House of Commons Amendments

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Public Bill Committee: 9 June 2009
76

Finance Bill, continued

“regulated insurer” means a member of the worldwide group that—

(a)
is authorised under the law of any territory to carry on insurance

business, or

(b)
is a member of a body or organisation that is so authorised.

Relevant dealing in financial instruments

6E  (1)
In this Part “financial instrument” means anything that is a financial instrument

for any purpose of the FSA Handbook.

      (2)
For the purposes of this Part, a dealing in a financial instrument is a “relevant

dealing” if—

(a)
it is a dealing other than in the capacity of a broker, and

(b)
profits or losses on the dealing form part of the trading profits or losses

of a business.

      (3)
In this paragraph “broker” includes any person offering to sell securities to, or

purchase securities from, members of the public generally.

UK trading income of the worldwide group

6F  (1)
This paragraph applies in relation to paragraph 6A for calculating the UK

trading income of the worldwide group for a period of account.

      (2)
The trading income for that period of a relevant group company is the

aggregate of—

(a)
the gross income calculated in accordance with sub-paragraph (3), and

(b)
the net income calculated in accordance with sub-paragraph (4).

      (3)
The income referred to in sub-paragraph (2)(a) is the gross income—

(a)
arising from the activities of the relevant group company (other than

net-basis activities), and

(b)
accounted for as such under generally accepted accounting practice,


without taking account of any deductions (whether for expenses or otherwise).

      (4)
The income referred to in sub-paragraph (2)(b) is the net income arising from

the net-basis activities of the relevant group company that—

(a)
is accounted for as such under generally accepted accounting practice,

or

(b)
would be accounted for as such if income arising from such activities

were accounted for under generally accepted accounting practice.

      (5)
Sub-paragraphs (3) and (4) are subject to sub-paragraph (6).

      (6)
In a case where a proportion of an accounting period of a relevant group

company does not fall within the period of account of the worldwide group, the

gross income or net income for that accounting period of the company is to be

reduced, for the purposes of this paragraph, by that proportion.

      (7)
Gross income or net income is to be disregarded for the purposes of sub-

paragraph (2) if the income arises in respect of an amount payable by another

member of the worldwide group that is either a UK group company or a

relevant group company.

      (8)
In this paragraph “net-basis activity” means activity that is normally reported

on a net basis in financial statements prepared in accordance with generally

accepted accounting practice.

Worldwide trading income of the worldwide group

6G  (1)
This paragraph applies in relation to paragraph 6A for calculating the

worldwide trading income of the worldwide group for a period of account.

Public Bill Committee: 9 June 2009
77

Finance Bill, continued

      (2)
The trading income for that period of the worldwide group is the aggregate

of—

(a)
the gross income calculated in accordance with sub-paragraph (3), and

(b)
the net income calculated in accordance with sub-paragraph (4).

      (3)
The income referred to in sub-paragraph (2)(a) the gross income—

(a)
arising from the activities of worldwide group (other than net-basis

activities), and

(b)
disclosed as such in the financial statements of the worldwide group,


without taking account of any deductions (whether for expenses or otherwise).

      (4)
The income referred to in sub-paragraph (2)(b) is the net income arising from

the net-basis activities of the worldwide group that—

(a)
is accounted for as such under international accounting standards, or

(b)
would be accounted for as such if income arising from such activities

were accounted for under international accounting standards.

      (5)
In this paragraph “net-basis activity” means activity that is normally reported

on a net basis in financial statements prepared in accordance with international

accounting standards.

      (6)
For provision about references in this Schedule to financial statements of the

worldwide group, and amounts disclosed in financial statements, see

paragraphs 69 to 72.’.

Mr Stephen Timms

111

Schedule  15,  page  152,  line  39,  after first ‘currency’ insert ‘(“the relevant foreign

currency”)’.

Mr Stephen Timms

112

Schedule  15,  page  152,  line  40,  after ‘applies’ insert ‘—

(a)
’.

