Income and Corporation Taxes Act 1988

[F1 768B Change in ownership of investment company: deductions generally. U.K.

(1) This section applies where there is a change in the ownership of an investment company and—

(a) after the change there is a significant increase in the amount of the company’s capital; or

(b) within the period of six years beginning three years before the change there is a major change in the nature or conduct of the business carried on by the company; or

(c) the change in the ownership occurs at any time after the scale of the activities in the business carried on by the company has become small or negligible and before any considerable revival of the business.

(2) For the purposes of subsection (1)(a) above, whether there is a significant increase in the amount of a company’s capital after a change in the ownership of the company shall be determined in accordance with the provisions of Part I of Schedule 28A.

(3) In paragraph (b) of subsection (1) above “major change in the nature or conduct of a business” includes a major change in the nature of the investments held by the company, even if the change is the result of a gradual process which began before the period of six years mentioned in that paragraph.

(4) For the purposes of this section—

(a) the accounting period of the company in which the change in the ownership occurs shall be divided into two parts, the first the part ending with the change, the second the part after;

(b) those parts shall be treated as two separate accounting periods; and

(c) the amounts in issue for the accounting period being divided shall be apportioned to those parts.

(5) In Schedule 28A—

(a) Part II shall have effect for identifying the amounts in issue for the accounting period being divided; and

(b) Part III shall have effect for the purpose of apportioning those amounts to the parts of that accounting period.

(6) Any sums which—

(a) are disbursed or treated as disbursed as expenses of management in the accounting period being divided, and

(b) under Part III of Schedule 28A are apportioned to either part of that period,

shall be treated for the purposes of section 75 as disbursed in that part.

(7) Any charges which under Part III of Schedule 28A are apportioned to either part of the accounting period being divided shall be treated for the purposes of sections 338 and 75 as paid in that part.

(8) Any allowances which under Part III of Schedule 28A are apportioned to either part of the accounting period being divided shall be treated for the purposes of [F2 section 253 of the Capital Allowances Act] and section 75(4) as falling to be made in that part.

(9) In computing the total profits of the company for an accounting period ending after the change in the ownership, no deduction shall be made under section 75 by reference to—

(a) sums disbursed or allowances falling to be made for an accounting period beginning before the change; or

(b) charges paid in such an accounting period.

[F3 (10) Part IV of Schedule 28A shall have effect for the purpose of restricting, in a case where this section applies, the debits to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 (loan relationships) in respect of the company’s loan relationships [F4 (including debits so brought into account by virtue of paragraph 14(3)of Schedule 26 to the Finance Act 2002)].]

(12) Subject to the modification in subsection (13) below, subsections (6) to (9) of section 768 shall apply for the purposes of this section as they apply for the purposes of that section.

(13) The modification is that in subsection (6) of section 768 for the words “relief in respect of a company’s losses has been restricted” there shall be substituted “deductions from a company’s total profits [F5 , or the debits to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 in the case of a company in respect of its loan relationships [F6 (or its derivative contracts by virtue of paragraph 14(3) of Schedule 26 to the Finance Act 2002)],] have been restricted.”

(14) In this section “investment company” has the same meaning as in Part IV.]

Textual Amendments

F1 Ss. 768B, 768C inserted (with application in accordance with Sch. 26 para. 5 of the amending Act) by Finance Act 1995 (c. 4), Sch. 26 para. 2

F2 Words in s. 768B(8) substituted (with effect in accordance with s. 579 of the amending Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 56

F3 S. 768B(10) substituted for s. 768B(10)(11) (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 39(1) (with Sch. 15)

F4 Words in s. 768B(10) inserted (with effect in accordance with s. 83(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 27 para. 9(a) (with Sch. 28)

F5 Words in s. 768B(13) inserted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 39(2) (with Sch. 15)

F6 Words in s. 768B(13) inserted (with effect in accordance with s. 83(3) of the amending Act) by Finance Act 2002 (c. 23), Sch. 27 para. 9(b) (with Sch. 28)