(1) This section applies where—
(a) apart from this section, an amount of income (“the relevant amount”) would meet condition A or B in section 406 in relation to a relevant accounting period of a company, and
(b) the amount of corporation tax chargeable in respect of the relevant amount is reduced under section 18(2) (entitlement to credit for foreign tax reduces UK tax by amount of the credit).
(2) The relevant amount is treated, for the purposes of section 406(2) (meaning of “adjusted corporation tax earnings”) as not meeting the condition mentioned in subsection (1)(a) to the extent that it consists of notional untaxed income.
(3) For this purpose, the amount of the relevant amount that consists of “notional untaxed income” is—
A B
where—
A is the amount of the reduction mentioned in subsection (1)(b);
B is the rate of corporation tax payable by the company, before any credit under Part 2 (double taxation relief), on the company's profits for the relevant accounting period.
(1) For the purposes of this Part the “net group-interest expense” of a worldwide group for a period of account of the group (“the relevant period of account”) is—
A − B
where—
A is the sum of the relevant expense amounts that are recognised in the financial statements of the group for the period as items of profit or loss;
B is the sum of the relevant income amounts that are recognised in the financial statements of the group for the period as items of profit or loss.
(2) Subsection (3) applies where—
(a) a relevant expense amount (“the capitalised expense”) is brought into account in financial statements of the group (whether for the relevant period of account or any earlier period) in determining the carrying value of an asset,
(b) the asset is not a relevant asset, and
(c) in the financial statements of the group for the relevant period of account, any of the carrying value is written down.
(3) A in subsection (1) is treated as including so much of the amount written down as is attributable to the capitalised expense.
(4) Subsection (5) applies where—
(a) a relevant income amount (“the capitalised income”) is brought into account in financial statements of the group (whether for the relevant period of account or any earlier period) in determining the carrying value of an asset,
(b) the asset is not a relevant asset, and
(c) in the financial statements of the group for the relevant period of account, any of the carrying value is written down.
(5) B in subsection (1) is treated as including the amount of the reduction in the amount written down that is attributable to the capitalised income.
(5A) If, on the assumption that subsections (3) and (5) applied to relevant assets, an amount would, in accordance with subsection (3) or (5), have been treated as included in A or B in subsection (1)—
(a) as an amount attributable to the capitalised expense, or
(b) as an amount attributable to the capitalised income,
none of that amount is to be included in A or B in that subsection.
(6) See—
section 411 for the definitions of “relevant expense amount” and “relevant income amount”;
section 417(5) and (6) for the definition of “relevant asset”;
section 420 for provision affecting amounts recognised in financial statements in respect of certain profits or losses arising from derivative contracts.
411 “Relevant expense amount” and “relevant income amount”
(1) In this Chapter “relevant expense amount” means (subject to subsection (3)) an amount in respect of any of the following—
(a) interest payable under a loan relationship;
(b) expenses ancillary to a loan relationship or related transaction;
(c) losses arising from a loan relationship or a related transaction, other than—
(i) exchange losses, and
(ii) impairment losses;
(d) dividends payable in respect of preference shares accounted for as a financial liability;
(e) losses arising from a relevant derivative contract or a related transaction, other than—
(i) exchanges losses,
(ii) impairment losses, and
(iii) losses in respect of risks arising in the ordinary course of a trade (other than risks arising in the ordinary course of a financial trade) where the derivative contract was entered into wholly for reasons unrelated to the capital structure of the worldwide group (or any member of the worldwide group);
(f) expenses ancillary to a relevant derivative contract or related transaction;
(g) financing charges implicit in payments made under a finance lease;
(h) financing charges relating to debt factoring or any similar transaction;
(i) financing charges implicit in payments made under a service concession arrangement if and to the extent that the arrangement is accounted for as a financial liability;
(j) debits that are brought into account under Part 5 of CTA 2009 as a result of section 481 of that Act (relevant non-lending relationships), or would be so brought into account if the company in question were within the charge to corporation tax, other than—
(i) exchange losses, or
(ii) impairment losses;
(k) alternative finance return payable under alternative finance arrangements;
(l) manufactured interest payable;
(m) financing charges in respect of the advance under a debtor repo or debtor quasi-repo;
(n) financing charges so far as they are made up of amounts which—
(i) are treated as interest payable under a loan relationship under a relevant provision of Chapter 2 of Part 16 of CTA 2010 (finance arrangements), or
(ii) would be so treated if the company in question were within the charge to corporation tax.
(2) In this Chapter “relevant income amount” means (subject to subsection (3)) an amount in respect of any of the following—
(a) interest receivable under a loan relationship;
(b) profits arising from a loan relationship or a related transaction, other than—
(i) exchange gains, and
(ii) the reversal of impairment losses;
(c) dividends receivable in respect of preference shares accounted for as a financial asset;
(d) gains arising from a relevant derivative contract or a related transaction, other than—
(i) exchange gains,
(ii) the reversal of impairment losses, and
(iii) gains in respect of risks arising in the ordinary course of a trade (other than risks arising in the ordinary course of a financial trade) where the derivative contract was entered into wholly for reasons unrelated to the capital structure of the worldwide group (or any member of the worldwide group);
(e) financing income implicit in amounts received under a finance lease;
(f) financing income relating to debt factoring or any similar transaction;
(g) financing income implicit in amounts received under a service concession arrangement if and to the extent that the arrangement is accounted for as a financial asset;
(h) credits that are brought into account under Part 5 of CTA 2009 as a result of section 481 of that Act (relevant non-lending relationships), or would be so brought into account if the company in question were within the charge to corporation tax, other than—
(i) exchange gains, or
(ii) the reversal of impairment losses;
(i) alternative finance return receivable under alternative finance arrangements;
(j) manufactured interest receivable;
(k) financing income in respect of the advance under a creditor repo or creditor quasi-repo;
(l) financing income so far as it is made up of amounts which—
(i) are treated as interest receivable under a loan relationship under a relevant provision of Chapter 2 of Part 16 of CTA 2010 (finance arrangements), or
(ii) would be so treated if the company in question were within the charge to corporation tax.
(3) In this Chapter—
(a) “relevant expense amount” does not include an amount payable under a pension scheme;
(b) “relevant income amount” does not include an amount receivable under a pension scheme.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) For the purposes of section 411(1)(b), expenses are “ancillary” to a loan relationship or related transaction if and only if they are incurred directly—
(a) in bringing, or attempting to bring, the relationship into existence,
(ab) in entering into or giving effect to, or attempting to enter into or give effect to, the related transaction,
(b) in making payments under the loan relationship or as a result of the related transaction, or
(c) in taking steps to ensure the receipt of payments under the loan relationship or in accordance with the related transaction.
(2) For the purposes of section 411(1)(e) and (2)(d) a derivative contract is “relevant” if its underlying subject matter consists only of one or more of the following—
(a) interest rates;
(b) any index determined by reference to income or retail prices;
(c) currency;
(d) an asset or liability representing a loan relationship;
(e) any other underlying subject matter which is—
(i) subordinate in relation to any of the matters mentioned in paragraphs (a) to (d), or
(ii) of small value in comparison with the value of the underlying subject matter as a whole.
(3) Whether part of the underlying subject matter of a derivative contract is subordinate or of small value is to be determined for the purposes of subsection (2)(e) by reference to the time when the company enters into or acquires the contract.
(3A) For the purposes of section 411(1)(e)(iii) and (2)(d)(iii) losses or gains are in respect of risks arising in the ordinary course of “a financial trade” only so far as the risks relate to amounts which are or are likely to be—
(a) relevant expense amounts, or
(b) relevant income amounts,
of the worldwide group for any period of account.
(4) For the purposes of section 411(1)(f) expenses are “ancillary” to a relevant derivative contract or related transaction if and only if they are incurred directly—
(a) in bringing, or attempting to bring, the derivative contract into existence,
(b) in entering into or giving effect to, or attempting to enter into or give effect to, the related transaction,
(c) in making payments under the derivative contract or as a result of the related transaction, or
(d) in taking steps to secure the receipt of payments under the derivative contract or in accordance with the related transaction.
(5) For the purposes of section 411(1)(n) and (2)(l), the following provisions of Chapter 2 of Part 16 of CTA 2010 are “relevant”—
(a) section 761(3) (type 1 finance arrangements: borrower a company);
(b) section 762(3) (type 1 finance arrangements: borrower a partnership);
(c) section 766(3) (type 2 finance arrangements);
(d) section 769(3) (type 3 finance arrangements).
(6) In section 411—
(a) in subsections (1)(b) and (c) and (2)(b), “related transaction”, “exchange loss” and “exchange gain” have the same meaning as in Parts 5 and 6 of CTA 2009 (see sections 304 and 475 of that Act);
(b) in subsections (1)(e) and (f) and (2)(d), “related transaction”, “exchange loss” and “exchange gain” have the same meaning as in Part 7 of that Act (see sections 596 and 705 of that Act).
(7) In section 411 and this section—
“alternative finance arrangements” has the same meaning as in Parts 5 and 6 of CTA 2009 (see section 501(2) of that Act);
“alternative finance return” has the same meaning as in Part 6 of CTA 2009 (see sections 511 to 513 of that Act);
“creditor quasi-repo” has the same meaning as in Chapter 10 of Part 6 of CTA 2009 (see section 544 of that Act);
“creditor repo” has the same meaning as in Chapter 10 of Part 6 of CTA 2009 (see section 543 of that Act);
“debtor quasi-repo” has the same meaning as in Chapter 10 of Part 6 of CTA 2009 (see section 549 of that Act);
“debtor repo” has the same meaning as in Chapter 10 of Part 6 of CTA 2009 (see section 548 of that Act);
“manufactured interest” has the same meaning as in Chapter 9 of Part 6 of CTA 2009 (see section 539(5) of that Act);
...
