PART 3 continued CHAPTER 9 continued
(3) After section 47 of FA 2005 insert—
(1) Subject to section 52, arrangements fall within this section if under them—
(a) a financial institution acquires a beneficial interest in an asset, and
(b) another person (“the eventual owner”)—
(i) also acquires a beneficial interest in the asset,
(ii) is to make payments to the financial institution amounting in aggregate to the consideration paid for the acquisition of its beneficial interest,
(iii) is to acquire the financial institution’s beneficial interest (whether or not in stages) as a result of those payments,
(iv) is to make other payments to the financial institution (whether in pursuance of a lease forming part of the arrangements, or otherwise),
(v) has the exclusive right to occupy or otherwise use the asset,
(vi) is exclusively entitled to any income, profit or gain arising from or attributable to the asset (including, in particular, any increase in the asset’s value).
(2) For the purposes of subsection (1)(a) it is immaterial—
(a) whether or not the financial institution acquires its beneficial interest from the eventual owner,
(b) whether the eventual owner or another person other than the financial institution also has a beneficial interest in the asset, and
(c) whether or not the financial institution also has a legal interest in the asset.
(3) Subsection (1)(b)(v) does not prevent the eventual owner from granting an interest or right in relation to the asset to someone other than—
(a) the financial institution,
(b) a person controlled by the financial institution within the meaning of section 840 of ICTA, and
(c) a person controlled by a person who also controls the financial institution, in each case within the meaning of section 840 of ICTA;
provided that the grant is not required by the financial institution or by arrangements to which the financial institution is party.
(4) Subsection (1)(b)(vi) does not prevent the financial institution from having responsibility for, or a share in any loss arising out of, any reduction in the asset’s value (and subsection (1)(b)(ii) is subject to this subsection).
(5) Payments by the eventual owner under arrangements to which this section applies are alternative finance return for the purposes of this Chapter except in so far as they amount to—
(a) payments of the kind described in subsection (1)(b)(ii), or
(b) payments in respect of any arrangement fee or legal or other costs or expenses which the eventual owner is required under the arrangements to pay.
(6) Arrangements to which this section applies shall not be treated as a partnership for the purposes of the Taxes Acts (within the meaning of the Taxes Management Act 1970).”
(4) In section 50 of FA 2005 (treatment of alternative finance arrangements: companies)—
(a) in subsection (1) after “section 47” insert “or 47A”,
(b) at the beginning of subsection (1)(b) add “in the case of arrangements within section 47,”, and
(c) after subsection (1)(b) insert—
“(ba) in the case of arrangements within section 47A, the consideration paid by the financial institution for the acquisition of its beneficial interest were the amount of a loan made (as the case requires) to the company by, or by the company to, the other party to the arrangements,”.
(5) In section 52 of FA 2005 (provision not at arm’s length)—
(a) in subsection (1)(a) after “47” insert “, 47A”,
(b) in subsection (3) after “47” insert “, 47A”, and
(c) in subsection (4) for “47,” substitute “47 or 47A,”.
(6) In section 53 of FA 2005 (sale and purchase of asset)—
(a) in subsection (1) after “47” insert “or 47A”,
(b) after subsection (2) add—
“(3) In the application of this section to section 47A a reference to the effective return is a reference to the alternative finance return.”, and
(c) in the heading after “47” insert “or 47A”.
(7) In the definition of “alternative finance return” in section 57 of FA 2005 for “section 47(5)” substitute “sections 47(6) and (7) and 47A(5)”.
(8) This section shall have effect in relation to alternative finance arrangements entered into on or after—
(a) 1st April 2006 in relation to corporation tax, and
(b) 6th April 2006 in relation to income tax.
(1) For the purposes of Chapter 7 of Part 3 of ITEPA 2003 (taxable benefits: loans) a reference to a loan includes a reference to an arrangement which—
(a) is an alternative finance arrangement to which section 47 or 47A FA 2005 applies, or
(b) would be an alternative finance arrangement to which one of those sections applied if one of the parties were a financial institution.
(2) In the application of that Chapter by virtue of subsection (1)—
(a) a reference to interest shall be treated as including a reference to alternative finance return, and
(b) a reference to the amount outstanding shall be taken to be—
(i) in the case of arrangements to which section 47 applies, a reference to the purchase price minus such part of the aggregate payments made as does not represent alternative finance return, and
(ii) in the case of arrangements to which section 47A applies, a reference to the amount of the financial institution’s original beneficial interest minus such part of the aggregate payments made as does not represent alternative finance return.
