|
| |
| |
(b) | in relation to a unit trust scheme, means an entitlement to a share in the |
| |
investments of the scheme, and |
| |
(c) | in relation to an offshore fund, means— |
| |
(i) | shares in any company by which the fund is constituted, or |
| |
(ii) | an entitlement to a share in the investments of the fund. |
| 5 |
(4) | In this section “relevant accounting period” means the accounting period |
| |
referred to in section 490(1). |
| |
496 | Meaning of “hedging relationship” |
| |
(1) | For the purposes of section 494, in relation to an open-ended investment |
| |
company, a unit trust scheme or an offshore fund, there is a hedging |
| 10 |
relationship between a derivative contract (“the hedging instrument”) and an |
| |
asset (“the hedged item”) so far as condition A or B is met. |
| |
(2) | Condition A is that the hedging instrument and the hedged item are |
| |
designated as a hedge by the company, scheme or fund. |
| |
(3) | Condition B is that the hedging instrument is intended to act as a hedge of |
| 15 |
exposure to changes in fair value of a hedged item which is— |
| |
(a) | a recognised asset which could affect the total net return of the |
| |
company, scheme or fund, or |
| |
(b) | an identified part of such an asset which is attributable to a particular |
| |
| 20 |
(4) | For the purposes of subsection (3) “the total net return” of a company, scheme |
| |
or fund means its total net return calculated— |
| |
(a) | in accordance with generally accepted accounting practice, or |
| |
(b) | in the case of accounts prepared in a jurisdiction outside the United |
| |
Kingdom, in accordance with generally accepted accounting practice in |
| 25 |
| |
Power to change investments that are qualifying investments |
| |
497 | Power to change investments that are qualifying investments |
| |
(1) | The Treasury may by order amend sections 493 to 496 so as to extend or restrict |
| |
the descriptions of investments of an open-ended investment company, a unit |
| 30 |
trust scheme or an offshore fund that are qualifying investments for the |
| |
purposes of those provisions. |
| |
| |
(a) | different provision for different cases, and |
| |
(b) | incidental, supplemental, consequential and transitional provision and |
| 35 |
| |
(3) | In particular, the order may make such incidental modifications of section |
| |
495(2) as the Treasury consider appropriate. |
| |
| |
| |
|
| |
| |
| |
| |
498 | Building society dividends and interest |
| |
(1) | This section deals with how building society dividends and interest are dealt |
| |
with for corporation tax purposes. |
| 5 |
(2) | Liability to pay building society interest or building society dividends is |
| |
treated for the purposes of Part 5 as a liability arising under a loan relationship |
| |
(so far it would not otherwise be such a liability). |
| |
(3) | If building society interest or building society dividends are payable to a |
| |
company, they are treated as so payable as the result of a right arising under a |
| 10 |
loan relationship of the company (so far as they would not otherwise be so |
| |
| |
(4) | Subsection (3) applies to interest paid under a certified SAYE savings |
| |
arrangement with a building society as if it were a dividend on a share in the |
| |
| 15 |
| |
“building society dividends” means dividends payable in respect of |
| |
shares in a building society, |
| |
“building society interest” means interest payable in respect of shares in, |
| |
deposits with, or loans to, a building society, |
| 20 |
“certified SAYE savings arrangement” has the meaning given by section |
| |
| |
“dividend” includes any distribution, however described. |
| |
| |
Industrial and provident societies |
| 25 |
499 | Industrial and provident society payments treated as interest under loan |
| |
| |
(1) | Any dividend, bonus or other sum payable to a shareholder in— |
| |
(a) | a registered industrial and provident society, or |
| |
(b) | a UK agricultural or fishing co-operative, |
| 30 |
| is treated for corporation tax purposes as interest under a loan relationship of |
| |
the society or co-operative if it is payable by reference to the amount of the |
| |
shareholder’s holding in its share capital. |
| |
(2) | If subsection (1) applies— |
| |
(a) | so far as the shareholder’s holding is held for the purposes of a trade, |
| 35 |
the shareholder is treated for the purposes of section 297 as a party to |
| |
