Legalize / United Kingdom / Public General Act

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

articles Not indexed

Reform history JSON API

(1) Regulations and orders under this Schedule are to be made by statutory instrument.

(2) A statutory instrument containing regulations or an order under this Schedule is subject to annulment in pursuance of a resolution of the House of Commons.

Interpretation

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(1) For the purposes of this Schedule “control”, in relation to a body corporate, means the power of a person to secure—

(a) by means of the holding of shares or the possession of voting power in or in relation to the body or any other body corporate, or

(b) by virtue of any powers conferred by the articles of association or other document regulating the body or any other body corporate,

that the affairs of the body are conducted in accordance with that person's wishes.

(2) Where two or more persons, taken together, have the power mentioned in sub-paragraph (1), they are taken for the purposes of this Schedule to control the body corporate.

(3) For the purposes of this Schedule “control” in relation to a partnership, means the right to a share of more than 50% of the assets, or of more than 50% of the income, of the partnership.

(4) In this Schedule—

“foreign” means resident outside the United Kingdom;

“partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership, and “partner” is to be read accordingly;

“subsidiary”, in relation to a reporting body, means a body corporate that is controlled by—the reporting body, orwhere the reporting body is a party to an arrangement under paragraph 6, any party to the arrangement.

(5) Section 150 of TIOPA 2010 (meaning of “transaction” and “series of transactions”) applies for the purposes of this Schedule.

Part 3 — Commencement etc

Commencement

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This Schedule has effect in relation to events taking place and transactions carried out on or after 1 July 2009.

Transitional provision

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(1) In its application in relation to an event taking place or a transaction carried out before 1 October 2009, paragraph 4(1) has effect as if it required any report under that provision to be made before 1 April 2010.

(2) Any regulations under this Schedule that are made within the period of one year beginning on the day on which this Act is passed may be made so as to have effect from any time on or after 1 July 2009.

SCHEDULE 18

Amendments of FA 1993

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Commencement and transitional provision

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Sterling equivalent if amount carried back to pre-commencement accounting period

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Sterling equivalent if amount carried forward from earlier period

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Adjustment of sterling loss if amount carried back to pre-commencement accounting period

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Adjustment of sterling loss if amount carried forward from earlier period

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Interpretation

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Right of company to elect for different commencement and transitional provision to apply

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SCHEDULE 19

ITTOIA 2005

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ITTOIA 2005 is amended as follows.

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(1) Section 397A (tax credits for distributions of non-UK resident companies: UK residents and eligible non-UK residents) is amended as follows.

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

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

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

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(1) Section 397C (meaning of “minority shareholder”) is amended as follows.

(2) In subsection (1)—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) omit “non-UK resident”.

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

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

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8

In section 873 (orders and regulations), after subsection (3) insert—

(4) Further, subsection (2) does not apply if any other Parliamentary procedure is expressly provided to apply in relation to the order or regulations.

Consequential amendments of other Acts

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In ICTA—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) in section 840ZA(3)(b) (meaning of “tax advantage”), after “397(1)” insert “ or 397A(1) ”.

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In ITA 2007—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

for “397A(2)” substitute “ 397A(1) ”.

Commencement

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(1) The amendments made by this Schedule have effect in relation to—

(a) qualifying distributions arising on or after 22 April 2009,

(b) cash dividends paid over to a person under paragraph 68(4) of Schedule 2 of ITEPA 2003 on or after 22 April 2009,

(d) manufactured overseas dividends that are representative of a distribution within paragraph (a), (b) or (c).

(2) In this paragraph—

“manufactured overseas dividend” has the same meaning as in Chapter 2 of Part 11 of ITA 2007;

“qualifying distribution” has the meaning given in section 989 of ITA 2007.

(3) Section 873(4) of ITTOIA 2005 (inserted by paragraph 8), so far as relating to any order or regulations made after the passing of FA 2016 under any provision of ITTOIA 2005 other than section 397BA of that Act, has effect as if sub-paragraph (1) did not apply in relation to it.

SCHEDULE 20

Introduction

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Part 5 of CTA 2009 (loan relationships) is amended as follows.

Section 374

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(1) Section 374 (late interest: connection between debtor and person standing in position of creditor) is amended as follows.

(2) In subsection (1)—

(a) in paragraph (b), after “company” insert “ ( ”, and

(b) insert at the end (not as part of paragraph (b))— “ and the condition in subsection (1A) is met. ”

(3) After that subsection insert—

(1A) The condition is that C is— (a) resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, or (b) effectively managed in a non-taxing non-qualifying territory at any such time.

(4) Insert at the end—

(3) For the purposes of this section— (a) “non-qualifying territory” has the meaning given by paragraph 5E of Schedule 28AA to ICTA, (b) a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management, and (c) “resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management.

Sections 375 and 376

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(1) Section 375 (late interest: loans to close companies by participators etc) is amended as follows.

(2) In subsection (1), insert at the end (not as part of paragraph (b))— “ and, where subsection (4A) applies, the non-qualifying territory condition is met. ”

(3) In subsections (3)(b) and (4)(b), after “resident” insert “ for tax purposes ”.

(4) After subsection (4) insert—

(4A) This subsection applies if C is a company; and the non-qualifying territory condition is that C is— (a) resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, or (b) effectively managed in a non-taxing non-qualifying territory at any such time.

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(1) Section 376 (interpretation of section 375) is amended as follows.

(2) In subsection (5), for the definition of “resident” substitute—

“resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management, and

(3) Insert at the end—

(6) For the purposes of section 375, a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management.

Section 377

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(1) Section 377 (late interest: party to loan relationship having major interest in other party) is amended as follows.

(2) The existing provision becomes subsection (1) of that section.

(3) In that subsection, omit the “and” at the end of paragraph (a) and insert at the end

and (c) the condition in subsection (2) is met.

(4) After that subsection insert—

(2) The condition is that C is— (a) resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, or (b) effectively managed in a non-taxing non-qualifying territory at any such time. (3) For the purposes of this section— (a) “non-qualifying territory” has the meaning given by paragraph 5E of Schedule 28AA to ICTA, (b) a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management, and (c) “resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management.

Section 407

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(1) Section 407 (postponement until redemption of debits for connected companies' deeply discounted securities) is amended as follows.

(2) In subsection (1)—

(a) in paragraph (b), after “company” insert “ (“the creditor company” ,

(b) omit the “and” at the end of paragraph (d), and

, and (f) the condition in subsection (1A) is met.

(3) After that subsection insert—

(1A) The condition is that the creditor company is— (a) resident for tax purposes in a non-qualifying territory at any time in the relevant period, or (b) effectively managed in a non-taxing non-qualifying territory at any such time.

(4) Insert at the end—

(6) For the purposes of this section— (a) “non-qualifying territory” has the meaning given by paragraph 5E of Schedule 28AA to ICTA, (b) a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management, and (c) “resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management.

Sections 409 and 410

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Section 409(1) (postponement until redemption of debits for close companies' deeply discounted securities)—

(a) in paragraph (b), after “there is a person” insert “ ( ”, and

(b) insert at the end (not as part of paragraph (d))— “ and, where it applies, the non-qualifying territory condition is met. ”

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(1) Section 410 (interpretation of section 409) is amended as follows.

(2) In subsections (3)(b) and (4)(b), after “resident” insert “ for tax purposes ”.

(3) After subsection (4) insert—

(4A) The non-qualifying territory condition applies if C is a company; and the non-qualifying territory condition is that C is— (a) resident for tax purposes in a non-qualifying territory at any time in the relevant period, or (b) effectively managed in a non-taxing non-qualifying territory at any such time.

(4) In subsection (5), for the definition of “resident” substitute—

“resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management, and

(5) After that subsection insert—

(5A) For the purposes of this section, a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management.

Commencement and transitional provision

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(1) The amendments made by this Schedule have effect where the actual accrual period (within the meaning of Chapter 8 of Part 5 of CTA 2009), or the relevant period (within the meaning of section 407(1) or 409(1) of that Act), begins on or after 1 April 2009.

