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Finance Act 2009

Type Public General Act

Publication 2009-07-21

Last updated 2025-09-01

State In force

Department Statute Law Database

Source legislation.gov.uk

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(6) In subsection (4), for “multiplying it by the fraction in subsection (3) above” substitute “ 15% ”.

(7) After that subsection insert—

(5) For the purposes of section 50B of ITTOIA 2005 (connected persons: application of restrictions), this section is to be treated as if it were part of section 48 of that Act.

63

(1) Section 578B (expenditure on car or motor cycle hire: supplementary) is amended as follows.

(2) In subsection (1)—

(a) omit “one”,

(b) before paragraph (a) insert—

(za) a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988),

(d) omit the words after paragraph (b).

(3) In subsection (2)—

(a) omit paragraph (b), and

(b) insert at the end—

(c) it is leased under a long-funding lease (within the meaning of section 70G of the Capital Allowances Act).

(4) In subsection (3), omit “section 578A and”.

(5) Omit subsection (4).

Consequential repeals

64

In consequence of the amendments made by this Part of this Schedule, omit—

(a) in FA 2008, section 77(4)(b), and

(b) in CTA 2009, in Schedule 1, paragraph 45.

Commencement

65

For the purposes of this Part of this Schedule—

(a) the first relevant date is—

(i) for corporation tax purposes, 1 April 2009, and

(ii) for income tax purposes, 6 April 2009, and

(b) the second relevant date is—

(i) for corporation tax purposes, 1 April 2010, and

(ii) for income tax purposes, 6 April 2010, and

66

(1) The amendments made by this Part of this Schedule have effect in relation to deductions for expenses incurred on the hiring of a car or motor cycle under an agreement under which the hire period begins on or after the first relevant date (but see paragraph 67).

(2) For the purposes of this paragraph and paragraph 67, the hire period, in relation to an agreement, begins on the first day on which the car or motor cycle is required to be made available for use under the agreement.

Election for new regime not to apply in certain cases

67

(1) This paragraph applies where—

(a) a person incurs expenses on the hiring of a car or motor cycle under an agreement entered into on or before 8 December 2008, and

(b) the hire period begins before the second relevant date.

(2) If the person makes an election under this paragraph, none of the amendments made by this Part of this Schedule has effect in relation to any deduction for expenses incurred by the person on the hiring of the car or motor cycle under the agreement.

(3) The election must be made by notice given to an officer of Revenue and Customs—

(a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends, and

(b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.

(4) “The relevant chargeable period” means the first chargeable period (as defined in section 6 of CAA 2001) in which any expenditure by the person on the provision of the car or motor cycle under the agreement was incurred.

(5) The election is irrevocable.

(6) All such assessments and adjustments of assessments are to be made as are necessary to give effect to the election.

(7) For the purpose of this paragraph, an agreement is entered into on the first date on which the following conditions are met—

(a) there is a contract in writing for the use of the car or motor cycle by the person,

(b) the contract is unconditional or, if it is conditional, the conditions have been met, and

Saving

68

The repeal of section 82 of CAA 2001 (meaning of “qualifying hire car”) by Part 1 of this Schedule does not affect the continued operation of the following provisions until they are repealed by this Part of this Schedule—

(a) section 578B(2)(b) of ICTA,

(b) section 49(2)(c) of ITTOIA 2005, and

SCHEDULE 12

Main provisions

1

In TCGA 1992, for section 171A substitute—

(171A) (1) This section applies where— (a) a chargeable gain or an allowable loss accrues to a company (“company A”) in respect of an asset (or would so accrue but for an election under this section), (b) at the time of accrual, company A and another company (“company B”) are members of the same group, and (c) had company A disposed of the asset to company B immediately before the time of accrual, section 171(1) would have applied. (2) In determining for the purposes of subsection (1)(c) whether subsection (1) of section 171 would have applied, it is to be assumed that subsection (1A)(b) of that section read— (b) that, at the time of the disposal, company B is resident in the United Kingdom, or carrying on a trade in the United Kingdom through a permanent establishment there. (3) In this section “the time of accrual” means the time the chargeable gain or allowable loss accrues to company A (or would so accrue but for an election under this section). (4) Companies A and B may make a joint election to transfer the chargeable gain or allowable loss, or such part of it as is specified in the election, from company A to company B. (5) An election under this section must be made— (a) by notice to an officer of Revenue and Customs, and (b) no later than two years after the end of the accounting period of company A in which the time of accrual falls. (6) An election, or two or more elections made simultaneously, is or are of no effect if, taken together with each earlier election (if any) made in respect of the same gain or loss, it or they would (apart from this subsection) have effect in relation to an amount exceeding the gain or loss. (7) This section does not apply in relation to a chargeable gain or allowable loss that accrues by virtue of section 179. For provision as to the reallocation within a group of gains and losses arising on such a disposal, see section 179A. (8) For the effect of an election under this section, see section 171B. (171B) (1) This section applies where an election is made under section 171A. (2) The effect of the election is that the chargeable gain or allowable loss, or such amount of it as is specified in the election, is treated as accruing not to company A but to company B. (3) The gain or loss treated as accruing to company B is to be taken to accrue at the time that, had the election not been made, it would have accrued to company A. (4) Where company B is not resident in the United Kingdom, the gain or loss treated as accruing to it is to be taken to accrue in respect of a chargeable asset held by it. (5) For this purpose an asset is a “chargeable asset” in relation to a company at any time if any gain accruing to the company on a disposal of the asset by the company at that time would be a chargeable gain and would by virtue of section 10B form part of its chargeable profits for corporation tax purposes. (6) Any payment made by company A to company B or by company B to company A, in pursuance of an agreement between them in connection with the election— (a) is not to be taken into account in computing profits or losses of either company for corporation tax purposes, and (b) is not for any purposes of the Corporation Tax Acts to be regarded as a distribution, provided it does not exceed the amount of the chargeable gain or allowable loss that is treated, as a result of the election, as accruing to company B. (171C) (1) This section applies where — (a) an election is made under section 171A in relation to a gain or loss, and (b) company B is an insurance company. (2) For the purposes of section 171A(1)(c), section 440(3) of the Taxes Act (disposals of certain assets by and to insurance companies to fall outside the rule in section 171) is to be disregarded. (3) Subsection (2) does not apply if— (a) company A is an insurance company, and (b) the gain or loss arose in respect of the disposal of an asset that, immediately before the disposal, was part of that company's long-term insurance fund. (4) The chargeable gain or allowable loss treated as accruing to company B as a result of the election is to be treated as arising in respect of an asset that is not part of company B's long-term insurance fund. (5) In this section “insurance company” and “long-term insurance fund” have the same meaning as in Chapter 1 of Part 12 of the Taxes Act (see section 431(2) of that Act).

Consequential amendments

2

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3

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

4

In consequence of the amendment made by paragraph 1, omit—

(a) in FA 2000, section 101,

(b) in FA 2001, section 77,

(d) in F(No.2)A 2005, section 36.

Commencement

5

The amendments made by this Schedule have effect in relation to chargeable gains and allowable losses accruing on or after the day on which this Act is passed.

