Finance Act 2002 (c. 23)

(The document as of February, 2008)

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(a) was acquired before the beginning of the first accounting period to which this Schedule applies in relation to it, and

(b) is a chargeable intangible asset immediately after the beginning of that period,

it shall be treated for the purposes of Part 7 (roll-over relief on realisation and reinvestment) as if it had been a chargeable intangible asset at all material times between its acquisition and the beginning of that period.

(4) Schedule 23 to the Finance Act 2000 shall cease to have effect for the purposes of corporation tax as regards accounting periods ending after commencement.

Application of Schedule to existing Lloyd's syndicate capacity

129 (1) This Schedule applies to an existing asset consisting of the rights of a member of Lloyd's under a syndicate within the meaning of Chapter 5 of Part 4 of the Finance Act 1994 (c. 9) (taxation of corporate members of Lloyd's).

(2) This Schedule has effect in relation to the asset as regards amounts to be brought into account for tax purposes in accounting periods ending after commencement.

(3) For the purposes of paragraph 9(5) (writing down on accounting basis: calculation of amount of debit for tax purposes) as it applies to the first accounting period to which this Schedule applies in relation to such an asset, the tax written down value of the asset shall be computed under paragraph 27 as if the debits to be deducted under that paragraph included all accounting losses previously recognised in respect of the asset, whether or not they gave rise to a deduction for tax purposes.

(4) If the asset--

(a) was acquired before the beginning of the first accounting period to which this Schedule applies in relation to it, and

(b) is a chargeable intangible asset immediately after the beginning of that period,

Roll-over relief: application in relation to disposal of existing asset after commencement

130 (1) This paragraph provides for the application of Part 7 (roll-over relief in case of reinvestment) where a company disposes of an existing asset after commencement.

References in this paragraph to the disposal of an asset have the same meaning as in the Taxation of Chargeable Gains Act 1992 (c. 12).

(2) Part 7 applies in accordance with this paragraph with the following adaptations--

(a) for references to the realisation of the old asset substitute references to its disposal;

(b) for references to its being a chargeable intangible asset substitute references to its being a chargeable asset within the Taxation of Chargeable Gains Act 1992 (c. 12);

(c) for references to the proceeds of its realisation substitute references to the net proceeds of disposal under that Act; and

(d) for references to its cost recognised for tax purposes substitute references to the cost under that Act.

(3) For the purposes of sub-paragraph (2)(b) an asset is a chargeable asset within the Taxation of Chargeable Gains Act 1992 in relation to a company at any time if, were the asset to be disposed of at that time, any gain accruing to the company on the disposal would be a chargeable gain within the meaning of that Act, and either--

(a) at that time the company is resident or ordinarily resident in the United Kingdom, or

(b) the gain would form part of the company's chargeable profits for corporation tax purposes by virtue of section 10(3) of that Act,

unless the company (were it to dispose of the asset at that time) would fall to be regarded for the purposes of any double taxation relief arrangements as not liable in the United Kingdom to tax on any gain accruing to it on the disposal.

(4) For the purposes of sub-paragraph (2)(c) the net proceeds of disposal under the Taxation of Chargeable Gains Act 1992 shall be taken to be the amount or value of the consideration for the disposal reduced by any incidental costs of making the disposal that would be allowable as a deduction under section 38(1)(c) of that Act.

(5) For the purposes of sub-paragraph (2)(d) the cost under the Taxation of Chargeable Gains Act 1992 shall be taken to be an amount equal to the difference between the net proceeds of disposal as defined in sub-paragraph (4) and the amount of the chargeable gain on the disposal.

(6) Paragraph 93 (exclusion of roll-over relief in case of part realisation involving related party) does not apply in a case where Part 7 applies by virtue of this paragraph.

(7) Where a company is entitled to relief under Part 7 by virtue of this paragraph, it is treated for the purposes of the Taxation of Chargeable Gains Act 1992 as if the consideration for the disposal of the old asset were reduced by the amount available for relief.

This does not affect the treatment for any purpose of the Taxes Acts of the other party to any transaction involved in the disposal of the old asset or the expenditure on other assets.

