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 5 — Financing costs and income of group companies
50

(b)
are not to apply in relation to periods of account of the
worldwide group beginning before the date on which the
regulations are made.”
Amendments of Chapter 9 (the “available amount”)
26    (1)
Section 332 (the available amount) is amended as follows.
5
      (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
10
(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,
15
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
20
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
25
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
30
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
35
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
40
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.
45

Finance (No. 2) Bill
Schedule 5 — Financing costs and income of group companies
51

(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
5
(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
10
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
15
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.
20
(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.
25
(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
30
(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
35
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—
40
(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.
45
(3)
The assumption is that, during the period of account, each member
of the partnership incurred the appropriate proportion of the
relevant partnership expenses.

Finance (No. 2) Bill
Schedule 5 — Financing costs and income of group companies
52

(4)
In subsection (3) “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.
5
(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
applies for the purposes of this Chapter.”
28
After section 336 (meaning of accounting expressions used in this Chapter)
10
insert—
“336A
Mismatches between tax treatment and accounting treatment
(1)
The Commissioners may make regulations for the purpose of
altering the way in which the available amount is calculated in a case
in which an accounts amount in respect of a matter is not equal to the
15
tax amount in respect of that matter.
(2)
For this purpose—
(a)
the “accounts amount” in respect of a matter is—
(i)
the amount disclosed in the financial statements of
the worldwide group in respect of the matter, or
20
(ii)
if no amount is so disclosed, nil, and
(b)
the “tax amount” in respect of a matter is—
(i)
the amount of the deduction to which a member of
the worldwide group is entitled under a provision of
the Corporation Tax Acts in respect of the matter,
25
(ii)
if more than one member is entitled to such a
deduction, the total such deductions, or
(iii)
if no member is entitled to such a deduction, nil.
(3)
Regulations under this section may amend any provision of this Part.
(4)
Regulations under this section may have effect in relation to periods
30
of account of the worldwide group beginning on or after the
beginning of the calendar year in which the regulations are made.
(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
35
(b)
are not to apply in relation to periods of account of the
worldwide group beginning before the date on which the
regulations are made.”
Amendments of Chapter 10 (other interpretative provisions)
29
In the heading of Chapter 10, for “provisions” substitute “and
40
supplementary provisions”.
30
In section 339 (meaning of “ultimate parent”), for subsection (1)(b) to (d)
substitute—
“(b)
is either—

Finance (No. 2) Bill
Schedule 5 — Financing costs and income of group companies
53

(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
(ii)
a relevant non-corporate entity,
(c)
is not a collective investment scheme or an entity that would
5
be a collective investment scheme but for the fact that it is a
body corporate, and
(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
10
company”) is amended as follows.
      (2)
For subsections (2) and (3) substitute—
    “(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.
15
      (3)
A company is a “relevant group company” if—
(a)
it is a member of the worldwide group, and
(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
20
within the meaning of section 83(2) of FA 2005 or section 623 of
CTA 2010.”
      (4)
In subsection (5), for “B” substitute “C”.
32
In section 351 (expressions taking their meaning from international
accounting standards), after subsection (1) insert—
25
“(1A)
The definition of “subsidiary” in subsection (1) does not affect the
meaning of the expression “75% subsidiary” (which is defined in
section 1154 of CTA 2010).”
33
After section 353 (other expressions) insert—
“353A
Effect of Part on parties to capital market arrangements
30
(1)
This section applies in relation to cases in which a company
(“company A”)—
(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
35
accounting period as a result of the operation of this Part.
(2)
The Commissioners may by regulations make provision under
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
40
liability.
(3)
Where an election has effect, the liability is treated for all purposes as
if it were a liability of company B and not of company A.
(4)
The regulations may include provision about—

Finance (No. 2) Bill
Schedule 5 — Financing costs and income of group companies
54

(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—
(i)
accept or reject an election, or
(ii)
terminate the effect of an election that has already
5
been accepted;
(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
10
(ii) includes provision conferring a discretion on HMRC.
(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
15
Regulations or orders under this Part may—
(a)
make different provision for different cases or circumstances,
(b)
include supplementary, incidental and consequential
provision, or
(c)
make transitional provision and savings.”
20
Amendment of transitional provision
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
25
at the appropriate places—

“dual resident investing company (in
section 275A”

Chapter 3 of Part 7)

“group securitisation company (in
section 273A”

Chapter 2 of Part 7)

30

“UK net debt (in Chapter 2 of Part 7)
section 262”

“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
35
effect subject to the amendments made by this Schedule.
      (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.
40

Finance (No. 2) Bill
Schedule 5 — Financing costs and income of group companies
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      (3)
The power to make regulations under section 353A of TIOPA 2010 (inserted
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.
Election to defer the application of some of the amendments made by this Schedule
5
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.
      (2)
The election—
10
(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
1 January 2010 (“the initial period of account”).
15
      (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
under that section, and
20
(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—
(a)
where the authorised corporate entity is a company, the proper
25
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.
      (6)
Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of
30
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—
(a)
is a member of the worldwide group,
35
(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
collective investment scheme but for the fact that it is a body
40
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).
      (8)
The following expressions have the same meaning in this paragraph as they
45
have in Part 7 of TIOPA 2010—

Finance (No. 2) Bill
Schedule 6 — Consortium claims for group relief
56

“collective investment scheme”;
“corporate entity”;
“period of account of the worldwide group”;
“subsidiary”;
“the worldwide group”.
5
Schedule 6
Section 12

Consortium claims for group relief
Introductory
1
Chapter 4 of Part 5 of CTA 2010 (claims for group relief) is amended as
follows.
10
Ability to claim group relief where link company established in the EEA
2
In section 129 (overview of Chapter), in subsection (2), for “Sections 130 to
134” substitute “Sections 130 to 134A”.
3
In section 130(2) (group relief claims on amounts surrenderable under
Chapter 2), in Requirement 3—
15
(a)
in paragraph (c), for “section 133(1), (3) and (4)” substitute “section
133(1) and (3) to (8)”, and
(b)
in paragraph (d), for “section 133(2), (3) and (4)” substitute “section
133(2) to (8)”.
4     (1)
Section 133 (conditions to be met for consortium claims for group relief) is
20
amended as follows.
      (2)
In subsection (1)—
(a)
omit the “and” at the end of paragraph (e), and
(b)
for paragraph (f) substitute—
“(f)
the surrendering company and the claimant company
25
are both UK related, and
(g)
the link company is UK related or established in the
EEA.”
      (3)
In subsection (2)—
(a)
omit the “and” at the end of paragraph (e), and
30
(b)
for paragraph (f) substitute—
“(f)
the surrendering company and the claimant company
are both UK related, and
(g)
the link company is UK related or established in the
EEA.”
35
      (4)
After subsection (4) insert—
“(5)
Subsection (6) applies where the link company—
(a)
is established in the EEA, but
(b)
is not UK related.