Accounting periods ending before 20 June 2003 are not affected by the changes. If the company was eligible for a 4% allowance then that allowance will not be disturbed by the changes announced on 20 June 2003 for accounting periods in this category.
For the purposes of the new tests (only), an accounting period
is deemed to end on 19 June 2003, and a new one to commence on 20
June 2003. For the accounting period deemed to end on 19 June 2003,
the relevant 4% allowance will be given if due, but, because of the
rules in FA02/SCH29/PARA11 (2), the 4% allowance is reduced in the
ration of the length of the accounting period to twelve months.
If however the transaction was one which would not have
fallen foul of the new avoidance or related party tests, and which
qualifies for the 4% allowance, the 4% claim will be unaffected by
the new measures.
In these accounting periods, including ones deemed to start on
20 June 2003 for this purpose - FA03/S184 - it is necessary to
examine the asset that is the subject of the 4% claim. If it was
acquired from a related party (including a fellow group member) in
whose hands it would have been an existing asset, it will not be
eligible for 4% claims in these accounting periods. This is the
case even if at the time of the acquisition the new rules were not
yet in force. Equally, if it was acquired in an avoidance
transaction which would have been caught by the 20 June 2003
version of FA02/SCH29/PARA111 had this then been in force, then it
will be necessary to consider which transactions to disregard to
deny the 4% claim.
But, note that since the related party test is more direct,
it is likely to be the easier of the two tests to use in order to
disqualify unmerited 4% claims where both the related party and
avoidance tests apply. This is because the avoidance test requires
an examination of the various objects of the transaction, and these
may not be explicit without further detailed enquiry.
