Corporation Tax Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
57

(a)
sums paid because of losses resulting from movements in the rate of
exchange between different currencies,
(b)
sums paid for the purpose of protecting against such losses,
(c)
the cost of repaying qualifying shares so far as attributable to their
being repayable at a premium or having been issued at a discount, and
5
(d)
stamp duty.
Industrial and provident societies
132
Dividends etc granted by industrial and provident societies
(1)
This section applies if a trade is carried on by a registered industrial and
provident society and—
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(a)
the society does not sell to persons who are not its members, or
(b)
the number of shares in the society is not limited by the society’s rules
or practice.
(2)
In calculating the profits of the trade, a deduction is allowed for sums which
meet conditions A and B.
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(3)
Condition A is that—
(a)
the sum represents a discount, rebate, dividend or bonus granted by
the society to a member or other person (“the recipient”),
(b)
the discount, rebate, dividend or bonus is in respect of—
(i)
amounts paid or payable by the recipient, or
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(ii)
amounts paid or payable to the recipient,

on account of the recipient’s transactions with the society, and
(c)
those transactions are taken into account in calculating the society’s
profits chargeable under this Part.
(4)
Condition B is that the sum mentioned in subsection (2) is calculated by
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reference to—
(a)
the amounts paid or payable by or to the recipient, or
(b)
the size of the transactions,

and not by reference to the amount of any share or interest in the capital of the
society.
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(5)
See also section 230A of ICTA (dividend or bonus to which this section applies
is not treated as a distribution).
Credit unions
133
Annual payments paid by a credit union
In calculating the profits of a credit union’s trade, no deduction is allowed for
35
annual payments made by the credit union.

Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
58

Dealers in land etc
134
Purchase or sale of woodlands
(1)
This section applies for the purpose of calculating the profits of a trade of
dealing in land.
(2)
If the company carrying on the trade buys woodlands in the United Kingdom
5
in the course of the trade, the part of the cost of the woodlands which is
attributable to trees or saleable underwood growing on the land is ignored.
(3)
If—
(a)
the woodlands are subsequently sold in the course of the trade, and
(b)
any of the trees or underwood are still growing on the land at the time
10
of the sale,

the part of the price that is equal to the amount ignored under subsection (2)
for those trees or that underwood is ignored.
135
Relief in respect of mineral royalties
(1)
This section applies for the purpose of calculating the profits of a trade carried
15
on by a UK resident company in an accounting period if the receipts of the
trade include mineral royalties—
(a)
which the company is entitled to receive under a mineral lease or
agreement, and
(b)
which are not chargeable to tax under Chapter 7 of Part 4 (rent
20
receivable in connection with a UK section 39(4) concern) because of the
priority rule in section 287.
(2)
The company is treated as entitled to receive only half of the total of the mineral
royalties arising under the lease or agreement in the accounting period.
(3)
Sections 274 to 276 (meaning of “mineral lease or agreement” and “mineral
25
royalties”) apply for the purposes of this section as they apply for the purposes
of Chapter 7 of Part 4.
(4)
See also section 201 of TCGA 1992 (gains treated as accruing to a company
entitled to receive mineral royalties).
136
Lease premiums etc: reduction of receipts
30
(1)
This section applies for the purpose of calculating the profits of a trade of
dealing in land if a receipt of the trade falls within one of the following
categories—
(a)
lease premiums within section 217,
(b)
sums within section 219 (sums payable instead of rent),
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(c)
sums within section 220 (sums payable for surrender of a lease),
(d)
sums within section 221 (sums payable for variation or waiver of terms
of lease),
(e)
consideration for the assignment of a lease within section 222 (lease
granted at an undervalue), and
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(f)
amounts received on the sale of an estate or interest in land within
section 224 (sales with right to reconveyance) or section 225 (sale and
leaseback transactions).

Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
59

(2)
The receipt is reduced by the relevant amount.
(3)
The relevant amount is the amount which is treated as a receipt of a property
business as a result of any of sections 217 to 225.
(4)
But if—
(a)
the company carrying on the trade makes a claim under section 238 or
5
239, and
(b)
as a result of the claim a repayment of tax is made to that company,

