Corporation Tax Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
631

(5)
If that use was the leasing of it under another long funding operating
lease as a qualifying activity, the starting value is the market value of
the plant or machinery at the commencement of the term of the
section 148D lease (“market value”).
(6)
If that use was the leasing of it under a long funding finance lease as
5
a qualifying activity, the starting value is the value at which the plant
or machinery is recognised in the books or other finance records of
the lessor at the commencement of the term of the section 148D lease.
(7)
If that use was for the purposes of a qualifying activity other than
leasing under a long funding lease, the starting value is the lower of
10
cost and market value.
(8)
For the meaning of “qualifying activity”, see section 148J(2).
148DB
“Starting value” where plant or machinery originally unqualifying
(1)
This section applies if the conditions in subsection (2) are met in
relation to a long funding operating lease to which section 148D
15
applies.
(2)
The conditions are that—
(a)
the lessor owns the plant or machinery as a result of having
incurred expenditure on its provision for purposes other than
those of a qualifying activity,
20
(b)
the plant or machinery is brought into use by the lessor for
the purposes of a qualifying activity on or after 1 April 2006,
and
(c)
that qualifying activity is the leasing of the plant or
machinery under the lease.
25
(3)
For the purposes of section 148D the starting value is the lower of—
(a)
first use market value, and
(b)
first use amortised market value.
(4)
“First use market value” means the market value of the plant or
machinery at the time when it is first brought into use for the
30
purposes of the qualifying activity.
(5)
“First use amortised value” means the value that the plant or
machinery would have at the time when it is first brought into use
for the purposes of the qualifying activity on the assumptions in
subsection (6).
35
(6)
The assumptions are that—
(a)
the cost of acquiring the plant or machinery had been written
off on a straight line basis over its remaining useful economic
life, and
(b)
any further capital expenditure incurred had been written off
40
on a straight line basis over so much of its remaining
economic life as remains at the time when the expenditure is
incurred.
(7)
For the meaning of “qualifying activity”, “remaining useful
economic life” and writing off on a straight line basis, see section
45
148J(2), section 148J(4) (and section 70YI of CAA 2001 as applied by
that section) and section 148J(3) respectively.”

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
632

442
For section 148E substitute—
“148E
Long funding operating lease: lessor’s additional expenditure
(1)
This section applies if in any period of account—
(a)
a person carrying on a trade is the lessor of any plant or
machinery under a long funding operating lease,
5
(b)
the person incurs capital expenditure in relation to the plant
or machinery (the “additional expenditure”), and
(c)
the additional expenditure is not reflected in the market
value of the plant or machinery at the commencement time
(see subsection (7)).
10
(2)
An additional deduction is allowed in calculating the profits of the
person for income tax purposes for each period of account—
(a)
which ends after the incurring of the additional expenditure,
and
(b)
in which the person is the lessor of the plant or machinery
15
under the lease.
(3)
The amount of the deduction is so much of the expected reduction in
value of the additional expenditure (“the expected reduction”) as is
attributable to the period of account.
(4)
The expected reduction is the amount of the additional expenditure,
20
less the remaining residual value of the plant or machinery resulting
from that expenditure.
(5)
For how to determine that remaining residual value, see—
(a)
section 148EA (determination of remaining residual value
resulting from lessor’s first additional expenditure), and
25
(b)
section 148EB (determination of remaining residual value
resulting from lessor’s further additional expenditure).
(6)
The amount of the expected reduction attributable to the period of
account is found by apportioning that reduction on a time basis
according to the proportion of the term of the lease that falls in the
30
period of account.
(7)
In this section “the commencement time” means—
(a)
except where section 148DB applies, the commencement of
the term of the lease, and
(b)
if that section applies, the time when the plant or machinery
35
is first brought into use by the lessor for the purposes of the
qualifying activity.”
443
After section 148E insert—
“148EA
Determination of remaining residual value resulting from lessor’s
first additional expenditure
40
(1)
This section sets out how the remaining residual value of the plant or
machinery resulting from the additional expenditure (“RRV”) is
determined for the purposes of section 148E(4) if section 148E has not
applied in relation to any previous additional expenditure incurred
by the person in relation to the leased plant or machinery.
45
(2)
RRV depends on whether—

