Corporation Tax Act 2010
 

Corporation Tax Act 2010

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CONTENTS

Corporation Tax Act 2010

2010 CHAPTER 4

Part 1

Introduction

1. Overview of Act

Part 2

Calculation of liability in respect of profits

Chapter 1

Introduction

2. Overview of Part

Chapter 2

Rates at which corporation tax on profits charged

3. Corporation tax rates

Chapter 3

Calculation of amount to which rates applied

4. Amount of profits to which corporation tax rates applied

Chapter 4

Currency

The currency to be used in tax calculations

5. Basic rule: sterling to be used

6. UK resident company operating in sterling and preparing accounts in another currency

7. UK resident company operating in currency other than sterling and preparing accounts in another currency

8. UK resident company preparing accounts in currency other than sterling

9. Non-UK resident company preparing return of accounts in currency other than sterling

Translating amounts into other currencies

10. The equivalent in another currency of a sterling amount

11. Sterling equivalents: basic rule

12. Sterling equivalents: carried-back amounts

13. Sterling equivalents: carried-forward amounts

Adjustment of sterling losses

14. Carried-back amounts

15. Carried-forward amounts

Interpretation

16. Sections 13(2) and 15(5): profit against which carried-forward amount to be set off

17. Interpretation of Chapter

Part 3

Companies with small profits

The small profits rate

18. Profits charged at the small profits rate

Marginal relief

19. Marginal relief

20. Company with only ring fence profits

21. Company with ring fence profits and other profits

22. The ring fence amount

23. The remaining amount

The lower limit and the upper limit

24. The lower limit and the upper limit

25. Associated companies

26. Section 25(3): treatment of certain non-trading companies

27. Attribution to persons of rights and powers of their partners

28. Associated companies: fixed-rate preference shares

29. Association through a loan creditor

30. Association through a trustee

Supplementary

31. Power to obtain information

32. Meaning of “augmented profits”

33. Interpretation of section 32(2) and (3)

34. Close investment-holding companies

Part 4

Loss relief

Chapter 1

Introduction

35. Overview of Part

Chapter 2

Trade losses

Introduction

36. Introduction to Chapter

Trade loss relief against total profits

37. Relief for trade losses against total profits

38. Limit on deduction if accounting period falls partly within 12 month period

39. Terminal losses: extension of periods for which relief may be given

40. Ring fence trades: extension of periods for which relief may be given

41. Sections 39 and 40: transfers of trade to obtain relief

42. Ring fence trades: further extension of period for relief

43. Claim period in case of ring fence or mineral extraction trades

44. Trade must be commercial or carried on for statutory functions

Carry forward of trade loss relief

45. Carry forward of trade loss against subsequent trade profits

46. Use of trade-related interest and dividends if insufficient trade profits

47. Registered industrial and provident societies

Restrictions on relief: farming or market gardening

48. Farming or market gardening

49. Reasonable expectation of profit

50. Cessation of trades

51. Companies treated as same person as individual

Restrictions on relief: commodity futures

52. Dealings in commodity futures

Other restrictions on relief

53. Leasing contracts and company reconstructions

54. Non-UK resident company: receipts of interest, dividends or royalties

Chapter 3

Limited partners and members of limited liability partnerships

Introduction

55. Introduction to Chapter

Limited partners

56. Restriction on reliefs for limited partners

57. Meaning of “contribution to the firm”

58. Meaning of “limited partner”

Members of LLPs

59. Restriction on relief for members of LLPs

60. Meaning of “contribution to the LLP”

61. Unrelieved losses brought forward

Chapter 4

Property losses

UK property businesses

62. Relief for losses made in UK property business

63. Company with investment business ceasing to carry on UK property business

64. UK property business to be commercial or carried on for statutory functions

65. UK furnished holiday lettings business treated as trade

Overseas property businesses

66. Relief for losses made in overseas property business

67. Overseas property business to be commercial or carried on for statutory functions

Chapter 5

Losses on disposal of shares

Share loss relief against income

68. Share loss relief

69. Eligibility conditions

70. Entitlement to claim

71. How relief works

72. Limit on deduction if accounting period falls partly within 12 month period

Shares: subscription and disposal

73. Subscription for shares

74. Disposals of new shares

75. Limits on relief

76. Disposal of shares forming part of mixed holding

77. Section 76: supplementary

Qualifying trading companies: the requirements

78. Qualifying trading companies

79. The trading requirement

80. Ceasing to meet trading requirement because of administration etc

81. The control and independence requirement

82. The qualifying subsidiaries requirement

83. The property managing subsidiaries requirement

84. The gross assets requirement

85. The unquoted status requirement

86. Power to amend requirements by Treasury order

Qualifying trading companies: supplementary

87. Relief after an exchange of shares for shares in another company

88. Substitution of new shares for old shares

89. Deemed time of issue for certain shares

Interpretation

90. Interpretation of Chapter

Chapter 6

Losses from miscellaneous transactions

91. Relief for losses from miscellaneous transactions

Chapter 7

Write-off of government investment

92. Loss relief to be reduced if government investment is written off

93. Groups of companies

94. Cases in which government investment is written off

95. Meaning of “carry-forward losses”

96. Interaction with other tax provisions

Part 5

Group relief

Chapter 1

Introduction

97. Introduction to Part

Chapter 2

Surrender of company’s losses etc for an accounting period

Introduction

98. Overview of Chapter

Basic provisions about surrendering losses and other amounts

99. Surrendering of losses and other amounts

100. Meaning of “trading loss”

101. Meaning of “capital allowance excess”

102. Meaning of “UK property business loss”

103. Meaning of “management expenses”

104. Meaning of “non-trading loss on intangible fixed assets”

Restrictions on losses and other amounts that may be surrendered

105. Restriction on surrender of losses etc within section 99(1)(d) to (g)

106. Restriction on losses etc surrenderable by UK resident

107. Restriction on losses etc surrenderable by non-UK resident

108. Meaning of “non-UK profits”

109. Restriction on losses etc surrenderable by dual resident

110. Restriction on surrender of losses etc from alternative finance arrangements

Chapter 3

Surrenders made by non-UK resident company resident or trading in the EEA

Introduction

111. Overview of Chapter

112. EEA related definitions

Basic provisions about surrendering losses and other amounts

113. Steps to determine extent to which loss etc can be surrendered

Conditions that must be met

114. The equivalence condition

115. The EEA tax loss condition: companies resident in EEA territory

116. The EEA tax loss condition: companies not resident in EEA territory

117. The qualifying loss condition: general

118. The qualifying loss condition: relief for current and previous periods

119. The qualifying loss condition: relief for future periods

120. The qualifying loss condition: non-UK tax relief in another territory

121. The precedence condition

Other rules, assumptions and exclusions

122. Assumptions to be made in recalculating EEA amount

123. Assumptions as to UK residence

124. Assumptions as to places in which activities carried on

125. Assumptions as to accounting periods

126. Assumptions in relation to capital allowances

127. Amounts excluded because of certain arrangements

128. Rules for recalculating EEA amount

Chapter 4

Claims for group relief

Introduction

129. Overview of Chapter

Surrenderable amounts under Chapter 2

130. Group relief claims on amounts surrenderable under Chapter 2

131. The group condition

132. Consortium condition 1

133. Consortium conditions 2 and 3

134. Meaning of “UK related” company

Surrenderable amounts under Chapter 3

135. Group relief claims on amounts surrenderable under Chapter 3

136. The EEA group condition

Giving of group relief

137. Deduction from total profits

General limitation on amount of group relief to be given

138. Limitation on amount of group relief applying to all claims

139. Unused part of the surrenderable amounts

140. Unrelieved part of claimant company’s available total profits

141. Sections 139 and 140: supplementary

142. Meaning of “the overlapping period”

Limitations on group relief if claim based on consortium condition 1, 2 or 3

143. Condition 1: surrendering company owned by consortium

144. Condition 1: claimant company owned by consortium

145. Conditions 2 and 3: limitations in sections 143 and 144

146. Conditions 2 and 3: companies in link company’s group

147. Conditions 1 and 2: surrenderable amounts including trading loss

148. Conditions 1 and 2: surrendering company in group of companies

149. Conditions 1 and 3: claimant company in group of companies

Chapter 5

Subsidiaries, groups and consortiums

Introduction

150. Overview of Chapter

Explanations of terms

151. Meaning of “75% subsidiary” and “90% subsidiary”

152. Groups of companies

153. Companies owned by consortiums and members of consortiums

Arrangements for transfers of companies

154. Arrangements for transfer of member of group of companies etc

155. Arrangements for transfer of company owned by consortium etc

156. Sections 154 and 155: supplementary

Chapter 6

Equity holders and profits or assets available for distribution

Introduction

157. Introduction to Chapter

Equity holders

158. Meaning of “equity holder”

159. Use of relevant company’s assets

160. Meaning of “ordinary shares”

161. Meaning of “restricted right to dividends”

162. Meaning of “normal commercial loan”

163. Normal commercial loans: company’s results or value of assets

164. Sections 160 and 162: supplementary

Company’s entitlement to profits or assets available for distribution: basic provisions

