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 7 — Tax treatment of financing costs and income
Chapter 2 — Application of Part
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264
Worldwide gross debt of worldwide group for period of account of the group
(1)
The reference in section 261 to the “worldwide gross debt” of the worldwide
group for a period of account of the group is to the average of—
(a)
the sum of the relevant liabilities of the group as at the day before the
first day of the period, and
5
(b)
the sum of the relevant liabilities of the group as at the last day of the
period.
(2)
For the purposes of this section, the “relevant liabilities” of the worldwide
group as at any date are the amounts that are disclosed in the balance sheet of
the group as at that date in respect of—
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(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
made by the Commissioners.
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(3)
Expressions used in subsection (2)(a) and (b) have the meaning for the time
being given by the accounting standards in accordance with which the
financial statements of the group are drawn up.
(4)
For provision about references in this Part to financial statements of the
worldwide group, and amounts disclosed in financial statements, see sections
20
346 to 349.
265
References to amounts disclosed in balance sheet of relevant group company
(1)
This section applies for the purpose of construing references in section 263 to
amounts disclosed in the balance sheet of a relevant group company as at any
date (“the relevant date”).
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(2)
If the company—
(a)
is not a foreign company, and
(b)
does not draw up a balance sheet as at the relevant date,

the references are to the amounts that would be disclosed in a balance sheet of
the company as at that date, were one drawn up in accordance with generally
30
accepted accounting practice.
(3)
If the company—
(a)
is a foreign company, and
(b)
draws up a balance sheet (“a UK permanent establishment balance
sheet”) as at the relevant date in respect of the company’s permanent
35
establishment in the United Kingdom that treats the establishment as a
distinct and separate enterprise,

the references are to amounts in that balance sheet.
(4)
If the company—
(a)
is a foreign company, and
40
(b)
does not draw up a UK permanent establishment balance sheet as at the
relevant date,

the references are to the amounts that would be disclosed in a UK permanent
establishment balance sheet as at that date, were one drawn up in accordance
with generally accepted accounting practice.
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Taxation (International and Other Provisions) Bill
Part 7 — Tax treatment of financing costs and income
Chapter 2 — Application of Part
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(5)
For the purposes of this section, a relevant group company is a “foreign
company” if it is not resident in the United Kingdom and is carrying on a trade
in the United Kingdom through a permanent establishment in the United
Kingdom.
266
Qualifying financial services groups
5
(1)
The worldwide group is a qualifying financial services group in a period of
account if the trading income condition—
(a)
is met in relation to that period, or
(b)
is not met in relation to that period, but only because of losses incurred
by the group in respect of activities that are normally reported on a net
10
basis in financial statements prepared in accordance with international
accounting standards.
(2)
The trading income condition is met in relation to a period of account if—
(a)
all or substantially all of the UK trading income of the worldwide
group for that period, or
15
(b)
all or substantially all of the worldwide trading income of the
worldwide group for that period,

is derived from qualifying activities (see section 267).
(3)
In this Chapter, in relation to a period of account of the worldwide group—
“UK trading income” means the sum of the trading income for that period
20
of each company that was a relevant group company at any time
during that period (see section 271), and
“worldwide trading income” means the trading income for that period of
the worldwide group (see section 272).
267
Qualifying activities
25
In this Chapter “qualifying activities” means—
(a)
lending activities and activities that are ancillary to lending activities
(see section 268),
(b)
insurance activities and insurance-related activities (see section 269),
and
30
(c)
relevant dealing in financial instruments (see section 270).
268
Lending activities and activities ancillary to lending activities
(1)
In this Chapter “lending activities” means any of the following activities—
(a)
acceptance of deposits or other repayable funds,
(b)
lending of money, including consumer credit, mortgage credit,
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factoring (with or without recourse) and financing of commercial
transactions (including forfeiting),
(c)
finance leasing (as lessor),
(d)
issuing and administering means of payment,
(e)
provision of guarantees or commitments to provide money,
40
(f)
money transmission services,
(g)
provision of alternative finance arrangements, and
(h)
other activities carried out in connection with activities falling within
any of paragraphs (a) to (g).

