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Finance Act 2013

Changes to legislation: There are currently no known outstanding effects for the Finance Act 2013. (See end of Document for details)

Finance Act 2013 2013 CHAPTER 29

An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance. [17th July 2013]

Most Gracious Sovereign

WE, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty's public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and to grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

PART 1

INCOME TAX, CORPORATION TAX AND CAPITAL GAINS TAX

CHAPTER 1

CHARGES, RATES ETC

Income tax

1 Charge for 2013-14

Income tax is charged for the tax year 2013-14.

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2 Personal allowance for 2013-14 for those born after 5 April 1948

(1) For the tax year 2013-14 the amount specified in section 35(1) of ITA 2007 (personal allowance for those born after 5 April 1948) is replaced with “ £9,440 ”.

(2) Accordingly section 57 of that Act (indexation of allowances), so far as relating to the amount specified in section 35(1) of that Act, does not apply for that tax year.

3 Basic rate limit for 2013-14

(1) For the tax year 2013-14 the amount specified in section 10(5) of ITA 2007 (basic rate limit) is replaced with “ £32,010 ”.

(2) Accordingly section 21 of that Act (indexation of limits), so far as relating to the basic rate limit, does not apply for that tax year.

Corporation tax

4 Charge and main rate for financial year 2014

(1) Corporation tax is charged for the financial year 2014.

(2) For that year the rate of corporation tax is— (a) 21% on profits of companies other than ring fence profits, and (b) 30% on ring fence profits of companies.

(3) In subsection (2) “ring fence profits” has the same meaning as in Part 8 of CTA 2010 (see section 276 of that Act).

5 Small profits rate and fractions for financial year 2013

(1) For the financial year 2013 the small profits rate is— (a) 20% on profits of companies other than ring fence profits, and (b) 19% on ring fence profits of companies.

(2) For the purposes of Part 3 of CTA 2010, for that year— (a) the standard fraction is 3/400ths, and (b) the ring fence fraction is 11/400ths.

(3) In subsection (1) “ring fence profits” has the same meaning as in Part 8 of that Act (see section 276 of that Act).

6 Main rate for financial year 2015

(1) For the financial year 2015 the rate of corporation tax is 20% on profits of companies other than ring fence profits.

(2) In subsection (1) “ring fence profits” has the same meaning as in Part 8 of CTA 2010 (see section 276 of that Act).

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Capital allowances

7 Temporary increase in annual investment allowance

(1) In relation to expenditure incurred during the period of two years beginning with 1 January 2013, section 51A of CAA 2001 (entitlement to annual investment allowance) has effect as if in subsection (5) for “£25,000” there were substituted “ £250,000 ”.

(2) Schedule 1 contains provision about chargeable periods which straddle 1 January 2013 or 1 January 2015.

CHAPTER 2

INCOME TAX: GENERAL

Exemptions and reliefs

8 London Anniversary Games

(1) An accredited competitor who performs an Anniversary Games activity is not liable to income tax in respect of any income arising from the activity if the non-residence condition is met.

(2) The following are Anniversary Games activities— (a) competing at the Anniversary Games, and (b) any activity that is performed during the games period the main purpose of

which is to support or promote the Anniversary Games.

(3) The non-residence condition is that— (a) the accredited competitor is non-UK resident for the tax year 2013-14, or (b) the accredited competitor is UK resident for the tax year 2013-14 but the year

is a split year as respects the competitor and the activity is performed in the overseas part of the year.

(4) Section 966 of ITA 2007 (deduction of sums representing income tax) does not apply to any payment or transfer which gives rise to income benefiting from the exemption under subsection (1).

(5) In this section— “accredited competitor” means a person to whom an accreditation card in

the athletes' category has been issued by the company named UK Athletics Limited which was incorporated on 16 December 1998;

“the Anniversary Games” means the British Athletics London Anniversary Games held at the Olympic Stadium in London in July 2013;

“the games period” means the period— (a) beginning with 21 July 2013, and (b) ending with 29 July 2013;

“income” means employment income or profits of a trade, profession or vocation (including profits treated as arising as a result of section 13 of ITTOIA 2005).

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(6) This section is treated as having come into force on 6 April 2013.

9 Glasgow Commonwealth Games

(1) An accredited competitor who performs a Commonwealth Games activity is not liable to income tax in respect of any income arising from the activity if the non-residence condition is met.

(2) The following are Commonwealth Games activities— (a) competing at the Glasgow Commonwealth Games, and (b) any activity that is performed during the games period the main purpose of

which is to support or promote the Glasgow Commonwealth Games or any future Commonwealth Games.

(3) The non-residence condition is that— (a) the accredited competitor is non-UK resident for the tax year in which the

Commonwealth Games activity is performed, or (b) the accredited competitor is UK resident for the tax year in which the activity

is performed but the year is a split year as respects the competitor and the activity is performed in the overseas part of the year.

(4) Section 966 of ITA 2007 (deduction of sums representing income tax) does not apply to any payment or transfer which gives rise to income benefiting from the exemption under subsection (1).

(5) In this section— “accredited competitor” means a person to whom a Glasgow 2014

accreditation card in the athletes' category has been issued by the company named Glasgow 2014 Limited which was incorporated on 11 June 2007;

“the games period” means the period— (a) beginning with 4 March 2014, and (b) ending with 3 September 2014;

“the Glasgow Commonwealth Games” means the Commonwealth Games held in Scotland in 2014;

“income” means employment income or profits of a trade, profession or vocation (including profits treated as arising as a result of section 13 of ITTOIA 2005).

10 Expenses of elected representatives

(1) After section 293A of ITEPA 2003 insert—

“293B UK travel expenses of other elected representatives

(1) No liability to income tax arises in respect of a payment to which this section applies if it is expressed to be made in respect of relevant UK travel expenses.

(2) This section applies to payments— (a) made to members of the Scottish Parliament under section 81(2) of

the Scotland Act 1998,

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(b) made to members of the National Assembly for Wales under section 20(2) of the Government of Wales Act 2006 or to a member of the Welsh Assembly Government under section 53(2) of that Act, or

(3) In this section “relevant UK travel expenses” means expenses necessarily incurred on journeys of the following kinds within the United Kingdom—

(a) journeys within subsection (4) made by the member that are necessary for the performance of his or her duties as a member;

(b) if the member shares caring responsibilities with a spouse or partner, journeys made by the spouse or partner between the constituency or region and the member's parliamentary home.

(4) The journeys referred to in subsection (3)(a) are those— (a) between the constituency or region and the Parliament or Assembly

to which the member belongs, (b) between the constituency or region and the member's parliamentary

home, or (c) within the constituency or region, but not excluded by subsection (5).

(5) A journey is excluded if— (a) in the case of a member who has only one local office, it is between

the member's local home and that office, and (b) in any other case, it is between the member's local home and the

principal local office.

(6) In this section— “constituency or region”, in relation to a member, means the

constituency or region which the member represents and the area within 20 miles of the boundary of that constituency or region;

“local office”, in relation to a member, means an office which is situated in the constituency or region and occupied by the member for the purposes of performing duties as a member;

“the member's local home” means a residence of the member situated in the constituency or region;

“the member's parliamentary home” means the member's only or main residence in the area comprising—

(a) the main site of the Parliament or Assembly to which the member belongs, and

(b) the area within 20 miles of that site; “principal local office”, in relation to a member, means the local

office most frequently occupied by the member for the purposes of performing duties as a member.

(7) A person has “caring responsibilities” if the person— (a) has parental responsibility for a dependent child aged under 17 or for

a child aged 17 or 18 who is in full-time education, or (b) is the primary carer for a family member in receipt of—

(i) attendance allowance,

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(ii) disability living allowance at the middle or highest rate for personal care,

(iii) the daily living component of personal independence payment, or

(iv) constant attendance allowance at or above the maximum rate with an industrial injuries disablement benefit, or the basic (full day) rate with a war disablement pension.

(8) The Treasury may by order amend the definition of “caring responsibilities” in subsection (7).”

(2) The amendment made by this section has effect in relation to payments made on or after 6 April 2013.

11 Exemption from income tax of contributions to pension schemes

(1) In Chapter 9 of Part 4 of ITEPA 2003 (exemptions from income tax for pension provision), in section 308 (exemption of contributions to registered pension scheme), at the end insert “ in respect of the employee ”.

(2) The amendment made by this section has effect for the tax year 2013-14 and subsequent tax years.

12 Childcare exemptions: meaning of disabled child

(1) In section 318B of ITEPA 2003 (childcare: meaning of “disabled” etc), in subsection (3)(a), after “allowance” insert “ or personal independence payment ”.

(2) The amendment made by this section has effect for the tax year 2013-14 and subsequent tax years.

13 Income tax exemption for universal credit

(1) In section 677(1) of ITEPA 2003 (UK social security benefits wholly exempt from tax), in Part 1 of Table B (benefits payable under primary legislation), insert at the appropriate place—

WRA 2012 Part 1“Universal credit Any provision made for Northern Ireland which corresponds to Part 1 of WRA 2012”.

(2) The amendment made by this section has effect for the tax year 2013-14 and subsequent tax years.

14 Tax advantaged employee share schemes

Schedule 2 amends the SIP code, the SAYE code, the CSOP code and the EMI code.

15 Abolition of tax relief for patent royalties

(1) Chapter 4 of Part 8 of ITA 2007 (reliefs: annual payments and patent royalties) is amended in accordance with subsections (2) and (3).

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(2) In section 448 (relief for individuals), in subsection (1)(b) omit “or 903(5)” and “and patent royalties”.

(3) In section 449 (relief for other persons), in subsection (1)(b) omit “or 903(6)” and “and patent royalties”.

(4) Accordingly, that Act is amended as follows— (a) in section 2 (overview of Act), in subsection (8)(c) omit “and patent royalties”, (b) in section 24 (reliefs deductible at Step 2), in subsection (1)(b) omit “and

patent royalties”, and (c) in the heading for Chapter 4 of Part 8 of that Act omit “AND PATENT

ROYALTIES”.

(5) The amendments made by this section have effect in relation to payments made on or after 5 December 2012.

16 Limit on income tax reliefs

Schedule 3 contains provision limiting the deductions which may be made at Step 2 of the calculation in section 23 of ITA 2007 (calculation of income tax liability).

Trade profits

17 Cash basis for small businesses

Schedule 4 contains provision enabling the profits of a trade, profession or vocation to be calculated on the cash basis.

18 Deductions allowable at a fixed rate

Schedule 5 contains provision enabling persons carrying on a trade, profession or vocation to claim deductions for certain expenses at a fixed rate.

Other provisions

19 Employment income: duties performed in the UK and overseas

Schedule 6 contains provision about employment income in cases where duties are performed in the UK and overseas.

20 Remittance basis: exempt property

Schedule 7 contains provision about the application of the remittance basis in relation to exempt property.

21 Payments on account

(1) ITA 2007 is amended as follows.

(2) In section 809K (sections 809L to 809Z6: introduction), in subsection (2)(e), for “809V” substitute “ 809UA ”.

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(3) Before section 809V (but after the italic heading) insert—

“809UA Money used for payments on account

(1) Subsection (2) applies to income or chargeable gains of an individual if— (a) the income or gains would (but for subsection (2)) be regarded as

remitted to the United Kingdom by virtue of the bringing of money to the United Kingdom,

(b) the money is brought to the United Kingdom by way of direct payments to the Commissioners on account of income tax,

(c) the tax year (“tax year 2”) in respect of which the payments on account are made is a tax year for which section 809H (remittance basis charge for long-term UK resident) does not apply as respects the individual, and

(d) that section applied as respects the individual for the previous tax year (“tax year 1”).

(2) The relevant amount of income or chargeable gains is to be treated as not remitted to the United Kingdom if money equal to the relevant amount is taken offshore by—

(a) the 15 March following the end of tax year 2, or (b) such later date as the Commissioners may allow on a claim made by

the individual.

(3) A claim under subsection (2)(b)— (a) may be made only if the individual has made and delivered a return

under section 8 of TMA 1970 for tax year 2 and reasonably expects to receive from the Commissioners a repayment of tax paid in respect of that tax year, and

(b) may be made no later than the 5 April following the end of tax year 2.

(4) Money that is taken offshore in accordance with subsection (2) is to be treated as having the same composition of kinds of income and capital as the money used to make the payments on account.

(5) In this section “the relevant amount” means the lower of the following— (a) the amount brought to the United Kingdom as mentioned in

subsection (1)(b), and (b) the applicable amount (as defined in section 809H) for tax year 1.”

(4) In section 809Z9(11) (taking proceeds etc offshore or investing them: modification of general provisions)—

(a) for “section 809VB(2) but in that case” substitute “ sections 809UA(2) and 809VB(2), but in those cases ”, and

(b) at the beginning of paragraph (b) insert “ in the case of section 809VB(2), ”.

(5) The amendments made by this section have effect in relation to payments on account made in respect of the tax year 2012-13 and subsequent tax years.

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22 Arrangements made by intermediaries

(1) In Chapter 8 of Part 2 of ITEPA 2003 (application of provisions to workers under arrangements made by intermediaries), in section 49 (engagements to which Chapter applies), for subsection (1)(c) substitute—

“(c) the circumstances are such that— (i) if the services were provided under a contract directly

between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or

(ii) the worker is an office-holder who holds that office under the client and the services relate to the office.”

(2) This section has effect for the tax year 2013-14 and subsequent tax years.

23 Taxable benefit of cars: the appropriate percentage

(1) Section 139 of ITEPA 2003 (car with CO2 figure: the appropriate percentage) is amended in accordance with subsections (2) to (6).

(2) In subsection (2), after “the relevant threshold” omit “for the year”.

(3) For subsection (2)(a) substitute— “(a) if the car's CO2 emissions figure does not exceed 50 grams per

kilometre driven, 5%, (aa) if the car's CO2 emissions figure exceeds 50 grams per kilometre

driven but does not exceed 75 grams per kilometre driven, 9%, and”.

(4) In subsection (2)(b), for “11%” substitute “ 13% ”.

(5) In subsection (3)— (a) after “the relevant threshold” omit “for the year”, and (b) for “12%” substitute “ 14% ”.

(6) In subsection (4)— (a) after “the relevant threshold” (in both places) omit “for the year”, and (b) in paragraph (b), for “35%” substitute “ 37% ”.

(7) Section 140 of that Act (car without CO2 figure: the appropriate percentage) is amended in accordance with subsections (8) to (11).

(8) In the Table in subsection (2), for “35%” substitute “ 37% ”.

(9) For subsection (3)(a) substitute— “(a) 5% if the car cannot in any circumstances emit CO2 by being driven,

and”.

(10) In subsection (3)(b), for “35%” substitute “ 37% ”.

(11) Omit subsection (3A).

(12) The amendments made by this section have effect for the tax year 2015-16 and subsequent tax years.

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24 Gains from contracts for life insurance etc

Schedule 8 amends Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc).

25 Qualifying insurance policies

Schedule 9 amends Schedule 15 to ICTA (qualifying insurance policies) and makes other provision relating to qualifying policies under Schedule 15 to ICTA.

26 Transfer of assets abroad

Schedule 10 amends Chapter 2 of Part 13 of ITA 2007 (tax avoidance: transfer of assets abroad).

27 Payments of interest

Schedule 11 contains provision in connection with the payment of interest for the purposes of income tax.

28 Disguised interest

Schedule 12 contains provision about returns which are economically equivalent to interest.

CHAPTER 3

CORPORATION TAX: GENERAL

Losses, other reliefs and deductions

29 Restriction on surrender of losses: controlled foreign company cases

(1) Section 105 of CTA 2010 (restriction on surrender of losses etc within section 99(1) (d) to (g)) is amended as follows.

(2) In subsection (2), for “the surrendering company's gross profits of the surrender period” substitute “ the profit-related threshold ”.

(3) In subsection (3), for “those gross profits” substitute “ the profit-related threshold ”.

(4) After subsection (3) insert—

“(3A) The profit-related threshold” is the sum of— (a) the surrendering company's gross profits of the surrender period, and (b) where chargeable profits of a CFC for an accounting period ending

in the surrender period are apportioned to the surrendering company in accordance with step 3 in subsection (1) of 371BC of TIOPA 2010 and the surrendering company is in relation to that accounting period of the CFC a chargeable company for the purposes of step 4 in that subsection, the total of the chargeable profits so apportioned.

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(3B) Where— (a) an accounting period of a CFC ending in the surrender period is one

to which (because of paragraph 50 of Schedule 20 of FA 2012) the repeal of Chapter 4 of Part 17 of ICTA does not apply,

(b) chargeable profits of the CFC for that accounting period are apportioned to the surrendering company in accordance with sections 747(3) and 752 of ICTA, and

(c) the surrendering company is not prevented by section 747(5) of ICTA from being chargeable to tax in respect of the CFC for that accounting period,

the profit-related threshold also includes the total of the chargeable profits so apportioned.”

(5) After subsection (5) insert—

“(5A) For the purposes of this section— “CFC” has the same meaning as in Part 9A of TIOPA 2010, except

that in subsection (3B) it means a controlled foreign company as defined by section 747(2) of ICTA;

“chargeable profits”, in relation to a CFC, is to be read in accordance with section 371BA(3) of TIOPA 2010, except that in subsection (3B) it is to be read in accordance with section 747(6) of ICTA.”

(6) The amendments made by this section have effect where the surrender period of the surrendering company ends on or after 20 March 2013, but subject to the following.

(7) For the purposes of section 105(3A)(b) and (3B)(b) of CTA 2010, chargeable profits do not include—

(a) chargeable profits for an accounting period within the meaning of Part 9A of TIOPA 2010 ending before 20 March 2013, or

(b) chargeable profits for an accounting period within the meaning of Chapter 4 of Part 17 of ICTA ending before that date.

(8) Subsection (9) applies where— (a) an accounting period within the meaning of Part 9A of TIOPA 2010, or (b) an accounting period within the meaning of Chapter 4 of Part 17 of ICTA,

falls partly before and partly on or after 20 March 2013.

(9) For the purposes of section 105 of CTA 2010, the chargeable profits of the CFC for that period, so far as apportioned to the surrendering company as mentioned in subsection (3A)(b) or (3B)(b) of that section (as the case requires), are to be further apportioned on a just and reasonable basis between the two parts of the period, and the chargeable profits referred to in subsection (3A)(b) or (3B)(b) are not to include the chargeable profits apportioned to the part ending before 20 March 2013.

30 Loss relief surrenderable by non-UK resident established in EEA state

(1) Section 107 of CTA 2010 (surrender of losses etc) is amended as follows.

(2) After subsection (1) insert—

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“(1A) If the surrendering company is established in the EEA (within the meaning of section 134A), it may surrender a loss or other amount under this Chapter only so far as conditions A and B are met.

Subsection (6A) imposes restrictions on a surrender under this subsection.”

(3) In subsection (2) for “The” substitute “ In any other case, the ”.

(4) After subsection (6) insert—

“(6A) A loss or other amount may not be surrendered by virtue of subsection (1A) if and to the extent that it, or any amount brought into account in calculating it, corresponds to, or is represented in, amounts within subsection (6B).

(6B) An amount is within this subsection if, for the purposes of non-UK tax chargeable under the law of a territory, the amount is (in any period) deducted from or otherwise allowed against non-UK profits of any person.”

(5) In subsection (7), after “subsection (6)” insert “ or (6B) ”.

(6) The amendments made by this section have effect in relation to accounting periods beginning on or after 1 April 2013.

(7) But for this purpose an accounting period beginning before, and ending on or after, 1 April 2013 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.

(8) An apportionment for the purposes of subsection (7) must be made in accordance with section 1172 of CTA 2010 (time basis) or, if that method produces a result that is unjust or unreasonable, on a just and reasonable basis.

31 Arrangements for transfers of companies

(1) In section 156 of CTA 2010 (definition of “arrangements” for purposes of sections 154 to 155B, etc)—

(a) in subsection (2), in paragraph (b), after “include” insert “— (i)”,

(b) at the end of that paragraph insert “, or (ii) a condition or requirement imposed by, or agreed

with, a Minister of the Crown, the Scottish Ministers, a Northern Ireland department or a statutory body.”, and

“(2A) In subsection (2) “statutory body” means a body (other than a company as defined by section 1(1) of the Companies Act 2006) established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision, except that the Treasury may, by order, specify that a body is or is not to be a statutory body for this purpose.”

(2) In sections 154(3) and 155(3) of that Act (arrangements for transfers), for “154A” substitute “ 155A ”.

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(3) In section 188 of that Act (other definitions for Part 5), in subsection (1), after “ “company”” insert “ (except in section 156(2A) ”.

(4) The amendments made by this section have effect in relation to accounting periods ending on or after 1 April 2013.

32 Change in company ownership: company reconstructions

(1) For section 676 of CTA 2010 (disallowance of trading losses where company reconstruction without a change of ownership) substitute—

“676 Company reconstructions

(1) Subsection (2) applies if, before the change in ownership— (a) a trade carried on by another company (“the predecessor company”)

is transferred to the company, and (b) the transfer is a transfer to which Chapter 1 of Part 22 applies

(transfers of trade without a change of ownership).

(2) In determining any relief available to the company by virtue of section 944(3) (carry forward of trading losses in successor company), this Chapter applies as if—

(a) references to a trade carried on by the company included the trade as carried on by the predecessor company or by any predecessor of that company, and

(b) any loss sustained by the predecessor company or any predecessor of that company had been sustained by the company.

(3) Subsection (4) applies if, after the change in ownership— (a) a trade carried on by the company is transferred to another company

(“the successor company”), and (b) the transfer is a transfer to which Chapter 1 of Part 22 applies.

(4) In determining— (a) any relief available to the company under section 45 (carry forward

of trading losses), or (b) any relief available to the successor company or any successor of that

company by virtue of section 944(3), this Chapter applies as if references to a trade carried on by the company included the trade as carried on by the successor company or by any successor of that company.

(5) For the purposes of this section a company (“company A”) is a predecessor of another company (“company B”), and company B is a successor of company A, if the first or second condition is met.

(6) The first condition is that Chapter 1 of Part 22 applies in relation to company A and company B as respectively the predecessor and the successor within the meaning of that Chapter.

(7) The second condition is that—

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(a) Chapter 1 of Part 22 applies in relation to company A and a third company (“company C”) as respectively the predecessor and the successor within the meaning of that Chapter, and

(b) company C is (whether by virtue of the first condition or this condition) a predecessor of company B.”

(2) The amendment made by this section has effect in relation to changes in ownership that occur on or after 20 March 2013.

33 Change in company ownership: shell companies

Schedule 13— (a) inserts into Part 14 of CTA 2010 (change in company ownership) a new

Chapter 5A (shell companies: restrictions on relief), and (b) makes consequential provision.

34 Transfer of deductions

Schedule 14— (a) inserts into CTA 2010 a new Part 14A (transfer of deductions), and (b) makes consequential provision.

35 R&D expenditure credits

Schedule 15 contains provision about R&D expenditure credits.

36 Relief for television production and video games development

(1) Schedule 16 contains provision about television production.

(2) Schedule 17 contains provision about video games development.

(3) Schedule 18 contains consequential amendments.

Exemption from charge

37 Health service bodies: exemption

In section 986 of CTA 2010 (exemption from corporation tax: meaning of “health service body”), insert the following entries at the appropriate places in the table—

“a clinical commissioning group section 1I of the National Health Service Act 2006”

“Health and Social Care Information Centre section 252 of the Health and Social Care Act 2012”

“National Health Service Commissioning Board

section 1H of the National Health Service Act 2006”

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“National Institute for Health and Care Excellence

section 232 of the Health and Social Care Act 2012”.

38 Chief constables etc (England and Wales): exemption

(1) In Chapter 8 of Part 22 of CTA 2010 (exemptions), after section 987 insert—

“Police

987A Chief constables etc (England and Wales)

The following are not liable to corporation tax— (a) a chief constable of a police force maintained under section 2 of the

Police Act 1996; (b) the Commissioner of Police of the Metropolis.”

(2) The amendment made by this section is treated as having come into force on 16 January 2012, but, in relation to any time before 22 November 2012, section 987A of CTA 2010 has effect as if paragraph (a) were omitted.

Other provisions

39 Real estate investment trusts: UK REITs which invest in other UK REITs

Schedule 19 amends Part 12 of CTA 2010 (real estate investment trusts).

40 Corporation tax relief for employee share acquisitions etc

(1) Chapter 6 of Part 12 of CTA 2009 (relief for employee share acquisitions: relationship between relief under Part 12 and other reliefs) is amended as follows.

(2) For section 1038 substitute—

“1038 Exclusion of other deductions

(1) Subsection (2) applies if relief is or, apart from condition 2 in section 1009(1), would be available under this Part.

For this purpose, it does not matter if the amount of the relief is or would be calculated as nil.

(2) Except as provided for by this Part, for the purpose of calculating any company's profits for corporation tax purposes for any accounting period, no deduction is allowed—

(a) in relation to the provision of the shares or to any matter connected with the provision of the shares, or

(b) so far as not covered by paragraph (a) in a case in which the shares are acquired pursuant to an option, in relation to the option or to any matter connected with the option.

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(3) In a case in which section 1022 has applied, in subsection (2)(b) references to the option cover the new option and any relevant earlier qualifying option.

(4) For the purposes of subsection (2) it does not matter if the accounting period in question falls wholly before or after the time at which the shares are acquired.

(5) In a case in which the shares are acquired under an employee share scheme, the deductions disallowed by subsection (2) include (in particular) deductions for amounts paid or payable by the employing company in relation to the participation of the employee in the scheme.

(6) But subsection (2) does not disallow deductions for— (a) expenses incurred in setting up the scheme, (b) expenses incurred in meeting, or contributing to, the costs of

administering the scheme, (c) the costs of borrowing for the purposes of the scheme, or (d) fees, commission, stamp duty, stamp duty reserve tax, and similar

incidental expenses of acquiring the shares.

(7) “Employee share scheme” means a scheme or arrangement for enabling shares to be acquired because of persons' employment.

(8) In a case in which relief is or, apart from condition 2 in section 1009(1), would be available under Chapter 5 by virtue of section 1030(2), subsection (2) does not disallow deductions in relation to the provision of the convertible securities.”

(3) After section 1038 insert—

“1038A Exclusion of deductions for share options: shares not acquired

(1) Subsection (2) applies if— (a) a person obtains an option to acquire shares and the requirements of

section 1015(1)(a) to (c) are met in relation to the obtaining of the option, or

(b) so far as not covered by paragraph (a), a person obtains an option to acquire shares and the obtaining of the option is connected with an option previously obtained in a case covered by paragraph (a) or this paragraph.

(2) For the purpose of calculating any company's profits for corporation tax purposes for any accounting period, no deduction is allowed in relation to—

(a) the option, or (b) any matter connected with the option,

unless the shares are acquired pursuant to the option.

(3) For the purposes of subsection (2) it does not matter if the accounting period in question falls wholly before or after the time at which the option is obtained.

(4) In a case in which the shares would be acquired under an employee share scheme, the deductions disallowed by subsection (2) include (in particular) deductions for amounts paid or payable by the employing company in relation to the participation of the employee in the scheme.

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(5) But subsection (2) does not disallow deductions for— (a) expenses incurred in setting up the scheme, (b) expenses incurred in meeting, or contributing to, the costs of

administering the scheme, (c) the costs of borrowing for the purposes of the scheme, or (d) fees, commission, stamp duty, stamp duty reserve tax, and similar

incidental expenses of acquiring the shares.

(6) “Employee share scheme” means a scheme or arrangement for enabling shares to be acquired because of persons' employment.

(7) Subsection (2) does not disallow deductions for— (a) amounts on which the employee is subject to a charge under ITEPA

2003, (b) amounts on which the employee would have been subject to a charge

under ITEPA 2003 had the employee been a UK employee at all material times, or

(c) if the employee has died, amounts on which the employee would have been subject to a charge under ITEPA 2003 had the employee been alive.

(8) “UK employee” is to be read in accordance with section 1017(4).”

(4) For the purposes of the following subsections— “pre-20 March 2013 relevant accounting period” means an accounting

period which begins before 20 March 2013 but ends on or after that date, and “relevant accounting period” means an accounting period which ends on

or after 20 March 2013.

(5) The amendment made by subsection (2) above has effect for the purpose of disallowing deductions for relevant accounting periods.

For this purpose, it does not matter if the acquisition of shares which gives rise, or would give rise, to the relief under Part 12 of CTA 2009 occurs before a company's first relevant accounting period.

(6) But the amendment made by subsection (2) above has no effect for the purpose of disallowing a deduction for a pre-20 March 2013 relevant accounting period where the acquisition of shares which gives rise, or would give rise, to the relief under Part 12 of CTA 2009 occurs before 20 March 2013.

(7) The amendment made by subsection (3) above has effect for the purpose of disallowing deductions for relevant accounting periods.

For this purpose, it does not matter if the option is obtained before a company's first relevant accounting period.

(8) But the amendment made by subsection (3) above has no effect for the purpose of disallowing a deduction for a pre-20 March 2013 relevant accounting period where—

(a) the option is obtained before 20 March 2013, and (b) before that date, an event (for example, the lapse or cancellation of the option)

occurs in consequence of which the shares cannot be acquired pursuant to the option.

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41 Derivative contracts: property total return swaps etc

(1) Chapter 7 of Part 7 of CTA 2009 (chargeable gains arising in relation to derivative contracts) is amended as follows.

(2) In section 643 (contracts relating to land or certain tangible movable property)— (a) in subsection (1), for “and C” substitute “ , C and D ”, and (b) after subsection (4) insert—

“(4A) Condition D is that no two or more of the parties to the derivative contract are connected persons.”

(3) In section 650 (property based total return swaps)— (a) in subsection (1), for “to F” substitute “ to H ”, and (b) after subsection (7) insert—

“(8) Condition G is that no two or more of the parties to the derivative contract are connected persons.

(9) Condition H is that the securing of a tax advantage is neither the main purpose, nor one of the main purposes, for which the company is a party to the derivative contract.

“Tax advantage” has the meaning given by section 1139 of CTA 2010.”

(4) In section 659 (meaning of “relevant credits” and “relevant debits”), after subsection (4) insert—

“(4A) But if the derivative contract has effect such that the return arising from the contract, so far as calculated by reference to that index, is calculated by reference to a percentage (“the capped percentage”) which is closer to zero than the full percentage change in that index over that period (or which is zero even though there has been a change in that index), for the purposes of subsection (4) R% is the capped percentage.”

(5) The amendments made by this section have effect in relation to accounting periods beginning on or after 5 December 2012.

(6) But, for the purposes of subsection (5), an accounting period beginning before, and ending on or after, 5 December 2012 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.

42 Corporation tax: tax mismatch schemes

Schedule 20 contains provision about tax mismatch schemes.

43 Tier two capital

(1) CTA 2010 is amended as follows.

(2) In section 162 (meaning of “normal commercial loan”), after subsection (1) insert—

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“(1A) For those purposes, “normal commercial loan” also includes any loan which is not a normal commercial loan by virtue of subsection (1) but is such a loan by virtue of section 164A(1) (loan forming part of tier two capital).”

(3) After section 164 insert—

“164A Loan forming part of tier two capital

(1) A loan is a normal commercial loan by virtue of this subsection if it— (a) was made to a bank or a parent undertaking of a bank, and (b) forms part of the tier two capital resources of the bank or parent

undertaking.

(2) Subsection (1) does not apply in the case of any loan if there are arrangements the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person as a result of the application of that subsection in respect of that loan.

(3) For the purposes of this section— (a) “bank” has the meaning given by section 1120, (b) “tax advantage” has the meaning given by section 1139, (c) “parent undertaking” is to be read in accordance with section 420 of

FISMA 2000, and (d) the reference to tier two capital resources is to be read in accordance

with the PRA Handbook made by the Prudential Regulation Authority (as that Handbook has effect from time to time).

(4) In relation to any time before 1 April 2013, the reference in subsection (3)(d) to the PRA Handbook is to be read as a reference to the Handbook of Rules and Guidance made by the Financial Services Authority (as that Handbook had effect at the time in question).”

(4) In section 1029(1) (overview), after paragraph (c) insert— “(ca) section 1032A (payment in respect of tier two capital),”.

(5) After section 1032 insert—

“Tier two capital

1032A Payment in respect of tier two capital

(1) A payment made in respect of tier two securities is not a distribution for the purposes of the Corporation Tax Acts.

(2) Subsection (1) does not apply in the case of any tier two securities if there are arrangements the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person as a result of the application of that subsection in respect of those securities.

(3) For the purposes of this section— (a) “tier two securities” means securities (other than shares) issued by a

bank or a parent undertaking of a bank that form part of the tier two capital resources of the bank or parent undertaking,

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(b) “bank” has the meaning given by section 1120, (c) “tax advantage” has the meaning given by section 1139, (d) “parent undertaking” is to be read in accordance with section 420 of

FISMA 2000, and (e) the reference to tier two capital resources is to be read in accordance

with the PRA Handbook made by the Prudential Regulation Authority (as that Handbook has effect from time to time).

(4) In relation to any time before 1 April 2013, the reference in subsection (3)(e) to the PRA Handbook is to be read as a reference to the Handbook of Rules and Guidance made by the Financial Services Authority (as that Handbook had effect at the time in question).”

(6) The amendments made by this section are treated as having come into force on 26 October 2012.

44 Financing costs and income: group treasury companies

(1) In section 316 of TIOPA 2010 (group treasury companies) for subsections (2) to (8) substitute—

“(2) A company is a group treasury company in the relevant period if— (a) it is a member of the worldwide group, (b) it undertakes treasury activities for the worldwide group in the

relevant period (whether or not it also undertakes other activities), (c) at least 90% of the relevant income of the company for the relevant

period is group treasury revenue, and (d) it makes an election in respect of the relevant period for the purposes

of this section.

(3) Subsection (4) applies if throughout the relevant period— (a) all or substantially all of the activities undertaken by a group treasury

company consist of treasury activities undertaken by it for the worldwide group, and

(b) all or substantially all of the assets and liabilities of the company relate to such activities.

(4) Where this subsection applies, the relevant amount, and all other amounts that are relevant amounts in respect of the group treasury company and the relevant period, are treated as not being a financing expense amount or a financing income amount of the group treasury company.

(5) If subsection (4) does not apply, those relevant amounts are treated as not being a financing expense amount or a financing income amount of the group treasury company only to the extent that they relate to treasury activities undertaken by the company for the worldwide group.

(6) For the purposes of subsection (5) the extent to which amounts relate to the matters mentioned is to be determined on a just and reasonable basis.

(7) An election under this section must be made within 3 years after the end of the relevant period.”

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(2) The amendment made by this section has effect in relation to periods of account of the worldwide group beginning on or after 11 December 2012.

45 Condition for company to be an “investment trust”

(1) In section 1158(2) of CTA 2010 (condition A for a company to be an “investment trust”), for “the business of the company consists of” substitute “ all, or substantially all, of the business of the company is ”.

(2) The amendment made by this section has effect in relation to accounting periods beginning on or after 1 January 2012.

46 Community amateur sports clubs

Schedule 21 contains provision about community amateur sports clubs.

CHAPTER 4

PENSIONS

47 Lifetime allowance charge: power to amend the transitional provision in Part 2 of Schedule 18 to FA 2011 etc

(1) Part 2 of Schedule 18 to FA 2011 (lifetime allowance charge: commencement and transitional provision relating to changes made for the tax year 2012-13 and onwards) is amended as follows.

(2) In paragraph 14— (a) omit sub-paragraphs (2) and (15) to (17) (which confer power on the HMRC

Commissioners to make provision specifying how notices under paragraph 14 are to be given),

(b) in sub-paragraph (7) omit “the annual rate of” where it first appears, and (c) in sub-paragraph (11) after “(5)(a)” insert “ and (c)(i) ”.

(3) After paragraph 14 insert—

“15 (1) The Commissioners for Her Majesty's Revenue and Customs may by

regulations amend paragraph 14.

(2) Regulations under this paragraph may (for example) add to the cases in which paragraph 14 is to apply or is to cease to apply.

(3) Regulations under this paragraph may include provision having effect in relation to a time before the regulations are made; but—

(a) the time must be no earlier than 6 April 2012, and (b) the provision must not increase any person's liability to tax.

(4) In relation to regulations under this paragraph made during 2013, sub- paragraph (3) has effect with the omission of paragraph (b) so long as the time in question is no earlier than 6 April 2013.

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16 (1) The Commissioners for Her Majesty's Revenue and Customs may by

regulations make provision specifying how any notice required to be given to an officer of Revenue and Customs under paragraph 14 is to be given.

(2) In sub-paragraph (1) the reference to paragraph 14 is to that paragraph as amended from time to time by regulations under paragraph 15.

17 (1) Regulations under paragraph 15 or 16 may include supplementary or

incidental provision.

(2) The powers to make regulations under paragraphs 15 and 16 are exercisable by statutory instrument.

(3) A statutory instrument containing regulations under paragraph 15 or 16 is subject to annulment in pursuance of a resolution of the House of Commons.”

(4) The amendments made by subsection (2)(b) and (c) are treated as having come into force on 6 April 2012.

(5) The Registered Pension Schemes (Lifetime Allowance Transitional Protection) Regulations 2011 (S.I. 2011/1752) are to continue to have effect and, so far as they were made under paragraph 14(2) and (15) of Schedule 18 to FA 2011, are to be treated as if they were made under paragraphs 16 and 17(1) of that Schedule (as inserted by subsection (3) above).

48 Lifetime allowance charge: new standard lifetime allowance for the tax year 2014-15 and subsequent tax years

(1) Section 218 of FA 2004 (standard lifetime allowance etc) is amended as follows.

(2) For subsection (2) substitute—

“(2) The standard lifetime allowance for the tax year 2014-15 and, subject to subsection (3), subsequent tax years is £1,250,000.”

(3) In subsection (3) for “the tax year 2012-13” substitute “ the tax year 2014-15 ”.

(4) The amendments made by subsections (2) and (3) have effect for the tax year 2014-15 and subsequent tax years.

(5) Schedule 22 contains transitional provision etc.

49 Annual allowance: new annual allowance for the tax year 2014-15 and subsequent tax years

(1) Section 228 of FA 2004 (annual allowance) is amended as follows.

(2) For subsection (1) substitute—

“(1) The annual allowance for the tax year 2014-15 and, subject to subsection (2), each subsequent tax year is £40,000.”

(3) In subsection (2) for “2011-12” substitute “ 2014-15 ”.

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(4) The amendments made by this section have effect for the tax year 2014-15 and subsequent tax years.

50 Drawdown pensions and dependants' drawdown pensions

(1) In section 165 of FA 2004 (pension rules), in subsection (1), in pension rule 5, for “100%” substitute “ 120% ”.

(2) In section 167 of that Act (pension death benefit rules), in subsection (1), in pension death benefit rule 4, for “100%” substitute “ 120% ”.

(3) In Schedule 16 to FA 2011 (benefits under pension schemes)— (a) in paragraph 90(2)(a), after “year” insert “ beginning before 26 March 2013

and ”, (b) in paragraph 90(3), omit paragraph (b) and the “and” before it, (c) in paragraph 98(2)(a), after “year” insert “ beginning before 26 March 2013

and ”, and (d) in paragraph 98(3), omit paragraph (b) and the “and” before it.

(4) The amendments made by subsections (1) and (2) have effect in relation to drawdown pension years beginning on or after 26 March 2013.

(5) The amendments made by subsection (3)(a) and (c) are treated as having come into force on 26 March 2013.

(6) The amendments made by subsection (3)(b) and (d) have effect in relation to transfers within paragraph 90(5) or 98(5) of Schedule 16 to FA 2011 occurring during a drawdown pension year ending on or after 25 March 2013.

51 Bridging pensions

(1) FA 2004 is amended as follows.

(2) In paragraph 2 of Schedule 28 (pension rules: meaning of scheme pension)— (a) in sub-paragraph (4)(c)—

(i) for the words from “not earlier” to “65” substitute “ during the permitted period ”, and

(ii) after “which” insert “ together with any previous reductions of the kind referred to in this paragraph (c) ”, and

(b) after sub-paragraph (4A) insert—

“(4B) In sub-paragraph (4)(c) “the permitted period” means the period beginning with the day on which the member reaches the age of 60 and ending with the day on which the member reaches the age of 65 or, if later, reaches pensionable age.”

(3) In paragraph 1 of Schedule 29 (pension commencement lump sums), in sub- paragraph (4)(a), omit the words from “at a time” to “65”.

(4) In consequence of subsection (3), paragraph 21 of Schedule 23 to the FA 2006 is repealed.

(5) The amendments made by this section have effect for the tax year 2013-14 and subsequent tax years.

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52 Abolition of contracting out of state second pension: consequential amendments etc

(1) FA 2004 is amended as follows.

(2) In section 188 (relief for contributions), in subsection (3) (contributions excluded from relief), omit paragraph (c) and the word “and” immediately preceding that paragraph.

(3) In that section, omit subsection (6) (which treats certain amounts recovered by individual's employer as contributions paid by individual).

(4) Omit section 190(5) (certain reliefs not to count towards annual limit for relief).

(5) Omit section 196(5) (references to contributions to include references to minimum payments when determining relief for employers).

(6) Omit section 202 (minimum contributions under pensions legislation).

(7) Omit section 233(2) (references to contributions not to include references to minimum payments when determining pension input amount).

(8) In paragraph 5 of Schedule 29 (short service refund lump sum), after sub-paragraph (2) insert—

“(2A) In sub-paragraph (2) the reference to the member's contributions includes —

(a) any amount paid under section 7 of the Social Security Act 1986 (incentive payments to schemes becoming contracted-out between 1986 and 1993),

(b) any amount paid by the Commissioners for Her Majesty's Revenue and Customs under section 42A(3) of the Pension Schemes Act 1993 or section 38A(3) of the Pension Schemes (Northern Ireland) Act 1993 (rebates), and

(c) any amount recovered by the member's employer under regulations falling within sub-paragraph (2B) in respect of minimum payments made to the scheme in relation to any period before 6 April 2012.

(2B) Those regulations are regulations which were made under— (a) section 8(3) of the Pension Schemes Act 1993 (recovery of

minimum payments), or (b) section 4(3) of the Pension Schemes (Northern Ireland) Act 1993

(corresponding provision for Northern Ireland).”

(9) Omit paragraph 14(2) of Schedule 36 (which excludes minimum payments from being relevant contributions for the purposes of enhanced protection from lifetime allowance charge).

(10) Subsections (1), (3) to (5) and (7) to (9) come into force on 6 April 2013.

(11) Subsection (2) comes into force on 6 April 2015.

(12) Subsection (6) comes into force on 6 April 2016, except that the repeal of section 202(5) of FA 2004 comes into force on such day as the Treasury may appoint by order made by statutory instrument.

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53 Overseas pension schemes: general

(1) In section 150(8) of FA 2004 (meaning of “recognised overseas pension scheme”), for the words from “which” to the end substitute “ which satisfies any requirements prescribed for the purposes of this subsection by regulations made by the Commissioners for Her Majesty's Revenue and Customs. ”

(2) Section 169 of that Act (pension schemes: recognised transfers) is amended as follows.

(3) In subsection (2)(c), for “any prescribed information requirements imposed on the scheme manager” substitute “ any requirements imposed under subsection (4) ”.

(4) For subsection (4) substitute—

“(4) Regulations may require the scheme manager of a QROPS or former QROPS to—

(a) give the Commissioners information of a prescribed description, (b) give the Commissioners such evidence as they may require of a

prescribed matter, and (c) give a prescribed authority, in prescribed circumstances, information

of a prescribed description.

(4A) Regulations under subsection (4) may make provision as to— (a) the way and form in which information or evidence is to be given, and (b) the times or intervals at which information or evidence is to be given.

(4B) The regulations may apply any provision of Part 7 of Schedule 36 to FA 2008 (penalties), with or without modifications, in relation to requirements imposed under the regulations on a former QROPS.”

(5) In subsection (5)— (a) for “the Inland Revenue has” substitute “ the Commissioners have ”, (b) for paragraph (a) (but not the “and” at the end of it) substitute—

“(a) any of the following conditions is met in relation to the scheme—

(i) there has been a failure to comply with a relevant requirement and the failure is significant,

(ii) any information given pursuant to a relevant requirement is incorrect in a material respect,

(iii) any declaration given pursuant to a relevant requirement is false in a material respect,

(iv) there is no scheme manager,”, and (c) in paragraph (b), for “the failure” substitute “ that condition being met ”.

(6) For subsection (6) substitute—

“(6) A failure to comply with a requirement is significant if— (a) it is a failure to give information or evidence that is (or may be) of

significance, or (b) there are reasonable grounds for believing that the failure prejudices

(or might prejudice) the assessment or collection of tax by the Commissioners.”

(7) After subsection (7) insert—

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“(8) In subsections (4) to (6) and this subsection— “the Commissioners” means the Commissioners for Her Majesty's

Revenue and Customs; “prescribed” means prescribed by regulations; “QROPS” means a qualifying recognised overseas pension

scheme, and “former QROPS” means a scheme that has at any time been a QROPS;

“regulations” means regulations made by the Commissioners; “relevant requirement” means—

(a) a requirement imposed by regulations under subsection (4), or (b) a requirement imposed by virtue of Part 1 of Schedule 36 to FA

2008 (powers to obtain information and documents).”

(8) In section 280(1) of that Act (abbreviations), insert at the appropriate place—

““FA 2008” means the Finance Act 2008,”.

54 Overseas pension schemes: information and inspection powers

(1) Part 6 of Schedule 36 to FA 2008 (information and inspection powers: special cases) is amended as follows.

(2) In paragraph 34B (registered pension schemes etc)— (a) in sub-paragraph (2), omit the “or” at the end of paragraph (b) and, at the end

of paragraph (c) insert— “(d) a QROPS or former QROPS, or (e) an annuity purchased with sums or assets held for the

purposes of a QROPS or former QROPS.”; (b) after sub-paragraph (4) insert—

“(4A) In relation to a notice to which this paragraph applies that refers only to information or documents relating to a matter within sub- paragraph (2)(d) or (e), paragraph 20 (old documents) has effect as if the reference to 6 years were to 10 years.”;

“(7A) Where the notice relates to a matter within sub-paragraph (2)(d) or (e), the officer of Revenue and Customs who gives the notice must give a copy of the notice to the scheme manager in relation to the pension scheme.”;

(d) in sub-paragraph (8), for “and (7)” substitute “ to (7A) ”.

(3) In paragraph 34C (registered pension schemes etc: interpretation), insert at the appropriate places—

““QROPS” and “former QROPS” have the meanings given by section 169(8) of FA 2004;”;

““ “scheme manager”, in relation to a pension scheme, has the meaning given by section 169(3) of FA 2004.”

(4) In paragraphs 34B and 34C of Schedule 36 to FA 2008, references to a former QROPS include a scheme that ceased to be a QROPS before this Act was passed.

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CHAPTER 5

OTHER PROVISIONS

Employee shareholder shares

55 Employee shareholder shares

Schedule 23 contains— (a) provision about employee shareholder shares, and (b) provision for an exemption from income tax in connection with advice relating

to proposed employee shareholder agreements.

Seed enterprise investment scheme

56 SEIS: income tax relief

(1) ITA 2007 is amended as follows.

(2) In section 29 (tax reductions: supplementary), in subsection (4B), after the entry for Chapter 1 of Part 5 insert— “ Chapter 1 of Part 5A (SEIS relief), ”.

(3) In section 32 (liability not dealt with in the calculation), after the entry for section 235 insert— “ under section 257G (withdrawal or reduction of SEIS relief), ”.

