Corporation Tax Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 1 — Introduction
1

A
Bill
[AS AMENDED IN THE JOINT COMMITTEE]
To
restate, with minor changes, certain enactments relating to corporation tax;
and for connected purposes.
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—
Part 1
Introduction
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Overview of Act
(1)
Part 2 of this Act contains basic provisions about the charge to corporation tax
including—
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(a)
the imposition of the charge to corporation tax on the income and
chargeable gains of companies (referred to collectively as “profits”),
(see section 2),
(b)
the exclusion of income and chargeable gains subject to corporation tax
from income tax and capital gains tax (see sections 3 and 4),
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(c)
provision about the territorial scope of the charge to corporation tax
(see section 5 and Chapter 4),
(d)
provision about how corporation tax is charged and assessed, in
particular its charging and assessment by reference to accounting
periods (see section 8),
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(e)
provision about accounting periods (see Chapter 2), and
(f)
rules for determining the residence of companies (see Chapter 3).
(2)
Under section 2(4) the charge to corporation tax on income has effect in
accordance with the provisions of the Corporation Tax Acts that deal with its
application, the main provisions of this Act that do so being—
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(a)
Part 3 (trading income),

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Corporation Tax Bill
Part 2 — Charge to corporation tax: basic provisions
Chapter 1 — The charge to corporation tax
2

(b)
Part 4 (property income),
(c)
Parts 5 and 6 (profits arising from loan relationships),
(d)
Part 7 (profits arising from derivative contracts),
(e)
Part 8 (gains in respect of intangible fixed assets),
(f)
Part 9 (profits arising from disposals of know-how and sales of patent
5
rights), and
(g)
Part 10 (miscellaneous income).
(3)
Part 7 also applies the charge to corporation tax on chargeable gains to certain
profits arising from derivative contracts.
(4)
Parts 5 to 8 also deal with how deficits or losses arising from, or in respect of,
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the matters to which they relate are brought into account for corporation tax
purposes.
(5)
The following Parts provide relief for particular types of expenditure—
(a)
Part 11 (relief for particular employee share acquisition schemes),
(b)
Part 12 (other relief for employee share acquisitions),
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(c)
Part 13 (additional relief for expenditure on research and
development),
(d)
Part 14 (remediation of contaminated land), and
(e)
Part 15 (film production).
(6)
The following Parts contain special rules for particular cases—
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(a)
Part 15 (film production),
(b)
Part 16 (companies with investment business),
(c)
Part 17 (partnerships), and
(d)
Part 18 (unremittable income).
(7)
The following Parts contain provisions of general application—
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(a)
Part 19 (general exemptions),
(b)
Part 20 (general calculation rules), and
(c)
Part 21 (other general provisions, including definitions for the purposes
of the Act).
(8)
For abbreviations and defined expressions used in this Act, see section 1312
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and Schedule 4.
Part 2
Charge to corporation tax: basic provisions
Chapter 1
The charge to corporation tax
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Charge to tax on profits
2
Charge to corporation tax
(1)
Corporation tax is charged on profits of companies for any financial year for
which an Act so provides.

Corporation Tax Bill
Part 2 — Charge to corporation tax: basic provisions
Chapter 1 — The charge to corporation tax
3

(2)
In this Part “profits” means income and chargeable gains, except in so far as the
context otherwise requires.
(3)
In this Act “the charge to corporation tax on income” means the charge under
subsection (1) so far as relating to income.
(4)
The charge to corporation tax on income has effect in accordance with the
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provisions of the Corporation Tax Acts that deal with its application.
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Exclusion of charge to income tax
(1)
The provisions of the Income Tax Acts relating to the charge to income tax do
not apply to income of a company if—
(a)
the company is UK resident, or
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(b)
the company is not UK resident and the income is within its chargeable
profits as defined by section 19.
(2)
Subsection (1) does not apply to income accruing to a company in a fiduciary
or representative capacity.
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Exclusion of charge to capital gains tax
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Capital gains tax is not charged on gains accruing to a company in respect of
which the company is chargeable to corporation tax, or would be so chargeable
but for an exemption.
General scheme of corporation tax
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Territorial scope of charge
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(1)
A UK resident company is chargeable to corporation tax on all its profits
wherever arising.
(2)
A non-UK resident company is within the charge to corporation tax only if it
carries on a trade in the United Kingdom through a permanent establishment
in the United Kingdom.
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(3)
A non-UK resident company which carries on a trade in the United Kingdom
through a permanent establishment in the United Kingdom is chargeable to
corporation tax on all its profits wherever arising that are chargeable profits as
defined in section 19 (profits attributable to its permanent establishment in the
United Kingdom).
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(4)
Subsections (1) and (3) are subject to any exceptions provided for by the
Corporation Tax Acts.
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Profits accruing in fiduciary or representative capacity
(1)
A company is not chargeable to corporation tax on profits which accrue to it in
a fiduciary or representative capacity except as respects its own beneficial
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interest (if any) in the profits.
(2)
The exception under subsection (1) from chargeability does not apply to profits
arising in the winding up of the company.