Taxation (International and Other Provisions) Bill
Part 7 — Tax treatment of financing costs and income
Chapter 2 — Application of Part
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(2)
Activities that are ancillary to lending activities are not qualifying activities for
the purposes of this Chapter if the income derived from the ancillary activities
forms a significant part of the total of—
(a)
that income, and
(b)
the income derived from lending activities of the worldwide group in
5
the period of account.
(3)
In subsection (2) “income” means the gross income or net income that would
be taken into account for the purposes of section 266 in calculating the UK or
worldwide trading income of the worldwide group for the period of account.
(4)
The Commissioners may by order—
10
(a)
amend subsection (1), and
(b)
make other amendments of this section in consequence of any
amendment of subsection (1).
(5)
In subsection (1)(h), and in the references to ancillary activities in this section
and section 267(a), “activities” includes buying, holding, managing and selling
15
assets.
(6)
In this section “alternative finance arrangements” has the same meaning as in
Chapter 6 of Part 6 of CTA 2009.
269
Insurance activities and insurance-related activities
(1)
In this Chapter “insurance activities” means—
20
(a)
the effecting or carrying out of contracts of insurance by a regulated
insurer, and
(b)
investment business that arises directly from activities falling within
paragraph (a).
(2)
In this Chapter “insurance-related activities” means—
25
(a)
activities that are ancillary to insurance activities, and
(b)
activities that—
(i)
are of the same kind as activities carried out for the purposes of
insurance activities,
(ii)
are not actually carried out for those purposes, and
30
(iii)
would not be carried out but for insurance activities being
carried out.
(3)
Subsection (2) is subject to subsection (4).
(4)
Activities that fall within subsection (2)(a) or (b) (“the relevant activities”) are
not insurance-related activities if the income derived from the relevant
35
activities forms a significant part of the total of—
(a)
that income, and
(b)
the income derived from insurance activities of the worldwide group in
the period of account.
(5)
In subsection (4) “income” means the gross income or net income that would
40
be taken into account for the purposes of section 266 in calculating the UK or
worldwide trading income of the worldwide group for the period of account.
(6)
In this section—
“activities” includes buying, holding, managing and selling assets,

Taxation (International and Other Provisions) Bill
Part 7 — Tax treatment of financing costs and income
Chapter 2 — Application of Part
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“contract of insurance” has the same meaning as in Chapter 1 of Part 12 of
ICTA, and
“regulated insurer” means a member of the worldwide group that—
(a)
is authorised under the law of any territory to carry on
insurance business, or
5
(b)
is a member of a body or organisation that is so authorised.
270
Relevant dealing in financial instruments
(1)
In this Chapter “financial instrument” means anything that is a financial
instrument for any purpose of the FSA Handbook.
(2)
For the purposes of this Chapter, a dealing in a financial instrument is a
10
“relevant dealing” if—
(a)
it is a dealing other than in the capacity of a broker, and
(b)
profits or losses on the dealing form part of the trading profits or losses
of a business.
(3)
In this section “broker” includes any person offering to sell securities to, or
15
purchase securities from, members of the public generally.
271
UK trading income of the worldwide group
(1)
This section applies in relation to section 266 for calculating the UK trading
income of the worldwide group for a period of account.
(2)
The trading income for that period of a relevant group company is the
20
aggregate of—
(a)
the gross income calculated in accordance with subsection (3), and
(b)
the net income calculated in accordance with subsection (4).
(3)
The income mentioned in subsection (2)(a) is the gross income—
(a)
arising from the activities of the relevant group company (other than
25
net-basis activities), and
(b)
accounted for as such under generally accepted accounting practice,

without taking account of any deductions (whether for expenses or otherwise).
(4)
The income mentioned in subsection (2)(b) is the net income arising from the
net-basis activities of the relevant group company that—
30
(a)
is accounted for as such under generally accepted accounting practice,
or
(b)
would be accounted for as such if income arising from such activities
were accounted for under generally accepted accounting practice.
(5)
Subsections (3) and (4) are subject to subsection (6).
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(6)
If a proportion of an accounting period of a relevant group company does not
fall within the period of account of the worldwide group, the gross income or
net income for that accounting period of the company is to be reduced, for the
purposes of this section, by that proportion.
(7)
Gross income or net income is to be disregarded for the purposes of subsection
40
(2) if the income arises in respect of an amount payable by another member of
the worldwide group that is either a UK group company or a relevant group
company.

Taxation (International and Other Provisions) Bill
Part 7 — Tax treatment of financing costs and income
Chapter 2 — Application of Part
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(8)
In this section “net-basis activity” means activity that is normally reported on
a net basis in financial statements prepared in accordance with generally
accepted accounting practice.
272
Worldwide trading income of the worldwide group
(1)
This section applies in relation to section 266 for calculating the worldwide
5
trading income of the worldwide group for a period of account.
(2)
The trading income for that period of the worldwide group is the aggregate
of—
(a)
the gross income calculated in accordance with subsection (3), and
(b)
the net income calculated in accordance with subsection (4).
10
(3)
The income mentioned in subsection (2)(a) is the gross income—
(a)
arising from the activities of the worldwide group (other than net-basis
activities), and
(b)
disclosed as such in the financial statements of the worldwide group,