(4) In section 257DG (the control and independence requirement), for subsection (2) substitute—

“(2) The independence element of the requirement is that— (a) the issuing company must not at any time in period A (ignoring any

on-the-shelf period) be within subsection (2A), and (b) no arrangements must be in existence at any time in period A

by virtue of which the issuing company could be within that subsection (whether during period A or otherwise).

(2A) The issuing company is within this subsection at any time if it is under the control of any other company (or of another company and any other person connected with that other company).

(2B) In subsection (2)(a) “on-the-shelf period” means a period during which the issuing company—

(a) has not issued any shares other than subscriber shares, and (b) has not begun to carry on, or make preparations for carrying on, any

trade or business.”

(5) The amendments made by subsections (2) and (3) have effect for the tax year 2013-14 and subsequent tax years.

(6) The amendment made by subsection (4) has effect in relation to shares issued on or after 6 April 2013.

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57 SEIS: re-investment relief

(1) Schedule 5BB to TCGA 1992 (seed enterprise investment scheme: re-investment) is amended as follows.

(2) In paragraph 1 (SEIS re-investment relief)— (a) in sub-paragraph (2)—

(i) in paragraph (a), after “the tax year 2012-13” insert “ or the tax year 2013-14 (the year in question being referred to in this Schedule as “the relevant year”) ”, and

(ii) in paragraph (b), for “that year” substitute “ the relevant year ”, (b) in sub-paragraph (3)(a), for “tax year 2012-13” substitute “ relevant year ”,

and (c) for sub-paragraph (5) substitute—

“(5) The relevant percentage of the available SEIS expenditure is to be set against a corresponding amount of the original gain.

(5A) In sub-paragraph (5)— “the available SEIS expenditure” means so much of the SEIS expenditure as—

(a) is specified in the claim, (b) is unused, and (c) does not exceed so much of the original gain as is

unmatched; “the relevant percentage” means—

(a) if the relevant year is the tax year 2012-13, 100%, and (b) if the relevant year is the tax year 2013-14, 50%.”

(3) In paragraph 2 (restrictions on relief under paragraph 1)— (a) in sub-paragraph (1), for “tax year 2012-13” substitute “ relevant year ”, and (b) in sub-paragraph (2)—

(i) for “tax year 2012-13” substitute “ relevant year ”, and (ii) for “that tax year” substitute “ that year ”.

(4) In paragraph 5 (removal or reduction of relief) in sub-paragraph (2) for “2012-13” substitute “ in which the shares were issued ”.

(5) Accordingly, in section 150G of TCGA (which introduces Schedule 5BB), for “tax year 2012-13” substitute “ tax years 2012-13 and 2013-14 ”.

Disincorporation

58 Disincorporation relief

(1) A claim for relief under this section (“disincorporation relief”) may be made where— (a) a company transfers its business to some or all of the shareholders of the

company, (b) the transfer of the business is a qualifying business transfer (see section 59),

and

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(2) As to the consequences of a claim for disincorporation relief being made, see— sections 162B and 162C of TCGA 1992; section 849A of CTA 2009.

(3) In this section and sections 59 to 61 “the business transfer date”, in relation to the transfer of a business, is the date on which the business is transferred.

For this purpose, where the business is transferred under a contract— (a) the date on which the business is transferred is to be determined in accordance

with section 28 of TCGA 1992, and (b) if the business in question is transferred by more than one contract, then for the

purposes of that section the contract under which the business is transferred is to be taken to be the contract under which the goodwill of the business is transferred.

(4) This section and sections 59 and 60 apply to a transfer of a business with a business transfer date of 1 April 2013 or a later date.

59 Qualifying business transfer

(1) The transfer of a business from a company to some or all of the shareholders of the company is a qualifying business transfer for the purposes of section 58 if conditions A to E are met.

(2) Condition A is that the business is transferred as a going concern.

(3) Condition B is that the business is transferred together with all of the assets of the business, or together with all of those assets other than cash.

(4) Condition C is that the total market value of the qualifying assets of the business included in the transfer does not exceed £100,000.

(5) Condition D is that all of the shareholders to whom the business is transferred are individuals.

(6) Condition E is that each of those shareholders held shares in the company throughout the period of 12 months ending with the business transfer date.

(7) For the purposes of condition D, the reference to individuals includes an individual acting as a member of a partnership, but does not include an individual acting as a member of a limited liability partnership.

(8) Section 60 of TCGA 1992 (nominees and bare trustees) applies for the purposes of this section as it applies for the purposes of that Act.

(9) In this section “market value”, in relation to an asset, means the price which the asset might reasonably be expected to fetch on a sale in the open market.

(10) In this section a “qualifying asset” means— (a) goodwill, or (b) an interest in land which is not held as trading stock.

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60 Making a claim

(1) A claim for disincorporation relief under section 58— (a) is to be made jointly by the company and all of the shareholders to whom the

business is transferred, and (b) is irrevocable.

(2) Any claim for disincorporation relief must be made within the period of 2 years beginning with the business transfer date.

61 Effect of disincorporation relief

(1) In Part 5 of TCGA 1992 (transfer of business assets), in Chapter 1 (general provisions), after section 162A insert—

“Transfer of business from company to shareholders

162B Disincorporation relief: assets (including pre-FA 2002 goodwill)

(1) This section applies where— (a) a company transfers its business to some or all of the shareholders of

the company, and (b) a claim for disincorporation relief in respect of the transfer has been

made under section 58 of the Finance Act 2013.

(2) The disposal and acquisition of any qualifying asset of the business included in the transfer is to be deemed to be for a consideration equal to the lower of—

(a) the sums allowable under section 38 as a deduction in the computation of the gain accruing to the company on the disposal of the asset in question, and

(b) the market value of the asset.

(3) In subsection (2) a “qualifying asset” means— (a) goodwill, or (b) an interest in land which is not held as trading stock.

(4) But subsection (2) does not apply to the goodwill of the business if section 162C applies to it.

162C Disincorporation relief: post-FA 2002 goodwill

(1) This section applies where— (a) a company transfers its business to some or all of the shareholders of

the company, (b) a claim for disincorporation relief in respect of the transfer has been

made under section 58 of the Finance Act 2013, and (c) section 849A of CTA 2009 (disincorporation relief: transfer values

for post-FA 2002 goodwill) applies to the transfer of the goodwill of the business.

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(2) The acquisition of the goodwill of the business is deemed to be for a consideration equal to the value at which the goodwill is treated as transferred by virtue of section 849A of CTA 2009.”

(2) In Part 8 of CTA 2009 (intangible fixed assets), Chapter 13 (transactions between related parties) is amended as follows.

(3) In section 844 (overview of Chapter), in subsection (2) for “849” substitute “ 849A ”.

(4) In section 845 (transfer between company and related party treated as at market value), in subsection (4) (exceptions to basic rule)—

(a) omit the “and” at the end of paragraph (ca), and (b) after paragraph (d) insert “, and

(e) section 849A (disincorporation relief: transfer values for post-FA 2002 goodwill).”

(5) After section 849 insert—

“849A Disincorporation relief: transfer values for post-FA 2002 goodwill

(1) This section applies where— (a) a company transfers its business to some or all of the shareholders of

the company, and (b) a claim for disincorporation relief in respect of the transfer has been

made under section 58 of the Finance Act 2013.

(2) If section 735 applies to the transfer of the goodwill of the business, the transfer is treated for the purposes of this Part as being at the lower of—

(a) the tax written-down value of the goodwill, and (b) its market value.

(3) If section 736 applies to the transfer of the goodwill of the business, the transfer is treated for the purposes of this Part as being at the lower of—

(a) the cost of the goodwill, and (b) its market value.

(4) If section 738 applies to the transfer of the goodwill of the business, the proceeds of realisation of the goodwill are treated for the purposes of this Part as being nil.

(5) In subsection (2)(a) the reference to the tax written-down value of the goodwill is to its tax written-down value immediately before the transfer.

(6) In subsection (3)(a) “the cost of the goodwill” means the cost recognised for tax purposes (determined in accordance with section 736(6) and (7)).

(7) In this section market value has the meaning given in section 845(5).”

(6) The amendments made by this section have effect in relation to a transfer of a business with a business transfer date of 1 April 2013 or a later date.

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Capital gains

62 Attribution of gains to members of non-resident companies

(1) TCGA 1992 is amended as follows.

(2) In subsection (4) of section 13 (members to whom rule for attributing gains to members of non-resident companies does not apply), for “one tenth” substitute “ one quarter ”.

(3) In subsection (5) of that section (cases where rule for attributing gains to members of non-resident companies does not apply), after the “or” at the end of paragraph (b) insert—

“(ca) a chargeable gain accruing on the disposal of an asset used, and used only, for the purposes of economically significant activities carried on by the company wholly or mainly outside the United Kingdom, or

(cb) a chargeable gain accruing to the company on a disposal of an asset where it is shown that neither—

(i) the disposal of the asset by the company, nor (ii) the acquisition or holding of the asset by the company,

formed part of a scheme or arrangements of which the main purpose, or one of the main purposes, was avoidance of liability to capital gains tax or corporation tax, or”.

(4) After section 13 insert—

“13A Section 13(5): interpretation

(1) For the purposes of section 13(5)(b) a disposal of an asset is to be regarded as a disposal of an asset used for the purposes of a trade carried on wholly outside the United Kingdom by a company if—

(a) the asset is accommodation, or an interest or right in accommodation, which is situated outside the United Kingdom, and

(b) the accommodation has for each relevant period been furnished holiday accommodation of which a person has made a commercial letting.

(2) For the purposes of subsection (1)(b) each of the following is “a relevant period”—

(a) the period of 12 months ending with the date of the disposal and each of the two preceding periods of 12 months, or

(b) if the company has been the beneficial owner of the accommodation (or interest or right) for a period longer than 36 months, the period of 12 months ending with the date of the disposal and each of the preceding periods of 12 months throughout which the company has been the beneficial owner of the accommodation (or interest or right).

(3) The reference in subsection (1)(b) to the commercial letting of furnished holiday accommodation is to be read in accordance with Chapter 6 of Part 4 of CTA 2009, but—

(a) as if sections 266, 268 and 268A were omitted, and (b) as if, in section 267(1), the reference to an accounting period were a

reference to a relevant period as defined by subsection (2) above.

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(4) For the purposes of section 13(5)(ca) activities carried on by a company are “economically significant activities” if they are activities which consist of the provision by the company of goods or services to others on a commercial basis and involve—

(a) the use of staff in numbers, and with competence and authority, (b) the use of premises and equipment, and (c) the addition of economic value, by the company, to those to whom

the goods or services are provided, commensurate with the size and nature of those activities.

(5) In subsection (4) “staff” means employees, agents or contractors of the company.”

(5) The amendments made by this section have effect in relation to disposals made on or after 6 April 2012.

(6) But, in the case of a disposal made on or after that date but before 6 April 2013, a person to whom a part of a chargeable gain or allowable loss would (but for the amendments made by this section) have accrued on the disposal may make an election in writing for section 13 of TCGA 1992 to apply in relation to the disposal without those amendments.

(7) An election under subsection (6) in respect of a disposal must be made— (a) in the case of a person within the charge to capital gains tax, within 4 years

from the end of the tax year in which the disposal was made, and (b) in the case of a person within the charge to corporation tax, within 4 years

from the end of the accounting period in which the disposal was made.

63 Heritage maintenance settlements

(1) In section 169D of TCGA 1992 (gifts to settlor-interested settlements etc: exceptions to sections 169B and 169C), in subsection (1), after “elected” insert “ , or could have elected, ”.

(2) The amendment made by this section has effect for the tax year 2012-13 and subsequent tax years.

64 EMI options and entrepreneurs' relief etc

Schedule 24 makes provision for capital gains tax purposes in connection with shares acquired under options which are qualifying options under the EMI code.

65 Charge on certain high value disposals by companies etc

Schedule 25 contains provision for a new capital gains tax charge on gains accruing to companies etc on certain high value disposals.

66 Currency used in tax calculations: chargeable gains and losses

(1) Chapter 4 of Part 2 of CTA 2010 (currency) is amended as follows.

(2) In section 5 (basic rule: sterling to be used), after subsection (2) insert—

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“(3) See section 9C for provision about the application of subsection (1) so far as it relates to calculating chargeable gains.”

(3) After section 9B insert—

“9C Chargeable gains and losses of companies

(1) This section applies if— (a) a company disposes of an asset which is a ship, an aircraft, shares or

an interest in shares, and (b) at any time beginning with the company's acquisition of the asset (or,

if earlier, the time allowable expenditure was first incurred in respect of the asset) and ending with the disposal, the company's relevant currency is not sterling.

(2) A company's relevant currency at any time is its functional currency at that time, subject to subsection (3).

(3) If, at any time— (a) a company is a UK resident investment company, and (b) the company has a designated currency (see sections 9A and 9B)

which is different from its functional currency, the company's relevant currency at that time is that designated currency.

(4) If the relevant currency of the company at the time of the disposal is not sterling, the chargeable gain or loss accruing to the company on the disposal must be calculated as follows—

Step 1 Calculate the chargeable gain or loss in the relevant currency of the company at the time of the disposal. Step 2 Translate the amount of the chargeable gain or loss into sterling by reference to the spot rate of exchange on the day of the disposal.

(5) In any case, subsections (6) to (10) apply for the purposes of calculating the chargeable gain or loss.

(6) Where any allowable expenditure is incurred in a currency which is not the company's relevant currency at the time it is incurred, that expenditure is to be translated into that relevant currency by reference to the spot rate of exchange for the day on which it is incurred.

(7) Where, at any time after any allowable expenditure is incurred but before the asset is disposed of, there is a change in the company's relevant currency, that expenditure is to be translated (or, if it has previously been translated under this section, further translated) into the relevant currency of the company immediately following the change, by reference to the spot rate of exchange for the day of the change.

(8) Any amount of consideration for the disposal which is given in a currency other than the company's relevant currency is to be translated into that relevant currency by reference to the spot rate of exchange on the day of disposal.

(9) For the purposes of subsections (6) and (7)— (a) any translation of expenditure under subsection (6) is to be done

before any translation of the expenditure under subsection (7), and

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(b) if subsection (7) applies as a result of more than one change in the company's relevant currency, it is to be applied in relation to each change in the order the changes were made (with the earliest first).

(10) Where, by virtue of any enactment, the company was at any time treated for the purposes of corporation tax on chargeable gains as acquiring the asset—

(a) for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the person disposing of the asset, or

(b) for a consideration equal to the market value of the asset, for the purposes of this section that allowable expenditure is treated as incurred by the company at that time.

(11) For the purposes of this section, a reference to a ship or aircraft includes a reference to the benefit of a contract—

(a) to which section 67 of CAA 2001 applies, and (b) which relates to plant or machinery which is a ship or aircraft.

(12) In this section— “allowable expenditure” means expenditure which, immediately

before the disposal, was attributable to the asset under section 38(1) (a) to (c) of TCGA 1992;

“interest in shares” has the same meaning as in Schedule 7AC to TCGA 1992 (see paragraph 29 of that Schedule);

“shares” includes stock.”

(4) The amendments made by this section come into force in accordance with provision made by the Treasury by order.

Capital allowances

67 Allowances for energy-saving plant and machinery: Northern Ireland

(1) Section 45AA of CAA 2001 (section 45A exclusion: payments under Energy Act 2008 schemes) is amended as follows.

(2) In subsection (1)— (a) in paragraph (a), after “(feed-in tariffs)” insert “ , or under a corresponding

scheme having effect in Northern Ireland, ”, and (b) in paragraph (b), after “of that Act” insert “ or section 113 of the Energy Act

2011 ”.

(3) In subsection (5), for “subsection (6)” substitute “ subsections (5A) and (6) ”.

(4) After that subsection insert—

“(5A) Except as provided by subsection (6), in the case of expenditure incurred on plant or machinery used or for use in Northern Ireland, the relevant date is—

(a) for corporation tax purposes, 1 April 2013, and (b) for income tax purposes, 6 April 2013.”

(5) In the heading, for “payments under Energy Act 2008 schemes” substitute “ feed- in tariffs and renewable heat incentives ”.

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68 Cars with low carbon dioxide emissions

(1) In section 45D of CAA 2001 (first year qualifying expenditure on cars with low carbon dioxide emissions)—

(a) in subsection (1)(a), for “2013” substitute “ 2015 ”, and (b) in subsection (4), for “110” substitute “ 95 ”.

(2) In section 46 of that Act (general exclusions), in subsection (5) omit “section 45D,”.

(3) In section 104AA of that Act (special rate expenditure: meaning of “main rate car”), in subsection (4) for “160” substitute “ 130 ”.

(4) Accordingly, in section 77 of FA 2008 omit— (a) subsection (2), and (b) subsection (3).

(5) The amendments made by subsections (1)(b), (2) and (4)(b) have effect in relation to expenditure incurred on or after 1 April 2013.

(6) The amendment made by subsection (3) has effect in relation to expenditure incurred on or after the relevant date.

(7) But in relation to expenditure incurred on the hiring of a car— (a) for a period of hire which begins before the relevant date, and (b) under a contract entered into before that date,

section 49(1A) of ITTOIA 2005 and section 57(1A) of CTA 2009 apply on or after the relevant date as if the amendment made by subsection (3) did not have effect.

(8) “The relevant date” means— (a) in the case of income tax, 6 April 2013, and (b) in the case of corporation tax, 1 April 2013.

69 Gas refuelling stations: extension of time limit for capital allowance

In section 45E(1)(a) of CAA 2001 (time limit for incurring of expenditure qualifying for first-year allowance), for “2013” substitute “ 2015 ”.

70 First-year allowance to be available for ships and railway assets

(1) In section 46(2) of CAA 2001 (general exclusions from first-year allowance), omit— (a) general exclusion 3 (ships), and (b) general exclusion 4 (railway assets),

and the italicised headings preceding them.

(2) The amendments made by this section have effect for expenditure incurred on or after 1 April 2013.

71 Restrictions on buying capital allowances

Schedule 26 contains provision amending Chapter 16A of Part 2 of CAA 2001 (restrictions on allowance buying).

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72 Hire cars for disabled persons

(1) In section 268D of CAA 2001 (hire cars for disabled persons), in subsection (2), after paragraph (a) insert—

“(aa) personal independence payment under the Welfare Reform Act 2012, or the corresponding provision having effect in Northern Ireland, because of entitlement to the mobility component,

(ab) armed forces independence payment under a scheme established under section 1 of the Armed Forces (Pensions and Compensation) Act 2004,”.

(2) The amendment made by this section has effect in relation to expenditure incurred on or after 1 April 2013.

73 Contribution allowances: plant and machinery

(1) Section 538 of CAA 2001 (contribution allowances: plant and machinery) is amended as follows.

(2) In subsection (1), omit the “and” at the end of paragraph (a) and after that paragraph insert—

“(aa) C's contribution is to expenditure on the provision of plant or machinery, and”.

(3) In subsection (2)— (a) in paragraph (a), for “asset provided by means of C's contribution” substitute

“ plant or machinery ”, (b) in paragraph (b), for “asset” substitute “ plant or machinery ”, and (c) in paragraph (c)—

(i) for “asset” substitute “ plant or machinery ”, and (ii) after “times” insert “ plant or machinery ”.

(4) The amendments made by this section have effect in relation to expenditure pooled, and to claims made, on or after 29 May 2013 (“the commencement date”).

(5) In relation to such expenditure and claims, when determining for the purposes of section 536(3)(a) of CAA 2001 whether an allowance can be made under Chapter 2 of Part 11 of that Act, the amendments made by this section are to be treated as always having had effect.

(6) Nothing in this section applies to a claim by a person for a contribution allowance under Part 2 of CAA 2001 in respect of a contribution made before the commencement date.

(7) Subsection (8) applies if— (a) expenditure which a person has been regarded as having incurred (despite

section 532(1) of CAA 2001) by virtue of section 536(1) of that Act has been pooled by virtue of section 53 of that Act—

(i) on or after 1 January 2013 but before the commencement date, or (ii) before 1 January 2013 in circumstances where no claim was made in

respect of the expenditure before that date, and

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(b) had the amendments made by this section had effect at the time the expenditure was incurred, that person would not have been regarded as having incurred that expenditure (“the relevant expenditure”).

(8) Part 2 of CAA 2001 has effect as if an event had occurred as a result of which the person is required to bring into account as a disposal receipt under that Part, for the chargeable period in which the commencement date falls, a disposal value of an amount equal to E-A.

(9) For the purposes of subsection (8)— E is the amount of the relevant expenditure, and A is the total amount of writing-down allowances made in respect of the relevant expenditure.

(10) For the purpose of calculating A, the total amount of writing-down allowances made in respect of expenditure on an item of plant or machinery is to be determined as if that item were the only item of plant or machinery in relation to which Chapter 5 of Part 2 of CAA 2001 had effect.

(11) The event mentioned in subsection (8) is not to be regarded as a disposal event for the purposes of section 60(3) of CAA 2001.

Miscellaneous

74 Community investment tax relief

Schedule 27 makes provision about community investment tax relief.

75 Lease premium relief

Schedule 28 makes provision in relation to relief for lease premiums.

76 Manufactured payments: stock lending arrangements

(1) Section 596 of ITA 2007 (deemed manufactured payments: stock lending arrangements) is amended in accordance with subsections (2) and (3).

(2) For subsection (1) substitute—

“(1) This section applies if conditions A to C are met.

(1A) Condition A is that there is a stock lending arrangement in respect of securities.

(1B) Condition B is that a dividend or interest on the securities is paid, as a result of the arrangement, to a person other than the person who is the lender under the arrangement.

(1C) Condition C is that— (a) no provision is made for securing that the lender receives payments

representative of the dividend or interest, or (b) provision is made for securing that the lender receives—

(i) payments representative of the dividend or interest, and

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(ii) another benefit in respect of the dividend or interest (including the release of the whole or part of any liability to pay an amount).”

(3) In subsection (2), for paragraph (a) substitute— “(a) were required, under the arrangement—

(i) in a case falling within paragraph (a) of subsection (1C), to pay the lender an amount representative of the dividend or interest, or

(ii) in a case falling within paragraph (b) of that subsection, to pay the lender an amount representative of the dividend or interest but deducting from that amount any payment mentioned in sub-paragraph (i) of that paragraph on which tax has been, or is to be, charged, and”.

(4) Section 812 of CTA 2010 (deemed manufactured payments: stock lending arrangements) is amended in accordance with subsections (5) to (7).

(5) For subsection (1) substitute—

“(1) This section applies if conditions A to C are met.

(1A) Condition A is that there is a stock lending arrangement in respect of securities.

(1B) Condition B is that a dividend or interest on the securities is paid, as a result of the arrangement, to a person other than the person who is the lender under the arrangement.

(1C) Condition C is that— (a) no provision is made for securing that the lender receives payments

representative of the dividend or interest, or (b) provision is made for securing that the lender receives—

(i) payments representative of the dividend or interest, and (ii) another benefit in respect of the dividend or interest

(including the release of the whole or part of any liability to pay an amount).”

(6) In subsection (2), for paragraph (a) substitute— “(a) were required, under the arrangement—

(i) in a case falling within paragraph (a) of subsection (1C), to pay the lender an amount representative of the dividend or interest, or

(7) After subsection (6) insert—

“(7) This section has effect regardless of section 358 of CTA 2009 (exclusion of credits on release of connected companies debts) or any other provision of Part

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5 of that Act (loan relationships) which prevents a credit from being brought into account.”

(8) The amendments made by this section have effect in relation to cases in which a dividend or interest is paid, or is treated as paid, on or after 5 December 2012.

77 Manufactured payments: general

Schedule 29 contains provision for, and in connection with, the application of the Tax Acts to manufactured payment relationships and payments representative of dividends and interest.

78 Relationship between rules prohibiting and allowing deductions

(1) In section 31 of ITTOIA 2005 (trade profits: relationship between rules prohibiting and allowing deductions)—

(a) after subsection (1) insert—

“(1A) But, if the relevant permissive rule would allow a deduction in calculating the profits of a trade in respect of an amount which arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements, that rule—

(a) does not have priority under subsection (1)(a), and (b) is subject to any relevant prohibitive rule in this Part (and to

the provisions mentioned in subsection (1)(b)).”, and” (b) after subsection (3) insert—

“(4) In this section “relevant tax avoidance arrangements” means arrangements—

(a) to which the person carrying on the trade is a party, and (b) the main purpose, or one of the main purposes, of which

is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).”

(2) In section 274 of ITTOIA 2005 (property businesses: relationship between rules prohibiting and allowing deductions)—

(a) after subsection (1) insert—

“(1A) But, if the relevant permissive rule would allow a deduction in calculating the profits of a property business in respect of an amount which arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements, that rule—

(a) does not have priority under subsection (1)(a), and (b) is subject to any relevant prohibitive rule in this Part (and to

the provisions mentioned in subsection (1)(b)).”, and” (b) after subsection (3) insert—

“(3A) In this section “relevant tax avoidance arrangements” means arrangements—

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(a) to which the person carrying on the property business is a party, and

(b) the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).”

(3) In section 51 of CTA 2009 (trade profits: relationship between rules prohibiting and allowing deductions)—

(a) after subsection (1) insert—

(a) does not have priority under subsection (1)(a), and (b) is subject to any relevant prohibitive rule (and to the

provisions mentioned in subsection (1)(b)).”, and (b) after subsection (3) insert—

“(4) In this section “relevant tax avoidance arrangements” means arrangements—

(a) to which the company carrying on the trade is a party, and (b) the main purpose, or one of the main purposes, of which

is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).”

(4) In section 214 of CTA 2009 (property businesses: relationship between rules prohibiting and allowing deductions)—

(a) after subsection (1) insert—

(a) does not have priority under subsection (1)(a), and (b) is subject to any relevant prohibitive rule (and to the

provisions mentioned in subsection (1)(b)).”, and (b) after subsection (3) insert—

“(3A) In this section “relevant tax avoidance arrangements” means arrangements—

(a) to which the company carrying on the property business is a party, and

(b) the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage (within the meaning of section 1139 of CTA 2010).

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“Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).”

(5) The amendments made by this section have effect in relation to deductions in respect of amounts which arise directly or indirectly in consequence of, or otherwise in connection with—

(a) arrangements which are entered into on or after 21 December 2012, or (b) any transaction forming part of arrangements which is entered into on or after

that date.

(6) But those amendments do not have effect where the arrangements are, or any such transaction is, entered into pursuant to an unconditional obligation in a contract made before that date.

(7) “An unconditional obligation” means an obligation which may not be varied or extinguished by the exercise of a right (whether under the contract or otherwise).

79 Close companies

Schedule 30 (which makes provision about close companies) has effect.

PART 2

OIL

Decommissioning relief agreements

80 Decommissioning relief agreements

(1) There are to be paid out of money provided by Parliament any sums which a Minister of the Crown is liable to pay under a decommissioning relief agreement.

(2) A “decommissioning relief agreement” is an agreement which— (a) is made between a Minister of the Crown and a qualifying company, and (b) provides that, in such circumstances as are specified in the agreement, if the

amount of tax relief in respect of any decommissioning expenditure incurred by that or another qualifying company is less than an amount determined in accordance with the agreement (“the reference amount”), the difference is payable to the company that incurred the expenditure.

(3) “Qualifying company” means— (a) any company that has at any time carried on a ring fence trade, (b) any company that is associated with a company carrying on a ring fence trade, (c) any company that has at any time been associated with a company that was

carrying on a ring fence trade at that time, and (d) in the case of decommissioning expenditure incurred in connection with any

plant or machinery, or any land, situated in the UK sector of a cross-boundary field, any company that is a party to a joint operating agreement or unitisation agreement in relation to that field.

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(4) For the purposes of subsection (2)(b) the amount of tax relief in respect of any decommissioning expenditure is to be determined in accordance with the agreement; and in making such a determination tax relief in respect of expenditure incurred by the qualifying company that is not decommissioning expenditure may, in such circumstances as are specified in the agreement, be treated as if it were tax relief in respect of decommissioning expenditure.

(5) A payment made to a company under a decommissioning relief agreement is not to be regarded as income or a gain of the company for any purpose of the Tax Acts.

(6) Section 18(1) of CRCA 2005 (restriction on disclosure by Revenue and Customs officials) does not prevent—

(a) disclosure to a Minister of the Crown for the purpose of enabling the Minister of the Crown to determine the extent of any liability under a decommissioning relief agreement, or

(b) disclosure to a company that has rights under a decommissioning relief agreement for the purpose of enabling the company to determine the reference amount.

(7) In this section— “company” has the meaning given by section 1121 of CTA 2010, “cross-boundary field” has the meaning given by section 10(9) of the

Petroleum Act 1998, “decommissioning expenditure” has the meaning given by section 81, “Minister of the Crown” includes the Treasury, “ring fence trade” has the same meaning as in Part 8 of CTA 2010 (see

section 277 of that Act), “the UK sector of a cross-boundary field” means that part of a cross-

boundary field lying within the UK marine area (as defined by section 42 of the Marine and Coastal Access Act 2009), and

“unitisation agreement” has the meaning given by paragraph 1(2) of Schedule 17 to FA 1980.

(8) Subsections (8) to (9) of section 30 of the Petroleum Act 1998 (which specifies when one body corporate is associated with another) apply for the purposes of this section as they apply for the purposes of that section.

81 Meaning of “decommissioning expenditure”

(1) In section 80 “decommissioning expenditure” means expenditure incurred in connection with—

(a) demolishing any plant or machinery, (b) preserving any plant or machinery pending its reuse or demolition, (c) preparing any plant or machinery for reuse, (d) arranging for the reuse of any plant or machinery, or (e) the restoration of any land.

(2) It is immaterial for the purposes of subsection (1)(b) whether the plant or machinery is reused, is demolished or is partly reused and partly demolished.

(3) It is immaterial for the purposes of subsection (1)(c) and (d) whether the plant or machinery is in fact reused.

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(4) In subsection (1)(e) “restoration” includes landscaping.

(5) The Treasury may by order amend this section.

(6) An order under subsection (5) may include transitional provision and savings.

(7) The power to make an order under subsection (5) is exercisable by statutory instrument.

(8) A statutory instrument containing an order under subsection (5) is subject to annulment in pursuance of a resolution of the House of Commons.

82 Annual report

(1) For each financial year the Treasury must prepare a report containing the information in subsection (2).

(2) The information is— (a) the number of decommissioning relief agreements entered into in that year, (b) the total number of decommissioning relief agreements in force at the end of

that year, (c) the number of payments made under any decommissioning relief agreements

during that year, and the amount of each payment, (d) the total number of payments that have been made under any

decommissioning relief agreements as at the end of that year, and the total amount of those payments, and

(e) an estimate of the maximum amount liable to be paid under any decommissioning relief agreements.

(3) The report for a financial year must be laid before the House of Commons as soon as is reasonably practicable after the end of that year.

(4) In this section “decommissioning relief agreement” has the same meaning as in section 80.

(5) This section has effect in relation to financial years ending on or after 31 March 2014.

83 Effect of claim on PRT

(1) This section applies where a sum is payable to a company (“the claimant”) under a decommissioning relief agreement.

(2) Subsection (3) applies where the reference amount is calculated by reference to what the claimant's assessable profit in any chargeable period would be if any expenditure incurred by it were used to reduce its profit in a particular way (rather than in any way that it has in fact been used).

(3) For the purposes of petroleum revenue tax— (a) the expenditure is treated as having been used to reduce the claimant's profit

in that way (rather than in any way that it has in fact been used), and (b) the claimant is treated as if it had received the tax relief it would receive if

its profit were reduced in that way (so no repayment of tax is to be made by virtue of this subsection).

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(4) Subsection (5) applies where the reference amount is calculated by reference to what any other company's assessable profit in any chargeable period would be if any expenditure incurred by the claimant—

(a) had been incurred by the other company, and (b) were used to reduce the other company's profit in a particular way.

(5) For the purposes of petroleum revenue tax— (a) the expenditure is treated as incurred by the other company (and not the

claimant), (b) the expenditure is treated as having been used by the other company to reduce

its profit in that way, and (c) the other company is treated as if it had received the tax relief it would receive

if its profit were reduced in that way (so no repayment of tax is to be made by virtue of this subsection).

(6) In this section— “assessable profit” and “chargeable period” have the same meaning as in

Part 1 of OTA 1975, “company” has the meaning given by section 1121 of CTA 2010, “decommissioning relief agreement” has the same meaning as in

section 80, and “the reference amount” means the reference amount (within the meaning

of that section) that relates to the sum mentioned in subsection (1).

84 Terminal losses accruing by virtue of another's default

(1) This section applies where— (a) a company defaults on a liability under—

(i) a relevant agreement, or (ii) an abandonment programme,

to make a payment towards decommissioning expenditure in respect of an oil field,

(b) in consequence of the default, another company (“the other company”) that has rights under a decommissioning relief agreement at the time of the default incurs decommissioning expenditure in respect of that oil field, and

(c) but for paragraph 15 of Schedule 17 to FA 1980 (terminal losses), a sum (or a sum of a greater amount) would be payable to the other company under the decommissioning relief agreement.

(2) Paragraph 15 of Schedule 17 to FA 1980 does not apply in relation to any allowable loss accruing to the other company from that oil field.

(3) Any allowable unrelievable field loss (within the meaning of section 6 of OTA 1975) that—

(a) consists of the unrelieved portion of an allowable loss within subsection (2), and

(b) would (in the absence of this subsection) arise as a result of subsection (2), is not to be regarded as arising.

(4) Nothing in this section affects the operation of section 83(3) or (5).

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(5) In this section— “abandonment programme” means an abandonment programme approved

under Part 4 of the Petroleum Act 1998 (including such a programme as revised),

“company” has the meaning given by section 1121 of CTA 2010, “decommissioning expenditure” has the same meaning as in section 80, “decommissioning relief agreement” has the same meaning as in that

section, “oil field” has the same meaning as in OTA 1975, “relevant agreement” has the meaning given by section 104(5)(a) of FA

1991, and “unrelieved portion”, in relation to an allowable loss, is to be read in

accordance with section 6 of OTA 1975.

85 Claims under agreement not to affect oil allowance

(1) This section applies where— (a) a company defaults on a liability under—

(i) a relevant agreement, or (ii) an abandonment programme,

to make a payment towards decommissioning expenditure in respect of an oil field,

(b) in consequence of the default, another company that has rights under a decommissioning relief agreement at the time of the default incurs decommissioning expenditure in respect of that oil field, and

(c) by virtue of section 83, any expenditure incurred by that company (whether or not that decommissioning expenditure) is treated as having been used by that company or any other company (“the affected company”) to reduce its assessable profit in a chargeable period in a particular way.

(2) If, in the absence of section 83, the assessable profit accruing to the affected company from an oil field in that chargeable period would be reduced under section 8(1) of OTA 1975, the amount of the oil allowance for the oil field utilised by the affected company in that chargeable period for the purposes of section 8 of that Act is to be determined as if section 83 did not apply.

(3) In this section— “abandonment programme” means an abandonment programme approved

under Part 4 of the Petroleum Act 1998 (including such a programme as revised),

section, “oil field” has the same meaning as in OTA 1975, and “relevant agreement” has the meaning given by section 104(5)(a) of FA

1991.

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Decommissioning security settlements

86 Removal of IHT charges in respect of decommissioning security settlements

(1) In Chapter 3 of Part 3 of IHTA 1984 (settled property: settlements without interests in possession etc), section 58 (relevant property) is amended as follows.

(2) In subsection (1), omit the “and” at the end of paragraph (ea) and before paragraph (f) insert—

“(eb) property comprised in a decommissioning security settlement; and”.

(3) At the end insert—

“(6) For the purposes of subsection (1)(eb) above a settlement is a “decommissioning security settlement” if the sole or main purpose of the settlement is to provide security for the performance of obligations under an abandonment programme.

(7) In subsection (6)— “abandonment programme” means an abandonment programme

approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised);

“security” has the same meaning as in section 38A of that Act.”

(4) This section is treated as having come into force on 20 March 1993.

(5) For the purposes of section 58 of IHTA 1984— (a) any reference in that section to Part 4 of the Petroleum Act 1998 has effect, in

relation to any period before the coming into force of that Part, as a reference to Part 1 of the Petroleum Act 1987, and

(b) section 38A of the Petroleum Act 1998 is to be treated as having come into force at the same time as this section.

(6) There is to be no charge to tax under section 65 of IHTA 1984 if the only reason for such a charge would be that property ceases to be relevant property by virtue of the coming into force of this section.

87 Loan relationships arising from decommissioning security settlements

(1) In Part 8 of CTA 2010 (oil activities), after section 287 insert—

“287A Restriction where debits or credits relate to decommissioning security settlement

(1) No debits or credits are to be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of a company's loan relationship so far as the loan relationship is in respect of property comprised in a decommissioning security settlement.

(2) For the purposes of this section a settlement is a “decommissioning security settlement” if the sole or main purpose of the settlement is to provide security for the performance of obligations under an abandonment programme.

(3) In subsection (2)—

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“abandonment programme” means an abandonment programme approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised), and

“security” has the same meaning as in section 38A of that Act.”

(2) In section 464 of CTA 2009 (priority of Part 5 for corporation tax purposes), in subsection (3)(e), for “and 287” substitute “ to 287A ”.

(3) The amendments made by this section have effect in relation to accounting periods beginning on or after the day on which this Act is passed.

Decommissioning expenditure etc

88 Decommissioning expenditure taken into account for PRT purposes

(1) Section 330B of CTA 2010 (decommissioning expenditure taken into account for PRT purposes) is amended as follows.

(2) In subsection (1), omit the “and” at the end of paragraph (a) and after paragraph (b) insert “, and

(c) an amount equal to the appropriate fraction of the used-up amount of that expenditure is added under section 330A(2) in calculating the participator's adjusted ring fence profits for an accounting period.”

(3) For subsection (2) substitute—

“(2) In calculating for the purposes of section 330(1) the amount of the participator's adjusted ring fence profits for the accounting period, there is to be deducted the amount given by—

where—

RP is the relevant percentage of the decommissioning expenditure,

AF is the appropriate fraction, and

D is the PRT difference.”

(4) In subsection (3)— (a) before the definition of “the appropriate fraction” insert—

““the relevant percentage of the decommissioning expenditure” is the percentage of that expenditure that is the used-up amount referred to in subsection (1)(c),”;

(b) in the definition of “the appropriate fraction”, omit “relevant”; (c) in the definition of “the PRT difference”, for “subsection (1)” substitute “

subsection (1)(a) ”.

(5) In subsection (4), for “subsection (1)” substitute “ subsection (1)(a) ”.

(6) In subsection (7)—

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(a) omit the definition of “the relevant accounting period”, and (b) at the end insert—

““the used-up amount”, in relation to any expenditure, has the same meaning as in section 330A (see subsection (3) of that section).”

(7) The amendments made by this section have effect in relation to expenditure incurred in connection with decommissioning carried out on or after the day on which this Act is passed.

89 Miscellaneous amendments relating to decommissioning

(1) Part 1 of Schedule 31 contains provision about expenditure on and under abandonment guarantees and abandonment expenditure.

(2) Part 2 of Schedule 31 contains provision about calculating the profits of a ring fence trade carried on by a person who incurs expenditure on meeting another person's decommissioning liabilities.

Capital allowances

90 Expenditure on decommissioning onshore installations

(1) Section 163 of CAA 2001 (meaning of “general decommissioning expenditure”) is amended as follows.

(2) In subsection (1)— (a) the words after “if” become paragraph (a) of that subsection, (b) in that paragraph, for “subsections (3) to (4)” substitute “ subsections (3), (3A)

and (4) ”, and (c) at the end of that paragraph insert “, or

(b) the conditions in subsections (3B) and (4) are met.”

(3) After subsection (3A) insert—

“(3B) The expenditure must have been incurred on decommissioning plant or machinery—

(a) which has been brought into use wholly or partly for the purposes of a ring fence trade, and

(b) which— (i) is, or forms part of, a relevant onshore installation, or

(ii) when last in use for the purposes of a ring fence trade, was, or formed part of, such an installation.

(3C) In subsection (3B) “relevant onshore installation” means any building or structure which—

(a) falls within any of sub-paragraphs (ii) to (iv) of section 3(4)(c) of OTA 1975,

(b) is not an offshore installation, and (c) is or has been used for purposes connected with the winning of oil

from an oil field any part of which lies within— (i) the boundaries of the territorial sea of the United Kingdom, or

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(ii) an area designated under section 1(7) of the Continental Shelf Act 1964.”

(4) In subsection (5)(a), for “ “oil field” has” substitute “ “oil” and “oil field” have”.

(5) The amendments made by this section have effect in relation to expenditure incurred on decommissioning carried out on or after the day on which this Act is passed.

91 Expenditure on decommissioning certain redundant plant or machinery

(1) In section 164 of CAA 2001 (general decommissioning expenditure incurred before cessation of ring fence trade), after subsection (1B) insert—

“(1C) If the plant or machinery concerned is incidentally-acquired redundant plant or machinery (see subsection (1D)), it is to be regarded for the purposes of this section as having been brought into use for the purposes of the ring fence trade.

(1D) Plant or machinery is “incidentally-acquired redundant plant or machinery” if—

(a) it has not been brought into use for the purposes of the ring fence trade,

(b) it forms part of a relevant installation (see subsection (1E)) which has been brought into use for the purposes of the ring fence trade,

(c) at the time R acquired an interest in the relevant installation, the plant or machinery was not being used for any purposes, and

(d) the acquisition of the interest in the plant or machinery was merely incidental to the acquisition of the interest in the relevant installation.

(1E) For the purposes of subsection (1D)— “relevant installation” means—

(a) an offshore installation, (b) a submarine pipeline, or (c) a relevant onshore installation;

“offshore installation” and “submarine pipeline” have the same meaning as in Part 4 of the Petroleum Act 1998;

“relevant onshore installation” has the meaning given by section 163(3C).”

(2) The amendment made by this section has effect in relation to expenditure incurred on decommissioning carried out on or after the day on which this Act is passed.

92 Expenditure on site restoration

(1) Part 5 of CAA 2001 (mineral extraction allowances) is amended as follows.

(2) In section 395 (qualifying expenditure), in subsection (1)(d), omit “post-trading”.

(3) In section 403 (qualifying expenditure on acquiring a mineral asset), after subsection (2) insert—

“(2A) For the purposes of this section the reference to expenditure on acquiring a mineral asset does not include expenditure incurred on the restoration of a relevant site (within the meaning of section 416 or 416ZA).”

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(4) In section 416 (expenditure on restoration within 3 years of ceasing to trade)— (a) in subsections (1)(a) and (6)(a), before “mineral extraction trade” insert “

relevant ”; (b) in subsection (5), at the end insert—

“But it does not include decommissioning any plant or machinery (within the meaning of section 163).”;

“(7A) Relevant mineral extraction trade” means a mineral extraction trade that is not a ring fence trade within the meaning of Part 8 of CTA 2010 (see section 277 of that Act).”;

(d) the heading of section 416 becomes “ Non-ring fence trades: expenditure on restoration within 3 years of ceasing to trade ”.

(5) In Chapter 5, after section 416 insert—

“416ZA Ring fence trades: expenditure on site restoration

(1) If— (a) a person who is carrying on, or has ceased to carry on, a ring fence

trade incurs expenditure on the restoration of a relevant site, (b) that part of the restoration work to which the expenditure relates has

been carried out, and (c) the expenditure has not been deducted in calculating for tax purposes

the profits of any trade carried on by the person, the net cost of the restoration is qualifying expenditure for the relevant period in which that part of the work to which the expenditure relates was carried out.

(2) “Relevant period” means— (a) in the case of restoration work carried out while the person is carrying

on the trade, a chargeable period, and (b) in the case of restoration work carried out after the person has ceased

to carry on the trade, a notional accounting period. For the meaning of “notional accounting period”, see section 416ZB.

(3) The qualifying expenditure for a notional accounting period is treated as incurred on the last day of trading.

(4) If the amount of expenditure incurred on any part of the restoration work carried out in a relevant period is disproportionate to that part of the restoration work, only so much of the net cost of the restoration as is proportionate to that part of the restoration work (the “allowable expenditure for the period”) is to be treated as qualifying expenditure for that period.

(5) But subsection (4) does not prevent that part of the expenditure that is not allowable expenditure for the period from being treated as qualifying expenditure for a subsequent relevant period.

(6) If any expenditure incurred by a person is qualifying expenditure under this section—

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(a) the whole of the expenditure on the restoration (not just the net cost) is not deductible in calculating the person's income for any tax purposes, and

(b) none of the amounts subtracted to produce the net cost is to be treated as the person's income for any tax purposes.

(7) “Restoration” includes— (a) landscaping, (b) in relation to land in the United Kingdom, the carrying out of any

works required as a condition of granting planning permission for development relating to the winning of oil from an oil field,

(i) an approved abandonment programme, (ii) a condition to which the approval of an abandonment

programme is subject, or (iii) a requirement imposed by the Secretary of State, or an

agreement made with the Secretary of State, in relation to a relevant site, and

(d) in relation to land in a foreign sector of the continental shelf, the carrying out of any works required in order to comply with anything corresponding to a matter within paragraph (c)(i), (ii) or (iii) under the law of a territory outside the United Kingdom.

But it does not include decommissioning any plant or machinery (within the meaning of section 163).

(8) A “relevant site” means— (a) the site of a source to the working of which the ring fence trade relates

(or related), or (b) land used in connection with working such a source.

(9) “The net cost of the restoration” means the expenditure incurred on the restoration less any amounts that—

(a) are received, or are to be received, by the person, and (b) are attributable to the restoration of the relevant site.

(10) All such adjustments are to be made, by way of discharge or repayment of tax or otherwise, as are necessary to give effect to this section.

(11) In this section— “abandonment programme”, “approval” and “approved” (in relation to an abandonment programme) have the same meaning as in Part 4 of the Petroleum Act 1998, “foreign sector of the continental shelf” means an area within which rights are exercisable with respect to the sea bed and subsoil and their natural resources by a territory outside the United Kingdom, “oil” and “oil field” have the same meaning as in Part 1 of OTA 1975, “ring fence trade” has the same meaning as in Part 8 of CTA 2010 (see section 277 of that Act), and “UK marine area” has the meaning given by section 42 of the Marine and Coastal Access Act 2009.

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416ZB “Notional accounting period”

(1) For the purposes of section 416ZA “notional accounting period”, in relation to a person (“the former trader”) who has ceased to carry on a ring fence trade, means each of the following periods—

(a) the period that— (i) begins with the day following the last day on which the

former trader carried on the ring fence trade, and (ii) ends with the day on which the first termination event

subsequently occurs, and (b) each period that—

(i) begins with the day following the last day of a period determined under paragraph (a) or this paragraph, and

(ii) ends with the day on which the first termination event subsequently occurs.

(2) But there are to be no notional accounting periods after the end of the post- cessation period (see subsection (4)).

(3) “Termination event”, in relation to a notional accounting period, means each of the following—

(a) the end of the period of 12 months beginning with the first day of the notional accounting period,

(b) the occurrence of an accounting date of the former trader or, if there is a period for which the former trader does not make up accounts, the end of that period (but see subsections (6) and (7)), and

(4) “The post-cessation period” means the period that— (a) begins with the day following the last day on which the former trader

carried on the ring fence trade, and (b) ends with the day on which the appropriate authority is satisfied that

the restoration of the relevant site has been completed.

(5) In subsection (4) “the appropriate authority” means— (a) in the case of restoration falling within section 416ZA(7)(c), the

Secretary of State, and (b) in any other case, such person or body as the Commissioners for Her

Majesty's Revenue and Customs may specify.

