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Corporation Tax Bill


 

These notes refer to the Corporation Tax Bill as introduced to the House of Commons on 4 December 2008

CORPORATION TAX BILL


EXPLANATORY NOTES - VOLUME 3

(SECTIONS 907 TO 1330 AND SCHEDULES)

TABLE OF CONTENTS

Part 9: Intellectual property: know-how and patents     14

Chapter 1: Introduction     14

Clause 907: Overview of Part     14

Chapter 2: Disposals of know-how     15

Clause 908: Charge to tax on profits from disposals of know-how     15

Clause 909: Exceptions to charge under section 908     15

Clause 910: Profits charged under section 908     15

Chapter 3: Sales of Patent Rights     15

Clause 911: Overview of Chapter     15

Clause 912: Charge to tax on profits from sales of patent rights     15

Clause 913: Profits charged under section 912     16

Clause 914: UK resident companies: proceeds of sale not received in instalments     16

Clause 915: UK resident companies: proceeds of sale received in instalments     17

Clause 916: Non-UK resident companies: proceeds of sale not received in instalments     17

Clause 917: Non-UK resident companies: proceeds of sale received in instalments     17

Clause 918: Winding up of a body corporate     18

Clause 919: Deduction of tax from payments to non-UK resident companies     18

Clause 920: Adjustments where tax has been deducted     18

Clause 921: Licences connected with patents     18

Clause 922: Rights to acquire future patent rights     19

Clause 923: Sums paid for Crown use etc treated as paid under licence     19

Chapter 4: Relief from corporation tax on patent income     19

Clause 924: Relief for expenses: patent income     19

Clause 925: How relief is given under section 924     20

Chapter 5: Supplementary     20

Clause 926: Contributions to expenditure     20

Clause 927: Contributions not made by public bodies nor eligible for tax relief     20

Clause 928: Exchanges     20

Clause 929: Apportionment where property sold together     20

Clause 930: Questions about apportionments affecting two or more persons     20

Clause 931: Meaning of “capital sums” etc     21

Part 10: Miscellaneous income     21

Chapter 1: Introduction     21

Clause 932: Overview of Part     21

Chapter 2: Dividends from non-UK resident companies     21

Clause 933: Charge to tax on dividends of non-UK resident companies     21

Chapter 3: Beneficiaries’ income from estates in administration     21

Clause 934: Charge to tax on estate income     21

Clause 935: Absolute, limited and discretionary interests     22

Clause 936: Meaning of “UK estate” and “foreign estate”     22

Clause 937: Absolute interests in residue     22

Clause 938: Meaning of “the administration period”, “the final accounting period” and “the final tax year”     23

Clause 939: Limited interests in residue     23

Clause 940: Discretionary interests in residue     23

Clause 941: UK estates     24

Clause 942: Foreign estates     24

Clause 943: Absolute interests     24

Clause 944: Limited interests     24

Clause 945: Discretionary interests     25

Clause 946: Applicable rate for grossing up basic amounts of estate income     25

Clause 947: Aggregate income of the estate     25

Clause 948: Assumed income entitlement     26

Clause 949: Residuary income of the estate     26

Clause 950: Shares of residuary income of estate     27

Clause 951: Reduction in share of residuary income of estate     27

Clause 952: Applicable rate for determining assumed income entitlement (UK estates)     27

Clause 953: Introduction     27

Clause 954: Successive absolute interests     28

Clause 955: Assumed income entitlement of holder of absolute interest following limited interest     28

Clause 956: Payments in respect of limited interests followed by absolute interests     29

Clause 957: Holders of limited interests     31

Clause 958: Basic amount of estate income: successive limited interests     31

Clause 959: Apportionments     32

Clause 960: Relief in respect of tax relating to absolute interests     32

Clause 961: Relief in respect of tax relating to limited or discretionary interests     32

Clause 962: Income from which basic amounts are treated as paid     33

Clause 963: Income treated as bearing income tax     33

Clause 964: Transfers of assets etc treated as payments     33

Clause 965: Assessments, adjustments and claims after the administration period     34

Clause 966: Power to obtain information from personal representatives and beneficiaries     34

