|
| |
|
(b) | there is an increase in the fair value of shares even if the |
| |
increase is realised by the payment of a distribution in respect |
| |
| |
(5) | In this section “relevant shares” means shares which, throughout the |
| |
| 5 |
(a) | fully paid-up shares of a relevant company, or |
| |
(b) | shares of a company, other than a relevant company, which |
| |
would be accounted for as a liability by the company in |
| |
which they are shares in accordance with generally accepted |
| |
accounting practice and which produce for the holding |
| 10 |
company a return in relation to any amount which is |
| |
economically equivalent to interest (as to which see Chapter |
| |
| |
(6) | For the purposes of subsection (5)(a) shares are fully paid-up if there |
| |
are no actual or contingent obligations— |
| 15 |
(a) | to meet unpaid calls on the shares, or |
| |
(b) | to make a contribution to the capital of the company in which |
| |
they are shares that could affect the value of the shares. |
| |
(7) | For the purposes of subsection (5)(b) a company is “a relevant |
| |
| 20 |
(a) | it and the holding company are connected companies, |
| |
(b) | it is a relevant joint venture company, or |
| |
(c) | it is a relevant controlled foreign company. |
| |
(8) | Section 466 (companies connected for an accounting period) applies |
| |
for the purposes of subsection (7)(a). |
| 25 |
(9) | For the purposes of subsection (7)(b) a company is a joint venture |
| |
| |
(a) | the holding company is one of two persons who, taken |
| |
| |
(b) | the holding company is a person in whose case the 40% test |
| 30 |
in section 755D(3) of ICTA is satisfied, and |
| |
(c) | the other is a person in whose case the 40% test in section |
| |
755D(4) of ICTA is satisfied. |
| |
(10) | Section 755D of ICTA (meaning of “control” etc) applies for the |
| |
purposes of subsection (9)(a) as for those of Chapter 4 of Part 17 of |
| 35 |
that Act (controlled foreign companies), except that no rights and |
| |
powers are attributed to a person by subsection (6)(c) or (d) of that |
| |
| |
(11) | For the purposes of subsection (7)(c) a company is a relevant |
| |
controlled foreign company if any of its chargeable profits (within |
| 40 |
the meaning of Chapter 4 of Part 17 of ICTA)— |
| |
(a) | are apportioned to the holding company for the relevant |
| |
accounting period in accordance with section 752 of ICTA by |
| |
virtue of section 747(3) of that Act, or |
| |
(b) | are not so apportioned because of section 748(1) or (3) of that |
| 45 |
| |
(12) | Section 550(3) (repos: ignoring effect on borrower of sale of |
| |
securities) does not apply for the purposes of this section.” |
| |
|
| |
|
| |
|
4 | After Chapter 6 insert— |
| |
| |
Shares accounted for as liabilities |
| |
521A | Introduction to Chapter |
| |
(1) | This Chapter contains rules for Part 5 (and the other provisions of the |
| 5 |
Corporation Tax Acts) to apply in some cases as if at some times in |
| |
the accounting period of a company (“A”) which holds shares of a |
| |
certain kind in another company (“B”) the shares were rights under |
| |
a creditor relationship of A. |
| |
| 10 |
(a) | section 521B (application of Part 5 to some shares as rights |
| |
under creditor relationship), and |
| |
(b) | section 521C (which describes the shares to which the rules |
| |
| |
(3) | In this Chapter references to the investing company are to A and |
| 15 |
references to the issuing company are to B. |
| |
(4) | For the purposes of this Chapter, the definition of “share” in section |
| |
476(1) only applies so far as it provides that “share” does not include |
| |
a share in a building society. |
| |
(5) | Section 550(3) (repos: ignoring effect on borrower of sale of |
| 20 |
securities) does not apply for the purposes of this Chapter. |
| |
(6) | See section 116B of TCGA 1992 for the effect for chargeable gains |
| |
purposes of shares beginning or ceasing to be shares to which section |
| |
| |
521B | Application of Part 5 to certain shares as rights under creditor |
| 25 |
| |
(1) | This section applies in relation to the times in a company’s |
| |
| |
(a) | the company holds a share in another company, and |
| |
(b) | section 521C (shares accounted for as liabilities) applies to the |
| 30 |
| |
(2) | Part 5 (and the other provisions of the Corporation Tax Acts) apply |
