Finance Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
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30
Tax relief for business expenditure on cars and motor cycles
Schedule 11 contains provision about tax relief for business expenditure on
cars and motor cycles.
31
Reallocation of chargeable gain or loss within a group
Schedule 12 contains provision about the reallocation of chargeable gains and
5
allowable losses between companies that are members of a group.
32
Stock lending: chargeable gains in event of insolvency etc of borrower
Schedule 13 contains provision amending TCGA 1992 in respect of stock
lending arrangements in the event of the insolvency of the borrower.
33
FSCS payments representing interest
10
(1)
Chapter 2 of Part 4 of ITTOIA 2005 (interest) is amended as follows.
(2)
In section 369(2) (list of provisions extending what is treated as interest for
certain purposes), after “bonds),” insert—
“section 380A (FSCS payments representing interest),”.
(3)
After section 380 insert—
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“380A
FSCS payments representing interest
(1)
Any payment representing interest which is made under the FSCS is
treated as interest for the purposes of this Act.
(2)
“Payment representing interest” means a payment calculated in the
same way as interest which would have been paid to the recipient but
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for the circumstances giving rise to the making of payments under the
FSCS.
(3)
Where a payment representing interest is made net of an amount equal
to a sum representing income tax that would have been deducted on
the payment of interest, the amount treated as interest by this section is
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the aggregate of the payment representing interest and that sum.
(4)
This section applies to payments made under the FSCS whether or not
they are made (in whole or in part) on behalf of the Treasury or any
other person.
(5)
In this section “the FSCS” means the Financial Services Compensation
30
Scheme (established under Part 15 of the Financial Services and
Markets Act 2000).”
(4)
In ITA 2007, after section 979 insert—
“979A
FSCS payments representing interest
(1)
This section applies where a payment is made under the FSCS
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representing interest net of an amount equal to a sum representing
income tax that would have been deducted on the payment of interest
but for the circumstances giving rise to the making of payments under
the FSCS.

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
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(2)
A payment of the relevant gross amount is treated as having been made
under the FSCS after there has been deducted from it a sum
representing income tax of that amount.
(3)
That sum is accordingly taken into account under section 59B of TMA
1970 in determining the income tax payable by, or repayable to, the
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recipient.
(4)
“The relevant gross amount” means the aggregate of the amount of the
payment representing interest which is made and that sum.
(5)
If the recipient requests it in writing, the scheme manager of the FSCS
must provide the recipient with a statement showing—
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(a)
the relevant gross amount,
(b)
the amount of the sum treated as deducted, and
(c)
the amount of the payment representing interest.
(6)
The duty to comply with a request under subsection (5) is enforceable
by the recipient.
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(7)
In this section—
“the FSCS” means the Financial Services Compensation Scheme
(established under Part 15 of the Financial Services and Markets
Act 2000);
“payment representing interest” has the same meaning as in
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section 380A of ITTOIA 2005.”
(5)
The amendments made by this section have effect in relation to payments
made on or after 6 October 2008.
Foreign profits etc
34
Corporation tax treatment of company distributions received
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Schedule 14 contains provision about the treatment for the purposes of
corporation tax of dividends and other distributions.
35
Tax treatment of financing costs and income
Schedule 15 contains provision about the treatment for the purposes of
corporation tax of certain financing costs and certain financing income of
30
companies that are members of a group.
36
Controlled foreign companies
Schedule 16 contains provision about controlled foreign companies.
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International movement of capital
Schedule 17 contains provision—
35
(a)
removing the existing requirements in relation to the international
movement of capital in sections 765 to 767 of ICTA, and
(b)
imposing new reporting requirements on certain bodies corporate in
relation to the international movement of capital.

