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
71

(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
earlier period,
5
(d)
the earlier period does not fall wholly within the period of
12 months immediately preceding the later period, and
(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.
10
      (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
carry repayment interest.
      (3)
But sub-paragraph (2) does not apply (and, accordingly, the
amount mentioned in that sub-paragraph carries repayment
15
interest) after the expiry of 9 months from the end of the later
period.
A3    (1)
This paragraph applies where—
(a)
a company is liable to corporation tax for an accounting
period (“the earlier period”),
20
(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
25
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
received by the company in that period.
      (2)
So much of the repayment mentioned in sub-paragraph (1)(d) as
30
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
amount mentioned in that sub-paragraph carries repayment
interest) after the expiry of 9 months from the end of the later
35
period.
      (4)
This paragraph does not apply where paragraph A4 applies.
A4    (1)
This paragraph applies where—
(a)
a company carrying on a trade has profits (of whatever
description) arising in an accounting period (“the middle
40
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
45
(whether under section 37 or 42 of that Act) for the
purposes of corporation tax against the profits of the
middle period,

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

(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
5
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
10
(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
15
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.”
20
11
In Part 2 (special provision as to repayment interest start date), after
paragraph 9A insert—
“Companies: income tax and certain tax credits
9B    (1)
This paragraph applies to—
(a)
a repayment of income tax which falls to be made in
25
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
in any franked investment income received by a company
in an accounting period.
30
      (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-
paragraph (1)(a) or the franked investment income mentioned in
sub-paragraph (1)(b) was received by the company.
35
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
company to participator), the repayment interest start date is the
later of dates A and B.
40
      (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
period in which the loan repayment date falls, and
(b)
in any other case, the date 9 months after the end of the
45
accounting period in which the loan date falls.

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

      (3)
Date B is the date on which the tax which is to be repaid was paid
to HMRC.
      (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
5
giving rise to the charge to tax under section 454 of that Act
is made;
“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;
10
“the loan repayment date” is the date on which the whole or
any part of the loan or advance is repaid, released or
written off.”
New Schedule
12
After Schedule 54 to FA 2009 insert—
15
“Schedule 54A
Section 103A

Further provision as to late payment interest and repayment interest
Certain amounts of repayment interest recoverable as late payment interest
1
Where each of conditions A to D (see paragraph 2) is met, an
amount of repayment interest that—
20
(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
interest.
2     (1)
This paragraph applies for the purposes of paragraph 1.
25
      (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
accounting period,
(b)
a payment of first-year tax credit under Schedule A1 to
30
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,
(d)
a payment of land remediation tax credit or life assurance
company tax credit under Part 14 of CTA 2009 for an
35
accounting period, or
(e)
a payment of film tax credit under Chapter 3 of Part 15 of
CTA 2009 for an accounting period.
      (3)
Condition B, in a case falling within sub-paragraph (2)(a), is that
(whether or not any previous assessment or determination has
40
been made)—
(a)
an assessment, or an amendment of an assessment, of the
amount of corporation tax payable by the company for the
accounting period is made, or

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

(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).
      (4)
Condition B, in a case falling within sub-paragraph (2)(b) to (e), is
5
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
met) in—
10
(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.
      (6)
In sub-paragraph (5) “error” includes—
15
(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
particular, not as a result of any error in the calculation of the
20
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—
(a)
there is a common period in relation to a company (see
25
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—
(a)
an amount of corporation tax is due and payable by the
30
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
tax is repayable to the company (“the repayment”).
35
      (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
amounts of corporation tax due and payable under
40
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
amounts paid or repaid under regulations under that
45
section).
4     (1)
This paragraph applies for the purposes of paragraph 3.

Finance (No. 2) Bill
Schedule 9 — Interest
Part 2 — Petroleum revenue tax
75

      (2)
Condition A is that the overdue payment and the repayment are
in respect of different accounting periods.
      (3)
Condition B is that the overdue payment would (apart from
paragraph 3) carry—
(a)
late payment interest, or
5
(b)
interest under regulations made by virtue of section
59E(2)(g) of TMA 1970.
      (4)
Condition C is that the repayment would (apart from paragraph
3) carry—
(a)
repayment interest, or
10
(b)
interest under regulations made by virtue of section
59E(2)(i) of TMA 1970.”
Part 2
Petroleum revenue tax
13
FA 2009 is amended as follows.
15
14
In section 101 (late payment interest on sums due to HMRC), omit
subsection (2)(b).
15
In section 102 (repayment interest on sums to be paid by HMRC), omit
subsection (2)(b).
16
Schedule 53 (late payment interest) is amended as follows.
20
17
After paragraph 11 insert—
“Instalments of petroleum revenue tax
11A
The late payment interest start date in respect of an instalment of
petroleum revenue tax payable under paragraph 2 of Schedule 19
to FA 1982 (payment for tax) is the last day of the month in which
25
that instalment is payable.
Other amounts of petroleum revenue tax
11B
The late payment interest start date in respect of any other amount
of petroleum revenue tax is the date falling two months after the
end of the chargeable period in respect of which the amount is
30
due.”
18
After paragraph 14 insert—
“Instalments of petroleum revenue tax
14A   (1)
An instalment of petroleum revenue tax payable under paragraph
2 of Schedule 19 to FA 1982 (payment for tax) carries late payment
35
interest until the earlier of—
(a)
the date on which the instalment is paid, and
(b)
the date falling two months after the end of the chargeable
period in respect of which the instalment is due.

Finance (No. 2) Bill
Schedule 9 — Interest
Part 2 — Petroleum revenue tax
76

      (2)
An instalment which remains unpaid after the date mentioned in
sub-paragraph (1)(b) carries interest as an amount payable on
account under section 1 of PRTA 1980.
      (3)
For the purposes of determining the date on which an overdue
instalment is paid, a payment on account of one or more such
5
instalments is to be attributed, so far as possible, to the earliest
month for which an instalment is overdue.”
19
In Schedule 54 (repayment interest), after paragraph 12 insert—
“Petroleum revenue tax
12A   (1)
The repayment interest start date in respect of any amount of
10
petroleum revenue tax is the later of—
(a)
the date falling two months after the end of the chargeable
period in respect of which the amount was paid, and
(b)
the date on which the amount was paid.
      (2)
Sub-paragraph (1) is subject to paragraph 12B (limit on amount of
15
repayment interest carried by certain repayments generated by
carry back reliefs).
      (3)
For the purposes of this paragraph any instalment or part of an
instalment that becomes repayable is to be regarded, so far as
possible, as consisting of the instalment most recently paid.
20
12B   (1)
This paragraph applies where—
(a)
an assessment for a chargeable period (“the earlier
period”) gives effect to relief under section 7(2) or (3) of
OTA 1975 for one or more allowable losses accruing in a
later chargeable period, and
25
(b)
by virtue of that assessment, an amount of tax becomes
repayable to the participator in question (whether wholly
or partly by reason of giving effect to that relief).
      (2)
The amount of repayment interest carried by the appropriate
repayment is not to exceed the difference between—
30
(a)
60% of the amount of the allowable loss or losses which is
treated as reducing the assessable profit of the earlier
period, and
(b)
the amount of the appropriate repayment.
      (3)
In this paragraph “the appropriate repayment” means so much of
35
the repayment as is attributable to giving effect to the relief (but
this is subject to sub-paragraphs (4) and (5)).
      (4)
Sub-paragraph (5) applies where the assessment (as well as giving
effect to the relief mentioned in sub-paragraph (1)) takes account
of any other matter, whether a relief or not, which goes—
40
(a)
to reduce the assessable profit of the earlier period, or
(b)
otherwise to reduce the tax payable for that period.
      (5)
The appropriate repayment is to be taken to be the difference
between—
(a)
the total amount of tax repayable by virtue of the
45
assessment, and

Finance (No. 2) Bill
Schedule 10 — Penalty for failure to make returns etc
77

(b)
the amount of tax (if any) which would have been
repayable if no account had been taken of that relief.
      (6)
If the earlier period ends on or before 30 June 1993, sub-paragraph
(2) has effect as if the percentage specified in paragraph (a) were
85%.
5
      (7)
In this paragraph references to an assessment include an
amendment of an assessment.”
Schedule 10
Section 26

Penalty for failure to make returns etc
1
Schedule 55 to FA 2009 (penalty for failure to make returns etc) is amended
10
as follows.
2     (1)
Paragraph 1 (penalty for failure) is amended as follows.
      (2)
In sub-paragraph (2), for “13” substitute “13J”.
      (3)
The Table is amended as follows.
      (4)
After item 7 insert—
15

“7A
Value added tax
Return under regulations under paragraph 2 of

Schedule 11 to VATA 1994

7B
Insurance premium tax
Return under regulations under section 54 of FA 1994”.

      (5)
Insert at the end—

“14
Aggregates levy
Return under regulations under section 25 of FA 2001

20

15
Climate change levy
Return under regulations under paragraph 41 of

Schedule 6 to FA 2000

16
Landfill tax
Return under regulations under section 49 of FA 1996

17
Air passenger duty
Return under regulations under section 38 of FA 1994

18
Alcoholic liquor duties
Return under regulations under section 13, 49, 56 or 62

25

of ALDA 1979

19
Tobacco products duty
Return under regulations under section 7 of TPDA

1979

20
Hydrocarbon oil duties
Return under regulations under section 21 of HODA

1979

30

21
Excise duties
Return under regulations under section 93 of the

Customs and Excise Management Act 1979

22
Excise duties
Return under regulations under section 100G or 100H

of the Customs and Excise Management Act 1979

23
General betting duty
Return under regulations under paragraph 2 of

35

Schedule 1 to BGDA 1981