|
| |
|
advantage, they will produce a broadly compensatory amount, the |
| |
arrangements are to be regarded for the purposes of subsection (2) as |
| |
making provision for securing the production of a post-tax |
| |
advantage in those circumstances. |
| |
(6) | “Produce a broadly compensatory amount” means give rise to a sum |
| 5 |
or sums payable as mentioned in subsection (3) of an amount (or |
| |
aggregate amount) which, after making the appropriate tax |
| |
adjustments, is not significantly less than the relevant amount. |
| |
(7) | For the purposes of subsections (3) and (6) causing the value of an |
| |
asset to be obtainable, directly or indirectly, by a person is to be |
| 10 |
treated as equivalent to giving rise to a sum payable to the person of |
| |
an amount equal to that value. |
| |
(8) | To make the appropriate tax adjustments for the purpose of |
| |
| |
(a) | if A exceeds B, deduct the amount of the excess from the |
| 15 |
amount (or aggregate amount), and |
| |
(b) | if B exceeds A, add the amount of the excess to the amount (or |
| |
| |
(9) | For the purposes of subsection (8)— |
| |
A is the amount of any income tax, any capital gains tax and any |
| 20 |
tax under the law of a territory outside the United Kingdom |
| |
to which the borrower is liable in consequence of the |
| |
| |
B is the amount by which the borrower’s liability to income tax |
| |
and capital gains tax is (or apart from subsection (1) would |
| 25 |
be) reduced in consequence of the arrangements. |
| |
(10) | Arrangements seem to have been designed to reduce any income tax |
| |
or capital gains tax to which the borrower (or any person whose |
| |
circumstances are like those of the borrower) would be liable apart |
| |
from the arrangements if (and only if) it would be reasonable to |
| 30 |
assume from either or both of— |
| |
(a) | the likely effect of the arrangements, and |
| |
(b) | the circumstances in which the arrangements, or any parts of |
| |
the arrangements, are entered into or effected, |
| |
| that the arrangements, or any parts of the arrangements, are |
| 35 |
| |
(11) | In this section “arrangements” means arrangements consisting of |
| |
any number of agreements, understandings, schemes, transactions |
| |
or other arrangements (whether or not legally enforceable); but in |
| |
subsections (1)(a), (2), (5) and (9) the references to arrangements also |
| 40 |
include any related transactions. |
| |
(12) | In subsection (11) “related transactions” means transactions in the |
| |
case of which it is reasonable to assume from either or both of— |
| |
(a) | the likely effect of the transactions, and |
| |
(b) | the circumstances in which the transactions are entered into |
| 45 |
| |
| that the transactions would not have been entered into or effected |
| |
independently of the arrangements. |
| |
|
| |
|
| |
|
(13) | Transactions are not prevented from being related transactions just |
| |
because the transactions— |
| |
(a) | are not between the same parties, or |
| |
(b) | are not between parties to the arrangements.” |
| |
(2) | The amendment made by sub-paragraph (1) has effect in relation to interest |
| 5 |
paid on or after 19 March 2009. |
| |
Amounts not fully recognised for accounting purposes |
| |
2 (1) | Section 311 of CTA 2009 (loan relationships: amounts not fully recognised |
| |
for accounting purposes) is amended as follows. |
| |
(2) | In subsection (2), for paragraphs (b) and (c) substitute— |
| 10 |
“(b) | condition A, B or C is met, and |
| |
(c) | an amount is not fully recognised for the period in respect of |
| |
the creditor relationship as a result of the application of |
| |
generally accepted accounting practice in relation to the |
| |
creditor relationship and the debtor relationship, |
| 15 |
contribution or securities referred to in the condition that is |
| |
| |
(3) | In subsection (3)(b), after “to the” insert “creditor relationship and the |
| |
| |
(4) | In paragraph (b) of subsection (4), after “to the” insert “creditor relationship |
| 20 |
and the relevant capital”. |
| |
(5) | After that subsection insert— |
| |
“(4A) | Condition C is that— |
| |
(a) | the company has issued securities that form part of its capital |
| |
| 25 |
(b) | an amount is not fully recognised for the period in respect of |
| |
the securities as a result of the application of generally |
