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 2 — Other enactments
724

insert—
“(4)
In calculating under subsection (2) or (3) the profits of a trade for any
period of account no account is taken of any losses for another period
of account.”
640
For section 850 (allocation of firm’s profits or losses between partners)
5
substitute—
“850
Allocation of firm’s profits or losses between partners
(1)
For any period of account a partner’s share of a profit or loss of a
trade carried on by a firm is determined for income tax purposes in
accordance with the firm’s profit-sharing arrangements during that
10
period.

This is subject to sections 850A and 850B.
(2)
In this section and sections 850A and 850B “profit-sharing
arrangements” means the rights of the partners to share in the profits
of the trade and the liabilities of the partners to share in the losses of
15
the trade.
850A
Profit-making period in which some partners have losses
(1)
For any period of account, if—
(a)
the calculation under section 849 in relation to a partner (“A”)
produces a profit, and
20
(b)
A’s share determined under section 850 is a loss,

A’s share of the profit of the trade is neither a profit nor a loss.
(2)
For any period of account, if—
(a)
the calculation under section 849 in relation to A produces a
profit,
25
(b)
A’s share determined under section 850 is a profit, and
(c)
the comparable amount for at least one other partner is a loss,

A’s share of the profit of the trade is the amount produced by the
formula in subsection (3).
(3)
The formula is—
30

where—
FP is the amount of the firm’s profit calculated under section
849 in relation to A,
PP is the amount determined under section 850 to be A’s profit,
and
35
TCP is the total of the comparable amounts attributed to other
partners under step 3 in subsection (4) that are profits.
(4)
The comparable amount for each partner other than A is determined
as follows.

Step 1
40

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
725


Take the firm’s profit calculated under section 849 in relation to A.

Step 2

Determine in accordance with the firm’s profit-sharing
arrangements during the relevant period of account the shares of
that profit that are attributable to each of the other partners.
5

Step 3

Each such share is the comparable amount for the partner to whom
it is attributed.
(5)
In subsections (2) to (4) “partner” means any partner in the firm,
whether or not chargeable to income tax.
10
850B
Loss-making period in which some partners have profits
(1)
For any period of account, if—
(a)
the calculation under section 849 in relation to a partner (“A”)
produces a loss, and
(b)
A’s share determined under section 850 is a profit,
15

A’s share of the loss of the trade is neither a profit nor a loss.
(2)
For any period of account, if—
(a)
the calculation under section 849 in relation to A produces a
loss,
(b)
A’s share determined under section 850 is a loss, and
20
(c)
the comparable amount for at least one other partner is a
profit,

A’s share of the loss of the trade is the amount produced by the
formula in subsection (3).
(3)
The formula is—
25

where—
FL is the amount of the firm’s loss calculated under section 849
in relation to A,
PL is the amount determined under section 850 to be A’s loss,
and
30
TCL is the total of the comparable amounts attributed to other
partners under step 3 in subsection (4) that are losses.
(4)
The comparable amount for each partner other than A is determined
as follows.

Step 1
35

Take the firm’s loss calculated under section 849 in relation to A.

Step 2

Determine in accordance with the firm’s profit-sharing
arrangements during the relevant period of account the shares of
that loss that are attributable to each of the other partners.
40

Step 3

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
726


Each such share is the comparable amount for the partner to whom
it is attributed.
(5)
In subsections (2) to (4) “partner” means any partner in the firm,
whether or not chargeable to income tax.”
641   (1)
Amend section 860 (adjustment income) as follows.
5
      (2)
After subsection (1) insert—
“(1A)
A change in the persons carrying on a property business from one
period of account to the next does not prevent Chapter 7 of Part 3
(adjustment income) applying in relation to the property business so
long as a person carrying on the property business immediately
10
before the change continues to carry on the property business
immediately after the change.”
      (3)
In subsection (3)—
(a)
after “trade” insert “or property business”, and
(b)
after “Chapter 17 of Part 2” insert “, or Chapter 7 of Part 3,”.
15
      (4)
In subsection (6)—
(a)
in paragraph (a), at the end insert “or Chapter 7 of Part 3 (as the case
requires)”, and
(b)
in paragraph (b) after “trade” insert “or property business (as the
case requires)”.
20
642
For section 861 (sale of patent rights: effect of partnership changes)
substitute—
“861
Sale of patent rights: effect of partnership changes
(1)
This section applies if each of the following conditions is met—
(a)
a person (“the trader”) sells the whole or part of any patent
25
rights in carrying on a trade,
(b)
tax is chargeable under section 587 of this Act or section 912
of CTA 2009 on the proceeds of the sale or on any instalment
of those proceeds,
(c)
the tax is chargeable in one or more tax years or accounting
30
periods (referred to in this section as “the tax charge
periods”),
(d)
there is a change in the persons carrying on the trade at any
time between the beginning of the first of those tax charge
periods and the end of the last of them, and
35
(e)
the partnership condition and the continuity condition are
met.
(2)
The partnership condition is that—
(a)
the trader is a firm at the time of the sale, or
(b)
the trade is carried on in partnership at any time between the
40
beginning of the first of the tax charge periods and the end of
the last of them.
(3)
The continuity condition is—
(a)
in the case of an amount chargeable under section 587, that a
person who carried on the trade immediately before the
45
change continues to carry it on after the change, or

