UK Laws - Legal Portal
 
Navigation
News

Income Tax Act 2007 (c. 3)

(The document as of February, 2008)

-- Back--

Page 19

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14 | P.15 | P.16 | P.17 | P.18 | P.19 | P.20 | P.21 | P.22 | P.23 | P.24 | P.25 | P.26 | P.27 | P.28 | P.29 | P.30 | P.31 | P.32 | P.33 | P.34 | P.35 | P.36 | P.37 | P.38 | P.39 | P.40 | P.41 | P.42 | P.43 | P.44 | P.45 | P.46 | P.47 | P.48 | P.49 | P.50 | P.51 | P.52 | P.53 | P.54 | P.55 | P.56 | P.57 | P.58 | P.59 | P.60 | P.61 | P.62 | P.63 | P.64 | P.65 | P.66 | P.67 | P.68 | P.69 | P.70

(b) any corresponding order under the law of a country or territory outside the United Kingdom.

332 Minor definitions etc

In this Part--

  • "associate" has the meaning given by section 253,

  • "company" includes any body corporate or unincorporated association but does not include a partnership, and is to be read in accordance with section 99 of TCGA 1992 (unit trust schemes),

  • "director" is read in accordance with section 417(5) of ICTA,

  • "group" means a parent company and its qualifying subsidiaries,

  • "group company", in relation to a group, means the parent company or any of its qualifying subsidiaries,

  • "ordinary shares" means shares forming part of a company's ordinary share capital,

  • "parent company" means a company that has one or more qualifying subsidiaries and "single company" means a company that does not,

  • "research and development" has the meaning given by section 1006, and

  • "shares" includes stock.



Part 7 Community investment tax relief

Chapter 1 Introduction

CITR

333 Meaning of "CITR"

This Part provides for community investment tax relief ("CITR"), that is, entitlement to tax reductions in respect of amounts invested by individuals in community development finance institutions.

334 Eligibility for CITR

(1) An individual ("the investor") who makes an investment ("the investment") in a body is eligible for CITR in respect of the investment if--

(a) that body is accredited as a community development finance institution under Chapter 2 at the time the investment is made,

(b) the investment is a qualifying investment (see Chapter 3), and

(c) the general conditions of Chapter 4 are met.

(2) In this Part references to "the CDFI" are to the body in which the investment is made.

335 Form and amount of CITR

(1) If the investor is eligible for CITR in respect of the investment, the investor may make a claim in respect of the investment for any one or more of the relevant tax years.

(2) If the investor makes a claim for a relevant tax year, the investor is entitled to a tax reduction for that year of 5% of the invested amount in respect of the investment for the year.

(3) For this purpose the "relevant" tax years are--

(a) the tax year in which the investment date falls, and

(b) each of the 4 subsequent tax years.

(4) The tax reduction is given effect at Step 6 of the calculation in section 23.

(5) The investor is entitled to make a claim for CITR for a relevant tax year if--

(a) the investor considers that the conditions for the CITR are for the time being met, and

(b) the investor has received a tax relief certificate (see section 348) relating to the investment from the CDFI,

but no claim may be made before the end of the tax year to which it relates.

(6) Subsection (5) is subject to the following provisions--

(a) section 354 (loans: no claim after disposal or excessive repayments or receipts of value),

(b) section 355 (securities or shares: no claim after disposal or excessive receipts of value), and

(c) section 356 (no claim after loss of accreditation by CDFI).



Miscellaneous

336 Meaning of "making an investment"

(1) For the purposes of this Part, an individual makes an investment in a body at any time when--

(a) the individual makes a loan (whether secured or unsecured) to the body, or

(b) an issue of securities of or shares in the body, for which the individual has subscribed, is made to the individual.

(2) The following provisions of this section apply for the purposes of subsection (1)(a).

(3) An individual does not make a loan to a body if--

(a) the body uses overdraft facilities provided by the individual, or

(b) the individual subscribes for or otherwise acquires securities of the body.

(4) If the loan agreement authorises the body to draw down amounts of the loan over a period of time, the loan is treated as made at the time when the first amount is drawn down.

337 Determination of "the invested amount"

(1) This section applies for the purpose of determining "the invested amount" in respect of any loan, securities or shares included in the investment.

