Section 35 and Schedule 5: Relief for Contributions to Flood and Coastal Erosion Risk Management Projects
Summary
1.This section and Schedule introduce deductions for income tax and corporation tax purposes for business contributions to partnership funding schemes for flood defence projects. The legislation will have effect for contributions made on or after 1 January 2015.
Details of the Section
2.Section 35 introduces Schedule 5.
Details of the Schedule
3.Paragraph 1 inserts new sections 86A and 86B into Chapter 5 of Part 2 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005).
4.Subsection (1) of new section 86A sets out the conditions for new section 86A to apply.
5.Subsection (2) of new section 86A ensures that this section has priority over a deduction provided for in the Capital Allowances Act 2001 (CAA 2001).
6.Subsection (3) of new section 86A provides for a deduction in calculating the profits of the trade where the conditions are met unless a deduction is denied by subsection (4) of new section 86A.
7.Subsection (5) of new section 86A clarifies the application of subsection (4) of new section 86A.
8.Subsection (6) of new section 86A sets out the conditions for subsection (7)of new section 86A to apply.
9.Subsection (7) of new section 86A ensures that a refund of, or compensation for, a contribution, will be taxable as profits of the trade or as a post-cessation receipt, where it would not otherwise be taken into account.
10.Subsection (8) of new section 86A defines “disqualifying benefit” for the purposes of new section 86A.
11.Subsection (9) of new section 86A clarifies the meaning of “structure” in subsection (8) of new section 86A.
12.New section 86B details the circumstances in which a flood or coastal erosion risk management project is a “qualifying project”, and the meaning of a “qualifying contribution”, for the purposes of new section 86A, and provides other interpretative provisions.
13.Paragraph 2 applies new sections 86A and 86B of ITTOIA 2005 to property businesses.
14.Paragraph 3 inserts new sections 86A and 86B into Chapter 5 of Part 3 of Corporation Tax Act 2009 (CTA 2009).
15.Subsection (1) of new section 86A sets out the conditions for new section 86A to apply.
16.Subsection (2) of new section 86A ensures that this section has priority over a deduction provided for in CAA 2001.
17.Subsection (3) of new section 86A provides for a deduction in calculating the profits of the trade where the conditions are met unless a deduction is denied by subsection (4) of new section 86A.
18.Subsection (5) of new section 86A clarifies the application of subsection (4) of new section 86A.
19.Subsection (6) of new section 86A sets out the conditions for subsection (7) of new section 86A to apply.
20.Subsection (7) of new section 86A ensures that a refund of, or compensation for, a contribution, will be taxable as profits of the trade or as a post-cessation receipt, where it would not otherwise be taken into account.
21.Subsection (8) of new section 86A defines “disqualifying benefit” for the purposes of new section 86A.
22.Subsection (9) of new section 86A clarifies the meaning of “structure” in subsection (8) of new section 86A.
23.New section 86B details the circumstances in which a flood or coastal erosion risk management project is a “qualifying project”, and the meaning of a “qualifying contribution”, for the purposes of new section 86A, and provides other interpretative provisions.
24.Paragraph 4 applies new sections 86A and 86B of CTA 2009 to property businesses.
25.Paragraph 5 amends section 1221(3) of CTA 2009 to include new section 1244A.
26.Paragraph 6 inserts new section 1244A into Chapter 3 of Part 16 of CTA 2009.
27.Subsection (1) of new section 1244A sets out the conditions under which the section applies.
28.Subsection (2) of new section 1244A provides that expenses in making a qualifying contribution are treated as management expenses of a company with investment business unless this treatment is denied by subsection (3) of new section 1244A.
29.Subsection (4) of new section 1244A provides clarification on the operation of subsection (3).
30.Subsection (5) of new section 1244A defines “disqualifying benefit” for the purposes of new section 1244A.
31.Subsection (6) of new section 1244A clarifies the meaning of “structure” in subsection (5) of new section 1244A.
32.Subsection (7) of new section 1244A applies new section 86B to new section 1244A as to new section 86A.
33.Paragraph 7 inserts new section 1253A into Chapter 5 of Part 16 of CTA 2009.
34.New section 1253A ensures that a refund of a contribution or compensation for a contribution of services, will be chargeable to corporation tax if it would not otherwise be taken into account in calculating profits for corporation tax purposes.
35.Paragraph 8 amends section 253 of CAA 2001 to include new section 1244A.
36.Paragraph 9 provides commencement rules.
Background Note
37.This measure forms part of the government’s wider package of measures to maintain and strengthen flood defences across the country.