| |
| |
(a) | the share were rights under a creditor relationship of the |
| |
| 35 |
(b) | any distribution in respect of the share were not a |
| |
distribution (and accordingly is within Part 5). |
| |
(3) | Where Part 5 applies in relation to the investing company in |
| |
accordance with subsection (2) it so applies as if the issuing company |
| |
stood in the position of debtor as respects the debt in question. |
| 40 |
(4) | No debits are to be brought into account by the investing company |
| |
as respects the share but this does not affect debits to be brought into |
| |
account in respect of exchange gains or losses. |
| |
|
| |
|
| |
|
(5) | Subsection (2)(b) does not affect the operation of Part 1 of Schedule |
| |
25 of ICTA (controlled foreign companies: acceptable distribution |
| |
policy) (including as it continues to have effect in accordance with |
| |
paragraph 8(1) of Schedule 36 to FA 2009). |
| |
(6) | In this Chapter references to “the share” are to the share mentioned |
| 5 |
| |
521C | Shares accounted for as liabilities |
| |
(1) | This section applies to the share if— |
| |
(a) | the share would be accounted for by the issuing company as |
| |
a liability in accordance with generally accepted accounting |
| 10 |
| |
(b) | the share produces for the investing company a return in |
| |
relation to any amount which is economically equivalent to |
| |
| |
(c) | the issuing company and the investing company are not |
| 15 |
| |
(d) | the condition in subsection (4) is met, |
| |
(e) | the share is not an excepted share (see section 521D), and |
| |
(f) | the investing company holds the share for an unallowable |
| |
purpose (see section 521E). |
| 20 |
(2) | For the purposes of this section a return produced for a company by |
| |
an arrangement in relation to any amount is “economically |
| |
equivalent to interest” if (and only if)— |
| |
(a) | it is reasonable to assume that it is a return by reference to the |
| |
time value of that amount of money, |
| 25 |
(b) | it is at a rate reasonably comparable to what is (in all the |
| |
circumstances) a commercial rate of interest, and |
| |
(c) | at the relevant time there is no practical likelihood that it will |
| |
cease to be produced in accordance with the arrangement |
| |
unless the person by whom it falls to be produced is |
| 30 |
prevented (by reason of insolvency or otherwise) from |
| |
| |
(3) | In subsection (2)(c) “the relevant time” means the time when the |
| |
investing company first holds the share or, if later, when the share |
| |
begins to produce a return for the investing company. |
| 35 |
(4) | The condition mentioned in subsection (1)(d) is that the share does |
| |
not fall to be treated for the accounting period in question as if it were |
| |
rights under a creditor relationship of the investing company |
| |
because of section 490 (holdings in OEICs, unit trusts and offshore |
| |
funds treated as creditor relationship rights). |
| 40 |
(5) | Section 466 (companies connected for an accounting period) applies |
| |
for the purposes of this section. |
| |
| |
(1) | A share is an excepted share for the purposes of section 521C if it is— |
| |
(a) | a qualifying publicly-issued share (see subsection (2)), or |
| 45 |
(b) | a share which mirrors a public issue (see subsections (3) and |
| |
| |
|
| |
|
| |
|
(2) | A share is a “qualifying publicly-issued share” if— |
| |
(a) | it was issued by a company as part of an issue of shares to |
| |
persons not connected with the company, and |
| |
(b) | less than 10% of the shares in that issue are held by the |
| |
investing company or persons connected with it. |
| 5 |
(3) | The first case where shares (“the mirroring shares”) mirror a public |
| |
| |
(a) | a company (“company A”) issues shares (“the public issue”) |
| |
to persons not connected with the company, |
| |
(b) | within 7 days of that issue, one or more other companies |
| 10 |
(“companies BB”) issue the mirroring shares to company A |
| |
on the same terms as the public issue or substantially the |
| |
| |
(c) | company A and companies BB are associated companies (see |
| |
| 15 |
(d) | the total nominal value of the mirroring shares does not |
| |
exceed the nominal value of the public issue. |
| |
(4) | The second case where shares (“the second level mirroring shares”) |