“underlying subject matter” has the same meaning as in Part 7 of CTA 2009 (see section 583 of that Act).
(1) For the purposes of this Part the “adjusted net group-interest expense” of a worldwide group for a period of account of the group is (subject to subsection (2))—
A + B − C
where—
A is the net group-interest expense of the group for the period (see section 410);
B is the sum of any upward adjustments (see subsection (3));
C is the sum of any downward adjustments (see subsection (4)).
(2) Where the amount determined under subsection (1) is negative, the “adjusted net group-interest expense” of the group for the period is nil.
(3) In this section “upward adjustment” means any of the following amounts—
(a) a relevant expense amount that is brought into account in the financial statements of the group for the period in determining the carrying value of a non-financial asset or non-financial liability;
(b) an amount that , in the case of a non-financial asset, is included in the net group-interest expense of the group for the period by virtue of section 410(5) (capitalised income written off);
(c) a relevant expense amount that—
(i) in the financial statements of the group for the period is recognised in equity or shareholders' funds, and is not recognised as an item of profit or loss or as an item of other comprehensive income, and
(ii) is brought into account for the purposes of corporation tax by a member of the group under a relevant enactment, or would be so brought into account if the member were within the charge to corporation tax;
(ca) an amount in respect of a loan relationship that is brought into account by a member of the group, for a relevant accounting period in relation to the period of account, under section 330ZA CTA 2009 (debits referable to times before UK property business etc carried on) so far as that amount has not been included in the adjusted net group-interest expense of the group for any earlier period of account;
(cb) an amount in respect of a relevant derivative contract that would be brought into account by a member of the group, for a relevant accounting period in relation to the period of account, under section 607ZA of CTA 2009, if an election under regulation 6A of the Disregard Regulations (as defined in section 421) had effect in relation to the contract, so far as the relevant amount has not been included in the adjusted net group-interest expense of the group for any earlier period of account;
(cc) a relevant income amount in respect of a loan relationship or a relevant derivative contract to which a member of the group is a party that—
(i) is recognised in the financial statements of the group for the period,
(ii) is not brought into account by a member of the group, for a relevant accounting period in relation to the period of account, and
(iii) is expected to be brought into account, or (in the case of a relevant derivative contract) would, if an election under regulation 6A of the Disregard Regulations had effect in relation to the contract, be expected to be brought into account, by a member of the group, for another accounting period, under section 330ZA or section 607ZA of CTA 2009;
(cd) an amount that is brought into account by a member of the group, for a relevant accounting period in relation to the period of account, under section 330(3) of CTA 2009 (debits in respect of pre-trading expenditure) in accordance with an election made under section 330(1)(b) of that Act, so far as that amount has not been included in the adjusted net group-interest expense of the group for any earlier period of account;
(d) a relevant income amount that is recognised in the financial statements of the group for the period, as an item of profit or loss, so far as it—
(i) is prevented from being brought into account for the purposes of corporation tax by a member of the group by section 322(2) , 323A, 358 or 359 of CTA 2009 ..., or
(ii) would be so prevented if the member were within the charge to corporation tax.
(4) In this section “downward adjustment” means any of the following amounts—
(a) a relevant income amount that is brought into account in the financial statements of the group for the period in determining the carrying value of a non-financial asset or non-financial liability;
(b) an amount that , in the case of a non-financial asset, is included in the net group-interest expense of the group for the period by virtue of section 410(3) (capitalised expense written off);
(c) a relevant income amount that—
(i) in the financial statements of the group for the period is recognised in equity or shareholders' funds, and is not recognised as an item of profit or loss or as an item of other comprehensive income, and
(ii) is brought into account for the purposes of corporation tax by a member of the group under a relevant enactment, or would be so brought into account if the member were within the charge to corporation tax;
(ca) a relevant expense amount, in respect of a loan relationship or a relevant derivative contract to which a member of the group is a party, that—
(i) is recognised in the financial statements of the group for the period,
(ii) is not brought into account by a member of the group, for a relevant accounting period in relation to the period of account, and
(iii) is expected to be brought into account, or (in the case of a relevant derivative contract) would, if an election under regulation 6A of the Disregard Regulations had effect in relation to the contract, be expected to be brought into account, by a member of the group, for another accounting period, under section 330ZA or section 607ZA of CTA 2009;
(cb) an amount, in respect of a loan relationship to which a member of the group is a party, that—
(i) is recognised in the financial statements of the group for the period, but
(ii) is prevented from being brought into account in accordance with an election made under section 330(1)(b) of CTA 2009 (debits in respect of pre-trading expenditure);
(d) a relevant expense amount that is recognised in the financial statements of the group for the period, as an item of profit or loss, so far as it—
(i) is prevented from being brought into account for the purposes of corporation tax by a member of the group by section 323A or 354 of CTA 2009 ..., or
(ii) would so prevented if the member were within the charge to corporation tax;
(e) a relevant expense amount that is recognised in the financial statements of the group for the period, as an item of profit or loss, so far as—
(i) the amount represents a dividend payable in respect of preference shares, and
(ii) those shares are recognised as a liability in the financial statements of the group for the period.
(5) For the purposes of subsections (3)(a) and (b) and (4)(a) and (b)—
(a) an asset is a “non-financial asset” if it is not a financial asset for accounting purposes or it is a share in a company,
(b) a liability is a “non-financial liability” if it is not a financial liability for accounting purposes or it is in respect of a share issued by a company, and
(c) references to amounts brought into account in determining the carrying value of a non-financial asset or non-financial liability do not include amounts so brought into account as a result of writing off any part of an amount which was itself so brought into account;
and in paragraphs (a) and (b) “share” has the meaning given by section 476(1) of CTA 2009.
(6) In subsections (3)(c)(ii) and (4)(c)(ii), “relevant enactment” means—
(a) section 321 or 605 of CTA 2009 (credits and debits recognised in equity), or
(b) section 320B of CTA 2009 (hybrid capital instruments: amounts recognised in equity).
(7) Subsection (8) applies, unless the reporting company elects otherwise, in relation to a period of account of a worldwide group—
(a) ending on or after 6 April 2020, and
(b) beginning before 1 April 2023.
(8) In relation to the period of account—
(a) no amount within any of paragraphs (ca) to (cc) of subsection (3) is to be treated as an “upward adjustment”, and
(b) no amount within paragraph (ca) of subsection (4) is to be treated as a “downward adjustment”.
(1) For the purposes of this Part the “qualifying net group-interest expense” of a worldwide group for a period of account of the group is (subject to subsection (2))—
A − B
where
A is the adjusted net group-interest expense of the group for the period (see section 413);
B is the sum of any downward adjustments (see subsection (3)).
(2) Where the amount determined under subsection (1) is negative, “the qualifying net group-interest expense” of the group for the period is nil.
(3) In this section “downward adjustment” means a relevant expense amount that meets the condition in subsection (4), so far as it relates to—
(a) a transaction with, or a financial liability owed to, a person who, at any time during the period, is a related party of a member of the group,
(b) results-dependent securities, or
(c) relevant equity notes.
(4) The condition mentioned in subsection (3) is that the amount—
(a) is recognised in the financial statements of the group for the period, as an item of profit and loss, and is not (and is not comprised in) a downward adjustment for the purposes of section 413 (adjusted net group-interest expense), or
(b) is (or is comprised in) an upward adjustment for the purposes of that section.
(5) In a case where—
(a) the person mentioned in subsection (3)(a) is not a related party of a member of the group during any part of the period of account, or
(b) during any part of the period of account, the financial liability mentioned in subsection (3)(a) is owed to a person who is not a related party of a member of the group,
the amount of the downward adjustment under subsection (3)(a) is to be reduced by such amount (if any) as is attributable, on a just and reasonable basis, to that part.
(1) For the purposes of section 414 a person is treated as not being a related party of a member of the group at any time (“the relevant time”) if at the relevant time—
(a) the person would (apart from this subsection) be a related party of the member by virtue only of section 466(2) (parties to loan relationship treated as related parties by virtue of financial assistance provided by a related party), and
(b) either—
(i) the condition in subsection (1A) is met, or
(ii) any of the conditions in subsection (2) is met in relation to the guarantee, indemnity or other financial assistance in question.
(1A) The condition is that—
(a) the member in question is a company that has not been UK resident at any time before 29 October 2018,
(b) the financial assistance in question is provided before that date, and
(c) the financial assistance in question is in respect of a loan relationship, derivative contract or relevant arrangement or transaction (within the meaning of section 382(4)) to which the member in question is a party for the purposes of its UK property business.
(2) The conditions are—
(a) that the financial assistance is provided before 1 April 2017;
(b) that the financial assistance is provided by a member of the group;
(c) that the financial assistance relates only to an undertaking in relation to—
(i) shares in the ultimate parent of the group, or
(ii) loans to a member of the group;
(d) that the financial assistance is a non-financial guarantee.
(3) Financial assistance is “a non-financial guarantee” if—
(a) it guarantees the performance by any person of contractual obligations to provide goods or services to a member of the group,
(b) it is given by the person providing the goods or services or by a related party of that person, and
(c) the maximum amount for which the guarantor is liable does not exceed the consideration given under the contract for the provision of the goods or services.
(4) The reference in section 414(3)(b) to “results-dependent securities” is (subject to subsection (8)) to securities issued by an entity where the consideration given by the entity for the use of the principal secured depends (to any extent) on—
(a) the results of the entity's business, or
(b) the results of the business of any other entity that was a member of the group at any time during the period of account of the group.
