Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 7 — Charitable donations relief
694

(a)
before 18 December 2008, or
(b)
on or after that date under an agreement entered into before that
date,

if the company has made an election in relation to those shares under
paragraph 6 of Schedule 9 to FA 2009.
5
      (2)
Chapter 6 of Part 5 of this Act has effect in relation to those shares with the
following modifications—
(a)
in section 160, the substitution for subsection (6) of—
“(6)
Condition D is that the shares do not carry any right to
dividends other than dividends which—
10
(a)
are of a fixed amount or are at a fixed percentage rate
of the nominal value of the shares, and
(b)
represent no more than a reasonable commercial
return on the new consideration mentioned in
subsection (3).”, and
15
(b)
the omission of section 161.
Part 7
Charitable donations relief
Condition as to repayment
56
Section 192, and the words “(but see section 192)” in section 191(3), do not
20
apply in relation to a payment to a charity made before 1 April 2010.
Restrictions on associated benefits
57    (1)
This paragraph applies if—
(a)
a payment is made in an accounting period ending on or after 1 April
2010, and
25
(b)
a benefit associated with the payment—
(i)
is received in an accounting period ending before that date,
or
(ii)
relates (wholly or partly) to an accounting period ending
before that date.
30
      (2)
Step 2 of the calculation in section 198(8) is to be read as if the words “(and
neither condition C nor condition D is met in relation to it)” were omitted.
Enactment of extra-statutory concession
58    (1)
This paragraph applies if the Enactment of Extra-Statutory Concessions
(No.2) Order, a draft of which was laid before the House of Commons for
35
approval on 10 November 2009, is not made so as to come into force on 1
April 2010 in a form which, so far as concerns article 5 of the draft Order,
equates to the form of the draft Order.
      (2)
This Act is treated as having had effect at all times after the beginning of the
day on which it is passed as if the following provisions were omitted—
40
(a)
the words “(but see section 192)” in section 191(3),
(b)
section 192, and

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 10 — Leasing plant or machinery
695

(c)
paragraph 56 of this Schedule.
Part 8
CITR
59    (1)
Sub-paragraph (2) applies in relation to any time after the commencement of
the repeal by this Act of Schedule 16 to FA 2002.
5
      (2)
Regulations made, or having effect as if made, under paragraph 4 of that
Schedule are to be treated as made under Chapter 2 of Part 7 of ITA 2007.
Part 9
Oil activities
Regional development grants
10
60
In relation to accounting periods beginning before 1 April 2011—
(a)
section 289(3)(b) has effect as if—
(i)
“, 3” were inserted after “Part 2”, and
(ii)
“, industrial buildings” were inserted after “machinery”, and
(b)
section 290(3) and (7) have effect as if “, 3” were inserted after “Part
15
2”.
Part 10
Leasing plant or machinery
Disapplication of Chapter 2 of Part 9
61    (1)
Chapter 2 of Part 9 (long funding leases of plant or machinery)—
20
(a)
does not apply to any lease in relation to which condition A, B or C
is met,
(b)
does not apply in the case of the relevant lessor (see sub-paragraph
(6)) to any lease in relation to which condition D is met, and
(c)
does not apply in the case of the relevant lessee (see sub-paragraph
25
(7)) to any lease in relation to which condition E is met.
      (2)
But sub-paragraph (1) does not apply in relation to a lease in the case of a
lessor (and accordingly Chapter 2 of Part 9 applies) if an election under
regulations made under paragraph 16 of Schedule 8 to FA 2006 (election for
lease to be treated as long funding lease for tax purposes)—
30
(a)
is in force in the case of the lease, and
(b)
has effect in the case of the lessor.
      (3)
Condition A is that—
(a)
the lease was finalised before 21 July 2005, and
(b)
on 17 May 2006 the lessor was within the charge to corporation tax.
35
      (4)
Condition B is that—
(a)
the commencement of the term of the lease was before 1 April 2006,
and

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 10 — Leasing plant or machinery
696

