House of Commons Public Bill Committee Proceedings

Session 2010 - 12
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Other Bills before Parliament

595

SUPPLEMENT TO THE VOTES AND PROCEEDINGS

Wednesday 18 May 2011

Report Stage Proceedings

Localism Bill, As Amended

[Second Day]

New Clause relating to tax in connection with provisions of Parts 6 and 7

Tax

Secretary Eric Pickles

Added  NC21

To move the following Clause:—

‘Schedule [Transfers and transfer schemes: tax provisions] (provision about tax

in connection with certain transfers and transfer schemes) has effect.’.

New Schedule relating to tax in connection with provisions of

Parts 6 and 7

Secretary Eric Pickles

Added  NS2

To move the following Schedule:—

‘Transfers and transfer schemes: tax provisions

Part 1

Transfer under paragraph 60 of Schedule 16

1    (1)
For the purposes of any enactment about income tax or corporation tax, the

Office and the HCA are to be treated as the same person.

      (2)
In particular, the transfer effected by paragraph 60 of Schedule 16 is to be

disregarded for those purposes.

      (3)
Accordingly, that transfer is not to be regarded for the purposes of Part 8 of the

Corporation Tax Act 2009 (gains and losses from intangible fixed assets) as

involving any realisation of an asset by the Office or acquisition of an asset by

the HCA.

      (4)
In this paragraph—

Report Stage Proceedings: 18 May 2011
596

Localism Bill, continued

“enactment” includes an enactment contained in an instrument made under

an Act,

“the HCA” means the Homes and Communities Agency, and

“the Office” means the Office for Tenants and Social Landlords.

Part 2

Certain transfers under scheme under section 161 or 162

Interpretation of Part 2 of Schedule

2
In this Part of this Schedule—

“CTA 2009” means the Corporation Tax Act 2009,

“public body” means—

(a)
a person which is a public body for the purposes of section 66 of

the Finance Act 2003 (stamp duty land tax: transfers involving

public bodies), or

(b)
a person prescribed for the purposes of this Part of this Schedule

by order made by the Treasury,

“relevant transfer” means—

(a)
a transfer, in accordance with a transfer scheme under section

161, to a taxable public body of property, rights or liabilities of

the Homes and Communities Agency, or

(b)
a transfer, in accordance with a transfer scheme under section

162, to a taxable public body,

“taxable public body” means a public body which is within the charge to

corporation tax,

“transferee”, in relation to a transfer in accordance with a transfer scheme

under section 161 or 162, means the person to whom the transfer is made,

and

“transferor”—

(a)
means the Homes and Communities Agency in relation to a

transfer, in accordance with a transfer scheme under section 161,

of property, rights or liabilities of that Agency, and

(b)
means the London Development Agency in relation to a transfer

in accordance with a transfer scheme under section 162.

Computation of profits and losses in respect of transfer of a trade

3    (1)
This paragraph applies where a taxable public body (“the predecessor”) is

carrying on a trade or part of a trade and, as a result of a transfer scheme under

section 161 or 162—

(a)
the predecessor ceases to carry on that trade or part of a trade, and

(b)
another taxable public body (“the successor”) begins to carry on that

trade or part.

      (2)
For the purposes of calculating, in relation to the time when the scheme comes

into force and subsequent times, the relevant trading profits or losses of the

predecessor and the successor—

(a)
the trade or part is to be treated as having been a separate trade at the

time of its commencement and as having been carried on by the

successor at all times since its commencement as a separate trade, and

(b)
the trade carried on by the successor after the time when the scheme

comes into force is to be treated as the same trade as that which the

Report Stage Proceedings: 18 May 2011
597

Localism Bill, continued

successor is treated, by virtue of paragraph (a), as having carried on as

a separate trade before that time.

      (3)
If a trade or part of a trade is to be treated under this paragraph as a separate

trade, such apportionments of receipts, expenses, assets and liabilities are to be

made for the purposes of computing relevant trading profits or losses as may

be just and reasonable.

      (4)
This paragraph is subject to the other provisions of this Part of this Schedule.

      (5)
In this paragraph “relevant trading profits or losses” means profits or losses

under Part 3 of CTA 2009 in respect of the trade or part of a trade in question.

