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Finance Bill
Schedule 19 — Income tax credits for foreign distributions

202

 

5          

After that section insert—

“397BA  

 Meaning of “qualifying territory”

(1)   

For the purposes of section 397AA, “qualifying territory” means—

(a)   

the United Kingdom, or

(b)   

a territory within subsection (2).

5

(2)   

A territory is within this subsection if—

(a)   

arrangements to which section 788 of ICTA applies (“double

taxation relief arrangements”) have effect in relation to the

territory, and

(b)   

the arrangements contain a non-discrimination provision.

10

(3)   

The Treasury may by regulations—

(a)   

provide that a territory specified in or of a description

specified in the regulations that does not satisfy subsection

(2)(a) or (b) is a qualifying territory for the purpose of section

397AA, and

15

(b)   

provide that a territory so specified or described that satisfies

subsection (2)(a) or (b) is not a qualifying territory for that

purpose.

(4)   

For the purposes of section 397AA, a company is a resident of a

territory if, under the laws of the territory, the company is liable to

20

tax there—

(a)   

by reason of its domicile, residence or place of management,

but

(b)   

not in respect only of income from sources in that territory or

capital situated there.

25

(5)   

In subsection (2) “non-discrimination provision”, in relation to

double taxation relief arrangements, means a provision to the effect

that nationals of a state which is a party to those arrangements (a

“contracting state”) are not to be subject in any other contracting state

to—

30

(a)   

any taxation, or

(b)   

any requirement connected with taxation,

   

which is other or more burdensome than the taxation and connected

requirements to which nationals of that other state in the same

circumstances (in particular with respect to residence) are or may be

35

subjected.

(6)   

In subsection (5) “national”, in relation to a contracting state,

includes—

(a)   

an individual possessing the nationality or citizenship of the

contracting state, and

40

(b)   

a legal person, partnership or association deriving its status

as such from the laws in force in that contracting state.

(7)   

Regulations under this section may—

(a)   

describe a territory by reference to the double taxation relief

arrangements for the time being in force in relation to the

45

territory,

 
 

Finance Bill
Schedule 19 — Income tax credits for foreign distributions

203

 

(b)   

make different provision in relation to different descriptions

of company, and

(c)   

make provision having effect in relation to the tax year

current on the day on which the regulations are made.

(8)   

No regulations may be made under this section unless a draft of the

5

instrument containing them has been laid before, and approved by a

resolution of, the House of Commons.”

6     (1)  

Section 397C (meaning of “minority shareholder”) is amended as follows.

      (2)  

In subsection (1)—

(a)   

for “397A” substitute “397AA”, and

10

(b)   

omit “non-UK resident”.

      (3)  

After that subsection insert—

“(1A)   

Where the company has more than one class of share, the reference

in subsection (1) to the company’s issued share capital is to issued

share capital of the same class as the share in respect of which the

15

distribution is made.”

      (4)  

Insert at the end—

“(8)   

For the purposes of this section, shares are not of the same class if the

amounts paid up on them (otherwise than by way of premium) are

different.”

20

7          

In section 398(1) (increase in amount or value of dividends where tax credit

available), for “397A(2)” substitute “397A(1)”.

8          

In section 873 (orders and regulations), after subsection (3) insert—

“(4)   

Further, subsection (2) does not apply if any other Parliamentary

procedure is expressly provided to apply in relation to the order or

25

regulations.”

Consequential amendments of other Acts

9          

In TMA 1970, in—

(a)   

sections 8(1AA)(b) and 8A(1AA)(b) (personal return and trustee

return: amount payable by way of income tax),

30

(b)   

section 9(1)(b) (self-assessment of amount payable by way of income

tax),

(c)   

sections 12AA(1A)(b) and 12AB(5) (partnership return etc; amount

payable by way of income tax), and

(d)   

sections 59A(8)(b) and 59B(2)(b) (payments of and on account of

35

income tax),

           

for “397A(2)” substitute “397A(1)”

10         

In ICTA—

(a)   

in section 824(4A)(b) (repayment supplements: individuals and

others), for “397A(2)” substitute “397A(1)”, and

40

(b)   

in section 840ZA(3)(b) (meaning of “tax advantage”), after “397(1)”

insert “or 397A(1)”.

