Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 1 — Payments connected with transferred land
414

Application of the Chapter
835
Transferor or associate becomes liable for payment of rent
(1)
Section 838 has effect if—
(a)
land, or an estate or interest in land, is transferred,
(b)
the transferor, or a company associated with the transferor, becomes
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liable to make a payment of rent under a lease of the land or part of it,
and
(c)
a deduction by way of relevant corporation tax relief (see section 837)
is allowed for the payment.
(2)
Section 839 has effect if—
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(a)
land, or an estate or interest in land, is transferred,
(b)
the transferor, or a company associated with the transferor, becomes
liable to make a payment of rent under a lease of the land or part of it,
and
(c)
a deduction under section 76 of ICTA (expenses of insurance
15
companies) is allowed for the payment.
(3)
The reference in subsection (1)(a) or (2)(a) to a transfer of an estate or interest
in land includes a reference to any of the following—
(a)
the granting of a lease or another transaction involving the creation of
a new estate or interest in the land,
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(b)
the transfer of the lessee’s interest under a lease by surrender or
forfeiture of the lease, and
(c)
a transaction or series of transactions affecting land or an estate or
interest in land, such that some person is the owner or one of the
owners before and after the transaction or transactions but another
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person becomes or ceases to be one of the owners.
(4)
In relation to a transaction or series of transactions mentioned in subsection
(3)(c), a person is to be regarded as a transferor for the purposes of this Chapter
if the person—
(a)
is an owner before the transaction or transactions, and
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(b)
is not the sole owner afterwards.
(5)
The liability mentioned in subsection (1)(b) or (2)(b) is one resulting from—
(a)
a lease of the land or part of it granted (at the time of the transfer or
later) by the transferee to the transferor, or
(b)
another transaction or series of transactions affecting the land or an
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estate or interest in it.
(6)
The liability mentioned in subsection (1)(b) or (2)(b) is one arising at the time
of the transfer or later.
(7)
The reference in subsection (1)(a) or (2)(a) to a transfer does not include a
transfer on or before 14 April 1964.
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836
Transferor or associate becomes liable for payment other than rent
(1)
Section 838 has effect if—
(a)
land, or an estate or interest in land, is transferred,

Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 1 — Payments connected with transferred land
415

(b)
the transferor, or a company associated with the transferor, becomes
liable to make a payment which is not rent under a lease but is
otherwise connected with the land or part of it (whether it is a payment
under a rentcharge or under some other transaction), and
(c)
a deduction by way of relevant corporation tax relief (see section 837)
5
is allowed for the payment.
(2)
Section 839 has effect if—
(a)
land, or an estate or interest in land, is transferred,
(b)
the transferor, or a company associated with the transferor, becomes
liable to make a payment which is not rent under a lease but is
10
otherwise connected with the land or part of it (whether it is a payment
under a rentcharge or under some other transaction), and
(c)
a deduction under section 76 of ICTA (expenses of insurance
companies) is allowed for the payment.
(3)
The reference in subsection (1)(a) or (2)(a) to a transfer of an estate or interest
15
in land includes a reference to any of the following—
(a)
the granting of a lease or another transaction involving the creation of
a new estate or interest in the land,
(b)
the transfer of the lessee’s interest under a lease by surrender or
forfeiture of the lease, and
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(c)
a transaction or series of transactions affecting land or an estate or
interest in land, such that some person is the owner or one of the
owners before and after the transaction or transactions but another
person becomes or ceases to be one of the owners.
(4)
In relation to a transaction or series of transactions mentioned in subsection
25
(3)(c), a person is to be regarded as a transferor for the purposes of this Chapter
if the person—
(a)
is an owner before the transaction or transactions, and
(b)
is not the sole owner afterwards.
(5)
The liability mentioned in subsection (1)(b) or (2)(b) is one resulting from a
30
transaction or series of transactions affecting the land or an estate or interest in
it.
(6)
The liability mentioned in subsection (1)(b) or (2)(b) is one arising at the time
of the transfer or later.
(7)
The reference in subsection (1)(a) or (2)(a) to a transfer does not include a
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transfer on or before 14 April 1964.
837
Relevant corporation tax relief
For the purposes of this Chapter each of the following is a deduction by way of
relevant corporation tax relief—
(a)
a deduction in calculating profits or losses of a trade for corporation tax
40
purposes,
(b)
a deduction in calculating the profits of a UK property business for
corporation tax purposes,
(c)
a deduction in calculating any loss for which relief is given under
section 91 (losses from miscellaneous transactions), or in calculating
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profits or gains chargeable to corporation tax under or by virtue of any
provision to which section 1173 (miscellaneous charges) applies, and

Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 1 — Payments connected with transferred land
416

(d)
a deduction under section 1219 of CTA 2009 (expenses of management
of a company’s investment business).
Relief (other than for certain insurance company expenses): restriction and carrying forward
838
Relevant corporation tax relief: deduction not to exceed commercial rent
(1)
The rules in subsection (3) apply to the calculation of the deduction by way of
5
relevant corporation tax relief allowed in an accounting period—
(a)
for the non-excluded element of the payment within section 835(1) or
836(1), or
(b)
if there are two or more such payments, for the non-excluded elements
of those payments.
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(2)
For the purposes of this section the non-excluded element of a payment is the
element of the payment not excluded under section 843 (service charges etc).
(3)
The rules are—

Rule 1 —meaning of amount E

For any accounting period, amount E (which may be nil) is the expense or total
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expenses to be brought, in accordance with generally accepted accounting
practice, into account in the period in respect of—
(a)
the non-excluded element of the payment, or
(b)
the non-excluded elements of the payments.

Rule 2 — calculations
20

For every accounting period—
(a)
calculate the total of amount E for the period and amount E for every
previous accounting period ending on or after the date of the transfer
mentioned in section 835(1)(a) or 836(1)(a),
(b)
calculate the total of the deductions by way of relevant corporation tax
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relief for every previous accounting period ending on or after the date
of that transfer, and
(c)
subtract the total at (b) from the total at (a) to give the cumulative
unrelieved expenses for the period.

Rule 3 — meaning of post-spread period
30

An accounting period is a post-spread period if for that accounting period, and
every later accounting period, there are no payments within section 835(1) or
836(1).

Rule 4 — the deduction allowed in an accounting period

If an accounting period is not a post-spread period, the deduction allowed for
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the period is equal to the cumulative unrelieved expenses for the period, but is
equal to the commercial rent for the period if that is less (see section 844 or 845).

Rule 5 — accounting periods in which no deduction allowed

If an accounting period is a post-spread period, no deduction is allowed for the
period.
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Corporation Tax Bill
Part 19 — Sale and lease-back etc
Chapter 1 — Payments connected with transferred land
417

Insurance company expenses: restriction and carrying forward of relief
839
Deduction under section 76 of ICTA not to exceed commercial rent
(1)
Subsection (3) applies to the calculation of the deduction under section 76 of
ICTA allowed for the non-excluded element of the payment within section
835(2) or 836(2).
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(2)
For the purposes of this section the non-excluded element of a payment is the
element of the payment not excluded under section 843 (service charges etc).
(3)
The deduction must not exceed the commercial rent for the period for which
the payment is made (see section 844 or 845).
840
Carrying forward parts of payments
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(1)
This section applies if—
(a)
section 839 has effect, and
(b)
conditions A and B are met.
(2)
Condition A is that under section 839 part of a payment which would
otherwise be allowed as a deduction under section 76 of ICTA is not allowed.
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(3)
Condition B is that one or more later payments are made, by the transferor or
a person associated with the transferor, under—
(a)
the lease (if section 839 has effect because of section 835(2)), or
(b)
the rentcharge or other transaction mentioned in section 836(2)(b) (if
section 839 has effect because of section 836(2)).
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(4)
The part of the payment mentioned in subsection (2) may be carried forward
and treated for the purposes of a deduction under section 76 of ICTA as if it
were made—
(a)
when the next of the later payments is made, and
(b)
for the period for which that later payment is made.
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(5)
So far as a part of a payment carried forward under this section is not allowed
as a deduction under section 76 of ICTA, it may be carried forward again under
this section.
841
Aggregation and apportionment of payments
(1)
This section applies for the purposes of section 839.
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(2)
If more than one payment is made for the same period the payments must be
taken together.
(3)
If payments are made for periods which overlap—
(a)
the payments must be apportioned, and
(b)
the apportioned payments which belong to the common part of the
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overlapping periods must be taken together.
(4)
References in subsections (2) and (3) to payments include references to parts of
payments which under section 840 are treated as if made later than they were
made.