Office of Public Sector Information
PART 3 continued CHAPTER 2 continued
(2) In any such case, subsection (4) or (5) below (as the case may be) shall apply in relation to the reversal amount.
(3) In this section “the reversal amount” means so much of the credit as—
(a) reverses so much of the debit as represents the expenses of management, and
(b) does not represent sums otherwise taken into account in determining for the purposes of corporation tax the profits and losses of the company for the relevant accounting period or any earlier accounting period.
For this purpose the relevant accounting period is the latest accounting period of the company that falls wholly or partly within the reversal period.
(4) If the reversal period coincides with an accounting period of the company beginning on or after the commencement date, the reversal amount shall be dealt with for that period in accordance with subsection (7) below.
(5) If the reversal period does not coincide with an accounting period of the company—
(a) the reversal amount shall be apportioned between any accounting periods that fall within the reversal period, and
(b) any amount so apportioned to an accounting period beginning on or after the commencement date shall be dealt with for that period in accordance with subsection (7) below.
(6) An apportionment under subsection (5) above shall be in accordance with section 834(4) (time basis) unless it appears that that method would work unreasonably or unjustly, in which case such other method shall be used as appears just and reasonable.
(7) Where an amount falls to be dealt with in accordance with this subsection for an accounting period—
(a) it shall, so far as possible, be applied in reducing or further reducing (but not below nil) the company’s expenses of management deductible for that period otherwise than by virtue of section 75(9) (carry forward of unrelieved excess), and
(b) so much of the amount as cannot be so applied shall be regarded as income of the company chargeable under Case VI of Schedule D for that accounting period.
(8) In subsection (1) above “brought into account”, in relation to a period of account of a company, means brought into account in accordance with generally accepted accounting practice in determining, for accounting purposes, profit and loss for that period of account.
(9) If (apart from this subsection) an accounting period does not coincide with, or fall within, any period of account, it shall be assumed for the purposes of this section that there is a period of account of the company that coincides with that accounting period.
(10) It shall be assumed for the purposes of this section that, in determining for accounting purposes profit and loss for any period of account of any company, amounts fall to be brought into account in accordance with generally accepted accounting practice.
(11) For the purposes of this section a credit reverses a debit in whole or in part in any case where the sum represented in whole or in part by the debit is paid and then in whole or in part repaid (as well as in a case where the sum represented by the debit is never paid).
(12) In this section—
“the commencement date” means 1st April 2004;
“credit” means an amount which for accounting purposes increases or creates a profit, or reduces a loss, for a period of account;
“debit” means an amount which for accounting purposes reduces a profit, or increases or creates a loss, for a period of account.”.
(2) Where any such previous period as is referred to in subsection (1)(d) of section 75B is an old accounting period, that section has effect so far as relating to that previous period as if the reference to section 75(9) were a reference to subsection (3) of the old section 75.
(3) In subsection (2), “old accounting period” and “the old section 75” have the same meaning as in section 43.
(4) In section 842 of the Taxes Act 1988 (investment trusts) after subsection (1AB) insert—
“(1AC) In determining the amount of a company’s income for the purposes of subsection (1)(a) above, no account shall be taken of any amount that falls under section 75B(7)(b) to be regarded as income of the company chargeable under Case VI of Schedule D.”.
(1) The Treasury may by order make such amendments, repeals or revocations in any enactment (including an enactment amended by this Act) as appear to them to be appropriate in consequence of sections 38 to 40 and 45 and Schedule 6.
(2) The power conferred by subsection (1) to make an order includes power—
(a) to make different provision for different cases, and
(b) to make incidental, consequential, supplemental or transitional provision and savings.
(3) Any order made under this section on or before 31st December 2004 may make provision having effect in relation to accounting periods ending before the date on which the order is made (but not before 1st April 2004).
(4) In this section—
“enactment” includes an enactment comprised in subordinate legislation;
“subordinate legislation” has the same meaning as in the Interpretation Act 1978 (c. 30) (see section 21 of that Act).
Schedule 7 to this Act (which makes provision about insurance companies and companies which have ceased to be insurance companies after a transfer of business) shall have effect.
Schedule 8 to this Act (which makes amendments relating to loan relationships) shall have effect.
