LegalizeReform history
Income and Corporation Taxes Act 1988
100 versions
· 1988-02-09
2022-07-14
Income and Corporation Taxes Act 1988
2019-07-05
Income and Corporation Taxes Act 1988
2019-02-12
Income and Corporation Taxes Act 1988
2017-11-16
Income and Corporation Taxes Act 1988
2017-04-27
Income and Corporation Taxes Act 1988
2017-04-06
Income and Corporation Taxes Act 1988
2016-12-14
Income and Corporation Taxes Act 1988
2016-09-15
Income and Corporation Taxes Act 1988
2016-08-12
Income and Corporation Taxes Act 1988
2016-06-16
Income and Corporation Taxes Act 1988
2015-03-26
Income and Corporation Taxes Act 1988
2015-02-12
Income and Corporation Taxes Act 1988
2014-08-01
Income and Corporation Taxes Act 1988
2014-07-17
Income and Corporation Taxes Act 1988
2014-01-01
Income and Corporation Taxes Act 1988
2013-07-17
Income and Corporation Taxes Act 1988
2013-04-06
Income and Corporation Taxes Act 1988
2012-07-17
Income and Corporation Taxes Act 1988
2012-04-01
Income and Corporation Taxes Act 1988
2012-03-14
Income and Corporation Taxes Act 1988
2011-08-11
Income and Corporation Taxes Act 1988
2011-07-19
Income and Corporation Taxes Act 1988
2011-06-16
Income and Corporation Taxes Act 1988
2011-02-25
Income and Corporation Taxes Act 1988
2010-12-16
Income and Corporation Taxes Act 1988
2010-10-01
Income and Corporation Taxes Act 1988
2010-07-27
Income and Corporation Taxes Act 1988
2010-04-08
Income and Corporation Taxes Act 1988
2010-04-01
Income and Corporation Taxes Act 1988
2009-12-01
Income and Corporation Taxes Act 1988
2009-11-11
Income and Corporation Taxes Act 1988
2009-10-01
Income and Corporation Taxes Act 1988
2009-09-01
Income and Corporation Taxes Act 1988
2009-08-13
Income and Corporation Taxes Act 1988
2009-07-21
Income and Corporation Taxes Act 1988
2009-06-01
Income and Corporation Taxes Act 1988
2009-04-23
Income and Corporation Taxes Act 1988
2009-04-22
Income and Corporation Taxes Act 1988
2009-04-06
Income and Corporation Taxes Act 1988
2009-04-01
Income and Corporation Taxes Act 1988
2009-02-21
Income and Corporation Taxes Act 1988
2009-02-03
Income and Corporation Taxes Act 1988
2009-01-01
Income and Corporation Taxes Act 1988
2008-12-27
Income and Corporation Taxes Act 1988
2008-12-01
Income and Corporation Taxes Act 1988
2008-10-29
Income and Corporation Taxes Act 1988
2008-10-28
Income and Corporation Taxes Act 1988
2008-09-08
Income and Corporation Taxes Act 1988
2008-08-12
Income and Corporation Taxes Act 1988
2008-07-22
Income and Corporation Taxes Act 1988
2008-07-21
Income and Corporation Taxes Act 1988
2008-07-08
Income and Corporation Taxes Act 1988
2008-07-01
Income and Corporation Taxes Act 1988
2008-04-06
Income and Corporation Taxes Act 1988
2008-04-01
Income and Corporation Taxes Act 1988
2008-02-19
Income and Corporation Taxes Act 1988
2008-01-03
Income and Corporation Taxes Act 1988
2008-01-01
Income and Corporation Taxes Act 1988
2007-12-28
Income and Corporation Taxes Act 1988
2007-12-27
Income and Corporation Taxes Act 1988
2007-12-06
Income and Corporation Taxes Act 1988
2007-11-29
Income and Corporation Taxes Act 1988
2007-10-01
Income and Corporation Taxes Act 1988
2007-09-01
Income and Corporation Taxes Act 1988
2007-08-14
Income and Corporation Taxes Act 1988
2007-08-13
Income and Corporation Taxes Act 1988
2007-07-19
Income and Corporation Taxes Act 1988
2007-07-17
Income and Corporation Taxes Act 1988
2007-04-17
Income and Corporation Taxes Act 1988
2007-04-06
Income and Corporation Taxes Act 1988
2007-04-01
Income and Corporation Taxes Act 1988
2007-03-29
Income and Corporation Taxes Act 1988
2007-03-21
Income and Corporation Taxes Act 1988
2007-03-01
Income and Corporation Taxes Act 1988
2007-01-08
Income and Corporation Taxes Act 1988
Changes on 2007-01-08
@@ -4,7 +4,7 @@
### Income tax
#### Computation of income tax where no profits in year of assessment.
#### Case V income from land outside UK: corporation tax.
##### 1
@@ -110,7 +110,7 @@
### Corporation tax
#### Restriction on withdrawal of relief under section 303.
#### Spouses and civil partners.
##### 6
@@ -168,7 +168,7 @@
- (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Capital sums: . . . winding up or partnership change.
#### Relief for expenses.
##### 9
@@ -206,7 +206,7 @@
- (6) The provisions of the Income Tax Acts applied by this section do not include sections 1 to 5, . . . Part VII or sections 348 to 350 of this Act; and nothing in this section shall be taken to mean that income arising in any period is to be computed by reference to any other period (except in so far as this results from apportioning to different parts of a period income of the whole period).
#### Interpretation.
#### Approval of schemes.
##### 10
@@ -27780,7 +27780,7 @@
## SCHEDULE 31
#### The charge to income tax.
#### Application of lower rate to income from savings and distributions.
##### 1A
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#### Advance corporation tax and qualifying distributions.
#### Schedule A.
### Connected persons
@@ -28332,7 +28332,7 @@
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#### Schedule E.
#### Schedule F.
##### 56A
@@ -28836,7 +28836,7 @@
- (3) Relevant expenditure is expenditure incurred in making to the agent any payment in respect of expenses which have been or are to be incurred by the agent in connection with his functions under the scheme.
#### Rules for ascertaining duration of leases.
#### Saving for pre-1963 leases, and special relief for individuals.
##### 87A
@@ -28856,7 +28856,7 @@
- “taxed receipt” (see section 287(4) of that Act).
#### Relief for rent etc. not paid.
#### Appeals against determinations under sections 34 to 36 or Chapter 4 of Part 3 of ITTOIA 2005.
##### 88A
@@ -29506,7 +29506,7 @@
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#### Commencement of direction under section 50 or 51.
#### Treasury directions as respects Northern Ireland securities.
### Limited liability partnerships
@@ -30034,42 +30034,42 @@
#### Payments to Export Credit Guarantee Department.
#### Paying agents.
##### 140A
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##### 140B
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##### 140C
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##### 140D
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##### 140E
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##### 140F
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##### 140G
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##### 140H
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#### Definitions.
##### 140A
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##### 140B
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##### 140C
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##### 140D
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##### 140E
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##### 140F
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##### 140G
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##### 140H
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#### Definitions.
##### 144A
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@@ -33590,7 +33590,7 @@
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#### Exemptions from section 148.
#### Relief for contributions in respect of share option gains.
##### 440A
@@ -34076,7 +34076,7 @@
- (13) For the purposes of this section an insurance company which has elected under section 83YA(9) of the Finance Act 1989 (changes in value of assets brought into account: non-profit companies) to be treated as a non-profit company in relation to a period of account is to be regarded as a non-profit company in relation to the period of account.
#### Relief for necessary expenses.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 432F
@@ -34128,4495 +34128,4495 @@
- (8) Condition C is that the surplus arising since the last valuation shown in line 34 of the Form 58 of the non-profit fund, or any of the non-profit funds, in relation to which condition A or B is met in the periodical return for the current period of account is a negative amount.
#### U.K. company distributions not generally chargeable to corporation tax.
##### 434AZB
- (1) The amount of the relief allowable as mentioned in section 434AZA(1) is reduced by whichever of the following is the least—
- (a) the amount of the loss,
- (b) the amount specified in subsection (2), and
- (c) the amount specified in subsection (4).
- (2) The amount mentioned in subsection (1)(b) is—
- (a) where only condition A in section 434AZA is met, the relevant amount relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant amounts relating to them,
- (b) where only condition B is met, the amount of the relevant reduction relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant reductions relating to them, and
- (c) where both condition A and condition B are met, the aggregate of the amounts in paragraphs (a) and (b).
- (3) In subsection (2)—
- (a) “*relevant amount*”, in relation to a non-profit fund, means the amount shown in relation to the non-profit fund as the excess of the value of net admissible assets in line 51 of the Form 14 of the non-profit fund in the periodical return for the current period of account (as reduced by any amount which has had effect to reduce relief for losses for a previous accounting period), and
- (b) “*relevant reduction*”, in relation to a non-profit fund, means the reduction of the relevant admissible value of assets of the non-profit fund (other than structural assets) which is attributable to the arrangements (as so reduced).
- (4) The amount mentioned in subsection (1)(c) is—
- (a) if the relevant period of account is the current period of account, the amount referred to in section 434AZA(3) in the case of the non-profit fund, or of each of the non-profit funds, to which there has been a relevant addition in the relevant period of account, and
- (b) otherwise, so much of the amount shown in line 31 of the Form 58 of the non-profit fund or non-profit funds in the periodical return for the current period of account as is attributable to the amount so referred to.
##### 434AZC
- (1) For the purposes of sections 434AZA and 434AZB, a non-profit fund required to support a with-profits fund is to be treated as not being a non-profit fund.
- (2) Sections 434AZA and 434AZB apply to a non-profit part of a with-profits fund as if references to something shown in the Form 14 or Form 58 of the non-profit fund in a periodical return were to what would be so shown if there were a Form 14 or Form 58 of the non-profit part of the with-profits fund in the periodical return.
- (3) In sections 434AZA and 434AZB—
- “*arrangements*” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and
- “*structural assets*” has the same meaning as in section 83XA of the Finance Act 1989 (see subsection (3) of that section and any regulations made under it).
##### 434B
- (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 434C
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##### 434D
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##### 434E
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##### 436A
- (1) Profits arising to an insurance company from gross roll-up business—
- (a) are to be treated as income within Schedule D, and
- (b) are chargeable under Case VI of that Schedule.
- (2) For that purpose—
- (a) the gross roll-up business is to be treated separately, and
- (b) the profits from it are to be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.
- (3) In making that computation, sections 82 and 82B to 83AB 83ZA of the Finance Act 1989 apply with the necessary modifications.
- (4) If in any accounting period an insurance company incurs a loss, to be computed on the same basis as the profits, arising from its gross roll-up business—
- (a) the loss must be set off against the amount of any profits chargeable under this section for any subsequent accounting period, and
- (b) accordingly, the amount of the company's profits so charged in any such accounting period is to be treated as reduced by the amount of the loss or so much of that amount as cannot be relieved under this section against profits of an earlier accounting period.
- (5) Section 396 does not apply to a loss incurred by an insurance company on its gross roll-up business.
- (6) No loss to which section 396 applies may be set off under subsection (4) above against the amount of any profits chargeable under this section.
- (7) This section does not apply in relation to an insurance company for an accounting period if the profits of its long-term business for the accounting period are charged to tax under Case I of Schedule D.
##### 436B
- (1) Gains referable to gross roll-up business are not chargeable gains.
- (2) For the purposes of this section “*gains referable to gross roll-up business*” means gains which—
- (a) accrue to an insurance company on the disposal by it of assets of its long-term insurance fund, and
- (b) are referable (in accordance with section 432A) to gross roll-up business.
##### 437A
- (1) For the purposes of section 437 an annuity is a steep-reduction annuity if—
- (a) the amount of any payment in respect of the annuity (but not the term of the annuity) depends on any contingency other than the duration of a human life or lives;
- (b) the annuitant is entitled in respect of the annuity to payments of different amounts at different times; and
- (c) those payments include a payment (“*a reduced payment*”) of an amount which is substantially smaller than the amount of at least one of the earlier payments in respect of that annuity to which the annuitant is entitled.
- (2) Where there are different intervals between payments to which an annuitant is entitled in respect of any annuity, the question whether or not the conditions in subsection (1)(b) and (c) above are satisfied in the case of that annuity shall be determined by assuming—
- (a) that the annuitant’s entitlement, after the first payment, to payments in respect of that annuity is an entitlement to payments at yearly intervals on the anniversary of the first payment; and
- (b) that the amount to which the annuitant is assumed to be entitled on each such anniversary is equal to the annuitant’s assumed entitlement for the year ending with that anniversary.
- (3) For the purposes of subsection (2) above an annuitant’s assumed entitlement for any year shall be determined as follows—
- (a) the annuitant’s entitlement to each payment in respect of the annuity shall be taken to accrue at a constant rate during the interval between the previous payment and that payment; and
- (b) his assumed entitlement for any year shall be taken to be equal to the aggregate of the amounts which, in accordance with paragraph (a) above, are treated as accruing in that year.
- (4) In the case of an annuity to which subsection (2) above applies, the reference in section 437(1CB)(a) to the making of a reduced payment shall be construed as if it were a reference to the making of a payment in respect of that annuity which (applying subsection (3)(a) above) is taken to accrue at a rate that is substantially less than the rate at which at least one of the earlier payments in respect of that annuity is taken to accrue.
- (5) Where—
- (a) any question arises for the purposes of this section whether the amount of any payment in respect of any annuity—
- (i) is substantially smaller than the amount of, or
- (ii) accrues at a rate substantially less than,
an earlier payment in respect of that annuity, and
- (b) the annuitant or, as the case may be, every annuitant is an individual who is beneficially entitled to all the rights conferred on him as such an annuitant,
that question shall be determined without regard to so much of the difference between the amounts or rates as is referable to a reduction falling to be made as a result of the occurrence of a death.
- (6) Where the amount of any one or more of the payments to which an annuitant is entitled in respect of an annuity depends on any contingency, his entitlement to payments in respect of that annuity shall be determined for the purposes of section 437(1CA) to (1CC) and this section according to whatever (applying any relevant actuarial principles) is the most likely outcome in relation to that contingency.
- (7) Where any agreement or arrangement has effect for varying the rights of an annuitant in relation to a payment in respect of any annuity, that payment shall be taken, for the purposes of section 437(1CA) to (1CC) and this section, to be a payment of the amount to which the annuitant is entitled in accordance with that agreement or arrangement.
- (8) References in this section to a contingency include references to a contingency that consists wholly or partly in the exercise by any person of any option.
##### 438B
- (1) Where an asset held by an insurance company as an asset of its long-term insurance fund is held by the company as a member of a property investment LLP, the policy holders’ share of any income arising from, or chargeable gains accruing on the disposal of, the asset which—
- (a) is attributable to the company, and
- (b) would otherwise be referable by virtue of section 432A to pension business,
shall be treated for the purposes of the Corporation Tax Acts as referable to basic life assurance and general annuity business.
- (2) For the purposes of this section the property business of the insurance company for the purposes of which the asset is held shall be treated as a separate business.
- (3) Where (apart from this subsection) an insurance company would not be carrying on basic life assurance and general annuity business, it shall be treated as carrying on such business if any income or chargeable gains of the company are treated as referable to the business by virtue of subsection (1) above.
- (4) A company may be charged to tax by virtue of this section—
- (a) notwithstanding section 439A, and
- (b) whether or not the income or chargeable gains to which subsection (1) above applies is taken into account in computing the profits of the company for the purposes of any charge to tax in accordance with Case I of Schedule D.
- (5) The policy holders’ share of income or chargeable gains to which subsection (1) above applies—
- (a) shall not be treated as relevant profits for the purposes of section 88 of the Finance Act 1989 (corporation tax on policy holders’ fraction of profits), . . .
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
but the whole of the income or gains to which that subsection applies shall be chargeable to tax at the rate provided by that section.
- (6) So far as income is brought into account as mentioned in section 83(2) of the Finance Act 1989, sections 432B to 432F (apportionment of receipts brought into account) have effect as if subsection (1) above did not apply.
##### 438C
- (1) For the purposes of section 438B the policy holders’ share of any income or chargeable gains to which subsection (1) of that section applies is what remains after deducting the shareholders’ share.
- (2) The shareholders’ share is found by applying to the whole the fraction—
$$AB$where—A is the amount of the profits of the company for the period which are chargeable to tax under section 436; andB is an amount equal to the excess of—(a) the amount taken into account as receipts of the company in computing those profits (apart from premiums and sums received by virtue of a claim under a reinsurance contract), over(b) the amounts taken into account as expenses in computing those profits.$
- (3) Where there is no such excess as is mentioned in subsection (2) above, or where the profits are greater than any excess, the whole of the income or gains is treated as the shareholders’ share.
- (4) Subject to that, where there are no profits none of the income or gains is treated as the shareholders’ share.
##### 439A
If a company does not carry on life assurance business other than reinsurance business, and none of that business is of a type excluded from this section by regulations made by the Board, the profits of that business shall be charged to tax in accordance with Case I of Schedule D and not otherwise.
##### 439B
- (1) Where a company carries on life reinsurance business and the profits arising from that business are not charged to tax in accordance with the provisions applicable to Case I of Schedule D, then, subject as follows, those profits shall be treated as income within Schedule D and be chargeable to tax under Case VI of that Schedule, and for that purpose—
- (a) that business shall be treated separately, and
- (b) subject to paragraph (a) above, the profits from it shall be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.
- (2) Subsection (1) above does not apply to so much of reinsurance business of any description excluded from that subsection by regulations made by the Board.
- (3) In making the computation referred to in subsection (1) above—
- (a) sections 82 and 82B to 83AB of the Finance Act 1989 shall apply with the necessary modifications . . . , and
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (c) there may be set off against the profits any loss, to be computed on the same basis as the profits, which has arisen from life reinsurance business in any previous accounting period beginning on or after 1st January 1995.
- (4) Section 396 shall not be taken to apply to a loss incurred by a company on life reinsurance business.
- (5) Nothing in section 128 or 399(1) shall affect the operation of this section.
- (6) Gains accruing to a company which are referable (in accordance with section 432A) to its life reinsurance business shall not be chargeable gains.
- (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 440B
- (1) The following provisions apply where the profits of a company’s life assurance business are charged to tax in accordance with Case I of Schedule D.
- (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (3) Section 440(1) and (2) apply as if the only categories set out in subsection (4) of that section were—
- (a) assets of the long-term insurance fund, and
- (b) other assets.
- (4) Section 440A applies as if for paragraphs (a) to (e) of subsection (2) there were substituted—
- (”) so many of the securities as are identified in the company’s records as securities by reference to the value of which there are to be determined benefits provided for under policies or contracts the effecting of all (or all but an insignificant proportion) of which constitutes the carrying on of long-term business, shall be treated for the purposes of corporation tax as a separate holding linked solely to that business, and
- (b) any remaining securities shall be treated for those purposes as a separate holding which is not of the description mentioned in the preceding paragraph.”.
- (5) Section 212(1) of the 1992 Act does not apply, but without prejudice to the bringing into account of any amounts deferred under section 213(1) or 214A(2) of that Act from any accounting period beginning before 1st January 1995.
##### 440C
- (1) Subsection (2) makes provision for a case where—
- (a) subsection (4) of section 431G applies in relation to the profits of the life assurance business of an insurance company for any accounting period, but
- (b) the profits of that business for a succeeding accounting period fall to be charged to tax in accordance with Case I of Schedule D by virtue of subsection (3) of that section.
- (2) The loss referred to in section 431G(4)(b) (less any loss for the same accounting period set off under section 436A for any intervening accounting period and any amount deducted for any such period in respect of the loss by virtue of section 85A(3)(b) of the Finance Act 1989) may be set off under section 393 against profits of that succeeding accounting period (without being reduced in accordance with section 434A(2)(a)).
- (3) In determining whether any loss has been set off under section 436A for any intervening accounting period, or whether any amount has been deducted for any such period in respect of the loss by virtue of section 85A(3)(b) of the Finance Act 1989, losses of earlier accounting periods are to be assumed to be set off before those of later accounting periods.
- (4) Subsection (5) makes provision for a case where—
- (a) a loss arises to an insurance company for an accounting period for which the profits of its life assurance business fall to be charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3)(b),
- (b) the profits of that business for a subsequent accounting period are charged to tax under the I minus E basis, and
- (c) had those profits (instead) been charged to tax in accordance with Case I of Schedule D, any of that loss would have been available to be set off against them under section 393.
- (5) The loss is to be treated for the purposes of the operation of section 436A in relation to the subsequent accounting period as if it were a loss arising from its gross roll-up business in the accounting period in which it arose.
- (6) Subsections (7) and (8) make provision for a case where—
- (a) the profits of the life assurance business of an insurance company for an accounting period are charged to tax under the I minus E basis,
- (b) the profits of that business for its next accounting period fall to be charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3), and
- (c) that prevents the giving of relief in accordance with section 86(8) of the Finance Act 1989 (acquisition expenses relieved in fractions under section 76).
- (7) Any relief which would have been so given in—
- (a) the next accounting period, or
- (b) any subsequent accounting period for which the profits of the company's life assurance business continue to be charged to tax in accordance with Case I of Schedule D,
may be given by set-off against any gains treated as accruing under section 213(1) of the 1992 Act at the end of the accounting period.
- (8) But if the profits of the company's life assurance business for a subsequent accounting period are charged to tax under the I minus E basis, any relief not previously given under subsection (7) is to be treated for the purposes of the operation of section 76 in relation to the first subsequent accounting period for which profits are so charged as if it were an amount which is to be relieved under that section by virtue of section 86(8) and (9) of the Finance Act 1989.
#### Application of lower rate to company distributions.
##### 434AZB
- (1) The amount of the relief allowable as mentioned in section 434AZA(1) is reduced by whichever of the following is the least—
- (a) the amount of the loss,
- (b) the amount specified in subsection (2), and
- (c) the amount specified in subsection (4).
- (2) The amount mentioned in subsection (1)(b) is—
- (a) where only condition A in section 434AZA is met, the relevant amount relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant amounts relating to them,
- (b) where only condition B is met, the amount of the relevant reduction relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant reductions relating to them, and
- (c) where both condition A and condition B are met, the aggregate of the amounts in paragraphs (a) and (b).
- (3) In subsection (2)—
- (a) “*relevant amount*”, in relation to a non-profit fund, means the amount shown in relation to the non-profit fund as the excess of the value of net admissible assets in line 51 of the Form 14 of the non-profit fund in the periodical return for the current period of account (as reduced by any amount which has had effect to reduce relief for losses for a previous accounting period), and
- (b) “*relevant reduction*”, in relation to a non-profit fund, means the reduction of the relevant admissible value of assets of the non-profit fund (other than structural assets) which is attributable to the arrangements (as so reduced).
- (4) The amount mentioned in subsection (1)(c) is—
- (a) if the relevant period of account is the current period of account, the amount referred to in section 434AZA(3) in the case of the non-profit fund, or of each of the non-profit funds, to which there has been a relevant addition in the relevant period of account, and
- (b) otherwise, so much of the amount shown in line 31 of the Form 58 of the non-profit fund or non-profit funds in the periodical return for the current period of account as is attributable to the amount so referred to.
##### 434AZC
- (1) For the purposes of sections 434AZA and 434AZB, a non-profit fund required to support a with-profits fund is to be treated as not being a non-profit fund.
- (2) Sections 434AZA and 434AZB apply to a non-profit part of a with-profits fund as if references to something shown in the Form 14 or Form 58 of the non-profit fund in a periodical return were to what would be so shown if there were a Form 14 or Form 58 of the non-profit part of the with-profits fund in the periodical return.
- (3) In sections 434AZA and 434AZB—
- “*arrangements*” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and
- “*structural assets*” has the same meaning as in section 83XA of the Finance Act 1989 (see subsection (3) of that section and any regulations made under it).
##### 434B
- (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 434C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 434D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 434E
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 436A
- (1) Profits arising to an insurance company from gross roll-up business—
- (a) are to be treated as income within Schedule D, and
- (b) are chargeable under Case VI of that Schedule.
- (2) For that purpose—
- (a) the gross roll-up business is to be treated separately, and
- (b) the profits from it are to be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.
- (3) In making that computation, sections 82 and 82B to 83AB 83ZA of the Finance Act 1989 apply with the necessary modifications.
- (4) If in any accounting period an insurance company incurs a loss, to be computed on the same basis as the profits, arising from its gross roll-up business—
- (a) the loss must be set off against the amount of any profits chargeable under this section for any subsequent accounting period, and
- (b) accordingly, the amount of the company's profits so charged in any such accounting period is to be treated as reduced by the amount of the loss or so much of that amount as cannot be relieved under this section against profits of an earlier accounting period.
- (5) Section 396 does not apply to a loss incurred by an insurance company on its gross roll-up business.
- (6) No loss to which section 396 applies may be set off under subsection (4) above against the amount of any profits chargeable under this section.
- (7) This section does not apply in relation to an insurance company for an accounting period if the profits of its long-term business for the accounting period are charged to tax under Case I of Schedule D.
##### 436B
- (1) Gains referable to gross roll-up business are not chargeable gains.
- (2) For the purposes of this section “*gains referable to gross roll-up business*” means gains which—
- (a) accrue to an insurance company on the disposal by it of assets of its long-term insurance fund, and
- (b) are referable (in accordance with section 432A) to gross roll-up business.
##### 437A
- (1) For the purposes of section 437 an annuity is a steep-reduction annuity if—
- (a) the amount of any payment in respect of the annuity (but not the term of the annuity) depends on any contingency other than the duration of a human life or lives;
- (b) the annuitant is entitled in respect of the annuity to payments of different amounts at different times; and
- (c) those payments include a payment (“*a reduced payment*”) of an amount which is substantially smaller than the amount of at least one of the earlier payments in respect of that annuity to which the annuitant is entitled.
- (2) Where there are different intervals between payments to which an annuitant is entitled in respect of any annuity, the question whether or not the conditions in subsection (1)(b) and (c) above are satisfied in the case of that annuity shall be determined by assuming—
- (a) that the annuitant’s entitlement, after the first payment, to payments in respect of that annuity is an entitlement to payments at yearly intervals on the anniversary of the first payment; and
- (b) that the amount to which the annuitant is assumed to be entitled on each such anniversary is equal to the annuitant’s assumed entitlement for the year ending with that anniversary.
- (3) For the purposes of subsection (2) above an annuitant’s assumed entitlement for any year shall be determined as follows—
- (a) the annuitant’s entitlement to each payment in respect of the annuity shall be taken to accrue at a constant rate during the interval between the previous payment and that payment; and
- (b) his assumed entitlement for any year shall be taken to be equal to the aggregate of the amounts which, in accordance with paragraph (a) above, are treated as accruing in that year.
- (4) In the case of an annuity to which subsection (2) above applies, the reference in section 437(1CB)(a) to the making of a reduced payment shall be construed as if it were a reference to the making of a payment in respect of that annuity which (applying subsection (3)(a) above) is taken to accrue at a rate that is substantially less than the rate at which at least one of the earlier payments in respect of that annuity is taken to accrue.
##### 440D
Schedule 19ABA (which makes modifications of this Act in relation to BLAGAB group reinsurers) shall have effect.
##### 441B
- (1) This section applies to land in the United Kingdom which—
- (a) is held by a company as an asset linked to the company’s overseas life assurance business, or
- (b) is held by a company which is charged to tax under Case I of Schedule D in respect of its life assurance business as an asset by reference to the value of which benefits under any policy or contract are to be determined, where the policy or contract (or, in the case of a reinsurance contract, the underlying policy or contract) is held by a person not residing in the United Kingdom.
- (2) Income arising from land to which this section applies shall be treated for the purposes of this Chapter as referable to basic life assurance and general annuity business.
- (2A) For the purposes of subsection (2) above a Schedule A business for the exploitation of any land to which this section applies shall be treated as a separate business from any other such business.
- (3) Where (apart from this subsection) an insurance company would not be carrying on basic life assurance and general annuity business it shall be treated as carrying on such business if any income of the company is treated as referable to such business by subsection (2) above.
- (4) A company may be charged to tax by virtue of this section—
- (a) notwithstanding section 439A, and
- (b) whether or not the income to which subsection (2) above relates is taken into account in computing the profits of the company for the purposes of any charge to tax in accordance with Case I of Schedule D.
- (5) In this section “*land*” has the same meaning as in Schedule 19AA.
##### 442A
- (1) Where an insurance company reinsures any risk in respect of a policy or contract attributable to its basic life assurance and general annuity business, the investment return on the policy or contract shall be treated as accruing to the company while the risk remains reinsured by the company under the reinsurance arrangement and shall be charged to tax under Case VI of Schedule D.
- (2) The Board may make provision by regulations as to the amount of investment return to be treated as accruing in each accounting period during which the reinsurance arrangement is in force.
- (3) The regulations may, in particular, provide that the investment return to be treated as accruing to the company in respect of a policy or contract in any accounting period shall be calculated by reference to—
- (a) the aggregate of the sums paid by the company to the reinsurer during that accounting period and any earlier accounting periods by way of premium or otherwise;
- (b) the aggregate of the sums paid by the reinsurer to the company during that accounting period and any earlier accounting periods by way of commission or otherwise;
- (c) the aggregate amount of the net investment return treated as accruing to the company in any earlier accounting periods, that is to say, net of tax at such rate as may be prescribed; and
- (d) such percentage rate of return as may be prescribed.
- (3A) Where a transfer of the reinsurance arrangement from one insurance company (“*the transferor*”) to another (“*the transferee*”) is effected by novation or an insurance business transfer scheme, for the purpose of calculating the investment return to be treated as accruing to the transferee in respect of the policy or contract after the transfer, the references to the company in subsection (3)(a), (b) and (c) above include (as well as the transferee)—
- (a) the transferor, and
- (b) any insurance company from which the reinsurance arrangement was transferred on an earlier transfer effected by novation or an insurance business transfer scheme.
- (4) The regulations shall provide that the amount of investment return to be treated as accruing . . . in respect of a policy or contract in the final accounting period during which the policy or contract is in force is the amount, ascertained in accordance with regulations, by which the profit over the whole period during which the policy or contract, and the reinsurance arrangement, were in force exceeds the aggregate of the amounts treated as accruing in earlier accounting periods.
- (5) Regulations under this section—
- (a) may exclude from the operation of this section such descriptions of insurance company, such descriptions of policies or contracts and such descriptions of reinsurance arrangements as may be prescribed;
- (b) may make such supplementary provision as to the ascertainment of the investment return to be treated as accruing to the company as appears to the Board to be appropriate, including provision requiring payments made during an accounting period to be treated as made on such date or dates as may be prescribed; and
- (c) may make different provision for different cases or descriptions of case.
- (6) In this section “*prescribed*” means prescribed by regulations under this section.
##### 444AZA
- (1) This section applies where—
- (a) an insurance business transfer scheme has effect to transfer life assurance business from one person (“*the transferor*”) to another (“*the transferee*”),
- (b) assuming the transferor had continued to carry on the business transferred after the transfer, the amount of any profits would have been charged to tax in respect of that business under the I minus E basis,
- (c) the profits in respect of the business transferred for the first period of account of the transferee ending after the date on which the transfer takes effect are charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3), and
- (d) the conditions in paragraphs (a) and (b) of section 343(1) are satisfied in relation to the business transferred (construing references to an event as to a transfer).
- (2) Any loss which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to be set off against profits chargeable under section 436A (a “Case VI loss”) shall instead be treated as a loss of the transferee (a “Case I loss”) available to be set off against GRBP in relation to a period of account.
- (3) For the purposes of subsection (2) above “*GRBP*”, in relation to a period of account, is—
$P×GRBTLTL$
where—
- *P* is the amount of such profits of the transferee's life assurance business for the period of account as relate to the business transferred (that amount being determined in accordance with section 343(9) and (10), where applicable),
- *GRBTL* is the mean of the opening and closing liabilities of the transferred gross roll-up business for the period of account, and
- *TL* is the mean of the opening and closing liabilities of the transferred life assurance business for the period of account.
- (4) Where the transfer is of part only of the transferor's long-term business, subsection (2) above shall apply only to such part of any Case VI loss to which it would otherwise apply as is appropriate.
- (5) Any question arising as to the operation of subsection (4) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but both the transferor and the transferee shall be entitled to appear and be heard or to make representations in writing.
#### Married couple's allowance (post-5th December 2005 marriages and civil partnerships etc.)
##### 444AZB
- (1) This section applies where—
- (a) an insurance business transfer scheme has effect to transfer life assurance business from one person (“*the transferor*”) to another (“*the transferee*”),
- (b) assuming the transferor had continued to carry on the business transferred after the transfer, the amount of any profits would have been charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3),
- (c) the profits in respect of the business transferred for the first period of account of the transferee ending after the date on which the transfer takes effect are charged to tax under the I minus E basis, and
- (d) the conditions in paragraphs (a) and (b) of section 343(1) are satisfied in relation to the business transferred (construing references to an event as to a transfer).
- (2) The relevant fraction of any loss which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to be set off against profits of that business (a “Case I loss”) shall instead be treated as a loss of the transferee (a “Case VI loss”) available to be set off against the amount of such profits chargeable under section 436A for a period of account as relate to the business transferred (that amount being determined in accordance with section 343(9) and (10), where applicable).
- (3) For the purposes of subsection (2) above “*the relevant fraction*”, in relation to a period of account, is—
$GRBTLTL$
where—
- *GRBTL* is the mean of the opening and closing liabilities of the transferred gross roll-up business for the period of account, and
- *TL* is the mean of the opening and closing liabilities of the transferred life assurance business for the period of account.
- (4) Where the transfer is of part only of the transferor's long-term business, subsection (2) above shall apply only to such part of the amount of any Case I loss to which it would otherwise apply as is appropriate.
- (5) Any question arising as to the operation of subsection (4) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but both the transferor and the transferee shall be entitled to appear and be heard or to make representations in writing.
##### 444AA
- (1) This section applies where an insurance business transfer scheme has effect to transfer the whole of the long-term business of one person (“*the transferor*”).
- (2) Where the last period covered by a periodical return of the transferor ends otherwise than immediately before the transfer, there is to be deemed for the purposes of corporation tax to be a periodical return of the transferor covering the period—
- (a) beginning immediately after the last period ending before the transfer which is covered by an actual periodical return of the transferor, and
- (b) ending immediately before the transfer,
containing such entries as would have been included in an actual periodical return of the transferor covering that period (and so making that period a period of account of the transferor).
- (3) Where the last period covered by a periodical return of the transferor (whether or not by virtue of subsection (2) above) ends immediately before the transfer, there is to be deemed for the relevant purpose to be a periodical return of the transferor—
- (a) covering the time of the transfer, and
- (b) containing such entries as would have been included in an actual periodical return covering the time of the transfer,
(and so making the time of the transfer a period of account of the transferor for the relevant purpose).
- (4) Where the last period covered by a periodical return of the transferor ends after the transfer, the periodical return covering that period is to be ignored for all purposes of corporation tax other than the relevant purpose.
- (5) In this section “*the relevant purpose*” means determining for the purposes of section 83(2B) of the Finance Act 1989 whether a transfer is brought into account as part of total expenditure.
- (6) For the purposes of this section “*insurance business transfer scheme*” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).
- (7) Where this section applies in relation to a transfer in a case in which the transferor continues, after the transfer, to carry on insurance business which is not long-term business—
- (a) references in this section to the last period covered by a periodical return (or deemed periodical return) of the transferor shall be taken to be references to the last period covered by a periodical return (or deemed periodical return) of the transferor containing entries relating to long-term business;
- (b) subsection (4) above is to be read as if after “other than” there were inserted the purposes of sections 444BA to 444BD and.
##### 444AB
- (1) This section applies where, immediately after an insurance business transfer scheme has effect to transfer long-term business from one person (“*the transferor*”) to one or more others (“*the transferee*” or “*the transferees*”), the transferor—
- (a) does not carry on long-term business, but
- (b) holds assets which, immediately before the transfer, were assets of its long-term insurance fund.
- (2) The transferor shall be charged to tax under Case VI of Schedule D in respect of the taxable amount as if it had been received by the transferor during the accounting period beginning immediately after the day of the transfer.
- (3) If the transferor was charged to tax on the profits of its life assurance business under Case I of Schedule D for the accounting period ending immediately before the transfer, the taxable amount is the whole of the previously untaxed amount.
- (4) Otherwise, the taxable amount is the non-BLAGAB fraction of the previously untaxed amount.
- (5) The previously untaxed amount is the lesser of—
- (a) if there are no retained liabilities, the fair value of the retained assets or, if there are, so much of the fair value of the retained assets as exceeds the amount of the retained liabilities, and
- (b) the amount by which the fair value of the assets of the transferor’s long-term insurance fund immediately before the transfer exceeds the amount of the relevant pre-transfer liabilities.
- (6) In subsection (5) above “*fair value*”, in relation to assets, means the amount which would be obtained from an independent person purchasing them or, if the assets are money, its amount.
- (6A) In subsection (5) above—
- (a) “*the retained assets*” means such of the assets held by the transferor immediately after the transfer as were assets of its long-term insurance fund immediately before the transfer; and
- (b) “*the retained liabilities*” means such of the liabilities of the transferor immediately after the transfer as were included in column 1 of line 14, 17, 22, 31 or 38 of Form 14 in the periodical return of the transferor covering the period of account ending immediately before the transfer.
- (7) Subject to subsection (8) below, the amount of the relevant pre-transfer liabilities is the aggregate of the amounts shown in column 1 of lines 14 and 49 of Form 14 in the periodical return of the transferor covering the period of account ending immediately before the transfer.
- (8) If the amount of the liabilities transferred exceeds the value of the assets so transferred, as brought into account for the first period of account of the transferee (or any of the transferees) ending after the transfer, the amount of the relevant pre-transfer liabilities is the amount arrived at by deducting the excess from the aggregate of the amounts shown as mentioned in subsection (7) above.
- (9) For the purposes of subsection (4) above the non-BLAGAB fraction of the previously untaxed amount is the fraction of which—
- (a) the numerator is the amount of the liabilities transferred, apart from those which are liabilities of basic life assurance and general annuity business, and
- (b) the denominator is the amount of the liabilities transferred.
- (10) References in this section to assets held by the transferor after the transfer do not include any held on trust for the transferee or any of the transferees.
- (11) For the purposes of this section “*insurance business transfer scheme*” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).
##### 444ABA
- (1) This section applies where—
- (a) section 444AB applies in relation to a transfer in the case of which there are retained liabilities, and
- (b) in any accounting period of the transferor beginning after the day of the transfer there is a reduction in the amount of the retained liabilities occasioned otherwise than by the making of a payment in or towards their discharge.
- (2) The transferor shall be charged to tax under Case VI of Schedule D in respect of the taxable amount as if it had been received by the transferor in the accounting period in which the reduction occurs.
- (3) If the transferor was charged to tax on the profits of its life assurance business under Case I of Schedule D for the accounting period ending immediately before the transfer, the taxable amount is the whole amount of the reduction.
- (4) Otherwise the taxable amount is the non-BLAGAB fraction of the amount of the reduction.
- (5) The non-BLAGAB fraction of the amount of the reduction is the fraction of which—
- (a) the numerator is the amount of the liabilities transferred, apart from those which are liabilities of basic life assurance and general annuity business, and
- (b) the denominator is the amount of the liabilities transferred.
- (6) Where in any accounting period of the transferor beginning after the transfer there is an increase in the amount of the retained liabilities, this section applies in relation to subsequent accounting periods of the transferor as if the amount of the retained liabilities were reduced by the amount of the increase.
- (7) Where an amount is shown as post-transfer reduction liabilities in the transferor’s accounts for any accounting period beginning after the transfer, this section applies as if the amount of the retained liabilities at the end of that accounting period (and the beginning of the next) were increased by the amount so shown.
- (8) In subsection (7) above “*post-transfer reduction liabilities*” means liabilities of the transferor to make payments to relevant persons which, in accordance with the terms of the insurance business transfer scheme, have arisen in consequence of a reduction in the amount of the retained liabilities at any time after the transfer.
- (9) In subsection (8) above “*relevant persons*” means—
- (a) if the transferor’s life assurance business immediately before the transfer was mutual business, persons who were policy holders or annuitants, or members of the transferor, at that time, and
- (b) in any other case, persons who were policy holders or annuitants at that time.
##### 444ABAA
- (1) For the purposes of section 444AB the relevant amount in relation to assets that are non-profit fund transferred assets is—
$$FVA-(ABTO+TL)$where—FVA is the fair value of the assets on the transfer date,ABTO is any amount brought into account in respect of the assets as a business transfer-out and shown (or treated as shown) in line 32 of Form 40 in the periodical return of the transferor for the period of account of the transferor including the transfer date, andTL is the amount of any non-profit fund transferred liabilities which are shown (or treated as shown) in any of lines 17, 21 to 23 and 31 to 38, but not in line 61, in Form 14 in the periodical return for the period of account of the transferor ending (or treated as ending by section 444AA) immediately before the transfer date or, if there is no period of account of the transferor so ending (or treated as so ending), the amount of any liabilities which would be so shown if one did.$
- (2) In subsection (1) “*non-profit fund transferred liabilities*” means such of the liabilities of the transferor's long-term insurance fund as are transferred from the transferor to the transferee by the insurance business transfer scheme and were, immediately before their transfer, liabilities of a non-profit fund of the transferor.
- (3) See section 444AA for the meaning of “the transfer date” in this section.
#### Meaning of “distribution”.
##### 444ABB
- (1) For the purposes of section 444AB the relevant amount in relation to assets that are retained assets is the lesser of FVA and UTA, where—
- (a) FVA is the fair value of the assets on the transfer date, and
- (b) UTA is the amount by which the fair value of the assets of the long-term insurance fund of the transferor immediately before the transfer date exceeds the amount shown (or treated as shown) in line 32 of Form 40 in the periodical return of the transferor covering the transfer date.
- (2) See section 444AA for the meaning of “the transfer date” in this section.
##### 444ABBA
- (1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“*the transferor*”) to another (“*the transferee*”).
- (2) If the transferor and the transferee jointly elect, the transferee (and not the transferor) is chargeable to any amount of additional corporation tax to which the transferor would otherwise be chargeable by virtue of section 444AB(4) in relation to relevant non-transferred assets.
- (3) An election under subsection (2) above—
- (a) is to be irrevocable, and
- (b) is to be made by notice to an officer of Revenue and Customs no later than the end of the period of 90 days beginning with the day following the transfer date,
and a copy of the notice containing the election must accompany the tax return of the transferee for the first accounting period ending after the transfer. Paragraphs 54 to 60 of Schedule 18 to the Finance Act 1998 (claims and elections for corporation tax purposes) do not apply to such an election.
- (4) Where an election under subsection (2) above has been made, the transferor must inform the transferee of—
- (a) the amount of any additional corporation tax to which the transferor considers the election to apply, and
- (b) the day on which that tax is due and payable,
no later than the end of the period of 8 months beginning with the day following the transfer date.
- (5) Tax chargeable on the transferee by virtue of an election under subsection (2) above—
- (a) is due in accordance with section 59D of the Management Act on the day on which it would have been due if no election had been made, and
- (b) for the purposes of that section, is to be treated as tax payable by the transferor (and not as tax payable by the transferee).
- (6) See section 444AA for the meaning of “the transfer date” in this section.
##### 444ABC
- (1) This section applies where an insurance business transfer scheme has effect to transfer part (but not the whole or substantially the whole) of the long-term business of a person (“*the transferor*”) to another person (“*the transferee*”) and the condition in subsection (2) below is met.
- (2) That condition is that any of the assets of the transferor's long-term insurance fund which are transferred from the transferor to the transferee by the insurance business transfer scheme are not, immediately after their transfer—
- (a) if the transferee is an insurance company, assets of the transferee's long-term insurance fund, or
- (b) if the transferee is not an insurance company, assets of a with-profits fund of the transferee,
(“relevant non-transferred assets”).
- (3) The relevant amount in relation to the relevant non-transferred assets (see subsection (4) below) is to be taken into account under section 83(2) of the Finance Act 1989 as an increase in value of the assets of the long-term insurance fund of the transferor for the period of account covering the transfer date.
- (4) The relevant amount in relation to the relevant non-transferred assets is—
$$FVA-BTO$whereFVA is the fair value of the assets on the transfer date, andBTO is any amount brought into account in respect of the assets as a business transfer-out.$
- (5) See section 444AA for the meaning of “the transfer date” in this section.
##### 444ABD
- (1) Any profits representing the amount by which—
- (a) the value of the liabilities transferred by an insurance business transfer scheme, exceeds
- (b) the value of the assets transferred by the insurance business transfer scheme shown (or treated as shown) in line 32 of the periodical return of the transferor for the period of account of the transferor including the transfer date,
are to be taken into account as profits of that period of account.
- (2) See section 444AA for the meaning of “the transfer date” in this section.
##### 444AC
- (1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“*the transferor*”) to another (“*the transferee*”).
- (2) If—
- (a) the transferee's line 31 amount in relation to the transfer, exceeds
- (b) the aggregate amount of the liabilities to policy holders and annuitants transferred to the transferee and of any relevant debts,
the excess is not to be regarded as a business transfer-in of the transferee for the purposes of section 83(2)(e) of the Finance Act 1989.
- (2A) Subject to subsections (2C) and (2D) below, subsection (2B) below applies if—
- (a) the aggregate amount of the liabilities to policy holders and annuitants transferred to the transferee and of any relevant debts, exceeds
- (b) the transferee's line 31 amount in relation to the transfer.
- (2B) Where this subsection applies—
- (a) the life assurance part of the excess is to be taken into account as a receipt of the transferee in computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits of its life assurance business for the period of account of the transferee in which the transfer takes place (“*the relevant period of account*”); and
- (b) the relevant proportion of the excess is to be taken into account as a receipt of the transferee in so computing the profits of each category of its life assurance business for the relevant period of account;
and, for this purpose, “*the life assurance part of the excess*” means the proportion of the excess that the liabilities of the transferee's life assurance business that are transferred bear to the total liabilities transferred and “*the relevant proportion*”, in relation to a category of the transferee's life assurance business, is the proportion that the liabilities of that category that are transferred bear to the total liabilities transferred.
- (2C) Subsection (2B) above does not require the life assurance part of the excess to be taken into account as a receipt of the transferee in so computing the profits of its life assurance business for the relevant period of account if—
- (a) transferred liabilities of an aggregate amount equal to the life assurance part of the excess are not taken into account in so computing those profits for that period of account, and
- (b) the amount of the closing liabilities of that period of account is taken into account as opening liabilities in so computing those profits for the next period of account.
- (2D) Subsection (2B) above does not require the relevant proportion of the excess to be taken into account as a receipt of the transferee in so computing the profits of a category of its life assurance business for the relevant period of account if—
- (a) transferred liabilities of an aggregate amount equal to the relevant proportion of the excess are not taken into account in so computing those profits for that period of account, and
- (b) the amount of the closing liabilities of that period of account is taken into account as opening liabilities in so computing those profits for the next period of account.
- (2E) In subsections (2C)(a) and (2D)(a) above “*transferred liabilities*” means—
- (a) liabilities to policy holders or annuitants at the end of the relevant period of account that were transferred to the transferee, and
- (b) payments made to discharge, during that period of account, liabilities to policy holders or annuitants that were transferred to the transferee.
- (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (4) In this section “*relevant debts*” means debts which become debts of the transferee's long-term insurance fund as a result of the transfer.
- (5) But if—
- (a) the aggregate amount of any relevant reinsurance amounts and of the fair value, as at the date of the transfer, of the assets which become assets of the transferee's long-term insurance fund as a result of the transfer, exceeds
- (b) the transferee's line 31 amount in relation to the transfer,
the amount of any relevant debts for the purposes of this section is to be reduced (but not below nil) by the excess.
- (5A) In subsection (5)(a) above “*relevant reinsurance amounts*” means—
- (a) amounts which are comprised in line 16 of Form 14 in the periodical return of the transferor covering the period ending immediately before the transfer (or would be so comprised if the transferor drew up a periodical return covering that period), or
- (b) other amounts which arise under contracts of reinsurance in relation to which the reinsurer is the transferee and which, as at the date of the transfer, have fallen due to the transferor,
and which (in either case) do not become assets of the transferee's long-term insurance fund as a result of the transfer because (and only because) they arise under contracts of reinsurance in relation to which the reinsurer is the transferee.
- (6) In determining the amount of the liabilities transferred for the purposes of this section, there is to be disregarded any reduction in the transferee's liabilities resulting from reinsurance under a contract of reinsurance which is a relevant financial reinsurance contract (within the meaning of section 82C of the Finance Act 1989).
- (7) But where—
- (a) such a reduction results from reinsurance under a contract which was entered into by the transferor as cedant before the day on which the transfer takes place, and
- (b) the transferor's rights and obligations under the contract are transferred to the transferee under the transfer,
the amount of the reduction that would (apart from this subsection) be disregarded under subsection (6) above shall be reduced (but not below nil) by the amount given by subsection (8) below or, if less, the amount given by subsection (9) below.
- (8) The amount given by this subsection is the amount by which the liabilities at the end of the closing period which fell to be taken into account in computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits of the transferor's business for that period were reduced as a result of reinsurance under the contract.
- (9) The amount given by this subsection is the amount given by paragraph (a) below reduced (but not below nil) by the amount given by paragraph (b) below—
- (a) the amount given by this paragraph is the aggregate of the relevant amounts for any accounting period, and for this purpose the relevant amount for an accounting period is the amount in sub-paragraph (i) or (ii) below or, where applicable, the aggregate of those amounts—
- (i) the amount by which the profits of the transferor's business, computed in accordance with the provisions of this Act applicable to Case I of Schedule D, were increased for that accounting period as a result of reinsurance under the contract;
- (ii) the amount by which the losses of the transferor's business, so computed, were reduced for that accounting period as a result of reinsurance under the contract; and
- (b) the amount given by this paragraph is the aggregate of the relevant amounts for any accounting period, and for this purpose the relevant amount for an accounting period is the amount in sub-paragraph (i) or (ii) below or, where applicable, the aggregate of those amounts—
- (i) the amount by which the profits of the transferor's business, so computed, were reduced for that accounting period as a result of a reduction in reinsurance under the contract;
- (ii) the amount by which the losses of the transferor's business, so computed, were increased for that accounting period as a result of a reduction in reinsurance under the contract.
- (10) In subsections (8) and (9) above—
- “*the closing period*” means the accounting period of the transferor ending with the day on which the transfer takes place;
- “the transferor's business” means—the transferor's life assurance business, andany category of its life assurance business to which the liabilities relate.
- (11) For the purposes of this section and section 444ACA—
- “*fair value*” has the meaning given by section 444AB(6);
- “*insurance business transfer scheme*” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).
##### 444ACZA
- (1) This section applies where an insurance business transfer scheme has effect to transfer part (but not the whole or substantially the whole) of the long-term business of a person (“*the transferor*”) to another person (“*the transferee*”) and the condition in subsection (2) below is met.
- (2) The condition is that the transferor did not carry on life assurance business that is mutual business during the period of account of the transferor covering the transfer date.
- (3) The amount which (apart from this section) would be regarded as other income of the transferee for the purposes of section 83(2)(e) of the Finance Act 1989 for the period of account of the transferee which includes the transfer date is to be reduced by an amount equal to the transferred surplus.
- (4) In subsection (4) above “*the transferred surplus*” means such part of the amount shown (or treated as shown) in line 13 of Form 14 in the periodical return of the transferor covering the last period of account of the transferor ending before the transfer date as it is just and reasonable to regard as being attributable to the transfer.
- (5) See section 444AA for the meaning of “the transfer date” in this section.
##### 444ACA
- (1) This section applies where an insurance business transfer scheme (see section 444AC(11)) has effect to transfer long-term business from one company (“*the transferor*”) to another (“*the transferee*”).
- (2) If—
- (a) immediately before the transfer, the assets of the long-term insurance fund of the transferee comprise or include relevant shares or an interest in such shares, and
- (b) the fair value (see section 444AC(11)) of the relevant shares, or of that interest, is reduced (whether or not to nil) as a result of the transfer,
an amount equal to that reduction in fair value is to be taken into account under section 83(2) of the Finance Act 1989 as a receipt of the transferee of the period of account of the transferee in which the transfer takes place.
- (3) But if—
- (a) the assets transferred to the transferee under the transfer comprise or include assets (“*the relevant assets*”) which, immediately before the transfer,—
- (i) were assets of the transferor, but
- (ii) were not assets of the transferor's long-term insurance fund, and
- (b) in respect of the transfer of the relevant assets, an amount is—
- (i) brought into account by the transferee as other income of the transferee of the period of account of the transferee in which the transfer takes place, and
- (ii) taken into account in computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits of the transferee's life assurance business and any category of its life assurance business to which the amount is referable,
the amount taken into account under section 83(2) of the Finance Act 1989 by virtue of subsection (2) above shall be reduced (but not below nil) by an amount equal to the amount referred to in paragraph (b) above.
- (4) In subsection (2) above “*relevant shares*” means—
- (a) some or all of the shares in the transferor, or
- (b) some or all of the shares in a company (whether or not an insurance company) which owns, directly or indirectly,—
- (i) some or all of the shares in the transferor, or
- (ii) an interest in some or all of those shares.
- (5) In subsection (4) above “*shares*”, in relation to a company, includes any interests in the company possessed by members of the company.
##### 444AD
- (1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“*the transferor*”) to another (“*the transferee*”).
- (2) If the transferor and the transferee jointly elect, section 83(2B) of the Finance Act 1989 does not apply to the transferor by reason of the transfer as respects so much of the value of the assets to which it would otherwise so apply as does not exceed the amount specified in subsection (4) below.
- (3) An election under subsection (2) above—
- (a) is irrevocable, and
- (b) is to be made by notice to an officer of the Board no later than the end of the period of 28 days beginning with the day following that on which the transfer takes place;
and a copy of the notice containing the election must accompany the tax return of the transferee for the first accounting period ending after the transfer.
Paragraphs 54 to 60 of Schedule 18 to the Finance Act 1998 (claims and elections for corporation tax purposes) do not apply to such an election.
- (4) The amount referred to in subsection (2) above is the amount by which—
- (a) the fair value of such of the assets of the long-term insurance fund of the transferee immediately after the transfer as were assets of the transferor’s long-term insurance fund immediately before the transfer, is greater than
- (b) the transferee's line 31 amount in relation to the transfer representing the transferor’s long-term insurance fund.
- (5) In subsection (4) above “*fair value*”, in relation to assets, means the amount which would be obtained from an independent person purchasing them or, if the assets are money, its amount.
- (6) For the purposes of this section “*insurance business transfer scheme*” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).
##### 444AE
- (1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“*the transferor*”) to another (“*the transferee*”).
- (2) If a contingent loan made to the transferor (within the meaning of subsection (1) of section 83ZA of the Finance Act 1989) is transferred to the transferee, that section has effect as if—
- (a) the contingent loan had become repayable by the transferor immediately before the transfer, and
- (b) the contingent loan were made to the transferee immediately after the transfer.
##### 444AEA
- (1) This section applies where—
- (a) as a result of the whole or any part of transfer scheme arrangements involving the transfer of long-term business from one person (“*the transferor*”) to another (“*the transferee*”) a Case I advantage is obtained by the transferor or the transferee (or by both), and
- (b) the sole or main purpose, or one of the main purposes, of the whole or any part of the transfer scheme arrangements is the obtaining of that Case I advantage.
- (2) In subsection (1) above “*transfer scheme arrangements*” means an insurance business transfer scheme (“*the relevant transfer scheme*”) together with any relevant associated operations.
- (3) If a Case I advantage is obtained by the transferor (see subsection (1) of section 444AEB), the amount of the transferor's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferor for the period of account of the transferor covering the transfer date.
- (4) If a Case I advantage is obtained by the transferee (see subsection (1) of section 444AEC), the amount of the transferee's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferee for the first period of account of the transferee ending after the transfer date.
- (5) In this section and sections 444AEB and 444AEC “*relevant associated operations*”, in relation to the relevant transfer scheme, means—
- (a) any other insurance business transfer scheme,
- (b) any contract of reinsurance,
- (c) any reconstruction or amalgamation involving the transferor, a dependant of the transferor which is an insurance undertaking or the transferee, or
- (d) any surplus-increasing transfer of assets,
which is effected in connection with the relevant transfer scheme.
- (6) In subsection (5) above—
- “*dependant*” and “*insurance undertaking*” have the same meaning as in the Insurance Prudential Sourcebook, and
- “*surplus-increasing transfer of assets*” means a transfer of assets of the transferor's long-term insurance fund to the transferee which is not brought into account for any period of account of the transferee but increases the amount of total surplus shown in line 39 of Form 58 in any periodical return of the transferee.
- (7) See section 444AA for the meaning of “the transfer date” in this section.
##### 444AEB
- (1) A Case I advantage is obtained by the transferor if—
- (a) Case I profits of its life assurance business for a period of account to which this section applies are less than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements, or
- (b) Case I losses of its life assurance business for such a period of account are greater than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements.
- (2) If a Case I advantage is obtained by the transferor, the amount of the Case I advantage is the aggregate of—
- (a) the amounts (if any) by which Case I profits for each period of account to which this section applies are less than they would be but for the transfer scheme arrangements or part, and
- (b) the amounts (if any) by which Case I losses for each such period of account are greater than they would be but for the transfer scheme arrangements or part.
- (3) This section applies to a period of account if it is—
- (a) the period of account of the transferor covering the transfer date,
- (b) any earlier period of account of the transferor, or
- (c) where any relevant associated operations are effected in any later period of account, that period of account.
- (4) In this section and section 444AEC “Case I profits” and “*Case I losses*” means profits and losses computed in accordance with the provisions of Case I of Schedule D.
- (5) See section 444AA for the meaning of “the transfer date”, and section 444AEA for the meaning of “relevant associated operations”, in this section.
##### 444AEC
- (1) A Case I advantage is obtained by the transferee if—
- (a) Case I profits of its life assurance business for a period of account to which this section applies are less than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements, or
- (b) Case I losses of its life assurance business for such a period of account are greater than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements.
- (2) If a Case I advantage is obtained by the transferee, the amount of the Case I advantage is—
- (a) the amount by which Case I profits for each period of account to which this section applies are less than they would be but for the transfer scheme arrangements or part, or
- (b) the amount by which Case I losses for each such period of account are greater than they would be but for the transfer scheme arrangements or part.
- (3) This section applies to a period of account if it is—
- (a) the first period of account of the transferee ending after the transfer date or after the effecting of the first of any relevant associated operations (if that occurs before the transfer date),
- (b) the second period of account of the transferee ending after the transfer date or after the effecting of the last of any relevant associated operations (if that occurs after the transfer date), or
- (c) any intervening period of account.
- (4) See section 444AA for the meaning of “the transfer date”, section 444AEA for the meaning of “relevant associated operations” and section 444AEB for the meaning of “Case I profits” and “Case I losses”, in this section.
##### 444AECA
- (1) This section applies where—
- (a) as a result of any part of transfer scheme arrangements involving the transfer of long-term business from one person (“*the transferor*”) to another (“*the transferee*”) a Case I advantage is obtained by the transferor or the transferee (or by both), and
- (b) the sole or main purpose, or one of the main purposes, of that part of the transfer scheme arrangements is the obtaining of that Case I advantage.
- (2) In subsection (1) above “*transfer scheme arrangements*” has the same meaning as in section 444AEA.
- (3) If a Case I advantage is obtained by the transferor (see subsection (1) of section 444AECB), the amount of the transferor's Case I advantage (see subsection (3) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferor—
- (a) to the extent that the advantage is obtained by the transferor in the period of account covering the transfer date or any earlier period of account—
- (i) for the period of account of the transferor ending (or treated as ending) immediately before the transfer date, or
- (ii) where there is no such period, for the period of account of the transferor including the transfer date, and
- (b) to the extent that the advantage is obtained by the transferor in any later period of account of the transferor in which any relevant associated operations are effected, for that later period of account.
- (4) If a Case I advantage is obtained by the transferee (see subsection (1) of section 444AECC), the amount of the transferee's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferee for the period of account of the transferee in which the advantage is obtained by the transferee.
- (5) See section 444AA for the meaning of “the transfer date”, and section 444AEA for the meaning of “relevant associated operations”, in this section.
##### 444AECB
- (1) A Case I advantage is obtained by the transferor if—
- (a) Case I profits of its life assurance business for a period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for any part of the transfer scheme arrangements, or
- (b) Case I losses of its life assurance business for such a period of account are, or at the relevant time are expected to be, greater than they would be but for any part of the transfer scheme arrangements.
- (2) But if any of the relevant associated operations would, by itself, cause the Case I profits to be greater or the Case I losses to be less than they would be but for that operation, the amount by which those profits would be greater or those losses would be less shall be taken into account in determining whether a Case I advantage is obtained by the transferor.
- (3) If a Case I advantage is obtained by the transferor, the amount of the Case I advantage is the aggregate of—
- (a) the amounts (if any) by which Case I profits for each period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for the relevant part of the arrangements, and
- (b) the amounts (if any) by which Case I losses for each such period of account are, or at the relevant time are expected to be, greater than they would be but for the relevant part of the arrangements.
- (4) This section applies to a period of account if it is—
- (a) the period of account of the transferor covering the transfer date,
- (b) any earlier period of account of the transferor, or
- (c) where any relevant associated operations are effected in any later period of account, that period of account.
- (5) In this section and section 444AECC “*the relevant part of the arrangements*” means, in relation to a Case I advantage, the part of the transfer scheme arrangements as a result of which the Case I advantage is obtained.
- (6) See section 444AA for the meaning of “the transfer date”, section 444AEA for the meaning of “relevant associated operations” and section 444AEB for the meaning of “Case I profits” and “Case I losses” and “the relevant time”, in this section.
##### 444AECC
- (1) A Case I advantage is obtained by the transferee if—
- (a) Case I profits of its life assurance business for a period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for any part of the transfer scheme arrangements, or
- (b) Case I losses of its life assurance business for such a period of account are, or at the relevant time are expected to be, greater than they would be but for the any part of the transfer scheme arrangements.
- (2) But if any of the relevant associated operations would, by itself, cause the Case I profits to be greater, or the Case I losses to be less, than they would be but for that operation, the amount by which those profits would be greater or those losses would be less shall be taken into account in determining whether a Case I advantage is obtained by the transferor.
- (3) If a Case I advantage is obtained by the transferee, the amount of the Case I advantage is—
- (a) the amount by which Case I profits for each period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for the relevant part of the arrangements, or
- (b) the amount by which Case I losses for each such period of account are, or at the relevant time are expected to be, greater than they would be but for the relevant part of the arrangements.
- (4) This section applies to a period of account if it is—
- (a) the first period of account of the transferee ending after the transfer date or after the effecting of the first of any relevant associated operations (if that occurs before the transfer date),
- (b) the second period of account of the transferee ending after the transfer date or after the effecting of the last of any relevant associated operations (if that occurs after the transfer date), or
- (c) any intervening period of account.
- (5) See section 444AA for the meaning of “the transfer date”, section 444AEA for the meaning of “relevant associated operations”, section 444AEB for the meaning of “Case I profits” and “Case I losses” and “the relevant time” and section 444AECB for the meaning of “the relevant part of the arrangements”, in this section.
##### 444AED
- (1) Section 444AEA does not apply in relation to the transferor or the transferee if, on an application under this section, the Commissioners for Her Majesty's Revenue and Customs (“the HMRC Commissioners”) have given a notice under subsection (2) below.
- (2) A notice under this subsection is a notice stating that the HMRC Commissioners are satisfied—
- (a) that the obtaining of a Case I advantage by the applicant is not the sole or main purpose of the whole or any part of the transfer scheme arrangements, or
- (b) that the transferor and the transferee are members of the same group of companies and that there is no advantage to the group arising from any Case I advantage obtained by the transferor or by the transferee.
- (3) For the purposes of this section there is no advantage to a group arising from any Case I advantage obtained by the transferor or by the transferee if—
- (a) as a result of transfer scheme arrangements, there is an increase in the liability to corporation tax of one or more companies which are members of the group of companies, and
- (b) the amount (or aggregate amount) of that increase is not less than the reduction in the liability to corporation tax of the transferor or the transferee (or both) arising from the obtaining of the Case I advantage.
- (4) An application under this section must be in writing and contain particulars of the transfer scheme arrangements.
- (5) The HMRC Commissioners may by notice require the applicant to provide further particulars in order to enable them to determine the application.
- (6) A requirement may be imposed under subsection (5) above within 30 days of the receipt of the application or of any further particulars required under that subsection.
- (7) If a notice under subsection (5) above is not complied with within 30 days or such longer period as the HMRC Commissioners may allow, they need not proceed further on the application.
- (8) The HMRC Commissioners must give notice of their decision on an application under this section to the applicant within 30 days of receiving the application or, if they give a notice under subsection (5) above, within 30 days of that notice being complied with.
- (9) If the HMRC Commissioners—
- (a) give notice to the applicant under subsection (8) above that they are not satisfied as mentioned in subsection (2) above, or
- (b) do not comply with subsection (8) above,
the applicant may require them to transmit the application to the Special Commissioners.
- (10) A requirement under subsection (9) above must be imposed within 30 days of the giving of the notice or the failure to comply and must be accompanied by any notice given under subsection (5) above and further particulars provided pursuant to any such notice.
- (11) Any notice given by the Special Commissioners has effect for the purposes of subsection (1) above as if it were given by the HMRC Commissioners.
- (12) If any particulars provided under this section do not fully and accurately disclose all facts and considerations material for the decision of the HMRC Commissioners or the Special Commissioners, any resulting notice that they are satisfied as mentioned in subsection (2) above is void.
- (13) For the purposes of this section two companies are members of the same group of companies if they are for the purposes of Chapter 4 of Part 10.
### Surpluses of mutual and former mutual businesses
##### 444AF
- (1) This section applies in relation to a period of account of an insurance company (“*the relevant period*”) if—
- (a) at any time in the relevant period the company carries on life assurance business that is not mutual business,
- (b) the company has an amount of undistributed demutualisation surplus for the relevant period (see subsection (7)), and
- (c) there is a reduction in the amount of the company's unappropriated surplus over the relevant period (see section 444AI).
- (2) Where this section applies in relation to the relevant period, there shall be deemed for the purposes of section 83(2) of the Finance Act 1989 to be brought into account for the relevant period as an increase in the value of the assets of the company's long-term insurance fund whichever of the following amounts is the smallest—
- (a) the amount of the reduction mentioned in subsection (1)(c) above;
- (b) the amount of the company's undistributed demutualisation surplus for the relevant period;
- (c) the amount of the company's relevant receipts reduction for the relevant period (see section 444AJ).
- (3) If the company prepares for the relevant period one or more such separate revenue accounts as are mentioned in section 83A(2)(b) of the Finance Act 1989—
- (a) subsection (2) above shall apply separately in relation to each separate revenue account which is recognised for the purposes of section 83 of that Act; and
- (b) for that purpose, any amount that falls to be determined in order to determine—
- (i) whether that subsection applies in relation to any such separate revenue account, and
- (ii) if so, the amount to be brought into account under that subsection in relation to that account,
shall be determined using only amounts or items which relate to the separate revenue account concerned.
- (4) In applying subsection (2) above in relation to a revenue account or separate revenue account which—
- (a) is recognised for the purposes of section 83 of that Act, and
- (b) is one in relation to which sections 432C and 432D apply,
that subsection shall have effect as if for “smallest” there were substituted smaller and as if paragraph (c) were omitted.
- (5) This section shall have effect—
- (a) for the purposes of computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits of the company's life assurance business, and
- (b) for the purposes of so computing the profits of any category of the company's life assurance business chargeable to tax under Case VI of Schedule D.
- (6) But for the purposes mentioned in subsection (5)(b) above, this section and section 444AG have effect subject to the modification in section 444AH; and the Corporation Tax Acts have effect accordingly (so that there may, in particular, be a difference between—
- (a) the amount deemed to be brought into account by virtue of subsection (2) above for a period of account for those purposes, and
- (b) the amount so deemed to be brought into account for that period of account for the purposes mentioned in subsection (5)(a) above).
- (7) For the purposes of this section, the undistributed demutualisation surplus of an insurance company for the relevant period is—
- (a) an amount equal to (UDSP – AD + DTSI – DTSO); or
- (b) if that amount is a negative amount, nil.
For this purpose—
- UDSP is the undistributed demutualisation surplus of the company for the period of account immediately preceding the relevant period,
- AD is any amount deemed under this section to be brought into account for the period of account immediately preceding the relevant period as an increase in the value of the assets of the company's long-term insurance fund,
- DTSI is the total amount of any demutualisation transfer surpluses accruing to the company during the relevant period (see section 444AG),
- DTSO is the total amount of any demutualisation transfer surpluses accruing to any other company (or companies) during the relevant period on a transfer (or transfers) of life assurance business by the company to that other company (or companies).
##### 444AG
- (1) For the purposes of section 444AF and this section, a demutualisation transfer surplus accrues to an insurance company where—
- (a) life assurance business is transferred to the company by a person (“*the transferor*”),
- (b) after the transfer, the company carries on the transferred business otherwise than as mutual business, and
- (c) the condition in subsection (2) below is satisfied in relation to the transfer.
- (2) The condition is that—
- (a) immediately before the transfer, the transferor carried on the transferred business as mutual business, or
- (b) where paragraph (a) above does not apply, some or all of the transferred business was carried on by an insurance company as mutual business at a time on or after 1st January 1990 and before the transfer (“former mutual business”).
- (3) The demutualisation transfer surplus accrues to the company on the date of the transfer.
- (4) The amount of the demutualisation transfer surplus is given by subsection (5) or (6) below.
- (5) Where subsection (2)(a) above applies, the amount of the demutualisation transfer surplus is—
- (a) where the whole of the transferor's life assurance business was transferred to the company under the transfer, the aggregate of—
- (i) the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer, and
- (ii) the amount of any added surplus accruing to the company in connection with the transfer (see subsection (10));
- (b) otherwise, a just and reasonable portion of that aggregate amount, having regard to how much of the transferor's life assurance business was transferred to the company under the transfer.
- (6) Where subsection (2)(b) above applies, the amount of the demutualisation transfer surplus is—
- (a) where the whole of the transferor's life assurance business was transferred to the company under the transfer and all of the transferred business is former mutual business, the former mutual surplus of the transferor on the transfer date (see subsection (7));
- (b) otherwise, so much of that former mutual surplus as it is just and reasonable to attribute to the company, having regard in particular to—
- (i) how much of the transferor's life assurance business was transferred to the company under the transfer, and
- (ii) how much of the transferred business is former mutual business.
- (7) For the purposes of subsection (6) above, the former mutual surplus of the transferor on the transfer date is—
- (a) the amount given by subsection (8) below, or
- (b) if less, the amount given by subsection (9) below.
- (8) The amount given by this subsection is the total amount of any demutualisation transfer surpluses accruing to the transferor—
- (a) on or after 1st January 1990, and
- (b) on or before the date of the transfer.
- (9) The amount given by this subsection is the lowest amount of unappropriated surplus of the transferor at the end of any period of account ending—
- (a) on or after the date of the last occasion on which a demutualisation transfer surplus accrued to it as mentioned in subsection (8) above, and
- (b) on or before the date of the transfer.
- (10) For the purposes of this section, added surplus accrues to the company in connection with the transfer if—
- (a) an amount of assets is received by the company in connection with the transfer, no later than six months after the date of the transfer,
- (b) the amount is not brought into account by the company,
- (c) the amount is added to the unappropriated surplus of the company, and
- (d) the amount does not derive from any unappropriated surplus of the transferor;
and the amount of the added surplus is the amount referred to in paragraphs (a) to (d) above.
##### 444AH
- (1) The modification in this section has effect for the purposes mentioned in section 444AF(5)(b) only.
- (2) In relation to any demutualisation transfer surplus accruing to a company in a post-2002 period of account—
- (a) the references in section 444AG(5) to the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer shall be taken to be references to—
- (i) the amount of that unappropriated surplus, or
- (ii) if less, the unappropriated surplus of the transferor at the end of the period of account immediately preceding the first post-2002 period of account of the transferor; and
- (b) the references in sections 444AF and 444AG to the amount of any demutualisation transfer surplus are to have effect accordingly.
- (3) In this section “*post-2002 period of account*”, in relation to an insurance company, means a period of account of the company beginning on or after 1st January 2003 and ending on or after 9th April 2003.
##### 444AI
- (1) For the purposes of section 444AF—
- (a) there is a reduction in the amount of the company's unappropriated surplus over the relevant period if CUS is less than (OUS + TSI – TSO);
- (b) the amount of that reduction is the amount by which CUS is less than (OUS + TSI – TSO).
- (2) In this section—
- CUS is the amount of the company's unappropriated surplus at the end of the relevant period,
- OUS is the amount of the company's unappropriated surplus at the end of the period of account immediately preceding the relevant period,
- TSI is the total amount of any transfer surpluses accruing to the company during the relevant period (see subsections (3) to (7)),
- TSO is the total amount of any transfer surpluses accruing to any other company (or companies) during the relevant period on a transfer (or transfers) of life assurance business by the company to that other company (or companies).
- (3) For the purposes of this section, a transfer surplus accrues to an insurance company where life assurance business is transferred to the company by a person (“*the transferor*”).
- (4) The transfer surplus accrues to the company on the date of the transfer.
- (5) The amount of the transfer surplus is equal to so much of the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer as is transferred to the company under the transfer.
- (6) But if, immediately before the transfer, the transferor carried on the transferred business as mutual business, the amount of the transfer surplus is the aggregate of—
- (a) the amount given by subsection (5) above, and
- (b) the amount of any added surplus accruing to the company in connection with the transfer.
- (7) Subsection (10) of section 444AG applies for the purposes of subsection (6) above as it applies for the purposes of that section.
##### 444AJ
- (1) For the purposes of sections 444AF and 444AK, the amount of the company's relevant receipts reduction for the relevant period is to be calculated by—
- (a) determining, in the case of each with-profits fund of the company, the amount given by subsection (2) or (6) below for the relevant period, and
- (b) aggregating each of those amounts.
- (2) The amount, in the case of a fund other than a policy holder participation fund, is—
- (a) where the gross transfer to non-technical account for the fund for the relevant period (see subsections (3) and (4)) is greater than the post-policy holder surplus for the fund for the relevant period (see subsection (5)), the amount of the difference;
- (b) otherwise, nil.
- (3) In this section “*the gross transfer to non-technical account*” means the amount shown in line 13 of Form 58 for the fund.
- (4) But if—
- (a) there is a transfer from a with-profits fund of the company to another fund of the company (“the initial transfer”) which is shown in (or included in an amount shown in) line 14 of Form 58 for the with-profits fund,
- (b) there is a transfer from a fund of the company (whether or not the other fund mentioned in paragraph (a) above) to the non-technical account which is shown in (or included in an amount shown in) line 13 of Form 58 for that fund, and
- (c) the transfer to the non-technical account can reasonably be regarded as connected with the initial transfer,
the amount of the gross transfer to non-technical account for the relevant period given by subsection (3) above in the case of the with-profits fund is to be increased by the amount transferred to the non-technical account.
- (5) In this section “*post-policy holder surplus*” means an amount equal to—
$$SA-TAP$where—SA is—(a) the amount shown in line 34 of Form 58 for the fund (surplus arising since last valuation), or(b) if that amount is a negative amount, nil;TAP is the amount shown in line 46 of Form 58 for the fund (total allocated to policy holders).$
- (6) The amount, in the case of a policy holder participation fund, is—
- (a) where TAP is greater than SA, the amount of the difference;
- (b) otherwise, nil;
and for this purpose “*SA*” and “*TAP*” have the same meaning as in subsection (5) above.
- (7) References in this section to Form 58 are references to that Form in the periodical return of the company for the relevant period.
- (8) In this section “*policy holder participation fund*” means a fund in the case of which an amount equal to the amount shown in line 34 of Form 58 for the fund is allocated to policy holders for the relevant period.
##### 444AK
- (1) This section applies if at any time in a period of account of an insurance company (“*the relevant period*”)—
- (a) the company carries on life assurance business as mutual business, and
- (b) the company carries on one or more categories of life assurance business chargeable to tax under Case VI of Schedule D.
- (2) If there is a reduction in the amount of the company's unappropriated surplus over the relevant period, there shall be deemed for the purposes of section 83(2) of the Finance Act 1989 to be brought into account for the relevant period as an increase in the value of the assets of the company's long-term insurance fund—
- (a) the amount of that reduction, or
- (b) if less, the amount of the company's relevant receipts reduction for the relevant period (see section 444AJ).
- (3) But subsection (2) above shall have effect only for the purposes of computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits for the relevant period of any category of the company's life assurance business chargeable to tax under Case VI of Schedule D.
- (4) If the company prepares for the relevant period one or more such separate revenue accounts as are mentioned in section 83A(2)(b) of the Finance Act 1989—
- (a) subsection (2) above shall apply separately in relation to each separate revenue account which is recognised for the purposes of section 83 of that Act; and
- (b) for that purpose, any amount that falls to be determined in order to determine—
- (i) whether that subsection applies in relation to any such separate revenue account, and
- (ii) if so, the amount to be brought into account under that subsection in relation to that account,
shall be determined using only amounts or items which relate to the separate revenue account concerned.
- (5) In applying subsection (2) above in relation to a revenue account or separate revenue account which—
- (a) is recognised for the purposes of section 83 of that Act, and
- (b) is one in relation to which sections 432C and 432D apply,
that subsection shall have effect as if paragraph (b) and the word “or” before it were omitted.
- (6) For the purposes of this section, there is a reduction in the amount of the company's unappropriated surplus over the relevant period if—
- (a) CUS is less than OUS, and
- (b) CUS is less than UUS.
- (7) The amount of that reduction is—
- (a) the amount by which CUS is less than OUS, or
- (b) if OUS is greater than UUS, the amount by which CUS is less than UUS.
- (8) In this section—
- CUS is the amount of the company's unappropriated surplus at the end of the relevant period,
- OUS is the amount of the company's unappropriated surplus at the end of the period of account immediately preceding the relevant period,
- UUS is the amount of the company's unappropriated surplus at the end of the period of account immediately preceding the first period of account of the company to begin on or after 1st January 2003 and to end on or after 9th April 2003.
##### 444AL
- (1) This section applies for the purposes of sections 444AF to 444AK.
- (2) References to mutual business, in relation to any time, include business which at that time is treated for the purposes of section 432E as mutual business.
- (3) “*Unappropriated surplus*”, in relation to a period of account of an insurance company, means an unappropriated surplus on valuation as shown in the periodical return of the company for the period of account.
- (4) References to the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer are, where a period of account of the transferor does not end at that time, references to the unappropriated surplus on valuation that would have been shown in a periodical return of the transferor for that period had such a return been drawn up.
### Provisions applying in relation to overseas life insurance companies
##### 444B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Meaning of “distribution”.
##### 444C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 444D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 444E
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Equalisation reserves
##### 444BA
- (1) Subject to the following provisions of this section and to sections 444BB to 444BD, the rules in subsection (2) below shall apply in making any computation, for the purposes of Case I or V of Schedule D, of the profits or losses for any accounting period of an insurance company whose business has at any time been or included business in respect of which it was required, by virtue of equalisation reserve rules, to maintain an equalisation reserve.
- (2) Those rules are—
- (a) that amounts which, in accordance with equalisation reserve rules, are transferred into the equalisation reserve in respect of the company’s business for the accounting period in question are to be deductible;
- (b) that amounts which, in accordance with any such regulations, are transferred out of the reserve in respect of the company’s business for that period are to be treated as receipts of that business; and
- (c) that it must be assumed that all such transfers as are required by equalisation reserve rules to be made into or out of the reserve in respect of the company’s business for any period are made as required.
- (3) Where an insurance company having any business in respect of which it is required, by virtue of equalisation reserve rules, to maintain an equalisation reserve ceases to trade—
- (a) any balance which exists in the reserve at that time for the purposes of the Tax Acts shall be deemed to have been transferred out of the reserve immediately before the company ceases to trade; and
- (b) that transfer out shall be deemed to be a transfer in respect of the company’s business for the accounting period in which the company so ceases and to have been required by equalisation reserve rules.
- (4) Where—
- (a) an amount is transferred into an equalisation reserve in respect of the business of an insurance company for any accounting period,
- (b) the rule in subsection (2)(a) above would apply to the transfer of that amount but for this subsection,
- (c) that company by notice in writing to an officer of the Board makes an election in relation to that amount for the purposes of this subsection, and
- (d) the notice of the election is given not more than two years after the end of that period,
the rule mentioned in subsection (2)(a) above shall not apply to that transfer of that amount and, instead, the amount transferred (the “unrelieved transfer”) shall be carried forward for the purposes of subsection (5) below to the next accounting period and (subject to subsection (6) below) from accounting period to accounting period.
- (5) Where—
- (a) any question arises for the purposes of this section whether the amount of any payment in respect of any annuity—
- (i) is substantially smaller than the amount of, or
- (ii) accrues at a rate substantially less than,
an earlier payment in respect of that annuity, and
- (b) the annuitant or, as the case may be, every annuitant is an individual who is beneficially entitled to all the rights conferred on him as such an annuitant,
that question shall be determined without regard to so much of the difference between the amounts or rates as is referable to a reduction falling to be made as a result of the occurrence of a death.
- (6) Where the amount of any one or more of the payments to which an annuitant is entitled in respect of an annuity depends on any contingency, his entitlement to payments in respect of that annuity shall be determined for the purposes of section 437(1CA) to (1CC) and this section according to whatever (applying any relevant actuarial principles) is the most likely outcome in relation to that contingency.
- (7) Where any agreement or arrangement has effect for varying the rights of an annuitant in relation to a payment in respect of any annuity, that payment shall be taken, for the purposes of section 437(1CA) to (1CC) and this section, to be a payment of the amount to which the annuitant is entitled in accordance with that agreement or arrangement.
- (8) References in this section to a contingency include references to a contingency that consists wholly or partly in the exercise by any person of any option.
##### 438B
- (1) Where an asset held by an insurance company as an asset of its long-term insurance fund is held by the company as a member of a property investment LLP, the policy holders’ share of any income arising from, or chargeable gains accruing on the disposal of, the asset which—
- (a) is attributable to the company, and
- (b) would otherwise be referable by virtue of section 432A to pension business,
shall be treated for the purposes of the Corporation Tax Acts as referable to basic life assurance and general annuity business.
- (2) For the purposes of this section the property business of the insurance company for the purposes of which the asset is held shall be treated as a separate business.
- (3) Where (apart from this subsection) an insurance company would not be carrying on basic life assurance and general annuity business, it shall be treated as carrying on such business if any income or chargeable gains of the company are treated as referable to the business by virtue of subsection (1) above.
- (4) A company may be charged to tax by virtue of this section—
- (a) notwithstanding section 439A, and
- (b) whether or not the income or chargeable gains to which subsection (1) above applies is taken into account in computing the profits of the company for the purposes of any charge to tax in accordance with Case I of Schedule D.
- (5) The policy holders’ share of income or chargeable gains to which subsection (1) above applies—
- (a) shall not be treated as relevant profits for the purposes of section 88 of the Finance Act 1989 (corporation tax on policy holders’ fraction of profits), . . .
- (a) in accordance with equalisation reserve rules, a transfer is made out of an equalisation reserve in respect of an insurance company’s business for any accounting period,
- (b) the rule in subsection (2)(b) above would apply to the transfer but for this subsection, and
- (c) the accounting period is one to which any amount representing one or more unrelieved transfers has been carried forward under subsection (4) above,
that rule mentioned in subsection (2)(b) above shall not apply to that transfer except to the extent (if any) that the amount of the transfer exceeds the aggregate of the amounts representing unrelieved transfers carried forward to that period.
- (6) Where in the case of any company—
- (a) any amount representing one or more unrelieved transfers is carried forward to an accounting period in accordance with subsection (4) above, and
- (b) by virtue of subsection (5) above the rule in subsection (2)(b) above does not apply to an amount representing the whole or any part of any transfer out of an equalisation reserve in respect of the company’s business for that period,
the amount mentioned in paragraph (a) above shall not be carried forward under subsection (4) above to the next accounting period except to the extent (if any) that it exceeds the amount mentioned in paragraph (b) above.
- (7) To the extent that any actual or assumed transfer in accordance with equalisation reserve rules of any amount into an equalisation reserve is attributable to arrangements entered into wholly or mainly for tax purposes—
- (a) the rule in subsection (2)(a) above shall not apply to that transfer; and
- (b) the making of that transfer shall be disregarded in determining, for the purposes of the Tax Acts, whether and to what extent there is subsequently any requirement to make a transfer into or out of the reserve in accordance with equalisation reserve rules;
and this subsection applies irrespective of whether the insurance company in question is a party to the arrangements.
- (8) For the purposes of this section the transfer of an amount into an equalisation reserve is attributable to arrangements entered into wholly or mainly for tax purposes to the extent that the arrangements to which it is attributable are arrangements—
- (a) the sole or main purpose of which is, or
- (b) the sole or main benefit accruing from which might (but for subsection (7) above) be expected to be,
the reduction by virtue of this section of any liability to tax.
- (9) Where—
- (a) any transfer made into or out of an equalisation reserve maintained by an insurance company is made in accordance with equalisation reserve rules in respect of business carried on by that company over a period (“the equalisation period”), and
- (b) parts of the equalisation period are in different accounting periods,
the amount transferred shall be apportioned for the purposes of this section between the different accounting periods in the proportions that correspond to the number of days in the equalisation period that are included in each of those accounting periods.
- (10) The Treasury may by regulations provide in relation to any accounting periods ending on or after 1st April 1996 for specified transitional provisions contained in equalisation reserve rules to be disregarded for the purposes of the Tax Acts in determining how much is required, on any occasion, to be transferred into or out of any equalisation reserve in accordance with the rules.
- (11) In this section, and in sections 444BB to 444BD, “equalisation reserves rules” means the rules in chapter 7.5 of the Integrated Prudential Sourcebook.
##### 444BB
- (1) The Treasury may by regulations make provision modifying section 444BA so as, in cases mentioned in subsection (2) below—
- (a) to require—
- (i) sums by reference to which the amount of any transfer into or out of an equalisation reserve falls to be computed, or
- (ii) the amount of any such transfer,
to be apportioned between different parts of the business carried on for any period by an insurance company; and
- (b) to provide for the purposes of corporation tax for the amounts taken to be transferred into or out of an equalisation reserve to be computed disregarding any such sum or, as the case may be, any such part of a transfer as is attributed, in accordance with the regulations, to a part of the business described for the purpose in the regulations.
- (2) Those cases are cases where an insurance company which, in accordance with equalisation reserve rules, is required to make transfers into or out of an equalisation reserve in respect of any business carried on by that company for any period is carrying on, for the whole or any part of that period—
- (a) any business the income and gains of which fall to be disregarded in making a computation of the company’s profits in accordance with the rules applicable to Case I of Schedule D, or
- (b) any business by reference to which double taxation relief is afforded in respect of any income or gains.
- (3) Section 444BA shall have effect (subject to any regulations under subsection (1) above) in the case of an equalisation reserve maintained by an insurance company which—
- (a) is not resident in the United Kingdom, and
- (b) carries on business in the United Kingdom through a permanent establishment,
only if such conditions as may be prescribed by regulations made by the Treasury are satisfied in relation to that company and in relation to transfers into or out of that reserve.
- (4) Regulations under this section prescribing conditions subject to which section 444BA is to apply in the case of any equalisation reserve maintained by an insurance company may—
- (a) contain conditions imposing requirements on the company to furnish the Board with information with respect to any matters to which the regulations relate, or to produce to the Board documents or records relating to any such matters; and
- (b) provide that, where any prescribed condition is not, or ceases to be, satisfied in relation to the company or in relation to transfers into or out of that reserve, there is to be deemed for the purposes of the Tax Acts to have been a transfer out of that reserve of an amount determined under the regulations.
- (5) Regulations under this section may—
- (a) provide for apportionments under the regulations to be made in such manner, and by reference to such factors, as may be specified or described in the regulations;
- (b) make different provision for different cases;
- (c) contain such supplementary, incidental, consequential and transitional provision as the Treasury may think fit;
- (d) make provision having retrospective effect in relation to accounting periods beginning not more than one year before the time when the regulations are made;
and the powers conferred by this section in relation to transfers into or out of any reserve shall be exercisable in relation to both actual and assumed transfers.
- (6) In this section “*double taxation relief*” means—
- (a) relief under double taxation arrangements which takes the form of a credit allowed against corporation tax, or
- (b) unilateral relief under section 790(1) which takes that form;
and “*double taxation arrangements*” here means arrangements having effect by virtue of section 788.
##### 444BC
- (1) The Treasury may by regulations make provision modifying the operation of section 444BA in relation to cases where an insurance company has, for the purpose of preparing the documents it is required to prepare for the purposes of section 9.3 of the Prudential Sourcebook (Insurers), applied for any period an accounting method described in paragraph 52 or 53 of Schedule 9A to the Companies Act 1985 (accounting on a non-annual basis).
- (2) Subsection (5) of section 444BB applies for the purposes of this section as it applies for the purposes of that section.
##### 444BD
- (1) The Treasury may by regulations provide for section 444BA to have effect, in such cases and subject to such modifications as may be specified in the regulations, in relation to any equivalent reserves as it has effect in relation to equalisation reserves maintained by virtue of equalisation reserve rules.
- (2) For the purposes of this section a reserve is an equivalent reserve if—
- (a) it is maintained, otherwise than by virtue of equalisation reserve rules, either—
- (i) by an EEA firm of the kind mentioned in paragraph 5(d) of Schedule 3 to the Financial Services and Markets Act 2000 which has permission under paragraph 15 of that Schedule (as a result of qualifying for authorisation under paragraph 12(1) of that Schedule) to effect or carry out contracts of insurance in the United Kingdom, or
- (ii) by a firm which has permission under paragraph 4 of Schedule 4 to that Act (as a result of qualifying for authorisation under paragraph 2 of that Schedule) to effect or carry out contracts of insurance in the United Kingdom, or
- (iii) in respect of any business which consists of the effecting or carrying out of contracts of insurance and which is carried on outside the United Kingdom by a company resident in the United Kingdom;
- (b) the purpose for which, or the manner in which, it is maintained is such as to make it equivalent to an equalisation reserve maintained by virtue of equalisation reserve rules.
- (3) For the purposes of this section a reserve is also an equivalent reserve if it is maintained in respect of any credit insurance business in accordance with requirements imposed either—
- (a) by or under any enactment, or
- (b) under so much of the law of any territory as secures compliance with the requirements of Article 1 of the credit insurance directive (equalisation reserves for credit insurance).
- (4) Without prejudice to the generality of subsection (1) above, the modifications made by virtue of that subsection may—
- (a) provide for section 444BA to apply in the case of an equivalent reserve only where such conditions as may be specified in the regulations are satisfied in relation to the company maintaining the reserve or in relation to transfers made into or out of it; and
- (b) contain any other provision corresponding to any provision which, in the case of a reserve maintained by virtue of equalisation reserve rules, may be made under sections 444BA to 444BC.
- (5) Subsections (4) and (5) of section 444BB shall apply for the purposes of this section as they apply for the purposes of that section.
- (6) Without prejudice to the generality of section 444BB(5), the transitional provision which by virtue of subsection (5) above may be contained in regulations under this section shall include—
- (a) provision for treating the amount of any transfers made into or out of an equivalent reserve in respect of business carried on for any specified period as increased by the amount by which they would have been increased if no transfers into the reserve had been made in respect of business carried on for an earlier period; and
- (b) provision for excluding from the rule in section 444BA(2)(b) so much of any amount transferred out of an equivalent reserve as represents, in pursuance of an apportionment made under the regulations, the transfer out of that reserve of amounts in respect of which there has been no entitlement to relief by virtue of section 444BA(2)(a).
- (7) In this section—
- “credit insurance business” means business which consists of the effecting or carrying out of contracts of insurance against risks of loss to the persons insured arising from—the insolvency of debtors of theirs, orfrom the failure (otherwise than through insolvency) of debtors of theirs to pay their debts when due;
- “*the credit insurance directive*” means Council Directive [87/343/EEC](https://www.legislation.gov.uk/european/directive/1987/0343) of 22nd June 1987 amending, as regards credit insurance and suretyship insurance, First Directive 73/239 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance; . . .
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 458A
- (1) The Treasury may by regulations provide for the life assurance provisions of the Corporation Tax Acts to have effect in relation to companies carrying on capital redemption business as if capital redemption business were, or were a category of, life assurance business.
- (2) Regulations under this section may provide that the provisions applied by the regulations are to have effect as respects capital redemption business with such modifications and exceptions as may be provided for in the regulations.
- (3) Regulations under this section may—
- (a) make different provision for different cases;
- (b) include such incidental, supplemental, consequential and transitional provision (including provision modifying provisions of the Corporation Tax Acts other than the life assurance provisions) as the Treasury consider appropriate; and
- (c) include retrospective provision.
- (4) In this section references to the life assurance provisions of the Corporation Tax Acts are references to the following—
- (a) the provisions of this Chapter so far as they relate to life assurance business or companies carrying on such business; and
- (b) any other provisions of the Corporation Tax Acts making separate provision by reference to whether or not the business of a company is or includes life assurance business or any category of insurance business that includes life assurance business.
- (5) In this section “*capital redemption business*” has the same meaning as in section 458.
##### 461A
- (1) For the purposes of sections 461B and 461C, a “*qualifying society*” is an incorporated friendly society which—
- (a) immediately before its incorporation, was a registered friendly society to which section 461(2) did not apply,
- (b) was formed otherwise than by the incorporation of a registered friendly society or the amalgamation of two or more friendly societies and satisfies subsection (2) below, or
- (c) was formed by the amalgamation of two or more friendly societies and satisfies subsection (3) below,
and in respect of which no direction under section 461C(5) is in force.
- (2) A society satisfies this subsection if its business is limited to the provision, in accordance with the rules of the society, of benefits for or in respect of employees of a particular employer or such other group of persons as is for the time being approved for the purposes of this section by the Board.
- (3) If at the time of the amalgamation referred to in subsection (1)(c) above—
- (a) section 461(2) applied to none of the registered friendly societies being amalgamated (if any), and
- (b) all of the incorporated friendly societies being amalgamated (if any) were qualifying societies,
the society formed by the amalgamation satisfies this subsection.
- (4) For the purposes of this section and section 461C, any group of persons which was approved for the purposes of this section (as mentioned in subsection (2) above) by the Friendly Societies Commission immediately before 1st December 2001 shall be treated as having been approved for the purposes of this section by the Board on that date.
##### 461B
- (1) Subject to the following provisions of this section, a qualifying society shall, on making a claim, be entitled to exemption from income tax and corporation tax (whether on income or chargeable gains) on its profits other than those arising from life or endowment business.
- (2) Subsection (1) above shall not apply to any profits arising or accruing to the society from, or by reason of its interest in, a body corporate which is a subsidiary (within the meaning of the Friendly Societies Act 1992) of the society or of which the society has joint control (within the meaning of that Act).
- (2A) Subsection (1) above shall not apply to any profits arising or accruing to the society from or by reason of its membership of a property investment LLP.
- (3) If an incorporated friendly society which is not a qualifying society makes a payment to a member in respect of his interest in the society and the payment is made otherwise than in the course of life or endowment business and exceeds the aggregate of any sums paid by him to the society by way of contributions or deposits, after deducting from that aggregate the amount of—
- (a) any previous payment so made to him by the society, and
- (b) any earlier repayment of such sums paid by him,
the excess shall be treated for the purposes of corporation tax and income tax as a qualifying distribution.
- (4) In relation to an incorporated friendly society which, immediately before its incorporation, was a registered friendly society to which section 461(2) applied—
- (a) the references in subsection (3) above to sums paid to the society shall include sums paid to the registered friendly society,
- (b) the reference in subsection (3)(a) above to any payment made by the society shall include any payment made by the registered friendly society after 26 March 1974 or such later date as was specified in any direction under section 461 (7) relating to it, and
- (c) the reference in subsection (3)(b) above to any repayment shall include any repayment made by the registered friendly society.
- (5) Where a qualifying society at any time ceases by virtue of section 91 of the Friendly Societies Act 1992 (conversion into company) to be registered under that Act, the company into which the society is converted shall be exempt from income tax or corporation tax on its profits arising from any part of its business, other than life or endowment business, which relates to contracts made before that time.
- (6) Subsection (5) above shall apply so long as there is no increase in the scale of benefits which the company undertakes to provide in the course of carrying on the relevant part of its business.
- (7) Any part of a company’s business to which an exemption under subsection (5) above relates shall be treated for the purposes of the Corporation Tax Acts as a separate business from any other business carried on by the company.
##### 461C
- (1) Subject to subsection (2) below, subsections (3) and (4) below apply where a qualifying society—
- (a) begins to carry on business other than life or endowment business, or
- (b) in the opinion of the Board, begins to carry on business other than life or endowment business on an enlarged scale or of a new character.
- (2) Subsections (3) and (4) below do not apply if—
- (a) the society’s business is limited to the provision, in accordance with the rules of the society, of benefits for or in respect of employees of a particular employer or such other group of persons as is for the time being approved for the purposes of section 461 or 461A by the Board, or
- (b) the society’s rules limit the aggregate amount which may be paid by a member by way of contributions and deposits to not more than £1 per month or such greater amount as is authorised for the purposes of section 461.
- (3) If it appears to the Board, having regard to the restrictions imposed by section 461 on registered friendly societies registered after 31st May 1973, that for the protection of the revenue it is expedient to do so, the Board may give a direction to the society under subsection (4) below.
- (4) A direction under this subsection is that (and has the effect that) the society to which it is given shall cease to be a qualifying society as from the date of the direction.
- (5) A society to which a direction is given may, within 30 days of the date on which it is given, appeal against the direction to the Special Commissioners on the ground that—
- (a) it has not begun to carry on business as mentioned in subsection (1) above;
- (b) subsections (3) and (4) above do not apply to it by reason of subsection (2) above; or
- (c) the direction is not necessary for the protection of the revenue.
##### 461D
- (1) Where—
- (a) at any time a friendly society (“*the transferee*”) acquires by way of transfer of engagements or amalgamation from another friendly society (“*the transferor*”) any business, other than life or endowment business, consisting of business which relates to contracts made before that time, and
- (b) immediately before that time the transferor was exempt from corporation tax on profits arising from that business,
the transferee is so exempt after that time.
- (2) But if during an accounting period of the transferee there is an increase in the scale of benefits which it undertakes to provide in the course of carrying on that business, the transferee shall not be exempt from corporation tax by virtue of subsection (1) above for that or any subsequent accounting period.
- (3) Where—
- (a) at any time a friendly society (“*the transferee*”) acquires by way of transfer of engagements or amalgamation from another friendly society (“*the transferor*”) any business, other than life or endowment business, consisting of business which relates to contracts made before that time, and
- (b) immediately before that time the transferor was not exempt from corporation tax on profits arising from that business,
the transferee is not so exempt after that time.
- (4) The Treasury may by regulations provide that, where any business of a friendly society is exempt from corporation tax by virtue of subsection (1) above, or not so exempt by virtue of subsection (3) above, the Corporation Tax Acts have effect subject to such modifications (or exceptions) as the Treasury consider appropriate.
- (5) Regulations under subsection (4) above—
- (a) may make different provision for different cases,
- (b) may include any incidental, supplementary, consequential or transitional provisions which the Treasury consider appropriate, and
- (c) may include retrospective provision.
##### 462A
- (1) Where a registered friendly society has tax exempt life or endowment business which includes contracts—
- (a) made before 20th March 1991, and
- (b) expressed at the outset not to be made in the course of such business,
the society may by notice to the inspector elect that section 460(1) shall not apply to so much of the profits arising from such business as is attributable to such contracts.
- (2) Where a registered friendly society has tax exempt life or endowment business which includes contracts falling within subsection (3) below, the society may by notice to the inspector elect that section 460(1) shall not apply to so much of the profits arising from such business as is attributable to such contracts.
- (3) A contract falls within this subsection if—
- (a) at the outset, it is neither expressed to be made in the course of tax exempt life or endowment business nor expressed not to be so made but is assumed by the society not to be so made, and
- (b) the policy issued in pursuance of it falls within paragraph 21(1)(b) of Schedule 15.
- (4) An election under subsection (2) above shall only be valid if the society satisfies the inspector (or the Commissioners on appeal) that it is possible to identify all the contracts to which the election relates.
- (5) If the inspector decides that he is not satisfied as mentioned in subsection (4) above, he shall give notice of his decision to the society; and section 42(3), (4) and (9) of, and paragraph 1(1) to (1E) of Schedule 2 to, the Management Act shall apply in relation to such a decision as they apply in relation to a decision of an inspector on a claim.
- (6) An election under subsection (1) or (2) above shall have effect for accounting periods ending on or after the day on which the Finance Act 1991 was passed.
- (7) No election under subsection (1) or (2) above may be made after 31st July 1992.
- (8) Where a friendly society has made an election under subsection (1) or (2) above, then, for any accounting period for which the election has effect—
- (a) section 460(1) shall apply to profits arising from life or endowment business which would have been included in the society’s tax exempt life or endowment business had no account been taken of the contracts to which the election relates, and
- (b) section 462(1), in its application to the society, shall have effect with the insertion after “policies” of “and all policies issued in pursuance of contracts to which an election under section 462A(1) or (2) relates”.
- (9) If a friendly society which (or a branch of which) has made an election under subsection (1) or (2) above becomes an incorporated friendly society, the election shall have effect in relation to the incorporated friendly society as it had effect in relation to the society (or branch) which made the election (and accordingly, in relation to accounting periods of the incorporated friendly society, “*the society*” in subsection (8)(a) and (b) above shall be read as referring to the incorporated friendly society).
#### Tax credits for certain recipients of qualifying distributions.
##### 465A
- (1) This section applies where any assets of a branch of a registered friendly society have been identified in a scheme under section 6(5) of the Friendly Societies Act 1992 (property, rights etc. excluded from transfer to the society on its incorporation).
- (2) In relation to any time after the incorporation of the society, the assets shall be treated for the purposes of the Tax Acts as assets of the society (and, accordingly, any tax liability arising in respect of them shall be a liability of the society rather than of the branch).
- (3) Where, by virtue of this section, tax in respect of any of the assets becomes chargeable on and is paid by the society, the society may recover from the trustees in whom those assets are vested the amount of the tax paid.
##### 468AA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 468A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 468B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### No tax credit for borrower under stock lending arrangement or interim holder under repurchase agreement.
##### 468C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 468D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 468E
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### No tax credit for original owner under repurchase agreement in respect of certain manufactured dividends.
##### 468EE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 468F
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##### 468G
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Distributions of authorised unit trusts: general
##### 468H
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##### 468I
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### Dividend and foreign income distributions
##### 468J
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##### 468K
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Interest distributions
##### 468L
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Tax credits for non-U.K. residents.
##### 468M
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 468N
- (1) Subsection (2) below applies where—
- (a) an interest distribution is made for a distribution period to a unit holder; and
- (b) the gross income entered in the distribution accounts for the purposes of computing the total amount available for distribution to unit holders does not derive from eligible income entirely.
- (2) Where this subsection applies, the obligation to deduct under section 349(2) shall not apply to the relevant amount of the interest distribution to the unit holder if the residence condition is on the distribution date fulfilled with respect to him.
- (3) Section 468O makes provision with respect to the circumstances in which the residence condition is fulfilled with respect to a unit holder.
- (4) This is how to calculate the relevant amount of the interest distribution—
$$R=AxBC$Where—R = the relevant amount;A = the amount of the interest distribution before deduction of tax to the unit holder in question;B = such amount of the gross income as derives from eligible income;C = the amount of the gross income.$
- (5) In subsection (4) above the references to the gross income are references to the gross income entered as mentioned in subsection (1)(b) above.
##### 468O
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##### 468P
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##### 468PA
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##### 468PB
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Distributions to corporate unit holder
##### 468Q
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##### 468R
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 469A
- (1) The Tax Acts shall have effect in relation to any common investment fund established under section 42 of the Administration of Justice Act 1982 (common investment funds for money paid into court) as if—
- (a) the fund were an authorised unit trust;
- (b) the person who is for the time being the investment manager of the fund were the trustee of that authorised unit trust; and
- (c) the persons with qualifying interests were the unit holders in that authorised unit trust.
- (1A) For the purposes of subsection (1)(c) above, the persons with qualifying interests are—
- (a) in relation to shares in the fund held by the Accountant General, the persons whose interests entitle them, as against him, to share in the fund’s investments;
- (b) in relation to shares in the fund held by any other person authorised by the Lord Chancellor to hold such shares on behalf of others (an “authorised person”)—
- (i) if there are persons whose interests entitle them, as against the authorised person, to share in the fund’s investments, those persons;
- (ii) if not, the authorised person;
- (c) in relation to shares in the fund held by persons authorised by the Lord Chancellor to hold such shares on their own behalf, those persons.
- (2) In this section “*the Accountant General*” means . . . the Accountant General of the Supreme Court of Judicature in England and Wales or the Accountant General of the Supreme Court of Judicature of Northern Ireland.
- (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 472A
- (1) This section applies in relation to securities—
- (a) which are held by a company carrying on a banking business, an insurance business or a business consisting wholly or partly in dealing in securities; and
- (b) which are such that a profit on their sale would form part of the trading profits of that business.
- (2) Profits and losses arising from such securities that in accordance with generally accepted accounting practice are—
- (a) calculated by reference to the fair value of the securities, and
- (b) recognised in that company's statement of recognised gains and losses or statement of changes in equity,
shall be brought into account in computing the profits or losses of a business in accordance with the provisions of this Act applicable to Case I of Schedule D.
- (3) Subsection (2) does not apply—
- (a) to an amount to the extent that it derives from or otherwise relates to an amount brought into account under that subsection in an earlier period of account, or
- (b) to an amount recognised for accounting purposes by way of correction of a fundamental error.
- (4) In this section, “securities”—
- (a) includes shares and any rights, interests or options that by virtue of section 99, 135(5) or 136(5) of the Taxation of Chargeable Gains Act 1992 are treated as shares for the purposes of sections 126 to 136 of that Act; but
- (b) does not include a loan relationship (within the meaning of Chapter 2 of Part 4 of the Finance Act 1996).
##### 477A
- (1) The Board may by regulations make provision with respect to any year of assessment requiring any building society—
- (a) in such cases as may be prescribed by the regulations to deduct out of any dividend or interest paid or credited in the year in respect of shares in, or deposits with or loans to, the society a sum representing the amount of income tax on it, and
- (b) to account for and pay any amount required to be deducted by the society by virtue of this subsection.
- (1A) Regulations under subsection (1) above may not make provision with respect to any dividend or interest paid or credited, on or after the day on which the Finance Act 1991 was passed, in respect of a security (other than a qualifying certificate of deposit and other than a qualifying deposit right) which was quoted, or capable of being listed, on a recognised stock exchange at the time the dividend or interest became payable.
- (2) Regulations under subsection (1) above may—
- (a) make provision with respect to the furnishing of information by building societies or their investors, including, in the case of societies, the inspection of books, documents and other records on behalf of the Board;
- (b) contain such incidental and consequential provisions as appear to the Board to be appropriate, including provisions requiring the making of returns.
- (2A) Without prejudice to the generality of subsection (2)(a) above, regulations under subsection (1) above may make provision with respect to the furnishing of information to or by building societies corresponding to any provision that is made by, or may be made under, section 482 with respect to the furnishing of information to or by deposit-takers.
- (3) For any year of assessment to which regulations under subsection (1) above apply, dividends or interest payable in respect of shares in, or deposits with or loans to, a building society shall be dealt with for the purposes of corporation tax as follows—
- (a) to the extent that it would not otherwise fall to be so regarded, liability to pay the dividends or interest shall be treated for the purposes of Chapter II of Part IV of the Finance Act 1996 as a liability arising under a loan relationship of the building society;
- (aa) if the dividends or interest are payable to a company, then, to the extent that they would not otherwise fall to be so regarded, they shall be treated for those purposes as payable to that company in pursuance of a right arising under a loan relationship of that company;
- (b) no part of any such dividends or interest paid or credited in the year of assessment shall be treated as a distribution of the society or as franked investment income of any company resident in the United Kingdom.
- (3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (3B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (3C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (4) Subsection (3)(a) above shall apply to any interest paid by the society under a certified SAYE savings arrangement as if it were a dividend on a share in the society.
- (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (7) Notwithstanding anything in sections 348 to 350, for any year of asessment to which regulations under subsection (1) above apply income tax shall not be deducted upon payment to the society of any interest on advances, being interest payable in that year.
- (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (9) In this section “*dividend*” has the meaning given by regulations under subsection (1) above . . . .
- (10) In this section—
- “*certified SAYE savings arrangement*” has the meaning given by section 703 of ITTOIA 2005
- “*qualifying certificate of deposit*” has the same meaning as in section 349, and
- “*qualifying deposit right*” has the meaning given by section 349(4), reading “paid” as “paid or credited”, and
- “*security*” includes share.
##### 477B
- (1) In computing for the purposes of corporation tax the income of a building society from the trade carried on by it, there shall be allowed as a deduction, if subsection (2) below applies, the incidental costs of obtaining finance by means of issuing shares in the society which are qualifying shares.
- (1A) A deduction shall not be allowed by virtue of subsection (1) above to the extent that the costs in question fall to be brought into account as debits for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships).
- (2) This subsection applies if any amount payable in respect of the shares by way of dividend or interest is deductible in computing for the purposes of corporation tax the income of the society from the trade carried on by it.
- (3) In subsection (1) above, “*the incidental costs of obtaining finance*” means expenditure on fees, commissions, advertising, printing and other incidental matters (but not including stamp duty), being expenditure wholly and exclusively incurred for the purpose of obtaining the finance (whether or not it is in fact obtained), or of providing security for it or of repaying it.
- (4) This section shall not be construed as affording relief—
- (a) for any sums paid in consequence of, or for obtaining protection against, losses resulting from changes in the rate of exchange between different currencies, or
- (b) for the cost of repaying qualifying shares so far as attributable to their being repayable at a premium or to their having been issued at a discount.
- (5) In this section—
- “*dividend*” has the same meaning as in section 477A, and
- “*qualifying share*” has the same meaning as in section 117(4) of the 1992 Act.
##### 480A
- (1) Any deposit-taker making a payment of interest in respect of a relevant deposit shall, on making the payment, deduct out of it a sum representing the amount of income tax on it for the year of assessment in which the payment is made.
- (2) Any payment of interest out of which an amount is deductible under subsection (1) above shall be a relevant payment for the purposes of Schedule 16 whether or not the deposit-taker making the payment is resident in the United Kingdom.
- (3) Schedule 16 shall apply in relation to any payment which is a relevant payment by virtue of subsection (2) above—
- (a) with the substitution for any reference to a company of a reference to a deposit-taker,
- (b) as if paragraph 5 applied only in relation to payments received by the deposit-taker and falling to be taken into account in computing his income chargeable to corporation tax, and
- (c) as if in paragraph 7 the reference to section 7(2) included a reference to sections 11(3) and 349(1).
- (4) In relation to any deposit-taker who is not a company, Schedule 16 shall have effect as if—
- (a) paragraph 5 were omitted, and
- (b) references to accounting periods were references to periods for which the deposit-taker makes up his accounts.
- (5) For the purposes of this section, crediting interest shall be treated as paying it.
##### 480B
- (1) The Board may by regulations provide that section 480A(1) shall not apply as regards a payment of interest if such conditions as may be prescribed by the regulations are fulfilled.
- (2) In particular, the regulations may include—
- (a) provision for a certificate to be supplied to the effect that the person beneficially entitled to a payment is unlikely to be liable to pay any amount by way of income tax for the year of assessment in which the payment is made;
- (b) provision for the certificate to be supplied by that person or such other person as may be prescribed by the regulations;
- (c) provision about the time when, and the manner in which, a certificate is to be supplied;
- (d) provision about the form and contents of a certificate.
- (3) Any provision included under subsection (2)(d) above may allow the Board to make requirements, in such manner as they see fit, as to the matters there mentioned.
- (4) For the purposes of this section, crediting interest shall be treated as paying it.
#### Procedure for making election.
##### 480C
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#### Treatment of cash dividend retained and then later paid out
##### 482A
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### PETROLEUM EXTRACTION ACTIVITIES
##### 494AA
- (1) This section applies where—
- (a) a company (“*the seller*”) carrying on a trade has disposed of an asset which was used for the purposes of that trade, or an interest in such an asset;
- (b) the asset is used, under a lease, by the seller or a company associated with the seller (“*the lessee*”) for the purposes of a ring fence trade carried on by the lessee; and
- (c) the lessee uses the asset before the end of the period of two years beginning with the disposal.
- (2) Subject to subsection (4) below, subsection (3) below applies to so much (if any) of the expenditure incurred by the lessee under the lease as—
- (a) falls, in accordance with generally accepted accounting practice, to be treated in the accounts of the lessee as a finance charge;. . . or
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
but the whole of the income or gains to which that subsection applies shall be chargeable to tax at the rate provided by that section.
- (6) So far as income is brought into account as mentioned in section 83(2) of the Finance Act 1989, sections 432B to 432F (apportionment of receipts brought into account) have effect as if subsection (1) above did not apply.
##### 438C
- (1) For the purposes of section 438B the policy holders’ share of any income or chargeable gains to which subsection (1) of that section applies is what remains after deducting the shareholders’ share.
- (2) The shareholders’ share is found by applying to the whole the fraction—
$$AB$where—A is the amount of the profits of the company for the period which are chargeable to tax under section 436; andB is an amount equal to the excess of—(a) the amount taken into account as receipts of the company in computing those profits (apart from premiums and sums received by virtue of a claim under a reinsurance contract), over(b) the amounts taken into account as expenses in computing those profits.$
- (3) Where there is no such excess as is mentioned in subsection (2) above, or where the profits are greater than any excess, the whole of the income or gains is treated as the shareholders’ share.
- (4) Subject to that, where there are no profits none of the income or gains is treated as the shareholders’ share.
##### 439A
If a company does not carry on life assurance business other than reinsurance business, and none of that business is of a type excluded from this section by regulations made by the Board, the profits of that business shall be charged to tax in accordance with Case I of Schedule D and not otherwise.
##### 439B
- (1) Where a company carries on life reinsurance business and the profits arising from that business are not charged to tax in accordance with the provisions applicable to Case I of Schedule D, then, subject as follows, those profits shall be treated as income within Schedule D and be chargeable to tax under Case VI of that Schedule, and for that purpose—
- (a) that business shall be treated separately, and
- (b) subject to paragraph (a) above, the profits from it shall be computed in accordance with the provisions of this Act applicable to Case I of Schedule D.
- (2) Subsection (1) above does not apply to so much of reinsurance business of any description excluded from that subsection by regulations made by the Board.
- (3) In making the computation referred to in subsection (1) above—
- (a) sections 82 and 82B to 83AB of the Finance Act 1989 shall apply with the necessary modifications . . . , and
- (c) falls, if the case is one where the lease is a long funding operating lease, to be deductible in computing the profits of the lessee for the purposes of corporation tax (after first making against any such expenditure any reductions falling to be made by virtue of section 502K).
- (3) The expenditure shall not be allowable in computing for the purposes of Schedule D the profits of the ring fence trade.
- (4) Expenditure shall not be disallowed by virtue of subsection (3) above to the extent that the disposal referred to in subsection (1) above is made for a consideration which—
- (a) is used to meet expenditure incurred by the seller in carrying on oil extraction activities or in acquiring oil rights otherwise than from a company associated with the seller; or
- (b) is appropriated to meeting expenditure to be so incurred by the seller.
- (5) Where any expenditure—
- (a) would apart from subsection (3) above be allowable in computing for the purposes of Schedule D the profits of the ring fence trade for an accounting period, but
- (b) by virtue of that subsection is not so allowable,
that expenditure shall be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 as if it were a non-trading debit in respect of a loan relationship of the lessee for that accounting period.
- (6) In this section —
- “*long funding operating lease*” means a long funding operating lease for the purposes of Part 2 of the Capital Allowances Act (see section 70YI(1) of that Act);
- “*lease*”, in relation to an asset, has the same meaning as in sections 781 to 784.
##### 494A
- (1) In section 403(3) (availability of charges, Schedule A losses and management expenses for surrender as group relief) the reference to the gross profits of the surrendering company for an accounting period does not include the company’s relevant ring fence profits for that period.
- (2) If for that period—
- (a) there are no charges on income paid by the company that are allowable under section 338, . . .
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (c) there may be set off against the profits any loss, to be computed on the same basis as the profits, which has arisen from life reinsurance business in any previous accounting period beginning on or after 1st January 1995.
- (4) Section 396 shall not be taken to apply to a loss incurred by a company on life reinsurance business.
- (5) Nothing in section 128 or 399(1) shall affect the operation of this section.
- (6) Gains accruing to a company which are referable (in accordance with section 432A) to its life reinsurance business shall not be chargeable gains.
all the company’s ring fence profits are relevant ring fence profits.
- (3) In any other case the company’s relevant ring fence profits are so much of its ring fence profits as exceeds the amount of the charges on income paid by the company as—
- (a) are allowable under section 338 for that period, . . .
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 496A
Schedule 19B to this Act (exploration expenditure supplement) shall have effect.
##### 496B
Schedule 19C to this Act (ring fence expenditure supplement) shall have effect.
#### “Gross rate” and “gross amount” of distributions to include ACT.
##### 501A
- (1) Where in any accounting period beginning on or after 17th April 2002 a company carries on a ring fence trade, a sum equal to 20 per cent of its adjusted ring fence profits for that period shall be charged on the company as if it were an amount of corporation tax chargeable on the company.
- (2) A company’s adjusted ring fence profits for an accounting period are the amount which, on the assumption mentioned in subsection (3) below, would be determined for that period (in accordance with this Chapter) as the profits of the company’s ring fence trade chargeable to corporation tax.
- (3) The assumption is that financing costs are left out of account in computing—
- (a) the amount of the profits or loss of any ring fence trade of the company’s for each accounting period beginning on or after 17th April 2002; and
- (b) where for any such period the whole or part of any loss relief is surrendered to the company in accordance with section 492(8), the amount of that relief or, as the case may be, that part.
- (4) For the purposes of this section, “*financing costs*” means the costs of debt finance.
- (5) In calculating the costs of debt finance for an accounting period the matters to be taken into account include—
- (a) any costs giving rise to debits in respect of debtor relationships of the company under Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships) , other than debits in respect of exchange losses from such relationships (see section 103(1A) and (1B) of that Act);
- (b) any exchange gain or loss from a debtor relationship, within the meaning of that Chapter (see section 103(1A) and (1B) of that Act), in relation to debt finance;
- (c) any credit or debit falling to be brought into account under Schedule 26 to the Finance Act 2002 (derivative contracts) in relation to debt finance;
- (d) the financing cost implicit in a payment under a finance lease;
- (dd) where the company is the lessee under a long funding operating lease, the amount deductible in respect of payments under the lease in computing the profits of the lessee for the purposes of corporation tax (after first making against any such amount any reductions falling to be made by virtue of section 502K); and
- (e) any other costs arising from what would be considered in accordance with generally accepted accounting practice to be a financing transaction.
- (6) Where an amount representing the whole or part of a payment falling to be made by a company—
- (a) falls (or would fall) to be treated as a finance charge under a finance lease for the purposes of accounts relating to that company and one or more other companies and prepared in accordance with generally accepted accounting practice, but
- (b) is not so treated in the accounts of the company,
the amount shall be treated for the purposes of this section as financing costs falling within subsection (5)(d) above.
- (7) If—
- (a) in computing the adjusted ring fence profits of a company for an accounting period, an amount falls to be left out of account by virtue of subsection (5)(d) above, but
- (b) the whole or any part of that amount is repaid,
the repayment shall also be left out of account in computing the adjusted ring fence profits of the company for any accounting period.
- (8) In this section “*finance lease*” means any arrangements—
- (a) which provide for an asset to be leased or otherwise made available by a person to another person (“*the lessee*”), and
- (b) which, under generally accepted accounting practice,—
- (i) fall (or would fall) to be treated, in the accounts of the lessee or a person connected with the lessee, as a finance lease or a loan, or
- (ii) are comprised in arrangements which fall (or would fall) to be so treated.
- (9) For the purposes of applying subsection (8)(b) above, the lessee and any person connected with the lessee are to be treated as being companies which are incorporated in a part of the United Kingdom.
- (10) In this section “*accounts*”, in relation to a company, includes any accounts which—
- (a) relate to two or more companies of which that company is one, and
- (b) are drawn up in accordance with generally accepted accounting practice.
- (11) In this section “*long funding operating lease*” means a long funding operating lease for the purposes of Part 2 of the Capital Allowances Act (see section 70YI(1) of that Act).
