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Finance Bill
Schedule 41 — Companies in administration

    440

 

                           (6)                  This sub-paragraph applies to any instrument for the sale or

transfer of any of the shares by the company, other than an

instrument which, in the absence of sub-paragraph (5), would be

an instrument in relation to which—

                      (a)                     section 67(2) of the Finance Act 1986 (transfer to person

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whose business is issuing depositary receipts etc), or

                      (b)                     section 70(2) of that Act (transfer to person who provides

clearance services etc),

                                             applied.”.

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Schedule 41

Section 196

 

Companies in administration

Accounting period for company in administration

  1       (1)      Section 12 of the Taxes Act 1988 (corporation tax: basis of, and periods for,

assessment) is amended as follows.

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          (2)      In subsection (3), after paragraph (d) insert—

                    “(da)                      the company ceasing to be in administration;”.

          (3)      After subsection (5A) insert—

              “(5B)                For the purposes of subsection (3)(da) a company ceases to be in

administration when it ceases to be in administration under

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Schedule B1 to the Insolvency Act 1986 or any corresponding event

occurs otherwise than under that Act.”.

          (4)      In subsection (7) (accounting periods where company is wound up), after

the words “subject to” insert “subsection (7ZA) below and”.

          (5)      After subsection (7) insert—

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              “(7ZA)                Notwithstanding anything in subsections (1) to (6) above, where a

company enters administration—

                    (a)                   an accounting period of the company shall end immediately

before the day the company enters administration, and

                    (b)                   if immediately before the company enters administration it is

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in the course of being wound up, subsection (7) ceases to

apply at the end of that accounting period.

                              For this purpose a company enters administration when it enters

administration under Schedule B1 to the Insolvency Act 1986 or is

subject to any corresponding procedure otherwise than under that

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Act.”.

          (6)      In subsection (7A) for “subsections (1) to (7)” substitute “subsections (1) to

(7ZA)”.

Responsibility of officers of company in administration

  2       (1)      Section 108 of the Taxes Management Act 1970 (c. 9) (responsibility of

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company officers) is amended as follows.

 

 

Finance Bill
Schedule 41 — Companies in administration

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          (2)      In subsection (3)(a)—

              (a)             after first “liquidator” insert “or administrator”, and

              (b)             after second “liquidator” insert “or, as the case may be,

administrator”.

          (3)      After subsection (3) insert—

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              “(4)                For the purposes of subsection (3)(a), where two or more persons are

appointed to act jointly or concurrently as the administrator of a

company, the proper officer is—

                    (a)                   such one of them as is specified in a notice given to the Board

by those persons for the purposes of this section, or

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                    (b)                   where the Board is not so notified, such one or more of those

persons as the Board may designate as the proper officer for

those purposes.”.

Tax on companies in administration

  3        After section 342 of the Taxes Act 1988 (tax on company in liquidation)

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insert—

       “342A             Tax on companies in administration

              (1)             In this section—

                    (a)                   references to the relevant event, in relation to a company in

administration, are references—

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                           (i)                          to the administrator sending a notice in respect of the

company under paragraph 84(1) of Schedule B1 to the

Insolvency Act 1986 (company moving from

administration to dissolution), or

                           (ii)                         in the case of a company which enters administration

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otherwise than under that Act, to the doing of any

other act for a like purpose, and

                    (b)                   references to a company’s final year are references to the

financial year in which the relevant event occurs, and

references to the company’s penultimate year are references

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to the last financial year preceding its final year.

              (2)             Subject to subsections (3) and (4)—

                    (a)                   corporation tax shall be charged on the profits of the

company arising in the administration in its final year at the

rate of corporation tax fixed or proposed for the penultimate

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year, but

                    (b)                   where the corporation tax charged on the company’s income

included in those profits falls to be calculated or reduced in

accordance with section 13, it shall be so calculated or

reduced in accordance with such rate or fraction fixed or

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proposed for the penultimate year as is applicable under that

section.

