Citation and commencement

1. This Order may be cited as the Scottish Water (Transfer of Functions, etc.) (Tax Provisions) Order 2002 and shall come into force on 1st April 2002.

Interpretation

2. In this Order—

• “the Corporation Tax Acts” has the meaning given by section 831(1)(a) of the Taxes Act;

• “the new water and sewerage authorities” means the bodies established by section 62(1) of the Local Government etc. (Scotland) Act 1994( 2 ), that is, the East of Scotland Water Authority, the West of Scotland Water Authority and the North of Scotland Water Authority;

• “Scottish Water” means the body corporate known as Scottish Water and established by section 20 of, and Schedule 3 to, the Water Industry (Scotland) Act 2002( 3 );

• “the Taxes Act” means the Income and Corporation Taxes Act 1988( 4 ).

Tax Provisions consequential on the transfer of functions etc. to Scottish Water

3. Articles 4 to 7 make provision in consequence of the transfer on 1st April 2002 of the functions, property and liabilities of the new water and sewerage authorities to Scottish Waterby virtue of sections 21 and 22 of the Water Industry (Scotland) Act 2002( 5 ).

Corporation tax: general

4. —(1) For all purposes of the Corporation Tax Acts in relation to accounting periods beginning on or after 1st April 2002—

(a) Scottish Water shall be treated as if it were the same person as each of the new water and sewerage authorities, and

(b) the new water and sewerage authorities shall be treated as if together they were the same person as Scottish Water.

(2) For the purposes of section 393 of the Taxes Act( 6 ) (losses other than terminal losses) the new water and sewerage authorities shall be treated as if, before 1st April 2002, they had together carried on a single trade.

(3) Section 400 of the Taxes Act( 7 ) (write-off of government investment) shall not apply with regard to any debt transferred to Scottish Waterby virtue ofsection 22 of the Water Industry (Scotland) Act 2002.

(4) For the purposes of section 400 of the Taxes Act the new water and sewerage authorities shall be treated as if, before 1st April 2002, they had together carried on a single trade.

(5) For the purposes of corporation tax on chargeable gains—

(a) Scottish Water shall be treated as having acquired all assets transferred from the new water and sewerage authoritiesby virtue ofsection 22 of the Water Industry (Scotland) Act 2002 at the time when they were acquired by the new water and sewerage authorities, and

(b) on any disposal of any of those assets by Scottish Water, any expenditure incurred by a new water and sewerage authority which would, if the disposal had been made by that authority, have been allowable by virtue ofsection 38 of the Taxation of Chargeable Gains Act 1992 in computing the chargeable gain or allowable loss on the disposal of the asset shall be treated as though it had been incurred by Scottish Water.

Transfer arrangements

5. The existence or exercise of the powers of the Scottish Ministers underthe Water Industry (Scotland) Act 2002 shall not be regarded as constituting or creating arrangements within the meaning of section 410 of the Taxes Act( 8 ) (arrangements for transfer of company to another group or consortium).

Tax-free benefits

6. Nothing in this Order or Part 3 of the Water Industry (Scotland) Act 2002, and nothing done under this Order or that Part, shall be regarded as a scheme or arrangement for the purposes of section 30 of the Taxation of Chargeable Gains Act 1992( 9 ) (tax-free benefits).

Stamp Duty

7. No transfer from the new water and sewerage authorities to Scottish Water effected by virtue ofthe Water Industry (Scotland) Act 2002 shall give rise to any liability to stamp duty.