Income and Corporation Taxes Act 1988

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546D

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547A

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548A

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Introduction

548B

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551A

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552ZA

• (1) This section supplements section 552 and shall be construed as one with it.

• (2) Where the obligations under any policy or contract of the body that issued, entered into or effected it (“the original insurer”) are at any time the obligations of another body (“the transferee”) to whom there has been a transfer of the whole or any part of a business previously carried on by the original insurer, section 552 shall have effect in relation to that time, except where the chargeable event—

• (a) happened before the transfer, and

• (b) in the case of a death or an assignment, is an event of which the notification mentioned in subsection (6) or (7) of that section was given before the transfer,

as if the policy or contract had been issued, entered into or effected by the transferee.

• (3) Where, in consequence of . . . section 514(1) of ITTOIA 2005, paragraph (a) or (b) of section 552(1) requires certificates to be delivered in respect of two or more surrenders, happening in the same year, of part of or a share in the rights conferred by the policy or contract, a single certificate may be delivered under the paragraph in question in respect of all those surrenders (and may treat them as if they together constituted a single surrender) unless between the happening of the first and the happening of the last of them there has been—

• (a) an assignment of part of or a share in the rights conferred by the policy or contract; or

• (b) an assignment, otherwise than for money or money’s worth, of the whole of the rights conferred by the policy or contract.

• (4) Where the appropriate policy holder is two or more persons—

• (a) section 552(1)(a) requires a certificate to be delivered to each of them; but

• (b) nothing in section 552 or this section requires a body to deliver a certificate under subsection (1)(a) of that section to any person whose address has not been provided to the body (or to another body, at a time when the obligations under the policy or contract were obligations of that other body).

• (5) A certificate under section 552(1)(b) or (3)—

• (a) shall be in a form prescribed for the purpose by the Board; and

• (b) shall be delivered by any means prescribed for the purpose by the Board;

and different forms, or different means of delivery, may be prescribed for different cases or different purposes.

• (6) The Board may by regulations make such provision as they think fit for securing that they are able—

• (a) to ascertain whether there has been or is likely to be any contravention of the requirements of section 552 or this section; and

• (b) to verify any certificate under that section.

• (7) Regulations under subsection (6) above may include, in particular, provisions requiring persons to whom premiums under any policy are or have at any time been payable—

• (a) to supply information to the Board; and

• (b) to make available books, documents and other records for inspection on behalf of the Board.

• (8) Regulations under subsection (6) above may—

• (a) make different provision for different cases; and

• (b) contain such supplementary, incidental, consequential or transitional provision as appears to the Board to be appropriate.

552ZB

• (1) The Commissioners for Her Majesty's Revenue and Customs may make regulations—

• (a) requiring relevant persons—

• (i) to provide prescribed information to persons who apply for the issue of qualifying policies or who are, or may be, required to make statements under paragraph B3(2) of Schedule 15;

• (ii) to provide to an officer of Revenue and Customs prescribed information about qualifying policies which have been issued by them or in relation to which they are or have been a relevant transferee;

• (b) making such provision (not falling within paragraph (a)) as the Commissioners think fit for securing that an officer of Revenue and Customs is able—

• (i) to ascertain whether there has been or is likely to be any contravention of the requirements of the regulations or of paragraph B3(2) of Schedule 15;

• (ii) to verify any information provided to an officer of Revenue and Customs as required by the regulations.

• (2) The provision that may be made by virtue of subsection (1)(b) includes, in particular, provision requiring relevant persons to make available books, documents and other records for inspection by or on behalf of an officer of Revenue and Customs.

• (3) The regulations may—

• (a) make different provision for different cases or circumstances, and

• (b) contain incidental, supplementary, consequential, transitional, transitory or saving provision.

• (4) In this section—

• “prescribed” means prescribed by the regulations,

• “qualifying policy” includes a policy which would be a qualifying policy apart from—paragraph A1(2), B1(2), B2(2) or B3(3) of Schedule 15, orparagraph 17(2)(za) of that Schedule (including as applied by paragraph 18), and

• “relevant person” means a person—who issues, or has issued, qualifying policies, orwho is, or has been, a relevant transferee in relation to qualifying policies.

• (5) For the purposes of this section a person (“X”) is at any time a “relevant transferee” in relation to a qualifying policy if the obligations under the policy of its issuer are at that time the obligations of X as a result of there having been a transfer to X of the whole or any part of a business previously carried on by the issuer.

552A

• (1) This section has effect for the purpose of securing that, where it applies to an overseas insurer, another person is the overseas insurer’s tax representative.

• (2) In this section “overseas insurer” means a person who is not resident in the United Kingdom who carries on a business which consists of or includes the effecting and carrying out of—

• (a) policies of life insurance;

• (b) contracts for life annuities; or

• (c) capital redemption policies.

• (3) This section applies to an overseas insurer—

• (a) if the condition in subsection (4) below is satisfied on the designated day; or

• (b) where that condition is not satisfied on that day, if it has subsequently become satisfied.

• (4) The condition mentioned in subsection (3) above is that—

• (a) there are in force relevant insurances the obligations under which are obligations of the overseas insurer in question or of an overseas insurer connected with him; and

• (b) the total amount or value of the gross premiums paid under those relevant insurances is £1 million or more.

