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 12 — Charitable companies etc
701

(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
connected with the partnership”, and
(b)
omit subsection (6).
5
      (7)
In section 417 (partner company’s income and other companies’ matching
expense) omit subsection (8).
      (8)
Omit section 420 (exception: companies carrying on business ceasing to
share in its profits).
      (9)
In section 424 (the amount of expense)—
10
(a)
in subsection (1)(c) for “is greater at the end than at the start of”
substitute “increases at any time on”,
(b)
in subsection (1)(d) after “the increase”, in both places, insert “at any
time”, and
(c)
for subsection (3) substitute—
15
“(3)
The appropriate percentage is the percentage of the other
company’s percentage share in the profits or loss of the
business immediately after the change that is wholly
attributable to the change.”
Part 11
20
Close companies
Exceptions to the charge under section 455
69    (1)
The reference in section 456(4)(b) to other outstanding loans and advances
does not include a loan or advance made before 31 March 1971 unless it was
made for the purpose of purchasing a dwelling which was or was to be the
25
borrower’s only or main residence.
      (2)
Condition A in section 456(4) is not to be treated as met if such of the other
outstanding loans and advances within section 456(4)(b) as were made
before 31 March 1971 together exceed £10,000.
      (3)
The reference in section 456(7) to a loan or advance does not include one
30
made before 31 March 1971.
Part 12
Charitable companies etc
Transactions in deposits
70
The repeal by this Act of section 56(3)(c) of ICTA (exemption from
35
corporation tax for profits and gains arising to charitable company from
transactions in deposits) does not affect the application of that provision in
relation to the disposal or exercise of—
(a)
a right to receive an amount stated in a certificate of deposit (as
defined by section 56(5) of ICTA), or interest on such an amount, or
40
(b)
a right under an arrangement of a kind mentioned in section 56A(1)
of ICTA,

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 12 — Charitable companies etc
702


if the right was in existence before 1 April 1996.
Exemption for investment income
71
In relation to distributions paid before 1 July 2009 section 486 has effect as if
subsection (2) provided as follows—
“(2)
The income referred to in subsection (1) is—
5
(a)
profits which are charged to tax under section 299 of CTA
2009 (non-trading profits from loan relationships),
(b)
a dividend of a non-UK resident company, and
(c)
income treated for the purposes of Chapter 5 of Part 10 of
CTA 2009 (distributions from unauthorised unit trusts) as
10
received by a unit trust holder from a scheme to which
section 972 of that Act applies (unauthorised unit trust
schemes).”

and as if subsection (3) were omitted,

and as if in subsection (4) the reference to subsection (2)(c) were a reference
15
to subsection (2)(b) and (c).
Exemption for certain miscellaneous income
72    (1)
In relation to distributions paid before 1 July 2009 section 488 has effect as if
the income mentioned in subsection (3) included relevant foreign
distributions.
20
      (2)
In this paragraph “relevant foreign distribution” means a distribution of a
non-UK resident company which is not chargeable under Chapter 2 of Part
10 of CTA 2009 (dividends of non-UK resident companies).
Transactions with substantial donors
73
Section 496(1)(e) and (f) and sections 502 to 510 (non-charitable expenditure:
25
transactions with substantial donors) do not have effect in relation to—
(a)
a transaction occurring before 22 March 2006, or
(b)
a transaction entered into in pursuance of a contract made before 22
March 2006 (otherwise than in pursuance of a variation on or after
that date).
30
74
For the purposes of section 502 a person may meet the definition of
“substantial donor” by reference to gifts made at a time before this Act comes
into force.
75
In relation to times before 23 April 2009, section 502(2)(b) has effect with the
substitution of “£100,000” for “£150,000”.
35
76
Until paragraph 15 of Schedule 9 to the Housing and Regeneration Act 2008
comes into force, section 508 (donors: exceptions) has effect as if subsection
(2)(a) and the “or” immediately after it were omitted.
Non-charitable expenditure
77    (1)
This paragraph applies if, as a result of sections 515 to 517, an amount of
40
expenditure for an accounting period ending after 31 March 2010 or any
subsequent accounting period (“the carry back accounting period”) is

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 13 — Real Estate Investment Trusts
703

