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
348

690
Amount B
(1)
In section 688, amount B is the highest 60 day minimum amount for the post-
change period.
(2)
The highest 60 day minimum amount for the post-change period is found as
follows.
5
Step 1

Find the daily amounts of the company’s capital over the post-change period.
Step 2

Take the highest of the daily amounts.
Step 3
10

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

If there was, the amount taken is the highest 60 day minimum amount for the
post-change period.
15

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 post-change
period is found.
(3)
In this section “the post-change period” means the period of 3 years beginning
with the change in ownership.
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691
Meaning of “amount of capital”
(1)
This section applies for the purposes of sections 688 to 690.
(2)
The amount of the capital of a company is the sum of—
(a)
the amount of the paid up share capital of the company,
(b)
the amount outstanding of any debts incurred by the company which
25
are within section 453(2), and
(c)
the amount outstanding of any redeemable loan capital issued by the
company.
(3)
For the purposes of subsection (2)—
(a)
the amount of the paid up share capital includes any amount in the
30
share premium account of the company, and
(b)
the amount outstanding of any debts includes the amount of any
interest due on the debts.
(4)
Amounts of capital are to be expressed in sterling.
(5)
In this section “share premium account” has the same meaning as in section 610
35
of the Companies Act 2006.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 4 — Company with investment business: restrictions on relief: asset transferred within group
349

Chapter 4
Company with investment business: restrictions on relief: asset transferred
within group
Introduction
692
Introduction to Chapter
5
(1)
This Chapter applies if—
(a)
there is a change in the ownership of a company with investment
business (“the company”), and
(b)
conditions 1 to 3 are met.
(2)
Condition 1 is that none of conditions A to C in section 677 is met.
10
(3)
Condition 2 is that after the change in ownership the company acquires an
asset from another company in circumstances such that—
(a)
section 171(1) of TCGA 1992 (no gain/no loss on transfer within group),
or
(b)
section 775 of CTA 2009 (tax-neutral transfer within group),
15

applies to the acquisition.
(4)
Condition 3 is that—
(a)
in a case within subsection (3)(a), a chargeable gain accrues to the
company on a disposal of the asset within the period of 3 years
beginning with the change in ownership, or
20
(b)
in a case within subsection (3)(b), there is a non-trading chargeable
realisation gain on the realisation of the asset within that period.
(5)
For the purposes of subsection (4), an asset (P) acquired by the company as
mentioned in subsection (3) is treated as the same as an asset (Q) owned at a
later time by the company if the value of Q is derived in whole or in part from
25
P.
(6)
In particular, P is treated as the same as Q for those purposes if—
(a)
Q is a freehold,
(b)
P was a leasehold, and
(c)
the lessee has acquired the reversion.
30
(7)
In this Chapter—
“the change in ownership” means the change in ownership mentioned in
subsection (1),
“the company” has the same meaning as in this section,
“non-trading chargeable realisation gain” means a chargeable realisation
35
gain (within the meaning of Part 8 of CTA 2009 (intangible fixed assets))
which is a non-trading credit for the purposes of that Part (see section
746 of that Act),
“realisation” has the meaning given by section 734 of CTA 2009, and
“the relevant gain” means the gain within subsection (4)(a) or (b).
40

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 4 — Company with investment business: restrictions on relief: asset transferred within group
350

693
Meaning of “amount of profits which represents a relevant gain”
(1)
In this Chapter, the amount of any profits which represents a relevant gain is
found by comparing—
(a)
the amount (“Y”) of the relevant gain, with
(b)
the amount (“Z”) which is included in respect of chargeable gains or, as
5
the case may be, non-trading chargeable realisation gains for the
accounting period concerned.
(2)
If Y does not exceed Z, the amount of the profits which represents the relevant
gain equals Y.
(3)
If Y exceeds Z, the amount of those profits equals Z.
10
694
Meaning of “the relevant provisions”
In this Chapter “the relevant provisions” means—
(a)
section 8(1) of, and Schedule 7A to, TCGA 1992 (amounts included in
respect of chargeable gains in total profits), or
(b)
Chapter 6 of Part 8 of CTA 2009 (intangible fixed assets: how credits
15
and debits are given effect).
Notional split of accounting period in which change in ownership occurs
695
Notional split of accounting period in which change in ownership occurs
(1)
This section applies for the purposes of this Chapter.
(2)
The accounting period in which the change in ownership occurs (“the actual
20
accounting period”) is treated as two separate accounting periods (“notional
accounting periods”), the first ending with the change and the second
consisting of the remainder of the period.
(3)
The amounts for the actual accounting period in column 1 of the table in section
702(2) are apportioned to the two notional accounting periods in accordance
25
with section 702.
(4)
In this Chapter “the actual accounting period” and “notional accounting
periods” have the same meaning as in this section.
Restrictions on relief
696
Restriction on debits to be brought into account
30
(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.
(2)
But this section applies only if, in accordance with the relevant provisions and
section 702, an amount is included in respect of chargeable gains or, as the case
35
may be, non-trading chargeable realisation gains in the total profits of the
accounting period of the company in which the relevant gain accrues or arises.
(3)
The debits to be brought into account for the purposes of Part 5 of CTA 2009
for—

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 4 — Company with investment business: restrictions on relief: asset transferred within group
351