Roll-over relief: application in relation to degrouping charge on existing asset arising after commencement

131 (1) This paragraph provides for the application of Part 7 (roll-over relief in case of reinvestment) where--

(a) a company is treated by virtue of subsection (3) or (6) of section 179 of the Taxation of Chargeable Gains Act 1992 (degrouping charge) as having sold and reacquired an existing asset, and

(b) the time at which by virtue of subsection (4) or (8) of that section the gain is treated as accruing is after commencement.

(2) Part 7 applies in accordance with this paragraph with the adaptations specified in paragraph 130(2) and the following further adaptations (which correspond to those in paragraph 65)--

(a) in paragraph 38 (conditions to be met in relation to the old asset), for the references to the old asset being a chargeable intangible asset throughout the period during which it was held by the company substitute a reference to its being a chargeable asset within the Taxation of Chargeable Gains Act 1992 (c. 12) throughout the period during which it was held by the company referred to in section 179 of that Act as company B;

(b) in paragraph 39(1) (conditions to be met in relation to expenditure on other assets), for the references to the date of realisation of the old asset substitute references to--

(i) in a case within subsection (3) of section 179 of that Act, the time at which the gain is treated as accruing under subsection (4) of that section, and

(ii) in a case within subsection (6) of that section, the time at which the gain is treated as accruing under subsection (8) of that section;

(c) references to the proceeds of realisation shall be read as references to the amount of the consideration for which the company is treated under that Act as having sold and reacquired the asset.

(3) Paragraph 130(3) (meaning of "chargeable asset") applies for the purposes of sub-paragraph (2)(a) of this paragraph.

(4) Paragraph 93 (exclusion of roll-over relief in case of part realisation involving related party) does not apply in a case where Part 7 applies by virtue of this paragraph.

(5) A company entitled to relief under Part 7 by virtue of this paragraph is treated for the purposes of the Taxation of Chargeable Gains Act 1992 as if the consideration for the disposal of the old asset were reduced by the amount available for relief.

This does not affect the treatment for any purpose of the Taxes Acts of the other party to any transaction involved in the disposal of the old asset or the expenditure on other assets.

Roll-over relief: transitory interaction with relief on replacement of business asset

132 (1) In relation to the disposal after commencement of an asset that is both--

(a) an asset of a class specified in section 155 of the Taxation of Chargeable Gains Act 1992 (assets qualifying for roll-over relief on replacement of business asset), and

(b) an intangible fixed asset,

the period specified in section 152(3) of that Act (period within which new assets must be acquired) does not include, and may not be extended so as to include, any period after commencement.

(2) Subject to that, relief may be claimed in such a case either under Part 7 of this Schedule (roll-over relief on realisation and reinvestment) or under section 152 or 153 of the Taxation of Chargeable Gains Act 1992, or partly under Part 7 and partly under section 152 or 153.

(3) For the purposes of any such claim under section 152 or 153 any expenditure on other assets within the meaning of Part 7 shall be treated as if it were an amount applied as mentioned in section 152(1).

(4) For the purposes of any such claim under Part 7 any amount applied as mentioned in section 152(1) shall be treated as if it were expenditure incurred on other assets.

(5) Classes 4 to 7 in section 155 of the Taxation of Chargeable Gains Act 1992 (c. 12) (goodwill and various types of quota) shall cease to have effect for the purposes of corporation tax as regards the acquisition of new assets that are chargeable intangible assets.

(6) References in this paragraph to the disposal of an asset have the same meaning as in that Act.

Part 15 Interpretation

References to expenditure on an asset

133 (1) References in this Schedule to expenditure on an asset are to any expenditure (including abortive expenditure)--

(a) for the purpose of acquiring or creating, or establishing title to, the asset, or

(b) by way of royalty in respect of the use of the asset, or

(2) No account shall be taken of capital expenditure on tangible assets in determining for the purposes of this Schedule the amount of expenditure on an intangible asset.

"Capital expenditure" here has the same meaning as in the Capital Allowances Act 2001 (c. 2).

(3) Any necessary apportionment shall be made on a just and reasonable basis in a case where expenditure is incurred partly as mentioned in sub-paragraph (1) or (2) and partly otherwise.