(6) If the former trader— (a) carries on more than one trade, (b) makes up accounts of any of them to different dates, and (c) does not make up general accounts for the whole of the former trader's

activities, subsection (3)(b) applies with reference to the accounting date of such one of the trades as the former trader may determine.

(7) If the Commissioners for Her Majesty's Revenue and Customs are of the opinion, on reasonable grounds, that a date determined by the former trader for the purposes of subsection (6) is inappropriate, the Commissioners may

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by notice direct that the accounting date of such other of the trades referred to in that subsection as appears to the Commissioners to be appropriate is to be used instead.

(8) Expressions used in this section and in section 416ZA have the same meaning in this section as they do in that section.”

(6) In section 416B (first-year qualifying expenditure), in subsection (2), at the end insert “ (within the meaning of section 403) ”.

(7) Part 4 of CTA 2010 (loss relief) is amended as follows.

(8) In section 40 (ring fence trades: extension of periods for which relief may be given), in subsection (1)(b), for “403” substitute “ by virtue of section 416ZA ”.

(9) In section 43 (claim period in case of ring fence or mineral extraction trades), in subsection (1)(b)—

(a) after “416” insert “ or 416ZA ”, and (b) for the words from “restoration” to “trade” substitute “ site restoration ”.

(10) The amendments made by this section have effect in relation to expenditure incurred on restoration carried out on or after the day on which this Act is passed.

93 Restrictions on allowances for certain oil-related expenditure

Schedule 32 contains provision in connection with restrictions on allowances for certain oil-related expenditure.

PART 3

ANNUAL TAX ON ENVELOPED DWELLINGS

The charge to tax

94 Charge to tax

(1) A tax (called “annual tax on enveloped dwellings”) is to be charged in accordance with this Part.

(2) Tax is charged in respect of a chargeable interest if on one or more days in a chargeable period—

(a) the interest is a single-dwelling interest and has a taxable value of more than £2 million, and

(b) a company, partnership or collective investment scheme meets the ownership condition with respect to the interest.

(3) The tax is charged for the chargeable period concerned.

(4) A company meets the ownership condition with respect to a single-dwelling interest on any day on which the company is entitled to the interest (otherwise than as a member of a partnership or for the purposes of a collective investment scheme).

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(5) A partnership meets the ownership condition with respect to a single-dwelling interest on any day on which a member of the partnership that is a company is entitled to the interest (as a member of the partnership).

(6) A collective investment scheme meets the ownership condition with respect to a single-dwelling interest on any day on which the interest is held for the purposes of the scheme.

(7) If a company is jointly entitled to a chargeable interest (as a member of a partnership or otherwise), then regardless of whether the company is entitled as a joint tenant or tenant in common (or, in Scotland, as a joint owner or owner in common) the ownership condition is regarded as met in relation to the whole chargeable interest.

(8) The chargeable periods are— (a) the period beginning with 1 April 2013 and ending with 31 March 2014, and (b) each subsequent period of 12 months beginning with 1 April.

(9) See also section 95.

95 Entitlement to interests

(1) In this Part “entitled” means beneficially entitled— (a) whether solely or jointly with another person, and (b) whether as a member of a partnership or otherwise.

This is subject to subsection (2).

(2) References in this Part to entitlement to a single-dwelling interest (or any other chargeable interest) do not include—

(a) entitlement in the capacity of a trustee or personal representative, or (b) entitlement as a beneficiary under a settlement.

(3) Subsection (1)(b) does not apply where the contrary is specified.

(4) In this section “settlement” has the same meaning as in Part 4 of FA 2003 (see paragraph 1 of Schedule 16 to that Act).

96 Person liable

(1) The chargeable person is liable to pay tax charged under this Part.

(2) “The chargeable person” means— (a) in relation to tax charged by virtue of section 94(4), the company; (b) in relation to tax charged by virtue of section 94(5), the responsible partners.

(3) In relation to tax charged by virtue of section 94(6) “the chargeable person” means— (a) if the collective investment scheme is a unit trust scheme, the trustee of the

scheme; (b) if the collective investment scheme is an open-ended investment company,

the body corporate referred to in section 236(2) of the Financial Services and Markets Act 2000;

(c) in relation to an EEA UCITS which is not an open-ended investment company or unit trust scheme, the management company for that UCITS;

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(d) in any other case, the person who has day-to-day control over the management of the property subject to the scheme.

(4) The liability of the responsible partners to pay tax charged on them under this Part is joint and several.

(5) References in this section to “the responsible partners” are to all the persons who are members of the partnership concerned on the first day in the chargeable period on which the partnership meets the ownership condition with respect to the single- dwelling interest.

(6) Tax charged under this Part is said to be “charged on” the chargeable person (and that person is said to be “chargeable to” the tax).

97 Liability of persons jointly entitled

(1) Subsection (2) applies if— (a) a company is within the charge for a chargeable period with respect to a single-

dwelling interest by virtue of section 96(2)(a), and (b) one or more other persons are jointly entitled to the interest on the first day in

that period on which the company is within the charge with respect to it.

(2) The company and the other person or persons are jointly and severally liable for the tax charged for that period with respect to the interest (whether or not those other persons are also within the charge with respect to the interest on the day in question).

(3) Subsection (4) applies if— (a) a company that is a member of a partnership is entitled (as a member of the

partnership) to a single-dwelling interest on a day in a chargeable period, and (b) as a result, the responsible partners are within the charge with respect to the

interest for the period.

(4) If, on the first day in the chargeable period on which the responsible partners are within the charge a person (“P”) who is not one of the responsible partners is jointly entitled to the chargeable interest, P and the responsible partners are jointly and severally liable for the tax charged for the period with respect to the interest (whether or not P is also within the charge with respect to the interest on the day in question).

98 Collective investment schemes: liability for and collection of tax

(1) Subsection (2) applies where tax is charged for a chargeable period with respect to a single-dwelling interest by virtue of section 94(6).

(2) The persons who are major participants in the scheme on the first day of the chargeable period on which the chargeable person is within the charge with respect to the interest are jointly and severally liable with the chargeable person for the tax charged.

(3) Subsection (2) does not permit the recovery from a major participant of an amount exceeding the market value of the participant's holding in the scheme.

(4) The reference in subsection (3) to a participant's holding in a collective investment scheme is to the interests or rights by virtue of which the participant takes part in the scheme.

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(5) Tax chargeable by virtue of section 94(6) may be recovered from the depositary (if any) of a collective investment scheme, but only up to the amount or value of any money or other property subject to the scheme that has been entrusted to the depositary for safekeeping.

(6) The depositary— (a) may retain out of any money entrusted to it as mentioned in subsection (5)

enough money to pay that tax, and (b) is entitled to be fully reimbursed by the participants in the scheme (by that

method or another) for amounts recovered under subsection (5).

(7) In this section— (a) “depositary”, in relation to a collective investment scheme (other than a unit

trust scheme), has the meaning given by section 237(2) of the Financial Services and Markets Act 2000;

(b) “major participant”, in relation to a collective investment scheme, is to be read in accordance with section 136(5);

(c) “participant”, in relation to a collective investment scheme, is to be read in accordance with section 235 of the Financial Services and Markets Act 2000.

(8) For the purposes of this Part “market value” is to be determined as for the purposes of TCGA 1992 (see, particularly, section 272 of that Act).

99 Amount of tax chargeable

(1) The amount of tax charged for a chargeable period with respect to a single-dwelling interest is stated in subsection (2) or (3).

(2) If the chargeable person is within the charge with respect to the single-dwelling interest on the first day of the chargeable period, the amount of tax charged is equal to the annual chargeable amount.

(3) Otherwise, the amount of tax charged is equal to the relevant fraction of the annual chargeable amount.

(4) The annual chargeable amount for a single-dwelling interest and a chargeable period is determined in accordance with the following table, by reference to the taxable value of the interest on the relevant day.

Annual chargeable amount Taxable value of the interest on the relevant day

£15,000 More than £2 million but not more than £5 million.

£35,000 More than £5 million but not more than £10 million.

£70,000 More than £10 million but not more than £20 million.

£140,000 More than £20 million.

(5) The “relevant day” is— (a) for the purposes of subsection (2), the first day of the chargeable period;

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(b) for the purposes of subsection (3), the first day in the chargeable period on which the chargeable person is within the charge with respect to the interest.

(6) The relevant fraction is—

where—

“N” is the number of days from (and including) the relevant day to the end of the chargeable period;

“Y” is the number of days in the chargeable period.

(7) See also— (a) section 100 (interim relief), and (b) section 106 (adjustment of amount chargeable).

100 Interim relief

(1) Where tax is charged for a chargeable period with respect to a single-dwelling interest, the chargeable person may claim relief before the end of the chargeable period if—

(a) one or more days in the period is relievable with respect to the interest (by virtue of any of sections 133 to 150),

(b) one or more days in the chargeable period (after the first day in the period on which the chargeable person is within the charge with respect to the interest) are days on which the chargeable person is not within the charge with respect to the interest, or

(c) the taxable value of the single-dwelling interest on the first day in the chargeable period on which the chargeable person is within the charge with respect to the interest is higher than its taxable value on a later day in the chargeable period on which the chargeable person remains within the charge with respect to the interest.

(2) Relief under this section is called “interim relief”, and must be claimed— (a) in an annual tax on enveloped dwellings return, or (b) by amending such a return.

(3) Where interim relief is claimed under this section, section 163(1) (payment of tax by filing date for annual tax on enveloped dwellings return) has effect as if the amount of tax charged with respect to the single-dwelling interest were the sum of amounts A and B.

(4) Amount A is the total of all the daily amounts for days in the pre-claim period on which the chargeable person is within the charge with respect to the single-dwelling interest, other than days that are relievable with respect to the single-dwelling interest.

(5) Amount B is zero if—

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(a) the day of the claim is relievable with respect to the single-dwelling interest by virtue of any of sections 133 to 150, or

(b) the chargeable person is not within the charge with respect to the single- dwelling interest on the day of the claim.

(6) Otherwise, amount B is the appropriate fraction of the annual chargeable amount for the single-dwelling interest.

For this purpose the annual chargeable amount is determined (under section 99(4)) on the basis that the day of the claim is the relevant day.

(7) In subsection (6) “appropriate fraction” means—

where—

“X” is the number of days in the period beginning with the day of the claim and ending at the end of the chargeable period, and

“Y” is the number of days in the chargeable period.

(8) In this section— “day of the claim” means the day on which the return mentioned in

subsection (2)(a), or notice of the amendment made under subsection (2)(b), is delivered to HMRC;

“pre-claim period” means the period— (a) beginning with the first day in the chargeable period mentioned in

subsection (1) on which the chargeable person is within the charge with respect to the single-dwelling interest, and

(b) ending with the day before the day of the claim.

(9) See sections 105 and 106 for provision about the adjustment of the amount of tax charged.

101 Indexation of annual chargeable amounts

(1) If the consumer prices index for September in 2013 or any later year (“the later year”) is higher than it was for the previous September, section 99(4) applies in relation to chargeable periods beginning on or after 1 April in the year after the later year with the following amendments.

(2) For each of the annual chargeable amounts stated in the table in section 99(4) (as it applies in relation to chargeable periods beginning in the previous 12 months) there is substituted the indexed amount.

(3) “The indexed amount” is found by— (a) increasing the previous amount by the same percentage increase as the

percentage increase in the consumer prices index, and

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(b) rounding down the result to the nearest multiple of £50.

(4) In this section “consumer prices index” means the all items consumer prices index published by the Statistics Board.

(5) The Treasury must, before 1 April 2014 and before each subsequent 1 April, make an order stating the amounts that by virtue of this section are to be the annual chargeable amounts for chargeable periods beginning on or after that date.

102 Taxable value

(1) The taxable value of a single-dwelling interest on any day (“the relevant day”) is equal to its market value at the end of the latest day that—

(a) falls on or before that day, and (b) is a valuation date in the case of that interest.

(2) Each of the following is a valuation date in the case of any single-dwelling interest— (a) 1 April 2012; (b) each 1 April falling 5 years, or a multiple of 5 years, after 1 April 2012.

(3) The following are also valuation dates in the case of any single-dwelling interest to which a company is entitled on the relevant day (otherwise than as a member of a partnership)—

(a) the effective date of any substantial acquisition by the company of a chargeable interest in or over the dwelling concerned;

(b) the effective date of any substantial disposal of part (but not the whole) of the single-dwelling interest.

(4) The following are also valuation dates in the case of any single-dwelling interest to which a company is entitled on the relevant day as a member of a partnership—

(a) the effective date of any substantial acquisition as a result of which a chargeable interest in or over the dwelling concerned became an asset of the partnership,

(b) the effective date of any substantial disposal of part (but not the whole) of the single-dwelling interest.

(5) The following are also valuation dates in the case of any single-dwelling interest that is on the relevant day held for the purposes of a collective investment scheme—

(a) the effective date of any substantial acquisition, made for the purposes of the scheme, of a chargeable interest in or over the dwelling concerned;

(b) the effective date of any substantial disposal of part (but not the whole) of the single-dwelling interest.

(6) In this section references to a disposal of part of a single-dwelling interest include the grant of a chargeable interest out of the single-dwelling interest.

(7) The grant of an option does not count as the grant of a chargeable interest for the purposes of subsection (6).

103 Section 102: “substantial” acquisitions and disposals

(1) For the purposes of section 102—

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(a) the acquisition of a chargeable interest in a dwelling is a “substantial acquisition” only if the chargeable consideration for the acquisition is £40,000 or more;

(b) the disposal of part (but not the whole) of a single-dwelling interest is a “substantial disposal” only if the chargeable consideration for the acquisition of the chargeable interest by the person acquiring it is £40,000 or more.

(2) If the acquisition mentioned in subsection (1)(a) is a transaction between persons who are connected with each other or not acting at arm's length, subsection (1)(a) applies as if the reference to the chargeable consideration for the acquisition were to the market value of the chargeable interest acquired.

(3) If the disposal mentioned in subsection (1)(b) is a transaction between persons who are connected with each other or not acting at arm's length, subsection (1)(b) applies as if the reference to the chargeable consideration for the acquisition in question were to the market value of the part of the single-dwelling interest disposed of.

(4) The chargeable consideration for the acquisition mentioned in subsection (1)(a) is taken to include the chargeable consideration for any linked acquisition of a chargeable interest in or over the same dwelling.

(5) The chargeable consideration for the transaction mentioned in subsection (1)(b) is taken to include the chargeable consideration for any linked disposal of part (but not the whole) of the single-dwelling interest concerned.

(6) For the purposes of subsection (2) the market value of the chargeable interest acquired is taken to be the sum of the market values of that chargeable interest and any chargeable interest in or over the same dwelling that is acquired in a linked transaction.

(7) For the purposes of subsection (3) the market value of the part of the single-dwelling interest disposed of is taken to be the sum of the market values of that chargeable interest and any chargeable interest in or over the same dwelling that is disposed of in a linked transaction.

(8) For the purposes of this section two or more transactions are “linked” if they form part of a single scheme, arrangement or series of transactions between the same vendor and purchaser or, in either case, persons connected with them.

(9) In this section “chargeable consideration”, “purchaser” and “vendor” have the same meaning as in Part 4 of FA 2003.

(10) In this section references to a disposal of part of a single-dwelling interest include the grant of a chargeable interest out of the single-dwelling interest.

104 No double charge

Tax in respect of a given single-dwelling interest is charged only once for any chargeable day even if more than one person is “the chargeable person” with respect to the tax charged.

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Adjustment of amount charged

105 “Adjusted chargeable amount”

(1) In relation to a person on whom tax is charged for a chargeable period with respect to a single-dwelling interest, the “adjusted chargeable amount” is the total of the daily amounts for all the days in the period on which the chargeable person is within the charge with respect to the interest.

(2) The daily amount for any such day (“the actual day”) is—

where—

“Y” is the number of days in the chargeable period;

“A” is the annual chargeable amount for the single-dwelling interest, determined (under section 99(4)) on the basis that the actual day is the relevant day.

106 Adjustment of amount chargeable

(1) Where tax is charged for a chargeable period with respect to a single-dwelling interest and the adjusted chargeable amount is greater than the initial charged amount, the amount of tax charged is taken to be increased to the adjusted chargeable amount.

(2) In this section “the initial charged amount” means the amount of tax charged under section 99 for the period in respect of the interest.

(3) Subsection (4) applies where— (a) tax is charged for a chargeable period with respect to a single-dwelling

interest, (b) the adjusted chargeable amount is less than the initial charged amount, and (c) a claim for relief is made under this subsection.

(4) The amount of tax charged for the period with respect to the interest is taken to be reduced (at the end of the chargeable period) to the adjusted chargeable amount.

(5) Relief under subsection (3) must be claimed— (a) in an annual tax on enveloped dwellings return, or (b) by amending an annual tax on enveloped dwellings return.

(6) The claim must be delivered by the end of the chargeable period following the one to which the claim relates.

(7) Relief under subsection (3) may be given by repayment of tax or otherwise.

(8) See also section 160 (return of adjusted amount chargeable); and see section 163(2) for provision about payment of additional tax by reference to the adjusted chargeable amount.

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Chargeable interests and “single-dwelling interest”

107 Chargeable interests

(1) In this Part “chargeable interest” means— (a) an estate, interest, right or power in or over land in the United Kingdom, or (b) the benefit of an obligation, restriction or condition affecting the value of any

such estate, interest, right or power.

(2) Where two or more persons are jointly entitled to a chargeable interest the chargeable interest is not regarded, for the purposes of this Part, as consisting of separate interests corresponding to the shares (if any) that those persons have by virtue of their joint entitlement.

(3) An exempt interest is not a chargeable interest for the purposes of this Part.

(4) The following are exempt interests— (a) any security interest; (b) a licence to use or occupy land; (c) in England and Wales or Northern Ireland, a tenancy at will.

(5) In subsection (4) “security interest” means an interest or right (other than a rentcharge) held for the purpose of securing the payment of money or the performance of any other obligation.

(6) In the application of this Part in Scotland the reference in subsection (5) to a rentcharge is to be read as a reference to a feu duty or a payment mentioned in section 56(1) of the Abolition of Feudal Tenure etc (Scotland) Act 2000 (asp 5).

(7) The Treasury may by regulations provide that any other description of interest or right in or over a dwelling is an exempt interest.

108 Meaning of “single-dwelling interest”

(1) References in this Part to a “single-dwelling interest” are to be read in accordance with this section.

(2) A chargeable interest that is exclusively in or over land consisting (on any day) of a single dwelling is a single-dwelling interest (on that day).

(3) Where a person is entitled to a chargeable interest that is exclusively in or over land consisting (on any day) of two or more single dwellings—

(a) provisions referring to a “single-dwelling interest” operate as if the person had (on that day) a separate chargeable interest in or over each dwelling, and

(b) the chargeable interest in or over each dwelling is therefore a single-dwelling interest.

(4) Where a person is entitled to a chargeable interest in or over land that on any day consists of one or more single dwellings and non-residential land—

(a) provisions referring to a “single-dwelling interest” operate as if the person had (on that day) a separate chargeable interest in or over each dwelling and a further separate chargeable interest in or over the non-residential land, and

(b) the chargeable interest in or over each dwelling is therefore a single-dwelling interest.

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(5) A single-dwelling interest is referred to as a single-dwelling interest “in” the dwelling concerned.

(6) A single-dwelling interest in one dwelling is distinct from any single-dwelling interest in another dwelling, even if the dwellings stand successively on the same land.

(7) In this section— (a) “non-residential land” means land that is not a dwelling or part of a dwelling; (b) references to a dwelling include a part of a dwelling.

109 Different interests held in the same dwelling

(1) Subsection (2) applies if on one or more days in a chargeable period— (a) a company is entitled to two or more single-dwelling interests in the same

dwelling, or (b) two or more single-dwelling interests in the same dwelling are held for the

purposes of the same collective investment scheme.

(2) This Part has effect with respect to that chargeable period as if those separate interests constituted just one single-dwelling interest, the taxable value of which on any day is the sum of the taxable values of the separate interests.

(3) In calculating the taxable values of the separate interests for the purposes of subsection (2), the market value of each interest is determined, under the provisions of TCGA 1992 applied by section 98(8), on the assumption that the other interest or interests are placed on the open market with that interest (on the valuation date appropriate to that interest).

110 Interests held by connected persons

(1) If on any day a company (“C”) is entitled to a single-dwelling interest in a dwelling and another person (“P”) who is connected with C is entitled to a different single- dwelling interest in the same dwelling, this Part has effect—

(a) in relation to C as if C were on that day entitled to P's single-dwelling interest as well as C's single-dwelling interest, and

(b) (if P is a company) in relation to P as if P were on that day entitled to C's single-dwelling interest as well as P's single-dwelling interest.

(2) This subsection provides for an exception to subsection (1).

Where P is an individual, C is not treated on the day in question as entitled to P's single-dwelling interest unless on that day C is entitled to a single-dwelling interest in the dwelling that is a freehold or leasehold interest with a taxable value of more than £500,000.

(3) If on any day a single-dwelling interest (“the scheme interest”) is held for the purposes of a collective investment scheme and a person (“P”) who is connected with the scheme is entitled to a different single-dwelling interest in the same dwelling, this Part has effect—

(a) in relation to the scheme, as if both those separate interests were on that day held for the purposes of the scheme, and

(b) (if P is a company) in relation to P as if P were on that day entitled to the scheme interest as well as P's single-dwelling interest.

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(4) If on any day a single-dwelling interest in a dwelling is held for the purposes of a collective investment scheme (“the first scheme”) and another interest in the same dwelling is held for the purposes of another collective investment scheme (“the second scheme”) that is connected with the first scheme, this Part has effect—

(a) in relation to the first scheme, as if both the interests were held on that day for the purposes of that scheme, and

(b) in relation to the second scheme, as if both interests were held on that day for the purposes of that scheme.

(5) See also— (a) section 97, for provision about the liability to tax of persons treated under this

section (read with section 104) as jointly entitled to a single-dwelling interest; (b) paragraph 55 of Schedule 33, for provision about returns in cases involving

joint entitlement.

(6) The provisions mentioned in subsection (5) are to be read as including corresponding provision for cases where the same single-dwelling interest is treated under this section as held—

(a) for the purposes of different collective investment schemes, or (b) by a company and for the purposes of a collective investment scheme.

(7) In the application of this section to Scotland— (a) the reference to a freehold interest is to the interest of the owner; (b) the reference to a leasehold interest is to a tenant's right over or interest in

property subject to a lease.

111 Different interests held in the same dwelling: effect of reliefs etc

(1) References in section 110 to a person do not include— (a) a public body, as defined in section 153, (b) a body listed in section 154(2) (bodies established for national purposes).

(2) Subsections (1) to (4) of section 110 do not apply in relation to a single-dwelling interest if—

(a) the day in question is relievable with respect to that interest by virtue of section 150 (providers of social housing),

(b) by virtue of section 151 (charitable companies) the ownership condition is regarded as not met with respect to the interest on that day, or

(c) the taxable value of the interest on that day is taken to be zero by virtue of section 155 (dwelling conditionally exempt from inheritance tax).

(3) Subsection (4) applies where the separate interests (the “relevant interests”) that under section 110 (or that section and section 109) are treated as constituting, on a day, just one single-dwelling interest (“the combined interest”) include—

(a) a freehold or leasehold interest, and (b) a leasehold interest (“the inferior interest”) granted out of that interest.

(4) If the inferior interest is the most inferior relevant interest, the combined interest, and the dwelling itself (where relevant), are regarded for the purposes of the relevant relieving provisions as being exploited, on the day mentioned in subsection (3), in the way the inferior interest is exploited on that day.

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(5) If the inferior interest is an interest in part only (“the sub-let part”) of the land that is the subject-matter of the combined interest, subsection (4) has effect in relation to the combined interest only so far as that interest relates to the sub-let part.

(6) In this section “the relevant relieving provisions” means sections 132 to 150.

(7) The inferior interest counts as “the most inferior relevant interest” if no relevant interest (see subsection (3)) is a leasehold interest granted out of it.

(8) In this section the reference to a leasehold interest includes the interest of a lessee under an agreement for a lease.

(9) In the application of this section to Scotland— (a) the reference to a freehold interest is to the interest of the owner; (b) the reference to a leasehold interest is to a tenant's right over or interest in

property subject to a lease; (c) the reference to an agreement for lease includes missives of let.

Meaning of “dwelling”

112 Meaning of “dwelling”

(1) A building or part of a building counts as a dwelling at any time when— (a) it is used or suitable for use as a single dwelling, or (b) it is in the process of being constructed or adapted for such use.

(2) Land that is, or is at any time intended to be, occupied or enjoyed with a dwelling as a garden or grounds (including any building or structure on such land) is taken to be part of that dwelling at that time.

(3) Land that subsists, or is at any time intended to subsist, for the benefit of a dwelling is taken to be part of the dwelling at that time.

(4) A building, or part of a building, used for a purpose specified in section 116(2) or (3) of FA 2003 is not used as a dwelling for the purposes of subsection (1).

(5) Where a building, or part of a building, is used for a purpose mentioned in subsection (4), no account is to be taken for the purposes of subsection (1) of its suitability for any other use.

(6) If a building or part of a building becomes temporarily unsuitable for use as a dwelling for any reason (including accidental damage, repairs or any other physical change to the building or its environment), that temporary unsuitability is ignored in determining whether or not the building or part of a building is, during the period in question, a dwelling for the purposes of this Part.

This subsection does not affect any of the provisions in sections 126 to 131.

113 Substantial performance of “off plan” purchase

(1) Subsection (2) applies where— (a) a contract is entered into for the acquisition of a chargeable interest in or over

land that consists of or includes a building, or part of a building, that is to be constructed or adapted for use as a single dwelling,

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(b) substantial performance is treated as constituting the acquisition of the chargeable interest (under section 122), and

(c) construction or adaptation of the building, or the part of a building, has not begun by the time the contract is substantially performed.

(2) The chargeable interest deemed to be acquired as mentioned in subsection (1)(b) is taken to be in or over land that consists of or (as appropriate) includes a dwelling.

(3) If at any time after the substantial performance of the contract the obligation under the contract to carry out the construction or adaptation ceases to have effect without the construction or adaptation having been begun, subsection (2) ceases to apply at that time.

(4) A building or part of a building used for a purpose specified in section 116(2) or (3) of FA 2003 is not used as a dwelling for the purposes of subsection (1).

(5) In this section— “contract” includes any agreement (including, in the case of Scotland,

missives of let not constituting a lease); “substantially performed” has the same meaning as in section 44 of FA

2003.

114 Power to modify meaning of “use as a dwelling”

(1) The Treasury may by order amend this Part so as to specify cases where use of a building is to be use of a building as a dwelling for the purposes of section 112(1) or 113(1).

(2) The reference in section 116(8)(a) of FA 2003 (power to amend section 116(2) and (3)) to “the purposes of subsection (1)” includes a reference to the purposes of sections 112(1) and 113(1).

115 Parts of a greater whole

(1) The fact that a part of a building is suitable for use as a dwelling does not prevent that part from forming part of a larger single dwelling.

(2) The fact that a building or structure that is— (a) in the garden or grounds of a dwelling, and (b) occupied or enjoyed with the dwelling,

is itself suitable for use as a single dwelling does not prevent it from being treated (in accordance with section 112(2)) as part of the dwelling.

116 Dwelling in grounds of another dwelling

(1) Subsection (4) applies where the conditions in subsection (2) are met in relation to two dwellings (the “main dwelling” and the “associated dwelling”) on a day (“the day in question”) in a chargeable period.

(2) The conditions are that— (a) the main dwelling has a garden or grounds, (b) the associated dwelling stands within the garden or grounds of the main

dwelling, but is not occupied or enjoyed with that dwelling,

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(c) the associated dwelling does not have separate access, and is not part of the same building as the main dwelling, and

(d) the common ownership condition is met.

(3) The common ownership condition is that— (a) a company is entitled to a chargeable interest in the main dwelling, and the

company or a person connected with the company is entitled to a chargeable interest in the associated dwelling, or

(b) a chargeable interest in the main dwelling is held for the purposes of a collective investment scheme, and a chargeable interest in the associated dwelling is held for the purposes of the same collective investment scheme.

(It does not matter whether or not the interest in the main dwelling and the interest in the associated dwelling are held for the same title.)

(4) This Part has effect in relation to the interests mentioned in paragraph (a) or (as the case may be) (b) of subsection (3) as if the main dwelling and the associated dwelling were, on the day in question, suitable for use as a single dwelling.

(5) Subsection (4) does not apply if— (a) the day in question is, in relation to the interest in the main dwelling or

the interest in the associated dwelling, relievable by virtue of a provision mentioned in subsection (6), or

(b) the ownership condition is, by virtue of section 151 (charitable companies), regarded as not being met on that day with respect to one or other of those interests.

(6) Those provisions are— section 133 (property rental businesses); section 134 (rental property: preparation for sale etc); section 137 (dwellings opened to the public); section 138 (property developers); section 139 (property developers: exchange of dwellings); section 141 (property traders); section 143 (financial institutions acquiring dwellings in the course of lending); section 145 (occupation by certain employees or partners); section 148 (farmhouses); section 150 (providers of social housing).

(7) The reference in subsection (3)(a) to a person connected with the company does not include a public body (as defined in section 153) or a body listed in section 154(2) (bodies established for national purposes).

(8) The reference in subsection (3)(b) to a chargeable interest being held for the purposes of the same collective investment scheme includes a reference to a person connected with the scheme being entitled to the interest.

(9) The associated dwelling has “separate access” only if— (a) there is access to the associated dwelling directly from a highway (in Scotland,

a road) that the dwelling adjoins, or (b) the person entitled to possession of the associated dwelling has access to that

dwelling from a highway (in Scotland, a road), exclusively by passing over

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land that the person is entitled to pass over by reason of one or more rights of way or other interests in land to which the person is separately entitled.

(10) In this section— in relation to a dwelling or dwellings, references to the “garden or grounds”

are to land occupied or enjoyed with the dwelling or dwellings as a garden or grounds;

references to the person entitled to possession of a dwelling are to the person entitled to possession of the dwelling by reason of an estate or interest held by that person;

“separately entitled” means entitled otherwise than by reason of a chargeable interest in or over the main dwelling.

117 Dwellings in the same building

(1) Two parts of a building are “linked dwellings” if— (a) each of them counts as a dwelling, (b) there is private access between the two dwellings, (c) the two parts of the building are not (together) used or suitable for use as a

single dwelling, and (d) the common ownership condition and the use condition are met.

(2) The common ownership condition is that— (a) a company is entitled to a chargeable interest in one of the dwellings, and the

company or a person connected with the company is entitled to a chargeable interest in the other dwelling, or

(b) a chargeable interest in one of the dwellings is held for the purposes of a collective investment scheme, and a chargeable interest in the other dwelling is held for the purposes of the same collective investment scheme.

(It does not matter whether or not the interests are held for the same title.)

(3) If on a day in a chargeable period (“the day in question”) two parts of a building constitute linked dwellings, this Part has effect in relation to the interests mentioned in paragraph (a) or (as the case may be) (b) of subsection (2) as if the two parts were, on the day in question, suitable for use as a single dwelling.

(4) Subsection (3) does not apply if— (a) the day in question is, in relation to a chargeable interest mentioned in

subsection (2)(a) or (as the case may be) (2)(b), relievable by virtue of a provision mentioned in subsection (5), or

(b) (in a case where paragraph (a) of subsection (2) applies) the ownership condition is, by virtue of section 151 (charitable companies), regarded as not being met on that day with respect to one or other of the chargeable interests mentioned in that paragraph.

(5) Those provisions are— section 133 (property rental businesses); section 134 (rental property: preparation for sale etc); section 137 (dwellings opened to the public); section 138 (property developers); section 139 (property developers: exchange of dwellings);

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section 141 (property traders); section 143 (financial institutions acquiring dwellings in the course of lending); section 145 (occupation by certain employees or partners); section 148 (farmhouses); section 150 (providers of social housing).

(6) The reference in subsection (2)(a) to a person connected with the company does not include a public body (as defined in section 153) or a body listed in section 154(2) (bodies established for national purposes).

(7) If two dwellings in a building (dwelling A and dwelling B) are treated under this section as suitable for use as a single dwelling, and dwelling B and a third dwelling in the building (“dwelling C”) are treated under this section as suitable for use as a single dwelling, all three are treated as suitable for use as a single dwelling (and so on).

118 Section 117: supplementary

(1) The reference in section 117(2)(b) to a chargeable interest being held for the purposes of the same collective investment scheme includes a reference to a person connected with the scheme being entitled to the interest.

(2) For the purposes of section 117, there is private access between two dwellings if the person entitled to possession of each dwelling is entitled, by reason of a right of way or other interest in land, to have access to that person's dwelling from the other dwelling, without passing over any part of the building (or any other land) in which a third party has an interest entitling that third party to enter it.

(3) In subsection (2) “third party” means a person other than— (a) the persons entitled to possession of the dwellings mentioned in

subsection (2), and (b) persons connected with any of them.

(4) The use condition mentioned in section 117(1)(d) is that each of the two dwellings— (a) is occupied (or usually occupied) by a relevant individual, (b) is intended to be so occupied (or usually so occupied), or (c) is not occupied.

(5) In subsection (4) “relevant individual” means— (a) an individual connected with the company mentioned in section 117(2)(a), (b) an individual connected with the collective investment scheme mentioned in

section 117(2)(b), (c) an individual who occupies (or is to occupy) the dwelling concerned otherwise

than on commercial terms, or (d) an individual who is employed wholly or partly in connection with the

occupation by a person falling within any of paragraphs (a) to (c) of a dwelling in the building, or provides services in connection with such a person's occupation of a dwelling in the building.

(6) In this section references to the person entitled to possession of a dwelling are to the person entitled to possession of the dwelling by reason of an estate or interest held by that person.

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119 Terraces etc

Any structure (such as a terrace of houses or a pair of semi-detached houses) that is composed of or includes dwellings is regarded as a building for the purposes of sections 117 and 118.

Acquisitions and disposals

120 Acquisitions and disposals of chargeable interests

(1) References in this Part to the acquisition of a chargeable interest include any acquisition however effected (including an acquisition effected by the act of parties to a transaction, by order of a court or other authority, by or under any statutory provision or by operation of law).

(2) The surrender or release of a chargeable interest is— (a) an acquisition of that interest by any person whose interest or right is benefited

or enlarged by the transaction, and (b) a disposal by the person ceasing to be entitled to that interest.

(3) The variation of a chargeable interest is— (a) an acquisition of a chargeable interest by the person benefiting from the

variation, and (b) a disposal of a chargeable interest by the person whose interest is subject to

or limited by the variation.

121 Date of acquisition or disposal

(1) A person who acquires a chargeable interest in or over land that consists of or includes a dwelling is treated for the purposes of this Part as acquiring the interest on the effective date of the acquisition (and therefore as entitled to the interest with effect from that date: see section 171).

(2) A person who disposes of a chargeable interest in or over land that consists of or includes a dwelling is treated for the purposes of this Part as ceasing to be entitled to the interest on the effective date of the disposal (and therefore as not being entitled to the interest on that day: see section 171).

(3) If a person's acquisition and disposal of a chargeable interest are completed on the same day, then for the purposes of this Part—

(a) the person's acquisition of the interest is ignored if it precedes the disposal; (b) the person's disposal of the interest is ignored if it precedes the acquisition.

(4) The effective date of an acquisition of a chargeable interest is— (a) the date on which the acquisition is completed, or (b) any alternative date the Commissioners for Her Majesty's Revenue and

Customs may prescribe by regulations.

(5) The effective date of a disposal of a chargeable interest is— (a) the date on which the disposal is completed, or (b) any alternative date the Commissioners for Her Majesty's Revenue and

Customs may specify by regulations.

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122 Contract and conveyance: the purchaser

(1) This section applies where a person (“P”) enters into a contract under which— (a) P is to acquire a relevant chargeable interest, and (b) the acquisition is to be completed by a conveyance.

(2) P is not regarded as acquiring any chargeable interest by reason of entering into the contract.

(3) If the contract is substantially performed without having been completed, this Part has effect as if the substantial performance of the contract were the completion of the acquisition provided for by the contract.

(4) Accordingly, where subsection (3) applies and the contract is subsequently completed by a conveyance, that completion is not treated for the purposes of section 102 (taxable value) as effecting the acquisition of a chargeable interest.

(5) Where subsection (3) applies and— (a) the contract is afterwards rescinded or annulled, or (b) performance of the contract is for any other reason terminated before the

contract has been carried fully into effect, this Part has effect as if P had at the relevant time disposed of the chargeable interest referred to in subsection (1)(a).

(6) In subsection (5) “the relevant time” means— (a) the time when the rescission or annulment takes effect, or (b) (as the case requires) the time when performance of the contract ceases.

(7) Where subsection (3) applies and the contract is afterwards varied (or partially rescinded) so that the chargeable interest to be acquired under the contract is not the same as the chargeable interest to which the contract originally related, this Part (including subsection (3)) has effect as if the variation of the contract effected—

(a) the disposal by P of the chargeable interest referred to in subsection (1)(a), and (b) the substantial performance of the contract, as varied.

(8) If the parties to the contract proceed as if they had varied the contract in the way mentioned in subsection (7) (without actually doing so), subsection (7) applies as if they had actually made the corresponding variation in the terms of the contract.

(9) In this section— (a) references to completion are to the completion of the acquisition proposed,

whether or not between the original parties; (b) “contract” includes any agreement; (c) “conveyance” includes any instrument; (d) “relevant chargeable interest” means a chargeable interest in or over land that

consists of or includes a dwelling; (e) “substantially performed” has the same meaning as in section 44 of FA 2003.

123 Contract and conveyance: the vendor

(1) This section applies where a person (“V”) enters into a contract under which— (a) V is to dispose of a relevant chargeable interest, and (b) the disposal is to be completed by a conveyance.

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(2) V is not regarded as disposing of a chargeable interest by reason of entering into the contract.

(3) If the contract is substantially performed without having been completed, this Part has effect as if the substantial performance of the contract were the completion of the disposal provided for by the contract.

(4) Accordingly, where subsection (3) applies and the contract is subsequently completed by a conveyance, that completion is not treated for the purposes of section 102 as effecting the disposal of a chargeable interest.

(5) Where subsection (3) applies and— (a) the contract is afterwards rescinded or annulled, or (b) performance of the contract is for any other reason terminated before the

contract has been carried fully into effect, this Part has effect as if V had at the relevant time re-acquired the chargeable interest referred to in subsection (1)(a).

(6) In subsection (5) “the relevant time” means— (a) the time when the rescission or annulment takes effect, or (b) (as the case requires) the time when performance of the contract ceases.

(7) Where subsection (3) applies and the contract is afterwards varied (or partially rescinded) so that the chargeable interest to be disposed of under the contract is not the same as the chargeable interest to which the contract originally related, this Part (including subsection (3)) has effect as if the variation of the contract effected—

(a) the re-acquisition by V of the chargeable interest referred to in subsection (1) (a), and

(b) the substantial performance of the contract, as varied.

(9) In this section— (a) references to completion are to the completion of the disposal proposed,

between the same parties, in substantial conformity with the contract; (b) “contract” includes any agreement; (c) “conveyance” includes any instrument; (d) “relevant chargeable interest” means a chargeable interest in or over land that

consists of or includes a dwelling; (e) “substantially performed” has the same meaning as in section 44 of FA 2003.

New dwellings, conversions, demolition etc

124 New dwellings

(1) Where a new dwelling is being or has been constructed (whether or not as part of a larger building) the earlier of the following days is a valuation date in the case of a single-dwelling interest in that dwelling—

(a) the completion day;

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(b) the day on which the dwelling is first occupied.

(2) The reference in subsection (1) to the construction of a new dwelling— (a) includes the production of a new dwelling by the alteration (whether structural

or otherwise) of an existing building, but (b) does not include a case to which section 125 (dwellings produced from

other dwellings) or section 128 (demolition and replacement: new dwellings) applies.

(3) The reference in subsection (1) to the “completion day” is to the day on which the new dwelling is treated as having come into existence for the purposes of—

(a) Part 1 of the Local Government Finance Act 1992 (council tax: England and Wales) (see section 17 of that Act), or

(b) Part 2 of that Act (council tax: Scotland) (see section 83 of that Act), or (c) the Rates (Northern Ireland) Order 1977 (S.I. 1977/2157 (N.I. 28)) (see Article

25B of that Order).

(4) In this section “building” includes a part of a building.

125 Dwellings produced from other dwellings

(1) This section applies where an existing building that is a dwelling or dwellings (“the old dwelling” or “the old dwellings”) becomes a different dwelling or dwellings ( “ new ” dwellings) as a result of structural alteration.

(2) Any question as to whether or not a person has a single-dwelling interest at any time either in the old dwelling or dwellings or in a new dwelling is determined on the assumption that the old dwelling or dwellings cease to exist, and any new dwelling come into existence, only when the conversion is completed.

(3) The day after the conversion is completed is a valuation date in the case of any single- dwelling interest in a new dwelling.

(4) References to when the conversion is completed are to the end of the day on which the new dwelling is treated as having come into existence (or the first day on which all the new dwellings are treated as having come into existence) for the purposes of—

(a) Part 1 of the Local Government Finance Act 1992 (council tax: England and Wales) (see section 17 of that Act), or

(b) Part 2 of that Act (council tax: Scotland) (see section 83 of that Act), or (c) the Rates (Northern Ireland) Order 1977 (S.I. 1977/2157 (N.I. 28)) (see Article

25B of that Order).

(5) In this section “building” includes a part of a building.

126 Demolition of a dwelling

(1) This section and sections 127 to 129 apply where a building that is a dwelling (“the old dwelling”) is demolished after 1 April 2013.

(2) Except so far as express provision to the contrary is made in sections 127 to 129, any question as to whether a person has a single-dwelling interest in the dwelling, and any question as to the taxable value of such an interest, is determined as if the dwelling had not been demolished.

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(3) For the purposes of subsection (1) the demolition of a building is treated as having occurred after 1 April 2013 if a day after 1 April 2013 is the first day on which—

(a) the demolition has begun, and (b) as a result, the building is no longer suitable for use as a dwelling.

(4) In this section “building” includes a part of a building.

127 Demolition without replacement

(1) Subsection (2) applies if a person entitled to a single-dwelling interest in the old dwelling notifies an officer of Revenue and Customs that to the best of the person's knowledge there is no proposal to construct any dwelling or dwellings on the site of the old dwelling.

(2) Any question as to whether a person has a single-dwelling interest in the old dwelling is determined on the assumption that the old dwelling ceases (or ceased) to exist with effect from the end of the day mentioned in subsection (3).

(3) That day is the first day on which— (a) the demolition has begun, and (b) as a result, the building in question is no longer suitable for use as a dwelling.

(4) A notification under subsection (1) must be given— (a) in an annual tax on enveloped dwellings return, or (b) by amending such a return.

(5) In this section— (a) “building” includes part of a building; (b) “the site of the old dwelling” means the land on which the dwelling stood and

that counted as part of the dwelling; (c) the reference to the construction of a dwelling or dwellings on that site is to

the construction of a dwelling or dwellings wholly or partly on the site.

128 Demolition and replacement: new dwellings

(1) Subsection (2) applies if one or more dwellings (referred to below as “new dwellings”) are constructed on the site of the old dwelling after the demolition.

(2) Any question as to whether or not a person has a single-dwelling interest at any time either in the old dwelling or in a new dwelling is determined on the assumption that the old dwelling ceases to exist, and the new dwellings come into existence, only when the rebuilding is completed.

(3) The day after the rebuilding is completed is a valuation date in the case of any single- dwelling interest in a new dwelling.

(4) In subsection (1)— (a) “the site of the old dwelling” means the land on which the dwelling stood and

that counted as part of the dwelling; (b) the reference to the construction of a dwelling on that site is to the construction

of a dwelling wholly or partly on the site.

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(5) References to when the rebuilding is completed are to the end of whichever of the following days is earlier—

(a) the completion day; (b) the day on which the last of the new dwellings to be occupied is first occupied.

(6) The reference in subsection (5) to the “completion day” is to the day on which the new dwelling is treated as having come into existence (or the first day on which all the new dwellings are treated as having come into existence) for the purposes of—

(a) Part 1 of the Local Government Finance Act 1992 (council tax: England and Wales) (see section 17 of that Act), or

(b) Part 2 of that Act (council tax: Scotland) (see section 83 of that Act), or (c) the Rates (Northern Ireland) Order 1977 (S.I. 1977/2157 (N.I. 28)) (see Article

25B of that Order).

129 Demolition and replacement: other cases

(1) This section applies if— (a) a building is constructed on the site of the old dwelling after the demolition,

and (b) section 128 does not apply.

(2) Any question as to whether a person has a single-dwelling interest in the old dwelling is determined on the assumption that the old dwelling ceases to exist on the day after—

(a) the day on which the change of use is approved, or (b) if later, the day on which the old dwelling ceased to be occupied.

(3) In subsection (1)— (a) “the site of the old dwelling” means the land on which the dwelling stood and

that counted as part of the dwelling; (b) the reference to the construction of a dwelling on that site is to the construction

of a dwelling wholly or partly on the site.

130 Conversion of dwelling for non-residential use

(1) This section applies where a building or part of a building— (a) has been suitable for use as a dwelling, and (b) is altered for the purpose of making it suitable for use otherwise than as a

dwelling.

(2) The question whether or not the alterations make the building or part unsuitable for use as a dwelling is one of fact (but see subsection (3)).

(3) The building or part will not be regarded as having become unsuitable for use as a dwelling as a result of the alterations at any time unless by that time any planning permission or development consent required for the alterations has been granted (and the alterations have been made in accordance with any such permission or consent).

(4) In this section “planning permission” has the meaning given by the relevant planning enactment.

(5) “The relevant planning enactment” means—

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(a) in relation to land in England and Wales, section 336(1) of the Town and Country Planning Act 1990;

(b) in relation to land in Scotland, section 277(1) of the Town and Country Planning (Scotland) Act 1997;

(c) in relation to land in Northern Ireland, Article 2(2) of the Planning (Northern Ireland) Order 1991 (S.I. 1991/1220 (N.I. 11)).

(6) In this section “development consent” means development consent under the Planning Act 2008.

131 Damage to a dwelling

(1) This section applies where a dwelling is damaged so as to be temporarily unsuitable for use as a dwelling.

(2) The unsuitability for use as a dwelling is taken into account in applying the definition of “dwelling” for the purposes of this Part (see section 112) only if the first and second conditions are met.

(3) The first condition is that the damage is— (a) accidental, or (b) otherwise caused by events beyond the control of the person entitled to the

single-dwelling interest.

(4) The second condition is that, as a result of the damage, the building concerned is unsuitable for use as a dwelling for at least 90 consecutive days.

(5) Where the first and second conditions are met— (a) the entire period of unsuitability for use as a dwelling (including the first 90

days) is taken into account in applying the definition of “dwelling”, and (b) work done in that period to restore the building to suitability for use as a

dwelling does not count, for the purposes of section 112 or 113, as construction or adaptation of the building for use as a dwelling.

(6) The first condition is regarded as not being met if the damage occurs in the course of work that—

(a) is done for the purpose of altering the dwelling (or a building of which it forms part), and

(b) itself involves, or could be expected to involve, making the building unsuitable for use as a dwelling for 30 days or more.

(7) In this section— (a) references to alteration include partial demolition; (b) references to a building include a part of a building.

(8) In this section references to damage include damage done before 1 April 2013; and days before 1 April 2013 may be taken into account for the purposes of subsection (4).