SCHEDULE 13

1

TCGA 1992 is amended as follows.

2

(1) Section 263B (stock lending arrangements) is amended as follows.

(2) In subsection (2), for “section 263C(2)” substitute “ sections 263C(2) and 263CA(3) and (5) ”.

(3) In subsection (4)—

(a) in paragraph (a), insert at the end “for a consideration equal to their market value at that time”,

(b) in paragraph (b), after “at that time” insert “ for that consideration ”, and

(c) insert at the end (not as part of paragraph (c))— “ This subsection does not apply where section 263CA (insolvency of borrower) applies. ”

(4) In subsection (7), omit the definition of “interest”.

3

After section 263C (stock lending involving redemption) insert—

(263CA) (1) This section applies where, in the case of any stock lending arrangement— (a) the borrower (B) becomes insolvent after the lender (L) has transferred the securities, (b) as a result of the insolvency, the requirement for B to make a transfer back to L will not be complied with as regards some or all of the securities, (c) collateral is used (whether directly or indirectly) to enable L to acquire securities (“replacement securities”) of the same description as the securities which will not be transferred back, and (d) the replacement securities are acquired before the end of the period of 30 days beginning with the day on which B becomes insolvent (“the insolvency date”). (2) In accordance with section 263B(2), the transfer of the securities under the arrangement is not to be regarded as a disposal by L for the purposes of this Act (but this is subject to subsection (5)). (3) B is to be treated for the purposes of this Act as having acquired the securities which will not be transferred back to L; and that acquisition is to be treated— (a) as being made on the insolvency date, and (b) as being for a consideration equal to their market value on that date. (4) The acquisition of the replacement securities is to be treated, as regards L, as if it were a transfer back of securities in accordance with the arrangement (so that, in accordance with section 263B(2), that acquisition is not regarded as an acquisition by L for the purposes of this Act). (5) If the number of replacement securities is less than the number of securities which B is treated as having acquired, L is to be treated for the purposes of this Act as having made a disposal, at the insolvency date, of the difference (“the deemed disposal”). (6) The consideration for the deemed disposal is— (a) where all the collateral is used to enable L to acquire replacement securities, nil, and (b) where not all the collateral is so used, the difference between— (i) the market value (at the insolvency date) of the number of securities which could have been acquired using the collateral, and (ii) the market value (at that date) of the number of securities which were in fact so acquired. (7) But if L at any time receives any amount (whether arising out of B's insolvency or otherwise) in respect of B's liability to L in respect of the securities which are treated under subsection (5) as having been disposed of by L that amount is to be treated as a chargeable gain accruing at that time to L. (8) The liability mentioned in subsection (7) is not to be treated as giving rise to a relevant non-lending relationship for the purposes of Part 6 of CTA 2009 (relationships treated as loan relationships etc). (9) For the purposes of this section, B becomes insolvent— (a) if a company voluntary arrangement takes effect under Part 1 of the Insolvency Act 1986, (b) if an administration application (within the meaning of Schedule B1 to that Act) is made or a receiver or manager, or an administrative receiver, is appointed, (c) on the commencement of a creditor's voluntary winding up (within the meaning of Part 4 of that Act) or a winding up by the court under Chapter 6 of that Part, (d) if an individual voluntary arrangement takes effect under Part 8 of that Act, (e) on the presentation of a bankruptcy petition (within the meaning of Part 9 of that Act), (f) if a compromise or arrangement takes effect under Part 26 of the Companies Act 2006, (g) if a bank insolvency order takes effect under Part 2 of the Banking Act 2009, (h) if a bank administration order takes effect under Part 3 of that Act, or (i) on the occurrence of any corresponding event which has effect under or as a result of the law of Scotland or Northern Ireland or a country or territory outside the United Kingdom. (10) In this section— (a) “collateral” means an amount of money or other property which— (i) is provided under the arrangement (or under arrangements of which the arrangement forms part), and (ii) is payable to or made available for the benefit of L for the purpose of securing the discharge of the requirement to transfer any or all of the securities back to L, and (b) any expression used in this section and in section 263B has the same meaning as in that section.

4

(1) The amendments made by paragraphs 2(2) and (3)(c) and 3 apply—

(a) in any case where B becomes insolvent on or after 24 November 2008, and

(b) where L makes an election under this paragraph, in any case where B becomes insolvent in the period beginning on 1 September 2008 and ending on 23 November 2008.

(2) An election under sub-paragraph (1)(b) must relate to all stock lending arrangements in which L is the lender and B is the borrower and must be made—

(a) where L is a company (within the meaning given by section 288(1) of TCGA 1992), no later than the second anniversary of the end of the accounting period of L in which 23 November 2008 falls, and

(b) otherwise, no later than 31 January 2011.

(3) Where section 263CA (inserted by paragraph 3) applies to any case which occurs before a period for which CTA 2009 has effect, the reference in subsection (8) of that section to a relevant non-lending relationship for the purposes of Part 6 of that Act is to be read as a reference to a relationship to which section 100 of FA 1996 applies.

