Finance Bill

Natascha Engel Excerpts

Tuesday 28th June 2016 Commons Chamber

Bill (Clauses 7 to 18, 41 to 44, 65 to 18, 129, 132 to 136, and 144 to 154, and schedules 2, 3, 11 to 14, and 18 to 22), as amended, reported, and ordered to lie on the Table.

[Madam Deputy Speaker (Natascha Engel)]

Before we move to the four Ways and Means resolutions numbered 2 to 5 on the Order Paper, the Minister has notified me that he wishes to move an additional Ways and Means motion relating to stamp duty. Copies have been in the Vote Office for the past 40 minutes and I hope hon. Members have had an opportunity to read it. The same procedure will apply as for the motions on the Order Paper.

FINANCE BILL: WAYS AND MEANS (STAMP DUTY: ACQUISITION OF TARGET COMPANY’S SHARE CAPITAL)

Resolved,

That the following provisions shall have effect for the period beginning with 29 June 2016 and ending 31 days after the earliest of the dates mentioned in section 50(2) of the Finance Act 1973—

(1) Section 77 of the Finance Act 1986 (acquisition of target company’s share capital) is amended as follows.

(2) In subsection (3), omit the “and” at the end of paragraph (g) and after paragraph (h) insert “, and

(i) at the time the instrument mentioned in subsection (1) isexecuted there are no disqualifying arrangements, within the meaning given by section 77A, in existence.”

(3) In subsection (3A) for “(3)” substitute “(3)(b) to (h)”.

(4) In subsection (4) after “this section” insert “and section 77A”.

(5) After section 77 of the Finance Act 1986 insert—

“77A Disqualifying arrangements

(1) This section applies for the purposes of section 77(3)(i).

(2) Arrangements are “disqualifying arrangements” if it is reasonable to assume that the purpose, or one of the purposes, of the arrangements is to secure that—

(a) a particular person obtains control of the acquiring company, or

(b) particular persons together obtain control of that company.

(3) But neither of the following are disqualifying arrangements—

(a) the arrangements for the issue of shares in the acquiring company which is the consideration for the acquisition mentioned in section 77(3);

(b) any relevant merger arrangements.

(4) In subsection (3) “relevant merger arrangements” means arrangements for the issue of shares in the acquiring company to the shareholders of a company (“company B”) other than the target company (“company A”) in a case where—

(a) that issue of shares to the shareholders of company B would be the only consideration for the acquisition by the acquiring company of the whole of the issued share capital of company B,

(b) the conditions in section 77(3)(c) and (e) would be met in relation to that acquisition (if that acquisition were made in accordance with the arrangements), and

(c) the conditions in paragraphs (f) to (h) of section 77(3) would be met in relation to that acquisition if—

(i) that acquisition were made in accordance with thearrangements, and

(ii) the shares in the acquiring company issued asconsideration for the acquisition of the share capital of company A were ignored for the purposes of those paragraphs;

and in section 77(3)(e) to (h) and (3A) as they apply by virtue of this subsection, references to the target company are to be read as references to company B.

(5) Where—

(a) arrangements within any paragraph of subsection (3) are part of a wider scheme or arrangement, and

(b) that scheme or arrangement includes other arrangements which—

(i) fall within subsection (2), and

(ii) do not fall within any paragraph of subsection(3),those other arrangements are disqualifying arrangements despite anything in subsection (3).

(6) In this section—

“the acquiring company” has the meaning given by section 77(1);

“arrangements” includes any agreement, understanding or scheme (whether or not legally enforceable);

“control” is to be read in accordance with section 1124 of the Corporation Tax Act 2010;

“the target company” has the meaning given by section 77(1).”

(6) The amendments made by this Resolution have effect in relation to anyinstrument executed on or after 29 June 2016 (and references to arrangementsin any provision inserted by this Resolution include arrangements entered into before that date).

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of section 50 of the Finance Act 1973.—(Mr Gauke.)

