Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

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Part 15 — Transactions in securities
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incorporated assets of that description are available for distribution by way of
dividend.
(6)
In this section references to the receipt of consideration include references to
the receipt of any money or money’s worth.
737
Receipt of consideration in connection with relevant company distribution
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(circumstance D)
(1)
This section applies in relation to a company (“the section 733 company”) if
subsections (2) to (4) apply.
(2)
The section 733 company receives consideration in connection with—
(a)
the distribution, transfer or realisation of assets of a relevant company
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(see section 739), or
(b)
the application of such assets in discharge of liabilities.
(3)
The consideration—
(a)
is or represents the value of—
(i)
assets which are available for distribution by way of dividend
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by the relevant company, or
(ii)
assets which would have been so available apart from anything
done by the relevant company,
(b)
is received in respect of future receipts of the relevant company, or
(c)
is or represents the value of trading stock of the relevant company.
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(4)
The section 733 company so receives the consideration that it does not pay or
bear corporation tax on income in respect of it (apart from this Part).
(5)
The assets mentioned in subsection (3) do not include assets which are shown
to represent a return of sums paid by subscribers on the issue of securities,
despite the fact that under the law of the country in which the relevant
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company is incorporated assets of that description are available for
distribution by way of dividend.
(6)
In this section references to the receipt of consideration include references to
the receipt of any money or money’s worth.
738
Receipt of assets of relevant company (circumstance E)
30
(1)
This section applies in relation to a company (“the section 733 company”) if
subsections (2) to (4) and (7) apply.
(2)
The section 733 company receives consideration in connection with—
(a)
the direct or indirect transfer of assets of a relevant company (see
section 739) to another such company, or
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(b)
any transaction in securities in which two or more relevant companies
are concerned.
(3)
The consideration is or represents the value of assets which—
(a)
are available for distribution by way of dividend by a relevant
company,
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(b)
would have been so available apart from anything done by the relevant
company, or
(c)
are trading stock of a relevant company.

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(4)
The consideration consists of any share capital or any security issued by a
relevant company.
(5)
So far as subsection (4) relates to share capital other than redeemable share
capital, it applies only so far as the share capital is repaid (in a winding up or
otherwise).
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(6)
The reference in subsection (5) to the repayment of share capital includes a
reference to any distribution made in respect of any shares in a winding up or
dissolution of the relevant company.
(7)
The section 733 company does not pay or bear corporation tax on income in
respect of the consideration (apart from this Part).
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(8)
In this section—
(a)
references to the receipt of consideration include references to the
receipt of any money or money’s worth,
(b)
“security” includes securities not creating or evidencing a charge on
assets, and
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(c)
“share” includes stock and any other interest of a member in a
company.
739
Meaning of “relevant company” in sections 737 and 738
(1)
A company is a relevant company for the purposes of sections 737 and 738 if it
is—
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(a)
a company under the control of not more than 5 persons (but see
subsection (2)), or
(b)
any other company none of whose shares or stocks is—
(i)
included in the official UK list, and
(ii)
dealt in on a recognised stock exchange in the United Kingdom
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regularly or from time to time.
(2)
A company is not a relevant company for those purposes if it is under the
control of one or more companies which are not relevant companies for those
purposes.
(3)
The reference in subsection (1)(b) to shares or stocks does not include
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debenture stock, preferred shares or preferred stock.
(4)
Section 450 (meaning of “control” for the purposes of Part 10 (close
companies)) applies for the purposes of this section.
740
Abnormal dividends: general
(1)
An amount received by way of dividend is treated as abnormal for the
35
purposes of this Part if the appropriate authority is satisfied—
(a)
in any case that the excessive return condition is met (see section 741),
or
(b)
in the case of a dividend at a fixed rate, that the excessive accrual
condition is met (see section 742).
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(2)
In subsection (1) “the appropriate authority” means whichever of the following
is determining the question whether the amount is abnormal for the purposes
of this Part—
(a)
an officer of Revenue and Customs,