SCHEDULE 14

Part 1 — Insertion of new Part 9A of CTA 2009

1

In CTA 2009, after Part 9 insert—

(931A) (1) The charge to corporation tax on income applies to any dividend or other distribution of a company, but only if the distribution is not exempt. (2) Subsection (1) does not apply in the case of a distribution of a capital nature. (3) For provision as to whether a distribution is exempt, see— - Chapter 2 (distributions received by small companies), and - Chapter 3 (distributions received by companies that are not small). (931B) A dividend or other distribution of a company that is received in an accounting period of the recipient in which the recipient is a small company is exempt if— (a) the payer is a resident of (and only of) the United Kingdom or a qualifying territory at the time that the distribution is received, (b) the distribution is not of a kind mentioned in paragraph (d) or (e) of section 209(2) of ICTA (certain non-dividend distributions), (c) no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution, and (d) the distribution is not made as part of a tax advantage scheme. (931C) (1) For the purpose of section 931B a territory is a “qualifying territory” if— (a) arrangements to which section 788 of ICTA applies (“double taxation relief arrangements”) have effect in relation to the territory, and (b) the arrangements contain a non-discrimination provision. (2) The Treasury may by regulations— (a) provide that a territory specified in or of a description specified in the regulations that does not satisfy subsection (1)(a) or (b) is a qualifying territory for the purpose of section 931B, and (b) provide that a territory so specified or described that satisfies subsection (1)(a) and (b) is not a qualifying territory for that purpose. (3) For the purpose of section 931B a company is a resident of a territory if, under the laws of the territory, the company is liable to tax there— (a) by reason of its domicile, residence or place of management, but (b) not in respect only of income from sources in that territory or capital situated there. (4) In subsection (1) “non-discrimination provision”, in relation to double taxation relief arrangements, means a provision to the effect that nationals of a state which is a party to those arrangements (a “contracting state”) are not to be subject in any other contracting state to— (a) any taxation, or (b) any requirement connected with taxation, which is other or more burdensome than the taxation and connected requirements to which nationals of that other state in the same circumstances (in particular with respect to residence) are or may be subjected. (5) In subsection (4) “national”, in relation to a contracting state, includes— (a) an individual possessing the nationality or citizenship of the contracting state, and (b) a legal person, partnership or association deriving its status as such from the laws in force in that contracting state. (6) Regulations under this section may— (a) describe a territory by reference to the double taxation relief arrangements for the time being in force in relation to the territory, (b) make different provision in relation to different descriptions of company, and (c) make provision having effect in relation to accounting periods current on the day on which the regulations are made. (931D) A dividend or other distribution of a company that is received in an accounting period of the recipient in which the recipient is not a small company is exempt if— (a) the distribution falls into an exempt class (see sections 931E to 931Q), (b) the distribution is not of a kind mentioned in paragraph (d) or (e) of section 209(2) of ICTA (certain non-dividend distributions), and (c) no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution. (931E) (1) A dividend or other distribution falls into an exempt class if condition A or B is met. (2) Condition A is that the recipient controls the payer. (3) Condition B is that— (a) the recipient is one of two persons who, taken together, control the payer, (b) the recipient is a person in whose case the 40% test in section 755D(3) of ICTA is satisfied, and (c) the other is a person in whose case the 40% test in section 755D(4) of ICTA is satisfied. (4) Section 755D of ICTA (meaning of “control” etc) applies for the purposes of this section. (5) As so applied, that section has effect with the omission of subsection (6)(c) and (d). (931F) A dividend or other distribution falls into an exempt class if it is made in respect of a share that— (a) is an ordinary share, and (b) is not redeemable. (931G) (1) A dividend or other distribution falls into an exempt class if the recipient— (a) holds less than 10% of the issued share capital of the payer, (b) is entitled to less than 10% of the profits available for distribution to holders of the issued share capital of the payer, and (c) would be entitled on a winding up to less than 10% of the assets of the company available for distribution to holders of the issued share capital of the payer. (2) Where the payer has more than one class of share, references in subsection (1) to the issued share capital of the payer are to issued share capital of the same class as the share in respect of which the distribution is made. (3) For the purposes of this section shares are not of the same class if the amounts paid up on them (otherwise than by way of premium) are different. (931H) (1) A dividend falls into an exempt class if it is paid in respect of relevant profits. (2) In this section “relevant profits” means any profits available for distribution at the time that the dividend is paid, other than profits that reflect the results of a transaction, or of one or more of a series of transactions, where— (a) the transaction or series of transactions achieve a reduction (other than a negligible reduction) in United Kingdom tax, and (b) the purpose or one of the main purposes of that transaction or series of transactions is to achieve that reduction. (3) A dividend that falls into an exempt class otherwise than by virtue of this section is for the purposes of this section treated, so far as possible, as paid in respect of relevant profits. (4) Any other dividend is for the purposes of this section treated, so far as possible, as paid in respect of profits other than relevant profits. (5) Where by virtue of subsection (4) part of a dividend is treated as paid in respect of relevant profits and part is treated as paid in respect of profits other than relevant profits, the two parts are treated for the purposes of this Part and Part 18 of ICTA (double taxation relief) as separate dividends. (931I) A dividend falls into an exempt class if the dividend is paid in respect of a share to which, at the time of the payment, section 521C (shares accounted for as liabilities treated as loan relationships) does not apply only because the condition in subsection (1)(f) of that section is not met. (931J) (1) This section applies to a dividend that would, apart from this section, fall into an exempt class by virtue of section 931E. (2) The dividend does not fall into an exempt class by virtue of that section if— (a) the dividend is paid as part of a scheme the main purpose, or one of the main purposes, of which is to secure that dividends of the payer received by the recipient fall into an exempt class by virtue of that section, and (b) the following condition is met. (3) The condition is that the dividend is paid in respect of pre-control profits. (4) A dividend that falls into an exempt class otherwise than by virtue of section 931E is for the purposes of this section treated, so far as possible, as paid in respect of profits other than pre-control profits. (5) Any other dividend is for the purposes of this section treated, so far as possible, as paid in respect of pre-control profits. (6) In this section “pre-control profits” means any profits available for distribution at the time the dividend is paid that arose at a time when neither condition A nor condition B in section 931E was met. (7) Where— (a) the condition in subsection (2)(a) is met, and (b) by virtue of subsection (5) part of a dividend is treated as paid in respect of pre-control profits and part is treated as paid in respect of profits other than pre-control profits, the two parts are treated for the purposes of this Part and Part 18 of ICTA (double taxation relief) as separate dividends. (931K) (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class by virtue of section 931F. (2) The distribution does not fall into an exempt class by virtue of that section if— (a) the distribution is made as part of a scheme the main purpose, or one of the main purposes, of which is to secure that distributions of the payer received by the recipient fall into an exempt class by virtue of that section, and (b) the following condition is met. (3) The condition is that the distribution is made in respect of a share that— (a) would not be an ordinary share, or (b) would be redeemable, were the rights under the scheme of each relevant person to be attached to the share. (931L) (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class by virtue of section 931G. (2) The distribution does not fall into an exempt class by virtue of that section if— (a) the distribution is made as part of a scheme the main purpose, or one of the main purposes, of which is to secure that distributions of the payer received by the recipient fall into an exempt class by virtue of that section, and (b) the following condition is met. (3) The condition is that the distribution would not fall into an exempt class by virtue of section 931G if the reference in subsection (1) of that section to the recipient were to all relevant persons taken together. (931M) (1) This section applies to a dividend or other distribution that does not fall into an exempt class by virtue of section 931E but would, apart from this section, fall into an exempt class otherwise than by virtue of that section. (2) The distribution does not fall into an exempt class if— (a) the distribution is made as part of a tax advantage scheme, and (b) conditions A to C are met. (3) Condition A is that the distribution constitutes part of a return in relation to an amount that is produced by the scheme for a relevant person, or two or more relevant persons taken together. (4) Condition B is that the return is economically equivalent to interest. (5) For this purpose a return produced for a person or persons by a scheme in relation to an amount is “economically equivalent to interest” if (and only if)— (a) it is reasonable to assume that it is a return by reference to the time value of that amount of money, (b) it is at a rate reasonably comparable to a commercial rate of interest, and (c) at the time the scheme is entered into by the person or any of the persons, there is no practical likelihood that it will cease to be produced in accordance with the scheme. (6) Condition C is that there is a connection between the payer and the recipient for the accounting period of the payer in which the distribution is made. (7) Section 466 (companies connected for an accounting period) applies for the purposes of subsection (6) as if that subsection were a provision of Part 5 to which that section is applied (but this does not affect the application of section 1316(1) (meaning of connected persons) for the purposes of any other provision of this Part). (931N) (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class. (2) The distribution does not fall into an exempt class if— (a) the distribution is made as part of a tax advantage scheme, and (b) the following condition is met. (3) The condition is that a deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of an amount determined by reference to the distribution. (931O) (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class. (2) The distribution does not fall into an exempt class if— (a) the distribution is made as part of a tax advantage scheme, and (b) the following condition is met. (3) The condition is that the scheme includes a payment, or the giving up of a right to income, by a relevant person where— (a) the payment is made, or the right to income is given up, under a liability incurred for consideration in money or money's worth all or any of which consists of, or of the right to receive, the distribution, and (b) in the case of a payment, the conditions in subsections (2) and (4) to (7) of section 1301 (restriction of deductions for annual payments) apply to the payment. (931P) (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class. (2) The distribution does not fall into an exempt class if— (a) the distribution is made as part of a tax advantage scheme, and (b) the following condition is met. (3) The condition is that— (a) the scheme includes a payment or receipt, or the giving up of a right to income, by a relevant person in respect of goods or services, and (b) the amount of the payment or receipt, or the amount of income given up, differs from the amount the relevant person would have paid, received or given up in respect of those goods or services had the distribution not been made. (4) This section does not apply to a scheme that consists of a transaction or series of transactions in relation to which Schedule 28AA to ICTA (provision not at arms length between parties under common control) applies. (931Q) (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class. (2) The distribution does not fall into an exempt class if— (a) the distribution is made as part of a scheme entered into by the recipient and another relevant person (“C”), (b) if C had received the distribution, it would be reasonable to assume that the distribution would be dealt with under Part 3 (trading income), and (c) the main purpose, or one of the main purposes, of the scheme is to produce the result that the distribution is dealt with under this Part because it is received by the recipient. (3) For the purposes of subsection (2)(b) it is to be assumed that, in the case of any relevant transaction to which a relevant person other than C is a party, C were that party to that transaction. (4) In this section “relevant transaction” means any of the transactions giving rise to the distribution. (931R) (1) This section applies where, apart from this section, a distribution (“the distribution”) would be exempt. (2) If the recipient so elects, the distribution is not exempt. (3) An election under this section must be made on or before the second anniversary of the end of the accounting period in which the distribution is received. (4) Subsection (5) applies where the distribution is a dividend that is treated for certain purposes of Part 18 of ICTA (double taxation relief) as two separate dividends by virtue of section 801C of that Act (separate streaming of dividend so far as representing an ADP dividend of a CFC). (5) If the recipient so elects— (a) the distribution is to be treated for the purposes of this Part as if it were an ADP dividend and a separate residual dividend as provided for in that section of that Act, and (b) the ADP dividend is not exempt. (6) The reference in subsection (4) to section 801C of ICTA is to that section as it continues to have effect in accordance with paragraph 8(1) of Schedule 16 to FA 2009 in relation to dividends paid on or after 1 July 2009 for accounting periods beginning before that day. (931S) (1) For the purposes of this Part a company is a “small company” in an accounting period if it is in that period a micro or small enterprise, as defined in the Annex to Commission Recommendation 2003/361/EC of 6 May 2003. (2) But a company is not a “small company” in an accounting period if it is at any time in that period— (a) an open-ended investment company, (b) an authorised unit trust scheme, (c) an insurance company, or (d) a friendly society. (3) In subsection (2)— - “open-ended investment company” has the meaning given by section 236 of FISMA 2000; - “authorised unit trust scheme” means a unit trust scheme (within the meaning given by section 237 of FISMA 2000) in relation to which a order under section 243 of that Act (authorisation orders) is in force; - “insurance company” has the meaning given by section 431 of ICTA; - “friendly society” has the meaning given by section 466(2) of ICTA. (931T) In this Part— - “the payer”, in relation to a distribution, means the company that makes the distribution; - “the recipient”, in relation to a distribution, means the company that receives the distribution; - “a relevant person”, in relation to a distribution, means— 1. the company that receives the distribution, or 2. any person connected with that company. (931U) (1) In this Part “ordinary share” means a share that does not carry any present or future preferential right to dividends or to a company's assets on its winding up. (2) A share is regarded as “redeemable” for the purposes of this Part only if it is redeemable as a result of its terms of issue (or any collateral arrangements)— (a) requiring redemption, (b) entitling the holder to require redemption, or (c) entitling the issuing company to redeem. (931V) (“) For the purposes of this Part— - “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions; - “tax advantage scheme” means a scheme the main purpose, or one of the main purposes, of which is to obtain a tax advantage (other than a negligible tax advantage). (2) In this section “tax advantage” has the meaning given by section 840ZA of ICTA. (931W) (1) Any income so far as it falls within— (a) this Part, and (b) Chapter 2 of Part 3 (income taxed as trade profits), is dealt with under Part 3. (2) Any income so far as it falls within— (a) this Part, and (b) Chapter 3 of Part 4 (profits of property businesses) so far as the Chapter relates to a UK property business, is dealt with under Part 4. (3) Any income so far as it falls within— (a) this Part, and (b) Chapter 1 of Part 12 of ICTA (insurance companies), is dealt with under that Chapter.