This is subject to sections 363(2) and 369 (which adjust "the invested amount" in certain cases where value is received).

(2) In the case of a loan, the invested amount is--

(a) for the tax year in which the investment date falls, the average capital balance for the first year of the 5 year period,

(b) for the next tax year, the average capital balance for the second year of the 5 year period, and

(c) for any subsequent tax year--

(i) the average capital balance for the period of 12 months beginning with the anniversary of the investment date falling in the tax year concerned, or

(ii) if less, the average capital balance for the period of 6 months beginning 18 months after the investment date.

(3) In the case of securities or shares, the invested amount for a tax year is the amount subscribed by the investor for the securities or shares.

(4) For the purposes of this section, the average capital balance of the loan for a period is the mean of the daily balances of capital outstanding during the period.

338 Meaning of "the 5 year period" and "the investment date"

In this Part--

  • "the 5 year period" means the period of 5 years beginning with the investment date, and

  • "the investment date" means the day the investment is made.

339 Overview of other Chapters of Part

In this Part--

(a) Chapter 5 provides for the making of claims for CITR and the attribution of CITR to investments,

(b) Chapter 6 provides for CITR to be withdrawn or reduced in the circumstances mentioned in that Chapter, and

(c) Chapter 7 contains supplementary and general provision.



Chapter 2 Accredited community development finance institutions

340 Application and criteria for accreditation

(1) Applications for accreditation as a community development finance institution must be made to the Secretary of State in the form and manner specified by the Secretary of State.

(2) The Secretary of State is to accredit a body if (and only if) the Secretary of State is satisfied--

(a) that the body's principal objective is to provide (directly or indirectly)--

(i) finance, or

(ii) finance and access to business advice,

for enterprises for disadvantaged communities, and

(b) that the body meets any other criteria specified in regulations made by the Treasury.

(3) For the purposes of this section "enterprises for disadvantaged communities" include--

(a) enterprises located in disadvantaged areas, and

(b) enterprises owned or operated by, or designed to serve, members of disadvantaged groups.

(4) The criteria mentioned in paragraph (b) of subsection (2) may include criteria relating to the enterprises to which the body provides or proposes to provide finance or access to business advice.

(5) Regulations under that paragraph may make the provision authorised by that paragraph by reference to any material published by, or on behalf of, the Secretary of State (whether before or after the coming into force of this section).

(6) Regulations under that paragraph--

(a) may make different provision for different cases or circumstances or in relation to different areas, and

(b) may, in particular, make different provision in the case of bodies whose principal objective in providing finance as mentioned in subsection (2)(a) is to invest directly in enterprises that meet the conditions of subsection (7).

(7) An enterprise meets the conditions of this subsection if it uses the money invested in it for the purposes of its business and either--

(a) that business does not include the provision of finance for other enterprises, or

(b) if it does, the nature and extent of such provision meets any conditions prescribed by regulations made by the Treasury.

(8) If the Secretary of State accredits a body of a kind mentioned in subsection (6)(b), the Secretary of State must specify in the accreditation that the body is accredited as a retail community development finance institution.

341 Terms and conditions of accreditation

(1) An accreditation under this Chapter must--

(a) be made on--

(i) any terms required by regulations, and

(ii) any other terms the Secretary of State considers appropriate, and

(b) be made conditional on compliance with--

(i) any requirements imposed by regulations, and

(ii) any other requirements the Secretary of State considers appropriate.

(2) The requirements that may be imposed by virtue of subsection (1)(b) include requirements relating to the provision of information.

(3) Regulations may--

(a) make provision for appeals to the Special Commissioners against refusals to grant accreditation under this Chapter,

(b) make provision about the consequences of a failure to comply with any requirement of an accreditation, including--

(i) provision for the withdrawal of the accreditation with effect from the time of the failure or a later time, and

(ii) provision for the imposition of penalties,

(c) make provision for the making of decisions by the Secretary of State as to any matter required to be decided for the purposes of the regulations,

(d) make different provision for different cases or circumstances or in relation to different areas, and

(e) contain incidental, supplemental, consequential and transitional provision and savings.

(4) In this section "regulations" means regulations made by the Treasury.

342 Period of accreditation

(1) An accreditation has effect for a period (an "accreditation period") of 3 years beginning on the day specified in the accreditation.