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Reliefs

132 Effect of reliefs under sections 133 to 150

(1) Subsection (2) applies where tax is charged, in respect of a single-dwelling interest, for a chargeable period that includes one or more days that are relievable as a result of any of the provisions listed in subsection (3) (or for more than one such period).

(2) For any such period, the adjusted chargeable amount is to be calculated on the basis that the chargeable person is not within the charge with respect to the interest on any relievable day.

(3) The provisions are— section 133 (property rental businesses); section 134 (rental property: preparation for sale etc); section 137 (dwellings opened to the public); section 138 (property developers); section 139 (property developers: exchange of dwellings); section 141 (property traders); section 143 (financial institutions acquiring dwellings in the course of lending); section 145 (occupation by certain employees or partners); section 148 (farmhouses); section 150 (providers of social housing).

(4) See also section 106 (adjustment of amount chargeable and claim for relief).

133 Property rental businesses

(1) A day in a chargeable period is relievable in relation to a single-dwelling interest if on that day the interest—

(a) is being exploited as a source of rents or other receipts (other than excluded rents) in the course of a qualifying property rental business carried on by a person entitled to the interest, or

(b) steps are being taken to secure that the interest will, without undue delay, be so exploited in the course of a qualifying property rental business that is being carried on, or is to be carried on, by a person entitled to the interest.

(2) A day is not relievable by virtue of subsection (1) or section 134 in the case of a single- dwelling interest if on that day a non-qualifying individual is permitted to occupy the dwelling.

(3) In this Part “qualifying property rental business” means a property rental business that is run on a commercial basis and with a view to profit.

(4) A business is a “property rental business” for the purposes of subsection (3) if it is a property business as defined in Chapter 2 of Part 4 of CTA 2009, but—

(a) the question whether or not a business is a property rental business for the purposes of subsection (3) is determined without reference to whether or not any profits of the business are chargeable to corporation tax (and section 204(2) of CTA 2009 is therefore disregarded), and

(b) for the purposes of this subsection the “rents or other receipts” referred to in section 207(1) of CTA 2009 are taken not to include excluded rents

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(5) In subsection (1)(b) “without undue delay” means without delay except so far as delay is justified by commercial considerations or cannot be avoided.

(6) In this Part “excluded rents” means rents within any of classes 2 to 6 in the table in section 605(2) of CTA 2010.

134 Rental property: preparation for sale, demolition etc

(1) A day (“day X”) on which a person (“P”) is entitled to a single-dwelling interest is relievable in relation to that interest if—

(a) on day X the dwelling is unoccupied and any of the first to fourth conditions is met (see below),

(b) day X is preceded by one or more days (“qualifying days”) that are relievable under section 133 in relation to the interest and on which P, or a relevant partner, was entitled to the interest, and

(c) the days (if any) between day X and the last of the qualifying days to precede day X are all relievable under this section.

First condition The first condition is that steps are being taken to secure that the interest will be sold without undue delay. Second condition The second condition is that—

(a) steps are being taken to secure that the dwelling will be demolished without undue delay, and

(b) if it is intended that a new dwelling will be constructed on the site of the existing dwelling, the intention is that it will be used in a relievable way.

Third condition The third condition is that— (a) steps are being taken to secure that the dwelling will be converted into

a different dwelling without undue delay, and (b) it is intended that the new dwelling will be used in a relievable way.

Fourth condition The fourth condition is that steps are being taken to secure that the dwelling will be converted into a building other than a dwelling without undue delay.

(2) A dwelling is “used in a relievable way” for the purposes of subsection (1) if the single- dwelling interest in question is exploited in such a way, or held in such a way and for such purposes, (or, as the case requires, the dwelling itself is exploited or used in such a way) that a day of such exploitation, ownership or use would be relievable under any of sections 133, 137, 145 and 148.

(3) In this section— “relevant partner”, where P is (on day X) entitled to the interest as a member of a partnership, means a person who was at the time in question carrying on the qualifying rental property business concerned as a member of that partnership; “without undue delay” means without delay, except so far as delay is justified by commercial considerations or cannot be avoided.

135 Non-qualifying occupation: look-forward and look-back

(1) Subsection (2) applies if on a day in a chargeable period (“the day of non-qualifying occupation”)—

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(a) a single-dwelling interest to which a person (“the landlord”) is entitled is being exploited as mentioned in section 133(1)(a), or steps are being taken to secure that the interest will be so exploited, as mentioned in section 133(1)(b), and

(b) a non-qualifying individual is permitted to occupy the dwelling.

(2) No subsequent day in that chargeable period, or in any of the subsequent 3 chargeable periods, that meets the continuity of ownership condition and would (in the absence of this subsection) be relievable by virtue of section 133(1)(b) is treated as relievable by virtue of that provision unless a day of qualifying use falls between that day and the day of non-qualifying occupation.

(3) A day meets the continuity of ownership condition if on that day— (a) the landlord is entitled to the single-dwelling interest, or (b) if the landlord carried on or (as the case requires) intended to carry on the

property rental business in partnership, another member of the partnership is entitled to the interest.

(4) Subsection (5) applies if a person who is a non-qualifying individual in relation to a single-dwelling interest occupies the dwelling on a day in a chargeable period (“the day of non-qualifying occupation”).

(5) An earlier day in that or the preceding chargeable period (“the earlier day”) is not relievable by virtue of section 133(1)(b) or 134 if a relevant person is entitled to the single-dwelling interest on that day.

(6) In subsection (5) “relevant person” means— (a) a person who is entitled to the single-dwelling interest on the day of non-

qualifying occupation, or (b) if a person falling within paragraph (a) is or has been a member of a

partnership whose members have at any time exploited the single-dwelling interest as a source of rents and receipts in a property rental business, any other member of that partnership.

(7) Subsection (5) does not apply in relation to the earlier day if a day that is relievable by virtue of section 133(1)(a) falls between that earlier day and the day of non-qualifying occupation.

(8) For the purposes of this section— (a) “day of qualifying use”, in relation to a single-dwelling interest, means a day

that is relievable in the case of the interest by virtue of section 133(1)(a); (b) occupation of any part of a dwelling is regarded as occupation of the dwelling.

136 Meaning of “non-qualifying individual”

(1) In sections 133 and 135 “non-qualifying individual”, in relation to a single-dwelling interest, means any of the following—

(a) an individual who is entitled to the interest (otherwise than as a member of a partnership),

(b) an individual (“a connected person”) who is connected with a person entitled to the interest,

(c) if a person is entitled to the interest as a member of a partnership, an individual who is, or is connected with, a qualifying member of that partnership,

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(d) an individual (“a relevant settlor”) who is the settlor in relation to a settlement of which a trustee is (in the capacity of trustee) connected with a person who is entitled to the interest,

(e) the spouse or civil partner of a connected person or of a relevant settlor, (f) a relative of a connected person or of a relevant settlor, or the spouse or civil

partner of a relative of a connected person or of a relevant settlor, (g) a relative of the spouse or civil partner of a connected person or of a relevant

settlor, (h) the spouse or civil partner of a person falling within paragraph (g), or (i) an individual who is a major participant in a relevant collective investment

scheme or is connected with a major participant in a relevant collective investment scheme.

(2) In subsection (1)(c) “qualifying member”, in relation to a partnership, means a member of the partnership who is entitled to a 50% or greater share—

(a) in the income profits of the partnership, or (b) in the partnership's assets.

(3) In subsection (1)(i) “relevant collective investment scheme”, in relation to a single- dwelling interest, means a collective investment scheme that meets the ownership condition with respect to the interest.

(4) A person who participates in a collective investment scheme is a “major participant” in the scheme if the person—

(a) is entitled to a share of at least 50% either of all the profits or income arising from the scheme or of any profits or income arising from the scheme that may be distributed to participants, or

(b) would in the event of the winding up of the scheme be entitled to 50% or more of the assets of the scheme that would then be available for distribution among the participants.

(5) The reference in subsection (4)(a) to profits or income arising from the scheme is to profits or income arising from the acquisition, holding, management or disposal of the property subject to the scheme.

(6) For the purposes of subsection (1), section 1122 of CTA 2010 (as applied by section 172) has effect as if subsections (7) and (8) of that section (application of rules about connected persons to partnerships) were omitted.

(7) In this section— “relative” means brother, sister, ancestor or lineal descendant; “settlement” and “settlor” have the same meaning as in Chapter 5 of Part

5 of ITTOIA 2005 (see section 620 of that Act).

(8) In subsection (1)(d) “trustee” is to be read in accordance with section 1123(3) of CTA 2010 (“connected persons”: supplementary).

137 Dwellings opened to the public

(1) A day in a chargeable period is relievable in relation to a single-dwelling interest if the first or second condition is met on that day.

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(2) The first condition is that the dwelling is being exploited as a source of income in the course of a qualifying trade in the normal course of which the public are offered the opportunity to make use of, stay in or otherwise enjoy the dwelling as customers of the trade on least 28 days in any year.

(3) The second condition is that steps are being taken to secure— (a) that the dwelling will (in that or a future chargeable period) be exploited as

a source of income in the course of a qualifying trade such as is mentioned in subsection (2), and

(b) that it will be so exploited without delay, except so far as delay is justified by commercial considerations or cannot otherwise be avoided.

(4) In this section “qualifying trade” means a trade carried on on a commercial basis and with a view to profit.

(5) For the purposes of this section persons are not taken to have an opportunity to make use of, stay in or otherwise enjoy a dwelling unless the areas that they are permitted to make use of, stay in or otherwise enjoy include a significant part of the interior of the dwelling.

(6) The size (relative to the size of the whole dwelling), nature, and function of the area or areas concerned are to be taken into account in determining whether they form a significant part of the interior of the dwelling.

138 Property developers

(1) A day in a chargeable period is relievable in relation to a single-dwelling interest if on that day—

(a) a person carrying on a property development trade (“the property developer”) is entitled to the interest, and

(b) the interest is held exclusively for the purpose of developing and reselling the land in the course of the trade.

(2) If the property developer holds an interest for the purpose mentioned in subsection (1) (b), any additional purpose the property developer may have of exploiting the interest as a source of rents or other receipts in the course of a qualifying property rental business (after developing the land and before reselling it) is treated as not being a separate purpose in applying the test in subsection (1)(b).

(3) A day is not relievable by virtue of subsection (1) if on the day a non-qualifying individual is permitted to occupy the dwelling.

(4) In this Part “property development trade” means a trade that— (a) consists of or includes buying and developing for resale residential or non-

residential property, and (b) is run on a commercial basis and with a view to profit.

(5) In this section references to development include redevelopment.

139 Property developers: exchange of dwellings

(1) A day in a chargeable period is relievable in relation to a single-dwelling interest if—

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(a) a person (“the property developer”) is on that day entitled to a single-dwelling interest (“the returned interest”) that was acquired (by the relevant person) in the course of a property development trade, and

(b) that acquisition (“the reverse acquisition”) was part of a qualifying exchange.

(2) A day is not relievable by virtue of this section if on that day a non-qualifying individual is permitted to occupy the dwelling.

(3) In this section “the relevant person” means— (a) if the property developer is entitled to the returned interest as a member

of a partnership, the persons who acquired the interest as members of the partnership, or

(b) otherwise, the property developer (and any person who acquired the returned interest jointly with the property developer).

(4) The reverse acquisition is “part of a qualifying exchange” only if— (a) it was made by way of transfer, (b) the person from whom the acquisition was made itself acquired (by way of

grant or transfer) a chargeable interest in or over a new dwelling from the relevant person, and

(5) A building or part of a building is a “new dwelling” if— (a) it has been constructed for use as a single dwelling and has not previously

been occupied, or (b) it has been adapted for use as a single dwelling and has not been occupied

since its adaptation.

140 Property developers: supplementary

(1) Subsection (2) applies if on a day in a chargeable period— (a) a person carrying on a property development trade (“the property developer”)

is entitled to a single-dwelling interest that has been acquired in the course of that trade (whether or not the acquisition was part of a qualifying exchange for the purposes of section 139), and

(b) a non-qualifying individual is permitted to occupy the dwelling.

(2) No subsequent day is relievable in the case of the single-dwelling interest by virtue of section 138(1) or 139(1) if—

(a) the day falls within that chargeable period, or any of the subsequent 3 chargeable periods, and

(b) there is continuity of ownership on that day.

(3) There is “continuity of ownership” on any day on which— (a) the property developer is entitled to the single-dwelling interest, or (b) if the property developer carried on the property development trade in

partnership, another member of the partnership is entitled to the interest.

(4) Subsection (5) applies if— (a) on a day in a chargeable period (“the day of non-qualifying occupation”) a

person who is a non-qualifying individual in relation to a single-dwelling interest is occupying the dwelling in question, and

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(b) on an earlier day in that, or the preceding, chargeable period (“the earlier day”) the conditions in section 138(1)(a) and (b) are met in relation to the same single-dwelling interest.

(5) The earlier day is not relievable by virtue of section 138(1) in the case of the single- dwelling interest if—

(a) a person who is entitled to the interest on the earlier day is also entitled to it on the day of non-qualifying occupation, or

(b) if the trade mentioned in section 138(1) is carried on in partnership, a person who has at any time carried that business on in partnership is entitled to the interest on the day of non-qualifying occupation.

(6) Subsection (7) applies if— (a) on a day in a chargeable period (“the day of non-qualifying occupation”) a

person who is a non-qualifying individual in relation to a single-dwelling interest is occupying the dwelling in question, and

(b) on an earlier day in that, or the preceding, chargeable period (“the earlier day”) the conditions in section 139(1)(a) and (b) are met in relation to the same single-dwelling interest.

(7) The earlier day is not relievable by virtue of section 139(1) in the case of the single- dwelling interest if—

(a) a person who is entitled to the interest on the earlier day is also entitled to it on the day of non-qualifying occupation, or

(b) where the trade mentioned in section 139(1) is carried on in partnership, a person who has at any time carried that trade on in partnership is entitled to the interest on the day of non-qualifying occupation.

(8) If a day that is relievable by virtue of section 133(1)(a) falls between the earlier day mentioned in subsection (5) or (as the case may be) (7) and the day of non-qualifying occupation, that subsection does not apply in relation to that earlier day.

(9) For the purposes of sections 138 and 139 and this section— (a) “non-qualifying individual” has the meaning given by section 136(1); (b) occupation of any part of a dwelling is regarded as occupation of the dwelling.

141 Property traders

(1) A day in a chargeable period is relievable in relation to a single-dwelling interest if on that day—

(a) a person carrying on a property trading business is entitled to the interest, and (b) the interest is held as stock of the business and for the sole purpose of resale

in the course of the business.

(2) A single-dwelling interest in a dwelling is taken not to be held for the sole purpose of resale in the course of a property trading business at any time when a non-qualifying individual is permitted to occupy the dwelling.

(3) In this Part “property trading business” means a business that— (a) consists of or includes activities in the nature of a trade of buying and selling

dwellings, and (b) is carried on on a commercial basis and with a view to profit.

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142 Property traders: supplementary

(1) Subsection (2) applies if on a day in a chargeable period (“the day of non-qualifying occupation”)—

(a) a person carrying on a property trading business (“the property trader”) is entitled to a single-dwelling interest that is held as mentioned in section 141(1) (b), and

(b) a non-qualifying individual is permitted to occupy the dwelling.

(2) No subsequent day is relievable in the case of the single-dwelling interest by virtue of section 141(1) if—

(a) the day falls within that chargeable period, or any of the subsequent 3 chargeable periods, and

(b) the property trader or a relevant partner is entitled to the interest on that day.

(3) If on the day of non-qualifying occupation mentioned in subsection (1) the property trader carries on the property trading business in partnership, “relevant partner” means any other person who is, at any time, a member of that partnership.

(4) Subsection (5) applies if— (a) on a day in a chargeable period (“the day of non-qualifying occupation”) a

person who is a non-qualifying individual in relation to a single-dwelling interest is occupying the dwelling in question, and

(b) on an earlier day in that, or the preceding, chargeable period (“the earlier day”) the conditions in section 141(1)(a) and (b) are met in relation to the same single-dwelling interest.

(5) The earlier day is not relievable by virtue of section 141(1) in the case of the single- dwelling interest if—

(a) a person who is entitled to the interest on the earlier day is also entitled to it on the day of non-qualifying occupation, or

(b) if the business mentioned in section 141(1) is carried on in partnership, a person who has at any time carried that business on in partnership is entitled to the interest on the day of non-qualifying occupation.

(6) Subsection (5) does not apply in relation to the earlier day if a day that is relievable by virtue of section 133(1)(a) falls between the earlier day and the day of non-qualifying occupation.

(7) For the purposes of this section and section 141— (a) “non-qualifying individual” has the meaning given by section 136(1); (b) occupation of any part of a dwelling is regarded as occupation of the dwelling.

143 Financial institutions acquiring dwellings in the course of lending

(1) A day in a chargeable period is relievable in relation to a single-dwelling interest if matters stand as follows on that day—

(a) a financial institution carrying on a business that involves the lending of money is entitled to the interest,

(b) the financial institution has acquired the interest in the course of that business and in connection with those lending activities, and

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(c) the interest is held with the intention that it will be sold in the course of that business without delay (except so far as delay is justified by commercial considerations or cannot be avoided).

(2) A single-dwelling interest in a dwelling is taken not to be held with the intention mentioned in subsection (1)(c) at any time when a non-qualifying individual is permitted to occupy the dwelling.

(3) In this Part (except where otherwise stated) “financial institution” has the meaning given by section 564B of ITA 2007; but for this purpose section 564B(1) is to be read as if paragraph (d) of that subsection were omitted.

144 Section 143: supplementary

(1) Subsection (2) applies if on a day in a chargeable period— (a) a financial institution that carries on a business involving the lending of

money is entitled to a single-dwelling interest that has been acquired by it as mentioned in section 143(1)(b), and

(b) a non-qualifying individual is permitted to occupy the dwelling.

(2) No subsequent day is relievable in the case of the single-dwelling interest by virtue of section 143(1) if—

(a) the day falls within that chargeable period, or any of the subsequent 3 chargeable periods, and

(b) there is continuity of ownership on that day.

(3) There is continuity of ownership on a day on which— (a) the financial institution is entitled to the single-dwelling interest, or (b) if the financial institution carried on the business mentioned in subsection (1)

(a) in partnership, another member of the partnership is entitled to the interest.

(4) Subsection (5) applies if— (a) on a day in a chargeable period (“the day of non-qualifying occupation”) a

person who is a non-qualifying individual in relation to a single-dwelling interest is occupying the dwelling in question, and

(b) on an earlier day in that, or the preceding, chargeable period (“the earlier day”) the conditions in section 143(1)(a) to (c) are met in relation to the same single- dwelling interest.

(5) The earlier day is not relievable by virtue of section 143(1) in the case of the single- dwelling interest if—

(a) a person who is entitled to the interest on the earlier day is also entitled to it on the day of non-qualifying occupation, or

(b) if the business mentioned in section 143(1) is carried on in partnership, a person who has at any time carried that business on in partnership is entitled to the interest on the day of non-qualifying ownership.

(6) Subsection (5) does not apply in relation to the earlier day if a day that is relievable by virtue of section 133(1)(a) falls between the earlier day and the day of non-qualifying occupation.

(7) For the purposes of this section and section 143— (a) “non-qualifying individual” has the meaning given by section 136(1);

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(b) occupation of any part of a dwelling is regarded as occupation of the dwelling.

145 Occupation by certain employees or partners

(1) A day in a chargeable period is a relievable if matters stand as follows on that day— (a) a person (“P”) is entitled to a single-dwelling interest, (b) P, or a relevant group member, carries on a qualifying trade, (c) the interest is held for the purpose of making the dwelling available to

one or more qualifying employees or qualifying partners for use as living accommodation, and

(d) the dwelling is, or is to be, made available as mentioned in paragraph (c) for purposes that are solely or mainly purposes of the trade.

(2) “Qualifying trade” means a trade that is carried on on a commercial basis and with a view to profit.

(3) In this section references to making a dwelling available to a qualifying employee or qualifying partner include making it available to persons who are to share the accommodation with such an individual as their family.

(4) Where P is a company, “a relevant group member” means a company which is a member of the same group as P for the purposes mentioned in paragraph 1(2) of Schedule 7 to FA 2003 (stamp duty land tax: group relief).

146 Meaning of “qualifying employee” and “qualifying partner” in section 145

(1) In a case where the person carrying on the trade mentioned in section 145(1)(b) carries it on in partnership with one or more other persons, “qualifying partner” means any individual who is a member of the partnership, except one who is entitled to a 10% or greater share—

(a) in the income profits of the partnership, or (b) in any company that is entitled to the single-dwelling interest mentioned in

section 145(1)(a), or (c) in the partnership's assets.

(2) “Qualifying employee” means any individual employed for the purposes of the qualifying trade, except one who—

(a) is entitled to a 10% or greater share— (i) in the income profits of the trade, or

(ii) in any company that is entitled to the single-dwelling interest mentioned in section 145(1)(a), or

(iii) in that single-dwelling interest, or (b) provides excluded domestic services.

(3) The reference in subsection (2)(b) to an individual who provides excluded domestic services is to an individual the duties of whose employment include the provision of services in connection with the (actual or intended) occupation, by a non-qualifying individual, of the dwelling mentioned in section 145(1)(c) (“the relevant dwelling”), or a linked dwelling.

(4) In subsection (3) “non-qualifying individual” means an individual connected with a person who is entitled to the single-dwelling interest.

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(5) The following are “linked” dwellings for the purposes of subsection (3)— (a) if the conditions in section 116(2) are met in relation to the relevant dwelling

and another dwelling, that other dwelling; (b) a dwelling that is linked to the relevant dwelling, as described in

section 117(1).

(6) In this section references to employment include the holding of an office.

(7) For the purposes of subsections (1)(c) and (2)(a)(iii) persons who are entitled to a chargeable interest as beneficial joint tenants (or, in Scotland, as joint owners) are taken to be entitled to the chargeable interest as beneficial tenants in common (or, in Scotland, as owners in common) in equal shares.

147 Meaning of “10% or greater share in a company”

(1) This section applies for the purposes of section 146.

(2) An individual (“P”) is taken to be entitled to a 10% or greater share in a company (“C”) if P possesses (directly or indirectly) or is entitled to acquire—

(a) 10% or more of the share capital of C, (b) 10% or more of the issued share capital of C, (c) 10% or more of the voting power in C, (d) so much of the issued share capital of C as would, on the assumption that the

whole of the income of C were distributed among the participators, entitle P to receive 10% or more of the amount so distributed, or

(e) such rights as would entitle P, in the event of the winding up of C or in any other circumstances, to receive 10% or more of the assets of C which would then be available for distribution among the participators.

(3) Any rights that P or any other person has as a loan creditor are to be disregarded for the purposes of the assumption in subsection (2)(d).

(4) For the purposes of subsection (2) a person is treated as entitled to acquire anything which the person—

(a) is entitled to acquire at a future date, or (b) will at a future date be entitled to acquire.

(5) If a person— (a) possesses any rights or powers on behalf of another person (“A”), or (b) may be required to exercise any rights or powers on A's direction or behalf,

those rights or powers are to be attributed to A.

(6) The following are also to be attributed to a person— (a) the rights and powers of any company of which the person has, or the person

and associates of the person have, control; (b) the rights and powers of any two or more companies within paragraph (a); (c) the rights and powers of any associate of the person (or of any two or more

associates of the person).

(7) The rights and powers which are to be attributed under subsection (6)— (a) include those attributed to a company or associate under subsection (5), but (b) do not include those attributed to an associate under subsection (6).

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(8) A person who does not meet the conditions in subsection (2) is nevertheless treated as having a 10% or greater share in a company if the person exercises, is able to exercise or is entitled to acquire, direct or indirect control over the company's affairs.

(9) In this section— “associate” has the same meaning as in Part 10 of CTA 2010 (see

section 448 of that Act); but for this purpose section 448 is to be read as if the words “or partner” were omitted in subsection (1)(a);

“control” has the same meaning as in that Part (see section 450 of that Act); “loan creditor” has the same meaning as in that Part (see section 453 of

that Act); “participator” has the same meaning as in that Part (see section 454 of that

Act).

148 Farmhouses

(1) This section applies where on a day in a chargeable period— (a) a dwelling (“the farmhouse”) forms part of land occupied for the purposes of

a qualifying trade of farming, and (b) a person carrying on the trade is entitled to, or connected with a person who

is entitled to, a single-dwelling interest in the farmhouse.

(2) That day is relievable in relation to the single-dwelling interest if on that day the farmhouse is occupied—

(a) by a farm worker who occupies it for the purposes of the trade, or (b) by a former long-serving farm worker, or the surviving spouse or civil partner

of a former farm worker.

(3) A trade of farming is a “qualifying trade of farming” only if it is carried on— (a) on a commercial basis, and (b) with a view to profit.

(4) In this section— “farming” has the same meaning as in the Corporation Tax Acts (see

section 1125 of CTA 2010), except that in this section “farming” includes market gardening;

“market gardening” has the same meaning as in the Corporation Tax Acts (see section 1125(5) of CTA 2010).

149 “Farm worker” and “former long-serving farm worker”

(1) An individual is a “farm worker” in relation to the qualifying trade of farming mentioned in section 148(1) at any time when the individual has a substantial involvement in—

(a) the day-to-day work of the trade, or (b) the direction and control of the conduct of the trade.

(2) Where section 148 applies, an individual occupying the farmhouse on the day mentioned in section 148(1) is a “former long-serving farm worker” if the individual had, before that day, been a farm worker in relation to the qualifying trade of farming for—

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(a) a qualifying period of 3 or more years, or (b) qualifying periods together amounting to 3 or more years within a 5 year

period.

(3) In subsection (2) “qualifying period” means a period throughout which— (a) the individual occupied the farmhouse for the purposes of the trade, (b) the land of which the farmhouse forms part was occupied for the purposes

of the trade, (c) the trade was carried on by—

(i) a person who is entitled to the single-dwelling interest in the farmhouse on the day mentioned in section 148(1), or

(ii) a person connected with such a person, and (d) a person who is entitled to the single-dwelling interest in the farmhouse on

the day mentioned in section 148(1) was entitled to that interest.

(4) A person occupying part of a dwelling is regarded as occupying the dwelling for the purposes of this section and section 148.

150 Providers of social housing

(1) A day in a chargeable period is relievable in relation to a single-dwelling interest if on that day—

(a) a profit-making registered provider of social housing (P) is entitled to the interest, and

(b) P's acquisition of the interest (or of any part of the interest) was funded with the assistance of public subsidy.

(2) A day in a chargeable period is relievable in relation to a single-dwelling interest if on that day—

(a) a relevant housing provider (that is, a non-profit registered provider of social housing or a registered social landlord) is entitled to the interest, and

(b) the condition in subsection (3) is met.

(3) The condition mentioned in subsection (2) is that— (a) the relevant housing provider is controlled by its tenants, (b) the person from whom the relevant housing provider acquired the interest (or

any part of the interest) is a qualifying body, or (c) the relevant housing provider's acquisition of the interest (or of any part of the

interest) was funded with the assistance of a public subsidy.

(4) In this section— (a) the reference to a relevant housing provider “controlled by its tenants” is to

be read in accordance with subsection (2) of section 71 of FA 2003; (b) “qualifying body” has the meaning given by subsection (3) of that section; (c) “public subsidy” has the same meaning as in that section.

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Exemptions

151 Charitable companies

(1) A charitable company that is entitled to a single-dwelling interest is regarded as not meeting the ownership condition with respect to the interest on any day on which the interest is held by the company for qualifying charitable purposes, other than an excluded day.

(2) The interest is “held for qualifying charitable purposes” if it is held— (a) for use in furtherance of the charitable purposes of the charitable company or

of another charity, or (b) as an investment from which the profits are (or are to be) applied to the

charitable purposes of the charitable company.

(3) A day is an “excluded day” if the following conditions are met— (a) a person (“the donor”) has on or before that day made, or agreed to make, a

gift to the charitable company or to a charity that is connected with it, (b) there exist on that day arrangements under which or as a result of which a

linked individual is permitted, or is to be or may in the future be permitted, to occupy the dwelling, and

(ii) the circumstances in which the gift was made and the circumstances in which the arrangements were entered into,

that the gift would not have been made and the arrangements would not have been entered into independently of one another;

but see the exception in subsection (5).

(4) In subsection (3)(b) “linked individual” means an individual who— (a) is the donor, or (b) was, when the arrangements were entered into, an associate of the donor.

(5) A day is not an “excluded day” if the first, second or third condition is met on that day. The first condition is that the activities undertaken for carrying out the primary purposes of the charitable company include, or normally include, opening the dwelling to the public. The second condition is that the dwelling is being exploited through commercial activities that involve, or normally involve, opening the dwelling to the public. The third condition is that steps are being taken—

(a) to secure that the first or second condition will be met without undue delay, or

(b) to secure that the single-dwelling interest will be sold without undue delay.

(6) In subsection (5)— (a) “opening the dwelling to the public” means offering the public the opportunity

to make use of, stay in or otherwise enjoy, on at least 28 days in any year, areas that constitute a significant part of the interior of the dwelling or of the dwelling's garden or grounds;

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(b) “without undue delay” means without delay, except so far as delay is justified by commercial considerations or for the sake of a primary purpose of the charitable company.

(7) For the purposes of subsection (6)(a), the size (relative to the size of the whole dwelling or of the whole garden or grounds), nature, and function of the areas concerned are to be taken into account in determining whether they form a significant part of the interior of the dwelling or (as the case may be) of the garden or grounds.

(8) For the purposes of subsection (3)(a)— (a) “connected” means connected in a matter relating to the structure,

administration or control of the charitable company, and (b) section 172 does not apply.

152 Section 151: supplementary

(1) In section 151 “associate”, in relation to the donor, means any of the following— (a) an individual (“a connected person”) who is connected with the donor, (b) an individual who is the settlor in relation to a settlement of which a trustee

is (in the capacity of trustee) connected with the donor, (c) the spouse or civil partner of a connected person or of a relevant settlor, (d) a relative of a connected person or of a relevant settlor, or the spouse or civil

partner of a relative of a connected person or of a relevant settlor, (e) a relative of the spouse or civil partner of a connected person or of a relevant

settlor, or (f) the spouse or civil partner of a person falling within paragraph (e).

(2) In subsection (1)— “relative” means brother, sister, ancestor or lineal descendant; “settlement” and “settlor” have the same meaning as in Chapter 5 of Part

5 of ITTOIA 2005 (see section 620 of that Act).

(3) In subsection (1)(b) “trustee” is to be read in accordance with section 1123(3) of CTA 2010 (“connected persons”: supplementary).

(4) For the purposes of section 151 occupation of any part of a dwelling is regarded as occupation of the dwelling.

(5) For the purposes of section 151(3)— (a) the making of a gift is disregarded if it is made before the day on which this

Act is passed, and (b) an agreement to make a gift is disregarded if the agreement is made before

that day.

(6) Arrangements entered into before the day on which this Act is passed are disregarded for the purposes of section 151(3) unless a material alteration has been made to them on or after that date.

“Material alteration” means an alteration affecting anything in the arrangements that relates to the individual's having (at any time), or potentially having, permission to occupy the dwelling.

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(7) References in section 151 and this section to a gift include the disposal of an asset for consideration of an amount or value which is less than the market value of the asset.

(8) In section 151 and this section “arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.

153 Public bodies

(1) A public body is not regarded as a company for the purposes of this Part.

(2) In this section— (a) “public body” means any body corporate that is a public body for the purposes

of section 66 of FA 2003, and (b) references to a public body accordingly include a company such as is

mentioned in subsection (5) of that section (companies wholly owned by the listed bodies).

(3) The power of the Treasury to prescribe persons by an order under section 66(4) of FA 2003 may be exercised so as to make different provision for purposes relating to annual tax on enveloped dwellings and stamp duty land tax.

(4) In paragraph (b) of subsection (2) “company” means a company as defined by section 1 of the Companies Act 2006 (and subsection (1) is to be ignored in interpreting that paragraph).

154 Bodies established for national purposes

(1) A body listed in subsection (2) is not regarded as a company for the purposes of this Part.

(2) The bodies are— the Historic Buildings and Monuments Commission for England; the Trustees of the British Museum; the Trustees of the National Heritage Memorial Fund; the Trustees of the Natural History Museum.

155 Dwelling conditionally exempt from inheritance tax

(1) Subsection (2) applies to a single-dwelling interest if— (a) the whole or part of the dwelling has been designated under section 31 of

IHTA 1984 (buildings of outstanding historic or architectural interest etc), (b) an undertaking has been made with respect to the dwelling under section 30

of that Act (conditionally exempt transfers), and (c) a transfer of value is exempt from inheritance tax by virtue of that designation

and that undertaking.

(2) The taxable value of the single-dwelling interest on any day is taken to be zero if no chargeable event has occurred with respect to the dwelling in the time between the transfer of value and the beginning of that day.

(3) Subsection (4) applies to a single-dwelling interest if—

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(a) the whole or part of the dwelling has been designated under section 31 of IHTA 1984,

(b) an undertaking has been made with respect to the dwelling under section 78 of that Act (settled property: conditionally exempt occasions), and

(c) a transfer of property or other event is a conditionally exempt occasion by virtue of that designation and that undertaking.

(4) The taxable value of the single-dwelling interest on any day is taken to be zero if no chargeable event has occurred with respect to the dwelling in the time between the conditionally exempt occasion and the beginning of that day.

(5) In this section— “chargeable event” means an event which is a chargeable event under

section 32 of IHTA 1984; “conditionally exempt occasion” is to be read in accordance with

section 78(2) of that Act; “transfer of value” has the same meaning as in that Act.

Power to modify reliefs

156 Modification of reliefs

(1) The Treasury may by regulations— (a) amend this Part for the purpose of providing further relief, or further

exemptions, from tax (whether by modifying an existing relief or exemption or otherwise);

(b) amend or repeal any of sections 132 to 155 for purposes not falling within paragraph (a);

(c) make any amendment of any other provision of this Part that may be necessary in consequence of provision under paragraph (b).

(2) In subsection (1)— (a) the reference to providing further relief from tax includes the provision of

relief for additional persons or categories of person or in additional cases or circumstances;

(b) the reference to providing further exemptions from tax includes the provision of exemptions for additional persons or categories of person or in additional cases or circumstances.

Alternative property finance

157 Land sold to financial institution and leased to person

(1) This section applies where— (a) section 71A of FA 2003 (land sold to financial institution and leased to person)

or section 72 of that Act (land in Scotland sold to financial institution and leased to person) applies in relation to arrangements entered into between a financial institution and another person (“the lessee”), and

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(b) the land in which the institution purchases a major interest under the first transaction consists of or includes one or more dwellings (or parts of a dwelling).

(2) If the lessee is a company, this Part has effect in relation to times when the arrangements are in operation as if—

(a) the interest held by the financial institution as mentioned in subsection (3)(b) were held by the lessee (and not by the financial institution), and

(b) the lease or sub-lease granted under the second transaction had not been granted.

(3) The reference in subsection (2) to times when the arrangements are in operation is to times when—

(a) the lessee holds the leasehold interest granted to it under the second transaction, and

(b) the interest purchased under the first transaction (or that interest except so far as transferred by a further transaction) is held by a financial institution.

(4) A company treated under subsection (2)(a) as holding an interest at a particular time is treated as holding it as a member of a partnership if at the time in question the company holds the leasehold interest as a member of the partnership (and this Part has effect accordingly in relation to the other members of the partnership).

(5) In relation to times when the arrangements operate for the benefit of a collective investment scheme, this Part has effect as if—

(a) the interest held by the financial institution as mentioned in subsection (6)(b) were held by the lessee for the purposes of a collective investment scheme (and were not held by the financial institution), and

(b) the lease or sub-lease granted under the second transaction had not been granted.

(6) The reference in subsection (5) to times when the arrangements operate for the benefit of a collective investment scheme is to times when—

(a) the lessee holds the leasehold interest for the purposes of a collective investment scheme, and

(b) the interest purchased under the first transaction (or that interest except so far as transferred by a further transaction) is held by a financial institution.

(7) In this section— “financial institution” has the meaning given by section 73BA of FA 2003; “the first transaction” has the same meaning as in section 71A or (as the

case requires) 72 of FA 2003; “further transaction” has the same meaning as in section 71A of FA 2003; “the leasehold interest” means the interest granted to the lessee under the

second transaction; “the second transaction” has the same meaning as in section 71A or (as the

case requires) 72 of FA 2003.

(8) The reference in subsection (1) to a major interest in land is to be read in accordance with section 117 of FA 2003.

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(9) Where the lessee is an individual, references in subsections (5) and (6) to the lessee are to be read, in relation to times after the death of the lessee, as references to the lessee's personal representatives.

(10) In relation to transactions in relation to which section 29 of the Scotland Act 2012 (disapplication of UK stamp duty land tax) has effect, this section has effect as if—

(a) in subsection (1) the words “or section 72 of that Act (land in Scotland sold to financial institution and leased to person)” were omitted, and

(b) in subsection (7) the words, “or (as the case requires) section 72” were omitted (in each place).

Administration and payment of tax

158 Responsibility for collection and management

The Commissioners for Her Majesty's Revenue and Customs are responsible for the collection and management of annual tax on enveloped dwellings.

159 Annual tax on enveloped dwellings return

(1) Where tax is charged on a person for a chargeable period with respect to a single- dwelling interest the person must deliver a return for the period with respect to the interest.

(2) A return under subsection (1) must be delivered by the end of the period of 30 days beginning with first day in the period on which the person is within the charge with respect to the interest.

(3) If the first day in the chargeable period on which the person is within the charge with respect to the interest (“day 1”) is a valuation date only because of section 124 (new dwellings) or section 125 (dwellings produced from other dwellings)—

(a) subsection (2) does not apply, and (b) the return must be delivered by the end of the period of 90 days beginning

with day 1.

(4) A return under this section must be delivered to an officer of Revenue and Customs, and is called an “annual tax on enveloped dwellings return”.

160 Return of adjusted chargeable amount

(1) A person on whom tax is charged for a chargeable period with respect to a single- dwelling interest must deliver a further return for the period with respect to the interest if the first or second condition is met.

(2) The return must be delivered by the end of the period of 30 days beginning with the first day of the period following the period for which the tax is charged (but see subsection (3)).

(3) If the return is required because the second condition is met and the adjusted chargeable amount is affected by an event that has occurred after the end of the chargeable period mentioned in subsection (1), the return must be delivered by the end of the period of 30 days beginning with the day on which that event occurred.

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(4) The first condition is that— (a) the person has not made a claim under section 100 (interim relief) with respect

to the interest for the chargeable period, and (b) the adjusted chargeable amount is greater than the amount charged under

section 99 with respect to the single-dwelling interest for the period.

(5) The second condition is that— (a) the person has made one or more claims under section 100 with respect to the

interest for the chargeable period, and (b) the sum of amounts A and B, as calculated under that section, in connection

with the last of those claims is less than the adjusted chargeable amount.

(6) A return under this section must be delivered to an officer of Revenue and Customs, and is called a “return of the adjusted chargeable amount”.

161 Return to include self assessment

(1) A return must include a self assessment.

(2) In subsection (1) “return” means— (a) an annual charge on enveloped dwellings return, or (b) a return of the adjusted chargeable amount.

(3) In the case of an annual tax on enveloped dwellings return, “self assessment” means an assessment of—

(a) the amount of tax to which the person is chargeable under section 99 for the period in respect of the interest, and

(b) if the return includes a claim under section 100 (interim relief), the tax payable after the relief.

(4) In the case of a return of the adjusted chargeable amount, “self assessment” means an assessment of—

(a) the adjusted chargeable amount, and (b) the additional tax payable in accordance with section 163(2).

(5) A self assessment must include a statement of the amount taken to be the market value of the interest on each valuation date (earlier than the date on which the return is delivered) that is relevant for the purposes of the assessment.

162 Returns, enquiries, assessments and other administrative matters

(1) Schedule 33 contains provision about returns, enquiries and related matters.

(2) The Treasury may by regulations— (a) make any amendments of Schedule 33 that they may at any time think

appropriate; (b) make any amendment of any other provision of this Part that may be necessary

in consequence of provision under paragraph (a).

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163 Payment of tax

(1) Tax charged on a person under section 99 for a chargeable period with respect to a single-dwelling interest must be paid not later than the filing date for the annual tax on enveloped dwellings return required to be made for the period with respect to the interest.

(2) So far as a chargeable person's adjusted chargeable amount for a chargeable period with respect to a single-dwelling interest exceeds the amount payable under subsection (1) (as modified, where applicable, by section 100(3)), the amount of the difference must be paid not later than the filing date for the return of the adjusted chargeable amount under section 160.

(3) Tax payable as a result of the amendment of a return must be paid— (a) immediately, or (b) if the amendment is made on or before the filing date for the return, not later

than that date.

(4) In subsection (3) “return” means— (a) an annual tax on enveloped dwellings return, or (b) a return of the adjusted chargeable amount.

(5) Tax payable in accordance with a determination or assessment by an officer of Revenue and Customs must be paid within the period of 30 days beginning with the day on which the determination or assessment is issued.

164 Information and enforcement

In Schedule 34— (a) Part 1 contains provision about information and inspection powers, and (b) Part 2 contains provision about penalties.

165 Collection and recovery of tax etc

(1) Schedule 12 to FA 2003 (stamp duty land tax: collection and recovery of tax) has effect in relation to the collection and recovery of tax under this Part as it has effect in relation to stamp duty land tax.

(2) The reference in subsection (1) to tax under this Part includes any unpaid penalty or interest under this Part.

Application of provisions

166 Companies

(1) In this Part “company” means a body corporate but does not include— (a) a corporation sole, or (b) any partnership (see section 167(1)).

(2) Everything to be done by a company under this Part must be done by the company acting through—

(a) the proper officer of the company, or

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(b) another person who has the express, implied or apparent authority of the company to act on its behalf for the purpose.

(3) Service of a document on a company under this Part may be effected by serving the document on the proper officer.

(4) Tax due from any company that is incorporated under the law of a country or territory outside the United Kingdom may be recovered from the proper officer of the company (as well as by any means available in the absence of this subsection).

(5) The proper officer— (a) may retain, out of any money that may come into the officer's hands on the

company's behalf, enough money to pay that tax, and (b) is entitled to be fully reimbursed by the company (whether by that method or

another) for amounts recovered from the officer under subsection (4).

(6) For the purposes of this section the proper officer of a company is— (a) the secretary, or a person acting as secretary, of the company, or (b) if the company does not have a proper officer within paragraph (a), the

treasurer, or a person acting as treasurer, of the company.

(7) If a liquidator has been appointed for the company— (a) subsections (2)(b) and (6) do not apply, and (b) the liquidator is the proper officer of the company.

(8) If an administrator has been appointed for the company— (a) subsection (6) does not apply, and (b) the administrator is the proper officer of the company.

(9) If two or more persons are appointed to act jointly or concurrently as the administrator of the company, the proper officer of the company is—

(a) whichever of those persons is specified in a notice given by the administrators to an officer of Revenue and Customs for the purposes of this section, or

(b) if no notice is given under paragraph (a), whichever of those persons is designated by an officer of Revenue and Customs as the proper officer for those purposes.

(10) See also section 153 (public bodies) and section 154 (bodies established for national purposes).

167 Partnerships

(1) In this Part “partnership” means— (a) a partnership within the Partnerships Act 1890, (b) a limited partnership registered under the Limited Partnerships Act 1907, (c) a limited liability partnership formed under the Limited Liability Partnerships

Act 2000 or the Limited Liability Partnerships Act (Northern Ireland) 2002, or (d) a firm or entity of a similar character to any of those mentioned in paragraphs

(a) to (c) formed under the law of a country or territory outside the United Kingdom.

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(2) This Part has effect as follows in relation to a partnership (for instance, a limited liability partnership formed as mentioned in subsection (1)(c)) that is itself capable of being entitled to, or of acquiring or disposing of, a chargeable interest—

(a) transactions entered into on behalf of the partnership are treated as entered into by or on behalf of the partners;

(b) where the partnership is entitled to a single-dwelling interest, this Part has effect as if the partners were jointly entitled to the interest (and the partnership had no entitlement to it).

(3) For the purposes of this Part a partnership is treated as the same partnership despite a change in membership if any person who was a member before the change remains a member after the change.

(4) For the purposes of this Part— (a) a collective investment scheme is not regarded as a partnership, and (b) accordingly, a member of a partnership by or on whose behalf a single-

dwelling interest is held for the purposes of a collective investment scheme is not regarded as entitled to the interest as a member of the partnership.

(5) Anything required or authorised by this Part to be done by or in relation to the responsible partners for a partnership may instead be done by or in relation to any representative partner or partners.

(6) A representative partner means a partner nominated by a majority of the partners to act as the representative of the partnership for the purposes of this Part of this Act.

(7) Any such nomination, or the revocation of such a nomination, has effect only after notice of the nomination, or revocation, has been given to an officer of Revenue and Customs.

Supplementary provisions

168 Miscellaneous amendments and transitory provision

Schedule 35 contains— (a) miscellaneous amendments, and (b) provision about the chargeable period beginning on 1 April 2013.

169 Orders and regulations

(1) Orders and regulations under this Part are to be made by statutory instrument.

(2) A statutory instrument containing an order or regulations made under this Part is subject to annulment in pursuance of a resolution of the House of Commons.

(3) Subsection (2) does not apply to— (a) an instrument containing only an order under section 101(5), or (b) an instrument to which subsection (4) applies.

(4) A statutory instrument containing (whether alone or with other provision) provision made under section 156(1) or 162(2) may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.

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(5) An order or regulations under this Part— (a) may make different provision for different purposes, (b) may include consequential or transitional provisions or savings.

Interpretation

170 Meaning of “chargeable day” and “within the charge”

(1) Any day on which the conditions in section 94(2) are met with respect to a single- dwelling interest is a “chargeable day” for that interest.

(2) Where a day is a chargeable day as a result of subsection (1), the chargeable person is “within the charge” with respect to a single-dwelling interest on that day.

171 References to the state of affairs “on” a day

In determining for the purposes of any provision of this Part whether or not a state of affairs obtains on a particular day, it is to be assumed that the state of affairs obtaining at the end of the day persisted throughout the day.

172 Connected persons

(1) Section 1122 of the Corporation Tax Act 2010 (connected persons) has effect for the purposes of this Part (except where otherwise stated).

(2) For the purposes of this Part a person is taken to be connected with a collective investment scheme if the person is a participant in the scheme who—

(a) is entitled to a share of at least 50% either of all the profits or income arising from the scheme or of any profits or income arising from the scheme that may be distributed to participants, or

(b) would in the event of the winding up of the scheme be entitled to 50% or more of the assets of the scheme that would then be available for distribution among the participants.

(3) The reference in subsection (2) to a collective investment scheme does not include a unit trust scheme; but see section 1123(2) of CTA 2010 (provision about the application of rules about connected persons to unit trust schemes).

(4) The reference in subsection (2)(a) to profits or income arising from the scheme is to profits or income arising from the acquisition, holding, management or disposal of the property subject to the scheme.

(5) For the purposes of subsection (2) a person is taken to have any rights and powers that the person—

(a) is entitled to acquire at a future date, or (b) will at a future date be entitled to acquire.

(6) For the purposes of subsection (2) the rights and powers of any associate of a person (or of any two or more associates of a person) are to be attributed to the person.

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(7) In this section “associate” has the same meaning as in Part 10 of CTA 2010 (see section 448 of that Act); but for this purpose section 448 is to be read as if the words “or partner” were omitted in subsection (1)(a).

173 Connected persons: cell companies

(1) For the purposes of this Part a person is to be treated as connected to a cell company where, if any cell of the company were a separate company, the person would be connected to that separate company.

