Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 7 — Community investment tax relief
Chapter 2 — Qualifying investments
117

(b)
fully paid up on the investment date.
(2)
Condition B is that the shares must not carry—
(a)
any present or future right to be redeemed during the 5 year period, or
(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
5
within that period.
(3)
For the purposes of subsection (1)(b) shares are not fully paid up if there is any
undertaking to pay cash to the CDFI at a future date in connection with the
acquisition of the shares.
229
Tax relief certificates
10
(1)
A “tax relief certificate” means a certificate issued by the CDFI in respect of the
investment which is in the form specified by the Commissioners for Her
Majesty’s Revenue and Customs.
(2)
The CDFI must not issue tax relief certificates under this section in respect of
investments made in the CDFI in an accreditation period if the total value of—
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(a)
those investments, and
(b)
any investments to which subsection (3) applies,

will exceed the limit for that period.
(3)
This subsection applies to investments—
(a)
which have been made in the CDFI in the accreditation period, and
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(b)
in respect of which the CDFI has issued tax relief certificates under
section 348 of ITA 2007 (which makes in relation to income tax
provision corresponding to that made by this section).
(4)
The limit for an accreditation period is—
(a)
£10 million if the CDFI is accredited for the period as a retail
25
community development finance institution (see section 340(8) of ITA
2007), and
(b)
£20 million in any other case.
(5)
For the purposes of subsection (2) the value of an investment made in the CDFI
is—
30
(a)
if the investment consists of a loan—
(i)
the amount of the loan, or
(ii)
if the loan agreement authorises the CDFI to draw down
amounts of the loan over a period of time, the amount
committed under the loan agreement, and
35
(b)
if the investment consists of securities or shares, the amount subscribed
for them.
(6)
The Treasury may by order substitute any other amount for any amount for the
time being specified in subsection (4).
(7)
Any such substitution is to have effect in relation to such accreditation periods
40
as may be specified in the order; and those periods may, if the substitution
increases an amount for the time being specified in subsection (4), include
periods beginning before the order comes into force.
(8)
Any tax relief certificate issued in contravention of subsection (2) is invalid.

Corporation Tax Bill
Part 7 — Community investment tax relief
Chapter 3 — General conditions
118

(9)
A body is liable to a penalty of not more than £3,000 if it issues a tax relief
certificate which is made fraudulently or negligently.
(10)
An accreditation period is a period for which accreditation of the CDFI has
effect under Chapter 2 of Part 7 of ITA 2007.
230
No pre-arranged protection against risks
5
(1)
Any arrangements—
(a)
under which the investment is made, or
(b)
made, before the investor makes the investment, in relation to or in
connection with the making of the investment,

must not include excluded arrangements.
10
(2)
For the purposes of subsection (1) “excluded arrangements”—
(a)
means arrangements the main purpose or one of the main purposes of
which is (by means of any insurance, indemnity or guarantee or
otherwise) to provide partial or complete protection for the investor
against what would otherwise be the risks attached to making the
15
investment, but
(b)
does not include any arrangements which are confined to the provision
for the investor of any protection against those risks which might
reasonably be expected to be provided for commercial reasons if the
investment were made in the course of a business of banking.
20
(3)
For the purposes of this section “arrangements” includes any scheme,
agreement or understanding (whether or not legally enforceable).
Chapter 3
General conditions
231
No control of CDFI by investor
25
(1)
The investor must not control the CDFI at any time during the 5 year period.
(2)
In this section references to the investor include any person connected with the
investor.
(3)
If the CDFI is a body corporate, the question whether the investor controls the
CDFI is, for the purposes of this section, determined in accordance with section
30
1124.

This is subject to subsection (6).
(4)
In any other case the investor is treated, for those purposes, as having control
of the CDFI if the investor has power to secure, as a result of—
(a)
the possession of voting power in the CDFI, or
35
(b)
any powers conferred by the constitution of, or any other document
regulating, the CDFI,

that the affairs of the body are conducted in accordance with the investor’s
wishes.

