Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 5 — Losses on disposal of shares
695

Excluded activities: provision of services or facilities for another business
49
In relation to shares issued before 6 April 2007, section 199 of ITA 2007 (as
applied by section 79(7) of this Act) applies with the following
modifications—
(a)
in subsections (1) to (4), the substitution of “trade” for “business”,
5
wherever it occurs, and
(b)
in subsection (5) the substitution for paragraph (b) of—
“(b)
references to a trade, in relation to the provider of the
services or facilities, are to be read without regard to
the definition of “trade” in section 989, and
10
(c)
“trade”, in relation to the other person, includes any
business, profession or vocation”.
Meaning of a company being “in administration”
50    (1)
Sub-paragraph (2) applies in relation to—
(a)
an administration order under Part 3 of the Insolvency (Northern
15
Ireland) Order 1989 (S.I. 1989/2405 (N.I.19)) the petition for which
was presented before 6 April 2007, or
(b)
any corresponding order under the law of a country or territory
outside the United Kingdom the proceedings for which were
instituted before that date.
20
      (2)
Section 252 of ITA 2007 (as it applies for the purposes of Chapter 5 of Part 4
of this Act) applies with the substitution for subsection (2) of—
“(2)
A company is “in administration” if—
(a)
it is in administration within the meaning of Schedule B1 to
the Insolvency Act 1986, or
25
(b)
there is in force in relation to it—
(i)
an administration order under Part 3 of the
Insolvency (Northern Ireland) Order 1989, or
(ii)
any corresponding order under the law of a country
or territory outside the United Kingdom.”
30
      (3)
For the purposes of sub-paragraph (2), section 252 of ITA 2007 applies for the
purposes of Chapter 5 of Part 4 of this Act in any case where—
(a)
it is applied by section 80(5) of this Act,
(b)
it applies for the purposes of section 190 of ITA 2007 as applied by
section 83(2) of this Act, or
35
(c)
it applies for the purposes of section 191 of ITA 2007 as applied by
section 79(7), 81(4), 82(2) or 84(4) of this Act.
      (4)
In relation to an administration order under Part 2 of the Insolvency Act 1986
the petition for which was presented before 15 September 2003, section 252
of ITA 2007 (as applied by section 80(5) of this Act) applies with the
40
substitution for subsection (2) of—
“(2)
A company is “in administration” if there is in force in relation to it—
(a)
an administration order under Part 2 of the Insolvency Act
1986 or Part 3 of the Insolvency (Northern Ireland) Order
1989, or
45

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 6 — Group Relief
696

(b)
any corresponding order under the law of a country or
territory outside the United Kingdom.”
      (5)
Section 252 of ITA 2007 (as applied by section 80(5) of this Act) does not
apply in relation to shares issued before 21 March 2000.
Application in relation to corresponding bonus shares
5
51    (1)
For the purposes of this Part of this Schedule, if—
(a)
any shares (“the original shares”) have been issued to a company
before a particular date, or are treated under this paragraph as
having been issued to the company before a particular date, and
(b)
any corresponding bonus shares are issued to the company on or
10
after that date,

the bonus shares are treated as having been issued at the time the original
shares were issued to the company or are treated as having been so issued.
      (2)
In this paragraph “bonus shares” and “corresponding bonus shares” have
the same meaning as in Chapter 5 of Part 4.
15
Part 6
Group Relief
52
In section 127 “arrangements” covers only—
(a)
arrangements made on or after 20 February 2006, or
(b)
arrangements made before that date if—
20
(i)
the amount (or part) would (apart from that section) first
qualify for group relief on or after that date, or (as the case
may be)
(ii)
the amount (or part) arises on or after that date.
53
Section 175 has effect in relation to an accounting period of company B (see
25
section 165(1) or 166(1)) where either of the following events occurs in that
period or occurred in a previous period—
(a)
shares or securities of company B are issued on or after 15 November
1991 in circumstances where they carry both rights referred to in
section 170(1) and rights referred to in section 171(2), or
30
(b)
shares or securities of company B issued before 15 November 1991
begin to carry on or after that date both rights referred to in section
170(1) and rights referred to in section 171(2) (whether or not they
previously carried rights referred to in one of those sections).
54
Sections 173 to 178 do not have effect where the option arrangements
35
concerned are made before 15 November 1991.
55    (1)
Sub-paragraph (2) applies in relation to shares issued by a company—
(a)
before 18 December 2008, or
(b)
on or after that date under an agreement entered into before that
date,
40

if the company has made an election in relation to those shares under
paragraph 6 of Schedule 9 to FA 2009.
      (2)
Chapter 6 of Part 5 of this Act has effect in relation to those shares with the
following modifications—

