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 5 — Withdrawal or reduction of CITR
127

248
Receipts of insignificant value to be added together
(1)
This section applies if—
(a)
value is received (“the relevant receipt”) by the investor from the CDFI
at any time during the 6 year period relating to the investment (see
section 249 for provision about when value is received),
5
(b)
the investor has received from the CDFI one or more receipts of
insignificant value at a time or times—
(i)
during that period, but
(ii)
not later than the time of the relevant receipt, and
(c)
the total amount of the value of the receipts within paragraphs (a) and
10
(b) is not an amount of insignificant value.
(2)
The investor is treated for the purposes of this Part as if the relevant receipt had
been a receipt of an amount of value equal to that total amount.
(3)
A receipt does not fall within subsection (1)(b) if the whole or any part of it has
previously formed part of a total amount falling within subsection (1)(c).
15
(4)
For the purposes of this section “an amount of insignificant value” means an
amount of value which—
(a)
is not more than £1,000, or
(b)
if it is more than £1,000, is insignificant in relation to the relevant
amount.
20
(5)
If the investment consists of a loan, the relevant amount for the purposes of
subsection (4) is—
(a)
if the relevant receipt is received in the first or second year of the 6 year
period, the average capital balance of the loan for the second year of
that period, and
25
(b)
if the relevant receipt is received in a later year, the average capital
balance of the loan for the year in question.
(6)
For the purposes of subsection (5)—
(a)
the average capital balance of the loan for a year is the mean of the daily
balances of capital outstanding during the year, and
30
(b)
the relevant receipt and any receipts within subsection (1)(b) are
ignored when calculating the average capital balance for the year in
question.
(7)
If the investment consists of securities or shares, the relevant amount for the
purposes of subsection (4) is—
35
(a)
if the relevant receipt is received in the first year of the 6 year period,
the amount subscribed for the securities or shares, and
(b)
in any other case, the amount subscribed for such of the securities or
shares as—
(i)
are held by the investor at the time the relevant receipt is
40
received, and
(ii)
have been held by the investor, as sole beneficial owner,
continuously since the investment was made.
(8)
This section is subject to section 251 (value received if there is more than one
investment).
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Corporation Tax Bill
Part 7 — Community investment tax relief
Chapter 5 — Withdrawal or reduction of CITR
128

249
When value is received
(1)
For the purposes of this Chapter the investor receives value from the CDFI at
any time when the CDFI—
(a)
repays, redeems or repurchases any securities or shares included in the
investment,
5
(b)
releases or waives any liability of the investor to the CDFI or
discharges, or undertakes to discharge, any liability of the investor to a
third person,
(c)
makes a loan or advance to the investor which has not been repaid in
full before the investment is made,
10
(d)
provides a benefit or facility for—
(i)
the investor or any associate of the investor, or
(ii)
a director or employee of the investor or any associate of a
director or employee of the investor,
(e)
disposes of an asset to the investor for no consideration or for a
15
consideration of an amount or value which is less than the market value
of the asset,
(f)
acquires an asset from the investor for a consideration of an amount or
value which is more than the market value of the asset, or
(g)
makes a payment to the investor other than a qualifying payment.
20
(2)
But if the investor is a bank, the investor does not receive value from the CDFI
when the CDFI makes a deposit with the investor in the course of the CDFI’s
ordinary banking arrangements with the investor.
(3)
For the purposes of subsection (1)(b) the CDFI is treated as having released or
waived a liability if the liability is not discharged within 12 months of the time
25
when it ought to have been discharged.
(4)
For the purposes of subsection (1)(c) the following are treated as loans made by
the CDFI to the investor—
(a)
the amount of any debt due from the investor to the CDFI (other than
an ordinary trade debt), and
30
(b)
the amount of any debt due from the investor to a third person which
has been assigned to the CDFI.
(5)
For the purposes of this section—
(a)
references to a debt or liability do not, in relation to a person, include
references to any debt or liability which would be discharged by the
35
making by that person of a qualifying payment,
(b)
references to a benefit or facility do not include references to any benefit
or facility provided in circumstances such that, if a payment had been
made of an amount equal to its value, that payment would have been a
qualifying payment, and
40
(c)
any reference to a payment or disposal to a person includes a reference
to a payment or disposal made to that person indirectly or to that
person’s order or for that person’s benefit.
(6)
In subsection (5) references to “a person” include references to any other
person who, at any time in the 6 year period, is connected with that person,
45
whether or not the other person is so connected at the material time.
(7)
In this section—
“bank” has the meaning given by section 1120,

Corporation Tax Bill
Part 7 — Community investment tax relief
Chapter 5 — Withdrawal or reduction of CITR
129

“qualifying payment” means—
(a)
any payment by any person for any goods, services or facilities
provided by the investor (in the course of the investor’s trade or
otherwise) which is reasonable in relation to the market value of
those goods, services or facilities,
5
(b)
the payment by any person of any interest which represents no
more than a reasonable commercial return on money lent to that
person,
(c)
the payment by any company of any dividend or other
distribution which does not exceed a normal return on any
10
investment in shares in or securities of that company,
(d)
any payment for the acquisition of an asset which does not
exceed its market value,
(e)
the payment by any person, as rent for any property occupied
by the person, of an amount which is not more than a
15
reasonable and commercial rent for the property, and
(f)
a payment in discharge of an ordinary trade debt, and
“ordinary trade debt” means any debt for goods or services supplied in
the ordinary course of a trade or business if any credit given—
(a)
is for not more than 6 months, and
20
(b)
is not longer than that normally given to customers of the
person carrying on the trade or business.
250
The amount of value received
(1)
In a case falling within a provision listed in column 1 of the following table, the
amount of value received for the purposes of this Chapter is given by the
25
corresponding entry in column 2 of the table.

