Finance Act 2000

Part I U.K. Application of Taxation of Chargeable Gains Act 1992

Main amendments U.K.

1 (1) In section 170 of the M1 Taxation of Chargeable Gains Act 1992 (groups of companies: interpretation), the following provisions shall cease to have effect— U.K.

(a) paragraph (a) of subsection (2) (which provides that references to companies apply only to companies resident in the United Kingdom); and

(b) in subsection (9)(b) the words “(although resident in the United Kingdom)".

(2) The above amendments (referred to in this Schedule as “the main amendments”) have effect in accordance with the following provisions of this Schedule.

Marginal Citations

M1 1992 c. 12.

Transfers within a group U.K.

2 (1) Section 171 of the M2 Taxation of Chargeable Gains Act 1992 (transfers within a group: general provisions) is amended as follows. U.K.

(2) For subsection (1) (treatment for corporation tax purposes of transfer of asset within group) substitute—

“(1) Where—

(a) a company (“company A”) disposes of an asset to another company (“company B”) at a time when both companies are members of the same group, and

(b) the conditions in subsection (1A) below are met,

company A and company B are treated for the purposes of corporation tax on chargeable gains as if the asset were acquired by company B for a consideration of such amount as would secure that neither a gain nor a loss would accrue to company A on the disposal.

(1A) The conditions referred to in subsection (1)(b) above are—

(a) that company A is resident in the United Kingdom at the time of the disposal, or the asset is a chargeable asset in relation to that company immediately before that time, and

(b) that company B is resident in the United Kingdom at the time of the disposal, or the asset is a chargeable asset in relation to that company immediately after that time.

For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section 10(3) form part of its chargeable profits for corporation tax purposes.”.

(3) In subsection (2)—

(a) in paragraph (a), for “a member of a group of companies" substitute “ company B ”, and

(b) in the closing words, for “a member of a group of companies" substitute “ company A ”.

(4) In subsection (3) for “the company first mentioned in that subsection" substitute “ company A ”.

(5) After subsection (5) add—

“(6) Subsection (1) above applies notwithstanding any provision in this Act fixing the amount of the consideration deemed to be received on a disposal or given on an acquisition.

But where it is assumed for any purpose that a member of a group of companies has sold or acquired an asset, it shall be assumed also that it was not a sale or acquisition to which this section applies.”.

(6) The above amendments, and the main amendments so far as they apply for the purposes of section 171, have effect in relation to disposals on or after 1st April 2000.

Marginal Citations

M2 1992 c. 12.

Transfer of United Kingdom branch or agency U.K.

3 (1) Section 172 of the M3 Taxation of Chargeable Gains Act 1992 (transfer of United Kingdom branch or agency) shall cease to have effect. U.K.

(2) The above amendment has effect in relation to disposals on or after 1st April 2000.

Marginal Citations

M3 1992 c. 12.

De-grouping charge U.K.

4 (1) Section 179 of the M4 Taxation of Chargeable Gains Act 1992 (company ceasing to be member of group) is amended as follows. U.K.

(2) For subsection (1) substitute—

“(1) This section applies where—

(a) a company (“company A”) acquires an asset from another company (“company B”) at a time when company B is a member of a group,

(b) the conditions in subsection (1A) below are met, and

(c) company A ceases to be a member of that group within the period of six years after the time of the acquisition.

References in this section to a company ceasing to be a member of a group of companies do not apply to cases where a company ceases to be a member of a group in consequence of another member of the group ceasing to exist.

(1A) The conditions referred to in subsection (1)(b) above are—

(a) that company A is resident in the United Kingdom at the time it acquires the asset, or the asset is a chargeable asset in relation to that company immediately after that time, and

(b) that company B is resident in the United Kingdom at the time of that acquisition, or the asset is a chargeable asset in relation to that company immediately before that time.

For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section 10(3) form part of its chargeable profits for corporation tax purposes.”.

