|
| |
|
| |
“Financing expense amount” and “financing income amount” |
| |
The financing expense amounts of a company |
| |
54 (1) | References in this Schedule to a “financing expense amount” of a company |
| |
for a period of account of the worldwide group are to any amount that meets |
| 5 |
| |
(2) | Condition A is that the amount is a debit that— |
| |
(a) | would, apart from this Schedule, be brought into account in a |
| |
relevant accounting period of the company, |
| |
(b) | would be so brought into account in respect of a loan relationship— |
| 10 |
(i) | under Part 3 of CTA 2009 by virtue of section 297 of that Act |
| |
(loan relationships for purposes of trade), or |
| |
(ii) | under Part 5 of that Act (other loan relationships), and |
| |
(c) | is not an excluded debit. |
| |
(3) | A debit is “excluded” if it is in respect of— |
| 15 |
| |
| |
(c) | a related transaction. |
| |
(4) | Condition B is that the amount is an amount that would, apart from this |
| |
Schedule, be brought into account for the purposes of corporation tax in a |
| 20 |
relevant accounting period of the company in respect of the financing cost |
| |
implicit in payments made under finance leases. |
| |
(5) | Condition C is that the amount is an amount that would, apart from this |
| |
Schedule, be brought into account for the purposes of corporation tax in a |
| |
relevant accounting period of the company in respect of the financing cost |
| 25 |
payable on debt factoring, or any similar transaction. |
| |
| |
(a) | a debit or other amount would, apart from this Schedule, be brought |
| |
into account in an accounting period, and |
| |
(b) | a proportion of that period does not fall within the period of account |
| 30 |
| |
| the debit or other amount is to be reduced, for the purposes of this |
| |
paragraph, by the same proportion. |
| |
(7) | This paragraph is subject to paragraphs 57 to 68. |
| |
The financing income amounts of a company |
| 35 |
55 (1) | References in this Schedule (except in Part 5 and paragraph 52) to a |
| |
“financing income amount” of a company for a period of account of the |
| |
worldwide group are to any amount that meets condition A, B or C. |
| |
(2) | Condition A is that the amount is a credit that— |
| |
(a) | would, apart from this Schedule, be brought into account in a |
| 40 |
relevant accounting period of the company, |
| |
(b) | would be so brought into account in respect of a loan relationship— |
| |
|
| |
|
| |
|
(i) | under Part 3 of CTA 2009 by virtue of section 297 of that Act |
| |
(loan relationships for purposes of trade), or |
| |
(ii) | under Part 5 of that Act (other loan relationships), and |
| |
(c) | is not an excluded credit. |
| |
(3) | A credit is “excluded” if it is in respect of— |
| 5 |
(a) | the reversal of an impairment loss, |
| |
| |
(c) | a profit from a related transaction. |
| |
(4) | Condition B is that the amount is an amount that would, apart from this |
| |
Schedule, be brought into account for the purposes of corporation tax in a |
| 10 |
relevant accounting period of the company in respect of the financing |
| |
income implicit in amounts received under finance leases. |
| |
(5) | Condition C is that the amount is an amount that would, apart from this |
| |
Schedule, be brought into account for the purposes of corporation tax in a |
| |
relevant accounting period of the company in respect of the financing |
| 15 |
income receivable on debt factoring, or any similar transaction. |
| |
| |
(a) | a credit or other amount would, apart from this Schedule, be brought |
| |
into account in an accounting period, and |
| |
(b) | a proportion of that period does not fall within the period of account |
| 20 |
| |
| the credit or other amount is to be reduced, for the purposes of this |
| |
paragraph, by the same proportion. |
| |
(7) | This paragraph is subject to paragraphs 57 to 68. |
| |
Interpretation of paragraphs 54 and 55 |
| 25 |
56 | In paragraphs 54 and 55 the following expressions have the same meaning |
| |
as they have in Part 5 of the Corporation Tax Act 2009 (loan relationships)— |
| |
“exchange gain” and “exchange loss”; |
| |
| |
| 30 |
| |
| |
57 (1) | This paragraph applies where, apart from this paragraph, an amount (“the |
| |
| |
(a) | a financing expense amount of a group treasury company by virtue |
| 35 |
of meeting condition A, B or C in paragraph 54, or |
| |
(b) | a financing income amount of a group treasury company by virtue of |
| |
meeting condition A, B or C in paragraph 55. |