References to amounts recognised in profit and loss account

134 References in this Schedule to an amount recognised in a company's profit and loss account for a period include--

(a) an amount recognised in a statement of total recognised gains and losses or other statement of items brought into account in computing the company's profits and losses for that period; and

(b) an amount that would have been so recognised if a profit and loss account or other such statement as is mentioned in paragraph (a) had been drawn up for that period in accordance with generally accepted accounting practice.

Meaning of "accounting value"

135 References in this Schedule to the "accounting value" of an asset are to the net book value (or carrying amount) of the asset recognised for accounting purposes.

Meaning of "adjustments required for tax purposes"

136 References in this Schedule to "adjustments required for tax purposes" are to any adjustment required--

(a) by Schedule 28AA to the Taxes Act 1988 (provision not at arm's length), or

(b) by any provision of this Schedule.

Meaning of "chargeable intangible asset" and "chargeable realisation gain"

137 (1) For the purposes of this Schedule--

(a) an asset is a "chargeable intangible asset" in relation to a company at any time if, were it to be realised by the company at that time, any gain on its realisation would be a chargeable realisation gain;

(b) there is a "chargeable realisation gain" if a gain on the realisation of an asset gives rise to a credit required to be brought into account for tax purposes under Part 4 (realisation of intangible fixed asset).

(2) For the purposes of sub-paragraph (1)--

(a) there is a gain on the realisation of an asset in any case if the circumstances are such that paragraph 20(2)(a), 21(2)(a) or 23(2) applies, and

(b) there shall be disregarded in determining whether there is such a gain--

(i) the availability of relief under Part 7 (roll-over relief on realisation and reinvestment), and

(ii) any provision of this Schedule under which a transfer of an asset is to be treated as tax-neutral.

Interpretation provisions relating to insurance companies

138 (1) In this Schedule "insurance company", "life assurance business", "long-term business", "long-term insurance fund" and "basic life assurance and general annuity business" have the same meaning as in Chapter 1 of Part 12 to the Taxes Act 1988 (see section 431(2) of that Act).

(2) Any question arising in the case of an intangible fixed asset held by an insurance company as to the extent to which--

(a) the asset is to be treated for the purposes of this Schedule as held for the purposes of any category of business carried on by the company, or

(b) credits or debits under this Schedule in respect of the asset are to be treated as referable to any such category of business,

shall be determined in accordance with section 432A of the Taxes Act 1988 as that section would apply (apart from this Schedule) in relation to income or gains from the asset.

(3) Any question arising as to the extent to which royalties payable by an insurance company are referable to any class of business carried on by the company shall be determined in accordance with section 432A of the Taxes Act 1988 as that section would apply if--

(a) the right in respect of the enjoyment or exercise of which the royalties are payable was an asset held by the company, and

(b) the royalties payable were income from that asset.

Meaning of "royalty"

139 In this Schedule "royalty" means a royalty in respect of the enjoyment or exercise of rights that constitute an intangible fixed asset.

Meaning of "tax-neutral transfer"

140 (1) This paragraph applies to a transfer of an asset that is, by virtue of any provision of this Schedule, to be treated as a "tax-neutral" transfer.

(2) Where this paragraph applies--

(a) the transfer is regarded for the purposes of this Schedule as not involving any realisation of the asset by the transferor or any acquisition of that asset by the transferee, and

(b) the transferee is treated for the purposes of this Schedule as having held the asset at all times when it was held by the transferor and as having done all such things in relation to the asset as were done by the transferor.

(3) This means, in particular--

(a) that the original cost of the asset in the hands of the transferor is treated as the original cost in the hands of the transferee, and

(b) that all such debits and credits in relation to the asset as have been brought into account for tax purposes by the transferor under this Schedule are treated as if they had been so brought into account by the transferee.

The reference in paragraph (a) to the cost of the asset is to the cost recognised for tax purposes.

Meaning of "the Inland Revenue"

141 (1) Functions under these provisions are functions of the Board--

paragraph 35(2) (relief against total profits: power to allow longer period for claim),
paragraph 39(1)(a) (roll-over relief: power to allow longer reinvestment period),
paragraphs 84(6), 85(5), 86(9), 87(8) and 88 (transfers treated as tax-neutral, etc: clearance procedure).

