Part 24: Corporation Tax Acts definitions etc
Overview
3203.This Part sets out definitions and related material applying for the purposes of the Corporation Tax Acts generally.
3204.Chapters 1 and 5 are based on a number of provisions in Part 19 of ICTA. Chapter 2 (permanent establishments) is based on sections 148 and 152 of, and Schedule 26 to, FA 2003. Chapter 3 (subsidiaries) is based on section 838 of ICTA. Chapter 4 (investment trusts) is based on section 842 of ICTA.
3205.Definitions have been rewritten using the following principles (which were also used in ITA):
if definitions are relatively short or straightforward, they are duplicated in the legislation about each of the taxes to which they apply;
if a definition is longer and more complicated, and is mainly concerned with one tax, it is set out in full in the legislation about that tax and defined by cross-reference for the purposes of any other taxes that are relevant;
if a definition is longer and more complicated but is made substantial use of in relation to more than one tax, again it is normally duplicated.
Chapter 1: Definitions
Section 1118: Introduction to Chapter
3206.This section introduces Chapter 1 which contains definitions applying for the purposes of the Corporation Tax Acts. Where it is not new, it is based on section 832 of ICTA. The corresponding provision for income tax is in section 988 of ITA.
3207.A number of terms that are defined by ITA for the purposes of the Income Tax Acts are used without definitionin this Act. As that use is in an income tax context, the ITA definition applies in this Act.
3208.Subsections (3) to (5)indicate the extent to which the definitions apply.
3209.Subsection (5) makes clear that the application of a definition is also subject to any contrary indication.
Section 1119: The definitions
3210.This section sets out the definitions in alphabetical order. It is based on a number of provisions in ICTA, in particular sections 832 and 834, and on section 1319 of CTA 2009. The corresponding provision for income tax is in section 989 of ITA.
3211.The definition of “Act” uses the term “Northern Ireland legislation”, which is defined in section 24(5) of the Interpretation Act 1978, rather than a list of categories of relevant legislation as in the source legislation. See Change 6 in Annex 1.
3212.The definition of “capital allowance” does not include, as specified by section 832(1) of ICTA, allowances under enactments which under ICTA are treated as contained in CAA. The only such enactment was section 532 of ICTA, which was repealed by CTA 2009.
3213.The definition of “period of account” omits the reference in the source legislation to “profession, vocation”. See Change 4 in Annex 1.
3214.The definition of “personal representatives” is new. It follows the approach adopted in ITTOIA and ITA. See Change 59in Annex 1.
3215.The definition of “tax” does not rewrite the words “and in any enactment passed after 12th March 1970 which by any express provision is to be construed as one with the Tax Acts, the Corporation Tax Acts or the Income Tax Acts” in section 832(3) of ICTA as the definition already applies in a case which is to be construed as one with the Corporation Tax Acts. The effect of the opening words of section 832(3) of ICTA (“except so far as the context otherwise requires”) is included in section 1118(4).
3216.The definition of “trade” has been streamlined in line with the approach in ITA.
3217.A number of definitions in section 832(1) of ICTA have not been rewritten. The definitions of “the Board”, “collector” and “inspector” were superseded by the interpretative rules in CRCA (see sections 5 to 7 and 50 of that Act). The terms “farm land” and “market garden land” no longer appear in corporation tax provisions but the substance of these definitions is included in the definitions in section 1125 (“farming” and related expressions). The term “qualifying policy” is no longer relevant to corporation tax provisions.
Section 1120: “Bank”
3218.This section defines “bank”. It is based on section 840A of ICTA. The corresponding provision for income tax is in section 991 of ITA.
3219.The definition operates only where specifically applied.
3220.The regulatory power mentioned in subsection (2)(e) differs from that in ITA, in that subsection (5) preserves the possibility in the source legislation that an organisation is designated for the purposes of only some provisions that deploy this definitionrather than all such provisions. Schedule 1 to this Act makes a corresponding consequential amendment to section 991 of ITA which brings the income tax and corporation tax codes back in line.
Section 1121: “Company”
3221.This section defines “company”. It is based on section 832(1) and (2) of ICTA. The corresponding provision for income tax is in section 992 of ITA.
3222.Subsection (2) indicates that an “authorised unit trust” is treated as a company for specified purposes of the Corporation Tax Acts.
