Finance Act 1989

Groups of companies E+W+S+N.I.

[F1 97 Set-off of ACT where companies remain in the same group. E+W+S+N.I.

(1) In section 240 of the Taxes Act 1988 (set-off of company’s ACT againstsubsidiary’s liability to corporation tax) at the end of subsection (5)(set-off not to be made against subsidiary’s liability to corporation tax forany accounting period in which, or in any part of which, it was not asubsidiary of the surrendering company) there shall be added the words “unless throughout that period or part both companies were subsidiaries ofa third company”.

(2) This section shall have effect in relation to accounting periods endingon or after 14th March 1989.]

Annotations:

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Amendments (Textual)

F1 S. 97 repealed (31.7.1998 with effect in accordance with Sch. 3 of the amending Act) by 1998 c. 36, s. 165, Sch. 27 Pt. III(2), note

[F2 98 Restriction on set-off of ACT. E+W+S+N.I.

(1) After section 245 of the Taxes Act 1988 there shall be inserted—

245A “ Restriction on application of section 240 in certain circumstances.

(1) This section applies if—

(a) there is a change in the ownership of a company (“the relevantcompany”);

(b) by virtue of section 240 the relevant company is treated as having paidan amount of advance corporation tax in respect of a distribution made by itat any time before the change; and

(c) within the period of six years beginning three years before the change,there is a major change in the nature or conduct of a trade or business of thecompany which is for the purposes of section 240 the surrendering company inrelation to that amount.

(2) No advance corporation tax which the relevant company is treated by virtueof section 240 as having paid in respect of a distribution made by it in anaccounting period beginning before the change of ownership shall be treatedunder section 239(4) as paid by it in respect of distributions made in anaccounting period ending after the change of ownership; and this subsectionshall apply to an accounting period in which the change of ownership occursas if the part ending with the change of ownership, and the part after, weretwo separate accounting periods.

(3) Subsections (4) and (5) of section 245 shall apply also for the purposesof this section and as if the reference in subsection (4) of section 245 tothe period of three years mentioned in subsection (1)(a) of that section werea reference to the period mentioned in subsection (1)(c) above.

(4) Sections 768(8) and (9) and 769 shall apply also for the purposes of thissection and as if in subsection (3) of section 769 the reference to thebenefit of losses were a reference to the benefit of advance corporation tax.

245B Restriction on set-off where asset transferred after change in ownershipof company.

(1) Subsection (4) below applies if—

(a) there is a change in the ownership of a company (“the relevantcompany”);

(b) any advance corporation tax paid by the relevant company in respect ofdistributions made by it in an accounting period beginning before the changeis treated under section 239(4) as paid by it in respect of distributions madeby it in an accounting period ending after the change;

(c) after the change the relevant company acquires an asset from anothercompany in such circumstances that section 273(1) of the Taxes Act 1970applies to the acquisition; and

(d) a chargeable gain accrues to the relevant company on the disposal of theasset within the period of three years beginning with the change of ownership.

(2) Subsection (1)(b) above shall apply to an accounting period in which thechange of ownership occurs as if the part ending with the change of ownership,and the part after, were two separate accounting periods.

(3) For the purposes of subsection (1)(d) above an asset acquired by therelevant company as mentioned in subsection (1)(c) above shall be treated asthe same as an asset owned at a later time by that company if the value of thesecond asset is derived in whole or in part from the first asset, and inparticular where the second asset is a freehold, and the first asset was aleasehold and the lessee has acquired the reversion.

(4) In relation to the accounting period in which the chargeable gain accruesto the relevant company (“the relevant period”), section 239 shall haveeffect as if the limit imposed by subsection (2) of that section on the amountof advance corporation tax to be set against the relevant company’s liabilityto corporation tax were reduced by whichever is the lesser of—

(a) the amount of advance corporation tax that would have been payable (apartfrom section 241) in respect of a distribution made at the end of the relevantperiod of an amount which, together with the advance corporation tax sopayable in respect of it, is equal to the chargeable gain, and

(b) the amount of surplus advance corporation tax in relation to theaccounting period which by virtue of subsection (2) above is treated for thepurposes of subsection (1)(b) above as ending with the change of ownership.

