CTM34470 - Residence: avoidance transactions: text of new Treasury General Consents

The Treasury, in exercise of the powers conferred on them by ICTA70/S482 (4)(a), hereby give the following consents.

Citation and commencement

1) These consents may be cited as the Treasury General Consents 1988 and apply to transactions on and after 15th March, 1988.

Interpretation

1) In these consents unless the context otherwise requires:

'company' means a body corporate;

'non-resident company' means the body corporate referred to in Section 482 (1)(c) or (d)(a), which is not resident in the UK and which:

a) are liable to tax in the same territory outside the UK by reason of domicile, residence or place of management, and

b) would be deemed to be members of a group of companies for the purposes of Section 258 of the Taxes Act if, in subsection (7) of that:

i) the words 'resident in the UK' were omitted, and

ii) a reference to a body corporate not liable to tax in the territory outside the UK by reason of domicile, residence or place of management referred to in subparagraph (a) above were substituted for the reference to a body corporate not resident in the UK in paragraph (c) of that subsection;

'redeemable', in relation to shares, means that the shares satisfy one or both of the following conditions:

a) that, by virtue of the terms of their issue, the exercise of a right by any person or the existence of any arrangements, they are liable to be redeemed, cancelled or repaid, in whole or in part;

b) that, by virtue of any material arrangements, the holder has a right to require another person to acquire the shares or is obliged in any circumstances to dispose of them or another person has a right or is in any circumstances obliged to acquire them;

and arrangements are material arrangements if the company, which issued the shares, or a company connected with that company is a party to the arrangements;

'resident company' means the body corporate resident in the UK referred to in Section 482 (1)(c) or (d);

'resident group' means those companies, including the resident company, which are deemed to be members of a group of companies for the purposes of Section 258 of the Taxes Act;

'Section 482 (1)(c)' and 'Section 482 (1)(d)' mean Section 482 (1)(c) and Section 482 (1)(d)' of the Taxes Act, as the case may be;

'the Taxes Act' means the ICTA70;

'Territorial group' means two or more companies, which are not resident in the UK and which

a) are liable to tax in the same territory outside the UK by reason of domicile, residence or place of management,

and

b) would be deemed to be members of a group of companies for the purposes of Section 258 of the Taxes Act if, in subsection (7) of that Section

i) the words 'resident in the UK' were omitted,

and

'transactions' means a transaction of one of the classes described in Section 482 (1)(c) or (d) as the case may be;

and other expressions have the same meaning as in Section 482 of the Taxes Act.

2) The Interpretation Act 1978 shall apply to these consents as it applies to an Act of Parliament.

3) In applying the provisions of Section 258 of the Taxes Act for the purposes of the definitions of 'overseas group', 'resident group' and 'territorial group' in subparagraph (1) above, the words '51 per cent subsidiary' and '51 per cent subsidiaries' shall be substituted for '75 per cent subsidiary' and '75 per cent subsidiaries' as the case may be, wherever they occur in that Section.

4) For the purposes of these consents, any question whether a person is connected with another shall be determined in accordance with the provisions of Section 533 (2) to (8) of the Taxes Act (any provision that one person is connected with another being taken to mean that they are connected with one another).

Consent to transactions within Section 482 (1)(c)

3) The Treasury consent generally to transactions of the class described in Section 482 (1)(c) which consist of:

a) the creation of shares by the non-resident company,

b) the issue of shares by the non-resident company:

i) to another member of the overseas group, or

ii) subject to the conditions prescribed by paragraph 4, to the resident company or to another member of the resident group, or

iii) subject to the conditions prescribed by paragraph 5, to a person not connected with the resident company, or

iv) subject to the conditions prescribed by paragraph 6, to all persons who are its shareholders at the time of the issue,

c) the creation of debentures by the non-resident company and their issue:

i) to another member of the overseas group, or

ii) subject to the condition prescribed by paragraph 7, to the resident company or to another member of the resident group, or

iii) subject to the conditions prescribed by paragraph 5, to a persons not connected with the resident company,

d) transactions of any kind described in subsection (1)(c) where the non-resident company:

i) was incorporated after 31 December 1951,

ii) is liable to tax in a Commonwealth territory other than the UK by reason of domicile, residence or place of management, and

iii) was incorporated for the purpose of starting and carrying on a new industrial activity in that Commonwealth territory,

and in this subparagraph 'industrial activity' means any productive, extractive or manufacturing industry, any public utility, fisheries or any form of husbandry.

