Legalize / United Kingdom / Public General Act

Corporation Tax Act 2009

Type Public General Act

Publication 2009-03-26

Last updated 2025-04-01

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(a) any published report prepared by the directors of the company for the purposes of any provision of the legislation under which company A is registered or, as the case may be, established;

(b) any published consolidated report prepared for such purposes, if the company is included in the consolidation.

(8) In this section “relevant listing disclosure” means a disclosure required—

(a) by rules under section 73A of FISMA 2000, or

(b) by virtue of a requirement imposed by or under a corresponding provision of the law of a territory outside the United Kingdom,

if the disclosure is made in the period of 5 years ending at the end of the period of account in which the expenses are recognised for accounting purposes.

(9) In this section “relevant period”, in relation to expenses incurred by company A, means—

(a) the period of account in which the expenses are recognised for accounting purposes, or

(b) any period which begins not more than 5 years before, and ends not later than, the end of that period.

(10) In this section, in relation to a company—

“relevant compensation” has the meaning given by section 133A(3);

“statutory accounts” means accounts prepared for the purposes of any provision of the legislation under which the company is registered or, as the case may be, established;

“relevant consolidated accounts” means consolidated accounts prepared for any such purposes, if the company is included in the consolidation.

133D

(1) Expenses in respect of relevant compensation are excluded by this section if the compensation is in respect of—

(a) an administrative error,

(b) the failure of a computer or electronic system, or

(2) In subsection (1) “third party” means a person who is neither the company mentioned in section 133A(1) nor (if different) the company in respect of whose conduct the compensation is paid or payable (see section 133A(3)(b)).

(3) For the purposes of this section a third party (“TP”) is an “unconnected third party” unless—

(a) TP was, at the time of the relevant actions, connected with the company mentioned in section 133A(1) or (if different) the company in respect of whose conduct the compensation is paid or payable, or

(b) in taking one or more of the relevant actions, TP was acting under arrangements with the company mentioned in paragraph (a) or (as the case may be) either of the companies mentioned in paragraph (a).

(4) In this section “the relevant actions” means the actions as a result of which the loss or damage is wholly or mainly attributable to TP (and references to actions or the taking of actions include failures to act).

(5) Section 1122 of CTA 2010 (meaning of “connected persons”) applies for the purposes of this section, but subject to the following modification.

(6) Section 1122 has effect as if after subsection (8) there were inserted—

(9) A person (“A”) is connected with any person who is an employee of A or by whom A is employed. (10) For the purposes of this section any director or other officer of a company is to be treated as employed by that company.

133E

(1) For the purposes of section 133A, a company is a “banking company”—

(a) at a time when it meets conditions A to D,

(b) at a time when it meets condition A and is a member of a partnership which meets conditions B to D, or

In subsections (2) to (6), “the relevant entity” means the company or partnership.

(2) Condition A is that the company is not an excluded company (see section 133F).

(3) Condition B—

(a) in relation to any time on or after 1 December 2001, is that the relevant entity is an authorised person for the purposes of FISMA 2000 (see section 31 of that Act);

(b) in relation to any time before that date, is that the relevant entity—

(i) was at that time an authorised person under Chapter 3 of Part 1 of the Financial Services Act 1986 (persons authorised to carry on investment business),

(ii) was authorised under the Banking Act 1987, or

(iii) was entitled by virtue of the Banking Co-ordination (Second Council Directive) Regulations 1992 (S.I. 1992/3218) to accept deposits (within the meaning of the Banking Act 1987) in the United Kingdom.

(4) Condition C is that—

(a) the relevant entity's activities include the relevant regulated activity described in the provision mentioned in section 133G(1)(a), or

(b) the relevant entity is an investment bank (see section 133H) whose activities consist wholly or mainly of any of the relevant regulated activities described in the provisions mentioned in section 133G(1)(b) to (f).

(5) Condition D is that the relevant entity carries on that relevant regulated activity, or those relevant regulated activities, wholly or mainly in the course of trade.

(6) Where the relevant entity carries on activities outside the United Kingdom, Condition B is met—

(a) in relation to any time on or after 1 December 2001, if the relevant entity would be required to be an authorised person for the purposes of FISMA 2000 (see section 31 of that Act) in order to carry on any of those activities in the United Kingdom at that time;

(b) in relation to any time before that date, if in order to carry on those activities in the United Kingdom at that time the relevant entity—

(i) would have been required to be an authorised person under Chapter 3 of Part 1 of the Financial Services Act 1986 (persons authorised to carry on investment business), or

(ii) would have been required either to be authorised under the Banking Act 1987 or to be entitled by virtue of the Banking Co-ordination (Second Council Directive) Regulations 1992 (S.I. 1992/3218) to accept deposits (within the meaning of the Banking Act 1987) in the United Kingdom.

(7) In this section “partnership” includes—

(a) a limited liability partnership, and

(b) an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership,

and “member”, in relation to a partnership, is to be read accordingly.

(8) For the meaning of “relevant regulated activity”, see section 133G.

133F

(1) This section gives the meaning of “excluded company” for the purposes of section 133E.

(2) A company is an “excluded company” at any time (in an accounting period) when the company is—

(a) an insurance company or an insurance special purpose vehicle;

(b) a company which is a member of a group and does not carry on any relevant regulated activities otherwise than on behalf of an insurance company or an insurance special purpose vehicle which is a member of the group;

(c) a company which does not carry on any relevant regulated activities otherwise than as the manager of a pension scheme;

(d) an investment trust;

(e) a company which does not carry on any relevant regulated activities other than asset management activities;

(f) an exempt commodities firm;

(g) a company which does not carry on any relevant regulated activities otherwise than for the purpose of trading in commodities or commodity derivatives;

(h) a company which does not carry on any relevant regulated activities otherwise than for the purpose of dealing in contracts for differences—

(i) as principal with persons all or all but an insignificant proportion of whom are retail clients, or

(ii) with any other person to enable the company or that other person to deal in contracts for differences as principal with persons all or all but an insignificant proportion of whom are retail clients;

(i) a friendly society;

(j) a society registered as a credit union under the Co-operative and Community Benefit Societies Act 2014 or the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12));

(k) a building society.

(2A) A company is also an “excluded company” at any time (in an accounting period) if—

(a) the company would fall within a relevant relieving provision but for one (and only one) line of business which it carries on,

(b) that line of business does not involve the relevant regulated activity described in the provision mentioned in section 133G(1)(a), and

(i) in relation to a time on or after 1 January 2022, an FCA investment firm that meets the conditions in section 133H(1B);

(ii) in relation to a time before that date,

both a 730k firm and a full scope investment firm.

(2B) For the purposes of subsection (2A) the “relevant relieving provisions” are paragraphs (b), (c), (e), (g) and (h) of subsection (2).

(3) In this section “asset management activities” means activities which consist (or, if they were carried on in the United Kingdom, would consist) of any or all of the following—

(a) acting as the operator of a collective investment scheme (see subsection (5)),

(b) managing investments on a discretionary basis for clients none of which is a linked entity (see subsection (6)), and

(4) In subsection (2)(f) “exempt commodities firm” means—

(za) in relation to a time on or after 1 January 2022, a commodity and emission allowance dealer;

(a) in relation to a time on or after 1 January 2014 but before 1 January 2022, an exempt IFPRU commodities firm, as defined by the FCA Handbook at that time,

(b) in relation to a time on or after 1 April 2013 but before 1 January 2014, an exempt BIPRU commodities firm, as defined by the PRA Handbook at that time,

(c) in relation to a time on or after 1 January 2007 but before 1 April 2013, an exempt BIPRU commodities firm, as defined by the Handbook of the Financial Services Authority at that time, and

(d) in relation to a time before 1 January 2007, an exempt BIPRU commodities firm as defined by the Handbook of the Financial Services Authority as in force on 1 January 2007.