165. Proportion of profits available for distribution to which company is entitled

166. Proportion of assets available for distribution to which company is entitled

167. Profits or assets available for distribution and entitlement: supplementary

168. Meaning of “the relevant accounting period”

Company’s entitlement to profits or assets available for distribution: supplementary

169. Application and interpretation of sections 170 to 182

170. Shares or securities with limited rights

171. Shares or securities with temporary rights

172. Company A’s proportion if shares etc have temporary rights

173. Cases in which option arrangements are in place

174. Company A’s proportion if option arrangements in place

175. Cases in which both sections 170 and 172 apply

176. Cases in which both sections 170 and 174 apply

177. Cases in which both sections 172 and 174 apply

178. Cases in which sections 170, 172 and 174 all apply

179. Cases in which surrendering or claimant company is non-UK resident

180. Company A’s proportion if non-UK resident involved

181. Assumptions to be applied if non-UK resident company involved

182. Assets etc referable to UK trade

Chapter 7

Miscellaneous provisions and interpretation of Part

Miscellaneous

183. Payments for group relief

184. References to “allowance” in CAA 2001

Interpretation

185. “Trading company” and “holding company”

186. When activities of a company are double taxation exempt

187. “Non-UK tax”

188. Other definitions

Part 6

Charitable donations relief

Chapter 1

Nature of relief

189. Relief for qualifying charitable donations

190. Qualifying charitable donations: meaning

Chapter 2

Certain payments to charity

Qualifying payments

191. Qualifying payments

192. Condition as to repayment

193. Associated acquisition etc

194. Distributions

195. Associated benefits

196. Associated benefits: meaning

197. Restrictions on associated benefits

198. Payments and benefits linked to periods of less than 12 months

Payment attributed to earlier period

199. Payment attributed to earlier accounting period

Interpretation

200. Company wholly owned by a charity

201. Associated persons

202. “Charity”

Chapter 3

Certain disposals to charity

Amounts treated as qualifying charitable donations

203. Certain disposals of investments

204. Meaning of qualifying investment

205. Meaning of qualifying interest in land

206. The relievable amount

207. Incidental costs of making disposal

208. Consideration

Value of net benefit to charity

209. Value of net benefit to charity

210. Market value of qualifying investments

211. Meaning of “disposal-related obligation”

212. Meaning and amount of “disposal-related liability”

Special provisions about qualifying interests in land

213. Certificate required from charity

214. Qualifying interests in land held jointly

215. Calculation of relievable amount etc where joint disposal of interest in land

216. Disqualifying events

Interpretation

217. “Charity”

Part 7

Community investment tax relief

Chapter 1

Introduction

CITR

218. Meaning of “CITR”

219. Eligibility for CITR

220. Form and amount of CITR

Miscellaneous

221. Meaning of “making an investment”

222. Determination of “the invested amount”

223. Meaning of “the 5 year period” and “the investment date”

224. Overview of other Chapters of Part

Chapter 2

Qualifying investments

225. Qualifying investments: introduction

226. Conditions to be met in relation to loans

227. Conditions to be met in relation to securities

228. Conditions to be met in relation to shares

229. Tax relief certificates

230. No pre-arranged protection against risks

Chapter 3

General conditions

231. No control of CDFI by investor

232. Investor must have beneficial ownership

233. Investor must not be accredited

234. No acquisition of share in partnership

235. No tax avoidance purpose

Chapter 4

Limitations on claims and attribution

Limitations on claims

236. Loans: no claim after disposal or excessive repayments or receipts of value

237. Securities or shares: no claim after disposal or excessive receipts of value

238. No claim after loss of accreditation by the CDFI

239. Accreditation of investor

Attribution

240. Attribution: general

241. Attribution: bonus shares

Chapter 5

Withdrawal or reduction of CITR

Introduction

242. Introduction to Chapter

Disposals

243. Disposal of loan during 5 year period

244. Disposal of securities or shares during 5 year period

Repayment of loans

245. Repayment of loan capital during 5 year period

Receipts of value

246. Value received by investor during 6 year period: loans

247. Value received by investor during 6 year period: securities or shares

248. Receipts of insignificant value to be added together

249. When value is received

250. The amount of value received

251. Value received if there is more than one investment

252. Effect of receipt of value on future claims

253. Receipts of value by or from connected persons

CITR not due

254. CITR subsequently found not to have been due

Manner of withdrawal or reduction

255. Manner of withdrawal or reduction of CITR

Chapter 6

Supplementary and general

Alternative finance arrangements

256. Meaning of “loan” and “interest”

257. Purchase and resale arrangements

258. Deposit arrangements

259. Profit share agency arrangements

Miscellaneous

260. Information to be provided by the investor

261. Disclosure

262. Nominees

263. Application for postponement of tax pending appeal

264. Identification of securities or shares on a disposal

Definitions

265. Meaning of “issue of securities or shares”

266. Meaning of “disposal”

267. Construction of references to being “held continuously”

268. Meaning of “associate”

269. Minor definitions etc

Part 8

Oil activities

Chapter 1

Introduction

270. Overview of Part

Chapter 2

Basic definitions

271. “Associated companies”

272. “Oil extraction activities”

273. “Oil rights”

274. “Oil-related activities”

275. “Ring fence income”

276. “Ring fence profits”

277. “Ring fence trade”