##### 501B
- (1) Subject to subsection (3) below, the provisions of section 501A(1) relating to the charging of a sum as if it were an amount of corporation tax shall be taken as applying, subject to the provisions of the Taxes Acts, and to any necessary modifications, all enactments applying generally to corporation tax, including—
- (a) those relating to returns of information and the supply of accounts, statements and reports;
- (b) those relating to the assessing, collecting and receiving of corporation tax;
- (c) those conferring or regulating a right of appeal; and
- (d) those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom.
- (2) Accordingly (but without prejudice to subsection (1) above) the Management Act shall have effect as if any reference to corporation tax included a reference to a sum chargeable under section 501A(1) as if it were an amount of corporation tax.
- (3) In any regulations made under section 32 of the Finance Act 1998 (as at 17th April 2002, the Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) Regulations 1999)—
- (a) references to corporation tax do not include a reference to a sum chargeable on a company under section 501A(1) as if it were corporation tax; and
- (b) references to profits charged to corporation tax do not include a reference to adjusted ring fence profits, within the meaning of section 501A(1).
- (4) In this section “*the Taxes Acts*” has the same meaning as in the Management Act.
### Chapter 5A — Special rules for long funding leases of plant or machinery: corporation tax
### Introductory
##### 502A
This Chapter has effect for the purposes of corporation tax only.
### Lessors under long funding finance leases
##### 502B
- (1) This section applies for determining for the purposes of corporation tax the profits of a company for any period of account in which it is the lessor of any plant or machinery under a long funding finance lease.
- (2) The amount to be brought into account as the lessor's taxable income from the lease for the period of account is the amount of the rental earnings in respect of the lease for the period of account.
- (3) The “rental earnings” for any period is the amount which, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment for that period in respect of the lease where it meets the finance lease test.
- (4) If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan in the accounts in question, so much of the rentals under the lease as fall (or would fall) to be treated as interest are to be treated for the purposes of this section as rental earnings.
##### 502C
- (1) This section applies for determining for the purposes of corporation tax the profits of a company which is or has been the lessor under a long funding finance lease.
- (2) This section has effect where a profit or loss (whether of an income or capital nature)—
- (a) arises to the company in connection with the lease, and
- (b) in accordance with generally accepted accounting practice falls to be recognised for accounting purposes in a period of account, but
- (c) would not, apart from this section, be brought into account in computing the profits of the company for the purposes of corporation tax.
- (3) The profit or loss is to be treated—
- (a) in the case of a profit, as income of the company attributable to the lease,
- (b) in the case of a loss, as a revenue expense incurred by the company in connection with the lease.
- (4) Any reference in this section to an amount falling to be recognised for accounting purposes in a period of account is a reference to an amount falling to be recognised for accounting purposes—
- (a) in the company's profit and loss account or income statement,
- (b) in the company's statement of recognised gains and losses or statement of changes in equity, or
- (c) in any other statement of items brought into account in computing the company's profits or losses for that period.
##### 502D
- (1) This section applies for determining the liability to corporation tax of a company which is or has been the lessor under a long funding finance lease.
- (2) Where—
- (a) the lease terminates, and
- (b) a sum calculated by reference to the termination value is paid to the lessee,
no deduction in respect of the sum paid to the lessee is allowed in computing the profits of the company.
- (3) This section does not prevent a deduction in respect of a sum to the extent that the sum is brought into account in determining the company's rental earnings.
### Lessors under long funding operating leases
##### 502E
- (1) This section applies for determining for the purposes of corporation tax the profits of a company for any period of account—
- (a) for the whole of which, or
- (b) for any part of which,
the company is the lessor of any plant or machinery under a long funding operating lease.
- (2) A deduction is allowed in computing the profits of the company for the period of account.
- (3) The amount of the deduction for any period of account is to be determined as follows.
- (4) First, find the “*relevant value*” for the purposes of subsection (6)(a) below, which is—
- (a) if the only use of the plant or machinery by the lessor has been the leasing of it under the long funding operating lease as a qualifying activity, cost;
- (b) if the last previous use of the plant or machinery by the lessor was the leasing of it under another long funding operating lease as a qualifying activity, market value;
- (c) if the last previous use of the plant or machinery by the lessor was the leasing of it under a long funding finance lease as a qualifying activity, the recognised value;
- (d) if the last previous use of the plant or machinery by the lessor was for the purposes of a qualifying activity other than leasing under a long funding lease, the lower of cost and market value;
- (e) if the lessor owns the plant or machinery as a result of having incurred expenditure on its provision for purposes other than those of a qualifying activity, but—
- (i) the plant or machinery is brought into use by the lessor for the purposes of a qualifying activity on or after 1st April 2006, and
- (ii) that qualifying activity is the leasing of the plant or machinery under the long funding operating lease,
the relevant value is the lower of first use market value and first use amortised value.
- (5) In subsection (4) above—
- “*cost*” means the amount of the expenditure incurred by the lessor on the provision of the plant or machinery;
- “*first use amortised value*” means the value that the plant or machinery would have at the time when it is first brought into use for the purposes of the qualifying activity, on the assumption that—the cost of acquiring the plant or machinery had been written off on a straight line basis over the remaining useful economic life of the plant or machinery, andany further capital expenditure incurred had been written off on a straight line basis over so much of the remaining economic life of the plant or machinery as remains at the time when the expenditure is incurred;
- “*first use market value*” means the market value of the plant or machinery at the time when it is first brought into use for the purposes of the qualifying activity;
- “*market value*” means the market value of the plant or machinery at the commencement of the term of the long funding operating lease;
- “*recognised value*” means the value at which the plant or machinery is recognised in the books or other financial records of the lessor at the commencement of the long funding operating lease.
- (6) From—
- (a) the relevant value determined in accordance with subsection (4) above,
subtract
- (b) the amount which, at the commencement of the term of the lease, is (or, in a case falling within subsection (4)(e) above, would have been) expected to be the residual value of the plant or machinery,
to find the expected gross reduction in value over the term of the lease.
- (7) Apportion the amount of that expected gross reduction in value to each period of account in which any part of the term of the lease falls.
- (8) The apportionment must be on a time basis according to the proportion of the term of the lease that falls in each period of account.
- (9) The amount of the deduction for any period of account is the amount so apportioned to that period.
##### 502F
- (1) This section applies if in any period of account—
- (a) a company is the lessor of any plant or machinery under a long funding operating lease,
- (b) the company incurs capital expenditure in relation to the plant or machinery, and
- (c) that capital expenditure (the “additional expenditure”) is not reflected in the market value of the plant or machinery at the commencement of the term of the lease.
- (2) In a case falling within section 502E(4)(e) above, subsection (1)(c) above has effect as if the reference to the commencement of the term of the lease were a reference to the time when the plant or machinery is first brought into use by the lessor for the purposes of the qualifying activity.
- (3) Where this section applies, an additional deduction is allowed in computing the profits of the company for each post-expenditure period of account in which the company is the lessor of the plant or machinery under the lease.
- (4) The amount of the deduction for any such period of account is to be determined as follows.
- (5) Find ARV, CRV, PRV, and TRV where—
- “ARV” is the amount which, at the time when the additional expenditure is incurred, is expected to be the residual value of the plant or machinery;
- “CRV” is the amount which, at the commencement of the term of the lease, is expected to be the residual value of the plant or machinery;
- “PRV” is the sum of any amounts that fell to be taken into account as RRV (see subsection (6)) in the application of this section in relation to any previous additional expenditure incurred by the company in relation to the leased plant or machinery;
- “TRV” is the total of CRV and PRV.
- (6) Find RRV, where—
- (a) if ARV exceeds TRV, RRV is the portion of the excess that is a result of the additional expenditure, but
- (b) if ARV does not exceed TRV, RRV is nil.
- (7) From—
- (a) the amount of the additional expenditure,
subtract
- (b) RRV,
to find the expected partial reduction in value over the remainder of the term of the lease.
- (8) Apportion the amount of that expected partial reduction in value to each post-expenditure period of account in which any part of the term of the lease falls.
- (9) The apportionment must be on a time basis according to the proportion of the term of the lease that falls in each post-expenditure period of account.
- (10) The amount of the additional deduction for any period of account is the amount so apportioned to that period.
- (11) In this section “*post-expenditure period of account*” means any period of account ending after the incurring of the additional expenditure.
##### 502G
- (1) This section applies for determining the liability to corporation tax of a company which is the lessor immediately before the termination of a long funding operating lease.
- (2) Step 1 is to find—
- (a) the termination amount (TA);
- (b) the total of any sums paid to the lessee that are calculated by reference to the termination value (LP).
- (3) Step 2 is to find—
- (a) the relevant value for the purposes of section 502E(6)(a) (RV);
- (b) the total of the deductions allowable under section 502E for periods of account for the whole or part of which the company was the lessor before the termination of the lease (TD1);
- (c) the amount, if any, (ERV) by which RV exceeds TD1.
- (4) Step 3 is to find—
- (a) the total of any amounts of capital expenditure incurred by the company which constitute additional expenditure for the purposes of section 502F in the case of the lease (TAE);
- (b) the total of any deductions allowable under section 502F for periods of account for the whole or part of which the company was the lessor before the termination of the lease (TD2);
- (c) the amount, if any, (EAE) by which TAE exceeds TD2.
- (5) Step 4 is to find the total of ERV and EAE (T).
- (6) If (TA – LP) exceeds T, treat a profit of an amount equal to the excess as arising to the company in the period of account in which the lease terminates.
- (7) If T exceeds (TA – LP), treat a loss of an amount equal to the excess as arising to the company in that period of account.
- (8) A profit or loss treated as arising to the company under subsection (6) or (7) above is to be treated—
- (a) in the case of a profit, as income of the company attributable to the lease,
- (b) in the case of a loss, as a revenue expense incurred by the company in connection with the lease.
- (9) In computing the profits of the company, no deduction is allowed in respect of any sums paid to the lessee that are calculated by reference to the termination value.
### Lessors under long funding finance or operating leases: avoidance etc
#### Meaning of “the minimum amount”
##### 502GA
- (1) Sections 502B to 502G do not apply in the case of a company which is or has been the lessor of any plant or machinery under a long funding lease if the following condition is met.
- (2) The condition is that any part of the expenditure incurred by the company on the acquisition of the plant or machinery for leasing under the lease—
- (a) is (apart from those sections) allowable as a deduction in calculating its profits or losses for the purposes of corporation tax, and
- (b) is so allowable as a result of the plant or machinery forming part of its trading stock.
- (3) For the purposes of this section the cases in which expenditure incurred by a company on the acquisition of any plant or machinery for leasing under a lease is allowable as such a deduction include any case where—
- (a) the company becomes entitled to the deduction at any time after the expenditure is incurred, and
- (b) the deduction arises as a result of the plant or machinery forming part of its trading stock at that time.
- (4) If—
- (a) at any time any of sections 502B to 502G has applied for determining the amounts to be taken into account in calculating the profits or losses of the company for the purposes of corporation tax, and
- (b) the condition in subsection (2) is met at any subsequent time,
those amounts, and any other amounts which (as a result of this section) are to be so taken into account, are subject to such adjustments as are just and reasonable.
- (5) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (4).
##### 502GB
- (1) This section applies if—
- (a) a company is the lessee of any plant or machinery under a lease (“lease A”) that is not a long funding lease,
- (b) it enters into a lease (“lease B”) of any of that plant or machinery (as lessor), and
- (c) lease B is a long funding lease.
- (2) Sections 502B to 502G do not apply in relation to lease B.
- (3) If by virtue of section 70H of the Capital Allowances Act (tax return by lessee treating lease as long funding lease) lease A becomes a long funding lease (and does not cease to be such a lease), treat this section as never having applied in relation to lease B.
##### 502GC
- (1) Sections 502B to 502G do not apply in the case of a company which is or has been the lessor of any plant or machinery under a long funding lease if conditions A to C are met.
- (2) Condition A is that the long funding lease forms part of any arrangement entered into by the company which includes one or more other transactions (whether the arrangement is entered into before or after or at the inception of the lease).
- (3) Condition B is that the main purpose, or one of the main purposes, of the arrangement is to secure that, over the relevant period, there would be a substantial difference between—
- (a) the total amount of the amounts under the arrangement which are, in accordance with generally accepted accounting practice, recognised in determining the company's profit or loss for any period or taken into account in calculating the amounts which are so recognised, and
- (b) the total amount of the amounts under the arrangement which are taken into account in calculating the profits or losses of the company for the purposes of corporation tax.
- (4) For the purposes of condition B “*the relevant period*” means the period which begins with the inception of the lease and ends with the end of the term of the lease.
- (5) Condition C is that the difference would be attributable (wholly or partly) to the application of any of sections 502B to 502G in relation to the company by reference to the plant or machinery under the lease.
- (6) The reference in this section to an amount being recognised in determining a company's profit or loss for a period is to an amount being recognised for accounting purposes—
- (a) in the company's profit and loss account or income statement,
- (b) in the company's statement of recognised gains and losses or statement of changes in equity, or
- (c) in any other statement of items brought into account in calculating the company's profits and losses for that period.
- (7) For the purposes of this section it does not matter whether the parties to any transaction which forms part of the arrangement differ from the parties to any of the other transactions.
- (8) For the purposes of this section the cases in which two or more transactions are to be taken as forming part of an arrangement include any case in which it would be reasonable to assume that one or more of them—
- (a) would not have been entered into independently of the other or others, or
- (b) if entered into independently of the other or others, would not have taken the same form or been on the same terms.
- (9) If—
- (a) at any time any of sections 502B to 502G has applied for determining the amounts to be taken into account in calculating the profits or losses of the company for the purposes of corporation tax, and
- (b) conditions A to C are met at any subsequent time,
those amounts, and any other amounts which (as a result of this section) are to be so taken into account, are subject to such adjustments as are just and reasonable.
- (10) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (9).
##### 502GD
- (1) If a company is or has been a lessor under a long funding lease of a film, sections 502B to 502G do not apply in respect of the lease.
- (2) “*Film*” has the same meaning as in Part 15 of CTA 2009 (see section 1181 of that Act).
### Insurance company as lessor
##### 502H
- (1) This section applies to a company carrying on life assurance business if it is the lessor under a long funding lease in a period of account.
- (2) In this section—
- (a) subsections (3) to (7) have effect in relation to—
- (i) basic life assurance and general annuity business, and
- (ii) long-term business which is not life assurance business, and
- (b) subsections (8) to (10) have effect in relation to certain computations falling to be made in accordance with the provisions of this Act applicable to Case I of Schedule D.
- (3) Subsection (4) below applies in the case of each of the following amounts—
- (a) an amount of rental earnings which the company is required by section 502B (long funding finance lease) to bring into account as taxable income,
- (b) an amount treated under section 502C(3)(a) (long funding finance lease: lessor's exceptional items) as a profit arising to the company,
- (c) an amount of rental income arising to the company from a long funding operating lease,
- (d) an amount treated under section 502G(8)(a) (long funding operating lease: lessor's excess termination amount) as a profit arising to the company,
but only if the leased asset is an asset of the company's long-term insurance fund.
- (4) In determining for the purposes of the Corporation Tax Acts in any such case the extent to which any such amount is referable to—
- (a) basic life assurance and general annuity business, or
- (b) long-term business which is not life assurance business,
section 432A (apportionment of insurance companies' income) is to have effect in relation to the amount as it has effect in relation to the income arising from an asset.
This subsection is subject to subsections (5) and (6) below.
- (5) Before applying subsection (4) above in a case where—
- (a) that subsection applies by virtue of subsection (3)(a) above in relation to an amount of rental earnings, and
- (b) there is an amount which is deductible as a revenue expense by virtue of section 502C(3)(b) (long funding finance lease: lessor's exceptional items),
the amount so deductible is to be given effect by applying it, so far as possible, in reducing the amount of the rental earnings.
- (6) Before applying subsection (4) above by virtue of subsection (3)(c) above in relation to an amount of rental income,—
- (a) any deduction falling to be made under section 502E, or
- (b) any reduction falling to be made under section 502F,
is to be given effect by applying it, so far as possible, in reducing (or further reducing) the amount of the rental income.
- (7) Where, after applying amounts in making reductions required by subsection (5) or (6) above, there remains unapplied an amount in respect of—
- (a) a deduction falling to be made under section 502E,
- (b) a reduction falling to be made under section 502F, or
- (c) an amount deductible as a revenue expense by virtue of section 502C(3)(b),
the amount is to be apportioned under section 432A in the same way as income.
- (8) Where—
- (a) the leased asset is an asset of the company's long-term insurance fund, and
- (b) a computation falling within subsection (9) below falls to be made,
subsection (10) below applies to the computation.
- (9) A computation falls within this subsection if it is a computation of profits of—
- (a) life assurance business carried on by the company, or
- (b) any category of life assurance business carried on by the company,
and falls to be made in accordance with the provisions of this Act applicable to Case I of Schedule D.
- (10) In making the computation, no amount shall be brought into account by virtue of any of the following provisions—
- (a) section 502B (long funding finance lease: rental earnings),
- (b) section 502C(3)(a) or (b) (long funding finance lease: profit or loss in respect of exceptional items),
- (c) section 502E (long funding operating lease: periodic deduction),
- (d) section 502F (long funding operating lease: lessor's additional expenditure),
- (e) section 502G(8)(a) or (b) (long funding operating lease: lessor's profit or loss in respect of termination amount).
### Lessees under long funding finance leases
#### Elections as to transfer of relief under section 257A or 257AB.
##### 502I
- (1) This section applies for determining for the purposes of corporation tax the profits of a company for any period of account in which it is the lessee of any plant or machinery under a long funding finance lease.
- (2) In calculating the company's profits for the period of account,—
- (a) the amount deducted in respect of amounts payable under the lease,
must not exceed
- (b) the amounts which, in accordance with generally accepted accounting practice, fall (or would fall) to be shown in the company's accounts as finance charges in respect of the lease.
- (3) If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, subsection (2) above applies as if the lease were one which, under generally accepted accounting practice, fell to be treated as a finance lease.
##### 502J
- (1) This section applies where—
- (a) a company is or has been the lessee under a long funding finance lease, and
- (b) in connection with the termination of the lease, a payment calculated by reference to the termination value falls to be made to the company.
- (2) The payment is not to be brought into account in determining for the purposes of corporation tax the profits of the company for any period of account.
- (3) Subsection (2) above does not affect the amount of any disposal value that falls to be brought into account by the company under the Capital Allowances Act.
### Lessees under long funding operating leases
##### 502K
- (1) This section applies for determining for the purposes of corporation tax the profits of a company for any period of account in which it is the lessee of any plant or machinery under a long funding operating lease.
- (2) The deductions that may be allowed in computing the profits of the company for the period of account are to be reduced in accordance with the following provisions of this section.
- (3) The amount of the reduction for any period of account is to be determined as follows.
- (4) First, find the “*relevant value*” for the purposes of subsection (6)(a) below, which is—
- (a) the market value of the plant or machinery at the commencement of the term of the lease, unless paragraph (b) below applies;
- (b) if the lessee—
- (i) has the use of the plant or machinery as a result of having incurred expenditure on its provision for purposes other than those of a qualifying activity, but
- (ii) brings the plant or machinery into use for the purposes of a qualifying activity on or after 1st April 2006,
the lower of first use market value and first use amortised market value.
- (5) In subsection (4) above—
- “*first use amortised market value*” means the value that the plant or machinery would have—at the time when it is first brought into use for the purposes of the qualifying activity, buton the assumption that the market value of the plant or machinery at the commencement of the term of the lease had been written off on a straight line basis over the remaining useful economic life of the plant or machinery;
- “*first use market value*” means the market value of the plant or machinery at the time when it is first brought into use for the purposes of the qualifying activity.
- (6) From—
- (a) the relevant value determined in accordance with subsection (4) above,
subtract
- (b) the amount which, at the commencement of the term of the lease, is (or, in a case falling within subsection (4)(b) above, would have been) expected to be the market value of the plant or machinery at the end of the term of the lease,
to find the expected gross reduction over the term of the lease.
- (7) Apportion the amount of that expected gross reduction to each period of account in which any part of the term of the lease falls.
- (8) The apportionment must be on a time basis according to the proportion of the term of the lease that falls in each period of account.
- (9) The amount of the reduction for any period of account is the amount so apportioned to that period.
### Interpretation of Chapter
##### 502L
- (1) This section has effect for the interpretation of this Chapter.
- (2) In this Chapter—
- “*qualifying activity*” has the same meaning as in Part 2 of the Capital Allowances Act;
- “*residual value*”, in relation to any plant or machinery leased under a long funding operating lease, means—the estimated market value of the plant or machinery on a disposal at the end of the term of the lease,lessthe estimated costs of that disposal.
- (3) Any reference in this Chapter to a sum being written off on a straight line basis over a period of time (the “writing-off period”) is a reference to—
- (a) the sum being apportioned between each of the periods of account in which any part of the writing-off period falls,
- (b) that apportionment being made on a time basis, according to the proportion of the writing-off period that falls in each of the periods of account, and
- (c) the sum being written off accordingly.
- (4) Chapter 6A of Part 2 of the Capital Allowances Act (interpretation of provisions about long funding leases) applies in relation to this Chapter as it applies in relation to that Part.
##### 504A
- (1) For the purposes specified in subsection (2)—
- (a) a UK property business which consists in, or so far as it consists in, the commercial letting of furnished holiday accommodation is treated as if it were a trade the profits of which are chargeable to income tax under Part 2 of ITTOIA 2005, and
- (b) all such lettings made by a particular person or partnership or body of persons are treated as one trade.
The “*commercial letting of furnished holiday accommodation*” has the same meaning as it has for the purposes of Chapter 6 of Part 3 of ITTOIA 2005.
- (2) Subsection (1) applies for the purposes of—
- (a) Chapter 1 of Part 10 (loss relief for income tax),
- (b) section 833(4)(c) (income regarded as earned income), and
- (c) section 189(2)(b) of the Finance Act 2004 (income regarded as relevant UK earnings for pension purposes).
- (3) Chapter 1 of Part 10 as applied by this section has effect with the following adaptations—
- (a) no relief is to be given to an individual under section 381 (relief for losses in early years of trade) in respect of a year of assessment if any of the accommodation in respect of which the trade is carried on in that year was first let by that person as furnished accommodation more than three years before the beginning of that year of assessment;
- (b) section 384 (restrictions on right of set-off) has effect with the omission of subsections (6) to (8) (which relate to certain losses attributable to capital allowances);
- (c) section 390 (treatment of interest as loss) has effect as if the reference to a trade carried on wholly or partly in the United Kingdom were a reference to the UK property business so far as it is treated as a trade.
- (4) If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.
- (5) Relief is not to be given for the same loss, or the same portion of a loss, both under a provision of Chapter 1 of Part 10 as applied by this section and under any other provision of the Income Tax Acts.
#### Transfer of relief under section 257A where relief exceeds income.
#### Transfer of relief under section 257A.
##### 506A
- (1) This section applies to the following transactions—
- (a) the sale or letting of property by a charity to a substantial donor,
- (b) the sale or letting of property to a charity by a substantial donor,
- (c) the provision of services by a charity to a substantial donor,
- (d) the provision of services to a charity by a substantial donor,
- (e) an exchange of property between a charity and a substantial donor,
- (f) the provision of financial assistance by a charity to a substantial donor,
- (g) the provision of financial assistance to a charity by a substantial donor, and
- (h) investment by a charity in the business of a substantial donor.
- (2) For the purposes of this section a person is a substantial donor to a charity in respect of a chargeable period if—
- (a) the charity receives relievable gifts of at least £25,000 from him in a period of 12 months in which the chargeable period wholly or partly falls, or
- (b) the charity receives relievable gifts of at least £100,000 from him in a period of six years in which the chargeable period wholly or partly falls;
and if a person is a substantial donor to a charity in respect of a chargeable period by virtue of paragraph (a) or (b), he is a substantial donor to the charity in respect of the following five chargeable periods.
- (3) A payment made by a charity to a substantial donor in the course of or for the purposes of a transaction to which this section applies shall be treated for the purposes of section 505 as non-charitable expenditure.
- (4) If the terms of a transaction to which this section applies are less beneficial to the charity than terms which might be expected in a transaction at arm's length, the charity shall be treated for the purposes of section 505 as incurring non-charitable expenditure equal to that amount which the Commissioners for Her Majesty's Revenue and Customs determine as the cost to the charity of the difference in terms.
- (5) A payment by a charity of remuneration to a substantial donor shall be treated for the purposes of section 505 as non-charitable expenditure unless it is remuneration, for services as a trustee, which is approved by—
- (a) the Charity Commission,
- (b) another body with responsibility for regulating charities by virtue of legislation having effect in respect of any Part of the United Kingdom, or
- (c) a court.
##### 506B
- (1) Section 506A shall not apply to a transaction within section 506A(1)(b) or (d) if the Commissioners for Her Majesty's Revenue and Customs determine that the transaction—
- (a) takes place in the course of a business carried on by the substantial donor,
- (b) is on terms which are no less beneficial to the charity than those which might be expected in a transaction at arm's length, and
- (c) is not part of an arrangement for the avoidance of any tax.
- (2) Section 506A shall not apply to the provision of services to a substantial donor if the Commissioners determine that the services are provided—
- (a) in the course of the actual carrying out of a primary purpose of the charity, and
- (b) on terms which are no more beneficial to the substantial donor than those on which services are provided to others.
- (3) Section 506A shall not apply to the provision of financial assistance to a charity by a substantial donor if the Commissioners determine that the assistance—
- (a) is on terms which are no less beneficial to the charity than those which might be expected in a transaction at arm's length, and
- (b) is not part of an arrangement for the avoidance of any tax.
- (4) Section 506A shall not apply to investment by a charity in the business of a substantial donor where the investment takes the form of the purchase of shares or securities listed on a recognised stock exchange.
- (5) A disposal at an undervalue to which section 587B applies shall not be a transaction to which section 506A applies (but may be taken into account in the application of section 506A(2)).
- (6) A disposal at an undervalue to which section 257(2) of the 1992 Act (gifts of chargeable assets) applies shall not be a transaction to which section 506A applies (but may be taken into account in the application of section 506A(2)).
- (7) In the application of section 506A payments by a charity, or benefits arising to a substantial donor from a transaction, shall be disregarded in so far as they—
- (a) relate to a donation by the donor, and
- (b) do not exceed the relevant limit in relation to the donation for the purposes of section 339 or section 25 of the Finance Act 1990.
- (8) A company which is wholly owned by a charity within the meaning of section 339(7AB) shall not be treated as a substantial donor in relation to the charity which owns it (or any of the charities which own it).
- (9) A registered social landlord or housing association shall not be treated as a substantial donor in relation to a charity with which it is connected; and for that purpose—
- (a) “*registered social landlord or housing association*” means a body entered on a register maintained under—
- (i) section 1 of the Housing Act 1996,
- (ii) section 57 of the Housing (Scotland) Act 2001, or
- (iii) Article 14 of the Housing (Northern Ireland) Order 1992, and
- (b) a body and a charity are connected if (and only if)—
- (i) the one is wholly owned, or subject to control, by the other, or
- (ii) both are wholly owned, or subject to control, by the same person.
##### 506C
- (1) A gift is “*relievable*” for the purposes of section 506A(2) if relief is available in respect of it under—
- (a) section 83A,
- (b) section 339,
- (c) sections 587B and 587C,
- (d) section 25 of the Finance Act 1990 (individual gift aid),
- (e) section 257 of the 1992 Act (gifts of chargeable assets),
- (f) section 63 of the Capital Allowances Act (gifts of plant and machinery),
- (g) sections 713 to 715 of ITEPA 2003 (payroll giving),
- (h) section 108 of ITTOIA 2005 (gifts of trading stock), or
- (i) sections 628 and 630 of ITTOIA 2005 (gifts from settlor-interested trusts).
- (2) A charity is treated as incurring expenditure in accordance with section 506A(4) at such time (or times) as the Commissioners determine.
- (3) Section 506A applies to a transaction entered into in a chargeable period with a person who is a substantial donor in respect of that period, even if it was not until after the transaction was entered into that he first satisfied the definition of “substantial donor” in respect of that period.
- (4) Either or both of subsections (3) and (4) of section 506A may be applied to a single transaction; but any amount of non-charitable expenditure which a charity is treated as incurring under section 506A(3) in respect of a transaction shall be deducted from any amount which it would otherwise be treated as incurring under section 506A(4) in respect of the transaction.
- (5) Two or more connected charities shall be treated as a single charity for the purposes of section 506A and 506B and this section; and for this purpose “*connected*” means connected in a matter relating to the structure, administration or control of a charity.
- (6) Where remuneration is paid otherwise than in money, section 506A(5) shall apply as to a payment in money of the amount that would, under Part 3 of ITEPA 2003, be the cash equivalent of the remuneration as a benefit.
- (7) In sections 506A and 506B and this section—
- (a) a reference to a substantial donor or other person includes a reference to a person connected with him within the meaning of section 839,
- (b) “*financial assistance*” includes, in particular—
- (i) the provision of a loan, guarantee or indemnity, and
- (ii) entering into alternative finance arrangements within the meaning of section 46 of the Finance Act 2005, and
- (c) a reference to a gift of a specified amount includes a reference to a non-monetary gift of that value.
- (8) On an appeal against an assessment the Special Commissioners may review a decision of the Commissioners in connection with section 506A.
- (9) The Treasury may by regulations vary a sum, or a period of time, specified in section 506A(2).
#### Transfer of relief under section 257A where relief exceeds income or 257AB.
##### 508A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 508B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 510A
- (1) In this section “*grouping*” means a European Economic Interest Grouping formed in pursuance of Council Regulation [(EEC) No. 2137/85](https://www.legislation.gov.uk/european/regulation/1985/2137) of 25th July 1985, whether registered in Great Britain, in Northern Ireland, or elsewhere.
- (2) Subject to the following provisions of this section, for the purposes of charging tax in respect of income and gains a grouping shall be regarded as acting as the agent of its members.
- (3) In accordance with subsection (2) above—
- (a) for the purposes mentioned in that subsection the activities of the grouping shall be regarded as those of its members acting jointly and each member shall be regarded as having a share of its property, rights and liabilities; and
- (b) for the purposes of charging tax in respect of chargeable gains a person shall be regarded as acquiring or disposing of a share of the assets of the grouping not only where there is an acquisition or disposal of assets by the grouping while he is a member of it, but also where he becomes or ceases to be a member of a grouping or there is a change in his share of the property of the grouping ;
but paragraph (a) above is subject to subsection (6A) below.
- (4) Subject to subsection (5) below, for the purposes of this section a member’s share of any property, rights or liabilities of a grouping shall be determined in accordance with the contract under which the grouping is established.
- (5) Where the contract does not make provision as to the shares of members in the property, rights or liabilities in question a member’s share shall be determined by reference to the share of the profits of the grouping to which he is entitled under the contract (and if the contract makes no provision as to that, the members shall be regarded as having equal shares).
- (6) . . . Where any trade or profession is carried on by a grouping it shall be regarded for the purposes of charging tax in respect of income and gains as carried on in partnership by the members of the grouping.
- (6A) Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships) shall have effect in relation to a grouping as it has effect in relation to a partnership (see in particular section 87A of, and paragraphs 19 and 20 of Schedule 9 to, that Act).
- (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 440B
- (1) The following provisions apply where the profits of a company’s life assurance business are charged to tax in accordance with Case I of Schedule D.
- (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (3) Section 440(1) and (2) apply as if the only categories set out in subsection (4) of that section were—
- (a) assets of the long-term insurance fund, and
- (b) other assets.
- (4) Section 440A applies as if for paragraphs (a) to (e) of subsection (2) there were substituted—
- (”) so many of the securities as are identified in the company’s records as securities by reference to the value of which there are to be determined benefits provided for under policies or contracts the effecting of all (or all but an insignificant proportion) of which constitutes the carrying on of long-term business, shall be treated for the purposes of corporation tax as a separate holding linked solely to that business, and
- (b) any remaining securities shall be treated for those purposes as a separate holding which is not of the description mentioned in the preceding paragraph.”.
- (5) Section 212(1) of the 1992 Act does not apply, but without prejudice to the bringing into account of any amounts deferred under section 213(1) or 214A(2) of that Act from any accounting period beginning before 1st January 1995.
##### 440C
- (1) Subsection (2) makes provision for a case where—
- (a) subsection (4) of section 431G applies in relation to the profits of the life assurance business of an insurance company for any accounting period, but
- (b) the profits of that business for a succeeding accounting period fall to be charged to tax in accordance with Case I of Schedule D by virtue of subsection (3) of that section.
- (2) The loss referred to in section 431G(4)(b) (less any loss for the same accounting period set off under section 436A for any intervening accounting period and any amount deducted for any such period in respect of the loss by virtue of section 85A(3)(b) of the Finance Act 1989) may be set off under section 393 against profits of that succeeding accounting period (without being reduced in accordance with section 434A(2)(a)).
- (3) In determining whether any loss has been set off under section 436A for any intervening accounting period, or whether any amount has been deducted for any such period in respect of the loss by virtue of section 85A(3)(b) of the Finance Act 1989, losses of earlier accounting periods are to be assumed to be set off before those of later accounting periods.
- (4) Subsection (5) makes provision for a case where—
- (a) a loss arises to an insurance company for an accounting period for which the profits of its life assurance business fall to be charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3)(b),
- (b) the profits of that business for a subsequent accounting period are charged to tax under the I minus E basis, and
- (c) had those profits (instead) been charged to tax in accordance with Case I of Schedule D, any of that loss would have been available to be set off against them under section 393.
- (5) The loss is to be treated for the purposes of the operation of section 436A in relation to the subsequent accounting period as if it were a loss arising from its gross roll-up business in the accounting period in which it arose.
- (6) Subsections (7) and (8) make provision for a case where—
- (a) the profits of the life assurance business of an insurance company for an accounting period are charged to tax under the I minus E basis,
- (b) the profits of that business for its next accounting period fall to be charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3), and
- (c) that prevents the giving of relief in accordance with section 86(8) of the Finance Act 1989 (acquisition expenses relieved in fractions under section 76).
- (7) Any relief which would have been so given in—
- (a) the next accounting period, or
- (b) any subsequent accounting period for which the profits of the company's life assurance business continue to be charged to tax in accordance with Case I of Schedule D,
may be given by set-off against any gains treated as accruing under section 213(1) of the 1992 Act at the end of the accounting period.
- (8) But if the profits of the company's life assurance business for a subsequent accounting period are charged to tax under the I minus E basis, any relief not previously given under subsection (7) is to be treated for the purposes of the operation of section 76 in relation to the first subsequent accounting period for which profits are so charged as if it were an amount which is to be relieved under that section by virtue of section 86(8) and (9) of the Finance Act 1989.
#### Application of lower rate to company distributions.
##### 440D
Schedule 19ABA (which makes modifications of this Act in relation to BLAGAB group reinsurers) shall have effect.
##### 441B
- (1) This section applies to land in the United Kingdom which—
- (a) is held by a company as an asset linked to the company’s overseas life assurance business, or
- (b) is held by a company which is charged to tax under Case I of Schedule D in respect of its life assurance business as an asset by reference to the value of which benefits under any policy or contract are to be determined, where the policy or contract (or, in the case of a reinsurance contract, the underlying policy or contract) is held by a person not residing in the United Kingdom.
- (2) Income arising from land to which this section applies shall be treated for the purposes of this Chapter as referable to basic life assurance and general annuity business.
- (2A) For the purposes of subsection (2) above a Schedule A business for the exploitation of any land to which this section applies shall be treated as a separate business from any other such business.
- (3) Where (apart from this subsection) an insurance company would not be carrying on basic life assurance and general annuity business it shall be treated as carrying on such business if any income of the company is treated as referable to such business by subsection (2) above.
- (4) A company may be charged to tax by virtue of this section—
- (a) notwithstanding section 439A, and
- (b) whether or not the income to which subsection (2) above relates is taken into account in computing the profits of the company for the purposes of any charge to tax in accordance with Case I of Schedule D.
- (5) In this section “*land*” has the same meaning as in Schedule 19AA.
##### 442A
- (1) Where an insurance company reinsures any risk in respect of a policy or contract attributable to its basic life assurance and general annuity business, the investment return on the policy or contract shall be treated as accruing to the company while the risk remains reinsured by the company under the reinsurance arrangement and shall be charged to tax under Case VI of Schedule D.
- (2) The Board may make provision by regulations as to the amount of investment return to be treated as accruing in each accounting period during which the reinsurance arrangement is in force.
- (3) The regulations may, in particular, provide that the investment return to be treated as accruing to the company in respect of a policy or contract in any accounting period shall be calculated by reference to—
- (a) the aggregate of the sums paid by the company to the reinsurer during that accounting period and any earlier accounting periods by way of premium or otherwise;
- (b) the aggregate of the sums paid by the reinsurer to the company during that accounting period and any earlier accounting periods by way of commission or otherwise;
- (c) the aggregate amount of the net investment return treated as accruing to the company in any earlier accounting periods, that is to say, net of tax at such rate as may be prescribed; and
- (d) such percentage rate of return as may be prescribed.
- (3A) Where a transfer of the reinsurance arrangement from one insurance company (“*the transferor*”) to another (“*the transferee*”) is effected by novation or an insurance business transfer scheme, for the purpose of calculating the investment return to be treated as accruing to the transferee in respect of the policy or contract after the transfer, the references to the company in subsection (3)(a), (b) and (c) above include (as well as the transferee)—
- (a) the transferor, and
- (b) any insurance company from which the reinsurance arrangement was transferred on an earlier transfer effected by novation or an insurance business transfer scheme.
- (4) The regulations shall provide that the amount of investment return to be treated as accruing . . . in respect of a policy or contract in the final accounting period during which the policy or contract is in force is the amount, ascertained in accordance with regulations, by which the profit over the whole period during which the policy or contract, and the reinsurance arrangement, were in force exceeds the aggregate of the amounts treated as accruing in earlier accounting periods.
- (5) Regulations under this section—
- (a) may exclude from the operation of this section such descriptions of insurance company, such descriptions of policies or contracts and such descriptions of reinsurance arrangements as may be prescribed;
- (b) may make such supplementary provision as to the ascertainment of the investment return to be treated as accruing to the company as appears to the Board to be appropriate, including provision requiring payments made during an accounting period to be treated as made on such date or dates as may be prescribed; and
- (c) may make different provision for different cases or descriptions of case.
- (6) In this section “*prescribed*” means prescribed by regulations under this section.
##### 444AZA
- (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 519A
- (1) A health service body—
- (a) shall be exempt from income tax in respect of its income, and
- (b) shall be exempt from corporation tax,
and, so far as the exemption from income tax conferred by this subsection calls for repayment of tax, effect shall be given thereto by means of a claim.
- (2) In this section “*health service body*” means—
- (a) a Strategic Health Authority or a Health Authority established under section 8 of the National Health Service Act 1977;
- (aa) a Special Health Authority established under section 11 of that Act;
- (ab) a Primary Care Trust;
- (aba) a Local Health Board;
- (b) a National Health Service trust established under Part I of the National Health Service and Community Care Act 1990;
- (bb) an NHS foundation trust
- (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (d) a Health Board or Special Health Board, the Common Services Agency for the Scottish Health Service and a National Health Service trust respectively constituted under sections 2, 10 and 12A of the National Health Service (Scotland) Act 1978;
- (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (g) the Scottish Dental Practice Board; . . .
- (h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (i) a Health and Social Services Board and the Northern Ireland Central Services Agency for the Health and Social Services established under Articles 16 and 26 respectively of the Health and Personal Social Services (Northern Ireland) Order 1972;
- (j) a special health and social services agency established under the Health and Personal Social Services (Special Agencies) (Northern Ireland) Order 1990; and
- (k) a Health and Social Services trust established under the Health and Personal Social Services (Northern Ireland) Order 1991.
- (3) The Treasury may by order disapply subsection (1)(b) in relation to a specified activity, or class of activity, of an NHS foundation trust.
- (4) An order under subsection (3) shall make provision for determining the amount of the profits relating to an activity that are to be charged to corporation tax as a result of the disapplication of subsection (1)(b).
- (5) An order under subsection (3) may, in particular—
- (a) make provision for disregarding profits of less than a specified amount in respect of a financial year or accounting period or a specified part of a financial year or accounting period;
- (b) make provision for disregarding a specified part of profits in respect of a financial year or accounting period or a specified part of a financial year or accounting period;
- (c) make provision for disregarding all or part of profits relating to activity in respect of which receipts or turnover (as defined by the order) are less than a specified amount in respect of a financial year or accounting period or a specified part of a financial year or accounting period.
- (6) An order under subsection (3)—
- (a) may apply, with or without modification, a provision of the Tax Acts,
- (b) may disapply a provision of the Tax Acts,
- (c) may make provision similar to a provision of the Tax Acts, and
- (d) may make provision generally or in relation to a specified body or class of bodies.
- (7) The Treasury may make an order under subsection (3) only—
- (a) in relation to an activity or class of activity that appears to the Treasury to be of a commercial nature,
- (b) where it appears to the Treasury to be expedient for the purpose of avoiding, removing or reducing differences between—
- (i) the fiscal treatment of the body undertaking the activity, and
- (ii) the fiscal treatment of another body or class of body which is of a commercial nature and which undertakes or might undertake the same or a similar activity, and
- (c) if a draft has been laid before, and approved by resolution of, the House of Commons.
- (8) An activity authorised under section 14(1) of the Health and Social Care (Community Health and Standards) Act 2003 shall not be treated as an activity of a commercial nature for the purposes of subsection (7)(a).
#### Transfer of relief under section 257A where relief exceeds income or 257AB.
#### Transfer of relief under section 257A.
#### Indexation of amounts in sections 257 , 257A and 257AB.
#### Life assurance premiums paid by employer
#### Expenditure and houses of ministers of religion.
### Designs
##### 537A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 537B
- (1) Where the usual place of abode of the owner of a right in a design is not within the United Kingdom, section 349(1) shall apply to any payment of or on account of any royalties or sums paid periodically for or in respect of that right as it applies to annual payments not payable out of profits or gains brought into charge to income tax.
- (2) In subsection (1) above—
- (a) “*right in a design*” means design right or the right in a registered design,
- (b) the reference to the owner of a right includes a person who, notwithstanding that he has assigned the right to some other person, is entitled to receive periodical payments in respect of the right, and
- (c) the reference to royalties or other sums paid periodically for or in respect of a right does not include royalties or sums paid in respect of articles which . . . have been exported from the United Kingdom for distribution outside the United Kingdom.
- (3) Where a payment to which subsection (1) above applies is made through an agent resident in the United Kingdom and that agent is entitled as against the owner of the right to deduct any sum by way of commission in respect of services rendered, the amount of the payment shall for the purpose of section 349(1) be taken to be diminished by the sum which the agent is entitled to deduct.
- (4) Where the person by or through whom the payment is made does not know that any such commission is payable or does not know the amount of any such commission, any income tax deducted by or assessed and charged on him shall be computed in the first instance on, and the account to be delivered of the payment shall be an account of, the total amount of the payment without regard being had to any diminution thereof . . . .
- (5) The time of the making of a payment to which subsection (1) above applies shall, for all tax purposes, be taken to be the time when it is made by the person by whom it is first made and not the time when it is made by or through any other person.
- (6) Any agreement for the making of any payment to which subsection (1) above applies in full and without deduction of income tax shall be void.
#### Aggregation of wife’s income with husband’s.
##### 539ZA
- (1) This section applies where, for the purposes of determining the application of this Chapter in relation to a policy or contract at any time, it is necessary to have regard to its application at another time.
- (2) It makes no difference to the application of this Chapter at that other time whether liability in respect of a gain arising at that time would have arisen or (as the case may be) would arise because of the application of this Chapter or Chapter 9 of Part 4 of ITTOIA 2005 (which makes provision for income tax purposes corresponding to that made by this Chapter).
- (3) References in this section to this Chapter include references to paragraph 20 of Schedule 15 to this Act and section 79 of the Finance Act 1997 (payments under certain life insurance policies).
##### 539A
- (1) The conditions mentioned in section 539(2)(f) (excepted group life policies) are those set out in the following provisions of this section.
- (2) Condition 1 is that under the terms of the policy a sum or other benefit of a capital nature is payable or arises on the death of each of the individuals insured under the policy who dies without attaining an age which is specified in the policy and is not greater than 75 years.
In determining whether this condition is satisfied, disregard any terms of the policy which exclude from benefit the death of a person in specified circumstances, if the exclusion applies in relation to death in those circumstances in the case of each of the individuals insured under the policy.
- (3) Condition 2 is that under the terms of the policy—
- (a) the same method is to be used for calculating the sums or other benefits of a capital nature payable or arising on each death, and
- (b) if there is any limitation on those sums or other benefits, the limitation is the same in the case of any death.
- (4) Condition 3 is that the policy does not have, and is not capable of having, on any day—
- (a) a surrender value that exceeds the proportion of the premiums paid which, on a time apportionment, is referable to the unexpired paid-up period beginning with that day, or
- (b) if there is no such period, any surrender value.
For the purposes of this subsection the unexpired paid-up period beginning with any day is the period (if any) which—
- (i) begins with that day, and
- (ii) ends with the earliest subsequent day on which—
- (a) a payment of premium falls due under the policy, or
- (b) the term of the policy ends.
- (5) Condition 4 is that no sums or other benefits may be paid or conferred under the policy, except as mentioned in condition 1 or condition 3.
- (6) Condition 5 is that any sums payable or other benefits arising under the policy must (whether directly or indirectly) be paid to or for, or conferred on, or applied at the direction of—
- (a) an individual or charity beneficially entitled to them, or
- (b) a trustee or other person acting in a fiduciary capacity who will secure that the sums or other benefits are paid to or for, or conferred on, or applied in favour of, an individual or charity beneficially.
In this subsection “*charity*” means any body of persons or trust established for charitable purposes only.
- (7) Condition 6 is that no person—
- (a) who is an individual whose life is insured under the policy, or
- (b) who is, within the meaning of section 839, connected with an individual whose life is so insured,
may, by virtue of a group membership right relating to that individual, receive (directly or indirectly) any death benefit in respect of another group member.
In this subsection—
- (i) “*group membership right*”, in relation to an individual, means any right (including the right of any person to be considered by trustees in their exercise of a discretion) that is referable to that individual’s being one of the individuals whose lives are insured by the policy; and
- (ii) “*death benefit in respect of another group member*” means—
- (a) any sums or other benefits payable or arising under the policy on the death of any other of those individuals, or
- (b) anything representing any such sums or benefits.
- (8) Condition 7 is that a tax avoidance purpose is not the main purpose, or one of the main purposes, for which a person is at any time—
- (a) the holder, or one of the holders, of the policy, or
- (b) the person, or one of the persons, beneficially entitled under the policy.
In this subsection—
- (i) “*tax avoidance purpose*” means any purpose that consists in securing a tax advantage (whether for the holder of the policy or any other person); and
- (ii) “*tax advantage*” has the same meaning as in Chapter 1 of Part 17 (tax avoidance).
#### Aggregation of wife’s income with husband’s.
##### 546A
- (1) This section applies in any case where—
- (a) as a result of any transaction (the “*material transaction*”) the whole or part of or a share in the rights conferred by a policy or contract (“*the material interest*”) becomes beneficially owned by one person or by two or more persons jointly or in common (“*the new ownership*”);
- (b) immediately before the material transaction, the material interest was in the beneficial ownership of one person or of two or more persons jointly (“*the old ownership*”); and
- (c) at least one person who is a member of the old ownership is also a member of the new ownership.
- (2) In any such case, the material transaction shall, in accordance with the following provisions of this section, be taken for the purposes of this Chapter (other than this section) to be one or more assignments, of part only of the rights conferred by the policy or contract.
- (3) For the purposes of this Chapter (other than this section), the members of the old ownership shall be treated—
- (a) where the old ownership consists of two or more persons beneficially entitled jointly, as if the material interest had been in their beneficial ownership in equal shares instead of jointly;
- (b) where the new ownership consists of two or more persons beneficially entitled jointly, as if the result of the material transaction had been that the material interest was in the beneficial ownership of those persons in equal shares instead of jointly; and
- (c) as if the material transaction had been the assignment by each member of the old ownership of so much (if any) of his old share as exceeds his new share (or, if he does not have a new share, the whole of his old share).
- (4) In this section—
- “*new share*”, in relation to the material interest and a person who is a member of the new ownership, means—if there is only one member of the new ownership, the material interest;if there are two or more members of the new ownership beneficially entitled to the material interest in common, the member’s share in the material interest; orif there are two or more members of the new ownership beneficially entitled to the material interest jointly, the share attributed to the member by subsection (3)(b) above;
- “*old share*”, in relation to the material interest and a person who is a member of the old ownership, means—if there is only one member of the old ownership, the material interest; orif there are two or more members of the old ownership, the share attributed to the member by subsection (3)(a) above.
##### 546B
- (1) This section applies in relation to a policy or contract in any case where—
- (a) a section 546 excess occurs at the end of any year (including the final year, whether or not ending with a terminal chargeable event); and
- (b) the condition in subsection (2) below is satisfied in relation to that year.
This subsection is subject to subsection (1A) below.
- (1A) In the case of a policy which is a qualifying policy (whether or not the premiums under the policy are eligible for relief under section 266) this section applies only if—
- (a) the section 546 excess occurs within the time described in section 540(1)(b)(i); or
- (b) the policy has been converted into a paid-up policy within that time.
- (2) The condition is that—
- (a) during the year there has been an assignment for money or money’s worth of part of or a share in the rights conferred by the policy or contract; or
- (b) during the year there has been both—
- (i) an assignment, otherwise than for money or money’s worth, of the whole or part of or a share in the rights conferred by the policy or contract; and
- (ii) an earlier surrender of part of or a share in the rights conferred by the policy or contract.
- (3) Where this section applies—
- (a) the occurrence of the section 546 excess shall be treated for the purposes of this Chapter as not being a chargeable event; but
- (b) the amount of the section 546 excess shall be charged to tax in accordance with the provisions of section 546C.
- (4) In this section—
- “*final year*” has the meaning given by section 546(4);
- “*section 546 excess*”, in relation to any year, means an excess, occurring at the end of the year, of—the reckonable aggregate value mentioned in subsection (2) of section 546, overthe allowable aggregate amount mentoned in subsection (3) of that section;
- “*terminal chargeable event*” means any chargeable event other than—
- (a) an assignment for money or money’s worth of the whole of the rights conferred by the policy or contract;
- (b) the occurrence of a section 546 excess; or
- (c) a chargeable event by virtue of section 546C(7)(a);
##### 546C
- (1) This section applies where, in relation to any policy or contract, the amount of a section 546 excess occurring at the end of any year falls to be charged to tax in accordance with this section by virtue of section 546B(3)(b).
- (2) The following amounts shall be calculated as at the end of that year—
- (a) the aggregate of the values calculated under section 546(1)(a) in respect of any part of or share in the rights conferred by the policy or contract which has been assigned for money or money’s worth, or surrendered, during the year;
- (b) the amount by which—
- (i) the reckonable aggregate value mentioned in section 546(2), as at the end of the year, exceeds
- (ii) the aggregate calculated under paragraph (a) above;
and
- (c) the amount by which—
- (i) the allowable aggregate amount mentioned in section 546(3), as at the end of the year, exceeds
- (ii) the amount calculated under paragraph (b) above.
- (3) In this section—
- (a) “*relevant transaction*” means any assignment for money or money’s worth, or any surrender, of a part of or share in the rights conferred by the policy or contract which has happened during the year;
- (b) “*transaction value*”, in relation to any relevant transaction, means the value calculated in accordance with section 546(1)(a) in the case of that transaction;
- (c) “*the amount of available premium*” means—
- (i) in relation to the earliest relevant transaction, the amount calculated under subsection (2)(c) above (that amount being taken to be nil if there is no such excess as is there mentioned); and
- (ii) in relation to each successive relevant transaction, that amount as successively reduced under subsections (5) to (7) below.
- (4) Subsection (5) below shall apply successively to each of the relevant transactions that happened in the year, in the order in which they happened.
If the year is the final year and ends with a terminal chargeable event, this subsection is subject to section 546D.
- (5) Where this subsection applies in relation to a relevant transaction—
- (a) the transaction value shall be compared to the amount of available premium; and
- (b) if the amount of available premium exceeds or is equal to the transaction value, subsection (6) below shall apply in relation to the transaction; but
- (c) if the transaction value exceeds the amount of available premium, subsection (7) below shall apply in relation to the transaction.
- (6) Where this subsection applies in relation to a relevant transaction—
- (a) the amount of available premium shall be reduced (or further reduced) by the transaction value; and
- (b) that reduction shall have effect in relation to the next subsequent relevant transaction.
- (7) Where this subsection applies in relation to a relevant transaction—
- (a) the relevant transaction shall for the purposes of this Chapter be a chargeable event in relation to the policy or contract, except as provided by sections 540(3) and 542(3);
- (b) a gain of an amount equal to that by which the transaction value exceeds the amount of available premium shall be treated for the purposes of this Chapter as arising in connection with the policy or contract on the happening of that chargeable event; and
- (c) in relation to any subsequent relevant transaction, the amount of available premium shall be reduced to nil.
- (8) Where the whole or any part of the amount of any gain treated as arising by subsection (7)(b) above falls to be treated under section 547(1)(b) as forming part of the income of any company for—
- (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (b) the accounting period in which the chargeable event in question happened,
that . . . accounting period shall be taken to be the one which includes the end of the year as at which the section 546 excess in question occurs, instead of the one (if different) in which the relevant transaction happened.
- (9) Where this section applies in relation to the final year and that year ends with a terminal chargeable event—
- (a) effect shall be given to this section before applying the provisions of this Chapter in relation to the terminal chargeable event; and
- (b) in applying this Chapter in relation to the terminal chargeable event, any chargeable event by virtue of subsection (7)(a) above accordingly falls to be regarded as having occurred before the terminal chargeable event.
- (10) This section shall be construed as one with section 546B.
##### 546D
- (1) This section applies in any case where the year mentioned in section 546C(4) is the final year and that year ends with a terminal chargeable event.
- (2) In any such case there shall be calculated, as at the end of the year, the amount of the gain (“*the gains limit*”) that would have been treated as arising on the happening of the terminal chargeable event, apart from the application of sections 546B and 546C in relation to that year.
- (3) Subsection (5) of section 546C shall apply successively to each of the relevant transactions that happened in the year, in the order in which they happened, unless and until the transaction in question (the “*final transaction*”) is such that the aggregate of—
- (a) its transaction value apart from subsection (4) below, and
- (b) the sum of the transaction values of any relevant transactions to which subsection (5) of that section has previously applied,
exceeds the gains limit.
- (4) If, in the case of the final transaction,—
- (a) the aggregate mentioned in subsection (3) above exceeds the gains limit, but
- (b) the sum mentioned in paragraph (b) of that subsection is less than that limit,
subsection (5) of section 546C shall apply in relation to that transaction, but for the purposes of subsections (5) to (7) of that section its transaction value shall be reduced to an amount equal to the difference between the gains limit and the sum mentioned in paragraph (b) above.
- (5) Except as provided by subsection (4) above, subsection (5) of section 546C shall not apply in relation to the final transaction or any subsequent relevant transaction.
- (6) This section shall be construed as one with sections 546B and 546C.
##### 547A
- (1) If—
- (a) immediately before the happening of a chargeable event, two or more persons have relevant interests in the rights conferred by the policy or contract in question, and
- (b) any of those persons is a company,
section 547 shall have effect in relation to each such company as if it had been the only person with a relevant interest in those rights, but with references to the amount of the gain construed as references to the company's proportionate share of the amount of the gain.
- (2) References in this section to the rights conferred by a policy or contract are, in the case of an assignment or surrender of only a part of or share in any rights, references to that part or share.
- (3) For the purposes of this section, a person has a “relevant interest" in the rights conferred by a policy or contract—
- (a) in the case of an individual, if a share in the rights is vested in him as beneficial owner, or is held on non-charitable trusts created, or as security for a debt owed, by him;
- (b) in the case of a company, if a share in the rights is in the beneficial ownership of the company, or is held on non-charitable trusts created, or as security for a debt owed, by the company;
- (c) in the case of personal representatives, if a share in the rights is vested in them;
- (cc) in the case of trustees of a charitable trust, if a share in the rights is held by them or as security for a debt owed by them;
- (d) in the case of trustees of a non-charitable trust—
- (i) if a share in the rights is held by them, and the person who created the trusts is not resident in the United Kingdom or has died or (in the case of a company or foreign institution) has been dissolved or wound up or has otherwise come to an end;
- (ia) if a share in the rights is held by them which does not also fall within paragraph (a), (b) or (c) above or sub-paragraph (i) above; or
- (ii) if a share in the rights is held as security for a debt owed by them;
- (e) in the case of a foreign institution, if a share in the rights is in the beneficial ownership of the foreign institution, or is held as security for a debt owed by the foreign institution.
- (4) For the purposes of subsection (1) above, a person’s “proportionate share" of the amount of a gain is that share of it which is proportionate to the share of the rights by reference to which he has the relevant interest in question.
- (5) Where, immediately before the happening of a chargeable event, the rights conferred by the policy or contract in question are, or a share in those rights is, held as security for one or more debts owed by two or more persons, this section shall effect in relation to the chargeable event as if—
- (a) each of those persons were instead the sole debtor in respect of a separate debt; and
- (b) the security for that separate debt were the appropriate share of the security for the actual debt or debts (so far as consisting of the rights, or a share in the rights, conferred by the policy or contract);
and for the purposes of paragraph (b) above the appropriate share, in the case of any person, is a share which is proportionate to that share of the actual debt or, as the case may be, the aggregate of the two or more actual debts, for which he is liable as between the debtors.
- (6) Where, immediately before the happening of a chargeable event, the rights conferred by the policy or contract in question are, or a share in those rights is, held on non-charitable trusts created by two or more persons, this section shall have effect in relation to that chargeable event as if—
- (a) each of those persons had instead been the sole settlor in relation to a separate share of the rights or share so held; and
- (b) that separate share were proportionate to the share which originates from him of the whole of the property subject to the trusts immediately before the happening of the chargeable event.
- (7) The reference in subsection (6)(b) above to the share of the property which originates from a person is a reference to the share of the property which consists of—
- (a) property which that person has provided directly or indirectly for the purposes of the trusts;
- (b) property representing property which that person has so provided; and
- (c) so much of any property which represents both property so provided and other property as, on a just apportionment, represents the property so provided.
- (8) References in subsection (7) above to property which a person has provided directly or indirectly—
- (a) include references to property which has been provided directly or indirectly by another in pursuance of reciprocal arrangements with the person, but
- (b) do not include references to property which the person has provided directly or indirectly in pursuance of reciprocal arrangements with another.
- (9) References in subsection (7) above to property which represents other property include references to property which represents accumulated income from that other property.
- (10) Where immediately before the happening of a chargeable event—
- (a) the rights conferred by the policy or contract in question are, or a share in those rights is, held subject to any non-charitable trusts, and
- (b) different shares of the whole of the property subject to those trusts originate (within the meaning of subsection (6)(b) above) from different persons,
the rights or share shall, in relation to that chargeable event, be taken for the purposes of this section to be held on non-charitable trusts created by those persons.
- (11) Where the rights conferred by a policy or contract are, or an interest in any such rights is, in the beneficial ownership of two or more persons jointly, the rights or interest shall be treated for the purposes of this section as if they were in the beneficial ownership of those persons in equal shares.
- (12) A non-fractional interest in the rights conferred by a policy or contract shall be treated for the purposes of this section as if it were instead such a share in those rights as may justly and reasonably be regarded for those purposes as representing the non-fractional interest.
- (13) For the purposes of subsection (12) above, a “non-fractional interest" in the rights conferred by a policy or contract is an interest in some or all of those rights which is not a share in all of those rights (otherwise than by virtue only of subsection (2) above).
- (14) This section applies in a case where the same person has two or more relevant interests in the rights conferred by a policy or contract as it applies in a case where two or more persons have separate relevant interests, unless—
- (a) that person is the only person with a relevant interest in those rights, and
- (b) he has all the relevant interests in the same capacity,
in which case section 547 applies.
- (15) In this section—
- “*foreign institution*” means a person which is a company or other institution resident or domiciled outside the United Kingdom;
- “*personal representatives*” has the same meaning as in Part XVI.
- (16) For the purposes of this section, property held for the purposes of a foreign institution shall be regarded as in the beneficial ownership of the foreign institution.
- (17) Any reference in this section to trusts created by an individual includes a reference to trusts arising under—
- (a) section 11 of the Married Women's Property Act 1882;
- (b) section 2 of the Married Women's Policies of Assurance (Scotland) Act 1880; or
- (c) section 4 of the Law Reform (Husband and Wife) Act (Northern Ireland) 1964;
and references to the settlor or to the person creating the trusts shall be construed accordingly.
##### 548A
- (1) This section applies if—
- (a) a relevant chargeable event occurs in respect of a policy or contract,
- (b) commission in respect of the policy or contract has at any time been rebated or reinvested, and
- (c) condition A or B is met.
- (2) For the purposes of performing the calculation under section 541(1)(b) or (c) or 543(1)(a) or (b) for the chargeable event, the total amount paid under the policy or contract by way of premiums in any period is to be reduced by the total amount of commission attributable to those premiums that has been rebated or reinvested.
- (3) Condition A is that the total amount paid under the policy or contract by way of premiums in a relevant period exceeds £100,000.
- (4) Condition B is that—
- (a) at a time when the policy or contract was the taxable person's, the taxable person's policies and contracts exceeded the relevant threshold as respects a relevant period, and
- (b) payments under the policy or contract by way of premiums were made in that relevant period.
- (5) In subsection (4)(a) “*taxable person*” means the person whose policy or contract the policy or contract is, immediately before the chargeable event.
- (6) For the purposes of subsection (4)(a) a person's policies and contracts “exceed the relevant threshold” as respects a relevant period if the total amount of payments under them by way of premiums in that relevant period exceeds the sum specified in subsection (3).
- (7) In this section “*relevant chargeable event*” means a chargeable event within—
- (a) any of sub-paragraphs (ii) to (iv) of section 540(1)(a) (including those sub-paragraphs as they apply in relation to a qualifying policy),
- (b) section 542(1)(a) or (b), or
- (c) section 545(1)(a) to (c).
- (8) In this section “*relevant period*” means—
- (a) the period beginning with the beginning of the year of assessment in which the chargeable event occurs and ending with the chargeable event, or
- (b) any of the 3 preceding years of assessment.
- (9) References in this section to a premium include, in relation to a contract for a life annuity, lump sum consideration.
- (10) The Treasury may by order—
- (a) substitute another sum for the sum for the time being specified in subsection (3);
- (b) amend the definition of “relevant period”.
#### Eligibility for relief.
##### 548B
- (1) This section supplements section 548A.
- (2) “*Commission*”, in relation to a policy or contract, includes any passing of value to or for the benefit of an intermediary, or a person connected with an intermediary, that can reasonably be taken to represent a reward in respect of the policy or contract.
- (3) Commission in respect of a policy or contract is “reinvested” if, as a result of a waiver of an entitlement to it, there is an increase in the total value of a relevant person's policies and contracts.
- (4) The amount of commission reinvested is the amount of the increase.
- (5) Commission in respect of a policy or contract is “rebated” if—
- (a) value passes (directly or indirectly) from an intermediary, or a person connected with an intermediary, to or for the benefit of a relevant person (and the passing of value does not amount to the reinvestment of the commission), and
- (b) the passing of value can reasonably be taken to be in respect of the commission.
- (6) The amount of commission rebated is the amount of value passed.
- (7) A policy or contract is a person's policy or contract if a gain arising in connection with it would be—
- (a) a gain for which the person, or (if the person is an individual) the person's spouse or civil partner, would be liable to tax under Chapter 9 of Part 4 of ITTOIA 2005, or
- (b) treated by virtue of section 547(1) above as forming part of the person's income.
- (8) Any necessary apportionment is to be made (on a just and reasonable basis) as regards—
- (a) commission which is attributable to two or more premiums, and
- (b) any part of such commission that has been rebated or reinvested.
- (9) Commission which is in respect of one or more policies or contracts (but is not attributable to particular premiums) is to be attributed to such premiums as is just and reasonable.
- (10) In subsections (3) and (5), “*relevant person*” means—
- (a) any of the policyholders (including any of the persons who hold the contract),
- (b) a person who beneficially owns the rights under the policy or contract,
- (c) if those rights are held on trust, any of the trustees, or
- (d) a person connected (within the meaning of section 839) with a person within any of paragraphs (a) to (c).
- (11) In subsections (8) and (9), references to a premium include, in relation to a contract for a life annuity, lump sum consideration.
##### 551A
- (1) Where—
- (a) an amount is included in a company’s income by virtue of section 547(1)(b), and
- (b) the rights, or the part or share, in question were held immediately before the happening of the chargeable event on non-charitable trusts,
the company shall be entitled to recover from the trustees, to the extent of any sums, or to the value of any benefits, received by them by reason of the event, the amount (if any) by which T1 exceeds T2.
- (2) For the purposes of subsection (1) above—
- T1 is the tax with which the company is chargeable for the accounting period in question; and
- T2 is the tax with which the company would have been chargeable for the accounting period if the amount mentioned in subsection (1)(a) above had not been included as there mentioned.
- (3) A company may require the Board to certify any amount recoverable by the company by virtue of this section, and the certificate shall be conclusive evidence of the amount.
##### 552ZA
- (1) This section supplements section 552 and shall be construed as one with it.
- (2) Where the obligations under any policy or contract of the body that issued, entered into or effected it (“*the original insurer*”) are at any time the obligations of another body (“*the transferee*”) to whom there has been a transfer of the whole or any part of a business previously carried on by the original insurer, section 552 shall have effect in relation to that time, except where the chargeable event—
- (a) happened before the transfer, and
- (b) in the case of a death or an assignment, is an event of which the notification mentioned in subsection (6) or (7) of that section was given before the transfer,
as if the policy or contract had been issued, entered into or effected by the transferee.
- (3) Where, in consequence of section 546C(7)(a) of this Act and section 514(1) of ITTOIA 2005, paragraph (a) or (b) of section 552(1) requires certificates to be delivered in respect of two or more surrenders, happening in the same year, of part of or a share in the rights conferred by the policy or contract, a single certificate may be delivered under the paragraph in question in respect of all those surrenders (and may treat them as if they together constituted a single surrender) unless between the happening of the first and the happening of the last of them there has been—
- (a) an assignment of part of or a share in the rights conferred by the policy or contract; or
- (b) an assignment, otherwise than for money or money’s worth, of the whole of the rights conferred by the policy or contract.
- (4) Where the appropriate policy holder is two or more persons—
- (a) section 552(1)(a) requires a certificate to be delivered to each of them; but
- (b) nothing in section 552 or this section requires a body to deliver a certificate under subsection (1)(a) of that section to any person whose address has not been provided to the body (or to another body, at a time when the obligations under the policy or contract were obligations of that other body).
- (5) A certificate under section 552(1)(b) or (3)—
- (a) shall be in a form prescribed for the purpose by the Board; and
- (b) shall be delivered by any means prescribed for the purpose by the Board;
and different forms, or different means of delivery, may be prescribed for different cases or different purposes.
- (6) The Board may by regulations make such provision as they think fit for securing that they are able—
- (a) to ascertain whether there has been or is likely to be any contravention of the requirements of section 552 or this section; and
- (b) to verify any certificate under that section.
- (7) Regulations under subsection (6) above may include, in particular, provisions requiring persons to whom premiums under any policy are or have at any time been payable—
- (a) to supply information to the Board; and
- (b) to make available books, documents and other records for inspection on behalf of the Board.
- (8) Regulations under subsection (6) above may—
- (a) make different provision for different cases; and
- (b) contain such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.
##### 552ZB
- (1) The Commissioners for Her Majesty's Revenue and Customs may make regulations—
- (a) requiring relevant persons—
- (i) to provide prescribed information to persons who apply for the issue of qualifying policies or who are, or may be, required to make statements under paragraph B3(2) of Schedule 15;
- (ii) to provide to an officer of Revenue and Customs prescribed information about qualifying policies which have been issued by them or in relation to which they are or have been a relevant transferee;
- (b) making such provision (not falling within paragraph (a)) as the Commissioners think fit for securing that an officer of Revenue and Customs is able—
- (i) to ascertain whether there has been or is likely to be any contravention of the requirements of the regulations or of paragraph B3(2) of Schedule 15;
- (ii) to verify any information provided to an officer of Revenue and Customs as required by the regulations.
- (2) The provision that may be made by virtue of subsection (1)(b) includes, in particular, provision requiring relevant persons to make available books, documents and other records for inspection by or on behalf of an officer of Revenue and Customs.
- (3) The regulations may—
- (a) make different provision for different cases or circumstances, and
- (b) contain incidental, supplementary, consequential, transitional, transitory or saving provision.
- (4) In this section—
- “*prescribed*” means prescribed by the regulations,
- “*qualifying policy*” includes a policy which would be a qualifying policy apart from—paragraph A1(2), B1(2), B2(2) or B3(3) of Schedule 15, orparagraph 17(2)(za) of that Schedule (including as applied by paragraph 18), and
- “*relevant person*” means a person—who issues, or has issued, qualifying policies, orwho is, or has been, a relevant transferee in relation to qualifying policies.
- (5) For the purposes of this section a person (“X”) is at any time a “*relevant transferee*” in relation to a qualifying policy if the obligations under the policy of its issuer are at that time the obligations of X as a result of there having been a transfer to X of the whole or any part of a business previously carried on by the issuer.
##### 552A
- (1) This section has effect for the purpose of securing that, where it applies to an overseas insurer, another person is the overseas insurer’s tax representative.
- (2) In this section “*overseas insurer*” means a person who is not resident in the United Kingdom who carries on a business which consists of or includes the effecting and carrying out of—
- (a) policies of life insurance;
- (b) contracts for life annuities; or
- (c) capital redemption policies.
- (3) This section applies to an overseas insurer—
- (a) if the condition in subsection (4) below is satisfied on the designated day; or
- (b) where that condition is not satisfied on that day, if it has subsequently become satisfied.
- (4) The condition mentioned in subsection (3) above is that—
- (a) there are in force relevant insurances the obligations under which are obligations of the overseas insurer in question or of an overseas insurer connected with him; and
- (b) the total amount or value of the gross premiums paid under those relevant insurances is £1 million or more.
- (5) In this section “*relevant insurance*” means any policy of life insurance, contract for a life annuity or capital redemption policy . . . in the case of which—
- (a) the holder is resident in the United Kingdom;
- (b) the obligations of the insurer are obligations of a person not resident in the United Kingdom; and
- (c) those obligations are not attributable to a branch or agency of that person’s in the United Kingdom.
- (6) Before the expiration of the period of three months following the day on which this section first applies to an overseas insurer, the overseas insurer must nominate to the Board a person to be his tax representative.
- (7) A person shall not be a tax representative unless—
- (a) if he is an individual, he is resident in the United Kingdom and has a fixed place of residence there, or
- (b) if he is not an individual, he has a business establishment in the United Kingdom,
and, in either case, he satisfies such other requirements (if any) as are prescribed in regulations made for the purpose by the Board.
- (8) A person shall not be an overseas insurer’s tax representative unless—
- (a) his nomination by the overseas insurer has been approved by the Board; or
- (b) he has been appointed by the Board.
- (9) The Board may by regulations make provision supplementing this section; and the provision that may be made by any such regulations includes provision with respect to—
- (a) the making of a nomination by an overseas insurer of a person to be his tax representative;
- (b) the information which is to be provided in connection with such a nomination;
- (c) the form in which such a nomination is to be made;
- (d) the powers and duties of the Board in relation to such a nomination;
- (e) the procedure for approving, or refusing to approve, such a nomination, and any time limits applicable to doing so;
- (f) the termination, by the overseas insurer or the Board, of a person’s appointment as a tax representative;
- (g) the appointment by the Board of a person as the tax representative of an overseas insurer (including the circumstances in which such an appointment may be made);
- (h) the nomination by the overseas insurer, or the appointment by the Board, of a person to be the tax representative of an overseas insurer in place of a person ceasing to be his tax representative;
- (j) circumstances in which an overseas insurer to whom this section applies may, with the Board’s agreement, be released (subject to any conditions imposed by the Board) from the requirement that there must be a tax representative;
- (k) appeals to the Special Commissioners against decisions of the Board under this section or regulations under it.
- (10) The provision that may be made by regulations under subsection (9) above also includes provision for or in connection with the making of other arrangements between the Board and an overseas insurer for the purpose of securing the discharge by or on behalf of the overseas insurer of the relevant duties, within the meaning of section 552B.
- (11) Section 839 (connected persons) applies for the purposes of this section.
- (12) In this section—
- “*capital redemption policy*” means a capital redemption policy in relation to which this Chapter and Chapter 9 of Part 4 of ITTOIA 2005 have effect;
- “*contract for a life annuity*” means a contract for a life annuity in relation to which this Chapter and Chapter 9 of Part 4 of ITTOIA 2005 have effect;
- “*the designated day*” means such day as the Board may specify for the purpose in regulations;
- “*policy of life insurance*” means a policy of life insurance in relation to which this Chapter and Chapter 9 of Part 4 of ITTOIA 2005 have effect;
- “*tax representative*” means a tax representative under this section.
##### 552B
- (1) It shall be the duty of an overseas insurer’s tax representative to secure (where appropriate by acting on the overseas insurer’s behalf) that the relevant duties are discharged by or on behalf of the overseas insurer.
- (2) For the purposes of this section “*the relevant duties*” are—
- (a) the duties imposed by section 552,
- (b) the duties imposed by section 552ZA(2), (4) or (5), and
- (c) any duties imposed by regulations made under subsection (6) of section 552ZA by virtue of subsection (7) of that section,
so far as relating to relevant insurances under which the overseas insurer in question has any obligations.
- (3) An overseas insurer’s tax representative shall be personally liable—
- (a) in respect of any failure to secure the discharge of the relevant duties, and
- (b) in respect of anything done for purposes connected with acting on the overseas insurer’s behalf,
as if the relevant duties were imposed jointly and severally on the tax representative and the overseas insurer.
- (4) In the application of this section in relation to any particular tax representative, it is immaterial whether any particular relevant duty arose before or after his appointment.
- (5) This section has effect in relation to relevant duties relating to chargeable events happening on or after the day by which section 552A(6) requires the nomination of the overseas insurer’s first tax representative to be made.
- (5A) In subsection (5) “*chargeable event*” has the same meaning as in section 552 (see subsection (10) of that section).
- (6) Expressions used in this section and in section 552A have the same meaning in this section as they have in that section.
##### 553A
- (1) A policy of life insurance which, immediately before the happening of a chargeable event or a relevant event—
- (a) is an overseas policy, but
- (b) is not a new non-resident policy,
shall, in relation to that event, be treated for the purposes of this Chapter as if it were a new non-resident policy.
- (2) A policy of life insurance which, immediately before the happening of a relevant event—
- (a) is an overseas policy, and
- (b) is a new non-resident policy,
shall, in relation to that event, be taken for the purposes of this Chapter not to be a qualifying policy.
- (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (4) In this section—
- “*new non-resident policy*” means a new non-resident policy as defined in paragraph 24 of Schedule 15 (and in subsection (2) above includes a policy treated as such by virtue of subsection (1) above);
- “*overseas policy*” means a policy of life insurance which, by virtue of section 431D(1)(a), forms part of the overseas life assurance business of an insurance company or friendly society;
- “*relevant event*”, in relation to a policy of life insurance, means an event which would be a chargeable event in relation to that policy if the policy were assumed not to be a qualifying policy.
- (5) This section applies in relation to chargeable events and relevant events happening on or after 17th March 1998 in relation to policies of life insurance issued in respect of insurances made on or after that date.
- (6) A policy of life insurance issued in respect of an insurance made before 17th March 1998 shall be treated for the purposes of this section as issued in respect of one made on or after that date if it is varied on or after that date so as to increase the benefits secured or to extend the term of the insurance; and any exercise of rights conferred by the policy shall be regarded for this purpose as a variation.
##### 553B
- (1) A capital redemption policy which immediately before the happening of a chargeable event—
- (a) is an overseas policy, but
- (b) is not a new offshore capital redemption policy,
shall, in relation to that event, be treated for the purposes of this Chapter as if it were a new offshore capital redemption policy.
- (2) In this section—
- “*new offshore capital redemption policy*” has the same meaning as in section 553;
- “*overseas policy*” means a capital redemption policy which, by virtue of section 431D(1)(a), forms part of the overseas life assurance business of an insurance company.
- (3) This section applies in relation to capital redemption policies where the contract is made after the coming into force of the first regulations under section 458A in consequence of which capital redemption business forms part of the overseas life assurance business of an insurance company.
##### 553C
- (1) The Treasury may by regulations make provision imposing a yearly charge to corporation tax in relation to personal portfolio bonds (“yearly" being construed for this purpose by reference to years as defined in section 546(4)).
- (2) Subject to any provision to the contrary made by the regulations, any charge to corporation tax under this section is in addition to any other charge to corporation tax under this Chapter.
- (3) The regulations may make provision with respect to or in connection with all or any of the following—
- (a) the method by which the charge to corporation tax, or any relief, allowance or deduction against or in respect of the tax, is to be imposed or given effect;
- (b) the person who is to be liable for the tax;
- (c) the periods for or in respect of which the tax is to be charged;
- (d) the amounts in respect of which, or by reference to which, the tax is to be charged;
- (e) the period or periods by reference to which those amounts are to be determined;
- (f) the rate or rates at which the tax is to be charged;
- (g) any reliefs, allowances or deductions which are to be given or made against or in respect of the tax;
- (h) the administration of the tax.
- (4) The provision that may be made by the regulations includes provision for imposing the charge to corporation tax by a method which involves—
- (a) treating an event described in the regulations as if it were a chargeable event;
- (b) treating an amount determined in accordance with the regulations as if it were a gain treated as arising on the happening of a chargeable event; or
- (c) deeming an amount determined in accordance with the regulations to be income of a company; . . .
- (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (5) The provision that may be made in the regulations includes provision for the amount or amounts in respect of which, or by reference to which, the tax is to be charged for periods beginning after the coming into force of the regulations to be determined in whole or in part by reference to periods beginning or ending, premiums paid, or events happening, before, on or after the day on which the Finance Act 1998 is passed.
- (6) The regulations may make provision excluding, or applying (with or without modification), other provisions of this Chapter in relation to policies or contracts which are also personal portfolio bonds.
- (7) In this section, “*personal portfolio bond*” means a policy of life insurance, contract for a life annuity or capital redemption policy under whose terms—
- (a) some or all of the benefits are determined by reference to the value of, or the income from, property of any description (whether or not specified in the policy or contract) or fluctuations in, or in an index of, the value of property of any description (whether or not so specified); and
- (b) some or all of the property, or such an index, may be selected by, or by a person acting on behalf of, the holder of the policy or contract or a person connected with him (or the holder of the policy or contract and a person connected with him);
but a policy or contract is not a personal portfolio bond if the only property or index which may be so selected is of a description prescribed for this purpose in the regulations.
- (8) The regulations may prescribe additional conditions which must be satisfied if a policy or contract is to be a personal portfolio bond.
- (9) The regulations—
- (a) may make different provision for different cases, different circumstances or different periods; and
- (b) may make incidental, consequential, supplemental or transitional provision.
- (9A) The Treasury may by regulations make provision, in relation to any policy or contract to which this subsection applies, for—
- (a) treating an event described in the regulations as if it were a chargeable event, and
- (b) treating an amount determined in accordance with the regulations as if it were a gain treated as arising on the happening of a chargeable event.
- (9B) Regulations under subsection (9A) may make such provision for the purposes only of enabling the gain to be taken into account in the application of this Chapter to the policy or contract on the later happening of a chargeable event.
- (9C) Regulations under subsection (9A) may make any provision for the calculation of the amount of the gain which regulations under subsection (1) may make for the calculation of the amount charged to corporation tax by virtue of regulations under that subsection.
- (9D) Subsections (6), (8) and (9) apply to regulations under subsection (9A).
- (9E) Subsection (9A) applies to a policy or contract if—
- (a) it is a personal portfolio bond, and
- (b) liability in respect of a gain arising in relation to it would arise by virtue of any of sections 464 to 468 of ITTOIA 2005 (persons liable for tax under Chapter 9 of Part 4 of that Act).
- (10) In this section, “holder", in the case of a policy or contract held by two or more persons, includes a reference to any of those persons.
- (11) Section 839 (connected persons) applies for the purposes of this section.
##### 559A
- (1) A sum deducted under section 559 from a payment made by a contractor—
- (a) shall be paid to the Board, and
- (b) shall be treated for the purposes of income tax or, as the case may be, corporation tax as not diminishing the amount of the payment.
- (2) If the sub-contractor is not a company a sum deducted under section 559 and paid to the Board shall be treated as being income tax paid in respect of the sub-contractor’s relevant profits.
If the sum is more than sufficient to discharge his liability to income tax in respect of those profits, so much of the excess as is required to discharge any liability of his for Class 4 contributions shall be treated as being Class 4 contributions paid in respect of those profits.
- (3) If the sub-contractor is a company—
- (a) a sum deducted under section 559 and paid to the Board shall be treated, in accordance with regulations, as paid on account of any relevant liabilities of the sub-contractor;
- (b) regulations shall provide for the sum to be applied in discharging relevant liabilities of the year of assessment in which the deduction is made;
- (c) if the amount is more than sufficient to discharge the sub-contractor’s relevant liabilities, the excess may be treated, in accordance with the regulations, as being corporation tax paid in respect of the sub-contractor’s relevant profits; and
- (d) regulations shall provide for the repayment to the sub-contractor of any amount not required for the purposes mentioned in paragraphs (b) and (c).
- (4) For the purposes of subsection (3) the “*relevant liabilities*” of a sub-contractor are any liabilities of the sub-contractor, whether arising before or after the deduction is made, to make a payment to a collector of inland revenue in pursuance of an obligation as an employer or contractor.
- (5) In this section—
- (a) “*the sub-contractor*” means the person for whose labour (or for whose employees’ or officers’ labour) the payment is made;
- (b) references to the sub-contractor’s “*relevant profits*” are to the profits from the trade, profession or vocation carried on by him in the course of which the payment was received;
- (c) “*Class 4 contributions*” means Class 4 contributions within the meaning of the Social Security Contributions and Benefits Act 1992 or the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
- (6) References in this section to regulations are to regulations made by the Board.
- (7) Regulations under this section—
- (a) may contain such supplementary, incidental or consequential provision as appears to the Board to be appropriate, and
- (b) may make different provision for different cases.
#### Individuals qualifying for relief.
### Chapter 5A — Share loss relief
### Relief for losses on unquoted shares in trading companies
##### 576A
- (1) For the purposes of this Chapter a qualifying trading company is a company which meets each of conditions A to D.
- (2) Condition A is that the company either—
- (a) meets each of the following requirements on the date of the disposal—
- (i) the trading requirement (see section 576B),
- (ii) the control and independence requirement (see section 576D),
- (iii) the qualifying subsidiaries requirement (see section 576E), and
- (iv) the property managing subsidiaries requirement (see section 576F), or
- (b) has ceased to meet any of those requirements at a time which is not more than 3 years before that date and has not since that time been an excluded company, an investment company or a trading company.
- (3) Condition B is that the company either—
- (a) has met each of the requirements mentioned in condition A for a continuous period of 6 years ending on that date or at that time, or
- (b) has met each of those requirements for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company, an investment company or a trading company.
- (4) Condition C is that the company—
- (a) met the gross assets requirement (see section 576G) both immediately before and immediately after the issue of the shares in respect of which the relief is claimed under this Chapter, and
- (b) met the unquoted status requirement (see section 576H) at the relevant time within the meaning of that section.
- (5) Condition D is that the company has carried on its business wholly or mainly in the United Kingdom throughout the period—
- (a) beginning with the incorporation of the company or, if later, 12 months before the shares in question were issued, and
- (b) ending with the date of the disposal.
### Qualifying trading companies: the requirements
##### 576B
- (1) The trading requirement is that—
- (a) the company, disregarding any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, or
- (b) the company is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities.
- (2) If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades—
- (a) the company is treated as a parent company for the purposes of subsection (1)(b), and
- (b) the reference in subsection (1)(b) to the group includes the company and any existing or future company that will be its qualifying subsidiary after the intention in question is carried into effect.
This subsection does not apply at any time after the abandonment of that intention.
- (3) For the purpose of subsection (1)(b) the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business.
- (4) For the purpose of determining the business of a group, activities are disregarded to the extent that they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.
- (5) For the purposes of determining the business of a group, activities of a group company are disregarded to the extent that they consist in—
- (a) the holding of shares in or securities of a qualifying subsidiary of the parent company,
- (b) the making of loans to another group company,
- (c) the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company, or
- (d) the holding and managing of property used by a group company for the purpose of research and development from which it is intended—
- (i) that a qualifying trade to be carried on by a group company will be derived, or
- (ii) that a qualifying trade carried on or to be carried on by a group company will benefit.
- (6) Any reference in subsection (5)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time.
- (7) In this section—
- “*excluded activities*” has the meaning given by section 192 of ITA 2007 read with sections 193 to 199 of that Act,
- “*group*” means a parent company and all its qualifying subsidiaries,
- “*group company*”, in relation to a group, means the parent company or any of its qualifying subsidiaries,
- “*incidental purposes*” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the company in question,
- “*mainly trading subsidiary*” means a subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly,
- “*non-qualifying activities*” means—excluded activities, andactivities (other than research and development) carried on otherwise than in the course of a trade,
- “*parent company*” means a company that has one or more qualifying subsidiaries,
- “*qualifying subsidiary*” is to be read in accordance with section 191 of ITA 2007,
- “*qualifying trade*” has the meaning given by section 189 of that Act,
- “*research and development*” has the meaning given by section 837A.
- (8) In sections 189(1)(b) and 194(4)(c) of ITA 2007 (as applied by subsection (7) for the purposes of the definitions of “excluded activities” and “qualifying trade”) “*period B*” means the continuous period that is relevant for the purposes of section 576A(3).
- (9) In section 195 of ITA 2007 as applied by subsection (7) for the purposes mentioned in subsection (8), references to the issuing company are to be read as references to the company mentioned in subsection (1).
#### Form of relief.
##### 576C
- (1) A company is not regarded as ceasing to meet the trading requirement by reason only of anything done in consequence of the company or any of its subsidiaries being in administration or receivership.
This has effect subject to subsections (2) and (3).
- (2) Subsection (1) applies only if—
- (a) the entry into administration or receivership, and
- (b) everything done as a result of the company concerned being in administration or receivership,
is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
- (3) A company ceases to meet the trading requirement if before the time that is relevant for the purposes of section 576A(2)—
- (a) a resolution is passed, or an order is made, for the winding up of the company or any of its subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989, any other act is done for the like purpose), or
- (b) the company or any of its subsidiaries is dissolved without winding up.
This is subject to subsection (4).
- (4) Subsection (3) does not apply if —
- (a) the winding up is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and
- (b) the company continues, during the winding up, to be a trading company.
- (5) References in this section to a company being “in administration” or “in receivership” are to be read in accordance with section 252 of ITA 2007.
##### 576D
- (1) The control element of the requirement is that—
- (a) the company must not control (whether on its own or together with any person connected with it) any company which is not a qualifying subsidiary of the company, and
- (b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 576A(3) or otherwise).
- (2) The independence element of the requirement is that—
- (a) the company must not—
- (i) be a 51% subsidiary of another company, or
- (ii) be under the control of another company (or of another company and any other person connected with that other company), without being a 51% subsidiary of that other company, and
- (b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 576A(3) or otherwise).
- (3) This section is subject to section 576J(3).
- (3A) Section 839 (connected persons) applies for the purposes of this section.
- (4) In this section—
- “*arrangements*” includes any scheme, agreement or understanding, whether or not legally enforceable,
- “control” is to be read as follows—in subsection (1)(a), in accordance with section 416(2) to (6),in subsection (2)(a), in accordance with section 840,
- “*qualifying subsidiary*” is to be read in accordance with section 191 of ITA 2007.
#### Restriction of relief where amounts raised exceed permitted maximum.
##### 576E
- (1) The qualifying subsidiaries requirement is that any subsidiary that the company has must be a qualifying subsidiary of the company.
- (2) In this section “*qualifying subsidiary*” is to be read in accordance with section 191 of ITA 2007.
##### 576F
- (1) The property managing subsidiaries requirement is that any property managing subsidiary that the company has must be a qualifying 90% subsidiary of the company.
- (2) In this section—
- “*property managing subsidiary*” has the meaning given by section 188(2) of ITA 2007,
- “*qualifying 90% subsidiary*” has the meaning given by section 190 of that Act.
##### 576G
- (1) The gross assets requirement in the case of a single company is that the value of the company's gross assets—
- (a) must not exceed £7 million immediately before the shares in respect of which the relief is claimed under this Chapter are issued, and
- (b) must not exceed £8 million immediately afterwards.
- (2) The gross assets requirement in the case of a parent company is that the value of the group assets—
- (a) must not exceed £7 million immediately before the shares in respect of which the relief is claimed under this Chapter are issued, and
- (b) must not exceed £8 million immediately afterwards.
- (3) The value of the group assets means the aggregate of the values of the gross assets of each of the members of the group, disregarding any that consist in rights against, or shares in or securities of, another member of the group.
- (4) In this section—
- “*group*” means a parent company and its qualifying subsidiaries,
- “*parent company*” means a company that has one or more qualifying subsidiaries,
- “*qualifying subsidiary*” is to be read in accordance with section 191 of ITA 2007, and
- “*single company*” means a company that does not have one or more qualifying subsidiaries.
##### 576H
- (1) The unquoted status requirement is that, at the time (“*the relevant time*”) at which the shares in respect of which the relief is claimed under this Chapter are issued—
- (a) the company must be an unquoted company,
- (b) there must be no arrangements in existence for the company to cease to be an unquoted company, and
- (c) there must be no arrangements in existence for the company to become a subsidiary of another company (“the new company”) by virtue of an exchange of shares, or shares and securities, if—
- (i) section 576J applies in relation to the exchange, and
- (ii) arrangements have been made with a view to the new company ceasing to be an unquoted company.
- (2) The arrangements referred to in subsection (1)(b) and (c)(ii) do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the company or the new company are at any subsequent time—
- (a) listed on a stock exchange that is a recognised stock exchange by virtue of an order made under section 1005 of ITA 2007, or
- (b) listed on an exchange, or dealt in by any means, designated by an order made for the purposes of section 184(3)(b) or (c) of that Act,
if the order was made after the relevant time.
- (3) In this section—
- “*arrangements*” includes any scheme, agreement or understanding, whether or not legally enforceable,
- “*debenture*” has the meaning given by section 744 of the Companies Act 1985,
- “*unquoted company*” has the meaning given by section 184(2) of ITA 2007.
##### 576I
The Treasury may by order make such amendments of sections 576B to 576H as they consider appropriate.
### Qualifying trading companies: supplementary provisions
##### 576J
- (1) This section and section 576K apply in relation to shares if—
- (a) a company (“the new company”) in which the only issued shares are subscriber shares acquires all the shares (“old shares”) in another company (“the old company”),
- (b) the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company,
- (c) the consideration for the new shares of each description consists wholly of old shares of the corresponding description,
- (d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings, and
- (e) by virtue of section 127 of the 1992 Act as applied by section 135(3) of that Act (company reconstructions etc), the exchange of shares is not to be treated as involving a disposal of the old shares or an acquisition of the new shares.
In this subsection references to shares, except the first and that in the expression “subscriber shares”, include securities.
- (2) For the purposes of this Chapter the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares.
- (3) Nothing in section 576D (the control and independence requirement) applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1), or arrangements with a view to such an exchange.
- (4) For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.
- (5) References in section 576K to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section.
##### 576K
- (1) Subsection (2) applies if, in the case of any new shares held by a company or by a nominee for a company, the old shares for which they were exchanged were shares that had been subscribed for by the company (“the investor”).
- (2) This Chapter has effect as if—
- (a) the new shares had been subscribed for by the investor at the time when, and for the amount for which, the old shares were subscribed for by the investor,
- (b) the new shares had been issued by the new company at the time when the old shares were issued to the investor by the old company, and
- (c) any requirements of this Chapter which were met at any time before the exchange by the old company had been met at that time by the new company.
- (3) Section 573(6) applies for the purposes of this section.
- (4) Nothing in subsection (2) applies in relation to section 195(7) of ITA 2007 as applied by section 576B(7) above for the purposes mentioned in section 576B(8).
### Supplemental
##### 576L
- (1) In this Chapter (subject to subsections (2) to (5))—
- “*excluded company*” means a company which—has a trade which consists wholly or mainly of dealing in land, in commodities or futures or in shares, securities or other financial instruments,has a trade which is not carried on on a commercial basis and in such a way that profits in the trade can reasonably be expected to be realised,is a holding company of a group other than a trading group, oris a building society or a registered industrial and provident society,
- “group” (except in sections 576B and 576G) means a company which has one or more 51% subsidiaries together with that or those subsidiaries,
- “*holding company*” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 51% subsidiaries,
- “*investment company*” has the meaning given by section 130 except that it does not include the holding company of a trading group,
- “*registered industrial and provident society*” means a society registered or treated as registered under the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) Act 1969,
- “shares”—includes stock, butdoes not include shares or stock not forming part of a company's ordinary share capital,
- “*trading company*” means a company other than an excluded company which is—a company whose business consists wholly or mainly of the carrying on of a trade or trades, orthe holding company of a trading group, and
- “*trading group*” means a group the business of whose members, when taken together, consists wholly or mainly in the carrying on of a trade or trades.
- (2) Except as provided by subsection (3), paragraph (b) of the definition of “shares” in subsection (1) does not apply in the definition of “excluded company” in subsection (1) or in section 576J(1) to (4).
- (3) Paragraph (b) of that definition applies in relation to the first reference to “shares” in section 576J(1).
- (4) The definition of “shares” in subsection (1) does not apply in sections 576B(5)(a), 576G(3) and 576H(1)(c) and (2).
- (5) For the purposes of the definition of “trading group” in subsection (1), any trade carried on by a subsidiary which is an excluded company is treated as not constituting a trade.
#### Individuals qualifying for relief.
##### 577A
- (1) In computing profits chargeable to corporation tax under . . . Schedule D, no deduction shall be made for any expenditure incurred —
- (a) in making a payment the making of which constitutes the commission of a criminal offence, or
- (b) in making a payment outside the United Kingdom where the making of a corresponding payment in any part of the United Kingdom would constitute a criminal offence there.
- (1A) In computing profits chargeable to corporation tax under . . . Schedule D, no deduction shall be made for any expenditure incurred in making a payment induced by a demand constituting—
- (a) the commission in England or Wales of the offence of blackmail under section 21 of the Theft Act 1968,
- (b) the commission in Northern Ireland of the offence of blackmail under section 20 of the Theft Act (Northern Ireland) 1969, or
- (c) the commission in Scotland of the offence of extortion.
- (2) Any expenditure mentioned in subsection (1) or (1A) above—
- (a) shall not be included in computing any expenses of management in respect of which relief may be given under the Corporation Tax Acts; and
- (b) shall not be brought into account under section 76 as expenses payable.
##### 578A
- (1) This section provides for a reduction in the amounts—
- (a) allowable as deductions in computing profits chargeable to corporation tax under Case I or II of Schedule D, or
- (b) which can be included as expenses of management of a company with investment business (as defined by section 130),. . . or
- (bb) which can be brought into account under section 76 as expenses payable,
- (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
for expenditure on the hiring of a car to which this section applies.
- (2) This section applies to the hiring of a car—
- (a) which is not a qualifying hire car, and
- (b) the retail price of which when new exceeds £12,000.
“Car” and “qualifying hire car” are defined by section 578B.
- (2A) This section does not apply to the hiring of a car, other than a motorcycle, if—
- (a) it is an electrically-propelled car, or
- (b) it is a car with low CO₂ emissions.
- (2B) In subsection (2A) above—
- “*car*” has the meaning given by section 578B;
- “*car with low CO₂ emissions*” has the meaning given by section 45D of the Capital Allowances Act 2001 (expenditure on cars with low CO₂ emissions to be first-year qualifying expenditure);
- “*electrically-propelled car*” has the meaning given by that section.
- (3) The amount which would, apart from this section, be allowable or capable of being included must be reduced by multiplying it by the fraction—
$£12,000+P2P$
where P is the retail price of the car when new.
- (4) If an amount has been reduced under subsection (3) and subsequently—
- (a) there is a rebate (however described) of the rentals, or
- (b) there occurs in connection with the rentals a transaction that falls within section 94 (debts deducted and subsequently released),
the amount otherwise taxable in respect of the rebate or transaction must be reduced by multiplying it by the fraction in subsection (3) above.
##### 578B
- (1) In section 578A “car” means a mechanically propelled road vehicle other than one—
- (a) of a construction primarily suited for the conveyance of goods or burden of any description, or
- (b) of a type not commonly used as a private vehicle and unsuitable for such use.
References to a car accordingly include a motor cycle.
- (2) For the purposes of section 578A, a car is a qualifying hire car if—
- (a) it is hired under a hire-purchase agreement (within the meaning of section 784(6)) under which there is an option to purchase exercisable on the payment of a sum equal to not more than 1 per cent. of the retail price of the car when new, or
- (b) it is a qualifying hire car for the purposes of Part 2 of the Capital Allowances Act (under section 82 of that Act).
- (3) In section 578A and this section “*new*” means unused and not second-hand.
- (4) The power under section 74(4) of the Capital Allowances Act to increase or further increase the sums of money specified in Chapter 8 of Part 2 of that Act includes the power to increase or further increase the sum of money specified in section 578A(2)(b) or (3).
##### 580A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 580B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 580C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Valuation of interests in land for purposes of section 294(1)(b).
##### 581A
Interest within section 755(1) of ITTOIA 2005 (interest on foreign currency securities etc.) shall be paid without deduction of income tax.
##### 582A
- (1) The Treasury may by order designate for the purposes of any one or more of subsections (2) and (4) to (6) below . . . any international organisation of which the United Kingdom is a member; and in those subsections “*designated*” means designated under this subsection.
- (2) Section 43 shall not apply in the case of payment made by an organisation designated for the purposes of this subsection.
- (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (4) Section 349(1) shall not apply in the case of a payment of an amount payable by an organisation designated for the purposes of this subsection.
- (5) Section 349(2) shall not apply in the case of interest payable by—
- (a) an organisation designated for the purposes of this subsection, or
- (b) a partnership of which such an organisation is a member.
- (6) An organisation designated for the purposes of this subsection shall not be a person to whom section 59 of the Finance Act 2004 applies.
#### Interpretation of Chapter III.
##### 587A
- (1) This section applies where—
- (a) an insurance business transfer scheme has effect to transfer life assurance business from one person (“*the transferor*”) to another (“*the transferee*”),
- (b) assuming the transferor had continued to carry on the business transferred after the transfer, the amount of any profits would have been charged to tax in respect of that business under the I minus E basis,
- (c) the profits in respect of the business transferred for the first period of account of the transferee ending after the date on which the transfer takes effect are charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3), and
- (d) the conditions in paragraphs (a) and (b) of section 343(1) are satisfied in relation to the business transferred (construing references to an event as to a transfer).
- (2) Any loss which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to be set off against profits chargeable under section 436A (a “Case VI loss”) shall instead be treated as a loss of the transferee (a “Case I loss”) available to be set off against GRBP in relation to a period of account.
- (3) For the purposes of subsection (2) above “*GRBP*”, in relation to a period of account, is—
$P×GRBTLTL$
where—
- *P* is the amount of such profits of the transferee's life assurance business for the period of account as relate to the business transferred (that amount being determined in accordance with section 343(9) and (10), where applicable),
- *GRBTL* is the mean of the opening and closing liabilities of the transferred gross roll-up business for the period of account, and
- *TL* is the mean of the opening and closing liabilities of the transferred life assurance business for the period of account.
- (4) Where the transfer is of part only of the transferor's long-term business, subsection (2) above shall apply only to such part of any Case VI loss to which it would otherwise apply as is appropriate.
- (5) Any question arising as to the operation of subsection (4) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but both the transferor and the transferee shall be entitled to appear and be heard or to make representations in writing.
#### Married couple's allowance (post-5th December 2005 marriages and civil partnerships etc.)
##### 444AZB
- (1) This section applies where—
- (a) an insurance business transfer scheme has effect to transfer life assurance business from one person (“*the transferor*”) to another (“*the transferee*”),
- (b) assuming the transferor had continued to carry on the business transferred after the transfer, the amount of any profits would have been charged to tax in accordance with Case I of Schedule D by virtue of section 431G(3),
- (c) the profits in respect of the business transferred for the first period of account of the transferee ending after the date on which the transfer takes effect are charged to tax under the I minus E basis, and
- (d) the conditions in paragraphs (a) and (b) of section 343(1) are satisfied in relation to the business transferred (construing references to an event as to a transfer).
- (2) The relevant fraction of any loss which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to be set off against profits of that business (a “Case I loss”) shall instead be treated as a loss of the transferee (a “Case VI loss”) available to be set off against the amount of such profits chargeable under section 436A for a period of account as relate to the business transferred (that amount being determined in accordance with section 343(9) and (10), where applicable).
- (3) For the purposes of subsection (2) above “*the relevant fraction*”, in relation to a period of account, is—
$GRBTLTL$
where—
- *GRBTL* is the mean of the opening and closing liabilities of the transferred gross roll-up business for the period of account, and
- *TL* is the mean of the opening and closing liabilities of the transferred life assurance business for the period of account.
- (4) Where the transfer is of part only of the transferor's long-term business, subsection (2) above shall apply only to such part of the amount of any Case I loss to which it would otherwise apply as is appropriate.
- (5) Any question arising as to the operation of subsection (4) above shall be determined by the Special Commissioners who shall determine the question in the same manner as they determine appeals; but both the transferor and the transferee shall be entitled to appear and be heard or to make representations in writing.
##### 444AA
- (1) This section applies where an insurance business transfer scheme has effect to transfer the whole of the long-term business of one person (“*the transferor*”).
- (2) Where the last period covered by a periodical return of the transferor ends otherwise than immediately before the transfer, there is to be deemed for the purposes of corporation tax to be a periodical return of the transferor covering the period—
- (a) beginning immediately after the last period ending before the transfer which is covered by an actual periodical return of the transferor, and
- (b) ending immediately before the transfer,
containing such entries as would have been included in an actual periodical return of the transferor covering that period (and so making that period a period of account of the transferor).
- (3) Where the last period covered by a periodical return of the transferor (whether or not by virtue of subsection (2) above) ends immediately before the transfer, there is to be deemed for the relevant purpose to be a periodical return of the transferor—
- (a) covering the time of the transfer, and
- (b) containing such entries as would have been included in an actual periodical return covering the time of the transfer,
(and so making the time of the transfer a period of account of the transferor for the relevant purpose).
- (4) Where the last period covered by a periodical return of the transferor ends after the transfer, the periodical return covering that period is to be ignored for all purposes of corporation tax other than the relevant purpose.
- (5) In this section “*the relevant purpose*” means determining for the purposes of section 83(2B) of the Finance Act 1989 whether a transfer is brought into account as part of total expenditure.
- (6) For the purposes of this section “*insurance business transfer scheme*” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).
- (7) Where this section applies in relation to a transfer in a case in which the transferor continues, after the transfer, to carry on insurance business which is not long-term business—
- (a) references in this section to the last period covered by a periodical return (or deemed periodical return) of the transferor shall be taken to be references to the last period covered by a periodical return (or deemed periodical return) of the transferor containing entries relating to long-term business;
- (b) subsection (4) above is to be read as if after “other than” there were inserted the purposes of sections 444BA to 444BD and.
##### 444AB
- (1) This section applies where, immediately after an insurance business transfer scheme has effect to transfer long-term business from one person (“*the transferor*”) to one or more others (“*the transferee*” or “*the transferees*”), the transferor—
- (a) does not carry on long-term business, but
- (b) holds assets which, immediately before the transfer, were assets of its long-term insurance fund.
- (2) The transferor shall be charged to tax under Case VI of Schedule D in respect of the taxable amount as if it had been received by the transferor during the accounting period beginning immediately after the day of the transfer.
- (3) If the transferor was charged to tax on the profits of its life assurance business under Case I of Schedule D for the accounting period ending immediately before the transfer, the taxable amount is the whole of the previously untaxed amount.
- (4) Otherwise, the taxable amount is the non-BLAGAB fraction of the previously untaxed amount.
- (5) The previously untaxed amount is the lesser of—
- (a) if there are no retained liabilities, the fair value of the retained assets or, if there are, so much of the fair value of the retained assets as exceeds the amount of the retained liabilities, and
- (b) the amount by which the fair value of the assets of the transferor’s long-term insurance fund immediately before the transfer exceeds the amount of the relevant pre-transfer liabilities.
- (6) In subsection (5) above “*fair value*”, in relation to assets, means the amount which would be obtained from an independent person purchasing them or, if the assets are money, its amount.
- (6A) In subsection (5) above—
- (a) “*the retained assets*” means such of the assets held by the transferor immediately after the transfer as were assets of its long-term insurance fund immediately before the transfer; and
- (b) “*the retained liabilities*” means such of the liabilities of the transferor immediately after the transfer as were included in column 1 of line 14, 17, 22, 31 or 38 of Form 14 in the periodical return of the transferor covering the period of account ending immediately before the transfer.
- (7) Subject to subsection (8) below, the amount of the relevant pre-transfer liabilities is the aggregate of the amounts shown in column 1 of lines 14 and 49 of Form 14 in the periodical return of the transferor covering the period of account ending immediately before the transfer.
- (8) If the amount of the liabilities transferred exceeds the value of the assets so transferred, as brought into account for the first period of account of the transferee (or any of the transferees) ending after the transfer, the amount of the relevant pre-transfer liabilities is the amount arrived at by deducting the excess from the aggregate of the amounts shown as mentioned in subsection (7) above.
- (9) For the purposes of subsection (4) above the non-BLAGAB fraction of the previously untaxed amount is the fraction of which—
- (a) the numerator is the amount of the liabilities transferred, apart from those which are liabilities of basic life assurance and general annuity business, and
- (b) the denominator is the amount of the liabilities transferred.
- (10) References in this section to assets held by the transferor after the transfer do not include any held on trust for the transferee or any of the transferees.
- (11) For the purposes of this section “*insurance business transfer scheme*” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).
##### 444ABA
- (1) This section applies where—
- (a) section 444AB applies in relation to a transfer in the case of which there are retained liabilities, and
- (b) in any accounting period of the transferor beginning after the day of the transfer there is a reduction in the amount of the retained liabilities occasioned otherwise than by the making of a payment in or towards their discharge.
- (2) The transferor shall be charged to tax under Case VI of Schedule D in respect of the taxable amount as if it had been received by the transferor in the accounting period in which the reduction occurs.
- (3) If the transferor was charged to tax on the profits of its life assurance business under Case I of Schedule D for the accounting period ending immediately before the transfer, the taxable amount is the whole amount of the reduction.
- (4) Otherwise the taxable amount is the non-BLAGAB fraction of the amount of the reduction.
- (5) The non-BLAGAB fraction of the amount of the reduction is the fraction of which—
- (a) the numerator is the amount of the liabilities transferred, apart from those which are liabilities of basic life assurance and general annuity business, and
- (b) the denominator is the amount of the liabilities transferred.
- (6) Where in any accounting period of the transferor beginning after the transfer there is an increase in the amount of the retained liabilities, this section applies in relation to subsequent accounting periods of the transferor as if the amount of the retained liabilities were reduced by the amount of the increase.
- (7) Where an amount is shown as post-transfer reduction liabilities in the transferor’s accounts for any accounting period beginning after the transfer, this section applies as if the amount of the retained liabilities at the end of that accounting period (and the beginning of the next) were increased by the amount so shown.
- (8) In subsection (7) above “*post-transfer reduction liabilities*” means liabilities of the transferor to make payments to relevant persons which, in accordance with the terms of the insurance business transfer scheme, have arisen in consequence of a reduction in the amount of the retained liabilities at any time after the transfer.
- (9) In subsection (8) above “*relevant persons*” means—
- (a) if the transferor’s life assurance business immediately before the transfer was mutual business, persons who were policy holders or annuitants, or members of the transferor, at that time, and
- (b) in any other case, persons who were policy holders or annuitants at that time.
##### 444ABAA
- (1) For the purposes of section 444AB the relevant amount in relation to assets that are non-profit fund transferred assets is—
$$FVA-(ABTO+TL)$where—FVA is the fair value of the assets on the transfer date,ABTO is any amount brought into account in respect of the assets as a business transfer-out and shown (or treated as shown) in line 32 of Form 40 in the periodical return of the transferor for the period of account of the transferor including the transfer date, andTL is the amount of any non-profit fund transferred liabilities which are shown (or treated as shown) in any of lines 17, 21 to 23 and 31 to 38, but not in line 61, in Form 14 in the periodical return for the period of account of the transferor ending (or treated as ending by section 444AA) immediately before the transfer date or, if there is no period of account of the transferor so ending (or treated as so ending), the amount of any liabilities which would be so shown if one did.$
- (2) In subsection (1) “*non-profit fund transferred liabilities*” means such of the liabilities of the transferor's long-term insurance fund as are transferred from the transferor to the transferee by the insurance business transfer scheme and were, immediately before their transfer, liabilities of a non-profit fund of the transferor.
- (3) See section 444AA for the meaning of “the transfer date” in this section.
#### Meaning of “distribution”.
##### 444ABB
- (1) For the purposes of section 444AB the relevant amount in relation to assets that are retained assets is the lesser of FVA and UTA, where—
- (a) FVA is the fair value of the assets on the transfer date, and
- (b) UTA is the amount by which the fair value of the assets of the long-term insurance fund of the transferor immediately before the transfer date exceeds the amount shown (or treated as shown) in line 32 of Form 40 in the periodical return of the transferor covering the transfer date.
- (2) See section 444AA for the meaning of “the transfer date” in this section.
##### 444ABBA
- (1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“*the transferor*”) to another (“*the transferee*”).
- (2) If the transferor and the transferee jointly elect, the transferee (and not the transferor) is chargeable to any amount of additional corporation tax to which the transferor would otherwise be chargeable by virtue of section 444AB(4) in relation to relevant non-transferred assets.
- (3) An election under subsection (2) above—
- (a) is to be irrevocable, and
- (b) is to be made by notice to an officer of Revenue and Customs no later than the end of the period of 90 days beginning with the day following the transfer date,
and a copy of the notice containing the election must accompany the tax return of the transferee for the first accounting period ending after the transfer. Paragraphs 54 to 60 of Schedule 18 to the Finance Act 1998 (claims and elections for corporation tax purposes) do not apply to such an election.
- (4) Where an election under subsection (2) above has been made, the transferor must inform the transferee of—
- (a) the amount of any additional corporation tax to which the transferor considers the election to apply, and
- (b) the day on which that tax is due and payable,
no later than the end of the period of 8 months beginning with the day following the transfer date.
- (5) Tax chargeable on the transferee by virtue of an election under subsection (2) above—
- (a) is due in accordance with section 59D of the Management Act on the day on which it would have been due if no election had been made, and
- (b) for the purposes of that section, is to be treated as tax payable by the transferor (and not as tax payable by the transferee).
- (6) See section 444AA for the meaning of “the transfer date” in this section.
##### 444ABC
- (1) This section applies where an insurance business transfer scheme has effect to transfer part (but not the whole or substantially the whole) of the long-term business of a person (“*the transferor*”) to another person (“*the transferee*”) and the condition in subsection (2) below is met.
- (2) That condition is that any of the assets of the transferor's long-term insurance fund which are transferred from the transferor to the transferee by the insurance business transfer scheme are not, immediately after their transfer—
- (a) if the transferee is an insurance company, assets of the transferee's long-term insurance fund, or
- (b) if the transferee is not an insurance company, assets of a with-profits fund of the transferee,
(“relevant non-transferred assets”).
- (3) The relevant amount in relation to the relevant non-transferred assets (see subsection (4) below) is to be taken into account under section 83(2) of the Finance Act 1989 as an increase in value of the assets of the long-term insurance fund of the transferor for the period of account covering the transfer date.
- (4) The relevant amount in relation to the relevant non-transferred assets is—
$$FVA-BTO$whereFVA is the fair value of the assets on the transfer date, andBTO is any amount brought into account in respect of the assets as a business transfer-out.$
- (5) See section 444AA for the meaning of “the transfer date” in this section.
##### 444ABD
- (1) Any profits representing the amount by which—
- (a) the value of the liabilities transferred by an insurance business transfer scheme, exceeds
- (b) the value of the assets transferred by the insurance business transfer scheme shown (or treated as shown) in line 32 of the periodical return of the transferor for the period of account of the transferor including the transfer date,
are to be taken into account as profits of that period of account.
- (2) See section 444AA for the meaning of “the transfer date” in this section.
##### 444AC
- (1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“*the transferor*”) to another (“*the transferee*”).
- (2) If—
- (a) the transferee's line 31 amount in relation to the transfer, exceeds
- (b) the aggregate amount of the liabilities to policy holders and annuitants transferred to the transferee and of any relevant debts,
the excess is not to be regarded as a business transfer-in of the transferee for the purposes of section 83(2)(e) of the Finance Act 1989.
- (2A) Subject to subsections (2C) and (2D) below, subsection (2B) below applies if—
- (a) the aggregate amount of the liabilities to policy holders and annuitants transferred to the transferee and of any relevant debts, exceeds
- (b) the transferee's line 31 amount in relation to the transfer.
- (2B) Where this subsection applies—
- (a) the life assurance part of the excess is to be taken into account as a receipt of the transferee in computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits of its life assurance business for the period of account of the transferee in which the transfer takes place (“*the relevant period of account*”); and
- (b) the relevant proportion of the excess is to be taken into account as a receipt of the transferee in so computing the profits of each category of its life assurance business for the relevant period of account;
and, for this purpose, “*the life assurance part of the excess*” means the proportion of the excess that the liabilities of the transferee's life assurance business that are transferred bear to the total liabilities transferred and “*the relevant proportion*”, in relation to a category of the transferee's life assurance business, is the proportion that the liabilities of that category that are transferred bear to the total liabilities transferred.
- (2C) Subsection (2B) above does not require the life assurance part of the excess to be taken into account as a receipt of the transferee in so computing the profits of its life assurance business for the relevant period of account if—
- (a) transferred liabilities of an aggregate amount equal to the life assurance part of the excess are not taken into account in so computing those profits for that period of account, and
- (b) the amount of the closing liabilities of that period of account is taken into account as opening liabilities in so computing those profits for the next period of account.
- (2D) Subsection (2B) above does not require the relevant proportion of the excess to be taken into account as a receipt of the transferee in so computing the profits of a category of its life assurance business for the relevant period of account if—
- (a) transferred liabilities of an aggregate amount equal to the relevant proportion of the excess are not taken into account in so computing those profits for that period of account, and
- (b) the amount of the closing liabilities of that period of account is taken into account as opening liabilities in so computing those profits for the next period of account.
- (2E) In subsections (2C)(a) and (2D)(a) above “*transferred liabilities*” means—
- (a) liabilities to policy holders or annuitants at the end of the relevant period of account that were transferred to the transferee, and
- (b) payments made to discharge, during that period of account, liabilities to policy holders or annuitants that were transferred to the transferee.
- (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (4) In this section “*relevant debts*” means debts which become debts of the transferee's long-term insurance fund as a result of the transfer.
- (5) But if—
- (a) the aggregate amount of any relevant reinsurance amounts and of the fair value, as at the date of the transfer, of the assets which become assets of the transferee's long-term insurance fund as a result of the transfer, exceeds
- (b) the transferee's line 31 amount in relation to the transfer,
the amount of any relevant debts for the purposes of this section is to be reduced (but not below nil) by the excess.
- (5A) In subsection (5)(a) above “*relevant reinsurance amounts*” means—
- (a) amounts which are comprised in line 16 of Form 14 in the periodical return of the transferor covering the period ending immediately before the transfer (or would be so comprised if the transferor drew up a periodical return covering that period), or
- (b) other amounts which arise under contracts of reinsurance in relation to which the reinsurer is the transferee and which, as at the date of the transfer, have fallen due to the transferor,
and which (in either case) do not become assets of the transferee's long-term insurance fund as a result of the transfer because (and only because) they arise under contracts of reinsurance in relation to which the reinsurer is the transferee.
- (6) In determining the amount of the liabilities transferred for the purposes of this section, there is to be disregarded any reduction in the transferee's liabilities resulting from reinsurance under a contract of reinsurance which is a relevant financial reinsurance contract (within the meaning of section 82C of the Finance Act 1989).
- (7) But where—
- (a) such a reduction results from reinsurance under a contract which was entered into by the transferor as cedant before the day on which the transfer takes place, and
- (b) the transferor's rights and obligations under the contract are transferred to the transferee under the transfer,
the amount of the reduction that would (apart from this subsection) be disregarded under subsection (6) above shall be reduced (but not below nil) by the amount given by subsection (8) below or, if less, the amount given by subsection (9) below.
- (8) The amount given by this subsection is the amount by which the liabilities at the end of the closing period which fell to be taken into account in computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits of the transferor's business for that period were reduced as a result of reinsurance under the contract.
- (9) The amount given by this subsection is the amount given by paragraph (a) below reduced (but not below nil) by the amount given by paragraph (b) below—
- (a) the amount given by this paragraph is the aggregate of the relevant amounts for any accounting period, and for this purpose the relevant amount for an accounting period is the amount in sub-paragraph (i) or (ii) below or, where applicable, the aggregate of those amounts—
- (i) the amount by which the profits of the transferor's business, computed in accordance with the provisions of this Act applicable to Case I of Schedule D, were increased for that accounting period as a result of reinsurance under the contract;
- (ii) the amount by which the losses of the transferor's business, so computed, were reduced for that accounting period as a result of reinsurance under the contract; and
- (b) the amount given by this paragraph is the aggregate of the relevant amounts for any accounting period, and for this purpose the relevant amount for an accounting period is the amount in sub-paragraph (i) or (ii) below or, where applicable, the aggregate of those amounts—
- (i) the amount by which the profits of the transferor's business, so computed, were reduced for that accounting period as a result of a reduction in reinsurance under the contract;
- (ii) the amount by which the losses of the transferor's business, so computed, were increased for that accounting period as a result of a reduction in reinsurance under the contract.
- (10) In subsections (8) and (9) above—
- “*the closing period*” means the accounting period of the transferor ending with the day on which the transfer takes place;
- “the transferor's business” means—the transferor's life assurance business, andany category of its life assurance business to which the liabilities relate.
- (11) For the purposes of this section and section 444ACA—
- “*fair value*” has the meaning given by section 444AB(6);
- “*insurance business transfer scheme*” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).
##### 444ACZA
- (1) This section applies where an insurance business transfer scheme has effect to transfer part (but not the whole or substantially the whole) of the long-term business of a person (“*the transferor*”) to another person (“*the transferee*”) and the condition in subsection (2) below is met.
- (2) The condition is that the transferor did not carry on life assurance business that is mutual business during the period of account of the transferor covering the transfer date.
- (3) The amount which (apart from this section) would be regarded as other income of the transferee for the purposes of section 83(2)(e) of the Finance Act 1989 for the period of account of the transferee which includes the transfer date is to be reduced by an amount equal to the transferred surplus.
- (4) In subsection (4) above “*the transferred surplus*” means such part of the amount shown (or treated as shown) in line 13 of Form 14 in the periodical return of the transferor covering the last period of account of the transferor ending before the transfer date as it is just and reasonable to regard as being attributable to the transfer.
- (5) See section 444AA for the meaning of “the transfer date” in this section.
##### 444ACA
- (1) This section applies where an insurance business transfer scheme (see section 444AC(11)) has effect to transfer long-term business from one company (“*the transferor*”) to another (“*the transferee*”).
- (2) If—
- (a) immediately before the transfer, the assets of the long-term insurance fund of the transferee comprise or include relevant shares or an interest in such shares, and
- (b) the fair value (see section 444AC(11)) of the relevant shares, or of that interest, is reduced (whether or not to nil) as a result of the transfer,
an amount equal to that reduction in fair value is to be taken into account under section 83(2) of the Finance Act 1989 as a receipt of the transferee of the period of account of the transferee in which the transfer takes place.
