824 Repayment supplements: individuals and others.
(1) Subject to the following provisions of this section, a repayment made by the Board or an officer of the Board of any of the following, namely—
(a) an amount paid on account of income tax under section 59A of the Management Act;
(b) any income tax paid by or on behalf of an individual for a year of assessment;
(c) a penalty payable under any paragraph of Schedule 56 to the Finance Act 2009 in respect of an amount falling within any of the following items of the Table in paragraph 1 of that Schedule—
(i) item 1, 12, 18 or 19; or
(ii) insofar as the tax falls within item 1, item 17, 23 or 24; and
(d) a penalty incurred by an individual under any of the provisions of that Act the Finance Act 2009 or Schedules 24 to 26 to the Finance Act 2021,
shall be increased under this section by an amount (a “repayment supplement”) equal to interest on the amount repaid at the rate applicable under section 178 of the Finance Act 1989 for the period (if any) between the relevant time and the date on which the order for the repayment is issued.
(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2A) Subsection (1) above shall apply to a repayment made in consequence of a claim under section 228 of the Income Tax Act 1952 (relief in respect of income accumulated under trusts) as if the repayment were of income tax paid by the claimant for the year of assessment in which the contingency mentioned in that section happened.
(2B) Subsection (1) above shall apply to a payment made by the Board under section 375(8) (payment of amount which borrower would have been able to deduct from interest payment under section 369(1)) as if the payment were a repayment falling within that subsection.
(2C) Subsection (1) above shall apply to a repayment made by the Board as a result of a claim for relief under—
(a) paragraph 2 of Schedule 1B to the Management Act (carry back of loss relief),
(b) paragraph 3 of that Schedule (relief for fluctuating profits of farming etc.), or
(c) Schedule 4A to this Act (relief for fluctuating profits of creative artists etc.),
as if it were a repayment falling within that subsection.
(2D) Subsection (1) shall apply—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) to a payment made under paragraph 6(1) of Schedule 14 (payment where entitlement to life assurance premium relief has not been given by deduction) as if the payment were a repayment of income tax paid for the tax year in which the entitlement to relief arose.
(3) For the purposes of subsection (1) above—
(aa) if the repayment is a payment made by the Board under section 375(8), the relevant time is—
(i) if the interest payment was made in the year 1996-97 or a subsequent year of assessment, the 31st January next following that year;
(ii) if the interest payment was made in an earlier year of assessment, the 5th April next following that year;
(ab) if the repayment is a repayment as a result of a claim for relief under any of the provisions mentioned in subsection (2C) above, the relevant time is the 31st January next following the year that is the later year in relation to the claim;
(ac) if the repayment is a repayment as a result of a claim under section 496B of ITA 2007 (relief for payments by discretionary trust taxable as employment income), the relevant time is the 31 January next following the end of the tax year to which the claim relates;
(ad) if the repayment is a payment falling within subsection (2D)(b), the relevant time is 31 January next following the end of the tax year in which the entitlement to relief arose;
(a) if the repayment is—
(i) the repayment of an amount paid in accordance with the requirements of section 59A of the Management Act on account of income tax for a year of assessment, or
(ii) the repayment of income tax for such a year which is not income tax deducted at source (other than a repayment within paragraph (ac)),
the relevant time is the date of the payment that is being repaid;
(b) if the repayment is of income tax deducted at source for a year of assessment, the relevant time is the 31st January next following that year; and
(c) if the repayment is of a penalty or surcharge, the relevant time is the date on which the penalty or surcharge was paid.
(4) For the purposes of subsection (3) above, where a repayment in respect of income tax for a year of assessment is made to any person, that repayment—
(a) shall be attributed first to so much of any payment made by him under section 59B of the Management Act as is a payment in respect of income tax for that year;
(b) in so far as it exceeds the amount (if any) to which it is attributable under paragraph (a) above, shall be attributed in two equal parts to each of the payments made by him under section 59A of the Management Act on account of income tax for that year;
(c) in so far as it exceeds the amounts (if any) to which it is attributable under paragraphs (a) and (b) above, shall be attributed to income tax deducted at source for that year; and
(d) in so far as it is attributable to a payment made in instalments shall be attributed to a later instalment before being attributed to an earlier one.
(4A) In this section any reference to income tax deducted at source for a year of assessment is a reference to—
(a) income tax deducted or treated as deducted from any income, or treated as paid on any income, in respect of that year, . . .
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
but does not include a reference to amounts which, in that year, are deducted at source under PAYE regulations in respect of previous years.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) ... The Treasury may by order from time to time increase or decrease the rate of interest by reference to which—
(a) repayment supplements are calculated under subsection (1) above; and
(b) repayment supplements are calculated under section 47 of the Finance (No. 2) Act 1975.
(7) A repayment supplement shall not be payable under this section in respect of a repayment or payment made in consequence of an order or judgment of a court having power to allow interest on the repayment or payment, or in respect of a repayment of a post-war credit within the meaning of the Income Tax (Repayment of Post-War Credits) Act 1959.
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) Subsections (1) to (7) above shall apply in relation to . . . the trustees of a settlement , scheme administrators of registered pension schemes sub-scheme administrators of sub-schemes which form part of a split scheme pursuant to the Registered Pensions (Splitting of Schemes) Regulations 2006 or personal representatives ... as they apply in relation to an individual.
