Corporation Tax Bill

House of Commons

Session 2009 - 10
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Corporation Tax Bill

Corporation Tax Bill
Part 23 — Company distributions
Chapter 8 — Interpretation of Part
543

(6)
In this section “90% group” means a company and all its 90% subsidiaries.
1114
“In respect of securities”
(1)
In this Part “in respect of securities of the company”, in relation to a company
which is a member of a 90% group, means in respect of securities of—
(a)
that company, or
5
(b)
any other company in the group.
(2)
Nothing in subsection (1) requires a company to be treated as making a
distribution to any company which is in the same group and is UK resident.
(3)
For the purposes of this Part, except where the context otherwise requires—
(a)
interest paid by a company on money advanced without the issue of a
10
security for the advance, or
(b)
other consideration given by a company for the use of money so
advanced,

is treated as if paid, or given, in respect of a security issued for the advance by
the company.
15
(4)
For the purposes of this Part a thing is regarded as done in respect of a security
if it is done to a person—
(a)
as the holder of the security, or
(b)
as the person who held the security at a particular time.
(5)
For the purposes of this Part a thing is also regarded as done in respect of a
20
security if it is done in pursuance of a right granted, or an offer made, in respect
of a security.
(6)
In this section “90% group” means a company and all its 90% subsidiaries.
1115
“New consideration”
(1)
In this Part, unless the context otherwise requires—
25
(a)
“new consideration” means consideration not provided (directly or
indirectly) out of assets of the company, and
(b)
in particular, “new consideration” does not include amounts retained
by the company by way of capitalising a distribution.

But paragraph (a) is subject to the other subsections of this section.
30
(2)
Subsection (3) applies if—
(a)
share capital has been issued at a premium representing new
consideration, and
(b)
any part (“the applied part”) of that premium is afterwards applied in
paying up share capital.
35
(3)
The applied part of the premium is also treated as new consideration for that
share capital.

But the premium is not so treated so far as it has been taken into account under
section 1025(2) so as to enable a distribution to be treated as a repayment of
share capital.
40
(4)
The general rule is that no consideration derived from the value of any share
capital or security of a company, or from voting or other rights in a company,
is to be treated for the purposes of this Part as new consideration.

Corporation Tax Bill
Part 23 — Company distributions
Chapter 8 — Interpretation of Part
544

(5)
The general rule in subsection (4) applies unless the consideration consists of—
(a)
money or value received from the company as a qualifying
distribution,
(b)
money received from the company as a payment which for the
purposes of this Part constitutes a repayment of the share capital in
5
question, or of the principal secured by the security in question, or
(c)
the giving up of the right to the share capital or security on its
cancellation, extinguishment or acquisition by the company.

This is subject to subsection (6).
(6)
No amount is regarded as new consideration by virtue of subsection (5)(b) or
10
(c) so far as it exceeds—
(a)
any new consideration received by the company for the issue of the
share capital or security in question, or
(b)
in the case of share capital which constituted a qualifying distribution
on issue, the nominal value of that share capital.
15
1116
References to married persons, or civil partners, living together
Individuals who are married to, or are civil partners of, each other are treated
for the purposes of this Part as living together unless—
(a)
they are separated under an order of a court of competent jurisdiction,
(b)
they are separated by a deed of separation, or
20
(c)
they are in fact separated in circumstances in which the separation is
likely to be permanent.
1117
Other interpretation
(1)
In this Part, except where the context otherwise requires—
“security” includes securities not creating or evidencing a charge on
25
assets, and
“share” includes stock, and any other interest of a member in a company.
(2)
Subsection (1) does not affect the meaning of “share” in section 1054 (building
society payments).
(3)
For the purposes of this Part a distribution is treated as made out of assets of a
30
company if the cost falls on the company.
(4)
For the purposes of this Part consideration is treated as provided out of assets
of a company if the cost falls on the company.
(5)
References in this Part to issuing share capital as paid up also apply to the
paying up of any issued share capital.
35
(6)
If securities—
(a)
are issued at a price less than the amount repayable on them, and
(b)
are not listed on a recognised stock exchange,

then, for the purposes of this Part the principal secured is not taken to exceed
the issue price, unless the securities are issued on terms reasonably comparable
40
with the terms of issue of securities listed on a recognised stock exchange.
(7)
For the purposes of this Part, if something done in respect of shares is done by
reference to share holdings at a particular time, it is regarded as done—
(a)
to the then holders of the shares, or