This is subject to subsections (5) and (6).
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(5)
If—
(a)
the CDFI is a partnership, and

Corporation Tax Bill
Part 7 — Community investment tax relief
Chapter 4 — Limitations on claims and attribution
119

(b)
the investor is a member of that partnership,

for the purposes of determining in accordance with this section whether the
investor controls the CDFI, the other members of that partnership are not, as a
result of their membership of the CDFI, treated as partners of the investor.
(6)
In determining whether the investor controls the CDFI there are attributed to
5
the investor (so far as it would not otherwise be the case)—
(a)
any rights or powers that the investor is entitled to acquire at a future
date or will, at a future date, become entitled to acquire, and
(b)
any rights or powers which another person holds on behalf of the
investor or may be required to exercise, by direction, on the investor’s
10
behalf.
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Investor must have beneficial ownership
(1)
The investor must be the sole beneficial owner of the investment when it is
made.
(2)
If the investment consists of a loan, the person beneficially entitled to
15
repayment of the loan is treated as the beneficial owner of the loan for the
purposes of this Part.
233
Investor must not be accredited
The investor must not be accredited as a community development finance
institution under Chapter 2 of Part 7 of ITA 2007 on the investment date.
20
234
No acquisition of share in partnership
(1)
If the CDFI is a partnership, the investment must not consist of or include any
amount of capital contributed by the investor on becoming a member of the
partnership.
(2)
For this purpose the amount of capital contributed by the investor on becoming
25
a member of the partnership includes any amount which—
(a)
purports to be provided by the investor by way of loan capital, and
(b)
is accounted for as partners’ capital in the accounts of the partnership.
235
No tax avoidance purpose
The investment must not be made as part of a scheme or arrangement the main
30
purpose or one of the main purposes of which is the avoidance of tax.
Chapter 4
Limitations on claims and attribution
Limitations on claims
236
Loans: no claim after disposal or excessive repayments or receipts of value
35
(1)
If the investment consists of a loan, no claim may be made for an accounting
period if—

Corporation Tax Bill
Part 7 — Community investment tax relief
Chapter 4 — Limitations on claims and attribution
120

(a)
the investor disposes of the whole or any part of the loan before the
qualifying date relating to that period,
(b)
at any time after the investment is made but before that qualifying date,
the amount of the capital outstanding on the loan is reduced to nil, or
(c)
before that qualifying date, paragraphs (a) and (b) of section 245(1)
5
(repayments of loan in 5 year period exceeding permitted limits) apply
in relation to the investment (whether by virtue of section 246 (receipts
of value treated as repayments) or otherwise).
(2)
For the purposes of subsection (1)(a) any repayment of the loan is to be
ignored.
10
(3)
For the purposes of this section the qualifying date relating to an accounting
period is the next anniversary of the investment date to occur after the end of
that period.
237
Securities or shares: no claim after disposal or excessive receipts of value
(1)
If the investment consists of securities or shares, a claim made for an
15
accounting period must relate only to those securities or shares held by the
investor, as sole beneficial owner, continuously throughout the period—
(a)
beginning when the investment is made, and
(b)
ending immediately before the qualifying date relating to the
accounting period.
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(2)
No claim may be made for an accounting period if before the qualifying date
relating to that period paragraphs (a) to (d) of section 247(1) (receipts of value
in the 6 year period exceeding permitted limits) apply in relation to the
investment or any part of it.
(3)
For the purposes of this section the qualifying date relating to an accounting
25
period is the next anniversary of the investment date to occur after the end of
that period.
238
No claim after loss of accreditation by the CDFI
(1)
If the CDFI ceases to be accredited under Chapter 2 of Part 7 of ITA 2007 with
effect from a time within the 5 year period, no claim in respect of the
30
investment may be made—
(a)
for the relevant accounting period, or
(b)
for any later accounting period.
(2)
To find the relevant accounting period proceed under the rest of this section,
in which references to the time of accreditation ceasing are to the time with
35
effect from which the CDFI ceases to be accredited.
(3)
If the time of accreditation ceasing falls within the first year of the 5 year
period, the relevant accounting period is the accounting period in which the
investment date fell.
(4)
In any other case the relevant accounting period is—
40
(a)
the accounting period in which the last anniversary of the investment
date before the time of accreditation ceasing fell, or
(b)
if the time of accreditation ceasing itself falls on an anniversary of the
investment date, the accounting period in which that anniversary falls.