(1) Subsections (2) to (4) apply where a company is a member of a partnership.
(2) For the purposes of section 433 the cases in which assets recognised in a balance sheet of the company are regarded as deriving their value from the matters mentioned in subsection (5)(a) to (e) of that section include any case where—
(a) the company's interest in the partnership is recognised in the balance sheet of the company, and
(b) that partnership interest derives its value from those matters.
(3) For the purposes of section 436 the cases in which an entry in respect of an asset is (or would be) recognised in a balance sheet of the company include any case where—
(a) the asset is (or would be) recognised in a balance sheet of the partnership, and
(b) the company has a significant interest in the partnership.
(4) For the purposes of section 438(4)—
(a) the obligations mentioned there include any case where the obligations are those of the partnership, and
(b) references to a qualifying infrastructure company in that case include the partnership.
(5) Subsections (2) to (4) apply (with any necessary modifications) in relation to transparent entities that are not partnerships as they apply in relation to partnerships.
(6) For the purposes of this section an entity is “transparent” if—
(a) it is not chargeable to corporation tax or income tax as a person (ignoring any exemptions), or
(b) 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).
(1) This Chapter applies in relation to an activity consisting of the decommissioning of a public infrastructure asset as it applies in relation to its provision.
(2) In determining whether a company is a qualifying infrastructure company the following assets of the company are ignored (and the income arising from them is, accordingly, also ignored)—
(a) any shares in a decommissioning fund, and
(b) any loan relationships or other financing arrangements to which a decommissioning fund is party.
(3) A decommissioning fund is to be regarded as a qualifying infrastructure company.
(4) For the purposes of this section “a decommissioning fund” means a fund which—
(a) holds particular investments for the sole purpose of funding activities for, or in connection with, the decommissioning or other provision of public infrastructure assets, and
(b) is prevented from using the proceeds of the investments, or the income arising from them, for any purpose other than the purpose mentioned in paragraph (a) or returning surplus funds.
(5) In this section “decommissioning” includes demolishing and putting out of use.
449 Minor definitions for purposes of this Chapter
(1) For the purposes of this Chapter—
“balance sheet” means a balance sheet that is drawn up in accordance with generally accepted accounting practice,
“financial asset” has the same meaning as it has for accounting purposes,
“loan relationships or other financing arrangements” means—
loan relationships,
derivative contracts in relation to which the condition in section 387(4) is met (underlying subject matter to be interest rates etc),
finance leases, or
debt factoring or similar transactions, and
“the UK sector of the continental shelf” means the areas designated by Order in Council under section 1(7) of the Continental Shelf Act 1964.
(2) For the purposes of this Chapter references to a company which is “associated” with another company at any time are references to companies that are members of the same worldwide group at that time.
(1) This section applies in relation to a banking company carrying on a trade so far as the activities of the trade consist of or include dealing in financial instruments.
(2) For the purposes of section 382 an amount is treated as meeting condition A, B or C if it is a debit arising directly from dealing in financial instruments other than one in respect of an impairment loss.
(3) An amount—
(a) which is treated as meeting condition A, B or C for the purposes of section 382 as a result of subsection (2) of this section, and
(b) which, but for that subsection, would not be a tax-interest expense amount,
is to be left out of account, or brought into account, as a result of section 377(2) or 380(2) after the second but before the third kind of tax-interest expense amounts mentioned there.
(4) For the purposes of section 385 an amount is treated as meeting condition A, B, C or D if it is a credit arising directly from dealing in financial instruments other than one in respect of the reversal of an impairment loss.
(5) In determining a relevant expense amount under section 411 in the case of the company, that section has effect as if it also included a reference to losses arising directly from dealing in financial instruments other than impairment losses.
(6) In determining a relevant income amount under section 411 in the case of the company, that section has effect as if it also included gains arising directly from dealing in financial instruments other than the reversal of impairment losses.
(7) In this section—
“banking company” has the same meaning as in Part 7A of CTA 2010 (see sections 269B to 269BD), and
“financial instruments” includes—
loan relationships,
derivative contracts, and
shares or other securities.
(1) For the purposes of this Part any amount which is, or is taken into account in calculating—
(a) the ring fence income of a company within the meaning of section 275 of CTA 2010, or
(b) a company's aggregate gain or loss under section 197(3) of TCGA 1992,
is to be ignored.
(2) For the purpose of applying subsection (1) in relation to the financial statements of a worldwide group of which the company is a member such adjustments are to be made to those statements as are just and reasonable.
(1) This section applies if a company (a “property rental business company”)—
(a) is a company which has profits for an accounting period which are not charged to corporation tax as a result of section 534(1) or (2) of CTA 2010, or
(b) is a company to which gains accrue in an accounting period that are not chargeable gains as a result of section 535(1) or (5) , or section 535A(2), of CTA 2010.
(2) In this section “the residual business company” means the company which—
(a) so far as it carries on residual business, is treated, as a result of section 541 of CTA 2010, as a separate company distinct from the property rental business company, but
(b) ignoring that section, is in fact the same company as the property rental business company.
(2A) In applying subsection (2) and giving effect to the remainder of this section, the company is treated, at all times in the accounting period, as carrying on a residual business within the charge to corporation tax (and, accordingly, amounts falling to be brought into account in the accounting period as a result of this section are within the charge to corporation tax).
(3) In applying the provisions of this Part—
(a) the property rental business company and the residual business company are at all times to be regarded as separate members of the same worldwide group (despite the provisions of section 541(3) of CTA 2010), but
(b) in the case of the application of section 433 (qualifying infrastructure company), the property rental business company and the residual business company are to be regarded as being one company (and any election (or its revocation) is, therefore, regarded as made by each company).