3223.The section does not rewrite the tail words of section 832(2) of ICTA as section 1118(4) fulfils the function, so far as now necessary (given the redundancy or repeal of some of the provisions mentioned in section 832(2) of ICTA), of ceding priority to a different definition.
3224.The reference to “sections 774 to 777” in the provisions listed in section 832(2) of ICTA implies the inclusion of sections 774A to 774G of ICTA. Those new sections were inserted by FA2006, i.e. after that list was drafted for ICTA in 1988. Those sections (rewritten in Chapter 2 of Part 16 of this Act) do not provide a bespoke definition of “company” nor did the drafter making the FA 2006 insertion provide that the exclusions in section 832(2) of ICTA should include those sections. Having regard to all that, and to give sensible effect in particular to the former section 774G(5) of ICTA (see section 774), the general definition in this section applies in those sections (so far as the use of the term in Chapter 2 of Part 16 of this Act needs a definition).
Section 1122: “Connected” persons
3225.This sectionsets out when various persons are regarded as “connected”. It is based on section 839 of ICTA. The corresponding provision for income tax is in section 993 of ITA.
3226.The definition operates only where specifically applied. Section 1176 applies the definition for the purposes of this Act unless otherwise indicated.
Section 1123: “Connected” persons: supplementary
3227.This sectioncontains interpretative material for section 1122. It is based on section 839 of ICTA. The corresponding provision for income tax is in section 994 of ITA.
Section 1124: “Control”
3228.This section defines what “control” of a company or partnership means. It is based on section 840 of ICTA. The corresponding provision for income tax is in section 995 of ITA.
3229.The drafting largely follows the approach adopted in section 574 of CAA.
3230.The definition operates only where specifically applied. Section 1176 applies the definition for the purposes of this Act unless otherwise indicated.
Section 1125: “Farming” and related expressions
3231.This section defines “farming” and “market gardening” and modifies the meaning of “forestry” and “woodlands”. It is based on section 832 of ICTA and section 154 of FA 1995. The corresponding provision for income tax is in section 996 of ITA.
3232.Subsection (3) provides that the cultivation of short rotation coppice is to be regarded as husbandry. To be then regarded as farming, within the meaning given by subsection (1), the cultivation of short rotation coppice must involve the occupation of land. As it is impossible to cultivate short rotation coppice without occupying land, such cultivation is also regarded as farming.
3233.As with section 996 of ITA, there is no territorial restriction in the definitions in this section. There is therefore no needin section 48, which rewrites section 397 of ICTA (restriction of loss relief in farming and market gardening cases), to apply the provision to farming outside the United Kingdom as was the case in section 397(5) of ICTA. Similarly, the cultivation of short rotation coppice on land outside the United Kingdomis regarded as husbandry and therefore as farming.
3234.If a territorial restriction is required, it is applied to a particular section (following the pattern in ITA). So subsection (7) restricts the definitions, in their application to paragraph 26 of Schedule 15 to FA 2000 (corporate venturing scheme), to farming or market gardening in the United Kingdom.
Section 1126: “Franked investment income”
3235.This section defines “franked investment income” and provides for the construction of references to an amount of franked investment income. It is based on sections 13(8AB) and 832(1) and (4A) of ICTA.
Section 1127: “Generally accepted accounting practice” and related expressions
3236.This section defines a number of terms referring to accounting practice. It is based on the definition of “for accounting purposes” in section 832(1) of ICTA and on section 50 of FA 2004. The corresponding provision for income tax is in section 997 of ITA.
Section 1128: “Grossing up”
3237.This section sets out how to calculate the gross amount of an amount from which income tax has been deducted. To the extent it is not new, it is based on section 25(12) of FA 1990. The corresponding provision for income tax is in section 998 of ITA.
Section 1129: “Hire-purchase agreement”
3238.This section defines a “hire-purchase agreement”. It is based on section 784(6) of ICTA and section 57(3), (4) and (6) of CTA 2009.
Section 1130: “Local authority”
3239.This section defines a “local authority” in relation to the constituent parts of the United Kingdom. It is based on section 842A of ICTA. The corresponding provision for income tax is in section 999 of ITA.
3240.The definition, in its application to Northern Ireland, is restricted to bodies of a local rather than central government character. See Change 60 in Annex 1. An amendment in Schedule 1 makes the equivalent restriction in section 999 of ITA.
Section 1131: “Local authority association”
3241.This section defines a “local authority association”. It is based on section 519(3) of ICTA. The corresponding provision for income tax is in section 1000 of ITA.