278. Other definitions

Chapter 3

Deemed separate trade

279. Oil-related activities treated as separate trade

Chapter 4

Calculation of profits

Oil valuation

280. Disposal to be valued by reference to section 2(5A) of OTA 1975

281. Valuation where market value taken into account under section 2 of OTA 1975

282. Valuation where disposal not sale at arm’s length

283. Valuation where excess of nominated proceeds

284. Valuation where relevant appropriation but no disposal

285. Valuation where appropriation to refining etc

Loan relationships

286. Restriction on debits to be brought into account

287. Restriction on credits to be brought into account

Sale and lease-back

288. Sale and lease-back

Regional development grants

289. Reduction of expenditure by reference to regional development grant

290. Adjustment as a result of regional development grant

Tariff receipts etc

291. Tariff receipts etc

Abandonment guarantees

292. Expenditure on and under abandonment guarantees

293. Relief for reimbursement expenditure under abandonment guarantees

294. Payment under abandonment guarantee not immediately applied

295. Amounts excluded from section 293(1)

Abandonment expenditure

296. Introduction to sections 297 and 298

297. Relief for expenditure incurred by a participator in meeting defaulter’s abandonment expenditure

298. Reimbursement by defaulter in respect of certain abandonment expenditure

Deduction of PRT in calculating income for corporation tax purposes

299. Deduction of PRT in calculating income for corporation tax purposes

300. Effect of repayment of PRT: general rule

301. Effect of repayment of PRT: special rule

Interest on repayment of PRT or APRT

302. Interest on repayment of PRT or APRT

Relief

303. Management expenses

304. Losses

305. Group relief

306. Capital allowances

Chapter 5

Ring fence expenditure supplement

Introduction

307. Overview of Chapter

Application and interpretation

308. Qualifying companies

309. Accounting periods

310. The relevant percentage

311. Limit on number of accounting periods for which supplement may be claimed

312. Qualifying pre-commencement expenditure

313. Unrelieved group ring fence profits for accounting periods

314. Taxable ring fence profits for an accounting period

Pre-commencement supplement

315. Supplement in respect of a pre-commencement accounting period

316. The mixed pool of qualifying pre-commencement expenditure and supplement previously allowed

317. Reduction in respect of disposal receipts under CAA 2001

318. Reduction in respect of unrelieved group ring fence profits

319. The reference amount for a pre-commencement period

320. Claims for pre-commencement supplement

Post-commencement supplement

321. Supplement in respect of a post-commencement period

322. Amount of post-commencement supplement for a post-commencement period

323. Ring fence losses

324. Special rule for straddling periods

325. The pool of ring fence losses and the pool of non-qualifying Schedule 19B losses

326. The ring fence pool

327. Reductions in respect of utilised ring fence losses

328. Reductions in respect of unrelieved group ring fence profits

329. The reference amount for a post-commencement period

Chapter 6

Supplementary charge in respect of ring fence trades

330. Supplementary charge in respect of ring fence trades

331. Meaning of “financing costs” etc

332. Assessment, recovery and postponement of supplementary charge

Chapter 7

Reduction of supplementary charge for certain new oil fields

Reduction of adjusted ring fence profits

333. Reduction of adjusted ring fence profits

Pool of field allowances

334. Company’s pool of field allowances

335. Carrying part of pool of field allowances into following period

336. Carrying whole of pool of field allowances into following period

Field allowance: when held and unactivated amount

337. Initial licensee to hold a field allowance

338. Holding a field allowance on acquisition of equity share

339. Unactivated amount of field allowance

No change in equity share: activation of allowance

340. Introduction to section 341

341. Activation of field allowance

Change in equity share: activation of allowance

342. Introduction to sections 343 and 344

343. Reference periods

344. Activation of field allowance

Change in equity share: transfer of field allowance

345. Introduction to sections 346 and 347

346. Reduction of field allowance if equity disposed of

347. Acquisition of field allowance if equity acquired

Miscellaneous

348. Adjustments

349. Orders

Interpretation

350. “New oil field”

351. “Authorisation of development of an oil field”

352. “Qualifying oil field”

353. “Small oil field”

354. “Ultra heavy oil field”

355. “Ultra high pressure/high temperature oil field”

356. “Total field allowance for a new oil field”

357. Other definitions

Part 9

Leasing plant or machinery

Chapter 1

Introduction

358. Introduction to Part

Chapter 2

Long funding leases of plant or machinery

Introduction

359. Overview of Chapter

Lessors under long funding finance leases

360. Lessor under long funding finance lease: rental earnings

361. Lessor under long funding finance lease: exceptional items

362. Lessor under long funding finance lease making termination payment

Lessors under long funding operating leases

363. Lessor under long funding operating lease: periodic deduction

364. “Starting value”: general

365. “Starting value” where plant or machinery originally unqualifying

366. Long funding operating lease: lessor’s additional expenditure

367. Determination of remaining residual value resulting from lessor’s first additional expenditure

368. Determination of remaining residual value resulting from lessor’s further additional expenditure

369. Lessor under long funding operating lease: termination of lease

Cases where sections 360 to 369 do not apply

370. Plant or machinery held as trading stock

371. Adjustments where sections 360 to 369 subsequently disapplied by section 370

372. Lessor also lessee under non-long funding lease

373. Other avoidance

374. Provision supplementing section 373

375. Adjustments where sections 360 to 369 subsequently disapplied by section 373

376. Films

Lessees under long funding finance leases

377. Lessee under long funding finance lease: limit on deductions

378. Lessee under long funding finance lease: termination

Lessees under long funding operating leases

379. Lessee under long funding operating lease

380. “Starting value” in section 379

Interpretation

381. Interpretation of Chapter

Chapter 3

Sales of lessors: leasing business carried on by a company alone

Introduction

382. Introduction to Chapter

Income and matching expense in different accounting periods

383. Income and matching expense in different accounting periods

384. Amount of income and expense

385. No carry back of the expense

386. Relief for expense otherwise giving rise to carried forward loss

“Business of leasing plant or machinery”

387. “Business of leasing plant or machinery”

388. “Relevant plant or machinery value” for condition A in section 387

389. Provision supplementing section 388

390. Relevant plant or machinery value where relevant company lessee under long funding lease etc

391. Relevant company’s income for condition B in section 387

“Qualifying change of ownership”

392. “Qualifying change of ownership”

393. Qualifying 75% subsidiaries

394. Consortium relationships

395. No qualifying change of ownership in certain intra-group reorganisations

396. No qualifying change of ownership where principal company’s interest in consortium company unchanged

397. Companies owned by consortiums and members of consortiums

398. “Qualifying 75% or 90% subsidiary” etc

The amount of the income

399. The amount of the income: the basic amount

400. “PM” in section 399

401. Provisions supplementing section 400

402. “PM” where relevant company lessee under long funding lease etc

403. “TWDV” in section 399

404. Amount to be nil if basic amount negative

405. Adjustment to the basic amount: qualifying 75% subsidiaries

406. Adjustment to the basic amount: consortium relationships

407. Migration

Associated company”

408. “Associated company”

Chapter 4

Sales of lessors: leasing business carried on by a company in partnership

Introduction

409. Introduction to Chapter

“Business of leasing plant or machinery”

410. “Business of leasing plant or machinery”

411. “Relevant plant or machinery value” for condition A in section 410

412. Provision supplementing section 411

413. Relevant plant or machinery value where partnership lessee under long funding lease etc

414. Partnership’s income for condition B in section 410

“Qualifying change” in company’s interest in a business

415. “Qualifying change” in company’s interest in a business

416. Determining the percentage share in the profits or loss of business

Qualifying changes in partner company’s interest in business

417. Partner company’s income and other companies’ matching expense

418. Amount of income and expense

419. Relief for expense otherwise giving rise to carried forward loss

420. Exception: companies carrying on business ceasing to share in its profits

421. The amount of the income: the basic amount

422. Amount to be nil if basic amount negative

423. Adjustment to the basic amount

424. The amount of expense

Qualifying changes of ownership in relation to partner company

425. Partner company’s income and matching expense in different accounting periods

426. Amount of income and expense

427. No carry back of the expense

428. Relief for expense otherwise giving rise to carried forward loss

429. The amount of the income

Interpretation

430. “Associated company”

431. “Profits” and “loss”

Chapter 5

Sales of lessors: anti-avoidance provisions

432. Restrictions on relief for Chapter 3 or 4 expenses: introduction

433. Restrictions applying to the restricted loss amount

434. Introduction to sections 435 and 436

435. Disregard of increases and decreases in balance sheet amounts

436. Balance sheet amounts determined on assumption company has no liabilities

Chapter 6

Sales of lessors: general interpretation

437. Interpretation of the sales of lessors Chapters

Part 10

Close companies

Chapter 1

Overview of Part

438. Overview of Part

Chapter 2

Basic definitions

Meaning of “close company": general

439. “Close company”

440. Basis of winding up under section 439(3)

441. Treatment of some persons as participators or directors for the purposes of section 439(3)

Companies which are not to be close companies

442. Particular types of company

443. Companies controlled by or on behalf of Crown

444. Companies involved with non-close companies

445. Section 444: registered pension schemes

446. Particular types of quoted company

447. Section 446: meaning of “shares beneficially held by the public” etc

Meaning of other expressions in this Part

448. “Associate”

449. “Associated company”

450. “Control”

451. Section 450: rights to be attributed etc

452. “Director”

453. “Loan creditor”

454. “Participator”

