Corporation Tax Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
659

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) in
respect of the transfer mentioned in section 807D(6)(a) or (b), it is to
be assumed—
5
(a)
that to the extent permitted by the law of the other member
State losses arising on that transfer are set against gains
arising on that transfer, and
(b)
that any relief due to company A under that law is claimed.
(3)
Subsection (1) does not apply if—
10
(a)
the merger is not effected for genuine commercial reasons, or
(b)
the merger 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
15
before the merger—
(a)
any of the merging companies has applied to the
Commissioners for Her Majesty’s Revenue and Customs,
and
(b)
the Commissioners have notified the merging companies
20
that they are satisfied subsection (3) will not have that effect.
(5)
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
section 428 to section 426(2)(b) as references to subsection (4)(b) of
25
this section.”
261
After section 807E insert—
“Transparent entities involved in cross-border transfers and mergers
807F
Introduction to section 807G
(1)
Section 807G applies if, as a result of—
30
(a)
a relevant loan relationship transaction,
(b)
a relevant derivative contracts transaction, or
(c)
a relevant intangible fixed assets transaction,

tax would have been chargeable under the law of a member State
other than the United Kingdom in respect of a relevant profit but for
35
the Mergers Directive.
(2)
In this section “relevant loan relationship transaction” means—
(a)
a transfer of a kind which meets condition A or B in section
421 of CTA 2009 or would meet one of those conditions if—
(i)
the business or part of the business transferred were
40
carried on by the transferor in the United Kingdom,
and
(ii)
the condition in section 421(3)(c) or (4)(f) of that Act
were met,

and in relation to which the transferor or transferee or one of
45
the transferees is a transparent entity, or

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
660

(b)
a merger of a kind mentioned in section 431(2) of that Act
which meets—
(i)
conditions B to D in section 431,
(ii)
in the case of a merger within section 431(3)(a), (b) or
(c), condition E in section 431, and
5
(iii)
in the case of a merger within section 431(3)(c) or (d),
condition F in section 431,

and in relation to which one or more of the merging
companies is a transparent entity.
(3)
In this section “relevant derivative contracts transaction” means—
10
(a)
a transfer of a kind which meets condition A or B in section
674 of CTA 2009 or would meet one of those conditions if—
(i)
the business or part of the business transferred were
carried on by the transferor in the United Kingdom,
and
15
(ii)
the condition in section 674(2)(c) or (3)(f) of that Act
were met,

and in relation to which the transferor is a transparent entity,
or
(b)
a merger of a kind mentioned in section 682(2) of that Act
20
which meets—
(i)
conditions B to D in section 682,
(ii)
in the case of a merger within section 682(2)(a), (b) or
(c), condition E in section 682, and
(iii)
in the case of a merger within section 682(2)(c) or (d),
25
condition F in section 682,

and in relation to which one or more of the merging
companies is a transparent entity.
(4)
In this section “relevant intangible fixed assets transaction” means—
(a)
a transfer—
30
(i)
which is of a kind which meets condition A or B in
section 819 of CTA 2009, or would meet one of those
conditions if the business or part of the business
transferred were carried on by the transferor in the
United Kingdom, and
35
(ii)
in relation to which the transferor or transferee or one
of the transferees is a transparent entity, or
(b)
a merger—
(i)
which is of a kind mentioned in section 821(2) of that
Act,
40
(ii)
which meets conditions B and C in section 821,
(iii)
which, if it is a merger within section 821(2)(a), (b) or
(c), meets condition D in section 821,
(iv)
which, if it is a merger within section 821(2)(c) or (d),
meets condition E in section 821,
45
(v)
in the course of which no qualifying assets are
transferred to which section 818 (company
reconstruction involving transfer of business) applies,
and

