Corporation Tax Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 4 — Company with investment business: restrictions on relief: asset transferred within group
355

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

9
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.

carried forward) to the actual

5

accounting period.

10
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

section 253 of CAA 2001 which
notional accounting periods.

10

would (but for this Chapter) be

added to the expenses of

management for the period because

of section 1233 of CTA 2009 (excess

capital allowances).

15

11
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.

(3)
If any method of apportionment in column 2 of rows 2 to 11 of the table in
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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 703.
703
Meaning of certain expressions in section 702
(1)
This section applies for the purposes of the table in section 702(2).
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(2)
For the purposes of column 1 of row 2 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
tax on non-trading profits) if, in calculating that amount, amounts for that
30
period within column 1 of row 4 or 5 of the table were disregarded.
(3)
For the purposes of column 1 of row 3 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
deficit from those relationships if, in calculating that amount, amounts for that
35
period within column 1 of row 4 or 5 of the table were disregarded.
(4)
Condition A is that—
(a)
the amount in column 1 of row 4 of the table is determined on an
amortised cost basis of accounting, and
(b)
none of the following provisions applies—
40
(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),
or
45

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 5 — Company without investment business: disallowance of property losses
356

(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 4 of the table is determined on an
amortised cost basis of accounting, and
5
(b)
any of the provisions mentioned in subsection (4)(b) applies.
(6)
The expenses of management mentioned in column 1 of row 8 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
disallowed because of subsection (3)(b) of that section.
10
Chapter 5
Company without investment business: disallowance of property losses
704
Company carrying on UK property business
(1)
This section applies if—
(a)
there is a change in the ownership of a company carrying on a UK
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property business,
(b)
the company is not a company with investment business, and
(c)
condition A or B is met.
(2)
Condition A is that within any period of 3 years in which the change in
ownership occurs there is a major change in the nature or conduct of a trade or
20
UK property business carried on by the company.
(3)
Condition B is that the change in ownership occurs at any time after the scale
of the activities in a trade or UK property business carried on by the company
has become small or negligible and before any significant revival of the trade
or business.
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(4)
The following provisions have effect for the purpose of restricting relief under
section 62 for a loss made by the company in a UK property business before the
change in ownership.
(5)
The accounting period in which the change in ownership occurs (“the actual
accounting period”) is treated for that purpose as two separate accounting
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periods (“notional accounting periods”), the first ending with the change and
the second consisting of the remainder of the period.
(6)
The profits or losses of the actual accounting period are apportioned to the two
notional accounting periods on a time basis according to the respective lengths
of the two periods.
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(7)
But if that method of apportionment would work unjustly or unreasonably in
any case, such other method is to be used as is just and reasonable.
(8)
Relief under section 62(3) is available only in relation to each of the notional
accounting periods considered separately.
(9)
A loss made in an accounting period beginning before the change in ownership
40
may not be—
(a)
carried forward under section 62(5)(a) to an accounting period ending
after the change in ownership, or

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 5 — Company without investment business: disallowance of property losses
357

(b)
treated in relation to such an accounting period as mentioned in section
62(5)(b).
(10)
In this section “major change in the nature or conduct of a trade or UK property
business” includes—
(a)
a major change in the type of property dealt in, or services or facilities
5
provided in, the trade or business, or
(b)
a major change in customers, outlets or markets of the trade or
business.

This section applies even if the change is the result of a gradual process which
began before the period of 3 years mentioned in subsection (2).
10
705
Company carrying on overseas property business
(1)
This section applies if—
(a)
there is a change in the ownership of a company carrying on an
overseas property business,
(b)
the company is not a company with investment business, and
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(c)
condition A or B is met.
(2)
Condition A is that within any period of 3 years in which the change in
ownership occurs there is a major change in the nature or conduct of a trade or
overseas property business carried on by the company.
(3)
Condition B is that the change in ownership occurs at any time after the scale
20
of the activities in a trade or overseas property business carried on by the
company has become small or negligible and before any significant revival of
the trade or business.
(4)
The following provisions have effect for the purpose of restricting relief under
section 66 for a loss made by the company in an overseas property business
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before the change in ownership.
(5)
The accounting period in which the change in ownership occurs (“the actual
accounting period”) is treated for that purpose as two separate accounting
periods (“notional accounting periods”), the first ending with the change and
the second consisting of the remainder of the period.
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(6)
The profits or losses of the actual accounting period are apportioned to the two
notional accounting periods on a time basis according to the respective lengths
of the two periods.
(7)
But if that method of apportionment would work unjustly or unreasonably in
any case, such other method is to be used as is just and reasonable.
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(8)
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.
(9)
In this section “major change in the nature or conduct of a trade or overseas
property business” includes—
40
(a)
a major change in the type of property dealt in, or services or facilities
provided in, the trade or business, or
(b)
a major change in customers, outlets or markets of the trade or
business.