(5) In subsection (3)(a) “operator of a collective investment scheme”—

(a) in relation to times on and after 25 February 2001, has the same meaning as in Part 17 of FISMA 2000 (see sections 235 and 237 of that Act);

(b) in relation to times before that date, has the same meaning as in the Financial Services Act 1986.

(6) In subsection (3)(b) “linked entity”, in relation to a company (“C”), means—

(a) a member of the same group as C;

(b) a company in which a company which is a member of the same group as C has a major interest, or

(i) which is a member of the same group as C, and

(ii) whose share of the profits or losses of a trade carried on by the partnership for an accounting period of the partnership any part of which falls within the accounting period mentioned in the opening words of subsection (2) is at least a 40% share (see Part 17 for provisions about shares of partnership profits and losses).

(7) In this section—

“730k firm”—in relation to any time on or after 1 January 2014 but before 1 January 2022, means an IFPRU 730k firm,in relation to any time before 1 January 2014, means a BIPRU 730k firm;

“authorised corporate director”—in relation to any time on or after 1 April 2013, has the meaning given by the FCA Handbook at that time;in relation to any time before 1 April 2013, has the meaning given by the FCA Handbook as in force on 1 April 2013;

“BIPRU 730k firm” and “full scope BIPRU investment firm” have the same meaning as in subsections (2) to (4) of section 133H;

“commodity and emission allowance dealer” has the meaning given by the FCA Handbook at the time in question;

“contract for differences” has the meaning given by section 582;

“the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000;

“FCA investment firm” has the meaning given by section 143A of FISMA 2000;

“friendly society” means a registered friendly society or an incorporated friendly society;

“full scope investment firm”—in relation to any time on or after 1 January 2014 but before 1 January 2022, means a full scope IFPRU investment firm,in relation to any time before 1 January 2014, means a full scope BIPRU investment firm;

“group” has the same meaning as in Part 7A of CTA 2010 (see section 269BD of that Act);

“IFPRU 730k firm” and “full scope IFPRU investment firm” have the meaning given by the FCA Handbook at the time in question;

“incorporated friendly society” means a society incorporated under the Friendly Societies Act 1992;

“insurance company” has the meaning given by section 133I;

“insurance special purpose vehicle” has the meaning given by section 139 of FA 2012;

“major interest” has the same meaning as in Part 5 (see section 473);

“partnership” has the same meaning as in section 133E;

“the PRA Handbook”, means the Handbook made by the Prudential Regulation Authority under FISMA 2000;

“registered friendly society” has the same meaning as in the Friendly Societies Act 1992 (and includes any society that as a result of section 96(2) of the Friendly Societies Act 1992 is treated as a registered friendly society);

“relevant regulated activity” has the meaning given by section 133G;

“retail client”—in relation to any time on or after 1 April 2013, has the meaning given by the FCA Handbook at that time;in relation to any time before 1 April 2013, has the meaning given by the FCA Handbook as in force on 1 April 2013.

133G

(1) In sections 133E and 133F “relevant regulated activity” means an activity which is a regulated activity for the purposes of FISMA 2000 by virtue of any of the following provisions of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544)—

(a) article 5 (accepting deposits);

(b) article 14 (dealing in investments as principal);

(d) article 25 (arranging deals in investments);

(da) article 25DA (operating an organised trading facility), but only where dealing on own account in relation to sovereign debt instruments for which there is no liquid market (within the meaning of the Handbook made by the Financial Conduct Authority under FISMA 2000);

(e) article 40 (safeguarding and administering investments);

(f) article 61 (regulated mortgage contracts).

(2) In determining whether an activity carried on at any time before 1 December 2001 was at that time a relevant regulated activity, it is to be assumed that FISMA 2000 and the order mentioned in subsection (1) were in force in the form in which they had effect on 1 December 2001.

133H

(1) This section gives the meaning of “investment bank” for the purposes of section 133E; and in this section “the relevant entity” has the same meaning as in subsections (2) to (6) of that section.

(1A) At any time on or after 1 January 2022, the relevant entity is an investment bank if—

(a) it is an FCA investment firm that meets the conditions in subsection (1B), or

(b) it is designated by the Prudential Regulation Authority under Article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (dealing in investments as principal: designation by PRA).

(1B) An FCA investment firm meets the conditions in this subsection if it has a permanent minimum capital requirement of £750,000 and is not—

(a) a limited activity firm,

(b) a limited licence firm,

(d) a matched principal trading firm.

(1C) In subsection (1B)—

“limited activity firm” means an investment firm that—deals on own account only for the purpose of fulfilling or executing a client order or for the purpose of gaining entrance to a clearing and settlement system or a recognised exchange when acting in an agency capacity or executing a client order; ormeets all the following conditions—it does not hold client money or securities;it undertakes only dealing on own account;it has no external customers; andits execution and settlement transactions take place under the responsibility of a clearing institution and are guaranteed by that clearing institution;

“limited licence firm” means an investment firm that is not authorised to provide the investment services and activities of—dealing on own account; orunderwriting of financial instruments or placing of financial instruments on a firm commitment basis;

“local firm” means a firm—dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, ordealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such a firm is assumed by clearing members of the same markets;

“matched principal trading firm” means an investment firm that executes investors’ orders for financial instruments and meets the following conditions—the firm only holds financial instruments for its own account as a result of its failure to match investors’ orders precisely;the total market value of all such positions is no more than 15% of the firm’s initial capital;such positions are incidental and provisional in nature and strictly limited to the time required to carry out the transaction in question.

(1D) In determining, for the purposes of subsection (1B), whether an FCA investment firm has a permanent minimum capital requirement of £750,000, any transitional provision in the FCA Handbook is to be disregarded.

(1E) In subsections (1A) to (1D), the following terms have the meaning given by the FCA Handbook—

“dealing on own account”

“financial instrument”;

“initial capital”;

“investment firm”;

“market value”;

“permanent minimum capital requirement”.

(2) At any time on or after 1 January 2014 but before 1 January 2022, the relevant entity is an investment bank if—

(a) it is both an IFPRU 730k firm and a full scope IFPRU investment firm, or

(b) it is designated by the Prudential Regulation Authority under article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (dealing in investments as principal: designation by PRA).

(3) At any time on or after 1 January 2007 but before 1 January 2014, the relevant entity was an investment bank if it was both a BIPRU 730k firm and a full scope BIPRU investment firm.

(4) At any time before 1 January 2007, the relevant entity was an investment bank if it would have been both a BIPRU 730k firm and a full scope BIPRU investment firm if the Handbook of the Financial Services Authority in force on 1 January 2007 had been in force at that earlier time.

(5) In subsections (2) to (4)—

“IFPRU 730k firm” and “full scope IFPRU investment firm” have the meaning given by the FCA Handbook at the time in question;

“BIPRU 730k firm” and “full scope BIPRU investment firm”—in relation to any time on or after 1 April 2013 have the meaning given by the PRA Handbook at that time;in relation to any time on or after 1 January 2007 but before 1 April 2013, have the meaning given by the Handbook of the Financial Services Authority at that time;in relation to any time before 1 January 2007, have the meaning given by the Handbook of the Financial Services Authority as in force on 1 January 2007.

(6) If the relevant entity would at any time be an investment bank under subsection (1A)(a), (2)(a), (3) or (4) by virtue of activities carried on in the United Kingdom but for the fact that its registered office (or, if it does not have a registered office, its head office) is not in the United Kingdom, the relevant entity is to be treated for the purposes of section 133E as being an investment bank.

(7) In this section—

“the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000;

“FCA investment firm” has the meaning given by section 143A of FISMA 2000;

“the PRA Handbook” means the Handbook made by the Prudential Regulation Authority under FISMA 2000.

