Finance Act 2006

(184A) (1) This section applies for the purposes of corporation tax in respect of chargeable gains if— (a) at any time (“the relevant time”) there is a qualifying change of ownership in relation to a company (“the relevant company”) (see section 184C), (b) a loss (a “qualifying loss”) accrues to the relevant company or any other company on a disposal of a pre-change asset (see subsection (3)), (c) the change of ownership occurs directly or indirectly in consequence of, or otherwise in connection with, any arrangements the main purpose, or one of the main purposes, of which is to secure a tax advantage (see section 184D), and (d) the advantage involves the deduction of a qualifying loss from any chargeable gains (whether or not it also involves anything else). (2) A qualifying loss accruing to a company is not to be deductible from chargeable gains accruing to the company unless the gains accrue to the company on a disposal of a pre-change asset. (3) In this section a “pre-change asset” means an asset which was held by the relevant company before the relevant time (but see also sections 184E and 184F). (4) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). (5) For the purposes of this section it does not matter— (a) whether a qualifying loss accrues before, after or at the relevant time, (b) whether a qualifying loss accrues at a time when there are no chargeable gains from which it could be deducted (or could otherwise have been deducted), or (c) whether the tax advantage is secured for the company to which a qualifying loss accrues or for any other company. (184B) (1) This section applies for the purposes of corporation tax in respect of chargeable gains if— (a) at any time (“the relevant time”) there is a qualifying change of ownership in relation to a company (“the relevant company”) (see section 184C), (b) a gain (a “qualifying gain”) accrues to the relevant company or any other company on a disposal of a pre-change asset (see subsection (3)), (c) the change of ownership occurs directly or indirectly in consequence of, or otherwise in connection with, any arrangements the main purpose, or one of the main purposes, of which is to secure a tax advantage, and (d) the advantage involves the deduction of a loss from a qualifying gain (whether or not it also involves anything else). (2) In the case of a qualifying gain accruing to a company, a loss accruing to the company is not to be deductible from the gain unless the loss accrues to the company on a disposal of a pre-change asset. (3) In this section a “pre-change asset” means an asset which was held by the relevant company before the relevant time (but see also sections 184E and 184F). (4) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). (5) For the purposes of this section it does not matter— (a) whether a qualifying gain accrues before, after or at the relevant time, (b) whether a qualifying gain accrues at a time when there are no losses which could be deducted (or could otherwise have been deducted) from the gain, or (c) whether the tax advantage is secured for the company to which a qualifying gain accrues or for any other company. (184C) (1) For the purposes of sections 184A and 184B, there is a qualifying change of ownership in relation to a company at any time if any one or more of the following occur at that time— (a) the company joins a group of companies (see subsections (2) to (5)), (b) the company ceases to be a member of a group of companies, (c) the company becomes subject to different control (see subsections (6) to (9)). (2) Whether a company is a member of a group of companies at any time is determined in accordance with section 170. (3) But, apart from in the excepted case, nothing in section 170(10) or (10A) is to prevent all the companies of one group from being regarded as joining another group when the principal company of the first group becomes a member of the other group at any time. (4) The excepted case is the case where— (a) the persons owning the shares of the principal company of the first group immediately before that time are the same as the persons owning the shares of the principal company of the other group immediately after that time, (b) the principal company of the other group was not the principal company of any group immediately before that time, and (c) immediately after that time the principal company of the other group had assets consisting entirely (or almost entirely) of shares of the principal company of the first group. (5) For this purpose, references to shares of a company are to the shares comprised in the issued share capital of the company. (6) The general rule is that a company becomes subject to different control at any time if any one or more of the following occur— (a) a person has control of the company at that time (whether alone or together with one or more others) and the person did not previously have control of the company, (b) a person has control of the company at that time together with one or more others and the person previously had control of the company alone, (c) a person ceases to have control of the company at that time (whether the person had control alone or together with one or more others). (7) The general rule is subject to the following exceptions. (8) A company does not become subject to different control in any case where it joins a group of companies and the case is the excepted case mentioned above. (9) A company (“the subsidiary”) does not become subject to different control at any time in any case where— (a) immediately before that time the subsidiary is the 75 per cent. subsidiary of another company, and (b) (although there is a change in the direct ownership of the subsidiary) that other company continues immediately after that time to own it as a 75 per cent. subsidiary. (184D) For the purposes of sections 184A and 184B, “tax advantage” means— (a) relief or increased relief from corporation tax, (b) repayment or increased repayment of corporation tax, (c) the avoidance or reduction of a charge to corporation tax or an assessment to corporation tax, or (d) the avoidance of a possible assessment to corporation tax. (184E) (1) If— (a) a company other than the relevant company makes a disposal of an asset, and (b) the asset has been disposed of at any time after the relevant time by a disposal to which section 171(1) does not apply (a “non-section 171(1) transfer”), the asset ceases to be regarded as a pre-change asset for the purposes of sections 184A and 184B (but see also subsections (10) and (11)). (2) But (without affecting the generality of the provision made by the following subsection) if, on a non-section 171(1) transfer,— (a) an asset would cease to be regarded as a pre-change asset as a result of subsection (1), and (b) the company making the non-section 171(1) transfer retains any interest in or over the asset, that interest is to be regarded as a pre-change asset for the purposes of sections 184A and 184B. (3) If— (a) the relevant company or any other company holds an asset (“the new asset”) at or after the relevant time, (b) the value of the new asset derives in whole or in part from a pre-change asset, and (c) the new asset is not acquired by the company concerned as a result of a non-section 171(1) transfer, the new asset is also to be regarded as a pre-change asset for the purposes of sections 184A and 184B. (4) For this purpose the cases in which the value of an asset may be derived from any other asset include any case where— (a) assets have been merged or divided, (b) assets have changed their nature, or (c) rights or interests in or over assets have been created or extinguished. (5) If a pre-change asset is “the old asset” for the purposes of section 116 (reorganisations, conversions and reconstructions), “the new asset” for the purposes of that section is also to be regarded as a pre-change asset for the purposes of sections 184A and 184B. (6) If a pre-change asset is the “original shares” for the purposes of sections 127 to 131 (reorganisation or reduction of share capital), the “new holding” for the purposes of those sections is also to be regarded as a pre-change asset for the purposes of sections 184A and 184B. (7) The following subsection applies if, as a result of the application of a relevant deferral provision in the case of a disposal of a pre-change asset (“the original disposal”),— (a) a gain or loss that would otherwise accrue to a company does not so accrue, or (b) any part of any such gain is treated as forming part of a single chargeable gain which does not accrue to the company on the original disposal, and a gain or loss does, wholly or partly in consequence of the application of that provision in the case of the original disposal, accrue to the company or any other company on a subsequent occasion. (8) So much of the gain or loss accruing on the subsequent occasion as accrues in consequence of the application of the relevant deferral provision in the case of the original disposal is to be regarded for the purposes of sections 184A and 184B as accruing on a disposal of a pre-change asset (so far as it would not otherwise be so regarded). (9) A “relevant deferral provision” means any of the following— (a) section 139 (reconstruction involving transfer of business), (b) section 140 (postponement of charge on transfer of assets to non-resident company), (c) section 140A (transfer of a UK trade), (d) section 140E (merger leaving assets within UK tax charge), (e) sections 152 and 153 (replacement of business assets), (f) section 187 (postponement of charge on deemed disposal under section 185). (10) If— (a) a pre-change asset of the relevant company is transferred to another company (“the transferee company”), (b) any of sections 139, 140A and 140E apply to the companies in the case of the asset, and (c) the transfer of the asset is made directly or indirectly in consequence of, or otherwise in connection with, the arrangements mentioned in section 184A or 184B, the asset is to be regarded as a “pre-change asset” in the hands of the transferee company for the purposes of sections 184A and 184B. (11) In such a case, subsection (1) applies as if the reference in paragraph (a) of that subsection to the relevant company were to the transferee company. (184F) (1) This section applies, in the case of any pre-change asset of the relevant company or any pre-change asset of any company which is acquired on a disposal to which section 171(1) applies, if— (a) the pre-change asset consists of a holding of securities which falls as a result of any provision of Chapter 1 of Part 4 to be regarded as a single asset (“the pre-change pooled asset”), and (b) as a result of any disposal or acquisition at any time after the relevant time, any securities (“the other securities”) would (but for this section) be regarded as forming part of the pre-change pooled asset. (2) None of the other securities are to be regarded for the purposes of this Act as forming part of the pre-change pooled asset. (3) But this does not prevent the other securities from being regarded, as a result of any provision of that Chapter, as forming part of or constituting a different, single asset (“the other pooled asset”). (4) Securities of the same class as the other securities which are disposed of at or after the relevant time— (a) are to be identified first with the other securities or securities forming part of the other pooled asset, (b) are to be identified next with securities forming part of the pre-change pooled asset (if the number of securities disposed of exceeds the number identified in accordance with paragraph (a)), and (c) subject to paragraphs (a) and (b), are to be identified in accordance with the provisions applicable apart from those paragraphs. (5) The above identification rules apply even if some or all of the securities disposed of are otherwise identified— (a) by the disposal, or (b) by a transfer or delivery giving effect to it; but where a company disposes of securities in one capacity, they are not to be identified with securities which it holds, or can dispose of, only in some other capacity. (6) Chapter 1 of Part 4 has effect subject to this section. (7) In this section— - “pre-change asset” means an asset which is pre-change asset for the purposes of section 184A or 184B, - “securities” does not include relevant securities as defined in section 108 but, subject to that, means— 1. shares or securities of a company, and 2. any other assets where they are of a nature to be dealt in without identifying the particular assets disposed of or acquired. (8) For the purposes of this section, shares or securities of a company are not to be treated as being of the same class unless— (a) they are so treated by the practice of a recognised stock exchange, or (b) they would be so treated if dealt with on a recognised stock exchange.