• (5) In this section “relevant insurance” means any policy of life insurance, contract for a life annuity or capital redemption policy . . . in the case of which—

• (a) the holder is resident in the United Kingdom;

• (b) the obligations of the insurer are obligations of a person not resident in the United Kingdom; and

• (c) those obligations are not attributable to a branch or agency of that person’s in the United Kingdom.

• (6) Before the expiration of the period of three months following the day on which this section first applies to an overseas insurer, the overseas insurer must nominate to the Board a person to be his tax representative.

• (7) A person shall not be a tax representative unless—

• (a) if he is an individual, he is resident in the United Kingdom and has a fixed place of residence there, or

• (b) if he is not an individual, he has a business establishment in the United Kingdom,

and, in either case, he satisfies such other requirements (if any) as are prescribed in regulations made for the purpose by the Board.

• (8) A person shall not be an overseas insurer’s tax representative unless—

• (a) his nomination by the overseas insurer has been approved by the Board; or

• (b) he has been appointed by the Board.

• (9) The Board may by regulations make provision supplementing this section; and the provision that may be made by any such regulations includes provision with respect to—

• (a) the making of a nomination by an overseas insurer of a person to be his tax representative;

• (b) the information which is to be provided in connection with such a nomination;

• (c) the form in which such a nomination is to be made;

• (d) the powers and duties of the Board in relation to such a nomination;

• (e) the procedure for approving, or refusing to approve, such a nomination, and any time limits applicable to doing so;

• (f) the termination, by the overseas insurer or the Board, of a person’s appointment as a tax representative;

• (g) the appointment by the Board of a person as the tax representative of an overseas insurer (including the circumstances in which such an appointment may be made);

• (h) the nomination by the overseas insurer, or the appointment by the Board, of a person to be the tax representative of an overseas insurer in place of a person ceasing to be his tax representative;

• (j) circumstances in which an overseas insurer to whom this section applies may, with the Board’s agreement, be released (subject to any conditions imposed by the Board) from the requirement that there must be a tax representative;

• (k) appeals to the tribunal against decisions of the Board under this section or regulations under it.

• (10) The provision that may be made by regulations under subsection (9) above also includes provision for or in connection with the making of other arrangements between the Board and an overseas insurer for the purpose of securing the discharge by or on behalf of the overseas insurer of the relevant duties, within the meaning of section 552B.

• (11) Section 1122 of CTA 2010 (connected persons) applies for the purposes of this section.

• (12) In this section—

• “capital redemption policy” means a capital redemption policy in relation to which . . . Chapter 9 of Part 4 of ITTOIA 2005 has effect;

• “contract for a life annuity” means a contract for a life annuity in relation to which . . . Chapter 9 of Part 4 of ITTOIA 2005 has effect;

• “the designated day” means such day as the Board may specify for the purpose in regulations;

• “policy of life insurance” means a policy of life insurance in relation to which . . . Chapter 9 of Part 4 of ITTOIA 2005 has effect;

• “tax representative” means a tax representative under this section.

552B

• (1) It shall be the duty of an overseas insurer’s tax representative to secure (where appropriate by acting on the overseas insurer’s behalf) that the relevant duties are discharged by or on behalf of the overseas insurer.

• (2) For the purposes of this section “the relevant duties” are—

• (a) the duties imposed by section 552,

• (b) the duties imposed by section 552ZA(2), (4) or (5), . . .

• (c) any duties imposed by regulations made under subsection (6) of section 552ZA by virtue of subsection (7) of that section, and

• (d) any duties imposed by regulations under section 552ZB,

so far as relating to relevant insurances under which the overseas insurer in question has any obligations.

• (3) An overseas insurer’s tax representative shall be personally liable—

• (a) in respect of any failure to secure the discharge of the relevant duties, and

• (b) in respect of anything done for purposes connected with acting on the overseas insurer’s behalf,

as if the relevant duties were imposed jointly and severally on the tax representative and the overseas insurer.

• (4) In the application of this section in relation to any particular tax representative, it is immaterial whether any particular relevant duty arose before or after his appointment.

• (5) This section has effect in relation to relevant duties relating to chargeable events happening on or after the day by which section 552A(6) requires the nomination of the overseas insurer’s first tax representative to be made.

• (5A) In subsection (5) “chargeable event” has the same meaning as in section 552 (see subsection (10) of that section).

• (6) Expressions used in this section and in section 552A have the same meaning in this section as they have in that section.

553A

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553B

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553C

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559A

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Tax year

Chapter 5A — Share loss relief

Relief for losses on unquoted shares in trading companies

576A

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Qualifying trading companies: the requirements

576B

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Tax year

576C

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576D

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576E

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576F

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576G

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576H

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576I

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Qualifying trading companies: supplementary provisions

576J

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576K

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Supplemental

576L

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The approved amount: mileage allowance payments

577A

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578A

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578B

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580A

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580B

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580C

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Company vehicles

581A

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582A

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Interest on payments in respect of corporation tax and meaning of “the material date".

587A

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587B

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587BA

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587C

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Interpretation of the Corporation Tax Acts etc.

589A

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589B

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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590A

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590B

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590C

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591A

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591B

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591C

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591D

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Income arising under settlement where settlor retains an interest.

596A

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596B

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596C

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599A

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605A

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606A

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611A

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611AA

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611A

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617A

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Revocable settlements allowing release of obligation.

