Finance Act 2000 (c. 17)

(The document as of February, 2008)

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135 The regulations may provide that where a partner leaves tonnage tax, such adjustments shall be made for capital allowance purposes, in relation to that partner and all or any of the other partners, with respect to--

(a) the amount of qualifying expenditure under Part II of the [1990 c. 1.] Capital Allowances Act 1990 (plant and machinery), and

(b) the amount of unrelieved qualifying expenditure under Part I of that Act (industrial buildings),

as may be specified in the regulations.

General

136 Regulations under this Part of this Schedule--

(a) may make different provision for different cases, and

(b) may contain such supplementary, incidental and transitional provision as appears to the Inland Revenue to be appropriate.

Part XIV Withdrawal of relief etc. on company leaving tonnage tax

Introduction

137 (1) This Part of this Schedule applies where a company ceases to be a tonnage tax company.

(2) The provisions of paragraphs 138 and 139 (exit charges: chargeable gains and balancing charges) apply where a company ceases to be a tonnage tax company--

(a) on ceasing to be a qualifying company for reasons relating wholly or mainly to tax, or

(b) under paragraph 42 (exclusion from tonnage tax where tax avoidance arrangements entered into).

(3) Paragraph 140 (ten year disqualification from re-entry into tonnage tax) applies in every case where a company ceases to be a tonnage tax company otherwise than on the expiry of a tonnage tax election.

Exit charge: chargeable gains

138 (1) Paragraph 65(1)(a) (chargeable gain: disposal of tonnage tax assets) has effect in relation to gains (but not losses) on all relevant disposals as if the company had never been a tonnage tax company.

(2) For this purpose a "relevant disposal" means a disposal--

(a) on or after the day on which the company ceases to be a tonnage tax company, or

(b) at any time during the period of six years immediately preceding that day when the company was a tonnage tax company.

(3) Where sub-paragraph (1) operates to increase the amount of the chargeable gain on a disposal made at a time within the period mentioned in sub-paragraph (2)(b), the gain is treated to the extent of the increase--

(a) as arising immediately before the company ceased to be a tonnage tax company, and

(b) as not being relevant shipping profits of the company.

(4) No relief, deduction or set-off of any description is allowed against the amount of that increase or the corporation tax on that amount.

Exit charge: balancing charges

139 (1) This paragraph applies if in a relevant accounting period during which the company was a tonnage tax company it was liable to a balancing charge in relation to which paragraph 78 (phasing-out of balancing charges) applied to reduce the amount of the charge.

(2) For this purpose a "relevant accounting period" means an accounting period ending not more than six years before the day on which the company ceased to be a tonnage tax company.

(3) The company is treated as having received an additional amount of profits chargeable to corporation tax equal to the aggregate of the amounts by which those balancing charges were reduced.

(4) Those additional profits are treated--

(a) as arising immediately before the company ceased to be a tonnage tax company, and

(b) as not being relevant shipping profits of the company.

(5) No relief, deduction or set-off of any description is allowed against those profits or against corporation tax on them.

Ten year disqualification from re-entry into tonnage tax

140 (1) A company election made by a former tonnage tax company is ineffective if made before the end of the period of ten years beginning with the date on which the company ceased to be a tonnage tax company.

(2) A group election that--

(a) is made in respect of a group whose members include a former tonnage tax company, and

(b) would result in that company becoming a tonnage tax company,

is ineffective if made before the end of the period of ten years beginning with the date on which that company ceased to be a tonnage tax company.

(3) Sub-paragraphs (1) and (2) do not prevent a company becoming a tonnage tax company under and in accordance with the rules in Part XII of this Schedule (groups, mergers and related matters).

(4) In this paragraph "former tonnage tax company" means a company that is not a tonnage tax company but has previously been a tonnage tax company.

Second or subsequent application of this Part

141 Where this Part of this Schedule applies on a second or subsequent occasion on which a company ceases to be a tonnage tax company (whether or not this Part applied on any of the previous occasions)--

(a) the references to the company ceasing to be a tonnage tax company shall be read as references to the last occasion on which it did so, and

(b) the references to the period during which the company was a tonnage tax company do not include any period before its most recent entry into tonnage tax.