(2) But a company may elect that any or all of the amendments made by this Schedule do not have effect in relation to the first accounting period for which they would otherwise apply.

(3) However, no election may be made under sub-paragraph (2) in relation to an accounting period ending after 31 March 2011.

(4) An election under sub-paragraph (2) must be made in the corporation tax return for the accounting period in relation to which the election is to have effect.

SCHEDULE 21

Loan relationships

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Derivative contracts

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Chapter 3 of Part 7 of CTA 2009 (derivative contracts: credits and debits to be brought into account) is amended as follows.

5

For the heading before section 606 (exchange gains and losses) substitute— “ Exchange gains and losses ”.

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(1) Section 606 is amended as follows

(2) In subsection (3), for paragraph (a) (together with the “and” at the end) substitute—

(a) condition A or B is met, and

(3) In subsection (4), for the words from “so much” to “currency as” substitute

an exchange gain or loss of a company so far as— (a) condition A is met, and (b) it

(4) After that subsection insert—

(4A) Condition A is that the exchange gain or loss arises in relation to a derivative contract whose underlying subject matter consists wholly or partly of currency. (4B) Condition B is that the exchange gain or loss arises as a result of the translation from one currency to another of the profit or loss of part of the company's business. (4C) Subsection (4D) applies where— (a) condition A is met, and (b) the amount that is recognised in respect of the exchange gain or loss as mentioned in subsection (3)(b) (“the recognised gain or loss”) is not calculated by reference to spot rates of exchange. (4D) Where this subsection applies— (a) the recognised gain or loss is to be treated for the purposes of this Part as comprising two separate exchange gains or losses, namely— (i) an exchange gain or loss calculated by reference to spot rates of exchange, and (ii) a residual exchange gain or loss, and (b) subsections (3) and (4) do not have effect in relation to the residual exchange gain or loss.

(5) After subsection (4D) (inserted by sub-paragraph (4) above) insert—

(4E) Subsections (3) and (4) do not have effect to disapply subsection (1) in the case of an exchange gain arising in an accounting period of a company so far as— (a) the exchange gain arises in relation to a derivative contract whose underlying subject matter consists wholly or partly of currency, (b) the derivative contract is part of arrangements that have a one-way exchange effect in relation to the company in the accounting period (see section 606A), and (c) the arrangements cause the company or any other company to gain a tax advantage (other than a negligible tax advantage).

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Immediately before section 607 (pre-contract or abortive expenses) insert— “ Miscellaneous ”.

Interpretation

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Consequential revocation

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The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2006 (S.I. 2006/843) are revoked.

Commencement

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(1) The amendments made by this Schedule have effect—

(a) in relation to exchange gains and losses arising in accounting periods beginning on or after 22 April 2009, and

(b) subject to the following provisions of this paragraph, in relation to exchange gains and losses arising in straddling accounting periods.

(2) In this paragraph “straddling accounting period” means an accounting period that—

(a) begins before 22 April 2009, and

(b) ends on or after that date.

(3) An exchange gain or loss that arises in a straddling accounting period in relation to—

(a) an asset or liability representing a loan relationship, or

(b) a derivative contract,

is to be treated for the purposes of this paragraph as if it were made up of two amounts.

(4) Those two amounts are the exchange gains or losses that would arise in relation to the loan relationship or derivative contract in—

(a) that part of the period that falls before 22 April 2009, and

(b) that part of the period that falls on or after that date,

if those parts were separate accounting periods.

(5) The amendments made by this Schedule have effect, in relation to an exchange gain or loss of the kind mentioned in sub-paragraph (3), as if the gain or loss were the amount determined in relation to it under sub-paragraph (4)(b).

SCHEDULE 22

Part 1 — Meaning of “offshore fund”

FA 2008

1

FA 2008 is amended as follows.

2

Before section 41 (tax treatment of participants in offshore funds) insert—

(40A) (1) This section and sections 40B to 40G have effect for this group of sections. (2) “Offshore fund” means— (a) a mutual fund constituted by a body corporate resident outside the United Kingdom, (b) a mutual fund under which property is held on trust for the participants where the trustees of the property are not resident in the United Kingdom, or (c) a mutual fund constituted by other arrangements that create rights in the nature of co-ownership where the arrangements take effect by virtue of the law of a territory outside the United Kingdom (but see subsection (3)). (3) Subsection (2)(c) does not include a mutual fund constituted by two or more persons carrying on a trade or business in partnership. (4) “This group of sections” means this section and sections 40B to 42A. (5) References to participants in arrangements (or a fund) are to persons taking part in the arrangements (or the arrangements constituting the fund), whether by becoming the owner of, or of any part of, the property that is the subject of the arrangements or otherwise (and references to participation in arrangements or a fund, however expressed, are to be read accordingly). (6) In this section— - “body corporate” does not include a limited liability partnership; - “co-ownership” is not restricted to the meaning of that term in the law of any part of the United Kingdom. (40B) (1) “Mutual fund” means arrangements with respect to property of any description, including money, that meet conditions A to C, subject to— (a) sections 40C and 40D, and (b) the exceptions made by or under sections 40E to 40G. (2) Condition A is that the purpose or effect of the arrangements is to enable the participants— (a) to participate in the acquisition, holding, management or disposal of the property, or (b) to receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income. (3) Condition B is that the participants do not have day-to-day control of the management of the property. (4) For the purpose of condition B a participant does not have day-to-day control of the management of property by virtue of having a right to be consulted or to give directions. (5) Condition C is that, under the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis calculated entirely, or almost entirely, by reference to— (a) the net asset value of the property that is the subject of the arrangements, or (b) an index of any description. (6) The Treasury may by regulations amend condition C. (40C) (1) In the case of umbrella arrangements— (a) each part of the umbrella arrangements is to be treated as separate arrangements (subject to section 40D), and (b) the umbrella arrangements are to be disregarded. (2) “Umbrella arrangements” means arrangements which provide for separate pooling of the contributions of the participants and the profits or income out of which payments are made to them. (3) References to a part of umbrella arrangements are to the arrangements relating to a separate pool. (40D) (1) Where there is more than one class of interest in arrangements (the “main arrangements”)— (a) the arrangements relating to each class of interest are to be treated as separate arrangements, and (b) the main arrangements are to be disregarded. (2) In relation to umbrella arrangements, “class of interest” does not include a part of the umbrella arrangements (but there may be more than one class of interest in a part of umbrella arrangements). (40E) (1) Arrangements are not a mutual fund if— (a) under the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis mentioned in condition C in section 40B only in the event of the winding up, dissolution or termination of the arrangements, and (b) condition X or Y is met. (2) Condition X is that the arrangements are not designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements. (3) Condition Y is that— (a) the arrangements are designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements, and (b) condition Y1, Y2 or Y3 is met. (4) Condition Y1 is that none of the assets that are the subject of the arrangements are relevant income-producing assets. (5) Condition Y2 is that, under the terms of the arrangements, the participants in the arrangements are not entitled to the income from the assets that are the subject of the arrangements or any benefit arising from such income. (6) Condition Y3 is that— (a) under the terms of the arrangements, after deductions for reasonable expenses, any income produced by the assets that are the subject of the arrangements is required to be paid or credited to the participants, and (b) a participant who is an individual resident in the United Kingdom would be charged to income tax on the amounts paid or credited. (7) Condition Y is not met if the arrangements are designed to produce a return for participants that equates, in substance, to the return on an investment of money at interest. (8) For the purposes of this section, the fact that arrangements provide for a vote or other action that may lead to the winding up, dissolution or termination of the arrangements does not, by itself, mean that the arrangements are designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements. (40F) (1) “Relevant income-producing assets” means assets that produce income on which, if they were held directly by an individual resident in the United Kingdom, the individual would be charged to income tax (subject to the following provisions of this section). (2) An asset is not a relevant income-producing asset if the asset is hedged, provided that no income is expected to arise from— (a) the asset (taking account of the hedging), or (b) any product of the hedging arrangements. (3) Cash awaiting investment is not a relevant income-producing asset, provided that the cash, and any income that it produces while awaiting investment, is invested as soon as reasonably practicable in assets that are not relevant income-producing assets. (40G) (1) The Treasury may by regulations amend or repeal any provision of section 40E or 40F. (2) The Treasury may by regulations provide that arrangements are not a mutual fund— (a) in specified circumstances, or (b) if they are of a specified description. (3) Regulations under this section may include provision having effect in relation to the tax year and accounting periods current on the day on which the regulations are made.