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• (3) In Schedule 7A (restriction on set-off of pre-entry losses), in paragraph 1(1) (application of Schedule), at the end insert “ , but this Schedule shall have no effect in any case where section 184A (restrictions on buying losses: tax avoidance schemes) has effect in relation to those losses ”.

• (4) Section 177B and Schedule 7AA (restrictions on setting losses against pre-entry gains) shall cease to have effect.

• (5) In section 213 (insurance companies: spreading of gains and losses under section 212)—

• (a) in subsection (8H) for “that the net amount is” to the end substitute “ that the net amount would still arise even if losses accruing after the date on which the company or transferee joined the group of companies were disregarded ”, and

• (b) in subsection (8I) for “paragraph 1” to the end substitute “ section 184C as if those references were contained in that section; and in subsection (8A)(b) above “group” has the same meaning as in that section ”.

The amendments made by this subsection have effect where the accounting period for which the net amount represents an excess of losses over gains is an accounting period ending on or after 5th December 2005.

• (6) The amendments made by this section, other than subsection (5), have effect for calculating the amount to be included in respect of chargeable gains in a company's total profits for any accounting period ending on or after 5th December 2005.

• (7) But, in respect of any such accounting period, those amendments do not have effect in relation to the deduction of any loss from chargeable gains that accrue on any disposal made before 5th December 2005 unless that loss accrues on a disposal made on or after that date.

• (8) For the purposes of those amendments, it does not matter whether a qualifying change of ownership in relation to a company occurs—

• (a) before 5th December 2005, or

• (b) on or after that date.

• (9) Subsections (10) to (12) apply so long as each of the following conditions is met—

• (a) at any time (“the relevant time”) before 5th December 2005 there is a qualifying change of ownership in relation to a company (“the relevant company”) for the purposes of section 184A . . . of TCGA 1992,

• (b) the change of ownership occurs because the relevant company ceases to be a member of a group of companies at the relevant time (whether or not it also occurs for any other reason),

• (c) the principal company of that group has control of the relevant company at the relevant time and at immediately afterwards,

• (ca) no qualifying change of ownership occurs at any time in relation to the principal company of that group for the purposes of section 184A of TCGA 1992 directly or indirectly in consequence of, or otherwise in connection with, any arrangements the main purpose, or one of the main purposes, of which is to secure a tax advantage falling within subsection (1)(d) of that section, and

• (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (e) a qualifying loss for the purposes of section 184A of TCGA 1992 . . . accrues to the relevant company or any other company on a disposal made before 5th December 2005.

• (10) Subsection (2) of that section has effect in relation to that qualifying loss subject to the following modifications.

• (11) That subsection has effect as if there were inserted at the end of it unless the gains accrue to the company on a disposal of a pre-change asset.

• (12) That subsection (modified as mentioned above) has effect as if the reference to a pre-change asset included an asset held before the relevant time by any company—

• (a) which, immediately before that time, was a member of the same group of companies as the relevant company, and

• (b) which, throughout the period beginning with that time and ending immediately after the making of the disposal referred to in that subsection, has remained under the control of the company which was the principal company of that group at the relevant time.

• (13) Expressions which are used in subsections (9) to (12) have the same meaning as in sections 184A and 184C of TCGA 1992.

Other avoidance involving losses accruing to companies

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• (1) After section 184F of TCGA 1992 (as inserted by section 70 above) insert—

