Finance Act 2000

Quantitative restrictions: further provisions as to rate bands, limit and pooling

95

• (1) The rate bands and limit in paragraph 94 (quantitative restrictions on allowances) apply separately in relation to each ship.

• (2) The amounts specified in that paragraph apply in relation to the whole cost of providing the ship.

• (3) If—

• (a) the cost is shared by two or more persons, or

• (b) a person acquires a part share in the ship,

that paragraph applies as if there were substituted in sub-paragraph (3)(a) and (b) and sub-paragraph (5) in relation to each person the proportion of the figure specified that his share of the cost bears to the whole cost.

• (4) The pools referred to in sub-paragraph (4A) of that paragraph are class pools of all expenditure of a lessor that falls to be allocated to a tonnage tax (main rate) or tonnage tax (special rate) pool in respect of ships leased by him.

Quantitative restrictions: meaning of “cost of providing ship"

96

• (1) For the purposes of paragraph 94 (quantitative restrictions on allowances) the cost of providing the ship means the total cost of providing it in a state ready to be brought into use for the purposes for which it is normally to be used.

This includes the cost of any accessories or additional equipment, or fitting out, necessary for the operation of the ship for those purposes.

• (2) The cost of providing the ship shall be determined without regard to the provisions of the Capital Allowances Act 2001 as to—

• (a) when expenditure is treated as incurred, or

• (b) when expenditure may be brought into account as qualifying expenditure.

• (3) Further capital expenditure by the lessor on the ship shall be added to the original cost of providing the ship to determine—

• (a) whether the lessor is entitled to capital allowances in respect of the further expenditure, and

• (b) if he is, the rate of writing-down allowances to which he is entitled.

References to the cost of providing the ship shall accordingly be read as including any such further expenditure.

• (4) The amounts to be taken into account under this paragraph are limited to the amounts that would otherwise have been qualifying expenditure for the purposes of capital allowances.

Quantitative restrictions: treatment of disposal proceeds

97

• (1) The following provisions apply where—

• (a) there is a disposal of a ship in relation to which paragraph 94 applies to restrict the capital allowances available, and

• (b) a disposal value falls fall to be brought into account.

The reference in paragraph (a) to a disposal of ship includes a disposal of a part of a ship, or of an interest in a ship or a part of a ship.

• (2) The disposal value is first allocated between the tonnage tax (main rate) pool and the tonnage tax (special rate) pool in the same proportions as the cost of providing the ship was allocated to those pools.

• (3) If the amount allocated to the tonnage tax (main rate) pool exceeds the amount of qualifying expenditure remaining in that pool, any excess shall be taken to the tonnage tax (special rate) pool.

• (4) A balancing charge arises only if the amount taken to the tonnage tax (special rate) pool exceeds the amount of qualifying expenditure remaining in that pool.

Quantitative restrictions: change of circumstances bringing case within restrictions

98

• (1) The provisions of this paragraph apply where—

• (a) the lessor under a ... lease has been entitled to capital allowances in circumstances in which paragraph 94 (quantitative restrictions on allowances) did not apply, and

• (b) a change of circumstances brings the case within paragraph 89(1) so that the restrictions in paragraph 94 do apply.

• (2) In this paragraph—

• “the relevant period” means the period beginning—with the beginning of the accounting period of the lessor in which there occurs the change of circumstances in relation to which this paragraph applies, orif since the beginning of that period there has been a change of circumstances in relation to which paragraph 99 applied (change taking case out of restrictions), with the time of that change (or if there has been more than one such change, the last of them),and ending with the time of the change of circumstances in relation to which this paragraph applies; and

• “the lessor’s normal pool” means the lessor’s pool that contains the qualifying expenditure relating to the ship at the beginning of the relevant period.

• (3) At the beginning of the relevant period an amount (“amount A”) equal to—

• (a) the tax written down value of the ship as at that time, or

• (b) if less, the amount of unrelieved qualifying expenditure in the lessor’s normal pool at that time,

shall be brought into account as a disposal value in the lessor’s normal pool.

• (4) At the same time an amount of qualifying expenditure equal to amount A shall be taken to a separate single-asset pool (“the temporary pool”).

• (5) Any qualifying expenditure or other items relating to the ship that would otherwise have been brought into account in the lessor’s normal pool in the relevant period shall instead be brought into account in the temporary pool.

• (6) At the end of the relevant period, the temporary pool shall be closed as if the ship had been disposed of by the lessor for an amount equal to its tax written down value at that time (“amount B”), and any resulting balancing allowance or balancing charge shall be given effect.

• (7) The lessor shall be treated as if he had incurred qualifying expenditure equal to amount B on the provision of the ship for the purposes of the lessee’s tonnage tax trade immediately after the end of the relevant period.

• (8) There shall be allocated to the lessor’s tonnage tax (main rate) and tonnage tax (special rate) pools the same proportions of amount B as the proportions of the actual cost of providing the ship that would have been so allocated if the case had been within paragraph 89(1) at all material times.

Quantitative restrictions: change of circumstances taking case out of restrictions

99

• (1) The provisions of this paragraph apply where—

• (a) the lessor under a ... lease has been entitled to capital allowances in circumstances in which paragraph 94 (quantitative restrictions on allowances) applied, and

• (b) a change of circumstances takes the case out of paragraph 89(1) so that the restrictions in paragraph 94 no longer apply.

• (2) When the change of circumstances occurs a disposal value shall be brought into account by the lessor equal to the tax written down value of the ship as at that time.

The provisions of paragraph 97 (treatment of disposal proceeds) apply as regards the allocation of that amount to the lessor’s tonnage tax (main rate) and tonnage tax (special rate) pools.

• (3) The lessor shall be treated as if he had incurred qualifying expenditure on the provision of the ship for the purposes of the lessee’s non-tonnage tax trade immediately after the change of circumstances occurs.

• (4) The amount of that expenditure shall be taken to be the amount that the tax written down value of the ship would have been, at the time the change of circumstances occurs, had paragraph 94 never applied.

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Determination of tax written down value, etc.

100

• (1) This paragraph supplements paragraphs 98 and 99.

• (2) The “tax written down value” of the ship at any time means what would be the amount of unrelieved qualifying expenditure at that time determined on the following assumptions—

• (a) that the qualifying expenditure relating to the ship had been held in a single asset pool, and

• (b) that there had been made to the lessor—

• (i) the first-year allowance (if any) that was actually made to him,

• (ii) any first-year allowance falling to be made to him that was postponed under section 130 of the Capital Allowances Act 2001, and

• (iii) the maximum amount of any writing-down allowances that, on the preceding assumptions, could have been made.

• (3) The references in paragraph 98(3)(b) and sub-paragraph (2) above to the amount of “unrelieved qualifying expenditure" are to the unrelieved qualifying expenditure that would otherwise have been carried forward under Chapter 5 of Part 2 of the Capital Allowances Act 2001.

• (4) For the purpose of determining that amount at a time other than the beginning or end of an accounting period of the lessor, it shall be assumed that an accounting period of the lessor began or ended at that time.

Quantitative restrictions: power to alter amounts by regulations

101

• (1) The Inland Revenue may by regulations alter the amounts for the time being specified in sub-paragraph (3)(a) and (b) and sub-paragraph (5) of paragraph 94 (quantitative restrictions on allowances).

• (2) The regulations may contain such incidental, supplementary and transitional provisions as appear to the Inland Revenue to be appropriate.

Exclusion of leases entered into on or before 23rd December 1999

102

The provisions of this Part do not apply in relation to a finance lease entered into on or before 23rd December 1999.

Part XI — Special rules for offshore activities

Introduction

103

• (1) This Part of this Schedule sets out special rules that apply where a qualifying ship operated by a tonnage tax company is engaged in offshore activities.

• (2) The rules in this Part of this Schedule do not apply in an accounting period unless the total number of days in that period on which qualifying ships operated by that company are engaged in offshore activities exceeds 30.

Meaning of “offshore activities"

104

• (1) In this Part of this Schedule “offshore activities” means activities in connection with the exploration or exploitation of so much of the seabed or subsoil or their natural resources as is situated in the UK sector of the continental shelf.