133I

(1) For the purposes of section 133F a person who carries on the activity of effecting or carrying out contracts of insurance is an “insurance company” if—

(a) the person has permission under Part 4A of FISMA 2000 to carry on that activity,

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

(2) In relation to times in the period beginning with 1 December 2001 and ending with 31 March 2013, the reference in subsection (1)(a) to Part 4A of FISMA 2000 is to be read as a reference to Part 4 of that Act

(3) In relation to times before 1 December 2001, this section has effect as if the following were substituted for subsection (1)—

(1) For the purposes of section 133F a person who carries on the activity of effecting or carrying out contracts of insurance is an “insurance company” if the person is— (a) authorised under section 3 or 4 of the Insurance Companies Act 1982, or (b) an EC company within the meaning of the Insurance Companies Act 1982 which, by virtue of paragraph 1 or 8 of Schedule 2F to that Act, was able to carry on direct insurance business through a branch in the United Kingdom or provide insurance in the United Kingdom.

133J

(1) For the purposes of sections 133A and 133C, a person (“P”) is a “customer” in relation to a company (“company A”) if—

(a) P uses, has used or may have contemplated using a financial service provided by company A, or

(b) has relevant rights or interests in relation to a financial service provided by company A.

(2) In subsection (1) “financial service” means a service provided—

(a) in carrying on regulated activities,

(b) in communicating, or approving the communication by others of, invitations or inducements to engage in investment activity, or

(3) P has a “relevant right or interest” in relation to any service if P has a right or interest—

(a) which is derived from, or is otherwise attributable to, the use of the service by another person, or

(b) which may be adversely affected by the use of the service by persons acting on P's behalf or in a fiduciary capacity in relation to P.

(4) If company A is providing a service as a trustee, the persons who are, have been, or may have been, beneficiaries of the trust are to be treated as persons who use, have used, or may have contemplated using, the service.

(5) A person who deals with company A in the course of company A providing a service is to be treated as using the service.

(6) In this section—

“credit institution” has the meaning given by section 1H(8) of FISMA 2000;

“engage in investment activity” has the meaning given in section 21 of FISMA 2000;

“investment firm” has the same meaning as in FISMA 2000 (see section 424A of that Act);

“regulated activities” has the same meaning as in FISMA 2000 (see section 22 of that Act);

“relevant ancillary services” means has the meaning given by section 1H(8) of FISMA 2000.

133K

(1) In sections 133A to 133D references to compensation which is paid or payable “in respect of” relevant conduct include compensation which is paid (or to be paid)—

(a) in connection with a claim by the customer for compensation in respect of the conduct, or

(b) in circumstances where there is reason to suspect that company A may (or might in the absence of the payment) be or become liable to pay compensation in respect of relevant conduct—

(i) to the customer, or

(ii) in one or more of a class of cases which includes the customer's case.

(2) In sections 133A to 133D and this section “compensation” includes any form of redress, whether monetary or non-monetary, and accordingly includes interest.

References in those sections to “payment” are to be interpreted accordingly.

(3) In subsection (1)—

“claim” includes any claim or request, however made;

“customer” has the meaning given by section 133J;

“relevant conduct” is to be interpreted in accordance with section 133A(6).

133L

(1) For the purposes of sections 133A and 133C a company (“company B”) is associated with another company (“company A”) at a time (“the relevant time”) if any of the following 5 conditions is met.

(2) The first condition is that the financial results of company A and company B, for a period that includes the relevant time, meet the consolidation condition.

(3) The second condition is that there is a connection between company A and company B for the accounting period of company A in which the relevant time falls.

(4) The third condition is that, at the relevant time, company A has a major interest in company B or company B has a major interest in company A.

(5) The fourth condition is that—

(a) the financial results of company A and a third company, for a period that includes the relevant time, meet the consolidation condition (see subsection (7)), and

(b) at the relevant time the third company has a major interest in company B.

(6) The fifth condition is that—

(a) there is a connection (see subsection (9)) between company A and a third company for the accounting period of company A in which the relevant time falls, and

(b) at the relevant time the third company has a major interest in company B.

(7) In this section, the financial results of any two companies for any period meet the “consolidation condition” if—

(a) they are required to be comprised in group accounts,

(b) they would be required to be comprised in group accounts but for the application of an exemption, or

(8) In subsection (7), “group accounts” means accounts prepared under—

(a) section 399 of the Companies Act 2006, or

(b) any corresponding provision of the law of a territory outside the United Kingdom.

(9) Sections 466 to 471 (companies connected for accounting period) apply for the purposes of this section.

(10) In this section “major interest” has the same meaning as in Part 5 (see section 473).

133M

(1) If a firm carries on a trade and any partner in the firm (“the corporate partner”) is within the charge to corporation tax, this section applies in determining the profits of the trade, in relation to the corporate partner, in accordance with section 1259(3) or (4).

(2) No deduction is allowed for expenses incurred by the firm if and so far as section 133A would prevent the expenses from being deductible if the firm were, and at all relevant times had been, a company.

(3) In its application for the purposes of subsection (2), section 133A is to be read subject to subsections (4) to (6).

(4) Section 133A(3)(b) is to be disregarded.

(5) Conduct of the firm is “relevant conduct” if the conduct occurs—

(a) on or after 29 April 1988, and

(b) at a time when—

(i) the corporate partner is for the purposes of section 133A a banking company, and

(ii) the firm would not (if references in section 133F(2) and (3) to companies included firms) be an excluded company for the purposes of section 133E.

(6) The disclosure condition in section 133C may be met by a relevant document relating to the liability of the corporate partner (as well as by a relevant document relating to the liability of the firm).

(7) Where in any accounting period of the firm (as defined by section 1261) the firm incurs expenses which but for section 133A (as read with subsections (2) to (6)) would be deductible in calculating the profits of the trade, the profits of the firm's trade are to be determined as if the references in section 133B to a company were a reference to the firm.

133N

(1) The Treasury may by regulations make such amendments of sections 133A to 133L as they consider appropriate in consequence of—

(a) any change made to, or replacement of, the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) or the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (or any replacement);

(b) any change made to, or replacement of, the FCA Handbook or the PRA Handbook (or any replacement);

(c) any regulatory requirement, or change to any regulatory requirement, imposed by EU legislation, or by or under any Act (whenever adopted, enacted or made).

(2) The Treasury may by regulations—

(a) amend sections 133A(1) and 133C for the purpose of varying the class of expenses to which section 133A(1) applies;

(b) amend section 133D for the purpose of adding cases to those for the time being listed in subsection (1) of that section;

(d) amend any of sections 133E to 133I;

(e) amend section 133M.

(3) Regulations under this section may include transitional provision.

(3A) Regulations under this section made on or before 30 June 2022 may have retrospective effect in relation to any time on or after 1 January 2022.

(4) A statutory instrument containing only regulations under subsection (1) or (2)(b) is subject to annulment in pursuance of a resolution of the House of Commons.

(5) Any other statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.

(6) In this section—

“the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000 (as that Handbook has effect from time to time);

“the PRA Handbook” means the Handbook made by the Prudential Regulation Authority under FISMA 2000 (as that Handbook has effect from time to time).

Matters in respect of which amounts are to be brought into account

306A

(1) The matters in respect of which amounts are to be brought into account for the purposes of this Part in respect of a company's loan relationships are—

(a) profits and losses of the company that arise to it from its loan relationships and related transactions (excluding interest or expenses),

(b) interest under those relationships, and

(2) Expenses are only treated as incurred as mentioned in subsection (1)(c) if they are incurred directly—

(a) in bringing any of the loan relationships into existence,

(b) in entering into or giving effect to any of the related transactions,

(d) in taking steps to ensure the receipt of payments under any of those relationships or in accordance with any of those transactions.

(3) For the treatment of pre-loan relationship and abortive expenses, see section 329.

