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Finance (No.2) Bill


Finance (No.2) Bill
Schedule 5 — Financing costs and income of group companies

50

 

      (2)  

In subsection (1)—

(a)   

in paragraphs (a), (b) and (c), for “amounts borrowed” substitute

“borrowing”,

(b)   

in paragraph (d), for “ancillary costs relating to amounts borrowed”

substitute “expenses ancillary to borrowing”, and

5

(c)   

in paragraphs (e) and (f), for “cost” substitute “expense”.

      (3)  

After subsection (1) insert—

“(1A)   

For the purposes of this section, expenses are “ancillary” to

borrowing if and only if they are incurred directly—

(a)   

in bringing borrowing into existence or in altering its terms,

10

or

(b)   

in making payments in respect of borrowing.

(1B)   

Where—

(a)   

a member of the group incurs expenses for the purpose of

bringing borrowing into existence but the borrowing is not

15

brought into existence, or

(b)   

a member of the group incurs expenses for the purpose of

altering the terms of borrowing but the terms are not altered,

   

the expenses are treated as falling within subsection (1A)(a) to the

same extent as if the borrowing had been brought into existence or

20

the terms had been altered.”

27         

After section 332 (the available amount) insert—

“332A   

Groups containing securitisation companies

(1)   

This section applies where a member of the worldwide group is a

securitisation company within the meaning of section 83(2) of FA

25

2005 or section 623 of CTA 2010 at any time during a period of

account of the worldwide group.

(2)   

The reference in section 332(1) to amounts disclosed in the financial

statements of the worldwide group for the period are to the amounts

that would have been disclosed in those statements had they been

30

prepared on the assumption that the company mentioned in

subsection (1) was not a member of the worldwide group.

332B    

Partnerships: expenses of borrowing

(1)   

This section applies where—

(a)   

a member of the worldwide group is a member of a

35

partnership at any time during a period of account of the

worldwide group, and

(b)   

at any time during the period of account, a liability of the

partnership in respect of borrowing (“the partnership

liability”) is outstanding.

40

(2)   

For the purposes mentioned in subsection (7), the financial

statements of the worldwide group for the period of account are to

be treated as if—

(a)   

they did not disclose any amounts falling within section

332(1)(a) to (d) relating to the partnership liability, and

45

 
 

Finance (No.2) Bill
Schedule 5 — Financing costs and income of group companies

51

 

(b)   

they disclosed instead such amounts as would have fallen

within that provision had the financial statements been

prepared on the following two assumptions.

(3)   

The first assumption is that, at each time during the period of

account at which the partnership liability was outstanding, each

5

member of the partnership owed the appropriate proportion of the

partnership liability to the same person, and on the same terms, as it

was in fact owed by the partnership.

(4)   

In subsection (3) “the appropriate proportion”, in relation to a

member of the partnership at any time, is the proportion of the

10

partnership’s profits to which the member is entitled at that time

under the partnership’s profit sharing arrangements.

(5)   

The second assumption is that, during the period of account, each

member of the partnership incurred the appropriate proportion of

any expenses relating to the partnership liability.

15

(6)   

In subsection (5) “the appropriate proportion” in relation to a

member of the partnership, is the proportion of the partnership’s

profits to which the member is entitled, over the period of account of

the worldwide group, under the partnership’s profit sharing

arrangements.

20

(7)   

The purposes referred to in subsection (2) are the purposes of—

(a)   

this Chapter, and

(b)   

any other provision of the Corporation Tax Acts so far as it

applies for the purposes of this Chapter.

332C    

Partnerships: other expenses

25

(1)   

This section applies where—

(a)   

a member of the worldwide group is a member of a

partnership at any time during a period of account of the

worldwide group, and

(b)   

during the period of account, the partnership incurs expenses

30

in relation to finance leases or debt factoring (“the relevant

partnership expenses”).

(2)   

For the purposes mentioned in subsection (5), the financial

statements of the worldwide group for the period of account are to

be treated as if—

35

(a)   

they did not disclose any of the relevant partnership

expenses, and

(b)   

they disclosed instead such amounts as would have fallen

within section 332(1)(e) or (f), had the financial statements

been prepared on the following assumption.

40

(3)   

The assumption is that, during the period of account, each member

of the partnership incurred the appropriate proportion of the

relevant partnership expenses.