Settlements made after 6th April 1965.

631A

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632A

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632B

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634A

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636A

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637A

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638ZA

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638A

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Settlements made after 6th April 1965.

640A

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641A

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Schedule 4 directions.

Interpretation.

646A

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646B

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646C

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646D

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Annuities: charge to tax

648A

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648B

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650A

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651A

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653A

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658A

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659A

• (1) For the purposes of sections . . . 613(4), 614(3) and (4) . . . —

• (a) “investments” (or “investment”) includes futures contracts and options contracts, and

• (b) income derived from transactions relating to such contracts shall be regarded as income derived from (or income from) such contracts.

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• (2) For the purposes of subsection (1) above a contract is not prevented from being a futures contract or an options contract by the fact that any party is or may be entitled to receive or liable to make, or entitled to receive and liable to make, only a payment of a sum (as opposed to a transfer of assets other than money) in full settlement of all obligations.

659B

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659C

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659D

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659E

• (1) The exemptions specified below do not apply to income derived from investments, deposits or other property held as a member of a property investment LLP (see section 1004 of ITA 2007).

• (2) The exemptions are those provided by—

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• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• section 613(4) (Parliamentary pension funds),

• section 614(3) (certain colonial, &c. pension funds),

• section 614(4) (the Overseas Service Pension Fund),

• section 614(5) (other pension funds for overseas employees),

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• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) The income to which subsection (1) above applies includes relevant stock lending fees, in relation to any investments, to which any of the provisions listed in subsection (2) above would apply by virtue of section 129B.

• (4) Section 659A (treatment of futures and options) applies for the purposes of subsection (1) above.

Chapter IA — Liability of settlor

Main provisions

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660A

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660B

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660C

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

660D

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Supplementary provisions

660E

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660F

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660G

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674A

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Introduction

How averaging claim is given effect

682A

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685A

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685B

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685C

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685D

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685E

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Adjustment of profits on averaging claim

685F

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685G

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686A

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686B

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686C

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686D

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Adjustment of profits on averaging claim

686E

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687A

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Chapter ID — Trust management expenses

689A

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689B

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698A

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699A

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705A

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705B

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Apportionment of chargeable profits and creditable tax

General definition of offshore fund

Deductions: asset transferred within group.

722A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in ownership of company carrying on property business.

726A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

727A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision not at arm’s length.

730A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

730B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

730BB

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

730C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sections 774B and 774D: exceptions

736A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sections 774B and 774D: exceptions

736B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

736C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

736D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sections 774A to 774D: minor definitions etc

737A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

737B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

737C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

737D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

737E

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

741A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

741B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

741C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

741D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transfers of rights to receive annual payments

747A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

748ZA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

748A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

749A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

749B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

750A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

751A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Leased assets subject to hire-purchase agreements.

751AA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

751AB

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Company vehicles

751AC

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The approved amount: passenger payments

751B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Employment

752A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

752B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

752C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

754A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

754B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

755A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

755B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

755C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

755D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of offshore fund

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

756A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of umbrella funds

756B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of funds comprising more than one class of interest

756C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sale by individual of income derived from his personal activities.

762ZA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

762ZB

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

762A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

765A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assets leased to traders and others.

767A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

767AA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

767B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

767C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

768A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

768B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

768C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

768D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

768E

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

770A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Factoring of income receipts etc

774A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

774B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

774C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

774D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

774E

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

774F

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

774G

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

775A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restriction of relief for payments of interest.

785ZA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

785ZB

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

785A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

785B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

785C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

785D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Relief by agreement with other territories.

785E

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction to section 807E

Tax treated as chargeable in respect of transfer of loan relationship, derivative contract or intangible fixed assets

793A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

795A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

797A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

797B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Withdrawal of right to tax credit of certain non-resident companies connected with unitary states.

798A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

798B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

798C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

801A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

801B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

801C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

803A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804ZA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804ZB

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804ZC

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804E

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804F

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

804G

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign dividends: onshore pooling and utilisation of eligible unrelieved foreign tax

806A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

806B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

806C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

806D

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

806E

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

806F

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

806G

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

806H

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

806J

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Application of foreign dividend provisions to branches or agencies in the UK of persons resident elsewhere

806K

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unrelieved foreign tax: profits of overseas branch or agency

806L

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

806M

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

807A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

808A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

808B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recovery of tax credits incorrectly paid.

Mutual agreement procedure and presentation of cases under arrangements.

815A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

815AZA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power to inspect documents.

815AA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

815B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

815C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Repayment supplements: companies.

Repayment supplements: companies.

826A

• (1) The Treasury may by regulations make provision applying section 826, with such modifications as may be prescribed, for the purpose of conferring on companies of such descriptions as may be prescribed a right to interest—

• (a) on such payments made by them in respect of corporation tax as may be prescribed,

• (b) at the rate applicable under section 178 of the Finance Act 1989, and

• (c) for such period as may be prescribed,

and for treating any such interest for the purposes, or prescribed purposes, of the Tax Acts as interest under section 826(1)(a) on a repayment of corporation tax.

• (2) The Treasury may by regulations make provision modifying section 826(2) in relation to companies of such description as may be prescribed.

• (3) Subsections (1) and (2) above do not apply in relation to companies in relation to which section 826(2) is modified or otherwise affected by regulations under section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) in relation to the accounting period to which the corporation tax in question relates.

