|
| |
|
| |
(1) | Condition B is that the person making the payment— |
| |
(a) | obtains a capital sum in respect of the lessee’s interest in the lease, and |
| |
(b) | is a company within the charge to corporation tax. |
| |
(2) | Condition C is that an associate of the person making the payment— |
| 5 |
(a) | obtains a capital sum by way of consideration in respect of the lessee’s |
| |
interest in the lease, and |
| |
(b) | is a company within the charge to corporation tax. |
| |
| |
(a) | the lessor’s interest in the lease, or any other interest in the asset, |
| 10 |
belongs to an associate of the person making the payment, |
| |
(b) | the associate obtains a capital sum in respect of the interest, and |
| |
(c) | the associate is a company within the charge to corporation tax. |
| |
| |
(a) | the lessor’s interest in the lease, or any other interest in the asset, |
| 15 |
belongs to an associate of the person making the payment, |
| |
(b) | an associate of that associate obtains a capital sum by way of |
| |
consideration in respect of the interest, and |
| |
(c) | the associate obtaining the sum is a company within the charge to |
| |
| 20 |
(5) | Condition B, C, D or E may be met before, at or after the time when the |
| |
| |
(6) | Condition B or C is not met if— |
| |
(a) | the lease is a hire-purchase agreement for plant or machinery, and |
| |
(b) | the capital sum is required to be brought into account as the whole or |
| 25 |
part of the disposal value of the plant or machinery under section 68 of |
| |
| |
(7) | Condition D or E is not met if— |
| |
(a) | the capital sum is obtained in respect of the lessee’s interest in the lease, |
| |
(b) | the lease is a hire-purchase agreement for plant or machinery, and |
| 30 |
(c) | the capital sum is required to be brought into account as the whole or |
| |
part of the disposal value of the plant or machinery under section 68 of |
| |
| |
Charge to corporation tax |
| |
874 | Charge to corporation tax |
| 35 |
(1) | The company obtaining the capital sum is to be treated as receiving, at the time |
| |
the sum is obtained, an amount— |
| |
(a) | which is equal to the chargeable amount, and |
| |
(b) | to which the charge to corporation tax on income applies. |
| |
(2) | The chargeable amount is— |
| 40 |
(a) | the amount of the payment for which a deduction by way of relevant |
| |
tax relief is allowed, or |
| |
(b) | the total amount of such payments (if more than one). |
| |
|
| |
|
| |
|
(3) | But subsections (1) and (2) have effect subject to— |
| |
(a) | subsections (4) to (7), and |
| |
(b) | section 875(3) (hire-purchase agreements). |
| |
(4) | The chargeable amount is not to exceed the capital sum (but see section 875(4)). |
| |
(5) | Subsection (6) applies if— |
| 5 |
(a) | the charge to corporation tax on income is applied by this section in |
| |
respect of a capital sum, and |
| |
(b) | a payment or part of a payment is taken into account in deciding the |
| |
chargeable amount in respect of the sum. |
| |
(6) | The payment or part must be left out of account in deciding— |
| 10 |
(a) | whether the charge to corporation tax on income is to be applied by this |
| |
section in respect of another capital sum, and |
| |
(b) | the chargeable amount in respect of the other sum (if the charge is to be |
| |
applied in respect of the other sum). |
| |
(7) | The order in which subsections (5) and (6) are applied is the order in which |
| 15 |
capital sums are obtained. |
| |
875 | Hire-purchase agreements |
| |
(1) | This section applies if— |
| |
(a) | the lease is a hire-purchase agreement (as defined in section 1129), and |
| |
(b) | the capital sum is obtained in respect of the lessee’s interest in the lease |
| 20 |
(whether it is obtained by the person making the payment or by an |
| |
| |
(2) | Find the total of the following amounts— |
| |
(a) | so much of any payment made under the lease by the company |
| |
obtaining the capital sum as is not a payment for which a deduction by |
| 25 |
way of relevant tax relief is allowed, and |
| |
(b) | if the lessee’s interest was assigned to the company obtaining the |
| |
capital sum, any capital payment made by that company as |
| |
consideration for the assignment. |
| |
(3) | If the total of the amounts found under subsection (2) is equal to or greater than |
| 30 |
the capital sum, the charge to corporation tax on income is not applied by |
| |
