Corporation Tax Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 6 — Trading income
745

      (2)
For the purposes of sections 62 to 67—
(a)
the lease is treated as a taxed lease, and
(b)
the ICTA pre-commencement receipt is treated as a taxed receipt.
      (3)
For the purposes of those sections, the “receipt period” of a taxed receipt
which is an ICTA pre-commencement receipt is—
5
(a)
in the case of an ICTA pre-commencement receipt as a result of
section 34 of ICTA, the period treated in calculating the amount of
the receipt as being the duration of the lease, and
(b)
in the case of an ICTA pre-commencement receipt as a result of
section 35 of ICTA, the period treated in calculating the amount of
10
the receipt as being the duration of the lease remaining at the date of
the assignment.
      (4)
For the purposes of sections 62 to 67 the “unreduced amount” of a taxed
receipt which is an ICTA pre-commencement receipt is the amount of the
ICTA pre-commencement receipt as a result of section 34 or 35 of ICTA,
15
before the operation of section 37(2) or (3) of ICTA.
      (5)
Sub-paragraph (6) applies to a taxed receipt which is an ICTA pre-
commencement receipt arising as a result of section 34(2) of ICTA
(obligation on tenant to carry out work under lease).
      (6)
If the obligation to carry out work included the carrying out of work which
20
gave or will give rise to expenditure for which an allowance has been, or
may be, made under the enactments relating to capital allowances, the
unreduced amount of the taxed receipt is calculated as if the obligation had
not included the carrying out of that work.
19    (1)
This paragraph provides for the application of section 63 as a result of
25
section 65 if—
(a)
a lease is a taxed lease as a result of paragraph 18,
(b)
another lease is granted out of the taxed lease,
(c)
in calculating the amount of an ICTA pre-commencement receipt in
respect of the other lease, there is a reduction under section 37(2) or
30
(3) of ICTA by reference to the amount chargeable on the superior
interest for the purposes of that section, and
(d)
as a result of paragraph 18 the amount chargeable on the superior
interest is the taxed receipt for the purposes of section 63.
      (2)
Sections 63 to 67 apply as follows—
35
(a)
the ICTA pre-commencement receipt is treated as if it were a lease
premium receipt for the purposes of sections 66 and 67,
(b)
references in those sections to the reduction under section 228 by
reference to the taxed receipt are, in relation to the ICTA pre-
commencement receipt, to the reduction under section 37(2) or (3) of
40
ICTA by reference to the amount chargeable on the superior interest,
and
(c)
for the purposes of those sections the receipt period of the ICTA pre-
commencement receipt is—
(i)
in the case of an ICTA pre-commencement receipt as a result
45
of section 34 of ICTA, the period treated in calculating the
amount of the receipt as being the duration of the lease, and
(ii)
in the case of an ICTA pre-commencement receipt as a result
of section 35 of ICTA, the period treated in calculating the

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 6 — Trading income
746

amount of the receipt as being the duration of the lease
remaining at the date of the assignment.
      (3)
References in this paragraph and paragraph 20 to a reduction under section
37(2) or (3) of ICTA in an ICTA pre-commencement receipt by reference to
the amount chargeable on the superior interest are to the difference
5
between—
(a)
the amount of the ICTA pre-commencement receipt before the
operation of section 37(2) or (3) of ICTA, and
(b)
the amount of the receipt after the operation of that subsection,

