Corporation Tax Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 5 — Companies in liquidation or administration
319

Companies in liquidation
628
Company in liquidation: corporation tax rates
(1)
This section applies, in the case of a company that is being wound up, in
relation to profits of the company arising in its final year (see subsections (2) to
(5)) or its penultimate year (see subsections (6) and (7)).
5
(2)
The rate of corporation tax to be applied in assessing, before the winding up of
the company is completed, the corporation tax chargeable on the profits of the
company arising in the winding up in its final year is to be determined in
accordance with subsections (3) to (5).
(3)
If the rate of corporation tax has been fixed for the final year, that fixed rate is
10
to be applied.
(4)
If the rate of corporation tax has been proposed (but not yet fixed) for the final
year, that proposed rate is to be applied.
(5)
If the rate of corporation tax has been neither fixed nor proposed for the final
year, the rate fixed or proposed for the penultimate year is to be applied.
15
(6)
Subsection (7) applies if—
(a)
the winding up of the company started before the company’s final year,
and
(b)
an assessment to corporation tax is made at a time when the rate of
corporation tax for the company’s penultimate year is proposed (but
20
not yet fixed).
(7)
The rate of corporation tax proposed for the penultimate year is to be applied
in relation to the profits of the company arising in the winding up at any time
in that year.
629
Company in liquidation: making of assessment to tax
25
(1)
This section applies if—
(a)
an assessment to corporation tax is made on the profits of a company
that is being wound up, and
(b)
the assessment is made before the date when the winding up is
completed (“the actual winding up date”).
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(2)
An assessment for an accounting period falling after the start of the winding
up is not invalid because it is made before the end of the period.
(3)
In applying section 12 of CTA 2009 (accounting periods of companies being
wound up) for the purpose of determining when an accounting period of the
company ends, the liquidator may make an assumption as to what the actual
35
winding up date will be (“the assumed winding up date”).
(4)
The company’s final and penultimate years are not changed if the assumption
made under subsection (3) as to the actual winding up date is wrong.
(5)
If the actual winding up date is later than the assumed winding up date—
(a)
an accounting period of the company ends on the assumed winding up
40
date (“period A”), and
(b)
a new accounting period of the company (“period B”) begins
immediately after the end of period A.

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 5 — Companies in liquidation or administration
320

(6)
Section 12 of CTA 2009 then applies as if the winding up of the company
started at the time when period B begins.
Companies in administration
630
Company in administration: corporation tax rates
(1)
This section applies, in the case of a company in administration, in relation to
5
profits of the company arising in its final year (see subsections (2) to (5)) or its
penultimate year (see subsections (6) and (7)).
(2)
The rate of corporation tax to be applied in assessing, before the dissolution
event in respect of the company, the corporation tax chargeable on the profits
of the company arising in the administration in its final year is to be
10
determined in accordance with subsections (3) to (5).
(3)
If the rate of corporation tax has been fixed for the final year, that fixed rate is
to be applied.
(4)
If the rate of corporation tax has been proposed (but not yet fixed) for the final
year, that proposed rate is to be applied.
15
(5)
If the rate of corporation has been neither fixed nor proposed for the final year,
the rate fixed or proposed for the penultimate year is to be applied.
(6)
Subsection (7) applies if—
(a)
the company entered administration before its final year, and
(b)
an assessment to corporation tax is made at a time when the rate of
20
corporation tax for the company’s penultimate year is proposed (but
not yet fixed).
(7)
The rate of corporation tax proposed for the penultimate year is to be applied
in relation to the profits of the company arising in the administration at any
time in that year.
25
631
Company in administration: making of assessment to tax
(1)
This section applies if—
(a)
an assessment to corporation tax is made on the profits of a company in
administration, and
(b)
the assessment is made before the date of the dissolution event in
30
respect of the company (“the actual dissolution date”).
(2)
An assessment for an accounting period in which the company is in
administration is not invalid because it is made before the end of the period.
(3)
In applying section 10(1) of CTA 2009 (time when accounting periods come to
an end) for the purpose of determining when an accounting period of the
35
company ends, the administrator may make an assumption as to what the
actual dissolution date will be (“the assumed dissolution date”).
(4)
The company’s final and penultimate years are not changed if the assumption
made under subsection (3) as to the actual dissolution date is wrong.
(5)
If the actual dissolution date is later than the assumed dissolution date—
40
(a)
an accounting period of the company ends on the assumed dissolution
date (“period A”), and

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 5 — Companies in liquidation or administration
321

(b)
a new accounting period of the company (“period B”) begins
immediately after the end of period A.
(6)
Section 10(1) of CTA 2009 then applies as if the company had entered
administration at the beginning of period B.
Supplementary
5
632
Meaning of rate being “fixed” or “proposed”
(1)
This section applies for the purposes of sections 628 and 630.
(2)
A rate of corporation tax is “fixed”—
(a)
in the case of a company that is being wound up, if the rate has been
fixed by an Act passed before the completion of the winding up, and
10
(b)
in the case of a company that is in administration, if the rate has been
fixed by an Act passed before the dissolution event in respect of the
company,

