Finance Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 25 — Transfers of income streams
Part 1 — Company transferors
243

      (3)
But this paragraph does not apply if paragraph 15 applies in relation to the
share and the company.
15    (1)
This paragraph applies where—
(a)
Chapter 7 of Part 6 of CTA 2009 applies in relation to a share held by
a company immediately before 22 April 2009 by reason of the
5
redemption return condition being met (see section 529 of that Act)
(or would so apply but for the share not being designed to produce
a return which equates in substance to the return on an investment
of money at a commercial rate of interest), and
(b)
section 521B of CTA 2009 applies in relation to the share and the
10
company on 22 April 2009.
      (2)
Part 5 of CTA 2009 applies as if the company had acquired the share on 22
April 2009 for an amount equal to the notional carrying value of the share on
that date.
      (3)
In sub-paragraph (2) “notional carrying value” has the same meaning as in
15
section 521E(2) of CTA 2009 (see subsection (3) of that section).
      (4)
Section 521E of CTA 2009 does not apply by virtue of the coming into force
of section 521B of that Act.
16
An election under—
(a)
section 486D(2) of CTA 2009, or
20
(b)
section 521E(2) of that Act,

relating to a return which begins to be produced before 1 August 2009 can
be made at any time before that date but only in relation to any return
produced on or after the day on which the election is made.
Schedule 25
25
Section 49

Transfers of income streams
Part 1
Company transferors
Application of Part
1     (1)
This Part applies where—
30
(a)
a company within the charge to corporation tax (“the transferor”)
makes a transfer to another person (“the transferee”) of a right to
relevant receipts (see sub-paragraph (2)), and
(b)
(subject to sub-paragraph (3)) the transfer of the right is not a
consequence of the transfer to the transferee of an asset from which
35
the right to relevant receipts arises.
      (2)
“Relevant receipts” means any income—
(a)
which (but for the transfer) would be charged to corporation tax as
income of the transferor, or
(b)
which (but for the transfer) would be brought into account in
40
calculating profits of the transferor for the purposes of corporation
tax.

Finance Bill
Schedule 25 — Transfers of income streams
Part 1 — Company transferors
244

      (3)
Despite paragraph (b) of sub-paragraph (1), this Part applies if the transfer
of the right is a consequence of the transfer to the transferee of all rights
under an agreement for annual payments; and for the purposes of that
paragraph the transfer of an asset under a sale and repurchase agreement is
not to be regarded as a transfer of the asset.
5
      (4)
Paragraph 2 makes provision as to the consequences of this Part applying.
      (5)
For exclusions from this Part, see—
(a)
paragraph 3 (amount otherwise taxed), and
(b)
paragraph 4 (transfer by way of security).
      (6)
Paragraph 5 makes special provision about transfers of partnership shares.
10
      (7)
Paragraph 6 contains supplementary provisions.
Value of transferred income stream treated as income
2     (1)
The relevant amount (see sub-paragraph (2)) is to be treated as income of the
transferor chargeable to corporation tax in the same way and to the same
extent as that in which the relevant receipts—
15
(a)
would have been chargeable to corporation tax, or
(b)
would have been brought into account in calculating any profits for
the purposes of corporation tax,

but for the transfer of the right to relevant receipts.
      (2)
The relevant amount is—
20
(a)
(except where paragraph (b) applies) the amount of the
consideration for the transfer of the right, or
(b)
where the amount of any such consideration is substantially less
than the market value of the right at the time when the transfer takes
place (or where there is no consideration for the transfer of the right),
25
the market value of the right at that time.
      (3)
The income under sub-paragraph (1) is to be treated as arising—
(a)
to the extent that it does not exceed the amount of the consideration
for the transfer of the right, in the period or periods for which, in
accordance with generally accepted accounting practice, the
30
consideration for the transfer is recognised for accounting purposes
in a profit and loss account or income statement of the transferor, and
(b)
otherwise, in the period or periods for which, in accordance with
generally accepted accounting practice, the consideration for the
transfer would be so recognised if it were of an amount equal to the
35
market value of the right at the time when the transfer takes place.
      (4)
But if at any time it becomes reasonable to assume that the income (to any
extent) is not, or would not be, treated by sub-paragraph (3) as arising in an
accounting period of the transferor, the income is to that extent to be treated
as arising immediately before that time.
40
Exception: amount otherwise taxed
3
This Part does not apply if and to the extent that the income under
paragraph 2(1) is (apart from this Part)—
(a)
charged to tax as income of the transferor,

Finance Bill
Schedule 25 — Transfers of income streams
Part 1 — Company transferors
245