These functions are within section 4A of the Inland Revenue Regulation Act 1890 (c. 21) (functions of Board exercisable by officer acting with their authority).

(2) Subject to sub-paragraph (1), references in this Schedule to "the Inland Revenue" are to any officer of the Board.

(3) In this paragraph "the Board" means the Commissioners of Inland Revenue.

Meaning of "the Taxes Acts"

142 In this Schedule "the Taxes Acts" means the enactments relating to income tax, corporation tax or chargeable gains.

Index of defined expressions

143 The expressions listed below are defined or otherwise explained by the provisions indicated:

accounting value	paragraph 135
adjustments required for tax purposes	paragraph 136
basic life assurance and general annuity business	paragraph 138(1)
chargeable intangible asset	paragraph 137(1)(a)
chargeable realisation gain	paragraph 137(1)(b)
company (in Part 8)	paragraph 46(2)
effective 51% subsidiary	paragraph 52
existing asset	paragraph 118(3) (and see paragraph 127)
expenditure on an asset	paragraph 133
goodwill	paragraph 4(2)
group (of companies)	paragraph 47 and Part 8 generally
Inland Revenue	paragraph 141
insurance company	paragraph 138(1)
intangible asset	paragraph 2
intangible fixed asset	paragraphs 3 and 4(1)
life assurance business	paragraph 138(1)
long-term business and long-term insurance fund	paragraph 138(1)
major interest (in Part 12)	paragraphs 96(2) and (3) and 97 to 99
non-trading credits or debits	paragraph 34(1)
non-trading gain (or loss) on intangible fixed assets	paragraph 34(2) or (3)
old asset (in Part 7)	paragraph 37(1)
other assets (in Part 7)	paragraph 37(1)
part realisation (of asset)	paragraph 19(3)
principal company (of group)	paragraph 47(1) and Part 8 generally
proceeds of realisation	paragraph 24
profit and loss account (amounts recognised in)	paragraph 134
realisation (of asset)	paragraph 19
related party	paragraph 95 to 101
royalty	paragraph 139
subsidiary (in relation to company formed outside UK)	paragraph 46(3)
the Taxes Acts	paragraph 142
tax-neutral transfer	paragraph 140
tax written down value	Part 5

Section 84(2)

SCHEDULE 30 Gains and losses of a company from intangible fixed assets: consequential amendments

General provisions about deductions

1 (1) For sections 337 and 337A of the Taxes Act 1988 (corporation tax: general provisions about taxation of income) substitute--

" 337 Company beginning or ceasing to carry on trade

(1) Where a company begins or ceases--

(a) to carry on a trade, or

(b) to be within the charge to corporation tax in respect of a trade,

the company's income shall be computed as if that were the commencement or, as the case may be, the discontinuance of the trade, whether or not the trade is in fact commenced or discontinued.

(2) Subsection (1) applies to a Schedule A business or overseas property business as it applies to a trade.

337A Computation of company's profits or income: exclusion of general deductions

(1) For the purposes of corporation tax, subject to any provision of the Corporation Tax Acts expressly authorising a deduction--

(a) a company's profits shall be computed without any deduction in respect of dividends or other distributions, and

(b) a company's income from any source shall be computed without any deduction in respect of charges on income.

(2) In computing a company's income from any source for the purposes of corporation tax--

(a) no deduction shall be made in respect of interest except in accordance with Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships); and

(b) no deduction shall be made in respect of losses from intangible fixed assets within Schedule 29 to the Finance Act 2002 except in accordance with that Schedule. " .

(2) For section 338 of the Taxes Act 1988 (corporation tax: charges on income) substitute--

" 338 Charges on income deducted from total profits

(1) Charges on income are allowed as deductions from a company's total profits in computing the corporation tax chargeable for an accounting period.

(2) They are deducted from the company's total profits for the period as reduced by any other relief from tax other than group relief.

(3) The amount of the deduction is limited to the amount that reduces the company's total profits for the period to nil.

(4) Except as otherwise provided, a deduction is allowed only in respect of payments made by the company in the accounting period concerned.

(5) The above provisions are subject to any express exceptions in the Corporation Tax Acts.

