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 17 — Manufactured payments and repos
708

      (7)
The following is substituted for section 791—
“791
Treatment of payer of manufactured overseas dividend
(1)
This section applies if a person (“the payer”) pays another person a
manufactured overseas dividend.
(2)
If—
5
(a)
the payer is a company carrying on a trade, and
(b)
the manufactured overseas dividend relates to the trade,

the manufactured overseas dividend is treated as an expense of the
trade.
(3)
If—
10
(a)
the payer is a company with an investment business, and
(b)
the manufactured overseas dividend relates to the business,

the manufactured overseas dividend is treated as expenses of
management within Part 16 of CTA 2009 (companies with
investment business).
15
(4)
Subsection (5) applies if the payer is a company carrying on life
assurance business.
(5)
So far as the manufactured overseas dividend is referable to basic life
assurance and general annuity business, the manufactured overseas
dividend is treated for the purposes of section 76 of ICTA (expenses
20
of insurance companies) as if it were an expense payable falling to be
brought into account at step 3 of section 76(7) of ICTA (amount of
expenses deduction).
(6)
The manufactured overseas dividend is to be treated as so referable
so far as the overseas dividend of which it is representative—
25
(a)
is treated under section 432A of ICTA (apportionment of
income and gains) as so referable, or
(b)
would be so treated if received by the payer.”
      (8)
Section 795 is omitted.
91
Accordingly, in relation to distributions paid before 1 July 2009—
30
(a)
the paragraph of Schedule 1 that amends section 577 of ITA 2007 has
effect as if in sub-paragraph (4) of that paragraph the words after
“substitute” were ““section 784(2) of CTA 2010”.”, and
(b)
section 1221(1)(i) of CTA 2009 (as inserted by Schedule 1) has effect
with the substitution of “section 791(3) of CTA 2010” for “section
35
791(4) of CTA 2010”.
Manufactured overseas dividends: overseas dividends paid before 22 April 2009
92    (1)
In relation to overseas dividends paid before 22 April 2009, Chapter 3 of Part
17 has effect with the following modifications (in addition to any
modifications that may apply under paragraph 90).
40
      (2)
The following is substituted for section 792—
“792
Treatment of recipient of manufactured overseas dividend
(1)
This section applies if—

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 18 — Sale and lease-back etc
709

(a)
a person pays a manufactured overseas dividend, and
(b)
the condition in subsection (2) is met.
(2)
The condition is that—
(a)
in a case within section 922(1) of ITA 2007 (manufactured
overseas dividends: payments by UK residents etc), the
5
amount required to be deducted as a result of that section has
been deducted, or
(b)
in a case within section 923(1) of that Act (foreign payers of
manufactured overseas dividends: the reverse charge), the
amount of income tax required to be accounted for and paid
10
as a result of that section has been accounted for and paid.
(3)
Subsections (4) and (5) apply in relation to the recipient, and
companies claiming title through or under the recipient, for all
purposes of the Corporation Tax Acts except Part 5 of CTA 2009 (loan
relationships).
15
(4)
The manufactured overseas dividend is treated as if it were—
(a)
an overseas dividend of an amount equal to the gross amount
of the manufactured overseas dividend, but
(b)
paid after the withholding from it, on account of overseas tax,
of the amount deducted as a result of section 922 of ITA 2007
20
or, as the case may be, accounted for and paid as a result of
section 923 of that Act.
(5)
The amount so deducted or so accounted for and paid is accordingly
to be treated as an amount withheld on account of overseas tax
instead of as an amount on account of income tax.
25
(6)
Subsections (3) and (4) are subject to—
(a)
section 797 (manufactured overseas dividends: amounts
exceeding underlying payments), and
(b)
section 798 (manufactured overseas dividends less than
underlying payments).”
30
      (3)
Sections 793 and 794 are omitted.
      (4)
In this paragraph “overseas dividend” has the same meaning as in Part 17.
Deemed manufactured payments: stock lending arrangements
93
In relation to any dividend or interest on securities paid before 22 April 2009,
section 812 has effect with the omission of subsections (4) and (5).
35
94
Section 812 does not apply if the arrangement mentioned in subsection (1)(a)
of that section was made on or after 1 July 1997.
Part 18
Sale and lease-back etc
New lease of land after assignment or surrender: right to new lease existed pre-22 June 1971
40
95    (1)
Sub-paragraphs (2) and (3) apply if—

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 19 — Tax avoidance involving leasing plant or machinery
710