FINANCE BILL: WAYS AND MEANS (TRANSACTIONS IN LAND)

Resolved,

That provision may be made for and in connection with the taxation of:

(1) profits of trading activities concerned with land, or the development of land, in the United Kingdom; and

(2) other amounts representing profits from a disposal of, or of property deriving its value from, land in the United Kingdom.—(Mr Gauke.)

FINANCE BILL: WAYS AND MEANS (RECEIPTS FROM INTELLECTUAL PROPERTY: DIVERTED PROFITS TAX)

Resolved,

That provision be made amending Part 3 of the Finance Act 2015 (diverted profits tax).—(Mr Gauke.)

FINANCE BILL: WAYS AND MEANS (RECEIPTS FROM INTELLECTUAL PROPERTY: TERRITORIAL SCOPE)

Resolved,

That:

(1) In section 577 of the Income Tax (Trading and Other Income) Act 2005 (territorial scope of Part 5 charges), at the end insert—

“(5) See also section 577A (territorial scope of Part 5 charges: receipts from intellectual property).”

(2) After that section insert—

“577A Territorial scope of Part 5 charges: receipts from intellectual property

(1) References in section 577 to income which is from a source in the United Kingdom include income arising where—

(a) a royalty or other sum is paid in respect of intellectual property by a person who is non-UK resident, and

(b) the payment is made in connection with a trade carried on by that person through a permanent establishment in the United Kingdom.

(2) Subsection (3) applies where a royalty or other sum is paid in respect of intellectual property by a person who is non-UK resident in connection with a trade carried on by that person only in part through a permanent establishment in the United Kingdom.

(3) The payment referred to in subsection (2) is to be regarded for the purposes of subsection (1)(b) as made in connection with a trade carried on through a permanent establishment in the United Kingdom to such extent as is just and reasonable, having regard to all the circumstances.

(4) In determining for the purposes of section 577 whether income arising is from a source in the United Kingdom, no regard is to be had to arrangements the main purpose of which, or one of the main purposes of which, is to avoid the effect of the rule in subsection (1).

(5) In this section—

‘arrangements’ includes any agreement, understanding, scheme, transaction or series of transactions

(whether or not legally enforceable);

‘intellectual property’ has the same meaning as in section 579;

‘permanent establishment’—

(a) in relation to a company, is to be read (by virtue of section 1007A of ITA 2007) in accordance with Chapter 2 of Part 24 of CTA 2010, and

(b) in relation to any other person, is to be read in accordance with that Chapter but as if references in that Chapter to a company were references to that person.”

(3) The amendments made by paragraphs (1) and (2) have effect in relation to royalties or other sums paid in respect of intellectual property on or after 28 June 2016.

(4) It does not matter for the purposes of subsection (4) of section 577A of the Income Tax (Trading and Other Income) Act 2005 (as inserted by paragraph (2)) whether the arrangements referred to in that subsection are entered into before, or on or after, 28 June 2016.

(5) Where arrangements are disregarded under subsection (4) of section 577A of the Income Tax (Trading and Other Income) Act 2005 (as inserted by paragraph (2)) in relation to a payment of a royalty or other sum which—

(a) is made before 28 June 2016, but

(b) is due on or after that day,

the payment is to be regarded for the purposes of subsection (1) of that section as made on the date on which it is due.

(6) In determining the date on which a payment is due for the purposes of paragraph (5), disregard the arrangements referred to in that paragraph.

(7) Where—

(a) an intellectual property royalty payment within the meaning of section 917A of the Income Tax Act 2007 is made on or after 28 June 2016,

(b) the payment is made under arrangements (within the meaning of that section) entered into before that day,

(c) the arrangements are not DTA tax avoidance arrangements for the purposes of that section,

(d) it is reasonable to conclude that the main purpose, or one of the main purposes, of the arrangements was to obtain a tax advantage by virtue of any provisions of a foreign double taxation arrangement, and

(e) obtaining that tax advantage is contrary to the object and purpose of those provisions,

the arrangements are to be regarded as DTA tax avoidance arrangements for the purposes of section 917A of the Income Tax Act 2007 in relation to the payment.