| |
accepted accounting practice in relation to the creditor |
| |
relationship and the securities.” |
| |
| 30 |
(a) | for “or a relevant capital contribution to it” substitute “, a |
| |
contribution to it or securities issued by it”, and |
| |
(b) | for “or contribution” (in both places) substitute “, contribution or |
| |
| |
(7) | In section 317(5) of CTA 2009 (carrying value), before paragraph (a) insert— |
| 35 |
“(za) | sections 311 and 312 (amounts not fully recognised for |
| |
| |
(8) | The amendments made by this paragraph have effect in relation to periods |
| |
of account beginning on or after 22 April 2009. |
| |
(9) | But for the purposes of sub-paragraph (8) a period of account beginning |
| 40 |
before, and ending on or after, 22 April 2009 is to be treated as if so much of |
| |
the period as falls before that date, and so much of the period as falls on or |
| |
after that date, were separate periods of account. |
| |
|
| |
|
| |
|
3 (1) | In CTA 2009, after section 599 insert— |
| |
“599A | Amounts not fully recognised for accounting purposes: introduction |
| |
(1) | Section 599B applies for the purpose of determining the credits and |
| |
debits which a company is to bring into account for a period for the |
| |
purposes of this Part in the following case. |
| 5 |
| |
(a) | the company is, or is treated as, a party to a derivative |
| |
| |
(b) | condition A or B is met, and |
| |
(c) | an amount is not fully recognised for the period in respect of |
| 10 |
the contract as a result of the application of generally |
| |
accepted accounting practice in relation to the contract and |
| |
the contribution or securities referred to in the condition that |
| |
| |
| 15 |
(a) | an amount (a “relevant capital contribution”) has at any time |
| |
been contributed to the company which forms part of its |
| |
capital for the period, and |
| |
(b) | an amount is not fully recognised for the period in respect of |
| |
the relevant capital contribution as a result of the application |
| 20 |
of generally accepted accounting practice in relation to the |
| |
derivative contract and the relevant contribution. |
| |
(4) | It does not matter for the purposes of subsection (3) whether the |
| |
contribution forms part of the company’s share capital or other |
| |
| 25 |
| |
(a) | the company has issued securities that form part of its capital |
| |
| |
(b) | an amount is not fully recognised for the period in respect of |
| |
the securities as a result of the application of generally |
| 30 |
accepted accounting practice in relation to the derivative |
| |
contract and the securities. |
| |
(6) | For the purposes of this section an amount is not fully recognised for |
| |
a period in respect of a contract of a company, a contribution to it or |
| |
securities issued by it if— |
| 35 |
(a) | no amount in respect of the contract, contribution or |
| |
securities is recognised in determining its profit or loss for the |
| |
| |
(b) | an amount is so recognised in respect of only part of the |
| |
contract, contribution or securities. |
| 40 |
599B | Determination of credits and debits where amounts not fully |
| |
| |
(1) | In determining the credits and debits which a company is to bring |
| |
into account for the period referred to in section 599A(1) for the |
| |
purposes of this Part in respect of the derivative contract mentioned |
| 45 |
in section 599A(2), the assumption in subsection (2) is to be made. |
| |
|
| |
|
| |
|
(2) | The assumption is that an amount in respect of the whole of the |
| |
contract in question is recognised in determining the company’s |
| |
profit or loss for the period. |
| |
(3) | The credits and debits which are to be brought into account for the |
| |
purposes of this Part by the company in respect of the contract are to |
| 5 |
be determined on the basis of fair value accounting.” |
| |
(2) | In section 702(3) of CTA 2009 (carrying value), before paragraph (c) insert— |
| |
“(ca) | sections 599A and 599B (amounts not fully recognised for |
| |
| |
(3) | The amendments made by this paragraph have effect in relation to periods |
| 10 |
of account beginning on or after 22 April 2009. |
| |
(4) | But for the purposes of sub-paragraph (3) a period of account beginning |
| |
before, and ending on or after, 22 April 2009 is to be treated as if so much of |
| |
