Finance (No.2) Bill

House of Commons

Session 2010 - 11
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Other Bills before Parliament

Finance (No.2) Bill

Finance (No.2) Bill
Schedule 9 — Interest
Part 1 — Corporation tax
68

      (2)
For the purposes of section 101, the amount mentioned in sub-
paragraph (1)(d) is to be taken to be an amount that is due and
payable as corporation tax for the earlier period.
      (3)
But late payment interest which is payable by virtue of sub-
paragraph (2) runs only until the day following the expiry of 9
5
months from the end of the later period.
2B    (1)
This paragraph applies where—
(a)
a company has profits arising in an accounting period
(“the earlier period”),
(b)
the company incurs a loss in a later accounting period (“the
10
later period”),
(c)
on a claim under section 37 of CTA 2010, the whole or any
part of the loss incurred in the later period has been set off
(whether under section 37 or 42 of that Act) for the
purposes of corporation tax against the profits of the
15
earlier period,
(d)
the earlier period does not fall wholly within the period of
12 months immediately preceding the later period, and
(e)
if the claim had not been made, there would be an amount
or additional amount of corporation tax for the earlier
20
period which would carry late payment interest.
      (2)
For the purposes of section 101, the amount mentioned in sub-
paragraph (1)(e) is to be taken to be an amount that is due and
payable as corporation tax for the earlier period.
      (3)
But late payment interest which is payable by virtue of sub-
25
paragraph (2) runs only until the day following the expiry of 9
months from the end of the later period.
2C    (1)
This paragraph applies where—
(a)
a company is liable to corporation tax for an accounting
period (“the earlier period”),
30
(b)
in a later accounting period of the company (“the later
period”), an excess arises as described in section 72 of
TIOPA 2010 (amounts of unrelieved foreign tax),
(c)
on a claim under section 77 of that Act, credit for the whole
or any part of the excess is allowed against corporation tax
35
in respect of the earlier period, and
(d)
if the claim had not been made, there would be an amount
or additional amount of corporation tax for the earlier
period which would carry late payment interest.
      (2)
For the purposes of section 101, the amount mentioned in sub-
40
paragraph (1)(d) is to be taken to be an amount that is due and
payable as corporation tax for the earlier period.
      (3)
But late payment interest which is payable by virtue of sub-
paragraph (2) runs only until the day following the expiry of 9
months from the end of the later period.
45
      (4)
This paragraph does not apply where paragraph 2D applies.
2D    (1)
This paragraph applies where—

Finance (No.2) Bill
Schedule 9 — Interest
Part 1 — Corporation tax
69

(a)
a company carrying on a trade has profits (of whatever
description) arising in an accounting period (“the middle
period”),
(b)
the company incurs a loss in a later accounting period (“the
later period”),
5
(c)
on a claim under section 37 of CTA 2010, the whole or any
part of the loss incurred in the later period has been set off
(whether under section 37 or 42 of that Act) for the
purposes of corporation tax against the profits of the
middle period,
10
(d)
the middle period does not fall wholly within the period of
12 months immediately preceding the later period,
(e)
as a result of the claim under section 37, an excess or
increased excess arises in the middle period as described in
section 72 of TIOPA 2010 (amounts of unrelieved foreign
15
tax),
(f)
on a claim under section 77 of that Act, credit for the whole
or any part of the excess is allowed against corporation tax
in respect of an accounting period before the middle
period (“the earlier period”), and
20
(g)
if the claim had not been made, there would be an amount
or additional amount of corporation tax for the earlier
period which would carry late payment interest.
      (2)
For the purposes of section 101, the amount mentioned in sub-
paragraph (1)(g) is to be taken to be an amount that is due and
25
payable as corporation tax for the earlier period.
      (3)
But late payment interest which is payable by virtue of sub-
paragraph (2) runs only until the day following the expiry of 9
months from the end of the later period.”
8
In Part 2 (special provision as to late payment interest start date), after
30
paragraph 6 insert—
“Payment of corporation tax by persons other than company assessed
6A    (1)
This paragraph applies to any amount of corporation tax assessed
or treated as assessed by virtue of any of the following provisions
(which enable unpaid corporation tax assessed on a company to be
35
assessed on other persons in certain circumstances)—
(a)
section 137(4), 139(7) or 190 of TCGA 1992,
(b)
paragraph 75A(2) of Schedule 18 to FA 1998,
(c)
section 795(2) of CTA 2009, and
(d)
Chapter 7 of Part 22 of CTA 2010.
40
      (2)
The late payment interest start date in respect of that amount is the
date when it became due and payable by the company.”
Amendments of Schedule 54
9
Schedule 54 to FA 2009 (repayment interest) is amended as follows.