(a)
each of conditions A to D in section 850 of this Act, or each of
conditions A to D in section 681BA of ITA 2007, is met (new lease
granted to, or to person linked with, lessee under assigned or
surrendered lease),
(b)
condition E in that section is not met (condition that no right to new
5
lease existed before 22 June 1971), and
(c)
the rent under the new lease is payable by a person within the charge
to corporation tax.
      (2)
No part of the rent paid under the new lease is to be treated as a payment of
capital.
10
      (3)
Any provision of CTA 2009 or ICTA providing for deductions or allowances
by way of corporation tax relief in respect of payments of rent applies in
relation to the rent under the new lease.
      (4)
Section 862 of this Act (meaning of “rent” etc) applies for the purposes of this
paragraph.
15
Part 19
Tax avoidance involving leasing plant or machinery
Relevant capital payments: pre-12 March 2008 payments and obligations
96    (1)
Chapter 2 of Part 20 does not apply as a result of section 890(1)(a) in relation
to cases where there is first an obligation of the kind mentioned in that
20
section before 13 December 2007.
      (2)
If that Chapter applies as a result of section 890(1)(a) in relation to cases
where there is first an obligation of the kind mentioned in that section on or
after 13 December 2007 but before 12 March 2008, that Chapter applies with
the modifications in sub-paragraphs (3) and (4).
25
      (3)
Omit section 891 (apportionments for leases of plant or machinery and other
property).
      (4)
In section 894 (interpretation of that Chapter) for subsections (3) to (5)
substitute—
“(3)
“Lease of plant or machinery” includes an equipment lease within
30
the meaning of Chapter 14 of Part 2 of CAA 2001, but subject to that
does not include a lease of plant or machinery and other property.”
Relevant capital payments: leases whose inception is before 22 April 2009
97    (1)
In relation to payments made under leases whose inception is before 13
November 2008, section 893 of this Act (“capital payment”, “relevant capital
35
payment” etc) and section 809ZE of ITA 2007 (which is inserted by Schedule
1 to this Act and makes provision corresponding to section 893 for income
tax purposes) apply with the modifications in sub-paragraphs (2) to (4).
      (2)
In subsection (3) for “subsections (6) and (7)” substitute “subsection (6)”.
      (3)
In subsection (6) at the end of paragraph (b) insert “, or
40
(c)
it would fall (or falls) to be brought into account by the lessor
as a disposal receipt within the meaning of Part 2 of CAA
2001 (see section 60(1) of that Act).”

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 23 — Company distributions
711

      (4)
Omit subsection (7).
      (5)
In relation to payments made under leases whose inception is before 22
April 2009 but not before 13 November 2008, section 893(7) of this Act and
section 809ZE(7) of ITA 2007 apply with the substitution for the words
following paragraph (b) of “the capital payment is not “relevant””.
5
      (6)
In this paragraph “inception” has the meaning given in section 70YI(1) of
CAA 2001.
Part 20
Leasing arrangements: finance leases and loans
Old bad debts
10
98
So far as it applies in relation to a period of account of the lessor beginning
before 1 January 2005, the definition of “bad debt deduction” in section
911(6) applies with the substitution for “the total” onwards of “the total of
any sums falling within sub-paragraph (i), (ii) or (iii) of section 74(1)(j) of
ICTA 1988 in respect of amounts in respect of rents from the lease of the asset
15
which are deductible as expenses for that period”.
Part 21
Transfers of trade without a change in ownership
99
Section 945 does not apply if the transfer of the transferred trade occurs
before 19 March 1986.
20
100
Section 949 does not apply if the transfer of the transferred trade occurs on
or before 31 March 1987.
Part 22
Use of different accounting practices within a group
101
Section 996 does not have effect in relation to periods of account beginning
25
before 1 January 2005.
Part 23
Company distributions
Amount of principal secured: non-commercial securities
102
Section 1006 applies only to securities issued after 5 April 1972.
30
Meaning of “special securities”
103   (1)
Securities do not meet Condition A in section 1015 if they were issued—
(a)
before 6 April 1965 in respect of shares, or
(b)
before 6 April 1972 in respect of securities.
      (2)
Securities do not fall within section 1015(3)(a)(ii) if they were issued before
35
6 April 1972.

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 23 — Company distributions
712

Amount of principal secured: special securities
104
Section 1018(1) applies only to securities issued after 5 April 1972.
Bonus issue following repayment of share capital
105   (1)
Section 1022(3) (amount paid up on bonus share capital treated as a
distribution) does not apply if the share capital mentioned in section
5
1022(1)(a) was repaid before 7 April 1965.
      (2)
Section 1023(3) (which limits the cases in which section 1022(3) applies)
applies only if the preference shares were issued after 6 April 1965 (but see
sub-paragraph (3)).
      (3)
Section 1022(3) (amount paid up on bonus share capital treated as a
10
distribution) does not apply if the repaid share capital referred to in section
1022(1) consists of fully paid preference shares and—
(a)
those shares existed as issued and fully paid preference shares on 6
April 1965, and
(b)
throughout the period from that date until the repayment those
15
shares continued to be fully paid preference shares.
      (4)
In order for section 1023(1) to apply the issue of share capital there
mentioned must take place after 5 April 1973 (as well as more than 10 years
after the repayment of share capital in question).
Share capital issued as paid up otherwise than by receipt of new consideration
20
106   (1)
In relation to share capital issued before 7 April 1973—
(a)
section 1026(1)(b) applies with the substitution of “distribution” for
“qualifying distribution”, and
(b)
section 1027(2)(b) applies with the substitution of “distributions” for
“qualifying distributions”.
25
      (2)
Section 1026 does not apply if the share capital mentioned in subsection (1)
of that section was issued before 7 April 1965.
      (3)
The reference in section 1027(2)(a) to amounts paid up on shares does not
include amounts paid up before 7 April 1965.
Interest etc paid in respect of certain securities
30
107   (1)
Section 1032(1) does not apply in the case of any interest or other distribution
which is paid in respect of a security of the borrower that meets Condition
C in section 1015 (securities under which the consideration for the use of the
principal secured is dependent on the results of the company’s business) if—
(a)
the principal secured does not exceed £100,000,
35
(b)
the borrower is under an obligation to repay the principal and
interest before the end of the period of 5 years beginning on the date
on which the principal was paid to the borrower,
(c)
that obligation was entered into before 9 March 1982 or was entered
into before 1 July 1982 in pursuance of negotiations which were in
40
progress on 9 March 1982, and
(d)
where the period for repayment of either principal or interest is
extended after 8 March 1982 (but paragraph (b) still applies), the

