|
| |
|
(2) | The relevant avoidance intention is the intention of eliminating or reducing the |
| |
credits to be brought into account in accordance with this Part. |
| |
(3) | Consideration is not fully recognised if, as a result of the application of |
| |
generally accepted accounting practice, the full amount or value of the |
| |
consideration is not recognised in determining the company’s profit or loss for |
| 5 |
the relevant accounting period or any other accounting period. |
| |
(4) | In determining the credits which the company is to bring into account for the |
| |
relevant accounting period in accordance with this Part, it is to be assumed that |
| |
the whole of the consideration is recognised in determining the company’s |
| |
profit or loss for that period. |
| 10 |
(5) | But this section does not apply if paragraph 1(2) of Schedule 28AA to ICTA |
| |
(provision not at arm’s length) operates in relation to the disposal so as to |
| |
increase the tax liability of the company. |
| |
| |
| 15 |
699 | Priority of this Part for corporation tax purposes |
| |
(1) | The amounts which are brought into account in accordance with this Part in |
| |
respect of any matter are the only amounts which may be brought into account |
| |
for corporation tax purposes in respect of it. |
| |
(2) | Subsection (1) is subject to any provision to the contrary. |
| 20 |
(3) | For such provisions, see in particular— |
| |
(a) | section 616 (disapplication of fair value accounting for certain |
| |
| |
(b) | paragraph 93 of Schedule 2 (plain vanilla contracts which became |
| |
derivative contracts before 30 December 2006), and |
| 25 |
(c) | section 83(2ZA) of FA 1989 (life assurance: receipts to be taken into |
| |
| |
700 | Relationship of this Part to Part 5: loan relationships |
| |
(1) | This section applies if— |
| |
(a) | a company is a party to a loan relationship because of a derivative |
| 30 |
| |
(b) | in accordance with this Part, a profit or loss accrues to the company on |
| |
the contract for an accounting period (“the derivative profit or loss”). |
| |
(2) | The general rule is that this Part does not apply to the derivative profit or loss |
| |
| 35 |
(a) | an amount representing the derivative profit or loss, or |
| |
(b) | an amount representing the profit or loss accruing to that company on |
| |
| |
| is brought into account for that period for the purposes of Part 5 otherwise than |
| |
| 40 |
(3) | But in a case where section 585 (loan relationships with embedded derivatives) |
| |
applies, the general rule does not apply so far as— |
| |
|
| |
|
| |
|
(a) | the derivative profit or loss accrues from the rights and liabilities |
| |
mentioned in section 585(1)(b) (rights and liabilities under derivative |
| |
financial instruments or equity instruments), and |
| |
(b) | that profit or loss is dealt with in accordance with that section and this |
| |
| 5 |
| |
General and supplementary provisions |
| |
Power to amend certain provisions |
| |
701 | Power to amend some provisions |
| |
(1) | The Treasury may by order amend— |
| 10 |
(a) | Chapter 2 (except sections 578(1), (2) and (4), 585, 587 and 588), |
| |
(b) | Chapter 4 (except section 613(4)), |
| |
| |
| |
(e) | Chapter 8 (except section 660), |
| 15 |
| |
| |
| |
| |
| 20 |
(k) | the definitions in section 710 specified in subsection (2), and |
| |
(l) | paragraphs 80 to 94 of Schedule 2. |
| |
(2) | The definitions mentioned in subsection (1)(k) are— |
| |
capital redemption policy, |
| |
depositary receipt (in relation to shares), |
| 25 |
| |
| |
| |
| |
(3) | The provision that may be made by an order under this section includes |
| 30 |
| |
(a) | adding to or varying the descriptions of contract which are derivative |
| |
contracts within section 576 (meaning of “derivative contract”) or |
| |
removing any such description of contract, or |
| |
(b) | adding to or varying the descriptions of contract which are excluded |
| 35 |
under section 589 (contracts excluded because of underlying subject |
| |
matter: general) or removing any such description of contract. |