Section 1132: “Offshore installation”
3242.This section defines an “offshore installation”. It is based on section 837C(1) to (4) of ICTA. The corresponding provision for income tax is in section 1001 of ITA.
Section 1133: Regulations about the meaning of “offshore installation”
3243.This section provides regulatory power for the purposes of section 1132. It is based on section 837C(5) and (6) of ICTA. The corresponding provision for income tax is in section 1002 of ITA.
Section 1134: “Oil and gas exploration and appraisal”
3244.This section defines the expression “oil and gas exploration and approval”. It is based on section 837B of ICTA. The corresponding provision for income tax is in section 1003 of ITA.
Section 1135: “Property investment LLP”
3245.This section defines a “property investment LLP”. It is based on section 842B of ICTA. The corresponding provision for income tax is in section 1004 of ITA.
Section 1136: “Qualifying distribution”
3246.This section defines a “qualifying distribution”. It is based on sections 14(2) and 832(1) of ICTA.
Section 1137: “Recognised stock exchange”
3247.This section defines a “recognised stock exchange”. It is based on section 841 of ICTA. The corresponding provision for income tax is in section 1005 of ITA.
3248.This section operates by cross-reference to the definition in section 1005 of ITA. This guards against any risk of orders being made (under powers in that section) which might inadvertently result in the two definitions getting out of step.
Section 1138: “Research and development”
3249.This section defines the expression “research and development”. It is based on section 837A of ICTA. The corresponding provision for income tax is in section 1006 of ITA.
Section 1139: “Tax advantage”
3250.This section defines “tax advantage”. It is based on section 840ZA of ICTA. The section is modelled on the definition of “income tax advantage” in section 683 of ITA.
Section 1140: “Unauthorised unit trust”
3251.This section defines an “unauthorised unit trust”. It is based on section 832(1) of ICTA. The corresponding provision for income tax is in section 989 of ITA.
3252.Subsection (2) applies the effect of regulations made under section 1007 of ITA that exclude certain unit trust schemes from those that would otherwise meet the definition in subsection (1).
Chapter 2: Permanent establishments
Overview
3253.This Chapter determines what constitutes a permanent establishment in a territory of a company which is not resident in that territory. It is based on sections 148 and 152 of, and Schedule 26 to, FA 2003.
3254.The determination is in line with various internationally recognised characteristics commonly used in the United Kingdom’s double tax agreements.
3255.If a non-UK resident company trades in the United Kingdom through a permanent establishment here, it is chargeable to corporation tax on its “chargeable profits”. Section 19 of CTA 2009 defines “chargeable profits” as the trading income arising directly or indirectly through or from the permanent establishment and the other income and chargeable gains referred to in section 19(3) attributable to the permanent establishment in accordance with sections 20 to 32 of that Act.
3256.If a non-UK resident company is chargeable to tax in respect of any other income from a United Kingdom source, it is charged to income tax and its liability is limited in accordance with Chapter 1 of Part 14 of ITA. The extent to which the non-UK resident company is chargeable to tax in respect of such income may be limited by the terms of any applicable DTA.
Section 1141: Permanent establishments of companies
3257.This section sets out the basic tests for determining whether a company resident in a territory has a permanent establishment in another territory. It is based on section 148(1) and (2) of FA 2003.
3258.This section is not limited to permanent establishments in the United Kingdom of non-UK resident companies but also serves to determine whether a UK resident company has a permanent establishment in another territory. Under DTAs adopting the OECD model convention, primary taxing rights in relation to the profits of a trade carried on by a company resident in the territory of one of the contracting states, through a permanent establishment in the territory of the other contracting state, are accorded to the fiscal authorities of the other contracting state.
3259.Subsection (3) refers to the following three sections which set out circumstances in which there is no permanent establishment, notwithstanding that the conditions in subsection (1) are met.
Section 1142: Agent of independent status
3260.This section prevents a company which is not resident in a territory from being treated as having a permanent establishment in that territory merely because it carries on business in that territory through an agent of independent status there. It is based on sections 148(3) and 152 of, and paragraph 1 of Schedule 26 to, FA 2003.
3261.Subsection (2) introduces sections 1145 to 1151 which contain special provisions in relation to non-UK resident companies concerning transactions carried out through a broker in the United Kingdom, investment transactions carried out through an investment manager in the United Kingdom and Lloyd’s underwriting business.