section 874 in respect of the capital sum. |
| |
(4) | If the total of those amounts is less than the capital sum, in applying section |
| |
874(4) that total must be deducted from the capital sum. |
| |
(5) | If the capital sum is the consideration for part only of the lessee’s interest in the |
| 35 |
| |
(a) | any amount found under subsection (2) (and still unallowed) must be |
| |
reduced to a just and reasonable proportion of it, and |
| |
(b) | in calculating that proportion account must be taken of the degree to |
| |
which the payments mentioned in subsection (2) have contributed to |
| 40 |
the value of what is disposed of in return for the capital sum. |
| |
(6) | Subsection (7) applies if— |
| |
(a) | more than one capital sum is (or is treated as) obtained by the same |
| |
company in respect of the lessee’s interest in the lease, and |
| |
|
| |
|
| |
|
(b) | in arriving at a total under subsection (2) a payment is taken into |
| |
account in respect of one of the capital sums. |
| |
(7) | So far as the payment is so taken into account it must not be taken into account |
| |
in applying subsection (2) to another of the capital sums. |
| |
(8) | The order in which subsections (6) and (7) are applied is the order in which |
| 5 |
capital sums are obtained. |
| |
876 | Adjustments where sum obtained before payment made |
| |
(1) | This section applies if a capital sum is obtained as mentioned in section 873 and |
| |
later a payment is made as mentioned in section 872. |
| |
(2) | Adjustments must be made if they are needed to give effect to the application |
| 10 |
by section 874 of the charge to corporation tax on income in respect of the |
| |
| |
(3) | An adjustment may be made within the period of 6 years which starts at the |
| |
end of the accounting period in which the payment is made. |
| |
(4) | Subsection (3) applies despite any time limit specified in the Corporation Tax |
| 15 |
| |
| |
877 | Sum obtained in respect of interest |
| |
A reference in this Chapter to a sum obtained in respect of an interest in an |
| |
asset (whether the lessee’s interest in a lease of the asset or the lessor’s interest |
| 20 |
or any other interest) includes a reference to— |
| |
(a) | insurance money obtained in respect of the interest, and |
| |
(b) | sums representing money or money’s worth obtained in respect of the |
| |
interest by a transaction or series of transactions disposing of it. |
| |
878 | Sum obtained in respect of lessee’s interest |
| 25 |
(1) | This section applies to a reference in this Chapter to a sum obtained in respect |
| |
of the lessee’s interest in a lease of an asset. |
| |
(2) | The reference includes a reference to sums representing the consideration in |
| |
money or money’s worth obtained on any of the following occasions— |
| |
(a) | a surrender of the interest to the lessor, |
| 30 |
(b) | an assignment of the lease, and |
| |
(c) | the creation of a sublease or another interest out of the lease. |
| |
(3) | The reference also includes a reference to sums representing money or |
| |
money’s worth obtained in respect of the interest by a transaction or series of |
| |
transactions under which the lessee’s rights are merged in any way with the |
| 35 |
lessor’s rights or with any other rights as respects the asset. |
| |
(4) | Subsection (3) applies so far as the money or money’s worth is attributable to |
| |
the lessee’s rights under the lease. |
| |
|
| |
|
| |
|
879 | Disposal of interest to associate |
| |
(1) | This section applies for the purposes of this Chapter if a company disposes of |
| |
an interest in an asset to a person who is the company’s associate (and the |
| |
interest may be the lessee’s interest in a lease of the asset or the lessor’s interest |
| |
| 5 |
(2) | The company disposing of the interest must be treated as obtaining in respect |
| |
| |
(a) | the sum in fact obtained by the company, |
| |
(b) | the value of the interest in the open market, and |
| |
(c) | the value of the interest to the person to whom it is in effect transferred. |
| 10 |
| |
(a) | may be direct or indirect, and |
| |
(b) | may be effected by a transaction or series of transactions described in |
| |
| |
| 15 |
880 | Apportionment of payments made and of sums obtained |
| |
(1) | This section applies for the purposes of this Chapter. |
| |
(2) | Subsection (3) applies if— |
| |
| |