320A

(1) This section applies if—

(a) in a period of account an asset or liability representing a loan relationship of a company ceases in accordance with generally accepted accounting practice to be recognised in the company's accounts,

(b) amounts relating to the matters mentioned in section 306A(1) in respect of that loan relationship have in accordance with generally accepted accounting practice been recognised in the company's accounts as items of other comprehensive income and have not subsequently been transferred to become items of profit or loss, and

(2) Condition A is that, at the time when the asset or liability ceases to be recognised, it is not expected that the amounts mentioned in subsection (1)(b) will in future be transferred to become items of profit or loss.

(3) Condition B is that, at any later time, it is no longer expected that the amounts mentioned in subsection (1)(b) will in future be transferred to become items of profit or loss.

(4) The amounts mentioned in subsection (1)(b)—

(a) must be brought into account for the purposes of this Part as credits or debits for the period of account in which the time mentioned in subsection (2) or (3) falls, in the same way as a credit or debit which is brought into account in determining the company's profit or loss for that period in accordance with generally accepted accounting practice, and

(b) must not be brought into account for a later period of account even if they are subsequently transferred to become items of profit or loss for the later period.

(5) This section applies in a case where part of an asset or liability representing a loan relationship of a company ceases to be recognised in the company's accounts as it applies in a case where the whole of an asset or liability representing a loan relationship ceases to be recognised, but as if the reference in subsection (1)(b) to amounts in respect of the loan relationship were a reference to so much of those amounts as are attributable to that part of the asset or liability.

(6) In determining what amounts fall within subsection (1)(b) at any time in an accounting period, it is to be assumed that the accounting policy applied in drawing up the company's accounts for the period was also applied in previous accounting periods.

(7) But if the company's accounts for the period are in accordance with generally accepted accounting practice drawn up on an assumption as to the accounting policy in previous accounting periods which differs from that mentioned in subsection (6), that different assumption applies in determining what amounts fall within subsection (1)(b) at the time in question.

(8) In this section “item of profit or loss” and “item of other comprehensive income” each has the meaning that it has for accounting purposes.

323A

(1) Subsection (2) applies if—

(a) a debtor relationship of a company is modified or replaced by another,

(b) immediately before the modification or replacement it is reasonable to assume that, without the modification or replacement and any arrangements of which the modification or replacement forms part, there would be a material risk that at some time within the next 12 months the company would be unable to pay its debts, and

(c) the modification or replacement is treated for accounting purposes as a substantial modification of the terms of a loan relationship of the company.

(2) The company is not required to bring into account for the purposes of this Part a credit in respect of any change in the carrying value of the liability representing the modified or replacement debtor relationship.

(3) If as a result of subsection (2) no credit was brought into account in respect of a change in the carrying value of a liability representing a debtor relationship, the company may not bring into account a debit for the purposes of this Part in respect of a change in the carrying value of that liability, to the extent that the change represents a reversal of the change in carrying value to which subsection (2) applied.

(4) Section 323(A1) applies for the interpretation of subsection (1)(b).

Company is not, or has ceased to be, party to loan relationship

330A

(1) This section applies if—

(a) amounts in respect of a qualifying relationship are recognised in a company's accounts for an accounting period (“the current period”) as an item of profit or loss even though during all or part of the period the company is not a party to the qualifying relationship,

(b) any of conditions A to D is met, and

(c) in the absence of this section, the credits and debits brought into account by the company for the purposes of this Part or Part 7 for the current period would not include credits or debits representing the whole of those amounts.

(2) In this section “qualifying relationship” means—

(a) a loan relationship, or

(b) a relationship that would be a loan relationship if references in section 302(1) to a company were references to any person.

References in this section to a company being a party to a qualifying relationship are to be read accordingly.

(3) Condition A is that—

(a) the company was a party to the qualifying relationship,

(b) amounts in respect of the qualifying relationship were recognised in the company's accounts as an item of profit or loss when it was a party to the relationship, and

(4) Condition B is that the amounts recognised as mentioned in subsection (1)(a) are recognised as a result of a transaction which has the effect of transferring to the company all or part of the risk or reward relating to the qualifying relationship without a corresponding transfer of rights or obligations under the relationship.

(5) Condition C is that the amounts recognised as mentioned in subsection (1)(a) are recognised as a result of a related transaction in relation to a qualifying relationship to which the company was, but has ceased to be, a party.

(6) Condition D is that—

(a) the amounts recognised as mentioned in subsection (1)(a) are recognised because the company may enter into a qualifying relationship or related transaction but has not yet done so, and

(b) the amounts are not expenses to which section 329 applies.

(7) The company must bring credits and debits into account for the purposes of this Part for the accounting period as if the company were a party to the qualifying relationship for the whole of the accounting period.

(8) The amounts that must be brought into account are those amounts in respect of the qualifying relationship that are recognised in the company's accounts for the accounting period as an item of profit or loss (but subject to the provisions of this Part).

(9) This section is subject to sections 330B and 330C.

(10) In this section—

“item of profit or loss” has the meaning it has for accounting purposes;

“recognised” means recognised in accordance with generally accepted accounting practice;

“related transaction”, in relation to a qualifying relationship, is to be read as if the references in section 304(1) and (2) to a loan relationship were to a qualifying relationship.

330B

A company is not to bring into account as a debit for the purposes of this Part as a result of section 330A an amount which—

(a) is brought into account as a debit for those purposes by another company,

(b) is brought into account so as to reduce the assumed taxable total profits of another company for the purposes of Part 9A of TIOPA 2010 (controlled foreign companies), or

330C

(1) This section applies if at any time a company (“the relevant company”) is required by section 330A to bring into account as a credit for the purposes of this Part an amount—

(a) which is brought into account as a credit for those purposes by another company,

(b) which is brought into account in determining the assumed taxable total profits of another company for the purposes of Part 9A of TIOPA 2010 (controlled foreign companies), or

(2) In order to avoid a double charge to tax in respect of the amount, the relevant company may make a claim for one or more consequential adjustments to be made in respect of the amount to be brought into account as a credit.

(3) On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.

(4) Consequential adjustments may be made—

(a) in respect of any period,

(b) by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and

352A

(1) If as a result of section 352 the debits brought into account by a company in respect of a loan relationship are reduced, no credit is to be brought into account for the purposes of this Part to the extent that it represents the reversal of so much of the loss as was not brought into account as a debit.

(2) Nothing in this section affects the credits to be brought into account for the purposes of this Part in respect of exchange gains or losses resulting from a debt.

361D

(1) This section applies if—

(a) the case is one in which section 361 would otherwise apply,

(b) within 60 days after C becomes a party to the loan relationship as creditor, C or a company connected with C releases D's liability to pay an amount under the loan relationship, and

(2) If the release is of the whole debt, section 361 does not apply to the acquisition of the rights by C.

(3) If the release is of part of the debt, the amount that C is treated by section 361 as having released when it acquired the rights under the loan relationship is reduced (but not below nil) by the amount that is actually released as mentioned in subsection (1)(b).

(4) The corporate rescue conditions are—

(a) that the acquisition by C of its rights under the loan relationship is an arm's length transaction,

(b) that immediately before C became a party to the loan relationship as creditor, it was reasonable to assume that, without the release and any arrangements of which the release forms part, there would be a material risk that at some time within the next 12 months the company would have been unable to pay its debts.

(5) For the purposes of subsection (4)(b), a company is unable to pay its debts if—

(a) it is unable to pay its debts as they fall due, or

(b) the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.

362A

(1) This section applies if—

(a) the case is one in which section 362 would otherwise apply,

(b) within 60 days after C and D become connected, C releases D's liability to pay an amount under the loan relationship, and

(2) If the release is of the whole debt, section 362 does not apply by reason of C and D becoming connected.