| |
(4) | The provision that may be made under subsection (3)(b), in relation to |
| |
contracts which are excluded under section 589, includes provision— |
| |
(a) | adding to the provisions which qualify the exclusion of contracts under |
| 40 |
| |
(b) | varying any such provision, or |
| |
(c) | removing any such provision. |
| |
|
| |
|
| |
|
(5) | An order under this section may provide for any of its provisions to have effect |
| |
| |
(a) | accounting periods ending on or after the day on which the order |
| |
comes into force (whenever they begin), |
| |
(b) | periods of account beginning before the order is made, but not earlier |
| 5 |
than the beginning of the calendar year in which it is made. |
| |
(6) | An order under this section may— |
| |
(a) | make different provision for different cases, and |
| |
(b) | contain incidental, supplemental, consequential and transitional |
| |
provision and savings (including provision amending any enactment |
| 10 |
or any instrument made under an enactment). |
| |
Other general definitions |
| |
| |
(1) | For the purposes of this Part, the “carrying value” of a contract includes |
| |
amounts recognised for accounting purposes in relation to the contract in |
| 15 |
| |
| |
(b) | amounts paid or received in advance, or |
| |
(c) | impairment losses (including provisions for bad or doubtful debts). |
| |
(2) | In determining the profits and losses to be recognised in determining the |
| 20 |
carrying value of the contract for the purposes of this Part, the provisions in |
| |
subsection (3) apply as they apply for the purposes of determining the credits |
| |
and debits to be brought into account in accordance with this Part. |
| |
(3) | Those provisions are— |
| |
(a) | section 584 (hybrid derivatives with embedded derivatives), |
| 25 |
(b) | section 585 (loan relationships with embedded derivatives), |
| |
(c) | section 586 (other contracts with embedded derivatives), |
| |
(d) | section 625(3) to (5) (transactions within groups), |
| |
(e) | sections 675 and 676 (European cross-border transfers of business), and |
| |
(f) | sections 684 and 685 (European cross-border mergers). |
| 30 |
(4) | In this section “impairment loss” means a debit in respect of the impairment of |
| |
a financial asset, and “impairment” includes uncollectability. |
| |
| |
(1) | For the purposes of this Part, an asset is a chargeable asset if any gain accruing |
| |
on its disposal would be a chargeable gain for corporation tax purposes. |
| 35 |
(2) | For the purposes of this section, “asset” includes any obligations under futures |
| |
contracts which are regarded because of section 143 of TCGA 1992 as assets to |
| |
the disposal of which that Act applies. |
| |
704 | “Creditor relationship” and “debtor relationship” |
| |
(1) | In this Part “creditor relationship” has the same meaning as in Part 5 (loan |
| 40 |
relationships) (see section 302(5) (meaning of “creditor relationship”)). |
| |
|
| |
|
| |
|
(2) | In this Part “debtor relationship” has the same meaning as in that Part (see |
| |
section 302(6) (meaning of “debtor relationship”)). |
| |
705 | Expressions relating to exchange gains and losses |
| |
(1) | References in this Part to exchange gains or exchange losses, in relation to a |
| |
company, are references respectively to— |
| 5 |
(a) | profits or gains which arise as a result of comparing at different times |
| |
the expression in one currency of the whole or some part of the |
| |
valuation put by the company in another currency on an asset or |
| |
liability of the company, or |
| |
(b) | losses which so arise. |
| 10 |
(2) | If the result of such a comparison is that neither an exchange gain nor an |
| |
exchange loss arises, for the purposes of this Part an exchange gain of nil is |
| |
taken to arise in the case of that comparison. |
| |
(3) | The Treasury may make provision by regulations as to the way in which |
| |
exchange gains or losses are to be calculated for the purposes of this section in |
| 15 |
a case where fair value accounting is used by the company. |
| |