338A Meaning of "charges on income"

(1) This section defines what payments or other amounts are "charges on income" for the purposes of corporation tax.

This section has effect subject to any express exceptions in the Corporation Tax Acts.

(2) Subject to the following provisions of this section, the following (and only the following) are charges on income--

(a) annuities or other annual payments that meet the conditions specified in section 338B;

(b) qualifying donations within the meaning of section 339 (qualifying donations to charity);

(3) No payment that is deductible in computing profits or any description of profits for the purposes of corporation tax shall be treated as a charge on income.

(4) No payment shall be treated as a charge on income if (without being so deductible) it is--

(a) an annuity payable by an insurance company, or

(b) an annuity or other annual payment payable by a company wholly or partly in satisfaction of any claim under an insurance policy in relation to which the company is the insurer.

In paragraph (a) "insurance company" has the same meaning as in Chapter 1 of Part 12.

338B Charges on income: annuities or other annual payments

(1) An annuity or other annual payment is a charge on income if--

(a) the requirements specified in subsection (2) are met, and

(b) it is not excluded from being a charge on income for the purposes of corporation tax--

(i) by any of the following provisions of this section, or

(ii) by any other provision of the Corporation Tax Acts.

(2) The requirements are that the payment--

(a) is made under a liability incurred for a valuable and sufficient consideration,

(b) is not charged to capital,

(d) in the case of a company not resident in the United Kingdom, is incurred wholly and exclusively for the purposes of a trade which is or is to be carried on by it in the United Kingdom through a branch or agency.

(3) An annuity or other annual payment made to a person not resident in the United Kingdom shall be treated as a charge on income only if the following conditions are met.

(4) The conditions are that the company making the payment is resident in the United Kingdom and that either--

(a) the company deducts tax from the payment in accordance with section 349, and accounts under Schedule 16 for the tax so deducted, or

(b) the person beneficially entitled to the income in respect of which the payment is made is a company that is not resident in the United Kingdom but which carries on a trade in the United Kingdom through a branch or agency and the payment falls to be brought into account in computing the chargeable profits (within the meaning given by section 11(2) of that company, or

(5) An annuity or other annual payment is not a charge on income if--

(a) it is payable in respect of the company's loan relationships, or

(b) it is a royalty to which Schedule 29 to the Finance Act 2002 applies (intangible fixed assets).

(6) Nothing in this section prevents an annuity or other annual payment from being a charge on income if it is a qualifying donation (within the meaning of section 339). " .

(3) In section 214(1) of the Taxes Act 1988 (chargeable payments connected with exempt distributions), in paragraph (c) (payments not to be treated as distributions for purposes of certain provisions) for "sections 337(2) and 338(2)(a)" substitute "section 337A(1)".

(4) In section 834(1) of the Taxes Act 1988 (interpretation of the Corporation Tax Acts), in the definition of "charges on income" for "338" substitute "338A".

(5) In Schedule 23A to the Taxes Act 1988 (manufactured dividends), in paragraph 4(2)(b) for "338(4)(a)" substitute "338B(4)(a)".

Surrender of non-trading loss by way of group relief

2 (1) In section 403 of the Taxes Act 1988 (amounts that may be surrendered by way of group relief)--

(a) in subsection (1)(b) (amounts that may be surrendered if available for group relief) for "or management expenses which are" substitute ", management expenses or a non-trading loss on intangible fixed assets";

(b) in subsection (3), in the first sentence (meaning of availability for group relief), for "and management expenses" substitute "management expenses and a non-trading loss on intangible fixed assets";

(c) in subsection (3), in the second sentence (order in which amounts treated as used), for "and finally management expenses" substitute ", management expenses and finally a non-trading loss on intangible fixed assets".

(2) In section 403ZD of the Taxes Act 1988 (further provisions as to amounts available for group relief), after subsection (5) insert--

" (6) A non-trading loss on intangible fixed assets means a non-trading loss on intangible fixed assets, within the meaning of Schedule 29 to the Finance Act 2002, for the surrender period.

It does not include so much of any such loss as is attributable to an amount being carried forward under paragraph 35(3) of that Schedule (amounts carried forward from earlier periods). " .