treated as non-charitable expenditure for an accounting period beginning
before 22 March 2006 or any earlier accounting period.
      (2)
The amount of relief or exemption to be disallowed in respect of the
accounting period beginning before 22 March 2006 or any earlier accounting
period is not to exceed the amount which would have been disallowed in
5
respect of that period if—
(a)
sections 515 to 517 had not applied in relation to the carry back
accounting period, and
(b)
the amount of expenditure for the carry back accounting period to be
treated as non-charitable expenditure for an earlier accounting
10
period had instead been calculated in accordance with the provisions
mentioned in sub-paragraph (3).
      (3)
Those provisions are—
(a)
sections 505 and 506 of ICTA, and
(b)
Part 3 of Schedule 20 to that Act,
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as those provisions would have had effect in relation to the carry back
accounting period if the amendments made to them by section 55 of FA 2006
had not been made and the amendments made to them by this Act had not
been made.
Part 13
20
Real Estate Investment Trusts
Notice under section 523 or 524
78    (1)
This paragraph applies in relation to accounting periods beginning before 22
April 2009.
      (2)
Section 525 has effect as if for subsections (2) to (9) there were substituted—
25
“(2)
Subsection (3) applies if the company giving the notice—
(a)
does not expect to meet condition D in section 528 on the first
day of accounting period 1, merely because the company’s
shares have not been listed and dealt with on a recognised
stock exchange within the preceding 12 months, but
30
(b)
reasonably expects to meet that condition throughout the rest
of accounting period 1 in reliance on section 446(1)(b).
(3)
If this subsection applies—
(a)
subsection (1)(c) does not apply, but
(b)
the notice must be accompanied by a statement by the
35
company containing the assertions specified in subsection
(4).
(4)
Those assertions are—
(a)
that conditions A, B, E and F in section 528 are reasonably
expected to be met in relation to the company throughout
40
accounting period 1,
(b)
that condition C in that section is reasonably expected to be
met in relation to the company for at least a part of the first
day of accounting period 1, and throughout the remainder of
the period, and
45

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 14 — Co-operative housing associations and self-build societies
704

(c)
that condition D in that section is reasonably expected to be
met in relation to the company throughout all of accounting
period 1 apart from the first day.
(5)
For the meaning of “accounting period 1”, see section 609.”
      (3)
Section 577(7)(b) has effect as if “or (5) to (7)” were omitted.
5
Property rental business: excluded business
79    (1)
In relation to any time before 6 July 2009, section 604 has effect with the
following modifications.
      (2)
In subsection (2) for class 3 substitute—

“Class 3
Letting of property if conditions A and B are met.

10

Condition A is that the property is let—

(a)
by one member of a group to another, or

(b)
by a member of a group to a company the shares

in which are stapled to the shares of a member of

the group (see subsection (3)).

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Condition B is that the property would fall in accordance

with generally accepted accounting practice to be

described as owner-occupied (see subsection (3A).”

      (3)
For subsection (3) substitute—
“(3)
For the purposes of paragraph (b) of condition A in class 3, shares of
20
one company (company A) are stapled to shares of another
(company B) if, in consequence of the nature of the rights attaching
to the shares of company A (including any terms or conditions
attaching to the right to transfer the shares) it is necessary or
advantageous for a person who has, disposes of or acquires shares of
25
company A also to have, dispose of or acquire a holding of shares of
company B.
(3A)
For the purposes of condition B in class 3, ignore the fact that a
property may fall to be described as owner-occupied merely because
of the provision by the company of services to an occupant who—
30
(a)
is in exclusive occupation of the property, and
(b)
is not connected with a member of the group.”
Part 14
Co-operative housing associations and self-build societies
Concurrent exercise of functions
35
80
So far as any function of the Welsh Ministers under section 488 of ICTA (co-
operative housing associations) was immediately before 1 April 2010
exercisable by the Welsh Ministers concurrently with the Secretary of State,
the corresponding function of the Welsh Ministers under section 644, 645 or
649 is exercisable concurrently with the Secretary of State.
40

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 15 — Transactions in securities
705

81
So far as any function of the Welsh Ministers under section 489 of ICTA (self-
build societies) was immediately before 1 April 2010 exercisable by the
Welsh Ministers concurrently with the Secretary of State, the corresponding
function of the Welsh Ministers under section 653 or 657 is exercisable
concurrently with the Secretary of State.
5
Delegation of functions to the Regulator of Social Housing
82
Until paragraph 13 of Schedule 9 to the Housing and Regeneration Act 2008
comes into force, section 646 has effect as if the following were substituted
for subsection (1)—
“(1)
In the case of a body registered as a social landlord in the register
10
maintained by the Housing Corporation under Part 1 of the Housing
Act 1996, the Secretary of State may delegate to the Housing
Corporation any of the Secretary of State’s functions under section
644 or 645.”
83
Until paragraph 14 of Schedule 9 to the Housing and Regeneration Act 2008
15
comes into force, section 654 has effect with the substitution, in subsection
(1), of “the Housing Corporation” for “the Regulator of Social Housing”.
Part 15
Transactions in securities
Transactions in securities: general
20
84    (1)
Part 15 (transactions in securities), so far as relating to the counteraction of
corporation tax advantages, applies—
(a)
whether or not the transaction or transactions in consequence of
which, or of the combined effect of which, the tax advantage has been
or will be obtained occur on or after 1 April 2010, and
25
(b)
whether or not that advantage relates to an accounting period
ending on or after that date.
      (2)
Sub-paragraph (1) does not affect section 746(5) (under which no
assessments may be made as a result of a counteraction notice later than 6
years after the accounting period to which the tax advantage relates).
30
      (3)
No notification under section 703(9) of ICTA (notification that the
Commissioners for Her Majesty’s Revenue and Customs have reason to
believe that section 703 applies to a company in respect of one or more
specified transactions) may be given on or after 1 April 2010.
      (4)
If notification under section 703(9) of ICTA has been given before that date,
35
Chapter 1 of Part 17 of that Act (cancellation of corporation tax advantages
from certain transactions in securities) continues to apply in relation to the
cancellation of any tax advantage resulting from the transaction or
transactions specified in the notification, regardless of the date on which any
accounting period to which the tax advantage relates ends.
40
      (5)
This paragraph is to be interpreted as if it were part of Part 15.