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Part 2 — Charge to corporation tax: basic provisions
Chapter 2 — Accounting periods
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Profits accruing under trusts
Profits that accrue for the benefit of a company under a trust are treated for the
purposes of the charge to corporation tax under section 2(1) as accruing
directly to the company.
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How tax is charged and assessed
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(1)
Corporation tax for a financial year is charged on profits arising in the year.
(2)
Corporation tax is calculated and chargeable, and assessments to corporation
tax are made, by reference to accounting periods.
(3)
Corporation tax which is assessed and charged for an accounting period of a
company is assessed and charged on the full amount of profits arising in the
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accounting period.
(4)
Subsection (3) is subject to any contrary provision in the Corporation Tax Acts.
(5)
If a company’s accounting period falls within more than one financial year, the
amount of the profits arising in the accounting period that is chargeable to
corporation tax must be apportioned between the financial years in which the
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accounting period falls.
Chapter 2
Accounting periods
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Beginning of accounting period
(1)
An accounting period of a company begins—
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(a)
when the company comes within the charge to corporation tax, or
(b)
immediately after the end of the previous accounting period of the
company, if the company is still within the charge to corporation tax.
(2)
For the purposes of this section a UK resident company is treated as coming
within the charge to corporation tax when it starts to carry on business, if it
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would not otherwise be within the charge to corporation tax.
(3)
If a chargeable gain or allowable loss accrues to a company at a time which is
not (ignoring this subsection) within an accounting period of the company—
(a)
an accounting period of the company begins at that time, and
(b)
the gain or loss accrues in that accounting period.
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(4)
This section does not apply if section 12 (companies being wound up) applies.
(5)
This section is subject to any provision of the Corporation Tax Acts which
provides for an accounting period of a company to which this section applies
to begin at a different time.
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End of accounting period
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(1)
An accounting period of a company comes to an end on the first occurrence of
any of the following—
(a)
the ending of 12 months from the beginning of the accounting period,
(b)
an accounting date of the company,

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Part 2 — Charge to corporation tax: basic provisions
Chapter 2 — Accounting periods
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(c)
if there is a period for which the company does not make up accounts,
the end of that period,
(d)
the company starting or ceasing to trade,
(e)
if the company carries on only one trade, coming, or ceasing to be,
within the charge to corporation tax in respect of that trade,
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(f)
if the company carries on more than one trade, coming, or ceasing to be,
within the charge to corporation tax in respect of all the trades it carries
on,
(g)
the company becoming, or ceasing to be, UK resident,
(h)
the company ceasing to be within the charge to corporation tax,
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(i)
the company entering administration, and
(j)
the company ceasing to be in administration.
(2)
If subsection (1)(i) applies, the accounting period is treated as having ended
immediately before the day on which the company enters administration.
(3)
For the purposes of this section a company enters administration—
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(a)
when it enters administration under Schedule B1 to the Insolvency Act
1986 (c. 45), or
(b)
when it is subject to a corresponding procedure, other than one under
that Act.
(4)
For the purposes of this section a company ceases to be in administration—
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(a)
when it ceases to be in administration under Schedule B1 to the
Insolvency Act 1986, or
(b)
when a corresponding event occurs, other than under that Act.
(5)
This section does not apply if section 12 (companies being wound up) applies.
(6)
This section is subject to any provision of the Corporation Tax Acts which
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provides for an accounting period of a company to which this section applies
to end at a different time.
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Companies with more than one accounting date
(1)
This section applies if a company carrying on more than one trade—
(a)
does not have the same accounting date for each of the trades, and
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(b)
does not make up general accounts for the whole of the company’s
activities.
(2)
The company may choose which of the accounting dates for the trades is to be
used for the purpose of section 10(1)(b).
(3)
But if an officer of Revenue and Customs thinks, on reasonable grounds, that
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the date chosen by the company is inappropriate, the officer may give notice to
the company directing one of the other accounting dates to be used for that
purpose instead.
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Companies being wound up
(1)
This section applies if a company is being wound up.
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(2)
An accounting period of the company ends immediately before the winding
up starts.
(3)
An accounting period of the company begins when the winding up starts.