(8) In paragraph (7)—

“foreign double taxation arrangement” means an arrangement made by two or more territories outside the United Kingdom with a view to affording relief from double taxation in relation to tax chargeable on income (with or without other tax relief);

“tax advantage” is to be construed in accordance with section 208 of the Finance Act 2013 but as if references in that section to “tax” were references to tax chargeable on income under the law of a territory outside the United Kingdom.

(9) Where—

(a) a royalty is paid on or after 28 June 2016,

(b) the right in respect of which the royalty is paid was created or assigned before that day,

(c) section 765(2) of the Income Tax (Trading and Other Income) Act 2005 does not apply in relation to the payment, and

(d) it is reasonable to conclude that the main purpose, or one of the main purposes, of any person connected with the creation or assignment of the right was to take advantage, by means of that creation or assignment, of the law of any territory giving effect to Council Directive 2003/49/EC of 3rd June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different member States, section 758 of the Income Tax (Trading and Other Income) Act 2005 does not apply in relation to the payment.

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—(Mr Gauke.)

FINANCE BILL: WAYS AND MEANS (DEDUCTION OF INCOME TAX AT SOURCE: INTELLECTUAL PROPERTY)

Resolved,

That:

(1) Part 15 of the Income Tax Act 2007 (deduction from other payments connected with intellectual property) is amended as specified in paragraphs (2) and (3).

(2) In section 906 (certain royalties etc where usual place of abode of owner is abroad), for subsections (1) to (3) substitute—

“(1) This section applies to any payment made in a tax year where condition A or condition B is met.

(2) Condition A is that—

(a) the payment is a royalty, or a payment of any other kind, for the use of, or the right to use, intellectual property (see section 907),

(b) the usual place of abode of the owner of the intellectual property is outside the United Kingdom, and

(c) the payment is charged to income tax or corporation tax.

(3) Condition B is that—

(a) the payment is a payment of sums payable periodically in respect of intellectual property,

(b) the person entitled to those sums (‘the assignor’) assigned the intellectual property to another person,

(c) the usual place of abode of the assignor is outside the United Kingdom, and (d) the payment is charged to income tax or corporation tax.”

(3) For section 907 substitute—

“907Meaning of ‘intellectual property’

(1) In section 906 ‘intellectual property’ means—

(a) copyright of literary, artistic or scientific work,

(b) any patent, trade mark, design, model, plan, or secret formula or process,

(c) any information concerning industrial, commercial or scientific experience, or

(d) public lending right in respect of a book.

(2) In this section ‘copyright of literary, artistic or scientific work’ does not include copyright in—

(a) a cinematographic film or video recording, or

(b) the sound-track of a cinematographic film or video recording, except so far as it is separately exploited.”

(4) The amendments made by paragraphs (2) and (3) have effect in respect of payments made on or after 28 June 2016.

(5) But the amendments made by paragraphs (2) and (3) do not have effect for the purposes of the definition of “intellectual property royalty payment” in section 917A of the Income Tax Act 2007 inserted by Resolution 23 of the House of 22 March 2016 (deduction of income tax at source: tax avoidance).

(6) That section has effect in relation to payments made on or after 28 June 2016 as if “intellectual property royalty payment” also included (so far as it would not otherwise do so) any payments referred to in section 906(2)(a) or (3)(a) of the Income Tax Act 2007 substituted by paragraph (2).

(7) In determining whether section 906 of the Income Tax Act 2007 applies to a payment, no regard is to be had to any arrangements the main purpose of which, or one of the main purposes of which, is to avoid the effect of the amendments made by paragraphs (2) and (3).

(8) Where arrangements are disregarded under paragraph (7) in relation to a payment which—

(a) is made before 28 June 2016, and

(b) is due on or after that day,

the payment is to be regarded for the purposes of section 906 of the Income Tax Act 2007 as made on the date on which it is due.

(9) In determining the date on which a payment is due for the purposes of paragraph (8), disregard the arrangements referred to in that paragraph.

(10) In this Resolution “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable and whether entered into before, or on or after, 28 June 2016).

And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—(Mr Gauke.)