(4)   

In subsection (3) “the appropriate proportion”, in relation to a

member of the partnership, is the proportion of the partnership’s

45

profits to which the member is entitled, over the period of account of

 
 

Finance (No.2) Bill
Schedule 5 — Financing costs and income of group companies

52

 

the worldwide group, under the partnership’s profit sharing

arrangements.

(5)   

The purposes referred to in subsection (2) are the purposes of—

(a)   

this Chapter, and

(b)   

any other provision of the Corporation Tax Acts so far as it

5

applies for the purposes of this Chapter.”

28         

After section 336 (meaning of accounting expressions used in this Chapter)

insert—

“336A   

 Mismatches between tax treatment and accounting treatment

(1)   

The Commissioners may make regulations for the purpose of

10

altering the way in which the available amount is calculated in a case

in which an accounts amount is not equal to the corresponding tax

amount.

(2)   

For this purpose—

(a)   

an “accounts amount” means the amount of any expenses

15

disclosed in the financial statements of the worldwide group,

(b)   

a “tax amount” means the amount of any deduction to which

a member of the worldwide group is entitled under a

provision of the Corporation Tax Acts, and

(c)   

an accounts amount and a tax amount “correspond” if they

20

are in respect of the same matter.

(3)   

Regulations under this section may amend any provision of this Part.

(4)   

Regulations under this section may have effect in relation to periods

of account of the worldwide group beginning on or after the

beginning of the calendar year in which the regulations are made.

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(5)   

Regulations under this section may include provision for the

worldwide group to elect that the regulations (or any of them)—

(a)   

are not to apply in relation to the group, or

(b)   

are not to apply in relation to periods of account of the

worldwide group beginning before the date on which the

30

regulations are made.”

Amendments of Chapter 10 (other interpretative provisions)

29         

In the heading of Chapter 10, for “provisions” substitute “and

supplementary provisions”.

30         

In section 339 (meaning of “ultimate parent”), for subsection (1)(b) to (d)

35

substitute—

“(b)   

is either—

(i)   

a corporate entity that is not a limited liability

partnership in relation to which section 1273(1) of

CTA 2009 (limited liability partnerships) applies, or

40

(ii)   

a relevant non-corporate entity,

(c)   

is not a collective investment scheme or an entity that would

be a collective investment scheme but for the fact that it is a

body corporate, and

 
 

Finance (No.2) Bill
Schedule 5 — Financing costs and income of group companies

53

 

(d)   

is not a subsidiary (whether direct or indirect) of an entity

that meets each of the conditions in paragraphs (a) to (c).”

31    (1)  

Section 345 (meaning of “UK group company” and “relevant group

company”) is amended as follows.

      (2)  

For subsections (2) and (3) substitute—

5

    “(2)  

A company is a “UK group company” if—

(a)   

it is a member of the worldwide group, and

(b)   

it meets conditions A and B.

      (3)  

A company is a “relevant group company” if—

(a)   

it is a member of the worldwide group, and

10

(b)   

it meets conditions A, B and C.”

      (3)  

After subsection (4) insert—

   “(4A)  

Condition B is that the company is not a securitisation company

within the meaning of section 83(2) of FA 2005 or section 623 of

CTA 2010.”

15

      (4)  

In subsection (5), for “B” substitute “C”.

32         

In section 351 (expressions taking their meaning from international

accounting standards), after subsection (1) insert—

“(1A)   

The definition of “subsidiary” in subsection (1) does not affect the

meaning of the expression “75% subsidiary” (which is defined in

20

section 1154 of CTA 2010).”

33         

After section 353 (other expressions) insert—

“353A   

 Effect of Part on parties to capital market arrangements

(1)   

This section applies in relation to cases in which a company

(“company A”)—

25

(a)   

is a party to a capital market arrangement at any time during

a period of account of the worldwide group, and

(b)   

is subject to a liability to corporation tax for a relevant

accounting period as a result of the operation of this Part.

(2)   

The Commissioners may by regulations make provision under

30

which company A and a company that is a relevant group company

at any time in the same period of account (“company B”) may jointly

elect that company B is to take sole responsibility for discharging the

liability.

(3)   

Where an election has effect, the liability is treated for all purposes as

35

if it were a liability of company B and not of company A.

