420A Amounts payable in respect of hybrid capital instruments
(1) This section applies if a loan relationship is a hybrid capital instrument for an accounting period of the debtor.
(2) The Corporation Tax Acts have effect in relation to any person in respect of times in the accounting period as if any qualifying amount payable in respect of the hybrid capital instrument were not a distribution.
(3) An amount is a “qualifying amount” so far as it would not be regarded as a distribution if it is assumed that any provision made by the loan relationship under which the debtor is entitled to defer or cancel a payment of interest under the loan relationship had not been made.
(4) This section also needs to be read together with section 1015(1A) of CTA 2010 (which prevents hybrid capital instruments from being “special securities” as a result of being equity notes).
(1) This Chapter applies if—
(a) condition A or B is met, and
(b) each of the companies mentioned in subsection (3)(a) or (4)(a) makes a claim under this section,
but see section 426 (tax avoidance etc) and section 429 (disapplication of Chapter where transparent entities involved).
(2) Sections 424 and 425 (reorganisations involving loan relationships) also apply if, in addition to the conditions in section 424(1)(a) and (b), condition C is met in relation to the transfer in the course of which the reorganisation in question occurs.
(3) Condition A is that—
(a) a company resident in one relevant state transfers to a company resident in another relevant state the whole or part of a business carried on in the United Kingdom,
(b) the transfer is wholly in exchange for shares or debentures issued by the transferee to the transferor, and
(c) immediately after the transfer the transferee is within the charge to corporation tax.
(4) Condition B is that—
(a) a company transfers part of its business to one or more companies,
(b) the transferor is resident in one relevant state,
(c) the part of the transferor's business which is transferred is carried on by the transferor in the United Kingdom,
(d) at least one transferee is resident in a relevant state other than that in which the transferor is resident (and each transferee is resident in a relevant state, but not necessarily the same one),
(e) the transferor continues to carry on a business after the transfer,
(f) immediately after the transfer each transferee is within the charge to corporation tax, and
(g) the transfer—
(i) is made in exchange for the issue of shares in or debentures of each transferee to each person holding shares in or debentures of the transferor, or
(ii) is not so made only because, and only so far as, a transferee is prevented from so issuing such shares or debentures by section 658 of the Companies Act 2006 (c. 46) (general rule against limited company acquiring own shares) or by a corresponding provision of the law of another relevant state preventing such an issue.
(5) Condition C is that—
(a) a UK resident company transfers part of its business to one or more companies,
(b) the part of the transferor's business which is transferred to the transferees was carried on immediately before the transfer in a member State ... through a permanent establishment, and
(c) the conditions in subsection (4)(d), (e) and (g) are met.
(6) In this Chapter—
“relevant state” means the United Kingdom or a member State;
“the transfer of business” means the transfer of business mentioned in subsection (3)(a), (4)(a) or (5)(a),
“transferee” has the same meaning as in subsection (3), (4) or (5), and
“the transferor” has the same meaning as in subsection (3), (4) or (5).
(7) For the meaning of “company” and “resident in a relevant state”, see section 430.
422 Transfer of loan relationship at notional carrying value
(1) This section applies if in the course of the transfer of business the transferor transfers an asset or liability representing a loan relationship to a transferee.
(2) For the purpose of determining the credits and debits to be brought into account in respect of the loan relationship for the purposes of this Part, the transferor and the transferee are treated as having entered into the transfer of that asset or liability for consideration of an amount equal to the notional carrying value of the asset or liability.
(3) For the purposes of this section—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) “notional carrying value”, in relation to an asset or liability, means the amount which would have been its tax-adjusted carrying value based on the accounts of the transferor if a period of account had ended immediately before the date when the transferor ceased to be a party to the loan relationship.
(4) This section is subject to section 423 (transferor using fair value accounting).
(1) This section applies instead of section 422 if, in a case where that section would otherwise apply, the transferor is regarded for the purposes of this section as using fair value accounting in respect of the loan relationship (see subsection (4)).
(2) The amount which is to be brought into account by the transferor in respect of the transfer of the asset or liability mentioned in section 422(1) (“the transferor's amount”) is—
(a) if an asset is to be brought into account, its fair value as at the date when the transferee becomes a party to the loan relationship, or the fair value of the rights under or interest in it as at that date, and
(b) if a liability is to be brought into account, its fair value as at that date.
