Corporation Tax Bill - continued          House of Commons

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Disposals for consideration not fully recognised by accounting practice: disposals before 16 May 2008

3572.     This paragraph preserves the commencement rules applying on the introduction of the source legislation for clause 698. It is based on paragraph 4(3) of Schedule 22 to FA 2008.

References to Companies Act 2006

3573.     This paragraph provides for the interpretation of references to section 286 of the Companies Act 2006 until such time as that section is brought into force. It is based on regulation 6 of The Corporation Tax (Implementation of the Mergers Directive) Regulations 2008 (SI 2008/1579).

3574.     The paragraph applies the equivalent provision in the predecessor Companies Act until an order brings section 658 of the Companies Act 2006 into force.

Repeal of provisions concerning exchange gains and losses from derivative contracts

3575.     This paragraph preserves the prospective repeal by F(No 2)A 2005 of some provisions dealing with exchange gains and losses. It is based on paragraph 9(1) of Schedule 6 to F(No 2)A 2005.

Part 14: Other relief for employee share acquisitions

Accounting periods beginning before 1 January 2003

3576.     This paragraph preserves the transitional provision in paragraph 33 of Schedule 23 to FA 2003. This transitional might be required to prevent a double deduction in the case of an option granted before 1 January 2003 but exercised after 30 March 2009.

Part 17: Film production

Application of Part 15 etc to films that commenced principal photography before 1 January 2007 but were not completed before that date

3577.     Section 52 of FA 2006 contains powers to make transitional provisions relating to films that started principal photography before 1 January 2007 but which were not completed before that date. The Corporation Tax (Taxation of Films) (Transitional Provisions) Regulations 2007 (SI 2007/1050) have been made under section 52 of FA 2006.

3578.     Some of the tax provisions which are modified, for transitional purposes, by SI 2007/1050 are rewritten in Part 15 but others (such as the withdrawal of existing film reliefs for both income tax and corporation tax purposes) are not rewritten or are, effectively, rewritten elsewhere (in the Part dealing with intangible fixed assets).

3579.     These paragraphs adapt the transitional provisions in SI 2007/1050 so that they refer to the appropriate places in FA 2006, Part 15 of this Bill or elsewhere in this Bill.

Part 19: Unremittable income

Unremittable income that arose in an accounting period ending before 1 April 2009

3580.     This paragraph ensures that the relief given by Part 18 of this Bill, and any withdrawal of that relief by virtue of clause 1276 or 1277, is not restricted to income that arose in an accounting period ending on or after 1 April 2009 or, as regards withdrawal of relief, to claims under that Part.

3581.     See also sub-paragraph (7) of the paragraph headed “tribunal reform” in Part 21 of this Schedule.

Part 21: Other provisions

Miscellaneous profits and losses: apportionment to accounting periods ending before 1 April 2009

3582.     Clause 1307 applies to various sources of income that are taxed under Schedule D Case VI in the source legislation. It rewrites section 72 of ICTA which allows the profits of a period of account to be apportioned.

3583.     The basis of assessment for such income is the full amount of the profit arising in the accounting period (clause 8). If accounts are prepared for any of these sources it may be necessary to apportion the profits of accounts made up to a period which is not itself an accounting period to arrive at the figure of profit that arises in each relevant accounting period.

3584.     Clause 1329 provides that the Bill when enacted takes effect for corporation tax purposes for accounting periods ending after 31 March 2009. This paragraph provides that the rewritten legislation applies to a period of account that straddles 1 April 2009 even though an accounting period or periods ending before 1 April 2009 are affected. This Bill includes a number of minor changes in the law. Without this paragraph it would be necessary for taxpayers to take account of those changes only for the accounting period ending on or after 1 April 2009.

3585.     If the taxpayer does not want the new law to apply to a transaction that occurred before 1 April 2009 it can elect for the old legislation to continue to apply (see Part 2 of this Schedule).

Charge to tax under Case VI of Schedule D in subordinate legislation

3586.     These paragraphs preserve the effect of references to Schedule D Case VI in subordinate legislation. Where a provision such as section 396 of ICTA refers to something "within the charge to corporation tax under Case VI of Schedule D", that reference is sufficient to pick up any such part of the charge as is applied in secondary legislation. For an example of this, see paragraph 58 of the Authorised Investment Funds (Tax) Regulations 2006 (SI 2006/964).