In this subsection references to a business include part of a business.
(5) For the purposes of subsection (4) the consideration given by the entity for the use of the principal secured does not fall within paragraph (a) or (b) of that subsection merely because the terms of the security provide—
(a) for the consideration to be reduced if the results mentioned in that paragraph improve, or
(b) for the consideration to be increased if the results mentioned in that paragraph deteriorate.
(6) An amount does not fall within section 414(3)(b) so far as it is relevant alternative finance return (within the meaning given by section 1019(2) of CTA 2010).
(7) For the purposes of section 414(3)(c), a “relevant equity note” is a security that—
(a) is an equity note within the meaning of section 1016 of CTA 2010, by reference to satisfying a test in subsection (2) of that section, and
(b) would satisfy that test if the “permitted period” for the purposes of that section were the period of 100 years beginning with the date of the security’s issue.
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) For the purposes of this Part “the group-EBITDA” of a worldwide group for a period of account of the group (“the relevant period of account”) is—
PBT + I + DA
where—
PBT is the group's profit before tax (which may be a negative amount) (see subsection (2));
I is the net group-interest expense of the group for the period (which may be a negative amount) (see section 410);
DA is the group's depreciation and amortisation adjustment (which may be a negative amount) (see subsection (3)).
(2) For the purposes of this Chapter a worldwide group's “profit before tax” is—
(a) the sum of the amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, in respect of income of any description other than tax income, less
(b) the sum of the amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, in respect of expenses of any description other than tax expense.
In this subsection “tax income” and “tax expense” have the meaning they have for accounting purposes.
(2A) An amount is not to be taken into account in calculating a worldwide group's profit before tax for the purposes of subsection (2) if it is, or relates to, an R&D expenditure credit under Chapter 1A of Part 13 of CTA 2009.
(3) In this section the group's “depreciation and amortisation adjustment” means the sum of the following amounts (any of which may be negative)—
(a) the capital (expenditure) adjustment (see section 417);
(b) the capital (fair value movement) adjustment (see section 418);
(c) the capital (disposals) adjustment (see section 419).
(4) The following expressions have the same meaning in sections 417 to 419 as they have in this section—
“the relevant period of account”;
“the group's profit before tax”.
(5) For provision affecting amounts recognised in financial statements in respect of certain profits or losses arising from derivative contracts, see section 420.
(1) For the purposes of section 416, “the capital (expenditure) adjustment” is—
A − B − C
where—
A is the sum of the amounts (if any) in respect of relevant capital expenditure which are brought into account in determining the group's profit before tax;
B is the sum of the amounts (if any) in respect of relevant capital expenditure reversals which are brought into account in determining the group's profit before tax;
C is the sum of the amounts (if any) in respect of relevant capital income which are brought into account in determining the group's profit before tax.
(2) In this section “relevant capital expenditure” means—
(a) expenditure of a capital nature that relates to relevant assets (including any relevant expense amounts previously included in the carrying value of relevant assets) that is recognised in the relevant period of account by way of depreciation or amortisation, or as the result of an impairment review,
(b) expenditure of a capital nature that relates to relevant assets that is incurred and recognised in the relevant period of account, and
(c) amounts recognised in the relevant period of account by way of provision in respect of future expenditure of a capital nature that relates to relevant assets.
(3) In this section “relevant capital expenditure reversals” means the reversal in the relevant period of account of any relevant capital expenditure recognised in an earlier period of account.
(4) In this section “relevant capital income” means income of a capital nature that relates to relevant assets.
(5) In this Chapter “relevant asset” means an asset that is—
(a) plant, property and equipment,
(b) an investment property,
(c) an intangible asset,
(d) goodwill,
(e) shares in a company, or
(f) an interest in an entity which entitles the holder to a share of the profits of the entity.
(6) In subsection (5)—
(a) “plant, property and equipment” has the meaning it has for accounting purposes;
(b) “investment property” has the meaning it has for accounting purposes;
(c) “intangible asset” has the meaning it has for accounting purposes (and includes an internally-generated intangible asset);
(d) “goodwill” has the meaning it has for accounting purposes (and includes internally-generated goodwill);
(e) “entity” includes anything which is treated as an entity in the financial statements of the group (regardless of whether it has a legal personality as a body corporate).
Section 712(2) and (3) of CTA 2009 (“intangible asset” includes intellectual property) applies for the purposes of paragraph (c).
(7) An amount does not fall within A in subsection (1) if it is brought into account in determining a profit or loss on the disposal of a relevant asset.
(1) In section 416, “the capital (fair value movement) adjustment” means the sum of any relevant fair value movements.
(2) For the purposes of subsection (1) there is a “relevant fair value movement” where—
(a) the carrying value of a relevant asset is measured, for the purposes of the financial statements of the group, using fair value accounting, and
(b) an amount representing a change in the carrying value of the asset is brought into account in determining the group's profit before tax.
(3) The amount of the relevant fair value movement is the amount of the change mentioned in subsection (2)(b) and—
(a) is a positive amount where the change is a loss;
(b) is a negative amount where the change is a profit.
(4) References in this section to a change in the carrying value of a relevant asset do not include a change where the amount brought into account in respect of the change as mentioned in subsection (2)(b) is of a revenue nature.
(1) For the purposes of section 416, “the capital (disposals) adjustment” is—
A − B + C
where—
A is the sum of the amounts (if any) that are brought into account in determining the group's profit before tax and that represent losses on disposals of relevant assets;
B is the sum of the amounts (if any) that are brought into account in determining the group's profit before tax and that represent profits on disposals of relevant assets;
C is the sum of any recalculated profit amounts (see subsections (2) to (8)).
(2) For the purposes of the definition of C in subsection (1) there is a “recalculated profit amount” where the following two conditions are met.
(3) The first condition is that an amount is brought into account in determining the group's profit before tax in respect of a profit or loss on the disposal of a relevant asset.
(4) The second condition is that—
(a) the relevant proceeds, exceeds
(b) the relevant cost.
(5) The amount of the recalculated profit amount is the amount of the excess mentioned in subsection (4).
(6) In this section “the relevant proceeds” means the amount of income of a capital nature that is brought into account in determining the profit or loss mentioned in subsection (3).
(7) In this section “the relevant cost” means (subject to subsection (8)) the amount of expenditure of a capital nature that is brought into account in determining the profit or loss mentioned in subsection (3).
(8) For the purposes of subsection (7), any adjustment made to the amount brought into account as mentioned in that subsection is to be disregarded where the adjustment is in respect of amounts that—
(a) are otherwise recognised, in the financial statements of the group for the relevant period of account, as items of profit or loss, or
(b) were so recognised in the financial statements of the group for an earlier period.
(9) References in this section to a relevant asset include part of a relevant asset.
(10) References in this section to the disposal of a relevant asset do not include a disposal where the profit or loss (if any) on the disposal is of a revenue nature.
(11) The condition in subsection (3) is met even if no amount is brought into account as mentioned in that subsection if that is because no gain or loss accrued on the disposal; and subsections (6) to (8) apply accordingly.
420 Derivative contracts subject to fair value accounting
(1) This section makes provision about the amounts recognised in a worldwide group's financial statements for a period of account (“the relevant period of account”) in respect of derivative contracts.
(2) Subsection (3) applies where one or more excluded derivative contract amounts are recognised in the group's financial statements for the relevant period of account as items of profit or loss.
(3) The financial statements are treated for the purposes of this Part (apart from this section) as if the excluded derivative contract amounts were not recognised in the group's financial statements for the relevant period of account.
(4) In subsections (2) and (3) “excluded derivative contract amount” means an amount which would, on the relevant assumptions, be excluded from section 597(1) of CTA 2009 (amounts recognised in determining a company's profit or loss) as a result of a relevant provision of the Disregard Regulations.
(5) Subsection (6) applies where, on the relevant assumptions, one or more amounts (“replacement derivative contract amounts”) would be brought into account by members of the group for the purposes of corporation tax in relevant accounting periods as a result of regulation 9 or 10 of the Disregard Regulations.
(6) The financial statements are treated for the purposes of this Part (apart from this section) as if the replacement derivative contract amounts were recognised in the group's financial statements for the relevant period of account.
(7) Subsection (9) applies if an accounting period in which a replacement derivative contract amount would, on the relevant assumptions, be brought into account for the purposes of corporation tax contains one or more disregarded periods.
(8) A “disregarded period” is any period falling within the accounting period—
(a) which does not fall within the relevant period of account, or
(b) throughout which the company is not a member of the group.
(9) Where this subsection applies, the replacement derivative contract amount mentioned in subsection (7) is reduced by such amount as is referable, on a just and reasonable basis, to the disregarded period or periods mentioned in that subsection.
(10) An amount may be reduced to nil under subsection (9).
421 Derivative contracts subject to fair value accounting: interpretation
(1) In section 420 “the relevant assumptions” means the following assumptions—
(a) that all members of the group are within the charge to corporation tax;
(b) that elections under regulation 6A of the Disregard Regulations have effect in relation to each derivative contract of each member of the group;
(c) that paragraph (5) of regulation 7 of the Disregard Regulations is of no effect;
(d) that where—
(i) a member of the group (“member A”) holds a derivative contract,
(ii) the group has a hedging relationship between that derivative contract (on the one hand), and an asset, liability, receipt or expense (on the other), and
(iii) the asset, liability, receipt or expense is held, or is expected to be received or incurred, by a member of the group other than member A,
the asset, liability, receipt or expense is held, or is expected to be received or incurred, by member A;
(e) that the financial statements of members of the group deal with derivative contracts and hedged items in the same way as they are dealt with in the group's financial statements.
