|
| |
|
(i) | entitlement to the redemption payment may (but need not) be capable |
| |
of being satisfied (whether or not at the option of the bond-issuer or the |
| |
bond-holder) by the issue or transfer of shares or other securities. |
| |
(3) | This section is subject to section 508. |
| |
508 | Provision not at arm’s length: exclusion of arrangements from sections 503 to |
| 5 |
| |
(1) | Arrangements to which this section applies are not— |
| |
(a) | purchase and resale arrangements, |
| |
(b) | diminishing shared ownership arrangements, |
| |
(c) | deposit arrangements, |
| 10 |
(d) | profit share agency arrangements, or |
| |
(e) | investment bond arrangements. |
| |
(2) | This section applies to arrangements if— |
| |
(a) | apart from this section they would be alternative finance arrangements, |
| |
(b) | paragraph 1(2) of Schedule 28AA to ICTA (provision not at arm’s |
| 15 |
length) requires the profits and losses of a person who is a party to the |
| |
arrangements to be calculated for tax purposes as if the arm’s length |
| |
provision referred to in paragraph 1(2)(a) of that Schedule had been |
| |
made or imposed, rather than in accordance with the arrangements, |
| |
(c) | any person who is an affected person for the purposes of that Schedule |
| 20 |
(“the affected person”) is entitled to— |
| |
(i) | relevant return in relation to the arrangements, or |
| |
(ii) | an amount representing relevant return in relation to them, and |
| |
(d) | the affected person is not subject— |
| |
(i) | to income tax or corporation tax, or |
| 25 |
(ii) | to any corresponding tax under the law of a territory outside the |
| |
| |
| on the relevant return or the amount representing it. |
| |
(3) | In this section “relevant return”, in relation to arrangements, means any |
| |
amount which would be alternative finance return if the arrangements were |
| 30 |
alternative finance arrangements. |
| |
(4) | For the meaning of “alternative finance return”, see sections 511 to 513. |
| |
Treatment as loan relationships |
| |
509 | Application of Part 5: general |
| |
(1) | Part 5 applies in relation to alternative finance arrangements to which a |
| 35 |
company (“A”) is a party as if the arrangements were a loan relationship to |
| |
| |
(2) | Accordingly, references in the Corporation Tax Acts to a loan relationship |
| |
include references to such alternative finance arrangements. |
| |
(3) | Section 510 makes further provision about the way in which Part 5 applies to |
| 40 |
particular descriptions of alternative finance arrangements. |
| |
|
| |
|
| |
|
510 | Application of Part 5 to particular alternative finance arrangements |
| |
(1) | In the case of purchase and resale arrangements, Part 5 applies in relation to A |
| |
| |
(a) | the first purchase price were the amount of a loan made by the first |
| |
purchaser to the second purchaser, and |
| 5 |
(b) | alternative finance return payable under the arrangements were |
| |
interest payable on the loan. |
| |
(2) | In the case of diminishing shared ownership arrangements, Part 5 applies in |
| |
| |
(a) | the consideration paid by the first owner for the acquisition of the first |
| 10 |
owner’s beneficial interest (“the acquisition consideration”) were the |
| |
amount of a loan made by A to the eventual owner, and |
| |
(b) | alternative finance return payable under the arrangements were |
| |
interest payable on the loan. |
| |
(3) | In the case of deposit arrangements, Part 5 applies in relation to A as if— |
| 15 |
(a) | any amount deposited under the arrangements were the amount of a |
| |
loan made by the depositor to the financial institution, and |
| |
(b) | alternative finance return payable under them were interest on the |
| |
| |
(4) | In the case of profit share agency arrangements, Part 5 applies in relation to A |
| 20 |
| |
(a) | any amount provided under the arrangements were the amount of a |
| |
loan made by the principal to the agent, and |
| |
(b) | alternative finance return payable under them were interest on the |
| |
| 25 |
(5) | In the case of investment bond arrangements, Part 5 applies in relation to A as |
| |
if alternative finance return payable to or by A under them were interest |
| |
payable under the loan relationship. |
| |
| |
“the depositor” has the same meaning as in section 505 (see subsection (1) |
| 30 |
| |
“the eventual owner” has the same meaning as in section 504 (see |
| |
subsection (1) of that section), |
| |
“the first owner” has the same meaning as in section 504 (see subsection |
