Corporation Tax Bill

House of Commons

Session 2008 - 09
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Corporation Tax Bill

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 15 — Research and development
773

      (2)
The “larger SME provisions” are—
sections 1089(4) and 1090 (modification of section 1089 for larger
SMEs),
section 1093 (modification of section 1092 for larger SMEs),
section 1104(5) (modification of amount B in section 1104 for larger
5
SMEs),
qualification 1 in section 1120(2) (qualifications to section 1119), and
section 1121 (meaning of “larger SME”).
      (3)
But for the purpose of determining, in relation to expenditure incurred on or
after 1 August 2008, whether a company is a small or medium-sized
10
enterprise within the meaning of Part 13, the larger SME provisions are to be
treated as always having had effect.
Staffing costs
119   (1)
In its application to expenditure incurred—
(a)
before 1 April 2004, and
15
(b)
in an accounting period ending on or after 6 April 2003,

section 1123 has effect with the following modification.
      (2)
For subsections (2) and (3) substitute—
    “(2)
This subsection applies to earnings paid by the company to
directors or employees of the company.
20

For this purpose “earnings” means earnings or amounts treated as
earnings which constitute employment income (see section 7(2)(a)
or (b) of ITEPA 2003).”
120
In its application to expenditure incurred before 1 August 2008, section 1123
has effect with the omission of subsections (5) and (6).
25
121   (1)
In relation to expenditure incurred before 27 September 2003, section 1124
applies, for the purposes of Chapters 2 and 7 of Part 13, with the
modification in sub-paragraph (3).
      (2)
In relation to expenditure incurred before 9 April 2003, section 1124 applies,
for the purposes of Chapters 3 to 5 of Part 13, with the modification in sub-
30
paragraph (3).
      (3)
For subsections (3) and (4) substitute—
“(3)
In the case of a director (“D”) or employee (“E”) partly engaged
directly and actively in relevant research and development the
following rules apply—
35
(a)
if the time D or E spends so engaged is less than 20% of D’s
or E’s total working time, none of the staffing costs relating to
D or E is treated as attributable to relevant research and
development,
(b)
if the time D or E spends so engaged is more than 80% of D’s
40
or E’s total working time, the whole of the staffing costs
relating to D or E is treated as attributable to relevant
research and development,
(c)
in any other case, an appropriate proportion of the staffing
costs relating to D or E is treated as attributable to relevant
45
research and development.”

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 15 — Research and development
774

Expenditure on software or consumable items
122   (1)
In relation to expenditure incurred before 1 April 2004, Part 13 applies with
the following modifications.
      (2)
For “software or consumable items” in each place where it occurs, substitute
“consumable stores”.
5
      (3)
For sections 1125 and 1126 substitute—

“1125 Consumable stores
(1)
For the purposes of this Part expenditure on consumable stores
means expenditure that would be treated as expenditure on
consumable stores in accordance with normal accounting practice.
10
(2)
For the purposes of this Part expenditure on consumable stores is
attributable to relevant research and development if the stores are
employed directly in such research and development.”
Qualifying expenditure on externally provided workers
123   (1)
In relation to expenditure incurred before 27 September 2003, Chapters 2
15
and 4 of Part 13 (relief for SMEs: cost of R&D borne by SME, and subsidised
expenditure on R&D) apply with the omission of—
(a)
section 1052(2)(c),
(b)
section 1071(3)(c),
(c)
in section 1134(3)(c), the words “or is qualifying expenditure on
20
externally provided workers”,
(d)
section 1134(5)(b), and
(e)
sections 1127 to 1132, as they apply for the purposes of those
Chapters.
      (2)
In relation to expenditure incurred before 9 April 2003, Chapter 3 of Part 13
25
(relief for SMEs: R&D sub-contracted to SME) applies with the omission of—
(a)
section 1066(3)(c), and
(b)
sections 1127 to 1132, as they apply for the purposes of that Chapter.
      (3)
In relation to expenditure incurred before 9 April 2003, Chapter 5 of Part 13
(relief for large companies) applies with the omission of—
30
(a)
section 1077(2)(c), and
(b)
sections 1127 to 1132, as they apply for the purposes of that Chapter.
      (4)
In relation to expenditure incurred by a large company before 27 September
2003, Chapter 7 of Part 13 (relief for SMEs and large companies: vaccine
research etc) applies in the case of such a company with the omission of—
35
(a)
section 1101(4)(c), and
(b)
sections 1127 to 1132, as they apply for the purposes of that Chapter.
      (5)
In sub-paragraph (4) “large company” has the same meaning as in Part 13.
Qualifying expenditure on relevant payments to subjects of clinical trials
124   (1)
In relation to expenditure incurred before 1 August 2008, Chapter 2 of Part
40
13 (relief for SMEs: cost of R&D borne by SME) applies with the omission
of—

