Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 22 — Miscellaneous provisions
Chapter 9 — Other miscellaneous provisions
488

Harbour reorganisation schemes
991
Harbour reorganisation schemes: corporation tax
(1)
This section and sections 992 and 993 apply if—
(a)
the trade of any body corporate other than a limited liability company
is transferred to a harbour authority,
5
(b)
the transfer is made by or under a certified harbour reorganisation
scheme, and
(c)
the scheme provides for the dissolution of the transferor.
(2)
For the purposes of the provisions of the Corporation Tax Acts that apply—
(a)
only if a person starts to carry on a trade, or
10
(b)
only if a person ceases to carry on a trade,

the transferor is not treated as ceasing to carry on the trade, and the transferee
is not treated as starting to carry it on.
(3)
Subsection (4) applies if an amount (“the loss amount”) would have been
available to the transferor for relief under section 45 (carry forward of trade
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loss against subsequent trade profits) had the transferor continued to carry on
the transferred trade.
(4)
The transferee is entitled to relief under section 45 in respect of the loss amount
as if the transferee had made a loss in carrying on—
(a)
the transferred trade, or
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(b)
any trade of which the transferred trade comes to form part.
(5)
The loss amount is subject to any claim made by the transferor under section
37 (relief for trade losses against total profits).
992
Harbour reorganisation schemes: capital allowances etc
(1)
For the purposes of this section—
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(a)
“relevant allowance” means any allowance that would have fallen to be
made to the transferor under CAA 2001 if the transferor had continued
to carry on the trade, and
(b)
“relevant charge” means any charge that would have fallen to be made
on the transferor under CAA 2001 if the transferor had continued to
30
carry on the trade.
(2)
All relevant allowances and charges are to be made in accordance with CAA
2001 to or on the transferee (and not the transferor).
(3)
The amount of a relevant allowance or charge is to be calculated as if—
(a)
the transferee had been carrying on the trade since the transferor had
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begun to do so, and
(b)
everything done to or by the transferor had been done to or by the
transferee.
(4)
A sale or transfer which, on the transfer of the trade, is made by the transferor
to the transferee of any assets in use for the purposes of the trade is not treated
40
as giving rise to a relevant allowance or charge.

Corporation Tax Bill
Part 22 — Miscellaneous provisions
Chapter 9 — Other miscellaneous provisions
489

993
Harbour reorganisation schemes: chargeable gains
(1)
The transferee is entitled to corporation tax relief in respect of chargeable gains
for an amount to which subsection (2) applies.
(2)
This subsection applies to an amount for which, if the transferor had continued
to carry on the trade, it would have been entitled to claim relief in respect of
5
allowable losses.
994
Transfer of part of trade
(1)
This section applies if part of a trade of any body corporate other than a limited
liability company is transferred to a harbour authority by or under a certified
harbour reorganisation scheme.
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(2)
If the transferor continues to carry on the remainder of the trade, sections 991,
992 and 993 apply as if the transferred part had at all times been a separate
trade.
(3)
If—
(a)
the trade is transferred in parts to two or more harbour authorities, and
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(b)
the scheme provides for the dissolution of the transferor,

sections 991, 992 and 993 apply as if each of the transferred parts had at all
times been a separate trade.
(4)
If a part of a trade is treated by virtue of subsection (2) or (3) as having been a
separate trade over any period—
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(a)
any necessary adjustments of accounting periods are to be made, and
(b)
just and reasonable apportionments of receipts, expenses, allowances
or charges are to be made.
(5)
Section 952(2) and (3) (apportionment if part of trade treated as separate trade)
apply to any apportionment under subsection (4).
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995
Interpretation of sections 991 to 994
(1)
This section applies for the purposes of sections 991 to 994.
(2)
“Harbour authority” has the same meaning as in the Harbours Act 1964.
(3)
“Harbour reorganisation scheme” means any statutory provision providing for
the management by a harbour authority of any harbour or group of harbours
30
in the United Kingdom.

For this purpose “statutory provision” means any enactment, or any scheme,
order or other instrument having effect under an enactment, and includes an
enactment confirming a provisional order.
(4)
“Certified”, in relation to a harbour reorganisation scheme, means certified
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by—
a Minister of the Crown,
a government department, or
the Scottish Ministers,

as providing for management as mentioned in subsection (3) with a view to
40
securing, in the public interest, the efficient and economical development of
the harbour or harbours in question.