| |
(2) | The relevant amount, and all other amounts that are relevant amounts in |
| |
respect of the group treasury company and the relevant period, are treated |
| 40 |
as not being a financing expense amount or a financing income amount of |
| |
the group treasury company, but only if that company makes an election for |
| |
the purposes of this paragraph in respect of the relevant period. |
| |
|
| |
|
| |
|
(3) | An election under this paragraph must be made within 3 years after the end |
| |
| |
(4) | 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 |
| 5 |
respect of the relevant period before the end of the 3 year period mentioned |
| |
| |
(5) | A company is a group treasury company in the relevant period if the |
| |
following conditions are met. |
| |
(6) | The first condition is that the company is a member of the worldwide group. |
| 10 |
(7) | The second condition is that the company undertakes treasury activities for |
| |
the worldwide group in the relevant period (whether or not it also |
| |
undertakes other activities). |
| |
(8) | The third condition is that— |
| |
(a) | if the company is the only company to meet the first and second |
| 15 |
conditions in the relevant period, or the only other companies to |
| |
meet those conditions are not UK group companies, at least 90% of |
| |
the relevant income of the company for the relevant period is group |
| |
| |
(b) | if the company and one or more other companies each of which is a |
| 20 |
UK group company meet the first and second conditions in the |
| |
relevant period, at least 90% of the aggregate relevant income of |
| |
those companies for the relevant period is group treasury revenue. |
| |
(9) | For the purposes of this paragraph a company undertakes treasury activities |
| |
for the worldwide group in the relevant period if, in that period, it does one |
| 25 |
or more of the following things in relation to, or on behalf of, the worldwide |
| |
group or any of its members— |
| |
(a) | managing surplus deposits of money or overdrafts, |
| |
(b) | making or receiving deposits of money, |
| |
| 30 |
(d) | subscribing for or holding shares in another company which is a UK |
| |
group company and a group treasury company, |
| |
(e) | investing in debt securities, and |
| |
(f) | hedging assets, liabilities, income or expenses. |
| |
(10) | For the purposes of this paragraph “group treasury revenue”, in relation to |
| 35 |
a company, means revenue— |
| |
(a) | arising from the treasury activities that the company undertakes for |
| |
| |
(b) | accounted for as such under generally accepted accounting practice; |
| |
| before any deduction (whether for expenses or otherwise). |
| 40 |
(11) | But revenue consisting of a dividend or other distribution is not group |
| |
treasury revenue unless it is a dividend or distribution from a company that |
| |
is, in the relevant period— |
| |
(a) | a UK group company, and |
| |
(b) | a group treasury company. |
| 45 |
| |
“debt security” has the same meaning as in the FSA Handbook; |
| |
|
| |
|
| |
|
“relevant income”, in relation to a company, means income— |
| |
(a) | arising from the activities of the company, and |
| |
(b) | accounted for as such under generally accepted accounting |
| |
| |
before any deduction (whether for expenses or otherwise); |
| 5 |
“relevant period” means the period of account of the worldwide group |
| |
to which the relevant amount relates. |
| |
Real estate investment trusts |
| |
58 (1) | This paragraph applies where, apart from this paragraph, an amount (“the |
| |
| 10 |
(a) | a financing expense amount of a company by virtue of meeting |
| |
condition A in paragraph 54, or |
| |
(b) | a financing income amount of a company by virtue of meeting |
| |
condition A in paragraph 55. |
| |
(2) | The relevant amount is treated as not being a financing expense amount or |
| 15 |
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 |
| |
| |
Companies engaged in oil extraction activities |
| |
59 (1) | This paragraph applies where, apart from this paragraph, an amount (“the |
| 20 |
| |
(a) | a financing expense amount of a company by virtue of meeting |
| |
condition A or condition B in paragraph 54, or |
| |
(b) | a financing income amount of a company by virtue of meeting |
| |
condition A or condition B in paragraph 55. |
| 25 |
(2) | The relevant amount is treated as not being a financing expense amount or |
| |
a financing income amount of the company if the following conditions are |
| |
| |