(4) This Part has effect as if—
(a) section 534(1) and (2) of CTA 2010, and
(b) section 535(1) and (5) , or section 535A(2), of CTA 2010,
do not apply in relation to the property rental business company for the accounting period (and, accordingly, the profits mentioned in section 534(1) or (2) of CTA 2010 are not calculated for the purposes of this Part in accordance with section 599 of that Act).
(4A) An amount charged on the residual business company as a result of section 543 of CTA 2010 (excessive property financing costs) is treated for the purposes of this Part as if it met condition A, B, C or D for the purposes of section 385 (tax-interest income amounts).
(5) The allocated disallowance for the property rental business company (if any) for the accounting period—
(a) is to be taken into account in calculating the profits of the property rental business for the purposes of section 530 of CTA 2010 (condition as to distribution of profits), but
(b) must be limited to such amount as secures that neither subsection (3)(b) nor subsection (5) of that section (distribution of profits not required if would result in unlawful distribution) applies.
(6) This subsection—
(a) sets out steps to be taken in order to facilitate the operation of Chapter 2 (disallowance and reactivation of tax-interest expense amounts), and
(b) has effect in relation to an accounting period of the residual business company whether or not it has net tax-interest expense referable to that period.
If the residual business company does not have net tax-interest expense referable to that period, it is treated for the purposes of steps 1 to 4 in the rest of this subsection as if it had instead a nil amount of tax-interest expense referable to that period.
Step 1 Determine the maximum amount that could be the allocated disallowance for the property rental business company for the accounting period if subsection (5) were ignored and the maximum amount that could be the allocated disallowance for the residual business company for the accounting period (ignoring step 5). The sum of those maximum amounts is referred to in this subsection as “the total REIT expenses”.
Step 2 Determine the amount (if any) that is the allocated disallowance for the property rental business for the accounting period, applying subsection (5) and all other rules in this Part. This amount is referred to in this subsection as “the actual disallowed amount”.
Step 3 Deduct from the total REIT expenses the actual disallowed amount.
Step 4 Determine whether so much of the total REIT expenses as remains after step 3 exceeds the net tax-interest expense of the residual business company referable to the accounting period (ignoring step 5).
Step 5 If the application of step 4 produces an excess, the residual business company is required to bring into account in the accounting period matching tax-interest expense and income amounts in accordance with the following provisions of this section.
(7) The residual business company—
(a) must bring a tax-interest expense amount equal to the excess into account in the accounting period, and
(b) must bring a tax-interest income amount equal to the excess into account in the accounting period,
but nothing in this subsection affects any calculation required under any other provision of this Part in relation to the accounting period of the residual business company.
(8) The bringing into account of a tax-interest expense amount under subsection (7) is subject to the operation of the other provisions of this Part (which may result in some or all of the amount not being brought into account).
(9) The tax-interest expense amount under subsection (7) must be matched in amount and nature to an amount comprised in the total REIT expenses.
Section 377(2) to (4) (which, subject to an election made by the company, set out the order in which amounts are left out of account) apply for the purposes of this subsection.
(10) The tax-interest expense or income amounts under subsection (7) are treated as being of the same nature as each other.
(11) An interest restriction return—
(a) must, in relation to any company carrying on residual business or property rental business, specify that fact, and
(b) must contain information about how the return has taken into account the effect of this section.
(12) Expressions which are used in this section and in Part 12 of CTA 2010 have the same meaning in this section as they have in that Part.
(1) This section applies where—
(a) an insurance entity is a member of a worldwide group,
(b) the entity has a subsidiary (“S”) which it holds as a portfolio investment, and
(c) apart from this section, S would be a member of the group.
(2) For the purposes of this Part—
(a) the group does not include S (or its subsidiaries), and
(b) accordingly, none of those entities is regarded as a consolidated subsidiary of any member of the group.
(3) For the purposes of this section an insurance entity holds an interest in an entity as “a portfolio investment” if—
(a) the insurance entity holds the interest as an investment, and
(b) the insurance entity judges the value that the interest has to it wholly or mainly by reference to the market value of the interest.
(4) In this section—
“insurance entity” means—
an insurance company,
a friendly society within the meaning of Part 3 of FA 2012 (see section 172), or
a body corporate which carries on underwriting business as a member of Lloyd's, and
“subsidiary” has the meaning given by international accounting standards.
In the case of a body corporate carrying on underwriting business as a member of Lloyd's—
(a) any reference in this Part to an amount being brought into account under Part 3 of CTA 2009 as a result of section 297 or 573 of that Act is to be read as a reference to its being brought into account under that Part as a result of section 219 of FA 1994, and
(b) any reference in this Part to a derivative contract is to be read as if subsection (3) of section 226 of FA 1994 (which provides that relevant contracts forming part of a premium trust fund are not derivative contracts) were omitted.
(1) This section applies where—
(a) an entity (“S”) would, apart from this section, be a member of a worldwide group as a result of one or more other members of the group managing S and holding rights or interests in relation to S,
(b) the entity managing S does so in the ordinary course of carrying on a business of providing investment management services, and
(c) the management of S is not coordinated to any extent with the management by any person of any other entity.
(1A) Except in a case within subsection (2), for the purposes of this Part—
(a) the group does not include S (or its subsidiaries), and
(b) accordingly, none of those entities is regarded as a consolidated subsidiary of any member of the group.
(2) Where S is a partnership or another transparent entity, for the purposes of this Part—
(a) the group does not include entities that are subsidiaries of S, and
(b) accordingly, none of those entities is regarded as a consolidated subsidiary of any member of the group.
(3) In this section “subsidiary” has the meaning given by international accounting standards.
