Office of Public Sector Information
PART 2 continued CHAPTER 7 continued
(3) In section 118ZE of that Act (restriction on relief for non-active partners), in subsection (1) omit “353,” and “, or interest paid by him in connection with the carrying on of a trade,”.
(4) In section 118ZF of that Act (meaning of “the aggregate amount”), in subsection (1) omit “353,” and “, or of interest paid by him in connection with carrying it on,”.
(5) In section 118ZG of that Act (meaning of “the individual’s contribution to the trade”), in subsection (2)(b)(ii) omit “353,” and “, or of interest paid by him in connection with carrying it on,”.
(6) In section 118ZJ of that Act (commencement: the first restricted year)—
(a) in subsection (3) omit “353,” and “, and interest paid by him in connection with carrying it on,”,
(b) in subsection (4)—
(i) omit “the sum of”, and
(ii) omit paragraph (b) and the word “and” immediately before it, and
(c) in subsection (5) omit paragraph (b) and the word “and” immediately before it.
(7) The amendments made by this section have effect in relation to the application of section 117 of ICTA (including that section as applied by section 118ZB of that Act) and section 118ZE of that Act in relation to—
(a) any loss sustained by an individual in a trade, or interest paid by him in connection with the carrying on of a trade, in a year of assessment the basis period for which begins on or after 2nd December 2004, and
(b) any post-announcement loss sustained by an individual in a trade, and any post-announcement interest paid by him in connection with the carrying on of a trade, in a straddling year of assessment.
(8) For the purposes of this section—
“basis period” means the basis period given by Chapter 15 of Part 2 of ITTOIA 2005, as applied by section 853 of that Act, except that the basis period for a year of assessment to which section 199(1) of that Act applies is to be taken to be the period beginning with the date when the individual first carried on the trade and ending with the end of the year of assessment;
“post-announcement loss”, in relation to a straddling year of assessment, means the loss (if any) sustained by the individual in the trade in the period which—
begins with 2nd December 2004, and
ends with the end of the basis period for that straddling year of assessment;
“post-announcement interest”, in relation to a straddling year of assessment, means any interest paid by the individual, in connection with carrying on the trade, in the period which—
begins with 2nd December 2004, and
ends with the end of the basis period for that straddling year of assessment;
“straddling year of assessment” means a year of assessment the basis period for which begins before and includes 2nd December 2004.
(9) In the definition of “post-announcement loss” in subsection (8), the reference to the loss sustained by the individual in the trade in a period is a reference to his share of any losses of the partnership arising for that period from the trade, and—
(a) the losses of the partnership arising for that period from the trade are to be computed in the same way as if the period were one for which profits and losses had to be computed for the purposes of section 849 of ITTOIA 2005, and
(b) the individual’s share of the losses is to be determined according to his interest in the partnership during that period.
(10) In subsection (9) the references to “the partnership” are to the partnership as a member of which the individual carries on the trade.
(11) In relation to years of assessment which are before the year 2005-06, subsections (7) to (9) have effect as if—
(a) in subsection (8) for the definition of “basis period” there were substituted—
““basis period” means the basis period given by sections 60 to 63 of ICTA as applied by section 111(4) and (5) of that Act, except that the basis period for a year of assessment to which section 61(1) of that Act applies is to be taken to be the period beginning with the date when the individual first carried on the trade and ending with the end of the year of assessment;”, and
(b) the reference in subsection (9)(a) to section 849 of ITTOIA 2005 were a reference to section 111(2) of ICTA.
(12) The amendments made by this section are deemed to have come into force on 2nd December 2004.
(1) After section 118ZM of ICTA insert—
(1) This section applies for the purposes of the application of any of the following provisions (“the relevant provisions”)—
(a) section 117 (restriction on relief for limited partners),
(b) that section as applied by section 118ZB in relation to a member of a limited liability partnership, and
(c) section 118ZE (restriction on relief for non-active partners),
to an amount which may be given to an individual under section 380 or 381 in respect of a relevant loss sustained by him in a trade (“the relevant trade”).
(2) The Board may by regulations provide that, for those purposes, any amount of a description specified in the regulations is to be excluded when computing the amount of the individual’s contribution to the relevant trade at any time for the purposes of the relevant provisions.
(3) Regulations under this section may—
(a) make provision having effect before the date on which the regulations are made,
(b) make such supplementary, incidental, consequential or transitional provision as appears to the Board to be necessary or expedient, and
(c) make different provision for different cases or different purposes.