(b) | it is one for which a deduction by way of relevant tax relief is allowed, |
| 20 |
| |
(c) | it is made by persons carrying on a trade, profession or vocation in |
| |
| |
(3) | The payment must be apportioned in a manner which is just and reasonable. |
| |
(4) | Subsection (5) applies if— |
| 25 |
(a) | a sum is obtained in respect of an interest in an asset, |
| |
(b) | the sum is obtained by persons carrying on a trade in partnership, and |
| |
(c) | the asset is and continues to be used for the purposes of the trade. |
| |
(5) | The sum must be apportioned between the partners in the shares in which they |
| |
are entitled to the profits of the trade at the time the sum is obtained. |
| 30 |
(6) | Subsection (7) applies if— |
| |
(a) | a sum is obtained in respect of an interest in an asset, and |
| |
(b) | the sum is obtained by persons jointly entitled to the interest. |
| |
(7) | The sum must be apportioned according to their respective rights in the |
| |
| 35 |
(8) | Subsections (6) and (7) are subject to subsections (4) and (5). |
| |
881 | Manner of apportionment |
| |
(1) | Subsections (2) and (3) apply if— |
| |
(a) | a payment or sum is to be apportioned under section 880 or under |
| |
section 681DJ of ITA 2007, |
| 40 |
|
| |
|
| |
|
(b) | at the time of the apportionment it appears that it is material to the |
| |
liability to tax (whether corporation tax or income tax, and for whatever |
| |
period) of two or more persons (in this section referred to collectively |
| |
| |
(c) | a question arises as to the manner in which the payment or sum is to be |
| 5 |
| |
(d) | at the time of the apportionment, it appears that the apportionment is |
| |
material to the corporation tax liability (for whatever period) of— |
| |
(i) | a person, or some two or more persons, in the set, or |
| |
(ii) | all the persons in the set. |
| 10 |
(2) | For the purposes of corporation tax of the person or persons mentioned in |
| |
subsection (1)(d), the question is to be determined in the same way as an |
| |
| |
(3) | All the persons in the set are entitled to be a party to the proceedings. |
| |
| 15 |
| |
(1) | This section applies for the purposes of this Chapter. |
| |
(2) | Persons are associates if they are associated with each other. |
| |
(3) | The following are associated with each other— |
| |
(a) | an individual and the individual’s spouse or civil partner or relative, |
| 20 |
(b) | an individual and a spouse or civil partner of a relative of the |
| |
| |
(c) | an individual and a relative of the individual’s spouse or civil partner, |
| |
(d) | an individual and a spouse or civil partner of a relative of the |
| |
individual’s spouse or civil partner. |
| 25 |
(4) | The following are associated with each other— |
| |
(a) | a person as trustee of a settlement and an individual who (in relation to |
| |
the settlement) is a settlor, |
| |
(b) | a person as trustee of a settlement and a person associated with an |
| |
individual who (in relation to the settlement) is a settlor. |
| 30 |
(5) | The following are associated with each other— |
| |
(a) | a person and a body of persons of which the person has control, |
| |
(b) | a person and a body of persons of which persons associated with the |
| |
| |
(c) | a person and a body of persons of which the person and persons |
| 35 |
associated with the person have control, |
| |
(d) | two or more bodies of persons associated with the same person under |
| |
| |
(6) | In relation to a disposal by joint owners, the joint owners and any person |
| |
associated with any of them are associated with each other. |
| 40 |
(7) | For the purposes of this section— |
| |
(a) | a relative is a brother, sister, ancestor or lineal descendant, |
| |
(b) | a body of persons includes a partnership, and |
| |
|
| |
|
| |
|
(c) | “settlement” and “settlor” have the meanings given by section 620 of |
| |
| |
| |
For the purposes of this Chapter a capital sum is any sum of money, or any |
| |
money’s worth, except so far as it or any part of it— |
| 5 |
(a) | is to be treated for corporation tax purposes as a receipt to be taken into |
| |
account in calculating the profits or losses of a trade, or |
| |
(b) | is (apart from this Chapter) chargeable to corporation tax under or by |
| |
virtue of any provision to which section 1173 applies (miscellaneous |
| |
| 10 |
| |
(1) | This section applies for the purposes of this Chapter. |
| |