Mr Stephen Timms

113

Schedule  15,  page  152,  line  42,  leave out from ‘the’ to end of line 43 and insert

‘relevant foreign currency, and—

(b)
for the purposes of determining under paragraph 3 the net debt amount

of a company, the reference in sub-paragraph (3) of that paragraph to

£3 million is to be read as a reference to the relevant amount.

      (4)
For this purpose “the relevant amount” means the average of—

(a)
£3 million expressed in the relevant foreign currency, translated by

reference to the spot rate of exchange for the company’s start date, and

(b)
£3 million expressed in the relevant foreign currency, translated by

reference to the spot rate of exchange for the company’s end date.’.

Mr Stephen Timms

114

Schedule  15,  page  161,  leave out line 9 and insert—

‘(b)
the lower of—

(i)
the total disallowed amount, and

(ii)
the tested income amount.’.

Public Bill Committee: 9 June 2009
78

Finance Bill, continued

Mr Stephen Timms

115

Schedule  15,  page  161,  line  38,  at end insert—

‘Balancing payments between group companies: no charge to, or relief from, tax

31A(1)
This paragraph applies where—

(a)
one or more financing income amounts of a company (“company A”)

for the relevant period of account are—

(i)
by virtue of paragraph 27, not brought into account, or

(ii)
by virtue of paragraph 30, reduced,

(b)
one or more financing expense amounts of another company

(“company B”) for the relevant period of account are—

(i)
by virtue of paragraph 15, not brought into account, or

(ii)
by virtue of paragraph 18, reduced,

(c)
company A makes one or more payments (“the balancing payments”)

to company B, and

(d)
the sole or main reason for making the balancing payments is that the

conditions in paragraphs (a) and (b) are met.

      (2)
To the extent that the sum of the balancing payments does not exceed the

amount specified in sub-paragraph (3), those payments—

(a)
are not to be taken into account in computing profits or losses of either

company A or company B for the purposes of corporation tax, and

(b)
are not to be regarded as distributions for any of the purposes of the

Corporation Tax Acts.

      (3)
The amount referred to in sub-paragraph (2) is the lower of—

(a)
the sum of the financing income amounts mentioned in sub-paragraph

(1)(a), and

(b)
the sum of the financing expense amounts mentioned in sub-paragraph

(1)(b).’.

Mr Stephen Timms

116

Schedule  15,  page  165,  line  18,  at end insert—

‘Part 5A

Anti-avoidance

Schemes involving manipulation of rules in Part 2

38A(1)
A period of account of the worldwide group that, apart from this paragraph, is

not within paragraph 2(1) is treated as within that provision if conditions A to

C are met.

      (2)
Condition A is that—

(a)
at any time before the end of the period, a scheme is entered into, and

(b)
if the scheme had not been entered into, the period would have been

within paragraph 2(1).

      (3)
Condition B is that the main purpose, or one of the main purposes, of any party

to the scheme on entering into the scheme is to secure that the period is not

within paragraph 2(1).

      (4)
Condition C is that the scheme is not an excluded scheme.

Public Bill Committee: 9 June 2009
79

Finance Bill, continued

Schemes involving manipulation of rules in Parts 3 and 4

38B(1)
Where conditions A to C are met in relation to a period of account of the

worldwide group (“the relevant period of account”), the tested expense

amount, the tested income amount and the available amount for the period are

to be calculated in accordance with paragraph 38D.

      (2)
Condition A is that—

(a)
at any time before the end of the relevant period of account, a scheme

is entered into, and

(b)
the main purpose, or one of the main purposes, of any party to the

scheme on entering into it is to secure that the amount of the relevant

net deduction (within the meaning given by paragraph 38C) is lower

than it would be if that amount were calculated in accordance with

paragraph 38D.

