Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
551

(a)
A is B’s spouse or civil partner,
(b)
A is a relative of B,
(c)
A is the spouse or civil partner of a relative of B,
(d)
A is a relative of B’s spouse or civil partner, or
(e)
A is the spouse or civil partner of a relative of B’s spouse or civil
5
partner.
(6)
A person, in the capacity as trustee of a settlement, is connected with—
(a)
any individual who is a settlor in relation to the settlement,
(b)
any person connected with such an individual,
(c)
any close company whose participators include the trustees of the
10
settlement,
(d)
any non-UK resident company which, if it were UK resident, would be
a close company whose participators include the trustees of the
settlement,
(e)
any body corporate controlled (within the meaning of section 1124) by
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a company within paragraph (c) or (d),
(f)
if the settlement is the principal settlement in relation to one or more
sub-fund settlements, a person in the capacity as trustee of such a sub-
fund settlement, and
(g)
if the settlement is a sub-fund settlement in relation to a principal
20
settlement, a person in the capacity as trustee of any other sub-fund
settlements in relation to the principal settlement.
(7)
A person who is a partner in a partnership is connected with—
(a)
any partner in the partnership,
(b)
the spouse or civil partner of any individual who is a partner in the
25
partnership, and
(c)
a relative of any individual who is a partner in the partnership.
(8)
But subsection (7) does not apply in relation to acquisitions or disposals of
assets of the partnership pursuant to genuine commercial arrangements.
1123
“Connected” persons: supplementary
30
(1)
In section 1122 and this section—
“company” includes any body corporate or unincorporated association,
but does not include a partnership (and see also subsection (2)),
“control” is to be read in accordance with sections 450 and 451 (except
where otherwise indicated),
35
“principal settlement” has the meaning given by paragraph 1 of Schedule
4ZA to TCGA 1992,
“relative” means brother, sister, ancestor or lineal descendant,
“settlement” has the same meaning as in Chapter 5 of Part 5 of ITTOIA
2005 (see section 620 of that Act), and
40
“sub-fund settlement” has the meaning given by paragraph 1 of Schedule
4ZA to TCGA 1992.
(2)
For the purposes of section 1122—
(a)
a unit trust scheme is treated as if it were a company, and
(b)
the rights of the unit holders are treated as if they were shares in the
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company.

Corporation Tax Bill
Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
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(3)
For the purposes of section 1122 “trustee”, in the case of a settlement in relation
to which there would be no trustees apart from this subsection, means any
person—
(a)
in whom the property comprised in the settlement is for the time being
vested, or
5
(b)
in whom the management of that property is for the time being vested.

Section 466(4) of ITA 2007 (which applies for the purposes of the Corporation
Tax Acts as a result of section 1169 below) does not apply for the purposes of
this subsection.
(4)
If any provision of section 1122 provides that a person (“A”) is connected with
10
another person (“B”), it also follows that B is connected with A.
1124
“Control”
(1)
This section has effect for the purposes of the provisions of the Corporation Tax
Acts which apply this section (or to which this section is applied).
(2)
In relation to a body corporate (“company A”), “control” means the power of a
15
person (“P”) to secure—
(a)
by means of the holding of shares or the possession of voting power in
relation to that or any other body corporate, or
(b)
as a result of any powers conferred by the articles of association or other
document regulating that or any other body corporate,
20

that the affairs of company A are conducted in accordance with P’s wishes.
(3)
In relation to a partnership, “control” means the right to a share of more than
half the assets, or of more than half the income, of the partnership.
1125
“Farming” and related expressions
(1)
In the Corporation Tax Acts “farming” means the occupation of land wholly or
25
mainly for the purposes of husbandry, but does not include market gardening
(see subsection (5)).
(2)
In subsection (1) “husbandry” includes—
(a)
hop growing, and
(b)
the breeding and rearing of horses and the grazing of horses in
30
connection with those activities.
(3)
For the purposes of the Corporation Tax Acts the cultivation of short rotation
coppice is regarded as husbandry and not as forestry.
(4)
In the Corporation Tax Acts “woodlands” does not include land on which short
rotation coppice is cultivated.
35
(5)
In the Corporation Tax Acts “market gardening” means the occupation of land
as a garden or nursery for the purpose of growing produce for sale.
(6)
For the purposes of this section “short rotation coppice” means a perennial
crop of tree species planted at high density, the stems of which are harvested
above ground level at intervals of less than 10 years.
40
(7)
In the application of this section for the purposes of paragraph 26 of Schedule
15 to FA 2000—

Corporation Tax Bill
Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
553

(a)
both references to the occupation of land, and the reference to land on
which short rotation coppice is cultivated, refer to land in the United
Kingdom, and
(b)
the reference to the cultivation of such coppice refers to its cultivation
in the United Kingdom.
5
1126
“Franked investment income”
(1)
In the Corporation Tax Acts “franked investment income” means income of a
UK resident company which consists of a distribution in respect of which the
company is entitled to a tax credit.
(2)
Accordingly, a reference in the Corporation Tax Acts to the amount of any
10
franked investment income is to the total of the amount or value of the
distribution and the amount of the tax credit.
(3)
In the Corporation Tax Acts a reference to franked investment income received
by a company includes a reference to franked investment income received by
another person on behalf of, or in trust for, the company.
15
(4)
But a reference in the Corporation Tax Acts to franked investment income
received by a company does not include a reference to franked investment
income received by the company on behalf of, or in trust for, another person.
1127
“Generally accepted accounting practice” and related expressions
(1)
In the Corporation Tax Acts “generally accepted accounting practice” means
20
UK generally accepted accounting practice.

