Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 5 — Group relief
Chapter 6 — Equity holders and profits or assets available for distribution
96

175
Cases in which both sections 170 and 172 apply
(1)
This section applies in a case in which sections 170 and 172 apply but section
174 does not.
(2)
Determine what company A’s proportion would be—
(a)
on the basis mentioned in section 170(2),
5
(b)
on the basis mentioned in section 172(1),
(c)
on those bases taken together, and
(d)
ignoring sections 170 and 172.
(3)
Company A’s proportion is taken to be the lowest proportion determined
under subsection (2).
10
176
Cases in which both sections 170 and 174 apply
(1)
This section applies in a case in which sections 170 and 174 apply but section
172 does not.
(2)
Determine what company A’s proportion would be—
(a)
on the basis mentioned in section 170(2),
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(b)
on the basis mentioned at Step 4 in section 174,
(c)
on those bases taken together, and
(d)
ignoring sections 170 and 174.
(3)
Company A’s proportion is taken to be the lowest proportion determined
under subsection (2).
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177
Cases in which both sections 172 and 174 apply
(1)
This section applies in a case in which sections 172 and 174 apply but section
170 does not.
(2)
Determine what company A’s proportion would be—
(a)
on the basis mentioned in section 172(1),
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(b)
on the basis mentioned at Step 4 in section 174,
(c)
on those bases taken together, and
(d)
ignoring sections 172 and 174.
(3)
Company A’s proportion is taken to be the lowest proportion determined
under subsection (2).
30
178
Cases in which sections 170, 172 and 174 all apply
(1)
This section applies in a case in which sections 170, 172 and 174 all apply.
(2)
Determine what company A’s proportion would be—
(a)
on the basis mentioned in section 170(2),
(b)
on the basis mentioned in section 172(1),
35
(c)
on the basis mentioned at Step 4 in section 174,
(d)
on the bases mentioned in sections 170(2) and 172(1) taken together,
(e)
on the bases mentioned in section 170(2) and at Step 4 in section 174
taken together,

Corporation Tax Bill
Part 5 — Group relief
Chapter 6 — Equity holders and profits or assets available for distribution
97

(f)
on the bases mentioned in section 172(1) and at Step 4 in section 174
taken together,
(g)
on the bases mentioned in section 170(2), section 172(1) and at Step 4 in
section 174 taken together, and
(h)
ignoring sections 170, 172 and 174.
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(3)
Company A’s proportion is taken to be the lowest proportion determined
under subsection (2).
179
Cases in which surrendering or claimant company is non-UK resident
(1)
If the surrendering company or the claimant company is non-UK resident at
the relevant time, section 180 applies as mentioned in subsections (2) and (3) in
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the cases set out in subsection (4).
(2)
Section 180 applies in the application of this Chapter for the purposes of
sections 143(3)(b) and (c) and 144(3)(b) and (c) if the non-UK resident company
is owned by the consortium at the relevant time.
(3)
Section 180 applies in the application of this Chapter for the purposes of section
15
151(4)(a) and (b) in determining if the non-UK resident company is a 75% or
90% subsidiary of another company at the relevant time.

But section 180 is not to be applied in determining if the EEA group condition
is met (see section 136) at the relevant time.
(4)
The cases in which section 180 applies are as follows.
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Case 1

One or more of the participating equity holders holds, as such, shares or
securities with distribution rights that have effect (wholly or partly) by
reference to whether or not, or to what extent, the profits or assets distributed
are referable to company B’s UK trade (see section 182).
25
Case 2

Section 174 applies and any of the proportions to be determined under
paragraph (b) of Step 3 in that section would differ according to whether or not,
or to what extent, the profits or assets distributed are referable to company B’s
UK trade.
30
180
Company A’s proportion if non-UK resident involved
(1)
If this section applies—
(a)
go to subsection (2) if the case is one in which none of sections 170, 172
and 174 applies, and
(b)
go to subsection (3) if the case is one in which any of sections 170, 172,
35
and 174 applies.
(2)
If the case is as mentioned in subsection (1)(a)—
(a)
determine what company A’s proportion would be using the
assumptions set out in section 181, and
(b)
if the proportion so determined (“the alternative proportion”) is less
40
than what company A’s proportion would be ignoring this section,
then company A’s proportion is taken to be the alternative proportion.
(3)
If the case is as mentioned in subsection (1)(b), take the following steps.

Corporation Tax Bill
Part 5 — Group relief
Chapter 6 — Equity holders and profits or assets available for distribution
98

Step 1

Determine, in each way required by the applicable sections, what company A’s
proportion would be ignoring this section.

A proportion determined at this step is referred to as a “normal proportion”.
Step 2
5

Determine, in each way required by the applicable sections, what company A’s
proportion would be using the assumptions set out in section 181.

