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Finance Bill


Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 8 — The “available amount”

174

 

Group members with income from oil extraction subject to particular tax treatment in UK

56    (1)  

In calculating the available amount, an amount disclosed in the income

statement of the worldwide group (“the external finance amount”) must be

disregarded if the following conditions are met.

      (2)  

Condition A is that a member of the worldwide group is treated in a relevant

5

accounting period as carrying on a ring fence trade (see section 502 of ICTA).

      (3)  

Condition B is that the external finance amount falls to be brought into

account for the purposes of corporation tax in calculating the profits of that

trade for that accounting period.

      (4)  

In this paragraph “relevant accounting period”, in relation to a member of

10

the worldwide group, means an accounting period of the member that falls

wholly or partly within the period of account.

Group members with income from shipping subject to particular tax treatment in UK

57    (1)  

In calculating the available amount, an amount disclosed in the income

statement of the worldwide group (“the external finance amount”) must be

15

disregarded if the following conditions are met.

      (2)  

Condition A is that a member of the worldwide group is, for a relevant

accounting period, a tonnage tax company for the purposes of Schedule 22

to FA 2000.

      (3)  

Condition B is that the external finance amount—

20

(a)   

is taken into account in computing relevant shipping profits of that

company for that accounting period, or

(b)   

comprises deductible finance costs outside the ring fence, to the

extent that they are adjusted under paragraph 61 or 62 of Schedule

22 to FA 2000.

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      (4)  

In this paragraph—

“relevant accounting period”, in relation to a member of the worldwide

group, means an accounting period of the member that falls wholly

or partly within the period of account;

“relevant shipping profits” has the same meaning as in Schedule 22 to

30

FA 2000 (see Part 6 of that Schedule).

Group members with income from property rental subject to particular tax treatment in UK

58    (1)  

In calculating the available amount, an amount disclosed in the income

statement of the worldwide group (“the external finance amount”) must be

disregarded if the following conditions are met.

35

      (2)  

Condition A is that a member of the worldwide group is treated in a relevant

accounting period as carrying on a separate business under section 113 of FA

2006 (ring-fencing of tax exempt business).

      (3)  

Condition B is that the external finance amount falls to be brought into

account in calculating the profits arising from that business in that

40

accounting period.

 
 

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 9 — Other interpretative provisions

175

 

      (4)  

In this paragraph “relevant accounting period”, in relation to a member of

the worldwide group, means an accounting period of the member that falls

wholly or partly within the period of account.

Meaning of accounting expressions used in this Part

59         

Subject to any provision to the contrary, expressions used in this Part have

5

the meaning for the time being given by international accounting standards.

Part 9

Other interpretative provisions

The worldwide group

60         

In this Schedule “the worldwide group” means any group of entities that—

10

(a)   

is large, and

(b)   

contains one or more relevant group companies.

Meaning of “group”

61    (1)  

Subject to sub-paragraphs (2) and (3), in this Schedule “group” has the

meaning for the time being given by international accounting standards.

15

      (2)  

Where a group would (apart from this sub-paragraph) contain more than

one ultimate parent, each of those ultimate parents, together with its

subsidiaries, is to be treated as a separate group.

      (3)  

An entity that is a parent of the ultimate parent of a group is to be treated as

not being a member of the group.

20

      (4)  

Sub-paragraphs (2) and (3) do not apply for the purposes of paragraph 62.

Meaning of “ultimate parent”

62    (1)  

For the purposes of this Schedule “ultimate parent”, in relation to a group,

means an entity that—

(a)   

is a member of the group,

25

(b)   

is a corporate entity or a relevant non-corporate entity,

(c)   

is not a subsidiary (whether direct or indirect) of a corporate entity

or a relevant non-corporate entity, and

(d)   

is not a collective investment scheme.

      (2)  

For the purposes of this paragraph, any interests in another entity held by an

30

entity in its capacity as a member of a partnership or unincorporated

association are to be disregarded.

      (3)  

In this paragraph—

“collective investment scheme” has the meaning given by section 235 of

FISMA 2000;

35

“partnership” and “unincorporated association” include an entity

established under the law of a country or territory outside the United

Kingdom of a similar character to a partnership or unincorporated

association, and “member” is to be read accordingly.

 
 

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 9 — Other interpretative provisions

176

 

Meaning of “corporate entity”

63    (1)  

In this Schedule “corporate entity” means (subject to sub-paragraph (4))—

(a)   

a body corporate incorporated under the laws of any part of the

United Kingdom or any other country or territory, or

(b)   

any other entity that meets conditions A and B.

5

      (2)  

Condition A is that the person or persons who have an interest in the entity

hold shares in the entity, or interests corresponding to shares.

      (3)  

Condition B is that the amount of profits to which each person who has an

interest in the entity is entitled depends upon a decision that—

(a)   

is taken by the entity or members of the entity, and

10

(b)   

is taken after the period in which the profits arise.

      (4)  

The following are not corporate entities for the purposes of this Schedule—

(a)   

the Crown,

(b)   

a Minister of the Crown,

(c)   

a government department,

15

(d)   

a Northern Ireland department, or

(e)   

a foreign sovereign power.

