Water Act 1989

95 Tax provisions

(1) The Secretary of State may, for the purposes of section 2 of the [1968 c. 3.] Capital Allowances Act 1968 (writing-down allowance), by order make provision specifying—

(a) the amount to be taken for the purposes of subsection (3) of that section as the residue on the transfer date of any expenditure in relation to which any property vested in a successor company in accordance with a scheme under Schedule 2 to this Act is a relevant interest for the purposes of that section; and

(b) the part of the period mentioned in subsection (3) of that section which is to be treated, in relation to any such property, as unexpired on that date.

(2) For the purposes of Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 (capital allowances in respect of machinery and plant) property which is vested in a successor company in accordance with a scheme under Schedule 2 to this Act shall be treated as if—

(a) it had been acquired by that company on the transfer date for the purposes for which it is used by that company on and after that date; and

(b) capital expenditure of such amount as may be specified for the purposes of this subsection in an order made by the Secretary of State had been incurred on that date by that company on the acquisition of the property for the purposes mentioned in paragraph (a) above.

(3) The Secretary of State shall not make an order under subsection (1) or (2) above in relation to any property of a successor company except with the consent of the Treasury and at a time when the company is wholly owned by the Crown; and the power to make such an order shall be exercisable by statutory instrument and shall include power to make different provision for different cases, including different provision in relation to different property or descriptions of property.

(4) Subject to subsection (5) below, for the purposes of the [1979 c. 14.] Capital Gains Tax Act 1979 (“the 1979 Act”) the following securities of a successor company, that is to say—

(a) those issued to that company’s nominated holding company in pursuance of section 83 above;

(b) those issued to that company’s nominated holding company in pursuance of section 85 above, so far as they are not extinguished under section 86 above; and

(c) those not issued in pursuance of section 83 or 85 above which are—

(i) held by that holding company, or any of its nominees, on the transfer date; or

(ii) held by the Secretary of State, or any of his nominees, on that date and transferred to that holding company at any time when that holding company is wholly owned by the Crown,

shall, together, be deemed to have been acquired by the nominated holding company on the transfer date for a consideration equal to whatever is the market value of the successor company’s undertaking immediately after the coming into force, on that date, of the scheme under Schedule 2 to this Act in accordance with which property, rights and liabilities of a water authority are transferred to the successor company.

(5) For the purposes of the 1979 Act—

(a) any loan which is a relevant loan for the purposes of section 85 above shall be disregarded in determining the market value referred to in subsection (4) above; and

(b) where an apportionment of the aggregate amount for which securities of any company are treated under that subsection as having been acquired by any company falls to be made between different securities, any debenture to which that subsection applies shall be treated as having been acquired by that company for an amount equal to the principal sum payable under the debenture.

(6) Where—

(a) any debt owed to a water authority is transferred to its successor company in accordance with a scheme under Schedule 2 to this Act; and

(b) the authority would have been the original creditor in relation to that debt for the purposes of section 134 of the 1979 Act (disposal of debts),

the successor company shall be treated as the original creditor for those purposes.

(7) For the purposes of Part VI of the [1988 c. 1.] Income and Corporation Taxes Act 1988 (company distributions) any securities of a company issued in pursuance of section 83, 85 or 86 above shall be treated as having been issued for new consideration equal—

(a) in the case of a share, to its nominal value; and

(b) in the case of a debenture, to the principal sum payable under the debenture.

(8) Subsection (1) of section 400 of the Income and Corporation Taxes Act 1988 (write-off of government investment: restriction of tax losses) shall not have effect in relation to any extinguishment, at a time when the nominated holding company of a successor company is wholly owned by the Crown, of any liabilities of that holding company.

(9) Subsection (6) of the said section 400 shall apply in relation to any such extinguishment of liabilities as is mentioned in subsection (8) above as if the reference to the body in question were a reference to the company whose liabilities are extinguished.

(10) Where any debentures of any company are issued in pursuance of section 83, 85 or 86 above, any annual payment secured by those debentures shall be treated for all purposes of corporation tax as if it were a charge on income of that company.

(11) The vesting in accordance with a scheme under Schedule 2 to this Act in a successor company of any liability for a loan made to a water authority shall not affect any direction in respect of the loan which has been given, or has effect as if given, under section 581 of the Income and Corporation Taxes Act 1988 (income tax exemption for interest on foreign currency securities).