A proportion determined at this step is referred to as a “section 181
proportion”.
Step 3
10

If a section 181 proportion determined in a required way is less than the normal
proportion determined in that way, for the purposes of the applicable sections
use the section 181 proportion instead of the normal proportion.
(4)
In subsection (3) “the applicable sections” means any of sections 170, 172 and
174 that applies in the case mentioned in subsection (1)(b), together with
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whichever (if any) of sections 175 to 178 that applies in that case.
181
Assumptions to be applied if non-UK resident company involved
(1)
The assumptions referred to in section 180 are as follows.
Assumption 1

The profit distribution or the distribution on the notional winding up is
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confined to a distribution of the profits or assets referable to company B’s UK
trade (see section 182).
Assumption 2

Section 165(2) (in the case of a profit distribution) is applied on the basis that
the amount of company B’s total profits referred to in that subsection does not
25
exceed the amount of those profits referable to its UK trade.
Assumption 3

Section 166(3) and (4) (in the case of a distribution on a notional winding up) is
applied on the basis that the amount of company B’s assets and liabilities
referred to in those subsections does not exceed the amount of those assets and
30
liabilities referable to its UK trade.
Assumption 4

None of the ordinary equity holders has a beneficial entitlement to the profits
or assets referable to company B’s UK trade that is greater than the proportion
of the distribution in question to which the equity holder would be beneficially
35
entitled—
(a)
if Assumptions 1 to 3 were ignored, and
(b)
if it would otherwise be less, the distribution were £100.
(2)
In subsection (1) “ordinary equity holder” means an equity holder whose
beneficial entitlement on the profit distribution or the distribution on the
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notional winding up does not differ according to whether or not, or the extent
to which, the profits or assets distributed are referable to company B’s UK
trade.

Corporation Tax Bill
Part 5 — Group relief
Chapter 7 — Miscellaneous provisions and interpretation of Part
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182
Assets etc referable to UK trade
Profits, assets or liabilities of company B are referable to company B’s UK trade
so far as they—
(a)
are attributable to, or used for the purposes of, activities the income or
chargeable gains from which are or (if there were any) would be
5
brought into account in calculating company B’s total profits of any
accounting period, and
(b)
are not attributable to, or used for the purposes of, activities which are
double taxation exempt for any accounting period (see section 186).
Chapter 7
10
Miscellaneous provisions and interpretation of Part
Miscellaneous
183
Payments for group relief
(1)
This section applies if—
(a)
the surrendering company and the claimant company have an
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agreement between them in relation to losses and other amounts of the
surrendering company (“the agreed loss amounts”),
(b)
group relief is given to the claimant company in relation to the agreed
loss amounts, and
(c)
as a result of the agreement the claimant company makes a payment to
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the surrendering company that does not exceed the total amount of the
agreed loss amounts.
(2)
The payment—
(a)
is not to be taken into account in determining the profits or losses of
either company for corporation tax purposes, and
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(b)
for corporation tax purposes is not to be regarded as a distribution.
184
References to “allowance” in CAA 2001
References in CAA 2001 (apart from Parts 6 and 10) to an allowance include
references to an allowance which would be made—
(a)
but for the giving of group relief, or
30
(b)
but for that and for a lack of profits or other income.
Interpretation
185
“Trading company” and “holding company”
(1)
In this Part “trading company” means a company the business of which
consists wholly or mainly in the carrying on of a trade or trades.
35
(2)
In this Part “holding company” means a company the business of which
consists wholly or mainly in the holding of shares or securities of companies
that—
(a)
are its 90% subsidiaries (see section 151), and

Corporation Tax Bill
Part 5 — Group relief
Chapter 7 — Miscellaneous provisions and interpretation of Part
100

(b)
are trading companies.
186
When activities of a company are double taxation exempt
(1)
For the purposes of this Part activities of a company are double taxation
exempt for an accounting period if, because of double taxation arrangements,
the income and chargeable gains (if any) arising for that period from the
5
activities are to be ignored in determining the company’s chargeable profits for
that period.
(2)
In determining if any activities are double taxation exempt, assume that any
claim that must be made before effect is given to any provision of double
taxation arrangements is made.
10
(3)
“Double taxation arrangements” means arrangements which have effect under
section 2(1) of TIOPA 2010 (double taxation relief by agreement with territories
outside the United Kingdom).
187
“Non-UK tax”
(1)
In this Part “non-UK tax” means a tax chargeable under the law of a territory
15
outside the United Kingdom which—
(a)
is charged on income and corresponds to United Kingdom income tax,
or
(b)
is charged on income or chargeable gains or both and corresponds to
United Kingdom corporation tax.
20
(2)
A tax is not outside the scope of subsection (1) by reason only that it—
(a)
is chargeable under the law of a province, state or other part of a
country, or
(b)
is levied by or on behalf of a municipality or other local body.
188
Other definitions
25
(1)
In this Part—
“the claimant company” has the meaning given by section 130(2) or 135(2)
(as the case may be),
“the claim period” has the meaning given by section 130(2) or 135(2) (as
the case may be),
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“company” means any body corporate,
“group relief” has the meaning given by section 97(2),
“profits” means income and chargeable gains, except in so far as the
context otherwise requires,
“the surrenderable amounts” has the meaning given by section 99(7) or
35
113(5) (as the case may be),
“surrendering company” has the meaning given by section 99(7) or 113(5)
(as the case may be), and
“the surrender period” has the meaning given by section 99(7) or 113(5)
(as the case may be).
40
(2)
In this Part, except in so far as the context otherwise requires—
(a)
references to a trade include an office, and
(b)
references to carrying on a trade include holding an office.

