(1) This section applies where—
(a) a scheme includes an arrangement under which a member of the scheme group has a debtor repo or a debtor quasi-repo, and
(b) the advance under that arrangement is received, directly or indirectly, from a member of the scheme group.
(2) References in this Part to amounts brought into account, or not brought into account, as debits or credits for the purposes of Part 5 of CTA 2009 include amounts brought into account, or not brought into account, for the purposes of any other provision so far as it applies the charge to corporation tax on income to the repayment of the advance.
(3) Sections 548 and 549 of CTA 2009 (meaning of debtor repo and debtor quasi-repo) apply for the purposes of this section.
(4) For the purposes of subsection (2) “ the repayment of the advance ” means the consideration given on the purchase of securities mentioned in condition D in section 548 or 549 of CTA 2009.
(1) This section applies in relation to a scheme if—
(a) it includes a type 1, 2 or 3 finance arrangement under which a member of the scheme group is the borrower, and
(b) the advance under that arrangement is received, directly or indirectly, from a member of the scheme group.
(2) References in this Part to amounts brought into account, or not brought into account, as debits or credits for the purposes of Part 5 of CTA 2009 include amounts brought into account, or not brought into account, for the purposes of any other provision so far as it applies the charge to corporation tax on income to the repayment of the advance.
(3) Sections 758, 763 and 767 of this Act (meaning of type 1, 2 and 3 finance arrangements) apply for the purposes of this section.
(4) For the purposes of subsection (2) “ the repayment of the advance ” means the payments mentioned in condition A in section 758, 763 or 767 of this Act.
References in this Part to amounts brought into account, or not brought into account, as debits or credits for the purposes of Part 5 or 7 of CTA 2009 include amounts brought into account, or not brought into account, as expenses or receipts of a trade by virtue of section 297 or 573 of that Act (trading credits and debits to be brought into account under Part 3).
938L Foreign companies and foreign permanent establishments
(1) References in this Part to a company not bringing amounts into account as debits or credits for the purposes of Part 5 or 7 of CTA 2009 do not include the company not bringing amounts into account by virtue of—
(a) the company being non-UK resident, or
(b) an election under section 18A of CTA 2009 (profits or losses of foreign permanent establishments).
(2) See section 938M for provision about controlled foreign companies.
(1) Section 371SL(1) of TIOPA 2010 (assumption that a CFC is not a member of any group for the purposes of any provision of the Tax Acts) does not apply for the purposes of this Part.
(2) References in this Part to a company bringing amounts into account, or not bringing them into account, as debits or credits for the purposes of Part 5 or 7 of CTA 2009 include bringing amounts into account, or not bringing them into account, as debits or credits under that Part in determining the assumed taxable total profits of the company (or in determining that there were no such profits) for the purposes of Part 9A of TIOPA 2010 (controlled foreign companies).
For the purposes of this Part the following provisions are to be treated as of no effect—
(a) section 441 of CTA 2009 (loan relationships for unallowable purposes);
(b) section 690 of that Act (derivative contracts for unallowable purposes);
(c) Part 4 of TIOPA 2010 (transfer pricing);
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(da) Part 6A of that Act (hybrid and other mismatches);
(e) Part 10 of that Act (corporate interest restriction).
938O Losses and profits from tax mismatch scheme to be disregarded
(1) This section applies to a company that is (at any time) a party to a tax mismatch scheme.
(2) No scheme loss or profit made by the company in any accounting period in relation to the scheme is to be brought into account as a debit or credit for the purposes of Part 5 of CTA 2009 (loan relationships) or Part 7 of that Act (derivative contracts).
(3) An amount that would, apart from this section, be brought into account for the purposes of Part 5 or 7 of that Act as respects any matter—
(a) is treated, for the purposes of section 464(1) or (as the case may be) 699(1) of that Act (priority of Part 5 or 7 for corporation tax purposes), as if it were so brought into account, and
(b) accordingly, may not be brought into account for any other corporation tax purposes as respects that matter.
(1) A scheme is a tax mismatch scheme if condition A or B is met.
(2) Condition A is that, at the time the scheme is entered into, there is no practical likelihood that the scheme will fail to secure a relevant tax advantage of £2 million or more.
(3) The Treasury may by order substitute a higher amount for the amount for the time being specified in subsection (2).
(4) Any such substitution is to have effect in relation to schemes entered into on or after the day on which the order comes into force.
(5) Condition B is that—
(a) the purpose, or one of the main purposes, of the company in entering into the scheme is to obtain the chance of securing a relevant tax advantage (of any amount), and
(b) at the time the scheme is entered into—
(i) there is no chance that the scheme will secure a relevant tax disadvantage, or
(ii) there is such a chance, but the expected value of the scheme is nevertheless a positive amount.