(3) For any accounting period in which the transferee is a party to the loan relationship, for the purpose of determining the credits and debits to be brought into account in respect of it for the purposes of this Part, the transferee is treated as if it had acquired the asset or liability representing the relationship for consideration of an amount equal to the transferor's amount.
(4) The transferor is regarded for the purposes of this section as using fair value accounting in respect of the loan relationship only if the credits and debits to be brought into account for the purposes of this Part as respects the relationship are determined on that basis.
(5) It does not matter for the purposes of subsection (4) if the transferor does not otherwise use fair value accounting in respect of the loan relationship.
(1) This section applies if—
(a) sections 127 to 130 of TCGA 1992 (reorganisations: equation of original shares and new holding)—
(i) apply in relation to a reorganisation, or
(ii) would so apply but for section 116(5) of that Act (which disapplies those sections where the original shares or the new holding consists of or includes a qualifying corporate bond),
(b) the original shares consist of or include an asset representing a loan relationship, and
(c) either—
(i) section 422 or 423 applies as a result of condition B in section 421 being met in relation to the transfer in the course of which the reorganisation occurs, or
(ii) condition C in section 421 is met in relation to that transfer.
(2) For the purposes of this Part such debits and credits are to be brought into account as would be brought into account if the reorganisation were a disposal of the asset representing the loan relationship for consideration of an amount equal to its notional carrying value.
(3) For the purposes of this section, the notional carrying value of that asset is the amount which would have been its tax-adjusted carrying value based on the accounts of the original holder if a period of account had ended immediately before the date when the reorganisation occurred.
(4) In this section—
...
“original holder” means a person holding the original shares immediately before the reorganisation,
“original shares” has the meaning given by section 126(1) of TCGA 1992 (application of sections 126 to 131 of that Act), and
“reorganisation” includes anything to which sections 127 to 130 of that Act apply as if it were a reorganisation.
(5) This section is subject to—
(a) section 425 (original holder using fair value accounting), and
(b) section 429 (disapplication of Chapter where transparent entities involved).
(1) This section applies instead of section 424 if, in a case where that section would otherwise apply, the original holder is regarded for the purposes of this section as using fair value accounting in respect of the loan relationship constituting or included in the original shares.
(2) The amount which is to be brought into account by the original holder in respect of the reorganisation (“the disposal amount”) is the fair value of the asset representing the loan relationship as at the date when the reorganisation occurred, or of the rights under or interest in that relationship as at that date.
(3) For any accounting period in which a successor creditor company is a party to the loan relationship, for the purpose of determining the credits and debits to be brought into account in respect of the relationship for the purposes of this Part, the successor creditor company is treated as if it had acquired the asset representing the loan relationship for consideration of an amount equal to the disposal amount.
(4) Subsections (4) and (5) of section 423 apply for the purposes of this section as they apply for the purposes of that section, but taking the references in that section to the transferor as references to the original holder.
(5) In this section—
“successor creditor company” means a company in relation to which the loan relationship constituting or included in the original shares is a creditor relationship immediately after the reorganisation, and
“original holder” and “original shares” have the same meaning as in section 424.
(6) This section is subject to section 429 (disapplication of Chapter where transparent entities involved).
(1) This Chapter does not apply in relation to the transfer of business if—
(a) the transfer of business is not effected for genuine commercial reasons, or
(b) the transfer of business forms part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax.
(2) But subsection (1) does not prevent this Chapter from applying if before the transfer of business—
(a) the companies mentioned in section 421(3)(a), (4)(a) or (5)(a) have applied to the Commissioners for Her Majesty's Revenue and Customs, and
(b) the Commissioners have notified them that they are satisfied that subsection will not have that effect.
(1) This section applies in relation to an application under section 426(2).
(2) The application must be in writing and must contain particulars of the operations which are to be effected.
(3) The Commissioners for Her Majesty's Revenue and Customs may by notice require the applicant to provide further particulars for the purpose of enabling them to make their decision.
(4) Such a notice may only be given within 30 days of the receipt of the application or of any further particulars previously required under subsection (3).
(5) If such a notice is not complied with within 30 days or such longer period as the Commissioners for Her Majesty's Revenue and Customs may allow, they need not proceed further on the application.
(1) The Commissioners for Her Majesty's Revenue and Customs must notify their decision on an application under section 426(2) to the applicant—
(a) within 30 days of receiving the application, or
(b) if they give a notice under section 427(3), within 30 days of the notice being complied with.
