Corporation Tax Bill

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Session 2008 - 09
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Corporation Tax Bill

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
652

(a)
to income chargeable under Chapter 15 of Part 3 of CTA 2009,
and
(b)
to income chargeable under Chapter 9 of Part 4 of CTA 2009,

do not include income that would, but for the repeal by CTA 2009 of
section 103 above, have been chargeable to corporation tax under
5
that section.”
250
In section 804A(1) (life assurance companies with overseas branches etc:
restriction of credit)—
(a)
for “Case I or VI of Schedule D” substitute “section 35 of CTA 2009
(charge on trade profits) or section 436A”, and
10
(b)
for “to Case I of Schedule D” substitute “for the purposes of section
35 of CTA 2009”.
251   (1)
Amend section 804C (insurance companies: allocation of expenses etc in
computations under Case I of Schedule D) as follows.
      (2)
In subsection (1)(b) for “to Case I of Schedule D” substitute “for the purposes
15
of section 35 of CTA 2009 (charge on trade profits)”.
      (3)
In the heading for “Case I of Schedule D” substitute “section 35 of CTA
2009”.
252
In section 806A(2) (eligible unrelieved foreign tax on dividends:
introductory) for “chargeable under Case V of Schedule D” substitute
20
“which are chargeable under Chapter 2 of Part 10 of CTA 2009 (dividends of
non-UK resident companies), or which would be so chargeable but for
section 982 of that Act (priority rules)”.
253   (1)
Amend section 806B (amounts that are eligible unrelieved foreign tax) as
follows.
25
      (2)
In subsections (3), (4) and (5) for “Case V dividend” substitute “dividend
falling within section 806A(2)”.
      (3)
In subsection (10)—
(a)
omit the definition of “the Case V dividend”,
(b)
for paragraph (b) of the definition of “higher level dividend”
30
substitute—
“(b)
which either is the dividend falling within section
806A(2) or is to any extent represented by that
dividend;”, and
(c)
in paragraph (a) of the definition of “the relevant tax” for “Case V
35
dividend” substitute “dividend falling within section 806A(2)”.
254
In section 806K(2)(bb) (application of foreign dividend provisions to
branches or agencies in the UK of persons resident elsewhere) for the words
from “take” to “under”, in the second place where it occurs, substitute “for
the words in section 806A(2) from “Chapter 2” to “rules)” substitute”.
40
255
In section 806L(5) (carry forward or carry back of unrelieved foreign tax)—
(a)
for paragraph (a) and the “or” immediately after it substitute—
“(a)
profits, chargeable under Chapter 2 of Part 3 of CTA
2009, of a trade carried on partly, but not wholly,
outside the United Kingdom; or”, and
45
(b)
in paragraph (b) omit “Case VI of Schedule D by virtue of”.

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
653

256   (1)
Amend section 807A (disposals and acquisitions of company loan
relationships with or without interest) as follows.
      (2)
In subsection (2B) for “section 91A” to “relationships)” substitute “section
523 of CTA 2009 (application of Part 5 of that Act to certain shares as rights
under creditor relationship)”.
5
      (3)
In subsection (6A) (as substituted by paragraph 10 of Schedule 14 to FA
2007) in paragraph (a) for “paragraph 2 of Schedule 13 to the Finance Act
2007” substitute “Chapter 10 of Part 6 of CTA 2009 (see section 548 of that
Act)”.
257
After section 807A insert—
10
“European cross-border transfers of business
807B
Introduction to section 807C
(1)
Subject to subsections (4) to (6), section 807C applies if condition A
or B is met.
(2)
Condition A is that—
15
(a)
a company resident in the United Kingdom transfers to a
company resident in another member State the whole or part
of a business which immediately before the transfer the
transferor carried on in a member State other than the United
Kingdom through a permanent establishment, and
20
(b)
the transfer includes—
(i)
the transfer of an asset or liability representing a loan
relationship,
(ii)
the transfer of rights and liabilities under a derivative
contract, or
25
(iii)
the transfer of intangible fixed assets that are
chargeable intangible assets in relation to the
transferor immediately before the transfer and in the
case of one or more of which the proceeds of
realisation exceed the costs recognised for tax
30
purposes.
(3)
Condition B is that—
(a)
a company resident in the United Kingdom transfers part of
its business to one or more companies,
(b)
the part of the transferor’s business which is transferred was
35
carried on immediately before the transfer in a member State
other than the United Kingdom through a permanent
establishment,
(c)
at least one transferee is resident in a member State other than
the United Kingdom,
40
(d)
the transferor continues to carry on a business after the
transfer,
(e)
the condition in subsection (2)(b) is met, and
(f)
the transfer—
(i)
is made in exchange for the issue of shares in or
45
debentures of each transferee to each person holding
shares in or debentures of the transferor, or