Extension of charitable exemption to non-trading gains

3 In section 505(1) of the Taxes Act 1988 (charities: exemptions), in paragraph (c) (income charged under Schedule D) after sub-paragraph (iib) insert--

" (iic) from tax under Case VI of Schedule D in respect of non-trading gains on intangible fixed assets under Schedule 29 to the Finance Act 2002, and " .

Change in ownership of company with unused non-trading loss

4 (1) Chapter 6 of Part 17 of the Taxes Act 1988 (tax avoidance: miscellaneous) is amended as follows.

(2) In section 768C, after subsection (12) add--

" (13) This section applies in relation to an asset to which Schedule 29 to the Finance Act 2002 applies (intangible fixed assets), with the following adaptations--

(a) for the reference to section 171(1) of the 1992 Act substitute a reference to paragraph 55 of that Schedule;

(b) for any reference to a chargeable gain under that Act substitute a reference to a chargeable realisation gain within the meaning of that Schedule that is a credit within paragraph 34(1)(a) of that Schedule (non-trading credits);

(c) for any reference to a disposal of the asset substitute a reference to its realisation within the meaning of that Schedule;

(d) for the reference to the relevant provisions of the 1992 Act substitute a reference to Part 6 of that Schedule. " .

(3) After section 768D insert--

" 768E Change in ownership of company with unused non-trading loss on intangible fixed assets

(1) Where there is a change in the ownership of an investment company and either--

(a) paragraph (a), (b) or (c) of section 768B(1) applies, or

(b) section 768C applies,

the following provisions have effect to prevent relief being given under paragraph 35 of Schedule 29 to the Finance Act 2002 by setting a non-trading loss on intangible fixed assets incurred by the company before the change of ownership against profits arising after the change.

(2) The accounting period in which the change of ownership occurs is treated for that purpose as two separate accounting periods, the first ending with the change and the second consisting of the remainder of the period.

(3) The profits or losses of the period in which the change occurs are apportioned to those two periods--

(a) where paragraph (a), (b) or (c) of section 768B(1) applies, in accordance with Parts 2 and 3 of Schedule 28A, or

(b) where section 768C applies, in accordance with Parts 5 and 6 of that Schedule,

unless in any case the specified method of apportionment would work unjustly or unreasonably in which case such other method shall be used as appears just and reasonable.

(4) Relief under paragraph 35 of Schedule 29 to the Finance Act 2002 against total profits of the same accounting period is available only in relation to each of those periods considered separately.

(5) A loss made in any accounting period beginning before the change of ownership may not be set off under paragraph 35(3) of Schedule 29 to the Finance Act 2002 against--

(a) in a case where paragraph (a), (b) or (c) of section 768B(1) applies, profits of an accounting period ending after the change of ownership;

(b) in a case where section 768C applies, so much of those profits as represents the relevant gain within the meaning of that section.

(6) Subsections (8) and (9) of section 768 (time limits for assessment; information powers) apply for the purposes of this section as they apply for the purposes of that section.

(7) In this section "investment company" has the same meaning as in Part 4. " .

(4) In paragraph 6 of Schedule 28A to the Taxes Act 1988 (amounts in issue for purposes of section 768B), after paragraph (dd) insert--

" (de) the amount of any non-trading credits or debits in respect of intangible fixed assets that fall to be brought into account for that period under paragraph 34 of Schedule 29 to the Finance Act 2002;

(df) the amount of any non-trading loss on intangible fixed assets carried forward to that accounting period under paragraph 35(3) of that Schedule; " .

(5) In paragraph 7(1) of that Schedule (apportionment for purposes of section 768B), after paragraph (f) insert--

" (g) in the case of any such credit or debit as is mentioned in paragraph 6(de), by apportioning to each accounting period the credits or debits that would fall to be brought into account in that period if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice;

(h) in the case of any such loss as is mentioned in paragraph 6(df) above, by apportioning the whole amount of the loss to the first part of the accounting period being divided. " .

(6) In paragraph 13(1) of that Schedule (amounts in issue for purposes of section 768C), after paragraph (ed) insert--

" (ee) the amount of any non-trading credits or debits in respect of intangible fixed assets that fall to be brought into account for that period under paragraph 34 of Schedule 29 to the Finance Act 2002;

(ef) the amount of any non-trading loss on intangible fixed assets carried forward to that accounting period under paragraph 35(3) of that Schedule; " .