(3) In subsection (2A)—

(a) in paragraph (a)—

(i) after “a company" insert “ (“company A”) ”, and

(ii) after “another company" insert “ (“company B”) ”,

(b) in paragraph (b) for “that company’s" substitute “ company A’s ”,

(c) in paragraph (c) for “the company that made the acquisition" substitute “ company A ”, and

(d) in the closing words for “the company’s" substitute “ company A’s ”.

(4) In subsections (2B) (three times), (2C), (2D), (3) (three times), (4) (twice), (10)(c) and (13) for “the chargeable company" substitute “ company A ”.

(5) Subsections (11) and (12) (which are superseded by the provision made by paragraph 9 below) shall cease to have effect.

(6) The amendments made by sub-paragraphs (2) to (4) above, and the main amendments so far as they apply for the purposes of section 179, have effect in relation to assets acquired on or after 1st April 2000.

(7) The amendments made by sub-paragraph (5) above have effect in relation to gains accruing on or after 1st April 2000.

Marginal Citations

M4 1992 c. 12.

Reconstruction or amalgamation involving transfer of business U.K.

5 (1) Section 139 of the M5 Taxation of Chargeable Gains Act 1992 (reconstruction or amalgamation involving transfer of business) is amended as follows. U.K.

(2) In subsection (1) (transfer of business on basis of no gain and no loss) for paragraph (b) (requirement that both companies are resident in the United Kingdom) substitute—

“(b) the conditions in subsection (1A) below are met in relation to the assets included in the transfer, and”.

(3) After subsection (1) insert—

“(1A) The conditions referred to in subsection (1)(b) above are—

(a) that the company acquiring the assets is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets in relation to that company immediately after that time, and

(b) that the company from which the assets are acquired is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets in relation to that company immediately before that time.

For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section 10(3) form part of its chargeable profits for corporation tax purposes.”.

(4) The above amendments have effect in relation to disposals made on or after 1st April 2000.

Marginal Citations

M5 1992 c. 12.

Deemed disposal on non-resident ceasing to carry on trade in United Kingdom through branch or agency U.K.

6 (1) Section 25 of the M6 Taxation of Chargeable Gains Act 1992 (non-residents: deemed disposals) is amended as follows. U.K.

(2) After subsection (3) insert—

“(3A) Subsection (3) above shall not apply if—

(a) the person ceasing to carry on the trade is a company, and

(b) the trade is transferred to another company in circumstances in which section 139 or 171 applies in relation to the assets transferred.”.

(3) Subsection (4) shall cease to have effect.

(4) The amendment in sub-paragraph (2) above has effect in relation to cases where section 139 or, as the case may be, section 171 has effect as amended by this Schedule.

(5) The amendment in sub-paragraph (3) above has effect in relation to cases where section 139 has effect as amended by this Schedule.

Marginal Citations

M6 1992 c. 12.

Restriction on set-off of pre-entry losses U.K.

7 (1) In Schedule 7A to the Taxation of Chargeable Gains Act 1992 (restriction on set-off of pre-entry losses), paragraph 1 (application and construction of Schedule) is amended as follows. U.K.

(2) In sub-paragraph (3)—

(a) for “it became a member of the relevant group" substitute “ the relevant event occurred in relation to it ”, and

(b) for “that group" substitute “ the relevant group ”.

(3) After sub-paragraph (3) insert—

“(3A) In this paragraph references to the relevant event occurring in relation to a company—

(a) in a case in which—

(i) the company was resident in the United Kingdom at the time when it became a member of the relevant group, or

(ii) the asset was a chargeable asset in relation to the company at that time,

are references to the company becoming a member of that group;

(b) in any other case, are references to whichever is the first of—

(i) the company becoming resident in the United Kingdom, or

(ii) the asset becoming a chargeable asset in relation to the company.

For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section 10(3) form part of its chargeable profits for corporation tax purposes.”

(4) In sub-paragraph (4)(a) for “it became a member of the relevant group" substitute “ the relevant event occurred in relation to it ”.