              (3)             If, before the relevant event, any of the rates or fractions mentioned

in subsection (2) has been fixed or proposed for the final year, that

subsection shall have effect in relation to that rate or fraction as if for

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the references to the penultimate year there were substituted

references to the final year.

 

 

Finance Bill
Schedule 41 — Companies in administration

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              (4)             If, in the case of the company’s final accounting period, the income

(if any) which consists of interest received or receivable by the

company under section 826 does not exceed £2,000, that income shall

not be subject to corporation tax.

              (5)             In subsection (4) “the company’s final accounting period” means the

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last accounting period of the company before the relevant event.

              (6)             An assessment on the company’s profits for an accounting period in

which the company is in administration shall not be invalid because

made before the end of the accounting period.

              (7)             In making an assessment after the company enters administration

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and before the date of the relevant event, the administrator may act

on an assumption as to when that date will fall so far as it governs

section 12(3).

              (8)             The assumption of the wrong date shall not alter the company’s final

and penultimate year and, if the right date is later—

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                    (a)                   an accounting period shall end on the date assumed and a

new accounting period shall begin, and

                    (b)                   thereafter, section 12(3) shall apply as if the company had

entered administration at the beginning of that new

accounting period.

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              (9)             Subsections (7) and (9) of section 342 apply in relation to this section

as they apply in relation to that section, except that in subsection (7)

of that section the reference to the completion of the winding up is to

be read as a reference to the relevant event.

              (10)            Where the company entered administration before its final year,

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paragraphs (a) and (b) of subsection (2) (but not subsection (3)) apply

in relation to the company’s profits arising at any time in its

penultimate year.”.

Debit for bad debt where parties connected and creditor insolvent

  4       (1)      Paragraph 6A of Schedule 9 to the Finance Act 1996 (c. 8) (bad debt etc:

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parties having connection and creditor in insolvent liquidation etc) is

amended as follows.

          (2)      In sub-paragraph (1)—

              (a)             in paragraph (a), for “has gone into” substitute “is in”,

              (b)             for paragraph (b) substitute—

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                             “(b)                               that company is in insolvent administration;”, and

              (c)             in paragraph (d), for “an event has occurred, or circumstances exist,”

substitute “circumstances exist”.

          (3)      In sub-paragraph (2)—

              (a)             in paragraph (a) for “after the commencement” substitute “in the

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course”, and

              (b)             in paragraph (b) for “when the administration order is in force”

substitute “in the course of the administration”.

 

 

Finance Bill
Schedule 42 — Controlled foreign companies: exempt activities

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          (4)      For sub-paragraph (3) substitute—

                           “(3)                  For the purposes of this paragraph a company is in insolvent

liquidation during the period which—

                      (a)                     begins when it goes into liquidation, as defined in section

247(2) of the Insolvency Act 1986 or Article 6(2) of the

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Insolvency (Northern Ireland) Order 1989, at a time when

its assets are insufficient for the payment of its debts and

other liabilities and the expenses of the winding up, and

                      (b)                     ends when the winding up is completed or otherwise

brought to an end (whether under paragraph 37 or 38 of

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Schedule B1 to the Insolvency Act 1986 or otherwise).

                           (4)                  For the purposes of this paragraph a company in administration is

in insolvent administration if—

                      (a)                     in the case of an administration under Schedule B1 to the

Insolvency Act 1986, it entered administration at a time

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when its assets were insufficient for the payment of its

debts and other liabilities and the expenses of the

administration, or

                      (b)                     in a case where an administration order has effect under

Part 3 of the Insolvency (Northern Ireland) Order 1989, the

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order was made at such a time.”.

Commencement

  5       (1)      Subject to sub-paragraph (2), this Schedule has effect in relation to

companies which enter administration (whether under the Insolvency Act

1986 (c. 45) or otherwise) on or after the commencement of section 248 of the

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Enterprise Act 2002 (c. 40) (which substitutes Part 2 of the Insolvency Act

1986 (administration)).

