Corporation Tax Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 20 — General calculation rules
Chapter 1 — Restriction of deductions
603

1303
Penalties, interest and VAT surcharges
(1)
In calculating profits for any corporation tax purpose, no deduction is allowed
for any penalty or interest mentioned in the first column of the following table.
(2)
This is the table—

Penalty or interest
Description of tax, levy or duty

5

Penalty under any of sections 60 to 70 of
Value added tax

VATA 1994

Interest under section 74 of VATA 1994

Penalty under any of sections 8 to 11 of
Excise duties

FA 1994

10

Penalty under any of paragraphs 12 to
Insurance premium tax

19 of Schedule 7 to FA 1994

Interest under paragraph 21 of that

Schedule

Penalty under any provision of Part 5 of
Landfill tax

15

Schedule 5 to FA 1996

Interest under paragraph 26 or 27 of

that Schedule

Penalty under any provision of
Climate change levy

Schedule 6 to FA 2000

20

Interest under any of paragraphs 70, 81

to 85 and 109 of that Schedule

Penalty under any provision of Part 2 of
Aggregates levy

FA 2001

Interest under any of paragraphs 5 to 9

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of Schedule 5 to, paragraph 6 of

Schedule 8 to and paragraph 5 of

Schedule 10 to FA 2001

Penalty under section 25 or 26 of FA
Customs, export and import

2003
duties

30

Penalty under any provision of Part 4 of
Stamp duty land tax

FA 2003

Interest under any provision of that Part

Interest required to be paid by
Income tax

regulations made under section 71 of

35

FA 2004 (construction industry)

(3)
In calculating profits for any corporation tax purpose, no deduction is allowed
for any surcharge under section 59 of VATA 1994.

Corporation Tax Bill
Part 20 — General calculation rules
Chapter 2 — Other general rules
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Crime-related payments
(1)
In calculating income from any source for corporation tax purposes, no
deduction is allowed for any expenses to which subsection (4) or (5) applies.
(2)
No deduction is allowed under section 1219 (expenses of management of a
company’s investment business) for any expenses to which subsection (4) or
5
(5) applies.
(3)
Expenses to which subsection (4) or (5) applies are not to be brought into
account under section 76 of ICTA (expenses of companies carrying on life
assurance business) as expenses payable.
(4)
This subsection applies to expenses incurred—
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(a)
in making a payment if the making of the payment constitutes a
criminal offence, or
(b)
in making a payment outside the United Kingdom if the making of a
corresponding payment in any part of the United Kingdom would
constitute a criminal offence in that part.
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(5)
This subsection applies to expenses incurred in making a payment induced by
a demand which constitutes—
(a)
the offence of blackmail under section 21 of the Theft Act 1968 (c. 60)
(England and Wales),
(b)
the offence of extortion (Scotland), or
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(c)
the offence of blackmail under section 20 of the Theft Act (Northern
Ireland) 1969 (c. 16 (N.I.)) (Northern Ireland).
1305
Dividends and other distributions
(1)
In the calculation of a company’s profits for corporation tax purposes, no
deduction is allowed in respect of a dividend or other distribution.
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(2)
Subsection (1) is subject to any provision of the Corporation Tax Acts expressly
authorising a deduction.
(3)
In this section “profits” has the same meaning as in Part 2.
Chapter 2
Other general rules
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Miscellaneous profits and losses
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Losses calculated on same basis as miscellaneous income
(1)
The same rules apply for corporation tax purposes in calculating a company’s
miscellaneous losses as apply in calculating corresponding miscellaneous
income.
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(2)
This is subject to any express provision to the contrary.
(3)
In this section—
(a)
“miscellaneous income” means profits or other income of the company
charged to corporation tax under or by virtue of a provision to which
section 834A of ICTA applies, and
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Corporation Tax Bill
Part 20 — General calculation rules
Chapter 2 — Other general rules
605

