Finance Act 1999

Section 54.

SCHEDULE 6 U.K. Tax treatment of receipts by way of reverse premium

Application of this Schedule U.K.

1 (1) This Schedule applies where— U.K.

(a) [F1 a company receives] a payment or other benefit by way of inducement in connection with a transaction being entered into by [F2 the company or a person connected with the company] ;

(b) that transaction (the “relevant transaction”) is one under which [F3 the company receiving the payment or other benefit, or as the case may be the person connected with the company] , becomes entitled to an estate or interest in, or a right in or over, land; and

(c) the payment or other benefit is paid or provided by—

(i) the person (“the grantor”) by whom that estate, interest or right is granted or was granted at an earlier time, or

(ii) a person connected with the grantor, or

(iii) a nominee of, or a person acting on the directions of, the grantor or a person connected with the grantor.

(2) The payment or other benefit is referred to in this Schedule as a “reverse premium”.

Textual Amendments

F1 Words in Sch. 6 para. 1(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(2)(a) (with Sch. 2)

F2 Words in Sch. 6 para. 1(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(2)(b) (with Sch. 2)

F3 Words in Sch. 6 para. 1(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(2)(c) (with Sch. 2)

Tax treatment of receipts by way of reverse premium U.K.

2 (1) A reverse premium shall be regarded for [F4 corporation tax purposes] as a receipt of a revenue nature. U.K.

(2) Where the relevant transaction is entered into—

(a) by [F5 the company receiving the reverse premium] , and

(b) for the purposes of a trade, profession or vocation carried on or to be carried on by [F6 that company] ,

the reverse premium shall be taken into account in computing the profits of that trade, profession or vocation under Case I or II of Schedule D.

(3) If sub-paragraph (2) does not apply, [F5 the company receiving the reverse premium] is chargeable to [F7 corporation tax] as if it were a receipt of a transaction entered into by [F8 the company] for the exploitation, as a source of rents or other receipts, of an estate, interest or right in or over the land in question.

Textual Amendments

F4 Words in Sch. 6 para. 2 substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(3)(a) (with Sch. 2)

F5 Words in Sch. 6 para. 2 substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(3)(b) (with Sch. 2)

F6 Words in Sch. 6 para. 2 substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(3)(c) (with Sch. 2)

F7 Words in Sch. 6 para. 2 substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(3)(d) (with Sch. 2)

F8 Words in Sch. 6 para. 2 substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(3)(e) (with Sch. 2)

Arrangements not at arm’s length U.K.

3 (1) Where— U.K.

(a) two or more of the parties to the relevant arrangements are connected persons, and

(b) the terms of those arrangements are not such as would reasonably have been expected if those persons had been dealing at arm’s length,

the whole amount or value of the reverse premium shall be brought into account under paragraph 2(2) or (3) in the first relevant period of account.

(2) The “first relevant period of account” means the period of account in which the relevant transaction is entered into, subject to sub-paragraph (3).

(3) If the relevant transaction is entered into—

(a) by [F9 the company receiving] the reverse premium, and

(b) for the purposes of a trade, profession or vocation which is not then carried on [F10 by the company but which it] subsequently begins to carry on,

the first relevant period of account is the first period of account in which [F11 the company carries] on the trade, profession or vocation.

(4) The condition in sub-paragraph (1)(b) is met if the terms differ to a significant extent from the terms which at the time the arrangements were entered into would be regarded as normal and reasonable in the market conditions then prevailing between persons dealing with each other at arm’s length in the open market.

F12 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F9 Words in Sch. 6 para. 3(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(4)(a) (with Sch. 2)

F10 Words in Sch. 6 para. 3(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(4)(b) (with Sch. 2)

F11 Words in Sch. 6 para. 3(3) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(4)(c) (with Sch. 2)

F12 Sch. 6 para. 3(5) repealed (24.7.2002) by 2002 c. 23, s. 141, Sch. 40 Pt. 3(16)

Special rules for insurance companies carrying on life assurance business U.K.

4 (1) Paragraphs 2 and 3 have effect subject to the provisions of this paragraph. U.K.

(2) Nothing in paragraph 2 or 3 shall prevent any amount from being brought into account in accordance with section 83 of the M1 Finance Act 1989 (receipts to be brought into account in Case I computation of profits in respect of life assurance).

[F13 (3) Sub-paragraph (3A) applies where a reverse premium is brought into account by an insurance company carrying on life assurance business in respect of which it is chargeable to tax otherwise than in accordance with the rules applicable to Case I of Schedule D.

(3A) Where this sub-paragraph applies so much of the reverse premium as is referable to the company’s basic life assurance and general annuity business shall be treated for the purposes of section 85 of the Finance Act 1989 (charge of certain receipts of basic life assurance and general annuity business to tax under Case VI of Schedule D) as receipts falling within subsection (1) of that section for the accounting period in which the reverse premium is brought into account.]

(4) In this paragraph “insurance company”, “ [F14 brought into account] ” and “basic life assurance and general annuity business” have the same meaning as in Chapter I of Part XII of the Taxes Act 1988.

Textual Amendments

F13 Sch. 6 para. 4(3)(3A) substituted for Sch. 6 para. 4(3) (6.4.2005 with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 51(2)

F14 Words in Sch. 6 para. 4(4) substituted (6.4.2005 with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 51(3)

Modifications etc. (not altering text)

C1 Sch. 6 para. 4 modified (13.10.1999) by 1997/473, reg. 53B (as inserted (13.10.1999) by S.I. 1999/2636, reg. 7)

C2 Sch. 6 para. 4 modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 43

Marginal Citations

M1 1989 c.26.

Exclusion of receipts taken into account for capital allowances U.K.

5 U.K. This Schedule does not apply to a payment or benefit if or to the extent that it is taken into account under [F15 section 532 of the Capital Allowances Act (the general rule excluding contributions)] to reduce the recipient’s expenditure qualifying for capital allowances.

Textual Amendments

F15 Words in Sch. 6 para. 5 substituted (22.3.2001 with effect as mentioned in s. 579(1) of the amending Act) by 2001 c. 2, s. 578, Sch. 2 para. 104

F16 ... U.K.

Textual Amendments

F16 Sch. 6 para. 6 and cross-heading repealed (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 509(5), Sch. 3 (with Sch. 2)

F16 6 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exclusion of consideration under sale and lease-back arrangement U.K.

7 U.K. This Schedule does not apply to a payment or benefit to the extent that it is consideration for the transfer of an estate or interest in land which constitutes the sale in a sale and lease-back arrangement.

A “sale and lease-back arrangement” means any such arrangement as is described in section 779(1) or (2) or section 780(1) of the Taxes Act 1988.

Connected persons and relevant arrangements U.K.

8 (1) For the purposes of this Schedule persons are connected with each other if they are connected within the meaning of section 839 of the Taxes Act 1988 at any time during the period when the relevant arrangements are entered into. U.K.

(2) In this Schedule “the relevant arrangements” means the relevant transaction and any arrangements entered into in connection with it, whether before, at the same time or after it.