Finance (No. 3) Bill

Session 2010 - 11
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Finance (No. 3) Bill

Finance (No. 3) Bill
Schedule 5 — Group mismatch schemes
143

938M
Controlled foreign companies
(1)
Paragraph 5(1) of Schedule 24 to ICTA (assumption that a controlled
foreign company is not a member of any group for the purposes of
any provision of the Tax Acts) does not apply for the purposes of this
Part.
5
(2)
References in this Part to a company bringing amounts into account,
or not bringing them into account, as debits or credits for the
purposes of Part 5 or 7 of CTA 2009 include bringing amounts into
account, or not bringing them into account, as debits or credits under
that Part in determining the chargeable profits of the company (or in
10
determining that there were no such profits) for the purposes of
Chapter 4 of Part 17 of ICTA (controlled foreign companies).
938N
Priority

For the purposes of this Part the following provisions are to be
treated as of no effect—
15
(a)
section 441 of CTA 2009 (loan relationships for unallowable
purposes);
(b)
section 690 of that Act (derivative contracts for unallowable
purposes);
(c)
Part 4 of TIOPA 2010 (transfer pricing);
20
(d)
Part 6 of that Act (tax arbitrage);
(e)
Part 7 of that Act (tax treatment of financing costs and
income).”
3     (1)
Sections 938 to 940 are renumbered as follows—
(a)
section 938 becomes section 940A,
25
(b)
section 939 becomes section 940B, and
(c)
section 940 becomes section 940C.
      (2)
In section 940A (as so renumbered)—
(a)
in subsection (2), for “939” substitute “940B”,
(b)
in subsection (3), for “940” substitute “940C”.
30
4     (1)
Schedule 4 to that Act (index of defined expressions) is amended as follows.
      (2)
In the entry for “the predecessor (in Chapter 1 of Part 24)”—
(a)
for “24” substitute “22”, and
(b)
for “939(4)” substitute “940B(4)”.
      (3)
In the entry for “the successor (in Chapter 1 of Part 22)”, for “939(4)”
35
substitute “940B(4)”.
      (4)
In the entry for “trade (in Chapter 1 of Part 22)”, for “939(5)” substitute
“940B(5)”.
      (5)
In the entry for “transfer of a trade (in Chapter 1 of Part 24)”—
(a)
for “24” substitute “22”, and
40
(b)
for “939(2)” substitute “940B(2)”.
      (6)
In the entry for “the transferred trade (in Chapter 1 of Part 24)”—
(a)
for “24” substitute “22”, and
(b)
for “939(3)” substitute “940B(3)”.

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Schedule 5 — Group mismatch schemes
144

      (7)
At the appropriate places insert—

“economic loss (in Part 21B)
section 938F”

“economic profit (in Part 21B)
section 938F”

“group (in Part 21B)
section 938E”

“a group mismatch scheme (in Part 21B)
section 938B”

5

“relevant tax advantage (in Part 21B)
section 938D”

“relevant tax disadvantage (in Part 21B)
section 938D”

“scheme (in Part 21B)
section 938H”

“the scheme group (in Part 21B)
section 938B”

“scheme loss (in Part 21B)
section 938C”

10

“the scheme period (in Part 21B)
section 938D”

“scheme profit (in Part 21B)
section 938C”.

