|Corporation Tax Bill - continued||House of Commons|
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1306. This clause allows a company (unless it is a charity) to claim that deficits which have not been surrendered as group relief may be set off against other profits of the deficit period or carried back against profits from loan relationships in an earlier accounting period. It is based on section 83(2) and (5) of FA 1996.
1307. Section 83(2)(a) of FA 1996 (set-off against other profits of the deficit period) allows the deficit to be set off against any profits..(of whatever description). Profits of any description are the total profits in section 9(3) of ICTA and this is reflected in subsection (1)(a).
1308. Section 83(2)(c) of FA 1996 (set-off carried back to earlier periods) refers only to set-off against profits. Paragraph 3(4) of Schedule 8 to FA 1996 makes it clear that the profits in section 83(2)(c) are only profits on non-trading loan relationships. This restriction has been brought out in subsection (1)(b). Full details of the profits against which a deficit can be set under subsection (1)(b) are given in clause 463 (signposted in subsection (6)).
1309. Section 83(5) of FA 1996 has been rewritten in subsection (3) and excludes charities from making a claim under subsection (1) of this clause. Before its repeal in FA 2002 section 83(2)(b) of FA 1996 allowed deficits to be surrendered as group relief. Section 83(5) was not consequentially amended when section 83(2)(b) was repealed and continues to refer to group relief.
1310. The reference to group relief is unnecessary since section 403(2) of ICTA, which allows non-trading deficits for the purposes of group relief, only provides for deficits to which section 83 of FA 1996 applies (see section 403ZC of ICTA). So all that is necessary to prevent the deficit of a charitable company from being surrendered as group relief is to provide that claims under this clause may not be made in respect of the deficits of a charitable company and this is what subsection (3) does.
1311. This clause provides the time limit for a claim under clause 459. It is based on section 83(6) to (8) of FA 1996.
1312. Subsection (1)(b) rewrites the Board as an officer of Revenue and Customs. See Change 1 in Annex 1.
1313. This clause provides that, following a claim under clause 459(1), the deficit is set off against the profits identified in the claim but after trade losses and before certain other reliefs. It is based on paragraph 1(1) to (4) of Schedule 8 to FA 1996.
1314. Although the set-off against profits of the deficit period is against total profits, the general rule in subsection (2) is that the set-off is against the profits of the company identified in the claim. In the figure of total profits any management expenses will already have been deducted under clause 1219. The profits identified in the claim will therefore be after management expenses. If the company has more than one source of income together with a reduction for management expenses, an officer of Revenue and Customs will agree the amount of income specified in the claim on a just and reasonable basis.
1315. This clause explains how a claim to carry back a deficit to an earlier period under clause 459(1)(b) applies, allowing the deficit to be set against profits of later accounting periods before earlier ones. It is based on paragraph 3(1) to (3) of Schedule 8 to FA 1996.
1316. Subsection (2) does not rewrite paragraph 3(2)(a)(ii) of Schedule 8 to FA 1996, which refers to section 83(4) of FA 1996, as section 83(4) has been repealed.
1317. This clause sets out which profits may be reduced by a deficit carried back against profits of an earlier period under clause 459. It is based on paragraph 3(4) to (7) of Schedule 8 to FA 1996.
1318. The reliefs in subsection (5) are set against the profits before the apportionment required by subsection (3) to give the amount available for relief.
1319. This Chapter gives the basic boundary rule for loan relationships in clause 464 and excludes debits and credits on distributions.
1320. This clause provides the main boundary provision applying to loan relationships. It is based on section 80(5) of, and paragraph 1(2) of Schedule 9 to, FA 1996.
1321. This clause excludes distributions from being brought into account under this Part unless they arise in consequence of avoidance arrangements. It is based on paragraph 1(1), (1A) and (2) of Schedule 9 to FA 1996.
1322. This Chapter explains when companies are connected for the purposes of Parts 5 and 6 as well as providing definitions of control, major interest and other expressions used in those Parts.
1323. This clause explains when two companies are connected for an accounting period for the purposes of any provisions that apply it. It is based on sections 87(3) and (4) and 87A(1) of FA 1996.
1324. This clause explains when loan relationships are taken to be between connected companies in the case of debts owed by or to a partnership. It is based on section 87(5A) and (5B) of FA 1996.
1325. Subsection (4) adopts the language (in accordance with the firms profit-sharing arrangements) of clause 1262 in Part 17 (partnerships) which rewrites section 114(2) of ICTA.
1326. This clause provides that a connection between a company in a creditor relationship and the company in the debtor relationship is ignored in certain circumstances. It is based on section 88(1), (5) and (6) of FA 1996. The circumstances are set out in clauses 469 and 471. The clause also provides that a company is treated for these purposes as being in a debtor relationship when the debt is dog-legged through intermediaries.
1327. Section 88(1) and (5) of FA 1996 refer to persons standing in a debtor relationship. Persons here has been rewritten as applying to companies only. See Change 56 in Annex 1.
1328. This clause sets out the circumstances under which connectedness between a company in a creditor relationship and one in a debtor relationship is ignored under clause 468. It is based on section 88(2) and (3) of FA 1996. The clause allows financial traders who buy and sell debt of connected companies in the same way that they buy and sell debt of non-connected companies to be exempt from the connectedness rules.
1329. Section 88(2)(f) of FA 1996 provides the condition that, for a three month period, the equivalent of 30% or more of the assets should not be in the beneficial ownership of connected persons. This has been rewritten as connected companies. See Change 56 in Annex 1.
1330. This clause explains terms used in the preceding clause. It is based on section 88(4) of FA 1996.
1331. Person in section 88(4) has been rewritten as company only. See Change 56 in Annex 1.
1332. This clause stops the connectedness rules from applying to insurance companies carrying on basic life assurance and general annuity business where certain conditions are met. It is based on section 88(3) of FA 1996.
1333. This clause explains the meaning of control for the purposes of any provisions that apply it, for example clause 466. It is based on section 87A(1) to (3) of FA 1996.
1334. Subsection (6)(b) adopts the language (in accordance with the firms profit-sharing arrangements) of clause 1262 in Part 17 (partnerships) which rewrites section 114(2) of ICTA.
1335. This clause gives the meaning of major interest. It is based on paragraphs 2(7), 17(10) and 20(1), (3) and (8) to (10) of Schedule 9 to FA 1996.
1336. This clause explains how the rule in clause 473(2) (meaning of major interest) on rights and powers is applied to partnerships with company members. It is based on paragraph 20(4) to (7) of Schedule 9 to FA 1996.
1337. This clause explains what is meant by a companys exchange gains and losses and gives the Treasury powers to make regulations as to how such gains and losses are to be calculated where fair value accounting is used. It is based on section 103(1A) to (1B) of FA 1996.
1338. Subsection (3) does not rewrite section 103(1AA)(b) of FA 1996 (any other profit or gains or losses) because the regulations are in respect of the manner in which exchange gains and losses in section 103(1A)(a) are to be calculated and a reference to other profits and losses is superfluous.
1339. This clause gives a number of definitions used in this Part. It is based on section 103(1) and (4) of FA 1996.
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