Schedule 13 - Profits of foreign permanent establishments etc

Finance (No. 3) Bill – in a Public Bill Committee at 12:00 pm on 7th June 2011.

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Amendments made: 123, in schedule 13, page 199, line 2, leave out ‘the relevant profits’ and insert ‘that’.

Amendment 124, in schedule 13, page 205, leave out lines 3 to 12 and insert—

‘(b) there is a transferred total opening negative amount in relation to the business transferred.

‘(2) In a case where the transferor had not made an election under section 18A before the transfer took place, or such an election had not had effect before that time, the “transferred total opening negative amount” is the amount that would have been the total opening negative amount in the case of the transferor at the beginning of the transferor’s first relevant accounting period if—

(a) the only business carried on by the transferor was the business transferred,

(b) the transfer had not taken place,

(c) the transferor’s first relevant accounting period had begun on the day after the transfer day, and

(d) any reference in section 18J(3) to the accounting period in which the election is made were a reference to the period beginning with the accounting period in which the transfer took place and ending with the transfer day.

(3) In a case where an election made by the transferor under section 18A had effect before the transfer took place, the “transferred total opening negative amount” is—

(a) the amount that would have been the total opening negative amount in the case of the transferor on the transfer day if the accounting period in which the transfer took place had ended on that day (the “remaining total opening negative amount”), less

(b) the amount that would have been the remaining total opening negative amount if the transferor had never carried on the business transferred.

But the transferred total opening negative amount cannot be below nil.

(4) In a case where—

(a) an election made by the transferee under section 18A first has effect after the transfer takes place, and

(b) the accounting period of the transferee in which the transfer took place is an affected prior accounting period for the purposes of section 18J(2),

there is to be added to the adjusted foreign permanent establishments amount in relation to that accounting period a negative amount equal to so much (if any) of the transferred total opening negative amount as is attributable to profits or losses arising after the beginning of the earliest affected prior accounting period of the transferee.

(5) In a case where an election made by the transferee under section 18A had effect before the transfer took place, sections 18K to 18N have effect in relation to the transferee and the transferred total opening negative amount as if—

(a) any reference to the total opening negative amount were a reference to the transferred total opening negative amount,

(b) any reference to the first relevant accounting period were a reference to the period beginning with the day after the transfer day and ending immediately before the start of the next accounting period of the transferee, and

(c) the requirement in section 18L(2) that a streaming election be made at the same time as the company’s election under section 18A did not apply.

(6) Where for the purposes of this section it is necessary to apportion the profits and losses for any accounting period to different parts of that period, that apportionment is to be made on a just and reasonable basis.

(7) Any amount included in a transferred total opening negative amount is to be disregarded in the application of sections 18J to 18N in the case of the transferor after the transfer day.

(8) In this section “the transfer day” means the day on which the transfer of the business takes place.’.

Amendment 125,  in schedule 13, page 206, leave out from the beginning of line 43 to the end of line 6 on page 207.

Amendment 126, in schedule 13, page 207, line 8, at end insert—

7A In section 845(4) (exceptions to rule that transfer between company and related party treated as being at market value)—

(a) omit the “and” at the end of paragraph (c), and

(b) after that paragraph insert—

“(ca) section 848A (assets held for purposes of exempt foreign permanent establishments), and”.

7B After section 848 insert—

“848A Assets held for purposes of exempt foreign permanent establishments

(1) This section applies if—

(a) subsection (1) of section 775 (transfers within a group) would apply in relation to the transfer but for paragraph (c) of subsection (4) of that section, and

(b) the asset has not at all times when the election under section 18A had effect been held by the transferor wholly for the purposes of a permanent establishment such as is mentioned in that paragraph.

(2) The transfer is treated for the purposes of this Part as being at the following value—

where—

WDV is the tax written-down value of the asset, and

FPEA is the amount which, for the purposes of Chapter 3A of Part 2, would in the case of the transferor be the foreign permanent establishments amount attributable to the transfer for the accounting period in which it took place if the transfer were at market value.”’.

Amendment 127, in schedule 13, page 208, line 18, at end insert

‘(with the result that that amount includes the amount which for the purposes of that Chapter would in the case of the company be the foreign permanent establishments amount attributable to the disposal for the accounting period in which it was made if the disposal were not a no gain/no loss disposal).

‘( ) For the purposes of this section a no gain/no loss disposal is one on which by virtue of section 152 or any of the no gain/no loss provisions neither a gain nor a loss accrues to the company making the disposal.”’.—(Mr Gauke.)

Amendment proposed: 101, in schedule 13, page 213, line 31, leave out

‘on the day on which this Act is passed’

and insert

‘when a full impact assessment on developing countries’ tax revenue has been laid before and approved by the House of Commons.’.—(Mr Hanson.)

Question put, That the amendment be made.

The Committee divided: Ayes 11, Noes 16.

Division number 9 Decision Time — Schedule 13 - Profits of foreign permanent establishments etc

Aye: 11 MPs

No: 16 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Amendment made: 128, in schedule 13, page 215, line 28, at end insert—

33A (1) This paragraph applies if—

(a) section 18O of CTA 2009 (as inserted by this Schedule) applies in relation to a transfer of business, and

(b) (apart from this paragraph) the effect of subsection (4) of that section would be that a relevant losses amount falling within paragraph 33(1)(a) would be ignored for the purposes of section 18J(2) of that Act.

(2) There is to be added to the adjusted foreign permanent establishments amount in relation to the accounting period of the transferee in which the transfer took place a negative amount equal to that relevant losses amount.’.—(Mr Gauke.)

Schedule 13, as amended, agreed to.