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
661

(vi)
in relation to which one or more of the merging
companies is a transparent entity.
(5)
In this section “relevant profit” means—
(a)
in the case of a transfer within subsection (2)(a), a profit
accruing to a transparent entity in respect of a loan
5
relationship (or which would be treated as accruing if it were
not transparent) because of the transfer of assets or liabilities
representing a loan relationship by the transparent entity to
the transferee,
(b)
in the case of a merger within subsection (2)(b), a profit
10
accruing to a transparent entity in respect of a loan
relationship (or which would be treated as accruing if it were
not transparent) because of the transfer of assets or liabilities
representing a loan relationship by the transparent entity to
another company in the course of the merger,
15
(c)
in the case of a transfer within subsection (3)(a), a profit
accruing to a transparent entity in respect of a derivative
contract (or which would be treated as accruing if it were not
transparent) because of the transfer of rights and liabilities
under the derivative contract by the transparent entity to the
20
transferee,
(d)
in the case of a merger within subsection (3)(b), a profit
accruing to a transparent entity in respect of a derivative
contract (or which would be treated as accruing if it were not
transparent) because of the transfer of rights and liabilities
25
under the derivative contract by the transparent entity to
another company in the course of the merger,
(e)
in the case of a transfer within subsection (4)(a), a profit
which would be treated as accruing to a transparent entity in
respect of an intangible fixed asset, because of the transfer of
30
intangible fixed assets by the transparent entity, if it were not
transparent,
(f)
in the case of a merger within subsection (4)(b), a profit which
would be treated as accruing to a transparent entity in respect
of an intangible fixed asset, because of the transfer of
35
intangible fixed assets by the transparent entity in the course
of the merger, if it were not transparent.
(6)
In this section and section 807G—
“company” means any entity listed as a company in the Annex
to the Mergers Directive,
40
“derivative contract” has the same meaning as in Part 7 of CTA
2009,
“intangible fixed assets” has the same meaning as in Part 8 of
CTA 2009,
“loan relationship” has the same meaning as in Part 5 of CTA
45
2009,
“the Mergers Directive” means Council Directive No. 90/434/
EEC of 23 July 1990 on mergers, transfers etc, and
“transparent entity” means a company which is resident in a
member State other than the United Kingdom and does not
50
have an ordinary share capital.”

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
662

262
After section 807F insert—
“807G
Tax treated as chargeable in respect of relevant transactions
(1)
This Part, including any arrangements having effect by virtue of
section 788, is to apply as if the tax that would have been chargeable
as mentioned in section 807F(1) had been chargeable.
5
(2)
In calculating tax notionally chargeable under subsection (1), it is
assumed—
(a)
that to the extent permitted by the law of the other member
State mentioned in section 807F(1) losses arising on the
relevant transfer are set against profits arising on it, and
10
(b)
that any relief available under that law is claimed.
(3)
In this section “the relevant transfer” means—
(a)
the transfer of assets or liabilities mentioned in paragraph (a)
or (b) of section 807F(5),
(b)
the transfer of rights and liabilities mentioned in paragraph
15
(c) or (d) of that section, or
(c)
the transfer of intangible fixed assets mentioned in paragraph
(e) or (f) of that section.”
263
In section 811(3) (deduction for foreign tax where no credit allowable)—
(a)
in paragraph (a) for “section 80(5) of the Finance Act 1996” and
20
“Chapter II of Part IV” substitute “section 464(1) of CTA 2009” and
“Part 5” respectively, and
(b)
in paragraph (b) for “paragraph 1(3) of Schedule 29 to the Finance
Act 2002” and “that Schedule” substitute “section 906(1) of CTA
2009” and “Part 8 of that Act” respectively.
25
264
In section 815AZA (UK residents and foreign enterprises) for subsection (4)
substitute—
“(4)
This section does not apply in relation to—
(a)
income of a person resident in the United Kingdom to which
section 858 of ITTOIA 2005 applies, or
30
(b)
income of a company resident in the United Kingdom to
which section 1266 of CTA 2009 applies.”
265
Omit section 817 (deductions not to be allowed in computing profits or
gains).
266
In section 821(1)(a) (under-deductions from payments made before passing
35
of annual Act) omit “under under Case III of Schedule D”.
267   (1)
Amend section 826 (interest on tax overpaid) as follows.
      (2)
In subsection (1)—
(a)
in paragraph (d) for “Schedule 20 to the Finance Act 2000” substitute
“Chapter 2 or 7 of Part 13 of CTA 2009”,
40
(b)
omit paragraph (da), and
(c)
in paragraph (e) for “Schedule 22 to the Finance Act 2001” substitute
“Part 14 of CTA 2009”.
      (3)
Omit subsection (3AA).