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(1) Section 41 (tax treatment of participants in offshore funds) is amended as follows.

(2) In subsection (2), omit the definition of “offshore fund” (and the “and” before it).

(3) Omit subsections (3) to (9).

4

(1) Section 42 (regulations under section 41: supplementary) is amended as follows.

(2) In subsection (2), for paragraphs (a) and (b) substitute—

(a) an offshore fund comprising a part of umbrella arrangements, and (b) an offshore fund comprising arrangements relating to a class of interest in other arrangements (see section 40D).

(3) In subsection (3), for the words from “may” to the end substitute

, in particular— (a) repeal Chapter 5 of Part 17 of ICTA (offshore funds), and (b) make provision consequential on the repeal of provisions of that Chapter.

(4) In subsection (4)(e), insert at the end “and savings”.

(5) For subsection (5) substitute—

(5) Regulations under section 41 may, in particular, provide for provisions to have effect in relation to the tax year, or accounting periods, current on the day on which the regulations are made.

(6) In subsection (6), for “and “offshore fund” have” substitute “ has ”.

5

After that section insert—

(42A) (1) Regulations under this group of sections are to be made by statutory instrument. (2) The following regulations may not be made unless a draft of the instrument containing them has been laid before, and approved by a resolution of, the House of Commons— (a) regulations under section 40B(6), (b) regulations under section 40G(1), and (c) the first regulations under section 41(1). (3) A statutory instrument containing any other regulations under this group of sections is subject to annulment in pursuance of a resolution of the House of Commons, unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

Restriction on regulation-making power under section 41 of FA 2008

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Part 2 — Application of TCGA 1992 to offshore funds

TCGA 1992

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TCGA 1992 is amended as follows.

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9

Accordingly, in the title of Part 3 and in the title of Chapter 3 of that Part, insert at the end “etc”.

10

In section 288(1) (interpretation), in the definition of “company”, for “section 99” substitute “ sections 99 and 103A ”.

Consequential provision

11

(1) In TMA 1970, in—

(a) section 25(9) (issuing houses, stockbrokers, auctioneers, etc), and

(b) section 28(2) (non-resident companies and trusts),

after “sections 99” insert “ , 103A ”.

(2) In section 1165 of CTA 2010—

(a) in subsection (1) for “section 99 of TCGA 1992 (application of that Act to unit trust schemes)” substitute “ sections 99 and 103A of TCGA 1992 (application of that Act to unit trust schemes and to certain offshore funds) ”, and

(b) in subsection (3) for “section 99 of TCGA 1992” substitute “ sections 99 and 103A of TCGA 1992 ”.

(3) In ITTOIA 2005—

(a) in section 149(4) (taxation of amounts taken to reserves), at the end of paragraph (b) (before the “and”) insert—

(ba) rights of participants in certain offshore funds to which TCGA 1992 applies as a result of section 103A of TCGA 1992,

, and

(b) in section 150(8) (conversion etc of securities held as circulating capital), after paragraph (c) insert—

(ca) rights of participants in certain offshore funds to which TCGA 1992 applies as a result of section 103A of TCGA 1992,

(4) In section 834(5) of the Companies Act 2006 (investment company: condition as to holdings in other companies), in the definition of “company” and “shares”, after “sections 99” insert “ , 103A ”.

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

Commencement: general

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(1) The amendments made by this Part of this Schedule have effect in relation to the acquisition, holding and disposal of rights in a relevant offshore fund on or after the commencement day, subject to paragraphs 13 and 15.

(2) In this paragraph and paragraphs 15 to 18 “the commencement day” means—

(a) in relation to the acquisition, holding and disposal of rights by a person subject to the charge to capital gains tax, 1 December 2009, and

(b) in relation to the acquisition, holding and disposal of rights by a person subject to the charge to corporation tax, such day as the Treasury may by order appoint.

Commencement: certain consequential amendments

13

(1) The amendment made by sub-paragraph (1)(a) of paragraph 11 comes into force on 1 December 2009 (and has effect as if section 103A of TCGA 1992 had effect from that date in relation to the issue, placing, acquisition, holding and disposal of rights in relevant offshore funds by any person).

(2) The amendments made by sub-paragraphs (2), (4) and (5) of paragraph 11 come into force in accordance with an order made by the Treasury.

Commencement orders

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(1) An order under paragraph 12(2)(b) or 13(2)—

(a) may make different provision for different cases or different purposes, and

(b) may include transitional provision and savings.

(2) Section 1171(4) of CTA 2010, section 287(3) of TCGA 1992 and section 1014(4) of ITA 2007 (orders etc subject to annulment) do not apply in relation to such an order.

Election modifying commencement

15

(1) This paragraph applies if a person makes an election—

(a) for capital gains tax purposes, in respect of a relevant tax year, or

(b) for corporation tax purposes, in respect of a relevant accounting period.

(2) The amendments made by this Part of this Schedule (other than the amendments made by paragraph 11(1)(a), (2), (4) and (5)) have effect, and are to be treated as always having had effect, in relation to the acquisition, holding and disposal by the person of rights in a relevant offshore fund on or after the first day of that tax year or accounting period (“the election day”).

(3) Sub-paragraph (4) applies if, in respect of any time on or after the election day but before the commencement day, the relevant offshore fund was not certified as a distributing fund under Part 3 of Schedule 27 to ICTA (distributing funds: certification procedure).

(4) The acquisition, holding or disposal by the person of rights in the fund at that time is to be treated as the acquisition, holding or disposal of rights in an offshore fund that is so certified.

(5) In this paragraph and paragraph 16—

“relevant accounting period” means an accounting period beginning on or after 1 April 2003 but before the day appointed under paragraph 12(2)(b);

“relevant tax year” means the tax year 2003-04 and any subsequent tax year up to and including the tax year 2009-2010.

Making an election

16

(1) An election under paragraph 15 must be made—

(a) for capital gains tax purposes, by being included in a relevant return under TMA 1970, and

(b) for corporation tax purposes, by being included in a relevant company tax return.

(2) A return under TMA 1970 is relevant if it is for—

(a) the tax year in respect of which the election is made, or

(b) a subsequent relevant tax year.

(3) A company tax return is relevant if it is for—

(a) the accounting period in respect of which the election is made, or

(b) a subsequent relevant accounting period.

(4) The references in sub-paragraph (1) to an election being included in a return include an election being included by virtue of an amendment of the return.

(5) An election under paragraph 15 is irrevocable.

Giving effect to elections

17

If, in order to give effect to an election under paragraph 15, any adjustments are required, whether by the discharge or repayment of tax, the making of assessments or otherwise—

(a) the adjustments must be made, and

(b) any time limit for making the adjustments is to be disregarded.

Modification of acquisition cost

18

(1) This paragraph applies where a participant in a relevant offshore fund—

(a) holds rights in a relevant offshore fund immediately before the effective date, and

(b) disposes of those rights on or after that date.

(2) For the purposes of TCGA 1992 the participant is to be treated as if the acquisition cost for those rights were the pre-commencement acquisition cost.

(3) “The effective date” means—

(a) if the participant has made an election under paragraph 15, the election day, or

(b) otherwise, the commencement day.

(4) “Acquisition cost” means the total of the consideration, costs and expenditure described in section 38(1)(a) and (b) of TCGA 1992 (acquisition and disposal costs etc).

(5) “Pre-commencement acquisition cost” means the total of the consideration, costs and expenditure that would have been allowable as a deduction under section 38(1)(a) and (b) of TCGA 1992 if the participant had disposed of the rights immediately before the effective date.

