The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004

Taxes Act 1988

2.  The Taxes Act 1988 is amended as follows.

Relief for contributions to certain bodies

3.—(1) Section 79 (contributions to local enterprise agencies)(1), section 79A (contributions to training and enterprise councils, business link organisations and local enterprise companies)(2), and section 79B (contributions to urban regeneration companies)(3) are each amended as follows.

(2) In subsection (2) (contribution by investing company treated as expenses of management) for “an investment company” substitute “a company with investment business”.

(3) After subsection (2) insert—

“(2A) Where any such contribution is made by a company in relation to which section 76 applies (expenses of insurance companies) any expenditure allowable as a deduction under subsection (1) above shall for the purposes of that section be treated as expenses payable which fall to be brought into account at Step 1 in subsection (7) of that section.”.

Costs of establishing share option or profit sharing schemes: relief

4.—(1) Section 84A(4) is amended as follows.

(2) In subsection (2) for paragraph (b) (expenditure to be treated as expenses of management) substitute—

“(b) if the company is one with investment business, shall be treated as expenses of management deductible under section 75 to the extent that it otherwise would not be, or

(c) if the company is one in relation to which section 76 applies, shall be treated for the purposes of that section as expenses payable which fall to be brought into account at Step 1 in subsection (7) of that section to the extent that it otherwise would not be.”.

(3) In subsection (3) (timing rule where approval given more than 9 months after end of period of account in which expenditure incurred) for the words following paragraph (b) substitute—

• “for the purpose of applying subsection (2) above the expenditure shall be treated in accordance with subsection (3ZA) below.”.

(4) After subsection (3) insert—

“(3ZA) Where this subsection applies—

(a) in applying subsection (2)(a) above, the expenditure shall be treated as incurred in the period of account in which the approval is given (and not the period of account mentioned in subsection (3)(b) above),

(b) in applying subsection (2)(b) or (c) above, the expenditure shall be treated as referable to the accounting period in which the approval is given.”.

Payment to trustees of approved profit sharing schemes

5.—(1) Section 85(5) is amended as follows.

(2) In subsection (1), for paragraph (b) (expenditure to be treated as expenses of management) substitute—

“(b) if that company is a company with investment business, shall be treated as expenses of management deductible under section 75, or

(c) if that company is one in relation to which section 76 applies, shall be treated as expenses payable for the purposes of that section.”.

Costs of establishing employee share ownership trusts

6.—(1) Section 85A(6) is amended as follows.

(2) In subsection (2)—

(a) in paragraph (a), omit “or”; and

(b) for paragraph (b) (expenditure to be treated as expenses of management) substitute—

“(b) if the company is a company with investment business, shall be treated as expenses of management deductible under section 75 to the extent that it otherwise would not be, or

(c) if the company is one in relation to which section 76 applies, shall be treated for the purposes of that section as expenses payable which fall to be brought into account at Step 1 in subsection (7) of that section to the extent that it otherwise would not be.”.

(3) In subsection (3) (timing rule where trust established more than 9 months after end of period of account in which expenditure incurred) for the words following paragraph (b) substitute—

• “for the purpose of applying subsection (2) above, the expenditure shall be treated in accordance with subsection(3A) below.”.

(4) After subsection (3) insert—

“(3A) Where this subsection applies—

(a) in applying subsection (2)(a) above, the expenditure shall be treated as incurred in the period of account in which the trust is established (and not the period of account mentioned in subsection (3)(b) above),

(b) in applying subsection (2)(b) or (c) above, the expenditure shall be treated as referable to the accounting period in which the trust is established.”.

Employees seconded to charities and educational establishments

7.—(1) Section 86(7) is amended as follows.

(2) In subsection (1) (expenditure on seconded employees deductible as if employee’s service were available for employer’s trade etc) for “notwithstanding anything in section 74 or 75, any expenditure incurred (or disbursed)” substitute “notwithstanding anything in section 74, 75 or 76, any expenditure incurred”.

(3) In subsection (2) (definitions) for the definition of “deductible” substitute—

““deductible” means—

(a)

deductible as an expense in computing the profits of the employer to be charged under Case I or II of Schedule D,

(b)

deductible as expenses of management for the purposes of section 75, or

(c)

falling to be brought into account in accordance with section 76 as expenses payable which fall to be brought into account at Step 1 in subsection (7) of that section,

as the case may be.”.

