Finance Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 17 — International movement of capital
Part 2 — Reporting requirement
188

(d)
section 767 (interpretation).
2
In section 98 of TMA 1970 (special returns etc)—
(a)
omit subsection (5),
(b)
in the first column of the Table omit “section 765A(2)(b);”, and
(c)
in the second column of the Table omit “section 765A(2)(a);”.
5
3
In consequence of the amendments made by subsections (1) and (2), omit—
(a)
in FA 1988, section 105(6), and
(b)
in FA 1990, section 68(1), (2) and (3)(b) to (d).
Part 2
Reporting requirement
10
Reporting requirement
4     (1)
If a UK corporate parent is a reporting body at the time a reportable event
takes place or a reportable transaction is carried out, it must, within 6
months of that time, make a report to an officer of Revenue and Customs.
      (2)
The report must contain such information relating to the event or
15
transaction, or persons connected with the event or transaction, as is
specified in regulations made by the Commissioners.
      (3)
The purpose of the report is to enable the Commissioners to consider
whether the event or transaction results, directly or indirectly, in an
advantage for any person in respect of corporation tax or any other tax or
20
duty.
      (4)
In this Schedule “the Commissioners” means the Commissioners for Her
Majesty’s Revenue and Customs.
Meaning of “reporting body”
5     (1)
For the purposes of this Schedule a body corporate (“body A”) is a reporting
25
body at any time if, at that time—
(a)
it is a UK corporate parent, and
(b)
condition A, B, C or D is met.
      (2)
Condition A is that body A is not controlled by a body corporate resident
outside the United Kingdom.
30
      (3)
Condition B is that—
(a)
body A is controlled by a body corporate resident outside the United
Kingdom (“the foreign parent”), and
(b)
no other relevant UK body corporate is controlled by the foreign
parent.
35
      (4)
Condition C is that —
(a)
body A is controlled by a body corporate resident outside the United
Kingdom (“the foreign parent”),
(b)
one or more other UK corporate parents are controlled by the foreign
parent, and
40
(c)
body A is not a party to an arrangement under paragraph 6.

Finance Bill
Schedule 17 — International movement of capital
Part 2 — Reporting requirement
189

      (5)
Condition D is that—
(a)
body A is controlled by a body corporate resident outside the United
Kingdom (“the foreign parent”),
(b)
one or more other UK corporate parents are controlled by the foreign
parent, and
5
(c)
body A is a party to an arrangement under paragraph 6 and is the
nominated reporting body under that arrangement.
Groups with more than one UK corporate parent: nomination of single reporting body
6     (1)
Sub-paragraph (2) applies where—
(a)
a UK corporate parent is controlled by a body corporate resident
10
outside the United Kingdom (“the foreign parent”), and
(b)
one or more other UK corporate parents are controlled by the foreign
parent.
      (2)
Two or more of the UK corporate parents controlled by the foreign parent
may enter into an arrangement under which one of their number (“the
15
nominated reporting body”) is nominated to exercise, on behalf of all of
them, the functions conferred under this Schedule on a reporting body.
      (3)
A party to an arrangement under this paragraph may withdraw from the
arrangement.
      (4)
The Commissioners may by regulations make provision about entering into
20
and withdrawing from an arrangement under this paragraph.
      (5)
Regulations under paragraph (4) may, in particular, include provision—
(a)
as to the form and manner in which bodies may enter into, or a body
may withdraw from, an arrangement;
(b)
requiring a person to give information to HMRC in connection with
25
entering into or withdrawing from an arrangement;
(c)
as to circumstances in which a body is to be treated as having
withdrawn from an arrangement.
Meaning of “UK corporate parent”
7
In this Schedule “UK corporate parent” means a body corporate that—
30
(a)
is resident in the United Kingdom,
(b)
controls one or more bodies corporate that are not resident in the
United Kingdom, and
(c)
is not controlled by—
(i)
a body corporate that is resident in the United Kingdom, or
35
(ii)
two or more bodies corporate taken together each of which is
resident in the United Kingdom.
Reportable events and transactions
8     (1)
For the purposes of this Schedule an event or transaction is “reportable”, in
relation to a reporting body, if—
40
(a)
it is of a value exceeding £100 million,
(b)
it is within sub-paragraph (2), and
(c)
it is not an excluded transaction (see paragraph 9).