(184G) (1) This section applies for the purposes of corporation tax in respect of chargeable gains if conditions A to D are satisfied. (2) Condition A is that— (a) any receipt arises to a company (“the relevant company”) on a disposal of an asset, and (b) the receipt arises directly or indirectly in consequence of, or otherwise in connection with, any arrangements. (3) Condition B is that— (a) a chargeable gain (the “relevant gain”) accrues to the relevant company on the disposal, and (b) losses accrue (or have accrued) to the relevant company on any other disposal of any asset (whether before or after or as part of the arrangements). (4) Condition C is that, but for the arrangements, an amount would have fallen to be taken into account wholly or partly instead of the receipt in calculating the income chargeable to corporation tax— (a) of the relevant company, or (b) of a company which, at any qualifying time, is a member of the same group as the relevant company. (5) Condition D is that— (a) the main purpose of the arrangements, or (b) one of the main purposes of the arrangements, is to secure a tax advantage that involves the deduction of any of the losses from the relevant gain (whether or not it also involves anything else). (6) If the Board consider, on reasonable grounds, that conditions A to D are or may be satisfied, they may give the relevant company a notice in respect of the arrangements (but see also section 184I). (7) If, when the notice is given, conditions A to D are satisfied, no loss accruing to the relevant company at any time is to be deductible from the relevant gain. (8) A notice under this section must— (a) specify the arrangements, (b) specify the accounting period in which the relevant gain accrues, and (c) inform the relevant company of the effect of this section. (9) If relevant gains accrue in more than one accounting period, a single notice under this section may specify all the accounting periods concerned. (10) In this section— - “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), - “group”, in relation to companies, means a group determined in accordance with section 170, - “qualifying time”, in relation to any arrangements, means any time which falls in the period— 1. beginning with the time at which the arrangements are made, and 2. ending with the time at which the matters (other than any tax advantage) intended to be secured by the arrangements are secured, - “tax advantage” has the meaning given by section 184D. (184H) (1) This section applies for the purposes of corporation tax in respect of chargeable gains if conditions A to D are satisfied. (2) Condition A is that— (a) a chargeable gain (the “relevant gain”) accrues to a company (“the relevant company”) directly or indirectly in consequence of, or otherwise in connection with, any arrangements, and (b) losses accrue (or have accrued) to the relevant company on any disposal of any asset (whether before or after or as part of the arrangements). (3) Condition B is that the relevant company, or a company connected with the relevant company, incurs any expenditure— (a) which is allowable as a deduction in calculating its total profits chargeable to corporation tax but which is not allowable as a deduction in computing its gains under section 38, and (b) which is incurred directly or indirectly in consequence of, or otherwise in connection with, the arrangements. (4) Condition C is that the main purpose, or one of the main purposes, of the arrangements is to secure a tax advantage that involves both— (a) the deduction of the expenditure in calculating total profits, and (b) the deduction of any of the losses from the relevant gain, whether or not it also involves anything else. (5) Condition D is that the arrangements are not excluded arrangements. For this purpose arrangements are excluded arrangements if— (a) the arrangements are made in respect of land or any estate or interest in land, (b) the arrangements fall within section 779(1) or (2) of the Taxes Act (sale and lease-back: limitation on tax reliefs), (c) the person to whom the payment mentioned in that subsection is payable is not a company connected with the relevant company, and (d) the arrangements are made between persons dealing at arm's length. (6) If the Board consider, on reasonable grounds, that conditions A to D are or may be satisfied, they may give the company a notice in respect of the arrangements (but see also section 184I). (7) If, when the notice is given, conditions A to D are satisfied, no loss accruing to the company at any time is to be deductible from the relevant gain. (8) A notice under this section must— (a) specify the arrangements, (b) specify the accounting period in which the relevant gain accrues, and (c) inform the relevant company of the effect of this section. (9) If relevant gains accrue in more than one accounting period, a single notice under this section may specify all the accounting periods concerned. (10) In this section— - “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), - “tax advantage” has the meaning given by section 184D. (11) For the purposes of this section it does not matter whether the tax advantage is secured for the relevant company or for any other company. (184I) (1) Subsection (2) applies if— (a) the Board give a notice under section 184G or 184H (a “relevant notice”) to a company that specifies an accounting period, and (b) the notice is given before the company has made its company tax return for that accounting period. (2) If the company makes its return for that period before the end of the applicable 90 day period (see subsection (12)), it may— (a) make a return that disregards the notice, and (b) at any time after making the return and before the end of the applicable 90 day period, amend the return for the purpose of complying with the provision referred to in the notice. (3) If a company has made a company tax return for an accounting period, the Board may give the company a relevant notice in relation to that period only if a notice of enquiry has been given to the company in respect of its return for that period. (4) After any enquiries into the return for that period have been completed, the Board may give the company a relevant notice only if requirements A and B are met. (5) Requirement A is that at the time the enquiries into the return were completed, the Board could not have been reasonably expected, on the basis of information made available— (a) to them before that time, or (b) to an officer of theirs before that time, to have been aware that the circumstances were such that a relevant notice could have been given to the company in relation to that period. (6) For the purposes of requirement A, paragraph 44(2) and (3) of Schedule 18 to the Finance Act 1998 (information made available) applies as it applies for the purposes of paragraph 44(1). (7) Requirement B is that— (a) the company or any other person was requested to produce or provide information during an enquiry into the return for that period, and (b) if the request had been duly complied with, the Board could reasonably have been expected to give the company a relevant notice in relation to that period. (8) If— (a) a company makes a company tax return for an accounting period, and (b) the company is subsequently given a relevant notice that specifies that period, it may amend the return for the purpose of complying with the provision referred to in the notice at any time before the end of the applicable 90 day period. (9) If the relevant notice is given to the company after it has been given a notice of enquiry in respect of its return for the period, no closure notice may be given in relation to its company tax return until— (a) the end of the applicable 90 day period, or (b) the earlier amendment of its company tax return for the purpose of complying with the provision referred to in the notice. (10) If the relevant notice is given to the company after any enquiries into the return for the period are completed, no discovery assessment may be made as regards the chargeable gain to which the notice relates until— (a) the end of the applicable 90 day period, or (b) the earlier amendment of the company tax return for the purpose of complying with the provision referred to in the notice. (11) Subsections (2)(b) and (8) do not prevent a company tax return for a period becoming incorrect if— (a) a relevant notice is given to the company 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 provision referred to in the notice, and (c) the return ought to have been so amended. (12) In this section— - “the applicable 90 day period”, in relation to a relevant notice, means the period of 90 days beginning with the day on which the notice is given, - “closure notice” means a notice under paragraph 32 of Schedule 18 to the Finance Act 1998, - “company tax return” means the return required to be delivered pursuant to a notice under paragraph 3 of that Schedule, as read with paragraph 4 of that Schedule, - “discovery assessment” means an assessment under paragraph 41 of that Schedule, - “notice of enquiry” means a notice under paragraph 24 of that Schedule.

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

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

• (4) The amendments made by this section have effect in relation to chargeable gains accruing on any disposal that is made on or after 5th December 2005.

Repeal of s.106 of TCGA 1992

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• (1) Section 106 of TCGA 1992 (disposal of shares and securities by company within prescribed period of acquisition) shall cease to have effect.

• (2) In consequence of that repeal—

• (a) in section 104(2)(b) of TCGA 1992 (share pooling: general interpretative provisions) omit “, 106”,

• (b) in section 105 of that Act (disposal on or before day of acquisition of shares and other unidentified assets)—

• (i) in subsection (2)(b) for “any of the provisions of section 106 or” substitute “ section ”, and

• (ii) in subsection (2)(c) omit “106,”,

• (c) in section 108(8) of that Act (identification of relevant securities) omit “shall have effect subject to section 106 but”,

• (d) in section 110(1)(b) of that Act (section 104 holdings: indexation allowance) for “sections 105 and 106” substitute “ section 105 ”, and

• (e) in Schedule 15 to FA 2000 (corporate venture scheme), in paragraph 93(6) (identification of shares on a disposal), for “Sections 104 to 106” substitute “ Sections 104, 105 ”.

• (3) The amendments made by this section have effect in relation to any disposal that is made on or after 5th December 2005.

Insurance policies and annuities

Policies of insurance and non-deferred annuities

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• (1) TCGA 1992 is amended as follows.

• (2) For section 204 (policies of insurance) substitute—

(204) (1) A gain accruing on a disposal of, or of an interest in, the rights conferred by a non-life policy of insurance is not a chargeable gain (but see subsection (2)). (2) If a disposal is of, or of an interest in, the rights conferred by a non-life policy of insurance of the risk of— (a) any kind of damage to assets, or (b) the loss or depreciation of assets, the exemption under subsection (1) does not apply so far as those rights relate to chargeable assets. (3) For this purpose “chargeable assets” means assets on the disposal of which a chargeable gain— (a) may accrue, or (b) might have accrued. (4) Nothing in subsections (1) and (2) prevents sums received under a non-life policy of insurance of the risk of— (a) any kind of damage to assets, or (b) the loss or depreciation of assets, from being sums derived from the assets for the purposes of this Act (and, in particular, for the purposes of section 22). (5) A gain accruing on a disposal of, or of an interest in, the rights conferred by a contract for an annuity is not a chargeable gain if the annuity is— (a) a non-deferred annuity, or (b) an annuity granted (or deemed to be granted) under the Government Annuities Act 1929. (6) If any investments or other assets are, in accordance with a policy issued in the course of life assurance business carried on by an insurance company, transferred to the policy holder— (a) the policy holder's acquisition of the assets, and (b) the disposal of the assets to the policy holder, are to be taken for the purposes of this Act to be for a consideration equal to the market value of the assets. (7) In this section “interest”, in relation to any rights, means an interest as a co-owner of the rights. (8) It does not matter— (a) whether the rights are owned jointly or in common, or (b) whether or not the interests of the co-owners are equal. (9) In this section a “non-deferred annuity” means an annuity— (a) which is not granted under a contract for a deferred annuity, and (b) which is granted in the ordinary course of a business of granting annuities on the life of any person, and it does not matter whether the annuity includes instalments of capital. (10) In this section a “non-life policy of insurance” means— (a) a contract made in the course of a capital redemption business, as defined in section 458(3) of the Taxes Act, and (b) any other policy of insurance which is not a policy of insurance on the life of any person.

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• (3) In section 237 (superannuation funds, annuities and annual payments)—

• (a) at the end of paragraph (a), insert “ or ”, and

• (b) omit paragraph (b) (exemption for disposals of non-deferred annuities etc).

• (4) The amendments made by this section have effect in relation to disposals made on or after 5th December 2005.

Capital gains tax

Exception to “bed and breakfasting” rules etc

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• (1) TCGA 1992 is amended as follows.

• (2) In section 106A (identification of securities: general rules for capital gains tax), after subsection (5) (acquisition of securities within 30 days after disposing of securities of same class) insert—

(5A) Subsection (5) above shall not require securities to be identified with securities which the person making the disposal acquires at a time when— (a) he is neither resident nor ordinarily resident in the United Kingdom, or (b) he is resident or ordinarily resident in the United Kingdom but is Treaty non-resident.

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• (3) In section 288 (interpretation), after subsection (7A) (meaning of “surrender” in application of Act to Scotland) insert—

(7B) For the purposes of this Act, a person is Treaty non-resident at any time if, at that time, he falls to be regarded as resident in a territory outside the United Kingdom for the purposes of double taxation relief arrangements having effect at that time.

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• (4) In consequence of the amendment made by subsection (3)—

• (a) in section 10A (temporary non-residents), omit subsection (9A) (meaning of “Treaty non-resident”), and

• (b) in section 83A (trustees both resident and non-resident in a year of assessment), omit subsection (5) (meaning of “Treaty non-resident”).