Chapter 3

Charge to tax in case of loan to participator

Charge to tax in case of loan to participator

455. Charge to tax in case of loan to participator

Exceptions to the charge to tax under section 455

456. Exceptions to the charge under section 455

457. Section 456: meaning of “material interest in a company”

Relief in case of repayment or release of loan

458. Relief in case of repayment or release of loan

Loan treated as made to participator

459. Loan treated as made to participator

Loan treated as made by close company

460. Loan treated as made by close company

461. Exception to section 460

462. Determination of particular questions as a result of section 460

Taxation of debtor on release of loan to trustees of settlement which has ended

463. Taxation of debtor on release of loan to trustees of settlement which has ended

464. Section 463: other person treated as releasing or writing off debt

Chapter 4

Power to obtain information

465. Power to obtain information

Part 11

Charitable companies etc

Chapter 1

Introduction

466. Overview of Part

467. Meaning of “charitable company”

468. Meaning of “eligible body”

469. Conditions for qualifying as a scientific research association

470. Meaning of “research and development” in section 469

Chapter 2

Gifts and other payments

Gifts and other payments to charitable companies

471. Gifts qualifying for gift aid relief: income tax treated as paid

472. Gifts qualifying for gift aid relief: corporation tax liability and exemption

473. Gifts of money from companies: corporation tax liability and exemption

474. Payments from other charities: corporation tax liability and exemption

Gifts to eligible bodies

475. Gifts qualifying for gift aid relief: income tax treated as paid and exemption

476. Gifts of money from companies: exemption

Gifts to scientific research associations

477. Gifts of money from companies: exemption

Chapter 3

Other exemptions

Exemptions

478. Exemption for profits etc of charitable trades

479. Meaning of “charitable trade”

480. Exemption for profits of small-scale trades

481. Exemption from charges under provisions to which section 1173 applies

482. Condition as to trading and miscellaneous incoming resources

483. Exemption for profits from fund-raising events

484. Exemption for profits from lotteries

485. Exemption for property income etc

486. Exemption for investment income and non-trading profits from loan relationships

487. Exemption for public revenue dividends

488. Exemption for certain miscellaneous income

489. Exemption for income from estates in administration

Application of exemptions to certain bodies

490. Eligible bodies

491. Scientific research associations

Chapter 4

Restrictions on exemptions

Restrictions on exemptions

492. Restrictions on exemptions

493. The non-exempt amount

494. Attributing income to the non-exempt amount

495. How income is attributed to the non-exempt amount

Non-charitable expenditure

496. Meaning of “non-charitable expenditure”

497. Section 496: supplementary

498. Section 496(1)(d): meaning of expenditure

499. Section 496(1)(d): accounting period in which certain expenditure treated as incurred

500. Section 496(1)(d): payment to body outside the UK

501. Section 496(1)(g) and (h): investments and loans

Substantial donor transactions

502. Transactions with substantial donors

503. Meaning of “relievable gift”

504. Non-charitable expenditure in substantial donor transactions

505. Adjustment if section 504(1) and (2) applied to single transaction

506. Section 504: certain payments and benefits to be ignored

507. Transactions: exceptions

508. Donors: exceptions

509. Connected charities

510. Substantial donor transactions: supplementary

Approved charitable investments and loans

511. Approved charitable investments

512. Securities which are approved charitable investments

513. Conditions to be met for some securities

514. Approved charitable loans

Carry back of excess non-charitable expenditure

515. Excess expenditure treated as non-charitable expenditure of earlier periods

516. Rules for attributing excess expenditure to earlier periods

517. Adjustments in consequence of section 515

Part 12

Real Estate Investment Trusts

Chapter 1

Introduction

Introductory

518. Introduction to Part

Key concepts

519. “Property rental business”

520. “UK property rental business” of non-UK companies

521. “UK company” and “non-UK company”

522. “Residual business”

Chapter 2

Requirements for being a UK REIT

Becoming a UK REIT

523. Notice for a group of companies to become a UK REIT

524. Notice for a company to become a UK REIT

525. Notice under section 523 or 524: supplementary

526. Duration of status as UK REIT

Being a UK REIT in relation to an accounting period

527. Being a UK REIT in relation to an accounting period

528. Conditions for company

529. Conditions as to property rental business

530. Condition as to distribution of profits

531. Conditions as to balance of business

532. Financial statements for group UK REITs

533. Financial statements: supplementary

Chapter 3

Tax treatment of profits and gains of UK REITs

534. Profits

535. Gains

Chapter 4

Entering the UK REIT regime

536. Effects of entry: corporation tax

537. Effects of entry: CAA 2001

538. Entry charge

539. Calculation of the notional amount

540. Election to treat notional income as arising in instalments

Chapter 5

Assets etc

Ring-fencing of property rental business

541. Ring-fencing of property rental business

542. Disapplication of certain provisions

Profits: financing-cost ratio

543. Profit: financing-cost ratio

544. Meaning of “property profits” and “property financing costs”

Cancellation of tax advantage

545. Cancellation of tax advantage

546. Appeal against notice under section 545

Funds awaiting reinvestment

547. Funds awaiting reinvestment

Chapter 6

Distributions

Recipients of distributions

548. Distributions: liability to tax

549. Distributions: supplementary

Attribution of distributions

550. Attribution of distributions

Distributions to certain shareholders

551. Tax consequences of distribution to holder of excessive rights

552. “The section 552 amount”

553. Meaning of “holder of excessive rights”

554. Regulations: distributions to holders of excessive rights

Chapter 7

Gains etc

Movement of assets

555. Assets: change of use

556. Disposal of assets

557. Movement of assets into ring fence

Demergers

558. Demergers: disposal of asset

559. Demergers: company leaving group UK REIT

Interpretation

560. Interpretation of Chapter

Chapter 8

Breach of conditions in Chapter 2

561. Notice of breach of relevant Chapter 2 condition

562. Breach of conditions C and D in section 528 (conditions for company)

563. Breach of conditions as to property rental business

564. Breach of condition as to distribution of profits

565. “The section 565 amount”

