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Finance (No. 3) Bill


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).

 
 

 
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Revised 31 March 2011