(5) In sub-paragraph (5)—

(a) in the opening words, for the words from “the company" to “the relevant group" substitute “ the relevant event occurred in relation to the company by reference to which that asset is a pre-entry asset ”,

(b) in paragraph (a), for “a company has become a member of the relevant group" substitute “ a relevant event has occurred in relation to a company ”, and

(c) in paragraph (b), for “a company became a member of the relevant group" substitute “ a relevant event occurred in relation to a company ”.

(6) The above amendments, and the main amendments so far as they apply for the purposes of Schedule 7A, have effect in relation to the amount to be included in respect of chargeable gains in a company’s total profits for any accounting period ending on or after 21st March 2000.

(7) Any question whether a company was, in relation to times before 21st March 2000, a member of a group shall be determined by reference to the position under the M7 Taxation of Chargeable Gains Act 1992 as it stood before the main amendments.

(8) Any question whether a company was, in relation to times before 6th April 1992, a member of a group shall be determined by reference to the position under the M8 Capital Gains Tax Act 1979.

(9) Where—

(a) immediately before the time when the main amendments have effect in relation to a company in accordance with sub-paragraph (6), the company was not a member of a group of companies for the purposes of section 170 of the Taxation of Chargeable Gains Act 1992 (as it stood before the main amendments), and

(b) immediately after that time, the company is a member of a group of companies for the purposes of that section (as amended by the main amendments),

Schedule 7A to that Act shall not have effect in relation to any losses accruing to the company before that time or any chargeable assets (within the meaning of paragraph 1(3A) of that Schedule) held by it immediately before that time.

Marginal Citations

M7 1992 c. 12.

M8 1979 c. 14.

Restrictions on setting losses against pre-entry gains U.K.

F1 8 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Sch. 29 para. 8 repealed (with effect in accordance with s. 70(6)-(11) of the amending Act) by Finance Act 2006 (c. 25), Sch. 26 Pt. 3(9)

Recovery of unpaid tax U.K.

9 (1) For sections 190 and 191 of the Taxation of Chargeable Gains Act 1992 substitute— U.K.

“190 Tax recoverable from another group company or controlling director.

(1) This section applies where—

(a) a chargeable gain has accrued to a company (“the taxpayer company”),

(b) the condition in subsection (2) below is met, and

(c) the whole or part of the corporation tax assessed on the company for the accounting period in which the gain accrued (“the relevant accounting period”) is unpaid at the end of the period of six months after it became payable.

(2) The condition referred to in subsection (1)(b) above is—

(a) that the taxpayer company is resident in the United Kingdom at the time when the gain accrued, or

(b) that the gain forms part of the taxpayer company’s chargeable profits for corporation tax purposes by virtue of section 10(3).

(3) The following persons may, by notice under this section, be required to pay the unpaid tax—

(a) if the taxpayer company was a member of a group at the time when the gain accrued—

(i) a company which was at that time the principal company of the group, and

(ii) any other company which in any part of the period of twelve months ending with that time was a member of that group and owned the asset disposed of, or any part of it, or where that asset is an interest or right in or over another asset, owned either asset or any part of either asset; and

(b) if the gain forms part of the chargeable profits of the taxpayer company for corporation tax purposes by virtue of section 10(3), any person who is, or during the period of twelve months ending with the time when the gain accrued was, a controlling director of the taxpayer company or of a company which has, or within that period had, control over the taxpayer company.

(4) The Board may serve a notice on a person within subsection (3) above requiring him, within 30 days of the service of the notice, to pay—

(a) the amount which remains unpaid of the corporation tax assessed on the taxpayer company for the relevant accounting period, or

(b) if less, an amount equal to corporation tax on the amount of the chargeable gain at the rate in force when the gain accrued.

(5) The notice must state—

(a) the amount of corporation tax assessed on the taxpayer company for the relevant accounting period that remains unpaid,

(b) the date when it first became payable, and

(c) the amount required to be paid by the person on whom the notice is served.

(6) The notice has effect—

(a) for the purposes of the recovery from that person of the amount required to be paid and of interest on that amount, and

(b) for the purposes of appeals,

as if it were a notice of assessment and that amount were an amount of tax due from that person.