(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) This section applies to the following payments made to a company in connection with any accounting period for which the company was resident in the United Kingdom (“the relevant accounting period”), that is to say—
(a) a repayment of corporation tax paid by the company for that accounting period (including advance corporation tax paid in respect of distributions made by the company in that accounting period . . . ); or
(b) a repayment of income tax in respect of a payment received by the company in that accounting period on which the company bore income tax by deduction; . . .
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Subject to the following provisions of this section, where a payment . . . to which this section applies is made by the Board or an inspector after the end of the 12 months beginning with the material date, the payment shall be increased under this section by an amount (a “repayment supplement”) equal to interest on the amount paid at the rate applicable under section 178 of the Finance Act 1989 for each complete tax month contained in the period (if any) beginning with the relevant date and ending at the end of the tax month in which the order for the payment is issued.
(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) For the purposes of subsection (2) above—
(a) if the payment is a repayment of corporation tax that was paid on or after the first anniversary of the material date, the relevant date is the anniversary of the material date that occurs next after the date on which that tax was paid;
(b) in any other case, the relevant date is the first anniversary of the material date;
and where a payment to which this section applies is a repayment of corporation tax paid by a company on different dates, the payment shall as far as possible be treated for the purposes of this subsection as a repayment of tax paid on a later rather than an earlier date among those dates.
(4) For the purposes of this section—
(a) a repayment of corporation tax made in consequence of a claim by a company under section 239(3) to have the whole or any part of an amount of surplus advance corporation tax arising in the case of any accounting period treated as if it were advance corporation tax paid in respect of distributions made by the company in any earlier accounting period shall be treated as a repayment of corporation tax paid for the accounting period in the case of which that amount of surplus advance corporation tax arose; and
(b) a repayment of income tax or corporation tax made on a claim under subsection (4) of section 419 shall be treated as if it were a repayment of corporation tax paid for the accounting period in which the repayment of, or of the part in question of, the loan or advance mentioned in that subsection was made; and
(c) a repayment of corporation tax or income tax falling to be made as a result of a claim under section 393A(1) to have the whole or any part of a loss incurred in an accounting period set off against profits of an earlier accounting period (“the earlier period”)—
(i) shall, in a case where the earlier period falls wholly within the period of twelve months immediately preceding the accounting period in which the loss was incurred, be treated as a repayment of tax paid for the earlier period; and
(ii) in any other case, shall be treated as a repayment of tax paid for the accounting period in which the loss is incurred; and
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . The Treasury may by order from time to time increase or decrease the rate of interest by reference to which repayment supplements are calculated under subsection (2) above.
(6) A repayment supplement shall not be payable under this section in respect of a payment made in consequence of an order or judgment of a court having power to allow interest on the payment.
(7) A repayment supplement paid under this section shall be disregarded for all purposes of income tax and corporation tax.
(8) In this section—
“tax month” means the period beginning with the 6th day of any calendar month and ending with the 5th day of the following calendar month;
“the material date” in relation to a payment to which this section applies, means the last date on which corporation tax on any of the profits of the company in question arising in the relevant accounting period could have been paid—
in a case where section 10(1) applies, within the nine months there mentioned;
in a case where section 478 applies, within the time limit imposed by subsection (2)(a) of that section, but subject to subsection (6) of that section.
(9) This section has effect subject to section 826(8).
(1) In any case where—
(a) a repayment falls to be made of corporation tax paid by a company for an accounting period which ends after the appointed day; or
(aa) a repayment falls to be made under sections 246N and 246Q of advance corporation tax paid by a company in respect of distributions made by it in such an accounting period; or
(b) a repayment of income tax falls to be made in respect of a payment received by a company in such an accounting period; or
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) a payment of R&D tax credit falls to be made to a company under Chapter 2 or 7 of Part 13 of CTA 2009 in respect of an accounting period; or
(da) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e) a payment of land remediation tax credit or life assurance company tax credit falls to be made to a company under Part 14 of CTA 2009 in respect of an accounting period; or
(f) a payment of film tax credit falls to be made to a company, or
(fa) a payment of television tax credit falls to be made to a company; or
(fb) a payment of video game tax credit falls to be made to a company; or
(fc) a payment of theatre tax credit falls to be made to a company; or
(fd) a payment of orchestra tax credit falls to be made to a company; or
(fe) a payment of museums and galleries exhibition tax credit falls to be made to a company; or
(g) a payment of first-year tax credit falls to be made to a company under Schedule A1 to the Capital Allowances Act,
then, from the material date until the order for repayment or payment is issued, the repayment or payment shall carry interest at the rate which, under section 89 of the Management Act, is for the time being the prescribed rate for the purposes of this section.
(2) Subject to section 826A(2), in relation to corporation tax paid by a company for an accounting period, the material date for the purposes of this section is the date on which corporation tax was paid or, if it is later, the date on which corporation tax for that accounting period became (or, as the case may be, would have become) due and payable in accordance with section 59D of the Management Act (payment of corporation tax).
(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) In relation to a repayment of income tax falling within subsection (1)(b) above . . . , the material date is the day after the end of the accounting period in which the payment referred to in subsection (1)(b) above . . . was received by the company.
