725 Provision applying for the purposes of Chapters 2 to 5A
(1) This section applies for the purposes of Chapters 2 to 5A .
(2) If any of those Chapters has operated to restrict relief by reference to a change in the ownership of a company taking place at any time, no transaction or circumstances before that time may be taken into account in determining whether there is any subsequent change in the ownership of the company.
(3) The following provisions apply if—
(a) any relevant assets are taken into account in determining that there has been a change in the ownership of a company, and
(b) the relevant assets were acquired—
(i) in pursuance of a contract of sale or option or other contract, or
(ii) by a person holding such a contract.
(4) The time when the change in the ownership of the company took place is to be determined as if the acquisition had been made—
(a) when the contract was made with the holder, or
(b) when the benefit of it was assigned to the holder.
(5) Accordingly, a person exercising an option to purchase shares is treated as having purchased the shares when that person acquired the option.
(6) In this section “relevant assets” means—
(a) ordinary share capital, or
(b) any property or rights which under section 721 or 722 may be taken into account instead of ordinary share capital.
In this Chapter—
“ownership” means beneficial ownership (and references to acquisition and shareholder are construed accordingly), and
“shares” includes stock.
If the operation of any provision in Chapters 2 to 6 depends on circumstances or events at a time or times after (but not more than 5 years after) a change in the ownership of a company, an assessment to give effect to that provision is not out of time if made within 6 years from that time, or the latest of those times.
(1) This section applies for the purposes of sections 679 , 696 and 705C .
(2) “Relevant non-trading debit” means a non-trading debit within subsection (3), (4) or (5).
(3) A non-trading debit is within this subsection if—
(a) it is determined on an amortised cost basis of accounting,
(b) section 407 or 409 of CTA 2009 (postponement until redemption of debits for connected or close companies' deeply discounted securities) applies, and
(c) were it not for those sections, the debit would have fallen to be brought into account for the purposes of Part 5 of that Act (loan relationships) for an accounting period ending before or with the change in ownership mentioned in section 679 , 696 or 705C .
(4) A non-trading debit is within this subsection if—
(a) it is determined on an amortised cost basis of accounting,
(b) section 373 of CTA 2009 (late interest treated as not accruing until paid in some cases) applies, and
(c) were it not for that section, the debit would have fallen to be brought into account for the purposes of Part 5 of that Act for an accounting period ending before or with the change in ownership mentioned in section 679 , 696 or 705C .
(5) A non-trading debit is within this subsection if—
(a) it is not within subsection (3) or (4),
(b) it is a debit in respect of a debtor relationship of the company mentioned in section 679 , 696 or 705C ,
(c) it is determined on an amortised cost basis of accounting, and
(d) it relates to an amount that accrued before the change in ownership so mentioned.
(6) Expressions used both in this section and in Part 5 of CTA 2009 (loan relationships) have the same meaning as in that Part.
(1) This Part makes provision restricting the circumstances in which deductible amounts may be brought into account where there has been a qualifying change in relation to a company.
(2) For the meaning of “deductible amount” and “qualifying change” see section 730B.
(1) In this Part—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),
“deductible amount” means—
an expense of a trade,
an expense of a UK property business or an overseas property business,
an expense of management of a company's investment business within the meaning of section 1219 of CTA 2009,
a non-trading debit within the meaning of Parts 5 and 6 of CTA 2009 (loan relationships and derivative contracts) (see section 301(2) of that Act), or
a non-trading debit within the meaning of Part 8 of CTA 2009 (intangible fixed assets) (see section 746 of that Act),
but does not include any amount that has been taken into account in determining RTWDV within the meaning of Chapter 16A of Part 2 of CAA 2001 (restrictions on allowance buying) (see section 212K of that Act),
other than an amount treated as such an expense by section 450(a) of CAA 2001 (research and development allowances treated as expenses in calculating profits of a trade),
“C” means the company mentioned in section 730A(1),
“qualifying change”, in relation to a company, has the same meaning as in that Chapter, and
“the relevant day” means the day on which the qualifying change in relation to C occurred.
(2) In this Part, references to bringing an amount into account “as a deduction” in any period are to bringing it into account as a deduction in that period—
(a) in calculating profits, losses or other amounts for corporation tax purposes, or
(b) from profits or other amounts chargeable to corporation tax.
730C Disallowance of deductible amounts: relevant claims
(1) This section applies where a relevant claim is made for an accounting period ending on or after the relevant day.
(2) “Relevant claim” means a claim by C, or a company connected with C, under—
(a) section 37 (relief for trade losses against total profits), ...
(aa) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Chapter4 of Part 5 (group relief), or
(c) Chapter 3 of Part 5A (group relief for carried-forward losses).
(3) In the case of a relevant claim within subsection (2)(a) or (b), a deductible amount that meets conditions A and B (a “restricted deductible amount”) may not be the subject of, or brought into account as a deduction in, the claim.
(3A) A relevant claim within subsection (2)(c) may not be made in respect of a loss or other amount which has been carried forward under any provision mentioned in paragraph (a) or (b) of section 188BB(1), so far as that amount is made up of an amount which was (in a previous accounting period) a restricted deductible amount.
(4) But subsections (3) and (3A) do not exclude any amount which could have been the subject of, or brought into account as a deduction in, or as a result of, the claim concerned in the absence of the qualifying change.
(5) Condition A is that, on the relevant day, it is highly likely that the amount, or any part of it, would (disregarding this Part) be the subject of, or brought into account as a deduction in, a relevant claim for an accounting period ending on or after the relevant day.
(6) Any question as to what is “highly likely” on the relevant day for the purposes of subsection (5) is to be determined having regard to—
(a) any arrangements made on or before that day, and
(b) any events that take place on or before that day.
(7) Condition B is that the main purpose, or one of the main purposes, of change arrangements is for the amount (whether or not together with other deductible amounts) to be the subject of, or brought into account as a deduction in, a relevant claim for an accounting period ending on or after the relevant day.
(7A) For the purposes of determining how much of an amount carried forward as mentioned in subsection (3A) is made up of an amount which was (in a previous accounting period) a restricted deductible amount, assume that in previous accounting periods amounts have been brought into account as deductions (see section 730B(2)) in the order that results in the greatest amount being excluded by subsection (3A).
(8) “Change arrangements” means any arrangements made to bring about, or otherwise connected with, the qualifying change.
(9) This section does not apply to a deductible amount if, and to the extent that—
(a) section 730D(2) applies to it, or
(b) for the purposes of section 432, a loss, or any part of a loss, to which section 433(2) applies derives from it.
730D Disallowance of deductible amounts: profit transfers
(1) This section applies where arrangements (“the profit transfer arrangements”) are made which result in—
(a) an increase in the total profits of C, or of a company connected with C, or
(b) a reduction of any loss or other amount for which relief from corporation tax could (disregarding this section) have been given to C or a company connected with C,
in any accounting period ending on or after the relevant day.
(2) A deductible amount that meets conditions D and E may not be brought into account by C, nor any company connected with C, as a deduction in any accounting period ending on or after the relevant day.
(3) Condition D is that, on the relevant day, it is highly likely that the amount, or any part of it, would (disregarding this Part) be brought into account by C, or any company connected with C, as a deduction in any accounting period ending on or after the relevant day.
(4) Any question as to what is “highly likely” on the relevant day for the purposes of subsection (3) is to be determined having regard to—
(a) any arrangements made on or before that day, and
(b) any events that take place on or before that day.
(5) Condition E is that the main purpose, or one of the main purposes, of the profit transfer arrangements is to bring the amount (whether or not together with other deductible amounts) into account as a deduction in any accounting period ending on or after the relevant day.
(6) Subsection (7) applies if—
(a) (disregarding subsection (7)) subsection (2) would prevent a deductible amount being brought into account by a company as a deduction in any accounting period ending on or after the relevant day, and
(b) in the absence of the profit transfer arrangements and disregarding any deductible amounts, the company would have an amount of total profits for that accounting period.
(7) Subsection (2) applies only in relation to such proportion of the deductible amount mentioned in subsection (6)(a) as is just and reasonable.
(1) This Part makes provision restricting the circumstances in which a company may make a deduction in respect of a relevant carried-forward loss.
(2) For the meaning of “relevant carried-forward loss”, see section 730F.
(1) In this Part “relevant carried-forward loss” means any of the following—
(a) a carried-forward trading loss (see subsection (2)),
(aa) a carried-forward UK property business loss (see subsection (2A),
(b) a carried-forward non-trading deficit (see subsection (3)),
(ba) a carried-forward non-trading loss on intangible fixed assets (see subsection (3A),
(c) any carried-forward management expenses (see subsection (4)).
(2) “Carried-forward trading loss”, in relation to a company and an accounting period, means a loss in a trade of the company which is carried forward from a previous accounting period under section 45, 45A or 45B (carry forward of trade loss ...).
(2A) “Carried-forward UK property business loss”, in relation to a company and an accounting period, means a loss in a UK property business carried on by the company which is carried forward from a previous accounting period under section 62(5).
(3) “Carried-forward non-trading deficit”, in relation to a company and an accounting period, means a non-trading deficit which the company has from its loan relationships under section 301(6) of CTA 2009 and which is carried forward from a previous accounting period under section 457, 463G or 463H of that Act (carry forward of deficits to accounting periods after deficit period).
(3A) “Carried-forward non-trading loss on intangible fixed assets”, in relation to a company and an accounting period, means a non-trading loss on intangible fixed assets which is carried forward from a previous accounting period under section 753 of CTA 2009 (treatment of non-trading losses).
(4) “Carried-forward management expenses”, in relation to a company and an accounting period, means—
(a) any amounts which—
(i) fall within subsection (2) of section 1223 of CTA 2009 (carrying forward expenses of management and other amounts), and
(ii) are treated by subsection (3) of that section as expenses of management deductible for the period, and
(b) any amounts which are treated by section 63(3) (carrying forward certain losses made by company with investment business which ceases to carry on UK property business) as expenses of management deductible for the period for the purposes of Chapter 2 of Part 16 of CTA 2009.
(5) In this section “non-trading loss on intangible fixed assets” is to be read in accordance with Part 8 of CTA 2009.
730G Disallowance of deductions for relevant carried-forward losses
(1) This section applies if conditions A to E are met.
(2) Condition A is that—
(a) for the purposes of corporation tax a company has profits (“relevant profits”) for an accounting period,
(b) the relevant profits arise to the company as a result of any arrangements (“the tax arrangements”), and
(c) in the absence of this section the company (“the relevant company”) would, for corporation tax purposes, be entitled to deduct from the relevant profits for the period an amount in respect of any relevant carried-forward losses.
(3) Condition B is that—
(a) the relevant company, or a company connected with that company, brings a deductible amount into account as a deduction for an accounting period, and
(b) it is reasonable to assume that neither the company, nor any company connected with it, would have brought that amount into account as a deduction for that period but for the tax arrangements.
(4) Condition C is that the main purpose, or one of the main purposes, of the tax arrangements is to secure a relevant corporation tax advantage or a relevant CFC charge advantage—
(a) for the relevant company, or
(b) if there are any companies connected with that company, for the relevant company and those connected companies (taken together).
(5) In this section “relevant corporation tax advantage” means a corporation tax advantage involving—
(a) the deductible amount mentioned in subsection (3), and
(b) the deduction of any relevant carried-forward losses from the relevant profits.
(5A) In this section “relevant CFC charge advantage” means a CFC charge advantage involving the deductible amount mentioned in subsection (3).
(6) Condition D is that, at the time when the tax arrangements were entered into, it would have been reasonable to assume that the tax value of the tax arrangements would be greater than the non-tax value of the tax arrangements.
(7) The “tax value” of the tax arrangements is the total value of—
(a) any relevant corporation tax advantage, ...
(aa) any relevant CFC charge advantage, and
(b) any other economic benefits derived by—
(i) the relevant company, or
(ii) if there are any companies connected with that company, the relevant company and those connected companies (taken together),
as a result of securing the relevant corporation tax advantage or the relevant CFC charge advantage.
(8) The “non-tax value” of the tax arrangements is the total value of any economic benefits, other than those falling within subsection (7)(a), (aa) or (b), derived by—
(a) the relevant company, or
(b) if there are any companies connected with that company, the relevant company and those connected companies (taken together),
as a result of the tax arrangements.
(9) Condition E is that the tax arrangements are not arrangements in relation to which section 269CK (banking companies: profits arising from tax arrangements to be disregarded) applies.
(10) If this section applies, the relevant company is not entitled to deduct from the relevant profits any amount in respect of the relevant carried-forward losses.
(1) In section 730G—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“CFC charge advantage” means the avoidance or reduction of a charge or assessment to a charge under Part 9A of TIOPA 2010 (controlled foreign companies);
“corporation tax advantage” means—
a relief from corporation tax or increased relief from corporation tax,
a repayment of corporation tax or increased repayment of corporation tax,
the avoidance or reduction of a charge to corporation tax or an assessment to corporation tax,
the avoidance of a possible assessment to corporation tax, or
the deferral of a payment of corporation tax or advancement of a repayment of corporation tax;
“deductible amount” means—
an expense of a trade, other than an amount treated as such an expense by section 450(a) of CAA 2001 (research and development allowances treated as expenses in calculating profits of a trade),
an expense of a UK property business or an overseas property business,
an expense of management of a company's investment business within the meaning of section 1219 of CTA 2009,
a non-trading debit within the meaning of Parts 5 and 6 of CTA 2009 (loan relationships and derivative contracts) (see section 301(2) of that Act), or
a non-trading debit within the meaning of Part 8 of CTA 2009 (intangible fixed assets) (see section 746 of that Act),
but does not include any amount that has been taken into account in determining RTWDV within the meaning of Chapter 16A of Part 2 of CAA 2001 (restrictions on allowance buying) (see section 212K of that Act);
“relevant carried-forward loss” has the meaning given by section 730F.
(2) References in section 730G to bringing an amount into account “as a deduction” in any period are to bringing it into account as a deduction in that period—
(a) in calculating profits, losses or other amounts for corporation tax purposes, or
(b) from profits or other amounts chargeable to corporation tax.
(1) This Part makes provision for counteracting corporation tax advantages obtained or obtainable by companies to which section 733 applies in respect of a transaction or transactions in securities.
(2) See section 746 (counteraction notices) for the way in which the corporation tax advantages may be counteracted.
(1) In this Part “corporation tax advantage” means—
(a) a relief from corporation tax or increased relief from corporation tax,
(b) a repayment of corporation tax or increased repayment of corporation tax,
(c) the avoidance or reduction of a charge to corporation tax or an assessment to corporation tax, or
(d) the avoidance of a possible assessment to corporation tax.
(2) For the purposes of subsection (1)(c) and (d) it does not matter whether the avoidance or reduction is effected—
(a) by receipts accruing in such a way that the recipient does not pay or bear corporation tax on them, or
(b) by a deduction in calculating profits or gains.
733 Company liable to counteraction of corporation tax advantage
(1) This section applies to a company in respect of a transaction in securities or two or more such transactions if the company is in a position to obtain or has obtained a corporation tax advantage—
(a) in circumstances where any of the provisions specified in subsection (2) applies in relation to the company, and
(b) in consequence of—
(i) the transaction, or
(ii) the combined effect of the transactions.
(2) The provisions are—
...
section 736 (receipt of consideration representing company's assets, future receipts or trading stock (circumstance C)),
section 737 (receipt of consideration in connection with relevant company distribution (circumstance D)), and
section 738 (receipt of assets of relevant company (circumstance E)).
(3) For the purposes of this Part a corporation tax advantage is treated as obtained or obtainable by a company in consequence of—
(a) a transaction in securities, or
(b) the combined effect of two or more such transactions,
if it is obtained or obtainable by the company in consequence of the combined effect of the transaction or transactions and the liquidation of a company.
(4) This section is subject to—
section 734 (exception where no tax avoidance object shown),
section 744(3) (disapplication of this section where company receiving preliminary notification that this section may apply makes a statutory declaration and the relevant officer of Revenue and Customs sees no reason to take further action), and
section 745(5) (determination by tribunal that there is no prima facie case that this section applies).
(1) Section 733 does not apply to a company in respect of a transaction in securities or two or more such transactions if the company shows that the transaction or transactions meet conditions A and B.
(2) Condition A is that the transaction or transactions are effected—
(a) for genuine commercial reasons, or
(b) in the ordinary course of making or managing investments.
(3) Condition B is that enabling corporation tax advantages to be obtained is not the main object or one of the main objects of the transaction or, as the case may be, any of the transactions.
736 Receipt of consideration representing company's assets, future receipts or trading stock (circumstance C)
(1) This section applies in relation to a company (“A”) if subsections (2) to (4) apply.
(2) A receives consideration which—
(a) is or represents the value of—
(i) assets which are available for distribution by a company by way of dividend, or
(ii) assets which would have been so available apart from anything done by the company,
(b) is received in respect of future receipts of a company, or
(c) is or represents the value of trading stock of a company.
(3) The receipt is in consequence of a transaction whereby another person subsequently receives, or has received, an abnormal amount by way of dividend (see section 740).
(4) The receipt of the consideration is such that A does not pay or bear corporation tax on income in respect of it (apart from this Part).
(5) The assets mentioned in subsection (2) do not include assets which are shown to represent a return of sums paid by subscribers on the issue of securities, despite the fact that under the law of the country in which the company is incorporated assets of that description are available for distribution by way of dividend.
(6) In this section references to the receipt of consideration include references to the receipt of any money or money's worth.
737 Receipt of consideration in connection with relevant company distribution (circumstance D)
(1) This section applies in relation to a company (“the section 733 company”) if subsections (2) to (4) apply.
(2) The section 733 company receives consideration in connection with—
(a) the distribution, transfer or realisation of assets of a relevant company (see section 739), or
(b) the application of such assets in discharge of liabilities.
(3) The consideration—
(a) is or represents the value of—
(i) assets which are available for distribution by way of dividend by the relevant company, or
(ii) assets which would have been so available apart from anything done by the relevant company,
(b) is received in respect of future receipts of the relevant company, or
(c) is or represents the value of trading stock of the relevant company.
(4) The section 733 company so receives the consideration that it does not pay or bear corporation tax on income in respect of it (apart from this Part).
(5) The assets mentioned in subsection (3) do not include assets which are shown to represent a return of sums paid by subscribers on the issue of securities, despite the fact that under the law of the country in which the relevant company is incorporated assets of that description are available for distribution by way of dividend.
(6) In this section references to the receipt of consideration include references to the receipt of any money or money's worth.
738 Receipt of assets of relevant company (circumstance E)
(1) This section applies in relation to a company (“the section 733 company”) if subsections (2) to (4) and (7) apply.
(2) The section 733 company receives consideration in connection with—
(a) the direct or indirect transfer of assets of a relevant company (see section 739) to another such company, or
(b) any transaction in securities in which two or more relevant companies are concerned.
(3) The consideration is or represents the value of assets which—
(a) are available for distribution by way of dividend by a relevant company,
(b) would have been so available apart from anything done by the relevant company, or
(c) are trading stock of a relevant company.
(4) The consideration consists of any share capital or any security issued by a relevant company.
(5) So far as subsection (4) relates to share capital other than redeemable share capital, it applies only so far as the share capital is repaid (in a winding up or otherwise).
(6) The reference in subsection (5) to the repayment of share capital includes a reference to any distribution made in respect of any shares in a winding up or dissolution of the relevant company.
(7) The section 733 company does not pay or bear corporation tax on income in respect of the consideration (apart from this Part).
(8) In this section—
(a) references to the receipt of consideration include references to the receipt of any money or money's worth,
(b) “security” includes securities not creating or evidencing a charge on assets, and
(c) “share” includes stock and any other interest of a member in a company.
739 Meaning of “relevant company” in sections 737 and 738
(1) A company is a relevant company for the purposes of sections 737 and 738 if it is—
(a) a company under the control of not more than 5 persons (but see subsection (2)), or
(b) any other company none of whose shares or stocks is—
(i) included in the official UK list, and
(ii) dealt in on a recognised stock exchange in the United Kingdom regularly or from time to time.
(2) A company is not a relevant company for those purposes if it is under the control of one or more companies which are not relevant companies for those purposes.
(3) The reference in subsection (1)(b) to shares or stocks does not include debenture stock, preferred shares or preferred stock.
(4) Section 450 (meaning of “control” for the purposes of Part 10 (close companies)) applies for the purposes of this section.
(1) An amount received by way of dividend is treated as abnormal for the purposes of this Part if the appropriate authority is satisfied—
(a) in any case that the excessive return condition is met (see section 741), or
(b) in the case of a dividend at a fixed rate, that the excessive accrual condition is met (see section 742).
(2) In subsection (1) “the appropriate authority” means whichever of the following is determining the question whether the amount is abnormal for the purposes of this Part—
(a) an officer of Revenue and Customs,
(b) the Commissioners for Her Majesty's Revenue and Customs, or
(c) the tribunal.
741 Abnormal dividends: the excessive return condition
(1) The excessive return condition is that the dividend substantially exceeds a normal return on the consideration provided by the recipient for the relevant securities.
(2) In this section “the relevant securities” means-
(a) the securities in respect of which the dividend was received, and
(b) if those securities are derived from securities previously acquired by the recipient, the securities that were previously acquired.
(3) In determining whether an amount received by way of dividend exceeds a normal return, regard must be had—
(a) to the length of time before its receipt that the recipient first acquired any of the relevant securities, and
(b) to any dividends paid and other distributions made in respect of them during that time.
(4) If—
(a) the consideration provided by the recipient for any of the relevant securities exceeded their market value at the time the recipient acquired them, or
(b) no consideration was so provided,
for the purposes of subsection (1) consideration equal to that market value is taken to have been so provided.
742 Abnormal dividends: the excessive accrual condition
(1) The excessive accrual condition is that the dividend substantially exceeds the amount which the recipient would have received if—
(a) the dividend had accrued from day to day, and
(b) the recipient had been entitled to only so much of the dividend as accrued while the recipient held the securities.
(2) But the excessive accrual condition is treated as not being met if during the period of 6 months beginning with the purchase of the securities the recipient does not—
(a) sell or otherwise dispose of any of the securities or any securities similar to them, or
(b) acquire an option to sell any of the securities or any securities similar to them.
(3) For the purposes of subsection (2) securities are taken to be similar if they entitle their holders—
(a) to the same rights against the same persons as to capital and interest, and
(b) to the same remedies for the enforcement of those rights.
(4) For the purposes of subsection (3) rights guaranteed by the Treasury are treated as rights against the Treasury.
(5) Subsection (3) applies despite any differences—
(a) in the total nominal amounts of the respective securities,
(b) in the form in which they are held, or
(c) in the way in which they can be transferred.
743 Preliminary notification that section 733 may apply
(1) An officer of Revenue and Customs must notify a company if the officer has reason to believe that—
(a) section 733 (company liable to counteraction of corporation tax advantage) may apply to the company in respect of a transaction or transactions, and
(b) a counteraction notice ought to be served on the company under section 746 about the transaction or transactions.
(2) The notification must specify the transaction or transactions.
(3) See section 746 for the serving of counteraction notices, and sections 744 and 745 for cases where the company on which the notice under this section is served disagrees that section 733 applies.
(1) If a company on which a notification is served under section 743 is of the opinion that section 733 (company liable to counteraction of corporation tax advantage) does not apply to the company in respect of the transaction or transactions specified in the notification, the company may—
(a) make a statutory declaration to that effect, stating the facts and circumstances on which the opinion is based, and
(b) send it to the officer of Revenue and Customs.
(2) Such a declaration must be sent within 30 days of the issue of the notification.
(3) If the company sends that declaration to the officer and the officer sees no reason to take further action—
(a) section 733 does not so apply, and
(b) accordingly no counteraction notice may be served on the company under section 746 about the transaction or transactions.
745 Opposed notifications: determinations by tribunal
(1) This section applies if the officer of Revenue and Customs receiving a statutory declaration under section 744(1) sees reason to take further action about the transaction or transactions in question.
(2) The officer must send the tribunal a certificate to that effect, together with the statutory declaration.
(3) The officer may also send the tribunal a counter-statement with the certificate.
(4) The tribunal must—
(a) consider the declaration and certificate and any counter-statement, and
(b) determine whether there is a prima facie case for the officer to take further action on the basis that section 733 (company liable to counteraction of corporation tax advantage) applies to the company by which the declaration was made in respect of the transaction or transactions in question.
(5) If the tribunal determines that there is no such case—
(a) section 733 does not so apply, and
(b) accordingly no counteraction notice may be served on the company under section 746 about the transaction or transactions.
(6) But such a determination does not affect the application of sections 733 and 746 in respect of transactions including not only the ones to which the determination relates but also others.
(1) If—
(a) a company on which a notification is served under section 743 does not send a statutory declaration to an officer of Revenue and Customs under section 744 within 30 days of the issue of the notification, or
(b) the tribunal to which such a declaration is sent under section 745 determines that there is a prima facie case for serving a notice on a company under this section,
the corporation tax advantage in question is to be counteracted by adjustments.
(2) The adjustments required to be made to counteract the corporation tax advantage and the basis on which they are to be made are to be specified in a notice served on the company by an officer of Revenue and Customs.
(3) In this Part such a notice is referred to as a “counteraction notice”.
(4) Any of the following adjustments may be specified—
(a) an assessment,
(b) the nullifying of a right to repayment,
(c) the requiring of the return of a repayment already made, or
(d) the calculation or recalculation of profits or gains or liability to corporation tax.
(5) Nothing in this section authorises the making of an assessment later than 6 years after the accounting period to which the corporation tax advantage relates.
(6) This section is subject to—
section 747 (timing of assessments in section 738 cases), and
section 749(2) (effect of clearance notification under section 748).
(7) But no other provision in the Corporation Tax Acts is to be read as limiting the powers conferred by this section.
(1) This section applies if section 733 (company liable to counteraction of corporation tax advantage) applies to a company because it is in a position to obtain or has obtained a corporation tax advantage by falling within the circumstances mentioned in section 738 (receipt of relevant company assets (circumstance E)) when share capital is repaid.
(2) An assessment to corporation tax made in accordance with a counteraction notice must be an assessment for the accounting period in which the repayment occurs.
(3) The references in this section to the repayment of share capital include references to any distribution made in respect of any shares in a winding up or dissolution of the company.
(4) In subsection (3) “shares” includes stock and any other interest of a member in a company.
(1) A company may provide the Commissioners for Her Majesty's Revenue and Customs with particulars of a transaction or transactions effected or to be effected by it in order to obtain a notification about them under this section.
(2) If the Commissioners consider that the particulars, or any further information provided under this subsection, are insufficient for the purposes of this section, they must notify the company what further information they require for those purposes within 30 days of receiving the particulars or further information.
(3) If any such further information is not provided within 30 days from the notification, or such further time as the Commissioners allow, they need not proceed further under this section.
(4) The Commissioners must notify the company whether they are satisfied that the transaction or transactions, as described in the particulars, were or will be such that no counteraction notice ought to be served about the transaction or transactions.
(5) The notification must be given within 30 days of receipt of the particulars, or, if subsection (2) applies, of all further information required.
749 Effect of clearance notification under section 748
(1) This section applies if the Commissioners for Her Majesty's Revenue and Customs notify a company under section 748 that they are satisfied that a transaction or transactions, as described in the particulars provided under that section, were or will be such that no counteraction notice ought to be served about the transaction or transactions.
(2) No such notice may be served on the company in respect of the transaction or transactions.
(3) But the notification does not prevent such a notice being served on the company in respect of transactions including not only the ones to which the notification relates but also others.
(4) The notification is void if the particulars and any further information given under section 748 about the transaction or transactions do not fully and accurately disclose all facts and considerations which are material for the purposes of that section.
(1) A company on which a counteraction notice has been served may appeal on the grounds that—
(a) section 733 (company liable to counteraction of corporation tax advantage) does not apply to the company in respect of the transaction or transactions in question, or
(b) the adjustments directed to be made are inappropriate.
(2) Such an appeal may be made only by giving notice to the Commissioners for Her Majesty's Revenue and Customs within 30 days of the service of the counteraction notice.
(3) On an appeal under this section the tribunal may—
(a) affirm, vary or cancel the counteraction notice, or
(b) affirm, vary or quash an assessment made in accordance with the notice.
(4) But the bringing of an appeal under this section does not affect—
(a) the validity of the counteraction notice, or
(b) the validity of any other thing done under or in accordance with section 746 (counteraction notices),
pending the determination of the proceedings.
(1) In this Part—
“company” includes any body corporate,
“dividends” includes references to other ... distributions and to interest,
“securities”—
includes shares and stock, and
in relation to a company not limited by shares (whether or not it has a share capital) also includes a reference to the interest of a member of the company as such, whatever the form of that interest,
“trading stock” has the meaning given by section 163 of CTA 2009, and
“transaction in securities” means transactions, of whatever description, relating to securities, and in particular—
the purchase, sale or exchange of securities,
issuing or securing the issue of new securities,
applying or subscribing for new securities, and
altering or securing the alteration of the rights attached to securities.
(2) In the definition of “dividends” given by subsection (1), “other distributions” does not include a distribution which is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph C or D in section 1000(1) (redeemable share capital or security issued as bonus in respect of shares in, or securities of, the company).
(1) This Chapter applies if—
(a) a company within the charge to corporation tax (“the transferor”) makes a transfer to another person (“the transferee”) of a right to relevant receipts (see subsection (2)), and
(b) (subject to subsection (3)) the transfer of the right is not a consequence of the transfer to the transferee of an asset from which the right to relevant receipts arises.
(2) “Relevant receipts” means any income—
(a) which (but for the transfer) would be charged to corporation tax as income of the transferor, or
(b) which (but for the transfer) would be brought into account in calculating profits of the transferor for the purposes of corporation tax.
(3) Despite subsection (1)(b), this Chapter applies if the transfer of the right is a consequence of the transfer to the transferee of all rights under an agreement for annual payments; and for the purposes of subsection (1)(b) the transfer of an asset under a sale and repurchase agreement is not to be regarded as a transfer of the asset.
(4) Section 753 makes provision as to the consequences of this Chapter applying.
(5) For exclusions from this Chapter, see—
(a) section 754 (amount otherwise taxed), and
(b) section 755 (transfer by way of security).
(6) Section 756 makes special provision about transfers of partnership shares.
(7) Section 757 contains supplementary provisions.
753 Value of transferred income stream treated as income
(1) The relevant amount (see subsection (2)) is to be treated as income of the transferor chargeable to corporation tax in the same way and to the same extent as that in which the relevant receipts—
(a) would have been chargeable to corporation tax, or
(b) would have been brought into account in calculating any profits for the purposes of corporation tax,
but for the transfer of the right to relevant receipts.
(2) The relevant amount is—
(a) (except where paragraph (b) applies) the amount of the consideration for the transfer of the right, or
(b) where the amount of any such consideration is substantially less than the market value of the right at the time when the transfer takes place (or where there is no consideration for the transfer of the right), the market value of the right at that time.
(3) The income under subsection (1) is to be treated as arising—
(a) to the extent that it does not exceed the amount of the consideration for the transfer of the right, in the period or periods for which, in accordance with generally accepted accounting practice, the consideration for the transfer is recognised for accounting purposes in a profit and loss account or income statement of the transferor, and
(b) otherwise, in the period or periods for which, in accordance with generally accepted accounting practice, the consideration for the transfer would be so recognised if it were of an amount equal to the market value of the right at the time when the transfer takes place.
(4) But if at any time it becomes reasonable to assume that the income (to any extent) is not, or would not be, treated by subsection (3) as arising in an accounting period of the transferor, the income is to that extent to be treated as arising immediately before that time.
This Chapter does not apply if and to the extent that the income under section 753(1) is (apart from this Chapter)—
(a) charged to tax as income of the transferor,
(b) brought into account as income in calculating the profits of the transferor, or
(c) brought into account under CAA 2001.
(1) This Chapter does not apply if—
(a) the consideration for the transfer is the advance under a type 1 finance arrangement, and
(b) the transferor is, or is a member of a partnership which is, the borrower in relation to the arrangement.
(2) This Chapter does not apply if—
(a) the consideration for the transfer is the advance under a type 2 finance arrangement or a type 3 finance arrangement, and
(b) the transferor is a member of the partnership which receives that advance under the arrangement.
(3) In this section—
“type 1 finance arrangement” has the meaning given for the purposes of Chapter 2 by section 758,
“type 2 finance arrangement” has the meaning given for the purposes of Chapter 2 by section 763, and
“type 3 finance arrangement” has the meaning given for the purposes of Chapter 2 by section 767.
(1) For the purposes of this Chapter a transfer of a right to relevant receipts consisting of the reduction in the transferor's share in the profits or losses of a partnership is to be regarded as a consequence of a transfer of an asset from which the right arose (that is, the partnership property) ....
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .