356N Restriction on hire etc of relevant assets to be brought into account
(1) This section applies if the contractor makes, or is to make, one or more payments under a lease of—
(a) a relevant asset, or
(b) part of a relevant asset.
(2) The total amount that may be brought into account in respect of the payments for the purposes of calculating the contractor's ring fence profits in an accounting period is limited to the hire cap.
(3) The “hire cap” is an amount equal to the relevant percentage of TC for the accounting period, subject to subsection (4).
(4) If payments in relation to which subsection (2) or section 285A(2) (restriction on hire for company carrying on a ring fence trade under Part 8) applies are also made, or to be made, by one or more other companies in respect of the relevant asset or part, the “hire cap” is to be such proportion of the amount mentioned in subsection (3) as is just and reasonable, having regard (in particular) to the amounts of the payments made, or to be made, by the contractor and each other company.
(5) Subject to subsection (7), the “relevant percentage” is—
UROSTU×7.5%
where—
UROS is the number of days in the accounting period that the relevant asset is provided, operated or used in a relevant offshore service, and
TU is the number of days in the accounting period that the relevant asset is provided, operated or used (whether or not in a relevant offshore service).
(6) Accordingly, the relevant percentage is zero if the relevant asset is not provided, operated or used in the accounting period.
(7) If the accounting period is less than 12 months, the relevant percentage is to be proportionally reduced.
(8) TC is—
OC+CE
(9) Unless subsection (11) applies, OC is the sum of—
(a) any consideration given for the acquisition of the relevant asset or part when it was first acquired by an associated person, and
(b) any expenses incurred by an associated person in connection with that acquisition (other than the costs of financing the acquisition).
This is subject to subsections (12) and (13).
(10) Subsection (11) applies if the relevant asset or part—
(a) is leased by an associated person from a person who is not an associated person, and
(b) has never been owned by an associated person.
(11) OC is the sum of—
(a) the consideration that it is reasonable to suppose would have been given for the acquisition of the relevant asset or part, if it had been acquired by an associated person by way of a bargain at arm's length at the time it was first leased as mentioned in subsection (10)(a), and
(b) the expenses (other than the costs of financing the acquisition) that it is reasonable to suppose would have been incurred by an associated person in connection with such an acquisition.
This is subject to subsections (12) and (13).
(12) If the relevant asset or part was first acquired by an associated person, or (as the case may be) first leased as mentioned in subsection (10)(a), before the beginning of the accounting period, OC does not include any part of the consideration mentioned in subsection (9)(a) or (as the case may be) (11)(a) that it is reasonable to attribute to anything that no longer forms part of the relevant asset or part at the beginning of the accounting period.
(13) If the relevant asset or part was first acquired by an associated person, or (as the case may be) first leased as mentioned in subsection (10)(a), in the accounting period, OC for the accounting period is—
OC×D−DBAD
where—
D is the total number of days in the accounting period,
DBA is the number of days in the accounting period before the day on which the relevant asset or part was first acquired or first leased, and
OC is the amount given by subsection (9) or (as the case may be) (11).
(14) CE is capital expenditure on the relevant asset or part (other than capital expenditure in respect of its acquisition or the acquisition of a lease of it) incurred by an associated person—
(a) after it was first acquired by an associated person or (as the case may be) was first leased as mentioned in subsection (10)(a), and
(b) before the end of the accounting period.
This is subject to subsections (15) and (16).
(15) CE does not include any capital expenditure mentioned in subsection (14) that is—
(a) incurred before the beginning of the accounting period, and
(b) not reflected in the state or nature of the relevant asset or part at the beginning of the accounting period.
(16) If any capital expenditure mentioned in subsection (14) is incurred on a day in the accounting period, the amount of CE for the accounting period in respect of that capital expenditure is—
CEA×D−DBID
where—
D is the total number of days in the accounting period,
DBI is the number of days in the accounting period before the day on which that capital expenditure is incurred, and
CEA is the amount of that capital expenditure.
(1) The Treasury may by regulations modify the “relevant percentage” for the purposes of section 356N or 285A.
(2) Regulations under subsection (1) may—
(a) amend section 356N or section 285A,
(b) make different provision for different cases or different purposes, and
(c) make incidental, consequential, supplementary or transitional provision or savings.
(3) To the extent that, by virtue of section 356N, payments within subsection (1) of that section cannot be brought into account for the purposes of calculating the contractor's ring fence profits in an accounting period, the payments may be—
(a) allowed as a deduction from the contractor's total profits for the accounting period, or
(b) treated as a surrenderable amount of the contractor for the accounting period for the purposes of Part 5 (group relief) (see section 99(7)) as if they were a trading loss,
subject to subsection (4).
(4) No deduction may be made by virtue of subsection (3) from total profits so far as they are contractor's ring fence profits or ring fence profits for the purposes of Part 8.
(5) If an associated person enters into arrangements the main purpose or one of the main purposes of which is to secure that section 356N(2) does not apply in relation to one or more payments to any extent, that provision applies in relation to the payments to the extent it would not otherwise do so.
(6) In subsection (5) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
356NB Restriction on debits to be brought into account
(1) Debits may not be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of the contractor's loan relationships in any way that results in a reduction of what would otherwise be the contractor's ring fence profits, but this is subject to subsections (2) to (4).
(2) Subsection (1) does not apply so far as a loan relationship is in respect of money borrowed by the contractor which has been—
(a) used to meet expenditure incurred by the contractor in carrying on oil contractor activities, or
(b) appropriated to meeting expenditure to be so incurred by the contractor.