(2) For the purposes of this section a company is a “cell company” if it meets the first or second condition.

(3) The first condition is that under the law under which the company is incorporated or formed, under the company's articles of association or other document regulating the company or under arrangements entered into by or in relation to the company—

(a) some or all of the assets of the company are available primarily, or only, to meet particular liabilities of the company, and

(b) some or all of the members of the company, and some or all of its creditors, have rights primarily, or only, in relation to particular assets of the company.

(4) The second condition is that the company's articles of association, or other document regulating it, establish an entity (by whatever name known) which—

(a) under the law under which the company is incorporated or formed, has legal personality distinct from that of the company, and

(b) which is not itself a company.

(5) For the purposes of this section a “cell”, in relation to a cell company, is— (a) an identifiable part of the company (by whatever name known) that carries on

distinct business activities and to which particular assets and liabilities of the company are primarily or wholly attributable, or

(b) an entity of the kind specified in subsection (4).

174 General interpretation of Part 3

(1) In this Part— “chargeable day” (in relation to a single-dwelling interest) is to be read in accordance with section 170; “chargeable interest” has the meaning given by section 107; “the chargeable person” has the meaning given by section 96(2) or (3); “closure notice” has the meaning given by paragraph 16 of Schedule 33; “collective investment scheme” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see section 235 of that Act); “company” has the meaning given by section 166(1); “completion”, in Scotland, means—

(a) in relation to a lease, when it is executed by the parties (that is to say, by signing) or constituted by any means,

(b) in relation to any other transaction, the settlement of the transaction; “discovery assessment” has the meaning given by paragraph 21 of Schedule 33;

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“EEA UCITS” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see section 237 of that Act); “excluded rents” has the meaning given by section 133(6); “farming” has the meaning given by section 148(4); “filing date”, in relation to an annual tax on enveloped dwellings return or a return of the adjusted chargeable amount, has the meaning given by paragraph 58 of Schedule 33; “financial institution” has the meaning given by section 143 (except where otherwise stated); “HMRC” means Her Majesty's Revenue and Customs; “HMRC determination” has the meaning given by paragraph 18 of Schedule 33; “jointly entitled” means—

(a) in England and Wales, beneficially entitled as joint tenants or tenants in common,

(b) in Scotland, entitled as joint owners or owners in common, (c) in Northern Ireland, beneficially entitled as joint tenants, tenants in

common or coparceners; “land” includes—

(a) buildings and structures, and (b) land covered by water;

“market value” has the meaning given by section 98(8); “notice of enquiry” has the meaning given by paragraph 8 of Schedule 33; “open-ended investment company” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see section 236(1) of that Act); “participant”, in relation to a collective investment scheme, has the meaning given by section 98(7); “partnership” has the meaning given by section 167; “property development trade” has the meaning given by section 138(4); “property rental business” has the meaning given by section 133(4); “property trading business” has the meaning given by section 141(3); “qualifying property rental business” has the meaning given by section 133(3); “self assessment” has the meaning given by section 161(3); “tax” means tax under this Part; “trade” has the same meaning as in section 35 of CTA 2009 (and cognate expressions are to be read accordingly); “unit trust scheme” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see section 237(1) of that Act).

(2) In this Part— references to the “adjusted chargeable amount”, in relation to a person on

whom tax is charged for a chargeable period with respect to a single-dwelling interest, are to be read in accordance with section 105;

references to an “annual tax on enveloped dwellings return” are to be read in accordance with section 159(4);

references to the “daily amount” for a day are to be read in accordance with section 105(2);

references to “delivery”, in relation to an annual tax on enveloped dwellings return, are to be read in accordance with paragraph 2 of Schedule 33;

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references to the “effective date” of an acquisition are to be read in accordance with section 121(4);

references to the “effective date” of a disposal are to be read in accordance with section 121(5);

references to a “major interest” in land are to be read in accordance with section 117 of FA 2003;

references to a “return of the adjusted chargeable amount” are to be read in accordance with section 160(6);

references to meeting the “ownership condition” are to be read in accordance with section 94(4) to (6);

references to being “within the charge” with respect to a single-dwelling interest are to be read in accordance with section 170.

PART 4

EXCISE DUTIES AND OTHER TAXES

Inheritance tax

175 Open- ended investment companies and authorised unit trusts

(1) In section 65 of IHTA 1984 (settlements without interests in possession etc: charge when property ceases to be relevant property etc), after subsection (7) insert—

“(7A) Tax shall not be charged under this section by reason only that property comprised in a settlement becomes excluded property by virtue of section 48(3A)(a) (holding in an authorised unit trust or a share in an open- ended investment company is excluded property unless settlor domiciled in UK when settlement made).”

(2) The amendment made by this section is treated as having come into force on 16 October 2002.

176 Treatment of liabilities for inheritance tax purposes

Schedule 36 makes provision in relation to the treatment of liabilities for the purposes of inheritance tax.

177 Election to be treated as domiciled in United Kingdom

(1) IHTA 1984 is amended as follows.

(2) In section 267 (persons treated as domiciled in United Kingdom), at the end insert—

“(5) In determining for the purposes of this section whether a person is, or at any time was, domiciled in the United Kingdom, sections 267ZA and 267ZB are to be ignored.”

(3) After that section insert—

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“267ZA Election to be treated as domiciled in United Kingdom

(1) A person may, if condition A or B is met, elect to be treated for the purposes of this Act as domiciled in the United Kingdom (and not elsewhere).

(2) A person's personal representatives may, if condition B is met, elect for the person to be treated for the purposes of this Act as domiciled in the United Kingdom (and not elsewhere).

(3) Condition A is that, at any time on or after 6 April 2013 and during the period of 7 years ending with the date on which the election is made, the person had a spouse or civil partner who was domiciled in the United Kingdom.

(4) Condition B is that a person (“the deceased”) dies and, at any time on or after 6 April 2013 and within the period of 7 years ending with the date of death, the deceased was—

(a) domiciled in the United Kingdom, and (b) the spouse or civil partner of the person who would, by virtue of the

election, be treated as domiciled in the United Kingdom.

(5) An election under this section does not affect a person's domicile for the purposes of section 6(2) or (3) or 48(4).

(6) An election under this section is to be ignored— (a) in interpreting any such provision as is mentioned in section 158(6),

and (b) in determining the effect of any qualifying double taxation relief

arrangements in relation to a transfer of value by the person making the election.

(7) For the purposes of subsection (6)(b) a qualifying double taxation relief arrangement is an arrangement which is specified in an Order in Council made under section 158 before the coming into force of this section (other than by way of amendment by an Order made on or after the coming into force of this section).

(8) In determining for the purposes of this section whether a person making an election under this section is or was domiciled in the United Kingdom, section 267 is to be ignored.

267ZB Section 267ZA: further provision about election

(1) For the purposes of this section— (a) references to a lifetime election are to an election made by virtue of

section 267ZA(3), and (b) references to a death election are to an election made by virtue of

section 267ZA(4).

(2) A lifetime or death election is to be made by notice in writing to HMRC.

(3) A lifetime or death election is treated as having taken effect on a date specified, in accordance with subsection (4), in the notice.

(4) The date specified in a notice under subsection (3) must—

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(a) be 6 April 2013 or a later date, (b) be within the period of 7 years ending with—

(i) in the case of a lifetime election, the date on which the election is made, or

(ii) in the case of a death election, the date of the deceased's death, and

(5) The condition in this subsection is met by a date if, on the date— (a) in the case of a lifetime election—

(i) the person making the election was married to, or in a civil partnership with, the spouse or civil partner, and

(ii) the spouse or civil partner was domiciled in the United Kingdom, or

(b) in the case of a death election— (i) the person who is, by virtue of the election, to be treated as

domiciled in the United Kingdom was married to, or in a civil partnership with, the deceased, and

(ii) the deceased was domiciled in the United Kingdom.

(6) A death election may only be made within 2 years of the death of the deceased or such longer period as an officer of Revenue and Customs may in the particular case allow.

(7) Subsection (8) applies if— (a) a lifetime or death election is made, (b) a disposition is made, or another event occurs, during the period

beginning with the time when the election is treated by virtue of subsection (3) as having taken effect and ending at the time when the election is made, and

(c) the effect of the election being treated as having taken effect at that time is that the disposition or event gives rise to a transfer of value.

(8) This Act applies with the following modifications in relation to the transfer of value—

(a) subsections (1) and (6)(c) of section 216 have effect as if the period specified in subsection (6)(c) of that section were the period of 12 months from the end of the month in which the election is made, and

(b) sections 226 and 233 have effect as if the transfer were made at the time when the election is made.

(9) A lifetime or death election cannot be revoked.

(10) If a person who made an election under section 267ZA(1) is not resident in the United Kingdom for the purposes of income tax for a period of four successive tax years beginning at any time after the election is made, the election ceases to have effect at the end of that period.”

178 Transfer to spouse or civil partner not domiciled in United Kingdom

(1) Section 18 of IHTA 1984 (transfers between spouses or civil partners) is amended as follows.

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(2) In subsection (2) (transfer to spouse or civil partner not domiciled in United Kingdom), for “£55,000” substitute “ the exemption limit at the time of the transfer, ”.

(3) After subsection (2) insert—

“(2A) For the purposes of subsection (2), the exemption limit is the amount shown in the second column of the first row of the Table in Schedule 1 (upper limit of portion of value charged at rate of nil per cent).”

(4) The amendments made by this section have effect in relation to transfers of value made on or after 6 April 2013.

Fuel

179 Fuel duties: rates of duty and rebates from 1 April 2013

(1) HODA 1979 is amended as follows.

(2) In section 6(1A) (main rates)— (a) in paragraph (a) (unleaded petrol), for “£0.6097” substitute “ £0.5795 ”, (b) in paragraph (aa) (aviation gasoline), for “£0.3966” substitute “ £0.3770 ”, (c) in paragraph (b) (light oil other than unleaded petrol or aviation gasoline), for

“£0.7069” substitute “ £0.6767 ”, and (d) in paragraph (c) (heavy oil), for “£0.6097” substitute “ £0.5795 ”.

(3) In section 8(3) (road fuel gas)— (a) in paragraph (a) (natural road fuel gas), for “£0.2907” substitute “ £0.2470

”, and (b) in paragraph (b) (other road fuel gas), for “£0.3734” substitute “ £0.3161 ”.

(4) In section 11(1) (rebate on heavy oil)— (a) in paragraph (a) (fuel oil), for “£0.1126” substitute “ £0.1070 ”, and (b) in paragraph (b) (gas oil), for “£0.1172” substitute “ £0.1114 ”.

(5) In section 14(1) (rebate on light oil for use as furnace fuel), for “£0.1126” substitute “ £0.1070 ”.

(6) In section 14A(2) (rebate on certain biodiesel), for “£0.1172” substitute “ £0.1114 ”.

(7) The following instruments are revoked— (a) Excise Duties (Surcharges or Rebates) (Hydrocarbon Oils etc) Order 2012

(S.I. 2012/3055), and (b) Excise Duties (Road Fuel Gas) (Reliefs) Regulations 2012 (S.I. 2012/3056).

(8) The amendments and revocations made by this section are treated as having come into force on 1 April 2013.

Alcohol

180 Rates of alcoholic liquor duties

(1) ALDA 1979 is amended as follows.

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(2) In section 5 (rate of duty on spirits), for “£26.81” substitute “ £28.22 ”.

(3) In section 36(1AA) (rates of general beer duty)— (a) in paragraph (za) (rate of duty on lower strength beer), for “£9.76” substitute

“ £9.17 ”, and (b) in paragraph (a) (standard rate of duty on beer), for “£19.51” substitute “

£19.12 ”.

(4) In section 37(4) (rate of high strength beer duty), for “£4.88” substitute “ £5.09 ”.

(5) In section 62(1A) (rates of duty on cider)— (a) in paragraph (a) (rate of duty per hectolitre on sparkling cider of a strength

exceeding 5.5 per cent), for “£245.32” substitute “ £258.23 ”, (b) in paragraph (b) (rate of duty per hectolitre on cider of a strength exceeding 7.5

per cent which is not sparkling cider), for “£56.55” substitute “ £59.52 ”, and (c) in paragraph (c) (rate of duty per hectolitre in any other case), for “£37.68”

substitute “ £39.66 ”.

(6) For the table in Schedule 1 substitute—

“Table of rates of duty on wine and made-wine

PART 1

WINE OR MADE-WINE OF A STRENGTH NOT EXCEEDING 22 PER CENT

Description of wine or made-wine Rates of duty per hectolitre £

Wine or made-wine of a strength not exceeding 4 per cent 82.18 Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent

113.01

Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not being sparkling

266.72

Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent

258.23

Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent

341.63

Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent

355.59

PART 2

WINE OR MADE-WINE OF A STRENGTH EXCEEDING 22 PER CENT

Description of wine or made-wine Rates of duty per litre of alcohol in

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wine or made-wine £

Wine or made-wine of a strength exceeding 22 per cent 28.22”.

(7) The amendments made by this section are treated as having come into force on 25 March 2013.

Tobacco

181 Rates of tobacco products duty

(1) For the table in Schedule 1 to TPDA 1979 substitute—

“TABLE

1. Cigarettes An amount equal to 16.5 per cent of the retail price plus £176.22 per thousand cigarettes

2. Cigars £219.82 per kilogram 3. Hand-rolling tobacco £172.74 per kilogram 4. Other smoking tobacco and chewing tobacco £96.64 per kilogram”.

(2) The amendment made by this section is treated as having come into force at 6 pm on 20 March 2013.

182 Meaning of “tobacco products”

(1) Section 1 of TPDA 1979 (tobacco products) is amended as follows.

(2) In subsection (1), omit “, but does not include herbal smoking products”.

(3) After that subsection insert—

“(1A) But a product is not a tobacco product for the purposes of this Act if— (a) the product does not contain any tobacco, and (b) the Commissioners are satisfied that—

(i) the product is of a description that is used for medical purposes, and

(ii) the product is intended to be used exclusively for such purposes.”

(4) In subsection (3), omit “but not including herbal smoking products”.

(5) Omit subsection (6).

(6) The amendments made by this section come into force on 1 January 2014.

Gambling

183 Rates of gaming duty

(1) In section 11(2) of FA 1997 (rates of gaming duty), for the table substitute—

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“TABLE

Part of gross gaming yield Rate The first £2,242,500 15 per cent The next £1,546,000 20 per cent The next £2,707,500 30 per cent The next £5,714,500 40 per cent The remainder 50 per cent”.

(2) The amendment made by this section has effect in relation to accounting periods beginning on or after 1 April 2013.

184 Combined bingo

(1) Section 20A of BGDA 1981 (combined bingo) is amended as follows.

(2) In subsection (3) for the words from the beginning to “second promoter”)—” substitute “Where money representing such payments (so far as they constituted stakes hazarded in the combined bingo) is paid in an accounting period by one promoter of the bingo (“the first promoter”) to another (“the second promoter”), to the extent that the money is used (directly or indirectly) to provide bingo winnings for combined bingo promoted by the second promoter—”.

(3) Omit subsection (4).

(4) The amendments made by this section have effect in relation to accounting periods beginning on or after the day on which this Act is passed.

Air passenger duty

185 Air passenger duty: rates of duty from 1 April 2013

(1) Section 30 of FA 1994 (air passenger duty: rates of duty) is amended as follows.

(2) In subsection (3)— (a) in paragraph (a) for “£65” substitute “ £67 ”, and (b) in paragraph (b) for “£130” substitute “ £134 ”.

(3) In subsection (4)— (a) in paragraph (a) for “£81” substitute “ £83 ”, and (b) in paragraph (b) for “£162” substitute “ £166 ”.

(4) In subsection (4A)— (a) in paragraph (a) for “£92” substitute “ £94 ”, and (b) in paragraph (b) for “£184” substitute “ £188 ”.

(5) The amendments made by this section have effect in relation to the carriage of passengers beginning on or after 1 April 2013.

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186 Air passenger duty: miscellaneous provision

(1) In section 38 of FA 1994 (accounting for and payment of duty) after subsection (2) insert—

“(2A) Regulations may require a prescribed person to make, at prescribed times during a prescribed period, payments based on an estimate of what the person's liability will be for duty charged in the period.

(2B) The estimate and the amounts of the payments are to be determined in accordance with provision made by the regulations.

(2C) The payments are to be treated as being payments on account of the person's liability for duty charged in the period.

(2D) The regulations must make provision for dealing with cases where this results in an overpayment of duty by providing for amounts—

(a) to be repaid by the Commissioners, or (b) to be treated as having been paid on account of the person's liability

for duty charged in other periods, or both.”

(2) In Part 2 of Schedule 5A to FA 1994 (territories etc) at the appropriate place insert “ South Sudan ”.

(3) The amendment made by subsection (2) has effect in relation to the carriage of passengers beginning on or after 9 July 2011.

Vehicle excise duty

187 VED rates for light passenger vehicles, light goods vehicles, motorcycles etc

(1) Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.

(2) In paragraph 1 (general)— (a) in sub-paragraph (2) (vehicle not covered elsewhere in Schedule otherwise

than with engine cylinder capacity not exceeding 1,549cc), for “£220” substitute “ £225 ”, and

(b) in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£135” substitute “ £140 ”.

(3) In paragraph 1B (graduated rates of duty for light passenger vehicles)— (a) for the tables substitute—

“TABLE 1

RATES PAYABLE ON FIRST VEHICLE LICENCE FOR VEHICLE

CO2 emissions figure Rate (1) (2) (3) (4) Exceeding Not exceeding Reduced rate Standard rate g/km g/km £ £

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130 140 115 125 140 150 130 140 150 165 165 175 165 175 275 285 175 185 325 335 185 200 465 475 200 225 610 620 225 255 830 840 255 1055 1065

TABLE 2

RATES PAYABLE ON ANY OTHER VEHICLE LICENCE FOR VEHICLE

CO2 emissions figure Rate (1) (2) (3) (4) Exceeding Not exceeding Reduced rate Standard rate g/km g/km £ £

100 110 10 20 110 120 20 30 120 130 95 105 130 140 115 125 140 150 130 140 150 165 165 175 165 175 190 200 175 185 210 220 185 200 250 260 200 225 270 280 225 255 465 475 255 480 490”;

(b) in the sentence immediately following the tables, for paragraphs (a) and (b) substitute—

“(a) in column (3), in the last two rows, “270” were substituted for “465” and “ 480 ”, and

(b) in column (4), in the last two rows, “280” were substituted for “475” and “ 490 ”.”

(4) In paragraph 1J (VED rates for light goods vehicles)— (a) in paragraph (a), for “£215” substitute “ £220 ”, and (b) in paragraph (b), for “£135” substitute “ £140 ”.

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(5) In paragraph 2(1) (VED rates for motorcycles)— (a) in paragraph (a), for “£16” substitute “ £17 ”, (b) in paragraph (b), for “£36” substitute “ £37 ”, (c) in paragraph (c), for “£55” substitute “ £57 ”, and (d) in paragraph (d), for “£76” substitute “ £78 ”.

(6) The amendments made by this section have effect in relation to licences taken out on or after 1 April 2013.

188 Not exhibiting licence: period of grace

(1) In section 33 of VERA 1994 (not exhibiting licence), omit subsections (1B) to (1D).

(2) After that section insert—

“33A Not exhibiting licence: period of grace

(1) A person is not guilty of an offence under subsection (1) or (1A) of section 33 by using or keeping a vehicle on a public road during any of the following periods.

First registration The period of 14 days beginning with the day on which the vehicle is first registered under this Act. Change of keeper The period of 14 days beginning with the day on which a new licence or nil licence is issued for the vehicle because of a change in the person by whom the vehicle is being kept. Renewal etc. The period of 14 days following the time when a licence or nil licence for or in respect of the vehicle, or a relevant declaration applying to the vehicle, ceases to be in force, but only if an application for a licence or nil licence for or in respect of the vehicle to run from that time has been received before that time. Replacement The period beginning with the time when a licence or nil licence that is in force for or in respect of the vehicle is delivered to the Secretary of State with an application for a replacement licence, and ending with the time when the replacement licence is obtained.

(2) For the purposes of this section— (a) there is a relevant declaration applying to a vehicle if the particulars

and declaration required to be furnished and made by regulations under section 22(1D) have been furnished and made in relation to the vehicle in accordance with the regulations, and

(b) the relevant declaration ceases to be in force if, after the particulars and declaration have been furnished and made the vehicle is used or kept on a public road (otherwise than under a trade licence).”

(3) In consequence of the provision made by subsections (1) and (2) omit— (a) section 147 of FA 2008, and (b) in regulation 6 of the Road Vehicles (Registration and Licensing) Regulations

2002 (S.I. 2002/2742), paragraph (1) and, in paragraph (2), the words “Except where paragraph (1) applies,”.

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189 Vehicles not kept or used on public road

(1) VERA 1994 is amended as follows.

(2) In section 7A (supplement payable on vehicle ceasing to be appropriately covered), in subsection (1A)(d) omit “within the immediately preceding period of 12 months”.

(3) In Schedule 2A (immobilisation, removal and disposal of vehicles), in paragraph 1(10) (b) omit “within the immediately preceding period of 12 months”.

190 Vehicle licences for disabled people

Schedule 37 makes provision about vehicle licences for disabled people.

Value added tax

191 Repayments of value added tax to health service bodies

(1) In section 41 of VATA 1994 (application to the Crown), in subsection (7), after “Board” insert “ and a clinical commissioning group, the Health and Social Care Information Centre, the National Health Service Commissioning Board and the National Institute for Health and Care Excellence ”.

(2) The amendment made by this section is treated as having come into force on 1 April 2013.

192 Valuation of certain supplies of fuel

Schedule 38 contains provision about the valuation of certain supplies of fuel for the purposes of value added tax.

193 Reduced rate for energy-saving materials

(1) Group 2 (installation of energy-saving materials) of Part 2 of Schedule 7A to VATA 1994 (reduced rate supplies of goods and services) is amended as follows.

(2) For items 1 and 2 substitute—

“1 Supplies of services of installing energy-saving materials in residential accommodation.

2 Supplies of energy-saving materials by a person who installs those materials in residential accommodation.”

(3) Omit Note 3 (meaning of “use for a relevant charitable purpose”).

(4) The amendments made by this section have effect in relation to supplies made on or after 1 August 2013.

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Stamp duty land tax

194 Pre-completion transactions: existing cases

(1) Section 45 of FA 2003 (contract and conveyance: effect of transfer of rights)— (a) has effect subject to the amendment in subsection (2) below in relation to

agreements for the grant or assignment of an option that are entered into during the period beginning with 21 March 2012 and ending immediately before the day on which this Act is passed, and

(b) has effect subject to the amendments in subsections (3) to (7) below in relation to transfers of rights (see subsection (1) of that section) entered into during that period.

(2) At the end of subsection (1A) insert “ or an agreement for the future grant or assignment of an option ”.

(3) In subsection (3), in the second sentence, after “except” insert “ in a case excluded by subsection (3A) or ”.

(4) After subsection (3) insert—

“(3A) A case is excluded by this subsection from the second sentence of subsection (3) if—

(a) the secondary contract is substantially performed at the same time as, and in connection with, the substantial performance or completion of the original contract but is not completed at that time (“the relevant time”),

(b) the original purchaser or a person connected with the original purchaser is in possession of the whole, or substantially the whole, of the subject-matter of the transfer of rights at any time after the relevant time, and

(c) having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage for the original purchaser was the main purpose, or one of the main purposes, of the original purchaser in entering into the transfer of rights.

(3B) In subsection (3A)— “possession” has the same meaning as in section 44(5)(a); “tax advantage” means—

(a) a relief from tax or increased relief from tax, (b) a repayment of tax or increased repayment of tax, or (c) the avoidance or reduction of a charge to tax.

(3C) Nothing in subsection (3A) or (3B) affects the breadth of the application of sections 75A to 75C.”

(5) In subsection (4), at the end insert “ except in a case excluded by subsection (4A) ”.

(6) After subsection (4) insert—

“(4A) Subsection (3A) applies for the purposes of subsection (4) as if— (a) the reference to subsection (3) were a reference to subsection (4), (b) a reference to the original contract were a reference to the secondary

contract arising from the earlier transfer of rights,

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(d) a reference to the transfer of rights were a reference to the subsequent transfer of rights.”

(7) In subsection (5)(b)— (a) after “subsection (3) above” insert “ or in subsection (3A) above ”, and (b) after “subsection (4)” insert “ or (4A) ”.

(8) Subsections (10) to (12) apply where— (a) as a result of subsection (2) of this section, section 45 of FA 2003 does not

apply in relation to a contract of the kind mentioned in subsection (1)(a) of that section (“the original contract”),

(b) the original contract was substantially performed or completed (or, in a case that would have fallen within subsection (5) of that section, substantially performed or completed so far as relating to the relevant part of the subject- matter of the original contract) at the same time as, and in connection with, the substantial performance or completion of an agreement for the grant or assignment of an option, and

(9) Subsections (10) to (12) also apply where— (a) section 45 of FA 2003 applies in relation to the contract for a land transaction

(“the original contract”), (b) as a result of subsections (1) to (7) above, the substantial performance or

completion of the original contract (or, in a case within subsection (5) of that section, its substantial performance or completion so far as relating to part of the subject-matter of the original contract) is not disregarded, and

(10) Section 76 of FA 2003 (duty to deliver land transaction return) is to be regarded as requiring the purchaser under the original contract to deliver a land transaction return relating to the land transaction not later than 30 September 2013.

(11) Accordingly, 30 September 2013 is for the purposes of Part 4 of FA 2003 the filing date for the land transaction return relating to the transaction.

(12) If the purchaser under the original contract (“P”) has delivered a land transaction return relating to the land transaction before the day on which this Act is passed, P must not later than 30 September 2013 give notice under paragraph 6 of Schedule 10 to FA 2003 amending the return, but this does not prevent P from making subsequent amendments within the time allowed by sub-paragraph (3) of that paragraph.

195 Pre-completion transactions

Schedule 39 contains provisions about certain transactions relating to a contract that is to be completed by a conveyance.

196 Relief from higher rate

Schedule 40 contains provisions about relief from the higher rate of stamp duty land tax.

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197 Leases

Schedule 41 contains provision about stamp duty land tax in relation to leases.

Landfill tax

198 Standard rate of landfill tax

(1) Section 42 of FA 1996 (amount of landfill tax) is amended as follows.

(2) In subsection (1)(a) (standard rate), for “£72” substitute “ £80 ”.

(3) In subsection (2) (reduced rate) for “£72” substitute “ £80 ”.

(4) The amendments made by this section have effect in relation to disposals made (or treated as made) on or after 1 April 2014.

Climate change levy

199 Climate change levy: main rates

(1) In paragraph 42(1) of Schedule 6 to FA 2000 (climate change levy: amount payable by way of levy) for the table substitute—

“TABLE

Taxable commodity supplied Rate at which levy payable if supply is not a reduced-rate supply or a supply for use in scrap metal recycling

Electricity £0.00541 per kilowatt hour Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility

£0.00188 per kilowatt hour

Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state

£0.01210 per kilogram

Any other taxable commodity £0.01476 per kilogram”.

(2) The amendment made by subsection (1) has effect in relation to supplies treated as taking place on or after 1 April 2014.

200 Climate change levy: supplies subject to carbon price support rates etc

Schedule 42 amends Schedule 6 to FA 2000 (climate change levy).

Insurance premium tax

201 Contracts that are not taxable

(1) In Schedule 7A to FA 1994 (IPT: contracts that are not taxable), paragraph 3 (contracts relating to motor vehicles for use by handicapped persons) is amended as follows.

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(2) In sub-paragraph (2)(a)— (a) after “disability living allowance” insert “ , or personal independence

payment, ” and (b) after “component” insert “ , or of an armed forces independence payment ”.

(3) In sub-paragraph (3), after “disability living allowance” insert “ , personal independence payment, armed forces independence payment ”.

(4) After sub-paragraph (4)(b) insert— “(ba) personal independence payment” means a personal independence

payment under Part 4 of the Welfare Reform Act 2012 or the corresponding provision having effect in Northern Ireland;

(bb) “armed forces independence payment” means an armed forces independence payment under a scheme established under section 1 of the Armed Forces (Pensions and Contributions) Act 2004;”.

(5) The amendments made by this section are treated as having come into force on 8 April 2013.

Bank levy

202 Bank levy: rates from 1 January 2013

(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.

(2) In paragraph 6 (steps for determining the amount of the bank levy), in sub- paragraph (2)—

(a) for “0.044%” substitute “ 0.065% ”, and (b) for “0.088%” substitute “ 0.130% ”.

(3) In paragraph 7 (special provision for chargeable periods falling wholly or partly before 1 January 2013), in sub-paragraph (2) (as substituted by paragraph 6 of Schedule 34 to FA 2012), in the table in the substituted Step 7—

(a) in the second column for “0.0525%” substitute “ 0.065% ”, and (b) in the third column for “0.105%” substitute “ 0.130% ”.

(4) In Schedule 34 to FA 2012 (bank levy)— (a) omit paragraph 5 (which substituted new rates from 1 January 2013), and (b) in paragraph 7 for “paragraphs 5 and” substitute “ paragraph ”.

(5) The amendments made by subsections (2) to (4) are treated as having come into force on 1 January 2013 (and accordingly the paragraph repealed by subsection (4) is treated as never having come into force).

(6) Subsections (7) to (13) apply where— (a) an amount of the bank levy is treated as if it were an amount of corporation

tax chargeable on an entity (“E”) for an accounting period of E, (b) the chargeable period in respect of which the amount of the bank levy is

charged falls (or partly falls) on or after 1 January 2013, and (c) under the Instalment Payment Regulations, one or more instalment payments,

in respect of the total liability of E for the accounting period, were

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treated as becoming due and payable before the commencement date (“pre- commencement instalment payments”).

(7) Subsections (1) to (5) are to be ignored for the purpose of determining the amount of any pre-commencement instalment payment.

(8) If there is at least one instalment payment, in respect of the total liability of E for the accounting period, which under the Instalment Payment Regulations is treated as becoming due and payable on or after the commencement date (“post-commencement instalment payments”), the amount of that instalment payment, or the first of them, is to be increased by the adjustment amount.

(9) If there are no post-commencement instalment payments, a further instalment payment, in respect of the total liability of E for the accounting period, of an amount equal to the adjustment amount is to be treated as becoming due and payable at the end of the period of 30 days beginning with the commencement date.

(10) “The adjustment amount” is the difference between— (a) the aggregate amount of the pre-commencement instalments determined in

accordance with subsection (7), and (b) the aggregate amount of those instalment payments determined ignoring

subsection (7) (and so taking account of subsections (1) to (5)).

(11) In the Instalment Payment Regulations— (a) in regulations 6(1)(a), 7(2), 8(1)(a) and (2)(a), 9(5), 10(1), 11(1) and 13,

references to regulation 4A, 4B, 4C, 4D, 5, 5A or 5B of those Regulations are to be read as including a reference to subsections (6) to (10) (and in regulation 7(2) “the regulation in question”, and in regulation 8(2) “that regulation”, are to be read accordingly), and

(b) in regulation 9(3), the reference to those Regulations is to be read as including a reference to subsections (6) to (10).

(12) In section 59D of TMA 1970 (general rule as to when corporation tax is due and payable), in subsection (5), the reference to section 59E is to be read as including a reference to subsections (6) to (11).

(13) In this section— “the chargeable period” is to be construed in accordance with paragraph 4

or (as the case may be) 5 of Schedule 19 to FA 2011; “the commencement date” means the day on which this Act is passed; “the Instalment Payment Regulations” means the Corporation Tax

(Instalment Payments) Regulations 1998 (S.I. 1998/3175); and references to the total liability of E for an accounting period are to be construed in accordance with regulation 2(3) of the Instalment Payment Regulations.

203 Bank levy: rates from 1 January 2014

(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.

(2) In paragraph 6 (steps for determining the amount of the bank levy), in sub- paragraph (2)—

(a) for “0.065%” substitute “ 0.071% ”, and (b) for “0.130%” substitute “ 0.142% ”.

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(3) In paragraph 7 (special provision for chargeable periods falling wholly or partly before 1 January 2013).

(4) In sub-paragraph (1) for “2013” substitute “ 2014 ”.

(5) In sub-paragraph (2) (as substituted by paragraph 6 of Schedule 34 to FA 2012), in the table in the substituted Step 7—

(a) for the final entry in the first column substitute—

“1 January 2013 to 31 December 2013”, and (b) at the end add—

“Any time on or after 1 January 2014

0.071% 0.142%”.

(6) In the italic heading immediately before that paragraph for “2013” substitute “ 2014 ”.

(7) Accordingly, in Schedule 34 to FA 2012 (bank levy), omit paragraph 6(2).

(8) The amendments made by this section come into force on 1 January 2014.

204 No deductions for UK or foreign bank levies

(1) Schedule 19 to FA 2011 (the bank levy) is amended as follows.

(2) In paragraph 46 (bank levy to be ignored for purposes of corporation tax and income tax), in paragraph (b), after “paid” insert “ (directly or indirectly) ”.

(3) In Part 7 (double taxation relief), after paragraph 69 insert—

69A “Foreign levies to be ignored for purposes of income tax or corporation tax

(1) In calculating profits or losses for the purposes of income tax or corporation tax—

(a) no deduction is allowed in respect of any tax which is imposed by the law of a territory outside the United Kingdom and corresponds to the bank levy, and

(b) no account is to be taken of any amount which is paid (directly or indirectly) by a member of a group to another member for the purposes of meeting or reimbursing the cost of such a tax charged in relation to the group.

(2) Paragraph 66(3) applies for the purposes of sub-paragraph (1) as it applies for the purposes of paragraph 66(2).”

(4) Accordingly— (a) in paragraph 3, after “double taxation relief” insert “ and with the deduction

of foreign levies for the purposes of corporation tax and income tax ”, and (b) in the heading for Part 7, after “RELIEF” insert “ ETC ”

(5) The amendments made by this section have effect in relation to any period of account beginning on or after 1 January 2013.

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(6) The amendments made by subsections (3) and (4) also have effect in relation to any period of account beginning before that date, but only if, and to the extent that, the tax is the subject of a claim for relief under paragraph 66 or 67 of Schedule 19 to FA 2011 (bank levy: double taxation relief) made on or after 5 December 2012.

(7) For the purposes of subsections (5) and (6), a period of account beginning before, and ending on or after 1 January 2013 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate periods of account.

205 High quality liquid assets

(1) In paragraph 70 of Schedule 19 to FA 2011 (bank levy: definitions), in sub- paragraph (1), in the definition of “high quality liquid asset” for “section 12.7.2(1) to (4)” substitute “section 12.7 (assets that are eligible for inclusion in a firm's regulatory liquid assets buffer)'.

(2) The amendment made by this section has effect in relation to chargeable periods ending on or after 1 January 2011, and in relation to those chargeable periods the amendment is to be treated as always having had effect.

PART 5

GENERAL ANTI-ABUSE RULE

206 General anti-abuse rule

(1) This Part has effect for the purpose of counteracting tax advantages arising from tax arrangements that are abusive.

(2) The rules of this Part are collectively to be known as “the general anti-abuse rule”.

(3) The general anti-abuse rule applies to the following taxes— (a) income tax, (b) corporation tax, including any amount chargeable as if it were corporation tax

or treated as if it were corporation tax, (c) capital gains tax, (d) petroleum revenue tax, (e) inheritance tax, (f) stamp duty land tax, and (g) annual tax on enveloped dwellings.

207 Meaning of “tax arrangements” and “abusive”

(1) Arrangements are “tax arrangements” if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes, of the arrangements.

(2) Tax arrangements are “abusive” if they are arrangements the entering into or carrying out of which cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances including—

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(a) whether the substantive results of the arrangements are consistent with any principles on which those provisions are based (whether express or implied) and the policy objectives of those provisions,

(b) whether the means of achieving those results involves one or more contrived or abnormal steps, and

(3) Where the tax arrangements form part of any other arrangements regard must also be had to those other arrangements.

(4) Each of the following is an example of something which might indicate that tax arrangements are abusive—

(a) the arrangements result in an amount of income, profits or gains for tax purposes that is significantly less than the amount for economic purposes,

(b) the arrangements result in deductions or losses of an amount for tax purposes that is significantly greater than the amount for economic purposes, and

(c) the arrangements result in a claim for the repayment or crediting of tax (including foreign tax) that has not been, and is unlikely to be, paid,

but in each case only if it is reasonable to assume that such a result was not the anticipated result when the relevant tax provisions were enacted.

(5) The fact that tax arrangements accord with established practice, and HMRC had, at the time the arrangements were entered into, indicated its acceptance of that practice, is an example of something which might indicate that the arrangements are not abusive.

(6) The examples given in subsections (4) and (5) are not exhaustive.

208 Meaning of “tax advantage”

A “tax advantage” includes— (a) relief or increased relief from tax, (b) repayment or increased repayment of tax, (c) avoidance or reduction of a charge to tax or an assessment to tax, (d) avoidance of a possible assessment to tax, (e) deferral of a payment of tax or advancement of a repayment of tax, and (f) avoidance of an obligation to deduct or account for tax.

209 Counteracting the tax advantages

(1) If there are tax arrangements that are abusive, the tax advantages that would (ignoring this Part) arise from the arrangements are to be counteracted by the making of adjustments.

(2) The adjustments required to be made to counteract the tax advantages are such as are just and reasonable.

(3) The adjustments may be made in respect of the tax in question or any other tax to which the general anti-abuse rule applies.

(4) The adjustments that may be made include those that impose or increase a liability to tax in any case where (ignoring this Part) there would be no liability or a smaller liability, and tax is to be charged in accordance with any such adjustment.

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(5) Any adjustments required to be made under this section (whether by an officer of Revenue and Customs or the person to whom the tax advantage would arise) may be made by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.

(6) But— (a) no steps may be taken by an officer of Revenue and Customs by virtue of

this section unless the procedural requirements of Schedule 43 have been complied with, and

(b) the power to make adjustments by virtue of this section is subject to any time limit imposed by or under any enactment other than this Part.

(7) Any adjustments made under this section have effect for all purposes.

210 Consequential relieving adjustments

(1) This section applies where— (a) the counteraction of a tax advantage under section 209 is final, and (b) if the case is not one in which notice of the counteraction was given under

paragraph 12 of Schedule 43, HMRC have been notified of the counteraction by the taxpayer.

(2) A person has 12 months, beginning with the day on which the counteraction becomes final, to make a claim for one or more consequential adjustments to be made in respect of any tax to which the general anti-abuse rule applies.

(3) On a claim under this section, an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.

(4) Consequential adjustments— (a) may be made in respect of any period, and (b) may affect any person (whether or not a party to the tax arrangements).

(5) But nothing in this section requires or permits an officer to make a consequential adjustment the effect of which is to increase a person's liability to any tax.

(6) For the purposes of this section— (a) if the claim relates to income tax or capital gains tax, Schedule 1A to TMA

1970 applies to it; (b) if the claim relates to corporation tax, Schedule 1A to TMA 1970 (and not

Schedule 18 to FA 1998) applies to it; (c) if the claim relates to petroleum revenue tax, Schedule 1A to TMA 1970

applies to it, but as if the reference in paragraph 2A(4) of that Schedule to a year of assessment included a reference to a chargeable period within the meaning of OTA 1975 (see section 1(3) and (4) of that Act);

(d) if the claim relates to inheritance tax it must be made in writing to HMRC and section 221 of IHTA 1984 applies as if the claim were a claim under that Act;

(e) if the claim relates to stamp duty land tax or annual tax on enveloped dwellings, Schedule 11A to FA 2003 applies to it as if it were a claim to which paragraph 1 of that Schedule applies.

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(7) Where an officer of Revenue and Customs makes a consequential adjustment under this section, the officer must give the person who made the claim written notice describing the adjustment which has been made.

(8) For the purposes of this section the counteraction of a tax advantage is final when the adjustments made to effect the counteraction, and any amounts arising as a result of those adjustments, can no longer be varied, on appeal or otherwise.

(9) Any adjustments required to be made under this section may be made— (a) by way of an assessment, the modification of an assessment, the amendment

of a claim, or otherwise, and (b) despite any time limit imposed by or under any enactment other than this Part.

(10) In this section “the taxpayer”, in relation to a counteraction of a tax advantage under section 209, means the person to whom the tax advantage would have arisen.

211 Proceedings before a court or tribunal

(1) In proceedings before a court or tribunal in connection with the general anti-abuse rule, HMRC must show—

(a) that there are tax arrangements that are abusive, and (b) that the adjustments made to counteract the tax advantages arising from the

arrangements are just and reasonable.

(2) In determining any issue in connection with the general anti-abuse rule, a court or tribunal must take into account—

(a) HMRC's guidance about the general anti-abuse rule that was approved by the GAAR Advisory Panel at the time the tax arrangements were entered into, and

(b) any opinion of the GAAR Advisory Panel about the arrangements (see paragraph 11 of Schedule 43).

(3) In determining any issue in connection with the general anti-abuse rule, a court or tribunal may take into account—

(a) guidance, statements or other material (whether of HMRC, a Minister of the Crown or anyone else) that was in the public domain at the time the arrangements were entered into, and

(b) evidence of established practice at that time.

212 Relationship between the GAAR and priority rules

(1) Any priority rule has effect subject to the general anti-abuse rule (despite the terms of the priority rule).

(2) A “priority rule” means a rule (however expressed) to the effect that particular provisions have effect to the exclusion of, or otherwise in priority to, anything else.

(3) Examples of priority rules are— (a) the rule in section 464, 699 or 906 of CTA 2009 (priority of loan

relationships rules, derivative contracts rules and intangible fixed assets rules for corporation tax purposes), and

(b) the rule in section 6(1) of TIOPA 2010 (effect to be given to double taxation arrangements despite anything in any enactment).

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213 Consequential amendment

(1) Section 42 of TMA 1970 (procedure for making claims etc) is amended as follows.

(2) In subsection (2), for “(3ZB)” substitute “ (3ZC) ”.

(3) After subsection (3ZB) insert—

“(3ZC) Subsection (2) also does not apply in relation to any claim under section 210 of the Finance Act 2013 (claims for consequential relieving adjustments after counteraction of tax advantage under the general anti-abuse rule).”

214 Interpretation of Part 5

In this Part— “abusive”, in relation to tax arrangements, has the meaning given by

section 207(2) to (6); “arrangements” includes any agreement, understanding, scheme, transaction

or series of transactions (whether or not legally enforceable); “the Commissioners” means the Commissioners for Her Majesty's Revenue

and Customs; “the GAAR Advisory Panel” has the meaning given by paragraph 1 of

Schedule 43; “the general anti-abuse rule” has the meaning given by section 206; “HMRC” means Her Majesty's Revenue and Customs; “tax advantage” has the meaning given by section 208; “tax arrangements” has the meaning given by section 207(1).

215 Commencement and transitional provision

(1) The general anti-abuse rule has effect in relation to any tax arrangements entered into on or after the day on which this Act is passed.

(2) Where the tax arrangements form part of any other arrangements entered into before that day those other arrangements are to be ignored for the purposes of section 207(3), subject to subsection (3).

(3) Account is to be taken of those other arrangements for the purposes of section 207(3) if, as a result, the tax arrangements would not be abusive.

PART 6

OTHER PROVISIONS

Trusts

216 Trusts with vulnerable beneficiary

Schedule 44 contains provision about trusts which have a vulnerable beneficiary.

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Unit trusts

217 Unauthorised unit trusts

(1) The Treasury may by regulations make provision about the treatment of the trustees or unit holders of unauthorised unit trusts for the purposes of income tax, corporation tax, capital gains tax or stamp duty land tax.

(2) Regulations under this section may— (a) confer or impose powers or duties on officers of Revenue and Customs or

other persons; (b) modify any enactment or instrument (whenever passed or made); (c) specify descriptions of unauthorised unit trust in relation to which the

regulations are to apply or are not to apply; (d) make different provision for different cases or different purposes; (e) make incidental, consequential, supplementary and transitional provision and

savings. In paragraph (b) “modify” includes amend, repeal or revoke.

(3) The statutory instrument containing the first regulations under this section may not be made unless a draft has been laid before and approved by a resolution of the House of Commons.

(4) A subsequent statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

(5) In this section— (a) “unauthorised unit trust” means a unit trust scheme which is neither an

authorised unit trust nor an umbrella scheme, (b) “unit trust scheme” has the meaning given by section 237 of the Financial

Services and Markets Act 2000, and (c) “authorised unit trust”, “umbrella scheme” and “unit holder” have the same

meaning as in Chapter 2 of Part 13 of CTA 2010 (authorised investment funds).

Residence

218 Statutory residence test

(1) Schedule 45 contains— (a) provision for determining whether individuals are resident in the United

Kingdom for the purposes of income tax, capital gains tax and (where relevant) inheritance tax and corporation tax,

(b) provision about split years, and (c) provision about periods when individuals are temporarily non-resident.

(2) The Treasury may by order make any incidental, supplemental, consequential, transitional or saving provision in consequence of Schedule 45.

(3) An order under subsection (2) may— (a) make different provision for different purposes, and

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(b) make provision amending, repealing or revoking any provision made by or under an Act (whenever passed or made).

(4) An order under subsection (2) is to be made by statutory instrument.

(5) A statutory instrument containing an order under subsection (2) is subject to annulment in pursuance of a resolution of the House of Commons.

219 Ordinary residence

(1) Schedule 46 contains provision removing or replacing rules relating to ordinary residence.

(2) The Treasury may by order make further provision removing or replacing rules relating to ordinary residence with respect to—

(a) income tax, (b) capital gains tax, and (c) (so far as the ordinary residence status of individuals is relevant to them)

inheritance tax and corporation tax.

(3) An order under subsection (2) may take effect from the start of the tax year in which the order is made.

(4) The Treasury may by order make any incidental, supplemental, consequential, transitional or saving provision in consequence of Schedule 46 or in consequence of any further provision made under subsection (2).

(5) An order under this section may— (a) make different provision for different purposes, and (b) make provision amending, repealing or revoking any provision made by or

under an Act (whenever passed or made).

(6) An order under this section is to be made by statutory instrument.

(7) A statutory instrument containing an order under subsection (2) (whether alone or with other provisions) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(8) Subject to subsection (7), a statutory instrument containing an order under this section is subject to annulment in pursuance of a resolution of the House of Commons.

International matters

220 Controlled foreign companies etc

Schedule 47 makes provision in relation to CFCs etc.

221 Agreement between UK and Switzerland

(1) In Schedule 36 to FA 2012 (agreement between UK and Switzerland), after paragraph 26 insert—

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26A (1) Income or chargeable gains of a person are to be treated as not remitted to the United Kingdom if conditions A to D are met.

(2) Condition A is that (but for sub-paragraph (1)) the income or gains would be regarded as remitted to the United Kingdom by virtue of the bringing of money to the United Kingdom.

(3) Condition B is that the money is brought to the United Kingdom pursuant to a transfer made to HMRC in accordance with the Agreement.

(4) Condition C (which applies only if the money brought to the United Kingdom is a sum levied under Article 19(2)(b)) is that the sum was levied within the period of 45 days beginning with the day on which the amount derived from the income or gain in question was remitted as mentioned in Article 19(2)(b).

(5) Condition D is that the transfer is made in relation to a tax year in which section 809B, 809D or 809E of ITA 2007 (application of remittance basis) applies to the person.