(3) This section shall have effect in relation to arrangements entered into on or after 22nd March 2006.
(1) The Treasury may by order amend Chapter 5 of Part 2 to FA 2005 (alternative finance arrangements) so as to introduce provision relating to arrangements which in the Treasury’s opinion—
(a) equate in substance to a loan, deposit or other transaction of a kind that generally involves the payment of interest, but
(b) achieve a similar effect without including provision for the payment of interest.
(2) An order under subsection (1) may, in particular—
(a) include provision of a kind similar to provision already made by Chapter 5 of Part 2;
(b) make other provision about the treatment for the purposes of the Tax Acts of arrangements to which the order applies;
(c) make provision generally or only in relation to specified cases or circumstances;
(d) make different provision for different cases or circumstances;
(e) include consequential provision (which may include provision amending a provision of the Tax Acts);
(f) include incidental or transitional provision.
(3) An order under subsection (1)—
(a) shall be made by statutory instrument, and
(b) shall not be made unless a draft has been laid before and approved by resolution of the House of Commons.
(1) Section 29 of the Energy Act 2004 (c. 20) (disregard for tax purposes of cancellation etc of decommissioning provisions) is amended as follows.
(2) In subsection (1)—
(a) in paragraph (a), for “relevant company” substitute “BNFL company”;
(b) for paragraphs (b) and (c) substitute—
“(b) that provision—
(i) relates to decommissioning or cleaning-up which the NDA acquires or has acquired responsibility for securing by virtue of a direction under section 3, but
(ii) is not provision recognised in order to reflect the terms or effect of a management contract between the company and the NDA;
and
(c) the responsibility referred to in paragraph (b)(i)—
(i) includes the financial responsibility under section 21, or
(ii) would do so but for the fact that the amount of the financial responsibility is for the time being subject to a limit imposed by a capping agreement.”
(3) For subsections (3) and (4) substitute—
“(3) This subsection applies to a credit or debit if it arises from—
(a) the recognition in the accounts of the company for a relevant period beginning on or after 1st April 2005 of—
(i) the relevant provision, or
(ii) an asset that, in accordance with generally accepted accounting practice, is recognised in connection with the relevant provision in order to reflect the acquisition of financial responsibility referred to in subsection (1) (a “matching asset”);
(b) an adjustment made in the accounts of the company for such a period of—
(i) the relevant provision, or
(ii) a matching asset;
or
(c) the removal from the accounts of the company for such a period of—
(i) the relevant provision,
(ii) a matching asset, or
(iii) an asset or liability recognised in order to reflect the terms or effect of a contract falling within subsection (3A).
(3A) A contract falls within this subsection if—
(a) it is a contract made before 1st April 2005 and having effect between two or more BNFL companies under which a party to the contract assumed responsibility for securing decommissioning or cleaning-up; and
(b) the rights and obligations under the contract are extinguished by reason of a transfer made under a nuclear transfer scheme.”
(4) In subsection (5)—
(a) for the definition of “BNFL company” substitute—
““BNFL company” means—
(a) BNFL,
(b) a company that immediately before 1st April 2005 was a wholly-owned subsidiary of BNFL, or
(c) a wholly-owned subsidiary of a company falling within paragraph (b);”;
(b) after that definition insert—
““capping agreement” means an agreement under subsection (9) of section 21, entered into on 1st April 2005, the sole or main effect of which is to impose a limit on the NDA’s financial responsibility under that section;
“management contract” has the same meaning as in section 27;”;
(c) for the definition of “relevant company” substitute—
““relevant period”, in relation to a company, means an accounting period during the whole of which the company is publicly owned;”.
(5) After that subsection insert—
“(5A) Where a company ceases to be publicly owned otherwise than at the end of an accounting period—
(a) the accounting period during which it ceases to be publicly owned is treated for the purposes of corporation tax as ending when it so ceases; and
(b) its profits and losses are to be computed accordingly for those purposes.”
(6) The amendments made by this section have effect in relation to accounting periods of a BNFL company ending on or after 22nd March 2006.
“BNFL company” has the same meaning as in section 29 of the Energy Act 2004 (c. 20) as amended by this section.