Section 1143: Preparatory or auxiliary activities
3262.This section treats a company which is not resident in a territory as not having a permanent establishment in that territory if the activities carried on in that territory are only of a preparatory or auxiliary character. It is based on section 148(4) and (5) of FA 2003.
3263.Subsection (3) sets out a non–exhaustive list of activities of a preparatory or auxiliary character.
Section 1144: Alternative finance arrangements
3264.This section provides that a non-UK resident company that receives sums treated as alternative finance return is not treated as having a permanent establishment in the United Kingdom merely because of anything done by the counter–party to the alternative finance arrangements under which the return is paid or by any other person acting for the non-UK resident company in relation to the arrangements. It is based on section 148(5A) of FA 2003.
3265.Alternative finance return is defined in subsection (3) by cross–reference to the application of provisions, in identical terms, contained in Part 10A of ITA (which is insertedby Schedule 2 to TIOPA andapplies for income tax purposes) and in Chapter 6 of Part 6 of CTA 2009 (which applies for corporation tax purposes). See the transitional provisions in Schedule 9 to TIOPA and Schedule 2 to CTA 2009 which provide in like terms for the application of the treatment of sums received as alternative finance return for the purposes of that Part and that Chapter.
Section 1145: The independent broker conditions
3266.This section sets out the conditions to be met if a broker in the United Kingdom is to be treated as an agent of independent status for the purposes of section 1142(1), and therefore not a permanent establishment, in relation to a transaction carried out on behalf of a non-UK resident company by the broker. It is based on paragraphs 1(1) and 2 of Schedule 26 to FA 2003.
3267.In subsection (6) the words “(apart from this subsection)” have been added for the reasons given in Change 61in Annex 1.
Section 1146: The independent investment manager conditions
3268.This section sets out the conditions to be met if an investment manager in the United Kingdom is to be treated as an agent of independent status for the purposes of section 1142(1), and therefore not a permanent establishment, in relation to an investment transaction carried out on behalf of a non-UK resident company by the investment manager. It is based on paragraphs 1(1), 3 and 7(2) of Schedule 26 to FA 2003.
Section 1147: Investment managers: the 20% rule
3269.This section sets out the “20% rule” for investment managers. It is based on paragraph 4(1) of Schedule 26 to FA 2003.
3270.The 20% rule has two requirements. The first requirement is that the investment manager and connected persons must intend that any interest that they may have in the non-UK resident’s “relevant disregarded income” does not exceed 20% of that income. The second requirement applies if that intention is not fulfilled. The 20% rule continues to be met if the only reason why it is not fulfilled is because of matters outside the control of the investment manager or connected persons despite their having taken reasonable steps to mitigate the effect of those matters.
3271.In subsection (2) the term “relevant disregarded income” has been substituted for the term “relevant excluded income” which appears in paragraph 4(1) of Schedule 26 to FA 2003. The same substitution was made in section 819(2) of ITA which is also based on paragraph 4(1) of Schedule 26 to FA 2003.
Section 1148: Section 1147: interpretation
3272.This section defines three terms used in section 1147. It is based on paragraph 4(2) to (4) of Schedule 26 to FA 2003.
3273.Subsection (2) makes explicit that the accounting periods referred to in paragraph 4(2) of Schedule 26 to FA 2003 are those of the non-UK resident company.
3274.Subsection (3) adopts the term “relevant disregarded income” in preference to the term “relevant excluded income” in paragraph 4(3) of Schedule 26 to FA 2003. Section 821 of ITA, which is also based on paragraph 4(3) of Schedule 26 to FA 2003, similarly adopts the term “relevant disregarded income”.
3275.In subsection (3), a reference to “the total of the non-UK resident company’s income” has been substituted for the reference in paragraph 4(3) of Schedule 26 to FA 2003 to “the aggregate of such of the chargeable profits of the company”. See Change 62 in Annex 1.
Section 1149: Application of 20% rule to collective investment schemes
3276.This section modifies the 20% rule where the non-UK resident company is a participant in a collective investment scheme. It is based on paragraph 5 of Schedule 26 to FA 2003.
3277.This section applies at the level of the scheme itself, treating the scheme as if it were a non-UK resident company, see subsection (3).
3278.A minor drafting change has been made in subsection (3) by substituting reference to a non-UK resident company for the reference in paragraph 5(2) of Schedule 26 to FA 2003 to a company resident outside the United Kingdom. This has been done to clarify the assumption and in this context does not change the effect of the law. The same minor drafting change was made in section 824(3) of ITA.