Transfers of trading stock

4    (1)
This paragraph applies if—

(a)
under a relevant transfer, trading stock of the transferor is transferred

to the transferee,

(b)
immediately after the transfer takes effect, the stock is to be treated as

trading stock of the transferee, and

(c)
paragraph 3 does not apply in relation to the transfer.

      (2)
Sub-paragraphs (3) and (4) have effect in calculating for any corporation tax

purpose both—

(a)
the profits of the trade in relation to which the stock is trading stock

immediately before the transfer takes effect (“the transferor’s trade”),

and

(b)
the profits of the trade in relation to which it is to be treated as trading

stock (“the transferee’s trade”).

      (3)
The stock is to be treated as having been—

(a)
disposed of by the transferor in the course of the transferor’s trade,

(b)
acquired by the transferee in the course of the transferee’s trade, and

(c)
subject to that, disposed of and acquired when the transfer takes effect.

      (4)
The stock is to be valued as if the disposal and acquisition had been for a

consideration which in relation to the transferor would have resulted in neither

a profit nor a loss being brought into account in respect of the disposal in the

accounting period of the transferor which ends with, or is current at, the time

when the transfer takes effect.

      (5)
In this paragraph “trading stock” has the meaning given by section 163 of CTA

2009.

Continuity in relation to loan relationships

5    (1)
For the purposes of the application of Part 5 of CTA 2009 (loan relationships)

in relation to a relevant transfer of rights and liabilities under a loan

relationship to which immediately before the transfer takes effect the

transferor is a party for the purposes of a trade it carries on, the transferee and

the transferor are to be treated as if at the time of the transfer they were

members of the same group.

      (2)
For the purposes of the application of Part 5 of CTA 2009 in relation to a

transfer that—

(a)
is to a public body,

(b)
is in accordance with a transfer scheme under section 161 or 162, and

(c)
is of rights and liabilities under a loan relationship to which

immediately before the transfer takes effect the HCA or LDA is a party

otherwise than for the purposes of a trade it carries on,

Report Stage Proceedings: 18 May 2011
598

Localism Bill, continued


the HCA or LDA, and the person to whom the transfer is made, are to be

treated as if at the time of the transfer they were members of the same group.

      (3)
In this paragraph any reference to being members of the same group is to be

read in accordance with section 170 of the Taxation of Chargeable Gains Act

1992.

      (4)
In this paragraph—

“the HCA” means the Homes and Communities Agency, and

“the LDA” means the London Development Agency.

Chargeable gains: disposal on transfer to be treated as no gain/no loss disposal

6    (1)
For the purposes of the Taxation of Chargeable Gains Act 1992, a disposal

constituted by a transfer within sub-paragraph (2) is to be treated in relation to

the transferor and transferee as made for a consideration such that no gain or

loss accrues to the transferor.

      (2)
A transfer is within this sub-paragraph if—

(a)
it is a transfer in accordance with a transfer scheme under section 161

of property, rights or liabilities of the Homes and Communities

Agency and the transferee is a public body, or

(b)
it is in accordance with a transfer scheme under section 162 and the

transferee is a public body.

      (3)
In section 288(3A) of the Taxation of Chargeable Gains Act 1992 (meaning of

the “no gain/no loss provisions”) at the end insert—

“(m)
paragraph 6(1) of Schedule [Transfers and transfer schemes:

tax provisions] to the Localism Act 2011.”

Stamp duty

7
Stamp duty is not chargeable on a transfer scheme under section 162 if the

transferee is a public body.

Modifications of transfer schemes

8    (1)
This paragraph applies if—

(a)
a company delivers a company tax return,

(b)
subsequently an agreement is made modifying a transfer scheme under

section 161 or 162, and

(c)
as a result of that, the return is incorrect.

      (2)
The return may be amended under paragraph 15 of Schedule 18 to the Finance

Act 1998 so as to remedy the error, ignoring any time limit which would

otherwise prevent that happening.

      (3)
An amendment may not be made in reliance on sub-paragraph (2) more than

12 months after the end of the accounting period of the company during which

the agreement is made.

      (4)
Sub-paragraphs (5) and (6) apply if the company does not amend the return so

as to remedy the error before the end of that 12 month period.

      (5)
A discovery assessment or a discovery determination may be made in relation

to the error, ignoring any time limit which would otherwise prevent that

happening.

      (6)
Such an assessment or determination may not be made in reliance on sub-

paragraph (5) more than 24 months after the end of the accounting period

mentioned in sub-paragraph (3).

      (7)
Expressions used in this paragraph and in Schedule 18 to the Finance Act 1998

have in this paragraph the meaning they have in that Schedule.’.

Report Stage Proceedings: 18 May 2011
599

Localism Bill, continued

Part 3

Transfers under scheme under section 171(1) or (4) or 187(1)

9    (1)
In this paragraph “transfer scheme” means a transfer scheme under section

171(1) or (4) or 187(1).

      (2)
The Treasury may by regulations make provision for varying the way in which

a relevant tax has effect from time to time in relation to—

(a)
any property, rights or liabilities transferred in accordance with a

transfer scheme, or

(b)
anything done for the purposes of, or in relation to, or in consequence

of, the transfer of any property, rights or liabilities in accordance with

a transfer scheme.

      (3)
The provision that may be made under sub-paragraph (2)(a) includes, in

particular, provision for—

(a)
a tax provision not to apply, or to apply with modifications, in relation

to any property, rights or liabilities transferred;

(b)
any property, rights or liabilities transferred to be treated in a specified

way for the purposes of a tax provision;

(c)
the Secretary of State or Mayor of London to be required or permitted,

with the consent of the Treasury, to determine, or to specify the

method for determining, anything which needs to be determined for

the purposes of any tax provision so far as relating to any property,

rights or liabilities transferred.

      (4)
The provision that may be made under sub-paragraph (2)(b) includes, in

particular, provision for—

(a)
a tax provision not to apply, or to apply with modifications, in relation

to anything done for the purposes of, or in relation to, or in

consequence of, the transfer;

(b)
anything done for the purposes of, or in relation to, or in consequence

of, the transfer to have or not to have a specified consequence or to be

treated in a specified way;

(c)
the Secretary of State or Mayor of London to be required or permitted,

with the consent of the Treasury, to determine, or to specify the

method for determining, anything which needs to be determined for

the purposes of any tax provision so far as relating to anything done

for the purposes of, in relation to, or in consequence of, the transfer.

      (5)
In this paragraph—

“relevant tax” means corporation tax, income tax, capital gains tax, stamp

duty, stamp duty land tax or stamp duty reserve tax, and

“tax provision” means a provision of an enactment about a relevant tax.

      (6)
In sub-paragraph (5) “enactment” includes an enactment contained in an

instrument made under an Act.’.

Report Stage Proceedings: 18 May 2011
600

Localism Bill, continued

Remaining new Clause relating to Part 7

Authority may be required to carry on commercial activities through a taxable body

Secretary Eric Pickles

Added  NC20

To move the following Clause:—

‘(1)
The Greater London Authority Act 1999 is amended as follows.

(2)
After section 34 insert—

“34A
Restriction on exercise of certain powers except through a taxable

body

(1)
The Authority may carry on specified activities for a commercial purpose

only if it does so—

(a)
through a company that is a subsidiary of the Authority, or

(b)
in pursuance of an authorisation under section 38(1), through—

(i)
a body that is specified in section 38(2) and is within the

charge to corporation tax, or

(ii)
a company that is a subsidiary of a body specified in

section 38(2).

(2)
Subsection (3) applies if—

(a)
the Authority carries on a specified activity for a commercial

purpose otherwise than as permitted by subsection (1), and

(b)
the activity is actually carried on by a body (whether the

Authority or another) that, disregarding this section, is in respect

of the carrying-on of the activity exempt from corporation tax

and income tax.

(3)
The body mentioned in subsection (2)(b) is to be treated in respect of the

carrying-on of the activity as not being a local authority for the purposes

of—

(a)
section 984 of the Corporation Tax Act 2010 (exemption of local

authorities from corporation tax),

(b)
section 838 of the Income Tax Act 2007 (exemption of local

authorities from income tax), and

(c)
section 271 of the Taxation of Chargeable Gains Act 1992

(exemption of local authorities from capital gains tax).

(4)
In this section—

“company” means—

(a)
a company within the meaning given by section 1(1) of the

Companies Act 2006, or

(b)
a society registered or deemed to be registered under the Co-

operative and Community Benefit Societies and Credit Unions

Act 1965 or the Industrial and Provident Societies Act (Northern

Ireland) 1969, and

“specified activity” means an activity specified in an order made by the

Secretary of State with the consent of the Treasury.”

(3)
In section 420(8) (orders subject to annulment) after the entry for section 25

insert—



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