• (5) The amendment made by subsection (2) has effect in relation to any acquisition made at any time on or after 22nd March 2006.

• (6) The amendments made by subsections (3) and (4) have effect in relation to any time on or after 22nd March 2006.

Chapter 8 — Avoidance: miscellaneous

Film partnerships

Interest relief: film partnership

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Financial instruments

Avoidance involving financial arrangements

76

Schedule 6 (which makes provision in relation to tax avoidance involving financial arrangements) has effect.

Intangible fixed assets

Treating assets as “existing assets” etc

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International matters

Controlled foreign companies and treaty non-resident companies

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• (1) Section 90 of FA 2002 (controlled foreign companies and treaty non-resident companies) is amended as follows.

• (2) In subsection (2) (application of subsection (1), which inserted section 747(1B) of ICTA (disregard of section 249 of FA 1994 for most purposes of Chapter 4 of Part 17 of ICTA (controlled foreign companies))), for paragraph (b) (exclusion for companies which were non-resident immediately before 1st April 2002) substitute—

(b) does not apply to a company (“the non-resident company”) that— (i) by virtue of section 249 of the Finance Act 1994 was treated as resident outside the United Kingdom, and not resident in the United Kingdom, immediately before that date, and (ii) has not subsequently ceased to be so treated, unless condition A or B is met in relation to the non-resident company at any time on or after 22nd March 2006.

.

• (3) After that subsection insert—

(3) Condition A is met in relation to the non-resident company at any time on or after 22nd March 2006 if— (a) immediately before 22nd March 2006 the non-resident company does not own directly or indirectly any company as a subsidiary company, and (b) at any time on or after that date the non-resident company becomes the direct or indirect owner of a UK resident company as a subsidiary company. (4) Condition B is met in relation to the non-resident company at any time on or after 22nd March 2006 if— (a) immediately before 22nd March 2006 the non-resident company owns directly or indirectly any company as a subsidiary company (which may be a UK resident company), (b) at any time (“the relevant time”) on or after that date the non-resident company becomes the direct or indirect owner of any UK resident company as a subsidiary company (or, as the case may be, another UK resident company), and (c) directly or indirectly in consequence of, or otherwise in connection with, the ownership mentioned in paragraph (b) there is a qualifying change in activities. (5) There is a qualifying change in activities if, at the relevant time or any subsequent time,— (a) there is a major change in the nature, conduct or scale of the non-resident company's activities, or (b) there is a major change in the nature, conduct or scale of the activities of the group of companies of which the non-resident company is a member. (6) In this section references to directly or indirectly owning a company are references to owning it— (a) directly or through another company or companies, or (b) partly directly and partly through another company or companies. (7) In this section references to ownership are to be read as references to beneficial ownership. (8) In this section “UK resident company”, in relation to any time, means any company which is resident in the United Kingdom at that time.

.

Transfer of assets abroad

79

Schedule 7 (which makes amendments of, or relating to, Chapter 3 of Part 17 of ICTA (transfer of assets abroad)) has effect.

Pre-owned assets

Restriction of exemption from charge to income tax

80

• (1) Schedule 15 to FA 2004 (charge to income tax on benefits received by former owner of property) is amended as follows.

• (2) In paragraph 11 (exemptions from charge)—

• (a) in sub-paragraph (9) (meaning of “the relevant property”) for “sub-paragraphs (1) to (8)” substitute “ this paragraph ”, and

• (b) at the end insert—

(11) Sub-paragraph (12) applies where at any time— (a) the relevant property has ceased to be comprised in a person's estate for the purposes of IHTA 1984, or (b) he has directly or indirectly provided any consideration for the acquisition of the relevant property, and at any subsequent time the relevant property or any derived property is comprised in his estate for the purposes of IHTA 1984 as a result of section 49(1) of that Act (treatment of interests in possession). (12) Where this sub-paragraph applies, the relevant property and any derived property— (a) are not to be treated for the purposes of sub-paragraphs (1) and (2) as comprised in his estate at that subsequent time, and (b) are not to be treated as falling within sub-paragraph (5) in relation to him at that subsequent time. (13) For the purposes of sub-paragraphs (11) and (12) references, in relation to the relevant property, to any derived property are to other property— (a) which derives its value from the relevant property, and (b) whose value, so far as attributable to the relevant property, is not substantially less than the value of the relevant property.

.

• (3) In paragraph 21 (election for application of inheritance tax provisions where paragraph 3 (land) or 6 (chattels) would otherwise apply)—

• (a) in sub-paragraph (2)(b) (application of the gifts with reservation rules), in sub-paragraph (i) at the end insert “ , but only so far as the chargeable person is not beneficially entitled to an interest in possession in the property ”,

• (b) in sub-paragraph (2)(b) for sub-paragraph (ii) and the “and” before it substitute—

(ii) section 102(3) and (4) of that Act shall apply, but only so far as the chargeable person is not beneficially entitled to an interest in possession in the property, and (iii) if the chargeable person is beneficially entitled to an interest in possession in the property, sections 53(3) and (4) and 54 of IHTA 1984 (which deal with cases of property reverting to the settlor etc) shall not apply in relation to the chargeable proportion of the property.

, and

• (c) in sub-paragraph (3) (meaning of “the chargeable proportion”), after paragraph (a)(ii) insert—

(iii) in the case of property in which the chargeable person is beneficially entitled to an interest in possession, to the date of his death or (if his interest comes to an end on an earlier date) that earlier date, and

.

• (4) In paragraph 22 (election for application of inheritance tax provisions where paragraph 8 (intangible property) would otherwise apply), in sub-paragraph (2)(b) (application of the gifts with reservation rules)—

• (a) in sub-paragraph (i) at the end insert “ , but only so far as the chargeable person is not beneficially entitled to an interest in possession in the property concerned ”, and

• (b) for sub-paragraph (ii) and the “and” before it substitute—

(ii) section 102(3) and (4) of that Act shall apply, but only so far as the chargeable person is not beneficially entitled to an interest in possession in the property concerned, and (iii) if the chargeable person is beneficially entitled to an interest in possession in the property concerned, sections 53(3) and (4) and 54 of IHTA 1984 (which deal with cases of property reverting to the settlor etc) shall not apply in relation to that property.

.

• (5) The amendments made by this section have effect—

• (a) for the part of the year 2005-06 beginning with 5th December 2005, and

• (b) for the year 2006-07 and subsequent years of assessment.

• (6) If—

• (a) paragraph 11 of Schedule 15 to FA 2004 ceases, in consequence of the amendments made by this section, to apply to a person in relation to any property, and

• (b) that person dies before the day on which this Act is passed without making an election under paragraph 21 or 22 of that Schedule in relation to that property,

his personal representatives (within the meaning of IHTA 1984) may make any election under paragraph 21 or 22 of that Schedule that he might have made.

• (7) If—

• (a) in consequence of the amendments made by this section a person makes an election under paragraph 21 or 22 of Schedule 15 to FA 2004,

• (b) that person dies before the day on which this Act is passed, and

• (c) an amount of inheritance tax would (but for this subsection) fall due before that day,

that amount is to be treated instead as falling due at the end of the period of 14 days beginning with that day.

• (8) This section is deemed to have come into force on 5th December 2005.

Chapter 9 — Miscellaneous provisions

Leasing of plant or machinery

Leases of plant or machinery

81

• (1) Schedule 8 (which makes provision in relation to leases of plant or machinery) has effect.

• (2) Schedule 9 (which makes miscellaneous amendments relating to such leases) has effect.

Sale of lessors

Sale etc of lessor companies etc

82

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

Restrictions on use of losses etc: leasing partnerships

83

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

• (3) After section 261 of CAA 2001 (special leasing: life assurance business) insert—

(261A) (1) This section applies for corporation tax purposes if— (a) a company carries on a business in partnership with other persons in a chargeable period of the partnership, (b) the business (“the leasing business”) is, on any day in that period, a business of leasing plant or machinery, (c) the company is entitled to an allowance under section 19 (special leasing of plant or machinery) for any chargeable period comprised (wholly or partly) in the chargeable period of the partnership, and (d) the interest of the company in the leasing business during the chargeable period of the partnership is not determined on an allowable basis. (2) Subsections (3) to (6) of section 260 do not apply in relation to the allowance. (3) For the purposes of this section— (a) “business of leasing plant or machinery” has the same meaning as in Part 3 of Schedule 10 to FA 2006 (sale etc of lessor companies etc), and (b) section 785ZA of ICTA applies for determining whether the interest of the company in the leasing business during the chargeable period of the partnership is determined on an allowable basis.