the loan relationship referred to in subsection (1) for that purpose, and |
| |
(b) | so far as the holding is held for any other purpose, the shareholder is |
| |
treated for the purposes of that section as a party to that loan |
| |
relationship for that other purpose. |
| 40 |
(3) | In subsection (1) “UK agricultural or fishing co-operative” means a co- |
| |
| |
| |
| |
|
| |
| |
(a) | which is established in the United Kingdom and UK resident, and |
| |
(b) | whose primary object is assisting its members in— |
| |
(i) | carrying on agricultural or horticultural businesses on land |
| |
occupied by them in the United Kingdom, or |
| |
(ii) | carrying on businesses consisting in the catching or taking of |
| 5 |
| |
(4) | In subsection (3) “co-operative association” means a body with a written |
| |
constitution from which the Secretary of State considers that it is in substance |
| |
a co-operative association. |
| |
(5) | For the purposes of subsection (4), the Secretary of State must have regard to |
| 10 |
the way in which the body’s constitution provides for its income to be applied |
| |
for its members’ benefit and all other relevant provisions. |
| |
(6) | In the application of subsections (4) and (5) in Northern Ireland for “the |
| |
Secretary of State” substitute “the Department of Agriculture and Rural |
| |
| 15 |
500 | Exclusion of interest where failure to make return |
| |
(1) | This section applies if for any accounting period a registered industrial and |
| |
provident society is obliged to make a return under section 887(2) of ITA 2007. |
| |
(2) | If the society has not made the return within 3 months after the end of the |
| |
period, no interest paid by it in the period is to be brought into account for the |
| 20 |
period for the purposes of Part 5. |
| |
(3) | It does not matter for the purposes of subsection (2) whether the payment |
| |
would be interest apart from section 499. |
| |
| |
Alternative finance arrangements |
| 25 |
| |
501 | Introduction to Chapter |
| |
(1) | This Chapter provides for alternative finance arrangements between |
| |
companies and financial institutions to be treated as loan relationships (see |
| |
| 30 |
(2) | In this Part “alternative finance arrangements” means— |
| |
(a) | purchase and resale arrangements, |
| |
(b) | diminishing shared ownership arrangements, |
| |
(c) | deposit arrangements, |
| |
(d) | profit share agency arrangements, and |
| 35 |
(e) | investment bond arrangements. |
| |
| |
(a) | “purchase and resale arrangements” means arrangements to which |
| |
| |
| |
| |
|
| |
| |
(b) | “diminishing shared ownership arrangements” means arrangements to |
| |
which section 504 applies, |
| |
(c) | “deposit arrangements” means arrangements to which section 505 |
| |
| |
(d) | “profit share agency arrangements” means arrangements to which |
| 5 |
| |
(e) | “investment bond arrangements” means arrangements to which |
| |
| |
(4) | For the meaning of “financial institution”, see section 502. |
| |
502 | Meaning of “financial institution” |
| 10 |
(1) | In this Chapter “financial institution” means— |
| |
(a) | a bank, as defined by section 840A of ICTA, |
| |
(b) | a building society within the meaning of the Building Societies Act 1986 |
| |
| |
(c) | a wholly-owned subsidiary of a bank within paragraph (a) or a |
| 15 |
building society within paragraph (b), |
| |
(d) | a person authorised by a licence under Part 3 of the Consumer Credit |
| |
Act 1974 (c. 39) to carry on a consumer credit business or consumer hire |
| |
business within the meaning of that Act, |
| |
(e) | a bond-issuer, within the meaning of section 507, but only in relation to |
| 20 |
any bond assets which are rights under purchase and resale |
| |
arrangements or diminishing shared ownership arrangements, or |
| |
(f) | a person authorised in a jurisdiction outside the United Kingdom— |
| |
(i) | to receive deposits or other repayable funds from the public, |
| |
| 25 |
(ii) | to grant credits for its own account. |
| |
(2) | For the purposes of subsection (1)(c) a company is a wholly-owned subsidiary |
| |
of a bank or building society (“the parent”) if it has no members except— |
| |
(a) | the parent or persons acting on behalf of the parent, and |
| |
(b) | the parent’s wholly-owned subsidiaries or persons acting on behalf of |
| 30 |
the parent’s wholly-owned subsidiaries. |
| |
Arrangements that are alternative finance arrangements |
| |
503 | Purchase and resale arrangements |
| |