(1) This section applies in relation to an accounting period of a tonnage tax company.
(2) The company's tonnage tax profits for the accounting period are treated as nil for the purpose of calculating the company's adjusted corporation tax earnings for the accounting period under section 406(2).
(3) In this section “tonnage tax company” and “tonnage tax profits” have the same meaning as in Schedule 22 to FA 2000 (see paragraphs 2 to 5).
456 Creditor relationships of companies determined on basis of fair value accounting
(1) A company may elect for all of its creditor relationships which are dealt with on the basis of fair value accounting (“fair-value creditor relationships”) to be subject to the provision made by this section for all of its accounting periods.
(2) For the purpose of calculating under this Part—
(a) tax-interest expense amounts of the company, and
(b) tax-interest income amounts of the company,
the relevant loan relationship debits and relevant loan relationship credits in respect of the company's fair-value creditor relationships are instead to be determined for the accounting periods on an amortised cost basis of accounting.
(3) If—
(a) a company has a hedging relationship between a relevant contract (“the hedging instrument”) and the asset representing a loan relationship subject to the election, and
(b) the loan relationship is dealt with in the company's accounts on the basis of fair value accounting,
it is to be assumed in applying the amortised cost basis of accounting that the hedging instrument has where possible been designated for accounting purposes as a fair value hedge of the loan relationship.
(4) An election under this section—
(a) must be made before the end of 12 months from the end of the relevant accounting period,
(b) has effect for that accounting period and all subsequent accounting periods, and
(c) is irrevocable.
(5) For this purpose “relevant accounting period” means—
(a) the first accounting period in which the company has a fair-value creditor relationship, or
(b) if that accounting period has ended before 1 April 2017, the first accounting period in relation to which any provision of this Part applies.
(6) In this section “amortised cost basis of accounting”, in relation to an accounting period, has the same meaning as in Part 5 of CTA 2009 (see section 313), but, in the case of creditor relationships relating to insurance activities, as if that basis of accounting required recognition only of—
(a) interest accrued for the period in respect of the creditor relationships, or
(b) if the creditor relationships arise as a result of section 490 of CTA 2009 (OEICs, unit trusts and offshore funds), amounts that can reasonably be regarded as equating to interest accrued for the period in respect of those relationships.
(7) In subsection (6) “creditor relationships relating to insurance activities” means creditor relationships which—
(a) are held by an insurance company, a friendly society within the meaning of Part 3 of FA 2012 (see section 172) or a body corporate which carries on underwriting business as a member of Lloyd's, or
(b) are held in connection with the regulation of underwriting business carried on by members of Lloyd's.
(8) The Commissioners may by regulations amend the definition of “amortised cost basis of accounting” in this section.
(9) Other expressions which are used in this section and in Part 5 of CTA 2009 have the same meaning in this section as they have in that Part.
457 Elections under section 456: deemed debits and credits
(1) This section applies if—
(a) as a result of an election under section 456, the tax-interest expense amounts of a company include notional debits for an accounting period,
(b) the worldwide group of which the company is a member is subject to interest restrictions for a period of account, and
(c) the total disallowed amount for the period of account consists of or includes the notional debits.
(2) In order to facilitate the operation of Chapter 2 (disallowance and reactivation of tax-interest expense amounts)—
(a) the company must bring a debit equal to the amount of the notional debits into account in the accounting period, and
(b) the company must bring a credit equal to the amount of the notional debits into account in the accounting period,
but nothing in this subsection affects any calculation required under any other provision of this Part in relation to the accounting period of the company.
(3) The bringing into account of a debit under subsection (2)(a) is subject to the operation of the other provisions of this Part (which may result in some or all of the debit not being brought into account).
(4) The debits and credits under subsection (2) are of the same nature as the notional debits that give rise to them.
(5) For the purposes of this section a debit is a “notional debit” if the debit is created as a result of the determination required by the election or so far as the amount of the debit is increased as a result of that determination.
458 Co-operative and community benefit societies etc
(1) This section applies where—
(a) apart from this section, an amount would be a tax-interest expense amount or tax-interest income amount of a company as a result of meeting condition A in section 382 or 385 (loan relationships), and
(b) the amount meets that condition only because of section 499 of CTA 2009 (certain sums payable by co-operative and community benefit societies or UK agricultural or fishing co-operatives treated as interest under loan relationship).
(2) The amount is treated as not being a tax-interest expense amount or tax-interest income amount of the company.
(1) This section applies where—
(a) apart from this section, an amount would be a tax-interest expense amount of a company as a result of meeting condition A in section 382 (loan relationship debits),
(b) the creditor is a charity,
(c) the company is a wholly-owned subsidiary of the charity, and
(d) the charitable gift condition is met at all times during the accounting period in which the amount is (or apart from this Part would be) brought into account.
(2) The amount is treated as not being a tax-interest expense amount of the company.
(3) For the purposes of this section the “charitable gift condition” is met at any time at which, were the company to make a donation to the charity at that time, it would be a qualifying charitable donation (see section 190 of CTA 2010).
(4) In this section—
“charity” has the same meaning as in Chapter 2 of Part 6 of CTA 2010 (see section 202 of that Act as read with Schedule 6 to FA 2010), and
“the creditor” means the person who is party to the loan relationship in question as creditor.
460 Long funding operating leases and finance leases
(1) In calculating a company's adjusted corporation tax earnings for an accounting period under section 406(2), each of the following amounts is to be ignored—
(a) the amount of a deduction under section 363 of CTA 2010 (lessor under long funding operating lease);
(b) the amount by which a deduction is reduced under section 379 of CTA 2010 (lessee under long funding operating lease);
(c) the capital component of the company's rental earnings under a finance lease which is not a long funding finance lease;
(d) the amount of depreciation in respect of any asset leased to the company under a finance lease which is not a long funding finance lease.
