Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 25 — Transfers of income streams
Part 1 — Company transferors
257

transfer would be so recognised if it were of an amount equal to the
market value of the right at the time when the transfer takes place.
      (4)
But if at any time it becomes reasonable to assume that the income (to any
extent) is not, or would not be, treated by sub-paragraph (3) as arising in an
accounting period of the transferor, the income is to that extent to be treated
5
as arising immediately before that time.
Exception: amount otherwise taxed
3
This Part does not apply if and to the extent that the income under
paragraph 2(1) is (apart from this Part)—
(a)
charged to tax as income of the transferor,
10
(b)
brought into account as income in calculating the profits of the
transferor, or
(c)
brought into account under CAA 2001.
Exception: transfer by way of security
4
This Part does not apply if the consideration for the transfer is the advance
15
under an arrangement that is a structured finance arrangement for the
purposes of section 774A or 774C of ICTA in relation to the transferor or a
partnership in which the transferor is a partner.
Partnership shares
5     (1)
For the purposes of this Part a transfer of a right to relevant receipts
20
consisting of the reduction in the transferor’s share in the profits or losses of
a partnership is to be regarded as a consequence of a transfer of an asset from
which the right arose (that is, the partnership property) if condition A or B
is met.
      (2)
Condition A is that there is a reduction of the transferor’s share in the
25
partnership property and the reduction in the transferor’s share in the
profits or losses is proportionate to that reduction.
      (3)
Condition B is that it is not the main purpose, or one of the main purposes,
of the transfer to secure that the relevant receipts are not charged to
corporation tax or income tax as income of any partner or brought into
30
account as income of any partner for the purpose of either of those taxes.
Interpretation
6     (1)
For the purposes of this Part—
(a)
the grant or surrender (or renunciation) of a lease of land is to be
regarded as a transfer of the land,
35
(b)
the disposal of an interest in an oil licence (within the meaning of
section 809 of CTA 2009) is to be regarded as a transfer of the oil
licence, and
(c)
the grant or disposal of an interest in intellectual property (within the
meaning of section 712(3) of CTA 2009) which constitutes a pre-2002
40
asset (within the meaning of section 881 of that Act) is to be regarded
as a transfer of that intellectual property.

Finance Bill
Schedule 25 — Transfers of income streams
Part 2 — Non-corporate transferors
258

      (2)
The Treasury may by order make other provision for securing that other
transactions are to be regarded as transfers of assets for those purposes.
      (3)
In this Part—
(a)
references to a transfer include sale, exchange, gift and assignment
(or assignation) and any other arrangement which equates in
5
substance to a transfer, and
(b)
references to a transfer taking place are, in the case of an
arrangement other than a sale, exchange, gift or assignment (or
assignation), to the making of the arrangement.
      (4)
A transfer to or by any partnership of which the transferor or transferee is a
10
member, and a transfer to the trustees of any trust of which the transferor is
a beneficiary, counts as a transfer in relation to which this Part applies.
Part 2
Non-corporate transferors
7
In ITA 2007, after section 809 insert—
15
“Chapter 5A
Transfers of income streams
809AZA
Application of Chapter
(1)
This Chapter applies where—
(a)
a person within the charge to income tax (“the transferor”)
20
makes a transfer to another person (“the transferee”) of a
right to relevant receipts (see subsection (2)), and
(b)
(subject to subsection (3)) the transfer of the right is not a
consequence of the transfer to the transferee of an asset from
which the right to relevant receipts arises.
25
(2)
“Relevant receipts” means any income—
(a)
which (but for the transfer) would be charged to income tax
as income of the transferor, or
(b)
which (but for the transfer) would be brought into account in
calculating profits of the transferor for the purposes of
30
income tax.
(3)
Despite paragraph (b) of subsection (1), this Chapter applies if the
transfer of the right is a consequence of the transfer to the transferee
of all rights under an agreement for annual payments; and for the
purposes of that paragraph the transfer of an asset under a sale and
35
repurchase agreement is not to be regarded as a transfer of the asset.
(4)
Section 809AZB makes provision as to the consequences of this
Chapter applying.
(5)
For exclusions from this Chapter, see—
(a)
section 809AZC (amount otherwise taxed),
40
(b)
section 809AZD (certain annuities), and
(c)
section 809AZE (transfer by way of security).

Finance Bill
Schedule 25 — Transfers of income streams
Part 2 — Non-corporate transferors
259

