Income and Corporation Taxes Act 1988 (c. 1)

PART II U.K. [F1 PROVISIONS RELATING TO THE SCHEDULE A CHARGE]

Textual Amendments

F1 Pt. 2 heading substituted (with effect as mentioned in s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), s. 38(1), Sch. 5 para. 3 (with Sch. 5 para. 73)

[F2 Rent factoring U.K.

Textual Amendments

F2 Ss. 43A-43G and cross-heading inserted (with effect in accordance with s. 110(2) of the amending Act) by Finance Act 2000 (c. 17), s.110(1)

43A Finance agreement: interpretation. U.K.

(1) A transaction is a finance agreement for the purposes of sections 43B to 43F if in accordance with [F3 generally accepted accounting practice] the accounts of a company which receives money under the transaction would record a financial obligation (whether in respect of a lease creditor or otherwise) in relation to that receipt.

(2) F4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The reference to a company’s accounts in subsection (1) shall be taken to include a reference to the consolidated group accounts of a group of companies of which it is a member; and—

(a) “group of companies” means a set of companies which, if each were incorporated in Great Britain, would form a group within the meaning given by section 262(1) of the M1 Companies Act 1985, and

(b) “consolidated group accounts” means accounts of a kind which would satisfy the requirements of section 227 of the Companies Act 1985.

(4) For the purposes of subsection (1) a company shall be treated as receiving any money which—

(a) falls to be taken into account as a receipt for the purpose of calculating the company’s liability to corporation tax, or

(b) would fall to be taken into account as a receipt for that purpose if the company were resident in the United Kingdom.

Textual Amendments

F3 Words in s. 43A(1) substituted (24.7.2002) by Finance Act 2002 (c. 23), s. 103(4)(a)

F4 S. 43A(2) repealed (24.7.2002) by Finance Act 2002 (c. 23), s. 141, Sch. 40 Pt. 3(16)

Marginal Citations

M1 1985 c. 6.

43B Transfer of rent. U.K.

(1) This section applies to a finance agreement if it transfers a right to receive rent in respect of land in the United Kingdom from one person to another, otherwise than by means of the grant of a lease of land in the United Kingdom.

(2) A person who receives a finance amount shall be treated for the purposes of the Tax Acts as receiving it—

(a) by way of rent,

(b) in the course of a business falling within paragraph 1(1) of Schedule A [F5 or in the course of a UK property business], and

(c) in the chargeable period in which the agreement is made;

and the finance amount shall be taken into account in computing the profits of the Schedule A business [F6 or the UK property business] for the chargeable period in which the agreement is made.

(3) In subsection (2) “finance amount” means a receipt in respect of which section 43A(1) is satisfied.

Textual Amendments

F5 Words in s. 43B(2) inserted (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), Sch. 1 para. 26(a) (with Sch. 2)

F6 Words in s. 43B(2) inserted (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), Sch. 1 para. 26(b) (with Sch. 2)

43C Transfer of rent: exceptions, &c. U.K.

(1) Section 43B shall not apply to a finance agreement if the term over which the financial obligation is to be reduced exceeds 15 years.

(2) Section 43B shall not apply to a finance agreement if—

(a) the arrangements for the reduction of the financial obligation substantially depend on a person’s entitlement to an allowance under [F7 the Capital Allowances Act (including enactments which under this Act are to be treated as contained in that Act)], and

(b) that person is not connected to the person from whom the right to receive rent is transferred.

(3) Section 43B shall not apply to a finance agreement if—

(a) section 36(1) applies (without reference to section 36(3)), F8 . . .

(b) section 36(1) would apply (without reference to section 36(3)) if the price at which an estate or interest is sold were to exceed the price at which it is to be reconveyed,

[F9 (c) section 284 of ITTOIA 2005 applies, or

(d) that section would apply if the price at which an estate or interest is sold were to exceed the price at which it is to be reconveyed.]

(4) If—

(a) section 36(1) would apply in relation to a finance agreement by virtue only of section 36(3), and

(b) section 43B applies in relation to the agreement,

section 36(1) shall not apply.

[F10 (4A) If—

(a) section 285 of ITTOIA 2005 would apply in relation to a finance agreement, and

(b) section 43B applies in relation to the agreement,

section 285 of ITTOIA 2005 shall not apply.]