3587.     Such references to Schedule D Case VI are replaced by references to provisions in the table in section 834A of ICTA (which is inserted by Schedule 1 to this Bill). The first paragraph ensures that such parts of the charge to corporation tax that are in secondary legislation are treated as within the table in that section. The second paragraph ensures that any such secondary legislation that had effect for the purposes of loss relief in respect of a transaction to which Schedule D Case VI applied continues to have equivalent effect.

Tribunal reform

3588.     This paragraph makes provision for a number of rules to apply by reference to the functions of General or Special Commissioners until those functions are transferred to the First-tier Tribunal or Upper Tribunal in accordance with an order made under section 30 (1) of the Tribunals, Courts and Enforcement Act 2007.

3589.     A draft of such an order (“the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2008”) has been laid before Parliament for approval by resolution of each House of Parliament in accordance with section 49(5) of the Tribunals, Courts and Enforcement Act 2007. The order proposes the transfer of the functions of the General Commissioners and Special Commissioners to the First-tier Tribunal or Upper Tribunal by means of amendments of references to General Commissioners and Special Commissioners in primary and secondary legislation. It also proposes the repeal of various provisions including sections 31B to 31D of TMA and section 584(9) of ICTA as well as the insertion of appropriate replacement appellate procedures where needed. The draft order proposes coming into force on 1 April 2009.

3590.     The drafting of the Bill assumes the proposals in the draft order will be in force on 1 April 2009, the date on which the Bill itself comes into force. This paragraph preserves the position under the law as it stood before that date, for the clauses rewriting provisions that refer to procedures before General or Special Commissioners, in the event that the draft order comes into force later than 1 April 2009. It also preserves a transitional rule, under which the right of appeal to the Special Commissioners, in section 584(9) of ICTA, is retained for cases involving questions on the operation of that section or Part 18 of the Bill that refer to income arising in an accounting period ending before 1 April 2009. See Change 98 in Annex 1.

Schedule 3: Repeals and revocations

3591.     This Schedule contains repeals and revocations of enactments including some spent enactments.

Schedule 4: Index of defined expressions

3592.     This Schedule lists expressions defined in this Act or in other Acts.

3593.     The definition of “registered industrial and provident society” is inserted into section 834(1) of ICTA by Schedule 1 to this Bill.


3594.     The Bill will not require any additions to previously planned expenditure. Revision of guidance for users and for staff will be undertaken as part and parcel of the process of improving such material and keeping it up to date in response to new legislation and other changes. The minor changes in the law in the Bill are expected to have negligible effect on tax revenues.


3595.     The Bill will not require any increase in the number of staff in HMRC or other departments.


3596.     An implementation stage impact assessment of the effects of the Bill is available at or from Jackie Bartlett, Tax Law Rewrite Project, HMRC, 8th Floor, SW Wing, Bush House, Strand, London WC2B 4RD (Telephone 020 7438 7606).

3597.     In summary, the Bill is expected to benefit companies, external tax professionals and agents as well as HMRC staff. The benefits are broadly summarised as:

  • greater ease of use of the legislation with fewer disputes or errors concerning the meaning of the law; and

  • less time spent navigating, understanding and applying the legislation correctly.

3598.     In addition:

  • tax professionals new to the legislation will find it easier to understand and learn; and

  • greater ease of use of the legislation will result in lower costs.

3599.     There will be some one-off costs to business: there will be retraining costs for users in familiarising themselves with the new legislation and commercial publishers and software suppliers will need to update their products.


3600.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement, before second reading, about the compatibility of the provisions of the Bill with the Convention rights (as defined in section 1 of that Act).

3601.     The Chancellor of the Exchequer has made the following statement:

In my view the provisions of the Corporation Tax Bill are compatible with the Convention rights.

3602.     The provisions of the Bill have been the subject of careful consideration in order to ensure that they are compatible with the Convention rights. The following provisions have received closest scrutiny. Articles referred to below are Articles of the Convention.

Clause 245

3603.     This clause provides that an officer of HMRC may by notice require a person, thought by the officer to have information about the effective duration of a lease, to provide information on matters specified in the notice. In relation to a solicitor acting for a client, the scope of the information is limited to whether the solicitor was acting on behalf of the client and that client’s name and address.