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
654

(ii)
is not so made only because, and only so far as, a
transferee is prevented from so issuing such shares or
debentures by section 658 of the Companies Act 2006
(general rule against limited company acquiring own
shares) or by a corresponding provision of the law of
5
another member State preventing such an issue.
(4)
If a transfer that meets condition A or B includes such a transfer as is
mentioned in subsection (2)(b)(i), section 807C —
(a)
only applies as respects the transfer so mentioned as a result
of the transfer meeting condition A if the transfer is wholly or
10
partly in exchange for shares or debentures issued by the
transferee to the transferor, and
(b)
only applies as respects the transfer so mentioned as a result
of the transfer meeting condition B if each transferee is
resident in a member State, but not necessarily the same one.
15
(5)
If a transfer that meets condition A or B includes such a transfer as is
mentioned in subsection (2)(b)(ii), section 807C—
(a)
only applies as respects the transfer so mentioned as a result
of the transfer meeting condition A if the transfer is wholly or
partly in exchange for shares or debentures issued by the
20
transferee to the transferor or to the persons holding shares in
or debentures of the transferor,
(b)
only applies as respects the transfer so mentioned as a result
of the transfer meeting condition B if each transferee is
resident in a member State, but not necessarily the same one,
25
and
(c)
only applies as respects the transfer so mentioned if the
transferor makes a claim under this section in respect of it.
(6)
If a transfer that meets condition A or B includes such a transfer as is
mentioned in subsection (2)(b)(iii), section 807C—
30
(a)
only applies as respects the transfer so mentioned as a result
of the transfer meeting condition A if—
(i)
the companies mentioned in subsection (2)(a) are
companies incorporated under the law of a member
State, and
35
(ii)
the transfer is wholly or partly in exchange for shares
or other securities issued by the transferee to the
transferor,
(b)
only applies as respects the transfer so mentioned as a result
of the transfer meeting condition B if—
40
(i)
the transferor and at least one of the transferees
mentioned in subsection (3)(a) is a company so
incorporated, and
(ii)
the transfer is in exchange for shares or debentures
issued by the transferee to the persons holding shares
45
in or debentures of the transferor, and
(c)
only applies as respects the transfer so mentioned if—
(i)
the transfer includes the whole of the assets of the
transferor used for the purposes of the business or
part, or the whole of those assets other than cash, and
50