4) The conditions prescribed by this paragraph are that the issue:

a) is of shares that are not redeemable; and

b) is made either

i) for full consideration paid in cash to the non-resident company,

ii) in or towards payment for any business undertaking or property acquired by the non-resident company for full consideration.

5) The conditions prescribed by this paragraph are:

a) that the issue

i) is for full consideration paid to the non-resident company, and

ii) is not to a nominee or trustee for a person who is connected with the resident company;

b) that no arrangements exist as a consequence of which the resident company or a person connected with the resident company, or a nominee or trustee for that person or that company, is or may become entitled to the shares or debentures so issued or to any of them or to any interest in them or in any of them.

6) The conditions prescribed by this paragraph are that the issue:

a) is in respect of and in proportion to the shares held by the shareholders in the non- resident company at the time of the issue,

and

b) is either

i) of shares that are not redeemable, or

ii) where no shares are issued to a company which is resident in the UK or to a nominee or trustee for such a company, for full consideration paid in cash to the non-resident company.

1) The condition prescribed by this paragraph is that none of the circumstances set out in subparagraph (2) below are associated with, or are present in connection with, the issue of the debentures.

2) Those circumstances are:

a) that the debentures are issued at a discount,

b) that arrangements exist as a result of which the non-resident company acquires property of any description from a company which is resident in the UK and the consideration, or some part of the consideration, for the acquisition remains unpaid,

c) that a loan, whether or not of the same amount as that secured by the debentures, is made by a company which is not resident in the UK to a company which is resident in the UK,

d) that any amount payable in respect of the debentures is determined by reference to the movement of an index of prices, earnings or any other indicator of an economic nature published in the UK or elsewhere.

Consent to transactions within Section 482 (1)(d)

8) The Treasury consent generally to transactions of the class described in Section 482 (1)(d), which consists of:

a) the transfer by the resident company of shares or debentures of the non-resident company to another member of the resident group;

b) subject to the conditions prescribed by paragraph 9, the transfer by the resident company or by a company which is not resident in the UK (in paragraph 9 referred to in either case as 'the transferor company') of shares or debentures of the non- resident company to a person not connected with the resident company;

c) the transfer by a company which is not resident in the UK of shares or debentures of the non-resident company to a company which is a member of a territorial group of which the first-mentioned company is also a member.

9) The conditions prescribed by this paragraph are:

a) that the transfer:

i) is for full consideration paid to the transferor company,

and

ii) is not to a nominee or trustee for a person who is connected with the resident company,

b) that no arrangements exist as a consequence of which:

i) the resident company, or

ii) a nominee or trustee for the resident company, or

iii) a person connected with the resident company, or

iv) a nominee or trustee for a person connected with the resident company,

is or may become entitled to the shares or debentures transferred or to any of them or to any interest in them or in any of them.

Revocation of previous consents

10) All consents previously given generally by the Treasury to transactions of the classes described in Section 482 (1)(c) and (d) are hereby revoked.

Footnotes to new general consents

1970 c.10. By virtue of ICTA88/SCH30/PARA21 (3)(c.1) on and after 6 April, 1988, the reference to Section 482 (4) is to be construed as a reference to Section 765 (4) of that Act, the reference to Section 482 (1)(c) or (d) is to be construed as a reference to Section 765 (1)(c) or (d) of that Act, the reference to Section 258 (7) is to be construed as reference to Section 413 (5) of that Act and the reference to the purposes of Section 258 is to be construed as a reference to the purposes of Chapter IV of Part X of that Act.

1978 c.30. By virtue of ICTA88/SCH30/PARA21 (3) (c.1) on and after 6 April, 1988, the reference to Section 533 (2) to (8) is to be construed as a reference to Section 839 (2) to (8) of that Act.

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