Finance (No. 3) Bill

Session 2010 - 11
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Finance (No. 3) Bill

Finance (No. 3) Bill
Schedule 4 — Amounts not fully recognised for accounting purposes
132

(a)
the definition of “relevant housing provider” in section 809ZJ(8) of
ITA 2007;
(b)
the definition of “relevant housing provider” in section 939C(8) of
CTA 2010.
5
Schedule 4
Section 28

Amounts not fully recognised for accounting purposes
Loan relationships
1
Part 5 of CTA 2009 (loan relationships) is amended as follows.
2     (1)
Section 311 (amounts not fully recognised for accounting purposes) is
10
amended as follows.
      (2)
In subsection (2)—
(a)
at the end of paragraph (a) insert “and”, and
(b)
for paragraphs (b) and (c) substitute—
“(b)
as a result of tax avoidance arrangements to which the
15
company is at any time a party, an amount is (in
accordance with generally accepted accounting
practice) not fully recognised for the period in respect
of the creditor relationship.”
      (3)
Omit subsections (3) to (5A).
20
      (4)
In subsection (6)—
(a)
in the opening words—
(i)
after “section” insert “and section 312”, and
(ii)
omit “, a contribution to it or securities issued by it”, and
(b)
in paragraphs (a) and (b), omit “, contribution or securities”.
25
      (5)
After subsection (6) insert—
“(7)
For the purposes of this section arrangements are “tax avoidance
arrangements” if the main purpose, or one of the main purposes, of
any party to the arrangements, in entering into them, is to obtain a
tax advantage.
30
(8)
In subsection (7) “arrangements” includes any arrangements,
scheme or understanding of any kind, whether or not legally
enforceable, involving a single transaction or two or more
transactions.
(9)
For the purposes of this section a company is to be treated as a party
35
to a creditor relationship even though it has disposed of its rights
under the relationship to another person—
(a)
under a repo or stock lending relationship, or
(b)
under a transaction which is treated as not involving any
disposal as a result of section 26 of TCGA 1992 (mortgages
40
and charges not to be treated as disposals).”

Finance (No. 3) Bill
Schedule 4 — Amounts not fully recognised for accounting purposes
133

3     (1)
Section 312 (determination of credits and debits where amounts not fully
recognised) is amended as follows.
      (2)
For subsection (1A) substitute—
“(1A)
Subsection (1B) applies in a case where—
(a)
pursuant to the arrangements mentioned in section 311(2)(b),
5
the company becomes, or is treated as becoming, a party to a
debtor relationship, and
(b)
an amount is (in accordance with generally accepted
accounting practice) not fully recognised for any period in
respect of the debtor relationship.”
10
      (3)
In subsection (1B) omit “by reference to which that condition is met”.
      (4)
In subsection (3) for “But” substitute “But—
(a)
no debits are, as a result of this section, to be brought into
account by the company in respect of the creditor
relationship mentioned in section 311(2), and
15
(b)
”.
4
In section 440 (overview of Chapter 15), in subsection (2), omit the “and” at
the end of paragraph (e), and after paragraph (f) insert “, and
(g)
for rules about debits arising as a result of the derecognition
of creditor relationships, see section 455A.”
20
5
After section 455 insert—
“Derecognition
455A
Debits arising from derecognition of creditor relationships
(1)
This section applies where—
(a)
a company is at any time a party to tax avoidance
25
arrangements,
(b)
as a result of those arrangements, a creditor relationship to
which the company is party, or any part of such a
relationship, is (in accordance with generally accepted
accounting practice) derecognised by the company, and
30
(c)
the company continues to be a party to the creditor
relationship immediately after the transaction or other event
giving rise to the derecognition.
(2)
No debit that would apart from this section be brought into account
by the company for the purposes of this Part as a result of the
35
derecognition is to be so brought into account.
(3)
An amount that would be brought into account for the purposes of
this Part as respects any matter apart from this section—
(a)
is treated for the purposes of section 464(1) (priority of this
Part for corporation tax purposes) as if it were so brought into
40
account, and
(b)
accordingly, may not be brought into account for any other
corporation tax purposes as respects that matter.

Finance (No. 3) Bill
Schedule 4 — Amounts not fully recognised for accounting purposes
134

(4)
For the purposes of this section a company is to be treated as a party
to a creditor relationship even though it has disposed of its rights
under the relationship to another person—
(a)
under a repo or stock lending arrangement, or
(b)
under a transaction which is treated as not involving any
5
disposal as a result of section 26 of TCGA 1992 (mortgages
and charges not to be treated as disposals).
(5)
For the purposes of this section arrangements are “tax avoidance
arrangements” if the main purpose, or one of the main purposes, of
any party to the arrangements, in entering into them, is to obtain a
10
tax advantage.
(6)
In subsection (5) “arrangements” includes any arrangements,
scheme or understanding of any kind, whether or not legally
enforceable, involving a single transaction or two or more
transactions.”
15
6
In section 464 (priority of Part for corporation tax purposes), in subsection
(4), omit the “and” at the end of paragraph (a) and after paragraph (b) insert
“, and
(c)
section 455A(3) (debits arising from derecognition of creditor
relationships).”
20
Derivative contracts
7
Part 7 of CTA 2009 (derivative contracts) is amended as follows.
8     (1)
Section 599A (amounts not fully recognised for accounting purposes) is
amended as follows.
      (2)
In subsection (2)—
25
(a)
at the end of paragraph (a) insert “and”, and
(b)
for paragraphs (b) and (c) substitute—
“(b)
as a result of tax avoidance arrangements to which the
company is at any time a party, an amount is (in
accordance with generally accepted accounting
30
practice) not fully recognised for the period in respect
of the contract.”
      (3)
Omit subsections (3) to (5B).
      (4)
In subsection (6)—
(a)
in the opening words, omit “, a contribution to it or securities issued
35
by it”, and
(b)
in paragraphs (a) and (b), omit “, contribution or securities”.
      (5)
After subsection (6) insert—
“(7)
For the purposes of this section arrangements are “tax avoidance
arrangements” if the main purpose, or one of the main purposes, of
40
any party to the arrangements, in entering into them, is to obtain a
tax advantage.
(8)
In subsection (7)—
(a)
“arrangements” includes any arrangements, scheme or
understanding of any kind, whether or not legally
45