Part XV Supplementary provisions

Meaning of "ship"

142 In this Schedule "ship" means any vessel used in navigation, and includes a hovercraft.

Meaning of "on bareboat charter terms"

143 In this Schedule a charter "on bareboat charter terms" means a hiring of a ship for a stipulated period on terms which give the charterer possession and control of the ship, including the right to appoint the master and crew.

Meaning of "associate"

144 (1) In this Schedule "associate", in relation to an individual, means--

(a) a relative of that individual;

(b) a partner of that individual;

(i) that individual, or

(ii) any relative (whether living or dead) of that individual,

is or was a settlor;

(d) where that individual is interested in any shares or obligations of a company that are subject to a trust, the trustee or trustees of the settlement concerned;

(e) where that individual is interested in any shares or obligations of a company that are part of the estate of a deceased person, the personal representatives of the deceased.

(2) In sub-paragraph (1)(a) and (c)(ii) "relative" means husband or wife, parent or remoter forebear, child or remoter issue, or brother or sister.

Section 831(4) of the Taxes Act 1988 applies for the purposes of this paragraph as it applies for the purposes of that Act.

(3) In sub-paragraph (1)(c) and (d) "settlement" and "settlor" have the same meaning as in Chapter IA of Part XV of the Taxes Act 1988 (see section 660G(1) and (2) of that Act).

Exercise of functions conferred on "the Inland Revenue"

145 (1) Any power to make regulations conferred by this Schedule on "the Inland Revenue" is exercisable only by the Board.

(2) Subject to that, references in this Schedule to "the Inland Revenue" are to any officer of the Board.

Meaning of "company" and related expressions

146 In this Schedule--

"company" means a body corporate or unincorporated association, but does not include a partnership;
"controlled foreign company" has the same meaning as in Chapter IV of Part XVII of the Taxes Act 1988 (tax avoidance: controlled foreign companies);
"single company" means a company that is not a member of a group.

Index of defined expressions

147 In this Schedule the following expressions are defined or otherwise explained by the provisions indicated:

associate (of an individual)	paragraph 144
bareboat charter terms	paragraph 143
capital allowances (in Part IX)	paragraph 88(1)
certificate of non-compliance (with training requirement)	paragraph 32
company	paragraph 146
company election	paragraph 7(1)(a)
control	paragraph 118 (and see paragraph 117)
controlled foreign company	paragraph 146
core qualifying activities	paragraph 46
cost of providing the ship (in Part X)	paragraph 96
demerger	paragraph 121(1)
dominant party (in relation to a merger)	paragraph 126
entering (or leaving) tonnage tax	paragraph 2(2)
finance costs (in paragraphs 61 and 62)	paragraph 63
finance lease (and lessor and lessee) (in Part X)	paragraph 89(2)
group	paragraph 116
group election	paragraph 7(1)(b)
initial period	paragraph 10(1) (and see paragraph 11(2))
Inland Revenue	paragraph 145
leaving (or entering) tonnage tax	paragraph 2(2)
member of group	paragraph 116
merger	paragraph 121(1)
minimum training obligation	paragraph 24
offshore activities (in Part XI)	paragraph 104
offshore profits (in Part XI)	paragraph 107(1)
payments in lieu of training	paragraph 29
pooling and related expressions (in Parts IX, X and XI)	paragraph 88(2) and (3)
operating (a ship)	paragraph 18
qualifying activity and qualifying expenditure (in Parts IX, X and XI)	paragraph 88(1)
qualifying company	paragraph 16(1) (and see paragraph 17)
qualifying group	paragraph 16(2)
qualifying incidental activities	paragraph 48
qualifying secondary activities	paragraph 47
qualifying ship	paragraphs 19 to 22
relevant shipping income	paragraph 44(2)
relevant shipping profits	paragraph 44(1) (and see paragraph 108(2))
renewal election	paragraph 15(1)
the 75% limit (on chartered-in tonnage)	paragraph 37
ship	paragraph 142
single company	paragraph 146
subject to tonnage tax	paragraph 2(2)
tonnage	paragraph 6(1)
tonnage tax	paragraph 1(1)
tonnage tax activities	paragraph 45 (and see paragraph 108(1))
tonnage tax asset (in Parts VIII and XI)	paragraph 64
tonnage tax company	paragraph 2(1)
tonnage tax election	paragraph 1(2) (and see Part II)
tonnage tax group	paragraph 2(1)
tonnage tax pool (in Part IX)	paragraph 69
tonnage tax profits	paragraphs 3 to 5 (and see Part XI)
tonnage tax trade	paragraph 53(1)
training commitment	paragraph 25 (and see paragraphs 27(4) and (5) and 28(2))

Section 87.

