Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
343

684
Disallowance of overseas property business losses
(1)
This section has effect for the purpose of restricting relief under section 66 for
a loss made by the company in an overseas property business before the
change in ownership.
(2)
A loss in the business made in an accounting period beginning before the
5
change in ownership may not be used under section 66(3) to reduce the profits
of the business of an accounting period ending after the change in ownership.
Apportionment of amounts
685
Apportionment of amounts
(1)
This section applies for the purposes of this Chapter, but subsection (2) is
10
subject to subsection (3).
(2)
Any amount for the actual accounting period in column 1 of the following table
is to be apportioned to the two notional accounting periods in accordance with
the corresponding method of apportionment in column 2 of the table.

Row
1. Amount to be apportioned
2. Method of apportionment

15

1
The amount for the actual
Apportion the amount in column 1

accounting period of any adjusted
on a time basis according to the

non-trading profits from the
respective lengths of the two

company’s loan relationships (see
notional accounting periods.

section 686(2)).

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2
The amount for the actual
Apportion the amount in column 1

accounting period of any adjusted
on a time basis according to the

non-trading deficit from the
respective lengths of the two

company’s loan relationships (see
notional accounting periods.

section 686(3)).

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3
The amount of any non-trading
(1) If condition A in section 686(4) is

debit that falls to be brought into
met, apportion the amount in

account for the actual accounting
column 1 by reference to the time of

period for the purposes of Part 5 of
accrual of the amount to which the

CTA 2009 (loan relationships) in
debit relates. (2) If condition B in

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respect of any debtor relationship of
section 686(5) is met, apportion the

the company.
amount in column 1 to the first

notional accounting period.

4
The amount of any non-trading
Apportion the whole of the amount

deficit carried forward to the actual
in column 1 to the first notional

35

accounting period under section
accounting period.

457(1) of CTA 2009 (basic rule for

deficits: carry forward to accounting

periods after deficit period).

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
344

Row
1. Amount to be apportioned
2. Method of apportionment

5
The amount of any non-trading
Apportion to each notional

credits or debits in respect of
accounting period the credits or

intangible fixed assets that fall to be
debits that would fall to be brought

brought into account for the actual
into account in that period if it were

5

accounting period under section 751
a period of account for which

of CTA 2009 (non-trading gains and
accounts were drawn up in

losses), but excluding any amount
accordance with generally accepted

within column 1 of row 6.
accounting practice.

6
The amount of any non-trading loss
Apportion the whole of the amount

10

on intangible fixed assets carried
in column 1 to the first notional

forward to the actual accounting
accounting period.

period under section 753(3) of CTA

2009 and treated under that section

as if it were a non-trading debit of

15

that period.

7
The amount of any expenses of
Apportion to each notional

management referable to the actual
accounting period the amounts that

accounting period within the
would fall to be brought into

meaning of Chapter 2 of Part 16 of
account in that period as an amount

20

CTA 2009 (companies with
in column 1 if it were a period of

investment business) (but see
account for which accounts were

section 686(6)).
drawn up in accordance with

generally accepted accounting

practice.

25

8
The amount of any excess carried
Apportion the whole of the amount

forward under section 1223 of CTA
in column 1 to the first notional

2009 (expenses of management
accounting period.

carried forward) to the actual

accounting period.

30

9
The amount of any allowances
Apportion the amount in column 1

falling to be made for the actual
on a time basis according to the

accounting period as a result of
respective lengths of the two

section 253 of CAA 2001 which
notional accounting periods.

would (but for this Chapter) be

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added to the expenses of

management for the period because

of section 1233 of CTA 2009 (excess

capital allowances).

10
Any other amounts by reference to
Apportion the amount in column 1

40

which the profits or losses of the
on a time basis according to the

actual accounting period would
respective lengths of the two

(but for this Chapter) be calculated.
notional accounting periods.

(3)
If any method of apportionment in column 2 of the table in subsection (2)
would work unjustly or unreasonably in any case, such other method is to be
45
used as is just and reasonable.
(4)
For the meaning of certain expressions used in this section, see section 686.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
345

686
Meaning of certain expressions in section 685
(1)
This section applies for the purposes of the table in section 685(2).
(2)
For the purposes of column 1 of row 1 of the table, the amount for the actual
accounting period of any adjusted non-trading profits from the company’s
loan relationships is the amount which would be the amount of the profits
5
from those relationships chargeable under section 299 of CTA 2009 (charge to
tax on non-trading profits) if, in calculating that amount, amounts for that
period within column 1 of row 3 or 4 of the table were disregarded.
(3)
For the purposes of column 1 of row 2 of the table, the amount for the actual
accounting period of any adjusted non-trading deficit from the company’s loan
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relationships is the amount which would be the amount of the non-trading
deficit from those relationships if, in calculating that amount, amounts for that
period within column 1 of row 3 or 4 of the table were disregarded.
(4)
Condition A is that —
(a)
the amount in column 1 of row 3 of the table is determined on an
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amortised cost basis of accounting, and
(b)
none of the following provisions applies—
(i)
section 373 of CTA 2009 (late interest treated as not accruing
until paid in some cases),
(ii)
section 407 of that Act (postponement until redemption of
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debits for connected companies’ deeply discounted securities),
or
(iii)
section 409 of that Act (postponement until redemption of
debits for close companies’ deeply discounted securities).
(5)
Condition B is that —
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(a)
the amount in column 1 of row 3 of the table is determined on an
amortised cost basis of accounting, and
(b)
any of the provisions mentioned in subsection (4)(b) applies.
(6)
The expenses of management mentioned in column 1 of row 7 of the table do
not include any expenses for which a deduction under section 1219 of CTA
30
2009 (expenses of management of a company’s investment business) would be
disallowed because of subsection (3)(b) of that section.
Adjustment to balancing charges if relief is restricted
687
Adjustment to balancing charges if relief is restricted
(1)
This section applies if condition A or B is met.
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(2)
Condition A is that the debits to be brought into account for the purposes of
Part 5 of CTA 2009 (loan relationships) in the case of the company in respect of
its loan relationships are restricted because of section 679.
(3)
Condition B is that deductions from the company’s total profits are restricted
because of section 680 or 682.
40
(4)
In applying the provisions of CAA 2001 about balancing charges to the
company by reference to any event after the change in ownership, there is to be
disregarded any allowance falling to be made in taxing the company’s trade
for any accounting period beginning before the change in ownership.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
346


This subsection applies despite section 577(3) of CAA 2001.
(5)
But subsection (4) does not apply if the allowance has been given effect to by
means of relief against any profits of that accounting period or any subsequent
accounting period beginning before the change in ownership.
(6)
For the purposes of subsection (5), it is to be assumed that any loss attributable
5
to any such allowance as is mentioned in subsection (4) is relieved before any
loss which is not attributable to such an allowance.
Meaning of “significant increase in the amount of a company’s capital”
688
Meaning of “significant increase in the amount of a company’s capital”
(1)
This section and sections 689 to 691 have effect for determining whether, for the
10
purposes of section 677(2), there is a significant increase in the amount of a
company’s capital after a change in the ownership of the company.
(2)
There is a significant increase in the amount of a company’s capital if amount
B—
(a)
exceeds amount A by at least £1 million, or
15
(b)
is at least twice amount A.
(3)
For the meaning of—
(a)
“amount A” and “amount B”, see sections 689 and 690 respectively, and
(b)
“amount of capital”, see section 691.
689
Amount A
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(1)
In section 688, amount A is the lower of—
(a)
the amount of the company’s capital immediately before the change in
ownership, and
(b)
the highest 60 day minimum amount for the pre-change year.
(2)
The highest 60 day minimum amount for the pre-change year is found as
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follows.
Step 1

Find the daily amounts of the company’s capital over the pre-change year.
Step 2

Take the highest of the daily amounts.
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Step 3

Find out whether there was in the pre-change year a period of at least 60 days
in which there was no daily amount lower than the amount taken.
Step 4

If there was, the amount taken is the highest 60 day minimum amount for the
35
pre-change year.

If there was not, take the next highest of the daily amounts and repeat step 3;
and so on, until the highest 60 day minimum amount for the pre-change year
is found.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
347

(3)
In this section “the pre-change year” means the period of one year ending
immediately before the change in ownership.
690
Amount B
(1)
In section 688, amount B is the highest 60 day minimum amount for the post-
change period.
5
(2)
The highest 60 day minimum amount for the post-change period is found as
follows.
Step 1

Find the daily amounts of the company’s capital over the post-change period.
Step 2
10

Take the highest of the daily amounts.
Step 3

Find out whether there was in the post-change period a period of at least 60
days in which there was no daily amount lower than the amount taken.
Step 4
15

If there was, the amount taken is the highest 60 day minimum amount for the
post-change period.

If there was not, take the next highest of the daily amounts and repeat step 3;
and so on, until the highest 60 day minimum amount for the post-change
period is found.
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(3)
In this section “the post-change period” means the period of 3 years beginning
with the change in ownership.
691
Meaning of “amount of capital”
(1)
This section applies for the purposes of sections 688 to 690.
(2)
The amount of the capital of a company is the sum of—
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(a)
the amount of the paid up share capital of the company,
(b)
the amount outstanding of any debts incurred by the company for any
money borrowed or capital assets acquired by the company,
(c)
the amount outstanding of any debts so incurred for any right to
receive income created in favour of the company,
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(d)
the amount outstanding of any debts so incurred for consideration the
value of which to the company was (at the time when the debts were
incurred) substantially less than the amount of the debts (including any
premium on the debts), and
(e)
the amount outstanding of any redeemable loan capital issued by the
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company.
(3)
For the purposes of subsection (2)—
(a)
the amount of the paid up share capital includes any amount in the
share premium account of the company, and
(b)
the amount outstanding of any debts includes the amount of any
40
interest due on the debts.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 4 — Company with investment business: restrictions on relief: asset transferred within group
348

(4)
Amounts of capital are to be expressed in sterling.
(5)
In this section “share premium account” has the same meaning as in section 610
of the Companies Act 2006.
Chapter 4
Company with investment business: restrictions on relief: asset transferred
5
within group
Introduction
692
Introduction to Chapter
(1)
This Chapter applies if—
(a)
there is a change in the ownership of a company with investment
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business (“the company”), and
(b)
conditions 1 to 3 are met.
(2)
Condition 1 is that none of conditions A to C in section 677 is met.
(3)
Condition 2 is that after the change in ownership the company acquires an
asset from another company in circumstances such that—
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(a)
section 171(1) of TCGA 1992 (no gain/no loss on transfer within group),
or
(b)
section 775 of CTA 2009 (tax-neutral transfer within group),

applies to the acquisition.
(4)
Condition 3 is that—
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(a)
in a case within subsection (3)(a), a chargeable gain accrues to the
company on a disposal of the asset within the period of 3 years
beginning with the change in ownership, or
(b)
in a case within subsection (3)(b), there is a non-trading chargeable
realisation gain on the realisation of the asset within that period.
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(5)
For the purposes of subsection (4), an asset (P) acquired by the company as
mentioned in subsection (3) is treated as the same as an asset (Q) owned at a
later time by the company if the value of Q is derived in whole or in part from
P.
(6)
In particular, P is treated as the same as Q for those purposes if—
30
(a)
Q is a freehold,
(b)
P was a leasehold, and
(c)
the lessee has acquired the reversion.
(7)
In this Chapter—
“the change in ownership” means the change in ownership mentioned in
35
subsection (1),
“the company” has the same meaning as in this section,
“non-trading chargeable realisation gain” means a chargeable realisation
gain (within the meaning of Part 8 of CTA 2009 (intangible fixed assets))
which is a non-trading credit for the purposes of that Part (see section
40
746 of that Act),
“realisation” has the meaning given by section 734 of CTA 2009, and

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 4 — Company with investment business: restrictions on relief: asset transferred within group
349

“the relevant gain” means the gain within subsection (4)(a) or (b).
693
Meaning of “amount of profits which represents a relevant gain”
(1)
In this Chapter, the amount of any profits which represents a relevant gain is
found by comparing—
(a)
the amount (“Y”) of the relevant gain, with
5
(b)
the amount (“Z”) which is included in respect of chargeable gains or, as
the case may be, non-trading chargeable realisation gains for the
accounting period concerned.
(2)
If Y does not exceed Z, the amount of the profits which represents the relevant
gain equals Y.
10
(3)
If Y exceeds Z, the amount of those profits equals Z.
694
Meaning of “the relevant provisions”
In this Chapter “the relevant provisions” means—
(a)
section 8(1) of, and Schedule 7A to, TCGA 1992 (amounts included in
respect of chargeable gains in total profits), or
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(b)
Chapter 6 of Part 8 of CTA 2009 (intangible fixed assets: how credits
and debits are given effect).
Notional split of accounting period in which change in ownership occurs
695
Notional split of accounting period in which change in ownership occurs
(1)
This section applies for the purposes of this Chapter.
20
(2)
The accounting period in which the change in ownership occurs (“the actual
accounting period”) is treated as two separate accounting periods (“notional
accounting periods”), the first ending with the change and the second
consisting of the remainder of the period.
(3)
The amounts for the actual accounting period in column 1 of the table in section
25
702(2) are apportioned to the two notional accounting periods in accordance
with section 702.
(4)
In this Chapter “the actual accounting period” and “notional accounting
periods” have the same meaning as in this section.
Restrictions on relief
30
696
Restriction on debits to be brought into account
(1)
This section has effect for the purpose of restricting the debits to be brought
into account for the purposes of Part 5 of CTA 2009 (loan relationships) in
respect of the company’s loan relationships.
(2)
But this section applies only if, in accordance with the relevant provisions and
35
section 702, an amount is included in respect of chargeable gains or, as the case
may be, non-trading chargeable realisation gains in the total profits of the
accounting period of the company in which the relevant gain accrues or arises.