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
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38
Corporation tax: foreign currency accounting
Schedule 18 contains provision about foreign currency accounting.
39
Certain distributions of offshore funds taxed as interest
(1)
Chapter 2 of Part 4 of ITTOIA 2005 (interest) is amended as follows.
(2)
In section 369(2) (list of provisions extending what is treated as interest for
5
certain purposes), after the entry relating to section 376 insert—
“section 378A (offshore fund distributions),”.
(3)
After section 378 insert—
“378A
Offshore fund distributions
(1)
This section applies where—
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(a)
a dividend is paid by an offshore fund, and
(b)
the offshore fund fails to meet the qualifying investments test at
any time in the relevant period.
(2)
The dividend is treated as interest for income tax purposes.
(3)
For the purposes of this section, an offshore fund fails to meet the
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qualifying investments test if the market value of the fund’s qualifying
investments exceeds 60% of the market value of all of the assets of the
fund (excluding cash awaiting investment).
(4)
“The relevant period” means—
(a)
the relevant period of account of the offshore fund, or
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(b)
if longer, the period of 12 months ending on the last day of that
period.
(5)
“The relevant period of account” means—
(a)
the last period of account ending before the dividend is paid, in
a case in which the profits available for distribution at the end
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of that period (and not used since then by distribution or
otherwise) equal or exceed the amount of the dividend
(aggregated with any other distribution made by the offshore
fund at the same time), and
(b)
the period of account in which the dividend is paid, in any other
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case.
(6)
This section applies to a manufactured overseas dividend if, and only
if, it is representative of a distribution to which this section would
apply.
(7)
In this section—
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“dividend” includes any distribution that (but for this section)
would be treated as a dividend for income tax purposes;
“manufactured overseas dividend” has the same meaning as in
Chapter 2 of Part 11 of ITA 2007 (manufactured payments);
“offshore fund” has the same meaning as in Chapter 5 of Part 17 of
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ICTA (see sections 756A to 756C of that Act);
“qualifying investments” has the meaning given in section 494 of
CTA 2009.”

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Part 2 — Income tax, corporation tax and capital gains tax
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(4)
Accordingly, in section 367 of ITTOIA 2005 (priority between Chapters within
Part 4), in subsection (3)—
(a)
in paragraph (a), after “dividends)” insert “, 378A (offshore fund
distributions)”, and
(b)
in paragraph (b), insert at the end “or Chapter 4 (or both)”.
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(5)
The amendments made by this section have effect in relation to—
(a)
distributions arising on or after 22 April 2009, and
(b)
manufactured overseas dividends that are representative of a
distribution arising on or after that date.
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Income tax credits for foreign distributions
10
Schedule 19 contains provision about income tax credits for foreign
distributions.
Loan relationships and derivatives
41
Loan relationships involving connected parties
Schedule 20 contains provision about loan relationships involving connected
15
parties.
42
Release of trade etc debts
(1)
CTA 2009 is amended as follows.
(2)
In section 353 (introduction to Chapter 6 of Part 5)—
(a)
omit subsection (3), and
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(b)
in subsection (6), after “loss”” insert “and “release debit””.
(3)
In section 476(1) (definitions for purposes of Parts 5 and 6), after the definition
of “profit sharing arrangements” insert—
““release debit”, in relation to a company, means a debit in respect
of a release by the company of a liability under a creditor
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relationship of the company,”.
(4)
Section 479 (relevant non-lending relationships not involving discounts) is
amended as follows.
(5)
In subsection (2)—
(a)
omit the “and” at the end of paragraph (b),
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(b)
in paragraph (c), after “loss)” insert “or release debit”, and
(c)
insert at the end “, and
(d)
a debt in relation to which a relevant deduction has been
allowed to the company and which is released.”
(6)
In subsection (3), for “(2)” substitute “(2)(c)”.
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(7)
After that subsection insert—
“(3A)
In subsection (2)(d) “relevant deduction” means a deduction allowed in
calculating the profits of a trade, UK property business or overseas
property business.”

Finance Bill
Part 2 — Income tax, corporation tax and capital gains tax
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(8)
Section 481 (application of Part 5 to relevant non-lending relationships) is
amended as follows
(9)
In subsection (3)—
(a)
in paragraph (d), after “loss” insert “or release debit” and for
“impairment, and” substitute “impairment or release,”, and
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(b)
insert at the end “and
(f)
in the case of a debt in relation to which a relevant
deduction has been allowed to the company and which
is released, the release.”
(10)
In subsection (4), for “(3)” substitute “(3)(d) and (e)”.
10
(11)
After that subsection insert—
“(4A)
In subsection (3)(f) “relevant deduction” has the meaning given in
section 479(3A).”
(12)
The amendments made by this section are treated as having come into force on
22 April 2009.
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43
Foreign exchange matching: anti-avoidance
Schedule 21 contains anti-avoidance provisions relating to exchange gains and
losses arising from loan relationships and derivative contracts.
Collective investment
44
Tax treatment of participants in offshore funds
20
In Schedule 22—
Part 1 contains provision defining what is meant by an offshore fund for
the purposes of section 41 of FA 2008 (tax treatment of participants in
offshore funds), and
Part 2 contains provision about the treatment of participants in certain
25
offshore funds under TCGA 1992.
45
Power to enable dividends of investment trusts to be taxed as interest
(1)
The Treasury may by regulations make provision for and in connection with—
(a)
the designation by a company that is an investment trust or a
prospective investment trust of dividends made by the company, and
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(b)
the treatment of a designated dividend for the purposes of the Tax Acts,
in specified circumstances and in the case of specified persons—
(i)
as a payment of yearly interest, or
(ii)
as interest under a loan relationship.
(2)
Regulations under this section may, in particular, make provision—
35
(a)
about the circumstances in which a dividend may, or may not, be
designated,
(b)
about limits on the amounts that may be designated or treated as a
payment of yearly interest or as interest under a loan relationship,