Schedule 9 to this Act (which makes amendments relating to derivative contracts) shall have effect.
(1) In the Tax Acts “generally accepted accounting practice” means—
(a) in relation to the affairs of a company or other entity that prepares accounts in accordance with international accounting standards (“IAS accounts”), generally accepted accounting practice with respect to such accounts;
(b) in any other case, UK generally accepted accounting practice.
(2) In the Tax Acts “international accounting standards” means the international accounting standards, within the meaning of Regulation (EC) No. 1606/2002 of the European Parliament and the Council of 19 July 2002 on the application of international accounting standards, adopted from time to time by the European Commission in accordance with that Regulation.
(3) Where the European Commission has not adopted a particular international accounting standard, then as regards the matters covered by that standard—
(a) generally accepted accounting practice with respect to IAS accounts shall be regarded as permitting the use either of the unadopted standard or of UK generally accepted accounting practice, and
(b) accounts prepared on either basis shall be regarded for the purposes of the Tax Acts as prepared in accordance with international accounting standards.
(4) In the Tax Acts “UK generally accepted accounting practice”—
(a) means generally accepted accounting practice with respect to accounts of UK companies (other than IAS accounts) that are intended to give a true and fair view, and
(b) has the same meaning in relation to—
(i) individuals,
(ii) entities other than companies, and
(iii) companies that are not UK companies,
as it has in relation to UK companies.
In this subsection “UK companies” means companies incorporated or formed under the law of a part of the United Kingdom.
(5) In section 832(1) of the Taxes Act 1988 (interpretation of the Tax Acts)—
(a) in the definition of “generally accepted accounting practice” for “has the meaning given by section 836A” substitute “has the meaning given by section 50(1) of the Finance Act 2004”;
(b) at the appropriate place insert—
““international accounting standards” has the meaning given by section 50(2) of the Finance Act 2004;”; and
““UK generally accepted accounting practice” has the meaning given by section 50(4) of the Finance Act 2004;”.
(6) This section has effect in relation to—
(a) periods of account beginning on or after 1st January 2005, and
(b) in the case of a company required to prepare accounts under the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), any period of account beginning before that date for which the company is required or permitted to prepare such accounts in accordance with international accounting standards.
(1) This section applies where—
(a) a company (company A) prepares accounts in accordance with international accounting standards,
(b) another company (company B) in the same group of companies prepares accounts in accordance with UK generally accepted accounting practice,
(c) there is a transaction between, or a series of transactions involving, company A and company B, and
(d) a tax advantage would (apart from this section) be obtained by either or both of those companies in relation to the transaction or series of transactions as a result of the use of different accounting practices.
(2) In that case the Tax Acts apply in relation to that transaction or series of transactions as if both companies prepared accounts in accordance with UK generally accepted accounting practice.
(3) The provisions of section 170(3) to (6) of the Taxation of Chargeable Gains Act 1992 (c. 12) apply to determine for the purposes of this section whether companies are in the same group of companies.
(4) A series of transactions is not prevented from being a series of transactions involving company A and company B by reason only of the fact that one or more of the following is the case—
(a) there is no transaction in the series to which both those companies are parties;
(b) that parties to any arrangement in pursuance of which the transactions in the series are entered into do not include one or both of those companies;
(c) there are one or more transactions in the series to which neither of those companies is a party.
(5) In this section “tax advantage” has the same meaning as in Chapter 1 of Part 17 of the Taxes Act 1988 (see section 709 of that Act).
(6) This section has effect in relation to—
(a) periods of account beginning on or after 1st January 2005, and
(b) in the case of a company required to prepare accounts under the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), any period of account beginning before that date for which the company is required or permitted to prepare such accounts in accordance with international accounting standards.
(1) Schedule 10 makes amendments of provisions of the Tax Acts that operate by reference to accounting practice.
(2) In that Schedule—
Part 1 makes amendments relating to loan relationships;
Part 2 makes amendments relating to derivative contracts;
Part 3 makes amendments relating to intangible fixed assets;
Part 4 makes amendments relating to foreign currency accounting.
(3) The amendments have effect in relation to—
(a) periods of account beginning on or after 1st January 2005, and
(b) in the case of a company required to prepare accounts under the Companies Act 1985 or the Companies (Northern Ireland) Order 1986, any period of account beginning before that date for which the company is required or permitted to prepare such accounts in accordance with international accounting standards.