Corporation Tax Bill
Part 22 — Miscellaneous provisions
Chapter 9 — Other miscellaneous provisions
490

(5)
“Limited liability company” means a company having a limit on the liability of
its members.
(6)
“Transferor”, in relation to a trade, means the body from which the trade is
transferred, whether or not the transfer is effected by that body.
(7)
“Transferee”, in relation to a trade, means the harbour authority to which the
5
trade is transferred.
Groups: use of different accounting practices
996
Use of different accounting practices within a group of companies
(1)
Subsection (2) applies if—
(a)
a company (“company A”) prepares accounts in accordance with
10
international accounting standards,
(b)
another company (“company B”) in the same group of companies
prepares accounts in accordance with UK generally accepted
accounting practice,
(c)
there is a transaction between, or a series of transactions involving,
15
company A and company B, and
(d)
a tax advantage would (apart from this section) be obtained by either
or both of those companies in relation to the transaction or series of
transactions as a result of the use of different accounting practices.
(2)
The Tax Acts apply in relation to the transaction or series of transactions as if
20
both company A and company B prepared accounts in accordance with UK
generally accepted accounting practice.
(3)
Section 170(3) to (6) of TCGA 1992 apply to determine for the purposes of this
section whether companies are in the same group of companies.
(4)
None of the following circumstances (individually or in combination) prevents
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a series of transactions from being a series of transactions involving company
A and company B—
(a)
there is no transaction in the series to which both those companies are
parties,
(b)
the parties to any arrangements in pursuance of which the transactions
30
in the series are entered into do not include one or both of those
companies,
(c)
there are one or more transactions in the series to which neither of those
companies is a party.
(5)
In this section “tax advantage” has the meaning given by section 1139.
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Corporation Tax Bill
Part 23 — Company distributions
Chapter 2 — Matters which are distributions
491

Part 23
Company distributions
Chapter 1
Introduction
997
Overview of Part
5
(1)
Chapters 2 to 5 contain provision about what is, and what is not, a distribution.
(2)
Chapter 5 (demergers) includes provision that charges income tax, or applies
the charge to corporation tax on income, in relation to certain payments.
(3)
Chapters 2 to 5 also include—
(a)
provision about the persons to whom certain distributions are treated
10
as made (see sections 1020(2) and 1064(2)),
(b)
provision about how the amount of certain distributions is determined
(see sections 1003, 1004, 1020(2) and 1064(2)),
(c)
other special rules about distributions made by certain companies (see
Chapter 4), and
15
(d)
provision about returns and information (see sections 1046, 1052, 1053
and 1095 to 1097).
(4)
Chapter 6 contains provision of more general application about returns and
information relating to distributions.
(5)
Chapter 7 contains provision about tax credits.
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(6)
Chapter 8 contains definitions and other provision about the interpretation of
this Part.
(7)
Section 152(3)(b) of FA 1995 enables regulations under that section to include
provision which modifies the following in relation to open-ended investment
companies, or payments falling to be treated as the distributions of such
25
companies—
(a)
Chapter 2 (except section 1000(2)),
(b)
sections 1030 to 1048 and section 1049(1) and (3),
(c)
sections 1059 to 1063,
(d)
Chapter 5.
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Chapter 2
Matters which are distributions
Introduction
998
Overview of Chapter
(1)
Sections 1000 to 1023 are about the meaning of “distribution” in the
35
Corporation Tax Acts.
(2)
In particular, section 1000(1) lists the matters which are distributions.

Corporation Tax Bill
Part 23 — Company distributions
Chapter 2 — Matters which are distributions
492

(3)
Sections 1002 to 1023 contain provisions supplementing the paragraphs of that
list.
(4)
The table in section 1001 mentions some of the main provisions which explain,
supplement or limit particular paragraphs of the list in section 1000(1).
(5)
Sections 1024 to 1028 are about the meaning of “repayment of share capital”.
5
999
Priority of negative rules
(1)
The provisions of this Chapter are subject to any express exceptions.
(2)
See, in particular—
(a)
Chapter 3 (matters which are not distributions),
(b)
section 1075 (exempt distributions), and
10
(c)
paragraph 6 of Schedule 12 to FA 1988 (transfer of building society’s
business to a company: qualifying benefits),

and see also the table in section 1001.
Meaning of “distribution”
1000
Meaning of “distribution”
15
(1)
In the Corporation Tax Acts “distribution”, in relation to any company, means
anything falling within any of the following paragraphs.