• (1A) But none of the following activities is to be regarded as an offshore activity—

• (a) offshore supply services;

• (b) towage, salvage or other marine assistance;

• (c) anchor handling;

• (d) carriage of liquids or gases;

• (e) safety or rescue services;

• (f) the carriage of cargo in connection with dredging.

• (1B) The Treasury may make provision by order amending sub-paragraph (1A) by—

• (a) adding, or

• (b) varying,

any description of activity.

• (2) The “UK sector of the continental shelf” means—

• (a) any area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964, and

• (b) any waters within the seaward limits of the territorial sea of the United Kingdom.

Vessels to which special provisions do not apply

105

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of periods of inactivity

106

A period between contracts when a qualifying ship is not working shall not be taken to be a period during which the ship is engaged in offshore activities unless—

• (a) the period of inactivity is specifically related to a forthcoming offshore activity, and

• (b) it is impractical for the vessel to undertake other work in the meantime.

Profits from offshore activities to be computed according to ordinary rules

107

• (1) The profits of a tonnage tax company from a qualifying ship in respect of periods during which the ship is engaged in offshore activities (its “offshore profits”) are computed and charged to tax in accordance with ordinary corporation tax principles as if they were not part of the company’s relevant shipping profits.

• (2) Accordingly, the number of days in an accounting period during which a qualifying ship is so engaged shall be left out of account for the purposes of paragraph 4 (calculation of tonnage tax profits by reference to daily profit).

Application of ring fence provisions

108

• (1) The provisions of Part VII (the ring fence: general provisions) apply in relation to a company’s offshore activities as if they were not tonnage tax activities.

• (2) The provisions of this Schedule apply in relation to a company’s offshore profits as they apply to profits other than relevant shipping profits.

Chargeable gains from assets used for offshore activities

109

A period during which an asset is used for the purposes of offshore activities is treated for the purposes of paragraph 65 (chargeable gains on disposal of tonnage tax asset) as if it were a period during which the asset was not a tonnage tax asset.

Capital allowances: general

110

• (1) A tonnage tax company may claim capital allowances for capital expenditure incurred in providing plant or machinery for the purposes of its offshore activities.

• (2) In such a case Part 2 of the Capital Allowances Act 2001 applies as if—

• (a) an asset used for the purposes of the company’s offshore activities were provided by the company for those purposes on the first occasion after entry into tonnage tax on which it is brought into use for those purposes, and

• (b) an amount of capital expenditure (the “notional qualifying expenditure”) had been incurred at that time on its provision.

• (3) The amount of the notional qualifying expenditure is given by paragraph 112 (existing assets) or paragraph 113 (new assets).

• (4) Where an asset to which this paragraph applies ceases permanently to be used for the purposes of the company’s offshore activities, it is treated for the purposes of Part 2 of the Capital Allowances Act 2001 as it applies by virtue of this paragraph as if it had been disposed of at market value.

This does not apply if a disposal value is required to be brought into account under section 61(1) of that Act apart from this sub-paragraph.

Capital allowances: proportionate reduction of allowances

111

• (1) This paragraph applies where in an accounting period of the company an asset to which paragraph 110 applies is used for the purposes of the company’s offshore activities on some only of the days in the period.

• (2) The amount of any writing-down allowance for that period in respect of expenditure incurred on the provision of the asset is restricted to the relevant proportion of the full allowance.

• (3) Any writing-down allowance for a subsequent accounting period of the company in respect of such expenditure shall be calculated as if an allowance had been made of an amount equal to the full allowance, whether or not that amount (or any amount) was in fact claimed.

• (4) For the purposes of this paragraph the full allowance means the allowance (if any) that would have been available apart from this paragraph.

• (5) For the purposes of this paragraph the relevant proportion of the full allowance is given by:

$$OSDAPD$where:OSD is the number of days in the accounting period on which the asset was used for the purposes of the company’s offshore activities; andAPD is the number of days in that period.$

Capital allowances: notional qualifying expenditure: existing assets

112

• (1) This paragraph applies to determine the amount of notional qualifying expenditure for the purposes of paragraph 110 where the company was entitled before entry into tonnage tax to capital allowances in respect of expenditure on providing the asset.

• (2) If the asset was brought into use for the purposes of the company’s offshore activities immediately on entry into tonnage tax, the notional qualifying expenditure is equal to any unrelieved qualifying expenditure attributable to the asset.

• (3) In this paragraph “unrelieved qualifying expenditure” means the unrelieved qualifying expenditure that would otherwise have been carried forward under Chapter 5 of Part 2 of the Capital Allowances Act 2001.

• (4) The amount of unrelieved qualifying expenditure attributable to plant or machinery in a class pool, or the main pool, is the proportion of the whole given by:

$$AVPV$where:AV is the market value of the asset concerned immediately before entry into tonnage tax, andPV is the aggregate market value at that time of all the assets in the pool.$

• (5) References in this paragraph to unrelieved qualifying expenditure include qualifying expenditure to the extent to which it is unrelieved by virtue of notice having been given under section 130 of the Capital Allowances Act 2001 (notice postponing first-year or writing-down allowance)—

• (6) If the asset was not brought into use for the purposes of the company’s offshore activities immediately on entry into tonnage tax, the notional qualifying expenditure is the amount given by sub-paragraph (2) but written down in respect of the period between the company’s entry into tonnage tax and the asset being brought into use for those purposes.

• (7) The Inland Revenue shall make provision by regulations as to the basis on which the writing down mentioned in sub-paragraph (6) is to be done.

The regulations may make different provision for different descriptions of asset.

Capital allowances: notional qualifying expenditure: new assets

113

• (1) This paragraph applies to determine the amount of notional qualifying expenditure for the purposes of paragraph 110 where the company was not entitled before entry into tonnage tax to capital allowances in respect of expenditure on providing the asset.

• (2) If the asset was brought into use for the purposes of the company’s offshore activities immediately on being acquired by the company, the notional qualifying expenditure is equal to the amount that would fall to be brought into account as qualifying expenditure under Part 2 of the Capital Allowances Act 2001 apart from this Schedule.

• (3) If the asset was not brought into use for the purposes of the company’s offshore activities immediately on being acquired by the company, the notional qualifying expenditure is the amount referred to in sub-paragraph (2) written down in respect of the period between its acquisition by the company and its being brought into use for those purposes.

• (4) The Inland Revenue shall make provision by regulations as to the basis on which the writing down mentioned in sub-paragraph (3) is to be done.

The regulations may make different provision for different descriptions of asset.

The training requirement

114

• (1) The fact that a qualifying ship is used for the purposes of offshore activities does not affect the training requirement but an allowance is made under this paragraph.

• (2) The amount of the allowance in an accounting period is equal to the aggregate of—

• (a) the cash equivalent of the training provided that would not have had to be provided, and

• (b) any payments in lieu of training made that would not have had to be made,

if the days on which the ship was engaged in offshore activities had been days on which it was not engaged in tonnage tax activities.

For the purposes of paragraph (a) the cash equivalent of training shall be calculated by reference to the current rate of payments in lieu of training.

• (3) The amount of the allowance may be deducted by the company in computing the amount of corporation tax payable for that accounting period, so far as that is attributable to offshore activities.

• (4) If in any accounting period the company is unable to deduct the full amount of—

• (a) any allowance to which it is entitled under this paragraph for that period, and

• (b) any amount brought forward under this sub-paragraph,

the balance may be carried forward and set against the amount of corporation tax payable in the next accounting period, so far as that is attributable to offshore activities.

• (5) No deduction may be made by a company in computing its profits from offshore activities in respect of expenditure incurred in meeting the training requirement.

Interpretation

115

Expressions used in this Part of this Schedule that are defined for the purposes of Part VIII or IX of this Schedule have the same meaning in this Part.

Part XII — Groups, mergers and related matters

Meaning of “group" and “member of group"

116

In this Schedule a “group” means—

• (a) all the companies controlled by an individual, or

• (b) where a company that is not controlled by another person controls one or more other companies, that company and all the companies controlled by it.

References to membership of a group shall be construed accordingly.