 
 

Finance Bill
Schedule 20 — Loan relationships: connected parties

204

 

11         

In section 171(2B) of FA 1993 (Lloyd’s underwriters etc: taxation of profits

and allowance of losses), for “397A(2)” substitute “397A(1)”.

12         

In Part 2 of Schedule 1 to ITEPA 2003 (definitions), in the entry for “tax

credit”, in the second column, after “397(1)” insert “or 397A(1)”.

13         

In ITA 2007—

5

(a)   

in section 504(4)(b) (provisions that do not apply to income of

unauthorised unit trusts),

(b)   

in sections 592(2), 593(2) and 594(2) (stock lending arrangements and

repos), and

(c)   

in section 989 (definitions), in the definition of “tax credit”,

10

           

for “397A(2)” substitute “397A(1)”.

Commencement

14    (1)  

The amendments made by this Schedule have effect in relation to—

(a)   

qualifying distributions arising on or after 22 April 2009,

(b)   

cash dividends paid over to a person under paragraph 68(4) of

15

Schedule 2 of ITEPA 2003 on or after 22 April 2009,

(c)   

dividends treated under section 407 of ITTOIA 2005 as paid to a

person on or after 22 April 2009, and

(d)   

manufactured overseas dividends that are representative of a

distribution within paragraph (a), (b) or (c).

20

      (2)  

In this paragraph—

“manufactured overseas dividend” has the same meaning as in Chapter

2 of Part 11 of ITA 2007;

“qualifying distribution” has the meaning given in section 989 of ITA

2007.

25

Schedule 20

Section 41

 

Loan relationships: connected parties

Introduction

1          

Part 5 of CTA 2009 (loan relationships) is amended as follows.

Section 374

30

2     (1)  

Section 374 (late interest: connection between debtor and person standing in

position of creditor) is amended as follows.

      (2)  

In subsection (1)—

(a)   

in paragraph (b), after “company” insert “(“C”)”, and

(b)   

insert at the end (not as part of paragraph (b))—

35

   

“and the condition in subsection (1A) is met.”

      (3)  

After that subsection insert—

“(1A)   

The condition is that C is—

 
 

Finance Bill
Schedule 20 — Loan relationships: connected parties

205

 

(a)   

resident for tax purposes in a non-qualifying territory at any

time in the actual accrual period, or

(b)   

effectively managed in a non-taxing non-qualifying territory

at any such time.”

      (4)  

Insert at the end—

5

“(3)   

For the purposes of this section—

(a)   

“non-qualifying territory” has the meaning given by

paragraph 5E of Schedule 28AA to ICTA,

(b)   

a non-qualifying territory is “non-taxing” if companies are

not under its law liable to tax by reason of domicile, residence

10

or place of management, and

(c)   

“resident for tax purposes” means liable, under the law of the

non-qualifying territory, to tax there by reason of domicile,

residence or place of management.”

Sections 375 and 376

15

3     (1)  

Section 375 (late interest: loans to close companies by participators etc) is

amended as follows.

      (2)  

In subsection (1), insert at the end (not as part of paragraph (b))—

   

“and, where subsection (4A) applies, the non-qualifying territory

condition is met.”

20

      (3)  

In subsections (3)(b) and (4)(b), after “resident” insert “for tax purposes”.

      (4)  

After subsection (4) insert—

“(4A)   

This subsection applies if C is a company; and the non-qualifying

territory condition is that C is—

(a)   

resident for tax purposes in a non-qualifying territory at any

25

time in the actual accrual period, or

(b)   

effectively managed in a non-taxing non-qualifying territory

at any such time.”

4     (1)  

Section 376 (interpretation of section 375) is amended as follows.

      (2)  

In subsection (5), for the definition of “resident” substitute—

30

““resident for tax purposes” means liable, under the law of the

non-qualifying territory, to tax there by reason of domicile,

residence or place of management, and”.

      (3)  

Insert at the end—

“(6)   

For the purposes of section 375, a non-qualifying territory is “non-

35

taxing” if companies are not under its law liable to tax by reason of

domicile, residence or place of management.”

Section 377

5     (1)  

Section 377 (late interest: party to loan relationship having major interest in

other party) is amended as follows.

