Corporation Tax Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 5 — Companies in liquidation or administration
318

627
Meaning of “rate of corporation tax” in case of companies with small profits
(1)
This section applies if corporation tax chargeable on profits of a company for a
financial year—
(a)
is to be charged at the small profits rate (see section 18), or
(b)
is to be reduced by reference to the standard fraction or the ring fence
5
fraction within the meaning of Part 3 (see sections 19 and 20).
(2)
References in this Chapter to the “rate of corporation tax”, so far as relating to
profits of the company for the financial year concerned, are to be taken—
(a)
as references to the small profits rate, or
(b)
(as the case may be) as including references to the standard fraction or
10
the ring fence fraction (and with references to a rate being “fixed” or
“proposed” read accordingly as references to the fraction concerned
being fixed or proposed).
Companies in liquidation
628
Company in liquidation: corporation tax rates
15
(1)
This section applies, in the case of a company that is being wound up, in
relation to profits of the company arising in its final year (see subsections (2) to
(5)) or its penultimate year (see subsections (6) and (7)).
(2)
The rate of corporation tax to be applied in assessing, before the winding up of
the company is completed, the corporation tax chargeable on the profits of the
20
company arising in the winding up in its final year is to be determined in
accordance with subsections (3) to (5).
(3)
If the rate of corporation tax has been fixed for the final year, that fixed rate is
to be applied.
(4)
If the rate of corporation tax has been proposed (but not yet fixed) for the final
25
year, that proposed rate is to be applied.
(5)
If the rate of corporation tax has been neither fixed nor proposed for the final
year, the rate fixed or proposed for the penultimate year is to be applied.
(6)
Subsection (7) applies if—
(a)
the winding up of the company started before the company’s final year,
30
and
(b)
an assessment to corporation tax is made at a time when the rate of
corporation tax for the company’s penultimate year is proposed (but
not yet fixed).
(7)
The rate of corporation tax proposed for the penultimate year is to be applied
35
in relation to the profits of the company arising in the winding up at any time
in that year.
629
Company in liquidation: making of assessment to tax
(1)
This section applies if—
(a)
an assessment to corporation tax is made on the profits of a company
40
that is being wound up, and
(b)
the assessment is made before the date when the winding up is
completed (“the actual winding up date”).

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 5 — Companies in liquidation or administration
319

(2)
An assessment for an accounting period falling after the start of the winding
up is not invalid because it is made before the end of the period.
(3)
In applying section 12 of CTA 2009 (accounting periods of companies being
wound up) for the purpose of determining when an accounting period of the
company ends, the liquidator may make an assumption as to what the actual
5
winding up date will be (“the assumed winding up date”).
(4)
The company’s final and penultimate years are not changed if the assumption
made under subsection (3) as to the actual winding up date is wrong.
(5)
If the actual winding up date is later than the assumed winding up date—
(a)
an accounting period of the company ends on the assumed winding up
10
date (“period A”), and
(b)
a new accounting period of the company (“period B”) begins
immediately after the end of period A.
(6)
Section 12 of CTA 2009 then applies as if the winding up of the company
started at the time when period B begins.
15
Companies in administration
630
Company in administration: corporation tax rates
(1)
This section applies, in the case of a company in administration, in relation to
profits of the company arising in its final year (see subsections (2) to (5)) or its
penultimate year (see subsections (6) and (7)).
20
(2)
The rate of corporation tax to be applied in assessing, before the dissolution
event in respect of the company, the corporation tax chargeable on the profits
of the company arising in the administration in its final year is to be
determined in accordance with subsections (3) to (5).
(3)
If the rate of corporation tax has been fixed for the final year, that fixed rate is
25
to be applied.
(4)
If the rate of corporation tax has been proposed (but not yet fixed) for the final
year, that proposed rate is to be applied.
(5)
If the rate of corporation has been neither fixed nor proposed for the final year,
the rate fixed or proposed for the penultimate year is to be applied.
30
(6)
Subsection (7) applies if—
(a)
the company entered administration before its final year, and
(b)
an assessment to corporation tax is made at a time when the rate of
corporation tax for the company’s penultimate year is proposed (but
not yet fixed).
35
(7)
The rate of corporation tax proposed for the penultimate year is to be applied
in relation to the profits of the company arising in the administration at any
time in that year.
631
Company in administration: making of assessment to tax
(1)
This section applies if—
40
(a)
an assessment to corporation tax is made on the profits of a company in
administration, and

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 5 — Companies in liquidation or administration
320

