|
| |
|
| |
| |
| |
Insertion of new Part 21B of CTA 2010 and consequential amendments |
| |
1 | In section 1(4) of CTA 2010 (overview of Act), omit the “and” at the end of |
| |
paragraph (h), and after paragraph (i) insert— |
| 5 |
“(j) | group mismatch schemes (see Part 21B).” |
| |
2 | After Part 21A of that Act insert— |
| |
| |
| |
938A | Losses and profits from group mismatch schemes to be disregarded |
| 10 |
(1) | This section applies to a company that— |
| |
(a) | is (at any time) a party to a group mismatch scheme, and |
| |
(b) | is a member of the scheme group. |
| |
(2) | No scheme loss or profit made by the company in any accounting |
| |
period in relation to the scheme is to be brought into account as a |
| 15 |
debit or credit for the purposes of Part 5 of CTA 2009 (loan |
| |
relationships) or Part 7 of that Act (derivative contracts). |
| |
(3) | An amount that would, apart from this section, be brought into |
| |
account for the purposes of Part 5 or 7 of that Act as respects any |
| |
| 20 |
(a) | is treated, for the purposes of section 464(1) or (as the case |
| |
may be) 699(1) of that Act (priority of Part 5 or 7 for |
| |
corporation tax purposes) as if it were so brought into |
| |
| |
(b) | accordingly, may not be brought into account for any other |
| 25 |
corporation tax purposes as respects that matter. |
| |
938B | Meaning of “a group mismatch scheme” and “the scheme group” |
| |
(1) | A scheme is “a group mismatch scheme” if— |
| |
(a) | the parties to the scheme are, or include, members of the |
| |
| 30 |
(b) | condition A or B is met. |
| |
(2) | Condition A is that, at the time the scheme is entered into, there is no |
| |
practical likelihood that the scheme will fail to secure a relevant tax |
| |
advantage of £2 million or more. |
| |
(3) | The Treasury may by order substitute a higher amount for the |
| 35 |
amount for the time being specified in subsection (2). |
| |
(4) | Any such substitution is to have effect in relation to schemes entered |
| |
into on or after the day on which the order comes into force. |
| |
| |
(a) | the purpose, or one of the main purposes, of any member of |
| 40 |
the scheme group in entering into the scheme is to obtain the |
| |
|
| |
|
| |
|
chance of securing a relevant tax advantage (of any amount), |
| |
| |
(b) | at the time the scheme is entered into— |
| |
(i) | there is no chance that the scheme will secure a |
| |
relevant tax disadvantage, or |
| 5 |
(ii) | there is such a chance, but the expected value of the |
| |
scheme is nevertheless a positive amount. |
| |
(6) | If, at the time the company enters into the scheme, there are chances |
| |
that the scheme would, if carried out, secure different relevant tax |
| |
advantages or disadvantages in different circumstances, the |
| 10 |
amounts and probabilities of each must be taken into account in |
| |
determining the expected value of the scheme. |
| |
(7) | In determining whether condition A or B is met, it is to be assumed |
| |
that the parties to the scheme carry it out. |
| |
(8) | Where, at the time the scheme is entered into, the length of the |
| 15 |
scheme period is uncertain, condition A or B is met if it would be met |
| |
on any reasonable assumption as to the length of the scheme period. |
| |
(9) | In determining whether condition A or B is met, section 938A |
| |
(scheme profits and losses to be left out of account) is to be |
| |
| 20 |
(10) | In this Part “the scheme group” means the group mentioned in |
| |
| |
938C | Meaning of “scheme loss” and “scheme profit” |
| |
(1) | A loss or profit made by a company in an accounting period is a |
| |
“scheme loss” or “scheme profit” in relation to a group mismatch |
| 25 |
scheme if the loss or profit— |
| |
(a) | arises from a transaction, or series of transactions, that forms |
| |
| |
(b) | is, or is comprised in, an amount that is brought into account |
| |
as a debit or credit for the purposes of Part 5 or 7 of CTA 2009, |
| 30 |
| |
(c) | meets the first or second asymmetry condition. |
| |
(2) | The first asymmetry condition is that the loss or profit affects the |
| |
amount of any relevant tax advantage secured by the scheme. |
| |
(3) | Where, at the end of the accounting period— |
| 35 |
(a) | it is not certain whether the scheme will secure a relevant tax |
| |
| |
(b) | it is not certain what the amount of the relevant tax |
| |
advantage secured by the scheme will be, |
| |
| a loss or profit is to be treated as meeting the first asymmetry |
| 40 |
condition if, at that time, there is a chance that the scheme will secure |
| |
a relevant tax advantage and that the loss or profit will affect its |
| |
| |
| |
(a) | a loss or profit meets the conditions in subsection (1)(a) and |
| 45 |
| |
|
| |
|
| |
|
(b) | a part, but not the whole, of the loss or profit meets the first |
| |
| |
| only that part of the loss or profit is a “scheme loss” or “scheme |
| |
| |
(5) | The second asymmetry condition is that the loss or profit— |
| 5 |
(a) | does not meet the first asymmetry condition, but |
| |