Companies treated as controlled by an individual

117

• (1) For the purposes of this Schedule an individual is treated as controlling any company that is controlled—

• (a) by him alone, or

• (b) by him together with one or more associates of his, or

• (c) subject to sub-paragraph (2), by any associate of his, with or without any other such associates.

• (2) An individual shall not be treated as controlling a company by virtue of sub-paragraph (1)(c) if he does not have any significant influence over the affairs of the company in question.

Meaning of “control"

118

• (1) In this Schedule “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 that or any other company, or

• (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other company,

that the affairs of the company are conducted in accordance with his wishes.

• (2) For the purposes of this paragraph there shall be attributed to a person—

• (a) any rights or powers which another person holds on his behalf or may be required to exercise at his direction or on his behalf,

• (b) any rights or powers—

• (i) of a company of which he has, or he and his associates have, control, or

• (ii) of any two or more such companies, and

• (c) any rights or powers of any associate of his, or of any two or more associates of his.

• (3) The references in paragraphs (b) and (c) of sub-paragraph (2) to rights or powers of a company or associate include rights or powers attributed to the company or associate under paragraph (a) of that sub-paragraph.

• (4) The references in paragraphs (b) and (c) of sub-paragraph (2) to rights or powers of an associate do not include rights or powers attributed to the associate under those paragraphs.

Company not to be treated as member of more than one group

119

• (1) For the purposes of this Schedule a company may not, at the same time, be a member—

• (a) of a tonnage tax group and a qualifying non-tonnage tax group, or

• (b) of more than one tonnage tax group.

• (2) If the rules in paragraphs 116 to 118 would produce that result in relation to a company, the following rules apply.

• (3) As between a tonnage tax group and a qualifying non-tonnage tax group, the company shall be treated as a member of the tonnage tax group and not of the non-tonnage tax group.

• (4) As between two tonnage tax groups, the company shall be treated as a member of the group whose tonnage tax election was made first and not of the other tonnage tax group.

• (5) In the case of group elections made at the same time, the company may choose which election it joins in.

It is treated for the purposes of this Schedule as a member of the group in respect of which that election is made and not of any other tonnage tax group.

Arrangements for dealing with group matters

120

• (1) The Inland Revenue may enter into arrangements with the qualifying companies in a group for one of those companies to deal on behalf of the group in relation to matters arising under this Schedule that may conveniently be dealt with on a group basis.

• (2) Any such arrangements—

• (a) may make provision in relation to cases where companies become or cease to be members of a group;

• (b) may make provision for or in connection with the termination of the arrangements; and

• (c) may make such supplementary, incidental, consequential or transitional provision as is necessary or expedient for the purposes of the arrangements.

• (3) Any such arrangements do not affect—

• (a) any requirement under this Schedule that an election be made jointly by all the qualifying companies in the group; or

• (b) any liability under this Schedule or any other provision of the Tax Acts of a company to which the arrangements relate.

• (4) The Secretary of State may also make such arrangements in relation to matters arising under this Schedule in relation to which he has functions.

Meaning of “merger" and “demerger"

121

• (1) In this Schedule—

• “merger” means a transaction by which one or more companies become members of a group, and

• “demerger” means a transaction by which one or more companies cease to be members of a group.

• (2) References to a merger to which a group is a party include any merger affecting a member of the group.

Merger: between tonnage tax groups or companies

122

• (1) This paragraph applies where there is a merger—

• (a) between two or more tonnage tax groups,

• (b) between one or more tonnage tax groups and one or more tonnage tax companies, or

• (c) between two or more tonnage tax companies.

• (2) In all those cases the group resulting from the merger is a tonnage tax group as if a group election had been made.

• (3) That deemed election continues in force, subject to the provisions of this Schedule—

• (a) if there is a dominant party to the merger, until that party’s tonnage tax election would have expired;

• (b) if there is no dominant party, until whichever of the existing tonnage tax elections had the longest period left to run would have expired.

Merger: tonnage tax group or company and qualifying non-tonnage tax group or company

123

• (1) This paragraph applies where there is a merger between a tonnage tax group or company (“T”) and a qualifying non-tonnage tax group or company (“QNT”).

• (2) If T is the dominant party, the group resulting from the merger is a tonnage tax group as if a group election had been made.

That deemed election continues in force, subject to the provisions of this Schedule, until T’s election would have expired.

• (3) If QNT is the dominant party, T’s tonnage tax election ceases to be in force as from the date of the merger.

• (4) If there is no dominant party—

• (a) the group resulting from the merger may elect that T shall be treated as the dominant party (with the result that sub-paragraph (2) applies), and

• (b) if it does not do so, T’s tonnage tax election ceases to be in force as from the date of the merger.

• (5) Any election under sub-paragraph (4)(a) must be made—

• (a) jointly by all the qualifying companies in the group resulting from the merger,

• (b) by notice to the Inland Revenue,

• (c) within twelve months of the merger.

Merger: tonnage tax group or company and non-qualifying group or company

124

• (1) This paragraph applies where there is a merger between a tonnage tax group or company (“T”) and a non-qualifying group or company.

• (2) In that case the group resulting from the merger is a tonnage tax group by virtue of T’s election.

Merger: non-qualifying group or company and qualifying non-tonnage tax group or company

125

• (1) This paragraph applies where there is a merger between a non-qualifying group or company (“NQ”) and a qualifying non-tonnage tax group or company.

• (2) In that case, if NQ is the dominant party the group resulting from the merger may make a tonnage tax election having effect as from the date of the merger.

• (3) Any such election must be made—

• (a) jointly by all the qualifying companies in the group resulting from the merger,

• (b) by notice to the Inland Revenue,

• (c) within twelve months of the merger.

Meaning of “dominant party" in relation to merger

126

• (1) This paragraph explains what is meant by the references in this Schedule to the “dominant party” in relation to a merger.

• (2) The “dominant party" is determined as follows—

• (a) if the turnover generated by the relevant activities of one of the parties to the merger is more than twice that of the other, that one is the dominant party;

• (b) if not, there is no dominant party.

• (3) The relevant activities of a party to a merger are—

• (a) for the purposes of—

• (i) paragraph 122 (merger between tonnage tax groups or companies), or

• (ii) paragraph 123 (merger between tonnage tax group or company and qualifying non-tonnage tax group or company),

the tonnage tax activities of that party;

• (b) for the purposes of paragraph 125 (merger between non-qualifying group or company and qualifying non-tonnage tax group or company), all the activities of that party.

• (4) The basis on which (and the periods by reference to which) the turnover from relevant activities is to be determined for the purposes of those paragraphs shall be such as may be agreed between the parties and the Inland Revenue.

• (5) In default of such agreement—

• (a) the Inland Revenue shall decide, and

• (b) an appeal may be made against their decision.

• (6) Notice of appeal must be given to the Inland Revenue within 30 days of their decision being notified to the parties.

Demerger: single company

127

• (1) This paragraph applies where a tonnage tax company ceases to be a member of a tonnage tax group and does not become a member of another group.

• (2) In that case—

• (a) the company in question remains a tonnage tax company as if a single company election had been made, and

• (b) that deemed election continues in force, subject to the provisions of this Schedule, until the group election would have expired.

• (3) If two or more members of the previous group remain, and any of them is a qualifying company, the group consisting of those companies is a tonnage tax group by virtue of the previous group election.

Demerger: group

128

• (1) This paragraph applies where a tonnage tax group splits into two or more groups.

• (2) In that case each new group that contains a qualifying company that was a tonnage tax company before the demerger is a tonnage tax group as if a group election had been made.

• (3) That deemed election continues in force, subject to the provisions of this Schedule, until the group election would have expired.

Duty to notify Inland Revenue of group changes

129

• (1) A tonnage tax company that becomes or ceases to be a member of a group, or of a particular group, must give notice to the Inland Revenue of that fact.

• (2) The notice must be given within the period of twelve months beginning with the date on which the company became or ceased to be a member of the group.

• (3) In the second column of the Table in section 98 of the Taxes Management Act 1970 (penalties for failure to provide information etc.), after the final entry insert—

		Paragraph 129 of Schedule 22 to the Finance Act 2000..