Part 2 — Other amendments

ICTA

2

ICTA is amended as follows.

3

In section 13(7) (small companies' relief), omit “resident in the United Kingdom”.

4

(1) Section 505(1)(c) (charitable companies: general) is amended as follows.

(2) After sub-paragraph (ii) insert—

(iizza) from tax under Part 9A of CTA 2009 (company distributions),

(3) Omit sub-paragraph (iib).

5

(1) Section 95ZA (taxation of UK distributions received by insurance companies) is amended as follows.

(2) In subsection (1), for “section 1285” substitute “ section 130(2) ”.

(3) In subsection (2)(a), omit “resident in the United Kingdom”.

6

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

7

In section 795 (double taxation relief: computation of income subject to foreign tax), omit subsection (3A).

8

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

9

Omit sections 806A to 806K (double taxation relief in relation to foreign dividends: onshore pooling and utilisation of eligible unrelieved foreign tax).

10

In section 826 (interest on tax overpaid), omit subsection (7BC).

11

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

12

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

13

In paragraph 5(3)(c) of Schedule 27 (distributing funds: United Kingdom equivalent profits)—

(a) for “section 1285” substitute “ Chapter 2 or 3 of Part 9A ”, and

(b) omit “in like manner as if they were dividends or distributions of a company resident outside the United Kingdom”.

14

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

FA 1989

15

FA 1989 is amended as follows.

16

(1) Section 85A (life assurance: excess adjusted Case I profits) is amended as follows.

(2) In paragraph (a) of subsection (6), for “distributions received by the company in the accounting period from companies resident in the United Kingdom” substitute “ non-taxable distributions received by the company in the accounting period ”.

(3) After that subsection insert—

(6A) In this section “non-taxable distribution” means— (a) a distribution that is exempt for the purposes of Part 9A of the Corporation Tax Act 2009 (company distributions), and (b) does not include any amount withheld from the distribution on account of tax payable under the laws of a territory outside the United Kingdom.

17

(1) Section 89 (life assurance: policy holders' share of profits) is amended as follows.

(2) In subsection (2)(b), for “distributions received from companies resident in the United Kingdom” substitute “ non-taxable distributions received ”.

(3) In subsection (7), after the definition of “Case I profits” insert—

“non-taxable distribution” has the same meaning as in section 85A.

FA 1994

18

In section 219 of FA 1994 (taxation of profits of Lloyd's underwriters etc)—

(a) in subsection (3), omit “Subject to subsection (4A) below,”, and

(b) omit subsections (4), (4A) and (4C).