Clause 967: Statements relating to estate income     34

Clause 968: Meaning of “personal representatives”     34

Chapter 4: Income from holding an office     34

Clause 969: Charge to tax on income from holding an office     34

Clause 970: Rule restricting deductions for bad debts     36

Chapter 5: Distributions from unauthorised unit trusts     36

Clause 971: Overview of Chapter     36

Clause 972: Charge to tax under this Chapter     36

Clause 973: Amount of income treated as received     36

Chapter 6: Sales of foreign dividend coupons     37

Clause 974: Charge to tax under this Chapter     38

Clause 975: Meaning of “foreign holdings” etc     38

Chapter 7: Annual payments not otherwise charged     38

Clause 976: Overview of Chapter     39

Clause 977: Charge to tax on annual payments not otherwise charged     39

Clause 978: Exemption for payments by persons liable to pool betting duty     40

Chapter 8: Income not otherwise charged     40

Clause 979: Charge to tax on income not otherwise charged     41

Clause 980: Exemption for commercial occupation of woodlands in UK     42

Clause 981: Exemption for gains on financial futures     42

Chapter 9: Priority rules     43

Clause 982: Provisions which must be given priority over this Part     43

Part 11: Relief for particular employee share acquisition schemes     43

Chapter 1: Share incentive plans     43

Clause 983: Overview of Chapter     43

Clause 984: Chapter to form part of SIP code etc     44

Clause 985: References to a deduction being allowed to a company     44

Clause 986: Treatment of receipts under Chapter     44

Clause 987: Deduction for costs of setting up an approved share incentive plan     45

Clause 988: Deductions for running expenses of an approved share incentive plan     45

Clause 989: Deduction for contribution to plan trust     46

Clause 990: Withdrawal of deduction under section 989     46

Clause 991: Another deduction to be allowed if all acquired shares are awarded     47

Clause 992: Award of shares to excluded employee     47

Clause 993: Termination plan notice     47

Clause 994: Deduction for providing free or matching shares     47

Clause 995: Deduction for additional expense in providing partnership shares     48

Clause 996: Shares excluded from sections 994 and 995     48

Clause 997: No deduction for expenses in providing dividend shares     49

Clause 998: Withdrawal of deductions if approval for share incentive plan withdrawn     49

Chapter 2: SAYE option schemes, Company share option schemes and Employee share options trusts     49

Clause 999: Deduction for costs of setting up SAYE option scheme or CSOP scheme     49

Clause 1000: Deduction for costs of setting up employee share ownership trust     50

Part 12: Other relief for employee share acquisitions     50

Chapter 1: Introduction     51

Clause 1001: Overview of Part     51

Clause 1002: “Employment”     51

Clause 1003: “Shares” etc     51

Clause 1004: Groups, consortiums and commercial associations of companies     51

Clause 1005: Other definitions     51

Chapter 2: Relief if shares acquired by employee or other person     52

Clause 1006: Overview of Chapter     52

Clause 1007: Basic requirements for relief under Chapter 2     52

Clause 1008: Conditions relating to shares acquired     52

Clause 1009: Conditions relating to employee’s income tax position     52

Clause 1010: Calculation of relief if shares are neither restricted nor convertible     54

Clause 1011: Calculation of relief if shares are restricted or convertible     54

Clause 1012: Reduction in amount of relief     55

Clause 1013: How the relief is given     55

Chapter 3: Relief if employee or other person obtains option to acquire shares     55

Clause 1014: Overview of Chapter     55

Clause 1015: Basic requirements for relief under Chapter 3     55

Clause 1016: Conditions relating to shares acquired     55

Clause 1017: Condition relating to employee’s income tax position     56

Clause 1018: Calculation of relief if shares are neither restricted nor convertible     56

Clause 1019: Calculation of relief if shares are restricted or convertible     56

Clause 1020: Reduction in amount of relief     57

Clause 1021: How the relief is given     58

Clause 1022: Takeover of company whose shares are subject to option     58

Clause 1023: Supplementary provision for purposes of section 1022     58

Clause 1024: Transfer of qualifying business by group transfers     58

Chapter 4: Additional relief in cases involving restricted shares     58

Clause 1025: Additional relief available if shares acquired are restricted shares     59

Clause 1026: Relief available on occurrence of chargeable event     60

Clause 1027: Relief available on death of employee     60

Clause 1028: Supplementary provision for purposes of sections 1026 and 1027     60

Clause 1029: Transfer of qualifying business by group transfers     60

Chapter 5: Additional relief in cases involving convertible securities     61

Clause 1030: Application of Chapter     61

Clause 1031: Additional relief available if shares acquired are convertible shares etc     61

Clause 1032: Meaning of “chargeable event”     62

Clause 1033: Relief available on occurrence of chargeable event     62

Clause 1034: Relief available following death of employee     62

Clause 1035: Supplementary provision for purposes of sections 1033 and 1034     62