(6)
Section 809AZF makes special provision about transfers of
partnership shares.
(7)
Section 809AZG contains supplementary provisions.
809AZB
Value of transferred income stream treated as income
(1)
The relevant amount (see subsection (2)) is to be treated as income of
5
the transferor chargeable to income tax in the same way and to the
same extent as that in which the relevant receipts—
(a)
would have been chargeable to income tax, or
(b)
would have been brought into account in calculating any
profits for the purposes of income tax,
10

but for the transfer of the right to relevant receipts.
(2)
The relevant amount is—
(a)
(except where paragraph (b) applies) the amount of the
consideration for the transfer of the right, or
(b)
where the amount of any such consideration is substantially
15
less than the market value of the right at the time when the
transfer takes place (or where there is no consideration for the
transfer of the right), the market value of the right at that
time.
(3)
The income under subsection (1) is to be treated as arising in the
20
chargeable period of the transferor in which the transfer takes place.
(4)
But subsection (5) applies if (apart from the transfer) any of the
relevant receipts—
(a)
would have been brought into account in accordance with
Part 2 or 3 of ITTOIA 2005 (trading income and property
25
income) in calculating any profits for the purposes of income
tax, and
(b)
in accordance with generally accepted accounting practice,
would have been recognised otherwise than wholly in the
chargeable period in which the transfer takes place.
30
(5)
If this subsection applies, the income under subsection (1) is to be
treated as arising—
(a)
to the extent that it does not exceed the amount of the
consideration for the transfer of the right, in the chargeable
period or periods for which, in accordance with generally
35
accepted accounting practice, the consideration for the
transfer is recognised for accounting purposes in a profit and
loss account or income statement of the transferor, and
(b)
otherwise, in the chargeable period or periods for which, in
accordance with generally accepted accounting practice, the
40
consideration for the transfer would be so recognised if it
were of an amount equal to the market value of the right at
the time when the transfer takes place.
(6)
But if in a case where the transferor is a company it at any time
becomes reasonable to assume that the income (to any extent) is not,
45
or would not be, treated by subsection (5) as arising in an accounting
period of the transferor, the income is to that extent to be treated as
arising immediately before that time.

Finance Bill
Schedule 25 — Transfers of income streams
Part 2 — Non-corporate transferors
260

809AZC
Exception: amount otherwise taxed
This Chapter does not apply if and to the extent that the income
under section 809AZB(1) is (apart from this Chapter)—
(a)
charged to tax as income of the transferor,
(b)
brought into account in calculating the profits of the
5
transferor, or
(c)
brought into account under CAA 2001.
809AZD
Exception: certain annuities
This Chapter does not apply to a transfer of a right to—
(a)
annual payments under a life annuity as defined in section
10
473(2) of ITTOIA 2005, or
(b)
annual payments under an annuity which is pension income
within the meaning of Part 9 of ITEPA 2003 (see section 566(2)
of that Act).
809AZE
Exception: transfer by way of security
15
This Chapter does not apply if the consideration for the transfer is
the advance under an arrangement that is a structured finance
arrangement for the purposes of section 774A or 774C of ICTA in
relation to the transferor or a partnership in which the transferor is a
partner.
20
809AZF
Partnership shares
(1)
For the purposes of this Chapter a transfer of a right to relevant
receipts consisting of the reduction in a transferor’s share in the
profits or losses of a partnership is to be regarded as a consequence
of a transfer of an asset from which the right arose (that is, the
25
partnership property) if condition A or B is met.
(2)
Condition A is that there is a reduction of the transferor’s share in the
partnership property and the reduction in the transferor’s share in
the profits or losses is proportionate to that reduction.
(3)
Condition B is that it is not the main purpose, or one of the main
30
purposes, of the transfer to secure that the relevant receipts are not
charged to income tax or corporation tax as income of any partner or
brought into account as income of any partner for the purpose of
either of those taxes.
809AZG
Interpretation
35
(1)
For the purposes of this Chapter—
(a)
the grant or surrender of a lease of land is to be regarded as a
transfer of the land, and
(b)
the disposal of an interest in an oil licence (within the
meaning of section 809 of CTA 2009) is to be regarded as a
40
transfer of the oil licence.
(2)
The Treasury may by order make other provision for securing that
other transactions are to be regarded as transfers of assets for those
purposes.
(3)
In this Chapter—
45

Finance Bill
Schedule 25 — Transfers of income streams
Part 3 — Company transferees
261

(a)
references to a transfer include sale, exchange, gift and
assignment (or assignation) and any other arrangement
which equates in substance to a transfer, and
(b)
references to a transfer taking place are, in the case of an
arrangement other than a sale, exchange, gift or assignment
5
(or assignation), to the making of the arrangement.
(4)
A transfer to or by any partnership of which the transferor or
transferee is a member, and a transfer to the trustees of any trust of
which the transferor is a beneficiary, counts as a transfer in relation
to which this Chapter applies.”
10
Part 3
Company transferees
8     (1)
Part 6 of CTA 2009 (relationships treated as loan relationships etc) is
amended as follows.
      (2)
In section 477(2) (overview of Part 6), after paragraph (aa) (inserted by
15
Schedule 24) insert—
“(ab)
Chapter 2B (transferred income streams),”.
      (3)
After Chapter 2A (inserted by Schedule 24) insert—
“Chapter 2B
Transferred income streams
20
486F
Introduction to Chapter
(1)
This Chapter provides for Part 5 to apply in relation to a company to
which an income stream transfer is made (“the transferee”).
(2)
An “income stream transfer” is a transfer by a person (“the
transferor”) to which either of the following provisions applies—
25
(a)
Part 1 of Schedule 25 to FA 2009 (transfers of income streams
by companies), or
(b)
Chapter 5A of Part 13 of ITA 2007 (transfers of income
streams by individuals).
486G
Consideration to be treated as loan relationship
30
(1)
For the purposes of this Part—
(a)
the consideration for the transfer of the right to relevant
receipts is to be treated as a money debt which is owed to the
transferee by the person by whom the relevant receipts fall to
be paid, and
35
(b)
the transfer is to be treated as a transaction for the lending of
money from which that debt is treated as arising.
(2)
For the meaning of “relevant receipts” see paragraph 1(2) of Schedule
25 to FA 2009 or section 809AZA(2) of ITA 2007.”