(3) If the release is of part of the debt, the amount that C is treated by section 362 as having released when it became connected with D is reduced (but not below nil) by the amount actually released.

(4) The corporate rescue conditions are—

(a) that C and D became connected as a result of an arm's length transaction, and

(b) that immediately before C and D became connected it was reasonable to assume that, without the connection and any arrangements of which the connection forms part, there would be a material risk that at some time within the next 12 months D would have been unable to pay its debts.

(5) For the purposes of subsection (4)(b), a company is unable to pay its debts if—

(a) it is unable to pay its debts as they fall due, or

(b) the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.

Party to loan relationship having major interest in other party

Application of Part 5 to relevant non-lending relationships

Exchange gains and losses: amounts treated as money debts

Counteracting avoidance arrangements

455B

(1) Any loan-related tax advantages that would (in the absence of this section) arise from relevant avoidance arrangements are to be counteracted by the making of such adjustments as are just and reasonable in relation to credits and debits to be brought into account for the purposes of this Part.

(2) Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.

(3) For the meaning of “relevant avoidance arrangements” and “loan-related tax advantage”, see section 455C.

455C

(1) This section applies for the interpretation of section 455B (and this section).

(2) “Arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(3) Arrangements are “relevant avoidance arrangements” if their main purpose, or one of their main purposes, is to enable a company to obtain a loan-related tax advantage.

(4) But arrangements are not “relevant avoidance arrangements” if the obtaining of any loan-related tax advantages that would (in the absence of section 455B) arise from them can reasonably be regarded as consistent with any principles on which the provisions of this Part that are relevant to the arrangements are based (whether expressed or implied) and the policy objectives of those provisions.

(5) A company obtains a “loan-related tax advantage” if—

(a) it brings into account a debit to which it would not otherwise be entitled,

(b) it brings into account a debit which exceeds that to which it would otherwise be entitled,

(d) the amount of any credit brought into account by the company is less than it would otherwise be, or

(e) it brings a debit or credit into account earlier or later than it otherwise would.

(6) In subsection (5), references to bringing a debit or credit into account are references to bringing a debit or credit into account for the purposes of this Part.

455D

(1) Each of the following is an example of something which might indicate that arrangements whose main purpose, or one of whose main purposes, is to enable a company to obtain a loan-related tax advantage are not excluded by section 455C(4) from being “relevant avoidance arrangements” for the purposes of section 455B—

(a) the elimination or reduction, for purposes of corporation tax, of profits of a company arising from any of its loan relationships, where for economic purposes profits, or greater profits, arise to the company from that relationship;

(b) the creation or increase, for purposes of corporation tax, of a loss or expense arising from a loan relationship, where for economic purposes no loss or expense, or a smaller loss or expense, arises from that relationship;

(c) preventing or delaying the recognition as an item of profit or loss of an amount that would apart from the arrangements be recognised in the company's accounts as an item of profit or loss or be so recognised earlier;

(d) ensuring that a loan relationship is treated for accounting purposes in a way in which it would not have been treated in the absence of some other transaction forming part of the arrangements;

(e) enabling a company to bring into account for the purposes of this Part a debit in respect of an exchange loss, in circumstances where a corresponding exchange gain would not give rise to a credit or would give rise to a credit of a smaller amount;

(f) enabling a company to bring into account for the purposes of this Part a debit in respect of a fair value loss in circumstances where a corresponding fair value gain would not give rise to a credit or would give rise to a credit of a smaller amount;

(g) ensuring that the effect of the provisions of Chapter 4 is to produce an overall reduction in the credits brought into account for the purposes this Part or an overall increase in the debits brought into account for those purposes;

(h) bringing into account for the purposes of this Part an impairment loss or release debit in a case where the provisions of Chapter 6 would but for the arrangements have prevented this.

(2) But in each case the result concerned is only capable of indicating that section 455C(4) is not available if it is reasonable to assume that such a result was not the anticipated result when the provisions of this Part that are relevant to the arrangements were enacted.

(3) In subsection (1)(f) references to a fair value gain or a fair value loss, in relation to a company, are references respectively to—

(a) a profit to be brought into account in relation to an asset or liability representing a loan relationship where fair value accounting is used for the period in question, or

(b) a loss to be brought into account in relation to such an asset or liability where fair value accounting is used for the period in question.

(4) “Arrangements” and “loan-related tax advantage” have the same meaning as in section 455C.

Tax-adjusted carrying value

465B

(1) This section applies for the purposes of this Part.

(2) “Tax-adjusted carrying value”, in relation to the asset or liability representing a loan relationship, means the carrying value of the asset or liability recognised for accounting purposes, except as provided by subsection (8).

(3) For the purposes of this section the “carrying value” of the asset or liability includes amounts recognised for accounting purposes in relation to the loan relationship in respect of—

(a) accrued amounts,

(b) amounts paid or received in advance, or

(4) For the meaning of “impairment loss” see section 476(1).

(5) In determining the tax-adjusted carrying value of an asset or liability in a period of account of a company, it is to be assumed that the accounting policy applied in drawing up the company's accounts for the period was also applied in previous periods of account.

(6) But if the company's accounts for the period are in accordance with generally accepted accounting practice drawn up on an assumption as to the accounting policy in previous periods of account which differs from that mentioned in subsection (5), that different assumption applies in determining the tax-adjusted carrying value of the asset or liability in the period.

(7) In determining the tax-adjusted carrying value of an asset or liability at a time other than the end (or beginning) of a period of account of a company, it is to be assumed that a period of account of the company had ended at the time in question.

(8) In determining the tax-adjusted carrying value of the asset or liability, the provisions specified in subsection (9) apply as they apply for the purposes of determining the credits and debits to be brought into account under this Part.

(9) Those provisions are—

(a) section 308(1A) (amounts recognised in other comprehensive income and transferred to profit and loss),

(b) sections 311 and 312 (amounts not fully recognised for accounting purposes),

(d) section 323A (substantial modification: cases where credits not required to be brought into account),

(da) section 323B (insurers in financial difficulties: write-down orders),

(e) section 324 (restriction on debits resulting from revaluation),

(f) section 325 (restriction on credits resulting from reversal of disallowed debits),

(g) sections 333 and 334 (company ceasing to be UK resident and non-UK company ceasing to hold loan relationship for UK permanent establishment),

(h) Chapter 4 (continuity of treatment on transfers within groups or organisations),

(i) section 349(2) (application of amortised cost basis of accounting to connected companies relationships),

(j) section 352 (disregard of related transactions),

(k) section 352A (exclusion of credits on reversal of disregarded loss),

(ka) section 352B (eliminating tax mismatch for loan relationships with qualifying link),

(l) section 354 (exclusion of debits for impaired or released connected companies debts),

(m) section 360 (exclusion of credits on reversal of impairments of connected companies debts),

(n) sections 361 to 363 (deemed debt releases on impaired debts becoming held by connected company),

(o) Chapter 8 (connected parties relationships: late interest),

(p) section 382 (company partners using fair value accounting),

(q) sections 399 to 400C (treatment of index-linked gilt-edged securities),

(r) section 404 (restriction on deductions etc relating to FOTRA securities),

(s) sections 406 to 412 (deeply discounted securities and close companies),

(t) section 415(2) (loan relationships with embedded derivatives),

(u) Chapter 13 (European cross-border transfers of business), and

(v) Chapter 14 (European cross-border mergers).

Meaning of “hedging relationship”

475A

(1) This section applies for the purposes of this Part.

(2) A company has a “hedging relationship” between a relevant contract (“the hedging instrument”) and an asset or liability (“the hedged item”) so far as condition A or B is met.

(3) Condition A is that the hedging instrument and the hedged item are designated as a hedge by the company.