(1) | This section applies to arrangements if— |
| |
(a) | they are entered into between two persons (“the first purchaser” and |
| 35 |
“the second purchaser”), one or both of whom are financial institutions, |
| |
| |
(b) | under the arrangements— |
| |
(i) | the first purchaser purchases an asset and sells it to the second |
| |
| 40 |
(ii) | the sale occurs immediately after the purchase or in the |
| |
circumstances mentioned in subsection (2), |
| |
(iii) | all or part of the second purchase price is not required to be paid |
| |
until a date later than that of the sale, |
| |
(iv) | the second purchase price exceeds the first purchase price, and |
| 45 |
| |
| |
|
| |
| |
(v) | the excess equates, in substance, to the return on an investment |
| |
| |
(2) | The circumstances are that— |
| |
(a) | the first purchaser is a financial institution, and |
| |
(b) | the asset referred to in subsection (1)(b)(i) was purchased by the first |
| 5 |
purchaser for the purpose of entering into arrangements within this |
| |
| |
| |
“the first purchase price” means the amount paid by the first purchaser in |
| |
respect of the purchase, and |
| 10 |
“the second purchase price” means the amount payable by the second |
| |
purchaser in respect of the sale. |
| |
(4) | This section is subject to section 508 (provision not at arm’s length: exclusion |
| |
of arrangements from this section and sections 504 to 507). |
| |
504 | Diminishing shared ownership arrangements |
| 15 |
(1) | This section applies to arrangements if under them— |
| |
(a) | a financial institution (“the first owner”) acquires a beneficial interest in |
| |
| |
(b) | another person (“the eventual owner”) also acquires a beneficial |
| |
| 20 |
(c) | the eventual owner is to make payments to the first owner amounting |
| |
in aggregate to the consideration paid for the acquisition of the first |
| |
owner’s beneficial interest (but subject to any adjustment required for |
| |
such a reduction as is mentioned in subsection (5)), |
| |
(d) | the eventual owner is to acquire the first owner’s beneficial interest |
| 25 |
(whether or not in stages) as a result of those payments, |
| |
(e) | the eventual owner is to make other payments to the first owner |
| |
(whether under a lease forming part of the arrangements, or |
| |
| |
(f) | the eventual owner has the exclusive right to occupy or otherwise to |
| 30 |
| |
(g) | the eventual owner is exclusively entitled to any income, profit or gain |
| |
arising from or attributable to the asset (including, in particular, an |
| |
| |
(2) | For the purposes of subsection (1)(a) it does not matter if— |
| 35 |
(a) | the first owner acquires its beneficial interest from the eventual owner, |
| |
(b) | the eventual owner, or another person who is not the first owner, also |
| |
has a beneficial interest in the asset, or |
| |
(c) | the first owner also has a legal interest in it. |
| |
(3) | Subsection (1)(f) does not prevent the eventual owner from granting an interest |
| 40 |
or right in relation to the asset if the conditions in subsection (4) are met. |
| |
(4) | The conditions are that— |
| |
| |
| |
(ii) | a person controlled by the first owner, or |
| 45 |
| |
| |
|
| |
| |
(iii) | a person controlled by a person who also controls the first |
| |
| |
(b) | the grant is not required by the first owner or arrangements to which |
| |
the first owner is a party. |
| |
(5) | Subsection (1)(g) does not prevent the first owner from— |
| 5 |
(a) | having responsibility for any reduction in the asset’s value, or |
| |
(b) | having a share in a loss arising out of any such reduction. |
| |
(6) | This section is subject to section 508 (provision not at arm’s length: exclusion |
| |
of arrangements from section 503, this section and sections 505 to 507). |
| |
| 10 |
(1) | This section applies to arrangements if under them— |
| |
(a) | a person (“the depositor”) deposits money with a financial institution, |
| |
(b) | the money, together with money deposited with the institution by |
| |
other persons, is used by it with a view to producing a profit, |
| |
(c) | from time to time the institution makes or credits a payment to the |
| 15 |
depositor out of profit resulting from the use of the money, |
| |
(d) | the payment is in proportion to the amount deposited by the depositor, |
| |
| |
(e) | the payments so made or credited by the institution equate, in |
| |
substance, to the return on an investment of money at interest. |
