Finance Bill 2002
Amendment 45 Page 375 Line 11
Mr Chancellor of the Exchequer
45
Page 375, line 11 [Schedule 28], leave out sub-paragraphs (4) and (5) and insert ?
?(4) If the sum of the amounts that would, on the assumptions in sub-paragraph (6)(a) and (b), have fallen to be brought into account as regards the contract in accordance with ?
(a) Chapter 2 of Part 2 of the Finance Act 1993 (c. 34), or
(b) Chapter 2 of Part 4 of the Finance Act 1994 (c. 9),for the purposes of computing corporation tax for an old period of the company is different from the sum of the amounts that would, on the assumption in sub-paragraph (6)(c), have fallen to be brought into account as regards the contract in accordance with Schedule 26 for those purposes (if that Schedule had had effect in relation to that period), sub-paragraph (5) shall apply as regards the amount of that difference.
(5) Where this sub-paragraph applies, the amount of the difference shall be brought into account ?
(a) as a credit under Schedule 26 in the company's first new period, if a greater profit or smaller loss would have been brought into account for the old period under that Schedule, or
(b) as a debit under that Schedule in the company's first new period, if a smaller profit or greater loss would have been brought into account for the old period under that Schedule.(6) The assumptions referred to in sub-paragraph (4) are that ?
(a) section 137 of the Finance Act 1993 (c. 34),
(b) sections 165 to 168A of the Finance Act 1994 (c. 9), and
(c) paragraphs 23 to 31 of Schedule 26,
would not have had effect in the case of the contract.?
EXPLANATORY NOTE
SUMMARY
1. The purpose of the amendment is to ensure that the derivative contract rules work properly where a qualifying contract (within the financial instruments rules in FA 1994) is already held at the start of the first new accounting period to which the Schedule applies.
DETAILS OF THE AMENDMENT
2 The amendment replaces the existing paragraph 3(4) and 3(5) Schedule 28 to the Bill with new sub-paragraphs (4) to (6) to ensure a transitional rule for qualifying contracts works as intended.
3. New paragraphs 3(4) to 3(6) together ensure that where a contract is one which is both a qualifying contract under the foreign exchange and financial instruments regimes (within the meaning of Chapter 2 of Part 4 of the Finance Act 1993 and Chapter 2 of Part 4 of the Finance Act 1994) and also a derivative contract under the new derivative contracts regime no amounts are left out of account or taxed twice.
4. New paragraph 3(4) requires the company to assume that the new rules in Schedule 26 applied for old periods (those beginning before 1 October 2002) and to find the difference in the amounts using Schedule 26 and the amounts actually brought into account. For the purposes of this calculation it is to be assumed that certain anti-avoidance rules, specified in new paragraph 3(6), are to treated as not applying.
5. New paragraph 3(5) says that if Schedule 26 would have brought in a bigger amount than the old rules, a credit under Schedule 26 is to be brought into account in a company's first accounting period under the new regime. Conversely, if Schedule 26 would have brought in a smaller amount than the old rules, a debit is brought into account.
BACKGROUND
6. The measures included in the Finance Bill as Schedule 28 represent the outcome of a major consultative process between the Government and representatives of, and advisers to, business. Two Technical Notes and a Consultative document have been produced, and two rounds of draft clauses have been published, most recently on 19 December 2001.