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
727

(b)
in the case of an amount chargeable under section 912 of CTA
2009, that a company which carried on the trade in
partnership immediately before the change continues to
carry it on in partnership after the change.
(4)
Any amounts chargeable in respect of the proceeds or instalment
5
that would (apart from this section) be treated in accordance with
Chapter 2 of Part 5 of this Act or Chapter 3 of Part 9 of CTA 2009 as
profits of the seller of the patent rights chargeable in tax charge
periods falling wholly after the change are treated for income tax
purposes—
10
(a)
as proceeds, arising at a constant daily rate during the
remainder of the relevant period, of a sale of patent rights by
the person or persons carrying on the trade after the change,
and
(b)
if the trade is carried on in partnership after the change, as
15
arising to the partners in shares calculated in accordance with
the firm’s profit-sharing arrangements.
(5)
If the change occurs during the course of a tax charge period—
(a)
any person who would, but for this section, have been
charged to income tax in that period on a sum (“S”) in respect
20
of the proceeds or instalment is so charged on a fraction of S
proportionate to the length of the part of the period before the
change, and
(b)
the balance of S not dealt with under paragraph (a) is treated
for the purposes of this section and section 1271 of CTA 2009
25
(sale of patent rights: effect of partnership changes) as if it
were an amount such as is described in subsection (4).
(6)
In this section “the remainder of the relevant period” means—
(a)
if one or more tax charge periods begins after the tax charge
period in which the change occurs, the period beginning
30
immediately after the change and ending 6 years after the
beginning of the first of the tax charge periods, or
(b)
otherwise, the period beginning immediately after the
change and ending at the end of the tax charge period in
which the change occurs.
35
(7)
In this section “profit-sharing arrangements” means the rights of the
partners to share in the profits of the trade.”
643   (1)
Amend section 862 (sale of patent rights: effect of later cessation of trade) as
follows.
      (2)
For subsections (1) and (2) substitute—
40
“(1)
This section applies if—
(a)
a person (“the trader”) sells the whole or part of any patent
rights in carrying on a trade,
(b)
by virtue of section 861 amounts are chargeable to income tax
under section 587 as profits of one or more persons for the
45
time being carrying on the trade in partnership,
(c)
a partner permanently ceases to carry on the trade after that,
and

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
728

(d)
no person who carried on the trade immediately before the
cessation continues to carry on the trade immediately after
the cessation.
(2)
Any amounts mentioned in subsection (1)(b) which would have been
chargeable in any tax year later than that in which the cessation
5
occurred are charged in the tax year in which the cessation
occurred.”
      (3)
Omit subsections (3) and (7).
644
Omit section 881 (disapplication of corporation tax: section 9 of ICTA).
645   (1)
Amend Schedule 1 (consequential amendments) as follows.
10
      (2)
Omit paragraph 312(4)(b) and the “and” immediately before it.
646   (1)
Amend Schedule 2 (transitionals and savings etc) as follows.
      (2)
In paragraph 70(2) for “term” substitute “terms”.
      (3)
In paragraph 71(2) for “term” substitute “terms”.
      (4)
In paragraph 109(5) for “section 12 of ICTA” substitute “Chapter 2 of Part 2
15
of CTA 2009”.
647   (1)
Amend Schedule 4 (abbreviations and defined expressions) as follows.
      (2)
In Part 1 at the end insert—

“CTA 2009
The Corporation Tax Act 2009”

      (3)
In Part 2—
20
(a)
in the entry for “accounting period”, in the second column—
(i)
for “sections 12 and” substitute “section”, and
(ii)
at the end insert “and Chapter 2 of Part 2 of CTA 2009”, and
(b)
omit the entry for “Schedule A business”.
Finance Act 2005 (c. 7)
25
648
The Finance Act 2005 is amended as follows.
649
In section 47A(6) (alternative finance arrangements: diminishing shared
ownership) for “Taxes” to “1970)” substitute “Income Tax Acts, TCGA 1992
and all other enactments relating to capital gains tax”.
650
In section 48A (alternative finance arrangements: alternative finance bond:
30
introduction) in subsection (3) after “this section” insert “and section 507 of
CTA 2009 (investment bond arrangements)”.
651
In section 48B (alternative finance arrangements: alternative finance
investment bond: effects)—
(a)
in subsections (2) and (3) after “any tax” insert “other than the
35
Corporation Tax Acts”,
(b)
in subsection (4) after “section 48A”, in both places where it occurs,
insert “of this Act or section 507 of CTA 2009”, and
(c)
in subsection (5)—

