Corporation Tax Act 2010 (c. 4)

[F1 PART 14B U.K. Tax avoidance involving carried-forward losses

Textual Amendments

F1 Pt. 14B inserted (with effect and application in accordance with Sch. 3 Pt. 2 of the amending Act) by Finance Act 2015 (c. 11), Sch. 3 para. 1

730E Overview U.K.

(1) This Part makes provision restricting the circumstances in which a company may make a deduction in respect of a relevant carried-forward loss.

(2) For the meaning of “relevant carried-forward loss”, see section 730F.

730F Meaning of “relevant carried-forward loss” U.K.

(1) In this Part “relevant carried-forward loss” means any of the following—

(a) a carried-forward trading loss (see subsection (2)),

[F2 (aa) a carried-forward UK property business loss (see subsection (2A),]

(b) a carried-forward non-trading deficit (see subsection (3)),

[F3 (ba) a carried-forward non-trading loss on intangible fixed assets (see subsection (3A),]

(c) any carried-forward management expenses (see subsection (4)).

(2) “Carried-forward trading loss”, in relation to a company and an accounting period, means a loss in a trade of the company which is carried forward from a previous accounting period under section 45[F4 , 45A or 45B] (carry forward of trade loss F5 ...).

[F6 (2A) “Carried-forward UK property business loss”, in relation to a company and an accounting period, means a loss in a UK property business carried on by the company which is carried forward from a previous accounting period under section 62(5).]

(3) “Carried-forward non-trading deficit”, in relation to a company and an accounting period, means a non-trading deficit which the company has from its loan relationships under section 301(6) of CTA 2009 and which is carried forward from a previous accounting period under section 457[F7 , 463G or 463H] of that Act (carry forward of deficits to accounting periods after deficit period).

[F8 (3A) “Carried-forward non-trading loss on intangible fixed assets”, in relation to a company and an accounting period, means a non-trading loss on intangible fixed assets which is carried forward from a previous accounting period under section 753 of CTA 2009 (treatment of non-trading losses).]

(4) “Carried-forward management expenses”, in relation to a company and an accounting period, means—

(a) any amounts which—

(i) fall within subsection (2) of section 1223 of CTA 2009 (carrying forward expenses of management and other amounts), and

(ii) are treated by subsection (3) of that section as expenses of management deductible for the period, and

(b) any amounts which are treated by section 63(3) (carrying forward certain losses made by company with investment business which ceases to carry on UK property business) as expenses of management deductible for the period for the purposes of Chapter 2 of Part 16 of CTA 2009.

[F9 (5) In this section “non-trading loss on intangible fixed assets” is to be read in accordance with Part 8 of CTA 2009.]

Textual Amendments

F2 S. 730F(1)(aa) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 69(2)(a)

F3 S. 730F(1)(ba) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 69(2)(b)

F4 Words in s. 730F(2) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 69(3)(a)

F5 Words in s. 730F(2) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 69(3)(b)

F6 S. 730F(2A) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 69(5)

F7 Words in s. 730F(3) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 69(4) (with Sch. 4 para. 194)

F8 S. 730F(3A) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 69(6)

F9 S. 730F(5) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 69(7)

730G Disallowance of deductions for relevant carried-forward losses U.K.

(1) This section applies if conditions A to E are met.

(2) Condition A is that—

(a) for the purposes of corporation tax a company has profits (“relevant profits”) for an accounting period,

(b) the relevant profits arise to the company as a result of any arrangements (“the tax arrangements”), and

(c) in the absence of this section the company (“the relevant company”) would, for corporation tax purposes, be entitled to deduct from the relevant profits for the period an amount in respect of any relevant carried-forward losses.

(3) Condition B is that—

(a) the relevant company, or a company connected with that company, brings a deductible amount into account as a deduction for an accounting period, and

(b) it is reasonable to assume that neither the company, nor any company connected with it, would have brought that amount into account as a deduction for that period but for the tax arrangements.

(4) Condition C is that the main purpose, or one of the main purposes, of the tax arrangements is to secure a relevant corporation tax advantage [F10 or a relevant CFC charge advantage]—

(a) for the relevant company, or

(b) if there are any companies connected with that company, for the relevant company and those connected companies (taken together).

(5) In this section “relevant corporation tax advantage” means a corporation tax advantage involving—

(a) the deductible amount mentioned in subsection (3), and

(b) the deduction of any relevant carried-forward losses from the relevant profits.

