SCHEDULES

C1Schedule 28AF1Change in ownership of company with investment business: deductions

Annotations:
Amendments (Textual)
F1

Sch. 28A heading substituted (28.9.2004 with effect in accordance with art. 1(2) of the amending S.I.) by virtue of The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 2, Sch. para. 39(11)

Modifications etc. (not altering text)
C1

Sch. 28A modified (22.7.2004) by Finance Act 2004 (c. 12), s. 43(7)

Part I Significant increase in company capital

General

1

The provisions referred to in section 768B(2) for determining whether there is a significant increase in the amount of a company’s capital after a change in the ownership of the company are as follows.

The basic rule

2

There is a significant increase in the amount of a company’s capital if amount B—

a

exceeds amount A by at least £1 million; or

b

is at least twice amount A.

Amount A

3

1

Amount A is the lower of—

a

the amount of the company’s capital immediately before the change in the ownership; and

b

the highest 60 day minimum amount for the pre-change year, found in accordance with sub-paragraphs (2) to (6) below.

2

Find the daily amounts of the company’s capital over the pre-change year.

3

Take the highest of the daily amounts.

4

Find out whether there was in the pre-change year a period of 60 days or more in which there was no daily amount lower than the amount taken.

5

If there was, the amount taken is the highest 60 day minimum amount for the pre-change year.

6

If there was not, take the next highest of the daily amounts and repeat the process in sub-paragraph (4) above; and so on, until the highest 60 day minimum amount for the pre-change year is found.

7

In this Part of this Schedule “the pre-change year” means the period of one year ending immediately before the change in the ownership of the company in question.

Amount B

4

1

Amount B is the highest 60 day minimum amount for the post-change period (finding that amount for that period in the same way as the highest 60 day minimum amount for the pre-change year is found).

2

In this paragraph “the post-change period” means the period of three years beginning with the change in the ownership of the company in question.

Capital and amounts of capital

5

1

The capital of a company consists of the aggregate of—

a

the amount of the paid up share capital of the company;

b

the amount outstanding of any debts incurred by the company which are of a description mentioned in any of paragraphs (a) to (c) of section 417(7); and

c

the amount outstanding of any redeemable loan capital issued by the company.

2

For the purposes of sub-paragraph (1) above—

a

the amount of the paid up share capital includes any amount in the share premium account of the company (construing “share premium account” in the same way as in section F2610 of the Companies Act F22006); and

b

the amount outstanding of any debts includes any interest due on the debts.

3

Amounts of capital shall be expressed in sterling and rounded up to the nearest pound.

Part II Amounts in issue for purposes of section 768B

6

The amounts in issue referred to in section 768B(4)(c) are—

a

F9the amount of any expenses of management referable to the accounting period (F10within the meaning of Chapter 2 of Part 16 of CTA 2009) being divided, except any such expenses as would (apart from section 768B) be deductible in computing profits otherwise than F11under section 1219 of CTA 2009 (expenses of management of a company's investment business);

b

the amount of any charges which are paid in that accounting period wholly and exclusively for the purposes of the company’s business;

c

the amount of any excess carried forward under F12section 1223 of CTA 2009 (expenses of management carried forward) to the accounting period being divided;

d

the amount of any allowances falling to be made for that accounting period by virtue of F7section 253 of the Capital Allowances Act which would (apart from section 768B) be added to the expenses of management for that accounting period by virtue of F13section 1233 of CTA 2009 (excess capital allowances);

F3da

the amount (if any) of the adjusted F14non-trading profits or non-trading deficit of the company for that accounting period F4(other than one within sub-paragraph (dc) below) ;

db

the amount of any non-trading debit (other than one within sub-paragraph F5. . . (dd) below) that falls to be brought into account for that accounting period for the purposes of F15Part 5 of CTA 2009 (loan relationships) in respect of any debtor relationship of the company;

dc

the amount of any non-trading F6deficit carried forward to that accounting period underF16section 457(1) of CTA 2009 (carried forward deficit not set off against profits);

dd

F17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F8de

the amount of any non-trading credits or debits in respect of intangible fixed assets that fall to be brought into account for that period under F18section 751 of CTA 2009;

df

the amount of any non-trading loss on intangible fixed assets carried forward to that accounting period under F19section 753(3) of CTA 2009;

e

any other amounts by reference to which the profits or losses of that accounting period would (apart from section 768B) be calculated.