(2) If the Commissioners for Her Majesty's Revenue and Customs—
(a) notify the applicant that they are not satisfied as mentioned in section 426(2)(b), or
(b) do not notify their decision to the applicant within the time required by subsection (1),
the applicant may within 30 days of the notification or of that time require them to transmit the application to the tribunal, together with any notice given and further particulars provided under section 427(3).
(3) In that case any notification by the tribunal has effect for the purposes of section 426(2)(b) as if it were a notification by the Commissioners for Her Majesty's Revenue and Customs.
(4) If any particulars provided under section 427 do not fully and accurately disclose all facts and considerations material for the decision—
(a) of the Commissioners for Her Majesty's Revenue and Customs, or
(b) of the tribunal,
any resulting notification by the Commissioners for Her Majesty's Revenue and Customs or the tribunal is void.
429 Disapplication of Chapter where transparent entities involved
(1) This Chapter does not apply in relation to the transfer of business if the transferor is a transparent entity.
(2) If any transferee is a transparent entity, sections 424 and 425 (reorganisations involving loan relationships) do not apply.
(3) In this section “transparent entity” means a company which is resident in a member State ... and does not have an ordinary share capital.
(4) For the meaning of “resident in a relevant state”, see section 430.
(1) In this Chapter “company” means any entity listed as a company in Part A of Annex I to the Mergers Directive.
(2) For the purposes of this Chapter, a company is resident in a relevant state if—
(a) it is within a charge to tax under the law of the relevant state as being resident for that purpose, and
(b) it is not regarded, for the purpose of any double taxation relief arrangements to which the relevant state is a party, as resident in a territory not within a relevant state.
(1) This Chapter applies if the following conditions are met—
(a) conditions A to D,
(b) in the case of a merger within subsection (3)(a), (b) or (c), condition E, and
(c) in the case of a merger within subsection (3)(c) or (d), condition F,
but see section 437 (tax avoidance etc) and section 438 (disapplication of Chapter where transparent entities involved).
(2) Sections 435 and 436 (reorganisations involving loan relationships) also apply in cases that would be within subsection (1) apart from condition D not being met if, in addition to the conditions in section 435(1)(a) and (b), condition G is met in relation to a transfer in the course of the merger in which the reorganisation in question occurs.
(3) Condition A is that—
(a) an SE is formed by the merger of two or more companies in accordance with Articles 2(1) and 17(2)(a) or (b) of Council Regulation (EC) No. 2157/2001 on the Statute for a European company (Societas Europaea),
(b) an SCE is formed by the merger of two or more co-operative societies, at least one of which is a society registered under the the Co-operative and Community Benefit Societies Act 2014, in accordance with Articles 2(1) and 19 of Council Regulation (EC) No. 1435/2003 on the Statute for a European Co-operative Society (SCE),
(c) a merger is effected by the transfer by one or more companies of all their assets and liabilities to a single existing company, or
(d) a merger is effected by the transfer by two or more companies of all their assets and liabilities to a single new company (other than an SE or an SCE) in exchange for the issue by the transferee, to each person holding shares in or debentures of a transferor, of shares or debentures.
(4) Condition B is that each merging company is resident in a relevant state.
(5) Condition C is that the merging companies are not all resident in the same relevant state.
(6) Condition D is that immediately after the merger the transferee is within the charge to corporation tax.
(7) Condition E is that—
(a) the transfer of assets and liabilities to the transferee in the course of the merger is made in exchange for the issue of shares or debentures by the transferee to each person holding shares in or debentures of a transferor, or
(b) that transfer is not so made only because, and only so far as, the transferee is prevented from so issuing such shares or debentures by section 658 of the Companies Act 2006 (c. 46) (general rule against limited company acquiring own shares) or by a corresponding provision of the law of a member State preventing such an issue.
(8) Condition F is that in the course of the merger each transferor ceases to exist without being in liquidation (within the meaning given by section 247 of the Insolvency Act 1986 (c. 45)).
(9) Condition G is that—
(a) in the course of the merger a company resident in the United Kingdom (“company A”) transfers to a company resident in a member State all assets and liabilities relating to a business which company A carried on in a member State ... through a permanent establishment, and
(b) that transfer includes the transfer of an asset or liability representing a loan relationship.
(10) In this Chapter,
(a) “the merger” and “the merging companies” have the same meaning as in this section
(b) “relevant state” means the United Kingdom or a member State.