(5) Section 43B shall not apply to a finance agreement if section 780 applies.

(6) Section 43B(2) shall not apply to a finance amount which is brought into account—

[F11 (a)]   in computing the profits of a trade for the purposes of Case I of Schedule D (otherwise than by virtue of section 83 of the M2 Finance Act 1989 (life assurance)),[F12 or

(b) in computing under Chapter 2 of Part 2 of ITTOIA 2005 the profits of a trade carried on wholly or partly in the United Kingdom.]

Textual Amendments

F7 Words in s. 43C(2)(a) substituted (with effect in accordance with s. 579 of the amending Act) by Capital Allowances Act 2001 (c. 2), s. 578, Sch. 2 para. 11

F8 Word at the end of s. 43C(3)(a) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 27(2)(a), Sch. 3 (with Sch. 2)

F9 S. 43C(3)(c)(d) inserted (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), Sch. 1 para. 27(2)(b) (with Sch. 2)

F10 S. 43C(4A) inserted (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), Sch. 1 para. 27(3) (with Sch. 2)

F11 Words in s. 43C(6) renumbered as s. 43C(6)(a) (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by virtue of Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 27(4)(a) (with Sch. 2)

F12 S. 43C(6)(b) and preceding word inserted (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), Sch. 1 para. 27(4)(b) (with Sch. 2)

Marginal Citations

M2 1989 c. 26.

43D Interposed lease. U.K.

(1) This section applies to a finance agreement under which—

(a) a lease is granted in respect of land in the United Kingdom,

(b) a premium is payable in respect of the lease, and

(c) section 43A(1) is satisfied by reference to the receipt of the premium.

(2) Where this section applies, the person to whom the premium is payable shall be treated for the purposes of the Tax Acts as receiving it—

(a) by way of rent,

(b) in the course of a business falling within paragraph 1(1) of Schedule A [F13 or in the course of a UK property business], and

(c) in the chargeable period in which the agreement is made;

and the premium shall be taken into account in computing the profits of the Schedule A business [F14 or the UK property business] for the chargeable period in which the agreement is made.

Textual Amendments

F13 Words in s. 43D(2)(b) inserted (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), Sch. 1 para. 28(a) (with Sch. 2)

F14 Words in s. 43D(2) inserted (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), Sch. 1 para. 28(b) (with Sch. 2)

43E Interposed lease: exceptions, &c. U.K.

(1) Section 43D shall not apply to a finance agreement if—

(a) the term over which the financial obligation is to be reduced exceeds 15 years, or

(b) the length of the lease does not exceed 15 years, or

(c) the length of the lease is not significantly different from the term over which the financial obligation is to be reduced.

(2) For the purpose of subsection (1) the length of a lease shall be calculated in accordance with section 38.

(3) Section 43D shall not apply to a finance agreement if—

(a) the arrangements for the reduction of the financial obligation substantially depend on a person’s entitlement to an allowance under [F15 the Capital Allowances Act (including enactments which under this Act are to be treated as contained in that Act)], and

(b) that person is not connected to the person who grants the lease in respect of which the premium is payable.

(4) Section 43D(2) shall not apply where all or part of the premium is brought into account [F16 —

(a)] in computing the profits of a trade for the purposes of Case I of Schedule D (otherwise than by virtue of section 83 of the M3 Finance Act 1989 (life assurance)),[F17 or

(b) in computing under Chapter 2 of Part 2 of ITTOIA 2005 the profits of a trade carried on wholly or partly in the United Kingdom.]

(5) Section 34 [F18 and sections 277 to 281 of ITTOIA 2005] shall not apply in relation to a premium to which section 43D(2) applies.

Textual Amendments

F15 Words in s. 43E(3)(a) substituted (with effect in accordance with s. 579 of the amending Act) by Capital Allowances Act 2001 (c. 2), s. 578, Sch. 2 para. 12

F16 Words in s. 43E(4) renumbered as s. 43E(4)(a) (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by virtue of Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 29(2)(a) (with Sch. 2)

F17 S. 43E(4)(b) and preceding word inserted (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), Sch. 1 para. 29(2)(b) (with Sch. 2)

F18 Words in s. 43E(5) inserted (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), Sch. 1 para. 29(3) (with Sch. 2)

Marginal Citations

M3 1989 c. 26.

