Taxation (International and Other Provisions) Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Taxation (International and Other Provisions) Bill

Taxation (International and Other Provisions) Bill
Schedule 4 — Sale and lease-back etc: new Part 12A of ITA 2007
274

(b)
would apply to it but for its being excluded under section
681CD (long funding finance leases).
(3)
Condition A is not met if section 865 of CTA 2010 (provision for
corporation tax corresponding to section 681CC)—
(a)
applies to the payment, or
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(b)
would apply to it but for its being excluded under section 866
of that Act (long funding finance leases).
(4)
The reference in subsection (1)(a) to a lease does not include a lease
created on or before 14 April 1964.
681DC
Sum obtained
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(1)
Condition B is that the person making the payment—
(a)
obtains a capital sum in respect of the lessee’s interest in the
lease, and
(b)
is within the charge to income tax.
(2)
Condition C is that an associate of the person making the payment—
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(a)
obtains a capital sum by way of consideration in respect of
the lessee’s interest in the lease, and
(b)
is within the charge to income tax.
(3)
Condition D is that—
(a)
the lessor’s interest in the lease, or any other interest in the
20
asset, belongs to an associate of the person making the
payment,
(b)
the associate obtains a capital sum in respect of the interest,
and
(c)
the associate is within the charge to income tax.
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(4)
Condition E is that—
(a)
the lessor’s interest in the lease, or any other interest in the
asset, belongs to an associate of the person making the
payment,
(b)
an associate of that associate obtains a capital sum by way of
30
consideration in respect of the interest, and
(c)
the associate obtaining the sum is within the charge to
income tax.
(5)
Condition B, C, D or E may be met before, at or after the time when
the payment is made.
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(6)
Condition B or C is not met if—
(a)
the lease is a hire-purchase agreement for plant or machinery,
and
(b)
the capital sum is required to be brought into account as the
whole or part of the disposal value of the plant or machinery
40
under section 68 of CAA 2001.
(7)
Condition D or E is not met if—
(a)
the capital sum is obtained in respect of the lessee’s interest
in the lease,
(b)
the lease is a hire-purchase agreement for plant or machinery,
45
and

Taxation (International and Other Provisions) Bill
Schedule 4 — Sale and lease-back etc: new Part 12A of ITA 2007
275

(c)
the capital sum is required to be brought into account as the
whole or part of the disposal value of the plant or machinery
under section 68 of CAA 2001.
Charge to income tax
681DD
Charge to income tax
5
(1)
The person obtaining the capital sum is charged to income tax, for
the tax year in which the sum is obtained, on the amount given by
subsection (2).
(2)
That amount is—
(a)
the amount of the payment for which a deduction by way of
10
relevant tax relief is allowed, or
(b)
the total amount of such payments (if more than one).
(3)
But subsections (1) and (2) have effect subject to—
(a)
subsections (4) to (7), and
(b)
section 681DE(3) (hire-purchase agreements).
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(4)
The amount on which tax is charged under this section is not to
exceed the capital sum obtained (but see section 681DE(4)).
(5)
Subsection (6) applies if—
(a)
income tax is charged under this section in respect of a capital
sum, and
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(b)
a payment or part of a payment is taken into account in
deciding the amount on which the tax is charged.
(6)
The payment or part must be left out of account in deciding—
(a)
whether income tax is to be charged under this section in
respect of another capital sum, and
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(b)
the amount on which the tax is to be charged (if any is to be
charged).
(7)
The order in which subsections (5) and (6) are applied is the order in
which capital sums are obtained.
(8)
An amount on which income tax is charged under this section is
30
treated for income tax purposes as an amount of income.
681DE
Hire-purchase agreements
(1)
This section applies if—
(a)
the lease is a hire-purchase agreement (as defined in section
998A), and
35
(b)
the capital sum is obtained in respect of the lessee’s interest
in the lease (whether it is obtained by the person making the
payment or by an associate).
(2)
Find the total of the following amounts—
(a)
so much of any payment made under the lease by the person
40
obtaining the capital sum as is not a payment for which a
deduction by way of relevant tax relief is allowed, and

Taxation (International and Other Provisions) Bill
Schedule 4 — Sale and lease-back etc: new Part 12A of ITA 2007
276