(6) Sub-paragraph (1) does not apply in relation to money brought to the United Kingdom if or to the extent that—

(a) paragraph 18(2), or section 138(4)(a) or 140(5)(a) of TIOPA 2010, is applied in relation to it (set-off against other tax liabilities), or

(b) it is repaid or refunded by HMRC. 26B (1) This paragraph applies if—

(a) but for paragraph 26A(1), income or chargeable gains would have been regarded as remitted to the United Kingdom by virtue of the bringing of money to the United Kingdom, and

(b) section 809Q of ITA 2007 (transfers from mixed funds) would have applied in determining the amount that would have been so remitted.

(2) The bringing of the money to the United Kingdom counts as an offshore transfer for the purposes of section 809R(4) of ITA 2007 (composition of mixed fund).”

(2) The amendment made by this section is to be treated as having come into force on 1 January 2013.

222 International agreements to improve tax compliance

(1) The Treasury may make regulations for, or in connection with, giving effect to or enabling effect to be given to—

(a) the agreement reached between the Government of the United Kingdom and the Government of the United States of America to improve international tax compliance and to implement FATCA, signed on 12 September 2012;

(b) any agreement modifying or supplementing that agreement; (c) any other agreement between the Government of the United Kingdom and

the government of another territory which makes provision corresponding, or substantially similar, to that made by an agreement within paragraph (a) or (b);

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(d) any arrangements for the exchange of tax information in relation to the United Kingdom and any other territory which make provision corresponding, or substantially similar, to that made by an agreement within paragraph (a) or (b).

(2) Regulations under this section may in particular— (a) authorise HMRC to require persons specified for the purposes of this

paragraph (“relevant financial entities”) to provide HMRC with information of specified descriptions;

(b) require that information to be provided at such times and in such form and manner as may be specified;

(c) impose obligations on relevant financial entities (including obligations to obtain from specified persons details of their place of residence for tax purposes);

(d) make provision (including provision imposing penalties) about contravention of, or non-compliance with, the regulations;

(e) make provision about appeals in relation to the imposition of any penalty.

(3) Regulations under this section may— (a) provide that a reference in the regulations to an agreement or arrangements

to which subsection (1) refers, or a provision of such an agreement or arrangements, is to be construed as a reference to the agreement or arrangements, or provision, as amended from time to time;

(b) make different provision in relation to different periods of time; (c) make different provision for different cases or circumstances; (d) contain incidental, supplemental, transitional, transitory or saving provision

(including provision amending any enactment).

(4) In this section— “FATCA” means the provisions commonly known as the Foreign Account

Tax Compliance Act in the enactment of the United States of America called the Hiring Incentives to Restore Employment Act;

“HMRC” means Her Majesty's Revenue and Customs; “specified” means specified in regulations under this section.

(5) The power conferred by this section is without prejudice to any other powers conferred by or under any enactment.

(6) The power of the Treasury to make regulations under this section is exercisable by statutory instrument.

(7) Any statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

Disclosure

223 Disclosure of tax avoidance schemes

(1) Part 7 of FA 2004 (disclosure of tax avoidance schemes) is amended in accordance with subsections (2) and (3).

(2) After section 312A insert—

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“312B Duty of client to provide information to promoter

(1) This section applies where a person who is a promoter in relation to notifiable arrangements has provided a person (“the client”) with the information prescribed under section 312(2) (duty of promoter to notify client of reference number).

(2) The client must, within the prescribed period, provide the promoter with prescribed information relating to the client.

(3) The duty under subsection (2) is subject to any exceptions that may be prescribed.”

(3) After section 313ZA insert—

“313ZB Enquiry following disclosure of client details

(1) This section applies where— (a) a person who is a promoter in relation to notifiable arrangements has

provided HMRC with information in relation to a person (“the client”) under section 313ZA(3) (duty to provide client details), and

(b) HMRC suspect that a person other than the client is or is likely to be a party to the arrangements.

(2) HMRC may by written notice require the promoter to provide prescribed information in relation to any person other than the client who the promoter might reasonably be expected to know is or is likely to be a party to the arrangements.

(3) The promoter must comply with a requirement under or by virtue of subsection (2) within—

(a) the prescribed period, or (b) such longer period as HMRC may direct.”

(4) In section 98C(2) of TMA 1970 (notification under Part 7 of FA 2004)— (a) after paragraph (da) insert—

“(daa) section 312B (duty of client to provide information to promoter),”, and

(b) after paragraph (db) insert— “(dc) section 313ZB (enquiry following disclosure of client

details),”.

Powers

224 Powers under Proceeds of Crime Act 2002

Schedule 48 makes provision for, and in connection with, conferring powers under Chapter 3 of Part 5 and Chapters 2 and 3 of Part 8 of the Proceeds of Crime Act 2002 on officers of Revenue and Customs.

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225 Definition of “goods” for certain customs purposes

In section 1(1) of CEMA 1979 (interpretation), in the definition of “goods”, for “baggage” substitute “ containers ”.

226 Power to detain goods

(1) Section 139 of CEMA 1979 (provisions as to detention, seizure and condemnation of goods etc) is amended as follows.

(2) After subsection (1) insert—

“(1A) A person mentioned in subsection (1) who reasonably suspects that any thing may be liable to forfeiture under the customs and excise Acts may detain that thing.

(1B) References in this section and Schedule 2A to a thing detained as liable to forfeiture under the customs and excise Acts include a thing detained under subsection (1A).”

(3) In subsection (2), for the words from “either” to the end substitute “ deliver that thing to an officer ”.

(4) In subsection (4), for “the Commissioners at the nearest office of customs and excise” substitute “ an officer ”.

(5) In subsection (5), for “Schedule 3” substitute “ Schedules 2A and 3 ”.

(6) After that subsection insert—

“(5A) Schedule 2A contains supplementary provisions relating to the detention of things as liable to forfeiture under the customs and excise Acts.”

(7) After Schedule 2 to that Act (composite goods: supplementary provisions as to excise duties and drawbacks) insert—

“SCHEDULE 2A Section 139(5A)

SUPPLEMENTARY PROVISIONS RELATING TO THE DETENTION OF THINGS AS LIABLE TO FORFEITURE

Interpretation 1 In this Schedule, references (however expressed) to a thing being detained are

references to a thing being detained as liable to forfeiture under the customs and excise Acts.

Period of detention 2 (1) This paragraph applies where a thing is detained.

(2) The thing may be detained for 30 days beginning with the day on which the thing is first detained.

(3) The thing is deemed to be seized as liable to forfeiture under the customs and excise Acts if its detention ceases to be authorised under this paragraph.

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Notice of detention 3 (1) The Commissioners must take reasonable steps to give written notice of the

detention of any thing, and of the grounds for the detention, to any person who to their knowledge was, at the time of the detention, the owner or one of the owners of the thing.

(2) But notice need not be given under sub-paragraph (1) if the detention occurred in the presence of—

(a) the person whose offence or suspected offence occasioned the detention,

(b) the owner or any of the owners of the thing detained or any servant or agent of such an owner, or

Unauthorised removal or disposal: penalties etc 4 (1) This paragraph applies where a thing is detained and, with the agreement of a

person within sub-paragraph (2) (“the responsible person”), the thing remains at the place where it is first detained (rather than being removed and detained elsewhere).

(2) A person is within this sub-paragraph if the person is— (a) the owner or any of the owners of the thing at the time it was detained

or any servant or agent of such an owner, or (b) a person whom the person who detains the thing reasonably believes

to be a person within paragraph (a).

(3) If the responsible person fails to prevent the unauthorised removal or disposal of the thing from the place where it is detained, that failure attracts a penalty under section 9 of the Finance Act 1994 (civil penalties).

(4) The removal or disposal of the thing is unauthorised unless it is done with the permission of a proper officer of Revenue and Customs.

(5) Where any duty of excise is payable in respect of the thing— (a) the penalty is to be calculated by reference to the amount of that duty

(whether it has been paid or not), and (b) section 9 of the Finance Act 1994 has effect as if in subsection (2)(a)

the words “5 per cent of” were omitted.

(6) If no duty of excise is payable in respect of the thing, that section has effect as if the penalty provided for by subsection (2)(b) of that section were whichever is the greater of—

(a) the value of the thing at the time it was first detained, or (b) £250.

5 (1) This paragraph applies where— (a) a thing is detained at a revenue trader's premises, (b) the thing is liable to forfeiture under the customs and excise Acts, and

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(c) without the permission of a proper officer of Revenue and Customs, the thing is removed from the trader's premises, or otherwise disposed of, by any person.

(2) The Commissioners may seize, as liable to forfeiture under the customs and excise Acts, goods of equivalent value to the thing, from the revenue trader's stock.

(3) For the purposes of this paragraph, a revenue trader's premises include any premises used to hold or store anything for the purposes of the revenue trader's trade, regardless of who owns or occupies the premises.”

(8) The amendments made by this section have effect in relation to things detained on or after the day on which this Act is passed.

227 Penalty instead of forfeiture of larger ships

(1) Section 143 of CEMA 1979 (penalty in lieu of forfeiture of larger ship where responsible officer is implicated in offence) is amended as follows.

(2) For subsection (1) (Commissioners' power to impose fine up to £50) substitute—

“(1) This section applies where— (a) any ship of 250 or more tons register would, but for section 142, be

liable to forfeiture for, or in connection with, any offence under the customs and excise Acts, and

(b) in the opinion of the Commissioners, a responsible officer of the ship is implicated either by the officer's own act, or by neglect, in that offence.”

(3) In subsection (3) (Commissioners' power to bring condemnation proceedings)— (a) for the words from the beginning to the first “they” substitute “ The

Commissioners ”, and (b) for “£500” substitute “ £10,000 ”.

(4) In subsection (4) (power to detain ship pending payment of deposit against fine or condemnation proceedings)—

(a) for the words from the beginning to “section, the” substitute “ The ”, (b) for “£50 or, as the case may be, £500” substitute “ £10,000 ”, and (c) omit “their final decision or, as the case may be,”.

(5) In paragraph (a) of subsection (6) (definition of “responsible officer)— (a) after “means” insert “ a person who is, or is acting as, ”, (b) for “or an engineer” substitute “ , an engineer or the bosun ”, and (c) omit the words from “and, in the case of a ship manned” to the end.

(6) After that subsection insert—

“(7) If the Treasury consider that there has been a change in the value of money since the Finance Act 2013 was passed or, as the case may be, since the last occasion when the power conferred by this subsection was exercised, they may by order substitute for the sum for the time being specified in subsections (3) and (4) such other sum as appears to them to be justified by the change.

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(8) An order under subsection (7) may not vary the penalty for any conduct occurring before the coming into force of the order.

(9) An order under subsection (7) must be made by statutory instrument.

(10) A statutory instrument containing an order under subsection (7) is subject to annulment in pursuance of a resolution of either House of Parliament.”

228 Data-gathering from merchant acquirers etc

(1) In Part 2 of Schedule 23 to FA 2011 (data-gathering powers: relevant data-holders), after paragraph 13 insert—

13A (1) A person who has a contractual obligation to make payments to retailers in settlement of payment card transactions is a relevant data-holder.

(2) In this paragraph— “payment card” includes a credit card, a charge card and a debit

card; “payment card transaction” means any transaction in which a

payment card is accepted as payment; “retailer” means a person who accepts a payment card as

payment for any transaction.

(3) In this paragraph any reference to a payment card being accepted as payment includes a reference to any account number or other indicators associated with a payment card being accepted as payment.”

(2) This section applies in relation to relevant data with a bearing on any period (whether before, on or after the day on which this Act is passed).

Payment

229 Corporation tax: deferral of payment of exit charge

Schedule 49 contains provision for, and in connection with, deferring the payment by a company of certain corporation tax in circumstances where income, profits or gains arise by virtue of section 25, 185 or 187(4) of TCGA 1992 or section 162, 333, 334, 609, 610, 859 or 862 of CTA 2009.

230 Penalties: late filing, late payment and errors

Schedule 50 contains provision for, and in connection with, penalties for late filing, late payment and errors.

231 Overpayment relief: generally prevailing practice exclusion and EU law

(1) In Schedule 1AB to TMA 1970 (recovery of overpaid tax etc), in paragraph 2 (cases in which Commissioners not liable to give effect to claim), after sub-paragraph (9) insert—

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“(9A) Cases G and H do not apply where the amount paid, or liable to be paid, is tax which has been charged contrary to EU law.

(9B) For the purposes of sub-paragraph (9A), an amount of tax is charged contrary to EU law if, in the circumstances in question, the charge to tax is contrary to—

(a) the provisions relating to the free movement of goods, persons, services and capital in Titles II and IV of Part 3 of the Treaty on the Functioning of the European Union, or

(b) the provisions of any subsequent treaty replacing the provisions mentioned in paragraph (a).”

(2) In Schedule 2 to OTA 1975 (management and collection of petroleum revenue tax), in paragraph 13B (claim for relief for overpaid tax etc: cases in which HMRC not liable to give effect to a claim), after sub-paragraph (8) insert—

“(9) Case G does not apply where the amount paid, or liable to be paid, is tax which has been charged contrary to EU law.

(10) For the purposes of sub-paragraph (9), an amount of tax is charged contrary to EU law if, in the circumstances in question, the charge to tax is contrary to—

(a) the provisions relating to the free movement of goods, persons, services and capital in Titles II and IV of Part 3 of the Treaty on the Functioning of the European Union, or

(b) the provisions of any subsequent treaty replacing the provisions mentioned in paragraph (a).”

(3) In Part 6 of Schedule 18 to FA 1998 (overpaid tax, excessive assessments or repayments etc), in paragraph 51A (cases in which Commissioners not liable to give effect to a claim), after sub-paragraph (8) insert—

“(9) Case G does not apply where the amount paid, or liable to be paid, is tax which has been charged contrary to EU law.

(10) For the purposes of sub-paragraph (9), an amount of tax is charged contrary to EU law if, in the circumstances in question, the charge to tax is contrary to—

(a) the provisions relating to the free movement of goods, persons, services and capital in Titles II and IV of Part 3 of the Treaty on the Functioning of the European Union, or

(b) the provisions of any subsequent treaty replacing the provisions mentioned in paragraph (a).”

(4) In Part 6 of Schedule 10 to FA 2003 (relief in case of overpaid tax or excessive assessment), in paragraph 34A (cases in which Commissioners not liable to give effect to a claim), after sub-paragraph (8) insert—

“(9) Case G does not apply where the amount paid, or liable to be paid, is tax which has been charged contrary to EU law.

(10) For the purposes of sub-paragraph (9), an amount of tax is charged contrary to EU law if, in the circumstances in question, the charge to tax is contrary to—

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(a) the provisions relating to the free movement of goods, persons, services and capital in Titles II and IV of Part 3 of the Treaty on the Functioning of the European Union, or

(b) the provisions of any subsequent treaty replacing the provisions mentioned in paragraph (a).”

(5) The amendments made by this section have effect in relation to any claim (in respect of overpaid tax, excessive assessment etc) made after the end of the six month period beginning with the day on which this Act is passed.

232 Overpayment relief: time limit for claims

(1) In Schedule 1AB to TMA 1970 (recovery of overpaid tax etc), in paragraph 3 (making a claim), in sub-paragraph (3) after “the relevant tax year is” insert “—

(a) where the amount liable to be paid is excessive by reason of a mistake in a return or returns under section 8, 8A or 12AA, the tax year to which the return (or, if more than one, the first return) relates, and

(b) otherwise,”.

(2) In Schedule 2 to OTA 1975, in paragraph 13C (claim for relief for overpaid tax etc: making a claim), in sub-paragraph (3) after “the relevant chargeable period is” insert “—

(a) where the amount liable to be paid is excessive by reason of a mistake in a return or returns under paragraph 2 or 5, the chargeable period to which the return (or, if more than one, the first return) relates, and

(b) otherwise,”.

(3) In Part 6 of Schedule 18 to FA 1998 (overpaid tax, excessive assessments or repayments, etc), in paragraph 51B (making a claim), in sub-paragraph (3), after “the relevant accounting period is” insert “—

(a) where the amount liable to be paid is excessive by reason of a mistake in a company tax return or returns, the accounting period to which the return (or, if more than one, the first return) relates, and

(b) otherwise,”.

(4) The amendments made by this section have effect in relation to any claim (in respect of overpaid tax, excessive assessment etc) made after the end of the six month period beginning with the day on which this Act is passed.

Administration

233 Self assessment: withdrawal of notice to file etc

Schedule 51 contains provision for, and in connection with, withdrawing a notice under section 8, 8A or 12AA of TMA 1970 and cancelling liability to a penalty under Schedule 55 to FA 2009.

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Interim remedies

234 Restrictions on interim payments in proceedings relating to taxation matters

(1) This section applies to an application for an interim remedy (however described), made in any court proceedings relating to a taxation matter, if the application is founded (wholly or in part) on a point of law which has yet to be finally determined in the proceedings.

(2) Any power of a court to grant an interim remedy (however described) requiring the Commissioners for Her Majesty's Revenue and Customs, or an officer of Revenue and Customs, to pay any sum to any claimant (however described) in the proceedings is restricted as follows.

(3) The court may grant the interim remedy only if it is shown to the satisfaction of the court—

(a) that, taking account of all sources of funding (including borrowing) reasonably likely to be available to fund the proceedings, the payment of the sum is necessary to enable the proceedings to continue, or

(b) that the circumstances of the claimant are exceptional and such that the granting of the remedy is necessary in the interests of justice.

(4) The powers restricted by this section include (for example)— (a) powers under rule 25 of the Civil Procedure Rules 1998 (S.I. 1998/3132); (b) powers under Part II of Rule 29 of the Rules of the Court of Judicature

(Northern Ireland) (Revision) 1980 (S.R. 1980 No.346).

(5) This section applies in relation to proceedings whenever commenced, but only in relation to applications made in those proceedings on or after 26 June 2013.

(6) This section applies on and after 26 June 2013.

(7) Subsection (8) applies where, on or after 26 June 2013 but before the passing of this Act, an interim remedy was granted by a court using a power which, because of subsection (6), is to be taken to have been restricted by this section.

(8) Unless it is shown to the satisfaction of the court that paragraph (a) or (b) of subsection (3) applied at the time the interim remedy was granted, the court must, on an application made to it under this subsection—

(a) revoke or modify the interim remedy so as to secure compliance with this section, and

(b) if the Commissioners have, or an officer of Revenue and Customs has, paid any sum as originally required by the interim remedy, order the repayment of the sum or any part of the sum as appropriate (with interest from the date of payment).

(9) For the purposes of this section, proceedings on appeal are to be treated as part of the original proceedings from which the appeal lies.

(10) In this section “taxation matter” means anything, other than national insurance contributions, the collection and management of which is the responsibility of the Commissioners for Her Majesty's Revenue and Customs (or was the responsibility of the Commissioners of Inland Revenue or Commissioners of Customs and Excise).

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PART 7

FINAL PROVISIONS

235 Interpretation

(1) In this Act— “ALDA 1979” means the Alcoholic Liquor Duties Act 1979, “BGDA 1981” means the Betting and Gaming Duties Act 1981, “CAA 2001” means the Capital Allowances Act 2001, “CEMA 1979” means the Customs and Excise Management Act 1979, “CRCA 2005” means the Commissioners for Revenue and Customs Act

2005, “CTA 2009” means the Corporation Tax Act 2009, “CTA 2010” means the Corporation Tax Act 2010, “F(No.3)A 2010” means the Finance (No. 3) Act 2010, “HODA 1979” means the Hydrocarbon Oil Duties Act 1979, “ICTA” means the Income and Corporation Taxes Act 1988, “IHTA 1984” means the Inheritance Tax Act 1984, “ITA 2007” means the Income Tax Act 2007, “ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003, “ITTOIA 2005” means the Income Tax (Trading and Other Income) Act

2005, “OTA 1975” means the Oil Taxation Act 1975, “TCGA 1992” means the Taxation of Chargeable Gains Act 1992, “TIOPA 2010” means the Taxation (International and Other Provisions)

Act 2010, “TMA 1970” means the Taxes Management Act 1970, “TPDA 1979” means the Tobacco Products Duty Act 1979, “VATA 1994” means the Value Added Tax Act 1994, and “VERA 1994” means the Vehicle Excise and Registration Act 1994.

(2) In this Act— “FA”, followed by a year, means the Finance Act of that year; “F(No.2)A”, followed by a year, means the Finance (No. 2) Act of that year.

236 Short title

This Act may be cited as the Finance Act 2013.

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S C H E D U L E S

SCHEDULE 1 Section 7

ANNUAL INVESTMENT ALLOWANCE: PERIODS STRADDLING 1 JANUARY 2013 OR 1 JANUARY 2015

Chargeable periods which straddle 1 January 2013 1 (1) This paragraph applies in relation to a chargeable period which begins before 1

January 2013 and ends on or after that date (“the first straddling period”).

(2) The maximum allowance under section 51A of CAA 2001 for the first straddling period is the sum of each maximum allowance that would be found if—

(a) so much (if any) of the first straddling period as falls before the relevant date, (b) so much of the first straddling period as falls on or after the relevant date but

before 1 January 2013, and (c) so much of the first straddling period as falls on or after 1 January 2013,

were each treated as separate chargeable periods.

(3) But this is subject to paragraphs 2 and 3.

(4) In this Schedule “the relevant date” means— (a) for the purposes of corporation tax, 1 April 2012; (b) for the purposes of income tax, 6 April 2012.

Straddling period beginning before the relevant date 2 (1) This paragraph applies where the first straddling period begins before the relevant

date.

(2) So far as concerns expenditure incurred before the relevant date, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if the amendment made by section 7(1) had not been made.

(3) So far as concerns expenditure incurred on or after the relevant date but before 1 January 2013, the maximum allowance under section 51A of CAA 2001 for the first straddling period is—

(4) In sub-paragraph (3)— (a) “A” means the amount that would have been the maximum allowance for

the period beginning on the relevant date and ending at the end of the first straddling period if—

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(i) that period had been a separate chargeable period, and (ii) the amendment made by section 7(1) had not been made;

(b) “B” means the amount (if any) by which— (i) the AIA expenditure incurred in the period mentioned in paragraph

1(2)(a) in respect of which a claim for an annual investment allowance is made, exceeds

(ii) the maximum allowance under section 51A of CAA 2001 for that period if it were treated as a separate chargeable period.

(5) So far as concerns expenditure incurred on or after 1 January 2013, the maximum allowance under section 51A of CAA 2001 for the first straddling period is the sum of each maximum allowance that would be found if the period mentioned in paragraph 1(2)(b) and the period mentioned in paragraph 1(2)(c) were each treated as separate chargeable periods.

First straddling period beginning on or after the relevant date 3 (1) This paragraph applies where no part of the first straddling period falls within

paragraph 1(2)(a).

(2) So far as concerns expenditure incurred before 1 January 2013, the maximum allowance under section 51A of CAA 2001 for the first straddling period is to be calculated as if the amendment made by section 7(1) had not been made.

Chargeable periods which straddle 1 January 2015 4 (1) This paragraph applies in relation to a chargeable period (“the second straddling

period”) which begins before 1 January 2015 and ends on or after that date.

(2) The maximum allowance under section 51A of CAA 2001 for the second straddling period is the sum of each maximum allowance that would be found if—

(a) the period beginning with the first day of the chargeable period and ending with the day before 1 January 2015, and

(b) the period beginning with 1 January 2015 and ending with the last day of the chargeable period,

were treated as separate chargeable periods.

(3) But, so far as concerns expenditure incurred on or after 1 January 2015, the maximum allowance under section 51A of CAA 2001 for the second straddling period is the maximum allowance, calculated in accordance with sub-paragraph (2), for the period mentioned in paragraph (b) of that sub-paragraph.

Operation of annual investment allowance where restrictions apply 5 (1) Paragraphs 1 to 4 also apply for the purpose of determining the maximum allowance

under section 51K of CAA 2001 (operation of annual investment allowance where restrictions apply) in a case where one or more chargeable periods in which the relevant AIA qualifying expenditure is incurred are chargeable periods within paragraph 1(1) or 4(1).

(2) There is to be taken into account for those purposes only chargeable periods of one year or less (whether or not they are chargeable periods within paragraph 1(1) or

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4(1)), and, if there is more than one such period, only that period which gives rise to the greatest maximum allowance.

(3) For the purposes of sub-paragraph (2) any chargeable period which— (a) is longer than a year, and (b) ends in the tax year 2012-13, 2013-14, 2014-15, 2015-16 or 2016-17,

is to be treated as being a chargeable period of one year ending at the same time as it actually ends.

(4) Section 11(11) of FA 2011 is repealed.

(5) That repeal has effect in relation to cases where one or more chargeable periods in which the relevant AIA qualifying expenditure is incurred are chargeable periods within paragraph 1(1).

(6) Nothing in this paragraph affects the operation of sections 51M and 51N of CAA 2001.

SCHEDULE 2 Section 14

TAX ADVANTAGED EMPLOYEE SHARE SCHEMES

PART 1

RETIREMENT OF PARTICIPANTS

Introduction 1 Part 7 of ITEPA 2003 (employment income: income and exemptions relating to

securities) is amended as follows.

Share incentive plans 2 In section 498 (no charge on shares ceasing to be subject to plan in certain

circumstances) in subsection (2)(e) omit the words from “on” to “2)”. 3 In Part 4 of Schedule 2 (types of shares that may be awarded) in paragraph 32

(provision for forfeiture) in sub-paragraph (2)(e) omit the words from “on” to “98)”. 4 Part 11 of Schedule 2 (supplementary provisions) is amended as follows. 5 Omit paragraph 98 (meaning of “specified retirement age”). 6 In paragraph 100 (index of defined expressions) omit the entry for “the specified

retirement age”.

SAYE option schemes 7 Part 6 of Schedule 3 (requirements etc relating to share options) is amended as

follows. 8 In paragraph 27 (introduction) in sub-paragraph (1)—

(a) omit the entry for paragraph 31,

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(b) after the entry for paragraph 32 insert “ and ”, and (c) omit the entry for paragraph 33 and the “and” after it.

9 In paragraph 30 (time for exercising options) in sub-paragraph (2)(a)— (a) for “32 to” substitute “ 32, ”, and (b) omit “reaching the specified age without retiring,”.

10 Omit paragraph 31 (requirement to have a “specified age”). 11 Omit paragraph 33 (exercise of options: reaching specified age without retiring). 12 In paragraph 34 (exercise of options: scheme-related employment ends) in sub-

paragraph (2)(b) omit the words from “on” to “employment”. 13 In Part 9 of Schedule 3 (supplementary provisions) in paragraph 49 (index of

defined expressions) omit the entry for “specified age”.

CSOP schemes 14 In section 524 (no charge in respect of exercise of option) in subsection (2C) omit

the definition of “retirement” and the “and” before it. 15 In Part 8 of Schedule 4 (supplementary provisions) omit paragraph 35A (retirement

age).

Transitional provision 16 The amendment made by paragraph 11 above has no effect in relation to options

granted before the day on which this Act is passed; and the effect of the amendments made by paragraphs 8 to 10 and 13 above is limited accordingly.

17 (1) A SIP, SAYE option scheme or CSOP scheme approved before the day on which this Act is passed has effect with any modifications needed to reflect the amendments made by this Part of this Schedule.

(2) In relation to any shares awarded under a SIP before that day which are subject to provision for forfeiture, that provision has effect with any modifications needed to reflect the amendment made by paragraph 3 above.

(3) Because of paragraphs 48 and 58 below, that amendment is not relevant to shares awarded under a SIP on or after that day.

PART 2

“GOOD LEAVERS” (OTHER THAN RETIREES)

Introduction 18 Part 7 of ITEPA 2003 (employment income: income and exemptions relating to

securities) is amended as follows.

Share incentive plans 19 In section 498 (no charge on shares ceasing to be subject to plan in certain

circumstances) after subsection (2) insert—

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“(3) A participant is not liable to income tax on shares (“the relevant shares”) in a company (“the relevant company”) being withdrawn from the plan if—

(a) the withdrawal of the relevant shares from the plan relates to— (i) a transaction resulting from a compromise, arrangement or

scheme falling within subsection (9), (ii) an offer forming part of a general offer falling within

subsection (10), or (iii) the application of sections 979 to 982 or 983 to 985 of

the Companies Act 2006 in the case of a takeover offer (as defined in section 974 of that Act) falling within subsection (13), and

(b) as a result of, as the case may be— (i) the transaction,

(ii) the offer, or (iii) the application of sections 979 to 982 or 983 to 985 of the

Companies Act 2006, the participant receives cash (and no other assets) in exchange for the relevant shares.

(4) For the purposes of subsection (3)(b) it does not matter if the participant receives other assets in exchange for shares other than the relevant shares.

(5) Subsection (3) does not apply to the relevant shares (or to a proportion of them) if in connection with, as the case may be—

(a) the compromise, arrangement or scheme, (b) the general offer, or (c) the takeover offer,

a course of action was open to the participant which, had it been followed, would have resulted in other assets being received in exchange for the relevant shares (or the proportion of them) instead of cash.

(6) Subsection (3) does not apply to the relevant shares (or to a proportion of them) if it is reasonable to suppose that the relevant shares (or the proportion of them) would not have been awarded to the participant—

(a) had, as the case may be— (i) the compromise, arrangement or scheme,

(ii) the general offer, or (iii) the takeover offer,

not been made, or (b) had any arrangements for the making of—

(i) a compromise, arrangement or scheme which would fall within subsection (9),

(ii) a general offer which would fall within subsection (10), or (iii) a takeover offer (as defined in section 974 of the Companies

Act 2006) which would fall within subsection (13), which were in place or under consideration at any time not been in place or under consideration.

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(7) In subsection (6) the reference to shares being awarded to the participant is to be read, in the case of dividend shares, as a reference to the shares being acquired by the trustees on the participant's behalf.

(8) In subsection (6)(b) “arrangements” includes any plan, scheme, agreement or understanding, whether or not legally enforceable.

(9) A compromise, arrangement or scheme falls within this subsection if it is applicable to or affects—

(a) all the ordinary share capital of the relevant company or all the shares of the same class as the relevant shares, or

(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or their participation in an approved SIP.

(10) A general offer falls within this subsection if— (a) it is made to holders of shares of the same class as the relevant shares

or to holders of shares in the relevant company, and (b) it is made in the first instance on a condition such that if it is

satisfied the person making the offer will have control of the relevant company.

(11) For the purposes of subsection (10) it does not matter if the general offer is made to different shareholders by different means.

(12) In subsection (10)(b) “control” has the meaning given by sections 450 and 451 of CTA 2010.

(13) A takeover offer falls within this subsection if— (a) it relates to the relevant company, and (b) where there is more than one class of share in the relevant company,

the class or classes to which it relates is or include the class of the relevant shares.”

20 (1) In Part 5 of Schedule 2 (free shares) in paragraph 37 (holding period: power of participant to direct trustees to accept general offers etc) after sub-paragraph (6) insert —

“(7) For the purposes of sub-paragraph (5) it does not matter if the general offer is made to different shareholders by different means.

(8) If in the case of a takeover offer (as defined in section 974 of the Companies Act 2006) there arises a right under section 983 of that Act to require the offeror to acquire the participant's free shares, or such of them as are of a particular class, the participant may direct the trustees to exercise that right.”

(2) A SIP approved before the day on which this Act is passed has effect with any modifications needed to reflect the amendment made by this paragraph.

SAYE option schemes 21 In section 519 (no charge in respect of exercise of option) after subsection (3) insert

—

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“(3A) In relation to any shares acquired by the exercise of the share option, no liability to income tax arises in respect of its exercise if—

(a) the individual exercises the option before the third anniversary of the date on which the option was granted at a time when the SAYE option scheme is approved,

(b) the option is exercised by virtue of a provision included in the scheme—

(i) under paragraph 37(1) of Schedule 3 where the relevant date is the relevant date for the purposes of paragraph 37(2) or (4), or

(ii) under paragraph 37(6) of Schedule 3, (c) as a result of, as the case may be—

(i) the general offer, (ii) the compromise or arrangement, or

(iii) the takeover offer, the individual receives cash (and no other assets) in exchange for the shares,

(d) when the decision to grant the option was taken— (i) the general offer,

(ii) the compromise or arrangement, or (iii) the takeover offer,

as the case may be, had not been made, (e) when that decision was taken, no arrangements were in place or

under consideration for— (i) the making of a general offer which would fall within

subsection (3D), (ii) the making of any compromise or arrangement which would

fall within subsection (3H), or (iii) the making of a takeover offer (as defined in section 974

of the Companies Act 2006) which would fall within subsection (3I),

(f) if the scheme includes a provision under paragraph 38 of Schedule 3 (“the paragraph 38 provision”), in connection with—

(i) the general offer, (ii) the compromise or arrangement, or

(iii) the takeover offer, as the case may be, no course of action was open to the individual which, had it been followed, would have resulted in the individual making an agreement under the paragraph 38 provision which would have prevented the individual from acquiring the shares by the exercise of the option, and

(g) the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised.

(3B) In subsection (3A)(c)(iii), (d)(iii) and (f)(iii) “the takeover offer” means the takeover offer (as defined in section 974 of the Companies Act 2006) giving rise to the application of sections 979 to 982 or 983 to 985 of that Act.

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(3C) In subsection (3A)(e) “arrangements” includes any plan, scheme, agreement or understanding, whether or not legally enforceable.

(3D) A general offer falls within this subsection if it is— (a) a general offer to acquire the whole of the issued ordinary share

capital of the relevant company which is made on a condition such that, if it is met, the person making the offer will have control of the relevant company, or

(b) a general offer to acquire all the shares in the relevant company which are of the same class as those acquired by the exercise of the option.

(3E) In subsection (3D)(a) the reference to the issued ordinary share capital of the relevant company does not include any capital already held by the person making the offer or a person connected with that person and in subsection (3D)(b) the reference to the shares in the relevant company does not include any shares already held by the person making the offer or a person connected with that person.

(3F) For the purposes of subsection (3D)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.

(3G) For the purposes of subsection (3D)(a) a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.

(3H) A compromise or arrangement falls within this subsection if it is applicable to or affects—

(a) all the ordinary share capital of the relevant company or all the shares of the same class as those acquired by the exercise of the option, or

(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in an approved SAYE option scheme.

(3I) A takeover offer falls within this subsection if— (a) it relates to the relevant company, and (b) where there is more than one class of share in the relevant company,

the class or classes to which it relates is or include the class of the shares acquired by the exercise of the option.

(3J) In subsections (3D), (3H) and (3I) “the relevant company” means the company whose shares are acquired by the exercise of the option.”

22 Part 6 of Schedule 3 (requirements etc relating to share options) is amended as follows.

23 (1) Paragraph 34 (exercise of options: scheme-related employment ends) is amended as follows.

(2) In sub-paragraph (2)— (a) omit the “or” after paragraph (a), and (b) after paragraph (b) insert—

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“(c) a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006, or

(d) if P holds office or is employed in a company which is an associated company (as defined in paragraph 35(4)) of the scheme organiser, that company ceasing to be an associated company of the scheme organiser by reason of a change of control (as determined in accordance with sections 450 and 451 of CTA 2010),”.

(3) In sub-paragraphs (4) and (5A)(b) for “or (b)” substitute “ to (d) ”.

(4) A SAYE option scheme approved before the day on which this Act is passed has effect with any modifications needed to reflect the amendments made by this paragraph.

24 (1) Paragraph 37 (exercise of options: company events) is amended as follows.

(2) After sub-paragraph (3) insert—

“(3A) In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3) (b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(3B) For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.”

(3) A SAYE option scheme approved before the day on which this Act is passed which contains provision under paragraph 37(1) of Schedule 3 to ITEPA 2003 by reference to paragraph 37(2) has effect with any modifications needed to reflect the amendment made by sub-paragraph (2).

(4) In sub-paragraph (4) for the words from “proposed” to the end substitute “applicable to or affecting—

(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(5) A SAYE option scheme approved before the day on which this Act is passed which contains provision under paragraph 37(1) of Schedule 3 to ITEPA 2003 by reference to paragraph 37(4) has effect with any modifications needed to reflect the amendment made by sub-paragraph (4).

(6) In sub-paragraph (6)— (a) after “982” insert “ or 983 to 985 ”, and (b) after “shareholder” insert “ etc ”.

(7) A SAYE option scheme approved before the day on which this Act is passed which contains provision under paragraph 37(6) of Schedule 3 to ITEPA 2003 has effect with any modifications needed to reflect the amendments made by sub-paragraph (6).

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25 (1) In Part 7 of Schedule 3 (exercise of share options) paragraph 38 (exchange of options on company reorganisation) is amended as follows.

(2) In sub-paragraph (2)(c)— (a) after “982” insert “ or 983 to 985 ”, and (b) after “shareholder” insert “ etc ”.

(3) After sub-paragraph (2) insert—

“(2A) In sub-paragraph (2)(a)(i) the reference to the issued ordinary share capital of the scheme company does not include any capital already held by the person making the offer or a person connected with that person and in sub- paragraph (2)(a)(ii) the reference to the shares in the scheme company does not include any shares already held by the person making the offer or a person connected with that person.

(2B) For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.”

(4) A SAYE option scheme approved before the day on which this Act is passed which contains provision under paragraph 38 of Schedule 3 to ITEPA 2003 has effect with any modifications needed to reflect the amendments made by this paragraph.

CSOP schemes 26 (1) Section 524 (no charge in respect of exercise of option) is amended as follows.

(2) In subsection (2B) for paragraph (a) substitute— “(a) has ceased to be in qualifying employment because of—

(i) injury, disability, redundancy or retirement, (ii) a relevant transfer within the meaning of the Transfer

of Undertakings (Protection of Employment) Regulations 2006, or

(iii) in the case of a group scheme where the qualifying employment is as a director or employee of a constituent company, that company ceasing to be controlled by the scheme organiser, and”.

(3) After subsection (2B) insert—

“(2BA) For the purposes of subsection (2B) an individual is in “qualifying employment” if the individual is a full-time director or qualifying employee (as defined in paragraph 8(2) of Schedule 4) of—

(a) the scheme organiser, or (b) in the case of a group scheme, a constituent company.”

(4) In subsection (2C) for “(2B)” substitute “ (2B)(a)(i) ”.

(5) After subsection (2C) insert—

“(2D) Subsection (2B)(a)(iii) does not cover a case where the constituent company was controlled by the scheme organiser by virtue of paragraph 34 of Schedule 4 (jointly owned companies).

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(2E) In relation to any shares acquired by the exercise of the share option, no liability to income tax arises in respect of its exercise if—

(a) the individual exercises the option before the third anniversary of the date on which the option was granted at a time when the CSOP scheme is approved,

(b) the option is exercised by virtue of a provision included in the scheme under paragraph 25A of Schedule 4,

(ii) the compromise or arrangement, or (iii) the takeover offer,

the individual receives cash (and no other assets) in exchange for the shares,

(d) when the decision to grant the option was taken— (i) the general offer,

(ii) the compromise or arrangement, or (iii) the takeover offer,

as the case may be, had not been made, (e) when that decision was taken, no arrangements were in place or

under consideration for— (i) the making of a general offer which would fall within

subsection (2H), (ii) the making of any compromise or arrangement which would

fall within subsection (2L), or (iii) the making of a takeover offer (as defined in section 974

of the Companies Act 2006) which would fall within subsection (2M),

(f) if the scheme includes a provision under paragraph 26 of Schedule 4 (“the paragraph 26 provision”), in connection with—

(i) the general offer, (ii) the compromise or arrangement, or

(iii) the takeover offer, as the case may be, no course of action was open to the individual which, had it been followed, would have resulted in the individual making an agreement under the paragraph 26 provision which would have prevented the individual from acquiring the shares by the exercise of the option, and

(g) the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised.

(2F) In subsection (2E)(c)(iii), (d)(iii) and (f)(iii) “the takeover offer” means the takeover offer (as defined in section 974 of the Companies Act 2006) giving rise to the application of sections 979 to 982 or 983 to 985 of that Act.

(2G) In subsection (2E)(e) “arrangements” includes any plan, scheme, agreement or understanding, whether or not legally enforceable.

(2H) A general offer falls within this subsection if it is—

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(a) a general offer to acquire the whole of the issued ordinary share capital of the relevant company which is made on a condition such that, if it is met, the person making the offer will have control of the relevant company, or

(b) a general offer to acquire all the shares in the relevant company which are of the same class as those acquired by the exercise of the option.

(2I) In subsection (2H)(a) the reference to the issued ordinary share capital of the relevant company does not include any capital already held by the person making the offer or a person connected with that person and in subsection (2H)(b) the reference to the shares in the relevant company does not include any shares already held by the person making the offer or a person connected with that person.

(2J) For the purposes of subsection (2H)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.

(2K) For the purposes of subsection (2H)(a) a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.

(2L) A compromise or arrangement falls within this subsection if it is applicable to or affects—

(a) all the ordinary share capital of the relevant company or all the shares of the same class as those acquired by the exercise of the option, or

(2M) A takeover offer falls within this subsection if— (a) it relates to the relevant company, and (b) where there is more than one class of share in the relevant company,

the class or classes to which it relates is or include the class of the shares acquired by the exercise of the option.

(2N) In subsections (2H), (2L) and (2M) “the relevant company” means the company whose shares are acquired by the exercise of the option.”

27 Part 5 of Schedule 4 (requirements etc relating to share options) is amended as follows.

28 In paragraph 21 (introduction) in sub-paragraph (2)— (a) after the entry for paragraph 24 omit “or”, and (b) after the entry for paragraph 25 insert “, or

paragraph 25A (exercise of options: company events)”. 29 After paragraph 25 insert—

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“Exercise of options: company events 25A(1) The scheme may provide that share options relating to shares in a company

may be exercised within 6 months after the relevant date for the purposes of sub-paragraph (2) or (6).

(2) The relevant date for the purposes of this sub-paragraph is the date when— (a) a person has obtained control of the company as a result of making

an offer falling within sub-paragraph (3), and (b) any condition subject to which the offer is made has been satisfied.

(3) An offer falls within this sub-paragraph if it is— (a) a general offer to acquire the whole of the issued ordinary share

capital of the company which is made on a condition such that, if it is met, the person making the offer will have control of the company, or

(b) a general offer to acquire all the shares in the company which are of the same class as the shares to which the option relates.

(4) In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3) (b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(5) For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.

(6) The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement) a compromise or arrangement applicable to or affecting—

(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(7) The scheme may provide that share options relating to shares in a company may be exercised at any time when any person is bound or entitled to acquire shares in the company under sections 979 to 982 or 983 to 985 of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder etc).

(8) For the purposes of this paragraph a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.”

30 (1) In Part 6 of Schedule 4 (exercise of share options) paragraph 26 (exchange of options on company reorganisation) is amended as follows.

(2) In sub-paragraph (2)(c)— (a) after “982” insert “ or 983 to 985 ”, and

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(b) after “shareholder” insert “ etc ”.

(3) After sub-paragraph (2) insert—

(2B) For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.”

(4) A CSOP scheme approved before the day on which this Act is passed which contains provision under paragraph 26 of Schedule 4 to ITEPA 2003 has effect with any modifications needed to reflect the amendments made by this paragraph.

Enterprise management incentives 31 (1) In Part 6 of Schedule 5 (company reorganisations) in paragraph 39 (introduction)

after sub-paragraph (3) insert—

“(4) In sub-paragraph (2)(a)(i) the reference to the issued share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2) (a)(ii) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(5) For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.”

(2) The amendment made by this paragraph comes into force on such day as the Treasury may by order appoint.

PART 3

MATERIAL INTEREST RULES

Introduction 32 Part 7 of ITEPA 2003 (employment income: income and exemptions relating to

securities) is amended as follows.

Share incentive plans 33 Part 3 of Schedule 2 (eligibility of individuals) is amended as follows. 34 In paragraph 13 (introduction)—

(a) after the entry for paragraph 18 insert “ and ”, and (b) omit the entry for paragraph 19 and the “and” before it.

35 In paragraph 14 (time of eligibility to participate) in sub-paragraph (7)—

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(a) after paragraph (b) insert “ and ”, and (b) omit paragraph (c) and the “and” before it.

36 Omit paragraphs 19 to 24 (the “no material interest” requirement). 37 In Part 11 of Schedule 2 (supplementary provisions) in paragraph 100 (index of

defined expressions), in the entry for “close company”, omit “(and see paragraph 20(4))”.

38 (1) The amendments made by paragraphs 33 to 37 above have effect for the purpose of determining whether an individual is eligible to participate in an award of shares on the day on which this Act is passed or any later day.

(2) A SIP approved before the day on which this Act is passed has effect accordingly with the omission of any provision falling within a provision of Schedule 2 to ITEPA 2003 omitted by those paragraphs.

SAYE option schemes 39 Part 3 of Schedule 3 (eligibility of individuals) is amended as follows. 40 In paragraph 9 (introduction) omit the entry for paragraph 11 and the “and” before it. 41 Omit paragraphs 11 to 16 (the “no material interest” requirement). 42 In Part 9 of Schedule 3 (supplementary provisions) in paragraph 49 (index of

defined expressions), in the entry for “close company”, omit “(and see paragraph 11(4))”.

43 (1) The amendments made by paragraphs 39 to 42 above have effect for the purpose of determining whether an individual is eligible to participate in a scheme on the day on which this Act is passed or any later day.

(2) A SAYE option scheme approved before the day on which this Act is passed has effect accordingly with the omission of any provision falling within a provision of Schedule 3 to ITEPA 2003 omitted by those paragraphs.

CSOP schemes 44 (1) In Part 3 of Schedule 4 (eligibility of individuals) in paragraphs 10(2) and (3), 11(3)

and (4) and 13(2) (which relate to the “no material interest” requirement) for “25%” substitute “ 30% ”.

(2) The amendments made by this paragraph have effect for the purpose of determining whether a person is eligible to participate in a scheme on the day on which this Act is passed or any later day (by altering what constitutes a material interest on that day and within the 12 months preceding that day).

(3) A CSOP scheme approved before the day on which this Act is passed has effect with any modifications needed to reflect the amendments made by this paragraph.

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PART 4

RESTRICTED SHARES

Introduction 45 Part 7 of ITEPA 2003 (employment income: income and exemptions relating to

securities) is amended as follows.

Share incentive plans 46 Part 4 of Schedule 2 (types of shares that may be awarded) is amended as follows. 47 In paragraph 25 (introduction) in sub-paragraph (1)—

(a) after the entry for paragraph 28 insert “ and ”, and (b) omit the entry for paragraph 30 and the “and” before it.

48 Omit paragraphs 30 to 33 (only certain kinds of restrictions allowed). 49 In Part 5 of Schedule 2 (free shares) in paragraph 35 (maximum annual award) omit

sub-paragraphs (3) and (4). 50 In Part 6 of Schedule 2 (partnership shares) in paragraph 43 (introduction) after

sub-paragraph (2) insert—

“(2A) The plan must provide that partnership shares are not to be subject to any provision for forfeiture.”

51 In Part 7 of Schedule 2 (matching shares) in paragraph 59 (general requirement for matching shares) omit sub-paragraph (2).

52 In Part 9 of Schedule 2 (trustees) in paragraph 75 (duty to give notice of award of shares etc) in sub-paragraphs (2) and (3) after paragraph (a) insert—

“(aa) if the shares are subject to any restriction, giving details of the restriction,”.

53 (1) In Part 10 of Schedule 2 (approval of plans) paragraph 84 (disqualifying events) is amended as follows.

(2) In sub-paragraph (3)— (a) after paragraph (b) insert “ or ”, and (b) omit paragraph (c) and the “or” after it.

(3) In sub-paragraph (4)(b) for “provision for forfeiture” substitute “ restriction ”. 54 Part 11 of Schedule 2 (supplementary provision) is amended as follows. 55 In paragraph 92 (determination of market value) for sub-paragraph (2) substitute—

“(2) For the purposes of this Schedule the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.”