| 20 |
(2) | This section is subject to section 508 (provision not at arm’s length: exclusion |
| |
of arrangements from sections 503 and 504, this section, and sections 506 and |
| |
| |
506 | Profit share agency arrangements |
| |
(1) | This section applies to arrangements if under them— |
| 25 |
(a) | a person (“the principal”) appoints a financial institution as agent, |
| |
(b) | the agent uses money provided by the principal with a view to |
| |
| |
(c) | the principal is entitled, to a specified extent, to profits resulting from |
| |
| 30 |
(d) | the agent is entitled to any additional profits resulting from its use (and |
| |
may also be entitled to a fee paid by the principal), and |
| |
(e) | payments made because of the principal’s entitlement to profits equate, |
| |
in substance, to the return on an investment of money at interest. |
| |
(2) | This section is subject to section 508 (provision not at arm’s length: exclusion |
| 35 |
of arrangements from sections 503 to 505, this section and section 507). |
| |
507 | Investment bond arrangements |
| |
(1) | This section applies to arrangements if— |
| |
(a) | they provide for one person (“the bond-holder”) to pay a sum of money |
| |
(“the capital”) to another (“the bond-issuer”), |
| 40 |
(b) | they identify assets, or a class of assets, which the bond-issuer will |
| |
acquire for the purpose of generating income or gains directly or |
| |
indirectly (“the bond assets”), |
| |
| |
| |
|
| |
| |
(c) | they specify a period at the end of which they cease to have effect (“the |
| |
| |
(d) | the bond-issuer undertakes under the arrangements— |
| |
(i) | to dispose at the end of the bond term of any bond assets which |
| |
are still in the bond-issuer’s possession, |
| 5 |
(ii) | to make a repayment of the capital (“the redemption payment”) |
| |
to the bond-holder during or at the end of the bond-term |
| |
(whether or not in instalments), and |
| |
(iii) | to pay to the bond-holder other payments on one or more |
| |
occasions during or at the end of the bond term (“additional |
| 10 |
| |
(e) | the amount of the additional payments does not exceed an amount |
| |
which would be a reasonable commercial return on a loan of the capital, |
| |
(f) | under the arrangements the bond-issuer undertakes to arrange for the |
| |
management of the bond assets with a view to generating income |
| 15 |
sufficient to pay the redemption payment and additional payments, |
| |
(g) | the bond-holder is able to transfer the rights under the arrangements to |
| |
another person (who becomes the bond-holder because of the transfer), |
| |
(h) | the arrangements are a listed security on a recognised stock exchange, |
| |
| 20 |
(i) | the arrangements are wholly or partly treated in accordance with |
| |
international accounting standards as a financial liability of the bond- |
| |
issuer, or would be if the bond-issuer applied those standards. |
| |
(2) | For the purposes of subsection (1)— |
| |
(a) | the bond-issuer may acquire bond assets before or after the |
| 25 |
arrangements take effect, |
| |
(b) | the bond assets may be property of any kind, including rights in |
| |
relation to property owned by someone other than the bond-issuer, |
| |
(c) | the identification of the bond assets mentioned in subsection (1)(b) and |
| |
the undertakings mentioned in subsection (1)(d) and (f) may (but need |
| 30 |
not) be described as, or accompanied by a document described as, a |
| |
| |
(d) | a reference to the management of assets includes a reference to |
| |
| |
(e) | the bond-holder may (but need not) be entitled under the arrangements |
| 35 |
to terminate them, or participate in terminating them, before the end of |
| |
| |
(f) | the amount of the additional payments may be— |
| |
(i) | fixed at the beginning of the bond term, |
| |
(ii) | determined wholly or partly by reference to the value of or |
| 40 |
income generated by the bond assets, or |
| |
(iii) | determined in some other way, |
| |
(g) | if the amount of the additional payments is not fixed at the beginning |
| |
of the bond term, the reference in subsection (1)(e) to the amount of the |
| |
additional payments is a reference to the maximum amount of the |
| 45 |
| |
(h) | the amount of the redemption payment may (but need not) be subject |
| |
to reduction in the event of a fall in the value of the bond assets or in the |
| |
rate of income generated by them, and |
| |
| |
| |
|