FA 2006

19

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

CTA 2009

20

CTA 2009 is amended as follows.

21

In section 1(2) (overview of Act), before the “and” at the end of paragraph (f) insert—

(fa) Part 9A (company distributions),

22

For section 130 (traders receiving distributions etc) substitute—

(130) (1) This section applies for the purpose of calculating the trading profits of— (a) insurance business other than life assurance business, or (b) any category of such business. (2) A receipt that is exempt for the purposes of Part 9A (company distributions) is not brought into account in calculating the profits of the trade.

23

In section 932(1) (overview of Part 10), omit paragraph (a).

24

Omit Chapter 2 of Part 10 (taxation of dividends from non-UK resident companies).

25

(1) Section 974 (charge to tax in relation to sale of foreign dividend coupons) is amended as follows.

(2) In subsection (3)(a), after “realisation of” insert “ taxable ”.

(3) In subsection (4), after “sale of” insert “ taxable ”.

(4) After subsection (4) insert—

(4A) For the purposes of subsections (3) and (4) a dividend coupon is “taxable” if the associated dividend would not have been exempt for the purposes of Part 9A (company distributions) had it been paid to the holder of the shares.

26

In section 982(1)(a) and (2)(a) (boundary provisions for Part 10), omit “2,”.

27

Omit section 1285 (exemption for distributions of UK resident companies).

28

In section 1310(4) (orders and regulations subject to affirmative resolution procedure in House of Commons), before paragraph (a) insert—

(za) section 931C (meaning of “qualifying territory”),

29

In Schedule 4 (index of defined expressions), insert at the appropriate places—

ordinary share (in Part 9A)	section 931U

;

the payer (in Part 9A)	section 931T

;

the recipient (in Part 9A)	section 931T

;

redeemable (in Part 9A)	section 931U

;

a relevant person (in Part 9A)	section 931T

;

scheme (in Part 9A)	section 931V

;

small company (in Part 9A)	section 931S

;

tax advantage scheme (in Part 9A)	section 931V

Consequential repeals

30

In consequence of the amendments made by this Schedule, omit—

(a) in F(No.2)A 1997, section 22(2) and (3)(a),

(b) in FA 2000, in Schedule 30, paragraphs 8(4)(c), 21 and 22,

(d) in FA 2008, in Schedule 39, paragraph 25, and

(e) in CTA 2009, in Schedule 1, paragraphs 174(4)(c), 252 to 254 and 392(4) and (5).

Part 3 — Commencement etc

Commencement

31

The amendments made by this Schedule have effect in relation to distributions paid on or after 1 July 2009 (“the commencement date”).

Transitional provision

32

(1) This paragraph contains transitional provision in relation to the commencement of Part 9A of CTA 2009 (as inserted by paragraph 1).

(2) In section 931H—

(a) a reference to a transaction that is one of a series of transactions does not include a transaction where each transaction in the series was entered into more than 12 months before the commencement date,

(b) a reference to any other transaction does not include a transaction entered into more than 12 months before the commencement date, and

(c) a reference to a dividend that falls into (or does not fall into) an exempt class otherwise than by virtue of that section is, in relation to a dividend paid before the commencement date, to a dividend that would have so fallen (or not so fallen) had that section had effect in relation to the dividend.

(3) In section 931J—

(a) a reference to profits available for distribution that arose at any time does not include such profits that arose in a period of account ending more than 12 months before the commencement date, and

(b) a reference to a dividend that falls into (or does not fall into) an exempt class otherwise than by virtue of section 931E is, in relation to a dividend paid before the commencement date, to a dividend that would have so fallen (or not so fallen) had that section had effect in relation to the dividend.

SCHEDULE 15

Part 1 — Introduction

Overview

1

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

Part 2 — Application of this Schedule

Application of Schedule

2

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

UK net debt of the worldwide group for period of account of worldwide group

3

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

Net debt of a company

4

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

Worldwide gross debt of worldwide group for period of account of worldwide group

5

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

References to amounts disclosed in balance sheet of relevant group company

6

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

Qualifying financial services groups

7

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

Qualifying activities

8

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

Lending activities and activities ancillary to lending activities

9

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

10

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

Relevant dealing in financial instruments

11

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

UK trading income of the worldwide group

12

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

Worldwide trading income of the worldwide group

13

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

Foreign currency accounting

14

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

Part 3 — Disallowance of deductions

Application of Part and meaning of “total disallowed amount”

15

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

Meaning of “company to which this Part applies”

16

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

Appointment of authorised company for relevant period of account

17

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

Meaning of “the reporting body”

18

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

Statement of allocated disallowances: submission

19

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

Statement of allocated disallowances: submission of revised statement

20

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

Statement of allocated disallowances: requirements

21

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

Statement of allocated disallowances: effect

22

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

Company tax returns

23

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

Power to make regulations about statement of allocated disallowances

24

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

Failure of reporting body to submit statement of allocated disallowances

25

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

Powers to make regulations in relation to reductions required under paragraph 25

26

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

Part 4 — Exemption of financing income

Application of Part and meaning of “total disallowed amount”

27

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

Meaning of “company to which this Part applies”

28

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

Appointment of authorised company for relevant period of account

29

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

Meaning of “the reporting body”

30

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

Statement of allocated exemptions: submission

31

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

Statement of allocated exemptions: submission of revised statement

32

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

Statement of allocated exemptions: requirements

33

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

Statement of allocated exemptions: effect

34

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

Company tax returns

35

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

Power to make regulations about statement of allocated exemptions

36

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

Failure of reporting body to submit statement of allocated exemptions

37

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

Power to make regulations in relation to reductions required under paragraph 37

38

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

Balancing payments between group companies: no charge to, or relief from, tax

39

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

Part 5 — Intra-group financing income where payer denied deduction

Exemption from tax for certain financing income received from certain EEA companies

40

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

Meaning of “relevant associate”

41

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

Meaning of “tax-resident” and “EEA territory”

42

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

Qualifying EEA tax relief for payment in the current period or a previous period

43

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

Qualifying EEA tax relief for payment in future period

44

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

References to tax of a territory

45

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

Financing income amounts of a company

46

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

Part 6 — Anti-avoidance

Schemes involving manipulation of rules in Part 2

47

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

Schemes involving manipulation of rules in Parts 3 and 4

48

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

Meaning of “relevant net deduction”

49

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

Calculation of amounts

50

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

Meaning of “carried-back amount” and “carried-forward amount”

51

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

Schemes involving manipulation of rules in Part 5

52

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

Meaning of “scheme” and “excluded scheme”

53

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

Part 7 — “Financing expense amount” and “financing income amount”

The financing expense amounts of a company

54

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

The financing income amounts of a company

55

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

Interpretation of paragraphs 54 and 55

56

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

Group treasury companies

57

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

Real estate investment trusts

58

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

Companies engaged in oil extraction activities

59

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

Intra-group short-term finance: financing expense

60

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

Intra-group short-term finance: financing income

61

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

Short-term loan relationships

62

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

Stranded deficits in non-trading loan relationships: financing expense

63

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

Stranded deficits in non-trading loan relationships: financing income

64

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

Stranded management expenses in non-trading loan relationships: financing expense