.

• (4) The amendments made by this section have effect in relation to any business carried on by a company in partnership in any accounting period of the partnership ending on or after 5th December 2005.

• (5) But, in relation to any accounting period of the partnership beginning before 5th December 2005 and ending on or after that date, those amendments have effect only if—

• (a) the company starts to carry on the business in partnership on or after that date, or

• (b) a relevant change in the interest of the company in the business occurs on or after that date.

• (6) A relevant change in the interest of the company in the business occurs at any time if—

• (a) immediately before that time its interest in the business during any accounting period of the partnership is determined on an allowable basis (within the meaning given by section 887 of the Corporation Tax Act 2010), and

• (b) immediately after that time its interest in the business during that period is not so determined.

Disposal of plant or machinery subject to lease where income retained

84

• (1) CAA 2001 is amended as follows.

• (2) In section 66 (list of provisions outside Chapter 5 of Part 2 about disposal values), after the entry relating to section 222 of CAA 2001, insert—

sections 228K to 228M	Disposal of plant or machinery subject to lease where income retained

.

• (3) After section 228J (plant or machinery subject to further operating lease) insert—

(228K) (1) This section applies for corporation tax purposes if— (a) on any day (“the relevant day”) a person (“the lessor”) carries on a business of leasing plant or machinery (the “leasing business”), (b) on the relevant day the lessor sells or otherwise disposes of any relevant plant or machinery subject to a lease to another person, (c) the lessor remains entitled immediately after the disposal to some or all of the rentals under the lease in respect of the plant or machinery which are payable on or after the relevant day, and (d) the lessor is required to bring a disposal value of the plant or machinery into account under this Part. (2) The disposal value to be brought into account is determined as follows. (3) If the amount or value of the consideration for the disposal exceeds the limit that would otherwise be imposed on the amount of the disposal value by section 62 (general limit) or 239 (limit on disposal value where additional VAT rebate)— (a) that limit is not to apply, and (b) the whole of the amount or value of the consideration for the disposal is to be the disposal value to be brought into account. (4) In any other case, the disposal value to be brought into account is the sum of— (a) the amount or value of the consideration for the disposal, and (b) the value of the rentals under the lease in respect of the plant or machinery (see subsections (7) and (8)) which are payable on or after the relevant day and to which the lessor remains entitled immediately after the disposal, but subject to the limit imposed on the amount of the disposal value by section 62 or 239. (5) If— (a) any of the rentals under the lease are receivable by the lessor on or after the relevant day, and (b) the value of any of those rentals is represented in the amount of the disposal value under subsection (4)(b), the amount of those rentals that is equal to their value as so represented is left out of account in calculating the income of the lessor's leasing business for corporation tax purposes. (6) If, in determining under subsection (5) the amount of any rental to be so left out of account, it is necessary to apportion the amount of the rental, the apportionment is to be made on a just and reasonable basis. (7) For the purposes of this section, the value of any rentals under the lease in respect of the plant or machinery is taken to be the amount of the net present value of the rentals (see section 228L). (8) If any land or other asset which is not plant or machinery is subject to the lease, the value of any rentals under the lease in respect of the plant or machinery is taken to be so much of the amount of the net present value of the rentals as, on a just and reasonable basis, relates to the plant or machinery. (9) This section is supplemented by— (a) section 228L (which provides rules for determining the net present value of the rentals), and (b) section 228M (which defines other expressions used in this section). (228L) (1) For the purposes of section 228K, the amount of the net present value of the rentals is calculated as follows— Step 1 Find the amount (“RI”) of each rental payment— (a) which is payable at any time during the term of the lease, and (b) which is payable on or after the relevant day. Step 2 For each rental payment find the day (“the payment day”) on which it becomes payable. Step 3 For each rental payment find the number of days in the period (“P”) which— (a) begins with the relevant day, and (b) ends with the payment day. Step 4 Calculate the net present value of each payment (“NPVRI”) by applying the following formula— $$RI(1+T)i$where—T is the temporal discount rate, andi is the number of days in P divided by 365.$ Step 5 Add together each amount of NPVRI determined under step 4. (2) For the purposes of this section the “term” of a lease has the meaning given in Chapter 6A of this Part. (3) For the purposes of this section the “temporal discount rate” is 3.5% or such other rate as may be specified by regulations made by the Treasury. (4) The regulations may make such provision as is mentioned in subsection (3)(b) to (f) of section 178 of FA 1989 (power of Treasury to set rates of interest). (5) Subsection (5) of that section (power of Commissioners to specify rate by order in certain circumstances) applies in relation to regulations under this section as it applies in relation to regulations under that section. (228M) (1) This section applies for the purposes of section 228K. (2) “Business of leasing plant or machinery”— (a) has the same meaning as in Part 2 of Schedule 10 to FA 2006 (sale etc of lessor companies etc) (if the business is carried on otherwise than in partnership), or (b) has the same meaning as in Part 3 of that Schedule (if the business is carried on in partnership). (3) “Lease” includes— (a) an underlease, sublease, tenancy or licence, and (b) an agreement for any of those things. (4) “Relevant plant or machinery”, in relation to a business of leasing plant or machinery, means plant or machinery on whose provision expenditure is incurred wholly or partly for the purposes of the business.

.

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

• (5) The amendments made by this section have effect in relation to any disposal made on or after 5th December 2005.

• (6) But any rentals that are receivable by the lessor before 22nd March 2006 are to be left out of account in calculating the income of the lessor's leasing business for corporation tax purposes.

Restrictions on effect of elections under section 266 of CAA 2001

85

• (1) CAA 2001 is amended as follows.

• (2) In section 266 (election where predecessor and successor are connected persons), in subsection (7) (sections 104, 108 and 265 not to apply if election is made), at the end insert “ (but see section 267A) ”.

• (3) In section 267 (effect of election), at the end insert—

(6) This section is subject to section 267A.

.

• (4) After that section insert—

(267A) (1) This section applies for corporation tax purposes if— (a) on any day (“the relevant day”) a person (“the predecessor”) carries on a business of leasing plant or machinery, (b) on the relevant day another person (“the successor”) succeeds to the business, and (c) the predecessor and the successor make an election under section 266. (2) Neither— (a) section 266(7), nor (b) the provisions of section 267, have effect in relation to any plant or machinery which, in determining whether the business is a business of leasing plant or machinery on the relevant day, is qualifying leased plant or machinery. (3) In this section “business of leasing plant or machinery”— (a) has the same meaning as in Part 2 of Schedule 10 to FA 2006 (sale etc of lessor companies etc) (if the business is carried on otherwise than in partnership), or (b) has the same meaning as in Part 3 of that Schedule (if the business is carried on in partnership).

.

• (5) The amendments made by this section have effect in relation to any succession occurring on or after 5th December 2005.

Insurance companies and policyholders

Insurance companies

86

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

Qualifying policies: altering method for calculating benefits

87

• (1) Schedule 15 to ICTA (provisions for determining whether an insurance policy is a “qualifying policy” for the purposes of the Tax Acts) is amended as follows.

• (2) In paragraph 18 (variations), in sub-paragraph (3) (paragraph does not apply by reason of certain variations), at the end insert

, or (d) any variation which alters the method for calculating the benefits secured by the policy.

.

• (3) In paragraph 22 (certificates from body issuing policy), in sub-paragraph (3) (sub-paragraph (2) does not apply by reason of certain variations), at the end insert

; or (c) any variation which alters the method for calculating the benefits secured by the policy.

.

• (4) In the case of a variation effected as part of, or in connection with, an insurance business transfer scheme, the amendments made by this section are deemed always to have had effect.

• (5) In any other case, the amendments made by this section have effect in relation to variations effected on or after 7th October 2005.

• (6) In this section an “insurance business transfer scheme” means—

• (a) a scheme falling within section 105 of the Financial Services and Markets Act 2000 (c. 8),

• (b) a scheme sanctioned by a court under Part 1 of Schedule 2C to the Insurance Companies Act 1982 (c. 50), or

• (c) a scheme sanctioned by a court under section 49 of that Act or under any earlier enactment corresponding to that section,

and for the purposes of this subsection any reference to an enactment is a reference to the enactment as it had effect from time to time.