• (4) Where the Treasury make regulations under subsection (2) above in relation to companies of any description, they may also make regulations modifying section 59DA(2) of the Management Act in relation to those companies, or any description of such companies, by varying the date before which the claim there mentioned may not be made.

• (5) Regulations under this section—

• (a) may make different provision in relation to different cases or circumstances or in relation to companies or accounting periods of different descriptions;

• (b) may make such supplementary, incidental, consequential or transitional provision as appears to the Treasury to be necessary or expedient.

• (6) Regulations under this section may not make provision in relation to accounting periods ending before the day appointed under section 199 of the Finance Act 1994 for the purposes of Chapter III of Part IV of that Act (corporation tax self-assessment).

• (7) In this section “prescribed” means prescribed by regulations made under this section.

827A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Repayment supplements: companies.

834A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

834B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

834C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

836A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

836B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recovery of tax credits incorrectly paid.

837A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

837B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

837C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

840ZA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

840A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

841A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

842AA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

842A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

842B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE A1

Part 1 — Introduction

Introduction

1

• (1) The provisions of this Schedule have effect for supplementing section 11AA as regards the determination of the profits attributable to a permanent establishment in the United Kingdom of a company that is not resident in the United Kingdom (“the non-resident company”).

• (2) In this Schedule “the separate enterprise principle” means the principle in section 11AA(2) (read with subsection (3) of that section).

Part 2 — General provisions

Transactions treated as taking place at arm’s length

2

In accordance with the separate enterprise principle, transactions between the permanent establishment and any other part of the non-resident company are treated as taking place on such terms as would have been agreed between parties dealing at arm’s length.

Application of general provision as to allowable deductions

3

• (1) Section 11AA(4) (general provision as to allowable deductions) applies whether or not the expenses are incurred by, or reimbursed by, the permanent establishment.

• (2) The amount of expenses to be taken into account under section 11AA(4) is the actual cost to the non-resident company.

Prohibition of deductions for payments in respect of intangible assets

4

• (1) No deduction is allowed in respect of royalties paid, or other similar payments made, by the permanent establishment to any other part of the non-resident company in respect of the use of intangible assets held by the company.

• (2) This does not prevent a deduction in respect of any contribution by the permanent establishment to the costs of creation of an intangible asset.

• (3) In this paragraph “intangible asset” has the meaning it has for accounting purposes, and includes any intellectual property (as defined in paragraph 2(2) of Schedule 29 to the Finance Act 2002).

Prohibition of deductions for interest or other financing costs

5

• (1) No deduction is allowed in respect of payments of interest or other financing costs by the permanent establishment to any other part of the non-resident company, except as provided by sub-paragraph (2).

• (2) The restriction in sub-paragraph (1) above does not apply to interest or other costs of financing that are payable in respect of borrowing by the permanent establishment in the ordinary course of a financial business carried on by it.

• (3) In sub-paragraph (2) “financial business” means any of the following—

• (a) banking, deposit-taking, money-lending or debt-factoring, or a business similar to any of those;

• (b) dealing in commodity or financial futures.

Provision of goods or services for permanent establishment

6

• (1) This paragraph applies where the non-resident company provides the permanent establishment with goods or services.

• (2) If the goods or services are of a kind that the company supplies, in the ordinary course of its business, to third parties dealing with it at arm’s length, the matter is dealt with as a transaction to which the separate enterprise principle applies.

• (3) If not, the matter is dealt with as an expense incurred by the non-resident company for the purposes of the permanent establishment.

Part 3 — Provisions applicable to non-resident banks

Application of this Part

7

• (1) The provisions of this Part of this Schedule have effect where the non-resident company is a bank.

• “Bank” for this purpose has the meaning given by section 840A.

• (2) Nothing in this Part of this Schedule shall be read as preventing the application of principles similar to those provided for in this Part in applying the separate enterprise principle to a non-resident company that is not a bank.

Non-resident banks: transfer of financial assets

8

• (1) In accordance with the separate enterprise principle, transfers of loans and other financial assets between the permanent establishment and any other part of the company are recognised only if they would have taken place between independent enterprises.

• (2) Such a transfer is not recognised where it cannot reasonably be considered that it is carried out for valid commercial reasons. For this purpose the obtaining of a tax advantage is not a valid commercial reason.

Loans by non-resident banks: attribution of financial assets and profits arising

9

• (1) In accordance with the separate enterprise principle, loans and other financial assets, and profits arising from them, are attributed to a permanent establishment to the extent that they can reasonably be regarded as having been generated by the activities of the permanent establishment.

• (2) The following provisions have effect as regards the factors to be taken into account.

• (3) Particular account shall be taken of the extent to which the permanent establishment is responsible for—

• (a) obtaining the offer of new business;

• (b) establishing the potential borrower’s credit rating and the risk involved in providing credit;

• (c) negotiating the terms of the loan with the borrower;

• (d) deciding whether, and if so on what conditions, to make or extend the loan.

• (4) Account may also be taken of the extent to which the permanent establishment is responsible for—

• (a) concluding the loan agreement and disbursing the proceeds of the loan;

• (b) administering the loan (including handling and monitoring the service of it) and holding and controlling any securities pledged.