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
663

      (4)
Omit subsections (5) and (5A).
      (5)
In subsection (7C)—
(a)
in paragraph (b) for “section 83(2)(c) of the Finance Act 1996 or
paragraph 4(3) of Schedule 11 to that Act” substitute “section 389(1)
or 459(1)(b) of CTA 2009”, and
5
(b)
in the words following paragraph (c) for “section 83(2)(c) of that Act
or, as the case may be, paragraph 4(3) of Schedule 11 to that Act”
substitute “section 389(1) or 459(1)(b) of CTA 2009”.
      (6)
In subsection (8A)—
(a)
in paragraph (a) for “(d), (da)” substitute “, (d)”, and
10
(b)
in paragraph (b)(ii), omit “, tax credit under Schedule 13 to the
Finance Act 2002”.
      (7)
In subsection (8BA), omit (in both places) “, tax credit under Schedule 13 to
the Finance Act 2002”.
268
Omit section 827 (VAT penalties etc).
15
269   (1)
Amend section 828 (orders and regulations made by the Treasury or the
Board) as follows.
      (2)
In subsection (4) omit “79B(5),”.
      (3)
In subsection (5)—
(a)
for “or section 717 of ITEPA 2003” substitute “, section 717 of ITEPA
20
2003 or section 1310 of CTA 2009”,
(b)
in paragraph (a) for “or ITEPA 2003” substitute “, ITEPA 2003 or CTA
2009”, and
(c)
in paragraph (b) for “either” substitute “any”.
270
Omit section 830(2) to (4) (territorial sea and designated areas).
25
271
In section 831(3) (interpretation of ICTA) before the definition of “ITEPA
2003” insert—
““CTA 2009” means the Corporation Tax Act 2009;”.
272   (1)
Amend section 832 (interpretation of the Corporation Tax Acts) as follows.
      (2)
In subsection (1)—
30
(a)
omit the definition of “overseas property business”, and
(b)
omit the definition of “Schedule A business”.
      (3)
Omit subsection (4).
273   (1)
Amend section 834 (interpretation of the Corporation Tax Acts) as follows.
      (2)
In subsection (1)—
35
(a)
in the definition of “accounting period” for “section 12” substitute
“Chapter 2 of Part 2 of CTA 2009”,
(b)
at the appropriate place insert—
““the charge to corporation tax on income” has the same
meaning as in CTA 2009 (see section 2(3));”,
40
(c)
in the definition of “chargeable profits”, for “section 11(2)” substitute
“section 19 of CTA 2009”,

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
664

(d)
in the definition of “derivative contract” for “Schedule 26 to the
Finance Act 2002” substitute “Part 7 of CTA 2009”,
(e)
at the appropriate place insert—
““income” includes anything to which the charge to
corporation tax on income applies;”,
5
(f)
in the definition of “loan relationship” for “Chapter II of Part IV of the
Finance Act 1996” substitute “Part 5 of CTA 2009”,
(g)
in the definition of “non-trading deficit” for “section 82 of the Finance
Act 1996” substitute “section 301 of CTA 2009”, and
(h)
at the appropriate place insert—
10
““registered industrial and provident society” means—
(a)
a society registered or treated as registered
under the Industrial and Provident Societies
Act 1965 or the Industrial and Provident
Societies Act (Northern Ireland) 1969, or
15
(b)
an SCE formed in accordance with Council
Regulation (EC) No 1435/2003 on the Statute
for a European Co-Operative Society;”.
      (3)
In subsection (2)—
(a)
for “sections 75 and 76” substitute “section 76”, and
20
(b)
at the end insert—
“section 834C.”
      (4)
In subsection (4) (apportionment to different periods) after “those Acts”
insert “, other than CTA 2009,”.
274
After section 834 insert—
25
“834A
Miscellaneous charges (list for the purposes of certain provisions that
formerly referred to Case VI of Schedule D)
(1)
In the Corporation Tax Acts references to any provision to which this
section applies are references to any provision listed in the following
table, so far as the provision relates to corporation tax (but subject to
30
any applicable limitation in subsection (3)).
(2)
This is the table—
PART 1

Provisions of this Act
Description

Section 56(2)
Transactions in deposits

35

Section 214(1)(ab)
Chargeable payments connected with

exempt distributions

Section 436A(1)
Gross roll-up business: separate

charge on profits

Section 442A(1)
Taxation of investment return where

40

risk reinsured

Section 571(1)
Cancellation of tax certificates

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
665

Provisions of this Act
Description

Section 730(6)
Transfers of income arising from

securities

Section 761(1)(b)(ii)
Offshore income gains

Section 774(1)
Transactions between dealing

5

company and associated company

Section 776(3A)
Transactions in land

Section 780(3A)(b)
Sale and leaseback: taxation of

consideration received

Section 781(1)
Assets leased to traders and others

10

Section 786(5)(b)
Transactions associated with loans or

credit

PART 2

Provisions of CTA 2009
Description

Chapter 15 of Part 3
Post-cessation receipts: trades

15

Chapter 7 of Part 4
Rent receivable in connection with a

UK section 39(4) concern

Chapter 8 of Part 4
Rent receivable for UK electric-line

wayleaves

Chapter 9 of Part 4
Post-cessation receipts: UK property

20

businesses

Section 752
Non-trading gains on intangible fixed

assets

Section 908
Profits from disposals of know-how

Section 912
Profits from sales of patent rights

25

Section 965(4)
Adjustments after the administration

period

Chapter 8 of Part 10
Income not otherwise charged

Section 986(4), so far as it relates to
Withdrawal of deductions if approval

an amount treated as received under
for share incentive plan withdrawn:

30

section 998(3)
non-trading cases

Section 1083(5)
Refunds of expenditure on research

and development

Section 1229
Management expenses: claw back of

relief

35