Finance Act 2006

71Other avoidance involving losses accruing to companiesU.K.

(1)After section 184F of TCGA 1992 (as inserted by section 70 above) insert—

“184GAvoidance involving losses: schemes converting income to capital

(1)This section applies for the purposes of corporation tax in respect of chargeable gains if conditions A to D are satisfied.

(2)Condition A is that—

(a)any receipt arises to a company (“the relevant company”) on a disposal of an asset, and

(b)the receipt arises directly or indirectly in consequence of, or otherwise in connection with, any arrangements.

(3)Condition B is that—

(a)a chargeable gain (the “relevant gain”) accrues to the relevant company on the disposal, and

(b)losses accrue (or have accrued) to the relevant company on any other disposal of any asset (whether before or after or as part of the arrangements).

(4)Condition C is that, but for the arrangements, an amount would have fallen to be taken into account wholly or partly instead of the receipt in calculating the income chargeable to corporation tax—

(a)of the relevant company, or

(b)of a company which, at any qualifying time, is a member of the same group as the relevant company.

(5)Condition D is that—

(a)the main purpose of the arrangements, or

(b)one of the main purposes of the arrangements,

is to secure a tax advantage that involves the deduction of any of the losses from the relevant gain (whether or not it also involves anything else).

(6)If the Board consider, on reasonable grounds, that conditions A to D are or may be satisfied, they may give the relevant company a notice in respect of the arrangements (but see also section 184I).

(7)If, when the notice is given, conditions A to D are satisfied, no loss accruing to the relevant company at any time is to be deductible from the relevant gain.

(8)A notice under this section must—

(a)specify the arrangements,

(b)specify the accounting period in which the relevant gain accrues, and

(c)inform the relevant company of the effect of this section.

(9)If relevant gains accrue in more than one accounting period, a single notice under this section may specify all the accounting periods concerned.

(10)In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),

• “group”, in relation to companies, means a group determined in accordance with section 170,

• “qualifying time”, in relation to any arrangements, means any time which falls in the period—

  (a)

  beginning with the time at which the arrangements are made, and

  (b)

  ending with the time at which the matters (other than any tax advantage) intended to be secured by the arrangements are secured,

• “tax advantage” has the meaning given by section 184D.

184HAvoidance involving losses: schemes securing deductions

(1)This section applies for the purposes of corporation tax in respect of chargeable gains if conditions A to D are satisfied.

(2)Condition A is that—

(a)a chargeable gain (the “relevant gain”) accrues to a company (“the relevant company”) directly or indirectly in consequence of, or otherwise in connection with, any arrangements, and

(b)losses accrue (or have accrued) to the relevant company on any disposal of any asset (whether before or after or as part of the arrangements).

(3)Condition B is that the relevant company, or a company connected with the relevant company, incurs any expenditure—

(a)which is allowable as a deduction in calculating its total profits chargeable to corporation tax but which is not allowable as a deduction in computing its gains under section 38, and

(b)which is incurred directly or indirectly in consequence of, or otherwise in connection with, the arrangements.

(4)Condition C is that the main purpose, or one of the main purposes, of the arrangements is to secure a tax advantage that involves both—

(a)the deduction of the expenditure in calculating total profits, and

(b)the deduction of any of the losses from the relevant gain,

whether or not it also involves anything else.

(5)Condition D is that the arrangements are not excluded arrangements. For this purpose arrangements are excluded arrangements if—

(a)the arrangements are made in respect of land or any estate or interest in land,

(b)the arrangements fall within section 779(1) or (2) of the Taxes Act (sale and lease-back: limitation on tax reliefs),

(c)the person to whom the payment mentioned in that subsection is payable is not a company connected with the relevant company, and

(d)the arrangements are made between persons dealing at arm's length.

(6)If the Board consider, on reasonable grounds, that conditions A to D are or may be satisfied, they may give the company a notice in respect of the arrangements (but see also section 184I).

(7)If, when the notice is given, conditions A to D are satisfied, no loss accruing to the company at any time is to be deductible from the relevant gain.

(8)A notice under this section must—

(a)specify the arrangements,

(b)specify the accounting period in which the relevant gain accrues, and

(c)inform the relevant company of the effect of this section.

