Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
342

Restrictions on relief
679
Restriction on debits to be brought into account
(1)
This section has effect for the purpose of restricting the debits to be brought
into account for the purposes of Part 5 of CTA 2009 (loan relationships) in
respect of the company’s loan relationships.
5
(2)
The debits to be brought into account for the purposes of Part 5 of CTA 2009
for—
(a)
the accounting period beginning immediately after the change in
ownership, or
(b)
any subsequent accounting period,
10

do not include relevant non-trading debits so far as amount A exceeds amount
B.
(3)
Amount A is the sum of—
(a)
the amount of those relevant non-trading debits, and
(b)
the amount of any relevant non-trading debits which have been
15
brought into account for the purposes of that Part for any previous
accounting period ending after the change in ownership.
(4)
Amount B is the amount of the taxable total profits of the accounting period
ending with the change in ownership.
(5)
For the meaning of “relevant non-trading debit”, see section 730.
20
680
Restriction on the carry forward of non-trading deficit from loan
relationships
(1)
This section has effect for the purpose of restricting the carry forward of a non-
trading deficit from the company’s loan relationships under Part 5 of CTA 2009
(loan relationships).
25
(2)
Subsection (3) applies if the non-trading deficit in column 1 of row 4 of the table
in section 685(2) is apportioned in accordance with section 685(2) to the first
notional accounting period.
(3)
None of that non-trading deficit may be carried forward to—
(a)
the accounting period beginning immediately after the change in
30
ownership, or
(b)
any subsequent accounting period.
681
Restriction on relief for non-trading loss on intangible fixed assets
(1)
This section has effect for the purpose of restricting relief under section 753 of
CTA 2009 (treatment of non-trading losses) in respect of a non-trading loss on
35
intangible fixed assets.
(2)
Relief under section 753 of CTA 2009 against the total profits of the same
accounting period is available only in relation to each of the notional
accounting periods considered separately.
(3)
A non-trading loss on intangible fixed assets for an accounting period
40
beginning before the change in ownership may not be—

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
343

(a)
carried forward under section 753(3) of that Act to an accounting
period ending after the change in ownership, or
(b)
treated under that section as if it were a non-trading debit of that
period.
682
Restriction on the deduction of expenses of management
5
(1)
This section has effect for the purpose of restricting deductions for expenses of
management.
(2)
Any amounts which—
(a)
are, or are treated as, expenses of management referable to the actual
accounting period, and
10
(b)
are apportioned to either of the two notional accounting periods in
accordance with section 685,

are treated for the purposes of Chapter 2 of Part 16 of CTA 2009 (companies
with investment business) as expenses of management referable to that
notional accounting period.
15
(3)
Any allowances which are apportioned to either of the notional accounting
periods in accordance with section 685 are treated for the purposes of section
253 of CAA 2001 and section 1233 of CTA 2009 (companies with investment
business: excess capital allowances) as falling to be made in that notional
accounting period.
20
(4)
In calculating the taxable total profits of an accounting period of the company
ending after the change in ownership, no deduction may be made under
section 1219 of CTA 2009 (expenses of management of a company’s investment
business) by reference to—
(a)
expenses of management deductible for an accounting period
25
beginning before the change, or
(b)
allowances falling to be made for such an accounting period.
683
Disallowance of UK property business losses
(1)
This section has effect for the purpose of restricting relief under sections 62 and
63 for a loss made by the company in a UK property business before the change
30
in ownership.
(2)
Relief under section 62(3) is available only in relation to each of the notional
accounting periods considered separately.
(3)
A loss made in an accounting period beginning before the change in ownership
may not be—
35
(a)
carried forward under section 62(5)(a) or 63(3)(a) to an accounting
period ending after the change in ownership, or
(b)
treated in relation to that accounting period as mentioned in section
62(5)(b) or 63(3)(b).
684
Disallowance of overseas property business losses
40
(1)
This section has effect for the purpose of restricting relief under section 66 for
a loss made by the company in an overseas property business before the
change in ownership.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
344

