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
144

257
Amendments, closure notices and discovery assessments where section 256
applies
(1)
Subsection (2) applies if, after having made a company tax return for an
accounting period, a company is given a deduction notice or a receipt notice in
relation to the period (“the Part 6 notice”).
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(2)
The company may amend the return for the purpose of complying with the
provision referred to in the Part 6 notice at any time before the end of the
period of 90 days beginning with the day on which the Part 6 notice is given
(“the 90 day period”).
(3)
Subsection (4) applies if the Part 6 notice is given to the company after it has
10
been given a notice of enquiry in respect of the return.
(4)
No closure notice may be given in relation to the return until—
(a)
the end of the 90 day period, or
(b)
the earlier amendment of the return for the purpose of complying with
the provision referred to in the Part 6 notice.
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(5)
Subsection (6) applies if the Part 6 notice is given to the company after any
enquiries into the return are completed.
(6)
No discovery assessment may be made in respect of the income or chargeable
gain to which the Part 6 notice relates until—
(a)
the end of the 90 day period, or
20
(b)
the earlier amendment of the return for the purpose of complying with
the provision referred to in the Part 6 notice.
(7)
Subsection (2) does not prevent a return for an accounting period becoming
incorrect if—
(a)
a deduction notice or receipt notice is given to the company in relation
25
to the period,
(b)
the return is not amended in accordance with subsection (2) for the
purpose of complying with the provision referred to in the notice, and
(c)
it ought to have been so amended.
Interpretation
30
258
Schemes and series of transactions
(1)
In this Part “scheme” means any scheme, arrangements or understanding of
any kind whatever, whether or not legally enforceable, involving one or more
transactions.
(2)
In determining whether any transactions have formed or will form part of a
35
series of transactions or scheme for the purposes of this Part, it does not matter
if the parties to one of the transactions are different from the parties to another
of the transactions.
(3)
For the purposes of this Part, the cases in which any two or more transactions
form, or form part of, a series of transactions or scheme include the cases where
40
subsection (4) or (5) applies.
(4)
This subsection applies if it would be reasonable to assume that one or more of
the transactions would not have been entered into independently of the other
or others.

Taxation (International and Other Provisions) Bill
Part 7 — Tax treatment of financing costs and income
Chapter 1 — Introduction
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(5)
This subsection applies if it would be reasonable to assume that one or more of
the transactions would not have taken the same form or been on the same
terms if entered into independently of the other or others.
259
Minor definitions
(1)
In this Part—
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“closure notice” means a notice under paragraph 32 of Schedule 18 to FA
1998,
“company tax return” means the return required to be delivered pursuant
to a notice under paragraph 3 of that Schedule, as read with paragraph
4 of that Schedule,
10
“discovery assessment” means an assessment under paragraph 41 of that
Schedule,
“notice of enquiry” means a notice under paragraph 24 of that Schedule,
and
“security” has the meaning given in section 1117(1) of CTA 2010, but
15
subject to section 242(8) of this Act.
(2)
Section 1122 of CTA 2010 (meaning of “connected”) applies for the purposes of
this Part.
Part 7
Tax treatment of financing costs and income
20
Chapter 1
Introduction
260
Introduction
(1)
Chapter 2 contains provision for determining whether this Part applies in
relation to any particular period of account of the worldwide group.
25
(2)
Chapter 3 provides for the disallowance of certain financing expenses of
relevant group companies arising in a period of account of the worldwide
group to which this Part applies.

The total of the amounts disallowed is the amount by which the tested expense
amount (defined in Chapter 8) exceeds the available amount (defined in
30
Chapter 9).
(3)
Chapter 4 provides for the exemption from the charge to corporation tax of
certain financing income of UK group companies where financing expenses of
relevant group companies have been disallowed under Chapter 3.
(4)
Chapter 5 provides for the exemption from the charge to corporation tax of
35
certain intra-group financing income of UK group companies where the
paying company is denied a deduction for tax purposes otherwise than under
this Part.
(5)
Chapter 6 contains rules connected with tax avoidance.
(6)
Chapter 7 defines a “financing expense amount” and “financing income
40
amount” of a company for a period of account of the worldwide group, which