(4)   

The regulations may include provision about—

(a)   

when an election may be made (which may, in particular, be

before the accounting period for which the liability arises);

(b)   

circumstances in which HMRC may or must—

40

(i)   

accept or reject an election, or

(ii)   

terminate the effect of an election that has already

been accepted;

 
 

Finance (No.2) Bill
Schedule 5 — Financing costs and income of group companies

54

 

(c)   

the effect of termination by virtue of paragraph (b)(ii);

(d)   

the transfer from company A to company B of liabilities to

penalties.

(5)   

The provision that may be made by virtue of subsection (4)(b)(i) or

(ii) includes provision conferring a discretion on HMRC.

5

(6)   

In this section “capital market arrangement” has the same meaning

as in section 72B(1) of the Insolvency Act 1986 (see paragraph 1 of

Schedule 2A to that Act).

353B    

Regulations and orders

Regulations or orders under this Part may—

10

(a)   

make different provision for different cases or circumstances,

(b)   

include supplementary, incidental and consequential

provision, or

(c)   

make transitional provision and savings.”

Amendment of transitional provision

15

34         

In Schedule 9 to TIOPA 2010 (transitionals and savings), in paragraph 32(3)

(exclusion of certain debits and credits), for “or C” substitute “, C or D”.

Amendments of index of defined expressions

35         

In Part 5 of Schedule 11 to TIOPA 2010 (index of defined expressions), insert

at the appropriate places—

20

 

“dual resident investing company (in

section 275A”

 
 

Chapter 3 of Part 7)

  
 

“group securitisation company (in

section 273A”

 
 

Chapter 2 of Part 7)

  
 

“UK net debt (in Chapter 2 of Part 7)

section 262”

 

25

 

“worldwide gross debt (in Chapter 2 of

section 264”.

 
 

Part 7)

  

Commencement

36    (1)  

Part 7 of, and Schedule 9 to, TIOPA 2010 are treated as always having had

effect subject to the amendments made by this Schedule.

30

      (2)  

Schedule 15 to FA 2009 (which contains provision rewritten in that Part and

that Schedule and which continues to apply in relation to accounting periods

ending before 1 April 2010) is treated as always having had effect subject to

corresponding amendments.

      (3)  

The power to make regulations under section 353A of TIOPA 2010 (inserted

35

by paragraph 33 above) may only be exercised in relation to liabilities to

corporation tax falling due and payable on or after the day on which this Act

is passed.

 
 

Finance (No.2) Bill
Schedule 5 — Financing costs and income of group companies

55

 

Election to defer the application of some of the amendments made by this Schedule

37    (1)  

If an authorised corporate entity makes an election under this paragraph, the

amendments made by paragraphs 4 and 5(3) and (4) do not have effect in

relation to any period of account of the worldwide group that begins before

the day on which this Act is passed.

5

      (2)  

The election—

(a)   

must be signed on behalf of the authorised corporate entity by the

appropriate person, and

(b)   

must be received by HMRC no later than one year after the end of the

first period of account of the worldwide group that begins on or after

10

1 January 2010 (“the initial period of account”).

      (3)  

The following are authorised corporate entities in relation to the worldwide

group—

(a)   

if an appointment under section 276 or 288 of TIOPA 2010 has effect

in relation to the initial period of account, the company appointed

15

under that section, and

(b)   

the ultimate UK parent of the worldwide group.

      (4)  

The election is irrevocable.

      (5)  

In this paragraph “the appropriate person”, in relation to an authorised

corporate entity, means—

20

(a)   

where the authorised corporate entity is a company, 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 authorised corporate entity to

act on its behalf for the purposes of this paragraph.

25

      (6)  

Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of

company officers: meaning of “proper officer”) apply for the purposes of this

paragraph as they apply for the purposes of that section.

      (7)  

In this paragraph “the ultimate UK parent”, in relation to the worldwide

group, means an entity that—

30

(a)   

is a member of the worldwide group,

(b)   

is a corporate entity that is not a limited liability partnership in

relation to which section 1273(1) of CTA 2009 (limited liability

partnerships) applies,

(c)   

is not a collective investment scheme or an entity that would be a

35

collective investment scheme but for the fact that it is a body

corporate,

(d)   

is resident in the United Kingdom, and

(e)   

is not a subsidiary (whether direct or indirect) of an entity that meets

each of the conditions in paragraphs (a) to (d).

40

      (8)  

The following expressions have the same meaning in this paragraph as they

have in Part 7 of TIOPA 2010—

“collective investment scheme”;

“corporate entity”;

“period of account of the worldwide group”;

45

“subsidiary”;

“the worldwide group”.

 
 

 
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