the relevant amount is the amount which, for the purpose of determining the
amount of the repayment of tax, is treated as brought into account as a receipt
in calculating the profits of the property business.
10
(5)
If subsection (4) applies, any adjustment of liability to tax may be made—
(a)
by assessment or otherwise, and
(b)
at any time at which it could be made if it related only to tax for the
accounting period in which the claim under section 238 or 239 is made.
Mineral exploration and access
15
137
Mineral exploration and access
(1)
This section applies for the purpose of calculating the profits of a trade if—
(a)
the company carrying on the trade incurs expenditure on mineral
exploration and access in an area or group of sands, and
(b)
the presence of mineral deposits in commercial quantities has already
20
been established in that area or group of sands.
(2)
A deduction is allowed for the expenditure only if a deduction would have
been allowed for it if the presence of mineral deposits in commercial quantities
had not already been established in that area or group of sands.
(3)
In this section “mineral exploration and access” has the same meaning as in
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Part 5 of CAA 2001 (see section 396(1) of that Act).
Companies liable to pool betting duty
138
Payments by companies liable to pool betting duty
(1)
This section applies for the purpose of calculating the profits of a trade if—
(a)
the company carrying on the trade is liable to pool betting duty,
30
(b)
there is a reduction in that duty, and
(c)
the company makes a qualifying payment in consequence of that
reduction.
(2)
A qualifying payment is one—
(a)
made in order to meet (directly or indirectly) capital expenditure
35
incurred by any person in improving the safety or comfort of spectators
at a ground to be used for the playing of association football, or
(b)
made to trustees established mainly for the support of athletic sports or
athletic games but with power to support the arts.
(3)
A deduction is allowed for the qualifying payment.
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Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
60

Intermediaries treated as making employment payments
139
Deduction for deemed employment payment
(1)
This section applies for the purpose of calculating the profits of a trade carried
on by an intermediary which is treated as making a deemed employment
payment in connection with the trade.
5
(2)
A deduction is allowed for—
(a)
the amount of the deemed employment payment, and
(b)
the amount of any employer’s national insurance contributions paid by
the intermediary in respect of it.
(3)
The deduction is allowed for the period of account in which the deemed
10
employment payment is treated as made.
(4)
No deduction in respect of—
(a)
the deemed employment payment, or
(b)
any employer’s national insurance contributions paid by the
intermediary in respect of it,
15

may be made except in accordance with this section.
(5)
In this section “deemed employment payment” and “intermediary” have the
same meaning as in Chapter 8 of Part 2 of ITEPA 2003 (see sections 49 and 50
of that Act).
140
Special rules for partnerships
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(1)
This section applies for the purpose of calculating the profits of a trade carried
on by a firm that is treated as making a deemed employment payment in
connection with the trade.
(2)
The amount of the deduction allowed under section 139 is limited to the
amount that reduces the profits of the firm of the period of account to nil.
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(3)
The expenses of the firm in connection with the relevant engagements for any
period of account are limited to the total of—
(a)
5% of the amount taken into account at Step 1 of the calculation in
section 54(1) of ITEPA 2003 (calculation of deemed employment
payment), and
30
(b)
the amount deductible at Step 3 of that calculation.
(4)
In this section “deemed employment payment” and “the relevant
engagements” have the same meaning as in Chapter 8 of Part 2 of ITEPA 2003
(see sections 49 and 50 of that Act).
Managed service companies
35
141
Deduction for deemed employment payments
(1)
This section applies for the purpose of calculating the profits of a trade carried
on by a managed service company (the “MSC”) which is treated as making a
deemed employment payment in connection with the trade.
(2)
A deduction is allowed for—
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Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
61

(a)
the amount of the deemed employment payment, and
(b)
the amount of any employer’s national insurance contributions paid by
the MSC in respect of it.
(3)
The deduction is allowed for the period of account in which the deemed
employment payment is treated as made.
5
(4)
If the MSC is a firm, the amount of the deduction allowed under subsection (2)
is limited to the amount that reduces the profits of the firm of the period of
account to nil.
(5)
No deduction in respect of—
(a)
the deemed employment payment, or
10
(b)
any employer’s national insurance contributions paid by the MSC in
respect of it,

may be made except in accordance with this section.
(6)
In this section the following expressions have the same meanings as in Chapter
9 of Part 2 of ITEPA 2003—
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“deemed employment payment” (see section 61D(2) of that Act),
“employer’s national insurance contributions” (see section 61J(1) of that
Act),
“managed service company” (see section 61B of that Act).
Waste disposal
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142
Deduction for site preparation expenditure
(1)
This section applies for the purpose of calculating the profits of a trade of a
period of account in which waste materials are deposited on a waste disposal
site if—
(a)
the company carrying on the trade (“the trader”), or a predecessor, has
25
incurred site preparation expenditure in relation to the site in the
course of carrying on the trade, and
(b)
at the time the trader first deposits waste materials on the site, the
trader holds a waste disposal licence which is then in force.
(2)
A deduction is allowed for the amount of the site preparation expenditure
30
allocated to the period of account under section 143.
(3)
For the purposes of this section “predecessor”, in relation to the trader, means
a person who—
(a)
has ceased to carry on the trade carried on by the trader or ceased to
carry on a trade so far as relating to the site, and
35
(b)
has transferred the whole of the site to the trader,

and it does not matter for this purpose whether or not the estate or interest in
the site transferred to the trader is the same as that held by that person.
(4)
For the purposes of this section and section 143, if site preparation expenditure
has been incurred by a predecessor—
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(a)
the trade carried on by the trader is treated as the same as the trade
carried on by the predecessor, and

Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
62

(b)
deductions are to be allowed to the trader (and not to the predecessor)
as if everything done to or by the predecessor were done to or by the
trader.
(5)
For—
(a)
the meaning of “site preparation expenditure”, “waste disposal licence”
5
and “waste disposal site”, and
(b)
a rule about pre-trading expenditure,

see section 144.
143
Allocation of site preparation expenditure
(1)
The amount of site preparation expenditure allocated to a period of account for
10
the purposes of section 142(2) is the amount given by the formula—

where—
RE means residual expenditure (see subsection (2)),
WD means the volume of waste materials deposited on the waste disposal
site during the period, and
15
SV means the volume of the waste disposal site not used up for the
deposit of waste materials at the end of the period.
(2)
“Residual expenditure” means the total of all site preparation expenditure
incurred by the trader in relation to the waste disposal site at any time before
the end of the period, less—
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(a)
any of that expenditure for which an allowance has been, or may be,
made for corporation or income tax purposes under the enactments
relating to capital allowances,
(b)
any of that expenditure for which a deduction has been made in
calculating for corporation or income tax purposes the profits of an
25
earlier period of account, and
(c)
if the trader started to carry on the trade before 6 April 1989, the
excluded amount of any unrelieved old expenditure (see subsections
(3) and (4)).
(3)
The excluded amount of unrelieved old expenditure is calculated by
30
multiplying the unrelieved old expenditure (see subsection (4)) by the
fraction—

where—
WD means the volume of waste materials deposited on the site before 6
April 1989, and
35
SV means the volume of the site not used up for the deposit of waste
materials immediately before that date.
(4)
“Unrelieved old expenditure” means site preparation expenditure which—
(a)
was incurred by the trader in relation to the waste disposal site before
6 April 1989, and
40

Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
63

(b)
does not fall within subsection (2)(a) or (b).
144
Site preparation expenditure: supplementary
(1)
For the purposes of this section and sections 142 and 143 “waste disposal
licence” means—
(a)
a disposal licence under Part 1 of the Control of Pollution Act 1974
5
(c. 40) or Part 2 of the Pollution Control and Local Government
(Northern Ireland) Order 1978 (S.I. 1978/1049 (N.I. 19)),
(b)
a waste management licence under Part 2 of the Environmental
Protection Act 1990 (c. 43) or any corresponding provision for the time
being in force in Northern Ireland,
10
(c)
a permit under regulations under—
(i)
section 2 of the Pollution Prevention and Control Act 1999
(c. 24), or
(ii)
Article 4 of the Environment (Northern Ireland) Order 2002 (S.I.
2002/3153 (N.I. 7)),
15
(d)
an authorisation under the Radioactive Substances Act 1960 (c. 34) or
the Radioactive Substances Act 1993 (c. 12) for the disposal of
radioactive waste, or
(e)
a nuclear site licence under the Nuclear Installations Act 1965 (c. 57).
(2)
For the purposes of this section and sections 142 and 143—
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“site preparation expenditure”, in relation to a waste disposal site, means
expenditure incurred on preparing the site for the deposit of waste
materials, and
“waste disposal site” means a site used, or to be used, for the disposal of
waste materials by their deposit on the site.
25
(3)
For the purposes of sections 142 and 143, expenditure incurred for the
purposes of a trade by a company about to carry on the trade is treated as if it
were incurred—
(a)
on the date on which the company starts to carry on the trade, and
(b)
in the course of carrying it on.
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145
Site restoration payments
(1)
This section applies for the purpose of calculating the profits of a trade if the
company carrying on the trade makes a site restoration payment in the course
of carrying it on.
(2)
A deduction is allowed for the unrelieved amount of the payment.
35
(3)
The deduction is allowed for the period of account in which the payment is
made.
(4)
The unrelieved amount of a site restoration payment is the amount of the
payment, less—
(a)
any amount of the payment that represents expenditure for which an
40
allowance has been, or may be, made under the enactments relating to
capital allowances, and
(b)
any amount of the payment that represents expenditure for which a
deduction has been made in calculating the profits of the trade of an
earlier period of account.
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