(7) Any notice under this section must be served before the end of the period of three years beginning with the date on which the liability of the taxpayer company to corporation tax for the relevant accounting period is finally determined.

(8) Where the unpaid tax is charged in consequence of a determination under paragraph 36 or 37 of Schedule 18 to the M9 Finance Act 1998 (determination where no return delivered or return incomplete), the date mentioned in subsection (7) above shall be taken to be the date on which the determination was made.

(9) Where the unpaid tax is charged in a self-assessment, including a self-assessment that supersedes a determination (see paragraph 40 of Schedule 18 to the Finance Act 1998), the date mentioned in subsection (7) above shall be taken to be the latest of—

(a) the last date on which notice of enquiry may be given into the return containing the self-assessment;

(b) if notice of enquiry is given, 30 days after the enquiry is completed;

(c) if more than one notice of enquiry is given, 30 days after the last notice of completion;

(d) if after such an enquiry the Inland Revenue amend the return, 30 days after notice of the amendment is issued;

(e) if an appeal is brought against such an amendment, 30 days after the appeal is finally determined.

(10) If the unpaid tax is charged in a discovery assessment, the date mentioned in subsection (7) above shall be taken to be—

(a) where there is no appeal against the assessment, the date when the tax becomes due and payable;

(b) where there is such an appeal, the date on which the appeal is finally determined.

(11) A person who has paid an amount in pursuance of a notice under this section may recover that amount from the taxpayer company.

(12) A payment in pursuance of a notice under this section is not allowed as a deduction in computing any income, profits or losses for any tax purposes.

(13) In this section—

• “director”, in relation to a company, has the meaning given by section 168(8) of the Taxes Act (read with subsection (9) of that section) and includes any person falling within section 417(5) of that Act (read with subsection (6) of that section);

• “controlling director”, in relation to a company, means a director of the company who has control of it (construing control in accordance with section 416 of the Taxes Act);

  “group" and “principal company" have the meaning which would be given by section 170 if in that section for references to 75 per cent. subsidiaries there were substituted references to 51 per cent. subsidiaries.”.

(2) In section 87A(3) of the M10 Taxes Management Act 1970 (date from which interest runs in the case of an assessment of a company’s tax on another person)—

(a) after “In relation to corporation tax assessed" insert “ or treated as assessed ”, and

(b) after “139(7)" insert “ or 190 ”.

(3) The above amendments, and the main amendments so far as they apply for the purposes of section 190 (as substituted by sub-paragraph (1) above), have effect in relation to gains accruing on or after 1st April 2000.

(4) Any question whether a company was a member of a group during the period of twelve months ending when such a gain accrued shall be determined in accordance with section 170 as amended by the main amendments.

Marginal Citations

M9 1988 c. 36.

M10 1970 c. 9.

Replacement of business assets by members of group U.K.

10 (1) Section 175 of the M11 Taxation of Chargeable Gains Act 1992 is amended as follows. U.K.

(2) In subsection (1) after “all the trades" insert “ to which this section applies ”.

(3) After subsection (1) insert—

“(1A) The trades to which this section applies are—

(a) any trade carried on by a company that is resident in the United Kingdom, and

(b) any trade carried on in the United Kingdom through a branch or agency by a company not so resident.”.

(4) In subsection (2A), after paragraph (b) insert—

“(ba) the conditions in subsection (2AA) below are met, and”.

(5) After subsection (2A) insert—

“(2AA) The conditions referred to in subsection (2A)(ba) above are—

(a) that the company making the disposal is resident in the United Kingdom at the time of the disposal, or the assets are chargeable assets in relation to that company immediately before that time, and

(b) that the acquiring company is resident in the United Kingdom at the time of the acquisition, or the assets are chargeable assets in relation to that company immediately after that time.

For this purpose an asset is a “chargeable asset” in relation to a company at any time if, were the asset to be disposed of by the company at that time, any gain accruing to the company would be a chargeable gain and would by virtue of section 10(3) form part of its chargeable profits for corporation tax purposes.”.