This is subject to subsection (3).
(2)
In the Corporation Tax Acts “UK generally accepted accounting practice”—
(a)
means generally accepted accounting practice in relation to accounts of
UK companies (other than IAS accounts) that are intended to give a
25
true and fair view, and
(b)
has the same meaning in relation to—
(i)
individuals,
(ii)
entities other than companies, and
(iii)
companies that are not UK companies,
30

as it has in relation to UK companies.
(3)
In relation to the affairs of a company or other entity that prepares IAS
accounts, in the Corporation Tax Acts “generally accepted accounting practice”
means generally accepted accounting practice in relation to IAS accounts.
(4)
In the Corporation Tax Acts “for accounting purposes” means for the purposes
35
of accounts drawn up in accordance with generally accepted accounting
practice.
(5)
In the Corporation Tax Acts “international accounting standards” has the same
meaning as in Regulation (EC) No 1606/2002 of the European Parliament and
the Council of 19 July 2002 on the application of international accounting
40
standards.
(6)
If the European Commission has in accordance with that Regulation adopted
an international accounting standard with modifications, then as regards
matters covered by that standard—

Corporation Tax Bill
Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
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(a)
generally accepted accounting practice with respect to IAS accounts is
to be regarded as permitting the use of the standard either with or
without modifications, and
(b)
accounts prepared on either basis are to be regarded for the purposes
of the Corporation Tax Acts as prepared in accordance with
5
international accounting standards.
(7)
In this section—
“IAS accounts” means accounts prepared in accordance with
international accounting standards, and
“UK companies” means companies incorporated or formed under the law
10
of a part of the United Kingdom.
1128
“Grossing up”
(1)
In the Corporation Tax Acts references to grossing up by reference to a rate of
tax are to calculating the amount (“the grossed up amount”) which after
deduction of income tax at that rate would equal the amount to be grossed up
15
(“the net amount”).
(2)
The grossed up amount is the sum of the net amount and the tax deducted.
(3)
The grossed up amount may also be expressed as—


where—
GA is the grossed up amount,
20
NA is the net amount, and
R is the percentage rate of tax by reference to which the net amount is to
be grossed up.
1129
“Hire-purchase agreement”
(1)
This section has effect for the purposes of the provisions of the Corporation Tax
25
Acts which apply this section.
(2)
A hire-purchase agreement is an agreement in whose case conditions A, B and
C are met.
(3)
Condition A is that under the agreement goods are bailed (or in Scotland hired)
in return for periodical payments by the person to whom they are bailed (or
30
hired).
(4)
Condition B is that under the agreement the property in the goods will pass to
the person to whom they are bailed (or hired) if the terms of the agreement are
complied with and one or more of the following events occurs—
(a)
the exercise of an option to purchase by that person,
35
(b)
the doing of another specified act by any party to the agreement,
(c)
the happening of another specified event.
(5)
Condition C is that the agreement is not a conditional sale agreement.
(6)
In subsection (5) “conditional sale agreement” means an agreement for the sale
of goods under which—
40

Corporation Tax Bill
Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
555

(a)
the purchase price or part of it is payable by instalments, and
(b)
the property in the goods is to remain in the seller (even though they
are to be in the possession of the buyer) until conditions specified in the
agreement are met (whether as to the payment of instalments or
otherwise).
5
1130
“Local authority”
(1)
In the Corporation Tax Acts “local authority”, in relation to England and
Wales, means—
(a)
a billing authority as defined in section 1(2) of the Local Government
Finance Act 1992,
10
(b)
a precepting authority as defined in section 69(1) of that Act,
(c)
a body with power to issue a levy (by virtue of regulations under
section 74 of the Local Government Finance Act 1988),
(d)
a body with power to issue a special levy (by virtue of regulations
under section 75 of that Act),
15
(e)
a fire and rescue authority in Wales constituted by a scheme under
section 2 of the Fire and Rescue Services Act 2004 or a scheme to which
section 4 of that Act applies,
(f)
an authority with power to make or determine a rate, or
(g)
a residuary body established by order under section 22(1) of the Local
20
Government Act 1992.
(2)
In the Corporation Tax Acts “local authority”, in relation to Scotland, means—
(a)
a council constituted under section 2 of the Local Government etc
(Scotland) Act 1994,
(b)
a joint board or committee within the meaning of the Local
25
Government (Scotland) Act 1973, or
(c)
an authority with power to requisition any sum from a council such as
is mentioned in paragraph (a).
(3)
In the Corporation Tax Acts “local authority”, in relation to Northern Ireland,
means a district council constituted under section 1 of the Local Government
30
Act (Northern Ireland) 1972 (c. 9 (N.I.)).
(4)
In this section “rate” means a rate—
(a)
whose proceeds are applicable for public local purposes, and
(b)
which is leviable by reference to the value of land or property.
1131
“Local authority association”
35
(1)
In the Corporation Tax Acts “local authority association” means any
incorporated or unincorporated association which meets conditions A and B.
(2)
Condition A is that all of its members are local authorities, groups of local
authorities or local authority associations.
(3)
Condition B is that its purpose, or primary purpose, is to protect and further
40
the general interests of local authorities or any description of local authorities.
(4)
For the purposes of condition A, if a member (“M”) of a local authority
association is a representative of, or is appointed by, a local authority, group of
local authorities or a local authority association, the authority, group or