Clause 1036: Transfer of qualifying business by group transfers     62

Chapter 6 Relationship between relief under this Part and other reliefs     62

Clause 1037: Priority of Chapter 1 of Part 11     62

Clause 1038: Exclusion of other deductions     62

Part 13: Additional relief for expenditure on research and development     63

Chapter 1: Introduction     63

Clause 1039: Overview of Part     63

Clause 1040: Relief may be available under more than one Chapter of Part     64

Clause 1041: “Research and development”     64

Clause 1042: “Relevant research and development”     64

Chapter 2: Relief for SMEs: cost of R&D incurred by SME     64

Clause 1043: Overview of Chapter     64

Clause 1044: Additional deduction in calculating profits of trade     64

Clause 1045: Alternative treatment for pre-trading expenditure: deemed trading loss     65

Clause 1046: Relief only available where company is going concern     65

Clause 1047: Elections under section 1045     65

Clause 1048: Treatment of deemed trading loss under section 1045     66

Clause 1049: Restriction on consortium relief     66

Clause 1050: R&D threshold     66

Clause 1051: Qualifying Chapter 2 expenditure     68

Clause 1052: Qualifying expenditure on in-house direct R&D     68

Clause 1053: Qualifying expenditure on contracted out R&D     69

Clause 1054: Entitlement to and payment of tax credit     69

Clause 1055: Meaning of “Chapter 2 surrenderable loss”     69

Clause 1056: Amount of trading loss which is “unrelieved”     69

Clause 1057: Tax credit only available where company is going concern     69

Clause 1058: Amount of tax credit     69

Clause 1059: Total amount of company’s PAYE and NIC liabilities     69

Clause 1060: Payment of tax credit     70

Clause 1061: Tax credit payment not income of company     70

Clause 1062: Restriction on losses carried forward where tax credit claimed     70

Chapter 3: Relief for SMEs: R&D sub-contracted to SME     70

Clause 1063: Additional deduction in calculating profits of trade     70

Clause 1064: R&D threshold     71

Clause 1065: Qualifying Chapter 3 expenditure     71

Clause 1066: Expenditure on sub-contracted R&D undertaken in-house     72

Clause 1067: Expenditure on sub-contracted R&D not undertaken in-house     72

Chapter 4: Relief for SMEs: subsidised and capped expenditure on R&D     72

Clause 1068: Additional deduction in calculating profits of trade     73

Clause 1069: R&D threshold     73

Clause 1070: Qualifying Chapter 4 expenditure     73

Clause 1071: Subsidised qualifying expenditure on in-house direct R&D     73

Clause 1072: Subsidised qualifying expenditure on contracted out R&D     74

Clause 1073: Capped R&D expenditure     74

Chapter 5: Relief for large companies     74

Clause 1074: Additional deduction in calculating profits of trade     74

Clause 1075: R&D threshold     75

Clause 1076: Qualifying Chapter 5 expenditure     75

Clause 1077: Qualifying expenditure on in-house direct R&D     75

Clause 1078: Qualifying expenditure on contracted out R&D     76

Clause 1079: Qualifying expenditure on contributions to independent R&D     76

Clause 1080: Entitlement to relief: I minus E basis     76

Chapter 6: Chapters 2 to 5: further provision     76

Clause 1081: Insurance companies treated as large companies     76

Clause 1082: R&D expenditure of group companies     77

Clause 1083: Refunds of expenditure treated as income chargeable to tax     77

Clause 1084: Artificially inflated claims for relief or tax credit     77

Chapter 7: Relief for SMEs and large companies: vaccine research etc     77

Clause 1085: Overview of Chapter     77

Clause 1086: Meaning of “qualifying R&D activity”     77

Clause 1087: Deduction in calculating profits of trade     77

Clause 1088: Large companies: declaration about effect of relief     78

Clause 1089: SMEs: amount of deduction     78

Clause 1090: Modification of section 1089 for larger SMEs     78

Clause 1091: Large companies: amount of deduction     78

Clause 1092: SMEs: deemed trading loss for pre-trading expenditure     79

Clause 1093: Modification of section 1092 for larger SMEs     79

Clause 1094: Relief only available to SME where company is going concern     79

Clause 1095: Elections under section 1092     79

Clause 1096: Treatment of deemed trading loss under section 1092     79

Clause 1097: R&D threshold     79

Clause 1098: Meaning of “qualifying Chapter 7 expenditure”     80

Clause 1099: SMEs: qualifying expenditure “for” an accounting period     80

 
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Prepared: 5 December 2008