Office of Public Sector Information
PART II continued CHAPTER II continued
(1) Subject to the following provisions of this section, a company becomes subject to a liability falling within section 153(2)(a) above when it becomes unconditionally subject to it.
(2) Where a company agrees to acquire a liability falling within section 153(2)(a) above by transfer it becomes subject to it when the contract is made and not on a later transfer made pursuant to the contract.
(3) Where a company agrees to dispose of a liability falling within section 153(2)(a) above by transfer it ceases to be subject to it when the contract is made and not on a later transfer made pursuant to the contract.
(4) If a contract is conditional (whether on the exercise of an option or otherwise) for the purposes of subsections (2) and (3) above it is made when the condition is satisfied.
(5) Where a company ceases to be subject to a liability falling within section 153(2)(a) above and at a later time becomes subject to the same liability, with effect from the later time the liability shall be treated as if it were a different liability.
(6) A company becomes subject to a liability falling within section 153(2)(b) above at the time with effect from which it makes the provision.
(7) A company ceases to be subject to a liability falling within section 153(2)(b) above at the time with effect from which it deletes the provision or (if different) the time with effect from which it would delete the provision under normal accountancy practice.
(8) Where a company makes a provision falling within section 153(2)(b) above and later changes the amount, the company shall be treated as—
(a) deleting (with effect from the time when the change becomes effective) the provision representing the amount before the change, and
(b) making (with effect from that time) a new provision representing the amount as changed;
and so on for further changes.
(9) A company ceases to be subject to a liability falling within section 153(2)(c) above when it becomes entitled to the right concerned, unless it ceases to be subject to the liability earlier apart from this subsection.
(10) A company ceases to be subject to a liability falling within section 153(2)(d) above when it becomes entitled to the share or shares, unless it ceases to be subject to the liability earlier apart from this subsection.
(11) In a case where—
(a) a company would (apart from this subsection) become subject to a liability at a particular time (the later time) by virtue of the preceding provisions of this section,
(b) the liability falls within section 153(2)(a) above,
(c) the time at which the company, in drawing up its accounts, regards itself as becoming subject to the liability is a time (the earlier time) earlier than the later time, and
(d) the accounts are drawn up in accordance with normal accountancy practice,
the company shall be taken to have become subject to the liability at the earlier time and not at the later time.
(12) Where subsection (11) above applies, as regards any time beginning with the earlier time and ending immediately before the later time the nominal amount of the debt shall be taken to be—
(a) such amount as the company treats as the nominal amount in its accounts, or
(b) such amount as it would so treat in accordance with normal accountancy practice (if that amount is different from the amount found under paragraph (a) above).
(13) A company owes a liability at a particular time if it is subject to it at that time.
(1) Each of the following questions shall be determined according to the facts of the case concerned—
(a) whether a transaction (or series of transactions) involves the creation of one asset consisting of a right to settlement under a debt or a number of assets consisting of a number of such rights;
(b) whether a transaction (or series of transactions) involves the creation of one liability consisting of a duty to settle under a debt or a number of liabilities consisting of a number of such duties;
(c) whether a transaction (or series of transactions) involves the creation of both an asset (or assets) held and a liability (or liabilities) owed by the same company.
(2) Subsection (3) below applies where—
(a) a company, in drawing up its accounts, regards itself as becoming entitled or subject to an asset or liability at a particular time,
(b) the company, in drawing up its accounts, regards itself as ceasing to be entitled or subject to the asset or liability at a later time,
(c) at the time mentioned in paragraph (a) above it could reasonably be expected that the company would become entitled or subject to such an asset or liability,
(d) the asset or liability does not in fact come into existence before the later time but (if it did) it would fall within section 153(1)(a) or (2)(a) above, and
(e) the accounts are drawn up in accordance with normal accountancy practice.
(3) The company shall be taken to—
(a) become entitled or subject to such an asset or liability at the time it regards itself as becoming so entitled or subject, and
(b) cease to be entitled or subject to such an asset or liability at the time it regards itself as ceasing to be so entitled or subject.
(4) Where subsection (3) above applies, as regards any time beginning with the time mentioned in subsection (3)(a) and ending with the time mentioned in subsection (3)(b) the nominal amount of the debt shall be taken to be—
(a) such amount as the company treats as the nominal amount in its accounts, or
(b) such amount as it would so treat in accordance with normal accountancy practice (if that amount is different from the amount found under paragraph (a) above).