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Part 24 — Corporation Tax Acts definitions etc
Chapter 1 — Definitions
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association concerned (rather than M) is to be treated as a constituent member
of the local authority association.
1132
“Offshore installation”
(1)
In the Corporation Tax Acts “offshore installation” means a structure which is,
is to be, or has been, put to a relevant use while in water (see subsections (3)
5
and (4)).
(2)
But a structure is not an offshore installation if—
(a)
it has permanently ceased to be put to a relevant use,
(b)
it is not, and is not to be, put to any other relevant use, and
(c)
since permanently ceasing to be put to a relevant use, it has been put to
10
a use which is not relevant.
(3)
A use is a relevant use if it is—
(a)
for the purposes of exploiting mineral resources by means of a well,
(b)
for the purposes of exploration with a view to exploiting mineral
resources by means of a well,
15
(c)
for the storage of gas in or under the shore or the bed of any waters,
(d)
for the recovery of gas so stored,
(e)
for the conveyance of things by means of a pipe, or
(f)
mainly for the provision of accommodation for individuals who work
on or from a structure which is, is to be, or has been, put to any of the
20
above uses while in water.
(4)
For the purposes of this section references to a structure being put to a use
while in water are to the structure being put to a use while—
(a)
standing in any waters,
(b)
stationed (by whatever means) in any waters, or
25
(c)
standing on the foreshore or other land intermittently covered with
water.
(5)
In this section “structure” includes a ship or other vessel.
1133
Regulations about the meaning of “offshore installation”
(1)
The Treasury may by regulations make provision as to the meaning of
30
“offshore installation” in the Corporation Tax Acts.
(2)
The regulations may—
(a)
add to, amend or repeal any provision of section 1132,
(b)
make different provision for different purposes, and
(c)
contain incidental, supplemental, consequential and transitional
35
provision and savings.
1134
“Oil and gas exploration and appraisal”
(1)
In the Corporation Tax Acts “oil and gas exploration and appraisal” means
activities carried out for the purpose of—
(a)
searching for petroleum anywhere in an area,
40
(b)
ascertaining a petroleum-bearing area’s extent or characteristics, or
(c)
ascertaining its reserves of petroleum,

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Chapter 1 — Definitions
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so that it may be determined whether the petroleum is suitable for commercial
exploitation.
(2)
In this section “petroleum” has the meaning given by section 1 of the Petroleum
Act 1998.
1135
“Property investment LLP”
5
(1)
In the Corporation Tax Acts “property investment LLP” means a limited
liability partnership—
(a)
whose business consists wholly or mainly in the making of investments
in land, and
(b)
the principal part of whose income is derived from investments in land.
10
(2)
Whether a limited liability partnership is a property investment LLP is
determined for each period of account of the partnership.
1136
“Qualifying distribution”
(1)
In the Corporation Tax Acts “qualifying distribution” means any distribution,
except—
15
(a)
one which is a distribution for corporation tax purposes only because it
falls within paragraph C or D in section 1000(1) (redeemable share
capital or security issued in respect of shares in, or securities of, the
company), or
(b)
a distribution which is derived from a distribution that falls within
20
paragraph (a).
(2)
A distribution made by a company (“A”) is derived from a distribution that
falls within subsection (1)(a) if it consists of share capital or a security which A
has received (directly or indirectly) from another company (“B”) which issued
the share capital or security by way of a distribution that falls within subsection
25
(1)(a).
1137
“Recognised stock exchange”
(1)
In the Corporation Tax Acts “recognised stock exchange” means—
(a)
any market of a recognised investment exchange which is for the time
being designated as a recognised stock exchange for the purposes of
30
section 1005 of ITA 2007 by an order made by the Commissioners for
Her Majesty’s Revenue and Customs, and
(b)
any market outside the United Kingdom which is for the time being so
designated.
(2)
References in the Corporation Tax Acts to securities which are listed on a
35
recognised stock exchange are to securities—
(a)
which are admitted to trading on that exchange, and
(b)
which are included in the official UK list or are officially listed in a
qualifying country outside the United Kingdom in accordance with
provisions corresponding to those generally applicable in EEA states.
40
(3)
For this purpose “qualifying country outside the United Kingdom” means any
country outside the United Kingdom in which there is a recognised stock
exchange.