SCHEDULE 23

Transfer from non technical account not to be receipt

1

(1) In section 83 of FA 1989 (receipts to be taken into account), after subsection (2) insert—

(2AZA) No amount shown as transfer from non technical account in line 32 of Form 58 in respect of the whole of the company's long-term business in the periodical return for a period of account is to be taken into account as a receipt of the period of account.

(2) The amendment made by sub-paragraph (1) has effect in relation to periods of account ending on or after 22 April 2009.

(3) But, in relation to a period of account of a company beginning before that date, that amendment has effect only insofar as the amount shown as transfer from non technical account in line 32 of Form 58 covering the whole of the company's long-term business in the periodical return for the period of account is attributable to transfers made on or after that date.

No deduction for capital allocations to with-profits policy holders

2

(1) In section 82 of FA 1989 (calculation of profits), after subsection (2) insert—

(2A) But amounts are not allowed as such a deduction if they— (a) are allocated to holders of policies under which they are eligible to participate in surplus, (b) are of a capital nature, and (c) are not funded from amounts brought into account as part of total income in line 19 of the revenue account prepared for the purposes of Chapter 9 of the Prudential Sourcebook (Insurers) in respect of the whole of the company's long-term business. (2B) For the purposes of subsection (2A) above payments made in connection with the reattribution of inherited estate are to be regarded as being of a capital nature.

(2) The amendment made by sub-paragraph (1) has effect in relation to amounts allocated on or after 22 April 2009 to holders of policies under which they are eligible to participate in surplus.

Limits on loss relief for addition to non-profit funds

3

(1) In ICTA, after section 434A insert—

(434AZA) (1) Where this section applies in the case of a company carrying on life assurance business, relief allowable under section 393A or Chapter 4 of Part 10 in respect of losses incurred by the company in the life assurance business in an accounting period is reduced in accordance with section 434AZB. (2) This section applies in the case of a company where— (a) there has been a relevant addition to one or more non-profit funds in a period of account ending no later than the accounting period (“the relevant period of account”) (see subsection (3)), (b) the company is not a non-profit company in relation to the relevant period of account and has not elected under subsection (9) of section 83YA of the Finance Act 1989 to be treated for the purposes of that section as if it were, and (c) condition A or B is met, and, if the relevant period of account is not the period of account ending with the accounting period (“the current period of account”), condition C is also met. (3) For the purposes of subsection (2), there is a relevant addition to a non-profit fund in the relevant period of account if an amount is shown as a transfer from non-technical account in line 32 of the Form 58 of the non-profit fund in the periodical return for that period of account. (4) Condition A is that there is a relevant book value election in relation to assets of a non-profit fund of the company. (5) For the purposes of subsection (4), there is a relevant book value election in relation to assets of a non-profit fund if an amount is shown in relation to the non-profit fund as the excess of the value of net admissible assets in line 51 of the Form 14 of the non-profit fund in the periodical return for the current period of account. (6) Condition B is that the company is party to arrangements the main purpose, or one of the main purposes, of which is to reduce the relevant admissible value of assets of a non-profit fund of the company, other than any structural assets. (7) For the purposes of subsection (6) (and section 434AZB), the “relevant admissible value” means the value reflected in line 89 of Form 13 of the periodical return for the current period of account. (8) Condition C is that the surplus arising since the last valuation shown in line 34 of the Form 58 of the non-profit fund, or any of the non-profit funds, in relation to which condition A or B is met in the periodical return for the current period of account is a negative amount. (434AZB) (1) The amount of the relief allowable as mentioned in section 434AZA(1) is reduced by whichever of the following is the least— (a) the amount of the loss, (b) the amount specified in subsection (2), and (c) the amount specified in subsection (4). (2) The amount mentioned in subsection (1)(b) is— (a) where only condition A in section 434AZA is met, the relevant amount relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant amounts relating to them, (b) where only condition B is met, the amount of the relevant reduction relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant reductions relating to them, and (c) where both condition A and condition B are met, the aggregate of the amounts in paragraphs (a) and (b). (3) In subsection (2)— (a) “relevant amount”, in relation to a non-profit fund, means the amount shown in relation to the non-profit fund as the excess of the value of net admissible assets in line 51 of the Form 14 of the non-profit fund in the periodical return for the current period of account (as reduced by any amount which has had effect to reduce relief for losses for a previous accounting period), and (b) “relevant reduction”, in relation to a non-profit fund, means the reduction of the relevant admissible value of assets of the non-profit fund (other than structural assets) which is attributable to the arrangements (as so reduced). (4) The amount mentioned in subsection (1)(c) is— (a) if the relevant period of account is the current period of account, the amount referred to in section 434AZA(3) in the case of the non-profit fund, or of each of the non-profit funds, to which there has been a relevant addition in the relevant period of account, and (b) otherwise, so much of the amount shown in line 31 of the Form 58 of the non-profit fund or non-profit funds in the periodical return for the current period of account as is attributable to the amount so referred to. (434AZC) (1) For the purposes of sections 434AZA and 434AZB, a non-profit fund required to support a with-profits fund is to be treated as not being a non-profit fund. (2) Sections 434AZA and 434AZB apply to a non-profit part of a with-profits fund as if references to something shown in the Form 14 or Form 58 of the non-profit fund in a periodical return were to what would be so shown if there were a Form 14 or Form 58 of the non-profit part of the with-profits fund in the periodical return. (3) In sections 434AZA and 434AZB— - “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and - “structural assets” has the same meaning as in section 83XA of the Finance Act 1989 (see subsection (3) of that section and any regulations made under it).

(2) The amendment made by sub-paragraph (1) has effect in relation to accounting periods ending on or after 22 April 2009 unless—

(a) to the extent that section 434AZA would otherwise apply because condition A in that section is met in relation to a non-profit fund, the relevant addition to the non-profit fund was made before that date, or

(b) to the extent that section 434AZA would otherwise apply because condition B in that section is so met, the relevant addition to the non-profit fund and the arrangements were both made before that date.

FAFTS and contingent loans

4

(1) In paragraph 4(5) of Schedule 17 to FA 2008 (financing-arrangement-funded transfers: companies with unrepaid contingent loan liabilities before first period of account beginning on or after 1 January 2008), in the definition of “R”, after “(7)(a) of that section” insert “ in respect of amounts brought into account as transfers to non-technical account for periods of account beginning on or after 1 January 2008 ”.

(2) The amendment made by sub-paragraph (1) has effect in relation to periods of account beginning on or after 1 January 2008.

Apportionment: foreign business assets

5

(1) Section 432E of ICTA (section 432B apportionment: participating funds) is amended as follows.

(2) In subsection (3)(a), omit “and foreign business assets”.

(3) In subsection (4), in the definition of “A”, omit “and foreign business assets”.

(4) In subsection (4A), omit “or foreign business assets”.

6

In consequence of the amendments made by paragraph 5, omit—

(a) paragraph 19(4)(a) and (6) of Schedule 7 to FA 2007, and

(b) paragraph 10(3)(c) of Schedule 17 to FA 2008.

7

(1) The amendments made by paragraphs 5 and 6 have effect in relation to periods of account beginning on or after 1 January 2009 and ending on or after 22 April 2009.

(2) But an insurance company may, in its company tax return for—

(a) an accounting period beginning on or after 1 January 2008 but before 1 January 2009, or

(b) an accounting period beginning on or after 1 January 2009 and ending before 22 April 2009,

elect that the amendments made by paragraphs 5 and 6 have effect in relation to that accounting period.

Value shifting attributable to transfer of business

8

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

SCHEDULE 24

Amendments of Part 6 of CTA 2009

1

Part 6 of CTA 2009 (relationships treated as loan relationships etc) is amended as follows.

2

(1) Section 477(2) (overview of Part 6) is amended as follows.