- (3) But if—
- (a) the assets transferred to the transferee under the transfer comprise or include assets (“*the relevant assets*”) which, immediately before the transfer,—
- (i) were assets of the transferor, but
- (ii) were not assets of the transferor's long-term insurance fund, and
- (b) in respect of the transfer of the relevant assets, an amount is—
- (i) brought into account by the transferee as other income of the transferee of the period of account of the transferee in which the transfer takes place, and
- (ii) taken into account in computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits of the transferee's life assurance business and any category of its life assurance business to which the amount is referable,
the amount taken into account under section 83(2) of the Finance Act 1989 by virtue of subsection (2) above shall be reduced (but not below nil) by an amount equal to the amount referred to in paragraph (b) above.
- (4) In subsection (2) above “*relevant shares*” means—
- (a) some or all of the shares in the transferor, or
- (b) some or all of the shares in a company (whether or not an insurance company) which owns, directly or indirectly,—
- (i) some or all of the shares in the transferor, or
- (ii) an interest in some or all of those shares.
- (5) In subsection (4) above “*shares*”, in relation to a company, includes any interests in the company possessed by members of the company.
##### 444AD
- (1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“*the transferor*”) to another (“*the transferee*”).
- (2) If the transferor and the transferee jointly elect, section 83(2B) of the Finance Act 1989 does not apply to the transferor by reason of the transfer as respects so much of the value of the assets to which it would otherwise so apply as does not exceed the amount specified in subsection (4) below.
- (3) An election under subsection (2) above—
- (a) is irrevocable, and
- (b) is to be made by notice to an officer of the Board no later than the end of the period of 28 days beginning with the day following that on which the transfer takes place;
and a copy of the notice containing the election must accompany the tax return of the transferee for the first accounting period ending after the transfer.
Paragraphs 54 to 60 of Schedule 18 to the Finance Act 1998 (claims and elections for corporation tax purposes) do not apply to such an election.
- (4) The amount referred to in subsection (2) above is the amount by which—
- (a) the fair value of such of the assets of the long-term insurance fund of the transferee immediately after the transfer as were assets of the transferor’s long-term insurance fund immediately before the transfer, is greater than
- (b) the transferee's line 31 amount in relation to the transfer representing the transferor’s long-term insurance fund.
- (5) In subsection (4) above “*fair value*”, in relation to assets, means the amount which would be obtained from an independent person purchasing them or, if the assets are money, its amount.
- (6) For the purposes of this section “*insurance business transfer scheme*” includes a scheme which would be such a scheme but for section 105(1)(b) of the Financial Services and Markets Act 2000 (which requires the business transferred to be carried on in an EEA State).
##### 444AE
- (1) This section applies where an insurance business transfer scheme has effect to transfer long-term business from one person (“*the transferor*”) to another (“*the transferee*”).
- (2) If a contingent loan made to the transferor (within the meaning of subsection (1) of section 83ZA of the Finance Act 1989) is transferred to the transferee, that section has effect as if—
- (a) the contingent loan had become repayable by the transferor immediately before the transfer, and
- (b) the contingent loan were made to the transferee immediately after the transfer.
##### 444AEA
- (1) This section applies where—
- (a) as a result of the whole or any part of transfer scheme arrangements involving the transfer of long-term business from one person (“*the transferor*”) to another (“*the transferee*”) a Case I advantage is obtained by the transferor or the transferee (or by both), and
- (b) the sole or main purpose, or one of the main purposes, of the whole or any part of the transfer scheme arrangements is the obtaining of that Case I advantage.
- (2) In subsection (1) above “*transfer scheme arrangements*” means an insurance business transfer scheme (“*the relevant transfer scheme*”) together with any relevant associated operations.
- (3) If a Case I advantage is obtained by the transferor (see subsection (1) of section 444AEB), the amount of the transferor's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferor for the period of account of the transferor covering the transfer date.
- (4) If a Case I advantage is obtained by the transferee (see subsection (1) of section 444AEC), the amount of the transferee's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferee for the first period of account of the transferee ending after the transfer date.
- (5) In this section and sections 444AEB and 444AEC “*relevant associated operations*”, in relation to the relevant transfer scheme, means—
- (a) any other insurance business transfer scheme,
- (b) any contract of reinsurance,
- (c) any reconstruction or amalgamation involving the transferor, a dependant of the transferor which is an insurance undertaking or the transferee, or
- (d) any surplus-increasing transfer of assets,
which is effected in connection with the relevant transfer scheme.
- (6) In subsection (5) above—
- “*dependant*” and “*insurance undertaking*” have the same meaning as in the Insurance Prudential Sourcebook, and
- “*surplus-increasing transfer of assets*” means a transfer of assets of the transferor's long-term insurance fund to the transferee which is not brought into account for any period of account of the transferee but increases the amount of total surplus shown in line 39 of Form 58 in any periodical return of the transferee.
- (7) See section 444AA for the meaning of “the transfer date” in this section.
##### 444AEB
- (1) A Case I advantage is obtained by the transferor if—
- (a) Case I profits of its life assurance business for a period of account to which this section applies are less than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements, or
- (b) Case I losses of its life assurance business for such a period of account are greater than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements.
- (2) If a Case I advantage is obtained by the transferor, the amount of the Case I advantage is the aggregate of—
- (a) the amounts (if any) by which Case I profits for each period of account to which this section applies are less than they would be but for the transfer scheme arrangements or part, and
- (b) the amounts (if any) by which Case I losses for each such period of account are greater than they would be but for the transfer scheme arrangements or part.
- (3) This section applies to a period of account if it is—
- (a) the period of account of the transferor covering the transfer date,
- (b) any earlier period of account of the transferor, or
- (c) where any relevant associated operations are effected in any later period of account, that period of account.
- (4) In this section and section 444AEC “Case I profits” and “*Case I losses*” means profits and losses computed in accordance with the provisions of Case I of Schedule D.
- (5) See section 444AA for the meaning of “the transfer date”, and section 444AEA for the meaning of “relevant associated operations”, in this section.
##### 444AEC
- (1) A Case I advantage is obtained by the transferee if—
- (a) Case I profits of its life assurance business for a period of account to which this section applies are less than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements, or
- (b) Case I losses of its life assurance business for such a period of account are greater than they would be but for the transfer scheme arrangements or any part of the transfer scheme arrangements.
- (2) If a Case I advantage is obtained by the transferee, the amount of the Case I advantage is—
- (a) the amount by which Case I profits for each period of account to which this section applies are less than they would be but for the transfer scheme arrangements or part, or
- (b) the amount by which Case I losses for each such period of account are greater than they would be but for the transfer scheme arrangements or part.
- (3) This section applies to a period of account if it is—
- (a) the first period of account of the transferee ending after the transfer date or after the effecting of the first of any relevant associated operations (if that occurs before the transfer date),
- (b) the second period of account of the transferee ending after the transfer date or after the effecting of the last of any relevant associated operations (if that occurs after the transfer date), or
- (c) any intervening period of account.
- (4) See section 444AA for the meaning of “the transfer date”, section 444AEA for the meaning of “relevant associated operations” and section 444AEB for the meaning of “Case I profits” and “Case I losses”, in this section.
##### 444AECA
- (1) This section applies where—
- (a) as a result of any part of transfer scheme arrangements involving the transfer of long-term business from one person (“*the transferor*”) to another (“*the transferee*”) a Case I advantage is obtained by the transferor or the transferee (or by both), and
- (b) the sole or main purpose, or one of the main purposes, of that part of the transfer scheme arrangements is the obtaining of that Case I advantage.
- (2) In subsection (1) above “*transfer scheme arrangements*” has the same meaning as in section 444AEA.
- (3) If a Case I advantage is obtained by the transferor (see subsection (1) of section 444AECB), the amount of the transferor's Case I advantage (see subsection (3) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferor—
- (a) to the extent that the advantage is obtained by the transferor in the period of account covering the transfer date or any earlier period of account—
- (i) for the period of account of the transferor ending (or treated as ending) immediately before the transfer date, or
- (ii) where there is no such period, for the period of account of the transferor including the transfer date, and
- (b) to the extent that the advantage is obtained by the transferor in any later period of account of the transferor in which any relevant associated operations are effected, for that later period of account.
- (4) If a Case I advantage is obtained by the transferee (see subsection (1) of section 444AECC), the amount of the transferee's Case I advantage (see subsection (2) of that section) is to be taken into account as an increase in value of the assets of the long-term insurance fund of the transferee for the period of account of the transferee in which the advantage is obtained by the transferee.
- (5) See section 444AA for the meaning of “the transfer date”, and section 444AEA for the meaning of “relevant associated operations”, in this section.
##### 444AECB
- (1) A Case I advantage is obtained by the transferor if—
- (a) Case I profits of its life assurance business for a period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for any part of the transfer scheme arrangements, or
- (b) Case I losses of its life assurance business for such a period of account are, or at the relevant time are expected to be, greater than they would be but for any part of the transfer scheme arrangements.
- (2) But if any of the relevant associated operations would, by itself, cause the Case I profits to be greater or the Case I losses to be less than they would be but for that operation, the amount by which those profits would be greater or those losses would be less shall be taken into account in determining whether a Case I advantage is obtained by the transferor.
- (3) If a Case I advantage is obtained by the transferor, the amount of the Case I advantage is the aggregate of—
- (a) the amounts (if any) by which Case I profits for each period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for the relevant part of the arrangements, and
- (b) the amounts (if any) by which Case I losses for each such period of account are, or at the relevant time are expected to be, greater than they would be but for the relevant part of the arrangements.
- (4) This section applies to a period of account if it is—
- (a) the period of account of the transferor covering the transfer date,
- (b) any earlier period of account of the transferor, or
- (c) where any relevant associated operations are effected in any later period of account, that period of account.
- (5) In this section and section 444AECC “*the relevant part of the arrangements*” means, in relation to a Case I advantage, the part of the transfer scheme arrangements as a result of which the Case I advantage is obtained.
- (6) See section 444AA for the meaning of “the transfer date”, section 444AEA for the meaning of “relevant associated operations” and section 444AEB for the meaning of “Case I profits” and “Case I losses” and “the relevant time”, in this section.
##### 444AECC
- (1) A Case I advantage is obtained by the transferee if—
- (a) Case I profits of its life assurance business for a period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for any part of the transfer scheme arrangements, or
- (b) Case I losses of its life assurance business for such a period of account are, or at the relevant time are expected to be, greater than they would be but for the any part of the transfer scheme arrangements.
- (2) But if any of the relevant associated operations would, by itself, cause the Case I profits to be greater, or the Case I losses to be less, than they would be but for that operation, the amount by which those profits would be greater or those losses would be less shall be taken into account in determining whether a Case I advantage is obtained by the transferor.
- (3) If a Case I advantage is obtained by the transferee, the amount of the Case I advantage is—
- (a) the amount by which Case I profits for each period of account to which this section applies are, or at the relevant time are expected to be, less than they would be but for the relevant part of the arrangements, or
- (b) the amount by which Case I losses for each such period of account are, or at the relevant time are expected to be, greater than they would be but for the relevant part of the arrangements.
- (4) This section applies to a period of account if it is—
- (a) the first period of account of the transferee ending after the transfer date or after the effecting of the first of any relevant associated operations (if that occurs before the transfer date),
- (b) the second period of account of the transferee ending after the transfer date or after the effecting of the last of any relevant associated operations (if that occurs after the transfer date), or
- (c) any intervening period of account.
- (5) See section 444AA for the meaning of “the transfer date”, section 444AEA for the meaning of “relevant associated operations”, section 444AEB for the meaning of “Case I profits” and “Case I losses” and “the relevant time” and section 444AECB for the meaning of “the relevant part of the arrangements”, in this section.
##### 444AED
- (1) Section 444AEA does not apply in relation to the transferor or the transferee if, on an application under this section, the Commissioners for Her Majesty's Revenue and Customs (“the HMRC Commissioners”) have given a notice under subsection (2) below.
- (2) A notice under this subsection is a notice stating that the HMRC Commissioners are satisfied—
- (a) that the obtaining of a Case I advantage by the applicant is not the sole or main purpose of the whole or any part of the transfer scheme arrangements, or
- (b) that the transferor and the transferee are members of the same group of companies and that there is no advantage to the group arising from any Case I advantage obtained by the transferor or by the transferee.
- (3) For the purposes of this section there is no advantage to a group arising from any Case I advantage obtained by the transferor or by the transferee if—
- (a) as a result of transfer scheme arrangements, there is an increase in the liability to corporation tax of one or more companies which are members of the group of companies, and
- (b) the amount (or aggregate amount) of that increase is not less than the reduction in the liability to corporation tax of the transferor or the transferee (or both) arising from the obtaining of the Case I advantage.
- (4) An application under this section must be in writing and contain particulars of the transfer scheme arrangements.
- (5) The HMRC Commissioners may by notice require the applicant to provide further particulars in order to enable them to determine the application.
- (6) A requirement may be imposed under subsection (5) above within 30 days of the receipt of the application or of any further particulars required under that subsection.
- (7) If a notice under subsection (5) above is not complied with within 30 days or such longer period as the HMRC Commissioners may allow, they need not proceed further on the application.
- (8) The HMRC Commissioners must give notice of their decision on an application under this section to the applicant within 30 days of receiving the application or, if they give a notice under subsection (5) above, within 30 days of that notice being complied with.
- (9) If the HMRC Commissioners—
- (a) give notice to the applicant under subsection (8) above that they are not satisfied as mentioned in subsection (2) above, or
- (b) do not comply with subsection (8) above,
the applicant may require them to transmit the application to the Special Commissioners.
- (10) A requirement under subsection (9) above must be imposed within 30 days of the giving of the notice or the failure to comply and must be accompanied by any notice given under subsection (5) above and further particulars provided pursuant to any such notice.
- (11) Any notice given by the Special Commissioners has effect for the purposes of subsection (1) above as if it were given by the HMRC Commissioners.
- (12) If any particulars provided under this section do not fully and accurately disclose all facts and considerations material for the decision of the HMRC Commissioners or the Special Commissioners, any resulting notice that they are satisfied as mentioned in subsection (2) above is void.
- (13) For the purposes of this section two companies are members of the same group of companies if they are for the purposes of Chapter 4 of Part 10.
### Surpluses of mutual and former mutual businesses
##### 444AF
- (1) This section applies in relation to a period of account of an insurance company (“*the relevant period*”) if—
- (a) at any time in the relevant period the company carries on life assurance business that is not mutual business,
- (b) the company has an amount of undistributed demutualisation surplus for the relevant period (see subsection (7)), and
- (c) there is a reduction in the amount of the company's unappropriated surplus over the relevant period (see section 444AI).
- (2) Where this section applies in relation to the relevant period, there shall be deemed for the purposes of section 83(2) of the Finance Act 1989 to be brought into account for the relevant period as an increase in the value of the assets of the company's long-term insurance fund whichever of the following amounts is the smallest—
- (a) the amount of the reduction mentioned in subsection (1)(c) above;
- (b) the amount of the company's undistributed demutualisation surplus for the relevant period;
- (c) the amount of the company's relevant receipts reduction for the relevant period (see section 444AJ).
- (3) If the company prepares for the relevant period one or more such separate revenue accounts as are mentioned in section 83A(2)(b) of the Finance Act 1989—
- (a) subsection (2) above shall apply separately in relation to each separate revenue account which is recognised for the purposes of section 83 of that Act; and
- (b) for that purpose, any amount that falls to be determined in order to determine—
- (i) whether that subsection applies in relation to any such separate revenue account, and
- (ii) if so, the amount to be brought into account under that subsection in relation to that account,
shall be determined using only amounts or items which relate to the separate revenue account concerned.
- (4) In applying subsection (2) above in relation to a revenue account or separate revenue account which—
- (a) is recognised for the purposes of section 83 of that Act, and
- (b) is one in relation to which sections 432C and 432D apply,
that subsection shall have effect as if for “smallest” there were substituted smaller and as if paragraph (c) were omitted.
- (5) This section shall have effect—
- (a) for the purposes of computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits of the company's life assurance business, and
- (b) for the purposes of so computing the profits of any category of the company's life assurance business chargeable to tax under Case VI of Schedule D.
- (6) But for the purposes mentioned in subsection (5)(b) above, this section and section 444AG have effect subject to the modification in section 444AH; and the Corporation Tax Acts have effect accordingly (so that there may, in particular, be a difference between—
- (a) the amount deemed to be brought into account by virtue of subsection (2) above for a period of account for those purposes, and
- (b) the amount so deemed to be brought into account for that period of account for the purposes mentioned in subsection (5)(a) above).
- (7) For the purposes of this section, the undistributed demutualisation surplus of an insurance company for the relevant period is—
- (a) an amount equal to (UDSP – AD + DTSI – DTSO); or
- (b) if that amount is a negative amount, nil.
For this purpose—
- UDSP is the undistributed demutualisation surplus of the company for the period of account immediately preceding the relevant period,
- AD is any amount deemed under this section to be brought into account for the period of account immediately preceding the relevant period as an increase in the value of the assets of the company's long-term insurance fund,
- DTSI is the total amount of any demutualisation transfer surpluses accruing to the company during the relevant period (see section 444AG),
- DTSO is the total amount of any demutualisation transfer surpluses accruing to any other company (or companies) during the relevant period on a transfer (or transfers) of life assurance business by the company to that other company (or companies).
##### 444AG
- (1) For the purposes of section 444AF and this section, a demutualisation transfer surplus accrues to an insurance company where—
- (a) life assurance business is transferred to the company by a person (“*the transferor*”),
- (b) after the transfer, the company carries on the transferred business otherwise than as mutual business, and
- (c) the condition in subsection (2) below is satisfied in relation to the transfer.
- (2) The condition is that—
- (a) immediately before the transfer, the transferor carried on the transferred business as mutual business, or
- (b) where paragraph (a) above does not apply, some or all of the transferred business was carried on by an insurance company as mutual business at a time on or after 1st January 1990 and before the transfer (“former mutual business”).
- (3) The demutualisation transfer surplus accrues to the company on the date of the transfer.
- (4) The amount of the demutualisation transfer surplus is given by subsection (5) or (6) below.
- (5) Where subsection (2)(a) above applies, the amount of the demutualisation transfer surplus is—
- (a) where the whole of the transferor's life assurance business was transferred to the company under the transfer, the aggregate of—
- (i) the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer, and
- (ii) the amount of any added surplus accruing to the company in connection with the transfer (see subsection (10));
- (b) otherwise, a just and reasonable portion of that aggregate amount, having regard to how much of the transferor's life assurance business was transferred to the company under the transfer.
- (6) Where subsection (2)(b) above applies, the amount of the demutualisation transfer surplus is—
- (a) where the whole of the transferor's life assurance business was transferred to the company under the transfer and all of the transferred business is former mutual business, the former mutual surplus of the transferor on the transfer date (see subsection (7));
- (b) otherwise, so much of that former mutual surplus as it is just and reasonable to attribute to the company, having regard in particular to—
- (i) how much of the transferor's life assurance business was transferred to the company under the transfer, and
- (ii) how much of the transferred business is former mutual business.
- (7) For the purposes of subsection (6) above, the former mutual surplus of the transferor on the transfer date is—
- (a) the amount given by subsection (8) below, or
- (b) if less, the amount given by subsection (9) below.
- (8) The amount given by this subsection is the total amount of any demutualisation transfer surpluses accruing to the transferor—
- (a) on or after 1st January 1990, and
- (b) on or before the date of the transfer.
- (9) The amount given by this subsection is the lowest amount of unappropriated surplus of the transferor at the end of any period of account ending—
- (a) on or after the date of the last occasion on which a demutualisation transfer surplus accrued to it as mentioned in subsection (8) above, and
- (b) on or before the date of the transfer.
- (10) For the purposes of this section, added surplus accrues to the company in connection with the transfer if—
- (a) an amount of assets is received by the company in connection with the transfer, no later than six months after the date of the transfer,
- (b) the amount is not brought into account by the company,
- (c) the amount is added to the unappropriated surplus of the company, and
- (d) the amount does not derive from any unappropriated surplus of the transferor;
and the amount of the added surplus is the amount referred to in paragraphs (a) to (d) above.
##### 444AH
- (1) The modification in this section has effect for the purposes mentioned in section 444AF(5)(b) only.
- (2) In relation to any demutualisation transfer surplus accruing to a company in a post-2002 period of account—
- (a) the references in section 444AG(5) to the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer shall be taken to be references to—
- (i) the amount of that unappropriated surplus, or
- (ii) if less, the unappropriated surplus of the transferor at the end of the period of account immediately preceding the first post-2002 period of account of the transferor; and
- (b) the references in sections 444AF and 444AG to the amount of any demutualisation transfer surplus are to have effect accordingly.
- (3) In this section “*post-2002 period of account*”, in relation to an insurance company, means a period of account of the company beginning on or after 1st January 2003 and ending on or after 9th April 2003.
##### 444AI
- (1) For the purposes of section 444AF—
- (a) there is a reduction in the amount of the company's unappropriated surplus over the relevant period if CUS is less than (OUS + TSI – TSO);
- (b) the amount of that reduction is the amount by which CUS is less than (OUS + TSI – TSO).
- (2) In this section—
- CUS is the amount of the company's unappropriated surplus at the end of the relevant period,
- OUS is the amount of the company's unappropriated surplus at the end of the period of account immediately preceding the relevant period,
- TSI is the total amount of any transfer surpluses accruing to the company during the relevant period (see subsections (3) to (7)),
- TSO is the total amount of any transfer surpluses accruing to any other company (or companies) during the relevant period on a transfer (or transfers) of life assurance business by the company to that other company (or companies).
- (3) For the purposes of this section, a transfer surplus accrues to an insurance company where life assurance business is transferred to the company by a person (“*the transferor*”).
- (4) The transfer surplus accrues to the company on the date of the transfer.
- (5) The amount of the transfer surplus is equal to so much of the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer as is transferred to the company under the transfer.
- (6) But if, immediately before the transfer, the transferor carried on the transferred business as mutual business, the amount of the transfer surplus is the aggregate of—
- (a) the amount given by subsection (5) above, and
- (b) the amount of any added surplus accruing to the company in connection with the transfer.
- (7) Subsection (10) of section 444AG applies for the purposes of subsection (6) above as it applies for the purposes of that section.
##### 444AJ
- (1) For the purposes of sections 444AF and 444AK, the amount of the company's relevant receipts reduction for the relevant period is to be calculated by—
- (a) determining, in the case of each with-profits fund of the company, the amount given by subsection (2) or (6) below for the relevant period, and
- (b) aggregating each of those amounts.
- (2) The amount, in the case of a fund other than a policy holder participation fund, is—
- (a) where the gross transfer to non-technical account for the fund for the relevant period (see subsections (3) and (4)) is greater than the post-policy holder surplus for the fund for the relevant period (see subsection (5)), the amount of the difference;
- (b) otherwise, nil.
- (3) In this section “*the gross transfer to non-technical account*” means the amount shown in line 13 of Form 58 for the fund.
- (4) But if—
- (a) there is a transfer from a with-profits fund of the company to another fund of the company (“the initial transfer”) which is shown in (or included in an amount shown in) line 14 of Form 58 for the with-profits fund,
- (b) there is a transfer from a fund of the company (whether or not the other fund mentioned in paragraph (a) above) to the non-technical account which is shown in (or included in an amount shown in) line 13 of Form 58 for that fund, and
- (c) the transfer to the non-technical account can reasonably be regarded as connected with the initial transfer,
the amount of the gross transfer to non-technical account for the relevant period given by subsection (3) above in the case of the with-profits fund is to be increased by the amount transferred to the non-technical account.
- (5) In this section “*post-policy holder surplus*” means an amount equal to—
$$SA-TAP$where—SA is—(a) the amount shown in line 34 of Form 58 for the fund (surplus arising since last valuation), or(b) if that amount is a negative amount, nil;TAP is the amount shown in line 46 of Form 58 for the fund (total allocated to policy holders).$
- (6) The amount, in the case of a policy holder participation fund, is—
- (a) where TAP is greater than SA, the amount of the difference;
- (b) otherwise, nil;
and for this purpose “*SA*” and “*TAP*” have the same meaning as in subsection (5) above.
- (7) References in this section to Form 58 are references to that Form in the periodical return of the company for the relevant period.
- (8) In this section “*policy holder participation fund*” means a fund in the case of which an amount equal to the amount shown in line 34 of Form 58 for the fund is allocated to policy holders for the relevant period.
##### 444AK
- (1) This section applies if at any time in a period of account of an insurance company (“*the relevant period*”)—
- (a) the company carries on life assurance business as mutual business, and
- (b) the company carries on one or more categories of life assurance business chargeable to tax under Case VI of Schedule D.
- (2) If there is a reduction in the amount of the company's unappropriated surplus over the relevant period, there shall be deemed for the purposes of section 83(2) of the Finance Act 1989 to be brought into account for the relevant period as an increase in the value of the assets of the company's long-term insurance fund—
- (a) the amount of that reduction, or
- (b) if less, the amount of the company's relevant receipts reduction for the relevant period (see section 444AJ).
- (3) But subsection (2) above shall have effect only for the purposes of computing in accordance with the provisions of this Act applicable to Case I of Schedule D the profits for the relevant period of any category of the company's life assurance business chargeable to tax under Case VI of Schedule D.
- (4) If the company prepares for the relevant period one or more such separate revenue accounts as are mentioned in section 83A(2)(b) of the Finance Act 1989—
- (a) subsection (2) above shall apply separately in relation to each separate revenue account which is recognised for the purposes of section 83 of that Act; and
- (b) for that purpose, any amount that falls to be determined in order to determine—
- (i) whether that subsection applies in relation to any such separate revenue account, and
- (ii) if so, the amount to be brought into account under that subsection in relation to that account,
shall be determined using only amounts or items which relate to the separate revenue account concerned.
- (5) In applying subsection (2) above in relation to a revenue account or separate revenue account which—
- (a) is recognised for the purposes of section 83 of that Act, and
- (b) is one in relation to which sections 432C and 432D apply,
that subsection shall have effect as if paragraph (b) and the word “or” before it were omitted.
- (6) For the purposes of this section, there is a reduction in the amount of the company's unappropriated surplus over the relevant period if—
- (a) CUS is less than OUS, and
- (b) CUS is less than UUS.
- (7) The amount of that reduction is—
- (a) the amount by which CUS is less than OUS, or
- (b) if OUS is greater than UUS, the amount by which CUS is less than UUS.
- (8) In this section—
- CUS is the amount of the company's unappropriated surplus at the end of the relevant period,
- OUS is the amount of the company's unappropriated surplus at the end of the period of account immediately preceding the relevant period,
- UUS is the amount of the company's unappropriated surplus at the end of the period of account immediately preceding the first period of account of the company to begin on or after 1st January 2003 and to end on or after 9th April 2003.
##### 444AL
- (1) This section applies for the purposes of sections 444AF to 444AK.
- (2) References to mutual business, in relation to any time, include business which at that time is treated for the purposes of section 432E as mutual business.
- (3) “*Unappropriated surplus*”, in relation to a period of account of an insurance company, means an unappropriated surplus on valuation as shown in the periodical return of the company for the period of account.
- (4) References to the unappropriated surplus of the transferor at the end of the period of account of the transferor ending immediately before the transfer are, where a period of account of the transferor does not end at that time, references to the unappropriated surplus on valuation that would have been shown in a periodical return of the transferor for that period had such a return been drawn up.
### Provisions applying in relation to overseas life insurance companies
##### 444B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Meaning of “distribution”.
##### 444C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 444D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 444E
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Equalisation reserves
##### 444BA
- (1) Subject to the following provisions of this section and to sections 444BB to 444BD, the rules in subsection (2) below shall apply in making any computation, for the purposes of Case I or V of Schedule D, of the profits or losses for any accounting period of an insurance company whose business has at any time been or included business in respect of which it was required, by virtue of equalisation reserve rules, to maintain an equalisation reserve.
- (2) Those rules are—
- (a) that amounts which, in accordance with equalisation reserve rules, are transferred into the equalisation reserve in respect of the company’s business for the accounting period in question are to be deductible;
- (b) that amounts which, in accordance with any such regulations, are transferred out of the reserve in respect of the company’s business for that period are to be treated as receipts of that business; and
- (c) that it must be assumed that all such transfers as are required by equalisation reserve rules to be made into or out of the reserve in respect of the company’s business for any period are made as required.
- (3) Where an insurance company having any business in respect of which it is required, by virtue of equalisation reserve rules, to maintain an equalisation reserve ceases to trade—
- (a) any balance which exists in the reserve at that time for the purposes of the Tax Acts shall be deemed to have been transferred out of the reserve immediately before the company ceases to trade; and
- (b) that transfer out shall be deemed to be a transfer in respect of the company’s business for the accounting period in which the company so ceases and to have been required by equalisation reserve rules.
- (4) Where—
- (a) an amount is transferred into an equalisation reserve in respect of the business of an insurance company for any accounting period,
- (b) the rule in subsection (2)(a) above would apply to the transfer of that amount but for this subsection,
- (c) that company by notice in writing to an officer of the Board makes an election in relation to that amount for the purposes of this subsection, and
- (d) the notice of the election is given not more than two years after the end of that period,
the rule mentioned in subsection (2)(a) above shall not apply to that transfer of that amount and, instead, the amount transferred (the “unrelieved transfer”) shall be carried forward for the purposes of subsection (5) below to the next accounting period and (subject to subsection (6) below) from accounting period to accounting period.
- (5) Where—
- (a) in accordance with equalisation reserve rules, a transfer is made out of an equalisation reserve in respect of an insurance company’s business for any accounting period,
- (b) the rule in subsection (2)(b) above would apply to the transfer but for this subsection, and
- (c) the accounting period is one to which any amount representing one or more unrelieved transfers has been carried forward under subsection (4) above,
that rule mentioned in subsection (2)(b) above shall not apply to that transfer except to the extent (if any) that the amount of the transfer exceeds the aggregate of the amounts representing unrelieved transfers carried forward to that period.
- (6) Where in the case of any company—
- (a) any amount representing one or more unrelieved transfers is carried forward to an accounting period in accordance with subsection (4) above, and
- (b) by virtue of subsection (5) above the rule in subsection (2)(b) above does not apply to an amount representing the whole or any part of any transfer out of an equalisation reserve in respect of the company’s business for that period,
the amount mentioned in paragraph (a) above shall not be carried forward under subsection (4) above to the next accounting period except to the extent (if any) that it exceeds the amount mentioned in paragraph (b) above.
- (7) To the extent that any actual or assumed transfer in accordance with equalisation reserve rules of any amount into an equalisation reserve is attributable to arrangements entered into wholly or mainly for tax purposes—
- (a) the rule in subsection (2)(a) above shall not apply to that transfer; and
- (b) the making of that transfer shall be disregarded in determining, for the purposes of the Tax Acts, whether and to what extent there is subsequently any requirement to make a transfer into or out of the reserve in accordance with equalisation reserve rules;
and this subsection applies irrespective of whether the insurance company in question is a party to the arrangements.
- (8) For the purposes of this section the transfer of an amount into an equalisation reserve is attributable to arrangements entered into wholly or mainly for tax purposes to the extent that the arrangements to which it is attributable are arrangements—
- (a) the sole or main purpose of which is, or
- (b) the sole or main benefit accruing from which might (but for subsection (7) above) be expected to be,
the reduction by virtue of this section of any liability to tax.
- (9) Where—
- (a) any transfer made into or out of an equalisation reserve maintained by an insurance company is made in accordance with equalisation reserve rules in respect of business carried on by that company over a period (“the equalisation period”), and
- (b) parts of the equalisation period are in different accounting periods,
the amount transferred shall be apportioned for the purposes of this section between the different accounting periods in the proportions that correspond to the number of days in the equalisation period that are included in each of those accounting periods.
- (10) The Treasury may by regulations provide in relation to any accounting periods ending on or after 1st April 1996 for specified transitional provisions contained in equalisation reserve rules to be disregarded for the purposes of the Tax Acts in determining how much is required, on any occasion, to be transferred into or out of any equalisation reserve in accordance with the rules.
- (11) In this section, and in sections 444BB to 444BD, “equalisation reserves rules” means the rules in chapter 7.5 of the Integrated Prudential Sourcebook.
##### 444BB
- (1) The Treasury may by regulations make provision modifying section 444BA so as, in cases mentioned in subsection (2) below—
- (a) to require—
- (i) sums by reference to which the amount of any transfer into or out of an equalisation reserve falls to be computed, or
- (ii) the amount of any such transfer,
to be apportioned between different parts of the business carried on for any period by an insurance company; and
- (b) to provide for the purposes of corporation tax for the amounts taken to be transferred into or out of an equalisation reserve to be computed disregarding any such sum or, as the case may be, any such part of a transfer as is attributed, in accordance with the regulations, to a part of the business described for the purpose in the regulations.
- (2) Those cases are cases where an insurance company which, in accordance with equalisation reserve rules, is required to make transfers into or out of an equalisation reserve in respect of any business carried on by that company for any period is carrying on, for the whole or any part of that period—
- (a) any business the income and gains of which fall to be disregarded in making a computation of the company’s profits in accordance with the rules applicable to Case I of Schedule D, or
- (b) any business by reference to which double taxation relief is afforded in respect of any income or gains.
- (3) Section 444BA shall have effect (subject to any regulations under subsection (1) above) in the case of an equalisation reserve maintained by an insurance company which—
- (a) is not resident in the United Kingdom, and
- (b) carries on business in the United Kingdom through a permanent establishment,
only if such conditions as may be prescribed by regulations made by the Treasury are satisfied in relation to that company and in relation to transfers into or out of that reserve.
- (4) Regulations under this section prescribing conditions subject to which section 444BA is to apply in the case of any equalisation reserve maintained by an insurance company may—
- (a) contain conditions imposing requirements on the company to furnish the Board with information with respect to any matters to which the regulations relate, or to produce to the Board documents or records relating to any such matters; and
- (b) provide that, where any prescribed condition is not, or ceases to be, satisfied in relation to the company or in relation to transfers into or out of that reserve, there is to be deemed for the purposes of the Tax Acts to have been a transfer out of that reserve of an amount determined under the regulations.
- (5) Regulations under this section may—
- (a) provide for apportionments under the regulations to be made in such manner, and by reference to such factors, as may be specified or described in the regulations;
- (b) make different provision for different cases;
- (c) contain such supplementary, incidental, consequential and transitional provision as the Treasury may think fit;
- (d) make provision having retrospective effect in relation to accounting periods beginning not more than one year before the time when the regulations are made;
and the powers conferred by this section in relation to transfers into or out of any reserve shall be exercisable in relation to both actual and assumed transfers.
- (6) In this section “*double taxation relief*” means—
- (a) relief under double taxation arrangements which takes the form of a credit allowed against corporation tax, or
- (b) unilateral relief under section 790(1) which takes that form;
and “*double taxation arrangements*” here means arrangements having effect by virtue of section 788.
##### 444BC
- (1) The Treasury may by regulations make provision modifying the operation of section 444BA in relation to cases where an insurance company has, for the purpose of preparing the documents it is required to prepare for the purposes of section 9.3 of the Prudential Sourcebook (Insurers), applied for any period an accounting method described in paragraph 52 or 53 of Schedule 9A to the Companies Act 1985 (accounting on a non-annual basis).
- (2) Subsection (5) of section 444BB applies for the purposes of this section as it applies for the purposes of that section.
##### 444BD
- (1) The Treasury may by regulations provide for section 444BA to have effect, in such cases and subject to such modifications as may be specified in the regulations, in relation to any equivalent reserves as it has effect in relation to equalisation reserves maintained by virtue of equalisation reserve rules.
- (2) For the purposes of this section a reserve is an equivalent reserve if—
- (a) it is maintained, otherwise than by virtue of equalisation reserve rules, either—
- (i) by an EEA firm of the kind mentioned in paragraph 5(d) of Schedule 3 to the Financial Services and Markets Act 2000 which has permission under paragraph 15 of that Schedule (as a result of qualifying for authorisation under paragraph 12(1) of that Schedule) to effect or carry out contracts of insurance in the United Kingdom, or
- (ii) by a firm which has permission under paragraph 4 of Schedule 4 to that Act (as a result of qualifying for authorisation under paragraph 2 of that Schedule) to effect or carry out contracts of insurance in the United Kingdom, or
- (iii) in respect of any business which consists of the effecting or carrying out of contracts of insurance and which is carried on outside the United Kingdom by a company resident in the United Kingdom;
- (b) the purpose for which, or the manner in which, it is maintained is such as to make it equivalent to an equalisation reserve maintained by virtue of equalisation reserve rules.
- (3) For the purposes of this section a reserve is also an equivalent reserve if it is maintained in respect of any credit insurance business in accordance with requirements imposed either—
- (a) by or under any enactment, or
- (b) under so much of the law of any territory as secures compliance with the requirements of Article 1 of the credit insurance directive (equalisation reserves for credit insurance).
- (4) Without prejudice to the generality of subsection (1) above, the modifications made by virtue of that subsection may—
- (a) provide for section 444BA to apply in the case of an equivalent reserve only where such conditions as may be specified in the regulations are satisfied in relation to the company maintaining the reserve or in relation to transfers made into or out of it; and
- (b) contain any other provision corresponding to any provision which, in the case of a reserve maintained by virtue of equalisation reserve rules, may be made under sections 444BA to 444BC.
- (5) Subsections (4) and (5) of section 444BB shall apply for the purposes of this section as they apply for the purposes of that section.
- (6) Without prejudice to the generality of section 444BB(5), the transitional provision which by virtue of subsection (5) above may be contained in regulations under this section shall include—
- (a) provision for treating the amount of any transfers made into or out of an equivalent reserve in respect of business carried on for any specified period as increased by the amount by which they would have been increased if no transfers into the reserve had been made in respect of business carried on for an earlier period; and
- (b) provision for excluding from the rule in section 444BA(2)(b) so much of any amount transferred out of an equivalent reserve as represents, in pursuance of an apportionment made under the regulations, the transfer out of that reserve of amounts in respect of which there has been no entitlement to relief by virtue of section 444BA(2)(a).
- (7) In this section—
- “credit insurance business” means business which consists of the effecting or carrying out of contracts of insurance against risks of loss to the persons insured arising from—the insolvency of debtors of theirs, orfrom the failure (otherwise than through insolvency) of debtors of theirs to pay their debts when due;
- “*the credit insurance directive*” means Council Directive [87/343/EEC](https://www.legislation.gov.uk/european/directive/1987/0343) of 22nd June 1987 amending, as regards credit insurance and suretyship insurance, First Directive 73/239 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance; . . .
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 458A
- (1) The Treasury may by regulations provide for the life assurance provisions of the Corporation Tax Acts to have effect in relation to companies carrying on capital redemption business as if capital redemption business were, or were a category of, life assurance business.
- (2) Regulations under this section may provide that the provisions applied by the regulations are to have effect as respects capital redemption business with such modifications and exceptions as may be provided for in the regulations.
- (3) Regulations under this section may—
- (a) make different provision for different cases;
- (b) include such incidental, supplemental, consequential and transitional provision (including provision modifying provisions of the Corporation Tax Acts other than the life assurance provisions) as the Treasury consider appropriate; and
- (c) include retrospective provision.
- (4) In this section references to the life assurance provisions of the Corporation Tax Acts are references to the following—
- (a) the provisions of this Chapter so far as they relate to life assurance business or companies carrying on such business; and
- (b) any other provisions of the Corporation Tax Acts making separate provision by reference to whether or not the business of a company is or includes life assurance business or any category of insurance business that includes life assurance business.
- (5) In this section “*capital redemption business*” has the same meaning as in section 458.
##### 461A
- (1) For the purposes of sections 461B and 461C, a “*qualifying society*” is an incorporated friendly society which—
- (a) immediately before its incorporation, was a registered friendly society to which section 461(2) did not apply,
- (b) was formed otherwise than by the incorporation of a registered friendly society or the amalgamation of two or more friendly societies and satisfies subsection (2) below, or
- (c) was formed by the amalgamation of two or more friendly societies and satisfies subsection (3) below,
and in respect of which no direction under section 461C(5) is in force.
- (2) A society satisfies this subsection if its business is limited to the provision, in accordance with the rules of the society, of benefits for or in respect of employees of a particular employer or such other group of persons as is for the time being approved for the purposes of this section by the Board.
- (3) If at the time of the amalgamation referred to in subsection (1)(c) above—
- (a) section 461(2) applied to none of the registered friendly societies being amalgamated (if any), and
- (b) all of the incorporated friendly societies being amalgamated (if any) were qualifying societies,
the society formed by the amalgamation satisfies this subsection.
- (4) For the purposes of this section and section 461C, any group of persons which was approved for the purposes of this section (as mentioned in subsection (2) above) by the Friendly Societies Commission immediately before 1st December 2001 shall be treated as having been approved for the purposes of this section by the Board on that date.
##### 461B
- (1) Subject to the following provisions of this section, a qualifying society shall, on making a claim, be entitled to exemption from income tax and corporation tax (whether on income or chargeable gains) on its profits other than those arising from life or endowment business.
- (2) Subsection (1) above shall not apply to any profits arising or accruing to the society from, or by reason of its interest in, a body corporate which is a subsidiary (within the meaning of the Friendly Societies Act 1992) of the society or of which the society has joint control (within the meaning of that Act).
- (2A) Subsection (1) above shall not apply to any profits arising or accruing to the society from or by reason of its membership of a property investment LLP.
- (3) If an incorporated friendly society which is not a qualifying society makes a payment to a member in respect of his interest in the society and the payment is made otherwise than in the course of life or endowment business and exceeds the aggregate of any sums paid by him to the society by way of contributions or deposits, after deducting from that aggregate the amount of—
- (a) any previous payment so made to him by the society, and
- (b) any earlier repayment of such sums paid by him,
the excess shall be treated for the purposes of corporation tax and income tax as a qualifying distribution.
- (4) In relation to an incorporated friendly society which, immediately before its incorporation, was a registered friendly society to which section 461(2) applied—
- (a) the references in subsection (3) above to sums paid to the society shall include sums paid to the registered friendly society,
- (b) the reference in subsection (3)(a) above to any payment made by the society shall include any payment made by the registered friendly society after 26 March 1974 or such later date as was specified in any direction under section 461 (7) relating to it, and
- (c) the reference in subsection (3)(b) above to any repayment shall include any repayment made by the registered friendly society.
- (5) Where a qualifying society at any time ceases by virtue of section 91 of the Friendly Societies Act 1992 (conversion into company) to be registered under that Act, the company into which the society is converted shall be exempt from income tax or corporation tax on its profits arising from any part of its business, other than life or endowment business, which relates to contracts made before that time.
- (6) Subsection (5) above shall apply so long as there is no increase in the scale of benefits which the company undertakes to provide in the course of carrying on the relevant part of its business.
- (7) Any part of a company’s business to which an exemption under subsection (5) above relates shall be treated for the purposes of the Corporation Tax Acts as a separate business from any other business carried on by the company.
##### 461C
- (1) Subject to subsection (2) below, subsections (3) and (4) below apply where a qualifying society—
- (a) begins to carry on business other than life or endowment business, or
- (b) in the opinion of the Board, begins to carry on business other than life or endowment business on an enlarged scale or of a new character.
- (2) Subsections (3) and (4) below do not apply if—
- (a) the society’s business is limited to the provision, in accordance with the rules of the society, of benefits for or in respect of employees of a particular employer or such other group of persons as is for the time being approved for the purposes of section 461 or 461A by the Board, or
- (b) the society’s rules limit the aggregate amount which may be paid by a member by way of contributions and deposits to not more than £1 per month or such greater amount as is authorised for the purposes of section 461.
- (3) If it appears to the Board, having regard to the restrictions imposed by section 461 on registered friendly societies registered after 31st May 1973, that for the protection of the revenue it is expedient to do so, the Board may give a direction to the society under subsection (4) below.
- (4) A direction under this subsection is that (and has the effect that) the society to which it is given shall cease to be a qualifying society as from the date of the direction.
- (5) A society to which a direction is given may, within 30 days of the date on which it is given, appeal against the direction to the Special Commissioners on the ground that—
- (a) it has not begun to carry on business as mentioned in subsection (1) above;
- (b) subsections (3) and (4) above do not apply to it by reason of subsection (2) above; or
- (c) the direction is not necessary for the protection of the revenue.
##### 461D
- (1) Where—
- (a) at any time a friendly society (“*the transferee*”) acquires by way of transfer of engagements or amalgamation from another friendly society (“*the transferor*”) any business, other than life or endowment business, consisting of business which relates to contracts made before that time, and
- (b) immediately before that time the transferor was exempt from corporation tax on profits arising from that business,
the transferee is so exempt after that time.
- (2) But if during an accounting period of the transferee there is an increase in the scale of benefits which it undertakes to provide in the course of carrying on that business, the transferee shall not be exempt from corporation tax by virtue of subsection (1) above for that or any subsequent accounting period.
- (3) Where—
- (a) at any time a friendly society (“*the transferee*”) acquires by way of transfer of engagements or amalgamation from another friendly society (“*the transferor*”) any business, other than life or endowment business, consisting of business which relates to contracts made before that time, and
- (b) immediately before that time the transferor was not exempt from corporation tax on profits arising from that business,
the transferee is not so exempt after that time.
- (4) The Treasury may by regulations provide that, where any business of a friendly society is exempt from corporation tax by virtue of subsection (1) above, or not so exempt by virtue of subsection (3) above, the Corporation Tax Acts have effect subject to such modifications (or exceptions) as the Treasury consider appropriate.
- (5) Regulations under subsection (4) above—
- (a) may make different provision for different cases,
- (b) may include any incidental, supplementary, consequential or transitional provisions which the Treasury consider appropriate, and
- (c) may include retrospective provision.
##### 462A
- (1) Where a registered friendly society has tax exempt life or endowment business which includes contracts—
- (a) made before 20th March 1991, and
- (b) expressed at the outset not to be made in the course of such business,
the society may by notice to the inspector elect that section 460(1) shall not apply to so much of the profits arising from such business as is attributable to such contracts.
- (2) Where a registered friendly society has tax exempt life or endowment business which includes contracts falling within subsection (3) below, the society may by notice to the inspector elect that section 460(1) shall not apply to so much of the profits arising from such business as is attributable to such contracts.
- (3) A contract falls within this subsection if—
- (a) at the outset, it is neither expressed to be made in the course of tax exempt life or endowment business nor expressed not to be so made but is assumed by the society not to be so made, and
- (b) the policy issued in pursuance of it falls within paragraph 21(1)(b) of Schedule 15.
- (4) An election under subsection (2) above shall only be valid if the society satisfies the inspector (or the Commissioners on appeal) that it is possible to identify all the contracts to which the election relates.
- (5) If the inspector decides that he is not satisfied as mentioned in subsection (4) above, he shall give notice of his decision to the society; and section 42(3), (4) and (9) of, and paragraph 1(1) to (1E) of Schedule 2 to, the Management Act shall apply in relation to such a decision as they apply in relation to a decision of an inspector on a claim.
- (6) An election under subsection (1) or (2) above shall have effect for accounting periods ending on or after the day on which the Finance Act 1991 was passed.
- (7) No election under subsection (1) or (2) above may be made after 31st July 1992.
- (8) Where a friendly society has made an election under subsection (1) or (2) above, then, for any accounting period for which the election has effect—
- (a) section 460(1) shall apply to profits arising from life or endowment business which would have been included in the society’s tax exempt life or endowment business had no account been taken of the contracts to which the election relates, and
- (b) section 462(1), in its application to the society, shall have effect with the insertion after “policies” of “and all policies issued in pursuance of contracts to which an election under section 462A(1) or (2) relates”.
- (9) If a friendly society which (or a branch of which) has made an election under subsection (1) or (2) above becomes an incorporated friendly society, the election shall have effect in relation to the incorporated friendly society as it had effect in relation to the society (or branch) which made the election (and accordingly, in relation to accounting periods of the incorporated friendly society, “*the society*” in subsection (8)(a) and (b) above shall be read as referring to the incorporated friendly society).
#### Dividend or bonus granted by industrial and provident society
##### 465A
- (1) This section applies where any assets of a branch of a registered friendly society have been identified in a scheme under section 6(5) of the Friendly Societies Act 1992 (property, rights etc. excluded from transfer to the society on its incorporation).
- (2) In relation to any time after the incorporation of the society, the assets shall be treated for the purposes of the Tax Acts as assets of the society (and, accordingly, any tax liability arising in respect of them shall be a liability of the society rather than of the branch).
- (3) Where, by virtue of this section, tax in respect of any of the assets becomes chargeable on and is paid by the society, the society may recover from the trustees in whom those assets are vested the amount of the tax paid.
##### 468AA
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##### 468A
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##### 468B
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#### Restrictions on the use of tax credits by pension funds.
##### 468C
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##### 468D
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##### 468E
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#### No tax credit for original owner under repurchase agreement in respect of certain manufactured dividends.
##### 468EE
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##### 468F
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##### 468G
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### Distributions of authorised unit trusts: general
##### 468H
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##### 468I
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### Dividend and foreign income distributions
##### 468J
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##### 468K
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### Interest distributions
##### 468L
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#### Consequences of certain arrangements to pass on the value of a tax credit.
##### 468M
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##### 468N
- (1) Subsection (2) below applies where—
- (a) an interest distribution is made for a distribution period to a unit holder; and
- (b) the gross income entered in the distribution accounts for the purposes of computing the total amount available for distribution to unit holders does not derive from eligible income entirely.
- (2) Where this subsection applies, the obligation to deduct under section 349(2) shall not apply to the relevant amount of the interest distribution to the unit holder if the residence condition is on the distribution date fulfilled with respect to him.
- (3) Section 468O makes provision with respect to the circumstances in which the residence condition is fulfilled with respect to a unit holder.
- (4) This is how to calculate the relevant amount of the interest distribution—
$$R=AxBC$Where—R = the relevant amount;A = the amount of the interest distribution before deduction of tax to the unit holder in question;B = such amount of the gross income as derives from eligible income;C = the amount of the gross income.$
- (5) In subsection (4) above the references to the gross income are references to the gross income entered as mentioned in subsection (1)(b) above.
##### 468O
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##### 468P
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##### 468PA
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##### 468PB
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### Distributions to corporate unit holder
##### 468Q
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##### 468R
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 469A
- (1) The Tax Acts shall have effect in relation to any common investment fund established under section 42 of the Administration of Justice Act 1982 (common investment funds for money paid into court) as if—
- (a) the fund were an authorised unit trust;
- (b) the person who is for the time being the investment manager of the fund were the trustee of that authorised unit trust; and
- (c) the persons with qualifying interests were the unit holders in that authorised unit trust.
- (1A) For the purposes of subsection (1)(c) above, the persons with qualifying interests are—
- (a) in relation to shares in the fund held by the Accountant General, the persons whose interests entitle them, as against him, to share in the fund’s investments;
- (b) in relation to shares in the fund held by any other person authorised by the Lord Chancellor to hold such shares on behalf of others (an “authorised person”)—
- (i) if there are persons whose interests entitle them, as against the authorised person, to share in the fund’s investments, those persons;
- (ii) if not, the authorised person;
- (c) in relation to shares in the fund held by persons authorised by the Lord Chancellor to hold such shares on their own behalf, those persons.
- (2) In this section “*the Accountant General*” means . . . the Accountant General of the Supreme Court of Judicature in England and Wales or the Accountant General of the Supreme Court of Judicature of Northern Ireland.
- (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 472A
- (1) This section applies in relation to securities—
- (a) which are held by a company carrying on a banking business, an insurance business or a business consisting wholly or partly in dealing in securities; and
- (b) which are such that a profit on their sale would form part of the trading profits of that business.
- (2) Profits and losses arising from such securities that in accordance with generally accepted accounting practice are—
- (a) calculated by reference to the fair value of the securities, and
- (b) recognised in that company's statement of recognised gains and losses or statement of changes in equity,
shall be brought into account in computing the profits or losses of a business in accordance with the provisions of this Act applicable to Case I of Schedule D.
- (3) Subsection (2) does not apply—
- (a) to an amount to the extent that it derives from or otherwise relates to an amount brought into account under that subsection in an earlier period of account, or
- (b) to an amount recognised for accounting purposes by way of correction of a fundamental error.
- (4) In this section, “securities”—
- (a) includes shares and any rights, interests or options that by virtue of section 99, 135(5) or 136(5) of the Taxation of Chargeable Gains Act 1992 are treated as shares for the purposes of sections 126 to 136 of that Act; but
- (b) does not include a loan relationship (within the meaning of Chapter 2 of Part 4 of the Finance Act 1996).
##### 477A
- (1) The Board may by regulations make provision with respect to any year of assessment requiring any building society—
- (a) in such cases as may be prescribed by the regulations to deduct out of any dividend or interest paid or credited in the year in respect of shares in, or deposits with or loans to, the society a sum representing the amount of income tax on it, and
- (b) to account for and pay any amount required to be deducted by the society by virtue of this subsection.
- (1A) Regulations under subsection (1) above may not make provision with respect to any dividend or interest paid or credited, on or after the day on which the Finance Act 1991 was passed, in respect of a security (other than a qualifying certificate of deposit and other than a qualifying deposit right) which was quoted, or capable of being listed, on a recognised stock exchange at the time the dividend or interest became payable.
- (2) Regulations under subsection (1) above may—
- (a) make provision with respect to the furnishing of information by building societies or their investors, including, in the case of societies, the inspection of books, documents and other records on behalf of the Board;
- (b) contain such incidental and consequential provisions as appear to the Board to be appropriate, including provisions requiring the making of returns.
- (2A) Without prejudice to the generality of subsection (2)(a) above, regulations under subsection (1) above may make provision with respect to the furnishing of information to or by building societies corresponding to any provision that is made by, or may be made under, section 482 with respect to the furnishing of information to or by deposit-takers.
- (3) For any year of assessment to which regulations under subsection (1) above apply, dividends or interest payable in respect of shares in, or deposits with or loans to, a building society shall be dealt with for the purposes of corporation tax as follows—
- (a) to the extent that it would not otherwise fall to be so regarded, liability to pay the dividends or interest shall be treated for the purposes of Chapter II of Part IV of the Finance Act 1996 as a liability arising under a loan relationship of the building society;
- (aa) if the dividends or interest are payable to a company, then, to the extent that they would not otherwise fall to be so regarded, they shall be treated for those purposes as payable to that company in pursuance of a right arising under a loan relationship of that company;
- (b) no part of any such dividends or interest paid or credited in the year of assessment shall be treated as a distribution of the society or as franked investment income of any company resident in the United Kingdom.
- (3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (3B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (3C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (4) Subsection (3)(a) above shall apply to any interest paid by the society under a certified SAYE savings arrangement as if it were a dividend on a share in the society.
- (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (7) Notwithstanding anything in sections 348 to 350, for any year of asessment to which regulations under subsection (1) above apply income tax shall not be deducted upon payment to the society of any interest on advances, being interest payable in that year.
- (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (9) In this section “*dividend*” has the meaning given by regulations under subsection (1) above . . . .
- (10) In this section—
- “*certified SAYE savings arrangement*” has the meaning given by section 703 of ITTOIA 2005
- “*qualifying certificate of deposit*” has the same meaning as in section 349, and
- “*qualifying deposit right*” has the meaning given by section 349(4), reading “paid” as “paid or credited”, and
- “*security*” includes share.
##### 477B
- (1) In computing for the purposes of corporation tax the income of a building society from the trade carried on by it, there shall be allowed as a deduction, if subsection (2) below applies, the incidental costs of obtaining finance by means of issuing shares in the society which are qualifying shares.
- (1A) A deduction shall not be allowed by virtue of subsection (1) above to the extent that the costs in question fall to be brought into account as debits for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships).
- (2) This subsection applies if any amount payable in respect of the shares by way of dividend or interest is deductible in computing for the purposes of corporation tax the income of the society from the trade carried on by it.
- (3) In subsection (1) above, “*the incidental costs of obtaining finance*” means expenditure on fees, commissions, advertising, printing and other incidental matters (but not including stamp duty), being expenditure wholly and exclusively incurred for the purpose of obtaining the finance (whether or not it is in fact obtained), or of providing security for it or of repaying it.
- (4) This section shall not be construed as affording relief—
- (a) for any sums paid in consequence of, or for obtaining protection against, losses resulting from changes in the rate of exchange between different currencies, or
- (b) for the cost of repaying qualifying shares so far as attributable to their being repayable at a premium or to their having been issued at a discount.
- (5) In this section—
- “*dividend*” has the same meaning as in section 477A, and
- “*qualifying share*” has the same meaning as in section 117(4) of the 1992 Act.
##### 480A
- (1) Any deposit-taker making a payment of interest in respect of a relevant deposit shall, on making the payment, deduct out of it a sum representing the amount of income tax on it for the year of assessment in which the payment is made.
- (2) Any payment of interest out of which an amount is deductible under subsection (1) above shall be a relevant payment for the purposes of Schedule 16 whether or not the deposit-taker making the payment is resident in the United Kingdom.
- (3) Schedule 16 shall apply in relation to any payment which is a relevant payment by virtue of subsection (2) above—
- (a) with the substitution for any reference to a company of a reference to a deposit-taker,
- (b) as if paragraph 5 applied only in relation to payments received by the deposit-taker and falling to be taken into account in computing his income chargeable to corporation tax, and
- (c) as if in paragraph 7 the reference to section 7(2) included a reference to sections 11(3) and 349(1).
- (4) In relation to any deposit-taker who is not a company, Schedule 16 shall have effect as if—
- (a) paragraph 5 were omitted, and
- (b) references to accounting periods were references to periods for which the deposit-taker makes up his accounts.
- (5) For the purposes of this section, crediting interest shall be treated as paying it.
##### 480B
- (1) The Board may by regulations provide that section 480A(1) shall not apply as regards a payment of interest if such conditions as may be prescribed by the regulations are fulfilled.
- (2) In particular, the regulations may include—
- (a) provision for a certificate to be supplied to the effect that the person beneficially entitled to a payment is unlikely to be liable to pay any amount by way of income tax for the year of assessment in which the payment is made;
- (b) provision for the certificate to be supplied by that person or such other person as may be prescribed by the regulations;
- (c) provision about the time when, and the manner in which, a certificate is to be supplied;
- (d) provision about the form and contents of a certificate.
- (3) Any provision included under subsection (2)(d) above may allow the Board to make requirements, in such manner as they see fit, as to the matters there mentioned.
- (4) For the purposes of this section, crediting interest shall be treated as paying it.
#### Election by company paying dividend.
##### 480C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Application of sections 251B and 251C
##### 482A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### PETROLEUM EXTRACTION ACTIVITIES
##### 494AA
- (1) This section applies where—
- (a) a company (“*the seller*”) carrying on a trade has disposed of an asset which was used for the purposes of that trade, or an interest in such an asset;
- (b) the asset is used, under a lease, by the seller or a company associated with the seller (“*the lessee*”) for the purposes of a ring fence trade carried on by the lessee; and
- (c) the lessee uses the asset before the end of the period of two years beginning with the disposal.
- (2) Subject to subsection (4) below, subsection (3) below applies to so much (if any) of the expenditure incurred by the lessee under the lease as—
- (a) falls, in accordance with generally accepted accounting practice, to be treated in the accounts of the lessee as a finance charge;. . . or
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (c) falls, if the case is one where the lease is a long funding operating lease, to be deductible in computing the profits of the lessee for the purposes of corporation tax (after first making against any such expenditure any reductions falling to be made by virtue of section 502K).
- (3) The expenditure shall not be allowable in computing for the purposes of Schedule D the profits of the ring fence trade.
- (4) Expenditure shall not be disallowed by virtue of subsection (3) above to the extent that the disposal referred to in subsection (1) above is made for a consideration which—
- (a) is used to meet expenditure incurred by the seller in carrying on oil extraction activities or in acquiring oil rights otherwise than from a company associated with the seller; or
- (b) is appropriated to meeting expenditure to be so incurred by the seller.
- (5) Where any expenditure—
- (a) would apart from subsection (3) above be allowable in computing for the purposes of Schedule D the profits of the ring fence trade for an accounting period, but
- (b) by virtue of that subsection is not so allowable,
that expenditure shall be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 as if it were a non-trading debit in respect of a loan relationship of the lessee for that accounting period.
- (6) In this section —
- “*long funding operating lease*” means a long funding operating lease for the purposes of Part 2 of the Capital Allowances Act (see section 70YI(1) of that Act);
- “*lease*”, in relation to an asset, has the same meaning as in sections 781 to 784.
##### 494A
- (1) In section 403(3) (availability of charges, Schedule A losses and management expenses for surrender as group relief) the reference to the gross profits of the surrendering company for an accounting period does not include the company’s relevant ring fence profits for that period.
- (2) If for that period—
- (a) there are no charges on income paid by the company that are allowable under section 338, . . .
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
all the company’s ring fence profits are relevant ring fence profits.
- (3) In any other case the company’s relevant ring fence profits are so much of its ring fence profits as exceeds the amount of the charges on income paid by the company as—
- (a) are allowable under section 338 for that period, . . .
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 496A
Schedule 19B to this Act (exploration expenditure supplement) shall have effect.
##### 496B
Schedule 19C to this Act (ring fence expenditure supplement) shall have effect.
#### Interpretation of Part VI.
##### 501A
- (1) Where in any accounting period beginning on or after 17th April 2002 a company carries on a ring fence trade, a sum equal to 20 per cent of its adjusted ring fence profits for that period shall be charged on the company as if it were an amount of corporation tax chargeable on the company.
- (2) A company’s adjusted ring fence profits for an accounting period are the amount which, on the assumption mentioned in subsection (3) below, would be determined for that period (in accordance with this Chapter) as the profits of the company’s ring fence trade chargeable to corporation tax.
- (3) The assumption is that financing costs are left out of account in computing—
- (a) the amount of the profits or loss of any ring fence trade of the company’s for each accounting period beginning on or after 17th April 2002; and
- (b) where for any such period the whole or part of any loss relief is surrendered to the company in accordance with section 492(8), the amount of that relief or, as the case may be, that part.
- (4) For the purposes of this section, “*financing costs*” means the costs of debt finance.
- (5) In calculating the costs of debt finance for an accounting period the matters to be taken into account include—
- (a) any costs giving rise to debits in respect of debtor relationships of the company under Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships) , other than debits in respect of exchange losses from such relationships (see section 103(1A) and (1B) of that Act);
- (b) any exchange gain or loss from a debtor relationship, within the meaning of that Chapter (see section 103(1A) and (1B) of that Act), in relation to debt finance;
- (c) any credit or debit falling to be brought into account under Schedule 26 to the Finance Act 2002 (derivative contracts) in relation to debt finance;
- (d) the financing cost implicit in a payment under a finance lease;
- (dd) where the company is the lessee under a long funding operating lease, the amount deductible in respect of payments under the lease in computing the profits of the lessee for the purposes of corporation tax (after first making against any such amount any reductions falling to be made by virtue of section 502K); and
- (e) any other costs arising from what would be considered in accordance with generally accepted accounting practice to be a financing transaction.
- (6) Where an amount representing the whole or part of a payment falling to be made by a company—
- (a) falls (or would fall) to be treated as a finance charge under a finance lease for the purposes of accounts relating to that company and one or more other companies and prepared in accordance with generally accepted accounting practice, but
- (b) is not so treated in the accounts of the company,
the amount shall be treated for the purposes of this section as financing costs falling within subsection (5)(d) above.
- (7) If—
- (a) in computing the adjusted ring fence profits of a company for an accounting period, an amount falls to be left out of account by virtue of subsection (5)(d) above, but
- (b) the whole or any part of that amount is repaid,
the repayment shall also be left out of account in computing the adjusted ring fence profits of the company for any accounting period.
- (8) In this section “*finance lease*” means any arrangements—
- (a) which provide for an asset to be leased or otherwise made available by a person to another person (“*the lessee*”), and
- (b) which, under generally accepted accounting practice,—
- (i) fall (or would fall) to be treated, in the accounts of the lessee or a person connected with the lessee, as a finance lease or a loan, or
- (ii) are comprised in arrangements which fall (or would fall) to be so treated.
- (9) For the purposes of applying subsection (8)(b) above, the lessee and any person connected with the lessee are to be treated as being companies which are incorporated in a part of the United Kingdom.
- (10) In this section “*accounts*”, in relation to a company, includes any accounts which—
- (a) relate to two or more companies of which that company is one, and
- (b) are drawn up in accordance with generally accepted accounting practice.
- (11) In this section “*long funding operating lease*” means a long funding operating lease for the purposes of Part 2 of the Capital Allowances Act (see section 70YI(1) of that Act).
##### 501B
- (1) Subject to subsection (3) below, the provisions of section 501A(1) relating to the charging of a sum as if it were an amount of corporation tax shall be taken as applying, subject to the provisions of the Taxes Acts, and to any necessary modifications, all enactments applying generally to corporation tax, including—
- (a) those relating to returns of information and the supply of accounts, statements and reports;
- (b) those relating to the assessing, collecting and receiving of corporation tax;
- (c) those conferring or regulating a right of appeal; and
- (d) those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom.
- (2) Accordingly (but without prejudice to subsection (1) above) the Management Act shall have effect as if any reference to corporation tax included a reference to a sum chargeable under section 501A(1) as if it were an amount of corporation tax.
- (3) In any regulations made under section 32 of the Finance Act 1998 (as at 17th April 2002, the Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) Regulations 1999)—
- (a) references to corporation tax do not include a reference to a sum chargeable on a company under section 501A(1) as if it were corporation tax; and
- (b) references to profits charged to corporation tax do not include a reference to adjusted ring fence profits, within the meaning of section 501A(1).
- (4) In this section “*the Taxes Acts*” has the same meaning as in the Management Act.
### Chapter 5A — Special rules for long funding leases of plant or machinery: corporation tax
### Introductory
##### 502A
This Chapter has effect for the purposes of corporation tax only.
### Lessors under long funding finance leases
##### 502B
- (1) This section applies for determining for the purposes of corporation tax the profits of a company for any period of account in which it is the lessor of any plant or machinery under a long funding finance lease.
- (2) The amount to be brought into account as the lessor's taxable income from the lease for the period of account is the amount of the rental earnings in respect of the lease for the period of account.
- (3) The “rental earnings” for any period is the amount which, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment for that period in respect of the lease where it meets the finance lease test.
- (4) If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan in the accounts in question, so much of the rentals under the lease as fall (or would fall) to be treated as interest are to be treated for the purposes of this section as rental earnings.
##### 502C
- (1) This section applies for determining for the purposes of corporation tax the profits of a company which is or has been the lessor under a long funding finance lease.
- (2) This section has effect where a profit or loss (whether of an income or capital nature)—
- (a) arises to the company in connection with the lease, and
- (b) in accordance with generally accepted accounting practice falls to be recognised for accounting purposes in a period of account, but
- (c) would not, apart from this section, be brought into account in computing the profits of the company for the purposes of corporation tax.
- (3) The profit or loss is to be treated—
- (a) in the case of a profit, as income of the company attributable to the lease,
- (b) in the case of a loss, as a revenue expense incurred by the company in connection with the lease.
- (4) Any reference in this section to an amount falling to be recognised for accounting purposes in a period of account is a reference to an amount falling to be recognised for accounting purposes—
- (a) in the company's profit and loss account or income statement,
- (b) in the company's statement of recognised gains and losses or statement of changes in equity, or
- (c) in any other statement of items brought into account in computing the company's profits or losses for that period.
##### 502D
- (1) This section applies for determining the liability to corporation tax of a company which is or has been the lessor under a long funding finance lease.
- (2) Where—
- (a) the lease terminates, and
- (b) a sum calculated by reference to the termination value is paid to the lessee,
no deduction in respect of the sum paid to the lessee is allowed in computing the profits of the company.
- (3) This section does not prevent a deduction in respect of a sum to the extent that the sum is brought into account in determining the company's rental earnings.
### Lessors under long funding operating leases
##### 502E
- (1) This section applies for determining for the purposes of corporation tax the profits of a company for any period of account—
- (a) for the whole of which, or
- (b) for any part of which,
the company is the lessor of any plant or machinery under a long funding operating lease.
- (2) A deduction is allowed in computing the profits of the company for the period of account.
- (3) The amount of the deduction for any period of account is to be determined as follows.
- (4) First, find the “*relevant value*” for the purposes of subsection (6)(a) below, which is—
- (a) if the only use of the plant or machinery by the lessor has been the leasing of it under the long funding operating lease as a qualifying activity, cost;
- (b) if the last previous use of the plant or machinery by the lessor was the leasing of it under another long funding operating lease as a qualifying activity, market value;
- (c) if the last previous use of the plant or machinery by the lessor was the leasing of it under a long funding finance lease as a qualifying activity, the recognised value;
- (d) if the last previous use of the plant or machinery by the lessor was for the purposes of a qualifying activity other than leasing under a long funding lease, the lower of cost and market value;
- (e) if the lessor owns the plant or machinery as a result of having incurred expenditure on its provision for purposes other than those of a qualifying activity, but—
- (i) the plant or machinery is brought into use by the lessor for the purposes of a qualifying activity on or after 1st April 2006, and
- (ii) that qualifying activity is the leasing of the plant or machinery under the long funding operating lease,
the relevant value is the lower of first use market value and first use amortised value.
- (5) In subsection (4) above—
- “*cost*” means the amount of the expenditure incurred by the lessor on the provision of the plant or machinery;
- “*first use amortised value*” means the value that the plant or machinery would have at the time when it is first brought into use for the purposes of the qualifying activity, on the assumption that—the cost of acquiring the plant or machinery had been written off on a straight line basis over the remaining useful economic life of the plant or machinery, andany further capital expenditure incurred had been written off on a straight line basis over so much of the remaining economic life of the plant or machinery as remains at the time when the expenditure is incurred;
- “*first use market value*” means the market value of the plant or machinery at the time when it is first brought into use for the purposes of the qualifying activity;
- “*market value*” means the market value of the plant or machinery at the commencement of the term of the long funding operating lease;
- “*recognised value*” means the value at which the plant or machinery is recognised in the books or other financial records of the lessor at the commencement of the long funding operating lease.
- (6) From—
- (a) the relevant value determined in accordance with subsection (4) above,
subtract
- (b) the amount which, at the commencement of the term of the lease, is (or, in a case falling within subsection (4)(e) above, would have been) expected to be the residual value of the plant or machinery,
to find the expected gross reduction in value over the term of the lease.
- (7) Apportion the amount of that expected gross reduction in value to each period of account in which any part of the term of the lease falls.
- (8) The apportionment must be on a time basis according to the proportion of the term of the lease that falls in each period of account.
- (9) The amount of the deduction for any period of account is the amount so apportioned to that period.
##### 502F
- (1) This section applies if in any period of account—
- (a) a company is the lessor of any plant or machinery under a long funding operating lease,
- (b) the company incurs capital expenditure in relation to the plant or machinery, and
- (c) that capital expenditure (the “additional expenditure”) is not reflected in the market value of the plant or machinery at the commencement of the term of the lease.
- (2) In a case falling within section 502E(4)(e) above, subsection (1)(c) above has effect as if the reference to the commencement of the term of the lease were a reference to the time when the plant or machinery is first brought into use by the lessor for the purposes of the qualifying activity.
- (3) Where this section applies, an additional deduction is allowed in computing the profits of the company for each post-expenditure period of account in which the company is the lessor of the plant or machinery under the lease.
- (4) The amount of the deduction for any such period of account is to be determined as follows.
- (5) Find ARV, CRV, PRV, and TRV where—
- “ARV” is the amount which, at the time when the additional expenditure is incurred, is expected to be the residual value of the plant or machinery;
- “CRV” is the amount which, at the commencement of the term of the lease, is expected to be the residual value of the plant or machinery;
- “PRV” is the sum of any amounts that fell to be taken into account as RRV (see subsection (6)) in the application of this section in relation to any previous additional expenditure incurred by the company in relation to the leased plant or machinery;
- “TRV” is the total of CRV and PRV.
- (6) Find RRV, where—
- (a) if ARV exceeds TRV, RRV is the portion of the excess that is a result of the additional expenditure, but
- (b) if ARV does not exceed TRV, RRV is nil.
- (7) From—
- (a) the amount of the additional expenditure,
subtract
- (b) RRV,
to find the expected partial reduction in value over the remainder of the term of the lease.
- (8) Apportion the amount of that expected partial reduction in value to each post-expenditure period of account in which any part of the term of the lease falls.
- (9) The apportionment must be on a time basis according to the proportion of the term of the lease that falls in each post-expenditure period of account.
- (10) The amount of the additional deduction for any period of account is the amount so apportioned to that period.
- (11) In this section “*post-expenditure period of account*” means any period of account ending after the incurring of the additional expenditure.
##### 502G
- (1) This section applies for determining the liability to corporation tax of a company which is the lessor immediately before the termination of a long funding operating lease.
- (2) Step 1 is to find—
- (a) the termination amount (TA);
- (b) the total of any sums paid to the lessee that are calculated by reference to the termination value (LP).
- (3) Step 2 is to find—
- (a) the relevant value for the purposes of section 502E(6)(a) (RV);
- (b) the total of the deductions allowable under section 502E for periods of account for the whole or part of which the company was the lessor before the termination of the lease (TD1);
- (c) the amount, if any, (ERV) by which RV exceeds TD1.
- (4) Step 3 is to find—
- (a) the total of any amounts of capital expenditure incurred by the company which constitute additional expenditure for the purposes of section 502F in the case of the lease (TAE);
- (b) the total of any deductions allowable under section 502F for periods of account for the whole or part of which the company was the lessor before the termination of the lease (TD2);
- (c) the amount, if any, (EAE) by which TAE exceeds TD2.
- (5) Step 4 is to find the total of ERV and EAE (T).
- (6) If (TA – LP) exceeds T, treat a profit of an amount equal to the excess as arising to the company in the period of account in which the lease terminates.
- (7) If T exceeds (TA – LP), treat a loss of an amount equal to the excess as arising to the company in that period of account.
- (8) A profit or loss treated as arising to the company under subsection (6) or (7) above is to be treated—
- (a) in the case of a profit, as income of the company attributable to the lease,
- (b) in the case of a loss, as a revenue expense incurred by the company in connection with the lease.
- (9) In computing the profits of the company, no deduction is allowed in respect of any sums paid to the lessee that are calculated by reference to the termination value.
### Lessors under long funding finance or operating leases: avoidance etc
#### Meaning of “the minimum amount”
##### 502GA
- (1) Sections 502B to 502G do not apply in the case of a company which is or has been the lessor of any plant or machinery under a long funding lease if the following condition is met.
- (2) The condition is that any part of the expenditure incurred by the company on the acquisition of the plant or machinery for leasing under the lease—
- (a) is (apart from those sections) allowable as a deduction in calculating its profits or losses for the purposes of corporation tax, and
- (b) is so allowable as a result of the plant or machinery forming part of its trading stock.
- (3) For the purposes of this section the cases in which expenditure incurred by a company on the acquisition of any plant or machinery for leasing under a lease is allowable as such a deduction include any case where—
- (a) the company becomes entitled to the deduction at any time after the expenditure is incurred, and
- (b) the deduction arises as a result of the plant or machinery forming part of its trading stock at that time.
- (4) If—
- (a) at any time any of sections 502B to 502G has applied for determining the amounts to be taken into account in calculating the profits or losses of the company for the purposes of corporation tax, and
- (b) the condition in subsection (2) is met at any subsequent time,
those amounts, and any other amounts which (as a result of this section) are to be so taken into account, are subject to such adjustments as are just and reasonable.
- (5) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (4).
##### 502GB
- (1) This section applies if—
- (a) a company is the lessee of any plant or machinery under a lease (“lease A”) that is not a long funding lease,
- (b) it enters into a lease (“lease B”) of any of that plant or machinery (as lessor), and
- (c) lease B is a long funding lease.
- (2) Sections 502B to 502G do not apply in relation to lease B.
- (3) If by virtue of section 70H of the Capital Allowances Act (tax return by lessee treating lease as long funding lease) lease A becomes a long funding lease (and does not cease to be such a lease), treat this section as never having applied in relation to lease B.
##### 502GC
- (1) Sections 502B to 502G do not apply in the case of a company which is or has been the lessor of any plant or machinery under a long funding lease if conditions A to C are met.
- (2) Condition A is that the long funding lease forms part of any arrangement entered into by the company which includes one or more other transactions (whether the arrangement is entered into before or after or at the inception of the lease).
- (3) Condition B is that the main purpose, or one of the main purposes, of the arrangement is to secure that, over the relevant period, there would be a substantial difference between—
- (a) the total amount of the amounts under the arrangement which are, in accordance with generally accepted accounting practice, recognised in determining the company's profit or loss for any period or taken into account in calculating the amounts which are so recognised, and
- (b) the total amount of the amounts under the arrangement which are taken into account in calculating the profits or losses of the company for the purposes of corporation tax.
- (4) For the purposes of condition B “*the relevant period*” means the period which begins with the inception of the lease and ends with the end of the term of the lease.
- (5) Condition C is that the difference would be attributable (wholly or partly) to the application of any of sections 502B to 502G in relation to the company by reference to the plant or machinery under the lease.
- (6) The reference in this section to an amount being recognised in determining a company's profit or loss for a period is to an amount being recognised for accounting purposes—
- (a) in the company's profit and loss account or income statement,
- (b) in the company's statement of recognised gains and losses or statement of changes in equity, or
- (c) in any other statement of items brought into account in calculating the company's profits and losses for that period.
- (7) For the purposes of this section it does not matter whether the parties to any transaction which forms part of the arrangement differ from the parties to any of the other transactions.
- (8) For the purposes of this section the cases in which two or more transactions are to be taken as forming part of an arrangement include any case in which it would be reasonable to assume that one or more of them—
- (a) would not have been entered into independently of the other or others, or
- (b) if entered into independently of the other or others, would not have taken the same form or been on the same terms.
- (9) If—
- (a) at any time any of sections 502B to 502G has applied for determining the amounts to be taken into account in calculating the profits or losses of the company for the purposes of corporation tax, and
- (b) conditions A to C are met at any subsequent time,
those amounts, and any other amounts which (as a result of this section) are to be so taken into account, are subject to such adjustments as are just and reasonable.
- (10) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (9).
##### 502GD
- (1) If a company is or has been a lessor under a long funding lease of a film, sections 502B to 502G do not apply in respect of the lease.
- (2) “*Film*” has the same meaning as in Part 15 of CTA 2009 (see section 1181 of that Act).
### Insurance company as lessor
##### 502H
- (1) This section applies to a company carrying on life assurance business if it is the lessor under a long funding lease in a period of account.
- (2) In this section—
- (a) subsections (3) to (7) have effect in relation to—
- (i) basic life assurance and general annuity business, and
- (ii) long-term business which is not life assurance business, and
- (b) subsections (8) to (10) have effect in relation to certain computations falling to be made in accordance with the provisions of this Act applicable to Case I of Schedule D.
- (3) Subsection (4) below applies in the case of each of the following amounts—
- (a) an amount of rental earnings which the company is required by section 502B (long funding finance lease) to bring into account as taxable income,
- (b) an amount treated under section 502C(3)(a) (long funding finance lease: lessor's exceptional items) as a profit arising to the company,
- (c) an amount of rental income arising to the company from a long funding operating lease,
- (d) an amount treated under section 502G(8)(a) (long funding operating lease: lessor's excess termination amount) as a profit arising to the company,
but only if the leased asset is an asset of the company's long-term insurance fund.
- (4) In determining for the purposes of the Corporation Tax Acts in any such case the extent to which any such amount is referable to—
- (a) basic life assurance and general annuity business, or
- (b) long-term business which is not life assurance business,
section 432A (apportionment of insurance companies' income) is to have effect in relation to the amount as it has effect in relation to the income arising from an asset.
This subsection is subject to subsections (5) and (6) below.
- (5) Before applying subsection (4) above in a case where—
- (a) that subsection applies by virtue of subsection (3)(a) above in relation to an amount of rental earnings, and
- (b) there is an amount which is deductible as a revenue expense by virtue of section 502C(3)(b) (long funding finance lease: lessor's exceptional items),
the amount so deductible is to be given effect by applying it, so far as possible, in reducing the amount of the rental earnings.
- (6) Before applying subsection (4) above by virtue of subsection (3)(c) above in relation to an amount of rental income,—
- (a) any deduction falling to be made under section 502E, or
- (b) any reduction falling to be made under section 502F,
is to be given effect by applying it, so far as possible, in reducing (or further reducing) the amount of the rental income.
- (7) Where, after applying amounts in making reductions required by subsection (5) or (6) above, there remains unapplied an amount in respect of—
- (a) a deduction falling to be made under section 502E,
- (b) a reduction falling to be made under section 502F, or
- (c) an amount deductible as a revenue expense by virtue of section 502C(3)(b),
the amount is to be apportioned under section 432A in the same way as income.
- (8) Where—
- (a) the leased asset is an asset of the company's long-term insurance fund, and
- (b) a computation falling within subsection (9) below falls to be made,
subsection (10) below applies to the computation.
- (9) A computation falls within this subsection if it is a computation of profits of—
- (a) life assurance business carried on by the company, or
- (b) any category of life assurance business carried on by the company,
and falls to be made in accordance with the provisions of this Act applicable to Case I of Schedule D.
- (10) In making the computation, no amount shall be brought into account by virtue of any of the following provisions—
- (a) section 502B (long funding finance lease: rental earnings),
- (b) section 502C(3)(a) or (b) (long funding finance lease: profit or loss in respect of exceptional items),
- (c) section 502E (long funding operating lease: periodic deduction),
- (d) section 502F (long funding operating lease: lessor's additional expenditure),
- (e) section 502G(8)(a) or (b) (long funding operating lease: lessor's profit or loss in respect of termination amount).
### Lessees under long funding finance leases
#### Elections as to transfer of relief under section 257A or 257AB.
##### 502I
- (1) This section applies for determining for the purposes of corporation tax the profits of a company for any period of account in which it is the lessee of any plant or machinery under a long funding finance lease.
- (2) In calculating the company's profits for the period of account,—
- (a) the amount deducted in respect of amounts payable under the lease,
must not exceed
- (b) the amounts which, in accordance with generally accepted accounting practice, fall (or would fall) to be shown in the company's accounts as finance charges in respect of the lease.
- (3) If the lease is one which, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, subsection (2) above applies as if the lease were one which, under generally accepted accounting practice, fell to be treated as a finance lease.
##### 502J
- (1) This section applies where—
- (a) a company is or has been the lessee under a long funding finance lease, and
- (b) in connection with the termination of the lease, a payment calculated by reference to the termination value falls to be made to the company.
- (2) The payment is not to be brought into account in determining for the purposes of corporation tax the profits of the company for any period of account.
- (3) Subsection (2) above does not affect the amount of any disposal value that falls to be brought into account by the company under the Capital Allowances Act.
### Lessees under long funding operating leases
##### 502K
- (1) This section applies for determining for the purposes of corporation tax the profits of a company for any period of account in which it is the lessee of any plant or machinery under a long funding operating lease.
- (2) The deductions that may be allowed in computing the profits of the company for the period of account are to be reduced in accordance with the following provisions of this section.
- (3) The amount of the reduction for any period of account is to be determined as follows.
- (4) First, find the “*relevant value*” for the purposes of subsection (6)(a) below, which is—
- (a) the market value of the plant or machinery at the commencement of the term of the lease, unless paragraph (b) below applies;
- (b) if the lessee—
- (i) has the use of the plant or machinery as a result of having incurred expenditure on its provision for purposes other than those of a qualifying activity, but
- (ii) brings the plant or machinery into use for the purposes of a qualifying activity on or after 1st April 2006,
the lower of first use market value and first use amortised market value.
- (5) In subsection (4) above—
- “*first use amortised market value*” means the value that the plant or machinery would have—at the time when it is first brought into use for the purposes of the qualifying activity, buton the assumption that the market value of the plant or machinery at the commencement of the term of the lease had been written off on a straight line basis over the remaining useful economic life of the plant or machinery;
- “*first use market value*” means the market value of the plant or machinery at the time when it is first brought into use for the purposes of the qualifying activity.
- (6) From—
- (a) the relevant value determined in accordance with subsection (4) above,
subtract
- (b) the amount which, at the commencement of the term of the lease, is (or, in a case falling within subsection (4)(b) above, would have been) expected to be the market value of the plant or machinery at the end of the term of the lease,
to find the expected gross reduction over the term of the lease.
- (7) Apportion the amount of that expected gross reduction to each period of account in which any part of the term of the lease falls.
- (8) The apportionment must be on a time basis according to the proportion of the term of the lease that falls in each period of account.
- (9) The amount of the reduction for any period of account is the amount so apportioned to that period.
### Interpretation of Chapter
##### 502L
- (1) This section has effect for the interpretation of this Chapter.
- (2) In this Chapter—
- “*qualifying activity*” has the same meaning as in Part 2 of the Capital Allowances Act;
- “*residual value*”, in relation to any plant or machinery leased under a long funding operating lease, means—the estimated market value of the plant or machinery on a disposal at the end of the term of the lease,lessthe estimated costs of that disposal.
- (3) Any reference in this Chapter to a sum being written off on a straight line basis over a period of time (the “writing-off period”) is a reference to—
- (a) the sum being apportioned between each of the periods of account in which any part of the writing-off period falls,
- (b) that apportionment being made on a time basis, according to the proportion of the writing-off period that falls in each of the periods of account, and
- (c) the sum being written off accordingly.
- (4) Chapter 6A of Part 2 of the Capital Allowances Act (interpretation of provisions about long funding leases) applies in relation to this Chapter as it applies in relation to that Part.
##### 504A
- (1) For the purposes specified in subsection (2)—
- (a) a UK property business which consists in, or so far as it consists in, the commercial letting of furnished holiday accommodation is treated as if it were a trade the profits of which are chargeable to income tax under Part 2 of ITTOIA 2005, and
- (b) all such lettings made by a particular person or partnership or body of persons are treated as one trade.
The “*commercial letting of furnished holiday accommodation*” has the same meaning as it has for the purposes of Chapter 6 of Part 3 of ITTOIA 2005.
- (2) Subsection (1) applies for the purposes of—
- (a) Chapter 1 of Part 10 (loss relief for income tax),
- (b) section 833(4)(c) (income regarded as earned income), and
- (c) section 189(2)(b) of the Finance Act 2004 (income regarded as relevant UK earnings for pension purposes).
- (3) Chapter 1 of Part 10 as applied by this section has effect with the following adaptations—
- (a) no relief is to be given to an individual under section 381 (relief for losses in early years of trade) in respect of a year of assessment if any of the accommodation in respect of which the trade is carried on in that year was first let by that person as furnished accommodation more than three years before the beginning of that year of assessment;
- (b) section 384 (restrictions on right of set-off) has effect with the omission of subsections (6) to (8) (which relate to certain losses attributable to capital allowances);
- (c) section 390 (treatment of interest as loss) has effect as if the reference to a trade carried on wholly or partly in the United Kingdom were a reference to the UK property business so far as it is treated as a trade.
- (4) If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.
- (5) Relief is not to be given for the same loss, or the same portion of a loss, both under a provision of Chapter 1 of Part 10 as applied by this section and under any other provision of the Income Tax Acts.
#### Transfer of relief under section 257A where relief exceeds income.
#### Transfer of relief under section 257A.
##### 506A
- (1) This section applies to the following transactions—
- (a) the sale or letting of property by a charity to a substantial donor,
- (b) the sale or letting of property to a charity by a substantial donor,
- (c) the provision of services by a charity to a substantial donor,
- (d) the provision of services to a charity by a substantial donor,
- (e) an exchange of property between a charity and a substantial donor,
- (f) the provision of financial assistance by a charity to a substantial donor,
- (g) the provision of financial assistance to a charity by a substantial donor, and
- (h) investment by a charity in the business of a substantial donor.
- (2) For the purposes of this section a person is a substantial donor to a charity in respect of a chargeable period if—
- (a) the charity receives relievable gifts of at least £25,000 from him in a period of 12 months in which the chargeable period wholly or partly falls, or
- (b) the charity receives relievable gifts of at least £100,000 from him in a period of six years in which the chargeable period wholly or partly falls;
and if a person is a substantial donor to a charity in respect of a chargeable period by virtue of paragraph (a) or (b), he is a substantial donor to the charity in respect of the following five chargeable periods.
- (3) A payment made by a charity to a substantial donor in the course of or for the purposes of a transaction to which this section applies shall be treated for the purposes of section 505 as non-charitable expenditure.
- (4) If the terms of a transaction to which this section applies are less beneficial to the charity than terms which might be expected in a transaction at arm's length, the charity shall be treated for the purposes of section 505 as incurring non-charitable expenditure equal to that amount which the Commissioners for Her Majesty's Revenue and Customs determine as the cost to the charity of the difference in terms.
- (5) A payment by a charity of remuneration to a substantial donor shall be treated for the purposes of section 505 as non-charitable expenditure unless it is remuneration, for services as a trustee, which is approved by—
- (a) the Charity Commission,
- (b) another body with responsibility for regulating charities by virtue of legislation having effect in respect of any Part of the United Kingdom, or
- (c) a court.
##### 506B
- (1) Section 506A shall not apply to a transaction within section 506A(1)(b) or (d) if the Commissioners for Her Majesty's Revenue and Customs determine that the transaction—
- (a) takes place in the course of a business carried on by the substantial donor,
- (b) is on terms which are no less beneficial to the charity than those which might be expected in a transaction at arm's length, and
- (c) is not part of an arrangement for the avoidance of any tax.
- (2) Section 506A shall not apply to the provision of services to a substantial donor if the Commissioners determine that the services are provided—
- (a) in the course of the actual carrying out of a primary purpose of the charity, and
- (b) on terms which are no more beneficial to the substantial donor than those on which services are provided to others.
- (3) Section 506A shall not apply to the provision of financial assistance to a charity by a substantial donor if the Commissioners determine that the assistance—
- (a) is on terms which are no less beneficial to the charity than those which might be expected in a transaction at arm's length, and
- (b) is not part of an arrangement for the avoidance of any tax.
- (4) Section 506A shall not apply to investment by a charity in the business of a substantial donor where the investment takes the form of the purchase of shares or securities listed on a recognised stock exchange.
- (5) A disposal at an undervalue to which section 587B applies shall not be a transaction to which section 506A applies (but may be taken into account in the application of section 506A(2)).
- (6) A disposal at an undervalue to which section 257(2) of the 1992 Act (gifts of chargeable assets) applies shall not be a transaction to which section 506A applies (but may be taken into account in the application of section 506A(2)).
- (7) In the application of section 506A payments by a charity, or benefits arising to a substantial donor from a transaction, shall be disregarded in so far as they—
- (a) relate to a donation by the donor, and
- (b) do not exceed the relevant limit in relation to the donation for the purposes of section 339 or section 25 of the Finance Act 1990.
- (8) A company which is wholly owned by a charity within the meaning of section 339(7AB) shall not be treated as a substantial donor in relation to the charity which owns it (or any of the charities which own it).
- (9) A registered social landlord or housing association shall not be treated as a substantial donor in relation to a charity with which it is connected; and for that purpose—
- (a) “*registered social landlord or housing association*” means a body entered on a register maintained under—
- (i) section 1 of the Housing Act 1996,
- (ii) section 57 of the Housing (Scotland) Act 2001, or
- (iii) Article 14 of the Housing (Northern Ireland) Order 1992, and
- (b) a body and a charity are connected if (and only if)—
- (i) the one is wholly owned, or subject to control, by the other, or
- (ii) both are wholly owned, or subject to control, by the same person.
##### 506C
- (1) A gift is “*relievable*” for the purposes of section 506A(2) if relief is available in respect of it under—
- (a) section 83A,
- (b) section 339,
- (c) sections 587B and 587C,
- (d) section 25 of the Finance Act 1990 (individual gift aid),
- (e) section 257 of the 1992 Act (gifts of chargeable assets),
- (f) section 63 of the Capital Allowances Act (gifts of plant and machinery),
- (g) sections 713 to 715 of ITEPA 2003 (payroll giving),
- (h) section 108 of ITTOIA 2005 (gifts of trading stock), or
- (i) sections 628 and 630 of ITTOIA 2005 (gifts from settlor-interested trusts).
- (2) A charity is treated as incurring expenditure in accordance with section 506A(4) at such time (or times) as the Commissioners determine.
- (3) Section 506A applies to a transaction entered into in a chargeable period with a person who is a substantial donor in respect of that period, even if it was not until after the transaction was entered into that he first satisfied the definition of “substantial donor” in respect of that period.
- (4) Either or both of subsections (3) and (4) of section 506A may be applied to a single transaction; but any amount of non-charitable expenditure which a charity is treated as incurring under section 506A(3) in respect of a transaction shall be deducted from any amount which it would otherwise be treated as incurring under section 506A(4) in respect of the transaction.
- (5) Two or more connected charities shall be treated as a single charity for the purposes of section 506A and 506B and this section; and for this purpose “*connected*” means connected in a matter relating to the structure, administration or control of a charity.
- (6) Where remuneration is paid otherwise than in money, section 506A(5) shall apply as to a payment in money of the amount that would, under Part 3 of ITEPA 2003, be the cash equivalent of the remuneration as a benefit.
- (7) In sections 506A and 506B and this section—
- (a) a reference to a substantial donor or other person includes a reference to a person connected with him within the meaning of section 839,
- (b) “*financial assistance*” includes, in particular—
- (i) the provision of a loan, guarantee or indemnity, and
- (ii) entering into alternative finance arrangements within the meaning of section 46 of the Finance Act 2005, and
- (c) a reference to a gift of a specified amount includes a reference to a non-monetary gift of that value.
- (8) On an appeal against an assessment the Special Commissioners may review a decision of the Commissioners in connection with section 506A.
- (9) The Treasury may by regulations vary a sum, or a period of time, specified in section 506A(2).
#### Transfer of relief under section 257A where relief exceeds income or 257AB.
##### 508A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 508B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 510A
- (1) In this section “*grouping*” means a European Economic Interest Grouping formed in pursuance of Council Regulation [(EEC) No. 2137/85](https://www.legislation.gov.uk/european/regulation/1985/2137) of 25th July 1985, whether registered in Great Britain, in Northern Ireland, or elsewhere.
- (2) Subject to the following provisions of this section, for the purposes of charging tax in respect of income and gains a grouping shall be regarded as acting as the agent of its members.
- (3) In accordance with subsection (2) above—
- (a) for the purposes mentioned in that subsection the activities of the grouping shall be regarded as those of its members acting jointly and each member shall be regarded as having a share of its property, rights and liabilities; and
- (b) for the purposes of charging tax in respect of chargeable gains a person shall be regarded as acquiring or disposing of a share of the assets of the grouping not only where there is an acquisition or disposal of assets by the grouping while he is a member of it, but also where he becomes or ceases to be a member of a grouping or there is a change in his share of the property of the grouping ;
but paragraph (a) above is subject to subsection (6A) below.
- (4) Subject to subsection (5) below, for the purposes of this section a member’s share of any property, rights or liabilities of a grouping shall be determined in accordance with the contract under which the grouping is established.
- (5) Where the contract does not make provision as to the shares of members in the property, rights or liabilities in question a member’s share shall be determined by reference to the share of the profits of the grouping to which he is entitled under the contract (and if the contract makes no provision as to that, the members shall be regarded as having equal shares).
- (6) . . . Where any trade or profession is carried on by a grouping it shall be regarded for the purposes of charging tax in respect of income and gains as carried on in partnership by the members of the grouping.
- (6A) Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships) shall have effect in relation to a grouping as it has effect in relation to a partnership (see in particular section 87A of, and paragraphs 19 and 20 of Schedule 9 to, that Act).
- (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 519A
- (1) A health service body—
- (a) shall be exempt from income tax in respect of its income, and
- (b) shall be exempt from corporation tax,
and, so far as the exemption from income tax conferred by this subsection calls for repayment of tax, effect shall be given thereto by means of a claim.
- (2) In this section “*health service body*” means—
- (a) a Strategic Health Authority or a Health Authority established under section 8 of the National Health Service Act 1977;
- (aa) a Special Health Authority established under section 11 of that Act;
- (ab) a Primary Care Trust;
- (aba) a Local Health Board;
- (b) a National Health Service trust established under Part I of the National Health Service and Community Care Act 1990;
- (bb) an NHS foundation trust
- (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (d) a Health Board or Special Health Board, the Common Services Agency for the Scottish Health Service and a National Health Service trust respectively constituted under sections 2, 10 and 12A of the National Health Service (Scotland) Act 1978;
- (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (g) the Scottish Dental Practice Board; . . .
- (h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (i) a Health and Social Services Board and the Northern Ireland Central Services Agency for the Health and Social Services established under Articles 16 and 26 respectively of the Health and Personal Social Services (Northern Ireland) Order 1972;
- (j) a special health and social services agency established under the Health and Personal Social Services (Special Agencies) (Northern Ireland) Order 1990; and
- (k) a Health and Social Services trust established under the Health and Personal Social Services (Northern Ireland) Order 1991.
- (3) The Treasury may by order disapply subsection (1)(b) in relation to a specified activity, or class of activity, of an NHS foundation trust.
- (4) An order under subsection (3) shall make provision for determining the amount of the profits relating to an activity that are to be charged to corporation tax as a result of the disapplication of subsection (1)(b).
- (5) An order under subsection (3) may, in particular—
- (a) make provision for disregarding profits of less than a specified amount in respect of a financial year or accounting period or a specified part of a financial year or accounting period;
- (b) make provision for disregarding a specified part of profits in respect of a financial year or accounting period or a specified part of a financial year or accounting period;
- (c) make provision for disregarding all or part of profits relating to activity in respect of which receipts or turnover (as defined by the order) are less than a specified amount in respect of a financial year or accounting period or a specified part of a financial year or accounting period.
- (6) An order under subsection (3)—
- (a) may apply, with or without modification, a provision of the Tax Acts,
- (b) may disapply a provision of the Tax Acts,
- (c) may make provision similar to a provision of the Tax Acts, and
- (d) may make provision generally or in relation to a specified body or class of bodies.
- (7) The Treasury may make an order under subsection (3) only—
- (a) in relation to an activity or class of activity that appears to the Treasury to be of a commercial nature,
- (b) where it appears to the Treasury to be expedient for the purpose of avoiding, removing or reducing differences between—
- (i) the fiscal treatment of the body undertaking the activity, and
- (ii) the fiscal treatment of another body or class of body which is of a commercial nature and which undertakes or might undertake the same or a similar activity, and
- (c) if a draft has been laid before, and approved by resolution of, the House of Commons.
- (8) An activity authorised under section 14(1) of the Health and Social Care (Community Health and Standards) Act 2003 shall not be treated as an activity of a commercial nature for the purposes of subsection (7)(a).
#### Transfer of relief under section 257A where relief exceeds income or 257AB.
#### Transfer of relief under section 257A.
#### Transfer of relief under section 257A.
#### Life assurance premiums.
#### Expenditure and houses of ministers of religion.
### Designs
##### 537A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 537B
- (1) Where the usual place of abode of the owner of a right in a design is not within the United Kingdom, section 349(1) shall apply to any payment of or on account of any royalties or sums paid periodically for or in respect of that right as it applies to annual payments not payable out of profits or gains brought into charge to income tax.
- (2) In subsection (1) above—
- (a) “*right in a design*” means design right or the right in a registered design,
- (b) the reference to the owner of a right includes a person who, notwithstanding that he has assigned the right to some other person, is entitled to receive periodical payments in respect of the right, and
- (c) the reference to royalties or other sums paid periodically for or in respect of a right does not include royalties or sums paid in respect of articles which . . . have been exported from the United Kingdom for distribution outside the United Kingdom.
- (3) Where a payment to which subsection (1) above applies is made through an agent resident in the United Kingdom and that agent is entitled as against the owner of the right to deduct any sum by way of commission in respect of services rendered, the amount of the payment shall for the purpose of section 349(1) be taken to be diminished by the sum which the agent is entitled to deduct.
- (4) Where the person by or through whom the payment is made does not know that any such commission is payable or does not know the amount of any such commission, any income tax deducted by or assessed and charged on him shall be computed in the first instance on, and the account to be delivered of the payment shall be an account of, the total amount of the payment without regard being had to any diminution thereof . . . .
- (5) The time of the making of a payment to which subsection (1) above applies shall, for all tax purposes, be taken to be the time when it is made by the person by whom it is first made and not the time when it is made by or through any other person.
- (6) Any agreement for the making of any payment to which subsection (1) above applies in full and without deduction of income tax shall be void.
#### Aggregation of wife’s income with husband’s.
##### 539ZA
- (1) This section applies where, for the purposes of determining the application of this Chapter in relation to a policy or contract at any time, it is necessary to have regard to its application at another time.
- (2) It makes no difference to the application of this Chapter at that other time whether liability in respect of a gain arising at that time would have arisen or (as the case may be) would arise because of the application of this Chapter or Chapter 9 of Part 4 of ITTOIA 2005 (which makes provision for income tax purposes corresponding to that made by this Chapter).
- (3) References in this section to this Chapter include references to paragraph 20 of Schedule 15 to this Act and section 79 of the Finance Act 1997 (payments under certain life insurance policies).
##### 539A
- (1) The conditions mentioned in section 539(2)(f) (excepted group life policies) are those set out in the following provisions of this section.
- (2) Condition 1 is that under the terms of the policy a sum or other benefit of a capital nature is payable or arises on the death of each of the individuals insured under the policy who dies without attaining an age which is specified in the policy and is not greater than 75 years.
In determining whether this condition is satisfied, disregard any terms of the policy which exclude from benefit the death of a person in specified circumstances, if the exclusion applies in relation to death in those circumstances in the case of each of the individuals insured under the policy.
- (3) Condition 2 is that under the terms of the policy—
- (a) the same method is to be used for calculating the sums or other benefits of a capital nature payable or arising on each death, and
- (b) if there is any limitation on those sums or other benefits, the limitation is the same in the case of any death.
- (4) Condition 3 is that the policy does not have, and is not capable of having, on any day—
- (a) a surrender value that exceeds the proportion of the premiums paid which, on a time apportionment, is referable to the unexpired paid-up period beginning with that day, or
- (b) if there is no such period, any surrender value.
For the purposes of this subsection the unexpired paid-up period beginning with any day is the period (if any) which—
- (i) begins with that day, and
- (ii) ends with the earliest subsequent day on which—
- (a) a payment of premium falls due under the policy, or
- (b) the term of the policy ends.
- (5) Condition 4 is that no sums or other benefits may be paid or conferred under the policy, except as mentioned in condition 1 or condition 3.
- (6) Condition 5 is that any sums payable or other benefits arising under the policy must (whether directly or indirectly) be paid to or for, or conferred on, or applied at the direction of—
- (a) an individual or charity beneficially entitled to them, or
- (b) a trustee or other person acting in a fiduciary capacity who will secure that the sums or other benefits are paid to or for, or conferred on, or applied in favour of, an individual or charity beneficially.
In this subsection “*charity*” means any body of persons or trust established for charitable purposes only.
- (7) Condition 6 is that no person—
- (a) who is an individual whose life is insured under the policy, or
- (b) who is, within the meaning of section 839, connected with an individual whose life is so insured,
may, by virtue of a group membership right relating to that individual, receive (directly or indirectly) any death benefit in respect of another group member.
In this subsection—
- (i) “*group membership right*”, in relation to an individual, means any right (including the right of any person to be considered by trustees in their exercise of a discretion) that is referable to that individual’s being one of the individuals whose lives are insured by the policy; and
- (ii) “*death benefit in respect of another group member*” means—
- (a) any sums or other benefits payable or arising under the policy on the death of any other of those individuals, or
- (b) anything representing any such sums or benefits.
- (8) Condition 7 is that a tax avoidance purpose is not the main purpose, or one of the main purposes, for which a person is at any time—
- (a) the holder, or one of the holders, of the policy, or
- (b) the person, or one of the persons, beneficially entitled under the policy.
In this subsection—
- (i) “*tax avoidance purpose*” means any purpose that consists in securing a tax advantage (whether for the holder of the policy or any other person); and
- (ii) “*tax advantage*” has the same meaning as in Chapter 1 of Part 17 (tax avoidance).
#### Aggregation of wife’s income with husband’s.
##### 546A
- (1) This section applies in any case where—
- (a) as a result of any transaction (the “*material transaction*”) the whole or part of or a share in the rights conferred by a policy or contract (“*the material interest*”) becomes beneficially owned by one person or by two or more persons jointly or in common (“*the new ownership*”);
- (b) immediately before the material transaction, the material interest was in the beneficial ownership of one person or of two or more persons jointly (“*the old ownership*”); and
- (c) at least one person who is a member of the old ownership is also a member of the new ownership.
- (2) In any such case, the material transaction shall, in accordance with the following provisions of this section, be taken for the purposes of this Chapter (other than this section) to be one or more assignments, of part only of the rights conferred by the policy or contract.
- (3) For the purposes of this Chapter (other than this section), the members of the old ownership shall be treated—
- (a) where the old ownership consists of two or more persons beneficially entitled jointly, as if the material interest had been in their beneficial ownership in equal shares instead of jointly;
- (b) where the new ownership consists of two or more persons beneficially entitled jointly, as if the result of the material transaction had been that the material interest was in the beneficial ownership of those persons in equal shares instead of jointly; and
- (c) as if the material transaction had been the assignment by each member of the old ownership of so much (if any) of his old share as exceeds his new share (or, if he does not have a new share, the whole of his old share).
- (4) In this section—
- “*new share*”, in relation to the material interest and a person who is a member of the new ownership, means—if there is only one member of the new ownership, the material interest;if there are two or more members of the new ownership beneficially entitled to the material interest in common, the member’s share in the material interest; orif there are two or more members of the new ownership beneficially entitled to the material interest jointly, the share attributed to the member by subsection (3)(b) above;
- “*old share*”, in relation to the material interest and a person who is a member of the old ownership, means—if there is only one member of the old ownership, the material interest; orif there are two or more members of the old ownership, the share attributed to the member by subsection (3)(a) above.
##### 546B
- (1) This section applies in relation to a policy or contract in any case where—
- (a) a section 546 excess occurs at the end of any year (including the final year, whether or not ending with a terminal chargeable event); and
- (b) the condition in subsection (2) below is satisfied in relation to that year.
This subsection is subject to subsection (1A) below.
- (1A) In the case of a policy which is a qualifying policy (whether or not the premiums under the policy are eligible for relief under section 266) this section applies only if—
- (a) the section 546 excess occurs within the time described in section 540(1)(b)(i); or
- (b) the policy has been converted into a paid-up policy within that time.
- (2) The condition is that—
- (a) during the year there has been an assignment for money or money’s worth of part of or a share in the rights conferred by the policy or contract; or
- (b) during the year there has been both—
- (i) an assignment, otherwise than for money or money’s worth, of the whole or part of or a share in the rights conferred by the policy or contract; and
- (ii) an earlier surrender of part of or a share in the rights conferred by the policy or contract.
- (3) Where this section applies—
- (a) the occurrence of the section 546 excess shall be treated for the purposes of this Chapter as not being a chargeable event; but
- (b) the amount of the section 546 excess shall be charged to tax in accordance with the provisions of section 546C.
- (4) In this section—
- “*final year*” has the meaning given by section 546(4);
- “*section 546 excess*”, in relation to any year, means an excess, occurring at the end of the year, of—the reckonable aggregate value mentioned in subsection (2) of section 546, overthe allowable aggregate amount mentoned in subsection (3) of that section;
- “*terminal chargeable event*” means any chargeable event other than—
- (a) an assignment for money or money’s worth of the whole of the rights conferred by the policy or contract;
- (b) the occurrence of a section 546 excess; or
- (c) a chargeable event by virtue of section 546C(7)(a);
##### 546C
- (1) This section applies where, in relation to any policy or contract, the amount of a section 546 excess occurring at the end of any year falls to be charged to tax in accordance with this section by virtue of section 546B(3)(b).
- (2) The following amounts shall be calculated as at the end of that year—
- (a) the aggregate of the values calculated under section 546(1)(a) in respect of any part of or share in the rights conferred by the policy or contract which has been assigned for money or money’s worth, or surrendered, during the year;
- (b) the amount by which—
- (i) the reckonable aggregate value mentioned in section 546(2), as at the end of the year, exceeds
- (ii) the aggregate calculated under paragraph (a) above;
and
- (c) the amount by which—
- (i) the allowable aggregate amount mentioned in section 546(3), as at the end of the year, exceeds
- (ii) the amount calculated under paragraph (b) above.
- (3) In this section—
- (a) “*relevant transaction*” means any assignment for money or money’s worth, or any surrender, of a part of or share in the rights conferred by the policy or contract which has happened during the year;
- (b) “*transaction value*”, in relation to any relevant transaction, means the value calculated in accordance with section 546(1)(a) in the case of that transaction;
- (c) “*the amount of available premium*” means—
- (i) in relation to the earliest relevant transaction, the amount calculated under subsection (2)(c) above (that amount being taken to be nil if there is no such excess as is there mentioned); and
- (ii) in relation to each successive relevant transaction, that amount as successively reduced under subsections (5) to (7) below.
- (4) Subsection (5) below shall apply successively to each of the relevant transactions that happened in the year, in the order in which they happened.
If the year is the final year and ends with a terminal chargeable event, this subsection is subject to section 546D.
- (5) Where this subsection applies in relation to a relevant transaction—
- (a) the transaction value shall be compared to the amount of available premium; and
- (b) if the amount of available premium exceeds or is equal to the transaction value, subsection (6) below shall apply in relation to the transaction; but
- (c) if the transaction value exceeds the amount of available premium, subsection (7) below shall apply in relation to the transaction.
- (6) Where this subsection applies in relation to a relevant transaction—
- (a) the amount of available premium shall be reduced (or further reduced) by the transaction value; and
- (b) that reduction shall have effect in relation to the next subsequent relevant transaction.
- (7) Where this subsection applies in relation to a relevant transaction—
- (a) the relevant transaction shall for the purposes of this Chapter be a chargeable event in relation to the policy or contract, except as provided by sections 540(3) and 542(3);
- (b) a gain of an amount equal to that by which the transaction value exceeds the amount of available premium shall be treated for the purposes of this Chapter as arising in connection with the policy or contract on the happening of that chargeable event; and
- (c) in relation to any subsequent relevant transaction, the amount of available premium shall be reduced to nil.
- (8) Where the whole or any part of the amount of any gain treated as arising by subsection (7)(b) above falls to be treated under section 547(1)(b) as forming part of the income of any company for—
- (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (b) the accounting period in which the chargeable event in question happened,
that . . . accounting period shall be taken to be the one which includes the end of the year as at which the section 546 excess in question occurs, instead of the one (if different) in which the relevant transaction happened.
- (9) Where this section applies in relation to the final year and that year ends with a terminal chargeable event—
- (a) effect shall be given to this section before applying the provisions of this Chapter in relation to the terminal chargeable event; and
- (b) in applying this Chapter in relation to the terminal chargeable event, any chargeable event by virtue of subsection (7)(a) above accordingly falls to be regarded as having occurred before the terminal chargeable event.
- (10) This section shall be construed as one with section 546B.
##### 546D
- (1) This section applies in any case where the year mentioned in section 546C(4) is the final year and that year ends with a terminal chargeable event.
- (2) In any such case there shall be calculated, as at the end of the year, the amount of the gain (“*the gains limit*”) that would have been treated as arising on the happening of the terminal chargeable event, apart from the application of sections 546B and 546C in relation to that year.
- (3) Subsection (5) of section 546C shall apply successively to each of the relevant transactions that happened in the year, in the order in which they happened, unless and until the transaction in question (the “*final transaction*”) is such that the aggregate of—
- (a) its transaction value apart from subsection (4) below, and
- (b) the sum of the transaction values of any relevant transactions to which subsection (5) of that section has previously applied,
exceeds the gains limit.
- (4) If, in the case of the final transaction,—
- (a) the aggregate mentioned in subsection (3) above exceeds the gains limit, but
- (b) the sum mentioned in paragraph (b) of that subsection is less than that limit,
subsection (5) of section 546C shall apply in relation to that transaction, but for the purposes of subsections (5) to (7) of that section its transaction value shall be reduced to an amount equal to the difference between the gains limit and the sum mentioned in paragraph (b) above.
- (5) Except as provided by subsection (4) above, subsection (5) of section 546C shall not apply in relation to the final transaction or any subsequent relevant transaction.
- (6) This section shall be construed as one with sections 546B and 546C.
##### 547A
- (1) If—
- (a) immediately before the happening of a chargeable event, two or more persons have relevant interests in the rights conferred by the policy or contract in question, and
- (b) any of those persons is a company,
section 547 shall have effect in relation to each such company as if it had been the only person with a relevant interest in those rights, but with references to the amount of the gain construed as references to the company's proportionate share of the amount of the gain.
- (2) References in this section to the rights conferred by a policy or contract are, in the case of an assignment or surrender of only a part of or share in any rights, references to that part or share.
- (3) For the purposes of this section, a person has a “relevant interest" in the rights conferred by a policy or contract—
- (a) in the case of an individual, if a share in the rights is vested in him as beneficial owner, or is held on non-charitable trusts created, or as security for a debt owed, by him;
- (b) in the case of a company, if a share in the rights is in the beneficial ownership of the company, or is held on non-charitable trusts created, or as security for a debt owed, by the company;
- (c) in the case of personal representatives, if a share in the rights is vested in them;
- (cc) in the case of trustees of a charitable trust, if a share in the rights is held by them or as security for a debt owed by them;
- (d) in the case of trustees of a non-charitable trust—
- (i) if a share in the rights is held by them, and the person who created the trusts is not resident in the United Kingdom or has died or (in the case of a company or foreign institution) has been dissolved or wound up or has otherwise come to an end;
- (ia) if a share in the rights is held by them which does not also fall within paragraph (a), (b) or (c) above or sub-paragraph (i) above; or
- (ii) if a share in the rights is held as security for a debt owed by them;
- (e) in the case of a foreign institution, if a share in the rights is in the beneficial ownership of the foreign institution, or is held as security for a debt owed by the foreign institution.
- (4) For the purposes of subsection (1) above, a person’s “proportionate share" of the amount of a gain is that share of it which is proportionate to the share of the rights by reference to which he has the relevant interest in question.
- (5) Where, immediately before the happening of a chargeable event, the rights conferred by the policy or contract in question are, or a share in those rights is, held as security for one or more debts owed by two or more persons, this section shall effect in relation to the chargeable event as if—
- (a) each of those persons were instead the sole debtor in respect of a separate debt; and
- (b) the security for that separate debt were the appropriate share of the security for the actual debt or debts (so far as consisting of the rights, or a share in the rights, conferred by the policy or contract);
and for the purposes of paragraph (b) above the appropriate share, in the case of any person, is a share which is proportionate to that share of the actual debt or, as the case may be, the aggregate of the two or more actual debts, for which he is liable as between the debtors.
- (6) Where, immediately before the happening of a chargeable event, the rights conferred by the policy or contract in question are, or a share in those rights is, held on non-charitable trusts created by two or more persons, this section shall have effect in relation to that chargeable event as if—
- (a) each of those persons had instead been the sole settlor in relation to a separate share of the rights or share so held; and
- (b) that separate share were proportionate to the share which originates from him of the whole of the property subject to the trusts immediately before the happening of the chargeable event.
- (7) The reference in subsection (6)(b) above to the share of the property which originates from a person is a reference to the share of the property which consists of—
- (a) property which that person has provided directly or indirectly for the purposes of the trusts;
- (b) property representing property which that person has so provided; and
- (c) so much of any property which represents both property so provided and other property as, on a just apportionment, represents the property so provided.
- (8) References in subsection (7) above to property which a person has provided directly or indirectly—
- (a) include references to property which has been provided directly or indirectly by another in pursuance of reciprocal arrangements with the person, but
- (b) do not include references to property which the person has provided directly or indirectly in pursuance of reciprocal arrangements with another.
- (9) References in subsection (7) above to property which represents other property include references to property which represents accumulated income from that other property.
- (10) Where immediately before the happening of a chargeable event—
- (a) the rights conferred by the policy or contract in question are, or a share in those rights is, held subject to any non-charitable trusts, and
- (b) different shares of the whole of the property subject to those trusts originate (within the meaning of subsection (6)(b) above) from different persons,
the rights or share shall, in relation to that chargeable event, be taken for the purposes of this section to be held on non-charitable trusts created by those persons.
- (11) Where the rights conferred by a policy or contract are, or an interest in any such rights is, in the beneficial ownership of two or more persons jointly, the rights or interest shall be treated for the purposes of this section as if they were in the beneficial ownership of those persons in equal shares.
- (12) A non-fractional interest in the rights conferred by a policy or contract shall be treated for the purposes of this section as if it were instead such a share in those rights as may justly and reasonably be regarded for those purposes as representing the non-fractional interest.
- (13) For the purposes of subsection (12) above, a “non-fractional interest" in the rights conferred by a policy or contract is an interest in some or all of those rights which is not a share in all of those rights (otherwise than by virtue only of subsection (2) above).
- (14) This section applies in a case where the same person has two or more relevant interests in the rights conferred by a policy or contract as it applies in a case where two or more persons have separate relevant interests, unless—
- (a) that person is the only person with a relevant interest in those rights, and
- (b) he has all the relevant interests in the same capacity,
in which case section 547 applies.
- (15) In this section—
- “*foreign institution*” means a person which is a company or other institution resident or domiciled outside the United Kingdom;
- “*personal representatives*” has the same meaning as in Part XVI.
- (16) For the purposes of this section, property held for the purposes of a foreign institution shall be regarded as in the beneficial ownership of the foreign institution.
- (17) Any reference in this section to trusts created by an individual includes a reference to trusts arising under—
- (a) section 11 of the Married Women's Property Act 1882;
- (b) section 2 of the Married Women's Policies of Assurance (Scotland) Act 1880; or
- (c) section 4 of the Law Reform (Husband and Wife) Act (Northern Ireland) 1964;
and references to the settlor or to the person creating the trusts shall be construed accordingly.
##### 548A
- (1) This section applies if—
- (a) a relevant chargeable event occurs in respect of a policy or contract,
- (b) commission in respect of the policy or contract has at any time been rebated or reinvested, and
- (c) condition A or B is met.
- (2) For the purposes of performing the calculation under section 541(1)(b) or (c) or 543(1)(a) or (b) for the chargeable event, the total amount paid under the policy or contract by way of premiums in any period is to be reduced by the total amount of commission attributable to those premiums that has been rebated or reinvested.
- (3) Condition A is that the total amount paid under the policy or contract by way of premiums in a relevant period exceeds £100,000.
- (4) Condition B is that—
- (a) at a time when the policy or contract was the taxable person's, the taxable person's policies and contracts exceeded the relevant threshold as respects a relevant period, and
- (b) payments under the policy or contract by way of premiums were made in that relevant period.
- (5) In subsection (4)(a) “*taxable person*” means the person whose policy or contract the policy or contract is, immediately before the chargeable event.
- (6) For the purposes of subsection (4)(a) a person's policies and contracts “exceed the relevant threshold” as respects a relevant period if the total amount of payments under them by way of premiums in that relevant period exceeds the sum specified in subsection (3).
- (7) In this section “*relevant chargeable event*” means a chargeable event within—
- (a) any of sub-paragraphs (ii) to (iv) of section 540(1)(a) (including those sub-paragraphs as they apply in relation to a qualifying policy),
- (b) section 542(1)(a) or (b), or
- (c) section 545(1)(a) to (c).
- (8) In this section “*relevant period*” means—
- (a) the period beginning with the beginning of the year of assessment in which the chargeable event occurs and ending with the chargeable event, or
- (b) any of the 3 preceding years of assessment.
- (9) References in this section to a premium include, in relation to a contract for a life annuity, lump sum consideration.
- (10) The Treasury may by order—
- (a) substitute another sum for the sum for the time being specified in subsection (3);
- (b) amend the definition of “relevant period”.
#### Eligibility for relief.
##### 548B
- (1) This section supplements section 548A.
- (2) “*Commission*”, in relation to a policy or contract, includes any passing of value to or for the benefit of an intermediary, or a person connected with an intermediary, that can reasonably be taken to represent a reward in respect of the policy or contract.
- (3) Commission in respect of a policy or contract is “reinvested” if, as a result of a waiver of an entitlement to it, there is an increase in the total value of a relevant person's policies and contracts.
- (4) The amount of commission reinvested is the amount of the increase.
- (5) Commission in respect of a policy or contract is “rebated” if—
- (a) value passes (directly or indirectly) from an intermediary, or a person connected with an intermediary, to or for the benefit of a relevant person (and the passing of value does not amount to the reinvestment of the commission), and
- (b) the passing of value can reasonably be taken to be in respect of the commission.
- (6) The amount of commission rebated is the amount of value passed.
- (7) A policy or contract is a person's policy or contract if a gain arising in connection with it would be—
- (a) a gain for which the person, or (if the person is an individual) the person's spouse or civil partner, would be liable to tax under Chapter 9 of Part 4 of ITTOIA 2005, or
- (b) treated by virtue of section 547(1) above as forming part of the person's income.