Provision
The amount of value received

Section 249(1)(a)
The amount received by the investor

Section 249(1)(b)
The amount of the liability

Section 249(1)(c)
The amount of the loan or advance, less the

30

amount of any repayment made before the

investment is made

Section 249(1)(d)(i)
The cost to the CDFI of providing the

benefit or facility, less any consideration

given for it by the investor or any associate

35

of the investor

Section 249(1)(d)(ii)
The cost to the CDFI of providing the

benefit or facility, less any consideration

given for it by the investor or any associate

of the investor or by a person within

40

subsection (2)

Section 249(1)(e) or (f)
The difference between the market value of

the asset and the consideration (if any)

received for it

Corporation Tax Bill
Part 7 — Community investment tax relief
Chapter 5 — Withdrawal or reduction of CITR
130

Provision
The amount of value received

Section 249(1)(g)
The amount of the payment

(2)
The persons within this subsection are—
(a)
in a case where the benefit or facility was provided to a director or
employee, the director or employee or any associate of the director or
5
employee, and
(b)
in a case where the benefit or facility was provided to an associate of a
director or employee, the associate or the director or employee.
251
Value received if there is more than one investment
(1)
This section applies if—
10
(a)
the investor makes two or more investments in the CDFI,
(b)
the investor is eligible for and claims CITR in respect of those
investments, and
(c)
the investor receives value (other than value within section 249(1)(a))
which is received within the 6 year periods relating to two or more of
15
those investments.
(2)
Sections 246, 247, 248 and 252 have effect in relation to each investment
referred to in subsection (1)(c) as if the amount of the value received were
reduced by multiplying it by the fraction—


where—
20

A is the appropriate amount in respect of the investment in question,
and

B is the sum of that amount and the appropriate amount or amounts in
respect of the other investment or investments.
(3)
If the investment consists of a loan, the appropriate amount for the purposes of
25
subsection (2) is—
(a)
if the value is received in the first or second year of the 6 year period,
the average capital balance of the loan for the second year of that
period, and
(b)
if the value is received in a later year, the average capital balance of the
30
loan for the year in question.
(4)
For the purposes of subsection (3)—
(a)
the average capital balance of the loan for a year is the mean of the daily
balances of capital outstanding during the year, and
(b)
the receipt of value is ignored when calculating the average capital
35
balance for the year in question.
(5)
If the investment consists of securities or shares, the appropriate amount for
the purposes of subsection (2) is—

Corporation Tax Bill
Part 7 — Community investment tax relief
Chapter 5 — Withdrawal or reduction of CITR
131

(a)
if the value is received in the first year of the 6 year period, the amount
subscribed for the securities or shares, and
(b)
in any other case, the amount subscribed for such of the securities or
shares as—
(i)
are held by the investor at the time the value is received, and
5
(ii)
have been held by the investor, as sole beneficial owner,
continuously since the investment was made.
252
Effect of receipt of value on future claims
(1)
This section applies if the investment consists of securities or shares and—
(a)
the investor receives any value (other than an amount of insignificant
10
value) from the CDFI during the 6 year period, and
(b)
the investment or a part of it is held by the investor at the time the value
is received and has been held by the investor, as sole beneficial owner,
continuously since the investment was made (“the continuing
investment”),
15

but no CITR attributable to the continuing investment is withdrawn under
section 247 as a result of the receipt.
(2)
For the purposes of calculating any CITR in respect of any securities or shares
included in the continuing investment for any relevant accounting period, the
amount subscribed for the securities or shares included in the continuing
20
investment is treated as reduced by the amount of the value received.
(3)
For this purpose the “relevant” accounting periods are—
(a)
any accounting period ending on or after the anniversary of the
investment date immediately before the receipt of value, or
(b)
if the value was received on an anniversary of the investment date, any
25
accounting period ending on or after that anniversary.
(4)
For the purposes of this section “an amount of insignificant value” means an
amount of value which—
(a)
is not more than £1,000, or
(b)
if it is more than £1,000, is insignificant in relation to the amount
30
subscribed by the investor for the securities or shares included in the
continuing investment.
(5)
This section is subject to section 251 (value received if there is more than one
investment).
253
Receipts of value by or from connected persons
35
In sections 246 to 252, if the context permits, references to the investor or the
CDFI include references to any person who at any time in the 6 year period
relating to the investment is connected with the investor or, as the case may be,
the CDFI, whether or not the person is connected at the material time.
CITR not due
40
254
CITR subsequently found not to have been due
If any CITR has been obtained which is subsequently found not to have been
due, the CITR must be withdrawn.