(2) After paragraph (a) insert—

(aa) Chapter 2A (disguised interest),

(3) For paragraph (f) substitute—

(f) Chapter 6A (shares accounted for as liabilities),

3

After Chapter 2 insert—

(486A) (1) This Chapter provides for Part 5 to apply in relation to returns which are economically equivalent to interest (see section 486B). (2) For exclusions from this Chapter, see— (a) section 486C (return otherwise taxable), (b) section 486D (arrangement having no tax avoidance purpose), and (c) section 486E (excluded shares). (486B) (1) Where a company is party to an arrangement which produces for the company a return in relation to any amount which is economically equivalent to interest, Part 5 applies as if the return were a profit arising to the company from a loan relationship. (2) For the purposes of this Chapter a return produced for a company by an arrangement in relation to any 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 what is (in all the circumstances) a commercial rate of interest, and (c) at the relevant time there is no practical likelihood that it will cease to be produced in accordance with the arrangement unless the person by whom it falls to be produced is prevented (by reason of insolvency or otherwise) from producing it. (3) In subsection (2)(c) “the relevant time” means the time when the company becomes party to the arrangement or, if later, when the arrangement begins to produce a return for the company. (4) The credits and debits to be brought into account for the purposes of Part 5 in respect of the return must be determined on an amortised cost basis of accounting. (5) But if any of the return is not recognised in determining the company's profit or loss for any period it is to be treated as recognised using an amortised cost basis of accounting. (6) Where two or more persons are party to an arrangement which produces a return such as is mentioned in subsection (1)— (a) for the persons (when taken together), but (b) not for either (or any) of them individually, this section applies as if there were a profit arising to such (if any) of them as are companies from a loan relationship of so much of the return as is just and reasonable. (7) The only amounts which may be brought into account for corporation tax purposes in relation to a return such as is mentioned in subsection (1) in the case of any company are those which are brought into account in accordance with this section (but see section 486C). (8) In subsection (4) “credits” and “debits” include exchange gains and losses arising as a result of translating at different times the carrying value of the return or the amount by reference to which the return falls to be produced. (9) In this Chapter “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), other than one which constitutes a finance lease (within the meaning given by section 219 of CAA 2001). (486C) (1) This Chapter does not apply to an arrangement which produces a return for a company if or to the extent that the return— (a) is charged to corporation tax as income of the company or brought into account as income of the company for corporation tax purposes no later than the time when amounts are brought into account in relation to the return in accordance with section 486B, (b) arises from anything that would produce credits or debits in relation to the company under Part 7 (derivative contracts) or Part 8 (intangible fixed assets) but for any exception relating to particular credits or debits, or (c) arises from anything that would produce credits or debits in relation to the company under Part 5 apart from this Chapter but for any exception relating to particular credits or debits. (2) Subsection (1)(b) does not disapply this Chapter in the case of a return in relation to which section 641 (derivative contracts taxed on chargeable gains basis) applies. (486D) (1) This Chapter does not apply in relation to a return produced by an arrangement to which a company is a party unless it is reasonable to assume that the main purpose, or one of the main purposes, of the company being a party to the arrangement is to obtain a relevant tax advantage. (2) But a company for which a return is produced by an arrangement to which this Chapter would otherwise be prevented from applying by subsection (1) may elect that this Chapter is to apply in relation to the return. (3) An election under subsection (2)— (a) may not be made by a company if section 486B applies to the company in relation to the return in accordance with subsection (6) of that section, (b) must be made no later than the time when the arrangement begins to produce a return for the company, and (c) is irrevocable. (4) In this section “obtain a relevant tax advantage” means secure that the return (or any part of it) is produced in a way which means that its treatment for corporation tax purposes is more advantageous to the company than it would be if it were— (a) charged to corporation tax as income of the company, or (b) brought into account as income of the company for corporation tax purposes, at the time when amounts would be brought into account in relation to the return in accordance with section 486B. (5) Nothing in this section applies in relation to a company for an accounting period if the company is an excluded controlled foreign company. (6) For this purpose a company is an excluded controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA)— (a) are apportioned for the accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or (b) are not so apportioned because of section 748(1) of that Act. (486E) (1) This Chapter does not apply in relation to an accounting period (“the relevant accounting period”) of a company (“the holding company”) for which an arrangement produces a return for the company if the arrangement involves only relevant shares held by the company throughout the relevant period. (2) In this section “the relevant period” means the period— (a) beginning with the later of— (i) the time when the holding company becomes party to the arrangement, and (ii) the time when the arrangement begins to produce a return for the company, and (b) ending with the earliest of— (i) the end of the relevant accounting period, (ii) the time when the holding company ceases to be party to the arrangement, and (iii) the time when the arrangement ceases to produce a return for the company. (3) For the purposes of this section an arrangement “involves only” relevant shares if (and only if) the return produced reflects only an increase in the fair value of the shares. (4) For the purposes of subsection (3)— (a) “fair value”, in relation to relevant shares held by the holding company, means an amount which the company would obtain from a knowledgeable and willing purchaser of the shares dealing at arm's length, and (b) there is an increase in the fair value of shares even if the increase is realised by the payment of a distribution in respect of the shares. (5) In this section “relevant shares” means shares which, throughout the relevant period, are— (a) fully paid-up shares of a relevant company, or (b) shares of a company, other than a relevant company, which would be accounted for as a liability by the company in which they are shares in accordance with generally accepted accounting practice and which produce for the holding company a return in relation to any amount which is economically equivalent to interest (as to which see Chapter 6A). (6) For the purposes of subsection (5)(a) shares are fully paid-up if there are no actual or contingent obligations— (a) to meet unpaid calls on the shares, or (b) to make a contribution to the capital of the company in which they are shares that could affect the value of the shares. (7) For the purposes of subsection (5) a company is “a relevant company” if— (a) it and the holding company are connected companies, (b) it is a relevant joint venture company, or (c) it is a relevant controlled foreign company. (8) Section 466 (companies connected for an accounting period) applies for the purposes of subsection (7)(a). (9) For the purposes of subsection (7)(b) a company is a relevant joint venture company if— (a) the holding company is one of two persons who, taken together, control it, (b) the holding company 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. (10) Section 755D of ICTA (meaning of “control” etc) applies for the purposes of subsection (9)(a) as for those of Chapter 4 of Part 17 of that Act (controlled foreign companies), except that no rights and powers are attributed to a person by subsection (6)(c) or (d) of that section. (11) For the purposes of subsection (7)(c) a company is a relevant controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA)— (a) are apportioned to the holding company for the relevant accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or (b) are not so apportioned because of section 748(1) or (3) of that Act. (12) Section 550(3) (repos: ignoring effect on borrower of sale of securities) does not apply for the purposes of this section.