5     (1)
In section 147(6) of TIOPA 2010 (transfer pricing: basic rule), omit the “and”
at the end of paragraph (e) and at the end of paragraph (f) insert “, and
(g)
section 938N of CTA 2010 (this Part treated as of no effect for
15
the purposes of Part 21B of CTA 2010 (group mismatch
schemes)).”
      (2)
In section 231 of that Act (tax arbitrage: overview), after subsection (7)
insert—
“(8)
This Part has effect subject to section 938N of CTA 2010 (this Part
20
treated as of no effect for the purposes of Part 21B of CTA 2010
(group mismatch schemes)).”
Commencement of new Part 21B of CTA 2010 and consequential amendments
6     (1)
The amendments made by paragraphs 1, 2 and 5 have effect in relation to
schemes entered into at any time (including any time before the
25
commencement date).
      (2)
But section 938A in Part 21B of CTA 2010 (as inserted by paragraph 2) does
not apply to—
(a)
scheme losses or profits that relate to a time before the
commencement date, or
30
(b)
scheme profits that relate to a time on or after that date but are made
in relation to a scheme entered into before that date.
      (3)
In this Schedule “the commencement date” means the day on which this Act
is passed.
Repeal of sections 418 to 419 of CTA 2009
35
7     (1)
Omit sections 418 to 419 of CTA 2009 (loan relationships treated differently
by connected debtor and creditor).

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Schedule 6 — Leasing businesses
145

      (2)
In consequence of the repeals made by sub-paragraph (1), omit—
(a)
in section 748ZA of ICTA (as inserted by paragraph 5 of Schedule 12
to this Act), subsection (5)(a),
(b)
in Schedule 30 to FA 2009, paragraph 4,
(c)
in section 416 of CTA 2009, subsection (4),
5
(d)
in Schedule 1 to CTA 2010, paragraph 615, and
(e)
section 29 of this Act.
      (3)
The repeals made by this paragraph have effect in relation to loan
relationships to which a company is a party (or to which it is treated as a
party under section 418(6A) of CTA 2009) on or after the commencement
10
date.
      (4)
But amounts are to continue to be brought into account for the purposes of
Part 5 of CTA 2009 disregarding the repeals made by sub-paragraph (1) if the
amounts relate to a time before the commencement date; and the repeals
made by sub-paragraph (2) have effect accordingly.
15
Repeal of section 453 of CTA 2009
8     (1)
Omit section 453 of CTA 2009 (connected parties deriving benefit from
creditor relationships).
      (2)
That repeal has effect in relation to loan relationships to which a company is
a party on or after the commencement date.
20
      (3)
But amounts are to continue to be brought into account for the purposes of
Part 5 of CTA 2009 disregarding that repeal if the amounts relate to a time
before the commencement date.
Schedule 6
Section 32

Leasing businesses
25
Businesses carried on by companies alone
1
Chapter 3 of Part 9 of CTA 2010 (sale of lessors: leasing business carried on
by a company alone) is amended as follows.
2     (1)
Section 387 (“business of leasing plant or machinery”) is amended as
follows.
30
      (2)
In subsection (3), for “qualifying leased plant or machinery” substitute
“plant or machinery falling within subsection (7)”.
      (3)
For subsection (5) substitute—
“(5)
Condition B is that at least half of the relevant company’s income in
the past 12 months derives from plant or machinery falling within
35
subsection (7).”
      (4)
For subsections (7) and (8) substitute—
“(7)
Plant or machinery falls within this subsection if—