(b)
the plant or machinery is brought into use for the purposes of a
qualifying activity carried on by the person concerned before that
date.
      (5)
Condition C is that—
(a)
the lease is an excepted lease, and
5
(b)
the commencement of the term of the lease is on or after 1 April 2006.
      (6)
Condition D is that—
(a)
Chapter 2 of Part 9 and the amendments of CAA 2001 made by
Schedule 8 to FA 2006 do not apply to a lease (“the old lease”) in the
case of a lessor (“the old lessor”),
10
(b)
there is a transfer of plant or machinery,
(c)
immediately before the transfer the old lessor is within the charge to
tax,
(d)
the transfer is in such circumstances that, if the amendments of CAA
2001 made by Schedule 8 to FA 2006 did apply to the old lease,
15
section 70W(4)(b) of CAA 2001 (transfers, assignments etc by lessor)
would have effect, in relation to the person who would be the new
lessor if that section applied (“P”), to treat the lease that would be the
new lease in that case as a lease that is not a long funding lease;

and P is the relevant lessor for the purposes of sub-paragraph (1)(b).
20
      (7)
Condition E is that—
(a)
Chapter 2 of Part 9 and the amendments of CAA 2001 made by
Schedule 8 to FA 2006 do not apply to a lease (“the old lease”) in the
case of a lessee (“the old lessee”),
(b)
there is a transfer of plant or machinery,
25
(c)
immediately before the transfer the old lessee is within the charge to
tax,
(d)
the transfer is in such circumstances that, if the amendments of CAA
2001 made by Schedule 8 to FA 2006 did apply to the old lease,
section 70X(4)(b) of CAA 2001 (transfers, assignments etc made by
30
lessee) would have effect, in relation to the person who would be the
new lessee if that section applied (“Q”), to treat the lease that would
be the new lease in that case as a lease that is not a long funding lease;

and Q is the relevant lessee for the purposes of sub-paragraph (1)(c).
      (8)
In the application of section 70W(4)(b) of CAA 2001 for the purposes of sub-
35
paragraph (6)(d) and the application of section 70X(4)(b) of that Act for the
purposes of sub-paragraph (7)(d), the old lease is to be treated as a lease that
is not a long funding lease.
      (9)
Paragraphs 17 to 27 of Schedule 8 to FA 2006 (interpretational and
supplemental provisions) apply for the purposes of this paragraph as they
40
apply for the purposes of Part 4 of that Schedule.
     (10)
See, in particular—
(a)
paragraphs 17 and 26 of that Schedule for the meaning of “excepted
lease”,
(b)
paragraph 23 of that Schedule for when a lease is “finalised”, and
45
(c)
paragraph 27 of that Schedule for general interpretation.
     (11)
See also paragraph 21 of that Schedule, which—

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 10 — Leasing plant or machinery
697

(a)
deems a separate long funding lease that is an excepted lease to exist
in some cases where a person incurred expenditure before 19 July
2006 on the provision of plant or machinery for leasing under a long
funding lease that is not itself excepted, and
(b)
provides for rentals under the actual lease to be apportioned to the
5
deemed lease.
Disapplication of sections 360 and 361 and modification of section 360 in some cases
62    (1)
If at the beginning of 13 December 2007—
(a)
a company carrying on a trade was the lessee of any plant or
machinery under a lease that is not a long funding lease (“lease A”),
10
and
(b)
the company was the lessor of any of that plant or machinery under
a lease that is a long funding finance lease (“lease B”),

sub-paragraphs (2) to (11) apply in respect of lease B.
      (2)
Section 360 (lessor under long funding finance lease: rental earnings) does
15
not apply to a period of account within sub-paragraph (3).
      (3)
A period of account is within this sub-paragraph if—
(a)
it begins on or after 13 December 2007, and
(b)
no rentals that were due under lease B before 13 December 2007 are
(wholly or in part) in respect of any part of the period.
20
      (4)
For the purpose of calculating the profits of the lessor under lease B for a
period of account ending on or after 13 December 2007 that is not within sub-
paragraph (3), the lessor is treated as receiving for that period income
attributable to lease B of an amount equal to the relevant amount.
      (5)
The relevant amount is an amount equal to so much of the rentals that—
25
(a)
become due on or after 13 December 2007, and
(b)
are wholly or partly in respect of the period of account,