(2) The definition of “relevant capital expenditure” in section 417(2) includes the amount of depreciation in respect of any relevant asset leased under a finance lease for some or all of the relevant period of account to a company that is a member of the worldwide group in question.
(3) For the purposes of this section the capital component of a company's rental earnings under a finance lease is so much of those earnings as do not constitute tax-interest income amounts of the company.
(4) For the purposes of this section the amount of depreciation in respect of any asset leased to a company under a finance lease is the amount which, in accordance with generally accepted accounting practice, falls (or would fall) to be shown as depreciation in respect of the asset in the applicable accounts.
(5) In this section “the applicable accounts” are—
(a) in a case within subsection (1)(d), the company's accounts for any period, and
(b) in a case within subsection (2), the financial statements of the worldwide group for the relevant period of account in question.
(6) In this section “long funding finance lease” means a finance lease which is a long funding lease (within the meaning of section 70G of CAA 2001).
461 Counteracting effect of avoidance arrangements
(1) Any tax advantage that would (in the absence of this section) arise from relevant avoidance arrangements is to be counteracted by the making of such adjustments as are just and reasonable.
(2) Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of an assessment, the modification of an assessment, amendment or disallowance of a claim or otherwise.
(3) For the purposes of this section arrangements are “relevant avoidance arrangements” if conditions A and B are met.
(4) Condition A is that the main purpose, or one of the main purposes, of the arrangements is to enable a company to obtain a tax advantage.
(5) Condition B is that the tax advantage is attributable (or partly attributable) to any company—
(a) not leaving tax-interest expense amounts out of account that it otherwise would have left out of account,
(b) leaving tax-interest expense amounts out of account that are lower than they otherwise would have been,
(c) leaving tax-interest expense amounts out of account in an accounting period other than that in which it otherwise would have left them out of account,
(d) bringing tax-interest expense amounts into account that it otherwise would not have brought into account,
(e) bringing tax-interest expense amounts into account that are higher than they otherwise would have been, or
(f) bringing tax-interest expense amounts into account in an accounting period other than that in which it otherwise would have brought them into account.
(6) In subsection (5)—
(a) references to leaving amounts out of account are to leaving them out of account under this Part;
(b) references to bringing amounts into account are to bringing them into account under this Part.
(7) In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and
“tax advantage” includes—
relief or increased relief from tax,
repayment or increased repayment of tax,
avoidance or reduction of a charge to tax or an assessment to tax,
avoidance of a possible assessment to tax,
deferral of a payment of tax or advancement of a repayment of tax, and
avoidance of an obligation to deduct or account for tax.
(8) For the purposes of the definition of “tax advantage” any reference to tax includes—
(a) any amount chargeable as if it were corporation tax or treated as if it were corporation tax, and
(b) diverted profits tax.
462 Expressions relating to “related parties”: introduction
(1) Section 463 sets out the circumstances in which a person is a related party of another person for the purposes of this Part.
(2) That section—
(a) applies generally in relation to any amount, and
(b) is supplemented by sections 464 and 465 (which contain provisions that have effect for the purposes of that section).
(3) Sections 466 and 467 make provision for treating persons as if they were related parties of each other but only in relation to certain matters.
(4) Sections 468 to 472—
(a) make provision for treating persons as if they were not related parties of each other but only in relation to certain matters, and
(b) take priority over sections 466 and 467.
463 Whether a person is generally a “related party” of another
(1) For the purposes of this Part a person (“A”) is a “related party” of another person (“B”)—
(a) throughout any period for which A and B are consolidated for accounting purposes,
(b) on any day on which the participation condition is met in relation to them, or
(c) on any day on which the 25% investment condition is met in relation to them.
(2) A and B are consolidated for accounting purposes for a period if—
(a) their financial results for a period are required to be comprised in group accounts,
(b) their financial results for the period would be required to be comprised in group accounts but for the application of an exemption, or
(c) their financial results for a period are in fact comprised in group accounts.
(3) In subsection (2) “group accounts” means accounts prepared under—
(a) section 399 of the Companies Act 2006, or
(b) any corresponding provision of the law of a territory outside the United Kingdom.
(4) The participation condition is met in relation to A and B (“the relevant parties”) on a day if, within the period of 6 months beginning or ending with that day—
(a) one of the relevant parties directly or indirectly participates in the management, control or capital of the other, or
(b) the same person or persons directly or indirectly participate in the management, control or capital of each of the relevant parties.
(5) For the interpretation of subsection (4), see sections 157(1), 158(4), 159(1) and 160(1) (which have the effect that references in that subsection to direct or indirect participation are to be read in accordance with provisions of Chapter 2 of Part 4).
(6) If one of the relevant parties is a securitisation company within the meaning of Chapter 4 of Part 13 of CTA 2010, the relevant parties are not to be regarded as related parties of each other as a result of subsection (4) merely by reference to the fact that—
(a) the securitisation company is held by a trustee of a settlement, and
(b) the other relevant party is a settlor in relation to that settlement.
(7) The 25% investment condition is met in relation to A and B if—
(a) one of them has a 25% investment in the other, or
(b) a third person has a 25% investment in each of them.
(8) Sections 464 and 465 apply for the purpose of determining whether a person has a “25% investment” in another person.
(1) A person (“P”) has a 25% investment in another person (“C”) if—
(a) P possesses or is entitled to acquire 25% or more of the voting power in C,
(b) in the event of a disposal of the whole of the equity in C, P would receive 25% or more of the proceeds,
(c) in the event that the income in respect of the equity in C were distributed among the equity holders in C, P would receive 25% or more of the amount so distributed, or
(d) in the event of a winding-up of C or in any other circumstances, P would receive 25% or more of C's assets which would then be available for distribution among the equity holders in C in respect of the equity in C.
