Finance Act 1998 (c. 36) (c. 36)

(The document as of February, 2008)

-- Back --

Page 26

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14 | P.15 | P.16 | P.17 | P.18 | P.19 | P.20 | P.21 | P.22 | P.23 | P.24 | P.25 | P.26 | P.27 | P.28 | P.29 | P.30 | P.31 | P.32 | P.33 | P.34 | P.35 | P.36

(7) After sub-paragraph (4B) there shall be inserted--

" (4C) For the purposes of sub-paragraph (2)(b) above, a person has a 25 per cent. assessable interest in a controlled foreign company in the case of an accounting period of the company if, on an apportionment of the chargeable profits and creditable tax (if any) of the company for that accounting period under section 747(3), at least 25 per cent. of the controlled foreign company's chargeable profits for the accounting period would be apportioned to that person. "

(8) In sub-paragraph (5) (extended meaning of references in sub-paragraph (3) or (4) to companies which a holding company controls)--

(a) for "sub-paragraph (3) or (4)" there shall be substituted "sub-paragraphs (3) to (4B)"; and

(b) after "holding company", in each place where it occurs, there shall be inserted "or superior holding company".

(9) After sub-paragraph (5) there shall be inserted--

" (5A) For the purposes of sub-paragraphs (3) to (4B) above, a company is an exempt trading company throughout any period if--

(a) it is a trading company throughout each of its accounting periods which falls wholly or partly within that period; and

(b) each of those accounting periods is one as regards which--

(i) the condition in section 747(1)(c) is not satisfied; or

(ii) the conditions in section 748(1)(e) are satisfied; or

(iii) the conditions in section 748(3)(a) and (b) are satisfied. "

Paragraph 8 of Schedule 25

31 (1) Paragraph 8 of Schedule 25 to the Taxes Act 1988 (which relates to the condition in paragraph 6(1)(b) of that Schedule) shall be amended as follows.

(2) In sub-paragraph (3) (which applies sub-paragraph (2) with modifications in relation to a holding company) after "In the case of a holding company" there shall be inserted "or superior holding company".

Paragraph 12 of Schedule 25

32 (1) Paragraph 12 of Schedule 25 to the Taxes Act 1988 (meaning of "holding company" in paragraphs 6 and 8(3)) shall be amended as follows.

(2) In sub-paragraph (1), after "in paragraphs 6 and 8(3) above and" there shall be inserted "paragraph 12A below and in".

(3) In sub-paragraph (5) (exclusion of income derived from certain sources) in paragraph (a)--

(a) after "which is not a holding company" there shall be inserted "or superior holding company"; and

(b) after "engaged in exempt activities" there shall be inserted "or, in terms of sub-paragraph (5A) of that paragraph, is an exempt trading company".

Superior holding companies: supplementary provisions

33 After paragraph 12 of Schedule 25 to the Taxes Act 1988 there shall be inserted--

" 12A (1) In paragraphs 6, 8(3) and 12(5) above and this paragraph, "superior holding company" means--

(a) a company whose business consists wholly or mainly in the holding of shares or securities of companies which--

(i) are holding companies or local holding companies; or

(ii) are themselves superior holding companies; or

(b) a company which would fall within paragraph (a) above if there were disregarded so much of its business as consists in the holding of property or rights of any description for use wholly or mainly by companies which it controls and which are resident in the territory in which it is resident.

(2) For the purposes of sub-paragraphs (4A) and (4B) of paragraph 6 above, the income of a company during any period which "represents qualifying exempt activity income of its subsidiaries" is any income of the company during that period which is directly or indirectly derived from companies--

(a) which it controls, and

(b) which, throughout that period, fall within sub-paragraph (4B)(a) of that paragraph, but

(3) In determining for the purposes of sub-paragraph (4A) or (4B) of paragraph 6 above the companies from which, and the proportions in which, different descriptions of income of a company are derived (whether directly or indirectly), any dividend shall be taken to be paid out of the appropriate profits.

(4) Subsections (3) and (4) of section 799 (which provide rules for determining the profits out of which a dividend is to be regarded as paid for the purpose of subsection (1) of that section) shall apply for determining the appropriate profits for the purposes of subsection (3) above as they apply for determining the relevant profits for the purposes of subsection (1) of that section.