Meaning of “relevant non-corporate entity”

64    (1)  

In this Schedule “relevant non-corporate entity” means an entity—

(a)   

that is not a corporate entity, and

20

(b)   

in relation to which conditions A and B are met.

      (2)  

Condition A is that shares or other interests in the entity are listed on a

recognised stock exchange.

      (3)  

Condition B is that the shares or other interests in the entity are sufficiently

widely held.

25

      (4)  

For this purpose shares or other interests in an entity are “sufficiently widely

held” if no participator in the entity holds more than 10% by value of all the

shares or other interests in the entity.

      (5)  

Section 417(1) of ICTA (meaning of participator) applies for the purposes of

this paragraph.

30

      (6)  

In the application of that provision for those purposes, references to a

company are to be treated as references to an entity.

Treatment of entities stapled to corporate entities or relevant non-corporate entities

65    (1)  

Where a corporate entity is stapled to another entity, the two entities are

treated for the purposes of this Schedule as if—

35

(a)   

they were one entity, and

(b)   

that one entity were a corporate entity.

      (2)  

Where a relevant non-corporate entity is stapled to another entity, the two

entities are treated as if—

(a)   

they were one entity, and

40

(b)   

that one entity were a relevant non-corporate entity.

 
 

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 9 — Other interpretative provisions

177

 

      (3)  

For the purposes of this paragraph an entity (“entity A”) is “stapled” to

another (“entity B”) if, in consequence of the nature of the rights attaching to

the shares or other interests in entity A (including any terms or conditions

attaching to the right to transfer the interests), it is necessary or

advantageous for a person who has, disposes of or acquires shares or other

5

interests in entity A also to have, to dispose of or to acquire shares or other

interests in entity B.

Treatment of business combinations

66    (1)  

This paragraph applies where two corporate entities are—

(a)   

not subsidiaries of the same entity, but

10

(b)   

are treated under international accounting standards as a single

economic entity by reason of being a business combination achieved

by contract.

      (2)  

The two entities are treated for the purposes of this Schedule as if—

(a)   

they were one entity, and

15

(b)   

that one entity were a corporate entity.

Meaning of “large” in relation to a group

67    (1)  

For the purposes of this Schedule a group is “large” at any time if (and only

if) any member of the group is not at that time within the category of micro,

small and medium-sized enterprises as defined in the Annex to Commission

20

Recommendation 2003/361/EC of 6 May 2003 (“the Annex”).

      (2)  

In its application by virtue of sub-paragraph (1), the Annex has effect subject

to the following qualifications.

      (3)  

Where a member of the group is in liquidation or administration, the rights

of the liquidator or administrator (in that capacity) are to be left out of

25

account when applying Article 3(3)(b).

      (4)  

Article 3 has effect with the omission of paragraph 5 (declaration in good

faith where control cannot be determined etc).

      (5)  

The first sentence of Article 4(1) has effect as if the reference to the latest

approved accounting period of a member of the group were to the current

30

accounting period of that member.

      (6)  

Article 4 has effect with the omission of—

(a)   

the second sentence of paragraph (1) (data to be taken into account

from date of closure of accounts),

(b)   

paragraph 2 (no change of status unless ceilings exceeded for two

35

consecutive periods), and

(c)   

paragraph 3 (estimate in case of newly established enterprise).

Meaning of “UK group company” and “relevant group company”

68    (1)  

This paragraph applies for the purposes of this Schedule.

      (2)  

A company is a “UK group company” if—

40

(a)   

it meets condition A, and

(b)   

it is a member of the worldwide group.

 
 

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 9 — Other interpretative provisions

178

 

      (3)  

A company is a “relevant group company” if—

(a)   

it meets condition A, and

(b)   

it meets condition B.

      (4)  

Condition A is that the company—

(a)   

is resident in the United Kingdom, or

5

(b)   

is not resident in the United Kingdom and is carrying on a trade in

the United Kingdom through a permanent establishment in the

United Kingdom.

      (5)  

Condition B is that the company is either—

(a)   

the ultimate parent of the worldwide group, or

10

(b)   

a relevant subsidiary of the ultimate parent of the worldwide group.

      (6)  

A company is a “relevant subsidiary” of the ultimate parent of the

worldwide group if—

(a)   

the company is a 75% subsidiary of the ultimate parent,

(b)   

the ultimate parent is beneficially entitled to at least 75% of any

15

profits available for distribution to equity holders of the company, or

(c)   

the ultimate parent would be beneficially entitled to at least 75% of

any assets of the company available for distribution to its equity

holders on a winding-up.

      (7)  

A company that would not otherwise be a relevant subsidiary of the

20

ultimate parent of the worldwide group is treated as such if any member of

the group is a party to arrangements the main purpose, or one of the main

purposes, of which is to secure that the company is not a relevant subsidiary

for the purposes of this paragraph.

      (8)  

Schedule 18 to ICTA (equity holders and profits or assets available for

25

distribution) applies in relation to sub-paragraph (6)(b) and (c) as it applies

in relation to section 413(7) of that Act.