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 6 — Recovery of unpaid corporation tax
358


This section applies even if the change is the result of a gradual process which
began before the period of 3 years mentioned in subsection (2).
Chapter 6
Recovery of unpaid corporation tax
General definitions
5
706
Meaning of “linked” person
(1)
If there is a change in the ownership of a company, a person is “linked” to the
company, for the purposes of this Chapter, if condition A or B is met.
(2)
Condition A is that the person had control of the company at any time in the
relevant period before the change.
10
(3)
Condition B is that the person is a company of which a person mentioned in
subsection (2) had control at any time in the period of 3 years before the change.
(4)
For the meaning of—
(a)
“control”, see section 707, and
(b)
“the relevant period”, see section 709.
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707
Meaning of “control”
(1)
This section applies for the purposes of this Chapter.
(2)
A person (“P”) is treated as having control of a company (“C”) if P—
(a)
exercises,
(b)
is able to exercise, or
20
(c)
is entitled to acquire,

direct or indirect control over C’s affairs.
(3)
In particular, P is treated as having control of C if P possesses or is entitled to
acquire—
(a)
50% of the share capital or issued share capital of C,
25
(b)
50% of the voting power in C,
(c)
so much of the issued share capital of C as would, on the assumption
that the whole of the income of C were distributed among the
participators, entitle P to receive the greater part of the amount so
distributed, or
30
(d)
such rights as would entitle P, in the event of the winding up of C or in
any other circumstances, to receive the greater part of the assets of C
which would then be available for distribution among the
participators.
(4)
Any rights that P or any other person has as a loan creditor are to be
35
disregarded for the purposes of the assumption in subsection (3)(c).
(5)
If two or more persons together satisfy any of the conditions in subsections (2)
and (3) and do so because they acted together to put themselves in a position
where they will in fact satisfy the condition, each of them is treated as having
control of C.
40

Corporation Tax Bill
Part 14 — Change in company ownership
Chapter 6 — Recovery of unpaid corporation tax
359

(6)
In this section—
“loan creditor” has the meaning given by section 453, and
“participator” has the meaning given by section 454.
(7)
See also section 708 (rights to be attributed for the purposes of this section).
708
Rights to be attributed for the purposes of section 707
5
(1)
This section applies for the purposes of section 707.
(2)
A person is treated as entitled to acquire anything which the person—
(a)
is entitled to acquire at a future date, or
(b)
will at a future date be entitled to acquire.
(3)
If a person—
10
(a)
possesses any rights or powers on behalf of another person (A), or
(b)
may be required to exercise any rights or powers on A’s direction or
behalf,

those rights or powers are to be attributed to A.
(4)
There may also be attributed to a person all the rights and powers—
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(a)
of any company of which the person has, or the person and associates
of the person have, control,
(b)
of any two or more companies within paragraph (a),
(c)
of any associate of the person, or
(d)
of any two or more associates of the person.
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(5)
The rights and power which may be attributed under subsection (4)—
(a)
include those attributed to a company or associate under subsection (3)
but
(b)
do not include those attributed to an associate under subsection (4).
(6)
Such attributions are to be made under subsection (4) as will result in C being
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treated as under the control of 5 or fewer participators if it can be so treated.
(7)
In this section—
“associate” has the meaning given by section 448, and
“participator” has the meaning given by section 454.
709
Meaning of “the relevant period”
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(1)
This section applies for the purposes of this Chapter.
(2)
“The relevant period”, in relation to a change in the ownership of a company,
means the period of 3 years before the change.
(3)
But if in the period of 3 years before the change (“the later change”) there was
another change in the ownership of the company (“the earlier change”), “the
35
relevant period”, in relation to the later change, means the period between the
earlier change and the later change.