Part XIII — Application of provisions to partnerships

Introduction

130

• (1) The Inland Revenue may make provision by regulations as to the application of this Schedule in relation to activities carried on by a company in partnership.

• (2) Nothing in the following provisions of this Part of this Schedule shall be read as restricting the generality of this power.

Calculation of partnership profits

131

The regulations may provide that—

• (a) for the purpose of calculating the profits of a partner which is a tonnage tax company, the profits of the partnership shall be calculated as if the partnership were a tonnage tax company, and

• (b) for the purpose of calculating the profits of a partner which is not a tonnage tax company, the profits of the partnership shall be calculated as if the partnership were not a tonnage tax company.

Qualifying partnerships

132

• (1) The regulations may provide that activities carried on by a company in partnership are not to be regarded as qualifying activities of that company unless the partnership is a qualifying partnership.

• (2) Subject to any provision made by the regulations, a “qualifying partnership” means a partnership that if it were a company would meet the requirements in paragraph 16(1) (qualifying companies).

Ships owned by or chartered to partners

133

The regulations may provide that a ship which is not partnership property but which—

• (a) is owned by or chartered to a member (or two or more members) of a partnership, and

• (b) is a ship in relation to which activities of the partnership business are carried on,

shall be treated as if it were owned by or chartered to every member of the partnership and as if everything done by or to any of the partners in relation to it had been done by or to all the partners.

Transactions not at arm’s length

134

The regulations may provide that for the purposes of paragraphs 58 and 59 (transactions not at arm’s length) the partnership shall be treated—

• (a) as an entity separate and distinct from the persons that are its members, and

• (b) as if it were a tonnage tax company.

Adjustments for capital allowance purposes

135

The regulations may provide that where a partner leaves tonnage tax, such adjustments shall be made for capital allowance purposes, in relation to that partner and all or any of the other partners, with respect to—

• (a) the amount of qualifying expenditure under Part 2 of the Capital Allowances Act 2001 (plant and machinery allowances), and

• (b) the amount of the residue of qualifying expenditure under Part 3 of that Act(industrial buildings allowances),

as may be specified in the regulations.

General

136

Regulations under this Part of this Schedule—

• (a) may make different provision for different cases, and

• (b) may contain such supplementary, incidental and transitional provision as appears to the Inland Revenue to be appropriate.

Part XIV — Withdrawal of relief etc. on company leaving tonnage tax

Introduction

137

• (1) This Part of this Schedule applies where a company ceases to be a tonnage tax company.

• (2) The provisions of paragraphs 138 and 139 (exit charges: chargeable gains and balancing charges) apply where a company ceases to be a tonnage tax company—

• (a) on ceasing to be a qualifying company for reasons relating wholly or mainly to tax, or

• (b) under paragraph 42 (exclusion from tonnage tax where tax avoidance arrangements entered into).

• (3) Paragraph 140 (ten year disqualification from re-entry into tonnage tax) applies in every case where a company ceases to be a tonnage tax company otherwise than on the expiry of a tonnage tax election.

Exit charge: chargeable gains

138

• (1) Paragraph 65(1)(a) (chargeable gain: disposal of tonnage tax assets) has effect in relation to gains (but not losses) on all relevant disposals as if the company had never been a tonnage tax company.

• (2) For this purpose a “relevant disposal” means a disposal—

• (a) on or after the day on which the company ceases to be a tonnage tax company, or

• (b) at any time during the period of six years immediately preceding that day when the company was a tonnage tax company.

• (3) Where sub-paragraph (1) operates to increase the amount of the chargeable gain on a disposal made at a time within the period mentioned in sub-paragraph (2)(b), the gain is treated to the extent of the increase—

• (a) as arising immediately before the company ceased to be a tonnage tax company, and

• (b) as not being relevant shipping profits of the company.

• (4) No relief, deduction or set-off of any description is allowed against the amount of that increase or the corporation tax on that amount.

Exit charge: balancing charges

139

• (1) This paragraph applies if in a relevant accounting period during which the company was a tonnage tax company it was liable to a balancing charge in relation to which paragraph 78 (phasing-out of balancing charges) applied to reduce the amount of the charge.

• (2) For this purpose a “relevant accounting period” means an accounting period ending not more than six years before the day on which the company ceased to be a tonnage tax company.

• (3) The company is treated as having received an additional amount of profits chargeable to corporation tax equal to the aggregate of the amounts by which those balancing charges were reduced.

• (4) Those additional profits are treated—

• (a) as arising immediately before the company ceased to be a tonnage tax company, and

• (b) as not being relevant shipping profits of the company.

• (5) No relief, deduction or set-off of any description is allowed against those profits or against corporation tax on them.

Ten year disqualification from re-entry into tonnage tax

140

• (1) A company election made by a former tonnage tax company is ineffective if made before the end of the period of ten years beginning with the date on which the company ceased to be a tonnage tax company.

• (2) A group election that—

• (a) is made in respect of a group whose members include a former tonnage tax company, and

• (b) would result in that company becoming a tonnage tax company,

is ineffective if made before the end of the period of ten years beginning with the date on which that company ceased to be a tonnage tax company.

• (3) Sub-paragraphs (1) and (2) do not prevent a company becoming a tonnage tax company under and in accordance with the rules in Part XII of this Schedule (groups, mergers and related matters).

• (4) In this paragraph “former tonnage tax company” means a company that is not a tonnage tax company but has previously been a tonnage tax company.

Second or subsequent application of this Part

141

Where this Part of this Schedule applies on a second or subsequent occasion on which a company ceases to be a tonnage tax company (whether or not this Part applied on any of the previous occasions)—

• (a) the references to the company ceasing to be a tonnage tax company shall be read as references to the last occasion on which it did so, and

• (b) the references to the period during which the company was a tonnage tax company do not include any period before its most recent entry into tonnage tax.

Part XV — Supplementary provisions

Meaning of “ship"

142

In this Schedule “ship” means any vessel used in navigation, and includes a hovercraft.

Meaning of “on bareboat charter terms"

143

In this Schedule a charter “on bareboat charter terms” means a hiring of a ship for a stipulated period on terms which give the charterer possession and control of the ship, including the right to appoint the master and crew.

Meaning of “associate"

144

• (1) In this Schedule “associate”, in relation to an individual, means—

• (a) a relative of that individual;

• (b) a partner of that individual;

• (c) the trustee or trustees of any settlement in relation to which—

• (i) that individual, or

• (ii) any relative (whether living or dead) of that individual,

is or was a settlor;

• (d) where that individual is interested in any shares or obligations of a company that are subject to a trust, the trustee or trustees of the settlement concerned;

• (e) where that individual is interested in any shares or obligations of a company that are part of the estate of a deceased person, the personal representatives of the deceased.

• (2) In sub-paragraph (1)(a) and (c)(ii) “relative” means spouse or civil partner, parent or remoter forebear, child or remoter issue, or brother or sister.

Section 831(4) of the Taxes Act 1988 applies for the purposes of this paragraph as it applies for the purposes of that Act.

• (3) In sub-paragraph (1)(c) and (d) “settlement” and “settlor” have the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).

Exercise of functions conferred on “the Inland Revenue"

145

• (1) Any power to make regulations conferred by this Schedule on “the Inland Revenue" is exercisable only by the Board.

• (2) Subject to that, references in this Schedule to “the Inland Revenue" are to any officer of the Board.

Meaning of “company" and related expressions

146

In this Schedule—

• “company” means a body corporate or unincorporated association, but does not include a partnership;

• “controlled foreign company” has the same meaning as in Chapter IV of Part XVII of the Taxes Act 1988 (tax avoidance: controlled foreign companies);

• “single company” means a company that is not a member of a group.