(3A) In relation to a payment of R&D tax credit falling within subsection (1)(d) above the material date is whichever is the later of—
(a) the filing date for the company’s company tax return for the accounting period for which the R&D tax credit is claimed, and
(b) the date on which the company tax return or amended company tax return containing the claim for payment of the R&D tax credit is delivered to the Inland Revenue.
For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.
(3AA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3B) In relation to a payment of land remediation tax credit or life assurance company tax credit falling within subsection (1)(e) above the material date is whichever is the later of—
(a) the filing date for the company’s company tax return for the accounting period for which the land remediation tax credit or the life assurance company tax credit is claimed, and
(b) the date on which the company tax return or amended company tax return containing the claim for payment of the land remediation tax credit or the life assurance company tax credit is delivered to the Inland Revenue.
For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.
(3C) In relation to a payment of film tax credit , television tax credit , video game tax credit , theatre tax credit , orchestra tax credit or museums and galleries exhibition tax credit the material date is whichever is the later of—
(a) the filing date for the company's company tax return for the accounting period for which the tax credit is payable, and
(b) the date on which the company tax return or amended company tax return containing the claim for payment is delivered to an officer of Revenue and Customs.
For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.
(3D) In relation to a payment of first-year tax credit falling within subsection (1)(g) above the material date is whichever is the later of—
(a) the filing date for the company's company tax return for the accounting period for which the tax credit is claimed, and
(b) the date on which the company tax return or amended company tax return containing the claim for payment of the tax credit is delivered to the Commissioners for Her Majesty's Revenue and Customs.
For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.
(4) For the purposes of this section a repayment of tax made on a claim under section 458 of CTA 2010 shall be treated as if it were a repayment of corporation tax for the accounting period in which the event giving rise to entitlement to relief under that section occurred but, in relation to such a repayment of tax, the material date for the purposes of this section is—
(a) the date when the entitlement to relief in respect of the repayment accrued, that is to say—
(i) where the repayment , or the release or writing off, of the loan or advance (or part thereof) occurred on or after the day mentioned in section 458(4) of CTA 2010, the date nine months after the end of that accounting period; and
(ii) in any other case, the date nine months after the end of the accounting period in which the loan or advance was made;
or
(b) if it is later, the date on which the tax which is to be repaid was in fact paid.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) Where a repayment of corporation tax is a repayment of tax paid by a company on different dates, the repayment shall so far as possible be treated for the purposes of this section as a repayment of tax paid on a later rather than an earlier date among those dates.
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7A) In any case where—
(a) a company carrying on a trade incurs a loss in the trade in an accounting period (“the later period”),
(b) as a result of a claim under section 37 of CTA 2010, the whole or any part of that loss is relieved(whether under section 37 or 42 of that Act) for the purposes of corporation tax against profits (of whatever description) of an earlier accounting period (“the earlier period”) which does not fall wholly within the period of twelve months immediately preceding the later period, and
(c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that accounting period,
then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of that repayment as falls to be made as a result of the claim under section 37 of CTA 2010, except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below.
(7AA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7AA) In any case where—
(a) a company ceases to carry on a trade in an accounting period (“the terminal period”),
(b) as a result of a claim under section 45F of CTA 2010, the whole or any part of a loss made in the trade is relieved for the purposes of corporation tax against profits (of whatever description) of an earlier accounting period (“the earlier period”) which does not fall wholly within the period of 12 months immediately preceding the terminal period, and
(c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that accounting period,
then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of that repayment as falls to be made as a result of the claim under section 45F, except so far as concerns interest for any time after the date on which any corporation tax for the terminal period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below).
(7B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7BB) Subject to subsection (7BC) below, in any case where—
(a) within the meaning of section 806D, any relievable underlying tax or relievable withholding tax arises in an accounting period of a company (“the later period”),
(b) pursuant to a claim under section 806G, the whole or any part of that tax is treated as mentioned in section 806D(4)(c) or (5)(c) in relation to the single related dividend or the single unrelated dividend arising in an earlier accounting period (“the earlier period”), and
(c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that period,
then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of the claim under section 806G, except so far as concerns interest for any time after the date on which any corporation tax for the later period became due and payable (as mentioned in subsection (7D) below).
(7BC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7C) In a case where—
(a) there is for an accounting period of a company (“the later period”) a non-trading deficit on the company’s loan relationships,
(b) as a result of a claim under section 389(1) or 459(1)(b) of CTA 2009 the whole or part of the deficit for the later period is set off against profits of an earlier accounting period (“the earlier period”), and
(c) a repayment falls to be made of corporation tax for the earlier period or of income tax in respect of a payment received by the company in that accounting period,
then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of the claim under section 389(1) or 459(1)(b) of CTA 2009 except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, as mentioned in subsection (7D) below.
(7CA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7D) In subsections (7), (7A), (7AA), (7B) , (7BB) and (7C) above, any reference to the date on which corporation tax for an accounting period became, or would have become, due and payable shall be construed on the basis that corporation tax for an accounting period becomes due and payable on the day following the expiry of nine months from the end of the accounting period.
(7E) The power conferred by section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) does not include power to make provision in relation to subsection (7), (7A), (7AA) (7B), (7BB), (7C) or (7D) above the effect of which would be to change the meaning of references in subsection (7), (7A), (7AA) (7B) , (7BB) or (7C) above to the date on which corporation tax for an accounting period became, or would have become, due and payable (as mentioned in subsection (7D) above).
(8) In consequence of the preceding provisions of this section, no repayment supplement (within the meaning of section 825) shall be paid in respect of any repayment of tax or payment of tax credit where the relevant accounting period (within the meaning of that section) ends after the appointed day.
(8A) Where—
(a) interest has been paid to a company under subsection (1)(a) , (d), (e) (f), (fa), (fb) , (fc) , (fd) or (fe) above,
(b) there is—
(i) a change in the company’s assessed liability to corporation tax, or
(ii) a change in the amount of the R&D tax credit . . . , land remediation tax credit or life assurance company tax creditor film tax creditor television tax credit or video game tax creditor theatre tax creditor orchestra tax creditor museums and galleries exhibition tax creditor first-year tax credit under Schedule A1 to the Capital Allowances Act payable to the company (which does not result in a change falling within sub-paragraph (i)),
other than a change which in whole or in part corrects an error made by the Board or an officer of the Board, and
(c) as a result only of that change (and, in particular, not as a result of any error in the calculation of the interest), it appears to an officer of the Board that the interest ought not to have been paid, either at all or to any extent,
the interest that ought not to have been paid may be recovered from the company as if it were interest charged under Part IX of the Management Act (interest on overdue tax).
(8B) For the purposes of subsection (8A) above, the cases where there is a change in a company’s assessed liability to corporation tax are those cases where—
(a) an assessment, or an amendment of an assessment, of the amount of corporation tax payable by the company for the accounting period in question is made, or
(b) a determination of that amount is made under paragraph 36 or 37 of Schedule 18 to the Finance Act 1998 (which until superseded by a self-assessment under that Schedule has effect as if it were one),
whether or not any previous assessment or determination has been made.
(8BA) For the purposes of subsection (8A)(b) above, the cases where there is a change in the amount of the R&D tax credit . . . , the land remediation tax credit or the life assurance company tax creditor film tax creditor television tax credit or video game tax creditor theatre tax creditor orchestra tax creditor museums and galleries exhibition tax creditor first-year tax credit under Schedule A1 to the Capital Allowances Act payable to the company are those cases where an assessment, or an amendment to an assessment, is made to recover an amount of R&D tax credit . . . , land remediation tax credit or life assurance company tax creditor film tax creditor television tax credit or video game tax creditor theatre tax creditor orchestra tax creditor museums and galleries exhibition tax creditor first-year tax credit under Schedule A1 to the Capital Allowances Act paid to the company for the accounting period in question.
(8C) In subsection (8A)(b) above “error” includes—
(a) any computational error; and
(b) the allowance of a claim or election which ought not to have been allowed.
(9) In this section “the appointed day” means such day or days, not being earlier than 31st March 1992, as the Treasury may by order appoint for the purposes of this section.
826A Interest on payments in respect of corporation tax and meaning of “the material date".
(1) The Treasury may by regulations make provision applying section 826, with such modifications as may be prescribed, for the purpose of conferring on companies of such descriptions as may be prescribed a right to interest—
(a) on such payments made by them in respect of corporation tax as may be prescribed,
(b) at the rate applicable under section 178 of the Finance Act 1989, and
(c) for such period as may be prescribed,
and for treating any such interest for the purposes, or prescribed purposes, of the Tax Acts as interest under section 826(1)(a) on a repayment of corporation tax.
(2) The Treasury may by regulations make provision modifying section 826(2) in relation to companies of such description as may be prescribed.
(3) Subsections (1) and (2) above do not apply in relation to companies in relation to which section 826(2) is modified or otherwise affected by regulations under section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) in relation to the accounting period to which the corporation tax in question relates.
(4) Where the Treasury make regulations under subsection (2) above in relation to companies of any description, they may also make regulations modifying section 59DA(2) of the Management Act in relation to those companies, or any description of such companies, by varying the date before which the claim there mentioned may not be made.
(5) Regulations under this section—
(a) may make different provision in relation to different cases or circumstances or in relation to companies or accounting periods of different descriptions;
(b) may make such supplementary, incidental, consequential or transitional provision as appears to the Treasury to be necessary or expedient.
(6) Regulations under this section may not make provision in relation to accounting periods ending before the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (corporation tax self-assessment).
(7) In this section “prescribed” means prescribed by regulations made under this section.
828 Orders and regulations made by the Treasury or the Board.
(1) . . . Any power of the Treasury or the Board to make any order or regulations under this Act . . . shall be exercisable by statutory instrument.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Subject to subsection (4) below and to any other provision to the contrary, any statutory instrument containing any order or regulations made by the Treasury or the Board . . . shall be subject to annulment in pursuance of a resolution of the House of Commons.
(4) Subsection (3) above shall not apply in relation to an order or regulations made under section . . . . . . . . . . . . . . . . . . . . . 590C(6). . . . . . . . . or paragraph 7 of Schedule 14 . . . or—
(a) if any other Parliamentary procedure is expressly provided;
(b) if the order in question is an order appointing a day for the purposes of any provision of the Tax Acts, being a day as from which the provision will have effect, with or without amendments, or will cease to have effect.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) In this Act, except so far as the context otherwise requires—
(a) “the Corporation Tax Acts” means the enactments relating to the taxation of the income and chargeable gains of companies and of company distributions (including provisions relating also to income tax); and
(b) “the Income Tax Acts” means the enactments relating to income tax, including any provisions of the Corporation Tax Acts which relate to income tax.
(2) In this Act “the Tax Acts”, except so far as the context otherwise requires, means this Act and all other provisions of the Income Tax Acts and the Corporation Tax Acts.
(3) In this Act—
“CTA 2009” means the Corporation Tax Act 2009;
“CTA 2010” means the Corporation Tax Act 2010;
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;
“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005;
“ITA 2007” means the Income Tax Act 2007;
“the Management Act” means the Taxes Management Act 1970;
“TIOPA 2010” means the Taxation (International and Other Provisions) Act 2010;
“the 1968 Act” means the Capital Allowances Act 1968;
“the 1970 Act” means the Income and Corporation Taxes Act 1970; and
“the 1979 Act” means the Capital Gains Tax Act 1979.
“the 1990 Act” means the Capital Allowances Act 1990.
“the 1992 Act” means the Taxation of Chargeable Gains Act 1992.
(4) Section 1 of the Family Law Reform Act 1987, the paragraph inserted in Schedule 1 to the Interpretation Act 1978 by paragraph 73 of Schedule 2 to that Act and section 1(3) of the Law Reform (Parent and Child) (Scotland) Act 1986 (legal equality of illegitimate children) shall be disregarded in construing references in this Act to a child or to children (however expressed).
(5) This Act, so far as it relates to capital gains tax, shall be construed as one with the 1992 Act.
(6) Any reference in this Act to a section, Part or Schedule is a reference to that section, Part or Schedule of or to this Act, unless the context otherwise requires.
(1) Except as otherwise provided by the following provisions of this section, this Act shall come into force in relation to tax for the year 1988-89 and subsequent years of assessment, and for companies’ accounting periods ending after 5th April 1988.
(2) Except as otherwise provided by the following provisions of this section, such of the provisions of this Act as relate to capital gains tax (including the provisions of Part XVIII as applied to capital gains tax by section 277 of the 1992 Act) shall come into force in relation to that tax for the year 1988-89 and subsequent years of assessment.
(3) The following provisions of this Act, that is to say—
(a) so much of any provision as authorises the making of any Order in Council or regulations or other instrument;
(b) so much of any provision as relates to the making of a return, the furnishing of a certificate or the giving of any other information, including any such provision which imposes a duty on the Board or an officer of the Board as well as any such provision which imposes a duty on any other person;
(c) so much of any provision as imposes any penalty;
(d) except where the tax concerned is all tax for years of assessment before the year 1988-89 or accounting periods ending before 6th April 1988, so much of any other provision as confers any power or imposes any duty the exercise or performance of which operates or may operate in relation to tax for more than one chargeable period,
shall come into force for all purposes on 6th April 1988 to the exclusion of the corresponding enactments repealed by this Act.
(4) This section has effect except as otherwise provided by any other provision of this Act, and in particular except as provided by sections 96, 380 to 384, 393, . . ., 400, 703 . . . .
844 Savings, transitional provisions, consequential amendments and repeals.
(1) Schedule 29, which makes amendments to other enactments consequential on the passing of this Act, shall have effect.
(2) Schedule 29, section 843 and this section are without prejudice to the provisions of the Interpretation Act 1978 as respects the effect of repeals.
(3) Schedule 30 which contains savings and transitional provisions shall have effect.
(4) The enactments mentioned in Schedule 31 are hereby repealed to the extent specified in the third column of that Schedule.
(5) Subject to subsection (6) below, section 843(3), Schedule 30 and to any other provision of this Act by which any provision is brought into force to the exclusion of the corresponding enactments repealed by this Act, those repeals shall come into force in accordance with subsections (1) and (2) of section 843.
(6) No provision mentioned in subsection (5) above shall be taken as bringing a repeal into force except to the extent that the repealed enactment is being superseded.
SCHEDULE A1 Determination of profits attributable to permanent establishment: supplementary provisions
Part 1 Introduction
Introduction
1 (1) The provisions of this Schedule have effect for supplementing section 11AA as regards the determination of the profits attributable to a permanent establishment in the United Kingdom of a company that is not resident in the United Kingdom (“the non-resident company”).
(2) In this Schedule “the separate enterprise principle” means the principle in section 11AA(2) (read with subsection (3) of that section).
Part 2 General provisions
Transactions treated as taking place at arm’s length
2 In accordance with the separate enterprise principle, transactions between the permanent establishment and any other part of the non-resident company are treated as taking place on such terms as would have been agreed between parties dealing at arm’s length.
Application of general provision as to allowable deductions
3 (1) Section 11AA(4) (general provision as to allowable deductions) applies whether or not the expenses are incurred by, or reimbursed by, the permanent establishment.
(2) The amount of expenses to be taken into account under section 11AA(4) is the actual cost to the non-resident company.
Prohibition of deductions for payments in respect of intangible assets
4 (1) No deduction is allowed in respect of royalties paid, or other similar payments made, by the permanent establishment to any other part of the non-resident company in respect of the use of intangible assets held by the company.
(2) This does not prevent a deduction in respect of any contribution by the permanent establishment to the costs of creation of an intangible asset.
(3) In this paragraph “intangible asset” has the meaning it has for accounting purposes, and includes any intellectual property (as defined in paragraph 2(2) of Schedule 29 to the Finance Act 2002).
Prohibition of deductions for interest or other financing costs
5 (1) No deduction is allowed in respect of payments of interest or other financing costs by the permanent establishment to any other part of the non-resident company, except as provided by sub-paragraph (2).
(2) The restriction in sub-paragraph (1) above does not apply to interest or other costs of financing that are payable in respect of borrowing by the permanent establishment in the ordinary course of a financial business carried on by it.
(3) In sub-paragraph (2) “financial business” means any of the following—
(a) banking, deposit-taking, money-lending or debt-factoring, or a business similar to any of those;
(b) dealing in commodity or financial futures.
Provision of goods or services for permanent establishment
6 (1) This paragraph applies where the non-resident company provides the permanent establishment with goods or services.
(2) If the goods or services are of a kind that the company supplies, in the ordinary course of its business, to third parties dealing with it at arm’s length, the matter is dealt with as a transaction to which the separate enterprise principle applies.
(3) If not, the matter is dealt with as an expense incurred by the non-resident company for the purposes of the permanent establishment.
Part 3 Provisions applicable to non-resident banks
Application of this Part
7 (1) The provisions of this Part of this Schedule have effect where the non-resident company is a bank.
“Bank” for this purpose has the meaning given by section 840A.
(2) Nothing in this Part of this Schedule shall be read as preventing the application of principles similar to those provided for in this Part in applying the separate enterprise principle to a non-resident company that is not a bank.
Non-resident banks: transfer of financial assets
8 (1) In accordance with the separate enterprise principle, transfers of loans and other financial assets between the permanent establishment and any other part of the company are recognised only if they would have taken place between independent enterprises.
(2) Such a transfer is not recognised where it cannot reasonably be considered that it is carried out for valid commercial reasons. For this purpose the obtaining of a tax advantage is not a valid commercial reason.
Loans by non-resident banks: attribution of financial assets and profits arising
9 (1) In accordance with the separate enterprise principle, loans and other financial assets, and profits arising from them, are attributed to a permanent establishment to the extent that they can reasonably be regarded as having been generated by the activities of the permanent establishment.
(2) The following provisions have effect as regards the factors to be taken into account.
(3) Particular account shall be taken of the extent to which the permanent establishment is responsible for—
(a) obtaining the offer of new business;
(b) establishing the potential borrower’s credit rating and the risk involved in providing credit;
(c) negotiating the terms of the loan with the borrower;
(d) deciding whether, and if so on what conditions, to make or extend the loan.
(4) Account may also be taken of the extent to which the permanent establishment is responsible for—
(a) concluding the loan agreement and disbursing the proceeds of the loan;
(b) administering the loan (including handling and monitoring the service of it) and holding and controlling any securities pledged.
(5) References in this paragraph to a financial asset include any financial risk in relation to a loan, or potential loan, that is capable of giving rise to fees or other receipts and for which the holding of capital is required (or would be required if the transaction were between parties at arm’s length).
Borrowing by non-resident banks: permanent establishment acting as agent or intermediary
10 (1) This paragraph applies where a permanent establishment—
(a) borrows funds for the purposes of another part of the non-resident company, and
(b) in relation to that borrowing acts only as an agent or intermediary.
(2) In such a case, in accordance with the separate enterprise principle—
(a) the profits attributable to the permanent establishment, and
(b) the capital attributable to the permanent establishment under section 11AA(3),
shall be that appropriate in the case of an agent acting at arm’s length, taking into account the risks and costs borne by the establishment.
SCHEDULE A2 Corporation tax: the non-corporate distribution rate: supplementary provisions
Part 1 General provisions
Introduction
1 The provisions of this Schedule supplement section 13AB (corporation tax: the non-corporate distribution rate).
Meaning of “non-corporate distribution”
2 (1) A “non-corporate distribution” means a distribution made by a company to a recipient who is not a company.
“Recipient” here means the person beneficially entitled to the distribution.
(2) A distribution made to a partnership is treated as made to the partners notwithstanding that the partnership is regarded as a legal person, or as a body corporate, under the law of the country or territory under which it is formed.
Calculation of company’s “underlying rate of corporation tax”
3 (1) A company’s underlying rate of corporation tax for an accounting period is determined as follows:
Step One
Take the company’s basic profits for the accounting period (“BP”).
Step Two
Find the amount of corporation tax chargeable on those profits apart from section 13AB (“CT”).
Step Three
The company’s underlying rate of corporation tax is the percentage determined as follows—
(
CT
BP
)
×
100
(2) In determining CT—
(a) apply the rate of corporation tax fixed for companies generally, and
(b) if the company is entitled to and claims relief under section 13 (small companies' relief) or section 13AA (corporation tax starting rate), apply the provisions of those sections.
But take no account of any other relief that is given by reducing the amount or rate of tax payable (as opposed to the amount of the profits chargeable to tax).
Matching: distributions not exceeding basic profits
4 Where in an accounting period the total amount of the distributions made (or treated as made) by a company does not exceed the amount of its basic profits, the amount of the company’s basic profits matched with non-corporate distributions is equal to the total amount of the non-corporate distributions made (or treated as made) by the company in that period.
Matching: distributions exceeding basic profits
5 Where in an accounting period the total amount of the distributions made (or treated as made) by a company exceeds its basic profits, the amount of the company’s basic profits for that period matched with non-corporate distributions is—
(
NCD
D
)
×
BP
where—
NCD is the total amount of the non-corporate distributions made (or treated as made) by the company in that period;
D is the total amount of all the distributions made (or treated as made) by the company in that period; and
BP is the amount of the company’s basic profits for that period.
Part 2 Allocation of excess NCDs to other companies
Allocation of excess NCDs to other companies
6 (1) This Part of this Schedule provides for the allocation to other companies of any amount by which the total amount of the non-corporate distributions made (or treated as made) by a company (the “distributing company”) in an accounting period (the “distribution period”) exceeds the amount of the company’s basic profits for that period that are matched under paragraph 5.
(2) That amount is referred to in this Schedule as “excess NCDs”.
(3) A company to which an amount of excess NCDs is allocated (a “recipient company”) is treated as if it had made a non-corporate distribution of that amount in the period to which it is allocated.
Allocation of excess NCDs to other group companies
7 (1) If at the end of the distribution period the distributing company is a member of a group, excess NCDs must be allocated, so far as possible, to the other group companies.
The allocation must be made in accordance with the following rules.
(2) Excess NCDs may not be allocated to a recipient company unless it has available profits for the accounting period to which they are to be allocated.
(3) The amount of a recipient company’s available profits for an accounting period is given by:
BP
-
NCD
where—
BP is the amount of that company’s basic profits for that accounting period, and
NCD is the total amount of non-corporate distributions made (or treated as made) by that company in that period.
(4) The maximum amount of excess NCDs that may be allocated to an accounting period of a recipient company is:
(
NCD
D
)
×
AP
where—
NCD is the total amount of the non-corporate distributions made (or treated as made) by the distributing company in the distribution period;
D is the total amount of all the distributions made (or treated as made) by that company in that period; and
AP is the amount of the recipient company’s available profits for that period.
(5) In determining the amount of a company’s available profits at any time account shall only be taken of excess NCDs allocated to it by virtue of an allocation made before that time that remains (or so far as it remains) effective.
Allocation of excess NCDs: period or periods to which amount to be allocated
8 (1) Excess NCDs falling to be allocated to another company under paragraph 7 (allocation to other group companies) may be allocated to any accounting period identified by this paragraph as a corresponding accounting period.
If there is more than one such period, excess NCDs must be allocated to the first to the full extent possible before any allocation is made to the second, and so on.
(2) The accounting period of a recipient company that includes the last day of the distribution period is its first corresponding accounting period.
Unless that accounting period is shorter than the distribution period, it is the recipient company’s only corresponding accounting period.
(3) If the first corresponding accounting period is shorter than the distribution period, any subsequent accounting period of the recipient company beginning before the end of the period specified in sub-paragraph (4) is a corresponding accounting period.
(4) The period referred to in sub-paragraph (3) is a period—
(a) of the same length as the distribution period, and
(b) beginning on the same day as the recipient company’s first corresponding accounting period.
Allocation of excess NCDs: degrouping
9 (1) This paragraph applies where a company (“company A”) ceases to be a member of the same group as another company (“company B”) but the companies remain under the control of the same person or persons.
This is referred to below as “degrouping”.
(2) If at the end of any accounting period of company A ending on or after the degrouping but no more than two years after the degrouping—
(a) company A has excess NCDs that (apart from this paragraph) cannot be allocated to other companies,
(b) the business activities of company A and any other companies in the same group as that company are negligible, and
(c) the business activities of company B and any other companies in the same group as that company are not negligible,
the provisions of sub-paragraphs (3) to (5) below apply.
The end of the accounting period when the above conditions are met is referred to in those provisions as “the relevant time”.
(3) Company B and any other companies in the same group as that company at the relevant time (the “B group”) shall be treated for the purposes of allocating the excess NCDs as if they were members of the same group as company A.
(4) Any excess NCDs remaining after any allocation made by virtue of sub-paragraph (3) must be allocated—
(a) to company B or, if different, the company in the B group that at the relevant time has the greatest number of members who are not companies, and
(b) to the accounting period of that company that includes the relevant time.
This allocation is not subject to the restrictions in paragraph 7 on the amount that may be allocated to another company.
(5) If there is more than one company answering the description in sub-paragraph (4)(a), the excess NCDs shall be apportioned between them according to the amount of their basic profits for the accounting period to which the amount falls to be allocated.
(6) In this paragraph “control” shall be construed in accordance with section 416(2) to (6).
Allocation of excess NCDs: procedure
10 (1) The basic rule is that the allocation of excess NCDs to another company must be made by the distributing company with the agreement of the recipient company.
(2) If excess NCDs are not so allocated within nine months after—
(a) in a case within paragraph 7, the end of the distribution period, or
(b) in a case within paragraph 9, the relevant time within the meaning of that paragraph,
they may be allocated at any time thereafter by an officer of the Board.
(3) An allocation under sub-paragraph (1) or (2) may be varied—
(a) by agreement between the relevant companies, or
(b) if further excess NCDs are required to be allocated and no variation is agreed within one year after its becoming apparent that a variation is required, by an officer of the Board.
Any such variation may in turn be varied as mentioned in paragraph (a) or (b).
