Corporation Tax Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 22 — Miscellaneous provisions
Chapter 4 — Surrender of tax refund within group
474

961
Non-trading profits and losses
(1)
This section applies if—
(a)
a company is a partner in a firm, and
(b)
any profits of the firm are charged to corporation tax under or by virtue
of any provision to which section 1173 (miscellaneous charges) applies.
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(2)
The profits or losses of the firm to which the company’s share is attributable
are to be treated for the purposes of sections 958 to 960 as if they were profits
or losses made by the firm in carrying on a trade.
(3)
Any allowance to be given effect under Part 2 of CAA 2001 in respect of a
special leasing of plant or machinery is to be treated for those purposes as if it
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were an allowance to be given effect in calculating the profits of that trade.
962
Interpretation of Chapter
(1)
In this Chapter “arrangements” means arrangements of any kind (whether or
not in writing).
(2)
References in this Chapter to a firm, and to an accounting period of a firm, are
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to be read in the same way as references to a firm, and to an accounting period
of a firm, in Part 17 of CTA 2009.
Chapter 4
Surrender of tax refund within group
963
Power to surrender tax refund
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(1)
This section enables a company—
(a)
which is a member of a group, and
(b)
to which a tax refund is due for an accounting period,

to surrender the refund (or any part of it) to another company which is a
member of the same group.
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(2)
The surrender may be made only if—
(a)
the company making the surrender (“the surrendering company”) and
the company to which the surrender is made (“the recipient company”)
give notice to an officer of Revenue and Customs,
(b)
the surrendering company and the recipient company are members of
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the same group throughout the period beginning with the start of the
accounting period for which the tax refund is due and ending on the
date on which the notice is given, and
(c)
the recipient company also has that accounting period as an accounting
period.
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(3)
A notice under subsection (2) must—
(a)
be given before the refund is made to the surrendering company,
(b)
be given jointly by the surrendering company and the recipient
company,
(c)
specify the amount to be surrendered, and
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(d)
be in such form as the Commissioners for Her Majesty’s Revenue and
Customs may require.

Corporation Tax Bill
Part 22 — Miscellaneous provisions
Chapter 4 — Surrender of tax refund within group
475

(4)
For the purposes of this section “tax refund”, in relation to an accounting
period of a company, means—
(a)
a repayment of corporation tax paid by the company for the period, or
(b)
a repayment of income tax in respect of a payment received by the
company in the period.
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(5)
For the purposes of this section two companies are members of the same group
if (and only if) they would be for the purposes of Part 5 (group relief).
964
Effects of surrender of tax refund
(1)
This section makes provision about the effect of the surrender under section
963 of a tax refund due for an accounting period.
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(2)
So far as the company to which the surrender is made (“the recipient
company”) is concerned, the effect of the surrender is that—
(a)
the company is treated for all corporation tax purposes, except the one
mentioned in subsection (3), as if it had paid an amount of corporation
tax for the accounting period equal to the amount specified in the notice
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under section 963(2) (“the surrendered amount”), and
(b)
the payment is treated for those purposes as if it had been made on the
relevant date.
(3)
For the purpose of working out the amount of any penalty to which the
recipient company is liable under paragraph 18 of Schedule 18 to FA 1998
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(failure to deliver return: tax-related penalty), the recipient company is treated
as having paid the amount of corporation tax on the day on which the notice
under section 963(2) is given (and not on the relevant date).
(4)
So far as the company by which the surrender is made (“the surrendering
company”) is concerned, the effect of the surrender is that—
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(a)
the company is treated for corporation tax purposes as if it had received
a repayment of tax equal to the surrendered amount, and
(b)
the repayment is treated for those purposes as if it had been received on
the relevant date.
(5)
If the tax refund surrendered is a repayment of corporation tax, any interest
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relating to it which has been paid by the surrendering company is treated as if
it had been paid by the recipient company.
(6)
For the purposes of this section “the relevant date”, in relation to a tax refund,
means—
(a)
so far as it consists of a repayment of corporation tax paid by the
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surrendering company after the date on which it became due and
payable under section 59D or 59E of TMA 1970, the day on which it was
paid by the surrendering company, and
(b)
otherwise, the date on which corporation tax for the accounting period
of the surrendering company became due and payable.
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965
Interest on tax overpaid or underpaid
(1)
This section applies if—
(a)
a company has surrendered an amount under section 963, and
(b)
there is, as a result of any of subsections (7A) to (7C) of section 826 of
ICTA, a period for which the whole or any part of the surrendered
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Corporation Tax Bill
Part 22 — Miscellaneous provisions
Chapter 5 — Set off of income tax deductions against corporation tax
476