- (8) Any necessary apportionment is to be made (on a just and reasonable basis) as regards—
- (a) commission which is attributable to two or more premiums, and
- (b) any part of such commission that has been rebated or reinvested.
- (9) Commission which is in respect of one or more policies or contracts (but is not attributable to particular premiums) is to be attributed to such premiums as is just and reasonable.
- (10) In subsections (3) and (5), “*relevant person*” means—
- (a) any of the policyholders (including any of the persons who hold the contract),
- (b) a person who beneficially owns the rights under the policy or contract,
- (c) if those rights are held on trust, any of the trustees, or
- (d) a person connected (within the meaning of section 839) with a person within any of paragraphs (a) to (c).
- (11) In subsections (8) and (9), references to a premium include, in relation to a contract for a life annuity, lump sum consideration.
##### 551A
- (1) Where—
- (a) an amount is included in a company’s income by virtue of section 547(1)(b), and
- (b) the rights, or the part or share, in question were held immediately before the happening of the chargeable event on non-charitable trusts,
the company shall be entitled to recover from the trustees, to the extent of any sums, or to the value of any benefits, received by them by reason of the event, the amount (if any) by which T1 exceeds T2.
- (2) For the purposes of subsection (1) above—
- T1 is the tax with which the company is chargeable for the accounting period in question; and
- T2 is the tax with which the company would have been chargeable for the accounting period if the amount mentioned in subsection (1)(a) above had not been included as there mentioned.
- (3) A company may require the Board to certify any amount recoverable by the company by virtue of this section, and the certificate shall be conclusive evidence of the amount.
##### 552ZA
- (1) This section supplements section 552 and shall be construed as one with it.
- (2) Where the obligations under any policy or contract of the body that issued, entered into or effected it (“*the original insurer*”) are at any time the obligations of another body (“*the transferee*”) to whom there has been a transfer of the whole or any part of a business previously carried on by the original insurer, section 552 shall have effect in relation to that time, except where the chargeable event—
- (a) happened before the transfer, and
- (b) in the case of a death or an assignment, is an event of which the notification mentioned in subsection (6) or (7) of that section was given before the transfer,
as if the policy or contract had been issued, entered into or effected by the transferee.
- (3) Where, in consequence of section 546C(7)(a) of this Act and section 514(1) of ITTOIA 2005, paragraph (a) or (b) of section 552(1) requires certificates to be delivered in respect of two or more surrenders, happening in the same year, of part of or a share in the rights conferred by the policy or contract, a single certificate may be delivered under the paragraph in question in respect of all those surrenders (and may treat them as if they together constituted a single surrender) unless between the happening of the first and the happening of the last of them there has been—
- (a) an assignment of part of or a share in the rights conferred by the policy or contract; or
- (b) an assignment, otherwise than for money or money’s worth, of the whole of the rights conferred by the policy or contract.
- (4) Where the appropriate policy holder is two or more persons—
- (a) section 552(1)(a) requires a certificate to be delivered to each of them; but
- (b) nothing in section 552 or this section requires a body to deliver a certificate under subsection (1)(a) of that section to any person whose address has not been provided to the body (or to another body, at a time when the obligations under the policy or contract were obligations of that other body).
- (5) A certificate under section 552(1)(b) or (3)—
- (a) shall be in a form prescribed for the purpose by the Board; and
- (b) shall be delivered by any means prescribed for the purpose by the Board;
and different forms, or different means of delivery, may be prescribed for different cases or different purposes.
- (6) The Board may by regulations make such provision as they think fit for securing that they are able—
- (a) to ascertain whether there has been or is likely to be any contravention of the requirements of section 552 or this section; and
- (b) to verify any certificate under that section.
- (7) Regulations under subsection (6) above may include, in particular, provisions requiring persons to whom premiums under any policy are or have at any time been payable—
- (a) to supply information to the Board; and
- (b) to make available books, documents and other records for inspection on behalf of the Board.
- (8) Regulations under subsection (6) above may—
- (a) make different provision for different cases; and
- (b) contain such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.
##### 552ZB
- (1) The Commissioners for Her Majesty's Revenue and Customs may make regulations—
- (a) requiring relevant persons—
- (i) to provide prescribed information to persons who apply for the issue of qualifying policies or who are, or may be, required to make statements under paragraph B3(2) of Schedule 15;
- (ii) to provide to an officer of Revenue and Customs prescribed information about qualifying policies which have been issued by them or in relation to which they are or have been a relevant transferee;
- (b) making such provision (not falling within paragraph (a)) as the Commissioners think fit for securing that an officer of Revenue and Customs is able—
- (i) to ascertain whether there has been or is likely to be any contravention of the requirements of the regulations or of paragraph B3(2) of Schedule 15;
- (ii) to verify any information provided to an officer of Revenue and Customs as required by the regulations.
- (2) The provision that may be made by virtue of subsection (1)(b) includes, in particular, provision requiring relevant persons to make available books, documents and other records for inspection by or on behalf of an officer of Revenue and Customs.
- (3) The regulations may—
- (a) make different provision for different cases or circumstances, and
- (b) contain incidental, supplementary, consequential, transitional, transitory or saving provision.
- (4) In this section—
- “*prescribed*” means prescribed by the regulations,
- “*qualifying policy*” includes a policy which would be a qualifying policy apart from—paragraph A1(2), B1(2), B2(2) or B3(3) of Schedule 15, orparagraph 17(2)(za) of that Schedule (including as applied by paragraph 18), and
- “*relevant person*” means a person—who issues, or has issued, qualifying policies, orwho is, or has been, a relevant transferee in relation to qualifying policies.
- (5) For the purposes of this section a person (“X”) is at any time a “*relevant transferee*” in relation to a qualifying policy if the obligations under the policy of its issuer are at that time the obligations of X as a result of there having been a transfer to X of the whole or any part of a business previously carried on by the issuer.
##### 552A
- (1) This section has effect for the purpose of securing that, where it applies to an overseas insurer, another person is the overseas insurer’s tax representative.
- (2) In this section “*overseas insurer*” means a person who is not resident in the United Kingdom who carries on a business which consists of or includes the effecting and carrying out of—
- (a) policies of life insurance;
- (b) contracts for life annuities; or
- (c) capital redemption policies.
- (3) This section applies to an overseas insurer—
- (a) if the condition in subsection (4) below is satisfied on the designated day; or
- (b) where that condition is not satisfied on that day, if it has subsequently become satisfied.
- (4) The condition mentioned in subsection (3) above is that—
- (a) there are in force relevant insurances the obligations under which are obligations of the overseas insurer in question or of an overseas insurer connected with him; and
- (b) the total amount or value of the gross premiums paid under those relevant insurances is £1 million or more.
- (5) In this section “*relevant insurance*” means any policy of life insurance, contract for a life annuity or capital redemption policy . . . in the case of which—
- (a) the holder is resident in the United Kingdom;
- (b) the obligations of the insurer are obligations of a person not resident in the United Kingdom; and
- (c) those obligations are not attributable to a branch or agency of that person’s in the United Kingdom.
- (6) Before the expiration of the period of three months following the day on which this section first applies to an overseas insurer, the overseas insurer must nominate to the Board a person to be his tax representative.
- (7) A person shall not be a tax representative unless—
- (a) if he is an individual, he is resident in the United Kingdom and has a fixed place of residence there, or
- (b) if he is not an individual, he has a business establishment in the United Kingdom,
and, in either case, he satisfies such other requirements (if any) as are prescribed in regulations made for the purpose by the Board.
- (8) A person shall not be an overseas insurer’s tax representative unless—
- (a) his nomination by the overseas insurer has been approved by the Board; or
- (b) he has been appointed by the Board.
- (9) The Board may by regulations make provision supplementing this section; and the provision that may be made by any such regulations includes provision with respect to—
- (a) the making of a nomination by an overseas insurer of a person to be his tax representative;
- (b) the information which is to be provided in connection with such a nomination;
- (c) the form in which such a nomination is to be made;
- (d) the powers and duties of the Board in relation to such a nomination;
- (e) the procedure for approving, or refusing to approve, such a nomination, and any time limits applicable to doing so;
- (f) the termination, by the overseas insurer or the Board, of a person’s appointment as a tax representative;
- (g) the appointment by the Board of a person as the tax representative of an overseas insurer (including the circumstances in which such an appointment may be made);
- (h) the nomination by the overseas insurer, or the appointment by the Board, of a person to be the tax representative of an overseas insurer in place of a person ceasing to be his tax representative;
- (j) circumstances in which an overseas insurer to whom this section applies may, with the Board’s agreement, be released (subject to any conditions imposed by the Board) from the requirement that there must be a tax representative;
- (k) appeals to the Special Commissioners against decisions of the Board under this section or regulations under it.
- (10) The provision that may be made by regulations under subsection (9) above also includes provision for or in connection with the making of other arrangements between the Board and an overseas insurer for the purpose of securing the discharge by or on behalf of the overseas insurer of the relevant duties, within the meaning of section 552B.
- (a) securities (old securities) of a particular kind are issued by way of the original issue of securities of that kind,
- (b) on a later occasion securities (new securities) of the same kind are issued,
- (c) a sum (the extra return) is payable in respect of the new securities, by the person issuing them, to reflect the fact that interest is accruing on the old securities,
- (d) the issue price of the new securities includes an element (whether or not separately identified) representing payment for the extra return, and
- (e) the extra return is equal to the amount of interest payable for the relevant period on so many old securities as there are new (or, if there are more new securities than old, the amount of interest which would be so payable if there were as many old securities as new),
but this section shall not apply for the purposes of corporation tax, except where the issue of the new securities was before 1st April 1996.
- (2) Anything payable or paid by way of the extra return shall be treated for the purposes of the Tax Acts as payable or paid by way of interest (to the extent that it would not be so treated apart from this subsection).
- (3) But as regards any payment by way of the extra return, relief shall not be given under any provision of the Tax Acts to the person by whom the new securities are issued; and “*relief*” here means relief by way of deduction in computing profits or gains or deduction or set off against income or total profits.
- (4) For the purposes of this section securities are of the same kind if they are treated as being of the same kind by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.
- (5) For the purposes of this section the relevant period is the period beginning with the day following the relevant day and ending with the day on which the new securities are issued.
- (6) For the purposes of this section the relevant day is—
- (a) the last (or only) interest payment day to fall in respect of the old securities before the day on which the new securities are issued, or
- (b) the day on which the old securities were issued, in a case where no interest payment day fell in respect of them before the day on which the new securities are issued;
and an interest payment day, in relation to the old securities, is a day on which interest is payable under them.
##### 587B
- (1) Subsections (2) and (3) below apply where, otherwise than by way of a bargain made at arm’s length, an individual, or a company which is not itself a charity, disposes of the whole of the beneficial interest in a qualifying investment to a charity.
- (2) On a claim made in that behalf to an officer of the Board—
- (a) the relevant amount shall be allowed—
- (i) in the case of a disposal by an individual, as a deduction in calculating his total income for the purposes of income tax for the year of assessment in which the disposal is made;
- (ii) in the case of a disposal by a company, as a charge on income for the purposes of corporation tax for the accounting period in which the disposal is made; and
- (b) no relief in respect of the disposal shall be given under section 83A of this Act, section 108 of ITTOIA 2005 or any other provision of the Income Tax Acts;
but paragraph (a)(i) above shall not apply for the purposes of any computation under sections 535 to 537 of ITTOIA 2005.
- (3) The consideration for which the charity’s acquisition of the qualifying investment is treated by virtue of section 257(2) of the 1992 Act as having been made—
- (a) shall be reduced by the relevant amount; or
- (b) where that consideration is less than that amount, shall be reduced to nil.
- (4) Subject to subsections (5) to (7) below, the relevant amount is an amount equal to—
- (a) where the disposal is a gift, the value of the net benefit to the charity at, or immediately after, the time when the disposal is made (whichever time gives the lower value);
- (b) where the disposal is at an undervalue, the amount by which—
- (i) the value described in paragraph (a) above, exceeds
- (ii) the amount or value of the consideration for the disposal,
or, if there is no such excess, nil.
- (5) Where there are one or more benefits received in consequence of making the disposal which are received by the person making the disposal or a person connected with him, the relevant amount shall be reduced by the value of that benefit or, as the case may be, the aggregate value of those benefits; and section 839 applies for the purposes of this subsection.
- (6) Where the disposal is a gift, the relevant amount shall be increased by the amount of the incidental costs of making the disposal to the person making it.
- (7) Where the disposal is at an undervalue—
- (a) to the extent that the consideration for the disposal is less than that for which the disposal is treated as made by virtue of section 257(2)(a) of the 1992 Act, the relevant amount shall be increased by the amount of the incidental costs of making the disposal to the person making it; and
- (b) section 48 of that Act (consideration due after time of disposal) shall apply in relation to the computation of the relevant amount as it applies in relation to the computation of a gain.
- (8) In the case of a disposal by a company which is carrying on life assurance business—
- (a) if the company is charged to tax under Case I of Schedule D in respect of such business, subsections (2) and (3) above shall not apply;
- (b) if the company is not so charged to tax in respect of such business—
- (i) subsection (2)(a)(ii) above shall have effect as if for “a charge on income" there were substituted “expenses payable falling to be brought into account at Step 3 in section 76(7)”; and
- (ii) the relevant amount given by subsection (4) above shall be reduced by so much (if any) of that amount as is not referable to basic life assurance and general annuity business;
and for the purpose of determining how much (if any) of that amount is not so referable, section 432A shall have effect as if that amount were a gain accruing on the disposal of the qualifying investment to the company.
- (8A) The value of the net benefit to the charity is—
- (a) the market value of the qualifying investment, unless subsection (8B) below applies;
- (b) where that subsection applies, that market value reduced by the aggregate amount of the related liabilities of the charity (see subsections (8E) to (8G)).
- (8B) This subsection applies in any case where—
- (a) the charity is, or becomes, subject to an obligation to any person (whether or not the person making the disposal or a person connected with him), and
- (b) one or more of the conditions in subsection (8C) below is satisfied.
- (8C) For the purposes of subsection (8B) above—
- (a) condition 1 is that, taking into account all the circumstances (including, in particular, the difference in the value of the net benefit to the charity if subsection (8B) applies and if it does not), it is reasonable to suppose that the disposal of the qualifying investment to the charity would not have been made in the absence of the obligation;
- (b) condition 2 is that the obligation (whether in whole or in part) relates to, is framed by reference to, or is conditional on the charity receiving, the qualifying investment or a related investment (see subsection (8D)).
- (8D) In subsection (8C) above “*related investment*” means any of the following—
- (a) any asset of the same class or description as the qualifying investment (irrespective of size, quantity or amount);
- (b) any asset derived from, or representing, the qualifying investment whether in whole or in part and whether directly or indirectly;
- (c) any asset from which the qualifying investment is derived, or which the qualifying investment represents, whether in whole or in part and whether directly or indirectly.
- (8E) For the purposes of this section, the liabilities which are related liabilities in the case of any qualifying investment are the liabilities of the charity under each of the obligations that fall within subsection (8B) above (as read with subsection (8C) above) in relation to that investment.
- (8F) Where an obligation is contingent and the contingency occurs, the amount to be brought into account for the purposes of this section at any time in respect of the liability, so far as contingent, under the obligation is the amount or value of the liability actually incurred in consequence of the occurrence of the contingency.
- (8G) Where an obligation is contingent and the contingency does not occur, the amount to be brought into account for the purposes of this section at any time in respect of the liability, so far as contingent, is nil.
- (9) In this section—
- “*authorised unit trust*” and “*open-ended investment company*” have the meanings given by section 468;
- “*charity*” has the same meaning as in section 506 and includes each of the bodies mentioned in section 507(1);
- “*the incidental costs of making the disposal to the person making it*” shall be construed in accordance with section 38(2) of the 1992 Act;
- “*life assurance business*” and related expressions have the same meaning as in Chapter I of Part XII;
- “*obligation*” includes a reference to each of the following—any scheme, arrangement or understanding of any kind, whether or not legally enforceable;a series of obligations (whether or not between the same parties);
- “*offshore fund*” has the same meaning as in Chapter 5 of Part 17;
- “*qualifying investment*” means any of the following—shares or securities which are listed or dealt in on a recognised stock exchange;units in an authorised unit trust;shares in an open-ended investment company;. . . an interest in an offshore fund; anda qualifying interest in land;
- “*related liabilities*” shall be construed in accordance with subsection (8E) above;
- “*value of the net benefit to the charity*” shall be construed in accordance with subsection (8A) above.
- (9A) In this section a “*qualifying interest in land*” means—
- (a) a freehold interest in land, or
- (b) a leasehold interest in land which is a term of years absolute,
where the land in question is in the United Kingdom.
This subsection is subject to subsections (9B) to (9D) below.
- (9B) Where a person makes a disposal to a charity of—
- (a) the whole of his beneficial interest in such freehold or leasehold interest in land as is described in subsection (9A)(a) or (b) above, and
- (b) any easement, servitude, right or privilege so far as benefiting that land,
the disposal falling within paragraph (b) above is to be regarded for the purposes of this section as a disposal by the person of the whole of his beneficial interest in a qualifying interest in land.
- (9C) Where a person who has a freehold or leasehold interest in land in the United Kingdom grants a lease for a term of years absolute (or, in the case of land in Scotland, grants a lease) to a charity of the whole or part of that land, the grant of that lease is to be regarded for the purposes of this section as a disposal by the person of the whole of the beneficial interest in the leasehold interest so granted.
- (9D) For the purposes of subsection (9A) above, an agreement to acquire a freehold interest and an agreement for a lease are not qualifying interests in land.
- (9E) In the application of this section to Scotland—
- (a) references to a freehold interest in land are references to the interest of the owner,
- (b) references to a leasehold interest in land which is a term of years absolute are references to a tenant’s right over or interest in a property subject to a lease, and
- (c) references to an agreement for a lease do not include references to missives of let that constitute an actual lease.
- (10) Subject to subsection (11) below, the market value of any qualifying investment shall be determined for the purposes of this section as for the purposes of the 1992 Act.
- (10A) Section 839 (connected persons) applies for the purposes of this section.
- (11) In the case of an interest in an offshore fund for which there are separate published buying and selling prices, section 272(5) of the 1992 Act (meaning of “*market value*” in relation to rights of unit holders in a unit trust scheme) shall apply with any necessary modifications for determining the market value of the interest for the purposes of this section.
- (12) This section is supplemented by section 587C below.
##### 587BA
- (1) This section applies for the purposes of section 587B where a qualifying investment is a qualifying interest in land.
- (2) Where two or more persons (“the owners”)—
- (a) are jointly beneficially entitled to the qualifying interest in land, or
- (b) are, taken together, beneficially entitled in common to the qualifying interest in land,
relief under section 587B is available if at least one of the owners is a qualifying company and all the owners dispose of the whole of their beneficial interests in the qualifying interest in land to the charity.
- (3) Subsection (4) applies if one or more of the owners is not a company.
- (4) For the purpose of determining whether the owners' beneficial interests are disposed of as mentioned in subsection (2), section 587B(9B) and (9C) applies as if references to a company included a reference to a person who is not a company.
- (5) Relief under section 587B is available to each of the owners which is a qualifying company.
- (6) If one or more of the owners is an individual—
- (a) the relevant amount is taken to be the relievable amount calculated for the purposes of Chapter 3 of Part 8 of ITA 2007, and
- (b) the amount of relief under section 587B to be given to a qualifying company is such share of the relievable amount as is allocated to the company by the agreement mentioned in section 442(5) of ITA 2007.
- (7) Subsections (8) to (12) apply if none of the owners is an individual.
- (8) The amount of relief under section 587B to be given to a qualifying company is such share of the relevant amount as is allocated to the company by an agreement made between those owners which are qualifying companies.
- (9) Calculate the relevant amount as if—
- (a) the owners were a single qualifying company, and
- (b) the disposals of the owners' beneficial interests were a single disposal by that single company of the whole of the beneficial interest in the qualifying interest in land.
- (10) In particular, for the purposes of section 587B(7) calculate the consideration for which the disposal is made by virtue of section 257(2)(a) of the 1992 Act by—
- (a) calculating, for each owner, the consideration for which the disposal of the owner's beneficial interest is so made, and
- (b) adding together all the consideration calculated under paragraph (a).
- (11) If one or more of the owners is not a qualifying company, in calculating the relevant amount make just and reasonable adjustments to reduce the relevant amount to reflect the fact that relief under section 587B is not available to that owner or to those owners.
- (12) If one or more of the owners is within paragraph (b) of section 587B(8), in calculating the relevant amount make just and reasonable adjustments to reduce the relevant amount to reflect the requirements of sub-paragraph (ii) of that paragraph.
- (13) A company is a qualifying company if—
- (a) it is not itself a charity, and
- (b) it is not within section 587B(8)(a).
##### 587C
- (1) This section applies for the purposes of section 587B where a qualifying investment is a qualifying interest in land.
- (2) Where two or more persons—
- (a) are jointly beneficially entitled to the qualifying interest in land, or
- (b) are, taken together, beneficially entitled in common to the qualifying interest in land,
section 587B applies only if each of those persons disposes of the whole of his beneficial interest in the qualifying interest in land to the charity.
- (3) Relief under section 587B shall be available to each of the persons referred to in subsection (2) above, but the amount that may be allowed as respects any of them shall be only such share of the relevant amount as they may agree in the case of that person.
- (4) No person may make a claim for a relief under subsection (2) of section 587B unless he has received a certificate given by or on behalf of the charity.
- (5) The certificate must—
- (a) specify the description of the qualifying interest in land which is the subject of the disposal,
- (b) specify the date of the disposal, and
- (c) contain a statement that the charity has acquired the qualifying interest in land.
- (6) If, in the case of a disposal of a qualifying interest in land, a disqualifying event occurs at any time in the relevant period, the person (or each of the persons) who made the disposal to the charity shall be treated as never having been entitled to relief under section 587B in respect of the disposal.
- (7) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (6) above.
- (8) For the purposes of subsection (6) above a disqualifying event occurs if the person (or any one of the persons) who made the disposal or any person connected with him (or any one of them)—
- (a) becomes entitled to an interest or right in relation to all or part of the land to which the disposal relates, or
- (b) becomes party to an arrangement under which he enjoys some right in relation to all or part of that land,
otherwise than for full consideration in money or money’s worth.
- (9) A disqualifying event does not occur, for the purposes of subsection (6) above, if a person becomes entitled to an interest or right as mentioned in subsection (8)(a) above as a result of a disposition of property on death, whether the disposition is effected by will, under the law relating to intestacy or otherwise.
- (10) For the purposes of subsection (6) above the relevant period is the period beginning with the date of the disposal of the qualifying interest in land and ending with—
- (a) in the case of an individual, the fifth anniversary of the 31st January next following the end of the year of assessment in which the disposal was made, and
- (b) in the case of a company, the sixth anniversary of the end of the accounting period in which the disposal was made.
- (11) Section 839 (connected persons) applies for the purposes of this section.
- (12) In this section—
- “*capital redemption policy*” means a capital redemption policy in relation to which this Chapter and Chapter 9 of Part 4 of ITTOIA 2005 have effect;
- “*contract for a life annuity*” means a contract for a life annuity in relation to which this Chapter and Chapter 9 of Part 4 of ITTOIA 2005 have effect;
- “*the designated day*” means such day as the Board may specify for the purpose in regulations;
- “*policy of life insurance*” means a policy of life insurance in relation to which this Chapter and Chapter 9 of Part 4 of ITTOIA 2005 have effect;
- “*tax representative*” means a tax representative under this section.
##### 552B
- (1) It shall be the duty of an overseas insurer’s tax representative to secure (where appropriate by acting on the overseas insurer’s behalf) that the relevant duties are discharged by or on behalf of the overseas insurer.
- (2) For the purposes of this section “*the relevant duties*” are—
- (a) the duties imposed by section 552,
- (b) the duties imposed by section 552ZA(2), (4) or (5), and
- (c) any duties imposed by regulations made under subsection (6) of section 552ZA by virtue of subsection (7) of that section,
so far as relating to relevant insurances under which the overseas insurer in question has any obligations.
- (3) An overseas insurer’s tax representative shall be personally liable—
- (a) in respect of any failure to secure the discharge of the relevant duties, and
- (b) in respect of anything done for purposes connected with acting on the overseas insurer’s behalf,
as if the relevant duties were imposed jointly and severally on the tax representative and the overseas insurer.
- (4) In the application of this section in relation to any particular tax representative, it is immaterial whether any particular relevant duty arose before or after his appointment.
- (5) This section has effect in relation to relevant duties relating to chargeable events happening on or after the day by which section 552A(6) requires the nomination of the overseas insurer’s first tax representative to be made.
- (5A) In subsection (5) “*chargeable event*” has the same meaning as in section 552 (see subsection (10) of that section).
- (6) Expressions used in this section and in section 552A have the same meaning in this section as they have in that section.
##### 553A
- (1) A policy of life insurance which, immediately before the happening of a chargeable event or a relevant event—
- (a) is an overseas policy, but
- (b) is not a new non-resident policy,
shall, in relation to that event, be treated for the purposes of this Chapter as if it were a new non-resident policy.
- (2) A policy of life insurance which, immediately before the happening of a relevant event—
- (a) is an overseas policy, and
- (b) is a new non-resident policy,
shall, in relation to that event, be taken for the purposes of this Chapter not to be a qualifying policy.
- (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (4) In this section—
- “*new non-resident policy*” means a new non-resident policy as defined in paragraph 24 of Schedule 15 (and in subsection (2) above includes a policy treated as such by virtue of subsection (1) above);
- “*overseas policy*” means a policy of life insurance which, by virtue of section 431D(1)(a), forms part of the overseas life assurance business of an insurance company or friendly society;
- “*relevant event*”, in relation to a policy of life insurance, means an event which would be a chargeable event in relation to that policy if the policy were assumed not to be a qualifying policy.
- (5) This section applies in relation to chargeable events and relevant events happening on or after 17th March 1998 in relation to policies of life insurance issued in respect of insurances made on or after that date.
- (6) A policy of life insurance issued in respect of an insurance made before 17th March 1998 shall be treated for the purposes of this section as issued in respect of one made on or after that date if it is varied on or after that date so as to increase the benefits secured or to extend the term of the insurance; and any exercise of rights conferred by the policy shall be regarded for this purpose as a variation.
##### 553B
- (1) A capital redemption policy which immediately before the happening of a chargeable event—
- (a) is an overseas policy, but
- (b) is not a new offshore capital redemption policy,
shall, in relation to that event, be treated for the purposes of this Chapter as if it were a new offshore capital redemption policy.
- (2) In this section—
- “*new offshore capital redemption policy*” has the same meaning as in section 553;
- “*overseas policy*” means a capital redemption policy which, by virtue of section 431D(1)(a), forms part of the overseas life assurance business of an insurance company.
- (3) This section applies in relation to capital redemption policies where the contract is made after the coming into force of the first regulations under section 458A in consequence of which capital redemption business forms part of the overseas life assurance business of an insurance company.
##### 553C
- (1) The Treasury may by regulations make provision imposing a yearly charge to corporation tax in relation to personal portfolio bonds (“yearly" being construed for this purpose by reference to years as defined in section 546(4)).
- (2) Subject to any provision to the contrary made by the regulations, any charge to corporation tax under this section is in addition to any other charge to corporation tax under this Chapter.
- (3) The regulations may make provision with respect to or in connection with all or any of the following—
- (a) the method by which the charge to corporation tax, or any relief, allowance or deduction against or in respect of the tax, is to be imposed or given effect;
- (b) the person who is to be liable for the tax;
- (c) the periods for or in respect of which the tax is to be charged;
- (d) the amounts in respect of which, or by reference to which, the tax is to be charged;
- (e) the period or periods by reference to which those amounts are to be determined;
- (f) the rate or rates at which the tax is to be charged;
- (g) any reliefs, allowances or deductions which are to be given or made against or in respect of the tax;
- (h) the administration of the tax.
- (4) The provision that may be made by the regulations includes provision for imposing the charge to corporation tax by a method which involves—
- (a) treating an event described in the regulations as if it were a chargeable event;
- (b) treating an amount determined in accordance with the regulations as if it were a gain treated as arising on the happening of a chargeable event; or
- (c) deeming an amount determined in accordance with the regulations to be income of a company; . . .
- (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (5) The provision that may be made in the regulations includes provision for the amount or amounts in respect of which, or by reference to which, the tax is to be charged for periods beginning after the coming into force of the regulations to be determined in whole or in part by reference to periods beginning or ending, premiums paid, or events happening, before, on or after the day on which the Finance Act 1998 is passed.
- (6) The regulations may make provision excluding, or applying (with or without modification), other provisions of this Chapter in relation to policies or contracts which are also personal portfolio bonds.
- (7) In this section, “*personal portfolio bond*” means a policy of life insurance, contract for a life annuity or capital redemption policy under whose terms—
- (a) some or all of the benefits are determined by reference to the value of, or the income from, property of any description (whether or not specified in the policy or contract) or fluctuations in, or in an index of, the value of property of any description (whether or not so specified); and
- (b) some or all of the property, or such an index, may be selected by, or by a person acting on behalf of, the holder of the policy or contract or a person connected with him (or the holder of the policy or contract and a person connected with him);
but a policy or contract is not a personal portfolio bond if the only property or index which may be so selected is of a description prescribed for this purpose in the regulations.
- (8) The regulations may prescribe additional conditions which must be satisfied if a policy or contract is to be a personal portfolio bond.
- (9) The regulations—
- (a) may make different provision for different cases, different circumstances or different periods; and
- (b) may make incidental, consequential, supplemental or transitional provision.
- (9A) The Treasury may by regulations make provision, in relation to any policy or contract to which this subsection applies, for—
- (a) treating an event described in the regulations as if it were a chargeable event, and
- (b) treating an amount determined in accordance with the regulations as if it were a gain treated as arising on the happening of a chargeable event.
- (9B) Regulations under subsection (9A) may make such provision for the purposes only of enabling the gain to be taken into account in the application of this Chapter to the policy or contract on the later happening of a chargeable event.
- (9C) Regulations under subsection (9A) may make any provision for the calculation of the amount of the gain which regulations under subsection (1) may make for the calculation of the amount charged to corporation tax by virtue of regulations under that subsection.
- (9D) Subsections (6), (8) and (9) apply to regulations under subsection (9A).
- (9E) Subsection (9A) applies to a policy or contract if—
- (a) it is a personal portfolio bond, and
- (b) liability in respect of a gain arising in relation to it would arise by virtue of any of sections 464 to 468 of ITTOIA 2005 (persons liable for tax under Chapter 9 of Part 4 of that Act).
- (10) In this section, “holder", in the case of a policy or contract held by two or more persons, includes a reference to any of those persons.
- (11) Section 839 (connected persons) applies for the purposes of this section.
##### 559A
- (1) A sum deducted under section 559 from a payment made by a contractor—
- (a) shall be paid to the Board, and
- (b) shall be treated for the purposes of income tax or, as the case may be, corporation tax as not diminishing the amount of the payment.
- (2) If the sub-contractor is not a company a sum deducted under section 559 and paid to the Board shall be treated as being income tax paid in respect of the sub-contractor’s relevant profits.
If the sum is more than sufficient to discharge his liability to income tax in respect of those profits, so much of the excess as is required to discharge any liability of his for Class 4 contributions shall be treated as being Class 4 contributions paid in respect of those profits.
- (3) If the sub-contractor is a company—
- (a) a sum deducted under section 559 and paid to the Board shall be treated, in accordance with regulations, as paid on account of any relevant liabilities of the sub-contractor;
- (b) regulations shall provide for the sum to be applied in discharging relevant liabilities of the year of assessment in which the deduction is made;
- (c) if the amount is more than sufficient to discharge the sub-contractor’s relevant liabilities, the excess may be treated, in accordance with the regulations, as being corporation tax paid in respect of the sub-contractor’s relevant profits; and
- (d) regulations shall provide for the repayment to the sub-contractor of any amount not required for the purposes mentioned in paragraphs (b) and (c).
- (4) For the purposes of subsection (3) the “*relevant liabilities*” of a sub-contractor are any liabilities of the sub-contractor, whether arising before or after the deduction is made, to make a payment to a collector of inland revenue in pursuance of an obligation as an employer or contractor.
- (5) In this section—
- (a) “*the sub-contractor*” means the person for whose labour (or for whose employees’ or officers’ labour) the payment is made;
- (b) references to the sub-contractor’s “*relevant profits*” are to the profits from the trade, profession or vocation carried on by him in the course of which the payment was received;
- (c) “*Class 4 contributions*” means Class 4 contributions within the meaning of the Social Security Contributions and Benefits Act 1992 or the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
- (6) References in this section to regulations are to regulations made by the Board.
- (7) Regulations under this section—
- (a) may contain such supplementary, incidental or consequential provision as appears to the Board to be appropriate, and
- (b) may make different provision for different cases.
#### Individuals qualifying for relief.
### Chapter 5A — Share loss relief
### Relief for losses on unquoted shares in trading companies
##### 576A
- (1) For the purposes of this Chapter a qualifying trading company is a company which meets each of conditions A to D.
- (2) Condition A is that the company either—
- (a) meets each of the following requirements on the date of the disposal—
- (i) the trading requirement (see section 576B),
- (ii) the control and independence requirement (see section 576D),
- (iii) the qualifying subsidiaries requirement (see section 576E), and
- (iv) the property managing subsidiaries requirement (see section 576F), or
- (b) has ceased to meet any of those requirements at a time which is not more than 3 years before that date and has not since that time been an excluded company, an investment company or a trading company.
- (3) Condition B is that the company either—
- (a) has met each of the requirements mentioned in condition A for a continuous period of 6 years ending on that date or at that time, or
- (b) has met each of those requirements for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company, an investment company or a trading company.
- (4) Condition C is that the company—
- (a) met the gross assets requirement (see section 576G) both immediately before and immediately after the issue of the shares in respect of which the relief is claimed under this Chapter, and
- (b) met the unquoted status requirement (see section 576H) at the relevant time within the meaning of that section.
- (5) Condition D is that the company has carried on its business wholly or mainly in the United Kingdom throughout the period—
- (a) beginning with the incorporation of the company or, if later, 12 months before the shares in question were issued, and
- (b) ending with the date of the disposal.
### Qualifying trading companies: the requirements
##### 576B
- (1) The trading requirement is that—
- (a) the company, disregarding any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, or
- (b) the company is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities.
- (2) If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades—
- (a) the company is treated as a parent company for the purposes of subsection (1)(b), and
- (b) the reference in subsection (1)(b) to the group includes the company and any existing or future company that will be its qualifying subsidiary after the intention in question is carried into effect.
This subsection does not apply at any time after the abandonment of that intention.
- (3) For the purpose of subsection (1)(b) the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business.
- (4) For the purpose of determining the business of a group, activities are disregarded to the extent that they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.
- (5) For the purposes of determining the business of a group, activities of a group company are disregarded to the extent that they consist in—
- (a) the holding of shares in or securities of a qualifying subsidiary of the parent company,
- (b) the making of loans to another group company,
- (c) the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company, or
- (d) the holding and managing of property used by a group company for the purpose of research and development from which it is intended—
- (i) that a qualifying trade to be carried on by a group company will be derived, or
- (ii) that a qualifying trade carried on or to be carried on by a group company will benefit.
- (6) Any reference in subsection (5)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time.
- (7) In this section—
- “*excluded activities*” has the meaning given by section 192 of ITA 2007 read with sections 193 to 199 of that Act,
- “*group*” means a parent company and all its qualifying subsidiaries,
- “*group company*”, in relation to a group, means the parent company or any of its qualifying subsidiaries,
- “*incidental purposes*” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the company in question,
- “*mainly trading subsidiary*” means a subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly,
- “*non-qualifying activities*” means—excluded activities, andactivities (other than research and development) carried on otherwise than in the course of a trade,
- “*parent company*” means a company that has one or more qualifying subsidiaries,
- “*qualifying subsidiary*” is to be read in accordance with section 191 of ITA 2007,
- “*qualifying trade*” has the meaning given by section 189 of that Act,
- “*research and development*” has the meaning given by section 837A.
- (8) In sections 189(1)(b) and 194(4)(c) of ITA 2007 (as applied by subsection (7) for the purposes of the definitions of “excluded activities” and “qualifying trade”) “*period B*” means the continuous period that is relevant for the purposes of section 576A(3).
- (9) In section 195 of ITA 2007 as applied by subsection (7) for the purposes mentioned in subsection (8), references to the issuing company are to be read as references to the company mentioned in subsection (1).
#### Eligibility for relief.
##### 576C
- (1) A company is not regarded as ceasing to meet the trading requirement by reason only of anything done in consequence of the company or any of its subsidiaries being in administration or receivership.
This has effect subject to subsections (2) and (3).
- (2) Subsection (1) applies only if—
- (a) the entry into administration or receivership, and
- (b) everything done as a result of the company concerned being in administration or receivership,
is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
- (3) A company ceases to meet the trading requirement if before the time that is relevant for the purposes of section 576A(2)—
- (a) a resolution is passed, or an order is made, for the winding up of the company or any of its subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989, any other act is done for the like purpose), or
- (b) the company or any of its subsidiaries is dissolved without winding up.
This is subject to subsection (4).
- (4) Subsection (3) does not apply if —
- (a) the winding up is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and
- (b) the company continues, during the winding up, to be a trading company.
- (5) References in this section to a company being “in administration” or “in receivership” are to be read in accordance with section 252 of ITA 2007.
##### 576D
- (1) The control element of the requirement is that—
- (a) the company must not control (whether on its own or together with any person connected with it) any company which is not a qualifying subsidiary of the company, and
- (b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 576A(3) or otherwise).
- (2) The independence element of the requirement is that—
- (a) the company must not—
- (i) be a 51% subsidiary of another company, or
- (ii) be under the control of another company (or of another company and any other person connected with that other company), without being a 51% subsidiary of that other company, and
- (b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 576A(3) or otherwise).
- (3) This section is subject to section 576J(3).
- (3A) Section 839 (connected persons) applies for the purposes of this section.
- (4) In this section—
- “*arrangements*” includes any scheme, agreement or understanding, whether or not legally enforceable,
- “control” is to be read as follows—in subsection (1)(a), in accordance with section 416(2) to (6),in subsection (2)(a), in accordance with section 840,
- “*qualifying subsidiary*” is to be read in accordance with section 191 of ITA 2007.
#### Restriction of relief where amounts raised exceed permitted maximum.
##### 576E
- (1) The qualifying subsidiaries requirement is that any subsidiary that the company has must be a qualifying subsidiary of the company.
- (2) In this section “*qualifying subsidiary*” is to be read in accordance with section 191 of ITA 2007.
##### 576F
- (1) The property managing subsidiaries requirement is that any property managing subsidiary that the company has must be a qualifying 90% subsidiary of the company.
- (2) In this section—
- “*property managing subsidiary*” has the meaning given by section 188(2) of ITA 2007,
- “*qualifying 90% subsidiary*” has the meaning given by section 190 of that Act.
##### 576G
- (1) The gross assets requirement in the case of a single company is that the value of the company's gross assets—
- (a) must not exceed £7 million immediately before the shares in respect of which the relief is claimed under this Chapter are issued, and
- (b) must not exceed £8 million immediately afterwards.
- (2) The gross assets requirement in the case of a parent company is that the value of the group assets—
- (a) must not exceed £7 million immediately before the shares in respect of which the relief is claimed under this Chapter are issued, and
- (b) must not exceed £8 million immediately afterwards.
- (3) The value of the group assets means the aggregate of the values of the gross assets of each of the members of the group, disregarding any that consist in rights against, or shares in or securities of, another member of the group.
- (4) In this section—
- “*group*” means a parent company and its qualifying subsidiaries,
- “*parent company*” means a company that has one or more qualifying subsidiaries,
- “*qualifying subsidiary*” is to be read in accordance with section 191 of ITA 2007, and
- “*single company*” means a company that does not have one or more qualifying subsidiaries.
##### 576H
- (1) The unquoted status requirement is that, at the time (“*the relevant time*”) at which the shares in respect of which the relief is claimed under this Chapter are issued—
- (a) the company must be an unquoted company,
- (b) there must be no arrangements in existence for the company to cease to be an unquoted company, and
- (c) there must be no arrangements in existence for the company to become a subsidiary of another company (“the new company”) by virtue of an exchange of shares, or shares and securities, if—
- (i) section 576J applies in relation to the exchange, and
- (ii) arrangements have been made with a view to the new company ceasing to be an unquoted company.
- (2) The arrangements referred to in subsection (1)(b) and (c)(ii) do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the company or the new company are at any subsequent time—
- (a) listed on a stock exchange that is a recognised stock exchange by virtue of an order made under section 1005 of ITA 2007, or
- (b) listed on an exchange, or dealt in by any means, designated by an order made for the purposes of section 184(3)(b) or (c) of that Act,
if the order was made after the relevant time.
- (3) In this section—
- “*arrangements*” includes any scheme, agreement or understanding, whether or not legally enforceable,
- “*debenture*” has the meaning given by section 744 of the Companies Act 1985,
- “*unquoted company*” has the meaning given by section 184(2) of ITA 2007.
##### 576I
The Treasury may by order make such amendments of sections 576B to 576H as they consider appropriate.
### Qualifying trading companies: supplementary provisions
##### 576J
- (1) This section and section 576K apply in relation to shares if—
- (a) a company (“the new company”) in which the only issued shares are subscriber shares acquires all the shares (“old shares”) in another company (“the old company”),
- (b) the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company,
- (c) the consideration for the new shares of each description consists wholly of old shares of the corresponding description,
- (d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings, and
- (e) by virtue of section 127 of the 1992 Act as applied by section 135(3) of that Act (company reconstructions etc), the exchange of shares is not to be treated as involving a disposal of the old shares or an acquisition of the new shares.
In this subsection references to shares, except the first and that in the expression “subscriber shares”, include securities.
- (2) For the purposes of this Chapter the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares.
- (3) Nothing in section 576D (the control and independence requirement) applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1), or arrangements with a view to such an exchange.
- (4) For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.
- (5) References in section 576K to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section.
##### 576K
- (1) Subsection (2) applies if, in the case of any new shares held by a company or by a nominee for a company, the old shares for which they were exchanged were shares that had been subscribed for by the company (“the investor”).
- (2) This Chapter has effect as if—
- (a) the new shares had been subscribed for by the investor at the time when, and for the amount for which, the old shares were subscribed for by the investor,
- (b) the new shares had been issued by the new company at the time when the old shares were issued to the investor by the old company, and
- (c) any requirements of this Chapter which were met at any time before the exchange by the old company had been met at that time by the new company.
- (3) Section 573(6) applies for the purposes of this section.
- (4) Nothing in subsection (2) applies in relation to section 195(7) of ITA 2007 as applied by section 576B(7) above for the purposes mentioned in section 576B(8).
### Supplemental
##### 576L
- (1) In this Chapter (subject to subsections (2) to (5))—
- “*excluded company*” means a company which—has a trade which consists wholly or mainly of dealing in land, in commodities or futures or in shares, securities or other financial instruments,has a trade which is not carried on on a commercial basis and in such a way that profits in the trade can reasonably be expected to be realised,is a holding company of a group other than a trading group, oris a building society or a registered industrial and provident society,
- “group” (except in sections 576B and 576G) means a company which has one or more 51% subsidiaries together with that or those subsidiaries,
- “*holding company*” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 51% subsidiaries,
- “*investment company*” has the meaning given by section 130 except that it does not include the holding company of a trading group,
- “*registered industrial and provident society*” means a society registered or treated as registered under the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) Act 1969,
- “shares”—includes stock, butdoes not include shares or stock not forming part of a company's ordinary share capital,
- “*trading company*” means a company other than an excluded company which is—a company whose business consists wholly or mainly of the carrying on of a trade or trades, orthe holding company of a trading group, and
- “*trading group*” means a group the business of whose members, when taken together, consists wholly or mainly in the carrying on of a trade or trades.
- (2) Except as provided by subsection (3), paragraph (b) of the definition of “shares” in subsection (1) does not apply in the definition of “excluded company” in subsection (1) or in section 576J(1) to (4).
- (3) Paragraph (b) of that definition applies in relation to the first reference to “shares” in section 576J(1).
- (4) The definition of “shares” in subsection (1) does not apply in sections 576B(5)(a), 576G(3) and 576H(1)(c) and (2).
- (5) For the purposes of the definition of “trading group” in subsection (1), any trade carried on by a subsidiary which is an excluded company is treated as not constituting a trade.
#### Restriction of relief where amounts raised exceed permitted maximum.
##### 577A
- (1) In computing profits chargeable to corporation tax under . . . Schedule D, no deduction shall be made for any expenditure incurred —
- (a) in making a payment the making of which constitutes the commission of a criminal offence, or
- (b) in making a payment outside the United Kingdom where the making of a corresponding payment in any part of the United Kingdom would constitute a criminal offence there.
- (1A) In computing profits chargeable to corporation tax under . . . Schedule D, no deduction shall be made for any expenditure incurred in making a payment induced by a demand constituting—
- (a) the commission in England or Wales of the offence of blackmail under section 21 of the Theft Act 1968,
- (b) the commission in Northern Ireland of the offence of blackmail under section 20 of the Theft Act (Northern Ireland) 1969, or
- (c) the commission in Scotland of the offence of extortion.
- (2) Any expenditure mentioned in subsection (1) or (1A) above—
- (a) shall not be included in computing any expenses of management in respect of which relief may be given under the Corporation Tax Acts; and
- (b) shall not be brought into account under section 76 as expenses payable.
##### 578A
- (1) This section provides for a reduction in the amounts—
- (a) allowable as deductions in computing profits chargeable to corporation tax under Case I or II of Schedule D, or
- (b) which can be included as expenses of management of a company with investment business (as defined by section 130),. . . or
- (bb) which can be brought into account under section 76 as expenses payable,
- (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
for expenditure on the hiring of a car to which this section applies.
- (2) This section applies to the hiring of a car—
- (a) which is not a qualifying hire car, and
- (b) the retail price of which when new exceeds £12,000.
“Car” and “qualifying hire car” are defined by section 578B.
- (2A) This section does not apply to the hiring of a car, other than a motorcycle, if—
- (a) it is an electrically-propelled car, or
- (b) it is a car with low CO₂ emissions.
- (2B) In subsection (2A) above—
- “*car*” has the meaning given by section 578B;
- “*car with low CO₂ emissions*” has the meaning given by section 45D of the Capital Allowances Act 2001 (expenditure on cars with low CO₂ emissions to be first-year qualifying expenditure);
- “*electrically-propelled car*” has the meaning given by that section.
- (3) The amount which would, apart from this section, be allowable or capable of being included must be reduced by multiplying it by the fraction—
$£12,000+P2P$
where P is the retail price of the car when new.
- (4) If an amount has been reduced under subsection (3) and subsequently—
- (a) there is a rebate (however described) of the rentals, or
- (b) there occurs in connection with the rentals a transaction that falls within section 94 (debts deducted and subsequently released),
the amount otherwise taxable in respect of the rebate or transaction must be reduced by multiplying it by the fraction in subsection (3) above.
##### 578B
- (1) In section 578A “car” means a mechanically propelled road vehicle other than one—
- (a) of a construction primarily suited for the conveyance of goods or burden of any description, or
- (b) of a type not commonly used as a private vehicle and unsuitable for such use.
References to a car accordingly include a motor cycle.
- (2) For the purposes of section 578A, a car is a qualifying hire car if—
- (a) it is hired under a hire-purchase agreement (within the meaning of section 784(6)) under which there is an option to purchase exercisable on the payment of a sum equal to not more than 1 per cent. of the retail price of the car when new, or
- (b) it is a qualifying hire car for the purposes of Part 2 of the Capital Allowances Act (under section 82 of that Act).
- (3) In section 578A and this section “*new*” means unused and not second-hand.
- (4) The power under section 74(4) of the Capital Allowances Act to increase or further increase the sums of money specified in Chapter 8 of Part 2 of that Act includes the power to increase or further increase the sum of money specified in section 578A(2)(b) or (3).
##### 580A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 580B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 580C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Companies with interests in land.
##### 581A
Interest within section 755(1) of ITTOIA 2005 (interest on foreign currency securities etc.) shall be paid without deduction of income tax.
##### 582A
- (1) The Treasury may by order designate for the purposes of any one or more of subsections (2) and (4) to (6) below . . . any international organisation of which the United Kingdom is a member; and in those subsections “*designated*” means designated under this subsection.
- (2) Section 43 shall not apply in the case of payment made by an organisation designated for the purposes of this subsection.
- (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (4) Section 349(1) shall not apply in the case of a payment of an amount payable by an organisation designated for the purposes of this subsection.
- (5) Section 349(2) shall not apply in the case of interest payable by—
- (a) an organisation designated for the purposes of this subsection, or
- (b) a partnership of which such an organisation is a member.
- (6) An organisation designated for the purposes of this subsection shall not be a person to whom section 59 of the Finance Act 2004 applies.
#### Interpretation of Chapter III.
##### 587A
- (1) This section applies where—
- (a) securities (old securities) of a particular kind are issued by way of the original issue of securities of that kind,
- (b) on a later occasion securities (new securities) of the same kind are issued,
- (c) a sum (the extra return) is payable in respect of the new securities, by the person issuing them, to reflect the fact that interest is accruing on the old securities,
- (d) the issue price of the new securities includes an element (whether or not separately identified) representing payment for the extra return, and
- (e) the extra return is equal to the amount of interest payable for the relevant period on so many old securities as there are new (or, if there are more new securities than old, the amount of interest which would be so payable if there were as many old securities as new),
but this section shall not apply for the purposes of corporation tax, except where the issue of the new securities was before 1st April 1996.
- (2) Anything payable or paid by way of the extra return shall be treated for the purposes of the Tax Acts as payable or paid by way of interest (to the extent that it would not be so treated apart from this subsection).
- (3) But as regards any payment by way of the extra return, relief shall not be given under any provision of the Tax Acts to the person by whom the new securities are issued; and “*relief*” here means relief by way of deduction in computing profits or gains or deduction or set off against income or total profits.
- (4) For the purposes of this section securities are of the same kind if they are treated as being of the same kind by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.
- (5) For the purposes of this section the relevant period is the period beginning with the day following the relevant day and ending with the day on which the new securities are issued.
- (6) For the purposes of this section the relevant day is—
- (a) the last (or only) interest payment day to fall in respect of the old securities before the day on which the new securities are issued, or
- (b) the day on which the old securities were issued, in a case where no interest payment day fell in respect of them before the day on which the new securities are issued;
and an interest payment day, in relation to the old securities, is a day on which interest is payable under them.
##### 587B
- (1) Subsections (2) and (3) below apply where, otherwise than by way of a bargain made at arm’s length, an individual, or a company which is not itself a charity, disposes of the whole of the beneficial interest in a qualifying investment to a charity.
- (2) On a claim made in that behalf to an officer of the Board—
- (a) the relevant amount shall be allowed—
- (i) in the case of a disposal by an individual, as a deduction in calculating his total income for the purposes of income tax for the year of assessment in which the disposal is made;
- (ii) in the case of a disposal by a company, as a charge on income for the purposes of corporation tax for the accounting period in which the disposal is made; and
- (b) no relief in respect of the disposal shall be given under section 83A of this Act, section 108 of ITTOIA 2005 or any other provision of the Income Tax Acts;
but paragraph (a)(i) above shall not apply for the purposes of any computation under sections 535 to 537 of ITTOIA 2005.
- (3) The consideration for which the charity’s acquisition of the qualifying investment is treated by virtue of section 257(2) of the 1992 Act as having been made—
- (a) shall be reduced by the relevant amount; or
- (b) where that consideration is less than that amount, shall be reduced to nil.
- (4) Subject to subsections (5) to (7) below, the relevant amount is an amount equal to—
- (a) where the disposal is a gift, the value of the net benefit to the charity at, or immediately after, the time when the disposal is made (whichever time gives the lower value);
- (b) where the disposal is at an undervalue, the amount by which—
- (i) the value described in paragraph (a) above, exceeds
- (ii) the amount or value of the consideration for the disposal,
or, if there is no such excess, nil.
- (5) Where there are one or more benefits received in consequence of making the disposal which are received by the person making the disposal or a person connected with him, the relevant amount shall be reduced by the value of that benefit or, as the case may be, the aggregate value of those benefits; and section 839 applies for the purposes of this subsection.
- (6) Where the disposal is a gift, the relevant amount shall be increased by the amount of the incidental costs of making the disposal to the person making it.
- (7) Where the disposal is at an undervalue—
- (a) to the extent that the consideration for the disposal is less than that for which the disposal is treated as made by virtue of section 257(2)(a) of the 1992 Act, the relevant amount shall be increased by the amount of the incidental costs of making the disposal to the person making it; and
- (b) section 48 of that Act (consideration due after time of disposal) shall apply in relation to the computation of the relevant amount as it applies in relation to the computation of a gain.
- (8) In the case of a disposal by a company which is carrying on life assurance business—
- (a) if the company is charged to tax under Case I of Schedule D in respect of such business, subsections (2) and (3) above shall not apply;
- (b) if the company is not so charged to tax in respect of such business—
- (i) subsection (2)(a)(ii) above shall have effect as if for “a charge on income" there were substituted “expenses payable falling to be brought into account at Step 3 in section 76(7)”; and
- (ii) the relevant amount given by subsection (4) above shall be reduced by so much (if any) of that amount as is not referable to basic life assurance and general annuity business;
and for the purpose of determining how much (if any) of that amount is not so referable, section 432A shall have effect as if that amount were a gain accruing on the disposal of the qualifying investment to the company.
- (8A) The value of the net benefit to the charity is—
- (a) the market value of the qualifying investment, unless subsection (8B) below applies;
- (b) where that subsection applies, that market value reduced by the aggregate amount of the related liabilities of the charity (see subsections (8E) to (8G)).
- (8B) This subsection applies in any case where—
- (a) the charity is, or becomes, subject to an obligation to any person (whether or not the person making the disposal or a person connected with him), and
- (b) one or more of the conditions in subsection (8C) below is satisfied.
- (8C) For the purposes of subsection (8B) above—
- (a) condition 1 is that, taking into account all the circumstances (including, in particular, the difference in the value of the net benefit to the charity if subsection (8B) applies and if it does not), it is reasonable to suppose that the disposal of the qualifying investment to the charity would not have been made in the absence of the obligation;
- (b) condition 2 is that the obligation (whether in whole or in part) relates to, is framed by reference to, or is conditional on the charity receiving, the qualifying investment or a related investment (see subsection (8D)).
- (8D) In subsection (8C) above “*related investment*” means any of the following—
- (a) any asset of the same class or description as the qualifying investment (irrespective of size, quantity or amount);
- (b) any asset derived from, or representing, the qualifying investment whether in whole or in part and whether directly or indirectly;
- (c) any asset from which the qualifying investment is derived, or which the qualifying investment represents, whether in whole or in part and whether directly or indirectly.
- (8E) For the purposes of this section, the liabilities which are related liabilities in the case of any qualifying investment are the liabilities of the charity under each of the obligations that fall within subsection (8B) above (as read with subsection (8C) above) in relation to that investment.
- (8F) Where an obligation is contingent and the contingency occurs, the amount to be brought into account for the purposes of this section at any time in respect of the liability, so far as contingent, under the obligation is the amount or value of the liability actually incurred in consequence of the occurrence of the contingency.
- (8G) Where an obligation is contingent and the contingency does not occur, the amount to be brought into account for the purposes of this section at any time in respect of the liability, so far as contingent, is nil.
- (9) In this section—
- “*authorised unit trust*” and “*open-ended investment company*” have the meanings given by section 468;
- “*charity*” has the same meaning as in section 506 and includes each of the bodies mentioned in section 507(1);
- “*the incidental costs of making the disposal to the person making it*” shall be construed in accordance with section 38(2) of the 1992 Act;
- “*life assurance business*” and related expressions have the same meaning as in Chapter I of Part XII;
- “*obligation*” includes a reference to each of the following—any scheme, arrangement or understanding of any kind, whether or not legally enforceable;a series of obligations (whether or not between the same parties);
- “*offshore fund*” has the same meaning as in Chapter 5 of Part 17;
- “*qualifying investment*” means any of the following—shares or securities which are listed or dealt in on a recognised stock exchange;units in an authorised unit trust;shares in an open-ended investment company;. . . an interest in an offshore fund; anda qualifying interest in land;
- “*related liabilities*” shall be construed in accordance with subsection (8E) above;
- “*value of the net benefit to the charity*” shall be construed in accordance with subsection (8A) above.
- (9A) In this section a “*qualifying interest in land*” means—
- (a) a freehold interest in land, or
- (b) a leasehold interest in land which is a term of years absolute,
where the land in question is in the United Kingdom.
This subsection is subject to subsections (9B) to (9D) below.
- (9B) Where a person makes a disposal to a charity of—
- (a) the whole of his beneficial interest in such freehold or leasehold interest in land as is described in subsection (9A)(a) or (b) above, and
- (b) any easement, servitude, right or privilege so far as benefiting that land,
the disposal falling within paragraph (b) above is to be regarded for the purposes of this section as a disposal by the person of the whole of his beneficial interest in a qualifying interest in land.
- (9C) Where a person who has a freehold or leasehold interest in land in the United Kingdom grants a lease for a term of years absolute (or, in the case of land in Scotland, grants a lease) to a charity of the whole or part of that land, the grant of that lease is to be regarded for the purposes of this section as a disposal by the person of the whole of the beneficial interest in the leasehold interest so granted.
- (9D) For the purposes of subsection (9A) above, an agreement to acquire a freehold interest and an agreement for a lease are not qualifying interests in land.
- (9E) In the application of this section to Scotland—
- (a) references to a freehold interest in land are references to the interest of the owner,
- (b) references to a leasehold interest in land which is a term of years absolute are references to a tenant’s right over or interest in a property subject to a lease, and
- (c) references to an agreement for a lease do not include references to missives of let that constitute an actual lease.
- (10) Subject to subsection (11) below, the market value of any qualifying investment shall be determined for the purposes of this section as for the purposes of the 1992 Act.
- (10A) Section 839 (connected persons) applies for the purposes of this section.
- (11) In the case of an interest in an offshore fund for which there are separate published buying and selling prices, section 272(5) of the 1992 Act (meaning of “*market value*” in relation to rights of unit holders in a unit trust scheme) shall apply with any necessary modifications for determining the market value of the interest for the purposes of this section.
- (12) This section is supplemented by section 587C below.
##### 587BA
- (1) This section applies for the purposes of section 587B where a qualifying investment is a qualifying interest in land.
- (2) Where two or more persons (“the owners”)—
- (a) are jointly beneficially entitled to the qualifying interest in land, or
- (b) are, taken together, beneficially entitled in common to the qualifying interest in land,
relief under section 587B is available if at least one of the owners is a qualifying company and all the owners dispose of the whole of their beneficial interests in the qualifying interest in land to the charity.
- (3) Subsection (4) applies if one or more of the owners is not a company.
- (4) For the purpose of determining whether the owners' beneficial interests are disposed of as mentioned in subsection (2), section 587B(9B) and (9C) applies as if references to a company included a reference to a person who is not a company.
- (5) Relief under section 587B is available to each of the owners which is a qualifying company.
- (6) If one or more of the owners is an individual—
- (a) the relevant amount is taken to be the relievable amount calculated for the purposes of Chapter 3 of Part 8 of ITA 2007, and
- (b) the amount of relief under section 587B to be given to a qualifying company is such share of the relievable amount as is allocated to the company by the agreement mentioned in section 442(5) of ITA 2007.
- (7) Subsections (8) to (12) apply if none of the owners is an individual.
- (8) The amount of relief under section 587B to be given to a qualifying company is such share of the relevant amount as is allocated to the company by an agreement made between those owners which are qualifying companies.
- (9) Calculate the relevant amount as if—
- (a) the owners were a single qualifying company, and
- (b) the disposals of the owners' beneficial interests were a single disposal by that single company of the whole of the beneficial interest in the qualifying interest in land.
- (10) In particular, for the purposes of section 587B(7) calculate the consideration for which the disposal is made by virtue of section 257(2)(a) of the 1992 Act by—
- (a) calculating, for each owner, the consideration for which the disposal of the owner's beneficial interest is so made, and
- (b) adding together all the consideration calculated under paragraph (a).
- (11) If one or more of the owners is not a qualifying company, in calculating the relevant amount make just and reasonable adjustments to reduce the relevant amount to reflect the fact that relief under section 587B is not available to that owner or to those owners.
- (12) If one or more of the owners is within paragraph (b) of section 587B(8), in calculating the relevant amount make just and reasonable adjustments to reduce the relevant amount to reflect the requirements of sub-paragraph (ii) of that paragraph.
- (13) A company is a qualifying company if—
- (a) it is not itself a charity, and
- (b) it is not within section 587B(8)(a).
##### 587C
- (1) This section applies for the purposes of section 587B where a qualifying investment is a qualifying interest in land.
- (2) Where two or more persons—
- (a) are jointly beneficially entitled to the qualifying interest in land, or
- (b) are, taken together, beneficially entitled in common to the qualifying interest in land,
section 587B applies only if each of those persons disposes of the whole of his beneficial interest in the qualifying interest in land to the charity.
- (3) Relief under section 587B shall be available to each of the persons referred to in subsection (2) above, but the amount that may be allowed as respects any of them shall be only such share of the relevant amount as they may agree in the case of that person.
- (4) No person may make a claim for a relief under subsection (2) of section 587B unless he has received a certificate given by or on behalf of the charity.
- (5) The certificate must—
- (a) specify the description of the qualifying interest in land which is the subject of the disposal,
- (b) specify the date of the disposal, and
- (c) contain a statement that the charity has acquired the qualifying interest in land.
- (6) If, in the case of a disposal of a qualifying interest in land, a disqualifying event occurs at any time in the relevant period, the person (or each of the persons) who made the disposal to the charity shall be treated as never having been entitled to relief under section 587B in respect of the disposal.
- (7) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (6) above.
- (8) For the purposes of subsection (6) above a disqualifying event occurs if the person (or any one of the persons) who made the disposal or any person connected with him (or any one of them)—
- (a) becomes entitled to an interest or right in relation to all or part of the land to which the disposal relates, or
- (b) becomes party to an arrangement under which he enjoys some right in relation to all or part of that land,
otherwise than for full consideration in money or money’s worth.
- (9) A disqualifying event does not occur, for the purposes of subsection (6) above, if a person becomes entitled to an interest or right as mentioned in subsection (8)(a) above as a result of a disposition of property on death, whether the disposition is effected by will, under the law relating to intestacy or otherwise.
- (10) For the purposes of subsection (6) above the relevant period is the period beginning with the date of the disposal of the qualifying interest in land and ending with—
- (a) in the case of an individual, the fifth anniversary of the 31st January next following the end of the year of assessment in which the disposal was made, and
- (b) in the case of a company, the sixth anniversary of the end of the accounting period in which the disposal was made.
- (11) Section 839 (connected persons) applies for the purposes of this section.
- (12) This section shall be construed as one with section 587B.
#### Taxation of consideration for certain restrictive undertakings.
#### Divers and diving supervisors.
##### 589A
@@ -38706,5214 +38706,5214 @@
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Charges on income: interest payable to non-residents.
##### 596A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 596B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 596C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 599A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 605A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 606A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 611A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 611AA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 611A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 617A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The conditions mentioned in section 349A(1)
#### Company reconstructions without a change of ownership.
##### 631A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 632A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 632B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 634A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 636A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 637A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 638ZA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 638A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Company reconstructions involving business of leasing plant or machinery
##### 640A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 641A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 596A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 596B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 596C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 599A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 605A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 606A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 611A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 611AA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 611A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 617A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying maintenance payments.
##### 646A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 646B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 646C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 646D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Annuities: charge to tax
##### 648A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 648B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 650A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 651A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 653A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 658A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 659A
- (1) For the purposes of sections . . . 613(4), 614(3) and (4) . . . —
- (a) “*investments*” (or “*investment*”) includes futures contracts and options contracts, and
- (b) income derived from transactions relating to such contracts shall be regarded as income derived from (or income from) such contracts.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (2) For the purposes of subsection (1) above a contract is not prevented from being a futures contract or an options contract by the fact that any party is or may be entitled to receive or liable to make, or entitled to receive and liable to make, only a payment of a sum (as opposed to a transfer of assets other than money) in full settlement of all obligations.
##### 659B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 659C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 659D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 659E
- (1) The exemptions specified below do not apply to income derived from investments, deposits or other property held as a member of a property investment LLP.
- (2) The exemptions are those provided by—
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- section 613(4) (Parliamentary pension funds),
- section 614(3) (certain colonial, &c. pension funds),
- section 614(4) (the Overseas Service Pension Fund),
- section 614(5) (other pension funds for overseas employees),
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (3) The income to which subsection (1) above applies includes relevant stock lending fees, in relation to any investments, to which any of the provisions listed in subsection (2) above would apply by virtue of section 129B.
- (4) Section 659A (treatment of futures and options) applies for the purposes of subsection (1) above.
### Chapter IA — Liability of settlor
### Main provisions
#### The conditions mentioned in section 349A(1)
#### Company reconstructions without a change of ownership.
##### 631A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 632A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 632B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 634A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 636A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 637A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 638ZA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 638A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Company reconstructions involving business of leasing plant or machinery
##### 640A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 641A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying maintenance payments.
##### 646A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 646B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 646C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 646D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Annuities: charge to tax
##### 648A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 648B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 650A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 651A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 653A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 658A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 659A
- (1) For the purposes of sections . . . 613(4), 614(3) and (4) . . . —
- (a) “*investments*” (or “*investment*”) includes futures contracts and options contracts, and
- (b) income derived from transactions relating to such contracts shall be regarded as income derived from (or income from) such contracts.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (2) For the purposes of subsection (1) above a contract is not prevented from being a futures contract or an options contract by the fact that any party is or may be entitled to receive or liable to make, or entitled to receive and liable to make, only a payment of a sum (as opposed to a transfer of assets other than money) in full settlement of all obligations.
##### 659B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 659C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 659D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 659E
- (1) The exemptions specified below do not apply to income derived from investments, deposits or other property held as a member of a property investment LLP.
- (2) The exemptions are those provided by—
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- section 613(4) (Parliamentary pension funds),
- section 614(3) (certain colonial, &c. pension funds),
- section 614(4) (the Overseas Service Pension Fund),
- section 614(5) (other pension funds for overseas employees),
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (3) The income to which subsection (1) above applies includes relevant stock lending fees, in relation to any investments, to which any of the provisions listed in subsection (2) above would apply by virtue of section 129B.
- (4) Section 659A (treatment of futures and options) applies for the purposes of subsection (1) above.
### Chapter IA — Liability of settlor
### Main provisions
##### 660A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 660B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 660C
- (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (3) Subject to section 833(3), income which is treated by virtue of section 624 or 629 of ITTOIA 2005 (income where settlor retains an interest or income paid to relevant children of settlor) as income of a settlor shall be deemed for the purposes of section 619 of that Act (charge to tax under Chapter 5 of Part 5 of that Act) so far as relating to income so treated to be the highest part of his income.
- (4) Income which is treated for income tax purposes as the income of the settlor alone by virtue of section 624 or 629 of ITTOIA 2005 is accordingly not the income of any company for corporation tax purposes.
##### 660D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Supplementary provisions
##### 660E
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 660F
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 660G
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 674A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Exceptions to section 349 for payments between companies etc
#### The conditions mentioned in section 349A(1)
##### 660A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 660B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 660C
- (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (3) Subject to section 833(3), income which is treated by virtue of section 624 or 629 of ITTOIA 2005 (income where settlor retains an interest or income paid to relevant children of settlor) as income of a settlor shall be deemed for the purposes of section 619 of that Act (charge to tax under Chapter 5 of Part 5 of that Act) so far as relating to income so treated to be the highest part of his income.
- (4) Income which is treated for income tax purposes as the income of the settlor alone by virtue of section 624 or 629 of ITTOIA 2005 is accordingly not the income of any company for corporation tax purposes.
##### 660D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Supplementary provisions
##### 660E
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 660F
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 660G
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 674A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Extension of section 349: proceeds of sale of UK patent rights
##### 682A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### . . .
### . . .
##### 685A
- (1) For the purposes of the Tax Acts, unless the context otherwise requires,
- (a) “*settled property*” means any property held in trust other than—
- (i) property held by a person as nominee for another,
- (ii) property held by a person as trustee for another person who is absolutely entitled as against the trustee, and
- (iii) property held by a person as trustee for another person who would be absolutely entitled as against the trustee if he were not an infant or otherwise under a disability, and
- (b) references, however expressed, to property comprised in a settlement are references to settled property.
- (2) For the purposes of the Tax Acts, a reference to a person who is or would be absolutely entitled to property as against the trustee—
- (a) means a person who has the exclusive right (subject to satisfying the right of the trustees to resort to the property for the payment of duty, taxes, costs or other outgoings) to direct how the property shall be dealt with, and
- (b) includes two or more persons who are or would be jointly absolutely entitled as against the trustee.
##### 685B
- (1) In the Tax Acts, unless the context otherwise requires—
- (a) “*settlor*” in relation to a settlement means the person, or any of the persons, who has made or is treated for the purposes of the Tax Acts as having made the settlement, and
- (b) a person is a settlor of property which—
- (i) is settled property by reason of his having made the settlement (or by reason of an event which causes him to be treated under this Act as having made the settlement), or
- (ii) derives from property to which sub-paragraph (i) applies.
- (2) A person is treated for the purposes of the Tax Acts as having made a settlement if—
- (a) he has made or entered into the settlement, directly or indirectly, or
- (b) the settled property, or property from which the settled property is derived, is or includes property of which he was competent to dispose immediately before his death and the settlement arose on his death, whether by will, on his intestacy, or otherwise.
- (3) A person is, in particular, treated for the purposes of the Tax Acts as having made a settlement if—
- (a) he has provided property directly or indirectly for the purposes of the settlement, or
- (b) he has undertaken to provide property directly or indirectly for the purposes of the settlement.
- (4) Where one person (A) makes or enters into a settlement in accordance with reciprocal arrangements with another person (B), for the purposes of the Tax Acts—
- (a) B shall be treated as having made the settlement, and
- (b) A shall not be treated as having made the settlement by reason only of the reciprocal arrangements.
- (5) In subsection (2)(b) the reference to property of which a deceased person was competent to dispose is a reference to property of the deceased which (otherwise than in right of a power of appointment or of the testamentary power conferred by statute to dispose of entailed interests) he could, if of full age and capacity, have disposed of by his will, assuming that all the property were situated in England and, if he was not domiciled in the United Kingdom, that he was domiciled in England, and includes references to his severable share in any property to which, immediately before his death, he was beneficially entitled as a joint tenant.
- (6) A person who has been a settlor in relation to a settlement shall be treated for the purposes of the Tax Acts as having ceased to be a settlor in relation to the settlement if—
- (a) no property of which he is the settlor is comprised in the settlement,
- (b) he has not undertaken to provide property directly or indirectly for the purposes of the settlement in the future, and
- (c) he has not made reciprocal arrangements with another person for that other person to enter into the settlement in the future.
- (7) For the purpose of this section and sections 685C and 685D property is derived from other property—
- (a) if it derives (directly or indirectly and wholly or partly) from that property or any part of it, and
- (b) in particular, if it derives (directly or indirectly and wholly or partly) from income from that property or any part of it.
- (8) In this section “*arrangements*” includes any scheme, agreement or understanding, whether or not legally enforceable.
##### 685C
- (1) This section applies in relation to a transfer of property from the trustees of one settlement (“Settlement 1”) to the trustees of another (“Settlement 2”) otherwise than—
- (a) for full consideration, or
- (b) by way of a bargain made at arm's length.
- (2) In this section “*transfer of property*” means—
- (a) a disposal of property by the trustees of Settlement 1, and
- (b) the acquisition by the trustees of Settlement 2 of—
- (i) property disposed of by the trustees of Settlement 1, or
- (ii) property created by the disposal;
and a reference to transferred property is a reference to property acquired by the trustees of Settlement 2 on the disposal.
- (3) For the purposes of the Tax Acts, except where the context otherwise requires—
- (a) the settlor (or each settlor) of the property disposed of by the trustees of Settlement 1 shall be treated from the time of the disposal as having made Settlement 2, and
- (b) if there is more than one settlor of the property disposed of by the trustees of Settlement 1, each settlor shall be treated in relation to Settlement 2 as the settlor of a proportionate part of the transferred property.
- (4) For the purposes of the Tax Acts, except where the context otherwise requires, if and to the extent that the property disposed of by the trustees of Settlement 1 was provided for the purposes of Settlement 1, or is derived from property provided for the purposes of Settlement 1, the transferred property shall be treated from the time of the disposal as having been provided for the purposes of Settlement 2.
- (5) If transferred property is treated by virtue of subsection (4) as having been provided for the purposes of Settlement 2—
- (a) the person who provided the property disposed of by the trustees of Settlement 1, or property from which it was derived, for the purposes of Settlement 1 shall be treated as having provided the transferred property, and
- (b) if more than one person provided the property disposed of by the trustees of Settlement 1, or property from which it was derived, for the purposes of Settlement 1, each of them shall be treated as having provided a proportionate part of the transferred property.
- (6) But subsections (3) and (4) do not apply in relation to a transfer of property—
- (a) which occurs by reason only of the assignment or assignation by a beneficiary under Settlement 1 of an interest in that settlement to the trustees of Settlement 2,
- (b) which occurs by reason only of the exercise of a general power of appointment, or
- (c) to which section 685D(6) applies.
- (7) There is an acquisition or disposal of property for the purposes of this section if there would be an acquisition or disposal of property for the purposes of the 1992 Act.
##### 685D
- (1) This section applies where—
- (a) a disposition of property following a person's death is varied, and
- (b) section 62(6) of the 1992 Act applies in respect of the variation.
- (2) Where property becomes settled property in consequence of the variation (and would not, but for the variation, have become settled property), a person mentioned in subsection (3) shall be treated for the purposes of the Tax Acts, except where the context otherwise requires—
- (a) as having made the settlement, and
- (b) as having provided the property for the purposes of the settlement.
- (3) Those persons are—
- (a) a person who immediately before the variation was entitled to the property, or to property from which it derives, absolutely as legatee,
- (b) a person who would have become entitled to the property, or to property from which it derives, absolutely as legatee but for the variation,
- (c) a person who immediately before the variation would have been entitled to the property, or to property from which it derives, absolutely as legatee but for being an infant or other person under a disability, and
- (d) a person who would, but for the variation, have become entitled to the property, or to property from which it derives, absolutely as legatee if he had not been an infant or other person under a disability.
- (4) For the purposes of this section—
- (a) “*legatee*” includes any person taking under a testamentary disposition or on an intestacy or partial intestacy, whether he takes beneficially or as trustee,
- (b) property taken under a testamentary disposition or on an intestacy or partial intestacy includes any property appropriated by the personal representatives in or towards satisfaction of a pecuniary legacy or any other interest or share in the property devolving under the disposition or intestacy, and
- (c) a person taking under a donatio mortis causa shall be treated as a legatee and his acquisition as made at the time of the donor's death.
- (5) Where—
- (a) property would have become comprised in a settlement—
- (i) which arose on the deceased person's death (whether in accordance with his will, on his intestacy or otherwise, or
- (ii) which was already in existence on the deceased person's death (whether or not the deceased person was a settlor in relation to that settlement), but
- (b) in consequence of the variation the property, or property derived from it, becomes comprised in another settlement,
the deceased person shall be treated for the purposes of the Tax Acts, except where the context otherwise requires, as having made the other settlement.
- (6) Where—
- (a) immediately before the variation property is comprised in a settlement and is property of which the deceased person is a settlor, and
- (b) immediately after the variation the property, or property derived from it, becomes comprised in another settlement,
the deceased person shall be treated for the purposes of the Tax Acts, except where the context otherwise requires, as having made the other settlement.
- (7) If a person is treated as having made a settlement under subsection (5) or (6), for the purposes of the Tax Acts he shall be treated as having made the settlement immediately before his death.
- (8) But subsection (7) does not apply in relation to a settlement which arose on the person's death.
##### 685E
- (1) For the purposes of the Tax Acts the trustees of a settlement shall, unless the context otherwise requires, together be treated as if they were a single person (distinct from the persons who are the trustees of the settlement from time to time).
- (2) The deemed person referred to in subsection (1) shall be treated for the purposes of the Tax Acts as resident and ordinarily resident in the United Kingdom at any time when a condition in subsection (3) or (4) is satisfied.
- (3) Condition 1 is that all the trustees are resident in the United Kingdom.
- (4) Condition 2 is that—
- (a) at least one trustee is resident in the United Kingdom,
- (b) at least one is not resident in the United Kingdom, and
- (c) a settlor in relation to the settlement was resident, ordinarily resident or domiciled in the United Kingdom at a time which is a relevant time in relation to him.
- (5) In subsection (4)(c) “*relevant time*” in relation to a settlor means—
- (a) where the settlement arose on the settlor's death (whether by will, intestacy or otherwise), the time immediately before his death, and
- (b) in any other case, a time when the settlor made the settlement (or was treated for the purposes of the Tax Acts as making the settlement);
and, in the case of a transfer of property from Settlement 1 to Settlement 2 in relation to which section 685C applies, “*relevant time*” in relation to a settlor of the transferred property in respect of Settlement 2 includes any time which, immediately before the time of the disposal by the trustees of Settlement 1, was a relevant time in relation to that settlor in respect of Settlement 1.
- (6) A trustee who is not resident in the United Kingdom shall be treated for the purposes of subsections (3) and (4) as if he were resident in the United Kingdom at any time when he acts as trustee in the course of a business which he carries on in the United Kingdom through a branch, agency or permanent establishment there.
- (7) If the deemed person referred to in subsection (1) is not treated for the purposes of the Tax Acts as resident and ordinarily resident in the United Kingdom, then for the purposes of the Tax Acts it shall be treated as neither resident nor ordinarily resident in the United Kingdom.
- (8) If part of the settled property in relation to a settlement is vested in one trustee or body of trustees and another part of the settled property in relation to that settlement is vested in another trustee or body of trustees (and in particular where settled land within the meaning of the Settled Land Act 1925 (c. 18) is vested in the tenant for life and investments representing capital money are vested in the trustees of the settlement) they shall together be treated for the purposes of this section as constituting and, in so far as they act separately, as acting on behalf of a single body of trustees.
- (9) If the trustees of a settlement are carrying on a trade, profession or vocation, a change in the trustees of the settlement by reason of the coming into force of this section and section 685A shall not result in—
- (a) any of the trustees before the change permanently ceasing to carry on the trade, profession or vocation, or
- (b) any of the trustees after the change starting to carry on the trade, profession or vocation.
#### Directions disapplying section 349A(1)
##### 685F
- (1) Section 685E(2) and (7) shall not apply for any of the purposes of section 739 in relation to income payable before 15th June 1989, or for the purposes of subsection (3) of that section in relation to income payable on or after that date if—
- (a) the capital sum mentioned in that subsection was received, or the right to receive it was acquired, before that date, and
- (b) the sum was wholly repaid, or the right to it waived, before 1st October 1989.
- (2) Section 685E shall not apply for any of the purposes of section 740 in relation to benefits received before 15th June 1989; and, in relation to benefits received on or after that date, “*relevant income*” includes income arising to the trustees of a settlement before 6 April 1989, notwithstanding that one or more trustees was not resident outside the United Kingdom, unless the trustees have been charged to tax in relation to that income.
##### 685G
- (1) If the trustees of a settlement have made a sub-fund election under paragraph 1 of Schedule 4ZA to the 1992 Act, then for the purposes of the Tax Acts, unless the context otherwise requires—
- (a) the sub-fund settlement shall be treated as a settlement,
- (b) the sub-fund settlement shall be treated as having been created at the time when the sub-fund election is treated as having taken effect,
- (c) each trustee of the trusts on which the property comprised in the sub-fund settlement is held shall be treated as a trustee of the sub-fund settlement,
- (d) a person who is a trustee of the sub-fund settlement shall be treated, from the time when the election is to be treated as having taken effect, as having ceased to be a trustee of the principal settlement unless he is also a trustee of trusts on which property comprised in the principal settlement is held,
- (e) a person who is a trustee of the principal settlement shall not be treated as a trustee of the sub-fund settlement unless he is also a trustee of trusts on which property comprised in the sub-fund settlement is held, and
- (f) the trustees of the sub-fund settlement shall be treated as having become absolutely entitled, at the time when the sub-fund election is treated as having taken effect, to the property comprised in that settlement as against the trustees of the principal settlement.
- (2) References in subsection (1) to the time when the sub-fund election is treated as having taken effect are references to the time when the sub-fund election is treated as having taken effect under paragraph 2 of Schedule 4ZA to the 1992 Act.
- (3) In this section—
- “*principal settlement*” has the meaning given by paragraph 1 of Schedule 4ZA to the 1992 Act,
- “*sub-fund election*” has the meaning given by paragraph 2 of that Schedule, and
- “*sub-fund settlement*” has the meaning given by paragraph 1 of that Schedule.
#### The conditions mentioned in section 349A(1)
##### 682A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### . . .
### . . .
##### 685A
- (1) For the purposes of the Tax Acts, unless the context otherwise requires,
- (a) “*settled property*” means any property held in trust other than—
- (i) property held by a person as nominee for another,
- (ii) property held by a person as trustee for another person who is absolutely entitled as against the trustee, and
- (iii) property held by a person as trustee for another person who would be absolutely entitled as against the trustee if he were not an infant or otherwise under a disability, and
- (b) references, however expressed, to property comprised in a settlement are references to settled property.
- (2) For the purposes of the Tax Acts, a reference to a person who is or would be absolutely entitled to property as against the trustee—
- (a) means a person who has the exclusive right (subject to satisfying the right of the trustees to resort to the property for the payment of duty, taxes, costs or other outgoings) to direct how the property shall be dealt with, and
- (b) includes two or more persons who are or would be jointly absolutely entitled as against the trustee.
##### 685B
- (1) In the Tax Acts, unless the context otherwise requires—
- (a) “*settlor*” in relation to a settlement means the person, or any of the persons, who has made or is treated for the purposes of the Tax Acts as having made the settlement, and
- (b) a person is a settlor of property which—
- (i) is settled property by reason of his having made the settlement (or by reason of an event which causes him to be treated under this Act as having made the settlement), or
- (ii) derives from property to which sub-paragraph (i) applies.
- (2) A person is treated for the purposes of the Tax Acts as having made a settlement if—
- (a) he has made or entered into the settlement, directly or indirectly, or
- (b) the settled property, or property from which the settled property is derived, is or includes property of which he was competent to dispose immediately before his death and the settlement arose on his death, whether by will, on his intestacy, or otherwise.
- (3) A person is, in particular, treated for the purposes of the Tax Acts as having made a settlement if—
- (a) he has provided property directly or indirectly for the purposes of the settlement, or
- (b) he has undertaken to provide property directly or indirectly for the purposes of the settlement.
- (4) Where one person (A) makes or enters into a settlement in accordance with reciprocal arrangements with another person (B), for the purposes of the Tax Acts—
- (a) B shall be treated as having made the settlement, and
- (b) A shall not be treated as having made the settlement by reason only of the reciprocal arrangements.
- (5) In subsection (2)(b) the reference to property of which a deceased person was competent to dispose is a reference to property of the deceased which (otherwise than in right of a power of appointment or of the testamentary power conferred by statute to dispose of entailed interests) he could, if of full age and capacity, have disposed of by his will, assuming that all the property were situated in England and, if he was not domiciled in the United Kingdom, that he was domiciled in England, and includes references to his severable share in any property to which, immediately before his death, he was beneficially entitled as a joint tenant.
- (6) A person who has been a settlor in relation to a settlement shall be treated for the purposes of the Tax Acts as having ceased to be a settlor in relation to the settlement if—
- (a) no property of which he is the settlor is comprised in the settlement,
- (b) he has not undertaken to provide property directly or indirectly for the purposes of the settlement in the future, and
- (c) he has not made reciprocal arrangements with another person for that other person to enter into the settlement in the future.
- (7) For the purpose of this section and sections 685C and 685D property is derived from other property—
- (a) if it derives (directly or indirectly and wholly or partly) from that property or any part of it, and
- (b) in particular, if it derives (directly or indirectly and wholly or partly) from income from that property or any part of it.
- (8) In this section “*arrangements*” includes any scheme, agreement or understanding, whether or not legally enforceable.
##### 685C
- (1) This section applies in relation to a transfer of property from the trustees of one settlement (“Settlement 1”) to the trustees of another (“Settlement 2”) otherwise than—
- (a) for full consideration, or
- (b) by way of a bargain made at arm's length.
- (2) In this section “*transfer of property*” means—
- (a) a disposal of property by the trustees of Settlement 1, and
- (b) the acquisition by the trustees of Settlement 2 of—
- (i) property disposed of by the trustees of Settlement 1, or
- (ii) property created by the disposal;
and a reference to transferred property is a reference to property acquired by the trustees of Settlement 2 on the disposal.
- (3) For the purposes of the Tax Acts, except where the context otherwise requires—
- (a) the settlor (or each settlor) of the property disposed of by the trustees of Settlement 1 shall be treated from the time of the disposal as having made Settlement 2, and
- (b) if there is more than one settlor of the property disposed of by the trustees of Settlement 1, each settlor shall be treated in relation to Settlement 2 as the settlor of a proportionate part of the transferred property.
- (4) For the purposes of the Tax Acts, except where the context otherwise requires, if and to the extent that the property disposed of by the trustees of Settlement 1 was provided for the purposes of Settlement 1, or is derived from property provided for the purposes of Settlement 1, the transferred property shall be treated from the time of the disposal as having been provided for the purposes of Settlement 2.
- (5) If transferred property is treated by virtue of subsection (4) as having been provided for the purposes of Settlement 2—
- (a) the person who provided the property disposed of by the trustees of Settlement 1, or property from which it was derived, for the purposes of Settlement 1 shall be treated as having provided the transferred property, and
- (b) if more than one person provided the property disposed of by the trustees of Settlement 1, or property from which it was derived, for the purposes of Settlement 1, each of them shall be treated as having provided a proportionate part of the transferred property.
- (6) But subsections (3) and (4) do not apply in relation to a transfer of property—
- (a) which occurs by reason only of the assignment or assignation by a beneficiary under Settlement 1 of an interest in that settlement to the trustees of Settlement 2,
- (b) which occurs by reason only of the exercise of a general power of appointment, or
- (c) to which section 685D(6) applies.
- (7) There is an acquisition or disposal of property for the purposes of this section if there would be an acquisition or disposal of property for the purposes of the 1992 Act.
##### 685D
##### 686A
- (1) Where the trustees of a settlement (other than the trustees of a unit trust scheme)—
- (a) receive or are entitled to a payment of a kind specified in subsection (2), or
- (b) are liable for tax in respect of a gain on a chargeable event of a kind specified in subsection (2),
the payment or gain shall be treated as if it were income to which section 686 applies.
- (2) Those payments and gains are—
- (a) a payment made by a company—
- (i) on the redemption, repayment or purchase of its own shares, or
- (ii) on the purchase of rights to acquire its own shares,
- (b) a gain arising on a chargeable event in respect of which the trustees are liable for tax under section 467 of ITTOIA 2005 (gains on contracts for life insurance, etc), other than a gain to which subsection (7)(a) of that section applies,
- (c) if the trustees are resident in the United Kingdom, a profit on the disposal of a deeply discounted security in respect of which the trustees are liable for tax under section 429 of ITTOIA 2005,
- (d) a sum to which Chapter 4 of Part 3 of ITTOIA 2005 applies,
- (e) a profit on the disposal of a future or option in respect of which the trustees are liable for tax under section 557 of ITTOIA 2005, if none of conditions A to C in section 568 of that Act are met,
- (f) a profit on the disposal of a deposit in respect of which the trustees are liable for tax under section 554 of ITTOIA 2005,
- (g) the proceeds of sale of a foreign dividend coupon in respect of which the trustees are liable for tax under section 573 of ITTOIA 2005,
- (h) a sum which is chargeable to tax under section 68(2) or 71(4) of the Finance Act 1989 (c. 26) (employee share ownership trusts: chargeable events),
- (i) an offshore income gain (within the meaning of section 761 of this Act), and
- (j) a gain on a disposal of land to which section 776 of this Act applies.
##### 686B
- (1) This section applies to income of the trustees of an approved share incentive plan consisting of dividends or other distributions in respect of shares held by them in relation to which the requirements of Part 4 of Schedule 2 to ITEPA 2003 (approved share incentive plans: types of shares that may be awarded) are met.
- (2) Income to which this section applies is income to which section 686 applies only if and when—
- (a) the period applicable to the shares under the following provisions of this section comes to an end without the shares being awarded to a participant in accordance with the plan, or
- (b) if earlier, the shares are disposed of by the trustees.
- (3) If any of the shares in the company in question are readily convertible assets at the time the shares are acquired by the trustees, the period applicable to the shares is the period of two years beginning with the date on which the shares were acquired by the trustees.
This is subject to subsection (5).
- (4) If at the time of the acquisition of the shares by the trustees none of the shares in the company in question are readily convertible assets, the period applicable to the shares is—
- (a) the period of five years beginning with the date on which the shares were acquired by the trustees, or
- (b) if within that period any of the shares in that company become readily convertible assets, the period of two years beginning with the date on which they did so,
whichever ends first.
This is subject to subsection (5).
- (5) If the shares are acquired by the trustees by virtue of a payment in respect of which a deduction is allowed under paragraph 9 of Schedule 4AA (deduction for contribution to plan trust), the period applicable to the shares is the period of ten years beginning with the date of acquisition.
- (6) For the purposes of determining whether shares are awarded to a participant within the period applicable under the above provisions, shares acquired by the trustees at an earlier time are taken to be awarded to a participant before shares of the same class acquired by the trustees at a later time.
- (7) For the purposes of this section shares which are subject to provision for forfeiture are treated as acquired by the trustees if and when the forfeiture occurs.
- (8) In relation to shares acquired by the trustees before 11th May 2001 this section has effect with the substitution—
- (a) in subsection (3), of “Subject to subsection (4)” for the words before “the period applicable”, and
- (b) in subsection (4)(b), of “the shares in question” for “any of the shares in that company”.
##### 686C
- (1) Section 686B and this section form part of the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)).
- (2) Accordingly, expressions used in section 686B or this section and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by that index.
- (3) References in section 686B to shares being awarded to a participant include references to the shares being acquired on behalf of the participant as dividend shares.
- (4) In section 686B, “*readily convertible assets*” has the meaning given by sections 701 and 702 of ITEPA 2003, but this is subject to subsection (5).
- (5) In determining for the purposes of section 686B whether shares are readily convertible assets, any market for the shares that—
- (a) is created by virtue of the trustees acquiring shares for the purposes of the plan, and
- (b) exists solely for the purposes of the plan,
shall be disregarded.
##### 686D
- (1) This section applies where income arising (or treated as arising) to the trustees of a settlement in a year of assessment consists of or includes income subject to a special trust tax rate (“the special trust tax rate income”).
- (2) “*Income subject to a special trust tax rate*” means any income which is (or apart from this section would be) chargeable to income tax at—
- (a) the dividend trust rate, or
- (b) the rate applicable to trusts.
- (3) So much of the special trust tax rate income as does not exceed £1,000 is not chargeable to income tax at the dividend trust rate or the rate applicable to trusts (but is instead chargeable to income tax at the basic rate, the lower rate or the dividend ordinary rate, depending on the nature of the income).
- (4) In the following provisions “*the relevant purposes*” means the purposes of—
- (a) determining (in accordance with section 1A(5)) which of the special trust tax rate income is not chargeable to income tax at the dividend trust rate, or the rate applicable to trusts, by virtue of subsection (3), and
- (b) determining at which of the basic rate, the lower rate and the dividend ordinary rate that special trust tax rate income is chargeable to income tax.
- (5) For the relevant purposes the fact that any amount forming part of the special trust tax rate income is subject to a special trust tax rate is to be disregarded if, in any circumstances, an amount of that description is chargeable on trustees at the basic rate, the lower rate or the dividend ordinary rate.
- (6) For the relevant purposes any of the special trust tax rate income that consists of—
- (a) an amount which, by virtue of section 686A, is treated for the purposes of the Tax Acts as if it were income to which section 686 applies, or
- (b) income treated as arising under Chapter 5 of Part 4 of ITTOIA 2005 (stock dividends from UK resident companies),
is to be regarded as income to which section 1A applies and which is chargeable at the dividend ordinary rate.
- (7) For the relevant purposes any of the special trust tax rate income that consists of—
- (a) income treated as arising under section 761(1) (offshore income gains),
- (b) income treated as received under section 68 of the Finance Act 1989 (c. 26) (employee share ownership trusts), or
- (c) profits or gains which are treated as income under Chapter 12 of Part 4 of ITTOIA 2005 (guaranteed returns on disposals of futures and options) and in relation to which section 568 of that Act applies (profits or gains not meeting conditions of that section),
is or are to be regarded as chargeable at the basic rate.
- (8) For the relevant purposes any of the special trust tax rate income that consists of—
- (a) income treated as received under section 714(2) or 716(3) (transfers of securities),
- (b) profits taken to be income arising under Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities), or
- (c) gains which are treated as arising under Chapter 9 of that Part and on which tax is charged at the rate applicable to trusts under section 467(7)(b) of that Act (gains from contracts for life assurance),
is or are chargeable at the lower rate.
#### The conditions mentioned in section 349A(1)
##### 686E
- (1) If a settlor in relation to a settlement has made more than one settlement, section 686D shall have effect in relation to each settlement made by him with the following modification.
- (2) The reference in subsection (3) to £1000 shall be treated as a reference to—
- (a) £200, or
- (b) such amount as may be obtained by dividing £1000 by the total number of settlements in the class, provided that the amount is not less than £200.
- (3) If there is more than one settlor in relation to a settlement, the amount shall be the amount obtained under subsection (2)(b) in relation to the largest class of settlements.
- (4) In this section a reference to a class of settlements is a reference to the class of settlements which were made by a settlor and which are in existence during any part of the year of assessment.
##### 687A
- (1) This section applies where—
- (a) a disposition of property following a person's death is varied, and
- (b) section 62(6) of the 1992 Act applies in respect of the variation.
- (2) Where property becomes settled property in consequence of the variation (and would not, but for the variation, have become settled property), a person mentioned in subsection (3) shall be treated for the purposes of the Tax Acts, except where the context otherwise requires—
- (a) as having made the settlement, and
- (b) as having provided the property for the purposes of the settlement.
- (3) Those persons are—
- (a) a person who immediately before the variation was entitled to the property, or to property from which it derives, absolutely as legatee,
- (b) a person who would have become entitled to the property, or to property from which it derives, absolutely as legatee but for the variation,
- (c) a person who immediately before the variation would have been entitled to the property, or to property from which it derives, absolutely as legatee but for being an infant or other person under a disability, and
- (d) a person who would, but for the variation, have become entitled to the property, or to property from which it derives, absolutely as legatee if he had not been an infant or other person under a disability.
- (a) the trustees of a settlement make a payment to a company;
- (b) section 687 applies to the payment; and
- (c) the company is chargeable to corporation tax and does not fall within subsection (2) below.
- (2) A company falls within this subsection if it is—
- (a) a charity, as defined in section 506(1);
- (b) a body mentioned in section 507 (heritage bodies); or
- (c) an Association of a description specified in section 508 (scientific research organisations).
- (3) Where this section applies—
- (a) none of the following provisions, namely—
- (i) section 7(2),
- (ii) section 11(3),
- (iii) paragraph 5(1) of Schedule 16,
shall apply in the case of the payment;
- (b) the payment shall be left out of account in calculating the profits of the company for the purposes of corporation tax; and
- (c) no repayment shall be made of the amount treated under section 687(2) as income tax paid by the company in the case of the payment.
- (4) If the company is not resident in the United Kingdom, this section applies only in relation to so much (if any) of the payment as is comprised in the company’s chargeable profits for the purposes of corporation tax.
### Chapter ID — Trust management expenses
##### 689A
- (1) This section applies where—
- (a) there is income (“the distributed income”) arising to the trustees of a settlement in any year of assessment which (before being distributed) is income of a person (“the beneficiary”) other than the trustees;
- (b) the trustees have any expenses in that year (“the management expenses”) which are properly chargeable to that income or would be so chargeable but for any express provisions of the trust; and
- (c) the beneficiary is not liable to income tax on an amount of the distributed income (“the untaxed income”) by reason wholly or partly of—
- (i) his not having been resident in the United Kingdom, or
- (ii) his being deemed under any arrangements under section 788, or any arrangements having effect by virtue of that section, to have been resident in a territory outside the United Kingdom.
- (2) Where this section applies, there shall be disregarded in computing the income of the beneficiary for the purposes of the Income Tax Acts such part of the management expenses as bears the same proportion to all those expenses as the untaxed income bears to the distributed income.
- (3) For the purpose of computing the proportion mentioned in subsection (2) above, the amounts of the distributed income and of the untaxed income shall not, in either case, include so much (if any) of the income as is equal to the amount of income tax, or of any foreign tax, chargeable on the trustees (by way of deduction or otherwise) in respect of that income.
- (4) In subsection (3) above, “foreign tax” means any tax which is—
- (a) of a similar character to income tax; and
- (b) imposed by the laws of a territory outside the United Kingdom.
- (5) For the purposes of this section, where the income tax chargeable on any person is limited in accordance with section 128 of the Finance Act 1995 (limit on income chargeable on non-residents), the income of that person on which he is not liable to tax by reason of not having been resident in the United Kingdom shall be taken to include so much of any income of his as—
- (a) is excluded income within the meaning of that section; and
- (b) is not income which is treated for the purposes of subsection (1)(b) of that section as income the tax on which is deducted at source.
##### 689B
- (1) The expenses of the trustees of a settlement in any year of assessment, so far as they are properly chargeable to income (or would be so chargeable but for any express provisions of the trust), shall be treated—
- (a) as set against so much (if any) of any income as is income falling within subsection (2) , (2A) or (3) below before being set against other income; and
- (b) as set against so much (if any) of any income as is income falling within subsection (2) or (2A) below before being set against income falling within subsection (3) below; and
- (c) as set against so much (if any) of any income as is income falling within subsection (2) below before being set against income falling within subsection (2A) below.
- (2) Income falls within this subsection if it is—
- (a) so much of the income of the trustees as is income chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.);
- (b) income treated as arising to the trustees under Chapter 5 of that Part (stock dividends from UK resident companies); or
- (c) income chargeable under Chapter 6 of that Part (release of loan to participator in close company).
- (2A) Income falls within this subsection if it is —
- (a) income chargeable under Chapter 4 of Part 4 of ITTOIA 2005 (dividends from non-UK resident companies); or
- (b) a relevant foreign distribution chargeable under Chapter 8 of Part 5 of that Act (income not otherwise charged).
- (2B) In subsection (2A) “*relevant foreign distribution*” means any distribution of a company not resident in the United Kingdom which—
- (a) is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but
- (b) would be chargeable under Chapter 3 of that Part if the company were resident in the United Kingdom.
- (3) Income falls within this subsection if it is income to which section 1A applies but which does not fall within subsection (2) or (2A) above.
- (4) This section has effect—
- (a) subject to sections 686(2A) and 689A, but
- (b) notwithstanding anything in section 1A(5) and (6).
##### 698A
- (1) Subject to subsection (3) below, in so far as any income of any person is treated under this Part as having borne income tax at the lower rate, section 1A shall have effect as if that income were income to which that section applies otherwise than by virtue of the income being income chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.).
- (2) Subject to subsection (3) below, in so far as any income of any person is treated under this Part as having borne income tax at the dividend ordinary rate, that income shall be treated as if it were income chargeable under Chapter 3 of Part 4 of ITTOIA 2005.
- (3) Subsections (1) and (2) above shall not apply to income paid indirectly through a trustee and treated by virtue of section 698(3) above or of section 662 of ITTOIA 2005 read with section 656(3) or 657(4) of that Act as having borne income tax at the lower rate or the dividend ordinary rate; but, subject to section 686(1), section 1A shall have effect as if the payment made to the trustee were income of the trustee—
- (a) to which section 1A applies by virtue of the income being chargeable under Chapter 3 of Part 4 of ITTOIA 2005, in the case of income treated as having borne tax at the dividend ordinary rate; and
- (b) to which section 1A applies otherwise than by virtue of the income being chargeable under Chapter 3 of Part 4 of ITTOIA 2005, in any other case.
##### 699A
- (1) In this section “*a relevant amount*” means so much of any amount which a person is deemed by virtue of this Part to receive or to have a right to receive as is or would be paid out of sums which—
- (a) are included in the aggregate income of the estate of the deceased by virtue of any of paragraphs (c) to (e) of section 701(8) below; and
- (b) are sums in respect of which the personal representatives are not directly assessable to United Kingdom income tax;
or out of any sums included in the aggregate income of the estate of the deceased which fall within subsection (1A) below.
- (1A) A sum falls within this subsection if it is a sum in respect of—
- (a) a distribution chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.); . . .
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (1B) Any reference in this Part to a sum to which subsection (1)(a) and (b) above applies includes a reference to a sum falling within subsection (1A) above which is included in the aggregate income of the estate of the deceased.
- (2) In determining for the purposes of this Part whether any amount is a relevant amount—
- (a) such apportionments of any sums to which subsection (1)(a) and (b) above applies shall be made between different persons with interests in the residue of the estate as are just and reasonable in relation to their different interests; and
- (b) subject to paragraph (a) above, the assumptions in section 701(3A)(b) shall apply, but (subject to that) it shall be assumed that payments are to be made out of other sums comprised in the aggregate income of the estate before they are made out of any sums to which subsection (1)(a) and (b) above applies.
- (3) In the case of a foreign estate, and notwithstanding anything in section 695(4)(b) or 696(6), a relevant amount shall be deemed—
- (a) to be income of such amount as would, after deduction of income tax for the year in which it is deemed to be paid, be equal to the relevant amount; and
- (b) to be income that has borne tax at the applicable rate.
- (4) Sums to which subsection (1)(a) and (b) above applies shall be assumed, for the purpose of determining the applicable rate in relation to any relevant amount, to bear tax—
- (a) in the case of sums included by virtue of section 701(8)(c) or (d), at the dividendordinary rate, and
- (b) in the case of sums included by virtue of section 701(8)(e), at the lower rate; and
- (c) in the case of sums falling within subsection (1A) above, at the dividend ordinary rate.
- (5) No repayment shall be made of any income tax which by virtue of this Part is treated as having been borne by the income that is represented by a relevant amount.
- (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Substitution of security: supplemental.
#### Relief where borrower deceased.
##### 705A
- (1) Immediately after the determination by the tribunal of an appeal re-heard by them under section 705 of this Act, the appellant or the Board, if dissatisfied with the determination as being erroneous in point of law, may declare his or their dissatisfaction to the tribunal.
- (2) The appellant or the Board, as the case may be, having declared his or their dissatisfaction, may, within thirty days after the determination, by notice in writing require the tribunal to state and sign a case for the opinion of the High Court.
- (3) The party requiring the case shall pay to the tribunal a fee of £25 for and in respect of the same, before he is entitled to have the case stated.
- (4) The case shall set forth the facts and the determination of the tribunal, and the party requiring it shall transmit the case, when stated and signed, to the High Court, within thirty days after receiving the same.
- (5) At or before the time when he transmits the case to the High Court, the party requiring it shall send notice in writing of the fact that the case has been stated on his application, together with a copy of the case, to the other party.
- (6) The High Court shall hear and determine any question of law arising on the case, and may reverse, affirm or amend the determination in respect of which the case has been stated, or remit the matter to the tribunal with the Court’s opinion on it, or make such other order in relation to the matter as the Court thinks fit.
- (7) The High Court may cause the case to be sent back for amendment, and thereupon the case shall be amended accordingly, and judgment shall be delivered after it has been amended.
- (8) Subject to subsection (9) below and to Part II of the Administration of Justice Act 1969 (appeal from High Court to House of Lords), an appeal shall, in England and Wales, lie from the decision of the High Court to the Court of Appeal and thence to the House of Lords.
- (9) No appeal shall lie to the House of Lords from the Court of Appeal unless leave has been given under and in accordance with section 1 of the Administration of Justice (Appeals) Act 1934.
- (10) Subject to subsection (11) below, where the determination of the tribunal is in respect of an assessment made in accordance with a notice under subsection (3) of section 703, then notwithstanding that a case has been required to be stated or is pending before the High Court in respect of the determination, tax shall be paid in accordance with the determination.
- (11) If the amount charged by the assessment is altered by the order or judgment of the High Court, then—
- (a) if too much tax has been paid the amount overpaid shall be refunded with such interest, if any, as the High Court may allow; or
- (b) if too little tax has been charged, the amount undercharged shall be due and payable at the expiration of a period of thirty days beginning with the date on which the Board issue to the other party a notice of the total amount payable in accordance with the order or judgment of that Court.
- (12) All matters within the jurisdiction of the High Court under this section shall be assigned in Scotland to the Court of Session sitting as the Court of Exchequer (references in this section to the High Court being construed accordingly); and an appeal shall lie from the decision under this section of the Court of Session, as the Court of Exchequer in Scotland, to the House of Lords.
##### 705B
- (1) A case which is stated by the tribunal under section 705A in proceedings in Northern Ireland shall be a case for the opinion of the Court of Appeal in Northern Ireland, and the Taxes Acts (as defined in section 118(1) of the Management Act shall have effect as if that section applied in relation to such proceedings—
- (a) with the substitution for references to the High Court of references to the Court of Appeal in Northern Ireland;
- (b) with the omission of subsections (4), (5), (8) and (9) of that section.
- (2) The procedure relating to the transmission of the case to, and the hearing and determination of the case by, the Court of Appeal in Northern Ireland shall be that for the time being in force in Northern Ireland as respects cases stated by a county court in exercise of its general jurisdiction, and an appeal shall lie from the Court of Appeal to the House of Lords in accordance with section 42 of the Judicature (Northern Ireland) Act 1978.
- (3) Where in proceedings in Northern Ireland an application is made for a case to be stated by the tribunal under this section, the case must be settled and sent to the applicant as soon after the application as is reasonably practicable.
- (4) For the purposes of this section “proceedings in Northern Ireland” means proceedings as respects which the place given by the rules in Schedule 3 to the Management Act is in Northern Ireland.
#### Section 349A(1): consequences of reasonable but incorrect belief
#### Loan to buy machinery or plant.
#### Loan to buy life annuity.
##### 722A
- (1) For the purposes of sections 710 to 728, where a gilt-edged security is exchanged by any person for strips of that security the security shall be deemed to have been transferred by that person.
- (2) Nothing in subsection (1) above shall have effect to cause any person to be treated as the transferee of any securities for the purposes of section 713(2)(b).
- (3) For the purposes of sections 710 to 728, where strips of gilt-edged securities are exchanged by any person for a single gilt-edged security consolidating those strips, that security shall be deemed to have been transferred to that person.
- (4) Nothing in subsection (3) above shall have effect to cause any person to be treated as the transferor of any securities for the purposes of section 713(2)(a).
- (5) In this section—
#### Relevant loan interest.
##### 726A
- (1) This section applies where—
- (a) securities (old securities) of a particular kind are issued by way of the original issue of securities of that kind,
- (b) on a later occasion securities (new securities) of the same kind are issued,
- (c) a sum (the extra return) is payable in respect of the new securities, by the person issuing them, to reflect the fact that interest is accruing on the old securities,
- (d) the issue price of the new securities includes an element (whether or not separately identified) representing payment for the extra return, and
- (e) the extra return is equal to the amount of interest payable for the relevant period on so many old securities as there are new (or, if there are more new securities than old, the amount of interest which would be so payable if there were as many old securities as new).
- (2) For the purposes of sections 710 to 728—
- (a) the new securities shall be treated as having been issued on the relevant day;
- (b) they shall be treated as transferred to the person to whom they are in fact issued (though not treated as transferred by any person);
- (c) the transfer shall be treated as a transfer with accrued interest and as made on the day on which the new securities are in fact issued;
- (d) that day shall be treated as the settlement day (notwithstanding section 712);
but this subsection is subject to subsection (7) below.
- (3) If the new securities are in fact issued under an arrangement by virtue of which the acquirer accounts to the issuer separately for the extra return mentioned in subsection (1) above and the rest of the issue price, in relation to the transfer mentioned in subsection (2)(b) above—
- (a) section 713(4) shall not apply, and
- (b) for the purposes of section 713(2) the accrued amount shall be the amount found under subsection (4) or (5) below (as the case may be);
and here “*the acquirer*” means the person to whom the new securities are in fact issued and “*the issuer*” means the person by whom they are in fact issued.
- (4) Subject to subsection (5) below, the amount is one equal to the amount (if any) of the extra return separately accounted for.
- (5) If the interest on the new securities is payable in a currency other than sterling, the amount is the sterling equivalent on the settlement day of the amount found under subsection (4) above; and for this purpose the sterling equivalent of an amount on the settlement day is the sterling equivalent calculated by reference to the London closing rate of exchange for that day.
- (6) If the new securities are in fact issued otherwise than as mentioned in subsection (3) above, section 713(4)(b) shall apply in relation to the transfer mentioned in subsection (2)(b) above.
- (7) If the new securities are securities to which section 717 applies (after applying subsection (2)(a) above) subsection (2)(b) to (d) above shall not apply.
- (8) For the purposes of this section the relevant period is the period beginning with the day following the relevant day and ending with the day on which the new securities are in fact issued.
- (9) For the purposes of this section the relevant day is—
- (a) the last (or only) interest payment day to fall in respect of the old securities before the day on which the new securities are in fact issued, or
- (b) the day on which the old securities were issued, in a case where no interest payment day fell in respect of them before the day on which the new securities are in fact issued.
##### 727A
- (1) Where securities are transferred under an agreement to sell them, and the transferor or a person connected with him—
- (a) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or
- (b) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises,
section 713(2) and (3) and section 716 do not apply to the transfer by the transferor or the transfer back except in a case where section 730A of the Taxes Act 1988 is prevented from applying by subsection (8) of that section.
- (2) For the purposes of this section agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).
- (3) Section 839 (connected persons) applies for the purposes of this section.
- (4) References in this section to buying back securities include buying similar securities.
- (5) For the purposes of this section—
- (a) a person connected with the transferor who is required to buy securities sold by the transferor shall be treated as being required to buy the securities back, and
- (b) a person connected with the transferor who acquires an option to buy securities sold by the transferor shall be treated as acquiring an option to buy the securities back,
notwithstanding that it was not he who sold them.
#### Interest ceasing to be relevant loan interest, etc.
##### 730A
- (1) Subject to subsection (8) below, this section applies where—
- (a) a person (“the original owner”) has transferred any securities to another person (“the interim holder”) under an agreement to sell them;
- (b) the original owner or a person connected with him—
- (i) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or
- (ii) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises; and
- (c) the sale price and the repurchase price are different.
- (2) The difference between the sale price and the repurchase price shall be treated for the purposes of the Tax Acts—
- (a) where the repurchase price is more than the sale price, as a payment of interest made by the repurchaser on a deemed loan from the interim holder of an amount equal to the sale price; and
- (b) where the sale price is more than the repurchase price, as a payment of interest made by the interim holder on a deemed loan from the repurchaser of an amount equal to the repurchase price.
- (3) Where any amount is deemed under subsection (2) above to be a payment of interest, that payment shall be deemed for the purposes of the Tax Acts to be one that becomes due at the time when the repurchase price becomes due and, accordingly, is treated as paid when that price is paid.
- (4) Where any amount is deemed under subsection (2) above to be a payment of interest, the repurchase price shall be treated for the purposes of the Tax Acts (other than the excepted provisions specified in subsection (4A) below) and (in cases where section 263A of the 1992 Act does not apply) for the purposes of the 1992 Act—
- (a) in a case falling within paragraph (a) of that subsection, as reduced by the amount of the deemed payment; and
- (b) in a case falling within paragraph (b) of that subsection, as increased by the amount of the deemed payment.
This subsection is subject to subsection (4B) below.
- (4A) The excepted provisions are—
- (a) this section,
- (b) section 730BB, apart from subsection (7),
- (c) section 737A, and
- (d) section 737C.
- (4B) Where section 730BB(7) has effect (repurchase price to be treated as increased or reduced for certain purposes), subsection (4) above does not have effect for any purpose other than that of determining the amount that falls to be increased or reduced under section 730BB(7).
- (5) For the purposes of section 209(2)(d) . . . any amount which is deemed under subsection (2)(a) above to be a payment of interest shall be deemed to be interest in respect of securities issued by the repurchaser and held by the interim holder.
- (5A) For the purposes of the Corporation Tax Acts, a company has a relationship to which this section applies in any case where—
- (a) the circumstances are as set out in subsection (1) above; and
- (b) interest on a deemed loan is deemed by virtue of subsection (2) above to be paid by or to the company;
and references to a relationship to which this section applies, and to a company’s being party to such a relationship, shall be construed accordingly.
- (6) Where a company has a relationship to which this section applies—
- (a) Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships) shall, as respects that company, have effect in relation to the interest deemed by virtue of subsection (2) above to be paid or received by the company under that relationship as it would have effect if it were interest under a loan relationship to which the company is a party,
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
and
- (c) the only debits or credits to be brought into account for the purposes of that Chapter by virtue of this subsection in respect of a relationship are those relating to that deemed interest,
and, subject to paragraph (c) above, references in the Corporation Tax Acts to a loan relationship accordingly include a reference to a relationship to which this section applies.
- (6A) Any question whether debits or credits brought into account in accordance with subsection (6) above in relation to any company—
- (a) are to be brought into account under section 82(2) of the Finance Act 1996 (trading loan relationships), or
- (b) are to be treated as non-trading debits or credits,
shall be determined (subject to Schedule 11 to that Act (insurance companies)) according to the extent (if any) to which the company is a party to the repurchase in the course of activities forming an integral part of a trade carried on by the company.
- (6B) To the extent that debits or credits fall to be brought into account by a company under section 82(2) of the Finance Act 1996 in the case of a relationship to which this section applies, the company shall be regarded for the purposes of Chapter 2 of Part 4 of that Act as being party to the relationship for the purposes of a trade carried on by the company.
- (7) The Treasury may by regulations provide for any amount which is deemed under subsection (2) above to be received as a payment of interest to be treated, in such circumstances and to such extent as may be described in the regulations, as comprised in income that is eligible for relief from tax by virtue of section 438, 613(4) or 614(2), (3) or (4) or section 186 of the Finance Act 2004.
- (8) Except where regulations under section 737E otherwise provide, this section does not apply if—
- (a) the agreement or agreements under which provision is made for the sale and repurchase are not such as would be entered into by persons dealing with each other at arm’s length; or
- (b) all of the benefits and risks arising from fluctuations, before the repurchase takes place, in the market value of the securities sold accrue to, or fall on, the interim holder.
- (8A) In this section references to the sale price are to be construed—
- (a) in a case where the securities are bought back by the transferor or a person connected with him in compliance with a requirement imposed in consequence of the exercise of an option acquired under the agreement to sell the securities or any related agreement, as references to what would otherwise be the sale price plus the amount of any consideration given for the option, and
- (b) in a case where the securities are so bought back in the exercise of an option so acquired, as references to what would otherwise be the sale price less the amount of any consideration so given,
unless the consideration is brought into account under Schedule 26 to the Finance Act 2002 (derivative contracts).
- (9) In this section references to the repurchase price are to be construed—
- (a) in cases where section 737A applies, and
- (b) in cases where section 737A would apply if it were in force in relation to the securities in question,
as references to the repurchase price which is or, as the case may be, would be applicable by virtue of section 737C(3)(b), (9) or (11)(c).
##### 730B
- (1) For the purposes of section 730A agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).
- (2) References in section 730A to buying back securities—
- (a) shall include references to buying similar securities; and
- (b) in relation to a person connected with the original owner, shall include references to buying securities sold by the original owner or similar securities,
notwithstanding (in each case) that the securities bought have not previously been held by the purchaser; and references in that section to repurchase or to a repurchaser shall be construed accordingly.
- (3) In section 730A and this section “*securities*” has the same meaning as in section 737A.
- (4) For the purposes of this section securities are similar if they entitle their holders—
- (a) to the same rights against the same persons as to capital, interest and dividends, and
- (b) to the same remedies for the enforcement of those rights,
notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred.
- (5) Section 839 (connected persons) applies for the purposes of section 730A.
##### 730BB
- (1) For the purposes of the Corporation Tax Acts, a company has a relationship to which this section applies in any case where—
- (a) the circumstances are as set out in section 730A(1)(a) and (b);
- (b) the company is the repurchaser of the securities or (subject to subsection (11) below) the interim holder;
- (c) the conditions in subsection (2) or (3) below are satisfied; and
- (d) subsection (10) below does not prevent this section from applying,
and references to a relationship to which this section applies, and to a company’s being a party to such a relationship, shall be construed accordingly.
- (2) The conditions in this subsection are that—
- (a) the sale price and the repurchase price are expressed in a currency other than sterling;
- (b) there is a difference between—
- (i) the sterling equivalent of the sale price as at the date of the transfer of the securities to the interim holder (“*the first sum*”); and
- (ii) the sterling equivalent of the sale price as at the date they are bought back by the repurchaser (“*the second sum*”); and
- (c) the case is not one where section 92B or 92C of the Finance Act 1993 (company preparing accounts or operating in currency other than sterling) applies in relation to the company.
- (3) The conditions in this subsection are that—
- (a) the case is one where section 92B or 92C of the Finance Act 1993 (company preparing accounts or operating in currency other than sterling) applies in relation to the company;
- (b) the sale price and the repurchase price are expressed in a currency other than the relevant currency; and
- (c) there is a difference between—
- (i) the relevant currency equivalent of the sale price as at the date of the transfer of the securities to the interim holder (“*the first sum*”); and
- (ii) the relevant currency equivalent of the sale price as at the date they are bought back by the repurchaser (“*the second sum*”).
- (3A) In subsection (3), references to the relevant currency are—
- (a) in cases in which section 92B of the Finance Act 1993 applies, to the functional currency (within the meaning of that section), and
- (b) in cases in which section 92C of the Finance Act 1993 applies, to the accounts currency (within the meaning of that section).
- (4) Where a company has a relationship to which this section applies and—
- (a) the company is the repurchaser and the first sum exceeds the second sum; or
- (b) the company is the interim holder and the second sum exceeds the first sum,
the amount of the excess shall be treated for the purposes of the Corporation Tax Acts as an exchange gain (within the meaning of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships)) arising to the company from the relationship.
- (5) Where a company has a relationship to which this section applies and—
- (a) the company is the repurchaser and the second sum exceeds the first sum; or
- (b) the company is the interim holder and the first sum exceeds the second sum,
the amount of the excess shall be treated for the purposes of the Corporation Tax Acts as an exchange loss (within the meaning of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships)) arising to the company from the relationship.
- (6) Where an exchange gain or loss is treated by virtue of subsection (4) or (5) above as arising to a company from a relationship to which this section applies—
- (a) Chapter 2 of Part 4 of the Finance Act 1996 shall have effect in relation to the exchange gain or loss as it would have effect if it were an exchange gain or loss (as the case may be) arising to the company from a loan relationship to which it is a party; but
- (b) the only debits and credits to be brought into account for the purposes of that Chapter by virtue of this section in respect of the relationship to which this section applies are those relating to the exchange gains and losses,
and, subject to paragraph (b) above, references in the Corporation Tax Acts to a loan relationship accordingly include a reference to a relationship to which this section applies.
- (7) Where a company has a relationship to which this section applies, the repurchase price shall be treated for the purposes of the Tax Acts (other than this section and sections 730A, 737A and 737C) and (in cases where section 263A of the 1992 Act does not apply) for the purposes of the 1992 Act—
- (a) in a case where an exchange gain arises to the company by virtue of subsection (4)(a) above or an exchange loss arises to the company by virtue of subsection (5)(b) above, as increased by the amount by which the first sum exceeds the second sum, and
- (b) in a case where an exchange gain arises to the company by virtue of subsection (4)(b) above or an exchange loss arises to the company by virtue of subsection (5)(a) above, as reduced by the amount by which the second sum exceeds the first sum.
- (8) Any question whether debits or credits brought into account in accordance with subsection (6) above in relation to any company—
- (a) are to be brought into account under section 82(2) of the Finance Act 1996 (trading loan relationships); or
- (b) are to be treated as non-trading debits or credits,
shall be determined (subject to Schedule 11 to that Act (insurance companies)) according to the extent (if any) to which the company is a party to the repurchase in the course of activities forming an integral part of a trade carried on by that company.
- (9) To the extent that debits or credits fall to be brought into account by a company under section 82(2) of that Act in the case of a relationship to which this section applies, the company shall be regarded for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 as being a party to the relationship for the purposes of a trade carried on by the company.