• (5) References in this paragraph to a financial asset include any financial risk in relation to a loan, or potential loan, that is capable of giving rise to fees or other receipts and for which the holding of capital is required (or would be required if the transaction were between parties at arm’s length).

Borrowing by non-resident banks: permanent establishment acting as agent or intermediary

10

• (1) This paragraph applies where a permanent establishment—

• (a) borrows funds for the purposes of another part of the non-resident company, and

• (b) in relation to that borrowing acts only as an agent or intermediary.

• (2) In such a case, in accordance with the separate enterprise principle—

• (a) the profits attributable to the permanent establishment, and

• (b) the capital attributable to the permanent establishment under section 11AA(3),

shall be that appropriate in the case of an agent acting at arm’s length, taking into account the risks and costs borne by the establishment.

SCHEDULE A2

Part 1 — General provisions

Introduction

1

The provisions of this Schedule supplement section 13AB (corporation tax: the non-corporate distribution rate).

Meaning of “non-corporate distribution”

2

• (1) A “non-corporate distribution” means a distribution made by a company to a recipient who is not a company.

• “Recipient” here means the person beneficially entitled to the distribution.

• (2) A distribution made to a partnership is treated as made to the partners notwithstanding that the partnership is regarded as a legal person, or as a body corporate, under the law of the country or territory under which it is formed.

Calculation of company’s “underlying rate of corporation tax”

3

• (1) A company’s underlying rate of corporation tax for an accounting period is determined as follows:

Step One

Take the company’s basic profits for the accounting period (“BP”).

Step Two

Find the amount of corporation tax chargeable on those profits apart from section 13AB (“CT”).

Step Three

The company’s underlying rate of corporation tax is the percentage determined as follows—

$(CTBP)×100$

• (2) In determining CT—

• (a) apply the rate of corporation tax fixed for companies generally, and

• (b) if the company is entitled to and claims relief under section 13 (small companies' relief) or section 13AA (corporation tax starting rate), apply the provisions of those sections.

But take no account of any other relief that is given by reducing the amount or rate of tax payable (as opposed to the amount of the profits chargeable to tax).

Matching: distributions not exceeding basic profits

4

Where in an accounting period the total amount of the distributions made (or treated as made) by a company does not exceed the amount of its basic profits, the amount of the company’s basic profits matched with non-corporate distributions is equal to the total amount of the non-corporate distributions made (or treated as made) by the company in that period.

Matching: distributions exceeding basic profits

5

Where in an accounting period the total amount of the distributions made (or treated as made) by a company exceeds its basic profits, the amount of the company’s basic profits for that period matched with non-corporate distributions is—

Part 2 — Allocation of excess NCDs to other companies

Allocation of excess NCDs to other companies

6

• (1) This Part of this Schedule provides for the allocation to other companies of any amount by which the total amount of the non-corporate distributions made (or treated as made) by a company (the “distributing company”) in an accounting period (the “distribution period”) exceeds the amount of the company’s basic profits for that period that are matched under paragraph 5.

• (2) That amount is referred to in this Schedule as “excess NCDs”.

• (3) A company to which an amount of excess NCDs is allocated (a “recipient company”) is treated as if it had made a non-corporate distribution of that amount in the period to which it is allocated.

Allocation of excess NCDs to other group companies

7

• (1) If at the end of the distribution period the distributing company is a member of a group, excess NCDs must be allocated, so far as possible, to the other group companies.

The allocation must be made in accordance with the following rules.

• (2) Excess NCDs may not be allocated to a recipient company unless it has available profits for the accounting period to which they are to be allocated.

• (3) The amount of a recipient company’s available profits for an accounting period is given by:

$$BP-NCD$where—BP is the amount of that company’s basic profits for that accounting period, andNCD is the total amount of non-corporate distributions made (or treated as made) by that company in that period.$

• (4) The maximum amount of excess NCDs that may be allocated to an accounting period of a recipient company is:

$$(NCDD)×AP$where—NCD is the total amount of the non-corporate distributions made (or treated as made) by the distributing company in the distribution period;D is the total amount of all the distributions made (or treated as made) by that company in that period; andAP is the amount of the recipient company’s available profits for that period.$

• (5) In determining the amount of a company’s available profits at any time account shall only be taken of excess NCDs allocated to it by virtue of an allocation made before that time that remains (or so far as it remains) effective.

Allocation of excess NCDs: period or periods to which amount to be allocated

8

• (1) Excess NCDs falling to be allocated to another company under paragraph 7 (allocation to other group companies) may be allocated to any accounting period identified by this paragraph as a corresponding accounting period.

If there is more than one such period, excess NCDs must be allocated to the first to the full extent possible before any allocation is made to the second, and so on.

• (2) The accounting period of a recipient company that includes the last day of the distribution period is its first corresponding accounting period.

Unless that accounting period is shorter than the distribution period, it is the recipient company’s only corresponding accounting period.

• (3) If the first corresponding accounting period is shorter than the distribution period, any subsequent accounting period of the recipient company beginning before the end of the period specified in sub-paragraph (4) is a corresponding accounting period.

• (4) The period referred to in sub-paragraph (3) is a period—

• (a) of the same length as the distribution period, and

• (b) beginning on the same day as the recipient company’s first corresponding accounting period.

