Corporation Tax Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 7 — Property income
750

      (3)
In sections 230(5)(a) (meaning of “unused amount”) and 235(3)(a) (limit on
reductions and deductions) references to reductions under section 288 of
ITTOIA 2005 by reference to the taxed receipt include references to
reductions under section 37(2) or (3) of ICTA in ICTA pre-commencement
receipts by reference to the amount chargeable on the superior interest.
5
      (4)
Sections 232 to 234 apply as follows—
(a)
the ICTA pre-commencement receipt is treated as if it were a lease
premium receipt for the purposes of sections 233 and 234,
(b)
references in those sections to the reduction under section 228 by
reference to the taxed receipt are, in relation to the ICTA pre-
10
commencement receipt, to the reduction under section 37(2) or (3) of
ICTA by reference to the amount chargeable on the superior interest,
and
(c)
for the purposes of those sections the receipt period of the ICTA pre-
commencement receipt is—
15
(i)
in the case of an ICTA pre-commencement receipt as a result
of section 34 of ICTA, the period treated in calculating the
amount of the receipt as being the duration of the lease, and
(ii)
in the case of an ICTA pre-commencement receipt as a result
of section 35 of ICTA, the period treated in calculating the
20
amount of the receipt as being the duration of the lease
remaining at the date of the assignment.
Lease premiums: taking account of deductions for rent as a result of section 37(4) or 87(2) of
ICTA
41    (1)
Sub-paragraph (2) applies if—
25
(a)
in calculating the profits of a trade, profession or vocation for a tax
year before the tax year 2005-06 or an accounting period ending
before 1 April 2009, a person is treated as paying rent under section
87(2) of ICTA by reference to the amount chargeable for the purposes
of that section, and
30
(b)
as a result of paragraph 39(1) and (2) or section 227(4)(c) or (d) (lease
taxed under ITTOIA 2005) the amount chargeable is the taxed receipt
for the purposes of Chapter 4 of Part 4.
      (2)
References in sections 230(5)(b) and 235(3)(c) to the deductions allowed for
expenses under section 63 by reference to the taxed receipt include
35
references to the deductions allowed in calculating the profits of the trade,
profession or vocation for the rent that the person is treated as paying under
section 87(2) of ICTA by reference to the amount chargeable.
      (3)
Sub-paragraph (4) applies if—
(a)
in calculating the profits of a Schedule A business or an overseas
40
property business (within the meaning of section 65A(4) or 70A(4) of
ICTA) for a tax year before the tax year 2005-06 or an accounting
period ending before 1 April 2009, a person is treated as paying rent
as a result of section 37(4) of ICTA by reference to the amount
chargeable on the superior interest for the purposes of that section,
45
and
(b)
as a result of paragraph 39(1) and (2) or section 227(4)(c) or (d) (lease
taxed under ITTOIA 2005) the amount chargeable on the superior
interest is the taxed receipt for the purposes of Chapter 4 of Part 4.

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 7 — Property income
751

      (4)
References in sections 230(5)(c) and 235(3)(b) to the deductions allowed for
expenses under section 292 of ITTOIA 2005 by reference to the taxed receipt
include references to the deductions allowed in calculating the profits of the
Schedule A business or overseas property business (within the meaning of
section 65A(4) or 70A(4) of ICTA) for the rent that the person is treated as
5
paying as a result of section 37(4) of ICTA by reference to the amount
chargeable on the superior interest.
Lease premiums: time limits for claims for repayment of tax
42    (1)
Until the Treasury by order appoints a day under this paragraph—
(a)
section 238 has effect as if “6 years” were substituted for “4 years” in
10
subsection (3) of that section, and
(b)
section 239 has effect as if “6 years” were substituted for “4 years” in
subsection (3) of that section.
      (2)
An order under this paragraph—
(a)
may appoint different days for different purposes, and
15
(b)
may include transitional provision and savings.
Lease premiums: rules for determining effective duration of lease
43    (1)
In relation to a lease granted after 24 August 1971 and before 1 April 2009,
section 243 applies with the following modifications.
      (2)
In subsection (1) for Rule 1 substitute—
20
“Rule 1: A lease is not to be treated as having been granted for a
term longer than one ending on a date before the end of the
term for which the lease was granted if—
(a)
the terms of the lease or any other circumstances
make it unlikely that the lease will continue beyond
25
that date, and
(b)
the premium was not substantially greater than it
would have been had the term been one ending on
that date.”
      (3)
Omit subsection (3).
30
44
The amendments made by paragraph 625 of Schedule 1 (amendments of
section 303 of ITTOIA 2005, which provides rules for determining the
effective duration of a lease) do not have effect in relation to leases granted
before 1 April 2009.
45    (1)
In relation to a lease granted after 12 June 1969 and before 25 August 1971,
35
for sections 243 and 244 substitute—