(4) No allocation or variation of an allocation of excess NCDs may be made after the end of the period of one year after whichever of the following last occurs—
(a) the final determination of the tax affairs of the distributing company in relation to the distribution period,
(b) in a case within paragraph 7, the final determination of the tax affairs of all recipient or potential recipient companies in relation to accounting periods that are or could be corresponding accounting periods, or
(c) in a case within paragraph 9, the final determination of the tax affairs of all recipient or potential recipient companies in relation to accounting periods to which an allocation may be made under that paragraph.
(5) If circumstances arise as a result of which the tax affairs of any such company for any such period are reopened, an allocation or variation of an allocation may (and shall if necessary) be made at any time before the end of the period of one year after the tax affairs of the company are again finally determined.
(6) For the purposes of sub-paragraphs (4) and (5) the tax affairs of a company for a period are finally determined when the amounts are conclusively determined within the meaning of paragraph 88 of Schedule 18 to the Finance Act 1998 (c. 36) (company tax returns: conclusiveness of amounts stated in return).
(7) References in this paragraph to variation of an allocation include reducing the amount allocated to nil.
Allocation of excess NCDs: amounts proving to be excessive
11 (1) This paragraph applies where an amount of excess NCDs allocated to another company in accordance with this Part of this Schedule later proves to be excessive.
(2) The excess shall revert to the distributing company.
(3) If allocations to two or more companies are involved, the amounts shall revert in the opposite order to that in which the allocations were made.
(4) In the case of allocations made at the same time, the amounts reverting to the distributing company shall be in proportion to the original allocations.
Allocation of excess NCDs to companies not resident in the United Kingdom
12 (1) The provisions of this Part of this Schedule as to the allocation of excess NCDs to other companies apply, with any necessary modifications, to companies that are not resident in the United Kingdom as they apply to companies that are so resident.
(2) In particular, references to the company’s basic profits and accounting periods shall be read in relation to a company that is not resident in the United Kingdom as references to what would have been the case if the company had been resident in the United Kingdom at all material times.
Part 3 Other supplementary provisions
Carry forward of excess NCDs
13 (1) Any excess NCDs not allocated to another company under Part 2 shall be carried forward by the distributing company.
(2) That company shall be treated as if it had made a non-corporate distribution of the amount carried forward (in addition to any distributions actually made by it) in its next accounting period.
(3) Where an allocation is made under paragraph 9(4) references in this paragraph to the distributing company shall be read as references to the company to which that allocation is made (which is treated by virtue of paragraph 6(3) as having made a distribution in the accounting period to which the allocation is made).
Definition of a group
14 (1) For the purposes of section 13AB and this Schedule a company and all its 51% subsidiaries form a group, and if any of those subsidiaries have 51% subsidiaries the group includes them and their 51% subsidiaries, and so on.
(2) The question whether a company is a 51% subsidiary shall be determined in accordance with section 838, subject to the following provisions.
(3) A company (“company A”) shall be treated for the purposes of this Schedule as if it were a 51% subsidiary of another company (“company B”) if company B has rights to, or in fact receives, more than 50% of the distributions made by company A.
(4) For the purposes of this paragraph a company shall be treated as not being the owner—
(a) of any share capital that it owns directly if a profit on the sale of the shares would be treated as a trading receipt of its trade, or
(b) of any share capital that it owns indirectly and that is owned directly by a body corporate for which a profit on the sale of the shares would be treated as a trading receipt of its trade.
Accounting period treated as ending if company ceases to be a member of a group
15 (1) Section 13AB and this Schedule apply in relation to an accounting period of a company in which it ceases to be a member of the group as if there were two accounting periods, one ending immediately before the company ceases to be a member of the group and the other consisting of the remainder of the period.
(2) For this purpose a company ceases to be in a group if it and another company cease to be in the same group, whether as a result it is no longer in a group, becomes a member of another group or continues to be in the same group as one or more other companies.
Treatment of distributions made otherwise than in an accounting period
16 For the purposes of section 13AB and this Schedule, a non-corporate distribution made by a company otherwise than in an accounting period of the company shall be treated as made in the next accounting period of the company.
Holding companies treated as carrying on a business
17 (1) For the purposes of section 13AB and this Schedule a holding company that is not otherwise carrying on a business shall be deemed to be carrying on a business and to be within the charge to corporation tax.
(2) For this purpose “a holding company” means a company that has one or more 51% subsidiaries from which it receives or has received one or more distributions.
Interpretation
18 In section 13AB and this Schedule—
“basic profits” means the amount of a company’s profits for an accounting period on which corporation tax finally falls to be borne;
“corresponding accounting period”, in relation to a recipient company, has the meaning given by paragraph 8;
“distributing company” has the meaning given by paragraph 6(1);
“distribution” does not include an amount treated as a dividend under paragraph 2(2) of Schedule 23A (manufactured dividends and interest);
“distribution period” has the meaning given by paragraph 6(1); and
“excess NCDs” has the meaning given by paragraph 6(2);
“group” has the meaning given by paragraph 14 (and references to a group company and membership of a group have a corresponding meaning);
“non-corporate distribution” has the meaning given by paragraph 2;
“recipient company” has the meaning given by paragraph 6(3);
“underlying rate of corporation tax” has the meaning given by paragraph 3.