(b)
“miscellaneous losses” means losses in transactions in respect of which
the company is within the charge to corporation tax under or by virtue
of such a provision.
(4)
Provision corresponding to that made by this section is made by—
(a)
section 47 (in relation to trades), and
5
(b)
section 210 (in relation to property businesses).
1307
Apportionment etc of miscellaneous profits and losses to accounting period
(1)
This section applies if—
(a)
income is chargeable to corporation tax under or by virtue of any
provision to which section 834A of ICTA applies, and
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(b)
any period for which accounts are drawn up (a “period of account”)
does not coincide with an accounting period.
(2)
For this purpose the reference to any provision to which section 834A of ICTA
applies is to be read as if subsection (3) of that section were omitted (exclusion
of Chapter 8 of Part 10 so far as relating to income which arises from a source
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outside the United Kingdom).
(3)
Any of the following steps may be taken if they are necessary in order to arrive
at the profits or losses of the accounting period—
(a)
apportioning the profits or losses of a period of account to the parts of
that period falling in different accounting periods, and
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(b)
adding the profits or losses of a period of account (or part of a period)
to profits or losses of other periods of account (or parts).
(4)
The steps must be taken by reference to the number of days in the periods
concerned.
Expenditure on research and development
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1308
Expenditure brought into account in determining value of intangible asset
(1)
Subsection (2) applies if a company—
(a)
incurs expenditure on research and development which is not of a
capital nature, and
(b)
brings the expenditure into account in determining the value of an
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intangible asset.
(2)
The expenditure is not prevented from being allowed as a deduction in
calculating for corporation tax purposes the company’s profits, just because it
is brought into account as mentioned in subsection (1)(b).
(3)
Subsection (2) applies, in particular, for the purposes of—
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(a)
section 87 (expenses of research and development), and
(b)
Part 13.
(4)
Subsection (5) applies if, in accordance with subsection (2), expenditure is
both—
(a)
brought into account in determining the value of an intangible asset,
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and
(b)
allowed as a deduction in calculating profits.

Corporation Tax Bill
Part 21 — Other general provisions
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(5)
No deduction may be made in calculating for corporation tax purposes the
profits of the company in respect of the writing down of so much of the value
of the intangible asset as is attributable to the expenditure.
(6)
Subsection (2) does not allow expenditure as a deduction in calculating a
company’s profits for an accounting period so far as—
5
(a)
a deduction has been made in respect of it in calculating the company’s
profits for a previous accounting period, or
(b)
the company has benefited from a tax relief in respect of it for a
previous accounting period under Part 13.
(7)
In this section—
10
“intangible asset” has the meaning it has for accounting purposes, and
“research and development” has the meaning given by section 837A of
ICTA.
Visiting performers
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Payments treated as made to visiting performers
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(1)
This section applies if a payment or transfer made to a company within the
charge to corporation tax is treated under section 13(5) of ITTOIA 2005 as made
instead to the performer.
(2)
The company is treated for corporation tax purposes as if the payment or
transfer had not been made to it.
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(3)
Subsection (2) does not apply in such circumstances as may be prescribed by
regulations.
(4)
Regulations—
(a)
may provide that any liability to corporation tax which would apart
from subsection (2) arise in relation to the payment or transfer is not to
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arise (or is to arise so far as prescribed),
(b)
may make provision generally for giving effect to subsection (2), and
(c)
may make different provision for different cases or descriptions of
cases.
(5)
In this section—
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“payment” and “transfer” have the same meaning as in section 13 of
ITTOIA 2005,
“regulations” means regulations made by the Treasury.
Part 21
Other general provisions
35
Orders and regulations
1310
Orders and regulations
(1)
Any power of the Treasury or the Commissioners for Her Majesty’s Revenue
and Customs to make any order or regulations under this Act is exercisable by
statutory instrument.
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Part 21 — Other general provisions
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(2)
Any statutory instrument containing any order or regulations made by the
Treasury or the Commissioners for Her Majesty’s Revenue and Customs under
this Act is subject to annulment in pursuance of a resolution of the House of
Commons.
(3)
Subsection (2) does not apply if the order or regulations are made under—
5
(a)
section 86 (meaning of “urban regeneration company”),
(b)
section 1325(2) (power to make transitional or saving provision in
connection with the coming into force of this Act),
(c)
section 1329(3) (power to appoint a day for the commencement of
certain provisions of this Act),
10
(d)
paragraph 42 of Schedule 2 (lease premiums: time limits for claims for
repayment of tax), or
(e)
any of the provisions mentioned in subsection (4) (which provides for
affirmative resolution procedure).
(4)
An order or regulations made under—
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(a)
section 1183(3) (meaning of “film-making activities” etc),
(b)
section 1185(3) (meaning of “UK expenditure” etc),
(c)
section 1198(2) (UK expenditure),
(d)
section 1199(4) (additional deduction for qualifying expenditure),
(e)
section 1200(4) (amount of additional deduction), or
20
(f)
paragraph 130 of Schedule 2 (application of Part 15 etc to films not
completed before 1 January 2007),

may only be made if a draft of the instrument containing the order or
regulations has been laid before and approved by resolution of the House of
Commons.
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(5)
If an order under section 521(1) (power to amend Chapter 6 of Part 6:
alternative finance arrangements)—
(a)
includes such amendments as are mentioned in subsection (2)(b) of that
section (introduction of new provision into the alternative finance
provisions), or
30
(b)
amends an enactment not contained in the alternative finance
provisions (within the meaning of section 521),

this section has effect as if section 521(1) were included in the list in subsection
(4).
Apportionment to different periods
35
1311
Apportionment to different periods
(1)
Any apportionment to different periods which falls to be made under this Act
is to be made on a time basis according to the respective lengths of the periods.
(2)
This section is subject to provision to the contrary.
Interpretation
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1312
Abbreviated references to Acts
In this Act—

