Finance Act, 2002

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“Relief for certain charges on income on a value basis.

243B.—(1) In this section—

‘charges on income paid for the purposes of the sale of goods’ has the same meaning as in section 454;

‘relevant corporation tax’, in relation to an accounting period of a company, means the corporation tax which, apart from this section and sections 239, 241, 396B, 420B, 440 and 441, would be chargeable on the company for the accounting period;

‘relevant trading charges on income’ has the same meaning as in section 243A.

(2) Where a company pays relevant trading charges on income in an accounting period and the amount so paid exceeds an amount equal to the aggregate of the amounts allowed as deductions against—

(a) the income of the company in accordance with section 243A, and

(b) the income from the sale of goods in accordance with section 454,

of the company for the accounting period, the company may claim relief under this section for the accounting period in respect of the excess.

(3) Where for any accounting period a company claims relief under this section in respect of the excess, the relevant corporation tax of the company for the accounting period shall be reduced—

(a) in so far as the excess consists of charges on income paid for the purpose of the sale of goods (within the meaning of section 454), by an amount equal to 10 per cent of those charges on income paid for the purpose of the sale of goods, and

(b) in so far as the excess consists of charges on income (in this section referred to as ‘other relevant trading charges on income’) which are not charges on income paid for the purposes of the sale of goods (within the meaning of section 454), by an amount determined by the formula—

C ×

R

where—

C is the amount of the other relevant trading charges on income, and

R is the rate per cent of corporation tax which, by virtue of section 21, applies in relation to the accounting period.

(4)  (a) Where a company makes a claim for relief under this section in respect of any relevant trading charges on income paid in an accounting period, an amount (which shall not exceed the amount of the excess in respect of which a claim under this section may be made), determined in accordance with paragraph (b), shall be treated for the purposes of the Tax Acts as relieved under this section.

(b) Subject to paragraph (c), the amount determined in accordance with this paragraph in relation to an accounting period is an amount equal to the aggregate of the following amounts:

(i) where relief is given under paragraph (a) of subsection (3) for the accounting period, an amount equal to 10 times the amount by which the relevant corporation tax for the accounting period is reduced by virtue of that paragraph, and

(ii) where relief is given under paragraph (b) of subsection (3) for the accounting period, an amount determined by the formula—

T ×

100

where—

T is the amount by which the relevant corporation tax for the accounting period is reduced by virtue of that paragraph, and

R is the rate per cent of corporation tax which, by virtue of section 21, applies in relation to the accounting period.”,

“Relief for certain trading losses on a value basis.

396B.—(1) In this section—

‘relevant corporation tax’, in relation to an accounting period of a company, means the corporation tax which, apart from this section and sections 239, 241, 420B, 440 and 441, would be chargeable on the company for the accounting period;

‘relevant trading loss’ has the same meaning as in section 396A but does not include any amount which is the relevant amount of the loss for the purposes of section 403(4).

(2) Where in any accounting period a company carrying on a trade incurs a relevant trading loss and the amount of the loss exceeds an amount equal to the aggregate of the amounts set off in respect of that loss for the purposes of corporation tax against—

(a) income of the company of that accounting period and any preceding accounting period in accordance with section 396A(3), and

(b) income of the company from the sale of goods of that accounting period and any preceding accounting period in accordance with section 455(3),

the company may claim relief under this section in respect of the excess.

(3) Where for any accounting period a company claims relief under this section in respect of the excess, the relevant corporation tax of the company for that accounting period and, if the company was then carrying on the trade and the claim so requires, for preceding accounting periods ending within the time specified in subsection (4), shall be reduced—

(a) in so far as the excess consists of a loss from the sale of goods (within the meaning of section 455), by an amount equal to 10 per cent of the loss from the sale of goods, and

(b) in so far as the excess consists of a loss (in this section referred to as the ‘remainder of the relevant trading loss’) which is not a loss from the sale of goods (within the meaning of section 455), by an amount determined by the formula—

L ×

R

where—

L is the amount of the remainder of the relevant trading loss, and

R is the rate per cent of corporation tax which, by virtue of section 21, applies in relation to the accounting period.

(4) For the purposes of subsection (3), the time referred to in that subsection shall be the time immediately preceding the accounting period first mentioned in subsection (3) equal in length to that accounting period; but the amount of the reduction which may be made under subsection (3) in the relevant corporation tax for an accounting period falling partly before that time shall not exceed such part of that relevant corporation tax as bears to the whole of that relevant corporation tax the same proportion as the part of the accounting period falling within that time bears to the whole of that accounting period.

