Income and Corporation Taxes Act 1988

Part 3 U.K. Other supplementary provisions

Carry forward of excess NCDs U.K.

13 (1) Any excess NCDs not allocated to another company under Part 2 shall be carried forward by the distributing company.

(2) That company shall be treated as if it had made a non-corporate distribution of the amount carried forward (in addition to any distributions actually made by it) in its next accounting period.

(3) Where an allocation is made under paragraph 9(4) references in this paragraph to the distributing company shall be read as references to the company to which that allocation is made (which is treated by virtue of paragraph 6(3) as having made a distribution in the accounting period to which the allocation is made).

Definition of a group U.K.

14 (1) For the purposes of section 13AB and this Schedule a company and all its 51% subsidiaries form a group, and if any of those subsidiaries have 51% subsidiaries the group includes them and their 51% subsidiaries, and so on.

(2) The question whether a company is a 51% subsidiary shall be determined in accordance with section 838, subject to the following provisions.

(3) A company (“company A”) shall be treated for the purposes of this Schedule as if it were a 51% subsidiary of another company (“company B”) if company B has rights to, or in fact receives, more than 50% of the distributions made by company A.

(4) For the purposes of this paragraph a company shall be treated as not being the owner—

(a) of any share capital that it owns directly if a profit on the sale of the shares would be treated as a trading receipt of its trade, or

(b) of any share capital that it owns indirectly and that is owned directly by a body corporate for which a profit on the sale of the shares would be treated as a trading receipt of its trade.

Accounting period treated as ending if company ceases to be a member of a group U.K.

15 (1) Section 13AB and this Schedule apply in relation to an accounting period of a company in which it ceases to be a member of the group as if there were two accounting periods, one ending immediately before the company ceases to be a member of the group and the other consisting of the remainder of the period.

(2) For this purpose a company ceases to be in a group if it and another company cease to be in the same group, whether as a result it is no longer in a group, becomes a member of another group or continues to be in the same group as one or more other companies.

Treatment of distributions made otherwise than in an accounting period U.K.

16 For the purposes of section 13AB and this Schedule, a non-corporate distribution made by a company otherwise than in an accounting period of the company shall be treated as made in the next accounting period of the company.

Holding companies treated as carrying on a business U.K.

17 (1) For the purposes of section 13AB and this Schedule a holding company that is not otherwise carrying on a business shall be deemed to be carrying on a business and to be within the charge to corporation tax.

(2) For this purpose “a holding company” means a company that has one or more 51% subsidiaries from which it receives or has received one or more distributions.

Interpretation U.K.

18 In section 13AB and this Schedule—

• “basic profits” means the amount of a company’s profits for an accounting period on which corporation tax finally falls to be borne;

• “corresponding accounting period”, in relation to a recipient company, has the meaning given by paragraph 8;

• “distributing company” has the meaning given by paragraph 6(1);

• “distribution” does not include an amount treated as a dividend under paragraph 2(2) of Schedule 23A (manufactured dividends and interest);

• “distribution period” has the meaning given by paragraph 6(1); and

• “excess NCDs” has the meaning given by paragraph 6(2);

• “group” has the meaning given by paragraph 14 (and references to a group company and membership of a group have a corresponding meaning);

• “non-corporate distribution” has the meaning given by paragraph 2;

• “recipient company” has the meaning given by paragraph 6(3);

• “underlying rate of corporation tax” has the meaning given by paragraph 3.