(9)If relevant gains accrue in more than one accounting period, a single notice under this section may specify all the accounting periods concerned.

(10)In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),

• “tax advantage” has the meaning given by section 184D.

(11)For the purposes of this section it does not matter whether the tax advantage is secured for the relevant company or for any other company.

184INotices under sections 184G and 184H

(1)Subsection (2) applies if—

(a)the Board give a notice under section 184G or 184H (a “relevant notice”) to a company that specifies an accounting period, and

(b)the notice is given before the company has made its company tax return for that accounting period.

(2)If the company makes its return for that period before the end of the applicable 90 day period (see subsection (12)), it may—

(a)make a return that disregards the notice, and

(b)at any time after making the return and before the end of the applicable 90 day period, amend the return for the purpose of complying with the provision referred to in the notice.

(3)If a company has made a company tax return for an accounting period, the Board may give the company a relevant notice in relation to that period only if a notice of enquiry has been given to the company in respect of its return for that period.

(4)After any enquiries into the return for that period have been completed, the Board may give the company a relevant notice only if requirements A and B are met.

(5)Requirement A is that at the time the enquiries into the return were completed, the Board could not have been reasonably expected, on the basis of information made available—

(a)to them before that time, or

(b)to an officer of theirs before that time,

to have been aware that the circumstances were such that a relevant notice could have been given to the company in relation to that period.

(6)For the purposes of requirement A, paragraph 44(2) and (3) of Schedule 18 to the Finance Act 1998 (information made available) applies as it applies for the purposes of paragraph 44(1).

(7)Requirement B is that—

(a)the company or any other person was requested to produce or provide information during an enquiry into the return for that period, and

(b)if the request had been duly complied with, the Board could reasonably have been expected to give the company a relevant notice in relation to that period.

(8)If—

(a)a company makes a company tax return for an accounting period, and

(b)the company is subsequently given a relevant notice that specifies that period,

it may amend the return for the purpose of complying with the provision referred to in the notice at any time before the end of the applicable 90 day period.

(9)If the relevant notice is given to the company after it has been given a notice of enquiry in respect of its return for the period, no closure notice may be given in relation to its company tax return until—

(a)the end of the applicable 90 day period, or

(b)the earlier amendment of its company tax return for the purpose of complying with the provision referred to in the notice.

(10)If the relevant notice is given to the company after any enquiries into the return for the period are completed, no discovery assessment may be made as regards the chargeable gain to which the notice relates until—

(a)the end of the applicable 90 day period, or

(b)the earlier amendment of the company tax return for the purpose of complying with the provision referred to in the notice.

(11)Subsections (2)(b) and (8) do not prevent a company tax return for a period becoming incorrect if—

(a)a relevant notice is given to the company in relation to that period,

(b)the return is not amended in accordance with subsection (2)(b) or (8) for the purpose of complying with the provision referred to in the notice, and

(c)the return ought to have been so amended.

(12)In this section—

• “the applicable 90 day period”, in relation to a relevant notice, means the period of 90 days beginning with the day on which the notice is given,

• “closure notice” means a notice under paragraph 32 of Schedule 18 to the Finance Act 1998,

• “company tax return” means the return required to be delivered pursuant to a notice under paragraph 3 of that Schedule, as read with paragraph 4 of that Schedule,

• “discovery assessment” means an assessment under paragraph 41 of that Schedule,

• “notice of enquiry” means a notice under paragraph 24 of that Schedule.”.

(2)In Schedule 18 to FA 1998 (company tax returns, assessments, etc), in paragraph 25(1) (scope of enquiry), after “relief)” insert “ or a notice under section 184G or 184H of the Taxation of Chargeable Gains Act 1992 (avoidance involving capital losses) ”.

(3)In paragraph 42 of that Schedule (restrictions on power to make discovery assessment etc), in sub-paragraph (2A), after “1988” insert “ or section 184G or 184H of the Taxation of Chargeable Gains Act 1992 ”.

(4)The amendments made by this section have effect in relation to chargeable gains accruing on any disposal that is made on or after 5th December 2005.