Corporation Tax Bill

House of Commons

Session 2009 - 10
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Corporation Tax Bill

Corporation Tax Bill
Part 6 — Charitable donations relief
Chapter 3 — Certain disposals to charity
110

(3)
Condition A is that it is reasonable to suppose that the disposal of the
qualifying investment to the charity would not have been made in the absence
of the obligation.
(4)
Condition B is that the obligation (whether in whole or in part) relates to, is
framed by reference to, or is conditional on the charity receiving, the qualifying
5
investment or a disposal-related investment.
(5)
In applying condition A all the circumstances must be taken into account
(including in particular the difference in the value of the net benefit to the
charity calculated under section 209(1)(a) and that value calculated under
section 209(1)(b) on the assumption that the obligation under consideration is
10
a disposal-related obligation).
(6)
In subsection (4) “disposal-related investment” means any of the following—
(a)
an asset of the same class or description as the qualifying investment
(irrespective of size, quantity or amount),
(b)
an asset derived from, or representing, the qualifying investment,
15
whether in whole or in part and whether directly or indirectly, and
(c)
an asset from which the qualifying investment is derived, or which the
qualifying investment represents, whether in whole or in part and
whether directly or indirectly.
(7)
In this section “obligation” includes a reference to each of the following—
20
(a)
a scheme, arrangement or understanding of any kind, whether or not
legally enforceable, and
(b)
a series of obligations (whether or not between the same parties).
212
Meaning and amount of “disposal-related liability”
(1)
For the purposes of this Chapter a liability is a “disposal-related liability” in the
25
case of a qualifying investment if it is a liability of the charity under a disposal-
related obligation in relation to the qualifying investment.
(2)
If the disposal-related obligation is contingent, the amount to be brought into
account for the purposes of section 209 at any time in respect of the disposal-
related liability, so far as contingent, is—
30
(a)
if the contingency occurs, the amount or value of the liability actually
incurred in consequence of the occurrence of the contingency, or
(b)
if the contingency does not occur, nil.
Special provisions about qualifying interests in land
213
Certificate required from charity
35
(1)
This section applies if the qualifying investment is a qualifying interest in land.
(2)
A company may not make a claim under section 203 unless the company has
received a certificate given by or on behalf of the charity.
(3)
The certificate must—
(a)
describe the qualifying interest in land,
40
(b)
specify the date of the disposal, and
(c)
state that the charity has acquired the qualifying interest in land.

Corporation Tax Bill
Part 6 — Charitable donations relief
Chapter 3 — Certain disposals to charity
111

214
Qualifying interests in land held jointly
(1)
This section applies if the qualifying investment is a qualifying interest in land.
(2)
It applies if two or more persons (“the owners”)—
(a)
are jointly beneficially entitled to the qualifying interest in land, or
(b)
are, taken together, beneficially entitled in common to the qualifying
5
interest in land.
(3)
Relief as a result of this Chapter is available if—
(a)
at least one of the owners is a qualifying company, and
(b)
all the owners dispose of the whole of their beneficial interests in the
qualifying interest in land to the charity.
10
(4)
Relief as a result of this Chapter is available to each of the owners which is a
qualifying company (and section 215 applies).
(5)
A company is a qualifying company if it is not itself a charity.
(6)
Subsection (7) applies if one or more of the owners is not a company.
(7)
For the purpose of determining whether the owners’ beneficial interests are
15
disposed of as mentioned in subsection (3)(b), section 205(2) to (4) applies as if
references to a company included references to a person who is not a company.
215
Calculation of relievable amount etc where joint disposal of interest in land
(1)
If relief as a result of this Chapter is available because of section 214, this section
applies for the purpose of finding—
20
(a)
the relievable amount, and
(b)
the amount of relief to be given to a qualifying company.
(2)
If one or more of the owners is an individual, subsections (3) and (4) apply.
(3)
The relievable amount is taken to be the relievable amount calculated for the
purposes of Chapter 3 of Part 8 of ITA 2007.
25
(4)
The amount of relief to be given to a qualifying company as a result of this
Chapter is calculated on the basis that the reference in section 203(2) to the
relievable amount is read as a reference to such share of the relievable amount
found under subsection (3) above as is allocated to the company by the
agreement mentioned in section 442(5) of ITA 2007.
30
(5)
If none of the owners is an individual, subsections (6) to (9) apply.
(6)
Calculate the relievable amount under this Chapter as if—
(a)
the owners were a single qualifying company, and
(b)
the disposals of the owners’ beneficial interests were a single disposal
by that single company of the whole of the beneficial interest in the
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qualifying interest in land.
(7)
In particular, calculate the consideration mentioned at Step 1 in section 206(4)
by—
(a)
calculating, for each owner, the consideration for which the disposal of
the owner’s beneficial interest is treated as made for the purposes of
40
TCGA 1992 as a result of section 257(2)(a) of that Act, and
(b)
adding together all the consideration calculated under paragraph (a).