Finance (No. 3) Bill
Schedule 4 — Amounts not fully recognised for accounting purposes
135

enforceable, involving a single transaction or two or more
transactions, and
(b)
“tax advantage” has the meaning given by section 1139 of
CTA 2010.
(9)
For the purposes of this section a company is to be treated as a party
5
to a derivative contract even though it has disposed of its rights and
liabilities under the contract to another person—
(a)
under a repo or stock lending arrangement, or
(b)
under a transaction which is treated as not involving any
disposal as a result of section 26 of TCGA 1992 (mortgages
10
and charges not to be treated as disposals).”
9     (1)
Section 599B (determination of credits and debits where amounts not fully
recognised) is amended as follows.
      (2)
After subsection (2) insert—
“(2A)
But no debits are, as a result of this section, to be brought into
15
account by the company in respect of the derivative contract.”
      (3)
After subsection (3) insert—
“(4)
If—
(a)
the company is, or is treated as, a party to the contract at the
beginning of the period referred to in section 599A(1), and
20
(b)
the fair value of the contract at that time is greater than the
carrying value of that contract at that time,

a credit of an amount equal to the difference is to be brought into
account for that period for the purposes of this Part in respect of the
contract.”
25
10
In section 689 (overview of Chapter 11), in subsection (2), omit the “and” at
the end of paragraph (c), and after paragraph (d) insert “, and
(e)
for rules about debits arising as a result of the derecognition
of derivative contracts, see section 698A.”
11
After section 698 insert—
30
“Derecognition
698A
Debits arising from derecognition of derivative contracts
(1)
This section applies where—
(a)
a company is at any time a party to tax avoidance
arrangements,
35
(b)
as a result of those arrangements, a derivative contract to
which the company is party, or any part of such a contract, is
(in accordance with generally accepted accounting practice)
derecognised by the company, and
(c)
the company continues to be a party to the derivative contract
40
immediately after the transaction or other event giving rise to
the derecognition.
(2)
No debit that would apart from this section be brought into account
by the company for the purposes of this Part as a result of the
derecognition is to be so brought into account.
45

Finance (No. 3) Bill
Schedule 4 — Amounts not fully recognised for accounting purposes
136

(3)
An amount that would be brought into account for the purposes of
this Part as respects any matter apart from this section—
(a)
is treated for the purposes of section 699(1) (priority of this
Part for corporation tax purposes) as if it were so brought into
account, and
5
(b)
accordingly, may not be brought into account for any other
corporation tax purposes as respects that matter.
(4)
For the purposes of this section a company is to be treated as a party
to a derivative contract even though it has disposed of its rights and
liabilities under the contract to another person—
10
(a)
under a repo or stock lending arrangement, or
(b)
under a transaction which is treated as not involving any
disposal as a result of section 26 of TCGA 1992 (mortgages
and charges not to be treated as disposals).
(5)
For the purposes of this section arrangements are “tax avoidance
15
arrangements” if the main purpose, or one of the main purposes, of
any party to the arrangements, in entering into them, is to obtain a
tax advantage.
(6)
In subsection (5)—
(a)
“arrangements” includes any arrangements, scheme or
20
understanding of any kind, whether or not legally
enforceable, involving a single transaction or two or more
transactions, and
(b)
“tax advantage” has the meaning given by section 1139 of
CTA 2010.”
25
Consequential repeals
12
In consequence of the amendments made by this Schedule, omit—
(a)
in Schedule 30 to FA 2009, paragraph 2(1) to (6), and
(b)
in Schedule 5 to F(No.2)A 2010, paragraphs 1 and 3.
Commencement
30
13    (1)
The amendments made by this Schedule have effect in relation to periods of
account beginning on or after 6 December 2010.
      (2)
But, for the purposes of sub-paragraph (1), a period of account beginning
before, and ending on or after, 6 December 2010 is to be treated as if so much
of the period as falls before that date, and so much of the period as falls on
35
or after that date, were separate periods of account.
      (3)
The following provisions of CTA 2009 do not have effect where they apply
by reason of tax avoidance arrangements to which the company became a
party before 23 March 2011—
(a)
section 312(3)(a) (as inserted by paragraph 3(4) of this Schedule);
40
(b)
section 599B(2A) (as inserted by paragraph 9(2) of this Schedule);
(c)
section 599B(4) (as inserted by paragraph 9(3) of this Schedule).