A. Any dividend paid by the company, including a capital dividend.
20

B. Any other distribution out of assets of the company in respect of shares in
the company, except however much (if any) of the distribution—
(a)
represents repayment of capital on the shares, or
(b)
is (when it is made) equal in amount or value to any new consideration
received by the company for the distribution.
25

For the purposes of this paragraph it does not matter whether the distribution
is in cash or not.

C. Any redeemable share capital issued by the company—
(a)
in respect of shares in, or securities of, the company, and
30
(b)
otherwise than for new consideration (see sections 1003 and 1115).

D. Any security issued by the company—
(a)
in respect of shares in, or securities of, the company, and
(b)
otherwise than for new consideration (see sections 1004 and 1115).
35

E. Any interest or other distribution out of assets of the company in respect of
securities of the company which are non-commercial securities (as defined in
section 1005), except—

Corporation Tax Bill
Part 23 — Company distributions
Chapter 2 — Matters which are distributions
493

(a)
however much (if any) of the distribution represents the principal
secured by the securities, and
(b)
however much (if any) of the distribution represents a reasonable
commercial return for the use of the principal.
5

F. Any interest or other distribution out of assets of the company in respect of
securities of the company which are special securities (as defined in section
1015), except—
(a)
however much (if any) of the distribution represents the principal
secured by the securities, and
10
(b)
however much (if any) of the distribution falls within paragraph E.

G. Any amount treated as a distribution by section 1020 (transfers of assets or
liabilities).
15

H. Any amount treated as a distribution by section 1022 (bonus issues
following repayment of share capital).
(2)
In the Corporation Tax Acts “distribution”, in relation to a close company, also
includes anything treated as a distribution by section 1064 (certain expenses of
close companies treated as distributions).
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(3)
See also section 1072 (which extends the meaning of “distribution” in relation
to members of a 90% group).
1001
Provisions related to paragraphs A to H in section 1000(1)
The following table mentions, for each paragraph in section 1000(1)—
(a)
some of the main provisions that explain or supplement it, and
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(b)
some of the main provisions that limit it.

Paragraph in section
Explained or
Limited by

1000(1)
supplemented by

A (dividends).

Section 1054 (building

society payments).

30

Sections 1055(2) and

1057(2) (dividend paid

by industrial and

provident society or UK

agricultural or fishing

35

co-operative).

Corporation Tax Bill
Part 23 — Company distributions
Chapter 2 — Matters which are distributions
494

Paragraph in section
Explained or
Limited by

1000(1)
supplemented by

B (other distributions in
Sections 1024 to 1028
Section 1002 (exception

respect of shares).
(meaning of “repayment
for certain transfers of

of share capital”).
assets and liabilities).

5

Section 1113(1) (extends

meaning of “in respect

of shares in the

company”).

C (redeemable share
Section 1003
Section 1049(3)(a) (stock

10

capital).
(redeemable share
dividends).

capital).

Section 1113(1).

Section 1114(1) (extends

meaning of “in respect

15

of securities of the

company”).

D (securities issued
Section 1004 (securities

otherwise than for new
issued otherwise than

consideration).
for new consideration).

20

Section 1113(1).

Section 1114(1).

E (distributions in
Sections 1005 to 1014

respect of non-
(meaning of “non-

commercial securities).
commercial securities”

25

etc).

Section 1114(1).

F (distributions in
Sections 1015 to 1018
Section 1019 (alternative

respect of special
(meaning of “special
finance arrangements).

securities).
securities” etc).

30

Section 1114(1).
Section 1032 (interest etc

paid in respect of certain

securities).

G (transfers of assets or
Section 1020 (transfers

liabilities).
of assets or liabilities

35

treated as distributions).

H (bonus issues
Sections 1022 and 1023
Section 1049(3)(b)(i)

following repayment of
(bonus issues following
(stock dividends).

share capital).
repayment of share

capital treated as

40

distributions).