“243  Rules for determining effective duration of lease
(1)
The following rules apply for determining the effective duration of a
lease for the purposes of this Chapter.
Rule 1: Where the terms of a lease include provision for the
40
determination of the lease by notice given by the landlord,
the lease is not to be treated as granted for a term longer than
one ending at the earliest date on which it could be
determined by notice so given.

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Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 7 — Property income
752

Rule 2: A lease is not to be treated as having been granted for a
term longer than one ending on a date before the end of the
term for which the lease was granted, if the terms of the lease
or any other circumstances make it unlikely that the lease will
continue beyond that date.
5

Rule 3: Where the terms of the lease include provision for the
extension of the lease beyond a given date by notice given by
the tenant, account may be taken of any circumstances
making it likely that the lease will be so extended.
10
(2)
Rule 2 applies by reference to the facts known or ascertainable at the
time of the grant of the lease.
(3)
In applying the rules, it is assumed that all parties concerned,
whatever their relationship, act as if they were at arm’s length.
(4)
In this section, in relation to Scotland, “term”, where referring to the
15
duration of a lease, means period.”
      (2)
This paragraph does not apply if the determination is for the purposes of
section 221 (sums payable for variation or waiver of terms of lease).
46    (1)
In relation to a lease granted before 13 June 1969, for sections 243 to 245
substitute—
20

“243  Rules for determining effective duration of lease
(1)
The following rules apply for determining the effective duration of a
lease for the purposes of this Chapter.
Rule 1: Where the effective duration of a lease is being
determined after the date on which the lease has for any
25
reason come to an end, the duration is taken to have extended
from its commencement to that date.

Rule 2: Where the terms of the lease include provision for the
determination of the lease by notice given either by the
30
landlord or by the tenant, the lease is not to be treated as
granted for a term longer than one ending at the earliest date
on which it could be determined by notice.

Rule 3: A lease is not to be treated as having been granted for a
35
term longer than one ending on a date before the end of the
term for which the lease was granted, if the terms of the lease
or any other circumstances make it unlikely that the lease will
continue beyond that date.
(2)
Rules 2 and 3 are subject to Rule 1.
40
(3)
Rules 2 and 3 apply in accordance with circumstances prevailing at
the time of the determination.
(4)
In this section, in relation to Scotland, “term”, where referring to the
duration of a lease, means period.”
      (2)
This paragraph does not apply if the determination is for the purposes of
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section 221 (sums payable for variation or waiver of terms of lease).

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 8 — Loan relationships
753

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The amendments made by paragraphs 497 and 505 of Schedule 1
(amendments of sections 291(3)(a) and 393J(3)(a) of CAA 2001) do not have
effect in relation to leases granted before 1 April 2009.
Lease premiums: meaning of “premium”
48    (1)
In relation to a lease granted after 12 June 1969 and before 25 August 1971
5
sections 246 and 247 have effect with the following modifications.
      (2)
Section 246 has effect with the omission of subsections (4) and (5).
      (3)
Section 247 has effect with the omission of—
(a)
the words “or to a person connected with such a person” in
subsection (1), and
10
(b)
subsection (2).
Reverse premiums
49    (1)
Section 250 does not apply to a reverse premium—
(a)
which was received before 9 March 1999, or
(b)
to which the recipient was entitled immediately before that date.
15
      (2)
In determining whether a reverse premium was one to which the recipient
was entitled immediately before 9 March 1999, no account is to be taken of
any arrangements made on or after that date.
Deductions for expenditure on energy-saving items
50
Sections 251 to 253 do not apply to expenditure incurred before 8 July 2008.
20
Adjustment on change of basis
51    (1)
Sections 261 and 262 apply to a change of basis taking effect for a period of
account which ends after 31 March 2009.
      (2)
For this purpose the period of account for which a change of basis takes
effect is the first period of account for which the new basis is adopted.
25
Meaning of “mineral royalties”
52
The definition of “mineral royalties” in section 274(2) does not include any
rent receivable before 6 April 1970.
Part 8
Loan relationships
30
Interpretation
53
Except as provided in this Part of this Schedule, expressions used in this Part
of this Schedule and in Part 5 of this Act have the same meaning as in Part 5.
Opening and closing values determined under Schedule 15 to the Finance Act 1996
54
So far as immediately before the commencement of this Act any opening
35
value or closing value is to be determined by reference to Schedule 15 to FA