(11) See—
(a) section 432 for the meaning of “the transferee” and “transferor”, and
(b) section 439 for the meaning of “company”, “co-operative society” and “resident in a relevant state”.
(1) In this Chapter, “the transferee” means—
(a) in relation to a merger within section 431(3)(a), the SE,
(b) in relation to a merger within section 431(3)(b), the SCE, and
(c) in relation to a merger within section 431(3)(c) or (d), the company to which assets and liabilities are transferred.
(2) In this Chapter “transferor” means—
(a) in relation to a merger within section 431(3)(a), a company merging to form the SE,
(b) in relation to a merger within section 431(3)(b), a co-operative society merging to form the SCE, and
(c) in relation to a merger within section 431(3)(c) or (d), a company transferring all its assets and liabilities.
433 Transfer of loan relationship at notional carrying value
(1) This section applies if in the course of the merger a transferor transfers an asset or liability representing a loan relationship to the transferee.
(2) For the purpose of determining the credits and debits to be brought into account in respect of the loan relationship in accordance with this Part, the transferor and the transferee are treated as having entered into the transfer of that asset or liability for consideration of an amount equal to the notional carrying value of the asset or liability.
(3) For the purposes of this section—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) “notional carrying value”, in relation to an asset or liability, means the amount which would have been its tax-adjusted carrying value based on the accounts of the transferor if a period of account had ended immediately before the date when the transferor ceased to be a party to the loan relationship.
(4) This section is subject to section 434.
(1) This section applies instead of section 433 if, in a case where that section would otherwise apply, the transferor is regarded for the purposes of this section as using fair value accounting in respect of the loan relationship (see subsection (4)).
(2) The amount which is to be brought into account by the transferor in respect of the transfer of the asset or liability mentioned in section 433(1) (“the transferor's amount”) is—
(a) if an asset is to be brought into account, its fair value as at the date when the transferee becomes a party to the loan relationship, or the fair value of the rights under or interest in it as at that date, and
(b) if a liability is to be brought into account, its fair value as at that date.
(3) For any accounting period in which the transferee is a party to the loan relationship, for the purpose of determining the credits and debits to be brought into account in respect of it for the purposes of this Part, the transferee is treated as if it had acquired the asset or liability representing the relationship for consideration of an amount equal to the transferor's amount.
(4) The transferor is regarded for the purposes of this section as using fair value accounting in respect of the loan relationship only if the credits and debits to be brought into account for the purposes of this Part as respects the relationship are determined on that basis.
(5) It does not matter for the purposes of subsection (4) if the transferor does not otherwise use fair value accounting in respect of the loan relationship.
(1) This section applies if—
(a) sections 127 to 130 of TCGA 1992 (reorganisations: equation of original shares and new holding)—
(i) apply in relation to a reorganisation, or
(ii) would so apply but for section 116(5) of that Act (which disapplies those sections where the original shares or the new holding consists of or includes a qualifying corporate bond),
(b) the original shares consist of or include an asset representing a loan relationship, and
(c) section 433 or 434 applies in relation to a transfer in the course of the merger in which the reorganisation occurs or, in a case where those sections would apply apart from condition D in section 431 not being met, condition G in that section is met in relation to such a transfer.
(2) For the purposes of this Part such debits and credits are to be brought into account as would be brought into account if the reorganisation were a disposal of the asset representing the loan relationship for consideration of an amount equal to its notional carrying value.
(3) For the purposes of this section, the notional carrying value of that asset is the amount which would have been its tax-adjusted carrying value based on the accounts of the original holder if a period of account had ended immediately before the date when the reorganisation occurred.
(4) In this section—
...
“original holder” means a person holding the original shares immediately before the reorganisation,
“original shares” has the meaning given by section 126(1) of TCGA 1992 (application of sections 126 to 131 of that Act), and
“reorganisation” includes anything to which sections 127 to 130 of that Act apply as if it were a reorganisation.
(5) This section is subject to—
(a) section 436 (original holder using fair value accounting), and
(b) section 438 (disapplication of Chapter where transparent entities involved).
(1) This section applies instead of section 435 if, in a case where that section would otherwise apply, the original holder is regarded for the purposes of this section as using fair value accounting in respect of the loan relationship constituting or included in the original shares.
(2) The amount which is to be brought into account by the original holder in respect of the reorganisation (“the disposal amount”) is the fair value of the asset representing the loan relationship as at the date when the reorganisation occurred, or of the rights under or interest in that relationship as at that date.