(4) Condition B is that—

(a) the hedging instrument is intended to act as a hedge of the exposure to changes in fair value of the hedged item which is attributable to a particular risk and could affect the profit or loss of the company, and

(b) the hedged item is an asset or liability recognised for accounting purposes or is an identified portion of such an asset or liability.

(5) For the purposes of subsections (2) and (4), the liabilities of a company include its own share capital.

Overview of Part

Relevant non-lending relationships involving discounts

Miscellaneous rules about amounts to be brought into account because of this Chapter

Consideration to be treated as loan relationship

Exclusion of interest where failure to make return

Introduction to Chapter

Matters in respect of which amounts are to be brought into account

594A

(1) The matters in respect of which amounts are to be brought into account for the purposes of this Part in respect of a company's derivative contracts are—

(a) profits and losses of the company which arise to it from its derivative contracts and related transactions (excluding expenses), and

(b) expenses incurred by the company under or for the purposes of those contracts and transactions.

(2) Expenses are only treated as incurred as mentioned in subsection (1)(b) if they are incurred directly—

(a) in bringing any of the derivative contracts into existence,

(b) in entering into or giving effect to any of the related transactions,

(d) in taking steps to secure the receipt of payments under any of those contracts or in accordance with any of those transactions.

(3) For the treatment of pre-contract or abortive expenses, see section 607.

(4) In subsection (1) “profits and losses” include profits and losses of a capital nature.

(5) For the meaning of “related transaction”, see section 596.

604A

(1) This section applies if—

(a) in a period of account a derivative contract of a company ceases in accordance with generally accepted accounting practice to be recognised in the company's accounts,

(b) amounts relating to the matters mentioned in section 594A(1) in respect of that derivative contract have in accordance with generally accepted accounting practice been recognised in the company's accounts as items of other comprehensive income and have not subsequently been transferred to become items of profit or loss, and

(2) Condition A is that, at the time when the derivative contract ceases to be recognised, it is not expected that the amounts mentioned in subsection (1)(b) will in future be transferred to become items of profit or loss.

(3) Condition B is that, at any later time, it is no longer expected that the amounts mentioned in subsection (1)(b) will in future be transferred to become items of profit or loss.

(4) The amounts mentioned in subsection (1)(b)—

(a) must be brought into account for the purposes of this Part as credits or debits for the period of account in which the time mentioned in subsection (2) or (3) falls, in the same way as a credit or debit which is brought into account in determining the company's profit or loss for that period in accordance with generally accepted accounting practice, and

(b) must not be brought into account for a later period of account even if they are subsequently transferred to become items of profit or loss for the later period.

(5) This section applies in a case where part of a derivative contract of a company ceases to be recognised in the company's accounts as it applies in a case where the whole of a derivative contract ceases to be recognised, but as if the reference in subsection (1)(b) to amounts in respect of a derivative contract were a reference to so much of those amounts as are attributable to that part of the derivative contract.

(6) In determining what amounts fall within subsection (1)(b) at any time in an accounting period, it is to be assumed that the accounting policy applied in drawing up the company's accounts for the period was also applied in previous accounting periods.

(7) But if the company's accounts for the period are in accordance with generally accepted accounting practice drawn up on an assumption as to the accounting policy in previous accounting periods which differs from that mentioned in subsection (6), that different assumption applies in determining what amounts fall within subsection (1)(b) at the time in question.

(8) In this section “item of profit or loss” and “item of other comprehensive income” each has the meaning that it has for accounting purposes.

607A

(1) This section applies if—

(a) amounts in respect of a qualifying contract are recognised in a company's accounts for an accounting period (“the current period”) as an item of profit or loss even though during all or part of the period the company is not a party to the qualifying contract,

(b) any of conditions A to D is met, and

(c) in the absence of this section, the credits and debits brought into account by the company for the purposes of this Part for the current period would not include credits or debits representing the whole of those amounts.

(2) In this section “qualifying contract” means—

(a) a derivative contract, or

(b) a contract that would be a derivative contract if references in section 576(1) to a company were references to any person.

(3) Condition A is that—

(a) the company was a party to the qualifying contract,

(b) amounts in respect of the qualifying contract were recognised in the company's accounts as an item of profit or loss when it was a party to the contract, and

(4) Condition B is that the amounts recognised as mentioned in subsection (1)(a) are recognised as a result of a transaction which has the effect of transferring to the company all or part of the risk or reward relating to the qualifying contract without a corresponding transfer of rights or obligations under the contract.

(5) Condition C is that the amounts recognised as mentioned in subsection (1)(a) are recognised as a result of a related transaction in relation to a qualifying contract to which the company was, but has ceased to be, a party.

(6) Condition D is that—

(a) the amounts recognised as mentioned in subsection (1)(a) are recognised because the company may enter into a qualifying contract or related transaction but has not yet done so, and

(b) the amounts are not expenses to which section 607 applies.

(7) The company must bring credits and debits into account for the purposes of this Part for the accounting period as if the company were a party to the qualifying contract for the whole of the accounting period.

(8) The amounts that must be brought into account are those amounts in respect of the qualifying contract that are recognised in the company's accounts for the accounting period as an item of profit or loss (but subject to the provisions of this Part).

(9) This section is subject to sections 607B and 607C.

(10) In this section—

“item of profit or loss” has the meaning it has for accounting purposes;

“recognised” means recognised in accordance with generally accepted accounting practice;

“related transaction”, in relation to a qualifying contract, is to be read as if the references in section 596(1) and (2) to a derivative contract were to a qualifying contract.

607B

A company is not to bring into account as a debit for the purposes of this Part as a result of section 607A any amount which—

(a) is brought into account as a debit for those purposes by another company,

(b) is brought into account so as to reduce the assumed taxable total profits of another company for the purposes of Part 9A of TIOPA 2010 (controlled foreign companies), or

607C

(1) This section applies if at any time a company (“the relevant company”) is required by section 607A to bring into account as a credit for the purposes of this Part an amount—

(a) which is brought into account as a credit for those purposes by another company,

(b) which is brought into account in determining the assumed taxable total profits of another company for the purposes of Part 9A of TIOPA 2010 (controlled foreign companies), or

(2) In order to avoid a double charge to tax in respect of the amount, the relevant company may make a claim for one or more consequential adjustments to be made in respect of the amount brought into account as a credit.

(3) On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.

(4) Consequential adjustments may be made—

(a) in respect of any period,

(b) by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and

Deemed market value acquisition: adjustment where nil accounting value

Counteracting avoidance arrangements

698B

(1) Any derivative-related tax advantages that would (in the absence of this section) arise from relevant avoidance arrangements are to be counteracted by the making of such adjustments as are just and reasonable in relation to credits and debits to be brought into account for the purposes of this Part.

(2) Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.

(3) For the meaning of “relevant avoidance arrangements” and “derivative-related tax advantage”, see section 698C.

698C

(1) This section applies for the interpretation of section 698B (and this section).

(2) “Arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(3) Arrangements are “relevant avoidance arrangements” if their main purpose, or one of their main purposes, is to enable a company to obtain a derivative-related tax advantage.

(4) But arrangements are not “relevant avoidance arrangements” if the obtaining of any derivative-related tax advantages that would (in the absence of section 698B) arise from them can reasonably be regarded as consistent with any principles on which the provisions of this Part that are relevant to the arrangements are based (whether expressed or implied) and the policy objectives of those provisions.

(5) A company obtains a “derivative-related tax advantage” if—

(a) it brings into account a debit to which it would not otherwise be entitled,

(b) it brings into account a debit which exceeds that to which it would otherwise be entitled,

(d) the amount of any credit brought into account by the company is less than it would otherwise be, or

(e) it brings a debit or credit into account earlier or later than it otherwise would.

(6) In subsection (5), references to bringing a debit or credit into account are references to bringing a debit or credit into account for the purposes of this Part.