as would not reasonably be regarded as reflected in the rental earnings for
that period.
      (6)
For the purposes of sub-paragraph (5) the rental earnings for a period of
30
account are determined in accordance with section 360(3) and (4).
      (7)
If any rental is paid for a period (“the rental period”) which begins before 13
December 2007 or is not wholly within the period of account, for the
purposes of sub-paragraph (6) the amount of that rental is treated as equal
to the amount apportioned (on a time basis) in respect of so much of the
35
rental period as falls on or after 13 December 2007 and within the period of
account.
      (8)
The income treated as received as a result of sub-paragraph (4) is in addition
to any amount brought into account under section 360(2).
      (9)
Section 361 (lessor under long funding finance lease: exceptional items) does
40
not apply to any profit or loss arising on or after 13 December 2007.
     (10)
If section 362 (lessor making termination payment) applies in respect of the
termination of lease B on or after 13 December 2007, a deduction is allowed
(in calculating the profits of the lessor) in respect of any sum calculated by
reference to the sum paid to the lessee.
45

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 10 — Leasing plant or machinery
698

     (11)
The amount of the deduction is (if it would otherwise exceed that amount)
limited to the total amount brought into account in respect of the lease as a
result of sub-paragraph (2) or (4).
     (12)
If lease A becomes a long funding lease as a result of section 70H of CAA
2001 (and does not cease to be such a lease), this paragraph is treated as
5
never having applied in relation to lease B.
     (13)
Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about long
funding leases) applies for the purposes of this paragraph.
Disapplication of provisions about cases where sections 360 to 369 do not apply
63    (1)
Sections 370 and 371 do not apply if—
10
(a)
expenditure is incurred before 9 October 2007, or
(b)
a company becomes entitled to a deduction in calculating its profits
or losses for corporation tax purposes as a result of any plant or
machinery forming part of its trading stock before that date.
      (2)
Section 372 does not apply if the lease referred to as “lease B” in subsection
15
(1)(c) of that section is entered into before 13 December 2007.
      (3)
Sections 373 to 375 do not apply in relation to arrangements entered into
before 9 October 2007.
64    (1)
Section 376 (films) does not apply if the inception of the long funding lease
is before 13 November 2008.
20
      (2)
Sub-paragraphs (3) to (10) apply in respect of a long funding finance lease of
a film—
(a)
whose inception is before that date, and
(b)
which has not terminated before that date.
      (3)
Section 360 (lessor under long funding finance lease: rental earnings) does
25
not apply to a period of account within sub-paragraph (4).
      (4)
A period of account is within this sub-paragraph if—
(a)
it begins on or after 13 November 2008, and
(b)
no rentals due (wholly or partly) in respect of any part of the period
of account were due under the lease before that date.
30
      (5)
For the purpose of calculating the profits of the lessor under the lease for a
period of account that—
(a)
ends on or after 13 November 2008, and
(b)
is not within sub-paragraph (4),

the lessor is treated as receiving for that period of account income
35
attributable to the lease of an amount equal to the relevant amount (in
addition to any amount brought into account under section 360(2)).
      (6)
The “relevant amount” is an amount equal to so much of the rentals as—
(a)
become due on or after 13 November 2008, and
(b)
are due wholly or partly in respect of the period of account.
40
      (7)
If any rental is paid for a period (“the rental period”) that—
(a)
begins before 13 November 2008, or
(b)
is not wholly within the period of account,