(3) | The first condition is that the company is treated, in the accounting period in |
| |
which the amount is brought into account, as carrying on a ring fence trade |
| 30 |
(see section 502 of ICTA). |
| |
(4) | The second condition is that the amount falls to be brought into account in |
| |
calculating the profits of that trade for that accounting period. |
| |
Intra-group short-term finance: financing expense |
| |
60 (1) | This paragraph applies where, apart from this paragraph, an amount (“the |
| 35 |
relevant amount”) is a financing expense amount of a company (“company |
| |
A”) by virtue of meeting condition A in paragraph 54. |
| |
(2) | The relevant amount is treated as not being a financing expense amount of |
| |
company A, but only if an election is made for this purpose. |
| |
(3) | Such an election may not be made unless the following conditions are met. |
| 40 |
(4) | The first condition is that company A and the other party to the loan |
| |
relationship (“company B”) are both members of the worldwide group. |
| |
|
| |
|
| |
|
(5) | The second condition is that the finance arrangement is a short-term loan |
| |
relationship as respects the period of account of the worldwide group. |
| |
(6) | An election under this paragraph may only be made— |
| |
(a) | jointly by company A and company B, and |
| |
(b) | within 36 months of the end of the period of account of the |
| 5 |
worldwide group to which the relevant amount relates. |
| |
(7) | An election under this paragraph is irrevocable. |
| |
(8) | In this paragraph “short-term loan relationship” has the meaning given in |
| |
| |
Intra-group short-term finance: financing income |
| 10 |
61 (1) | This paragraph applies where— |
| |
(a) | under paragraph 60, the relevant amount is treated as not being a |
| |
financing expense amount of company A, and |
| |
(b) | apart from this paragraph, the relevant amount is a financing income |
| |
amount of company B by virtue of meeting condition A in paragraph |
| 15 |
| |
(2) | The relevant amount is treated as not being a financing income amount of |
| |
| |
(3) | In this paragraph “company A” and “company B” have the same meanings |
| |
| 20 |
Short-term loan relationships |
| |
62 (1) | For the purposes of paragraph 60, the finance arrangement is a short-term |
| |
loan relationship as respects the period of account of the worldwide group |
| |
(“the relevant period”) if— |
| |
(a) | regulations made by the Commissioners provide for it to be so, or |
| 25 |
(b) | one or other of the following conditions is met. |
| |
(2) | The first condition is that the finance arrangement does not terminate during |
| |
| |
(a) | to the extent that the finance arrangement provides for the creation |
| |
of money debt, its terms require all money debt created under it to be |
| 30 |
settled within 12 months of money debt first being created under it, |
| |
| |
(b) | to the extent that the finance arrangement is otherwise a loan |
| |
relationship, its terms provide for it to terminate within 12 months of |
| |
| 35 |
(3) | The second condition is that the finance arrangement terminates during, or |
| |
after the end of, the relevant period and— |
| |
(a) | to the extent that the relationship provided for the creation of money |
| |
debt, all money debt created under it was settled within 12 months |
| |
of money debt first being created under it, and |
| 40 |
(b) | to the extent that the relationship was otherwise a loan relationship, |
| |
it terminated within 12 months of its coming into force. |
| |
|
| |
|
| |
|
(4) | The Treasury may, by regulations, make provision about other |
| |
circumstances in which the finance arrangement is to be taken not to be a |
| |
short-term loan relationship as respects— |
| |
(a) | the relevant period, or |
| |
(b) | any part or parts of the relevant period. |
| 5 |
(5) | Regulations under sub-paragraph (4) may include provision for the finance |
| |
arrangement to be taken never to have been a short-term loan relationship |
| |
as respects the relevant period or the part or parts of it. |
| |
(6) | No regulations may be made under sub-paragraph (4) unless a draft of the |
| |
statutory instrument containing them has been laid before, and approved by |
| 10 |
a resolution of, the House of Commons. |
| |
(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. |
| 15 |
Stranded deficits in non-trading loan relationships: financing expense |
| |
63 (1) | This paragraph applies where, apart from this paragraph, an amount (“the |
| |