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 8 — Loan relationships
754

1996 (loan relationships: savings and transitional provisions), the
determination of that value is not affected by the repeal by this Act of any
provision in that Schedule or any provision affecting such a provision.
References to Part 5 to include Schedule 15 to FA 1996
55
Except where the context indicates otherwise, references to Part 5 of this Act
5
in any enactment other than Schedule 15 to FA 1996 include references to
that Schedule.
Exemption for interest on tax overpaid for accounting periods ending before 1 July 1999
56
No liability to corporation tax arises in respect of interest paid under section
826(1) of ICTA (interest on tax overpaid) if the accounting period mentioned
10
in the paragraph of that section as a result of which it is paid ends before 1
July 1999.
Regulations under section 81 of FA 2002
57
The repeal by this Act of any provision in Schedule 23 to FA 2002
(transitional provision) does not affect the power in section 81 of that Act so
15
far as relating to that provision.
Continuity on transfers: transferees becoming party to loan relationship before 9 April 2003
58    (1)
In determining whether Chapter 4 of Part 5 (continuity on transfers within
groups or on reorganisations) applies in the case mentioned in section 336 or
337 where the transferee became party to the loan relationship before 9 April
20
2003, section 338 (meaning of company replacing another as party to loan
relationship) applies with the following omissions.
      (2)
In subsection (1) omit paragraphs (b) and (c).
      (3)
In subsection (2) omit “or obligations”.
      (4)
Omit subsections (5) and (6).
25
      (5)
This paragraph must be read as if it were in Chapter 4 of Part 5.
Deeply discounted securities held before 1 October 2002
59    (1)
This sub-paragraph applies if—
(a)
the condition in paragraph 17(1)(c) of Schedule 9 to FA 1996
(connection between issuing company and another company) is met
30
as respects an accounting period beginning on or after 1 October
2002 as a result of the amendments made by paragraph 33 of
Schedule 25 to FA 2002, but would not have been met in an
accounting period beginning before that date, and
(b)
the debtor relationship in question was a debtor relationship of the
35
issuing company (within the meaning of section 407) on the first day
of the company’s first accounting period beginning on or after that
date.
      (2)
If sub-paragraph (1) applies, section 407 does not apply in relation to that
debtor relationship as a result of those amendments.
40
      (3)
This sub-paragraph applies if section 409 applies in a case where—