(b)
brought into account as income in calculating the profits of the
transferor, or
(c)
brought into account under CAA 2001.
Exception: transfer by way of security
4
This Part does not apply if the consideration for the transfer is the advance
5
under an arrangement that is a structured finance arrangement for the
purposes of section 774A or 774C of ICTA in relation to the transferor or a
partnership in which the transferor is a partner.
Partnership shares
5     (1)
For the purposes of this Part a transfer of a right to relevant receipts
10
consisting of the reduction in the transferor’s share in the profits or losses of
a partnership is to be regarded as a consequence of a transfer of an asset from
which the right arose (that is, the partnership property) if condition A or B
is met.
      (2)
Condition A is that there is a reduction of the transferor’s share in the
15
partnership property and the reduction in the transferor’s share in the
profits or losses is proportionate to that reduction.
      (3)
Condition B is that it is not the main purpose, or one of the main purposes,
of the transfer to secure that the relevant receipts are not charged to
corporation tax or income tax as income of any partner or brought into
20
account as income of any partner for the purpose of either of those taxes.
Interpretation
6     (1)
For the purposes of this Part—
(a)
the grant or surrender (or renunciation) of a lease of land is to be
regarded as a transfer of the land,
25
(b)
the disposal of an interest in an oil licence (within the meaning of
section 809 of CTA 2009) is to be regarded as a transfer of the oil
licence, and
(c)
the grant or disposal of interest in intellectual property (within the
meaning of section 712(3) of CTA 2009) which constitutes a pre-2002
30
asset (within the meaning of section 881 of that Act) is to be regarded
as a transfer of that intellectual property.
      (2)
The Treasury may by order make other provision for securing that other
transactions are to be regarded as transfers of assets for those purposes.
      (3)
In this Part—
35
(a)
references to a transfer include sale, exchange, gift and assignment
(or assignation) and any other arrangement which equates in
substance to a transfer, and
(b)
references to a transfer taking place are, in the case of an
arrangement other than a sale, exchange, gift or assignment (or
40
assignation), to the making of the arrangement.
      (4)
A transfer to or by any partnership of which the transferor or transferee is a
member, and a transfer to the trustees of any trust of which the transferor is
a beneficiary, counts as a transfer in relation to which this Part applies.

Finance Bill
Schedule 25 — Transfers of income streams
Part 2 — Non-corporate transferors
246

Part 2
Non-corporate transferors
7
In ITA 2007, after section 809 insert—
“Chapter 5A
Transfers of income streams
5
809AZA
Application of Chapter
(1)
This Chapter applies where—
(a)
a person within the charge to income tax (“the transferor”)
makes a transfer to another person (“the transferee”) of a
right to relevant receipts (see subsection (2)), and
10
(b)
(subject to subsection (3)) the transfer of the right is not a
consequence of the transfer to the transferee of an asset from
which the right to relevant receipts arises.
(2)
“Relevant receipts” means any income—
(a)
which (but for the transfer) would be charged to income tax
15
as income of the transferor, or
(b)
which (but for the transfer) would be brought into account in
calculating profits of the transferor for the purposes of
income tax.
(3)
Despite paragraph (b) of subsection (1), this Chapter applies if the
20
transfer of the right is a consequence of the transfer to the transferee
of all rights under an agreement for annual payments; and for the
purposes of that paragraph the transfer of an asset under a sale and
repurchase agreement is not to be regarded as a transfer of the asset.
(4)
Section 809AZB makes provision as to the consequences of this
25
Chapter applying.
(5)
For exclusions from this Chapter, see—
(a)
section 809AZC (amount otherwise taxed), and
(b)
section 809AZD (transfer by way of security).
(6)
Section 809AZE makes special provision about transfers of
30
partnership shares.
(7)
Section 809AZF contains supplementary provisions.
809AZB
Value of transferred income stream treated as income
(1)
The relevant amount (see subsection (2)) is to be treated as income of
the transferor chargeable to income tax in the same way and to the
35
same extent as that in which the relevant receipts—
(a)
would have been chargeable to income tax, or
(b)
would have been brought into account in calculating any
profits for the purposes of income tax,

but for the transfer of the right to relevant receipts.
40
(2)
The relevant amount is—

Finance Bill
Schedule 25 — Transfers of income streams
Part 2 — Non-corporate transferors
247

(a)
(except where paragraph (b) applies) the amount of the
consideration for the transfer of the right, or
(b)
where the amount of any such consideration is substantially
less than the market value of the right at the time when the
transfer takes place (or where there is no consideration for the
5
transfer of the right), the market value of the right at that
time.
(3)
The income under subsection (1) is to be treated as arising in the
chargeable period of the transferor in which the transfer takes place.
(4)
But subsection (5) applies if (apart from the transfer) any of the
10
relevant receipts—
(a)
would have been brought into account in accordance with
Part 2 or 3 of ITTOIA 2005 (trading income and property
income) in calculating any profits for the purposes of income
tax, and
15
(b)
in accordance with generally accepted accounting practice,
would have been recognised otherwise than wholly in the
chargeable period in which the transfer takes place.
(5)
If this subsection applies, the income under subsection (1) is to be
treated as arising—
20
(a)
to the extent that it does not exceed the amount of the
consideration for the transfer of the right, in the chargeable
period or periods for which, in accordance with generally
accepted accounting practice, the consideration for the
transfer is recognised for accounting purposes in a profit and
25
loss account or income statement of the transferor, and
(b)
otherwise, in the chargeable period or periods for which, in
accordance with generally accepted accounting practice, the
consideration for the transfer would be so recognised if it
were of an amount equal to the market value of the right at
30
the time when the transfer takes place.
(6)
But if in a case where the transferor is a company it at any time
becomes reasonable to assume that the income (to any extent) is not,
or would not be, treated by subsection (5) as arising in an accounting
period of the transferor, the income is to that extent to be treated as
35
arising immediately before that time.
809AZC
Exception: amount otherwise taxed
This Chapter does not apply if and to the extent that the income
under section 809AZB(1) is (apart from this Chapter)—
(a)
charged to tax as income of the transferor,
40
(b)
brought into account in calculating the profits of the
transferor, or
(c)
brought into account under CAA 2001.
809AZD
Exception: transfer by way of security
This Chapter does not apply if the consideration for the transfer is
45
the advance under an arrangement that is a structured finance
arrangement for the purposes of section 774A or 774C of ICTA in