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Schedule 17 — International movement of capital
Part 2 — Reporting requirement
190

      (2)
An event or transaction is within this sub-paragraph if—
(a)
it is an issue of shares or debentures by a foreign subsidiary,
(b)
it is a transfer by the reporting body, or a transfer caused or
permitted by the reporting body, of shares or debentures of a foreign
subsidiary in which the reporting body has an interest,
5
(c)
where the reporting body is a party to an arrangement under
paragraph 6, it is a transfer by another party to the arrangement, or
a transfer caused or permitted by such a party, of shares or
debentures of a foreign subsidiary in which that party has an
interest,
10
(d)
it results in a foreign subsidiary becoming, or ceasing to be, a
controlling partner in a partnership, or
(e)
it is of a description specified in regulations made by the
Commissioners.
      (3)
For the purposes of sub-paragraph (2)(e) a foreign subsidiary is a
15
“controlling partner” in a partnership if, whether alone or taken together
with one or more other partners that are subsidiaries, it controls the
partnership.
      (4)
The Commissioners may by regulations make provision about how the
value of an event or transaction is to be determined for the purposes of this
20
paragraph.
      (5)
Regulations under sub-paragraph (4) may, in particular, in the case of a
transaction that is one of a series of transactions, include provision
attributing to the transaction the value of other transactions in the series.
      (6)
Regulations under this paragraph may—
25
(a)
make provision by reference to standards or other documents issued
by any person, or
(b)
make different provision for different cases or purposes.
      (7)
The Commissioners may by order amend sub-paragraph (1)(a) so as to
substitute a higher amount for the amount for the time being mentioned
30
there.
Excluded transactions
9     (1)
For the purposes of this Schedule a transaction is “excluded” if—
(a)
it is carried out in the ordinary course of a trade,
(b)
all the parties to the transaction are, at the time the transaction is
35
carried out, resident in the same territory,
(c)
it consists in giving to the bankers of a foreign subsidiary any
security for the payment of any sum due or to become due from it to
them by reason of any transaction entered into with it by them in the
ordinary course of their business as bankers,
40
(d)
it consists in a foreign subsidiary giving to an insurance company
any security for the payment of any sum due or to become due from
that subsidiary to that company by reason of any transaction entered
into with that subsidiary by that company in the ordinary course of
that company’s business by way of investment of its funds, or
45
(e)
it is of a description specified in regulations made by the
Commissioners.

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Schedule 17 — International movement of capital
Part 2 — Reporting requirement
191

      (2)
Regulations under sub-paragraph (1)(e)—
(a)
may make provision by reference to standards or other documents
issued by any person, and
(b)
may make different provision for different cases or purposes.
Penalty for failure to comply with reporting requirement
5
10
In section 98 of TMA 1970 (special returns etc), in the second column of the
Table, at the end insert “paragraph 4 of Schedule 17 to FA 2009.”
Regulations and orders
11    (1)
Regulations and orders under this Schedule are to be made by statutory
instrument.
10
      (2)
A statutory instrument containing regulations or an order under this
Schedule is subject to annulment in pursuance of a resolution of the House
of Commons.
Interpretation
12    (1)
For the purposes of this Schedule “control”, in relation to a body corporate,
15
means the power of a person to secure—
(a)
by means of the holding of shares or the possession of voting power
in or in relation to the body or any other body corporate, or
(b)
by virtue of any powers conferred by the articles of association or
other document regulating the body or any other body corporate,
20

that the affairs of the body are conducted in accordance with that person’s
wishes.
      (2)
Where two or more persons, taken together, have the power mentioned in
sub-paragraph (1), they are taken for the purposes of this Schedule to control
the body corporate.
25
      (3)
For the purposes of this Schedule “control” in relation to a partnership,
means the right to a share of more than 50% of the assets, or of more than
50% of the income, of the partnership.
      (4)
In this Schedule—
“foreign” means resident outside the United Kingdom;
30
“partnership” includes an entity established under the law of a country
or territory outside the United Kingdom of a similar character to a
partnership, and “partner” is to be read accordingly;
“subsidiary”, in relation to a reporting body, means a body corporate
that is controlled by—
35
(a)
the reporting body, or
(b)
where the reporting body is a party to an arrangement under
paragraph 6, any party to the arrangement.
      (5)
Paragraph 3 of Schedule 28AA to ICTA (meaning of “transaction” and
“series of transactions”) applies for the purposes of this Schedule.
40

Finance Bill
Schedule 18 — Corporation tax: foreign currency accounting
192

Part 3
Commencement etc
Commencement
13
This Schedule has effect in relation to events taking place and transactions
carried out on or after 1 July 2009.
5
Transitional provision
14    (1)
In its application in relation to an event taking place or a transaction carried
out before 1 October 2009, paragraph 4(1) has effect as if it required any
report under that provision to be made before 1 April 2010.
      (2)
Any regulations under this Schedule that are made within the period of one
10
year beginning on the day on which this Act is passed may be made so as to
have effect from any time on or after 1 July 2009.
Schedule 18
Section 38