so far as attributable to the amount chargeable on the superior interest for
10
the purposes of section 37 of ICTA.
20    (1)
This paragraph provides for the application of section 63 as a result of
section 65 if—
(a)
the taxed lease referred to in those sections is a taxed lease as a result
of section 227(4)(c) or (d) (lease taxed under ITTOIA 2005),
15
(b)
another lease is granted out of the taxed lease, and
(c)
in calculating the amount of an ICTA pre-commencement receipt in
respect of the other lease, there is a reduction under section 37(2) or
(3) of ICTA by reference to the amount chargeable on the superior
interest for the purposes of that section.
20
      (2)
Sections 63 to 67 apply as follows—
(a)
the ICTA pre-commencement receipt is treated as if it were a lease
premium receipt for the purposes of sections 66 and 67,
(b)
references in those sections to the reduction under section 228 by
reference to the taxed receipt are, in relation to the ICTA pre-
25
commencement receipt, to the reduction under section 37(2) or (3) of
ICTA by reference to the amount chargeable on the superior interest,
and
(c)
for the purposes of those sections the receipt period of the ICTA pre-
commencement receipt is—
30
(i)
in the case of an ICTA pre-commencement receipt as a result
of section 34 of ICTA, the period treated in calculating the
amount of the receipt as being the duration of the lease, and
(ii)
in the case of an ICTA pre-commencement receipt as a result
of section 35 of ICTA, the period treated in calculating the
35
amount of the receipt as being the duration of the lease
remaining at the date of the assignment.
Local enterprise agencies
21
To the extent that any function of the Scottish Ministers under section 79 of
ICTA was, before 1 April 2009, also exercisable by the Secretary of State for
40
the purposes specified in section 2(2) of the European Communities Act 1972
(c. 68) that function as rewritten in—
(a)
section 83(2) (meaning of “local enterprise agency”),
(b)
section 84 (approval of local enterprise agencies), or
(c)
section 85 (supplementary provisions with respect to approvals),
45

continues to be also exercisable by the Secretary of State for those purposes.

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 6 — Trading income
747

Expenses connected with patents, designs and trade marks
22    (1)
This paragraph applies if—
(a)
fees have been incurred, but not paid, for the purposes of a trade in
connection with any of the matters mentioned in section 89 or 90,
(b)
the fees were incurred in a period of account no part of which falls in
5
an accounting period ending after 31 March 2009, and
(c)
the fees have not been taken into account in calculating the profits of
the trade of any accounting period.
      (2)
A deduction is allowed for the fees in calculating the profits of the period of
account in which they are paid.
10
Payments to Export Credits Guarantee Department
23    (1)
This paragraph applies if—
(a)
a sum is payable, but not paid, by the company carrying on a trade
to the Export Credits Guarantee Department under an agreement
mentioned in section 91(a) or with a view to entering into such an
15
agreement,
(b)
the sum was incurred in a period of account no part of which falls in
an accounting period ending after 31 March 2009, and
(c)
the sum has not been taken into account in calculating the profits of
the trade of any accounting period.
20
      (2)
A deduction is allowed for the sum in calculating the profits of the period of
account in which it is paid.
Reverse premiums
24    (1)
Sections 98 and 99 do not apply to a reverse premium—
(a)
which was received before 9 March 1999, or
25
(b)
to which the recipient was entitled immediately before that date.
      (2)
In determining whether a reverse premium was one to which the recipient
was entitled immediately before 9 March 1999, no account is to be taken of
any arrangements made on or after that date.
Sums recovered under insurance policies etc
30
25
Section 103 does not apply if—
(a)
a company carrying on a trade recovers a sum mentioned in that
section, and
(b)
the sum has been taken into account in calculating the profits of the
trade of an accounting period ending before 1 April 2009.
35
Meaning of “designated educational establishment”
26
To the extent that the power of the Welsh Ministers to make regulations
under section 84(5) of ICTA was, before 1 April 2009, also exercisable by the
Secretary of State for the purposes specified in section 2(2) of the European
Communities Act 1972 (c. 68), that power as rewritten in section 106
40
continues to be also exercisable by the Secretary of State for those purposes.

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 7 — Property income
748

27
The reference in section 106(1)(a) to regulations made for England and
Scotland by the Secretary of State includes a reference to regulations made
for Great Britain by the Secretary of State before 1 July 1999.
Dealers in securities etc
28
The repeal by this Act of section 473(2B) of ICTA (conversion etc of securities
5
held as circulating capital) does not affect any election made under section
66 of FA 2002 (election to continue postponement of mark to market) before
the repeal takes effect.
Purchase or sale of woodlands
29
Section 134 does not apply if the purchase mentioned in subsection (2) of
10
that section was made under a contract entered into before 1 May 1963.
Waste disposal
30
If the predecessor 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, before 21 March 2000,
section 142 applies as if—
15
(a)
“, or a predecessor,” in subsection (1) were omitted, and
(b)
subsections (3) and (4) were omitted.
31
If the trade carried on by the trader was started before 1 April 1993, section
144(1) (definition of “waste disposal licence”) applies for the purposes of
sections 142 and 143 as if paragraphs (d) and (e) of that subsection were
20
omitted (radioactive waste and nuclear site authorisations or licences).
32
Section 144(3) does not apply for the purposes of sections 142 and 143 if the
trade was started before 1 April 1993.
Reserves of marketing authorities etc
33
In section 153(5) “approved scheme or arrangement” includes a scheme or
25
arrangement—
(a)
approved by the National Assembly for Wales, or
(b)
made with the National Assembly for Wales,