(3) For any accounting period in which a successor creditor company is a party to the loan relationship, for the purpose of determining the credits and debits to be brought into account in respect of the relationship for the purposes of this Part, the successor creditor company is treated as if it had acquired the asset representing the loan relationship for consideration of an amount equal to the disposal amount.
(4) Subsections (4) and (5) of section 434 apply for the purposes of this section as they apply for the purposes of that section, but taking the references in that section to the transferor as references to the original holder.
(5) In this section—
“successor creditor company” means a company in relation to which the loan relationship constituting or included in the original shares is a creditor relationship immediately after the reorganisation, and
“original holder” and “original shares” have the same meaning as in section 435.
(6) This section is subject to section 438 (disapplication of Chapter where transparent entities involved).
(1) This Chapter does not apply in relation to the merger if—
(a) the merger is not effected for genuine commercial reasons, or
(b) the merger forms part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoiding liability to corporation tax, capital gains tax or income tax.
(2) But subsection (1) does not prevent this Chapter from applying if before the merger—
(a) any of the merging companies has applied to the Commissioners for Her Majesty's Revenue and Customs, and
(b) the Commissioners have notified the merging companies that they are satisfied that subsection will not have that effect.
(3) Sections 427 and 428 have effect in relation to subsection (2) as in relation to section 426(2), taking the references in section 428 to section 426(2)(b) as references to subsection (2)(b) of this section.
438 Disapplication of Chapter where transparent entities involved
(1) This section applies if one or more of the merging companies is a transparent entity.
(2) If as a result of the merger the assets and liabilities of a transparent entity are transferred to another company, this Chapter does not apply in relation to the transfer.
(3) If as a result of the merger the assets and liabilities of one or more other companies are transferred to a transparent entity, sections 435 and 436 do not apply to the new holding.
(4) In this section—
“new holding” has the meaning given by section 126(1) of TCGA 1992 (application of sections 126 to 131 of that Act), and
“transparent entity” means a company which is resident in a member State ... and does not have an ordinary share capital.
(1) In this Chapter—
“company” means any entity listed as a company in Part A of Annex I to the Mergers Directive, and
“co-operative society” means a society registered under the Co-operative and Community Benefit Societies Act 2014 or a similar society governed by the law of a member State ....
(2) For the purposes of this Chapter, a company is resident in a relevant state if—
(a) it is within a charge to tax under the law of the relevant state as being resident for that purpose, and
(b) it is not regarded, for the purpose of any double taxation relief arrangements to which the relevant state is a party, as resident in a territory not within a relevant state.
(1) This Chapter contains rules connected with tax avoidance.
(2) In particular—
(a) for rules about unallowable purposes ..., see sections 441 and 442,
(b) for rules relating to credits and debits where transactions are not at arm's length (other than credits and debits relating to exchange gains and losses), see sections 444 to 446,
(c) for rules relating to credits and debits relating to exchange gains and losses where transactions are not at arm's length, see sections 448 and 452,
(d) for rules about connected parties deriving benefit from creditor relationships, see section 453,
(e) for rules dealing with tax advantages from resetting interest rates, see section 454, ...
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(g) for rules about debits arising as a result of the derecognition of creditor relationships, see section 455A, and
(h) for rules dealing with tax avoidance arrangements, see sections 455B to 455D.
(1) This section applies if in any accounting period a loan relationship of a company has an unallowable purpose.
(2) The company may not bring into account for that period for the purposes of this Part so much of any credit in respect of exchange gains from that relationship as on a just and reasonable apportionment is attributable to the unallowable purpose.
(3) The company may not bring into account for that period for the purposes of this Part so much of any debit in respect of that relationship as on a just and reasonable apportionment is attributable to the unallowable purpose.
(3A) If—
(a) a credit brought into account for that period for the purposes of this Part by the company would (in the absence of this section) be reduced, and
(b) the reduction represents an amount which, if it did not reduce a credit, would be brought into account as a debit in respect of that relationship,
subsection (3) applies to the amount of the reduction as if it were an amount that would (in the absence of this section) be brought into account as a debit.
(4) An amount which would be brought into account for the purposes of this Part as respects any matter apart from this section is treated for the purposes of section 464(1) (amounts brought into account under this Part excluded from being otherwise brought into account) as if it were so brought into account.
(5) Accordingly, that amount is not to be brought into account for corporation tax purposes as respects that matter either under this Part or otherwise.