3604.     The solicitor/client relationship is in principle protected by Article 8. Nevertheless, this clause has a legitimate aim and is a proportionate means of obtaining the information, since it is discretionary in nature and therefore allows the officer to use alternative, less intrusive means if available. It does not offend the limits of legal professional privilege, since it does not result in the disclosure of legal advice itself. It is therefore compatible with the Article 8 rights of both the taxpayer and the solicitor.

Clauses 333, 334, 609 and 610

3605.     These clauses rewrite Paragraph 10A of Schedule 9 to FA 1996 (loan relationships) and Paragraph 22A of Schedule 26 to FA 2002 (derivative contracts). They apply where a United Kingdom resident company asset holder ceases to be resident or where the asset ceases to be held for the purposes of a permanent establishment in the United Kingdom. In either case the relevant event causes the asset to be taxed at fair (market) value.

3606.     The apparent difference in treatment, between resident and non-resident companies, does not engage Article 14 (in conjunction with Article 1 of Protocol 1). There is no use of a personal characteristic as a ground for the difference in treatment.

Clauses 792 and 793

3607.     These clauses rewrite part of Paragraph 66 of Schedule 29 to FA 2002, relating to intangible fixed assets. That paragraph allows the reallocation of a chargeable realisation gain (described in clause 741) between members of a group of companies, on certain conditions. The main condition is that the transferee company must be resident in the United Kingdom or trading through a permanent establishment not exempt from corporation tax under double taxation rules.

3608.     The apparent different treatment of non-resident group companies not trading here is not incompatible with Article 14 (prohibition of discrimination), taken in conjunction with Article 1 Protocol 1 (protection of property), because such a company is not in a comparable situation to resident group companies, not having the same economic connection with the United Kingdom. Nor is the difference in treatment based upon a personal characteristic. Further, in so far as the condition is intended to prevent reallocation of charges outside the United Kingdom tax net, it is an anti-avoidance provision which pursues a legitimate aim in a proportionate manner.

Clause 1207

3609.     The offence created in this clause consists of unlawful disclosure of private taxpayer information by officials acting for the Secretary of State for Culture, Media and Sport and officials of the United Kingdom Film Council. A defence is available if the official shows that he or she reasonably believed that the disclosure was lawful or that the information was already available to the public. Disclosure is “lawful” if it is made in accordance with one of the six exceptions listed in clause 1206(3) (for example, if disclosure is authorised by an enactment, under an order of a court or with the consent of the person to whom the information relates).

3610.     The reverse onus in this provision does not offend the presumption of innocence in Article 6(2), since it does not remove the presumption, but merely allows a specific defence which, when weighed against the taxpayer confidentiality rights, is both appropriate and fair.

Part 2 of Schedule 2

3611.     The Bill makes minor changes to the law in the interests of simplification and to bring the legislation into line with current practice. These changes have either no practical effect or only small effects. A small number may make small increases in the amount of tax payable for a small group of taxpayers. In addition, the wording of the Bill differs from the wording of the legislation it replaces in very many detailed particulars. Although the contents of the Bill have been examined with great care, it is still possible that some of these detailed changes will operate to change the law in ways that cannot now be foreseen. Some of the changes arising in this way may have effect so as to impose a charge to tax in respect of events occurring before the respective provisions have effect.

3612.     Part 2 of Schedule 2, therefore, addresses the possibility of an unfair adverse effect upon a taxpayer, and possibly upon the taxpayer’s Convention rights. A corresponding provision was included in ITA. If there is an action or event prior to the coming into force of the Bill which has certain tax consequences, and the effect of the Bill is that those tax consequences change when the Bill comes into force, the taxpayer may opt that the tax consequences after the Bill comes into force are to be the same as they were under the “old” law. While Article 1 of Protocol 1 is engaged, the provision satisfies the fair balance test in that Article.


3613.     The Bill extends to the whole of the United Kingdom.

3614.     Because the Sewel Convention provides that Westminster will not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament, if there are amendments relating to such matters which trigger the Convention, consent of the Scottish Parliament will be sought for them.


3615.     The substantive provisions of this Bill will come into force on 1 April 2009. Clause 1329 provides for it to have effect:

  • for corporation tax purposes, for accounting periods ending on or after that day; and

  • for income tax and capital gains tax purposes, for the tax year 2009-10 and subsequent tax years.

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Prepared: 5 December 2008