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 16 — Remediation of contaminated land
775

(a)
section 1052(2)(d),
(b)
section 1071(3)(d),
(c)
in section 1134(3)(c), the words “or relevant payments to the subjects
of a clinical trial”, and
(d)
section 1140, as it applies for the purposes of that Chapter.
5
      (2)
In relation to expenditure incurred before 1 August 2008, Chapter 3 of Part
13 (relief for SMEs: cost of R&D sub-contracted to SME) applies with the
omission of—
(a)
section 1066(3)(d), and
(b)
section 1140, as it applies for the purposes of that Chapter.
10
      (3)
In relation to expenditure incurred before 1 April 2006, Chapter 4 of Part 13
(relief for SMEs: subsidised expenditure on R&D) applies with the omission
of—
(a)
section 1071(3)(d),
(b)
in section 1134(3)(c), the words “or relevant payments to the subjects
15
of a clinical trial”, and
(c)
section 1140, as it applies for the purposes of that Chapter.
      (4)
In relation to expenditure incurred before 1 April 2006, Chapter 5 of Part 13
(relief for large companies) applies with the omission of—
(a)
section 1077(2)(d), and
20
(b)
section 1140, as it applies for the purposes of that Chapter.
      (5)
In relation to expenditure incurred before 1 August 2008, Chapter 7 of Part
13 (relief for SMEs and large companies: vaccine research etc) applies with
the omission of—
(a)
section 1101(4)(d), and
25
(b)
section 1140, as it applies for the purposes of that Chapter.
Part 16
Remediation of contaminated land
Part 14: expenditure incurred before 11 May 2001
125   (1)
Part 14 does not apply to expenditure incurred before 11 May 2001.
30
      (2)
For this purpose section 61 (pre-trading expenses) is to be ignored.
Staffing costs
126   (1)
In its application to expenditure incurred—
(a)
before 1 April 2004, and
(b)
in an accounting period ending on or after 6 April 2003,
35

section 1170 has effect with the following modification.
      (2)
For subsections (2) and (3) substitute—
“(2)
This subsection applies to earnings paid by the company to directors
or employees of the company.

For this purpose “earnings” means earnings or amounts treated as
40
earnings which constitute employment income (see section 7(2)(a) or
(b) of ITEPA 2003).”

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 17 — Film production
776

Part 17
Film production
Interpretation
127
The provisions of sections 1181 to 1187 apply for the purposes of this Part of
this Schedule as if this Part were contained in Part 15 of this Act.
5
Chapters 2 and 3 of Part 15 to apply only to films that commence principal photography on or
after 1 January 2007
128
Chapters 2 and 3 of Part 15 apply only in relation to films that commence
principal photography on or after 1 January 2007 (but see paragraphs 130
and 131).
10
129
The references in section 1206 to the functions of the Secretary of State under
Schedule 1 to the Films Act 1985 (c. 21) are to those functions only so far as
they are exercised in relation to films that commence principal photography
on or after 1 January 2007 (but see paragraphs 130 and 131).
Application of Part 15 etc to films that commenced principal photography before 1 January
15
2007 but were not completed before that date
130   (1)
The Treasury may make provision by regulations for the application of the
provisions of—
(a)
Part 15 or section 812 of this Act, and
(b)
Chapter 3 of Part 3 of FA 2006 and any enactment amended by that
20
Chapter,