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 16 — Factoring of income etc
706

Transactions in securities: meaning of relevant companies for the purposes of sections 737 and
738
85    (1)
In its application to a transaction in securities that took place before 29 April
1996 or two or more transactions in securities the first of which took place
before that date, section 739(1)(b)(i) (meaning of “relevant company”)
5
applies with the substitution for the words “included in the official UK list”
of the words “authorised to be dealt in on the Stock Exchange”.
      (2)
In its application to a transaction in securities that took place before 1
January 1997 or two or more transactions in securities the first of which took
place before that date, section 739(1) applies as if the companies referred to
10
in paragraph (b) included companies none of whose shares or stocks are
dealt in on the Unlisted Securities Market regularly or from time to time.
      (3)
In this paragraph “companies” and “transaction in securities” have the same
meaning as in Part 15 (see section 751).
Part 16
15
Factoring of income etc
Transfers of income streams
86
Chapter 1 of Part 16 does not have effect in relation to transfers before 22
April 2009.
Application of Chapter 2 of Part 16 (finance arrangements) to pre-6 June 2006 arrangements
20
87
Chapter 2 of Part 16 has no effect in relation to an arrangement made before
6 June 2006 so far as section 43B or 43D of ICTA applies to the arrangement
(sections 43B and 43D of ICTA contain provision about rent factoring: their
repeal by paragraph 1 of Schedule 6 to FA 2006 does not apply in relation to
pre-6 June 2006 transactions).
25
Application of section 771 (finance arrangements: exceptions)
88    (1)
In relation to a transfer before 22 April 2009, section 771 has effect as if after
subsection (1) there were inserted—
“(1A)
For the purposes of subsection (1) the effect of section 785A of ICTA
(rent factoring of leases of plant or machinery) is to be disregarded.”
30
      (2)
If the arrangement mentioned in section 771 came into force before 1 October
2007, subsection (5)(b) of that section applies as if for “Schedule 13 to FA 2007
or Chapter 10 of Part 6 of CTA 2009” there were substituted “paragraph 15
of Schedule 9 to FA 1996”.
      (3)
Paragraph 14(6) of Schedule 13 to FA 2007 (when an arrangement is in force)
35
applies for the purposes of sub-paragraph (2) of this paragraph as for those
of that Schedule.
      (4)
In the case of plant or machinery which is the subject of a sale and finance
leaseback (as defined in section 221 of CAA 2001) where the date of the
transaction (within the meaning of that section) is before 9 October 2007,
40
section 771(8) has effect as if at the end there were inserted “, but in applying
that section it is to be assumed that the words “and which are not a long

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 17 — Manufactured payments and repos
707

funding lease in the case of the lessor” were omitted from section 219(1)(b)
of that Act (meaning of “finance lease”)”.
      (5)
In relation to transactions referred to in section 228A(2)(a) of CAA 2001 (as
substituted by paragraph 12 of Schedule 20 to FA 2008) and entered into
before 9 October 2007, section 771(9) has effect as if at the end there were
5
inserted “with the modifications contained in section 228F of that Act”.
Application of section 779 (income-transfer under loan or credit transaction)
89
In relation to a transfer before 22 April 2009, section 779(4) has effect as if—
(a)
after “if it” there were inserted “assigns,” and
(b)
after “forgoes it” there were inserted “(without a sale or transfer of
10
the property)”.
Part 17
Manufactured payments and repos
Manufactured dividends and manufactured overseas dividends: distributions paid before 1 July
2009
15
90    (1)
In relation to distributions paid before 1 July 2009, Chapters 2 and 3 of Part
17 have effect with the following modifications.
      (2)
Section 783 is omitted.
      (3)
The following is substituted for section 784—
“784
Manufactured dividends on shares
20
(1)
This section applies if a person pays a manufactured dividend to
another person.
(2)
The Corporation Tax Acts apply to in relation to—
(a)
the recipient of the manufactured dividend, and
(b)
companies claiming title through or under the recipient,
25

as if the manufactured dividend were a dividend on the shares.
(3)
If the payer is a UK resident company, the Corporation Tax Acts
apply in relation to the payer as if the manufactured dividend were
a dividend of the company.
(4)
Subsection (1) is subject to—
30
(a)
section 786 (treatment of recipient: Real Estate Investment
Trusts),
(b)
section 796 (manufactured dividends: amounts exceeding
underlying payments), and
(c)
section 803 (power to deal with special cases).”
35
      (4)
In section 786(1) “(instead of section 784(2))” is substituted for “instead of
section 784(1))”.
      (5)
Section 787 is omitted.
      (6)
In section 788(6)(a) “section 784(2)” is substituted for “section 784(1)”.