Finance Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 15 — Index-linked gilt-edged securities
132

400B
Interpretation of section 400A: economic profits and losses
(1)
A reference in section 400A to an “economic” profit or loss made by
any person in a period is to a profit or loss made by that person in
that period, computed taking into account unrealised (as well as
realised) profits and losses.
5
(2)
For the purposes of section 400A an economic profit or loss is made
by a group of companies if it is made by the members of the group
considered together.
(3)
In determining for the purposes of section 400A the amount of an
economic profit or loss made by a group of companies in any period,
10
the economic profits and losses of each member of the group are to
be computed over that period (whether or not that period is an
accounting period of the member).
(4)
A reference in section 400A to a “pre-tax” economic profit or loss is a
reference to an economic profit or loss determined disregarding any
15
gain or loss made as a result of the operation of any provision of the
Corporation Tax Acts.
400C
Meaning of “associated with”
(1)
For the purposes of section 400A, a company (“company B”) is
associated with company A at a time (“the relevant time”) during an
20
accounting period of company A (“the accounting period”) if any of
the following five conditions is met.
(2)
The first condition is that the financial results of company A and
company B, for a period that includes the relevant time, meet the
consolidation condition.
25
(3)
The second condition is that there is a connection between company
A and company B for the accounting period.
(4)
The third condition is that, at the relevant time, company A has a
major interest in company B or company B has a major interest in
company A.
30
(5)
The fourth condition is that—
(a)
the financial results of company A and a third company, for
a period that includes the relevant time, meet the
consolidation condition, and
(b)
at the relevant time the third company has a major interest in
35
company B.
(6)
The fifth condition is that—
(a)
there is a connection between company A and a third
company for the accounting period, and
(b)
at the relevant time the third company has a major interest in
40
company B.
(7)
In this paragraph the financial results of any two companies for any
period meet “the consolidation condition” if—
(a)
they are required to be comprised in group accounts
prepared under section 399 of the Companies Act 2006 (duty
45
of certain parent companies to prepare group accounts), or

Finance Bill
Schedule 16 — Connected companies: releases of debts
133

(b)
they would be required to be comprised in such accounts but
for the application of an exemption mentioned in subsection
(3) of that section.
(8)
Section 466 (companies connected for an accounting period) applies
for the purposes of this section.
5
(9)
In this section “scheme” includes any scheme, arrangements or
understanding of any kind whatever, whether or not legally
enforceable, involving a single transaction or two or more
transactions.
Other gilt-edged securities”.
10
Consequential amendment
7
In section 317(5)(g) of CTA 2009 (carrying value), for “and 400” substitute “to
400C”.
Commencement
8
The amendments made by this Schedule have effect in relation to
15
adjustments made under section 400(2) of CTA 2009 in respect of increases
in the retail prices index over periods beginning on or after 9 December 2009.
Transitional provision
9     (1)
This paragraph applies in relation to an accounting period of a company
beginning before 9 December 2009 if, apart from this paragraph—
20
(a)
an amount to be brought into account for the purposes of Part 5 of
CTA 2009 in respect of an index-linked gilt-edged security falls to be
determined by reference to its value at two different times, and
(b)
the earlier time is before 9 December 2009 and the later time is on or
after that date.
25
      (2)
Instead of bringing into account the amount determined as mentioned in
sub-paragraph (1)(a), the company is to bring into account the amounts that
it would have brought into account for—
(a)
that part of the accounting period that falls before 9 December 2009,
and
30
(b)
that part of the accounting period that falls on or after that date,

had those parts been separate periods of account (and so separate
accounting periods).
Schedule 16
Section 45

Connected companies: releases of debts
35
Amendments of section 322 of CTA 2009
1     (1)
Section 322 of CTA 2009 (release of debts: cases where credits not required
to be brought into account) is amended as follows.

