Finance Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 17 — International movement of capital
Part 2 — Reporting requirement
202

(a)
as to the form and manner in which bodies may enter into, or a body
may withdraw from, an arrangement;
(b)
requiring a person to give information to HMRC in connection with
entering into or withdrawing from an arrangement;
(c)
as to circumstances in which a body is to be treated as having
5
withdrawn from an arrangement.
Meaning of “UK corporate parent”
7
In this Schedule “UK corporate parent” means a body corporate that—
(a)
is resident in the United Kingdom,
(b)
controls one or more bodies corporate that are not resident in the
10
United Kingdom, and
(c)
is not controlled by—
(i)
a body corporate that is resident in the United Kingdom, or
(ii)
two or more bodies corporate taken together each of which is
resident in the United Kingdom.
15
Reportable events and transactions
8     (1)
For the purposes of this Schedule an event or transaction is “reportable”, in
relation to a reporting body, if—
(a)
it is of a value exceeding £100 million,
(b)
it is within sub-paragraph (2), and
20
(c)
it is not an excluded transaction (see paragraph 9).
      (2)
An event or transaction is within this sub-paragraph if—
(a)
it is an issue of shares or debentures by a foreign subsidiary,
(b)
it is a transfer by the reporting body, or a transfer caused or
permitted by the reporting body, of shares or debentures of a foreign
25
subsidiary in which the reporting body has an interest,
(c)
where the reporting body is a party to an arrangement under
paragraph 6, it is a transfer by another party to the arrangement, or
a transfer caused or permitted by such a party, of shares or
debentures of a foreign subsidiary in which that party has an
30
interest,
(d)
it results in a foreign subsidiary becoming, or ceasing to be, a
controlling partner in a partnership, or
(e)
it is of a description specified in regulations made by the
Commissioners.
35
      (3)
For the purposes of sub-paragraph (2)(d) a foreign subsidiary is a
“controlling partner” in a partnership if, whether alone or taken together
with one or more other partners that are subsidiaries, it controls the
partnership.
      (4)
The Commissioners may by regulations make provision about how the
40
value of an event or transaction is to be determined for the purposes of this
paragraph.
      (5)
Regulations under sub-paragraph (4) may, in particular, in the case of a
transaction that is one of a series of transactions, include provision
attributing to the transaction the value of other transactions in the series.
45

Finance Bill
Schedule 17 — International movement of capital
Part 2 — Reporting requirement
203

      (6)
Regulations under this paragraph may—
(a)
make provision by reference to standards or other documents issued
by any person, or
(b)
make different provision for different cases or purposes.
      (7)
The Commissioners may by order amend sub-paragraph (1)(a) so as to
5
substitute a higher amount for the amount for the time being mentioned
there.
Excluded transactions
9     (1)
For the purposes of this Schedule a transaction is “excluded” if—
(a)
it is carried out in the ordinary course of a trade,
10
(b)
all the parties to the transaction are, at the time the transaction is
carried out, resident in the same territory,
(c)
it consists in giving to the bankers of a foreign subsidiary any
security for the payment of any sum due or to become due from it to
them by reason of any transaction entered into with it by them in the
15
ordinary course of their business as bankers,
(d)
it consists in a foreign subsidiary giving to an insurance company
any security for the payment of any sum due or to become due from
that subsidiary to that company by reason of any transaction entered
into with that subsidiary by that company in the ordinary course of
20
that company’s business by way of investment of its funds, or
(e)
it is of a description specified in regulations made by the
Commissioners.
      (2)
Regulations under sub-paragraph (1)(e)—
(a)
may make provision by reference to standards or other documents
25
issued by any person, and
(b)
may make different provision for different cases or purposes.
Penalty for failure to comply with reporting requirement
10
In section 98 of TMA 1970 (special returns etc), in the second column of the
Table, at the end insert “paragraph 4 of Schedule 17 to FA 2009.”
30
Regulations and orders
11    (1)
Regulations and orders under this Schedule are to be made by statutory
instrument.
      (2)
A statutory instrument containing regulations or an order under this
Schedule is subject to annulment in pursuance of a resolution of the House
35
of Commons.
Interpretation
12    (1)
For the purposes of this Schedule “control”, in relation to a body corporate,
means the power of a person to secure—
(a)
by means of the holding of shares or the possession of voting power
40
in or in relation to the body or any other body corporate, or
(b)
by virtue of any powers conferred by the articles of association or
other document regulating the body or any other body corporate,