Index of defined expressions

147

In this Schedule the following expressions are defined or otherwise explained by the provisions indicated:

SCHEDULE 23

Rights to which this Schedule applies

1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax treatment of expenditure on acquisition and receipts from disposal

2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax treatment of amounts arising from revaluation

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax treatment must accord with accounting approach in relevant group accounts

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transitional provision in relation to IRUs

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 24

The Schedule inserted after Schedule 4 to the Taxation of Chargeable Gains Act 1992 is as follows:

SCHEDULE 25

The Schedule inserted after Schedule 4A to the Taxation of Chargeable Gains Act 1992 is as follows:

SCHEDULE 26

Part I — New Schedule 4C to the Taxation of Chargeable Gains Act 1992

1

The Schedule inserted after Schedule 4B to the Taxation of Chargeable Gains Act 1992 is as follows:

Schedule 4C (1) (1) This Schedule applies where in any year of assessment a chargeable gain or allowable loss accrues by virtue of Schedule 4B to trustees of a settlement within section 87. For this purpose a settlement is “within section 87" for a year of assessment if in that year the conditions specified in section 87(1) or section 88(1) are met in relation to the trustees of the settlement. (2) The provisions of this Schedule have effect in relation to any such chargeable gain or allowable loss as is mentioned in sub-paragraph (1) above in place of the provisions of sections 86A to 95. (3) No account shall be taken— (a) of any such chargeable gain or allowable loss in computing the trust gains for a year of assessment in accordance with sections 87 to 89; or (b) of any chargeable gain or allowable loss to which those sections apply in computing the Schedule 4B trust gains in accordance with this Schedule. (2) The general scheme of this Schedule is that— (a) Schedule 4B trust gains are attributed to beneficiaries— (i) of the transferor settlement, or (ii) of any transferee settlement, who have received capital payments from the trustees; and (b) any allowable loss accruing by virtue of Schedule 4B may only be set against a chargeable gain so accruing. (3) (1) This paragraph explains what is meant for the purposes of this Schedule by “Schedule 4B trust gains”. (2) The Schedule 4B trust gains are computed in relation to each transfer of value to which that Schedule applies. (3) In relation to a transfer of value the amount of the Schedule 4B trust gains for the purposes of this Schedule is given by— $$CA-SG-AL$where—CA is the chargeable amount computed under paragraph 4 or 5 below,SG is the amount of any gains attributed to the settlor that fall to be deducted under paragraph 6 below, andAL is the amount of any allowable losses that may be deducted under paragraph 7 below.$ (4) (1) If the transfer of value is made in a year of assessment during which the trustees of the transferor settlement are at no time resident or ordinarily resident in the United Kingdom the chargeable amount is computed under this paragraph. (2) Where this paragraph applies the chargeable amount is the amount on which the trustees would have been chargeable to tax under section 2(2) by virtue of Schedule 4B if they had been resident or ordinarily resident in the United Kingdom in the year. (5) (1) If the transfer of value is made in a year of assessment where— (a) the trustees of the transferor settlement are resident in the United Kingdom during any part of the year or ordinarily resident in the United Kingdom during the year, and (b) at any time of such residence or ordinary residence they fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom, the chargeable amount is computed under this paragraph. (2) Where this paragraph applies the chargeable amount is the lesser of— (a) the amount on which the trustees would be chargeable to tax under section 2(2) by virtue of Schedule 4B on the assumption that the double taxation relief arrangements did not apply, and (b) the amount on which the trustees would be so chargeable to tax by virtue of disposals of protected assets. (3) For this purpose “protected assets” has the meaning given by section 88(4). (6) (1) For the purposes of this Schedule the chargeable amount in relation to a transfer of value shall be reduced by the amount of any chargeable gains arising by virtue of that transfer of value that— (a) are by virtue of section 86(4) treated as accruing to the settlor, or (b) where section 10A applies, are treated by virtue of that section (as it has effect subject to paragraph 12 below) as accruing to the settlor in the year of return. (2) In determining for the purposes of sub-paragraph (1)(a) the amount of chargeable gains arising by virtue of a transfer of value that are treated as accruing to the settlor, there shall be disregarded any losses which arise otherwise than by virtue of Schedule 4B. (3) In computing the chargeable amount in relation to a transfer of value the effect of sections 77 to 79 shall be ignored. (7) (1) An allowable loss arising under Schedule 4B in relation to a transfer of value by the trustees of a settlement may be taken into account in accordance with this paragraph to reduce for the purposes of this Schedule the chargeable amount in relation to another transfer of value by those trustees. (2) Any such allowable loss goes first to reduce chargeable amounts arising from other transfers of value made in the same year of assessment. If there is more than one chargeable amount and the aggregate amount of the allowable losses is less than the aggregate of the chargeable amounts, each of the chargeable amounts is reduced proportionately. (3) If in any year of assessment the aggregate amount of the allowable losses exceeds the aggregate of the chargeable amounts, the excess shall be carried forward to the next year of assessment and treated for the purposes of this paragraph as if it were an allowable loss arising in relation to a transfer of value made in that year. (4) Any reduction of a chargeable amount under this paragraph is made after any deduction under paragraph 6. (8) (1) The Schedule 4B trust gains relating to a transfer of value shall be treated as chargeable gains accruing to beneficiaries— (a) of the transferor settlement, and (b) of any transferee settlement, in accordance with the following rules. (2) The Schedule 4B trust gains shall be treated as chargeable gains accruing to beneficiaries who— (a) receive capital payments from the trustees in the year of assessment in which the transfer of value is made, or (b) have received such payments in any earlier year, to the extent that such payments exceed the amount of any gains attributed to the beneficiaries under section 87(4) or 89(2). (3) Any Schedule 4B trust gains remaining after the application of sub-paragraph (2) in relation to the year of assessment in which the transfer of value was made shall be carried forward to the following year of assessment and treated for the purposes of this paragraph as if they were gains from a transfer of value made in that year. (4) The attribution of chargeable gains to beneficiaries under this paragraph shall be made in proportion to, but shall not exceed, the amounts of the capital payments received by them. (9) (1) A capital payment shall be left out of account— (a) for the purposes of paragraph 8, to the extent that chargeable gains have, by reason of it, been treated as accruing to the recipient in an earlier year of assessment; and (b) for the purposes of sections 87(4) and (5) and 89(2), to the extent that chargeable gains have, by reason of it, been treated as accruing to the recipient under paragraph 8. (2) A beneficiary shall not be charged to tax on chargeable gains treated by virtue of paragraph 8 as accruing to him in any year unless he is domiciled in the United Kingdom at some time in that year. (3) For the purposes of paragraph 8 capital payments received— (a) before 21st March 2000, or (b) before the year of assessment preceding the year of assessment in which the transfer of value is made, shall be disregarded. (10) (1) Subject to sub-paragraph (2) below, it is immaterial for the purposes of paragraph 8 that the trustees of the transferor settlement, or any transferee settlement, are or have at any time been resident or ordinarily resident in the United Kingdom. (2) A capital payment received by a beneficiary of a settlement from the trustees in a year of assessment— (a) during the whole of which the trustees are resident in the United Kingdom, or (b) in which the trustees are ordinarily resident in the United Kingdom, shall be disregarded for the purposes of paragraph 8 if it was made before, but was not made in anticipation of, chargeable gains accruing under Schedule 4B or of a transfer of value being made to which that Schedule applies. (3) For the purposes of sub-paragraph (2) the trustees of a settlement shall not be regarded as resident or ordinarily resident in the United Kingdom at any time when they fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom. (11) Without prejudice to so much of this Schedule as requires section 2A to be applied in the computation of the amount of Schedule 4B trust gains, chargeable gains that are treated as accruing to beneficiaries under this Schedule shall not be eligible for taper relief. (12) (1) This paragraph applies where by virtue of section 10A an amount of gains— (a) arising under Schedule 4B in an intervening year, and (b) falling within section 86(1)(e), would (apart from this Schedule) be treated as accruing to a person (“the settlor”) in the year of return. (2) Where this paragraph applies, only so much (if any) of the Schedule 4B trust gains falling within section 86(1)(e) as exceeds the amount charged to beneficiaries shall fall in accordance with section 10A to be attributed to the settlor for the year of return. (3) The “amount charged to beneficiaries” means, subject to sub-paragraph (4) below, the total of the amounts on which beneficiaries of the transferor or transferee settlements are charged to tax under this Schedule by reference to those gains for all the intervening years. (4) Where the property comprised in the transferor settlement has at any time included property not originating from the settlor, only so much (if any) of any capital payment taken into account for the purposes of paragraph 8 above as, on a just and reasonable apportionment, is properly referable to property originating from the settlor shall be taken into account in computing the amount charged to beneficiaries. (5) Expressions used in this paragraph and section 10A have the same meanings in this paragraph as in that section; and paragraph 8 of Schedule 5 shall apply for the construction of the references in sub-paragraph (4) above to property originating from the settlor as it applies for the purposes of that Schedule. (13) (1) This paragraph applies where— (a) a capital payment is made by the trustees of a settlement, (b) the payment is made in circumstances where paragraph 8 above treats chargeable gains as accruing in respect of the payment, and (c) a beneficiary is charged to tax in respect of the payment by virtue of that paragraph. (2) The tax payable by the beneficiary in respect of the payment shall be increased by the amount found under sub-paragraph (3) below, except that it shall not be increased beyond the amount of the payment; and an assessment may charge tax accordingly. (3) The amount is one equal to the interest that would be yielded if an amount equal to the tax which would be payable by the beneficiary in respect of the payment (apart from this paragraph) carried interest for the chargeable period at the specified rate. The “specified rate” means the rate for the time being specified in section 91(3). (4) The chargeable period is the period which— (a) begins with the later of the 2 days specified in sub-paragraph (5) below, and (b) ends with 30th November in the year of assessment following that in which the capital payment is made. (5) The 2 days are— (a) 1st December in the year of assessment following that in which the transfer of value was made, and (b) 1st December falling 6 years before 1st December in the year of assessment following that in which the capital payment is made. (14) (1) In this Schedule— (a) “transfer of value” has the same meaning as in Schedule 4B; and (b) references to the time at which a transfer of value was made are to the time which is the material time for the purposes of that Schedule. (2) In this Schedule, in relation to a transfer of value— (a) references to the transferor settlement are to the settlement the trustees of which made the transfer of value; and (b) references to a transferee settlement are to any settlement of which the settled property includes property representing, directly or indirectly, the proceeds of the transfer of value. (3) References in this Schedule to beneficiaries of a settlement include— (a) persons who have ceased to be beneficiaries by the time the chargeable gains accrue, and (b) persons who were beneficiaries of the settlement before it ceased to exist, but who were beneficiaries of the settlement at a time in a previous year of assessment when a capital payment was made to them.