| |
| 35 |
“the first purchaser” has the same meaning as in section 503 (see |
| |
subsection (1) of that section), |
| |
“the first purchase price” has the same meaning as in section 503 (see |
| |
subsection (3) of that section), |
| |
“the principal” has the same meaning as in section 506 (see subsection (1) |
| 40 |
| |
“the second purchaser” has the same meaning as in section 503 (see |
| |
subsection (1) of that section). |
| |
(7) | For the meaning of “alternative finance return”, see sections 511 to 513. |
| |
|
| |
|
| |
|
Meaning of “alternative finance return” |
| |
511 | Purchase and resale arrangements |
| |
(1) | In the case of purchase and resale arrangements, so much of the second |
| |
purchase price as is specified under the following provisions of this section is |
| |
alternative finance return for the purposes of this Part. |
| 5 |
(2) | If under the arrangements the whole of the second purchase price is paid on |
| |
one day, the alternative finance return equals the amount by which the second |
| |
purchase price exceeds the first purchase price. |
| |
(3) | If under the arrangements the second purchase price is paid by instalments, the |
| |
alternative finance return in each instalment equals the appropriate amount. |
| 10 |
(4) | The appropriate amount is an amount equal to the interest which would have |
| |
been included in the instalment on the assumptions in subsection (5). |
| |
(5) | The assumptions are that— |
| |
(a) | interest is payable on a loan by the first purchaser to the second |
| |
purchaser of an amount equal to the first purchase price, |
| 15 |
(b) | the total interest payable on the loan is equal to the amount by which |
| |
the second purchase price exceeds the first purchase price, |
| |
(c) | the instalment is a part repayment of the principal of the loan with |
| |
| |
(d) | the loan is made on arm’s length terms and accounted for under |
| 20 |
generally accepted accounting practice. |
| |
(6) | In this section expressions used in section 503 have the same meaning as in that |
| |
| |
512 | Diminishing shared ownership arrangements |
| |
(1) | In the case of diminishing shared ownership arrangements, payments by the |
| 25 |
eventual owner under the arrangements are alternative finance return for the |
| |
purposes of this Part, except so far subsection (2) or (3) applies to them. |
| |
(2) | This subsection applies to the payments so far as they amount to payments of |
| |
the kind described in section 504(1)(c) (payments to be made by the eventual |
| |
owner to the institution, amounting to the consideration paid for the |
| 30 |
acquisition of the institution’s beneficial interest). |
| |
(3) | This subsection applies to the payments so far as they amount to payments in |
| |
respect of any arrangement fee or legal or other expenses which the eventual |
| |
owner is required under the arrangements to pay. |
| |
(4) | In this section “the eventual owner” has the same meaning as in section 504. |
| 35 |
| |
(1) | In the case of deposit arrangements, amounts paid or credited as mentioned in |
| |
section 505(1)(c) by a financial institution under the arrangements (payments |
| |
to depositor out of profits resulting from use of money) are alternative finance |
| |
return for the purposes of this Part. |
| 40 |
(2) | In the case of profit share agency arrangements, amounts paid or credited by a |
| |
financial institution in accordance with such an entitlement as is mentioned in |
| |
|
| |
|
| |
|
section 506(1)(c) (principal’s entitlement to profits under the arrangements) are |
| |
alternative finance return for the purposes of this Part. |
| |
(3) | In the case of investment bond arrangements, the additional payments under |
| |
the arrangements are alternative finance return for the purposes of this Part. |
| |
(4) | In subsection (3) “additional payments” has the same meaning as in section 507 |
| 5 |
(see subsection (1)(d)(iii) of that section). |
| |
Treatment for other tax purposes |
| |
514 | Exclusion of alternative finance return from consideration for sale of assets |
| |
(1) | If under purchase and resale arrangements an asset is sold by one party to the |
| |
arrangements to the other party, the alternative finance return is excluded in |
| 10 |
determining the consideration for the sale and purchase of the asset for the |
| |
purposes of the Corporation Tax Acts (apart from section 503). |
| |
(2) | If under diminishing shared ownership arrangements an asset is sold by one |