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 8 — CITR
697

(a)
in section 160, the substitution for subsection (6) of—
“(6)
Condition D is that the shares do not carry any right to
dividends other than dividends which—
(a)
are of a fixed amount or are at a fixed percentage rate
of the nominal value of the shares, and
5
(b)
represent no more than a reasonable commercial
return on the new consideration mentioned in
subsection (3).”, and
(b)
the omission of section 161.
Part 7
10
Charitable donations relief
Condition as to repayment
56
Section 192, and the words “(but see section 192)” in section 191(3), do not
apply in relation to a payment to a charity made before 1 April 2010.
Restrictions on associated benefits
15
57    (1)
This paragraph applies if—
(a)
a payment is made in an accounting period ending on or after 1 April
2010, and
(b)
a benefit associated with the payment—
(i)
is received in an accounting period ending before that date,
20
or
(ii)
relates (wholly or partly) to an accounting period ending
before that date.
      (2)
Step 2 of the calculation in section 198(8) is to be read as if the words “(and
neither condition C nor condition D is met in relation to it)” were omitted.
25
Enactment of extra-statutory concession
58    (1)
This paragraph applies if the Enactment of Extra-Statutory Concessions
(No.2) Order, a draft of which was laid before the House of Commons for
approval on 10 November 2009, is not made so as to come into force on 1
April 2010 in a form which, so far as concerns article 5 of the draft Order,
30
equates to the form of the draft Order.
      (2)
This Act is treated as having had effect at all times after the beginning of the
day on which it is passed as if the following provisions were omitted—
(a)
the words “(but see section 192)” in section 191(3),
(b)
section 192, and
35
(c)
paragraph 56 of this Schedule.
Part 8
CITR
59    (1)
Sub-paragraph (2) applies in relation to any time after the commencement of
the repeal by this Act of Schedule 16 to FA 2002.
40

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 10 — Leasing plant or machinery
698

      (2)
Regulations made, or having effect as if made, under paragraph 4 of that
Schedule are to be treated as made under Chapter 2 of Part 7 of ITA 2007.
Part 9
Oil activities
Regional development grants
5
60
In relation to accounting periods beginning before 1 April 2011—
(a)
section 289(3)(b) has effect as if—
(i)
“, 3” were inserted after “Part 2”, and
(ii)
“, industrial buildings” were inserted after “machinery”, and
(b)
section 290(3) and (7) have effect as if “, 3” were inserted after “Part
10
2”.
Part 10
Leasing plant or machinery
Disapplication of Chapter 2 of Part 9
61    (1)
Chapter 2 of Part 9 (long funding leases of plant or machinery)—
15
(a)
does not apply to any lease in relation to which condition A, B or C
is met,
(b)
does not apply in the case of the relevant lessor (see sub-paragraph
(6)) to any lease in relation to which condition D is met, and
(c)
does not apply in the case of the relevant lessee (see sub-paragraph
20
(7)) to any lease in relation to which condition E is met.
      (2)
But sub-paragraph (1) does not apply in relation to a lease in the case of a
lessor (and accordingly Chapter 2 of Part 9 applies) if an election under
regulations made under paragraph 16 of Schedule 8 to FA 2006 (election for
lease to be treated as long funding lease for tax purposes)—
25
(a)
is in force in the case of the lease, and
(b)
has effect in the case of the lessor.
      (3)
Condition A is that—
(a)
the lease was finalised before 21 July 2005, and
(b)
on 17 May 2006 the lessor was within the charge to corporation tax.
30
      (4)
Condition B is that—
(a)
the commencement of the term of the lease was before 1 April 2006,
and
(b)
the plant or machinery is brought into use for the purposes of a
qualifying activity carried on by the person concerned before that
35
date.
      (5)
Condition C is that—
(a)
the lease is an excepted lease, and
(b)
the commencement of the term of the lease is on or after 1 April 2006.
      (6)
Condition D is that—
40

