Finance (No. 2) Act 1992

Section 66.

SCHEDULE 12 Banks etc. in compulsory liquidation

Introductory

1 (1) This Schedule applies where—

(a) a company is being, or has been, wound up by the court in the United Kingdom,

(b) the company was, at any time in the period mentioned in sub-paragraph (2) below, lawfully carrying on a deposit-taking business within the meaning of the [1987 c. 22.] Banking Act 1987 (otherwise than by virtue of an exemption under section 4 of that Act),

(c) the trade of the company that included the deposit-taking business (referred to in this Schedule as “the relevant trade”) has been permanently discontinued, and

(d) the company is insolvent and either was so when the winding-up proceedings were commenced or became so at any time in the period of twelve months following the day on which they were commenced.

(2) The period mentioned in sub-paragraph (1)(b) above is the period of twelve months ending with—

(a) the day on which the winding-up proceedings were commenced, or

(b) the day on which the relevant trade was discontinued,

whichever was the earlier.

2 (1) Sub-paragraphs (2) to (5) below apply for the purposes of this Schedule.

(2) “Company” means—

(a) any company as defined in section 735 of the [1985 c. 6.] Companies Act 1985 or Article 3 of the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986, or

(b) any unregistered company as defined in section 220 of the [1986 c. 45.] Insolvency Act 1986 or Article 184 of the [S.I. 1989/2405 (N.I. 19).] Insolvency (Northern Ireland) Order 1989.

(3) Winding-up proceedings shall be taken to have been commenced against a company at the time of the presentation of the petition for its winding up by the court.

(4) A company’s ceasing to carry on a trade, or to be within the charge to corporation tax in respect of a trade, shall be treated as the permanent discontinuance of the trade, whether or not the trade is in fact discontinued.

(5) A company shall be taken to be insolvent, or to have been insolvent at any time, if—

(a) it is unable to pay its debts as they fall due, or was at that time unable to pay its debts as they fell due, or

(b) the value of the its assets is, or was at that time, less than the amount of its liabilities (taking into account its contingent and prospective liabilities).

Taxation of certain receipts under Case VI of Schedule D

3 (1) Tax shall be charged under Case VI of Schedule D in respect of any sums within sub-paragraph (2) below that are received by the company or its liquidator after—

(a) the commencement of the winding-up proceedings, or

(b) the discontinuance of the relevant trade,

whichever was the later.

(2) Subject to sub-paragraph (3) below, any sum arising from the carrying on of the relevant trade is within this sub-paragraph, in so far as its value was not brought into account in computing the profits or gains of the trade for any period before the discontinuance.

(3) The following are not within sub-paragraph (2) above—

(a) any sum received on behalf of a person who is entitled to it to the exclusion of the company and its liquidator;

(b) any sum realised by the transfer of an asset required to be valued under section 100 of the Taxes Act 1988 (valuation of trading stock at discontinuance);

(c) any interest or dividend that, by reason of its having been subjected to tax under other provisions, would not have been taken into account under Case I of Schedule D in computing the profits or gains of the relevant trade, had it continued.

(4) Where tax is chargeable in respect of any sum by virtue of this paragraph, any other provision charging that sum to tax shall not apply.

Relief from tax

4 (1) In computing the tax that is chargeable by virtue of paragraph 3 above for any chargeable period, there shall be deducted from the amount that would otherwise be chargeable to tax the aggregate amount of all losses, expenses and debits within sub-paragraph (2) below incurred in that chargeable period or before it, in so far as relief (whether under this sub-paragraph, sub-paragraph (3) below or any other provision of the Tax Acts) has not been given in respect of them already.

(2) Any loss, expense or debit (other than a loss, expense or debit arising directly or indirectly from the discontinuance itself) incurred—

(a) after the later of the two events mentioned in paragraph 3(1) above, or

(b) in the case of a loss, at or before the discontinuance of the relevant trade,

is within this sub-paragraph if it would have been deducted in computing for tax purposes the profits or gains of the trade for any period, or deducted from or set off against those profits or gains as so computed, had the trade continued.

(3) If the aggregate amount exceeds the amount from which it is to be deducted under sub-paragraph (1) above, the company or its liquidator may make a claim requiring the excess to be deducted from or set off against the amount assessed to tax for the chargeable period in respect of any sums—

(a) received after the later of the two events mentioned in paragraph 3(1) above, and

(b) excluded from paragraph 3(2) above by paragraph 3(3)(c) above,

and relief, by repayment or otherwise, shall be given in respect of the excess accordingly.

Application of charge etc. where rights to payments transferred

5 Where the right of the company or its liquidator to receive any sum which is within paragraph 3(2) above (or which would be, if the right to receive it were not transferred) is transferred for value, any tax chargeable by virtue of paragraph 3 above shall be charged in respect of the amount or value of the consideration (or, in the case of a transfer otherwise than at arm’s length, in respect of the value of the right transferred as between parties at arm’s length); and references in this Schedule to sums received shall be construed accordingly.

Election for carry-back

6 (1) Where any sum is—

(a) chargeable to tax by virtue of paragraph 3 above, and

(b) received in any chargeable period beginning in the period of six years following the day on which the relevant trade was discontinued,

the company or its liquidator may, by notice sent to the inspector within two years after that chargeable period, elect that the tax so chargeable shall be charged as if the sum in question were received on the day on which the trade was discontinued.

(2) Where such an election has been made, an assessment shall (notwithstanding anything in the Tax Acts) be made accordingly.

Commencement

7 This Schedule shall have effect in relation to chargeable periods ending after 10th March 1992.