65

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

Stranded management expenses in non-trading loan relationships: financing income

66

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

Charities

67

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

Educational and public bodies

68

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

Interpretation of paragraphs 57 to 68

69

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

Part 8 — The “tested expense amount” and “tested income amount”

The tested expense amount

70

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

The tested income amount

71

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

Companies with net financing deduction or net financing income that is small

72

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

Part 9 — The “available amount”

The available amount

73

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

Group members with income from oil extraction subject to particular tax treatment in UK

74

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

Group members with income from shipping subject to particular tax treatment in UK

75

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

Group members with income from property rental subject to particular tax treatment in UK

76

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

Meaning of accounting expressions used in this Part

77

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

Part 10 — Other interpretative provisions

The worldwide group

78

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

Meaning of “group”

79

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

Meaning of “ultimate parent”

80

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

Meaning of “corporate entity”

81

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

Meaning of “relevant non-corporate entity”

82

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

Treatment of entities stapled to corporate entities or relevant non-corporate entities

83

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

Treatment of business combinations

84

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

Meaning of “large” in relation to a group

85

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

Meaning of “UK group company” and “relevant group company”

86

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

Financial statements of the worldwide group

87

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

Non-compliant financial statements of worldwide group

88

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

Non-existent financial statements of worldwide group

89

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

References to amounts disclosed in financial statements

90

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

Translation of amounts disclosed in financial statements into sterling

91

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

Expressions taking their meaning from international accounting standards

92

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

Meaning of “relevant accounting period”

93

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

Meaning of “the Commissioners” and “HMRC”

94

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

Part 11 — Consequential amendments and commencement

Consequential amendments

95

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

96

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

Commencement

97

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

Anti-avoidance: change of period of account of worldwide group

98

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

Transitional provision

99

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

SCHEDULE 16

Part 1 — Abolition of acceptable distribution policy exemption

Abolition of acceptable distribution policy exemption

1

(1) ICTA is amended as follows.

(2) In section 748(1) (cases where apportionment under section 747(3) does not apply), omit paragraph (a) (including the “or” at the end).

(3) In Schedule 25 (supplementary provision in relation to cases where apportionment under section 747(3) does not apply), omit Part 1 (acceptable distribution policy).

Consequential amendments

2

(1) ICTA is amended as follows.

(2) Omit section 754A (returns where it is not established whether acceptable distribution policy applies).

(3) In section 801 (dividends paid between related companies: relief for UK and third country taxes), omit subsections (2A)(aa), (2B), (6) and (7).

(4) Omit section 801C (double taxation relief: separate streaming of dividend so far as representing an ADP dividend of a CFC).

(5) In section 803A (foreign taxation of group as single entity), omit subsection (1A).

(6) In Schedule 24 (assumptions for calculating chargeable profits, creditable tax and corresponding UK tax of foreign companies), omit—

(a) in paragraph 1(3A), paragraph (b)(ii) (and the “and” before it) and the words “or which is an ADP exempt period” (in both places),

(b) paragraph 1(6),

(d) paragraph (b) of paragraph 4(1A) (and the “or” before it),

(e) paragraph 4(3A),

(f) in paragraph 9(1)(c), “, and is not to be assumed by virtue of paragraph 2(1)(b) above to have been resident,”, and

(g) paragraph (b) of paragraph 10(1) (and the “or” before it).

3

In paragraph 116 of Schedule 29 to FA 2002 (assumptions for calculating chargeable profits of CFCs in connection with intangible fixed assets), omit paragraph (b) of sub-paragraph (2) (and the “or” before it).

4

In section 870 of CTA 2009 (assumptions for calculating chargeable profits of CFCs in connection with intangible fixed assets), omit—

(a) paragraph (b) of subsection (3) (and the “or” before it), and

(b) subsection (7).

5

In consequence of the amendments made by paragraphs 1 to 4, omit—

(a) in FA 1990, section 67(3)(b) and (c),

(b) in FA 1994, section 134,

(d) in FA 1998, in Schedule 17, paragraphs 10, 17(2) to (5) and 26 to 28,

(e) in FA 1999, section 88,

(f) in FA 2000, in Schedule 30, paragraph 13,

(g) in FA 2001, section 82,

(h) in FA 2005, sections 89 and 90,

(i) in FA 2007, in Schedule 7, paragraph 56,

(j) in FA 2008, section 64(4) and, in Schedule 17, paragraph 29, and

(k) in this Act, section 57(4).

Commencement

6

The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies beginning on or after 1 July 2009.

Periods straddling 1 July 2009

7

(1) Where a controlled foreign company has an accounting period (“the straddling accounting period”) that—

(a) begins before 1 July 2009, and

(b) ends on or after that date,

the straddling accounting period is to be treated as split.

(2) Where this paragraph provides that the straddling accounting period is to be treated as “split”—

(a) that part of the straddling accounting period that falls before 1 July 2009 and that part of the straddling accounting period that falls on or after that date are to be treated for the purposes of Chapter 4 of Part 17, and Part 18, of ICTAand Part 2 of TIOPA 2010 as separate accounting periods, and

(b) the company's chargeable profits for the straddling accounting period, and its creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a just and reasonable basis.

Transitional provision

8

(1) The amendments made by this Part do not affect the application of sections 801, 801C or 803A of, or Part 1 of Schedule 25 to, ICTA in relation to dividends paid on or after 1 July 2009 if they are paid for accounting periods beginning before that date.

(2) Sub-paragraph (3) applies where a dividend of a controlled foreign company is paid during the second of the two accounting periods provided for by paragraph 7(2).

(3) For the purposes of Part 1 of Schedule 25 to ICTA, section 799 of that Act has effect as if the reference in subsection (3)(c) to the last period for which accounts of the company were made up which ended before the dividend became payable were to the first of the two accounting periods provided for by paragraph 7(2).

Interpretation

9

The following expressions have the same meaning for the purposes of this Part as they have for the purposes of Chapter 4 of Part 17 of ICTA—

“accounting period”;

“chargeable profits”;

“controlled foreign company”;

“creditable tax”.

Part 2 — Amendment of exempt activities exemption

Abolition of special rules for holding companies other than local holding companies

10

(1) Part 2 of Schedule 25 to ICTA (exempt activities) is amended as follows.

(2) In paragraph 6 (definition of exempt activities)—

(a) in sub-paragraph (1)(c), for “(2), (3), (4) or (4A)” substitute “ (2) or (3) ”,

(b) in sub-paragraph (3)(b), omit “or superior holding companies”,

(d) in sub-paragraph (5)—

(i) for “sub-paragraphs (3) to (4B)” substitute “ sub-paragraph (3) ”, and

(ii) omit “or superior holding company”,

(e) in sub-paragraph (5ZA), omit “or superior holding company”,

(f) in sub-paragraph (5ZB), omit “or superior holding company”,

(g) in sub-paragraph (5A), for “sub-paragraphs (3) to (4B)” substitute “ sub-paragraph (3) ”,

(h) omit sub-paragraph (5B),

(i) in sub-paragraph (5C), omit “or superior holding company”, and

(j) in sub-paragraph (6), for “sub-paragraphs (1) to (4BB) above” substitute “ this paragraph ”.

