(1)This section applies where there is a change in the ownership of [F3a company with investment business] 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)[F4are, or are treated as, expenses of management referable to 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 [F5expenses of management referable to 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 [F6section 253 of the Capital Allowances Act] and section [F775(7)] 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)[F8expenses of management deductible] or allowances falling to be made for an accounting period beginning before the change; or
(b)charges paid in such an accounting period.
[F9(10)Part IV of Schedule 28A shall have effect for the purpose of restricting, in a case where this section applies, the debits [F10and non-trading deficits] 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 [F11(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 [F12, 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 [F13(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 [F14“company with investment business”] has the same meaning as in Part IV.]
Textual Amendments
F1S. 768B sidenote substituted (with effect in accordance with ss. 42-44 of the amending Act) by virtue of Finance Act 2004 (c. 12), Sch. 6 para. 3(7)
F2Ss. 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
F3Words in s. 768B(1) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 3(2)
F4Words in s. 768B(6)(a) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 3(3)(a)
F5Words in s. 768B(6) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 3(3)(b)
F6Words 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
F7Words in s. 768B(8) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 3(4)
F8Words in s. 768B(9)(a) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 3(5)
F9S. 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)
F10Words in s. 768B(10) inserted (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(1)
F11Words 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)
F12Words 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)
F13Words 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)
F14Words in s. 768B(14) substituted (with effect in accordance with ss. 42-44 of the amending Act) by Finance Act 2004 (c. 12), Sch. 6 para. 3(6)
Modifications etc. (not altering text)
C1Ss. 768B, 768C modified (22.7.2004) by Finance Act 2004 (c. 12), s. 43(7)
C2Ss. 767A-768E: The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), reg. 36 to be construed as one (6.4.2006) with these sections, by virtue of that reg.
C3Ss. 768-768E modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 30