(2) In this section references to the equity in C are to—
(a) the shares in C other than restricted preference shares, or
(b) loans to C other than normal commercial loans.
(3) For this purpose “shares in C” includes—
(a) stock, and
(b) any other interests of members in C.
(4) For the purposes of this section a person is an equity holder in C if the person possesses any of the equity in C.
(5) For the purposes of this section—
“normal commercial loan” means a loan which is a normal commercial loan for the purposes of section 158(1)(b) or 159(4)(b) of CTA 2010, and
“restricted preference shares” means shares which are restricted preference shares for the purposes of section 160 of CTA 2010.
(6) In applying for the purposes of this section the definitions of “normal commercial loan” and “restricted preference shares” in a case where—
(a) C is not a company, or
(b) C is a company which does not have share capital,
sections 160(2) to (7) and 161 to 164 of CTA 2010 (and any other relevant provisions of that Act) have effect with the necessary modifications.
(7) In this section references to a person receiving any proceeds, amount or assets include—
(a) the direct or indirect receipt of the proceeds, amount or assets, and
(b) the direct or indirect application of the proceeds, amount or assets for the person's benefit,
and it does not matter whether the receipt or application is at the time of the disposal, distribution, winding-up or other circumstances or at a later time.
(8) If—
(a) there is a direct receipt or direct application of any proceeds, amount or assets by or for the benefit of a person (“A”), and
(b) another person (“B”) directly or indirectly owns a percentage of the equity in A,
there is, for the purposes of subsection (7), an indirect receipt or indirect application of that percentage of the proceeds, amount or assets by or for the benefit of B.
(9) For this purpose the percentage of the equity in A directly or indirectly owned by B is to be determined by applying the rules in sections 1155 to 1157 of CTA 2010 with such modifications (if any) as may be necessary.
(10) Subsection (7) is not to result in a person being regarded as having a 25% investment in another person merely as a result of their being parties to a normal commercial loan.
(11) Any reference in this section, in the case of a person who is a member of a partnership, to the proceeds, amount or assets of the person includes the person's share of the proceeds, amount or assets of the partnership (apportioning those things between the partners on a just and reasonable basis).
(1) In determining for the purposes of section 464 the investment that a person (“P”) has in another person, P is to be taken to have all of the rights and interests of—
(a) any person connected with P,
(b) any person who is a member of a partnership, or is connected with a person who is member of a partnership, of which P is a member, or
(c) any person who is a member of a partnership, or is connected with a person who is a member of a partnership, of which a person connected with P is a member.
(2) For the purposes of subsection (1)—
(a) section 1122 of CTA 2010 (“connected” persons) applies but as if subsections (7) and (8) of that section were omitted, but
(b) a person is not to be regarded as connected with another person merely as a result of their being parties to a loan that is a normal commercial loan for the purposes of section 464.
(3) In determining for the purposes of section 464 the investment that a person (“P”) has in another person (“U”), P is to be taken to have all of the rights and interests of a third person (“T”) with whom P acts together in relation to U.
(4) For this purpose P “acts together” with T in relation to U if (and only if)—
(a) for the purpose of influencing the conduct of U's affairs—
(i) P is able to secure that T acts in accordance with P's wishes (or vice versa), or
(ii) T can reasonably be expected to act, or typically acts, in accordance with P's wishes (or vice versa),
(b) P and T are party to an arrangement that it is reasonable to conclude is designed to affect the value of any equity in U possessed by T, or
(c) the same person manages some or all of any equity in U possessed by P and T.
In paragraphs (b) and (c) references to equity in U are to be read in accordance with section 464.
(5) But P does not “act together” with T in relation to U under subsection (4)(c) if—
(a) the managing person does so as the operator of different collective investment schemes, and
(b) the management of the schemes is not coordinated for the purpose of influencing the conduct of U's affairs.
(6) For this purpose “collective investment scheme” and “operator” have the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see sections 235 and 237).
(7) In determining for the purposes of section 464 the investment that a person (“P”) has in another person (“U”), P is to be taken to have all of the rights and interests of one or more third persons with whom P has entered into a qualifying arrangement in relation to U.
(8) For this purpose P has entered into a qualifying arrangement with one or more third persons in relation to U if they are parties to an arrangement concerning U as a result of which, by reference to shares held, or to be held, by any one or more of them in U, they can reasonably be expected to act together—
(a) so as to exert greater influence in relation to U than any one of them would be able to exert if acting alone, or
(b) otherwise so as to be able to achieve an outcome in relation to U that, if attempted by any one of them acting alone, would be significantly more difficult to achieve.
(9) For this purpose the reference to shares in U includes shares in U that may be held as a result of the exercise of any right or power and includes rights or interests in U that are of a similar character to shares.
(10) In this section “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
466 Certain loan relationships etc to be treated as made between related parties
(1) This section—
(a) makes provision for treating a person (“D”) who is not a related party of another person (“C”) as if they were related parties of each other but only in respect of particular liabilities or transactions, and
(b) is expressed to apply in relation to loan relationships but also applies (with any necessary modifications) in relation to any other financial liability owed to, or any transaction with, C.
(2) If at any time—
(a) D is party to a loan relationship as debtor and C is party to the relationship as creditor, and
(b) another person (“G”) who is a related party of D provides a guarantee, indemnity or other financial assistance in respect of the liability of D that represents the loan relationship,
D and C are treated for the purposes of this Part as if, in relation to the loan relationship concerned (and anything done under or for the purposes of it), they were related parties of each other at that time.
(3) Subsection (2) is subject to—
(a) section 415 (qualifying net group-interest expense), and
(b) section 438(3) (infrastructure: interest payable to third parties etc).
(4) If at any time—
(a) D is party to a loan relationship as debtor and C is party to the relationship as creditor, and
(b) another person (“G”) who is a related party of D indirectly stands in the position of a creditor as respects the debt in question by reference to a series of loan relationships or other arrangements,
D and C are treated for the purposes of this Part as if, in relation to the loan relationship concerned (and anything done under or for the purposes of it), they were related parties of each other at that time.
(5) For the purposes of this section “arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
467 Holdings of debt and equity in same proportions
(1) This section applies at any time where—
(a) persons have lent money to another person (“U”),
(b) the lenders also have shares or voting power in U,
(c) the amounts each of the lenders has lent stand in the same, or substantially the same, proportion as the shares or voting power in U that each of them has, and
(d) for the purposes of section 464 the lenders (taken together) have a 25% investment in U.
(2) The lenders are treated for the purposes of this Part as if, in relation to the loans (and anything done under or for the purposes of them), they were related parties of U at that time (so far as that would not otherwise be the case).
(3) If—
(a) some or all of the rights under the loan are transferred, and
(b) the transferred rights are held by, or for the benefit of, another person (“the transferee”) at any time,
the transferee is treated for the purposes of this Part as if, in relation to the loan (and anything done under or for the purposes of it), the transferee were a related party of U at that time (so far as that would not otherwise be the case).
(4) This applies whether or not the transferee has any shares or voting power in U.
(5) For the purposes of this section references to shares in U include shares in U that may be held as a result of the exercise of any right or power and include rights or interests in U that are of a similar character to shares.
(6) This section applies (with any necessary modifications) in relation to any other financial liability owed to, or any transaction with, U as it applies to loans made to U.
468 Debts with same rights where unrelated parties hold more than 50%
(1) This section applies if—
(a) a person (“D”) is party to a loan relationship as debtor in a period of account of a worldwide group of which it is a member,
(b) a person (“C”) who is party to the loan relationship as creditor is a related party of D at any time in that period,
(c) there are persons (“the relevant creditors”) other than C who are parties to the loan relationship, or are parties to other loan relationships entered into at the same time, as creditors but who are not related parties of D at any time in that period,
(d) at all times in that period the rights of the relevant creditors are rights in relation to at least 50% of the total amount of the money debt or debts in question, and
(e) at all times in that period C and the relevant creditors have the same rights in relation to the money debt or debts in question.
(2) D and C are treated for the purposes of this Part as if, in relation to the loan relationship concerned (and anything done under or for the purposes of it), they were not related parties of each other at any time in that period.
(3) Persons are not to be regarded as having the same rights in relation to a money debt or debts at any time if—
(a) the terms or conditions on which any of the money is lent and which are in force at that time make different provision in relation to different persons or have, or are 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 debts differ, or will or may differ, from the rights of others in relation to any of the debts, 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 debts cannot reasonably be regarded as being, in substance, the same rights as others in relation any of the debts at that or any subsequent time.
(4) For the purposes of this section—
“arrangements” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),
“different persons” includes persons of a different class or description, and
“rights” includes powers.
(1) This section—
(a) makes provision for treating a person (“D”) who is a related party of another person (“C”) as if they were not related parties of each other but only in respect of particular liabilities or transactions, and
(b) is expressed to apply in relation to loan relationships but also applies (with any necessary modifications) in relation to any other financial liability owed to, or any transaction with, C.
(2) If—
(a) D is party to a loan relationship as debtor and C is party to the loan relationship as creditor,
(b) D subsequently becomes a related party of C in consequence of a relevant release of debt, and
(c) before D became a related party of C in consequence of the release none of the parties to the loan relationship had been related parties of each other,
D and C are treated for the purposes of this Part as if, in relation to the loan relationship (and anything done under or for the purposes of it), they were not related parties of each other at times on or after the release.
(3) There is a “relevant release of debt” at any time for the purposes of this section if—
(a) a liability to pay an amount under a person's debtor relationship is released under the arrangements,
(b) that person is D or a person who is a related party of D at that time, and
(c) immediately before the release, it is reasonable to conclude that, without the release and any arrangements of which the release forms part, there would be a material risk that, at some time within the next 12 months, D or the related party would be unable to pay its debts.
(4) For the purposes of this section “debtor relationship” has the meaning given by section 302(6) of CTA 2009 (reading the references in that subsection to a company as references to a person).
470 Ordinary independent financing arrangements by banks and others
(1) This section applies where—
(a) at any time, a person (“C”) is party to a loan relationship as creditor and the party to the loan relationship as debtor (“D”) is a related party of C as a result of any circumstances, and
(b) the loan relationship is not one to which C is a party at that time directly or indirectly in consequence of, or otherwise in connection with, the existence of any of those circumstances.
(2) C and D are treated for the purposes of this Part as if, in relation to the loan relationship (and anything done under or for the purposes of it), they were not related parties of each other at that time.
(1) This section applies at any time where—
(a) a relevant public body (“B”) lends money to a person (“P”),
(b) B is a related party of P, and
(c) the realising of a profit is merely incidental to the making of the loan.
(2) B and P are treated for the purposes of this Part as if, in relation to the loan (and anything done under or for the purposes of it), they were not related parties of each other at that time.
(1) This section applies at any time where an asset is leased by a person (“A”) to another (“B”) under a lease which is granted before 20 March 2017 and which, in the case of B, is a finance lease.
