Source: http://www.legislation.gov.uk/ukpga/2009/4/part/7/chapter/11
Timestamp: 2020-01-28 12:55:45
Document Index: 216140840

Matched Legal Cases: ['art 4', 'art 4', 'art 4', 'art 4', 'art 4', 'art 4', 'art 4', 'art 4']

Chapter 11U.K.Tax avoidance
Unallowable purposesU.K.
690Derivative contracts for unallowable purposesU.K.
(1)This section applies if in any accounting period a derivative contract of a company has an unallowable purpose.
(2)The company may not bring into account for that period for the purposes of this Part so much of any exchange credit in respect of that contract as is referable to the unallowable purpose on a just and reasonable apportionment.
(3)The company may not bring into account for that period for the purposes of this Part so much of any debit in respect of that contract as is referable to the unallowable purpose on a just and reasonable apportionment.
(4)Subsections (2) and (3) are subject to section 692 (allowance of accumulated net losses).
(5)An amount which would be brought into account in accordance with this Part as respects any matter apart from this section and section 692—
(b)accordingly may not be brought into account for any other corporation tax purposes as respects that matter.
(6)For the purposes of this section and section 692, a credit is an exchange credit, in the case of any company, so far as it is attributable to any exchange gains arising to the company which are included in the reference to profits of the company in section 595(3) (see section 606 (exchange gains and losses from derivative contracts)).
(7)For the meaning of “has an unallowable purpose” and “the unallowable purpose” in this section and section 692, see section 691.
C1S. 690 excluded by 2010 c. 4, s. 938N (as inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 5 para. 2)
C2S. 690 excluded by 2010 c. 4, s. 938V(b) (as inserted (with effect in accordance with Sch. 20 para. 6 of the amending Act) by Finance Act 2013 (c. 29), Sch. 20 para. 3)
691Meaning of “unallowable purpose”U.K.
(1)For the purposes of sections 690 and 692, a derivative contract of a company has an unallowable purpose in an accounting period if the purposes for which, at times during that period, the company—
(a)is a party to the contract, or
(b)enters into transactions which are related transactions by reference to it,
(2)If a company is not within the charge to corporation tax in respect of a part of its activities, for the purposes of this section the business and other commercial purposes of the company do not include the purposes of that part.
(3)Subsection (4) applies if a tax avoidance purpose is one of the purposes for which a company—
(a)is a party to a derivative contract at any time, or
(b)enters into a transaction which is a related transaction by reference to a derivative contract of the company.
(4)For the purpose of subsection (1), the tax avoidance purpose is only regarded as a business or other commercial purpose of the company if it is not—
(a)the main purpose for which the company is a party to the derivative contract or, as the case may be, enters into the related transaction, or
(b)one of the main purposes for which it is or does so.
(5)The references in subsections (3) and (4) to a tax avoidance purpose are references to any purpose which consists of securing a tax advantage for the company or any other person.
(6)In this section “tax advantage” has the meaning given by [F3section 1139 of CTA 2010] (meaning of “tax advantage”).
F3Words in s. 691(6) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 642 (with Sch. 2)
692Allowance of accumulated net lossesU.K.
(a)in any accounting period a derivative contract of a company has an unallowable purpose, and
(b)there is a net loss in respect of that contract for that period.
(2)For the purposes of this section, there is such a net loss if—
(a)the sum of the debits in respect of that contract which are excluded from being brought into account for that period by section 690(3), exceeds
(b)the sum of the exchange credits in respect of that contract which are so excluded by section 690(2).
(3)The amount of that excess is the amount of the net loss in respect of the contract for the period.
(4)The amount of the excess accumulated net losses in respect of the contract for an accounting period is to be brought into account as a debit for that period.
(5)The amount of the excess accumulated net losses in respect of a contract for an accounting period is found as follows.
Add together the amount of any net loss arising in respect of the contract for that accounting period and earlier accounting periods.
Deduct from the result of Step 1 any amount which was brought into account in accordance with this section in any earlier accounting period.
Add together the amount of any credits (other than exchange credits) arising in respect of the contract for that accounting period or any earlier accounting period.
Deduct from the result of Step 3 (but not so as to reduce it below nil)—
(a)so much of any debits arising in respect of the contract for that accounting period or any earlier accounting period as is not excluded from being brought into account by section 690(3), and
(b)any amount which was brought into account in accordance with this section in any earlier accounting period.
Compare the result of Step 2 and the result of Step 4.
The amount of the excess accumulated net losses for the period is the lower of those results.
693Bringing into account adjustments under [F4Part 4 of TIOPA 2010]U.K.
(1)This section deals with the credits and debits which are to be brought into account in accordance with this Part as a result of [F5Part 4 of TIOPA 2010] (provision not at arm's length) applying in relation to a company's derivative contracts or related transactions.
(2)Subsection (3) applies if under [F6Part 4 of TIOPA 2010] an amount (“the imputed amount”) is treated as an amount of profits or losses arising to a company from any of its derivative contracts or related transactions.
(4)Subsection (5) applies if under [F7Part 4 of TIOPA 2010] an amount is treated as expenses incurred by a company under or for the purposes of any of its derivative contracts or related transactions.
F4Words in s. 693 title substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 142(2) (with Sch. 9 paras. 1-9, 22)
F5Words in s. 693(1) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 142(2) (with Sch. 9 paras. 1-9, 22)
F6Words in s. 693(2) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 142(2) (with Sch. 9 paras. 1-9, 22)
F7Words in s. 693(4) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 142(2) (with Sch. 9 paras. 1-9, 22)
(2)Subsection (3) applies if as a result of [F8Part 4 of TIOPA 2010] (provision not at arm's length) the company's profits and losses are calculated for tax purposes as if it were not a party to the contract.