(5) Sections 768(8) and (9) and 769 shall apply also for the purposes of thissection and as if in subsection (3) of section 769 the reference to thebenefit of losses were a reference to the benefit of advance corporation tax.”

(2) This section shall have effect where the change in the ownership of therelevant company occurs on or after 14th March 1989.]

Annotations:

Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Amendments (Textual)

F2 S. 98 repealed (31.7.1998 with effect in accordance with Sch. 3 of the amending Act) by 1998 c. 36, s. 165, Sch. 27 Pt. III(2), note

F3 99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E+W+S+N.I.

Annotations:

Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Amendments (Textual)

F3 S. 99 repealed (11.5.2001 with application as mentioned in Sch. 33 Pt. 2(10) of the amending Act) by 2001 c. 9, s. 110, Sch. 33 Pt. 2(10), note

100 Change in ownership of company. E+W+S+N.I.

(1) Section 769 of the Taxes Act 1988 (which contains rules for determiningwhether for the purposes of sections 245 and 768 of that Act there is a changein the ownership of a company) shall be amended in accordance with thissection.

(2) For subsection (6) there shall be substituted—

“(6) If there is a change in the ownership of a company, including a changeoccurring by virtue of the application of this subsection but not a changewhich is to be disregarded under subsection (5) above, then—

(a) in a case falling within subsection (1)(a) above, the person mentioned insubsection (1)(a) shall be taken for the purposes of this section to acquireat the time of the change any relevant assets owned by the company;

(b) in a case falling within subsection (1)(b) above but not within subsection(1)(a) above, each of the persons mentioned in subsection (1)(b) shall betaken for the purposes of this section to acquire at the time of the changethe appropriate proportion of any relevant assets owned by the company; and

(c) in any other case, each of the persons mentioned in paragraph (c) ofsubsection (1) above (other than any whose holding is disregarded under thatparagraph) shall be taken for the purposes of this section to acquire at thetime of the change the appropriate proportion of any relevant assets owned bythe company.

(6A) In subsection (6) above—

• “the appropriate proportion”, in relation to one of two ormore persons mentioned in subsection (1)(b) or (c) above, means a proportioncorresponding to the proportion which the percentage of the ordinary sharecapital acquired by him bears to the percentage of that capital acquired byall those persons taken together; and

• “relevant assets”, in relation to a company, means—

  (a)

  any ordinary share capital of another company, and

  (b)

  any property or rights which under subsection (3) above may be taken intoaccount instead of ordinary share capital of another company.

(6B) Notwithstanding that at any time a company (“the subsidiarycompany”) is a 75 per cent. subsidiary of another company (“theparent company”) it shall not be treated at that time as such a subsidiaryfor the purposes of this section unless, additionally, at that time—

(a) the parent company would be beneficially entitled to not less than 75 percent. of any profits available for distribution to equity holders of thesubsidiary company; and

(b) the parent company would be beneficially entitled to not less than 75 percent. of any assets of the subsidiary company available for distribution toits equity holders on a winding-up.

(6C) Schedule 18 shall apply for the purposes of subsection (6B) above as itapplies for the purposes of section 413(7).”

(3) Subsection (7)(b) and (c) shall cease to have effect.

(4) This section shall have effect where the change of ownership of a companywould be treated as occurring on or after 14th March 1989.

101 Treatment of convertible shares or securities for purposes relating togroup relief etc. E+W+S+N.I.

(1) Paragraph 1 of Schedule 18 to the Taxes Act 1988 (which containsdefinitions relating to group relief) shall be amended in accordance with thissection.

(2) For sub-paragraph (3)(b) there shall be substituted—

“(b) do not carry any right either to conversion into shares or securities ofany other description except—

(i) shares to which sub-paragraph (5A) below applies,

(ii) securities to which sub-paragraph (5B) below applies, or

(iii) shares or securities in the company’s quoted parent company,

or to the acquisition of any additional shares or securities;”.

(3) For sub-paragraph (5)(a) there shall be substituted—

“(a) which does not carry any right either to conversion into shares orsecurities of any other description except—

(i) shares to which sub-paragraph (5A) below applies,

(ii) securities to which sub-paragraph (5B) below applies, or

(iii) shares or securities in the company’s quoted parent company,

or to the acquisition of any additional shares or securities;”.

(4) After sub-paragraph (5) there shall be inserted—

“(5A) This sub-paragraph applies to any shares which—

(a) satisfy the requirements of sub-paragraph (3)(a), (c) and (d) above, and

(b) do not carry any rights either to conversion into shares or securities ofany other description, except shares or securities in the company’s quotedparent company, or to the acquisition of any additional shares or securities.

(5B) This sub-paragraph applies to any securities representing a loan of orincluding new consideration and—

(a) which satisfies the requirements of sub-paragraph (5)(b) and (c) above,and

(b) which does not carry any such rights as are mentioned in sub-paragraph(5A)(b) above.

(5C) For the purposes of sub-paragraphs (3) and (5) to (5B) above a company(“the parent company”) is another company’s “quotedparent company” if and only if—

(a) the other company is a 75 per cent. subsidiary of the parent company,

(b) the parent company is not a 75 per cent. subsidiary of any company, and

(c) the parent company’s ordinary shares (or, if its ordinary share capitalis divided into two or more classes, its ordinary shares of each class) arequoted on a recognised stock exchange or dealt in on the Unlisted SecuritiesMarket;

and in this sub-paragraph “ordinary shares” means sharesforming part of ordinary share capital.

(5D) In the application of sub-paragraphs (3) and (5) to (5B) above indetermining for the purposes of sub-paragraph (5C)(a) above who are the equityholders of the other company (and, accordingly, whether section 413(7)prevents the other company from being treated as a 75 per cent. subsidiary ofthe parent company for the purposes of sub-paragraph (5C)(a)), it shall beassumed that the parent company is for the purposes of sub-paragraphs (3) and(5) to (5B) above the other company’s quoted parent company.”

(5) In sub-paragraph (6) for the words “to (5)” there shall besubstituted the words “to (5D)”.

(6) This section, so far as relating to Schedule 18 of the Taxes Act 1988 inits application (by virtue of section 138 below) for the purposes ofsubsections (1D) and (1E) of section 272 of the Taxes Act 1970, shall bedeemed to have come into force on 14th March 1989.

102 Surrender of company tax refund etc. within group. E+W+S+N.I.

(1) Subsection (2) below applies where—

(a) there falls to be made to a company (“the surrendering company”)which is a member of a group throughout the appropriate period a tax refundrelating to an accounting period of the company (“the relevant accountingperiod”), and

(b) another company (“the recipient company”) which is a member of thesame group throughout the appropriate period also has the relevant accountingperiod as an accounting period.

(2) Where this subsection applies the two companies may, at any time beforethe refund is made to the surrendering company, jointly give notice to theinspector in such form as the Board may require that subsection (4) below isto have effect in relation to the refund or to any part of the refundspecified in the notice.

(3) In subsection (1) above—

• “appropriate period” means the period beginning with therelevant accounting period and ending on the day on which the notice undersubsection (2) above is given, and

• “tax refund relating to an accounting period” means, inrelation to a company—

(a) a repayment of corporation tax paid by the company for the period,

(b) a repayment of income tax in respect of a payment received by the companyin the period, or

(c) a payment of the whole or part of the tax credit comprised in any frankedinvestment income received by the company in the period.