| |
mirror a public issue is where, in the circumstances of the first case— |
| |
(a) | within 7 days of the public issue, one or more other |
| 20 |
companies (“companies CC”) issue the second level |
| |
mirroring shares to one or more of companies BB on the same |
| |
terms as the public issue or substantially the same terms, |
| |
(b) | company A, companies BB and companies CC are associated |
| |
companies (see subsection (5)), and |
| 25 |
(c) | the total nominal value of the second-level mirroring shares |
| |
does not exceed the nominal value of the public issue. |
| |
(5) | For the purposes of subsections (3) and (4) companies are associated |
| |
companies if they are members of the same group of companies for |
| |
the purposes of Chapter 4 of Part 10 of ICTA (group relief) (see |
| 30 |
section 413(3)(a) of that Act). |
| |
| |
(1) | For the purposes of section 521C, the investing company holds the |
| |
share for an unallowable purpose if the main purpose, or one of the |
| |
main purposes for which the company holds the share is to obtain a |
| 35 |
| |
(2) | But the investing company may elect that this Chapter is to apply in |
| |
relation to the share even though it would otherwise be prevented |
| |
from applying by subsection (1)(f) of that section. |
| |
(3) | An election under subsection (2)— |
| 40 |
(a) | must be made no later than the time when the investing |
| |
company first holds the share or, if later, when the share |
| |
begins to produce a return for the investing company, and |
| |
| |
(4) | In this section “obtain a relevant tax advantage” means secure that |
| 45 |
the return produced by the share (or any part of it) is received in a |
| |
way that means that its treatment for corporation tax purpose is |
| |
|
| |
|
| |
|
more advantageous to the investing company than it would be if it |
| |
| |
(a) | charged to corporation tax as income of the investing |
| |
| |
(b) | brought into account as income of the investing company for |
| 5 |
corporation tax purposes, |
| |
| at the time when amounts would be brought into account in relation |
| |
to the return in accordance with section 521B. |
| |
(5) | Nothing in this section applies in relation to the investing company |
| |
for an accounting period if it is an excluded controlled foreign |
| 10 |
| |
(6) | For this purpose the investing company is an excluded controlled |
| |
foreign company if any of its chargeable profits (within the meaning |
| |
of Chapter 4 of Part 17 of ICTA)— |
| |
(a) | are apportioned for the accounting period in accordance with |
| 15 |
section 752 of ICTA by virtue of section 747(3) of that Act, or |
| |
(b) | are not so apportioned because of section 748(1) of that Act. |
| |
521F | Shares becoming or ceasing to be shares to which section 521B applies |
| |
(1) | This section applies if at any time section 521B begins or ceases to |
| |
apply in the case of a share held by the investing company. |
| 20 |
(2) | The investing company is treated for the purposes of Part 5— |
| |
(a) | as having disposed of the share immediately before that time |
| |
for consideration of an amount equal to the notional carrying |
| |
value of the share at that time, and |
| |
(b) | as having immediately reacquired it for consideration of the |
| 25 |
| |
(3) | In subsection (2) “notional carrying value”, in relation to the share, |
| |
means the amount which would have been its carrying value in the |
| |
accounts of the investing company if a period of account had ended |
| |
immediately before section 521B began or ceased to apply in the case |
| 30 |
of the share and the investing company. |
| |
(4) | For the purposes of subsection (3) “carrying value” has the same |
| |
meaning as it has for the purposes of section 316 (see section 317).” |
| |
| |
5 (1) | Section 116B of TCGA 1992 (shares beginning or ceasing to be shares to |
| 35 |
which section 523 of CTA 2009 applies) is amended as follows. |
| |
(2) | In subsection (1) and the heading, for “522” substitute “521B”. |
| |
(3) | In subsection (1)(b), for “its fair value” substitute “the notional carrying |
| |
| |
(4) | In subsection (2), for the definition of “fair value” substitute— |
| 40 |
““notional carrying value” has the same meaning as in |
| |
subsection (2) of section 521F of CTA 2009 (see subsection (3) |