(3) Subsection (1) does not apply, in the case of debits falling to be brought into account as a result of section 329 of CTA 2009 (pre-loan relationship and abortive expenses) in respect of a loan relationship that has not been entered into, so far as the relationship would have been one entered into for the purpose of borrowing money to be used or appropriated as mentioned in subsection (2).
(4) Subsection (1) does not apply, in the case of debits in respect of a loan relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies, so far as—
(a) the payment of interest under the relationship is expenditure incurred as mentioned in subsection (2)(a), or
(b) the exchange loss arising from the relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure.
(5) If a debit—
(a) falls to be brought into account for the purposes of Part 5 of CTA 2009 in respect of a loan relationship of the contractor, but
(b) as a result of this section cannot be brought into account in a way that results in any reduction of what would otherwise be the contractor's ring fence profits,
the debit is to be brought into account for those purposes as a non-trading debit despite anything in section 297 of that Act.
(6) References in this section to a loan relationship, in relation to the borrowing of money, do not include a relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies.
356NC Restriction on credits to be brought into account
(1) Credits in respect of exchange gains from the contractor's loan relationships may not be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in any way that results in an increase of what would otherwise be the contractor's ring fence profits, but this is subject to subsections (2) to (4).
(2) Subsection (1) does not apply so far as a loan relationship is in respect of money borrowed by the contractor which has been—
(a) used to meet expenditure incurred by the contractor in carrying on oil contractor activities, or
(b) appropriated to meeting expenditure to be so incurred by the contractor.
(3) Subsection (1) does not apply, in the case of credits falling to be brought into account as a result of section 329 of CTA 2009 (pre-loan relationship and abortive expenses) in respect of a loan relationship that has not been entered into, so far as the relationship would have been one entered into for the purpose of borrowing money to be used or appropriated as mentioned in subsection (2).
(4) Subsection (1) does not apply, in the case of credits in respect of a loan relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies, so far as—
(a) the payment of interest under the relationship is expenditure incurred as mentioned in subsection (2)(a), or
(b) the exchange gain arising from the relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure.
(5) If a credit—
(a) falls to be brought into account for the purposes of Part 5 of CTA 2009 in respect of a loan relationship of the contractor, but
(b) as a result of this section cannot be brought into account in a way that results in any increase of what would otherwise be the contractor's ring fence profits,
the credit is to be brought into account for those purposes as a non-trading credit despite anything in section 297 of that Act.
(6) Section 356NB(6) applies for the purposes of this section.
No deduction under section 1219 of CTA 2009 (expenses of management of a company's investment business) is to be allowed from the contractor's ring fence profits.
(1) Relief in respect of a loss incurred by the contractor (or an amount of such a loss) may not be given under section 37 (relief for trade losses against total profits) or section 45A (carry forward of post-1 April 2017 trade loss against total profits) against the contractor's ring fence profits except so far as the loss (or amount) arises from oil contractor activities.
(2) Relief in respect of a loss incurred by the contractor may not be given against the contractor's ring fence profits under any provision listed in subsection (3).
(3) The provisions are—
(a) section 753 of CTA 2009 (non-trading losses on intangible fixed assets);
(b) section 62(3) (relief for losses made in UK property business);
(c) section 303C(3) (excess carried forward non-decommissioning losses of ring fence trade: relief against total profits).
356NF Group relief and group relief for carried-forward losses
(1) On a claim for group relief made by a claimant company in relation to a surrendering company, group relief may not be allowed against the claimant company's contractor's ring fence profits except so far as the claim relates to losses incurred by the surrendering company that arose from oil contractor activities.
(2) In section 105 (restriction on surrender of losses etc within section 99(1)(d) to (g)) the references to the surrendering company's gross profits of the surrender period do not include the company's relevant contractor's ring fence profits for that period.
(3) The company's “relevant contractor's ring fence profits” for that period are—
(a) if for that period there are no qualifying charitable donations made by the company that are allowable under Part 6 (charitable donations relief), the company's contractor's ring fence profits for that period, or
(b) otherwise, so much of the contractor's ring fence profits of the company for that period as exceeds the amount of the qualifying charitable donations made by the company that are allowable under section 189 for that period.
(3A) On a claim under Chapter 3 of Part 5A, group relief for carried-forward losses may not be allowed against the claimant company's contractor's ring fence profits, except so far as the claim relates to losses incurred by the surrendering company that arose from oil contractor activities.
(4) In this section—
“claimant company” is to be read in accordance with Part 5 (see section 188) or Part 5A (see sections 188CB(2) and 188CC(2)), as the case requires;
“surrendering company” is to be read in accordance with Part 5 (see section 188) or Part 5A (see section 188BB(7)), as the case requires.
A capital allowance may not to any extent be given effect under section 259 or 260 of CAA 2001 (special leasing) by deduction from the contractor's ring fence profits.
356NH Restriction on deductions from contractor's ring fence profits
(1) For the purpose of determining the contractor's taxable total profits for an accounting period, the sum of any relevant deductions from total profits made by the contractor for the accounting period may not exceed the relevant Part 8ZA maximum.
(2) In this section “relevant deduction from total profits” means—
(a) any deduction of a loss (or an amount of a loss) under section 45(4)(b) (carry forward of pre-1 April 2017 loss against subsequent profits), so far as the loss arises from oil contractor activities,
(b) any deduction of a loss (or an amount of a loss) under section 45A (carry forward of post-1 April 2017 trade loss against total profits), so far as the amount is set against the contractor's ring fence profits, and
(c) any deduction of a loss or other amount under Part 5A (group relief for carried-forward losses), so far as the amount in question is set against the contractor's ring fence profits.
(3) In this section “the relevant Part 8ZA maximum” means the sum of—
(a) 50% of the contractor's ring fence profits for the accounting period, and
(b) the amount of the contractor's ring fence profits deductions allowance for the period.
356NI Deductions allowances where company has contractor's ring fence profits
(1) This section applies if a company (“C”) has contractor's ring fence profits for an accounting period.
(2) Subsections (3) to (6) set out how to determine, for the accounting period—
(a) C's deductions allowance for the purposes of Part 7ZA (restrictions on obtaining certain deductions), and
(b) C's contractor's ring fence profits deductions allowance.
(3) Determine in accordance with Part 7ZA what C's deductions allowance for the period would be in the absence of this section (and call this “amount A”).
(4) Determine C's contractor's ring fence profits deductions allowance for the period in accordance with subsection (5).
(5) C's “contractor's ring fence profits deductions allowance” for an accounting period—
(a) is so much of amount A as is specified in C's company tax return as its contractor's ring fence profits deductions allowance for the period, and
(b) accordingly, is nil if no amount is so specified.
(6) Subsection (7) applies if a relevant reversal credit is brought into account in calculating C's contractor's ring fence profits for the accounting period.
In this subsection the reference to bringing into account a relevant reversal credit is to be interpreted in accordance with section 269ZY.
(7) C's contractor's ring fence profits deductions allowance for the accounting period (as determined in accordance with subsection (5)) is to be treated for all purposes as increased by—
(a) the amount of the relevant reversal credit, or
(b) if lower, the amount of the contractor's ring fence profits for the accounting period.
(8) C's deductions allowance for the period for the purposes of Part 7ZA is to be taken to be an amount equal to amount A less the amount of C's ring fence profits deductions allowance for the period.
356NJ Modification of provisions restricting the use of losses
(1) The following deductions are to be treated as not being relevant deductions for the purposes of section 269ZD (restrictions on deductions from total profits)—
(a) the deduction of a loss (or an amount of a loss) under section 45A (carry forward of post- 1 April 2017 trade loss against total profits), so far as the amount is set against the company's contractor's ring fence profits for the accounting period;
(b) the deduction under Part 5A (group relief for carried-forward losses) of a loss or other amount, so far as the amount is set against the company's contractor's ring fence profits for the accounting period.
(2) A deduction under section 45(4)(b) (carry forward of pre-1 April 2017 trade loss against subsequent profits) of a loss arising from oil contractor activities is to be ignored for the purposes of section 269ZB of CTA 2010 (restriction on deductions from trading profits).
This Part contains provision about the corporation tax treatment of certain profits and gains realised from disposals concerned with land in the United Kingdom.
(1) Section 356OC(1) applies (subject to subsection (3) of that section) if—
(a) a person within subsection (2)(a), (b) or (c) realises a profit or gain from a disposal of any land in the United Kingdom, and
(b) any of conditions A to D is met in relation to the land.
(2) The persons referred to in subsection (1) are—
(a) the person acquiring, holding or developing the land,
(b) a person who is associated with the person in paragraph (a) at a relevant time, and
(c) a person who is a party to, or concerned in, an arrangement within subsection (3).
(3) An arrangement is within this subsection if—
(a) it is effected with respect to all or part of the land, and
(b) it enables a profit or gain to be realised—
(i) by any indirect method, or
(ii) by any series of transactions.
(4) Condition A is that the main purpose, or one of the main purposes, of acquiring the land was to realise a profit or gain from disposing of the land.
(5) Condition B is that the main purpose, or one of the main purposes, of acquiring any property deriving its value from the land was to realise a profit or gain from disposing of the land.
(6) Condition C is that the land is held as trading stock.
(7) Condition D is that (in a case where the land has been developed) the main purpose, or one of the main purposes, of developing the land was to realise a profit or gain from disposing of the land when developed.
(8) In this section “relevant time” means any time in the period beginning when the activities of the project begin and ending 6 months after the disposal mentioned in subsection (1).
(9) In this section “the project” means all activities carried out for any of the following purposes—
(a) the purposes of dealing in or developing the land, and
(b) any other purposes mentioned in Conditions A to D.
(10) For the purposes of this section a person (“A”) is associated with another person (“B”) if—
(a) A is connected with B by virtue of any of subsections (5) to (7) of section 1122 (read in accordance with section 1123), or
(b) A is related to B (see section 356OT).
356OC Disposals of land: profits treated as trading profits
(1) The profit or gain is to be treated for corporation tax purposes as profits of a trade carried on by the chargeable company (see section 356OG).
(2) If the chargeable company is non-UK resident, that trade is the company's trade of dealing in or developing UK land (as defined in section 5B of CTA 2009).
(3) But subsection (1) does not apply to a profit or gain so far as it would (apart from this section) be brought into account as income in calculating profits (of any person)—
(a) for corporation tax purposes, or
(b) for income tax purposes.
(4) The profits are treated as arising in the accounting period of the chargeable company in which the profit or gain is realised.
(5) This section applies in relation to gains which are capital in nature as it applies in relation to other gains.
356OD Disposals of property deriving its value from land in the United Kingdom
(1) Section 356OE applies (subject to subsection (3) of that section) if—
(a) a person realises a profit or gain from a disposal of any property which (at the time of the disposal) derives at least 50% of its value from land in the United Kingdom,
(b) the person is a party to, or concerned in, an arrangement concerning some or all of the land mentioned in paragraph (a) (“the project land”), and
(c) the arrangement meets the condition in subsection (2).
(2) The condition is that the main purpose, or one of the main purposes, of the arrangement is to—
(a) deal in or develop the project land, and
(b) realise a profit or gain from a disposal of property deriving the whole or part of its value from that land.
356OE Disposals within section 356OD: profits treated as trading profits
(1) The relevant amount is to be treated for corporation tax purposes as profits of a trade carried on by the chargeable company.
(2) If the chargeable company is non-UK resident, that trade is the company's trade of dealing in or developing UK land.
(3) But subsection (1) does not apply to an amount so far as it would (apart from this section) be brought into account as income in calculating profits (of any person)—
(a) for corporation tax purposes, or
(b) for income tax purposes.
(4) The profits are treated as arising in the accounting period of the chargeable company in which the profit or gain is realised.
(5) In this section the “relevant amount” means so much (if any) of the profit or gain mentioned in section 356OD(1) as is attributable, on a just and reasonable apportionment, to the relevant UK assets.
(6) In this section “the relevant UK assets” means any land in the United Kingdom from which the property mentioned in section 356OD(1) derives any of its value (at the time of the disposal mentioned in that subsection).
(7) This section applies in relation to gains which are capital in nature as it applies in relation to other gains.
(1) Sections 356OB to 356OE have effect as if they included provision about losses corresponding to the provision they make about profits and gains.
(2) Accordingly, in the following sections of this Part references to a “profit or gain” include a loss.
(1) For the purposes of sections 356OC and 356OE the general rule is that the “chargeable company” is the company (“C”) that realises the profit or gain (as mentioned in section 356OB(1) or 356OD(1)).
(2) The general rule in subsection (1) is subject to the special rules in subsections (4) to (6).
(3) But those special rules do not apply in relation to a profit or gain to which section 356OH(3) (fragmented activities) applies.
(4) If all or any part of the profit or gain accruing to C is derived from value provided directly or indirectly by another person (“B”) which is a company, B is the “chargeable company”.
(5) Subsection (4) applies whether or not the value is put at the disposal of C.
(6) If all or any part of the profit or gain accruing to C is derived from an opportunity of realising a profit or gain provided directly or indirectly by another person (“D”) which is a company, D is “the chargeable company” (unless the case falls within subsection (4)).
(7) For the meaning of “another person” see section 356OO.
(1) Subsection (3) applies if—
(a) a company (“C”) disposes of any land in the United Kingdom,
(b) any of conditions A to D in section 356OB is met in relation to the land, and
(c) a person (“R”) who is associated with C at a relevant time has made a relevant contribution to activities falling within subsection (2).
(2) The following activities fall within this subsection—
(a) the development of the land,
(b) any other activities directed towards realising a profit or gain from the disposal of the land.
(3) For the purposes of this Part, the profit or gain (if any) realised by C from the disposal is to be taken to be what that profit or gain would be if R were not a distinct person from C (and, accordingly, as if everything done by or in relation to R had been done by or in relation to C).
(4) Subsection (5) applies to any amount which is paid (directly or indirectly) by R to C for the purposes of meeting or reimbursing the cost of corporation tax which C is liable to pay as a result of the application of subsection (3) in relation to R and C.
(5) The amount—
(a) is not to be taken into account in calculating profits or losses of either R or C for the purposes of income tax or corporation tax, and
(b) is not for any purpose of the Corporation Tax Acts to be regarded as a distribution.
(6) In subsection (1) “relevant time” means any time in the period beginning when the activities of the project begin and ending 6 months after the disposal.
(7) For the purposes of this section any contribution made by R to activities falling within subsection (2) is a “relevant contribution” unless the profit made or to be made by R in respect of the contribution is insignificant having regard to the size of the project.
(8) In this section “contribution” means any kind of contribution, including, for example—
(a) the provision of professional or other services, or
(b) a financial contribution (including the assumption of a risk).
(9) For the purposes of this section R is “associated” with C if—
(a) R is connected with C by virtue of any of subsections (5) to (7) of section 1122 (read in accordance with section 1123), or
(b) R is related to C (see section 356OT).
(10) In this section “the project” means all activities carried out for any of the following purposes—
(a) the purposes of dealing in or developing the land, and
(b) any other purposes mentioned in Conditions A to D in section 356OB.
For the purposes of this Part, the profit or gain (if any) from a disposal of any property is to be calculated according to the principles applicable for calculating the profits of a trade under Part 3 of CTA 2009, subject to any modifications that may be appropriate (and for this purpose the same rules are to apply in calculating losses from a disposal as apply in calculating profits).
Any apportionment (whether of expenditure, consideration or any other amount) that is required to be made for the purposes of this Part is to be made on a just and reasonable basis.
(1) Subsection (3) applies if an arrangement has been entered into the main purpose or one of the main purposes of which is to enable a company to obtain a relevant tax advantage.
(2) In subsection (1) the reference to obtaining a relevant tax advantage includes obtaining a relevant tax advantage by virtue of any provisions of double taxation arrangements, but only in a case where the relevant tax advantage is contrary to the object and purpose of the provisions of the double taxation arrangements (and subsection (3) has effect accordingly, regardless of anything in section 6(1) of TIOPA 2010).
(3) The tax advantage is to be counteracted by means of adjustments.
(4) For this purpose adjustments may be made (whether by an officer of Revenue and Customs or by the company) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.
(5) In this section “relevant tax advantage” means a tax advantage in relation to corporation tax charged (or which would, if the tax advantage were not obtained, be charged) in respect of amounts treated as profits of a trade by virtue of this Part.
(6) In this section—
“double taxation arrangements” means arrangements which have effect under section 2(1) of TIOPA 2010 (double taxation relief by agreement with territories outside the United Kingdom);
“tax advantage” has the meaning given by section 1139.
356OL Profits attributable to period before relevant activities etc began
(1) Subsection (2) applies if—
(a) subsection (1) of section 356OC applies because Condition D in section 356OB is met (land developed with purpose of realising a gain from its disposal when developed), and
(b) part of the profit or gain mentioned in that subsection is fairly attributable to a period before the intention to develop was formed.
(2) Section 356OC(1) has effect as if the person mentioned in section 356OB(1) had not realised that part of the profit or gain.
(3) Subsection (4) applies if—
(a) section 356OE(1) applies, and
(b) part of the profit or gain mentioned in section 356OE(5) is fairly attributable to a period before the person mentioned in section 356OD(1) was a party to, or concerned in, the arrangement in question.
(4) Section 356OE has effect as if the person had not realised that part of the profit or gain.
(5) In applying this section account must be taken of the treatment under Part 3 of CTA 2009 (trading income) of a company which appropriates land as trading stock.
(1) This section applies if it is necessary to determine the extent to which the value of any property or right is derived from any other property or right for the purposes of this Part.
(2) Value may be traced through any number of companies, partnerships, trusts and other entities or arrangements.
(3) The property held by a company, partnership or trust must be attributed to the shareholders, partners, beneficiaries or other participants at each stage in whatever way is appropriate in the circumstances.
(4) In this section—
“partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar nature to a partnership; and “partners”, in relation to such arrangements, is to be construed accordingly;
“trust” includes arrangements—
which have effect under the law of a country or territory outside the United Kingdom; and
under which persons acting in a fiduciary capacity hold and administer property on behalf of other persons,
and “beneficiaries”, in relation to such arrangements, is to be construed accordingly.
356ON Relevance of transactions, arrangements, etc
(1) In determining whether section 356OC(1) or 356OE(1) applies, account is to be taken of any method, however indirect, by which—
(a) any property or right is transferred or transmitted, or
(b) the value of any property or right is enhanced or diminished.
(2) Accordingly—
(a) the occasion of the transfer or transmission of any property or right, however indirect, and
(b) the occasion when the value of any property or right is enhanced,
may be an occasion on which section 356OC(1) or 356OE(1) applies.
(3) Subsections (1) and (2) apply in particular—
(a) to sales, contracts and other transactions made otherwise than for full consideration or for more than full consideration,
(b) to any method by which any property or right, or the control of any property or right, is transferred or transmitted by assigning—
(i) share capital or other rights in a company,
(ii) rights in a partnership, or
(iii) an interest in settled property,
(c) to the creation of an option affecting the disposition of any property or right and the giving of consideration for granting it,
(d) to the creation of a requirement for consent affecting such a disposition and the giving of consideration for granting it,
(e) to the creation of an embargo affecting such a disposition and the giving of consideration for releasing it, and
(f) to the disposal of any property or right on the winding up, dissolution or termination of a company, partnership or trust.
(1) In this Part references to “other” persons are to be interpreted in accordance with subsections (2) to (4).
(2) A partnership or partners in a partnership may be regarded as a person or persons distinct from the individuals or other persons who are for the time being partners.
(3) The trustees of settled property may be regarded as persons distinct from the individuals or other persons who are for the time being the trustees.
(4) Personal representatives may be regarded as persons distinct from the individuals or other persons who are for the time being personal representatives.
(1) In this Part “arrangement” (except in the phrase “double taxation arrangements”) includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable).
(2) For the purposes of this Part any number of transactions may be regarded as constituting a single arrangement if—
(a) a common purpose can be discerned in them, or
(b) there is other sufficient evidence of a common purpose.
(1) In this Part references to a “disposal” of any property include any case in which the property is effectively disposed of (whether wholly or in part, as mentioned in subsection (2))—
(a) by one or more transactions, or
(b) by any arrangement.
(2) For the purposes of this Part—
(a) references to a disposal of land or any other property include a part disposal of the property, and
(b) there is a part disposal of property (“the asset”) where on a person making a disposal, any form of property derived from the asset remains undisposed of (including in cases where an interest or right in or over the asset is created by the disposal, as well as where it subsists before the disposal).
(1) In this Part “land” includes—
(a) buildings and structures,
(b) any estate, interest or right in or over land, and
(c) land under the sea or otherwise covered by water.
(2) In this Part references to property deriving its value from land include—
(a) any shareholding in a company deriving its value directly or indirectly from land,
(b) any partnership interest deriving its value directly or indirectly from land,
(c) any interest in settled property deriving its value directly or indirectly from land, and
(d) any option, consent or embargo affecting the disposition of land.
(1) For the purposes of sections 356OB(1) and 356OD(1) it does not matter whether the person (“P”) realising the profit or gain in question realises it for P or another person.
(2) For the purposes of subsection (1), if, for example by a premature sale, a person (“A”) directly or indirectly transmits the opportunity of realising a profit or gain to another person (“B”), A realises B's profit or gain for B.
(1) For the purposes of this Part a person (“A”) is related to 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 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) 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.
(6) Section 259NC of TIOPA 2010 applies for the purposes of determining whether a person has a “25% investment” in another person for the purposes of this section as it applies for the purposes of section 259NB(2) of that Act.
(7) In Chapter 2 of Part 4 of TIOPA 2010, sections 157(2), 158(4), 159(2) and 160(2) (which are about the interpretation of references to direct and indirect participation) apply in relation to subsection (4) as they apply in relation to subsection (4) of section 259NA of that Act.
357A Election for special treatment of profits from patents etc
(1) A company may elect that any relevant IP profits of a trade of the company for an accounting period for which it is a qualifying company are chargeable at a lower rate of corporation tax.
(2) An election under subsection (1) is to be given effect by allowing a deduction to be made in calculating for corporation tax purposes the profits of the trade for the period.
(3) The amount of the deduction is—
RP × ( MR – IPR MR )
where—
RP is the relevant IP profits of the trade of the company,
“AR” means, in relation to a company—
in a case where corporation tax is charged at the standard small profits rate on the company’s taxable total profits of the accounting period mentioned in subsection (1) which are not ring fence profits, that rate, or
in any other case, the main rate of corporation tax.
IPR is the special IP rate of corporation tax.
(4) The special IP rate of corporation tax is 10%.
(5) Chapter 2 specifies when a company is a qualifying company.
(6) Chapter 2A makes provision for determining the relevant IP profits or relevant IP losses of a trade of a company for an accounting period in a case where—
(a) the accounting period begins on or after 1 July 2021, or
(b) the company is a new entrant (see subsection (11)).
(7) Chapters 2B, 3 and 4 make provision for determining the relevant IP profits or relevant IP losses of a trade of a company for an accounting period in various cases where—
(a) the accounting period begins before 1 July 2021, and
(b) the company is not a new entrant.
(8) Chapter 5 makes provision in relation to the relevant IP losses of a trade.
(9) Chapter 6 contains anti-avoidance provisions.
(10) Chapter 7 contains supplementary provision.
(11) A company is a “new entrant” for the purposes of this Part if—
(a) the first accounting period for which the company's election (or most recent election) under subsection (1) has effect begins on or after 1 July 2016, or
(b) the company elects to be treated as a new entrant for the purposes of this Part.
(1) A company is a qualifying company for an accounting period if—
(a) condition A or B is met, and
(b) in the case of a company that is a member of a group, condition C is met.
(2) Condition A is that, at any time during the accounting period, the company—
(a) holds any qualifying IP rights, or
(b) holds an exclusive licence in respect of any qualifying IP rights.
For the meaning of “exclusive licence”, see section 357BA.
(3) Condition B is that—
(a) the company has held a qualifying IP right or an exclusive licence in respect of such a right,
(b) the company has received income in respect of an event which occurred in relation to the right or licence, or any part of which so occurred, at a time when—
(i) the company was a qualifying company, and
(ii) an election under section 357A(1) had effect in relation to it, and
(c) the income falls to be taxed in the accounting period.
(4) A right is a qualifying IP right for the purposes of this Part if—
(a) it is a right to which this Part applies (see sections 357BB and 357BBA), and
(b) the company meets the development condition in relation to the right (see section 357BC).
(5) Condition C is that the company meets the active ownership condition for the accounting period (see section 357BE).
(1) In this Part “exclusive licence”, in relation to a right (“the principal right”), means a licence which—
(a) is granted by the person who holds either the principal right or an exclusive licence in respect of the principal right (“the proprietor”), and
(b) confers on the person holding the licence (“the licence-holder”), or on the licence-holder and persons authorised by it, the rights in respect of the principal right that are listed in subsection (2).
(2) The rights are—
(a) one or more rights conferred to the exclusion of all other persons (including the proprietor) in one or more countries or territories, and
(b) the right—
(i) to bring proceedings without the consent of the proprietor or any other person in respect of any infringement of the rights within paragraph (a), or
(ii) to receive the whole or the greater part of any damages awarded in respect of any such infringement.
(3) Where the licence-holder has any right within subsection (2)(b) by virtue of any enactment or rule of law, the right is to be regarded for the purposes of this section as conferred by the licence.
(4) Where—
(a) a company (“C”) that is a member of a group holds either a right to which this Part applies or an exclusive licence in respect of such a right, and
(b) C confers on another company that is a member of the group all of the rights held by C in respect of the invention,
that other company is to be treated for the purposes of this Part as holding an exclusive licence in respect of that right.
(5) For the purposes of subsection (4) it does not matter if the rights conferred by C do not include the right to enforce, assign or grant a licence of any of those rights.
(1) This Part applies to the following rights—
(a) a patent granted under the Patents Act 1977,
(b) a patent granted under the European Patent Convention,
(c) a right of a specified description which corresponds to a right within paragraph (a) or (b) and is granted under the law of a specified EEA state,
(d) a supplementary protection certificate, and
(e) any plant breeders' rights granted in accordance with Part 1 of the Plant Varieties Act 1997,
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) Where—
(a) directions are in force under section 22 of the Patents Act 1977 (information prejudicial to national security or safety of public) with respect to an application for a patent under that Act, and
(b) the person making the application has been notified under section 18(4) of that Act that the application complies with the requirements of the Act and the rules,
the person is to be treated for the purposes of this Part as if the person had been granted the patent under that Act.
(3) Where a product benefits from marketing protection (see subsection (4)) or data protection (see subsection (5)), the person who holds the relevant marketing authorisation in respect of the product (see subsection (6A)) is to be treated for the purposes of this Part as having been granted a right to which this Part applies in respect of the product.
(4) A product benefits from marketing protection if—
(a) a marketing authorisation under the Human Medicines Regulations 2012 has been granted in respect of the product and the period during which a generic of the product may be prevented from being sold by reason of regulation 51(8) of those Regulations has not expired;
(b) an orphan marketing authorisation under the Human Medicines Regulations 2012 has been granted in respect of the product and the prohibition arising in connection with that authorisation under regulation 58D(1) of those Regulations remains in force;
(c) a marketing authorisation to which paragraph 6 of Schedule 33A to the Human Medicines Regulations 2012 applies has been granted in respect of the product and the holder of the authorisation continues to benefit from marketing exclusivity by reason of sub-paragraph (4)(f) or (7) of that paragraph;
(d) a marketing authorisation under the Veterinary Medicines Regulations 2013 has been granted in respect of the product and the period during which an equivalent of the product may be prevented from being placed on the market by paragraph 11(3) of Schedule 1 to those Regulations has not expired.
(5) A product benefits from data protection if—
(a) a marketing authorisation in respect of the product under the Human Medicines Regulations 2012 has been granted or varied in circumstances giving rise to the prohibition in regulation 51(16) or 64A(3) of those Regulations and that prohibition remains in force;
(b) a marketing authorisation under Regulation (EC) No 1107/2009 has been granted in respect of the product and data relating to the product benefits from data protection under Article 59 of that Regulation.
(6) The reference to data in subsection (5)(b) does not include a study necessary for the renewal or review of a marketing authorisation granted in respect of the product in accordance with Regulation (EC) No 1107/2009.
(6A) In subsection (3) the relevant marketing authorisation is the marketing authorisation by reference to which it is determined that the product benefits from marketing protection or data protection.
(7) In this section—
“European Patent Convention” means the Convention on the Grant of European Patents,
“Regulation (EC) No 1107/2009” means Regulation (EC) No 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the placing of plant protection products on the market,
“rules” means rules made under section 123 of the Patents Act 1977,
“specified” means specified in an order made by the Treasury, and
“supplementary protection certificate” means a certificate issued under—
Council Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products, or
Regulation (EC) No 1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products.
(8) The Treasury may by order—
(a) amend this section so as to make provision about the circumstances in which a product benefits from marketing or data protection for the purposes of subsection (3);
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) An order made under this section may make any incidental, supplemental, consequential, transitional or saving provision, including provision amending or modifying this Part.
357BBA Rights to which this Part applies: EU rights
(1) This Part applies to the following rights—
(a) an EU supplementary protection certificate, and
(b) any Community plant variety rights granted under Council Regulation (EC) No 2100/94.
(2) Where—
(a) a person holds a marketing authorisation in respect of any product in accordance with any legislation having effect in EU law, and
(b) the product benefits from EU marketing protection (see subsection (3)) or EU data protection (see subsection (4)),
the person is to be treated for the purposes of this Part as having been granted a right to which this Part applies in respect of the product.
(3) A product benefits from EU marketing protection if—
(a) the product benefits from marketing protection by virtue of Article 14.11 of Regulation (EC) No 726/2004 of the European Parliament and of the Council of 31 March 2004 laying down Community procedures for the authorisation and supervision of medical products for human use, or
(b) any of the following prohibitions is in force—
(i) the prohibition on placing on the market a generic of the product imposed by Article 10.1 of Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to medicinal products for human use,
(ii) the prohibition imposed by Article 8.1 of Regulation (EC) No 141/2000 of the European Parliament and the Council of 16 December 1999 on orphan medicinal products, and
(iii) the prohibition on placing on the market a generic of the product imposed by Article 13.1 of Directive 2001/82/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to veterinary medicinal products.
(4) A product benefits from EU data protection if—
(a) the product benefits from the data exclusivity conferred by Article 10.5 of Directive 2001/83/EC of the European Parliament and of the Council,
(b) the prohibition on referring to the results of tests or trials in relation to the product imposed by Article 74a of that Directive is in force, or
(c) data relating to the product benefits from data protection under Article 59 of Regulation (EC) No 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the placing of plant protection products on the market.
(5) The reference to data in subsection (4)(c) does not include a study necessary for the renewal or review of a marketing authorisation granted in respect of the product in accordance with Regulation (EC) No 1107/2009.
(6) In this section “EU supplementary protection certificate” means a certificate issued under—
(a) Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products, or
(b) Regulation (EC) No 1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products.
(7) A reference in this section to any EU legislation is a reference to that legislation as it has effect in EU law.
(8) The Treasury may by regulations—
(a) amend this section so as to make provision about the circumstances in which a product benefits from EU marketing protection or EU data protection for the purposes of subsection (2);
(b) make such provision amending any reference in this section to EU legislation as appears to the Treasury appropriate in consequence of any EU legislation amending or replacing that EU legislation.
(9) Regulations under subsection (8) may make any incidental, supplemental, consequential, transitional or saving provision, including provision amending or modifying this Part.
(1) A company meets the development condition in relation to a right if condition A, B, C or D is met.
Section 357BD (meaning of “qualifying development”) applies for the purposes of this section.
(2) Condition A is that—
(a) the company has at any time carried out qualifying development in relation to the right, and
(b) the company has not ceased to be, or become, a controlled member of a group since that time.
(3) Condition B is that—
(a) the company has at any time carried out qualifying development in relation to the right,
(b) the company has ceased to be, or become, a controlled member of a group since that time,
(c) the company has, for a period of 12 months beginning with the day on which it ceased to be, or became, a controlled member of the group, performed activities of the same description as those that constituted the qualifying development, and
(d) the company remains a member of that group or (as the case may be) does not become a controlled member of any other group.
(4) Condition C is that—
(a) the company is a member of a group,
(b) another company that is or has been a member of the group has carried out qualifying development in relation to the right, and
(c) that other company was a member of the group at the time it carried out the qualifying development.
(5) Condition D is that—
(a) the company is a member of a group,
(b) another company that is or has been a member of the group has carried out qualifying development in relation to the right,
(c) that other company (“T”) or, where another member of the group begins to carry on the trade which T carried on immediately before becoming a member of the group, either or both of those companies have, while carrying on that trade as a member of the group, performed activities of the same description as those that constituted the qualifying development, and
(d) those activities of those companies, taken together, have been performed for a period of 12 months beginning with the day on which T became a member of the group.
(6) For the purposes of conditions A and B, a company becomes a controlled member of a group at any time if—
(a) another company (“P”) either becomes the holder of a major interest in the company, or begins to control the company, at that time, and
(b) immediately before that time the company was not associated with P or with any company associated with P immediately before that time.
(7) For the purposes of conditions A and B, a company ceases to be a controlled member of a group at any time if—
(a) every other company which immediately before that time held a major interest in, or controlled, the company ceases to do so, and
(b) as a result the company ceases to be associated with any of those companies.
(8) Where—
(a) a company ceases to be a controlled member of a group at any time, and
(b) at that time the company holds a major interest in, or controls, any other company,
that other company is to be treated for the purposes of conditions A and B as also having ceased to be a controlled member of the group at that time.
(9) In subsections (6) and (7) “associated” is to be read in accordance with section 357GD(3).
(10) The following provisions apply for the purposes of subsections (6) to (8)—
section 472 of CTA 2009 (meaning of “control”), and
sections 473 and 474 of CTA 2009 (meaning of “major interest”).
(11) A company that meets the development condition in relation to a right by virtue of the performance of the activities mentioned in subsection (3) or (5) for the period of 12 months so mentioned is to be regarded as meeting that condition in relation to the right during that period (as well as at any other time when the company meets the condition).
(1) A company carries out “qualifying development” in relation to a right if—
(a) it creates, or significantly contributes to the creation of, the invention, or
(b) it performs a significant amount of activity for the purposes of developing the invention or any item or process incorporating the invention.
(2) The reference in subsection (1)(b) to developing the invention includes developing ways in which the invention may be used or applied.
(3) For the purposes of section 357BC it does not matter whether the qualifying development was carried out before or after—
(a) the company, or
(b) where the company is a member of a group, any member of the group,
became the holder of the right or (as the case may be) an exclusive licence in respect of the right.
(1) A company meets the active ownership condition for an accounting period if all or almost all of the qualifying IP rights held by the company in that accounting period are rights in respect of which condition A or B is met.
(2) Condition A is that during the accounting period the company performs a significant amount of management activity in relation to the rights.
(3) In subsection (2) “management activity”, in relation to any qualifying IP rights, means formulating plans and making decisions in relation to the development or exploitation of the rights.
(4) Condition B is that the company meets the development condition in relation to the rights by virtue of section 357BC(2) or (3).
(5) Any reference in this section to a qualifying IP right held by the company includes a reference to a qualifying IP right in respect of which the company holds an exclusive licence.
(1) This section applies for the purposes of determining the relevant IP profits of a trade of a company for an accounting period in a case where—
(a) the accounting period begins on or after 1 July 2021, or
(b) the company is a new entrant (see section 357A(11)).
(2) To determine the relevant IP profits—
Step 1 Take any amounts which are brought into account as credits in calculating the profits of the trade for the accounting period, other than any amounts of finance income (see section 357BG), and divide them into two “streams”, amounts of relevant IP income (see sections 357BH to 357BHC) and amounts that are not amounts of relevant IP income. The stream consisting of relevant IP income is “the relevant IP income stream”; the other stream is the “standard income stream”.
Step 2 Divide the relevant IP income stream into “relevant IP income sub-streams” so that each sub-stream is—
a sub-stream consisting of income properly attributable to a particular qualifying IP right (an “individual IP right sub-stream”),
a sub-stream consisting of income properly attributable to a particular kind of IP item (a “product sub-stream”), or
a sub-stream consisting of income properly attributable to a particular kind of IP process (a “process sub-stream”).
See subsection (5) for the meaning of “IP item” and “IP process” and see subsections (6) and (7) for further provision in connection with product sub-streams and process sub-streams.
Step 3 Take any amounts which are brought into account as debits in calculating the profits of the trade for the accounting period, other than any excluded debits (see section 357BI), and allocate them on a just and reasonable basis between the standard income stream and each of the relevant IP income sub-streams.
Step 4 Deduct from each relevant IP income sub-stream—
the amounts allocated to the sub-stream at Step 3, and
the routine return figure for the sub-stream (see section 357BJ).
But see section 357BIA (which provides that certain amounts allocated to a relevant IP income sub-stream at Step 3 are not to be deducted from the sub-stream at this Step).
Step 5 Deduct from each relevant IP income sub-stream which is greater than nil following Step 4 the marketing assets return figure for the sub-stream (see section 357BK).
Step 6 Multiply the amount of each relevant IP income sub-stream (following the deductions required at Steps 4 and 5) by the R&D fraction for the sub-stream (see section 357BL).
Step 7 Add together the amounts of the relevant IP income sub-streams (following Step 6).
Step 8 If the company has made an election under section 357BM (which provides in certain circumstances for profits arising before the grant of a right to be treated as relevant IP profits), add to the amount given by Step 7 any amount determined in accordance with subsection (3) of that section.
(3) If the amount given by subsection (2) is greater than nil, that amount is the relevant IP profits of the trade for the accounting period.
(4) If the amount given by subsection (2) is less than nil, that amount is the relevant IP losses of the trade for the accounting period (see Chapter 5).
(5) In this section—
“IP item” means—
an item in respect of which a qualifying IP right held by the company has been granted, or
an item which incorporates one or more items within paragraph (a);
“IP process” means—
a process in respect of which a qualifying IP right held by the company has been granted, or
a process which incorporates one or more processes within paragraph (a).
(6) For the purposes of this section two or more IP items, or two or more IP processes, may be treated as being of a particular kind if they are intended to be, or are capable of being, used for the same or substantially the same purposes.
(7) Income may be allocated at Step 2 of subsection (2) to a product sub-stream or process sub-stream only if—
(a) it would not be reasonably practicable to apportion the income between individual IP right sub-streams, or
(b) it would be reasonably practicable to do that but doing so would result in it not being reasonably practicable to apply any of the remaining steps in subsection (2).
(8) Any reference in this section to a qualifying IP right held by the company includes a reference to a qualifying IP right in respect of which the company holds an exclusive licence.