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Schedule 6 — Leasing businesses
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(a)
it is or at any time in the past 12 months has been leased out
by the relevant company or a qualifying associate,
(b)
the lease under which it is or has been leased out is a plant or
machinery lease but not an excluded lease of background
plant or machinery for a building (see section 437(3)), and
5
(c)
if the plant or machinery satisfies paragraph (a) only because
it is or has been leased out by a qualifying associate, the lessee
under the lease is or was someone other than the relevant
company.
(8)
For the purposes of subsection (7)—
10
(a)
plant or machinery is “leased out” by a person if it is subject
to a plant or machinery lease under which that person is a
lessor,
(b)
“associate” means a person connected with the relevant
company (see also subsection (9)), and
15
(c)
a person is a “qualifying associate” if the person is an
associate at the start of the relevant day or at any earlier time
in the past 12 months (whether or not a time when the plant
or machinery was leased out by the person).
(9)
If the relevant company is owned by a consortium or is a qualifying
20
75% subsidiary of a company owned by a consortium, the reference
in subsection (8)(b) to a person connected with the relevant company
also includes—
(a)
any member of the consortium, and
(b)
any person connected with such a member.
25
(10)
A reference in this section to the past 12 months is to the period of 12
months ending with the relevant day.”
3
In section 389 (provision supplementing section 388), in subsection (5)(b), for
“market value” substitute “ascribed value”.
4
In section 390 (relevant plant or machinery value where relevant company
30
lessee under long funding lease etc), in subsection (2), for “market value”
substitute “ascribed value”.
5
In section 391 (relevant company’s income for condition B in section 387), in
subsection (5), for “qualifying leased plant or machinery” substitute “plant
or machinery falling within section 387(7)”.
35
6     (1)
Section 398G (transfers into and out of A) is amended as follows.
      (2)
Omit subsection (2).
      (3)
For subsection (3) substitute—
“(3)
If any event occurs that requires A to bring the disposal value of
plant or machinery into account under Part 2 of CAA 2001, that Part
40
has effect as if the disposal value that A is required to bring into
account were the higher of—
(a)
the disposal value determined in accordance with that Part,
and
(b)
the ascribed value of the plant or machinery.
45
(4)
Section 265 of CAA 2001 (successions) is subject to this section.”

Finance (No. 3) Bill
Schedule 6 — Leasing businesses
147

7
In section 401 (provisions supplementing section 400), in subsection (5)(b),
for “market value” substitute “ascribed value”.
8
In section 402 (“PM” where relevant company lessee under long funding
lease etc), in subsection (2), for “market value” substitute “ascribed value”.
9     (1)
Section 403 (“TWDV” in section 399) is amended as follows.
5
      (2)
In subsection (2), for paragraph (b) substitute—
“(b)
in calculating the amounts of unrelieved qualifying
expenditure mentioned in subsection (1)(a) to (c), any part of
those amounts that is relevant new expenditure is to be left
out of account.”
10
      (3)
After that subsection insert—
“(3)
“Relevant new expenditure” means—
(a)
expenditure attributable to plant or machinery acquired by
the relevant company on the relevant day except for plant or
machinery acquired on that day from an associated
15
company, and
(b)
expenditure incurred on the relevant day but attributable to
plant or machinery acquired by the relevant company before
that day.
(4)
In subsection (3)—
20
(a)
“acquired” includes brought into use or made available for
use for the first time for the purposes of the business, and
(b)
a reference to anything acquired or incurred includes
anything treated as acquired or treated as incurred.”
Businesses carried on by companies in partnership
25
10
Chapter 4 of Part 9 of CTA 2010 (sale of lessors: leasing business carried on
by a company in partnership) is amended as follows.
11    (1)
Section 410 (“business of leasing plant or machinery”) is amended as
follows.
      (2)
In subsection (2), for “qualifying leased plant or machinery” substitute
30
“plant or machinery falling within subsection (6)”.
      (3)
For subsection (4) substitute—
“(4)
Condition B is that at least half of the partnership’s income in the
past 12 months derives from plant or machinery falling within
subsection (6).”
35
      (4)
For subsections (6) and (7) substitute—
“(6)
Plant or machinery falls within this subsection if—
(a)
it is or at any time in the past 12 months has been leased out
by the partnership or a qualifying associate,
(b)
the lease under which it is or has been leased out is a plant or
40
machinery lease but not an excluded lease of background
plant or machinery for a building (see section 437(3)), and