but this is subject to subsection (4).
(3)
A rate of corporation tax is “proposed” if the rate is proposed by a Budget
15
resolution (whether or not subsequently fixed by an Act).
(4)
If a Budget resolution proposes to alter a rate of corporation tax that has been
fixed, references in sections 628 and 630 to a fixed rate are references to that rate
as proposed to be altered by the resolution.
(5)
In this section “Budget resolution” means a resolution of the House of
20
Commons for fixing a rate of corporation tax.
633
Exemption for interest on overpaid tax in final accounting period
(1)
This section applies if, in the final accounting period of a company that is being
wound up or is in administration, interest within subsection (2) arises to the
company.
25
(2)
Interest within this subsection arises to a company if—
(a)
the interest is received or is receivable by the company under section
826 of ICTA (interest on tax overpaid), and
(b)
the interest does not exceed £2000.
(3)
The interest is excluded in calculating the company’s income for corporation
30
tax purposes.
(4)
In subsection (1) the “final accounting period” means—
(a)
in the case of a company being wound up, the accounting period which
ends, in accordance with section 12 of CTA 2009 (accounting periods of
companies being wound up), with the completion of the winding up,
35
and
(b)
in the case of a company in administration, the last accounting period
of the company before the dissolution event in respect of the company.

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 6 — Banks etc in compulsory liquidation
322

Chapter 6
Banks etc in compulsory liquidation
634
Overview of Chapter
(1)
This Chapter provides for the receipts of certain types of company being
wound up to be charged to corporation tax.
5
(2)
For provision charging the receipts of such companies to income tax, see
Chapter 3A of Part 14 of ITA 2007.
635
Application of Chapter
(1)
This Chapter applies if—
(a)
a company is being or has been wound up by the court in the United
10
Kingdom, and
(b)
conditions A, B and C are met.
(2)
Condition A is that the company was, at any time within the period mentioned
in subsection (5), lawfully carrying on a business of accepting deposits as—
(a)
a person of the kind mentioned in paragraph (b) of the definition of
15
“bank” in section 1120(2) (persons with permission under Part 4 of
FISMA 2000 to accept deposits), or
(b)
a permitted EEA credit institution.
(3)
Condition B is that the company has permanently ceased to carry on the trade
that included the business of accepting deposits (the “deposit-taking trade”).
20
(4)
Condition C is that the company is insolvent and—
(a)
was so when the winding up proceedings started, or
(b)
became so at any time in the period of 12 months following the day on
which those proceedings started.
(5)
The period referred to in subsection (2) is the period of 12 months ending with
25
the earlier of—
(a)
the day on which the winding up proceedings started, and
(b)
the day on which the company permanently ceased to carry on the
deposit-taking trade.
(6)
In subsection (2)(b) a “permitted EEA credit institution” means an EEA firm of
30
the kind mentioned in paragraph 5(b) of Schedule 3 to FISMA 2000 (credit
institutions authorised by home state regulator) which has permission to
accept deposits under paragraph 15 of that Schedule.
636
Charge to corporation tax on winding up receipts
(1)
The charge to corporation tax on income applies to winding up receipts arising
35
from the deposit-taking trade.
(2)
Subsection (1) applies in relation to a winding up receipt only so far as its value
was not brought into account in calculating the profits of the trade of any
period before the permanent cessation of the trade.
(3)
A “winding up receipt” means (subject to subsection (4)) a sum received by the
40
company or its liquidator after—

Corporation Tax Bill
Part 13 — Other special types of company etc
Chapter 6 — Banks etc in compulsory liquidation
323

(a)
the start of the winding up proceedings, or
(b)
if later, the permanent cessation of the deposit-taking trade.
(4)
The following are not winding up receipts—
(a)
a sum received on behalf of a person entitled to the sum to the exclusion
of the company and its liquidator, and
5
(b)
a sum realised by the transfer of an asset required to be valued under
section 162 of CTA 2009 (valuation of trading stock on cessation).
637
Transfer of rights to payment
(1)
This section applies if—
(a)
the company or its liquidator transfers for value to another person the
10
right to receive a sum arising from the deposit-taking trade, and
(b)
the sum is one which, if received by the company or its liquidator,
would be a winding up receipt.
(2)
If the transfer is at arm’s length, this Chapter has effect as if the amount or
value of the consideration for the transfer were a winding up receipt arising
15
from the deposit-taking trade.
(3)
If the transfer is not at arm’s length, this Chapter has effect as if the value of the
right transferred as between parties at arm’s length were a winding up receipt
arising from the deposit-taking trade.
638
Allowable deductions
20
(1)
In calculating the amount on which corporation tax is charged under this
Chapter for an accounting period, deductions are allowed in accordance with
this section from the amount which would otherwise be chargeable to
corporation tax under this Chapter.
(2)
A deduction is allowed for the total sum of all losses, expenses and debits
25
within subsection (3) that are incurred during or before the accounting period
(but subject to subsections (4) and (5)).
(3)
The losses, expenses and debits within this subsection are those which, if the
company carrying on the deposit-taking trade had not permanently ceased to
do so—
30
(a)
would have been deducted in calculating the profits of the trade for
corporation tax purposes, or
(b)
would have been deducted from or set off against the profits of the
trade for corporation tax purposes.
(4)
No deduction is allowed if the loss, expense or debit arises directly or indirectly
35
from the cessation itself.
(5)
A loss, expense or debit is only within subsection (3) if incurred—
(a)
after the start of the winding up proceedings or, if later, the permanent
cessation of the deposit-taking trade, or
(b)
in the case of a loss, at or before the permanent cessation of the deposit-
40
taking trade.
(6)
No deduction for an amount is allowed under this section if the amount has
already been allowed (whether under this section or under any other provision
of the Tax Acts).