(1) Section 30 of the Energy Act 2004 (disregard for tax purposes of decommissioning provisions recognised by Nuclear Decommissioning Authority) is amended as follows.
(2) In subsection (1)—
(a) for paragraph (b) substitute—
“(b) that responsibility—
(i) includes the financial responsibility under section 21, or
(ii) would do so but for the fact that the amount of the financial responsibility is for the time being subject to a limit imposed by a capping agreement;”;
(b) in paragraph (c) omit “on the coming into force of the direction mentioned in paragraph (a),”;
(c) at the end of that paragraph insert “; and
(d) the provision is recognised—
(i) in order to reflect the coming into force of the direction mentioned in paragraph (a), or
(ii) in consequence of the variation or removal of a limit on the NDA’s financial responsibility under section 21 imposed by a capping agreement.”
(3) For subsection (3) substitute—
“(3) In computing the profits, gains or losses of the NDA for the purposes of corporation tax, no amount shall be brought into account in connection with—
(a) the recognition made in the accounts of the NDA of—
(i) the relevant provision, or
(ii) an asset that, in accordance with generally accepted accounting practice, is recognised in order to reflect a limit on the NDA’s financial responsibility under section 21 imposed by a capping agreement;
(b) any adjustment made in those accounts (including the removal from the accounts of an asset falling within paragraph (a)(ii)) in consequence of a variation or removal of the limit mentioned in paragraph (a)(ii).”
(4) In subsection (4), for the words after “in connection with” substitute “an adjustment not falling within paragraph (b) of that subsection”.
(5) In subsection (5), after the definition of “BNFL company” insert—
““capping agreement” has the same meaning as in section 29;”.
(6) The amendments made by this section have effect in relation to accounting periods of the Nuclear Decommissioning Authority ending on or after 22nd March 2006.
(1) Section 83 of FA 2005 (application of accounting standards to securitisation companies) is amended as follows.
(2) In subsection (1)(b) (periods of account in relation to which old UK GAAP is to apply) for “1st January 2007” substitute “1st January 2008”.
(3) In subsection (3) (meaning of “note-issuing company”)—
(a) omit “and” at the end of paragraph (c);
(b) after paragraph (d) insert— “, and
(e) if it has any business apart from the activity mentioned in paragraph (a) (and any incidental activities) it consists in one or both of the following—
(i) acquiring, holding and managing assets forming the whole or part of the security for the capital market arrangement;
(ii) acting as guarantor in respect of loan relationships, derivative contracts, finance leases or other liabilities of other companies where the whole, or substantially the whole, of the company’s rights in respect of the guarantee (including any right of subrogation) form the whole or part of the security for the capital market arrangement.”.
(4) In subsection (5) (meaning of “intermediate borrowing company”)—
(a) in paragraph (a) after “asset-holding company”, and
(b) in paragraph (b) after “note-issuing company”,
insert “(or another intermediate borrowing company)”.
(5) In section 84 of that Act (power to make provision as to application of Corporation Tax Acts in relation to securitisation companies)—
(a) in subsection (3)(d)—
(i) at the end of sub-paragraph (i) insert “, and”, and
(ii) omit sub-paragraph (ii) and the word “and” following it;
(b) in subsection (5), omit paragraph (a).
(6) The amendments in this section shall be deemed always to have had effect, subject as follows.
(7) A company that would have been a securitisation company for the purposes of section 83 of FA 2005 if the amendments in this section had not been made, being either—
(a) a note-issuing company that—
(i) had become party as debtor to the capital market investment before 22nd March 2006, or
(ii) had before that date entered into a binding arrangement to become a party as debtor to the capital market investment, or
(b) another description of securitisation company by virtue of its connection with a company within paragraph (a),
may elect to be taxed as if the amendments in subsection (3) had not been made.
(8) Any such election must be made not later than 31st March 2007 and has effect for all relevant periods of account.
(1) Schedule 15 to this Act (accountancy change: spreading of adjustment) has effect.
(2) In that Schedule—
Part 1 makes provision for income tax purposes, and
Part 2 makes provision for corporation tax purposes.
(3) In section 21B of ICTA (corporation tax: application to Schedule A business of other rules applicable to Case 1 of Schedule D) for “section 44 of and Schedule 6 to the Finance Act 1998” substitute “section 64 of and Schedule 22 to the Finance Act 2002”.