      (3)
Condition B is that a result of the scheme is that—

(a)
the sum of the profits of UK group companies that arise in relevant

accounting periods and that are chargeable to corporation tax is less

than it would be if that sum were determined in accordance with

paragraph 38D, or

(b)
the sum of the losses of UK group companies that arise in relevant

accounting periods (other than any taken into account in calculating

profits within paragraph (a)) and that are capable of being a carried-

back amount or a carried-forward amount is higher than it would be if

that sum were determined in accordance with paragraph 38D.

      (4)
Condition C is that the scheme is not an excluded scheme.

      (5)
In a case where—

(a)
a profit or loss arises in an accounting period of a UK group company,

and

(b)
a proportion of that period does not fall within the relevant period of

account,


the profit or loss is to be reduced, for the purposes of condition B, by the same

proportion.

Meaning of “relevant net deduction”

38C(1)
In paragraph 38B(2) the “relevant net deduction” means—

(a)
the amount by which the total disallowed amount exceeds the tested

income amount, or

(b)
if the total disallowed amount does not exceed the tested income

amount, nil.

      (2)
In this paragraph the “total disallowed amount” means—

(a)
the amount by which the tested expense amount exceeds the available

amount, or

(b)
if the tested expense amount does not exceed the available amount, nil.

Calculation of amounts

38D(1)
References in paragraph 38B to the calculation of any amount or sum in

accordance with this paragraph are to the calculation of that amount or sum on

the following assumptions.

      (2)
The assumptions are that—

(a)
the scheme in question was not entered into, and

Public Bill Committee: 9 June 2009
80

Finance Bill, continued

(b)
instead, anything that it is more likely than not would have been done

or not done had this Schedule not had effect in relation to the relevant

period of account, was done or not done.

Meaning of “carried-back amount” and “carried-forward amount”

38E(1)
In paragraph 38B “carried-back amount” means—

(a)
an amount carried back under section 393A(1)(b) of ICTA (trading

losses),

(b)
an amount carried back by virtue of a claim under section 459(1)(b) of

CTA 2009 (non-trading deficits from loan relationships), or

(c)
an amount carried back under section 389(2) of CTA 2009 (deficits of

insurance companies).

      (2)
In paragraph 38B “carried-forward amount” means—

(a)
an amount carried forward under section 76(12) or (13) of ICTA

(certain expenses of insurance companies),

(b)
an amount carried forward under section 392A(2) or (3) of ICTA (UK

property business losses),

(c)
an amount carried forward under section 392B(1)(b) of ICTA

(overseas property business losses),

(d)
an amount carried forward under section 393(1) of ICTA (trading

losses),

(e)
an amount carried forward under section 396(1) of ICTA (losses from

miscellaneous transactions),

(f)
an amount carried forward under section 436A(4) of ICTA (insurance

companies: losses from gross roll-up business),

(g)
an amount carried forward under section 8(1)(b) of TCGA 1992

(allowable losses),

(h)
an amount carried forward under section 391(2) of CTA 2009 (deficits

of insurance companies),

(i)
an amount carried forward under section 457(3) of CTA 2009 (non-

trading deficits from loan relationships),

(j)
an amount carried forward under section 753(3) of CTA 2009 (non-

trading loss on intangible fixed assets),

(k)
an amount carried forward under section 925(3) of CTA 2009 (patent

income: relief for expenses), or

(l)
an amount carried forward under section 1223 of CTA 2009 (expenses

of management and other amounts).

Schemes involving manipulation of rules in Part 5

38F(1)
This paragraph applies to a financing income amount of a company received

during a period of account of the worldwide group if—

(a)
apart from this paragraph, the financing income amount would, by

virtue of paragraph 32, not be brought into account for the purposes of

corporation tax, and

(b)
conditions A to C are met.

      (2)
Condition A is that, at any time before the financing income amount is

received, a scheme is entered into that secures that any of the conditions in sub-

paragraphs (2) to (4) of paragraph 32 (“the relevant paragraph 32 condition”)

is met in relation to the amount.

Public Bill Committee: 9 June 2009
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Finance Bill, continued

      (3)
Condition B is that the purpose, or one of the main purposes, of any party to

the scheme on entering into the scheme is to secure that the relevant paragraph

32 condition is met.

