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HM Revenue and Customs Brief 07/09

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Issued 01 April 2009

The Corporation Tax Act 2009

The Corporation Tax Act 2009 (CTA 2009), produced by the tax law rewrite project, has come into force for Corporation Tax purposes for accounting periods ending on or after 1 April 2009 and for Income Tax and Capital Gains Tax purposes for the tax year 2009-10 and subsequent tax years. The project has already produced the following Acts:

  • the Capital Allowances Act 2001 (CAA)
  • the Income Tax (Earnings and Pensions) Act 2003 (ITEPA), which rewrote Schedule E
  • the Income Tax (Trading and Other Income) Act 2005 (ITTOIA), which rewrote Schedules A, D and F for Income Tax
  • the Income Tax Act 2007

This Act is expected to be followed by a second Bill dealing with Corporation Tax. This was published in draft for consultation on 3 March 2009. (A third Bill covering international and miscellaneous provisions which applies in part for corporation purposes was published in draft at the same time.)

CTA 2009 consists largely of provisions covering much the same ground as those rewritten in ITTOIA for Income Tax, but includes provisions that are confined to Corporation Tax such as those dealing with loan relationships, derivative contracts, research and development and expenses of investment businesses. The second Corporation Tax Bill includes rates of tax, reliefs, losses, rules for special vehicles such as REITs and AUTs, special regimes such as repos, leasing, oil and tax avoidance.

The law is rewritten to make it clearer and easier to use. The structure is logical, with each of the main areas in a part of its own.

In the main, CTA 2009 does not change the effect of the law but it does correct some minor anomalies. It also incorporates two extra-statutory concessions and one statement of practice.

Detailed Explanatory Notes, including an Annex listing the minor changes made to the law, accompany the Act. There are also Tables of Origins and Destinations which will assist users to identify the source material for any given provision and trace what has happened to it.

Particular features of CTA 2009

Removal of references to schedules and cases

A key feature of CTA 2009 is the removal of references to schedules and cases. This does for Corporation Tax what ITTOIA did for Income Tax. The law is not changed but income now falls within different parts of the Act rather than under schedules and cases.

Foreign income and UK source income are amalgamated

Profits arising from UK or non-UK sources are now amalgamated, although separation is still required where losses arising on overseas sources are treated in a distinct way or reliefs are only available against non-UK source income.

The structure of CTA 2009

CTA 2009 is divided into 17 Parts and 4 Schedules.

Part 1: Introduction

This part provides an overview to the Act as a whole.

Part 2: Charge to Corporation Tax: Basic Provisions

This part rewrites the charge to Corporation Tax on resident and non-resident companies, the rules of company residence and of accounting periods.

Part 3: Trading Income

This part calculates the profits of a trade, applies the rules for particular trades and identifies components of trading income including post-cessation receipts.

Part 4: Property Income

This part rewrites the Corporation Tax rules on property income including lease premiums, furnished holiday accommodation and mineral royalties.

Part 5: Loan Relationships

This part rewrites the loan relationship provisions, mainly Chapter 2 of Part 4 of FA 1996.

Part 6: Relationships treated as Loan Relationships

This part rewrites provisions on relationships treated as loan relationships, many of which are based on provisions outside Chapter 2 of Part 4 of FA 1996 such as alternative finance arrangements in FA 2005 and repos in FA 2007.

Part 7: Derivative Contracts

This part rewrites the provisions for derivative contracts in Schedule 26 to FA 2002.

Part 8: Intangible Fixed Assets

This part rewrites the rules on intangible fixed assets in Schedule 29 to FA 2002.

Part 9: Intellectual Property: Know-How and Patents

This part rewrites the rules on disposal of know-how, sales of patent rights and relief on patent income in sections 524 to 533 of ICTA.

Part 10: Miscellaneous Income

This part brings together income not included elsewhere; foreign dividends, estates in administration, annual payments and income not otherwise charged (old Case VI of Schedule D).

Part 11: Relief for Particular Employee Share Acquisition Schemes

This part rewrites the relief for share incentive plans in Schedule 4AA to ICTA and option schemes in sections 84A and 85A of ICTA.

Part 12: Other Relief for Employee Share Acquisition

This part rewrites the relief for share acquisition schemes in Schedule 23 to FA 2003.

Part 13: Additional Relief for Expenditure on Research and Development

This part rewrites the special relief for research and development expenditure including relief for SMEs, sub-contracted work and vaccine research in Schedules 10 and 20 to FA 2000 and Schedules 12 and 13 to FA 2002.

Part 14: Remediation of Contaminated Land

This part rewrites the relief for expenditure on remedying contaminated land in Schedule 22 to FA 2001.

Part 15: Film Production

This part rewrites the rules on the taxation of film production in Chapter 3 of Part 3 of FA 2006.

Part 16: Companies with Investment Business

This part rewrites the rules for investment companies.

Part 17: Partnerships

This part rewrites the tax rules that apply for partnerships.

Part 18: Unremittable Income

This part rewrites the rules on unremittable income in section 584 of ICTA.

Part 19: General Exemptions

This part rewrites various exemptions from tax including FOTRA securities and housing grants.

Part 20: General Calculation Rules

This part contains various general rules that apply to all income charged to Corporation Tax. These include restriction on deductions for unpaid remuneration, employee benefit contributions, business entertaining and other general rules.

Part 21: Other General Provisions

This part includes provisions of a general nature including orders and regulations, definitions and Treasury powers in relation to the Act.

The Schedules

The four schedules are:

  1. Minor and consequential amendments.
  2. Transitionals and savings.
  3. Repeals and revocations.
  4. Index of defined expressions.

About the Author

Crown Copyright 2009.

A licence is need to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.



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Article Published/Sorted/Amended on Scopulus 2009-04-04 12:50:44 in Tax Articles

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