(5) Sub-paragraphs (4) to (6) of paragraph 12 above shall apply in relation to sub-paragraph (4A) or (4B) of paragraph 6 above and a superior holding company as they apply in relation to sub-paragraph (3) or (4) of paragraph 6 above and a holding company, but taking the reference in sub-paragraph (4) of paragraph 12 above to paragraph (a) or (b) of sub-paragraph (1) of that paragraph as a reference to paragraph (a) or (b) of sub-paragraph (1) above. "

Paragraph 1 of Schedule 26

34 (1) In Schedule 26 to the Taxes Act 1988 (reliefs against liability for tax in respect of chargeable profits apportioned to UK resident company) paragraph 1 (trading losses and group relief etc) shall be amended as follows.

(2) In sub-paragraph (1) (set-off against liability to tax under section 747(4)(a) where UK resident company entitled to deduction in respect of relevant allowance) the following provisions shall cease to have effect--

(a) paragraph (c) (set-off only available if company has no profits or relevant allowance exceeds profits) and the word "and" immediately preceding that paragraph; and

(b) in the words following paragraph (c), the words "or, as the case may be, of the excess of it referred to in paragraph (c) above".

(3) In sub-paragraph (2)(a) (which defines the appropriate accounting period as that for which by virtue of section 754(2) the company is regarded as assessed to corporation tax in respect of the chargeable profits concerned) for "regarded as assessed to corporation tax" there shall be substituted "chargeable to tax by virtue of this Chapter".

(4) Sub-paragraph (4) (time limit for making claims for group relief) shall cease to have effect.

(5) Sub-paragraph (6) (which modifies section 43 of the [1970 c. 9.] Taxes Management Act 1970 in its application for the purposes of the paragraph) shall cease to have effect.

Paragraph 3 of Schedule 26

35 (1) Paragraph 3 of Schedule 26 to the Taxes Act 1988 (gains on disposal of shares in controlled foreign companies) shall be amended as follows.

(2) In sub-paragraph (1), for paragraph (a) (which refers to a direction having been given in respect of an accounting period of a controlled foreign company) there shall be substituted--

" (a) an accounting period of a controlled foreign company ("the apportionment period") is one in respect of which an apportionment under section 747(3) falls to be made; and " .

(3) Accordingly, in paragraphs (b) and (c) of sub-paragraph (1), for the words "the direction period", in each place where they occur, there shall be substituted "the apportionment period".

(4) In paragraph (d) of sub-paragraph (1) (which refers to a sum being, under section 747(1)(a), assessed and recoverable from a company) for "assessed on and recoverable from" there shall be substituted "chargeable on".

(5) In sub-paragraph (3), for "the direction period" there shall be substituted "the apportionment period".

(6) In sub-paragraph (4), in the words following paragraph (c), for "assessed and recoverable" there shall be substituted "chargeable under section 747(4)(a)".

(7) After subsection (6) there shall be inserted--

" (6A) Nothing in--

(a) paragraph 10 of Schedule 18 to the Finance Act 1998 (claims or elections in company tax returns), or

(b) Schedule 1A to the Management Act (claims or elections not included in returns),

shall apply, whether by virtue of section 754 or otherwise, to a claim under sub-paragraph (6) above. "

Paragraph 4 of Schedule 26

36 (1) Paragraph 4 of Schedule 26 to the Taxes Act 1988 (dividends from the controlled foreign company) shall be amended as follows.

(2) In sub-paragraph (1), for paragraph (a) (which refers to a direction having been given in respect of an accounting period of a controlled foreign company) there shall be substituted--

" (a) an accounting period of a controlled foreign company is one in respect of which an apportionment under subsection (3) of section 747 falls to be made; and " .

(3) Accordingly, in paragraph (b) of that sub-paragraph for "subsection (3) of that section" there shall be substituted "that subsection".

(4) In sub-paragraph (2) (which refers to sums assessed on and recoverable from companies in accordance with s.747(4)(a)) for "assessed on and recoverable from" there shall be substituted "chargeable on".

(5) In sub-paragraph (5)(a) (which refers to the amount of tax assessed on and recoverable from the company in accordance with s.747(4)(a)) for "assessed on and recoverable from" there shall be substituted "chargeable on".

Commencement and transitional provision

37 (1) The preceding provisions of this Schedule have effect as respects accounting periods of companies resident in the United Kingdom which end on or after the corporation tax self-assessment appointed day.