Finance Bill
Schedule 16 — Connected companies: releases of debts
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      (2)
In subsection (4), after “release is” insert “not a release of relevant rights and
is”.
      (3)
After that subsection insert—
“(4A)
“Relevant rights” has the same meaning for the purposes of this
section as it has for the purposes of section 358.”
5
Amendments of Chapter 6 of Part 5 of CTA 2009
2     (1)
Chapter 6 of Part 5 of CTA 2009 (connected companies relationships: release
of debts etc) is amended as follows.
      (2)
In section 353(2)(b) (introduction to Chapter), for “except where the release
is a deemed release under section 361 or 362” substitute “subject to some
10
exceptions”.
      (3)
In section 358 (exclusion of credits on release of connected companies debts:
general)—
(a)
in subsection (1)(a), for “a company’s debtor relationship is
released,” substitute “a debtor relationship of a company (“D”) is
15
released, and”,
(b)
in subsection (2), for “The company” substitute “D” and for “it is a
deemed release” substitute “—
(a)
it is a deemed release, or
(b)
it is a release of relevant rights.”, and
20
(c)
at the end insert—
“(4)
For the purposes of this section “relevant rights” means rights
of a company (“C”) that—
(a)
were acquired by C in circumstances that, but for the
application of the corporate rescue exception or the
25
debt-for-debt exception, would have resulted in a
deemed release under section 361(3), or
(b)
were acquired by another company in such
circumstances and transferred to C by way of an
assignment or assignments.
30
(5)
The amount of the credit that D is required to bring into
account in respect of a release of relevant rights is—
(a)
the amount of the discount received on the
acquisition, less
(b)
the sum of any credits brought into account in respect
35
of that amount (whether in the accounting period in
which the release takes place or in a previous
accounting period) by C or, in a case within
subsection (4)(b), by the company that acquired the
rights or any company to which the rights were
40
subsequently assigned.
(6)
A reference in subsection (5) to the amount of the discount
received on the acquisition is to the amount that would have
been treated as released under section 361(4) on the
acquisition, but for the application of the corporate rescue
45
exception or the debt-for-debt exception.”

Finance Bill
Schedule 16 — Connected companies: releases of debts
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      (4)
In section 361 (acquisition of creditor rights by connected company at
undervalue)—
(a)
in subsection (1), for paragraph (f) substitute—
“(f)
no relevant exception applies.”, and
(b)
for subsection (2) substitute—
5
“(2)
In subsection (1) “relevant exception” means—
(a)
the corporate rescue exception (see section 361A),
(b)
the debt-for-debt exception (see section 361B), or
(c)
the equity-for-debt exception (see section 361C).”
      (5)
After section 361 insert—
10
“361A
The corporate rescue exception
(1)
For the purposes of section 361, the “corporate rescue exception”
applies if—
(a)
the acquisition is an arm’s length transaction,
(b)
there has been a change in the ownership of D at any time in
15
the period beginning one year before, and ending 60 days
after, the date of the acquisition,
(c)
it is reasonable to assume that, but for the change in
ownership, D would, within one year of the date of the
change of ownership, have met one of the insolvency
20
conditions, and
(d)
it is reasonable to assume that, but for the change in
ownership, the acquisition would not have been made.
(2)
Subject to subsection (3), section 769 of ICTA (rules for ascertaining
change in ownership of company) applies for the purpose of
25
construing a reference in this section to a change in the ownership of
a company.
(3)
A reference in this section to a change in the ownership of a
company, in the case of a company that is a building society, is a
reference to—
30
(a)
an amalgamation of two or more building societies under
section 93 of the Building Societies Act 1986,
(b)
a transfer of all the engagements of one building society to
another under section 94 of that Act, or
(c)
a transfer of the whole of the business of a building society to
35
a company under section 97 of that Act.
(4)
Sections 322(6) and 323 (insolvency conditions) apply for the
purposes of this section.
361B
The debt-for-debt exception
(1)
For the purposes of section 361, the “debt-for-debt exception” applies
40
if condition 1 or 2 is met.
(2)
Condition 1 is that—
(a)
the acquisition is an arm’s length transaction,
(b)
the rights that are acquired are rights under a loan
relationship that is represented by a security (“the old
45
security”),

Finance Bill
Schedule 16 — Connected companies: releases of debts
136

(c)
the consideration given by C for the acquisition consists only
of a security (“the new security”) representing a loan
relationship to which C is a party as debtor, and
(d)
the new security—
(i)
has the same nominal value as the old security, and
5
(ii)
at the time of the acquisition, has substantially the
same market value as the old security.
(3)
Condition 2 is that—
(a)
the acquisition is an arm’s length transaction,
(b)
the rights that are acquired are rights under a loan
10
relationship that is represented by an asset other than a
security (“the old unsecured loan”),
(c)
the consideration given by C for the acquisition consists only
of an asset other than a security (“the new unsecured loan”)
representing a loan relationship to which C is a party as
15
debtor, and
(d)
the amount of the new unsecured loan, and its terms, are
substantially the same as those of the old unsecured loan.
(4)
In this section “market value” has the same meaning as in TCGA
1992 (see sections 272 and 273 of that Act).
20
(5)
In determining for the purposes of this section the market value of a
security in a case in which the security represents a loan relationship
to which section 415 (loan relationships with embedded derivatives)
applies, rights or liabilities within subsection (1)(b) of that section are
to be treated as comprised in the loan relationship.
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361C
The equity-for-debt exception
(1)
For the purposes of section 361 the “equity-for-debt exception”
applies if the following two conditions are met.
(2)
The first condition is that the acquisition is an arm’s length
transaction.
30
(3)
The second condition is that the consideration given by C for the
acquisition consists only of—
(a)
shares forming part of the ordinary share capital of C,
(b)
shares forming part of the ordinary share capital of a
company connected with C, or
35
(c)
an entitlement to shares within paragraph (a) or (b).”
      (6)
In section 363—
(a)
in the heading, for “and” substitute “to”, and
(b)
in subsections (1) and (4), for “and” substitute “to”.
Commencement
40
3     (1)
The amendments made by paragraph 1 have effect in relation to a release of
rights that takes place on or after 9 November 2009.
      (2)
The amendments made by paragraph 2(2) and (4) to (6) have effect in
relation to a relevant acquisition that is made on or after 14 October 2009.