(1) Expenditure by a company on research and development, if not of a capital nature, is not prevented from being regarded for tax purposes as deductible in computing profits by reason of the fact that for accounting purposes it is brought into account by the company in determining the value of an intangible asset.
(2) Subsection (1) applies, in particular, for the purposes of—
section 82A of the Taxes Act 1988 (deduction of expenditure on research and development),
Schedule 20 to the Finance Act 2000 (c. 17) (R&D tax relief),
Schedule 12 to the Finance Act 2002 (c. 23) (tax relief for expenditure on research and development), and
Schedule 13 to that Act (tax relief for expenditure on vaccine research etc.).
(3) Where expenditure is brought into account by a company for tax purposes in accordance with subsection (1), no deduction may be made in computing for tax purposes the profits of the company in respect of the writing down of so much of the value of an intangible asset as is attributable to that expenditure.
(4) Expenditure shall not be regarded by virtue of subsection (1) as deductible in computing a company’s profits for an accounting period to the extent that—
(a) a deduction has been made in respect of it in computing the company’s profits for a previous accounting period, or
(b) the company has benefited from a tax relief in respect of it for a previous accounting period under any of the provisions specified in subsection (2).
(5) In this section—
“intangible asset” has the meaning it has for accounting purposes; and
“research and development” has the meaning given by section 837A of the Taxes Act 1988.
(6) This section shall come into force in accordance with provision made by the Treasury by order made by statutory instrument.
(1) Before section 473 of the Taxes Act 1988 insert—
(1) This section applies in relation to securities—
(a) which are held by a person carrying on a banking business, an insurance business or a business consisting wholly or partly in dealing in securities; and
(b) which are such that a profit on their sale would form part of the trading profits of that business.
(2) Profits and losses arising from such securities that in accordance with generally accepted accounting practice are—
(a) calculated by reference to the fair value of the securities, and
(b) recognised in that person’s statement of recognised gains and losses or statement of changes in equity,
shall be brought into account in computing the profits or losses of a business in accordance with the provisions of this Act applicable to Case I of Schedule D.
(3) Subsection (2) does not apply—
(a) to an amount to the extent that it derives from or otherwise relates to an amount brought into account under that subsection in an earlier period of account, or
(b) to an amount recognised for accounting purposes by way of correction of a fundamental error.
(4) In this section, “securities”—
(a) includes shares and any rights, interests or options that by virtue of section 99, 135(5) or 136(5) of the Taxation of Chargeable Gains Act 1992 are treated as shares for the purposes of sections 126 to 136 of that Act; but
(b) does not include a loan relationship (within the meaning of Chapter 2 of Part 4 of the Finance Act 1996).”.
(2) This section has effect in relation to—
(a) periods of account beginning on or after 1st January 2005, and
(b) in the case of a company required to prepare accounts under the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), any period of account beginning before that date for which the company is required or permitted to prepare such accounts in accordance with international accounting standards.
(1) A company must give notice to the Board—
(a) of the beginning of its first accounting period, and
(b) of the beginning of any subsequent accounting period that does not immediately follow the end of a previous accounting period.
(2) The notice required by this section—
(a) must be in writing;
(b) must state when the accounting period began;
(c) must contain such other information as may be prescribed;
(d) may be given to any officer of the Board; and
(e) must be given not later than three months after the beginning of the accounting period.
(3) “Prescribed” in subsection (2)(c) means prescribed by regulations made by the Board.
(4) A company that has a reasonable excuse for failing to give notice as required by this section—
(a) is not to be regarded as having failed to comply with this section until the excuse ceases, and
(b) after the excuse ceases is not to be regarded as having failed to comply with this section if the required notice is given without unreasonable delay after the excuse ceases.
(5) In this section—
(a) “accounting period” means an accounting period for the purposes of corporation tax;
(b) “company” means a body corporate and does not include an unincorporated association or a partnership; and
(c) “the Board” means the Commissioners of Inland Revenue.
(6) In the second column of the Table in section 98 of the Taxes Management Act 1970 (c. 9) (penalty for failure to provide information), at the appropriate place insert—
“section 55 of the Finance Act 2004”.