Settlements

Settlements, etc: chargeable gains

88

Schedule 12 (which amends TCGA 1992 in respect of settlors and trustees of settlements and makes other minor and consequential amendments) shall have effect.

Settlements, etc: income

89

Schedule 13 (which amends ICTA and ITTOIA 2005 in respect of settlors and trustees of settlements and makes other minor and consequential amendments) shall have effect.

Special trusts tax rates not to apply to social landlords' service charge income

90

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

Investment reliefs

Venture capital schemes

91

• (1) Schedule 14 contains amendments of the provisions relating to—

• . . .

• . . .

• the corporate venturing scheme.

• (2) Those amendments have effect as mentioned in that Schedule.

Employment-related securities

Avoidance using options etc

92

• (1) Section 420 of ITEPA 2003 (meaning of securities etc) is amended as follows.

• (2) In subsection (1)(f), insert at the beginning “ options and ”.

• (3) In subsection (5)(e), insert at the beginning “ securities ”.

• (4) In subsection (8), in the definition of “securities option”, after “acquire securities” insert “ other than a right to acquire securities which is acquired pursuant to a right or opportunity made available under arrangements the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions ”.

• (5) This section has effect in relation to options acquired on or after 2nd December 2004; but subsection (4) also has effect in relation to an option acquired before that date where something is done on or after that date as part of the arrangements under which it was made available.

Corporation tax relief for shares acquired under EMI option

93

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

PAYE

PAYE: retrospective notional payments

94

• (1) ITEPA 2003 is amended as follows.

• (2) In section 222 (payments by employer on account of tax where deduction not possible)—

• (a) in subsection (1)(c), for “date on which the employer is treated as making the notional payment” substitute “ relevant date ”,

• (b) in subsection (2), for “date mentioned in subsection (1)(c)” substitute “ relevant date ”, and

• (c) after subsection (3) insert—

(4) In this section “the relevant date” means— (a) if the employer is treated by virtue of any Act as making the notional payment before the date on which the Act is passed, that date, and (b) in any other case, the date on which the employer is treated as making the notional payment.

• (3) In section 684(2) (PAYE regulations), in item 1—

• (a) for “time of the payment” substitute “ relevant time ”, and

• (b) after paragraph (b) insert—

“The relevant time” is— (a) if the payment is a notional payment for the purposes of section 710 and the person is treated by virtue of any Act as making it at a time before the date on which the Act is passed, that date, and (b) in any other case, the time when the payment is made.

• (4) In section 710 (notional payments: accounting for tax)—

• (a) in subsection (7), after “means” insert “ (subject to subsection (7A)) ”, and

• (b) after that subsection insert—

(7A) In a case where the notional payment is treated by virtue of any Act as made before the date on which the Act is passed— (a) the reference in sub-paragraph (i) of paragraph (a) of subsection (7) to the time when the notional payment is made is to the date on which the Act is passed, (b) the reference in sub-paragraph (ii) of that paragraph to any occasion falling within the same income tax period is to any occasion falling before the end of the income tax period next after that in which that date falls, and (c) the reference in paragraph (b) of that subsection to the income tax period in which the notional payment was made is to the income tax period next after that in which that date falls.

• (5) The provisions of ITEPA 2003 amended by this section have effect in relation to notional payments treated by virtue of this Act as made before the date on which this Act is passed as if for the references to the date on which the Act is passed in—

• (a) section 222(4)(a),

• (b) paragraph (a) of the definition of “the relevant time” in section 684(2), and

• (c) section 710(7A)(a), (b) and (c),

there were substituted references to such date as the Commissioners for Her Majesty's Revenue and Customs may by order made by statutory instrument appoint.

Alternative finance arrangements

Profit share agency

95

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

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

• (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diminishing shared ownership

96

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

Beneficial loans to employees

97

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

Regulations

98

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

Nuclear decommissioning

Amendment of section 29 of the Energy Act 2004

99

• (1) Section 29 of the Energy Act 2004 (c. 20) (disregard for tax purposes of cancellation etc of decommissioning provisions) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (a), for “relevant company” substitute “ BNFL company ”;

• (b) for paragraphs (b) and (c) substitute—

(b) that provision— (i) relates to decommissioning or cleaning-up which the NDA acquires or has acquired responsibility for securing by virtue of a direction under section 3, but (ii) is not provision recognised in order to reflect the terms or effect of a management contract between the company and the NDA; and (c) the responsibility referred to in paragraph (b)(i)— (i) includes the financial responsibility under section 21, or (ii) would do so but for the fact that the amount of the financial responsibility is for the time being subject to a limit imposed by a capping agreement.

• (3) For subsections (3) and (4) substitute—

(3) This subsection applies to a credit or debit if it arises from— (a) the recognition in the accounts of the company for a relevant period beginning on or after 1st April 2005 of— (i) the relevant provision, or (ii) an asset that, in accordance with generally accepted accounting practice, is recognised in connection with the relevant provision in order to reflect the acquisition of financial responsibility referred to in subsection (1) (a “matching asset”); (b) an adjustment made in the accounts of the company for such a period of— (i) the relevant provision, or (ii) a matching asset; or (c) the removal from the accounts of the company for such a period of— (i) the relevant provision, (ii) a matching asset, or (iii) an asset or liability recognised in order to reflect the terms or effect of a contract falling within subsection (3A). (3A) A contract falls within this subsection if— (a) it is a contract made before 1st April 2005 and having effect between two or more BNFL companies under which a party to the contract assumed responsibility for securing decommissioning or cleaning-up; and (b) the rights and obligations under the contract are extinguished by reason of a transfer made under a nuclear transfer scheme.

• (4) In subsection (5)—

• (a) for the definition of “BNFL company” substitute—

“BNFL company” means— (a) BNFL, (b) a company that immediately before 1st April 2005 was a wholly-owned subsidiary of BNFL, or (c) a wholly-owned subsidiary of a company falling within paragraph (b);

;

• (b) after that definition insert—

• “capping agreement” means an agreement under subsection (9) of section 21, entered into on 1st April 2005, the sole or main effect of which is to impose a limit on the NDA's financial responsibility under that section;
• “management contract” has the same meaning as in section 27;

;

• (c) for the definition of “relevant company” substitute—

“relevant period”, in relation to a company, means an accounting period during the whole of which the company is publicly owned;

.

• (5) After that subsection insert—

(5A) Where a company ceases to be publicly owned otherwise than at the end of an accounting period— (a) the accounting period during which it ceases to be publicly owned is treated for the purposes of corporation tax as ending when it so ceases; and (b) its profits and losses are to be computed accordingly for those purposes.

• (6) The amendments made by this section have effect in relation to accounting periods of a BNFL company ending on or after 22nd March 2006.

Amendment of section 30 of the Energy Act 2004

100

• (1) Section 30 of the Energy Act 2004 (disregard for tax purposes of decommissioning provisions recognised by Nuclear Decommissioning Authority) is amended as follows.

• (2) In subsection (1)—

• (a) for paragraph (b) substitute—

(b) that responsibility— (i) includes the financial responsibility under section 21, or (ii) would do so but for the fact that the amount of the financial responsibility is for the time being subject to a limit imposed by a capping agreement;

;

• (b) in paragraph (c) omit “on the coming into force of the direction mentioned in paragraph (a),”;

• (c) at the end of that paragraph insert

; and (d) the provision is recognised— (i) in order to reflect the coming into force of the direction mentioned in paragraph (a), or (ii) in consequence of the variation or removal of a limit on the NDA's financial responsibility under section 21 imposed by a capping agreement.

• (3) For subsection (3) substitute—

(3) In computing the profits, gains or losses of the NDA for the purposes of corporation tax, no amount shall be brought into account in connection with— (a) the recognition made in the accounts of the NDA of— (i) the relevant provision, or (ii) an asset that, in accordance with generally accepted accounting practice, is recognised in order to reflect a limit on the NDA's financial responsibility under section 21 imposed by a capping agreement; (b) any adjustment made in those accounts (including the removal from the accounts of an asset falling within paragraph (a)(ii)) in consequence of a variation or removal of the limit mentioned in paragraph (a)(ii).