| |
party to the arrangements to the other party, the alternative finance return is |
| |
excluded in determining the consideration for the sale and purchase of the |
| 15 |
asset for the purposes of the Corporation Tax Acts (apart from section 504). |
| |
(3) | If under investment bond arrangements an asset is sold by one party to the |
| |
arrangements to the other party, the alternative finance return is excluded in |
| |
determining the consideration for the sale and purchase of the asset for the |
| |
purposes of the Corporation Tax Acts (apart from section 507). |
| 20 |
(4) | Subsections (1) to (3) do not affect the operation of any provision of the |
| |
Corporation Tax Acts which provides that the consideration for a sale or |
| |
purchase is taken for any purpose to be an amount other than the actual |
| |
| |
515 | Diminishing shared ownership arrangements not partnerships |
| 25 |
Diminishing shared ownership arrangements are not treated as a partnership |
| |
for the purposes of the Corporation Tax Acts. |
| |
516 | Treatment of principal under profit sharing agency arrangements |
| |
(1) | The principal under profit sharing agency arrangements is not treated for the |
| |
purposes of the Corporation Tax Acts as entitled to profits to which the agent |
| 30 |
is entitled in accordance with section 506(1)(d). |
| |
(2) | And the agent under such arrangements is treated for those purposes as |
| |
entitled to those profits and the profits specified in section 506(1)(c). |
| |
(3) | In this section “the principal” and “the agent” are to be read in accordance with |
| |
| 35 |
517 | Treatment of bond-holder under investment bond arrangements |
| |
(1) | This section applies for the purposes of the Corporation Tax Acts and |
| |
irrespective of the position for other purposes. |
| |
(2) | The bond-holder under investment bond arrangements is not treated as having |
| |
a legal or beneficial interest in the bond assets. |
| 40 |
|
| |
|
| |
|
(3) | The bond-issuer under such arrangements is not treated as a trustee of the |
| |
| |
(4) | Profits accruing to the bond-issuer in connection with the bond assets are |
| |
profits of the bond-issuer and not of the bond-holder (and do not arise to the |
| |
bond-issuer in a fiduciary or representative capacity). |
| 5 |
(5) | Payments made by the bond-issuer by way of redemption payment or |
| |
additional payment are not made in a fiduciary or representative capacity. |
| |
(6) | The bond-holder is not entitled to relief for capital expenditure in connection |
| |
| |
(7) | Expressions used in this section have the same meaning as in section 507. |
| 10 |
518 | Investment bond arrangements: treatment as securities |
| |
(1) | Investment bond arrangements are securities for the purposes of the |
| |
| |
| |
(a) | a reference in an enactment to redemption is to be taken as a reference |
| 15 |
to making the redemption payment, and |
| |
(b) | a reference in an enactment to interest is to be taken as a reference to |
| |
alternative finance return. |
| |
(3) | In subsection (2) “the redemption payment” has the same meaning as in section |
| |
507 (see subsection (1)(d)(ii) of that section). |
| 20 |
519 | Investment bond arrangements: other provisions |
| |
(1) | A bond-issuer is not a securitisation company for the purposes of section 83 of |
| |
FA 2005 (application of accounting standards to securitisation companies) |
| |
unless it is one as a result of arrangements which are not investment bond |
| |
| 25 |
(2) | For the purposes of section 417 of ICTA (close companies)— |
| |
(a) | a bond-holder is a loan creditor in respect of the bond-issuer, and |
| |
(b) | investment bond arrangements must be ignored in the application of |
| |
section 417(1)(d) of that Act. |
| |
(3) | For the purposes of Schedule 18 to ICTA (group relief)— |
| 30 |
(a) | a bond-holder is a loan creditor in respect of the bond-issuer, and |
| |
(b) | paragraph 1(5)(b) of that Schedule must be ignored in determining |
| |
whether a person is an equity holder as a result of investment bond |
| |
| |
520 | Provision not at arm’s length: non-deductibility of relevant return |
| 35 |
(1) | This section applies if arrangements to which section 508 (provision not at |
| |
arm’s length: exclusion of arrangements from sections 503 to 507) applies |
| |
would, but for that section, be alternative finance arrangements. |
| |
(2) | A company paying relevant return under the arrangements is not entitled to— |
| |
(a) | any deduction in calculating profits or gains for corporation tax |