(b) | arises from a transaction, or series of transactions, that might |
| |
(if events had turned out differently) have given rise to a loss |
| |
or profit that would have done so. |
| |
(6) | References in this section to a loss or profit include a loss or profit |
| 10 |
arising in respect of interest or expenses. |
| |
(7) | In determining whether the condition in subsection (1)(b) or the first |
| |
or second asymmetry condition is met, section 938A (scheme profits |
| |
and losses to be left out of account) is to be disregarded. |
| |
938D | Meaning of “relevant tax advantage” etc and “the scheme period” |
| 15 |
(1) | In this Part “relevant tax advantage”, in relation to a scheme, means |
| |
| |
(a) | is made by the scheme group over the scheme period, |
| |
(b) | meets the condition in subsection (3), and |
| |
| 20 |
(2) | In this Part “relevant tax disadvantage”, in relation to a scheme, |
| |
means an economic loss that— |
| |
(a) | is made by the scheme group over the scheme period, |
| |
(b) | meets the condition in subsection (3), and |
| |
| 25 |
(3) | The condition is that the economic profit or loss arises as a result of |
| |
asymmetries in the way different members of the scheme group |
| |
bring, or do not bring, amounts into account as debits and credits for |
| |
the purposes of Part 5 or 7 of CTA 2009. |
| |
(4) | A reference in this section to asymmetries includes, in particular— |
| 30 |
(a) | asymmetries relating to quantification, and |
| |
(b) | asymmetries relating to timing. |
| |
| |
(a) | a reference to an economic profit includes an increase in an |
| |
economic profit and a decrease in an economic loss, and |
| 35 |
(b) | a reference to an economic loss includes an increase in an |
| |
economic loss and a decrease in an economic profit. |
| |
(6) | In this Part “the scheme period”, in relation to a scheme, means the |
| |
period during which the scheme has effect. |
| |
| 40 |
(1) | For the purposes of this Part a company (“company A”) is a member |
| |
of a group, in relation to a scheme, if any other company is at any |
| |
time in the scheme period associated with company A. |
| |
|
| |
|
| |
|
(2) | The group consists of company A and each company in relation to |
| |
which the condition in subsection (1) is met. |
| |
(3) | For the purposes of this section a company (“company B”) is |
| |
associated with company A at a time (“the relevant time”) if any of |
| |
the following five conditions is met. |
| 5 |
(4) | The first condition is that the financial results of company A and |
| |
company B, for a period that includes the relevant time, meet the |
| |
| |
(5) | The second condition is that there is a connection between company |
| |
A and company B for the accounting period of company A in which |
| 10 |
| |
(6) | The third condition is that, at the relevant time, company A has a |
| |
major interest in company B or company B has a major interest in |
| |
| |
(7) | The fourth condition is that— |
| 15 |
(a) | the financial results of company A and a third company, for |
| |
a period that includes the relevant time, meet the |
| |
consolidation condition, and |
| |
(b) | at the relevant time the third company has a major interest in |
| |
| 20 |
(8) | The fifth condition is that— |
| |
(a) | there is a connection between company A and a third |
| |
company for the accounting period of company A in which |
| |
the relevant time falls, and |
| |
(b) | at the relevant time the third company has a major interest in |
| 25 |
| |
(9) | In this section, the financial results of any two companies for any |
| |
period meet “the consolidation condition” if— |
| |
(a) | they are required to be comprised in group accounts, |
| |
(b) | they would be required to be comprised in such accounts but |
| 30 |
for the application of an exemption, or |
| |
(c) | they are in fact comprised in such accounts. |
| |
(10) | In subsection (9), “group accounts” means accounts prepared |
| |
| |
(a) | section 399 of the Companies Act 2006, or |
| 35 |
(b) | any corresponding provision of the law of a territory outside |
| |
| |
(11) | The following provisions apply for the purposes of this section— |
| |
sections 466 to 471 of CTA 2009 (companies connected for |
| |
| 40 |
sections 473 and 474 of CTA 2009 (meaning of “major interest”). |
| |
938F | Meaning of references to economic profits and losses |
| |
(1) | An economic profit or loss is to be computed for the purposes of this |
| |
Part taking into account, in particular— |
| |
(a) | profits and losses made as a result of the operation of the |
| 45 |
Corporation Tax Acts, and |
| |
|
| |
|
| |
|
(b) | any adjustments required to reflect the time value of money. |
| |
(2) | A reference in this Part to an economic profit or loss made by the |
| |
scheme group over the scheme period is to an economic profit or loss |
| |
made in that period by the members of the group considered |
| |
| 5 |
(3) | In determining for the purposes of this Part the amount of an |
| |
economic profit or loss made by the scheme group over the scheme |