(5)  (a) Where a company makes a claim for relief for any accounting period under this section in respect of any relevant trading loss incurred in a trade in an accounting period, an amount (which shall not exceed the amount of the excess in respect of which a claim under this section may be made), determined in accordance with paragraph (b), shall be treated for the purposes of the Tax Acts as an amount of loss relieved against profits of that accounting period.

(b) Subject to paragraph (c), the amount determined in accordance with this paragraph in relation to an accounting period is an amount equal to the aggregate of the following amounts:

(i) where relief is given under paragraph (a) of subsection (3) for the accounting period, an amount equal to 10 times the amount by which the relevant corporation tax payable for the accounting period is reduced by virtue of that paragraph, and

(ii) where relief is given under paragraph (b) of subsection (3) for the accounting period, an amount determined by the formula—

T ×

100

where—

T is the amount by which the relevant corporation tax payable is reduced by virtue of subsection (3)(b), and

R is the rate per cent of corporation tax which, by virtue of section 21, applies in relation to the accounting period.

(c) (i) In this paragraph ‘relevant amount’ means an amount (not being an amount incurred by a company for the purposes of a trade carried on by it) of charges on income, expenses of management or other amount (not being an allowance to which effect is given under section 308(4)) which is deductible from, or may be treated as reducing, profits of more than one description.

(ii) For the purposes of paragraph (b), where as respects an accounting period of a company a relevant amount is deductible from, or may be treated as reducing, profits of more than one description, the amount by which corporation tax is reduced by virtue of subsection (3) shall be deemed to be the amount by which it would have been reduced if no relevant amount were so deductible or so treated.”,

“Group relief: Relief for certain losses on a value basis.

420B.—(1) In this section—

‘relevant corporation tax’, in relation to an accounting period of a company means the corporation tax which, apart from this section and sections 239, 241, 440 and 441, would be chargeable on the company for the accounting period;

‘relevant trading charges on income’ has the same meaning as in section 243A;

‘relevant trading loss’ has the same meaning as in section 396A but does not include any amount which is the relevant amount of the loss for the purposes of section 403(4).

(2) Where in any accounting period the surrendering company has incurred a relevant trading loss, computed as for the purposes of section 396(2), or an excess of relevant trading charges on income, in carrying on a trade in respect of which the company is within the charge to corporation tax, and the amount of the loss or excess is greater than an amount equal to the aggregate of the amounts set off in respect of that loss or excess for the purposes of corporation tax against—

(a) the income of the company in accordance with section 243A, 396A or 420A, and

(b) the income from the sale of goods in accordance with section 455 or 456,

of the claimant company for its corresponding accounting period, the claimant company may claim relief under this section for that corresponding accounting period in respect of the amount (in this section referred to as the ‘relievable loss’) by which the loss or excess is greater than that aggregate.

(3) Where for any accounting period a company claims relief under this section in respect of a relievable loss, the relevant corporation tax of the company for the accounting period shall be reduced—

(a) in so far as the relievable loss consists of a loss from the sale of goods (within the meaning of section 455) or charges on income paid for the sale of goods (within the meaning of section 454), by an amount equal to 10 per cent of that loss from the sale of goods or those charges on income from the sale of goods, and

(b) in so far as the relievable loss consists of a loss or charges on income (in this section referred to as the ‘remainder of the loss or charges’) which is not a loss or charge on income of the type mentioned in paragraph (a), by an amount determined by the formula—

L ×

R

where—

L is an amount equal to the remainder of the loss or charges, and

R is the rate per cent specified in section 21 in relation to the accounting period.

(4)  (a) Where for any accounting period a company claims relief under this section in respect of any relevant trading loss or excess of relevant trading charges on income, the surrendering company shall be treated as having surrendered, and the claimant company shall be treated as having claimed relief for, trading losses and charges on income of an amount determined in accordance with paragraph (b).

(b) The amount determined in accordance with this paragraph is an amount equal to the aggregate of the following amounts:

(i) where relief is given under paragraph (a) of subsection (3) for the accounting period, an amount equal to 10 times the amount by which the relevant corporation tax payable for the accounting period is reduced by virtue of that paragraph, and

(ii) where relief is given under paragraph (b) of subsection (3) for the accounting period, an amount determined by the formula—

T ×

100

where—

T is the amount by which the relevant corporation tax payable for the accounting period is reduced by virtue of subsection (3)(b), and

R is the rate per cent of corporation tax which, by virtue of section 21, applies in relation to the accounting period.”,