Finance (No. 2) Act 2005

26 Receipts cases

(1) If the Commissioners for Her Majesty’s Revenue and Customs consider, on reasonable grounds, that conditions A to E are or may be satisfied in relation to a company resident in the United Kingdom, they may give the company a notice under this section.

(2) Condition A is that a scheme makes or imposes provision (“the actual provision”) as between the company and another person (“the paying party”) by means of a transaction or series of transactions.

(3) Condition B is that the actual provision includes the making by the paying party, by means of a transaction or series of transactions, of a payment that is a qualifying payment in relation to the company.

(4) Condition C is that, as regards the qualifying payment made by the paying party, there is an amount that—

(a) is available as a deduction for the purposes of the Tax Acts, or

(b) may be deducted or otherwise allowed in respect of the payment under the tax law of any territory outside the United Kingdom,

and does not fall to be disregarded as described in subsection (5).

(5) An amount is to be disregarded if or to the extent that it is, for tax purposes, set against any income arising to the paying party from the transaction or transactions forming part of the scheme.

(6) Condition C is not to be treated as satisfied if—

(a) the paying party is a dealer,

(b) in the ordinary course of his business, he incurs losses in respect of the transaction or transactions forming part of the scheme to which he is party, and

(c) the amount by reference to which condition C would, but for this subsection, be satisfied is an amount in respect of those losses.

(7) In subsection (6), “dealer” means a person who is a dealer in relation to a distribution within the meaning of section 95(2) of ICTA or who would, if he were resident in the United Kingdom, be such a dealer.

(8) Condition D is that at least part of the qualifying payment is not an amount to which subsection (9) or (10) applies.

(9) This subsection applies to an amount that is, for the purposes of the Corporation Tax Acts—

(a) income or gains arising to the company in the accounting period in which the qualifying payment was made in relation to the company, or

(b) income arising to any other company resident in the United Kingdom in a corresponding accounting period.

(10) This subsection applies to an amount that is taken into account in determining the debits and credits to be brought into account by a company for the purposes of Chapter 2 of Part 4 of FA 1996 as respects a share in another company by virtue of section 91A or 91B of FA 1996 (shares treated as loan relationships).

(11) Condition E is that the company and the paying party expected on entering into the scheme that a benefit would arise as a result of condition D being satisfied (whether by reference to all or part of the qualifying payment).

(12) A notice under this section is a notice—

(a) informing the company of the Commissioners' view under subsection (1),

(b) specifying the qualifying payment by reference to which the Commissioners consider conditions B to E are or may be satisfied,

(c) specifying the accounting period of the company in which the payment is made, and

(d) informing the company that as a consequence section 27 has effect in relation to the payment.

(13) For the purposes of this section a payment is a qualifying payment in relation to a company if it constitutes a contribution to the capital of the company.

(14) For the purposes of this section the accounting period of a company (“company A”) corresponds to the accounting period of another company (“company B”) if at least one day of company A’s accounting period falls within company B’s accounting period.