6A

For the purposes of paragraph 6(da) above, the amount for any accounting period of the adjusted F20non-trading profits or non-trading deficit of a company is the amount which, as the case may be, would be—

F21a

the amount of the profits arising from the company's loan relationships chargeable under section 299 of CTA 2009 (charge to tax on non-trading profits), or

b

the amount of the company’s non-trading deficit on those relationships for that period,

if, in computing that amount, amounts for that period falling within paragraph 6(db) F22or (dc) above were disregarded.

Part III Apportionment for purposes of section 768B

7

1

Subject to paragraph 8 below, the apportionment required by section 768B(4)(c) shall be made—

F33a

in the case of the sums mentioned in paragraph 6(a) above, by apportioning to each accounting period the amounts that would fall to be brought into account in that period as such sums, if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice;

aa

in the case of the charges mentioned in paragraph 6(b) above, by reference to the time when the charge is due to be paid;

b

in the case of the excess mentioned in paragraph 6(c) above, F23or in the case of the non-trading F24deficit mentioned in paragraph 6(dc) above, by apportioning the whole amount of the excess F35or, as the case may be, of the deficit to the first part of the accounting period being divided;

c

in the case of the amounts mentioned in paragraph 6(d) F25, (da) and (e) above, by reference to the respective lengths of the parts of the accounting period being divided;

F26d

in the case of any such debit as—

i

is mentioned in paragraph 6(db) above,

ii

falls to be brought into account for the purposes of F36Part 5 of CTA 2009 in accordance with an F32amortised cost basis of accounting, F27. . .

iii

so falls to be brought into account otherwise than on the assumption, specified in F37section 373 of to that Act, that the interest to which it relates does not accrue until it is paid F28, and

iv

so falls to be brought into account without any adjustment under F38sections 406 to 412 of that Act (debit relating to amount of discount referable to the relevant accounting period to be brought into account instead for the accounting period in which the security is redeemed),

by reference to the time of accrual of the amount to which the debit relates;

e

in the case of any such debit as—

i

is mentioned in paragraph 6(db) above,

ii

falls to be brought into account for the purposes of F39Part 5 of CTA 2009 in accordance with an F32amortised cost basis of accounting, F29. . . F34and

iii

so falls to be brought into account—

  • — on the assumption mentioned in paragraph (d)(iii) above, or

  • — with such an adjustment as is mentioned in paragraph (d)(iv) above,

by apportioning the whole amount of the debit to the first part of the accounting period being divided;

f

in the case of any such debit as is mentioned in paragraph 6(dd) above, by apportioning the whole amount of the debit to the first part of the accounting period being divided.

F30g

in the case of any such credit or debit as is mentioned in paragraph 6(de), by apportioning to each accounting period the credits or debits that would fall to be brought into account in that period if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice;

h

in the case of any such loss as is mentioned in paragraph 6(df) above, by apportioning the whole amount of the loss to the first part of the accounting period being divided.

2

F31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

If it appears that any method of apportionment given by paragraph 7 above would work unreasonably or unjustly for any case for which it is given, such other method shall be used for that case as appears just and reasonable.

Part IVF88Disallowed debits and non-trading deficits

Annotations:
Amendments (Textual)
F88

Sch. 28A Pt. 4 title substituted (with effect in accordance with Sch. 7 para. 3(9) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 3(8)

9

1

This paragraph has effect in a case to which section 768B applies for determining the debits to be brought into account for the purposes of F73Part 5 of CTA 2009 (loan relationships) for—

a

the accounting period beginning immediately after the change in the ownership of the company; and

b

any subsequent accounting period.

2

The debits so brought into account shall not include the debits falling within paragraph 11 below to the extent (if at all) that the aggregate of—

a

the amount of those debits, and

b

the amount of any debits falling within that paragraph which have been brought into account for the purposes of F74that Part for any previous accounting period ending after the change in the ownership,

exceeds the profits for the accounting period ending with the change in the ownership.

3

The reference in sub-paragraph (2) above to the profits is a reference to profits after making all deductions and giving all reliefs that for the purposes of corporation tax are made or given against the profits, including deductions and reliefs which under any provision are treated as reducing them for those purposes.