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 10 — Leasing plant or machinery
699

(a)
Chapter 2 of Part 9 and the amendments of CAA 2001 made by
Schedule 8 to FA 2006 do not apply to a lease (“the old lease”) in the
case of a lessor (“the old lessor”),
(b)
there is a transfer of plant or machinery,
(c)
immediately before the transfer the old lessor is within the charge to
5
tax,
(d)
the transfer is in such circumstances that, if the amendments of CAA
2001 made by Schedule 8 to FA 2006 did apply to the old lease,
section 70W(4)(b) of CAA 2001 (transfers, assignments etc by lessor)
would have effect, in relation to the person who would be the new
10
lessor if that section applied (“P”), to treat the lease that would be the
new lease in that case as a lease that is not a long funding lease;

and P is the relevant lessor for the purposes of sub-paragraph (1)(b).
      (7)
Condition E is that—
(a)
Chapter 2 of Part 9 and the amendments of CAA 2001 made by
15
Schedule 8 to FA 2006 do not apply to a lease (“the old lease”) in the
case of a lessee (“the old lessee”),
(b)
there is a transfer of plant or machinery,
(c)
immediately before the transfer the old lessee is within the charge to
tax,
20
(d)
the transfer is in such circumstances that, if the amendments of CAA
2001 made by Schedule 8 to FA 2006 did apply to the old lease,
section 70X(4)(b) of CAA 2001 (transfers, assignments etc made by
lessee) would have effect, in relation to the person who would be the
new lessee if that section applied (“Q”), to treat the lease that would
25
be the new lease in that case as a lease that is not a long funding lease;

and Q is the relevant lessee for the purposes of sub-paragraph (1)(c).
      (8)
In the application of section 70W(4)(b) of CAA 2001 for the purposes of sub-
paragraph (6)(d) and the application of section 70X(4)(b) of that Act for the
purposes of sub-paragraph (7)(d), the old lease is to be treated as a lease that
30
is not a long funding lease.
      (9)
Paragraphs 17 to 27 of Schedule 8 to FA 2006 (interpretational and
supplemental provisions) apply for the purposes of this paragraph as they
apply for the purposes of Part 4 of that Schedule.
     (10)
See, in particular—
35
(a)
paragraphs 17 and 26 of that Schedule for the meaning of “excepted
lease”,
(b)
paragraph 23 of that Schedule for when a lease is “finalised”, and
(c)
paragraph 27 of that Schedule for general interpretation.
     (11)
See also paragraph 21 of that Schedule, which—
40
(a)
deems a separate long funding lease that is an excepted lease to exist
in some cases where a person incurred expenditure before 19 July
2006 on the provision of plant or machinery for leasing under a long
funding lease that is not itself excepted, and
(b)
provides for rentals under the actual lease to be apportioned to the
45
deemed lease.

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 10 — Leasing plant or machinery
700

Disapplication of sections 360 and 361 and modification of section 360 in some cases
62    (1)
If at the beginning of 13 December 2007—
(a)
a company carrying on a trade was the lessee of any plant or
machinery under a lease that is not a long funding lease (“lease A”),
and
5
(b)
the company was the lessor of any of that plant or machinery under
a lease that is a long funding finance lease (“lease B”),

sub-paragraphs (2) to (11) apply in respect of lease B.
      (2)
Section 360 (lessor under long funding finance lease: rental earnings) does
not apply to a period of account within sub-paragraph (3).
10
      (3)
A period of account is within this sub-paragraph if—
(a)
it begins on or after 13 December 2007, and
(b)
no rentals that were due under lease B before 13 December 2007 are
(wholly or in part) in respect of any part of the period.
      (4)
For the purpose of calculating the profits of the lessor under lease B for a
15
period of account ending on or after 13 December 2007 that is not within sub-
paragraph (3), the lessor is treated as receiving for that period income
attributable to lease B of an amount equal to the relevant amount.
      (5)
The relevant amount is an amount equal to so much of the rentals that—
(a)
become due on or after 13 December 2007, and
20
(b)
are wholly or partly in respect of the period of account,

