Office of Public Sector Information
SCHEDULE 30 continued
29 (1) Amend section 826 of the Taxes Act 1988 as follows.
(2) After subsection (7B) insert—
“(7BB) Subject to subsection (7BC) below, in any case where—
(a) within the meaning of section 806D, any relievable underlying tax or relievable withholding tax arises in an accounting period of a company (“the later period”),
(b) pursuant to a claim under section 806G, the whole or any part of that tax is treated as mentioned in section 806D(4)(c) or (5)(c) in relation to the single related dividend or the single unrelated dividend arising in an earlier accounting period (“the earlier period”), and
(c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that period,
then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of the claim under section 806G, except so far as concerns interest for any time after the date on which any corporation tax for the later period became due and payable (as mentioned in subsection (7D) below).
(7BC) Where, in a case falling within subsection (7A)(a) and (b) above—
(a) as a result of the claim under section 393A(1), an amount or increased amount of eligible unrelieved foreign tax arises for the purposes of section 806A(1), and
(b) pursuant to a claim under section 806G, the whole or any part of an amount of relievable underlying tax or relievable withholding tax is treated as mentioned in section 806D(4)(c) or (5)(c) in relation to the single related dividend or the single unrelated dividend arising in an accounting period before the earlier period,
then subsection (7BB) above shall have effect in relation to the claim under section 806G as if the reference in the words after paragraph (c) to the later period within the meaning of that subsection were a reference to the period which, in relation to the claim under section 393A(1), would be the later period for the purposes of subsection (7A) above.”
(3) In subsection (7D) (date on which corporation tax is due and payable for the purposes of certain provisions) after “(7B)” insert “, (7BB)”.
(4) In subsection (7E) (which, for the purposes of certain provisions, restricts the power in section 59A of the [1970 c. 9.] Taxes Management Act 1970 to alter the date on which corporation tax is due and payable) after “(7B),”, in both places where it occurs, insert “(7BB),”.
30 (1) Amend section 278 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 as follows.
(2) At the beginning, insert “(1)”.
(3) At the end add—
“(2) Where the amount of any deduction allowed under subsection (1) above is rendered excessive or insufficient by reason of any adjustment of the amount of any tax payable either—
(a) in the United Kingdom, or
(b) under the law of any other territory,
nothing in this Act, the Management Act or the Taxes Act limiting the time for the making of assessments or claims for relief shall apply to any assessment or claim to which the adjustment gives rise, being an assessment or claim made not later than six years from the time when all such assessments, adjustments and other determinations have been made, whether in the United Kingdom or elsewhere, as are material in determining whether any and if so what deduction falls to be made under subsection (1) above.
(3) Where—
(a) a deduction has been allowed under subsection (1) above in the case of the person making the disposal, and
(b) the amount of that deduction is subsequently rendered excessive by reason of an adjustment of the amount of any tax payable under the law of a territory outside the United Kingdom,
that person shall give notice in writing to an officer of the Board that an adjustment has been made that has rendered the amount of the deduction excessive.
(4) A notice under subsection (3) above must be given within one year from the time of the making of the adjustment.
(5) A person who fails to comply with the requirements imposed on him by subsections (3) and (4) above in relation to any adjustment shall be liable to a penalty of an amount not exceeding the amount of the difference specified in subsection (6) below.
(6) The difference is that between—
(a) the amount of tax payable by the person in question for the relevant chargeable period, after giving effect to the deduction that ought to be made under subsection (1) above; and
(b) the amount that would have been the tax so payable after giving effect instead to a deduction under that subsection of the amount rendered excessive as mentioned in subsection (3)(b) above.
(7) For the purposes of subsection (6) above “the relevant chargeable period” means the chargeable period as respects which the deduction was treated as made.”
(4) This paragraph has effect in relation to adjustments made on or after 21st March 2000.
Section 104.
1 Amend Chapter IV of Part XVII of the Taxes Act 1988 as follows.
2 (1) Amend section 747 as follows.
(2) After subsection (1) insert—
“(1A) A company which would not, apart from this subsection, fall to be regarded as controlled by persons resident in the United Kingdom shall be taken for the purposes of this Chapter to be so controlled if—
(a) there are two persons who, taken together, control the company;
(b) one of those persons is resident in the United Kingdom and is a person in whose case the 40 per cent test in section 755D(3) is satisfied; and
(c) the other is a person in whose case the 40 per cent test in section 755D(4) is satisfied.”
3 After section 750 insert—
(1) Where—
(a) in any accounting period a company is to be regarded by virtue of any of subsections (1) to (4) of section 749 as resident in a particular territory outside the United Kingdom, and
(b) within the meaning of section 750(1), the local tax in respect of the profits arising to the company in that accounting period is equal to or greater than three-quarters of the corresponding United Kingdom tax on those profits, but
(c) that local tax is determined under designer rate tax provisions,
the company shall be taken for the purposes of this Chapter to be subject to a lower level of taxation in that territory in that accounting period.
(2) In subsection (1) above “designer rate tax provisions” means provisions—
(a) which appear to the Board to be designed to enable companies to exercise significant control over the amount of tax which they pay; and
(b) which are specified in regulations made by the Board.
(3) Regulations under subsection (2) above—
(a) may make different provision for different cases or with respect to different territories; and
(b) may contain such supplementary, incidental, consequential or transitional provision as the Board may think fit.
(4) The first regulations under subsection (2) above may make provision having effect in relation to accounting periods beginning not more than fifteen months before the date on which the regulations are made.”
4 (1) After section 755C insert—
(1) For the purposes of this Chapter “control”, in relation to a company, means the power of a person to secure—
(a) by means of the holding of shares or the possession of voting power in or in relation to the company or any other company, or
(b) by virtue of any powers conferred by the articles of association or other document regulating the company or any other company,
that the affairs of the company are conducted in accordance with his wishes.
(2) Where two or more persons, taken together, have the power mentioned in subsection (1) above, they shall be taken for the purposes of this Chapter to control the company.
(3) The 40 per cent test in this subsection is satisfied in the case of one of two persons who, taken together, control a company if that one of them has interests, rights and powers representing at least 40 per cent of the holdings, rights and powers in respect of which the pair of them fall to be taken as controlling the company.
(4) The 40 per cent test in this subsection is satisfied in the case of one of two persons who, taken together, control a company if that one of them has interests, rights and powers representing—
(a) at least 40 per cent, but
(b) not more than 55 per cent,
of the holdings, rights and powers in respect of which the pair of them fall to be taken as controlling the company.
(5) For the purposes of this Chapter any question—
(a) whether a company is controlled by a person, or by two or more persons taken together, or
(b) whether, in the case of any company, the applicable 40 per cent test is satisfied in the case of each of two persons who, taken together, control the company,
shall be determined after attributing to each of the persons all the rights and powers mentioned in subsection (6) below that are not already attributed to that person for the purposes of subsections (1) to (4) above.
(6) The rights and powers referred to in subsection (5) above are—
(a) rights and powers which the person is entitled to acquire at a future date or which he will, at a future date, become entitled to acquire;
(b) rights and powers of other persons, to the extent that they are rights or powers falling within subsection (7) below;
(c) if the person is resident in the United Kingdom, rights and powers of any person who is resident in the United Kingdom and connected with the person; and
(d) if the person is resident in the United Kingdom, rights and powers which for the purposes of subsection (5) above would be attributed to a person who is resident in the United Kingdom and connected with the person (a “UK connected person”) if the UK connected person were himself the person.
(7) Rights and powers fall within this subsection to the extent that they—
(a) are required, or may be required, to be exercised in any one or more of the following ways, that is to say—
(i) on behalf of the person;
(ii) under the direction of the person; or
(iii) for the benefit of the person; and
(b) are not confined, in a case where a loan has been made by one person to another, to rights and powers conferred in relation to property of the borrower by the terms of any security relating to the loan.
(8) In subsections (6)(b) to (d) and (7) above, the references to a person’s rights and powers include references to any rights or powers which he either—
(a) is entitled to acquire at a future date, or
(b) will, at a future date, become entitled to acquire.
(9) In paragraph (d) of subsection (6) above, the reference to rights and powers which would be attributed to a UK connected person if he were the person includes a reference to rights and powers which, by applying that paragraph wherever one person resident in the United Kingdom is connected with another person, would be so attributed to him through a number of persons each of whom is resident in the United Kingdom and connected with at least one of the others.
(10) In determining for the purposes of this section whether one person is connected with another in relation to a company, subsection (7) of section 839 shall be disregarded.
(11) References in this section—
(a) to rights and powers of a person, or
(b) to rights and powers which a person is or will become entitled to acquire,
include references to rights or powers which are exercisable by that person, or (when acquired by that person) will be exercisable, only jointly with one or more other persons.”
(2) In consequence of sub-paragraph (1), in section 756(3) (application of provisions of Part XI)—
(a) omit paragraph (a); and
(b) omit the words following paragraph (b).
5 (1) In Part II of Schedule 25 (exempt activities) amend paragraph 6 as follows.
(2) In sub-paragraph (2)(b) (company mainly engaged in wholesale, distributive or financial business: percentage of gross trading receipts from connected persons etc)—
(a) for “or financial” substitute “financial or service”; and
(b) for the words from “connected” to the end substitute “persons falling within sub-paragraph (2A) below.”