(4) | The regulations may be made so as to apply to periods of account beginning |
| |
before the regulations are made, but not earlier than the beginning of the |
| |
calendar year in which they are made. |
| |
(5) | Any reference in this Part to an exchange gain or loss from a derivative contract |
| 20 |
of a company is a reference to an exchange gain or loss arising to a company in |
| |
relation to a derivative contract of the company. |
| |
| |
In this Part “excluded body” means— |
| |
an authorised unit trust, |
| 25 |
| |
an open-ended investment company, or |
| |
| |
707 | “Hedging relationship” |
| |
(1) | This section applies for the purposes of this Part. |
| 30 |
(2) | A company has a “hedging relationship” between a relevant contract (“the |
| |
hedging instrument”) and an asset or liability (“the hedged item”) so far as |
| |
| |
(3) | Condition A is that the hedging instrument and the hedged item are |
| |
designated as a hedge by the company. |
| 35 |
| |
(a) | the hedging instrument is intended to act as a hedge of the exposure to |
| |
changes in fair value of the hedged item which is attributable to a |
| |
particular risk and could affect the profit or loss of the company, and |
| |
(b) | the hedged item is an asset or liability recognised for accountancy |
| 40 |
purposes or is an identified portion of such an asset or liability. |
| |
|
| |
|
| |
|
(5) | For the purposes of subsections (2) and (4), the liabilities of a company include |
| |
| |
708 | “Plain vanilla contract” |
| |
In this Part “plain vanilla contract” means a relevant contract other than one to |
| |
which a company is treated as being a party under— |
| 5 |
(a) | section 584 (hybrid derivatives with embedded derivatives), |
| |
(b) | section 585 (loan relationships with embedded derivatives), or |
| |
(c) | section 586 (other contracts with embedded derivatives). |
| |
| |
In this Part “securities house” means a person— |
| 10 |
(a) | who is authorised for the purposes of FISMA 2000, and |
| |
(b) | whose business consists wholly or mainly of dealing as a principal in |
| |
financial instruments within the meaning of section 984 of ITA 2007. |
| |
| |
| 15 |
| |
| |
(b) | a person within section 840A(1)(b) of ICTA, or |
| |
(c) | a firm within section 840A(1)(c) of that Act, |
| |
“capital redemption policy” means a contract made in the course of capital |
| 20 |
redemption business (as defined in section 431(2ZF) of ICTA), |
| |
“contract of insurance” has the meaning given by section 431(2) of ICTA, |
| |
“contract of long-term insurance” has the meaning given by section 431(2) |
| |
| |
“depositary receipt”, in relation to shares (as defined in this section), has |
| 25 |
the same meaning as it has in Part 4 of FA 1986 in relation to shares |
| |
(within the meaning of that Part), |
| |
“designated” has the meaning it has for accounting purposes, |
| |
“equity instrument” has the meaning it has for accounting purposes, |
| |
“fair value”, in relation to a derivative contract of a company, means the |
| 30 |
amount which, at the time as at which the value is to be determined, is |
| |
the amount which the company would obtain from or, as the case may |
| |
be, would have to pay to an independent person dealing at arm’s |
| |
| |
(a) | the transfer of the company’s rights under the contract, and |
| 35 |
(b) | the release of all the company’s liabilities under it, |
| |
“fair value accounting” means a basis of accounting under which assets |
| |
and liabilities are shown in the company’s balance sheet at their fair |
| |
| |
“financial trader” means— |
| 40 |
| |
(i) | is within section 31(1)(a), (b) or (c) of FISMA 2000, and |
| |
(ii) | has permission under that Act to carry on one or more |
| |
of the activities specified in Article 14 and, in so far as it |
| |
applies to that Article, Article 64 of the Financial |
| 45 |
|
| |
|
| |
|
Services and Markets Act (Regulated Activities) Order |
| |
| |
(b) | a person not within paragraph (a) who is approved by the |
| |
Commissioners for Her Majesty’s Revenue and Customs for the |
| |
purposes of this section, |