(2) Where by virtue of sub-paragraph (1) above any question as to liability (if any) to tax by virtue of Chapter IV of Part XVII of the Taxes Act 1988 as respects any particular accounting period of a non-resident company which ends before the corporation tax self-assessment appointed day falls to be determined--

(a) in the case of at least one company resident in the United Kingdom, for an accounting period of its which ends on or after that day, and

(b) in the case of at least one other such company, for an accounting period of its which ends before that day,

such separate determinations and computations shall be made as are necessary for determining the liability of the companies which fall within paragraph (a) above and the liability of the companies which fall within paragraph (b) above.

(3) For the purposes of sub-paragraph (2) above--

(a) any question as to the liability (if any) of a company falling within paragraph (a) shall be determined as if, in the case of every company resident in the United Kingdom, the accounting period of the non-resident company ended in an accounting period of the company ending on or after the corporation tax self-assessment appointed day; and

(b) any question as to the liability (if any) of a company falling within paragraph (b) shall be determined as if, in the case of every company resident in the United Kingdom, the accounting period of the non-resident company ended in an accounting period of the company ending before the corporation tax self-assessment appointed day.

(4) In this paragraph--

"accounting period", in relation to a non-resident company, has the same meaning as it has in Chapter IV of Part XVII of the Taxes Act 1988;
"the corporation tax self-assessment appointed day" means the day which is the appointed day for the purposes of section 199 of the [1994 c. 9.] Finance Act 1994 (corporation tax self-assessment);
"non-resident company" means a company resident outside the United Kingdom.

Section 117(1).

SCHEDULE 18 Company tax returns, assessments and related matters

Part I Introduction

Meaning of "tax"

1 In this Schedule "tax" means corporation tax including, except as otherwise indicated, any amount assessable or chargeable as if it was corporation tax.

Amounts are assessable or chargeable as if they were corporation tax under--

section 419(1) of the Taxes Act 1988 (tax on loan or advance made by close company to a participator), and
section 747(4)(a) of that Act (tax on profits of controlled foreign company).

Duty to give notice of chargeability

2 (1) A company which--

(a) is chargeable to tax for an accounting period, and

(b) has not received a notice requiring a company tax return,

must give notice to the Inland Revenue that it is so chargeable.

(2) The notice must be given within twelve months from the end of the accounting period.

(3) A company which fails to comply with this paragraph is liable to a penalty not exceeding the amount of tax payable for the accounting period in question that remains unpaid twelve months after the end of the period.

(4) In computing the amount of unpaid tax for this purpose, no account shall be taken of any relief under section 419(4) of the Taxes Act 1988 (relief in respect of repayment, etc. of loan) which is deferred under subsection (4A) of that section.

Part II Company tax return

Company tax return

3 (1) The Inland Revenue may by notice require a company to deliver a return (a "company tax return") of such information, accounts, statements and reports--

(a) relevant to the tax liability of the company, or

(b) otherwise relevant to the application of the Corporation Tax Acts to the company,

as may reasonably be required by the notice.

(2) Different information, accounts, statements and reports may be required from different descriptions of company.

(3) A company tax return must include a declaration by the person making the return that the return is to the best of his knowledge correct and complete.

(4) The return must be delivered to the officer of the Board by whom the notice was issued not later than the filing date.

Meaning of delivery of return

4 References in this Schedule to the delivery of a company tax return are to the delivery of all the information, accounts, statements and reports required to comply with the notice requiring the return.

Period for which return required

5 (1) A notice requiring a company tax return must specify the period to which the notice relates.

(2) If an accounting period of the company ended during (or at the end of) the specified period, a return is required for that accounting period.

If there is more than one, a separate company tax return is required for each of them.

(3) If sub-paragraph (2) does not apply but an accounting period of the company began during the specified period, a company tax return is required for the part of the specified period before the accounting period began.

(4) If the company was outside the charge to corporation tax for the whole of the specified period, a company tax return is required for the whole of the specified period.

(5) If none of the above provisions applies, no company tax return is required in response to the notice.

Notice relating to period beginning before appointed day

6 (1) A notice requiring a company tax return may be given on or after the self-assessment appointed day in relation to a period beginning before that day.

(2) Where the effect of such a notice is to require a return for an accounting period ending before that day, the provisions of the Tax Acts apply as if it were a notice under section 11 of the [1970 c. 9.] Taxes Management Act 1970.

(3) The provisions of this Act relating to company tax returns, or amending other provisions of the Tax Acts so as to refer to such returns, do not affect the operation of those Acts in relation to such a notice.