(2) For the purposes of subsection (1)(d) the group has a “hedging relationship” between a derivative contract (on the one hand) and an asset, liability, receipt or expense (on the other) if, were those things held, received or incurred by a single company, the company would have a hedging relationship between them.
(3) Regulation 2(5) of the Disregard Regulations (hedging relationships of a company) applies for the purposes of this section.
(4) For the purposes of section 420 and this section—
(a) “the Disregard Regulations” means the Loan Relationship and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004 (S.I. 2004/3256);
(b) the following are “relevant provisions” of the Disregard Regulations—
(i) regulation 7 (fair value profits or losses arising from derivative contracts which are currency contracts);
(ii) regulation 8 (profits or losses arising from derivative contracts which are commodity contracts or debt contracts);
(iii) regulation 9 (profits or losses arising from derivative contracts which are interest rate contracts).
(1) Where a group-EBITDA (chargeable gains) election has effect in relation to a period of account of a worldwide group (“the relevant period of account”), this Chapter applies in relation to the period subject to this section.
(2) Section 419 (the capital (disposals) adjustment) has effect as if—
(a) the definition of C in subsection (1) of that section did not apply, and
(b) instead, C were defined for the purposes of that section as—
(i) the sum of any relevant gains, less
(ii) the sum of any relevant losses,
or, where that is a negative amount, nil.
(3) For the purposes of this section, there is a “relevant gain” or “relevant loss” where condition A or B is met.
(4) Condition A is that a member of the group disposes of a relevant asset during the relevant period of account.
(5) Condition B is that—
(a) a member of the group ceases to be a member of the group during the relevant period of account, and
(b) the member held a relevant asset immediately before ceasing to be a member of the group.
(6) Where condition A is met, the amount of the relevant gain or relevant loss is the amount of the chargeable gain or allowable loss that would, on the assumptions in subsection (8), accrue to the member on the disposal.
(7) Where condition B is met, the amount of the relevant gain or relevant loss is the amount of the chargeable gain or allowable loss that would, on the assumptions in subsection (8), accrue to the member if the member—
(a) disposed of the relevant asset immediately before ceasing to be a member of the group, and
(b) received such consideration for that disposal as it is just and reasonable to attribute to it, having regard to the consideration received by the group for its interests in the member.
(8) The assumptions mentioned in subsections (6) and (7) are that—
(a) all members of the group are within the charge to corporation tax;
(b) Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with substantial shareholdings) is of no effect;
(c) Part 2 (double taxation relief) is of no effect.
(9) Where—
(a) the sum of any relevant losses, exceeds
(b) the sum of any relevant gains,
the amount of the excess is treated as a relevant loss in relation to the period of account of the group immediately after the relevant period of account.
(10) In this section “relevant asset” does not include shares in (or other interests giving an entitlement to share in the profits of) a member of the group.
423 Capitalised interest brought into account for tax purposes in accordance with GAAP
(1) Where an interest allowance (alternative calculation) election (see paragraph 16 of Schedule 7A) has effect in relation to a period of account of a worldwide group (“the relevant period of account”), this Chapter applies in relation to the period subject to this section.
(2) Section 413 (adjusted net group-interest expense of a worldwide group) has effect as if—
(a) subsections (3)(a) and (4)(a) (which relate to capitalised interest) did not apply in relation to a GAAP-taxable asset or liability, and
(b) subsections (3)(b) and (4)(b) (which relate to capitalised interest written off) did not apply in relation to a GAAP-taxable asset or liability.
(2A) Section 413 has effect, in the case of a GAAP-taxable asset that is a relevant asset, as if—
(a) the definition of “upward adjustment” included so much of its carrying value written down in the group’s financial statements for the relevant period of account as is attributable to a relevant expense amount brought into account in the group’s financial statements in determining its carrying value, and
(b) the definition of “downward adjustment” included so much of the reduction of its carrying value written down in the group’s financial statements for the relevant period of account as is attributable to a relevant income amount brought into account in the group’s financial statements in determining its carrying value.
(2AA) Section 413 has effect, in the case of a GAAP-taxable asset within subsection (2AB), as if—
(a) the definition of “upward adjustment” included so much of its carrying value as is attributable to a relevant expense amount (whether or not that amount is brought into account in the group’s financial statements for the relevant period of account); and
(b) the definition of “downward adjustment” included so much of its carrying value as is attributable to a relevant income amount (whether or not that amount is brought into account in the group’s financial statements for the relevant period of account).
(2AB) A GAAP-taxable asset is within this subsection if it is (or, under section 173 of TCGA 1992, is treated as being) appropriated, in a relevant accounting period in relation to a period of account, from trading stock to fixed assets.
(2B) For the purposes of subsection (2A) it does not matter whether the relevant expense or income amount is brought into account in determining the asset’s carrying value in the group’s financial statements for the relevant period of account or an earlier period.
(3) But subsections (2)(b), (2A) and (2AA) of this section are of no effect so far as the adjusted net group-interest expense of the group for a period of account before the relevant period of account included any amount by virtue of section 413(3)(a) or (4)(a) in respect of the GAAP-taxable asset or liability.
(4) For the purposes of this section an asset or liability is “GAAP-taxable” if any profit or loss for corporation tax purposes in relation to the asset or liability falls to be calculated in accordance with generally accepted accounting practice (and, for the purposes of this subsection, an asset is a GAAP-taxable asset even if an election under section 730 of CTA 2009 is, or could be, made in respect of it).
(5) For the purposes of this section, all members of the group are treated as within the charge to corporation tax.
(1) Where an interest allowance (alternative calculation) election has effect in relation to a period of account of a worldwide group, this Chapter applies in relation to the period subject to this section.
(2) The definition of “the group's profit before tax” in subsection (2) of section 416 has effect as if references to amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, did not include amounts so recognised in respect of employer pension contributions.
(3) The group's profit before tax, as defined in that section, is reduced by the total of the relief to which members of the group are entitled, by virtue of sections 196 to 200 of FA 2004, in respect of relevant employer pension contributions paid during the period.
(4) In this section—
(a) “employer pension contributions” means contributions paid by an employer under a registered pension scheme in respect of an individual;
(b) employer pension contributions are “relevant” if they are paid at a time at which the employer is a member of the group.
(1) Where an interest allowance (alternative calculation) election has effect in relation to a period of account of a worldwide group, this Chapter applies in relation to the period subject to this section.
(2) The definition of “the group’s profit before tax” in section 416(2) has effect as if references to amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, excluded amounts so recognised in respect of employees’ remuneration that are not paid before the end of the period of 9 months immediately following the end of the period of account.
(3) If—
(a) an amount is, as a result of subsection (2), excluded from the financial statements of the group for the period of account, and
(b) the amount is paid in a later period of account of the group in relation to which an interest allowance (alternative calculation) election has effect,
the definition of “the group’s profit before tax” in section 416(2) has effect as if references to amounts that are recognised in the financial statements of the group for the later period of account, as items of profit or loss, included the amount that is paid in that later period.
(4) Section 1289 of CTA 2009 (unpaid remuneration: supplementary) applies for the purposes of this section as it applies for the purposes of section 1288 of that Act.
(1) Where an interest allowance (alternative calculation) election has effect in relation to a period of account of a worldwide group, this Chapter applies in relation to the period subject to this section.
(2) The definition of “the group's profit before tax” in subsection (2) of section 416 has effect as if references to amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, did not include amounts so recognised in respect of employee share acquisition arrangements.
(3) The group's profit before tax, as defined in that section, is reduced by such amount as, on a just and reasonable basis, reflects the effect on the group in the period of—
(a) deductions allowed to members of the group under Part 11 of CTA 2009 (relief for particular employee share acquisition schemes) and amounts treated as received by members of the group under that Part, and
(b) relief given to members of the group under Part 12 of that Act (other relief for employee share acquisitions).
(4) In this section “employee share acquisition arrangements” means arrangements the corporation tax treatment of which is determined under Part 11 or 12 of CTA 2009.
(5) For the purposes of this section, all members of the group are treated as within the charge to corporation tax.
(1) Where an interest allowance (alternative calculation) election has effect in relation to a period of account of a worldwide group (“the relevant period of account”), this Chapter applies in relation to the period subject to this section.
(2) The financial statements of the group for the relevant period of account are to be treated as subject to such adjustments as would be made to them under the change of accounting policy provisions if the group were a company that—
(a) was within the charge to corporation tax,
(b) held the assets and owed the liabilities recognised in the financial statements, to the extent that they are so recognised, and
(c) carried on the trades and other activities giving rise to amounts recognised in the financial statements as items of profit and loss.
(3) In this section “the change of accounting policy provisions” means the following provisions as modified by subsection (4)—
(a) Chapter 14 of Part 3 of CTA 2009 (trading profits);
(ab) sections 261 and 262 of that Act (property profits);
(b) sections 315 to 319 of that Act (loan relationships);
(c) sections 613 to 615 of that Act (derivative contracts);
(d) Chapter 15 of Part 8 of that Act (intangible fixed assets);
(e) the Loan Relationships and Derivative Contracts (Change of Accounting Practice) Regulations 2004 (S.I. 2004/3271);
(f) paragraphs 12 to 17 of Schedule 14 to FA 2019 (transitional provision following the repeal of section 53 of FA 2011) so far as they have effect in relation to adjustments under Chapter 14 of Part 3 of CTA 2009 or sections 261 and 262 of that Act.
(4) The provisions mentioned in subsection (3)—
(a) are to have effect for the purposes of this section as if their application were limited to cases where there is a change of accounting policy and as if any election had been made under the provisions, and
(b) are to have effect subject to any modifications necessary for the purposes of this section.
