Corporation Tax Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
722

628   (1)
Amend section 356 (application to Schedule A businesses) as follows.
      (2)
In subsection (1) for “a Schedule A business” substitute “one within the
charge to corporation tax”.
      (3)
In subsection (2) for the words from “includes” to the end substitute
“includes, in the case of a company, the occurrence of an event treated under
5
section 289 of CTA 2009 (company starting or ceasing to be within the charge
to corporation tax) as the company permanently ceasing to carry on the
business.”
      (4)
In subsection (3) for “Schedule A business” substitute “UK property
business”.
10
      (5)
In the title for “Schedule A business” substitute “businesses within the
charge to corporation tax”.
629
In section 413(4) (person liable) for paragraph (b) substitute—
“(b)
section 947 of CTA 2009 (under which similar provision is
made for the purposes of Chapter 3 of Part 10 of that Act)”.
15
630
In section 419(2) (loans and advances to persons who die) for paragraph (b)
substitute—
“(b)
section 947 of CTA 2009” (under which similar provision is
made for the purposes of Chapter 3 of Part 10 of that Act)”.
631
In section 466(3) (person liable: personal representatives) for “section 701(8)
20
of ICTA” and “Part 16 of ICTA” substitute “section 947 of CTA 2009” and
“Chapter 3 of Part 10 of CTA 2009” respectively.
632
In section 496(7) (modification of section 494: qualifying endowment
policies held as security for company debts) in the definition of “accounting
period” for “section 12 of ICTA” substitute “Chapter 2 of Part 2 of CTA
25
2009”.
633
In section 671 (successive absolute interests)—
(a)
at the end of subsection (4) add “(or, where the previous holder is a
company chargeable to corporation tax, having regard to the
application of section 954(4) of CTA 2009 to the previous holder)”,
30
and
(b)
at the end of subsection (6) add “(but, in a case where the last
previous holder or any earlier previous holder is a company
chargeable to corporation tax, having regard to the application of
section 954(6) of CTA 2009 to the previous holder)”.
35
634
After section 749 insert—
“749A
Interest on tax overpaid
No liability to income tax arises in respect of interest paid under
section 826 of ICTA (interest on tax overpaid).”
635
In section 754(1) (redemption of funding bonds) for “section 582(1) of ICTA”
40
substitute “section 413 of CTA 2009”.
636   (1)
Amend section 839 (annual payments payable out of relevant foreign
income) as follows.
      (2)
In subsection (1) for “A to C” substitute “A, B1 or B2 and C”.

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
723

      (3)
In subsection (3)—
(a)
for “B” substitute “B1”, and
(b)
omit “or to corporation tax under Case III of Schedule D”.
      (4)
After subsection (3) insert—
“(3A)
Condition B2 is that, had the payment arisen in the United Kingdom
5
it would have been—
(a)
required to be brought into account under Part 5 of CTA 2009
(loan relationships) as a non-trading credit, or
(b)
chargeable to corporation tax under Chapter 5 of Part 10 of
that Act (distributions from unauthorised unit trusts) or
10
Chapter 7 of that Part (annual payments not otherwise
charged).”
637
In section 847(2) (partnerships: general provisions), in the words before
paragraph (a) for the words from “are expressed” to “also apply” substitute
“which are expressed to apply to trades also apply, unless otherwise
15
indicated (whether expressly or by implication)”.
638
In section 849 (calculation of firm’s profits or losses) after subsection (3)
insert—
“(4)
In calculating under subsection (2) or (3) the profits of a trade for any
period of account no account is taken of any losses for another period
20
of account.”
639
For section 850 (allocation of firm’s profits or losses between partners)
substitute—
“850
Allocation of firm’s profits or losses between partners
(1)
For any period of account a partner’s share of a profit or loss of a
25
trade carried on by a firm is determined for income tax purposes in
accordance with the firm’s profit-sharing arrangements during that
period.

This is subject to sections 850A and 850B.
(2)
In this section and sections 850A and 850B “profit-sharing
30
arrangements” means the rights of the partners to share in the profits
of the trade and the liabilities of the partners to share in the losses of
the trade.
850A
Profit-making period in which some partners have losses
(1)
For any period of account, if—
35
(a)
the calculation under section 849 in relation to a partner (“A”)
produces a profit, and
(b)
A’s share determined under section 850 is a loss,

A’s share of the profit of the trade is neither a profit nor a loss.
(2)
For any period of account, if—
40
(a)
the calculation under section 849 in relation to A produces a
profit,
(b)
A’s share determined under section 850 is a profit, and
(c)
the comparable amount for at least one other partner is a loss,

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
724


A’s share of the profit of the trade is the amount produced by the
formula in subsection (3).
(3)
The formula is—

where—
FP is the amount of the firm’s profit calculated under section
5
849 in relation to A,
PP is the amount determined under section 850 to be A’s profit,
and
TCP is the total of the comparable amounts attributed to other
partners under step 3 in subsection (4) that are profits.
10
(4)
The comparable amount for each partner other than A is determined
as follows.

Step 1

Take the firm’s profit calculated under section 849 in relation to A.

Step 2
15

Determine in accordance with the firm’s profit-sharing
arrangements during the relevant period of account the shares of
that profit that are attributable to each of the other partners.

Step 3

Each such share is the comparable amount for the partner to whom
20
it is attributed.
(5)
In subsections (2) to (4) “partner” means any partner in the firm,
whether or not chargeable to income tax.
850B
Loss-making period in which some partners have profits
(1)
For any period of account, if—
25
(a)
the calculation under section 849 in relation to a partner (“A”)
produces a loss, and
(b)
A’s share determined under section 850 is a profit,

A’s share of the loss of the trade is neither a profit nor a loss.
(2)
For any period of account, if—
30
(a)
the calculation under section 849 in relation to A produces a
loss,
(b)
A’s share determined under section 850 is a loss, and
(c)
the comparable amount for at least one other partner is a
profit,
35

A’s share of the loss of the trade is the amount produced by the
formula in subsection (3).

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
725

(3)
The formula is—

where—
FL is the amount of the firm’s loss calculated under section 849
in relation to A,
PL is the amount determined under section 850 to be A’s loss,
5
and
TCL is the total of the comparable amounts attributed to other
partners under step 3 in subsection (4) that are losses.
(4)
The comparable amount for each partner other than A is determined
as follows.
10

Step 1

Take the firm’s loss calculated under section 849 in relation to A.

Step 2

Determine in accordance with the firm’s profit-sharing
arrangements during the relevant period of account the shares of
15
that loss that are attributable to each of the other partners.

Step 3

Each such share is the comparable amount for the partner to whom
it is attributed.
(5)
In subsections (2) to (4) “partner” means any partner in the firm,
20
whether or not chargeable to income tax.”
640   (1)
Amend section 860 (adjustment income) as follows.
      (2)
After subsection (1) insert—
“(1A)
A change in the persons carrying on a property business from one period of
account to the next does not prevent Chapter 7 of Part 3 (adjustment
25
income) applying in relation to the property business so long as a person
carrying on the property business immediately before the change continues
to carry on the property business immediately after the change.”
      (3)
In subsection (3)—
(a)
after “trade” insert “or property business”, and
30
(b)
after “Chapter 17 of Part 2” insert “, or Chapter 7 of Part 3,”.
      (4)
In subsection (6)—
(a)
in paragraph (a), at the end insert “or Chapter 7 of Part 3 (as the case
requires)”, and
(b)
in paragraph (b) after “trade” insert “or property business (as the case
35
requires)”.
641
For section 861 (sale of patent rights: effect of partnership changes)
substitute—
“861
Sale of patent rights: effect of partnership changes
(1)
This section applies if each of the following conditions is met—
40

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
726

(a)
a person (“the trader”) sells the whole or part of any patent
rights in carrying on a trade,
(b)
tax is chargeable under section 587 of this Act or section 912
of CTA 2009 on the proceeds of the sale or on any instalment
of those proceeds,
5
(c)
the tax is chargeable in one or more tax years or accounting
periods (referred to in this section as “the tax charge
periods”),
(d)
there is a change in the persons carrying on the trade at any
time between the beginning of the first of those tax charge
10
periods and the end of the last of them, and
(e)
the partnership condition and the continuity condition are
met.
(2)
The partnership condition is that—
(a)
the trader is a firm at the time of the sale, or
15
(b)
the trade is carried on in partnership at any time between the
beginning of the first of the tax charge periods and the end of
the last of them.
(3)
The continuity condition is—
(a)
in the case of an amount chargeable under section 587, that a
20
person who carried on the trade immediately before the
change continues to carry it on after the change, or
(b)
in the case of an amount chargeable under section 912 of CTA
2009, that a company which carried on the trade in
partnership immediately before the change continues to
25
carry it on in partnership after the change.
(4)
Any amounts chargeable in respect of the proceeds or instalment
that would (apart from this section) be treated in accordance with
Chapter 2 of Part 5 of this Act or Chapter 3 of Part 9 of CTA 2009 as
profits of the seller of the patent rights chargeable in tax charge
30
periods falling wholly after the change are treated for income tax
purposes—
(a)
as proceeds, arising at a constant daily rate during the
remainder of the relevant period, of a sale of patent rights by
the person or persons carrying on the trade after the change,
35
and
(b)
if the trade is carried on in partnership after the change, as
arising to the partners in shares calculated in accordance with
the firm’s profit-sharing arrangements.
(5)
If the change occurs during the course of a tax charge period—
40
(a)
any person who would, but for this section, have been
charged to income tax in that period on a sum (“S”) in respect
of the proceeds or instalment is so charged on a fraction of S
proportionate to the length of the part of the period before the
change, and
45
(b)
the balance of S not dealt with under paragraph (a) is treated
for the purposes of this section and section 1271 of CTA 2009
(sale of patent rights: effect of partnership changes) as if it
were an amount such as is described in subsection (4).
(6)
In this section “the remainder of the relevant period” means—
50

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
727

(a)
if one or more tax charge periods begins after the tax charge
period in which the change occurs, the period beginning
immediately after the change and ending 6 years after the
beginning of the first of the tax charge periods, or
(b)
otherwise, the period beginning immediately after the
5
change and ending at the end of the tax charge period in
which the change occurs.
(7)
In this section “profit-sharing arrangements” means the rights of the
partners to share in the profits of the trade.”
642   (1)
Amend section 862 (sale of patent rights: effect of later cessation of trade) as
10
follows.
      (2)
For subsections (1) and (2) substitute—
“(1)
This section applies if—
(a)
a person (“the trader”) sells the whole or part of any patent
rights in carrying on a trade,
15
(b)
by virtue of section 861 amounts are chargeable to income tax
under section 587 as profits of one or more persons for the
time being carrying on the trade in partnership,
(c)
a partner permanently ceases to carry on the trade after that,
and
20
(d)
no person who carried on the trade immediately before the
cessation continues to carry on the trade immediately after
the cessation.
(2)
Any amounts mentioned in subsection (1)(b) which would have been
chargeable in any tax year later than that in which the cessation
25
occurred are charged in the tax year in which the cessation
occurred.”
      (3)
Omit subsections (3) and (7).
643
Omit section 881 (disapplication of corporation tax: section 9 of ICTA).
644   (1)
Amend Schedule 1 (consequential amendments) as follows.
30
      (2)
Omit paragraph 312(4)(b) and the “and” immediately before it.
645   (1)
Amend Schedule 2 (transitionals and savings etc) as follows.
      (2)
In paragraph 70(2) for “term” substitute “terms”.
      (3)
In paragraph 71(2) for “term” substitute “terms”.
      (4)
In paragraph 109(5) for “section 12 of ICTA” substitute “Chapter 2 of Part 2
35
of CTA 2009”.
646   (1)
Amend Schedule 4 (abbreviations and defined expressions) as follows.
      (2)
In Part 1 at the end insert—

“CTA 2009
The Corporation Tax Act 2009”

      (3)
In Part 2—
40

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
728

(a)
in the entry for “accounting period”, in the second column—
(i)
for “sections 12 and” substitute “section”, and
(ii)
at the end insert “and Chapter 2 of Part 2 of CTA 2009”, and
(b)
omit the entry for “Schedule A business”.
Finance Act 2005 (c. 7)
5
647
The Finance Act 2005 is amended as follows.
648
In section 47A(6) (alternative finance arrangements: diminishing shared
ownership) for “Taxes” to “1970)” substitute “Income Tax Acts, TCGA 1992
and all other enactments relating to capital gains tax”.
649
In section 48A (alternative finance arrangements: alternative finance bond:
10
introduction) in subsection (3) after “this section” insert “and section 507 of
CTA 2009 (investment bond arrangements)”.
650
In section 48B (alternative finance arrangements: alternative finance
investment bond: effects)—
(a)
in subsections (2) and (3) after “any tax” insert “other than the
15
Corporation Tax Acts”,
(b)
in subsection (4) after “section 48A”, in both places where it occurs,
insert “of this Act or section 507 of CTA 2009”, and
(c)
in subsection (5)—
(i)
after “section 48A” insert “of this Act or section 507 of CTA
20
2009”,
(ii)
after paragraph (b) insert “or”, and
(iii)
omit paragraph (d) and the “or” immediately before it.
651
In section 49(2) (alternative finance arrangements: deposit) for “profit share
return” substitute “alternative finance return”.
25
652
In section 49A (alternative finance arrangements: profit share agency)—
(a)
in subsection (2) for “profit share return” substitute “alternative
finance return”, and
(b)
in subsection (3) for “Tax Acts” substitute “Income Tax Acts”.
653
Omit section 50 (treatment of alternative finance arrangements: companies).
30
654
In section 51 (treatment of alternative finance arrangements: persons other
than companies) in subsections (1), (4) and (5)(b) omit “or profit share
return”.
655
In section 52 (provision not at arm’s length)—
(a)
in subsection (2) omit “or profit share return”, and
35
(b)
omit subsection (6).
656
Omit section 54 (return not to be treated as distribution).
657
In section 54A (treatment of section 47, 49 and 49A arrangements as loans:
Community Investment Tax Relief)—
(a)
in subsection (2)(a) after “or 49A” insert “of this Act or section 503,
40
505 or 506 of CTA 2009”,
(b)
in subsection (2)(b) omit “or profit share return”,
(c)
in subsections (3) and (4) after “section 47” insert “of this Act or
section 503 of CTA 2009”,