Finance Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 3 — Disallowance of deductions
153

Part 3
Disallowance of deductions
Application of Part and meaning of “total disallowed amount”
8     (1)
This Part applies where, for a period of account of the worldwide group to
which this Schedule applies (“the relevant period of account”)—
5
(a)
the tested expense amount (see Part 7), exceeds
(b)
the available amount (see Part 8).
      (2)
In this Part “the total disallowed amount” means the difference between the
amounts referred to in paragraphs (a) and (b) of sub-paragraph (1).
Meaning of “company to which this Part applies”
10
9
References in this Part to a company to which this Part applies are to a
company that is a relevant group company at any time during the relevant
period of account.
Appointment of authorised company for relevant period of account
10    (1)
The companies to which this Part applies may appoint one of their number
15
to exercise functions conferred under this Part on the reporting body in
relation to the relevant period of account.
      (2)
An appointment under this paragraph is of no effect unless it is signed on
behalf of each company to which this Part applies by the appropriate person.
      (3)
The Commissioners may by regulations make further provision about an
20
appointment under this paragraph including, in particular, provision—
(a)
about the form and manner in which an appointment may be made,
(b)
about how an appointment may be revoked and the form and
manner of such revocation,
(c)
requiring a person to notify HMRC of the making or revocation of an
25
appointment and about the form and manner of such notification,
(d)
requiring a person to give information to HMRC in connection with
the making or revocation of an appointment,
(e)
imposing time limits in relation to making or revoking an
appointment,
30
(f)
providing that an appointment or its revocation is of no effect, or
ceases to have effect, if time limits or other requirements under the
regulations are not met, and
(g)
about cases where a company is not a relevant group company at all
times during the relevant period of account.
35
      (4)
In this paragraph “the appropriate person”, in relation to a company,
means—
(a)
the proper officer of the company, or
(b)
such other person as may for the time being have the express,
implied or apparent authority of the company to act on its behalf for
40
the purposes of this Schedule.

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 3 — Disallowance of deductions
154

      (5)
Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of
company officers: meaning of “proper officer”) apply for the purposes of this
paragraph as they apply for the purposes of that section.
Meaning of “the reporting body”
11
In this Part “the reporting body” means—
5
(a)
in a case in which an appointment under paragraph 10 has effect in
relation to the relevant period of account, the company appointed
under that paragraph, and
(b)
in a case in which such an appointment does not have effect in
relation to the relevant period of account, the companies to which
10
this Part applies, acting jointly.
Statement of allocated disallowances: submission
12    (1)
The reporting body must submit a statement (a “statement of allocated
disallowances”) in relation to the relevant period of account to HMRC.
      (2)
A statement submitted under this paragraph must be received by HMRC
15
within 12 months of the end of the relevant period of account.
      (3)
A statement submitted under this paragraph must comply with the
requirements of paragraph 14.
Statement of allocated disallowances: submission of revised statement
13    (1)
Where the reporting body has submitted a statement of allocated
20
disallowances under paragraph 12 or this paragraph, it may submit a
revised statement to HMRC.
      (2)
A statement submitted under this paragraph must be received by HMRC
within 36 months of the end of the relevant period of account.
      (3)
A statement submitted under this paragraph must comply with the
25
requirements of paragraph 14.
      (4)
A statement submitted under this paragraph—
(a)
must indicate the respects in which it differs from the previous
statement, and
(b)
supersedes the previous statement.
30
Statement of allocated disallowances: requirements
14    (1)
This paragraph applies in relation to a statement of allocated disallowances
submitted under paragraph 12 or 13.
      (2)
The statement must be signed—
(a)
in a case in which an appointment under paragraph 10 has effect in
35
relation to the relevant period of account, by the appropriate person
in relation to the company appointed under that paragraph, or
(b)
in a case in which such an appointment does not have effect in
relation to the relevant period of account, by the appropriate person
in relation to each company to which this Part applies.
40
      (3)
The statement must show—

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 3 — Disallowance of deductions
155

