Corporation Tax Act 2009

[F1 Index-linked gilt-edged securities] U.K.

Textual Amendments

F1 S. 399 cross-heading substituted (with effect in accordance with Sch. 14 para. 8 of the amending Act) by Finance Act 2010 (c. 13), Sch. 14 para. 3 (with Sch. 14 para. 9)

399 [F2 Basic rules] U.K.

(1) This section applies if a loan relationship is represented by an index-linked gilt-edged security.

(2) The amounts to be brought into account for the purposes of this Part are to be determined using fair value accounting.

[F3 (3) For provision requiring adjustments to be made to amounts determined under subsection (2), see sections 400 to 400C (adjustments for changes in index).]

[F4 (4) In this section and sections 400 to 400C—

• “index-linked gilt-edged securities” means any gilt-edged securities under which the amounts of the payments are determined wholly or partly by reference to an index of prices published by the Statistics Board;

• “relevant prices index”, in relation to an index-linked gilt-edged security, means the index of prices by reference to which the amounts of the payments under the security are wholly or partly determined.]

(5) For the meaning of “gilt-edged securities”, see section 476(1).

[F5 (6) In the case of insurance companies, the application of sections 400 to 400C is subject to section 112 of FA 2012.]

Textual Amendments

F2 S. 399 heading substituted (with effect in accordance with Sch. 14 para. 8 of the amending Act) by Finance Act 2010 (c. 13), Sch. 14 para. 4(2) (with Sch. 14 para. 9)

F3 S. 399(3) substituted (with effect in accordance with Sch. 14 para. 8 of the amending Act) by Finance Act 2010 (c. 13), Sch. 14 para. 4(3) (with Sch. 14 para. 9)

F4 S. 399(4) substituted (19.7.2011) (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2011 (c. 11), s. 60(1)

F5 S. 399(6) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 157

Modifications etc. (not altering text)

C1 Pt. 5 modified (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 88(1)(2)(7) (with s. 147, Sch. 17)

400 [F6 Adjustments for changes in index] U.K.

(1) This section applies if—

(a) [F7 an amount] to be brought into account for the purposes of this Part in respect of [F8 an index-linked gilt-edged security] [F9 falls] to be determined by reference to its value at two different times, and

(b) there is a change in the [F10 relevant] prices index between the earlier and the later time.

(2) If that change is an increase, the carrying value of the security at the earlier time is increased by the same percentage as the percentage increase in the [F11 relevant] prices index between those times.

[F12 (2A) Subsection (2) is subject to sections 400A to 400C (relevant hedging schemes).]

(3) If that change is a reduction, the carrying value of the security at the earlier time is reduced by the same percentage as the percentage reduction in the [F13 relevant] prices index between those times.

(4) The Treasury may, in relation to any description of index-linked gilt-edged securities, by order provide that—

(a) there are to be no adjustments under this section, or

(b) an adjustment specified in the order is to be made instead.

(5) An order under subsection (4)—

(a) may not apply to a security issued before the making of the order, but

(b) may make different provision for different descriptions of securities.

(6) The general rule is that the percentage increase or reduction in the [F14 relevant] prices index is determined for the purposes of this section by reference to the difference between—

(a) the index for the month in which the earlier time falls, and

(b) the index for the month in which the later time falls.

(7) But if the earlier time falls at the beginning of an accounting period which begins with the first day of a month, the index for the previous month is used for the purposes of subsection (6)(a).

Textual Amendments

F6 S. 400 heading substituted (with effect in accordance with Sch. 14 para. 8 of the amending Act) by Finance Act 2010 (c. 13), Sch. 14 para. 5(2) (with Sch. 14 para. 9)

F7 Words in s. 400(1)(a) substituted (with effect in accordance with Sch. 14 para. 8 of the amending Act) by Finance Act 2010 (c. 13), Sch. 14 para. 5(3)(a) (with Sch. 14 para. 9)

F8 Words in s. 400(1)(a) substituted (retrospective and with effect in accordance with art. 1(2) of the commencing S.I.) by Corporation Tax Act 2009 (Amendment) Order 2010 (S.I. 2010/614), arts. 1(1), 3(2)

F9 Word in s. 400(1)(a) substituted (with effect in accordance with Sch. 14 para. 8 of the amending Act) by Finance Act 2010 (c. 13), Sch. 14 para. 5(3)(b) (with Sch. 14 para. 9)

F10 Word in s. 400(1)(b) substituted (19.7.2011) (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2011 (c. 11), s. 60(2)(a)

F11 Word in s. 400(2) substituted (19.7.2011) (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2011 (c. 11), s. 60(2)(a)

F12 S. 400(2A) inserted (with effect in accordance with Sch. 14 para. 8 of the amending Act) by Finance Act 2010 (c. 13), Sch. 14 para. 5(4) (with Sch. 14 para. 9)

F13 Word in s. 400(3) substituted (19.7.2011) (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2011 (c. 11), s. 60(2)(a)

F14 Word in s. 400(6) substituted (19.7.2011) (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2011 (c. 11), s. 60(2)(a)

Modifications etc. (not altering text)

C2 Ss. 400-400C excluded (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 112(1) (with s. 147, Sch. 17)

[F15 400A Adjustments for changes in index: relevant hedging schemes U.K.

