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 employees 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 employees 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 companys 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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