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Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

    92

 

 150   Non-resident companies: assessment, collection and recovery of corporation

tax

     (1)    The enactments relating to corporation tax, so far as they make provision for or

in connection with the assessment, collection and recovery of tax, or of interest

on tax, have effect, in accordance with this section, as if the obligations and

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liabilities of a non-resident company were also obligations and liabilities of its

UK representative.

     (2)    For this purpose a permanent establishment in the United Kingdom through

which a non-resident company carries on a trade—

           (a)           is the UK representative of the company in relation to chargeable

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profits of the company attributable to that establishment,

           (b)           continues to be the company’s UK representative in relation to those

profits even after ceasing to be a permanent establishment through

which the company carries on a trade, and

           (c)           shall be treated, if it would not otherwise be so treated, as a distinct and

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separate person from the non-resident company.

            As to the chargeable profits attributable to a permanent establishment, see

section 11(2A) of the Taxes Act 1988.

     (3)    Subject to the following provisions of this section—

           (a)           the discharge by the UK representative of a non-resident company, or

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by the company itself, of an obligation or liability that corresponds to

one to which the other is subject discharges the corresponding

obligation or liability of the other, and

           (b)           a non-resident company is bound, as if they were its own, by acts or

omissions of its UK representative in the discharge of the obligations

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and liabilities imposed on the representative by this section.

     (4)    An obligation or liability attaching to a non-resident company—

           (a)           by reason of its having been given or served with a notice or other

document, or

           (b)           by reason of its having received a request or demand,

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            does not also attach to its UK representative unless the notice or document, or

a copy of it, has been given to or served on the representative or, as the case

may be, unless the representative has been notified of the request or demand.

     (5)    A non-resident company is not bound by mistakes in information provided by

its UK representative in pursuance of an obligation imposed on the

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representative by this section, unless the mistake is the result of an act or

omission of the company itself, or to which the company consented or in which

it connived.

     (6)    The UK representative of a non-resident company is not by virtue of this

section liable to be proceeded against for a criminal offence unless the

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representative committed the offence itself, or consented to or connived in its

commission.

     (7)    In this section—

                    “enactment” includes an enactment contained in subordinate legislation

within the meaning of the Interpretation Act 1978 (c. 30);

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                    “information” includes anything contained in a return, self-assessment,

account, statement or report required to be provided to the Board or

any officer of the Board;

 

 

Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

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                    “non-resident company” means a company that is not resident in the

United Kingdom; and

                    “trade” has the meaning given by section 6(4)(b) of the Taxes Act 1988.

     (8)    This section has effect for accounting periods (of the non-resident company)

beginning on or after 1st January 2003.

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 151   Non-resident companies: extent of charge to income tax

     (1)    The income tax chargeable for a year of assessment on the total income of a

company that is not resident in the United Kingdom is limited to the sum of the

following amounts—

           (a)           the amount of tax that, apart from this section, would be chargeable on

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that total income if—

                  (i)                 the amount of that income were reduced by the amount of any

income to which this section applies, and

                  (ii)                there were disregarded any relief to which that company is

entitled by virtue of arrangements having effect under section

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788 of the Taxes Act 1988 (double taxation relief), and

           (b)           the amount of tax deducted from so much of any income to which this

section applies as is income the tax on which is deducted at source.

     (2)    The income to which this section applies is—

           (a)           income chargeable to tax under Case III of Schedule D or Schedule F;

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           (b)           income chargeable to tax under Case VI of Schedule D by virtue of

section 56 of the Taxes Act 1988 (transactions in deposits);

           (c)           income arising from a transaction carried out through a broker or

investment manager in the United Kingdom acting as an agent of

independent status in the ordinary course of his business; or

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           (d)           income of such other description as the Treasury may by regulations

designate for the purposes of this subsection.

            Regulations under paragraph (d) shall be made by statutory instrument which

shall be subject to annulment in pursuance of a resolution of the House of

Commons.

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     (3)    In subsection (1)(b) above—

           (a)           the reference to tax deducted at source is to tax that is or is treated as

deducted, or is treated as paid, or in respect of which there is a tax

credit, and

           (b)           the reference to the amount of tax deducted at source is to the amount

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that is or is treated as deducted, or is treated as paid, or, as the case may

be, to the amount of that credit.