(6) For the meaning of “has an unallowable purpose” and “the unallowable purpose” in this section, see section 442.
(1) For the purposes of section 441 a loan relationship of a company has an unallowable purpose in an accounting period if, at times during that period, the purposes for which the company—
(a) is a party to the relationship, or
(b) enters into transactions which are related transactions by reference to it,
include a purpose (“the unallowable purpose”) which is not amongst the business or other commercial purposes of the company.
(1A) In subsection (1)(b) “related transaction”, in relation to a loan relationship, includes anything which equates in substance to a disposal or acquisition of the kind mentioned in section 304(1) (as read with section 304(2)).
(2) If a company is not within the charge to corporation tax in respect of a part of its activities, for the purposes of this section the business and other commercial purposes of the company do not include the purposes of that part.
(3) Subsection (4) applies if a tax avoidance purpose is one of the purposes for which a company—
(a) is a party to a loan relationship at any time, or
(b) enters into a transaction which is a related transaction by reference to a loan relationship of the company.
(4) For the purposes of subsection (1) the tax avoidance purpose is only regarded as a business or other commercial purpose of the company if it is not—
(a) the main purpose for which the company is a party to the loan relationship or, as the case may be, enters into the related transaction, or
(b) one of the main purposes for which it is or does so.
(5) The references in subsections (3) and (4) to a tax avoidance purpose are references to any purpose which consists of securing a tax advantage for the company or any other person.
(1) If—
(a) credits or debits in respect of a loan relationship of a company are to be brought into account for the purposes of this Part in respect of a related transaction, and
(b) that transaction is not a transaction at arm's length,
those credits or debits are to be determined for the purposes of this Part in accordance with the independent terms assumption.
(2) The independent terms assumption is that the transaction was entered into on the terms on which it would have been entered into between knowledgeable and willing parties dealing at arm's length.
(3) This section is subject to section 445 (disapplication of this section where Part 4 of TIOPA 2010 applies).
(4) Subsection (1) does not apply to debits arising from the acquisition of rights under a loan relationship if those rights are acquired for less than market value.
(5) In a case where the related transaction is a transaction within section 336(2) or part of a series of transactions within 336(3) (group transactions), subsection (1) does not apply if—
(a) section 340 (group transfers and transfers of insurance business: transfer at notional carrying value) applies as a result of that transaction or, as the case may be, that series of transactions, or
(b) section 340 would so apply apart from section 341 (transferor using fair value accounting).
(6) Subsection (1) does not apply to exchange gains or losses (but see sections 448 and 452).
445 Disapplication of section 444 where Part 4 of TIOPA 2010 applies
(1) Section 444 does not apply in relation to credits or debits of a company if—
(a) as a result of Part 4 of TIOPA 2010 (transfer pricing), the profits and losses of the company are to be calculated for tax purposes as if the arm's length provision to which those credits or debits would relate had been made or imposed instead of the actual provision to which they relate, or
(b) those profits would be so calculated if the actual provision —
(i) conferred a potential advantage in relation to United Kingdom taxation (within the meaning of that Part) on the company, and
(ii) differed from the arm’s length provision.
(2) Subsection (1) applies despite section 464 (amounts brought into account under this Part excluded from being otherwise brought into account), but is subject to—
(a) section 340(7) (disapplication of Part 4 of TIOPA 2010 where group member replaces another as party to loan), ...
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) For the way in which this Part applies where adjustments are made under Part 4 of TIOPA 2010, see section 446.
(5) In this section “the actual provision” and “the arm's length provision” have the same meaning as in Part 4 of TIOPA 2010 (see sections 149 and 151 of that Act).
446 Bringing into account adjustments made under Part 4 of TIOPA 2010
(1) This section deals with the credits and debits which are to be brought into account for the purposes of this Part as a result of Part 4 of TIOPA 2010 (provision not at arm's length) applying in relation to a company's loan relationships or related transactions.
(2) Subsection (3) applies if under Part 4 of TIOPA 2010 an amount (“the imputed amount”) is treated as an amount of profits or losses arising to a company from any of its loan relationships or related transactions.
(3) Credits or debits relating to the imputed amount are to be brought into account for the purposes of this Part to the same extent as they would be in the case of an actual amount of such profits or losses.
(4) Subsection (5) applies if under Part 4 of TIOPA 2010 an amount is treated as interest payable under any of a company's loan relationships.