(3) After sub-paragraph (2) insert—
“(2A) Those persons are—
(a) persons who are connected or associated with the company;
(b) persons who have a 25 per cent assessable interest in the company in the case of the accounting period in question; and
(c) if the company is a controlled foreign company in that accounting period by virtue of subsection (1A) of section 747, persons who are connected or associated with either or both of the two persons mentioned in that subsection.”
6 (1) In Part II of Schedule 25 (exempt activities) amend paragraph 6 as follows.
(2) In sub-paragraph (3) (local holding companies) after “90 per cent of its gross income during the accounting period in question” insert “is received by it in the territory in which it is resident and”.
7 (1) In Part II of Schedule 25 (exempt activities) amend paragraph 6 as follows.
(2) In sub-paragraph (4) (holding companies other than local holding companies) after “90 per cent of its gross income during the accounting period in question” insert “falls within sub-paragraph (4ZA) below and”.
(3) After sub-paragraph (4) insert—
“(4ZA) For the purposes of sub-paragraph (4) above, income of the holding company falls within this sub-paragraph if—
(a) the company from which the holding company directly derives the income is, throughout the accounting period in question, resident in the territory in which the holding company is resident and the income is received by the holding company in that territory; or
(b) the income consists of qualifying dividends.”
(4) In sub-paragraph (4A) (superior holding companies) at the end of paragraph (b) add “; and
(c) falls within sub-paragraph (4AA) below.”
(5) After sub-paragraph (4A) insert—
“(4AA) For the purposes of sub-paragraph (4A) above, income of the superior holding company falls within this sub-paragraph if—
(a) the company from which the superior holding company directly derives the income is, throughout the accounting period in question, resident in the territory in which the superior holding company is resident and the income is received by the superior holding company in that territory; or
(b) the income consists of qualifying dividends.”
(6) In sub-paragraph (4B) (companies from which income of superior holding company is derived) in paragraph (b), at the end of sub-paragraph (ii) add “, and
(iii) falls within sub-paragraph (4BB) below”.
(7) After sub-paragraph (4B) insert—
“(4BB) For the purposes of sub-paragraph (4B)(b) above, income of the superior holding company there mentioned falls within this sub-paragraph if—
(a) the company from which that superior holding company directly derives the income is, throughout the accounting period in question, resident in the territory in which that superior holding company is resident and the income is received by that superior holding company in that territory; or
(b) the income consists of qualifying dividends.”
(8) In sub-paragraph (5) (interpretation of sub-paragraphs (3) to (4B)) after “a reference to a trading company” insert “to which sub-paragraph (5ZA) or (5ZB) below applies.
(5ZA) This sub-paragraph applies to a trading company”.
(9) After sub-paragraph (5ZA) insert—
“(5ZB) This sub-paragraph applies to a trading company if—
(a) it is a controlled foreign company by virtue of subsection (1A) of section 747; and
(b) the person who satisfies the requirement in paragraph (b) of that subsection in relation to the company also controls the holding company or superior holding company.”
(10) After sub-paragraph (5A) insert—
“(5B) In this paragraph “qualifying dividend” means any dividend other than one for which the company paying the dividend is entitled to a deduction against its profits for tax purposes under the law of the territory in which it is resident.”
(11) In sub-paragraph (6) (application of following provisions of Part II of Schedule 25) for “(4)” substitute “(4BB)”.
8 (1) In Part II of Schedule 25 (exempt activities) amend paragraph 11 as follows.
(2) In sub-paragraph (1) (meaning of “wholesale, distributive or financial business” for purposes of paragraph 6(2)(b))—
(a) in the opening words, for “or financial” substitute “financial or service”;
(b) omit the word “and” immediately preceding paragraph (g); and
(c) at the end of paragraph (g) add “; and
(h) the provision of services not falling within any of the preceding paragraphs.”
9 (1) Paragraph 2 has effect on and after 21st March 2000.
(2) Paragraph 3 has effect in relation to any accounting period of a company resident outside the United Kingdom which begins on or after 6th October 1999.
(3) Paragraph 4 has effect—
(a) for the purpose of determining whether at any time on or after 21st March 2000 a company resident outside the United Kingdom is to be regarded for the purposes of Chapter IV of Part XVII of the Taxes Act 1988 as controlled by persons resident in the United Kingdom; and
(b) for any accounting period of a company resident outside the United Kingdom which begins on or after 21st March 2000.
(4) Paragraphs 5 to 8 have effect in relation to any accounting period of a controlled foreign company which begins on or after 21st March 2000.
(5) In this paragraph “accounting period” and “controlled foreign company” have the same meaning as they have in Chapter IV of Part XVII of the Taxes Act 1988.
Finance Act 2000