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Schedule 16 — Connected companies: releases of debts
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      (3)
The amendments made by paragraph 2(3) have effect in relation to a release
of rights that takes place on or after 14 October 2009.
      (4)
Sub-paragraphs (1) to (3) are subject to paragraph 4.
      (5)
In this paragraph and paragraph 4 “relevant acquisition” means an
acquisition of rights within subsection (1)(a) to (e) of section 361 of CTA 2009
5
(acquisition of creditor rights by connected company at an undervalue).
Transitional provision
4     (1)
The amendments made by this Schedule do not have effect in relation to a
relevant acquisition that is made on or after 14 October 2009, or to a release
of rights acquired by way of such an acquisition, if—
10
(a)
the acquisition is made pursuant to an agreement entered into before
14 October 2009, or
(b)
the acquisition is made during the transitional period and condition
A, B or C is met.
      (2)
Condition A is that, before 14 October 2009—
15
(a)
the original creditor received a proposal from the new creditor that
the acquisition should be made, or
(b)
the new creditor received a proposal from the original creditor that
the acquisition should be made.
      (3)
Condition B is that—
20
(a)
the acquisition is of rights under a loan relationship that is
represented by a security,
(b)
during the transitional period the new creditor acquires rights under
other loan relationships represented by securities, and
(c)
before 14 October 2009, either—
25
(i)
persons together holding more than 50% by value of the
securities referred to in paragraphs (a) and (b) (“the bought-
back securities”) received proposals from the new creditor
that the acquisitions should be made, or
(ii)
the new creditor received proposals from persons together
30
holding more than 50% by value of the bought-back
securities that the acquisitions should be made.
      (4)
In sub-paragraphs (2) and (3)—
(a)
a reference to the original creditor includes any person acting on
behalf of, or who controls, the original creditor,
35
(b)
a reference to the new creditor includes any person acting on behalf
of, or who controls, the new creditor, and
(c)
a reference to a person holding a security includes any person acting
on behalf of, or who controls, the person holding the security.
      (5)
Condition C is that—
40
(a)
before 14 October 2009, the Financial Services Authority gave its
agreement (“the FSA agreement”) to the acquisition being made (and
had not withdrawn that agreement),
(b)
if the FSA agreement was given subject to the agreement of any other
person, the agreement of that other person was also given (and not
45
withdrawn) before that date, and

Finance Bill
Schedule 17 — Risk transfer schemes
138

(c)
condition A or B would have been met but for the compliance by the
original creditor or the new creditor with any other term on which
the FSA agreement was given.
      (6)
In this paragraph—
(a)
“the original creditor”, in relation to a relevant acquisition, means the
5
person from whom the rights are acquired, and
(b)
“the new creditor”, in relation to a relevant acquisition, means the
person who acquires the rights.
      (7)
In this paragraph “the transitional period” means the period—
(a)
beginning with 14 October 2009, and
10
(b)
ending with 31 January 2010.
      (8)
Section 472 of CTA 2009 (meaning of “control”) applies for the purposes of
this paragraph.
Schedule 17
Section 47

Risk transfer schemes
15
Amendments
1
CTA 2010 is amended as follows.
2
In section 1(4) (overview of Act) omit the “and” at the end of paragraph (g),
insert “, and” at the end of paragraph (h) and after that paragraph insert—
“(i)
risk transfer schemes (see Part 21A).”
20
3
After Part 21 insert—
“Part 21A
Risk transfer schemes
Introduction
937A
Overview
25

This Part contains rules about the treatment of certain losses made by
companies as a result of risk transfer schemes.
937B
Group schemes and single company schemes
(1)
A risk transfer scheme may be—
(a)
a group scheme, or
30
(b)
a risk transfer scheme other than a group scheme (a “single-
company scheme”).
(2)
A risk transfer scheme to which a company (“company A”) is a party
is a “group scheme” if at least one company other than company A is
at any time both—
35
(a)
associated with company A, and
(b)
a party to the scheme.