SCHEDULES

SCHEDULE 8Financing of companies etc: transfer pricing and loan relationships

Amendments of Schedule 9 to FA 1996

2

(1)

In Schedule 9 to FA 1996 (loan relationships: computational provisions), paragraph 2 (late interest) is amended as follows.

(2)

In sub-paragraph (1B)—

(a)

omit “, but not a CIS-based close company,” and the words after paragraph (c);

(b)

in paragraph (a), at the end insert “ or a person who controls a company which is such a participator ”;

(c)

in paragraph (b), after “who is” insert “ , or who controls a company which is, ”;

(d)

for paragraph (c) substitute—

“(c)

a company controlled by such a participator or by a person who controls a company which is such a participator, or

(d)

a company in which such a participator has a major interest.”;

(e)

at the end insert— “ This is subject to sub-paragraph (1E). ”.

(3)

After sub-paragraph (1D) insert—

“(1E)

A case does not fall within sub-paragraph (1B) above if either of the following exceptions applies.

(1F)

The first exception applies where—

(a)

the debtor company is a CIS-based close company at all such times as are mentioned in sub-paragraph (1B) above;

(b)

the person standing in the position of a creditor as respects the loan relationship is not resident in a non-qualifying territory at any such time; and

(c)

the debtor company is a small or medium-sized enterprise for the relevant accounting period.

(1G)

The second exception applies where—

(a)

the debt is one that is owed to, or to persons acting for, a CIS limited partnership;

(b)

no member of that partnership is resident in a non-qualifying territory at any time in the relevant accounting period;

(c)

the debtor company has received written notice from the partnership containing information from which it appears that the condition in paragraph (b) above is satisfied; and

(d)

the debtor company is a small or medium-sized enterprise for the relevant accounting period.”.

(4)

In sub-paragraph (6), at the appropriate places insert—

““non-qualifying territory” has the meaning given by paragraph 5E of Schedule 28AA to the Taxes Act 1988;”;

““resident” has the meaning given by paragraph 5B(6) of Schedule 28AA to the Taxes Act 1988;”;

““small or medium-sized enterprise” has the meaning given by paragraph 5D of that Schedule.”.

3

(1)

Paragraph 18 of that Schedule (discounted securities of close companies) is amended as follows.

(2)

In sub-paragraph (1), omit paragraphs (aa) and (c).

(3)

In sub-paragraph (1)(b)—

(a)

in sub-paragraph (i), at the end insert “ or a person who controls a company which is such a participator ”;

(b)

in sub-paragraph (ii), after “an associate of” insert “ a person who is, or who controls a company which is, ”;

(c)

for sub-paragraph (iii) substitute—

“(iii)

a company controlled by such a participator or by a person who controls a company which is such a participator.”.

(4)

After sub-paragraph (1) insert—

“(1ZA)

But for any such accounting period this paragraph shall not apply in relation to that debtor relationship if any of the following exceptions applies.”.

(5)

In sub-paragraph (1A), for the words before paragraph (a) substitute “ The first exception applies where— ”.

(6)

After that sub-paragraph insert—

“(1B)

The second exception applies where—

(a)

the issuing company is a CIS-based close company;

(b)

at all times in the period when there is such a person as is described in sub-paragraph (1)(b) above, that person is not resident in a non-qualifying territory; and

(c)

the issuing company is a small or medium-sized enterprise for the period.

(1C)

The third exception applies where—

(a)

the debt is one that is owed to, or to persons acting for, a CIS limited partnership;

(b)

no member of that partnership is resident in a non-qualifying territory at any time in the period when there is such a person as is described in sub-paragraph (1)(b) above;

(c)

the debtor company has received written notice from the partnership containing information from which it appears that the condition in paragraph (b) above is satisfied; and

(d)

the issuing company is a small or medium-sized enterprise for the period.”.

(7)

In sub-paragraph (4), at the appropriate places insert—

““CIS-based close company” and “CIS limited partnership” have the meaning given by paragraph 2(6) above;”;

““non-qualifying territory” has the meaning given by paragraph 5E of Schedule 28AA to the Taxes Act 1988;”;

““resident” has the meaning given by paragraph 5B(6) of Schedule 28AA to that Act;”;

““small or medium-sized enterprise” has the meaning given by paragraph 5D of that Schedule.”.