9A

1

This paragraph has effect in any case to which section 768B applies where the non-trading deficit mentioned in paragraph 6(dc) above is apportioned by paragraph 7(b) above to the first part of the accounting period being divided.

2

In any such case, none of that non-trading deficit shall be carried forward to—

a

the accounting period beginning immediately after the change in the ownership of the company, or

b

any subsequent accounting period.

10

1

This paragraph has effect in a case to which section 768C applies for determining the debits to be brought into account for the purposes of F75Part 5 of CTA 2009 (loan relationships) for—

a

the accounting period beginning immediately after the change in the ownership of the relevant company; and

b

any subsequent accounting period.

2

The debits so brought into account for any such accounting period shall not include the debits falling within paragraph 11 below to the extent (if at all) that the amount of those debits exceeds the modified total profits for the accounting period.

3

The reference in sub-paragraph (2) above to the modified total profits for an accounting period is a reference to the total profits for that period—

a

reduced, if that period is the period in which the relevant gain accrues, by an amount equal to the amount of the total profits for that period which represents the relevant gain; and

b

after making all deductions and giving all reliefs that for the purposes of corporation tax are made or given against the profits, including deductions and reliefs which under any provision are treated as reducing them for those purposes, other than any reduction by virtue of F76section 461 of CTA 2009.

4

Where by virtue of sub-paragraph (2) above a debit is to any extent not brought into account for an accounting period, that debit may (to that extent) be brought into account for the next accounting period, but this is subject to the application of sub-paragraphs (1) to (3) above to that next accounting period.

10A

1

This paragraph has effect in any case to which section 768C applies where the non-trading deficit mentioned in paragraph 13(1)(ec) below is apportioned by paragraph 16(1)(b) below to the first part of the accounting period being divided.

2

In any such case, none of that non-trading deficit shall be carried forward to—

a

the accounting period beginning immediately after the change in the ownership of the company, or

b

any subsequent accounting period.

11

1

A debit falls within this paragraph if it is a non-trading debit which—

a

falls to be brought into account for the purposes of F80Part 5 of CTA 2009 in accordance with an F78amortised cost basis of accounting;

F79b

so falls to be brought into account—

i

with an adjustment under F81sections 406 to 412 of that Act (debit relating to amount of discount referable to the relevant accounting period to be brought into account instead for the accounting period in which the security is redeemed); or

ii

on the assumption, specified in F82section 373(1) of that Act, that the interest to which it relates does not accrue until it is paid; and

c

F77apart from F83sections 373 and 406 to 412 of that Act, would have fallen to be brought into account for those purposes for an accounting period ending before or with the change in the ownership of the company or, as the case may be, the relevant company.

2

F84. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

The debits that fall within this paragraph also include any non-trading debit which—

a

is not such a debit as is mentioned in sub-paragraph (1) F85. . . above;

b

is a debit in respect of a debtor relationship of the company or, as the case may be, the relevant company;

c

falls to be brought into account for the purposes of F86Part 5 of CTA 2009 in accordance with an F78amortised cost basis of accounting; and

d

relates to an amount that accrued before the change in the ownership of that company.

4

In this paragraph “post-change accounting period” means the accounting period beginning immediately after the change in the ownership of the company or, as the case may be, the relevant company.

12

Expressions used both in this Part of this Schedule and in F87Part 5 of CTA 2009 have the same meanings in this Part of this Schedule as in that Chapter.

Part V Amounts in issue for purposes of section 768C

13

1

The amounts in issue referred to in section 768C(3)(c) are—

a

the amount which would in accordance with the relevant provisions of the 1992 Act (and apart from section 768C) be included in respect of chargeable gains in the total profits for the accounting period being divided;

b

F46the amount of any expenses of management referable to the accounting period (within the meaning of section 75) being divided except any such expenses as would (apart from section 768C) be deductible in computing total profits otherwise than under section 75;

c

the amount of any charges which are paid in that accounting period wholly and exclusively for the purposes of the company’s business;

d

the amount of any excess carried forward under F47section 75(9) to the accounting period being divided;

e

the amount of any allowances falling to be made for that accounting period by virtue of F44section 253 of the Capital Allowances Act which would (apart from section 768C) be added to the expenses of management for that accounting period by virtue of F48section 75(7);