Finance (No.2) Bill
Schedule 9 — Interest
Part 1 — Corporation tax
70

10
Insert at the beginning—
“Part A1
Special provision as to amount carrying repayment interest
Carry back of losses etc
A1    (1)
This paragraph applies where—
5
(a)
a company has profits arising in an accounting period
(“the earlier period”),
(b)
there is for a later accounting period (“the later period”) a
non-trading deficit on the company’s loan relationships,
(c)
as a result of a claim under section 389(1) or 459(1)(b) of
10
CTA 2009, the whole or part of the deficit for the later
period is set off against the profits of the earlier period, and
(d)
a repayment falls to be made of corporation tax for the
earlier period or of income tax in respect of a payment
received by the company in that period.
15
      (2)
So much of the repayment mentioned in sub-paragraph (1)(d) as
falls to be made as a result of the claim under section 389(1) or
459(1)(b) does not carry repayment interest.
      (3)
But sub-paragraph (2) does not apply (and, accordingly, the
amount mentioned in that sub-paragraph carries repayment
20
interest) after the expiry of 9 months from the end of the later
period.
A2    (1)
This paragraph applies where—
(a)
a company carrying on a trade has profits (of whatever
description) arising in an accounting period (“the earlier
25
period”),
(b)
the company incurs a loss in a later accounting period (“the
later period”),
(c)
on a claim under section 37 of CTA 2010, the whole or any
part of the loss incurred in the later period has been set off
30
(whether under section 37 or 42 of that Act) for the
purposes of corporation tax against the profits of the
earlier period,
(d)
the earlier period does not fall wholly within the period of
12 months immediately preceding the later period, and
35
(e)
a repayment falls to be made of corporation tax paid for the
earlier period or of income tax in respect of a payment
received by the company in that period.
      (2)
So much of the repayment mentioned in sub-paragraph (1)(e) as
falls to be made as a result of the claim under section 37 does not
40
carry repayment interest.
      (3)
But sub-paragraph (2) does not apply (and, accordingly, the
amount mentioned in that sub-paragraph carries repayment
interest) after the expiry of 9 months from the end of the later
period.
45
A3    (1)
This paragraph applies where—

Finance (No.2) Bill
Schedule 9 — Interest
Part 1 — Corporation tax
71

(a)
a company is liable to corporation tax for an accounting
period (“the earlier period”),
(b)
in a later accounting period of the company (“the later
period”), an excess arises as described in section 72 of
TIOPA 2010 (amounts of unrelieved foreign tax),
5
(c)
on a claim under section 77 of that Act, credit for the whole
or any part of the excess is allowed against corporation tax
in respect of the earlier period, and
(d)
a repayment falls to be made of corporation tax paid for the
earlier period or of income tax in respect of a payment
10
received by the company in that period.
      (2)
So much of the repayment mentioned in sub-paragraph (1)(d) as
falls to be made as a result of the claim under section 77 does not
carry repayment interest.
      (3)
But sub-paragraph (2) does not apply (and, accordingly, the
15
amount mentioned in that sub-paragraph carries repayment
interest) after the expiry of 9 months from the end of the later
period.
      (4)
This paragraph does not apply where paragraph A4 applies.
A4    (1)
This paragraph applies where—
20
(a)
a company carrying on a trade has profits (of whatever
description) arising in an accounting period (“the middle
period”),
(b)
the company incurs a loss in a later accounting period (“the
later period”),
25
(c)
on a claim under section 37 of CTA 2010, the whole or any
part of the loss incurred in the later period has been set off
(whether under section 37 or 42 of that Act) for the
purposes of corporation tax against the profits of the
middle period,
30
(d)
the middle period does not fall wholly within the period of
12 months immediately preceding the later period,
(e)
as a result of the claim under section 37, an excess or
increased excess arises in the middle period as described in
section 72 of TIOPA 2010 (amounts of unrelieved foreign
35
tax),
(f)
on a claim under section 77 of that Act, credit for the whole
or any part of the excess is allowed against corporation tax
in respect of an accounting period before the middle
period (“the earlier period”), and
40
(g)
a repayment falls to be made of corporation tax paid for the
earlier period or of income tax in respect of a payment
received by the company in that period.
      (2)
So much of the repayment mentioned in sub-paragraph (1)(g) as
falls to be made as a result of the claim under section 77 does not
45
carry repayment interest.
      (3)
But sub-paragraph (2) does not apply (and, accordingly, the
amount mentioned in that sub-paragraph carries repayment