• (4) In subsection (4), for the words after “in connection with” substitute “ an adjustment not falling within paragraph (b) of that subsection ”.

• (5) In subsection (5), after the definition of “BNFL company” insert—

“capping agreement” has the same meaning as in section 29;

.

• (6) The amendments made by this section have effect in relation to accounting periods of the Nuclear Decommissioning Authority ending on or after 22nd March 2006.

Accounting practice

Securitisation companies

101

• (1) Section 83 of FA 2005 (application of accounting standards to securitisation companies) is amended as follows.

• (2) In subsection (1)(b) (periods of account in relation to which old UK GAAP is to apply) for “1st January 2007” substitute “ 1st January 2008 ”.

• (3) In subsection (3) (meaning of “note-issuing company”)—

• (a) omit “and” at the end of paragraph (c);

• (b) after paragraph (d) insert—

, and (e) if it has any business apart from the activity mentioned in paragraph (a) (and any incidental activities) it consists in one or both of the following— (i) acquiring, holding and managing assets forming the whole or part of the security for the capital market arrangement; (ii) acting as guarantor in respect of loan relationships, derivative contracts, finance leases or other liabilities of other companies where the whole, or substantially the whole, of the company's rights in respect of the guarantee (including any right of subrogation) form the whole or part of the security for the capital market arrangement.

.

• (4) In subsection (5) (meaning of “intermediate borrowing company”)—

• (a) in paragraph (a) after “asset-holding company”, and

• (b) in paragraph (b) after “note-issuing company”,

insert “ (or another intermediate borrowing company) ”.

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

• (6) The amendments in this section shall be deemed always to have had effect, subject as follows.

• (7) A company that would have been a securitisation company for the purposes of section 83 of FA 2005 if the amendments in this section had not been made, being either—

• (a) a note-issuing company that—

• (i) had become party as debtor to the capital market investment before 22nd March 2006, or

• (ii) had before that date entered into a binding arrangement to become a party as debtor to the capital market investment, or

• (b) another description of securitisation company by virtue of its connection with a company within paragraph (a),

may elect to be taxed as if the amendments in subsection (3) had not been made.

• (8) Any such election must be made not later than 31st March 2007 and has effect for all relevant periods of account.

Accountancy change: spreading of adjustment

102

• (1) Schedule 15 to this Act (accountancy change: spreading of adjustment) has effect.

• (2) In that Schedule—

• Part 1 makes provision for income tax purposes, and

• Part 2 makes provision for corporation tax purposes.

• (3) In section 21B of ICTA (corporation tax: application to Schedule A business of other rules applicable to Case 1 of Schedule D) for “section 44 of and Schedule 6 to the Finance Act 1998” substitute “ section 64 of and Schedule 22 to the Finance Act 2002 ”.

Part 4 — Real Estate Investment Trusts

Introduction

Real Estate Investment Trusts

103

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

Property rental business

104

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

Other key concepts

105

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

Conditions for company

106

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Conditions for tax-exempt business

107

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

Conditions for balance of business

108

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Entering Real Estate Investment Trust Regime

Notice

109

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Duration

110

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Effects of entry

111

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Entry charge

112

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Assets etc

Ring-fencing of tax-exempt business

113

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Maximum shareholding

114

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Profit: financing-cost ratio

115

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Minor or inadvertent breach

116

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Cancellation of tax advantage

117

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Funds awaiting re-investment

118

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Profits

Corporation tax

119

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Calculation of profits

120

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Distributions: liability to tax

121

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Distributions: deduction of tax

122

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Attribution of distributions

123

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

Capital gains

Corporation tax

124

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Movement of assets out of ring-fence

125

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Movement of assets into ring-fence

126

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

Interpretation

127

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Leaving Real Estate Investment Trust Regime

Termination by notice: company

128

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Termination by notice: Commissioners

129

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Automatic termination for breach of requirement

130

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Effects of cessation

131

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Early exit by notice

132

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Early exit

133

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Groups

Group Real Estate Investment Trusts

134

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Transfer within group

135

After section 171(2)(d) of TCGA 1992 (transfer within a group: exclusions) insert—

; or (da) a disposal by or to a company to which Part 4 of the Finance Act 2006 applies (Real Estate Investment Trusts);

.

Availability of group reliefs

136

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

Miscellaneous

Insurance companies

137

In section 212(1) of TCGA 1992 (annual deemed disposal of holdings of certain assets) after paragraph (b) insert—

, or (c) shares in a company to which Part 4 of the Finance Act 2006 applies (Real Estate Investment Trusts),

.

Joint ventures

138

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

Manufactured dividends

139

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Penalties for failure to give notice, etc

140

At the end of the second column of the Table in section 98(5) of TMA 1970 (penalties) add—

Section 106 of FA 2006 as modified by Schedule 17 to that Act. Section 116 of FA 2006. Regulations under section 116 of FA 2006. Regulations under section 122 of FA 2006. Section 130 of FA 2006.

Effect of deemed disposal and re-acquisition

141

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Interpretation

142

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Housing investment trusts: repeal

143

Section 160 of, and Schedule 30 to, FA 1996 (housing investment trusts) shall cease to have effect (and accordingly—

• (a) sections 508A and 508B of ICTA shall cease to have effect,

• (b) the amendments of section 842(1)(a) and (e) of ICTA effected by paragraph 2(2) of Schedule 30 shall cease to have effect, and

• (c) section 842(1AA) of ICTA shall cease to have effect).

General

Regulations

144

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Commencement

145

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) Section 143 shall have effect in relation to accounting periods beginning on or after the day on which this Act is passed.

Part 5 — Oil

New basis for determining market value

New basis for determining the market value of oil

146

• (1) In OTA 1975, in Schedule 3 (petroleum revenue tax: miscellaneous provisions) before paragraph 2 (definition of market value of oil) insert—

(1A) (1) This paragraph has effect for determining, for the purposes of this Schedule, the day which is the “notional delivery day” in the case of any particular quantity of oil of any particular kind whose market value falls to be determined in accordance with the provisions of this Schedule in the case of any chargeable period. (2) The notional delivery day need not be a day in the chargeable period. (3) In the case of a quantity of oil which, at the end of the chargeable period,— (a) has neither been disposed of nor relevantly appropriated in the period, or (b) has been disposed of but not delivered in the period, the notional delivery day is the last business day of the chargeable period. (4) In the case of— (a) a quantity of oil won and disposed of which is delivered on a day in the chargeable period, or (b) a quantity of oil— (i) relevantly appropriated on a day in the chargeable period, but (ii) not disposed of in the chargeable period, the notional delivery day is to be determined in accordance with sub-paragraphs (5) to (7) below. (5) If that oil is— (a) oil transported by ship from the place of extraction to a place in the United Kingdom or elsewhere, or (b) oil transported by pipeline to a place in the United Kingdom and loaded on to a ship there, and there is a loading slot for it (see sub-paragraph (8)), the notional delivery day is the middle day of the loading slot. (6) If sub-paragraph (5) above does not apply to that oil, then— (a) if it is oil delivered on a day in the chargeable period, the notional delivery day is the date of the delivery, or (b) if it is oil relevantly appropriated on a day in the chargeable period, the notional delivery day is the date of the appropriation. (7) The Treasury may by regulations make provision for or in connection with substituting as the notional delivery day in such circumstances as may be prescribed— (a) in the case of oil transported by ship from the place of extraction to a place in the United Kingdom or elsewhere, the date of completion of load, or (b) in the case of oil transported by pipeline to a place in the United Kingdom and loaded on to a ship there, the date of the bill of lading. (8) The “loading slot” for any oil is the period of three days within which the loading of the oil on to the ship is or was to take place— (a) as duly published by the operator of the facility at which that loading is or was to take place (unless paragraph (b) below applies), or (b) as subsequently finally duly varied to give effect to any modifications duly notified to that operator by the participator concerned. (9) In sub-paragraph (8) above, “duly” means in accordance with the arrangements for the time being governing the time and manner of— (a) publication, or variation, of the final loading schedule for the calendar month in which loading is or was to take place, or (b) notification of modifications to that schedule, and, in any case, before the end of the calendar month immediately preceding that in which loading is to take place. (10) If the Treasury consider that, for the purpose of defining “loading slot”, any period of days for the time being specified by or under this Act as the period of days within which loading of oil on to a ship is to take place is, or is to be, no longer appropriate, they may by regulations make provision for, or in connection with,— (a) varying the number of days in the period, (b) determining the day that is to be the notional delivery day if the number, as varied, is an even number. The power conferred by this sub-paragraph includes power to make amendments to, or modifications of, this Schedule.