566. Breach of condition B in section 531 in accounting period 1

567. Meaning of “the notional amount”

568. Breach of balance of business conditions after accounting period 1

569. Chapter subject to section 572

Chapter 9

Leaving the UK REIT regime

Introduction

570. Overview of Chapter

Notice to leave regime

571. Termination by notice: group or company

572. Termination by notice: officer of Revenue and Customs

573. Notice under section 572: tax advantage

574. Notice under section 572: serious breach

575. Notice under section 572: breach of conditions as to property rental business

576. Notice under section 572: breach of conditions as to balance of business

577. Notice under section 572: multiple breaches of conditions in Chapter 2

Automatic termination

578. Automatic termination for breach of certain conditions in section 528

Effects of cessation

579. Effects of cessation: corporation tax

580. Effects of cessation: CAA 2001

Early exit

581. Early exit by notice

582. Early exit

Chapter 10

Joint ventures

Introduction

583. Overview of Chapter

584. Meaning of “joint venture company” and “joint venture group”

585. Meaning of “venturing group” and “venturing company”

Notice for Part to apply to joint venture

586. Notice for Part to apply: joint venture company

587. Notice for Part to apply: joint venture group

Effect and duration of notice

588. Effect of notice under section 586

589. Effect of notice under section 587

590. Duration of notice under section 586 or 587

Specific requirements and modifications

591. Conditions as to balance of business

592. Joint venture groups: financial statements

593. Financial statements under section 532: joint venture groups

594. Modifications of Chapter 3

Additional entry charge due in some cases

595. Joint venture company liable for additional charge

596. Member of joint venture group liable for additional charge

597. Cases where no additional charge due

Supplementary

598. Chapter 10: supplementary

Chapter 11

Part 12: supplementary

Miscellaneous

599. Calculation of profits

600. Power to make regulations about cases involving related persons

601. Availability of group reliefs

602. Effect of deemed disposal and reacquisition

603. Regulations

Interpretation

604. Property rental business: exclusion of listed business

605. Property rental business: exclusion of business producing listed income

606. Groups

607. Meaning of “entry” and “cessation” etc

608. References to assets

609. Definitions

Part 13

Other special types of company etc

Chapter 1

Corporate beneficiaries under trusts

Discretionary payments

610. Discretionary payments by trustees to companies

Trustees’ expenses

611. Income tax provisions to apply in relation to trustees’ expenses

Chapter 2

Authorised investment funds

Introduction

612. Overview of Chapter

Open-ended investment companies

613. Meaning of “open-ended investment company”

614. Applicable corporation tax rate

615. Umbrella companies

Authorised unit trusts

616. Meaning of “authorised unit trust” and “unit holder”

617. Authorised unit trust treated as UK resident company

618. Applicable corporation tax rate

619. Umbrella schemes

Court investment funds

620. Court investment funds

Chapter 3

Unauthorised unit trusts

621. Treatment of income

622. Treatment of capital expenditure

Chapter 4

Securitisation companies

623. Meaning of “securitisation company”

624. Power to make regulations about the taxation of securitisation companies

625. Regulations: supplementary

Chapter 5

Companies in liquidation or administration

Introduction

626. Meaning of “final year”, “penultimate year” etc

627. Meaning of “rate of corporation tax” in case of companies with small profits

Companies in liquidation

628. Company in liquidation: corporation tax rates

629. Company in liquidation: making of assessment to tax

Companies in administration

630. Company in administration: corporation tax rates

631. Company in administration: making of assessment to tax

Supplementary

632. Meaning of rate being “fixed” or “proposed”

633. Exemption for interest on overpaid tax in final accounting period

Chapter 6

Banks etc in compulsory liquidation

634. Overview of Chapter

635. Application of Chapter

636. Charge to corporation tax on winding up receipts

637. Transfer of rights to payment

638. Allowable deductions

639. Election to carry back

640. Relationship of Chapter with other corporation tax provisions

641. Interpretation of Chapter

Chapter 7

Co-operative housing associations

642. Disregard of rent from members and of interest payable

643. Exemption for gains on a sale of property

644. Approval of housing associations

645. Tests to be satisfied by the association

646. Delegation of powers to the Regulator of Social Housing

647. Claims under section 642 or 643

648. Adjustments of liability

649. Power to make further provision

Chapter 8

Self-build societies

650. Meaning of “self-build society”

651. Disregard of rent from members

652. Exemption for gains on disposals of land to members

653. Approval of self-build societies

654. Delegation of powers to the Regulator of Social Housing

655. Claims under section 651 or 652

656. Adjustments of liability

657. Power to make further provision

Chapter 9

Community amateur sports clubs

Basic concepts

658. Meaning of “community amateur sports club” and “registered club”

659. Meaning of “open to the whole community”

660. Meaning of “organised on an amateur basis”

661. Meaning of “eligible sport”, “qualifying purposes” etc

Exemptions

662. Exemption for UK trading income

663. Exemption for UK property income

664. Exemption for interest and gift aid income

665. Exemption for chargeable gains

Restrictions on exemptions

666. Exemptions reduced if non-qualifying expenditure incurred

667. Rules for attributing surplus amount to earlier periods etc

668. How income and gains are attributed

Deemed disposal and acquisition of asset

669. Asset ceasing to be held for qualifying purposes etc

Decisions and appeals

670. Notification of HMRC decision

671. Appeals

Part 14

Change in company ownership

Chapter 1

Introduction

672. Overview of Part

Chapter 2

Disallowance of trading losses

673. Introduction to Chapter

674. Disallowance of trading losses

675. Disallowance of trading losses: calculation of balancing charges

676. Disallowance of trading losses where company reconstruction without change in ownership

Chapter 3

Company with investment business: restrictions on relief: general provision

Introduction

677. Introduction to Chapter

Notional split of accounting period in which change in ownership occurs

678. Notional split of accounting period in which change in ownership occurs

Restrictions on relief

679. Restriction on debits to be brought into account

680. Restriction on the carry forward of non-trading deficit from loan relationships

681. Restriction on relief for non-trading loss on intangible fixed assets

682. Restriction on the deduction of expenses of management

683. Disallowance of UK property business losses

684. Disallowance of overseas property business losses

Apportionment of amounts

685. Apportionment of amounts

686. Meaning of certain expressions in section 685

Adjustment to balancing charges if relief is restricted

687. Adjustment to balancing charges if relief is restricted

Meaning of “significant increase in the amount of a company’s capital”

688. Meaning of “significant increase in the amount of a company’s capital”

689. Amount A

690. Amount B

691. Meaning of “amount of capital”

Chapter 4

Company with investment business: restrictions on relief: asset transferred within group

Introduction

692. Introduction to Chapter

693. Meaning of “amount of profits which represents a relevant gain”

694. Meaning of “the relevant provisions”

Notional split of accounting period in which change in ownership occurs

695. Notional split of accounting period in which change in ownership occurs

Restrictions on relief

696. Restriction on debits to be brought into account

697. Restriction on the carry forward of non-trading deficit from loan relationships

698. Restriction on relief for non-trading loss on intangible fixed assets

699. Restrictions on the deduction of expenses of management

700. Disallowance of UK property business losses

701. Disallowance of overseas property business losses

Apportionment of amounts

702. Apportionment of amounts

703. Meaning of certain expressions in section 702

Chapter 5

Company without investment business: disallowance of property losses

704. Company carrying on UK property business

705. Company carrying on overseas property business

Chapter 6

Recovery of unpaid corporation tax

General definitions

706. Meaning of “linked” person

707. Meaning of “control”

708. Rights to be attributed for the purposes of section 707

709. Meaning of “the relevant period”

Recovery of unpaid corporation tax for accounting period beginning before change

710. Recovery of unpaid corporation tax for accounting period beginning before change

711. Conditions relating to company’s trade or business

712. Meaning of “a major change in the nature or conduct of a trade or business”

Recovery of unpaid corporation tax for accounting period ending on or after change

713. Recovery of unpaid corporation tax for accounting period ending on or after change

714. The expectation condition

715. Meaning of “transaction entered into in connection with change in ownership”

Miscellaneous

716. Interest

717. Effect of payment in pursuance of assessment under section 710 or 713

718. Meaning of “associated company”

Chapter 7

Meaning of “change in the ownership of a company”

Meaning of “change in the ownership of a company”

719. Meaning of “change in the ownership of a company”

720. Section 719: supplementary

721. When things other than ordinary share capital may be taken into account: Chapters 2 to 5

722. When things other than ordinary share capital may be taken into account: Chapter 6

Changes in indirect ownership

723. Changes in indirect ownership

Disregard of change in ownership

724. Disregard of change in company ownership

Supplementary provision

725. Provision applying for the purposes of Chapters 2 to 5

726. Interpretation of Chapter

Chapter 8

Supplementary provision

727. Extended time limit for assessment

728. Provision of information about ownership of shares etc

729. Meaning of “company with investment business”

730. Meaning of “relevant non-trading debit”

Part 15

Transactions in securities

Introduction

731. Overview of Part

732. Meaning of “corporation tax advantage”

Company liable to counteraction of corporation tax advantage

733. Company liable to counteraction of corporation tax advantage

734. Exception where no tax avoidance object shown

Circumstances in which corporation tax advantages obtained or obtainable

735. Abnormal dividends used for exemptions or reliefs (circumstance A)

736. Receipt of consideration representing company’s assets, future receipts or trading stock (circumstance C)

737. Receipt of consideration in connection with relevant company distribution (circumstance D)

738. Receipt of assets of relevant company (circumstance E)

739. Meaning of “relevant company” in sections 737 and 738

740. Abnormal dividends: general

741. Abnormal dividends: the excessive return condition

742. Abnormal dividends: the excessive accrual condition

Procedure for counteraction of corporation tax advantages

743. Preliminary notification that section 733 may apply

744. Opposed notifications: statutory declarations

745. Opposed notifications: determinations by tribunal

746. Counteraction notices

747. Timing of assessments in section 738 cases

Clearance procedure

748. Application for clearance of transactions

749. Effect of clearance notification under section 748

Appeals

750. Appeals against counteraction notices

Interpretation

751. Interpretation of Part

Part 16

Factoring of income etc

Chapter 1

Transfers of income streams

752. Application of Chapter

753. Value of transferred income stream treated as income

754. Exception: amount otherwise taxed

755. Exception: transfer by way of security

756. Partnership shares

757. Interpretation of Chapter

Chapter 2

Finance arrangements

Type 1 arrangements

758. Type 1 finance arrangement defined

759. Certain tax consequences not to have effect

760. Payments treated as borrower’s income

761. Deemed loan relationship if borrower is a company

762. Deemed loan relationship if borrower is partnership with corporate member

Type 2 arrangements

763. Type 2 finance arrangement defined

764. Relevant change in relation to partnership

765. Certain tax consequences not to have effect

766. Deemed loan relationship

Type 3 arrangements

767. Type 3 finance arrangement defined

768. Certain tax consequences not to have effect

769. Deemed loan relationship

Exceptions

770. Exceptions: preliminary

771. Exceptions

772. Exceptions: relevant person

773. Power to make further exceptions

Supplementary

774. Accounts

775. Arrangements

776. Assets

Chapter 3

Loan or credit transactions

777. Loan or credit transaction defined

778. Certain payments treated as interest

779. Tax charged on income transferred

Part 17

Manufactured payments and repos

Chapter 1

Introduction

780. Overview of Part

781. Key definitions

Chapter 2

Manufactured dividends

782. Meaning of “manufactured dividend”

783. Treatment of payer of manufactured dividend

784. Treatment of recipient of manufactured dividend

785. Treatment of payer: Real Estate Investment Trusts

786. Treatment of recipient: Real Estate Investment Trusts

787. Exemption of manufactured dividends

788. Statements about manufactured dividends

789. Powers about administrative provisions

Chapter 3

Manufactured overseas dividends

790. Meaning of “manufactured overseas dividend”

791. Treatment of payer of manufactured overseas dividend

792. Company receiving manufactured overseas dividend from UK resident etc

793. Section 792: amount treated as withheld

794. Company receiving manufactured overseas dividend from foreign payer

795. Exemption of manufactured overseas dividends

Chapter 4

Further provision about manufactured payments

Manufactured payments exceeding, or less than, underlying payments

796. Manufactured dividends: amounts exceeding underlying payments

797. Manufactured overseas dividends: amounts exceeding underlying payments

798. Manufactured overseas dividends less than underlying payments

Manufactured payments under arrangements with unallowable purpose

799. Manufactured payments under arrangements with unallowable purpose

800. Arrangements with an unallowable purpose

801. Sections 799 and 800: supplementary

Miscellaneous

802. Powers about amounts representative of overseas dividends

803. Power to deal with special cases

804. Regulation-making powers: general

Chapter 5

Stock lending arrangements and repos

Interpretation

805. “Stock lending arrangement”