(7) In paragraph 16(1) of that Schedule (apportionment for purposes of section 768C), after paragraph (f) insert--

" (g) in the case of any such credit or debit as is mentioned in paragraph 13(ee), by apportioning to each accounting period the credits or debits that would fall to be brought into account in that period if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice;

(h) in the case of any such loss as is mentioned in paragraph 13(ef), by apportioning the whole amount of the loss to the first part of the accounting period being divided. " .

Double taxation relief

5 (1) Part 18 of the Taxes Act 1988 (double taxation relief) is amended as follows.

(2) In section 795 (computation of income subject to foreign tax), in subsection (4) (application of that section notwithstanding certain other provisions) after "notwithstanding anything in" insert "--(a)" and at the end insert-- " , or

(b) paragraph 1(3) of Schedule 29 to the Finance Act 2002 (matters to be brought into account in respect of intangible fixed assets only under that Schedule). " .

(3) In the heading to section 797A (foreign tax on items giving rise to a non-trading credit), at the end add ": loan relationships".

(4) After that section insert--

" 797B Foreign tax on items giving rise to a non-trading credit: intangible fixed assets

(1) This section applies for the purposes of any arrangements where, in the case of a company--

(a) a non-trading credit relating to an item is brought into account for the purposes of Schedule 29 to the Finance Act 2002 (intangible fixed assets) for an accounting period ("the applicable accounting period"), and

(b) there is in respect of that item an amount of foreign tax for which, under the arrangements, credit is allowable against United Kingdom tax computed by reference to that item.

(2) It shall be assumed that tax chargeable under Case VI of Schedule D on the profits and gains arising for the applicable accounting period from the company's intangible fixed assets falls to be computed on the actual amount of its non-trading credits for that period, and without any deduction in respect of non-trading debits.

(3) Section 797(3) shall have effect as if--

(a) there were for the applicable accounting period an amount equal to the adjusted amount of the non-trading debits falling to be brought into account by being set against profits of the company for that period of any description, and

(b) different parts of that amount might be set against different profits.

(4) For this purpose the adjusted amount of a company's non-trading debits for an accounting period is given by:

TotalDebits - Amount Carried Forward

where--

Total Debits is the aggregate amount of the company's non-trading debits for that accounting period under Schedule 29 to the Finance Act 2002 (intangible fixed assets), and
Amount Carried Forward is the amount (if any) carried forward to the next accounting period of the company under paragraph 35(3) of that Schedule (carry-forward of non-trading loss in respect of which no claim is made for it to be set against total profits of current period). " .

(5) In section 811 (deduction for foreign tax where no credit available), in subsection (3) (application of that section notwithstanding certain other provisions) after "notwithstanding anything in" insert "--(a)" and at the end insert-- " , or

(b) paragraph 1(3) of Schedule 29 to the Finance Act 2002 (matters to be brought into account in respect of intangible fixed assets only under that Schedule). " .

Value-shifting provisions

6 After section 33 of the Taxation of Chargeable Gains Act 1992 (provisions supplementary to sections 30 to 32) insert--

" 33A Modification of sections 30 to 33 in relation to chargeable intangible asset

(1) Sections 30 to 33 have effect in relation to a chargeable intangible asset subject to the following modifications.

In this section "chargeable intangible asset" has the same meaning as in Schedule 29 to the Finance Act 2002.

(2) Any reference in those sections--

(a) to a disposal or part disposal of the asset shall be read as a reference to its realisation or part realisation within the meaning of that Schedule (see paragraph 19 of that Schedule);

(b) to an disposal of the asset under section 171(1) shall be read as a reference to its transfer under paragraph 55 of that Schedule (transfers within a group);

(c) to a disposal of the asset under section 179 shall be read as a reference to its realisation under paragraph 58 or 60 of that Schedule (degrouping).

(3) In section 31(6), paragraph (c) shall not apply to a revaluation where the profit on the revaluation is wholly taken into account as a credit under that Schedule (see paragraph 15 of that Schedule).

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