| 40 |
| |
|
| |
|
| |
|
(b) | any deduction against total profits, |
| |
| in respect of the relevant return. |
| |
(3) | In this section “relevant return” has the same meaning as in section 508 (see |
| |
subsection (3) of that section). |
| |
Power to extend this Chapter to other arrangements |
| 5 |
521 | Power to extend this Chapter to other arrangements |
| |
(1) | The Treasury may by order amend the alternative finance provisions. |
| |
(2) | The amendments which may be made by such an order include— |
| |
(a) | the variation of provision already included in the alternative finance |
| |
| 10 |
(b) | the introduction into those provisions of new provision relating to |
| |
alternative finance arrangements. |
| |
(3) | In this section “alternative finance arrangements” means arrangements which |
| |
in the Treasury’s opinion— |
| |
(a) | equate in substance to a loan, deposit or other transaction of a kind that |
| 15 |
generally involves the payment of interest, but |
| |
(b) | achieve a similar effect without including provision for the payment of |
| |
| |
(4) | An order under subsection (1) may, in particular— |
| |
(a) | make provision of a kind similar to provision already made by the |
| 20 |
alternative finance provisions, |
| |
(b) | make other provision about the treatment for the purposes of the |
| |
Corporation Tax Acts of arrangements to which the order applies, |
| |
(c) | make provision generally or only in relation to specified cases or |
| |
| 25 |
(d) | make different provision for different cases or circumstances, and |
| |
(e) | make incidental, supplemental, consequential and transitional |
| |
| |
(5) | An order making consequential provision under subsection (4)(e) may, in |
| |
particular, include provision amending a provision of the Tax Acts. |
| 30 |
(6) | In this section “the alternative finance provisions” means— |
| |
| |
(b) | section 209(6A) of ICTA (meaning of distribution), |
| |
(c) | section 411ZA of ICTA (no relief where deduction of relevant return |
| |
under alternative finance arrangements disallowed), and |
| 35 |
(d) | section 151F of TCGA 1992 (treatment of alternative finance |
| |
| |
|
| |
|
| |
|
| |
Shares with guaranteed returns etc |
| |
Application of Part 5 to certain shares as rights under creditor relationship |
| |
522 | Introduction to Chapter |
| |
(1) | This Chapter contains rules for Part 5 to apply in some cases as if at some times |
| 5 |
in the accounting period of a company (“A”) which holds certain kinds of |
| |
shares in another company (“B”) the shares were rights under a creditor |
| |
| |
| |
(a) | section 523 (application of Part 5 to some shares as rights under creditor |
| 10 |
| |
(b) | sections 524 and 526 (which describe the two kinds of shares to which |
| |
the rules apply: shares subject to outstanding third party obligations |
| |
and non-qualifying shares). |
| |
(3) | In this Chapter references to the investing company are to A and references to |
| 15 |
the issuing company are to B. |
| |
(4) | For the purposes of this Chapter a company is treated as continuing to hold a |
| |
share even though the share has been transferred to another person— |
| |
(a) | under a repo or stock lending arrangement, or |
| |
(b) | under a transaction which is treated as not involving any disposal as a |
| 20 |
result of section 26 of TCGA 1992 (mortgages and charges not to be |
| |
| |
(5) | But subsection (4) does not apply for the purposes of section 535 (shares |
| |
ceasing to be shares to which section 523 applies). |
| |
(6) | For the purposes of this Chapter, the definition of “share” in section 476(1) only |
| 25 |
applies so far as it provides that “share” does not include a share in a building |
| |
| |
(7) | See section 116B of TCGA 1992 for the effect for the purposes of that Act of |
| |
shares beginning or ceasing to be shares to which section 523 applies. |
| |
523 | Application of Part 5 to certain shares as rights under creditor relationship |
| 30 |
(1) | This section applies in relation to the times in a company’s accounting period |
| |
| |
(a) | the company holds a share in another company, and |
| |
| |
(i) | section 524 (shares subject to outstanding third party |
| 35 |
obligations) applies to the share, or |
| |
(ii) | that section does not so apply, but section 526 (non-qualifying |
| |
| |
(2) | Part 5 applies as if at those times— |
| |
(a) | the share were rights under a creditor relationship of the investing |
| 40 |
| |
|
| |
|