4

After Chapter 6 insert—

(521A) (1) This Chapter contains rules for Part 5 (and the other provisions of the Corporation Tax Acts) to apply in some cases as if at some times in the accounting period of a company (“A”) which holds shares of a certain kind in another company (“B”) the shares were rights under a creditor relationship of A. (2) See, in particular— (a) section 521B (application of Part 5 to some shares as rights under creditor relationship), and (b) section 521C (which describes the shares to which the rules apply). (3) In this Chapter references to the investing company are to A and references to the issuing company are to B. (4) For the purposes of this Chapter, the definition of “share” in section 476(1) only applies so far as it provides that “share” does not include a share in a building society. (5) Section 550(3) (repos: ignoring effect on borrower of sale of securities) does not apply for the purposes of this Chapter. (6) See section 116B of TCGA 1992 for the effect for chargeable gains purposes of shares beginning or ceasing to be shares to which section 521C applies. (521B) (1) This section applies in relation to the times in a company's accounting period when— (a) the company holds a share in another company, and (b) section 521C (shares accounted for as liabilities) applies to the share. (2) Part 5 (and the other provisions of the Corporation Tax Acts) apply as if at those times— (a) the share were rights under a creditor relationship of the investing company, and (b) any distribution in respect of the share were not a distribution (and accordingly is within Part 5). (3) Where Part 5 applies in relation to the investing company in accordance with subsection (2) it so applies as if the issuing company stood in the position of debtor as respects the debt in question. (4) No debits are to be brought into account by the investing company as respects the share but this does not affect debits to be brought into account in respect of exchange gains or losses. (5) Subsection (2)(b) does not affect the operation of Part 1 of Schedule 25 of ICTA (controlled foreign companies: acceptable distribution policy) (including as it continues to have effect in accordance with paragraph 8(1) of Schedule 16 to FA 2009). (6) In this Chapter references to “the share” are to the share mentioned in subsection (1). (521C) (1) This section applies to the share if— (a) the share would be accounted for by the issuing company as a liability in accordance with generally accepted accounting practice, (b) the share produces for the investing company a return in relation to any amount which is economically equivalent to interest, (c) the issuing company and the investing company are not connected companies, (d) the condition in subsection (4) is met, (e) the share is not an excepted share (see section 521D), and (f) the investing company holds the share for an unallowable purpose (see section 521E). (2) For the purposes of this section a return produced for a company by an arrangement in relation to any 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 what is (in all the circumstances) a commercial rate of interest, and (c) at the relevant time there is no practical likelihood that it will cease to be produced in accordance with the arrangement unless the person by whom it falls to be produced is prevented (by reason of insolvency or otherwise) from producing it. (3) In subsection (2)(c) “the relevant time” means the time when the investing company first holds the share or, if later, when the share begins to produce a return for the investing company. (4) The condition mentioned in subsection (1)(d) is that the share does not fall to be treated for the accounting period in question as if it were rights under a creditor relationship of the investing company because of section 490 (holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights). (5) Section 466 (companies connected for an accounting period) applies for the purposes of this section. (521D) (1) A share is an excepted share for the purposes of section 521C if it is— (a) a qualifying publicly-issued share (see subsection (2)), or (b) a share which mirrors a public issue (see subsections (3) and (4)). (2) A share is a “qualifying publicly-issued share” if— (a) it was issued by a company as part of an issue of shares to persons not connected with the company, and (b) less than 10% of the shares in that issue are held by the investing company or persons connected with it. (3) The first case where shares (“the mirroring shares”) mirror a public issue is where— (a) a company (“company A”) issues shares (“the public issue”) to persons not connected with the company, (b) within 7 days of that issue, one or more other companies (“companies BB”) issue the mirroring shares to company A on the same terms as the public issue or substantially the same terms, (c) company A and companies BB are associated companies (see subsection (5)), and (d) the total nominal value of the mirroring shares does not exceed the nominal value of the public issue. (4) The second case where shares (“the second level mirroring shares”) mirror a public issue is where, in the circumstances of the first case— (a) within 7 days of the public issue, one or more other companies (“companies CC”) issue the second level mirroring shares to one or more of companies BB on the same terms as the public issue or substantially the same terms, (b) company A, companies BB and companies CC are associated companies (see subsection (5)), and (c) the total nominal value of the second-level mirroring shares does not exceed the nominal value of the public issue. (5) For the purposes of subsections (3) and (4) companies are associated companies if they are members of the same group of companies for the purposes of Chapter 4 of Part 10 of ICTA (group relief) (see section 413(3)(a) of that Act). (521E) (1) For the purposes of section 521C, the investing company holds the share for an unallowable purpose if the main purpose, or one of the main purposes for which the company holds the share is to obtain a relevant tax advantage. (2) But the investing company may elect that this Chapter is to apply in relation to the share even though it would otherwise be prevented from applying by subsection (1)(f) of that section. (3) An election under subsection (2)— (a) must be made no later than the time when the investing company first holds the share or, if later, when the share begins to produce a return for the investing company, and (b) is irrevocable. (4) In this section “obtain a relevant tax advantage” means secure that the return produced by the share (or any part of it) is received in a way that means that its treatment for corporation tax purpose is more advantageous to the investing company than it would be if it were— (a) charged to corporation tax as income of the investing company, or (b) brought into account as income of the investing company for corporation tax purposes, at the time when amounts would be brought into account in relation to the return in accordance with section 521B. (5) Nothing in this section applies in relation to the investing company for an accounting period if it is an excluded controlled foreign company. (6) For this purpose the investing company is an excluded controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA)— (a) are apportioned for the accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or (b) are not so apportioned because of section 748(1) of that Act. (521F) (1) This section applies if at any time section 521B begins or ceases to apply in the case of a share held by the investing company. (2) The investing company is treated for the purposes of Part 5— (a) as having disposed of the share immediately before that time for consideration of an amount equal to the notional carrying value of the share at that time, and (b) as having immediately reacquired it for consideration of the same amount. (3) In subsection (2) “notional carrying value”, in relation to the share, means the amount which would have been its carrying value in the accounts of the investing company if a period of account had ended immediately before section 521B began or ceased to apply in the case of the share and the investing company. (4) For the purposes of subsection (3) “carrying value” has the same meaning as it has for the purposes of section 316 (see section 317).

Amendments and repeals

5

(1) Section 116B of TCGA 1992 (shares beginning or ceasing to be shares to which section 523 of CTA 2009 applies) is amended as follows.

(2) In subsection (1) and the heading, for “522” substitute “ 521B ”.

(3) In subsection (1)(b), for “its fair value” substitute “ the notional carrying value of the share ”.

(4) In subsection (2), for the definition of “fair value” substitute—

“notional carrying value” has the same meaning as in subsection (2) of section 521F of CTA 2009 (see subsection (3) of that section),

(5) In that subsection, in the definition of “investing company”—

(a) for “7” substitute “ 6A ”, and

(b) for “with guaranteed returns) (see section 522(3)” substitute “ accounted for as liabilities) (see section 521A(3) ”.

6

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

7

(1) Schedule 4 to CTA 2009 (index of expressions) is amended as follows.

(2) After the entry relating to “approved, approval (in relation to a share incentive plan) (in Chapter 1 of Part 11)” insert—

arrangement (in Chapter 2A of Part 6)	section 486B(9)

(3) Omit the entry relating to “the associated transactions condition (in Chapter 7 of Part 6)”.

(4) After the entry relating to “effective 51% subsidiary (in Part 8)” insert—

economically equivalent to interest (in Chapter 2A of Part 6)	section 486B(2)

(5) For the entry relating to “the investing company (in Chapter 7 of Part 5)” substitute—

the investing company (in Chapter 6A of Part 6)	section 521A(3)

(6) For the entry relating to “the investing company (in Chapter 7 of Part 5)” substitute—

the issuing company (in Chapter 6A of Part 6)	section 521A(3)

(7) Omit the entries relating to “the increasing value condition (in Chapter 7 of Part 6)” and “the redemption return condition (in Chapter 7 of Part 6)”.

(8) In the entry relating to “share (in Part 5 and in Part 6 except for Chapter 7 of that Part)”, for “7” substitute “ 6A ”.

(9) For the entries relating to “share (in Chapter 7 of Part 6)” and “the share (in Chapter 7 of Part 6) substitute—

share (in Chapter 6A of Part 6)	section 521A(4)
the share (in Chapter 6A of Part 6)	section 521B(6)

Repeals

8

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

(a) in ICTA—

(i) section 736C (deemed interest: cash collateral under stock lending arrangement), and

(ii) section 736D (quasi-stock lending arrangements and quasi-cash collateral),

(b) in FA 2004, sections 131 to 133 (companies in partnership), and

(i) Chapter 7 of Part 6 (shares with guaranteed returns etc),

(ii) Chapter 8 of that Part (returns from partnerships), and

(iii) section 547 (repo under arrangement designed to produce quasi-interest: tax avoidance).

9

Omit the following provisions (which relate to the provisions repealed by paragraph 8)—

(a) in ICTA, sections 736B(4) and 807A(2B),

(b) in TCGA 1992, section 171(3A),

(d) in FA 2006, in Schedule 6, paragraphs 3 and 4,

(e) in ITA 2007, in Schedule 1, paragraphs 172 and 373, and

(f) in CTA 2009, in Schedule 1, paragraphs 215 and 571.

10

In section 542(2) of CTA 2009 (introduction to Chapter 10 of Part 6), for “547” substitute “ 546 ”.

Commencement

11

The amendments made by paragraphs 2(2) and 3 have effect in relation to any arrangement which produces for a company a return which is economically equivalent to interest if the company becomes a party to the arrangement on or after 22 April 2009.

12

The amendments (and repeals) made by paragraphs 2(3) and 4 to 10 come into force on 22 April 2009.