Allocation of excess NCDs: degrouping

9

• (1) This paragraph applies where a company (“company A”) ceases to be a member of the same group as another company (“company B”) but the companies remain under the control of the same person or persons.

This is referred to below as “degrouping”.

• (2) If at the end of any accounting period of company A ending on or after the degrouping but no more than two years after the degrouping—

• (a) company A has excess NCDs that (apart from this paragraph) cannot be allocated to other companies,

• (b) the business activities of company A and any other companies in the same group as that company are negligible, and

• (c) the business activities of company B and any other companies in the same group as that company are not negligible,

the provisions of sub-paragraphs (3) to (5) below apply.

The end of the accounting period when the above conditions are met is referred to in those provisions as “the relevant time”.

• (3) Company B and any other companies in the same group as that company at the relevant time (the “B group”) shall be treated for the purposes of allocating the excess NCDs as if they were members of the same group as company A.

• (4) Any excess NCDs remaining after any allocation made by virtue of sub-paragraph (3) must be allocated—

• (a) to company B or, if different, the company in the B group that at the relevant time has the greatest number of members who are not companies, and

• (b) to the accounting period of that company that includes the relevant time.

This allocation is not subject to the restrictions in paragraph 7 on the amount that may be allocated to another company.

• (5) If there is more than one company answering the description in sub-paragraph (4)(a), the excess NCDs shall be apportioned between them according to the amount of their basic profits for the accounting period to which the amount falls to be allocated.

• (6) In this paragraph “control” shall be construed in accordance with section 416(2) to (6).

Allocation of excess NCDs: procedure

10

• (1) The basic rule is that the allocation of excess NCDs to another company must be made by the distributing company with the agreement of the recipient company.

• (2) If excess NCDs are not so allocated within nine months after—

• (a) in a case within paragraph 7, the end of the distribution period, or

• (b) in a case within paragraph 9, the relevant time within the meaning of that paragraph,

they may be allocated at any time thereafter by an officer of the Board.

• (3) An allocation under sub-paragraph (1) or (2) may be varied—

• (a) by agreement between the relevant companies, or

• (b) if further excess NCDs are required to be allocated and no variation is agreed within one year after its becoming apparent that a variation is required, by an officer of the Board.

Any such variation may in turn be varied as mentioned in paragraph (a) or (b).

• (4) No allocation or variation of an allocation of excess NCDs may be made after the end of the period of one year after whichever of the following last occurs—

• (a) the final determination of the tax affairs of the distributing company in relation to the distribution period,

• (b) in a case within paragraph 7, the final determination of the tax affairs of all recipient or potential recipient companies in relation to accounting periods that are or could be corresponding accounting periods, or

• (c) in a case within paragraph 9, the final determination of the tax affairs of all recipient or potential recipient companies in relation to accounting periods to which an allocation may be made under that paragraph.

• (5) If circumstances arise as a result of which the tax affairs of any such company for any such period are reopened, an allocation or variation of an allocation may (and shall if necessary) be made at any time before the end of the period of one year after the tax affairs of the company are again finally determined.

• (6) For the purposes of sub-paragraphs (4) and (5) the tax affairs of a company for a period are finally determined when the amounts are conclusively determined within the meaning of paragraph 88 of Schedule 18 to the Finance Act 1998 (c. 36) (company tax returns: conclusiveness of amounts stated in return).

• (7) References in this paragraph to variation of an allocation include reducing the amount allocated to nil.

Allocation of excess NCDs: amounts proving to be excessive

11

• (1) This paragraph applies where an amount of excess NCDs allocated to another company in accordance with this Part of this Schedule later proves to be excessive.

• (2) The excess shall revert to the distributing company.

• (3) If allocations to two or more companies are involved, the amounts shall revert in the opposite order to that in which the allocations were made.

• (4) In the case of allocations made at the same time, the amounts reverting to the distributing company shall be in proportion to the original allocations.

Allocation of excess NCDs to companies not resident in the United Kingdom

12

• (1) The provisions of this Part of this Schedule as to the allocation of excess NCDs to other companies apply, with any necessary modifications, to companies that are not resident in the United Kingdom as they apply to companies that are so resident.

• (2) In particular, references to the company’s basic profits and accounting periods shall be read in relation to a company that is not resident in the United Kingdom as references to what would have been the case if the company had been resident in the United Kingdom at all material times.

Part 3 — Other supplementary provisions

Carry forward of excess NCDs

13

• (1) Any excess NCDs not allocated to another company under Part 2 shall be carried forward by the distributing company.

• (2) That company shall be treated as if it had made a non-corporate distribution of the amount carried forward (in addition to any distributions actually made by it) in its next accounting period.

• (3) Where an allocation is made under paragraph 9(4) references in this paragraph to the distributing company shall be read as references to the company to which that allocation is made (which is treated by virtue of paragraph 6(3) as having made a distribution in the accounting period to which the allocation is made).

Definition of a group

14

• (1) For the purposes of section 13AB and this Schedule a company and all its 51% subsidiaries form a group, and if any of those subsidiaries have 51% subsidiaries the group includes them and their 51% subsidiaries, and so on.

• (2) The question whether a company is a 51% subsidiary shall be determined in accordance with section 838, subject to the following provisions.

• (3) A company (“company A”) shall be treated for the purposes of this Schedule as if it were a 51% subsidiary of another company (“company B”) if company B has rights to, or in fact receives, more than 50% of the distributions made by company A.