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(b)
the Commissioners for Her Majesty’s Revenue and Customs, or
(c)
the tribunal.
741
Abnormal dividends: the excessive return condition
(1)
The excessive return condition is that the dividend substantially exceeds a
normal return on the consideration provided by the recipient for the relevant
5
securities.
(2)
In this section “the relevant securities” means-
(a)
the securities in respect of which the dividend was received, and
(b)
if those securities are derived from securities previously acquired by
the recipient, the securities that were previously acquired.
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(3)
In determining whether an amount received by way of dividend exceeds a
normal return, regard must be had—
(a)
to the length of time before its receipt that the recipient first acquired
any of the relevant securities, and
(b)
to any dividends paid and other distributions made in respect of them
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during that time.
(4)
If—
(a)
the consideration provided by the recipient for any of the relevant
securities exceeded their market value at the time the recipient acquired
them, or
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(b)
no consideration was so provided,

for the purposes of subsection (1) consideration equal to that market value is
taken to have been so provided.
742
Abnormal dividends: the excessive accrual condition
(1)
The excessive accrual condition is that the dividend substantially exceeds the
25
amount which the recipient would have received if—
(a)
the dividend had accrued from day to day, and
(b)
the recipient had been entitled to only so much of the dividend as
accrued while the recipient held the securities.
(2)
But the excessive accrual condition is treated as not being met if during the
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period of 6 months beginning with the purchase of the securities the recipient
does not—
(a)
sell or otherwise dispose of any of the securities or any securities
similar to them, or
(b)
acquire an option to sell any of the securities or any securities similar to
35
them.
(3)
For the purposes of subsection (2) securities are taken to be similar if they
entitle their holders—
(a)
to the same rights against the same persons as to capital and interest,
and
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(b)
to the same remedies for the enforcement of those rights.
(4)
For the purposes of subsection (3) rights guaranteed by the Treasury are
treated as rights against the Treasury.
(5)
Subsection (3) applies despite any differences—

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(a)
in the total nominal amounts of the respective securities,
(b)
in the form in which they are held, or
(c)
in the way in which they can be transferred.
Procedure for counteraction of corporation tax advantages
743
Preliminary notification that section 733 may apply
5
(1)
An officer of Revenue and Customs must notify a company if the officer has
reason to believe that—
(a)
section 733 (company liable to counteraction of corporation tax
advantage) may apply to the company in respect of a transaction or
transactions, and
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(b)
a counteraction notice ought to be served on the company under
section 746 about the transaction or transactions.
(2)
The notification must specify the transaction or transactions.
(3)
See section 746 for the serving of counteraction notices, and sections 744 and
745 for cases where the company on which the notice under this section is
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served disagrees that section 733 applies.
744
Opposed notifications: statutory declarations
(1)
If a company on which a notification is served under section 743 is of the
opinion that section 733 (company liable to counteraction of corporation tax
advantage) does not apply to the company in respect of the transaction or
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transactions specified in the notification, the company may—
(a)
make a statutory declaration to that effect, stating the facts and
circumstances on which the opinion is based, and
(b)
send it to the officer of Revenue and Customs.
(2)
Such a declaration must be sent within 30 days of the issue of the notification.
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(3)
If the company sends that declaration to the officer and the officer sees no
reason to take further action—
(a)
section 733 does not so apply, and
(b)
accordingly no counteraction notice may be served on the company
under section 746 about the transaction or transactions.
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745
Opposed notifications: determinations by tribunal
(1)
This section applies if the officer of Revenue and Customs receiving a statutory
declaration under section 744(1) sees reason to take further action about the
transaction or transactions in question.
(2)
The officer must send the tribunal a certificate to that effect, together with the
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statutory declaration.
(3)
The officer may also send the tribunal a counter-statement with the certificate.
(4)
The tribunal must—
(a)
consider the declaration and certificate and any counter-statement, and
(b)
determine whether there is a prima facie case for the officer to take
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further action on the basis that section 733 (company liable to