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
633

(a)
the amount (“ARV”) which is expected to be the residual
value of the plant or machinery at the time when the
additional expenditure is incurred, exceeds
(b)
the amount (“CRV”) which at the commencement of the term
of the lease is expected to be its residual value (or, if section
5
148DB applies, would have been expected to be that value
had that value been estimated at that time).
(3)
If ARV exceeds CRV, RRV is the part of the excess that is a result of
the additional expenditure.
(4)
Otherwise, RRV is nil.
10
(5)
For the meaning of “residual value”, see section 148J(2).
148EB
Determination of remaining residual value resulting from lessor’s
further additional expenditure
(1)
This section sets out how the remaining residual value of the plant or
machinery resulting from the additional expenditure (“RRV”) is
15
determined for the purposes of section 148E(4) if section 148E has
applied in relation to previous additional expenditure incurred by
the person in relation to the leased plant or machinery.
(2)
RRV depends on whether—
(a)
the amount which is expected to be the residual value of the
20
plant or machinery at the time when the further additional
expenditure is incurred (“FARV”), exceeds
(b)
the sum of the amounts in subsection (3).
(3)
Those amounts are—
(a)
the amount which at the commencement of the term of the
25
lease is expected to be the residual value of the plant or
machinery (or, if section 148DB applies, would have been
expected to be that value had that value been estimated at
that time), and
(b)
any amounts that were subtracted under section 148E(4) as
30
the remaining residual value of the plant or machinery
resulting from the previous additional expenditure.
(4)
If FARV exceeds the sum of the amounts in subsection (3), RRV is the
portion of the excess that is a result of the further additional
expenditure.
35
(5)
Otherwise, RRV is nil.
(6)
For the meaning of “residual value”, see section 148J(2).”
444
For section 148F substitute—
“148F
Lessor under long funding operating lease: termination of lease
(1)
This section applies in calculating for income tax purposes the profits
40
of a person carrying on a trade if the person is the lessor immediately
before the termination of a long funding operating lease.
(2)
If the termination amount exceeds the sum of the amounts in
subsection (3), an amount equal to the excess is treated as income of

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
634

the person attributable to the lease arising in the period of account in
which it terminates.
(3)
The amounts referred to in subsection (2) are—
(a)
the total amounts paid to the lessee that are calculated by
reference to the termination value,
5
(b)
the excess relevant value for section 148D (see subsection (6)),
and
(c)
the excess expenditure for section 148E (see subsection (7)).
(4)
If the sum of the amounts in subsection (3) exceeds the termination
amount, the excess is treated as a revenue expense incurred by the
10
person in connection with the lease in the period of account in which
it terminates.
(5)
No deduction is allowed in respect of any sums within subsection
(3)(a).
(6)
“The excess relevant value for section 148D” is the amount (if any) by
15
which—
(a)
the starting value of the plant or machinery for the purposes
of section 148D(4) (lessor under long funding operating lease:
periodic deduction), exceeds
(b)
the total of the deductions allowable under section 148D for
20
periods of account for the whole or part of which the person
was the lessor.
(7)
“The excess expenditure for section 148E” is the amount (if any) by
which—
(a)
the total of any amounts of capital expenditure incurred by
25
the person which constitute additional expenditure in the
case of the lease for the purposes of section 148E (long
funding operating lease: lessor’s additional expenditure),
exceeds
(b)
the total of any deductions allowable under section 148E for
30
periods of account for the whole or part of which the person
was the lessor.
(8)
For the meaning of “termination amount” and “termination value”,
see sections 70YG and 70YH of CAA 2001 (as applied by section
148J(4)).”
35
445
In section 375(1) (interpretation of sections 373 and 374) for the definition of
“umbrella company” substitute—
““umbrella company” has the meaning given by section 615 of
CTA 2010.”
446
In section 388(1) (interpretation of sections 386 and 387) for the definition of
40
“umbrella company” substitute—
““umbrella company” has the meaning given by section 615 of
CTA 2010.”
447
In section 389(5) (authorised unit trust dividend distributions) for “section
468(1) of ICTA” substitute “section 617(1) of CTA 2010”.
45

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
635

448
In section 401(7) (relief: qualifying distributions after linked non-qualifying
distribution) for “section 254(1) of ICTA” substitute “section 1117(1) of CTA
2010”.
449
In Chapter 3 of Part 4 after section 401 insert—
“401A
Recovery of overpaid tax credit etc
5
(1)
If an officer of Revenue and Customs discovers that a payment or set-
off of tax credit should not have been made or is excessive, the officer
may act in accordance with subsection (3) or (4).
(2)
For the purposes of subsection (1) it does not matter whether the
payment or set-off was excessive when made or became so later.
10
(3)
The officer may make any assessment that in the officer’s judgement
is needed to recover—
(a)
any income tax that should have been paid, or
(b)
any payment of tax credit that should not have been made.
(4)
More generally, the officer may make any assessment that in the
15
officer’s judgement is needed to secure that the liabilities to income
tax (and any liabilities to interest on income tax) of the persons
concerned are what they would have been if only the correct set-offs
and payments had been made.
(5)
TMA 1970 applies to an assessment under this section for recovering
20
a payment of tax credit, or of interest on a tax credit—
(a)
as if it were an assessment to income tax for the tax year in
respect of which the payment was claimed, and
(b)
as if the payment represented a loss of tax to the Crown.
(6)
Any sum charged by an assessment such as is mentioned in
25
subsection (5) is due within 14 days after the notice of assessment is
issued.
(7)
The duty to comply with subsection (6) is subject to any appeal
against the assessment.”
450
After section 401A insert—
30
“401B
Power to obtain information
(1)
An officer of Revenue and Customs may, for the purposes of section
397, by notice require any person in whose name any shares or loan
capital are registered—
(a)
to state whether or not that person is the beneficial owner of
35
the shares or loan capital, and
(b)
if that person is not the beneficial owner of the shares or loan
capital, to provide the name and address of the person on
whose behalf the shares or loan capital are registered in that
person’s name.
40
(2)
Subsections (3) and (4) apply if a company (“the issuing company”)
appears to an officer of Revenue and Customs to be a close company.
(3)
The officer may, for the purposes of section 397, by notice require the
issuing company to provide the officer with—
(a)
particulars of any bearer securities issued by the company,
45

