Taxation (International and Other Provisions) Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Taxation (International and Other Provisions) Bill

Taxation (International and Other Provisions) Bill
Part 6 — Tax arbitrage
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248
The rule against deduction for untaxable payments
(1)
The rule referred to in section 243(3)(b) is that the total deduction amount must
be reduced.
(2)
In this section “the total deduction amount” means the total of the amounts
allowable as a deduction for the purposes of the Corporation Tax Acts in
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calculating any profits arising to the company from any transaction forming
part of the deduction scheme.
(3)
If the payee is not liable to tax for the purposes of section 245(4) in respect of
the payment or payments that the payee receives or is entitled to receive, the
total deduction amount must be reduced to nil.
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(4)
If the payee is liable to tax for those purposes in respect of part of that payment
or those payments, the total deduction amount must be reduced by the same
proportion of that amount as the proportion of the payment or payments on
which the payee is not liable to tax.
(5)
If the payee’s liability to tax is reduced as described in section 245(4)(b), the
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total deduction amount must be reduced by the same proportion of that
amount as the reduction in the payee’s liability bears to that liability before
reduction.
Receipt notices
249
Receipt notices
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(1)
An officer of Revenue and Customs may give a company a notice under this
section if—
(a)
the company is UK resident, and
(b)
the officer considers on reasonable grounds that each of the receipt
scheme conditions is or may be met in relation to the company.
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(2)
In this Part—
(a)
a notice under this section is referred to as a “receipt notice”, and
(b)
“the receipt scheme conditions” means the conditions specified in
section 250.
(3)
For the consequences of a receipt notice, see section 254.
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250
The receipt scheme conditions
(1)
This section sets out the receipt scheme conditions.
(2)
Receipt scheme condition A is that a scheme makes or imposes provision as
between the company and another person (“the paying party”) by means of a
transaction or series of transactions.
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(3)
Receipt scheme condition B is that that provision includes the paying party
making, by means of a transaction or series of transactions, a payment—
(a)
which is a qualifying payment in relation to the company, and
(b)
at least part of which is not an amount to which section 251 (amounts
within corporation tax) applies.
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Taxation (International and Other Provisions) Bill
Part 6 — Tax arbitrage
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(4)
A payment is a qualifying payment in relation to a company for the purposes
of this section and sections 251 to 254 if it constitutes a contribution to the
capital of the company.
(5)
Receipt scheme condition C is that on entering into the scheme the company
and the paying party expected that a benefit would arise because at least part
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of the qualifying payment was not an amount to which section 251 applies.
(6)
Receipt scheme condition D is that there is an amount in relation to the
qualifying payment that—
(a)
is a deductible amount, and
(b)
is not set against any scheme income arising to the paying party for
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income tax purposes or corporation tax purposes.
(7)
In subsection (6)—
“deductible amount” means an amount that—
(a)
is available as a deduction for the purposes of the Tax Acts, or
(b)
may be deducted or otherwise allowed under the tax law of any
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territory outside the United Kingdom, and
“scheme income” means income arising from the transaction or
transactions forming part of the scheme.
(8)
Section 253 (exception for dealers) specifies a case where receipt scheme
condition D is treated as not met.
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251
Amounts within corporation tax
(1)
This section applies to an amount if it falls within subsection (2) or (4).
(2)
An amount is within this subsection if for the purposes of the Corporation Tax
Acts it is—
(a)
income or chargeable gains arising to the company in the accounting
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period in which the qualifying payment was made, or
(b)
income arising to any other UK resident company in a corresponding
accounting period.
(3)
For the purposes of this section, the accounting period of one company (“the
first period”) corresponds to the accounting period of another company (“the
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second period”) if at least one day of the first period falls within the second
period.
(4)
An amount is within this subsection if it is brought into account as a result of
Chapter 2A or 6A of Part 6 of CTA 2009 (relationships treated as loan
relationships: disguised interest, and shares accounted for as liabilities).
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252
Further provisions about receipt notices
(1)
A receipt notice must inform the company to which it is given that the officer
of Revenue and Customs giving it considers that each of the receipt scheme
conditions is or may be met in relation to the company.
(2)
A receipt notice must specify the qualifying payment by reference to which the
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officer of Revenue and Customs considers receipt scheme conditions B, C and
D are or may be met.

Taxation (International and Other Provisions) Bill
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(3)
A receipt notice must specify the accounting period of the company in which
the qualifying payment is made.
(4)
A receipt notice must inform the company that, as a result of the service of the
notice, section 254(2) (rule for calculation or recalculation of income etc
following receipt notice) will apply in relation to the payment if each of the
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receipt scheme conditions is met in relation to the company.
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Exception for dealers
(1)
Receipt scheme condition D (see section 250(6)) is treated as not met if—
(a)
the paying party (“P”) is a dealer,
(b)
in the ordinary course of P’s business, P incurs losses in respect of the
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transaction or transactions forming part of the scheme to which P is
party, and
(c)
the amount by reference to which that condition would be met, but for
this section, is an amount in respect of those losses.
(2)
In subsection (1) “dealer” means a person who—
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(a)
is charged to corporation tax under Part 3 of CTA 2009 (trading income)
in respect of distributions of companies that are received in the course
of a trade not consisting of insurance business, or
(b)
would be so charged if UK resident.
(3)
In this section “the paying party” has the same meaning as in section 250.
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254
Rule for calculation or recalculation of income etc following receipt notice
(1)
This section applies in relation to a qualifying payment if—
(a)
a receipt notice specifying the payment is given to the company in
relation to which it is a qualifying payment, and
(b)
when the notice is given, each of the receipt scheme conditions is met
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in relation to the company.
(2)
The company must calculate (or recalculate)—
(a)
its income or chargeable gains for the purposes of corporation tax for
the accounting period specified in the notice, or
(b)
its liability to corporation tax for that period,
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as if so much of the qualifying payment as falls within subsection (3) were a
receipt of the company that is chargeable for that period under the charge to
corporation tax on income.
(3)
The qualifying payment falls within this subsection so far as—
(a)
receipt scheme condition D (see section 250(6)) is met in relation to it,
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and
(b)
it is not an amount to which section 251 (amounts within corporation
tax) applies.

Taxation (International and Other Provisions) Bill
Part 6 — Tax arbitrage
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General provisions about deduction notices and receipt notices
255
Notices given before tax return made
(1)
This section applies if an officer of Revenue and Customs gives a company a
deduction notice or a receipt notice before the company has made its company
tax return for the accounting period specified in the notice.
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(2)
If the company makes that return before the end of the period of 90 days
beginning with the day on which the notice is given, it may—
(a)
make a return that disregards the notice, and
(b)
at any time after making the return and before the end of that 90 day
period, amend the return for the purpose of complying with the
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provision referred to in the notice.
(3)
Subsection (2)(b) does not prevent a company tax return for a period becoming
incorrect if—
(a)
a deduction notice or a receipt notice is given to the company in relation
to that period,
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(b)
the return is not amended in accordance with subsection (2)(b) for the
purpose of complying with the provision referred to in the notice, and
(c)
it ought to have been so amended.
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Notices given after tax return made
(1)
If a company has made a company tax return for an accounting period, an
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officer of Revenue and Customs may only give the company a deduction notice
or a receipt notice if a notice of enquiry has been given to the company in
respect of the return.
(2)
After any enquiries into the return have been completed, an officer of Revenue
and Customs may only give the company a deduction notice or a receipt notice
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if conditions A and B are met.
(3)
Condition A is that the officer could not have been reasonably expected to have
been aware that the circumstances were such that a deduction notice or a
receipt notice could have been given to the company in relation to the period.
(4)
Whether condition A is met must be determined on the basis of information
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made available to the Commissioners for Her Majesty’s Revenue and Customs
or an officer of Revenue and Customs before the time the enquiries into the
return were completed.
(5)
Paragraph 44(2) and (3) of Schedule 18 to FA 1998 (information made available)
applies for the purposes of subsection (4) as it applies for the purposes of
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paragraph 44(1) of that Schedule.
(6)
Condition B is that—
(a)
the company was requested to provide information during an enquiry
into the return, and
(b)
if the company had duly complied with the request, an officer of
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Revenue and Customs could reasonably have been expected to give the
company a deduction notice or a receipt notice in relation to the period.