Taxation (International and Other Provisions) Bill
Part 7 — Tax treatment of financing costs and income
Chapter 2 — Application of Part
146

are amounts that would, apart from this Part, be brought into account for the
purposes of corporation tax.
(7)
Chapter 8 defines the “tested expense amount” and the “tested income
amount” of the worldwide group for a period of account of the group, which
are totals deriving from the financing expense amounts and financing income
5
amounts of certain group companies.
(8)
Chapter 9 defines the “available amount” for a period of account of the
worldwide group, which derives from certain financing costs disclosed in the
group’s consolidated financial statements.
(9)
Chapter 10 contains further interpretative provisions.
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Chapter 2
Application of Part
261
Application of Part
(1)
This Part applies to any period of account of the worldwide group for which—
(a)
the UK net debt of the group (see sections 262 and 263), exceeds
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(b)
75% of the worldwide gross debt of the group (see section 264).
(2)
But a period of account that is within subsection (1) is not a period of account
to which this Part applies if the worldwide group is a qualifying financial
services group in that period (see section 266).
(3)
The Treasury may by order amend subsection (1)(b) by substituting a higher or
20
lower percentage for the percentage for the time being specified there.
(4)
An order under subsection (3) may only be made if a draft of the statutory
instrument containing the order has been laid before and approved by a
resolution of the House of Commons.
(5)
An order under subsection (3) may only have effect in relation to periods of
25
account of the worldwide group beginning after the date on which the order is
made.
262
UK net debt of worldwide group for period of account of worldwide group
(1)
The reference in section 261 to the “UK net debt” of the worldwide group for a
period of account of the group is to the sum of the net debt amounts of each
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company that was a relevant group company at any time during the period.
(2)
In this section “net debt amount”, in relation to a company, means the average
of—
(a)
the net debt of the company as at that company’s start date, and
(b)
the net debt of the company as at that company’s end date.
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For the meaning of “net debt”, see section 263.
(3)
If the amount determined in accordance with subsection (2) is less than £3
million, the net debt amount of the company is nil.
(4)
If a company is dormant (within the meaning given by section 1169 of the
Companies Act 2006) at all times in the period beginning with that company’s
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Taxation (International and Other Provisions) Bill
Part 7 — Tax treatment of financing costs and income
Chapter 2 — Application of Part
147

start date and ending with that company’s end date, the net debt amount of the
company is nil.
(5)
The Treasury may by order amend subsection (3) by substituting a higher or
lower amount for the amount for the time being specified there.
(6)
An order under subsection (5) may only be made if a draft of the statutory
5
instrument containing the order has been laid before and approved by a
resolution of the House of Commons.
(7)
An order under subsection (5) may only have effect in relation to periods of
account of the worldwide group beginning after the date on which the order is
made.
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(8)
In this Chapter—
(a)
“the start date” of a company means the first day of the period of
account of the worldwide group or, if later, the first day in the period
on which the company was a relevant group company, and
(b)
“the end date” of a company means the last day of the period of account
15
of the worldwide group or, if earlier, the last day in the period on which
the company was a relevant group company.
263
Net debt of a company
(1)
References in section 262 to the “net debt” of a company as at any date are to—
(a)
the sum of the company’s relevant liabilities as at that date, less
20
(b)
the sum of the company’s relevant assets as at that date.
(2)
The amount determined in accordance with subsection (1) may be a negative
amount.
(3)
For the purposes of this section, a company’s “relevant liabilities” as at any
date are the amounts that are disclosed in the balance sheet of the company as
25
at that date in respect of—
(a)
amounts borrowed (whether by way of overdraft or other short term or
long term borrowing),
(b)
liabilities in respect of finance leases, or
(c)
amounts of such other description as may be specified in regulations
30
made by the Commissioners.
(4)
For the purposes of this section, a company’s “relevant assets” as at any date
are the amounts that are disclosed in the balance sheet of the company as at
that date in respect of—
(a)
cash and cash equivalents,
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(b)
amounts loaned (whether by way of overdraft or other short term or
long term loan),
(c)
net investments, or net cash investments, in finance leases,
(d)
securities of Her Majesty’s government or of the government of any
other country or territory, or
40
(e)
amounts of such other description as may be specified in regulations
made by the Commissioners.
(5)
Expressions used in subsections (3)(a) and (b) and (4)(a) to (c) have the
meaning for the time being given by generally accepted accounting practice.