Finance Act 1995 (c. 4)

(The document as of February, 2008)

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5 (1) A person shall not by virtue of this Schedule be guilty of a criminal offence except where he committed the offence himself or consented to, or connived in, its commission.

(2) An independent agent of the non-resident shall not by virtue of this Schedule be liable, in respect of any act or omission, to any civil penalty or surcharge if--

(a) the act or omission is neither an act or omission of the agent himself nor an act or omission to which he consented or in which he connived, and

(b) he is able to show that he will not, after being indemnified for his other liabilities by virtue of this Schedule, be able to recover the amount of the penalty or surcharge out of any such sums as are mentioned in paragraph 6 below.

Indemnities

6 An independent agent of the non-resident shall be entitled--

(a) to be indemnified in respect of the amount of any liability of the non-resident which is discharged by that agent by virtue of paragraph 2 above; and

(b) to retain, out of any sums otherwise due from that agent to the non-resident, or received by that agent on behalf of the non-resident, amounts sufficient for meeting any liabilities by virtue of that paragraph which have been discharged by the agent, or to which he is subject.

Meaning of

7 (1) In this Schedule "independent agent", in relation to the non-resident, means any person who is the non-resident's UK representative in respect of any agency from the non-resident in which he was acting on the non-resident's behalf in an independent capacity.

(2) For the purposes of this paragraph a person shall not be regarded as acting in an independent capacity on behalf of the non-resident unless, having regard to its legal, financial and commercial characteristics, the relationship between them is a relationship between persons carrying on independent businesses that deal with each other at arm's length.

Section 130.

SCHEDULE 24 Exchange gains and losses

Part I Amendments of Finance Act 1993

Introduction

1 Chapter II of Part II of the [1993 c. 34.] Finance Act 1993 (exchange gains and losses) shall be deemed to have been enacted with the modifications set out in paragraphs 2 to 6 below.

Trading gains and losses

2 In section 128 (trading gains and losses) the following subsections shall be inserted after subsection (10)--

" (10A) In a case where--

(a) an exchange gain of a trade or part of a trade or an exchange loss of a trade or part of a trade would (apart from this subsection) accrue to a company as regards a liability consisting of a duty to settle under a qualifying debt, and

(b) a charge is allowed to the company in respect of the debt under section 338 of the Taxes Act 1988 (allowance of charges on income and capital),

the exchange gain or loss shall be treated as not accruing.

(10B) A charge shall be treated as allowed as mentioned in subsection (10A) above if--

(a) it would be so allowed if the company's total profits were sufficient,

(b) it would be so allowed if the duty mentioned in that subsection were settled, and if in settling it payment were made out of the company's profits brought into charge to corporation tax, or

Non-trading gains and losses

3 (1) Section 129 (non-trading gains and losses) shall be amended as follows.

(2) In subsection (8) (no non-trading exchange gain or loss where a charge is allowed) in paragraph (b) the words "or the circumstances are such that a charge would be so allowed if the duty were settled" shall be omitted.

(3) The following subsection shall be inserted after subsection (8)--

" (8A) A charge shall be treated as allowed as mentioned in subsection (8) above if--

(a) it would be so allowed if the company's total profits were sufficient,

(b) it would be so allowed if the duty mentioned in that subsection were settled, and if in settling it payment were made out of the company's profits brought into charge to corporation tax, or

Assets and liabilities

4 (1) Section 153 (qualifying assets and liabilities) shall be amended as follows.

(2) In subsection (4) (certain convertible securities excluded from qualifying assets) for the words from "which" to "shares" there shall be substituted "and did not represent a normal commercial loan when it was created".

(3) In subsection (6) (certain convertible securities excluded from qualifying liabilities) for the words from "which" to "shares" there shall be substituted "and did not represent a normal commercial loan when it was created".