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Chapter 3 — Company residence
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(4)
After the winding up starts, an accounting period of the company ends—
(a)
at the end of the period of 12 months beginning on the first day of the
accounting period, or
(b)
if earlier, when the winding up is completed.
(5)
After the winding up starts, an accounting period of the company begins
5
immediately after the end of the previous accounting period of the company,
if the winding up has not been completed.
(6)
This section is subject to any provision of the Corporation Tax Acts which
provides for an accounting period of a company to which this section applies
to begin or end at a different time.
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(7)
For the purposes of this section a winding up of a company starts—
(a)
when the company passes a resolution for the winding up of the
company,
(b)
when a petition for the winding up of the company is presented, if the
company has not already passed such a resolution and a winding up
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order is made on the petition, or
(c)
when an act is done in relation to the company for a similar purpose, if
the winding up is not under the Insolvency Act 1986 (c. 45).
Chapter 3
Company residence
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13
Overview of Chapter
(1)
This Chapter contains rules for determining the residence of companies.
(2)
Section 14 gives the main rule for companies incorporated in the United
Kingdom (including SEs and SCEs incorporated in the United Kingdom).
(3)
Section 15 deals with companies which have been UK resident under the rules
25
of common law and provides for their continued residence when certain
circumstances arise.
(4)
Sections 16 and 17 deal with SEs and SCEs which transfer their registered office
to the United Kingdom.
(5)
Section 18 contains a special rule for companies treated as non-UK resident
30
under double taxation arrangements.
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Companies incorporated in the United Kingdom
(1)
A company which is incorporated in the United Kingdom is UK resident for
the purposes of the Corporation Tax Acts.
(2)
Accordingly, even if a different place of residence is given by a rule of law, the
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company is not resident in that place for the purposes of the Corporation Tax
Acts.
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Continuation of residence established under common law
(1)
This section applies to a company which is neither—
(a)
incorporated in the United Kingdom, nor
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Corporation Tax Bill
Part 2 — Charge to corporation tax: basic provisions
Chapter 3 — Company residence
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(b)
resident in the United Kingdom by virtue of section 16 or 17.
(2)
If the company—
(a)
is no longer carrying on a business, and
(b)
was UK resident for the purposes of the Corporation Tax Acts
immediately before it ceased to carry on business,
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the company continues to be UK resident for the purposes of the Corporation
Tax Acts.
(3)
If the company—
(a)
is being wound up outside the United Kingdom, and
(b)
was UK resident for the purposes of the Corporation Tax Acts
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immediately before any of its activities came under the control of a
foreign liquidator,

the company continues to be UK resident for the purposes of the Corporation
Tax Acts.
(4)
In subsection (3) “foreign liquidator” means a person exercising functions
15
which, in the United Kingdom, would be exercisable by a liquidator.
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SEs which transfer registered office to the United Kingdom
(1)
This section applies to an SE which transfers its registered office to the United
Kingdom in accordance with Article 8 of Council Regulation (EC) No 2157/
2001 on the Statute for a European company (Societas Europaea).
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(2)
The SE is UK resident for the purposes of the Corporation Tax Acts from the
time of its registration in the United Kingdom.
(3)
Accordingly, even if a different place of residence is given by a rule of law, the
SE is not resident in that place for the purposes of the Corporation Tax Acts.
(4)
The SE does not cease to be UK resident merely because it later transfers its
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registered office from the United Kingdom.
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SCEs which transfer registered office to the United Kingdom
(1)
This section applies to an SCE which transfers its registered office to the United
Kingdom in accordance with Article 7 of Council Regulation (EC) No 1435/
2003 on the Statute for a European Cooperative Society (SCE).
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(2)
The SCE is UK resident for the purposes of the Corporation Tax Acts from the
time of its registration in the United Kingdom.
(3)
Accordingly, even if a different place of residence is given by a rule of law, the
SCE is not resident in that place for the purposes of the Corporation Tax Acts.
(4)
The SCE does not cease to be UK resident merely because it later transfers its
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registered office from the United Kingdom.
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Companies treated as non-UK resident under double taxation arrangements
(1)
This section applies to a company which is treated as—
(a)
resident in a territory outside the United Kingdom, and
(b)
non-UK resident,
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for the purposes of any double taxation arrangements.