          (2)      Paragraph 4 has effect in relation to companies which—

              (a)             are in insolvent liquidation or insolvent administration immediately

before 9th April 2003, or

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              (b)             go into insolvent liquidation or insolvent administration on or after

that date.

                   For this purpose “insolvent liquidation” and “insolvent administration” are

to be construed in accordance with paragraph 6A of Schedule 9 to the

Finance Act 1996 (c. 8) (as amended by paragraph 4 above).

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Schedule 42

Section 200

 

Controlled foreign companies: exempt activities

Introductory

  1        Part 2 of Schedule 25 to the Taxes Act 1988 (controlled foreign companies:

exempt activities) is amended as follows.

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Finance Bill
Schedule 42 — Controlled foreign companies: exempt activities

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Companies engaged in wholesale, distributive, financial or service business

  2       (1)      Paragraph 6 (meaning of “engaged in exempt activities”) is amended as

follows.

          (2)      In sub-paragraph (1)(c) (requirement that any of sub-paragraphs (2) to (4A)

applies to the company) for “(2) to (4A)” substitute “(2), (3), (4) or (4A)”.

5

          (3)      In sub-paragraph (2A) (persons from whom less than 50% of the gross

trading receipts of a wholesale etc business of the controlled foreign

company must be derived) omit the word “and” immediately preceding

paragraph (c) and at the end of that paragraph add “;

                    (d)                      persons not falling within paragraphs (a) to (c) above which

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are companies resident in the United Kingdom;

                    (e)                      persons not falling within paragraphs (a) to (c) above which

are companies not resident in the United Kingdom which

carry on business through a branch or agency in the United

Kingdom;

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                    (f)                      persons not falling within paragraphs (a) to (c) above who are

individuals habitually resident in the United Kingdom;

                              but where the company is a controlled foreign company falling

within sub-paragraph (2B) below, paragraphs (d) to (f) above shall be

disregarded.”.

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          (4)      After sub-paragraph (2A) insert—

                           “(2B)                  A controlled foreign company falls within this sub-paragraph if

either—

                      (a)                     its main business is the effecting or carrying out of

contracts of long-term insurance, other than protection

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business; or

                      (b)                     it is a member of an insurance group and its main business

is insuring or reinsuring large risks.

                                             Paragraph 11A below has effect for the interpretation of this sub-

paragraph.

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                           (2C)                  For the purposes of sub-paragraph (2)(b) above, a company’s

gross trading receipts from a business shall be regarded as directly

or indirectly derived from a person falling within sub-paragraph

(2A)(e) above only to the extent that they are derived directly or

indirectly from contracts or other arrangements relating to that

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person’s branch or agency in the United Kingdom.”.

          (5)      In sub-paragraph (4C) (which defines for the purposes of sub-paragraph

(2)(b) a “25 per cent assessable interest”, an expression not used in sub-

paragraph (2)(b) but used in sub-paragraph (2A)(b)) for “(2)(b)” substitute

“(2A)(b)”.

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Companies engaged in business of banking etc

  3       (1)      Paragraph 11 (provisions relating to wholesale, distributive, financial or

service business) is amended as follows.

          (2)      In sub-paragraph (3) (controlled foreign company engaged in business of

banking etc) for paragraph (a) (interest from UK company not to be regarded

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Finance Bill
Schedule 42 — Controlled foreign companies: exempt activities

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as receipt derived from connected or associated persons) substitute—

                    “(a)                      no payment of interest received from a company resident in

the United Kingdom which is connected or associated with

the controlled foreign company shall be regarded for the

purposes of paragraph 6(2)(b) above as a receipt derived

5

directly or indirectly from a person falling within paragraph

6(2A) above, but”.