(4) The following subsection shall be inserted after subsection (11)--

" (11A) In subsections (4) and (6) above "normal commercial loan" has the meaning which would be given by sub-paragraph (5) of paragraph 1 of Schedule 18 to the Taxes Act 1988 if--

(a) for paragraph (a)(i) to (iii) of that sub-paragraph there were substituted the words "corporate bonds (within the meaning of section 117 of the Taxation of Chargeable Gains Act 1992)", and

(b) paragraphs (b) and (c) of that sub-paragraph were omitted. "

Chargeable gains

5 In Schedule 17 (chargeable gains) in paragraph 4 (no chargeable gain or allowable loss on disposal of certain debts other than debts on securities) the following sub-paragraph shall be inserted after sub-paragraph (2)--

" (2A) In sub-paragraph (1)(e) above "security" includes a debenture that is deemed to be a security for the purposes of section 251 of the 1992 Act by virtue of subsection (6) of that section (debentures issued on reorganisation etc.) " .

6 In Schedule 17, the following paragraph shall be substituted for paragraph 5--

" 5 (1) This paragraph applies where--

(a) a right to settlement under a debt on a security is a qualifying asset,

(b) there occurs in relation to the security an event which is a disposal of it for the purposes of the 1992 Act by a qualifying company or which would be such a disposal but for section 127 of that Act (reorganisations),

(d) immediately before the occurrence of the event the company did not hold the right in exempt circumstances.

(2) In applying section 117 of that Act (qualifying corporate bonds) in relation to the event mentioned in sub-paragraph (1) above or to a transaction (if any) falling within sub-paragraph (4) below, that section shall be construed as if subsection (1)(b) (corporate bond must be in sterling) were omitted.

(3) Where the settlement currency of the debt is a currency other than sterling, then, in applying section 117 of the 1992 Act in relation to the event mentioned in sub-paragraph (1) above or to a transaction (if any) falling within sub-paragraph (4) below--

(a) the definition of normal commercial loan for the purposes of section 117(1)(a) shall have effect, and be treated as always having had effect, as if paragraphs (b) and (c) of paragraph 1(5) of Schedule 18 to the Taxes Act 1988 had always been omitted;

(b) section 117 shall be construed as if subsection (10) (securities issued within group) were omitted.

(4) A transaction falls within this sub-paragraph if--

(a) it is a transaction in relation to which sections 127 to 130 of the 1992 Act apply by virtue of any provision of Chapter II of Part IV of that Act, or would apply apart from section 116 of that Act,

(b) it is a transaction under which the qualifying company becomes entitled to the right,

(d) the company holds the right at all times following the time when it becomes entitled to it and preceding the event mentioned in sub-paragraph (1) above.

(5) Paragraph 3 above applies for the purposes of this paragraph as if references to currency were references to a right. "

Part II Amendments of other provisions

Introduction

7 Paragraphs 8 to 12 below shall be deemed to have come into force on the day appointed under section 165(7)(b) of the [1993 c. 34.] Finance Act 1993 (which relates to exchange gains and losses).

Interest on overdue tax

8 In section 87A of the Taxes Management Act 1970 (interest on overdue tax) in subsection (4A) (claims under section 131(5) or (6) of the [1970 c. 9.] Finance Act 1993)--

(a) for paragraph (c) there shall be substituted--

" (c) if the claim had not been made, there would be an amount or, as the case may be, an additional amount of corporation tax for the earlier period which would carry interest in accordance with this section, " , and

(b) for the words from "then" to the end there shall be substituted " then, for the purposes of the determination at any time of whether any interest is payable under this section or of the amount of interest so payable, the amount mentioned in paragraph (c) above shall be taken to be an amount of unpaid corporation tax for the earlier period except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable as mentioned in subsection (1) above. "

9 (1) In subsection (4) of that section (amounts of surplus advance corporation tax) for the words "subsection (7)" there shall be substituted "subsections (4B) and (7)".