3279.Subsection (4) applies to a scheme which, if it was assumed to be a non-UK resident company, would not be regarded as carrying on a trade in the United Kingdom. The 20% rule is treated as satisfied in relation to such a scheme.
3280.Subsection (5) applies to a scheme which, if it was assumed to be a non-UK resident company, would be regarded as carrying on a trade in the United Kingdom. The 20% rule applies to such a scheme with the modifications in subsection (6).
Section 1150: Meaning of “investment manager” and “investment transaction”
3281.This section defines the terms “investment manager” and “investment transaction” which underlie the independent investment manager conditions. It is based on paragraph 3(1), (3) and (4) of Schedule 26 to FA 2003.
3282.The transactions currently specified as “investment transactions” are set out in the Investment Manager (Specified Transactions) Regulations 2009 made under the powers in paragraph 3(3) and (4) of Schedule 26 to FA 2003 and which came into force on 12 May 2009.
Section 1151: Lloyd’s agents
3283.This section applies if a person in the United Kingdom acts as the members’ agent of a non-UK resident company which is trading as a corporate member of Lloyd’s or if the person acts as the managing agent of a Lloyd’s syndicate of which the non-UK resident company is a member. It is based on paragraphs 1(1) and 6 of Schedule 26 to FA 2003.
3284.This section provides that the members’ agent or managing agent is to be treated as an agent of independent status for the purposes of section 1142(1), and therefore not a permanent establishment, in relation to a transaction carried out on behalf of the non-UK resident company in the course of the non-UK resident company’s underwriting business at Lloyd’s.
Section 1152: Investment managers: disregard of certain chargeable profits
3285.This section applies if an investment manager falls to be treated as a permanent establishment in the United Kingdom of a non-UK resident company. It is based on paragraph 5A of Schedule 26 to FA 2003.
3286.The section provides that in the two cases specified in subsection (2) some or all of the profits derived from an investment transaction carried out by the investment manager on behalf of the non-UK resident company are disregarded when attributing profits to the permanent establishment.
3287.If Case 2 applies, the disregard is only of that part of the non-UK resident company’s income from the transaction to which the investment manager and persons connected with the investment manager are not beneficially entitled (see subsection (3)).
Section 1153: Miscellaneous
3288.This section explains when a person is to be regarded as carrying out a transaction on behalf of another and makes provision for a person part only of whose business is as a broker or investment manager. It is based on paragraph 7(1) and (4) of Schedule 26 to FA 2003.
3289.Paragraph 7(3) of Schedule 26 to FA 2003, which provides that section 839 of ICTA (connected persons) applies for the purposes of that Schedule, has not been rewritten. This provision is not required, as section 1176(1) applies section 1122 (rewriting section 839 of ICTA) for the purposes of this Act unless otherwise indicated.
Chapter 3: Subsidiaries
Overview
3290.This Chapter sets out the circumstances in which one body corporate is regarded for the purposes of the Corporation Tax Acts as a “51% subsidiary”, “75% subsidiary” or “90% subsidiary” of another. It is based on section 838 of ICTA.
3291.The definitions apply in respect of a “body corporate” rather than a “company” as the definition of the latter term in section 1121 includes other types of body to whom these definitions are not relevant. But all bodies corporate in relation to whom the definitions are relevant are companies.
Section 1154: Meaning of “51% subsidiary”, “75% subsidiary” and “90% subsidiary”
3292.This section defines “51% subsidiary”, “75% subsidiary” and “90% subsidiary” in terms of beneficial ownership of the subsidiary’s ordinary share capital. It is based on section 838(1), (2) and (3) of ICTA.
3293.In the case of the definitions of “51% subsidiary” and “75% subsidiary” (but not “90% subsidiary”), “indirect ownership”counts towards meeting the test. Indirect ownership means the attribution to one company (“A”) of all or part of the ordinary share capital in the subsidiary in question held by a company in which A has an interest. The remainder of the Chapter sets out how such indirect ownership is identified and quantified.
Section 1155: Indirect ownership of ordinary share capital
3294.This section explains indirect ownership. It is based on section 838(2), (4) and (5) of ICTA.
Section 1156: Calculation of amounts owned indirectly: main rules
3295.This section sets out how to find how much of the ordinary share capital of a company that may be a “51% subsidiary” or “75% subsidiary” of another company (“A”) is owned indirectly by A. It is based on section 838(6), (7), (8) and (9) of ICTA.