(a)
the accounting period beginning immediately after the change in
ownership, or
(b)
any subsequent accounting period,

do not include relevant non-trading debits so far as the amount of those debits
exceeds the modified total profits of the accounting period.
5
(4)
In subsection (3) “the modified total profits of the accounting period” means
the total profits of that period—
(a)
less, if that period is the period in which the relevant gain accrues or
arises, an amount equal to so much of those profits as represents the
relevant gain, and
10
(b)
after deducting any amounts which can be relieved against the profits,
other than an amount falling to be deducted under section 461 of CTA
2009 (claim to set off deficit against other profits for the deficit period).
(5)
If, as a result of subsection (3), a debit is to any extent not brought into account
for an accounting period, that debit may (to that extent) be brought into
15
account for the next accounting period, but this is subject to the application of
subsections (3) and (4) to that next accounting period.
(6)
For the meaning of “relevant non-trading debit”, see section 730.
697
Restriction on the carry forward of non-trading deficit from loan
relationships
20
(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).
(2)
But this section applies only if, in accordance with the relevant provisions and
section 702, an amount is included in respect of chargeable gains or, as the case
25
may be, non-trading chargeable realisation gains in the total profits of the
accounting period of the company in which the relevant gain accrues or arises.
(3)
Subsection (4) applies if the non-trading deficit in column 1 of row 5 of the table
in section 702(2) is apportioned in accordance with section 702(2) to the first
notional accounting period.
30
(4)
None of that non-trading deficit may be carried forward to—
(a)
the accounting period beginning immediately after the change in
ownership, or
(b)
any subsequent accounting period.
698
Restriction on relief for non-trading loss on intangible fixed assets
35
(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
intangible fixed assets.
(2)
But this section applies only if, in accordance with the relevant provisions and
section 702, an amount is included in respect of chargeable gains or, as the case
40
may be, non-trading chargeable realisation gains in the total profits of the
accounting period of the company (“the relevant period”) in which the relevant
gain accrues or arises.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 4 — Company with investment business: restrictions on relief: asset transferred within group
352

(3)
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.
(4)
Subsection (5) applies if a non-trading loss on intangible fixed assets for an
accounting period beginning before the change in ownership is carried
5
forward under section 753(3) of that Act to an accounting period ending after
the change in ownership.
(5)
The non-trading loss may not be used to give relief under section 753 of that
Act in respect of so much of the total profits of the relevant period as represents
the relevant gain.
10
699
Restrictions on the deduction of expenses of management
(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
15
accounting period, and
(b)
are apportioned to either of the two notional accounting periods in
accordance with section 702,

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
20
notional accounting period.
(3)
Any allowances which are apportioned to either of the notional accounting
periods in accordance with section 702 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
25
accounting period.
(4)
Subsection (5) applies if, in accordance with the relevant provisions and section
702, an amount is included in respect of chargeable gains or, as the case may
be, non-trading chargeable realisation gains in the total profits of the
accounting period of the company in which the relevant gain accrues or arises.
30
(5)
In calculating the taxable total profits of the accounting period of the company
in which the relevant gain accrues or arises, 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
35
beginning before the change in ownership, or
(b)
allowances falling to be made for such an accounting period,

from so much of the total profits of the accounting period as represents the
relevant gain.
700
Disallowance of UK property business losses
40
(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
in ownership.
(2)
But this section applies only if, in accordance with the relevant provisions and
section 702, an amount is included in respect of chargeable gains or, as the case
45

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 4 — Company with investment business: restrictions on relief: asset transferred within group
353

may be, non-trading chargeable realisation gains in the total profits of the
accounting period of the company in which the relevant gain accrues or arises.
(3)
Relief under section 62(3) is available only in relation to each of the notional
accounting periods considered separately.
(4)
A loss made in an accounting period beginning before the change in ownership
5
may not be deducted, as a result of section 62(5) or 63(3), from so much of the
profits of an accounting period ending after the change in ownership as
represents the relevant gain.
701
Disallowance of overseas property business losses
(1)
This section has effect for the purpose of restricting relief under section 66 for
10
a loss made by the company in an overseas property business before the
change in ownership.
(2)
But this section applies only if, in accordance with the relevant provisions and
section 702, an amount is included in respect of chargeable gains or, as the case
may be, non-trading chargeable realisation gains in the total profits of the
15
accounting period of the company in which the relevant gain accrues or arises.
(3)
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 so much of
the profits of the business of an accounting period ending after the change in
ownership as represents the relevant gain.
20
Apportionment of amounts
702
Apportionment of amounts
(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
25
is to be apportioned to the two notional accounting periods in accordance with
the corresponding method of apportionment in column 2 of the table.

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

1
The amount which would in
(1) If the amount in column 1 does

accordance with the relevant
not exceed the amount of the

30

provisions (and but for this
relevant gain, apportion the whole

Chapter) be included in respect of
of it to the second notional

chargeable gains or, as the case may
accounting period. (2) If the amount

be, non-trading chargeable
in column 1 exceeds the amount of

realisation gains in the total profits
the relevant gain, apportion the

35

of the actual accounting period.
excess to the first notional

accounting period and an amount

equal to the relevant gain to the

second notional accounting period.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 4 — Company with investment business: restrictions on relief: asset transferred within group
354

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

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 profits from the
respective lengths of the two

company’s loan relationships (see
notional accounting periods.

5

section 703(2)).

3
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.

10

section 703(3)).

4
The amount of any non-trading
(1) If condition A in section 703(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

15

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

respect of any debtor relationship of
section 703(5) is met, apportion the

the company.
amount in column 1 to the first

notional accounting period.

5
The amount of any non-trading
Apportion the whole of the amount

20

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).

25

6
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

30

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 7.
accounting practice.

7
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

35

forward to the actual accounting
accounting period.

period under section 753(3) of CTA

2009 and treated under that section

as if it were a non-trading debit of

that period.

40

8
The amount of any expenses of
Apportion to each notional

management referable to the actual
accounting period the amounts that

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

45

investment business) (but see
account for which accounts were

section 703(6)).
drawn up in accordance with

generally accepted accounting

practice.