13

(1) This paragraph applies where any of the provisions repealed by paragraph 8 applies in relation to anything done by a company before 22 April 2009 which amounts to becoming party to an arrangement (within the meaning given by section 486B(9) of CTA 2009).

(2) The company is to be treated for the purposes of Chapter 2A of Part 6 of CTA 2009 as having become a party to the arrangement on that date.

(3) But this paragraph does not apply in circumstances in which paragraph 15 does.

14

(1) This paragraph applies where Chapter 7 of Part 6 of CTA 2009 applies in relation to a share held by a company immediately before 22 April 2009.

(2) Section 116B(1) of TCGA 1992 is to be treated as applying as if section 523 of CTA 2009 ceased to apply in relation to the share on that date.

(3) But this paragraph does not apply if paragraph 15 applies in relation to the share and the company.

15

(1) This paragraph applies where—

(a) Chapter 7 of Part 6 of CTA 2009 applies in relation to a share held by a company immediately before 22 April 2009 by reason of the redemption return condition being met (see section 529 of that Act) (or would so apply but for the share not being designed to produce a return which equates in substance to the return on an investment of money at a commercial rate of interest), and

(b) section 521B of CTA 2009 applies in relation to the share and the company on 22 April 2009.

(2) Part 5 of CTA 2009 applies as if the company had acquired the share on 22 April 2009 for an amount equal to the notional carrying value of the share on that date.

(3) In sub-paragraph (2) “notional carrying value” has the same meaning as in section 521F(2) of CTA 2009 (see subsection (3) of that section).

(4) Section 521F of CTA 2009 does not apply by virtue of the coming into force of section 521B of that Act.

16

An election under—

(a) section 486D(2) of CTA 2009, or

(b) section 521E(2) of that Act,

relating to a return which begins to be produced before 1 August 2009 can be made at any time before that date but only in relation to any return produced on or after the day on which the election is made.

SCHEDULE 25

Part 1 — Company transferors

Application of Part

1

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

Value of transferred income stream treated as income

2

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

Exception: amount otherwise taxed

3

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

Exception: transfer by way of security

4

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

Partnership shares

5

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

Interpretation

6

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

Part 2 — Non-corporate transferors

7

In ITA 2007, after section 809 insert—

(809AZA) (1) This Chapter applies where— (a) a person within the charge to income tax (“the transferor”) makes a transfer to another person (“the transferee”) of a right to relevant receipts (see subsection (2)), and (b) (subject to subsection (3)) the transfer of the right is not a consequence of the transfer to the transferee of an asset from which the right to relevant receipts arises. (2) “Relevant receipts” means any income— (a) which (but for the transfer) would be charged to income tax as income of the transferor, or (b) which (but for the transfer) would be brought into account in calculating profits of the transferor for the purposes of income tax. (3) Despite paragraph (b) of subsection (1), this Chapter applies if the transfer of the right is a consequence of the transfer to the transferee of all rights under an agreement for annual payments; and for the purposes of that paragraph the transfer of an asset under a sale and repurchase agreement is not to be regarded as a transfer of the asset. (4) Section 809AZB makes provision as to the consequences of this Chapter applying. (5) For exclusions from this Chapter, see— (a) section 809AZC (amount otherwise taxed), (b) section 809AZD (certain annuities), and (c) section 809AZE (transfer by way of security). (6) Section 809AZF makes special provision about transfers of partnership shares. (7) Section 809AZG contains supplementary provisions. (809AZB) (1) The relevant amount (see subsection (2)) is to be treated as income of the transferor chargeable to income tax in the same way and to the same extent as that in which the relevant receipts— (a) would have been chargeable to income tax, or (b) would have been brought into account in calculating any profits for the purposes of income tax, but for the transfer of the right to relevant receipts. (2) The relevant amount is— (a) (except where paragraph (b) applies) the amount of the consideration for the transfer of the right, or (b) where the amount of any such consideration is substantially less than the market value of the right at the time when the transfer takes place (or where there is no consideration for the transfer of the right), the market value of the right at that time. (3) The income under subsection (1) is to be treated as arising in the chargeable period of the transferor in which the transfer takes place. (4) But subsection (5) applies if (apart from the transfer) any of the relevant receipts— (a) would have been brought into account in accordance with Part 2 or 3 of ITTOIA 2005 (trading income and property income) in calculating any profits for the purposes of income tax, and (b) in accordance with generally accepted accounting practice, would have been recognised otherwise than wholly in the chargeable period in which the transfer takes place. (5) If this subsection applies, the income under subsection (1) is to be treated as arising— (a) to the extent that it does not exceed the amount of the consideration for the transfer of the right, in the chargeable period or periods for which, in accordance with generally accepted accounting practice, the consideration for the transfer is recognised for accounting purposes in a profit and loss account or income statement of the transferor, and (b) otherwise, in the chargeable period or periods for which, in accordance with generally accepted accounting practice, the consideration for the transfer would be so recognised if it were of an amount equal to the market value of the right at the time when the transfer takes place. (6) But if in a case where the transferor is a company it at any time becomes reasonable to assume that the income (to any extent) is not, or would not be, treated by subsection (5) as arising in an accounting period of the transferor, the income is to that extent to be treated as arising immediately before that time. (809AZC) This Chapter does not apply if and to the extent that the income under section 809AZB(1) is (apart from this Chapter)— (a) charged to tax as income of the transferor, (b) brought into account in calculating the profits of the transferor, or (c) brought into account under CAA 2001. (809AZD) This Chapter does not apply to a transfer of a right to— (a) annual payments under a life annuity as defined in section 473(2) of ITTOIA 2005, or (b) annual payments under an annuity which is pension income within the meaning of Part 9 of ITEPA 2003 (see section 566(2) of that Act). (809AZE) This Chapter does not apply if the consideration for the transfer is the advance under an arrangement that is a structured finance arrangement for the purposes of section 774A or 774C of ICTA in relation to the transferor or a partnership in which the transferor is a partner. (809AZF) (1) For the purposes of this Chapter a transfer of a right to relevant receipts consisting of the reduction in a transferor's share in the profits or losses of a partnership is to be regarded as a consequence of a transfer of an asset from which the right arose (that is, the partnership property) if condition A or B is met. (2) Condition A is that there is a reduction of the transferor's share in the partnership property and the reduction in the transferor's share in the profits or losses is proportionate to that reduction. (3) Condition B is that it is not the main purpose, or one of the main purposes, of the transfer to secure that the relevant receipts are not charged to income tax or corporation tax as income of any partner or brought into account as income of any partner for the purpose of either of those taxes. (809AZG) (1) For the purposes of this Chapter— (a) the grant or surrender of a lease of land is to be regarded as a transfer of the land, and (b) the disposal of an interest in an oil licence (within the meaning of section 809 of CTA 2009) is to be regarded as a transfer of the oil licence. (2) The Treasury may by order make other provision for securing that other transactions are to be regarded as transfers of assets for those purposes. (3) In this Chapter— (a) references to a transfer include sale, exchange, gift and assignment (or assignation) and any other arrangement which equates in substance to a transfer, and (b) references to a transfer taking place are, in the case of an arrangement other than a sale, exchange, gift or assignment (or assignation), to the making of the arrangement. (4) A transfer to or by any partnership of which the transferor or transferee is a member, and a transfer to the trustees of any trust of which the transferor is a beneficiary, counts as a transfer in relation to which this Chapter applies.

Part 3 — Company transferees

8

(1) Part 6 of CTA 2009 (relationships treated as loan relationships etc) is amended as follows.

(2) In section 477(2) (overview of Part 6), after paragraph (aa) (inserted by Schedule 24) insert—

(ab) Chapter 2B (transferred income streams),

(3) After Chapter 2A (inserted by Schedule 24) insert—

(486F) (1) This Chapter provides for Part 5 to apply in relation to a company to which an income stream transfer is made (“the transferee”). (2) An “income stream transfer” is a transfer by a person (“the transferor”) to which either of the following provisions applies— (a) Part 1 of Schedule 25 to FA 2009 (transfers of income streams by companies), or (b) Chapter 5A of Part 13 of ITA 2007 (transfers of income streams by individuals). (486G) (1) For the purposes of this Part— (a) the consideration for the transfer of the right to relevant receipts is to be treated as a money debt which is owed to the transferee by the person by whom the relevant receipts fall to be paid, and (b) the transfer is to be treated as a transaction for the lending of money from which that debt is treated as arising. (2) For the meaning of “relevant receipts” see paragraph 1(2) of Schedule 25 to FA 2009 or section 809AZA(2) of ITA 2007.