Section 1157: Adding fractions together
3296.This section supplements section 1156 for the case where A owns part of the ordinary share capital of the potential “51% subsidiary” or “75% subsidiary” directly as well as having an indirect holding, or where a number of indirect holdings arise because of chains of ownership that have one or more different members. It is based on section 838(6) and (10) of ICTA.
Chapter 4: Investment trusts
Overview
This Chapter sets out the meaning of “investment trust” for the purposes of the Corporation Tax Acts.
Section 1158: Meaning of “investment trust”
3297.This section explains that an investment trust is a company that is not a close company and is approved by the Commissioners for HMRC as an investment trust. It is based on section 842(1) of ICTA.
3298.Paragraph (b) makes it explicit that the requirement that the company is not a close company relates to the whole of the accounting period for which approval is sought.
Section 1159: Conditions for approval
3299.This section sets out conditions A to F which a company must meet for an accounting period in order for it to be approved by the Commissioners for HMRC. It is based on section 842(1) of ICTA.
3300.Conditions A, B and E make it clear that the conditions concerned relate to the whole of the accounting period for which approval is sought. This is implicit in section 842(1) of ICTA. Similarly, the reference in condition C to the income of the accounting period aims to state more clearly what is implied by the reference to “the company’s income” in section 842(1)(a).
Section 1160: Calculation of income
3301.This section provides additional information on conditions C and D. It is based on section 842(1AB), (1AC), (2D), (2E) and (3A) of ICTA.
3302.Some references to income in section 842 of ICTA, for example references to income derived from shares or securities, are in a context which implies that the term “income” is to be interpreted in the framework of tax language and principles. References to income in the context of the retention of income in section 842(2A) and (2B), on the other hand, do not appear to invoke the tax-based meaning of income.
3303.Section 842(1AB) of ICTA, on which subsection (2) is based, makes provision for determining amounts of “income” for the purposes of subsections (1)(a) and (e) of that section (and accordingly of subsection (2A)(b)). The requirements in section 842(1)(a) and (e) are conditions C and D in section 1159.
3304.In contrast section 842(2D) and (3A) of ICTA are expressed to apply to section 842 as a whole. But it appears that those subsections also presuppose a tax-based measure of income and that their application is accordingly limited to the purposes for which section 842(1AB) applies.
3305.Therefore subsection (1) provides that subsections (3) and (4)of this section, based on section 842(2D) and (2E) and section 842(3A) respectively, as well as subsection (2), apply in determining what is to be included as the amount of the company’s income or the amount of income which a company derives from shares or securities for the purposes of conditions C and D (and accordingly of section 1161(2)(a)).
3306.Subsection (5) is concerned specifically with what is to be included as income of the company for the purpose of condition C.
Section 1161: The income retention condition: exceptions
3307.This section qualifies the application of condition D. It is based on section 842(2A), (2B) and (2C) of ICTA.
Section 1162: The 15% holding limit: exceptions
3308.This section qualifies the application of condition E. It is based on section 842(1), (2) and (3) of ICTA.
3309.A well-known HMRC practice with regard to the disposal of shares or securities from a holding is legislated for in subsections (4) and (5). See Change 63in Annex 1.
Section 1163: Basic meaning of “holding in a company”
3310.This section explains references to “holding in a company”for the purposes of condition E. It is based on section 842(3) of ICTA.
3311.Subsection (2) explains the reference to a holding being “enlarged” in section 1162.
Section 1164: More about the meaning of “holding in a company”
3312.This section gives more information about how to interpret a holding in a company for the purposes of condition E. It is based on section 842(1A), (3) and (4) of ICTA.
3313.Subsections (1) and (2) deal with certain cases involving a scheme of reconstruction. The newly issued shares or securities in the first company are treated under subsection (2) as forming part of the existing holding of shares or securities in the second company. Since the shares or securities are issued for no consideration there is no enlargement of the holding as defined in section 1163(2).
Section 1165: Other interpretation
3314.This section sets out the meaning of company, shares and scheme of reconstruction in this Chapter. It is based on section 842(4) of ICTA.
3315.Under subsection (1) “company” has the meaning given by section 1121, based on section 832(1) of ICTA, and references to company in this Chapter are read in accordance with section 99 of TCGA. In section 842(4) of ICTA the definition of company in section 288 of TCGA is applied in addition to section 99 of that Act. The only difference is that section 1121 omits a local authority and alocal authority association from the definition of company and this can have no relevance to an investment trust.