before 26 May 2007.
Adjustment on change of basis
30
34
Chapter 14 of Part 3 applies to a change of basis only if the first day of the
first period of account for which the new basis is adopted falls within an
accounting period that ends after 31 March 2009.
Part 7
Property income
35
Lease premiums
35
Section 217 does not apply in relation to a lease granted pursuant to a
contract entered into before 4 April 1963.

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 7 — Property income
749

Lease premiums: sums payable instead of rent
36
Section 219 does not apply in relation to a lease granted—
(a)
before 6 April 1963, or
(b)
pursuant to a contract entered into before 4 April 1963.
Lease premiums: sums payable for surrender of lease
5
37
Section 220 does not apply in relation to a lease granted—
(a)
before 6 April 1963, or
(b)
pursuant to a contract entered into before 4 April 1963.
Lease premiums: assignments for profit of lease granted at undervalue
38
Section 222 does not apply in relation to a lease granted—
10
(a)
before 6 April 1963, or
(b)
pursuant to a contract entered into before 4 April 1963.
Lease premiums: pre-commencement receipts under ICTA treated as taxed receipts
39    (1)
This paragraph relates to the operation of sections 227 to 235 where, in
respect of a lease—
15
(a)
there is a receipt of a Schedule A business or an overseas property
business (within the meaning of section 65A(4) or 70A(4) of ICTA) as
a result of section 34 or 35 of ICTA (treatment of premiums etc as rent
and assignments for profit of lease granted at an undervalue) for a
tax year before the tax year 2005-06 or an accounting period ending
20
before 1 April 2009, or
(b)
there would be such a receipt, but for the operation of section 37(2)
or (3) of ICTA (reductions in certain receipts under section 34 or 35
of ICTA).

In this paragraph and paragraph 40 a receipt falling within paragraph (a) or
25
(b) is referred to as an “ICTA pre-commencement receipt”.
      (2)
For the purposes of Chapter 4 of Part 4—
(a)
the lease is treated as a taxed lease, and
(b)
the ICTA pre-commencement receipt is treated as a taxed receipt.
      (3)
For the purposes of that Chapter, the “receipt period” of a taxed receipt
30
which is an ICTA pre-commencement receipt is—
(a)
in the case of an ICTA pre-commencement receipt as a result of
section 34 of ICTA, the period treated in calculating the amount of
the receipt as being the duration of the lease, and
(b)
in the case of an ICTA pre-commencement receipt as a result of
35
section 35 of ICTA, the period treated in calculating the amount of
the receipt as being the duration of the lease remaining at the date of
the assignment.
      (4)
For the purposes of that Chapter the “unreduced amount” of a taxed receipt
which is an ICTA pre-commencement receipt is the amount of the ICTA pre-
40
commencement receipt as a result of section 34 or 35 of ICTA, before the
operation of section 37(2) or (3) of ICTA.

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 7 — Property income
750

      (5)
Sub-paragraph (6) applies to a taxed receipt which is an ICTA pre-
commencement receipt arising as a result of section 34(2) of ICTA
(obligation on tenant to carry out work under lease).
      (6)
If the obligation to carry out work included the carrying out of work which
gave or will give rise to expenditure for which an allowance has been, or
5
may be, made under the enactments relating to capital allowances, the
unreduced amount of the taxed receipt is calculated as if the obligation had
not included the carrying out of that work.
Lease premiums: taking account of reductions under section 37(2) or (3) of ICTA
40    (1)
This paragraph applies if—
10
(a)
in calculating the amount of an ICTA pre-commencement receipt,
there is a reduction under section 37(2) or (3) of ICTA by reference to
the amount chargeable on the superior interest for the purposes of
that section, and
(b)
as a result of paragraph 39(1) and (2) or section 227(4)(c) or (d) (lease
15
taxed under ITTOIA 2005) the amount chargeable on the superior
interest is the taxed receipt for the purposes of Chapter 4 of Part 4.
      (2)
References to a reduction under section 37(2) or (3) of ICTA in an ICTA pre-
commencement receipt by reference to the amount chargeable on the
superior interest are to the difference between—
20
(a)
the amount of the ICTA pre-commencement receipt before the
operation of section 37(2) or (3) of ICTA, and
(b)
the amount of the receipt after the operation of that subsection,