43F Insurance business. U.K.

(1) In the application of sections 43A to 43E to companies carrying on insurance business a reference to accounts does not include a reference to accounts required to be prepared under [F19 Chapter 9 of the Prudential Sourcebook (Insurers)].

(2) Neither section 43B(2) nor section 43D(2) shall require any amount to be brought into account in a computation of profits of life assurance business, or any category of life assurance business, carried on by a company where the computation is made in accordance with the provisions of this Act applicable to Case I of Schedule D.

(3) Section 432A shall have effect in relation to any sum which is or would be treated as received by virtue of section 43B(2) or 43D(2) of this Act.

(4) Expressions used in this section and in Chapter I of Part XII have the same meaning in this section as in that Chapter.

Textual Amendments

F19 Words in s. 43F(1) substituted (1.12.2001 with effect in accordance with art. 15(2) of the amending S.I.) by The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629), arts. 1(2)(a), 15(1)

Modifications etc. (not altering text)

C1 S. 43F(1) modified (with effect in accordance with reg. 4A(3) of the 1997 modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1997 (S.I. 1997/473), reg. 4A(1)(2) (as inserted (25.10.2000) by The Friendly Societies (Modification of the Corporation Tax Acts) (Amendment) Regulations 2000 (S.I. 2000/2710), regs. 1, 3, and as amended by: S.I. 2003/23, regs. 1, 3; S.I. 2005/2005, regs. 1, 4)

C2 S. 43F(1) modified (12.8.2005 with effect in accordance with reg. 1(2) of the modifying S.I.) by The Friendly Societies (Modification of the Corporation Tax Acts) Regulations 2005 (S.I. 2005/2014), regs. 1(1), 4 (which modifying reg. 4 is omitted (14.8.2007 with effect in accordance with reg. 1(3) of the revoking S.I.) by virtue of S.I. 2007/2134, regs. 1(1), 4)

43G Interpretation. U.K.

(1) This section applies for the purposes of sections 43A to 43F.

(2) In those sections—

• “connected” in relation to persons has the meaning given by section 839,

• “rent” includes any sum which is chargeable to tax under Schedule A [F20 or, as the profits of a UK property business, under Chapter 3 of Part 3 of ITTOIA 2005],

• “lease” includes an underlease, sublease, tenancy or licence and an agreement for any of those things, but does not include a mortgage or heritable security,

• “premium” [F21 —

  (a)

  for the purposes of corporation tax] has the meaning given by section 24(1) (and, in relation to Scotland, section 24(5)), and subsections (4) and (5) of section 34 shall have effect in relation to sections 43A to 43F as they have effect in relation to section 34, and

  (b)

  [F22 for the purposes of income tax has the meaning given by section 307(1) of ITTOIA 2005 (and, in relation to Scotland, section 307(3) of that Act), and includes—

  (i)

  a sum payable by the tenant under the terms subject to which a lease is granted instead of the whole or a part of the rent for a period,

  (ii)

  a sum payable by the tenant under those terms as consideration for the surrender (in Scotland, the renunciation) of the lease, and

  (iii)

  a sum payable by the tenant (otherwise than by way of rent) as consideration for the variation or waiver of a term of a lease, and]

• “sum” has the meaning given by section 24(4).

(3) A reference to a transfer of a right to receive rent from one person to another includes a reference to any arrangement under which rent ceases to form part of the receipts taken into account for the purposes of calculating a company’s liability to corporation tax or income tax.

(4) In calculating the term over which a financial obligation is to be reduced no account shall be taken of any period during which the arrangements for reduction differ from the arrangements which apply in a previous period if—

(a) the period begins after the financial obligation has been substantially reduced, and

(b) the different arrangements for reduction are not the result of a provision for periodic review, on commercial terms, of rent under a lease.]

Textual Amendments

F20 S. 43G(2): words in definition of "rent" inserted (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), Sch. 1 para. 30(2) (with Sch. 2)

F21 S. 43G(2): words in definition of "premium" inserted (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), Sch. 1 para. 30(3)(a) (with Sch. 2)

F22 S. 43G(2): in definition of "premium", para. (b) inserted (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), Sch. 1 para. 30(3)(b) (with Sch. 2)