| 5 |
“income statement” has the meaning it has for accounting purposes, |
| |
“intangible fixed asset” has the same meaning as in Part 8 (intangible fixed |
| |
assets), and sections 804 to 807 and 809 (assets wholly excluded from |
| |
that Part) (and sections 800 to 802 so far as they relate to those sections) |
| |
apply for the purposes of this Part as they apply for the purposes of that |
| 10 |
| |
“open-ended investment company” has the meaning given by section |
| |
| |
“profit-sharing arrangements”, in relation to a firm, has the meaning |
| |
given by section 1262(4) (allocation of firm’s profits or losses between |
| 15 |
| |
“shares”, in relation to a company, means any shares in the company |
| |
under which an entitlement to receive distributions may arise, |
| |
| |
(a) | a depositary receipt for shares under which such an entitlement |
| 20 |
| |
(b) | in the case of a company which has no share capital, any |
| |
interests in the company possessed by members of the |
| |
| |
“statement of changes in equity” has the meaning it has for accounting |
| 25 |
| |
“statement of comprehensive income” has the meaning it has for |
| |
| |
“statement of income and retained earnings” has the meaning it has for |
| |
| 30 |
“statement of recognised income and expense” has the meaning it has for |
| |
| |
“statement of total recognised gains and losses” has the meaning it has for |
| |
| |
“warrant” means an instrument which entitles the holder to subscribe |
| 35 |
| |
(a) | shares in a company, or |
| |
(b) | assets representing a loan relationship of a company, |
| |
whether or not the shares or assets exist or are identifiable. |
| |
|
| |
|
| |
|
| |
| |
| |
| |
| 5 |
| |
(1) | This Part sets out how a company’s gains and losses in respect of intangible |
| |
fixed assets are calculated and brought into account for corporation tax |
| |
| |
(2) | For the meaning of “intangible fixed assets” and rules about the assets to which |
| 10 |
| |
| |
(b) | Chapter 10 (excluded assets), and |
| |
(c) | Chapter 16 (pre-FA 2002 assets etc). |
| |
(3) | For how such gains and losses are calculated and brought into account, see, in |
| 15 |
particular, Chapter 6 which— |
| |
(a) | deals with the use of credits and debits in respect of some intangible |
| |
fixed assets in calculating the profits and losses of trades, businesses |
| |
and other concerns (see sections 747 to 750), |
| |
(b) | provides for the calculation of gains and losses where there are credits |
| 20 |
or debits in respect of other intangible fixed assets (see section 751), |
| |
(c) | makes gains so calculated subject to the charge to corporation tax on |
| |
income (see section 752), and |
| |
(d) | gives an allowance for losses so calculated (see section 753). |
| |
(4) | For the priority of this Part for corporation tax purposes, see Chapter 18 (under |
| 25 |
which the general rule is that the amounts brought into account in accordance |
| |
with this Part in respect of any matter are the only amounts that may be |
| |
brought into account for corporation tax purposes in respect of it). |
| |
(5) | This Part operates by reference to the accounts of companies and amounts |
| |
recognised for accounting purposes. |
| 30 |
(6) | For the meaning of “amounts recognised for accounting purposes” and other |
| |
expressions related to accounting and for rules about “GAAP-compliant |
| |
accounts”, see sections 716 to 719. |
| |
(7) | Chapters 2 to 6 contain basic rules about the credits and debits to be brought |
| |
into account for corporation tax purposes in respect of intangible fixed assets. |
| 35 |
(8) | For rules about particular situations and cases, see— |
| |
(a) | Chapter 7 (roll-over relief in case of realisation and reinvestment), |
| |
(b) | Chapters 8 and 9 (groups of companies), |
| |
(c) | Chapter 11 (transfer of business or trade), |
| |
(d) | Chapter 12 and 13 (related parties), |
| 40 |
(e) | Chapter 14 (further provisions relating to miscellaneous cases), |
| |
(f) | Chapter 15 (adjustments on change of accounting policies), and |
| |
|
| |
|