     (4)    This section does not apply to the income tax chargeable for a year of

assessment on income of a company as a trustee.

     (5)    This section applies—

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           (a)           in relation to the year 2002-03, as regards income arising on or after 1st

January 2003, and

           (b)           in relation to the year 2003-04 and subsequent years of assessment.

 

 

Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

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 152   Non-resident companies: transactions carried out through broker, investment

manager or Lloyd’s agent

Schedule 26 to this Act contains provisions supplementing—

           (a)           section 148(3) (meaning of “permanent establishment”: not to include

independent agent), and

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           (b)           section 151(2)(c) (limit on income tax chargeable on non-resident

company: income arising from transactions carried out through

independent agent),

            as regards transactions carried out through a broker, investment manager or

Lloyd’s agent.

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 153   General replacement of references to branch or agency of company

     (1)    In the following provisions (which relate only to companies) for “branch or

agency” or “branches or agencies”, wherever occurring, substitute “permanent

establishment” or “permanent establishments”.

            The provisions are—

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           (a)           in the Taxes Act 1988, sections 115(4)(b), 338B(2)(d) and (4)(b),

349B(2)(b) and (7)(b)(ii), 402(3B), 403E(1)(a), (2), (4), (5) and (6), 442(1),

444BB(3)(b), 547(6A), 748A(1)(c) and (2), 790(6A)(b), 801(1A)(b),

804A(1)(a), 806L(1), (2), (4), and (5), 806M(2) to (5) and 815A(6); in

Schedule 15, paragraphs 17(3)(c) and 25(2)(c); in Schedule 19AA,

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paragraph 5(5)(c); in Schedule 24, paragraphs 1 and 8; and in Schedule

25, paragraphs 6(2A) and (2C), 8 and 11(3);

           (b)           in the Taxation of Chargeable Gains Act 1992 (c. 12), sections 140(1),

140C(1)(a), 173(3)(b), 175(1A)(b), 185(4) and 213(5A);

           (c)           in the Finance Act 2000 (c. 17), section 107(7);

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           (d)           in the Capital Allowances Act 2001 (c. 2), sections 560(2) and 561(1)(c);

           (e)           in the Finance Act 2002 (c. 23), in Schedule 22, paragraph 10(1)(b)(ii);

and in Schedule 29, paragraphs 66(5) and (8)(b), 68(2)(b), 86(1)(a),

87(1)(a), 109(1)(b) and 110(1)(b).

     (2)    In the following provisions (which relate to companies and other persons), any

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reference to a branch or agency shall be read, in relation to a company, as a

reference to a permanent establishment.

            The provisions are—

           (a)           in the Taxes Act 1988, sections 606(13), 794(2)(bb), 806K(1), 814(1) and

830(4), and in Schedule 23A, paragraphs 3 and 4;

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           (b)           in the Taxation of Chargeable Gains Act 1992, sections 25(2), (3) and (5),

80(4)(a) and (b) and (7)(b), 199(2) and (4) and 276(7);

           (c)           in the Finance Act 1999 (c. 16), section 85(2)(a);

           (d)           in the Finance Act 2002, in Schedule 26, paragraph 31(6)(a).

     (3)    Any reference to a branch or agency—

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           (a)           in subordinate legislation made under an enactment contained in the

Tax Acts or relating to chargeable gains, or

           (b)           that is to be construed as having the same meaning as in any such

enactment,

            shall be read, in relation to a company, as a reference to a permanent

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establishment.

            “Subordinate legislation” here has the same meaning as in the Interpretation

Act 1978 (c. 30).

 

 

Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

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     (4)    This section has effect in relation to accounting periods beginning on or after

1st January 2003.

 154   Double taxation relief: profits attributable to overseas permanent

establishment

     (1)    In Part 18 of the Taxes Act 1988 (double taxation relief), section 797 (limits on

5

credit: corporation tax) is amended as follows.

     (2)    In subsection (1) for “subsections (2) and (3)” substitute “the following

provisions of this section”.

     (3)    In subsection (2) for “subsection (3)” substitute “subsections (2A) and (3)”.

     (4)    After subsection (2) insert—

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           “(2A)              The provisions of section 11AA (profits attributable to permanent

establishment), and of any regulations made under that section, apply,

with the necessary modifications, in determining for the purposes of

this section how much of the chargeable profits of a company resident

in the United Kingdom is attributable to a permanent establishment of

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the company outside the United Kingdom.”.