Finance Bill
Schedule 25 — Transfers of income streams
Part 3 — Company transferees
248

relation to the transferor or a partnership in which the transferor is a
partner.
809AZE
Partnership shares
(1)
For the purposes of this Chapter a transfer of a right to relevant
receipts consisting of the reduction in a transferor’s share in the
5
profits or losses of a partnership is to be regarded as a consequence
of a transfer of an asset from which the right arose (that is, the
partnership property) if condition A or B is met.
(2)
Condition A is that there is a reduction of the transferor’s share in the
partnership property and the reduction in the transferor’s share in
10
the profits or losses is proportionate to that reduction.
(3)
Condition B is that it is not the main purpose, or one of the main
purposes, of the transfer to secure that the relevant receipts are not
charged to income tax or corporation tax as income of any partner or
brought into account as income of any partner for the purpose of
15
either of those taxes.
809AZF
Interpretation
(1)
For the purposes of this Chapter—
(a)
the grant or surrender of a lease of land is to be regarded as a
transfer of the land, and
20
(b)
the disposal of an interest in an oil licence (within the
meaning of section 809 of CTA 2009) is to be regarded as a
transfer of the oil licence.
(2)
The Treasury may by order make other provision for securing that
other transactions are to be regarded as transfers of assets for those
25
purposes.
(3)
In this Chapter—
(a)
references to a transfer include sale, exchange, gift and
assignment (or assignation) and any other arrangement
which equates in substance to a transfer, and
30
(b)
references to a transfer taking place are, in the case of an
arrangement other than a sale, exchange, gift or assignment
(or assignation), to the making of the arrangement.
(4)
A transfer to or by any partnership of which the transferor or
transferee is a member, and a transfer to the trustees of any trust of
35
which the transferor is a beneficiary, counts as a transfer in relation
to which this Chapter applies.”
Part 3
Company transferees
8     (1)
Part 6 of CTA 2009 (relationships treated as loan relationships etc) is
40
amended as follows.
      (2)
In section 477(2) (overview of Part 6), after paragraph (aa) (inserted by
Schedule 24) insert—
“(ab)
Chapter 2B (transferred income streams),”.

Finance Bill
Schedule 25 — Transfers of income streams
Part 4 — Consequential amendments and repeals
249

      (3)
After Chapter 2A (inserted by Schedule 24) insert—
“Chapter 2B
Transferred income streams
486F
Introduction to Chapter
(1)
This Chapter provides for Part 5 to apply in relation to a company to
5
which an income stream transfer is made (“the transferee”).
(2)
An “income stream transfer” is a transfer by a person (“the
transferor”) to which either of the following provisions applies—
(a)
Part 1 of Schedule 25 to FA 2009 (transfers of income streams
by companies), or
10
(b)
Chapter 5A of Part 13 of ITA 2007 (transfers of income
streams by individuals).
486G
Consideration to be treated as loan relationship
(1)
For the purposes of this Part—
(a)
the consideration for the transfer of the right to relevant
15
receipts is to be treated as a money debt which is owed to the
transferee by the person by whom the relevant receipts fall to
be paid, and
(b)
the transfer is to be treated as a transaction for the lending of
money from which that debt is treated as arising.
20
(2)
For the meaning of “relevant receipts” see paragraph 1(2) of Schedule
25 to FA 2009 or section 809AZA(2) of ITA 2007.”
Part 4
Consequential amendments and repeals
9     (1)
In ICTA, omit—
25
(a)
section 730 (transfers of rights to receive distributions in respect of
shares),
(b)
section 775A (transfers of rights to receive annual payments),
(c)
section 785A (rent factoring of leases of plant or machinery), and
(d)
in section 786 (transactions associated with loans or credit)—
30
(i)
in subsection (5), “assigns,”, “(without a sale or transfer of the
property)” and “assigned,”,
(ii)
in subsection (5ZA), “assigned,”, and
(iii)
in subsection (5A), “assigned,”.
      (2)
In ITTOIA 2005, omit—
35
(a)
in Chapter 11 of Part 4 (transactions in deposits)—
(i)
in section 551(2), the words after “of it”, and
(ii)
in section 552(1), paragraph (e) and the word “and” before it,
and
(b)
Chapter 13 of Part 4 (sales of foreign dividend coupons).
40
      (3)
Omit the following provisions (which relate to the provisions repealed by
sub-paragraphs (1) and (2))—