.

Part II — Consequential amendments

Taxation of Chargeable Gains Act 1992 (c. 12)

2

In section 90 of the Taxation of Chargeable Gains Act 1992 (transfers between settlements), after subsection (4) add—

(5) This section shall not apply— (a) to a transfer to the extent that it is in accordance with Schedule 4B treated as linked with trustee borrowing; or (b) to any chargeable gains arising by virtue of that Schedule.

.

3

In section 96 of the Taxation of Chargeable Gains Act 1992 (payments by and to companies), in subsections (1) and (2) after “sections 87 to 90" insert “ and Schedule 4C ”

4

In section 97 of the Taxation of Chargeable Gains Act 1992 (supplementary provisions)—

• (a) in subsections (1), (3)(a), (4) and (7), after “sections 86A to 96", and

• (b) in subsections (5) and (8), after “sections 86A to 90",

insert “ and Schedule 4C ”.

5

In section 98 of the Taxation of Chargeable Gains Act 1992, after subsection (2) add—

(3) The provisions of subsections (1) and (2) above have effect as if the references to sections 87 to 90 included references to Schedule 4C.

.

Taxes Act 1988

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 27

Part I — Amendments of Chapter IV of Part X of the Taxes Act 1988

Availability of relief

1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Limits on amount of relief

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amendments of Schedule 18 to the Taxes Act 1988

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part II — Consequential amendments

Section 76 of the Taxes Act 1988

7

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 434A of the Taxes Act 1988

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 502 of the Taxes Act 1988

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schedule 24 to the Taxes Act 1988

10

In Schedule 24 to the Taxes Act 1988 (assumptions for calculating chargeable profits etc. of foreign companies), make paragraph 5 sub-paragraph (1) of that paragraph; and after that sub-paragraph insert—

(2) Where, under Chapter IV of Part X, any relief is in fact surrendered by the company and allowed to another company by way of group relief, it shall be assumed that the chargeable profits of the company, apart from this paragraph, are to be increased by an amount of additional profits equal to the amount of the relief so surrendered and allowed.

.

Schedule 18 to the Finance Act 1998

11

In paragraph 68 of Schedule 18 to the Finance Act 1998 (contents of claim for group relief), after sub-paragraph (2) insert—

(3) A claim for group relief must also state whether or not there is a company mentioned in sub-paragraph (4) that was not resident in the United Kingdom in either or both of the following periods— (a) the accounting period of the surrendering company to which the surrender relates, (b) the corresponding accounting period of the claimant company. (4) Those companies are the claimant company, the surrendering company and any other company by reference to which— (a) the claimant company and the surrendering company are members of the same group, or (b) the conditions specified in section 402(3) of the Taxes Act 1988 for the making of the claim are satisfied in the case of the claimant company and the surrendering company.

.

Commencement

12

• (1) Paragraphs 7, 8, 10 and 11 have effect in relation to accounting periods ending on or after 1st April 2000.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 28

Introduction

1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Companies that may be required to pay unpaid tax

2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notice requiring payment of unpaid tax

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Time limit for giving notice

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Limit on amount payable in consortium case

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary provisions

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 29

Part I — Application of Taxation of Chargeable Gains Act 1992

Main amendments

1

• (1) In section 170 of the Taxation of Chargeable Gains Act 1992 (groups of companies: interpretation), the following provisions shall cease to have effect—

• (a) paragraph (a) of subsection (2) (which provides that references to companies apply only to companies resident in the United Kingdom); and

• (b) in subsection (9)(b) the words “(although resident in the United Kingdom)".

• (2) The above amendments (referred to in this Schedule as “the main amendments”) have effect in accordance with the following provisions of this Schedule.

Transfers within a group

2

• (1) Section 171 of the Taxation of Chargeable Gains Act 1992 (transfers within a group: general provisions) is amended as follows.

• (2) For subsection (1) (treatment for corporation tax purposes of transfer of asset within group) substitute—

(1) Where— (a) a company (“company A”) disposes of an asset to another company (“company B”) at a time when both companies are members of the same group, and (b) the conditions in subsection (1A) below are met, company A and company B are treated for the purposes of corporation tax on chargeable gains as if the asset were acquired by company B for a consideration of such amount as would secure that neither a gain nor a loss would accrue to company A on the disposal. (1A) The conditions referred to in subsection (1)(b) above are— (a) that company A is resident in the United Kingdom at the time of the disposal, or the asset is a chargeable asset in relation to that company immediately before that time, and (b) that company B is resident in the United Kingdom at the time of the disposal, or the asset is a chargeable asset in relation to that company immediately after that time. For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section 10(3) form part of its chargeable profits for corporation tax purposes.

.

• (3) In subsection (2)—

• (a) in paragraph (a), for “a member of a group of companies" substitute “ company B ”, and

• (b) in the closing words, for “a member of a group of companies" substitute “ company A ”.

• (4) In subsection (3) for “the company first mentioned in that subsection" substitute “ company A ”.

• (5) After subsection (5) add—

(6) Subsection (1) above applies notwithstanding any provision in this Act fixing the amount of the consideration deemed to be received on a disposal or given on an acquisition. But where it is assumed for any purpose that a member of a group of companies has sold or acquired an asset, it shall be assumed also that it was not a sale or acquisition to which this section applies.

.

• (6) The above amendments, and the main amendments so far as they apply for the purposes of section 171, have effect in relation to disposals on or after 1st April 2000.

Transfer of United Kingdom branch or agency

3

• (1) Section 172 of the Taxation of Chargeable Gains Act 1992 (transfer of United Kingdom branch or agency) shall cease to have effect.

• (2) The above amendment has effect in relation to disposals on or after 1st April 2000.

De-grouping charge

4

• (1) Section 179 of the Taxation of Chargeable Gains Act 1992 (company ceasing to be member of group) is amended as follows.