(1) A company becomes entitled to rights and subject to duties under a currency contract when it enters into the contract.
(2) A company holds a currency contract at a particular time if it is then entitled to rights and subject to duties under the contract; and it is immaterial when the rights and duties fall to be exercised and performed.
(1) Where a qualifying company holds a qualifying asset the following are translation times as regards the asset—
(a) the time immediately after the company becomes entitled to the asset;
(b) the time immediately before the company ceases to be entitled to the asset;
(c) any time which is a time when an accounting period of the company ends and which falls after the time mentioned in paragraph (a) above and before the time mentioned in paragraph (b) above.
(2) Where a qualifying company owes a qualifying liability the following are translation times as regards the liability—
(a) the time immediately after the company becomes subject to the liability;
(b) the time immediately before the company ceases to be subject to the liability;
(c) any time which is a time when an accounting period of the company ends and which falls after the time mentioned in paragraph (a) above and before the time mentioned in paragraph (b) above.
(3) Where a qualifying company enters into a currency contract the following are translation times as regards the contract—
(a) the time immediately after the company becomes entitled to rights and subject to duties under the contract;
(b) the time immediately before the company ceases to be entitled to those rights and subject to those duties;
(c) any time which is a time when an accounting period of the company ends and which falls after the time mentioned in paragraph (a) above and before the time mentioned in paragraph (b) above.
(4) As regards a qualifying asset, a qualifying liability or a currency contract an accrual period is a period which—
(a) begins with a time which is a translation time (other than the last to fall) as regards the asset, liability or contract, and
(b) ends with the time which is the next translation time to fall as regards the asset, liability or contract.
(1) Subject to the following provisions of this section, the basic valuation of an asset or liability is—
(a) such valuation as the company puts on it with regard to the time immediately after the company becomes entitled or subject to it, or
(b) such valuation as the company would put on it with regard to that time under normal accountancy practice, if that valuation is different from that found under paragraph (a) above.
(2) Where (apart from this subsection) the valuation under subsection (1) above would be in a currency (the actual currency) other than the nominal currency, it shall be taken to be the equivalent, expressed in terms of the nominal currency, of the valuation in the actual currency; and the translation required by this subsection shall be made by reference to the London closing exchange rate for the two currencies concerned for the day in which the time mentioned in subsection (1) above falls.
(3) The basic valuation of a liability falling within section 153(2)(c) or (d) above is the consideration for the company becoming subject to the liability; and any consideration or part that is not pecuniary shall be taken to be equal to its open market value—
(a) found at the time when the company becomes subject to the liability, and
(b) if part of the consideration is pecuniary, expressed in the same currency as that part.
(4) Where (apart from this subsection) the valuation under subsection (3) above would be in a currency (the actual currency) other than the nominal currency, it shall be taken to be the equivalent, expressed in terms of the nominal currency, of the valuation in the actual currency; and the translation required by this subsection shall be made by reference to the London closing exchange rate for the two currencies concerned for the day on which the company becomes subject to the liability.
(5) Subsections (6) to (9) below apply where—
(a) the company becomes entitled to a right to settlement under a qualifying debt on a security, and
(b) the circumstances are such that section 713(2)(b) or (3)(b) of the Taxes Act 1988 applies (transferee treated as entitled under accrued income scheme to relief or a sum found in sterling).
(6) In such a case the basic valuation of the right shall be found by taking the consideration for the company becoming entitled to the right and—
(a) subtracting such of the amount found under section 713(2)(b) as is attributable to the right, or
(b) adding such of the amount found under section 713(3)(b) as is attributable to the right;
and any apportionment of consideration or of the amount found under section 713(2)(b) or (3)(b) shall be made on a just and reasonable basis.
(7) The following rules apply for the purposes of subsection (6) above—
(a) any consideration or part that is pecuniary shall be expressed in sterling (if not otherwise so expressed);
(b) any consideration or part that is not pecuniary shall be taken to be equal to its open market value, found at the time when the company becomes entitled to the right and expressed in sterling.
(8) Where the nominal currency of the right mentioned in subsection (5) above is not sterling, the valuation found in sterling under subsection (6) above shall be taken to be its equivalent expressed in terms of the nominal currency.
(9) Any translation required by subsection (7) or (8) above shall be made by reference to the London closing exchange rate for the currencies concerned for the day on which the company becomes entitled to the right.
(10) Subsections (11) and (12) below apply where—
(a) section 127 above applies as regards an asset or liability for an accrual period (the earlier period), and
(b) section 125 or 127 above applies as regards the asset or liability for the next accrual period (the later period).
(11) As regards the later period the basic valuation of the asset or liability shall be taken to be—
(a) the nominal amount of the debt outstanding immediately before the beginning of the later period, or
(b) if section 127(7) above also applies as regards the earlier period, the amount found under section 127(10) for that period.
(12) As regards an accrual period which falls after the later period the basic valuation of the asset or liability shall be the amount found under subsection (11) above, subject to any subsequent application of that subsection.
(1) As regards an asset mentioned in section 153(1)(a) above, or a liability mentioned in section 153(2)(a) or (b) or (c) above, the nominal currency is the settlement currency of the debt mentioned in the paragraph concerned.
(2) As regards an asset mentioned in section 153(1)(b) above, the nominal currency is the currency concerned.
(3) As regards an asset mentioned in section 153(1)(c) above, the nominal currency is the currency in which the share is denominated.
(4) As regards a liability mentioned in section 153(2)(d) above, the nominal currency is the currency in which the share is (or shares are) denominated.
(1) Subject to the following provisions of this section, the settlement currency of a debt is the currency in which ultimate settlement of the debt falls to be made.
(2) In a case where—
(a) ultimate settlement of a debt falls to be made in a particular currency, but
(b) the amount of the currency falls to be determined by reference to the value at any time of an asset consisting of or denominated in another currency,
the settlement currency of the debt is the other currency.
(3) As regards a debt mentioned in section 153(2)(b) above, and as regards a case where section 156(3) above applies, in subsections (1) and (2) above “falls” (in each place) shall be read as “would fall”.
(4) Where the settlement currency of a debt cannot be determined under subsections (1) to (3) above, the settlement currency of the debt is the currency that can reasonably be regarded as the most appropriate—
(a) deeming the state of affairs at settlement to be the same as the state of affairs at the material time, and
(b) having regard to subsections (1) to (3) above;
and the material time is the time immediately after the company becomes entitled to the asset mentioned in section 153(1)(a) above or subject to the liability mentioned in section 153(2)(a) or (b) or (c) above.
(5) For the purposes of this section the ecu shall be regarded as a currency.
(1) The nominal amount of a debt outstanding at any time is the amount of the debt outstanding at that time, expressed in terms of the settlement currency of the debt.
(2) In a case where—
(a) a payment or repayment is made at any time in a currency other than the settlement currency of a debt, and
(b) it falls to be decided whether there is in consequence an increase or decrease in the nominal amount of the debt outstanding,
the amount of the payment or repayment shall be taken to be its equivalent expressed in terms of the settlement currency of the debt.
(3) Any translation required by this section shall be made by reference to the London closing exchange rate for the currencies concerned for the day in which the time concerned falls.
(1) Subject to subsection (2) below, the local currency of a trade for an accounting period is sterling.
(2) Where by virtue of regulations under section 93 above the basic profits or losses of a trade for an accounting period are to be computed and expressed in a currency other than sterling for the purposes of corporation tax, that other currency is the local currency of the trade for the period.
(3) Where by virtue of regulations under section 94 above the basic profits or losses of part of a trade for an accounting period are to be computed and expressed in a particular currency for the purposes of corporation tax, that currency is the local currency of the part for the period.
(4) For the purposes of this section the ecu shall be regarded as a currency other than sterling; and references in this Chapter to a currency other than sterling shall be construed accordingly.
(1) References to—
(a) initial exchange gains and losses,
(b) exchange gains and losses of a trade or of part of a trade,
(c) non-trading exchange gains and losses, and
(d) the accrual of gains and losses mentioned in paragraphs (a) to (c) above,
shall be construed in accordance with sections 125 to 129 above and Schedule 15 to this Act.
(2) References to a currency contract shall be construed in accordance with section 126(1) above.
(3) References to a qualifying debt shall be construed in accordance with section 153(10) above.
(4) References to a company’s commencement day shall be construed in accordance with section 165(7) below.
(5) The local currency equivalent of a valuation of an asset or liability, or of an amount, is that valuation or amount expressed in terms of the local currency (a process sometimes known as translation).
(6) References to the basic profits or losses of a trade for an accounting period shall be construed in accordance with section 93(2) above.
(7) References to the basic profits or losses of part of a trade for an accounting period shall be construed in accordance with section 94(4) above.
(8) References to a share are to a share in a company (whether or not the qualifying company).
(9) Shares are of the same kind if they are treated as being of the same kind by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.
(10) Rights to settlement under debts on securities are of the same kind if the securities are treated as being of the same kind by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.
(11) “Security”, in the expression “debt on a security”, has the meaning given by section 132 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992.
(12) References to deep gain securities shall be construed in accordance with Schedule 11 to the [1989 c. 26.] Finance Act 1989.
(13) References to the ecu are to the European currency unit as defined for the time being in Council Regulation No. 3180/78/EEC or in any Community instrument replacing it.
(14) “Prescribed” means prescribed by regulations made under this Chapter.
(15) A reference to this Chapter includes a reference to regulations made under it and a reference to a provision of this Chapter includes a reference to regulations made under the provision, unless otherwise required by the context or regulations.
(16) Sections 152 to 163 above, and the preceding provisions of this section, apply for the purposes of this Chapter.
(1) This Chapter applies where—
(a) a qualifying asset is one to which the company becomes entitled on or after the company’s commencement day;
(b) a qualifying liability is one to which the company becomes subject on or after that day;
(c) the rights and duties under a currency contract are ones to which the company becomes entitled and subject on or after that day.
(2) Where a qualifying asset or liability is held or owed by a qualifying company both immediately before and at the beginning of its commencement day, for the purposes of this Chapter the company shall be treated as becoming entitled or subject to the asset or liability at the beginning of its commencement day.
(3) Where both immediately before and at the beginning of its commencement day a qualifying company is entitled to rights and subject to duties under a currency contract, for the purposes of this Chapter the company shall be treated as becoming entitled and subject to them at the beginning of its commencement day.
(4) Regulations may provide that where—
(a) a qualifying asset or liability is held or owed by a qualifying company both immediately before and at the beginning of its commencement day, and
(b) the asset or liability is of a prescribed description,
subsection (2) above shall not apply and for the purposes of this Chapter the company shall be treated as becoming entitled or subject to the asset or liability at such time (falling after its commencement day) as is found in accordance with prescribed rules.
(5) Regulations may provide that any rule made under subsection (4) above shall not apply, and that subsection (2) above shall accordingly apply, in a case where the company so elects in accordance with prescribed rules.
(6) Schedule 16 to this Act (which contains transitional provisions) shall have effect.
(7) For the purposes of this section—
(a) a company’s commencement day is the first day of its first accounting period to begin after the day preceding the appointed day;
(b) the appointed day is such day as may be appointed by order.
(8) Subsections (1) to (6) above do not apply for the purposes of construing Schedule 17 to this Act (which contains its own commencement provisions).
(1) This section applies where—
(a) a company changes the date on which any accounting period is to begin,
(b) if the change had not been made an exchange gain or gains not accruing to the company would have accrued or an exchange loss or losses accruing to the company would not have accrued or an exchange gain or gains accruing would have been bigger or an exchange loss or losses accruing would have been smaller, and
(c) the change mentioned in paragraph (a) above was made for the purpose, or for purposes which include the purpose, of securing the non-accrual or reduction of the gain or gains or the accrual or increase of the loss or losses.
(2) In such a case the inspector or on appeal the Commissioners concerned—
(a) may in arriving at the exchange gains and losses accruing to the company assume that there had been no such change as is mentioned in subsection (1)(a) above, and
(b) may accordingly make, with regard to the accounting period mentioned in subsection (1)(a) above, such adjustment to the company’s corporation tax liability as is just and reasonable.
(3) For the purposes of this section—
(a) an exchange gain is an exchange gain of a trade or an exchange gain of part of a trade or a non-trading exchange gain;
(b) an exchange loss is an exchange loss of a trade or an exchange loss of part of a trade or a non-trading exchange loss.
(1) Any power to make an order or regulations under this Chapter shall be exercisable by the Treasury.
(2) Any power to make an order under this Chapter shall be exercisable by statutory instrument.
(3) Any power to make regulations under this Chapter shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.
(4) Any power to make regulations under this Chapter—
(a) may be exercised as regards prescribed cases or descriptions of case;
(b) may be exercised differently in relation to different cases or descriptions of case.
(5) Regulations under this Chapter may make provision in such way as the Treasury think fit, and in particular may amend or modify the effect of any enactment (whether or not contained in this Chapter).
(6) Regulations under this Chapter may include such supplementary, incidental, consequential or transitional provisions as appear to the Treasury to be necessary or expedient.
(7) No specific provision of this Chapter about regulations shall prejudice the generality of subsections (4) to (6) above.
(1) Subject to the following provisions of this section, this Chapter shall apply in relation to insurance companies as it applies in relation to other qualifying companies.
(2) Regulations may make provision about the treatment for corporation tax purposes of exchange differences arising as regards assets and liabilities held or owed by insurance companies.
(3) Any such provision may be made—
(a) about exchange differences arising as regards assets or liabilities (or both) generally or about a proportion of such differences;
(b) about exchange differences arising as regards prescribed descriptions of assets or liabilities (or both) or about a proportion of such differences;
(c) about exchange differences arising as regards individual assets or liabilities.
(4) Any such provision may be made about assets or liabilities that are qualifying assets or liabilities, or about those that are not, or about both.
(5) Regulations under this section may—
(a) contain exceptions (whether by reference to categories of insurance business or otherwise);
(b) contain provision about the circumstances in which a charge or relief is to arise, its amount, and other matters relating to it;
(c) provide for consequential adjustments in a company’s corporation tax liability;
(d) exclude or modify the effect of any of the provisions of this Chapter.
(6) References in this section to exchange differences are to gains and losses attributable to fluctuations in currency exchange rates.
(7) For the purposes of this section an insurance company is a company to which Part II of the [1982 c. 50.] Insurance Companies Act 1982 applies.
Schedule 17 to this Act (provisions which relate to the taxation of chargeable gains and are connected with other provisions of this Chapter) shall have effect.
Schedule 18 to this Act (which contains amendments) shall have effect.
(1) Income tax for any year of assessment on the profits arising from a member’s underwriting business shall be computed on the profits of that year of assessment.
(2) As respects the profits arising to a member from his underwriting business for any year of assessment—
(a) the aggregate of those profits shall be chargeable to tax under Case I of Schedule D; and
(b) accordingly, no part of those profits shall be chargeable to tax under any other Schedule or any other Case of Schedule D;
but nothing in this subsection shall affect the manner in which the amount of any profits arising from assets forming part of an ancillary trust fund is to be computed.
(3) Relief under section 380 of the Taxes Act 1988 (set-off against general income) in respect of a loss sustained by a member in his underwriting business in any year of assessment—
(a) shall not be given under subsection (2) of that section; but
(b) may, if the member so claims and he was a member in the preceding year of assessment, be given against his income for that preceding year, so far as it cannot be given against the income for the year in which the loss was sustained and can be given after any relief for a loss sustained in that preceding year.
(4) Subsection (2) above does not apply in relation to any profits arising before 6th April 1993 from assets forming part of an ancillary trust fund.
(1) Subject to the provisions of this Chapter, for the purposes of section 171 above and all other purposes of the Income Tax Acts the profits or losses in any year of assessment of a member’s underwriting business shall be taken to be—
(a) in the case of profits or losses arising directly from his membership of one or more syndicates, those arising in respect of the corresponding underwriting year;
(b) in the case of profits or losses arising from assets forming part of a premiums trust fund, those allocated under the rules or practice of Lloyd’s to the corresponding underwriting year; and
(c) in the case of other profits or losses, those derived from payments received or made in the corresponding underwriting year.
(2) Subsection (1)(c) above does not apply in relation to payments received or made before 6th April 1993.
(1) Schedule 19 to this Act (assessment and collection of tax) shall have effect.
(2) Schedule 19A to the Taxes Act 1988 (which is superseded by Schedule 19 to this Act for the year 1992-93 and subsequent years of assessment) shall have effect as if for sub-paragraph (3) of paragraph 1 there were substituted the following sub-paragraph—
“(3) Regulations under this paragraph may make provision with respect to any year or years of assessment; and the year (or any of the years) may be the year next but one preceding the year in which the regulations are made or any year following that earlier year.”
(3) Subsection (2) above applies in relation to regulations made after the passing of this Act.
(1) A member shall be treated for the purposes of the Income Tax Acts and the Gains Tax Acts as absolutely entitled as against the trustees to the assets forming part of a premiums trust fund of his.
(2) Where an asset forms part of a premiums trust fund at the beginning of any underwriting year, for the purposes of the Income Tax Acts—
(a) the trustees of the fund shall be treated as acquiring it on that day, and
(b) they shall be treated as paying in respect of the acquisition an amount equal to the value of the asset at the time of the acquisition.
Finance Act 1993