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
64

(5)
A “site restoration payment” means a payment made in connection with the
restoration of a site (or part of a site) in order to comply with—
(a)
a condition of a waste disposal licence (as defined in section 144(1)),
(b)
a condition imposed on the grant of planning permission to use the site
for the collection, treatment, conversion and final depositing of waste
5
materials or for the carrying out of any of those activities, or
(c)
a relevant planning obligation.
(6)
For this purpose “a relevant planning obligation” means—
(a)
an obligation arising under an agreement made under section 106 of the
Town and Country Planning Act 1990 (c. 8) (as originally enacted) or
10
any corresponding provision for the time being in force in Northern
Ireland,
(b)
an obligation arising under an agreement made under section 75 of the
Town and Country Planning (Scotland) Act 1997 (c. 8),
(c)
a planning obligation entered into under section 106 of the Town and
15
Country Planning Act 1990 (as substituted by section 12 of the Planning
and Compensation Act 1991 (c. 34)) or any corresponding provision for
the time being in force in Northern Ireland, or
(d)
a planning obligation entered into under section 299A of the Town and
Country Planning Act 1990 or any corresponding provision for the time
20
being in force in Northern Ireland.
Cemeteries and crematoria
146
Cemeteries and crematoria: introduction
(1)
This section and sections 147 to 149 apply for the purpose of calculating the
profits of a period of account (“the relevant period”) of a trade which consists
25
of or includes—
(a)
the carrying on of a cemetery, or
(b)
the carrying on of a crematorium and, in connection with doing so, the
maintenance of memorial garden plots,

and the following provisions of this section apply for the interpretation of this
30
section and those sections.
(2)
References to the sale of land in a cemetery include the sale of a right of
interment in land in a cemetery.
(3)
References to the sale of land in a memorial garden include the appropriation
of part of a memorial garden in return for a dedication fee or similar payment.
35
(4)
“Ancillary capital expenditure” means capital expenditure incurred for the
purposes of the trade by the company carrying on the trade (“the trader”), or a
predecessor, on—
(a)
any building or structure (other than a dwelling-house) which is in the
cemetery or memorial garden and is likely to have little or no value
40
when the cemetery or memorial garden is full,
(b)
the purchase of an interest in, or the preparation of, any land taken up
by such a building or structure, or
(c)
the purchase of an interest in, or the preparation of, any other land in
the cemetery or memorial garden which is not suitable or adaptable for
45
use for interments or memorial garden plots and which is likely to have
little or no value when the cemetery or memorial garden is full.

Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
65

(5)
“Predecessor”, in relation to the trader, means a person who carried on the
trade at any time before the trader started to do so.
(6)
“Preparation”, in relation to land, means levelling or draining the land or
making it suitable in some other way for use as a cemetery or memorial garden.
147
Deduction for capital expenditure
5
(1)
This section applies if, in the relevant period, an interest in land in the cemetery
or memorial garden is sold with a view to the land being used—
(a)
for the purpose of interments, or
(b)
for memorial garden plots.
(2)
A deduction is allowed for—
10
(a)
capital expenditure incurred by the trader, or a predecessor, on the
purchase of an interest in the land or on the preparation of the land, and
(b)
ancillary capital expenditure allocated to the relevant period under
section 148 (allocation of ancillary capital expenditure).
(3)
But no expenditure is to be brought into account—
15
(a)
under both paragraphs (a) and (b) of subsection (2), or
(b)
under both subsection (2)(a) above and section 170(2)(b) of ITTOIA
2005 (relief for income tax purposes) or under both subsection (2)(b)
above and section 170(2)(a) of ITTOIA 2005,

whether for the same or different periods of account.
20
(4)
Any purchase price paid on a sale in connection with a change in the persons
carrying on the trade is ignored in calculating the amount of the deduction.
(5)
No deduction is allowed for any expenditure which is excluded by section 149
(exclusion of expenditure met by subsidies).
148
Allocation of ancillary capital expenditure
25
(1)
The amount of ancillary capital expenditure allocated to the relevant period for
the purposes of section 147(2)(b) is the amount given by the formula—

where—
RE means residual expenditure (see subsection (2)),
PSR means the number of grave-spaces or memorial garden plots in the
30
cemetery or memorial garden sold in the relevant period, and
PAR means the number of grave-spaces or memorial garden plots in the
cemetery or memorial garden which are or could be made available for
sale at the end of the relevant period.
(2)
“Residual expenditure” means the total of all ancillary capital expenditure
35
incurred at any time before the end of the relevant period, less—
(a)
ancillary capital expenditure incurred on buildings or structures which
were destroyed before the beginning of the first sale period,
(b)
the excluded amount of any remaining old expenditure (see subsection
(3)),
40

Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
66

(c)
if, after the beginning of the first sale period and before the end of the
relevant period, an asset representing ancillary capital expenditure was
sold or destroyed, the net sale proceeds or the compensation, and
(d)
any amount deducted under section 147(2)(b) above, or under section
170(2)(b) of ITTOIA 2005, for a period of account ending before the
5
relevant period.
(3)
The excluded amount of remaining old expenditure is calculated by
multiplying the remaining old expenditure by the fraction—

where—
PSB means the number of grave-spaces or memorial garden plots in the
10
cemetery or memorial garden sold before the beginning of the basis
period for the tax year 1954-55, and
PAB means the number of grave-spaces or memorial garden plots in the
cemetery or memorial garden which were or could have been made
available for sale immediately before the beginning of the basis period
15
for that tax year.
(4)
In this section—
“compensation”, in relation to the destruction of an asset, means—
(a)
insurance money or other compensation received by the trader,
or a predecessor, in respect of the destruction, and
20
(b)
money received for the remains of the asset by the trader or
predecessor,
“the first sale period” means—
(a)
the period of account in which an interest in land in the
cemetery or memorial garden was first sold for the purposes of
25
the trade with a view to the land being used for the purpose of
interments or for memorial garden plots, or
(b)
if later, the basis period for the tax year 1954-55, and
“remaining old expenditure” means ancillary capital expenditure
which—
30
(a)
was incurred before the beginning of the basis period for the tax
year 1954-55, and
(b)
does not fall within subsection (2)(a).
149
Exclusion of expenditure met by subsidies
(1)
Expenditure is excluded for the purposes of section 147 so far as it has been, or
35
is to be, met (directly or indirectly) by—
(a)
the Crown,
(b)
a government or local or other public authority (whether in the United
Kingdom or elsewhere), or
(c)
any person other than the person incurring the expenditure.
40
(2)
This is subject to the following exceptions.
(3)
Expenditure is not excluded for the purposes of section 147 if it is met (directly
or indirectly) by a grant—
(a)
made under Northern Ireland legislation, and

Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
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(b)
declared by the Treasury by an order under section 534 of CAA 2001 to
correspond to a grant under Part 2 of the Industrial Development Act
1982 (c. 52).
(4)
Expenditure is not excluded for the purposes of section 147 if it is met (directly
or indirectly) by—
5
(a)
insurance money, or
(b)
other compensation money,

payable in respect of an asset which has been destroyed, demolished or put out
of use.
(5)
Expenditure is not excluded for the purposes of section 147 if—
10
(a)
it has been, or is to be, met (directly or indirectly) by a person other than
the Crown or a government or local or other public authority, and
(b)
no deduction is allowed for the expenditure in calculating for
corporation or income tax purposes the profits of a trade carried on by
that person.
15
Sound recordings
150
Revenue nature of expenditure
(1)
If a company carrying on a trade incurs expenditure on the production or
acquisition of the original master version of a sound recording, the expenditure
is treated for corporation tax purposes as expenditure of a revenue nature.
20
(2)
If expenditure is treated under this section as revenue in nature, sums received
by the company from the disposal of the original master version of the sound
recording—
(a)
are treated for corporation tax purposes as receipts of a revenue nature,
and
25
(b)
are brought into account in calculating the profits of the relevant period
in which they are received.
(3)
For this purpose sums received from the disposal of the original master version
include—
(a)
sums received from the disposal of any interest or right in or over the
30
original master version (including an interest or right created by the
disposal), and
(b)
insurance, compensation or similar money derived from the original
master version.
151
Allocation of expenditure
35
(1)
This section applies in calculating for corporation tax purposes the profits or
losses of a company from a trade if—
(a)
the trade consists of or includes the exploitation of original master
versions of sound recordings, and
(b)
the original master versions do not constitute trading stock of the trade
40
as defined by section 163.
(2)
Expenditure that—
(a)
is incurred on the production or acquisition of the original master
version of a sound recording, and

Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
68

(b)
is of a revenue nature (whether as a result of section 150 or otherwise),

must be allocated to relevant periods in accordance with this section.
(3)
The company must allocate to a relevant period so much of the expenditure as
is just and reasonable having regard to—
(a)
the amount of the expenditure that remains unallocated at the
5
beginning of the period,
(b)
the proportion that the estimated value of the original master version
of the sound recording that is realised in that period (whether by way
of income or otherwise) bears to the total value so realised and the
estimated remaining value of the original master version at the end of
10
the period, and
(c)
the need to bring the whole of the expenditure into account over the
time during which the value of the original master version is expected
to be realised.
(4)
The company may also allocate to a relevant period a further amount, so long
15
as the total amount allocated does not exceed the value of the original master
version of the sound recording realised in that period (whether by way of
income or otherwise).
152
Interpretation of sections 150 and 151
(1)
For the purposes of sections 150 and 151—
20
(a)
“sound recording” does not include a film soundtrack,
(b)
“original master version” means the master tape or master audio disc
of the recording,
(c)
references to the original master version of a sound recording include
any rights in the original master version that are held or acquired with
25
it, and
(d)
“relevant period” means—
(i)
a period for which accounts of the trade are made up, or
(ii)
if no accounts of the trade are made up for a period, an
accounting period of the company.
30
(2)
In subsection (1)(a) “film” is to be read in accordance with section 1181.
Reserves of marketing authorities etc
153
Reserves of marketing authorities and certain other statutory bodies
(1)
This section applies to a statutory body if its object (or one of its objects) is—
(a)
marketing an agricultural product, or
35
(b)
stabilising the price of an agricultural product.
(2)
Subsections (3) and (4) apply if the body is required, by or under an approved
scheme or arrangement (“the scheme”), to pay the whole or part of any trading
surplus into a reserve fund meeting the conditions specified in section 154.
(3)
Any sums which the body is required by or under the scheme to pay into the
40
fund out of the profits of its trade are allowed as deductions in calculating the
profits of the trade.

Corporation Tax Bill
Part 3 — Trading income
Chapter 9 — Trade profits: other specific trades
69

(4)
Any sums withdrawn by the body from the fund are taken into account as
trading receipts, except so far as—
(a)
they are required, by or under the scheme, to be paid to a Minister or
department,
(b)
they are distributed to producers of the product in question, or
5
(c)
they are refunded to persons who pay any levy or duty.
(5)
In this section—
“approved scheme or arrangement” means a scheme or arrangement
approved by, or made with, a Minister or department,
“producers of the product” includes persons producing the product from
10
another product,
“statutory body” means a body established by or under an enactment,
“trading surplus” means a surplus from the body’s trading operations or
other trade receipts.
154
Conditions to be met by reserve fund
15
(1)
These are the conditions to be met by the reserve fund (see section 153(2)).
(2)
The first condition is that no sum may be withdrawn from the fund without the
authority or consent of a Minister or department.
(3)
The second condition is that if—
(a)
money has been paid to the body by a Minister or department—
20
(i)
in connection with arrangements for maintaining guaranteed
prices, or
(ii)
in connection with the body’s trading arrangements, and
(b)
the money is repayable to the Minister or department,

sums standing to the credit of the fund are required to be applied (in whole or
25
in part) in repaying the money.
(4)
The requirement mentioned in subsection (3) must be imposed by or under the
scheme or arrangement mentioned in section 153(2).
(5)
The third condition is that—
(a)
the fund is reviewed by a Minister at intervals fixed by or under the
30
scheme or arrangement mentioned in section 153(2), and
(b)
if the fund appears to the Minister to exceed what is reasonably
required by the body, the excess is withdrawn from the fund.
155
Interpretation of sections 153 and 154
(1)
In sections 153 and 154 “Minister” means—
35
(a)
a Minister of the Crown,
(b)
the Scottish Ministers,
(c)
the Welsh Ministers, or
(d)
a Minister within the meaning of the Northern Ireland Act 1998 (c. 47).
(2)
In sections 153 and 154 “department” means—
40
(a)
a government department,
(b)
a part of the Scottish Administration,
(c)
a part of the Welsh Assembly Government, or

Corporation Tax Bill
Part 3 — Trading income
Chapter 10 — Trade profits: changes in trading stock
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(d)
a Northern Ireland department.
Chapter 10
Trade profits: changes in trading stock
Introduction
156
Meaning of “trading stock”
5
(1)
In this Chapter “trading stock”, in relation to a trade, means anything (whether
land or other property)—
(a)
which is sold in the ordinary course of the trade, or
(b)
which would be so sold if it were mature or its manufacture,
preparation or construction were complete.
10
(2)
It does not include—
(a)
materials used in the manufacture, preparation or construction of any
such thing,
(b)
any services performed in the ordinary course of the trade, or
(c)
any article produced, or any material used, in the performance of any
15
such services.
Transfers of trading stock between trade and trader
157
Trading stock appropriated by trader
(1)
This section applies if trading stock of a company’s trade is appropriated by
the company for any other purpose.
20
(2)
In calculating the profits of the trade—
(a)
the amount which the stock appropriated would have realised if sold in
the open market at the time of the appropriation is brought into account
as a receipt, and
(b)
the value of anything in fact received for it is left out of account.
25
(3)
The receipt is treated as arising on the date of the appropriation.
158
Trading stock supplied by trader
(1)
This section applies if something that—
(a)
belongs to a company carrying on a trade, but
(b)
is not trading stock of the trade,
30

becomes trading stock of the trade.
(2)
In calculating the profits of the trade—
(a)
the cost of the stock is taken to be the amount which it would have
realised if sold in the open market at the time it became trading stock of
the trade, and
35
(b)
the value of anything in fact given for it is left out of account.
(3)
The cost is treated as being incurred on the date it became trading stock of the
trade.