Return to include self-assessment

7 (1) Every company tax return for an accounting period must include an assessment (a "self-assessment") of the amount of tax which is payable by the company for that period--

(a) on the basis of the information contained in the return, and

(b) taking into account any relief or allowance for which a claim is included in the return or which is required to be given in relation to that accounting period.

(2) For this purpose a company tax return is regarded as a return for an accounting period if the period is treated in the return as an accounting period and is not longer than twelve months, even though it is not, or may not be, an accounting period.

Calculation of tax payable

8 (1) The amount of tax payable for an accounting period is calculated as follows.

First step

Calculate the corporation tax chargeable on the company's profits:

1 Take the amount of the company's profits for that period on which corporation tax is chargeable.

2 Apply the rate or rates of corporation tax applicable to the company.

Second step

Then give effect to any reliefs or set-offs available against corporation tax chargeable on profits:

1 Any reduction under section 13(2) of the Taxes Act 1988 (marginal small companies' relief).

2 Any double taxation relief under section 788 or 790 of that Act.

3 Any set off for advance corporation tax under section 239 of that Act or under regulations made under section 32 of this Act.

Third step

Then add any amounts assessable or chargeable as if they were corporation tax (reduced by any reliefs specific to those amounts):

1 Any amount due under section 419(1) of the Taxes Act 1988 (tax on a loan or advance made by close company to a participator).

2 Any sum chargeable under section 747(4)(a) of that Act (tax on profits of a controlled foreign company).

Fourth step

Then deduct any amounts to be set off against the company's overall tax liability for that period:

1 Any amount to be set off under section 7(2) or 11(3) of the Taxes Act 1988 (income tax borne by deduction).

2 Any amount to be set off under section 246N or 246Q of that Act (advance corporation tax paid in respect of foreign income dividend).

(2) Except as otherwise provided, references in this Schedule to the amount of tax payable by a company for an accounting period are to the amount shown in the company's self-assessment as the amount payable.

Claims that cannot be made without a return

9 (1) No claim to which this paragraph applies may be made by a company before it delivers a company tax return for the period to which the claim relates.

(2) This paragraph applies to a claim by a company for any repayment of income tax called for by virtue of--

(a) section 6(2) of the Taxes Act 1988 (exclusion of income tax charge in case of UK resident company or income within chargeable profits for corporation tax), or

(b) exemptions from income tax conferred by the Corporation Tax Acts.

(3) This paragraph applies to a claim by a company for payment of a tax credit, unless--

(a) the company is wholly exempt from corporation tax or is only not so exempt in respect of trading income, and

(b) the tax credit is not one in respect of which a payment on account may be claimed by the company under Schedule 19AB to the Taxes Act 1988 (pension business).

Other claims and elections to be included in return

10 (1) In Part VII of this Schedule (general provisions as to claims and elections) paragraphs 57 to 59 contain provisions as to the circumstances in which a claim or election may or must be made, or is to be treated as having been made, in a company tax return.

(2) A claim to which Part VIII or IX of this Schedule applies (claims for group relief or capital allowances) can only be made by being included in a company tax return (see paragraphs 67 and 79).

Accounts required in case of Companies Act company

11 (1) In the case of a company which--

(a) is required to deliver a company tax return for a period,

(b) is resident in the United Kingdom throughout that period, and

(c) is required under the [1985 c. 6.] Companies Act 1985 to prepare accounts for a period consisting of or including the whole of that period,

the power to require the delivery of accounts as part of the return is limited to such accounts, containing such information and having annexed to them such documents, as are required to be prepared under that Act.

(2) In relation to a company registered in Northern Ireland, for the reference in sub-paragraph (1) to the [1985 c. 6.] Companies Act 1985 substitute a reference to the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986.

Information about business carried on in partnership

12 (1) A company tax return of a company which carries on a trade, profession or business in partnership must include any amount which in a relevant partnership statement is stated to be its share of any income, loss, consideration, tax, credit or charge.

(2) A "relevant partnership statement" means a statement under section 12AB of the [1970 c. 9.] Taxes Management Act 1970 for the period for which the return is made or a period which includes that period or any part of it.

Information about chargeable gains

13 (1) A notice requiring a company tax return may require details of assets acquired by the company in the period specified in the notice.

The details required may include details of the person from whom the asset was acquired and the consideration for its acquisition.