(a)
the tested expense amount,
(b)
the available amount, and
(c)
the total disallowed amount.
      (4)
The statement must—
(a)
list one or more companies to which this Part applies, and
5
(b)
in relation to each listed company, specify one or more financing
expense amounts for the relevant period of account that are to be
disallowed, and give the relevant details in relation to each such
amount.
      (5)
For this purpose “the relevant details”, in relation to a financing expense
10
amount are—
(a)
which of conditions A, B or C in paragraph 39 is met in relation to the
amount, and
(b)
the relevant accounting period of the company in which the amount
would, apart from this Schedule, be brought into account for the
15
purposes of corporation tax.
      (6)
The sum of the amounts specified under sub-paragraph (4)(b) must equal
the total disallowed amount.
      (7)
In this paragraph “the appropriate person”, in relation to a company,
means—
20
(a)
the proper officer of the company, or
(b)
such other person as may for the time being have the express,
implied or apparent authority of the company to act on its behalf for
the purposes of this Schedule.
      (8)
Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of
25
company officers: meaning of “proper officer”) apply for the purposes of this
paragraph as they apply for the purposes of that section.
      (9)
For the meaning of “financing expense amount”, see Part 6.
Statement of allocated disallowances: effect
15
A financing expense amount of a company to which this Part applies that is
30
specified in a statement of allocated disallowances under paragraph 14(4)(b)
is not to be brought into account by the company for the purposes of
corporation tax.
Company tax returns
16    (1)
This paragraph applies where—
35
(a)
a company to which this Part applies has delivered a company tax
return for a relevant accounting period, and
(b)
as a result of the submission of a revised statement of allocated
disallowances under paragraph 13—
(i)
there is a change in the amount of profits on which
40
corporation tax is chargeable for the period, or
(ii)
any other information contained in the return is incorrect.

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 3 — Disallowance of deductions
156

      (2)
The company is treated as having amended its company tax return for the
accounting period so as to reflect the change mentioned in sub-paragraph
(1)(b)(i) or to correct the information mentioned in sub-paragraph (1)(b)(ii).
Power to make regulations about statement of allocated disallowances
17
The Commissioners may by regulations make further provision about a
5
statement of allocated disallowances including, in particular, provision—
(a)
about the form of a statement and the manner in which it is to be
submitted,
(b)
requiring a person to give information to HMRC in connection with
a statement,
10
(c)
as to circumstances in which a statement that is not received by the
time specified in paragraph 12(2) or 13(2) is to be treated as if it were
so received, and
(d)
as to circumstances in which a statement that does not comply with
the requirements of paragraph 14 is to be treated as if it did so
15
comply.
Failure of reporting body to submit statement of allocated disallowances
18    (1)
This paragraph applies if no statement of allocated disallowances is
submitted under paragraph 12 that complies with the requirements of
paragraph 14.
20
      (2)
Each company to which this Part applies that has a net financing deduction
for the relevant period of account that is greater than nil must reduce the
amounts that it brings into account in relevant accounting periods in respect
of financing expense amounts.
      (3)
The total of the reductions required to be made by a company by virtue of
25
sub-paragraph (2) is—

NFD
TEA    x    TDA


where—

NFD is the net financing deduction of the company for the relevant
period of account (see paragraph 52(2)),
TEA is the tested expense amount for the relevant period of account
30
(see paragraph 52(1)), and
TDA is the total disallowed amount (see paragraph 8(2)).
      (4)
The particular financing expense amounts that must be reduced, and the
amounts by which they must be reduced, must be determined in accordance
with regulations made by the Commissioners.
35
      (5)
Regulations under this paragraph may, in particular, include provision—
(a)
conferring a discretion on a company required to make reductions
under this paragraph as to the particular financing expense amounts
that are to be reduced;
(b)
requiring a company required to make reductions under this
40
paragraph to notify another relevant group company of the
particular reductions made;
(c)
as to the times by which such notices must be sent and as to
information that must accompany such notices.

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 4 — Exemption of financing income
157

Powers to make regulations in relation to reductions required under paragraph 18
19    (1)
The Commissioners may by regulations make provision for the purpose of
securing that a company required under paragraph 18 to reduce the
amounts that it brings into account in respect of financing expense amounts
for the relevant period of account (“a company required to make default
5
reductions”) has sufficient information to determine their amount.
      (2)
Provision that may be made in regulations under sub-paragraph (1) includes
provision requiring one or more members of the worldwide group to send
specified information to a company required to make default reductions.
      (3)
The Commissioners may by regulations make provision about cases in
10
which (whether as a result of non-compliance with regulations made under
sub-paragraph (1) or otherwise) a company required to make default
reductions does not possess specified information.
      (4)
Provision that may be made in regulations under sub-paragraph (3) includes
provision as to assumptions that may or must be made in determining the
15
amount of a reduction under paragraph 18 of a financing expense amount.
      (5)
The Commissioners may by regulations make provision for determining a
time later than that determined under paragraph 15(4) of Schedule 18 to FA
1998 (amendment of return by company) before which a company required
to make default reductions may amend its company tax return so as to
20
reflect a reduction under paragraph 18.
      (6)
In this paragraph “specified” means specified in regulations under this
paragraph.
Part 4
Exemption of financing income
25
Application of Part and meaning of “total disallowed amount”
20    (1)
This Part applies where, for a period of account of the worldwide group to
which this Schedule applies (“the relevant period of account”)—
(a)
the tested expense amount (see Part 7), exceeds
(b)
the available amount (see Part 8).
30
      (2)
In this Part the “total disallowed amount” means the difference between the
amounts referred to in paragraphs (a) and (b) of sub-paragraph (1).
Meaning of “company to which this Part applies”
21
References in this Part to a company to which this Part applies are to a
company that is a UK group company at any time during the relevant period
35
of account.
Appointment of authorised company for relevant period of account
22    (1)
The companies to which this Part applies may appoint one of their number
to exercise functions conferred under this Part on the reporting body in
relation to the relevant period of account.
40