56 In paragraph 99 (minor definitions) after sub-paragraph (3) insert—

“(4) For the purposes of the SIP code— (a) shares are subject to a “restriction” if there is any contract,

agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted

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securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

(b) the “restriction” is that provision.” 57 In paragraph 100 (index of defined expressions) at the appropriate place insert—

“restriction (in relation to shares) paragraph 99(4)”.

58 (1) The amendments made by paragraphs 46 to 48 and 50 to 52 above have effect in relation to awards of shares made on or after the day on which this Act is passed.

(2) A SIP approved, or a trust instrument made, before that day has effect with any modifications needed to reflect the amendments made by paragraphs 46 to 57 above.

(3) In particular, in relation to awards of shares on or after that day, such a SIP has effect with the omission of any provision falling within a provision of Schedule 2 to ITEPA 2003 omitted by paragraph 48 above.

SAYE option schemes 59 Part 4 of Schedule 3 (shares to which schemes can apply) is amended as follows. 60 In paragraph 17 (introduction) in sub-paragraph (1)—

(a) after the entry for paragraph 20 insert “ and ”, and (b) omit the entry for paragraph 21 and the “and” after it.

61 Omit paragraph 21 (only certain kinds of restrictions allowed). 62 In Part 6 of Schedule 3 (requirements etc relating to share options) in paragraph 28

(requirements as to price of acquisition of shares) after sub-paragraph (4) insert—

“(5) At the time a share option is granted— (a) it must be stated whether or not the shares which may be acquired

by the exercise of the option may be subject to any restriction, and (b) if so, the details of the restriction must also be stated.

(6) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.”

63 In Part 7 of Schedule 3 (exchange of share options) in paragraph 39 (requirements about share options granted in exchange) after sub-paragraph (6) insert—

“(7) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.”

64 Part 9 of Schedule 3 (supplementary provisions) is amended as follows. 65 In paragraph 48 (minor definitions) after sub-paragraph (2) insert—

“(3) For the purposes of the SAYE code— (a) shares are subject to a “restriction” if there is any contract,

agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

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(b) the “restriction” is that provision.” 66 In paragraph 49 (index of defined expressions) at the appropriate place insert—

“restriction (in relation to shares) paragraph 48(3)”.

67 (1) The amendments made by paragraphs 59 to 62 above have effect in relation to options granted on or after the day on which this Act is passed.

(2) The amendment made by paragraph 63 above has effect for cases where the old options are granted on or after that day.

(3) A SAYE option scheme approved before that day has effect with any modifications needed to reflect the amendments made by paragraphs 59 to 66 above.

(4) In particular, in relation to options granted on or after that day, such a SAYE option scheme has effect with the omission of any provision falling within a provision of Schedule 3 to ITEPA 2003 omitted by paragraph 61 above.

CSOP schemes 68 In Part 2 of Schedule 4 (general requirements for approval) in paragraph 6 (limit

on value of shares subject to options) after sub-paragraph (3) insert—

“(4) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.”

69 Part 4 of Schedule 4 (shares to which schemes can apply) is amended as follows. 70 In paragraph 15 (introduction)—

(a) after the entry for paragraph 18 insert “ and ”, and (b) omit the entry relating to paragraph 19 and the “and” after it.

71 Omit paragraph 19 (only certain kinds of restrictions allowed). 72 In Part 5 of Schedule 4 (requirements etc relating to share options) in paragraph 22

after sub-paragraph (4) insert—

“(5) At the time a share option is granted— (a) it must be stated whether or not the shares which may be acquired

by the exercise of the option may be subject to any restriction, and (b) if so, the details of the restriction must also be stated.

(6) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.”

73 In Part 6 of Schedule 4 (exchange of share options) in paragraph 27 (requirements about share options granted in exchange) after sub-paragraph (6) insert—

“(7) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.”

74 Part 8 of Schedule 4 (supplementary provisions) is amended as follows. 75 In paragraph 36 (minor definitions) after sub-paragraph (2) insert—

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“(3) For the purposes of the CSOP code— (a) shares are subject to a “restriction” if there is any contract,

(b) the “restriction” is that provision.” 76 In paragraph 37 (index of defined expressions) at the appropriate place insert—

“restriction (in relation to shares) paragraph 36(3)”.

77 (1) The amendment made by paragraph 68 above has effect for the purpose of determining whether options may be granted to an individual on or after the day on which this Act is passed; but the amendment is to be ignored in determining the market value of any shares to which an option granted before that day relates.

(2) The amendments made by paragraphs 69 to 72 above have effect in relation to options granted on or after that day.

(3) The amendment made by paragraph 73 above has effect for cases where the old options are granted on or after that day.

(4) A CSOP scheme approved before that day has effect with any modifications needed to reflect the amendments made by paragraphs 68 to 76 above.

(5) In particular, in relation to options granted on or after that day, such a CSOP scheme has effect with the omission of any provision falling within a provision of Schedule 4 to ITEPA 2003 omitted by paragraph 71 above.

PART 5

SHARE INCENTIVE PLANS: PARTNERSHIP SHARES 78 Schedule 2 to ITEPA 2003 is amended as follows. 79 (1) In Part 6 (partnership shares) paragraph 52 (application of money deducted in

accumulation period) is amended as follows.

(2) After sub-paragraph (2) insert—

“(2A) The number of shares awarded to the employee must be determined in accordance with one of sub-paragraphs (3), (3A) and (3B) and the partnership share agreement must specify which one of those sub-paragraphs is to apply for the purposes of the agreement.”

(3) In sub-paragraph (3) for “The number of shares awarded to each” substitute “ If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the ”.

(4) After sub-paragraph (3) insert—

“(3A) If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the market value of the shares at the beginning of the accumulation period.

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(3B) If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the market value of the shares on the acquisition date.”

(5) In sub-paragraphs (4) and (5) for “and (3)” substitute “ to (3B) ”. 80 In Part 9 (trustees) in paragraph 75 (duty to give notice of award of shares etc) in

sub-paragraph (3) for paragraph (c) substitute— “(c) stating the market value in accordance with which the number of

shares awarded to the employee was determined.” 81 (1) The amendments made by paragraphs 79 and 80 above have effect in relation to

partnership share agreements made on or after the day on which this Act is passed.

(2) A trust instrument made before that day has effect with any modifications needed to reflect the amendment made by paragraph 80 above.

PART 6

SHARE INCENTIVE PLANS: DIVIDEND SHARES

Introduction 82 Part 8 of Schedule 2 to ITEPA 2003 (cash dividends and dividend shares) is

amended as follows.

Company's power to direct reinvestment of cash dividends 83 (1) Paragraph 62 (reinvestment of dividends) is amended as follows.

(2) In sub-paragraph (1) for the first “all” substitute “ some or all of the ”.

(3) After sub-paragraph (1) insert—

“(1A) The company's direction must set out— (a) the amount of the cash dividends to be applied as mentioned in sub-

paragraph (1), or (b) how that amount is to be determined.”

(4) In sub-paragraph (4) after “may” insert “ modify or ”. 84 In paragraph 68 (reinvestment: amounts to be carried forward) for sub-

paragraph (1) substitute—

“(1) This paragraph applies where an amount is not reinvested because it is not sufficient to acquire a share.”

85 In paragraph 69 (cash dividends with no requirement to reinvest) in sub- paragraph (2) for “which” substitute “ so far as they ”.

86 (1) A SIP approved before the day on which this Act is passed which contains provision under paragraph 62(1) of Schedule 2 to ITEPA 2003 has effect with any modifications needed to reflect the amendments made by paragraphs 83 to 85 above.

(2) Sub-paragraph (3) applies to a direction requiring the reinvestment of cash dividends which is given before that day.

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(3) For the purposes of paragraph 62(1A) of Schedule 2 to ITEPA 2003 the direction is to be treated as requiring the reinvestment of all the cash dividends, subject to any modification of the direction which is made on or after that day under paragraph 62(4) of that Schedule.

Removal of limit on amount reinvested 87 In paragraph 63 (requirements to be met as regards cash dividends) in sub-

paragraph (1) omit the entry for paragraph 64. 88 Omit paragraph 64 (limit on amount reinvested). 89 (1) The amendments made by paragraphs 87 and 88 above have effect in relation to the

tax year 2013-14 and subsequent tax years.

(2) A SIP approved before 6 April 2013 has effect accordingly with the omission of any provision falling within a provision of Schedule 2 to ITEPA 2003 omitted by paragraph 88 above.

Amounts to be carried forward 90 (1) Paragraph 68 (reinvestment: amounts to be carried forward) is amended as follows.

(2) In sub-paragraph (4)— (a) omit paragraph (a) and the “or” after it, and (b) in paragraphs (b) and (c) omit “during that period”.

(3) Omit sub-paragraph (6).

(4) The amendments made by this paragraph have effect in relation to amounts held by trustees on or after 6 April 2013 (including amounts originally retained before that date in relation to which an event falling within paragraph 68(4)(a) to (c) of Schedule 2 to ITEPA 2003 did not occur before that date).

(5) A SIP approved before 6 April 2013 has effect accordingly with the omission of any provision falling within a provision of Schedule 2 to ITEPA 2003 omitted by this paragraph.

PART 7

SHARE INCENTIVE PLANS: EMPLOYEE SHARE OWNERSHIP TRUSTS 91 Part 9 of Schedule 2 to ITEPA 2003 (trustees) is amended as follows. 92 In paragraph 70 (introduction) in sub-paragraph (2)—

(a) after the entry for paragraph 77 insert “ and ”, and (b) omit the entry for paragraph 78.

93 (1) Omit paragraph 78 (acquisition of shares from employee share ownership trusts).

(2) A trust instrument made before the day on which this Act is passed has effect with the omission of any provision falling within a provision of Schedule 2 to ITEPA 2003 omitted by this paragraph.

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PART 8

ENTERPRISE MANAGEMENT INCENTIVES: CONSEQUENCES OF DISQUALIFYING EVENTS 94 (1) In section 532 of ITEPA 2003 (modified tax consequences following disqualifying

events) in subsection (1)(b) for “40” substitute “ 90 ”.

(2) The amendment made by this paragraph has effect in relation to disqualifying events occurring on or after the day on which this Act is passed.

SCHEDULE 3 Section 16

LIMIT ON INCOME TAX RELIEFS

The limit 1 In Chapter 3 of Part 2 of ITA 2007 (calculation of income tax liability) after

section 24 insert—

“24A Limit on Step 2 deductions

(1) If the taxpayer is an individual, there is a limit on certain deductions which may be made for the tax year at Step 2.

(2) The limit is determined as follows.

(3) Amount A must not exceed amount B.

(4) Amount A is— (a) the deductions for the tax year at Step 2 for the reliefs listed in

subsection (6) taken together, less (b) so much of those deductions as fall within subsection (7).

(5) Amount B is— (a) £50,000, or (b) if more, 25% of the taxpayer's adjusted total income for the tax year

(see subsection (8)).

(6) The reliefs are— (a) relief under section 64 (trade loss relief against general income); (b) relief under section 72 (early trade losses relief); (c) relief under section 96 (post-cessation trade relief); (d) relief under section 120 (property loss relief against general

income); (e) relief under section 125 (post-cessation property relief); (f) relief under section 128 (employment loss relief against general

income); (g) relief under Chapter 6 of Part 4 (share loss relief); (h) relief under Chapter 1 of Part 8 (interest payments); (i) relief under section 555 of ITEPA 2003 (deduction for liabilities

relating to former employment);

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(j) relief under section 446 of ITTOIA 2005 (strips of government securities: relief for losses);

(k) relief under section 454(4) of ITTOIA 2005 (listed securities held since 26 March 2003: relief for losses: persons other than trustees).

(7) The deductions falling within this subsection are— (a) deductions for amounts of relief so far as attributable to allowances

under Part 3A of CAA 2001 (business premises renovation allowances);

(b) deductions for amounts of relief under a provision mentioned in subsection (6)(a) to (e) so far as made from profits of the trade or business to which the relief in question relates;

(c) deductions for amounts of relief under the provision mentioned in subsection (6)(a) or (b) so far as attributable to a deduction allowed under section 205 or 220 of ITTOIA 2005 (deduction for overlap profit in final tax year or on change of accounting date);

(d) deductions for amounts of relief under the provision mentioned in subsection (6)(g)—

(i) where the shares in question fall within section 131(2)(a) (qualifying shares to which EIS relief is attributable), or

(ii) where SEIS relief is attributable to the shares in question as determined in accordance with Part 5A (seed enterprise investment scheme).

(8) The taxpayer's “adjusted total income” for the tax year is calculated as follows.

Step 1 Take the amount of the taxpayer's total income for the tax year. Step 2 Add back the amounts of any deductions allowed under Part 12 of ITEPA 2003 (payroll giving) in calculating the taxpayer's income which is charged to tax for the tax year. Step 3 If the taxpayer is given relief in accordance with section 192 of FA 2004 (pension schemes: relief at source) in respect of any contribution paid in the tax year under a pension scheme, deduct the gross amount of the contribution. The “gross” amount of a contribution is the amount of the contribution before deduction of tax under section 192(1) of FA 2004. Step 4 If the taxpayer is entitled to a deduction for relief under section 193(4) or 194(1) of FA 2004 (pension schemes: excess relief under net payment arrangements or relief on making a claim) for the tax year, deduct the amount of the excess or contribution (as the case may be). The result is the taxpayer's adjusted total income for the tax year.”

Consequential amendments 2 (1) ITA 2007 is amended as follows.

(2) In section 23 (calculation of income tax liability) at step 2 for “section 25” substitute “ sections 24A and 25 ”.

(3) In the following provisions (which explain how certain reliefs work) for “section 25(4) and (5)” substitute “ sections 24A and 25(4) and (5) ”

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(a) section 65(1), (b) section 73, (c) section 121(1), (d) section 129(1), and (e) section 133(1).

(4) In section 148 (share loss relief: disposal of shares forming part of mixed holding) in subsection (3)(b) before sub-paragraph (i) insert—

“(ai) shares to which SEIS relief is attributable (as determined in accordance with Part 5A),”.

Commencement and transitional provision 3 The amendments made by paragraphs 1 and 2 above have effect for the tax year

2013-14 and subsequent tax years. 4 (1) Sub-paragraph (2) applies to a claim which relates to the tax year 2013-14 or a

subsequent tax year by virtue of paragraph 2 of Schedule 1B to TMA 1970 where the earlier year is a tax year before the tax year 2013-14.

(2) The amount of the claim is to be determined as if the amendments made by paragraphs 1 and 2 above also have effect for tax years before the tax year 2013-14.

(3) For this purpose, section 24A(6) of ITA 2007 (as inserted by paragraph 1 above) is treated as having effect for tax years before the tax year 2013-14 as if—

(a) in paragraphs (a), (b), (f) and (g) the references to relief were limited to relief in respect of a loss made in the tax year 2013-14 or a subsequent tax year, and

(b) all the other paragraphs were omitted. 5 In section 24A(6)(d) of ITA 2007 (as inserted by paragraph 1 above) the reference

to relief does not include relief in respect of a loss made in the tax year 2012-13.

SCHEDULE 4 Section 17

CASH BASIS FOR SMALL BUSINESSES

PART 1

MAIN PROVISIONS

Introductory 1 Part 2 of ITTOIA 2005 (trading income) is amended as follows.

Eligibility to calculate profits on cash basis 2 Chapter 3 (trade profits: basic rules) is amended as follows. 3 In section 25(3) (exception to requirement to use generally accepted accounting

practice), for “section 160 (barristers and advocates in early years of practice)” substitute “ section 25A (cash basis for small businesses) ”.

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4 After section 25 insert—

“25A Cash basis for small businesses

(1) A person who is or has been carrying on a trade may elect for the profits of the trade to be calculated on the cash basis (instead of in accordance with generally accepted accounting practice).

(2) References in this Part to calculating the profits of a trade on the cash basis are references to doing so in accordance with this section.

(3) Chapter 3A contains provision about— (a) when a person may make an election under this section, and (b) the effect of such an election.

(4) Where an election under this section has effect in relation to a trade, sections 27, 28 and 30 do not apply in relation to the calculation of the profits of the trade.”

5 After Chapter 3 insert—

“CHAPTER 3A

TRADE PROFITS: CASH BASIS

Eligibility

31A Conditions to be met for profits to be calculated on cash basis

(1) A person may make an election under section 25A for a tax year if conditions A to C are met.

(2) Condition A is that the aggregate of the cash basis receipts of each trade, profession or vocation carried on by the person during that tax year does not exceed any relevant maximum applicable for that tax year (see section 31B).

(3) Condition B is that, in a case where the person is either an individual who controls a firm or a firm controlled by an individual—

(a) the aggregate of the cash basis receipts of each trade, profession or vocation carried on by the individual or the firm during that tax year does not exceed any relevant maximum applicable for that tax year, and

(b) the firm or the individual (as the case may be) has also made an election under section 25A for that tax year.

(4) Condition C is that the person is not an excluded person in relation to the tax year (see section 31C).

(5) For the purposes of this section, the “cash basis receipts” of a trade, profession or vocation, in relation to a tax year, are any receipts that—

(a) are received during the basis period for the tax year, and (b) would be brought into account in calculating the profits of the trade,

profession or vocation for that tax year on the cash basis.

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31B Relevant maximum

(1) For the purposes of section 31A there is a “relevant maximum” applicable for a tax year in relation to a trade, profession or vocation carried on by a person if any of conditions A to C is met.

(2) Condition A is that an election under section 25A did not have effect in relation to the trade, profession or vocation for the previous tax year.

(3) Condition B is that the aggregate of the cash basis receipts of each trade, profession or vocation carried on by the person during the previous tax year is greater than an amount equal to twice the VAT threshold for that previous tax year.

(4) Condition C is that, in a case where the person is either an individual who controls a firm or a firm controlled by an individual, the aggregate of the cash basis receipts of each trade, profession or vocation carried on by the individual or the firm during the previous tax year is greater than an amount equal to twice the VAT threshold for that previous tax year.

(5) If there is a relevant maximum applicable for a tax year, the amount of the relevant maximum is—

(a) the VAT threshold, or (b) in the case where the person is an individual who is a universal credit

claimant in the tax year, an amount equal to twice the VAT threshold.

(6) For the purposes of this section, where the basis period for a tax year is less than 12 months, the VAT threshold is proportionately reduced.

(7) In this section— “universal credit claimant”, in relation to a tax year, means

a person who is entitled to universal credit under the relevant legislation for an assessment period (within the meaning of the relevant legislation) that falls within the basis period for the tax year,

“the relevant legislation” means— (a) Part 1 of the Welfare Reform Act 2012, or (b) any provision made for Northern Ireland which corresponds to

that Part of that Act, and “the VAT threshold”, in relation to a tax year, means the amount

specified at the end of that tax year in paragraph 1(1)(a) of Schedule 1 to VATA 1994.

(8) The Treasury may by order amend this section.

(9) A statutory instrument containing an order under subsection (8) that restricts the circumstances in which an election may be made under section 25A may not be made unless a draft of the instrument containing the order has been laid before, and approved by a resolution of, the House of Commons.

31C Excluded persons

(1) A person is an excluded person in relation to a tax year if the person meets any of conditions A to H.

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(2) Condition A is that— (a) the person is a firm, and (b) one or more of the persons who have been partners in the firm at any

time during the basis period for the tax year was not an individual at that time.

(3) Condition B is that the person was a limited liability partnership at any time during the basis period for the tax year.

(4) Condition C is that the person is an individual who has been a Lloyd's underwriter at any time during the basis period for the tax year.

(5) Condition D is that the person has made an election under Chapter 8 (trade profits: herd basis rules) that has effect in relation to the tax year.

(6) Condition E is that the person has made a claim under section 221 (claim for averaging of fluctuating profits) in relation to the tax year.

(7) Condition F is that, at any time within the period of 7 years ending immediately before the basis period for the tax year, the person obtained an allowance under Part 3A of CAA 2001 (business premises renovation allowances).

(8) Condition G is that the person has carried on a mineral extraction trade at any time during the basis period for the tax year.

In this subsection “mineral extraction trade” has the same meaning as in Part 5 of CAA 2001 (see section 394(2) of that Act).

(9) Condition H is that— (a) at any time before the beginning of the basis period for the tax

year the person obtained an allowance under Part 6 of CAA 2001 (research and development allowances) in respect of qualifying expenditure incurred by the person, and

(b) the person owns an asset representing the expenditure. In this subsection “qualifying expenditure” has the same meaning as in Part 6 of CAA 2001.

(10) The Treasury may by order amend this section.

(11) A statutory instrument containing an order under subsection (10) that restricts the circumstances in which an election may be made under section 25A may not be made unless a draft of the instrument containing the order has been laid before, and approved by a resolution of, the House of Commons.

Elections under section 25A

31D Effect of election under section 25A

(1) An election made by a person under section 25A has effect— (a) for the tax year for which it is made, and (b) for every subsequent tax year.

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This is subject to subsections (2) and (3).

(2) An election made by a person under section 25A ceases to have effect if any of conditions A to C in section 31A is not met for a subsequent tax year.

(3) An election made by a person under section 25A ceases to have effect if— (a) there is a change of circumstances relating to any trade, profession or

vocation carried on by the person which makes it more appropriate for its profits for a subsequent tax year to be calculated in accordance with generally accepted accounting practice, and

(b) the person elects to calculate those profits in that way.

(4) Neither subsection (2) nor subsection (3) prevents the person making an election under section 25A for any subsequent tax year.

(5) An election that— (a) is made by a person under section 25A, and (b) has effect for a tax year,

has effect in relation to every trade, profession or vocation carried on by the person during the tax year.

(6) For provision prohibiting a person who has made an election under section 25A from claiming any capital allowances (other than in respect of expenditure incurred on the provision of a car), see section 1(4) of CAA 2001.

Calculation of profits on cash basis

31E Calculation of profits on cash basis

(1) This section applies to professions and vocations as it applies to trades.

(2) To determine the profits of a trade for a tax year on the cash basis— Step 1 Calculate the total amount of receipts of the trade received during the basis period for the tax year. Step 2 Deduct from that amount the total amount of expenses of the trade paid during the basis period for the tax year.

(3) Subsection (2) is subject to any adjustment required or authorised by law in calculating profits for income tax purposes.

Overview of rest of Part 2

31F Overview of rest of Part 2 as it applies to cash basis

(1) For provision about the application of Chapters 4 to 6 (rules about deductions and receipts) in relation to the cash basis, see sections 32A, 56A and 95A.

(2) For provision about the application of Chapter 11 (trade profits: other specific trades) in relation to the cash basis, see section 148K.

(3) The following Chapters apply only where profits are calculated on the cash basis—

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Chapter 6A (trade profits: amounts not reflecting commercial transactions), Chapter 17A (cash basis: adjustments for capital allowances).

(4) The following Chapters do not apply in relation to the cash basis— Chapter 8 (trade profits: herd basis rules), Chapter 9 (trade profits: sound recordings), Chapter 10 (trade profits: certain telecommunication rights), Chapter 10A (leases of plant or machinery: special rules for long funding leases), Chapter 11A (trade profits: changes in trading stock), Chapter 13 (deductions from profits: unremittable amounts), Chapter 14 (disposal and acquisition of know-how), Chapter 16 (averaging profits of farmers and creative artists), Chapter 16ZA (compensation for compulsory slaughter of animal), Chapter 16A (oil activities).”

Rules restricting deductions 6 Chapter 4 (trade profits: rules restricting deductions) is amended as follows. 7 After section 32 insert—

“Cash basis accounting

32A Application of Chapter to the cash basis

(1) The following sections do not apply in calculating the profits of a trade on the cash basis—

section 33 (capital expenditure), section 35 (bad and doubtful debts), sections 36 and 37 (unpaid remuneration), section 43 (employee benefit contributions: profits calculated before end of 9 month period), sections 48 to 50B (car hire).

(2) For rules restricting deductions that apply only where profits are calculated on the cash basis, see the following—

section 33A (cash basis: capital expenditure), section 51A (cash basis: interest payments on loans).”

8 After section 33 insert—

“33A Cash basis: capital expenditure

(1) In calculating the profits of a trade on the cash basis, no deduction is allowed for items of a capital nature, other than expenditure that—

(a) if it were not allowable as a deduction in calculating the profits of the trade, would be qualifying expenditure within the meaning of Part 2 of CAA 2001 (plant and machinery allowances), and

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(b) is not expenditure incurred on the provision of a car.

(2) In this section “car” has the same meaning as in Part 2 of CAA 2001 (see section 268A of that Act).”

9 In section 38 (restriction of deductions in respect of employee benefit contributions), after subsection (2) insert—

“(2A) In calculating for income tax purposes the profits of a trade on the cash basis, this section has effect as if—

(a) in subsection (1), the words “or to be made” were omitted, and (b) in subsection (2), the words “or within 9 months from the end of it”

were omitted (in both places).” 10 Before section 52 (and after the heading “Interest payments”) insert—

“51A Cash basis: interest payments on loans

(1) In calculating the profits of a trade on the cash basis, no deduction is allowed for the interest paid on a loan.

(2) This is subject to section 57B.” 11 (1) Section 55A (expenditure on integral features) is amended as follows.

(2) The existing provision becomes subsection (1).

(3) After that subsection insert—

“(2) But section 33A(3) of CAA 2001 does not apply in calculating the profits of a trade on the cash basis.”

Rules allowing deductions 12 Chapter 5 (trade profits: rules allowing deductions) is amended as follows. 13 After section 56 insert—

“Cash basis accounting

56A Application of Chapter to the cash basis

(1) The following sections do not apply in calculating the profits of a trade on the cash basis—

sections 60 to 67 (tenants under taxed leases), section 68 (replacement and alteration of trade tools).

(2) For rules allowing deductions that apply only where profits are calculated on the cash basis, see the following—

section 57B (cash basis: interest payments on loans).

(3) In calculating the profits of a trade on the cash basis, any reference in this Chapter to the incurring of expenses is to be read as a reference to the paying of expenses.”

14 After section 57A insert—

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“Cash basis: interest payments

57B Cash basis: interest payments on loans

(1) This section applies if a person carrying on a trade in a period pays any interest on a loan during the period and—

(a) a deduction for the interest would not otherwise be allowable in calculating the profits of the trade because of section 51A, or

(b) in the absence of section 51A, a deduction for the interest would not otherwise be allowable in calculating the profits of the trade because (and only because) it was not an expense incurred wholly and exclusively for the purposes of the trade.

(2) In calculating the profits of the trade on the cash basis, a deduction is allowed for the interest.

(3) But the maximum amount that may be deducted by virtue of this section or section 58 (incidental costs of obtaining finance) in calculating the profits of a trade for any period is £500.

(4) The Treasury may by order amend the figure for the time being specified in subsection (3).

(5) A statutory instrument containing an order under this section that amends that figure so as to substitute a lower figure may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”

15 In section 58 (incidental costs of obtaining finance), in subsection (5), after “with” insert “—

(a) section 57B(3) (which imposes a limit on the total amount that may be deducted by virtue of this section or section 57B), and

(b)”. 16 In section 72 (payroll deduction schemes: contributions to agents' expenses), after

subsection (2) insert—

“(2A) In calculating the profits of the employer's trade on the cash basis, subsection (2) has effect as if paragraph (b) were omitted.”

17 In section 94A (costs of setting up SAYE option scheme or CSOP scheme), after subsection (4) insert—

“(5) But subsection (4) does not apply in calculating the profits of a trade on the cash basis.”

Receipts 18 Chapter 6 (trade profits: receipts) is amended as follows. 19 After section 95 insert—

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“Cash basis accounting

95A Application of Chapter to the cash basis

For rules about receipts that apply only for the purpose of calculating profits on the cash basis, see the following—

section 96A (cash basis: capital receipts), section 97A (cash basis: value of trading stock on cessation of trade), section 97B (cash basis: value of work in progress on cessation of profession or vocation).”

20 After section 96 insert—

“96A Cash basis: capital receipts

(1) This section applies if— (a) the whole or part of any expenditure incurred in acquiring, creating

or improving an asset has been brought into account in calculating the profits of a trade of a person on the cash basis, or

(b) the whole or part of any such expenditure would have been so brought into account if an election under section 25A had had effect in relation to the trade at the time the expenditure was paid.

(2) The following amounts are to be brought into account as a receipt in calculating the profits of the trade on the cash basis—

(a) any proceeds arising from the disposal of the asset or any part of it; (b) any proceeds arising from the grant of any right in respect of, or any

interest in, the asset; (c) any amount of damages, proceeds of insurance or other

compensation received in respect of the asset.

(3) In a case where only part of the expenditure incurred in acquiring, creating or improving an asset has been, or would have been, brought into account as mentioned in subsection (1), the amount brought into account under subsection (2) is proportionately reduced.

(4) If— (a) at any time the person ceases to use the asset or any part of it for the

purposes of the trade, but (b) the person does not dispose of the asset (or that part) at that time,

the person is to be regarded for the purposes of this section as disposing of the asset (or that part) at that time for an amount equal to the market value amount.

(5) If at any time there is a material increase in the person's non-business use of the asset or any part of it, the person is to be regarded for the purposes of this section as disposing of the asset (or that part) at that time for an amount equal to the relevant proportion of the market value amount.

(6) For the purposes of subsection (5)—

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(a) there is an increase in a person's non-business use of an asset (or part of an asset) if—

(i) the proportion of the person's use of the asset (or that part) that is for the purposes of the trade decreases, and

(ii) the proportion of the person's use of the asset (or that part) that is for other purposes (the “non-business use”) increases;

(b) “the relevant proportion” is the difference between— (i) the proportion of the person's use of the asset (or part of the

asset) that is non-business use, and (ii) the proportion of the person's use of the asset (or that part)

that was non-business use before the increase mentioned in subsection (5).

(7) In this section “the market value amount” means the amount that would be regarded as normal and reasonable—

(a) in the market conditions then prevailing, and (b) between persons dealing with each other at arm's length in the open

market.” 21 After section 97 insert—

“Cash basis: value of stock and work in progress on cessation

97A Cash basis: value of trading stock on cessation of trade

(1) This section applies if— (a) a person permanently ceases to carry on a trade in a tax year, and (b) an election under section 25A (cash basis for small businesses) has

effect in relation to the trade for the tax year.

(2) The value of any trading stock belonging to the trade at the time of the cessation is brought into account as a receipt in calculating the profits of the trade for the tax year.

(3) The value is to be determined on a basis that is just and reasonable in all the circumstances.

(4) If there is a change in the persons carrying on a trade, subsection (2) does not apply in relation to the trade so long as a person carrying on the trade immediately before the change continues to carry it on after the change.

(5) In this section “trading stock” has the same meaning as in Chapter 12 (see section 174).

(6) This section does not apply to professions or vocations.

97B Cash basis: value of work in progress on cessation of profession or vocation

(1) This section applies if— (a) a person permanently ceases to carry on a profession or vocation in

a tax year, and

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(b) an election under section 25A (cash basis for small businesses) has effect in relation to the profession or vocation for the tax year.

(2) The value of any work in progress at the time of the cessation is brought into account as a receipt in calculating the profits of the profession or vocation for the tax year.

(3) The value is to be determined on a basis that is just and reasonable in all the circumstances.

(4) If there is a change in the persons carrying on a profession, subsection (2) does not apply in relation to the profession so long as a person carrying on the profession immediately before the change continues to carry it on after the change.

(5) In this section “work in progress” has the same meaning as in Chapter 12 (see section 183).”

22 (1) Section 105 (industrial development grants) is amended as follows.

(2) In subsection (2), at the end of paragraph (a) insert “ (but see subsection (2A)) ”.

(3) After that subsection insert—

“(2A) Subsection (2)(a) is to be disregarded in calculating the profits of a trade on the cash basis.”

Amounts not reflecting commercial transactions 23 After Chapter 6 insert—

“CHAPTER 6A

TRADE PROFITS: AMOUNTS NOT REFLECTING COMMERCIAL TRANSACTIONS

106A Professions and vocations

The provisions of this Chapter apply to professions and vocations as they apply to trades.

106B Application of Chapter

This Chapter applies in calculating the profits of a person's trade for a period on the cash basis.

106C Amounts not reflecting commercial transactions

(1) This section applies if— (a) the person does anything in relation to the trade (“the relevant act”), (b) there is a difference between—

(i) the amount (if any) that, as a result of the relevant act, would (apart from this section) be brought into account in calculating the profits of the trade for the period, and

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(ii) the amount (if any) that would have been so brought into account had the relevant act consisted of a transaction between the person and another person dealing with each other at arm's length in the open market (“the arm's length amount”), and

(c) the profits of the trade for the period are less than they would have been if the arm's length amount had been so brought into account.

(2) The amount to be brought into account in calculating the profits of the trade for the period is an amount that is just and reasonable in all the circumstances.

106D Capital receipts

Section 106C does not apply in relation to the relevant act if subsection (4) or (5) of section 96A (cash basis: capital receipts) applies in relation to that act.

106E Gifts to charities etc

Section 106C does not apply in relation to the relevant act if any of the provisions of Chapter 7 (trade profits: gifts to charities etc) applies in relation to that act.”

Herd basis rules 24 In Chapter 8 (trade profits: herd basis rules), after section 111 insert—

“111A Herd basis rules not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.”

Sound recordings 25 In Chapter 9 (trade profits: sound recordings), after section 130 insert—

“130A Chapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.”

Telecommunication rights 26 In Chapter 10 (trade profits: certain telecommunication rights), before section 145

insert—

“144A Chapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.”

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Long funding leases 27 In Chapter 10A (leases of plant or machinery: special rules for long funding leases),

before section 148A (and the italic heading preceding it) insert—

“Application of Chapter

148ZA Chapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.”

Specific trades 28 In Chapter 11 (trade profits: other specific trades), before section 149 (and the italic

heading preceding it) insert—

“Cash basis accounting

148K Application of Chapter to the cash basis

The following sections do not apply in calculating the profits of a trade, profession or vocation on the cash basis—

sections 149 to 154A (dealers in securities etc), section 157 (relief in respect of mineral royalties), section 158 (lease premiums etc: reduction of receipts), section 159 (ministers of religion), section 161 (mineral exploration and access), section 162 (payments by persons liable to pool betting duty), sections 163 and 164 (intermediaries treated as making employment payments), section 164A (managed service companies), sections 165 to 168 (waste disposal), sections 169 to 172ZE (cemeteries and crematoria).”

Changes in trading stock 29 In Chapter 11A (trade profits: changes in trading stock), after section 172A insert—

“172AA Chapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.”

Unremittable amounts 30 In Chapter 13 (deductions from profits: unremittable amounts), after section 188

insert—

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“188A Chapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.”

Disposal and acquisition of know-how 31 In Chapter 14 (disposal and acquisition of know-how), before section 192 insert—

“191A Chapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.”

Averaging profits of farmers and creative artists 32 In Chapter 16 (averaging profits of farmers and creative artists), after section 221

insert—

“221A Claim not available where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.”

Compensation for compulsory slaughter of animal 33 In Chapter 16ZA (compensation for compulsory slaughter of animal), after

section 225ZA insert—

“225ZAA Chapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.”

Oil activities 34 In Chapter 16A (oil activities), before section 225A (and the italic heading

preceding it) insert—

“Application of Chapter

225ZH Chapter not to apply where cash basis used

Nothing in this Chapter applies in calculating the profits of a trade on the cash basis.”

Adjustment income 35 Chapter 17 (adjustment income) is amended as follows. 36 After section 227 insert—

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“227A Application of Chapter where cash basis used

(1) This Chapter applies if— (a) an election under section 25A (cash basis for small businesses) has

effect in relation to a trade for a tax year but no such election has effect in relation to the trade for the following tax year, or

(b) no such election has effect in relation to a trade for a tax year but such an election has effect in relation to the trade for the following tax year.

(2) But this Chapter does not apply to income which is charged in accordance with section 832.”

37 After section 239 insert—

“Spreading of adjustment income on leaving cash basis

239A Spreading on leaving cash basis

(1) This section applies if— (a) an election under section 25A (cash basis for small businesses) has

effect in relation to a trade for a tax year, and (b) no such election has effect in relation to the trade for the following

tax year.

(2) Any adjustment income is spread over 6 tax years as follows.

(3) In each of the 6 tax years beginning with that in which the whole amount of the adjustment income would otherwise be chargeable to tax, an amount equal to one-sixth of the amount of the adjustment income is treated as arising and is charged to tax.

(4) This section is subject to any election under section 239B (election to accelerate charge).

239B Election to accelerate charge under section 239A

(1) A person who under section 239A is liable to tax for a tax year on an amount of adjustment income may elect for an additional amount to be treated as arising in the tax year.

(2) The election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year.

(3) The election must specify the amount to be treated as income arising in the tax year (which may be any amount of the adjustment income not previously charged to tax).

(4) If an election is made, section 239A applies in relation to any subsequent tax year as if the amount of adjustment income (as reduced by any previous application of this section) were reduced by the amount given by the following formula—

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where—

A is the additional amount treated as arising in the tax year for which the election is made, and

T is the number of tax years remaining after that tax year in the period of 6 tax years referred to in section 239A.”

Adjustments for capital allowances 38 After Chapter 17 insert—

“CHAPTER 17A

CASH BASIS: ADJUSTMENTS FOR CAPITAL ALLOWANCES

Introduction

240A Professions and vocations

The provisions of this Chapter apply to professions and vocations as they apply to trades.

Adjustments on entering cash basis

240B “Entering the cash basis”

For the purposes of this Chapter a person carrying on a trade enters the cash basis for a tax year if—

(a) an election under section 25A has effect in relation to the trade for the tax year, and

(b) immediately before the beginning of the basis period for the tax year, such an election does not have effect in relation to the trade.

240C Unrelieved qualifying expenditure

(1) This section applies if— (a) a person carrying on a trade enters the cash basis for a tax year (“the

current tax year”), and (b) at the end of the basis period for the previous tax year, the person

has unrelieved qualifying expenditure to carry forward from the chargeable period ending with that basis period.

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(2) But this section does not apply if section 240D (assets not fully paid for) applies.

(3) In calculating the profits of the trade for the current tax year, a deduction is allowed for the relevant portion of the expenditure.

(4) The “relevant portion” of the expenditure means the amount of the expenditure for which a deduction would be allowed in calculating the profits of the trade on the cash basis for a period if the expenditure was paid during that period.

(5) The relevant portion of the expenditure is to be determined on such basis as is just and reasonable in all the circumstances.

(6) Section 59(1) and (2) of CAA 2001 (unrelieved qualifying expenditure) has effect for the purposes of this section.

240D Assets not fully paid for

(1) This section applies if— (a) a person carrying on a trade enters the cash basis for a tax year, (b) at any time before the beginning of the basis period for that tax year

the person has obtained capital allowances in respect of expenditure on the provision of plant or machinery (“the relevant expenditure”), and

(2) If the amount of the relevant expenditure that the person has actually paid exceeds the amount of capital allowances given in respect of the relevant expenditure, the difference is to be deducted in calculating the profits of the trade for the tax year.

(3) If the amount of the relevant expenditure that the person has actually paid is less than the amount of capital allowances given in respect of the relevant expenditure, the difference is to be treated as a receipt in calculating the profits of the trade for the tax year.

(4) The amount of any capital allowance obtained in respect of expenditure on the provision of any plant or machinery is to be determined on such basis as is just and reasonable in all the circumstances.

(5) If the amount of capital allowances given in respect of the relevant expenditure has been reduced under section 205 or 207 of CAA 2001 (reduction where asset provided or used only partly for qualifying activity), the amount of the relevant expenditure that the person has actually paid is to be proportionately reduced for the purposes of this section.

(6) This section does not apply where the relevant expenditure was incurred on the provision of a car.

In this subsection “car” has the same meaning as in Part 2 of CAA 2001 (see section 268A of that Act).

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Successions where predecessor and successor are connected persons

240E Effect of election where predecessor and successor are connected persons

(1) This section applies if— (a) a person carrying on a trade enters the cash basis for a tax year, (b) the person is the successor for the purposes of section 266 of CAA

2001, and (c) as a result of an election under section 267 of that Act, relevant plant

or machinery is treated as sold by the predecessor to the successor at any time during the basis period for the tax year.

(2) The provisions of this Chapter have effect in relation to the successor as if everything done to or by the predecessor had been done to or by the successor.

(3) Any expenditure actually incurred by the successor on acquiring the relevant plant or machinery is to be ignored for the purposes of calculating the profits of the trade for the tax year.

(4) In this section “the predecessor” and “relevant plant or machinery” have the same meaning as in section 267 of CAA 2001.”

Post-cessation receipts 39 (1) Chapter 18 (post-cessation receipts) is amended as follows.

(2) In section 246 (basic meaning of “post-cessation receipt”), after subsection (2) insert —

“(2A) If, immediately before a person permanently ceases to carry on a trade, an election under section 25A (cash basis for small businesses) has effect in relation to the trade, a sum is to be treated as a post-cessation receipt only if it would have been brought into account in calculating the profits of the trade on the cash basis had it been received at that time.”

(3) In section 254 (allowable deductions), after subsection (2) insert—

“(2A) If, immediately before the person permanently ceases to carry on the trade, an election under section 25A (cash basis for small businesses) has effect in relation to the trade, assume for the purposes of subsection (2) that such an election has effect in relation to the trade.”

Rent-a-room relief 40 In Chapter 1 of Part 7 of ITTOIA 2005 (rent-a-room relief), in section 786 (meaning

of “rent-a-room receipts”), after subsection (4) insert—

“(5) Subsections (6) and (7) apply if— (a) the receipts would otherwise be brought into account in calculating

the profits of a trade, and

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(b) an election under section 25A (cash basis for small businesses) has effect in relation to the trade.

(6) Any amounts brought into account under section 96A (capital receipts) as a receipt in calculating the profits of the trade are to be treated as receipts within paragraph (a) of subsection (1) above.

(7) The reference in subsection (1)(b) to receipts that accrue to an individual during the income period for those receipts is to be read as a reference to receipts that are received by the individual during that period.”

Qualifying care relief 41 Chapter 2 of Part 7 of ITTOIA 2005 (qualifying care relief) is amended as follows. 42 In section 805 (meaning of “qualifying care receipts”), after subsection (3) insert—

“(4) Subsections (5) and (6) apply if— (a) the receipts would otherwise be brought into account in calculating

the profits of a trade, and (b) an election under section 25A (cash basis for small businesses) has

effect in relation to the trade.

(5) Any amounts brought into account under section 96A (capital receipts) as a receipt in calculating the profits of the trade are to be treated as receipts within paragraph (a) of subsection (1) above.

(6) The reference in subsection (1)(b) to receipts that accrue to an individual during the income period for those receipts is to be read as a reference to receipts that are received by the individual during that period.”

43 In section 820 (periods of account not ending on 5th April)— (a) the existing provision becomes subsection (1), and (b) after that subsection insert—

“(2) Where an election under section 25A (cash basis for small businesses) has effect in relation to the trade, any reference in this section or sections 821 to 823 to the period of account in which receipts accrue is to be read as a reference to the period of account in which receipts are received.”

PART 2

CONSEQUENTIAL AMENDMENTS

TMA 1970 44 In section 42 of TMA 1970 (procedure for making claims etc), in subsection (7)

(e), after “sections” insert “ 25A, ”.

TCGA 1992 45 After section 47 of TCGA 1992 insert—

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“Cash basis accounting

47A Exemption for disposals by persons using cash basis

(1) No chargeable gain shall accrue on the disposal of, or of an interest in, an asset if conditions A to D are met in relation to the asset.

(2) Condition A is that the asset is— (a) tangible movable property, and (b) a wasting asset.

(3) Condition B is that, at any time during the period of ownership of the person making the disposal, the asset has been used for the purposes of a trade, profession or vocation carried on by the person.

(4) Condition C is that an election under section 25A of ITTOIA 2005 (cash basis for small businesses) has effect in relation to the trade, profession or vocation at the time of the disposal.

(5) Condition D is that— (a) any expenditure attributable to the asset or interest under

paragraph (a) or (b) of section 38(1) has been brought into account in calculating the profits of the trade, profession or vocation on the cash basis, or

(b) any of that expenditure would have been so brought into account if an election under section 25A of ITTOIA 2005 had had effect in relation to the trade, profession or vocation at the time the expenditure was paid.

(6) Subsection (7) applies in the case of the disposal of, or of an interest in, an asset which, in the period of ownership of the person making the disposal—

(a) has been used partly for the purposes of the trade, profession or vocation and partly for other purposes, or

(b) has been used for the purposes of the trade, profession or vocation for part of that period.

(7) In such a case— (a) the consideration for the disposal, and any expenditure attributable

to the asset or interest by virtue of section 38(1)(a) and (b), shall be apportioned by reference to the extent to which that expenditure was, or (as the case may be) would have been, brought into account as mentioned in subsection (5) above,

(b) the computation of the gain shall be made separately in relation to the apportioned parts of the expenditure and consideration, and

(c) subsection (1) above shall apply to any gain accruing by reference to the computation in relation to the part of the consideration apportioned to use for the purposes of the trade, profession or vocation.

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47B Disposals made by persons after leaving cash basis

(1) This section applies where— (a) a person disposes of, or of an interest in, an asset that has been used

for the purposes of a trade, profession or vocation carried on by the person, and

(b) conditions A and B are met in relation to the trade, profession or vocation.

(2) Condition A is that— (a) any expenditure attributable to the asset or interest under

paragraph (a) or (b) of section 38(1) was incurred at a time when an election under section 25A of ITTOIA 2005 (cash basis for small businesses) had effect in relation to the trade, profession or vocation, and

(b) that expenditure (“the relevant expenditure”) has been brought into account in calculating the profits of the trade, profession or vocation on the cash basis.

(3) Condition B is that no such election has effect in relation to the trade, profession or vocation at the time of the disposal.

(4) Section 39 (exclusion of expenditure by reference to tax on income) does not apply in relation to the relevant expenditure.

(5) Section 41 (restriction of losses by reference to capital allowances and renewals allowances) has effect as if—

(a) the election mentioned in subsection (2)(a) above had not had effect at the time the relevant expenditure was incurred, and

(b) the reference in subsection (7) to qualifying expenditure included a reference to expenditure which, if that election had not had effect at that time, would have been qualifying expenditure.

(6) Section 45 (exemption for certain wasting assets) and section 47 (wasting assets qualifying for capital allowances) have effect as if the election mentioned in subsection (2)(a) above had not had effect at the time the relevant expenditure was incurred.

Accordingly, any reference in those sections to expenditure qualifying for capital allowances is to be read as a reference to expenditure that would, in the absence of the election, have qualified for such allowances.”

CAA 2001 46 In section 1 of CAA 2001 (capital allowances), after subsection (3) insert—

“(4) But a person is not entitled to any allowance or liable to any charge under this Act in calculating the profits of a trade, profession or vocation of the person in relation to which an election under section 25A of ITTOIA 2005 (cash basis for small businesses) has effect, other than an allowance in respect of expenditure incurred on the provision of a car (or a charge in connection with such an allowance).

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(5) In subsection (4) “car” has the same meaning as in Part 2 (see section 268A).” 47 In section 59 of CAA 2001 (unrelieved qualifying expenditure), after subsection (3)

insert—

“(4) If a person carrying on a trade, profession or vocation enters the cash basis for a tax year, no amount may be carried forward as unrelieved qualifying expenditure from the chargeable period ending with the basis period for the previous tax year.

(5) But subsection (4) does not apply to unrelieved qualifying expenditure incurred on the provision of a car.

(6) Where a person has unrelieved qualifying expenditure to carry forward from a chargeable period that is not expenditure allocated to a single asset pool, the amount of unrelieved qualifying expenditure incurred on the provision of a car is to be determined on such basis as is just and reasonable in all the circumstances.