(5) Credits or debits relating to that amount are to be brought into account for the purposes of this Part to the same extent as they would be in the case of an actual amount of such interest.
(6) Subsection (7) applies if under Part 4 of TIOPA 2010 an amount is treated as expenses incurred by a company under or for the purposes of any of its loan relationships or related transactions.
(7) Debits relating to the amount are to be brought into account for the purposes of this Part to the same extent as they would be in the case of an actual amount of such expenses.
(8) Where a company makes a claim under this subsection, any qualifying credit of the company which (ignoring this subsection) would be brought into account for the purposes of this Part is not to be brought into account.
(9) But subsection (8) does not apply—
(a) if the corresponding profits of the company are less than the corresponding arm’s length profits, or
(b) to the extent that its application would result in the corresponding profits being less than the corresponding arm’s length profits.
(10) A credit of a company is a “qualifying credit” to the extent it corresponds to an amount which, as a result of Part 4 of TIOPA 2010, has not previously been brought into account as a debit.
(11) Where a company makes a claim under this subsection, neither subsection (3) nor (5) of section 147 of TIOPA 2010 applies to prevent the bringing into account of a qualifying debit which (ignoring this subsection) would not be brought in account for the purposes of this Part as a result of the application of either subsection.
(12) But subsection (11) does not apply—
(a) if the corresponding profits of the company are less than the corresponding arm’s length profits, or
(b) to the extent that its application would result in the corresponding profits being less than the corresponding arm’s length profits.
(13) A debit of a company is a “qualifying debit” to the extent it corresponds to a matched credit.
(14) The relevant amount of a credit of a company is a “matched credit” if—
(a) the credit was previously brought into account,
(b) the credit relates to actual provision made or imposed between the company and another person to which neither subsection (3) or (5) of section 147 of that Act applied in relation to the company,
(c) the only reason neither subsection applied in relation to the company and the actual provision was because the actual provision did not confer a potential advantage on the company (see section 155 of that Act), and
(d) if the profits of the company were calculated as if the arm's length provision had been made or imposed instead of the actual provision, the credit would not have been brought into account to some extent.
(15) The “relevant amount” of a credit means so much of the credit as would not have been brought into account if the arm's length provision had been made or imposed instead of the actual provision to which the credit relates.
(16) For the purposes of subsections (9) and (12), the corresponding profits of the company means the sum of the profits and losses of the company—
(a) for each accounting period for which there was actual provision made or imposed between the company and another person (“the other affected person”) to which the qualifying credit or qualifying debit relates,
(b) that arose from—
(i) each such provision where the profits and losses of the company were not (as a result of Part 4 of TIOPA 2010) required to be calculated as if the arm’s length provision had been made or imposed instead of that provision, and
(ii) the arm’s length provision in relation to each such provision where the profits and losses of the company are to be calculated as if that arm’s length provision had been made or imposed instead (as a result of that Part), and
(c) ignoring the effect (if any) of Part 10 of TIOPA 2010 (corporate interest restriction).
(17) For the purposes of those subsections, the corresponding arm’s length profits means the corresponding profits calculated as if the arm’s length provision had been made or imposed instead of the actual provision referred to in subsection (16)(a) in each case.
(18) In this section “actual provision”, “arm’s length provision” and “potential advantage” are to be construed in accordance with Part 4 of TIOPA 2010 (transfer pricing).
(19) A claim under subsection (8) or (11) must be made—
(a) within the period of two years after the end of the accounting period to which the claim relates, or
(b) within such further period as an officer of Revenue and Customs may allow.
(20) A claim may not be made under either of those subsections if—
(a) the profits and losses of other affected person were required, for any chargeable period of that person, to be calculated as if the arm’s length provision had been made or imposed instead of the actual provision relating to the qualifying credit or qualifying debit, and
(b) those profits and losses were not so calculated for that chargeable period.
(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.
448 Exchange gains and losses on debtor relationships: equity notes where holder associated with issuer
(1) This section applies if—
(a) a company has a debtor relationship in an accounting period,
(b) an exchange gain or loss arises in the period in respect of a liability representing the relationship, and
(c) the whole of any interest or other distribution out of the assets of the company in respect of securities of the company which represent the relationship is regarded as a distribution because of section 1015(6) of CTA 2010 (equity notes held by company associated with issuer or by a funded company).
(2) The exchange gain or loss must be left out of account in determining the credits or debits to be brought into account for the purposes of this Part.