698D

(1) Each of the following is an example of something which might indicate that arrangements whose main purpose, or one of whose main purposes, is to enable a company to obtain a derivative-related tax advantage are not excluded by section 698C(4) from being “relevant avoidance arrangements” for the purposes of section 698B—

(a) the elimination or reduction, for purposes of corporation tax, of profits of a company arising from any of its derivative contracts, where for economic purposes profits, or greater profits, arise to the company from that contract;

(b) the creation or increase, for purposes of corporation tax, of a loss or expense arising from a derivative contract, where for economic purposes no loss or expense, or a smaller loss or expense, arises from that contract;

(c) preventing or delaying the recognition as an item of profit or loss of an amount that would apart from the arrangements be recognised in the company's accounts as an item of profit or loss or be so recognised earlier;

(d) ensuring that a derivative contract is treated for accounting purposes in a way in which it would not have been treated in the absence of some other transaction forming part of the arrangements;

(e) enabling a company to bring into account a debit in respect of an exchange loss, in circumstances where a corresponding exchange gain would not give rise to a credit or would give rise to a credit of a smaller amount;

(f) enabling a company to bring into account a debit in respect of a fair value loss in circumstances where a corresponding fair value gain would not give rise to a credit or would give rise to a credit of a smaller amount.

(2) But in each case the result concerned is only capable of indicating that section 698C(4) is not available if it is reasonable to assume that such a result was not the anticipated result when the provisions of this Part that are relevant to the arrangements were enacted

(3) In subsection (1)(f) references to a fair value gain or a fair value loss are references respectively to—

(a) a profit to be brought into account in relation to a derivative contract where fair value accounting is used for the period in question, or

(b) a loss to be brought into account in relation to a derivative contract where fair value accounting is used for the period in question.

(4) “Arrangements” and “derivative-related tax advantage” have the same meaning as in section 698C.

Meaning of “proceeds of realisation”

Abortive expenditure on realisation

816A

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

... Goodwill: time of creation

Assets treated as created or acquired when expenditure incurred

Introduction to Chapter

Special rule: section 900C or 900D case

Schemes involving manipulation of controlled company rules

Dividends in respect of shares accounted for as liabilities

Assessments, adjustments and claims after the administration period

Another deduction to be allowed if all acquired shares are awarded

“Qualifying expenditure”

Special rule: section 900C or 900D case

Limit on State aid

Payment in respect of orchestra tax credit

Activities involved in developing, producing, running or closing a production

Orchestra tax credit claimable if company has surrenderable loss

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

5A

(1) Subsection (3) applies if a company has entered into an arrangement the main purpose or one of the main purposes of which is to obtain a relevant tax advantage for the company.

(2) In subsection (1) the reference to obtaining a relevant tax advantage includes obtaining a relevant tax advantage by virtue of any provisions of double taxation arrangements, but only in a case where the relevant tax advantage is contrary to the object and purpose of the provisions of the double taxation arrangements (and subsection (3) has effect accordingly, regardless of section 6(1) of TIOPA 2010).

(3) The relevant tax advantage is to be counteracted by means of adjustments.

(4) For this purpose adjustments may be made (whether by an officer of Revenue and Customs or by the company) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.

(5) In this section “relevant tax advantage” means a tax advantage in relation to corporation tax to which the company is chargeable (or would without the tax advantage be chargeable) by virtue of section 5(2A).

(6) In this section—

“arrangement” (except in the phrase “double taxation arrangements”) includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable;

“double taxation arrangements” means arrangements which have effect under section 2(1) of TIOPA 2010 (double taxation relief by agreement with territories outside the United Kingdom);

“tax advantage” has the meaning given by section 1139 of CTA 2010.

5B

(1) A non-UK resident company's “trade of dealing in or developing UK land” consists of —

(a) any activities falling within subsection (2) which it carries on, and

(b) any activities from which profits, gains or losses arise which are treated under Part 8ZB of CTA 2010 as profits or losses of the company's trade of dealing in or developing UK land.

(2) The activities within this subsection are—

(a) dealing in UK land;

(b) developing UK land for the purpose of disposing of it.

(3) In this section “land” includes—

(a) buildings and structures,

(b) any estate, interest or right in or over land, and

(4) In this section—

“disposal” is to be interpreted in accordance with section 356OQ of CTA 2010;

“UK land” means land in the United Kingdom.

49A

(1) Subsection (2) applies—

(a) for the purpose of bringing into account an amount arising in respect of a transaction involving money's worth entered into in the course of a trade, and

(b) if an amount at least equal to the amount that would be brought into account under that subsection is not otherwise brought into account as a receipt in calculating the profits of a trade under a provision of this Part other than a provision mentioned in subsection (3).

(2) For the purpose of calculating the profits of the trade, an amount equal to the value of the money's worth is brought into account as a receipt if, had the transaction involved money, an amount would have been brought into account as a receipt in respect of it.

(3) But where another provision of this Part makes express provision for the bringing into account of an amount in respect of money's worth as a receipt in calculating the profits of a trade (however expressed), that other provision applies instead of subsection (2).

Deduction for replacement of domestic items

250A

(1) This section applies if conditions A to D are met.

(2) Condition A is that a company (“C”) carries on a property business in relation to land which consists of or includes a dwelling-house.

(3) Condition B is that—

(a) a domestic item has been provided for use in the dwelling-house (“the old item”),

(b) C incurs expenditure on a domestic item for use in the dwelling-house (“the new item”),

(d) the new item replaces the old item, and

(e) following that replacement, the old item is no longer available for use in the dwelling-house.

(4) Condition C is that a deduction for the expenditure is not prohibited by the wholly and exclusively rule but would otherwise be prohibited by the capital expenditure rule (see subsection (14)).

(5) Condition D is that no allowance under CAA 2001 may be claimed in respect of the expenditure.

(6) In calculating the profits of the business, a deduction for the expenditure is allowed.

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

(8) The basic amount of the deduction is as follows—

(a) where the new item is the same or substantially the same as the old item, the deduction is equal to the expenditure incurred by C on the new item;

(b) where the new item is not the same or substantially the same as the old item, the deduction is equal to so much of the expenditure incurred by C on the new item as does not exceed the expenditure which C would have incurred on an item which is the same or substantially the same as the old item.

Subsections (9) to (12) make further provision about the calculation of the deduction in certain cases.

(9) If C incurs incidental expenditure of a capital nature in connection with the disposal of the old item or the purchase of the new item, the deduction is increased by the amount of the incidental expenditure.

(10) If the old item is disposed of in part-exchange for the new item—

(a) the expenditure incurred by C on the new item is treated as including an amount equal to the value of the old item, and

(b) the deduction is reduced by that amount.

(11) If the old item is disposed of other than in part-exchange for the new item, the deduction is reduced by the amount or value of any consideration in money or money's worth which C or a person connected with C receives, or is entitled to receive, in respect of the disposal.

(12) For the purposes of subsection (11), where the old item is disposed of together with other consideration, the consideration in respect of the disposal mentioned in that subsection is taken not to include the amount of, or an amount equal to the value of, that other consideration.

(13) In this section, “domestic item” means an item for domestic use (such as furniture, furnishings, household appliances and kitchenware), and does not include anything that is a fixture.

“Fixture”—means any plant or machinery that is so installed or otherwise fixed in or to a dwelling-house as to become, in law, part of that dwelling-house, andincludes any boiler or water-filled radiator installed in a dwelling-house as part of a space or water heating system.

“Plant or machinery” here has the same meaning as in Part 2 of CAA 2001.

(14) In this section—

“the capital expenditure rule” means the rule in section 53 (capital expenditure), as applied by section 210;

“lessee” means the person who is entitled to the use of the dwelling-house under a lease or other arrangement under which a sum is payable in respect of the use of the dwelling-house;

“the wholly and exclusively rule” means the rule in section 54 (expenses not wholly and exclusively for trade and unconnected losses), as applied by section 210.