(2) | A lease is (in relation to an asset) an agreement or arrangement under which |
| |
payments are made for the use of or otherwise in respect of the asset. |
| |
(3) | In particular it includes an agreement or arrangement under which the |
| 15 |
payments (or any of them) represent instalments of a purchase price or |
| |
| |
| |
For the purposes of this Chapter a relevant asset is any description of property |
| |
or rights other than land or an interest in land. |
| 20 |
| |
For the purposes of this Chapter each of the following is a deduction by way of |
| |
| |
(a) | a deduction in calculating profits or losses of a trade for corporation tax |
| |
| 25 |
(b) | a deduction in calculating any loss for which relief is given under |
| |
section 91 (losses from miscellaneous transactions), or in calculating |
| |
profits or gains chargeable to corporation tax under or by virtue of any |
| |
provision to which section 1173 applies (miscellaneous charges), |
| |
(c) | a deduction under section 76 of ICTA (insurance companies), |
| 30 |
(d) | a deduction under section 1219 of CTA 2009 (expenses of management |
| |
of a company’s investment business), |
| |
(e) | a deduction in calculating profits or losses of a trade, profession or |
| |
vocation for income tax purposes, |
| |
(f) | a deduction in calculating any loss for which relief is allowed under |
| 35 |
section 152 of ITA 2007 (losses from miscellaneous transactions), or in |
| |
calculating profits or other income or gains chargeable to income tax |
| |
under or by virtue of any provision to which section 1016 of that Act |
| |
| |
(g) | a deduction from earnings allowed under section 336 of ITEPA 2003 |
| 40 |
(expenses) or allowed in calculating losses in an employment for |
| |
| |
|
| |
|
| |
|
| |
Tax avoidance involving leasing plant or machinery |
| |
| |
Restrictions on use of losses in leasing partnerships |
| |
887 | When restrictions on leasing partnership losses under this Chapter apply |
| 5 |
(1) | The restrictions in section 888 (restrictions on leasing partnership losses) apply |
| |
| |
(a) | a company carries on a business in respect of which the company is |
| |
within the charge to corporation tax, |
| |
(b) | the company carries on the business in partnership with other persons |
| 10 |
in an accounting period of the partnership, |
| |
(c) | the business (“the leasing business”) is, on any day in that period, a |
| |
business of leasing plant or machinery, |
| |
(d) | the company incurs a loss in its notional business in any accounting |
| |
period of the company comprised (wholly or partly) in the accounting |
| 15 |
period of the partnership, and |
| |
(e) | the interest of the company in the leasing business during the |
| |
accounting period of the partnership is not determined on an allowable |
| |
basis (see subsections (2) to (4)). |
| |
(2) | The interest of the company in the leasing business during the accounting |
| 20 |
period of the partnership is determined on an allowable basis if (and only if) |
| |
the condition in subsection (3) is met. |
| |
(3) | The condition is that for the purposes of sections 1262 to 1264 of CTA 2009 |
| |
(allocation of firm’s profits between partners)— |
| |
(a) | the company’s share in the profits or loss of the leasing business for that |
| 25 |
period is determined wholly by reference to a single percentage, and |
| |
(b) | the company’s share in any relevant capital allowances for that period |
| |
is determined wholly by reference to the same percentage. |
| |
(4) | For the purposes of subsection (3) “profits” does not include chargeable gains. |
| |
(5) | In this section “business of leasing plant or machinery” has the same meaning |
| 30 |
as in Chapter 4 of Part 9 (sales of lessors: leasing business carried on by a |
| |
company in partnership) (see sections 410 to 414). |
| |
(6) | For the meaning of other expressions used in this section or section 888, see |
| |
| |
888 | Restrictions on leasing partnership losses |
| 35 |
(1) | The restrictions in subsections (2) to (4) apply in respect of so much of the loss |
| |
incurred by the company in its notional business as derives from any relevant |
| |
capital allowances (“the restricted part of the loss”). |
| |
(2) | Relief is not to be given to the company under any relevant loss relief provision |
| |
in respect of the restricted part of the loss, except by way of set off against any |
| 40 |
| |
|
| |
|