Chapter 5: Other Corporation Tax Acts provisions
Section 1166: Scotland
3316.This section provides interpretative rules in relation to Scotland. It is based on sections 24, 488, 780 and 832 of ICTA, paragraph 30(1) of Schedule 12 to FA 1997 and section 1320(1) of CTA 2009. The corresponding provision for income tax is in section 1008 of ITA.
Section 1167: Sources of income within the charge to corporation tax or income tax
3317.This section is based on section 832(1) of ICTA. The corresponding provision for the Income Tax Acts is in section 1009 of ITA.
Section 1168: Payment of dividends
3318.This section provides when dividends are treated as paid. It is based on section 834(3) of ICTA and regulation 15(4) of the Authorised Investment Funds (Tax) Regulations 2006 (SI 2006/964).
3319.The section does not rewrite the words making an exception by reference to provisions in Chapter 3 of Part 12 of ICTA that deal differently with dividends treated as paid under that Chapter. Following earlier amendments of that Chapter, there are now no such provisions nor any such dividends.
3320.However, subsection (2) recognises that other provisions may make such an exception to the general rule. Regulation 15(4) of the Authorised Investment Funds (Tax) Regulations 2006 (SI2006/964) provides a different definition of “distribution date” for a distribution period of an authorised investment fund. That regulation is therefore included as an origin for this subsection.
Section 1169: Settlements and trustees
3321.This sectionprovides interpretative rules in relation to settlements and trustees for the purposes of the Corporation Tax Acts by reference to Chapter 2 of Part 9 of ITA. It is based on section 832(2A) of ICTA.
Section 1170: Territorial sea of the United Kingdom
3322.This section takes the territorial sea of the United Kingdom into account in the meaning of “United Kingdom” for the purposes of the Corporation Tax Acts. It is based on section 830(1) of ICTA.The corresponding provision for income tax is in section 1013 of ITA.
Section 1171: Orders and regulations
3323.This section sets out the rules for making orders and regulations. It is based on section 828 of ICTA. The corresponding provision for income tax is in section 1014 of ITA.
3324.Subsection (2) identifies “excluded powers”. These are the powers that have their own rules. Paragraphs (a) to (h) deal with powers in other Acts, in which sections corresponding to this section provide rules.
3325.Paragraph (g)(i) deals with the power to designate a market, so that it is treated in the same way as a recognised stock exchange. This exclusion rewrites the mention of section 578B(9ZA) of ICTA in section 828(2) of ICTA.
3326.Paragraph (g)(ii) deals with the power to specify an investment transaction for the purposes of the rules for permanent establishments. This exclusion rewrites the mention of paragraph 3(3) of Schedule 26 to FA 2003 in section 828(2) of ICTA.
3327.Subsection (5) sets out three exceptions to the rule in subsection (4) that a statutory instrument is subject to the negative resolution procedure.
3328.Paragraph (a) deals with the power in section 73A of FA 2004 to designate an international organisation so that the construction industry scheme does not apply to it. See Change 64 in Annex 1.
3329.Paragraph (b)(i) deals with the power to designate an international organisation as a bank. This exception rewrites the mention of section 840A(1)(d) of ICTA in section 828(4) of ICTA.
3330.Paragraph (b)(ii) deals with the new power in section 1180(2) to make transitional or savings provision.
Section 1172: Apportionment to different periods
3331.This section sets out how apportionments to different periods are to be made. It is based on section 834(4) of ICTA.
Section 1173: Miscellaneous charges
3332.This section sets out a table of the provisions relevant to any reference in the Corporation Tax Acts to the provisions to which this section applies. It is based on section 834A of ICTA. The equivalent provision is made for income tax in section 1016 of ITA.
3333.The provisions in the table are all types of income or other amounts chargeable under the charge to corporation tax on income that were charged in predecessor legislation under Case VI of Schedule D in section 18 of ICTA.
3334.The reference in Part 3 of the table to regulation 18(4) of the Offshore Funds (Tax) Regulations 2009 (SI 2009/3001) derives from the substitution made by regulation 126(5) of those Regulations in section 834A of ICTA for the former reference there to section 761 of ICTA.
3335.For reference to this table, see in particular section 91 (losses from miscellaneous transactions).