Finance Bill
Schedule 18 — Corporation tax: foreign currency accounting
204


that the affairs of the body are conducted in accordance with that person’s
wishes.
      (2)
Where two or more persons, taken together, have the power mentioned in
sub-paragraph (1), they are taken for the purposes of this Schedule to control
the body corporate.
5
      (3)
For the purposes of this Schedule “control” in relation to a partnership,
means the right to a share of more than 50% of the assets, or of more than
50% of the income, of the partnership.
      (4)
In this Schedule—
“foreign” means resident outside the United Kingdom;
10
“partnership” includes an entity established under the law of a country
or territory outside the United Kingdom of a similar character to a
partnership, and “partner” is to be read accordingly;
“subsidiary”, in relation to a reporting body, means a body corporate
that is controlled by—
15
(a)
the reporting body, or
(b)
where the reporting body is a party to an arrangement under
paragraph 6, any party to the arrangement.
      (5)
Paragraph 3 of Schedule 28AA to ICTA (meaning of “transaction” and
“series of transactions”) applies for the purposes of this Schedule.
20
Part 3
Commencement etc
Commencement
13
This Schedule has effect in relation to events taking place and transactions
carried out on or after 1 July 2009.
25
Transitional provision
14    (1)
In its application in relation to an event taking place or a transaction carried
out before 1 October 2009, paragraph 4(1) has effect as if it required any
report under that provision to be made before 1 April 2010.
      (2)
Any regulations under this Schedule that are made within the period of one
30
year beginning on the day on which this Act is passed may be made so as to
have effect from any time on or after 1 July 2009.
Schedule 18
Section 38

Corporation tax: foreign currency accounting
Amendments of FA 1993
35
1
FA 1993 is amended as follows.
2
In section 92(2) (the basic rule: sterling to be used), insert at the end—
“section 92D (sterling equivalents: the basic rule);

Finance Bill
Schedule 18 — Corporation tax: foreign currency accounting
205

  sections 92DA and 92DB (sterling equivalents: special rules
where amounts carried back or forward);
  sections 92DC and 92DD (adjustment of sterling amounts
carried back or forward where operating currency changes).”
3
In section 92B (company operating in currency other than sterling and
5
preparing accounts in another currency), insert at the end—
“(4)
Where, for the purposes of computing the profits or losses of the
company arising in an accounting period, an amount expressed in
sterling is required by subsection (3) to be translated into its
equivalent expressed in another currency, it must be translated by
10
reference to the appropriate exchange rate.”
4
In section 92C (company preparing accounts in currency other than
sterling), insert at the end—
“(5)
Where, for the purposes of computing the profits or losses of the
company arising in an accounting period, an amount expressed in
15
sterling is required by subsection (4) to be translated into its
equivalent expressed in another currency, it must be translated by
reference to the appropriate exchange rate.”
5
For section 92D (translating amounts into equivalent in different currency)
substitute—
20
“92D
Sterling equivalents: the basic rule
(1)
This section applies where, for the purposes of computing the profits
or losses of a company arising in an accounting period, a profit or
loss is required by section 92B or 92C to be translated into its sterling
equivalent.
25
(2)
The translation must be made by reference to the appropriate
exchange rate.
(3)
This section is subject to sections 92DA and 92DB (special rules
where translation is for the purpose of computing amounts to be
carried back or carried forward to other accounting periods).
30
92DA
Sterling equivalents: carried-back amounts
(1)
This section applies where, for the purpose of computing a carried-
back amount in respect of a company, a loss (“the loss”) is required
by section 92B or 92C to be translated into its sterling equivalent.
(2)
The translation must be made in accordance with rule 1, 2 or 3
35
(whichever is applicable).
(3)
Rule 1 applies if the operating currency of the company in the
accounting period in which the loss arises (“the later operating
currency”) is the same as the operating currency of the company in
the accounting period to which the carried-back amount is to be
40
carried back (“the earlier operating currency”).
(4)
Rule 1 is that the loss must be translated into its sterling equivalent
by reference to the same rate of exchange as that at which the profit
against which the carried-back amount is to be set off is required to
be translated under section 92D.
45

Finance Bill
Schedule 18 — Corporation tax: foreign currency accounting
206

(5)
Rule 2 applies if—
(a)
the later operating currency is not the same as the earlier
operating currency, and
(b)
the earlier operating currency is sterling.
(6)
Rule 2 is that the loss must be translated into its sterling equivalent
5
by reference to the spot rate of exchange for the last day of the
relevant accounting period.
(7)
Rule 3 applies if—
(a)
the later operating currency is not the same as the earlier
operating currency, and
10
(b)
the earlier operating currency is a currency other than
sterling.
(8)
Rule 3 is that the loss must be translated into its sterling equivalent
by—
(a)
being translated into the earlier operating currency by
15
reference to the spot rate of exchange for the last day of the
relevant accounting period, before
(b)
being translated into sterling by reference to the same rate of
exchange as that at which the profit against which the
carried-back amount is to be set off is required to be
20
translated under section 92D.
(9)
In this section “the relevant accounting period” means the latest
accounting period of the company before the accounting period in
which the loss arises in which the operating currency of the company
is the earlier operating currency.
25
92DB
Sterling equivalents: carried-forward amounts
(1)
This section applies where, for the purpose of computing a carried-
forward amount in respect of a company, a loss (“the loss”) is
required by section 92B or 92C to be translated into its sterling
equivalent.
30
(2)
The translation must be made in accordance with rule 1, 2 or 3
(whichever is applicable).
(3)
Rule 1 applies if the operating currency of the company in the
accounting period in which the loss arises (“the earlier operating
currency”) is the same as the operating currency of the company in
35
the accounting period to which the carried-forward amount is to be
carried forward (“the later operating currency”).
(4)
Rule 1 is that the loss must be translated into its sterling equivalent
by reference to the same rate of exchange as that at which the profit
against which the carried-forward amount is to be set off is required
40
to be translated under section 92D.
(5)
Rule 2 applies if—
(a)
the earlier operating currency is not the same as the later
operating currency, and
(b)
the later operating currency is sterling.
45

Finance Bill
Schedule 18 — Corporation tax: foreign currency accounting
207

(6)
Rule 2 is that the loss must be translated into its sterling equivalent
by reference to the spot rate of exchange for the first day of the
relevant accounting period.
(7)
Rule 3 applies if—
(a)
the earlier operating currency is not the same as the later
5
operating currency, and
(b)
the later operating currency is a currency other than sterling.
(8)
Rule 3 is that the loss must be translated into its sterling equivalent
by—
(a)
being translated into the later operating currency by
10
reference to the spot rate of exchange for the first day of the
relevant accounting period, before
(b)
being translated into sterling by reference to the same rate of
exchange as that at which the profit against which the
carried-forward amount is to be set off is required to be
15
translated under section 92D.
(9)
In this section “the relevant accounting period” means the earliest
accounting period of the company after the accounting period in
which the loss arises in which the operating currency of the company
is the later operating currency.
20
92DC
Adjustment of sterling losses: carried-back amounts
(1)
This section applies if conditions A to C are met.
(2)
Condition A is that, in accordance with generally accepted
accounting practice, a company resident in the United Kingdom—
(a)
prepares its accounts for a period of account in sterling, or
25
(b)
prepares its accounts for a period of account in a currency
other than sterling and in those accounts identifies sterling as
its functional currency.
(3)
Condition B is that a loss of the company for the period that falls to
be computed in accordance with generally accepted accounting
30
practice for corporation tax purposes (“the loss”) is to be a carried-
back amount.
(4)
Condition C is that the operating currency of the company in the
accounting period to which the loss is to be carried back (“the earlier
operating currency”) is a currency other than sterling.
35
(5)
The loss must be adjusted by—
(a)
being translated into the earlier operating currency by
reference to the spot rate of exchange for the last day of the
relevant accounting period, before
(b)
being translated into sterling by reference to the same rate of
40
exchange as that at which the profit against which the
carried-back amount is to be set off is required to be
translated under section 92D.
(6)
In this section “the relevant accounting period” means the latest
accounting period of the company before the accounting period in
45
which the loss arises in which the operating currency of the company
is the earlier operating currency.