- (10) Except where regulations under section 737E otherwise provide, this section does not apply if—
- (a) the agreement or agreements under which provision is made for the sale and repurchase are not such as would be entered into by persons dealing with each other at arm’s length; or
- (b) all of the benefits and risks arising from fluctuations, before the repurchase takes place, in the market value of the securities sold accrue to, or fall on, the interim holder.
- (11) Where—
- (a) the repurchase price is more than the sale price, so that by virtue of section 730A(2)(a) a payment of interest is treated as made by the repurchaser on a deemed loan from the interim holder; but
- (b) the payment of interest is treated as made to a person other than the interim holder,
references to the “*interim holder*” in subsections (1), (4) and (5) above shall be read as references to the person to whom the payment of interest is treated as made.
- (12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (13) Expressions used in this section and in section 730A have the same meaning in this section as in that section.
##### 730C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Schedule A losses.
##### 736A
Schedule 23A to this Act shall have effect in relation to certain cases where under a contract or other arrangements for the transfer of shares or other securities a person is required to pay to the other party an amount representative of a dividend or payment of interest on the securities.
#### Losses from UK property business.
##### 736B
- (1) This section applies where—
- (a) any interest on securities transferred by the lender under a stock lending arrangement is paid, as a consequence of the arrangement, to a person other than the lender; and
- (b) no provision is made for securing that the lender receives payments representative of that interest.
- (2) Where this section applies, Schedule 23A and the provisions for the time being contained in any regulations under that Schedule shall apply , subject to subsection (2A) below, as if—
- (a) the borrower were required under the stock lending arrangement to pay the lender an amount representative of the interest mentioned in subsection (1)(a) above;
- (b) a payment were made by the borrower in discharge of that requirement; and
- (c) that payment were made on the same date as the payment of the interest of which it is representative.
- (2A) The borrower is not entitled, by virtue of anything in Schedule 23A or any provision of regulations under that Schedule, or otherwise—
- (a) to any deduction in computing profits or gains for the purposes of income tax or corporation tax, or
- (b) to any deduction against total income or, as the case may be, total profits,
in respect of any such deemed requirement or payment as is provided for by subsection (2) above.
Where the borrower is a company, an amount may not be surrendered by way of group relief if a deduction in respect of it is prohibited by this subsection.
- (3) In this section—
- “*interest*” includes dividends; and
- “*stock lending arrangement*” and “*securities*” have the same meanings as in section 263B of the 1992 Act.
- (4) See section 736D for provision treating certain arrangements as stock lending arrangements for the purposes of this section.
##### 736C
- (1) This section applies where—
- (a) the borrower under a stock lending arrangement is treated under section 736B(2) as paying under that arrangement an amount representative of interest on any securities (“the relevant securities”),
- (b) an amount of money (“cash collateral”) is payable to or for the benefit of the lender for the purpose of securing the discharge of the requirement to transfer the relevant securities back to the lender,
- (c) the stock lending arrangement is designed to produce a return to the borrower which equates, in substance, to the return on an investment of money at interest, and
- (d) the main purpose, or one of the main purposes, of the stock lending arrangement is the obtaining of a tax advantage.
- (2) Where this section applies—
- (a) the Tax Acts are to apply as if the borrower receives an amount of interest payable in respect of the cash collateral, and
- (b) the amount of the interest is calculated in accordance with the following provisions of this section (see, in particular, subsections (3) to (7)).
- (3) The interest is treated for the purposes of the Tax Acts as if it were received on the date (“the return date”) on which the borrower transfers the relevant securities back to the lender.
- (4) The interest is treated for the purposes of the Tax Acts as if it were payable in respect of the period (“*the interest period*”)—
- (a) beginning with the date on which the lender transfers the relevant securities to the borrower, and
- (b) ending with the return date.
- (5) The rate of interest payable in respect of the cash collateral is a rate that is reasonably comparable to the rate that the borrower could obtain by placing the cash collateral on deposit for the interest period.
- (6) For the purposes of this section, the amount of the cash collateral on which the interest is payable is taken to be—
- (a) in any case where the amount of the cash collateral varies at any time on or before the return date, the highest amount of the cash collateral at any time on or before the return date, and
- (b) in any other case, the amount of the cash collateral as at the return date.
- (7) The amount of the interest which the borrower is treated as receiving in respect of the cash collateral for the interest period is reduced (but not below nil) by any interest which the borrower actually receives in respect of that collateral for that period.
- (8) If the borrower is a person within the charge to income tax, the interest which the borrower is treated as receiving is charged to income tax under Chapter 2 of Part 4 of ITTOIA 2005 (interest).
- (9) If the borrower is a company within the charge to corporation tax—
- (a) the interest which the borrower is treated as receiving is treated for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships) as payable to it on a money debt,
- (b) that money debt is treated for those purposes as a relationship to which section 100 of the Finance Act 1996 applies (money debts etc not arising from the lending of money), and
- (c) the credits to be brought into account for those purposes in respect of the interest must be determined using an amortised cost basis of accounting.
- (10) The fact that the borrower is treated as receiving an amount of interest is not to be taken as implying that the interest is payable by the lender or any other person.
- (11) For the purposes of this section—
- “*money*” includes money expressed in a currency other than sterling,
- “*stock lending arrangement*” and “*securities*” have the same meanings as in section 263B of the 1992 Act,
- “*tax advantage*” has the meaning given by section 709(1).
- (12) For the purposes of this section—
- (a) any reference to the transfer of securities back has the same meaning as in section 263B of the 1992 Act (see, in particular, sections 263B(5) and 263C(1) of that Act), but
- (b) if it becomes apparent that the borrower will not comply with the requirement to transfer any securities back, the borrower is treated as if he transfers them back on the date on which it becomes so apparent.
- (13) For the purposes of this section it does not matter—
- (a) whether the cash collateral is payable by the borrower or by any other person,
- (b) whether the cash collateral is payable under the stock lending arrangement or under any other arrangement,
- (c) whether collateral in another form is also provided in connection with the stock lending arrangement.
- (14) See section 736D—
- (a) for provision treating certain arrangements as stock lending arrangements for the purposes of this section, and
- (b) for provision treating certain amounts as cash collateral for those purposes.
##### 736D
- (1) In this section “*quasi-stock lending arrangement*” means so much of any arrangements between two or more persons as are not stock lending arrangements, but are arrangements under which—
- (a) a person (“*the lender*”) transfers securities to another person (“*the borrower*”), and
- (b) a requirement is imposed on a person to transfer any or all of the securities, or any other property, back to the lender or any other person,
and it does not matter whether the person on whom that requirement is imposed is the borrower or any other person.
- (2) In this section “*quasi-cash collateral*”, in relation to any stock lending arrangement or quasi-stock lending arrangement, means—
- (a) any money which is payable for a relevant purpose, plus
- (b) any other property which is transferable for a relevant purpose.
- (3) Money or other property is payable or transferable for a relevant purpose if it is payable or transferable to or for the benefit of—
- (a) the lender under the stock lending arrangement or quasi-stock lending arrangement, or
- (b) a person connected with that lender,
for the purpose of securing the discharge of the requirement to transfer any or all of the securities, or any other property, back to that lender or any other person.
- (4) For the purposes of sections 736B and 736C, a quasi-stock lending arrangement is treated as if it were a stock lending arrangement.
- (5) For the purposes of section 736C, in relation to any stock lending arrangement or quasi-stock lending arrangement,—
- (a) quasi-cash collateral is treated as if it were cash collateral, and
- (b) the amount of the quasi-cash collateral in relation to the stock lending arrangement or quasi-stock lending arrangement is taken to be the amount of the cash collateral.
- (6) If any property other than money is transferable for a relevant purpose, the amount of the quasi-cash collateral so far as relating to that property is determined by reference to its market value.
- (7) In any case where—
- (a) section 736C applies in relation to a quasi-stock lending arrangement, and
- (b) the person for whom the tax advantage was designed to be obtained is a person (“*the other person*”) other than the borrower under that arrangement,
that section has effect as if the other person were the person who receives the amount of interest mentioned in that section.
- (8) In any case where section 736C applies in relation to a quasi-stock lending arrangement—
- (a) any reference in that section to cash collateral being payable to or for the benefit of the lender includes its being payable to or for the benefit of a person connected with the lender,
- (b) the reference in subsection (1)(c) of that section to a return to the borrower includes a return to any other person, and
- (c) any reference in that section to the transfer back of the relevant securities by the borrower to the lender includes the transfer back of any or all of the securities, or any other property, by any person to the lender or any other person.
- (9) Section 839 (connected persons) applies for the purposes of this section.
- (10) In this section—
- “*money*” includes money expressed in a currency other than sterling,
- “*property*” means property in any form,
- “*stock lending arrangement*” and “*securities*” have the same meaning as in section 263B of the 1992 Act,
- “*transfer*” means a transfer otherwise than by way of sale.
#### Losses from UK property business.
##### 737A
- (1) This section applies where on or after the appointed day a person (the transferor) agrees to sell any securities, and the transferor or a person connected with him—
- (a) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or
- (b) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises;
but this section does not apply unless either the conditions set out in subsection (2) below or the conditions set out in subsection (2A) below are fulfilled.
- (2) The first set of conditions referred to in subsection (1) above are that—
- (a) as a result of the transaction, a dividend which becomes payable in respect of the securities is receivable otherwise than by the transferor,
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (c) there is no requirement under any agreement mentioned in subsection (1) above for a person to pay to the transferor on or before the relevant date an amount representative of the dividend, and
- (d) it is reasonable to assume that, in arriving at the repurchase price of the securities, account was taken of the fact that the dividend is receivable otherwise than by the transferor.
- (2A) The second set of conditions referred to in subsection (1) above are that—
- (a) a dividend which becomes payable in respect of the securities is receivable otherwise than by the transferor,
- (b) the transferor or a person connected with him is required under any agreement mentioned in subsection (1) above to make a payment representative of the dividend,
- (c) there is no requirement under any such agreement for a person to pay to the transferor on or before the relevant date an amount representative of the dividend, and
- (d) it is reasonable to assume that, in arriving at the repurchase price of the securities, account is taken of the circumstances referred to in paragraphs (a) to (c).
- (3) For the purposes of subsections (2) and (2A) above the relevant date is the date when the repurchase price of the securities becomes due.
- (4) Where it is a person connected with the transferor who is required to buy back the securities, or who acquires the option to buy them back, references in the following provisions of this section to the transferor shall be construed as references to the connected person.
- (5) Where this section applies, . . . Schedule 23A and dividend manufacturing regulations shall apply , subject to subsection (5A) below, as if—
- (a) the relevant person were required, under the arrangements for the transfer of the securities, to pay to the transferor an amount representative of the dividend mentioned in subsection (2)(a) or (2A)(a) above,
- (b) a payment were made by that person to the transferor in discharge of that requirement, and
- (c) the payment were made on the date when the repurchase price of the securities becomes due.
- (5A) If the relevant person is not the person to whom the transferor agreed to sell the securities, the relevant person is not entitled, by virtue of anything in Schedule 23A or any provision of dividend manufacturing regulations, or otherwise—
- (a) to any deduction in computing profits or gains for the purposes of income tax or corporation tax, or
- (b) to any deduction against total income or total profits,
by virtue of subsection (5) above.
Where the relevant person is a company, an amount may not be surrendered by way of group relief if a deduction in respect of it is prohibited by this subsection.
- (6) In this section“*the relevant person*” means—
- (a) where subsection (1)(a) above applies, the person from whom the transferor is required to buy back the securities;
- (b) where subsection (1)(b) above applies, the person from whom the transferor has the right to buy back the securities;
and in this section“*dividend manufacturing regulations*” means regulations under Schedule 23A (whenever made).
##### 737B
- (1) In section 737A and this section “*securities*” means United Kingdom equities, United Kingdom securities or overseas securities; and—
- (a) where the securities mentioned in section 737A(1) are United Kingdom securities, references in section 737A to a dividend shall be construed as references to a periodical payment of interest;
- (b) where the securities mentioned in section 737A(1) are overseas securities, references in section 737A to a dividend shall be construed as references to an overseas dividend.
- (2) In this section “*United Kingdom equities*”, “*United Kingdom securities*”, “*overseas securities*” and “*overseas dividend*” have the meanings given by paragraph 1(1) of Schedule 23A.
- (3) For the purposes of section 737A agreements are related if each is entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).
- (4) In section 737A “*the repurchase price of the securities*” means—
- (a) where subsection (1)(a) of that section applies, the amount which, under any agreement mentioned in section 737A(1), the transferor or connected person is required to pay for the securities bought back, or
- (b) where subsection (1)(b) of that section applies, the amount which under any such agreement the transferor or connected person is required, if he exercises the option, to pay for the securities bought back.
- (5) In section 737A and subsection (4) above references to buying back securities include references to buying similar securities.
- (6) For the purposes of subsection (5) above securities are similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred; and “interest” here includes dividends.
- (7) For the purposes of section 737A and subsection (4) above—
- (a) a person who is connected with the transferor and is required to buy securities sold by the transferor shall be treated as being required to buy the securities back notwithstanding that it was not he who sold them, and
- (b) a person who is connected with the transferor and acquires an option to buy securities sold by the transferor shall be treated as acquiring an option to buy the securities back notwithstanding that it was not he who sold them.
- (8) Section 839 shall apply for the purposes of section 737A and this section.
- (9) In section 737A “*the appointed day*” means such day as the Treasury may by order appoint, and different days may be appointed in relation to—
- (a) United Kingdom equities,
- (b) United Kingdom securities, and
- (c) overseas securities.
##### 737C
- (1) This section applies where section 737A applies.
- (2) Subsection (3) below applies where—
- (a) the dividend mentioned in section 737A(2)(a) or (2A)(a) is a dividend on United Kingdom equities, and
- (b) by virtue of section 737A(5), . . . paragraph 2 of Schedule 23A applies, in relation to the payment which is treated under section 737A(5) as having been made;
and in subsection (3) below “*the deemed manufactured dividend*” means that payment.
- (3) Where this subsection applies—
- (a) the amount of the deemed manufactured dividend shall be taken to be an amount equal to the amount of the dividend mentioned in section 737A(2)(a) or (2A)(a);
- (b) the repurchase price of the securities shall be treated, for the purposes of section 730A, as increased by an amount equal to the . . . amount of the deemed manufactured dividend.
- (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (7) Subsection (8) below applies where—
- (a) the dividend mentioned in section 737A(2)(a) or (2A)(a) is a periodical payment of interest on United Kingdom securities, and
- (b) by virtue of section 737A(5), paragraph 3 of Schedule 23A applies in relation to the payment which is treated under section 737A(5) as having been made . . . ;
and in subsection (8) below “*the deemed manufactured interest*” means the payment referred to in paragraph (b) above.
- (8) Where this subsection applies—
- (a) the amount which by virtue of section 737A(5) is taken to be the gross amount of the deemed manufactured payment for the purposes of paragraph 3 of Schedule 23A shall be taken to be the gross amount of the deemed manufactured interest for the purposes of this section;
- (b) any deduction which, by virtue of that paragraph, is required to be made out of the gross amount of the deemed manufactured interest shall be deemed to have been made.
- (9) Where . . . subsection (8) above applies, the repurchase price of the securities shall be treated, for the purposes of section 730A, as increased by the gross amount of the deemed manufactured interest.
- (10) Subsection (11) below applies where—
- (a) the dividend mentioned in section 737A(2)(a) or (2A)(a) is an overseas dividend, and
- (b) by virtue of section 737A(5), paragraph 4 of Schedule 23A applies in relation to the payment which is treated under section 737A(5) as having been made;
and in subsection (11) below “*the deemed manufactured overseas dividend*” means that payment.
- (11) Where this subsection applies—
- (a) the gross amount of the deemed manufactured overseas dividend shall be taken to be the amount found under paragraph 4(5)(b) and (c) of Schedule 23A;
- (b) any deduction which, by virtue of paragraph 4 of Schedule 23A, is required to be made out of the gross amount of the deemed manufactured overseas dividend shall be deemed to have been made;
- (c) the repurchase price of the securities shall be treated, for the purposes of section 730A, as increased by the gross amount of the deemed manufactured overseas dividend.
- (11A) The deemed increase of the repurchase price which is made for the purposes of section 730A by subsection (3)(b), (9) or (11)(c) above shall also have effect—
- (a) for all the purposes of the Tax Acts, other than section 737A, and
- (b) in cases where section 263A of the 1992 Act does not apply, for the purposes of the 1992 Act,
wherever in consequence of that increase there is for the purposes of section 730A no difference between the sale price and the repurchase price or where that section is prevented from applying by subsection (8) of that section.
- (11B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (12) In this section—
- (a) “*United Kingdom equities*”, “*United Kingdom securities*” and “*overseas dividend*” have the meanings given by paragraph 1(1) of Schedule 23A;
- (b) “*the repurchase price of the securities*” shall be construed in accordance with section 737B(4).
##### 737D
- (1) The Treasury may by regulations provide for any manufactured payment made to any person to be treated, in such circumstances and to such extent as may be described in the regulations, as comprised in income of that person that is eligible for relief from tax by virtue of section 438, 613(4) or 614(2), (3) or (4) or section 186 of the Finance Act 2004.
- (2) In this section “*manufactured payment*” means any . . . manufactured interest or manufactured overseas dividend, within the meaning of Schedule 23A.
##### 737E
- (1) The Treasury may by regulations make provision for all or any of sections 727A, 730A , 730BB and 737A to 737C to have effect with modifications in relation to cases involving any arrangement for the sale and repurchase of securities where—
- (a) the obligation to make the repurchase is not performed or the option to repurchase is not exercised;
- (b) provision is made by or under any agreement for different or additional securities to be treated as, or as included with, securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale;
- (c) provision is made by or under any agreement for any securities to be treated as not included with securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale;
- (d) provision is made by or under any agreement for the sale price or repurchase price to be determined or varied wholly or partly by reference to fluctuations, occurring in the period after the making of the agreement for the original sale, in the value of securities transferred in pursuance of that sale, or in the value of securities treated as representing those securities; or
- (e) provision is made by or under any agreement for any person to be required, in a case where there are any such fluctuations, to make any payment in the course of that period and before the repurchase price becomes due.
- (2) The Treasury may by regulations make provision for all or any of sections 727A, 730A , 730BB and 737A to 737C to have effect with modifications in relation to cases where—
- (a) arrangements, corresponding to those made in cases involving an arrangement for the sale and repurchase of securities, are made by any agreement, or by one or more related agreements, in relation to securities that are to be redeemed in the period after their sale; and
- (b) those arrangements are such that the person making the sale or a person connected with him (instead of being required to repurchase the securities or acquiring an option to do so) is granted rights in respect of the benefits that will accrue from their redemption.
- (3) The Treasury may by regulations provide that section 730A or 730BB is to have effect with modifications in relation to cases involving any arrangement for the sale and repurchase of securities where there is an agreement relating to the sale or repurchase which is not such as would be entered into by persons dealing with each other at arm’s length.
- (4) The powers conferred by subsections (1) and (2) above shall be exercisable in relation to section 263A or 263D of the 1992 Act as they are exercisable in relation to section 730A of this Act.
- (5) Regulations made for the purposes of this section may—
- (a) make different provision for different cases; and
- (b) contain such supplementary, incidental, consequential and transitional provision as appears to the Treasury to be appropriate.
- (6) The supplementary, incidental and consequential provision that may be made by regulations under this section shall include—
- (a) in the case of regulations relating to section 730A, provision modifying subsections (3)(b), (9), (11)(c) and (11A) of section 737C; and
- (b) in the case of regulations relating to section 263A or 263D of the 1992 Act, provision modifying the operation of that Act in relation to cases where by virtue of the regulations any acquisition or disposal is excluded from those which are to be disregarded for the purposes of capital gains tax.
- (7) In this section “*modifications*” includes exceptions and omissions; and any power under this section to provide for an enactment to have effect with modifications in any case shall include power to provide for it not to apply (if it otherwise would do) in that case.
- (8) References in this section to a case involving an arrangement for the sale and repurchase of securities are references to any case where—
- (a) a person makes a sale of any securities under any agreement (“the original sale”); and
- (b) that person or a person connected with him—
- (i) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or
- (ii) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises.
- (9) Section 730B shall apply for the purposes of this section as it applies for the purposes of section 730A.
##### 741A
- (1) The individual is not liable to income tax by virtue of section 739 or 740 for the year of assessment by reference to the relevant transactions if he satisfies an officer of the Board—
- (a) that Condition A is met, or
- (b) in a case where Condition A is not met, that Condition B is met.
- (2) Condition A is that it would not be reasonable to draw the conclusion, from all the circumstances of the case, that the purpose of avoiding liability to taxation was the purpose, or one of the purposes, for which the relevant transactions or any of them were effected.
- (3) Condition B is that—
- (a) all the relevant transactions were genuine commercial transactions, and
- (b) it would not be reasonable to draw the conclusion, from all the circumstances of the case, that any one or more of those transactions was more than incidentally designed for the purpose of avoiding liability to taxation.
- (4) The intentions and purposes of any person who, whether or not for consideration,—
- (a) designs or effects the relevant transactions or any of them, or
- (b) provides advice in relation to the relevant transactions or any of them,
are to be taken into account in determining the purposes for which those transactions or any of them were effected.
- (5) A relevant transaction is a commercial transaction only if it is effected—
- (a) in the course of a trade or business, or
- (b) with a view to setting up and commencing a trade or business,
and, in either case, for the purposes of that trade or business.
- (6) For that purpose, the making and managing of investments, or the making or managing of investments, is not a trade or business except to the extent that—
- (a) the person by whom it is done, and
- (b) the person for whom it is done,
are independent persons dealing at arm's length.
- (7) In this section—
- “*commercial transaction*” does not include—a transaction on terms other than those that would have been made between independent persons dealing at arm's length, ora transaction that would not have been entered into between independent persons dealing at arm's length;
- “*independent persons*” means persons who are not connected with each other (within the meaning given by section 839);
- “*relevant transactions*” means—the transfer, andany associated operations;
- “*revenue*” includes taxes, duties and national insurance contributions;
- “*taxation*” includes any revenue for whose collection and management the Commissioners for Her Majesty's Revenue and Customs are responsible.
- (8) Any associated operation that would not (apart from this subsection) fall to be taken into account for the purposes of this section must be taken into account for those purposes if, were it to be so taken into account, the conditions in subsection (1) above would be failed by reference to—
- (a) that associated operation, or
- (b) that associated operation taken together with the transfer or any one or more other associated operations.
- (9) The jurisdiction of the Special Commissioners on any appeal includes jurisdiction to review any decision taken by an officer of the Board in exercise of the officer's functions under this section.
- (10) This section is subject to sections 741B and 741C (application of section 741 and this section etc).
##### 741B
- (1) This section makes provision with respect to the application for the year of assessment of—
- (a) section 741,
- (b) section 741A, or
- (c) section 741C,
in the case of the individual and the relevant transactions.
- (2) In this section—
- “*new transaction*” means a relevant transaction effected on or after the relevant date;
- “*old transaction*” means a relevant transaction effected before the relevant date;
- “*the relevant date*” means 5th December 2005;
- “*relevant transactions*” means—the transfer, andany associated operations.
- (3) If all the relevant transactions are old transactions, section 741 is the provision to be applied.
- (4) If all the relevant transactions are new transactions, section 741A is the provision to be applied.
- (5) If—
- (a) any one or more of the relevant transactions are old transactions, and
- (b) any one or more of the relevant transactions are new transactions,
section 741C is the provision to be applied.
##### 741C
- (1) This section applies by virtue of section 741B if the case falls within subsection (5) of that section.
- (2) Sections 739 and 740 do not apply, unless subsection (3) below applies.
- (3) This subsection applies if—
- (a) the conditions in section 741(1) are failed by reference to the old transactions or any of them, or
- (b) the conditions in section 741A(1) are failed by reference to the new transactions or any of them.
- (4) Where subsection (3) above applies, the general rule is that sections 739 and 740 apply as they would have applied apart from any exemption by virtue of sections 741 to 741C.
- (5) In any case where subsection (3) above applies by virtue only of paragraph (b) of that subsection, the general rule has effect subject to, and in accordance with, the Rules in subsections (6) to (8) below.
- (6) Rule 1 is that, for the purposes of section 739(2) or (3), any income arising before the relevant date must not be brought into account as income of the person resident or domiciled outside the United Kingdom.
- (7) Rule 2 is that for the purposes of section 740, where—
- (a) a benefit is received by the individual in a year of assessment ending after the relevant date, and
- (b) relevant income of years of assessment up to and including that year falls to be determined,
the general rule requires years ending before the relevant date to be brought into account as well as years ending after that date.
- (8) Rule 3 is that, for the purposes of section 740, a benefit received by the individual in the year 2005-06 is to be left out of account to the extent that, on a time apportionment basis, it fell to be enjoyed in any part of the year that falls before the relevant date.
- (9) This section is to be read as one with section 741B.
##### 741D
- (1) This section applies where—
- (a) an individual is liable to tax by virtue of section 739 for a year of assessment (the “taxable year”), but
- (b) the conditions in subsections (2) to (4) below are met.
- (2) Condition 1 is that since the making of the transfer there have been one or more years of assessment when the circumstances were such that, so far as relating to such of the relevant transactions as were effected before the end of the year, the individual—
- (a) was not liable to tax by virtue of section 739, or
- (b) would not have been liable to tax by virtue of section 739 if there had been any deemed income of his under that section,
because an appropriate exemption applied or, in a case falling within paragraph (b) above, would have applied.
- (3) Condition 2 is that the individual is liable to tax under section 739 in the taxable year in consequence of Condition B in section 741A(3) not being met.
- (4) Condition 3 is that the income by reference to which the individual is liable to tax for the taxable year is attributable—
- (a) partly to relevant transactions by reference to which the appropriate exemption applied for the last exempt year of assessment, and
- (b) partly to associated operations not falling within paragraph (a) above (“chargeable operations”).
- (5) For the purposes of this section, a year of assessment is “exempt” if it is one of the years of assessment mentioned in subsection (2) and there is no earlier year of assessment for which—
- (a) the individual was liable to tax by virtue of section 739, or
- (b) the individual would have been liable to tax by virtue of section 739, if there had been any deemed income of his under that section.
- (6) Where this section applies, the liability of the individual is to be reduced as if it fell to be determined by reference to only so much of the income as appears to an officer of the Board to be justly and reasonably attributable to chargeable operations in all the circumstances of the case.
- (7) The facts and matters that may be taken into account in determining for the purposes of subsection (6) above whether income may be regarded as justly and reasonably attributable to chargeable operations include whether, and to what extent, the chargeable operations or any of them directly or indirectly affect any of the following—
- (a) the character, description or amount of any income of any person,
- (b) any person's power to enjoy any income,
- (c) the character, description or amount of any income which a person has power to enjoy.
- (8) The jurisdiction of the Special Commissioners on any appeal includes jurisdiction to review any decision taken by an officer of the Board in exercise of the officer's functions under this section.
- (9) In this section—
- “*appropriate exemption*” means exemption by virtue of—paragraph (b) of section 741(1), orCondition B in section 741A(3);
- “*relevant transactions*” means—the transfer, andany associated operations.
#### Set-off against general income.
##### 747A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 748ZA
- (1) Nothing in section 748(1)(da) prevents an apportionment falling to be made as regards an accounting period (“*the relevant accounting period*”) of a controlled foreign company (“X”) if condition A, B or C is met.
- (2) Condition A is that at any time before the end of the relevant accounting period a scheme is entered into and—
- (a) in the absence of this subsection, in consequence of the scheme, section 748(1)(da) would apply to prevent an apportionment falling to be made as regards the relevant accounting period of X, and
- (b) the main purpose, or one of the main purposes, of any party to the scheme in entering into the scheme is to secure that section 748(1)(da) prevents an apportionment falling to be made as regards that period, or that period and one or more other accounting periods of X.
- (3) Condition B is that at any time before the end of the relevant accounting period a scheme is entered into and—
- (a) in consequence of the scheme profits are shifted to X from another company (“Y”),
- (b) the main purpose or one of the main purposes of any party to the scheme in entering into the scheme is to ensure that section 748(1)(da) prevents an apportionment falling to be made as regards the chargeable profits of one or more controlled foreign companies for one or more accounting periods, and
- (c) the relevant accounting period of X falls wholly or partly within that accounting period or those accounting periods.
- (4) For the purposes of subsection (3), profits are shifted to X from Y if it is reasonable to suppose that in the absence of the scheme, and any similar scheme, the whole or a part of the income which is reflected in X's profits would have been reflected in Y's profits.
- (5) Condition C is that, in determining X's chargeable profits for the relevant accounting period—
- (a) section 418(5) of CTA 2009 (loan relationships involving connected debtor and creditor where debits exceed credits) has effect so as to treat X, for the purposes of Part 5 of that Act, as bringing into account for that period credits in respect of a loan relationship, or
- (b) Part 21B of CTA 2010 (group mismatch schemes) has effect so as to exclude an amount from being brought into account as a debit or credit for the purposes of Part 5 of CTA 2009 (loan relationships) or Part 7 of that Act (derivative contracts).
- (6) For the purposes of this section—
- “*apportionment*” means an apportionment under section 747(3);
- “*scheme*” means any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving one or more transactions.
##### 748A
- (1) Nothing in section 748 prevents an apportionment under section 747(3) falling to be made as regards an accounting period of a controlled foreign company if the company—
- (a) is a company incorporated in a territory to which this section applies as respects that accounting period; or
- (b) is at any time in that accounting period liable to tax in such a territory by reason of domicile, residence or place of management; or
- (c) at any time in that accounting period carries on business through a permanent establishment in such a territory.
- (2) The condition in subsection (1)(c) above is not satisfied as regards an accounting period of a controlled foreign company if the business carried on by the company in that period through permanent establishments in territories to which this section applies, taken as a whole, is only a minimal part of the whole of the business carried on by the company in that period.
- (3) The territories to which this section applies as respects an accounting period of a controlled foreign company are those specified as such in regulations made by the Treasury.
- (4) Regulations under subsection (3) above—
- (a) may make different provision for different cases or with respect to different territories; and
- (b) may contain such incidental, supplemental, consequential or transitional provision as the Treasury may think fit.
- (5) A statutory instrument containing regulations under subsection (3) above shall not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
##### 749A
- (1) An election under paragraph (d) or a designation under paragraph (e) of section 749(3) shall have effect in relation to—
- (a) the accounting period in relation to which it is made (“the original accounting period"), and
- (b) each successive accounting period of the controlled foreign company in question which precedes the next one in which the eligible territories are different,
and shall so have effect notwithstanding any change in the persons who have interests in the company or any change in the interests which those persons have in the company.
- (2) For the purposes of subsection (1)(b) above, an accounting period of the controlled foreign company is one in which the eligible territories are different if in the case of that accounting period—
- (a) at least one of the two or more territories which fell within subsection (1) of section 749 in the original accounting period does not fall within that subsection; or
- (b) some other territory also falls within that subsection.
- (3) Any election under section 749(3)(d)—
- (a) must be made by notice given to an officer of the Board;
- (b) must be made no later than twelve months after the end of the controlled foreign company’s accounting period in relation to which it is made;
- (c) must state, as respects each of the persons making it, the percentage of the chargeable profits and creditable tax (if any) of the controlled foreign company for that accounting period which it is likely would be apportioned to him on an apportionment under section 747(3) if one were made;
- (d) must be signed by the persons making it; and
- (e) is irrevocable.
- (4) Nothing in—
- (a) paragraph 10 of Schedule 18 to the Finance Act 1998 (claims or elections in company tax returns), or
- (b) Schedule 1A to the Management Act (claims or elections not included in returns),
shall apply, whether by virtue of section 754 or otherwise, to an election under section 749(3)(d).
- (5) A designation under section 749(3)(e) is irrevocable.
- (6) Where the Board make a designation under section 749(3)(e), notice of the making of the designation shall be given to every company resident in the United Kingdom which appears to the Board to have had an assessable interest in the controlled foreign company at any time during the accounting period of the controlled foreign company in relation to which the designation is made.
- (7) A notice under subsection (6) above shall specify—
- (a) the date on which the designation was made;
- (b) the controlled foreign company to which the designation relates;
- (c) the accounting period of the controlled foreign company in relation to which the designation is made; and
- (d) the territory designated.
- (8) Subsection (9) of section 749 has effect for the purposes of subsection (6) above as it has effect for the purposes of subsection (8) of that section.
##### 749B
- (1) For the purposes of this Chapter, the following persons have an interest in a company—
- (a) any person who possesses, or is entitled to acquire, share capital or voting rights in the company;
- (b) any person who possesses, or is entitled to acquire, a right to receive or participate in distributions of the company;
- (c) any person who is entitled to secure that income or assets (whether present or future) of the company will be applied directly or indirectly for his benefit; and
- (d) any other person who, either alone or together with other persons, has control of the company.
- (2) Rights which a person has as a loan creditor of a company do not constitute an interest in the company for the purposes of this Chapter.
- (3) For the purposes of subsection (1)(b) above, the definition of “distribution" in Part VI shall be construed without any limitation to companies resident in the United Kingdom.
- (4) References in subsection (1) above to being entitled to do anything apply where a person—
- (a) is presently entitled to do it at a future date, or
- (b) will at a future date be entitled to do it;
but a person whose entitlement to secure that any income or assets of the company will be applied as mentioned in paragraph (c) of that subsection is contingent upon a default of the company or any other person under any agreement shall not be treated as falling within that paragraph unless the default has occurred.
- (5) Where a company has an interest in another company and a third person has, or two or more persons together have, an interest in the first company (as in a case where one company has a shareholding in a controlled foreign company and the first company is controlled by a third company or by two or more persons together) subsections (6) and (7) below apply.
- (6) Where this subsection applies, the person who has, or each of the persons who together have, the interest in the first company shall be regarded for the purposes of this Chapter as thereby having an interest in the second company.
- (7) In any case where this subsection applies, in construing references in this Chapter to one person having the same interest as another, the person or, as the case may be, each of the persons who together have, the interest in the first company shall be treated as having, to the extent of that person’s interest in that company, the same interest as the first company has in the second company.
- (8) Where two or more persons jointly have an interest in a company otherwise than in a fiduciary or representative capacity, they shall be treated for the purposes of this Chapter as having the interest in equal shares.
##### 750A
- (1) Where—
- (a) in any accounting period a company is to be regarded by virtue of any of subsections (1) to (4) of section 749 as resident in a particular territory outside the United Kingdom, and
- (b) within the meaning of section 750(1), the local tax in respect of the profits arising to the company in that accounting period is equal to or greater than three-quarters of the corresponding United Kingdom tax on those profits, but
- (c) that local tax is determined under designer rate tax provisions,
the company shall be taken for the purposes of this Chapter to be subject to a lower level of taxation in that territory in that accounting period.
- (2) In subsection (1) above “*designer rate tax provisions*” means provisions—
- (a) which appear to the Board to be designed to enable companies to exercise significant control over the amount of tax which they pay; and
- (b) which are specified in regulations made by the Board.
- (3) Regulations under subsection (2) above—
- (a) may make different provision for different cases or with respect to different territories; and
- (b) may contain such supplementary, incidental, consequential or transitional provision as the Board may think fit.
- (4) The first regulations under subsection (2) above may make provision having effect in relation to accounting periods beginning not more than fifteen months before the date on which the regulations are made.
##### 751A
- (1) This section applies if—
- (a) an apportionment under section 747(3) falls to be made as regards an accounting period (“*the relevant accounting period*”) of a controlled foreign company,
- (b) throughout that period the controlled foreign company has a business establishment in an EEA territory,
- (c) throughout that period there are individuals who work for the controlled foreign company in that territory, and
- (d) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in that period.
- (2) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period to be reduced by an amount (“*the specified amount*”) specified in the application (including to nil).
- (3) If the Commissioners grant the application—
- (a) those chargeable profits are treated as reduced by the specified amount, and
- (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in those chargeable profits,
for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).
- (4) The Commissioners may grant the application only if they are satisfied that the specified amount does not exceed the amount (if any) equal to so much of those chargeable profits as can reasonably be regarded as representing the net economic value which—
- (a) arises to the appropriate body of persons (taken as a whole), and
- (b) is created directly by qualifying work.
- (5) For the purposes of subsection (4) “*net economic value*” does not include any value which derives directly or indirectly from the reduction or elimination of any liability of any person to any tax or duty imposed under the law of any territory.
- (6) For the purposes of subsection (4) “*the appropriate body of persons*” means—
- (a) if the controlled foreign company is not a member of a group of companies, the controlled foreign company and the persons who have an interest in it at any time in the relevant accounting period, and
- (b) if the controlled foreign company is a member of a group of companies, all the persons falling within paragraph (a) and any other person who is a member of that group of companies,
and for the purposes of this subsection “*group of companies*” means a company and any other companies of which it has control.
- (7) For the purposes of subsection (4) “*qualifying work*” means work which—
- (a) is done in any EEA territory in which the controlled foreign company has a business establishment throughout the relevant accounting period, and
- (b) is done in that territory by individuals working for the controlled foreign company there.
- (8) Any reference in this section to a business establishment of a controlled foreign company in an EEA territory is to be construed in accordance with paragraph 7 of Schedule 25 (but as if the reference in that paragraph to the territory in which the company is resident were to the EEA territory).
- (9) For the purposes of this section individuals are not to be regarded as working for a company in any territory unless—
- (a) they are employed by the company in the territory, or
- (b) they are otherwise directed by the company to perform duties on its behalf in the territory.
#### Carry-forward against subsequent profits.
##### 751AA
- (1) This section applies if—
- (a) an apportionment under section 747(3) falls to be made as regards an accounting period (“*the relevant accounting period*”) of a controlled foreign company,
- (b) the chargeable profits of the controlled foreign company for the relevant accounting period would, apart from this section, include an amount of income in respect of a payment made by another company (“the payer”),
- (c) the amount that the payer brings into account for the purposes of corporation tax in respect of the payment is reduced (in part or in full) by virtue of Part 3 of Schedule 15 to FA 2009 (tax treatment of financing costs and income), and
- (d) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in the relevant accounting period.
- (2) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period (“the chargeable profits”) to be reduced by an amount (“*the specified amount*”) specified in the application (including to nil).
- (3) If the Commissioners grant the application—
- (a) the chargeable profits are treated as reduced by the specified amount, and
- (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in the chargeable profits,
for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).
- (4) The Commissioners may grant the application only if they are satisfied that the specified amount does not exceed the relevant amount.
- (5) In subsection (4) “*the relevant amount*” means the amount (if any) by which it is just and reasonable that the chargeable profits should be treated as reduced, having regard to the effect of Parts 3 and 4 of Schedule 15 to FA 2009 on amounts brought into account for the purposes of corporation tax by the payer, or any other company.
#### Treatment of interest as a loss for purposes of carry-forward and carry-back.
##### 751AB
- (1) This section applies if—
- (a) an apportionment under section 747(3) would fall to be made as regards an accounting period (“*the relevant accounting period*”) of a controlled foreign company,
- (b) but for a relevant failure, section 748(1)(ba) or (bb) would have prevented such an apportionment, and
- (c) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in that period.
- (2) “*Relevant failure*” means—
- (a) in the case of section 748(1)(ba), one or both of the following—
- (i) a failure to satisfy the requirement of paragraph 12E of Schedule 25 (requirement as to company's UK connection) in circumstances where the requirement would be satisfied if the reference in sub-paragraph (3)(a) of that paragraph to 10% were a reference to 50%, and
- (ii) a failure to satisfy the requirement of paragraph 12F of that Schedule (finance income and relevant IP income) in circumstances where the relevant IP income of the controlled foreign company for the accounting period does not exceed 5% of the company's gross income for that period, and
- (b) in the case of section 748(1)(bb), a failure to satisfy the requirement of paragraph 12M of that Schedule (finance income).
- (3) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period (“the chargeable profits”) to be reduced to an amount specified in the application (“*the specified amount*”).
The specified amount may be nil.
- (4) If the Commissioners grant the application—
- (a) the chargeable profits are treated as reduced to the specified amount, and
- (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in the chargeable profits,
for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).
- (5) The Commissioners may grant the application only if—
- (a) they are satisfied that the specified amount is not less than the relevant amount, and
- (b) they have not previously granted an application made by the UK resident company in respect of the relevant accounting period under section 751A or 751AC.
- (6) “*The relevant amount*” means—
- (a) if the relevant failure is within subsection (2)(a), the sum of—
- (i) the excess finance and IP income (if any) for the relevant accounting period, and
- (ii) in a case where there is a failure specified in subsection (2)(a)(i), so much (if any) of the net chargeable profits for that period as are not excluded by subsection (8), and
- (b) if the relevant failure is within subsection (2)(b)—
- (i) the amount (if any) by which the controlled foreign company's finance income for the relevant accounting period exceeds 5% of its gross income for that period, or
- (ii) if that amount is a negligible amount, nil.
- (7) “The excess finance and IP income” for the relevant accounting period means—
- (a) the amount (if any) by which the total of the controlled foreign company's finance income and relevant IP income for that period exceeds 5% of its gross income for that period, or
- (b) if that amount is a negligible amount, nil.
- (8) Net chargeable profits are excluded by this subsection if, and to the extent that, they can reasonably be regarded—
- (a) as representing the net economic value which—
- (i) arises to the appropriate body of persons (taken as a whole), and
- (ii) is created directly by qualifying work, or
- (b) as not being wholly or partly attributable, directly or indirectly, to transactions with persons within the charge to United Kingdom tax.
- (9) In subsection (8)(a) “*qualifying work*” means work which—
- (a) is done in the territory in which the controlled foreign company is resident, and
- (b) is done in that territory by individuals working for the controlled foreign company there.
- (10) A transaction with a company which is within the charge to United Kingdom tax only because it carries on a trade in the United Kingdom through a permanent establishment there is within subsection (8)(b) only if the transaction is attributable to activities carried on through that establishment.
- (11) For the purposes of subsections (8) and (9)—
- (a) section 751A(5), (6) and (9) applies as it applies for the purposes of the equivalent provisions of section 751A, and
- (b) paragraph 5(2) to (5) of Schedule 25 (residence of controlled foreign company) applies as it applies in relation to Part 2 of that Schedule.
- (12) In this section—
- “*finance income*” has the meaning given by paragraph 12F(3) of Schedule 25 (with references to C read as references to the controlled foreign company);
- “*relevant IP income*” has the meaning given by paragraph 12F(4) of that Schedule;
- “*net chargeable profits*” means chargeable profits excluding so much of those profits as is directly attributable to the finance income or relevant IP income of the controlled foreign company;
- “*UK-connected gross income*” has the same meaning as in paragraph 12E of Schedule 25;
- “*United Kingdom tax*” means corporation tax or income tax;
and paragraph 12G of that Schedule (gross income) applies for the purposes of this section as it applies for the purposes of Part 2A of that Schedule (with references to C read as references to the controlled foreign company).
#### Schedule A losses.
##### 751AC
- (1) This section applies if—
- (a) an exempt period in relation to a controlled foreign company ends in accordance with paragraph 15F(2) of Schedule 25 (time exempt period ends if there is an early termination event), other than by reason of an early termination event within paragraph 15F(3)(b),
- (b) an accounting period (“*the relevant accounting period*”) of the company ends after that exempt period but before the time the exempt period would have ended had paragraph 15F(2) of that Schedule not applied,
- (c) an apportionment under section 747(3) would fall to be made as regards the relevant accounting period, and
- (d) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in that period.
- (2) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for that accounting period (“the chargeable profits”) to be reduced to an amount (“*the specified amount*”) specified in the application (which may be nil).
- (3) If the Commissioners grant the application—
- (a) the chargeable profits are treated as reduced to the specified amount, and
- (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in the chargeable profits,
for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).
- (4) The Commissioners may grant the application only if—
- (a) they are satisfied that the specified amount is not less than the relevant amount, and
- (b) they have not previously granted an application made by the UK resident company in respect of the relevant accounting period under section 751A or 751AB.
- (5) “*The relevant amount*” means the amount (if any) equal to so much of the chargeable profits as it is just and reasonable to regard as referable to—
- (a) the relevant transaction which triggered the end of the exempt period, or
- (b) any later relevant transaction occurring before the time the exempt period would have ended had paragraph 15F(2) of Schedule 25 not applied.
- (6) “*Relevant transaction*” has the meaning given by paragraph 15E of Schedule 25 (and it does not matter if the transaction occurs pursuant to an agreement entered into by the controlled foreign company before the relevant time (within the meaning of paragraph 15G of that Schedule)).
#### Losses other than terminal losses.
##### 751B
- (1) An application by a company under section 751A—
- (a) must be made in such form as the HMRC Commissioners may determine,
- (b) must be accompanied by such documents (or copies of documents) in the company's possession or power as those Commissioners may reasonably require for the purpose of determining whether to grant the application, and
- (c) must contain such information as those Commissioners may reasonably require for that purpose.
- (2) An application by a company under section 751A—
- (a) may be made at any time on or before the filing date (within the meaning of Schedule 18 to the Finance Act 1998) for the relevant company tax return of the company, and
- (b) may be amended or withdrawn at any time before the application is determined by those Commissioners.
- (3) If an application by a company under section 751A is granted after the company has delivered its relevant company tax return, it has 30 days beginning with the day on which the application is granted in which to amend that return to give effect to section 751A.
- (4) The time limits otherwise applicable to an amendment of a company tax return do not prevent an amendment being made under subsection (3).
- (5) If the HMRC Commissioners refuse an application by a company under section 751A, the company may appeal to the Special Commissioners against the refusal.
- (6) Notice of an appeal must be given in writing to the HMRC Commissioners within 30 days after the application is refused.
- (7) On an appeal—
- (a) if the Special Commissioners are satisfied that the relevant amount is a different amount from the amount specified in the application, they must direct the HMRC Commissioners to grant the application as if the amount specified in it were that different amount,
- (b) if the Special Commissioners are satisfied that the relevant amount is the amount specified in the application, they must direct the HMRC Commissioners to grant the application, and
- (c) in any other case, the Special Commissioners must confirm the refusal.
- (8) For the purposes of subsection (7) “*the relevant amount*” means the amount (if any) equal to so much of the chargeable profits mentioned in subsection (4) of section 751A as can reasonably be regarded as representing the value mentioned in that subsection.
- (9) Part 5 of the Management Act (appeals against assessments to tax), apart from section 50, applies in relation to an appeal under this section as it applies in relation to an appeal against an assessment to tax.
- (10) In this section “*relevant company tax return*”, in relation to a company, means the return for the accounting period for which—
- (a) any sum is chargeable on the company under section 747(4)(a), or
- (b) any sum would be so chargeable but for section 751A,
in respect of the chargeable profits of the controlled foreign company for the accounting period mentioned in section 751A(1).
- (11) In this section “*the HMRC Commissioners*” means the Commissioners for Her Majesty's Revenue and Customs.
#### Losses from overseas property business.
##### 752A
- (1) This section has effect for the purpose of determining for the purposes of this Chapter who has a relevant interest in a controlled foreign company at any time; and references in this Chapter to relevant interests shall be construed accordingly.
- (2) A UK resident company which has a direct or indirect interest in a controlled foreign company has a relevant interest in the company by virtue of that interest unless subsection (3) below otherwise provides.
- (3) A UK resident company which has an indirect interest in a controlled foreign company does not have a relevant interest in the company by virtue of that interest if it has the interest by virtue of having a direct or indirect interest in another UK resident company.
- (4) A related person who has a direct or indirect interest in a controlled foreign company has a relevant interest in the company by virtue of that interest unless subsection (5) or (6) below otherwise provides.
- (5) A related person who has an indirect interest in a controlled foreign company does not have a relevant interest in the company by virtue of that interest if he has the interest by virtue of having a direct or indirect interest in—
- (a) a UK resident company; or
- (b) another related person.
- (6) A related person who has a direct or indirect interest in a controlled foreign company does not have a relevant interest in the company by virtue of that interest to the extent that a UK resident company—
- (a) has the whole or any part of the same interest indirectly, by virtue of having a direct or indirect interest in the related person, and
- (b) by virtue of that indirect interest in the controlled foreign company, has a relevant interest in the company by virtue of subsection (2) above.
- (7) A person who—
- (a) has a direct interest in a controlled foreign company, but
- (b) does not by virtue of subsections (2) to (6) above have a relevant interest in the company by virtue of that interest,
has a relevant interest in the company by virtue of that interest unless subsection (8) below otherwise provides.
- (8) A person does not by virtue of subsection (7) above have a relevant interest in a controlled foreign company by virtue of having a direct interest in the company to the extent that another person—
- (a) has the whole or any part of the same interest indirectly, and
- (b) by virtue of that indirect interest, has a relevant interest in the company by virtue of subsections (2) to (6) above.
- (9) No person has a relevant interest in a controlled foreign company otherwise than as provided by subsections (2) to (8) above.
- (10) In this section—
- “*related person*” means a person who—is not a UK resident company, butis connected or associated with a UK resident company which has by virtue of subsection (2) above a relevant interest in the controlled foreign company in question;
- “*UK resident company*” means a company resident in the United Kingdom.
##### 752B
- (1) For the purposes of section 752(3) above, where a person has a relevant interest in a controlled foreign company by virtue of indirectly holding issued ordinary shares of the company, the percentage of the issued ordinary shares of the company which the relevant interest represents is equal to—
$$P×S$where—P is the product of the appropriate fractions of that person and each of the share-linked companies through which he indirectly holds the shares in question, other than the lowest share-linked company; andS is the percentage of issued ordinary shares of the controlled foreign company which is held directly by the lowest share-linked company.$
- (2) In subsection (1) above and this subsection—
- “the appropriate fraction", in the case of a person who directly holds ordinary shares of a share-linked company, means that fraction of the issued ordinary shares of that company which his holding represents;
- “*the lowest share-linked company*”, in relation to a person who indirectly holds ordinary shares of a controlled foreign company, means the share-linked company which directly holds the shares in question;
- “*share-linked company*” means a company which is share-linked to the controlled foreign company in question.
- (3) Where a person has different indirect holdings of shares of the controlled foreign company (as in a case where different shares are held through different companies which are share-linked to the controlled foreign company)—
- (a) subsection (1) above shall apply separately in relation to the different holdings with any necessary modifications; and
- (b) for the purposes of section 752(3) above the percentage of the issued ordinary shares of the company which the relevant interest represents is the aggregate of the percentages resulting from those separate applications.
- (4) Where, for the purposes of subsection (3) of section 752, the percentage of the issued ordinary shares of the controlled foreign company which a person directly or indirectly holds varies during the relevant accounting period, he shall be treated for the purposes of that subsection as holding throughout that period that percentage of the issued ordinary shares of the company which is equal to the sum of the relevant percentages for each holding period in the relevant accounting period.
- (5) For the purposes of subsection (4) above—
- “holding period", in the case of any person, means a part of the relevant accounting period during which the percentage of the issued ordinary shares of the controlled foreign company which the person holds (whether directly or indirectly) remains the same;
- “the relevant percentage", in the case of a holding period, means the percentage equal to—$P×HA$where—P is the percentage of the issued ordinary shares of the controlled foreign company which the person in question directly or indirectly holds in the holding period, as calculated in accordance with subsections (1) to (3) above so far as applicable;H is the number of days in the holding period; andA is the number of days in the relevant accounting period.
##### 752C
- (1) In this section “*the relevant provisions*” means sections 752 to 752B and this section.
- (2) For the purposes of the relevant provisions—
- (a) a person has a direct interest in a company if (and only if) he has an interest in the company otherwise than by virtue of having an interest in another company;
- (b) a person has an indirect interest in a company if (and only if) he has an interest in the company by virtue of having an interest in another company;
- (c) a person indirectly holds shares of a controlled foreign company if (and only if) he directly holds ordinary shares of a company which is share-linked to the controlled foreign company.
- (3) For the purposes of the relevant provisions, a company is “share-linked" to a controlled foreign company if it has an interest in the controlled foreign company only by virtue of directly holding ordinary shares—
- (a) of the controlled foreign company, or
- (b) of the controlled foreign company or of one or more companies which are share-linked to the controlled foreign company by virtue of paragraph (a) above, or
- (c) of the controlled foreign company or of one or more companies which are share-linked to the controlled foreign company by virtue of paragraph (a) or (b) above,
and so on.
- (4) For the purposes of the relevant provisions, a company (“company A") has an intermediate interest in a controlled foreign company if (and only if)—
- (a) it has a direct or indirect interest in the controlled foreign company; and
- (b) one or more other persons have relevant interests in the controlled foreign company by virtue of having a direct or indirect interest in company A.
- (5) Any interest or shares held by a nominee or bare trustee shall be treated for the purposes of the relevant provisions as held by the person or persons for whom the nominee or bare trustee holds the interest or shares.
- (6) Where—
- (a) an interest in a controlled foreign company is held in a fiduciary or representative capacity, and
- (b) subsection (5) above does not apply, but
- (c) there are one or more identifiable beneficiaries,
the interest shall be treated for the purposes of the relevant provisions as held by that beneficiary or, as the case may be, as apportioned on a just and reasonable basis among those beneficiaries.
- (7) In the relevant provisions—
- “*bare trustee*” means a person acting as trustee—for a person absolutely entitled as against the trustee; orfor any person who would be so entitled but for being a minor or otherwise under a disability; orfor two or more persons who are or would, but for all or any of them being a minor or otherwise under a disability, be jointly so entitled;
- “ordinary shares", in the case of any company, means shares of a single class, however described, which is the only class of shares issued by the company;
- “*the relevant accounting period*” means the accounting period mentioned in section 752(1);
- “*share*” includes a reference to a fraction of a share.
##### 754A
- (1) This section applies where—
- (a) a company resident in the United Kingdom (“the UK company") has an interest in a controlled foreign company at any time during an accounting period of the controlled foreign company;
- (b) the UK company delivers a company tax return; and
- (c) at the time when the UK company delivers the company tax return, it is not established whether or not the controlled foreign company has pursued an acceptable distribution policy in relation to the accounting period.
- (2) If the UK company is of the opinion that the controlled foreign company is likely to pursue an acceptable distribution policy in relation to the accounting period, the UK company shall make the company tax return on the basis that the accounting period of the controlled foreign company is one in relation to which the controlled foreign company pursues such a policy.
- (3) If the UK company is not of the opinion that the controlled foreign company is likely to pursue an acceptable distribution policy in relation to the accounting period, the UK company shall make the company tax return on the basis that the accounting period of the controlled foreign company is one in relation to which the controlled foreign company does not pursue such a policy.
- (4) In any case where—
- (a) the UK company acts in pursuance of subsection (2) above, but
- (b) it becomes established that the controlled foreign company has not pursued an acceptable distribution policy in relation to the accounting period,
the UK company shall amend the company tax return on the basis that the accounting period is not one in relation to which the controlled foreign company pursues an acceptable distribution policy.
- (5) In any case where—
- (a) the UK company acts in pursuance of subsection (3) above, but
- (b) it becomes established that the controlled foreign company has pursued an acceptable distribution policy in relation to the accounting period,
the UK company shall amend the company tax return on the basis that the accounting period is one in relation to which the controlled foreign company pursues an acceptable distribution policy.
- (6) Any amendment required to be made to the company tax return by virtue of subsection (4) or (5) above (“*an ADP amendment*”) shall be made by the UK company before the expiration of the period of 30 days next following the end of the period allowed for establishing an ADP in relation to the accounting period of the controlled foreign company.
- (7) Subject to subsection (8) below, the making of any ADP amendment is subject to, and must be in accordance with, the other provisions of the Corporation Tax Acts as they apply for the purposes of this Chapter.
- (8) The time limits otherwise applicable to amendment of a company tax return do not apply to an ADP amendment.
- (9) A company which fails to make an ADP amendment required by subsection (4) above within the time allowed for doing so shall be liable to a tax-related penalty under paragraph 20 of Schedule 18 to the Finance Act 1998 (penalty, not exceeding amount of tax understated, for incorrect or uncorrected return).
- (10) For the purposes of this section, if it has not previously been established whether or not the controlled foreign company has pursued an acceptable distribution policy in relation to the accounting period, it shall be taken to be established immediately after the end of the period allowed for establishing an ADP in relation to that accounting period.
- (11) In this section, “*the period allowed for establishing an ADP*” means, in relation to an accounting period of a controlled foreign company, the period ending with the expiration of—
- (a) subject to paragraph (b) below, the period of eighteen months next following the end of the accounting period; or
- (b) if the Board have, in the case of the accounting period, allowed further time under paragraph 2(1)(b) of Schedule 25, the further time so allowed.
- (12) In this section any reference to a controlled foreign company pursuing an acceptable distribution policy in relation to an accounting period shall be construed in accordance with Part I of Schedule 25.
##### 754B
- (1) This section has effect where a determination requiring the Board’s sanction is made for any of the following purposes, that is to say—
- (a) the giving of a closure notice; or
- (b) the making of a discovery assessment.
- (2) If the closure notice or, as the case may be, notice of the discovery assessment is given to any person without—
- (a) the determination, so far as it is taken into account in the closure notice or the discovery assessment, having been approved by the Board, or
- (b) notification of the Board’s approval having been served on that person at or before the time of the giving of the notice,
the closure notice or, as the case may be, the discovery assessment shall be deemed to have been given or made (and in the case of an assessment notified) in the terms (if any) in which it would have been given or made had that determination not been taken into account.
- (3) A notification under subsection (2)(b) above—
- (a) must be in writing;
- (b) must state that the Board have given their approval on the basis that—
- (i) an amount of chargeable profits, and
- (ii) an amount of creditable tax (which may be nil),
for the accounting period of the controlled foreign company in question fall to be apportioned under section 747(3) to the person in question;
- (c) must state the amounts mentioned in sub-paragraphs (i) and (ii) of paragraph (b) above; and
- (d) subject to paragraphs (a) to (c) above, may be in such form as the Board may determine.
- (4) For the purposes of this section, the Board’s approval of a determination requiring their sanction—
- (a) must be given specifically in relation to the case in question and must apply to the amount determined; but
- (b) subject to that, may be given by the Board (either before or after the making of the determination) in any such form or manner as they may determine.
- (5) In this section references to a determination requiring the Board’s sanction are references (subject to subsection (6) below) to any determination of the amount of chargeable profits or creditable tax for an accounting period of a controlled foreign company which falls to be apportioned to a particular person under section 747(3).
- (6) For the purposes of this section, a determination shall be taken, in relation to a closure notice or a discovery assessment, not to be a determination requiring the Board’s sanction if—
- (a) an agreement about the relevant amounts has been made between an officer of the Board and the person in whose case it is made;
- (b) that agreement is in force at the time of the giving of the closure notice or, as the case may be, notice of the assessment; and
- (c) the matters to which the agreement relates include the amount determined.
- (7) In paragraph (a) of subsection (6) above, “*the relevant amounts*” means—
- (a) the amount of chargeable profits, and
- (b) the amount of creditable tax (which may be nil),
for the accounting period of the controlled foreign company in question which fall to be apportioned under section 747(3) to the person mentioned in that paragraph.
- (8) For the purposes of subsection (6) above an agreement made between an officer of the Board and any person (“the taxpayer") in relation to any matter shall be taken to be in force at any time if, and only if—
- (a) the agreement is one which has been made or confirmed in writing;
- (b) that time is after the end of the period of thirty days beginning—
- (i) in the case of an agreement made in writing, with the day of the making of the agreement, and
- (ii) in any other case, with the day of the agreement’s confirmation in writing; and
- (c) the taxpayer has not, before the end of that period of thirty days, served a notice on an officer of the Board stating that he is repudiating or resiling from the agreement.
- (9) The references in subsection (8) above to the confirmation in writing of an agreement are references to the service on the taxpayer by an officer of the Board of a notice—
- (a) stating that the agreement has been made; and
- (b) setting out the terms of the agreement.
- (10) The matters that may be questioned on so much of any appeal by virtue of any provision of the Management Act or Schedule 18 to the Finance Act 1998 (company tax returns, assessments and related matters) as relates to a determination the making of which has been approved by the Board for the purposes of this section shall not include the Board’s approval, except to the extent that the grounds for questioning the approval are the same as the grounds for questioning the determination itself.
- (11) In this section—
- “*closure notice*” means a notice under paragraph 32 of Schedule 18 to the Finance Act 1998 (completion of enquiry and statement of conclusions);
- “*discovery assessment*” means a discovery assessment or discovery determination under paragraph 41 of that Schedule (including an assessment by virtue of paragraph 52 of that Schedule).
##### 755A
- (1) This section applies in any case where—
- (a) an amount (“the apportioned profit") of a controlled foreign company’s chargeable profits for an accounting period falls to be apportioned under section 747(3) to a company resident in the United Kingdom (“the UK company");
- (b) the UK company carries on life assurance business in that one of its accounting periods (“the relevant accounting period") in which ends the accounting period of the controlled foreign company; and
- (c) the property or rights which represent the UK company’s relevant interest in the controlled foreign company constitute to any extent assets of the UK company’s long-term insurance fund.
- (2) Subsections (3) and (4) below apply if, in the case of the relevant accounting period, the UK company is not charged to tax under Case I of Schedule D in respect of its profits from life assurance business.
- (3) Where this subsection applies, the “*appropriate rate*” for the purposes of section 747(4)(a) and paragraph 1 of Schedule 26 in relation to the policy holders’ part of any BLAGAB apportioned profit shall be—
- (a) if a single rate of tax under section 88(1) of the Finance Act 1989 (lower corporation tax rate on certain insurance company profits) is applicable in relation to the relevant accounting period, that rate; or
- (b) if more than one such rate of tax is applicable in relation to the relevant accounting period, the average of those rates over the whole of that period.
- (4) Where this subsection applies, the “*appropriate rate*” for the purposes of section 747(4)(a) and paragraph 1 of Schedule 26 shall be nil in relation to so much of the apportioned profit as is referable to—
- (a) pension business,
- (b) life reinsurance business, or
- (c) overseas life assurance business,
carried on by the UK company.
- (4A) In any case where—
- (a) paragraph 4 of Schedule 26 to this Act applies to a dividend received by the UK company, and
- (b) but for this subsection, subsection (4) of section 804B of this Act would apply to that dividend,
the amount of credit for foreign tax in respect of that dividend shall be treated, for the purposes of that section, as wholly attributable to basic life assurance and general annuity business.
- (5) If, in the case of the relevant accounting period, the UK company is charged to tax under Case I of Schedule D in respect of its profits from life assurance business, the “*appropriate rate*” for the purposes of—
- (a) section 747(4)(a), and
- (b) paragraph 1 of Schedule 26,
shall be nil in relation to so much of the apportioned profit as is referable to the UK company’s relevant interest so far as represented by assets of its long-term insurance fund.
- (6) If, in the case of the relevant accounting period,—
- (a) the UK company is not charged to tax under Case I of Schedule D in respect of its profits from life assurance business,
- (b) any creditable tax of the controlled foreign company falls to be apportioned to the UK company, and
- (c) the apportioned profit is to any extent referable to a category of business specified in paragraphs (a) to (c) of subsection (4) above,
so much of the creditable tax so apportioned as is attributable to the apportioned profit so far as so referable shall be left out of account for the purposes of this Chapter, other than section 747(3) and this section, and shall be treated as extinguished.
- (7) If, in the case of the relevant accounting period,—
- (a) the UK company is charged to tax under Case I of Schedule D in respect of its profits from life assurance business, and
- (b) any creditable tax of the controlled foreign company falls to be apportioned to the UK company,
so much of the creditable tax so apportioned as is attributable to so much of the apportioned profit as is referable to the UK company’s relevant interest so far as represented by assets of the UK company’s long-term insurance fund shall be left out of account for the purposes of this Chapter, other than section 747(3) and this section, and shall be treated as extinguished.
- (8) Any set off under paragraph 1 . . . of Schedule 26 against the UK company’s liability to tax under section 747(4)(a) in respect of the apportioned profit shall be made against only so much of that liability as is attributable to the eligible part of the apportioned profit.
- (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (10) For the purposes of this section, the “eligible part" of the apportioned profit is any BLAGAB apportioned profit, other than the policy holders’ part.
- (11) For the purposes of this section the policy holders' part of any BLAGAB apportioned profit is—
- (a) where subsection (11A) below applies, the whole of that profit, and
- (b) in any other case, the relevant fraction (within the meaning of subsection (11B) below) of that profit.
- (11A) This subsection applies if—
- (a) the UK company’s life assurance business is mutual business,
- (b) the policy holders' share of the UK company’s relevant profits for the relevant accounting period is equal to all those profits, or
- (c) the policy holders' share of the UK company’s relevant profits for the relevant accounting period is more than its BLAGAB profits for that period.
- (11B) The relevant fraction for the purposes of subsection (11)(b) above is the fraction arrived at by dividing—
- (a) the policy holders' share of the UK company’s relevant profits for the relevant accounting period, by
- (b) the UK company’s BLAGAB profits for that period.
- (11C) In subsections (11A) and (11B) above—
- (a) references to the policy holders' share of the UK company’s share of the relevant profits are to be construed in accordance with sections 88(3) and 89 of the Finance Act 1989, and
- (b) references to the UK company’s BLAGAB profits are to be construed in accordance with section 89(1B) of that Act.
- (12) In this section—
- “*BLAGAB apportioned profit*” means so much of the apportioned profit as is referable to basic life assurance and general annuity business carried on by the UK company;
- “*long-term insurance fund*” has the meaning given by section 431(2).
- (13) For the purposes of this section, the part of the apportioned profit which is referable to—
- (a) pension business,
- (b) life reinsurance business,
- (c) overseas life assurance business, or
- (d) basic life assurance and general annuity business,
carried on by the UK company is the part which would have been so referable under section 432A had the apportioned profit been a dividend paid to the UK company at the end of the accounting period mentioned in subsection (1)(a) above in respect of the property or rights which represent the UK company’s relevant interest in the controlled foreign company.
- (14) For the purposes of this section, any attribution of creditable tax to a particular part of the apportioned profit shall be made in the proportion which that part of the apportioned profit bears to the whole of the apportioned profit.
##### 755B
- (1) This section applies where—
- (a) a controlled foreign company carries on general insurance business in an accounting period;
- (b) an amount of the company’s chargeable profits, and an amount of its creditable tax (if any), for that accounting period falls to be apportioned under section 747(3) to a company resident in the United Kingdom (“the UK company");
- (c) the UK company delivers a company tax return for that one of its accounting periods in which the controlled foreign company’s accounting period ends; and
- (d) in making or amending the return, the UK company has regard to accounts of the controlled foreign company drawn up using a method falling within subsection (2) below.
- (2) The methods which fall within this subsection are—
- (a) the method described in paragraph 52 of Schedule 9A to the Companies Act 1985 (which provides for a technical provision to be made in the accounts which is later replaced by a provision for estimated claims outstanding); and
- (b) any method which would have fallen within paragraph (a) above, had final replacement of the technical provision, as described in sub-paragraph (4) of paragraph 52 of that Schedule, taken place, and been required to take place, no later than the end of the year referred to in that sub-paragraph as the third year following the underwriting year.
- (3) Where this section applies—
- (a) the UK company may make any amendments of its company tax return arising from the replacement of the technical provision in the controlled foreign company’s accounts at any time within twelve months from the date on which the provision was replaced; and
- (b) notice of intention to enquire into the return under paragraph 24 of Schedule 18 to the Finance Act 1998 may be given at any time up to two years from that date (or at any later time in accordance with the general rule in sub-paragraph (3) of that paragraph).
- (4) If, in a case where this section applies, the accounts of the controlled foreign company are drawn up using a method falling within paragraph (b) of subsection (2) above—
- (a) the controlled foreign company, and
- (b) any person with an interest in the controlled foreign company,
shall be treated for the purposes of this section as if final replacement of the technical provision, as described in sub-paragraph (4) of paragraph 52 of Schedule 9A to the Companies Act 1985, had taken place at, and been required to take place no later than, the end of the year referred to in that sub-paragraph as the third year following the underwriting year.
- (5) Regulations under section 755C may make provision with respect to the determination of the amount of the provision by which the technical provision is to be treated as replaced in cases falling within subsection (4) above.
- (6) In this section “general insurance business” means business which consists of the effecting or carrying out of contracts which fall within Part I of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.
##### 755C
- (1) The Treasury may by regulations provide for the provisions of this Chapter to have effect with prescribed modifications in any case where a non-resident company—
- (a) carries on general insurance business; and
- (b) draws up accounts relating to that business using a method falling within subsection (2) of section 755B.
- (2) Regulations under subsection (1) above may—
- (a) make different provision for different cases;
- (b) make provision having effect in relation to accounting periods of non-resident companies ending not more than one year before the date on which the regulations are made; and
- (c) contain such supplementary, incidental, consequential and transitional provision as the Treasury may think fit.
- (3) In this section—
- “*general insurance business*” has the same meaning as in section 755B;
- “*non-resident company*” means a company resident outside the United Kingdom;
- “*prescribed*” means prescribed in regulations under this section.
##### 755D
- (1) For the purposes of this Chapter “control", in relation to a company, means the power of a person to secure—
- (a) by means of the holding of shares or the possession of voting power in or in relation to the company or any other company, or
- (b) by virtue of any powers conferred by the articles of association or other document regulating the company or any other company,
that the affairs of the company are conducted in accordance with his wishes.
- (2) Where two or more persons, taken together, have the power mentioned in subsection (1) above, they shall be taken for the purposes of this Chapter to control the company.
- (3) The 40 per cent test in this subsection is satisfied in the case of one of two persons who, taken together, control a company if that one of them has interests, rights and powers representing at least 40 per cent of the holdings, rights and powers in respect of which the pair of them fall to be taken as controlling the company.
- (4) The 40 per cent test in this subsection is satisfied in the case of one of two persons who, taken together, control a company if that one of them has interests, rights and powers representing—
- (a) at least 40 per cent, but
- (b) not more than 55 per cent,
of the holdings, rights and powers in respect of which the pair of them fall to be taken as controlling the company.
- (5) For the purposes of this Chapter any question—
- (a) whether a company is controlled by a person, or by two or more persons taken together, or
- (b) whether, in the case of any company, the applicable 40 per cent test is satisfied in the case of each of two persons who, taken together, control the company,
shall be determined after attributing to each of the persons all the rights and powers mentioned in subsection (6) below that are not already attributed to that person for the purposes of subsections (1) to (4) above.
- (6) The rights and powers referred to in subsection (5) above are—
- (a) rights and powers which the person is entitled to acquire at a future date or which he will, at a future date, become entitled to acquire;
- (b) rights and powers of other persons, to the extent that they are rights or powers falling within subsection (7) below;
- (c) if the person is resident in the United Kingdom, rights and powers of any person who is resident in the United Kingdom and connected with the person; and
- (d) if the person is resident in the United Kingdom, rights and powers which for the purposes of subsection (5) above would be attributed to a person who is resident in the United Kingdom and connected with the person (a “*UK connected person*”) if the UK connected person were himself the person.
- (7) Rights and powers fall within this subsection to the extent that they—
- (a) are required, or may be required, to be exercised in any one or more of the following ways, that is to say—
- (i) on behalf of the person;
- (ii) under the direction of the person; or
- (iii) for the benefit of the person; and
- (b) are not confined, in a case where a loan has been made by one person to another, to rights and powers conferred in relation to property of the borrower by the terms of any security relating to the loan.
- (8) In subsections (6)(b) to (d) and (7) above, the references to a person’s rights and powers include references to any rights or powers which he either—
- (a) is entitled to acquire at a future date, or
- (b) will, at a future date, become entitled to acquire.
- (9) In paragraph (d) of subsection (6) above, the reference to rights and powers which would be attributed to a UK connected person if he were the person includes a reference to rights and powers which, by applying that paragraph wherever one person resident in the United Kingdom is connected with another person, would be so attributed to him through a number of persons each of whom is resident in the United Kingdom and connected with at least one of the others.
- (10) In determining for the purposes of this section whether one person is connected with another in relation to a company, subsection (7) of section 839 shall be disregarded.
- (11) References in this section—
- (a) to rights and powers of a person, or
- (b) to rights and powers which a person is or will become entitled to acquire,
include references to rights or powers which are exercisable by that person, or (when acquired by that person) will be exercisable, only jointly with one or more other persons.
### Meaning of offshore fund
#### Losses of ring fence trade: set off against profits of an earlier accounting period
##### 756A
- (1) In this Chapter references to an offshore fund are to a collective investment scheme constituted by—
- (a) a company that is resident outside the United Kingdom, or
- (b) a unit trust scheme the trustees of which are not resident in the United Kingdom, or
- (c) arrangements not falling within paragraph (a) or (b) taking effect by virtue of the law of a territory outside the United Kingdom and which under that law create rights in the nature of co-ownership (without restricting that expression to its meaning in the law of any part of the United Kingdom).
- (2) Subsection (1) has effect subject to—
- section 756B (treatment of umbrella funds), and
- section 756C (treatment of funds comprising more than one class of interest).
- (3) In this section “*collective investment scheme*” has the meaning given by section 235 of the Financial Services and Markets Act 2000.
### Treatment of umbrella funds
##### 756B
- (1) In this Chapter, an “*umbrella fund*” means an offshore fund—
- (a) which provides arrangements for separate pooling of the contributions of the participants and the profits or income out of which payments are made to them; and
- (b) under which the participants are entitled to exchange rights in one pool for rights in another;
and references in this Chapter to a part of an umbrella fund are to such of the arrangements as relate to a separate pool.
- (2) For the purposes of this Chapter (except subsection (1))—
- (a) each part of an umbrella fund shall be regarded as a separate offshore fund, and
- (b) the umbrella fund as a whole shall not be regarded as an offshore fund.
- (3) In this Chapter, in relation to a part of an umbrella fund—
- (a) a reference to the assets of an offshore fund is to such of the assets of the umbrella fund as under the arrangements form part of the separate pool to which that part of the umbrella fund relates;
- (b) a reference to the income of an offshore fund is to the income arising from those assets;
- (c) a reference to a person having an interest in an offshore fund is to a person for the time being having an interest in that separate pool; and
- (d) a reference to an offshore fund being a non-qualifying fund shall be read in relation to times before the coming into force of this section as a reference to the umbrella fund being a non-qualifying fund.
### Treatment of funds comprising more than one class of interest
##### 756C
- (1) For the purposes of this Chapter where there is more than one class of interest in an offshore fund (the “*main fund*”)—
- (a) each class of interest shall be regarded as a separate offshore fund, and
- (b) the main fund shall not be regarded as an offshore fund.
- (2) In this section, references to a class of interest in an offshore fund do not include—
- (a) a part of an umbrella fund which is regarded as an offshore fund by virtue of section 756B, or
- (b) a class of interest in an offshore fund which by virtue of section 759(5), (6) or (8) is not a material interest in the fund.
- (3) In this Chapter, in relation to a class of interest in an offshore fund—
- (a) a reference to the assets of an offshore fund is to the assets of the main fund;
- (b) a reference to the income of an offshore fund is to such of the income of the main fund as is attributable to interests of that class under the arrangements constituting the main fund;
- (c) a reference to a person having an interest in an offshore fund is to a person for the time being having an interest of that class; and
- (d) a reference to an offshore fund being a non-qualifying fund shall be read in relation to times before the coming into force of this section as a reference to the main fund being a non-qualifying fund.
#### Transactions in deposits with and without certificates or in debts.
##### 762ZA
- (1) Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) applies in relation to an offshore income gain arising to a person resident or domiciled outside the United Kingdom as if the offshore income gain were income becoming payable to the person.
- (2) Income treated as arising under that Chapter by virtue of subsection (1) is regarded as “*foreign*” for the purposes of section 726, 730 or 735 of that Act.
- (3) Subsection (1) does not apply in relation to an offshore income gain if (and to the extent that) it is treated, by virtue of section 762(1), as arising to a person resident or ordinarily resident in the United Kingdom.
- (4) The following provisions apply if section 762(2) applies in relation to an offshore income gain (“the relevant offshore income gain”).
- (5) If—
- (a) by virtue of section 762(3) an offshore income gain is treated as arising in a tax year to a person resident or ordinarily resident in the United Kingdom, and
- (b) it is so treated by reason of the relevant offshore income gain (or part of it),
for that and subsequent tax years subsection (1) does not apply in relation to the relevant offshore income gain (or that part).
- (6) If, by virtue of subsection (1) as it applies in relation to the relevant offshore income gain, income is treated under Chapter 2 of Part 13 of ITA 2007 as arising in a tax year, reduce (with effect from the following tax year) the OIG amount in question by the amount of the income.
##### 762ZB
- (1) This section applies to income treated as arising under section 761(1) to an individual in a tax year if—
- (a) section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for that year, and
- (b) the individual is not domiciled in the United Kingdom in that year.
- (2) Treat the income as relevant foreign income of the individual.
- (3) For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis)—
- (a) treat any consideration obtained on the disposal of the asset as deriving from the income, and
- (b) unless the consideration so obtained is of an amount equal to the market value of the asset, treat the asset as deriving from the income.
- (4) In subsection (3)—
- (a) “*the asset*” means the asset the disposal of which causes the income to be treated as arising, and
- (b) “*the disposal*” means the disposal mentioned in paragraph (a).
##### 762A
- (1) This section applies where—
- (a) classes of interest in an offshore fund (the “*main fund*”) are treated as separate offshore funds under section 756C; and
- (b) as the result of—
- (i) a reorganisation within the meaning of section 126 of the 1992 Act, or
- (ii) a conversion of securities within the meaning of section 132 of that Act,
a person exchanges an interest of one class (A) in the main fund for an interest of another class (B) in that fund.
- (2) Where—
- (a) the interest of class A—
- (i) is at the time of the exchange an interest in a non-qualifying offshore fund, or
- (ii) has been an interest in such a fund at any material time, and
- (b) the interest of class B is at the time of the exchange an interest in a fund which is certified by the Board as a distributing offshore fund,
section 127 of the 1992 Act (equation of original shares and new holding) shall not prevent the exchange constituting a disposal for the purposes of this Chapter.
- (3) Any such disposal shall be treated as a disposal for a consideration equal to the market value of the rights at the time of the exchange.
- (4) In this section—
- “*class of interest*” has the same meaning as in section 756C(1);
- “*material time*” has the same meaning as in section 757.
##### 765A
- (1) Section 765(1) shall not apply to a transaction which is a movement of capital to which Article 1 of the Directive of the Council of the European Communities dated 24th June 1988 No. [88/361/EEC](https://www.legislation.gov.uk/european/directive/1988/0361) applies.
- (2) Where if that Article did not apply to it a transaction would be unlawful under section 765(1), the body corporate in question (that is to say, the body corporate resident in the United Kingdom) shall—
- (a) give to the Board within six months of the carrying out of the transaction such information relating to the transaction, or to persons connected with the transaction, as regulations made by the Board may require, and
- (b) where notice is given to the body corporate by the Board, give to the Board within such period as is prescribed by regulations made by the Board (or such longer period as the Board may in the case allow) such further particulars relating to the transaction, to related transactions, or to persons connected with the transaction or related transactions, as the Board may require.
#### Write-off of government investment.
##### 767A
- (1) Where it appears to the Board that—
- (a) there has been a change in the ownership of a company (“*the tax-payer company*”),
- (b) any corporation tax assessed on the tax-payer company for an accounting period beginning before the change remains unpaid at any time after the relevant date, and
- (c) any of the three conditions mentioned below is fulfilled,
any person mentioned in subsection (2) below may be assessed by the Board and charged (in the name of the tax-payer company) to an amount of corporation tax in accordance with this section.
- (2) The persons are—
- (a) any person who at any time during the relevant period before the change in the ownership of the tax-payer company had control of it;
- (b) any company of which the person mentioned in paragraph (a) above has at any time had control within the period of three years before that change.
- (3) In subsection (2) above, “*the relevant period*” means—
- (a) the period of three years before the change in the ownership of the tax-payer company; or
- (b) if during the period of three years before that change (“*the later change*”) there was a change in the ownership of the tax-payer company (“*the earlier change*”), the period elapsing between the earlier change and the later change.
- (4) The first condition is that—
- (a) at any time during the period of three years before the change in the ownership of the tax-payer company the activities of a trade or business of that company cease or the scale of those activities become small or negligible; and
- (b) there is no significant revival of those activities before that change occurs.
- (5) The second condition is that at any time after the change in the ownership of the tax-payer company, but under arrangements made before that change, the activities of a trade or business of that company cease or the scale of those activities become small or negligible.
- (6) The third condition is that—
- (a) at any time during the period of six years beginning three years before the change in the ownership of the tax-payer company there is a major change in the nature or conduct of a trade or business of that company;
- (b) there is a transfer or there are transfers of assets of the tax-payer company to a person mentioned in subsection (7) below or to any person under arrangements which enable any of those assets or any assets representing those assets to be transferred to a person mentioned in subsection (7) below;
- (c) that transfer occurs or those transfers occur during the period of three years before the change in the ownership of the tax-payer company or after that change but under arrangements made before that change; and
- (d) the major change mentioned in paragraph (a) above is attributable to that transfer or those transfers.
- (7) The persons are—
- (a) any person mentioned in subsection (2)(a) above; and
- (b) any person connected with him.
- (8) The amount of tax charged in an assessment made under this section must not exceed the amount of the tax which, at the time of that assessment, remains unpaid by the tax-payer company.
- (9) For the purposes of this section the relevant date is the date six months from the date on which the corporation tax is assessed as mentioned in subsection (1)(b) above.
- (10) Any assessment made under this section shall not be out of time if made within three years from the date on which the liability of the tax-payer company to corporation tax for the accounting period mentioned in subsection (1)(b) above is finally determined.
##### 767AA
- (1) Where it appears to the Board that—
- (a) there has been a change in the ownership of a company (“the transferred company"),
- (b) any corporation tax relating to an accounting period ending on or after the change has been assessed on the transferred company or an associated company,
- (c) that tax remains unpaid at any time more than six months after it was assessed, and
- (d) the condition set out in subsection (2) below is fulfilled,
any person mentioned in subsection (4) below may be assessed by the Board and charged to an amount of corporation tax not exceeding the amount remaining unpaid.
- (2) The condition is that it would be reasonable (apart from this section) to infer, from either or both of—
- (a) the terms of any transactions entered into in connection with the change, and
- (b) the other circumstances of the change and of any such transactions,
that at least one of those transactions was entered into by one or more of its parties on the assumption, as regards a potential tax liability, that that liability would be unlikely to be met, or met in full, if it were to arise.
- (3) In subsection (2) above the reference to a potential tax liability is a reference to a liability to pay corporation tax which—
- (a) in circumstances which were reasonably foreseeable at the time of the change in ownership, or
- (b) in circumstances the occurrence of which is something of which there was at that time a reasonably foreseeable risk,
would or might arise from an assessment made, after the change in ownership, on the transferred company or an associated company (whether or not a particular associated company).
- (4) The persons mentioned in subsection (1) above are—
- (a) any person who at any time during the relevant period had control of the transferred company;
- (b) any company of which the person mentioned in paragraph (a) above has at any time had control within the period of three years before the change in the ownership of the transferred company.
- (5) In subsection (4) above, “*the relevant period*” means—
- (a) the period of three years before the change in the ownership of the transferred company; or
- (b) if during the period of three years before that change (“the later change") there was a change in the ownership of the transferred company (“the earlier change"), the period elapsing between the earlier change and the later change.
- (6) For the purposes of this section a transaction is entered into in connection with a change in the ownership of a company if—
- (a) it is the transaction, or one of the transactions, by which that change is effected; or
- (b) it is entered into as part of a series of transactions, or scheme, of which transactions effecting the change in ownership have formed or will form a part.
- (7) For the purposes of this section—
- (a) references to a scheme are references to any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions;
- (b) it shall be immaterial in determining whether any transactions have formed or will form part of a series of transactions or scheme that the parties to any of the transactions are different from the parties to another of the transactions; and
- (c) the cases in which any two or more transactions are to be taken as forming part of a series of transactions or scheme shall include any case in which it would be reasonable to assume that one or more of them—
- (i) would not have been entered into independently of the other or others; or
- (ii) if entered into independently of the other or others, would not have taken the same form or been on the same terms.
- (8) In this section references, in relation to the transferred company and an assessment to tax, to an associated company are references to any compnay (whenever formed) which, at the time of the assessment or at an earlier time after the change in ownership—
- (a) has control of the transferred company;
- (b) is a company of which the transferred company has control; or
- (c) is a company under the control of the same person or persons as the transferred company.
- (9) A person assessed and charged to tax under this section shall be assessed and charged in the name of the company by whom the tax to which the assessment relates remains unpaid.
- (10) Any assessment made under this section shall not be out of time if made within three years from the date of the final determination of the liability of the company by whom the tax remains unpaid to corporation tax for the accounting period for which that tax was assessed.
##### 767B
- (1) In relation to corporation tax assessed under section 767A—
- (a) section 86 of the Management Act (interest on overdue tax), in so far as it has effect in relation to accounting periods ending on or before 30th September 1993, and
- (b) section 87A of that Act (corresponding provision for corporation tax due for accounting periods ending after that date),
shall have effect as if the references in section 86 to the reckonable date and in section 87A to the date when the tax becomes due and payable were, respectively, references to the date which is the reckonable date in relation to the tax-payer company and the date when the tax became due and payable by the tax-payer company.
- (1A) In relation to corporation tax assessed under section 767AA, section 87A of the Management Act shall have effect as if the references to the date when the tax becomes due and payable were references to the date when the tax became due and payable by the transferred company or the associated company (as the case may be).
- (2) A payment in pursuance of an assessment under section 767A or 767AA shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes; but any person making such a payment shall be entitled to recover an amount equal to the payment from the tax-payer company or the transferred company or associated company (as the case may be).
- (3) In subsection (2) above the reference to a payment in pursuance of an assessment includes a reference to a payment of interest under section 86 or 87A of the Management Act (as they have effect by virtue of subsection (1) above).
- (4) For the purposes of sections 767A, 767AA and 767C, “*control*”, in relation to a company, shall be construed in accordance with section 416 as modified by subsections (5) and (6) below.
- (5) In subsection (2)(a) for “the greater part of” there shall be substituted “50 per cent. of”.
- (6) For subsection (3) there shall be substituted—
- (”) Where two or more persons together satisfy any of the conditions in subsection (2) above and do so by reason of having acted together to put themselves in a position where they will in fact satisfy the condition in question, each of those persons shall be treated as having control of the company.”
- (7) In section 767A(6) “*a major change in the nature or conduct of a trade or business*” includes any change mentioned in any of paragraphs (a) to (d) of section 245(4); and also includes a change falling within any of those paragraphs which is achieved gradually as the result of a series of transfers.
- (8) In section 767A(6) “*transfer*”, in relation to an asset, includes any disposal, letting or hiring of it, and any grant or transfer of any right, interest or licence in or over it, or the giving of any business facilities with respect to it.
- (9) Section 839 shall apply for the purposes of section 767A(7).
- (10) Subsection (9) of section 768 shall apply for the purposes of sections 767A and 767AA as it applies for the purposes of section 768.
##### 767C
- (1) This section applies where it appears to the Board that—
- (a) there has been a change in the ownership of a company (“the subject company"); and
- (b) in connection with that change a person (“the seller") may be or become liable to be assessed and charged to corporation tax under section 767A or 767AA.
- (2) The Board may by notice require any person to supply to them—
- (a) any document in the person’s possession or power which appears to the Board to be relevant for determining any one or more of the matters referred to in subsection (3) below; or
- (b) any particulars which appear to them to be so relevant.
- (3) Those matters are—
- (a) whether the seller is or may become liable as mentioned in subsection (1) above and the extent of the liability or potential liability; and
- (b) whether the subject company or an associated company is or may become liable to be assessed to any tax in respect of which the seller is or could become liable as mentioned in subsection (1) above, and the extent of the liability or potential liability of the subject company or associated company.
- (4) Without prejudice to the following provisions of this section, the references in subsection (2) above to documents and particulars are references to the documents and particulars specified or described in the notice.
- (5) A notice under subsection (2) above must specify the period, which must not be less than 30 days, within which the notice must be complied with.
- (6) Any person to whom any documents are supplied under this section may take copies of them or of any extracts from them.
- (7) A notice under subsection (2) above shall not oblige a person to supply any documents or particulars relating to the conduct of any pending appeal relating to tax.
- (8) In relation to any notice under subsection (2) above—
- (a) subsection (4) of section 20B of the Taxes Management Act 1970 (rules relating to copies of documents) shall apply as it applies in relation to a notice under section 20(1) of that Act; and
- (b) subsections (8) to (14) of section 20B of that Act (rules about obtaining documents etc. from professional advisers) shall apply as they apply in relation to a notice under section 20(3) of that Act but as if any reference to an inspector were a reference to the Board;
and subsection (8C) of section 20 of that Act (exclusion of personal records and journalistic material) shall apply for the purposes of this section as it applies for the purposes of that section.
- (9) In this section references, in relation to the subject company and an assessment to tax, to an associated company are references to any company which, at the time of the assessment or at an earlier time after the change in ownership—
- (a) has control of the subject company;
- (b) is a company of which the subject company has control; or
- (c) is a company under the control of the same person or persons as the subject company.
- (10) In this section “*document*” means anything in which information of any description is recorded.
##### 768A
- (1) In any case where—
- (a) within any period of three years there is both a change in the ownership of a company and (either earlier or later in that period, or at the same time) a major change in the nature or conduct of a trade carried on by the company, or
- (b) at any time after the scale of the activities in a trade carried on by a company has become small or negligible, and before any considerable revival of the trade, there is a change in the ownership of the company,
no relief shall be given under section 393A(1) by setting a loss incurred by the company in an accounting period ending after the change in ownership against any profits of an accounting period beginning before the change in ownership.
- (2) Subsections (2) to (4), (8) and (9) of section 768 shall apply for the purposes of this section as they apply for the purposes of that section.
- (3) This section applies in relation to changes in ownership occurring on or after 14th June 1991.
##### 768B
- (1) This section applies where there is a change in the ownership of a company with investment business and—
- (a) after the change there is a significant increase in the amount of the company’s capital; or
- (b) within the period of six years beginning three years before the change there is a major change in the nature or conduct of the business carried on by the company; or
- (c) the change in the ownership occurs at any time after the scale of the activities in the business carried on by the company has become small or negligible and before any considerable revival of the business.
- (2) For the purposes of subsection (1)(a) above, whether there is a significant increase in the amount of a company’s capital after a change in the ownership of the company shall be determined in accordance with the provisions of Part I of Schedule 28A.
- (3) In paragraph (b) of subsection (1) above “*major change in the nature or conduct of a business*” includes a major change in the nature of the investments held by the company, even if the change is the result of a gradual process which began before the period of six years mentioned in that paragraph.
- (4) For the purposes of this section—
- (a) “*legatee*” includes any person taking under a testamentary disposition or on an intestacy or partial intestacy, whether he takes beneficially or as trustee,
- (b) property taken under a testamentary disposition or on an intestacy or partial intestacy includes any property appropriated by the personal representatives in or towards satisfaction of a pecuniary legacy or any other interest or share in the property devolving under the disposition or intestacy, and
- (c) a person taking under a donatio mortis causa shall be treated as a legatee and his acquisition as made at the time of the donor's death.
- (a) the accounting period of the company in which the change in the ownership occurs shall be divided into two parts, the first the part ending with the change, the second the part after;
- (b) those parts shall be treated as two separate accounting periods; and
- (c) the amounts in issue for the accounting period being divided shall be apportioned to those parts.
- (5) In Schedule 28A—
- (a) Part II shall have effect for identifying the amounts in issue for the accounting period being divided; and
- (b) Part III shall have effect for the purpose of apportioning those amounts to the parts of that accounting period.
- (6) Any sums which—
- (a) are, or are treated as, expenses of management referable to the accounting period being divided, and
- (b) under Part III of Schedule 28A are apportioned to either part of that period,
shall be treated for the purposes of section 75 expenses of management referable to that part.
- (7) Any charges which under Part III of Schedule 28A are apportioned to either part of the accounting period being divided shall be treated for the purposes of sections 338 and 75 as paid in that part.
- (8) Any allowances which under Part III of Schedule 28A are apportioned to either part of the accounting period being divided shall be treated for the purposes of section 253 of the Capital Allowances Act and section 75(7) as falling to be made in that part.
- (9) In computing the total profits of the company for an accounting period ending after the change in the ownership, no deduction shall be made under section 75 by reference to—
- (a) expenses of management deductible or allowances falling to be made for an accounting period beginning before the change; or
- (b) charges paid in such an accounting period.
- (10) Part IV of Schedule 28A shall have effect for the purpose of restricting, in a case where this section applies, the debits and non-trading deficits to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in respect of the company’s loan relationships (including debits so brought into account by virtue of paragraph 14(3)of Schedule 26 to the Finance Act 2002).
- (12) Subject to the modification in subsection (13) below, subsections (6) to (9) of section 768 shall apply for the purposes of this section as they apply for the purposes of that section.
- (13) The modification is that in subsection (6) of section 768 for the words “relief in respect of a company’s losses has been restricted” there shall be substituted “deductions from a company’s total profits , or the debits to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 in the case of a company in respect of its loan relationships (or its derivative contracts by virtue of paragraph 14(3) of Schedule 26 to the Finance Act 2002), have been restricted.”
- (14) In this section “*company with investment business*” has the same meaning as in Part IV.
##### 768C
- (1) This section applies where—
- (a) there is a change in the ownership of a company with investment business (“the relevant company”);
- (b) none of paragraphs (a) to (c) of section 768B(1) applies;
- (c) after the change in the ownership the relevant company acquires an asset from another company in circumstances such that section 171(1) of the 1992 Act applies to the acquisition; and
- (d) a chargeable gain (“a relevant gain”) accrues to the relevant company on a disposal of the asset within the period of three years beginning with the change in the ownership.
- (2) For the purposes of subsection (1)(d) above an asset acquired by the relevant company as mentioned in subsection (1)(c) above shall be treated as the same as an asset owned at a later time by that company if the value of the second asset is derived in whole or in part from the first asset, and in particular where the second asset is a freehold and the first asset was a leasehold and the lessee has acquired the reversion.
- (3) For the purposes of this section—
- (a) the accounting period of the relevant company in which the change in the ownership occurs shall be divided into two parts, the first the part ending with the change, the second the part after;
- (b) those parts shall be treated as two separate accounting periods; and
- (c) the amounts in issue for the accounting period being divided shall be apportioned to those parts.
- (4) In Schedule 28A—
- (a) Part V shall have effect for identifying the amounts in issue for the accounting period being divided; and
- (b) Part VI shall have effect for the purpose of apportioning those amounts to the parts of that accounting period.
- (5) Subsections (6) to (8) of section 768B shall apply in relation to the relevant company as they apply in relation to the company mentioned in subsection (1) of that section except that any reference in those subsections to Part III of Schedule 28A shall be read as a reference to Part VI of that Schedule.
- (6) Subsections (7) and (9) below apply only where, in accordance with the relevant provisions of the 1992 Act and Part VI of Schedule 28A, an amount is included in respect of chargeable gains in the total profits for the accounting period of the relevant company in which the relevant gain accrues.
- (7) In computing the total profits of the relevant company for the accounting period in which the relevant gain accrues, no deduction shall be made under section 75 by reference to—
- (a) expenses of management deductible or allowances falling to be made for an accounting period of the relevant company beginning before the change in ownership, or
- (b) charges paid in such an accounting period,
from an amount of the total profits equal to the amount which represents the relevant gain.
- (8) For the purposes of this section, the amount of the total profits for an accounting period which represents the relevant gain is—
- (a) where the amount of the relevant gain does not exceed the amount which is included in respect of chargeable gains for that period, an amount equal to the amount of the relevant gain;
- (b) where the amount of the relevant gain exceeds the amount which is included in respect of chargeable gains for that period, the amount so included.
- (9) Part IV of Schedule 28A shall have effect for the purpose of restricting, in a case where this section applies, the debits and non-trading deficits to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in respect of the relevant company’s loan relationships (including debits so brought into account by virtue of paragraph 14(3) of Schedule 26 to the Finance Act 2002).
- (11) Subsections (8) and (9) of section 768 shall apply for the purposes of this section as they apply for the purposes of that section.
- (12) In this section—
- “*the relevant provisions of the 1992 Act*” means section 8(1) of and Schedule 7A to that Act; and
- “*company with investment business*” has the same meaning as in Part 4.
- (13) This section applies in relation to an asset to which Schedule 29 to the Finance Act 2002 applies (intangible fixed assets), with the following adaptations—
- (a) for the reference to section 171(1) of the 1992 Act substitute a reference to paragraph 55 of that Schedule;
- (b) for any reference to a chargeable gain under that Act substitute a reference to a chargeable realisation gain within the meaning of that Schedule that is a credit within paragraph 34(1)(a) of that Schedule (non-trading credits);
- (c) for any reference to a disposal of the asset substitute a reference to its realisation within the meaning of that Schedule;
- (d) for the reference to the relevant provisions of the 1992 Act substitute a reference to Part 6 of that Schedule.
##### 768D
- (1) This section applies where there is a change in the ownership of a company carrying on a Schedule A business and—
- (a) in the case of a company with investment business, either—
- (i) paragraph (a), (b) or (c) of section 768B(1) applies, or
- (ii) section 768C applies;
- (b) in the case of a company which is not a company with investment business, paragraph (a) or (b) of section 768(1) applies.
- (2) Where this section applies the following provisions have effect to prevent relief being given under section 392A by setting a Schedule A loss incurred by the company before the change of ownership against profits arising after the change.
- (3) The accounting period in which the change of ownership occurs is treated for that purpose as two separate accounting periods, the first ending with the change and the second consisting of the remainder of the period.
- (4) The profits or losses of the period in which the change occurs are apportioned to those two periods—
- (a) in the case of a company with investment business—
- (i) where paragraph (a), (b) or (c) of section 768B(1) applies, in accordance with Parts II and III of Schedule 28A, or
- (ii) where section 768C applies, in accordance with Parts V and VI of that Schedule, and
- (b) in the case of a company which is not a company with investment business, according to the length of the periods,
unless in any case the specified method of apportionment would work unjustly or unreasonably in which case such other method shall be used as appears just and reasonable.
- (5) Relief under section 392A(1) against total profits of the same accounting period is available only in relation to each of those periods considered separately.
- (6) A loss made in any accounting period beginning before the change of ownership may not be set off under section 392A(2) against, or deducted by virtue of section 392A(3) from—
- (a) in the case of—
- (i) a company with investment business where paragraph (a), (b) or (c) of section 768B(1) applies, or
- (ii) a company which is not a company with investment business,
profits of an accounting period ending after the change of ownership;
- (b) in the case of a company with investment business where section 768C applies, from so much of those profits as represents the relevant gain within the meaning of that section.
- (7) Subsections (8) and (9) of section 768 (time limits for assessment; information powers) apply for the purposes of this section as they apply for the purposes of that section.
- (8) In this section—
- (a) any reference to a case where paragraph (a) or (b) of section 768(1) applies includes the case where that paragraph would apply if the reference there to a trade carried on by the company were to a Schedule A business carried on by it;
- (b) “*company with investment business*” has the same meaning as in Part 4.
- (9) The provisions of this section apply in relation to an overseas property business as they apply in relation to a Schedule A business.
##### 768E
- (1) Where there is a change in the ownership of a company with investment business and either—
- (a) paragraph (a), (b) or (c) of section 768B(1) applies, or
- (b) section 768C applies,
the following provisions have effect to prevent relief being given under paragraph 35 of Schedule 29 to the Finance Act 2002 by setting a non-trading loss on intangible fixed assets incurred by the company before the change of ownership against profits arising after the change.
- (2) The accounting period in which the change of ownership occurs is treated for that purpose as two separate accounting periods, the first ending with the change and the second consisting of the remainder of the period.
- (3) The profits or losses of the period in which the change occurs are apportioned to those two periods—
- (a) where paragraph (a), (b) or (c) of section 768B(1) applies, in accordance with Parts 2 and 3 of Schedule 28A, or
- (b) where section 768C applies, in accordance with Parts 5 and 6 of that Schedule,
unless in any case the specified method of apportionment would work unjustly or unreasonably in which case such other method shall be used as appears just and reasonable.
- (4) Relief under paragraph 35 of Schedule 29 to the Finance Act 2002 against total profits of the same accounting period is available only in relation to each of those periods considered separately.
- (5) A loss made in any accounting period beginning before the change of ownership may not be set off under paragraph 35(3) of Schedule 29 to the Finance Act 2002 against—
- (a) in a case where paragraph (a), (b) or (c) of section 768B(1) applies, profits of an accounting period ending after the change of ownership;
- (b) in a case where section 768C applies, so much of those profits as represents the relevant gain within the meaning of that section.
- (6) Subsections (8) and (9) of section 768 (time limits for assessment; information powers) apply for the purposes of this section as they apply for the purposes of that section.
- (7) In this section “company with investment business” has the same meaning as in Part 4.
##### 770A
Schedule 28AA (which deals with provision made or imposed otherwise than at arm’s length) shall have effect.
#### Dealings in commodity futures etc: withdrawal of loss relief.
### Factoring of income receipts etc
##### 774A
- (1) For the purposes of section 774B an arrangement is a structured finance arrangement in relation to a person (“*the borrower*”) if the following condition is met in relation to the borrower.
- (2) The condition is that—
- (a) under the arrangement the borrower receives from another person (“*the lender*”) any money or other asset (“the advance”) in any period,
- (b) in accordance with generally accepted accounting practice the accounts of the borrower for that period record a financial liability in respect of the advance,
- (c) the borrower, or a person connected with the borrower, makes a disposal of an asset (“the security”) under the arrangement to or for the benefit of the lender or a person connected with the lender,
- (d) the lender, or a person connected with the lender, is entitled under the arrangement to payments in respect of the security, and
- (e) in accordance with generally accepted accounting practice those payments reduce the amount of the financial liability in respect of the advance recorded in the accounts of the borrower.
- (3) For the purposes of this section, in any case where the borrower is a partnership, references to the accounts of the borrower include the accounts of any member of the partnership.
- (4) For the purposes of this section and section 774B—
- (a) references to a person connected with the borrower do not include the lender, and
- (b) references to a person connected with the lender do not include the borrower.
##### 774B
- (1) If—
- (a) an arrangement is a structured finance arrangement in relation to a person (“*the borrower*”), and
- (b) the arrangement would (disregarding this section) have had the relevant effect (see subsections (2) and (3)),
the arrangement is not to have that effect.
- (2) If the borrower is a person other than a partnership, the relevant effect is that—
- (a) an amount of income on which the borrower, or a person connected with the borrower, would otherwise have been charged to tax is not so charged,
- (b) an amount which would otherwise have been brought into account in calculating for tax purposes any income of the borrower, or of a person connected with the borrower, is not so brought into account, or
- (c) the borrower, or a person connected with the borrower, becomes entitled to an income deduction.
- (3) If the borrower is a partnership, the relevant effect is that—
- (a) an amount of income on which a member of the partnership would otherwise have been charged to tax is not so charged,
- (b) an amount which would otherwise have been brought into account in calculating for tax purposes any income of a member of the partnership is not so brought into account, or
- (c) a member of the partnership becomes entitled to an income deduction.
- (4) If—
- (a) a person in relation to whom the structured finance arrangement would otherwise have had the relevant effect is a person within the charge to income tax, and
- (b) in accordance with generally accepted accounting practice the accounts of the person record an amount as a finance charge in respect of the advance,
that person may treat the amount for income tax purposes as interest payable on a loan.
- (5) If a person in relation to whom the structured finance arrangement would otherwise have had the relevant effect is a company within the charge to corporation tax—
- (a) the advance is to be treated, in relation to the company, for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 as a money debt owed by the company,
- (b) the arrangement is to be treated, in relation to the company, for the purposes of that Chapter as a loan relationship of the company (as a debtor relationship), and
- (c) any amount which, in accordance with generally accepted accounting practice, is recorded in the accounts of the company as a finance charge in respect of the advance is to be treated as interest payable under that relationship.
- (6) For the purposes of this section, in any case where the borrower is a partnership,—
- (a) references to accounts include the accounts of the partnership, and
- (b) any deemed interest is treated as payable by the partnership (whether or not the finance charge is recorded in the accounts of the partnership).
- (7) For the purpose of determining when any deemed interest in respect of the advance is paid—
- (a) the payments mentioned in section 774A(2)(d) are treated as consisting of amounts for repaying the advance and amounts (“the interest elements”) in respect of interest on the advance, and
- (b) the interest elements of those payments are treated as paid when those payments are paid,
and the deemed interest in respect of the advance is treated as paid at the times when the interest elements are treated as paid.
- (8) In this section “*deemed interest*” means any amount which is treated as interest as a result of subsection (4) or (5).
- (9) This section is subject to the exceptions contained in section 774E.
##### 774C
- (1) For the purposes of section 774D an arrangement is a structured finance arrangement in relation to a partnership (“the borrower partnership”) if condition A or B is met in relation to the borrower partnership.
- (2) Condition A is that—
- (a) a person (“the transferor partner”) disposes of an asset (“the security”) under the arrangement to the borrower partnership,
- (b) the transferor partner is a member of the borrower partnership immediately after the disposal (whether or not a member immediately before the disposal),
- (c) under the arrangement the borrower partnership receives from another person (“*the lender*”) any money or other asset (“the advance”) in any period,
- (d) in accordance with generally accepted accounting practice the accounts of the borrower partnership for that period record a financial liability in respect of the advance,
- (e) there is a relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender (see subsection (6)),
- (f) under the arrangement the share of the lender or person connected with the lender in the profits of the borrower partnership is determined by reference (wholly or partly) to payments in respect of the security, and
- (g) in accordance with generally accepted accounting practice those payments reduce the amount of the financial liability in respect of the advance recorded in the accounts of the borrower partnership.
- (3) For the purposes of condition A, references to the accounts of the borrower partnership include the accounts of the transferor partner.
- (4) Condition B is that—
- (a) the borrower partnership holds an asset (“the security”) as a partnership asset at any time before the arrangement is made,
- (b) under the arrangement the borrower partnership receives from another person (“*the lender*”) any money or other asset (“the advance”) in any period,
- (c) in accordance with generally accepted accounting practice the accounts of the borrower partnership for that period record a financial liability in respect of the advance,
- (d) there is a relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender,
- (e) under the arrangement the share of the lender or person connected with the lender in the profits of the borrower partnership is determined by reference (wholly or partly) to payments in respect of the security, and
- (f) in accordance with generally accepted accounting practice those payments reduce the amount of the financial liability in respect of the advance recorded in the accounts of the borrower partnership.
- (5) For the purposes of condition B, references to the accounts of the borrower partnership include the accounts of any person who is a member of the partnership immediately before the arrangement is made.
- (6) For the purposes of this section and section 774D there is a relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender if directly or indirectly in consequence of, or otherwise in connection with, the arrangement—
- (a) the lender, or a person connected with the lender, becomes a member of the borrower partnership at any time, or
- (b) there is at any time a change in the share of a member of the borrower partnership in the profits of the borrower partnership in a case where that member is the lender or a person connected with the lender.
- (7) For the purposes of subsection (6)(b) the reference to a person connected with the lender includes a person who at any time becomes connected with the lender directly or indirectly in consequence of, or otherwise in connection with, the arrangement.
##### 774D
- (1) This section applies if—
- (a) an arrangement is a structured finance arrangement in relation to a partnership (“the borrower partnership”), and
- (b) any relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender would (disregarding this section) have had the following effect.
- (2) The effect is that—
- (a) an amount of income on which a relevant member of the borrower partnership would otherwise have been charged to tax is not so charged,
- (b) an amount which would otherwise have been brought into account in calculating for tax purposes any income of a relevant member of the borrower partnership is not so brought into account, or
- (c) a relevant member of the borrower partnership becomes entitled to an income deduction.
- (3) In this section “*relevant member of the borrower partnership*” means—
- (a) in any case where condition A in section 774C is met in relation to the arrangement, the transferor partner, and
- (b) in any case where condition B in that section is met in relation to the arrangement, any person other than the lender who is a member of the borrower partnership immediately before the time at which the relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender occurs.
- (4) Part 9 of ITTOIA 2005 and section 114 above are to have effect in relation to any relevant member of the borrower partnership as if the relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender had not occurred.
Accordingly, the structured finance arrangement is not to have the effect mentioned in subsection (2).
- (5) The following provisions of this section confer relief from tax the availability of which depends on which of the conditions in section 774C is met in relation to the arrangement.
- (6) In any case where condition A in section 774C is met, if—
- (a) the transferor partner is a person within the charge to income tax, and
- (b) in accordance with generally accepted accounting practice the accounts of the borrower partnership record an amount as a finance charge in respect of the advance,
the transferor partner may treat the amount for income tax purposes as interest payable by the transferor partner on a loan.
- (7) In any case where condition A in that section is met, if the transferor partner is a company within the charge to corporation tax—
- (a) the advance is to be treated, in relation to the company, for the purposes of paragraph 19 of Schedule 9 to the Finance Act 1996 (and the other provisions of Chapter 2 of Part 4 of that Act) as a money debt owed by the borrower partnership,
- (b) the arrangement is to be treated, in relation to the company, as a transaction for the lending of money from which that debt is treated as arising for those purposes, and
- (c) any amount which, in accordance with generally accepted accounting practice, is recorded in the accounts of the borrower partnership as a finance charge in respect of the advance is to be treated as interest payable by the company under that transaction.
- (8) For the purposes of subsections (6) and (7), references to the accounts of the borrower partnership include the accounts of the transferor partner.
- (9) In any case where condition B in section 774C is met, if—
- (a) a relevant member of the borrower partnership is a person within the charge to income tax, and
- (b) in accordance with generally accepted accounting practice the accounts of the borrower partnership record an amount as a finance charge in respect of the advance,
the relevant partner may treat the amount for income tax purposes as interest payable by the borrower partnership on a loan.
- (10) In any case where condition B in that section is met, if a relevant member of the borrower partnership is a company within the charge to corporation tax—
- (a) the advance is to be treated, in relation to the company, for the purposes of paragraph 19 of Schedule 9 to the Finance Act 1996 (and the other provisions of Chapter 2 of Part 4 of that Act) as a money debt owed by that partnership,
- (b) the arrangement is to be treated, in relation to the company, as a transaction for the lending of money from which that debt is treated as arising for those purposes, and
- (c) any amount which, in accordance with generally accepted accounting practice, is recorded in the accounts of the borrower partnership as a finance charge in respect of the advance is to be treated as interest payable by the borrower partnership under that transaction.
- (11) For the purposes of subsections (9) and (10), references to the accounts of the borrower partnership include the accounts of any relevant member of the borrower partnership.
- (12) For the purpose of determining when any deemed interest in respect of the advance is paid—
- (a) the payments mentioned in section 774C(2)(f) or (4)(e) are treated as consisting of amounts for repaying the advance and amounts (“the interest elements”) in respect of interest on the advance, and
- (b) the interest elements of those payments are treated as paid when those payments are paid,
and the deemed interest in respect of the advance is treated as paid at the times when the interest elements are treated as paid.
- (13) In this section “*deemed interest*” means any amount which is treated as interest as a result of any of subsections (6) to (10).
- (14) This section is subject to the exceptions contained in section 774E.
##### 774E
- (1) Section 774B or 774D does not apply if the whole of the advance under the structured finance arrangement—
- (a) is charged to tax on a relevant person (see subsection (7)) as an amount of income,
- (b) is brought into account in calculating for tax purposes any income of a relevant person, or
- (c) is brought into account for the purposes of any provision of the Capital Allowances Act as a disposal receipt, or proceeds from a balancing event or disposal event, of a relevant person.
For the purposes of this subsection the effect of section 785A (rent factoring of leases of plant or machinery) is to be disregarded.
- (2) Subsection (1)(c) is not to be taken as met in any case where—
- (a) the receipt or proceeds gives rise to a balancing charge, and
- (b) the amount of the balancing charge is limited by any provision of the Capital Allowances Act.
- (3) Section 774B or 774D does not apply if, at all times, the whole of the advance under the structured finance arrangement—
- (a) is a debtor relationship of a relevant person for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships), or
- (b) would be a debtor relationship of a relevant person for those purposes if that person were a company within the charge to corporation tax.
For the purposes of this subsection references to a debtor relationship do not include a relationship to which section 100 of the Finance Act 1996 (money debts etc not arising from the lending of money) applies.
- (4) Section 774B or 774D does not apply in so far as the structured finance arrangement is an arrangement in relation to which—
- (a) section 263A of the 1992 Act (agreements for sale and repurchase of securities) applies,
- (b) paragraph 15 of Schedule 9 to the Finance Act 1996 (repo transactions and stock-lending) applies, or
- (c) Chapter 5 of Part 2 of the Finance Act 2005 (alternative finance arrangements) has effect.
- (5) Section 774B or 774D does not apply in so far as—
- (a) the security under the structured finance arrangement is plant or machinery which is the subject of a sale and finance leaseback, or
- (b) the structured finance arrangement is an arrangement in relation to which sections 228B to 228D of the Capital Allowances Act apply with the modifications contained in section 228F of that Act (lease and finance leaseback).
- (6) For the purposes of subsection (5)(a), whether plant or machinery is the subject of a sale and finance leaseback is determined in accordance with section 221 of the Capital Allowances Act.
But, in applying that section, it is to be assumed that the words “and which are not a long funding lease in the case of the lessor” were omitted from section 219(1)(b) of that Act (meaning of “finance lease”).
- (7) For the purposes of this section a “*relevant person*” means—
- (a) if section 774B applies, a person in relation to whom the structured finance arrangement would (but for that section) otherwise have had the relevant effect (within the meaning of that section), and
- (b) if section 774D applies, a relevant member of the borrower partnership (within the meaning of that section).
##### 774F
- (1) The Treasury may make regulations prescribing other circumstances in which section 774B or 774D is not to apply in relation to a structured finance arrangement.
- (2) Any regulations under subsection (1) may make provision amending section 774E.
- (3) The power to make regulations under subsection (1) includes—
- (a) power to make provision having effect in relation to times before the making of the regulations (but not times earlier than 6th June 2006),
- (b) power to make different provision for different cases or different purposes, and
- (c) power to make incidental, supplemental, consequential or transitional provision and savings.
##### 774G
- (1) For the purposes of sections 774A to 774D “*arrangement*” includes any agreement or understanding (whether or not legally enforceable).
- (2) For the purposes of sections 774A to 774D “*income deduction*” means—
- (a) a deduction in calculating any income for tax purposes, or
- (b) a deduction against total income or total profits.
- (3) For the purposes of sections 774A to 774D—
- (a) references to a person's receiving any asset include the person's obtaining directly or indirectly the value of any asset or otherwise deriving directly or indirectly any benefit from it,
- (b) references to a disposal of an asset include anything which constitutes a disposal of the asset for the purposes of the 1992 Act,
- (c) references to payments in respect of any asset include obtaining directly or indirectly the value of any asset or otherwise deriving directly or indirectly any benefit from it.
- (4) For the purposes of sections 774A to 774D, section 839 (connected persons) applies.
- (5) For the purposes of sections 774A to 774D references to the accounts of any person who is a company include the consolidated group accounts of a group of companies of which it is a member.
- (6) If any person does not draw up accounts in accordance with generally accepted accounting practice, sections 774A to 774D apply as if the accounts had been drawn up by the person in accordance with that practice.
- (7) Sections 277 to 281 of ITTOIA 2005 and section 34 above (lease premiums) are not to apply in relation to a premium paid in respect of a grant of a lease where the grant constitutes a disposal of an asset for the purposes of section 774A(2)(c) or 774C(2)(a).
##### 775A
- (1) This section applies in any case where—
- (a) a person sells or transfers the right to receive an annual payment to which this section applies (see subsection (4)), and
- (b) the consideration (if any) for the sale or transfer would not, apart from this section, be chargeable to tax.
- (2) In any such case, tax is charged—
- (a) in the case of income tax, under this section; or
- (b) in the case of corporation tax, under Case III of Schedule D.
- (3) Where this section applies—
- (a) the tax is charged on an amount equal to the market value of the right to receive the annual payment;
- (b) the tax is charged for the chargeable period in which the sale or transfer takes place;
- (c) the person liable for the tax is the person who sells or transfers the right to the annual payment.
- (4) This section applies to any annual payment other than—
- (a) an annual payment under a life annuity;
- (b) an annual payment under a pension annuity;
- (c) an annual payment to which section 347A applies (annual payments that are not charges on income);
- (d) an annual payment in respect of which, by virtue of section 727 of ITTOIA 2005 (payments by individuals arising in UK), no liability to income tax arises under Part 5 of that Act.
- (5) This section applies in relation to part of an annual payment as it applies in relation to the whole of an annual payment.
- (6) For the purposes of this section, a sale or transfer of all rights under an agreement for annual payments, or under an annuity, is a sale or transfer of the rights to each individual payment under the agreement or annuity.
- (7) In this section—
- “*life annuity*” means—a life annuity, as defined in section 657(1); ora life annuity, as defined in section 473(2) of ITTOIA 2005;
- “*pension annuity*” means an annuity which is pension income within the meaning of Part 9 of ITEPA 2003 (see section 566(2) of that Act).
#### Close companies.
##### 785ZA
- (1) This section applies for corporation tax purposes if—
- (a) a company carries on a business in respect of which the company is within the charge to corporation tax,
- (b) the company carries on the business in partnership with other persons in an accounting period of the partnership,
- (c) the business (“the leasing business”) is, on any day in that period, a business of leasing plant or machinery,
- (d) the company incurs a loss in its notional business in any accounting period comprised (wholly or partly) in the accounting period of the partnership, and
- (e) the interest of the company in the leasing business during the accounting period of the partnership is not determined on an allowable basis (see subsections (2) to (4)).
- (2) The interest of the company in the leasing business during the accounting period of the partnership is determined on an allowable basis if (and only if) the following condition is met.
- (3) The condition is met if, for the purposes of section 114(2),—
- (a) the company's share in the profits or loss of the leasing business for that period is determined wholly by reference to a single percentage, and
- (b) the company's share in any relevant capital allowances for that period is determined wholly by reference to the same percentage.
- (4) For the purposes of this condition “*profits*” does not include chargeable gains.
- (5) The following restrictions apply in respect of so much of the loss incurred by the company in its notional business as derives from any relevant capital allowances (“the restricted part of the loss”).
- (6) Apart from by way of set off against any relevant leasing income, relief is not to be given to the company under any relevant loss relief provision in respect of the restricted part of the loss.
- (7) If the leasing business is a trade, relief is not to be given to the company under section 393A(1) in respect of the restricted part of the loss.
- (8) The restricted part of the loss is not available for set off by way of group relief in accordance with section 403.
- (9) For the purpose of determining how much of a loss derives from any relevant capital allowances, the loss is to be calculated on the basis that any relevant capital allowances are the final amounts to be deducted.
##### 785ZB
- (1) This section applies for the purposes of section 785ZA.
- (2) “*Business of leasing plant or machinery*” has the same meaning as in Part 3 of Schedule 10 to the Finance Act 2006 (sale etc of lessor companies etc).
- (3) “*Lease*” has the same meaning as in section 785A.
- (4) “*Notional business*”, in relation to a company, means the business—
- (a) from which the company's share in the profits or loss of the leasing business is treated under section 114(2) as deriving for the purposes of the charge to corporation tax, and
- (b) which is treated under that provision as carried on alone by the company for those purposes.
- (5) “*Plant or machinery*” has the same meaning as in Part 2 of the Capital Allowances Act.
- (6) “*Relevant capital allowance*” means an allowance under Part 2 of the Capital Allowances Act in respect of expenditure incurred on the provision of plant or machinery wholly or partly for the purposes of the leasing business.
- (7) “*Relevant leasing income*” means any income of the company's notional business deriving from any lease—
- (a) which is a lease of plant or machinery, and
- (b) which was entered into before the end of the accounting period of the company in which the loss in its notional business was incurred.
- (8) “*Relevant loss relief provision*” means any of the following provisions—
- (a) section 392A (Schedule A losses),
- (b) section 392B (losses from overseas property businesses),
- (c) section 393 (trade losses),
- (d) section 396 (Case VI losses).
##### 785A
- (1) This section applies in any case where the following conditions are satisfied—
- (a) a person (call him “P”) is entitled to receive rentals under a lease of plant or machinery,
- (b) the rentals, so far as receivable by him, fall to be brought into account as income for the purpose of calculating his tax liability,
- (c) P enters into arrangements for the transfer of his right to receive some or all of the rentals to another person,
- (d) apart from this section, some or all of the amount or value of the consideration for the transfer (“the relevant portion of the consideration”) would fall to be brought into account neither—
- (i) as income, nor
- (ii) as a capital allowances disposal receipt,
for the purpose of calculating P’s tax liability.