Corporation Tax Bill
Part 6 — Charitable donations relief
Chapter 2 — Certain payments to charity
101

Part 6
Charitable donations relief
Chapter 1
Nature of relief
189
Relief for qualifying charitable donations
5
(1)
Qualifying charitable donations made by a company are allowed as deductions
from the company’s total profits in calculating the corporation tax chargeable
for an accounting period.
(2)
They are deducted from the company’s total profits for the period after any
other relief from corporation tax other than group relief.
10
(3)
The amount of the deduction is limited to the amount that reduces the
company’s taxable total profits for the period to nil.
(4)
Except as otherwise provided, a deduction is allowed only in respect of
qualifying charitable donations made by the company in the accounting period
concerned.
15
(5)
The above provisions are subject to any express exceptions in the Corporation
Tax Acts.
190
Qualifying charitable donations: meaning
(1)
The following are qualifying charitable donations for corporation tax
purposes—
20
(a)
payments which are qualifying payments for the purposes of Chapter
2 (certain payments to charity), and
(b)
amounts treated as qualifying charitable donations under Chapter 3
(certain disposals of investments to charity).
(2)
However, no payment that is otherwise deductible from total profits, or in
25
calculating any component of total profits, is a qualifying charitable donation.
Chapter 2
Certain payments to charity
Qualifying payments
191
Qualifying payments
30
(1)
A payment made to a charity by a company is a qualifying payment for the
purposes of this Chapter if each of conditions A to F is met.
(2)
Condition A is that the payment is a payment of a sum of money.
(3)
Condition B is that the payment is not subject to a condition as to repayment
(but see section 192).
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(4)
Condition C is that the company making the payment is not itself a charity.

Corporation Tax Bill
Part 6 — Charitable donations relief
Chapter 2 — Certain payments to charity
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(5)
Condition D is that the payment is not disqualified under section 193
(associated acquisition etc by the charity).
(6)
Condition E is that the payment is not disqualified under section 194 (certain
distributions).
(7)
Condition F is that the payment is not disqualified under section 195
5
(associated benefits).
192
Condition as to repayment
(1)
If—
(a)
a company makes a payment to a charity (“the charitable payment”),
(b)
the charity makes a payment to the company (“the repayment”), and
10
(c)
each of conditions A to D is met,

the charitable payment is not subject to a condition as to repayment.
(2)
Condition A is that the company is wholly owned by the charity, or by a
number of charities that include the charity.
(3)
Condition B is that the charitable payment is of an amount which the company
15
estimates to be the amount necessary to reduce to nil the company’s taxable
total profits for the accounting period in which the payment is made (“the
relevant period”).
(4)
Condition C is that the only purpose for which the charity makes the
repayment is to adjust the amount of the charitable payment so that it is of the
20
amount actually necessary to reduce to nil the company’s taxable total profits
for the relevant period.
(5)
Condition D is that the repayment is made no later than 12 months after the
end of the relevant period.
(6)
If subsection (1) applies—
25
(a)
the repayment is not non-charitable expenditure for the purposes of
section 493 or 515 of this Act or section 543(1)(f) of ITA 2007, and
(b)
paragraphs 56 and 62 (but not 64) of Schedule 18 to FA 1998
(supplementary claims or elections) apply to the repayment.
193
Associated acquisition etc
30
(1)
A payment is disqualified under this section if—
(a)
it is conditional on an acquisition of property by the charity from the
company or a person associated with the company,
(b)
it is associated with such an acquisition, or
(c)
it is part of an arrangement involving such an acquisition.
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(2)
An acquisition by way of gift is to be ignored for the purposes of this section.
194
Distributions
(1)
A payment is disqualified under this section if it is to be regarded as a
distribution by reason of any provision of the Taxes Acts (within the meaning
of TMA 1970) except section 1020 (transfers of assets or liabilities treated as
40
distributions).