(1) Where an interest allowance (non-consolidated investment) election (see paragraph 17 of Schedule 7A) has effect in relation to a period of account of a worldwide group, this Chapter applies in relation to the period subject to this section.
(2) In this section and section 428 (which contains further interpretative provision)—
(a) “the principal worldwide group” means the worldwide group mentioned in subsection (1);
(b) “the relevant period of account” means the period of account mentioned in subsection (1).
(3) The financial statements of the principal worldwide group for the relevant period of account are treated as if—
(a) no relevant income amounts were recognised in them, as items of profit or loss, so far as they relate to financial liabilities owed to any member of the principal worldwide group by any member of an associated worldwide group, and
(b) no amounts were recognised in them, as items of profits or loss, in respect of any profit or loss attributable to an interest held by any member of the principal worldwide group in any member of an associated worldwide group
(4) The adjusted net group-interest expense of the principal worldwide group for the relevant period of account is treated as increased by the appropriate proportion of the adjusted net group-interest expense for the period of each associated worldwide group.
(5) The qualifying net group-interest expense of the principal worldwide group for the relevant period of account is treated as increased by the appropriate proportion of the qualifying net group-interest expense for the period of each associated worldwide group.
(5A) Any increase to be made as a result of subsection (4) or (5) is to be made as part of a single calculation required by section 413(1) or 414(1) (so that the amount produced by that calculation is subject to section 413(2) or 414(2)).
(6) The group-EBITDA of the principal worldwide group for the relevant period of account is treated as increased by the appropriate proportion of the group-EBITDA of each associated worldwide group for the period.
(7) In this section “the appropriate proportion”, in relation to an associated worldwide group means the proportion of the profits or losses of the associated worldwide group arising in the relevant period of account to which the principal worldwide group is entitled.
(1) This section has effect for the purposes of section 427 and this section.
(2) “Associated worldwide group” means the worldwide group of which a specified non-consolidated associate is the ultimate parent.
(3) Where (apart from this subsection) a specified non-consolidated associate does not fall within section 473(1)(a) (conditions for being the ultimate parent of a worldwide group), it is treated as if it did fall within that provision.
(4) Where (apart from this subsection) financial statements of an associated worldwide group are not drawn up in respect of the relevant period of account, IAS financial statements of the associated worldwide group are treated as having been drawn up in respect of that period.
(5) The associated worldwide group's financial statements for the relevant period of account are treated as if no relevant expense amounts were recognised in them, as items of profit or loss, so far as they relate to financial liabilities owed to any member of the principal worldwide group by any member of the associated worldwide group.
(6) The reference in section 427(6) to profits or losses of the associated worldwide group to which the principal worldwide group is entitled does not include any profits or losses that relate to times when the non-consolidated associate is a member of the principal worldwide group.
(7) Subsection (8) has effect in the application of this Part (for the purposes mentioned in subsection (1)) in relation to the financial statements of an associated worldwide group for the relevant period of account.
(8) The associated worldwide group is treated—
(a) as having made an interest allowance (alternative calculation) election if and only if such an election has effect in relation to the relevant period of account of the principal worldwide group, and
(b) as not having made any other election under this Part.
(9) In this section “specified” means specified in the interest allowance (non-consolidated investment) election.
(1) An entity is a “non-consolidated associate” of a worldwide group, in relation to a period of account of the group (“the relevant period of account”) if condition A, B , C or D is met.
(2) Condition A is that the ultimate parent’s interest in the entity is accounted for in the financial statements of the group for the relevant period of account—
(a) as a joint venture or an associate, and
(b) using the gross equity method or the equity method.
(3) Condition B is that—
(a) the entity is a partnership, and
(b) an interest allowance (consolidated partnership) election has effect in relation to the relevant period of account.
(4) Condition C is the entity is a non-consolidated subsidiary of the ultimate parent at any time during the relevant period of account.
(4A) Condition D is that—
(a) the entity is—
(i) a partnership, or
(ii) a transparent entity (other than a partnership), and
(b) the ultimate parent’s interest in the entity is accounted for in the financial statements of the group for the relevant period of account on the basis of fair value accounting.
(5) In this section the following expressions have the meaning they have for accounting purposes—
“associate”;
“equity method”;
“gross equity method”;
“joint venture”.
(6) For the purposes of this section—
(a) “entity” includes anything which may be treated as an entity for accounting purposes (regardless of whether it has a legal personality as a body corporate);
(b) an entity is “transparent” if—
(i) it is not chargeable to corporation tax or income tax as a person (ignoring any exemptions), or
(ii) it is a collective investment vehicle which is “transparent for income tax purposes” for the purposes of paragraph 8 of Schedule 5AAA to TCGA 1992 (see paragraph 8(7) of that Schedule).
(7) This section has effect for the purposes of this Part.
(1) Where an interest allowance (consolidated partnerships) election (see paragraph 18 of Schedule 7A) has effect in relation to a period of account of a worldwide group, this Chapter applies in relation to the period subject to this section.
(2) The financial statements of the group for the period are treated as if—
(a) no amounts were recognised in them, as items of profit or loss, in respect of any income or expenses of a specified consolidated partnership, and
(b) instead, each specified consolidated partnership were accounted for using the equity method.
(3) In subsection (2)(b) “the equity method” has the meaning it has for accounting purposes.
(4) In this Part “consolidated partnership”, in relation to a period of account of a worldwide group, means a partnership in relation to which conditions A and B are met.
(5) Condition A is that, in the financial statements of the worldwide group for the period, the results of the partnership are consolidated with those of the ultimate parent as the results of a single economic entity.
(6) Condition B is that at no time during the period does the partnership have a subsidiary that is a company.
(7) In this section—
(a) “specified” means specified in the interest allowance (consolidated partnerships) election or elections;
(b) “subsidiary” has the meaning given by international accounting standards.
In this Chapter the following expressions have the meaning they have for accounting purposes—
“item of profit or loss”;
“item of other comprehensive income”.
(1) This Chapter —
(a) alters the way in which this Part has effect in relation to companies (referred to as “qualifying infrastructure companies”) that are fully taxed in the United Kingdom, and
(b) operates by reference to the provision of public infrastructure assets or the carrying on of certain other related activities.
(2) In addition to the requirement for the company to be fully taxed in the United Kingdom, the qualifying requirements are—
(a) a requirement designed to ensure that the company's income and assets are referable to activities in relation to public infrastructure assets, and
(b) a requirement for the company to make an election (which may be revoked, subject to a 5-year rule in relation to the revocation and the ability to make a fresh election).
(3) Two different types of asset meet the definition of a “public infrastructure asset”, namely—
(a) tangible assets forming part of the infrastructure of the United Kingdom (or the UK sector of the continental shelf) that meet a public benefit test, and
(b) buildings (or parts of buildings) that are part of a UK property business and are let (or sub-let) on a short-term basis to unrelated parties.
(4) In either case an asset counts as a public infrastructure asset only if—
(a) it has had, has or is likely to have an expected economic life of at least 10 years, and
(b) it is shown in a balance sheet of a member of the group that is fully taxed in the United Kingdom.
(5) The detail of the above tests is set out in sections 433 to 437.
(6) The substantive rules provide that an amount does not count as a tax-interest expense amount if—
(a) the creditor in relation to the amount is an unrelated party or another qualifying infrastructure company or the amount is in respect of a loan relationship entered into on or before 12 May 2016 (see sections 438 and 439), and
(b) the recourse of the creditor in relation to the amount is limited to the income or assets of, or shares in or debt issued by, a qualifying infrastructure company (ignoring certain financial assistance and certain non-financial guarantees).
(7) In addition—
(a) provision is made for adjusting the operation of this Part to take into account the effect of the above rules (for example, the tax-EBITDA of a qualifying infrastructure company is treated as nil (see section 441)),
(b) provision is made modifying the operation of this Chapter in the case of joint venture companies or partnerships or other transparent entities (see sections 444 to 447), and
(c) provision is made in relation to the decommissioning of a public infrastructure asset (see section 448).
433 Meaning of “qualifying infrastructure company”
(1) For the purposes of this Chapter a company is a “qualifying infrastructure company” throughout an accounting period if—
(a) it meets the public infrastructure income test for the accounting period (see subsections (2) to (4)),
(b) it meets the public infrastructure assets test for the accounting period (see subsections (5) to (10)),
(c) it is fully taxed in the United Kingdom in the accounting period (see subsections (11) and (12)), and
(d) it has made an election for the purposes of this section that has effect for the accounting period (see section 434).
(2) A company meets the public infrastructure income test for an accounting period if all, or all but an insignificant proportion, of its income for the accounting period derives from—
(a) qualifying infrastructure activities carried on by the company (see sections 436 and 437),
(b) shares in a qualifying infrastructure company, or
(c) loan relationships or other financing arrangements to which the only other party is a qualifying infrastructure company.
(3) A company also meets the public infrastructure income test for an accounting period if it has no income for the period.
(4) In determining whether the public infrastructure income test for an accounting period is met, income which does not derive from any of the matters mentioned in subsection (2)(a) to (c) is ignored if, having regard to all the circumstances, it is reasonable to regard the amount of the income as insignificant.
(5) A company meets the public infrastructure assets test for an accounting period if all, or all but an insignificant proportion, of the total value of the company's assets recognised in an appropriate balance sheet on each day in that period derives from—
(a) tangible assets that are related to qualifying infrastructure activities,
(b) service concession arrangements in respect of assets that are related to qualifying infrastructure activities,
(c) financial assets to which the company is a party for the purpose of the carrying on of qualifying infrastructure activities by the company or another associated qualifying infrastructure company,
(ca) assets held for the purposes of a pension scheme under which benefits are provided to, or in respect of, persons employed for the purpose of the carrying on of qualifying infrastructure activities by the company or another associated qualifying infrastructure company,
(cb) assets in respect of deferred tax so far as attributable to qualifying infrastructure activities carried on by the company or another associated qualifying infrastructure company,
(d) shares in a qualifying infrastructure company, or
(e) loan relationships or other financing arrangements to which the only other party is a qualifying infrastructure company.