(3) If the debtor relationship is to any extent matched, subsection (2) applies to leave out of account only the amount of the exchange gain or loss arising in respect of a liability representing the debtor relationship to the extent that the debtor relationship is unmatched (an amount which may be nil).
452 Exchange gains and losses where loan not on arm's length terms
(1) This subsection applies if—
(a) a company would be treated as having a debtor relationship, or would be treated as borrowing more under an existing debtor relationship, in relation to an accounting period if—
(i) an election were made under section 153B(2) of TIOPA 2010 in relation to that period,
(ii) a claim were made under section 192(1) of that Act in relation to that period, or
(iii) such an election and such a claim were made in relation to that period, and
(b) for that period there is a connection between that company and the company that would have the corresponding creditor relationship.
(2) If subsection (1) applies, it is assumed that such a election, claim or election and claim is made for the purpose of determining the debits or credits to be brought into account for the purposes of this Part in respect of any exchange gains or losses arising in that period in respect of the liability representing that debtor relationship.
(3) Subsections (4) and (5) apply if, because of one or more elections or claims made under section 153B(2) or 192(1) of TIOPA 2010 or assumed to have been made as a result of subsection (2)—
(a) one company is treated for any purpose as having a debtor relationship, or is treated as borrowing more under an existing debtor relationship, or
(b) more than one company is treated for any purpose as having a debtor relationship represented by the same liability.
(4) The total amount of the credits brought into account for the purposes of this Part in respect of exchange gains from that debtor relationship (in a subsection (3)(a) case) or from those debtor relationships (in a subsection (3)(b) case) must not exceed the total amount of the exchange gains or the proportion of the exchange gains to be left out of account ... by the borrower in respect of the loan relationship as a result of Part 4 of TIOPA 2010.
(5) The total amount of the debits brought into account for those purposes in respect of exchange losses from that debtor relationship (in a subsection (3)(a) case) or from those debtor relationships (in a subsection (3)(b) case) must not exceed the total amount of the exchange losses or the proportion of the exchange losses to be left out of account ... by the borrower in respect of the loan relationship as a result of Part 4 of TIOPA 2010.
(5A) In this section “borrower” is to be construed in accordance with section 191(1)(a) of TIOPA 2010.
(6) Section 466 (companies connected for an accounting period) applies for the purposes of this section.
455A Debits arising from derecognition of creditor relationships
(1) This section applies where—
(a) a company is at any time a party to tax avoidance arrangements,
(b) as a result of those arrangements, a creditor relationship to which the company is party, or any part of such a relationship, is (in accordance with generally accepted accounting practice) derecognised by the company, and
(c) the company continues to be a party to the creditor relationship immediately after the transaction or other event giving rise to the derecognition.
(2) No debit that would apart from this section be brought into account by the company for the purposes of this Part as a result of the derecognition is to be so brought into account.
(3) An amount that would be brought into account for the purposes of this Part as respects any matter apart from this section—
(a) is treated for the purposes of section 464(1) (priority of this Part for corporation tax purposes) as if it were so brought into account, and
(b) accordingly, may not be brought into account for any other corporation tax purposes as respects that matter.
(4) For the purposes of this section a company is to be treated as a party to a creditor relationship even though it has disposed of its rights under the relationship to another person—
(a) under a repo or stock lending arrangement, or
(b) under a transaction which is treated as not involving any disposal as a result of section 26 of TCGA 1992 (mortgages and charges not to be treated as disposals).
(5) For the purposes of this section arrangements are “tax avoidance arrangements” if the main purpose, or one of the main purposes, of any party to the arrangements, in entering into them, is to obtain a tax advantage.
(6) In subsection (5) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.
455B Counteracting effect of avoidance arrangements
(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.
(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,
(c) it avoids having to bring a credit into account,
(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 Examples of results that may indicate exclusion not applicable
(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.
(1) This Chapter applies if—
(a) for any accounting period a company has a non-trading deficit from its loan relationships under section 301(6), and
(b) either—
(i) that accounting period begins before 1 April 2017, or
(ii) at the end of that accounting period the company is a charity.
(2) In this Chapter “the deficit” and “the deficit period” mean that deficit and that period respectively (but see section 458(5)).
(3) Sections 457 and 458 set out the rules about carrying the deficit forward to later accounting periods.
(4) Sections 459 and 460 deal with claims for the deficit to be dealt with differently.
(5) Sections 461 to 463 deal with the consequences of such claims.