in relation to films that commenced principal photography before 1 January
2007 but were not completed before that date.
      (2)
The regulations may provide for such adaptations and modifications of—
(a)
the provisions mentioned in sub-paragraph (1), and
25
(b)
any other provision of the Corporation Tax Acts,

as appear to the Treasury appropriate for that purpose.
      (3)
The regulations may—
(a)
provide that the provisions of Part 15 or section 812 of this Act (or
any specified provisions of that Part or section) or Chapter 3 of Part
30
3 of FA 2006 (or any specified provisions of that Chapter) have effect
as if they had been in force at all material times,
(b)
require or authorise the making or amendment of returns, or the
making of assessments, in relation to past accounting periods or tax
years (whenever beginning), and
35
(c)
authorise the making of any such return, amendment or assessment
despite any limitation on the time within which a return,
amendment or assessment may normally be made.
131   (1)
In accordance with Part 1 of this Schedule, the Corporation Tax (Taxation of
Films) (Transitional Provisions) Regulations 2007 (S.I. 2007/1050) have
40
effect as if made under paragraph 130 above.
      (2)
For that purpose they are amended as follows.

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 17 — Film production
777

      (3)
In regulation 1(2) for “(films and sound recordings)” substitute “and Part 15
and section 812 of the Corporation Tax Act 2009 (film production)”.
      (4)
Omit regulation 2.
      (5)
In regulation 3 for “Chapter 3 of Part 3” substitute “Part 15 and section 812
of the Corporation Tax Act 2009, Chapter 3 of Part 3 of the Finance Act 2006”.
5
      (6)
In regulation 4 for “section 32” substitute “section 1182 of the Corporation
Tax Act 2009” (and make a corresponding change in the heading for
regulation 4).
      (7)
In regulation 5 for “section 40” substitute “section 1197 of the Corporation
Tax Act 2009” (and make a corresponding change in the heading for
10
regulation 5).
      (8)
In regulation 6(1) after “section 46” insert “of the Finance Act 2006” (and
make a corresponding change in the heading for regulation 6).
      (9)
In regulation 7(1) after “section 47” insert “of the Finance Act 2006” (and
make a corresponding change in the heading for regulation 7).
15
     (10)
For regulation 8 substitute—
“8
Modification of section 812 of the Corporation Tax Act 2009
(intangible fixed assets: films)
In section 812(1) of the Corporation Tax Act 2009—
(a)
in paragraph (a) for “that began principal photography
20
before 1st January 2007” substitute “to which Chapter 2 of
Part 15 of the Corporation Tax Act 2009 does not apply”, and
(b)
in paragraph (b) for “1st October 2007” substitute “31st
March 2008”.
     (11)
For regulation 9 substitute—
25
“9
Modification of section 1188 of the Corporation Tax Act 2009 (taxation
of activities of film production company)
In section 1188(1) of the Corporation Tax Act 2009 (taxation of
activities of film production company) after “a film” insert “if the
film—
30
(a)
is certified by the Secretary of State under Schedule 1 to the
Films Act 1985 as a British film for the purposes of film tax
relief, and
(b)
is intended for theatrical release at the time principal
photography commences”.
35
     (12)
In regulation 10(1) after “Schedule 5” insert “to the Finance Act 2006” (and
make a corresponding change in the heading for regulation 10).
     (13)
Omit regulation 10(2).
     (14)
In regulation 10(5) for the words after “sections 46 and 47” substitute “of the
Finance Act 2006 (films: withdrawal of existing reliefs) and section 1188(1)
40
of the Corporation Tax Act 2009 (taxation of activities of film production
company)”.
     (15)
In regulation 13(1)—

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 19 — Unremittable income
778