(2) After subsection (4A) of that section there shall be inserted--

" (4B) Where, in a case falling within subsection (4A)(a) and (b) above--

(a) there is in the earlier period, as a result of the claim under section 131(5) or (6) of the [1993 c. 34.] Finance Act 1993, an amount of surplus advance corporation tax, as defined in section 239(3) of the principal Act, and

(b) pursuant to a claim under the said section 239(3), the whole or any part of that amount is to be treated for the purposes of section 239 of the principal Act as discharging liability for an amount of corporation tax for an accounting period before the earlier period,

the claim under the said section 239(3) shall be disregarded for the purposes of subsection (4A) above but subsection (4) above shall have effect in relation to that claim as if the reference in the words after paragraph (c) to the later period within the meaning of subsection (4) above were a reference to the period which, in relation to the claim under section 131(5) or (6) of the [1993 c. 34.] Finance Act 1993, would be the later period for the purposes of subsection (4A) above. "

10 In section 91 of the [1970 c. 9.] Taxes Management Act 1970 (effect on interest of reliefs) in subsection (1B) (provisions to which section 91(1A) is subject) after the words "section 87A(4)" there shall be inserted ", (4A), (4B),".

Interest on tax overpaid

11 In section 826 of the Taxes Act 1988 (interest on tax overpaid) in subsection (7C) (claims under section 131(5) or (6) of the [1993 c. 34.] Finance Act 1993)--

(a) at the end of paragraph (c) there shall be inserted "or of income tax in respect of a payment received by the company in that accounting period", and

(b) for the words from "repayment of corporation tax" to "resulting from" there shall be substituted "repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of".

12 (1) In subsection (7) of that section (amounts of surplus advance corporation tax) for the words "subsection (7AA)" there shall be substituted "subsections (7AA) and (7CA)".

(2) After subsection (7C) of that section there shall be inserted--

" (7CA) Where, in a case falling within subsection (7C)(a) and (b) above--

(b) pursuant to a claim under section 239(3), the whole or any part of that amount is to be treated for the purposes of section 239 as discharging liability for an amount of corporation tax for an accounting period before the earlier period,

then subsection (7) above shall have effect in relation to the claim under section 239(3) as if the reference in the words after paragraph (c) to the later period within the meaning of subsection (7) above were a reference to the period which, in relation to the claim under section 131(5) or (6) of the [1993 c. 34.] Finance Act 1993, would be the later period for the purposes of subsection (7C) above. "

(3) In section 102 of the Finance Act 1989 (surrender of company tax refund etc. within group) in subsection (4A) (cases where any of subsections (7) to (7C) of section 826 of the [1989 c. 26.] Taxes Act 1988 applies) for "(7C)" there shall be substituted "(7CA)".

(4) Subject to sub-paragraph (5) below, section 826(7CA) of the Taxes Act 1988 (inserted by sub-paragraph (2) above) shall apply in relation to any claim under section 131(5) or (6) of the [1993 c. 34.] Finance Act 1993 as a result of which there is an amount of surplus advance corporation tax in an accounting period ending after 30th September 1993.

(5) Where there is a claim in relation to which section 826(7CA) would, but for this sub-paragraph, apply, and--

(a) the case is one falling within section 826(7CA)(a) and (b), but

(b) the period mentioned in section 826(7CA)(b) ended on or before 30th September 1993,

section 826(7CA) shall not apply but section 825(4)(a) of the Taxes Act 1988 shall have effect as if the reference to the accounting period in the case of which the amount of surplus advance corporation tax arose were a reference to the period which, in relation to the claim, would be the later period for the purposes of section 826(7C) of that Act.

Section 133.

SCHEDULE 25 Controlled Foreign Companies

Introduction

1 In this Schedule--

(a) paragraph 2 contains an amendment designed to secure that in certain cases the chargeable profits of a company resident outside the United Kingdom are to be computed and expressed in the currency used in its accounts;

(b) the other paragraphs contain amendments connected with that amendment.