• (2) For subsection (1) substitute—

(1) This section applies where— (a) a company (“company A”) acquires an asset from another company (“company B”) at a time when company B is a member of a group, (b) the conditions in subsection (1A) below are met, and (c) company A ceases to be a member of that group within the period of six years after the time of the acquisition. References in this section to a company ceasing to be a member of a group of companies do not apply to cases where a company ceases to be a member of a group in consequence of another member of the group ceasing to exist. (1A) The conditions referred to in subsection (1)(b) above are— (a) that company A is resident in the United Kingdom at the time it acquires the asset, or the asset is a chargeable asset in relation to that company immediately after that time, and (b) that company B is resident in the United Kingdom at the time of that acquisition, or the asset is a chargeable asset in relation to that company immediately before that time. For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section 10(3) form part of its chargeable profits for corporation tax purposes.

.

• (3) In subsection (2A)—

• (a) in paragraph (a)—

• (i) after “a company" insert “ (“company A”) ”, and

• (ii) after “another company" insert “ (“company B”) ”,

• (b) in paragraph (b) for “that company’s" substitute “ company A’s ”,

• (c) in paragraph (c) for “the company that made the acquisition" substitute “ company A ”, and

• (d) in the closing words for “the company’s" substitute “ company A’s ”.

• (4) In subsections (2B) (three times), (2C), (2D), (3) (three times), (4) (twice), (10)(c) and (13) for “the chargeable company" substitute “ company A ”.

• (5) Subsections (11) and (12) (which are superseded by the provision made by paragraph 9 below) shall cease to have effect.

• (6) The amendments made by sub-paragraphs (2) to (4) above, and the main amendments so far as they apply for the purposes of section 179, have effect in relation to assets acquired on or after 1st April 2000.

• (7) The amendments made by sub-paragraph (5) above have effect in relation to gains accruing on or after 1st April 2000.

Reconstruction or amalgamation involving transfer of business

5

• (1) Section 139 of the Taxation of Chargeable Gains Act 1992 (reconstruction or amalgamation involving transfer of business) is amended as follows.

• (2) In subsection (1) (transfer of business on basis of no gain and no loss) for paragraph (b) (requirement that both companies are resident in the United Kingdom) substitute—

(b) the conditions in subsection (1A) below are met in relation to the assets included in the transfer, and

.

• (3) After subsection (1) insert—

(1A) The conditions referred to in subsection (1)(b) above are— (a) that the company acquiring the assets is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets in relation to that company immediately after that time, and (b) that the company from which the assets are acquired is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets in relation to that company immediately before that time. For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section 10(3) form part of its chargeable profits for corporation tax purposes.

.

• (4) The above amendments have effect in relation to disposals made on or after 1st April 2000.

Deemed disposal on non-resident ceasing to carry on trade in United Kingdom through branch or agency

6

• (1) Section 25 of the Taxation of Chargeable Gains Act 1992 (non-residents: deemed disposals) is amended as follows.

• (2) After subsection (3) insert—

(3A) Subsection (3) above shall not apply if— (a) the person ceasing to carry on the trade is a company, and (b) the trade is transferred to another company in circumstances in which section 139 or 171 applies in relation to the assets transferred.

.

• (3) Subsection (4) shall cease to have effect.

• (4) The amendment in sub-paragraph (2) above has effect in relation to cases where section 139 or, as the case may be, section 171 has effect as amended by this Schedule.

• (5) The amendment in sub-paragraph (3) above has effect in relation to cases where section 139 has effect as amended by this Schedule.

Restriction on set-off of pre-entry losses

7

• (1) In Schedule 7A to the Taxation of Chargeable Gains Act 1992 (restriction on set-off of pre-entry losses), paragraph 1 (application and construction of Schedule) is amended as follows.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (6) The above amendments, and the main amendments so far as they apply for the purposes of Schedule 7A, have effect in relation to the amount to be included in respect of chargeable gains in a company’s total profits for any accounting period ending on or after 21st March 2000.

• (7) Any question whether a company was, in relation to times before 21st March 2000, a member of a group shall be determined by reference to the position under the Taxation of Chargeable Gains Act 1992 as it stood before the main amendments.

• (8) Any question whether a company was, in relation to times before 6th April 1992, a member of a group shall be determined by reference to the position under the Capital Gains Tax Act 1979.

• (9) Where—

• (a) immediately before the time when the main amendments have effect in relation to a company in accordance with sub-paragraph (6), the company was not a member of a group of companies for the purposes of section 170 of the Taxation of Chargeable Gains Act 1992 (as it stood before the main amendments), and

• (b) immediately after that time, the company is a member of a group of companies for the purposes of that section (as amended by the main amendments),

Schedule 7A to that Act shall not have effect in relation to any losses accruing to the company before that time or any chargeable assets (within the meaning of paragraph 1(3A) of that Schedule) held by it immediately before that time.

Restrictions on setting losses against pre-entry gains

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recovery of unpaid tax

9

• (1) For sections 190 and 191 of the Taxation of Chargeable Gains Act 1992 substitute—

(190) (1) This section applies where— (a) a chargeable gain has accrued to a company (“the taxpayer company”), (b) the condition in subsection (2) below is met, and (c) the whole or part of the corporation tax assessed on the company for the accounting period in which the gain accrued (“the relevant accounting period”) is unpaid at the end of the period of six months after it became payable. (2) The condition referred to in subsection (1)(b) above is— (a) that the taxpayer company is resident in the United Kingdom at the time when the gain accrued, or (b) that the gain forms part of the taxpayer company’s chargeable profits for corporation tax purposes by virtue of section 10(3). (3) The following persons may, by notice under this section, be required to pay the unpaid tax— (a) if the taxpayer company was a member of a group at the time when the gain accrued— (i) a company which was at that time the principal company of the group, and (ii) any other company which in any part of the period of twelve months ending with that time was a member of that group and owned the asset disposed of, or any part of it, or where that asset is an interest or right in or over another asset, owned either asset or any part of either asset; and (b) if the gain forms part of the chargeable profits of the taxpayer company for corporation tax purposes by virtue of section 10(3), any person who is, or during the period of twelve months ending with the time when the gain accrued was, a controlling director of the taxpayer company or of a company which has, or within that period had, control over the taxpayer company. (4) The Board may serve a notice on a person within subsection (3) above requiring him, within 30 days of the service of the notice, to pay— (a) the amount which remains unpaid of the corporation tax assessed on the taxpayer company for the relevant accounting period, or (b) if less, an amount equal to corporation tax on the amount of the chargeable gain at the rate in force when the gain accrued. (5) The notice must state— (a) the amount of corporation tax assessed on the taxpayer company for the relevant accounting period that remains unpaid, (b) the date when it first became payable, and (c) the amount required to be paid by the person on whom the notice is served. (6) The notice has effect— (a) for the purposes of the recovery from that person of the amount required to be paid and of interest on that amount, and (b) for the purposes of appeals, as if it were a notice of assessment and that amount were an amount of tax due from that person. (7) Any notice under this section must be served before the end of the period of three years beginning with the date on which the liability of the taxpayer company to corporation tax for the relevant accounting period is finally determined. (8) Where the unpaid tax is charged in consequence of a determination under paragraph 36 or 37 of Schedule 18 to the Finance Act 1998 (determination where no return delivered or return incomplete), the date mentioned in subsection (7) above shall be taken to be the date on which the determination was made. (9) Where the unpaid tax is charged in a self-assessment, including a self-assessment that supersedes a determination (see paragraph 40 of Schedule 18 to the Finance Act 1998), the date mentioned in subsection (7) above shall be taken to be the latest of— (a) the last date on which notice of enquiry may be given into the return containing the self-assessment; (b) if notice of enquiry is given, 30 days after the enquiry is completed; (c) if more than one notice of enquiry is given, 30 days after the last notice of completion; (d) if after such an enquiry the Inland Revenue amend the return, 30 days after notice of the amendment is issued; (e) if an appeal is brought against such an amendment, 30 days after the appeal is finally determined. (10) If the unpaid tax is charged in a discovery assessment, the date mentioned in subsection (7) above shall be taken to be— (a) where there is no appeal against the assessment, the date when the tax becomes due and payable; (b) where there is such an appeal, the date on which the appeal is finally determined. (11) A person who has paid an amount in pursuance of a notice under this section may recover that amount from the taxpayer company. (12) A payment in pursuance of a notice under this section is not allowed as a deduction in computing any income, profits or losses for any tax purposes. (13) In this section— - “director”, in relation to a company, has the meaning given by section 168(8) of the Taxes Act (read with subsection (9) of that section) and includes any person falling within section 417(5) of that Act (read with subsection (6) of that section); - “controlling director”, in relation to a company, means a director of the company who has control of it (construing control in accordance with section 416 of the Taxes Act);“group" and “principal company" have the meaning which would be given by section 170 if in that section for references to 75 per cent. subsidiaries there were substituted references to 51 per cent. subsidiaries.

