Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 30 — Financial arrangements avoidance
263

      (5)
In subsection (7), for “Section 419 supplements” substitute “Sections 418A
and 419 supplement”.
      (6)
In the heading, for “treated differently by connected debtor and creditor”
substitute “involving connected debtor and creditor where debits exceed
credits”.
5
      (7)
After section 418 insert—
“418A
Cases involving host contract
(1)
This section applies where the debtor or the creditor, in accordance
with generally accepted accounting practice, treats the rights and
liabilities under the loan relationship as divided between—
10
(a)
rights and liabilities under a loan relationship (“the host
contract”), and
(b)
rights and liabilities under one or more derivative financial
instruments or equity instruments.
(2)
Where the debtor, in accordance with generally accepted accounting
15
practice, treats the rights and liabilities under the loan relationship as
so divided, section 418 has effect as if the reference to the loan
relationship in subsection (3)(a) were to the host contract.
(3)
Where the creditor, in accordance with generally accepted
accounting practice, treats the rights and liabilities under the loan
20
relationship as so divided, section 418 has effect as if the reference to
the loan relationship in subsection (3)(b) were to the host contract.
(4)
In this section “the debtor” and “the creditor” have the same meaning
as in section 418.”
      (8)
The amendments made by this paragraph have effect in relation to debits
25
and credits arising on or after 22 April 2009.
Credits and debits for manufactured interest
5     (1)
In section 540(3) of CTA 2009 (manufactured interest treated as interest
under loan relationship), insert at the end “and the credits and debits to be
brought into account in respect of manufactured interest for any period are
30
those that are recognised in determining the company’s profit or loss for the
period in accordance with generally accepted accounting practice (but
subject to the provisions of Part 5, including, in particular, section 307(3) and
to paragraph 7A of Schedule 23A to ICTA).”
      (2)
In section 97(2) of FA 1996 (equivalent provision for accounting periods
35
ending before 1 April 2009), insert at the end “and the credits and debits to
be brought into account in respect of manufactured interest for any period
are those that are recognised in determining the company’s profit or loss for
the period in accordance with generally accepted accounting practice (but
subject to the provisions of this Chapter (including, in particular, section
40
84(1)) and to paragraph 7A of Schedule 23A to the Taxes Act 1988).”
      (3)
The amendments made by this paragraph have effect in relation to
manufactured interest whenever paid, apart from payments treated under
section 737A(5) of ICTA as made before 27 January 2009.

Finance Bill
Schedule 31 — Sale of lessor companies etc: anti-avoidance
264

Schedule 31
Section 62

Sale of lessor companies etc: anti-avoidance
Introduction
1
Schedule 10 to FA 2006 (sale etc of lessor companies etc) is amended as
follows.
5
Paragraph 6
2
In paragraph 6(3) (meaning of “business of leasing plant or machinery”:
condition A), for “accounting value of the plant or machinery owned by the
relevant company on the relevant day” substitute “relevant plant or
machinery value”.
10
Paragraph 7
3     (1)
Paragraph 7 (provision for purposes of condition A) is amended as follows.
      (2)
For sub-paragraphs (2) and (3) substitute—
    “(2)
The relevant plant or machinery value is the aggregate of the
amounts in sub-paragraph (3), but subject to paragraph 7A.
15
      (3)
The amounts are—
(a)
the amounts (if any) which would be shown in respect of
plant or machinery in the appropriate balance sheet of the
relevant company drawn up as at the start of the relevant
day, and
20
(b)
the amounts (if any) which would be shown in the
appropriate balance sheet of the relevant company drawn
up as at the end of the relevant day in respect of relevant
transferred plant or machinery.
     (3A)
For the purposes of sub-paragraph (3)(b) plant or machinery is
25
“relevant transferred plant or machinery” if an amount in respect
of it would be shown in the appropriate balance sheet of an
associated company drawn up as at the start of the relevant day.”
      (3)
In sub-paragraph (4), for “this purpose” substitute “the purposes of this
paragraph”.
30
      (4)
In sub-paragraph (8)(a), omit “as at the start of the relevant day”.
      (5)
Insert at the end—
   “(10)
References in this Schedule to an associated company are to a
company which is an associated company of the relevant
company on the relevant day (as to which, see paragraph 9).”
35
Paragraph 7A
4
After paragraph 7 insert—
“7A   (1)
Where this paragraph applies in relation to any plant or
machinery—

Finance Bill
Schedule 31 — Sale of lessor companies etc: anti-avoidance
265

(a)
any amount included in the aggregate mentioned in
paragraph 7(2) in respect of the plant or machinery is to be
deducted from that aggregate, and
(b)
the market value of the plant or machinery as at the
relevant day is to be added to that aggregate (or, if that
5
aggregate is nil, is to constitute the relevant plant or
machinery value).
      (2)
This paragraph applies in relation to plant or machinery if
condition A or B is met.
      (3)
Condition A is that—
10
(a)
the plant or machinery falls within sub-paragraph (4) at
the start of the relevant day, or
(b)
the plant or machinery falls within that sub-paragraph at
the end of the relevant day, having been acquired by the
relevant company from an associated company on that
15
day.
      (4)
Plant or machinery falls within this sub-paragraph if the relevant
company—
(a)
is the lessee of the plant or machinery under a long funding
finance lease, or
20
(b)
is treated as the owner of the plant or machinery under
section 67 of CAA 2001 (hire purchase and similar
contracts).
      (5)
Condition B is that—
(a)
the relevant company is the lessee of the plant or
25
machinery under a long funding operating lease at the
start of the relevant day, or
(b)
the relevant company is the lessee of the plant or
machinery under such a lease at the end of the relevant day
and the plant or machinery was acquired by the relevant
30
company from an associated company on that day.”
Paragraph 17
5     (1)
Paragraph 17 (meaning of “PM” in paragraph 16) is amended as follows.
      (2)
In sub-paragraph (1)—
(a)
after “paragraph” insert “and paragraph 17A”, and
35
(b)
for paragraph (a) substitute—
“(a)
on the provision of which the company has not
incurred qualifying expenditure for the purposes
of Part 2 of CAA 2001,
(aa)
of which the company is the lessor under a long
40
funding lease, or”.
      (3)
For sub-paragraph (2) substitute—
    “(2)
For the purposes of paragraph 16 “PM” is the aggregate of the
amounts in sub-paragraph (2A), but subject to paragraph 17A.
     (2A)
The amounts are—
45

Finance Bill
Schedule 31 — Sale of lessor companies etc: anti-avoidance
266

(a)
the amounts (if any) which would be shown in respect of
plant or machinery in the appropriate balance sheet of the
relevant company drawn up as at the start of the relevant
day, and
(b)
the amounts (if any) which would be shown in the
5
appropriate balance sheet of the relevant company drawn
up as at the end of the relevant day in respect of relevant
transferred plant or machinery.
     (2B)
For the purposes of sub-paragraph (2)(b) plant or machinery is
“relevant transferred plant or machinery” if an amount in respect
10
of it would be shown in the appropriate balance sheet of an
associated company drawn up as at the start of the relevant day.”
      (4)
In sub-paragraph (3), for “this purpose” substitute “the purposes of this
paragraph”.
      (5)
In sub-paragraph (7)(a), omit “as at the start of the relevant day”.
15
Paragraph 17A
6
After paragraph 17 insert—
“17A  (1)
Where this paragraph applies in relation to any plant or
machinery—
(a)
any amount included in the aggregate mentioned in
20
paragraph 17(2) in respect of the plant or machinery is to
be deducted from that aggregate, and
(b)
the market value of the plant or machinery as at the
relevant day is to be added to that aggregate (or, if that
aggregate is nil, is to constitute PM).
25
      (2)
This paragraph applies in relation to plant or machinery if
condition A or B is met.
      (3)
Condition A is that—
(a)
the plant or machinery falls within sub-paragraph (4) at
the start of the relevant day, or
30
(b)
the plant or machinery falls within that sub-paragraph at
the end of the relevant day, having been acquired by the
relevant company from an associated company on that
day.
      (4)
Plant or machinery falls within this sub-paragraph if the relevant
35
company—
(a)
is the lessee of the plant or machinery under a long funding
finance lease, or
(b)
is treated as the owner of the plant or machinery under
section 67 of CAA 2001 (hire purchase and similar
40
contracts).
      (5)
Condition B is that—
(a)
the relevant company is the lessee of the plant or
machinery under a long funding operating lease at the
start of the relevant day, or
45

Finance Bill
Schedule 31 — Sale of lessor companies etc: anti-avoidance
267

(b)
the relevant company is the lessee of the plant or
machinery under such a lease at the end of the relevant day
and the plant or machinery was acquired by the relevant
company from an associated company on that day.”
Paragraph 22
5
7
In paragraph 22(2) (migration), for “owned by the company” substitute “in
respect of which an amount would be shown in a balance sheet of the
company drawn up immediately before the relevant day in accordance with
generally accepted accounting practice”.
Paragraph 40
10
8
Omit paragraph 40 (relationship of Schedule with section 228K of CAA
2001).
Paragraph 41
9
In paragraph 41 (definitions), after sub-paragraph (5) insert—
   “(5A)
“Long funding finance lease”, “long funding lease” and “long
15
funding operating lease” have the same meaning as in Part 2 of
CAA 2001 (see section 70YI of that Act).”
Paragraph 42
10
In paragraph 42 (index), in the table, after the entry relating to “fixture”
insert—
20

“long funding finance lease
paragraph 41

long funding lease
paragraph 41

long funding operating lease
paragraph 41”.

Consequential repeal
11
In FA 2007, in Schedule 6, omit paragraph 2(3).
25
Commencement
12
The amendments made by this Schedule have effect where the relevant day
is on or after 13 November 2008.