(b)
if the lessee’s interest was assigned to the person obtaining
the capital sum, any capital payment made by that person as
consideration for the assignment.
(3)
If the total of the amounts found under subsection (2) is equal to or
greater than the capital sum, income tax is not charged under section
5
681DD in respect of the capital sum.
(4)
If the total of those amounts is less than the capital sum, in applying
section 681DD(4) that total must be deducted from the capital sum.
(5)
If the capital sum is the consideration for part only of the lessee’s
interest in the lease—
10
(a)
any amount found under subsection (2) (and still unallowed)
must be reduced to a just and reasonable proportion of it, and
(b)
in calculating that proportion account must be taken of the
degree to which the payments mentioned in subsection (2)
have contributed to the value of what is disposed of in return
15
for the capital sum.
(6)
Subsection (7) applies if—
(a)
more than one capital sum is (or is treated as) obtained by the
same person in respect of the lessee’s interest in the lease, and
(b)
in arriving at a total under subsection (2) a payment is taken
20
into account in respect of one of the capital sums.
(7)
So far as the payment is so taken into account it must not be taken
into account in applying subsection (2) to another of the capital sums.
(8)
The order in which subsections (6) and (7) are applied is the order in
which capital sums are obtained.
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(9)
If the capital sum is obtained by the personal representatives of a
deceased person, the reference in subsection (2)(a) to any payment
made under the lease by the person obtaining the capital sum
includes any payment made under the lease by the deceased.
681DF
Adjustments where sum obtained before payment made
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(1)
This section applies if a capital sum is obtained as mentioned in
section 681DC and later a payment is made as mentioned in section
681DB.
(2)
Adjustments must be made if they are needed to give effect to a
charge to income tax under section 681DD in respect of the capital
35
sum.
(3)
An adjustment may be made within the period ending with the fifth
anniversary of the 31 January following the tax year in which the
payment is made.
(4)
Subsection (3) applies despite any time limit specified in the Income
40
Tax Acts.

Taxation (International and Other Provisions) Bill
Schedule 4 — Sale and lease-back etc: new Part 12A of ITA 2007
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Obtaining of sum
681DG
Sum obtained in respect of interest
A reference in this Chapter to a sum obtained in respect of an interest
in an asset (whether the lessee’s interest in a lease of the asset or the
lessor’s interest or any other interest) includes a reference to—
5
(a)
insurance money obtained in respect of the interest, and
(b)
sums representing money or money’s worth obtained in
respect of the interest by a transaction or series of
transactions disposing of it.
681DH
Sum obtained in respect of lessee’s interest
10
(1)
This section applies to a reference in this Chapter to a sum obtained
in respect of the lessee’s interest in a lease of an asset.
(2)
The reference includes a reference to sums representing the
consideration in money or money’s worth obtained on any of the
following occasions—
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(a)
a surrender of the interest to the lessor,
(b)
an assignment of the lease, and
(c)
the creation of a sublease or another interest out of the lease.
(3)
The reference also includes a reference to sums representing money
or money’s worth obtained in respect of the interest by a transaction
20
or series of transactions under which the lessee’s rights are merged
in any way with the lessor’s rights or with any other rights as
respects the asset.
(4)
Subsection (3) applies so far as the money or money’s worth is
attributable to the lessee’s rights under the lease.
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681DI
Disposal of interest to associate
(1)
This section applies for the purposes of this Chapter if a person
disposes of an interest in an asset to a person who is the first person’s
associate (and the interest may be the lessee’s interest in a lease of the
asset or the lessor’s interest or any other interest).
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(2)
The person disposing of the interest must be treated as obtaining in
respect of it the greatest of—
(a)
the sum in fact obtained by the person,
(b)
the value of the interest in the open market, and
(c)
the value of the interest to the person to whom it is in effect
35
transferred.
(3)
The disposal—
(a)
may be direct or indirect, and
(b)
may be effected by a transaction or series of transactions
described in section 681DG(b) or 681DH(3).
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Apportionment
681DJ
Apportionment of payments made and of sums obtained
(1)
This section applies for the purposes of this Chapter.

Taxation (International and Other Provisions) Bill
Schedule 4 — Sale and lease-back etc: new Part 12A of ITA 2007
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(2)
Subsection (3) applies if—
(a)
a payment is made,
(b)
it is one for which a deduction by way of relevant tax relief is
allowed, and
(c)
it is made by persons carrying on a trade or profession in
5
partnership.
(3)
The payment must be apportioned in a manner which is just and
reasonable.
(4)
Subsection (5) applies if—
(a)
a sum is obtained in respect of an interest in an asset,
10
(b)
the sum is obtained by persons carrying on a trade or
profession in partnership, and
(c)
the asset is and continues to be used for the purposes of the
trade or profession.
(5)
The sum must be apportioned between the partners in the shares in
15
which they are entitled to the profits of the trade or profession at the
time the sum is obtained.
(6)
Subsection (7) applies if—
(a)
a sum is obtained in respect of an interest in an asset, and
(b)
the sum is obtained by persons jointly entitled to the interest.
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(7)
The sum must be apportioned according to their respective rights in
the interest.
(8)
Subsections (6) and (7) are subject to subsections (4) and (5).
681DK
Manner of apportionment
(1)
Subsections (2) and (3) apply if—
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(a)
a payment or sum is to be apportioned under section 681DJ
or under section 880 of CTA 2010,
(b)
at the time of the apportionment it appears that it is material
to the liability to tax (whether income tax or corporation tax,
and for whatever period) of two or more persons (in this
30
section referred to collectively as “the set”),
(c)
a question arises as to the manner in which the payment or
sum is to be apportioned, and
(d)
at the time of the apportionment, it appears that the
apportionment is material to the income tax liability (for
35
whatever period) of—
(i)
a person, or some two or more persons, in the set, or
(ii)
all the persons in the set.
(2)
For the purposes of income tax of the person or persons mentioned
in subsection (1)(d), the question is to be determined in the same way
40
as an appeal.
(3)
All the persons in the set are entitled to be a party to the proceedings.