.

• (2) In section 87A(3) of the Taxes Management Act 1970 (date from which interest runs in the case of an assessment of a company’s tax on another person)—

• (a) after “In relation to corporation tax assessed" insert “ or treated as assessed ”, and

• (b) after “139(7)" insert “ or 190 ”.

• (3) The above amendments, and the main amendments so far as they apply for the purposes of section 190 (as substituted by sub-paragraph (1) above), have effect in relation to gains accruing on or after 1st April 2000.

• (4) Any question whether a company was a member of a group during the period of twelve months ending when such a gain accrued shall be determined in accordance with section 170 as amended by the main amendments.

Replacement of business assets by members of group

10

• (1) Section 175 of the Taxation of Chargeable Gains Act 1992 is amended as follows.

• (2) In subsection (1) after “all the trades" insert “ to which this section applies ”.

• (3) After subsection (1) insert—

(1A) The trades to which this section applies are— (a) any trade carried on by a company that is resident in the United Kingdom, and (b) any trade carried on in the United Kingdom through a branch or agency by a company not so resident.

.

• (4) In subsection (2A), after paragraph (b) insert—

(ba) the conditions in subsection (2AA) below are met, and

.

• (5) After subsection (2A) insert—

(2AA) The conditions referred to in subsection (2A)(ba) above are— (a) that the company making the disposal is resident in the United Kingdom at the time of the disposal, or the assets are chargeable assets in relation to that company immediately before that time, and (b) that the acquiring company is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets in relation to that company immediately after that time. For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section 10(3) form part of its chargeable profits for corporation tax purposes.

.

• (6) For subsection (3) substitute—

(3) Section 154(2) applies where the company making the claim is a member of a group of companies— (a) as if all members of the group for the time being carrying on a trade to which this section applies were the same person, and (b) in accordance with subsection (1) above, as if all those trades were the same trade; so that the gain accrues to the member of the group holding the asset concerned on the occurrence of the event mentioned in section 154(2).

.

• (7) The above amendments, and the main amendments so far as they apply for the purposes of section 175, have effect in relation to cases in which—

• (a) either the disposal or acquisition is on or after 1st April 2000, or

• (b) both the disposal and acquisition are on or after that date.

• (8) In a case falling within paragraph (a) of sub-paragraph (7) above, any question whether a company was, at the time of the acquisition or disposal corresponding to the disposal or acquisition referred to in that paragraph, a member of a group shall be determined in accordance with section 170 of the Taxation of Chargeable Gains Act 1992 as amended by the main amendments.

Transfers of assets within a group: trading stock

11

• (1) For section 173 of the Taxation of Chargeable Gains Act 1992 substitute—

(173) (1) Where— (a) a company (“company A”) acquires an asset as trading stock of a trade to which this section applies, (b) the acquisition is from a company (“company B”) that at the time of the acquisition is a member of the same group of companies, and (c) the asset did not form part of the trading stock of any such trade carried on by company B, company A is treated for the purposes of section 161 as having acquired the asset otherwise than as trading stock and immediately appropriated it for the purposes of the trade as trading stock. (2) Where— (a) a company (“company C”) disposes of an asset forming part of the trading stock of a trade to which this section applies carried on by that company, (b) the disposal is to another company (“company D”) that at the time of the disposal is a member of the same group of companies, and (c) the asset is acquired by company D otherwise than as trading stock of any such trade carried on by it, company C is treated for the purposes of section 161 as having appropriated the asset immediately before the disposal for some purpose other than the purpose of use as trading stock. (3) The trades to which this section applies are— (a) any trade carried on by a company resident in the United Kingdom, and (b) any trade carried on in the United Kingdom through a branch or agency by a company not so resident.

.

• (2) The above amendment, and the main amendments so far as they apply for the purposes of section 173 (as substituted by sub-paragraph (1) above), have effect in relation to acquisitions and disposals on or after 1st April 2000.

Restriction of losses by reference to capital allowances

12

• (1) In section 41 of the Taxation of Chargeable Gains Act 1992, after subsection (7) add—

(8) Where there is a disposal of an asset acquired in circumstances in which— (a) section 140A applies, or (b) section 171 applies or would apply but for subsection (2) of that section, this section has effect in relation to capital allowances made to the person from which it was acquired (so far as not taken into account in relation to a disposal of the asset by that person), and so on as respects previous transfers of the asset in such circumstances. This does not affect the consideration for which an asset is deemed under section 140A or 171 to be acquired.

.

• (2) The above amendment has effect in relation to cases where the disposal first referred to in section 41(8) (as inserted by sub-paragraph (1) above) is on or after 1st April 2000.

Assets held on 6th April 1965: disposal outside group

13

• (1) Section 174 of the Taxation of Chargeable Gains Act 1992 is amended as follows.

• (2) In subsection (4) for “at a time when both were members of the group" substitute “ in a transfer to which section 171(1) applied ”.

• (3) Subsection (5) shall cease to have effect.

• (4) The above amendments, and the main amendments so far as they apply for the purposes of section 174, have effect in relation to acquisitions on or after 1st April 2000.

• (5) Any question whether a company was, in relation to times before 1st April 2000, a member of a group shall be determined in accordance with section 170 of the Taxation of Chargeable Gains Act 1992 as it stood before the main amendments.

Part II — Minor and consequential amendments

Section 97 of the Inheritance Tax Act 1984

14

The main amendments have effect for the purposes of section 97 of the Inheritance Tax Act 1984 (transfer of asset within a group of companies) in relation to disposals on or after 1st April 2000.

Section 132 of the Finance Act 1988

15

• (1) In section 132 of the Finance Act 1988 (recovery of tax from another group company or controlling director), in subsection (6), in the definition of “group", the words “references to residence in the United Kingdom were omitted and" shall cease to have effect.

• (2) The above amendment, and the main amendments so far as they apply for the purposes of section 132, have effect in relation to cases in which the migrating company ceases to be resident in the United Kingdom on or after 1st April 2000.

• (3) Any question whether a company was a member of a group during the period of twelve months ending when the migrating company ceased to be so resident shall be determined in accordance with section 170 of the Taxation of Chargeable Gains Act 1992 as amended by the main amendments.

Section 14 of the Taxation of Chargeable Gains Act 1992

16

• (1) Section 14 of the Taxation of Chargeable Gains Act 1992 (non-resident groups of companies) is amended as follows.

• (2) For subsection (2) substitute—

(2) The following provisions— (a) section 41(8), (b) section 171 (except subsections (1)(b) and (1A)), (c) section 173 (with the omission of the words “to which this section applies" in subsections (1)(a) and (2)(a) and “such" in subsections (1)(c) and (2)(c) and with the omission of subsection (3)), (d) section 174(4) (with the substitution of “ at a time when both were members of the group" for “in a transfer to which section 171(1) applied”), and (e) section 175(1) (with the omission of the words “to which this section applies”), shall apply in relation to non-resident companies which are members of a non-resident group of companies as they apply in relation to companies which are members of a group of companies.

• (3) In subsection (3), for “Sections 178 to 180" substitute “ Section 179 (except subsections (1)(b) and (1A)) ”.

• (4) In subsection (4)(b), the words “without subsections (2)(a), (9) and (12) to (14)" shall cease to have effect.

• (5) The above amendments, and the main amendments so far as they apply for the purposes of section 14, have effect in cases in which section 41, 171, 173, 174(4), 175(1) or 179, as the case may be, have effect as amended by this Schedule.

Section 31A of the Taxation of Chargeable Gains Act 1992

17

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .