F1Part 21ARisk transfer schemes
General
937JTax capacity assumption
1
This section applies for the purpose of determining whether condition 2 in section 937C is met.
2
Where a member of the relevant group (“ the company ”) makes a scheme loss in an accounting period, the economic profits and losses made by the relevant group in the period must be calculated on the assumption that the company obtained the full tax benefit of the loss.
3
The “full tax benefit” of the loss is the reduction in the corporation tax liability of the company that would result if—
a
the loss were brought into account, and
b
the company's profits chargeable to corporation tax, before doing so, were equal to the debit (or the reduction in any credit) determined by reference to the loss.
4
A reference in this section to bringing a loss into account is to bringing it into account in determining a debit or credit for the purposes of Part 5 of CTA 2009 (loan relationships) or Part 7 of that Act (derivative contracts).
937KMeaning of “associated with”
1
For the purposes of this Part a company (“company B”) is associated with another company (“company A”) at a time (“ the relevant time ”) if any of the following five conditions is met.
2
The first condition is that the financial results of company A and company B, for a period that includes the relevant time, meet the consolidation condition.
3
The second condition is that there is a connection between company A and company B for the accounting period of company A in which the relevant time falls.
4
The third condition is that, at the relevant time, company A has a major interest in company B or company B has a major interest in company A.
5
The fourth condition is that—
a
the financial results of company A and a third company, for a period that includes the relevant time, meet the consolidation condition, and
b
at the relevant time the third company has a major interest in company B.
6
The fifth condition is that—
a
there is a connection between company A and a third company for the accounting period of company A in which the relevant time falls, and
b
at the relevant time the third company has a major interest in company B.
7
In this section the financial results of any two companies for any period meet “the consolidation condition” if—
a
they are required to be comprised in group accounts prepared under section 399 of the Companies Act 2006 (duty of certain parent companies to prepare group accounts), or
b
they would be required to be comprised in such accounts but for the application of an exemption mentioned in subsection (3) of that section.
8
The following provisions apply for the purposes of this section—
sections 466 to 471 of CTA 2009 (companies connected for accounting period), and
sections 473 and 474 of CTA 2009 (meaning of “major interest”).
937LInterpretation of references to economic losses and profits
1
A reference in this Part to an “economic” loss or profit made by any person in a period is to a loss or profit made by that person in that period, computed taking into account unrealised (as well as realised) losses and profits.
2
For the purposes of this Part an economic loss or profit is made “by the relevant group” if it is made by the members of the relevant group considered together.
3
Where—
a
any member of the relevant group makes a scheme loss or profit in an accounting period, and
b
that scheme loss or profit is, under generally accepted accounting practice, calculated by reference to fluctuations in the scheme rate, index or value over a longer period,
the economic loss or profit made by the group in the accounting period as a result of those fluctuations is, so far as it relates to that scheme loss or profit, to be computed over that longer period.
4
In determining for the purposes of this Part the amount of an economic loss or profit made by the relevant group in any period, the economic losses and profits of each member of the relevant group—
a
are (subject to subsection (3)) to be computed over that period (whether or not that period is an accounting period of the member), but
b
are only to be taken into account to the extent that they are attributable to times at which the member is a party to the risk transfer scheme in question.
5
A reference in this Part to a “pre-tax” economic loss or profit is a reference to an economic loss or profit determined disregarding any loss or gain made as a result of the operation of any provision of the Corporation Tax Acts.
937MForeign currency accounting
1
In determining under this Part amounts that a company may or may not bring into account in an accounting period, economic losses and profits are to be computed in the tax calculation currency of that company in that accounting period.
2
Section 17(5) of CTA 2010 (meaning of references to the tax calculation currency of a company) applies for the purposes of this section.
937NMeaning of “scheme”
In this Part “ scheme ” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions.
Pt. 21A inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 3