40

      (2)  

The existing provision becomes subsection (1) of that section.

      (3)  

In that subsection, omit the “and” at the end of paragraph (a) and insert at

 
 

Finance Bill
Schedule 20 — Loan relationships: connected parties

206

 

the end “and

(c)   

the condition in subsection (2) is met.”

      (4)  

After that subsection insert—

“(2)   

The condition is that C is—

(a)   

resident for tax purposes in a non-qualifying territory at any

5

time in the actual accrual period, or

(b)   

effectively managed in a non-taxing non-qualifying territory

at any such time.

(3)   

For the purposes of this section—

(a)   

“non-qualifying territory” has the meaning given by

10

paragraph 5E of Schedule 28AA to ICTA,

(b)   

a non-qualifying territory is “non-taxing” if companies are

not under its law liable to tax by reason of domicile, residence

or place of management, and

(c)   

“resident for tax purposes” means liable, under the law of the

15

non-qualifying territory, to tax there by reason of domicile,

residence or place of management.”

Section 407

6     (1)  

Section 407 (postponement until redemption of debits for connected

companies’ deeply discounted securities) is amended as follows.

20

      (2)  

In subsection (1)—

(a)   

in paragraph (b), after “company” insert “(“the creditor company”)”,

(b)   

omit the “and” at the end of paragraph (d), and

(c)   

insert at the end “, and

(f)   

the condition in subsection (1A) is met.”

25

      (3)  

After that subsection insert—

“(1A)   

The condition is that the creditor company is—

(a)   

resident for tax purposes in a non-qualifying territory at any

time in the relevant period, or

(b)   

effectively managed in a non-taxing non-qualifying territory

30

at any such time.”

      (4)  

Insert at the end—

“(6)   

For the purposes of this section—

(a)   

“non-qualifying territory” has the meaning given by

paragraph 5E of Schedule 28AA to ICTA,

35

(b)   

a non-qualifying territory is “non-taxing” if companies are

not under its law liable to tax by reason of domicile, residence

or place of management, and

(c)   

“resident for tax purposes” means liable, under the law of the

non-qualifying territory, to tax there by reason of domicile,

40

residence or place of management.”

 
 

Finance Bill
Schedule 20 — Loan relationships: connected parties

207

 

Sections 409 and 410

7          

Section 409(1) (postponement until redemption of debits for close

companies’ deeply discounted securities)—

(a)   

in paragraph (b), after “there is a person” insert “(“C”)”, and

(b)   

insert at the end (not as part of paragraph (d))—

5

   

“and, where it applies, the non-qualifying territory condition

is met.”

8     (1)  

Section 410 (interpretation of section 409) is amended as follows.

      (2)  

In subsections (3)(b) and (4)(b), after “resident” insert “for tax purposes”.

      (3)  

After subsection (4) insert—

10

“(4A)   

The non-qualifying territory condition applies if C is a company; and

the non-qualifying territory condition is that C is—

(a)   

resident for tax purposes in a non-qualifying territory at any

time in the relevant period, or

(b)   

effectively managed in a non-taxing non-qualifying territory

15

at any such time.”

      (4)  

In subsection (5), for the definition of “resident” substitute—

““resident for tax purposes” means liable, under the law of the

non-qualifying territory, to tax there by reason of domicile,

residence or place of management, and”.

20

      (5)  

After that subsection insert—

“(5A)   

For the purposes of this section, a non-qualifying territory is “non-

taxing” if companies are not under its law liable to tax by reason of

domicile, residence or place of management.”

Commencement and transitional provision

25

9     (1)  

The amendments made by this Schedule have effect where the actual accrual

period (within the meaning of Chapter 8 of Part 5 of CTA 2009), or the

relevant period (within the meaning of section 407(1) or 409(1) of that Act),

begins on or after 1 April 2009.

      (2)  

But a company may elect that any or all of the amendments made by this

30

Schedule do not have effect in relation to the first accounting period for

which they would otherwise apply.

      (3)  

However, no election may be made under sub-paragraph (2) in relation to

an accounting period ending after 31 March 2011.

      (4)  

An election under sub-paragraph (2) must be made in the corporation tax

35

return for the accounting period in relation to which the election is to have

effect.

 
 

 
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