so far as attributable to the amount chargeable on the superior interest for
the purposes of section 37 of ICTA.
25
      (3)
In sections 230(5)(a) (meaning of “unused amount”) and 235(3)(a) (limit on
reductions and deductions) references to reductions under section 288 of
ITTOIA 2005 by reference to the taxed receipt include references to
reductions under section 37(2) or (3) of ICTA in ICTA pre-commencement
receipts by reference to the amount chargeable on the superior interest.
30
      (4)
Sections 232 to 234 apply as follows—
(a)
the ICTA pre-commencement receipt is treated as if it were a lease
premium receipt for the purposes of sections 233 and 234,
(b)
references in those sections to the reduction under section 228 by
reference to the taxed receipt are, in relation to the ICTA pre-
35
commencement receipt, to the reduction under section 37(2) or (3) of
ICTA by reference to the amount chargeable on the superior interest,
and
(c)
for the purposes of those sections the receipt period of the ICTA pre-
commencement receipt is—
40
(i)
in the case of an ICTA pre-commencement receipt as a result
of section 34 of ICTA, the period treated in calculating the
amount of the receipt as being the duration of the lease, and
(ii)
in the case of an ICTA pre-commencement receipt as a result
of section 35 of ICTA, the period treated in calculating the
45
amount of the receipt as being the duration of the lease
remaining at the date of the assignment.

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 7 — Property income
751

Lease premiums: taking account of deductions for rent as a result of section 37(4) or 87(2) of
ICTA
41    (1)
Sub-paragraph (2) applies if—
(a)
in calculating the profits of a trade, profession or vocation for a tax
year before the tax year 2005-06 or an accounting period ending
5
before 1 April 2009, a person is treated as paying rent under section
87(2) of ICTA by reference to the amount chargeable for the purposes
of that section, and
(b)
as a result of paragraph 39(1) and (2) or section 227(4)(c) or (d) (lease
taxed under ITTOIA 2005) the amount chargeable is the taxed receipt
10
for the purposes of Chapter 4 of Part 4.
      (2)
References in sections 230(5)(b) and 235(3)(c) to the deductions allowed for
expenses under section 63 by reference to the taxed receipt include
references to the deductions allowed in calculating the profits of the trade,
profession or vocation for the rent that the person is treated as paying under
15
section 87(2) of ICTA by reference to the amount chargeable.
      (3)
Sub-paragraph (4) applies if—
(a)
in calculating the profits of a Schedule A business or an overseas
property business (within the meaning of section 65A(4) or 70A(4) of
ICTA) for a tax year before the tax year 2005-06 or an accounting
20
period ending before 1 April 2009, a person is treated as paying rent
as a result of section 37(4) of ICTA by reference to the amount
chargeable on the superior interest for the purposes of that section,
and
(b)
as a result of paragraph 39(1) and (2) or section 227(4)(c) or (d) (lease
25
taxed under ITTOIA 2005) the amount chargeable on the superior
interest is the taxed receipt for the purposes of Chapter 4 of Part 4.
      (4)
References in sections 230(5)(c) and 235(3)(b) to the deductions allowed for
expenses under section 292 of ITTOIA 2005 by reference to the taxed receipt
include references to the deductions allowed in calculating the profits of the
30
Schedule A business or overseas property business (within the meaning of
section 65A(4) or 70A(4) of ICTA) for the rent that the person is treated as
paying as a result of section 37(4) of ICTA by reference to the amount
chargeable on the superior interest.
Lease premiums: time limits for claims for repayment of tax
35
42    (1)
Until the Treasury by order appoints a day under this paragraph—
(a)
section 238 has effect as if “6 years” were substituted for “4 years” in
subsection (3) of that section, and
(b)
section 239 has effect as if “6 years” were substituted for “4 years” in
subsection (3) of that section.
40
      (2)
An order under this paragraph—
(a)
may appoint different days for different purposes, and
(b)
may include transitional provision and savings.
Lease premiums: rules for determining effective duration of lease
43    (1)
In relation to a lease granted after 24 August 1971 and before 1 April 2009,
45
section 243 applies with the following modifications.