          (3)      At the end of paragraph (b) of that sub-paragraph (the capitalisation test)

add “, and

                    (c)                      it shall also be conclusively presumed that the condition in

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paragraph 6(2)(b) is not fulfilled if 10% or more of the

company’s gross trading receipts from all businesses carried

on by it in the accounting period in question, taken together,

are receipts other than interest and are directly or indirectly

derived from persons—

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                           (i)                          which are companies resident in the United

Kingdom,

                           (ii)                         which are companies not resident in the United

Kingdom but which carry on business through a

branch or agency in the United Kingdom, or

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                           (iii)                        who are individuals habitually resident in the United

Kingdom,

                                          but for this purpose a company’s gross trading receipts shall

be regarded as directly or indirectly derived from a person

falling within sub-paragraph (ii) above only to the extent that

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they are derived directly or indirectly from contracts or other

arrangements relating to that person’s branch or agency in

the United Kingdom.”.

Interpretation of paragraph 6(2B)

  4        After paragraph 11 insert—

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         “11A                  (1)                  This paragraph has effect for the interpretation of paragraph 6(2B)

above.

                           (2)                  “Contract of long-term insurance” means any contract falling

within Part II of Schedule 1 to the Financial Services and Markets

Act 2000 (Regulated Activities) Order 2001.

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                           (3)                  “Protection business” means contracts of long-term insurance

where—

                      (a)                     either—

                             (i)                            the contract has no surrender value; or

                             (ii)                           the consideration consists of a single premium and

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the surrender value does not exceed the amount of

that premium; and

                      (b)                     the contract makes no provision for its conversion or

extension in a manner which would result in its ceasing to

fall within paragraph (a) above;

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                                             and references to protection business include a reference to

reinsurance of protection business.

 

 

Finance Bill
Schedule 42 — Controlled foreign companies: exempt activities

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                           (4)                  “Insurance group” shall be construed in accordance with section

255A(5) of the Companies Act 1985 (meaning of “insurance group”

in Part 7) but reading Part 7 of that Act—

                      (a)                     as if it extended to Northern Ireland, and

                      (b)                     as if any reference to a company (within the meaning of

5

that Act) included a reference to a company as defined in

Article 3 of the Companies (Northern Ireland) Order 1986,

                                             but does not include such an insurance group if it falls within sub-

paragraph (5) below.

                           (5)                  Such an insurance group falls within this sub-paragraph if (within

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the meaning of that Part as so read) the parent company is a

subsidiary undertaking of a parent company which is neither—

                      (a)                     the parent company of an insurance group; nor

                      (b)                     a subsidiary undertaking of the parent company of an

insurance group.

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                           (6)                  A controlled foreign company is, in accordance with sub-

paragraphs (4) and (5) above, a “member of an insurance group” if

(within the meaning of that Part as so read) it is the parent

company, or a subsidiary undertaking of the parent company, of

an insurance group which is by virtue of sub-paragraph (4) above

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an insurance group for the purposes of paragraph 6(2B) above.

                           (7)                  A company’s main business is “insuring or reinsuring large risks”

if (and only if)—

                      (a)                     the company’s main business is the effecting or carrying

out of contracts of insurance; and

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                      (b)                     50% or more of its gross trading receipts from that business

are derived from insuring or reinsuring large risks.

                                             “Large risks” is defined in paragraph 11B below.

                           (8)                  In this paragraph—

                       “contract of insurance” has the meaning given by article 3(1)

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of the Financial Services and Markets Act 2000 (Regulated

Activities) Order 2001;

                       “contract of long-term insurance” has the meaning given by

sub-paragraph (2) above.

          11B                 (1)                  In paragraph 11A above “large risks” means—

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                      (a)                     risks falling within classes 4, 5, 6, 7, 11 and 12 of Part I of

Schedule 1 to the Financial Services and Markets Act 2000

(Regulated Activities) Order 2001;

                      (b)                     risks falling within classes 14 and 15 of that Part which

relate to a business carried on by the policy holder;

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                      (c)                     risks falling within classes 3, 8, 9, 10, 13 and 16 of that Part

where the policy holder carries on a business in respect of

which the condition specified in sub-paragraph (2) below

is satisfied.

                           (2)                  The condition referred to in sub-paragraph (1)(c) above is that, in

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the case of that business of the policy holder, at least two of the

three following criteria were exceeded in the most recent financial

year beginning on or after 1st January 1999 for which the

information is available—

 

 

 
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