     (5)    The amendments in this section have effect in relation to accounting periods

beginning on or after 1st January 2003.

 155   Consequential amendments

     (1)    Schedule 27 to this Act provides for amendments consequential on the

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provisions of sections 148 to 153.

     (2)    The amendments made by that Schedule have effect in relation to accounting

periods beginning on or after 1st January 2003.

 156   Overseas life insurance companies

     (1)    The enactments relating to corporation tax have effect in relation to overseas

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life insurance companies subject to such modifications and exceptions as the

Treasury may prescribe by regulations.

     (2)    The power to make regulations under this section includes power to make

provision in place of, and in consequence to repeal or revoke, all or any of the

enactments relating to corporation tax that on the passing of this Act make

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provision in relation to overseas life insurance companies.

     (3)    Regulations under this section—

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

           (b)           may make such consequential amendments of other enactments as

appear to the Treasury to be necessary or expedient.

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     (4)    Regulations under this section providing for the application to overseas life

insurance companies of sections 148 to 154 of this Act, Schedules 26 and 27 to

this Act or any enactment amended by those sections or Schedules may be

made so as to have effect from 1st January 2003.

     (5)    In this section—

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Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

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                    “enactment” includes an enactment contained in subordinate legislation

within the meaning of the Interpretation Act 1978 (c. 30), and

                    “overseas life insurance company” means an insurance company (as

defined in section 431(2) of the Taxes Act 1988) that is not resident in the

United Kingdom but carrying on life assurance business (as so defined)

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through a permanent establishment in the United Kingdom.

Chargeable gains

 157   Life insurance policies and deferred annuity contracts

     (1)    For section 210 of the Taxation of Chargeable Gains Act 1992 (c. 12)

substitute—

10

       “210             Life insurance and deferred annuities

           (1)           This section has effect in relation to any policy of insurance or contract

for a deferred annuity on the life of any person.

           (2)                         A gain accruing on a disposal of, or of an interest in, the rights

conferred by the policy of insurance or contract for a deferred annuity

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is not a chargeable gain unless subsection (3) below applies.

           (3)           This subsection applies if—

                  (a)                 (in the case of a disposal of the rights) the rights or any interest

in the rights, or

                  (b)                                     (in the case of a disposal of an interest in the rights) the rights,

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the interest or any interest from which the interest directly or

indirectly derives (in whole or in part),

                         have or has at any time been acquired by any person for actual

consideration (as opposed to consideration deemed to be given by any

enactment relating to the taxation of chargeable gains).

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           (4)                         For the purposes of subsection (3) above —

                  (a)                 (in the case of a policy of insurance) amounts paid under the

policy by way of premiums, and

                  (b)                 (in the case of a contract for a deferred annuity) amounts paid

under the contract, whether by way of premiums or as lump

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sum consideration,

                         do not constitute actual consideration.

           (5)           And for those purposes actual consideration for—

                  (a)                 a disposal which is made by one spouse to the other or is an

approved post-marriage disposal, or

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                  (b)                 a disposal to which section 171(1) applies,

                         is to be treated as not constituting actual consideration.

           (6)           For the purposes of subsection (5)(a) above a disposal is an approved

post-marriage disposal if—

                  (a)                 it is made in consequence of the dissolution or annulment of a

40

marriage by one person who was a party to the marriage to the

other,

                  (b)                 it is made with the approval, agreement or authority of a court

(or other person or body) having jurisdiction under the law of

 

 

Finance Bill
Part 7 — Income tax, corporation tax and capital gains tax: general

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any country or territory or pursuant to an order of such a court

(or other person or body), and

                  (c)                 the rights disposed of were, or the interest disposed of was, held

by the person by whom the disposal is made immediately

before the marriage was dissolved or annulled.

5

           (7)           Subsection (8) below applies for the purposes of tax on chargeable gains

where—

                  (a)                 (if that subsection did not apply) a loss would accrue on a

disposal of, or of an interest in, the rights conferred by the policy

of insurance or contract for a deferred annuity, but

10

                  (b)                 if sections 37 and 39 were disregarded, there would accrue on

the disposal a loss of a smaller amount, a gain or neither a loss

nor a gain.