(7) This section applies in relation to accounting periods beginning on or after the day on which this Act is passed.
(1) Schedule 18 to the Finance Act 2002 (c. 23) (relief for community amateur sports clubs) is amended as follows.
(2) In paragraph 4(1)(b) (exemption for trading income not exceeding £15,000 etc) for “£15,000” substitute “£30,000”.
(3) In paragraph 6(1)(b) (exemption for property income not exceeding £10,000 etc) for “£10,000” substitute “£20,000”.
(4) The amendments made by this section have effect in relation to accounting periods ending on or after 1st April 2004.
(5) Where an accounting period begins before, and ends on or after, 1st April 2004, the amendments made by subsections (2) and (3) have effect as if—
(a) the part falling before that date and the part falling on or after it were two separate accounting periods, and
(b) the club’s trading income and property income for each of those parts were the proportionally reduced amount of its trading income and property income for the actual accounting period.
(6) In this section—
“property income” has the same meaning as in paragraph 6 of Schedule 18 to the Finance Act 2002;
“trading income” has the same meaning as in paragraph 4 of that Schedule.
(1) This Chapter provides for certain payments (see section 60) under construction contracts to be made under deduction of sums on account of tax (see sections 61 and 62).
(2) In this Chapter “construction contract” means a contract relating to construction operations (see section 74) which is not a contract of employment but where—
(a) one party to the contract is a sub-contractor (see section 58); and
(b) another party to the contract (“the contractor”) either—
(i) is a sub-contractor under another such contract relating to all or any of the construction operations, or
(ii) is a person to whom section 59 applies.
(3) In sections 60 and 61 “the contractor” has the meaning given by this section.
(4) In this Chapter—
(a) references to registration for gross payment are to registration under section 63(2),
(b) references to registration for payment under deduction are to registration under section 63(3), and
(c) references to registration under section 63 are to registration for gross payment or registration for payment under deduction.
(5) To the extent that any provision of this Chapter would not, apart from this subsection, form part of the Tax Acts, it shall be taken to form part of those Acts.
For the purposes of this Chapter a party to a contract relating to construction operations is a sub-contractor if, under the contract—
(a) he is under a duty to the contractor to carry out the operations, or to furnish his own labour (in the case of a company, the labour of employees or officers of the company) or the labour of others in the carrying out of the operations or to arrange for the labour of others to be furnished in the carrying out of the operations; or
(b) he is answerable to the contractor for the carrying out of the operations by others, whether under a contract or under other arrangements made or to be made by him.
(1) This section applies to the following bodies or persons—
(a) any person carrying on a business which includes construction operations;
(b) any public office or department of the Crown (including any Northern Ireland department and any part of the Scottish Administration);
(c) the Corporate Officer of the House of Lords, the Corporate Officer of the House of Commons and the Scottish Parliamentary Corporate Body;
(d) any local authority;
(e) any development corporation or new town commission;
(f) the Commission for the New Towns;
(g) the Secretary of State if the contract is made by him under section 89 of the Housing Associations Act 1985 (c. 69);
(h) the Housing Corporation, a housing association, a housing trust, Scottish Homes, and the Northern Ireland Housing Executive;
(i) any NHS trust;
(j) any HSS trust;
(k) any such body or person, being a body or person (in addition to those falling within paragraphs (b) to (j)) which has been established for the purpose of carrying out functions conferred on it by or under any enactment, as may be designated as a body or person to which this section applies in regulations made by the Board of Inland Revenue;
(l) a person carrying on a business at any time if—
(i) his average annual expenditure on construction operations in the period of three years ending with the end of the last period of account before that time exceeds £1,000,000, or
(ii) where he was not carrying on the business at the beginning of that period of three years, one-third of his total expenditure on construction operations for the part of that period during which he has been carrying on the business exceeds £1,000,000.
(2) But this section only applies to a body or person falling within subsection (1)(b) to (f) or (h) to (k) if—
(a) in any period of three years, that body or person has had an average annual expenditure on construction operations of more than £1,000,000, and
(b) since the condition in paragraph (a) was last satisfied, there have not been three successive years in each of which the body or person has had expenditure on construction operations of less than £1,000,000.