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
655

(ii)
the transferor makes a claim under this section in
respect of the transfer so mentioned.
(7)
No claim may be made under subsection (6) in respect of a transfer
in relation to which a claim is made under section 827 of CTA 2009
(claims to postpone charge on transfer of assets to non-UK resident
5
company).
(8)
For the purposes of this section, a company is resident in a member
State if—
(a)
it is within a charge to tax under the law of the State as being
resident for that purpose, and
10
(b)
it is not regarded, for the purpose of any double taxation
relief arrangements to which the State is a party, as resident
in a territory not within a member State.
(9)
In this section and section 807C—
“company” means any entity listed as a company in the Annex
15
to the Mergers Directive,
“derivative contract” has the same meaning as in Part 7 of CTA
2009,
“intangible fixed assets” and “chargeable intangible assets”, in
relation to any person, have the same meaning as in Part 8 of
20
CTA 2009,
“loan relationship” has the same meaning as in Part 5 of CTA
2009,
“the Mergers Directive” means Council Directive No. 90/434/
EEC of 23 July 1990 on mergers, transfers etc,
25
“proceeds of realisation”, in relation to intangible fixed assets,
has the meaning given in section 739 of CTA 2009, and
“recognised for tax purposes” has the same meaning as in Part
8 of CTA 2009.”
258
After section 807B insert—
30
“807C
Tax treated as chargeable in respect of transfer of loan relationship,
derivative contract or intangible fixed assets
(1)
If tax would have been chargeable under the law of one or more
other member States in respect of the transfer mentioned in section
807B(2)(b)(i), (ii) or (iii) but for the Mergers Directive, this Part,
35
including any arrangements having effect by virtue of section 788, is
to apply as if that tax had been chargeable.
(2)
In calculating tax notionally chargeable under subsection (1), it is to
be assumed—
(a)
that to the extent permitted by the law of the other member
40
State losses arising on the transfer mentioned in section
807B(2)(b)(i), (ii) or (iii) are set against gains arising on that
transfer, and
(b)
that any relief due to the transferor under that law is claimed.
(3)
Subsection (1) does not apply if—
45
(a)
the transfer of business mentioned in section 807B(2)(a) or
(3)(a) is not effected for genuine commercial reasons, or

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
656

(b)
that transfer of business forms part of a scheme or
arrangements of which the main purpose, or one of the main
purposes, is avoiding liability to corporation tax, capital
gains tax or income tax.
(4)
But subsection (3) does not prevent subsection (1) from applying if
5
before the transfer—
(a)
the appropriate applicant has applied to the Commissioners
for Her Majesty’s Revenue and Customs, and
(b)
the Commissioners have notified the appropriate applicant
that they are satisfied subsection (3) will not have that effect.
10
(5)
In subsection (4) “the appropriate applicant” means—
(a)
in a case where tax chargeable in respect of such a transfer as
is mentioned in section 807B(2)(b)(i) or (ii) is concerned, the
companies mentioned in section 807B(2)(a) or (3)(a), and
(b)
in a case where tax chargeable in respect of such a transfer as
15
is mentioned in section 807B(2)(b)(iii) is concerned, the
transferor.
(6)
Sections 427 and 428 of CTA 2009 (procedure and decisions on
applications for clearance) have effect in relation to subsection (4) as
in relation to section 426(2) of that Act, taking the references in
20
section 428 to section 426(2)(b) as references to subsection (4)(b) of
this section.”
259
After section 807C insert—
“European cross-border mergers
807D
Introduction to section 807E
25
(1)
Section 807E applies if—
(a)
conditions A to E,
(b)
in the case of a merger within subsection (2)(a), (b) or (c),
condition F, and
(c)
in the case of a merger within subsection (2)(c) or (d),
30
condition G.

are met.
(2)
Condition A is that—
(a)
an SE is formed by the merger of two or more companies in
accordance with Articles 2(1) and 17(2)(a) or (b) of Council
35
Regulation (EC) No. 2157/2001 on the Statute for a European
company (Societas Europaea),
(b)
an SCE is formed by the merger of two or more co-operative
societies, at least one of which is a society registered under
the Industrial and Provident Societies Act 1965, in accordance
40
with Articles 2(1) and 19 of Council Regulation (EC) No.
1435/2003 on the Statute for a European Co-operative Society
(SCE),
(c)
a merger is effected by the transfer by one or more companies
of all their assets and liabilities to a single existing company,
45
or