(a)
for “Chapter 3 of Part 3” substitute “Part 15 or section 812 of the
Corporation Tax Act 2009, of Chapter 3 of Part 3 of the Finance Act
2006”, and
(b)
for “whether before or after the commencement of that Chapter”
substitute “whenever beginning”.
5
Prohibition on double counting
132   (1)
Expenditure is not to be taken into account for the purposes of Chapter 2 of
Part 15 if relief has been given in respect of it under—
(a)
section 40B, 41 or 42 of F(No.2)A 1992,
(b)
section 48 of F(No.2)A 1997, or
10
(c)
section 135, 136 to 138A or 139 to 142 of ITTOIA 2005.
      (2)
For the purposes of paragraph 130 and any regulations made under that
paragraph, sub-paragraph (1) of this paragraph is treated as if contained in
Part 15.
Part 18
15
Management expenses
Unpaid remuneration
133   (1)
This paragraph applies for the purposes of section 1249.
      (2)
In relation to a period of account ending before 27 November 2002, an
amount charged in the accounts in respect of employees’ remuneration
20
includes an amount which is held by an intermediary with a view to its
becoming employees’ remuneration.
      (3)
In relation to a period of account ending on or after 27 November 2002, an
amount charged in the accounts in respect of employees’ remuneration
includes an amount—
25
(a)
in respect of employee benefit contributions (within the meaning of
sections 1290 to 1296) made before that date, and
(b)
which is held by an intermediary,

with a view to its becoming employees’ remuneration.
Part 19
30
Unremittable income
Unremittable income that arose in an accounting period ending before 1 April 2009
134   (1)
A claim may be made under section 1275 (claim for relief for unremittable
income) for an accounting period ending after 31 March 2009, despite the
income having arisen in an accounting period ending before 1 April 2009.
35
      (2)
Section 1276 (withdrawal of relief) applies for an accounting period ending
after 31 March 2009, despite the income having arisen originally in an
accounting period ending before 1 April 2009 (whether the claim in respect
of it was made under section 584 of ICTA (relief for unremittable overseas
income) or section 1275 of this Act).
40

Corporation Tax Bill
Schedule 2 — Transitionals and savings
Part 21 — Other provisions
779

Withdrawal of relief: income that arose in an accounting period ending before 1 October 1993
135
Section 1277 (income charged on withdrawal of relief after source ceases)
does not apply if the income originally arose in an accounting period ending
before 1 October 1993.
Part 20
5
General exemptions
Ulster savings certificates
136
In the case of certificates acquired before 27 July 1981, in section 1282(4) for
“the Department of Finance and Personnel” substitute “the Treasury”.
Part 21
10
Other provisions
Training courses for employees
137   (1)
This paragraph applies if, without the repeal by this Act of section 588 of
ICTA (training courses for employees)—
(a)
section 588(5) of ICTA would operate in relation to an employee by
15
virtue of paragraph (a) of that provision and paragraph 37 of
Schedule 7 to ITEPA 2003 (savings in relation to tax years before
2003-04),
(b)
section 588(5) of ICTA would operate in relation to an employer by
virtue of paragraph (b) of that provision and paragraph 37 of
20
Schedule 7 to ITEPA 2003, or
(c)
section 588(6) and (7) of ICTA would operate in relation to an
employer by virtue of paragraph 37 of Schedule 7 to ITEPA 2003.
      (2)
That repeal does not apply in relation to—
(a)
the operation of section 588(5) of ICTA in relation to the employee as
25
mentioned in sub-paragraph (1)(a),
(b)
the operation of section 588(5) of ICTA in relation to the employer as
mentioned in sub-paragraph (1)(b), or
(c)
the operation of section 588(6) and (7) of ICTA in relation to the
employer as mentioned in sub-paragraph (1)(c).
30
138
In the Table in section 98 of TMA 1970 (special returns etc)—
(a)
the entry relating to section 588(6) of ICTA, and
(b)
the entry relating to section 588(7) of ICTA,

continue to have effect (despite the repeal by this Act of those entries) in
relation to section 588(6) and (7) as it has effect by virtue of paragraph 137.
35
139   (1)
This paragraph applies if—
(a)
at any time during the period beginning with 6 April 2003 and
ending with 31 March 2009, a company (“the employer”) incurred
expenditure in paying or reimbursing retraining course expenses
within the meaning of section 311 of ITEPA 2003,
40
(b)
the employer’s liability to corporation tax for any accounting period
has been determined (before or after 1 April 2009, and by assessment