(2) A and B are treated for the purposes of this Part as if, in relation to the lease (and anything done under or for the purposes of it), they were not related parties of each other at that time.
473 Meaning of “a worldwide group”, “ultimate parent” etc
(1) In this Part “a worldwide group” means—
(a) any entity which—
(i) is a relevant entity (see section 474), and
(ii) meets the first or second non-consolidation condition (see subsections (2) and (3)), and
(b) each consolidated subsidiary (if any) of the entity mentioned in paragraph (a).
(2) The first non-consolidation condition is that the entity—
(a) is a member of an IAS group, and
(b) is not a consolidated subsidiary of an entity that—
(i) is a relevant entity, and
(ii) itself meets the first non-consolidation condition.
(3) The second non-consolidation condition is that the entity is not a member of an IAS group.
(4) In this Part—
(a) references to “a member” of a worldwide group are to an entity mentioned in subsection (1)(a) or (b);
(b) references to “the ultimate parent” of a worldwide group are to the entity mentioned in subsection (1)(a);
(c) references to “a single-company worldwide group” are to a worldwide group whose only member is its ultimate parent;
(d) references to “a multi-company worldwide group” are to a worldwide group with two or more members.
(5) In this section “IAS group” means a group within the meaning given by international accounting standards.
474 Interpretation of section 473: “relevant entity”
(1) In section 473 “relevant entity” means—
(a) a company, or
(b) an entity the shares or other interests in which are listed on a recognised stock exchange and are sufficiently widely held.
(2) Shares or other interests in an entity are “sufficiently widely held” if no participator in the entity holds more than 10% by value of all the shares or other interests in the entity.
Section 454 of CTA 2010 (meaning of participator) applies for the purposes of this subsection.
(3) The following are not relevant entities—
(a) the Crown,
(b) a Minister of the Crown,
(c) a government department,
(d) a Northern Ireland department, or
(e) a foreign sovereign power.
475 Meaning of “non-consolidated subsidiary” and “consolidated subsidiary”
(1) An entity (“X”) is a “non-consolidated subsidiary” of another entity (“Y”) at any time (“the relevant time”) if—
(a) X is a subsidiary of Y at the relevant time, and
(b) if Y were required at the relevant time to measure its investment in X, it would be required to do so using fair value accounting ....
(2) An entity (“X”) is a “consolidated subsidiary” of another entity (“Y”) at any time if, at that time, X is a subsidiary, but not a non-consolidated subsidiary, of Y.
(3) In this section “subsidiary” has the meaning given by international accounting standards.
(4) For the purposes of this section, assume that all entities are subject to international accounting standards.
(5) This section has effect for the purposes of this Part.
476 Continuity of identity of a worldwide group through time
(1) This section applies for the purpose of determining whether a group of entities that constitutes a worldwide group at any time (“Time 2”) is the same worldwide group as a group of entities that constitutes a worldwide group at an earlier time (“Time 1”).
(2) The group at Time 2 is the same worldwide group as the group at Time 1 if and only if the entity that is the ultimate parent of the group at Time 2—
(a) was the ultimate parent of the group at Time 1, and
(b) was the ultimate parent of a worldwide group at all times between Time 1 and Time 2.
(1) This section applies where two or more entities—
(a) would, apart from this section, each be the ultimate parent of a worldwide group, and
(b) are stapled to each other.
(2) This Part has effect as if—
(a) the entities were consolidated subsidiaries of another entity (the “deemed parent”), and
(b) the deemed parent fell within section 473(1)(a) (conditions for being the ultimate parent of a worldwide group).
(3) For the purpose of this section an entity (“entity A”) is “stapled” to another entity (“entity B”) if, in consequence of the nature of the rights attaching to the shares or other interests in entity A (including any terms or conditions attaching to the right to transfer the interests), it is necessary or advantageous for a person who has, disposes of or acquires shares or other interests in entity A also to have, dispose of or acquire shares or other interests in entity B.
(1) This section applies where two entities—
(a) would, apart from this section, each be the ultimate parent of a worldwide group, and
(b) are treated under international accounting standards as a single economic entity by reason of being a business combination achieved by contract.
(2) This Part has effect as if—
(a) the two entities were consolidated subsidiaries of another entity (the “deemed parent”), and
(b) the deemed parent fell within section 473(1)(a) (conditions for being the ultimate parent of a worldwide group).
(3) In this section “business combination” has the meaning given by international accounting standards.
(1) References in this Part to “financial statements” of a worldwide group for a period are (subject to subsection (2)) to consolidated financial statements of the worldwide group's ultimate parent and its subsidiaries in respect of the period.
(2) Where the worldwide group is at all times during the period a single-company worldwide group, the references are to financial statements of the ultimate parent in respect of the period.
(3) The basic rule is that the references mentioned in subsections (1) and (2) are to financial statements that are drawn up by or on behalf of the ultimate parent.
(4) But see—
(a) section 481 for provision under which, in specified circumstances, financial statements of a worldwide group are treated as having been drawn up in accordance with different accounting standards from those in accordance with which they are drawn up by or on behalf of the ultimate parent;
(b) section 482 for provision under which, in specified circumstances, financial statements of a worldwide group are treated as consolidating different subsidiaries from those consolidated in financial statements drawn up by or on behalf of the ultimate parent;
(c) section 483 for provision under which, in specified circumstances, financial statements of a worldwide group are treated as having been drawn up where the ultimate parent has drawn up consolidated financial statements covering more than one worldwide group;
(d) sections 484 to 486 for provision under which, where financial statements of a worldwide group are not drawn up by or on behalf of the ultimate parent, financial statements of the group are treated as having been drawn up.
(5) See also section 487 (under which financial statements drawn up by or on behalf of an entity, but for too long a period or too late, are ignored for the purposes of this Part).