(2) The power in sub-paragraph (1) does not apply to--

(a) assets exempted by--

section 121 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (government non-marketable securities), or
section 263 of that Act (passenger vehicles); or

(b) tangible movable property, unless--

(i) the amount or value of the consideration for its acquisition exceeded £6,000, or

(ii) it is within the exceptions in section 262(6) of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (terminal markets and currency); or

(c) assets acquired as trading stock, unless they are held for the purposes of long term business carried on by an insurance company.

(3) In sub-paragraph (2)(c)--

"trading stock" has the meaning given by section 100(2) of the Taxes Act 1988, and
"long term business" and "insurance company" have the meaning given by section 431(2) of that Act.

Filing date

14 (1) The filing date for a company tax return is the last day of whichever of the following periods is the last to end--

(a) twelve months from the end of the period for which the return is made;

(b) if the company's relevant period of account is not longer than 18 months, twelve months from the end of that period;

(d) three months from the date on which the notice requiring the return was served.

(2) In sub-paragraph (1) "relevant period of account" means, in relation to a return for an accounting period, the period of account of the company in which the last day of that accounting period falls.

For this purpose "period of account" means a period for which the company makes up accounts.

Amendment of return by company

15 (1) A company may amend its company tax return by notice to the Inland Revenue.

(2) The notice must be in such form as the Inland Revenue may require.

(3) The notice must contain such information and be accompanied by such statements as the Inland Revenue may reasonably require.

(4) Except as otherwise provided, an amendment may not be made more than twelve months after--

(a) the filing date, or

(b) in the case of a return for the wrong period, what would be the filing date if the period for which the return was made were an accounting period.

Correction of return by Revenue

16 (1) The Inland Revenue may amend a company tax return so as to correct obvious errors or omissions in the return (whether errors of principle, arithmetical mistakes or otherwise).

(2) A correction under this paragraph is made by notice to the company concerned.

(3) No such correction may be made more than nine months after--

(a) the day on which the return was delivered, or

(b) if the correction is required in consequence of an amendment by the company under paragraph 15, the day on which that amendment was made.

(4) A correction under this paragraph is of no effect if the company--

(a) amends its return so as to reject the correction, or

(b) after the end of the period within which it may amend its return, but within three months from the date of issue of the notice of correction, gives notice rejecting the correction.

(5) Notice under sub-paragraph (4)(b) must be given--

(a) in writing,

(b) to the officer of the Board by whom notice of the correction was given.

Failure to deliver return: flat-rate penalty

17 (1) A company which is required to deliver a company tax return and fails to do so by the filing date is liable to a flat-rate penalty under this paragraph.

It may also be liable to a tax-related penalty under paragraph 18.

(2) The penalty is--

(a) £100, if the return is delivered within three months after the filing date, and

(b) £200, in any other case.

(3) The amounts are increased to £500 and £1000 for a third successive failure, that is, where--

(a) the company is within the charge to corporation tax for three consecutive accounting periods (and at no time between the beginning of the first of those periods and the end of the last is it outside the charge to corporation tax),

(b) a company tax return is required for each of those accounting periods,

(d) the company is again liable to a penalty under this paragraph in respect of the third period.

(4) The first or second period mentioned in sub-paragraph (3) may be a period ending before the self-assessment appointed day, in relation to which--

(a) the reference in paragraph (b) to a company tax return shall be construed as a reference to a return under section 11 of the [1970 c. 9.] Taxes Management Act 1970, and

(b) the references in paragraphs (c) and (d) to a penalty under this paragraph shall be construed as a reference to a penalty under section 94 of that Act.

Failure to deliver return: tax-related penalty

18 (1) A company which is required to deliver a company tax return for an accounting period and fails to do so--

(a) within 18 months after the end of that period, or

(b) if the filing date is later than that, by the filing date,

is liable to a tax-related penalty under this paragraph.

This is in addition to any flat-rate penalty under paragraph 17.

(2) The penalty is--

(a) 10 per cent. of the unpaid tax, if the return is delivered within two years after the end of the period for which the return is required, and

(b) 20 per cent. of the unpaid tax, in any other case.

(3) The "unpaid tax" means the amount of tax payable by the company for the accounting period for which the return was required which remains unpaid on the date when the liability to the penalty arises under sub-paragraph (1).

(4) In determining that amount no account shall be taken of any relief under section 419(4) of the Taxes Act 1988 (relief in respect of repayment, etc. of loan) which is deferred under subsection (4A) of that section.

Excuse for late delivery of return

19 A company is not liable to a penalty under paragraph 17 (flat rate penalty) if--

-- Back --

Stat