(4)Subsection (5) applies if as a result of [F9Part 4 of TIOPA 2010] the company's profits and losses are calculated for tax purposes as if the terms of the contract were those which would have been agreed by the company and the other party to the contract had they been dealing at arm's length (“the arm's length terms”).
(8)Nothing in [F10Part 4 of TIOPA 2010] requires the amounts brought into account in accordance with this Part in respect of exchange gains and losses from derivative contracts to be calculated on the assumption that the arm's length provision had been made instead of the actual provision.
(10)In subsection (8) “the actual provision” and “the arm's length provision” have the same meaning as in [F11Part 4 of TIOPA 2010 (see sections 149 and 151 of that Act)].
F8Words in s. 694(2) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 143(2) (with Sch. 9 paras. 1-9, 22)
F9Words in s. 694(4) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 143(2) (with Sch. 9 paras. 1-9, 22)
F10Words in s. 694(8) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 143(2) (with Sch. 9 paras. 1-9, 22)
F11Words in s. 694(10) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 143(3) (with Sch. 9 paras. 1-9, 22)
[F12(za)the Crown,]
F12S. 695(9)(za) inserted (1.4.2009 retrospective) by Corporation Tax Act 2009 (Amendment) Order 2009 (S.I. 2009/2860), arts. 1(2), 6(6)
Transactions with non-UK residentsU.K.
696Derivative contracts with non-UK residentsU.K.
(1)This section applies in relation to a company (“A”) if, as a result of any transaction—
(a)A becomes a party to a derivative contract to which a non-UK resident (“NR”) is a party,
(b)NR becomes a party to a derivative contract to which A is a party, or
(c)A and NR both become a party to a derivative contract.
(2)For each accounting period for any part of which A and NR are both a party to a derivative contract which makes provision for notional interest payments, the credits and debits which fall to be brought into account in accordance with this Part in respect of the contract in the case of A do not include the amount of any excluded debit in relation to that contract.
(3)The amount of an excluded debit is calculated by determining for the accounting period the amount (if any) by which—
(a)the sum of any notional interest payments made by A to NR while A and NR are both a party to the contract,
(b)the sum of any notional interest payments made by NR to A during that time.
(4)For the purposes of this section, a payment is a notional interest payment if—
(a)a derivative contract specifies—
(i)a notional principal amount,
(ii)a period, and
(iii)a rate of interest,
(b)the amount of the payment is determined (wholly or mainly) by applying a rate to the specified notional principal amount for the specified period, and
(c)the value of the rate is the same at all times as that of the specified rate of interest.
(5)This section is subject to section 697.
697Exceptions to section 696U.K.
(1)Section 696 does not apply if A—
(a)is a bank, building society, financial trader [F13, recognised clearing house, EEA central counterparty or third country central counterparty],
(b)is a party to the derivative contract solely for the purposes of a trade or part of a trade it carries on in the United Kingdom, and
(c)is a party to it otherwise than as agent or nominee of another person.
(2)Section 696 does not apply if NR—
(a)is a party to the derivative contract solely for the purposes of a trade or part of a trade which NR carries on in the United Kingdom through a relevant entity, and
(b)is a party to it otherwise than as agent or nominee of another person.
(3)Section 696 does not apply if arrangements made in relation to the territory in which NR is resident—
(a)have effect [F14under section 2(1) of TIOPA 2010] (double taxation relief), and
(b)make provision in relation to interest (as defined in the arrangements).
(4)It does not matter whether the provision mentioned in subsection (3)(b) is for relief or otherwise.
(5)If NR is a party to the contract as agent or nominee of another person, subsection (3) applies as if the reference to the territory in which NR is resident were a reference to the territory in which that other person is resident.
[F15“recognised clearing house”, “EEA central counterparty” and “third country central counterparty” have the meanings given by section 285 of FISMA 2000 (exemptions for recognised investment exchanges and clearing houses),]
“relevant entity” means—
if NR is a company, a permanent establishment, and
if that is not the case, a branch or agency.
F13Words in s. 697(1)(a) substituted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 26(2)(a) (with regs. 52-58)
F14Words in s. 697(3)(a) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 93 (with Sch. 9 paras. 1-9, 22)
F15Words in s. 697(6) substituted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 26(2)(b) (with regs. 52-58)
Disposals for consideration not fully recognised by accounting practiceU.K.
698Disposals for consideration not fully recognised by accounting practiceU.K.
(1)This section applies if in any accounting period (“the relevant accounting period”) a company with the relevant avoidance intention disposes of rights or liabilities under a derivative contract wholly or partly for consideration which—
(2)The relevant avoidance intention is the intention of eliminating or reducing the credits to be brought into account in accordance with this Part.
(4)In determining the credits which the company is to bring into account for the relevant accounting period in accordance with this Part, it is to be assumed that the whole of the consideration is recognised in determining the company's profit or loss for that period.
(5)But this section does not apply if [F16section 147(3) or (5) of TIOPA 2010] (provision not at arm's length) operates in relation to the disposal so as to increase the tax liability of the company.
F16Words in s. 698(5) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 144 (with Sch. 9 paras. 1-9, 22)
[F17DerecognitionU.K.
F17S. 698A and cross-heading inserted (19.7.2011) (with effect in accordance with Sch. 4 para. 13 of the amending Act) by Finance Act 2011 (c. 11), Sch. 4 para. 11