relevant amount”) is a financing expense amount of a company (“company |
| |
A”) by virtue of meeting condition A in paragraph 54. |
| |
(2) | The relevant amount is treated as not being a financing expense amount of |
| 20 |
company A, but only if an election is made for this purpose. |
| |
(3) | Such an election may not be made unless the following conditions are met. |
| |
(4) | The first condition is that company A and the other party to the loan |
| |
relationship (“company B”) are both members of the worldwide group. |
| |
(5) | The second condition is that company B— |
| 25 |
(a) | is resident in the United Kingdom, or |
| |
(b) | is not resident in the United Kingdom and is carrying on a trade in |
| |
the United Kingdom through a permanent establishment in the |
| |
| |
(6) | The third condition is that, under section 457 of CTA 2009, company B |
| 30 |
carries forward an amount of non-trading deficit and sets it off against non- |
| |
trading profits of an accounting period that falls wholly or partly within the |
| |
period of account of the worldwide group. |
| |
(7) | The fourth condition is that the amount of non-trading deficit carried |
| |
forward and set off is equal to, or greater than, the relevant amount. |
| 35 |
(8) | An election under this paragraph may only be made— |
| |
(a) | jointly by company A and company B, and |
| |
(b) | within 36 months of the end of the period of account of the |
| |
worldwide group to which the relevant amount relates. |
| |
Stranded deficits in non-trading loan relationships: financing income |
| 40 |
64 (1) | This paragraph applies where— |
| |
(a) | under paragraph 63, the relevant amount is treated is not being a |
| |
financing expense amount of company A, and |
| |
|
| |
|
| |
|
(b) | apart from this paragraph, the relevant amount is a financing income |
| |
amount of company B by virtue of meeting condition A in paragraph |
| |
| |
(2) | The relevant amount is treated as not being a financing income amount of |
| |
| 5 |
(3) | In this paragraph “company A” and “company B” have the same meanings |
| |
| |
Stranded management expenses in non-trading loan relationships: financing expense |
| |
65 (1) | This paragraph applies where, apart from this paragraph, an amount (“the |
| |
relevant amount”) is a financing expense amount of a company (“company |
| 10 |
A”) by virtue of meeting condition A in paragraph 54. |
| |
(2) | The relevant amount is treated as not being a financing expense amount of |
| |
company A, but only if an election is made for this purpose. |
| |
(3) | Such an election may not be made unless the following conditions are met. |
| |
(4) | The first condition is that company A and the other party to the finance |
| 15 |
arrangement (“company B”) are both members of the worldwide group. |
| |
(5) | The second condition is that company B is a company with investment |
| |
business (within the meaning of Part 16 of CTA 2009) and— |
| |
(a) | is resident in the United Kingdom, or |
| |
(b) | is not resident in the United Kingdom and is carrying on a trade in |
| 20 |
the United Kingdom through a permanent establishment in the |
| |
| |
(6) | The third condition is that company B is allowed a deduction under section |
| |
1219 of CTA 2009 (expenses of management of a company’s investment |
| |
business) in respect of an accounting period that falls wholly or partly |
| 25 |
within the period of account of the worldwide group (“the relevant period”). |
| |
(7) | The fourth condition is that the amount of the deduction allowed is equal to, |
| |
or greater than, the relevant amount. |
| |
(8) | The fifth condition is that the calculation of company B’s total profits for the |
| |
relevant period for the purposes of corporation tax results in a loss if |
| 30 |
company B’s credit is not included in that calculation. |
| |
(9) | An election under this paragraph may only be made— |
| |
(a) | jointly by company A and company B, and |
| |
(b) | within 36 months of the end of the period of account of the |
| |
worldwide group to which the relevant amount relates. |
| 35 |
(10) | In this paragraph “company B’s credit” means the credit to company B that |
| |
arises from the debit to company A by virtue of which condition A in |
| |
| |
Stranded management expenses in non-trading loan relationships: financing income |
| |
66 (1) | This paragraph applies where— |
| 40 |
(a) | under paragraph 65, the relevant amount is treated is not being a |
| |
financing expense amount of company A, and |
| |
|
| |
|