(1) This section applies where—

(a) section 400 applies in relation to an amount to be brought into account for an accounting period of a company (“company A”) in respect of a security, and

(b) conditions 1 to 3 are met.

(2) Condition 1 is that company A is a party to a relevant hedging scheme at any time in the accounting period.

(3) Condition 2 is that there is an increase in the [F16 relevant] prices index between the times mentioned in subsection (1) of section 400.

(4) Condition 3 is that the index-linked capital return on the security in the accounting period, or a proportion of it, is hedged.

(5) Where this section applies, any increase in the carrying value of the security at the earlier of the times mentioned in subsection (1) of section 400 that would, apart from this section, be made under subsection (2) of that section is reduced—

(a) in a case in which the index-linked capital return on the security in the accounting period is wholly hedged, to nil, and

(b) in a case in which only a proportion of that return is hedged, by the same proportion.

(6) For the purposes of this section “a relevant hedging scheme” means a scheme the purpose, or one of the main purposes, of any party to which, on entering into the scheme, is to secure that the index-linked capital return on the security, or a proportion of it, is hedged.

(7) For the purposes of this section the “index-linked capital return” of the security is so much of the return on the security as—

(a) would, disregarding section 400, result in an increase in the carrying value of the security between the times mentioned in subsection (1) of that section, and

(b) is attributable to an increase in the [F17 relevant] prices index.

(8) For the purposes of this section the index-linked capital return on the security, or any proportion of that return, is “hedged” if (whether because of the operation of a swap or otherwise) the pre-tax economic profit or loss made by the relevant group or company in the accounting period is unaffected by it.

(9) In subsection (8) “the relevant group or company” means—

(a) company A and every other company that is at any time in the accounting period—

(i) associated with company A, and

(ii) a party to the relevant hedging scheme, or

(b) if there is no such other company, company A.

(10) In this section “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions.

Textual Amendments

F15 Ss. 400A-400C inserted (with effect in accordance with Sch. 14 para. 8 of the amending Act) by Finance Act 2010 (c. 13), Sch. 14 para. 6 (with Sch. 14 para. 9)

F16 Word in s. 400A(3) substituted (19.7.2011) (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2011 (c. 11), s. 60(2)(b)

F17 Word in s. 400A(7)(b) substituted (19.7.2011) (with effect in accordance with s. 60(4) of the amending Act) by Finance Act 2011 (c. 11), s. 60(2)(b)

Modifications etc. (not altering text)

C2 Ss. 400-400C excluded (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 112(1) (with s. 147, Sch. 17)

400B Interpretation of section 400A: economic profits and losses U.K.

(1) A reference in section 400A to an “economic” profit or loss made by any person in a period is to a profit or loss made by that person in that period, computed taking into account unrealised (as well as realised) profits and losses.

(2) For the purposes of section 400A an economic profit or loss is made by a group of companies if it is made by the members of the group considered together.

(3) In determining for the purposes of section 400A the amount of an economic profit or loss made by a group of companies in any period, the economic profits and losses of each member of the group are to be computed over that period (whether or not that period is an accounting period of the member).

(4) A reference in section 400A to a “pre-tax” economic profit or loss is a reference to an economic profit or loss determined disregarding any gain or loss made as a result of the operation of any provision of the Corporation Tax Acts.

Textual Amendments

F15 Ss. 400A-400C inserted (with effect in accordance with Sch. 14 para. 8 of the amending Act) by Finance Act 2010 (c. 13), Sch. 14 para. 6 (with Sch. 14 para. 9)

Modifications etc. (not altering text)

C2 Ss. 400-400C excluded (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 112(1) (with s. 147, Sch. 17)

400C Meaning of “associated with” U.K.

(1) For the purposes of section 400A, a company (“company B”) is associated with company A at a time (“the relevant time”) during an accounting period of company A (“the accounting period”) if any of the following five conditions is met.

(2) The first condition is that the financial results of company A and company B, for a period that includes the relevant time, meet the consolidation condition.

(3) The second condition is that there is a connection between company A and company B for the accounting period.

(4) The third condition is that, at the relevant time, company A has a major interest in company B or company B has a major interest in company A.

(5) The fourth condition is that—

(a) the financial results of company A and a third company, for a period that includes the relevant time, meet the consolidation condition, and

(b) at the relevant time the third company has a major interest in company B.

(6) The fifth condition is that—

(a) there is a connection between company A and a third company for the accounting period, and

(b) at the relevant time the third company has a major interest in company B.

(7) In this paragraph the financial results of any two companies for any period meet “the consolidation condition” if—

(a) they are required to be comprised in group accounts prepared under section 399 of the Companies Act 2006 (duty of certain parent companies to prepare group accounts), or

(b) they would be required to be comprised in such accounts but for the application of an exemption mentioned in subsection (3) of that section.

(8) Section 466 (companies connected for an accounting period) applies for the purposes of this section.

(9) In this section “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions.]

Textual Amendments

F15 Ss. 400A-400C inserted (with effect in accordance with Sch. 14 para. 8 of the amending Act) by Finance Act 2010 (c. 13), Sch. 14 para. 6 (with Sch. 14 para. 9)

Modifications etc. (not altering text)

C2 Ss. 400-400C excluded (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 112(1) (with s. 147, Sch. 17)