Corporation Tax Act 2009

[F1 Miscellaneous] U.K.

Textual Amendments

F1 Pt. 7 Ch. 3 cross-heading inserted (with effect in accordance with Sch. 21 para. 11 of the amending Act) by Finance Act 2009 (c. 10), Sch. 21 para. 8

607 Pre-contract or abortive expenses U.K.

(1) This section applies if—

(a) a company may enter into a derivative contract or related transaction but has not yet done so,

(b) it incurs any expenses for purposes connected—

(i) with entering into it, or

(ii) with giving effect to any obligation which might arise under it, and

(c) had the company entered into the contract or transaction, the expenses would be expenses within [F2 section 594A(1)(b)].

(2) The expenses are treated as expenses in relation to which debits may be brought into account in accordance with [F3 section 595(2)] to the same extent as if the company had entered into the contract or transaction.

Textual Amendments

F2 Words in s. 607(1)(c) substituted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 70(2)

F3 Words in s. 607(2) substituted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 70(3)

[F4 607A Company is not, or has ceased to be, party to derivative contract U.K.

(1) This section applies if—

(a) amounts in respect of a qualifying contract are recognised in a company's accounts for an accounting period (“the current period”) as an item of profit or loss even though during all or part of the period the company is not a party to the qualifying contract,

(b) any of conditions A to D is met, and

(c) in the absence of this section, the credits and debits brought into account by the company for the purposes of this Part for the current period would not include credits or debits representing the whole of those amounts.

(2) In this section “qualifying contract” means—

(a) a derivative contract, or

(b) a contract that would be a derivative contract if references in section 576(1) to a company were references to any person.

(3) Condition A is that—

(a) the company was a party to the qualifying contract,

(b) amounts in respect of the qualifying contract were recognised in the company's accounts as an item of profit or loss when it was a party to the contract, and

(c) any amounts in respect of the contract continue to be recognised in those accounts as an item of profit or loss.

(4) Condition B is that the amounts recognised as mentioned in subsection (1)(a) are recognised as a result of a transaction which has the effect of transferring to the company all or part of the risk or reward relating to the qualifying contract without a corresponding transfer of rights or obligations under the contract.

(5) Condition C is that the amounts recognised as mentioned in subsection (1)(a) are recognised as a result of a related transaction in relation to a qualifying contract to which the company was, but has ceased to be, a party.

(6) Condition D is that—

(a) the amounts recognised as mentioned in subsection (1)(a) are recognised because the company may enter into a qualifying contract or related transaction but has not yet done so, and

(b) the amounts are not expenses to which section 607 applies.

(7) The company must bring credits and debits into account for the purposes of this Part for the accounting period as if the company were a party to the qualifying contract for the whole of the accounting period.

(8) The amounts that must be brought into account are those amounts in respect of the qualifying contract that are recognised in the company's accounts for the accounting period as an item of profit or loss (but subject to the provisions of this Part).

(9) This section is subject to sections 607B and 607C.

(10) In this section—

• “item of profit or loss” has the meaning it has for accounting purposes;

• “recognised” means recognised in accordance with generally accepted accounting practice;

• “related transaction”, in relation to a qualifying contract, is to be read as if the references in section 596(1) and (2) to a derivative contract were to a qualifying contract.

Textual Amendments

F4 Ss. 607A-607C inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 71

607B Exclusion of debit where relief allowed to another U.K.

A company is not to bring into account as a debit for the purposes of this Part as a result of section 607A any amount which—

(a) is brought into account as a debit for those purposes by another company,

(b) is brought into account so as to reduce the assumed taxable total profits of another company for the purposes of Part 9A of TIOPA 2010 (controlled foreign companies), or

(c) is allowable as a deduction by a person for the purposes of income tax.

Textual Amendments

F4 Ss. 607A-607C inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 71

607C Avoidance of double charge U.K.

(1) This section applies if at any time a company (“the relevant company”) is required by section 607A to bring into account as a credit for the purposes of this Part an amount—

(a) which is brought into account as a credit for those purposes by another company,

(b) which is brought into account in determining the assumed taxable total profits of another company for the purposes of Part 9A of TIOPA 2010 (controlled foreign companies), or

(c) on which a person is charged to income tax.

(2) In order to avoid a double charge to tax in respect of the amount, the relevant company may make a claim for one or more consequential adjustments to be made in respect of the amount brought into account as a credit.

(3) On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.

(4) Consequential adjustments may be made—

(a) in respect of any period,

(b) by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and

(c) despite any time limit imposed by or under any enactment.]

Textual Amendments

F4 Ss. 607A-607C inserted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 71

F5 608 Company ceasing to be party to derivative contract U.K.

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Textual Amendments

F5 S. 608 omitted (with effect in accordance with Sch. 7 Pt. 6 of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), Sch. 7 para. 72

609 Company ceasing to be UK resident U.K.

(1) If a company ceases to be UK resident, this Part applies as if—

(a) immediately before so ceasing the company had assigned the rights and liabilities under its derivative contracts for consideration of an amount equal to their fair value at that time, and

(b) it had immediately reacquired them for consideration of the same amount.

(2) Subsection (1) does not apply in relation to a derivative contract so far as immediately after the company ceases to be UK resident its rights and liabilities under the contract are held or owed for the purposes of a permanent establishment of the company in the United Kingdom.

(3) Subsection (1) does not apply if—

(a) the conditions in section 630(1)(a) and (b) are met in relation to the company (transferee leaving group after replacing transferor as party to derivative contract), and

(b) it ceases to be UK resident at the same time as it ceases to be a member of the relevant group.

(4) In subsection (3) “the relevant group” has the meaning given by section 630(4).

610 Non-UK resident company ceasing to hold derivative contract for UK permanent establishment U.K.

(1) This section applies if the rights and liabilities under a derivative contract of a company which is not UK resident cease to any extent to be held or owed for the purposes of a permanent establishment of the company in the United Kingdom in circumstances not involving a related transaction.

(2) This Part applies as if—

(a) immediately before the rights and liabilities so cease the company had assigned them, so far as so ceasing, for consideration of an amount equal to their fair value at that time, and

(b) the company had immediately reacquired them for consideration of the same amount.

(3) This section does not apply if—

(a) the conditions in section 630(1)(a) and (b) are met in relation to the company (transferee leaving group after replacing transferor as party to derivative contract), and

(b) the rights and liabilities mentioned in subsection (1) cease to be held or owed for the purposes of the permanent establishment at the same time as the company ceases to be a member of the relevant group.

(4) In subsection (3) “the relevant group” has the meaning given by section 630(4).

611 Release under statutory insolvency arrangement of liability under derivative contract U.K.

No credit is required to be brought into account by a company in respect of the release of the company's liability to pay an amount under a derivative contract of the company if the release is part of a statutory insolvency arrangement.