(2) Subject to subsection (4), the accreditation must not specify a day which is earlier than--

(a) if the body is not accredited under this Chapter at the time the application is made, the day the accreditation is granted, and

(b) if the body is so accredited, the time the body's current accreditation expires.

(3) Subsection (4) applies if--

(a) the body is accredited at the time the application is made, and

(b) it makes a request under this subsection.

(4) The new accreditation may specify that the existing accreditation is to be treated for the purposes of this Part (including subsection (2)(b)) as expiring immediately before the grant of the new accreditation (if it would otherwise expire at a later time).

(5) This section has effect subject to section 341(3)(b) (power to provide for the withdrawal of accreditation).

343 Delegation of Secretary of State's functions

The Secretary of State may delegate any functions conferred on the Secretary of State by or under this Chapter.



Chapter 3 Qualifying investments

344 Qualifying investments: introduction

For the purposes of this Part the investment is a "qualifying investment" in the CDFI if--

(a) the investment consists of--

(i) a loan in relation to which the conditions of section 345 are met,

(ii) securities in relation to which the conditions of section 346 are met, or

(iii) shares in relation to which the conditions of section 347 are met,

(b) the investor receives from the CDFI a valid tax relief certificate in relation to the investment (see section 348), and

(c) the requirements of section 349 (no pre-arranged protection against risks) are met.

345 Conditions to be met in relation to loans

(1) Condition A of this section is that either--

(a) the CDFI receives from the investor, on the investment date, the full amount of the loan, or

(b) if the loan agreement authorises the CDFI to draw down amounts of the loan over a period of time, the end of that period is not later than 18 months after the investment date.

(2) Condition B is that the loan must not carry any present or future right to be converted into or exchanged for a loan which is, or securities, shares or other rights which are, redeemable within the 5 year period.

(3) Condition C is that the loan must not have been made on terms that allow any person to require--

(a) the repayment during the first two years of the 5 year period of any of the loan capital advanced in those two years,

(b) the repayment during the third year of that period of more than 25% of the loan capital outstanding at the end of those two years,

(c) the repayment before the end of the fourth year of that period of more than 50% of that loan capital, or

(d) the repayment before the end of that period of more than 75% of that loan capital.

(4) Subsection (3) does not apply if the CDFI is required to make the repayment as a result of its failure to meet any obligation of the loan agreement which--

(a) is imposed merely because of the commercial risks to which the investor is exposed as lender under that agreement, and

(b) is no more likely to be breached than any obligation that might reasonably have been agreed in respect of the loan in the absence of this Part.

(5) The Treasury may by order substitute any other percentage for any percentage for the time being specified in subsection (3).

(6) Any such substitution is to have effect in relation to loans made by an individual on or after the date specified in the order.

346 Conditions to be met in relation to securities

(1) Condition A of this section is that the securities must be--

(a) subscribed for wholly in cash, and

(b) fully paid for on the investment date.

(2) Condition B is that the securities must not carry--

(a) any present or future right to be redeemed within the 5 year period, or

(b) any present or future right to be converted into or exchanged for a loan which is, or securities, shares or other rights which are, redeemable within that period.

(3) Securities are not fully paid for the purposes of subsection (1)(b) if there is any undertaking to pay cash to the CDFI at a future date in connection with the acquisition of the securities.

347 Conditions to be met in relation to shares

(1) Condition A of this section is that the shares must be--

(a) subscribed for wholly in cash, and

(b) fully paid up on the investment date.

(2) Condition B is that the shares must not carry--

(a) any present or future right to be redeemed during the 5 year period, or

(b) any present or future right to be converted into or exchanged for a loan which is, or securities, shares or other rights which are, redeemable within that period.

(3) Shares are not fully paid up for the purposes of subsection (1)(b) if there is any undertaking to pay cash to the CDFI at a future date in connection with the acquisition of the shares.

348 Tax relief certificates

(1) A "tax relief certificate" means a certificate issued by the CDFI in respect of the investment which is in the form specified by the Commissioners for Her Majesty's Revenue and Customs.

(2) The CDFI must not issue tax relief certificates under this section in respect of investments made in the CDFI in an accreditation period if the total value of--

(a) those investments, and

(b) any investments to which subsection (3) applies,

will exceed the limit for that period.