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 23 — Company distributions
713

interest or other distribution is paid within the period applicable
immediately before that date.
      (2)
For the purposes of sub-paragraph (1)(c) negotiations are not regarded as
having been in progress on 9 March 1982 unless, before that date, the
borrower—
5
(a)
had applied to the lender for a loan, and
(b)
had supplied the lender with any documents required by the lender
to support the application.
Stock dividends
108   (1)
This paragraph applies if—
10
(a)
share capital is issued by a UK resident company in respect of shares
in the company issued before 6 April 1975 (“the old shares”),
(b)
the old shares confer on the holder a right to convert them into, or
exchange them for, shares of a different class, and
(c)
the case falls within section 410(2), (3) or (4) of ITTOIA 2005 (whether
15
or not that section in fact applies).
      (2)
Section 1049 (stock dividends) does not apply to the protected part of any
bonus share capital issued by the company after 5 April 1976 in connection
with an exercise of the right mentioned in sub-paragraph (1)(b).
      (3)
For the purposes of sub-paragraph (2), the protected part of the bonus share
20
capital is however much of it (if any) would have been issued if the right had
been exercised so as to bring about the conversion or exchange of the shares
on the earliest possible date after 5 April 1975.
109
Section 1050 does not apply in relation to a conversion or exchange of share
capital for shares occurring before 6 April 1975.
25
Exempt distributions
110
Paragraph 8(1) (saving for certain provisions repealed by this Act that relate
to the commencement of provisions rewritten in this Act) does not have
effect in relation to the repeal by this Act of regulation 1(3) of the
Corporation Tax (Implementation of the Mergers Directive) Regulations
30
2009 (S.I. 2009/2797).
Eligibility for tax credits
111
In relation to a distribution paid before 1 July 2009 section 1109 has effect as
if in subsection (1) the words “if a UK resident company makes a qualifying
distribution” stood in place of the words “if a company makes a qualifying
35
distribution which is exempt for the purposes of Part 9A of CTA 2009
(qualifying distributions)”.
Recovery of overpaid tax credits etc
112
Section 1110(5) and (6) and section 1111(1) do not apply to payments of tax
credit claimed in respect of accounting periods ending before 1 October
40
1993.

Corporation Tax Bill
Schedule 3 — Repeals and revocations
Part 1 — General
714

Part 24
Corporation Tax Acts definitions etc
113   (1)
Section 1139 has effect as if in subsection (4)(b) the words “or 397A(1)” were
omitted in relation to—
(a)
qualifying distributions arising before 22 April 2009,
5
(b)
cash dividends paid over to a person under paragraph 68(4) of
Schedule 2 to ITEPA 2003 before 22 April 2009,
(c)
dividends treated under section 407 of ITTOIA 2005 as paid to a
person before 22 April 2009, and
(d)
manufactured overseas dividends that are representative of a
10
distribution within paragraph (a), (b) or (c).
      (2)
In sub-paragraph (1)—
“manufactured overseas dividend” has the same meaning as in Chapter
2 of Part 11 of ITA 2007, and
“qualifying distribution” has the meaning given in section 989 of ITA
15
2007.
114   (1)
In relation to shares and securities issued before 17 April 2002, section
1164(1) has effect—
(a)
as if in subsection (1) “or amalgamation” were inserted after “scheme
of reconstruction”, and
20
(b)
as if section 1165(2) were omitted.
      (2)
In sub-paragraph (1) “shares” has the same meaning as in Chapter 4 of Part
24.
115
Until paragraph 11(2) of Schedule 22 to FA 2009 comes into force, section
1165 has effect as if—
25
(a)
in subsection (1) for the words from “sections 99” to the end there
were substituted “section 99 of TCGA 1992 (application of that Act to
unit trust schemes).”, and
(b)
in subsection (3) for the words from “sections 99” to the end there
were substituted “section 99 of TCGA 1992.”
30
Schedule 3
Section 1181

Repeals and revocations
Part 1
General

Reference
Extent of repeal or revocation

35

Taxes Management Act 1970
In section 87A(3), the words “Schedule 28 to the

(c. 9)
Finance Act 2000 or”.