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
657

(d)
a merger is effected by the transfer by two or more companies
of all their assets and liabilities to a single new company
(other than an SE or an SCE) in exchange for the issue by the
transferee, to each person holding shares in or debentures of
a transferor, of shares or debentures.
5
(3)
Condition B is that each merging company is resident in a member
State.
(4)
Condition C is that the merging companies are not all resident in the
same State.
(5)
Condition D is that in the course of the merger a company resident
10
in the United Kingdom (“company A”) transfers to a company
resident in another member State all assets and liabilities relating to
a business which company A carried on in a member State other than
the United Kingdom through a permanent establishment (but see
subsection (9)).
15
(6)
Condition E is that the transfer mentioned in subsection (5)
includes—
(a)
the transfer of an asset or liability representing a loan
relationship,
(b)
the transfer of rights and liabilities under a derivative
20
contract, or
(c)
the transfer of intangible fixed assets—
(i)
that are chargeable intangible assets in relation to
company A immediately before the transfer, and
(ii)
in the case of one or more of which the proceeds of
25
realisation exceed the cost recognised for tax
purposes.
(7)
Condition F is that—
(a)
the transfer of assets and liabilities to the transferee in the
course of the merger is made in exchange for the issue of
30
shares or debentures by the transferee to each person holding
shares in or debentures of a transferor, or
(b)
paragraph (a) is not met in relation to the transfer of those
assets and liabilities only because, and only so far as, the
transferee is prevented from so issuing such shares or
35
debentures by section 658 of the Companies Act 2006
(general rule against limited company acquiring own shares)
or by a corresponding provision of the law of another
member State preventing such an issue.
(8)
Condition G is that in the course of the merger each transferor ceases
40
to exist without being in liquidation (within the meaning given by
section 247 of the Insolvency Act 1986).
(9)
In the case of a merger within subsection (2)(a) or (b), in determining
whether section 807E applies in respect of such a transfer as is
mentioned in subsection (6)(c), condition D is regarded as met even
45
if all liabilities relating to the business which company A carried on
are not transferred as mentioned in subsection (5).
(10)
For the purposes of this section, a company is resident in a member
State if—

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
658

(a)
it is within a charge to tax under the law of the State as being
resident for that purpose, and
(b)
it is not regarded, for the purpose of any double taxation
relief arrangements to which the State is a party, as resident
in a territory not within a member State.
5
(11)
In this section and section 807E—
“company” means any entity listed as a company in the Annex
to the Mergers Directive,
“co-operative society” means a society registered under the
Industrial and Provident Societies Act 1965 or a similar
10
society governed by the law of a member State other than the
United Kingdom,
“derivative contract” has the same meaning as in Part 7 of CTA
2009,
“intangible fixed assets” and “chargeable intangible assets”, in
15
relation to any person, have the same meaning as in Part 8 of
CTA 2009,
“loan relationship” has the same meaning as in Part 5 of CTA
2009,
“the Mergers Directive” means Council Directive No. 90/434/
20
EEC of 23 July 1990 on mergers, transfers etc,
“proceeds of realisation”, in relation to intangible fixed assets,
has the meaning given in section 739 of CTA 2009,
“recognised for tax purposes” has the same meaning as in Part
8 of CTA 2009,
25
“SE” and “SCE” have the same meaning as in CTA 2009 (see
section 1319 of that Act)),
“the transferee” means—
(a)
in relation to a merger within subsection (2)(a), the SE,
(b)
in relation to a merger within subsection (2)(b), the
30
SCE,
(c)
in relation to a merger within subsection (2)(c) or (d),
the company to which assets and liabilities are
transferred, and
“transferor” means—
35
(a)
in relation to a merger within subsection (2)(a), a
company merging to form the SE,
(b)
in relation to a merger within subsection (2)(b), a co-
operative society merging to form the SCE, and
(c)
in relation to a merger within subsection (2)(c) or (d),
40
a company transferring all of its assets and liabilities.
(12)
In section 807E, “company A”, “the merger” and “the merging
companies” have the same meaning as in this section.”
260
After section 807D insert—
“807E
Tax treated as chargeable in respect of transfer of loan relationship,
45
derivative contract or intangible fixed assets
(1)
If tax would have been chargeable under the law of one or more
other member States in respect of the transfer mentioned in section
807D(6)(a), (b) or (c) but for the Mergers Directive, this Part,