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 8 — Loan relationships
755

(a)
the relevant period began before 1 October 2002,
(b)
as a result of paragraph 18 of Schedule 9 to FA 1996 an amount (“the
deferred amount”) was not brought into account by a company for
the purposes of Chapter 2 of Part 4 of that Act in respect of a debtor
relationship for an accounting period beginning before that date, and
5
(c)
the deeply discounted security concerned has not been redeemed
before the beginning of the company’s first accounting period to
which this Act applies.
      (4)
If sub-paragraph (3) applies, as regards any accounting period to which this
Act applies, section 409(2) applies as if paragraph 18(2) of Schedule 9 to FA
10
1996, instead of preventing the bringing of amounts into account for any
accounting period before that in which the security was redeemed, had
provided for the deferred amount to be brought into account for the
accounting period in which the security was redeemed rather than for the
relevant period.
15
      (5)
In this paragraph—
“deeply discounted security” has the same meaning as in Chapter 8 of
Part 4 of ITTOIA 2005 (profits from deeply discounted securities)
(see section 430 of that Act), and
“the relevant period” has the same meaning as in section 409.
20
60    (1)
This paragraph applies if—
(a)
an authorised unit trust or open-ended investment company holds a
deeply discounted security on the last day of the unit trust’s or
company’s last accounting period beginning before 1 October 2002
(“the last old day”),
25
(b)
the security was not transferred or redeemed on that day,
(c)
there is an amount which, if the unit trust or company had made a
transfer of that security on that day, by selling it for its adjusted
closing value—
(i)
would have been charged under paragraph 1 of Schedule 13
30
to FA 1996 under Case III or IV of Schedule D, or
(ii)
would have been eligible for relief from tax on a claim for the
purposes of paragraph 2 of Schedule 13 to FA 1996, and
(d)
that amount has not fallen to be brought into account under
paragraph 64(3) of Schedule 25 to FA 2002.
35
      (2)
That amount must be brought into account as a non-trading credit, or (as the
case may be) a non-trading debit, for the purposes of Part 5 (loan
relationships) for the relevant accounting period.
      (3)
The relevant accounting period is the accounting period in which falls the
earliest of—
40
(a)
the first day that falls after the last old day and is a day on which,
under the terms on which the security was issued, the holder of the
security is entitled to require it to be redeemed,
(b)
the day on which the security is redeemed, and
(c)
the day on which the unit trust or company makes a disposal of the
45
security.
      (4)
For the purposes of sub-paragraph (1)(c), the “adjusted closing value” of a
deeply discounted security held by the unit trust or company on the last old
day is the amount which for the purposes of Chapter 2 of Part 4 of FA 1996

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 8 — Loan relationships
756

was the opening value, as at the first day of the unit trust’s or company’s
first accounting period beginning on or after 1 October 2002, of the unit
trust’s or company’s rights and liabilities under the relationship represented
by that security.
      (5)
Paragraph 5(7) of Schedule 15 to FA 1996 (determination of opening value
5
where accruals basis of accounting is used) applies for the purposes of sub-
paragraph (4) as it applies for the purposes of paragraph 5 of that Schedule,
but—
(a)
taking the reference to 1 April 1996 as a reference to the first day of
the unit trust’s or company’s first accounting period beginning on or
10
after 1 October 2002, and
(b)
applying paragraph 4 of that Schedule (determination of amounts
treated as accruing on or after 1 April 1996) (as it had effect
immediately before 1 April 2009) for these purposes with the same
modification.
15
      (6)
In this paragraph—
“creditor relationship” has the same meaning as in Part 5,
“deeply discounted security” has the same meaning as in that Chapter
(see section 430 of that Act),
“open-ended investment company” has the same meaning as in section
20
468A(2) of ICTA,
“redeem” means—
(a)
make a disposal, within the meaning of Chapter 8 of Part 4 of
ITTOIA 2005 (profits from deeply discounted securities),
except by a transfer within the meaning of that Chapter, or
25
(b)
convert as mentioned in section 437(1)(c) of that Act, and
“transfer” has the same meaning as in that Chapter.
      (7)
In this paragraph “the relevant period” has the same meaning as in section
409.
Restriction on bringing into account credits resulting from reversal of debits disallowed in a
30
period of account beginning before 1 January 2005
61    (1)
No credit is to be brought into account for the purposes of Part 5 in respect
of the reversal of a debit that was disallowed for tax purposes in a period of
account beginning before 1 January 2005—
(a)
because of the assumption required by paragraph 5(1) of Schedule 9
35
to FA 1996, or
(b)
because the exceptions in section 74(1)(j) of ICTA did not apply.
      (2)
This paragraph does not apply if fair value accounting is used.
Disregard of pre-2005 disallowed debits
62    (1)
This paragraph applies if in a period of account of a company beginning
40
before 1 January 2005 (“the earlier period”) a debit was disallowed for tax
purposes—
(a)
because of the assumption required by paragraph 5(1) of Schedule 9
to FA 1996, or
(b)
because the exceptions in section 74(1)(j) of ICTA did not apply.
45