References in this Part to a “period of account” of a worldwide group are to—
(a) a period in respect of which financial statements of the group are drawn up by or on behalf of the ultimate parent, or
(b) a period in respect of which financial statements of the group are treated as drawn up for the purposes of this section (whether under any of sections 481 to 485 or under any other enactment).
481 Actual financial statements not drawn up on acceptable principles
(1) This section applies where financial statements of a worldwide group for a period drawn up by or on behalf of the ultimate parent are not drawn up on acceptable principles.
(2) For the purposes of this Part (apart from this section)—
(a) the financial statements mentioned in subsection (1) are to be ignored, and
(b) IAS financial statements of the worldwide group are treated as having been drawn up in respect of the period.
(3) For the purposes of this Chapter financial statements are “drawn up on acceptable principles” only if condition A, B, C or D is met.
(4) Condition A is that the financial statements are IAS financial statements.
(5) Condition B is that the amounts recognised in the financial statements are not materially different from those that would be recognised in IAS financial statements of the worldwide group, if such statements were drawn up.
(6) Condition C is that the financial statements are drawn up in accordance with UK generally accepted accounting practice.
(7) Condition D is that the financial statements are drawn up in accordance with generally accepted accounting principles and practice of one of the following territories—
(a) Canada;
(b) China;
(c) India;
(d) Japan;
(e) South Korea;
(f) the United States of America.
(8) The Commissioners may by regulations amend this section so as to alter the circumstances in which financial statements are “drawn up on acceptable principles” for the purposes of this Chapter.
482 Actual financial statements drawn up on acceptable principles but consolidating wrong subsidiaries
(1) This section applies where financial statements of a worldwide group for a period drawn up by or on behalf of the ultimate parent are drawn up on acceptable principles but—
(a) do not consolidate one or more entities that are IAS subsidiaries, or
(b) consolidate one or more entities that are not IAS subsidiaries.
(2) In this section “IAS subsidiary”, in relation to a period, means an entity which would be required to be consolidated with those of the ultimate parent in IAS financial statements of the group for the period.
(3) For the purposes of this Part (apart from this section)—
(a) the financial statements mentioned in subsection (1) are to be ignored, and
(b) consolidated financial statements of the ultimate parent and its IAS subsidiaries are treated as having been drawn up in respect of the period.
(4) The financial statements treated by subsection (3)(b) as drawn up are treated as drawn up in accordance with the same accounting principles and practice as the financial statements mentioned in subsection (1).
(5) In this section a reference to financial statements consolidating the results of an entity is to consolidating its results with those of the ultimate parent as the results of a single economic entity.
483 Actual financial statements covering more than one worldwide group
(1) This section applies where—
(a) consolidated financial statements of an entity and its subsidiaries are drawn up by or on behalf of the entity in respect of a period (“the actual period of account”), and
(b) the entity was the ultimate parent of a worldwide group for a part (but not all) of that period.
(2) For the purposes of this Part (apart from this section)—
(a) the financial statements mentioned in subsection (1)(a) are to be ignored, and
(b) consolidated financial statements of the entity and its IAS subsidiaries are treated as having been drawn up in respect of the part of the actual period of account mentioned in subsection (1)(b).
(3) The financial statements treated by subsection (2)(b) as drawn up are treated as drawn up—
(a) where the financial statements mentioned in subsection (1)(a) are drawn up on acceptable principles, in accordance with the same accounting principles and practice as those financial statements;
(b) otherwise, in accordance with international accounting standards.
(4) In this section “IAS subsidiary” has the same meaning as in section 482.
484 No actual financial statements: ultimate parent draws up financial statements
(1) Subsection (2) applies where—
(a) financial statements of the ultimate parent of a worldwide group are drawn up by or on behalf of the ultimate parent in respect of a period (“the relevant period”),
(b) consolidated financial statements of the ultimate parent and its subsidiaries are not drawn up by or on behalf of the ultimate parent in respect of the relevant period or any part of it, and
(c) the group was, at any time during the relevant period, a multi-company worldwide group.
(2) For the purposes of this Part (apart from this section) IAS financial statements of the worldwide group are treated as drawn up in respect of the relevant period.
(3) The ultimate parent may elect that subsection (2) is not to apply in relation to financial statements of the ultimate parent.
(4) An election under subsection (3)—
(a) has effect in relation to financial statements in respect of periods ending on or after such date as is specified in the election, and
(b) is irrevocable.
(5) The date specified in the election may not be before the day on which the election is made.
(1) In this section “accounts-free period” means (subject to subsection (2)) any period—
(a) which begins on or after 1 April 2017,
(b) throughout which a worldwide group exists, and
(c) in respect of no part of which are financial statements of the group—
(i) drawn up by or on behalf of the ultimate parent, or
(ii) treated as drawn up for the purposes of this section (whether under section 481, 482, 483 or 484 or any other enactment).
(2) A period is not an “accounts-free period” if it forms part of an accounts-free period.
(3) If an accounts-free period in relation to a worldwide group is 12 months or less, IAS financial statements of the worldwide group are treated for the purposes of this Part (apart from this section) as having been drawn up for the accounts-free period.
(4) If an accounts-free period in relation to a worldwide group is more than 12 months, IAS financial statements of the worldwide group are treated for the purposes of this Part (apart from this section) as having been drawn up for each of the following periods—
(a) the first period of 12 months falling within the accounts-free period;
(b) any subsequent period of 12 months falling within the accounts-free period;
(c) any period of less than 12 months which—
(i) begins immediately after the end of a period mentioned in paragraph (a) or (b), and
(ii) ends at the end of the accounts-free period.