The principal amendment

2 The following section shall be inserted after section 747 of the Taxes Act 1988--

" 747A Special rule for computing chargeable profits.

(1) Subsection (2) below applies where for the purposes of this Chapter a company's chargeable profits fall to be determined for--

(a) the first relevant accounting period of the company, or

(b) any subsequent accounting period of the company.

(2) Notwithstanding any other rule (whether statutory or otherwise) the chargeable profits for any such period shall be computed and expressed in the currency used in the accounts of the company for its first relevant accounting period.

(3) Subsection (4) below applies where for the purposes of this Chapter a company's chargeable profits fall to be determined for any accounting period of the company which--

(a) begins on or after the appointed day, and

(b) falls before the company's first relevant accounting period.

(4) Notwithstanding any other rule (whether statutory or otherwise) the chargeable profits for any such period shall be computed and expressed in the currency used in the accounts of the company for the accounting period concerned.

(5) For the purposes of this section the first relevant accounting period of the company shall be found in accordance with subsections (6) to (8) below.

(6) Where a direction has been given under section 747 as regards an accounting period of the company which begins before its commencement day, its first relevant accounting period is its accounting period which begins on its commencement day.

(7) Where the company is a trading company and subsection (6) above does not apply, its first relevant accounting period is its first accounting period which begins on or after its commencement day and as regards which a direction has been given under section 747.

(8) Where the company is not a trading company and subsection (6) above does not apply, its first relevant accounting period is its first accounting period which begins on or after its commencement day and as regards which--

(a) a direction has been given under section 747, or

(b) it can reasonably be assumed that a direction would have been given under section 747 but for the fact that it pursued, within the meaning of Part I of Schedule 25, an acceptable distribution policy.

(9) For the purposes of this section--

(a) a company's commencement day is the first day of its first accounting period to begin after the day preceding the appointed day;

(b) the appointed day is such day as may be appointed under section 165(7)(b) of the [1993 c. 34.] Finance Act 1993 (which relates to exchange gains and losses).

(10) References in this section to the accounts of a company--

(a) are to the accounts which the company is required by the law of its home State to keep, or

(b) if the company is not required by the law of its home State to keep accounts, are to the accounts of the company which most closely correspond to the individual accounts which companies formed and registered under the [1985 c. 6.] Companies Act 1985 are required by that Act to keep;

and for the purposes of this subsection the home State of a company is the country or territory under whose law the company is incorporated or formed. "

Connected amendments

3 In section 747 of the Taxes Act 1988 (imputation of chargeable profits and creditable tax of controlled foreign companies) the following subsections shall be inserted after subsection (4)--

" (4A) Where by virtue of section 747A a company's chargeable profits for an accounting period are to be computed and expressed in a currency other than sterling, for the purposes of subsection (4)(a) above the apportioned amount shall be taken to be the sterling equivalent of the apportioned amount found in the currency other than sterling.

(4B) The translation required by subsection (4A) above shall be made by reference to the London closing exchange rate for the two currencies concerned for the last day of the accounting period concerned. "

4 In section 748 of the Taxes Act 1988 (limitations on direction-making power) the following subsections shall be inserted after subsection (3)--

" (4) Where by virtue of section 747A a company's chargeable profits for an accounting period are to be computed and expressed in a currency other than sterling, for the purposes of subsection (1)(d) above its chargeable profits for the period shall be taken to be the sterling equivalent of its chargeable profits found in the currency other than sterling.

(5) The translation required by subsection (4) above shall be made by reference to the London closing exchange rate for the two currencies concerned for the last day of the accounting period concerned. "

5 In section 750 of the Taxes Act 1988 (territories with a lower level of taxation) the following subsections shall be inserted after subsection (4)--

" (5) Subsections (6) and (7) below apply where by virtue of section 747A a company's chargeable profits for an accounting period are to be computed and expressed in a currency other than sterling.

