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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

1       

Overview of Act

(1)   

Part 2 of this Act contains basic provisions about the charge to corporation tax

including—

5

(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),

10

(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,

10

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),

15

(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

30

and Schedule 4.

Part 2

Charge to corporation tax: basic provisions

Chapter 1

The charge to corporation tax

35

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

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(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

5

provisions of the Corporation Tax Acts that deal with its application.

3       

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

10

(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.

4       

Exclusion of charge to capital gains tax

15

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

5       

Territorial scope of charge

20

(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.

6       

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.

 
 

Corporation Tax Bill
Part 2 — Charge to corporation tax: basic provisions
Chapter 2 — Accounting periods

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7       

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.

8       

How tax is charged and assessed

5

(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

10

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

9       

Beginning of accounting period

(1)   

An accounting period of a company begins—

20

(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

25

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.

10      

End of accounting period

35

(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,

 
 

Corporation Tax Bill
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,

5

(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,

10

(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—

15

(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—

20

(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

25

provides for an accounting period of a company to which this section applies

to end at a different time.

11      

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

30

(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

35

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.

12      

Companies being wound up

(1)   

This section applies if a company is being wound up.

40

(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.

 
 

Corporation Tax Bill
Part 2 — Charge to corporation tax: basic provisions
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.

10

(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

15

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

20

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.

14      

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

35

company is not resident in that place for the purposes of the Corporation Tax

Acts.

15      

Continuation of residence established under common law

(1)   

This section applies to a company which is neither—

(a)   

incorporated in the United Kingdom, nor

40

 
 

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,

5

   

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

10

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.

16      

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).

20

(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

25

registered office from the United Kingdom.

17      

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).

30

(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

35

registered office from the United Kingdom.

18      

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,

40

   

for the purposes of any double taxation arrangements.

 
 

 
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