Non-market loans

446A

(1) This section applies as respects any accounting period if—

(a) a company has a debtor relationship in the period,

(b) the amount recognised in the company's accounts in respect of the debt at the time the company became party to the debtor relationship was less than the transaction price,

(c) credits in respect of the whole or part of the discount were not brought into account for the purposes of this Part, and

(d) in a case where the creditor is a company, the non-qualifying territory condition is met.

(2) The debits which are to be brought into account for the accounting period for the purposes of this Part by the debtor company in respect of the loan relationship are not to include debits relating to the relevant discount amount, to the extent that that amount is referable to the accounting period.

(3) In this section “relevant discount amount” means—

(a) in a case where credits in respect of the whole of the discount were not brought into account for the purposes of this Part, an amount equal to the whole discount, and

(b) in a case where credits in respect of part of the discount were not brought into account for the purposes of this Part, an amount equal to that part of the discount.

(4) The non-qualifying territory condition referred to in subsection (1)(d) is that the creditor company is—

(a) resident for tax purposes in a non-qualifying territory at any time in the accounting period, or

(b) effectively managed in a non-taxing non-qualifying territory at any such time.

(5) In this section—

“discount” means the difference between the two amounts referred to in subsection (1)(b);

“non-qualifying territory” has the meaning given in section 173 of TIOPA 2010;

“non-taxing non-qualifying territory” means a non-qualifying territory under whose law companies are not liable to tax by reason of domicile, residence or place of management;

“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.

Meaning of “matched”

475B

(1) This section applies for the purposes of this Part.

(2) A loan relationship of a company is matched if and to the extent that—

(a) it is in a matching relationship with another loan relationship or a derivative contract of the company, or

(b) exchange gains or losses arising in relation to an asset or liability representing the loan relationship are excluded from being brought into account under regulations under section 328(4),

and “unmatched” is to be construed accordingly.

(3) A loan relationship is in a matching relationship with another loan relationship or derivative contract if one is intended by the company to act to eliminate or substantially reduce the economic risk of the other.

(4) In this section “economic risk” means a risk which can be attributed to fluctuations in exchange rates between currencies over a period of time.

(5) In this section “derivative contract” has the same meaning as in Part 7 (see section 576).

808D

(1) This Part does not apply to an intangible fixed asset held by an orchestral concert production company so far as the asset represents expenditure on an orchestral concert or orchestral concert series that is treated under Part 15D as expenditure of a separate trade (see particularly sections 1217Q and 1217QF).

(2) In this section—

“orchestral concert” has the same meaning as in Part 15D (see section 1217PA);

“orchestral concert production company” means a company which, for the purposes of that Part, is the production company in relation to a concert (see section 1217PB).

PART 15D — Orchestra tax relief

CHAPTER 1 — Introduction

Overview

1217P

(1) This Part is about the production of orchestral concerts, and applies for corporation tax purposes.

(2) This Chapter explains what is meant by “orchestral concert” and how a company comes to be treated as the production company in relation to a concert.

(3) Chapter 2 is about the taxation of the activities of a production company and includes—

(a) provision for the company's activities in relation to its concert, or its concert series, to be treated as a separate trade, and

(b) provision about the calculation of the profits and losses of that trade.

(4) Chapter 3 is about relief (called “orchestra tax relief”) which may be given to a production company in relation to its concert or concert series—

(a) by way of additional deductions to be made in calculating the profits or losses of the company's separate trade, or

(b) by way of a payment (an “orchestra tax credit”) to be made on the company's surrender of losses from that trade,

and describes the conditions a company must meet to qualify for orchestra tax relief.

(5) Chapter 4 contains provision about the use of losses of the separate trade (including provision about relief for terminal losses).

(6) Chapter 5 provides—

(a) for relief under Chapters 3 and 4 to be given on a provisional basis, and

(b) for such relief to be withdrawn if it turns out that conditions that must be met for such relief to be given are not actually met.

Interpretation

1217PA

(1) In this Part “orchestral concert” means a concert by an orchestra, ensemble, group or band consisting wholly or mainly of instrumentalists who are the primary focus of the concert.

(2) But a concert is not an orchestral concert if—

(za) it is produced for training purposes,

(a) the main purpose, or one of the main purposes, of the concert is to advertise or promote any goods or services,

(b) the concert is to consist of or include a competition or contest, or

(c) the making of a relevant recording is the main object of the production company's activities in relation to the concert.

(3) A recording of a concert is a “relevant recording” if the recording is made for the purpose of using it (or an edited version of it) in any of the following ways—

(a) broadcast, at the time of the concert or later, to the general public;

(b) release, at the time of the concert or later, to the paying public (by digital or other means);

(c) use as a soundtrack (or part of a soundtrack) to a television, radio, theatre, video game or similar production for broadcast, exhibition or release to the general public;

(d) use in a film (or part of a film) for exhibition to the paying public at the commercial cinema.

(4) In this section—

“broadcast” means broadcast by any means (including television, radio or the internet);

“film” has the same meaning as in Part 15 (see section 1181).

1217PB

(1) A company is the production company in relation to a concert if the company (acting otherwise than in partnership)—

(a) is responsible for putting on the concert from the start of the production process to the finish, including employing or engaging the performers,

(b) is actively engaged in decision-making in relation to the concert,

(d) directly negotiates for, contracts for and pays for rights, goods and services in relation to the concert.

(2) No more than one company can be the production company in relation to a concert.

(3) If more than one company meets the conditions in subsection (1) in relation to a concert, the company that is most directly engaged in the activities mentioned in that subsection is the production company.

(4) If no company meets the conditions in subsection (1), there is no production company in relation to the concert.

CHAPTER 2 — Taxation of activities of production company

Separate orchestral trade

1217Q

(1) Subsection (2) applies to a company in relation to a concert if—

(a) the company qualifies for orchestra tax relief in relation to the production of the concert (see section 1217RA(2)), and

(b) the concert is not included in a concert series in relation to which the company has made an election under subsection (4).

(2) The company's activities in relation to the production of the concert are treated as a trade separate from any other activities of the company (including activities in relation to the production of any other concert).

(3) Subsections (4) and (5) apply to a company in relation to concerts in a series if the conditions in section 1217RA(4)(a), (b), (c) and (d) are met in relation to the company and the concert series.

(4) The company may, for the purposes of this Part, make an election in relation to the concert series.

See section 1217QA for provision about making an election.

(5) Where the company makes an election in relation to a concert series (and accordingly qualifies for orchestra tax relief in relation to the production of the series), the company's activities in relation to the production of the concert series are treated as a trade separate from any other activities of the company (including activities in relation to the production of any other concert).

(6) In this Part the separate trade mentioned in subsection (2) or (5) is called the “separate orchestral trade”.

(7) If the separate orchestral trade relates to a single concert, the company is treated as beginning to carry on that trade—

(a) at the beginning of the pre-performance stage of the concert, or

(b) if earlier, at the time of the first receipt by the company of any income from the production of the concert.

1217QA

(1) An election under section 1217Q(4) must be made by the company by notice in writing to an officer of Her Majesty's Revenue and Customs—

(a) before the date on which the company first delivers a company tax return for a period in relation to which a concert in the series falls to be treated in accordance with section 1217Q, or

(b) if later, before the date of the first concert in the series.

Reading this document does not replace reading the official text published on legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0. We assume no responsibility for any inaccuracies arising from the conversion of the original CLML XML to this format.

This text is published under legislation.gov.uk's own terms of reuse, not a Legalize or public-domain licence. legislation.gov.uk
Open Government Licence v3.0 (attribution required)
© Crown and database right. Derived from content available under the Open Government Licence v3.0 from legislation.gov.uk.