Corporation Tax Bill
Part 6 — Charitable donations relief
Chapter 3 — Certain disposals to charity
112

(8)
If one or more of the owners is not a qualifying company, in calculating the
relievable amount make just and reasonable adjustments to reduce the
relievable amount to reflect the fact that relief as a result of this Chapter is not
available to that owner or to those owners.
(9)
The amount of relief to be given to a qualifying company as a result of this
5
Chapter is calculated on the basis that the reference in section 203(2) to the
relievable amount is read as a reference to such share of the relievable amount
found under subsections (6) to (8) above as is allocated to the company by an
agreement made between those owners which are qualifying companies.
216
Disqualifying events
10
(1)
This section applies if the qualifying investment is a qualifying interest in land.
(2)
If a disqualifying event occurs at any time in the provisional period, the
following are treated as never having been entitled to relief as a result of this
Chapter in respect of the disposal of the qualifying interest in land—
(a)
in a case where sections 214 and 215 do not apply, the company which
15
made the disposal, and
(b)
in a case where those sections apply, each qualifying company which is
an owner.
(3)
All such assessments and adjustments of assessments are to be made as are
necessary to give effect to subsection (2).
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(4)
A disqualifying event occurs if a person mentioned in subsection (5) becomes
(otherwise than for full consideration in money or money’s worth)—
(a)
entitled to an interest or right in relation to all or part of the land to
which the disposal relates, or
(b)
party to an arrangement under which he enjoys some right in relation
25
to all or part of that land.
(5)
The persons are—
(a)
in a case where sections 214 and 215 do not apply, the company which
made the disposal or a person connected with that company, and
(b)
in a case where those sections apply, a person who is an owner or a
30
person connected with such a person.
(6)
A disqualifying event does not occur if a person becomes entitled to an interest
or right as mentioned in subsection (4)(a) as a result of a disposition of property
on death (whether the disposition is effected by will, under the law relating to
intestacy or otherwise).
35
(7)
“The provisional period” is the period beginning with the date of the disposal
of the qualifying interest in land and ending with the sixth anniversary of the
end of the accounting period in which the disposal was made.
Interpretation
217
“Charity”
40
In this Chapter “charity” means—
(a)
a body of persons or trust established for charitable purposes only,
(b)
the Trustees of the National Heritage Memorial Fund,

Corporation Tax Bill
Part 7 — Community investment tax relief
Chapter 1 — Introduction
113

(c)
the Historic Buildings and Monuments Commission for England, or
(d)
the National Endowment for Science, Technology and the Arts.
Part 7
Community investment tax relief
Chapter 1
5
Introduction
CITR
218
Meaning of “CITR”
This Part provides for community investment tax relief (“CITR”), that is,
entitlement to tax reductions in respect of amounts invested by companies in
10
community development finance institutions.
219
Eligibility for CITR
(1)
A company (“the investor”) which makes an investment (“the investment”) in
a body is eligible for CITR in respect of the investment if—
(a)
at the time the investment is made the body is accredited as a
15
community development finance institution under Chapter 2 of Part 7
of ITA 2007,
(b)
the investment is a qualifying investment (see Chapter 2 of this Part),
and
(c)
the general conditions of Chapter 3 of this Part are met.
20
(2)
In this Part references to “the CDFI” are to the body in which the investment is
made.
220
Form and amount of CITR
(1)
If the investor is eligible for CITR in respect of the investment, the investor may
make a claim in respect of the investment for any one or more of the relevant
25
accounting periods.
(2)
If the investor makes a claim for a relevant accounting period, the investor is
entitled to a reduction in the amount of its liability for corporation tax for that
period.
(3)
The amount of that reduction for the relevant accounting period is the smaller
30
of the following amounts—
(a)
5% of the invested amount in respect of the investment for the period,
and
(b)
the amount which reduces the investor’s liability for corporation tax for
the period to nil.
35
(4)
For this purpose the “relevant” accounting periods are—
(a)
the accounting period in which the investment date falls, and
(b)
each of the accounting periods in which the subsequent 4 anniversaries
of that date fall.

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Part 7 — Community investment tax relief
Chapter 1 — Introduction
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(5)
The investor is entitled to make a claim for CITR for a relevant accounting
period if—
(a)
the investor considers that the conditions for the CITR are for the time
being met, and
(b)
the investor has received a tax relief certificate (see section 229) relating
5
to the investment from the CDFI,

but a claim may not be made before the end of the accounting period to which
the claim relates.
(6)
Subsection (5) is subject to the following provisions—
(a)
section 236 (loans: no claim after disposal or excessive repayments or
10
receipts of value),
(b)
section 237 (securities or shares: no claim after disposal or excessive
receipts of value),
(c)
section 238 (no claim after loss of accreditation by the CDFI), and
(d)
section 239 (accreditation of investor).
15
Miscellaneous
221
Meaning of “making an investment”
(1)
For the purposes of this Part, a company makes an investment in a body at any
time when—
(a)
the company makes a loan (whether secured or unsecured) to the body,
20
or
(b)
an issue of securities of or shares in the body, for which the company
has subscribed, is made to the company.
(2)
The following provisions of this section apply for the purposes of subsection
(1)(a).
25
(3)
A company does not make a loan to a body if—
(a)
the body uses overdraft facilities provided by the company, or
(b)
the company subscribes for or otherwise acquires securities of the
body.
(4)
If the loan agreement authorises the body to draw down amounts of the loan
30
over a period of time, the loan is treated as made at the time when the first
amount is drawn down.
222
Determination of “the invested amount”
(1)
This section applies for the purpose of determining “the invested amount” in
respect of any loan, securities or shares included in the investment.
35