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 10 — Leasing plant or machinery
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for the purposes of sub-paragraph (6) the amount of that rental is treated as
equal to the amount apportioned (on a time basis) in respect of so much of
the rental period as falls on or after 13 November 2008 and within the period
of account.
      (8)
Section 361 (lessor under long funding finance lease: exceptional items) does
5
not apply to any profit or loss arising on or after 13 November 2008.
      (9)
If section 362 (lessor making termination payment) applies in respect of the
termination of the lease on or after 13 November 2008, a deduction is
allowed (in calculating the profits of the lessor) in respect of any sum
calculated by reference to the termination value paid to the lessee.
10
     (10)
The amount of the deduction is (if it would otherwise exceed that amount)
limited to the total amount brought into account in respect of the lease as a
result of sub-paragraph (3) or sub-paragraphs (5) to (7).
     (11)
For the purposes of this paragraph—
(a)
“film” has the same meaning as in Part 15 of CTA 2009 (see section
15
1181 of that Act),
(b)
the amount of the rental earnings for a period of account is
determined in accordance with section 360(3) and (4), and
(c)
Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about
long funding leases) applies (see section 70YI(1), in particular, for the
20
meaning of “inception”).
Relief for expenses otherwise carried forward: losses incurred in accounting periods ending
before 22 April 2009
65    (1)
In relation to losses incurred in accounting periods ending before 22 April
2009, section 386 (relief for expense under section 383 otherwise giving rise
25
to carried forward loss) applies with the following modifications.
      (2)
In subsection (1)—
(a)
in paragraph (c) omit “or a later accounting period”,
(b)
in paragraph (d) omit “after the accounting period in which the loss
is made”,
30
(c)
omit paragraph (e), and
(d)
in paragraph (f) for “5 years beginning immediately after” substitute
“12 months beginning with”.
      (3)
For subsection (2) substitute—
“(2)
So much of the carried forward loss as derives from the expense
35
under section 383 is instead of being carried forward to be treated for
corporation tax purposes as an expense.”
      (4)
In subsection (4) omit “or an expense within subsection (1)(e)(ii)”.
66    (1)
In relation to losses incurred in accounting periods ending before 22 April
2009, section 419 (relief for expense under section 417(5) otherwise giving
40
rise to carried forward loss) applies with the following modifications.
      (2)
In subsection (1)—
(a)
in paragraph (b) omit “or a later accounting period”,
(b)
in paragraph (c) omit “after the accounting period in which the loss
is made”,
45

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 10 — Leasing plant or machinery
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(c)
omit paragraph (d), and
(d)
in paragraph (e) for “5 years” substitute “12 months”.
      (3)
For subsection (2) substitute—
“(2)
So much of the carried forward loss as derives from the expense
under section 417(5) is instead of being carried forward to be treated
5
for corporation tax purposes as an expense.”
      (4)
In subsection (4) omit “or an expense within subsection (1)(d)(ii)”.
67    (1)
In relation to losses incurred in accounting periods ending before 22 April
2009, section 428 (relief for expense under section 425 otherwise giving rise
to carried forward loss) applies with the following modifications.
10
      (2)
In subsection (1)—
(a)
in paragraph (c) omit “or a later accounting period”,
(b)
in paragraph (d) omit “after the accounting period in which the loss
is made”,
(c)
omit paragraph (e), and
15
(d)
in paragraph (f) for “5 years beginning immediately after” substitute
“12 months beginning with”.
      (3)
For subsection (2) substitute—
“(2)
So much of the carried forward loss as derives from the expense
under section 425 is instead of being carried forward to be treated for
20
corporation tax purposes as an expense.”
      (4)
In subsection (4) omit “or an expense within subsection (1)(e)(ii)”.
Modifications of sales of lessors Chapters in Part 9 where the relevant date is before 22 April
2009
68    (1)
If the relevant date for the purposes of any provision in Chapter 3, 4 or 5 of
25
Part 9 is before 22 April 2009, that Part applies for the purposes of that
provision with the following modifications.
      (2)
In section 389 (provision supplementing section 388)—
(a)
in subsection (5)(b) for “acquired any plant or machinery in
circumstances in which this paragraph applies” substitute “acquires
30
any plant or machinery directly or indirectly from a person who is
connected with the company”, and
(b)
omit subsection (6).
      (3)
In section 392 (“qualifying change of ownership”) omit subsection (5).
      (4)
Omit section 396 (no qualifying change of ownership where principal
35
company’s interest in consortium company unchanged).
      (5)
In section 401 (provisions supplementing section 400)—
(a)
in subsection (5)(b) for “acquired any plant or machinery in
circumstances in which this paragraph applies” substitute “acquires
any plant or machinery directly or indirectly from a person who is
40
connected with the company”, and
(b)
omit subsection (6).
      (6)
In section 412 (provision supplementing section 411)—