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 2 — Double taxation relief
Chapter 2 — Double taxation relief by way of credit
53

(5)
Information is made available to Her Majesty’s Revenue and Customs if the
return is under section 8 or 8A of TMA 1970 and the information —
(a)
is contained in any claim made as regards the period by, or on behalf
of, the person acting in the same capacity as that in which the person
made the return,
5
(b)
is contained in any documents accompanying such a claim, or
(c)
is, or is contained in documents which are, produced or provided by or
on behalf of the person to an officer of Revenue and Customs for the
purposes of any enquiries into such a claim.
(6)
Information is made available to Her Majesty’s Revenue and Customs if the
10
return is a company tax return and the information—
(a)
is contained in a claim made by or on behalf of the person as regards
the period,
(b)
is contained in an application under section 751A of ICTA (applications
relating to controlled foreign companies) made by or on behalf of the
15
person which affects the return,
(c)
is contained in any documents accompanying such a claim or
application, or
(d)
is, or is contained in documents which are, produced or provided by
the person to an officer of Revenue and Customs for the purposes of
20
any enquiries into such a claim or application.
(7)
Information is made available to Her Majesty’s Revenue and Customs if the
existence of the information, and the relevance of the information as regards
exercise of power to give the person a counteraction notice in relation to the
period—
25
(a)
could reasonably be expected to be inferred by an officer of Revenue
and Customs from information falling within subsections (2) to (6), or
(b)
are notified in writing by or on behalf of the person to an officer of
Revenue and Customs.
95
Interpretation of sections 89 to 94
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(1)
This section applies for the purposes of sections 89 to 94, and subsection (4)
applies also for the purposes of subsection (8).
(2)
“Chargeable period”, in relation to capital gains tax, means tax year (see section
288(1ZA) of TCGA 1992).
(3)
“Closure notice” means a notice under—
35
(a)
section 28A or 28B of TMA 1970 (completion of enquiry into personal,
trustee’s or partnership return), or
(b)
paragraph 32 of Schedule 18 to FA 1998 (completion of enquiry into
company return).
(4)
“Company tax return” means the return required to be delivered pursuant to a
40
notice under paragraph 3 of Schedule 18 to FA 1998, as read with paragraph 4
of that Schedule (company returns).
(5)
“Counteraction notice” means a notice under section 81(2).
(6)
“Discovery assessment” means an assessment under—
(a)
section 29 of TMA 1970 (assessment to income tax or capital gains tax),
45
or

Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 2 — Double taxation relief by way of credit
54

(b)
paragraph 41 of Schedule 18 to FA 1998 (assessment on company).
(7)
“Notice of enquiry” means a notice under—
(a)
section 9A or 12AC of TMA 1970 (enquiry into personal, trustee’s or
partnership return), or
(b)
paragraph 24 of Schedule 18 to FA 1998 (enquiry into company return).
5
(8)
“Tax return” means—
(a)
a return under section 8, 8A or 12AA of TMA 1970 (personal return,
trustee’s return or partnership return), or
(b)
a company tax return.
Insurance companies
10
96
Companies with overseas branches: restriction of credit
(1)
Subsection (4) applies if credit for foreign tax—
(a)
which is payable in respect of insurance business carried on by a
company through a permanent establishment in the non-UK territory,
and
15
(b)
which is calculated otherwise than wholly by reference to profits
arising in the non-UK territory,

is to be allowed (in accordance with this Part) against corporation tax charged
under section 35 of CTA 2009 or section 436A of ICTA in respect of the profits,
calculated in accordance with the provisions applicable for the purposes of
20
section 35 of CTA 2009, of life assurance business or gross roll-up business
carried on by the company in an accounting period (in this section called “the
relevant UK-taxable profits”).
(2)
For the purposes of subsection (1)(b), the cases in which foreign tax is
“calculated otherwise than wholly by reference to profits arising in the non-UK
25
territory” are those cases in which the charge to tax in the non-UK territory is
within subsection (3).
(3)
A charge to tax is within this subsection if it is such a charge made otherwise
than by reference to profits as (by disallowing their deduction in calculating
the amount chargeable) to require sums payable and other liabilities arising
30
under policies to be treated as sums or liabilities falling to be met out of
amounts subject to tax in the hands of the company.
(4)
If this subsection applies, the amount of the credit is not to exceed the greater
of—
(a)
any such part of the foreign tax as is charged by reference to profits
35
arising in the non-UK territory, and
(b)
the shareholders’ share of the foreign tax.
(5)
For the purposes of subsection (4), the shareholders’ share of the foreign tax is
so much of that tax as is represented by the fraction—


where—
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A is an amount equal to the amount of the relevant UK-taxable profits
before making any deduction authorised by subsection (7), and
B is an amount equal to the excess of—

Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 2 — Double taxation relief by way of credit
55

(a)
the amount taken into account as receipts of the company in
calculating those profits, apart from premiums and sums
received by virtue of a claim under a reinsurance contract, over
(b)
the amount taken into account as expenses in calculating those
profits.
5
(6)
If there is no such excess, or if the profits are greater than any excess, the whole
of the foreign tax is the shareholders’ share; and, subject to that, if there are no
profits, none of the foreign tax is the shareholders’ share.
(7)
If, by virtue of this section, the credit for any foreign tax is less than it otherwise
would be, section 31(2)(a) does not prevent a deduction being made for the
10
difference in calculating the relevant UK-taxable profits.
97
Companies with more than one category of business: restriction of credit
(1)
Subsection (2) has effect if—
(a)
an insurance company carries on more than one category of long-term
business in an accounting period, and
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(b)
there arises to the company in that period any income or gain (“the
relevant income”) in respect of which credit for foreign tax is to be
allowed under the arrangements.
(2)
The amount of the credit for foreign tax which, under the arrangements, is
allowable against corporation tax in respect of so much of the relevant income
20
as is referable (in accordance with the provisions of sections 432ZA to 432E of
ICTA) to a particular category of business must not exceed the fraction of the
foreign tax which, in accordance with the following provisions of this section
and with the provisions of section 98, is attributable to that category of
business.
25
(3)
If the relevant income arises from an asset which is linked solely to a category
of business, the whole of the foreign tax is attributable to that category of
business, unless section 98(3) applies.
(4)
If the relevant income arises from foreign business assets, the whole of the
foreign tax is attributable to gross roll-up business, unless section 98(3) applies.
30
(5)
If subsection (3) does not apply and the category of business in question is—
(a)
basic life assurance and general annuity business, or
(b)
PHI business,

the fraction of the foreign tax that is attributable to that category of business is
the fraction given by—

35

where “the referable part” of the relevant income is the part of the relevant
income which is referable to that category of business by virtue of any
provision of section 432A of ICTA.
(6)
Section 98(2) and (3) apply if the category of business in question is gross roll-
up business.
40
(7)
No part of the foreign tax is attributable to any category of business except as
provided by subsections (3) to (6) and section 98(2) and (3).

Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 2 — Double taxation relief by way of credit
56

(8)
If under this section or section 98(2) and (3) an amount of foreign tax is for the
purposes of this section attributable to gross roll-up business, credit in respect
of the foreign tax so attributable is allowed only against corporation tax in
respect of profits charged under section 436A of ICTA (charge on profits from
gross roll-up business).
5
98
Attribution for section 97 purposes if category is gross roll-up business
(1)
Subsections (2) and (3) apply for the purposes of section 97 in accordance with
section 97(6), and in this section “the relevant income” has the meaning given
by section 97(1).
(2)
If—
10
(a)
section 97(3) does not apply, and
(b)
some or all of the relevant income is taken into account in accordance
with section 83 of FA 1989 in an account in relation to which the
provisions of section 432C of ICTA apply,

the fraction of the foreign tax that is attributable to gross roll-up business is the
15
fraction given by—


where “the referable part” of the relevant income is the part of the relevant
income which is referable to gross roll-up business by virtue of any provision
of section 432C of ICTA.
(3)
If some or all of the relevant income falls to be taken into account in
20
determining in accordance with section 83(2) of FA 1989 the amount referred
to in section 432E(1) of ICTA as the net amount, the fraction of the foreign tax
that is attributable to gross roll-up business is the fraction given by—


where—
“INV” is the investment income taken into account in that determination,
25
and
“the referable part” of INV is the part of INV which would be referable to
gross roll-up business by virtue of section 432E of ICTA if INV were the
only amount included in the net amount.
(4)
The Treasury may by regulations amend subsection (3); and the regulations
30
may include amendments having effect in accounting periods during which
they are made.
99
Allocation of expenses etc in calculations under section 35 of CTA 2009
(1)
Subsection (2) has effect if—
(a)
an insurance company carries on any category of insurance business in
35
a period of account,
(b)
a calculation in accordance with the provisions applicable for the
purposes of section 35 of CTA 2009 (charge on trade profits) falls to be
made in relation to that category of business for that period, and
(c)
there arises to the company in that period any income or gain in respect
40
of which credit for foreign tax is to be allowed under the arrangements.

Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 2 — Double taxation relief by way of credit
57

(2)
The amount of the credit for foreign tax which, under the arrangements, is to
be allowed against corporation tax in respect of so much of that income or gain
as is referable to the category of business concerned (“the relevant income”) is
to be limited by treating the amount of the relevant income as reduced in
accordance with sections 100 and 101.
5
(3)
In determining the amount of credit for foreign tax which is to be allowed as
mentioned in subsection (2), the relevant income is not to be reduced except in
accordance with that subsection.
(4)
If a 75% subsidiary of an insurance company is acting in accordance with a
scheme or arrangement and—
10
(a)
the purpose, or one of the main purposes, of the scheme or arrangement
is to prevent or restrict the application of subsection (2) to the insurance
company, and
(b)
the subsidiary does not carry on insurance business of any description,

the amount of corporation tax attributable (apart from this subsection) to any
15
item of income or gain arising to the subsidiary is to be found by setting off
against that item the amount of expenses that would be attributable to it under
section 100(1) if that item had arisen directly to the insurance company.
(5)
If the credit allowed for any foreign tax is, by virtue of subsection (2), less than
it would be if the relevant income were not treated as reduced in accordance
20
with that subsection, section 31(2)(a) does not prevent a deduction being made
for the difference in calculating the profits of the category of business
concerned.
(6)
If, by virtue of subsection (4), the credit allowed for any foreign tax is less than
it would be apart from that subsection, section 31(2)(a) does not prevent a
25
deduction being made for the difference in calculating the income of the 75%
subsidiary.
(7)
For the purposes of the operation of this section in relation to any income or
gain in respect of which credit is to be allowed under the arrangements, the
amount of the income or gain that is referable to a category of insurance
30
business is the same fraction of the income or gain as the fraction of the foreign
tax that is attributable to that category of business in accordance with sections
97 and 98.
100
First limitation for purposes of section 99(2)
(1)
The first limitation for the purposes of section 99(2) is to treat the amount of the
35
relevant income as reduced (but not below nil) for the purposes of this Chapter
by the amount of expenses (if any) attributable to the relevant income.
(2)
For the purposes of subsection (1), the amount of expenses attributable to the
relevant income is the appropriate fraction of the total relevant expenses of the
category of business concerned for the period of account in question.
40
(3)
In subsection (2) “the appropriate fraction” means the fraction given by—


where—
RI is the amount of the relevant income before any reduction in
accordance with section 99(2), and

Taxation (International and Other Provisions) Bill
Part 2 — Double taxation relief
Chapter 2 — Double taxation relief by way of credit
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TI is the total income of the category of business concerned for the period
of account in question, but if that would result in TI being nil, TI is
instead the amount described in subsection (4).
(4)
That amount is so much in total of the income and gains—
(a)
which arise to the company in the period of account in question, and
5
(b)
in respect of which credit for foreign tax is to be allowed under any
double taxation arrangements or under unilateral relief arrangements
for any territory outside the United Kingdom,

as are referable to the category of business concerned (before any reduction in
accordance with section 99(2)).
10
(5)
Subsection (4) is to be read with section 104 (determining how much of any
income or gain is referable to a category of business).
(6)
In this section “the relevant income” has the meaning given by section 99(2).
101
Second limitation for purposes of section 99(2)
(1)
If—
15
(a)
the amount of the relevant income after any reduction under section
100(1),

exceeds—
(b)
the relevant fraction of the profits of the category of business concerned
for the period of account in question which are chargeable to
20
corporation tax,

the second limitation is to treat the relevant income as further reduced (but not
below nil) for the purposes of this Chapter to an amount equal to that fraction
of those profits.
(2)
In subsection (1) “the relevant fraction” means the fraction given by—

25

where—
“RI” is the amount of the relevant income before any reduction in
accordance with section 99(2), and
“the referable share of total relievable income and gains” is so much in
total of the income and gains—
30
(a)
which arise to the company in the period of account in question,
and
(b)
in respect of which credit for foreign tax is to be allowed under
any double taxation arrangements or under unilateral relief
arrangements for any territory outside the United Kingdom,
35
as are referable to the category of business concerned (before any
reduction in accordance with section 99(2)).
(3)
In subsection (1), any reference to the profits of a category of business is a
reference to those profits after the set off of any losses of that category of
business which have arisen in any previous accounting period.
40
(4)
Subsection (2) is to be read with section 104 (determining how much of any
income or gain is referable to a category of business).
(5)
In this section “the relevant income” has the meaning given by section 99(2).