From 2008 the statutory basis of assessment of profits and gains chargeable to tax under Schedule D arising to an investment holding company has changed from those arising in the year ending 31 December to those arising in the financial period ending in the year of assessment.
This change has no effect for those investment holding companies whose financial year end is 31 December.
For those investment holding companies who have a financial year end other than 31 December and who were assessed on the statutory calendar year basis, the effect of the change in the basis of assessment means that some profit and gains form the basis of both the 2007 and 2008 assessments i.e. they are taxed twice.
In recognition of this ‘double taxation’ the Comptroller has introduced the following concessions.
Concession 1
For the year of ‘cessation’ or when the investment holding company is wound up, the basis of assessment will be the profits and gains arising in the financial period 1 January to the date in which that event occurs.
Example of concession 1
| Profit year ended 31 March 2007 | £10,000 |
| Profit year ended 31 March 2008 | £12,000 |
| Profit year ended 31 March 2009 | £14,000 |
| Profit year ended 1 April 2009 to 30 June 2009 | £5,000 |
| Company wound up 30 June 2009 | |
| Basis period for the 2007 assessment is the year ended 31 December |
|---|
| Year ended 31 March 2007 | £10,000 x 90/365 days | £2,466 |
| Year ended 31 March 2008 | £12,000 x 275/365 days | £9,041 |
| 2007 assessment | Year ended 31 December 2007 | £11,507 |
| Basis period for the 2008 assessment is the financial period ending in the year of assessment |
|---|
| 2008 assessment | Year ended 31 March 2008 | £12,000 |
The profit for the period 1/4/07 to 31/12/07 [£9,008] falls to be assessed to tax twice i.e. in both the 2007 and 2008 assessments.
| Basis period for the 2009 assessment [by concession] is 1 January 2009 to 30 June 2009 |
|---|
| Year ended 31 March 2009 | £14,000 x 90/365 days | £3,452 |
| Period 1 April 2008 to 30 June 2009 | £5,000 |
| 2009 assessment | Period 1 January 2009 to 30 March 2009 | £8,452 |
The profit for the period 1 April 2008 to 31 December 2008 [£10,548] falls out of assessment to tax.
Concession 2
The basis of assessment for 2008 will be the profits and gains arising in the period 1 January 2008 to the end of the financial year end in 2008.
Example of a company wound up on 30 June 2009
| Financial year end 31 March | |
|---|
| Profit year ended 31 March 2007 | £10,000 |
| Profit year ended 31 March 2008 | £12,000 |
| Profit year ended 31 March 2009 | £14,000 |
| Profit for the period 1 April 2009 to June 2009 | £5,000 |
Company wound up 30 June 2009 | |
| Basis period for the 2007 assessment is the year ended 31 December |
|---|
| Year ended 31 March 2007 | £10,000 x 90/365 days | £2,466 |
| Year ended 31 March 2008 | £12,000 x 275/365 days | £9,041 |
| 2007 assessment | Year ended 31 December 2007 | £11,507 |
| Basis period for the 2008 assessment [by concession] is 1 January 2008 to 31 March 2008 |
|---|
| Year ended 31 March 2008 | £12,000 x 90/365 days | £2,959 |
| 2008 assessment | Period 1 January 2008 to 31 March 2008 | £2,959 |
| Basis periods for the 2009 assessment is the year ended 31 March 2009 plus period 1 April to 30 June 2009 |
|---|
| Year ended 31 March 2009 | £14,000 |
| Period 1 April 2009 to 30 June 2009 | £5,000 |
| 2009 assessment | £19,000 |
The Comptroller will apply concession 1 unless the company elects in writing by 31 December 2010 for concession 2. An investment holding company is not permitted to revoke an election for concession 2.
Concession 56
The basis of assessment of the profits and gains arising to an investment holding company upon 'cessation' or winding up which elected for concession 56 (no longer applicable) in the published concession and practice guidelines will continue to be those for the period 1 January to the date in which the event occurs.
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