- (2) In any such case, the relevant portion of the consideration—
- (a) shall be treated for tax purposes as income of P,
- (b) shall be taxable as rentals receivable by P under the lease (apart from any transfer of his right to receive some or all of the rentals), and
- (c) shall be brought into account in a period of account to the extent that it is receivable in that period of account.
- (3) Any reference to the transfer from P to another person of a right to receive rentals includes a reference to any arrangement under which rental ceases to form part of the receipts taken into account as income for the purposes of calculating P’s tax liability.
- (4) Where P is a partnership, any reference in this section to calculating P’s tax liability includes a reference to calculating the tax liability of the partners, notwithstanding that the partnership has legal personality.
- (5) A partnership has legal personality for the purposes of subsection (4) above if it is regarded as a legal person, or as a body corporate, under the law of the country or territory under which it is formed.
- (5A) This section does not apply in so far as section 774B or 774D (structured finance arrangements) applies in relation to the arrangements mentioned in paragraph (c) of subsection (1) above as a result of the transfer mentioned in that paragraph.
- (6) In this section—
- “*capital allowances disposal receipt*” means a disposal receipt within the meaning of Part 2 of the Capital Allowances Act 2001 (see section 60 of that Act);
- “*lease*” includes an underlease, sublease, tenancy or licence and an agreement for any of those things;
- “*tax liability*” means liability to income tax or corporation tax.
##### 785B
- (1) This section applies if—
- (a) there is an unconditional obligation, under a lease of plant or machinery or a relevant arrangement, to make a relevant capital payment (at any time), or
- (b) a relevant capital payment is made under such a lease or arrangement otherwise than in pursuance of such an obligation.
- (2) The lessor is treated for corporation tax purposes as receiving income attributable to the lease of an amount equal to the amount of the capital payment.
- (3) The income is treated—
- (a) if subsection (1)(a) applies, as income for the period of account in which there is first an obligation of the kind mentioned there, and
- (b) if subsection (1)(b) applies, as income for the period of account in which the payment is made.
##### 785C
- (1) The expressions used in section 785B and this section are to be interpreted as follows.
- (2) “*Capital payment*” means any payment except one which, if made to the lessor—
- (a) would fall to be included in a calculation of the lessor's income for corporation tax purposes, or
- (b) would fall to be included in such a calculation but for section 502B (rental earnings under long funding finance lease).
- (3) “*Lease*” includes—
- (a) a licence, and
- (b) the letting of a ship or aircraft on charter or the letting of any other asset on hire,
and “*lessor*” and “*lessee*” are to be read accordingly.
- (4) “*Lease of plant or machinery*” includes a lease of plant or machinery and other property but does not include—
- (a) a lease where the income attributable to the lease received by the lessor (if any) would be chargeable to tax under Schedule A, or
- (b) a lease of plant or machinery where the lessor has incurred what would (but for section 34A of the Capital Allowances Act) be qualifying expenditure (within the meaning of Part 2 of that Act) on the plant or machinery.
- (5) “*Relevant arrangement*” means any agreement or arrangement relating to a lease of plant or machinery, including one made before the lease is entered into or after it has ended (and, accordingly, “lessor” and lessee” include prospective and former lessors and lessees).
- (6) A capital payment, in relation to a lease or relevant arrangement, is “relevant” if condition A or B is met (but this is subject to subsection (9)).
- (7) Condition A is that the capital payment is payable (or paid), directly or indirectly, by (or on behalf of) the lessee to (or on behalf of) the lessor in connection with—
- (a) the grant, assignment, novation or termination of the lease, or
- (b) any provision of the lease or relevant arrangement (including the variation or waiver of any such provision).
- (8) Condition B is that rentals payable under the lease are less than (or payable later than) they might reasonably be expected to be if there were no obligation to make the capital payment (and the capital payment were not made).
- (9) A capital payment is not “relevant” if or to the extent that—
- (a) the capital payment reduces (or would but for section 536 of the Capital Allowances Act reduce) the amount of expenditure incurred by the lessor for the purposes of the Capital Allowances Act in respect of the plant or machinery in question,
- (b) the capital payment is compensation for loss resulting from damage to, or damage caused by, the plant or machinery in question, or
- (c) the capital payment would fall (or falls) to be brought into account by the lessor as a disposal receipt within the meaning of Part 2 of the Capital Allowances Act (see section 60(1) of that Act).
- (10) References to payment include the provision of value by any means other than the making of a payment, and accordingly—
- (a) references to the making of a payment include the passing of value (by any other means), and
- (b) references to the amount of the payment include the value passed.
##### 785D
- (1) This section applies if section 785B applies in relation to a lease of plant or machinery and other property (see section 785C(4)).
- (2) The relevant capital payment is to be apportioned, on a just and reasonable basis, between—
- (a) the plant and machinery, and
- (b) the other property.
- (3) If the income (if any) received by the lessor that is attributable to any of the plant or machinery is chargeable to tax under Schedule A, treat that plant or machinery as falling within subsection (2)(b) (and not subsection (2)(a)).
- (4) Section 785B(2) has effect as if the reference to the amount of the capital payment were to such amount as is apportioned under subsection (2) in respect of the plant or machinery within subsection (2)(a).
#### Meaning of “participator”, “associate”, “director” and “loan creditor”.
##### 785E
- (1) This section applies for corporation tax purposes if—
- (a) section 785B applies by virtue of subsection (1)(a) of that section, and
- (b) at any time, the lessor reasonably expects that the relevant capital payment will not be paid (or will not be paid in full).
- (2) For the purposes of calculating the profits of the lessor, a deduction is allowed for the period of account which includes that time.
- (3) The amount of the deduction is equal to the amount reasonably expected not to be paid.
- (4) No other deduction is allowed in respect of the matters mentioned in subsection (1).
#### Section 432B: apportionment of business transfer-in
#### Section 432B: apportionment of business transfer-in
##### 793A
- (1) Where relief in respect of an amount of tax that would otherwise be payable under the law of a territory outside the United Kingdom may be allowed—
- (a) under arrangements made in relation to that territory, or
- (b) under the law of that territory in consequence of any such arrangements,
credit may not be allowed in respect of that tax, whether the relief has been used or not.
- (2) Where, under arrangements having effect by virtue of section 788, credit may be allowed in respect of an amount of tax, credit by way of unilateral relief may not be allowed in respect of that tax.
- (3) Where arrangements made in relation to a territory outside the United Kingdom contain express provision to the effect that relief by way of credit shall not be given under the arrangements in cases or circumstances specified or described in the arrangements, then neither shall credit by way of unilateral relief be allowed in those cases or circumstances.
##### 795A
- (1) The amount of credit for foreign tax which, under any arrangements, is to be allowed against tax in respect of any income or chargeable gain shall not exceed the credit which would be allowed had all reasonable steps been taken—
- (a) under the law of the territory concerned, and
- (b) under any arrangements made in relation to that territory,
to minimise the amount of tax payable in that territory.
- (2) The steps mentioned in subsection (1) above include—
- (a) claiming, or otherwise securing the benefit of, reliefs, deductions, reductions or allowances; and
- (b) making elections for tax purposes.
- (3) For the purposes of subsection (1) above, any question as to the steps which it would have been reasonable for a person to take shall be determined on the basis of what the person might reasonably be expected to have done in the absence of relief under this Part against tax in the United Kingdom.
##### 797A
- (1) This section applies for the purposes of any arrangements where, in the case of any company—
- (a) any non-trading credit relating to an item is brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) for any accounting period (“the applicable accounting period”); and
- (b) there is in respect of that item an amount of foreign tax for which, under the arrangements, credit is allowable against United Kingdom tax computed by reference to that interest.
- (2) It shall be assumed that tax chargeable under paragraph (a) of Case III of Schedule D on the profits and gains arising for the applicable accounting period from the company’s loan relationships falls to be computed on the actual amount of its non-trading credits for that period, and without any deduction in respect of non-trading debits.
- (3) Section 797(3) shall have effect (subject to subsection (7) below) as if—
- (a) there were for the applicable accounting period an amount equal to the adjusted amount of the non-trading debits falling to be brought into account by being set against profits of the company for that period of any description; and
- (b) different parts of that amount might be set against different profits.
- (4) For the purposes of this section, the adjusted amount of a company’s non-trading debits for any accounting period is the amount equal, in the case of that company, to the aggregate of the non-trading debits given for that period for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) less the aggregate of the amounts specified in subsection (5) below.
- (5) Those amounts are—
- (a) so much of any non-trading deficit for the applicable accounting period as is an amount to which a claim under subsection (2)(c) of section 83 of the Finance Act 1996 or paragraph 4(3) of Schedule 11 to that Act (deficit carried back and set against profits) relates; and
- (aa) so much of any non-trading deficit for that period as is surrendered as group relief by virtue of section 403 of the Taxes Act 1988; and
- (b) so much of any non-trading deficit for that period as falls to be carried forward to a subsequent period in accordance with subsection (3A) of that section or paragraph 4(4) of that Schedule; . . .
- (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (6) Section 797(3) shall have effect as if any amount carried forward to the applicable accounting period under section 83(3A) of that Act were an amount capable of being allocated only to any non-trading profits of the company.
- (7) Where—
- (a) the company has a non-trading deficit for the applicable accounting period,
- (b) the amount of that deficit exceeds the aggregate of the amounts specified in subsection (5) above, and
- (c) in pursuance of a claim under—
- (i) subsection (2)(a) of section 83 of the Finance Act 1996 (deficit set against current year profits), or
- (ii) paragraph 4(2) of Schedule 11 to that Act (set-off of deficits in the case of insurance companies),
the excess falls to be set off against profits of any description,
section 797(3) shall have effect as if non-trading debits of the company which in aggregate are equal to the amount of the excess were required to be allocated to the profits against which they are set off in pursuance of the claim.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (8) In this section “*non-trading profits*” has the same meaning as in paragraph 4 of Schedule 8 to the Finance Act 1996.
##### 797B
- (1) This section applies for the purposes of any arrangements where, in the case of a company—
- (a) a non-trading credit relating to an item is brought into account for the purposes of Schedule 29 to the Finance Act 2002 (intangible fixed assets) for an accounting period (“*the applicable accounting period*”), and
- (b) there is in respect of that item an amount of foreign tax for which, under the arrangements, credit is allowable against United Kingdom tax computed by reference to that item.
- (2) It shall be assumed that tax chargeable under Case VI of Schedule D on the profits and gains arising for the applicable accounting period from the company’s intangible fixed assets falls to be computed on the actual amount of its non-trading credits for that period, and without any deduction in respect of non-trading debits.
- (3) Section 797(3) shall have effect as if—
- (a) there were for the applicable accounting period an amount equal to the adjusted amount of the non-trading debits falling to be brought into account by being set against profits of the company for that period of any description, and
- (b) different parts of that amount might be set against different profits.
- (4) For this purpose the adjusted amount of a company’s non-trading debits for an accounting period is given by:
$$TotalDebits-AmountCarriedForward$where—Total Debits is the aggregate amount of the company’s non-trading debits for that accounting period under Schedule 29 to the Finance Act 2002 (intangible fixed assets), andAmount Carried Forward is the amount (if any) carried forward to the next accounting period of the company under paragraph 35(3) of that Schedule (carry-forward of non-trading loss in respect of which no claim is made for it to be set against total profits of current period).$
#### Computation of losses and limitation on relief.
##### 798A
- (1) This section has effect in relation to the application of section 797(1) to the allowance of credit for foreign tax against corporation tax in respect of trade income.
- (2) The reference in section 797(1) to the relevant income or gain shall be treated as referring only to income arising or gains accruing out of the transaction, arrangement or asset in connection with which the credit for foreign tax arises.
- (3) In determining for the purposes of section 797(1) the amount of corporation tax attributable to any income or gain, there shall be taken into account—
- (a) deductions or expenses which would be allowable in the computation of the taxpayer's liability,
- (b) a reasonable apportionment of allowable deductions or expenses which relate partly to the transaction, arrangement or asset from which the income or gain arises and partly to other matters, and
- (c) expenses of a company connected (within the meaning given by section 839) with the taxpayer, in so far as reasonably attributable to the income or gain.
- (4) In this section and section 798B “*trade income*” means—
- (a) income or profits chargeable to tax under Case I, II or V of Schedule D,
- (b) profits of a Schedule A business computed in same way as the profits of a trade in accordance with section 21A of ICTA,
- (c) sums charged to tax under Case VI of Schedule D in accordance with section 104 of ICTA, and
- (d) any other income or profits which by a provision of ICTA is chargeable to tax under, or computed in accordance with, Case I of Schedule D;
but this section shall not apply in relation to income to which section 804C below applies.
##### 798B
- (1) Where—
- (a) a credit for foreign tax arises in connection with an asset, and
- (b) the asset is in a hedging relationship with a derivative contract,
in the application of section 798A(2) the reference to the income arising out of the asset shall be taken as a reference to the income arising out of the asset and the derivative contract taken together (but taking account of the income or loss from the derivative contract only in so far as reasonably attributable to the hedging relationship).
- (2) For the purposes of subsection (1)(b) an asset is in a hedging relationship with a derivative contract if—
- (a) the asset is acquired as a hedge of risk in connection with the contract, or
- (b) the contract is entered into as a hedge of risk in connection with the asset;
and if an asset or a contract is wholly or partly designated as a hedge for the purposes of a person's accounts, that shall be conclusive for the purpose of this subsection.
- (3) Where royalties (as defined in arrangements having effect by virtue of section 788) are paid in respect of an asset in more than one jurisdiction outside the United Kingdom, for the purposes of section 798A(2)—
- (a) royalty income arising in more than one jurisdiction (other than the United Kingdom) in a year of assessment in respect of that asset shall be treated as income arising from a single transaction, arrangement or asset, and
- (b) credits available for foreign tax in respect of the royalty income shall be aggregated accordingly.
- (4) If a person (“A”) carrying on a trade giving rise to trade income enters into a scheme or arrangement with another person (“B”) a main purpose of which is to alter the effect of section 798A in relation to A, income received in pursuance of the scheme or arrangement shall be treated for the purposes of section 798A as trade income of B (and not as income of A).
- (5) Where—
- (a) property would have become comprised in a settlement—
- (i) which arose on the deceased person's death (whether in accordance with his will, on his intestacy or otherwise, or
- (ii) which was already in existence on the deceased person's death (whether or not the deceased person was a settlor in relation to that settlement), but
- (b) in consequence of the variation the property, or property derived from it, becomes comprised in another settlement,
the deceased person shall be treated for the purposes of the Tax Acts, except where the context otherwise requires, as having made the other settlement.
- (a) transactions, arrangements or assets are treated by a taxpayer as a series or group (the “portfolio”),
- (b) a number of credits for foreign tax arise in respect of the portfolio, and
- (c) either—
- (i) it is not reasonably practicable to prepare a separate computation of income or gain for the purposes of section 798A(2) in respect of each transaction, arrangement or asset, or
- (ii) a separate computation of income or gain in respect of each transaction, arrangement or asset for the purposes of section 798A(2) would not, compared with an aggregated computation, make a material difference to the amount of credit for foreign tax which is allowable,
the income or gains arising from the portfolio, or part of the portfolio, may be aggregated and apportioned for the purposes of section 798A(2) in a fair and reasonable manner.
##### 798C
- (1) This section applies where the application of section 796(1) or 797(1) prevents an amount of credit for foreign tax from being allowable against income tax or corporation tax.
- (2) The amount of disallowed credit may be taken into account as a deduction in computing the taxpayer's liability for income tax or corporation tax, but only in so far as it does not exceed the amount of any loss attributable to the income or gain in respect of which the foreign tax was paid (for which purpose payment of the foreign tax is to be taken into account, despite section 795(2)).
##### 801A
- (1) This section applies where—
- (a) a company (“*the claimant company*”) makes a claim for an allowance by way of credit in accordance with this Part;
- (b) the claim relates to underlying tax on a dividend paid to that company by a company resident outside the United Kingdom (“*the overseas company*”);
- (c) that underlying tax is or includes an amount in respect of tax (“*the high rate tax*”) payable by—
- (i) the overseas company, or
- (ii) such a third, fourth or successive company as is mentioned in section 801,
at a rate in excess of the relievable rate; and
- (d) the whole or any part of the amount in respect of the high rate tax which is or is included in the underlying tax would not be, or be included in, that underlying tax but for the existence of, or for there having been, an avoidance scheme.
- (2) Where this section applies, the amount of the credit to which the claimant company is entitled on the claim shall be determined as if the high rate tax had been tax at the relievable rate, instead of at a rate in excess of that rate.
- (3) For the purposes of this section tax shall be taken to be payable at a rate in excess of the relievable rate if, and to the extent that, the amount of that tax exceeds the amount that would represent tax on the relevant profits at the relievable rate.
- (4) In subsection (3) above “*the relevant profits*”, in relation to any tax, means the profits of the overseas company or, as the case may be, of the third, fourth or successive company which, for the purposes of this Part, are taken to bear that tax.
- (5) In this section “*the relievable rate*” means the rate of corporation tax in force when the dividend mentioned in subsection (1)(b) above was paid.
- (6) In this section “*an avoidance scheme*” means any scheme or arrangement which—
- (a) falls within subsection (7) below; and
- (b) is a scheme or arrangement the purpose, or one of the main purposes, of which is to have an amount of underlying tax taken into account on a claim for an allowance by way of credit in accordance with this Part.
- (7) A scheme or arrangement falls within this subsection if the parties to it include both—
- (a) the claimant company, a company related to that company or a person connected with the claimant company; and
- (b) a person who was not under the control of the claimant company at any time before the doing of anything as part of, or in pursuance of, the scheme or arrangement.
- (8) In this section “*arrangement*” means an arrangement of any kind, whether in writing or not.
- (9) Section 839 (meaning of “*connected persons*”) applies for the purposes of this section.
- (10) Subsection (5) of section 801 (meaning of “*related company*”) shall apply for the purposes of this section as it applies for the purposes of that section.
- (11) For the purposes of this section a person who is a party to a scheme or arrangement shall be taken to have been under the control of the claimant company at all the following times, namely—
- (a) any time when that company would have been taken (in accordance with section 416) to have had control of that person for the purposes of Part XI;
- (b) any time when that company would have been so taken if that section applied (with the necessary modifications) in the case of partnerships and unincorporated associations as it applies in the case of companies; and
- (c) any time when that person acted in relation to that scheme or arrangement, or any proposal for it, either directly or indirectly under the direction of that company.
##### 801B
- (1) This section applies where—
- (a) a company (“*company A*”) resident outside the United Kingdom has paid tax under the law of a territory outside the United Kingdom in respect of any of its profits;
- (b) some or all of those profits become profits of another company resident outside the United Kingdom (“*company B*”) otherwise than by virtue of the payment of a dividend to company B; and
- (c) company B pays a dividend out of those profits to another company (“*company C*”), wherever resident.
- (2) Where this section applies, this Part shall have effect, so far as relating to the determination of underlying tax in relation to any dividend paid—
- (a) by any company resident outside the United Kingdom (whether or not company B),
- (b) to a company resident in the United Kingdom,
as if company B had paid the tax paid by company A in respect of those profits of company A which have become profits of company B as mentioned in subsection (1)(b) above.
- (3) But the amount of relief under this Part which is allowable to a company resident in the United Kingdom shall not exceed the amount which would have been allowable to that company had those profits become profits of company B by virtue of the payment of a dividend by company A to company B.
##### 801C
- (1) This section applies in any case where—
- (a) by virtue only of section 748(1)(a), no apportionment under section 747(3) falls to be made as regards an accounting period of a controlled foreign company; and
- (b) one or more of the dividends paid by the controlled foreign company by virtue of which the condition in paragraph (a) above is satisfied are dividends falling within subsection (2) below.
- (2) A dividend falls within this subsection if, for the purposes of Part I of Schedule 25, the whole or any part of it falls to be treated by virtue of paragraph 4 of that Schedule as paid by the controlled foreign company to a United Kingdom resident.
- (3) If, in a case where this section applies,—
- (a) an initial dividend is paid to a company resident outside the United Kingdom, and
- (b) that company, or any other company which is related to it, pays an intermediate dividend which for the purposes of paragraph 4 of Schedule 25 to any extent represents that initial dividend,
subsection (4) below shall have effect in relation to the UK recipient concerned.
- (4) Where this subsection has effect, it shall be assumed for the purposes of allowing credit relief under this Part to that UK recipient—
- (a) that, instead of the intermediate dividend, the dividends described in subsection (5) below had been paid and the circumstances had been as described in subsection (6) or (7) below, as the case may be; and
- (b) that any tax paid under the law of any territory in respect of the intermediate dividend, or which is underlying tax in relation to that dividend, had instead fallen to be borne accordingly (taking account of any reduction falling to be made under section 799(2)).
- (5) The dividends mentioned in subsection (4)(a) above are—
- (a) as respects each of the initial dividends which are, for the purposes of paragraph 4 of Schedule 25, to any extent represented by the intermediate dividend, a separate dividend (an “*ADP dividend*”) representing, and of an amount equal to, so much of that initial dividend as is for those purposes represented by the intermediate dividend; and
- (b) a further separate dividend (a “*residual dividend*”) representing, and of an amount equal to, the remainder (if any) of the intermediate dividend.
- (6) As respects each of the ADP dividends, the intermediate company is to be treated as if it were a separate company whose distributable profits are of a constitution corresponding to, and an amount equal to, that of the ADP dividend.
- (7) As respects the residual dividend (if any), the relevant profits out of which it is to be regarded for the purposes of section 799(1) as paid by the intermediate company are, in consequence of subsection (6) above, to be treated as being of such constitution and amount as remains after excluding accordingly so much of those relevant profits as constitute the whole or any part of the distributable profits out of which the ADP dividends are paid.
- (8) If, in a case where this section applies, an intermediate company also pays a dividend which is not an intermediate dividend (an “*independent dividend*”) and either—
- (a) that dividend is paid to a United Kingdom resident, or
- (b) if it is not so paid, a dividend which to any extent represents it is paid by a company which is related to that company and resident outside the United Kingdom to a United Kingdom resident,
subsection (9) below shall have effect in relation to the United Kingdom resident.
- (9) Where this subsection has effect, it shall be assumed for the purposes of allowing credit relief under this Part to the United Kingdom resident—
- (a) that the relevant profits out of which the independent dividend is to be regarded for the purposes of section 799(1) as paid by the intermediate company are, in consequence of subsection (6) above, to be treated as being of such constitution and amount as remains after excluding so much of those relevant profits as constitute the whole or any part of the distributable profits out of which the ADP dividends are paid; and
- (b) that any tax paid under the law of any territory in respect of the independent dividend, or which is underlying tax in relation to that dividend, had instead fallen to be borne accordingly (taking account of any reduction falling to be made under section 799(2)).
- (10) For the purposes of this section—
- (a) a controlled foreign company is an “ADP controlled foreign company" as respects any of its accounting periods if the condition in paragraph (a) of subsection (1) above is satisfied as respects that accounting period;
- (b) an “initial dividend" (subject to subsection (14) below) is any of the dividends mentioned in paragraph (b) of subsection (1) above paid by an ADP controlled foreign company; and
- (c) a “*subsequent dividend*” is any dividend which, in relation to one or more initial dividends, is the subsequent dividend for the purposes of paragraph 4 of Schedule 25.
- (11) In this section—
- “*distributable profits*” means a company’s profits available for distribution, determined in accordance with section 799(6);
- “*intermediate company*” means any company resident outside the United Kingdom which pays an intermediate dividend;
- “*intermediate dividend*” means any dividend which is paid by a company resident outside the United Kingdom and which—for the purposes of paragraph 4 of Schedule 25, to any extent represents one or more initial dividends paid by other companies; andeither is the subsequent dividend in the case of those initial dividends or is itself to any extent represented for those purposes by a subsequent dividend;
- “*the UK recipient*” means the United Kingdom resident to whom a subsequent dividend is paid.
- (12) Where—
- (a) one company pays a dividend (“*dividend A*”) to another company, and
- (b) that other company, or a company which is related to it, pays a dividend (“*dividend B*”) to another company,
then, for the purposes of this section, dividend B represents dividend A, and dividend A is represented by dividend B, to the extent that dividend B is paid out of profits which are derived, directly or indirectly, from the whole or part of dividend A.
- (13) Sub-paragraph (2) of paragraph 4 of Schedule 25 (related companies) shall apply for the purposes of this section as it applies for the purposes of that paragraph.
- (14) Where an intermediate company which is an ADP controlled foreign company pays a dividend—
- (a) by virtue of which (whether taken alone or with other dividends) the condition in subsection (1)(a) above is satisfied as regards an accounting period of the company, but
- (b) which also for the purposes of paragraph 4 of Schedule 25 to any extent represents one or more initial dividends paid by other ADP controlled foreign companies,
the dividend shall not be regarded for the purposes of this section as an initial dividend paid by the company, to the extent that it so represents initial dividends paid by other ADP controlled foreign companies.
##### 803A
- (1) This section applies in any case where, under the law of a territory outside the United Kingdom, tax is payable by any one company resident in that territory (“*the responsible company*”) in respect of the aggregate profits, or aggregate profits and aggregate gains, of that company and one or more other companies so resident, taken together as a single taxable entity.
- (1A) Where—
- (a) a company is (within the meaning of section 801) an ADP controlled foreign company as respects any of its accounting periods, and
- (b) the whole or any part of the profits or gains of that accounting period are included in the aggregate profits, or aggregate profits or gains, mentioned in subsection (1) above,
subsection (2) below shall have effect as if the companies mentioned in subsection (1) above did not include that company.
- (2) Where this section applies, this Part shall have effect, so far as relating to the determination of underlying tax in relation to any dividend paid by any of the companies mentioned in subsection (1) above (the “*non-resident companies*”) to another company (“*the recipient company*”), as if—
- (a) the non-resident companies, taken together, were a single company,
- (b) anything done by or in relation to any of the non-resident companies (including the payment of the dividend) were done by or in relation to that single company, and
- (c) that single company were related to the recipient company, if that one of the non-resident companies which actually pays the dividend is related to the recipient company,
(so that, in particular, the relevant profits for the purposes of section 799(1) is a single aggregate figure in respect of that single company and the foreign tax paid by the responsible company is foreign tax paid by that single company).
- (3) For the purposes of this section a company is related to another company if that other company—
- (a) controls directly or indirectly, or
- (b) is a subsidiary of a company which controls directly or indirectly,
not less than 10 per cent. of the voting power in the first-mentioned company.
##### 804ZA
- (1) If the Board consider, on reasonable grounds, that conditions A to D are or may be satisfied in relation to any income or chargeable gain taken or to be taken into account for the purposes of determining a person's liability to tax in a chargeable period, they may give the person a notice under this section.
- (2) Condition A is that, in the case of the person, there is in respect of the income or gain an amount of foreign tax for which, under any arrangements, credit is allowable against United Kingdom tax for that chargeable period.
- (3) Condition B is that there is a scheme or arrangement the main purpose, or one of the main purposes, of which is to cause an amount of foreign tax to be taken into account in the case of the person for that chargeable period.
- (4) Condition C is that the scheme or arrangement is a prescribed scheme or arrangement.
- (5) Condition D is that the amount referred to in subsection (6) is more than a minimal amount.
- (6) The amount is the aggregate of—
- (a) the aggregate amount of the claims for credit that the person has made, or is in a position to make, for the chargeable period; and
- (b) for all the persons connected to that person, the aggregate amount of the claims for credit that the connected person has made, or is in a position to make, for a corresponding chargeable period.
- (7) A chargeable period of a person (“A”) corresponds to a chargeable period of another person (“B”) if at least one day of A's chargeable period falls within B's chargeable period.
- (8) A notice under this section is a notice—
- (a) informing the person of the Board's view under subsection (1),
- (b) specifying the chargeable period in relation to which the Board formed that view,
- (c) if the amount of foreign tax considered by the Board to satisfy condition B is an amount of underlying tax, specifying the body corporate resident in a territory outside the United Kingdom whose payment of foreign tax is relevant to that underlying tax, and
- (d) informing the person that as a consequence section 804ZB has effect in relation to him.
- (9) A notice under this section may specify the adjustments of a person's tax return that, in the view of the Board, fall to be made by him under section 804ZB(2).
- (10) The adjustments specified may, in a case where the notice given to a person specifies a body corporate resident outside the United Kingdom, include treating the body corporate as having paid or being liable to pay only so much foreign tax as would have been allowed to it as a credit if it were resident in the United Kingdom and a notice under this section had been given to it as regards an amount of foreign tax.
- (11) Schedule 28AB makes provision about what constitutes a prescribed scheme or arrangement.
- (12) In this section and sections 804ZB and 804ZC “*tax return*” means—
- (a) a return under section 8, 8A or 12AA of the Management Act, or
- (b) a company tax return;
and “*company tax return*” means the return required to be delivered pursuant to a notice under paragraph 3 of Schedule 18 to the Finance Act 1998, as read with paragraph 4 of that Schedule.
##### 804ZB
- (1) This section applies in relation to a person if—
- (a) a notice under section 804ZA has been given to the person in respect of a chargeable period specified in the notice, and
- (b) the chargeable period specified is a chargeable period in relation to which conditions A to D of section 804ZA are satisfied.
- (2) The person must in his tax return for the period make (or must amend his return for the period so as to make) such adjustments as are necessary for counteracting the effects of the scheme or arrangement in that period that are referable to the purpose referred to in condition B of section 804ZA.
##### 804ZC
- (1) Subsection (2) applies if the Board give a notice to a person under section 804ZA before the person has made his tax return for the chargeable period specified in the notice.
- (2) If the person makes a tax return for that period before the end of the period of 90 days beginning with the day on which the notice is given, he may—
- (a) make a tax return that disregards the notice, and
- (b) at any time after making the return and before the end of the period of 90 days, amend the return for the purpose of complying with the notice.
- (3) If a person has made a tax return for a chargeable period, the Board may only give him a notice under section 804ZA in relation to that period if a notice of enquiry has been given to him in respect of his tax return for that period.
- (4) After any enquiries into the person's tax return for that period have been completed, the Board may only give him a notice under section 804ZA in relation to that period if the requirements in subsections (5) and (7) are satisfied.
- (5) The first requirement is that at the time the enquiries were completed, the Board could not have been reasonably expected, on the basis of the information made available to them or to an officer of theirs before that time, to have been aware that the circumstances were such that a notice under section 804ZA could have been given to the person in relation to that period.
- (6) For the purposes of subsection (5)—
- (a) section 29(6) and (7) of the Management Act (information made available) applies as it applies for the purposes of section 29(5), and
- (b) paragraph 44(2) and (3) of Schedule 18 to the Finance Act 1998 applies as it applies for the purposes of paragraph 44(1).
- (7) The second requirement is that—
- (a) the person was requested to produce, provide or furnish information during an enquiry into the return for that period, and
- (b) if the person had duly complied with the request, the Board could have been reasonably expected to give the person a notice under section 804ZA in relation to that period.
- (8) If a person is given a notice under section 804ZA in relation to a chargeable period after having made a tax return for that period, the person may amend the return for the purpose of complying with the notice at any time before the end of the period of 90 days beginning with the day on which the notice is given.
- (9) If the notice under section 804ZA is given to the person after he has been given a notice of enquiry in respect of his tax return for the period, no closure notice may be given in relation to his tax return until—
- (a) the end of the period of 90 days beginning with the day on which the notice under section 804ZA is given, or
- (b) the earlier amendment of the return for the purpose of complying with the notice.
- (10) If the notice under section 804ZA is given to the person after any enquiries into the return for the period are completed, no discovery assessment may be made as regards the income or chargeable gain to which the notice relates until—
- (a) the end of the period of 90 days beginning with the day on which the notice under section 804ZA is given, or
- (b) the earlier amendment of the return for the purpose of complying with the notice.
- (11) Subsections (2)(b) and (8) do not prevent a person's tax return for a chargeable period becoming incorrect if—
- (a) a notice under section 804ZA is given to the person in relation to that period,
- (b) the return is not amended in accordance with subsection (2)(b) or (8) for the purpose of complying with the notice, and
- (c) the return ought to have been so amended.
- (12) In this section—
- “*closure notice*” means a notice under—section 28A or 28B of the Management Act, orparagraph 32 of Schedule 18 to the Finance Act 1998;
- “*discovery assessment*” means an assessment under—section 29 of the Management Act, orparagraph 41 of Schedule 18 to the Finance Act 1998;
- “*notice of enquiry*” means a notice under—section 9A or 12AC of the Management Act, orparagraph 24 of Schedule 18 to the Finance Act 1998.
##### 804A
- (1) Subsection (2) below applies where credit for tax—
- (a) which is payable under the laws of a territory outside the United Kingdom in respect of insurance business carried on by a company through a permanent establishment in that territory, and
- (b) which is computed otherwise than wholly by reference to profits arising in that territory,
is to be allowed (in accordance with this Part) against corporation tax charged under Case I or Case VI of Schedule D in respect of the profits, computed in accordance with the provisions applicable to Case I of Schedule D, of life assurance business or any category of life assurance business carried on by the company in an accounting period (in this section referred to as “*the relevant profits*”).
- (1A) For the purposes of paragraph (b) of subsection (1) above, the cases where tax payable under the laws of a territory outside the United Kingdom is “*computed otherwise than wholly by reference to profits arising in that territory*” are those cases where the charge to tax in that territory falls within subsection (1B) below.
- (1B) A charge to tax falls within this subsection if it is such a charge made otherwise than by reference to profits as (by disallowing their deduction in computing the amount chargeable) to require sums payable and other liabilities arising under policies to be treated as sums or liabilities falling to be met out of amounts subject to tax in the hands of the company.
- (2) Where this subsection applies, the amount of the credit shall not exceed the greater of—
- (a) any such part of the tax payable under the laws of the territory outside the United Kingdom as is charged by reference to profits arising in that territory, and
- (b) the shareholders’ share of the tax so payable.
- (3) For the purposes of subsection (2) above the shareholders’ share of tax payable under the laws of a territory outside the United Kingdom is so much of that tax as is represented by the fraction
$$AB$where— A is an amount equal to the amount of the relevant profits before making any deduction authorised by subsection (5) below; andB is an amount equal to the excess of—$
- (a) the amount taken into account as receipts of the company in computing those profits, apart from premiums and sums received by virtue of a claim under a reinsurance contract, over
- (b) the amounts taken into account as expenses . . . in computing those profits.
- (4) Where there is no such excess as is mentioned in subsection (3) above, or where the profits are greater than any excess, the whole of the tax payable under the laws of the territory outside the United Kingdom shall be the shareholders’ share; and (subject to that) where there are no profits, none of it shall be the shareholders’ share.
- (5) Where, by virtue of this section, the credit for any tax payable under the laws of a territory outside the United Kingdom is less than it otherwise would be, section 795(2)(a) shall not prevent a deduction being made for the difference in computing the relevant profits.
##### 804B
- (1) Where—
- (a) an insurance company carries on more than one category of business in an accounting period, and
- (b) there arises to the company in that period any income or gain (“*the relevant income*”) in respect of which credit for foreign tax falls to be allowed under any arrangements,
subsection (2) below shall have effect.
- (2) In any such case, the amount of the credit for foreign tax which, under the arrangements, is allowable against corporation tax in respect of so much of the relevant income as is referable (in accordance with the provisions of sections 432ZA to 432E or section 438B) to a particular category of business must not exceed the fraction of the foreign tax which, in accordance with the following provisions of this section, is attributable to that category of business.
- (3) Where the relevant income arises from an asset—
- (a) which is linked solely to a category of business (other than overseas life assurance business), or
- (b) which is an asset of the company’s overseas life assurance fund,
the whole of the foreign tax is attributable to the category mentioned in paragraph (a) above or, as the case may be, to the company’s overseas life assurance business, unless the case is one where subsection (7) below applies in relation to the category of business in question.
- (4) Where subsection (3) above does not apply and the category of business in question is—
- (a) basic life assurance and general annuity business, or
- (b) long-term business which is not life assurance business,
the fraction of the foreign tax that is attributable to that category of business is the fraction whose numerator is the part of the relevant income which is referable to that category by virtue of any provision of section 432A or 438B and whose denominator is the whole of the relevant income.
- (5) Subsections (6) and (7) below apply where the category of business in question is neither—
- (a) basic life assurance and general annuity business; nor
- (b) long-term business which is not life assurance business.
- (6) Where—
- (a) immediately before the variation property is comprised in a settlement and is property of which the deceased person is a settlor, and
- (b) immediately after the variation the property, or property derived from it, becomes comprised in another settlement,
the deceased person shall be treated for the purposes of the Tax Acts, except where the context otherwise requires, as having made the other settlement.
- (7) If a person is treated as having made a settlement under subsection (5) or (6), for the purposes of the Tax Acts he shall be treated as having made the settlement immediately before his death.
- (8) But subsection (7) does not apply in relation to a settlement which arose on the person's death.
##### 685E
- (1) For the purposes of the Tax Acts the trustees of a settlement shall, unless the context otherwise requires, together be treated as if they were a single person (distinct from the persons who are the trustees of the settlement from time to time).
- (2) The deemed person referred to in subsection (1) shall be treated for the purposes of the Tax Acts as resident and ordinarily resident in the United Kingdom at any time when a condition in subsection (3) or (4) is satisfied.
- (3) Condition 1 is that all the trustees are resident in the United Kingdom.
- (4) Condition 2 is that—
- (a) at least one trustee is resident in the United Kingdom,
- (b) at least one is not resident in the United Kingdom, and
- (c) a settlor in relation to the settlement was resident, ordinarily resident or domiciled in the United Kingdom at a time which is a relevant time in relation to him.
- (5) In subsection (4)(c) “*relevant time*” in relation to a settlor means—
- (a) where the settlement arose on the settlor's death (whether by will, intestacy or otherwise), the time immediately before his death, and
- (b) in any other case, a time when the settlor made the settlement (or was treated for the purposes of the Tax Acts as making the settlement);
and, in the case of a transfer of property from Settlement 1 to Settlement 2 in relation to which section 685C applies, “*relevant time*” in relation to a settlor of the transferred property in respect of Settlement 2 includes any time which, immediately before the time of the disposal by the trustees of Settlement 1, was a relevant time in relation to that settlor in respect of Settlement 1.
- (6) A trustee who is not resident in the United Kingdom shall be treated for the purposes of subsections (3) and (4) as if he were resident in the United Kingdom at any time when he acts as trustee in the course of a business which he carries on in the United Kingdom through a branch, agency or permanent establishment there.
- (7) If the deemed person referred to in subsection (1) is not treated for the purposes of the Tax Acts as resident and ordinarily resident in the United Kingdom, then for the purposes of the Tax Acts it shall be treated as neither resident nor ordinarily resident in the United Kingdom.
- (8) If part of the settled property in relation to a settlement is vested in one trustee or body of trustees and another part of the settled property in relation to that settlement is vested in another trustee or body of trustees (and in particular where settled land within the meaning of the Settled Land Act 1925 (c. 18) is vested in the tenant for life and investments representing capital money are vested in the trustees of the settlement) they shall together be treated for the purposes of this section as constituting and, in so far as they act separately, as acting on behalf of a single body of trustees.
- (9) If the trustees of a settlement are carrying on a trade, profession or vocation, a change in the trustees of the settlement by reason of the coming into force of this section and section 685A shall not result in—
- (a) any of the trustees before the change permanently ceasing to carry on the trade, profession or vocation, or
- (b) any of the trustees after the change starting to carry on the trade, profession or vocation.
#### Directions disapplying section 349A(1)
##### 685F
- (1) Section 685E(2) and (7) shall not apply for any of the purposes of section 739 in relation to income payable before 15th June 1989, or for the purposes of subsection (3) of that section in relation to income payable on or after that date if—
- (a) the capital sum mentioned in that subsection was received, or the right to receive it was acquired, before that date, and
- (b) the sum was wholly repaid, or the right to it waived, before 1st October 1989.
- (2) Section 685E shall not apply for any of the purposes of section 740 in relation to benefits received before 15th June 1989; and, in relation to benefits received on or after that date, “*relevant income*” includes income arising to the trustees of a settlement before 6 April 1989, notwithstanding that one or more trustees was not resident outside the United Kingdom, unless the trustees have been charged to tax in relation to that income.
##### 685G
- (1) If the trustees of a settlement have made a sub-fund election under paragraph 1 of Schedule 4ZA to the 1992 Act, then for the purposes of the Tax Acts, unless the context otherwise requires—
- (a) the sub-fund settlement shall be treated as a settlement,
- (b) the sub-fund settlement shall be treated as having been created at the time when the sub-fund election is treated as having taken effect,
- (c) each trustee of the trusts on which the property comprised in the sub-fund settlement is held shall be treated as a trustee of the sub-fund settlement,
- (d) a person who is a trustee of the sub-fund settlement shall be treated, from the time when the election is to be treated as having taken effect, as having ceased to be a trustee of the principal settlement unless he is also a trustee of trusts on which property comprised in the principal settlement is held,
- (e) a person who is a trustee of the principal settlement shall not be treated as a trustee of the sub-fund settlement unless he is also a trustee of trusts on which property comprised in the sub-fund settlement is held, and
- (f) the trustees of the sub-fund settlement shall be treated as having become absolutely entitled, at the time when the sub-fund election is treated as having taken effect, to the property comprised in that settlement as against the trustees of the principal settlement.
- (2) References in subsection (1) to the time when the sub-fund election is treated as having taken effect are references to the time when the sub-fund election is treated as having taken effect under paragraph 2 of Schedule 4ZA to the 1992 Act.
- (3) In this section—
- “*principal settlement*” has the meaning given by paragraph 1 of Schedule 4ZA to the 1992 Act,
- “*sub-fund election*” has the meaning given by paragraph 2 of that Schedule, and
- “*sub-fund settlement*” has the meaning given by paragraph 1 of that Schedule.
#### The conditions mentioned in section 349A(1)
##### 686A
- (1) Where the trustees of a settlement (other than the trustees of a unit trust scheme)—
- (a) receive or are entitled to a payment of a kind specified in subsection (2), or
- (b) are liable for tax in respect of a gain on a chargeable event of a kind specified in subsection (2),
the payment or gain shall be treated as if it were income to which section 686 applies.
- (2) Those payments and gains are—
- (a) a payment made by a company—
- (i) on the redemption, repayment or purchase of its own shares, or
- (ii) on the purchase of rights to acquire its own shares,
- (b) a gain arising on a chargeable event in respect of which the trustees are liable for tax under section 467 of ITTOIA 2005 (gains on contracts for life insurance, etc), other than a gain to which subsection (7)(a) of that section applies,
- (c) if the trustees are resident in the United Kingdom, a profit on the disposal of a deeply discounted security in respect of which the trustees are liable for tax under section 429 of ITTOIA 2005,
- (d) a sum to which Chapter 4 of Part 3 of ITTOIA 2005 applies,
- (e) a profit on the disposal of a future or option in respect of which the trustees are liable for tax under section 557 of ITTOIA 2005, if none of conditions A to C in section 568 of that Act are met,
- (f) a profit on the disposal of a deposit in respect of which the trustees are liable for tax under section 554 of ITTOIA 2005,
- (g) the proceeds of sale of a foreign dividend coupon in respect of which the trustees are liable for tax under section 573 of ITTOIA 2005,
- (h) a sum which is chargeable to tax under section 68(2) or 71(4) of the Finance Act 1989 (c. 26) (employee share ownership trusts: chargeable events),
- (i) an offshore income gain (within the meaning of section 761 of this Act), and
- (j) a gain on a disposal of land to which section 776 of this Act applies.
##### 686B
- (1) This section applies to income of the trustees of an approved share incentive plan consisting of dividends or other distributions in respect of shares held by them in relation to which the requirements of Part 4 of Schedule 2 to ITEPA 2003 (approved share incentive plans: types of shares that may be awarded) are met.
- (2) Income to which this section applies is income to which section 686 applies only if and when—
- (a) the period applicable to the shares under the following provisions of this section comes to an end without the shares being awarded to a participant in accordance with the plan, or
- (b) if earlier, the shares are disposed of by the trustees.
- (3) If any of the shares in the company in question are readily convertible assets at the time the shares are acquired by the trustees, the period applicable to the shares is the period of two years beginning with the date on which the shares were acquired by the trustees.
This is subject to subsection (5).
- (4) If at the time of the acquisition of the shares by the trustees none of the shares in the company in question are readily convertible assets, the period applicable to the shares is—
- (a) the period of five years beginning with the date on which the shares were acquired by the trustees, or
- (b) if within that period any of the shares in that company become readily convertible assets, the period of two years beginning with the date on which they did so,
whichever ends first.
This is subject to subsection (5).
- (5) If the shares are acquired by the trustees by virtue of a payment in respect of which a deduction is allowed under paragraph 9 of Schedule 4AA (deduction for contribution to plan trust), the period applicable to the shares is the period of ten years beginning with the date of acquisition.
- (6) For the purposes of determining whether shares are awarded to a participant within the period applicable under the above provisions, shares acquired by the trustees at an earlier time are taken to be awarded to a participant before shares of the same class acquired by the trustees at a later time.
- (7) For the purposes of this section shares which are subject to provision for forfeiture are treated as acquired by the trustees if and when the forfeiture occurs.
- (8) In relation to shares acquired by the trustees before 11th May 2001 this section has effect with the substitution—
- (a) in subsection (3), of “Subject to subsection (4)” for the words before “the period applicable”, and
- (b) in subsection (4)(b), of “the shares in question” for “any of the shares in that company”.
##### 686C
- (1) Section 686B and this section form part of the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)).
- (2) Accordingly, expressions used in section 686B or this section and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by that index.
- (3) References in section 686B to shares being awarded to a participant include references to the shares being acquired on behalf of the participant as dividend shares.
- (4) In section 686B, “*readily convertible assets*” has the meaning given by sections 701 and 702 of ITEPA 2003, but this is subject to subsection (5).
- (5) In determining for the purposes of section 686B whether shares are readily convertible assets, any market for the shares that—
- (a) is created by virtue of the trustees acquiring shares for the purposes of the plan, and
- (b) exists solely for the purposes of the plan,
shall be disregarded.
##### 686D
- (1) This section applies where income arising (or treated as arising) to the trustees of a settlement in a year of assessment consists of or includes income subject to a special trust tax rate (“the special trust tax rate income”).
- (2) “*Income subject to a special trust tax rate*” means any income which is (or apart from this section would be) chargeable to income tax at—
- (a) the dividend trust rate, or
- (b) the rate applicable to trusts.
- (3) So much of the special trust tax rate income as does not exceed £1,000 is not chargeable to income tax at the dividend trust rate or the rate applicable to trusts (but is instead chargeable to income tax at the basic rate, the lower rate or the dividend ordinary rate, depending on the nature of the income).
- (4) In the following provisions “*the relevant purposes*” means the purposes of—
- (a) determining (in accordance with section 1A(5)) which of the special trust tax rate income is not chargeable to income tax at the dividend trust rate, or the rate applicable to trusts, by virtue of subsection (3), and
- (b) determining at which of the basic rate, the lower rate and the dividend ordinary rate that special trust tax rate income is chargeable to income tax.
- (5) For the relevant purposes the fact that any amount forming part of the special trust tax rate income is subject to a special trust tax rate is to be disregarded if, in any circumstances, an amount of that description is chargeable on trustees at the basic rate, the lower rate or the dividend ordinary rate.
- (6) For the relevant purposes any of the special trust tax rate income that consists of—
- (a) an amount which, by virtue of section 686A, is treated for the purposes of the Tax Acts as if it were income to which section 686 applies, or
- (b) income treated as arising under Chapter 5 of Part 4 of ITTOIA 2005 (stock dividends from UK resident companies),
is to be regarded as income to which section 1A applies and which is chargeable at the dividend ordinary rate.
- (7) For the relevant purposes any of the special trust tax rate income that consists of—
- (a) income treated as arising under section 761(1) (offshore income gains),
- (b) income treated as received under section 68 of the Finance Act 1989 (c. 26) (employee share ownership trusts), or
- (c) profits or gains which are treated as income under Chapter 12 of Part 4 of ITTOIA 2005 (guaranteed returns on disposals of futures and options) and in relation to which section 568 of that Act applies (profits or gains not meeting conditions of that section),
is or are to be regarded as chargeable at the basic rate.
- (8) For the relevant purposes any of the special trust tax rate income that consists of—
- (a) income treated as received under section 714(2) or 716(3) (transfers of securities),
- (b) profits taken to be income arising under Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities), or
- (c) gains which are treated as arising under Chapter 9 of that Part and on which tax is charged at the rate applicable to trusts under section 467(7)(b) of that Act (gains from contracts for life assurance),
is or are chargeable at the lower rate.
#### The conditions mentioned in section 349A(1)
##### 686E
- (1) If a settlor in relation to a settlement has made more than one settlement, section 686D shall have effect in relation to each settlement made by him with the following modification.
- (2) The reference in subsection (3) to £1000 shall be treated as a reference to—
- (a) £200, or
- (b) such amount as may be obtained by dividing £1000 by the total number of settlements in the class, provided that the amount is not less than £200.
- (3) If there is more than one settlor in relation to a settlement, the amount shall be the amount obtained under subsection (2)(b) in relation to the largest class of settlements.
- (4) In this section a reference to a class of settlements is a reference to the class of settlements which were made by a settlor and which are in existence during any part of the year of assessment.
##### 687A
- (1) This section applies where—
- (a) the trustees of a settlement make a payment to a company;
- (b) section 687 applies to the payment; and
- (c) the company is chargeable to corporation tax and does not fall within subsection (2) below.
- (2) A company falls within this subsection if it is—
- (a) a charity, as defined in section 506(1);
- (b) a body mentioned in section 507 (heritage bodies); or
- (c) an Association of a description specified in section 508 (scientific research organisations).
- (3) Where this section applies—
- (a) none of the following provisions, namely—
- (i) section 7(2),
- (ii) section 11(3),
- (iii) paragraph 5(1) of Schedule 16,
shall apply in the case of the payment;
- (b) the payment shall be left out of account in calculating the profits of the company for the purposes of corporation tax; and
- (c) no repayment shall be made of the amount treated under section 687(2) as income tax paid by the company in the case of the payment.
- (4) If the company is not resident in the United Kingdom, this section applies only in relation to so much (if any) of the payment as is comprised in the company’s chargeable profits for the purposes of corporation tax.
### Chapter ID — Trust management expenses
##### 689A
- (1) This section applies where—
- (a) there is income (“the distributed income”) arising to the trustees of a settlement in any year of assessment which (before being distributed) is income of a person (“the beneficiary”) other than the trustees;
- (b) the trustees have any expenses in that year (“the management expenses”) which are properly chargeable to that income or would be so chargeable but for any express provisions of the trust; and
- (c) the beneficiary is not liable to income tax on an amount of the distributed income (“the untaxed income”) by reason wholly or partly of—
- (i) his not having been resident in the United Kingdom, or
- (ii) his being deemed under any arrangements under section 788, or any arrangements having effect by virtue of that section, to have been resident in a territory outside the United Kingdom.
- (2) Where this section applies, there shall be disregarded in computing the income of the beneficiary for the purposes of the Income Tax Acts such part of the management expenses as bears the same proportion to all those expenses as the untaxed income bears to the distributed income.
- (3) For the purpose of computing the proportion mentioned in subsection (2) above, the amounts of the distributed income and of the untaxed income shall not, in either case, include so much (if any) of the income as is equal to the amount of income tax, or of any foreign tax, chargeable on the trustees (by way of deduction or otherwise) in respect of that income.
- (4) In subsection (3) above, “foreign tax” means any tax which is—
- (a) of a similar character to income tax; and
- (b) imposed by the laws of a territory outside the United Kingdom.
- (5) For the purposes of this section, where the income tax chargeable on any person is limited in accordance with section 128 of the Finance Act 1995 (limit on income chargeable on non-residents), the income of that person on which he is not liable to tax by reason of not having been resident in the United Kingdom shall be taken to include so much of any income of his as—
- (a) is excluded income within the meaning of that section; and
- (b) is not income which is treated for the purposes of subsection (1)(b) of that section as income the tax on which is deducted at source.
##### 689B
- (1) The expenses of the trustees of a settlement in any year of assessment, so far as they are properly chargeable to income (or would be so chargeable but for any express provisions of the trust), shall be treated—
- (a) as set against so much (if any) of any income as is income falling within subsection (2) , (2A) or (3) below before being set against other income; and
- (b) as set against so much (if any) of any income as is income falling within subsection (2) or (2A) below before being set against income falling within subsection (3) below; and
- (c) as set against so much (if any) of any income as is income falling within subsection (2) below before being set against income falling within subsection (2A) below.
- (2) Income falls within this subsection if it is—
- (a) so much of the income of the trustees as is income chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.);
- (b) income treated as arising to the trustees under Chapter 5 of that Part (stock dividends from UK resident companies); or
- (c) income chargeable under Chapter 6 of that Part (release of loan to participator in close company).
- (2A) Income falls within this subsection if it is —
- (a) income chargeable under Chapter 4 of Part 4 of ITTOIA 2005 (dividends from non-UK resident companies); or
- (b) a relevant foreign distribution chargeable under Chapter 8 of Part 5 of that Act (income not otherwise charged).
- (2B) In subsection (2A) “*relevant foreign distribution*” means any distribution of a company not resident in the United Kingdom which—
- (a) is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but
- (b) would be chargeable under Chapter 3 of that Part if the company were resident in the United Kingdom.
- (3) Income falls within this subsection if it is income to which section 1A applies but which does not fall within subsection (2) or (2A) above.
- (4) This section has effect—
- (a) subject to sections 686(2A) and 689A, but
- (b) notwithstanding anything in section 1A(5) and (6).
##### 698A
- (1) Subject to subsection (3) below, in so far as any income of any person is treated under this Part as having borne income tax at the lower rate, section 1A shall have effect as if that income were income to which that section applies otherwise than by virtue of the income being income chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.).
- (2) Subject to subsection (3) below, in so far as any income of any person is treated under this Part as having borne income tax at the dividend ordinary rate, that income shall be treated as if it were income chargeable under Chapter 3 of Part 4 of ITTOIA 2005.
- (3) Subsections (1) and (2) above shall not apply to income paid indirectly through a trustee and treated by virtue of section 698(3) above or of section 662 of ITTOIA 2005 read with section 656(3) or 657(4) of that Act as having borne income tax at the lower rate or the dividend ordinary rate; but, subject to section 686(1), section 1A shall have effect as if the payment made to the trustee were income of the trustee—
- (a) to which section 1A applies by virtue of the income being chargeable under Chapter 3 of Part 4 of ITTOIA 2005, in the case of income treated as having borne tax at the dividend ordinary rate; and
- (b) to which section 1A applies otherwise than by virtue of the income being chargeable under Chapter 3 of Part 4 of ITTOIA 2005, in any other case.
##### 699A
- (1) In this section “*a relevant amount*” means so much of any amount which a person is deemed by virtue of this Part to receive or to have a right to receive as is or would be paid out of sums which—
- (a) are included in the aggregate income of the estate of the deceased by virtue of any of paragraphs (c) to (e) of section 701(8) below; and
- (b) are sums in respect of which the personal representatives are not directly assessable to United Kingdom income tax;
or out of any sums included in the aggregate income of the estate of the deceased which fall within subsection (1A) below.
- (1A) A sum falls within this subsection if it is a sum in respect of—
- (a) a distribution chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.); . . .
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (1B) Any reference in this Part to a sum to which subsection (1)(a) and (b) above applies includes a reference to a sum falling within subsection (1A) above which is included in the aggregate income of the estate of the deceased.
- (2) In determining for the purposes of this Part whether any amount is a relevant amount—
- (a) such apportionments of any sums to which subsection (1)(a) and (b) above applies shall be made between different persons with interests in the residue of the estate as are just and reasonable in relation to their different interests; and
- (b) subject to paragraph (a) above, the assumptions in section 701(3A)(b) shall apply, but (subject to that) it shall be assumed that payments are to be made out of other sums comprised in the aggregate income of the estate before they are made out of any sums to which subsection (1)(a) and (b) above applies.
- (3) In the case of a foreign estate, and notwithstanding anything in section 695(4)(b) or 696(6), a relevant amount shall be deemed—
- (a) to be income of such amount as would, after deduction of income tax for the year in which it is deemed to be paid, be equal to the relevant amount; and
- (b) to be income that has borne tax at the applicable rate.
- (4) Sums to which subsection (1)(a) and (b) above applies shall be assumed, for the purpose of determining the applicable rate in relation to any relevant amount, to bear tax—
- (a) in the case of sums included by virtue of section 701(8)(c) or (d), at the dividendordinary rate, and
- (b) in the case of sums included by virtue of section 701(8)(e), at the lower rate; and
- (c) in the case of sums falling within subsection (1A) above, at the dividend ordinary rate.
- (5) No repayment shall be made of any income tax which by virtue of this Part is treated as having been borne by the income that is represented by a relevant amount.
- (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Substitution of security: supplemental.
#### Relief where borrower deceased.
##### 705A
- (1) Immediately after the determination by the tribunal of an appeal re-heard by them under section 705 of this Act, the appellant or the Board, if dissatisfied with the determination as being erroneous in point of law, may declare his or their dissatisfaction to the tribunal.
- (2) The appellant or the Board, as the case may be, having declared his or their dissatisfaction, may, within thirty days after the determination, by notice in writing require the tribunal to state and sign a case for the opinion of the High Court.
- (3) The party requiring the case shall pay to the tribunal a fee of £25 for and in respect of the same, before he is entitled to have the case stated.
- (4) The case shall set forth the facts and the determination of the tribunal, and the party requiring it shall transmit the case, when stated and signed, to the High Court, within thirty days after receiving the same.
- (5) At or before the time when he transmits the case to the High Court, the party requiring it shall send notice in writing of the fact that the case has been stated on his application, together with a copy of the case, to the other party.
- (6) The High Court shall hear and determine any question of law arising on the case, and may reverse, affirm or amend the determination in respect of which the case has been stated, or remit the matter to the tribunal with the Court’s opinion on it, or make such other order in relation to the matter as the Court thinks fit.
- (7) The High Court may cause the case to be sent back for amendment, and thereupon the case shall be amended accordingly, and judgment shall be delivered after it has been amended.
- (8) Subject to subsection (9) below and to Part II of the Administration of Justice Act 1969 (appeal from High Court to House of Lords), an appeal shall, in England and Wales, lie from the decision of the High Court to the Court of Appeal and thence to the House of Lords.
- (9) No appeal shall lie to the House of Lords from the Court of Appeal unless leave has been given under and in accordance with section 1 of the Administration of Justice (Appeals) Act 1934.
- (10) Subject to subsection (11) below, where the determination of the tribunal is in respect of an assessment made in accordance with a notice under subsection (3) of section 703, then notwithstanding that a case has been required to be stated or is pending before the High Court in respect of the determination, tax shall be paid in accordance with the determination.
- (11) If the amount charged by the assessment is altered by the order or judgment of the High Court, then—
- (a) if too much tax has been paid the amount overpaid shall be refunded with such interest, if any, as the High Court may allow; or
- (b) if too little tax has been charged, the amount undercharged shall be due and payable at the expiration of a period of thirty days beginning with the date on which the Board issue to the other party a notice of the total amount payable in accordance with the order or judgment of that Court.
- (12) All matters within the jurisdiction of the High Court under this section shall be assigned in Scotland to the Court of Session sitting as the Court of Exchequer (references in this section to the High Court being construed accordingly); and an appeal shall lie from the decision under this section of the Court of Session, as the Court of Exchequer in Scotland, to the House of Lords.
##### 705B
- (1) A case which is stated by the tribunal under section 705A in proceedings in Northern Ireland shall be a case for the opinion of the Court of Appeal in Northern Ireland, and the Taxes Acts (as defined in section 118(1) of the Management Act shall have effect as if that section applied in relation to such proceedings—
- (a) with the substitution for references to the High Court of references to the Court of Appeal in Northern Ireland;
- (b) with the omission of subsections (4), (5), (8) and (9) of that section.
- (2) The procedure relating to the transmission of the case to, and the hearing and determination of the case by, the Court of Appeal in Northern Ireland shall be that for the time being in force in Northern Ireland as respects cases stated by a county court in exercise of its general jurisdiction, and an appeal shall lie from the Court of Appeal to the House of Lords in accordance with section 42 of the Judicature (Northern Ireland) Act 1978.
- (3) Where in proceedings in Northern Ireland an application is made for a case to be stated by the tribunal under this section, the case must be settled and sent to the applicant as soon after the application as is reasonably practicable.
- (4) For the purposes of this section “proceedings in Northern Ireland” means proceedings as respects which the place given by the rules in Schedule 3 to the Management Act is in Northern Ireland.
#### Directions disapplying section 349A(1)
#### Relief where borrower deceased.
#### Loan to pay inheritance tax.
##### 722A
- (1) For the purposes of sections 710 to 728, where a gilt-edged security is exchanged by any person for strips of that security the security shall be deemed to have been transferred by that person.
- (2) Nothing in subsection (1) above shall have effect to cause any person to be treated as the transferee of any securities for the purposes of section 713(2)(b).
- (3) For the purposes of sections 710 to 728, where strips of gilt-edged securities are exchanged by any person for a single gilt-edged security consolidating those strips, that security shall be deemed to have been transferred to that person.
- (4) Nothing in subsection (3) above shall have effect to cause any person to be treated as the transferor of any securities for the purposes of section 713(2)(a).
- (5) In this section—
#### Relevant loan interest.
##### 726A
- (1) This section applies where—
- (a) securities (old securities) of a particular kind are issued by way of the original issue of securities of that kind,
- (b) on a later occasion securities (new securities) of the same kind are issued,
- (c) a sum (the extra return) is payable in respect of the new securities, by the person issuing them, to reflect the fact that interest is accruing on the old securities,
- (d) the issue price of the new securities includes an element (whether or not separately identified) representing payment for the extra return, and
- (e) the extra return is equal to the amount of interest payable for the relevant period on so many old securities as there are new (or, if there are more new securities than old, the amount of interest which would be so payable if there were as many old securities as new).
- (2) For the purposes of sections 710 to 728—
- (a) the new securities shall be treated as having been issued on the relevant day;
- (b) they shall be treated as transferred to the person to whom they are in fact issued (though not treated as transferred by any person);
- (c) the transfer shall be treated as a transfer with accrued interest and as made on the day on which the new securities are in fact issued;
- (d) that day shall be treated as the settlement day (notwithstanding section 712);
but this subsection is subject to subsection (7) below.
- (3) If the new securities are in fact issued under an arrangement by virtue of which the acquirer accounts to the issuer separately for the extra return mentioned in subsection (1) above and the rest of the issue price, in relation to the transfer mentioned in subsection (2)(b) above—
- (a) section 713(4) shall not apply, and
- (b) for the purposes of section 713(2) the accrued amount shall be the amount found under subsection (4) or (5) below (as the case may be);
and here “*the acquirer*” means the person to whom the new securities are in fact issued and “*the issuer*” means the person by whom they are in fact issued.
- (4) Subject to subsection (5) below, the amount is one equal to the amount (if any) of the extra return separately accounted for.
- (5) If the interest on the new securities is payable in a currency other than sterling, the amount is the sterling equivalent on the settlement day of the amount found under subsection (4) above; and for this purpose the sterling equivalent of an amount on the settlement day is the sterling equivalent calculated by reference to the London closing rate of exchange for that day.
- (6) If the new securities are in fact issued otherwise than as mentioned in subsection (3) above, section 713(4)(b) shall apply in relation to the transfer mentioned in subsection (2)(b) above.
- (7) If the new securities are securities to which section 717 applies (after applying subsection (2)(a) above) subsection (2)(b) to (d) above shall not apply.
- (8) For the purposes of this section the relevant period is the period beginning with the day following the relevant day and ending with the day on which the new securities are in fact issued.
- (9) For the purposes of this section the relevant day is—
- (a) the last (or only) interest payment day to fall in respect of the old securities before the day on which the new securities are in fact issued, or
- (b) the day on which the old securities were issued, in a case where no interest payment day fell in respect of them before the day on which the new securities are in fact issued.
##### 727A
- (1) Where securities are transferred under an agreement to sell them, and the transferor or a person connected with him—
- (a) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or
- (b) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises,
section 713(2) and (3) and section 716 do not apply to the transfer by the transferor or the transfer back except in a case where section 730A of the Taxes Act 1988 is prevented from applying by subsection (8) of that section.
- (2) For the purposes of this section agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).
- (3) Section 839 (connected persons) applies for the purposes of this section.
- (4) References in this section to buying back securities include buying similar securities.
- (5) For the purposes of this section—
- (a) a person connected with the transferor who is required to buy securities sold by the transferor shall be treated as being required to buy the securities back, and
- (b) a person connected with the transferor who acquires an option to buy securities sold by the transferor shall be treated as acquiring an option to buy the securities back,
notwithstanding that it was not he who sold them.
#### Interest which never has been relevant loan interest etc.
##### 730A
- (1) Subject to subsection (8) below, this section applies where—
- (a) a person (“the original owner”) has transferred any securities to another person (“the interim holder”) under an agreement to sell them;
- (b) the original owner or a person connected with him—
- (i) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or
- (ii) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises; and
- (c) the sale price and the repurchase price are different.
- (2) The difference between the sale price and the repurchase price shall be treated for the purposes of the Tax Acts—
- (a) where the repurchase price is more than the sale price, as a payment of interest made by the repurchaser on a deemed loan from the interim holder of an amount equal to the sale price; and
- (b) where the sale price is more than the repurchase price, as a payment of interest made by the interim holder on a deemed loan from the repurchaser of an amount equal to the repurchase price.
- (3) Where any amount is deemed under subsection (2) above to be a payment of interest, that payment shall be deemed for the purposes of the Tax Acts to be one that becomes due at the time when the repurchase price becomes due and, accordingly, is treated as paid when that price is paid.
- (4) Where any amount is deemed under subsection (2) above to be a payment of interest, the repurchase price shall be treated for the purposes of the Tax Acts (other than the excepted provisions specified in subsection (4A) below) and (in cases where section 263A of the 1992 Act does not apply) for the purposes of the 1992 Act—
- (a) in a case falling within paragraph (a) of that subsection, as reduced by the amount of the deemed payment; and
- (b) in a case falling within paragraph (b) of that subsection, as increased by the amount of the deemed payment.
This subsection is subject to subsection (4B) below.
- (4A) The excepted provisions are—
- (a) this section,
- (b) section 730BB, apart from subsection (7),
- (c) section 737A, and
- (d) section 737C.
- (4B) Where section 730BB(7) has effect (repurchase price to be treated as increased or reduced for certain purposes), subsection (4) above does not have effect for any purpose other than that of determining the amount that falls to be increased or reduced under section 730BB(7).
- (5) For the purposes of section 209(2)(d) . . . any amount which is deemed under subsection (2)(a) above to be a payment of interest shall be deemed to be interest in respect of securities issued by the repurchaser and held by the interim holder.
- (5A) For the purposes of the Corporation Tax Acts, a company has a relationship to which this section applies in any case where—
- (a) the circumstances are as set out in subsection (1) above; and
- (b) interest on a deemed loan is deemed by virtue of subsection (2) above to be paid by or to the company;
and references to a relationship to which this section applies, and to a company’s being party to such a relationship, shall be construed accordingly.
- (6) Where a company has a relationship to which this section applies—
- (a) Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships) shall, as respects that company, have effect in relation to the interest deemed by virtue of subsection (2) above to be paid or received by the company under that relationship as it would have effect if it were interest under a loan relationship to which the company is a party,
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
and
- (c) the only debits or credits to be brought into account for the purposes of that Chapter by virtue of this subsection in respect of a relationship are those relating to that deemed interest,
and, subject to paragraph (c) above, references in the Corporation Tax Acts to a loan relationship accordingly include a reference to a relationship to which this section applies.
- (6A) Any question whether debits or credits brought into account in accordance with subsection (6) above in relation to any company—
- (a) are to be brought into account under section 82(2) of the Finance Act 1996 (trading loan relationships), or
- (b) are to be treated as non-trading debits or credits,
shall be determined (subject to Schedule 11 to that Act (insurance companies)) according to the extent (if any) to which the company is a party to the repurchase in the course of activities forming an integral part of a trade carried on by the company.
- (6B) To the extent that debits or credits fall to be brought into account by a company under section 82(2) of the Finance Act 1996 in the case of a relationship to which this section applies, the company shall be regarded for the purposes of Chapter 2 of Part 4 of that Act as being party to the relationship for the purposes of a trade carried on by the company.
- (7) The Treasury may by regulations provide for any amount which is deemed under subsection (2) above to be received as a payment of interest to be treated, in such circumstances and to such extent as may be described in the regulations, as comprised in income that is eligible for relief from tax by virtue of section 438, 613(4) or 614(2), (3) or (4) or section 186 of the Finance Act 2004.
- (8) Except where regulations under section 737E otherwise provide, this section does not apply if—
- (a) the agreement or agreements under which provision is made for the sale and repurchase are not such as would be entered into by persons dealing with each other at arm’s length; or
- (b) all of the benefits and risks arising from fluctuations, before the repurchase takes place, in the market value of the securities sold accrue to, or fall on, the interim holder.
- (8A) In this section references to the sale price are to be construed—
- (a) in a case where the securities are bought back by the transferor or a person connected with him in compliance with a requirement imposed in consequence of the exercise of an option acquired under the agreement to sell the securities or any related agreement, as references to what would otherwise be the sale price plus the amount of any consideration given for the option, and
- (b) in a case where the securities are so bought back in the exercise of an option so acquired, as references to what would otherwise be the sale price less the amount of any consideration so given,
unless the consideration is brought into account under Schedule 26 to the Finance Act 2002 (derivative contracts).
- (9) In this section references to the repurchase price are to be construed—
- (a) in cases where section 737A applies, and
- (b) in cases where section 737A would apply if it were in force in relation to the securities in question,
as references to the repurchase price which is or, as the case may be, would be applicable by virtue of section 737C(3)(b), (9) or (11)(c).
##### 730B
- (1) For the purposes of section 730A agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).
- (2) References in section 730A to buying back securities—
- (a) shall include references to buying similar securities; and
- (b) in relation to a person connected with the original owner, shall include references to buying securities sold by the original owner or similar securities,
notwithstanding (in each case) that the securities bought have not previously been held by the purchaser; and references in that section to repurchase or to a repurchaser shall be construed accordingly.
- (3) In section 730A and this section “*securities*” has the same meaning as in section 737A.
- (4) For the purposes of this section securities are similar if they entitle their holders—
- (a) to the same rights against the same persons as to capital, interest and dividends, and
- (b) to the same remedies for the enforcement of those rights,
notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred.
- (5) Section 839 (connected persons) applies for the purposes of section 730A.
##### 730BB
- (1) For the purposes of the Corporation Tax Acts, a company has a relationship to which this section applies in any case where—
- (a) the circumstances are as set out in section 730A(1)(a) and (b);
- (b) the company is the repurchaser of the securities or (subject to subsection (11) below) the interim holder;
- (c) the conditions in subsection (2) or (3) below are satisfied; and
- (d) subsection (10) below does not prevent this section from applying,
and references to a relationship to which this section applies, and to a company’s being a party to such a relationship, shall be construed accordingly.
- (2) The conditions in this subsection are that—
- (a) the sale price and the repurchase price are expressed in a currency other than sterling;
- (b) there is a difference between—
- (i) the sterling equivalent of the sale price as at the date of the transfer of the securities to the interim holder (“*the first sum*”); and
- (ii) the sterling equivalent of the sale price as at the date they are bought back by the repurchaser (“*the second sum*”); and
- (c) the case is not one where section 92B or 92C of the Finance Act 1993 (company preparing accounts or operating in currency other than sterling) applies in relation to the company.
- (3) The conditions in this subsection are that—
- (a) the case is one where section 92B or 92C of the Finance Act 1993 (company preparing accounts or operating in currency other than sterling) applies in relation to the company;
- (b) the sale price and the repurchase price are expressed in a currency other than the relevant currency; and
- (c) there is a difference between—
- (i) the relevant currency equivalent of the sale price as at the date of the transfer of the securities to the interim holder (“*the first sum*”); and
- (ii) the relevant currency equivalent of the sale price as at the date they are bought back by the repurchaser (“*the second sum*”).
- (3A) In subsection (3), references to the relevant currency are—
- (a) in cases in which section 92B of the Finance Act 1993 applies, to the functional currency (within the meaning of that section), and
- (b) in cases in which section 92C of the Finance Act 1993 applies, to the accounts currency (within the meaning of that section).
- (4) Where a company has a relationship to which this section applies and—
- (a) the company is the repurchaser and the first sum exceeds the second sum; or
- (b) the company is the interim holder and the second sum exceeds the first sum,
the amount of the excess shall be treated for the purposes of the Corporation Tax Acts as an exchange gain (within the meaning of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships)) arising to the company from the relationship.
- (5) Where a company has a relationship to which this section applies and—
- (a) the company is the repurchaser and the second sum exceeds the first sum; or
- (b) the company is the interim holder and the first sum exceeds the second sum,
the amount of the excess shall be treated for the purposes of the Corporation Tax Acts as an exchange loss (within the meaning of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships)) arising to the company from the relationship.
- (6) Where an exchange gain or loss is treated by virtue of subsection (4) or (5) above as arising to a company from a relationship to which this section applies—
- (a) Chapter 2 of Part 4 of the Finance Act 1996 shall have effect in relation to the exchange gain or loss as it would have effect if it were an exchange gain or loss (as the case may be) arising to the company from a loan relationship to which it is a party; but
- (b) the only debits and credits to be brought into account for the purposes of that Chapter by virtue of this section in respect of the relationship to which this section applies are those relating to the exchange gains and losses,
and, subject to paragraph (b) above, references in the Corporation Tax Acts to a loan relationship accordingly include a reference to a relationship to which this section applies.
- (7) Where a company has a relationship to which this section applies, the repurchase price shall be treated for the purposes of the Tax Acts (other than this section and sections 730A, 737A and 737C) and (in cases where section 263A of the 1992 Act does not apply) for the purposes of the 1992 Act—
- (a) in a case where an exchange gain arises to the company by virtue of subsection (4)(a) above or an exchange loss arises to the company by virtue of subsection (5)(b) above, as increased by the amount by which the first sum exceeds the second sum, and
- (b) in a case where an exchange gain arises to the company by virtue of subsection (4)(b) above or an exchange loss arises to the company by virtue of subsection (5)(a) above, as reduced by the amount by which the second sum exceeds the first sum.
- (8) Any question whether debits or credits brought into account in accordance with subsection (6) above in relation to any company—
- (a) are to be brought into account under section 82(2) of the Finance Act 1996 (trading loan relationships); or
- (b) are to be treated as non-trading debits or credits,
shall be determined (subject to Schedule 11 to that Act (insurance companies)) according to the extent (if any) to which the company is a party to the repurchase in the course of activities forming an integral part of a trade carried on by that company.
- (9) To the extent that debits or credits fall to be brought into account by a company under section 82(2) of that Act in the case of a relationship to which this section applies, the company shall be regarded for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 as being a party to the relationship for the purposes of a trade carried on by the company.
- (10) Except where regulations under section 737E otherwise provide, this section does not apply if—
- (a) the agreement or agreements under which provision is made for the sale and repurchase are not such as would be entered into by persons dealing with each other at arm’s length; or
- (b) all of the benefits and risks arising from fluctuations, before the repurchase takes place, in the market value of the securities sold accrue to, or fall on, the interim holder.
- (11) Where—
- (a) the repurchase price is more than the sale price, so that by virtue of section 730A(2)(a) a payment of interest is treated as made by the repurchaser on a deemed loan from the interim holder; but
- (b) the payment of interest is treated as made to a person other than the interim holder,
references to the “*interim holder*” in subsections (1), (4) and (5) above shall be read as references to the person to whom the payment of interest is treated as made.
- (12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (13) Expressions used in this section and in section 730A have the same meaning in this section as in that section.
##### 730C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Schedule A losses.
##### 736A
Schedule 23A to this Act shall have effect in relation to certain cases where under a contract or other arrangements for the transfer of shares or other securities a person is required to pay to the other party an amount representative of a dividend or payment of interest on the securities.
#### Losses from UK property business.
##### 736B
- (1) This section applies where—
- (a) any interest on securities transferred by the lender under a stock lending arrangement is paid, as a consequence of the arrangement, to a person other than the lender; and
- (b) no provision is made for securing that the lender receives payments representative of that interest.
- (2) Where this section applies, Schedule 23A and the provisions for the time being contained in any regulations under that Schedule shall apply , subject to subsection (2A) below, as if—
- (a) the borrower were required under the stock lending arrangement to pay the lender an amount representative of the interest mentioned in subsection (1)(a) above;
- (b) a payment were made by the borrower in discharge of that requirement; and
- (c) that payment were made on the same date as the payment of the interest of which it is representative.
- (2A) The borrower is not entitled, by virtue of anything in Schedule 23A or any provision of regulations under that Schedule, or otherwise—
- (a) to any deduction in computing profits or gains for the purposes of income tax or corporation tax, or
- (b) to any deduction against total income or, as the case may be, total profits,
in respect of any such deemed requirement or payment as is provided for by subsection (2) above.
Where the borrower is a company, an amount may not be surrendered by way of group relief if a deduction in respect of it is prohibited by this subsection.
- (3) In this section—
- “*interest*” includes dividends; and
- “*stock lending arrangement*” and “*securities*” have the same meanings as in section 263B of the 1992 Act.
- (4) See section 736D for provision treating certain arrangements as stock lending arrangements for the purposes of this section.
##### 736C
- (1) This section applies where—
- (a) the borrower under a stock lending arrangement is treated under section 736B(2) as paying under that arrangement an amount representative of interest on any securities (“the relevant securities”),
- (b) an amount of money (“cash collateral”) is payable to or for the benefit of the lender for the purpose of securing the discharge of the requirement to transfer the relevant securities back to the lender,
- (c) the stock lending arrangement is designed to produce a return to the borrower which equates, in substance, to the return on an investment of money at interest, and
- (d) the main purpose, or one of the main purposes, of the stock lending arrangement is the obtaining of a tax advantage.
- (2) Where this section applies—
- (a) the Tax Acts are to apply as if the borrower receives an amount of interest payable in respect of the cash collateral, and
- (b) the amount of the interest is calculated in accordance with the following provisions of this section (see, in particular, subsections (3) to (7)).
- (3) The interest is treated for the purposes of the Tax Acts as if it were received on the date (“the return date”) on which the borrower transfers the relevant securities back to the lender.
- (4) The interest is treated for the purposes of the Tax Acts as if it were payable in respect of the period (“*the interest period*”)—
- (a) beginning with the date on which the lender transfers the relevant securities to the borrower, and
- (b) ending with the return date.
- (5) The rate of interest payable in respect of the cash collateral is a rate that is reasonably comparable to the rate that the borrower could obtain by placing the cash collateral on deposit for the interest period.
- (6) For the purposes of this section, the amount of the cash collateral on which the interest is payable is taken to be—
- (a) in any case where the amount of the cash collateral varies at any time on or before the return date, the highest amount of the cash collateral at any time on or before the return date, and
- (b) in any other case, the amount of the cash collateral as at the return date.
- (7) The amount of the interest which the borrower is treated as receiving in respect of the cash collateral for the interest period is reduced (but not below nil) by any interest which the borrower actually receives in respect of that collateral for that period.
- (8) If the borrower is a person within the charge to income tax, the interest which the borrower is treated as receiving is charged to income tax under Chapter 2 of Part 4 of ITTOIA 2005 (interest).
- (9) If the borrower is a company within the charge to corporation tax—
- (a) the interest which the borrower is treated as receiving is treated for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships) as payable to it on a money debt,
- (b) that money debt is treated for those purposes as a relationship to which section 100 of the Finance Act 1996 applies (money debts etc not arising from the lending of money), and
- (c) the credits to be brought into account for those purposes in respect of the interest must be determined using an amortised cost basis of accounting.
- (10) The fact that the borrower is treated as receiving an amount of interest is not to be taken as implying that the interest is payable by the lender or any other person.
- (11) For the purposes of this section—
- “*money*” includes money expressed in a currency other than sterling,
- “*stock lending arrangement*” and “*securities*” have the same meanings as in section 263B of the 1992 Act,
- “*tax advantage*” has the meaning given by section 709(1).
- (12) For the purposes of this section—
- (a) any reference to the transfer of securities back has the same meaning as in section 263B of the 1992 Act (see, in particular, sections 263B(5) and 263C(1) of that Act), but
- (b) if it becomes apparent that the borrower will not comply with the requirement to transfer any securities back, the borrower is treated as if he transfers them back on the date on which it becomes so apparent.
- (13) For the purposes of this section it does not matter—
- (a) whether the cash collateral is payable by the borrower or by any other person,
- (b) whether the cash collateral is payable under the stock lending arrangement or under any other arrangement,
- (c) whether collateral in another form is also provided in connection with the stock lending arrangement.
- (14) See section 736D—
- (a) for provision treating certain arrangements as stock lending arrangements for the purposes of this section, and
- (b) for provision treating certain amounts as cash collateral for those purposes.
##### 736D
- (1) In this section “*quasi-stock lending arrangement*” means so much of any arrangements between two or more persons as are not stock lending arrangements, but are arrangements under which—
- (a) a person (“*the lender*”) transfers securities to another person (“*the borrower*”), and
- (b) a requirement is imposed on a person to transfer any or all of the securities, or any other property, back to the lender or any other person,
and it does not matter whether the person on whom that requirement is imposed is the borrower or any other person.
- (2) In this section “*quasi-cash collateral*”, in relation to any stock lending arrangement or quasi-stock lending arrangement, means—
- (a) any money which is payable for a relevant purpose, plus
- (b) any other property which is transferable for a relevant purpose.
- (3) Money or other property is payable or transferable for a relevant purpose if it is payable or transferable to or for the benefit of—
- (a) the lender under the stock lending arrangement or quasi-stock lending arrangement, or
- (b) a person connected with that lender,
for the purpose of securing the discharge of the requirement to transfer any or all of the securities, or any other property, back to that lender or any other person.
- (4) For the purposes of sections 736B and 736C, a quasi-stock lending arrangement is treated as if it were a stock lending arrangement.
- (5) For the purposes of section 736C, in relation to any stock lending arrangement or quasi-stock lending arrangement,—
- (a) quasi-cash collateral is treated as if it were cash collateral, and
- (b) the amount of the quasi-cash collateral in relation to the stock lending arrangement or quasi-stock lending arrangement is taken to be the amount of the cash collateral.
- (6) If any property other than money is transferable for a relevant purpose, the amount of the quasi-cash collateral so far as relating to that property is determined by reference to its market value.
- (7) In any case where—
- (a) section 736C applies in relation to a quasi-stock lending arrangement, and
- (b) the person for whom the tax advantage was designed to be obtained is a person (“*the other person*”) other than the borrower under that arrangement,
that section has effect as if the other person were the person who receives the amount of interest mentioned in that section.
- (8) In any case where section 736C applies in relation to a quasi-stock lending arrangement—
- (a) any reference in that section to cash collateral being payable to or for the benefit of the lender includes its being payable to or for the benefit of a person connected with the lender,
- (b) the reference in subsection (1)(c) of that section to a return to the borrower includes a return to any other person, and
- (c) any reference in that section to the transfer back of the relevant securities by the borrower to the lender includes the transfer back of any or all of the securities, or any other property, by any person to the lender or any other person.
- (9) Section 839 (connected persons) applies for the purposes of this section.
- (a) subsection (3) above does not apply, and
- (b) some or all of the relevant income is taken into account in accordance with section 83 of the Finance Act 1989 in an account in relation to which the provisions of section 432C or 432D apply,
the fraction of the foreign tax that is attributable to the category of business in question is the fraction whose numerator is the part of the relevant income which is referable to that category by virtue of any provision of section 432C or 432D and whose denominator is the whole of the relevant income.
- (7) Where some or all of the relevant income falls to be taken into account in determining in accordance with section 83(2) of the Finance Act 1989 the amount referred to in section 432E(1) as the net amount, the fraction of the foreign tax that is attributable to the category of business in question is the fraction—
- (a) whose numerator is the part of the investment income taken into account in that determination which would be referable to that category by virtue of section 432E if the investment income were the only amount included in the net amount; and
- (b) whose denominator is the whole of that investment income.
- (7A) The Treasury may by regulations amend subsection (7) above; and the regulations may include amendments having effect in relation to accounting periods during which they are made.
- (8) No part of the foreign tax is attributable to any category of business except as provided by subsections (3) to (7) above.
- (9) Where for the purposes of this section an amount of foreign tax is attributable to a category of life assurance business other than basic life assurance and general annuity business, credit in respect of the foreign tax so attributable shall be allowed only against corporation tax in respect of profits chargeable under Case VI of Schedule D arising from carrying on that category of business.
##### 804C
- (1) Where—
- (a) an insurance company carries on any category of insurance business in a period of account,
- (b) a computation in accordance with the provisions applicable to Case I of Schedule D falls to be made in relation to that category of business for that period, and
- (c) there arises to the company in that period any income or gain in respect of which credit for foreign tax falls to be allowed under any arrangements,
subsection (2) below shall have effect.
- (2) In any such case, the amount of the credit for foreign tax which, under the arrangements, is to be allowed against corporation tax in respect of so much of that income or gain as is referable to the category of business concerned (“*the relevant income*”) shall be limited by treating the amount of the relevant income as reduced in accordance with subsections (3) and (4) below.
- (3) The first limitation is to treat the amount of the relevant income as reduced (but not below nil) for the purposes of this Chapter by the amount of expenses (if any) attributable to the relevant income.
- (4) If—
- (a) the amount of the relevant income after any reduction under subsection (3) above,
exceeds
- (b) the relevant fraction of the profits of the category of business concerned for the period of account in question which are chargeable to corporation tax,
the second limitation is to treat the relevant income as further reduced (but not below nil) for the purposes of this Chapter to an amount equal to that fraction of those profits.
In this subsection any reference to the profits of a category of business is a reference to those profits after the set off of any losses of that category of business which have arisen in any previous accounting period.
- (5) In determining the amount of the credit for foreign tax which is to be allowed as mentioned in subsection (2) above, the relevant income shall not be reduced except in accordance with that subsection.
- (6) For the purposes of subsection (3) above, the amount of expenses attributable to the relevant income is the appropriate fraction of the total relevant expenses of the category of business concerned for the period of account in question.
- (7) In subsection (6) above, the “*appropriate fraction*” means the fraction—
- (a) whose numerator is the amount of the relevant income before any reduction in accordance with subsection (2) above, and
- (b) whose denominator is the total income of the category of business concerned for the period of account in question,
unless the denominator so determined is nil, in which case the denominator shall instead be the amount described in subsection (8) below.
- (8) That amount is so much in total of the income and gains—
- (a) which arise to the company in the period of account in question, and
- (b) in respect of which credit for foreign tax falls to be allowed under any arrangements,
as are referable to the category of business concerned (before any reduction in accordance with subsection (2) above).
- (9) In subsection (4) above, the “*relevant fraction*” means the fraction—
- (a) whose numerator is the amount of the relevant income before any reduction in accordance with subsection (2) above; and
- (b) whose denominator is the amount described in subsection (8) above.
- (10) Where a 75 per cent subsidiary of an insurance company is acting in accordance with a scheme or arrangement and—
- (a) the purpose, or one of the main purposes, of that scheme or arrangement is to prevent or restrict the application of subsection (2) above to the insurance company, and
- (b) the subsidiary does not carry on insurance business of any description,
the amount of corporation tax attributable (apart from this subsection) to any item of income or gain arising to the subsidiary shall be found by setting off against that item the amount of expenses that would be attributable to it under subsection (3) above if that item had arisen directly to the insurance company.
- (11) Where the credit allowed for any tax payable under the laws of a territory outside the United Kingdom is, by virtue of subsection (2) above, less than it would be if the relevant income were not treated as reduced in accordance with that subsection, section 795(2)(a) shall not prevent a deduction being made for the difference in computing the profits of the category of business concerned.
- (12) Where, by virtue of subsection (10) above, the credit allowed for any tax payable under the laws of a territory outside the United Kingdom is less than it would be apart from that subsection, section 795(2)(a) shall not prevent a deduction being made for the difference in computing the income of the 75 per cent subsidiary.
- (13) For the purposes of the operation of this section in relation to any income or gain in respect of which credit falls to be allowed under any arrangements, the amount of the income or gain that is referable to a category of insurance business is the same fraction of the income and gain as the fraction of the foreign tax that is attributable to that category of business in accordance with section 804B.
- (14) This section shall be construed—
- (a) in accordance with section 804D, where the category of business concerned is life assurance business or a category of life assurance business; and
- (b) in accordance with section 804E, where the category of business concerned is not life assurance business or any category of life assurance business.
##### 804D
- (1) This section has effect for the interpretation of section 804C where the category of business concerned is life assurance business or a category of life assurance business.
- (2) The “total income" of the category of business concerned for the period of account in question is the amount (if any) by which—
- (a) so much of the total income shown in the revenue account in the periodical return of the company concerned for that period as is referable to that category of business,
exceeds
- (b) so much of any commissions payable and any expenses of management incurred in connection with the acquisition of the business, as shown in that return, so far as referable to that category of business.
- (3) Where any amounts fall to be brought into account in accordance with section 83 of the Finance Act 1989, the amounts that are referable to the category of business concerned shall be determined for the purposes of subsection (2) above in accordance with sections 432B to 432F.
- (4) The “total relevant expenses" of the category of business concerned for any period of account is the amount of the claims incurred—
- (a) increased by any increase in the liabilities of the company, or
- (b) reduced (but not below nil) by any decrease in the liabilities of the company.
- (5) For the purposes of subsection (4) above, the amounts to be taken into account in the case of any period of account are the amounts as shown in the company’s periodical return for the period so far as referable to the category of business concerned.
##### 804E
- (1) This section has effect for the interpretation of section 804C where the category of business concerned is not life assurance business or any category of life assurance business.
- (2) The “total income" of the category of business concerned for any period of account is the amount (if any) by which—
- (a) the sum of the amounts specified in subsection (3) below,
exceeds
- (b) the sum of the amounts specified in subsection (4) below.
- (3) The amounts mentioned in subsection (2)(a) above are—
- (a) earned premiums, net of reinsurance;
- (b) investment income and gains;
- (c) other technical income, net of reinsurance;
- (d) any amount treated under section 107(2) of the Finance Act 2000 as a receipt of the company’s trade.
- (4) The amounts mentioned in subsection (2)(b) above are—
- (a) acquisition costs;
- (b) the change in deferred acquisition costs;
- (c) losses on investments.
- (5) The “total relevant expenses" of the category of business concerned for any period of account is the sum of—
- (a) the claims incurred, net of reinsurance,
- (b) the changes in other technical provisions, net of reinsurance,
- (c) the change in the equalisation provision, and
- (d) investment management expenses,
unless that sum is a negative amount, in which case the total relevant expenses shall be taken to be nil.
- (6) The amounts to be taken into account for the purposes of the paragraphs of subsections (3) to (5) above are the amounts taken into account for the purposes of corporation tax.
- (7) Expressions used—
- (a) in the paragraphs of subsections (3) to (5) above, and
- (b) in the provisions of section B of Schedule 9A to the Companies Act 1985 (form and content of accounts of insurance companies and groups) which relate to the profit and loss account format (within the meaning of paragraph 7(1) of that section),
have the same meaning in those paragraphs as they have in those provisions.
##### 804F
Expressions used in sections 804A to 804E and in Chapter I of Part XII have the same meaning in those sections as in that Chapter.
##### 804G
- (1) This section applies if—
- (a) credit for foreign tax falls to be allowed to a person (“P”) under any arrangements, and
- (b) a payment is made by a tax authority to P, or any person connected with P, by reference to the foreign tax.
- (2) The amount of that credit is to be reduced by an amount equal to that payment.
- (3) Section 839 applies for the purposes of determining whether or not a person is connected with P.
### Foreign dividends: onshore pooling and utilisation of eligible unrelieved foreign tax
##### 806A
- (1) This section applies where, in any accounting period of a company resident in the United Kingdom, an amount of eligible unrelieved foreign tax arises in respect of a dividend falling within subsection (2) below paid to the company.
- (2) The dividends that fall within this subsection are any dividends chargeable under Case V of Schedule D, other than—
- (a) any dividend which is trading income for the purposes of section 393;
- (b) any dividend which, in the circumstances described in paragraphs (a) and (b) of subsection (8) of section 393, would by virtue of that subsection fall to be treated as trading income for the purposes of subsection (1) of that section;
- (c) in a case where section 801A applies, the dividend mentioned in subsection (1)(b) of that section;
- (d) in a case where section 803 applies, the dividend mentioned in subsection (1)(b) of that section;
- (e) any dividend the amount of which is, under section 811, treated as reduced.
- (3) For the purposes of this section—
- (a) the cases where an amount of eligible unrelieved foreign tax arises in respect of a dividend falling within subsection (2) above are the cases set out in subsections (4) and (5) below; and
- (b) the amounts of eligible unrelieved foreign tax which arise in any such case are those determined in accordance with section 806B.
- (4) Case A is where—
- (a) the amount of the credit for foreign tax which under any arrangements would, apart from section 797, be allowable against corporation tax in respect of the dividend,
exceeds
- (b) the amount of the credit for foreign tax which under the arrangements is allowed against corporation tax in respect of the dividend.
- (5) Case B is where the amount of tax which, by virtue of any provision of any arrangements, falls to be taken into account as mentioned in section 799(1) in the case of the dividend (whether or not by virtue of section 801(2) or (3)) is less than it would be apart from the mixer cap.
But if that is so in any case by reason only of the mixer cap restricting the amount of underlying tax that is treated as mentioned in subsection (2) or (3) of section 801 in the case of a dividend paid by a company resident in the United Kingdom, the case does not fall within Case B.
- (6) In determining whether the circumstances are as set out in subsection (4) or (5) above, sections 806C and 806D shall be disregarded.
##### 806B
- (1) This section has effect for determining the amounts of eligible unrelieved foreign tax which arise in the cases set out in section 806A(4) and (5).
- (2) In Case A, the difference between—
- (a) the amount of the credit allowed as mentioned in section 806A(4)(b), and
- (b) the greater amount of the credit that would have been so allowed if, for the purposes of subsection (2) of section 797, the rate of corporation tax payable as mentioned in that subsection were the upper percentage,
shall be an amount of eligible unrelieved foreign tax.
- (3) In Case B, the amount (if any) by which—
- (a) the aggregate of the upper rate amounts falling to be brought into account for the purposes of this paragraph by virtue of subsection (4) or (5) below, exceeds
- (b) the amount of tax to be taken into account as mentioned in section 799(1) in the case of the Case V dividend, before any increase under section 801(4B),
shall be an amount of eligible unrelieved foreign tax.
- (4) In the case of the Case V dividend (but not any lower level dividend), the upper rate amount to be brought into account for the purposes of subsection (3)(a) above—
- (a) in a case where the mixer cap does not restrict the amount of tax to be taken into account as mentioned in section 799(1) (before any increase under section 801(4B)) in the case of that dividend, is that amount of tax; or
- (b) in a case where the mixer cap restricts the amount of tax to be so taken into account in the case of that dividend, is the greater amount that would have been so taken into account if, in the application of the formula in section 799(1A) in the case of that dividend (but not any lower level dividend) M% had, in relation to—
- (i) so much of D as does not represent any lower level dividend, and
- (ii) so much of U as is not underlying tax attributable to any lower level dividend,
been the upper percentage.
- (5) In the case of any dividend (the “*relevant dividend*”) received as mentioned in subsection (2) or (3) of section 801 which is a lower level dividend in relation to the Case V dividend, the upper rate amount to be brought into account for the purposes of subsection (3)(a) above—
- (a) in a case where the mixer cap does not restrict the amount of underlying tax that is treated as mentioned in subsection (2) or (3), as the case may be, of section 801 in the case of the relevant dividend, is the appropriate portion of that amount of underlying tax;
- (b) in a case where—
- (i) the relevant dividend was paid by a company resident in the United Kingdom, and
- (ii) the mixer cap restricts the amount of underlying tax that is treated as mentioned in subsection (2) or (3), as the case may be, of section 801 in the case of that dividend,
is the appropriate portion of that restricted amount of underlying tax; or
- (c) in a case where—
- (i) the relevant dividend was paid by a company resident outside the United Kingdom, and
- (ii) the mixer cap restricts the amount of underlying tax that is treated as mentioned in subsection (2) or (3), as the case may be, of section 801 in the case of that dividend,
is the appropriate portion of the greater amount of tax that would have been so treated if, in the application of the formula in section 799(1A) in the case of that dividend (but not any other dividend) M% had, in relation to so much of D as does not represent any lower level dividend, and so much of U as is not underlying tax attributable to any lower level dividend, been the upper percentage.
- (6) For the purposes of subsection (5) above, the “*appropriate portion*” of any amount there mentioned in the case of a dividend is found by multiplying that amount by the product of the reducing fractions for each of the higher level dividends.
- (7) For the purposes of subsection (6) above, the “*reducing fraction*” for any dividend is the fraction—
- (a) whose numerator is the amount of the dividend; and
- (b) whose denominator is the amount of the relevant profits (within the meaning of section 799(1)) out of which the dividend is paid.
- (8) Any reference in this section to any tax being restricted by the mixer cap in the case of any dividend is a reference to that tax being so restricted otherwise than by virtue only of the application of the mixer cap in the case of one or more lower level dividends.
- (9) For the purpose of determining the amount described in subsection (2)(b), (4)(b) or (5)(c) above, sections 806C and 806D shall be disregarded.
- (10) In this section—
- “*money*” includes money expressed in a currency other than sterling,
- “*property*” means property in any form,
- “*stock lending arrangement*” and “*securities*” have the same meaning as in section 263B of the 1992 Act,
- “*transfer*” means a transfer otherwise than by way of sale.
#### Losses from UK property business.
##### 737A
- (1) This section applies where on or after the appointed day a person (the transferor) agrees to sell any securities, and the transferor or a person connected with him—
- (a) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or
- (b) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises;
but this section does not apply unless either the conditions set out in subsection (2) below or the conditions set out in subsection (2A) below are fulfilled.
- (2) The first set of conditions referred to in subsection (1) above are that—
- (a) as a result of the transaction, a dividend which becomes payable in respect of the securities is receivable otherwise than by the transferor,
- (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (c) there is no requirement under any agreement mentioned in subsection (1) above for a person to pay to the transferor on or before the relevant date an amount representative of the dividend, and
- (d) it is reasonable to assume that, in arriving at the repurchase price of the securities, account was taken of the fact that the dividend is receivable otherwise than by the transferor.
- (2A) The second set of conditions referred to in subsection (1) above are that—
- (a) a dividend which becomes payable in respect of the securities is receivable otherwise than by the transferor,
- (b) the transferor or a person connected with him is required under any agreement mentioned in subsection (1) above to make a payment representative of the dividend,
- (c) there is no requirement under any such agreement for a person to pay to the transferor on or before the relevant date an amount representative of the dividend, and
- (d) it is reasonable to assume that, in arriving at the repurchase price of the securities, account is taken of the circumstances referred to in paragraphs (a) to (c).
- (3) For the purposes of subsections (2) and (2A) above the relevant date is the date when the repurchase price of the securities becomes due.
- (4) Where it is a person connected with the transferor who is required to buy back the securities, or who acquires the option to buy them back, references in the following provisions of this section to the transferor shall be construed as references to the connected person.
- (5) Where this section applies, . . . Schedule 23A and dividend manufacturing regulations shall apply , subject to subsection (5A) below, as if—
- (a) the relevant person were required, under the arrangements for the transfer of the securities, to pay to the transferor an amount representative of the dividend mentioned in subsection (2)(a) or (2A)(a) above,
- (b) a payment were made by that person to the transferor in discharge of that requirement, and
- (c) the payment were made on the date when the repurchase price of the securities becomes due.
- (5A) If the relevant person is not the person to whom the transferor agreed to sell the securities, the relevant person is not entitled, by virtue of anything in Schedule 23A or any provision of dividend manufacturing regulations, or otherwise—
- (a) to any deduction in computing profits or gains for the purposes of income tax or corporation tax, or
- (b) to any deduction against total income or total profits,
by virtue of subsection (5) above.
Where the relevant person is a company, an amount may not be surrendered by way of group relief if a deduction in respect of it is prohibited by this subsection.
- (6) In this section“*the relevant person*” means—
- (a) where subsection (1)(a) above applies, the person from whom the transferor is required to buy back the securities;
- (b) where subsection (1)(b) above applies, the person from whom the transferor has the right to buy back the securities;
and in this section“*dividend manufacturing regulations*” means regulations under Schedule 23A (whenever made).
##### 737B
- (1) In section 737A and this section “*securities*” means United Kingdom equities, United Kingdom securities or overseas securities; and—
- (a) where the securities mentioned in section 737A(1) are United Kingdom securities, references in section 737A to a dividend shall be construed as references to a periodical payment of interest;
- (b) where the securities mentioned in section 737A(1) are overseas securities, references in section 737A to a dividend shall be construed as references to an overseas dividend.
- (2) In this section “*United Kingdom equities*”, “*United Kingdom securities*”, “*overseas securities*” and “*overseas dividend*” have the meanings given by paragraph 1(1) of Schedule 23A.
- (3) For the purposes of section 737A agreements are related if each is entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).
- (4) In section 737A “*the repurchase price of the securities*” means—
- (a) where subsection (1)(a) of that section applies, the amount which, under any agreement mentioned in section 737A(1), the transferor or connected person is required to pay for the securities bought back, or
- (b) where subsection (1)(b) of that section applies, the amount which under any such agreement the transferor or connected person is required, if he exercises the option, to pay for the securities bought back.
- (5) In section 737A and subsection (4) above references to buying back securities include references to buying similar securities.
- (6) For the purposes of subsection (5) above securities are similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred; and “interest” here includes dividends.
- (7) For the purposes of section 737A and subsection (4) above—
- (a) a person who is connected with the transferor and is required to buy securities sold by the transferor shall be treated as being required to buy the securities back notwithstanding that it was not he who sold them, and
- (b) a person who is connected with the transferor and acquires an option to buy securities sold by the transferor shall be treated as acquiring an option to buy the securities back notwithstanding that it was not he who sold them.
- (8) Section 839 shall apply for the purposes of section 737A and this section.
- (9) In section 737A “*the appointed day*” means such day as the Treasury may by order appoint, and different days may be appointed in relation to—
- (a) United Kingdom equities,
- (b) United Kingdom securities, and
- (c) overseas securities.
##### 737C
- (1) This section applies where section 737A applies.
- (2) Subsection (3) below applies where—
- (a) the dividend mentioned in section 737A(2)(a) or (2A)(a) is a dividend on United Kingdom equities, and
- (b) by virtue of section 737A(5), . . . paragraph 2 of Schedule 23A applies, in relation to the payment which is treated under section 737A(5) as having been made;
and in subsection (3) below “*the deemed manufactured dividend*” means that payment.
- (3) Where this subsection applies—
- (a) the amount of the deemed manufactured dividend shall be taken to be an amount equal to the amount of the dividend mentioned in section 737A(2)(a) or (2A)(a);
- (b) the repurchase price of the securities shall be treated, for the purposes of section 730A, as increased by an amount equal to the . . . amount of the deemed manufactured dividend.
- (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (7) Subsection (8) below applies where—
- (a) the dividend mentioned in section 737A(2)(a) or (2A)(a) is a periodical payment of interest on United Kingdom securities, and
- (b) by virtue of section 737A(5), paragraph 3 of Schedule 23A applies in relation to the payment which is treated under section 737A(5) as having been made . . . ;
and in subsection (8) below “*the deemed manufactured interest*” means the payment referred to in paragraph (b) above.
- (8) Where this subsection applies—
- (a) the amount which by virtue of section 737A(5) is taken to be the gross amount of the deemed manufactured payment for the purposes of paragraph 3 of Schedule 23A shall be taken to be the gross amount of the deemed manufactured interest for the purposes of this section;
- (b) any deduction which, by virtue of that paragraph, is required to be made out of the gross amount of the deemed manufactured interest shall be deemed to have been made.
- (9) Where . . . subsection (8) above applies, the repurchase price of the securities shall be treated, for the purposes of section 730A, as increased by the gross amount of the deemed manufactured interest.
- (10) Subsection (11) below applies where—
- (a) the dividend mentioned in section 737A(2)(a) or (2A)(a) is an overseas dividend, and
- (b) by virtue of section 737A(5), paragraph 4 of Schedule 23A applies in relation to the payment which is treated under section 737A(5) as having been made;
and in subsection (11) below “*the deemed manufactured overseas dividend*” means that payment.
- (11) Where this subsection applies—
- (a) the gross amount of the deemed manufactured overseas dividend shall be taken to be the amount found under paragraph 4(5)(b) and (c) of Schedule 23A;
- (b) any deduction which, by virtue of paragraph 4 of Schedule 23A, is required to be made out of the gross amount of the deemed manufactured overseas dividend shall be deemed to have been made;
- (c) the repurchase price of the securities shall be treated, for the purposes of section 730A, as increased by the gross amount of the deemed manufactured overseas dividend.
- (11A) The deemed increase of the repurchase price which is made for the purposes of section 730A by subsection (3)(b), (9) or (11)(c) above shall also have effect—
- (a) for all the purposes of the Tax Acts, other than section 737A, and
- (b) in cases where section 263A of the 1992 Act does not apply, for the purposes of the 1992 Act,
wherever in consequence of that increase there is for the purposes of section 730A no difference between the sale price and the repurchase price or where that section is prevented from applying by subsection (8) of that section.
- (11B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (12) In this section—
- (a) “*United Kingdom equities*”, “*United Kingdom securities*” and “*overseas dividend*” have the meanings given by paragraph 1(1) of Schedule 23A;
- (b) “*the repurchase price of the securities*” shall be construed in accordance with section 737B(4).
##### 737D
- (1) The Treasury may by regulations provide for any manufactured payment made to any person to be treated, in such circumstances and to such extent as may be described in the regulations, as comprised in income of that person that is eligible for relief from tax by virtue of section 438, 613(4) or 614(2), (3) or (4) or section 186 of the Finance Act 2004.
- (2) In this section “*manufactured payment*” means any . . . manufactured interest or manufactured overseas dividend, within the meaning of Schedule 23A.
##### 737E
- (1) The Treasury may by regulations make provision for all or any of sections 727A, 730A , 730BB and 737A to 737C to have effect with modifications in relation to cases involving any arrangement for the sale and repurchase of securities where—
- (a) the obligation to make the repurchase is not performed or the option to repurchase is not exercised;
- (b) provision is made by or under any agreement for different or additional securities to be treated as, or as included with, securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale;
- (c) provision is made by or under any agreement for any securities to be treated as not included with securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale;
- (d) provision is made by or under any agreement for the sale price or repurchase price to be determined or varied wholly or partly by reference to fluctuations, occurring in the period after the making of the agreement for the original sale, in the value of securities transferred in pursuance of that sale, or in the value of securities treated as representing those securities; or
- (e) provision is made by or under any agreement for any person to be required, in a case where there are any such fluctuations, to make any payment in the course of that period and before the repurchase price becomes due.
- (2) The Treasury may by regulations make provision for all or any of sections 727A, 730A , 730BB and 737A to 737C to have effect with modifications in relation to cases where—
- (a) arrangements, corresponding to those made in cases involving an arrangement for the sale and repurchase of securities, are made by any agreement, or by one or more related agreements, in relation to securities that are to be redeemed in the period after their sale; and
- (b) those arrangements are such that the person making the sale or a person connected with him (instead of being required to repurchase the securities or acquiring an option to do so) is granted rights in respect of the benefits that will accrue from their redemption.
- (3) The Treasury may by regulations provide that section 730A or 730BB is to have effect with modifications in relation to cases involving any arrangement for the sale and repurchase of securities where there is an agreement relating to the sale or repurchase which is not such as would be entered into by persons dealing with each other at arm’s length.
- (4) The powers conferred by subsections (1) and (2) above shall be exercisable in relation to section 263A or 263D of the 1992 Act as they are exercisable in relation to section 730A of this Act.
- (5) Regulations made for the purposes of this section may—
- (a) make different provision for different cases; and
- (b) contain such supplementary, incidental, consequential and transitional provision as appears to the Treasury to be appropriate.
- (6) The supplementary, incidental and consequential provision that may be made by regulations under this section shall include—
- (a) in the case of regulations relating to section 730A, provision modifying subsections (3)(b), (9), (11)(c) and (11A) of section 737C; and
- (b) in the case of regulations relating to section 263A or 263D of the 1992 Act, provision modifying the operation of that Act in relation to cases where by virtue of the regulations any acquisition or disposal is excluded from those which are to be disregarded for the purposes of capital gains tax.
- (7) In this section “*modifications*” includes exceptions and omissions; and any power under this section to provide for an enactment to have effect with modifications in any case shall include power to provide for it not to apply (if it otherwise would do) in that case.
- (8) References in this section to a case involving an arrangement for the sale and repurchase of securities are references to any case where—
- (a) a person makes a sale of any securities under any agreement (“the original sale”); and
- (b) that person or a person connected with him—
- (i) is required to buy them back in pursuance of an obligation imposed by, or in consequence of the exercise of an option acquired under, that agreement or any related agreement, or
- (ii) acquires an option to buy them back under that agreement or any related agreement which he subsequently exercises.
- (9) Section 730B shall apply for the purposes of this section as it applies for the purposes of section 730A.
##### 741A
- (1) The individual is not liable to income tax by virtue of section 739 or 740 for the year of assessment by reference to the relevant transactions if he satisfies an officer of the Board—
- (a) that Condition A is met, or
- (b) in a case where Condition A is not met, that Condition B is met.
- (2) Condition A is that it would not be reasonable to draw the conclusion, from all the circumstances of the case, that the purpose of avoiding liability to taxation was the purpose, or one of the purposes, for which the relevant transactions or any of them were effected.
- (3) Condition B is that—
- (a) all the relevant transactions were genuine commercial transactions, and
- (b) it would not be reasonable to draw the conclusion, from all the circumstances of the case, that any one or more of those transactions was more than incidentally designed for the purpose of avoiding liability to taxation.
- (4) The intentions and purposes of any person who, whether or not for consideration,—
- (a) designs or effects the relevant transactions or any of them, or
- (b) provides advice in relation to the relevant transactions or any of them,
are to be taken into account in determining the purposes for which those transactions or any of them were effected.
- (5) A relevant transaction is a commercial transaction only if it is effected—
- (a) in the course of a trade or business, or
- (b) with a view to setting up and commencing a trade or business,
and, in either case, for the purposes of that trade or business.
- (6) For that purpose, the making and managing of investments, or the making or managing of investments, is not a trade or business except to the extent that—
- (a) the person by whom it is done, and
- (b) the person for whom it is done,
are independent persons dealing at arm's length.
- “*the Case V dividend*” means the dividend mentioned in section 806A(1);
- “*higher level dividend*”, in relation to another dividend, means any dividend—by which that other dividend is to any extent represented; andwhich either is the Case V dividend or is to any extent represented by the Case V dividend;
- “*lower level dividend*”, in relation to another dividend, means any dividend which—is received as mentioned in section 801(2) or (3); andis to any extent represented by that other dividend;
- “*the relevant tax*” means—in the case of the Case V dividend, the foreign tax to be taken into account as mentioned in section 799(1); andin the case of any other dividend, the amount of underlying tax to be treated as mentioned in section 801(2) or (3) in the case of the dividend.
##### 806C
- (1) In this section “qualifying foreign dividend" means any dividend which falls within section 806A(2), other than—
- (a) an ADP dividend paid by a controlled foreign company;
- (b) so much of any dividend paid by any company as represents an ADP dividend paid by another company which is a controlled foreign company;
- (c) a dividend in respect of which an amount of eligible unrelieved foreign tax arises.
- (2) For the purposes of this section—
- (a) a “related qualifying foreign dividend" is any qualifying foreign dividend paid to a company resident in the United Kingdom by a company which, at the time of payment of the dividend, is related to that company;
- (b) an “unrelated qualifying foreign dividend" is any qualifying foreign dividend which is not a related qualifying foreign dividend.
- (3) For the purposes of giving credit relief under this Part to a company resident in the United Kingdom—
- (a) the related qualifying foreign dividends that arise to the company in an accounting period shall be aggregated;
- (b) the unrelated qualifying foreign dividends that arise to the company in an accounting period shall be aggregated;
- (c) the underlying tax in relation to the related qualifying foreign dividends that arise to the company in an accounting period shall be aggregated;
- (d) so much of the foreign tax paid in respect of the qualifying foreign dividends that arise to the company in an accounting period as is not underlying tax shall be aggregated.
- (4) Credit relief under this Part shall be given as if—
- (a) the related qualifying foreign dividends aggregated under paragraph (a) of subsection (3) above in the case of any accounting period instead together constituted a single related qualifying foreign dividend arising in that accounting period (“*the single related dividend*” arising in that accounting period);
- (b) the unrelated qualifying foreign dividends aggregated under paragraph (b) of that subsection in the case of any accounting period instead together constituted a single unrelated qualifying foreign dividend arising in that accounting period (“*the single unrelated dividend*” arising in that accounting period);
- (c) the underlying tax aggregated under paragraph (c) of that subsection for any accounting period were instead underlying tax in relation to the single related dividend arising in that accounting period (the “aggregated underlying tax" in respect of the single related dividend);
- (d) the tax aggregated under paragraph (d) of that subsection for any accounting period were instead foreign tax (other than underlying tax) paid in respect of, and computed by reference to,—
- (i) the single related dividend arising in that accounting period,
- (ii) the single unrelated dividend so arising, or
- (iii) partly the one dividend and partly the other,
(that aggregated tax being referred to as the “*aggregated withholding tax*”).
- (5) For the purposes of this section, a dividend paid by a controlled foreign company is an “*ADP dividend*” if it is a dividend by virtue of which (whether in whole or in part and whether taken alone or with one or more other dividends) no apportionment under section 747(3) falls to be made as regards an accounting period of the controlled foreign company in a case where such an apportionment would fall to be made apart from section 748(1)(a).
##### 806D
- (1) For the purposes of this section, where—
- (a) any eligible unrelieved foreign tax arises in an accounting period of a company, and
- (b) the dividend in relation to which it arises is paid by a company which, at the time of payment of the dividend, is related to that company,
that tax is “eligible underlying tax" to the extent that it consists of or represents underlying tax.
- (2) To the extent that any eligible unrelieved foreign tax is not eligible underlying tax it is for the purposes of this section “*eligible withholding tax*”.
- (3) For the purposes of giving credit relief under this Part to a company resident in the United Kingdom—
- (a) the amounts of eligible underlying tax that arise in an accounting period of the company shall be aggregated (that aggregate being referred to as the “relievable underlying tax" arising in that accounting period); and
- (b) the amounts of eligible withholding tax that arise in an accounting period of the company shall be aggregated (that aggregate being referred to as the “relievable withholding tax" arising in that accounting period).
- (4) The relievable underlying tax arising in an accounting period of the company shall be treated for the purposes of allowing credit relief under this Part as if it were—
- (a) underlying tax in relation to the single related dividend that arises in the same accounting period,
- (b) relievable underlying tax arising in the next accounting period (whether or not any related qualifying foreign dividend in fact arises to the company in that accounting period), or
- (c) underlying tax in relation to the single related dividend that arises in such one or more preceding accounting periods as result from applying the rules in section 806E,
or partly in one of those ways and partly in each or either of the others.
- (5) The relievable withholding tax arising in an accounting period of the company shall be treated for the purposes of allowing credit relief under this Part as if it were—
- (a) foreign tax (other than underlying tax) paid in respect of, and computed by reference to, the single related dividend or the single unrelated dividend that arises in the same accounting period,
- (b) relievable withholding tax arising in the next accounting period (whether or not any qualifying foreign dividend in fact arises to the company in that accounting period), or
- (c) foreign tax (other than underlying tax) paid in respect of, and computed by reference to, the single related dividend or the single unrelated dividend that arises in such one or more preceding accounting periods as result from applying the rules in section 806E,
or partly in one of those ways and partly in any one or more of the others.
- (6) The amount of relievable underlying tax or relievable withholding tax arising in an accounting period that is treated—
- (a) under subsection (4)(a) or (c) above as underlying tax in relation to the single related dividend arising in the same or any earlier accounting period, or
- (b) under subsection (5)(a) or (c) above as foreign tax paid in respect of, and computed by reference to, the single related dividend or the single unrelated dividend arising in the same or any earlier accounting period,
must not be such as would cause an amount of eligible unrelieved foreign tax to arise in respect of that dividend.
##### 806E
- (1) Where any relievable tax is to be treated as mentioned in section 806D(4)(c) or (5)(c), the rules for determining the accounting periods in question (and the amount of the relievable tax to be so treated in relation to each of them) are those set out in the following provisions of this section.
- (2) Rule 1 is that the accounting periods in question must be accounting periods beginning not more than three years before the accounting period in which the relievable tax arises.
- (3) Rule 2 is that the relievable tax must be so treated that—
- (a) credit for, or for any remaining balance of, the relievable tax is allowed against corporation tax in respect of the single dividend arising in a later one of the accounting periods beginning as mentioned in rule 1 above,
before
- (b) credit for any of the relievable tax is allowed against corporation tax in respect of the single dividend arising in any earlier such accounting period.
- (4) Rule 3 is that the relievable tax must be so treated that, before allowing credit for any of the relievable tax against corporation tax in respect of the single dividend arising in any accounting period, credit for foreign tax is allowed—
- (a) first for the aggregated foreign tax in respect of the single dividend arising in that accounting period, so far as not consisting of relievable tax arising in another accounting period; and
- (b) then for relievable tax arising in any accounting period before that in which the relievable tax in question arises.
- (5) The above rules are subject to sections 806D(6) and 806F.
- (6) In this section—
- “*aggregated foreign tax*” means aggregated underlying tax or aggregated withholding tax;
- “*relievable tax*” means relievable underlying tax or relievable withholding tax;
- “*the single dividend*” means—in relation to relievable underlying tax, the single related dividend; andin relation to relievable withholding tax, the single related dividend or the single unrelated dividend.
##### 806F
- (1) For the purposes of this Part, credit in accordance with any arrangements shall, in the case of any dividend, be given so far as possible—
- (a) for underlying tax (where allowable) before foreign tax other than underlying tax;
- (b) for foreign tax other than underlying tax before amounts treated as underlying tax; and
- (c) for amounts treated as underlying tax (where allowable) before amounts treated as foreign tax other than underlying tax.
- (2) Accordingly, where the amount of foreign tax to be brought into account for the purposes of allowing credit relief under this Part is subject to any limitation or restriction, the limitation or restriction shall be taken to have the effect of excluding foreign tax other than underlying tax before excluding underlying tax.
##### 806G
- (1) The relievable underlying tax or relievable withholding tax arising in any accounting period shall only be treated as mentioned in subsection (4) or (5) of section 806D on a claim.
- (2) Any such claim must specify the amount (if any) of that tax—
- (a) which is to be treated as mentioned in paragraph (a) of the subsection in question;
- (b) which is to be treated as mentioned in paragraph (b) of that subsection; and
- (c) which is to be treated as mentioned in paragraph (c) of that subsection.
- (3) A claim under subsection (1) above may only be made before the expiration of the period of—
- (a) six years after the end of the accounting period mentioned in that subsection; or
- (b) if later, one year after the end of the accounting period in which the foreign tax in question is paid.
##### 806H
- (1) The Board may by regulations make provision for, or in connection with, allowing a company which is a member of a group to surrender all or any part of the amount of the relievable tax arising to it in an accounting period to another company which is a member of that group at the time, or throughout the period, prescribed by the regulations.
- (2) The provision that may be made under subsection (1) above includes provision—
- (a) prescribing the conditions which must be satisfied if a surrender is to be made;
- (b) determining the amount of relievable tax which may be surrendered in any accounting period;
- (c) prescribing the conditions which must be satisfied if a claim to surrender is to be made;
- (d) prescribing the consequences for tax purposes of a surrender having been made;
- (e) allowing a claim to be withdrawn and prescribing the effect of such a withdrawal.
- (3) Regulations under subsection (1) above—
- (a) may make different provision for different cases; and
- (b) may contain such supplementary, incidental, consequential or transitional provision as the Board may think fit.
- (4) For the purposes of subsection (1) above a company is a member of a group if the conditions prescribed for that purpose in the regulations are satisfied.
##### 806J
- (1) This section has effect for the interpretation of the foreign dividend provisions of this Chapter.
- (2) In this section, “*the foreign dividend provisions of this Chapter*” means sections 806A to 806H and this section.