(3) This subsection applies to investments which--

(a) have been made in the CDFI in the accreditation period, and

(b) in respect of which the CDFI has issued tax relief certificates under paragraph 12 of Schedule 16 to FA 2002 (which makes in relation to corporation tax provision corresponding to that made by this section).

(4) The limit for an accreditation period is--

(a) £10 million if the CDFI is accredited for the period as a retail community development finance institution (see section 340(8)), and

(b) £20 million in any other case.

(5) For the purposes of subsection (2) the value of an investment made in the CDFI is--

(a) if the investment consists of a loan--

(i) the amount of the loan, or

(ii) if the loan agreement authorises the CDFI to draw down amounts of the loan over a period of time, the amount committed under the loan agreement, and

(b) if the investment consists of securities or shares, the amount subscribed for them.

(6) The Treasury may by order substitute any other amount for any amount for the time being specified in subsection (4).

(7) Any such substitution is to have effect in relation to such accreditation periods as may be specified in the order; and those periods may, if the substitution increases the amount for the time being specified in subsection (4), include periods beginning before the order takes effect.

(8) Any tax relief certificate issued in contravention of subsection (2) is invalid.

(9) A body is liable to a penalty of not more than £3,000 if it issues a tax relief certificate which is made fraudulently or negligently.

349 No pre-arranged protection against risks

(1) Any arrangements--

(a) under which the investment is made, or

(b) made, before the investor makes the investment, in relation to or in connection with the making of the investment,

must not include excluded arrangements.

(2) For the purposes of subsection (1) "excluded arrangements"--

(a) means arrangements the main purpose or one of the main purposes of which is (by means of any insurance, indemnity or guarantee or otherwise) to provide partial or complete protection for the investor against what would otherwise be the risks attached to making the investment, but

(b) does not include any arrangements which are confined to the provision for the investor of any protection against those risks which might reasonably be expected to be provided for commercial reasons if the investment were made in the course of a business of banking.

(3) For the purposes of this section "arrangements" includes any scheme, agreement or understanding, whether or not legally enforceable.



Chapter 4 General conditions

350 No control of CDFI by investor

(1) The investor must not control the CDFI at any time during the 5 year period.

(2) In this section references to the investor include any person connected with the investor.

(3) If the CDFI is a body corporate, the question whether the investor controls the CDFI is, for the purposes of this section, determined in accordance with section 995.

This is subject to subsection (6).

(4) In any other case the investor is treated, for those purposes, as having control of the CDFI if the investor has power to secure, as a result of--

(a) the possession of voting power in the CDFI, or

(b) any powers conferred by the constitution of, or any other document regulating, the CDFI,

that the affairs of the body are conducted in accordance with the investor's wishes.

This is subject to subsections (5) and (6).

(5) If--

(a) the CDFI is a partnership, and

(b) the investor is a member of that partnership,

for the purposes of determining in accordance with this section whether the investor controls the CDFI, the other members of that partnership are not, as a result of their membership of the CDFI, treated as partners of the investor.

(6) In determining whether the investor controls the CDFI there are attributed to the investor (so far as it would not otherwise be the case)--

(a) any rights or powers that the investor is entitled to acquire at a future date or will, at a future date, become entitled to acquire, and

(b) any rights or powers which another person holds on behalf of the investor or may be required to exercise, by direction, on the investor's behalf.

351 Investor must have beneficial ownership

(1) The investor must be the sole beneficial owner of the investment when it is made.

(2) If the investment consists of a loan, the person beneficially entitled to repayment of the loan is treated as the beneficial owner of the loan for the purposes of this Part.

352 No acquisition of share in partnership

(1) If the CDFI is a partnership, the investment must not consist of or include any amount of capital contributed by the investor on becoming a member of the partnership.

(2) For this purpose the amount of capital contributed by the investor on becoming a member of the partnership includes any amount which--

(a) purports to be provided by the investor by way of loan capital, and

(b) is accounted for as partners' capital in the accounts of the partnership.

353 No tax avoidance purpose

The investment must not be made as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.



