Section 53: Site Restoration Payments
Summary
1.Section 53 provides for changes to the income tax and corporation tax rules which give a deduction for site restoration payments. The changes will prevent a deduction being given where a payment is made to a connected person until the work to which the payment relates is completed and will deny any deduction where the payment arises from avoidance arrangements. These changes will apply from 21 March 2012.
Details of the Section
2.Subsection (2) replaces the existing section 168(3) of the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 with new subsections (3) and (3A).
3.New section 168(3) provides the rules governing the timing of a deduction depending on whether a payment is made, directly or indirectly, to a connected person or otherwise made.
4.New section 168(3A) provides that no deduction is available for a payment arising from arrangements to which the person is party where the main purpose, or one of the main purposes, of the arrangements is to obtain a deduction for a site restoration payment.
5.Subsection (3) inserts new section 168(7). This defines “arrangements” for the purposes of new section 168(3A).
6.Subsection (5) replaces the existing section 145(3) of the Corporation Tax Act 2009 with new sections 145(3) and (3A).
7.New section 145(3) provides the rules governing the timing of a deduction depending on whether a payment is made, directly or indirectly, to a connected person or otherwise made.
8.New section 145(3A) provides that no deduction is available for a payment arising from arrangements to which the person is party where the main purpose, or one of the main purposes, of the arrangements is to obtain a deduction for a site restoration payment.
9.Subsection (6) inserts new section 145(7). This defines “arrangements” for the purposes of new section 145(3A).
10.Subsection (7) provides commencement rules.
11.Subsection (8) defines “an unconditional obligation” for the purposes of subsection (7).
Background Note
12.Payments made to restore a site to its original state after use in a waste disposal trade are historically capital in nature and without a specific statutory deduction would not be an allowable trading deduction.
13.The Government has become aware of businesses abusing the intended relief by making payments to connected persons many years in advance of future works and claiming relief is due as a payment has been made. This puts at risk substantial amounts of tax.
14.This section introduces new rules for income tax and corporation tax purposes to counter the avoidance exploiting deductions for site restoration payments with effect on or after 21 March 2012.