(6) For the purposes of subsection (2) above the company's chargeable profits for the period shall be taken to be the sterling equivalent of its chargeable profits found in the currency other than sterling.

(7) In applying section 13 for the purposes of making the determination mentioned in subsection (3) above, any reference in section 13 to the amount of the company's profits for the period on which corporation tax falls finally to be borne shall be construed as a reference to the sterling sum found under subsection (6) above.

(8) Any translation required by subsection (6) above shall be made by reference to the London closing exchange rate for the two currencies concerned for the last day of the accounting period concerned. "

6 (1) Schedule 24 to the Taxes Act 1988 (assumptions for calculating chargeable profits etc.) shall be amended as mentioned in sub-paragraphs (2) to (5) below; and--

(a) the amendment made by sub-paragraph (2) below shall be deemed always to have had effect, and

(b) paragraph 1(4) of Schedule 16 to the [1984 c. 43.] Finance Act 1984 shall be deemed always to have had effect subject to the same amendment.

(2) In paragraph 1 (general assumptions for calculating chargeable profits etc.) in sub-paragraph (4) (assumption for certain purposes that a direction has been given) before the words "it shall be assumed" there shall be inserted "in determining the chargeable profits of the company for the accounting period mentioned in paragraph (a) above".

(3) Paragraph 4A (computation of basic profits or losses of a trade) shall be deemed never to have been inserted.

(4) The following paragraph shall be inserted after paragraph 11--

" 11A (1) This paragraph applies where by virtue of section 747A the company's chargeable profits for an accounting period (the period in question) are to be computed and expressed in a currency (the relevant foreign currency) other than sterling.

(2) For the purposes of making in relation to the period in question any calculation which--

(a) falls to be made under the enactments relating to capital allowances, and

(b) takes account of amounts arrived at under those enactments in relation to accounting periods falling before the company's commencement day (within the meaning given by section 747A(9)),

it shall be assumed that any such amount is the equivalent, expressed in the relevant foreign currency, of the amount expressed in sterling.

(3) For the purposes of the application in relation to the period in question of paragraph 11(1)(c) above, it shall be assumed that the company's chargeable profits for the period are the sterling equivalent of its chargeable profits found in the relevant foreign currency.

(4) For the purposes of the application of section 34, 35 or 96 of the 1990 Act (motor cars and dwelling-houses) in relation to expenditure incurred in the period in question, it shall be assumed that any sterling sum mentioned in any of those sections is the equivalent, expressed in the relevant foreign currency, of the amount expressed in sterling.

(5) The translation required by sub-paragraph (2) above shall be made by reference to the London closing exchange rate for the two currencies concerned for the first day of the period in question.

(6) The translation required by sub-paragraph (3) above shall be made by reference to the London closing exchange rate for the two currencies concerned for the last day of the period in question.

(7) The translation required by sub-paragraph (4) above shall be made by reference to the London closing exchange rate for the two currencies concerned for the day on which the expenditure concerned was incurred. "

(5) The following shall be inserted after paragraph 12--

" Exchange gains and losses

13 Paragraphs 14 to 19 below apply for the purposes of the application of Chapter II of Part II of the [1993 c. 34.] Finance Act 1993.

14 (1) This paragraph applies where--

(a) by virtue of section 747A the company's chargeable profits for an accounting period are to be computed and expressed in a particular currency (the relevant currency),

(b) in an accrual period an asset or contract was held, or a liability was owed, by the company, and

(2) It shall be assumed that--

(a) the local currency for the purposes of sections 125 to 127 of the [1993 c. 34.] Finance Act 1993 is the relevant currency, and

(b) section 149 of that Act (local currency to be used) does not apply as regards the accrual period concerned.

15 Where the accounting period mentioned in section 139(1) of the [1993 c. 34.] Finance Act 1993 is one for which, by virtue of section 747A, the company's chargeable profits are to be computed and expressed in a currency other than sterling--

(a) section 142(1) to (4) of that Act shall be assumed not to apply as regards that period;

(b) section 142(5) and (6) of that Act shall be assumed not to apply as regards the next accounting period of the company.

16 (1) This paragraph applies where the last relevant accounting period for the purposes of section 146 of the [1993 c. 34.] Finance Act 1993 is one for which by virtue of section 747A the company's chargeable profits are to be computed and expressed in a particular currency (the relevant currency).

(2) Subsections (10), (11) and (14) of section 146 of the [1993 c. 34.] Finance Act 1993 shall be assumed not to apply.

17 Where by virtue of section 747A the company's chargeable profits for an accounting period are to be computed and expressed in a particular currency, the references in section 148(9) of the [1993 c. 34.] Finance Act 1993 to sterling shall be assumed to be references to that particular currency.

18 (1) This paragraph applies where the accounting period mentioned in paragraph (b) of subsection (11) of section 153 of the [1993 c. 34.] Finance Act 1993 is one for which, by virtue of section 747A, the company's chargeable profits are to be computed and expressed in a particular currency (the relevant currency).

(2) That subsection shall have effect as if the reference to the local currency of the trade for the accounting period were a reference to the relevant currency.

19 (1) This paragraph applies where--

(a) Chapter II of Part II of the [1993 c. 34.] Finance Act 1993 falls to be applied as regards an accounting period of the company;

(b) under that Chapter, an exchange gain or an exchange loss accrued to the company for an accrual period constituting or falling within an earlier accounting period of the company, and

(2) It shall be assumed, for the purposes of applying Chapter II of Part II of the [1993 c. 34.] Finance Act 1993 as respects the accounting period mentioned in sub-paragraph (1)(a) above, that the exchange gain or loss mentioned in sub-paragraph (1)(b) above never existed.

(3) In sub-paragraph (1) above--

(a) references to an exchange gain are to an exchange gain of a trade or an exchange gain of part of a trade or a non-trading exchange gain;

(b) references to an exchange loss are to an exchange loss of a trade or an exchange loss of part of a trade or a non-trading exchange loss;

(c) the reference in sub-paragraph (1)(b) to an exchange gain or an exchange loss accruing is to the gain or loss accruing before the application of any of sections 131, 136, 137 and 140 of the [1993 c. 34.] Finance Act 1993 in relation to the accounting period mentioned in sub-paragraph (1)(b);

(d) references to the first relevant accounting period of the company shall be construed in accordance with section 747A. "

7 The following section shall be inserted after section 168 of the [1993 c. 34.] Finance Act 1993--

" 168A Application of Chapter to certain companies becoming resident in the United Kingdom.

(1) In a case where--

(a) by virtue of section 751 of the Taxes Act 1988, an exchange gain or an exchange loss accrues to a company for an accrual period constituting or falling within an accounting period during which the company is resident outside the United Kingdom, and

(b) the company subsequently becomes resident in the United Kingdom,

the company shall be treated, for the purposes of applying this Chapter to accounting periods beginning on or after the date when the company becomes resident in the United Kingdom, as if the exchange gain or loss mentioned in paragraph (a) above never existed.

(2) In this section--

(a) references to an exchange gain are to an exchange gain of a trade or an exchange gain of part of a trade or a non-trading exchange gain;

(b) references to an exchange loss are to an exchange loss of a trade or an exchange loss of part of a trade or a non-trading exchange loss;

(c) the reference in paragraph (a) of subsection (1) above to an exchange gain or an exchange loss accruing is to the gain or loss accruing before the application of any of sections 131, 136, 137 and 140 above in relation to the accounting period mentioned in that paragraph. "

Section 135.

SCHEDULE 26 Change in ownership of investment company: deductions

Introductory

1 The Taxes Act 1988 shall have effect subject to the amendments in paragraphs 2 to 4 below.

Main provisions

2 After section 768A there shall be inserted the following sections--

" 768B Change in ownership of investment company: deductions generally.