- (3) For the purposes of the foreign dividend provisions of this Chapter, where—
- (a) one company pays a dividend (“*dividend A*”) to another company, and
- (b) that other company, or a company which is related to it, pays a dividend (“*dividend B*”) to another company,
dividend B represents dividend A, and dividend A is represented by dividend B, to the extent that dividend B is paid out of profits which are derived, directly or indirectly, from the whole or part of dividend A.
- (4) Where—
- (a) one company is related to another, and
- (b) that other is related to a third company,
the first company shall be taken for the purposes of paragraph (b) of subsection (3) above to be related to the third, and so on where there is a chain of companies, each of which is related to the next.
- (5) In any case where—
- (a) a company resident outside the United Kingdom pays a dividend to a company resident in the United Kingdom, and
- (b) the circumstances are such that subsection (6)(b) of section 790 has effect in relation to that dividend,
the foreign dividend provisions of this Chapter shall have effect as if the company resident outside the United Kingdom were related to the company resident in the United Kingdom (and subsection (10) of that section shall have effect accordingly).
- (6) Subsection (5) of section 801 (related companies) shall apply for the purposes of the foreign dividend provisions of this Chapter as it applies for the purposes of that section.
- (7) In the foreign dividend provisions of this Chapter—
- “*aggregated underlying tax*” shall be construed in accordance with section 806C(4)(c);
- “*aggregated withholding tax*” shall be construed in accordance with section 806C(4)(d);
- “*controlled foreign company*” has the same meaning as in Chapter IV of Part XVII;
- “*eligible unrelieved foreign tax*” shall be construed in accordance with sections 806A and 806B;
- “*the mixer cap*” means section 799(1)(b);
- “*qualifying foreign dividend*” has the meaning given by section 806C(1);
- “*related qualifying foreign dividend*” has the meaning given by section 806C(2)(a);
- “*relievable tax*” has the meaning given by section 806E(6);
- “*relievable underlying tax*” shall be construed in accordance with 806D(3)(a);
- “*relievable withholding tax*” shall be construed in accordance with 806D(3)(b);
- “*single related dividend*” shall be construed in accordance with section 806C(4)(a);
- “*single unrelated dividend*” shall be construed in accordance with section 806C(4)(b);“the upper percentage" is 45 per cent.
### Application of foreign dividend provisions to branches or agencies in the UK of persons resident elsewhere
##### 806K
- (1) Sections 806A to 806J shall apply in relation to an amount of eligible unrelieved foreign tax arising in a chargeable period in respect of any of the income of a branch or agency in the United Kingdom of a person resident outside the United Kingdom as they apply in relation to eligible unrelieved foreign tax arising in an accounting period of a company resident in the United Kingdom in respect of any of the company’s income, but with the modifications specified in subsection (2) below.
- (2) Those modifications are—
- (a) take any reference to an accounting period as a reference to a chargeable period;
- (b) take any reference to corporation tax as including a reference to income tax;
- (bb) in relation to income tax, take any reference to a dividend chargeable under Case V of Schedule D as a reference to a dividend chargeable under Chapter 4 of Part 4 of ITTOIA 2005;
- (c) take the reference in section 806A(4)(a) to section 797 as a reference to sections 796 and 797;
- (d) in relation to income tax, for subsection (2) of section 806B substitute the subsection (2) set out in subsection (3) below.
- (3) That subsection is—
- (“) In Case A, the difference between—
- (a) the amount of the credit allowed as mentioned in section 806A(4)(b), and
- (b) the greater amount of credit that would have been so allowed if, for the purposes of section 796, the amount of income tax borne on the dividend as computed under that section were charged at a rate equal to the upper percentage,
shall be an amount of eligible unrelieved foreign tax. ".
### Unrelieved foreign tax: profits of overseas branch or agency
##### 806L
- (1) This section applies where, in any accounting period of a company resident in the United Kingdom, an amount of unrelieved foreign tax arises in respect of any of the company’s qualifying income from an overseas permanent establishment of the company.
- (2) The amount of the unrelieved foreign tax so arising shall be treated for the purposes of allowing credit relief under this Part as if it were foreign tax paid in respect of, and computed by reference to, the company’s qualifying income from the same overseas permanent establishment—
- (a) in the next accounting period (whether or not the company in fact has any such income from that source in that accounting period), or
- (b) in such one or more preceding accounting periods, beginning not more than three years before the accounting period in which the unrelieved foreign tax arises, as result from applying the rules in subsection (3) below,
or partly in the one way and partly in the other.
- (3) Where any unrelieved foreign tax is to be treated as mentioned in paragraph (b) of subsection (2) above, the rules for determining the accounting periods in question (and the amount of the unrelieved foreign tax to be so treated in relation to each of them) are that the unrelieved foreign tax must be so treated under that paragraph—
- (1) that—
- (a) credit for, or for any remaining balance of, the unrelieved foreign tax is allowed against corporation tax in respect of income of a later one of the accounting periods beginning as mentioned in that paragraph,
before
- (b) credit for any of the unrelieved foreign tax is allowed against corporation tax in respect of income of any earlier such period;
- (2) that, before allowing credit for any of the unrelieved foreign tax against corporation tax in respect of income of any accounting period, credit for foreign tax is allowed—
- (a) first for foreign tax in respect of the income of that accounting period, other than unrelieved foreign tax arising in another accounting period; and
- (b) then for unrelieved foreign tax arising in any accounting period before that in which the unrelieved foreign tax in question arises.
- (4) For the purposes of this section, the cases where an amount of unrelieved foreign tax arises in respect of any of a company’s qualifying income from an overseas permanent establishment in an accounting period are those cases where—
- (a) the amount of the credit for foreign tax which under any arrangements would, apart from section 797, be allowable against corporation tax in respect of that income,
exceeds
- (b) the amount of the credit for foreign tax which under the arrangements is allowed against corporation tax in respect of that income;
and in any such case that excess is the amount of the unrelieved foreign tax in respect of that income.
- (5) For the purposes of this section, a company’s qualifying income from an overseas permanent establishment is the profits of the overseas permanent establishment which are—
- (a) chargeable under Case I of Schedule D; or
- (b) included in the profits of life reinsurance business or overseas life assurance business chargeable under Case VI of Schedule D by virtue of section 439B or 441.
- (6) Where (whether by virtue of this subsection or otherwise) an amount of unrelieved foreign tax arising in an accounting period falls to be treated under subsection (2) above for the purposes of allowing credit relief under this Part as foreign tax paid in respect of, and computed by reference to, qualifying income of an earlier accounting period, it shall not be so treated for the purpose of any further application of this section.
- (7) In this section—
- “*commercial transaction*” does not include—a transaction on terms other than those that would have been made between independent persons dealing at arm's length, ora transaction that would not have been entered into between independent persons dealing at arm's length;
- “*independent persons*” means persons who are not connected with each other (within the meaning given by section 839);
- “*relevant transactions*” means—the transfer, andany associated operations;
- “*revenue*” includes taxes, duties and national insurance contributions;
- “*taxation*” includes any revenue for whose collection and management the Commissioners for Her Majesty's Revenue and Customs are responsible.
- (8) Any associated operation that would not (apart from this subsection) fall to be taken into account for the purposes of this section must be taken into account for those purposes if, were it to be so taken into account, the conditions in subsection (1) above would be failed by reference to—
- (a) that associated operation, or
- (b) that associated operation taken together with the transfer or any one or more other associated operations.
- (9) The jurisdiction of the Special Commissioners on any appeal includes jurisdiction to review any decision taken by an officer of the Board in exercise of the officer's functions under this section.
- (10) This section is subject to sections 741B and 741C (application of section 741 and this section etc).
##### 741B
- (1) This section makes provision with respect to the application for the year of assessment of—
- (a) section 741,
- (b) section 741A, or
- (c) section 741C,
in the case of the individual and the relevant transactions.
- (2) In this section—
- “*new transaction*” means a relevant transaction effected on or after the relevant date;
- “*old transaction*” means a relevant transaction effected before the relevant date;
- “*the relevant date*” means 5th December 2005;
- “*relevant transactions*” means—the transfer, andany associated operations.
- (3) If all the relevant transactions are old transactions, section 741 is the provision to be applied.
- (4) If all the relevant transactions are new transactions, section 741A is the provision to be applied.
- (5) If—
- (a) any one or more of the relevant transactions are old transactions, and
- (b) any one or more of the relevant transactions are new transactions,
section 741C is the provision to be applied.
##### 741C
- (1) This section applies by virtue of section 741B if the case falls within subsection (5) of that section.
- (2) Sections 739 and 740 do not apply, unless subsection (3) below applies.
- (3) This subsection applies if—
- (a) the conditions in section 741(1) are failed by reference to the old transactions or any of them, or
- (b) the conditions in section 741A(1) are failed by reference to the new transactions or any of them.
- (4) Where subsection (3) above applies, the general rule is that sections 739 and 740 apply as they would have applied apart from any exemption by virtue of sections 741 to 741C.
- (5) In any case where subsection (3) above applies by virtue only of paragraph (b) of that subsection, the general rule has effect subject to, and in accordance with, the Rules in subsections (6) to (8) below.
- (6) Rule 1 is that, for the purposes of section 739(2) or (3), any income arising before the relevant date must not be brought into account as income of the person resident or domiciled outside the United Kingdom.
- (7) Rule 2 is that for the purposes of section 740, where—
- (a) a benefit is received by the individual in a year of assessment ending after the relevant date, and
- (b) relevant income of years of assessment up to and including that year falls to be determined,
the general rule requires years ending before the relevant date to be brought into account as well as years ending after that date.
- (8) Rule 3 is that, for the purposes of section 740, a benefit received by the individual in the year 2005-06 is to be left out of account to the extent that, on a time apportionment basis, it fell to be enjoyed in any part of the year that falls before the relevant date.
- (9) This section is to be read as one with section 741B.
##### 741D
- (1) This section applies where—
- (a) an individual is liable to tax by virtue of section 739 for a year of assessment (the “taxable year”), but
- (b) the conditions in subsections (2) to (4) below are met.
- (2) Condition 1 is that since the making of the transfer there have been one or more years of assessment when the circumstances were such that, so far as relating to such of the relevant transactions as were effected before the end of the year, the individual—
- (a) was not liable to tax by virtue of section 739, or
- (b) would not have been liable to tax by virtue of section 739 if there had been any deemed income of his under that section,
because an appropriate exemption applied or, in a case falling within paragraph (b) above, would have applied.
- (3) Condition 2 is that the individual is liable to tax under section 739 in the taxable year in consequence of Condition B in section 741A(3) not being met.
- (4) Condition 3 is that the income by reference to which the individual is liable to tax for the taxable year is attributable—
- (a) partly to relevant transactions by reference to which the appropriate exemption applied for the last exempt year of assessment, and
- (b) partly to associated operations not falling within paragraph (a) above (“chargeable operations”).
- (5) For the purposes of this section, a year of assessment is “exempt” if it is one of the years of assessment mentioned in subsection (2) and there is no earlier year of assessment for which—
- (a) the individual was liable to tax by virtue of section 739, or
- (b) the individual would have been liable to tax by virtue of section 739, if there had been any deemed income of his under that section.
- (6) Where this section applies, the liability of the individual is to be reduced as if it fell to be determined by reference to only so much of the income as appears to an officer of the Board to be justly and reasonably attributable to chargeable operations in all the circumstances of the case.
- (7) The facts and matters that may be taken into account in determining for the purposes of subsection (6) above whether income may be regarded as justly and reasonably attributable to chargeable operations include whether, and to what extent, the chargeable operations or any of them directly or indirectly affect any of the following—
- (a) the character, description or amount of any income of any person,
- (b) any person's power to enjoy any income,
- (c) the character, description or amount of any income which a person has power to enjoy.
- (8) The jurisdiction of the Special Commissioners on any appeal includes jurisdiction to review any decision taken by an officer of the Board in exercise of the officer's functions under this section.
- (9) In this section—
- “*appropriate exemption*” means exemption by virtue of—paragraph (b) of section 741(1), orCondition B in section 741A(3);
- “*relevant transactions*” means—the transfer, andany associated operations.
#### Losses from overseas property business.
##### 747A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 748ZA
- (1) Nothing in section 748(1)(da) prevents an apportionment falling to be made as regards an accounting period (“*the relevant accounting period*”) of a controlled foreign company (“X”) if condition A, B or C is met.
- (2) Condition A is that at any time before the end of the relevant accounting period a scheme is entered into and—
- (a) in the absence of this subsection, in consequence of the scheme, section 748(1)(da) would apply to prevent an apportionment falling to be made as regards the relevant accounting period of X, and
- (b) the main purpose, or one of the main purposes, of any party to the scheme in entering into the scheme is to secure that section 748(1)(da) prevents an apportionment falling to be made as regards that period, or that period and one or more other accounting periods of X.
- (3) Condition B is that at any time before the end of the relevant accounting period a scheme is entered into and—
- (a) in consequence of the scheme profits are shifted to X from another company (“Y”),
- (b) the main purpose or one of the main purposes of any party to the scheme in entering into the scheme is to ensure that section 748(1)(da) prevents an apportionment falling to be made as regards the chargeable profits of one or more controlled foreign companies for one or more accounting periods, and
- (c) the relevant accounting period of X falls wholly or partly within that accounting period or those accounting periods.
- (4) For the purposes of subsection (3), profits are shifted to X from Y if it is reasonable to suppose that in the absence of the scheme, and any similar scheme, the whole or a part of the income which is reflected in X's profits would have been reflected in Y's profits.
- (5) Condition C is that, in determining X's chargeable profits for the relevant accounting period—
- (a) section 418(5) of CTA 2009 (loan relationships involving connected debtor and creditor where debits exceed credits) has effect so as to treat X, for the purposes of Part 5 of that Act, as bringing into account for that period credits in respect of a loan relationship, or
- (b) Part 21B of CTA 2010 (group mismatch schemes) has effect so as to exclude an amount from being brought into account as a debit or credit for the purposes of Part 5 of CTA 2009 (loan relationships) or Part 7 of that Act (derivative contracts).
- (6) For the purposes of this section—
- “*apportionment*” means an apportionment under section 747(3);
- “*scheme*” means any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving one or more transactions.
##### 748A
- (1) Nothing in section 748 prevents an apportionment under section 747(3) falling to be made as regards an accounting period of a controlled foreign company if the company—
- (a) is a company incorporated in a territory to which this section applies as respects that accounting period; or
- (b) is at any time in that accounting period liable to tax in such a territory by reason of domicile, residence or place of management; or
- (c) at any time in that accounting period carries on business through a permanent establishment in such a territory.
- (2) The condition in subsection (1)(c) above is not satisfied as regards an accounting period of a controlled foreign company if the business carried on by the company in that period through permanent establishments in territories to which this section applies, taken as a whole, is only a minimal part of the whole of the business carried on by the company in that period.
- (3) The territories to which this section applies as respects an accounting period of a controlled foreign company are those specified as such in regulations made by the Treasury.
- (4) Regulations under subsection (3) above—
- (a) may make different provision for different cases or with respect to different territories; and
- (b) may contain such incidental, supplemental, consequential or transitional provision as the Treasury may think fit.
- (5) A statutory instrument containing regulations under subsection (3) above shall not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
##### 749A
- (1) An election under paragraph (d) or a designation under paragraph (e) of section 749(3) shall have effect in relation to—
- (a) the accounting period in relation to which it is made (“the original accounting period"), and
- (b) each successive accounting period of the controlled foreign company in question which precedes the next one in which the eligible territories are different,
and shall so have effect notwithstanding any change in the persons who have interests in the company or any change in the interests which those persons have in the company.
- (2) For the purposes of subsection (1)(b) above, an accounting period of the controlled foreign company is one in which the eligible territories are different if in the case of that accounting period—
- (a) at least one of the two or more territories which fell within subsection (1) of section 749 in the original accounting period does not fall within that subsection; or
- (b) some other territory also falls within that subsection.
- (3) Any election under section 749(3)(d)—
- (a) must be made by notice given to an officer of the Board;
- (b) must be made no later than twelve months after the end of the controlled foreign company’s accounting period in relation to which it is made;
- (c) must state, as respects each of the persons making it, the percentage of the chargeable profits and creditable tax (if any) of the controlled foreign company for that accounting period which it is likely would be apportioned to him on an apportionment under section 747(3) if one were made;
- (d) must be signed by the persons making it; and
- (e) is irrevocable.
- (4) Nothing in—
- (a) paragraph 10 of Schedule 18 to the Finance Act 1998 (claims or elections in company tax returns), or
- (b) Schedule 1A to the Management Act (claims or elections not included in returns),
shall apply, whether by virtue of section 754 or otherwise, to an election under section 749(3)(d).
- (5) A designation under section 749(3)(e) is irrevocable.
- (6) Where the Board make a designation under section 749(3)(e), notice of the making of the designation shall be given to every company resident in the United Kingdom which appears to the Board to have had an assessable interest in the controlled foreign company at any time during the accounting period of the controlled foreign company in relation to which the designation is made.
- (7) A notice under subsection (6) above shall specify—
- (a) the date on which the designation was made;
- (b) the controlled foreign company to which the designation relates;
- (c) the accounting period of the controlled foreign company in relation to which the designation is made; and
- (d) the territory designated.
- (8) Subsection (9) of section 749 has effect for the purposes of subsection (6) above as it has effect for the purposes of subsection (8) of that section.
##### 749B
- (1) For the purposes of this Chapter, the following persons have an interest in a company—
- (a) any person who possesses, or is entitled to acquire, share capital or voting rights in the company;
- (b) any person who possesses, or is entitled to acquire, a right to receive or participate in distributions of the company;
- (c) any person who is entitled to secure that income or assets (whether present or future) of the company will be applied directly or indirectly for his benefit; and
- (d) any other person who, either alone or together with other persons, has control of the company.
- (2) Rights which a person has as a loan creditor of a company do not constitute an interest in the company for the purposes of this Chapter.
- (3) For the purposes of subsection (1)(b) above, the definition of “distribution" in Part VI shall be construed without any limitation to companies resident in the United Kingdom.
- (4) References in subsection (1) above to being entitled to do anything apply where a person—
- (a) is presently entitled to do it at a future date, or
- (b) will at a future date be entitled to do it;
but a person whose entitlement to secure that any income or assets of the company will be applied as mentioned in paragraph (c) of that subsection is contingent upon a default of the company or any other person under any agreement shall not be treated as falling within that paragraph unless the default has occurred.
- (5) Where a company has an interest in another company and a third person has, or two or more persons together have, an interest in the first company (as in a case where one company has a shareholding in a controlled foreign company and the first company is controlled by a third company or by two or more persons together) subsections (6) and (7) below apply.
- (6) Where this subsection applies, the person who has, or each of the persons who together have, the interest in the first company shall be regarded for the purposes of this Chapter as thereby having an interest in the second company.
- (7) In any case where this subsection applies, in construing references in this Chapter to one person having the same interest as another, the person or, as the case may be, each of the persons who together have, the interest in the first company shall be treated as having, to the extent of that person’s interest in that company, the same interest as the first company has in the second company.
- (8) Where two or more persons jointly have an interest in a company otherwise than in a fiduciary or representative capacity, they shall be treated for the purposes of this Chapter as having the interest in equal shares.
##### 750A
- (1) Where—
- (a) in any accounting period a company is to be regarded by virtue of any of subsections (1) to (4) of section 749 as resident in a particular territory outside the United Kingdom, and
- (b) within the meaning of section 750(1), the local tax in respect of the profits arising to the company in that accounting period is equal to or greater than three-quarters of the corresponding United Kingdom tax on those profits, but
- (c) that local tax is determined under designer rate tax provisions,
the company shall be taken for the purposes of this Chapter to be subject to a lower level of taxation in that territory in that accounting period.
- (2) In subsection (1) above “*designer rate tax provisions*” means provisions—
- (a) which appear to the Board to be designed to enable companies to exercise significant control over the amount of tax which they pay; and
- (b) which are specified in regulations made by the Board.
- (3) Regulations under subsection (2) above—
- (a) may make different provision for different cases or with respect to different territories; and
- (b) may contain such supplementary, incidental, consequential or transitional provision as the Board may think fit.
- (4) The first regulations under subsection (2) above may make provision having effect in relation to accounting periods beginning not more than fifteen months before the date on which the regulations are made.
##### 751A
- (1) This section applies if—
- (a) an apportionment under section 747(3) falls to be made as regards an accounting period (“*the relevant accounting period*”) of a controlled foreign company,
- (b) throughout that period the controlled foreign company has a business establishment in an EEA territory,
- (c) throughout that period there are individuals who work for the controlled foreign company in that territory, and
- (d) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in that period.
- (2) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period to be reduced by an amount (“*the specified amount*”) specified in the application (including to nil).
- (3) If the Commissioners grant the application—
- (a) those chargeable profits are treated as reduced by the specified amount, and
- (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in those chargeable profits,
for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).
- (4) The Commissioners may grant the application only if they are satisfied that the specified amount does not exceed the amount (if any) equal to so much of those chargeable profits as can reasonably be regarded as representing the net economic value which—
- (a) arises to the appropriate body of persons (taken as a whole), and
- (b) is created directly by qualifying work.
- (5) For the purposes of subsection (4) “*net economic value*” does not include any value which derives directly or indirectly from the reduction or elimination of any liability of any person to any tax or duty imposed under the law of any territory.
- (6) For the purposes of subsection (4) “*the appropriate body of persons*” means—
- (a) if the controlled foreign company is not a member of a group of companies, the controlled foreign company and the persons who have an interest in it at any time in the relevant accounting period, and
- (b) if the controlled foreign company is a member of a group of companies, all the persons falling within paragraph (a) and any other person who is a member of that group of companies,
and for the purposes of this subsection “*group of companies*” means a company and any other companies of which it has control.
- (7) For the purposes of subsection (4) “*qualifying work*” means work which—
- (a) is done in any EEA territory in which the controlled foreign company has a business establishment throughout the relevant accounting period, and
- (b) is done in that territory by individuals working for the controlled foreign company there.
- (8) Any reference in this section to a business establishment of a controlled foreign company in an EEA territory is to be construed in accordance with paragraph 7 of Schedule 25 (but as if the reference in that paragraph to the territory in which the company is resident were to the EEA territory).
- (9) For the purposes of this section individuals are not to be regarded as working for a company in any territory unless—
- (a) they are employed by the company in the territory, or
- (b) they are otherwise directed by the company to perform duties on its behalf in the territory.
#### Restriction of set-off of allowances against general income
##### 751AA
- (1) This section applies if—
- (a) an apportionment under section 747(3) falls to be made as regards an accounting period (“*the relevant accounting period*”) of a controlled foreign company,
- (b) the chargeable profits of the controlled foreign company for the relevant accounting period would, apart from this section, include an amount of income in respect of a payment made by another company (“the payer”),
- (c) the amount that the payer brings into account for the purposes of corporation tax in respect of the payment is reduced (in part or in full) by virtue of Part 3 of Schedule 15 to FA 2009 (tax treatment of financing costs and income), and
- (d) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in the relevant accounting period.
- (2) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period (“the chargeable profits”) to be reduced by an amount (“*the specified amount*”) specified in the application (including to nil).
- (3) If the Commissioners grant the application—
- (a) the chargeable profits are treated as reduced by the specified amount, and
- (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in the chargeable profits,
for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).
- (4) The Commissioners may grant the application only if they are satisfied that the specified amount does not exceed the relevant amount.
- (5) In subsection (4) “*the relevant amount*” means the amount (if any) by which it is just and reasonable that the chargeable profits should be treated as reduced, having regard to the effect of Parts 3 and 4 of Schedule 15 to FA 2009 on amounts brought into account for the purposes of corporation tax by the payer, or any other company.
#### Treatment of interest as a loss for purposes of carry-forward and carry-back.
##### 751AB
- (1) This section applies if—
- (a) an apportionment under section 747(3) would fall to be made as regards an accounting period (“*the relevant accounting period*”) of a controlled foreign company,
- (b) but for a relevant failure, section 748(1)(ba) or (bb) would have prevented such an apportionment, and
- (c) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in that period.
- (2) “*Relevant failure*” means—
- (a) in the case of section 748(1)(ba), one or both of the following—
- (i) a failure to satisfy the requirement of paragraph 12E of Schedule 25 (requirement as to company's UK connection) in circumstances where the requirement would be satisfied if the reference in sub-paragraph (3)(a) of that paragraph to 10% were a reference to 50%, and
- (ii) a failure to satisfy the requirement of paragraph 12F of that Schedule (finance income and relevant IP income) in circumstances where the relevant IP income of the controlled foreign company for the accounting period does not exceed 5% of the company's gross income for that period, and
- (b) in the case of section 748(1)(bb), a failure to satisfy the requirement of paragraph 12M of that Schedule (finance income).
- (3) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period (“the chargeable profits”) to be reduced to an amount specified in the application (“*the specified amount*”).
The specified amount may be nil.
- (4) If the Commissioners grant the application—
- (a) the chargeable profits are treated as reduced to the specified amount, and
- (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in the chargeable profits,
for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).
- (5) The Commissioners may grant the application only if—
- (a) they are satisfied that the specified amount is not less than the relevant amount, and
- (b) they have not previously granted an application made by the UK resident company in respect of the relevant accounting period under section 751A or 751AC.
- (6) “*The relevant amount*” means—
- (a) if the relevant failure is within subsection (2)(a), the sum of—
- (i) the excess finance and IP income (if any) for the relevant accounting period, and
- (ii) in a case where there is a failure specified in subsection (2)(a)(i), so much (if any) of the net chargeable profits for that period as are not excluded by subsection (8), and
- (b) if the relevant failure is within subsection (2)(b)—
- (i) the amount (if any) by which the controlled foreign company's finance income for the relevant accounting period exceeds 5% of its gross income for that period, or
- (ii) if that amount is a negligible amount, nil.
- (7) “The excess finance and IP income” for the relevant accounting period means—
- (a) the amount (if any) by which the total of the controlled foreign company's finance income and relevant IP income for that period exceeds 5% of its gross income for that period, or
- (b) if that amount is a negligible amount, nil.
- (8) Net chargeable profits are excluded by this subsection if, and to the extent that, they can reasonably be regarded—
- (a) as representing the net economic value which—
- (i) arises to the appropriate body of persons (taken as a whole), and
- (ii) is created directly by qualifying work, or
- (b) as not being wholly or partly attributable, directly or indirectly, to transactions with persons within the charge to United Kingdom tax.
- (9) In subsection (8)(a) “*qualifying work*” means work which—
- (a) is done in the territory in which the controlled foreign company is resident, and
- (b) is done in that territory by individuals working for the controlled foreign company there.
- (10) A transaction with a company which is within the charge to United Kingdom tax only because it carries on a trade in the United Kingdom through a permanent establishment there is within subsection (8)(b) only if the transaction is attributable to activities carried on through that establishment.
- (11) For the purposes of subsections (8) and (9)—
- (a) section 751A(5), (6) and (9) applies as it applies for the purposes of the equivalent provisions of section 751A, and
- (b) paragraph 5(2) to (5) of Schedule 25 (residence of controlled foreign company) applies as it applies in relation to Part 2 of that Schedule.
- (12) In this section—
- “*finance income*” has the meaning given by paragraph 12F(3) of Schedule 25 (with references to C read as references to the controlled foreign company);
- “*relevant IP income*” has the meaning given by paragraph 12F(4) of that Schedule;
- “*net chargeable profits*” means chargeable profits excluding so much of those profits as is directly attributable to the finance income or relevant IP income of the controlled foreign company;
- “*UK-connected gross income*” has the same meaning as in paragraph 12E of Schedule 25;
- “*United Kingdom tax*” means corporation tax or income tax;
and paragraph 12G of that Schedule (gross income) applies for the purposes of this section as it applies for the purposes of Part 2A of that Schedule (with references to C read as references to the controlled foreign company).
#### Schedule A losses.
##### 751AC
- (1) This section applies if—
- (a) an exempt period in relation to a controlled foreign company ends in accordance with paragraph 15F(2) of Schedule 25 (time exempt period ends if there is an early termination event), other than by reason of an early termination event within paragraph 15F(3)(b),
- (b) an accounting period (“*the relevant accounting period*”) of the company ends after that exempt period but before the time the exempt period would have ended had paragraph 15F(2) of that Schedule not applied,
- (c) an apportionment under section 747(3) would fall to be made as regards the relevant accounting period, and
- (d) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in that period.
- (2) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for that accounting period (“the chargeable profits”) to be reduced to an amount (“*the specified amount*”) specified in the application (which may be nil).
- (3) If the Commissioners grant the application—
- (a) the chargeable profits are treated as reduced to the specified amount, and
- (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in the chargeable profits,
for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).
- (4) The Commissioners may grant the application only if—
- (a) they are satisfied that the specified amount is not less than the relevant amount, and
- (b) they have not previously granted an application made by the UK resident company in respect of the relevant accounting period under section 751A or 751AB.
- (5) “*The relevant amount*” means the amount (if any) equal to so much of the chargeable profits as it is just and reasonable to regard as referable to—
- (a) the relevant transaction which triggered the end of the exempt period, or
- (b) any later relevant transaction occurring before the time the exempt period would have ended had paragraph 15F(2) of Schedule 25 not applied.
- (6) “*Relevant transaction*” has the meaning given by paragraph 15E of Schedule 25 (and it does not matter if the transaction occurs pursuant to an agreement entered into by the controlled foreign company before the relevant time (within the meaning of paragraph 15G of that Schedule)).
#### Losses from overseas property business.
##### 751B
- (1) An application by a company under section 751A—
- (a) must be made in such form as the HMRC Commissioners may determine,
- (b) must be accompanied by such documents (or copies of documents) in the company's possession or power as those Commissioners may reasonably require for the purpose of determining whether to grant the application, and
- (c) must contain such information as those Commissioners may reasonably require for that purpose.
- (2) An application by a company under section 751A—
- (a) may be made at any time on or before the filing date (within the meaning of Schedule 18 to the Finance Act 1998) for the relevant company tax return of the company, and
- (b) may be amended or withdrawn at any time before the application is determined by those Commissioners.
- (3) If an application by a company under section 751A is granted after the company has delivered its relevant company tax return, it has 30 days beginning with the day on which the application is granted in which to amend that return to give effect to section 751A.
- (4) The time limits otherwise applicable to an amendment of a company tax return do not prevent an amendment being made under subsection (3).
- (5) If the HMRC Commissioners refuse an application by a company under section 751A, the company may appeal to the Special Commissioners against the refusal.
- (6) Notice of an appeal must be given in writing to the HMRC Commissioners within 30 days after the application is refused.
- (7) On an appeal—
- (a) if the Special Commissioners are satisfied that the relevant amount is a different amount from the amount specified in the application, they must direct the HMRC Commissioners to grant the application as if the amount specified in it were that different amount,
- (b) if the Special Commissioners are satisfied that the relevant amount is the amount specified in the application, they must direct the HMRC Commissioners to grant the application, and
- (c) in any other case, the Special Commissioners must confirm the refusal.
- (8) For the purposes of subsection (7) “*the relevant amount*” means the amount (if any) equal to so much of the chargeable profits mentioned in subsection (4) of section 751A as can reasonably be regarded as representing the value mentioned in that subsection.
- (9) Part 5 of the Management Act (appeals against assessments to tax), apart from section 50, applies in relation to an appeal under this section as it applies in relation to an appeal against an assessment to tax.
- (10) In this section “*relevant company tax return*”, in relation to a company, means the return for the accounting period for which—
- (a) any sum is chargeable on the company under section 747(4)(a), or
- (b) any sum would be so chargeable but for section 751A,
in respect of the chargeable profits of the controlled foreign company for the accounting period mentioned in section 751A(1).
- (11) In this section “*the HMRC Commissioners*” means the Commissioners for Her Majesty's Revenue and Customs.
#### Losses from overseas property business.
##### 752A
- (1) This section has effect for the purpose of determining for the purposes of this Chapter who has a relevant interest in a controlled foreign company at any time; and references in this Chapter to relevant interests shall be construed accordingly.
- (2) A UK resident company which has a direct or indirect interest in a controlled foreign company has a relevant interest in the company by virtue of that interest unless subsection (3) below otherwise provides.
- (3) A UK resident company which has an indirect interest in a controlled foreign company does not have a relevant interest in the company by virtue of that interest if it has the interest by virtue of having a direct or indirect interest in another UK resident company.
- (4) A related person who has a direct or indirect interest in a controlled foreign company has a relevant interest in the company by virtue of that interest unless subsection (5) or (6) below otherwise provides.
- (5) A related person who has an indirect interest in a controlled foreign company does not have a relevant interest in the company by virtue of that interest if he has the interest by virtue of having a direct or indirect interest in—
- (a) a UK resident company; or
- (b) another related person.
- (6) A related person who has a direct or indirect interest in a controlled foreign company does not have a relevant interest in the company by virtue of that interest to the extent that a UK resident company—
- (a) has the whole or any part of the same interest indirectly, by virtue of having a direct or indirect interest in the related person, and
- (b) by virtue of that indirect interest in the controlled foreign company, has a relevant interest in the company by virtue of subsection (2) above.
- (7) A person who—
- (a) has a direct interest in a controlled foreign company, but
- (b) does not by virtue of subsections (2) to (6) above have a relevant interest in the company by virtue of that interest,
has a relevant interest in the company by virtue of that interest unless subsection (8) below otherwise provides.
- (8) A person does not by virtue of subsection (7) above have a relevant interest in a controlled foreign company by virtue of having a direct interest in the company to the extent that another person—
- (a) has the whole or any part of the same interest indirectly, and
- (b) by virtue of that indirect interest, has a relevant interest in the company by virtue of subsections (2) to (6) above.
- (9) No person has a relevant interest in a controlled foreign company otherwise than as provided by subsections (2) to (8) above.
- (10) In this section—
- “*related person*” means a person who—is not a UK resident company, butis connected or associated with a UK resident company which has by virtue of subsection (2) above a relevant interest in the controlled foreign company in question;
- “*UK resident company*” means a company resident in the United Kingdom.
##### 752B
- (1) For the purposes of section 752(3) above, where a person has a relevant interest in a controlled foreign company by virtue of indirectly holding issued ordinary shares of the company, the percentage of the issued ordinary shares of the company which the relevant interest represents is equal to—
$$P×S$where—P is the product of the appropriate fractions of that person and each of the share-linked companies through which he indirectly holds the shares in question, other than the lowest share-linked company; andS is the percentage of issued ordinary shares of the controlled foreign company which is held directly by the lowest share-linked company.$
- (2) In subsection (1) above and this subsection—
- “the appropriate fraction", in the case of a person who directly holds ordinary shares of a share-linked company, means that fraction of the issued ordinary shares of that company which his holding represents;
- “*the lowest share-linked company*”, in relation to a person who indirectly holds ordinary shares of a controlled foreign company, means the share-linked company which directly holds the shares in question;
- “*share-linked company*” means a company which is share-linked to the controlled foreign company in question.
- (3) Where a person has different indirect holdings of shares of the controlled foreign company (as in a case where different shares are held through different companies which are share-linked to the controlled foreign company)—
- (a) subsection (1) above shall apply separately in relation to the different holdings with any necessary modifications; and
- (b) for the purposes of section 752(3) above the percentage of the issued ordinary shares of the company which the relevant interest represents is the aggregate of the percentages resulting from those separate applications.
- (4) Where, for the purposes of subsection (3) of section 752, the percentage of the issued ordinary shares of the controlled foreign company which a person directly or indirectly holds varies during the relevant accounting period, he shall be treated for the purposes of that subsection as holding throughout that period that percentage of the issued ordinary shares of the company which is equal to the sum of the relevant percentages for each holding period in the relevant accounting period.
- (5) For the purposes of subsection (4) above—
- “holding period", in the case of any person, means a part of the relevant accounting period during which the percentage of the issued ordinary shares of the controlled foreign company which the person holds (whether directly or indirectly) remains the same;
- “the relevant percentage", in the case of a holding period, means the percentage equal to—$P×HA$where—P is the percentage of the issued ordinary shares of the controlled foreign company which the person in question directly or indirectly holds in the holding period, as calculated in accordance with subsections (1) to (3) above so far as applicable;H is the number of days in the holding period; andA is the number of days in the relevant accounting period.
##### 752C
- (1) In this section “*the relevant provisions*” means sections 752 to 752B and this section.
- (2) For the purposes of the relevant provisions—
- (a) a person has a direct interest in a company if (and only if) he has an interest in the company otherwise than by virtue of having an interest in another company;
- (b) a person has an indirect interest in a company if (and only if) he has an interest in the company by virtue of having an interest in another company;
- (c) a person indirectly holds shares of a controlled foreign company if (and only if) he directly holds ordinary shares of a company which is share-linked to the controlled foreign company.
- (3) For the purposes of the relevant provisions, a company is “share-linked" to a controlled foreign company if it has an interest in the controlled foreign company only by virtue of directly holding ordinary shares—
- (a) of the controlled foreign company, or
- (b) of the controlled foreign company or of one or more companies which are share-linked to the controlled foreign company by virtue of paragraph (a) above, or
- (c) of the controlled foreign company or of one or more companies which are share-linked to the controlled foreign company by virtue of paragraph (a) or (b) above,
and so on.
- (4) For the purposes of the relevant provisions, a company (“company A") has an intermediate interest in a controlled foreign company if (and only if)—
- (a) it has a direct or indirect interest in the controlled foreign company; and
- (b) one or more other persons have relevant interests in the controlled foreign company by virtue of having a direct or indirect interest in company A.
- (5) Any interest or shares held by a nominee or bare trustee shall be treated for the purposes of the relevant provisions as held by the person or persons for whom the nominee or bare trustee holds the interest or shares.
- (6) Where—
- (a) an interest in a controlled foreign company is held in a fiduciary or representative capacity, and
- (b) subsection (5) above does not apply, but
- (c) there are one or more identifiable beneficiaries,
the interest shall be treated for the purposes of the relevant provisions as held by that beneficiary or, as the case may be, as apportioned on a just and reasonable basis among those beneficiaries.
- (7) In the relevant provisions—
- “*bare trustee*” means a person acting as trustee—for a person absolutely entitled as against the trustee; orfor any person who would be so entitled but for being a minor or otherwise under a disability; orfor two or more persons who are or would, but for all or any of them being a minor or otherwise under a disability, be jointly so entitled;
- “ordinary shares", in the case of any company, means shares of a single class, however described, which is the only class of shares issued by the company;
- “*the relevant accounting period*” means the accounting period mentioned in section 752(1);
- “*share*” includes a reference to a fraction of a share.
##### 754A
- (1) This section applies where—
- (a) a company resident in the United Kingdom (“the UK company") has an interest in a controlled foreign company at any time during an accounting period of the controlled foreign company;
- (b) the UK company delivers a company tax return; and
- (c) at the time when the UK company delivers the company tax return, it is not established whether or not the controlled foreign company has pursued an acceptable distribution policy in relation to the accounting period.
- (2) If the UK company is of the opinion that the controlled foreign company is likely to pursue an acceptable distribution policy in relation to the accounting period, the UK company shall make the company tax return on the basis that the accounting period of the controlled foreign company is one in relation to which the controlled foreign company pursues such a policy.
- (3) If the UK company is not of the opinion that the controlled foreign company is likely to pursue an acceptable distribution policy in relation to the accounting period, the UK company shall make the company tax return on the basis that the accounting period of the controlled foreign company is one in relation to which the controlled foreign company does not pursue such a policy.
- (4) In any case where—
- (a) the UK company acts in pursuance of subsection (2) above, but
- (b) it becomes established that the controlled foreign company has not pursued an acceptable distribution policy in relation to the accounting period,
the UK company shall amend the company tax return on the basis that the accounting period is not one in relation to which the controlled foreign company pursues an acceptable distribution policy.
- (5) In any case where—
- (a) the UK company acts in pursuance of subsection (3) above, but
- (b) it becomes established that the controlled foreign company has pursued an acceptable distribution policy in relation to the accounting period,
the UK company shall amend the company tax return on the basis that the accounting period is one in relation to which the controlled foreign company pursues an acceptable distribution policy.
- (6) Any amendment required to be made to the company tax return by virtue of subsection (4) or (5) above (“*an ADP amendment*”) shall be made by the UK company before the expiration of the period of 30 days next following the end of the period allowed for establishing an ADP in relation to the accounting period of the controlled foreign company.
- (7) Subject to subsection (8) below, the making of any ADP amendment is subject to, and must be in accordance with, the other provisions of the Corporation Tax Acts as they apply for the purposes of this Chapter.
- (8) The time limits otherwise applicable to amendment of a company tax return do not apply to an ADP amendment.
- (9) A company which fails to make an ADP amendment required by subsection (4) above within the time allowed for doing so shall be liable to a tax-related penalty under paragraph 20 of Schedule 18 to the Finance Act 1998 (penalty, not exceeding amount of tax understated, for incorrect or uncorrected return).
- (10) For the purposes of this section, if it has not previously been established whether or not the controlled foreign company has pursued an acceptable distribution policy in relation to the accounting period, it shall be taken to be established immediately after the end of the period allowed for establishing an ADP in relation to that accounting period.
- (11) In this section, “*the period allowed for establishing an ADP*” means, in relation to an accounting period of a controlled foreign company, the period ending with the expiration of—
- (a) subject to paragraph (b) below, the period of eighteen months next following the end of the accounting period; or
- (b) if the Board have, in the case of the accounting period, allowed further time under paragraph 2(1)(b) of Schedule 25, the further time so allowed.
- (12) In this section any reference to a controlled foreign company pursuing an acceptable distribution policy in relation to an accounting period shall be construed in accordance with Part I of Schedule 25.
##### 754B
- (1) This section has effect where a determination requiring the Board’s sanction is made for any of the following purposes, that is to say—
- (a) the giving of a closure notice; or
- (b) the making of a discovery assessment.
- (2) If the closure notice or, as the case may be, notice of the discovery assessment is given to any person without—
- (a) the determination, so far as it is taken into account in the closure notice or the discovery assessment, having been approved by the Board, or
- (b) notification of the Board’s approval having been served on that person at or before the time of the giving of the notice,
the closure notice or, as the case may be, the discovery assessment shall be deemed to have been given or made (and in the case of an assessment notified) in the terms (if any) in which it would have been given or made had that determination not been taken into account.
- (3) A notification under subsection (2)(b) above—
- (a) must be in writing;
- (b) must state that the Board have given their approval on the basis that—
- (i) an amount of chargeable profits, and
- (ii) an amount of creditable tax (which may be nil),
for the accounting period of the controlled foreign company in question fall to be apportioned under section 747(3) to the person in question;
- (c) must state the amounts mentioned in sub-paragraphs (i) and (ii) of paragraph (b) above; and
- (d) subject to paragraphs (a) to (c) above, may be in such form as the Board may determine.
- (4) For the purposes of this section, the Board’s approval of a determination requiring their sanction—
- (a) must be given specifically in relation to the case in question and must apply to the amount determined; but
- (b) subject to that, may be given by the Board (either before or after the making of the determination) in any such form or manner as they may determine.
- (5) In this section references to a determination requiring the Board’s sanction are references (subject to subsection (6) below) to any determination of the amount of chargeable profits or creditable tax for an accounting period of a controlled foreign company which falls to be apportioned to a particular person under section 747(3).
- (6) For the purposes of this section, a determination shall be taken, in relation to a closure notice or a discovery assessment, not to be a determination requiring the Board’s sanction if—
- (a) an agreement about the relevant amounts has been made between an officer of the Board and the person in whose case it is made;
- (b) that agreement is in force at the time of the giving of the closure notice or, as the case may be, notice of the assessment; and
- (c) the matters to which the agreement relates include the amount determined.
- (7) In paragraph (a) of subsection (6) above, “*the relevant amounts*” means—
- (a) the amount of chargeable profits, and
- (b) the amount of creditable tax (which may be nil),
for the accounting period of the controlled foreign company in question which fall to be apportioned under section 747(3) to the person mentioned in that paragraph.
- (8) For the purposes of subsection (6) above an agreement made between an officer of the Board and any person (“the taxpayer") in relation to any matter shall be taken to be in force at any time if, and only if—
- (a) the agreement is one which has been made or confirmed in writing;
- (b) that time is after the end of the period of thirty days beginning—
- (i) in the case of an agreement made in writing, with the day of the making of the agreement, and
- (ii) in any other case, with the day of the agreement’s confirmation in writing; and
- (c) the taxpayer has not, before the end of that period of thirty days, served a notice on an officer of the Board stating that he is repudiating or resiling from the agreement.
- (9) The references in subsection (8) above to the confirmation in writing of an agreement are references to the service on the taxpayer by an officer of the Board of a notice—
- (a) stating that the agreement has been made; and
- (b) setting out the terms of the agreement.
- (10) The matters that may be questioned on so much of any appeal by virtue of any provision of the Management Act or Schedule 18 to the Finance Act 1998 (company tax returns, assessments and related matters) as relates to a determination the making of which has been approved by the Board for the purposes of this section shall not include the Board’s approval, except to the extent that the grounds for questioning the approval are the same as the grounds for questioning the determination itself.
- (11) In this section—
- “*closure notice*” means a notice under paragraph 32 of Schedule 18 to the Finance Act 1998 (completion of enquiry and statement of conclusions);
- “*discovery assessment*” means a discovery assessment or discovery determination under paragraph 41 of that Schedule (including an assessment by virtue of paragraph 52 of that Schedule).
##### 755A
- (1) This section applies in any case where—
- (a) an amount (“the apportioned profit") of a controlled foreign company’s chargeable profits for an accounting period falls to be apportioned under section 747(3) to a company resident in the United Kingdom (“the UK company");
- (b) the UK company carries on life assurance business in that one of its accounting periods (“the relevant accounting period") in which ends the accounting period of the controlled foreign company; and
- (c) the property or rights which represent the UK company’s relevant interest in the controlled foreign company constitute to any extent assets of the UK company’s long-term insurance fund.
- (2) Subsections (3) and (4) below apply if, in the case of the relevant accounting period, the UK company is not charged to tax under Case I of Schedule D in respect of its profits from life assurance business.
- (3) Where this subsection applies, the “*appropriate rate*” for the purposes of section 747(4)(a) and paragraph 1 of Schedule 26 in relation to the policy holders’ part of any BLAGAB apportioned profit shall be—
- (a) if a single rate of tax under section 88(1) of the Finance Act 1989 (lower corporation tax rate on certain insurance company profits) is applicable in relation to the relevant accounting period, that rate; or
- (b) if more than one such rate of tax is applicable in relation to the relevant accounting period, the average of those rates over the whole of that period.
- (4) Where this subsection applies, the “*appropriate rate*” for the purposes of section 747(4)(a) and paragraph 1 of Schedule 26 shall be nil in relation to so much of the apportioned profit as is referable to—
- (a) pension business,
- (b) life reinsurance business, or
- (c) overseas life assurance business,
carried on by the UK company.
- (4A) In any case where—
- (a) paragraph 4 of Schedule 26 to this Act applies to a dividend received by the UK company, and
- (b) but for this subsection, subsection (4) of section 804B of this Act would apply to that dividend,
the amount of credit for foreign tax in respect of that dividend shall be treated, for the purposes of that section, as wholly attributable to basic life assurance and general annuity business.
- (5) If, in the case of the relevant accounting period, the UK company is charged to tax under Case I of Schedule D in respect of its profits from life assurance business, the “*appropriate rate*” for the purposes of—
- (a) section 747(4)(a), and
- (b) paragraph 1 of Schedule 26,
shall be nil in relation to so much of the apportioned profit as is referable to the UK company’s relevant interest so far as represented by assets of its long-term insurance fund.
- (6) If, in the case of the relevant accounting period,—
- (a) the UK company is not charged to tax under Case I of Schedule D in respect of its profits from life assurance business,
- (b) any creditable tax of the controlled foreign company falls to be apportioned to the UK company, and
- (c) the apportioned profit is to any extent referable to a category of business specified in paragraphs (a) to (c) of subsection (4) above,
so much of the creditable tax so apportioned as is attributable to the apportioned profit so far as so referable shall be left out of account for the purposes of this Chapter, other than section 747(3) and this section, and shall be treated as extinguished.
- (7) If, in the case of the relevant accounting period,—
- (a) the UK company is charged to tax under Case I of Schedule D in respect of its profits from life assurance business, and
- (b) any creditable tax of the controlled foreign company falls to be apportioned to the UK company,
so much of the creditable tax so apportioned as is attributable to so much of the apportioned profit as is referable to the UK company’s relevant interest so far as represented by assets of the UK company’s long-term insurance fund shall be left out of account for the purposes of this Chapter, other than section 747(3) and this section, and shall be treated as extinguished.
- (8) Any set off under paragraph 1 . . . of Schedule 26 against the UK company’s liability to tax under section 747(4)(a) in respect of the apportioned profit shall be made against only so much of that liability as is attributable to the eligible part of the apportioned profit.
- (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (10) For the purposes of this section, the “eligible part" of the apportioned profit is any BLAGAB apportioned profit, other than the policy holders’ part.
- (11) For the purposes of this section the policy holders' part of any BLAGAB apportioned profit is—
- (a) where subsection (11A) below applies, the whole of that profit, and
- (b) in any other case, the relevant fraction (within the meaning of subsection (11B) below) of that profit.
- (11A) This subsection applies if—
- (a) the UK company’s life assurance business is mutual business,
- (b) the policy holders' share of the UK company’s relevant profits for the relevant accounting period is equal to all those profits, or
- (c) the policy holders' share of the UK company’s relevant profits for the relevant accounting period is more than its BLAGAB profits for that period.
- (11B) The relevant fraction for the purposes of subsection (11)(b) above is the fraction arrived at by dividing—
- (a) the policy holders' share of the UK company’s relevant profits for the relevant accounting period, by
- (b) the UK company’s BLAGAB profits for that period.
- (11C) In subsections (11A) and (11B) above—
- (a) references to the policy holders' share of the UK company’s share of the relevant profits are to be construed in accordance with sections 88(3) and 89 of the Finance Act 1989, and
- (b) references to the UK company’s BLAGAB profits are to be construed in accordance with section 89(1B) of that Act.
- (12) In this section—
- “*BLAGAB apportioned profit*” means so much of the apportioned profit as is referable to basic life assurance and general annuity business carried on by the UK company;
- “*long-term insurance fund*” has the meaning given by section 431(2).
- (13) For the purposes of this section, the part of the apportioned profit which is referable to—
- (a) pension business,
- (b) life reinsurance business,
- (c) overseas life assurance business, or
- (d) basic life assurance and general annuity business,
carried on by the UK company is the part which would have been so referable under section 432A had the apportioned profit been a dividend paid to the UK company at the end of the accounting period mentioned in subsection (1)(a) above in respect of the property or rights which represent the UK company’s relevant interest in the controlled foreign company.
- (14) For the purposes of this section, any attribution of creditable tax to a particular part of the apportioned profit shall be made in the proportion which that part of the apportioned profit bears to the whole of the apportioned profit.
##### 755B
- (1) This section applies where—
- (a) a controlled foreign company carries on general insurance business in an accounting period;
- (b) an amount of the company’s chargeable profits, and an amount of its creditable tax (if any), for that accounting period falls to be apportioned under section 747(3) to a company resident in the United Kingdom (“the UK company");
- (c) the UK company delivers a company tax return for that one of its accounting periods in which the controlled foreign company’s accounting period ends; and
- (d) in making or amending the return, the UK company has regard to accounts of the controlled foreign company drawn up using a method falling within subsection (2) below.
- (2) The methods which fall within this subsection are—
- (a) the method described in paragraph 52 of Schedule 9A to the Companies Act 1985 (which provides for a technical provision to be made in the accounts which is later replaced by a provision for estimated claims outstanding); and
- (b) any method which would have fallen within paragraph (a) above, had final replacement of the technical provision, as described in sub-paragraph (4) of paragraph 52 of that Schedule, taken place, and been required to take place, no later than the end of the year referred to in that sub-paragraph as the third year following the underwriting year.
- (3) Where this section applies—
- (a) the UK company may make any amendments of its company tax return arising from the replacement of the technical provision in the controlled foreign company’s accounts at any time within twelve months from the date on which the provision was replaced; and
- (b) notice of intention to enquire into the return under paragraph 24 of Schedule 18 to the Finance Act 1998 may be given at any time up to two years from that date (or at any later time in accordance with the general rule in sub-paragraph (3) of that paragraph).
- (4) If, in a case where this section applies, the accounts of the controlled foreign company are drawn up using a method falling within paragraph (b) of subsection (2) above—
- (a) the controlled foreign company, and
- (b) any person with an interest in the controlled foreign company,
shall be treated for the purposes of this section as if final replacement of the technical provision, as described in sub-paragraph (4) of paragraph 52 of Schedule 9A to the Companies Act 1985, had taken place at, and been required to take place no later than, the end of the year referred to in that sub-paragraph as the third year following the underwriting year.
- (5) Regulations under section 755C may make provision with respect to the determination of the amount of the provision by which the technical provision is to be treated as replaced in cases falling within subsection (4) above.
- (6) In this section “general insurance business” means business which consists of the effecting or carrying out of contracts which fall within Part I of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.
##### 755C
- (1) The Treasury may by regulations provide for the provisions of this Chapter to have effect with prescribed modifications in any case where a non-resident company—
- (a) carries on general insurance business; and
- (b) draws up accounts relating to that business using a method falling within subsection (2) of section 755B.
- (2) Regulations under subsection (1) above may—
- (a) make different provision for different cases;
- (b) make provision having effect in relation to accounting periods of non-resident companies ending not more than one year before the date on which the regulations are made; and
- (c) contain such supplementary, incidental, consequential and transitional provision as the Treasury may think fit.
- (3) In this section—
- “*general insurance business*” has the same meaning as in section 755B;
- “*non-resident company*” means a company resident outside the United Kingdom;
- “*prescribed*” means prescribed in regulations under this section.
##### 755D
- (1) For the purposes of this Chapter “control", in relation to a company, means the power of a person to secure—
- (a) by means of the holding of shares or the possession of voting power in or in relation to the company or any other company, or
- (b) by virtue of any powers conferred by the articles of association or other document regulating the company or any other company,
that the affairs of the company are conducted in accordance with his wishes.
- (2) Where two or more persons, taken together, have the power mentioned in subsection (1) above, they shall be taken for the purposes of this Chapter to control the company.
- (3) The 40 per cent test in this subsection is satisfied in the case of one of two persons who, taken together, control a company if that one of them has interests, rights and powers representing at least 40 per cent of the holdings, rights and powers in respect of which the pair of them fall to be taken as controlling the company.
- (4) The 40 per cent test in this subsection is satisfied in the case of one of two persons who, taken together, control a company if that one of them has interests, rights and powers representing—
- (a) at least 40 per cent, but
- (b) not more than 55 per cent,
of the holdings, rights and powers in respect of which the pair of them fall to be taken as controlling the company.
- (5) For the purposes of this Chapter any question—
- (a) whether a company is controlled by a person, or by two or more persons taken together, or
- (b) whether, in the case of any company, the applicable 40 per cent test is satisfied in the case of each of two persons who, taken together, control the company,
shall be determined after attributing to each of the persons all the rights and powers mentioned in subsection (6) below that are not already attributed to that person for the purposes of subsections (1) to (4) above.
- (6) The rights and powers referred to in subsection (5) above are—
- (a) rights and powers which the person is entitled to acquire at a future date or which he will, at a future date, become entitled to acquire;
- (b) rights and powers of other persons, to the extent that they are rights or powers falling within subsection (7) below;
- (c) if the person is resident in the United Kingdom, rights and powers of any person who is resident in the United Kingdom and connected with the person; and
- (d) if the person is resident in the United Kingdom, rights and powers which for the purposes of subsection (5) above would be attributed to a person who is resident in the United Kingdom and connected with the person (a “*UK connected person*”) if the UK connected person were himself the person.
- (7) Rights and powers fall within this subsection to the extent that they—
- (a) are required, or may be required, to be exercised in any one or more of the following ways, that is to say—
- (i) on behalf of the person;
- (ii) under the direction of the person; or
- (iii) for the benefit of the person; and
- (b) are not confined, in a case where a loan has been made by one person to another, to rights and powers conferred in relation to property of the borrower by the terms of any security relating to the loan.
- (8) In subsections (6)(b) to (d) and (7) above, the references to a person’s rights and powers include references to any rights or powers which he either—
- (a) is entitled to acquire at a future date, or
- (b) will, at a future date, become entitled to acquire.
- (9) In paragraph (d) of subsection (6) above, the reference to rights and powers which would be attributed to a UK connected person if he were the person includes a reference to rights and powers which, by applying that paragraph wherever one person resident in the United Kingdom is connected with another person, would be so attributed to him through a number of persons each of whom is resident in the United Kingdom and connected with at least one of the others.
- (10) In determining for the purposes of this section whether one person is connected with another in relation to a company, subsection (7) of section 839 shall be disregarded.
- (11) References in this section—
- (a) to rights and powers of a person, or
- (b) to rights and powers which a person is or will become entitled to acquire,
include references to rights or powers which are exercisable by that person, or (when acquired by that person) will be exercisable, only jointly with one or more other persons.
### Meaning of offshore fund
#### Losses of ring fence trade: set off against profits of an earlier accounting period
##### 756A
- (1) In this Chapter references to an offshore fund are to a collective investment scheme constituted by—
- (a) a company that is resident outside the United Kingdom, or
- (b) a unit trust scheme the trustees of which are not resident in the United Kingdom, or
- (c) arrangements not falling within paragraph (a) or (b) taking effect by virtue of the law of a territory outside the United Kingdom and which under that law create rights in the nature of co-ownership (without restricting that expression to its meaning in the law of any part of the United Kingdom).
- (2) Subsection (1) has effect subject to—
- section 756B (treatment of umbrella funds), and
- section 756C (treatment of funds comprising more than one class of interest).
- (3) In this section “*collective investment scheme*” has the meaning given by section 235 of the Financial Services and Markets Act 2000.
### Treatment of umbrella funds
##### 756B
- (1) In this Chapter, an “*umbrella fund*” means an offshore fund—
- (a) which provides arrangements for separate pooling of the contributions of the participants and the profits or income out of which payments are made to them; and
- (b) under which the participants are entitled to exchange rights in one pool for rights in another;
and references in this Chapter to a part of an umbrella fund are to such of the arrangements as relate to a separate pool.
- (2) For the purposes of this Chapter (except subsection (1))—
- (a) each part of an umbrella fund shall be regarded as a separate offshore fund, and
- (b) the umbrella fund as a whole shall not be regarded as an offshore fund.
- (3) In this Chapter, in relation to a part of an umbrella fund—
- (a) a reference to the assets of an offshore fund is to such of the assets of the umbrella fund as under the arrangements form part of the separate pool to which that part of the umbrella fund relates;
- (b) a reference to the income of an offshore fund is to the income arising from those assets;
- (c) a reference to a person having an interest in an offshore fund is to a person for the time being having an interest in that separate pool; and
- (d) a reference to an offshore fund being a non-qualifying fund shall be read in relation to times before the coming into force of this section as a reference to the umbrella fund being a non-qualifying fund.
### Treatment of funds comprising more than one class of interest
##### 756C
- (1) For the purposes of this Chapter where there is more than one class of interest in an offshore fund (the “*main fund*”)—
- (a) each class of interest shall be regarded as a separate offshore fund, and
- (b) the main fund shall not be regarded as an offshore fund.
- (2) In this section, references to a class of interest in an offshore fund do not include—
- (a) a part of an umbrella fund which is regarded as an offshore fund by virtue of section 756B, or
- (b) a class of interest in an offshore fund which by virtue of section 759(5), (6) or (8) is not a material interest in the fund.
- (3) In this Chapter, in relation to a class of interest in an offshore fund—
- (a) a reference to the assets of an offshore fund is to the assets of the main fund;
- (b) a reference to the income of an offshore fund is to such of the income of the main fund as is attributable to interests of that class under the arrangements constituting the main fund;
- (c) a reference to a person having an interest in an offshore fund is to a person for the time being having an interest of that class; and
- (d) a reference to an offshore fund being a non-qualifying fund shall be read in relation to times before the coming into force of this section as a reference to the main fund being a non-qualifying fund.
#### Transactions in deposits with and without certificates or in debts.
##### 762ZA
- (1) Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) applies in relation to an offshore income gain arising to a person resident or domiciled outside the United Kingdom as if the offshore income gain were income becoming payable to the person.
- (2) Income treated as arising under that Chapter by virtue of subsection (1) is regarded as “*foreign*” for the purposes of section 726, 730 or 735 of that Act.
- (3) Subsection (1) does not apply in relation to an offshore income gain if (and to the extent that) it is treated, by virtue of section 762(1), as arising to a person resident or ordinarily resident in the United Kingdom.
- (4) The following provisions apply if section 762(2) applies in relation to an offshore income gain (“the relevant offshore income gain”).
- (5) If—
- (a) by virtue of section 762(3) an offshore income gain is treated as arising in a tax year to a person resident or ordinarily resident in the United Kingdom, and
- (b) it is so treated by reason of the relevant offshore income gain (or part of it),
for that and subsequent tax years subsection (1) does not apply in relation to the relevant offshore income gain (or that part).
- (6) If, by virtue of subsection (1) as it applies in relation to the relevant offshore income gain, income is treated under Chapter 2 of Part 13 of ITA 2007 as arising in a tax year, reduce (with effect from the following tax year) the OIG amount in question by the amount of the income.
##### 762ZB
- (1) This section applies to income treated as arising under section 761(1) to an individual in a tax year if—
- (a) section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for that year, and
- (b) the individual is not domiciled in the United Kingdom in that year.
- (2) Treat the income as relevant foreign income of the individual.
- (3) For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis)—
- (a) treat any consideration obtained on the disposal of the asset as deriving from the income, and
- (b) unless the consideration so obtained is of an amount equal to the market value of the asset, treat the asset as deriving from the income.
- (4) In subsection (3)—
- (a) “*the asset*” means the asset the disposal of which causes the income to be treated as arising, and
- (b) “*the disposal*” means the disposal mentioned in paragraph (a).
##### 762A
- (1) This section applies where—
- (a) classes of interest in an offshore fund (the “*main fund*”) are treated as separate offshore funds under section 756C; and
- (b) as the result of—
- (i) a reorganisation within the meaning of section 126 of the 1992 Act, or
- (ii) a conversion of securities within the meaning of section 132 of that Act,
a person exchanges an interest of one class (A) in the main fund for an interest of another class (B) in that fund.
- (2) Where—
- (a) the interest of class A—
- (i) is at the time of the exchange an interest in a non-qualifying offshore fund, or
- (ii) has been an interest in such a fund at any material time, and
- (b) the interest of class B is at the time of the exchange an interest in a fund which is certified by the Board as a distributing offshore fund,
section 127 of the 1992 Act (equation of original shares and new holding) shall not prevent the exchange constituting a disposal for the purposes of this Chapter.
- (3) Any such disposal shall be treated as a disposal for a consideration equal to the market value of the rights at the time of the exchange.
- (4) In this section—
- “*class of interest*” has the same meaning as in section 756C(1);
- “*material time*” has the same meaning as in section 757.
##### 765A
- (1) Section 765(1) shall not apply to a transaction which is a movement of capital to which Article 1 of the Directive of the Council of the European Communities dated 24th June 1988 No. [88/361/EEC](https://www.legislation.gov.uk/european/directive/1988/0361) applies.
- (2) Where if that Article did not apply to it a transaction would be unlawful under section 765(1), the body corporate in question (that is to say, the body corporate resident in the United Kingdom) shall—
- (a) give to the Board within six months of the carrying out of the transaction such information relating to the transaction, or to persons connected with the transaction, as regulations made by the Board may require, and
- (b) where notice is given to the body corporate by the Board, give to the Board within such period as is prescribed by regulations made by the Board (or such longer period as the Board may in the case allow) such further particulars relating to the transaction, to related transactions, or to persons connected with the transaction or related transactions, as the Board may require.
#### Dealings in commodity futures etc: withdrawal of loss relief.
##### 767A
- (1) Where it appears to the Board that—
- (a) there has been a change in the ownership of a company (“*the tax-payer company*”),
- (b) any corporation tax assessed on the tax-payer company for an accounting period beginning before the change remains unpaid at any time after the relevant date, and
- (c) any of the three conditions mentioned below is fulfilled,
any person mentioned in subsection (2) below may be assessed by the Board and charged (in the name of the tax-payer company) to an amount of corporation tax in accordance with this section.
- (2) The persons are—
- (a) any person who at any time during the relevant period before the change in the ownership of the tax-payer company had control of it;
- (b) any company of which the person mentioned in paragraph (a) above has at any time had control within the period of three years before that change.
- (3) In subsection (2) above, “*the relevant period*” means—
- (a) the period of three years before the change in the ownership of the tax-payer company; or
- (b) if during the period of three years before that change (“*the later change*”) there was a change in the ownership of the tax-payer company (“*the earlier change*”), the period elapsing between the earlier change and the later change.
- (4) The first condition is that—
- (a) at any time during the period of three years before the change in the ownership of the tax-payer company the activities of a trade or business of that company cease or the scale of those activities become small or negligible; and
- (b) there is no significant revival of those activities before that change occurs.
- (5) The second condition is that at any time after the change in the ownership of the tax-payer company, but under arrangements made before that change, the activities of a trade or business of that company cease or the scale of those activities become small or negligible.
- (6) The third condition is that—
- (a) at any time during the period of six years beginning three years before the change in the ownership of the tax-payer company there is a major change in the nature or conduct of a trade or business of that company;
- (b) there is a transfer or there are transfers of assets of the tax-payer company to a person mentioned in subsection (7) below or to any person under arrangements which enable any of those assets or any assets representing those assets to be transferred to a person mentioned in subsection (7) below;
- (c) that transfer occurs or those transfers occur during the period of three years before the change in the ownership of the tax-payer company or after that change but under arrangements made before that change; and
- (d) the major change mentioned in paragraph (a) above is attributable to that transfer or those transfers.
- (7) The persons are—
- (a) any person mentioned in subsection (2)(a) above; and
- (b) any person connected with him.
- (8) The amount of tax charged in an assessment made under this section must not exceed the amount of the tax which, at the time of that assessment, remains unpaid by the tax-payer company.
- (9) For the purposes of this section the relevant date is the date six months from the date on which the corporation tax is assessed as mentioned in subsection (1)(b) above.
- (10) Any assessment made under this section shall not be out of time if made within three years from the date on which the liability of the tax-payer company to corporation tax for the accounting period mentioned in subsection (1)(b) above is finally determined.
##### 767AA
- (1) Where it appears to the Board that—
- (a) there has been a change in the ownership of a company (“the transferred company"),
- (b) any corporation tax relating to an accounting period ending on or after the change has been assessed on the transferred company or an associated company,
- (c) that tax remains unpaid at any time more than six months after it was assessed, and
- (d) the condition set out in subsection (2) below is fulfilled,
any person mentioned in subsection (4) below may be assessed by the Board and charged to an amount of corporation tax not exceeding the amount remaining unpaid.
- (2) The condition is that it would be reasonable (apart from this section) to infer, from either or both of—
- (a) the terms of any transactions entered into in connection with the change, and
- (b) the other circumstances of the change and of any such transactions,
that at least one of those transactions was entered into by one or more of its parties on the assumption, as regards a potential tax liability, that that liability would be unlikely to be met, or met in full, if it were to arise.
- (3) In subsection (2) above the reference to a potential tax liability is a reference to a liability to pay corporation tax which—
- (a) in circumstances which were reasonably foreseeable at the time of the change in ownership, or
- (b) in circumstances the occurrence of which is something of which there was at that time a reasonably foreseeable risk,
would or might arise from an assessment made, after the change in ownership, on the transferred company or an associated company (whether or not a particular associated company).
- (4) The persons mentioned in subsection (1) above are—
- (a) any person who at any time during the relevant period had control of the transferred company;
- (b) any company of which the person mentioned in paragraph (a) above has at any time had control within the period of three years before the change in the ownership of the transferred company.
- (5) In subsection (4) above, “*the relevant period*” means—
- (a) the period of three years before the change in the ownership of the transferred company; or
- (b) if during the period of three years before that change (“the later change") there was a change in the ownership of the transferred company (“the earlier change"), the period elapsing between the earlier change and the later change.
- (6) For the purposes of this section a transaction is entered into in connection with a change in the ownership of a company if—
- (a) it is the transaction, or one of the transactions, by which that change is effected; or
- (b) it is entered into as part of a series of transactions, or scheme, of which transactions effecting the change in ownership have formed or will form a part.
- (7) For the purposes of this section—
- (a) references to a scheme are references to any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions;
- (b) it shall be immaterial in determining whether any transactions have formed or will form part of a series of transactions or scheme that the parties to any of the transactions are different from the parties to another of the transactions; and
- (c) the cases in which any two or more transactions are to be taken as forming part of a series of transactions or scheme shall include any case in which it would be reasonable to assume that one or more of them—
- (i) would not have been entered into independently of the other or others; or
- (ii) if entered into independently of the other or others, would not have taken the same form or been on the same terms.
- (8) In this section references, in relation to the transferred company and an assessment to tax, to an associated company are references to any compnay (whenever formed) which, at the time of the assessment or at an earlier time after the change in ownership—
- (a) has control of the transferred company;
- (b) is a company of which the transferred company has control; or
- (c) is a company under the control of the same person or persons as the transferred company.
- (9) A person assessed and charged to tax under this section shall be assessed and charged in the name of the company by whom the tax to which the assessment relates remains unpaid.
- (10) Any assessment made under this section shall not be out of time if made within three years from the date of the final determination of the liability of the company by whom the tax remains unpaid to corporation tax for the accounting period for which that tax was assessed.
##### 767B
- (1) In relation to corporation tax assessed under section 767A—
- (a) section 86 of the Management Act (interest on overdue tax), in so far as it has effect in relation to accounting periods ending on or before 30th September 1993, and
- (b) section 87A of that Act (corresponding provision for corporation tax due for accounting periods ending after that date),
shall have effect as if the references in section 86 to the reckonable date and in section 87A to the date when the tax becomes due and payable were, respectively, references to the date which is the reckonable date in relation to the tax-payer company and the date when the tax became due and payable by the tax-payer company.
- (1A) In relation to corporation tax assessed under section 767AA, section 87A of the Management Act shall have effect as if the references to the date when the tax becomes due and payable were references to the date when the tax became due and payable by the transferred company or the associated company (as the case may be).
- (2) A payment in pursuance of an assessment under section 767A or 767AA shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes; but any person making such a payment shall be entitled to recover an amount equal to the payment from the tax-payer company or the transferred company or associated company (as the case may be).
- (3) In subsection (2) above the reference to a payment in pursuance of an assessment includes a reference to a payment of interest under section 86 or 87A of the Management Act (as they have effect by virtue of subsection (1) above).
- (4) For the purposes of sections 767A, 767AA and 767C, “*control*”, in relation to a company, shall be construed in accordance with section 416 as modified by subsections (5) and (6) below.
- (5) In subsection (2)(a) for “the greater part of” there shall be substituted “50 per cent. of”.
- (6) For subsection (3) there shall be substituted—
- (”) Where two or more persons together satisfy any of the conditions in subsection (2) above and do so by reason of having acted together to put themselves in a position where they will in fact satisfy the condition in question, each of those persons shall be treated as having control of the company.”
- (7) In section 767A(6) “*a major change in the nature or conduct of a trade or business*” includes any change mentioned in any of paragraphs (a) to (d) of section 245(4); and also includes a change falling within any of those paragraphs which is achieved gradually as the result of a series of transfers.
- (8) In section 767A(6) “*transfer*”, in relation to an asset, includes any disposal, letting or hiring of it, and any grant or transfer of any right, interest or licence in or over it, or the giving of any business facilities with respect to it.
- (9) Section 839 shall apply for the purposes of section 767A(7).
- (10) Subsection (9) of section 768 shall apply for the purposes of sections 767A and 767AA as it applies for the purposes of section 768.
##### 767C
- (1) This section applies where it appears to the Board that—
- (a) there has been a change in the ownership of a company (“the subject company"); and
- (b) in connection with that change a person (“the seller") may be or become liable to be assessed and charged to corporation tax under section 767A or 767AA.
- (2) The Board may by notice require any person to supply to them—
- (a) any document in the person’s possession or power which appears to the Board to be relevant for determining any one or more of the matters referred to in subsection (3) below; or
- (b) any particulars which appear to them to be so relevant.
- (3) Those matters are—
- (a) whether the seller is or may become liable as mentioned in subsection (1) above and the extent of the liability or potential liability; and
- (b) whether the subject company or an associated company is or may become liable to be assessed to any tax in respect of which the seller is or could become liable as mentioned in subsection (1) above, and the extent of the liability or potential liability of the subject company or associated company.
- (4) Without prejudice to the following provisions of this section, the references in subsection (2) above to documents and particulars are references to the documents and particulars specified or described in the notice.
- (5) A notice under subsection (2) above must specify the period, which must not be less than 30 days, within which the notice must be complied with.
- (6) Any person to whom any documents are supplied under this section may take copies of them or of any extracts from them.
- (7) A notice under subsection (2) above shall not oblige a person to supply any documents or particulars relating to the conduct of any pending appeal relating to tax.
- (8) In relation to any notice under subsection (2) above—
- (a) subsection (4) of section 20B of the Taxes Management Act 1970 (rules relating to copies of documents) shall apply as it applies in relation to a notice under section 20(1) of that Act; and
- (b) subsections (8) to (14) of section 20B of that Act (rules about obtaining documents etc. from professional advisers) shall apply as they apply in relation to a notice under section 20(3) of that Act but as if any reference to an inspector were a reference to the Board;
and subsection (8C) of section 20 of that Act (exclusion of personal records and journalistic material) shall apply for the purposes of this section as it applies for the purposes of that section.
- (9) In this section references, in relation to the subject company and an assessment to tax, to an associated company are references to any company which, at the time of the assessment or at an earlier time after the change in ownership—
- (a) has control of the subject company;
- (b) is a company of which the subject company has control; or
- (c) is a company under the control of the same person or persons as the subject company.
- (10) In this section “*document*” means anything in which information of any description is recorded.
##### 768A
- (1) In any case where—
- (a) within any period of three years there is both a change in the ownership of a company and (either earlier or later in that period, or at the same time) a major change in the nature or conduct of a trade carried on by the company, or
- (b) at any time after the scale of the activities in a trade carried on by a company has become small or negligible, and before any considerable revival of the trade, there is a change in the ownership of the company,
no relief shall be given under section 393A(1) by setting a loss incurred by the company in an accounting period ending after the change in ownership against any profits of an accounting period beginning before the change in ownership.
- (2) Subsections (2) to (4), (8) and (9) of section 768 shall apply for the purposes of this section as they apply for the purposes of that section.
- (3) This section applies in relation to changes in ownership occurring on or after 14th June 1991.
##### 768B
- (1) This section applies where there is a change in the ownership of a company with investment business and—
- (a) after the change there is a significant increase in the amount of the company’s capital; or
- (b) within the period of six years beginning three years before the change there is a major change in the nature or conduct of the business carried on by the company; or
- (c) the change in the ownership occurs at any time after the scale of the activities in the business carried on by the company has become small or negligible and before any considerable revival of the business.
- (2) For the purposes of subsection (1)(a) above, whether there is a significant increase in the amount of a company’s capital after a change in the ownership of the company shall be determined in accordance with the provisions of Part I of Schedule 28A.
- (3) In paragraph (b) of subsection (1) above “*major change in the nature or conduct of a business*” includes a major change in the nature of the investments held by the company, even if the change is the result of a gradual process which began before the period of six years mentioned in that paragraph.
- (4) For the purposes of this section—
- (a) the accounting period of the company in which the change in the ownership occurs shall be divided into two parts, the first the part ending with the change, the second the part after;
- (b) those parts shall be treated as two separate accounting periods; and
- (c) the amounts in issue for the accounting period being divided shall be apportioned to those parts.
- (5) In Schedule 28A—
- (a) Part II shall have effect for identifying the amounts in issue for the accounting period being divided; and
- (b) Part III shall have effect for the purpose of apportioning those amounts to the parts of that accounting period.
- (6) Any sums which—
- (a) are, or are treated as, expenses of management referable to the accounting period being divided, and
- (b) under Part III of Schedule 28A are apportioned to either part of that period,
shall be treated for the purposes of section 75 expenses of management referable to that part.
- (7) Any charges which under Part III of Schedule 28A are apportioned to either part of the accounting period being divided shall be treated for the purposes of sections 338 and 75 as paid in that part.
- (8) Any allowances which under Part III of Schedule 28A are apportioned to either part of the accounting period being divided shall be treated for the purposes of section 253 of the Capital Allowances Act and section 75(7) as falling to be made in that part.
- (9) In computing the total profits of the company for an accounting period ending after the change in the ownership, no deduction shall be made under section 75 by reference to—
- (a) expenses of management deductible or allowances falling to be made for an accounting period beginning before the change; or
- (b) charges paid in such an accounting period.
- (10) Part IV of Schedule 28A shall have effect for the purpose of restricting, in a case where this section applies, the debits and non-trading deficits to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in respect of the company’s loan relationships (including debits so brought into account by virtue of paragraph 14(3)of Schedule 26 to the Finance Act 2002).
- (12) Subject to the modification in subsection (13) below, subsections (6) to (9) of section 768 shall apply for the purposes of this section as they apply for the purposes of that section.
- (13) The modification is that in subsection (6) of section 768 for the words “relief in respect of a company’s losses has been restricted” there shall be substituted “deductions from a company’s total profits , or the debits to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 in the case of a company in respect of its loan relationships (or its derivative contracts by virtue of paragraph 14(3) of Schedule 26 to the Finance Act 2002), have been restricted.”
- (14) In this section “*company with investment business*” has the same meaning as in Part IV.
##### 768C
- (1) This section applies where—
- (a) there is a change in the ownership of a company with investment business (“the relevant company”);
- (b) none of paragraphs (a) to (c) of section 768B(1) applies;
- (c) after the change in the ownership the relevant company acquires an asset from another company in circumstances such that section 171(1) of the 1992 Act applies to the acquisition; and
- (d) a chargeable gain (“a relevant gain”) accrues to the relevant company on a disposal of the asset within the period of three years beginning with the change in the ownership.
- (2) For the purposes of subsection (1)(d) above an asset acquired by the relevant company as mentioned in subsection (1)(c) above shall be treated as the same as an asset owned at a later time by that company if the value of the second asset is derived in whole or in part from the first asset, and in particular where the second asset is a freehold and the first asset was a leasehold and the lessee has acquired the reversion.
- (3) For the purposes of this section—
- (a) the accounting period of the relevant company in which the change in the ownership occurs shall be divided into two parts, the first the part ending with the change, the second the part after;
- (b) those parts shall be treated as two separate accounting periods; and
- (c) the amounts in issue for the accounting period being divided shall be apportioned to those parts.
- (4) In Schedule 28A—
- (a) Part V shall have effect for identifying the amounts in issue for the accounting period being divided; and
- (b) Part VI shall have effect for the purpose of apportioning those amounts to the parts of that accounting period.
- (5) Subsections (6) to (8) of section 768B shall apply in relation to the relevant company as they apply in relation to the company mentioned in subsection (1) of that section except that any reference in those subsections to Part III of Schedule 28A shall be read as a reference to Part VI of that Schedule.
- (6) Subsections (7) and (9) below apply only where, in accordance with the relevant provisions of the 1992 Act and Part VI of Schedule 28A, an amount is included in respect of chargeable gains in the total profits for the accounting period of the relevant company in which the relevant gain accrues.
- (7) In computing the total profits of the relevant company for the accounting period in which the relevant gain accrues, no deduction shall be made under section 75 by reference to—
- (a) expenses of management deductible or allowances falling to be made for an accounting period of the relevant company beginning before the change in ownership, or
- (b) charges paid in such an accounting period,
from an amount of the total profits equal to the amount which represents the relevant gain.
- (8) For the purposes of this section, the amount of the total profits for an accounting period which represents the relevant gain is—
- (a) where the amount of the relevant gain does not exceed the amount which is included in respect of chargeable gains for that period, an amount equal to the amount of the relevant gain;
- (b) where the amount of the relevant gain exceeds the amount which is included in respect of chargeable gains for that period, the amount so included.
- (9) Part IV of Schedule 28A shall have effect for the purpose of restricting, in a case where this section applies, the debits and non-trading deficits to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in respect of the relevant company’s loan relationships (including debits so brought into account by virtue of paragraph 14(3) of Schedule 26 to the Finance Act 2002).
- (11) Subsections (8) and (9) of section 768 shall apply for the purposes of this section as they apply for the purposes of that section.
- (12) In this section—
- “*the relevant provisions of the 1992 Act*” means section 8(1) of and Schedule 7A to that Act; and
- “*company with investment business*” has the same meaning as in Part 4.
- (13) This section applies in relation to an asset to which Schedule 29 to the Finance Act 2002 applies (intangible fixed assets), with the following adaptations—
- (a) for the reference to section 171(1) of the 1992 Act substitute a reference to paragraph 55 of that Schedule;
- (b) for any reference to a chargeable gain under that Act substitute a reference to a chargeable realisation gain within the meaning of that Schedule that is a credit within paragraph 34(1)(a) of that Schedule (non-trading credits);
- (c) for any reference to a disposal of the asset substitute a reference to its realisation within the meaning of that Schedule;
- (d) for the reference to the relevant provisions of the 1992 Act substitute a reference to Part 6 of that Schedule.
##### 768D
- (1) This section applies where there is a change in the ownership of a company carrying on a Schedule A business and—
- (a) in the case of a company with investment business, either—
- (i) paragraph (a), (b) or (c) of section 768B(1) applies, or
- (ii) section 768C applies;
- (b) in the case of a company which is not a company with investment business, paragraph (a) or (b) of section 768(1) applies.
- (2) Where this section applies the following provisions have effect to prevent relief being given under section 392A by setting a Schedule A loss incurred by the company before the change of ownership against profits arising after the change.
- (3) The accounting period in which the change of ownership occurs is treated for that purpose as two separate accounting periods, the first ending with the change and the second consisting of the remainder of the period.
- (4) The profits or losses of the period in which the change occurs are apportioned to those two periods—
- (a) in the case of a company with investment business—
- (i) where paragraph (a), (b) or (c) of section 768B(1) applies, in accordance with Parts II and III of Schedule 28A, or
- (ii) where section 768C applies, in accordance with Parts V and VI of that Schedule, and
- (b) in the case of a company which is not a company with investment business, according to the length of the periods,
unless in any case the specified method of apportionment would work unjustly or unreasonably in which case such other method shall be used as appears just and reasonable.
- (5) Relief under section 392A(1) against total profits of the same accounting period is available only in relation to each of those periods considered separately.
- (6) A loss made in any accounting period beginning before the change of ownership may not be set off under section 392A(2) against, or deducted by virtue of section 392A(3) from—
- (a) in the case of—
- (i) a company with investment business where paragraph (a), (b) or (c) of section 768B(1) applies, or
- (ii) a company which is not a company with investment business,
profits of an accounting period ending after the change of ownership;
- (b) in the case of a company with investment business where section 768C applies, from so much of those profits as represents the relevant gain within the meaning of that section.
- (7) Subsections (8) and (9) of section 768 (time limits for assessment; information powers) apply for the purposes of this section as they apply for the purposes of that section.
- (8) In this section—
- (a) any reference to a case where paragraph (a) or (b) of section 768(1) applies includes the case where that paragraph would apply if the reference there to a trade carried on by the company were to a Schedule A business carried on by it;
- (b) “*company with investment business*” has the same meaning as in Part 4.
- (9) The provisions of this section apply in relation to an overseas property business as they apply in relation to a Schedule A business.
##### 768E
- (1) Where there is a change in the ownership of a company with investment business and either—
- (a) paragraph (a), (b) or (c) of section 768B(1) applies, or
- (b) section 768C applies,
the following provisions have effect to prevent relief being given under paragraph 35 of Schedule 29 to the Finance Act 2002 by setting a non-trading loss on intangible fixed assets incurred by the company before the change of ownership against profits arising after the change.
- (2) The accounting period in which the change of ownership occurs is treated for that purpose as two separate accounting periods, the first ending with the change and the second consisting of the remainder of the period.
- (3) The profits or losses of the period in which the change occurs are apportioned to those two periods—
- (a) where paragraph (a), (b) or (c) of section 768B(1) applies, in accordance with Parts 2 and 3 of Schedule 28A, or
- (b) where section 768C applies, in accordance with Parts 5 and 6 of that Schedule,
unless in any case the specified method of apportionment would work unjustly or unreasonably in which case such other method shall be used as appears just and reasonable.
- (4) Relief under paragraph 35 of Schedule 29 to the Finance Act 2002 against total profits of the same accounting period is available only in relation to each of those periods considered separately.
- (5) A loss made in any accounting period beginning before the change of ownership may not be set off under paragraph 35(3) of Schedule 29 to the Finance Act 2002 against—
- (a) in a case where paragraph (a), (b) or (c) of section 768B(1) applies, profits of an accounting period ending after the change of ownership;
- (b) in a case where section 768C applies, so much of those profits as represents the relevant gain within the meaning of that section.
- (6) Subsections (8) and (9) of section 768 (time limits for assessment; information powers) apply for the purposes of this section as they apply for the purposes of that section.
- (7) In this section “company with investment business” has the same meaning as in Part 4.
##### 770A
Schedule 28AA (which deals with provision made or imposed otherwise than at arm’s length) shall have effect.
#### Dealings in commodity futures etc: withdrawal of loss relief.
### Factoring of income receipts etc
##### 774A
- (1) For the purposes of section 774B an arrangement is a structured finance arrangement in relation to a person (“*the borrower*”) if the following condition is met in relation to the borrower.
- (2) The condition is that—
- (a) under the arrangement the borrower receives from another person (“*the lender*”) any money or other asset (“the advance”) in any period,
- (b) in accordance with generally accepted accounting practice the accounts of the borrower for that period record a financial liability in respect of the advance,
- (c) the borrower, or a person connected with the borrower, makes a disposal of an asset (“the security”) under the arrangement to or for the benefit of the lender or a person connected with the lender,
- (d) the lender, or a person connected with the lender, is entitled under the arrangement to payments in respect of the security, and
- (e) in accordance with generally accepted accounting practice those payments reduce the amount of the financial liability in respect of the advance recorded in the accounts of the borrower.
- (3) For the purposes of this section, in any case where the borrower is a partnership, references to the accounts of the borrower include the accounts of any member of the partnership.
- (4) For the purposes of this section and section 774B—
- (a) references to a person connected with the borrower do not include the lender, and
- (b) references to a person connected with the lender do not include the borrower.
##### 774B
- (1) If—
- (a) an arrangement is a structured finance arrangement in relation to a person (“*the borrower*”), and
- (b) the arrangement would (disregarding this section) have had the relevant effect (see subsections (2) and (3)),
the arrangement is not to have that effect.
- (2) If the borrower is a person other than a partnership, the relevant effect is that—
- (a) an amount of income on which the borrower, or a person connected with the borrower, would otherwise have been charged to tax is not so charged,
- (b) an amount which would otherwise have been brought into account in calculating for tax purposes any income of the borrower, or of a person connected with the borrower, is not so brought into account, or
- (c) the borrower, or a person connected with the borrower, becomes entitled to an income deduction.
- (3) If the borrower is a partnership, the relevant effect is that—
- (a) an amount of income on which a member of the partnership would otherwise have been charged to tax is not so charged,
- (b) an amount which would otherwise have been brought into account in calculating for tax purposes any income of a member of the partnership is not so brought into account, or
- (c) a member of the partnership becomes entitled to an income deduction.
- (4) If—
- (a) a person in relation to whom the structured finance arrangement would otherwise have had the relevant effect is a person within the charge to income tax, and
- (b) in accordance with generally accepted accounting practice the accounts of the person record an amount as a finance charge in respect of the advance,
that person may treat the amount for income tax purposes as interest payable on a loan.
- (5) If a person in relation to whom the structured finance arrangement would otherwise have had the relevant effect is a company within the charge to corporation tax—
- (a) the advance is to be treated, in relation to the company, for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 as a money debt owed by the company,
- (b) the arrangement is to be treated, in relation to the company, for the purposes of that Chapter as a loan relationship of the company (as a debtor relationship), and
- (c) any amount which, in accordance with generally accepted accounting practice, is recorded in the accounts of the company as a finance charge in respect of the advance is to be treated as interest payable under that relationship.
- (6) For the purposes of this section, in any case where the borrower is a partnership,—
- (a) references to accounts include the accounts of the partnership, and
- (b) any deemed interest is treated as payable by the partnership (whether or not the finance charge is recorded in the accounts of the partnership).
- (7) For the purpose of determining when any deemed interest in respect of the advance is paid—
- (a) the payments mentioned in section 774A(2)(d) are treated as consisting of amounts for repaying the advance and amounts (“the interest elements”) in respect of interest on the advance, and
- (b) the interest elements of those payments are treated as paid when those payments are paid,
and the deemed interest in respect of the advance is treated as paid at the times when the interest elements are treated as paid.
- (8) In this section “*deemed interest*” means any amount which is treated as interest as a result of subsection (4) or (5).
- (9) This section is subject to the exceptions contained in section 774E.
##### 774C
- (1) For the purposes of section 774D an arrangement is a structured finance arrangement in relation to a partnership (“the borrower partnership”) if condition A or B is met in relation to the borrower partnership.
- (2) Condition A is that—
- (a) a person (“the transferor partner”) disposes of an asset (“the security”) under the arrangement to the borrower partnership,
- (b) the transferor partner is a member of the borrower partnership immediately after the disposal (whether or not a member immediately before the disposal),
- (c) under the arrangement the borrower partnership receives from another person (“*the lender*”) any money or other asset (“the advance”) in any period,
- (d) in accordance with generally accepted accounting practice the accounts of the borrower partnership for that period record a financial liability in respect of the advance,
- (e) there is a relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender (see subsection (6)),
- (f) under the arrangement the share of the lender or person connected with the lender in the profits of the borrower partnership is determined by reference (wholly or partly) to payments in respect of the security, and
- (g) in accordance with generally accepted accounting practice those payments reduce the amount of the financial liability in respect of the advance recorded in the accounts of the borrower partnership.
- (3) For the purposes of condition A, references to the accounts of the borrower partnership include the accounts of the transferor partner.
- (4) Condition B is that—
- (a) the borrower partnership holds an asset (“the security”) as a partnership asset at any time before the arrangement is made,
- (b) under the arrangement the borrower partnership receives from another person (“*the lender*”) any money or other asset (“the advance”) in any period,
- (c) in accordance with generally accepted accounting practice the accounts of the borrower partnership for that period record a financial liability in respect of the advance,
- (d) there is a relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender,
- (e) under the arrangement the share of the lender or person connected with the lender in the profits of the borrower partnership is determined by reference (wholly or partly) to payments in respect of the security, and
- (f) in accordance with generally accepted accounting practice those payments reduce the amount of the financial liability in respect of the advance recorded in the accounts of the borrower partnership.
- (5) For the purposes of condition B, references to the accounts of the borrower partnership include the accounts of any person who is a member of the partnership immediately before the arrangement is made.
- (6) For the purposes of this section and section 774D there is a relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender if directly or indirectly in consequence of, or otherwise in connection with, the arrangement—
- (a) the lender, or a person connected with the lender, becomes a member of the borrower partnership at any time, or
- (b) there is at any time a change in the share of a member of the borrower partnership in the profits of the borrower partnership in a case where that member is the lender or a person connected with the lender.
- (7) For the purposes of subsection (6)(b) the reference to a person connected with the lender includes a person who at any time becomes connected with the lender directly or indirectly in consequence of, or otherwise in connection with, the arrangement.
##### 774D
- (1) This section applies if—
- (a) an arrangement is a structured finance arrangement in relation to a partnership (“the borrower partnership”), and
- (b) any relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender would (disregarding this section) have had the following effect.
- (2) The effect is that—
- (a) an amount of income on which a relevant member of the borrower partnership would otherwise have been charged to tax is not so charged,
- (b) an amount which would otherwise have been brought into account in calculating for tax purposes any income of a relevant member of the borrower partnership is not so brought into account, or
- (c) a relevant member of the borrower partnership becomes entitled to an income deduction.
- (3) In this section “*relevant member of the borrower partnership*” means—
- (a) in any case where condition A in section 774C is met in relation to the arrangement, the transferor partner, and
- (b) in any case where condition B in that section is met in relation to the arrangement, any person other than the lender who is a member of the borrower partnership immediately before the time at which the relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender occurs.
- (4) Part 9 of ITTOIA 2005 and section 114 above are to have effect in relation to any relevant member of the borrower partnership as if the relevant change in relation to the membership of the borrower partnership involving the lender or a person connected with the lender had not occurred.
Accordingly, the structured finance arrangement is not to have the effect mentioned in subsection (2).
- (5) The following provisions of this section confer relief from tax the availability of which depends on which of the conditions in section 774C is met in relation to the arrangement.
- (6) In any case where condition A in section 774C is met, if—
- (a) the transferor partner is a person within the charge to income tax, and
- (b) in accordance with generally accepted accounting practice the accounts of the borrower partnership record an amount as a finance charge in respect of the advance,
the transferor partner may treat the amount for income tax purposes as interest payable by the transferor partner on a loan.
- (7) In any case where condition A in that section is met, if the transferor partner is a company within the charge to corporation tax—
- (a) the advance is to be treated, in relation to the company, for the purposes of paragraph 19 of Schedule 9 to the Finance Act 1996 (and the other provisions of Chapter 2 of Part 4 of that Act) as a money debt owed by the borrower partnership,
- (b) the arrangement is to be treated, in relation to the company, as a transaction for the lending of money from which that debt is treated as arising for those purposes, and
- (c) any amount which, in accordance with generally accepted accounting practice, is recorded in the accounts of the borrower partnership as a finance charge in respect of the advance is to be treated as interest payable by the company under that transaction.
- (8) For the purposes of subsections (6) and (7), references to the accounts of the borrower partnership include the accounts of the transferor partner.
- (9) In any case where condition B in section 774C is met, if—
- (a) a relevant member of the borrower partnership is a person within the charge to income tax, and
- (b) in accordance with generally accepted accounting practice the accounts of the borrower partnership record an amount as a finance charge in respect of the advance,
the relevant partner may treat the amount for income tax purposes as interest payable by the borrower partnership on a loan.
- (10) In any case where condition B in that section is met, if a relevant member of the borrower partnership is a company within the charge to corporation tax—
- (a) the advance is to be treated, in relation to the company, for the purposes of paragraph 19 of Schedule 9 to the Finance Act 1996 (and the other provisions of Chapter 2 of Part 4 of that Act) as a money debt owed by that partnership,
- (b) the arrangement is to be treated, in relation to the company, as a transaction for the lending of money from which that debt is treated as arising for those purposes, and
- (c) any amount which, in accordance with generally accepted accounting practice, is recorded in the accounts of the borrower partnership as a finance charge in respect of the advance is to be treated as interest payable by the borrower partnership under that transaction.
- (11) For the purposes of subsections (9) and (10), references to the accounts of the borrower partnership include the accounts of any relevant member of the borrower partnership.
- (12) For the purpose of determining when any deemed interest in respect of the advance is paid—
- (a) the payments mentioned in section 774C(2)(f) or (4)(e) are treated as consisting of amounts for repaying the advance and amounts (“the interest elements”) in respect of interest on the advance, and
- (b) the interest elements of those payments are treated as paid when those payments are paid,
and the deemed interest in respect of the advance is treated as paid at the times when the interest elements are treated as paid.
- (13) In this section “*deemed interest*” means any amount which is treated as interest as a result of any of subsections (6) to (10).
- (14) This section is subject to the exceptions contained in section 774E.
##### 774E
- (1) Section 774B or 774D does not apply if the whole of the advance under the structured finance arrangement—
- (a) is charged to tax on a relevant person (see subsection (7)) as an amount of income,
- (b) is brought into account in calculating for tax purposes any income of a relevant person, or
- (c) is brought into account for the purposes of any provision of the Capital Allowances Act as a disposal receipt, or proceeds from a balancing event or disposal event, of a relevant person.
For the purposes of this subsection the effect of section 785A (rent factoring of leases of plant or machinery) is to be disregarded.
- (2) Subsection (1)(c) is not to be taken as met in any case where—
- (a) the receipt or proceeds gives rise to a balancing charge, and
- (b) the amount of the balancing charge is limited by any provision of the Capital Allowances Act.
- (3) Section 774B or 774D does not apply if, at all times, the whole of the advance under the structured finance arrangement—
- (a) is a debtor relationship of a relevant person for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships), or
- (b) would be a debtor relationship of a relevant person for those purposes if that person were a company within the charge to corporation tax.
For the purposes of this subsection references to a debtor relationship do not include a relationship to which section 100 of the Finance Act 1996 (money debts etc not arising from the lending of money) applies.
- (4) Section 774B or 774D does not apply in so far as the structured finance arrangement is an arrangement in relation to which—
- (a) section 263A of the 1992 Act (agreements for sale and repurchase of securities) applies,
- (b) paragraph 15 of Schedule 9 to the Finance Act 1996 (repo transactions and stock-lending) applies, or
- (c) Chapter 5 of Part 2 of the Finance Act 2005 (alternative finance arrangements) has effect.
- (5) Section 774B or 774D does not apply in so far as—
- (a) the security under the structured finance arrangement is plant or machinery which is the subject of a sale and finance leaseback, or
- (b) the structured finance arrangement is an arrangement in relation to which sections 228B to 228D of the Capital Allowances Act apply with the modifications contained in section 228F of that Act (lease and finance leaseback).
- (6) For the purposes of subsection (5)(a), whether plant or machinery is the subject of a sale and finance leaseback is determined in accordance with section 221 of the Capital Allowances Act.
But, in applying that section, it is to be assumed that the words “and which are not a long funding lease in the case of the lessor” were omitted from section 219(1)(b) of that Act (meaning of “finance lease”).
- (7) For the purposes of this section a “*relevant person*” means—
- (a) if section 774B applies, a person in relation to whom the structured finance arrangement would (but for that section) otherwise have had the relevant effect (within the meaning of that section), and
- (b) if section 774D applies, a relevant member of the borrower partnership (within the meaning of that section).
##### 774F
- (1) The Treasury may make regulations prescribing other circumstances in which section 774B or 774D is not to apply in relation to a structured finance arrangement.
- (2) Any regulations under subsection (1) may make provision amending section 774E.
- (3) The power to make regulations under subsection (1) includes—
- (a) power to make provision having effect in relation to times before the making of the regulations (but not times earlier than 6th June 2006),
- (b) power to make different provision for different cases or different purposes, and
- (c) power to make incidental, supplemental, consequential or transitional provision and savings.
##### 774G
- (1) For the purposes of sections 774A to 774D “*arrangement*” includes any agreement or understanding (whether or not legally enforceable).
- (2) For the purposes of sections 774A to 774D “*income deduction*” means—
- (a) a deduction in calculating any income for tax purposes, or
- (b) a deduction against total income or total profits.
- (3) For the purposes of sections 774A to 774D—
- (a) references to a person's receiving any asset include the person's obtaining directly or indirectly the value of any asset or otherwise deriving directly or indirectly any benefit from it,
- (b) references to a disposal of an asset include anything which constitutes a disposal of the asset for the purposes of the 1992 Act,
- (c) references to payments in respect of any asset include obtaining directly or indirectly the value of any asset or otherwise deriving directly or indirectly any benefit from it.
- (4) For the purposes of sections 774A to 774D, section 839 (connected persons) applies.
- (5) For the purposes of sections 774A to 774D references to the accounts of any person who is a company include the consolidated group accounts of a group of companies of which it is a member.
- (6) If any person does not draw up accounts in accordance with generally accepted accounting practice, sections 774A to 774D apply as if the accounts had been drawn up by the person in accordance with that practice.
- (7) Sections 277 to 281 of ITTOIA 2005 and section 34 above (lease premiums) are not to apply in relation to a premium paid in respect of a grant of a lease where the grant constitutes a disposal of an asset for the purposes of section 774A(2)(c) or 774C(2)(a).
##### 775A
- (1) This section applies in any case where—
- (a) a person sells or transfers the right to receive an annual payment to which this section applies (see subsection (4)), and
- (b) the consideration (if any) for the sale or transfer would not, apart from this section, be chargeable to tax.
- (2) In any such case, tax is charged—
- (a) in the case of income tax, under this section; or
- (b) in the case of corporation tax, under Case III of Schedule D.
- (3) Where this section applies—
- (a) the tax is charged on an amount equal to the market value of the right to receive the annual payment;
- (b) the tax is charged for the chargeable period in which the sale or transfer takes place;
- (c) the person liable for the tax is the person who sells or transfers the right to the annual payment.
- (4) This section applies to any annual payment other than—
- (a) an annual payment under a life annuity;
- (b) an annual payment under a pension annuity;
- (c) an annual payment to which section 347A applies (annual payments that are not charges on income);
- (d) an annual payment in respect of which, by virtue of section 727 of ITTOIA 2005 (payments by individuals arising in UK), no liability to income tax arises under Part 5 of that Act.
- (5) This section applies in relation to part of an annual payment as it applies in relation to the whole of an annual payment.
- (6) For the purposes of this section, a sale or transfer of all rights under an agreement for annual payments, or under an annuity, is a sale or transfer of the rights to each individual payment under the agreement or annuity.
- “*overseas permanent establishment*” means a permanent establishment through which a company carries on a trade in a territory outside the United Kingdom; and
- “*permanent establishment*”—if there are arrangements having effect under section 788 in relation to the territory concerned that define the expression, has the meaning given by those arrangements, andif there are no such arrangements, or if they do not define the expression, has the meaning given by section 148 of the Finance Act 2003.
##### 806M
- (1) This section has effect for the purposes of section 806L and shall be construed as one with that section.
- (2) If, in any accounting period, a company ceases to have a particular overseas permanent establishment, the amount of any unrelieved foreign tax which arises in that accounting period in respect of the company’s income from that overseas permanent establishment shall, to the extent that it is not treated as mentioned in section 806L(2)(b), be reduced to nil (so that no amount arises which falls to be treated as mentioned in section 806L(2)(a)).
- (3) If a company—
- (a) at any time ceases to have a particular overseas permanent establishment in a particular territory (“*the old permanent establishment*”), but
- (b) subsequently again has an overseas permanent establishment in that territory (“*the new permanent establishment*”),
the old permanent establishment and the new permanent establishment shall be regarded as different overseas permanent establishments.
- (4) If, under the law of a territory outside the United Kingdom, tax is charged in the case of a company resident in the United Kingdom in respect of the profits of two or more of its overseas permanent establishments in that territory, taken together, then, for the purposes of—
- (a) section 806L, and
- (b) subsection (3) above,
those overseas permanent establishments shall be treated as if they together constituted a single overseas permanent establishment of the company.
- (5) Unrelieved foreign tax arising in respect of qualifying income from a particular overseas permanent establishment in any accounting period shall only be treated as mentioned in subsection (2) of section 806L on a claim.
- (6) Any such claim must specify the amount (if any) of the unrelieved foreign tax—
- (a) which is to be treated as mentioned in paragraph (a) of that subsection; and
- (b) which is to be treated as mentioned in paragraph (b) of that subsection.
- (7) A claim under subsection (5) above may only be made before the expiration of the period of—
- (a) six years after the end of the accounting period mentioned in that subsection, or
- (b) if later, one year after the end of the accounting period in which the foreign tax in question is paid.
##### 807A
- (1) This Part shall have effect for the purposes of corporation tax in relation to any company as if tax falling within subsection (2) below were to be disregarded.
- (2) Subject to subsection (2A) below, tax falls within this subsection in relation to a company to the extent that it is—
- (a) tax under the law of a territory outside the United Kingdom; and
- (b) is attributable, on a just and reasonable apportionment,
- (i) to interest accruing under a loan relationship at a time when the company is not a party to the relationship ; or
- (ii) to so much of a relevant payment as, on such an apportionment, is attributable to a time when the company is not a party to the derivative contract concerned.
- (2A) Tax attributable to interest accruing to a company under a loan relationship does not fall within subsection (2) above if—
- (a) at the time when the interest accrues, that company has ceased to be a party to that relationship by reason of having made the initial transfer under or in accordance with any repo or stock-lending arrangements relating to that relationship; and
- (b) that time falls during the period for which those arrangements have effect.
- (2B) Where, in the case of any share, section 91A or 91B of the Finance Act 1996 (shares treated as loan relationships) applies in relation to a company for an accounting period, this section has effect—
- (a) in relation to a distribution in respect of the share as it has effect in relation to interest under a loan relationship, and
- (b) in relation to a distribution accruing in respect of the share at a time when the company does not (within the meaning of the section in question) hold the share as it applies in relation to interest accruing under a loan relationship at a time when the company is not a party to the loan relationship.
- (3) Subject to subsections (1), (4) and (5) of this section, where—
- (a) any non-trading credit relating to an amount of interest under a loan relationship is brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in the case of any company,
- (b) that amount falls, as a result of any related transaction other than the initial transfer under or in accordance with any repo or stock-lending arrangements relating to that relationship, to be paid to a person other than the company, and
- (c) had the company been entitled, at the time of that transaction, to receive a payment of an amount of interest equal to the amount of interest to which the non-trading credit relates, the company would have been liable in respect of the amount of interest received to an amount of tax under the law of a territory outside the United Kingdom,
credit for that amount of tax shall be allowable under section 790(4) as if that amount of tax were an amount of tax paid under the law of that territory in respect of the amount of interest to which the non-trading credit relates.
- (4) Subsection (3) above does not apply in the case of a credit brought into account in accordance with paragraph 1(2) of Schedule 11 to the Finance Act 1996 (the I minus E basis).
- (5) The Treasury may by regulations provide for subsection (3) above to apply—
- (a) in the case of trading credits, as well as in the case of non-trading credits;
- (b) in the case of any credit (“an insurance credit”) in the case of which, by virtue of subsection (4) above, it would not otherwise apply.
- (6) Regulations under subsection (5) above may—
- (a) provide for subsection (3) above to apply in the case of a trading credit or an insurance credit only if the circumstances are such as may be described in the regulations;
- (b) provide for subsection (3) above to apply, in cases where it applies by virtue of any such regulations, subject to such exceptions, adaptations or other modifications as may be specified in the regulations;
- (c) make different provision for different cases; and
- (d) contain such incidental, supplemental, consequential and transitional provision as the Treasury think fit.
- (6A) In this section “*repo or stock-lending arrangements*” has the same meaning as in paragraph 15 of Schedule 9 to the Finance Act 1996 (repo transactions and stock-lending); and, in relation to any such arrangements—
- (a) a reference to the initial transfer is a reference to the transfer mentioned in sub-paragraph (3)(a) of that paragraph; and
- (b) a reference to the period for which the arrangements have effect is a reference to the period from the making of the initial transfer until whichever is the earlier of the following—
- (i) the discharge of the obligations arising by virtue of the entitlement or requirement mentioned in sub-paragraph (3)(b) of that paragraph; and
- (ii) the time when it becomes apparent that the discharge mentioned in sub-paragraph (i) above will not take place.
- (7) In this section—
- “*life annuity*” means—a life annuity, as defined in section 657(1); ora life annuity, as defined in section 473(2) of ITTOIA 2005;
- “*pension annuity*” means an annuity which is pension income within the meaning of Part 9 of ITEPA 2003 (see section 566(2) of that Act).
#### Close companies.
##### 785ZA
- (1) This section applies for corporation tax purposes if—
- (a) a company carries on a business in respect of which the company is within the charge to corporation tax,
- (b) the company carries on the business in partnership with other persons in an accounting period of the partnership,
- (c) the business (“the leasing business”) is, on any day in that period, a business of leasing plant or machinery,
- (d) the company incurs a loss in its notional business in any accounting period comprised (wholly or partly) in the accounting period of the partnership, and
- (e) the interest of the company in the leasing business during the accounting period of the partnership is not determined on an allowable basis (see subsections (2) to (4)).
- (2) The interest of the company in the leasing business during the accounting period of the partnership is determined on an allowable basis if (and only if) the following condition is met.
- (3) The condition is met if, for the purposes of section 114(2),—
- (a) the company's share in the profits or loss of the leasing business for that period is determined wholly by reference to a single percentage, and
- (b) the company's share in any relevant capital allowances for that period is determined wholly by reference to the same percentage.
- (4) For the purposes of this condition “*profits*” does not include chargeable gains.
- (5) The following restrictions apply in respect of so much of the loss incurred by the company in its notional business as derives from any relevant capital allowances (“the restricted part of the loss”).
- (6) Apart from by way of set off against any relevant leasing income, relief is not to be given to the company under any relevant loss relief provision in respect of the restricted part of the loss.
- (7) If the leasing business is a trade, relief is not to be given to the company under section 393A(1) in respect of the restricted part of the loss.
- (8) The restricted part of the loss is not available for set off by way of group relief in accordance with section 403.
- (9) For the purpose of determining how much of a loss derives from any relevant capital allowances, the loss is to be calculated on the basis that any relevant capital allowances are the final amounts to be deducted.
##### 785ZB
- (1) This section applies for the purposes of section 785ZA.
- (2) “*Business of leasing plant or machinery*” has the same meaning as in Part 3 of Schedule 10 to the Finance Act 2006 (sale etc of lessor companies etc).
- (3) “*Lease*” has the same meaning as in section 785A.
- (4) “*Notional business*”, in relation to a company, means the business—
- (a) from which the company's share in the profits or loss of the leasing business is treated under section 114(2) as deriving for the purposes of the charge to corporation tax, and
- (b) which is treated under that provision as carried on alone by the company for those purposes.
- (5) “*Plant or machinery*” has the same meaning as in Part 2 of the Capital Allowances Act.
- (6) “*Relevant capital allowance*” means an allowance under Part 2 of the Capital Allowances Act in respect of expenditure incurred on the provision of plant or machinery wholly or partly for the purposes of the leasing business.
- (7) “*Relevant leasing income*” means any income of the company's notional business deriving from any lease—
- (a) which is a lease of plant or machinery, and
- (b) which was entered into before the end of the accounting period of the company in which the loss in its notional business was incurred.
- (8) “*Relevant loss relief provision*” means any of the following provisions—
- (a) section 392A (Schedule A losses),
- (b) section 392B (losses from overseas property businesses),
- (c) section 393 (trade losses),
- (d) section 396 (Case VI losses).
##### 785A
- (1) This section applies in any case where the following conditions are satisfied—
- (a) a person (call him “P”) is entitled to receive rentals under a lease of plant or machinery,
- (b) the rentals, so far as receivable by him, fall to be brought into account as income for the purpose of calculating his tax liability,
- (c) P enters into arrangements for the transfer of his right to receive some or all of the rentals to another person,
- (d) apart from this section, some or all of the amount or value of the consideration for the transfer (“the relevant portion of the consideration”) would fall to be brought into account neither—
- (i) as income, nor
- (ii) as a capital allowances disposal receipt,
for the purpose of calculating P’s tax liability.
- (2) In any such case, the relevant portion of the consideration—
- (a) shall be treated for tax purposes as income of P,
- (b) shall be taxable as rentals receivable by P under the lease (apart from any transfer of his right to receive some or all of the rentals), and
- (c) shall be brought into account in a period of account to the extent that it is receivable in that period of account.
- (3) Any reference to the transfer from P to another person of a right to receive rentals includes a reference to any arrangement under which rental ceases to form part of the receipts taken into account as income for the purposes of calculating P’s tax liability.
- (4) Where P is a partnership, any reference in this section to calculating P’s tax liability includes a reference to calculating the tax liability of the partners, notwithstanding that the partnership has legal personality.
- (5) A partnership has legal personality for the purposes of subsection (4) above if it is regarded as a legal person, or as a body corporate, under the law of the country or territory under which it is formed.
- (5A) This section does not apply in so far as section 774B or 774D (structured finance arrangements) applies in relation to the arrangements mentioned in paragraph (c) of subsection (1) above as a result of the transfer mentioned in that paragraph.
- “*related transaction*” has the same meaning as in section 84 of the Finance Act 1996;
- “*relevant payment*” means a payment the amount of which falls to be determined (wholly or mainly) by applying to a notional principal amount specified in a derivative contract, for a period so specified, a rate the value of which at all times is the same as that of a rate of interest so specified;
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and
- “*trading credit*” means any credit falling to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in accordance with section 82(2) of that Act.
##### 808A
- (1) Subsection (2) below applies where any arrangements having effect by virtue of section 788—
- (a) make provision, whether for relief or otherwise, in relation to interest (as defined in the arrangements), and
- (b) make provision (the special relationship provision) that where owing to a special relationship the amount of the interest paid exceeds the amount which would have been paid in the absence of the relationship, the provision mentioned in paragraph (a) above shall apply only to the last-mentioned amount.
- (2) The special relationship provision shall be construed as requiring account to be taken of all factors, including—
- (a) the question whether the loan would have been made at all in the absence of the relationship,
- (b) the amount which the loan would have been in the absence of the relationship, and
- (c) the rate of interest and other terms which would have been agreed in the absence of the relationship.
- (3) The special relationship provision shall be construed as requiring the taxpayer to show that there is no special relationship or (as the case may be) to show the amount of interest which would have been paid in the absence of the special relationship.
- (4) In a case where—
- (a) a company makes a loan to another company with which it has a special relationship, and
- (b) it is not part of the first company’s business to make loans generally,
the fact that it is not part of the first company’s business to make loans generally shall be disregarded in construing subsection (2) above.
- (5) Subsection (2) above does not apply where the special relationship provision expressly requires regard to be had to the debt on which the interest is paid in determining the excess interest (and accordingly expressly limits the factors to be taken into account).
##### 808B
- (1) Subsection (2) below applies where any arrangements having effect by virtue of section 788—
- (a) make provision, whether for relief or otherwise, in relation to royalties (as defined in the arrangements), and
- (b) make provision (the special relationship provision) that where owing to a special relationship the amount of the royalties paid exceeds the amount which would have been paid in the absence of the relationship, the provision mentioned in paragraph (a) above shall apply only to the last-mentioned amount.
- (2) The special relationship provision shall be construed as requiring account to be taken of all factors, including—
- (a) the question whether the agreement under which the royalties are paid would have been made at all in the absence of the relationship,
- (b) the rate or amounts of royalties and other terms which would have been agreed in the absence of the relationship, and
- (c) where subsection (3) below applies, the factors specified in subsection (4) below.
- (3) This subsection applies if the asset in respect of which the royalties are paid, or any asset which that asset represents or from which it is derived, has previously been in the beneficial ownership of—
- (a) the person who is liable to pay the royalties,
- (b) a person who is, or has at any time been, an associate of the person who is liable to pay the royalties,
- (c) a person who has at any time carried on a business which, at the time when the liability to pay the royalties arises, is being carried on in whole or in part by the person liable to pay those royalties, or
- (d) a person who is, or has at any time been, an associate of a person who has at any time carried on such a business as is mentioned in paragraph (c) above.
- (4) The factors mentioned in subsection (2)(c) above are—
- (a) the amounts which were paid under the transaction, or under each of the transactions in the series of transactions, as a result of which the asset has come to be an asset of the beneficial owner for the time being,
- (b) the amounts which would have been so paid in the absence of a special relationship, and
- (c) the question whether the transaction or series of transactions would have taken place in the absence of such a relationship.
- (5) The special relationship provision shall be construed as requiring the taxpayer to show—
- (a) the absence of any special relationship, or
- (b) the rate or amount of royalties that would have been payable in the absence of the relationship,
as the case may be.
- (6) The requirement on the taxpayer to show in accordance with subsection (5)(a) above the absence of any special relationship includes a requirement—
- (a) to show that no person of any of the descriptions in paragraphs (a) to (d) of subsection (3) above has previously been the beneficial owner of the asset in respect of which the royalties are paid, or of any asset which that asset represents or from which it is derived, or
- (b) to show the matters specified in subsection (7) below,
as the case may be.
- (7) Those matters are—
- (a) that the transaction or series of transactions mentioned in subsection (4)(a) above would have taken place in the absence of a special relationship, and
- (b) the amounts which would have been paid under the transaction, or under each of the transactions in the series of transactions, in the absence of such a relationship.
- (8) Subsection (2) above does not apply where the special relationship provision expressly requires regard to be had to the use, right or information for which royalties are paid in determining the excess royalties (and accordingly expressly limits the factors to be taken into account).
- (9) For the purposes of this section one person (“*person A*”) is an associate of another person (“*person B*”) at a given time if—
- (a) person A was, within the meaning of Schedule 28AA, directly or indirectly participating in the management, control or capital of person B at that time, or
- (b) the same person was or same persons were, within the meaning of Schedule 28AA, directly or indirectly participating in the management, control or capital of person A and person B at that time.
#### Additions to non-profit funds: amount of loss reduction
#### Additions to non-profit funds: amount of loss reduction
##### 815A
- (1) This section applies where section 269C of the 1970 Act or section 140C or 140F of the Taxation of Chargeable Gains Act 1992 applies; and references in this section to company A, the transfer and the trade shall be construed accordingly.
- (2) Where gains accruing to company A on the transfer would have been chargeable to tax under the law of the relevant member State but for the Mergers Directive, this Part, including any arrangements having effect by virtue of section 788, shall apply as if the amount of tax, calculated on the required basis, which would have been payable under that law in respect of the gains so accruing but for that Directive, were tax payable under that law.
- (5) For the purposes of this section, the required basis is that—
- (a) so far as permitted under the law of the relevant member State, any losses arising on the transfer are set against any gains so arising, and
- (b) any relief available to company A under that law has been duly claimed.
- (6) In this section—
- “*capital allowances disposal receipt*” means a disposal receipt within the meaning of Part 2 of the Capital Allowances Act 2001 (see section 60 of that Act);
- “*lease*” includes an underlease, sublease, tenancy or licence and an agreement for any of those things;
- “*tax liability*” means liability to income tax or corporation tax.
##### 785B
- (1) This section applies if—
- (a) there is an unconditional obligation, under a lease of plant or machinery or a relevant arrangement, to make a relevant capital payment (at any time), or
- (b) a relevant capital payment is made under such a lease or arrangement otherwise than in pursuance of such an obligation.
- (2) The lessor is treated for corporation tax purposes as receiving income attributable to the lease of an amount equal to the amount of the capital payment.
- (3) The income is treated—
- (a) if subsection (1)(a) applies, as income for the period of account in which there is first an obligation of the kind mentioned there, and
- (b) if subsection (1)(b) applies, as income for the period of account in which the payment is made.
##### 785C
- (1) The expressions used in section 785B and this section are to be interpreted as follows.
- (2) “*Capital payment*” means any payment except one which, if made to the lessor—
- (a) would fall to be included in a calculation of the lessor's income for corporation tax purposes, or
- (b) would fall to be included in such a calculation but for section 502B (rental earnings under long funding finance lease).
- (3) “*Lease*” includes—
- (a) a licence, and
- (b) the letting of a ship or aircraft on charter or the letting of any other asset on hire,
and “*lessor*” and “*lessee*” are to be read accordingly.
- (4) “*Lease of plant or machinery*” includes a lease of plant or machinery and other property but does not include—
- (a) a lease where the income attributable to the lease received by the lessor (if any) would be chargeable to tax under Schedule A, or
- (b) a lease of plant or machinery where the lessor has incurred what would (but for section 34A of the Capital Allowances Act) be qualifying expenditure (within the meaning of Part 2 of that Act) on the plant or machinery.
- (5) “*Relevant arrangement*” means any agreement or arrangement relating to a lease of plant or machinery, including one made before the lease is entered into or after it has ended (and, accordingly, “lessor” and lessee” include prospective and former lessors and lessees).
- (6) A capital payment, in relation to a lease or relevant arrangement, is “relevant” if condition A or B is met (but this is subject to subsection (9)).
- (7) Condition A is that the capital payment is payable (or paid), directly or indirectly, by (or on behalf of) the lessee to (or on behalf of) the lessor in connection with—
- (a) the grant, assignment, novation or termination of the lease, or
- (b) any provision of the lease or relevant arrangement (including the variation or waiver of any such provision).
- (8) Condition B is that rentals payable under the lease are less than (or payable later than) they might reasonably be expected to be if there were no obligation to make the capital payment (and the capital payment were not made).
- (9) A capital payment is not “relevant” if or to the extent that—
- (a) the capital payment reduces (or would but for section 536 of the Capital Allowances Act reduce) the amount of expenditure incurred by the lessor for the purposes of the Capital Allowances Act in respect of the plant or machinery in question,
- (b) the capital payment is compensation for loss resulting from damage to, or damage caused by, the plant or machinery in question, or
- (c) the capital payment would fall (or falls) to be brought into account by the lessor as a disposal receipt within the meaning of Part 2 of the Capital Allowances Act (see section 60(1) of that Act).
- (10) References to payment include the provision of value by any means other than the making of a payment, and accordingly—
- (a) references to the making of a payment include the passing of value (by any other means), and
- (b) references to the amount of the payment include the value passed.