Corporation Tax Bill
Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
545

(b)
to the personal representatives of any holder then dead.
(8)
For the purposes of this Part, if something done in respect of securities is done
by reference to holdings of securities at a particular time, it is regarded as
done—
(a)
to the then holders of the securities, or
5
(b)
to the personal representatives of any holder then dead.
Part 24
Corporation Tax Acts definitions etc
Chapter 1
Definitions
10
1118
Introduction to Chapter
(1)
This Chapter contains definitions for the purposes of the Corporation Tax Acts.
(2)
Section 1119 lists the definitions and either sets them out in full or indicates
where they are set out in full.
(3)
The definitions set out in sections 1120, 1129, 1138 and 1139 apply only for the
15
purposes of the provisions of the Corporation Tax Acts that apply them.
(4)
The definitions set out in sections 1122 and 1124 apply only for the purposes of
provisions of the Corporation Tax Acts—
(a)
which apply them, or
(b)
to which they are applied (see section 1316 of CTA 2009 and section
20
1176 of this Act).
(5)
The other definitions apply for the purposes of the Corporation Tax Acts unless
otherwise indicated (whether expressly or by implication).
1119
The definitions
The definitions referred to in section 1118(2) are—
25
“accounting date” means the date to which a company makes up its
accounts,
“accounting period” is to be read in accordance with Chapter 2 of Part 2
of CTA 2009,
“Act” includes Northern Ireland legislation,
30
“allowable loss”, in relation to corporation tax in respect of chargeable
gains, has the same meaning as in TCGA 1992 (see section 288(1) of that
Act),
“authorised unit trust” has the same meaning as in Chapter 2 of Part 13
(see sections 616 and 619),
35
“bank” is to be read in accordance with section 1120,
“basic rate” means the rate of income tax determined in pursuance of
section 6(2) of ITA 2007,
“body of persons” means any body politic, corporate or collegiate and any
company, fraternity, fellowship and society of persons whether
40
corporate or not corporate,

Corporation Tax Bill
Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
546

“branch or agency” means any factorship, agency, receivership, branch or
management,
“building society” means a building society within the meaning of the
Building Societies Act 1986,
“capital allowance” means any allowance under CAA 2001,
5
“the Capital Allowances Act” means CAA 2001,
“the charge to corporation tax on income” has the same meaning as in
CTA 2009 (see section 2(3) of that Act),
“chargeable gain” has the same meaning as in TCGA 1992,
“chargeable period” means an accounting period of a company or a tax
10
year,
“chargeable profits”, in relation to a non-UK resident company carrying
on a trade in the United Kingdom through a permanent establishment,
has the meaning given by section 19 of CTA 2009,
“charity” means a body of persons or trust established for charitable
15
purposes only,
“close company” is to be read in accordance with Chapter 2 of Part 10 (see
in particular section 439),
“company” has the meaning given by section 1121,
“connected”, in relation to two persons being connected with one another,
20
is to be read in accordance with sections 1122 and 1123,
“control”, in relation to the control of a body corporate or a partnership, is
to be read in accordance with section 1124,
“derivative contract” has the same meaning as in Part 7 of CTA 2009,
“distribution” has the meaning given by Chapters 2 to 5 of Part 23,
25
“farming” has the meaning given by section 1125,
“the financial year 2010” means the financial year beginning with April
2010 (and any corresponding expression in which a year is similarly
mentioned is to be read in the same way),
“for accounting purposes” has the meaning given by section 1127(4),
30
“forestry” is to be read in accordance with section 1125,
“franked investment income” has the meaning given by section 1126,
“generally accepted accounting practice” has the meaning given by
section 1127(1) and (3),
“grossing up” is to be read in accordance with section 1128,
35
“group relief” has the meaning given by section 97(2),
“hire-purchase agreement” is to be read in accordance with section 1129,
“income” includes anything to which the charge to corporation tax on
income applies,
“international accounting standards” has the meaning given by section
40
1127(5),
“investment trust” has the meaning given by section 1158,
“loan relationship” has the same meaning as in Part 5 of CTA 2009,
“local authority” has the meaning given by section 1130,
“local authority association” has the meaning given by section 1131,
45
“market gardening” has the meaning given by section 1125(5),
“non-UK resident” means not resident in the United Kingdom (and
references to a non-UK resident are to a person not resident there),
“notice” means notice in writing,
“offshore installation” has the meaning given by sections 1132 and 1133,
50