(3) In paragraph 8(3) (paragraph 6(1)(b) condition), omit “or superior holding company”.

(4) In paragraph 12 (definition of “holding company” etc)—

(a) in sub-paragraph (1), for “paragraph 12A below and in” substitute “ in ”,

(b) in sub-paragraph (4), omit “or (4), as the case may be,”, and

(i) in the words before paragraph (a), for “sub-paragraphs (3) and (4)” substitute “ sub-paragraph (3) ”, and

(ii) in paragraph (a), omit “or superior holding company”.

(5) Omit paragraph 12A (definition of “superior holding company” etc).

11

In consequence of the amendments made by paragraph 10, omit—

(a) in FA 1998, in Schedule 17, paragraphs 30(4)(a), (5), (6) and (8), 31, 32(2) and (3)(a) and 33,

(b) in FA 2000, in Schedule 31, paragraph 7(2) to (7), (10) and (11), and

Commencement

12

(1) The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies beginning on or after the commencement date.

(2) For this purpose “the commencement date” means—

(a) in relation to a controlled foreign company other than a qualifying holding company, 1 July 2009, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The amendments made by this Part have no effect in relation to a qualifying holding company.

Meaning of “qualifying holding company” and “exempt holding company”

13

(1) In this Part “qualifying holding company” means a controlled foreign company that was an exempt holding company in relation to the last accounting period to end before 1 July 2009.

(2) For the purposes of sub-paragraph (1) paragraphs 14 and 15 are to be disregarded.

(3) For the purposes of this Part a company is an “exempt holding company” in relation to an accounting period if—

(a) throughout the period the company is, within the meaning of Part 2 of Schedule 25 to ICTA, engaged in exempt activities, and

(b) paragraph 6(4) or (4A) of that Schedule applies to the company in relation to the period.

Periods straddling 1 July 2009

14

(1) Where a controlled foreign company has an accounting period (“the straddling accounting period”) that—

(a) begins before 1 July 2009, and

(b) ends on or after that date,

the straddling accounting period is to be treated as split.

(2) Where this paragraph provides that the straddling accounting period is to be treated as “split”—

(a) that part of the straddling accounting period that falls before 1 July 2009 and that part of the straddling accounting period that falls on or after that date are to be treated for the purposes of Chapter 4 of Part 17 of ICTA as separate accounting periods, and

(b) the company's gross income for the straddling accounting period, and its chargeable profits and creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a time basis according to the respective lengths of the periods.

Qualifying holding companies: periods straddling 1 July 2011

15

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

Qualifying holding companies: definition of “relevant accounting period”

16

For the purposes of paragraph 17 an accounting period of a qualifying holding company is a “relevant accounting period” if it—

(a) begins on or after 1 July 2009 but before 1 January 2013, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualifying holding companies: treatment during two years before 1 July 2011

17

(1) In its application in relation to a relevant accounting period of a qualifying holding company, Part 2 of Schedule 25 to ICTA has effect subject to the modifications in this paragraph.

(2) Sub-paragraph (4) or (4A) of paragraph 6 applies to a company only if—

(a) the condition specified in that sub-paragraph is met, and

(b) conditions A and B are met.

(3) Condition A is that at all material times the company was a member of a group with the same ultimate corporate parent.

(4) For this purpose the following times are “material”—

(a) the beginning of 9 December 2008, and

(b) all times during the accounting period in question.

(5) Condition B is that amount X does not exceed amount Y.

(6) Amount X is the amount of the company's gross income in the accounting period in question that is non-qualifying gross income.

(7) Amount Y is (subject to sub-paragraph (8))—

(a) where there are three reference periods in relation to the company, the greatest of the amounts of the company's non-qualifying gross income in each of those periods,

(b) where there are two reference periods in relation to the company, the greater of the amounts of the company's non-qualifying gross income in each of those periods,

(c) where there is one reference period in relation to the company, the amount of the company's non-qualifying gross income in that period, or

(d) where there is no reference period in relation to the company, the amount of the company's non-qualifying gross income in the period of 12 months ending with 9 December 2008.

(8) Where the number of days in the period by reference to which amount X is determined is not the same as the number of days in the period by reference to which amount Y is determined, amount Y is to be multiplied by—

$$DXDY$where—DX is the number of days in the period by reference to which amount X is determined, andDY is the number of days in the period by reference to which amount Y is determined.$

(9) In this paragraph—

“non-qualifying gross income” means gross income that does not satisfy the test in paragraph 6(3), (4) or (4A) of Schedule 25 to ICTA;

“a reference period”, in relation to a company, means an accounting period of the company that—is one of the last three accounting periods of the company to end before 9 December 2008, andis an accounting period in relation to which the company is an exempt holding company.

Meaning of “ultimate corporate parent” and “group” for the purposes of paragraph 17(3)

18

(1) In paragraph 17(3) the “ultimate corporate parent”, in relation to a group, means a member of the group that—

(a) is a body corporate, and

(b) is not a subsidiary (whether direct or indirect) of another body corporate.

(2) A reference in this paragraph to a body corporate does not include—

(a) the Crown,

(b) a Minister of the Crown,

(d) a Northern Ireland department, or

(e) a foreign sovereign power.

(3) In paragraph 17(3) and this paragraph “group” has the meaning for the time being given by international accounting standards.

(4) In this paragraph “subsidiary” has the meaning for the time being given by international accounting standards.

Reference periods: anti-avoidance

19

(1) This paragraph applies where, on or after 9 December 2008, a company alters its accounting date so that any period (“period A”) that would otherwise have fallen in an accounting period ending on or after 9 December 2008 falls instead in an accounting period ending before that date.

(2) The reference in paragraph (a) of the definition of “a reference period” in paragraph 17(9) to 9 December 2008 is to be treated as a reference to the beginning of period A.

Interpretation

20

The following expressions have the same meaning for the purposes of this Part as they have for the purposes of Chapter 4 of Part 17 of ICTA—

“accounting period”;

“chargeable profits”;

“control”;

“controlled foreign company”;

“creditable tax”;

“gross income”.

Part 3 — Reduction in chargeable profits for certain financing income

Reduction in chargeable profits for certain financing income

21

ICTA is amended as follows.

22

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

23

After section 751A insert—

(751AA) (1) This section applies if— (a) an apportionment under section 747(3) falls to be made as regards an accounting period (“the relevant accounting period”) of a controlled foreign company, (b) the chargeable profits of the controlled foreign company for the relevant accounting period would, apart from this section, include an amount of income in respect of a payment made by another company (“the payer”), (c) the amount that the payer brings into account for the purposes of corporation tax in respect of the payment is reduced (in part or in full) by virtue of Part 3 of Schedule 15 to FA 2009 (tax treatment of financing costs and income), and (d) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in the relevant accounting period. (2) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period (“the chargeable profits”) to be reduced by an amount (“the specified amount”) specified in the application (including to nil). (3) If the Commissioners grant the application— (a) the chargeable profits are treated as reduced by the specified amount, and (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in the chargeable profits, for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose). (4) The Commissioners may grant the application only if they are satisfied that the specified amount does not exceed the relevant amount. (5) In subsection (4) “the relevant amount” means the amount (if any) by which it is just and reasonable that the chargeable profits should be treated as reduced, having regard to the effect of Parts 3 and 4 of Schedule 15 to FA 2009 on amounts brought into account for the purposes of corporation tax by the payer, or any other company.