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
636

(b)
the names and addresses of the persons to whom the
securities were issued, and
(c)
details of the amounts issued to each person.
(4)
The officer may, for the purposes of section 397, by notice require—
(a)
any person to whom bearer securities were issued by the
5
company, or
(b)
any person to or through whom bearer securities issued by
the company were subsequently sold or transferred,

to provide any further information that the officer reasonably
requires with a view to enabling the officer to find out the names and
10
addresses of the persons beneficially interested in the securities.
(5)
In this section—
“loan creditor” has the meaning given by section 453 of CTA
2010, and
“securities” includes—
15
(a)
shares, stocks, bonds, debentures and debenture
stock, and
(b)
any promissory note or other instrument evidencing
indebtedness to a loan creditor of the company.”
451   (1)
Amend section 410 as follows.
20
      (2)
For subsection (1) substitute—
“(1)
This section applies to—
(a)
share capital issued by a UK resident company in lieu of a
cash dividend, and
(b)
bonus share capital issued by a UK resident company in
25
respect of shares in the company of a qualifying class.
(1A)
For the purposes of subsection (1)(b), shares are of a qualifying class
if—
(a)
shares of that class carry the right to receive bonus share
capital in the company (of the same or a different class), and
30
(b)
that right is conferred by the terms on which shares of that
class were originally issued or by those terms as
subsequently extended or otherwise varied.”
      (3)
After subsection (7) insert—
“(8)
There are special rules in paragraph 78A of Schedule 2 for share
35
capital issued in respect of shares issued before 6 April 1975.”
452
After section 410 insert—
“410A
Conversion etc of bonus share capital
(1)
This section applies if bonus share capital falling within section
410(1)(b) is converted into, or exchanged for, shares in the company
40
of a different class.
(2)
Section 410 does not apply to any shares in the company issued—
(a)
in connection with the conversion or exchange, and
(b)
in consideration of the cancellation, extinguishment or
acquisition by the company of the bonus share capital.”
45

Corporation Tax Bill
Schedule 1 — Minor and consequential amendments
Part 2 — Other enactments
637

453   (1)
Amend section 412 (cash equivalent of share capital) as follows.
      (2)
In subsection (1) for the words from “within” to the end substitute “issued
as mentioned in section 410(1)(a) is the amount of the cash dividend
alternative (see section 414A(2)).”
      (3)
In subsection (3) for “within section 249(1)(b) of ICTA (bonus share capital)”
5
substitute “issued as mentioned in section 410(1)(b)”.
454
After section 414 insert—
“414A
Interpretation of Chapter
(1)
In this Chapter “bonus share capital” means—
(a)
share capital issued otherwise than wholly for new
10
consideration, or
(b)
the part (if there is such a part) of any share capital so issued
that is not properly referable to new consideration.
(2)
For the purposes of this Chapter share capital is issued by a company
in lieu of a cash dividend if—
15
(a)
it is issued in consequence of the exercise by any person of an
option conferred on the person, and
(b)
that option is an option to receive, in respect of shares in the
company, either a dividend in cash or additional share
capital.
20
(3)
For the purposes of subsection (2), an option to receive either a
dividend in cash or additional share capital is conferred on a person
not only—
(a)
if the person is required to choose one or the other, but also
(b)
if the person is offered the one subject to a right, however
25
expressed, to choose the other instead.
(4)
The reference in subsection (2) to a person’s exercise of an option
includes a person’s abandonment of, or failure to exercise, a right
such as is mentioned in subsection (3)(b).
(5)
In this Chapter “share” includes stock, and any other interest of a
30
member in a company.
(6)
If two or more companies enter into arrangements to make
distributions to each other’s members, all parties concerned
(however many) may, for the purposes of this Chapter, be treated as
if anything done by any one of those companies had been done by
35
any one of the others.
(7)
The following apply in relation to this Chapter as they apply in
relation to Part 23 of CTA 2010—
(a)
section 1113 (“in respect of shares”) of CTA 2010,
(b)
section 1115 (“new consideration”) of CTA 2010.”
40
455   (1)
Amend section 415 (charge to tax under Chapter 6) as follows.
      (2)
In subsection (1)(a) for “is or has been assessed or is liable to be assessed
under section 419 of ICTA” substitute “is or was chargeable to tax under
section 455 of CTA 2010”.