amount would not have carried interest under that section if the refund
had been made to the surrendering company (“the interest-free
period”).
(2)
The interest-free period is excluded from any period for which any refund
made because of section 964(2) to the recipient company in respect of some or
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all of the surrendered amount or, as the case may be, that part of it is to carry
interest under section 826 of ICTA.
(3)
The interest-free period is excluded from any period for which a sum
representing some or all of the surrendered amount or, as the case may be, that
part of it would otherwise be treated (as a result of section 964) as not carrying
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interest under section 87A of TMA 1970.
(4)
The following assumption is to be made in determining for the purposes of this
section—
(a)
which part of any amount is applied in discharging a liability of the
recipient company to pay corporation tax, and
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(b)
which part is represented by a refund to the recipient company.
(5)
The assumption is that the part in relation to which there is a period which
would not have carried interest under section 826 of ICTA is applied in
preference to any other part of that amount in or towards discharging the
liability.
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966
Payments for surrendered tax refunds
(1)
This section applies if—
(a)
companies give a notice under section 963(2) in pursuance of an
agreement, and
(b)
the company to which the surrender is made makes a payment under
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the agreement to the company by which the surrender is made that
does not exceed the amount specified in the notice.
(2)
The payment—
(a)
is not to be taken into account in determining profits or losses of either
company for corporation tax purposes, and
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(b)
is not to be regarded for the purposes of the Corporation Tax Acts as a
distribution.
Chapter 5
Set off of income tax deductions against corporation tax
967
Deductions from payments received by UK resident companies
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(1)
Subsection (2) applies if a UK resident company receives a payment on which
it bears income tax by deduction.
(2)
The income tax on the payment is to be set off against any corporation tax
assessable on the company for the accounting period in which the payment
falls to be taken into account for corporation tax, or would fall to be so taken
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into account but for any exemption from corporation tax.
(3)
Subsection (2) is subject to the provisions of the Corporation Tax Acts.

Corporation Tax Bill
Part 22 — Miscellaneous provisions
Chapter 6 — Collection etc of tax from UK representatives of non-UK resident companies
477

(4)
The reference in subsection (1) to a payment received by a company—
(a)
includes a reference to a payment received by another person on behalf
of or in trust for the company, but
(b)
does not include a reference to a payment received by the company on
behalf of or in trust for another person.
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968
Deductions from payments received by non-UK resident companies
(1)
Subsection (2) applies if—
(a)
a non-UK resident company receives a payment on which it bears
income tax by deduction, and
(b)
the payment forms part of, or is to be taken into account in calculating,
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the company’s income chargeable to corporation tax.
(2)
The income tax on the payment is to be set off against any corporation tax
assessable on that income for the accounting period in which the payment falls
to be taken into account for corporation tax.
Chapter 6
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Collection etc of tax from UK representatives of non-UK resident companies
969
Introduction to Chapter
(1)
This Chapter applies to the enactments relating to corporation tax so far as they
make provision for or in connection with the assessment, collection and
recovery of tax, or of interest on tax.
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(2)
Those enactments have effect in accordance with section 970 in relation to a
non-UK resident company and its UK representative.
(3)
For the purposes of this Chapter, the following rules apply to a permanent
establishment in the United Kingdom through which a non-UK resident
company carries on a trade.
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Rule 1

The permanent establishment is the UK representative of the non-UK resident
company in relation to chargeable profits of the company attributable to that
establishment.
Rule 2
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The permanent establishment continues to be the company’s UK
representative in relation to those profits even after ceasing to be a permanent
establishment through which the non-UK resident company carries on a trade.
Rule 3

The permanent establishment is to be treated as a distinct and separate person
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from the non-UK resident company (if it would not otherwise be so treated).
(4)
For the determination of the chargeable profits attributable to a permanent
establishment, see Chapter 4 of Part 2 of CTA 2009.