• (4) For the purposes of this paragraph a company shall be treated as not being the owner—

• (a) of any share capital that it owns directly if a profit on the sale of the shares would be treated as a trading receipt of its trade, or

• (b) of any share capital that it owns indirectly and that is owned directly by a body corporate for which a profit on the sale of the shares would be treated as a trading receipt of its trade.

Accounting period treated as ending if company ceases to be a member of a group

15

• (1) Section 13AB and this Schedule apply in relation to an accounting period of a company in which it ceases to be a member of the group as if there were two accounting periods, one ending immediately before the company ceases to be a member of the group and the other consisting of the remainder of the period.

• (2) For this purpose a company ceases to be in a group if it and another company cease to be in the same group, whether as a result it is no longer in a group, becomes a member of another group or continues to be in the same group as one or more other companies.

Treatment of distributions made otherwise than in an accounting period

16

For the purposes of section 13AB and this Schedule, a non-corporate distribution made by a company otherwise than in an accounting period of the company shall be treated as made in the next accounting period of the company.

Holding companies treated as carrying on a business

17

• (1) For the purposes of section 13AB and this Schedule a holding company that is not otherwise carrying on a business shall be deemed to be carrying on a business and to be within the charge to corporation tax.

• (2) For this purpose “a holding company” means a company that has one or more 51% subsidiaries from which it receives or has received one or more distributions.

Interpretation

18

In section 13AB and this Schedule—

• “basic profits” means the amount of a company’s profits for an accounting period on which corporation tax finally falls to be borne;

• “corresponding accounting period”, in relation to a recipient company, has the meaning given by paragraph 8;

• “distributing company” has the meaning given by paragraph 6(1);

• “distribution” does not include an amount treated as a dividend under paragraph 2(2) of Schedule 23A (manufactured dividends and interest);

• “distribution period” has the meaning given by paragraph 6(1); and

• “excess NCDs” has the meaning given by paragraph 6(2);

• “group” has the meaning given by paragraph 14 (and references to a group company and membership of a group have a corresponding meaning);

• “non-corporate distribution” has the meaning given by paragraph 2;

• “recipient company” has the meaning given by paragraph 6(3);

• “underlying rate of corporation tax” has the meaning given by paragraph 3.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6A

• (1) On the fourteenth day following the month in which a transaction such as is mentioned in paragraph 6 above is effected, income tax (at the lower rate in force at the time of payment) shall become due in respect of the relevant dividends or proceeds.

• (2) The tax shall be payable by the chargeable person on behalf of the persons entitled to the dividends or proceeds.

• (2A) Payments of tax made on any person’s behalf under this paragraph shall be treated as made for the purpose only of being applied in the discharge of that person’s liability to tax charged (otherwise than by virtue of this paragraph) on the dividends or proceeds to which the payments relate.

• (3) The tax shall be payable without the making of any assessment.

• (4) For the purposes of sub-paragraph (1) above the applicable rate shall be—

• (a) the lower rate, in the case of a foreign dividend which is neither interest nor any other annual payment which is made otherwise than by way of dividend; and

• (b) the basic rate in any other case.

6B

Any tax due under paragraph 6A above shall carry interest, at the rate applicable under section 178 of the Finance Act 1989, from the date on which it becomes due until it is paid.

6C

• (1) For each quarter in which a person effects a transaction in respect of which he is a chargeable person, he shall make a return to the Board.

• (2) The return shall specify the chargeable person’s name and address and give, in respect of each such transaction effected by him in the quarter, correct and complete particulars of—

• (a) the relevant dividends or proceeds, and

• (b) the income tax on those dividends or proceeds for which he has accounted, or is accountable, under paragraph 6A above.

• (3) The return shall be made within 30 days from the end of the quarter.

• (4) In this paragraph and paragraphs 6D to 6F below, “quarter” means any period of three months ending with 31st March, 30th June, 30th September or 31st December.

6D

• (1) Any income tax which has become due under paragraph 6A above and particulars of which are included in a return may be assessed on the chargeable person (whether or not it has been paid when the assessment is made) if it, or any part of it, was not paid on or before the date on which it became due.

• (2) If it appears to the Board that there are any dividends or proceeds particulars of which ought to have been and have not been included in a return, or if the Board are not satisfied with any return, the Board may make an assessment on the chargeable person of the amount, or further amount, of income tax for which he is in their opinion accountable.

• (3) Where the Board make an assessment under sub-paragraph (2) above they shall specify—

• (a) which of the months in the quarter was the one in which they consider the transactions in question were effected, or

• (b) where they consider that the transactions were effected in more than one of the months in the quarter, the proportion of the total amount of the assessment that is to be attributed to each of those months.

• (4) Any income tax assessed under sub-paragraph (2) above shall be due within 14 days after the issue of the notice of assessment; but for the purposes of paragraph 6B above—

• (a) it shall be treated as having become due on the fourteenth day following the month specified under sub-paragraph (3)(a) above, or

• (b) each of the portions of it specified under sub-paragraph (3)(b) above shall be treated as having become due on the fourteenth day following the month to which it is to be attributed.

6E

• (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) For the purposes of sections 34 and 36(1) of the Management Act (time limits for making assessments), an assessment under paragraph 6D above shall be taken to relate to the year of assessment in which the quarter to which the assessment relates ends.