Part 4 — Consequential amendments and repeals

9

(1) In ICTA, omit—

(a) section 730 (transfers of rights to receive distributions in respect of shares),

(b) section 775A (transfers of rights to receive annual payments),

(d) in section 786 (transactions associated with loans or credit)—

(i) in subsection (5), “assigns,”, “(without a sale or transfer of the property)” and “assigned,”,

(ii) in subsection (5ZA), “assigned,”, and

(iii) in subsection (5A), “assigned,”.

(2) In ITTOIA 2005, omit—

(a) in Chapter 11 of Part 4 (transactions in deposits)—

(i) in section 551(2), the words after “of it”, and

(ii) in section 552(1), paragraph (e) and the “and” before it, and

(b) Chapter 13 of Part 4 (sales of foreign dividend coupons).

(3) Omit the following provisions (which relate to the provisions repealed by sub-paragraphs (1) and (2))—

(a) in TMA 1970, in section 98, in column 1 of the Table, the entry relating to section 730(8) of ICTA,

(b) in ICTA, in section 774E(1), the second sentence,

(d) in FA 2004, section 135,

(e) in ITTOIA 2005, in Schedule 1, paragraph 300,

(f) in F(No.2)A 2005, in Schedule 7, paragraphs 2 and 4,

(g) in FA 2006, in Schedule 6, paragraph 7,

(h) in ITA 2007—

(i) in section 1016, in Part 3 of the table, the entry relating to section 730(4) of ICTA, and

(ii) in Schedule 1, paragraphs 183 and 545, and

(i) in CTA 2009, in Schedule 1, paragraphs 214 and 230.

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

(5) In section 2(13) of ITA 2007, omit the “and” at the end of paragraph (d) and insert at the end

or (f) transfers of income streams (Chapter 5A).

(6) Schedule 4 to that Act (index of defined expressions) is amended as follows.

(7) After the entry relating to “transfer (in Chapter 2 of Part 13)” insert—

transfer (in Chapter 5A of Part 13)	Section 809AZF(3)

(8) After the entry relating to “transferor (in Part 12)” insert—

transfer taking place (in Chapter 5A of Part 13)	Section 809AZF(3)

Part 5 — Commencement

10

This Schedule has effect in relation to transfers on or after 22 April 2009.

SCHEDULE 26

1

Chapter 4 of Part 6 of ITTOIA 2005 (SAYE interest) is amended as follows.

Transfer of certain functions from Treasury to HMRC

2

(1) Section 705 (certification of arrangements) is amended as follows.

(2) In subsections (1) and (2), for “Treasury” (in each place) substitute “ Commissioners ”.

(3) After subsection (4) insert—

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

3

In section 706(1) and (2) (withdrawal and variation of certifications etc), for “Treasury” substitute “ Commissioners ”.

4

In section 707(1) (authorisation of providers), for “Treasury” substitute “ Commissioners ”.

5

(1) Section 708 (withdrawal and variation of authorisations) is amended as follows.

(2) In subsections (1) and (2), for “Treasury” substitute “ Commissioners ”.

(3) In subsection (4), for “Treasury of its” substitute “ Commissioners of their ”.

Removal of requirement that notice be sent by post

6

In the following provisions omit “by post”—

(a) section 706(2)(b) (notification of withdrawal and variation of certifications etc), and

(b) section 708(2)(b) (notification of withdrawal and variation of authorisations).

Reduction of notice period for withdrawals and variations

7

In section 706(2)(b) (notification of withdrawal and variation of certifications etc), for “28 days” substitute “ 15 days ”.

Power to provide for withdrawals and variations not to affect certain contracts

8

In section 706(3) (transitional provision for withdrawals and variations of certifications), for the words from “the operation of” to the end substitute—

(a) the operation of the arrangement concerned before that date, (b) contracts made under that arrangement before that date, or (c) where the notice so provides, contracts which are of a description specified in the notice and are made under that arrangement after that date.

SCHEDULE 27

Part 1 — Amendments of ITA 2007

1

Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

2

In section 809C (claim for remittance basis by long-term UK resident: nomination of foreign income and gains to which section 809H(2) is to apply), after subsection (5) insert—

(5A) The references to income tax in subsection (5) do not include income tax under section 424 (gift aid).

3

(1) Section 809D (application of remittance basis without claim where unremitted foreign income and gains under £2,000) is amended as follows.

(2) In subsection (1), insert at the end (not as part of paragraph (c))— “ unless condition A or condition B is met. ”

(3) After that subsection insert—

(1A) Condition A is that the individual is not domiciled in the United Kingdom in that year and conditions A to F in section 828B are met. (1B) Condition B is that the individual gives notice in a return under section 8 of TMA 1970 that this section is not to apply in relation to the individual for that year.

4

(1) Section 809E (application of remittance basis without claim: other cases) is amended as follows.

(2) In subsection (1), for paragraph (c) substitute—

(c) for that year the individual either has no UK income or gains or has no UK income and gains other than taxed investment income not exceeding £100.

(3) In that subsection, insert at the end (not as part of paragraph (e))— “ unless the individual gives notice in a return under section 8 of TMA 1970 that this section is not to apply in relation to the individual for that year. ”

(4) After subsection (2) insert—

(2A) For the purposes of subsection (1)(c) “taxed investment income” means UK income or gains consisting of payments within section 946 from which a sum representing income tax has been deducted.

5

In section 809H (claim for remittance basis by long-term UK resident: charge), after subsection (5) insert—

(5A) The references to income tax in subsection (5) do not include income tax under section 424 (gift aid).

6

(1) Section 809L (meaning of “remitted to the United Kingdom”) is amended as follows.

(2) Omit subsection (8).

(3) In subsection (9), for “income or chargeable gains are used in respect of a debt include cases where income or chargeable gains are” substitute “ property (including income or chargeable gains) is used in respect of a debt include cases where the property is ”.

7

(1) Section 809M (meaning of “relevant person” for purposes of sections 809L, 809N and 809O) is amended as follows.

(2) In subsection (2)(e), insert at the end “or a company which is a 51% subsidiary of such a close company”.

(3) In subsection (3), after paragraph (c) insert—

(ca) “participator”, in relation to a close company, means a person who is a participator in relation to the company for the purposes of section 419 of ICTA (see sections 417(1) and 419(7) of that Act), (cb) “51% subsidiary” has the same meaning as in the Corporation Tax Acts (see section 838 of ICTA),

8

In section 809P (amount remitted), insert at the end—

(13) If the property forms part of a set only part of which is in the United Kingdom, the amount remitted is such portion of what it would have been had the complete set been brought to, or received or used in, the United Kingdom when the part was as is just and reasonable (having regard to the part of the set which is there).

9

(1) Section 809T (foreign chargeable gains accruing on disposals made other than for full consideration) is amended as follows.

(2) In subsection (1)(b), after “amount” insert “ at least ”.

(3) In the heading, for “other” substitute “ otherwise ”.

10

(1) Section 809X (property which is exempt property) is amended as follows.

(2) In subsection (4), omit “that derive from relevant foreign income”.

(3) In subsection (5), omit “of any description that derives from relevant foreign income”.

11

(1) Section 809Z5 (notional remitted amount) is amended as follows.

(2) In subsection (1), omit “of income”.

(3) Omit subsections (2) and (3).

Part 2 — Amendments of other Acts

TCGA 1992

12

In section 14A(3)(b) of TCGA 1992 (section 13: non-UK domiciled individuals), after “amount” insert “ at least ”.

ITTOIA 2005

13

In section 648 of ITTOIA 2005 (income arising under a settlement), for subsections (2) to (5) substitute—

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