      (9)  

The reference in sub-paragraph (7) to arrangements is to any arrangements,

scheme or understanding of any kind whatever, whether or not legally

enforceable, involving a single transaction or two or more transactions.

30

Financial statements of the worldwide group

69    (1)  

This paragraph applies for the purposes of this Schedule.

      (2)  

References to financial statements of the worldwide group are to

consolidated financial statements of the ultimate parent and its subsidiaries;

and references to a balance sheet of the worldwide group or an income

35

statement of the worldwide group are to be read accordingly.

      (3)  

In sub-paragraph (2) “income statement” includes a consolidated profit and

loss account or other equivalent financial statement.

      (4)  

References to a period of account of the worldwide group are to a period in

respect of which financial statements of the worldwide group are drawn up.

40

Non-compliant financial statements of worldwide group

70    (1)  

This paragraph applies where—

 
 

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 9 — Other interpretative provisions

179

 

(a)   

financial statements of the worldwide group are drawn up in respect

of a period,

(b)   

those financial statements are not drawn up in accordance with

acceptable accounting standards, and

(c)   

the amounts disclosed in those financial statements are materially

5

different from those that would be disclosed in IAS financial

statements for the period.

      (2)  

This Schedule (apart from this paragraph) applies as if IAS financial

statements had been drawn up in respect of the period.

      (3)  

In this paragraph “acceptable accounting standards”, in relation to a period,

10

means—

(a)   

international accounting standards,

(b)   

accounting standards that meet conditions A to C, or

(c)   

such other accounting standards as may be specified in regulations

made by the Commissioners.

15

      (4)  

Condition A is that—

(a)   

the companies whose results are included in the financial statements

of the worldwide group for the period, and

(b)   

the companies whose results would be included in IAS financial

statements of the worldwide group for the period, were such

20

statements drawn up,

           

are the same.

      (5)  

Condition B is that—

(a)   

the transactions whose results are reflected in the amounts

mentioned in paragraph 55(1)(a) to (g) in the income statement of the

25

worldwide group for the period, and

(b)   

the transactions whose results would be reflected in those amounts

in an income statement of the worldwide group for the period, were

such a statement drawn up,

           

are the same.

30

      (6)  

Condition C is that the amounts mentioned in paragraph 55(1)(a) to (d) in

the income statement of the worldwide group for the period are calculated

using the effective interest method.

      (7)  

In this paragraph, references to IAS financial statements of the worldwide

group for a period are to financial statements of the group for the period

35

drawn up in accordance with international accounting standards.

Non-existent financial statements of worldwide group

71    (1)  

This paragraph applies where financial statements of the worldwide group

are not drawn up in respect of a period (“the relevant period”).

      (2)  

If the relevant period is 12 months or less, this Schedule (apart from this

40

paragraph) applies as if IAS financial statements had been drawn up in

respect of the relevant period.

      (3)  

If the relevant period is more than 12 months, this Schedule (apart from this

paragraph) applies as if IAS financial statements had been drawn up in

respect of each period to which sub-paragraph (4) applies.

45

 
 

Finance Bill
Schedule 15 — Tax treatment of financing costs and income
Part 9 — Other interpretative provisions

180

 

      (4)  

This sub-paragraph applies to a period if—

(a)   

it is the first period of 12 months falling within the relevant period,

(b)   

it is a period of 12 months falling within the relevant period that

begins immediately after the end of the period mentioned in

paragraph (a), or immediately after the end of a period determined

5

under this paragraph, or

(c)   

it is a period of less than 12 months that—

(i)   

begins immediately after the end of the period mentioned in

paragraph (a) or after the end of a period determined under

paragraph (b), and

10

(ii)   

ends at the end of the relevant period.

      (5)  

In this paragraph, references to IAS financial statements of the worldwide

group for a period are to financial statements of the group for the period

drawn up in accordance with international accounting standards.

References to amounts disclosed in financial statements

15

72    (1)  

References in this Schedule to amounts disclosed in financial statements

include an amount comprised in an amount so disclosed.

      (2)  

References in this Schedule to amounts disclosed in financial statements do

not include—

(a)   

any amount disclosed in respect of a group pension scheme, or

20

(b)   

any amount disclosed in respect of any entity that is not a member of

the group.

Translation of amounts disclosed in financial statements into sterling

73    (1)  

References in this Schedule (except in Part 2) to an amount disclosed in

financial statements for a period are, where the amount is expressed in a

25

currency other than sterling, to that amount translated into its sterling

equivalent.

      (2)  

The exchange rate by reference to which the amount is to be translated is the

average rate of exchange for the period calculated from daily spot rates.

Expressions taking their meaning from international accounting standards

30

74    (1)  

For the purposes of this Schedule the following expressions have the

meaning for the time being given by international accounting standards—

“effective interest method”;

“entity”;

“parent”;

35

“subsidiary”.

      (2)  

The Commissioners may by order amend this paragraph.

Meaning of “relevant accounting period”

75         

For the purposes of this Schedule a “relevant accounting period” of a

company, in relation to a period of account of the worldwide group, means

40

any accounting period that falls wholly or partly within the period of

account of the worldwide group.

 
 

 
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