(6) If, at the time the company enters into the scheme, there are chances that the scheme would, if carried out, secure different relevant tax advantages or disadvantages in different circumstances, the amounts and probabilities of each must be taken into account in determining the expected value of the scheme.
(7) In determining whether condition A or B is met, it is to be assumed that the parties to the scheme carry it out.
(8) Where, at the time the scheme is entered into, the length of the scheme period is uncertain, condition A or B is met if it would be met on any reasonable assumption as to the length of the scheme period.
(9) In determining whether condition A or B is met, section 938O (scheme profits and losses to be left out of account) is to be disregarded.
(1) A loss or profit made by a company in an accounting period is a “scheme loss” or “scheme profit” in relation to a tax mismatch scheme if the loss or profit—
(a) arises from a transaction, or series of transactions, that forms part of the scheme,
(b) is, or is comprised in, an amount that is brought into account as a debit or credit for the purposes of Part 5 or 7 of CTA 2009, and
(c) meets the first or second asymmetry condition.
(2) The first asymmetry condition is that the loss or profit affects the amount of any relevant tax advantage secured by the scheme.
(3) Where, at the end of the accounting period—
(a) it is not certain whether the scheme will secure a relevant tax advantage, or
(b) it is not certain what the amount of the relevant tax advantage secured by the scheme will be,
a loss or profit is to be treated as meeting the first asymmetry condition if, at that time, there is a chance that the scheme will secure a relevant tax advantage and that the loss or profit will affect its amount.
(4) Where—
(a) a loss or profit meets the conditions in subsection (1)(a) and (b), and
(b) a part, but not the whole, of the loss or profit meets the first asymmetry condition,
only that part of the loss or profit is a “scheme loss” or “scheme profit”.
(5) The second asymmetry condition is that the loss or profit—
(a) does not meet the first asymmetry condition, but
(b) arises from a transaction, or series of transactions, that might (if events had turned out differently) have given rise to a loss or profit that would have done so.
(6) References in this section to a loss or profit include a loss or profit arising in respect of interest or expenses.
(7) In determining whether the condition in subsection (1)(b) or the first or second asymmetry condition is met, section 938O (scheme profits and losses to be left out of account) is to be disregarded.
938R Meaning of “relevant tax advantage” etc and “the scheme period”
(1) In this Part “relevant tax advantage”, in relation to a scheme, means an economic profit that—
(a) is made by the company over the scheme period,
(b) meets the condition in subsection (3), and
(c) is not negligible.
(2) In this Part “relevant tax disadvantage”, in relation to a scheme, means an economic loss that—
(a) is made by the company over the scheme period,
(b) meets the condition in subsection (3), and
(c) is not negligible.
(3) The condition is that the economic profit or loss arises as a result of asymmetries in the way that the company brings, or does not bring, amounts into account as debits and credits for the purposes of Part 5 or 7 of CTA 2009.
(4) A reference in this section to asymmetries includes, in particular—
(a) asymmetries relating to quantification, and
(b) asymmetries relating to timing.
(5) In this section—
(a) a reference to an economic profit includes an increase in an economic profit and a decrease in an economic loss, and
(b) a reference to an economic loss includes an increase in an economic loss and a decrease in an economic profit.
(6) In this Part “the scheme period”, in relation to a scheme, means the period during which the scheme has effect.
938S Meaning of references to economic profits and losses
(1) An economic profit or loss is to be computed for the purposes of this Part taking into account, in particular—
(a) profits and losses made as a result of the operation of the Corporation Tax Acts, and
(b) any adjustments required to reflect the time value of money.
(2) In determining for the purposes of this Part the amount of an economic profit or loss made by the company over the scheme period, profits and losses made by the company are to be taken into account only to the extent that they are attributable to times at which the company is a party to the scheme.
(1) This section applies for the purpose of determining whether a scheme will, or might, secure a relevant tax advantage.
(2) The economic profits and losses made by the company over the scheme period must be calculated on the assumption that the company—
(a) obtains the full tax benefit of any loss made by the company in relation to a loan relationship or a derivative contract during the period, and
(b) incurs the full tax cost of any profit made by the company in relation to a loan relationship or a derivative contract during the period.
(3) The “full tax benefit” of a loss is the reduction in the liability of the company to corporation tax that would result if—
(a) the loss were brought into account as a debit or as a reduction in a credit for the purposes of Part 5 or 7 of CTA 2009, and
(b) the company's profits chargeable to corporation tax, disregarding the loss, were equal to the debit (or the reduction in the credit) determined by reference to the loss.