(4) Subject to subsection (6) below, where this subsection has effect inrelation to any refund or part of a refund—

(a) the recipient company shall be treated for all purposes of the Tax Actsas having paid on the relevant date an amount of corporation tax for therelevant accounting period equal to the amount of the refund or part, and

(b) there shall be treated for all those purposes as having been made to thesurrendering company on the relevant date a repayment of corporation tax orincome tax or a payment of tax credit (as the case may be) equal to the amountof the refund or part;

and where the refund is a repayment of corporation tax, any interestrelating to it which has been paid by the surrendering company shall betreated as having been paid by the recipient company.

[F4 (4A) Where subsection (4) above has effect in relation to any amount and there is, by virtue of any of subsections (7) to [F5 (7CA)] of section 826 of the Taxes Act 1988, a period for which the whole or any part of that amount would not, had the refund been made to the surrendering company, have carried interest under that section, that period shall be treated as excluded—

(a) from any period for which any refund made by virtue of subsection (4) above to the recipient company in respect of some or all of that amount or, as the case may be, that part of it is to carry interest under that section; and

(b) from any period for which a sum representing some or all of that amount or part would (apart from this subsection) be treated by virtue of subsection (4) above as not carrying interest under section 87A of the M1 Taxes Management Act 1970;

and in determining for the purposes of this subsection which part of any amount is applied in discharging a liability of the recipient company to pay any corporation tax and which part is represented by a refund to the recipient company, it shall be assumed that the part in relation to which there is a period which would not have carried interest under section 826 of the Taxes Act 1988 is applied in preference to any other part of that amount in or towards discharging the liability.]

(5) In subsection (4) above “relevant date”, in relation toa refund, means—

(a) in so far as it consists of a repayment of corporation tax paid by thesurrendering company after the date on which it became due and payable under [F6 section 59D or 59E of the Taxes Management Act 1970], the day on which it was paid by thatcompany, and

(b) otherwise, the date on which corporation tax for the relevant accountingperiod became due and payable.

(6) For the purpose of ascertaining the amount of any penalty to which therecipient company is liable under [F7 paragraph 18 of the Taxes Management Act 1970], the corporation tax which the company istreated as having paid by subsection (4)(a) above shall be treated as paid onthe day on which the notice under subsection (2) above is given (and not onthe relevant date).

(7) A payment for a transferred tax refund—

(a) shall not be taken into account in computing profits or losses of eithercompany for corporation tax purposes, and

(b) shall not for any of the purposes of the Corporation Tax Acts be regardedas a distribution or a charge on income;

and in this subsection “a payment for a transferred taxrefund” means a payment made by the receiving company to thesurrendering company in pursuance of an agreement between them as respects thegiving of a notice under this section, being a payment not exceeding theamount of the refund in question.

(8) For the purposes of this section two companies are members of the samegroup if and only if they would be for the purposes of Chapter IV of Part Xof the Taxes Act 1988.

(9) This section shall not apply unless the relevant accounting period endsafter such day, not being earlier than 31st March 1992, as the Treasury mayby order made by statutory instrument appoint.

Annotations:

Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Amendments (Textual)

F4 S. 102(4A) inserted (27.7.1993) by 1993 c. 34, s. 120, Sch. 14 para. 11

F5 Words in s. 102(4A) substituted (1.5.1995) by 1995 c. 4, s. 130, Sch. 24 Pt. II para. 12(3)

F6 Words in s. 102(5)(a) substituted (27.7.199 with effect in relation to accounting periods ending on or after 1.7.1999) by 1999 c. 16, s. 89(2)(3)

F7 Words in s. 102(6) substituted (27.7.1999 with effect in relation to accounting periods ending on or after 1.7.1999) by 1999 c. 16, s. 93(1)(2), Sch. 11 para. 3

Modifications etc. (not altering text)

C1 S. 102 applied (with modifications) (7.1.1999) by S.I. 1998/3175, reg. 9(1)

Marginal Citations

M1 1970 c. 9.