as would not reasonably be regarded as reflected in the rental earnings for
that period.
      (6)
For the purposes of sub-paragraph (5) the rental earnings for a period of
account are determined in accordance with section 360(3) and (4).
25
      (7)
If any rental is paid for a period (“the rental period”) which begins before 13
December 2007 or is not wholly within the period of account, for the
purposes of sub-paragraph (6) the amount of that rental is treated as equal
to the amount apportioned (on a time basis) in respect of so much of the
rental period as falls on or after 13 December 2007 and within the period of
30
account.
      (8)
The income treated as received as a result of sub-paragraph (4) is in addition
to any amount brought into account under section 360(2).
      (9)
Section 361 (lessor under long funding finance lease: exceptional items) does
not apply to any profit or loss arising on or after 13 December 2007.
35
     (10)
If section 362 (lessor making termination payment) applies in respect of the
termination of lease B on or after 13 December 2007, a deduction is allowed
(in calculating the profits of the lessor) in respect of any sum calculated by
reference to the sum paid to the lessee.
     (11)
The amount of the deduction is (if it would otherwise exceed that amount)
40
limited to the total amount brought into account in respect of the lease as a
result of sub-paragraph (2) or (4).
     (12)
If lease A becomes a long funding lease as a result of section 70H of CAA
2001 (and does not cease to be such a lease), this paragraph is treated as
never having applied in relation to lease B.
45

Corporation Tax Bill
Schedule 2 — Transitionals and savings etc
Part 10 — Leasing plant or machinery
701

     (13)
Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about long
funding leases) applies for the purposes of this paragraph.
Disapplication of provisions about cases where sections 360 to 369 do not apply
63    (1)
Sections 370 and 371 do not apply if—
(a)
expenditure is incurred before 9 October 2007, or
5
(b)
a company becomes entitled to a deduction in calculating its profits
or losses for corporation tax purposes as a result of any plant or
machinery forming part of its trading stock before that date.
      (2)
Section 372 does not apply if the lease referred to as “lease B” in subsection
(1)(c) of that section is entered into before 13 December 2007.
10
      (3)
Sections 373 to 375 do not apply in relation to arrangements entered into
before 9 October 2007.
64    (1)
Section 376 (films) does not apply if the inception of the long funding lease
is before 13 November 2008.
      (2)
Sub-paragraphs (3) to (10) apply in respect of a long funding finance lease of
15
a film—
(a)
whose inception is before that date, and
(b)
which has not terminated before that date.
      (3)
Section 360 (lessor under long funding finance lease: rental earnings) does
not apply to a period of account within sub-paragraph (4).
20
      (4)
A period of account is within this sub-paragraph if—
(a)
it begins on or after 13 November 2008, and
(b)
no rentals due (wholly or partly) in respect of any part of the period
of account were due under the lease before that date.
      (5)
For the purpose of calculating the profits of the lessor under the lease for a
25
period of account that—
(a)
ends on or after 13 November 2008, and
(b)
is not within sub-paragraph (4),

the lessor is treated as receiving for that period of account income
attributable to the lease of an amount equal to the relevant amount (in
30
addition to any amount brought into account under section 360(2)).
      (6)
The “relevant amount” is an amount equal to so much of the rentals as—
(a)
become due on or after 13 November 2008, and
(b)
are due wholly or partly in respect of the period of account.
      (7)
If any rental is paid for a period (“the rental period”) that—
35
(a)
begins before 13 November 2008, or
(b)
is not wholly within the period of account,

for the purposes of sub-paragraph (6) the amount of that rental is treated as
equal to the amount apportioned (on a time basis) in respect of so much of
the rental period as falls on or after 13 November 2008 and within the period
40
of account.
      (8)
Section 361 (lessor under long funding finance lease: exceptional items) does
not apply to any profit or loss arising on or after 13 November 2008.