Corporation Tax Bill

House of Commons

Session 2009 - 10
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Corporation Tax Bill

Corporation Tax Bill
Part 23 — Company distributions
Chapter 6 — Information and returns: further provisions
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1099
Other definitions etc
(1)
In this Chapter—
“control” has the same meaning as in Part 10 (see sections 450 and 451),
“group” means a company which has one or more 75% subsidiaries
together with those subsidiaries (but there is a separate definition of
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“group” for the purposes of section 1081(5)(d)),
“holding company” means a company whose business (ignoring any
trade carried on by it) consists wholly or mainly of holding shares or
securities of one or more companies which are its 75% subsidiaries,
“member” where the reference is to a member of a company—
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(a)
in section 1088(2) includes a person who is a member otherwise
than by virtue of holding shares forming part of the ordinary
share capital of the company, but
(b)
elsewhere only includes persons who are members by virtue of
holding shares forming part of the ordinary share capital of the
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company,
“shares” includes stock,
“trade”, except in subsection (4), does not include dealing in shares,
securities, land, trades or commodity futures,
“trading activities” is to be read in accordance with the above definition of
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“trade”,
“trading company” means a company whose business consists wholly or
mainly of carrying on a trade or trades, and
“trading group” means a group the business of whose members (taken
together) consists wholly or mainly of carrying on a trade or trades.
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(2)
In determining for the purposes of sections 1076(a), 1077(1), 1082(4) or 1084(2)
whether a company (“A”) whose shares are transferred by the distributing
company is a 75% subsidiary of the distributing company, ignore any share
capital of A which is owned indirectly by the distributing company.
(3)
In determining for the purposes of this Chapter whether one company is a 75%
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subsidiary of another, the other company is treated as not being the owner of—
(a)
any share capital which it owns directly in a body corporate as trading
stock, or
(b)
any share capital which it owns indirectly and which is owned directly
by a body corporate as trading stock.
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(4)
For the purposes of subsection (3) share capital owned by a person is owned as
trading stock if (and only if) a profit on a sale of the shares would be treated as
a trading receipt of that person’s trade.
Chapter 6
Information and returns: further provisions
40
General duties to provide information
1100
Qualifying distributions: right to request a statement
(1)
If a company makes a qualifying distribution, the recipient is entitled to ask the
company to provide a statement in writing showing—

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Part 23 — Company distributions
Chapter 6 — Information and returns: further provisions
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(a)
the amount or value of the distribution, and
(b)
the amount of the tax credit (under section 1109(2) below or section
397(1) of ITTOIA 2005) to which an eligible person would be entitled in
respect of the distribution.
(2)
For the purposes of subsection (1)(b) it does not matter whether or not the
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recipient is in fact an eligible person.
(3)
The request must be in writing.
(4)
The company which makes the distribution has a duty to comply with a
request under subsection (1), and that duty is enforceable by the recipient.
(5)
In this section “eligible person” means a person who is entitled to a tax credit
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in respect of the dividend.
(6)
This section does not affect the operation of section 1104 (duty to provide tax
certificates).
1101
Non-qualifying distributions etc: returns and information
(1)
If a company makes a distribution which is not a qualifying distribution, it
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must make a return to an officer of Revenue and Customs.
(2)
The return must—
(a)
contain particulars of the transaction giving rise to the distribution,
(b)
state the name and address of the recipient, or each recipient, of the
distribution, and
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(c)
state the amount or value of the distribution received by the recipient,
or each recipient.
(3)
The return must be made—
(a)
within 14 days from the end of the accounting period in which the
distribution is made, or
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(b)
if the date on which the distribution is made does not fall in an
accounting period, within 14 days from that date.
(4)
If it is not apparent whether or not a transaction gives rise to a distribution
which is not a qualifying distribution, the company—
(a)
must make a return to an officer of Revenue and Customs containing
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particulars of the transaction, and
(b)
must do so within the time limit that would be given by subsection (3)
if the transaction did give rise to such a distribution.
(5)
If subsection (4) applies, an officer of Revenue and Customs may serve a notice
on the company requiring it to provide any further information in relation to
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the transaction that the officer reasonably requires.
(6)
If it appears to an officer of Revenue and Customs that particulars of any
transaction should have been, but have not been, included in a return under
subsection (1) or (4), the officer may serve a notice on the company requiring it
to provide any information relating to the transaction that the officer
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reasonably requires.
(7)
The company must provide the information required under subsection (5) or
(6) within the time specified in the notice.