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Part 21 — Other general provisions
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“CAA 2001” means the Capital Allowances Act 2001 (c. 2),
“FA”, followed by a year, means the Finance Act of that year,
“F(No.2)A”, followed by a year, means the Finance (No.2) Act of that year,
“FISMA 2000” means the Financial Services and Markets Act 2000 (c. 8),
“ICTA” means the Income and Corporation Taxes Act 1988 (c. 1),
5
“IHTA 1984” means the Inheritance Tax Act 1984 (c. 51),
“ITA 2007” means the Income Tax Act 2007 (c. 3),
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003
(c. 1),
“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act
10
2005 (c. 5),
“TCGA 1992” means the Taxation of Chargeable Gains Act 1992 (c. 12),
“TMA 1970” means the Taxes Management Act 1970 (c. 9), and
“VATA 1994” means the Value Added Tax Act 1994 (c. 23).
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Activities in UK sector of continental shelf
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(1)
Any profits—
(a)
from exploration or exploitation activities carried on in the UK sector of
the continental shelf, or
(b)
from exploration or exploitation rights,

are treated for corporation tax purposes as profits from activities or property
20
in the United Kingdom.
(2)
Any profits arising to a non-UK resident company—
(a)
from exploration or exploitation activities, or
(b)
from exploration or exploitation rights,

are treated for corporation tax purposes as profits of a trade carried on by the
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company in the United Kingdom through a permanent establishment in the
United Kingdom.
(3)
In this section—
“exploration or exploitation activities” means activities carried on in
connection with the exploration or exploitation of so much of the
30
seabed and subsoil and their natural resources as is situated in the
United Kingdom or the UK sector of the continental shelf,
“exploration or exploitation rights” means rights to assets to be produced
by exploration or exploitation activities or interests in or to the benefit
of such assets, and
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“the UK sector of the continental shelf” means the areas designated by
Order in Council under section 1(7) of the Continental Shelf Act 1964
(c. 29).
1314
Meaning of “caravan”
(1)
In this Act “caravan” means—
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(a)
a structure designed or adapted for human habitation which is capable
of being moved by being towed or being transported on a motor vehicle
or trailer, or
(b)
a motor vehicle designed or adapted for human habitation,

but does not include railway rolling stock which is on rails forming part of a
45
railway system or any tent.

Corporation Tax Bill
Part 21 — Other general provisions
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(2)
A structure composed of two sections—
(a)
separately constructed, and
(b)
designed to be assembled on a site by means of bolts, clamps or other
devices,

is not prevented from being a caravan just because it cannot, when assembled,
5
be lawfully moved on a highway (or, in Scotland or Northern Ireland, road) by
being towed or being transported on a motor vehicle or trailer.
1315
Claims and elections
In this Act any reference to a claim or election is to a claim or election in
writing.
10
1316
Meaning of “connected” persons and “control”
(1)
Section 839 of ICTA (how to tell whether persons are connected) applies for the
purposes of this Act unless otherwise indicated (whether expressly or by
implication).
(2)
Section 840 of ICTA (meaning of control in relation to a body corporate) applies
15
for the purposes of this Act unless otherwise indicated (whether expressly or
by implication).
1317
Meaning of “farming” and related expressions
(1)
In this Act “farming” means the occupation of land wholly or mainly for the
purposes of husbandry, but does not include market gardening (see subsection
20
(5)).
(2)
In subsection (1) “husbandry” includes (for example)—
(a)
hop growing, and
(b)
the breeding and rearing of horses and the grazing of horses in
connection with those activities.
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(3)
For the purposes of this Act the cultivation of short rotation coppice is
regarded as husbandry and not as forestry.
(4)
In this Act “woodlands” does not include land on which short rotation coppice
is cultivated.
(5)
In this Act “market gardening” means the occupation of land as a garden or
30
nursery for the purpose of growing produce for sale.
(6)
For the purposes of this section “short rotation coppice” means a perennial
crop of tree species planted at high density, the stems of which are harvested
above ground level at intervals of less than 10 years.
1318
Meaning of grossing up
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(1)
In this Act references to grossing up by reference to a rate of tax are to
calculating the amount (“the grossed up amount”) which after deduction of
income tax at that rate would equal the amount to be grossed up (“the net
amount”).
(2)
The grossed up amount is the sum of the net amount and the tax deducted.
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