Finance Bill
Schedule 25 — Transfers of income streams
Part 4 — Consequential amendments and repeals
262

Part 4
Consequential amendments and repeals
9     (1)
In ICTA, omit—
(a)
section 730 (transfers of rights to receive distributions in respect of
shares),
5
(b)
section 775A (transfers of rights to receive annual payments),
(c)
section 785A (rent factoring of leases of plant or machinery), and
(d)
in section 786 (transactions associated with loans or credit)—
(i)
in subsection (5), “assigns,”, “(without a sale or transfer of the
property)” and “assigned,”,
10
(ii)
in subsection (5ZA), “assigned,”, and
(iii)
in subsection (5A), “assigned,”.
      (2)
In ITTOIA 2005, omit—
(a)
in Chapter 11 of Part 4 (transactions in deposits)—
(i)
in section 551(2), the words after “of it”, and
15
(ii)
in section 552(1), paragraph (e) and the word “and” before it,
and
(b)
Chapter 13 of Part 4 (sales of foreign dividend coupons).
      (3)
Omit the following provisions (which relate to the provisions repealed by
sub-paragraphs (1) and (2))—
20
(a)
in TMA 1970, in section 98, in column 1 of the Table, the entry
relating to section 730(8) of ICTA,
(b)
in ICTA, in section 774E(1), the second sentence,
(c)
in FA 1996, in Schedule 7, paragraph 23,
(d)
in FA 2004, section 135,
25
(e)
in ITTOIA 2005, in Schedule 1, paragraph 300,
(f)
in F(No.2)A 2005, in Schedule 7, paragraphs 2 and 4,
(g)
in FA 2006, in Schedule 6, paragraph 7,
(h)
in ITA 2007—
(i)
in section 1016, in Part 3 of the table, the entry relating to
30
section 730(4) of ICTA, and
(ii)
in Schedule 1, paragraphs 183 and 545, and
(i)
in CTA 2009, in Schedule 1, paragraphs 214 and 230.
      (4)
In section 785ZB(3) of ICTA, for “has the same meaning as in section 785A”
substitute “includes an underlease, sublease, tenancy or licence and an
35
agreement for any of those things”.
      (5)
In section 2(13) of ITA 2007, omit the “and” at the end of paragraph (d) and
insert at the end “or
(f)
transfers of income streams (Chapter 5A).”
      (6)
Schedule 4 to that Act (index of defined expressions) is amended as follows.
40
      (7)
After the entry relating to “transfer (in Chapter 2 of Part 13)” insert—

“transfer (in Chapter 5A of Part
Section 809AZF(3)”.

13)

Finance Bill
Schedule 26 — Certification of SAYE savings arrangements
263

      (8)
After the entry relating to “transferor (in Part 12)” insert—

“transfer taking place (in Chapter
Section 809AZF(3)”.

5A of Part 13)

Part 5
Commencement
5
10
This Schedule has effect in relation to transfers on or after 22 April 2009.
Schedule 26
Section 50

Certification of SAYE savings arrangements
1
Chapter 4 of Part 6 of ITTOIA 2005 (SAYE interest) is amended as follows.
Transfer of certain functions from Treasury to HMRC
10
2     (1)
Section 705 (certification of arrangements) is amended as follows.
      (2)
In subsections (1) and (2), for “Treasury” (in each place) substitute
“Commissioners”.
      (3)
After subsection (4) insert—
“(5)
In this Chapter “the Commissioners” means the Commissioners for
15
Her Majesty’s Revenue and Customs.”
3
In section 706(1) and (2) (withdrawal and variation of certifications etc), for
“Treasury” substitute “Commissioners”.
4
In section 707(1) (authorisation of providers), for “Treasury” substitute
“Commissioners”.
20
5     (1)
Section 708 (withdrawal and variation of authorisations) is amended as
follows.
      (2)
In subsections (1) and (2), for “Treasury” substitute “Commissioners”.
      (3)
In subsection (4), for “Treasury of its” substitute “Commissioners of their”.
Removal of requirement that notice be sent by post
25
6
In the following provisions omit “by post”—
(a)
section 706(2)(b) (notification of withdrawal and variation of
certifications etc), and
(b)
section 708(2)(b) (notification of withdrawal and variation of
authorisations).
30
Reduction of notice period for withdrawals and variations
7
In section 706(2)(b) (notification of withdrawal and variation of certifications
etc), for “28 days” substitute “15 days”.