Charitable donations: contributions to agent’s expenses

8.—(1) Section 86A(8) is amended as follows.

(2) In subsection (2), for paragraph (b) (expenditure to be treated as expenses of management for the purposes of sections 75 and 76) substitute—

“(b) if the employer is a company with investment business, shall be treated as expenses of management deductible under section 75.”.

Payments to Export Credits Guarantee Department

9.—(1) Section 88(9) is amended as follows.

(2) For paragraph (b) (expenditure to be treated as expenses of management for the purposes of sections 75 and 76) substitute—

“(b) if that person is a company with investment business, in the expenses of management that are deductible under section 75 in computing the company’s profits for the purpose of corporation tax;”.

Additional payments to redundant employees

10.—(1) Section 90(10) is amended as follows.

(2) For subsection (1) (expenditure that would be allowable as a deduction or eligible for relief under section 75 or 76 as expenses of management) substitute—

“(1) Where a payment is made by way of addition to a redundancy payment or to the corresponding amount of any other employer’s payment and the additional payment would be—

(a) allowable as a deduction in computing for the purposes of Schedule D the profits or losses of a trade, profession or vocation,

(b) deductible under section 75 as expenses of management of a business, or

(c) regarded as expenses payable for the purposes of section 76,

but for the permanent discontinuance of the trade, profession, vocation or business, the additional payment shall, subject to subsection (2) below, be so allowable, deductible or regarded notwithstanding that discontinuance.

• If the additional payment—

  (i)

  is made after discontinuance, or

  (ii)

  is for the purposes of section 75 or 76 referable to an accounting period beginning after the discontinuance,

  it shall be treated as made, or (as the case may be) as referable to the accounting period ending, on the last day on which the trade, profession, vocation or business was carried on.”.

(3) After subsection (1) insert—

“(1A) To the extent that the additional payment would, apart from this subsection, be regarded as expenses payable for the purposes of Step 5 in subsection (7) of section 76, it shall not be so regarded for the purposes of that subsection (or of subsection (1) above so far as relating to that section).”.

Other grants under Industrial Development Act 1982 etc

11.—(1) Section 93 is amended as follows.

(2) In subsection (1) (which includes provision about certain payments to an investment company) for “an investment company” substitute “a company with investment business”.

Schedule A losses

12.—(1) Section 392A(11) is amended as follows.

(2) For subsection (3) (investment company ceasing to carry on Schedule A business) substitute—

“(3) Where a company with investment business—

(a) ceases to carry on a Schedule A business, but

(b) continues to be a company with investment business,

any Schedule A loss that cannot be used under the preceding provisions shall be carried forward to the succeeding accounting period and be treated for the purposes of section 75 as if it were expenses of management deductible for that period.”.

(3) In subsection (4) (definitions) in paragraph (b) (definition of “investment company”) for ““investment company”” substitute ““company with investment business””.

(4) Any loss which would, apart from this sub-paragraph, have fallen to be carried forward under section 392A(3) of the Taxes Act 1988 and treated as if it had been disbursed as expenses of management for the first accounting period of a company to begin on or after 1st April 2004 shall be treated as if that provision instead provided for the loss to be carried forward and treated for the purposes of section 75 of that Act as if it were expenses of management deductible for that period.

Write-off of government investment

13.—(1) Section 400(12) is amended as follows.

(2) In subsection (2) (a body’s tax losses) for paragraph (b) (expenses of management investment company) substitute—

“(b) in the case of a company with investment business, within the meaning of Part 4, any such excess as is mentioned in subsection (8) of section 75 which falls to be treated in accordance with subsection (9) of that section;”.

(3) In paragraph (bb) of that subsection, for sub-paragraph (ii) (losses treated under section 392A(3) as disbursed in the next accounting period) substitute—

“(ii) under section 392A(3) are to be carried forward to the next accounting period and treated for the purposes of section 75 as if they were expenses of management deductible for that period;”.

(4) The amendments made by this article also have effect (in addition to their application for the purposes of the periods mentioned in article 1(2)) for the purpose of determining a body’s tax losses for an accounting period which—

(a) begins before 1st April 2004; and

(b) ends on or after 31st March 2004.

(5) In section 400(2)—

(a) the references in paragraph (b) to subsections (8) and (9) of section 75 include a reference to the old section 75(3), as read with section 43 of the Finance Act 2004, and

(b) the reference in paragraph (bb)(ii) to section 392A(3) includes a reference to that provision as read with paragraph 12(4) of this Schedule.

Group relief: meaning of “management expenses” in section 403

14.—(1) Section 403ZD (other amounts available by way of group relief)(13) is amended as follows.

(2) For subsection (4) (meaning of “management expenses” in section 403) substitute—

“(4) Management expenses means the aggregate of the amounts deductible under section 75(1) (expenses of management of company with investment business) by the surrendering company for this period.

• It does not include an amount deductible by virtue only of section 75(9) or 392A(3) (amounts carried forward from earlier periods).”.

(3) Omit subsection (5) (which is rendered unnecessary by section 76 no longer applying section 75).

(4) In section 403ZD(4)—

(a) the reference to section 75(9) includes a reference to the old section 75(3), as read with section 43 of the Finance Act 2004, and

(b) the reference to section 392A(3) includes a reference to that provision as read with paragraph 12(4) of this Schedule.

Computation of gross profits

15.—(1) Section 403ZE(14) is amended as follows.

(2) In subsection (1) (gross profits for surrender period) in paragraph (b)(ii) (no deduction by virtue of section 75(3) of the Taxes Act 1988) for “75(3)” substitute “75(9)”.

(3) In section 403ZE(2)(b)(ii), the reference to section 75(9) of the Taxes Act 1988 includes a reference to the old section 75(3).

(4) Omit subsection (2) (which is rendered unnecessary by section 76 no longer applying section 75).

Limitation of group relief in relation to certain dual resident companies

16.—(1) Section 404 is amended as follows.

(2) In subsection (2)(c) (accounting period for which expenses of management are disbursed)(15) for “disbursed” substitute “deductible”.

(3) The amendment made by sub-paragraph (2) has effect in any case where the accounting period referred to in section 404(2) of the Taxes Act 1988 begins on or after 1st April 2004.

Losses from Schedule A business or overseas property business

17.—(1) Section 432AB(16) is amended as follows.

(2) For subsection (3) (loss to be treated as expenses of management under section 76 disbursed for the period in which the loss arose) substitute—

“(3) So far as a loss is referable to basic life assurance and general annuity business, it shall be treated for the purposes of section 76 as expenses payable which fall to be brought into account at Step 3 in subsection (7) of that section.”.

General annuity business

18.—(1) Section 437(17) is amended as follows.

(2) In subsection (1A) (new annuities to be brought into account by treating an amount as a sum disbursed as expenses of management) for the words from “as a sum” to the end of the subsection substitute—

• “as expenses payable which fall to be brought into account for that period at Step 3 in section 76(7)”.

Transfers of business

19.—(1) Section 444A(18) is amended as follows.

(2) For subsection (2) (treatment of expenses of management) substitute—

“(2) Any expenses payable which (assuming the transferor had continued to carry on the business transferred after the transfer) would have fallen to be brought into account by the transferor in determining the deduction for expenses payable to be allowed under section 76 in computing profits for an accounting period following the period which ends with the day on which the transfer takes place shall, instead, be brought into account under and in accordance with that section by the transferee as expenses payable by him (and giving effect in the case of acquisition expenses, to section 86(6) to (9) of the Finance Act 1989).”.

(3) In subsection (4) (treatment of acquisition expenses) for “expenses of management of the transferee” substitute “expenses payable by the transferee”.

Authorised unit trusts

20.  Section 468(4) is repealed.

Interest distributions

21.—(1) Section 468L(19) is amended as follows.

(2) In subsection (6)(a) for “sums disbursed as expenses of management” substitute “expenses of management”.

Credit unions

22.—(1) Section 487 is amended as follows.

(2) In subsection (4) (credit union not to be regarded as an investment company for purposes of section 75 or Part 2 of the Capital Allowances Act)(20) for “an investment company” substitute “a company with investment business”.

Business entertaining expenses

23.—(1) Section 577(21) is amended as follows.

(2) In subsection (1)(a) (expenses not to be included in computing expenses of management in respect of which may be given under the Tax Acts)—

(a) after “and such expenses” insert “(i)”, and

(b) after “the Tax Acts;” insert—

“and

(ii) shall not be brought into account under section 76 as expenses payable”.

Expenditure involving crime

24.—(1) Section 577A(22) is amended as follows.

(2) In subsection (2) (expenditure not to be included in computing expenses of management in respect of which relief may be given under the Tax Acts)—

(a) after “above” insert “(a)”, and

(b) after “the Tax Acts” insert—

“; and

(b) shall not be brought into account under section 76 as expenses payable”.

Expenditure on car hire

25.—(1) Section 578A(23) is amended as follows.

(2) In subsection (1) (amounts for which the section provides a reduction) in paragraph (b) for “an investment company” substitute “a company with investment business”.

(3) In subsection (1), at the end of paragraph (b) insert—

• “or

  (bb)

  which can be brought into account under section 76 as expenses payable,”.

Statutory redundancy payments

26.—(1) Section 579(24) is amended as follows.

(2) For subsection (3) (amount of payment to be allowable as expenses of management eligible for relief under section 75 or 76 etc) substitute—

“(3) Where a redundancy payment or other employer’s payment is made in respect of employment wholly in a business carried on by the employer and—

(a) expenses of management of the business are deductible under section 75, or

(b) a deduction for expenses payable falls to be allowed in accordance with section 76 in computing profits of the business,

the amount of the redundancy payment, or the corresponding amount of the other employer’s payment, shall (to the extent that it would not otherwise fall to be so treated) be deductible under section 75 as expenses of management or as the case may be, be included at Step 1 in section 76(7).

(3A) If in a case where subsection (3) above applies, the payment in question is for the purposes of section 75 or 76 referable to an accounting period beginning after discontinuance, it shall be treated as referable to the accounting period ending on the last day on which the business was carried on.”.

Gifts of shares, securities and real property to charities etc

27.—(1) Section 587B(25) is amended as follows.

(2) In subsection (8) (disposal by company carrying on life assurance business) in paragraph (b)(i), for ““an expense of management”” substitute ““expenses payable falling to be brought into account at Step 3 in section 76(7)””.

Training courses for employees

28.—(1) Section 588(26) is amended as follows.

(2) For subsection (4) (modification of subsection (3) for expenses of management) substitute—

“(4) Where the employer is a company with investment business or a company carrying on life assurance business, subsection (3) above shall have effect with the substitution for the words following paragraph (b) of—

• “then, if and so far as that expenditure would not, apart from this subsection, fall to be so deductible or brought into account, it shall—

  (i)

  in a case where the employer is a company with investment business, be deductible as expenses of management under section 75, or

  (ii)

  in a case where the employer is a company carrying on life assurances business, be brought into account under section 76 as expenses payable.”.”.

(3) After subsection (5) (consequences of failure to meet condition) insert—

“(5A) The reference in subsection (5)(b) above to a deduction on account of any expenditure includes a reference to bringing an amount into account in determining the amount of the deduction to be made under section 76.”.

Counselling services for employees

29.—(1) Section 589A(27) is amended as follows.

(2) For subsection (9) (modification of subsection (8) for expenses of management) substitute—

“(9) Where the employer is a company with investment business or a company carrying on life assurance business, subsection (8) above shall have effect as if for the words from “so deductible” onwards there were substituted—

• “so deductible or brought into account, it shall—

  (a)

  in a case where the employer is a company with investment business, be deductible as expenses of management under section 75, or

  (b)

  in case where the employer is a company carrying on life assurance business, be brought into account under section 76 as expenses payable.”.”.

Exempt approved schemes

30.—(1) Section 592(28) is amended as follows.

(2) For subsection (4) (deduction of employer’s contributions) substitute—

“(4) This subsection makes provision about an employer’s entitlement to relief in respect of contributions paid by the employer the pension scheme in respect of any individual, and accordingly—

(a) for the purposes of Case I or II of Schedule D—

(i) the contributions are to be treated as not being payments of a capital nature to the extent that they otherwise would be, and

(ii) if they are allowed to be deducted in computing the amount of the profits of the employer, they are deductible in computing the amount of the profits for the period of account in which they are paid;

(b) for the purposes of section 75 (expenses of management: companies with investment business), the contributions—

(i) are to be treated as being expenses of management to the extent that they otherwise would not be, and

(ii) are referable to the accounting period in which they are paid;

(c) for the purposes of section 76 (expenses of insurance companies), the contributions—

(i) are to be brought into account at Step 1 in subsection 7 of that section to the extent that they otherwise would not be, and

(ii) are referable to the accounting period in which they are paid.”.