Corporation Tax Bill
Part 23 — Company distributions
Chapter 6 — Information and returns: further provisions
539

1102
Non-qualifying distributions etc: additional information
(1)
This section—
(a)
gives officers of Revenue and Customs power to require persons to
provide information for the purposes of section 1101, and
(b)
applies only if section 1101(1), (4) or (6) applies.
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(2)
An officer of Revenue and Customs may, for the purposes of section 1101, by
notice require any person in whose name any shares or loan capital are
registered—
(a)
to state whether or not that person is the beneficial owner of the shares
or loan capital, and
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(b)
if that person is not the beneficial owner of the shares or loan capital, to
provide the name and address of the person on whose behalf the shares
or loan capital are registered in that person’s name.
(3)
Subsections (4) and (5) apply if a company (“the issuing company”) appears to
an officer of Revenue and Customs to be a close company.
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(4)
The officer may, for the purposes of section 1101, by notice require the issuing
company to provide the officer with—
(a)
particulars of any bearer securities issued by the company,
(b)
the names and addresses of the persons to whom the securities were
issued, and
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(c)
details of the amounts issued to each person.
(5)
The officer may, for the purposes of section 1101, by notice require—
(a)
any person to whom bearer securities were issued by the company, or
(b)
any person to or through whom bearer securities issued by the
company were subsequently sold or transferred,
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to provide any further information that the officer reasonably requires with a
view to enabling the officer to find out the names and addresses of the persons
beneficially interested in the securities.
(6)
In this section—
“securities” includes—
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(a)
shares, stocks, bonds, debentures and debenture stock, and
(b)
any promissory note or other instrument evidencing
indebtedness to a loan creditor of the company, and
“loan creditor” has the meaning given by section 453.
1103
Power to modify or replace sections 1101 and 1102
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(1)
The Commissioners for Her Majesty’s Revenue and Customs may by
regulations modify, supplement or replace any of the provisions of sections
1101 and 1102 for the purpose stated in subsection (2).
(2)
That is the purpose of requiring UK resident companies to—
(a)
make returns, and
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(b)
give information,

to an officer of Revenue and Customs in respect of distributions made by the
companies which are not qualifying distributions.
(3)
References in this Act and in any other enactment to sections 1101 and 1102 are
to be read as including a reference to any regulations made under this section.
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Chapter 6 — Information and returns: further provisions
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(4)
Regulations under this section may authorise the Commissioners to make
special arrangements as regards the matters specified in subsection (5) if in
their opinion there are circumstances justifying it.
(5)
Those matters are—
(a)
the repayment of income tax borne by a company, and
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(b)
the payment to a company of amounts in respect of any tax credit to
which it is entitled.
(6)
Regulations under this section may—
(a)
make different provision for different descriptions of companies and
for different circumstances, and
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(b)
contain incidental, supplemental, consequential and transitional
provision and savings.
(7)
No regulations may be made under this section unless a draft of the statutory
instrument containing them has been laid before and approved by a resolution
of the House of Commons.
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Companies and nominees required to provide tax certificates
1104
Company distributing dividend or interest: duty to provide tax certificates
(1)
This section applies if a distribution consisting of any dividend or interest is
made by a company which is—
(a)
a company as defined in section 1(1) of the Companies Act 2006, or
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(b)
a company created by letters patent or by or in pursuance of an Act.
(2)
If the company makes a payment of dividend or interest into a bank or building
society account held by any person the company must, within a reasonable
period, send a tax certificate (see section 1106) to either—
(a)
the bank or building society, or
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(b)
the person holding the account.
(3)
If the company makes a payment of dividend or interest to a person without
paying it into a bank or building society account, the company must, within a
reasonable period, send a tax certificate to that person.
1105
Duties of nominees
30
(1)
This section applies if—
(a)
a tax certificate is received by a person under section 1104(2)(b) or (3),
and
(b)
the sum concerned (or part of it)—
(i)
is paid to that person as nominee for another person, or
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(ii)
is paid into the account of that person as nominee for another
person.
(2)
If the nominee pays the sum (or the part concerned) into a bank or building
society account held by the other person the nominee must, within a
reasonable period, send a tax certificate to either—
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(a)
the bank or building society, or
(b)
the other person.

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Part 23 — Company distributions
Chapter 7 — Tax credits
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(3)
If the nominee pays the sum (or the part concerned) to the other person without
paying it into a bank or building society account held by that person, the
nominee must, within a reasonable period, send a tax certificate to that person.
1106
Meaning of “tax certificate” etc
(1)
This section gives the meaning of “bank”, “send” and “tax certificate” in
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sections 1104 and 1105.
(2)
“Bank” has the meaning given by section 1120.
(3)
“Send” means send by post.
(4)
“Tax certificate”, in relation to a payment of dividend or interest, means a
written statement showing—
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(a)
the amount of the dividend or interest paid,
(b)
the date of the payment, and
(c)
the amount of the tax credit (under section 1109(2) below or section
397(1) of ITTOIA 2005) to which an eligible person would be entitled in
respect of the dividend or interest.
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(5)
In subsection (4)(c) “eligible person” means a person who is entitled to a tax
credit in respect of the dividend or interest.
(6)
But for the purposes of subsection (4)(c) it does not matter whether or not any
person is in fact entitled to a tax credit in respect of the dividend or interest.
1107
Penalties
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(1)
A person who fails to comply with section 1104(2) or (3) or section 1105(2) or
(3) is liable to a penalty of £60 for each offence.
(2)
But, in respect of offences connected with any one distribution of dividends or
interest, the total amount of any penalties imposed on a person under
subsection (1) must not exceed £600.
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1108
Alternative means of compliance with sections 1104 and 1105
(1)
The Commissioners for Her Majesty’s Revenue and Customs may by
regulations provide that a person may comply with section 1104(2) or (3) or
section 1105(2) or (3) either—
(a)
by acting in accordance with the subsection concerned, or
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(b)
by acting in accordance with rules contained in the regulations.
(2)
Regulations under subsection (1) may make different provision for different
circumstances.
Chapter 7
Tax credits
35
1109
Tax credits for certain recipients of exempt qualifying distributions
(1)
This section applies if a company makes a qualifying distribution which is
exempt for the purposes of Part 9A of CTA 2009 (company distributions).