##### 785D
- (1) This section applies if section 785B applies in relation to a lease of plant or machinery and other property (see section 785C(4)).
- (2) The relevant capital payment is to be apportioned, on a just and reasonable basis, between—
- (a) the plant and machinery, and
- (b) the other property.
- (3) If the income (if any) received by the lessor that is attributable to any of the plant or machinery is chargeable to tax under Schedule A, treat that plant or machinery as falling within subsection (2)(b) (and not subsection (2)(a)).
- (4) Section 785B(2) has effect as if the reference to the amount of the capital payment were to such amount as is apportioned under subsection (2) in respect of the plant or machinery within subsection (2)(a).
#### Meaning of “participator”, “associate”, “director” and “loan creditor”.
##### 785E
- (1) This section applies for corporation tax purposes if—
- (a) section 785B applies by virtue of subsection (1)(a) of that section, and
- (b) at any time, the lessor reasonably expects that the relevant capital payment will not be paid (or will not be paid in full).
- (2) For the purposes of calculating the profits of the lessor, a deduction is allowed for the period of account which includes that time.
- (3) The amount of the deduction is equal to the amount reasonably expected not to be paid.
- (4) No other deduction is allowed in respect of the matters mentioned in subsection (1).
#### Section 432B: apportionment of business transfer-in
#### Profits reserved for policy holders and annuitants.
##### 793A
- (1) Where relief in respect of an amount of tax that would otherwise be payable under the law of a territory outside the United Kingdom may be allowed—
- (a) under arrangements made in relation to that territory, or
- (b) under the law of that territory in consequence of any such arrangements,
credit may not be allowed in respect of that tax, whether the relief has been used or not.
- (2) Where, under arrangements having effect by virtue of section 788, credit may be allowed in respect of an amount of tax, credit by way of unilateral relief may not be allowed in respect of that tax.
- (3) Where arrangements made in relation to a territory outside the United Kingdom contain express provision to the effect that relief by way of credit shall not be given under the arrangements in cases or circumstances specified or described in the arrangements, then neither shall credit by way of unilateral relief be allowed in those cases or circumstances.
##### 795A
- (1) The amount of credit for foreign tax which, under any arrangements, is to be allowed against tax in respect of any income or chargeable gain shall not exceed the credit which would be allowed had all reasonable steps been taken—
- (a) under the law of the territory concerned, and
- (b) under any arrangements made in relation to that territory,
to minimise the amount of tax payable in that territory.
- (2) The steps mentioned in subsection (1) above include—
- (a) claiming, or otherwise securing the benefit of, reliefs, deductions, reductions or allowances; and
- (b) making elections for tax purposes.
- (3) For the purposes of subsection (1) above, any question as to the steps which it would have been reasonable for a person to take shall be determined on the basis of what the person might reasonably be expected to have done in the absence of relief under this Part against tax in the United Kingdom.
##### 797A
- (1) This section applies for the purposes of any arrangements where, in the case of any company—
- (a) any non-trading credit relating to an item is brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) for any accounting period (“the applicable accounting period”); and
- (b) there is in respect of that item an amount of foreign tax for which, under the arrangements, credit is allowable against United Kingdom tax computed by reference to that interest.
- (2) It shall be assumed that tax chargeable under paragraph (a) of Case III of Schedule D on the profits and gains arising for the applicable accounting period from the company’s loan relationships falls to be computed on the actual amount of its non-trading credits for that period, and without any deduction in respect of non-trading debits.
- (3) Section 797(3) shall have effect (subject to subsection (7) below) as if—
- (a) there were for the applicable accounting period an amount equal to the adjusted amount of the non-trading debits falling to be brought into account by being set against profits of the company for that period of any description; and
- (b) different parts of that amount might be set against different profits.
- (4) For the purposes of this section, the adjusted amount of a company’s non-trading debits for any accounting period is the amount equal, in the case of that company, to the aggregate of the non-trading debits given for that period for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) less the aggregate of the amounts specified in subsection (5) below.
- (5) Those amounts are—
- (a) so much of any non-trading deficit for the applicable accounting period as is an amount to which a claim under subsection (2)(c) of section 83 of the Finance Act 1996 or paragraph 4(3) of Schedule 11 to that Act (deficit carried back and set against profits) relates; and
- (aa) so much of any non-trading deficit for that period as is surrendered as group relief by virtue of section 403 of the Taxes Act 1988; and
- (b) so much of any non-trading deficit for that period as falls to be carried forward to a subsequent period in accordance with subsection (3A) of that section or paragraph 4(4) of that Schedule; . . .
- (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (6) Section 797(3) shall have effect as if any amount carried forward to the applicable accounting period under section 83(3A) of that Act were an amount capable of being allocated only to any non-trading profits of the company.
- (7) Where—
- (a) the company has a non-trading deficit for the applicable accounting period,
- (b) the amount of that deficit exceeds the aggregate of the amounts specified in subsection (5) above, and
- (c) in pursuance of a claim under—
- (i) subsection (2)(a) of section 83 of the Finance Act 1996 (deficit set against current year profits), or
- (ii) paragraph 4(2) of Schedule 11 to that Act (set-off of deficits in the case of insurance companies),
the excess falls to be set off against profits of any description,
section 797(3) shall have effect as if non-trading debits of the company which in aggregate are equal to the amount of the excess were required to be allocated to the profits against which they are set off in pursuance of the claim.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- (8) In this section “*non-trading profits*” has the same meaning as in paragraph 4 of Schedule 8 to the Finance Act 1996.
##### 797B
- (1) This section applies for the purposes of any arrangements where, in the case of a company—
- (a) a non-trading credit relating to an item is brought into account for the purposes of Schedule 29 to the Finance Act 2002 (intangible fixed assets) for an accounting period (“*the applicable accounting period*”), and
- (b) there is in respect of that item an amount of foreign tax for which, under the arrangements, credit is allowable against United Kingdom tax computed by reference to that item.
- (2) It shall be assumed that tax chargeable under Case VI of Schedule D on the profits and gains arising for the applicable accounting period from the company’s intangible fixed assets falls to be computed on the actual amount of its non-trading credits for that period, and without any deduction in respect of non-trading debits.
- (3) Section 797(3) shall have effect as if—
- (a) there were for the applicable accounting period an amount equal to the adjusted amount of the non-trading debits falling to be brought into account by being set against profits of the company for that period of any description, and
- (b) different parts of that amount might be set against different profits.
- (4) For this purpose the adjusted amount of a company’s non-trading debits for an accounting period is given by:
$$TotalDebits-AmountCarriedForward$where—Total Debits is the aggregate amount of the company’s non-trading debits for that accounting period under Schedule 29 to the Finance Act 2002 (intangible fixed assets), andAmount Carried Forward is the amount (if any) carried forward to the next accounting period of the company under paragraph 35(3) of that Schedule (carry-forward of non-trading loss in respect of which no claim is made for it to be set against total profits of current period).$
#### Computation of losses and limitation on relief.
##### 798A
- (1) This section has effect in relation to the application of section 797(1) to the allowance of credit for foreign tax against corporation tax in respect of trade income.
- (2) The reference in section 797(1) to the relevant income or gain shall be treated as referring only to income arising or gains accruing out of the transaction, arrangement or asset in connection with which the credit for foreign tax arises.
- (3) In determining for the purposes of section 797(1) the amount of corporation tax attributable to any income or gain, there shall be taken into account—
- (a) deductions or expenses which would be allowable in the computation of the taxpayer's liability,
- (b) a reasonable apportionment of allowable deductions or expenses which relate partly to the transaction, arrangement or asset from which the income or gain arises and partly to other matters, and
- (c) expenses of a company connected (within the meaning given by section 839) with the taxpayer, in so far as reasonably attributable to the income or gain.
- (4) In this section and section 798B “*trade income*” means—
- (a) income or profits chargeable to tax under Case I, II or V of Schedule D,
- (b) profits of a Schedule A business computed in same way as the profits of a trade in accordance with section 21A of ICTA,
- (c) sums charged to tax under Case VI of Schedule D in accordance with section 104 of ICTA, and
- (d) any other income or profits which by a provision of ICTA is chargeable to tax under, or computed in accordance with, Case I of Schedule D;
but this section shall not apply in relation to income to which section 804C below applies.
##### 798B
- (1) Where—
- (a) a credit for foreign tax arises in connection with an asset, and
- (b) the asset is in a hedging relationship with a derivative contract,
in the application of section 798A(2) the reference to the income arising out of the asset shall be taken as a reference to the income arising out of the asset and the derivative contract taken together (but taking account of the income or loss from the derivative contract only in so far as reasonably attributable to the hedging relationship).
- (2) For the purposes of subsection (1)(b) an asset is in a hedging relationship with a derivative contract if—
- (a) the asset is acquired as a hedge of risk in connection with the contract, or
- (b) the contract is entered into as a hedge of risk in connection with the asset;
and if an asset or a contract is wholly or partly designated as a hedge for the purposes of a person's accounts, that shall be conclusive for the purpose of this subsection.
- (3) Where royalties (as defined in arrangements having effect by virtue of section 788) are paid in respect of an asset in more than one jurisdiction outside the United Kingdom, for the purposes of section 798A(2)—
- (a) royalty income arising in more than one jurisdiction (other than the United Kingdom) in a year of assessment in respect of that asset shall be treated as income arising from a single transaction, arrangement or asset, and
- (b) credits available for foreign tax in respect of the royalty income shall be aggregated accordingly.
- (4) If a person (“A”) carrying on a trade giving rise to trade income enters into a scheme or arrangement with another person (“B”) a main purpose of which is to alter the effect of section 798A in relation to A, income received in pursuance of the scheme or arrangement shall be treated for the purposes of section 798A as trade income of B (and not as income of A).
- (5) Where—
- (a) transactions, arrangements or assets are treated by a taxpayer as a series or group (the “portfolio”),
- (b) a number of credits for foreign tax arise in respect of the portfolio, and
- (c) either—
- (i) it is not reasonably practicable to prepare a separate computation of income or gain for the purposes of section 798A(2) in respect of each transaction, arrangement or asset, or
- (ii) a separate computation of income or gain in respect of each transaction, arrangement or asset for the purposes of section 798A(2) would not, compared with an aggregated computation, make a material difference to the amount of credit for foreign tax which is allowable,
the income or gains arising from the portfolio, or part of the portfolio, may be aggregated and apportioned for the purposes of section 798A(2) in a fair and reasonable manner.
##### 798C
- (1) This section applies where the application of section 796(1) or 797(1) prevents an amount of credit for foreign tax from being allowable against income tax or corporation tax.
- (2) The amount of disallowed credit may be taken into account as a deduction in computing the taxpayer's liability for income tax or corporation tax, but only in so far as it does not exceed the amount of any loss attributable to the income or gain in respect of which the foreign tax was paid (for which purpose payment of the foreign tax is to be taken into account, despite section 795(2)).
##### 801A
- (1) This section applies where—
- (a) a company (“*the claimant company*”) makes a claim for an allowance by way of credit in accordance with this Part;
- (b) the claim relates to underlying tax on a dividend paid to that company by a company resident outside the United Kingdom (“*the overseas company*”);
- (c) that underlying tax is or includes an amount in respect of tax (“*the high rate tax*”) payable by—
- (i) the overseas company, or
- (ii) such a third, fourth or successive company as is mentioned in section 801,
at a rate in excess of the relievable rate; and
- (d) the whole or any part of the amount in respect of the high rate tax which is or is included in the underlying tax would not be, or be included in, that underlying tax but for the existence of, or for there having been, an avoidance scheme.
- (2) Where this section applies, the amount of the credit to which the claimant company is entitled on the claim shall be determined as if the high rate tax had been tax at the relievable rate, instead of at a rate in excess of that rate.
- (3) For the purposes of this section tax shall be taken to be payable at a rate in excess of the relievable rate if, and to the extent that, the amount of that tax exceeds the amount that would represent tax on the relevant profits at the relievable rate.
- (4) In subsection (3) above “*the relevant profits*”, in relation to any tax, means the profits of the overseas company or, as the case may be, of the third, fourth or successive company which, for the purposes of this Part, are taken to bear that tax.
- (5) In this section “*the relievable rate*” means the rate of corporation tax in force when the dividend mentioned in subsection (1)(b) above was paid.
- (6) In this section “*an avoidance scheme*” means any scheme or arrangement which—
- (a) falls within subsection (7) below; and
- (b) is a scheme or arrangement the purpose, or one of the main purposes, of which is to have an amount of underlying tax taken into account on a claim for an allowance by way of credit in accordance with this Part.
- (7) A scheme or arrangement falls within this subsection if the parties to it include both—
- (a) the claimant company, a company related to that company or a person connected with the claimant company; and
- (b) a person who was not under the control of the claimant company at any time before the doing of anything as part of, or in pursuance of, the scheme or arrangement.
- (8) In this section “*arrangement*” means an arrangement of any kind, whether in writing or not.
- (9) Section 839 (meaning of “*connected persons*”) applies for the purposes of this section.
- (10) Subsection (5) of section 801 (meaning of “*related company*”) shall apply for the purposes of this section as it applies for the purposes of that section.
- (11) For the purposes of this section a person who is a party to a scheme or arrangement shall be taken to have been under the control of the claimant company at all the following times, namely—
- (a) any time when that company would have been taken (in accordance with section 416) to have had control of that person for the purposes of Part XI;
- (b) any time when that company would have been so taken if that section applied (with the necessary modifications) in the case of partnerships and unincorporated associations as it applies in the case of companies; and
- (c) any time when that person acted in relation to that scheme or arrangement, or any proposal for it, either directly or indirectly under the direction of that company.
##### 801B
- (1) This section applies where—
- (a) a company (“*company A*”) resident outside the United Kingdom has paid tax under the law of a territory outside the United Kingdom in respect of any of its profits;
- (b) some or all of those profits become profits of another company resident outside the United Kingdom (“*company B*”) otherwise than by virtue of the payment of a dividend to company B; and
- (c) company B pays a dividend out of those profits to another company (“*company C*”), wherever resident.
- (2) Where this section applies, this Part shall have effect, so far as relating to the determination of underlying tax in relation to any dividend paid—
- (a) by any company resident outside the United Kingdom (whether or not company B),
- (b) to a company resident in the United Kingdom,
as if company B had paid the tax paid by company A in respect of those profits of company A which have become profits of company B as mentioned in subsection (1)(b) above.
- (3) But the amount of relief under this Part which is allowable to a company resident in the United Kingdom shall not exceed the amount which would have been allowable to that company had those profits become profits of company B by virtue of the payment of a dividend by company A to company B.
##### 801C
- (1) This section applies in any case where—
- (a) by virtue only of section 748(1)(a), no apportionment under section 747(3) falls to be made as regards an accounting period of a controlled foreign company; and
- (b) one or more of the dividends paid by the controlled foreign company by virtue of which the condition in paragraph (a) above is satisfied are dividends falling within subsection (2) below.
- (2) A dividend falls within this subsection if, for the purposes of Part I of Schedule 25, the whole or any part of it falls to be treated by virtue of paragraph 4 of that Schedule as paid by the controlled foreign company to a United Kingdom resident.
- (3) If, in a case where this section applies,—
- (a) an initial dividend is paid to a company resident outside the United Kingdom, and
- (b) that company, or any other company which is related to it, pays an intermediate dividend which for the purposes of paragraph 4 of Schedule 25 to any extent represents that initial dividend,
subsection (4) below shall have effect in relation to the UK recipient concerned.
- (4) Where this subsection has effect, it shall be assumed for the purposes of allowing credit relief under this Part to that UK recipient—
- (a) that, instead of the intermediate dividend, the dividends described in subsection (5) below had been paid and the circumstances had been as described in subsection (6) or (7) below, as the case may be; and
- (b) that any tax paid under the law of any territory in respect of the intermediate dividend, or which is underlying tax in relation to that dividend, had instead fallen to be borne accordingly (taking account of any reduction falling to be made under section 799(2)).
- (5) The dividends mentioned in subsection (4)(a) above are—
- (a) as respects each of the initial dividends which are, for the purposes of paragraph 4 of Schedule 25, to any extent represented by the intermediate dividend, a separate dividend (an “*ADP dividend*”) representing, and of an amount equal to, so much of that initial dividend as is for those purposes represented by the intermediate dividend; and
- (b) a further separate dividend (a “*residual dividend*”) representing, and of an amount equal to, the remainder (if any) of the intermediate dividend.
- (6) As respects each of the ADP dividends, the intermediate company is to be treated as if it were a separate company whose distributable profits are of a constitution corresponding to, and an amount equal to, that of the ADP dividend.
- (7) As respects the residual dividend (if any), the relevant profits out of which it is to be regarded for the purposes of section 799(1) as paid by the intermediate company are, in consequence of subsection (6) above, to be treated as being of such constitution and amount as remains after excluding accordingly so much of those relevant profits as constitute the whole or any part of the distributable profits out of which the ADP dividends are paid.
- (8) If, in a case where this section applies, an intermediate company also pays a dividend which is not an intermediate dividend (an “*independent dividend*”) and either—
- (a) that dividend is paid to a United Kingdom resident, or
- (b) if it is not so paid, a dividend which to any extent represents it is paid by a company which is related to that company and resident outside the United Kingdom to a United Kingdom resident,
subsection (9) below shall have effect in relation to the United Kingdom resident.
- (9) Where this subsection has effect, it shall be assumed for the purposes of allowing credit relief under this Part to the United Kingdom resident—
- (a) that the relevant profits out of which the independent dividend is to be regarded for the purposes of section 799(1) as paid by the intermediate company are, in consequence of subsection (6) above, to be treated as being of such constitution and amount as remains after excluding so much of those relevant profits as constitute the whole or any part of the distributable profits out of which the ADP dividends are paid; and
- (b) that any tax paid under the law of any territory in respect of the independent dividend, or which is underlying tax in relation to that dividend, had instead fallen to be borne accordingly (taking account of any reduction falling to be made under section 799(2)).
- (10) For the purposes of this section—
- (a) a controlled foreign company is an “ADP controlled foreign company" as respects any of its accounting periods if the condition in paragraph (a) of subsection (1) above is satisfied as respects that accounting period;
- (b) an “initial dividend" (subject to subsection (14) below) is any of the dividends mentioned in paragraph (b) of subsection (1) above paid by an ADP controlled foreign company; and
- (c) a “*subsequent dividend*” is any dividend which, in relation to one or more initial dividends, is the subsequent dividend for the purposes of paragraph 4 of Schedule 25.
- (11) In this section—
- “*distributable profits*” means a company’s profits available for distribution, determined in accordance with section 799(6);
- “*intermediate company*” means any company resident outside the United Kingdom which pays an intermediate dividend;
- “*intermediate dividend*” means any dividend which is paid by a company resident outside the United Kingdom and which—for the purposes of paragraph 4 of Schedule 25, to any extent represents one or more initial dividends paid by other companies; andeither is the subsequent dividend in the case of those initial dividends or is itself to any extent represented for those purposes by a subsequent dividend;
- “*the UK recipient*” means the United Kingdom resident to whom a subsequent dividend is paid.
- (12) Where—
- (a) one company pays a dividend (“*dividend A*”) to another company, and
- (b) that other company, or a company which is related to it, pays a dividend (“*dividend B*”) to another company,
then, for the purposes of this section, dividend B represents dividend A, and dividend A is represented by dividend B, to the extent that dividend B is paid out of profits which are derived, directly or indirectly, from the whole or part of dividend A.
- (13) Sub-paragraph (2) of paragraph 4 of Schedule 25 (related companies) shall apply for the purposes of this section as it applies for the purposes of that paragraph.
- (14) Where an intermediate company which is an ADP controlled foreign company pays a dividend—
- (a) by virtue of which (whether taken alone or with other dividends) the condition in subsection (1)(a) above is satisfied as regards an accounting period of the company, but
- (b) which also for the purposes of paragraph 4 of Schedule 25 to any extent represents one or more initial dividends paid by other ADP controlled foreign companies,
the dividend shall not be regarded for the purposes of this section as an initial dividend paid by the company, to the extent that it so represents initial dividends paid by other ADP controlled foreign companies.
##### 803A
- (1) This section applies in any case where, under the law of a territory outside the United Kingdom, tax is payable by any one company resident in that territory (“*the responsible company*”) in respect of the aggregate profits, or aggregate profits and aggregate gains, of that company and one or more other companies so resident, taken together as a single taxable entity.
- (1A) Where—
- (a) a company is (within the meaning of section 801) an ADP controlled foreign company as respects any of its accounting periods, and
- (b) the whole or any part of the profits or gains of that accounting period are included in the aggregate profits, or aggregate profits or gains, mentioned in subsection (1) above,
subsection (2) below shall have effect as if the companies mentioned in subsection (1) above did not include that company.
- (2) Where this section applies, this Part shall have effect, so far as relating to the determination of underlying tax in relation to any dividend paid by any of the companies mentioned in subsection (1) above (the “*non-resident companies*”) to another company (“*the recipient company*”), as if—
- (a) the non-resident companies, taken together, were a single company,
- (b) anything done by or in relation to any of the non-resident companies (including the payment of the dividend) were done by or in relation to that single company, and
- (c) that single company were related to the recipient company, if that one of the non-resident companies which actually pays the dividend is related to the recipient company,
(so that, in particular, the relevant profits for the purposes of section 799(1) is a single aggregate figure in respect of that single company and the foreign tax paid by the responsible company is foreign tax paid by that single company).
- (3) For the purposes of this section a company is related to another company if that other company—
- (a) controls directly or indirectly, or
- (b) is a subsidiary of a company which controls directly or indirectly,
not less than 10 per cent. of the voting power in the first-mentioned company.
##### 804ZA
- (1) If the Board consider, on reasonable grounds, that conditions A to D are or may be satisfied in relation to any income or chargeable gain taken or to be taken into account for the purposes of determining a person's liability to tax in a chargeable period, they may give the person a notice under this section.
- (2) Condition A is that, in the case of the person, there is in respect of the income or gain an amount of foreign tax for which, under any arrangements, credit is allowable against United Kingdom tax for that chargeable period.
- (3) Condition B is that there is a scheme or arrangement the main purpose, or one of the main purposes, of which is to cause an amount of foreign tax to be taken into account in the case of the person for that chargeable period.
- (4) Condition C is that the scheme or arrangement is a prescribed scheme or arrangement.
- (5) Condition D is that the amount referred to in subsection (6) is more than a minimal amount.
- (6) The amount is the aggregate of—
- (a) the aggregate amount of the claims for credit that the person has made, or is in a position to make, for the chargeable period; and
- (b) for all the persons connected to that person, the aggregate amount of the claims for credit that the connected person has made, or is in a position to make, for a corresponding chargeable period.
- (7) A chargeable period of a person (“A”) corresponds to a chargeable period of another person (“B”) if at least one day of A's chargeable period falls within B's chargeable period.
- (8) A notice under this section is a notice—
- (a) informing the person of the Board's view under subsection (1),
- (b) specifying the chargeable period in relation to which the Board formed that view,
- (c) if the amount of foreign tax considered by the Board to satisfy condition B is an amount of underlying tax, specifying the body corporate resident in a territory outside the United Kingdom whose payment of foreign tax is relevant to that underlying tax, and
- (d) informing the person that as a consequence section 804ZB has effect in relation to him.
- (9) A notice under this section may specify the adjustments of a person's tax return that, in the view of the Board, fall to be made by him under section 804ZB(2).
- (10) The adjustments specified may, in a case where the notice given to a person specifies a body corporate resident outside the United Kingdom, include treating the body corporate as having paid or being liable to pay only so much foreign tax as would have been allowed to it as a credit if it were resident in the United Kingdom and a notice under this section had been given to it as regards an amount of foreign tax.
- (11) Schedule 28AB makes provision about what constitutes a prescribed scheme or arrangement.
- (12) In this section and sections 804ZB and 804ZC “*tax return*” means—
- (a) a return under section 8, 8A or 12AA of the Management Act, or
- (b) a company tax return;
and “*company tax return*” means the return required to be delivered pursuant to a notice under paragraph 3 of Schedule 18 to the Finance Act 1998, as read with paragraph 4 of that Schedule.
##### 804ZB
- (1) This section applies in relation to a person if—
- (a) a notice under section 804ZA has been given to the person in respect of a chargeable period specified in the notice, and
- (b) the chargeable period specified is a chargeable period in relation to which conditions A to D of section 804ZA are satisfied.
- (2) The person must in his tax return for the period make (or must amend his return for the period so as to make) such adjustments as are necessary for counteracting the effects of the scheme or arrangement in that period that are referable to the purpose referred to in condition B of section 804ZA.
##### 804ZC
- (1) Subsection (2) applies if the Board give a notice to a person under section 804ZA before the person has made his tax return for the chargeable period specified in the notice.
- (2) If the person makes a tax return for that period before the end of the period of 90 days beginning with the day on which the notice is given, he may—
- (a) make a tax return that disregards the notice, and
- (b) at any time after making the return and before the end of the period of 90 days, amend the return for the purpose of complying with the notice.
- (3) If a person has made a tax return for a chargeable period, the Board may only give him a notice under section 804ZA in relation to that period if a notice of enquiry has been given to him in respect of his tax return for that period.
- (4) After any enquiries into the person's tax return for that period have been completed, the Board may only give him a notice under section 804ZA in relation to that period if the requirements in subsections (5) and (7) are satisfied.
- (5) The first requirement is that at the time the enquiries were completed, the Board could not have been reasonably expected, on the basis of the information made available to them or to an officer of theirs before that time, to have been aware that the circumstances were such that a notice under section 804ZA could have been given to the person in relation to that period.
- (6) For the purposes of subsection (5)—
- (a) section 29(6) and (7) of the Management Act (information made available) applies as it applies for the purposes of section 29(5), and
- (b) paragraph 44(2) and (3) of Schedule 18 to the Finance Act 1998 applies as it applies for the purposes of paragraph 44(1).
- (7) The second requirement is that—
- (a) the person was requested to produce, provide or furnish information during an enquiry into the return for that period, and
- (b) if the person had duly complied with the request, the Board could have been reasonably expected to give the person a notice under section 804ZA in relation to that period.
- (8) If a person is given a notice under section 804ZA in relation to a chargeable period after having made a tax return for that period, the person may amend the return for the purpose of complying with the notice at any time before the end of the period of 90 days beginning with the day on which the notice is given.
- (9) If the notice under section 804ZA is given to the person after he has been given a notice of enquiry in respect of his tax return for the period, no closure notice may be given in relation to his tax return until—
- (a) the end of the period of 90 days beginning with the day on which the notice under section 804ZA is given, or
- (b) the earlier amendment of the return for the purpose of complying with the notice.
- (10) If the notice under section 804ZA is given to the person after any enquiries into the return for the period are completed, no discovery assessment may be made as regards the income or chargeable gain to which the notice relates until—
- (a) the end of the period of 90 days beginning with the day on which the notice under section 804ZA is given, or
- (b) the earlier amendment of the return for the purpose of complying with the notice.
- (11) Subsections (2)(b) and (8) do not prevent a person's tax return for a chargeable period becoming incorrect if—
- (a) a notice under section 804ZA is given to the person in relation to that period,
- (b) the return is not amended in accordance with subsection (2)(b) or (8) for the purpose of complying with the notice, and
- (c) the return ought to have been so amended.
- (12) In this section—
- “*closure notice*” means a notice under—section 28A or 28B of the Management Act, orparagraph 32 of Schedule 18 to the Finance Act 1998;
- “*discovery assessment*” means an assessment under—section 29 of the Management Act, orparagraph 41 of Schedule 18 to the Finance Act 1998;
- “*notice of enquiry*” means a notice under—section 9A or 12AC of the Management Act, orparagraph 24 of Schedule 18 to the Finance Act 1998.
##### 804A
- (1) Subsection (2) below applies where credit for tax—
- (a) which is payable under the laws of a territory outside the United Kingdom in respect of insurance business carried on by a company through a permanent establishment in that territory, and
- (b) which is computed otherwise than wholly by reference to profits arising in that territory,
is to be allowed (in accordance with this Part) against corporation tax charged under Case I or Case VI of Schedule D in respect of the profits, computed in accordance with the provisions applicable to Case I of Schedule D, of life assurance business or any category of life assurance business carried on by the company in an accounting period (in this section referred to as “*the relevant profits*”).
- (1A) For the purposes of paragraph (b) of subsection (1) above, the cases where tax payable under the laws of a territory outside the United Kingdom is “*computed otherwise than wholly by reference to profits arising in that territory*” are those cases where the charge to tax in that territory falls within subsection (1B) below.
- (1B) A charge to tax falls within this subsection if it is such a charge made otherwise than by reference to profits as (by disallowing their deduction in computing the amount chargeable) to require sums payable and other liabilities arising under policies to be treated as sums or liabilities falling to be met out of amounts subject to tax in the hands of the company.
- (2) Where this subsection applies, the amount of the credit shall not exceed the greater of—
- (a) any such part of the tax payable under the laws of the territory outside the United Kingdom as is charged by reference to profits arising in that territory, and
- (b) the shareholders’ share of the tax so payable.
- (3) For the purposes of subsection (2) above the shareholders’ share of tax payable under the laws of a territory outside the United Kingdom is so much of that tax as is represented by the fraction
$$AB$where— A is an amount equal to the amount of the relevant profits before making any deduction authorised by subsection (5) below; andB is an amount equal to the excess of—$
- (a) the amount taken into account as receipts of the company in computing those profits, apart from premiums and sums received by virtue of a claim under a reinsurance contract, over
- (b) the amounts taken into account as expenses . . . in computing those profits.
- (4) Where there is no such excess as is mentioned in subsection (3) above, or where the profits are greater than any excess, the whole of the tax payable under the laws of the territory outside the United Kingdom shall be the shareholders’ share; and (subject to that) where there are no profits, none of it shall be the shareholders’ share.
- (5) Where, by virtue of this section, the credit for any tax payable under the laws of a territory outside the United Kingdom is less than it otherwise would be, section 795(2)(a) shall not prevent a deduction being made for the difference in computing the relevant profits.
##### 804B
- (1) Where—
- (a) an insurance company carries on more than one category of business in an accounting period, and
- (b) there arises to the company in that period any income or gain (“*the relevant income*”) in respect of which credit for foreign tax falls to be allowed under any arrangements,
subsection (2) below shall have effect.
- (2) In any such case, the amount of the credit for foreign tax which, under the arrangements, is allowable against corporation tax in respect of so much of the relevant income as is referable (in accordance with the provisions of sections 432ZA to 432E or section 438B) to a particular category of business must not exceed the fraction of the foreign tax which, in accordance with the following provisions of this section, is attributable to that category of business.
- (3) Where the relevant income arises from an asset—
- (a) which is linked solely to a category of business (other than overseas life assurance business), or
- (b) which is an asset of the company’s overseas life assurance fund,
the whole of the foreign tax is attributable to the category mentioned in paragraph (a) above or, as the case may be, to the company’s overseas life assurance business, unless the case is one where subsection (7) below applies in relation to the category of business in question.
- (4) Where subsection (3) above does not apply and the category of business in question is—
- (a) basic life assurance and general annuity business, or
- (b) long-term business which is not life assurance business,
the fraction of the foreign tax that is attributable to that category of business is the fraction whose numerator is the part of the relevant income which is referable to that category by virtue of any provision of section 432A or 438B and whose denominator is the whole of the relevant income.
- (5) Subsections (6) and (7) below apply where the category of business in question is neither—
- (a) basic life assurance and general annuity business; nor
- (b) long-term business which is not life assurance business.
- (6) Where—
- (a) subsection (3) above does not apply, and
- (b) some or all of the relevant income is taken into account in accordance with section 83 of the Finance Act 1989 in an account in relation to which the provisions of section 432C or 432D apply,
the fraction of the foreign tax that is attributable to the category of business in question is the fraction whose numerator is the part of the relevant income which is referable to that category by virtue of any provision of section 432C or 432D and whose denominator is the whole of the relevant income.
- (7) Where some or all of the relevant income falls to be taken into account in determining in accordance with section 83(2) of the Finance Act 1989 the amount referred to in section 432E(1) as the net amount, the fraction of the foreign tax that is attributable to the category of business in question is the fraction—
- (a) whose numerator is the part of the investment income taken into account in that determination which would be referable to that category by virtue of section 432E if the investment income were the only amount included in the net amount; and
- (b) whose denominator is the whole of that investment income.
- (7A) The Treasury may by regulations amend subsection (7) above; and the regulations may include amendments having effect in relation to accounting periods during which they are made.
- (8) No part of the foreign tax is attributable to any category of business except as provided by subsections (3) to (7) above.
- (9) Where for the purposes of this section an amount of foreign tax is attributable to a category of life assurance business other than basic life assurance and general annuity business, credit in respect of the foreign tax so attributable shall be allowed only against corporation tax in respect of profits chargeable under Case VI of Schedule D arising from carrying on that category of business.
##### 804C
- (1) Where—
- (a) an insurance company carries on any category of insurance business in a period of account,
- (b) a computation in accordance with the provisions applicable to Case I of Schedule D falls to be made in relation to that category of business for that period, and
- (c) there arises to the company in that period any income or gain in respect of which credit for foreign tax falls to be allowed under any arrangements,
subsection (2) below shall have effect.
- (2) In any such case, the amount of the credit for foreign tax which, under the arrangements, is to be allowed against corporation tax in respect of so much of that income or gain as is referable to the category of business concerned (“*the relevant income*”) shall be limited by treating the amount of the relevant income as reduced in accordance with subsections (3) and (4) below.
- (3) The first limitation is to treat the amount of the relevant income as reduced (but not below nil) for the purposes of this Chapter by the amount of expenses (if any) attributable to the relevant income.
- (4) If—
- (a) the amount of the relevant income after any reduction under subsection (3) above,
exceeds
- (b) the relevant fraction of the profits of the category of business concerned for the period of account in question which are chargeable to corporation tax,
the second limitation is to treat the relevant income as further reduced (but not below nil) for the purposes of this Chapter to an amount equal to that fraction of those profits.
In this subsection any reference to the profits of a category of business is a reference to those profits after the set off of any losses of that category of business which have arisen in any previous accounting period.
- (5) In determining the amount of the credit for foreign tax which is to be allowed as mentioned in subsection (2) above, the relevant income shall not be reduced except in accordance with that subsection.
- (6) For the purposes of subsection (3) above, the amount of expenses attributable to the relevant income is the appropriate fraction of the total relevant expenses of the category of business concerned for the period of account in question.
- (7) In subsection (6) above, the “*appropriate fraction*” means the fraction—
- (a) whose numerator is the amount of the relevant income before any reduction in accordance with subsection (2) above, and
- (b) whose denominator is the total income of the category of business concerned for the period of account in question,
unless the denominator so determined is nil, in which case the denominator shall instead be the amount described in subsection (8) below.
- (8) That amount is so much in total of the income and gains—
- (a) which arise to the company in the period of account in question, and
- (b) in respect of which credit for foreign tax falls to be allowed under any arrangements,
as are referable to the category of business concerned (before any reduction in accordance with subsection (2) above).
- (9) In subsection (4) above, the “*relevant fraction*” means the fraction—
- (a) whose numerator is the amount of the relevant income before any reduction in accordance with subsection (2) above; and
- (b) whose denominator is the amount described in subsection (8) above.
- (10) Where a 75 per cent subsidiary of an insurance company is acting in accordance with a scheme or arrangement and—
- (a) the purpose, or one of the main purposes, of that scheme or arrangement is to prevent or restrict the application of subsection (2) above to the insurance company, and
- (b) the subsidiary does not carry on insurance business of any description,
the amount of corporation tax attributable (apart from this subsection) to any item of income or gain arising to the subsidiary shall be found by setting off against that item the amount of expenses that would be attributable to it under subsection (3) above if that item had arisen directly to the insurance company.
- (11) Where the credit allowed for any tax payable under the laws of a territory outside the United Kingdom is, by virtue of subsection (2) above, less than it would be if the relevant income were not treated as reduced in accordance with that subsection, section 795(2)(a) shall not prevent a deduction being made for the difference in computing the profits of the category of business concerned.
- (12) Where, by virtue of subsection (10) above, the credit allowed for any tax payable under the laws of a territory outside the United Kingdom is less than it would be apart from that subsection, section 795(2)(a) shall not prevent a deduction being made for the difference in computing the income of the 75 per cent subsidiary.
- (13) For the purposes of the operation of this section in relation to any income or gain in respect of which credit falls to be allowed under any arrangements, the amount of the income or gain that is referable to a category of insurance business is the same fraction of the income and gain as the fraction of the foreign tax that is attributable to that category of business in accordance with section 804B.
- (14) This section shall be construed—
- (a) in accordance with section 804D, where the category of business concerned is life assurance business or a category of life assurance business; and
- (b) in accordance with section 804E, where the category of business concerned is not life assurance business or any category of life assurance business.
##### 804D
- (1) This section has effect for the interpretation of section 804C where the category of business concerned is life assurance business or a category of life assurance business.
- (2) The “total income" of the category of business concerned for the period of account in question is the amount (if any) by which—
- (a) so much of the total income shown in the revenue account in the periodical return of the company concerned for that period as is referable to that category of business,
exceeds
- (b) so much of any commissions payable and any expenses of management incurred in connection with the acquisition of the business, as shown in that return, so far as referable to that category of business.
- (3) Where any amounts fall to be brought into account in accordance with section 83 of the Finance Act 1989, the amounts that are referable to the category of business concerned shall be determined for the purposes of subsection (2) above in accordance with sections 432B to 432F.
- (4) The “total relevant expenses" of the category of business concerned for any period of account is the amount of the claims incurred—
- (a) increased by any increase in the liabilities of the company, or
- (b) reduced (but not below nil) by any decrease in the liabilities of the company.
- (5) For the purposes of subsection (4) above, the amounts to be taken into account in the case of any period of account are the amounts as shown in the company’s periodical return for the period so far as referable to the category of business concerned.
##### 804E
- (1) This section has effect for the interpretation of section 804C where the category of business concerned is not life assurance business or any category of life assurance business.
- (2) The “total income" of the category of business concerned for any period of account is the amount (if any) by which—
- (a) the sum of the amounts specified in subsection (3) below,
exceeds
- (b) the sum of the amounts specified in subsection (4) below.
- (3) The amounts mentioned in subsection (2)(a) above are—
- (a) earned premiums, net of reinsurance;
- (b) investment income and gains;
- (c) other technical income, net of reinsurance;
- (d) any amount treated under section 107(2) of the Finance Act 2000 as a receipt of the company’s trade.
- (4) The amounts mentioned in subsection (2)(b) above are—
- (a) acquisition costs;
- (b) the change in deferred acquisition costs;
- (c) losses on investments.
- (5) The “total relevant expenses" of the category of business concerned for any period of account is the sum of—
- (a) the claims incurred, net of reinsurance,
- (b) the changes in other technical provisions, net of reinsurance,
- (c) the change in the equalisation provision, and
- (d) investment management expenses,
unless that sum is a negative amount, in which case the total relevant expenses shall be taken to be nil.
- (6) The amounts to be taken into account for the purposes of the paragraphs of subsections (3) to (5) above are the amounts taken into account for the purposes of corporation tax.
- (7) Expressions used—
- (a) in the paragraphs of subsections (3) to (5) above, and
- (b) in the provisions of section B of Schedule 9A to the Companies Act 1985 (form and content of accounts of insurance companies and groups) which relate to the profit and loss account format (within the meaning of paragraph 7(1) of that section),
have the same meaning in those paragraphs as they have in those provisions.
##### 804F
Expressions used in sections 804A to 804E and in Chapter I of Part XII have the same meaning in those sections as in that Chapter.
##### 804G
- (1) This section applies if—
- (a) credit for foreign tax falls to be allowed to a person (“P”) under any arrangements, and
- (b) a payment is made by a tax authority to P, or any person connected with P, by reference to the foreign tax.
- (2) The amount of that credit is to be reduced by an amount equal to that payment.
- (3) Section 839 applies for the purposes of determining whether or not a person is connected with P.
### Foreign dividends: onshore pooling and utilisation of eligible unrelieved foreign tax
##### 806A
- (1) This section applies where, in any accounting period of a company resident in the United Kingdom, an amount of eligible unrelieved foreign tax arises in respect of a dividend falling within subsection (2) below paid to the company.
- (2) The dividends that fall within this subsection are any dividends chargeable under Case V of Schedule D, other than—
- (a) any dividend which is trading income for the purposes of section 393;
- (b) any dividend which, in the circumstances described in paragraphs (a) and (b) of subsection (8) of section 393, would by virtue of that subsection fall to be treated as trading income for the purposes of subsection (1) of that section;
- (c) in a case where section 801A applies, the dividend mentioned in subsection (1)(b) of that section;
- (d) in a case where section 803 applies, the dividend mentioned in subsection (1)(b) of that section;
- (e) any dividend the amount of which is, under section 811, treated as reduced.
- (3) For the purposes of this section—
- (a) the cases where an amount of eligible unrelieved foreign tax arises in respect of a dividend falling within subsection (2) above are the cases set out in subsections (4) and (5) below; and
- (b) the amounts of eligible unrelieved foreign tax which arise in any such case are those determined in accordance with section 806B.
- (4) Case A is where—
- (a) the amount of the credit for foreign tax which under any arrangements would, apart from section 797, be allowable against corporation tax in respect of the dividend,
exceeds
- (b) the amount of the credit for foreign tax which under the arrangements is allowed against corporation tax in respect of the dividend.
- (5) Case B is where the amount of tax which, by virtue of any provision of any arrangements, falls to be taken into account as mentioned in section 799(1) in the case of the dividend (whether or not by virtue of section 801(2) or (3)) is less than it would be apart from the mixer cap.
But if that is so in any case by reason only of the mixer cap restricting the amount of underlying tax that is treated as mentioned in subsection (2) or (3) of section 801 in the case of a dividend paid by a company resident in the United Kingdom, the case does not fall within Case B.
- (6) In determining whether the circumstances are as set out in subsection (4) or (5) above, sections 806C and 806D shall be disregarded.
##### 806B
- (1) This section has effect for determining the amounts of eligible unrelieved foreign tax which arise in the cases set out in section 806A(4) and (5).
- (2) In Case A, the difference between—
- (a) the amount of the credit allowed as mentioned in section 806A(4)(b), and
- (b) the greater amount of the credit that would have been so allowed if, for the purposes of subsection (2) of section 797, the rate of corporation tax payable as mentioned in that subsection were the upper percentage,
shall be an amount of eligible unrelieved foreign tax.
- (3) In Case B, the amount (if any) by which—
- (a) the aggregate of the upper rate amounts falling to be brought into account for the purposes of this paragraph by virtue of subsection (4) or (5) below, exceeds
- (b) the amount of tax to be taken into account as mentioned in section 799(1) in the case of the Case V dividend, before any increase under section 801(4B),
shall be an amount of eligible unrelieved foreign tax.
- (4) In the case of the Case V dividend (but not any lower level dividend), the upper rate amount to be brought into account for the purposes of subsection (3)(a) above—
- (a) in a case where the mixer cap does not restrict the amount of tax to be taken into account as mentioned in section 799(1) (before any increase under section 801(4B)) in the case of that dividend, is that amount of tax; or
- (b) in a case where the mixer cap restricts the amount of tax to be so taken into account in the case of that dividend, is the greater amount that would have been so taken into account if, in the application of the formula in section 799(1A) in the case of that dividend (but not any lower level dividend) M% had, in relation to—
- (i) so much of D as does not represent any lower level dividend, and
- (ii) so much of U as is not underlying tax attributable to any lower level dividend,
been the upper percentage.
- (5) In the case of any dividend (the “*relevant dividend*”) received as mentioned in subsection (2) or (3) of section 801 which is a lower level dividend in relation to the Case V dividend, the upper rate amount to be brought into account for the purposes of subsection (3)(a) above—
- (a) in a case where the mixer cap does not restrict the amount of underlying tax that is treated as mentioned in subsection (2) or (3), as the case may be, of section 801 in the case of the relevant dividend, is the appropriate portion of that amount of underlying tax;
- (b) in a case where—
- (i) the relevant dividend was paid by a company resident in the United Kingdom, and
- (ii) the mixer cap restricts the amount of underlying tax that is treated as mentioned in subsection (2) or (3), as the case may be, of section 801 in the case of that dividend,
is the appropriate portion of that restricted amount of underlying tax; or
- (c) in a case where—
- (i) the relevant dividend was paid by a company resident outside the United Kingdom, and
- (ii) the mixer cap restricts the amount of underlying tax that is treated as mentioned in subsection (2) or (3), as the case may be, of section 801 in the case of that dividend,
is the appropriate portion of the greater amount of tax that would have been so treated if, in the application of the formula in section 799(1A) in the case of that dividend (but not any other dividend) M% had, in relation to so much of D as does not represent any lower level dividend, and so much of U as is not underlying tax attributable to any lower level dividend, been the upper percentage.
- (6) For the purposes of subsection (5) above, the “*appropriate portion*” of any amount there mentioned in the case of a dividend is found by multiplying that amount by the product of the reducing fractions for each of the higher level dividends.
- (7) For the purposes of subsection (6) above, the “*reducing fraction*” for any dividend is the fraction—
- (a) whose numerator is the amount of the dividend; and
- (b) whose denominator is the amount of the relevant profits (within the meaning of section 799(1)) out of which the dividend is paid.
- (8) Any reference in this section to any tax being restricted by the mixer cap in the case of any dividend is a reference to that tax being so restricted otherwise than by virtue only of the application of the mixer cap in the case of one or more lower level dividends.
- (9) For the purpose of determining the amount described in subsection (2)(b), (4)(b) or (5)(c) above, sections 806C and 806D shall be disregarded.
- (10) In this section—
- “*the Case V dividend*” means the dividend mentioned in section 806A(1);
- “*higher level dividend*”, in relation to another dividend, means any dividend—by which that other dividend is to any extent represented; andwhich either is the Case V dividend or is to any extent represented by the Case V dividend;
- “*lower level dividend*”, in relation to another dividend, means any dividend which—is received as mentioned in section 801(2) or (3); andis to any extent represented by that other dividend;
- “*the relevant tax*” means—in the case of the Case V dividend, the foreign tax to be taken into account as mentioned in section 799(1); andin the case of any other dividend, the amount of underlying tax to be treated as mentioned in section 801(2) or (3) in the case of the dividend.
##### 806C
- (1) In this section “qualifying foreign dividend" means any dividend which falls within section 806A(2), other than—
- (a) an ADP dividend paid by a controlled foreign company;
- (b) so much of any dividend paid by any company as represents an ADP dividend paid by another company which is a controlled foreign company;
- (c) a dividend in respect of which an amount of eligible unrelieved foreign tax arises.
- (2) For the purposes of this section—
- (a) a “related qualifying foreign dividend" is any qualifying foreign dividend paid to a company resident in the United Kingdom by a company which, at the time of payment of the dividend, is related to that company;
- (b) an “unrelated qualifying foreign dividend" is any qualifying foreign dividend which is not a related qualifying foreign dividend.
- (3) For the purposes of giving credit relief under this Part to a company resident in the United Kingdom—
- (a) the related qualifying foreign dividends that arise to the company in an accounting period shall be aggregated;
- (b) the unrelated qualifying foreign dividends that arise to the company in an accounting period shall be aggregated;
- (c) the underlying tax in relation to the related qualifying foreign dividends that arise to the company in an accounting period shall be aggregated;
- (d) so much of the foreign tax paid in respect of the qualifying foreign dividends that arise to the company in an accounting period as is not underlying tax shall be aggregated.
- (4) Credit relief under this Part shall be given as if—
- (a) the related qualifying foreign dividends aggregated under paragraph (a) of subsection (3) above in the case of any accounting period instead together constituted a single related qualifying foreign dividend arising in that accounting period (“*the single related dividend*” arising in that accounting period);
- (b) the unrelated qualifying foreign dividends aggregated under paragraph (b) of that subsection in the case of any accounting period instead together constituted a single unrelated qualifying foreign dividend arising in that accounting period (“*the single unrelated dividend*” arising in that accounting period);
- (c) the underlying tax aggregated under paragraph (c) of that subsection for any accounting period were instead underlying tax in relation to the single related dividend arising in that accounting period (the “aggregated underlying tax" in respect of the single related dividend);
- (d) the tax aggregated under paragraph (d) of that subsection for any accounting period were instead foreign tax (other than underlying tax) paid in respect of, and computed by reference to,—
- (i) the single related dividend arising in that accounting period,
- (ii) the single unrelated dividend so arising, or
- (iii) partly the one dividend and partly the other,
(that aggregated tax being referred to as the “*aggregated withholding tax*”).
- (5) For the purposes of this section, a dividend paid by a controlled foreign company is an “*ADP dividend*” if it is a dividend by virtue of which (whether in whole or in part and whether taken alone or with one or more other dividends) no apportionment under section 747(3) falls to be made as regards an accounting period of the controlled foreign company in a case where such an apportionment would fall to be made apart from section 748(1)(a).
##### 806D
- (1) For the purposes of this section, where—
- (a) any eligible unrelieved foreign tax arises in an accounting period of a company, and
- (b) the dividend in relation to which it arises is paid by a company which, at the time of payment of the dividend, is related to that company,
that tax is “eligible underlying tax" to the extent that it consists of or represents underlying tax.
- (2) To the extent that any eligible unrelieved foreign tax is not eligible underlying tax it is for the purposes of this section “*eligible withholding tax*”.
- (3) For the purposes of giving credit relief under this Part to a company resident in the United Kingdom—
- (a) the amounts of eligible underlying tax that arise in an accounting period of the company shall be aggregated (that aggregate being referred to as the “relievable underlying tax" arising in that accounting period); and
- (b) the amounts of eligible withholding tax that arise in an accounting period of the company shall be aggregated (that aggregate being referred to as the “relievable withholding tax" arising in that accounting period).
- (4) The relievable underlying tax arising in an accounting period of the company shall be treated for the purposes of allowing credit relief under this Part as if it were—
- (a) underlying tax in relation to the single related dividend that arises in the same accounting period,
- (b) relievable underlying tax arising in the next accounting period (whether or not any related qualifying foreign dividend in fact arises to the company in that accounting period), or
- (c) underlying tax in relation to the single related dividend that arises in such one or more preceding accounting periods as result from applying the rules in section 806E,
or partly in one of those ways and partly in each or either of the others.
- (5) The relievable withholding tax arising in an accounting period of the company shall be treated for the purposes of allowing credit relief under this Part as if it were—
- (a) foreign tax (other than underlying tax) paid in respect of, and computed by reference to, the single related dividend or the single unrelated dividend that arises in the same accounting period,
- (b) relievable withholding tax arising in the next accounting period (whether or not any qualifying foreign dividend in fact arises to the company in that accounting period), or
- (c) foreign tax (other than underlying tax) paid in respect of, and computed by reference to, the single related dividend or the single unrelated dividend that arises in such one or more preceding accounting periods as result from applying the rules in section 806E,
or partly in one of those ways and partly in any one or more of the others.
- (6) The amount of relievable underlying tax or relievable withholding tax arising in an accounting period that is treated—
- (a) under subsection (4)(a) or (c) above as underlying tax in relation to the single related dividend arising in the same or any earlier accounting period, or
- (b) under subsection (5)(a) or (c) above as foreign tax paid in respect of, and computed by reference to, the single related dividend or the single unrelated dividend arising in the same or any earlier accounting period,
must not be such as would cause an amount of eligible unrelieved foreign tax to arise in respect of that dividend.
##### 806E
- (1) Where any relievable tax is to be treated as mentioned in section 806D(4)(c) or (5)(c), the rules for determining the accounting periods in question (and the amount of the relievable tax to be so treated in relation to each of them) are those set out in the following provisions of this section.
- (2) Rule 1 is that the accounting periods in question must be accounting periods beginning not more than three years before the accounting period in which the relievable tax arises.
- (3) Rule 2 is that the relievable tax must be so treated that—
- (a) credit for, or for any remaining balance of, the relievable tax is allowed against corporation tax in respect of the single dividend arising in a later one of the accounting periods beginning as mentioned in rule 1 above,
before
- (b) credit for any of the relievable tax is allowed against corporation tax in respect of the single dividend arising in any earlier such accounting period.
- (4) Rule 3 is that the relievable tax must be so treated that, before allowing credit for any of the relievable tax against corporation tax in respect of the single dividend arising in any accounting period, credit for foreign tax is allowed—
- (a) first for the aggregated foreign tax in respect of the single dividend arising in that accounting period, so far as not consisting of relievable tax arising in another accounting period; and
- (b) then for relievable tax arising in any accounting period before that in which the relievable tax in question arises.
- (5) The above rules are subject to sections 806D(6) and 806F.
- (6) In this section—
- “*aggregated foreign tax*” means aggregated underlying tax or aggregated withholding tax;
- “*relievable tax*” means relievable underlying tax or relievable withholding tax;
- “*the single dividend*” means—in relation to relievable underlying tax, the single related dividend; andin relation to relievable withholding tax, the single related dividend or the single unrelated dividend.
##### 806F
- (1) For the purposes of this Part, credit in accordance with any arrangements shall, in the case of any dividend, be given so far as possible—
- (a) for underlying tax (where allowable) before foreign tax other than underlying tax;
- (b) for foreign tax other than underlying tax before amounts treated as underlying tax; and
- (c) for amounts treated as underlying tax (where allowable) before amounts treated as foreign tax other than underlying tax.
- (2) Accordingly, where the amount of foreign tax to be brought into account for the purposes of allowing credit relief under this Part is subject to any limitation or restriction, the limitation or restriction shall be taken to have the effect of excluding foreign tax other than underlying tax before excluding underlying tax.
##### 806G
- (1) The relievable underlying tax or relievable withholding tax arising in any accounting period shall only be treated as mentioned in subsection (4) or (5) of section 806D on a claim.
- (2) Any such claim must specify the amount (if any) of that tax—
- (a) which is to be treated as mentioned in paragraph (a) of the subsection in question;
- (b) which is to be treated as mentioned in paragraph (b) of that subsection; and
- (c) which is to be treated as mentioned in paragraph (c) of that subsection.
- (3) A claim under subsection (1) above may only be made before the expiration of the period of—
- (a) six years after the end of the accounting period mentioned in that subsection; or
- (b) if later, one year after the end of the accounting period in which the foreign tax in question is paid.
##### 806H
- (1) The Board may by regulations make provision for, or in connection with, allowing a company which is a member of a group to surrender all or any part of the amount of the relievable tax arising to it in an accounting period to another company which is a member of that group at the time, or throughout the period, prescribed by the regulations.
- (2) The provision that may be made under subsection (1) above includes provision—
- (a) prescribing the conditions which must be satisfied if a surrender is to be made;
- (b) determining the amount of relievable tax which may be surrendered in any accounting period;
- (c) prescribing the conditions which must be satisfied if a claim to surrender is to be made;
- (d) prescribing the consequences for tax purposes of a surrender having been made;
- (e) allowing a claim to be withdrawn and prescribing the effect of such a withdrawal.
- (3) Regulations under subsection (1) above—
- (a) may make different provision for different cases; and
- (b) may contain such supplementary, incidental, consequential or transitional provision as the Board may think fit.
- (4) For the purposes of subsection (1) above a company is a member of a group if the conditions prescribed for that purpose in the regulations are satisfied.
##### 806J
- (1) This section has effect for the interpretation of the foreign dividend provisions of this Chapter.
- (2) In this section, “*the foreign dividend provisions of this Chapter*” means sections 806A to 806H and this section.
- (3) For the purposes of the foreign dividend provisions of this Chapter, where—
- (a) one company pays a dividend (“*dividend A*”) to another company, and
- (b) that other company, or a company which is related to it, pays a dividend (“*dividend B*”) to another company,
dividend B represents dividend A, and dividend A is represented by dividend B, to the extent that dividend B is paid out of profits which are derived, directly or indirectly, from the whole or part of dividend A.
- (4) Where—
- (a) one company is related to another, and
- (b) that other is related to a third company,
the first company shall be taken for the purposes of paragraph (b) of subsection (3) above to be related to the third, and so on where there is a chain of companies, each of which is related to the next.
- (5) In any case where—
- (a) a company resident outside the United Kingdom pays a dividend to a company resident in the United Kingdom, and
- (b) the circumstances are such that subsection (6)(b) of section 790 has effect in relation to that dividend,
the foreign dividend provisions of this Chapter shall have effect as if the company resident outside the United Kingdom were related to the company resident in the United Kingdom (and subsection (10) of that section shall have effect accordingly).
- (6) Subsection (5) of section 801 (related companies) shall apply for the purposes of the foreign dividend provisions of this Chapter as it applies for the purposes of that section.
- (7) In the foreign dividend provisions of this Chapter—
- “*aggregated underlying tax*” shall be construed in accordance with section 806C(4)(c);
- “*aggregated withholding tax*” shall be construed in accordance with section 806C(4)(d);
- “*controlled foreign company*” has the same meaning as in Chapter IV of Part XVII;
- “*eligible unrelieved foreign tax*” shall be construed in accordance with sections 806A and 806B;
- “*the mixer cap*” means section 799(1)(b);
- “*qualifying foreign dividend*” has the meaning given by section 806C(1);
- “*related qualifying foreign dividend*” has the meaning given by section 806C(2)(a);
- “*relievable tax*” has the meaning given by section 806E(6);
- “*relievable underlying tax*” shall be construed in accordance with 806D(3)(a);
- “*relievable withholding tax*” shall be construed in accordance with 806D(3)(b);
- “*single related dividend*” shall be construed in accordance with section 806C(4)(a);
- “*single unrelated dividend*” shall be construed in accordance with section 806C(4)(b);“the upper percentage" is 45 per cent.
### Application of foreign dividend provisions to branches or agencies in the UK of persons resident elsewhere
##### 806K
- (1) Sections 806A to 806J shall apply in relation to an amount of eligible unrelieved foreign tax arising in a chargeable period in respect of any of the income of a branch or agency in the United Kingdom of a person resident outside the United Kingdom as they apply in relation to eligible unrelieved foreign tax arising in an accounting period of a company resident in the United Kingdom in respect of any of the company’s income, but with the modifications specified in subsection (2) below.
- (2) Those modifications are—
- (a) take any reference to an accounting period as a reference to a chargeable period;
- (b) take any reference to corporation tax as including a reference to income tax;
- (bb) in relation to income tax, take any reference to a dividend chargeable under Case V of Schedule D as a reference to a dividend chargeable under Chapter 4 of Part 4 of ITTOIA 2005;
- (c) take the reference in section 806A(4)(a) to section 797 as a reference to sections 796 and 797;
- (d) in relation to income tax, for subsection (2) of section 806B substitute the subsection (2) set out in subsection (3) below.
- (3) That subsection is—
- (“) In Case A, the difference between—
- (a) the amount of the credit allowed as mentioned in section 806A(4)(b), and
- (b) the greater amount of credit that would have been so allowed if, for the purposes of section 796, the amount of income tax borne on the dividend as computed under that section were charged at a rate equal to the upper percentage,
shall be an amount of eligible unrelieved foreign tax. ".
### Unrelieved foreign tax: profits of overseas branch or agency
##### 806L
- (1) This section applies where, in any accounting period of a company resident in the United Kingdom, an amount of unrelieved foreign tax arises in respect of any of the company’s qualifying income from an overseas permanent establishment of the company.
- (2) The amount of the unrelieved foreign tax so arising shall be treated for the purposes of allowing credit relief under this Part as if it were foreign tax paid in respect of, and computed by reference to, the company’s qualifying income from the same overseas permanent establishment—
- (a) in the next accounting period (whether or not the company in fact has any such income from that source in that accounting period), or
- (b) in such one or more preceding accounting periods, beginning not more than three years before the accounting period in which the unrelieved foreign tax arises, as result from applying the rules in subsection (3) below,
or partly in the one way and partly in the other.
- (3) Where any unrelieved foreign tax is to be treated as mentioned in paragraph (b) of subsection (2) above, the rules for determining the accounting periods in question (and the amount of the unrelieved foreign tax to be so treated in relation to each of them) are that the unrelieved foreign tax must be so treated under that paragraph—
- (1) that—
- (a) credit for, or for any remaining balance of, the unrelieved foreign tax is allowed against corporation tax in respect of income of a later one of the accounting periods beginning as mentioned in that paragraph,
before
- (b) credit for any of the unrelieved foreign tax is allowed against corporation tax in respect of income of any earlier such period;
- (2) that, before allowing credit for any of the unrelieved foreign tax against corporation tax in respect of income of any accounting period, credit for foreign tax is allowed—
- (a) first for foreign tax in respect of the income of that accounting period, other than unrelieved foreign tax arising in another accounting period; and
- (b) then for unrelieved foreign tax arising in any accounting period before that in which the unrelieved foreign tax in question arises.
- (4) For the purposes of this section, the cases where an amount of unrelieved foreign tax arises in respect of any of a company’s qualifying income from an overseas permanent establishment in an accounting period are those cases where—
- (a) the amount of the credit for foreign tax which under any arrangements would, apart from section 797, be allowable against corporation tax in respect of that income,
exceeds
- (b) the amount of the credit for foreign tax which under the arrangements is allowed against corporation tax in respect of that income;
and in any such case that excess is the amount of the unrelieved foreign tax in respect of that income.
- (5) For the purposes of this section, a company’s qualifying income from an overseas permanent establishment is the profits of the overseas permanent establishment which are—
- (a) chargeable under Case I of Schedule D; or
- (b) included in the profits of life reinsurance business or overseas life assurance business chargeable under Case VI of Schedule D by virtue of section 439B or 441.
- (6) Where (whether by virtue of this subsection or otherwise) an amount of unrelieved foreign tax arising in an accounting period falls to be treated under subsection (2) above for the purposes of allowing credit relief under this Part as foreign tax paid in respect of, and computed by reference to, qualifying income of an earlier accounting period, it shall not be so treated for the purpose of any further application of this section.
- (7) In this section—
- “*overseas permanent establishment*” means a permanent establishment through which a company carries on a trade in a territory outside the United Kingdom; and
- “*permanent establishment*”—if there are arrangements having effect under section 788 in relation to the territory concerned that define the expression, has the meaning given by those arrangements, andif there are no such arrangements, or if they do not define the expression, has the meaning given by section 148 of the Finance Act 2003.
##### 806M
- (1) This section has effect for the purposes of section 806L and shall be construed as one with that section.
- (2) If, in any accounting period, a company ceases to have a particular overseas permanent establishment, the amount of any unrelieved foreign tax which arises in that accounting period in respect of the company’s income from that overseas permanent establishment shall, to the extent that it is not treated as mentioned in section 806L(2)(b), be reduced to nil (so that no amount arises which falls to be treated as mentioned in section 806L(2)(a)).
- (3) If a company—
- (a) at any time ceases to have a particular overseas permanent establishment in a particular territory (“*the old permanent establishment*”), but
- (b) subsequently again has an overseas permanent establishment in that territory (“*the new permanent establishment*”),
the old permanent establishment and the new permanent establishment shall be regarded as different overseas permanent establishments.
- (4) If, under the law of a territory outside the United Kingdom, tax is charged in the case of a company resident in the United Kingdom in respect of the profits of two or more of its overseas permanent establishments in that territory, taken together, then, for the purposes of—
- (a) section 806L, and
- (b) subsection (3) above,
those overseas permanent establishments shall be treated as if they together constituted a single overseas permanent establishment of the company.
- (5) Unrelieved foreign tax arising in respect of qualifying income from a particular overseas permanent establishment in any accounting period shall only be treated as mentioned in subsection (2) of section 806L on a claim.
- (6) Any such claim must specify the amount (if any) of the unrelieved foreign tax—
- (a) which is to be treated as mentioned in paragraph (a) of that subsection; and
- (b) which is to be treated as mentioned in paragraph (b) of that subsection.
- (7) A claim under subsection (5) above may only be made before the expiration of the period of—
- (a) six years after the end of the accounting period mentioned in that subsection, or
- (b) if later, one year after the end of the accounting period in which the foreign tax in question is paid.
##### 807A
- (1) This Part shall have effect for the purposes of corporation tax in relation to any company as if tax falling within subsection (2) below were to be disregarded.
- (2) Subject to subsection (2A) below, tax falls within this subsection in relation to a company to the extent that it is—
- (a) tax under the law of a territory outside the United Kingdom; and
- (b) is attributable, on a just and reasonable apportionment,
- (i) to interest accruing under a loan relationship at a time when the company is not a party to the relationship ; or
- (ii) to so much of a relevant payment as, on such an apportionment, is attributable to a time when the company is not a party to the derivative contract concerned.
- (2A) Tax attributable to interest accruing to a company under a loan relationship does not fall within subsection (2) above if—
- (a) at the time when the interest accrues, that company has ceased to be a party to that relationship by reason of having made the initial transfer under or in accordance with any repo or stock-lending arrangements relating to that relationship; and
- (b) that time falls during the period for which those arrangements have effect.
- (2B) Where, in the case of any share, section 91A or 91B of the Finance Act 1996 (shares treated as loan relationships) applies in relation to a company for an accounting period, this section has effect—
- (a) in relation to a distribution in respect of the share as it has effect in relation to interest under a loan relationship, and
- (b) in relation to a distribution accruing in respect of the share at a time when the company does not (within the meaning of the section in question) hold the share as it applies in relation to interest accruing under a loan relationship at a time when the company is not a party to the loan relationship.
- (3) Subject to subsections (1), (4) and (5) of this section, where—
- (a) any non-trading credit relating to an amount of interest under a loan relationship is brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in the case of any company,
- (b) that amount falls, as a result of any related transaction other than the initial transfer under or in accordance with any repo or stock-lending arrangements relating to that relationship, to be paid to a person other than the company, and
- (c) had the company been entitled, at the time of that transaction, to receive a payment of an amount of interest equal to the amount of interest to which the non-trading credit relates, the company would have been liable in respect of the amount of interest received to an amount of tax under the law of a territory outside the United Kingdom,
credit for that amount of tax shall be allowable under section 790(4) as if that amount of tax were an amount of tax paid under the law of that territory in respect of the amount of interest to which the non-trading credit relates.
- (4) Subsection (3) above does not apply in the case of a credit brought into account in accordance with paragraph 1(2) of Schedule 11 to the Finance Act 1996 (the I minus E basis).
- (5) The Treasury may by regulations provide for subsection (3) above to apply—
- (a) in the case of trading credits, as well as in the case of non-trading credits;
- (b) in the case of any credit (“an insurance credit”) in the case of which, by virtue of subsection (4) above, it would not otherwise apply.
- (6) Regulations under subsection (5) above may—
- (a) provide for subsection (3) above to apply in the case of a trading credit or an insurance credit only if the circumstances are such as may be described in the regulations;
- (b) provide for subsection (3) above to apply, in cases where it applies by virtue of any such regulations, subject to such exceptions, adaptations or other modifications as may be specified in the regulations;
- (c) make different provision for different cases; and
- (d) contain such incidental, supplemental, consequential and transitional provision as the Treasury think fit.
- (6A) In this section “*repo or stock-lending arrangements*” has the same meaning as in paragraph 15 of Schedule 9 to the Finance Act 1996 (repo transactions and stock-lending); and, in relation to any such arrangements—
- (a) a reference to the initial transfer is a reference to the transfer mentioned in sub-paragraph (3)(a) of that paragraph; and
- (b) a reference to the period for which the arrangements have effect is a reference to the period from the making of the initial transfer until whichever is the earlier of the following—
- (i) the discharge of the obligations arising by virtue of the entitlement or requirement mentioned in sub-paragraph (3)(b) of that paragraph; and
- (ii) the time when it becomes apparent that the discharge mentioned in sub-paragraph (i) above will not take place.
- (7) In this section—
- “*related transaction*” has the same meaning as in section 84 of the Finance Act 1996;
- “*relevant payment*” means a payment the amount of which falls to be determined (wholly or mainly) by applying to a notional principal amount specified in a derivative contract, for a period so specified, a rate the value of which at all times is the same as that of a rate of interest so specified;
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and
- “*trading credit*” means any credit falling to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in accordance with section 82(2) of that Act.
##### 808A
- (1) Subsection (2) below applies where any arrangements having effect by virtue of section 788—
- (a) make provision, whether for relief or otherwise, in relation to interest (as defined in the arrangements), and
- (b) make provision (the special relationship provision) that where owing to a special relationship the amount of the interest paid exceeds the amount which would have been paid in the absence of the relationship, the provision mentioned in paragraph (a) above shall apply only to the last-mentioned amount.
- (2) The special relationship provision shall be construed as requiring account to be taken of all factors, including—
- (a) the question whether the loan would have been made at all in the absence of the relationship,
- (b) the amount which the loan would have been in the absence of the relationship, and
- (c) the rate of interest and other terms which would have been agreed in the absence of the relationship.
- (3) The special relationship provision shall be construed as requiring the taxpayer to show that there is no special relationship or (as the case may be) to show the amount of interest which would have been paid in the absence of the special relationship.
- (4) In a case where—
- (a) a company makes a loan to another company with which it has a special relationship, and
- (b) it is not part of the first company’s business to make loans generally,
the fact that it is not part of the first company’s business to make loans generally shall be disregarded in construing subsection (2) above.
- (5) Subsection (2) above does not apply where the special relationship provision expressly requires regard to be had to the debt on which the interest is paid in determining the excess interest (and accordingly expressly limits the factors to be taken into account).
##### 808B
- (1) Subsection (2) below applies where any arrangements having effect by virtue of section 788—
- (a) make provision, whether for relief or otherwise, in relation to royalties (as defined in the arrangements), and
- (b) make provision (the special relationship provision) that where owing to a special relationship the amount of the royalties paid exceeds the amount which would have been paid in the absence of the relationship, the provision mentioned in paragraph (a) above shall apply only to the last-mentioned amount.
- (2) The special relationship provision shall be construed as requiring account to be taken of all factors, including—
- (a) the question whether the agreement under which the royalties are paid would have been made at all in the absence of the relationship,
- (b) the rate or amounts of royalties and other terms which would have been agreed in the absence of the relationship, and
- (c) where subsection (3) below applies, the factors specified in subsection (4) below.
- (3) This subsection applies if the asset in respect of which the royalties are paid, or any asset which that asset represents or from which it is derived, has previously been in the beneficial ownership of—
- (a) the person who is liable to pay the royalties,
- (b) a person who is, or has at any time been, an associate of the person who is liable to pay the royalties,
- (c) a person who has at any time carried on a business which, at the time when the liability to pay the royalties arises, is being carried on in whole or in part by the person liable to pay those royalties, or
- (d) a person who is, or has at any time been, an associate of a person who has at any time carried on such a business as is mentioned in paragraph (c) above.
- (4) The factors mentioned in subsection (2)(c) above are—
- (a) the amounts which were paid under the transaction, or under each of the transactions in the series of transactions, as a result of which the asset has come to be an asset of the beneficial owner for the time being,
- (b) the amounts which would have been so paid in the absence of a special relationship, and
- (c) the question whether the transaction or series of transactions would have taken place in the absence of such a relationship.
- (5) The special relationship provision shall be construed as requiring the taxpayer to show—
- (a) the absence of any special relationship, or
- (b) the rate or amount of royalties that would have been payable in the absence of the relationship,
as the case may be.
- (6) The requirement on the taxpayer to show in accordance with subsection (5)(a) above the absence of any special relationship includes a requirement—
- (a) to show that no person of any of the descriptions in paragraphs (a) to (d) of subsection (3) above has previously been the beneficial owner of the asset in respect of which the royalties are paid, or of any asset which that asset represents or from which it is derived, or
- (b) to show the matters specified in subsection (7) below,
as the case may be.
- (7) Those matters are—
- (a) that the transaction or series of transactions mentioned in subsection (4)(a) above would have taken place in the absence of a special relationship, and
- (b) the amounts which would have been paid under the transaction, or under each of the transactions in the series of transactions, in the absence of such a relationship.
- (8) Subsection (2) above does not apply where the special relationship provision expressly requires regard to be had to the use, right or information for which royalties are paid in determining the excess royalties (and accordingly expressly limits the factors to be taken into account).
- (9) For the purposes of this section one person (“*person A*”) is an associate of another person (“*person B*”) at a given time if—
- (a) person A was, within the meaning of Schedule 28AA, directly or indirectly participating in the management, control or capital of person B at that time, or
- (b) the same person was or same persons were, within the meaning of Schedule 28AA, directly or indirectly participating in the management, control or capital of person A and person B at that time.
#### Additions to non-profit funds: amount of loss reduction
#### Additions to non-profit funds: amount of loss reduction
##### 815A
- (1) This section applies where section 269C of the 1970 Act or section 140C or 140F of the Taxation of Chargeable Gains Act 1992 applies; and references in this section to company A, the transfer and the trade shall be construed accordingly.
- (2) Where gains accruing to company A on the transfer would have been chargeable to tax under the law of the relevant member State but for the Mergers Directive, this Part, including any arrangements having effect by virtue of section 788, shall apply as if the amount of tax, calculated on the required basis, which would have been payable under that law in respect of the gains so accruing but for that Directive, were tax payable under that law.
- (5) For the purposes of this section, the required basis is that—
- (a) so far as permitted under the law of the relevant member State, any losses arising on the transfer are set against any gains so arising, and
- (b) any relief available to company A under that law has been duly claimed.
- (6) In this section—
- “*the Mergers Directive*” means the Directive of the Council of the European Communities dated 23rd July 1990 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different member States (no. [90/434/EEC](https://www.legislation.gov.uk/european/directive/1990/0434));
- “*relevant member State*” means the member State in which, immediately before the time of the transfer, company A carried on the trade through a permanent establishment.
@@ -43982,7 +43982,7 @@
#### Transfers of life assurance business: Case VI losses of the transferor
#### Transfers of business: deemed periodical return
#### Transfers of life assurance business: Case I losses of the transferor
##### 826A
@@ -44026,7 +44026,7 @@
- (6) This section does not apply for the purposes of corporation tax.
#### Transfers of business: election for transferee to pay tax of transferor
#### Retained assets
##### 834A
@@ -44188,7 +44188,7 @@
- (5) For the purposes of this section the reference to section 583 of ITEPA 2003 is a reference to that section only where the paying scheme (see subsection (3) of that section) is a pilots' benefit fund (see section 587 of that Act).
#### Transfer schemes transferring part of business: reduction in income of transferee
#### Transfers of business: transferor shares are assets of transferee's long-term insurance fund etc
##### 837A
@@ -45364,7 +45364,7 @@
## SCHEDULE 4A
#### Treatment of oil extraction activities etc. for tax purposes.
#### Valuation of oil disposed of or appropriated in certain circumstances.
##### 1
@@ -47314,7 +47314,7 @@
## SCHEDULE 12AA
#### Regulations in relation to qualifying policies
#### Tax representatives.
##### 1
@@ -47328,7 +47328,7 @@
“*Business travel*” means travelling the expenses of which, if incurred and defrayed by the employee in question out of the emoluments of his employment, would (in the absence of sections 197AD to 197AF) be deductible under section 198(1) (general relief for necessary expenses).
#### Non-resident policies and off-shore capital redemption policies.
#### Overseas life assurance business: life policies.
##### 3
@@ -47407,7 +47407,7 @@
- (2) Section 168(6) (when cars and vans are made available for private use and are made available by reason of employment) applies for the purposes of sub-paragraph (1).
#### Conditions to be satisfied by partners who are individuals.
#### Conditions to be satisfied by firms.
##### 7
@@ -51242,7 +51242,7 @@
## Part 2 — Application and interpretation
#### Leased assets subject to hire-purchase agreements.
#### Meaning of “asset”, “capital sum” and “lease” for purposes of sections 781 to 784.
##### 2
@@ -74502,537 +74502,537 @@
#### U.K. company distributions not generally chargeable to corporation tax.
#### Conditional acquisition of shares.
#### Further interpretation of sections 135 to 139.
#### Application of lower rate to company distributions.
#### Section 209(3AA): hedging arrangements
#### Chargeable payments connected with exempt distributions.
#### Section 209(3AA): link to shares of company or associated company
#### Exempt distributions: division of business
#### Stock dividends: distributions.
#### Interpretation of sections 249 and 250.
#### Meaning of “the minimum amount”
#### Children’s tax credit.
#### Married couple’s allowance(pre-5th December 2005 marriages).
#### Transitional relief: the elderly.
#### Early conversion or surrender of life policies.
#### Eligibility for relief.
#### Aggregation of wife’s income with husband’s.
#### Transfer of reliefs.
#### Minimum and maximum subscriptions.
#### Disposal of shares.
#### Withdrawal of relief.
#### Tax on companies in administration
#### The conditions mentioned in section 349A(1)
#### Transfers of trade to obtain balancing allowances
#### Company reconstructions: supplemental.
#### Company reconstructions involving business of leasing plant or machinery
#### Directions disapplying section 349A(1)
#### Directions disapplying section 349A(1)
#### Substitution of security: supplemental.
#### Relief where borrower deceased.
#### Loan to pay inheritance tax.
#### Home improvement loans.
#### Interest which never has been relevant loan interest etc.
#### Losses from overseas property business.
#### Losses from overseas property business.
#### Treatment of interest as a loss for purposes of carry-forward and carry-back.
#### Restrictions on right of set-off.
#### Losses of ring fence trade: set off against profits of an earlier accounting period
#### Leasing contracts and company reconstructions.
#### Transactions in deposits with and without certificates or in debts.
#### Close companies.
#### Limits on group relief.
#### Meaning of “participator”, “associate”, “director” and “loan creditor”.
#### “Distribution” to include certain expenses of close companies.
#### Computation of losses and limitation on relief.
#### Additions to non-profit funds: amount of loss reduction
#### Determination of policy holders’ share for purposes of s.438B
#### Taxation of pure reinsurance business.
#### Modification of s. 444BA for mutual or overseas business and for non-resident companies.
#### Retained assets
#### Taxation in respect of other business.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Exploration expenditure supplement
#### Cases where ss. 502B to 502G do not apply: plant or machinery held as trading stock
#### Conditions to be satisfied by individuals.
#### Conditions to be satisfied by companies.
#### General powers to make regulations under Chapter IV.
#### Transactions associated with loans or credit.
#### Offshore income gains: application of transfer of assets abroad provisions
#### Income treated as arising under section 761(1): remittance basis
#### Provision not at arm’s length.
#### Form of relief.
#### Attribution of relief to shares.
#### Interpretation of Chapter III.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Losses from UK property business.
#### Amounts eligible for group relief: trading losses.
#### Loans to participators etc.
#### Income or gains arising from property investment LLP
#### Securities.
#### Taxation in respect of other business.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Lessee under long funding finance lease: limit on deductions
#### General powers to make regulations under Chapter IV.
#### Meaning of “construction operations”.
#### Change in ownership of company carrying on property business.
#### Change in company ownership: postponed corporation tax.
#### Supplementary provisions.
#### Provisions supplementary to section 138.
#### Travel expenses of employees not domiciled in the United Kingdom.
#### U.K. company distributions not generally chargeable to corporation tax.
#### Meaning of “distribution”.
#### Election by company paying dividend.
#### Returns.
#### Meaning of “adjusted net income”
#### Children’s tax credit.
#### Children’s tax credit.
#### Transitional relief: husband with excess allowances.
#### Qualifying policies.
#### Eligibility for relief.
#### Aggregation of wife’s income with husband’s.
#### Aggregation of wife’s income with husband’s.
#### Further interpretation of sections 135 to 139.
#### Relief for contributions in respect of share option gains.
#### Further interpretation of sections 135 to 139.
#### Relief for necessary expenses.
## [SCHEDULE 19A
#### Change in ownership of company with unused non-trading loss on intangible fixed assets
#### Relief by agreement with other territories.
#### Exceptions from the general charge.
#### Provisions supplementary to section 138.
#### Interpretation of sections 251A to 251C
#### Interpretation of sections 251A to 251C
#### Relief for contributions in respect of share option gains.
#### Meaning of “distribution”.
#### Married couple's allowance (post-5th December 2005 marriages and civil partnerships etc.)
#### Tax on companies in administration
#### Qualifying maintenance payments.
#### Payments out of profits or gains brought into charge to income tax: deduction of tax.
#### Payments not out of profits or gains brought into charge to income tax, and annual interest.
#### Extension of section 349: proceeds of sale of UK patent rights
#### The conditions mentioned in section 349A(1)
#### Losses from trade etc. carried on abroad
#### Exclusions from section 423.
#### Election that assets not be foreign business assets
#### Securities.
#### Transfers of life assurance business: Case VI losses of the transferor
#### Taxation in respect of other business.
#### Taxation in respect of other business: incorporated friendly societies etc.
#### Transfers of other business
#### Conditions for tax exempt business.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Lessee under long funding finance lease: termination
#### Lessee under long funding finance lease: termination
#### Deductions from profits of contributions paid under certified schemes.
#### General powers to make regulations under Chapter IV.
#### General powers to make regulations under Chapter IV.
#### Deductions from profits of contributions paid under certified schemes.
#### Relief by agreement with other territories.
#### Section 785B: expectation that relevant capital payment will not be paid
#### Arrangements made under old law.
#### Reduction of United Kingdom taxes by amount of credit due.
#### Dividends paid out of transferred profits.
#### Payments not out of profits or gains brought into charge to income tax, and annual interest.
#### Payments out of profits or gains brought into charge to income tax: deduction of tax.
#### Exclusions from section 423.
#### Interpretative provisions relating to insurance companies.
#### Schedule A business or overseas property business.
#### Modifications where tax charged under Case I of Schedule D.
#### Election as to tax exempt business.
#### Maximum benefits payable to members.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Letting of furnished holiday accommodation treated as trade for certain income tax purposes
#### Charities: general.
#### Taxation of design royalties where owner abroad.
#### Deductions from profits of contributions paid under certified schemes.
#### Provisions supplementary to sections 573 to 575.
#### Schemes and arrangements designed to increase relief
#### Insurance companies carrying on more than one category of business: restriction of credit.
#### Exemptions from section 148.
#### Giving effect to mileage allowance relief
#### Limited exemption for computer equipment.
#### Taxation of profit-related pay.
#### Taxation of profit-related pay.
#### Relief for contributions in respect of share option gains.
#### Elections as to transfer of relief under section 257A or 257AB.
#### Application to subsidiaries.
#### Losses from overseas property business.
#### Meaning of “associated company” and “control”.
#### Section 432B apportionment: income of non-participating funds.
#### Apportionment of asset value increase where line 51 amount decreases
#### Modifications in relation to BLAGAB group reinsurers
#### Election as to tax exempt business.
#### Old societies.
#### Assets of branch of registered friendly society to be treated as assets of society after incorporation.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Transactions with substantial donors
#### Transactions with substantial donors
#### Introductory.
#### Qualifying trading companies
#### Provisions supplementary to sections 573 to 575.
#### The trading requirement
#### Arrangements made under old law.
#### Section 796: trade income
#### Separate streaming of dividend so far as representing an ADP dividend of a CFC.
#### Limited exemption for computer equipment.
#### Provisions supplementary to section 138.
#### Attribution of relief to shares.
#### Provisions supplementary to sections 293 and 297.
#### Withdrawal of relief.
#### Tax on companies in administration
#### The conditions mentioned in section 349A(1)
#### Transfers of trade to obtain balancing allowances
#### Company reconstructions: supplemental.
#### Transfers of trade to obtain balancing allowances
#### Directions disapplying section 349A(1)
#### Directions disapplying section 349A(1)
#### Substitution of security: supplemental.
#### Relief where borrower deceased.
#### Loan to pay inheritance tax.
#### Second loans.
#### Interest which never has been relevant loan interest etc.
#### Losses from overseas property business.
#### Losses from overseas property business.
#### Treatment of interest as a loss for purposes of carry-forward and carry-back.
#### Extension of right of set-off to capital allowances.
#### Losses of ring fence trade: set off against profits of an earlier accounting period
#### Terminal losses.
#### Transactions in deposits with and without certificates or in debts.
#### Close companies.
#### Computation of gross profits.
#### Meaning of “participator”, “associate”, “director” and “loan creditor”.
#### “Distribution” to include certain expenses of close companies.
#### Reduced loss relief for additions to non-profit funds
#### Sections 434AZA and 434AZB: supplementary
#### Determination of policy holders’ share for purposes of s.438B
#### Life reinsurance business: separate charge on profits.
#### Equalisation reserves for general business.
#### Retained assets
#### Taxation in respect of other business.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Tariff receipts and tax-exempt tariffing receipts
#### Cases where ss. 502B to 502G do not apply: lessor also lessee under non-long funding lease
#### Conditions to be satisfied by individuals.
#### Conditions to be satisfied by companies.
#### General powers to make regulations under Chapter IV.
#### Section 785B: expectation that relevant capital payment will not be paid
#### Offshore income gains: application of transfer of assets abroad provisions
#### Income treated as arising under section 761(1): remittance basis
#### Provision not at arm’s length.
#### Form of relief.
#### Attribution of relief to shares.
#### Interpretation of Chapter III.
#### Company reconstructions: supplemental.
#### Losses from UK property business.
#### Losses etc. which may be surrendered by way of group relief.
#### Loans to participators etc.
#### Determination of policy holders’ share for purposes of s.438B
#### Securities.
#### Taxation in respect of other business.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Taxation of borrower when loan under section 419 released etc
#### Section 432B apportionment: income of non-participating funds.
#### Authorised unit trusts.
#### Certified unit trusts: corporation tax.
#### Dividends paid to investment trusts.
#### Transitional provisions relating to unit trusts.
#### Supplementary provisions.
#### Audit powers in relation to non-residents.
#### Lessee under long funding finance lease: limit on deductions
#### General powers to make regulations under Chapter IV.
#### Meaning of “construction operations”.
#### Change in ownership of company carrying on property business.
#### Change in company ownership: postponed corporation tax.
#### Supplementary provisions.
#### Provisions supplementary to section 138.
#### Travel expenses of employees not domiciled in the United Kingdom.
#### U.K. company distributions not generally chargeable to corporation tax.
#### Meaning of “distribution”.
#### Election by company paying dividend.
#### Returns.
#### Further interpretation of sections 135 to 139.
#### Relief for contributions in respect of share option gains.
#### Further interpretation of sections 135 to 139.
#### Relief for necessary expenses.
## [SCHEDULE 19A
#### Change in ownership of company with unused non-trading loss on intangible fixed assets
#### Relief by agreement with other territories.
#### Exceptions from the general charge.
#### Provisions supplementary to section 138.
#### Interpretation of sections 251A to 251C
#### Interpretation of sections 251A to 251C
#### Relief for contributions in respect of share option gains.
#### Meaning of “distribution”.
#### Married couple's allowance (post-5th December 2005 marriages and civil partnerships etc.)
#### Tax on companies in administration
#### Qualifying maintenance payments.
#### Payments out of profits or gains brought into charge to income tax: deduction of tax.
#### Payments not out of profits or gains brought into charge to income tax, and annual interest.
#### Extension of section 349: proceeds of sale of UK patent rights
#### The conditions mentioned in section 349A(1)
#### Treatment of interest as a loss for purposes of carry-forward and carry-back.
#### Apportionment of certain income, deductions and interest.
#### Interpretative provisions relating to insurance companies.
#### Securities.
#### Transfers of life assurance business: Case VI losses of the transferor
#### Taxation in respect of other business.
#### Taxation in respect of other business: incorporated friendly societies qualifying for exemption.
#### Transfers of other business
#### Transfers of other business
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Lessee under long funding finance lease: termination
#### Lessee under long funding finance lease: limit on deductions
#### Deductions from profits of contributions paid under certified schemes.
#### General powers to make regulations under Chapter IV.
#### General powers to make regulations under Chapter IV.
#### Meaning of “construction operations”.
#### Relief by agreement with other territories.
#### Section 785B: expectation that relevant capital payment will not be paid
#### Arrangements made under old law.
#### Interpretation of credit code.
#### Dividends paid out of transferred profits.
#### Payments not out of profits or gains brought into charge to income tax, and annual interest.
#### Payments out of profits or gains brought into charge to income tax: deduction of tax.
#### Exclusions from section 423.
#### Interpretative provisions relating to insurance companies.
#### Apportionment of income and gains.
#### Modifications for change of tax basis
#### Election as to tax exempt business.
#### Life or endowment business: application of the Corporation Tax Acts.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Letting of furnished holiday accommodation treated as trade for certain income tax purposes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Income arising under settlement where settlor retains an interest.
#### Income arising under settlement where settlor retains an interest.
#### Revocable settlements allowing release of obligation.
#### Payments to unmarried minor children of settlor.
#### Repayment supplements: companies.
#### Application of Income Tax Acts to public departments and avoidance of exempting provisions.
#### Interest on tax overpaid.
#### VAT penalties etc.
#### Application of Income Tax Acts to public departments and avoidance of exempting provisions.
#### Substituted retirement annuity contracts.
#### Revocable settlements allowing release of obligation.
#### Repayment supplements: companies.
#### Interest on payments in respect of corporation tax and meaning of “the material date".
#### Territorial sea and designated areas.
#### Interest on tax overpaid.
#### Schedule C.
#### Certain income charged at basic rate.
#### Restrictions on relief
#### Regulations
#### Rules for ascertaining duration of leases.
#### Tax treatment of receipts and outgoings on sale of land.
#### United Kingdom government securities held by non-residents.
#### Disposal or exercise of rights in pursuance of deposits.
#### Discounted bills of exchange.
#### Expenses of insurance companies
#### Discounted bills of exchange.
#### Payments to Export Credit Guarantee Department.
#### Expenses connected with living accommodation.
#### Restrictions on the use of tax credits by pension funds.
#### Section 432B apportionment: value of non-participating funds.
#### Section 432B apportionment: value of non-participating funds.
#### Distribution accounts.
#### Interest paid on deposits with banks etc.
#### Computation of amount available for surrender by way of group relief.
#### Charities: general.
#### Relief for payments in respect of designs.
#### Deductions from profits of contributions paid under certified schemes.
#### Provisions supplementary to sections 573 to 575.
#### Schemes and arrangements designed to increase relief
#### Insurance companies carrying on more than one category of business: restriction of credit.
#### Exemptions from section 148.
#### Giving effect to mileage allowance relief
#### Limited exemption for computer equipment.
#### Taxation of profit-related pay.
#### Interpretation.
#### Relief for contributions in respect of share option gains.
#### Elections as to transfer of relief under section 257A or 257AB.
#### Withdrawal of relief.
#### Losses from overseas property business.
#### Certain quoted companies not to be close companies.
#### Section 432B apportionment: income of non-participating funds.
#### Transfers of business involving excess assets
#### Overseas life assurance business.
#### Election as to tax exempt business.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Section 548A: further definitions
#### Payments to unmarried minor children of settlor.
#### Revocable settlements allowing reversion of property.
#### Interpretation of the Tax Acts.
#### Interpretation of Income Tax Acts.
#### Old societies.
#### Assets of branch of registered friendly society to be treated as assets of society after incorporation.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Transactions with substantial donors
#### Charitable and non-charitable expenditure
#### Savings banks: exemption from tax.
#### Patent income to be earned income in certain cases.
#### Relief for expenses.
#### Introductory.
#### Qualifying trading companies
#### Provisions supplementary to sections 573 to 575.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Information: supplementary provisions
#### The property managing subsidiaries requirement
#### Settlements made before 7th April 1965 but after 9th April 1946.
#### Sub-funds
#### Certain distributions to be treated as income to which section 686 applies.
#### Earnings from associated employments.
#### Interpretation of Income Tax Acts.
#### Miscellaneous charges (list for the purposes of certain provisions that formerly referred to Case VI of Schedule D)
#### Interpretation of the Corporation Tax Acts.
#### Meaning of “UK property business” and “overseas property business”
#### Meaning of “UK property business” and “overseas property business”
#### Assets of branch of registered friendly society to be treated as assets of society after incorporation.
#### Exemption for trade unions and employers’ associations.
#### Funds of funds: distributions.
#### Provisions supplementary to section 520.
#### Provisions supplementary to section 520.
#### Life policies: chargeable events.
#### Treatment of certain assignments etc involving co-ownership
#### Certain deficiencies allowable as deductions.
#### Information: supplementary provisions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Statutory redundancy payments.
#### Qualifying interests in land held jointly
#### Exemption from tax in respect of qualifying premiums.
#### Payments under discretionary trusts.
#### Certain income not to be income of settlor etc.
#### Special provisions as to certain interests in residue.
#### Cancellation of tax advantage.
#### Interpretation of the Tax Acts.
#### Interpretation of Income Tax Acts.
#### Interpretation of the Tax Acts.
#### Interpretation of Income Tax Acts.
#### Interpretation of the Corporation Tax Acts.
#### Authorised unit trusts.
#### Introductory.
#### Information: supplementary provisions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The trading requirement
#### Relief by agreement with other territories.
#### Foreign tax on items giving rise to a non-trading credit: intangible fixed assets
#### Dividends paid out of transferred profits.
#### Limited exemption for computer equipment.
#### Provisions supplementary to section 138.
#### Attribution of relief to shares.
#### Exceptions from section 419.
#### Section 432B apportionment: income of non-participating funds.
#### Exemption for trade unions and employers’ associations.
#### Certified unit trusts: corporation tax.
#### Dividends paid to investment trusts.
#### Court common investment funds.
#### Supplementary provisions.
#### Audit powers in relation to non-residents.
#### Lessee under long funding finance lease: limit on deductions
#### Letting of furnished holiday accommodation treated as trade for certain income tax purposes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Income arising under settlement where settlor retains an interest.
#### Income arising under settlement where settlor retains an interest.
#### Revocable settlements allowing release of obligation.
#### Payments to unmarried minor children of settlor.
#### Repayment supplements: companies.
#### Application of Income Tax Acts to public departments and avoidance of exempting provisions.
#### Interest on tax overpaid.
#### Interest on payments in respect of corporation tax and meaning of “the material date".
#### Application of Income Tax Acts to public departments and avoidance of exempting provisions.
#### Substituted retirement annuity contracts.
#### Revocable settlements allowing release of obligation.
#### Repayment supplements: companies.
#### Interest on payments in respect of corporation tax and meaning of “the material date".
#### Territorial sea and designated areas.
#### Interest on tax overpaid.
#### Schedule C.
#### Fractions of a pound, and yearly assessments.
#### Restrictions on relief
#### Restrictions on relief
#### Rules for ascertaining duration of leases.
#### Tax treatment of receipts and outgoings on sale of land.
#### Securities of foreign states.
#### Deep discount securities.
#### Discounted bills of exchange.
#### Expenses of insurance companies
#### Discounted bills of exchange.
#### Debts of overseas governments etc.
#### Expenses connected with living accommodation.
#### Restrictions on the use of tax credits by pension funds.
#### Section 432B apportionment: participating funds.
#### Section 432B apportionment: value of non-participating funds.
#### Interpretation.
#### Building societies: time for payment of tax.
#### Sale and lease-back.
#### Charities: general.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Section 548A: further definitions
#### Income arising under settlement where settlor retains an interest.
#### Revocable settlements allowing release of obligation.
#### Interpretation of the Tax Acts.
#### Interpretation of Income Tax Acts.
#### Old societies.
#### Assets of branch of registered friendly society to be treated as assets of society after incorporation.
#### Determination of reduced rate for building societies and composite rate for banks etc.
#### Manner of making allowances and charges.
#### Relief for expenses.
#### Introductory.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Information: supplementary provisions
#### The qualifying subsidiaries requirement
#### Settlements made after 6th April 1965.
#### Application of section 739 and 740
#### Certain distributions to be treated as income to which section 686 applies.
#### Earnings from associated employments.
#### Interpretation of Income Tax Acts.
#### Miscellaneous charges (list for the purposes of certain provisions that formerly referred to Case VI of Schedule D)
#### Interpretation of the Corporation Tax Acts.
#### Meaning of “UK property business” and “overseas property business”
#### Miscellaneous charges (list for the purposes of certain provisions that formerly referred to Case VI of Schedule D)
#### Old societies.
#### Exemption for trade unions and employers’ associations.
#### Certified unit trusts: distributions.
#### Provisions supplementary to section 520.
#### Allowances for expenditure on purchase of patent rights: post-31st March 1986 expenditure.
#### Life policies: chargeable events.
#### Calculation of certain amounts for purposes of sections 540, 542 and 545.
#### Section 548A: further definitions
#### Information: supplementary provisions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Expenditure on car hire: supplementary
#### Gifts of shares, securities and real property to charities etc
#### Counselling services for employees.
#### Exemption from tax in respect of qualifying premiums.
#### Application of section 686D where settlor has made more than one settlement
#### Schedule 4 directions.
#### Supplementary provisions as to absolute interests in residue.
#### Cancellation of tax advantage.
#### Interpretation of the Tax Acts.
#### Interpretation of Income Tax Acts.
#### Interpretation of the Tax Acts.
#### Interpretation of Income Tax Acts.
#### Interpretation of the Corporation Tax Acts.
#### Authorised unit trusts.
#### Introductory.
#### Information: supplementary provisions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying trading companies
#### Qualifying courses of training etc.
#### Termination of relief under this Chapter, and transitional provisions.
#### Interpretation.
#### Application to Scotland.
#### Meaning of “interest”, “transfers with or without accrued interest” etc.
@@ -75254,7 +75254,7 @@
#### Levies and repayments under the Financial Services and Markets Act 2000.
#### Provisions supplementary to sections 100 and 101.
#### Valuation of work in progress at discontinuance of profession or vocation.
#### Tax credits for non-U.K. residents.
@@ -75386,7 +75386,7 @@
#### Building societies: incidental costs of issuing qualifying shares.
#### Relevant deposits: computation of tax on interest.
#### “Deposit-taker”, “deposit” and “relevant deposit”.
#### Non-resident policies and off-shore capital redemption policies.
@@ -75398,334 +75398,838 @@
#### Treatment of price differential on sale and repurchase of securities.
#### Interpretation of section 730A.
#### Dealers in securities.
#### Exchange gains and losses on sale and repurchase of securities
#### Persons entitled to exemptions.
#### Manufactured dividends and interest.
#### Qualifying trade, profession or vocation
#### How averaging claim is given effect
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Levies and repayments under the Financial Services and Markets Act 2000.
#### Costs of establishing share option or profit sharing schemes: relief.
#### Payments to trustees of approved profit sharing schemes.
#### Charitable donations: contributions to agent’s expenses.
#### Restriction on relief: individuals.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### CHAPTER 1B — PROVISIONS AS TO CAPITAL SUMS PAID TO SETTLOR
### CHAPTER 1C — LIABILITY OF TRUSTEES
#### Cessation of approval: general provisions.
#### Section 591C: supplementary.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Receipts to be treated as income to which section 686 applies
#### Meaning of “settlement day” for purposes of sections 711 to 728.
#### Reduction in chargeable profits for certain financing income
#### Special rule for computing chargeable profits.
#### Special rule for computing chargeable profits.
#### Reduction in chargeable profits following an exempt period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The approved amount: passenger payments
#### Introduction
#### Introduction
## Part IV — Disallowed debits and non-trading deficits
#### Reduction in chargeable profits: failure to qualify for exemptions
#### Reduction in chargeable profits for certain financing income
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying vehicles
#### Employment
#### The approved amount: mileage allowance payments
#### Costs of establishing share option or profit sharing schemes: relief.
#### Charitable donations: contributions to agent’s expenses.
#### Taxable premiums etc.
#### Meaning of “the aggregate amount”
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Introductory.
#### Life policies: computation of gain.
#### Information: supplementary provisions
#### Business entertaining expenses.
#### Qualifying counselling services etc.
#### Revocable settlements allowing reversion of property.
#### Settlements made before 7th April 1965 but after 9th April 1946.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Treatment of deemed sums and reliefs.
#### Appeals against Board’s notices under section 703.
#### Unrealised interest in default
#### Nominees, trustees etc.
#### Transfers of rights to receive distributions in respect of shares
#### Offshore income gains: application of transfer of assets abroad provisions
#### Offshore income gains accruing to persons resident or domiciled abroad.
#### Offshore income gains accruing to persons resident or domiciled abroad.
#### Change in ownership of company carrying on property business.
#### The approved amount: mileage allowance payments
#### The approved amount: mileage allowance payments
#### Qualifying companies
#### Tax year
#### Treatment of receipts as earned income.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Application of this Chapter etc. to policies and contracts in which persons other than companies are interested
#### The conditions for being an excepted group life policy
#### The property managing subsidiaries requirement
#### Substituted retirement annuity contracts.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Exceptions from sections 713 and 714
#### Variable interest rate.
#### Trading stock.
#### Section 751A: supplementary
#### Relevant interests.
#### Determinations requiring the sanction of the Board.
#### Tax year
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Manufactured interest on UK securities: general
### Manufactured interest on gilt-edged securities etc.
#### Amount of post-commencement supplement for a post-commencement period
#### Taxable premiums etc.
#### Meaning of “the aggregate amount”
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Regulations in relation to qualifying policies
#### Effect of appointment or arrangements under section 659B.
#### Exemption from tax in respect of qualifying premiums.
#### Certain distributions to be treated as income to which section 686 applies.
#### Application of section 686D where settlor has made more than one settlement
#### Receipts to be treated as income to which section 686 applies
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Variable interest rate.
#### Transfers of rights to receive distributions in respect of shares
#### Deemed interest: cash collateral under stock lending arrangements
#### Income treated as arising under section 761(1): remittance basis
#### Change in company ownership: postponed corporation tax.
#### Change in company ownership: postponed corporation tax.
#### Sales etc. at an undervalue or overvalue.
#### Section 785B: expectation that relevant capital payment will not be paid
#### Company vehicles
#### Introduction
#### The approved amount: mileage allowance payments
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Effect of appointment or arrangements under section 659B.
#### Interpretation of section 686B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Deemed manufactured payments: further provisions.
#### Change in ownership of company with unused non-trading loss on intangible fixed assets
#### Sales etc. at an undervalue or overvalue.
#### Restriction of relief for payments of interest.
#### Tax year
#### Company vehicles
#### Employment
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### “A significant amount of time”
#### Section 87(2) and (3) and reductions in receipts under ITTOIA 2005
#### “A significant amount of time”
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The control and independence requirement
#### Business entertaining expenses.
#### Appeals against Board’s notices under section 703.
#### Meaning of “settlement day” for purposes of sections 711 to 728.
#### Exceptions from sections 713 and 714
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Exemption from sections 739 and 740 (transactions before 5th December 2005)
#### Application of sections 741 and 741A
### Introductory
### Payments and other benefits to which section 148 applies
### Payments and other benefits excluded from charge under section 148
### Application of £30,000 threshold
### Exclusion or reduction of charge in case of foreign service
### Valuation of benefits
### Notional interest treated as paid if amount charged in respect of beneficial loan
### Giving effect to the charge to tax
### Reporting requirements
### Interpretation
#### Leased assets: special cases.
#### The approved amount: passenger payments
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying companies
#### About this Schedule
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Exemption from sections 739 and 740 (transactions before 5th December 2005)
#### Supplemental provisions.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### About this Schedule
#### Qualifying companies
#### Section 590: supplementary provisions.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Liability of non-transferors.
#### Exemption from sections 739 and 740 (transactions before 5th December 2005)
#### Company vehicles
#### Introduction
#### The non-qualifying pool
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Power to modify sections 727A, 730A, 730BB and 737A to 737C
#### Power to modify sections 727A, 730A, 730BB and 737A to 737C
#### Power to obtain information.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Exemption from sections 739 and 740 (transactions before 5th December 2005)
#### Tax year
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Tax credits under Part 1 of Tax Credits Act 2002
#### Nominees, trustees etc.
#### Trading stock.
#### Information.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Reduction in chargeable profits for certain financing income
#### Reduction in chargeable profits: failure to qualify for exemptions
### The appropriate percentage
### Car with CO2 emissions figure
### The lower threshold
### Bi-fuel cars
#### Interpretation of credit code.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Supplement in respect of a post-commencement period
#### The non-qualifying pool
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying companies
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Manufactured dividends and interest.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Interpretation.
#### Amount of post-commencement supplement for a post-commencement period
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### Amount of post-commencement supplement for a post-commencement period
#### About this Schedule
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### Qualifying companies
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Effect of notice under section 804ZA
#### Utilisation of eligible unrelieved foreign tax.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### Supplement in respect of a pre-commencement accounting period
#### Supplement in respect of a post-commencement period
#### Supplement in respect of a post-commencement period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### “The individual’s contribution to the trade”
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Insurance companies: allocation of expenses etc in computations under Case I of Schedule D.
#### Interest: special relationship.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Supplement in respect of a pre-commencement accounting period
#### The pool of qualifying E&A losses and the pool of non-qualifying losses
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Change in company ownership: corporation tax.
#### Income treated as arising under section 761(1): remittance basis
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Interpretation of this Act.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Recovery of tax credits incorrectly paid.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Section 87(2) and (3) and reductions in receipts under ITTOIA 2005
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Reduction in chargeable profits following an exempt period
#### Reduction in chargeable profits following an exempt period
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Power to inspect documents.
#### The Arbitration Convention.
#### Schemes and arrangements designed to increase relief
#### Withdrawal of right to tax credit of certain non-resident companies connected with unitary states.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The non-qualifying pool
#### About this Schedule
#### About this Schedule
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Application of Income Tax Acts from year to year.
#### Repayment supplements: companies.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Accounting periods
#### The non-qualifying pool
#### About this Schedule
#### Accounting periods
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### Amount of post-commencement supplement for a post-commencement period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Conventional basis: general charge on receipts after discontinuance . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Withdrawal of right to tax credit of certain non-resident companies connected with unitary states.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Introduction
#### Adjustment of profits on averaging claim
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Levies and repayments under the Financial Services and Markets Act 2000: investment companies.
#### Costs of establishing share option or profit sharing schemes: relief.
#### Costs of establishing employee share ownership trusts: relief.
#### Charitable donations: contributions to agent’s expenses.
#### Restriction on relief: individuals.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### CHAPTER 1B — PROVISIONS AS TO CAPITAL SUMS PAID TO SETTLOR
### CHAPTER 1C — LIABILITY OF TRUSTEES
#### Cessation of approval: general provisions.
#### Cessation of approval: tax on certain schemes.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Receipts to be treated as income to which section 686 applies
#### Meaning of “settlement day” for purposes of sections 711 to 728.
#### Reduction in chargeable profits for certain financing income
#### Special rule for computing chargeable profits.
#### Imputation of chargeable profits and creditable tax of controlled foreign companies
#### Reduction in chargeable profits following an exempt period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Accounting periods
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Restriction of relief for payments of interest.
#### Recovery of tax credits incorrectly paid.
#### Old references to standard rate tax.
#### Reduction of United Kingdom taxes by amount of credit due.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### “Annual value” of land.
#### Qualifying trade, profession or vocation
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The approved amount: passenger payments
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### Supplement in respect of a pre-commencement accounting period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Accounting periods
#### Conventional basis: general charge on receipts after discontinuance . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Power to inspect documents.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Interpretation of the Corporation Tax Acts.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Introduction
#### Qualifying companies
#### Amount of post-commencement supplement for a post-commencement period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
## Part IV — Disallowed debits and non-trading deficits
#### Reduction in chargeable profits: failure to qualify for exemptions
#### Reduction in chargeable profits for certain financing income
#### Accounting periods
#### Supplement in respect of a post-commencement period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying vehicles
#### Employment
#### Qualifying vehicles
#### Costs of establishing share option or profit sharing schemes: relief.
#### Charitable donations: contributions to agent’s expenses.
#### Taxable premiums etc.
#### Meaning of “the aggregate amount”
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Introductory.
#### Life policies: chargeable events.
#### Information: supplementary provisions
#### Relief for individuals.
#### Qualifying counselling services etc.
#### Revocable settlements allowing reversion of property.
#### Settlements made before 7th April 1965 but after 9th April 1946.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Treatment of deemed sums and reliefs.
#### The prescribed circumstances.
#### Interest in default.
#### Nominees, trustees etc.
#### Sale and repurchase of securities.
#### Offshore income gains: application of transfer of assets abroad provisions
#### Offshore income gains accruing to persons resident or domiciled abroad.
#### Offshore income gains accruing to persons resident or domiciled abroad.
#### Change in ownership of company carrying on property business.
#### The approved amount: mileage allowance payments
#### The approved amount: mileage allowance payments
#### Qualifying companies
#### Tax year
#### Application of charges where rights to payments transferred.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Application of this Chapter etc. to policies and contracts in which persons other than companies are interested
#### Application of this Chapter etc. to policies and contracts in which persons other than companies are interested
#### The property managing subsidiaries requirement
#### Substituted retirement annuity contracts.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Treatment of deemed sums and reliefs.
#### Variable interest rate.
#### Death.
#### Section 751A: supplementary
#### Apportionment of chargeable profits and creditable tax
#### Returns where it is not established whether acceptable distribution policy applies.
#### Tax year
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Meaning of “research and development”.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
### Manufactured interest on UK securities: general
### Manufactured interest on gilt-edged securities etc.
#### The pool of qualifying E&A losses and the pool of non-qualifying losses
#### Allowable deductions.
#### Partners: meaning of “contribution to the trade”
#### Partners: meaning of “contribution to the trade”
#### Restriction on deduction of interest or dividends from trading income.
#### Miscellaneous charges (list for the purposes of certain provisions that formerly referred to Case VI of Schedule D)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying trade, profession or vocation
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### Amount of post-commencement supplement for a post-commencement period
#### Taxable premiums etc.
#### Meaning of “the aggregate amount”
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Regulations in relation to qualifying policies
#### Effect of appointment or arrangements under section 659B.
#### Exemption from tax in respect of qualifying premiums.
#### Certain distributions to be treated as income to which section 686 applies.
#### Application of section 686D where settlor has made more than one settlement
#### Receipts to be treated as income to which section 686 applies
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Transfer of unrealised interest.
#### Transfers of rights to receive distributions in respect of shares
#### Deemed manufactured payments in the case of stock lending arrangements.
#### Offshore income gains: application of transfer of assets abroad provisions
#### Change in company ownership: postponed corporation tax.
#### Change in company ownership: corporation tax.
#### Sales etc. at an undervalue or overvalue.
#### Section 785B: expectation that relevant capital payment will not be paid
#### The approved amount: passenger payments
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Supplement in respect of a post-commencement period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Restriction on relief: companies.
#### Meaning of “relevant loss” in section 118ZN
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Definitions.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Repayment supplements: companies.
#### Meaning of “investment LLP” and “property investment LLP”
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Introduction
#### The approved amount: mileage allowance payments
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Definition of insurance company.
#### Share incentive plans: distributions in respect of unappropriated shares
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Interpretation of section 737A.
#### Change in ownership of company carrying on property business.
#### Provision not at arm’s length.
#### Restriction of relief for payments of interest.
#### Tax year
#### Company vehicles
#### Employment
#### Amount of post-commencement supplement for a post-commencement period
#### The non-qualifying pool
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 468A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
##### 468A
- (1) In relation to an open-ended investment company the rate of corporation tax for the financial year 2005 and subsequent financial years shall be deemed to be the rate at which income tax at the lower rate is charged for the year of assessment which begins on 6th April in the financial year concerned (and section 13 shall not apply).
- (2) In this section “*open-ended investment company*” means a company incorporated in the United Kingdom to which section 236 of the Financial Services and Markets Act 2000 applies.
- (3) Each of the parts of an umbrella company shall be regarded for the purposes of this section as an open-ended investment company and the umbrella company as a whole shall not be so regarded (and shall not, unless an enactment expressly provides otherwise, be regarded as a company for any other purpose of the Tax Acts).
- (4) In subsection (3) “*umbrella company*” means an open-ended investment company—
- (a) in respect of which the instrument of incorporation provides arrangements for separate pooling of the contributions of the shareholders and the profits or income out of which payments are to be made to them, and
- (b) the shareholders of which are entitled to exchange rights in one pool for rights in another,
and a reference to part of an umbrella company is a reference to a separate pool.
#### Insurance companies: allocation of expenses etc in computations under Case I of Schedule D.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### “A significant amount of time”
#### Section 87(2) and (3) and reductions in receipts under ITTOIA 2005
#### “The individual’s contribution to the trade”
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Ceasing to meet the trading requirement because of administration or receivership
#### Business entertaining expenses.
#### Appeals against Board’s notices under section 703.
#### Meaning of “interest”, “transfers with or without accrued interest” etc.
#### Exceptions from sections 713 and 714
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Exemption from sections 739 and 740 (transactions before 5th December 2005)
#### Exemption from sections 739 and 740 (transactions on or after 5th December 2005)
### Introductory
### Payments and other benefits to which section 148 applies
### Payments and other benefits excluded from charge under section 148
### Application of £30,000 threshold
### Exclusion or reduction of charge in case of foreign service
### Valuation of benefits
### Notional interest treated as paid if amount charged in respect of beneficial loan
### Giving effect to the charge to tax
### Reporting requirements
### Interpretation
#### Assets leased to traders and others.
#### The approved amount: passenger payments
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying trade, profession or vocation
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying companies
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Exemption from sections 739 and 740 (transactions before 5th December 2005)
#### Supplemental provisions.
#### About this Schedule
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Meaning of “research and development”.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### How averaging claim is given effect
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The pool of qualifying E&A losses and the pool of non-qualifying losses
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying trade, profession or vocation
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Supplement in respect of a pre-commencement accounting period
#### Amount of post-commencement supplement for a post-commencement period
#### The non-qualifying pool
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Introduction
#### Adjustment of profits on averaging claim
#### About this Schedule
#### Qualifying companies
#### Conditions for approval of retirement benefit schemes.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Prevention of avoidance of income tax.
#### Exemption from sections 739 and 740 (transactions before 5th December 2005)
#### Company vehicles
#### Introduction
#### The non-qualifying pool
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Power to modify sections 727A, 730A, 730BB and 737A to 737C
#### Power to provide for manufactured payments to be eligible for relief.
#### No duplication of charge.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
@@ -75734,536 +76238,32 @@
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Exemption from sections 739 and 740 (transactions before 5th December 2005)
#### Employment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Tax credits under Part 1 of Tax Credits Act 2002
#### Nominees, trustees etc.
#### Trading stock.
#### Exception for sale and repurchase of securities.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Reduction in chargeable profits for certain financing income
#### Reduction in chargeable profits: failure to qualify for exemptions
### The appropriate percentage
### Car with CO2 emissions figure
### The lower threshold
### Bi-fuel cars
#### Interpretation of credit code.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Supplement in respect of a post-commencement period
#### The non-qualifying pool
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying companies
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Manufactured dividends and interest.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Interpretation.
#### Amount of post-commencement supplement for a post-commencement period
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### Amount of post-commencement supplement for a post-commencement period
#### About this Schedule
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### Qualifying companies
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Schemes and arrangements designed to increase relief
#### Onshore pooling.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### Supplement in respect of a pre-commencement accounting period
#### Supplement in respect of a post-commencement period
#### Supplement in respect of a post-commencement period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### “The individual’s contribution to the trade”
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Insurance companies carrying on more than one category of business: restriction of credit.
#### Restriction on deduction of interest or dividends from trading income.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Supplement in respect of a pre-commencement accounting period
#### The pool of qualifying E&A losses and the pool of non-qualifying losses
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Change in company ownership: corporation tax.
#### Income treated as arising under section 761(1): remittance basis
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Territorial sea and designated areas.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Recovery of tax credits incorrectly paid.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Section 87(2) and (3) and reductions in receipts under ITTOIA 2005
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Reduction in chargeable profits following an exempt period
#### Reduction in chargeable profits following an exempt period
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Arrangements to avoid section 812.
#### Mutual agreement procedure and presentation of cases under arrangements.
#### Schemes and arrangements designed to increase relief
#### Withdrawal of right to tax credit of certain non-resident companies connected with unitary states.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The non-qualifying pool
#### About this Schedule
#### About this Schedule
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Old references to standard rate tax.
#### Repayment supplements: companies.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Accounting periods
#### The non-qualifying pool
#### About this Schedule
#### Accounting periods
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### Amount of post-commencement supplement for a post-commencement period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Conventional basis: general charge on receipts after discontinuance . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Withdrawal of right to tax credit of certain non-resident companies connected with unitary states.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Introduction
#### Adjustment of profits on averaging claim
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### About this Schedule
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Accounting periods
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Restriction of relief for payments of interest.
#### Recovery of tax credits incorrectly paid.
#### Old references to standard rate tax.
#### Reduction of United Kingdom taxes by amount of credit due.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### “Annual value” of land.
#### Introduction
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
#### Supplement in respect of a pre-commencement accounting period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Accounting periods
#### Conventional basis: general charge on receipts after discontinuance . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Power to inspect documents.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Interpretation of the Corporation Tax Acts.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Introduction
#### Qualifying companies
#### Amount of post-commencement supplement for a post-commencement period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying companies
#### Supplement in respect of a post-commencement period
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### “Annual value” of land.
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### The pool of qualifying E&A losses and the pool of non-qualifying losses
#### Allowable deductions.
#### Partners: meaning of “contribution to the trade”
#### Partners: meaning of “contribution to the trade”
#### Restriction on deduction of interest or dividends from trading income.
#### Miscellaneous charges (list for the purposes of certain provisions that formerly referred to Case VI of Schedule D)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Qualifying trade, profession or vocation
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
#### Supplement in respect of a pre-commencement accounting period
#### Supplement in respect of a post-commencement period
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#### Supplement in respect of a post-commencement period
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#### Restriction on relief: individuals.
#### Partners: meaning of “contribution to the trade”
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#### Definitions.
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#### Repayment supplements: companies.
#### Local authorities.
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#### Introduction
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#### Amount of post-commencement supplement for a post-commencement period
#### The pool of qualifying E&A losses and the pool of non-qualifying losses
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
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##### 468A
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##### 468A
- (1) In relation to an open-ended investment company the rate of corporation tax for the financial year 2005 and subsequent financial years shall be deemed to be the rate at which income tax at the lower rate is charged for the year of assessment which begins on 6th April in the financial year concerned (and section 13 shall not apply).
- (2) In this section “*open-ended investment company*” means a company incorporated in the United Kingdom to which section 236 of the Financial Services and Markets Act 2000 applies.
- (3) Each of the parts of an umbrella company shall be regarded for the purposes of this section as an open-ended investment company and the umbrella company as a whole shall not be so regarded (and shall not, unless an enactment expressly provides otherwise, be regarded as a company for any other purpose of the Tax Acts).
- (4) In subsection (3) “*umbrella company*” means an open-ended investment company—
- (a) in respect of which the instrument of incorporation provides arrangements for separate pooling of the contributions of the shareholders and the profits or income out of which payments are to be made to them, and
- (b) the shareholders of which are entitled to exchange rights in one pool for rights in another,
and a reference to part of an umbrella company is a reference to a separate pool.
#### Insurance companies: allocation of expenses etc in computations under Case I of Schedule D.
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#### Qualifying trade, profession or vocation
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#### About this Schedule
#### About this Schedule
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#### Meaning of “research and development”.
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#### How averaging claim is given effect
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#### About this Schedule
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#### The pool of qualifying E&A losses and the pool of non-qualifying losses
#### The mixed pool of qualifying E&A expenditure and supplement previously allowed
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#### Qualifying trade, profession or vocation
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#### Supplement in respect of a pre-commencement accounting period
#### Amount of post-commencement supplement for a post-commencement period
#### The non-qualifying pool
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#### Introduction
#### Adjustment of profits on averaging claim
#### About this Schedule
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2007-01-01
Income and Corporation Taxes Act 1988
2006-12-31
Income and Corporation Taxes Act 1988
2006-12-26
Income and Corporation Taxes Act 1988
2006-12-12
Income and Corporation Taxes Act 1988
2006-12-06
Income and Corporation Taxes Act 1988
2006-08-11
Income and Corporation Taxes Act 1988
2006-07-19
Income and Corporation Taxes Act 1988
2006-06-09
Income and Corporation Taxes Act 1988
2006-04-06
Income and Corporation Taxes Act 1988
2006-04-01
Income and Corporation Taxes Act 1988
2006-03-22
Income and Corporation Taxes Act 1988
2006-01-06
Income and Corporation Taxes Act 1988
2005-12-27
Income and Corporation Taxes Act 1988
2005-12-05
Income and Corporation Taxes Act 1988
2005-11-01
Income and Corporation Taxes Act 1988
2005-10-05
Income and Corporation Taxes Act 1988
2005-09-27
Income and Corporation Taxes Act 1988
2005-08-12
Income and Corporation Taxes Act 1988
2005-08-11
Income and Corporation Taxes Act 1988
2005-08-03
Income and Corporation Taxes Act 1988
2005-07-24
Income and Corporation Taxes Act 1988
2005-07-20
Income and Corporation Taxes Act 1988
2005-06-08
Income and Corporation Taxes Act 1988
2005-04-07
Income and Corporation Taxes Act 1988
2005-04-06
Income and Corporation Taxes Act 1988
original version
Text at this date