Details of the Schedule
2.Paragraph 1 amends section 311 of the Corporation Tax Act 2009 (CTA). Section 311 currently applies in three cases (referred to as Conditions A, B and C) where a company is, or is treated as being, party to a creditor loan relationship in respect of which it does not fully recognise amounts in its accounts. The three cases are, respectively, where the company is also a party to a debtor loan relationship, or has received a capital contribution, or has issued securities. Where one of the conditions applies, the company is required to recognise for tax purposes the full amount of the credits and debits on the creditor loan relationship.
3.Paragraph (1)(2) amends section 311(2) CTA by adding a new condition (“Condition D”) to the circumstances in which the rule in section 311 of CTA applies. Paragraph 1(6) inserts the new condition as new section 311(4B), which specifies that it applies where a company at any time acquires or varies a “relevant interest” in a company, partnership or trust.
4.Paragraph 1(8) inserts new section 311(5A) which defines “relevant interest” as an interest in a company’s shares, or a partnership’s profits or capital, or a trust’s property.
5.Paragraphs 1(3), 1(4) 1(5) and 1(7) amend each of Conditions A, B and C so that they apply whenever the company is party to the debtor loan relationship, or receives the capital contribution, or issues securities. At present, these Conditions only apply where these circumstances occur in the same accounting period as that in which the creditor loan relationship is derecognised.
6.Paragraph 2 makes consequential changes to section 312 of CTA to reflect the fact that as a result of the changes made by paragraph 1, section 311 now applies where the Conditions in that section are met in “any period”.
7.Paragraph 3 makes equivalent changes to section 599A of CTA which currently applies in two cases, (referred to as Conditions A and B), where a company is, or is treated as being party to a derivative contract in respect of which it does not fully recognise amounts in its accounts. The two cases are, respectively, where the company has received a capital contribution, or has issued securities. Where one of the conditions applies, the company is required to recognise for tax purposes the full amount of the credits and debits on the derivative contract.
8.Paragraph (3)(2) amends section 599A(2) of CTA by adding a new condition (“Condition C”) to the circumstances in which the rule in section 599A CTA applies. Paragraph 3(7) inserts the new condition as new section 599A(5A), which specifies that it applies where a company at any time acquires or varies a “relevant interest” in a company, partnership or trust. New section 599A(5B) defines “relevant interest” as an interest in a company’s shares, or a partnership’s profits or capital, or a trust’s property.
9.Paragraph 3(3), 3(4), 3(5) and 3(6) amend each of Conditions A and B so that they apply whenever the company receives the capital contribution, or issues securities, rather than as now only where these circumstances occur in the same accounting period as that in which the derivative contract is derecognised.
10.Paragraph 4 sets out the commencement provisions for the changes, which have effect for accounting periods beginning on or after 22 June 2010. An accounting period beginning before and ending after this date is treated as two separate periods ending and beginning on this date respectively.