Finance (No. 3) Bill
Schedule 6 — Leasing businesses
148

(c)
if the plant or machinery satisfies paragraph (a) only because
it is or has been leased out by a qualifying associate, the lessee
under the lease is or was someone other than the partnership.
(7)
For the purposes of subsection (6)—
(a)
plant or machinery is “leased out” by a person if it is subject
5
to a plant or machinery lease under which that person is a
lessor,
(b)
“associate” means a person who is a partner in the
partnership or connected with a partner in the partnership
(see also subsection (8)), and
10
(c)
a person is a “qualifying associate” if the person is an
associate at the start of the relevant day or at any earlier time
in the past 12 months (whether or not a time when the plant
or machinery was leased out by the person).
(8)
In relation to a corporate partner who is owned by a consortium or is
15
a qualifying 75% subsidiary of a company owned by a consortium,
the reference in subsection (7)(b) to a person connected with a
partner also includes—
(a)
any member of the consortium, and
(b)
any person connected with such a member.
20
(9)
A reference in this section to the past 12 months is to the period of 12
months ending with the relevant day.”
12
In section 412 (provision supplementing section 411), in subsection (5)(b), for
“market value” substitute “ascribed value”.
13
In section 413 (relevant plant or machinery value where partnership lessee
25
under long funding lease etc), in subsection (2), for “market value”
substitute “ascribed value”.
14
In section 414 (partnership’s income for condition B in section 410), in
subsection (5), for “qualifying leased plant or machinery” substitute “plant
or machinery falling within section 410(6)”.
30
15    (1)
Section 421 (the amount of the income: the basic amount) is amended as
follows.
      (2)
In subsection (6), for paragraph (b) substitute—
“(b)
in calculating the amounts of unrelieved qualifying
expenditure mentioned in subsection (5)(a) to (c), any part of
35
those amounts that is relevant new expenditure is to be left
out of account.”
      (3)
After that subsection insert—
“(6A)
“Relevant new expenditure” means—
(a)
expenditure attributable to plant or machinery acquired by
40
the partnership on the relevant day except for plant or
machinery acquired on that day from a qualifying company,
and
(b)
expenditure incurred on the relevant day but attributable to
plant or machinery acquired by the partnership before that
45
day.

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(6B)
In subsection (6A)—
(a)
“acquired” includes brought into use or made available for
use for the first time for the purposes of the business, and
(b)
a reference to anything acquired or incurred includes
anything treated as acquired or treated as incurred.”
5
Anti-avoidance provisions
16
Chapter 5 of Part 9 of CTA 2010 (sales of lessors: anti-avoidance provisions)
is amended as follows.
17    (1)
Section 434 (introduction to sections 435 and 436) is amended as follows.
      (2)
In subsection (2), for “question A or B” substitute “question A, B or C”.
10
      (3)
After subsection (4) insert—
“(5)
Question C is the question of the amount of any disposal value to be
substituted by section 398G(3).”
18    (1)
Section 435 (disregard of increases or decreases in balance sheet amounts) is
amended as follows.
15
      (2)
In subsection (1), for paragraph (a) substitute—
“(a)
an amount mentioned in subsection (1A) is to be ascertained
for the purpose of determining a question as to the
application of Chapter 3 or 4,”.
      (3)
After that subsection insert—
20
“(1A)
The amounts are—
(a)
the relevant plant or machinery value,
(b)
the value of plant or machinery falling within section 387(7)
or 410(6),
(c)
the relevant company’s or partnership’s income in the period
25
of 12 months ending with the relevant day,
(d)
the amount of PM,
(e)
the amount of TWDV,
(f)
the amount of any disposal value to be substituted by section
398G(3), and
30
(g)
any underlying amount required to calculate or verify an
amount mentioned in any of the preceding paragraphs.”
      (4)
In subsection (2)—
(a)
omit “or” at the end of paragraph (b), and
(b)
at the end of paragraph (c) insert “, or
35
(d)
the amount of any disposal value to be substituted by
section 398G(3) would be reduced.”
      (5)
In subsection (3), for “which falls (or would fall) to be shown in the balance
sheet in respect of plant or machinery” substitute “to be ascertained”.
      (6)
Accordingly, in the heading of that section, for “in balance sheet amounts”
40
substitute “in certain amounts”.
19
In section 436 (balance sheet amounts determined on assumption company