.

• (2) Paragraph 2 of that Schedule (definition of market value of oil) is amended as follows.

• (3) In sub-paragraph (1) (market value of oil in any calendar month to be determined in accordance with the paragraph) for “any oil in any calendar month” substitute “ any particular quantity of oil of any kind on any day ”.

• (4) After sub-paragraph (1) insert—

(1A) This paragraph makes different provision according to whether the oil is— (a) Category 1 oil of any kind, or (b) Category 2 oil of any kind. (1B) For the purposes of this Act— (a) Category 1 oil is oil of any of one or more kinds specified as such in regulations made for the purpose by the Board; (b) Category 2 oil is oil of any other kind. (1C) The Board may specify oil of any particular kind as Category 1 oil only if they are satisfied that reports of prices for sales of oil of that kind are published and widely available (whether or not on payment of a fee).

.

• (5) For sub-paragraph (2) substitute—

(2) The market value of any particular quantity of Category 1 oil of any kind is the price for which that quantity of oil of that kind might reasonably have been expected to be sold under a contract of sale that meets the following conditions— (a) the contract is for the sale of the oil at arm's length to a willing buyer; (b) the contract is for delivery of a single standard cargo of the oil; (c) the contract specifies a period of three days within which loading of the oil is to take place and that period includes the notional delivery day for the actual oil; (d) the contract requires the oil to have been subjected to appropriate initial treatment before delivery; (e) the contract requires the oil to be delivered— (i) in the case of oil extracted in the United Kingdom, at the place of extraction; or (ii) in the case of oil extracted from strata in the sea bed and subsoil of the territorial sea of the United Kingdom or of a designated area, at the place in the United Kingdom or another country at which the seller could reasonably be expected to deliver it or, if there is more than one such place, the one nearest to the place of extraction. The terms as to payment which are to be implied in the contract are those which are customarily contained in contracts for the sale at arm's length of oil of the kind in question. (2AA) The market value of any particular quantity of Category 2 oil of any kind is the price for which that quantity of oil of that kind might reasonably have been expected to be sold under a contract of sale that meets the following conditions— (a) the contract is for the sale of the oil at arm's length to a willing buyer; (b) the contract provides for delivery of the oil on the notional delivery day for the actual oil or within such period that includes that day as is normal under a contract at arm's length for the sale of oil of that kind (or, if there is more than one such period, the shortest of them); (c) the contract is made on a date such that the period between that date and the notional delivery day for the actual oil is the normal period between contract and delivery in the case of a contract at arm's length for the sale of oil of that kind (or, if there is more than one such period, the shortest of them); (d) the contract requires the oil to have been subjected to appropriate initial treatment before delivery; (e) the contract requires the oil to be delivered— (i) in the case of oil extracted in the United Kingdom, at the place of extraction; or (ii) in the case of oil extracted from strata in the sea bed and subsoil of the territorial sea of the United Kingdom or of a designated area, at the place in the United Kingdom or another country at which the seller could reasonably be expected to deliver it or, if there is more than one such place, the one nearest to the place of extraction. The terms as to payment which are to be implied in the contract are those which are customarily contained in contracts for the sale at arm's length of oil of the kind in question.

.

• (6) For sub-paragraphs (2A) to (2D) substitute—

(2E) For the purposes of sub-paragraph (2) or (2AA) above, the price of any quantity of Category 1 or Category 2 oil of any kind shall be determined in such manner, on the basis of such information, and by reference to such factors, as may be prescribed for oil of that Category and kind in regulations made by the Board. (2F) The provision that may be made by regulations under subsection (2E) above includes provision for or in connection with any or all of the following— (a) determining the price by reference to prices, or an average of prices, for sales of oil (whether or not oil of the Category or kind in question, and whether the prices are prices under actual contracts, prices that are published and widely available (whether on payment of a fee or otherwise) or prices ascertained or determined in some other way); (b) the prices to be taken into account; (c) the descriptions of contracts to be taken into account; (d) the method to be used for determining an average of prices; (e) the day or days, or period or periods, by reference to which prices, or any average of prices, is to be determined; (f) the application of a prescribed price differential, in cases where the price of oil of one kind falls to be determined in whole or in part by reference to prices for oil of some other kind. (2G) Sub-paragraph (2I) below has effect if, or in so far as, the Board are satisfied that it is impracticable or inappropriate to determine for the purposes of sub-paragraph (2) or (2AA) above the price of any oil in accordance with the provisions of regulations for the time being in force under sub-paragraph (2E) above. (2H) For that purpose it is immaterial whether the impracticability or inappropriateness is by virtue of— (a) an insufficiency of contracts or published prices that satisfy the conditions, (b) an insufficiency of information relating to such contracts or published prices, or (c) the nature of the market for oil of the kind in question, or for any other reason. (2I) Where this sub-paragraph has effect, the price is to be determined— (a) so far as it is practicable and appropriate to do so by reference to other contracts or published prices (whether or not relating to oil of the same kind) and in accordance with the principles set out in the regulations for determining an average of prices; and (b) so far as it is not practicable or appropriate to determine it as mentioned in paragraph (a) above, in such other manner as appears to the Board to be appropriate in the circumstances.

.

• (7) Omit sub-paragraph (3) (which relates to the market value of disposals in a calendar month).

• (8) In sub-paragraph (3A) (oil that has been subjected to initial treatment)—

• (a) for “sub-paragraphs (1) and (2) above” substitute “ sub-paragraph (1) and sub-paragraph (2) or (2AA) above ”, and

• (b) for “sub-paragraph (2)(a) above” substitute “ sub-paragraph (2)(d) or (2AA)(d) above ”.

• (9) In sub-paragraph (4) (application of sub-paragraphs (2) and (3) in relation to paragraph 2(2) of Schedule 2) for “sub-paragraphs (2) and (3)” substitute “ sub-paragraphs (2) and (2AA) ”.

• (10) After paragraph (4) insert—

(5) In this paragraph “prescribed” means specified in, or determined in accordance with, regulations.

.

• (11) Schedule 18 (which makes minor and consequential amendments) has effect.

Section 146: commencement and transitional provisions

147

• (1) The amendments made by section 146 and Schedule 18 have effect in relation to oil delivered or appropriated on or after 1st July 2006 (disregarding section 12A of that Act).

• (2) Those amendments also have effect for the purpose of determining for any chargeable period ending on or after 31st December 2006—

• (a) the value to be brought into account under section 2(4)(b) of OTA 1975 by reference to a previous chargeable period ending on or after 30th June 2006, and

• (b) the value to be brought into account under section 2(5)(d) of that Act.

• (3) Subsections (1) and (2) are subject to any express provision in Schedule 18 as to the commencement or application of any provision of that Schedule.

• (4) In the following provisions of this section—

• (a) “the last old period” means the chargeable period that ends on 30th June 2006, and

• (b) “the first new period” means the chargeable period that ends on 31st December 2006.

• (5) Subsection (6) applies in relation to oil which was won from an oil field before 1st July 2006 and which—

• (a) was loaded on to a ship before 1st July 2006 and transported from the place of extraction to a place in the United Kingdom or elsewhere, or

• (b) was transported by pipeline from the place of extraction to a place in the United Kingdom and there loaded on to a ship before that date.

• (6) If the oil is or was disposed of crude by a participator in sales otherwise than at arm's length, but the market value of the oil—

• (a) does not fall to be brought into account for the purposes of section 2(5)(b) of OTA 1975 for the last old period by reason only that the oil was not delivered in that period, and

• (b) would not (apart from this subsection) fall to be brought into account for the purposes of that provision in the first new period by reason only that the date on which the oil is to be regarded by virtue of section 12A of that Act as delivered falls in the last old period,

the date on which the oil is to be taken for the purposes of section 2(5)(b) of that Act to have been delivered is instead to be the first business day of the first new period.

• (7) Any power to make regulations that is conferred under or by virtue of any of the amendments made by section 146 or Schedule 18 includes power to make regulations having effect for, or in relation to,—

• (a) the first new period, or

• (b) for the purpose mentioned in subsection (2), the last old period,