806. Section 805: supplementary

807. “Creditor repo”, “creditor quasi-repo”, “debtor repo” and “debtor quasi-repo”

Tax credits: stock lending arrangements and repos

808. No tax credits for borrower under stock lending arrangement

809. No tax credits for lender under creditor repo or creditor quasi-repo

810. No tax credits for borrower under debtor repo or debtor quasi-repo

811. Arrangements between companies to make distributions

Deemed manufactured payments

812. Deemed manufactured payments: stock lending arrangements

Chapter 6

Interpretation of Part

813. The gross amount of a manufactured overseas dividend etc

814. Other interpretation

Part 18

Transactions in land

Introduction

815. Introduction to Part

816. Meaning of disposing of land

817. Priority of other tax provisions

Charge to tax on gains from transactions in land

818. Charge to tax on gains from transactions in land

819. Gains obtained from land disposals in some circumstances

820. Person obtaining gain

821. Company chargeable

822. Method of calculating gain

Further provisions relevant to the charge

823. Transactions, arrangements, sales and realisations relevant for Part

824. Tracing value

825. Meaning of “another person”

826. Valuations and apportionments

Exemptions

827. Gain attributable to period before intention to develop formed

828. Disposals of shares in companies holding land as trading stock

Recovery of tax

829. Cases where consideration receivable by person not assessed

830. Certificates of tax paid etc

Clearances and power to obtain information

831. Clearance procedure

832. Power to obtain information

Interpretation

833. Interpretation of Part

Part 19

Sale and lease-back etc

Chapter 1

Payments connected with transferred land

Introduction

834. Overview of Chapter

Application of the Chapter

835. Transferor or associate becomes liable for payment of rent

836. Transferor or associate becomes liable for payment other than rent

837. Relevant corporation tax relief

Relief (other than for certain insurance company expenses): restriction and carrying forward

838. Relevant corporation tax relief: deduction not to exceed commercial rent

Insurance company expenses: restriction and carrying forward of relief

839. Deduction under section 76 of ICTA not to exceed commercial rent

840. Carrying forward parts of payments

841. Aggregation and apportionment of payments

842. Payments made for later periods

Interpretation etc

843. Exclusion of service charges etc

844. Commercial rent: comparison with rent under a lease

845. Commercial rent: comparison with payments other than rent

846. Lease and rent

847. Associated persons

848. Land outside the UK

Chapter 2

New lease of land after assignment or surrender

Introduction

849. Overview of Chapter

Application of the Chapter

850. New lease after assignment or surrender

Taxation of consideration

851. Taxation of consideration

852. Position where new lease does not include all original property

Relief for rent under new lease

853. Relief for rent under new lease

New lease treated as ending

854. New lease treated as ending

855. Position where rent reduces

856. Position where lease may be ended

857. Position where lease may be varied

858. Lease treated as ending: rentcharge

Lease varied to provide for increased rent

859. Lease varied to provide for increased rent

Interpretation

860. Relevant corporation tax relief

861. Linked persons

862. Lease, lessee, lessor and rent

Chapter 3

Leased trading assets

Introduction

863. Overview of Chapter

Application of the Chapter

864. Leased trading assets

Relief: restriction and carrying forward

865. Tax deduction not to exceed commercial rent

866. Long funding finance leases

867. Commercial rent

Interpretation

868. Lease

869. Relevant asset

Chapter 4

Leased assets: capital sums

Introduction

870. Overview of Chapter

Application of the Chapter

871. Application of the Chapter

872. Payment under lease

873. Sum obtained

Charge to corporation tax

874. Charge to corporation tax

875. Hire-purchase agreements

876. Adjustments where sum obtained before payment made

Obtaining of sum

877. Sum obtained in respect of interest

878. Sum obtained in respect of lessee’s interest

879. Disposal of interest to associate

Apportionment

880. Apportionment of payments made and of sums obtained

881. Manner of apportionment

Interpretation

882. Associates

883. Capital sum

884. Lease

885. Relevant asset

886. Relevant tax relief

Part 20

Tax avoidance involving leasing plant or machinery

Chapter 1

Restrictions on use of losses in leasing partnerships

887. When restrictions on leasing partnership losses under this Chapter apply

888. Restrictions on leasing partnership losses

889. Interpretation of Chapter

Chapter 2

Capital payments in respect of leases treated as income

890. Capital payments in respect of leases treated as income

891. Apportionments for leases of plant or machinery and other property

892. Deduction where failure to make relevant capital payment expected .

893. Meaning of “capital payment”, “relevant capital payment” etc

894. Other interpretation of Chapter

Part 21

Leasing arrangements: finance leases and loans

Chapter 1

Introduction

Introduction

895. Overview of Part

Meaning of expressions about rent

896. Normal rent

897. Accountancy rental earnings

898. Rental earnings

Chapter 2

Finance leases with return in capital form

Introduction

899. Arrangements to which this Chapter applies

900. Purposes of this Chapter

Leases to which this Chapter applies

901. Application of this Chapter

902. The conditions referred to in section 901(1)

903. Provisions supplementing section 902

904. The arrangements and circumstances referred to in section 902(8)

Current lessor taxed by reference to accountancy rental earnings

905. Current lessor taxed by reference to accountancy rental earnings

Reduction of taxable rent by cumulative rental excesses

906. Reduction of taxable rent by cumulative rental excesses: introduction

907. Meaning of “accountancy rental excess” and “cumulative accountancy rental excess”

908. Reduction of taxable rent by the cumulative accountancy rental excess

909. Meaning of “normal rental excess” and “cumulative normal rental excess”

910. Reduction of taxable rent by the cumulative normal rental excess

Relief for bad debts by reduction of cumulative rental excesses

911. Relief for bad debts: reduction of cumulative accountancy rental excess

912. Recovery of bad debts following reduction under section 911

913. Relief for bad debts: reduction of cumulative normal rental excess

914. Recovery of bad debts following reduction under section 913

Effect of disposals

915. Effect of disposals of leases: general

916. Assignments on which neither a gain nor a loss accrues

Capital allowances: clawback of major lump sum

917. Effect of capital allowances: introduction

918. Cases where expenditure taken into account under Part 2, 5 or 8 of CAA 2001

919. Cases where expenditure taken into account under other provisions of CAA 2001

920. Capital allowances deductions: waste disposal and cemeteries

921. Capital allowances deductions: films

922. Contributors to capital expenditure

Schemes to which this Chapter does not at first apply

923. Pre-26 November 1996 schemes where this Chapter does not at first apply

924. Post-25 November 1996 schemes to which Chapter 3 applied first

Chapter 3

Other finance leases

Introduction

925. Introduction to Chapter

926. Purpose of this Chapter

Current lessor taxed by reference to accountancy rental earnings

927. Leases to which this Chapter applies

928. Current lessor taxed by reference to accountancy rental earnings

Application of provisions of Chapter 2 for purposes of this Chapter

929. Application of provisions of Chapter 2 for purposes of this Chapter

Chapter 4

Supplementary provisions

930. Pre-26 November 1996 schemes and post-25 November 1996 schemes

931. Time apportionment where periods of account do not coincide

932. Periods of account and related periods of account and accounting periods

933. Connected persons

934. Assets which represent the leased asset

935. Parent undertakings and consolidated group accounts

936. Assessments and adjustments

937. Interpretation of Part

Part 22

Miscellaneous provisions

Chapter 1

Transfers of trade without a change of ownership

Introduction

938. Overview of Chapter

939. Meaning of “transfer of a trade” and related expressions

Transfers to which Chapter applies

940. Transfers to which Chapter applies

941. The ownership condition

942. Options that may be applied for the purposes of the ownership condition

943. The tax condition

Effect of Chapter in relation to transfers to which it applies

944. Modified application of Chapter 2 of Part 4

945. Cases in which predecessor retains more liabilities than assets

946. Rules for determining “L”

947. Rules for determining “A”

948. Modified application of CAA 2001

949. Dual resident investing companies

950. Transfers of trades involving business of leasing plant or machinery

Supplementary

951. Part of trade treated as separate trade

952. Apportionment if part of trade treated as separate trade

953. Application of Chapter to further transfers of a trade

Chapter 2

Transfers of trade to obtain balancing allowances

954. Transfer of activities on complete cessation of trade

955. Transfer of activities on part cessation of trade

956. Apportionment if part of trade treated as separate trade

957. Chapter 2: supplementary

Chapter 3

Transfer of relief within partnerships

958. Application

959. Arrangements for transfer of relief

960. Restrictions on use of reliefs

961. Non-trading profits and losses

962. Interpretation of Chapter

Chapter 4

Surrender of tax refund within group

963. Power to surrender tax refund

964. Effects of surrender of tax refund

965. Interest on tax overpaid or underpaid

966. Payments for surrendered tax refunds

Chapter 5

Set off of income tax deductions against corporation tax

967. Deductions from payments received by UK resident companies

968. Deductions from payments received by non-UK resident companies

Chapter 6

Collection etc of tax from UK representatives of non-UK resident companies

969. Introduction to Chapter

970. Obligations and liabilities in relation to corporation tax

971. Exceptions

972. Interpretation of Chapter

Chapter 7

Recovery of unpaid corporation tax due from non-UK resident company

973. Introduction to Chapter

974. Case in which this Chapter applies

975. Meaning of “the relevant period”

976. Meaning of “related company”

977. Notice requiring payment of unpaid tax

978. Time limit for giving notice

979. Amount payable in consortium case

980. Chapter 7: supplementary

Chapter 8

Exemptions

Trade unions and employers’ associations

981. Exemption for trade unions and eligible employers’ associations

982. Qualifying income or gains

983. Meaning of “trade union” and “eligible employers’ association”

Local authorities etc

984. Local authorities and local authority associations

Health service bodies

985. Health service bodies

986. Meaning of “health service body”

987. NHS foundation trusts

Reserve Bank of India and State Bank of Pakistan

988. Issue departments of the Reserve Bank of India and the State Bank of Pakistan

Agricultural societies

989. Agricultural societies

Chapter 9

Other miscellaneous provisions

European Economic Interest Groupings

990. European Economic Interest Groupings

Harbour reorganisation schemes

991. Harbour reorganisation schemes: corporation tax

992. Harbour reorganisation schemes: capital allowances etc

993. Harbour reorganisation schemes: chargeable gains

994. Transfer of part of trade

995. Interpretation of sections 991 to 994

Groups: use of different accounting practices

996. Use of different accounting practices within a group of companies

Part 23

Company distributions

Chapter 1

Introduction

997. Overview of Part

Chapter 2

Matters which are distributions

Introduction

998. Overview of Chapter

999. Priority of negative rules

Meaning of “distribution”

1000. Meaning of “distribution”

1001. Provisions related to paragraphs A to H in section 1000(1)

Distributions, other than dividends, in respect of shares

1002. Exceptions for certain transfers of assets or liabilities between a company and its members

Redeemable share capital

1003. Redeemable share capital

Securities issued otherwise than for new consideration

1004. Securities issued otherwise than for new consideration

Distributions in respect of non-commercial securities

1005. Meaning of “non-commercial securities”

1006. Distributions exceeding consideration received for issue of security

1007. Securities issued at premium representing new consideration

1008. Consideration for issue of security exceeding amount of principal

Exceptions to section 1008

1009. Securities reflecting dividends on certain shares etc: exclusion of section 1008

1010. Meaning of “qualifying index” in section 1009

1011. Meaning of “associated company” in section 1009

1012. Hedging arrangements

1013. Exception to section 1012

1014. Meaning of “hedging arrangements”

istributions in respect of special securities

1015. Meaning of “special securities”

1016. Meaning of “equity note” in section 1015

1017. Section 1015: other interpretation

1018. The principal secured: special securities

1019. Relevant alternative finance return

Transfers of assets or liabilities treated as distributions

1020. Transfers of assets or liabilities treated as distributions

1021. Section 1020: exceptions

Bonus issue following repayment of share capital

1022. Bonus issue following repayment of share capital treated as distribution

1023. Exceptions to section 1022(3)

Interpretation of references to repayment of share capital

1024. Premiums paid on redemption of share capital

1025. Share capital issued at a premium representing new consideration

1026. Distributions following a bonus issue

1027. Cap on amount of distributions affected by section 1026

1028. Certain payments connected with exempt distributions

Chapter 3

Matters which are not distributions

Introduction

1029. Overview of Chapter

Distributions in a winding up

1030. Distribution in respect of share capital in a winding up

Distribution as part of a cross-border merger

1031. Distribution as part of a cross-border merger

Payments of interest

1032. Interest etc paid in respect of certain securities

Purchase of own shares

1033. Purchase by unquoted trading company of own shares

1034. Requirements as to residence

1035. Requirement as to period of ownership

1036. Determining the period of ownership

1037. Requirement as to reduction of seller’s interest as shareholder

1038. Section 1037: effect of entitlement to profits

1039. Requirements where purchasing company is a member of a group

1040. Determining whether interests as shareholders in a group are substantially reduced

1041. Section 1040: effect of entitlement to profits

1042. Other requirements

1043. Relaxation of requirements in certain cases

Purchase of own shares: supplementary

1044. Advance clearance of payments by Commissioners

1045. Advance clearance: supplementary

1046. Information and returns

1047. Meaning of “group” and “51% subsidiary” in sections 1033 to 1047

1048. Sections 1033 to 1047: other interpretation

Stock dividends

1049. Stock dividends

1050. Application of section 1049 where bonus share capital is converted etc

1051. “Bonus share capital” and “in lieu of a cash dividend”

1052. Share capital to which section 1049 applies: returns

1053. Return periods

Building society payments

1054. Building society payments

Industrial and provident society payments

1055. Industrial and provident societies: interest and share dividends

1056. Dividend or bonus relating to transactions

Payments made by UK agricultural or fishing co-operatives

1057. UK agricultural or fishing co-operatives: interest and share dividends

1058. Meaning of “UK agricultural or fishing co-operative”

Supplementary provisions

1059. Associated persons

1060. Associated persons: trustees

1061. Associated persons: personal representatives

1062. Connected persons

1063. Section 1062: supplementary

Chapter 4

Special rules for distributions made by certain companies

Close companies

1064. Certain expenses of close companies treated as distributions

1065. Exception for benefits treated as employment income etc

1066. Exception for certain transfers between UK resident companies

1067. Companies acting in concert or under arrangements

1068. Meaning of “participator” in sections 1064 to 1067

1069. Additional persons treated as participators

Companies carrying on a mutual business

1070. Companies carrying on a mutual business

Companies not carrying on a business

1071. Companies not carrying on a business

Members of a 90% group

1072. Members of a 90% group

Chapter 5

Demergers

Introduction

1073. Key terms etc

1074. Purpose of provisions about demergers

Exempt distributions

1075. Exempt distributions

1076. Transfer of shares in subsidiaries to members

1077. Transfer by distributing company and issue of shares by transferee company

1078. Division of business in a cross-border transfer

1079. “The distributing company”

1080. Meaning of “relevant company”

Exemption by virtue of section 1076 or 1077: conditions

1081. General conditions

1082. Conditions for distributions within section 1076(a)

1083. Conditions for distributions within section 1077(1)

1084. Cases where condition K does not apply

1085. Conditions to be met if the distributing company is a 75% subsidiary

Chargeable payments

1086. Chargeable payments connected with exempt distributions

1087. Chargeable payments not deductible in calculating profits

1088. Meaning of “chargeable payment”

1089. Meaning of “chargeable payment”: unquoted companies

1090. Meaning of “company concerned in an exempt distribution”

Advance clearance

1091. Advance clearance of distributions

1092. Advance clearance of payments

1093. Requirements relating to applications for clearance

1094. Decision of the Commissioners or tribunal

Information and returns

1095. Exempt distributions: returns

1096. Chargeable payments etc: returns

1097. Information about person for whom a payment is received

Supplementary

1098. Meaning of “unquoted company”

1099. Other definitions etc

Chapter 6

Information and returns: further provisions

General duties to provide information

1100. Qualifying distributions: right to request a statement

1101. Non-qualifying distributions etc: returns and information

1102. Non-qualifying distributions etc: additional information

1103. Power to modify or replace sections 1101 and 1102

Companies and nominees required to provide tax certificates

1104. Company distributing dividend or interest: duty to provide tax certificates

1105. Duties of nominees

1106. Meaning of “tax certificate” etc

1107. Penalties

1108. Alternative means of compliance with sections 1104 and 1105

Chapter 7

Tax credits

1109. Tax credits for certain recipients of exempt qualifying distributions

1110. Recovery of overpaid tax credit etc

1111. Section 1110: supplementary

Chapter 8

Interpretation of Part

1112. Arrangements between companies

1113. “In respect of shares”