SCHEDULE 23 Tax treatment of amounts relating to acquisition etc. of certain rights

Rights to which this Schedule applies

1 This Schedule applies to--

(a) licences granted under section 1 of the [1949 c. 54.] Wireless Telegraph Act 1949 in accordance with regulations made under section 3 of the [1998 c. 6.] Wireless Telegraphy Act 1998 (bidding for licences), and

(b) indefeasible rights to use a telecommunications cable system ("IRUs"),

and to any right derived, directly or indirectly, from a right within paragraph (a) or (b).

Tax treatment of expenditure on acquisition and receipts from disposal

2 (1) Amounts that may in accordance with normal accounting practice be taken into account in determining profit or loss for accounting purposes in respect of--

(a) expenditure on the acquisition of a right to which this section applies, or

(b) receipts from the disposal of any such right,

shall be treated as items of a revenue nature for tax purposes provided they are so taken into account in any relevant statutory accounts of the taxpayer.

(2) The reference in sub-paragraph (1) to the acquisition of a right to which this Schedule applies includes--

(a) the extension of rights attached to such a right, and

(b) in relation to a right subject to a derivative right, the cancellation or restriction of rights attached to the derivative right.

(3) The reference in sub-paragraph (1) to the disposal of a right to which this Schedule applies includes--

(a) the cancellation or restriction of rights attached to such a right, and

(b) the granting of a derivative right or the extension of rights attached to a derivative right.

Tax treatment of amounts arising from revaluation

3 (1) There shall also be taken into account for tax purposes as an item of a revenue nature any amount in respect of the revaluation of a right to which this Schedule applies that, in accordance with normal accounting practice, falls to be taken into account for accounting purposes.

(2) This paragraph applies whether or not the item--

(a) may be so taken into account in determining profit or loss, or

(b) is so taken into account in any relevant statutory accounts of the taxpayer.

(3) An item taken into account for tax purposes under this paragraph shall be so taken into account as a credit or debit for the period of account in which it is recognised for accounting purposes in accordance with normal accounting practice.

Tax treatment must accord with accounting approach in relevant group accounts

4 (1) If the taxpayer is a member of a group of companies for which consolidated group accounts are required to be prepared, the accounting approach adopted by the taxpayer for tax purposes in respect of items within paragraph 2 or 3 must not be more cautious than that adopted in the group accounts.

(2) The "accounting approach" means the accounting policies used in preparing the accounts and the methods of applying those policies.

(3) Where consolidated group accounts are required to be prepared for more than one group of which the taxpayer is a member, this paragraph applies in relation to each of them.

(4) In this paragraph--

"consolidated group accounts" means group accounts that satisfy the requirements of--
(a)
section 227 of the [1985 c. 6.] Companies Act 1985, or
(b)
in Northern Ireland, Article 235 of the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986,

or the corresponding requirements of the law of a country outside the United Kingdom; and
"group of companies" means a group as defined in--
(a)
section 262(1) of the [1985 c. 6.] Companies Act 1985, or
(b)
in Northern Ireland, Article 270(1) of the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986,

or the corresponding provisions of the law of a country outside the United Kingdom.

Interpretation

5 In this Schedule--

"normal accounting practice" means normal accounting practice with respect to the statutory accounts of companies incorporated in a part of the United Kingdom;
"statutory accounts" means accounts that are required by law to be prepared and which meet the requirements of--
(a)
section 226 of the [1985 c. 6.] Companies Act 1985, or
(b)
in Northern Ireland, Article 234 of the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986,

or the corresponding requirements of the law of a country outside the United Kingdom; and
"for tax purposes" means for the purposes of calculating the amount of any profits chargeable to income tax or corporation tax.

Transitional provision in relation to IRUs

6 (1) This Schedule does not apply to IRUs acquired before 21st March 2000.

(2) This Schedule does not apply to an IRU by virtue of its being acquired on or after that date, directly or indirectly, from an associate or an associated company if the associate or associated company acquired the IRU before that date.