the period as falls before that date, and so much of the period as falls on or |
| |
after that date, were separate periods of account. |
| 15 |
Loan relationships involving connected debtor and creditor where debits exceed credits |
| |
4 (1) | Section 418 of CTA 2009 (loan relationships treated differently by connected |
| |
debtor and creditor) is amended as follows. |
| |
(2) | In subsection (1)(b), for “A, B and C” substitute “A and B”. |
| |
(3) | For subsections (2) to (4) substitute— |
| 20 |
“(2) | Condition A is that the rights under the loan relationship include |
| |
provision by virtue of which the creditor company— |
| |
(a) | is or may become entitled, or |
| |
(b) | is or may be required, |
| |
| to acquire (whether by conversion or exchange or otherwise) any |
| 25 |
| |
| |
(a) | the debits brought into account by the debtor under this Part |
| |
in respect of the loan relationship for any accounting period, |
| |
| 30 |
(b) | the credits brought into account (otherwise than as a result of |
| |
this section) by the creditor in respect of the loan relationship |
| |
for the corresponding accounting period or periods of the |
| |
| |
(4) | After subsection (6) insert— |
| 35 |
“(6A) | For the purposes of this section the creditor is to be treated as |
| |
continuing to be a party to the loan relationship even though the |
| |
creditor has disposed of the creditor’s rights under the loan |
| |
relationship to another person— |
| |
(a) | under a repo or stock lending arrangement, or |
| 40 |
(b) | under a transaction which is treated as not involving any |
| |
disposal as a result of section 26 of TCGA 1992 (mortgages |
| |
and charges not to be treated as disposals). |
| |
|
| |
|
| |
|
(6B) | For the purposes of this section the creditor is to be treated as |
| |
continuing to be a party to the loan relationship even though the |
| |
creditor has disposed of the creditor’s rights under the loan |
| |
relationship to another person if the disposal was made with the |
| |
relevant avoidance intention. |
| 5 |
(6C) | The relevant avoidance intention is the intention of eliminating or |
| |
reducing the credits to be brought into account for the purposes of |
| |
| |
(5) | In subsection (7), for “Section 419 supplements” substitute “Sections 418A |
| |
| 10 |
(6) | In the heading, for “treated differently by connected debtor and creditor” |
| |
substitute “involving connected debtor and creditor where debits exceed |
| |
| |
(7) | After section 418 insert— |
| |
“418A | Cases involving host contract |
| 15 |
(1) | This section applies where the debtor or the creditor, in accordance |
| |
with generally accepted accounting practice, treats the rights and |
| |
liabilities under the loan relationship as divided between— |
| |
(a) | rights and liabilities under a loan relationship (“the host |
| |
| 20 |
(b) | rights and liabilities under one or more derivative financial |
| |
instruments or equity instruments. |
| |
(2) | Where the debtor, in accordance with generally accepted accounting |
| |
practice, treats the rights and liabilities under the loan relationship as |
| |
so divided, section 418 has effect as if the reference to the loan |
| 25 |
relationship in subsection (3)(a) were to the host contract. |
| |
(3) | Where the creditor, in accordance with generally accepted |
| |
accounting practice, treats the rights and liabilities under the loan |
| |
relationship as so divided, section 418 has effect as if the reference to |
| |
the loan relationship in subsection (3)(b) were to the host contract. |
| 30 |
(4) | In this section “the debtor” and “the creditor” have the same meaning |
| |
| |
(8) | The amendments made by this paragraph have effect in relation to debits |
| |
and credits arising on or after 22 April 2009. |
| |
Credits and debits for manufactured interest |
| 35 |
5 (1) | In section 540(3) of CTA 2009 (manufactured interest treated as interest |
| |
under loan relationship), insert at the end “and the credits and debits to be |
| |
brought into account in respect of manufactured interest for any period are |
| |
those that are recognised in determining the company’s profit or loss for the |
| |
period in accordance with generally accepted accounting practice (but |
| 40 |
subject to the provisions of Part 5, including, in particular, section 307(3) and |
| |
to paragraph 7A of Schedule 23A to ICTA).” |
| |