24

(1) Section 751B (supplementary) is amended as follows.

(2) In the heading, for “Section 751A” substitute “ Sections 751A and 751AA ”.

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

(4) In subsection (8)—

(a) after “ “the relevant amount”” insert

— (a) in the case of an appeal in respect of the refusal of an application under section 751A,

, and

(b) after “mentioned in that subsection” insert

, and (b) in the case of an appeal in respect of the refusal of an application under section 751AA, has the meaning given by subsection (5) of that section.

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

Commencement

25

(1) The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies ending on or after 1 January 2010.

(2) For this purpose “accounting period” and “controlled foreign company” have the same meaning as they have for the purposes of Chapter 4 of Part 17 of ICTA.

SCHEDULE 17

Part 1 — Abolition of existing regime

1

In ICTA, omit—

(a) section 765 (prior Treasury consent required for certain transactions involving movement of capital outside Europe),

(b) section 765A (HMRC to be given information about certain transactions involving movement of capital within Europe),

(d) section 767 (interpretation).

2

In section 98 of TMA 1970 (special returns etc)—

(a) omit subsection (5),

(b) in the first column of the Table, omit “section 765A(2)(b);”, and

3

In consequence of the amendments made by paragraphs 1 and 2, omit—

(a) in FA 1988, section 105(6), and

(b) in FA 1990, section 68(1), (2) and (3)(b) to (d).

Part 2 — Reporting requirement

Reporting requirement

4

(1) If a UK corporate parent is a reporting body at the time a reportable event takes place or a reportable transaction is carried out, it must, within 6 months of that time, make a report to an officer of Revenue and Customs.

(2) The report must contain such information relating to the event or transaction, or persons connected with the event or transaction, as is specified in regulations made by the Commissioners.

(3) The purpose of the report is to enable the Commissioners to consider whether the event or transaction results, directly or indirectly, in an advantage for any person in respect of corporation tax or any other tax or duty.

(4) In this Schedule “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.

Meaning of “reporting body”

5

(1) For the purposes of this Schedule a body corporate (“body A”) is a reporting body at any time if, at that time—

(a) it is a UK corporate parent, and

(b) condition A, B, C or D is met.

(2) Condition A is that body A is not controlled by a body corporate resident outside the United Kingdom.

(3) Condition B is that—

(a) body A is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”), and

(b) no other relevant UK body corporate is controlled by the foreign parent.

(4) Condition C is that —

(a) body A is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”),

(b) one or more other UK corporate parents are controlled by the foreign parent, and

(5) Condition D is that—

(a) body A is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”),

(b) one or more other UK corporate parents are controlled by the foreign parent, and

Groups with more than one UK corporate parent: nomination of single reporting body

6

(1) Sub-paragraph (2) applies where—

(a) a UK corporate parent is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”), and

(b) one or more other UK corporate parents are controlled by the foreign parent.

(2) Two or more of the UK corporate parents controlled by the foreign parent may enter into an arrangement under which one of their number (“the nominated reporting body”) is nominated to exercise, on behalf of all of them, the functions conferred under this Schedule on a reporting body.

(3) A party to an arrangement under this paragraph may withdraw from the arrangement.

(4) The Commissioners may by regulations make provision about entering into and withdrawing from an arrangement under this paragraph.

(5) Regulations under sub-paragraph (4) may, in particular, include provision—

(a) as to the form and manner in which bodies may enter into, or a body may withdraw from, an arrangement,

(b) requiring a person to give information to HMRC in connection with entering into or withdrawing from an arrangement, and

Meaning of “UK corporate parent”

7

In this Schedule “UK corporate parent” means a body corporate that—

(a) is resident in the United Kingdom,

(b) controls one or more bodies corporate that are not resident in the United Kingdom, and

(i) a body corporate that is resident in the United Kingdom, or

(ii) two or more bodies corporate taken together each of which is resident in the United Kingdom.

Reportable events and transactions

8

(1) For the purposes of this Schedule an event or transaction is “reportable”, in relation to a reporting body, if—

(a) it is of a value exceeding £100 million,

(b) it is within sub-paragraph (2), and

(2) An event or transaction is within this sub-paragraph if—

(a) it is an issue of shares or debentures by a foreign subsidiary,

(b) it is a transfer by the reporting body, or a transfer caused or permitted by the reporting body, of shares or debentures of a foreign subsidiary in which the reporting body has an interest,

(c) where the reporting body is a party to an arrangement under paragraph 6, it is a transfer by another party to the arrangement, or a transfer caused or permitted by such a party, of shares or debentures of a foreign subsidiary in which that party has an interest,

(d) it results in a foreign subsidiary becoming, or ceasing to be, a controlling partner in a partnership, or

(e) it is of a description specified in regulations made by the Commissioners.

(3) For the purposes of sub-paragraph (2)(d) a foreign subsidiary is a “controlling partner” in a partnership if, whether alone or taken together with one or more other partners that are subsidiaries, it controls the partnership.

(4) The Commissioners may by regulations make provision about how the value of an event or transaction is to be determined for the purposes of this paragraph.

(5) Regulations under sub-paragraph (4) may, in particular, in the case of a transaction that is one of a series of transactions, include provision attributing to the transaction the value of other transactions in the series.

(6) Regulations under this paragraph may—

(a) make provision by reference to standards or other documents issued by any person, or

(b) make different provision for different cases or purposes.

(7) The Commissioners may by order amend sub-paragraph (1)(a) so as to substitute a higher amount for the amount for the time being mentioned there.

Excluded transactions

9

(1) For the purposes of this Schedule a transaction is “excluded” if—

(a) it is carried out in the ordinary course of a trade,

(b) all the parties to the transaction are, at the time the transaction is carried out, resident in the same territory,

(c) it consists in giving to the bankers of a foreign subsidiary any security for the payment of any sum due or to become due from it to them by reason of any transaction entered into with it by them in the ordinary course of their business as bankers,

(d) it consists in a foreign subsidiary giving to an insurance company any security for the payment of any sum due or to become due from that subsidiary to that company by reason of any transaction entered into with that subsidiary by that company in the ordinary course of that company's business by way of investment of its funds, or

(e) it is of a description specified in regulations made by the Commissioners.

(2) Regulations under sub-paragraph (1)(e)—

(a) may make provision by reference to standards or other documents issued by any person, and

(b) may make different provision for different cases or purposes.

Penalty for failure to comply with reporting requirement

10

In section 98 of TMA 1970 (special returns etc), in the second column of the Table, insert at the end “paragraph 4 of Schedule 17 to FA 2009.”

Regulations and orders

11

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