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6F

If a person has made a payment purporting to be a payment of tax due under paragraph 6A above but it appears to the Board that—

• (a) he was not liable to make any payment under that paragraph, or

• (b) the sum paid exceeded his liability under that paragraph,

the Board shall make or allow to be made such repayments, adjustments or set-offs against unpaid tax as they think appropriate.

11A

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Issue price

11B

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Retirement benefit schemes

15

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Stock lending

16

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Trustees

17

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Underwriters

18

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Gilts: special rules

19

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Non-gilts: special rules

20

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Convertible securities: special rules

21

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SCHEDULE 4AA

Introductory

1

• (1) This Schedule forms part of the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)).

• (2) Accordingly, expressions used in this Schedule and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by that index.

• (3) References in this Schedule to deductions are to deductions by a company in calculating for the purposes of corporation tax the profits of a trade carried on by it.

• (4) Sub-paragraph (3) is subject to paragraph 13 (application of provisions to expenses of management of companies with investment business etc.).

Deduction for providing free or matching shares

2

• (1) Where, under an approved share incentive plan, shares are awarded to employees as free or matching shares by reason of their employment with a company, a deduction is allowed under this paragraph to that company.

• (2) Any such deduction—

• (a) is of an amount equal to the market value of the shares at the time they are acquired by the trustees, and

• (b) must be made for the period of account in which the shares are awarded to employees in accordance with the plan.

• (3) Except as provided by sub-paragraph (1), no deduction may be made by the company or any associated company in respect of the provision of those shares.

This is subject to paragraphs 7 and 8 (deductions for costs of setting up, and contributions to running expenses of, plan).

• (4) Where the shares are awarded under a group plan, the market value of the shares at the time they are acquired by the trustees shall for the purposes of this paragraph be taken to be the relevant proportion of the total market value of the shares included in the award.

• (5) For the purposes of sub-paragraph (4) “the relevant proportion” means the proportion that the number of shares in the award awarded to the employees of the company concerned bears to the total number of shares in the award.

• (6) In determining the market value of any shares for the purposes of this paragraph, if shares have been acquired by the trustees on different days it shall be assumed that those acquired on an earlier day are awarded to employees under the plan before those acquired by the trustees on a later day.

• (7) If a deduction is made under this paragraph by a company, no deduction may be made by any other company under this paragraph in respect of the provision of the shares.

• (8) This paragraph has effect subject to paragraph 4 (cases in which no deduction is allowed).

Deduction for additional expenses in providing partnership shares

3

• (1) Where under an approved share incentive plan—

• (a) partnership shares are awarded to employees by reason of their employment with a company, and

• (b) the market value of those shares at the time they are acquired by the trustees exceeds the partnership share money paid by the participants to acquire those shares,

a deduction is allowed under this paragraph to that company.

• (2) Any such deduction—

• (a) is of an amount equal to the amount of the excess referred to in sub-paragraph (1)(b), and

• (b) must be made for the period of account in which the shares are awarded to employees in accordance with the plan.

• (3) Except as provided by sub-paragraph (1), no deduction may be made by that company or any associated company in respect of the provision of those shares.

This is subject to paragraphs 7 and 8 (deductions for costs of setting up, and contributions to running expenses of, plan).

• (4) If a deduction is made under this paragraph by a company, no deduction may be made by any other company under this paragraph in respect of the provision of the shares.

• (5) This paragraph has effect subject to paragraph 4 (cases in which no deduction is allowed).

Cases in which no deduction is allowed

4

• (1) No deduction is allowed under paragraph 2 or 3 (deductions for providing free or matching shares or for additional expenses in providing partnership shares) in the following cases.

• (2) No deduction is allowed in respect of shares awarded to an individual under the plan unless, at the time of the award, any earnings from the required employment are (or would be) chargeable earnings.

• (3) In sub-paragraph (2)—

• “chargeable earnings” means general earnings to which any of the charging provisions of Chapter 4 or 5 of Part 2 of ITEPA 2003 apply, and

• the “required employment” means the employment by reference to which the individual is eligible to participate in the award.

• (4) In sub-paragraph (3), the reference to any of the charging provisions of Chapter 4 or 5 of Part 2 of that Act has the same meaning as it has in the employment income Parts of ITEPA 2003 (see sections 14(3) and 20(3) of that Act).

• (5) No deduction is allowed in respect of shares that are liable to depreciate substantially in value for reasons that do not apply generally to shares in the company.

• (6) No deduction is allowed if a deduction has been made—

• (a) by the company, or

• (b) by an associated company of the company,

in respect of the provision of the same shares for this or another trust.

• (7) Sub-paragraph (6) applies whatever the nature or purpose of the other trust and whatever the basis on which the deduction was made.

• (8) For the purposes of determining whether the same shares have been provided to more than one trust, if shares have been acquired by the trustees of the plan trust on different days it shall be assumed that those acquired on an earlier day are awarded under the plan before those acquired by the trustees on a later day.

• (9) No deduction is allowed in respect of the award of shares acquired by the trustees by virtue of a payment in respect of which a deduction has been made under paragraph 9 (deduction for contribution to plan trust) or 10(3) (further deduction where deduction under paragraph 9 withdrawn).

No deduction for expenses in providing dividend shares

5