(2) | In section 97(2) of FA 1996 (equivalent provision for accounting periods |
| |
ending before 1 April 2009), insert at the end “and the credits and debits to |
| |
be brought into account in respect of manufactured interest for any period |
| 45 |
|
| |
|
| |
|
are those that are recognised in determining the company’s profit or loss for |
| |
the period in accordance with generally accepted accounting practice (but |
| |
subject to the provisions of this Chapter (including, in particular, section |
| |
84(1)) and to paragraph 7A of Schedule 23A to the Taxes Act 1988).” |
| |
(3) | The amendments made by this paragraph have effect in relation to |
| 5 |
manufactured interest whenever paid, apart from payments treated under |
| |
section 737A(5) of ICTA as made before 27 January 2009. |
| |
| |
| |
Sale of lessor companies etc: anti-avoidance |
| |
| 10 |
1 | Schedule 10 to FA 2006 (sale etc of lessor companies etc) is amended as |
| |
| |
| |
2 | In paragraph 6(3) (meaning of “business of leasing plant or machinery”: |
| |
condition A), for “accounting value of the plant or machinery owned by the |
| 15 |
relevant company on the relevant day” substitute “relevant plant or |
| |
| |
| |
3 (1) | Paragraph 7 (provision for purposes of condition A) is amended as follows. |
| |
(2) | For sub-paragraphs (2) and (3) substitute— |
| 20 |
“(2) | The relevant plant or machinery value is the aggregate of the |
| |
amounts in sub-paragraph (3), but subject to paragraph 7A. |
| |
| |
(a) | the amounts (if any) which would be shown in respect of |
| |
plant or machinery in the appropriate balance sheet of the |
| 25 |
relevant company drawn up as at the start of the relevant |
| |
| |
(b) | the amounts (if any) which would be shown in the |
| |
appropriate balance sheet of the relevant company drawn |
| |
up as at the end of the relevant day in respect of relevant |
| 30 |
transferred plant or machinery. |
| |
(3A) | For the purposes of sub-paragraph (3)(b) plant or machinery is |
| |
“relevant transferred plant or machinery” if an amount in respect |
| |
of it would be shown in the appropriate balance sheet of an |
| |
associated company drawn up as at the start of the relevant day.” |
| 35 |
(3) | In sub-paragraph (4), for “this purpose” substitute “the purposes of this |
| |
| |
(4) | In sub-paragraph (8)(a), omit “as at the start of the relevant day”. |
| |
|
| |
|
| |
|
| |
“(10) | References in this Part of this Schedule to an associated company |
| |
are to a company which is an associated company of the relevant |
| |
company on the relevant day (as to which, see paragraph 9).” |
| |
| 5 |
4 | After paragraph 7 insert— |
| |
“7A (1) | Where this paragraph applies in relation to any plant or |
| |
| |
(a) | any amount included in the aggregate mentioned in |
| |
paragraph 7(2) in respect of the plant or machinery is to be |
| 10 |
deducted from that aggregate, and |
| |
(b) | the market value of the plant or machinery as at the |
| |
relevant day is to be added to that aggregate (or, if that |
| |
aggregate is nil, is to constitute the relevant plant or |
| |
| 15 |
(2) | This paragraph applies in relation to plant or machinery if |
| |
| |
| |
(a) | the plant or machinery falls within sub-paragraph (4) at |
| |
the start of the relevant day, or |
| 20 |
(b) | the plant or machinery falls within that sub-paragraph at |
| |
the end of the relevant day, having been acquired by the |
| |
relevant company from an associated company on that |
| |
| |
(4) | Plant or machinery falls within this sub-paragraph if the relevant |
| 25 |
| |
(a) | is the lessee of the plant or machinery under a long funding |
| |
| |
(b) | is treated as the owner of the plant or machinery under |
| |
section 67 of CAA 2001 (hire purchase and similar |
| 30 |
| |
| |
(a) | the relevant company is the lessee of the plant or |
| |
machinery under a long funding operating lease at the |
| |
start of the relevant day, or |
| 35 |
(b) | the relevant company is the lessee of the plant or |
| |
machinery under such a lease at the end of the relevant day |
| |
and the plant or machinery was acquired by the relevant |
| |
company from an associated company on that day.” |
| |
| 40 |
5 (1) | Paragraph 17 (meaning of “PM” in paragraph 16) is amended as follows. |
| |
(2) | In sub-paragraph (1)— |
| |
(a) | after “paragraph” insert “and paragraph 17A”, and |
| |
|
| |
|