(6) For subsection (3) substitute—

“(3) Section 154(2) applies where the company making the claim is a member of a group of companies—

(a) as if all members of the group for the time being carrying on a trade to which this section applies were the same person, and

(b) in accordance with subsection (1) above, as if all those trades were the same trade;

so that the gain accrues to the member of the group holding the asset concerned on the occurrence of the event mentioned in section 154(2).”.

(7) The above amendments, and the main amendments so far as they apply for the purposes of section 175, have effect in relation to cases in which—

(a) either the disposal or acquisition is on or after 1st April 2000, or

(b) both the disposal and acquisition are on or after that date.

(8) In a case falling within paragraph (a) of sub-paragraph (7) above, any question whether a company was, at the time of the acquisition or disposal corresponding to the disposal or acquisition referred to in that paragraph, a member of a group shall be determined in accordance with section 170 of the Taxation of Chargeable Gains Act 1992 as amended by the main amendments.

Marginal Citations

M11 1992 c. 12.

Transfers of assets within a group: trading stock U.K.

11 (1) For section 173 of the Taxation of Chargeable Gains Act 1992 substitute— U.K.

“173 Transfers within a group: trading stock.

(1) Where—

(a) a company (“company A”) acquires an asset as trading stock of a trade to which this section applies,

(b) the acquisition is from a company (“company B”) that at the time of the acquisition is a member of the same group of companies, and

(c) the asset did not form part of the trading stock of any such trade carried on by company B,

company A is treated for the purposes of section 161 as having acquired the asset otherwise than as trading stock and immediately appropriated it for the purposes of the trade as trading stock.

(2) Where—

(a) a company (“company C”) disposes of an asset forming part of the trading stock of a trade to which this section applies carried on by that company,

(b) the disposal is to another company (“company D”) that at the time of the disposal is a member of the same group of companies, and

(c) the asset is acquired by company D otherwise than as trading stock of any such trade carried on by it,

company C is treated for the purposes of section 161 as having appropriated the asset immediately before the disposal for some purpose other than the purpose of use as trading stock.

(3) The trades to which this section applies are—

(a) any trade carried on by a company resident in the United Kingdom, and

(b) any trade carried on in the United Kingdom through a branch or agency by a company not so resident.”.

(2) The above amendment, and the main amendments so far as they apply for the purposes of section 173 (as substituted by sub-paragraph (1) above), have effect in relation to acquisitions and disposals on or after 1st April 2000.

Restriction of losses by reference to capital allowances U.K.

12 (1) In section 41 of the Taxation of Chargeable Gains Act 1992, after subsection (7) add— U.K.

“(8) Where there is a disposal of an asset acquired in circumstances in which—

(a) section 140A applies, or

(b) section 171 applies or would apply but for subsection (2) of that section,

this section has effect in relation to capital allowances made to the person from which it was acquired (so far as not taken into account in relation to a disposal of the asset by that person), and so on as respects previous transfers of the asset in such circumstances.

This does not affect the consideration for which an asset is deemed under section 140A or 171 to be acquired.”.

(2) The above amendment has effect in relation to cases where the disposal first referred to in section 41(8) (as inserted by sub-paragraph (1) above) is on or after 1st April 2000.

Assets held on 6th April 1965: disposal outside group U.K.

13 (1) Section 174 of the M12 Taxation of Chargeable Gains Act 1992 is amended as follows. U.K.

(2) In subsection (4) for “at a time when both were members of the group" substitute “ in a transfer to which section 171(1) applied ”.

(3) Subsection (5) shall cease to have effect.

(4) The above amendments, and the main amendments so far as they apply for the purposes of section 174, have effect in relation to acquisitions on or after 1st April 2000.

(5) Any question whether a company was, in relation to times before 1st April 2000, a member of a group shall be determined in accordance with section 170 of the Taxation of Chargeable Gains Act 1992 as it stood before the main amendments.

Marginal Citations

M12 1992 c. 12.