Corporation tax: foreign currency accounting
Amendments of FA 1993
15
1
FA 1993 is amended as follows.
2
In section 92(2) (the basic rule: sterling to be used), insert at the end—
“section 92D (sterling equivalents: the basic rule);
  sections 92DA and 92DB (sterling equivalents: special rules
where amounts carried back or forward);
20
  sections 92DC and 92DD (adjustment of sterling amounts
carried back or forward where operating currency changes).”
3
In section 92B (company operating in currency other than sterling and
preparing accounts in another currency), insert at the end—
“(4)
Where, for the purposes of computing the profits or losses of the
25
company arising in an accounting period, an amount expressed in
sterling is required by subsection (3) to be translated into its
equivalent expressed in another currency, it must be translated by
reference to the appropriate exchange rate.”
4
In section 92C (company preparing accounts in currency other than
30
sterling), insert at the end—
“(5)
Where, for the purposes of computing the profits or losses of the
company arising in an accounting period, an amount expressed in
sterling is required by subsection (4) to be translated into its
equivalent expressed in another currency, it must be translated by
35
reference to the appropriate exchange rate.”
5
For section 92D (translating amounts into equivalent in different currency)

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Schedule 18 — Corporation tax: foreign currency accounting
193

substitute—
“92D
Sterling equivalents: the basic rule
(1)
This section applies where, for the purposes of computing the profits
or losses of a company arising in an accounting period, a profit or
loss is required by section 92B or 92C to be translated into its sterling
5
equivalent.
(2)
The translation must be made by reference to the appropriate
exchange rate.
(3)
This section is subject to sections 92DA and 92DB (special rules
where translation is for the purpose of computing amounts to be
10
carried back or carried forward to other accounting periods).
92DA
Sterling equivalents: carried-back amounts
(1)
This section applies where, for the purpose of computing a carried-
back amount in respect of a company, a loss (“the loss”) is required
by section 92B or 92C to be translated into its sterling equivalent.
15
(2)
The translation must be made in accordance with rule 1, 2 or 3
(whichever is applicable).
(3)
Rule 1 applies if the operating currency of the company in the
accounting period in which the loss arises (“the later operating
currency”) is the same as the operating currency of the company in
20
the accounting period to which the carried-back amount is to be
carried back (“the earlier operating currency”).
(4)
Rule 1 is that the loss must be translated into its sterling equivalent
by reference to the same rate of exchange as that at which the profit
against which the carried-back amount is to be set off is required to
25
be translated under section 92D.
(5)
Rule 2 applies if—
(a)
the later operating currency is not the same as the earlier
operating currency, and
(b)
the earlier operating currency is sterling.
30
(6)
Rule 2 is that the loss must be translated into its sterling equivalent
by reference to the spot rate of exchange for the last day of the
relevant accounting period.
(7)
Rule 3 applies if—
(a)
the later operating currency is not the same as the earlier
35
operating currency, and
(b)
the earlier operating currency is a currency other than
sterling.
(8)
Rule 3 is that the loss must be translated into its sterling equivalent
by—
40
(a)
being translated into the earlier operating currency by
reference to the spot rate of exchange for the last day of the
relevant accounting period, before
(b)
being translated into sterling by reference to the same rate of
exchange as that at which the profit against which the
45

Finance Bill
Schedule 18 — Corporation tax: foreign currency accounting
194

carried-back amount is to be set off is required to be
translated under section 92D.
(9)
In this section “the relevant accounting period” means the latest
accounting period of the company before the accounting period in
which the loss arises in which the operating currency of the company
5
is the earlier operating currency.
92DB
Sterling equivalents: carried-forward amounts
(1)
This section applies where, for the purpose of computing a carried-
forward amount in respect of a company, a loss (“the loss”) is
required by section 92B or 92C to be translated into its sterling
10
equivalent.
(2)
The translation must be made in accordance with rule 1, 2 or 3
(whichever is applicable).
(3)
Rule 1 applies if the operating currency of the company in the
accounting period in which the loss arises (“the earlier operating
15
currency”) is the same as the operating currency of the company in
the accounting period to which the carried-forward amount is to be
carried forward (“the later operating currency”).
(4)
Rule 1 is that the loss must be translated into its sterling equivalent
by reference to the same rate of exchange as that at which the profit
20
against which the carried-forward amount is to be set off is required
to be translated under section 92D.
(5)
Rule 2 applies if—
(a)
the earlier operating currency is not the same as the later
operating currency, and
25
(b)
the later operating currency is sterling.
(6)
Rule 2 is that the loss must be translated into its sterling equivalent
by reference to the spot rate of exchange for the first day of the
relevant accounting period.
(7)
Rule 3 applies if—
30
(a)
the earlier operating currency is not the same as the later
operating currency, and
(b)
the later operating currency is a currency other than sterling.
(8)
Rule 3 is that the loss must be translated into its sterling equivalent
by—
35
(a)
being translated into the later operating currency by
reference to the spot rate of exchange for the first day of the
relevant accounting period, before
(b)
being translated into sterling by reference to the same rate of
exchange as that at which the profit against which the
40
carried-forward amount is to be set off is required to be
translated under section 92D.
(9)
In this section “the relevant accounting period” means the earliest
accounting period of the company after the accounting period in
which the loss arises in which the operating currency of the company
45
is the later operating currency.