(1) This section applies where there is a change in the ownership of an investment company and--

(a) after the change there is a significant increase in the amount of the company's capital; or

(b) within the period of six years beginning three years before the change there is a major change in the nature or conduct of the business carried on by the company; or

(c) the change in the ownership occurs at any time after the scale of the activities in the business carried on by the company has become small or negligible and before any considerable revival of the business.

(2) For the purposes of subsection (1)(a) above, whether there is a significant increase in the amount of a company's capital after a change in the ownership of the company shall be determined in accordance with the provisions of Part I of Schedule 28A.

(3) In paragraph (b) of subsection (1) above "major change in the nature or conduct of a business" includes a major change in the nature of the investments held by the company, even if the change is the result of a gradual process which began before the period of six years mentioned in that paragraph.

(4) For the purposes of this section--

(a) the accounting period of the company in which the change in the ownership occurs shall be divided into two parts, the first the part ending with the change, the second the part after;

(b) those parts shall be treated as two separate accounting periods; and

(5) In Schedule 28A--

(a) Part II shall have effect for identifying the amounts in issue for the accounting period being divided; and

(b) Part III shall have effect for the purpose of apportioning those amounts to the parts of that accounting period.

(6) Any sums which--

(a) are disbursed or treated as disbursed as expenses of management in the accounting period being divided, and

(b) under Part III of Schedule 28A are apportioned to either part of that period,

shall be treated for the purposes of section 75 as disbursed in that part.

(7) Any charges which under Part III of Schedule 28A are apportioned to either part of the accounting period being divided shall be treated for the purposes of sections 338 and 75 as paid in that part.

(8) Any allowances which under Part III of Schedule 28A are apportioned to either part of the accounting period being divided shall be treated for the purposes of section 28 of the 1990 Act and section 75(4) as falling to be made in that part.

(9) In computing the total profits of the company for an accounting period ending after the change in the ownership, no deduction shall be made under section 75 by reference to--

(a) sums disbursed or allowances falling to be made for an accounting period beginning before the change; or

(b) charges paid in such an accounting period.

(10) To the extent that a payment of interest made by the company represents excess overdue interest, the payment shall not be deductible under section 338(1) from the total profits for the accounting period in which it is made.

(11) Whether a payment of interest made by the company represents excess overdue interest, and if so to what extent, shall be determined in accordance with the provisions of Part IV of Schedule 28A.

(12) Subject to the modification in subsection (13) below, subsections (6) to (9) of section 768 shall apply for the purposes of this section as they apply for the purposes of that section.

(13) The modification is that in subsection (6) of section 768 for the words "relief in respect of a company's losses has been restricted" there shall be substituted "deductions from a company's total profits have been restricted".

(14) In this section "investment company" has the same meaning as in Part IV.

768C Deductions: asset transferred within group.

(1) This section applies where--

(a) there is a change in the ownership of an investment company ("the relevant company");

(b) none of paragraphs (a) to (c) of section 768B(1) applies;

(c) after the change in the ownership the relevant company acquires an asset from another company in circumstances such that section 171(1) of the 1992 Act applies to the acquisition; and

(d) a chargeable gain ("a relevant gain") accrues to the relevant company on a disposal of the asset within the period of three years beginning with the change in the ownership.

(2) For the purposes of subsection (1)(d) above an asset acquired by the relevant company as mentioned in subsection (1)(c) above shall be treated as the same as an asset owned at a later time by that company if the value of the second asset is derived in whole or in part from the first asset, and in particular where the second asset is a freehold and the first asset was a leasehold and the lessee has acquired the reversion.

(3) For the purposes of this section--

(a) the accounting period of the relevant company in which the change in the ownership occurs shall be divided into two parts, the first the part ending with the change, the second the part after;

(b) those parts shall be treated as two separate accounting periods; and

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