(4) The provision mentioned in subsection (3)(b) may include provision amending or repealing any provision of an Act passed before the passing of the Finance Act 2005.
(5) No regulations may be made under this section unless a draft has been laid before and approved by a resolution of the House of Commons.
(1) For the purposes of section 118ZN a “relevant loss” means—
(a) a loss sustained by the individual in the relevant trade in a year of assessment the basis period for which begins on or after 2nd December 2004, or
(b) a post-announcement loss sustained by the individual in the relevant trade in a straddling year of assessment.
(2) For the purposes of this section—
“basis period” means the basis period given by Chapter 15 of Part 2 of ITTOIA 2005, as applied by section 853 of that Act, except that the basis period for a year of assessment to which section 199(1) of that Act applies is to be taken to be the period beginning with the date when the individual first carried on the relevant trade and ending with the end of the year of assessment;
“post-announcement loss”, in relation to a straddling year of assessment, means the loss (if any) sustained by the individual in the relevant trade in the period which—
begins with 2nd December 2004, and
ends with the end of the basis period for that straddling year of assessment;
“straddling year of assessment” means a year of assessment the basis period for which begins before and includes 2nd December 2004.
(3) In the definition of “post-announcement loss” in subsection (2), the reference to the loss sustained by the individual in the relevant trade in a period is a reference to his share of any losses of the partnership arising for that period from the trade, and—
(a) the losses of the partnership arising for that period from the trade are to be computed in the same way as if the period were one for which profits and losses had to be computed for the purposes of section 849 of ITTOIA 2005, and
(b) the individual’s share of the losses is to be determined according to his interest in the partnership during that period.
(4) In subsection (3) the references to “the partnership” are to the partnership as a member of which the individual carries on the relevant trade.
(5) In relation to years of assessment which are before the year 2005-06, this section has effect as if—
(a) in subsection (2) for the definition of “basis period” there were substituted—
““basis period” means the basis period given by sections 60 to 63 as applied by section 111(4) and (5), except that the basis period for a year of assessment to which section 61(1) applies is to be taken to be the period beginning with the date when the individual first carried on the trade and ending with the end of the year of assessment;”, and
(b) the reference in subsection (3)(a) to section 849 of ITTOIA 2005 were a reference to section 111(2) of this Act.”
(2) In section 117 of ICTA (restriction on relief for limited partners) at the end add—
“(5) This section is subject to provision made by regulations under section 118ZN (partners: meaning of “contribution to the trade”).”
(3) In section 118ZC of ICTA (meaning of the contribution to the trade of a member of a limited liability partnership) at the end add—
“(5) This section is subject to provision made by regulations under section 118ZN (partners: meaning of “contribution to the trade”).”
(4) In section 118ZG of ICTA (meaning of a non-active partner’s contribution to the trade) at the end add—
“(7) This section is subject to provision made by regulations under section 118ZN (partners: meaning of “contribution to the trade”).”
(5) The amendments made by this section are deemed to have come into force on 2nd December 2004.
(1) This section applies where—
(a) an individual makes one or more claims for relief under section 380 or 381 of ICTA at any time in respect of any relevant losses sustained by him in a trade (“the relevant trade”),
(b) the whole or part of that relief has been claimed against income other than income consisting of profits arising from the relevant trade,
(c) the amount of the relief which could be given against such income was determined in accordance with one or more of the restriction provisions (whether or not any of those provisions prevented any amount of relief being given), and
(d) at any time after the claim or claims mentioned in paragraph (a) has or have been made, a chargeable event occurs in relation to the individual.
(2) The “restriction provisions” are—
(a) section 117 of ICTA (restriction on relief for limited partners),
(b) that section as applied by section 118ZB of ICTA in relation to a member of a limited liability partnership, and
(c) section 118ZE of ICTA (restriction on relief for non-active partners).
(3) A “chargeable event” occurs in relation to an individual at any time when a relevant decrease in the individual’s contribution to the relevant trade occurs which immediately results in—
(a) the total losses claimed (less any reclaimed relief) becoming greater than the individual’s contribution to the relevant trade, or
(b) an increase in the amount (if any) by which the total losses claimed (less any reclaimed relief) exceeds the individual’s contribution to the relevant trade.
(4) Where a chargeable event occurs in relation to an individual—
(a) the individual is to be treated as receiving at the time of the occurrence of the chargeable event an amount of income equal to the chargeable amount,
(b) that income is not to be treated as profits of the relevant trade and is to be chargeable to income tax for the year of assessment in which the chargeable event occurs, and
(c) the individual is to be liable for any tax so chargeable.
(5) The “total losses claimed” means the total amount of any losses sustained by the individual in the relevant trade in any eligible year of assessment to the extent that they are losses—
(a) in respect of which the individual has at any time claimed relief under section 380 or 381 of ICTA, or
(b) that he has at any time claimed as allowable losses under section 72 of FA 1991.
(6) “Reclaimed relief” means the total of the amounts which the individual has been treated as receiving under subsection (4) as a result of the occurrence of any previous chargeable event in relation to the individual in respect of the relevant trade.
(7) The “individual’s contribution to the relevant trade” at any time means the amount of the individual’s contribution to that trade at that time within the meaning given for the purposes of the relevant restriction provision and computed at that time in accordance with that provision.
(8) The “relevant restriction provision” means—
(a) the restriction provision which applied as mentioned in subsection (1)(c), or
(b) where more than one restriction provision so applied, the restriction provision which so applied to the amount of relief which could be given in respect of the relevant loss which was most recently sustained by the individual in the relevant trade.
(9) A “relevant decrease in the individual’s contribution to the relevant trade” occurs when the amount of that contribution becomes, as a result of the application of any regulations made under section 118ZN of ICTA (partners: meaning of “contribution to the trade”), less than the amount it would otherwise be apart from the application of those regulations.
(10) The “amount of the relevant decrease in the individual’s contribution to the relevant trade” is the difference between those two amounts.
(11) An “eligible year of assessment” is—
(a) a year of assessment at any time during which the individual carried on the relevant trade as a member of a limited liability partnership or as a limited partner within the meaning given by section 117(2) of ICTA, or
(b) a qualifying year of assessment within the meaning of section 118ZE of that Act.
(12) In sections 75 to 77 references to expressions which are defined in this section are to be construed in accordance with this section.
(13) This section is deemed to have come into force on 2nd December 2004.
(1) For the purposes of section 74, the “chargeable amount” is determined by taking whichever is the smallest of amounts A, B and C.
(2) Amount A is the amount of the relevant decrease in the individual’s contribution to the relevant trade which constitutes the chargeable event.
(3) Amount B is the amount given by—
(a) taking, at the time immediately after the occurrence of the chargeable event, the amount of the total losses claimed which are relevant losses, and
(b) reducing that amount (but not below nil) by any reclaimed relief at that time.
(4) Amount C is the amount given by—
(a) taking the amount by which, at the time immediately after the occurrence of the chargeable event, the total losses claimed exceed the individual’s contribution to the relevant trade, and
(b) reducing that amount (but not below nil) by any reclaimed relief at that time.
(5) This section is deemed to have come into force on 2nd December 2004.
(1) For the purposes of sections 74 and 75 a “relevant loss” means—
(a) a loss sustained by the individual in the relevant trade in a year of assessment the basis period for which begins on or after 2nd December 2004, or
(b) a post-announcement loss sustained by the individual in the relevant trade in a straddling year of assessment.
(2) For the purposes of this section—
“basis period” means the basis period given by Chapter 15 of Part 2 of ITTOIA 2005, as applied by section 853 of that Act, except that the basis period for a year of assessment to which section 199(1) of that Act applies is to be taken to be the period beginning with the date when the individual first carried on the relevant trade and ending with the end of the year of assessment;
“post-announcement loss”, in relation to a straddling year of assessment, means the loss (if any) sustained by the individual in the relevant trade in the period which—
begins with 2nd December 2004, and
ends with the end of the basis period for that straddling year of assessment;
“straddling year of assessment” means a year of assessment the basis period for which begins before and includes 2nd December 2004.
(3) In the definition of “post-announcement loss” in subsection (2), the reference to the loss sustained by the individual in the relevant trade in a period is a reference to his share of any losses of the partnership arising for that period from the trade, and—
(a) the losses of the partnership arising for that period from the trade are to be computed in the same way as if the period were one for which profits and losses had to be computed for the purposes of section 849 of ITTOIA 2005, and
(b) the individual’s share of the losses is to be determined according to his interest in the partnership during that period.
(4) In subsection (3) the references to “the partnership” are to the partnership as a member of which the individual carries on the relevant trade.
(5) This section is deemed to have come into force on 2nd December 2004.
(1) This section applies in relation to years of assessment which are before the year 2005-06.
(2) Subsection (4) of section 74 has effect as if for “individual—” to the end there were substituted “individual, the individual is to be treated as receiving at the time of the occurrence of the chargeable event annual profits or gains which are of an amount equal to the chargeable amount and are chargeable to income tax under Case VI of Schedule D.”.
(3) Section 76 has effect as if—
(a) in subsection (2) for the definition of “basis period” there were substituted—
““basis period” means the basis period given by sections 60 to 63 of ICTA as applied by section 111(4) and (5) of that Act, except that the basis period for a year of assessment to which section 61(1) of that Act applies is to be taken to be the period beginning with the date when the individual first carried on the relevant trade and ending with the end of the year of assessment;”, and
(b) the reference in subsection (3)(a) to section 849 of ITTOIA 2005 were a reference to section 111(2) of ICTA.
(4) This section is deemed to have come into force on 2nd December 2004.
(1) In section 117(2) of ICTA (restriction on relief for limited partners)—
(a) at the end of the definition of “the aggregate amount” insert—
“less the amount of any reclaimed relief at that time;”, and
(b) after that definition insert—
““the amount of any reclaimed relief” at any time means the total of any amounts at that time which the individual has been treated as receiving under section 74 of the Finance Act 2005 (recovery of excess relief given under section 380 or 381) as a result of the application of that section of that Act to him in respect of losses sustained by him in the trade;”.
(2) In section 118ZF of ICTA (meaning of “the aggregate amount”)—
(a) in subsection (1), after “subsection (2)” insert “, less the amount of any reclaimed relief.”, and
(b) after that subsection insert—
“(1A) For the purposes of subsection (1) “the amount of any reclaimed relief” means the total of any amounts which the individual has been treated as receiving under section 74 of the Finance Act 2005 (recovery of excess relief given under section 380 or 381) as a result of the application of that section of that Act to him in respect of losses sustained by him in the trade.”
(3) In section 121 of FA 2004 (definition of “the losses claimed”)—
(a) at the end of subsection (1) insert—
“less the amount of any relevant reclaimed relief.”, and
(b) after that subsection insert—
“(1A) The “amount of any relevant reclaimed relief” means whichever is the lesser of—
(a) the total of any amounts which the individual has been treated as receiving under section 74 of the Finance Act 2005 (recovery of excess relief given under section 380 or 381 of the Taxes Act 1988) as a result of the application of that section of that Act to him in respect of losses sustained by him in the trade, and
(b) the total amount of any film-related losses sustained by the individual in the trade in any eligible years of assessment within the meaning of section 74 of the Finance Act 2005 to the extent that they are losses in respect of which he has at any time claimed relief as described in paragraph (a) or (b) of subsection (1) above.”
(4) The amendments made by this section are deemed to have come into force on 2nd December 2004.
(1) After section 122 of FA 2004 insert—
(1) This section applies for the purposes of section 119 where an individual makes a relevant claim (within the meaning of subsection (1)(a) of that section) in respect of a film-related loss sustained by him in a trade carried on in partnership (“the relevant trade”).
(2) The Board may by regulations provide that for the purposes of determining under section 119—
(a) whether an exit event within the meaning of subsection (2)(b) or (c) of that section occurs on or after 2nd December 2004, and
(b) where such an event occurs on or after that date, the chargeable amount within the meaning of subsection (5) of that section,
any amount of a description specified in the regulations is to be excluded when computing the amount of the individual’s capital contribution to the relevant trade.
(3) Regulations under this section may—
(a) make provision having effect before the date on which the regulations are made,
(b) make such supplementary, incidental, consequential or transitional provision as appears to the Board to be necessary or expedient, and
(c) make different provision for different cases or different purposes.
(4) The provision mentioned in subsection (3)(b) may include provision amending or repealing any provision of an Act passed before the Finance Act 2005.
(5) No regulations may be made under this section unless a draft has been laid before and approved by a resolution of the House of Commons.”
(2) In section 121 of FA 2004 (definition of “the individual’s capital contribution to the trade”) at the end insert—
“(7) This section is subject to provision made by regulations under section 122A (partners: meaning of “capital contribution to the trade”).”
(3) In section 123(1) of FA 2004 (definition of “film-related losses”) for “and 121” substitute “, 121 and 122A”.