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Chapter 7 — Tax credits
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(2)
If the person receiving the distribution is a UK resident company, that
company is entitled to a tax credit equal to one-ninth of the amount or value of
the distribution (but see subsection (5)).
(3)
If the distribution is, or is treated under any provision of the Tax Acts as, the
income of a person (“P”) other than the recipient (“R”), P (not R) is treated as
5
receiving it for the purposes of subsection (2) (and so P (not R) is entitled to a
tax credit if P falls within subsection (2)).
(4)
Section 1102(2) to (6) (power to obtain certain information from close
companies and others) applies for the purposes of this section as it applies for
the purposes of section 1101.
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(5)
This section is subject to the following provisions—
(a)
section 808 (no tax credits for borrower under stock lending
arrangement),
(b)
section 809 (no tax credits for lender under creditor repo or creditor
quasi-repo),
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(c)
section 810 (no tax credits for borrower under debtor repo or debtor
quasi-repo), and
(d)
section 219(4B) of FA 1994 (no tax credit for distributions in respect of
assets in Lloyd’s member’s premium trust fund).
1110
Recovery of overpaid tax credit etc
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(1)
If an officer of Revenue and Customs discovers that a payment or set-off of tax
credit should not have been made or is excessive, the officer may act in
accordance with subsection (3) or (4).
(2)
For the purposes of subsection (1) it does not matter whether the payment or
set-off was excessive when made or became so later.
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(3)
The officer may make any assessment that in the officer’s judgement is needed
to recover—
(a)
any corporation tax that should have been paid, or
(b)
any payment of tax credit that should not have been made.
(4)
More generally, the officer may make any assessment that in the officer’s
30
judgement is needed to secure that the liabilities to corporation tax (and any
liabilities to interest on corporation tax) of the persons concerned are what they
would have been if only the correct set-offs and payments had been made.
(5)
Subsection (6) applies if—
(a)
interest on a payment of tax credit comprised in any franked
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investment income has been paid under section 826 of ICTA, and
(b)
interest should not have been paid on the payment, or should only have
been paid on part of it.
(6)
An officer of Revenue and Customs may make an assessment for recovering
the interest, so far as it should not have been paid.
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1111
Section 1110: supplementary
(1)
If—

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Chapter 8 — Interpretation of Part
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(a)
an assessment is made under section 1110 to recover tax credit paid to
a company in respect of franked investment income received in an
accounting period, and
(b)
more than one payment of tax credit was made in respect of that period,

then as far as possible a sum recovered is treated as relating to a payment of tax
5
credit made later rather than to one made earlier.
(2)
TMA 1970 applies to an assessment under section 1110 for recovering a
payment of tax credit, or of interest on a tax credit—
(a)
as if it were an assessment to corporation tax for the accounting period
in respect of which the payment was claimed, and
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(b)
and as if the payment represented a loss of tax to the Crown.
(3)
Any sum charged by an assessment such as is mentioned in subsection (2) is
due within 14 days after the notice of assessment is issued.
(4)
The duty to comply with subsection (3) is subject to any appeal against the
assessment.
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Chapter 8
Interpretation of Part
1112
Arrangements between companies
(1)
This section applies if two or more companies enter into arrangements to make
distributions to each other’s members.
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(2)
For the purposes mentioned in subsection (3) all parties concerned (however
many) may be treated as if anything done by any one of those companies had
been done by any one of the others.
(3)
The purposes are those of this Part except sections 1054 to 1058 and 1064 to
1071.
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1113
“In respect of shares”
(1)
In this Part “in respect of shares in the company”, in relation to a company
which is a member of a 90% group, means in respect of shares in—
(a)
that company, or
(b)
any other company in the group.
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(2)
Nothing in subsection (1) requires a company to be treated as making a
distribution to any company which is in the same group and is UK resident.
(3)
For the purposes of this Part a thing is regarded as done in respect of a share if
it is done to a person—
(a)
as the holder of the share, or
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(b)
as the person who held the share at a particular time.
(4)
For the purposes of this Part a thing is also regarded as done in respect of a
share if it is done in pursuance of a right granted, or an offer made, in respect
of a share.
(5)
Subsections (3) and (4) do not affect the meaning of “in respect of shares” in
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section 1054 (building society payments).