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
729

(i)
after “section 48A” insert “of this Act or section 507 of CTA
2009”,
(ii)
after paragraph (b) insert “or”, and
(iii)
omit paragraph (d) and the “or” immediately before it.
652
In section 49(2) (alternative finance arrangements: deposit) for “profit share
5
return” substitute “alternative finance return”.
653
In section 49A (alternative finance arrangements: profit share agency)—
(a)
in subsection (2) for “profit share return” substitute “alternative
finance return”, and
(b)
in subsection (3) for “Tax Acts” substitute “Income Tax Acts”.
10
654
Omit section 50 (treatment of alternative finance arrangements: companies).
655
In section 51 (treatment of alternative finance arrangements: persons other
than companies) in subsections (1), (4) and (5)(b) omit “or profit share
return”.
656
In section 52 (provision not at arm’s length)—
15
(a)
in subsection (2) omit “or profit share return”, and
(b)
omit subsection (6).
657
Omit section 54 (return not to be treated as distribution).
658
In section 54A (treatment of section 47, 49 and 49A arrangements as loans:
Community Investment Tax Relief)—
20
(a)
in subsection (2)(a) after “or 49A” insert “of this Act or section 503,
505 or 506 of CTA 2009”,
(b)
in subsection (2)(b) omit “or profit share return”,
(c)
in subsections (3) and (4) after “section 47” insert “of this Act or
section 503 of CTA 2009”,
25
(d)
in subsection (5) after “section 49” insert “of this Act or section 505 of
CTA 2009”, and
(e)
in subsection (6) after “section 49A” insert “of this Act or section 506
of CTA 2009”.
659
In section 55 (further provisions) omit “, corporation tax”.
30
660
In section 56 (application of Chapter)—
(a)
in subsections (2) and (3) for “profit share return” substitute
“alternative finance return”,
(b)
omit subsection (4)(b) and the “and” immediately before it,
(c)
omit subsection (5), and
35
(d)
in subsection (6)—
(i)
for “Section 54” substitute “Section 209(6A) of ICTA”, and
(ii)
for “profit share return” substitute “alternative finance
return”.
661
In section 57 (interpretation of Chapter)—
40
(a)
in the definition of “alternative finance return” for “and 47A(5)”
substitute “47A(5), 48B(1), 49(2) and 49A(2)”, and
(b)
omit the definition of “profit share return”.
662
In section 83(8) (application of accounting standards to securitisation
companies) in the definition of “asset” for “Schedule 26 to FA 2002
45

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
730

(derivative contracts) (see paragraph 12 of that Schedule)” substitute “Part 7
of CTA 2009 (derivative contracts) (see sections 580, 581 and 582 of that
Act)”.
663
In section 105 (interpretation) after the definition of “CAA 2001” insert—
““CTA 2009” means the Corporation Tax Act 2009;”.
5
664   (1)
Amend Schedule 2 (alternative finance arrangements: further provisions) as
follows.
      (2)
Omit paragraph 2.
      (3)
Omit paragraph 7.
      (4)
In paragraphs 8, 10, 11(c), 12 and 13 omit “or profit share return”.
10
665
In Schedule 4 (accounting practice and related matters) omit paragraphs 27
and 52.
Railways Act 2005 (c. 14)
666
The Railways Act 2005 is amended as follows.
667   (1)
Amend Schedule 10 (taxation provisions relating to transfer schemes) as
15
follows.
      (2)
In paragraph 7—
(a)
in sub-paragraph (a) for “Chapter 2 of Part 4 of the Finance Act 1996
(c. 8)” substitute “Part 5 of the Corporation Tax Act 2009”, and
(b)
in sub-paragraph (b) for “Schedule 26 to the Finance Act 2002
20
(derivative contracts)” substitute “Part 7 of the Corporation Tax Act
2009 (derivative contracts)”.
      (3)
In paragraph 10(5) for the words from “under” to the end substitute “under
Part 3 of the Corporation Tax Act 2009 in respect of the trade or part of a
trade in question for periods in which the trade was carried on wholly or
25
partly in the United Kingdom.”
      (4)
In paragraph 17—
(a)
in sub-paragraph (1) for “Schedule 29 to the Finance Act 2002” and
“existing asset”, in both places where it occurs, substitute “Part 8 of
the Corporation Tax Act 2009” and “pre-FA 2002 asset” respectively,
30
and
(b)
in sub-paragraph (2) for “that Schedule”, in both places where it
occurs, substitute “that Part”.
      (5)
In paragraph 18—
(a)
in sub-paragraph (1) for “Chapter 2 of Part 4 of the Finance Act 1996
35
(c. 8)” substitute “Part 5 of the Corporation Tax Act 2009”, and
(b)
in sub-paragraph (2) for “paragraph 12(8) of Schedule 9 to” substitute
“section 335(6) of”.
      (6)
In paragraph 19—
(a)
in sub-paragraph (1) for “Schedule 26 to the Finance Act 2002
40
(derivative contracts)” substitute “Part 7 of the Corporation Tax Act
2009 (derivative contracts)”, and
(b)
in sub-paragraph (2) for “paragraph 28(6) of that Schedule”
substitute “section 624(3) of that Act”.