Corporation Tax Bill
Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
547

“oil and gas exploration and appraisal” has the meaning given by section
1134,
“ordinary share capital”, in relation to a company, means all the
company’s issued share capital (however described), other than capital
the holders of which have a right to a dividend at a fixed rate but have
5
no other right to share in the company’s profits,
“overseas property business” has the meaning given by Chapter 2 of Part
4 of CTA 2009,
“period of account”—
(a)
in relation to a person, means any period for which the person
10
draws up accounts, and
(b)
in relation to a trade or other business, means any period for
which the accounts of the business are drawn up,
“permanent establishment”, in relation to a company, is to be read in
accordance with Chapter 2 of this Part,
15
“personal representatives”, in relation to a person who has died, means—
(a)
in the United Kingdom, persons responsible for administering
the estate of the deceased, and
(b)
in a territory outside the United Kingdom, those persons having
functions under its law equivalent to those of administering the
20
estate of the deceased,
“property investment LLP” has the meaning given by section 1135,
“qualifying charitable donation” has the same meaning as in Part 6 (see
section 190),
“qualifying distribution” has the meaning given by section 1136,
25
“recognised stock exchange” has the meaning given by section 1137,
“registered industrial and provident society” means—
(a)
a society registered or treated as registered under the Industrial
and Provident Societies Act 1965 or the Industrial and
Provident Societies Act (Northern Ireland) 1969 (c. 24 (N.I.)), or
30
(b)
an SCE formed in accordance with Council Regulation (EC) No
1435/2003 on the Statute for a European Cooperative Society,
“registered pension scheme” has the meaning given by section 150(2) of
FA 2004,
“research and development” is to be read in accordance with section 1138,
35
“retail prices index” means—
(a)
the general index of retail prices (for all items) published by the
Statistics Board, or
(b)
if that index is not published for a relevant month, any
substituted index or index figures published by that Board,
40
“scheme administrator”, in relation to a pension scheme, has the meaning
given by section 270 of FA 2004 (but see also sections 271 to 274 of that
Act),
“settled property” (together with references to property comprised in a
settlement) is to be read in accordance with section 466 of ITA 2007 (as
45
a result of the application of that section for the purposes of the
Corporation Tax Acts by section 1169 below),
“settlor” is to be read in accordance with sections 467 to 473 of ITA 2007
(as a result of the application of those sections for the purposes of the
Corporation Tax Acts by section 1169 below),
50