F40ea

the amount (if any) of the adjusted F49non-trading profits or non-trading deficit of the company for that accounting period F41(other than one within paragraph (ec) below);

eb

the amount of any non-trading debit (other than one within paragraph F42. . . (ed) below) that falls to be brought into account for that accounting period for the purposes of F50Part 5 of CTA 2009 (loan relationships) in respect of any debtor relationship of the company;

ec

the amount of any non-trading F43deficit carried forward to that accounting period underF51section 457(1) of CTA 2009 (carried forward deficit not set off against profits);

ed

F52. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F45ee

the amount of any non-trading credits or debits in respect of intangible fixed assets that fall to be brought into account for that period under F53section 751 of CTA 2009;

ef

the amount of any non-trading loss on intangible fixed assets carried forward to that accounting period under F54section 753(3) of CTA 2009; and

f

any other amounts by reference to which the profits or losses of the accounting period being divided would (apart from section 768C) be calculated.

2

In sub-paragraph (1)(a) above “the relevant provisions of the 1992 Act” means section 8(1) of and Schedule 7A to that Act.

13A

Paragraph 6A above shall apply for the purposes of paragraph 13(1)(ea) above as it applies for the purposes of paragraph 6(da) above.

Part VI Apportionment for purposes of section 768C

14

The apportionment required by section 768C(3)(c) shall be made as follows.

15

In the case of the amount mentioned in paragraph 13(1)(a) above—

a

if it does not exceed the amount of the relevant gain, the whole of it shall be apportioned to the second part of the accounting period being divided;

b

if it exceeds the amount of the relevant gain, the excess shall be apportioned to the first part of the accounting period being divided and the relevant gain shall be apportioned to the second part.

16

1

Subject to paragraph 17 below, the apportionment shall be made—

F65a

in the case of the sums mentioned in paragraph 13(1)(b) above, by apportioning to each accounting period the amounts that would fall to be brought into account in that period as such sums, if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice;

aa

in the case of the charges mentioned in paragraph 13(1)(c) above, by reference to the time when the charge is due to be paid;

b

in the case of the excess mentioned in paragraph 13(1)(d) above, F55or in the case of the non-trading F56deficit mentioned in paragraph 13(1)(ec) above, by apportioning the whole amount of the excess F67or, as the case may be, of the deficit to the first part of the accounting period being divided;

c

in the case of the amounts mentioned in paragraph 13(1)(e) F57, (ea) and (f) above, by reference to the respective lengths of the parts of the accounting period being divided;

F58d

in the case of any such debit as—

i

is mentioned in paragraph 13(1)(eb) above,

ii

falls to be brought into account for the purposes of F68Part 5 of CTA 2009 in accordance with an F64amortised cost basis of accounting, F59. . .

iii

so falls to be brought into account otherwise than on the assumption, specified in F69section 373(1) of that Act, that the interest to which it relates does not accrue until it is paid F60, and

iv

so falls to be brought into account without any adjustment under F70sections 406 to 412 of that Act (debit relating to amount of discount referable to the relevant accounting period to be brought into account instead for the accounting period in which the security is redeemed),

by reference to the time of accrual of the amount to which the debit relates;

e

in the case of any such debit as—

i

is mentioned in paragraph 13(1)(eb) above,

ii

falls to be brought into account for the purposes of F71Part 5 of CTA 2009 in accordance with an F64amortised cost basis of accounting, F61. . . F66and

iii

so falls to brought into account—

  • — on the assumption mentioned in paragraph (d)(iii) above, or

  • — with such an adjustment as is mentioned in paragraph (d)(iv) above,

by apportioning the whole amount of the debit to the first part of the accounting period being divided;

f

F72. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F62g

in the case of any such credit or debit as is mentioned in paragraph 13(ee), by apportioning to each accounting period the credits or debits that would fall to be brought into account in that period if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice;

h

in the case of any such loss as is mentioned in paragraph 13(ef), by apportioning the whole amount of the loss to the first part of the accounting period being divided.

2

F63. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

If it appears that any method of apportionment given by paragraph 16 above would work unreasonably or unjustly for any case for which it is given, such other method shall be used for that case as appears just and reasonable.