(b)
the assessment is made before the date of the dissolution event in
respect of the company (“the actual dissolution date”).
(2)
An assessment for an accounting period in which the company is in
administration is not invalid because it is made before the end of the period.
(3)
In applying section 10(1) of CTA 2009 (time when accounting periods come to
5
an end) for the purpose of determining when an accounting period of the
company ends, the administrator may make an assumption as to what the
actual dissolution date will be (“the assumed dissolution date”).
(4)
The company’s final and penultimate years are not changed if the assumption
made under subsection (3) as to the actual dissolution date is wrong.
10
(5)
If the actual dissolution date is later than the assumed dissolution date—
(a)
an accounting period of the company ends on the assumed dissolution
date (“period A”), and
(b)
a new accounting period of the company (“period B”) begins
immediately after the end of period A.
15
(6)
Section 10(1) of CTA 2009 then applies as if the company had entered
administration at the beginning of period B.
Supplementary
632
Meaning of rate being “fixed” or “proposed”
(1)
This section applies for the purposes of sections 628 and 630.
20
(2)
A rate of corporation tax is “fixed”—
(a)
in the case of a company that is being wound up, if the rate has been
fixed by an Act passed before the completion of the winding up, and
(b)
in the case of a company that is in administration, if the rate has been
fixed by an Act passed before the dissolution event in respect of the
25
company,

but this is subject to subsection (4).
(3)
A rate of corporation tax is “proposed” if the rate is proposed by a Budget
resolution (whether or not subsequently fixed by an Act).
(4)
If a Budget resolution proposes to alter a rate of corporation tax that has been
30
fixed, references in sections 628 and 630 to a fixed rate are references to that rate
as proposed to be altered by the resolution.
(5)
In this section “Budget resolution” means a resolution of the House of
Commons for fixing a rate of corporation tax.
633
Exemption for interest on overpaid tax in final accounting period
35
(1)
This section applies if, in the final accounting period of a company that is being
wound up or is in administration, interest within subsection (2) arises to the
company.
(2)
Interest within this subsection arises to a company if—
(a)
the interest is received or is receivable by the company under section
40
826 of ICTA (interest on tax overpaid), and

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 6 — Banks etc in compulsory liquidation
321

(b)
the interest does not exceed £2000.
(3)
The interest is excluded in calculating the company’s income for corporation
tax purposes.
(4)
In subsection (1) the “final accounting period” means—
(a)
in the case of a company being wound up, the accounting period which
5
ends, in accordance with section 12 of CTA 2009 (accounting periods of
companies being wound up), with the completion of the winding up,
and
(b)
in the case of a company in administration, the last accounting period
of the company before the dissolution event in respect of the company.
10
Chapter 6
Banks etc in compulsory liquidation
634
Overview of Chapter
(1)
This Chapter provides for the receipts of certain types of company being
wound up to be charged to corporation tax.
15
(2)
For provision charging the receipts of such companies to income tax, see
Chapter 3A of Part 14 of ITA 2007.
635
Application of Chapter
(1)
This Chapter applies if—
(a)
a company is being or has been wound up by the court in the United
20
Kingdom, and
(b)
conditions A, B and C are met.
(2)
Condition A is that the company was, at any time within the period mentioned
in subsection (5), lawfully carrying on a business of accepting deposits as—
(a)
a person of the kind mentioned in paragraph (b) of the definition of
25
“bank” in section 1120(2) (persons with permission under Part 4 of
FISMA 2000 to accept deposits), or
(b)
a permitted EEA credit institution.
(3)
Condition B is that the company has permanently ceased to carry on the trade
that included the business of accepting deposits (the “deposit-taking trade”).
30
(4)
Condition C is that the company is insolvent and—
(a)
was so when the winding up proceedings started, or
(b)
became so at any time in the period of 12 months following the day on
which those proceedings started.
(5)
The period referred to in subsection (2) is the period of 12 months ending with
35
the earlier of—
(a)
the day on which the winding up proceedings started, and
(b)
the day on which the company permanently ceased to carry on the
deposit-taking trade.
(6)
In subsection (2)(b) a “permitted EEA credit institution” means an EEA firm of
40
the kind mentioned in paragraph 5(b) of Schedule 3 to FISMA 2000 (credit

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 6 — Banks etc in compulsory liquidation
322

institutions authorised by home state regulator) which has permission to
accept deposits under paragraph 15 of that Schedule.
636
Charge to corporation tax on winding up receipts
(1)
The charge to corporation tax on income applies to winding up receipts arising
from the deposit-taking trade.
5
(2)
Subsection (1) applies in relation to a winding up receipt only so far as its value
was not brought into account in calculating the profits of the trade of any
period before the permanent cessation of the trade.
(3)
A “winding up receipt” means (subject to subsection (4)) a sum received by the
company or its liquidator after—
10
(a)
the start of the winding up proceedings, or
(b)
if later, the permanent cessation of the deposit-taking trade.
(4)
The following are not winding up receipts—
(a)
a sum received on behalf of a person entitled to the sum to the exclusion
of the company and its liquidator, and
15
(b)
a sum realised by the transfer of an asset required to be valued under
section 162 of CTA 2009 (valuation of trading stock on cessation).
637
Transfer of rights to payment
(1)
This section applies if—
(a)
the company or its liquidator transfers for value to another person the
20
right to receive a sum arising from the deposit-taking trade, and
(b)
the sum is one which, if received by the company or its liquidator,
would be a winding up receipt.
(2)
If the transfer is at arm’s length, this Chapter has effect as if the amount or
value of the consideration for the transfer were a winding up receipt arising
25
from the deposit-taking trade.
(3)
If the transfer is not at arm’s length, this Chapter has effect as if the value of the
right transferred as between parties at arm’s length were a winding up receipt
arising from the deposit-taking trade.
638
Allowable deductions
30
(1)
In calculating the amount on which corporation tax is charged under this
Chapter for an accounting period, deductions are allowed in accordance with
this section from the amount which would otherwise be chargeable to
corporation tax under this Chapter.
(2)
A deduction is allowed for the total sum of all losses, expenses and debits
35
within subsection (3) that are incurred during or before the accounting period
(but subject to subsections (4) and (5)).
(3)
The losses, expenses and debits within this subsection are those which, if the
company carrying on the deposit-taking trade had not permanently ceased to
do so—
40
(a)
would have been deducted in calculating the profits of the trade for
corporation tax purposes, or

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 6 — Banks etc in compulsory liquidation
323

(b)
would have been deducted from or set off against the profits of the
trade for corporation tax purposes.
(4)
No deduction is allowed if the loss, expense or debit arises directly or indirectly
from the cessation itself.
(5)
A loss, expense or debit is only within subsection (3) if incurred—
5
(a)
after the start of the winding up proceedings or, if later, the permanent
cessation of the deposit-taking trade, or
(b)
in the case of a loss, at or before the permanent cessation of the deposit-
taking trade.
(6)
No deduction for an amount is allowed under this section if the amount has
10
already been allowed (whether under this section or under any other provision
of the Tax Acts).
639
Election to carry back
(1)
This section applies if a winding up receipt arising from the deposit-taking
trade is received in an accounting period beginning no later than 6 years after
15
the company permanently ceased to carry on the trade.
(2)
The company or its liquidator may elect that the corporation tax chargeable
under this Chapter in respect of the receipt is to be charged as if the receipt has
been received on the date of the cessation.
(3)
The election must be made before the end of the period of two years beginning
20
immediately after the end of the accounting period in which the receipt is
received.
(4)
If an election is made under this section an assessment to corporation tax must
be made accordingly (regardless of anything in the Corporation Tax Acts).
640
Relationship of Chapter with other corporation tax provisions
25
(1)
If a winding up receipt arising from the deposit-taking trade is chargeable to
corporation tax under this Chapter it is not chargeable to corporation tax under
any other provision.
(2)
This Chapter has effect regardless of section 464(1) of CTA 2009 (priority of
loan relationship provisions).
30
641
Interpretation of Chapter
(1)
This section applies for the purposes of this Chapter.
(2)
Winding up proceedings start against a company at the time when the petition
for its winding up by the court is presented.
(3)
There is the permanent cessation of a company’s trade if—
35
(a)
the company ceases to carry on the trade, or
(b)
the company ceases to be within the charge to corporation tax in respect
of the trade,

whether or not the trade is in fact ceased.
(4)
A company is insolvent at any time if at that time—
40
(a)
it is unable to pay its debts as they fall due, or

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 7 — Co-operative housing associations
324

(b)
the value of its assets is less than the amount of its liabilities (including
its contingent and prospective liabilities).
(5)
“Company” means—
(a)
a company as defined in section 1(1) of the Companies Act 2006, or
(b)
an unregistered company as defined in section 220 of the Insolvency
5
Act 1986 or Article 184 of the Insolvency (Northern Ireland) Order 1989
(S.I. 1989/2405 (N.I.19)).
(6)
For the meaning of “deposit-taking trade” and “winding up receipt”, see
sections 635(3) and 636(3) respectively.
Chapter 7
10
Co-operative housing associations
642
Disregard of rent from members and of interest payable
(1)
Subsections (2) and (3) apply if a housing association makes a claim under this section
for an accounting period or part of an accounting period during which the association
was approved for the purposes of this Chapter.
15
(2)
Rent to which the association was entitled from its members for the accounting period
or part of an accounting period is ignored for tax purposes.
(3)
The association is treated for corporation tax purposes as if any interest payable by it
for the accounting period or part of an accounting period were not payable.
(4)
But subsection (3) does not apply so far as the interest is attributable to
20
property that is not subject to a tenancy.
643
Exemption for gains on a sale of property
(1)
This section applies if—
(a)
chargeable gains accrue to a housing association on a disposal by way
of sale of any property which has been occupied, or is occupied, by a
25
tenant of the housing association,
(b)
the gains accrue in an accounting period or part of an accounting period
during which the association was approved for the purposes of this
Chapter, and
(c)
the association makes a claim under this section for that period or part
30
of a period.
(2)
No liability to corporation tax arises in respect of the gains.
644
Approval of housing associations
(1)
In the case of a housing association in Great Britain, the power to approve
housing associations for the purposes of this Chapter—
35
(a)
is exercisable by the Scottish Ministers if the association has its
registered office in Scotland,
(b)
is exercisable by the Welsh Ministers in relation to Wales, and
(c)
is otherwise exercisable by the Secretary of State.