(6) If a company has no assets recognised in an appropriate balance sheet on any day in an accounting period, the company is to be taken as meeting the public infrastructure assets test in respect of that day.
(7) In determining whether the public infrastructure assets test for an accounting period is met in respect of any day, the value of an asset which does not derive from any of the matters mentioned in subsection (5)(a) to (e) is ignored if, having regard to all the circumstances, it is reasonable to regard the value of the asset as insignificant.
(8) For the purposes of subsection (5)(a) and (b) assets are “related to qualifying infrastructure activities” in the case of a company if the assets are—
(a) public infrastructure assets (see section 436(2) and (5)) in relation to the company that are provided by the company, or
(b) other assets used in the course of a qualifying infrastructure activity carried on by the company or by an associated qualifying infrastructure company.
(9) For the purposes of this section the reference to the value of an asset recognised in an appropriate balance sheet of a company on a day is to the value which is, or would be, recognised in a balance sheet of the company drawn up on that day.
(10) A company is not to be taken as failing to meet the public infrastructure assets test for an accounting period if, ignoring this subsection, that test would have been failed on a particular day or days merely as a result of particular circumstances—
(a) which existed, and
(b) which were always intended to exist,
for a temporary period of an insignificant duration.
(11) A company is fully taxed in the United Kingdom in an accounting period if—
(a) every source of income that the company has at any time in the accounting period is within the charge to corporation tax,
(b) the company has not made an election under section 18A of CTA 2009 (exemption for profits or losses of foreign permanent establishments) that has effect for the accounting period, and
(c) the company has not made a claim for relief under Chapter 2 of Part 2 (double taxation relief) for the accounting period.
(12) In determining whether the condition in subsection (11)(a) is met in the case of a company not resident in the United Kingdom in an accounting period, a source of income of the company is ignored if, having regard to all the circumstances, it is reasonable to regard as insignificant the amount of income arising in the accounting period from the source.
(1) An election under section 433—
(a) must be made before the end of the accounting period in relation to which it is to have effect, and
(b) has effect in relation to that accounting period and all subsequent accounting periods (subject to subsections (2) to (4)).
(2) An election under section 433 may be revoked.
(3) A revocation of an election under section 433—
(a) must be made before the beginning of the accounting period from which the revocation is to have effect, but
(b) cannot have effect in relation to any accounting period that begins before the end of the period of 5 years beginning with the first day of the first accounting period in relation to which the election had effect.
(4) Once revoked, a fresh election may be made under section 433 but cannot have effect in relation to any accounting period that begins before the end of the period of 5 years beginning with the first day of the accounting period from which the revocation had effect.
(5) If—
(a) a qualifying infrastructure company transfers to another company a business, or a part of a business, that consists of the carrying on of qualifying infrastructure activities,
(ab) the time of the transfer falls in a period of account of a worldwide group of which both the transferor and transferee are members, and
(b) the transferee has not made an election under section 433 that has effect for the accounting period in which the transfer takes place,
the transferee is to be treated as if it had made the election under that section that the transferor had made.
(6) If a company has made an election under section 433 that has effect in relation to an accounting period, the company—
(a) may not make an election under section 18A of CTA 2009 that has effect for the accounting period, and
(b) may not make a claim for relief under Chapter 2 of Part 2 for the accounting period.
435 Group elections modifying the operation of sections 433 and 434
(1) Two or more companies which are members of the same worldwide group , and have each made an election under section 433, may jointly make an election under this section modifying the operation of sections 433 and 434 in relation to them for the times during which they remain members of that group.
(2) An election under this section—
(aa) must be made before the end of the earliest elected accounting period (see subsection (11));
(a) has effect from a date specified in the election , which may not be before the first day of the earliest elected accounting period;
(b) may be revoked jointly by the members of the group in relation to which the election has effect from a date specified in the revocation;
(c) ceases to have effect in relation to a company which gives a notice to an officer of Revenue and Customs, and to the companies in relation to which the election has effect, notifying them of its withdrawal from the election from a date specified in the notice.
(3) A date specified in a revocation or notice may not be before the date on which it is made or given.
(4) An election under this section which has effect at particular times (“relevant times”) in relation to particular companies (“elected companies”) modifies the operation of sections 433 and 434 as follows.
(5) If an elected company (“C”) has made an election under section 433 which has effect for an accounting period that includes relevant times, that section has effect as if, in determining whether anything is insignificant for the purposes of section 433(2), (4), (5) or (7), C also had the income and assets that the other elected companies had at those times.
(6) If—
(a) an elected company (“C”) has made an election under section 433 which has effect for an accounting period including relevant times, and
(b) C fails to meet one or more of the tests in subsection (1)(a) to (c) of that section in relation to that accounting period otherwise than as a result of this subsection,
all the other elected companies are also treated as failing to meeting those tests for so much of their accounting periods as consists of the relevant times in the accounting period of C.
(7) If, in a case where subsection (6) applies, the deemed failed period does not coincide with an accounting period of another elected company (“E”), the accounting period of E is treated for the purposes of this Part as if it consisted of separate accounting periods beginning and ending at such times as secure that none of the separate accounting periods fall partly within the deemed failed period.
(8) For this purpose “the deemed failed period” means the period consisting of the relevant times in the accounting period of C mentioned in subsection (6).
(9) All such apportionments as are necessary for the purposes of, or in consequence of, subsections (5) to (7) are to be made on a just and reasonable basis.
(10) If—
(a) elected companies have made elections under section 433 which have effect for accounting periods including relevant times, and
(b) more than half of those elected companies have each made an election under that section that has had effect for a period of at least 5 years,
section 434(3)(b) does not apply in relation to any of the elected companies.
(11) The “earliest elected accounting period” is the accounting period which—
(a) is the first elected accounting period of an elected company, and
(b) begins no later than the first elected accounting period of each other elected company.
(12) For the purposes of subsection (11), the “first elected accounting period” of an elected company is the first of the company’s accounting periods in relation to which the election is to have effect.
(13) If there is more than one earliest elected accounting period under subsection (11) and those periods (the “relevant periods”) do not all end on the same date, the “earliest elected accounting period” is the relevant period that ends no later than each of the other relevant periods.
436 Meaning of “qualifying infrastructure activity”
(1) For the purposes of this Chapter a company carries on a “qualifying infrastructure activity” if the company—
(a) provides an asset that is a public infrastructure asset in relation to it (see subsections (2) and (5)), or
(b) carries on any other activity that is ancillary to, or facilitates, the provision of an asset that is a public infrastructure asset in relation to it.
(2) For the purposes of this Chapter an asset is a “public infrastructure asset” in relation to a company at any time if—
(a) the asset is, or is to be, a tangible asset forming part of the infrastructure of the United Kingdom or the UK sector of the continental shelf,
(b) the asset meets the public benefit test (see subsections (3) and (4)),
(c) the asset has had, has or is likely to have an expected economic life of at least 10 years, and
(d) the asset meets the group balance sheet test (see subsections (10) and (10A)) in relation to the company.
(3) An asset meets the “public benefit test” if—
(a) the asset is, or is to be, procured by a relevant public body, or
(b) the asset is, or is to be, used in the course of a regulated activity.
(4) An asset is used in the course of a “regulated activity” if its use—
(a) is regulated by an infrastructure authority (see section 437(2)), or
(b) could be regulated by an infrastructure authority if the authority exercised any of its powers.
(5) For the purposes of this Chapter a building, or part of a building, is also a “public infrastructure asset” in relation to a company at any time if—
(a) the building or part is, or is to be, let on a short-term basis —
(i) within a UK property business carried on by the company, or another member of the worldwide group of which it is a member at that time, and
(ii) to persons who, at that time, are not related parties of the company or member.
(c) the building or part has had, has or is likely to have an expected economic life of at least 10 years, and
(d) the building or part meets the group balance sheet test in relation to the company.
(5A) But a building, or part of a building, is not a public infrastructure asset in relation to a company at a particular time if, were the building or part to be disposed of at that time, profits arising from the disposal would be charged to corporation tax as profits of a trade.
(6) A building, or part of a building, is “let” to a person if the person is entitled to the use of the building or part under a lease or other arrangement.
(7) A building, or part of a building, is let on a “short-term basis” if the lease or other arrangement in question—
(a) has an effective duration which is 50 years or less, and
(b) is not an arrangement to which any provision of Chapter 2 of Part 16 of CTA 2010 applies (finance arrangements).
(8) Whether or not a lease or other arrangement has an effective duration which is 50 years or less is determined in accordance with Chapter 4 of Part 4 of CTA 2009 (reading any reference to a lease as a reference to a lease or other arrangement within subsection (6)).
(9) For the purposes of this section references to a building or part of a building being let include the building or part being sub-let, and, accordingly, references to a lease include a sub-lease.
(10) An asset meets the “group balance sheet test” in relation to a company at any time if—
(a) an entry in respect of the asset is, or would be, recognised (whether as a tangible asset or otherwise) in a balance sheet of the company, or an associated company, that is drawn up at that time, and
(b) the company or associated company is within the charge to corporation tax at that time in respect of all of its sources of income and no election or claim mentioned in section 433(11)(b) or (c) has effect for a period including that time.