Finance (No.2) Bill
Schedule 9 — Interest
Part 1 — Corporation tax
72

interest) after the expiry of 9 months from the end of the later
period.”
11
In Part 2 (special provision as to repayment interest start date), after
paragraph 9A insert—
“Companies: income tax and certain tax credits
5
9B    (1)
This paragraph applies to—
(a)
a repayment of income tax which falls to be made in
respect of a payment received by a company in an
accounting period, and
(b)
a payment of the whole or part of the tax credit comprised
10
in any franked investment income received by a company
in an accounting period.
      (2)
In the case of a repayment or payment to which this paragraph
applies, the repayment interest start date is the day after the end
of the accounting period in which the payment mentioned in sub-
15
paragraph (1)(a) or the franked investment income mentioned in
sub-paragraph (1)(b) was received by the company.
Loan by close company to participator
9C    (1)
In the case of a repayment of tax made on a claim under section
457(3) of CTA 2010 (relief on repayment of loan made by close
20
company to participator), the repayment interest start date is the
later of dates A and B.
      (2)
Date A is—
(a)
where the loan repayment date is on or after the tax due
date, the date 9 months after the end of the accounting
25
period in which the loan repayment date falls, and
(b)
in any other case, the date 9 months after the end of the
accounting period in which the loan date falls.
      (3)
Date B is the date on which the tax which is to be repaid was paid
to HMRC.
30
      (4)
In this paragraph, in relation to a claim under section 457(3) of
CTA 2010—
“the loan date” is the date on which the loan or advance
giving rise to the charge to tax under section 454 of that Act
is made;
35
“the tax due date” is the date on which tax under that section
becomes due (in accordance with subsection (3) of that
section) in relation to that loan or advance;
“the loan repayment date” is the date on which the whole or
any part of the loan or advance is repaid, released or
40
written off.”

Finance (No.2) Bill
Schedule 9 — Interest
Part 1 — Corporation tax
73

New Schedule
12
After Schedule 54 to FA 2009 insert—
“Schedule 54A
Section 103A

Further provision as to late payment interest and repayment interest
Certain amounts of repayment interest recoverable as late payment interest
5
1
Where each of conditions A to D (see paragraph 2) is met, an
amount of repayment interest that—
(a)
has been paid to a company, but
(b)
ought not to have been paid (see condition D),

may be recovered from the company as if it were late payment
10
interest.
2     (1)
This paragraph applies for the purposes of paragraph 1.
      (2)
Condition A is that repayment interest has been paid to the
company on—
(a)
a repayment of corporation tax paid by the company for an
15
accounting period,
(b)
a payment of first-year tax credit under Schedule A1 to
CAA 2001 for an accounting period,
(c)
a payment of R&D tax credit under Chapter 2 or 7 of Part
13 of CTA 2009 for an accounting period,
20
(d)
a payment of land remediation tax credit or life assurance
company tax credit under Part 14 of CTA 2009 for an
accounting period, or
(e)
a payment of film tax credit under Chapter 3 of Part 15 of
CTA 2009 for an accounting period.
25
      (3)
Condition B, in a case falling within sub-paragraph (2)(a), is that
(whether or not any previous assessment or determination has
been made)—
(a)
an assessment, or an amendment of an assessment, of the
amount of corporation tax payable by the company for the
30
accounting period is made, or
(b)
a determination of that amount is made under paragraph
36 or 37 of Schedule 18 to FA 1998 (which until superseded
by a self-assessment under that Schedule has effect as if it
were one).
35
      (4)
Condition B, in a case falling within sub-paragraph (2)(b) to (e), is
that an assessment, or an amendment of an assessment, is made to
recover an amount of the tax credit in question paid to the
company for that accounting period.
      (5)
Condition C is that the change (as a result of condition B being
40
met) in—
(a)
the company’s assessed liability to corporation tax, or
(b)
the amount of tax credit payable,

is not one which in whole or in part corrects an error made by
HMRC.
45

Finance (No.2) Bill
Schedule 9 — Interest
Part 1 — Corporation tax
74

      (6)
In sub-paragraph (5) “error” includes—
(a)
any computational error, and
(b)
the allowance of a claim or election which ought not to
have been allowed.
      (7)
Condition D is that as a result only of that change (and, in
5
particular, not as a result of any error in the calculation of the
interest), it appears to HMRC that some or all of the repayment
interest ought not to have been paid.
Common period rule for corporation tax
3     (1)
This paragraph applies where—
10
(a)
there is a common period in relation to a company (see
sub-paragraph (2)), and
(b)
each of conditions A to C (see paragraph 4) is met.
      (2)
A common period in relation to a company is any period during
which—
15
(a)
an amount of corporation tax is due and payable by the
company in accordance with section 59D of TMA 1970 or
regulations made under section 59E of that Act (“the
overdue payment”), and
(b)
an amount which has been paid on account of corporation
20
tax is repayable to the company (“the repayment”).
      (3)
During the common period—
(a)
the overdue payment does not carry late payment interest
or interest under regulations made by virtue of section
59E(2)(g) of TMA 1970 (interest payable to HMRC on
25
amounts of corporation tax due and payable under
regulations under that section), and
(b)
the repayment does not carry repayment interest or
interest under regulations made by virtue of section
59E(2)(i) of TMA 1970 (interest payable by HMRC on
30
amounts paid or repaid under regulations under that
section).
4     (1)
This paragraph applies for the purposes of paragraph 3.
      (2)
Condition A is that the overdue payment and the repayment are
in respect of different accounting periods.
35
      (3)
Condition B is that the overdue payment would (apart from
paragraph 3) carry—
(a)
late payment interest, or
(b)
interest under regulations made by virtue of section
59E(2)(g) of TMA 1970.
40
      (4)
Condition C is that the repayment would (apart from paragraph
3) carry—
(a)
repayment interest, or
(b)
interest under regulations made by virtue of section
59E(2)(i) of TMA 1970.”
45