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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))—

 
 

 
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