For this purpose--

"associate" has the meaning given by section 417(3) and (4) of the Taxes Act 1988; and
"associated company"--
(a)
in relation to another company, has the meaning given by section 416(1) of that Act, and
(b)
in relation to an individual, means a company of which that individual has control within the meaning of subsections (2) to (6) of that section.

Section 91(2).

SCHEDULE 24 New Schedule 4A to the Taxation of Chargeable Gains Act 1992

The Schedule inserted after Schedule 4 to the [1992 c. 12).] Taxation of Chargeable Gains Act 1992 is as follows:

" Schedule 4A Disposal of interest in settled property: deemed disposal of underlying assets

Circumstances in which this Schedule applies

1 This Schedule applies where there is a disposal of an interest in settled property for consideration.

Meaning of "interest in settled property"

2 (1) For the purposes of this Schedule an "interest in settled property" means any interest created by or arising under a settlement.

(2) This includes any right to, or in connection with, the enjoyment of a benefit--

(a) created by or arising directly under a settlement, or

(b) arising as a result of the exercise of a discretion or power--

(i) by the trustees of a settlement, or

(ii) by any person in relation to settled property.

Meaning of "for consideration"

3 (1) For the purposes of this Schedule a disposal is "for consideration" if consideration is given or received by any person for, or otherwise in connection with, any transaction by virtue of which the disposal is effected.

(2) In determining for the purposes of this Schedule whether a disposal is for consideration there shall be disregarded any consideration consisting of another interest under the same settlement that has not previously been disposed of by any person for consideration.

(3) In this Schedule "consideration" means actual consideration, as opposed to consideration deemed to be given by any provision of this Act.

Deemed disposal of underlying assets

4 (1) Where this Schedule applies and the following conditions are met--

(a) the condition as to UK residence of the trustees (see paragraph 5),

(b) the condition as to UK residence of the settlor (see paragraph 6), and

the trustees of the settlement are treated for all purposes of this Act as disposing of and immediately reacquiring the relevant underlying assets.

This is referred to below in this Schedule as the "deemed disposal".

(2) In paragraphs 5, 6 and 7 "the relevant year of assessment" means the year of assessment in which the disposal of the interest in settled property is made.

(3) The deemed disposal is treated as taking place when the disposal of the interest in settled property is made.

This is subject to paragraph 13(3)(a) where the beginning of the disposal and its effective completion fall in different years of assessment.

Condition as to UK residence of trustees

5 (1) The condition as to UK residence of the trustees is that the trustees of the settlement were either--

(a) resident in the United Kingdom during the whole or part of the relevant year of assessment, or

(b) ordinarily resident in the United Kingdom during that year.

(2) For this purpose the trustees shall not be regarded as resident or ordinarily resident in the United Kingdom at any time when they fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.

(3) This paragraph has effect subject to paragraph 13(3)(b) where the beginning of the disposal and its effective completion fall in different years of assessment.

Condition as to UK residence of settlor

6 (1) The condition as to UK residence of the settlor is that in the relevant year of assessment, or any of the previous five years of assessment, a person who is a settlor in relation to the settlement either--

(a) was resident in the United Kingdom during the whole or part of the year, or

(b) was ordinarily resident in the United Kingdom during the year.

(2) Sub-paragraph (1) has effect subject to paragraph 13(3)(c) where the beginning of the disposal and its effective completion fall in different years of assessment.

(3) No account shall be taken for the purposes of this paragraph of any year of assessment before the year 1999-00.

Condition as to settlor interest in the settlement

7 (1) The condition as to settlor interest in the settlement is that at any time in the relevant period the settlement--

(a) was a settlor-interested settlement, or

(b) comprised property derived, directly or indirectly, from a settlement that at any time in that period was a settlor-interested settlement.

(2) The relevant period for this purpose is the period--

(a) beginning two years before the beginning of the relevant year of assessment, and

(b) ending with the date of the disposal of the interest in settled property.

This is subject to paragraph 13(3)(d) where the beginning of the disposal and its effective completion fall in different years of assessment.

(3) The relevant period shall not be treated as beginning before 6th April 1999.

If the rule in sub-paragraph (2) (or, where relevant, that in paragraph 13(3)(d)) would produce that result, the relevant period shall be treated as beginning on that date.

(4) For the purposes of this paragraph a "settlor-interested settlement" means a settlement in which a person who is a settlor in relation to the settlement has an interest or had an interest at any time in the relevant period.