(4) The amendments made by this section are deemed to have come into force on 2nd December 2004.
(1) Schedule 4 (accounting practice and related matters) has effect.
(2) In that Schedule—
Part 1 makes provision about bad debts and related matters;
Part 2 makes other provision connected with accounting practice.
(3) Part 1 of the Schedule, so far as it amends provisions that have effect both for income tax and corporation tax, has effect for the purposes of corporation tax only.
(4) Except as otherwise provided, the provisions of the Schedule have effect for periods of account beginning on or after 1st January 2005.
(1) In section 64 of FA 2002 (computation of profits: adjustment on change of basis), for subsection (3) (meaning of “relevant change of accounting approach”) substitute—
“(3) A “relevant change of accounting approach” means—
(a) a change of accounting principle or practice that, in accordance with generally accepted accounting practice, gives rise to a prior period adjustment, or
(b) a change from using UK generally accepted accounting practice to using generally accepted accounting practice with respect to accounts drawn up in accordance with international accounting standards.”.
(2) In paragraphs 4(3) and 5(2) of Schedule 22 to FA 2002 (adjustments treated as arising on the last day of the first period of account for which the new basis is adopted), for “last day” substitute “first day”.
(3) The amendments in this section have effect for periods of account beginning on or after 1st January 2005.
(1) This section applies where—
(a) a company enters into a transaction on or after 14th December 2004, otherwise than in the ordinary course of its business,
(b) as a result of the transaction it incurs a loss in respect of a loan relationship or derivative contract in respect of which, apart from this section, a debit would fall to be brought into account for tax purposes in a period of account beginning before 1st January 2005,
(c) the sole or main purpose of the company in entering into the transaction at the time it did was to enable it to bring a debit into account for tax purposes in such a period, and
(d) if the company had continued to hold the asset or liability representing the loan relationship or derivative contract, as it was held immediately before the transaction referred to in paragraph (a), in its first period of account beginning on or after 1st January 2005, a debit would have arisen in respect of the loan relationship or derivative contract in that period that was a prescribed debit for the purposes of regulation 3 of the Loan Relationship and Derivative Contracts (Change of Accounting Practice) Regulations 2004 (S.I. 2004/3271) (debits not to be brought into account until the company’s first period beginning on or after 1st January 2006).
(2) Where this section applies no such debit as is mentioned in subsection (1)(b) shall be brought into account in the period of account mentioned there, but a debit of the same amount shall instead be brought into account as if it were a prescribed debit for the purposes of the regulation referred to in subsection (1)(d) (even though the loss giving rise to the debit was incurred before 1st January 2005).
(3) In determining the sole or main purpose of a company for the purposes of subsection (1)(c) regard shall be had to anything done by a connected company that would be relevant for the purposes of that determination if done by the company in question.
For this purpose companies are connected if they are connected persons within the meaning of section 839 of ICTA.
(4) For the purposes of subsection (1)(d) it shall be assumed that the loan relationship or derivative contract has the same value at the beginning of the company’s first period of account beginning on or after 1st January 2005 as it had at the time of the transaction referred to in subsection (1)(a).
(5) This section does not apply where the transaction is entered into in pursuance of legally binding arrangements entered into before 14th December 2004.
(6) In this section, references to a company entering into a transaction include a reference to the company, or the directors of the company, taking a decision about a loan relationship or derivative contract that affects its treatment for accounting purposes (other than a decision to prepare some or all of the company’s accounts in accordance with international accounting standards).
(1) For the purposes of the Corporation Tax Acts as they apply to a securitisation company in relation to a period of account—
(a) beginning on or after 1st January 2005, and
(b) ending before 1st January 2007,
generally accepted accounting practice shall be taken to be UK generally accepted accounting practice as it applied for a period of account ending on 31st December 2004.
(2) For the purposes of this section a “securitisation company” means a company that is—
(a) a note-issuing company,
(b) an asset-holding company,
(c) an intermediate borrowing company,
(d) a warehouse company, or
(e) a commercial paper funded company,
as defined below.
(3) A “note-issuing company” means a company in relation to which the following conditions are met—
(a) it is party as debtor to a capital market investment,
(b) the securities that represent the capital market investment are issued wholly or mainly to independent persons,
(c) the capital market investment is part of a capital market arrangement, and
(d) the total value of the capital market investments made under that capital market arrangement is at least £50 million.
Finance Act 2005