(3) In subsection (5) (limit on amount that may be deducted under subsection (4)) for “be deducted under subsection (4) above” substitute the following paragraphs—

“(a) be deducted under paragraph (a) of subsection (4) above,

(b) be deductible under paragraph (b) of that subsection, or

(c) be included at Step 1 in section 76(7),”.

(4) For subsection (6) (power of Board to direct sum not paid by way of ordinary annual contribution to be treated as expense incurred in chargeable period in which paid or to be spread over period of years) substitute—

“(6) A sum not paid by ordinary way of annual contribution shall for the purposes of subsection (4) above be treated, as the Board may direct, either—

(a) as an expense deductible for the chargeable period in which the sum is paid,

(b) as expenses of management deductible under section 75 for that chargeable period, or

(c) for the purposes of section 76, as expenses payable referable to that chargeable period,

or as an expense to be spread over such period of years as the Board think proper.”.

Social security benefits and contributions

31.—(1) Section 617(29) is amended as follows.

(2) In subsection (4) (exception from subsection (3) of certain contributions) in paragraph (b) (expenses of management etc) for “under that section as applied by section 76” substitute—

• “falls to be brought into account under section 76 as expenses payable”.

Sale and lease-back: limitation on tax reliefs

32.—(1) Section 779(30) is amended as follows.

(2) In subsection (13)(d) (deductions by way of relevant tax relief), for “allowance of a payment” substitute “a deduction”.

Assets leased to traders and others

33.—(1) Section 781(31) is amended as follows.

(2) In subsection (4)(c) (deductions by way of tax relief to which subsection (1) applies), for “allowance of a payment” substitute “a deduction”.

Limits on credit for foreign tax: corporation tax

34.—(1) Section 797(32) is amended as follows.

(2) In subsection (3) (power of company to allocate deductions against such of its profits as it thinks fit after “expenses of management” insert “expenses payable (within the meaning of section 76(1))”.

Share incentive plans: corporation tax deductions

35.—(1) Schedule 4AA(33) is amended as follows.

(2) In paragraph 1 (introductory) in sub-paragraph (4) for “investment companies” substitute “companies with investment business”.

(3) In paragraph 7 (deduction for costs of setting up plan) in sub-paragraph (3) (approval given more than 9 months after end of period in which expenses incurred) for “incurred in” substitute “deductible for”.

(4) In paragraph 13 (application of provisions to expenses of management of investment companies etc) for sub-paragraphs (1) and (2) substitute—

“(1) The provisions of this Schedule apply in relation to—

(a) companies with investment business, and

(b) companies in relation to which section 76 applies (expenses of insurance companies),

in accordance with the following provisions.

(2) The provisions of this Schedule which allow a deduction in calculating the profits of a trade apply—

(a) in relation to a company with investment business, to treat amounts as expenses of management, and

(b) in relation to companies in relation to which section 76 applies, to treat amounts as expenses payable falling to be brought into account at Step 1 in section 76(7).”.

(5) The heading to paragraph 13 accordingly becomes “Application of provisions to expenses of management of companies with investment business etc”.

Modification of the Taxes Act 1988 in relation to overseas life insurance companies

36.—(1) Schedule 19AC(34) is amended as follows.

(2) For paragraph 5 substitute—

“5.   After subsection (3) of section 76 there shall be treated as inserted the following subsection—

“(3A) In its application to an overseas life insurance company subsection (3) shall have effect as if—

(a) in a case where the company is not an EEA firm of the kind mentioned in paragraph 5(d) of Schedule 3 to the Financial Services and Markets Act 2000(35), the reference to the Form 40 (revenue account) were a reference to the Form 40 relating only to the long-term business carried on by it at a permanent establishment in the UK, and

(b) in a case where it is an EEA firm of the kind mentioned in paragraph 5(d) of Schedule 3 to the Financial Services and Markets Act 2000, the reference to “expenses brought into account in line 12, 22 or 25 of Form 40 in the periodical return of the company for a period of account” were a reference to so much of the expenses included in Item II.8 or 9(a) of the Profit and Loss account included in accounts drawn up in accordance with the Council Directive of 19th December 1991 on the annual accounts and consolidated accounts of insurance undertakings (No.91/674/EEC) as are attributable to permanent establishment in the United Kingdom through which the company carries on life assurance business.”.

5ZA.   After subsection (11) there shall be treated as inserted the following subsections—

“(11A) In subsection (11) the reference in paragraph (a) of the definition of “the relevant income” to income and gains shall be treated as a reference to so much of the income and gains mentioned in that paragraph as falls to be attributed, for the purposes of section 11AA(2)(36), to the permanent establishment in the United Kingdom through which the company carries on life assurance business.

(11B) In that subsection the reference in paragraph (b) of that definition to distributions shall be treated as a reference to so much of the distributions mentioned in that paragraph as falls to be attributed, for the purposes of section 11AA(2), to the permanent establishment in the United Kingdom through which the company carries on life assurance business.”.”.

Manufactured overseas dividends

37.—(1) Schedule 23A(37) is amended as follows.

(2) Paragraph 4(38) is amended as follows.

(3) After sub-paragraph (1) insert—

“(1A) Where a manufactured overseas dividend is paid as set out in sub-paragraph (1) above it shall be treated—

(a) as an expense of the trade where a company carries on a trade to which that payment relates;

(b) where a company has investment business to which the payment relates, for the purposes of section 75 as expenses of management;

(c) in the case of a company carrying on life assurance business—

(i) so far as the payment is referable to basic life assurance and general annuity business, for the purposes of section 76 as if it were an expense payable falling to be brought into account at Step 3 of subsection (7) of that section, and

(ii) the payment is to be treated as referable to basic life assurance and general annuity business to the extent that the overseas dividend of which it is representative is or would, if it were received by the company, be so referable by virtue of section 432A.”.

(4) In sub-paragraph (2)—

(a) after “treated”, insert “, except in determining whether it is deductible,”;

(b) in paragraph (b)—

(i) for “sections 338B(4) and 350(4)” substitute “section 350(4)”; and

(ii) for “references” substitute “reference”.

(5) After sub-paragraph (2) insert—

“(2A) Sub-paragraph (10) of paragraph 3 applies for the construction of the reference in sub-paragraph (2) above to an amount being deductible as it applies to references in that paragraph.”.

(6) Paragraph 7 is amended as follows.

(7) In sub-paragraph (1) for “notwithstanding anything in paragraphs 2 to 4 above.” substitute—

• “notwithstanding anything in paragraphs 2 or 3 above or anything in paragraph 4 other than in sub-paragraph (1A).”.

Controlled foreign companies: relief against liability for tax in respect of chargeable profits

38.—(1) Schedule 26 is amended as follows.

(2) In paragraph 1(3) (trading losses and group relief: meaning of “relevant allowance”)(39) after paragraph (c) (expenses of management) insert—

“(cc) any expenses deduction under section 76(1);”.

Change in ownership of investment company: deductions

39.—(1) Schedule 28A(40) is amended as follows.

(2) In Part 2 (amounts in issue for the purpose of section 768B) in paragraph 6(a)(41) for—

• “the amount of any sums (including commissions) actually disbursed as expenses of management for the accounting period”

substitute “the amount of any expenses of management referable to the accounting period (within the meaning of section 75)”.

(3) In paragraph 6(c) for “section 75(3)” substitute “section 75(9)”.

(4) In paragraph 6(d) for “section 75(4)” substitute “section 75(7)”.

(5) In Part 3 (apportionment for purposes of section 768B) for paragraph 7(1)(a), substitute—

“(a) in the case of the sums mentioned in paragraph 6(a) above, by apportioning to each accounting period the amounts that would fall to be brought into account in that period as such sums, if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice;

(aa) in the case of the charges mentioned in paragraph 6(b) above, by reference to the time when the charge is due to be paid;”.

(6) In paragraph 7(1)(e) (apportionment in case of debits falling to be brought into account on the assumption that interest does not accrue until paid etc)(42) for sub-paragraphs (iii) and (iv) substitute—

“and

(iii) so falls to be brought into account—

• on the assumption mentioned in paragraph (d)(iii) above, or

• with such an adjustment as is mentioned in paragraph (d)(iv) above,”.

(7) In Part 4 (disallowed debits)(43) in paragraph 11(1) (debits that fall within paragraph 11)(44) for paragraphs (b) and (bb) substitute—

“(b) so falls to be brought into account—

(i) with an adjustment under paragraph 17 or 18 of Schedule 9 to that Act (debit relating to amount of discount referable to the relevant accounting period to be brought into account instead for the accounting period in which the security is redeemed); or

(ii) on the assumption, specified in sub-paragraph (2) of paragraph 2 of that Schedule, that the interest to which it relates does not accrue until it is paid; and”.