In this subsection “year” means a year ending with 31st March.
(3) Where section 57(2)(b) begins to apply to a person in any period of account by virtue of his falling within subsection (1)(l), it shall continue to apply to him until he satisfies the Board of Inland Revenue that his expenditure on construction operations has been less than £1,000,000 in each of three successive years beginning in or after that period of account.
(4) Where the whole or part of a trade is transferred by a company (“the transferor”) to another company (“the transferee”) and section 343 of the Taxes Act 1988 has effect in relation to the transfer, then in determining for the purposes of this section the amount of expenditure incurred by the transferee—
(a) the whole or, as the case may be, a proportionate part of any expenditure incurred by the transferor at a time before the transfer is to be treated as if it had been incurred at that time by the transferee; and
(b) where only a part of the trade is transferred, the expenditure is to be apportioned in such manner as appears to the Board of Inland Revenue, or on appeal to the Commissioners, to be just and reasonable.
(5) In this section—
“development corporation” has the same meaning as in—
the New Towns Act 1981 (c. 64), or
the New Towns (Scotland) Act 1968 (c. 16);
“enactment” includes an enactment comprised in an Act of the Scottish Parliament and a provision comprised in Northern Ireland legislation;
“housing association” has the same meaning as in—
the Housing Associations Act 1985 (c. 69), or
Part 2 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/ 1725 (N.I. 15));
“housing trust” has the same meaning as in the Housing Associations Act 1985;
“HSS trust” means a Health and Social Services trust established under the Health and Personal Social Services (Northern Ireland) Order 1991 (S.I. 1991/194 (N.I. 1));
“new town commission” has the same meaning as in the New Towns Act (Northern Ireland) 1965 (c. 13 (N.I.));
“NHS trust” means a National Health Service trust—
established under Part 1 of the National Health Service and Community Care Act 1990 (c. 19), or
constituted under section 12A of the National Health Service (Scotland) Act 1978 (c. 29).
(6) In this section references to a body or person include references to an office or department.
(7) The Board of Inland Revenue may make regulations amending this section for the purpose of removing references to bodies which have ceased to exist.
(1) In this Chapter “contract payment” means any payment which is made under a construction contract and is so made by the contractor (see section 57(3)) to—
(a) the sub-contractor,
(b) a person nominated by the sub-contractor or the contractor, or
(c) a person nominated by a person who is a sub-contractor under another such contract relating to all or any of the construction operations.
(2) But a payment made under a construction contract is not a contract payment if any of the following exceptions applies in relation to it.
(3) This exception applies if the payment is treated as earnings from an employment by virtue of Chapter 7 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (agency workers).
(4) This exception applies if the person to whom the payment is made or, in the case of a payment made to a nominee, each of the following persons—
(a) the nominee,
(b) the person who nominated him, and
(c) the person for whose labour (or, where that person is a company, for whose employees' or officers' labour) the payment is made,
is registered for gross payment when the payment is made.
But this is subject to subsections (5) and (6).
(5) Where a person is registered for gross payment as a partner in a firm (see section 64), subsection (4) applies only in relation to payments made under contracts under which—
(a) the firm is a sub-contractor, or
(b) where a person has nominated the firm to receive payments, the person who has nominated the firm is a sub-contractor.
(6) Where a person is registered for gross payment otherwise than as a partner in a firm but he is or becomes a partner in a firm, subsection (4) does not apply in relation to payments made under contracts under which—
(a) the firm is a sub-contractor, or
(b) where a person has nominated the firm to receive payments, the person who has nominated the firm is a sub-contractor.
(7) This exception applies if such conditions as may be prescribed in regulations made by the Board of Inland Revenue for the purposes of this subsection are satisfied; and those conditions may relate to any one or more of the following—
(a) the payment,
(b) the person making it, and
(c) the person receiving it.
(8) For the purposes of this Chapter a payment (including a payment by way of loan) that has the effect of discharging an obligation under a contract relating to construction operations is to be taken to be made under the contract; and if—
(a) the obligation is to make a payment to a person (“A”) within paragraph (a) to (c) of subsection (1), but
(b) the payment discharging that obligation is made to a person (“B”) not within those paragraphs,
the payment is for those purposes to be taken to be made to A.
Finance Act 2004