[F1501A Supplementary charge in respect of ring fence tradesU.K.
(1)Where in any accounting period beginning on or after 17th April 2002 a company carries on a ring fence trade, a sum equal to [F220 per cent] of its adjusted ring fence profits for that period shall be charged on the company as if it were an amount of corporation tax chargeable on the company.
(2)A company’s adjusted ring fence profits for an accounting period are the amount which, on the assumption mentioned in subsection (3) below, would be determined for that period (in accordance with this Chapter) as the profits of the company’s ring fence trade chargeable to corporation tax.
(3)The assumption is that financing costs are left out of account in computing—
(a)the amount of the profits or loss of any ring fence trade of the company’s for each accounting period beginning on or after 17th April 2002; and
(b)where for any such period the whole or part of any loss relief is surrendered to the company in accordance with section 492(8), the amount of that relief or, as the case may be, that part.
(4)For the purposes of this section, “financing costs” means the costs of debt finance.
(5)In calculating the costs of debt finance for an accounting period the matters to be taken into account include—
(a)any costs giving rise to debits in respect of debtor relationships of the company under Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships) [F3, other than debits in respect of exchange losses from such relationships (see section 103(1A) and (1B) of that Act)];
[F4(b)any exchange gain or loss from a debtor relationship, within the meaning of that Chapter (see section 103(1A) and (1B) of that Act), in relation to debt finance;]
[F5(c)any credit or debit falling to be brought into account under Schedule 26 to the Finance Act 2002 (derivative contracts) in relation to debt finance;]
(d)the financing cost implicit in a payment under a finance lease;
[F6(dd)where the company is the lessee under a long funding operating lease, the amount deductible in respect of payments under the lease in computing the profits of the lessee for the purposes of corporation tax (after first making against any such amount any reductions falling to be made by virtue of section 502K); and]
(e)any other costs arising from what would be considered in accordance with generally accepted accounting practice to be a financing transaction.
(6)Where an amount representing the whole or part of a payment falling to be made by a company—
(a)falls (or would fall) to be treated as a finance charge under a finance lease for the purposes of accounts relating to that company and one or more other companies and prepared in accordance with generally accepted accounting practice, but
(b)is not so treated in the accounts of the company,
the amount shall be treated for the purposes of this section as financing costs falling within subsection (5)(d) above.
(7)If—
(a)in computing the adjusted ring fence profits of a company for an accounting period, an amount falls to be left out of account by virtue of subsection (5)(d) above, but
(b)the whole or any part of that amount is repaid,
the repayment shall also be left out of account in computing the adjusted ring fence profits of the company for any accounting period.
(8)In this section “finance lease” means any arrangements—
(a)which provide for an asset to be leased or otherwise made available by a person to another person (“the lessee”), and
(b)which, under generally accepted accounting practice,—
(i)fall (or would fall) to be treated, in the accounts of the lessee or a person connected with the lessee, as a finance lease or a loan, or
(ii)are comprised in arrangements which fall (or would fall) to be so treated.
(9)For the purposes of applying subsection (8)(b) above, the lessee and any person connected with the lessee are to be treated as being companies which are incorporated in a part of the United Kingdom.
(10)In this section “accounts”, in relation to a company, includes any accounts which—
(a)relate to two or more companies of which that company is one, and
[F7(b)are drawn up in accordance with generally accepted accounting practice.]
[F8(11)In this section “long funding operating lease” means a long funding operating lease for the purposes of Part 2 of the Capital Allowances Act (see section 70YI(1) of that Act).]]
Textual Amendments
F1S. 501A inserted (24.7.2002) by Finance Act 2002 (c. 23), ss. 91, 93
F2Words in s. 501A(1) substituted (with effect in accordance with s. 152(2)(3) of the amending Act) by Finance Act 2006 (c. 25), s. 152(1)
F3Words in s. 501A(5)(a) inserted (with effect in accordance with s. 79(3), Sch. 23 para. 25 of the amending Act) by Finance Act 2002 (c. 23), Sch. 23 para. 18(2) (with s. 81(4)(5))
F4S. 501A(5)(b) substituted (with effect in accordance with s. 79(3), Sch. 23 para. 25 of the amending Act) by Finance Act 2002 (c. 23), Sch. 23 para. 18(3) (with s. 81(4)(5))
F5S. 501A(5)(c) substituted (with effect in accordance with s. 83(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 27 para. 8 (with Sch. 28)
F6S. 501A(5)(dd) substituted for word at the end of s. 501A(5)(d) (with effect in accordance with Sch. 9 para. 2(4) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 2(2)
F7S. 501A(10)(b) substituted (with effect in accordance with s. 80(4) of the amending Act) by Finance Act 2005 (c. 7), Sch. 4 para. 23
F8S. 501A(11) inserted (with effect in accordance with Sch. 9 para. 2(4) of the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 2(3)