      (4)
Condition C is that the scheme is not an excluded scheme.

      (5)
Where this paragraph applies to a financing income amount, the relevant

paragraph 32 condition is treated as not met in relation to the amount.

      (6)
Paragraph 38 (meaning of references to a “financing income amount” of a

company) applies for the purposes of this paragraph.

Meaning of “scheme” and “excluded scheme”

38G(1)
For the purposes of this Part “scheme” includes any scheme, arrangements or

understanding of any kind whatever, whether or not legally enforceable,

involving a single transaction or two or more transactions.

      (2)
For the purposes of this Part a scheme is “excluded” if it is of a description

specified in regulations made by the Commissioners.

      (3)
Regulations under sub-paragraph (2) may make different provision for

different purposes.’.

Mr Stephen Timms

117

Schedule  15,  page  167,  line  11,  leave out ‘is’ and insert ‘, and all other amounts

that are relevant amounts in respect of the group treasury company and the relevant

period, are’.

Mr Stephen Timms

118

Schedule  15,  page  167,  line  13,  leave out ‘this purpose’ and insert ‘the purposes of

this paragraph in respect of the relevant period’.

Mr Stephen Timms

119

Schedule  15,  page  167,  line  15,  at end insert—

  ‘(3A)
If two or more members of the worldwide group are group treasury companies

in the relevant period, an election under this paragraph made by any of them is

not valid unless each of them makes such an election in respect of the relevant

period before the end of the 3 year period mentioned in sub-paragraph (3).’.

Mr Stephen Timms

120

Schedule  15,  page  167,  line  25,  leave out ‘not UK companies’ and insert ‘neither

UK group companies nor relevant group companies’.

Mr Stephen Timms

121

Schedule  15,  page  167,  line  28,  leave out ‘that are UK companies’ and insert ‘each

of which is either a UK group company or a relevant group company’.

Mr Stephen Timms

122

Schedule  15,  page  167,  line  38,  leave out ‘and’ and insert—

‘(ca)
subscribing for or holding shares in another company which is a UK

group company and a group treasury company,

Public Bill Committee: 9 June 2009
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Finance Bill, continued

(cb)
investing in debt securities, and’.

Mr Stephen Timms

123

Schedule  15,  page  168,  line  6,  at end insert—

‘“debt security” has the same meaning as in the FSA Handbook.’.

Mr Stephen Timms

124

Schedule  15,  page  168,  line  13,  at end insert—

‘Real estate investment trusts

42A(1)
This paragraph applies where, apart from this paragraph, an amount (“the

relevant amount”) is—

(a)
a financing expense amount of a company by virtue of meeting

condition A in paragraph 39, or

(b)
a financing income amount of a company by virtue of meeting

condition A in paragraph 40.

      (2)
The relevant amount is treated as not being a financing expense amount or a

financing income amount of the company if the finance arrangement is one to

which section 211 of CTA 2009 does not apply by virtue of section 120(3)(a)

of FA 2006.’.

Mr Mark Hoban

Mr David Gauke

Mr Greg Hands

52

Schedule  15,  page  168,  line  18,  after ‘A’, insert ‘or condition B’.

Mr Mark Hoban

Mr David Gauke

Mr Greg Hands

53

Schedule  15,  page  168,  line  20,  after ‘A’, insert ‘or condition B’.

Mr Stephen Timms

125

Schedule  15,  page  170,  line  3,  at end insert—

    ‘(7)
The Commissioners may by regulations make provision (including provision

conferring a discretion on the Commissioners) about circumstances in which

regulations under sub-paragraph (4) are not to apply in relation to the finance

arrangements.’.

Mr Mark Hoban

Mr David Gauke

Mr Greg Hands

54

Schedule  15,  page  170,  line  19,  leave out ‘from the finance arrangement’.

Mr Stephen Timms

127

Schedule  15,  page  171,  line  10,  leave out ‘an investment company (within the