| |
| |
(5) | In that subsection, in the definition of “investing company”— |
| |
|
| |
|
| |
|
(a) | for “7” substitute “6A”, and |
| |
(b) | for “with guaranteed returns) (see section 522(3)” substitute |
| |
“accounted for as liabilities) (see section 521A(3)”. |
| |
6 | In section 26 of F(No.2)A 2005 (tax arbitrage), for subsection (10) substitute— |
| |
“(10) | This subsection applies to an amount that is brought into account by |
| 5 |
virtue of Chapter 2A or 6A of Part 6 of CTA 2009 (shares treated as |
| |
| |
7 (1) | Schedule 4 to CTA 2009 (index of expressions) is amended as follows. |
| |
(2) | After the entry relating to “approved, approval (in relation to a share |
| |
incentive plan) (in Chapter 1 of Part 11)” insert— |
| 10 |
| “arrangement (in Chapter 2A of |
| | | | | | | | |
|
(3) | Omit the entry relating to “the associated transactions condition (in Chapter |
| |
| |
(4) | After the entry relating to “effective 51% subsidiary (in Part 8)” insert— |
| 15 |
| “economically equivalent to |
| | | | | interest (in Chapter 2A of Part 6) |
| | | |
|
(5) | For the entry relating to “the investing company (in Chapter 7 of Part 5)” |
| |
| |
| “the investing company (in |
| | | 20 | | | | | |
|
(6) | For the entry relating to “the investing company (in Chapter 7 of Part 5)” |
| |
| |
| “the issuing company (in Chapter |
| | | | | | | | 25 |
|
(7) | Omit the entries relating to “the increasing value condition (in Chapter 7 of |
| |
Part 6)” and “the redemption return condition (in Chapter 7 of Part 6)”. |
| |
(8) | In the entry relating to “share (in Part 5 and in Part 6 except for Chapter 7 of |
| |
that Part)”, for “7” substitute “6A”. |
| |
(9) | For the entries relating to “share (in Chapter 7 of Part 6)” and “the share (in |
| 30 |
Chapter 7 of Part 6) substitute— |
| |
| “share (in Chapter 6A of Part 6) |
| | | |
|
|
| |
|
| |
|
| the share (in Chapter 6A of Part 6) |
| | | |
|
|
| |
8 | In consequence of the amendments made by this Schedule, omit— |
| |
| |
(i) | section 736C (deemed interest: cash collateral under stock |
| 5 |
lending arrangement), and |
| |
(ii) | section 736D (quasi-stock lending arrangements and quasi- |
| |
| |
(b) | in FA 2004, sections 131 to 133 (companies in partnership), |
| |
| 10 |
(i) | Chapter 7 of Part 6 (shares with guaranteed returns etc), |
| |
(ii) | Chapter 8 of that Part (returns from partnerships), and |
| |
(iii) | section 547 (repo under arrangement designed to produce |
| |
quasi-interest: tax avoidance). |
| |
9 | Omit the following provisions (which relate to the provisions repealed by |
| 15 |
| |
(a) | in ICTA, sections 736B(4) and 807A(2B), |
| |
(b) | in TCGA 1992, section 171(3A), |
| |
(c) | in F(No.2)A 2005, in Schedule 7, paragraphs 5 and 9, |
| |
(d) | in FA 2006, in Schedule 6, paragraphs 3 and 4, |
| 20 |
(e) | in ITA 2007, in Schedule 1, paragraphs 172 and 373, and |
| |
(f) | in CTA 2009, in Schedule 1, paragraphs 215 and 571 of Schedule 1. |
| |
10 | In section 542(2) of CTA 2007 (introduction to Chapter 10 of Part 6), for “547” |
| |
| |
| 25 |
11 | The amendments made by paragraphs 2(2) and 3 have effect in relation to |
| |
any arrangement which produces for a company a return which is |
| |
economically equivalent to interest if the company becomes a party to the |
| |
arrangement on or after 22 April 2009. |
| |
12 | The amendments (and repeals) made by paragraphs 2(3) and 4 to 10 come |
| 30 |
into force on 22 April 2009. |
| |
13 (1) | This paragraph applies where any of the provisions repealed by paragraph |
| |
8 applies in relation to anything done by a company before 22 April 2009 |
| |
which amounts to becoming party to an arrangement (within the meaning |
| |
given by section 486B(7) of CTA 2009). |
| 35 |
(2) | The company is to be treated for the purposes of Chapter 2A of CTA 2009 as |
| |
having become a party to the arrangement on that date. |
| |
(3) | But this paragraph does not apply in circumstances in which paragraph 14 |
| |
| |
14 (1) | This paragraph applies where Chapter 7 of Part 6 of CTA 2009 applies in |
| 40 |
relation to a share held by a company immediately before 22 April 2009. |
| |
(2) | Section 116B(1) of TCGA 1992 is to be treated as applying as if section 523 of |
| |
CTA 2009 ceased to apply in relation to the share on that date. |
| |
|
| |
|