| |
period, profits and losses made by a member of the group are to be |
| |
taken into account only to the extent that they are attributable to |
| |
times at which the member is a party to the scheme. |
| 10 |
938G | Tax capacity assumption |
| |
(1) | This section applies for the purpose of determining whether a |
| |
scheme will, or might, secure a relevant tax advantage. |
| |
(2) | The economic profits and losses made by the scheme group over the |
| |
scheme period must be calculated on the assumption that each |
| 15 |
company that is at any time a party to the scheme— |
| |
(a) | obtains the full tax benefit of any loss made by that company |
| |
in relation to a loan relationship or a derivative contract |
| |
| |
(b) | incurs the full tax cost of any profit made by that company in |
| 20 |
relation to a loan relationship or a derivative contract during |
| |
| |
(3) | The “full tax benefit” of a loss is the reduction in the liability of the |
| |
company to corporation tax that would result if— |
| |
(a) | the loss were brought into account as a debit or as a reduction |
| 25 |
in a credit for the purposes of Part 5 or 7 of CTA 2009, and |
| |
(b) | the company’s profits chargeable to corporation tax, |
| |
disregarding the loss, were equal to the debit (or the |
| |
reduction in the credit) determined by reference to the loss. |
| |
(4) | The “full tax cost” of a profit is the increase in the liability of the |
| 30 |
company to corporation tax that would result if— |
| |
(a) | the profit were brought into account as a credit or as a |
| |
reduction in a debit for the purposes of Part 5 or 7 of CTA |
| |
| |
(b) | the company’s profits chargeable to corporation tax, |
| 35 |
disregarding the profit, were nil. |
| |
| |
| In this Part “scheme” includes any scheme, arrangements or |
| |
understanding of any kind whatever, whether or not legally |
| |
enforceable, involving a single transaction or two or more |
| 40 |
| |
938I | Schemes involving repos or quasi-repos |
| |
(1) | This section applies where— |
| |
(a) | a scheme includes an arrangement under which a member of |
| |
the scheme group has a debtor repo or a debtor quasi-repo, |
| 45 |
| |
|
| |
|
| |
|
(b) | the advance under that arrangement is received, directly or |
| |
indirectly, from a member of the scheme group. |
| |
(2) | References in this Part to amounts brought into account, or not |
| |
brought into account, as debits or credits for the purposes of Part 5 of |
| |
CTA 2009 include amounts brought into account, or not brought into |
| 5 |
account, for the purposes of any other provision so far as it applies |
| |
the charge to corporation tax on income to the repayment of the |
| |
| |
(3) | Sections 548 and 549 of CTA 2009 (meaning of debtor repo and |
| |
debtor quasi-repo) apply for the purposes of this section. |
| 10 |
(4) | For the purposes of subsection (2) “the repayment of the advance” |
| |
means the consideration given on the purchase of securities |
| |
mentioned in condition D in section 548 or 549 of CTA 2009. |
| |
938J | Schemes involving finance arrangements |
| |
(1) | This section applies in relation to a scheme if— |
| 15 |
(a) | it includes a type 1, 2 or 3 finance arrangement under which |
| |
a member of the scheme group is the borrower, and |
| |
(b) | the advance under that arrangement is received, directly or |
| |
indirectly, from a member of the scheme group. |
| |
(2) | References in this Part to amounts brought into account, or not |
| 20 |
brought into account, as debits or credits for the purposes of Part 5 of |
| |
CTA 2009 include amounts brought into account, or not brought into |
| |
account, for the purposes of any other provision so far as it applies |
| |
the charge to corporation tax on income to the repayment of the |
| |
| 25 |
(3) | Sections 758, 763 and 767 of this Act (meaning of type 1, 2 and 3 |
| |
finance arrangements) apply for the purposes of this section. |
| |
(4) | For the purposes of subsection (2) “the repayment of the advance” |
| |
means the payments mentioned in condition A in section 758, 763 or |
| |
| 30 |
| |
| References in this Part to amounts brought into account, or not |
| |
brought into account, as debits or credits for the purposes of Part 5 |
| |
or 7 of CTA 2009 include amounts brought into account, or not |
| |
brought into account, as expenses or receipts of a trade by virtue of |
| 35 |
section 297 or 573 of that Act (trading credits and debits to be |
| |
brought into account under Part 3). |
| |
938L | Foreign companies and foreign permanent establishments |
| |
(1) | References in this Part to a company not bringing amounts into |
| |
account as debits or credits for the purposes of Part 5 or 7 of CTA |
| 40 |
2009 do not include the company not bringing amounts into account |
| |
| |
(a) | the company being non-UK resident, or |
| |
(b) | an election under section 18A of CTA 2009 (profits or losses |
| |
of foreign permanent establishments). |
| 45 |
(2) | See section 938M for provision about controlled foreign companies. |
| |
|
| |
|