(10A) In determining whether the condition in subsection (10)(b) is met in relation to a company not resident in the United Kingdom at any time, a source of income of the company is ignored if, having regard to all the circumstances, it is reasonable to regard as insignificant the amount of income arising from the source for the accounting period including that time.
(11) For the purposes of this Chapter references to provision, in relation to a public infrastructure asset, include its acquisition, design, construction, conversion, improvement, operation or repair.
(1) In section 436 “infrastructure” includes—
(a) water, electricity, gas, telecommunications or sewerage facilities,
(b) oil pipelines, oil terminals or oil refineries,
(c) railway facilities (including rolling stock), roads or other transport facilities,
(d) health or educational facilities,
(e) facilities or housing accommodation provided for use by members of any of the armed forces or of any police force,
(f) court or prison facilities,
(g) waste processing facilities, and
(h) buildings (or parts of buildings) occupied by any relevant public body.
(2) Each of the following is an “infrastructure authority” for the purposes of section 436(4)—
(a) the Civil Aviation Authority so far as exercising functions in relation to the provision of airports (within the meaning of the Airports Act 1986),
(b) each of the following so far as exercising functions in relation to waste processing—
(i) the Environment Agency,
(ii) the Scottish Environmental Protection Agency,
(iii) the Northern Ireland Environment Agency, or
(iv) Natural Resources Wales,
(c) the Gas and Electricity Markets Authority,
(d) each of the following so far as exercising functions in relation to the management of ports or harbours—
(i) a harbour authority within the meaning of the Harbours Act 1964, or
(ii) a harbour authority within the meaning of the Harbours Act (Northern Ireland) 1970,
(e) the Northern Ireland Authority for Utility Regulation,
(f) the Office of Communications so far as exercising functions in relation to the provision of electronic communication services (within the meaning of the Communications Act 2003) or the management of the radio spectrum,
(g) the Office of Nuclear Regulation,
(h) the Office of Rail and Road,
(i) the Oil and Gas Authority,
(j) the Water Services Regulation Authority or the Water Industry Commission for Scotland, or
(k) any other public authority which has functions of a regulatory nature exercisable in relation to the use of tangible assets forming part of the infrastructure of the United Kingdom or the UK sector of the continental shelf.
(3) The Commissioners may by regulations amend the definition of “infrastructure authority”.
438 Exemption for interest payable to third parties etc
(1) Amounts that arise to a qualifying infrastructure company in a relevant accounting period are not to be regarded for the purposes of this Part as tax-interest expense amounts of the company so far as they qualify as exempt amounts in that period (see subsections (2) and (3)).
(2) An amount qualifies as an exempt amount so far as it is attributable, on a just and reasonable apportionment, to the times in the relevant accounting period when—
(a) each creditor in relation to the amount is within subsection (3) or the amount is in respect of a qualifying old loan relationship (see section 439), and
(b) the recourse of each creditor in relation to the amount is limited to relevant infrastructure matters (see subsections (4) to (6)).
(3) A creditor is within this subsection if—
(a) the creditor is not a related party of the company, or
(b) the creditor is a company which is a qualifying infrastructure company,
but section 466(2) does not apply for the purposes of paragraph (a).
(4) The recourse of a creditor is limited to relevant infrastructure matters if, in the event that the company fails to perform its obligations in question, the recourse of the creditor is limited to—
(a) income of a qualifying infrastructure company,
(b) assets of a qualifying infrastructure company, or
(c) shares in or debt issued by a qualifying infrastructure company,
whether the income, assets, shares or debt relate to the company concerned or another qualifying infrastructure company.
(5) For the purposes of subsection (4) a guarantee, indemnity or other financial assistance in favour of the creditor is ignored if—
(a) it is provided before 1 April 2017, or
(b) it is provided at any later time by a person who, at that time, is not a related party of the company or is a relevant public body.
(5A) For the purposes of subsection (4) a guarantee, indemnity or other financial assistance in favour of the creditor is also ignored if—
(a) it is provided before 29 October 2018,
(b) the company concerned has not been UK resident at any time before that date, and
(c) the amount concerned is in respect of a loan relationship, derivative contract or relevant arrangement or transaction (within the meaning of section 382(4)) to which the member in question is a party for the purposes of its UK property business.
(6) For the purposes of subsection (4) a non-financial guarantee in favour of the creditor is ignored if—
(a) it guarantees the performance by any person of contractual obligations to provide goods or services to a qualifying infrastructure company,
(b) it is given by the person providing the goods or services or by a person who is a related party of that person, and
(c) the maximum amount for which the guarantor is liable does not exceed the consideration given under the contract for the provision of the goods or services.
(7) In this section “creditor” means—
(a) if the amount meets condition A in section 382, the person who is party to the loan relationship as creditor,
(b) if the amount meets condition B in that section, the person other than the company who is party to the derivative contract, and
(c) if the amount meets condition C in that section, the person other than the company who is party to the relevant arrangement or transaction.
438A Application of section 438: certain creditors treated as qualifying infrastructure companies
(1) This section applies where—
(a) a company (“C”), at a time in the period mentioned in subsection (1) of section 438—
(i) is a member of the worldwide group of which the qualifying infrastructure company mentioned in that subsection is a member, but
(ii) is not a UK group company; and
(b) C is a creditor in relation to an amount which—
(i) is a relevant loan relationship debit (as defined in section 383) for the debtor company, or
(ii) would be a relevant loan relationship debit if the debtor company were UK resident.
(2) For the purposes of section 438, C is treated in relation to the amount mentioned in subsection (1)(b) (the “relevant loan amount”) as a qualifying infrastructure company if—
(a) throughout the period mentioned in section 438(1), C—
(i) meets the public infrastructure income test for the accounting period (see subsections (2) to (4) of section 433) and subsection (3) of this section), and
(ii) meets the public infrastructure assets test for the accounting period (see subsections (5) to (10) of that section and subsection (4) of this section),
(but does not satisfy the conditions in subsection (1)(c) and (d) of section 433);
(b) the loan to which the relevant loan amount relates (the “relevant loan”) is fully funded by another loan (the “corresponding loan”) made to C for that purpose and on substantially the same terms as the relevant loan; and
(c) amounts arising to C in respect of the corresponding loan would, if section 438(2) applied to C, qualify as “exempt amounts” within the meaning of that subsection.
(3) For the purposes of subsection (2)(a)(i), C is also treated as meeting the public infrastructure income test for an accounting period if all, or all but an insignificant proportion, of its income for the period derives from—
(a) anything listed in any of paragraphs (a) to (c) of section 433(2),
(b) shares in, or debt issued by, a company that meets the test in section 433(2) for that period,
(c) shares in or debt issued by a company that is treated as meeting the public infrastructure income test for that period by reason of this subsection.
(4) For the purposes of subsection (2)(a)(ii), C is also treated as meeting the public infrastructure assets test for an accounting period if all, or all but an insignificant proportion, of the total value of the company's assets recognised in an appropriate balance sheet on each day in that period derives from—
(a) anything listed in any of paragraphs (a) to (e) of section 433(5),
(b) shares in, or debt issued by, a company that meets the test in section 433(5) for that period,
(c) shares in or debt issued by a company that is treated as meeting the public infrastructure assets test for that period by reason of this subsection.
(5) For the purposes of determining whether amounts arising to C would qualify as exempt amounts under section 438(2) (for the purposes of subsection (2)(c) of this section), the recourse of a creditor is treated as being limited to relevant infrastructure matters if, in the event that C fails to perform its obligations in question, the recourse of the creditor is limited to—
(a) anything listed in paragraphs (a) to (c) of section 438(4),
(b) shares in or debt issued by a company whose income and assets consist wholly of income and assets within those paragraphs,
(c) shares in or debt issued by a company whose income and assets consist wholly of income and assets within paragraphs (a) or (b) of this subsection, or
(d) shares in or debt issued by a company whose income and assets consists wholly of income and assets within paragraphs (a) to (c) of this subsection, and so on.
(6) For the purposes of subsection (5), in determining whether a company’s income and assets consists wholly of income and assets of a particular description, any source of income or any asset is ignored if, having regard to all the circumstances, it is reasonable to regard as insignificant the amount of income arising from the source, or (as the case may be) the value of the asset recognised, in the accounting period.
439 Exemption in respect of certain pre-13 May 2016 loan relationships
(1) A loan relationship is a “qualifying old loan relationship” of a qualifying infrastructure company if—
(a) the company entered into the loan relationship on or before 12 May 2016, and
(b) as at that date, at least 80% of the total value of the company's future qualifying infrastructure receipts for the qualifying period was highly predictable by reference to qualifying public contracts,
but see subsection (8) for cases where a loan relationship is not a qualifying old loan relationship of the company.
(2) For the purposes of this section “the qualifying period” means—
(a) in a case where the loan relationship would cease to subsist at any time before 12 May 2026 (if any amendments of the loan relationship made on or after 12 May 2016 are ignored), the period beginning with 12 May 2016 and ending with that time, and
(b) in any other case, the period of 10 years beginning with 12 May 2016.
(3) For the purposes of this section “qualifying infrastructure receipts”, in relation to a company (“C”), means—
(a) receipts arising from qualifying infrastructure activities carried on by C, and
(b) such proportion of the receipts arising from qualifying infrastructure activities carried on by another company as, on a just and reasonable basis, is attributable to C's interests in the other company (whether direct or indirect) arising as a result of shares or loans ,
but ignoring amounts that represent the reimbursement of expenses incurred by C or the other company.
(4) For the purposes of this section receipts are highly predictable by reference to qualifying public contracts so far as their value can be predicted with a high degree of certainty because—
(a) the amounts of the receipts are fixed by a qualifying public contract, and
(b) the factors affecting the volume of receipts are fixed by a qualifying public contract or are otherwise capable of being predicted with a high degree of certainty.