(8) In Part 5 (amounts in issue for the purposes of section 768C) in paragraph 13(1)(45)—

(a) in paragraph (b) for—

“the amount of any sums (including commissions) actually disbursed as expenses of management for the accounting period”

• substitute—

  • “the amount of any expenses of management referable to the accounting period (within the meaning of section 75)”; and

  (b)

  in paragraph (d) for “section 75(3)” substitute “section 75(9)”; and

  (c)

  in paragraph (e) for “section 75(4)” substitute “section 75(7)”.

(9) In Part 6 (apportionment for purposes of section 768C) for paragraph 16(1)(a), substitute—

“(a) in the case of the sums mentioned in paragraph 13(1)(b) above, by apportioning to each accounting period the amounts that would fall to be brought into account in that period as such sums, if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice;

(aa) in the case of the charges mentioned in paragraph 13(1)(c) above, by reference to the time when the charge is due to be paid;”.

(10) In paragraph 16(1)(e) (manner of apportionment in case of debits falling to be brought into account on the assumption that interest does not accrue until paid)(46) for sub-paragraphs (iii) and (iv) substitute—

“and

(iii) so falls to brought into account—

• on the assumption mentioned in paragraph (d)(iii) above, or

• with such an adjustment as is mentioned in paragraph (d)(iv) above,”.

(11) The heading to the Schedule accordingly becomes “Change in ownership of company with investment business: deductions”.

Provision not at arm’s length

40.—(1) Schedule 28AA(47) is amended as follows.

(2) In paragraph (a) of the definition of “losses” in paragraph 14(1), for “section 75(3)” substitute “section 75(9)”.

(1)

There are amendments which are not relevant for present purposes.

(2)

Section 79A was inserted by section 76 of the Finance Act 1990 (c. 29) and amended by section 145 of the Finance Act 1994 (c. 9) and section 88 of the Finance Act 2000 (c. 17).

(3)

Section 79B was inserted by section 180 of the Finance Act 2003 (c. 14).

(4)

Section 84A was inserted by section 42 of the Finance Act 1991 and amended by paragraph 1 of Schedule 7 to the Finance Act 1998 (c. 36) and paragraph 11 of Part 1 of Schedule 6 and paragraph 92 of Part 11 of Schedule 7 to ITEPA.

(5)

Section 85 was amended by paragraph 1 of Schedule 7 to the Finance Act 1998.

(6)

Section 85A was inserted by section 43 of the Finance Act 1991 and amended by paragraph 1 of Schedule 7 to the Finance Act 1998.

(7)

Section 86 was amended by paragraph 1 of Schedule 7 to the Finance Act 1998 and section 58 of the Finance Act 1999 (c. 16).

(8)

Section 86A was inserted by section 69 of the Finance Act 1993 and amended by paragraph 1 of Schedule 7 to the Finance Act 1998 and paragraph 13 of Schedule 6 to ITEPA.

(9)

Section 88 was amended by paragraph 1 of Schedule 7 to the Finance Act 1998.

(10)

Section 90 was amended by paragraph 1 of Schedule 7 to the Finance Act 1998.

(11)

Section 392A was inserted by paragraph 28 of Schedule 5 to the Finance Act 1998.

(12)

Section 400 was amended by paragraph 35 of Schedule 2 to the Taxation of Chargeable Gains Act 1992 (c. 12), paragraph 8(5) of Schedule 14 to the Finance Act 1993, paragraph 36 of Schedule 5 to the Finance Act 1998, paragraph 35 of Schedule 2 to the Capital Allowances Act 2001 (c. 2) and paragraph 87 of Part 1 of Schedule 2 to S.I. 1999/1870.

(13)

Section 403ZD was substituted for the original section 403 by paragraph 29 of Schedule 5 to the Finance Act 1998 and amended by paragraph 2(2) of Schedule 30 to the Finance Act 2002 (c. 23).

(14)

Section 403ZE was substituted for the original section 403 by paragraph 29 of Schedule 5 to the Finance Act 1998.

(15)

Section 404 has been amended: the relevant amendment is that made by paragraph 37(2) of Schedule 5 to the Finance Act 1998.

(16)

Section 432AB was inserted by paragraph 39 of Schedule 5 to the Finance Act 1998.

(17)

Section 437 has been amended. The relevant amendments are those made by paragraphs 5 and 18 of Schedule 7 to the Finance Act 1991, section 67(1) and (7) of the Finance Act 1997, and paragraph 6 of Schedule 33 to the Finance Act 2003.

(18)

Section 444A was inserted by paragraph 7 of Schedule 9 to the Finance Act 1990. There are amendments which are not relevant for present purposes.

(19)

Section 486L was inserted by paragraph 7 of Schedule 14 to the Finance Act 1994 (c. 9). There are amendments which are not relevant for present purposes.

(20)

Section 487 has been amended: the relevant amendment is that made by paragraph 40 of Schedule 2 to the Capital Allowances Act 2001.

(21)

Section 577 has been amended: relevant amendments are those made by paragraph 1 of Schedule 7, and Part III(4) of Schedule 27 to the Finance Act 1998, paragraph 51 of Schedule 2 to the Capital Allowances Act 2001 and paragraph 62 of Schedule 6 to ITEPA.

(22)

Section 577A was inserted by section 123 of the Finance Act 1993: the relevant amendments are those made by section 141 of the Finance Act 1994 and paragraph 1 of Schedule 7, and Part III(4) of Schedule 27, to the Finance Act 1998.

(23)

Section 578A was inserted by paragraph 52 of Schedule 2 to the Capital Allowances Act 2001 and amended by paragraph 11 of Part 2 of Schedule 12 to the Finance Act 2001.

(24)

There are amendments which are not relevant for present purposes.

(25)

Section 587B was inserted by section 43 of the Finance Act 2000, and amended by section 97 of the Finance Act 2002, section 139 of the Finance Act 2004 and articles 13 and 40 of S.I. 2001/3629.

(26)

Section 588 has been amended: the relevant amendment is that made by paragraph 67 of Part 1 of Schedule 6 to ITEPA.

(27)

Section 589A was inserted by section 108 of the Finance Act 1993: the relevant amendment is that made by paragraph 1 of Schedule 7 to the Finance Act 1998.

(28)

There are amendments which are not relevant for present purposes. Section 592 is prospectively repealed by the relevant entry in Part 3 of Schedule 42 to the Finance Act 2004.

(29)

Section 617 has been amended: the relevant amendments are those made by section 65 of the Finance Act 1997 (c. 16), section 61 of the Finance Act 1999 and paragraph 87 of Part 1 of Schedule 6 to ITEPA.

(30)

There are amendments which are not relevant for present purposes.

(31)

There are amendments which are not relevant for present purposes.

(32)

There are amendments which are not relevant for present purposes.

(33)

Schedule 4AA was inserted by paragraph 108 of Part 1 of Schedule 6 to ITEPA.

(34)

Schedule 19AC was inserted by paragraph 1 of Schedule 9 to the Finance Act 1993.

(35)

2000 c. 8.

(36)

This section was inserted by section 149 of the Finance Act 2003.

(37)

Schedule 23A was inserted by paragraph 1 of Schedule 13 to the Finance Act 1991.

(38)

Paragraph 4 has been amended: the relevant amendment is that made by paragraph 1(5) of Schedule 30 to the Finance Act 2002.

(39)

There are amendments to paragraph 1 which are not relevant for present purposes.

(40)

Schedule 28A was inserted by paragraph 5 of Schedule 6 to the Finance Act 1995 (c. 4).

(41)

There are amendments to paragraph 6 which are not relevant for present purposes.

(42)

Paragraph 7(1)(e)(iv) was inserted by paragraph 58(4) of Part 2 of Schedule 25 to the Finance Act 2002 (c. 23).

(43)

Part 4 was substituted by paragraph 54(4) of Schedule 14 to the Finance Act 1996 (c. 8).

(44)

The relevant amendment to paragraph 11 is that made by paragraph 58 of Part 2 of Schedule 25 to the Finance Act 2002.

(45)

There are amendments to paragraph 13 which are not relevant for present purposes.

(46)

Paragraph 16(1)(e) was inserted by paragraph 54(7) of Schedule 14 to the Finance Act 1996 and amended by paragraph 58(9) of Part 2 of Schedule 25 and Part 3(12) of Schedule 40 to the Finance Act 2002.

(47)

Schedule 28AA was inserted by Schedule 16 of the Finance Act 1998 (c. 36): there are amendments which are not relevant for present purposes.