This is subject to sections 246(2) and 252 (which adjust “the invested amount”
in certain cases where value is received).
(2)
In the case of a loan, the invested amount is—
(a)
for the accounting period in which the investment date falls, the
average capital balance for the first year of the 5 year period,
40
(b)
for the accounting period in which the first anniversary of the
investment date falls, the average capital balance for the second year of
the 5 year period, and

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Part 7 — Community investment tax relief
Chapter 2 — Qualifying investments
115

(c)
for any subsequent accounting period—
(i)
the average capital balance for the period of 12 months
beginning with the anniversary of the investment date falling in
the accounting period concerned, or
(ii)
if less, the average capital balance for the period of 6 months
5
beginning 18 months after the investment date.
(3)
In the case of securities or shares, the invested amount for an accounting period
is the amount subscribed by the investor for the securities or shares.
(4)
For the purposes of this section, the average capital balance of the loan for a
period is the mean of the daily balances of capital outstanding during the
10
period.
223
Meaning of “the 5 year period” and “the investment date”
In this Part—
“the 5 year period” means the period of 5 years beginning with the
investment date, and
15
“the investment date” means the day the investment is made.
224
Overview of other Chapters of Part
In this Part—
(a)
Chapter 4 provides for limitations on claims and the attribution of CITR
to investments,
20
(b)
Chapter 5 provides for CITR to be withdrawn or reduced in the
circumstances mentioned in that Chapter, and
(c)
Chapter 6 contains supplementary and general provision.
Chapter 2
Qualifying investments
25
225
Qualifying investments: introduction
For the purposes of this Part the investment is a “qualifying investment” in the
CDFI if—
(a)
the investment consists of—
(i)
a loan in relation to which the conditions of section 226 are met,
30
(ii)
securities in relation to which the conditions of section 227 are
met, or
(iii)
shares in relation to which the conditions of section 228 are met,
(b)
the investor receives from the CDFI a valid tax relief certificate in
relation to the investment (see section 229), and
35
(c)
the requirements of section 230 (no pre-arranged protection against
risks) are met.
226
Conditions to be met in relation to loans
(1)
Condition A of this section is that either—

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Part 7 — Community investment tax relief
Chapter 2 — Qualifying investments
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(a)
the CDFI receives from the investor, on the investment date, the full
amount of the loan, or
(b)
if the loan agreement authorises the CDFI to draw down amounts of the
loan over a period of time, the end of that period is not later than 18
months after the investment date.
5
(2)
Condition B is that the loan must not carry any present or future right to be
converted into or exchanged for a loan which is, or securities, shares or other
rights which are, redeemable within the 5 year period.
(3)
Condition C is that the loan must not have been made on terms that allow any
person to require—
10
(a)
the repayment during the first two years of the 5 year period of any of
the loan capital advanced in those two years,
(b)
the repayment during the third year of that period of more than 25% of
the loan capital outstanding at the end of those two years,
(c)
the repayment before the end of the fourth year of that period of more
15
than 50% of that loan capital, or
(d)
the repayment before the end of that period of more than 75% of that
loan capital.
(4)
Subsection (3) does not apply if the CDFI is required to make the repayment as
a result of its failure to meet any obligation of the loan agreement which—
20
(a)
is imposed merely because of the commercial risks to which the
investor is exposed as lender under that agreement, and
(b)
is no more likely to be breached than any obligation that might
reasonably have been agreed in respect of the loan in the absence of this
Part.
25
(5)
The Treasury may by order substitute any other percentage for any percentage
for the time being specified in subsection (3).
(6)
Any such substitution is to have effect in relation to loans made by a company
on or after the date specified in the order.
227
Conditions to be met in relation to securities
30
(1)
Condition A of this section is that the securities must be—
(a)
subscribed for wholly in cash, and
(b)
fully paid for on the investment date.
(2)
Condition B is that the securities must not carry—
(a)
any present or future right to be redeemed within the 5 year period, or
35
(b)
any present or future right to be converted into or exchanged for a loan
which is, or securities, shares or other rights which are, redeemable
within that period.
(3)
For the purposes of subsection (1)(b), securities are not fully paid for if there is
any undertaking to pay cash to the CDFI at a future date in connection with the
40
acquisition of the securities.
228
Conditions to be met in relation to shares
(1)
Condition A of this section is that the shares must be—
(a)
subscribed for wholly in cash, and