Chapter 5 Claims for and attribution of CITR

<<<< >>>>

Claims

354 Loans: no claim after disposal or excessive repayments or receipts of value

(1) If the investment consists of a loan, no claim may be made in respect of a tax year if--

(a) the investor disposes of the whole or any part of the loan before the qualifying date relating to that year,

(b) at any time after the investment is made but before that qualifying date, the amount of the capital outstanding on the loan is reduced to nil, or

(c) before that qualifying date, paragraphs (a) and (b) of section 362(1) (repayments of loan in 5 year period exceeding permitted limits) apply in relation to the investment (whether by virtue of section 363 (receipts of value treated as repayments) or otherwise).

(2) For the purposes of subsection (1)(a) any repayment of the loan is to be ignored.

(3) For the purposes of this section the qualifying date relating to a tax year is the next anniversary of the investment date to occur after the end of that year.

355 Securities or shares: no claim after disposal or excessive receipts of value

(1) If the investment consists of securities or shares, a claim made in respect of a tax year must relate only to those securities or shares held by the investor, as sole beneficial owner, continuously throughout the period--

(a) beginning when the investment is made, and

(b) ending immediately before the qualifying date relating to the tax year.

(2) No claim for CITR may be made in relation to a tax year if before the qualifying date relating to that year paragraphs (a) to (d) of section 364(1) (receipts of value in the 5 year period exceeding permitted limits) apply in relation to the investment or any part of it.

(3) For the purposes of this section the qualifying date relating to a tax year is the next anniversary of the investment date to occur after the end of that year.

356 No claim after loss of accreditation by the CDFI

(1) If the CDFI ceases to be accredited under Chapter 2 with effect from a time ("the relevant time") within the 5 year period, no claim for CITR relating to the investment may be made by the investor--

(a) for the relevant tax year, or

(b) for any later tax year.

(2) For the purposes of subsection (1) the relevant tax year is--

(a) if the relevant time falls within the first year of the 5 year period, the tax year in which the investment date fell, and

(b) in any other case, the year in which fell the last anniversary of that date before the relevant time (or, if the relevant time itself falls on an anniversary of the investment date, the year in which that anniversary falls).



Attribution

357 Attribution: general

(1) In this Part references to the CITR attributable to any loan, securities or shares in respect of a tax year are read as references to the reduction which--

(a) is made in the investor's liability to income tax for that year, and

(b) is attributed to that loan, or those securities or shares, in accordance with this section and section 358.

This is subject to the provisions of Chapter 6 for the withdrawal or reduction of CITR.

(2) Subsections (3) and (4) apply if the investor's liability to income tax is reduced for a tax year under this Part.

(3) If the reduction is obtained because of one loan, or securities or shares included in one issue, the amount of the tax reduction is attributed to that loan or those securities or shares.

(4) If the reduction is obtained because of a loan or loans, securities or shares included in two or more investments, the reduction--

(a) is apportioned between the loan or loans, securities or shares in each of those investments in the same proportions as the invested amounts in respect of the loan or loans, securities or shares for the year, and

(b) is attributed to that loan or those loans, securities or shares accordingly.

(5) If under this section an amount of any reduction of income tax is attributed to any securities in the same issue, a proportionate part of that amount is attributed to each security.

(6) If under this section an amount of any reduction of income tax is attributed to any shares in the same issue, a proportionate part of that amount is attributed to each of those shares.

(7) If CITR attributable to a loan or any securities or shares falls to be withdrawn under Chapter 6, the CITR attributable to that loan or each of those securities or shares is reduced to nil.

(8) If CITR attributable to any securities or shares falls to be reduced under that Chapter by any amount, the CITR attributable to each of those securities or shares is reduced by a proportionate part of that amount.

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14 | P.15 | P.16 | P.17 | P.18 | P.19 | P.20 | P.21 | P.22 | P.23 | P.24 | P.25 | P.26 | P.27 | P.28 | P.29 | P.30 | P.31 | P.32 | P.33 | P.34 | P.35 | P.36 | P.37 | P.38 | P.39 | P.40 | P.41 | P.42 | P.43 | P.44 | P.45 | P.46 | P.47 | P.48 | P.49 | P.50 | P.51 | P.52 | P.53 | P.54 | P.55 | P.56 | P.57 | P.58 | P.59 | P.60 | P.61 | P.62 | P.63 | P.64 | P.65 | P.66 | P.67 | P.68 | P.69 | P.70

-- Back--

<<<< >>>>

Stat




Search
Popular article
Advert