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Part 2 — Income tax, corporation tax and capital gains tax
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(c)
disapplying the duty under section 874 of ITA 2007 (deduction of sums
representing income tax from payments of yearly interest) in specified
circumstances,
(d)
about the preparation of accounts and the keeping of records by
investment trusts and prospective investment trusts, and
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(e)
about the provision by investment trusts and prospective investment
trusts of information, whether to recipients of designated dividends or
to other persons, including provision imposing a penalty not exceeding
£3,000.
(3)
Regulations under this section may, in particular—
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(a)
make provision applying enactments and instruments (with or without
modification),
(b)
make different provision for different cases or different purposes, and
(c)
make incidental, consequential, supplementary or transitional
provision.
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(4)
Regulations under this section are to be made by statutory instrument.
(5)
A statutory instrument containing regulations under this section is subject to
annulment in pursuance of a resolution of the House of Commons.
(6)
In this section—
“company” has the same meaning as in section 842 of ICTA (investment
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trusts);
“investment trust” means an investment trust within the meaning of
section 842(1) of ICTA;
“loan relationship” has the same meaning as in the Corporation Tax Acts
(see section 302(1) and (2) of CTA 2009);
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“prospective investment trust” means a company that—
(a)
intends to seek approval under section 842 of ICTA (investment
trusts), and
(b)
has a reasonable belief that such approval will be obtained;
“specified” means specified in regulations under this section.
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Insurance etc
46
Insurance companies
Schedule 23 contains provisions relating to insurance companies.
47
Equalisation reserves for Lloyd’s corporate and partnership members
(1)
The Treasury may by regulations provide for section 444BA of ICTA
35
(equalisation reserves) to have effect, in such cases and subject to such
modifications as may be specified in the regulations, in relation to equivalent
Lloyd’s reserves as it has effect in relation to equalisation reserves maintained
by virtue of equalisation reserves rules.
(2)
For this purpose a reserve is an equivalent Lloyd’s reserve if it is maintained
40
by a corporate or partnership member for purposes, or in a manner, such as to
make it equivalent to an equalisation reserve maintained by virtue of
equalisation reserves rules.

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(3)
The regulations may include—
(a)
provision having effect in relation to periods before they are made, and
(b)
supplementary, incidental, consequential and transitional provision.
(4)
In this section—
“corporate member” means a body corporate which is a member of
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Lloyd’s;
“equalisation reserves rules” has the same meaning as in section 444BA of
ICTA (see subsection (11) of that section);
“member” means underwriting member;
“partnership member” means a limited partnership formed under the law
10
of Scotland, or a limited liability partnership formed under the law of
any part of the United Kingdom, which is a member of Lloyd’s.
Simplification
48
Disguised interest
Schedule 24 contains provision about the corporation tax treatment of
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disguised interest.
49
Transfer of income streams
Schedule 25 contains provision about transfers of income streams.
50
SAYE schemes
(1)
Schedule 26 contains provision amending Chapter 4 of Part 6 of ITTOIA 2005
20
(SAYE interest).
(2)
The amendments made by that Schedule are treated as having come into force
on 29 April 2009.
Residence and domicile
51
Remittance basis
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Schedule 27 contains amendments about the remittance basis.
52
Exemption for certain non-domiciled persons
(1)
In Part 14 of ITA 2007 (income tax: miscellaneous rules), after Chapter 1
insert—
“Chapter 1A
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Exemption for persons not domiciled in United Kingdom
828A
Introduction
This Chapter provides for an exemption from liability to income tax for
an individual for a tax year if—