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 4 — Exemption of financing income
158

      (2)
An appointment under this paragraph is of no effect unless it is signed on
behalf of each company to which this Part applies by the appropriate person.
      (3)
The Commissioners may by regulations make further provision about an
appointment under this paragraph including, in particular, provision—
(a)
about the form and manner in which an appointment may be made
5
or revoked,
(b)
requiring a person to notify HMRC of the making or revocation of an
appointment and about the form and manner of such notification,
(c)
requiring a person to give information to HMRC in connection with
the making or revocation of an appointment,
10
(d)
imposing time limits in relation to making or revoking an
appointment,
(e)
that an appointment or its revocation is of no effect, or ceases to have
effect, if time limits or other requirements under the regulations are
not met, and
15
(f)
about cases where a company does not meet condition A in
paragraph 68, or is not a member of the worldwide group, at all times
during the relevant period of account.
      (4)
In this paragraph “the appropriate person”, in relation to a company,
means—
20
(a)
the proper officer of the company, or
(b)
such other person as may for the time being have the express,
implied or apparent authority of the company to act on its behalf for
the purposes of this Schedule.
      (5)
Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of
25
company officers: meaning of “proper officer”) apply for the purposes of this
paragraph as they apply for the purposes of that section.
Meaning of “the reporting body”
23
In this Part “the reporting body” means—
(a)
in a case in which an appointment under paragraph 22 has effect in
30
relation to the relevant period of account, the company appointed
under that paragraph, and
(b)
in a case in which such an appointment does not have effect in
relation to the relevant period of account, the companies to which
this Part applies, acting jointly.
35
Statement of allocated exemptions: submission
24    (1)
The reporting body must submit a statement (a “statement of allocated
exemptions”) in relation to the relevant period of account to HMRC.
      (2)
A statement submitted under this paragraph must be received by HMRC
within 12 months of the end of the relevant period of account.
40
      (3)
A statement submitted under this paragraph must comply with the
requirements of paragraph 26.

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 4 — Exemption of financing income
159

Statement of allocated exemptions: submission of revised statement
25    (1)
Where the reporting body has submitted a statement of allocated
exemptions under paragraph 24 or this paragraph, it may submit a revised
statement to HMRC.
      (2)
A statement submitted under this paragraph must be received by HMRC
5
within 36 months of the end of the relevant period of account.
      (3)
A statement submitted under this paragraph must comply with the
requirements of paragraph 26.
      (4)
A statement submitted under this paragraph—
(a)
must indicate the respects in which it differs from the previous
10
statement, and
(b)
supersedes the previous statement.
Statement of allocated exemptions: requirements
26    (1)
This paragraph applies in relation to a statement of allocated exemptions
submitted under paragraph 24 or 25.
15
      (2)
The statement must be signed—
(a)
in a case in which an appointment under paragraph 22 has effect in
relation to the relevant period of account, by the appropriate person
in relation to the company appointed under that paragraph, or
(b)
in a case in which such an appointment does not have effect in
20
relation to the relevant period of account, by the appropriate person
in relation to each company to which this Part applies.
      (3)
The statement must show—
(a)
the tested expense amount,
(b)
the available amount, and
25
(c)
the total disallowed amount.
      (4)
The statement must—
(a)
list one or more companies to which this Part applies, and
(b)
in relation to each listed company, specify one or more financing
income amounts for the relevant period of account that are to be
30
exempted, and give the relevant details in relation to each such
amount.
      (5)
For this purpose “the relevant details” in relation to a financing income
amount are—
(a)
which of conditions A, B or C in paragraph 40 is met in relation to the
35
amount, and
(b)
the relevant accounting period of the company in which the amount
would, apart from this Schedule, be brought into account for the
purposes of corporation tax.
      (6)
The sum of the amounts specified under sub-paragraph (4)(b) must not
40
exceed the lower of—
(a)
total disallowed amount, and
(b)
the tested income amount (see Part 7).