(5) For this purpose any provision of a qualifying public contract (however expressed) that adjusts the amount of a receipt for changes in the general level of prices or earnings is to be ignored.
(6) For the purposes of this section a contract is a “qualifying public contract” if—
(a) it was entered into at any time on or before 12 May 2016 and, as at that time, it was expected to have effect for at least 10 years, and
(b) it was entered into either with a relevant public body or following bids made in an auction conducted by a relevant public body.
(7) If a qualifying old loan relationship is amended after 12 May 2016 so as to increase the amount lent or extend the period for which the relationship is to subsist—
(a) section 438 is to have effect as if none of those amendments were made (and, accordingly, the exemption under that section has no effect in relation to the increase in the amount or the period of the extension), and
(b) such apportionments of amounts in respect of the relationship are to be made as are just and reasonable.
(8) A loan relationship to which a qualifying infrastructure company is a party at any time is not a qualifying old loan relationship of the company at that or any subsequent time if, on the relevant assumptions, the condition in subsection (1)(b) would not have been met.
(9) The relevant assumptions are that—
(a) the assets held by the company at that time were the only assets that the company held on 12 May 2016,
(b) the assets held at that time by any other company in which it has interests (whether direct or indirect) arising as a result of shares or loans were the only assets that the other company held on 12 May 2016, and
(c) a qualifying infrastructure receipt could not be regarded as highly predictable if, on 12 May 2016, the public infrastructure asset in question did not exist or was not in the course of being constructed or converted.
(10) For the purposes of this section the value of a receipt on 12 May 2016 is taken to be its present value on that date, discounted using a rate that can reasonably be regarded as one that, in accordance with normal commercial criteria, is appropriate for the purpose.
(11) In this section “receipts” means receipts of a revenue nature.
440 Loans etc made by qualifying infrastructure companies to be ignored
(1) This section applies where—
(a) a company is a qualifying infrastructure company throughout an accounting period, and
(b) the company would (but for this section) have had tax-interest income amounts in the accounting period.
(2) For the purposes of this Part, the company is treated as if it did not have any tax-interest income amounts in the accounting period.
441 Tax-EBITDA of qualifying infrastructure company to be nil
(1) This section applies where a company is a qualifying infrastructure company throughout an accounting period.
(2) For the purposes of this Part, the tax-EBITDA of the company for the accounting period is nil.
442 Amounts of qualifying infrastructure company left out of account for other purposes
(1) This section applies where a company is a qualifying infrastructure company throughout a relevant accounting period.
(2) In calculating—
(a) the adjusted net group-interest expense of the worldwide group for the period of account concerned, or
(b) the qualifying net group-interest expense of the worldwide group for the period of account concerned,
amounts that are exempt amounts of the company under section 438, or are treated as mentioned in section 440, are to be left out of account.
(3) For the purposes of this Part the group EBITDA of the worldwide group for the period of account concerned is to be calculated as if the group did not include the company in respect of the relevant accounting period.
443 Interest capacity for group with qualifying infrastructure company etc
(1) If a worldwide group for a period of account includes a qualifying infrastructure company at any time, the general rule is that the interest capacity of the group for the period is calculated as if section 392 did not contain the de minimis provisions.
(2) There is an exception to the general rule (see subsections (4) and (5)) which—
(a) applies if no tax-interest income amounts of any qualifying infrastructure company (“Q”) which is a member of the group for the period are receivable from another qualifying infrastructure company which is not a member of the group for the period but is a related party of Q at any time in that period, and
(b) depends on the comparison set out in subsection (3),
and, for the purposes of paragraph (a), tax-interest income amounts are to be ignored if, having regard to all the circumstances, it is reasonable to regard the amounts as insignificant.
(3) The following amounts must be compared with each other—
(a) the total disallowed amount of the group in the period calculated as if this Chapter (including subsection (1) of this section but ignoring the remainder of it) were contained in this Part (“the Chapter 8 amount”), and
(b) the total disallowed amount of the group in the period calculated as if this Chapter were not contained in this Part and as if section 392 contained only the de minimis provisions (“the ordinary amount”).
(4) If the Chapter 8 amount exceeds the ordinary amount, the interest capacity of the worldwide group for the period is taken to be the de minimis amount (as defined by 392(3)).
(5) If the interest capacity of the worldwide group for the period is given by subsection (4), nothing else in this Chapter has effect in relation to the worldwide group for the period.
(6) For the purposes of this section the reference to section 392 not containing the de minimis provisions is a reference to that section not containing subsections (2) and (3) of that section.
(7) For the purposes of this section the reference to section 392 containing only the de minimis provisions is a reference to that section having effect as if for subsections (1) and (2) of that section there were substituted—
(1) For the purposes of this Part the “interest capacity” of a worldwide group for a period of account of the group is the de minimis amount.
(1) This section makes modifications of this Part in relation to an accounting period of a qualifying infrastructure company (“the joint venture company”) which is the ultimate parent of a worldwide group at all times in that period where—
(a) one or more qualifying infrastructure companies (“the qualifying investor or investors”) have shares in the joint venture company,
(b) other persons (“the other investors”) who are not qualifying infrastructure companies have all the other shares in the joint venture company,
(c) each of the investors (that is to say, the qualifying investor or investors and the other investors) has lent money to the joint venture company,
(d) the amounts each of the investors has lent stand in the same, or substantially the same, proportion as the shares in the joint venture company that each of them has,
(e) at all times in the accounting period the investors have the same rights in relation to the shares in or assets of the joint venture company and the same rights in relation to the money debt or debts in question, and
(f) the joint venture company makes an election for the purposes of this section that has effect for the accounting period (but see section 445 for further provision about elections).
(2) Section 401 has effect as if the qualifying investor or investors were not investors in the group for times in the accounting period falling in the relevant period of account.
(3) Section 427 has effect as if, in determining the appropriate proportion in relation to an associated worldwide group, it is assumed that the qualifying investor or investors were not investors in the group for times in the accounting period falling in the relevant period of account.
(4) In consequence of subsection (2) or (3), the shares of the qualifying investor or investors in the group are treated as distributed for times in the accounting period falling in the relevant period of account among the other investors in proportion to the actual shares of the other investors in the group.
(5) For the purposes of section 438 there is a reduction in any amount that would otherwise qualify as an exempt amount in the accounting period where—
(a) the exemption operates by reference to creditors being within subsection (3) of that section, and
(b) the creditor in relation to the amount is not an investor.
(6) The amount qualifying as an exempt amount is to be reduced so that only the qualifying proportion of it qualifies.
(7) For the purposes of this section—
“the qualifying proportion” means the proportion of the shares that the qualifying investor or investors have in the joint venture company in the accounting period, and
“the non-qualifying proportion” means the proportion of the shares that the other investors have in the joint venture company in the accounting period.
(8) The treatment mentioned in section 440(2) is to extend only to the qualifying proportion of the tax-interest income amounts in the accounting period.
(9) Section 441(2) has effect as if the tax-EBITDA of the company for the accounting period were the amount determined as follows.
Step 1 Find the tax-EBIDTA of the company for the accounting period if section 441 were ignored.
Step 2 The tax-EBITDA of the company for the accounting period is equal to the non-qualifying proportion of that amount.
(10) Section 442(3) has effect as if for the words “the group did not include the company” there were substituted “ amounts of the company were limited to the non-qualifying proportion of those amounts ”.
(1) This section applies if the joint venture company is the ultimate parent of a multi-company worldwide group at any time in the accounting period.
(2) An election made by the joint venture company under section 444 in relation to the accounting period is of no effect unless all the other members of the group—
(a) are qualifying infrastructure companies for the accounting period,
(b) are wholly-owned subsidiaries of the joint venture company throughout the accounting period, and
(c) have the same accounting periods as the joint venture company.
(3) In determining whether the conditions in section 444(1)(c) to (e) are met in relation to the accounting period of the joint venture company, any loans made to any of the other members of the group are treated as if they were made to the joint venture company.
(4) If the joint venture company makes an election under section 444 for the accounting period, the modifications made by subsections (5) to (10) of that section are also to apply in relation to each of the other members of the group.
(1) If—
(a) the joint venture company makes an election under section 444 in relation to an accounting period,
(b) that company, or any member of the worldwide group of which it is a member, is the creditor for the purposes of section 438 in any case, and
(c) the company mentioned in that section in that case is a not a member of that group at any time in the accounting period,
section 438 has effect in that case as if subsection (3)(b) were of no effect in relation to that time.
(2) Section 434(1) to (5) apply to an election under section 444 as they apply to an election under section 433.
(3) For the purposes of section 444 the investors are not to be regarded as having the same rights in relation to the shares in or assets of the joint venture company, or in relation to the money debt or debts in question, at any time if—
(a) provision is in force at that time in respect of any of the relevant matters that differs in relation to different persons or has, or is capable of having, a different effect in relation to different persons (whether at that or any subsequent time),
(b) arrangements are in place at that time the effect of which is that, at that or any subsequent time, the rights of some persons in relation to any of the relevant matters differ, or will or may differ, from the rights of others in relation to the matters in question, or
(c) any other circumstances exist at that time as a result of which the rights of some persons in relation to any of the relevant matters cannot reasonably be regarded as being, in substance, the same rights as others in relation to the matters in question at that or any subsequent time.
(4) In this section—
(a) “the relevant matters” means the shares in or assets of the joint venture company or the money debt or debts in question,
(b) “rights” includes powers,
(c) “different persons” includes persons of a different class or description, and
(d) “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).