The provisions of section 77(2) to (5) and (8) apply to determine for the purposes of this paragraph whether a settlor has (or had) an interest in the settlement.

(5) The condition as to settlor interest in the settlement is treated as not met in a year of assessment--

(a) where the settlor dies during the year, or

(b) in a case where the settlor is regarded as having an interest in the settlement by reason only of--

(i) the fact that property is, or will or may become, payable to or applicable for the benefit of his spouse, or

(ii) the fact that a benefit is enjoyed by his spouse,

where the spouse dies, or the settlor and the spouse cease to be married, during the year.

The relevant underlying assets

8 (1) Where the interest disposed of is a right in relation to a specific fund or other defined part of the settled property, the deemed disposal is of the whole or part of each of the assets comprised in that fund or part.

In any other case the deemed disposal is of the whole or part of each of the assets comprised in the settled property.

(2) Where the interest disposed of is an interest in a specific fraction or amount of the income or capital of--

(a) the settled property, or

(b) a specific fund or other defined part of the settled property,

the deemed disposal is of a corresponding part of each of the assets comprised in the settled property or, as the case may be, each of the assets comprised in that fund or part.

In any other case the deemed disposal is of the whole of each of the assets so comprised.

(3) Sub-paragraphs (1) and (2) have effect subject to paragraph 13(4)(a) where the identity of the underlying assets changes during the period between the beginning of the disposal and its effective completion.

(4) Where part only of an asset is comprised in a specific fund or other defined part of the settled property, that part of the asset shall be treated for the purposes of this Schedule as if it were a separate asset.

Character of deemed disposal

9 (1) The deemed disposal shall be taken--

(a) to be for a consideration equal to the whole or, as the case may be, a corresponding part of the market value of each of the assets concerned, and

(b) to be a disposal under a bargain at arm's length.

(2) Sub-paragraph (1)(a) shall be read with paragraph 13(4)(b) where the value of the assets changes during the period between the beginning of the disposal and its effective completion.

Avoidance of double-counting

10 (1) The provisions of this paragraph have effect to prevent there being both a deemed disposal under this Schedule in relation to the disposal of an interest in settled property and a chargeable disposal of the interest itself.

A "chargeable disposal" means one in relation to which section 76(1) does not apply.

(2) If there would be a chargeable gain on the disposal of the interest in the settlement, then--

(a) if--

(i) the chargeable gain on the disposal of the interest would be greater than the net chargeable gain on the deemed disposal, or

(ii) there would be no net chargeable gain on the deemed disposal,

the provisions of this Schedule as to a deemed disposal do not apply; and

(b) in any other case, the provisions of this Schedule as to a deemed disposal apply and no chargeable gain is treated as accruing on the disposal of the interest in the settlement.

(3) If there would be an allowable loss on the disposal of the interest in the settlement, then--

(a) if there would be a greater net allowable loss on the deemed disposal, the provisions of this Schedule as to a deemed disposal do not apply; and

(b) in any other case, the provisions of this Schedule as to a deemed disposal apply and no allowable loss is treated as accruing on the disposal of the interest in the settlement.

(4) If there would be neither a chargeable gain nor an allowable loss on the disposal of the interest in the settlement, then--

(a) if there would be a net allowable loss on the deemed disposal, the provisions of this Schedule as to a deemed disposal do not apply; and

(b) in any other case, the provisions of this Schedule as to a deemed disposal apply.

(5) For the purposes of this paragraph--

(a) there is a net chargeable gain on a deemed disposal if the aggregate of the chargeable gains accruing to the trustees in respect of the assets involved exceeds the aggregate of the allowable losses so accruing; and

(b) there is a net allowable loss on a deemed disposal if the aggregate of the allowable losses accruing to the trustees in respect of the assets involved exceeds the aggregate of the chargeable gains so accruing.

Recovery of tax from person disposing of interest

11 (1) This paragraph applies where chargeable gains accrue to the trustees on the deemed disposal and--

(a) tax becomes chargeable on and is paid by the trustees in respect of those gains, or

(b) a person who is a settlor in relation to the settlement recovers from the trustees under section 78 an amount of tax in respect of those gains.

(2) The trustees are entitled to recover the amount of the tax referred to in sub-paragraph (1)(a) or (b) from the person who disposed of the interest in the settlement.

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