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counteraction of corporation tax advantage) applies to the company by
which the declaration was made in respect of the transaction or
transactions in question.
(5)
If the tribunal determines that there is no such case—
(a)
section 733 does not so apply, and
5
(b)
accordingly no counteraction notice may be served on the company
under section 746 about the transaction or transactions.
(6)
But such a determination does not affect the application of sections 733 and 746
in respect of transactions including not only the ones to which the
determination relates but also others.
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746
Counteraction notices
(1)
If—
(a)
a company on which a notification is served under section 743 does not
send a statutory declaration to an officer of Revenue and Customs
under section 744 within 30 days of the issue of the notification, or
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(b)
the tribunal to which such a declaration is sent under section 745
determines that there is a prima facie case for serving a notice on a
company under this section,

the corporation tax advantage in question is to be counteracted by adjustments.
(2)
The adjustments required to be made to counteract the corporation tax
20
advantage and the basis on which they are to be made are to be specified in a
notice served on the company by an officer of Revenue and Customs.
(3)
In this Part such a notice is referred to as a “counteraction notice”.
(4)
Any of the following adjustments may be specified—
(a)
an assessment,
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(b)
the nullifying of a right to repayment,
(c)
the requiring of the return of a repayment already made, or
(d)
the calculation or recalculation of profits or gains or liability to
corporation tax.
(5)
Nothing in this section authorises the making of an assessment later than 6
30
years after the accounting period to which the corporation tax advantage
relates.
(6)
This section is subject to—
section 747 (timing of assessments in section 738 cases), and
section 749(2) (effect of clearance notification under section 748).
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(7)
But no other provision in the Corporation Tax Acts is to be read as limiting the
powers conferred by this section.
747
Timing of assessments in section 738 cases
(1)
This section applies if section 733 (company liable to counteraction of
corporation tax advantage) applies to a company because it is in a position to
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obtain or has obtained a corporation tax advantage by falling within the
circumstances mentioned in section 738 (receipt of relevant company assets
(circumstance E)) when share capital is repaid.

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(2)
An assessment to corporation tax made in accordance with a counteraction
notice must be an assessment for the accounting period in which the
repayment occurs.
(3)
The references in this section to the repayment of share capital include
references to any distribution made in respect of any shares in a winding up or
5
dissolution of the company.
(4)
In subsection (3) “shares” includes stock and any other interest of a member in
a company.
Clearance procedure
748
Application for clearance of transactions
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(1)
A company may provide the Commissioners for Her Majesty’s Revenue and
Customs with particulars of a transaction or transactions effected or to be
effected by it in order to obtain a notification about them under this section.
(2)
If the Commissioners consider that the particulars, or any further information
provided under this subsection, are insufficient for the purposes of this section,
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they must notify the company what further information they require for those
purposes within 30 days of receiving the particulars or further information.
(3)
If any such further information is not provided within 30 days from the
notification, or such further time as the Commissioners allow, they need not
proceed further under this section.
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(4)
The Commissioners must notify the company whether they are satisfied that
the transaction or transactions, as described in the particulars, were or will be
such that no counteraction notice ought to be served about the transaction or
transactions.
(5)
The notification must be given within 30 days of receipt of the particulars, or,
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if subsection (2) applies, of all further information required.
749
Effect of clearance notification under section 748
(1)
This section applies if the Commissioners for Her Majesty’s Revenue and
Customs notify a company under section 748 that they are satisfied that a
transaction or transactions, as described in the particulars provided under that
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section, were or will be such that no counteraction notice ought to be served
about the transaction or transactions.
(2)
No such notice may be served on the company in respect of the transaction or
transactions.
(3)
But the notification does not prevent such a notice being served on the
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company in respect of transactions including not only the ones to which the
notification relates but also others.
(4)
The notification is void if the particulars and any further information given
under section 748 about the transaction or transactions do not fully and
accurately disclose all facts and considerations which are material for the
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purposes of that section.