(4) The “full tax cost” of a profit is the increase in the liability of the company to corporation tax that would result if—
(a) the profit were brought into account as a credit or as a reduction in a debit for the purposes of Part 5 or 7 of CTA 2009, and
(b) the company's profits chargeable to corporation tax, disregarding the profit, were nil.
In this Part “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions.
For the purposes of this Part the following provisions are to be treated as of no effect—
(a) section 441 of CTA 2009 (loan relationships for unallowable purposes);
(b) section 690 of that Act (derivative contracts for unallowable purposes);
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ca) Part 6A of TIOPA 2010 (hybrid and other mismatches);
(d) Part 10 of that Act (corporate interest restriction).
(1) This Part makes provision for removing entitlement to corporation tax reliefs where a person makes a relievable charity donation which is a tainted donation.
(2) See Chapter 8 of Part 13 of ITA 2007 and sections 257A and 257B of TCGA 1992 for the removal of entitlement to other reliefs, and the ways in which other income tax advantages are counteracted, where a person makes a relievable charity donation which is a tainted donation.
(1) In this Chapter “ relievable charity donation ” means a gift or other disposal which—
(a) is made by a person to a charity, and
(b) is eligible for tax relief.
(2) A gift or other disposal is eligible for tax relief if one or both of the following apply—
(a) (ignoring the tainted donation provisions) tax relief would be available in respect of it under a relevant relieving provision;
(b) the charity is entitled to claim a repayment of tax in respect of it.
(3) “The tainted donation provisions” are—
(a) this Part,
(b) sections 257A and 257B of TCGA 1992 (tainted charity donations: disapplication of section 257), and
(c) Chapter 8 of Part 13 of ITA 2007 (tainted charity donations: removal of income tax relief etc ).
(4) The following are “relevant relieving provisions”—
(a) section 257 of TCGA 1992 (gifts of chargeable assets),
(b) section 63(2)(a), (aa) and (ab) of CAA 2001 (gifts of plant and machinery),
(c) Part 12 of ITEPA 2003 (payroll giving),
(d) section 108 of ITTOIA 2005 (gifts of trading stock),
(e) Chapters 2 and 3 of Part 8 of ITA 2007 (gift aid and gifts of shares),
(f) section 105 of CTA 2009 (gifts of trading stock), and
(g) Part 6 of this Act (charitable donations relief).
(5) For the purposes of this Part, an amount of income which arises under a UK settlement and to which a charity is entitled under the terms of the settlement is to be regarded as an amount gifted to the charity by the trustees of the settlement.
“ UK settlement ” has the same meaning as in section 628 of ITTOIA 2005.
(1) For the purposes of this Part, a relievable charity donation
(a) is a tainted donation if (and only if) Conditions A, B and C are met , and
(b) becomes a tainted donation at the earliest time when all those conditions are met.
(2) Condition A is that—
(a) a linked person enters into arrangements (whether before or after the donation is made), and
(b) it is reasonable to assume from either or both of—
(i) the likely effects of the donation and the arrangements, as at the later of the time when the donation is made and the time when the arrangements are entered into and
(ii) the circumstances in which the donation is made and the circumstances in which the arrangements are entered into,
that the donation would not have been made and the arrangements would not have been entered into independently of one another.
(3) “ Linked person ” means—
(a) the person who made the donation (“ the donor ”), or
(b) a person who is connected with the donor at a relevant time.
(4) In subsection (3) “ relevant time ” means any time after the earliest of the following times—
(a) the time when the arrangements are entered into as mentioned in subsection (2);
(b) the time when the relievable charity donation is made;
(c) the time when the arrangements are first materially implemented.
(5) Condition B is that a linked person who is not a charity receives financial assistance—
(a) under or in connection with the arrangements, and
(b) directly or indirectly from the charity to which the donation is made or from a connected charity.
(6) Condition C is that the donor is not—
(a) a qualifying charity-owned company, or
(b) a relevant housing provider linked with the charity to which the donation is made.
(7) For the purposes of subsection (6)(b) a relevant housing provider is linked with the charity if (and only if)—
(a) one is wholly owned, or subject to control, by the other, or
(b) both are wholly owned, or subject to control, by the same person.
(8) In this section—
“financial assistance” includes a loan, a guarantee, an indemnity or any form of investment (in each case, whether or not on arm’s length terms);
“ qualifying charity-owned company ”, in relation to a relievable charity donation, means a company which—
is wholly owned by one or more charities, at least one of which is the charity to which the donation is made or a connected charity, and
has not previously been under the control of, and does not carry on a trade or business previously carried on by, one or more of the following—
a linked person;
a person (other than a charity) who, at any time within the period of 4 years ending with the day on which paragraph (a) was first satisfied, was connected with a person who is a linked person;
“ relevant housing provider ” means a body which is—
a non-profit registered provider of social housing, or
entered on a register maintained under section 1 of the Housing Act 1996, section 20 of the Housing (Scotland) Act 2010 (asp 17) or Article 14 of the Housing (Northern Ireland) Order 1992 ( S.I. 1992/1725 (N.I. 15)).
(9) Section 200 (company wholly owned by a charity) applies for the purposes of subsection (8), and for those purposes references in that section to “charity” include a registered club within the meaning of section 658(6).
(10) This section is subject to section 939E (certain financial assistance to be ignored).
(1) When determining whether a relievable charity donation is a tainted donation, financial assistance within subsection (2A), (3), (4) or (5) is to be ignored.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2A) Financial assistance is within this subsection if it constitutes a payment made by a charity, on arm’s length terms, in respect of—
(a) work carried out by a person for or on behalf of the charity, or
(b) expenses incurred by a person in the course of such work.
(3) Financial assistance is within this subsection if (ignoring the tainted donation provisions) it is—
(a) a benefit associated with a gift which is a qualifying donation for the purposes of Chapter 2 of Part 8 of ITA 2007 (gift aid), or
(b) a benefit associated with a payment which is a qualifying payment for the purposes of Chapter 2 of Part 6 (charitable donations relief: payments to charity).
(4) Financial assistance is within this subsection if (ignoring the tainted donation provisions)—
(a) the relievable charity donation is a disposal in respect of which tax relief would be available under Chapter 3 of Part 8 of ITA 2007 (gifts of shares, securities and real property to charities etc ) or Chapter 3 of Part 6 (charitable donations: certain disposals to charity), and
(b) the assistance is a benefit the value of which would be taken into account in determining the relievable amount in respect of the disposal for the purposes of the Chapter in question.
(5) Financial assistance is within this subsection if (ignoring the tainted donation provisions)—
(a) the relievable charity donation is a gift in respect of which tax relief would be available under section 108 of ITTOIA 2005 or section 105 of CTA 2009 (gifts of trading stock to charities etc ), and
(b) the assistance is a benefit attributable to the making of the gift in respect of which an amount would be brought into account under section 109 of ITTOIA 2005 or section 108 of CTA 2009 (receipt of benefits by donor or connected person).
(6) In this section—
“ benefit associated with a gift ” has the meaning given by section 417 of ITA 2007;
“ benefit associated with a payment ” has the meaning given by section 196;
“financial assistance” has the same meaning as in section 939C;
“ the tainted donation provisions ” has the meaning given by section 939B(3).
939F Removal of corporation tax relief where donation becomes tainted in same accounting period
(1) This section applies where—
(a) a company makes a relievable charity donation, and
(b) the donation becomes a tainted donation in the same accounting period in which it is made.
(2) Where (ignoring this Part) corporation tax relief would be available in respect of the tainted donation, that relief is not available.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) In this section —
...
“ corporation tax relief ” means relief under—
section 63(2)(a), (aa) or (ab) of CAA 2001 (gifts of plant and machinery), so far as it applies in relation to corporation tax,
section 105 of CTA 2009 (gifts of trading stock), or
Part 6 of CTA 2010 (charitable donations relief);
...
...
...
939FA Clawback of corporation tax relief where donation becomes tainted in later accounting period
(1) This section applies where—
(a) a company makes a relievable charity donation in an accounting period (“the donation period”),
(b) the donation becomes a tainted donation in a later accounting period (“the tainting period”), and
(c) if the donation had become a tainted donation in the donation period, the company’s liability to corporation tax for the donation period would have been greater than it in fact was for that period.
(2) The company’s liability to corporation tax for the tainting period is increased by an amount equal to the difference between—
(a) the amount of corporation tax for which it would have been liable for the donation period had the donation become a tainted donation in that period, and
(b) the amount of corporation tax for which it was in fact liable for the donation period.
(3) Section 87A of TMA 1970 (interest on overdue corporation tax etc) has effect in relation to tax for which a company is liable by virtue of subsection (2) as though the tax had become due and payable on the day following the expiry of 9 months from the end of the donation period.
939FB Removal or clawback of corporation tax relief for associated donations
(1) This section applies where—
(a) a person makes a relievable charity donation that becomes a tainted donation, and
(b) a company makes an associated donation in relation to the tainted donation.
(2) If the donation mentioned in subsection (1)(a) becomes a tainted donation before the end of the accounting period of the company in which the associated donation is made, any corporation tax relief that would otherwise be available in respect of the associated donation is not available.
(3) Subsection (4) applies where—
(a) the donation mentioned in subsection (1)(a) becomes a tainted donation after the end of the accounting period of the company in which the associated donation is made, and
(b) if the donation mentioned in subsection (1)(a) had become a tainted donation before the end of that accounting period, the company’s liability to corporation tax for that accounting period would have been greater than it in fact was for that period.
(4) The liability of the company to corporation tax for the accounting period in which the donation mentioned in subsection (1)(a) becomes a tainted donation is increased by an amount equal to the difference between—
(a) the amount of corporation tax for which it would have been liable for the accounting period in which the associated donation was made, had the tainted donation become a tainted donation before the end of that period, and
(b) the amount of corporation tax for which it was in fact liable for the accounting period in which the associated donation was made.
(5) Subsection (4) does not apply in relation to an associated donation if the company—
(a) is already liable for tax by virtue of that subsection by reference to the accounting period in which the associated donation was made, or
(b) is liable for tax by virtue of section 939FA(2) by reference to that accounting period,
and for that purpose the accounting period “by reference to which” the company is liable for tax is the earlier accounting period for which the company’s liability falls to be considered under (as the case may be) subsection (4)(a) and (b) or section 939FA(2)(a) and (b).
(6) Section 87A of TMA 1970 (interest on overdue corporation tax etc) has effect in relation to tax for which a company is liable by virtue of subsection (4) as though the tax had become due and payable on the day following the expiry of 9 months from the end of the accounting period in which the associated donation was made.
(7) In this section—
“associated donation”, in relation to a tainted donation, means a relievable charity donation made—
in accordance with the arrangements by reference to which Conditions A and B in section 939C are met, and
by a person other than—
a qualifying charity-owned company in relation to that relievable charity donation, or
a relevant housing provider linked (within the meaning of section 939C(7)) with the charity to which that donation is made;
“corporation tax relief” has the same meaning as in section 939F;
“qualifying charity-owned company” has the meaning given by section 939C(8) (except that paragraph (b) of that definition does not apply);
“relevant housing provider” has the meaning given by section 939C(8).
For the purposes of this Part, a “ connected charity ” in relation to another charity means a charity which is connected with that other charity in a matter relating to the structure, administration or control of either charity.
(1) Section 1122 (meaning of “connected” persons) applies for the purposes of this Part (except section 939G), but subject to the following modification.
(2) Section 1122 has effect as if after subsection (8) there were inserted—
(9) A person who is a beneficiary of a settlement is connected with—
(a) a person in the capacity as trustee of the settlement, and
(b) the settlor in relation to the settlement.
(10) For the purposes of this section—
(a) two people living together as if they were a married couple or civil partners are treated as if they were spouses or civil partners of each other, and
(c) “ close company ” includes a company that would be a close company if it were resident in the United Kingdom.
(1) In this Part—
“ arrangements ” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions;
“ charity ” includes a registered club within the meaning of section 658(6) (meaning of “ community amateur sports club ” and “ registered club ”).
(2) In this Part, in the case of a charitable trust, references to a charity being entitled to a repayment of tax are to be read as references to the trustees of the trust being so entitled.
(1) This Chapter contains rules for cases where a trade is transferred between companies within the charge to tax and certain conditions as to common ownership of the trade are met.
(2) Section 940B explains when there is a transfer of a trade for the purposes of this Chapter.
(3) Sections 940C to 943 contain provision about when this Chapter applies to a transfer of a trade.
(4) Sections 943A to 950 set out the effects of this Chapter in relation to a transfer to which it applies.
(5) Sections 951 to 953 contain supplementary provision.
940B Meaning of “transfer of a trade” and related expressions
(1) This section applies for the purposes of this Chapter.
(2) If, on a company ceasing to carry on a trade, another company begins to carry it on, there is a transfer of a trade.
(3) The trade that is transferred is referred to in this Chapter as “the transferred trade”.
(4) In relation to a transfer of a trade—
“the predecessor” means the company which ceases to carry on the trade, and
“the successor” means the company which begins to carry on the trade.
(5) In this Chapter, except in so far as the context otherwise requires—
(a) references to a trade include an office, and
(b) references to carrying on a trade include holding an office.
This Chapter applies to a transfer of a trade if—
(a) the ownership condition is met (see sections 941 and 942), and
(b) the tax condition is met (see section 943).
(1) The ownership condition is that—
(a) on the transfer of the transferred trade or at some time during the period of two years beginning immediately after the transfer, a 75% interest in the transferred trade belongs to certain persons, and
(b) at some time during the period of one year ending immediately before the transfer, a 75% interest in the transferred trade belonged to the same persons.
(2) In subsection (1) references to a 75% interest are to an interest amounting to a share of at least 75%.
(3) If at any time the activities of the transferred trade are actually included in the activities of another trade, for the purposes of subsection (1) interests in the transferred trade at that time are determined by reference to interests in the other trade.
(4) Accordingly, a person who has an interest in the other trade at that time is taken to have a corresponding interest in the transferred trade.
(5) For the purposes of this section—
(a) if two or more companies carry on a trade, the interests in the trade belonging to them are taken to correspond to the shares of the trade's profits to which they are entitled, and
(b) an interest in a trade belonging to trustees (otherwise than for charitable or public purposes) is treated as belonging to the persons for the time being entitled to the income under the trust.
(6) If a company is carrying on a trade, the interest in the trade belonging to the company may be treated in accordance with any of the options set out in section 942(1) if that results in the ownership condition being met.
(7) In determining for the purposes of this section the extent to which an interest in a trade belongs at different times to the same persons—
(a) the persons from time to time entitled to the income under a trust are treated as a single person, and
(b) persons who are relatives of one another are treated as a single person.
(8) In subsection (7) “relative” means spouse, civil partner, ancestor, lineal descendant, brother or sister.
942 Options that may be applied for the purposes of the ownership condition
(1) The options referred to in section 941(6) are as follows (with references in the options to “the trading company” being to the company to which the interest in the trade belongs as mentioned in that subsection).
Option 1
The interest in the trade is taken to belong to the persons owning the ordinary share capital of the trading company in proportion to the amount of their holdings of that capital.
Option 2
This option can be applied if the trading company is the subsidiary of another company (see subsection (2)). The interest in the trade is taken to belong to—
a company that is a parent company of the trading company (see subsection (3)), or
the persons owning the ordinary share capital of such a parent company in proportion to the amount of their holdings of that capital.
Option 3
This option can be applied if—
a person (“P”) has management control over a company (see subsections (4) and (5)), and
by applying Option 1 or 2 an interest in the trade can be taken to belong to that company.
That interest in the trade is instead taken to belong to P.
(2) For the purposes of this section a company (“company A”) is a subsidiary of another company (“company B”) if at least 75% of company A's ordinary share capital is owned by company B.
(3) If company A is a subsidiary of company B, company B is a parent company of company A unless both are subsidiaries of a third company.
(4) For the purposes of subsection (1) a person has management control over a company if the person has the power to secure that the affairs of the company are conducted in accordance with the wishes of the person.
(5) “Power” in subsection (4) means power resulting from—
(a) the holding of shares or the possession of voting rights in or in relation to any company, or
(b) a document regulating any company.
(6) In this section references to a person owning ordinary share capital are to be read, if the person is a company, as references to the company owning the capital—
(a) directly,
(b) through another company or companies, or
(c) partly directly and partly through another company or companies.
(7) If a company owns ordinary share capital as mentioned in subsection (6)(b) or (c), the amount of the capital owned by the company is determined in accordance with sections 1155 to 1157.
(8) In this section references to ownership are references to beneficial ownership.
(1) The tax condition is that, in the period mentioned in subsection (2), the transferred trade is carried on only by companies within the charge to corporation tax or income tax in respect of the trade.
(2) That period is the period—
(a) beginning with the latest time at which the requirement of section 941(1)(b) is met for the purposes of the ownership condition, and
(b) ending with the earliest time at which the requirement of section 941(1)(a) is met for the purposes of that condition.
(3) If at any time the activities of the transferred trade are actually included in the activities of another trade, subsection (1) applies in relation to that time as if references to the transferred trade were references to the other trade.
If this Chapter applies to a transfer of a trade, section 39 (terminal losses: extension of periods for which relief may be given) does not apply in relation to a claim under section 37 by the predecessor for relief for a loss made in the transferred trade.
(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) If this Chapter applies to a transfer of a trade, relief under section 45 (carry forward of pre-1 April 2017 trade loss against subsequent trade profits) is given to the successor in relation to a loss—
(a) which is made by the predecessor in the transferred trade, and
(b) for which relief would have been given under that section to the predecessor had it continued to carry on that trade.
(4) Subsection (3) is subject to—
(a) any claim made by the predecessor under section 37 (including a case where section 42 applies), and
(ab) any claim made by the predecessor under section 45F in reliance on subsection (2) of section 944C,
(b) section 945.
(1) Subsection (2) applies if—
(a) this Chapter applies to a transfer of a trade,
(b) the transferred trade is not a ring fence trade,
(c) the predecessor made a loss in the transferred trade in the accounting period in which it ceased to carry it on,
(d) that accounting period began on or after 1 April 2017,
(e) relief for an amount of that loss is not given under section 37 or Part 5,
(f) relief under section 37 was not unavailable for that loss by reason of a provision mentioned in section 45A(3)(b)(i) or (ii), and
(g) relief under section 37 would not be unavailable by reason of section 44 for a loss (assuming there was one) made by the successor in the transferred trade in the accounting period in which the successor begins to carry on the transferred trade (“the successor's start-up accounting period”).
(2) Subsections (4) to (8) of section 45A (carry-forward of post-1 April 2017 trade loss against total profits) apply as if—
(a) references to the unrelieved amount were to the amount referred to in subsection (1)(e),
(b) references to the later period were to the successor's start-up accounting period, and
(c) references to the company were to the successor.
(3) Subsection (4) applies if—
(a) this Chapter applies to a transfer of a trade,
(b) an amount of a loss made in the transferred trade was carried forward under section 45A(4) to the accounting period of the predecessor in which the predecessor ceased to carry on the trade,
(c) any of that amount was not deducted from the predecessor's total profits on a claim under section 45A(5) or surrendered by the predecessor by way of group relief for carried-forward losses under Part 5A, and
(d) relief under section 37 would not be unavailable by reason of section 44 for a loss (assuming there was one) made by the successor in the transferred trade in the accounting period in which the successor begins to carry on the transferred trade (“the successor's start-up accounting period”).
(4) Subsections (4) to (8) of section 45A apply as if—
(a) references to the unrelieved amount were to so much of the amount referred to in subsection (3)(b) as was not deducted or surrendered as mentioned in subsection (3)(c),
(b) references to the later period were to the successor's start-up accounting period, and
(c) references to the company were to the successor.
(5) In this section “ring fence trade” has the same meaning as in Part 8 (see section 277).
(1) Subsection (2) applies if—
(a) this Chapter applies to a transfer of a trade,
(b) the predecessor made a loss in the transferred trade in the accounting period in which it ceased to carry it on,
(c) that accounting period began on or after 1 April 2017,
(d) relief under section 37 or 42 or Part 5 is not given for an amount of the loss, and
(e) it is the case that—
(i) relief under section 37 was unavailable for the loss by reason of any provision mentioned in section 45A(3)(b)(i) or (ii),
(ii) relief under section 37 would be unavailable by reason of section 44 for a loss (assuming there was one) made by the successor in the transferred trade in the accounting period in which the successor begins to carry on the transferred trade (“the successor's start-up accounting period”), or
(iii) the transferred trade is a ring fence trade.
(2) Subsections (2) to (8) of section 45B (carry forward of post-1 April 2017 trade loss against trade profits) apply as if—
(a) references to the unrelieved amount were to the amount mentioned in subsection (1)(d),
(b) references to the later period were to the successor's start-up accounting period,
(c) references to the company were to the successor, and
(d) references to the trade were to the transferred trade.
(3) Subsection (4) applies if—
(a) this Chapter applies to a transfer of a trade,
(b) an amount of a loss made in the transferred trade was carried forward under section 45B(2) to the accounting period in which the predecessor ceased to carry on the trade, and
(c) any of that amount is not used under section 45B(4) to reduce profits of the transferred trade of the accounting period in which the predecessor ceases to carry on the trade.
(4) Subsections (2) to (8) of section 45B apply as if—
(a) references to the unrelieved amount were to so much of the amount referred to in subsection (3)(b) as is not used as mentioned in subsection (3)(c),
(b) references to the later period were to the accounting period of the successor in which the successor begins to carry on the transferred trade,
(c) references to the company were to the successor, and
(d) references to the trade were to the transferred trade.
(1) If this Chapter applies to a transfer of a trade, the predecessor may not make a claim under section 45F for relief to be given for an amount of a loss made in the transferred trade.
(2) But subsection (1) does not apply if—
(a) the trade is transferred before 13 July 2017, and
(b) the amount of the loss is carried forward to the accounting period in which the predecessor ceases to carry on the trade under section 45 (carry forward of pre-1 April 2017 trade losses).
(3) Subsection (4) applies if—
(a) this Chapter applies to a transfer of a trade,
(b) an amount of a loss made by the predecessor in the transferred trade is carried forward under section 45, 45A or 45B to the accounting period of the successor in which the successor ceases to carry on the transferred trade, and
(c) relief in that accounting period is not given to the successor under section 45, 45A or (as the case may be) 45B for that amount or for any part of it.
(4) Section 45F has effect as if the loss was made by the successor in the transferred trade in the accounting period in which it began carrying on the transferred trade.
(1) Subsection (2) applies if—
(a) this Chapter applies to a transfer of a trade,
(b) the transferred trade is a ring-fence trade,
(c) the predecessor made a non-decommissioning loss in the transferred trade in the accounting period in which it ceased to carry it on,
(d) that accounting period began on or after 1 April 2017, and
(e) relief under section 37 or 42 or Part 5 is not given for an amount of the loss.
(2) Subsections (2) to (5) of section 303B (carry forward of non-decommissioning losses against subsequent profits) have effect as if—
(a) references to the unrelieved amount were to the amount mentioned in subsection (1)(e),
(b) references to the later period were to the accounting period of the successor in which the successor begins to carry on the transferred trade,
(c) references to the company were to the successor, and
(d) references to the trade were to the transferred trade.
(3) Section 303A (meaning of non-decommissioning loss) applies for the purposes of this section.
(4) In this section “ring fence trade” has the same meaning as in Part 8 (see section 277).
(1) Subsection (2) applies if—
(a) this Chapter applies to a transfer of a trade,
(b) the trade is a ring-fence trade,
(c) an amount of a loss made in the trade was carried forward under section 303B(2) or 303D(3) to the accounting period in which the predecessor ceased to carry on the trade (“the cessation period”), and
(d) any of that amount was not—
(i) deducted under section 303B(4) or 303D(5) from the predecessor's profit (if any) of the cessation period,
(ii) deducted from the predecessor's total profits of the cessation period on a claim under section 303C(2), or
(iii) surrendered by the predecessor by way of group relief for carried-forward losses under Part 5A.
(2) Subsections (3) to (6) of section 303D have effect as if—
(a) the reference to so much of the amount mentioned in section 303D(1)(a) as is unrelieved in the later period were to so much of the amount mentioned in subsection (1)(c) of this section as was not deducted or surrendered as mentioned in subsection (1)(d),
(b) references to the further period were to the accounting period of the successor in which the successor begins to carry on the transferred trade,
(c) references to the company were to the successor, and
(d) references to the trade were to the transferred trade.
(3) In this section “ring fence trade” has the same meaning as in Part 8 (see section 277).
945 Cases in which predecessor retains more liabilities than assets
(1) This section applies if L exceeds A.
(2) “L” is the amount of the predecessor's liabilities so far as they—
(a) are outstanding immediately before the transfer of the transferred trade, and
(b) are not transferred to the successor on the transfer of the trade.
(3) “A” is the sum of the values of—
(a) the predecessor's assets immediately before the transfer of the transferred trade so far as they are not transferred to the successor on that transfer, and
(b) the consideration given to the predecessor by the successor in relation to the transfer of the transferred trade.
(4) The relief to be given to the successor as a result of sections 944 to 944E is limited to—
R
-
E
where—
R is the total amount of loss for which relief could be given to the successor as a result of sections 944 to 944E, ignoring this section, and
E is the amount by which L exceeds A.
(5) If R does not exceed E, no relief is to be given to the successor.
(1) This section applies for the purposes of section 945(2) (determination of “L”).
(2) A liability is to be ignored if—
(a) the predecessor was the predecessor in relation to a transfer of a trade on a previous application of this Chapter, and
(b) on that previous application of this Chapter the liability was apportioned under section 952 to a trade carried on by the company that was the successor on that application.
(3) Subsection (4) applies if—
(a) the predecessor transfers a liability to the successor, and
(b) the creditor in question has agreed to accept settlement of part of the liability as settlement for the whole of it.
(4) The transfer of the liability is taken to cover only the part of the liability mentioned in subsection (3)(b).
(5) The predecessor's capital is to be treated as a liability of the predecessor so far as it is recently converted capital (but not otherwise).
(6) For the purposes of subsection (5) a part of the predecessor's capital is recently converted capital if—
(a) it was issued or otherwise originated on the conversion of a liability that was not part of the predecessor's capital or on the conversion of a part of that capital that was itself recently converted capital, and
(b) the conversion occurred during the period of 12 months ending with the day on which the transfer of the transferred trade occurs.
(7) In this section “the predecessor's capital” means the predecessor's share capital, share premium account, reserves and relevant loan stock.
(8) In subsection (7) “relevant loan stock” means any loan stock or similar security (whether secured or unsecured) other than any to which subsection (9) applies.
(9) This subsection applies to any stock or security if, when the liability giving rise to the stock or security was incurred, the person who was the creditor was carrying on a trade of lending money.