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Taxation (International and Other Provisions) Bill


Taxation (International and Other Provisions) Bill
Part 6 — Tax arbitrage

140

 

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.

10

(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

20

(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.

40

 
 

Taxation (International and Other Provisions) Bill
Part 6 — Tax arbitrage

141

 

(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

5

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

10

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

15

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

25

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

30

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
Part 6 — Tax arbitrage

142

 

(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.

253     

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,

30

   

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,

35

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

143

 

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.

5

(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.

256     

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

25

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.

 
 

 
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