           (8)           If (disregarding those sections) a loss of a smaller amount would

accrue, that smaller amount is to be taken to be the amount of the loss

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accruing on the disposal; and in any other case, neither a loss nor a gain

is to be taken to accrue on the disposal.

           (9)                         But subsection (8) above does not affect the treatment for the purposes

of tax on chargeable gains of the person who acquired rights, or an

interest in rights, on the disposal.

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           (10)          The occasion of—

                  (a)                 the receipt of the sum or sums assured by the policy of

insurance,

                  (b)                 the transfer of investments or other assets to the owner of the

policy of insurance in accordance with the policy, or

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                  (c)                 the surrender of the policy of insurance,

                         is for the purposes of tax on chargeable gains an occasion of a disposal

of the rights (or of all of the interests in the rights) conferred by the

policy of insurance.

           (11)          The occasion of—

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                  (a)                 the receipt of the first instalment of the annuity under the

contract for a deferred annuity, or

                  (b)                 the surrender of the rights conferred by the contract for a

deferred annuity,

                         is for the purposes of tax on chargeable gains an occasion of a disposal

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of the rights (or of all of the interests in the rights) conferred by the

contract for a deferred annuity.

           (12)          Where there is a disposal on the occasion of the receipt of the first

instalment of the annuity under the contract for a deferred annuity—

                  (a)                 in the case of a disposal of the rights conferred by the contract,

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the consideration for the disposal is the aggregate of the amount

or value of the first instalment and the market value at the time

of the disposal of the right to receive the further instalments of

the annuity, and

                  (b)                 in the case of a disposal of an interest in the rights, the

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consideration for the disposal is such proportion of that

aggregate as is just and reasonable;

                         and no gain accruing on any subsequent disposal of, or of any interest

in, the rights is a chargeable gain (even if subsection (3) above applies).

 

 

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Part 7 — Income tax, corporation tax and capital gains tax: general

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           (13)          In this section “interest”, in relation to rights conferred by a policy of

insurance or contract for a deferred annuity, means an interest as a co-

owner of the rights (whether the rights are owned jointly or in common

and whether or not the interests of the co-owners are equal).”.

     (2)    This section has effect in relation to disposals on or after 9th April 2003.

5

 158   Application of market value rule in case of exercise of option

     (1)    In Chapter 3 of Part 4 of the Taxation of Chargeable Gains Act 1992 (c. 12)

(miscellaneous provisions relating to options and other matters), after section

144 insert—

       “144ZA Application of market value rule in case of exercise of option

10

           (1)           This section applies where—

                  (a)                 an option is exercised, so that by virtue of section 144(2) or (3)

the grant or acquisition of the option and the transaction

resulting from its exercise are treated as a single transaction,

and

15

                  (b)                 section 17(1) (“the market value rule”) applies, or would apply

but for this section, in relation to—

                        (i)                        the grant of the option,

                        (ii)                       the acquisition of the option (whether directly from the

grantor or not) by the person exercising it, or

20

                        (iii)                      the transaction resulting from its exercise.

           (2)           If the option binds the grantor to sell—

                  (a)                 the market value rule does not apply for determining the

consideration for the sale, except, where the rule applies for

determining the consideration for the option, to that extent (in

25

accordance with section 144(2)(a));

                  (b)                 the market value rule does not apply for determining the cost to

the person exercising the option of acquiring what is sold,

except, where the rule applies for determining the cost of

acquiring the option, to that extent (in accordance with section

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144(3)(a)).

           (3)           If the option binds the grantor to buy—

                  (a)                 the market value rule does not apply for determining the cost of

acquisition incurred by the grantor, but without prejudice to its

application (in accordance with section 144(2)(b)) where the

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rule applies for determining the consideration for the option;

                  (b)                 the market value rule does not apply for determining the

consideration for the disposal of what is bought, but without

prejudice to its application (in accordance with section

144(3)(b)) where the rule applies for determining the cost of the

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option.

           (4)           To the extent that, by virtue of this section, the market value rule does

not apply for determining an amount or value, the amount or value to

be taken into account is (subject to section 120) the actual amount or

value.

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           (5)           In this section “option” has the same meaning as in section 144.”.

 

 

 
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