Part 12: Relocation of Schedule 12 to F(No 2)A 1992 so far as applying for income tax purposes
Overview
1339.This Part inserts Chapter 3A of Part 14 of ITA (Banks etc in compulsory liquidation). It is based on Schedule 12 to F(No 2)A 1992.
1340.The source provisions applied for both income tax and corporation tax purposes. The corporation tax aspects are rewritten in Chapter 6 of Part 13 of CTA 2010. The income tax aspects are rewritten in ITA.
1341.The pattern of sections in ITA closely follows that in CTA 2010.
Section 837A of ITA: Overview of Chapter
1342.This section gives an overview of the Chapter. It is new.
Section 837B of ITA: Application of Chapter
1343.This section sets out the conditions that a company must meet in order for the Chapter to apply. It is based on paragraph 1 of Schedule 12 to F(No 2)A 1992.
1344.Subsection (6) refers to an EEA firm with permission under paragraph 15 of Schedule 3 to the Financial Services and Markets Act 2000. The source qualified this by adding “(as a result of qualifying for authorisation by virtue of paragraph 12 of that Schedule)”. This qualification is considered unnecessary as the only way in which permission under paragraph 15 may be given is by virtue of paragraph 12. These words are therefore repealed without replacement.
Section 837C of ITA: Charge to income tax on winding up receipts
1345.This section charges amounts received during the winding up period. It is based on paragraph 3(1), (2) and (3) of Schedule 12 to F(No 2)A 1992.
Section 837D of ITA: Transfer of rights to payment
1346.This section charges sums received in respect of transfers of rights as if those sums were winding up receipts. It is based on paragraph 5 of Schedule 12 to F(No 2)A 1992.
1347.In the case of a non-arm’s length transaction the source provides that market value is to be substituted for the consideration received. However, the tax charge is based on amounts received. In relation to the deemed amounts arising from non-arm’s length transactions the source, therefore, states that “references … to sums received shall be construed accordingly.”
1348.Although the meaning is not in doubt the source is not as clear as it might have been. In the rewritten section a slightly different approach is adopted by explicitly treating the value of transferred rights as winding up receipts.
Section 837E of ITA: Allowable deductions
1349.This section provides rules for setting allowable deductions against winding up receipts. It is based on paragraph 4 of Schedule 12 to F(No 2)A 1992.
Section 837F of ITA: Election to carry back
1350.This section gives a company the right to elect to carry back a winding up receipt to the date that the business ceased. It is based on paragraph 6 of Schedule 12 to F(No 2)A 1992.
Section 837G of ITA: Relationship of Chapter with other income tax provisions
1351.This section gives priority to a charge under this Chapter over potential charges arising under other provisions. It is based on paragraph 3(4) and (5) of Schedule 12 to F(No 2)A 1992.
Section 837H of ITA: Interpretation of Chapter
1352.This section sets out a number of definitions and interpretations relevant to the Chapter. It is based on paragraph 2 of Schedule 12 to F(No 2)A 1992.