[F11 (5A) In this section “relevant CFC charge advantage” means a CFC charge advantage involving the deductible amount mentioned in subsection (3).]

(6) Condition D is that, at the time when the tax arrangements were entered into, it would have been reasonable to assume that the tax value of the tax arrangements would be greater than the non-tax value of the tax arrangements.

(7) The “tax value” of the tax arrangements is the total value of—

(a) [F12 any] relevant corporation tax advantage, F13 ...

[F14 (aa) any relevant CFC charge advantage, and]

(b) any other economic benefits derived by—

(i) the relevant company, or

(ii) if there are any companies connected with that company, the relevant company and those connected companies (taken together),

as a result of securing the relevant corporation tax advantage [F15 or the relevant CFC charge advantage].

(8) The “non-tax value” of the tax arrangements is the total value of any economic benefits, other than those falling within subsection (7)(a)[F16 , (aa)] or (b), derived by—

(a) the relevant company, or

(b) if there are any companies connected with that company, the relevant company and those connected companies (taken together),

as a result of the tax arrangements.

(9) Condition E is that the tax arrangements are not arrangements in relation to which section 269CK (banking companies: profits arising from tax arrangements to be disregarded) applies.

(10) If this section applies, the relevant company is not entitled to deduct from the relevant profits any amount in respect of the relevant carried-forward losses.

Textual Amendments

F10 Words in s. 730G(4) inserted (18.11.2015) (with effect in accordance with s. 37(7)(8) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 37(2)

F11 S. 730G(5A) inserted (18.11.2015) (with effect in accordance with s. 37(7)(8) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 37(3)

F12 Word in s. 730G(7)(a) substituted (18.11.2015) (with effect in accordance with s. 37(7)(8) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 37(4)(a)(i)

F13 Word in s. 730G(7)(a) omitted (18.11.2015) (with effect in accordance with s. 37(7)(8) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 37(4)(a)(ii)

F14 S. 730G(7)(aa) inserted (18.11.2015) (with effect in accordance with s. 37(7)(8) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 37(4)(b)

F15 Words in s. 730G(7)(b) inserted (18.11.2015) (with effect in accordance with s. 37(7)(8) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 37(4)(c)

F16 Word in s. 730G(8) inserted (18.11.2015) (with effect in accordance with s. 37(7)(8) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 37(5)

730H Interpretation of section 730G U.K.

(1) In section 730G—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

• [F17 “CFC charge advantage” means the avoidance or reduction of a charge or assessment to a charge under Part 9A of TIOPA 2010 (controlled foreign companies);]

• “corporation tax advantage” means—

  (a)

  a relief from corporation tax or increased relief from corporation tax,

  (b)

  a repayment of corporation tax or increased repayment of corporation tax,

  (c)

  the avoidance or reduction of a charge to corporation tax or an assessment to corporation tax,

  (d)

  the avoidance of a possible assessment to corporation tax, or

  (e)

  the deferral of a payment of corporation tax or advancement of a repayment of corporation tax;

• “deductible amount” means—

  (a)

  an expense of a trade, other than an amount treated as such an expense by section 450(a) of CAA 2001 (research and development allowances treated as expenses in calculating profits of a trade),

  (b)

  an expense of a UK property business or an overseas property business,

  (c)

  an expense of management of a company's investment business within the meaning of section 1219 of CTA 2009,

  (d)

  a non-trading debit within the meaning of Parts 5 and 6 of CTA 2009 (loan relationships and derivative contracts) (see section 301(2) of that Act), or

  (e)

  a non-trading debit within the meaning of Part 8 of CTA 2009 (intangible fixed assets) (see section 746 of that Act),

  but does not include any amount that has been taken into account in determining RTWDV within the meaning of Chapter 16A of Part 2 of CAA 2001 (restrictions on allowance buying) (see section 212K of that Act);

• “relevant carried-forward loss” has the meaning given by section 730F.

(2) References in section 730G to bringing an amount into account “as a deduction” in any period are to bringing it into account as a deduction in that period—

(a) in calculating profits, losses or other amounts for corporation tax purposes, or

(b) from profits or other amounts chargeable to corporation tax.]

Textual Amendments

F17 Words in s. 730H(1) inserted (18.11.2015) (with effect in accordance with s. 37(7)(8) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 37(6)