1114. “In respect of securities”

1115. “New consideration”

1116. References to married persons, or civil partners, living together

1117. Other interpretation

Part 24

Corporation Tax Acts definitions etc

Chapter 1

Definitions

1118. Introduction to Chapter

1119. The definitions

1120. “Bank”

1121. “Company”

1122. “Connected” persons

1123. “Connected” persons: supplementary

1124. “Control”

1125. “Farming” and related expressions

1126. “Franked investment income”

1127. “Generally accepted accounting practice” and related expressions

1128. “Grossing up”

1129. “Hire-purchase agreement”

1130. “Local authority”

1131. “Local authority association”

1132. “Offshore installation”

1133. Regulations about the meaning of “offshore installation”

1134. “Oil and gas exploration and appraisal”

1135. “Property investment LLP”

1136. “Qualifying distribution”

1137. “Recognised stock exchange”

1138. “Research and development”

1139. “Tax advantage”

1140. “Unauthorised unit trust”

Chapter 2

Permanent establishments

General

1141. Permanent establishments of companies

Circumstances where there is no permanent establishment

1142. Agent of independent status

1143. Preparatory or auxiliary activities

1144. Alternative finance arrangements

Brokers

1145. The independent broker conditions

Investment managers

1146. The independent investment manager conditions

1147. Investment managers: the 20% rule

1148. Section 1147: interpretation

1149. Application of 20% rule to collective investment schemes

1150. Meaning of “investment manager” and “investment transaction”

Lloyd’s agents

1151. Lloyd’s agents

Supplementary

1152. Investment managers: disregard of certain chargeable profits

1153. Miscellaneous

Chapter 3

Subsidiaries

1154. Meaning of “51% subsidiary”, “75% subsidiary” and “90% subsidiary”

1155. Indirect ownership of ordinary share capital

1156. Calculation of amounts owned indirectly: main rules

1157. Adding fractions together

Chapter 4

Investment trusts

1158. Meaning of “investment trust”

1159. Conditions for approval

1160. Calculation of income

1161. The income retention condition: exceptions

1162. The 15% holding limit: exceptions

1163. Basic meaning of “holding in a company”

1164. More about the meaning of “holding in a company”

1165. Other interpretation

Chapter 5

Other Corporation Tax Acts provisions

1166. Scotland

1167. Sources of income within the charge to corporation tax or income tax

1168. Payment of dividends

1169. Settlements and trustees

1170. Territorial sea of the United Kingdom

1171. Orders and regulations

1172. Apportionment to different periods

1173. Miscellaneous charges

Part 25

Definitions for purposes of Act and final provisions

Definitions for the purposes of Act

1174. Abbreviated references to Acts

1175. Claims and elections

1176. Meaning of “connected” persons and “control”

Final provisions

1177. Minor and consequential amendments

1178. Power to make consequential provision

1179. Power to undo changes

1180. Transitional provisions and savings

1181. Repeals and revocations

1182. Index of defined expressions

1183. Extent

1184. Commencement

1185. Short title

Schedule 1: Minor and consequential amendments

Part 1: Income and Corporation Taxes Act 1988

Part 2: Other enactments

Schedule 2: Transitionals and savings etc

Part 1: General provisions

Part 2: Changes in the law

Part 3: Currency

Part 4: Loss relief (other than share loss relief)

Part 5: Losses on disposal of shares

Part 6: Group Relief

Part 7: Charitable donations relief

Part 8: CITR

Part 9: Oil activities

Part 10: Leasing plant or machinery

Part 11: Close companies

Part 12: Charitable companies etc

Part 13: Real Estate Investment Trusts

Part 14: Co-operative housing associations and self-build societies

Part 15: Transactions in securities

Part 16: Factoring of income etc

Part 17: Manufactured payments and repos

Part 18: Sale and lease-back etc

Part 19: Tax avoidance involving leasing plant or machinery

Part 20: Leasing arrangements: finance leases and loans

Part 21: Transfers of trade without a change in ownership

Part 22: Use of different accounting practices within a group

Part 23: Company distributions

Part 24: Corporation Tax Acts definitions etc

Schedule 3: Repeals and revocations

Part 1: General

Part 2: Repeals and revocations having effect for corporation tax purposes only

Schedule 4: Index of defined expressions

 

An Act to restate, with minor changes, certain enactments relating to corporation tax and certain enactments relating to company distributions; and for connected purposes.

[3rd March 2010]

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Part 1

Introduction

1 Overview of Act

1) Part 2 is about calculation of the corporation tax chargeable on a company’s profits, in particular—

(a) the rates at which corporation tax on profits is charged (see Chapter 2),

(b) ascertaining the amount of profits to which the rates of tax are applied (see Chapter 3), and

(c) the currency in which profits are to be calculated and expressed (see Chapter 4).

(2) Parts 3 to 7 make provision for the following reliefs—

(a) relief for companies with small profits (see Part 3),

(b) relief for trade losses (see Chapters 2 and 3 of Part 4),

(c) relief for losses from property businesses (see Chapter 4 of Part 4),

(d) relief for losses on a disposal of shares (see Chapter 5 of Part 4),

(e) relief for losses from miscellaneous transactions (see Chapter 6 of Part 4),

(f) group relief (see Part 5),

(g) relief for qualifying charitable donations (see Part 6), and

(h) community investment tax relief (see Part 7).

(3) Parts 8 to 13 make provision about special types of business and company etc, in particular—

(a) oil activities (see Part 8),

(b) leasing plant or machinery (see Part 9),

(c) close companies (see Part 10),

(d) charitable companies etc (see Part 11),

(e) Real Estate Investment Trusts (see Part 12),

(f) corporate beneficiaries under trusts (see Chapter 1 of Part 13),

(g) open-ended investment companies, authorised unit trusts and court investment funds (see Chapter 2 of Part 13),

(h) unauthorised unit trusts (see Chapter 3 of Part 13),

(i) securitisation companies (see Chapter 4 of Part 13),

(j) companies in liquidation or administration (see Chapter 5 of Part 13),

(k) banks etc in compulsory liquidation (see Chapter 6 of Part 13),

(l) co-operative housing associations and self-build societies (see Chapters 7 and 8 of Part 13), and

(m) community amateur sports clubs (see Chapter 9 of Part 13).

(4) Parts 14 to 21 contain provisions relating to tax avoidance, in particular with respect to—

(a) change in company ownership (see Part 14),

(b) transactions in securities (see Part 15),

(c) factoring of income (see Part 16),

(d) manufactured payments and repos (see Part 17),

(e) transactions in land (see Part 18),

(f) the sale and lease-back of assets (see Part 19),

(g) leasing plant or machinery (see Part 20), and

(h) other arrangements involving asset leasing (see Part 21).

(5) Part 22 contains miscellaneous provisions, including provision with respect to—

(a) transfers of trade without a change of ownership (see Chapter 1),

(b) transfers of trade to obtain balancing allowances (see Chapter 2),

(c) transfer of relief within partnerships (see Chapter 3),

(d) the surrender of tax refunds within groups of companies (see Chapter 4),

(e) the set off of income tax deductions against corporation tax (see Chapter 5),

(f) the assessment, collection and recovery of corporation tax from UK representatives of non-UK resident companies (see Chapter 6),

(g) the recovery of unpaid corporation tax due from non-UK resident companies (see Chapter 7), and

(h) exemptions (see Chapter 8).

(6) Part 23 contains provisions about the meaning of “distribution” and certain associated matters.

(7) Part 24 contains definitions that apply for the purposes of the Corporation Tax Acts and other general provisions that have effect for the purposes of those Acts.

(8) Part 25 contains provisions of general application, including definitions for the purposes of the Act.

(9) For abbreviations and defined expressions used in this Act, see section 1174 and Schedule 4.

 
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