Corporation Tax Bill
Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
548

“51% subsidiary”, “75% subsidiary” and “90% subsidiary”, in relation to
bodies corporate, is to be read in accordance with Chapter 3 of this Part,
“tax”, if neither income tax nor corporation tax is specified, means either
of those taxes,
“tax advantage” has the meaning given by section 1139,
5
“tax credit” means a tax credit under section 1109,
“tax year” means a year for which income tax is charged (see section 4(2)
of ITA 2007),
“the tax year 2010-11” means the tax year beginning on 6 April 2010 (and
any corresponding expression in which two years are similarly
10
mentioned is to be read in the same way),
“total profits”, in relation to an accounting period of a company, is to be
read in accordance with section 4(3) and (4),
“trade” includes any venture in the nature of trade,
“tribunal” means the First-tier Tribunal or, where determined by or under
15
Tribunal Procedure Rules, the Upper Tribunal,
“UK generally accepted accounting practice” has the meaning given by
section 1127(2),
“UK property business” has the meaning given by Chapter 2 of Part 4 of
CTA 2009,
20
“UK resident” means resident in the United Kingdom (and references to a
UK resident are to a person resident there),
“unauthorised unit trust” has the meaning given by section 1140,
“unit holder” has the same meaning as in Chapter 2 of Part 13 (see sections
616 and 619),
25
“unit trust scheme” has the meaning given by section 237 of FISMA 2000,
“venture capital trust” and “VCT” have the same meaning as in Part 6 of
ITA 2007,
“woodlands” has the meaning given by section 1125(4),
“year of assessment” means a tax year, and
30
“the year 2010-11” means the tax year 2010-11 (and any corresponding
expression in which two years are similarly mentioned is to be read in
the same way).
1120
“Bank”
(1)
This section has effect for the purposes of the provisions of the Corporation Tax
35
Acts which apply this section.
(2)
“Bank” means—
(a)
the Bank of England,
(b)
a person who has permission under Part 4 of FISMA 2000 to accept
deposits (but see subsection (3) for exclusions),
40
(c)
an EEA firm of the kind mentioned in paragraph 5(b) of Schedule 3 to
FISMA 2000 which has permission under paragraph 15 of that Schedule
to accept deposits (as a result of qualifying for authorisation under
paragraph 12(1) of that Schedule),
(d)
the European Investment Bank, and
45
(e)
an international organisation designated as a bank for the purposes of
this section by an order made by the Treasury.

Corporation Tax Bill
Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
549

(3)
The reference to a person who has permission under Part 4 of FISMA 2000 to
accept deposits does not include—
(a)
a building society,
(b)
a society registered within the meaning of the Friendly Societies Act
1974 or incorporated under the Friendly Societies Act 1992,
5
(c)
a society registered as a credit union under the Industrial and
Provident Societies Act 1965 or the Credit Unions (Northern Ireland)
Order 1985 (S.I. 1985/1205 (N.I. 12)), or
(d)
an insurance company within the meaning of section 275 of FA 2004.
(4)
The Treasury may designate an international organisation for the purposes of
10
this section only if the United Kingdom is a member of the organisation.
(5)
An order under subsection (2)(e) may include provision for a designation to
have effect only in relation to the application of this section by a provision
specified in the order.
1121
“Company”
15
(1)
In the Corporation Tax Acts “company” means any body corporate or
unincorporated association, but does not include a partnership, a local
authority or a local authority association.
(2)
Subsection (1) needs to be read with section 617 (under which the trustees of an
authorised unit trust are treated for certain purposes as a UK resident
20
company).
1122
“Connected” persons
(1)
This section has effect for the purposes of the provisions of the Corporation Tax
Acts which apply this section (or to which this section is applied).
(2)
A company is connected with another company if—
25
(a)
the same person has control of both companies,
(b)
a person (“A”) has control of one company and persons connected with
A have control of the other company,
(c)
A has control of one company and A together with persons connected
with A have control of the other company, or
30
(d)
a group of two or more persons has control of both companies and the
groups either consist of the same persons or could be so regarded if (in
one or more cases) a member of either group were replaced by a person
with whom the member is connected.
(3)
A company is connected with another person (“A”) if—
35
(a)
A has control of the company, or
(b)
A together with persons connected with A have control of the
company.
(4)
In relation to a company, any two or more persons acting together to secure or
exercise control of the company are connected with—
40
(a)
one another, and
(b)
any person acting on the directions of any of them to secure or exercise
control of the company.
(5)
An individual (“A”) is connected with another individual (“B”) if—