(2)
A loss in the business made in an accounting period beginning before the
change in ownership may not be used under section 66(3) to reduce the profits
of the business of an accounting period ending after the change in ownership.
Apportionment of amounts
685
Apportionment of amounts
5
(1)
This section applies for the purposes of this Chapter, but subsection (2) is
subject to subsection (3).
(2)
Any amount for the actual accounting period in column 1 of the following table
is to be apportioned to the two notional accounting periods in accordance with
the corresponding method of apportionment in column 2 of the table.
10

Row
1. Amount to be apportioned
2. Method of apportionment

1
The amount for the actual
Apportion the amount in column 1

accounting period of any adjusted
on a time basis according to the

non-trading profits from the
respective lengths of the two

company’s loan relationships (see
notional accounting periods.

15

section 686(2)).

2
The amount for the actual
Apportion the amount in column 1

accounting period of any adjusted
on a time basis according to the

non-trading deficit from the
respective lengths of the two

company’s loan relationships (see
notional accounting periods.

20

section 686(3)).

3
The amount of any non-trading
(1) If condition A in section 686(4) is

debit that falls to be brought into
met, apportion the amount in

account for the actual accounting
column 1 by reference to the time of

period for the purposes of Part 5 of
accrual of the amount to which the

25

CTA 2009 (loan relationships) in
debit relates. (2) If condition B in

respect of any debtor relationship of
section 686(5) is met, apportion the

the company.
amount in column 1 to the first

notional accounting period.

4
The amount of any non-trading
Apportion the whole of the amount

30

deficit carried forward to the actual
in column 1 to the first notional

accounting period under section
accounting period.

457(1) of CTA 2009 (basic rule for

deficits: carry forward to accounting

periods after deficit period).

35

5
The amount of any non-trading
Apportion to each notional

credits or debits in respect of
accounting period the credits or

intangible fixed assets that fall to be
debits that would fall to be brought

brought into account for the actual
into account in that period if it were

accounting period under section 751
a period of account for which

40

of CTA 2009 (non-trading gains and
accounts were drawn up in

losses), but excluding any amount
accordance with generally accepted

within column 1 of row 6.
accounting practice.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
345

Row
1. Amount to be apportioned
2. Method of apportionment

6
The amount of any non-trading loss
Apportion the whole of the amount

on intangible fixed assets carried
in column 1 to the first notional

forward to the actual accounting
accounting period.

period under section 753(3) of CTA

5

2009 and treated under that section

as if it were a non-trading debit of

that period.

7
The amount of any expenses of
Apportion to each notional

management referable to the actual
accounting period the amounts that

10

accounting period within the
would fall to be brought into

meaning of Chapter 2 of Part 16 of
account in that period as an amount

CTA 2009 (companies with
in column 1 if it were a period of

investment business) (but see
account for which accounts were

section 686(6)).
drawn up in accordance with

15

generally accepted accounting

practice.

8
The amount of any excess carried
Apportion the whole of the amount

forward under section 1223 of CTA
in column 1 to the first notional

2009 (expenses of management
accounting period.

20

carried forward) to the actual

accounting period.

9
The amount of any allowances
Apportion the amount in column 1

falling to be made for the actual
on a time basis according to the

accounting period as a result of
respective lengths of the two

25

section 253 of CAA 2001 which
notional accounting periods.

would (but for this Chapter) be

added to the expenses of

management for the period because

of section 1233 of CTA 2009 (excess

30

capital allowances).

10
Any other amounts by reference to
Apportion the amount in column 1

which the profits or losses of the
on a time basis according to the

actual accounting period would
respective lengths of the two

(but for this Chapter) be calculated.
notional accounting periods.

35

(3)
If any method of apportionment in column 2 of the table in subsection (2)
would work unjustly or unreasonably in any case, such other method is to be
used as is just and reasonable.
(4)
For the meaning of certain expressions used in this section, see section 686.
686
Meaning of certain expressions in section 685
40
(1)
This section applies for the purposes of the table in section 685(2).
(2)
For the purposes of column 1 of row 1 of the table, the amount for the actual
accounting period of any adjusted non-trading profits from the company’s
loan relationships is the amount which would be the amount of the profits
from those relationships chargeable under section 299 of CTA 2009 (charge to
45

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
346

tax on non-trading profits) if, in calculating that amount, amounts for that
period within column 1 of row 3 or 4 of the table were disregarded.
(3)
For the purposes of column 1 of row 2 of the table, the amount for the actual
accounting period of any adjusted non-trading deficit from the company’s loan
relationships is the amount which would be the amount of the non-trading
5
deficit from those relationships if, in calculating that amount, amounts for that
period within column 1 of row 3 or 4 of the table were disregarded.
(4)
Condition A is that —
(a)
the amount in column 1 of row 3 of the table is determined on an
amortised cost basis of accounting, and
10
(b)
none of the following provisions applies—
(i)
section 373 of CTA 2009 (late interest treated as not accruing
until paid in some cases),
(ii)
section 407 of that Act (postponement until redemption of
debits for connected companies’ deeply discounted securities),
15
or
(iii)
section 409 of that Act (postponement until redemption of
debits for close companies’ deeply discounted securities).
(5)
Condition B is that —
(a)
the amount in column 1 of row 3 of the table is determined on an
20
amortised cost basis of accounting, and
(b)
any of the provisions mentioned in subsection (4)(b) applies.
(6)
The expenses of management mentioned in column 1 of row 7 of the table do
not include any expenses for which a deduction under section 1219 of CTA
2009 (expenses of management of a company’s investment business) would be
25
disallowed because of subsection (3)(b) of that section.
Adjustment to balancing charges if relief is restricted
687
Adjustment to balancing charges if relief is restricted
(1)
This section applies if condition A or B is met.
(2)
Condition A is that the debits to be brought into account for the purposes of
30
Part 5 of CTA 2009 (loan relationships) in the case of the company in respect of
its loan relationships are restricted because of section 679.
(3)
Condition B is that deductions from the company’s total profits are restricted
because of section 680 or 682.
(4)
In applying the provisions of CAA 2001 about balancing charges to the
35
company by reference to any event after the change in ownership, there is to be
disregarded any allowance falling to be made in taxing the company’s trade
for any accounting period beginning before the change in ownership.

This subsection applies despite section 577(3) of CAA 2001.
(5)
But subsection (4) does not apply if the allowance has been given effect to by
40
means of relief against any profits of that accounting period or any subsequent
accounting period beginning before the change in ownership.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 3 — Company with investment business: restrictions on relief: general provision
347

(6)
For the purposes of subsection (5), it is to be assumed that any loss attributable
to any such allowance as is mentioned in subsection (4) is relieved before any
loss which is not attributable to such an allowance.
Meaning of “significant increase in the amount of a company’s capital”
688
Meaning of “significant increase in the amount of a company’s capital”
5
(1)
This section and sections 689 to 691 have effect for determining whether, for the
purposes of section 677(2), there is a significant increase in the amount of a
company’s capital after a change in the ownership of the company.
(2)
There is a significant increase in the amount of a company’s capital if amount
B—
10
(a)
exceeds amount A by at least £1 million, or
(b)
is at least twice amount A.
(3)
For the meaning of—
(a)
“amount A” and “amount B”, see sections 689 and 690 respectively, and
(b)
“amount of capital”, see section 691.
15
689
Amount A
(1)
In section 688, amount A is the lower of—
(a)
the amount of the company’s capital immediately before the change in
ownership, and
(b)
the highest 60 day minimum amount for the pre-change year.
20
(2)
The highest 60 day minimum amount for the pre-change year is found as
follows.
Step 1

Find the daily amounts of the company’s capital over the pre-change year.
Step 2
25

Take the highest of the daily amounts.
Step 3

Find out whether there was in the pre-change year a period of at least 60 days
in which there was no daily amount lower than the amount taken.
Step 4
30

If there was, the amount taken is the highest 60 day minimum amount for the
pre-change year.

If there was not, take the next highest of the daily amounts and repeat step 3;
and so on, until the highest 60 day minimum amount for the pre-change year
is found.
35
(3)
In this section “the pre-change year” means the period of one year ending
immediately before the change in ownership.