without taking account of any deductions (whether for expenses or otherwise).
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(4)
The income mentioned in subsection (2)(b) is the net income arising from the
net-basis activities of the worldwide group that—
(a)
is accounted for as such under international accounting standards, or
(b)
would be accounted for as such if income arising from such activities
were accounted for under international accounting standards.
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(5)
In this section “net-basis activity” means activity that is normally reported on
a net basis in financial statements prepared in accordance with international
accounting standards.
(6)
For provision about references in this Part to financial statements of the
worldwide group, and amounts disclosed in financial statements, see sections
25
346 to 349.
273
Foreign currency accounting
(1)
Subject to the following provisions of this section, references in this Chapter to
an amount disclosed in a balance sheet of a relevant group company, or of the
worldwide group, as at any date are, where the amount is expressed in a
30
currency other than sterling, to that amount translated into its sterling
equivalent, translated by reference to the spot rate of exchange for that date.
(2)
Subsection (3) applies in relation to a period of account of the worldwide group
if all the amounts disclosed in balance sheets (whether of relevant group
companies, or of the worldwide group) that are relevant to a calculation under
35
this Chapter in relation to that period are expressed in the same currency (“the
relevant foreign currency”) and that currency is not sterling.
(3)
If this subsection applies—
(a)
references in this Part to an amount disclosed in a balance sheet of a
relevant group company, or of the worldwide group, are to that
40
amount expressed in the relevant foreign currency, and
(b)
for the purposes of determining under section 262 the net debt amount
of a company, subsection (3) of that section is to have effect as if the
reference to the amount for the time being specified there (“the section
262(3) amount”) were read as a reference to the relevant amount.
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Taxation (International and Other Provisions) Bill
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Chapter 3 — Disallowance of deductions
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(4)
For this purpose “the relevant amount” means the average of—
(a)
the section 262(3) amount expressed in the relevant foreign currency,
translated by reference to the spot rate of exchange for the company’s
start date, and
(b)
the section 262(3) amount expressed in the relevant foreign currency,
5
translated by reference to the spot rate of exchange for the company’s
end date.
Chapter 3
Disallowance of deductions
274
Application of Chapter and meaning of “total disallowed amount”
10
(1)
This Chapter applies if, for a period of account of the worldwide group to
which this Part applies (“the relevant period of account”)—
(a)
the tested expense amount (see Chapter 8), exceeds
(b)
the available amount (see Chapter 9).
(2)
In this Chapter “the total disallowed amount” means the difference between
15
the amounts mentioned in paragraphs (a) and (b) of subsection (1).
275
Meaning of “company to which this Chapter applies”
References in this Chapter to a company to which this Chapter applies are to a
company that is a relevant group company at any time during the relevant
period of account.
20
276
Appointment of authorised company for relevant period of account
(1)
The companies to which this Chapter applies may appoint one of their number
to exercise functions conferred under this Chapter on the reporting body in
relation to the relevant period of account.
(2)
An appointment under this section is of no effect unless it is signed on behalf
25
of each company to which this Chapter applies by the appropriate person.
(3)
The Commissioners may by regulations make further provision about an
appointment under this section including, in particular, provision—
(a)
about the form and manner in which an appointment may be made,
(b)
about how an appointment may be revoked and the form and manner
30
of such revocation,
(c)
requiring a person to notify HMRC of the making or revocation of an
appointment and about the form and manner of such notification,
(d)
requiring a person to give information to HMRC in connection with the
making or revocation of an appointment,
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(e)
imposing time limits in relation to making or revoking an appointment,
(f)
providing that an appointment or its revocation is of no effect, or ceases
to have effect, if time limits or other requirements under the regulations
are not met, and
(g)
about cases where a company is not a relevant group company at all
40
times during the relevant period of account.
(4)
In this section “the appropriate person”, in relation to a company, means—

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Chapter 3 — Disallowance of deductions
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(a)
the proper officer of the company, or
(b)
such other person as may for the time being have the express, implied
or apparent authority of the company to act on its behalf for the
purposes of this Part.
(5)
Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company
5
officers: meaning of “proper officer”) apply for the purposes of this section as
they apply for the purposes of that section.
277
Meaning of “the reporting body”
In this Chapter “the reporting body” means—
(a)
if an appointment under section 276 has effect in relation to the relevant
10
period of account, the company appointed under that section, and
(b)
if such an appointment does not have effect in relation to the relevant
period of account, the companies to which this Chapter applies, acting
jointly.
278
Statement of allocated disallowances: submission
15
(1)
The reporting body must submit a statement (a “statement of allocated
disallowances”) in relation to the relevant period of account to HMRC.
(2)
A statement submitted under this section must be received by HMRC within
12 months of the end of the relevant period of account.
(3)
A statement submitted under this section must comply with the requirements
20
of section 280.
279
Statement of allocated disallowances: submission of revised statement
(1)
If the reporting body has submitted a statement of allocated disallowances
under section 278 or this section, it may submit a revised statement to HMRC.
(2)
A statement submitted under this section must be received by HMRC within
25
36 months of the end of the relevant period of account.
(3)
A statement submitted under this section must comply with the requirements
of section 280.
(4)
A statement submitted under this section—
(a)
must indicate the respects in which it differs from the previous
30
statement, and
(b)
supersedes the previous statement.
280
Statement of allocated disallowances: requirements
(1)
This section applies in relation to a statement of allocated disallowances
submitted under section 278 or 279.
35
(2)
The statement must be signed—
(a)
if an appointment under section 276 has effect in relation to the relevant
period of account, by the appropriate person in relation to the company
appointed under that section, or