(7) Section 240B of ITTOIA 2005 (meaning of “entering the cash basis”) applies for the purposes of this section as it applies for the purposes of Chapter 17A of Part 2 of that Act.”

48 In Chapter 5 of Part 2 of CAA 2001 (plant and machinery allowances and charges), after section 66 insert—

“Application of Chapter to person leaving cash basis

66A Persons leaving cash basis

(1) This section applies if— (a) a person carrying on a trade, profession or vocation leaves the cash

basis in a chargeable period, and (b) the person has at any time incurred expenditure which, if an

election under section 25A of ITTOIA 2005 (cash basis for small businesses) had not had effect at that time, would have been qualifying expenditure.

(2) In this section— (a) the “relieved portion” of the expenditure is the amount of that

expenditure for which— (i) a deduction was allowed in calculating the profits of the

trade, profession or vocation, or (ii) a deduction would have been so allowed if the expenditure

had been incurred wholly and exclusively for the purposes of the trade, profession or vocation;

(b) the “unrelieved portion” of the expenditure is any remaining amount of the expenditure.

(3) For the purposes of determining any entitlement of the person to an annual investment allowance or a first-year allowance, the person is to be treated as incurring the unrelieved portion of the expenditure in the chargeable period.

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(4) For the purposes of determining the person's available qualifying expenditure in a pool for the chargeable period (see section 58)—

(a) the whole of the expenditure must be allocated to the appropriate pool (or pools) in that chargeable period, and

(b) the available qualifying expenditure in a pool to which the expenditure (or some of it) is allocated is reduced by the relieved portion of that expenditure.

(5) For the purposes of determining any disposal receipts (see section 60), the expenditure incurred by the person is to be regarded as qualifying expenditure.

(6) For the purposes of this section a person carrying on a trade, profession or vocation leaves the cash basis in a chargeable period if—

(a) immediately before the beginning of the chargeable period an election under section 25A had effect in relation to the trade, profession or vocation, and

(b) such an election does not have effect in relation to the trade, profession or vocation for the chargeable period.”

ITTOIA 2005 49 In section 31 of ITTOIA 2005 (relationship between rules prohibiting and allowing

deductions), in subsection (2), omit the “or” at the end of paragraph (b) and after paragraph (c) insert “or

(d) Chapter 17A,”. 50 In section 56 of ITTOIA 2005 (rules allowing deductions: professions and

vocations), after “marks)” insert “ and section 97A (cash basis: value of trading stock on cessation of trade) ”.

51 Omit section 160 of ITTOIA 2005 (cash basis of calculation for barristers and advocates in early years of practice).

52 (1) Chapter 17 of Part 2 of ITTOIA 2005 (adjustment income) is amended as follows.

(2) In section 229(2)(a), for “sections 237 to 239” substitute “ sections 237 to 239B ”.

(3) Omit sections 238 and 239 (spreading of adjustment income: barristers and advocates).

53 In Part 2 of Schedule 4 to ITTOIA 2005 (index of defined expressions), at the appropriate place insert—

“the cash basis (in Part 2) section 25A”; “entering the cash basis (in Chapter 17A of Part 2)

section 240B”.

ITA 2007 54 (1) In Part 4 of ITA 2007 (loss relief), Chapter 2 (trade losses) is amended as follows.

(2) In section 64 (deduction of losses from general income), in subsection (8), after paragraph (ba) insert—

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“(bb) section 74E (restriction on the relief and early trade losses relief where cash basis applies),”.

(3) In section 72 (relief for individuals for losses in first 4 years of trade), in subsection (5), after paragraph (ba) insert—

“(bb) section 74E (restriction on the relief and trade loss relief where cash basis applies),”.

(4) After section 74D insert—

“Restriction on sideways relief and capital gains relief where cash basis applies

74E No relief where cash basis used to calculate losses

(1) This section applies if— (a) a person makes a loss in any trade in a tax year, and (b) an election under section 25A of ITTOIA 2005 (cash basis for small

businesses) has effect in relation to the trade for that tax year.

(2) No sideways relief or capital gains relief may be given to the person for the loss.

(3) For the purposes of this section— (a) capital gains relief is, in relation to a loss, the treatment of a loss as

an allowable loss by virtue of section 261B of TCGA 1992 (use of trading loss as a CGT loss), and

(b) capital gains relief is given for a loss when it is so treated.” 55 (1) Chapter 1 of Part 8 of ITA 2007 (relief for interest payments) is amended as follows.

(2) In section 383(5), after paragraph (a) insert— “(aa) section 384B (restriction on relief where cash basis applies),”.

(3) After section 384A insert—

“384B Restriction on relief where cash basis applies

(1) Relief is not to be given under this Chapter for a tax year for interest paid by a person on a relevant loan if the partnership to which the loan relates has made an election under section 25A of ITTOIA 2005 (cash basis for small businesses) for the tax year.

(2) A loan is a “relevant loan” if— (a) it is a loan to which section 388 applies (loan to buy plant or

machinery for partnership use), or (b) it is a loan to which section 398 applies (loan to invest in partnership)

and which is not used for purchasing a share in a partnership.”

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PART 3

COMMENCEMENT AND TRANSITIONAL PROVISION 56 Subject to paragraph 57, the amendments made by this Schedule have effect for the

tax year 2013-14 and subsequent tax years. 57 (1) In a case where—

(a) the profits of a barrister or advocate in independent practice for a period of account ending in the tax year 2012-13 have been calculated in accordance with section 160 of ITTOIA 2005 (barristers and advocates: alternative basis of calculation in early years of practice), and

(b) if that section had not been repealed by this Schedule, the profits of the barrister or advocate for any subsequent period of account could have been calculated in accordance with that section,

the profits of the barrister or advocate for that subsequent period of account may be calculated in accordance with that section.

(2) The repeal of sections 238 and 239 of ITTOIA 2005 (spreading of adjustment income: barristers and advocates) does not have effect in relation to any individual whose profits for a period of account ending in or before the tax year 2012-13 have been calculated in accordance with section 160 of ITTOIA 2005.

SCHEDULE 5 Section 18

DEDUCTIONS ALLOWABLE AT A FIXED RATE 1 Part 2 of ITTOIA 2005 (trading income) is amended as follows. 2 After Chapter 5 insert—

“CHAPTER 5A

TRADE PROFITS: DEDUCTIONS ALLOWABLE AT A FIXED RATE

Introduction

94B Professions and vocations

The provisions of this Chapter apply to professions and vocations as they apply to trades.

94C Provisions not applicable to certain firms

The provisions of this Chapter do not apply in calculating the profits of a trade carried on by a firm for a period if one or more of the persons who have been partners in the firm at any time during the period was not an individual at that time.

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Expenditure on vehicles

94D Expenditure on vehicles

(1) This section applies if, in calculating the profits of a trade of a person for a period—

(a) a deduction would otherwise be allowable for the period in respect of qualifying expenditure incurred in relation to a relevant vehicle (see subsection (2)), or

(b) a deduction would be so allowable in respect of such expenditure but for the fact it is capital expenditure.

(2) In this section “relevant vehicle” means a car, motor cycle or goods vehicle that—

(a) is used for the purposes of the trade, and (b) is not an excluded vehicle (see section 94E).

(3) The person may make a deduction under this section for the period in respect of the qualifying expenditure.

(4) If a deduction for a period is made under this section— (a) no other deduction is allowed (for that or any other period) in respect

of the qualifying expenditure, and (b) this section applies in relation to the relevant vehicle for every

subsequent period for which the vehicle is used for the purposes of the trade.

(5) The amount of the deduction is the appropriate mileage amount in relation to the relevant vehicle for the period (see section 94F).

(6) In this section “qualifying expenditure”, in relation to a vehicle, means any expenditure incurred in respect of the acquisition, ownership, hire, leasing or use of the vehicle, other than incidental expenses incurred in connection with a particular journey.

(7) For provision preventing capital allowances from being claimed in respect of qualifying expenditure incurred in relation to a relevant vehicle, see section 38ZA of CAA 2001.

94E Excluded vehicles

(1) A car, motor cycle or goods vehicle that is used for the purposes of a trade is an “excluded vehicle” for the purposes of section 94D if condition A or B is met in relation to the vehicle.

(2) Condition A is that the person who is or has been carrying on the trade has at any time claimed any capital allowances under Part 2 of CAA 2001 in respect of any expenditure incurred on the provision of the vehicle.

(3) Condition B is that— (a) the vehicle is a goods vehicle or a motor cycle, and

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(b) any of the expenditure incurred on acquiring the vehicle has been deducted in calculating the profits of the trade for a period on the cash basis (see section 25A).

94F The appropriate mileage amount

(1) In calculating the profits of a trade for a period, the appropriate mileage amount in relation to a relevant vehicle for the period is—

where—

M is the number of miles of business journeys made by a person (other than as a passenger) using that vehicle in the period, and

R is the rate applicable to that kind of vehicle.

(2) The rates applicable are as follows—

TABLE

Kind of vehicle Rate per mile 45p for the first 10,000 milesCar or goods vehicle 25p after that

Motor cycle 24p

(3) In a case where the total number of miles of relevant business journeys made in the period is greater than 10,000, the rate of 45p per mile is available only in relation to 10,000 of those miles.

(4) “Relevant business journey” means any business journey made in the period by a car or goods vehicle—

(a) that is used for the purposes of the trade, and (b) in relation to which section 94D applies for the period.

(5) In this section— “business journey”, in relation to a vehicle used for the purposes

of a trade, means any journey, or any identifiable part or proportion of a journey, that is made wholly and exclusively for the purposes of the trade, and

“relevant vehicle” has the same meaning as in section 94D.

(6) The Treasury may by regulations amend subsection (2) so as to alter the rates or rate bands.

Regulations under this subsection may also make consequential amendments to subsection (3).

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94G Definitions of types of vehicle

(1) This section applies for the purposes of sections 94D to 94F (and this section).

(2) “Car” means a mechanically propelled road vehicle which is not— (a) a goods vehicle, (b) a motor cycle, (c) an invalid carriage, or (d) a vehicle of a type not commonly used as a private vehicle and

unsuitable to be so used.

(3) “Goods vehicle” means a mechanically propelled road vehicle which— (a) is of a construction primarily suited for the conveyance of goods or

burden of any description, and (b) is not a motor cycle.

(4) “Motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988.

(5) For the purposes of this section “invalid carriage” has the meaning given by section 185(1) of the Road Traffic Act 1988.

Use of home for business purposes

94H Use of home for business purposes

(1) This section applies if, in calculating the profits of a trade of a person for a period, a deduction (“the standard deduction”) would otherwise be allowable for the period in respect of the use of the person's home for the purposes of the trade.

(2) The person may, instead of making the standard deduction, make a deduction for the period under this section.

(3) The amount of the deduction allowable for the period is the sum of the applicable amounts for each month, or part of a month, falling within the period.

(4) The applicable amount for a month, or part of a month, is given by the following Table—

TABLE

Number of hours worked Applicable amount 25 or more £10.00 51 or more £18.00 101 or more £26.00

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where the “number of hours worked” in a month (or part of a month) is the number of hours spent wholly and exclusively on work done by the person, or any employee of the person, in the person's home wholly and exclusively for the purposes of the trade.

(5) If the person has more than one home, this section has effect as if those homes were a single home.

(6) The Treasury may by regulations amend subsection (4) so as to alter the rates or rate bands.

Premises used both as home and business premises

94I Premises used both as a home and as business premises

(1) This section applies if— (a) a person carries on a trade at any premises, (b) the premises are used mainly for the purposes of carrying on the

trade, but are also used by the person as a home, (c) the person incurs expenses in relation to the premises, (d) the expenses are incurred mainly (but not wholly and exclusively)

for the purposes of the trade, and (e) in calculating the profits of the trade for a period, a deduction (“the

standard deduction”) would otherwise be allowable for the period in respect of a part or proportion of the expenses in accordance with section 34(2).

(2) The person may, instead of making the standard deduction, make a deduction for the period under this section.

(3) The amount of the deduction allowable for the period is the amount of the expenses less the non-business use amount.

(4) The non-business use amount is the sum of the applicable amounts for each month, or part of a month, falling within the period.

(5) The applicable amount for a month, or part of a month, is given by the following Table—

TABLE

Number of relevant occupants Applicable amount 1 £350 2 £500 3 or more £650

(6) For the purposes of subsection (5) “relevant occupant”, in relation to a month (or part of a month), means an individual who, at any time during that month (or that part of a month)—

(a) occupies the premises as a home, or

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(b) stays at the premises otherwise than in the course of the trade.

(7) The Treasury may by regulations amend subsection (5) so as to alter the rates or rate bands.”

3 In section 31 (relationship between rules prohibiting and allowing deductions), in subsection (2), after paragraph (a) insert—

“(aa) Chapter 5A,”. 4 In Chapter 18 (post-cessation receipts), in section 254 (allowable deductions), after

subsection (2A) (inserted by paragraph 39 of Schedule 4) insert—

“(2B) If— (a) the loss or expense is incurred, or the debit arises, in relation to a

vehicle, and (b) immediately before the person permanently ceases to carry on the

trade, section 94D (deduction allowable at fixed rate for expenditure on vehicles) applies in relation to the vehicle,

assume for the purposes of subsection (2) that that section applies in relation to the vehicle.”

5 (1) Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

(2) In Chapter 3 (qualifying expenditure), after section 38 insert—

“38ZA Vehicles for which deductions allowed at fixed rate under Part 2 of ITTOIA 2005

Expenditure is not qualifying expenditure if— (a) it is incurred in respect of a vehicle in a period, and (b) a deduction is made for the period in respect of the expenditure under

section 94D of ITTOIA 2005 (deduction allowable at fixed rate for expenditure on vehicles).”

(3) In Chapter 5 (allowances and charges), in section 59 (unrelieved qualifying expenditure), at the end insert—

“(8) Subsection (9) applies if— (a) a person carrying on a trade, profession or vocation incurs

expenditure in relation to a vehicle, (b) at the end of the basis period for a tax year, the person has unrelieved

qualifying expenditure incurred in relation to the vehicle to carry forward from the chargeable period ending with that basis period (“the relevant chargeable period”),

(c) in calculating the profits of a trade, profession or vocation of a person for the following tax year, a deduction is made under section 94D of ITTOIA 2005 in respect of expenditure incurred in relation to the vehicle, and

(d) the person does not enter the cash basis for that tax year.

(9) None of the unrelieved qualifying expenditure incurred in relation to the vehicle may be carried forward as unrelieved qualifying expenditure from the relevant chargeable period.

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(10) Where a person has unrelieved qualifying expenditure to carry forward from a chargeable period that is not expenditure allocated to a single asset pool, the amount of the unrelieved qualifying expenditure incurred in relation to the vehicle is to be determined on such basis as is just and reasonable in all the circumstances.”

6 The amendments made by this Schedule have effect for the tax year 2013-14 and subsequent tax years.

SCHEDULE 6 Section 19

EMPLOYMENT INCOME: DUTIES PERFORMED IN THE UK AND OVERSEAS

PART 1

APPORTIONMENT OF EARNINGS 1 Part 2 of ITEPA 2003 (employment income: charge to tax) is amended as follows. 2 In section 15 (earnings for year when employee UK resident), as amended by

Schedule 45 to this Act, in subsection (5)— (a) after paragraph (a) omit “and”, and (b) after paragraph (b) insert “, and

(c) section 41ZA (which is about determining the extent to which general earnings are in respect of United Kingdom duties).”

3 In Chapter 5 (taxable earnings: remittance basis rules and rules for non-UK resident employees), after section 41 insert—

“Apportionment of earnings

41ZA Basis of apportionment

The extent to which general earnings are in respect of duties performed in the United Kingdom is to be determined under this Chapter on a just and reasonable basis.”

PART 2

REMITTANCE BASIS OF TAXATION: SPECIAL MIXED FUND RULES 4 Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows. 5 In section 809Q (sections 809L and 809P: transfers from mixed funds), after

subsection (1) insert—

“(1A) But this section must be read subject to section 809RA.” 6 After section 809R insert—

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“809RA Special mixed fund rules for certain employment cases

(1) This section applies if— (a) an individual has general earnings from an employment for a tax

year, (b) those earnings include both general earnings within section 15(1) of

ITEPA 2003 (“section 15(1) earnings”) and general earnings within section 26(1) of that Act (“section 26(1) earnings”),

(c) at least some of the section 15(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 15(1) earnings, are paid into an account in that tax year at a time (a “relevant time”) when the account is a qualifying account of the individual, and

(d) at least some of the section 26(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 26(1) earnings, are also paid into the account in that tax year at a relevant time.

(2) If this section applies, the composition of each transfer made from the account in that tax year at a relevant time is to be determined as follows—

Step 1 Suppose that all the condition A transfers made from the account in the tax year at a relevant time had been a single transfer made from the account at the end of the tax year. Step 2 Suppose that all the other transfers made from the account in the tax year at a relevant time had been a single offshore transfer made at the end of the tax year immediately after the single transfer mentioned in step 1. Step 3 Applying those suppositions—

(a) find under section 809Q(3) the extent to which the single transfer mentioned in step 1 is of the individual's income or chargeable gains, and

(b) find under section 809R(4) the content of the single offshore transfer mentioned in step 2.

Step 4 Each transfer made from the account in the tax year at a relevant time is to be treated as containing the specified proportion of each kind of income or capital contained in the relevant deemed transfer.“The specified proportion” is the amount of the transfer divided by the amount of the relevant deemed transfer.“The relevant deemed transfer” is—

(a) if the transfer is a condition A transfer, the single transfer mentioned in step 1, and

(b) otherwise, the single offshore transfer mentioned in step 2.

(3) Subsection (2) applies in determining the composition of a transfer for the purposes of sections 809Q and 809R but it does not otherwise affect the date on which a transfer is considered to occur for the purposes of this Chapter.

(4) If the tax year is the tax year in which the account becomes a qualifying account, for the purpose of applying section 809Q(3) in relation to the single transfer mentioned in step 1 of subsection (2), treat the part of the tax year falling before the qualifying date for the account as a separate tax year.

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(5) If the account ceases to be a qualifying account of the individual during the tax year other than as a result of a breach of the deposit rule—

(a) subsection (2) has effect as if references to the end of the tax year were to the end of the day on which the account ceases to be a qualifying account, and

(b) for the purpose of applying section 809Q(3) in relation to the single transfer mentioned in step 1 of subsection (2), treat the part of the tax year falling after the day mentioned in paragraph (a) as a separate tax year.

(6) A transfer from the account is a “condition A transfer” if and to the extent that—

(a) condition A in section 809L is met, and (b) either—

(i) the property or consideration for the service is (wholly or in part), or derives (wholly or in part, and directly or indirectly) from, the transfer, or

(ii) the transfer, or anything deriving (wholly or in part, and directly or indirectly) from the transfer, is used as mentioned in section 809L(3)(c).

(7) A transfer from the account is an “other transfer” if and to the extent that it is not a condition A transfer.

(8) Treat a transfer as an “other transfer” if and to the extent that, at the end of the tax year—

(a) it is not a condition A transfer, and (b) on the basis of the best estimate that can reasonably be made at that

time, it will not become a condition A transfer.

(9) If the account ceases to be a qualifying account of the individual during the tax year other than as a result of a breach of the deposit rule, subsection (8) has effect as if the reference to the end of the tax year were to the end of the day on which the account ceases to be a qualifying account.

(10) “Qualifying account” and “the qualifying date” for an account are defined in section 809RB.

(11) For the purposes of this section and sections 809RB to 809RD— (a) “employment” is to be read in accordance with section 4(1) of

ITEPA 2003, and includes an office (as read in accordance with section 5(3) of that Act),

(b) whether general earnings are “for” a tax year is to be determined as for the purposes of the employment income Parts of ITEPA 2003 (see section 3(2) of that Act),

(d) references to a breach of the deposit rule are to be read in accordance with section 809RC.

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809RB Qualifying accounts

(1) An individual may by notice to the Commissioners nominate an account to be a qualifying account of the individual for the purposes of section 809RA.

(2) The notice must specify the qualifying date for the account.

(3) “The qualifying date” for the account is the first date on which there is paid into the account sums falling within subsection (4) which (in total) are more than £10.

(4) A sum falls within this subsection if it is, or derives wholly (whether directly or indirectly) from, general earnings of the individual from an employment for a tax year which is a relevant tax year in relation to the employment.

(5) A tax year is a “relevant” tax year in relation to an employment if the general earnings which the individual has for the tax year from the employment include both general earnings within section 15(1) of ITEPA 2003 and general earnings within section 26(1) of that Act.

(6) The individual may withdraw the nomination by giving a further notice to the Commissioners, specifying the date with effect from which the nomination is withdrawn.

(7) A notice under subsection (1) or (6) must be in writing and include such information as the Commissioners may reasonably require.

(8) A notice under subsection (1) or (6) must be given no later than— (a) 31 January in the tax year following the tax year in which falls, as

the case may be— (i) the qualifying date for the account, or

(ii) the date with effect from which the nomination is withdrawn, or

(b) such later date as the Commissioners may allow.

(9) If an individual nominates an account under this section, the account is a “qualifying account” of the individual throughout the period—

(a) beginning with the qualifying date, and (b) ending with the date before the earliest of the following dates—

(i) the date on which the account is closed or ceases to be an ordinary bank account held by and for the benefit of the individual (alone or jointly with others);

(ii) the date with effect from which the nomination is withdrawn under this section;

(iii) the qualifying date for another qualifying account of the individual;

(iv) 6 April in a tax year in which there is a breach of the deposit rule which is not remedied or cannot be remedied;

(v) 6 April in a tax year for which the individual has no general earnings within section 26(1) of ITEPA 2003.

(10) The account is not to be a qualifying account at all if—

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(a) at any time on the qualifying date, the account is not an ordinary bank account held by and for the benefit of the individual (alone or jointly with others), or

(b) immediately before the qualifying date, the account has a credit balance of more than £10.

(11) The account is not to be a qualifying account at all if the qualifying date falls in a tax year—

(a) for which the individual has no general earnings within section 26(1) of ITEPA 2003, or

(b) in which there is a breach of the deposit rule which is not remedied or cannot be remedied.

(12) Subsection (9)(b)(iv) or (11)(b) (as relevant) is to be ignored if the breach occurs on or after a date falling within subsection (9)(b)(i) to (iii).

(13) If, apart from this subsection, an individual might have nominated two or more accounts for which the qualifying date would be the same, the individual may nominate only one of those accounts.

(14) If, apart from this subsection, an account would be a qualifying account of two or more individuals at any time, it is not to be a qualifying account of either or any of them at that time or any other time.

(15) For the purposes of this section an account is an “ordinary bank account” if it is a cash account in a bank (whether a current or savings account) where sums standing to the credit of the account from time to time represent a debt owed by the bank to the account-holder.

809RC Breaches of the deposit rule

(1) There is a breach of the deposit rule if a prohibited sum is paid into the account on or after the qualifying date.

(2) A breach of the deposit rule is remedied if, within 30 days beginning with the day on which the individual became or ought reasonably to have become aware of the payment of the prohibited sum, the required amount is transferred out of the account by way of a single one-off transfer.

(3) “The required amount” is an amount equal to— (a) the prohibited sum, plus (b) all the other prohibited sums (if any) that have been paid into the

account since that sum was paid in.

(4) If there are 3 breaches of the deposit rule in any 12 month period, subsection (2) does not apply to the third breach and, accordingly, the third breach cannot be remedied.

(5) The payment of a prohibited sum (“the later prohibited sum”) into the account does not result in a breach of the deposit rule if—

(a) a breach resulting from an earlier payment of a prohibited sum into the account is remedied, and

(b) the later prohibited sum is represented by the required amount in relation to that breach.

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(6) A “prohibited sum” is anything other than a sum that is, or derives wholly (whether directly or indirectly) from, any of the following kinds of income or capital—

(a) general earnings of the individual from an employment for a tax year which is a relevant tax year in relation to the employment,

(b) general earnings of the individual from an employment which consist of money and are paid in a tax year which is a relevant tax year in relation to the employment,

(c) an amount of specific employment income which, by virtue of Part 6, 7 or 7A of ITEPA 2003 or any other enactment, counts as employment income of the individual in respect of an employment for a tax year which is a relevant tax year in relation to the employment,

(d) interest on the account, or (e) consideration for the disposal of employment-related securities

or employment-related securities options in the circumstances described in subsection (7).

(7) The circumstances are— (a) the securities or options were acquired pursuant to a right or

opportunity available by reason of an employment of the individual, (b) the disposal is or occurs in conjunction with, or as soon as reasonably

practicable after, a relevant event involving those securities or options, and

(8) For the purposes of subsection (7) each of the following is a “relevant event”—

(a) the acquisition mentioned in subsection (7)(a), and (b) any event on the occurrence of which an amount (if positive) counts

as employment income by virtue of Part 7 of ITEPA 2003 or would do so but for—

(i) section 421E or 474 of that Act (exclusions: residence etc), or

(ii) an election under section 430 or 431 of that Act.

(9) For the purposes of this section a tax year is a “relevant” tax year in relation to an employment if—

(a) the individual has general earnings from the employment for the tax year,

(b) those earnings include both general earnings within section 15(1) of ITEPA 2003 (“section 15(1) earnings”) and general earnings within section 26(1) of that Act (“section 26(1) earnings”),

(c) at least some of the section 15(1) earnings, or sums deriving (wholly or in part, and directly or indirectly) from at least some of the section 15(1) earnings, are paid into the account in the tax year, and

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(10) For the purposes of this section— (a) “employment-related securities” has the meaning given in

section 421B(8) of ITEPA 2003, and (b) “employment-related securities options” has the meaning given in

section 471(5) of that Act.

809RD Effect where 30-day deadline is met

(1) This section applies if the required amount in relation to a breach of the deposit rule was transferred out of the account in accordance with section 809RC(2).

(2) Sections 809Q and 809R have effect as if— (a) the intervening transactions had never taken place, and (b) each prohibited sum represented by the required amount had instead

been transferred directly (at the time that sum was paid into the qualifying account) into the account or other property into which the required amount was transferred by virtue of the single one-off transfer.

(3) Each of the following is an “intervening transaction”— (a) each payment into the qualifying account of a prohibited sum

represented by the required amount, and (b) the single one-off transfer out of the qualifying account.

(4) If it is supposed under step 1 or 2 of section 809RA(2) that a single transfer had been made in the intervening period, re-apply section 809Q or 809R in relation to that transfer taking account of subsection (2).

(5) “The intervening period” is the period— (a) beginning with the day on which the breach occurred, and (b) ending with the day on which the single one-off transfer was made

in accordance with section 809RC(2).

(6) If more than one transfer of a sum equal to the required amount was transferred out of the qualifying account within the 30-day grace period, the first of those transfers is assumed to be the single one-off transfer.

(7) “The 30-day grace period” is the period of 30 days mentioned in section 809RC(2).”

PART 3

COMMENCEMENT 7 The amendments made by Part 1 of this Schedule have effect in relation to earnings

for the tax year 2013-14 and subsequent tax years. 8 The amendments made by Part 2 of this Schedule have effect in relation to transfers

from a mixed fund that are made in the tax year 2013-14 or any subsequent tax year.

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SCHEDULE 7 Section 20

REMITTANCE BASIS: EXEMPT PROPERTY 1 Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows. 2 In section 809X(3) (exempt property: public access rule), for “sections 809Z and

809Z1)” substitute “ section 809Z) ”. 3 (1) Section 809Y (property that ceases to be exempt property treated as remitted) is

amended as follows.

(2) In subsection (2), for “either” substitute “ any ”.

(3) After subsection (4) insert—

“(4A) Where exempt property has been lost, stolen or destroyed, the first and second cases do not apply in relation to the property during any period—

(a) beginning with the time at which it was lost, stolen or destroyed, and (b) (if lost or stolen) ending with the time at which it is recovered.

(4B) The third case is where a compensation payment is released in respect of exempt property that has been lost, stolen or destroyed.”

(4) In subsection (6), after “exempt property” insert “ by virtue of the first or second case ”.

4 After section 809YE insert—

“809YF Exception to section 809Y: compensation taken offshore or invested

(1) Section 809Y(1) does not apply to property if— (a) it ceases to be exempt property because a compensation payment in

respect of it is released, and (b) conditions A and B are met.

(2) Condition A is that the whole of the compensation payment is taken offshore or used by a relevant person to make a qualifying investment within the period of 45 days beginning with the day on which the payment is released.

(3) Condition B is that, if Condition A is satisfied wholly or in part by using the compensation payment to make a qualifying investment, the remittance basis user makes a claim for relief under subsection (4) on or before the first anniversary of the 31 January following the tax year in which the payment is released.

(4) If section 809Y(1) does not apply to property by virtue of subsection (1), the income and gains treated under section 809X as not remitted to the United Kingdom continue to be treated after the compensation payment is released as not remitted to the United Kingdom even though the property has ceased to be exempt property.

(5) But nothing in subsection (4) prevents anything done in relation to any part of the compensation payment after that payment is taken offshore (or used to make a qualifying investment) from counting as a remittance of the underlying income or gains to the United Kingdom at the time when the thing is done.

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(6) Treat the compensation payment as containing or deriving from an amount of each kind of income and gain mentioned in section 809Q(4)(a) to (h) equal to the amount of that kind of income or gain contained in the exempt property when it was brought to, or received or used in, the United Kingdom (as mentioned in section 809X).

(7) Where Condition A was met by using the compensation payment to make a qualifying investment—

(a) the business investment provisions apply to the income and gains that continue, by virtue of subsection (4), to be treated as not remitted as they apply to income or gains that are treated under section 809VA(2) as not remitted, and

(b) if the investment was made using more than just the compensation payment, treat only the part of the investment made using the payment as “the investment” for the purposes of those provisions.”

5 (1) Section 809Z (public access rule: general) is amended as follows.

(2) In subsection (1), for “A to D” substitute “ B and C ”.

(3) Omit subsection (2).

(4) After subsection (8) insert—

“(8A) But if the property is lost or stolen— (a) the relevant period ends with the time at which it is lost or stolen, and (b) a new relevant period begins with its importation or the time at

which it is recovered.”

(5) Omit subsection (10). 6 Omit section 809Z1 (public access rule: relevant VAT relief). 7 (1) Section 809Z4 (temporary importation rule) is amended as follows.

(2) In subsection (1), after “days” insert “ (subject to any increase under subsection (3B)) ”.

(3) In subsection (3)— (a) before paragraph (a) insert—

“(za) the property meets the public access rule,”, (b) after paragraph (b) insert—

“(ba) subsection (3A) applies to the property,”, and (c) in paragraph (d) for “or 809YC(2)” substitute “ , 809YC(2) or 809YF(4) ”.

(4) After that subsection insert—

“(3A) This subsection applies to the property if— (a) it is not available to be used or enjoyed in the United Kingdom by

or for the benefit of a relevant person because it has been lost, stolen or destroyed,

(b) (if lost or stolen) it has not been recovered, and (c) no compensation payment has been released in respect of it.

(3B) If—

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(a) property that has been lost or stolen is recovered, (b) the first day after the day on which it is recovered is a countable

day, and (c) excluding that countable day there have already been 231 or more

countable days in relation to the property, the number of countable days specified in subsection (1) is read as being increased by the number necessary for there to be 45 countable days beginning with the countable day mentioned in paragraph (b).”

(5) Omit subsections (4) to (10). 8 In section 809Z6 (exempt property: other interpretation), after subsection (4) insert

—

“(5) References to property being lost, stolen or destroyed are to the property being lost, stolen or destroyed whilst in the United Kingdom.

(6) “Compensation payment”, in relation to property that has been lost, stolen or destroyed, means any payment of compensation (whether under an insurance policy or otherwise) in respect of the property.

(7) A compensation payment is “released” on the day on which it first becomes available for use in the United Kingdom by or for the benefit of any relevant person.

(8) Property that has been lost or stolen is “recovered” on the day on which it becomes available to be used or enjoyed in the United Kingdom by or for the benefit of a relevant person.”

9 The amendments made by paragraphs 3, 4, 5(4), 7(2), (3)(b) and (c) and (4) and 8 have effect in relation to property that is lost, stolen or destroyed on or after 6 April 2013.

10 The other amendments made by this Schedule have effect— (a) in relation to property that is not in the United Kingdom on 6 April 2013,

as from that date, and (b) in relation to property that is in the United Kingdom on that date, as from

the time when it ceases to be in the United Kingdom or is lost or stolen. 11 In the case of property that falls within paragraph 10(b) by virtue of being lost or

stolen, any period that is a period of importation in relation to the property for the purposes of section 809Z4 of ITA 2007 ends with the time at which it is lost or stolen.

SCHEDULE 8 Section 24

GAINS FROM CONTRACTS FOR LIFE INSURANCE ETC 1 Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc)

is amended as follows. 2 In section 476 (special rules: foreign policies) in subsection (2)—

(a) after the entry relating to section 474(3) to (5) insert “ and ”, (b) omit the entry relating to section 528,

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3 For section 528 substitute—

“528 Reduction in amount charged on basis of non-UK residence where individual liable for tax

(1) Subsection (2) applies if— (a) an individual is liable for tax charged on a gain from a policy of life

insurance or a capital redemption policy, and (b) there are one or more days in the material interest period on which

the individual is not UK resident.

(2) In determining the individual's liability for tax, the gain on which the tax is charged in the case of the individual is to be reduced by the appropriate fraction.

(3) The appropriate fraction is—

where—

A is the number of days in the material interest period which are days falling within subsection (1)(b), and

B is the number of days in the material interest period.

(4) In subsection (2) the reference to the gain is to be read in accordance with section 463A(4), 463D(4) or 463E(3) (which relates to restricted relief qualifying policies etc) if applicable.

(5) In this section “the material interest period” means so much of the policy period as during which the individual meets condition A, B or C in section 465 in relation to the policy (subject to subsection (7)).

(6) Subsections (7) and (8) apply if, before the chargeable event, there is an assignment falling within section 487(c) in relation to the policy where the individual is the assignee.

(7) There is to be added to the material interest period any part of the policy period falling before the assignment—

(a) during which the assignor meets condition A, B or C in section 465 in relation to the policy, and

(b) which is not included in the material interest period under subsection (5).

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(8) In relation to any period added to the material interest period under subsection (7), in subsection (1)(b) the reference to the individual is to be read as a reference to the assignor.

(9) For the purposes of subsections (5) and (7), in section 465(2) to (4) references to the rights under the policy are to be read as including references to a share of those rights.

(10) In this section “the policy period” means the period for which the policy has run before the chargeable event occurs.

(11) If the policy is a policy of life insurance which is a new policy in relation to another policy, for the purposes of subsection (10) the new policy is to be taken to have run—

(a) from the issue of the other policy, or (b) if it also was a new policy in relation to an earlier policy, from the

issue of the earlier policy, and so on; and in subsections (5) to (9) references to the policy are to be read accordingly as including any relevant earlier policy.

(12) In subsection (11) “new policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA.

528A Reduction in amount charged on basis of non-UK residence of deceased person

(1) Subsection (3) applies if— (a) personal representatives are liable for tax charged on a gain from

a policy of life insurance or a capital redemption policy under section 466, and

(b) there were one or more days in the material interest period on which the deceased was not UK resident.

(2) Subsection (3) also applies if— (a) trustees are liable for tax charged on a gain from a policy of life

insurance or a capital redemption policy under section 467 where— (i) of conditions A to D in that section, only condition B is met,

and (ii) the absent settlor condition which is met is the one in

subsection (4)(b) of that section (deceased settlor), (b) there were one or more days in the material interest period on which

the deceased was not UK resident, and (c) the deceased was UK resident when the deceased died.

(3) In determining the liability for tax of the personal representatives or trustees, the gain on which the tax is charged in the case of the personal representatives or trustees is to be reduced by the appropriate fraction.

(4) The appropriate fraction is—

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where—

A is the number of days in the material interest period which are days falling within subsection (1)(b) or (2)(b) (as the case may be), and

B is the number of days in the material interest period.

(5) In subsection (3) the reference to the gain is to be read in accordance with section 463C(8) (which relates to restricted relief qualifying policies) if applicable.

(6) In this section “the material interest period” means so much of the policy period falling before the deceased's death as during which the deceased met condition A, B or C in section 465 in relation to the policy (subject to subsection (8)).

(7) Subsections (8) and (9) apply if, before the deceased's death, there was an assignment falling within section 487(c) in relation to the policy where the deceased was the assignee.

(8) There is to be added to the material interest period any part of the policy period falling before the assignment—

(a) during which the assignor met condition A, B or C in section 465 in relation to the policy, and

(b) which is not included in the material interest period under subsection (6).

(9) In relation to any period added to the material interest period under subsection (8), in subsection (1)(b) or (2)(b) the reference to the deceased is to be read as a reference to the assignor.

(10) For the purposes of subsections (6) and (8), in section 465(2) to (4) references to the rights under the policy are to be read as including references to a share of those rights.

(11) In this section “the policy period” means the period for which the policy has run before the chargeable event occurs.

(12) If the policy is a policy of life insurance which is a new policy in relation to another policy, for the purposes of subsection (11) the new policy is to be taken to have run—

(a) from the issue of the other policy, or (b) if it also was a new policy in relation to an earlier policy, from the

issue of the earlier policy, and so on; and in subsections (6) to (10) references to the policy are to be read accordingly as including any relevant earlier policy.

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(13) In subsection (12) “new policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA.”

4 Omit section 529 (exceptions to section 528). 5 (1) Section 536 (top slicing relieved liability: one chargeable event) is amended as

follows.

(2) In subsection (6) for the words from “from” to the end substitute “ reduced under section 528 in the case of the individual. ”

(3) For subsection (7) substitute—

“(7) If in the case of the individual the gain is reduced under section 528, for steps 1 and 3 in subsection (1) N is reduced by the number of complete years consisting wholly of days falling within section 528(1)(b) (including days falling within section 528(1)(b) by virtue of section 528(8)).”

6 In section 552 of ICTA (information: duty of insurers) after subsection (13) insert—

“(14) For the purposes of this section no account is to be taken of the effect of sections 528 and 528A of ITTOIA 2005.”

7 (1) The amendments made by this Schedule have effect in relation to— (a) any policy of life insurance issued in respect of an insurance made on or

after 6 April 2013, or (b) any contract constituting a capital redemption policy made on or after that

date.

(2) The amendment made by paragraph 3 above has effect in relation to any insurance or contract made before 6 April 2013 if on or after that date—

(a) the policy or contract is varied with the result that there is an increase in the benefits secured,

(b) there is or was an assignment (or assignation) of rights, or a share of the rights, conferred by the policy or contract (whether or not for money's worth) to the individual or deceased, or

(c) some or all of the rights conferred by the policy or contract become or became held as a security for a debt of the individual or deceased,

and the other amendments made by this Schedule have effect in relation to the insurance or contract accordingly.

(3) For the purposes of sub-paragraph (2)(a) an exercise of rights conferred by a policy or contract is to count as a variation of the policy or contract.

(4) In the case of a policy or contract treated under section 473A of ITTOIA 2005 as a single policy or contract, for the purposes of sub-paragraphs (1) and (2) the date on which the insurance or contract is made is the date on which, as the case may be—

(a) the first insurance is made in respect of which the connected policies are issued, or

(b) the first of the connected contracts is made.

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SCHEDULE 9 Section 25

QUALIFYING INSURANCE POLICIES

PART 1

AMENDMENTS OF SCHEDULE 15 TO ICTA ETC 1 Schedule 15 to ICTA (qualifying insurance policies) is amended as follows. 2 Before Part 1 insert—

“PART A1

PREMIUM LIMIT FOR QUALIFYING POLICIES

Premium limit for qualifying policies to apply from 6 April 2013 A1 (1) Sub-paragraph (2) applies if—

(a) an event falling within sub-paragraph (3) occurs, (b) apart from sub-paragraph (2), the policy to which the event relates

would be a qualifying policy after the event, and (c) an individual who is a beneficiary under that policy is in breach of

the premium limit for qualifying policies.

(2) That policy is not to be a qualifying policy after the event.

(3) The events falling within this sub-paragraph are— (a) the issue of a policy in respect of an insurance made on or after 6

April 2013; (b) the variation of a policy on or after 6 April 2013 where as a result

of the variation— (i) the period over which premiums are payable under the

policy is or could be lengthened, or (ii) the total amount of the premiums payable under the policy

in any relevant period is or could be increased, or both;

(c) the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) below;

(d) a deceased beneficiary event on or after 6 April 2013; (e) the conditions in paragraph 24(3) below being fulfilled for the first

time in respect of a new non-resident policy where— (i) the conditions are fulfilled for the first time on or after 6

April 2013, and (ii) but for the conditions being fulfilled, the policy could not

be a qualifying policy because of paragraph 24(2).

(4) An event does not fall within sub-paragraph (3) if— (a) the policy to which the event relates is—

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(i) a protected policy, (ii) a restricted relief qualifying policy, or

(iii) a pure protection policy, (b) the event is the issue of a policy which is a new policy in relation

to an earlier policy where— (i) the new policy is issued in substitution for the earlier policy

(and not on its maturity), and (ii) the life assured under the new policy is different to the

life assured under the earlier policy but that is the only difference to what the position would have been had the earlier policy continued to run,

(c) paragraph 20ZA below applies to a policy and the event is the reinstatement or replacement of the policy as mentioned in paragraph 20ZA(4),

(d) the event is the issue or variation of a policy in relation to which paragraph 29 of Schedule 39 to the Finance Act 2012 applies, or

(e) the event is an assignment falling within paragraph B2(3)(e) below where the assignment is a mortgage endowment assignment.

(5) In sub-paragraph (3)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation.

(6) A variation is to be ignored for the purposes of sub-paragraph (3)(b) if its effect is nullified before the end of the period of 3 months after the day on which the variation occurs.

(7) Sub-paragraph (4)(a)(i) does not apply in the case of an event mentioned in sub-paragraph (3)(e).

(8) Sub-paragraph (4)(a)(ii) does not apply in the case of— (a) an event mentioned in sub-paragraph (3)(c) or (d) occurring in

relation to a restricted relief qualifying policy (“the assigned policy”),

(b) any subsequent event relating to the assigned policy, or (c) any event relating to—

(i) a later policy which is a new policy in relation to the assigned policy, or

(ii) any policy which is a new policy in relation to the later policy,

and so on.

(9) In the case of an event mentioned in sub-paragraph (3)(b), sub-paragraph (4) (a)(iii) applies only if the policy is a pure protection policy both before and after the variation.

(10) This paragraph is to be applied after all other provisions of this Schedule relevant to the question of whether a policy is a qualifying policy after an event have been applied.

Restricted relief qualifying policies A2 (1) Sub-paragraph (2) applies if—

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(a) an event falling within sub-paragraph (3) occurs, (b) the policy to which the event relates is a qualifying policy after the

event, and (c) an individual who is a beneficiary under that policy is in breach of

the premium limit for qualifying policies.

(2) That policy is to be a restricted relief qualifying policy after the event.

(3) The events falling within this sub-paragraph are— (a) a premium limit event in relation to a protected policy on or after

21 March 2012; (b) the issue of a policy as mentioned in paragraph A4(2)(b) below if,

assuming that the substitution of the protected policy were instead a variation of that policy, there would be a premium limit event in relation to that policy;

(c) the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a protected policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) below;

(d) a deceased beneficiary event on or after 6 April 2013 where the policy in question is a protected policy;

(e) the issue of a policy in respect of an insurance made on or after 21 March 2012 but before 6 April 2013 otherwise than as mentioned in paragraph A4(2)(b) below;

(f) the variation of a policy, other than a protected policy, on or after 21 March 2012 but before 6 April 2013 where as a result of the variation—

(i) the period over which premiums are payable under the policy is or could be lengthened, or

(ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased,

or both; (g) the conditions in either sub-paragraph (3) or sub-paragraph (4) of

paragraph 24 below being fulfilled for the first time in respect of a new non-resident policy where—

(i) the conditions are fulfilled for the first time on or after 21 March 2012 but before 6 April 2013, and

(ii) but for the conditions being fulfilled, the policy could not be a qualifying policy because of sub-paragraph (2) of paragraph 24.

(4) An event does not fall within sub-paragraph (3) if— (a) the policy to which the event relates is a pure protection policy, (b) the event is the issue of a policy which is a new policy in relation

to an earlier policy where— (i) the new policy is issued in substitution for the earlier policy

(and not on its maturity), and (ii) the life assured under the new policy is different to the

life assured under the earlier policy but that is the only difference to what the position would have been had the earlier policy continued to run,

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(c) paragraph 20ZA below applies to a policy and the event is the reinstatement or replacement of the policy as mentioned in paragraph 20ZA(4),

(d) the event is the issue or variation of a policy in relation to which paragraph 29 of Schedule 39 to the Finance Act 2012 applies, or

(e) the event is an assignment falling within paragraph B2(3)(e) below where the assignment is a mortgage endowment assignment.

(5) In sub-paragraph (3)(f)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation.

(6) A premium limit event or a variation is to be ignored for the purposes of sub- paragraph (3)(a) or (f) if its effect is nullified before 6 July 2013.

(7) In the case of a premium limit event which occurs on or after 6 April 2013, in sub-paragraph (6) the reference to 6 July 2013 is to be read as a reference to the end of the period of 3 months after the day on which the premium limit event occurs.

(8) In the case of an event mentioned in sub-paragraph (3)(a) or (f), sub- paragraph (4)(a) applies only if the policy is a pure protection policy both before and after the premium limit event or variation.

(9) A “premium limit event” occurs in relation to a protected policy if— (a) the policy is varied or a relevant option is exercised so as to change

the terms of the policy, and (b) as a result of the variation or exercise of the relevant option—

(i) the period over which premiums are payable under the policy is or could be lengthened, or

(ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased,

or both.

(10) A “premium limit event” also occurs in relation to a protected policy if on or after 6 April 2013—

(a) the policy is varied or a relevant option is exercised so as to change the terms of the policy, and

(b) as a result of the variation or exercise of the relevant option— (i) the period over which premiums are payable under the

policy is or could be shortened, or (ii) the total amount of the premiums payable under the policy

in any relevant period is or could be decreased, or both.

(11) In sub-paragraphs (9)(b)(ii) and (10)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation or exercise of the relevant option.

(12) The variation of, or exercise of a relevant option under, a protected policy is not a premium limit event in relation to the policy if—

(a) the policy secures a capital sum payable either— (i) on survival for a specified term, or

(ii) on earlier death or on earlier death or disability,

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(b) the policy is issued and maintained for the sole purpose of ensuring that the borrower under an interest-only mortgage will have sufficient funds to repay the principal lent under the mortgage, and

(13) In sub-paragraph (3)(g) references to paragraph 24 below are to that paragraph as it has effect before the appointed date for the purposes of section 55 of the Finance Act 1995.

(14) A qualifying policy which is a new policy in relation to an earlier policy is a restricted relief qualifying policy if the earlier policy is a restricted relief qualifying policy.

(15) A policy which is a restricted relief qualifying policy remains a restricted relief qualifying policy so long as it is a qualifying policy.

(16) Paragraph A1 above is to be ignored in determining for the purposes of sub- paragraph (14) or (15) if a policy is a qualifying policy. This is subject to paragraph A1(8).

(17) For further provision about restricted relief qualifying policies, see sections 463A to 463D of ITTOIA 2005.

The premium limit for qualifying policies A3 (1) For the purposes of paragraphs A1(1)(c) and A2(1)(c) above an individual

is in breach of the premium limit for qualifying policies if the total amount of the premiums payable under relevant policies in any relevant period—

(a) exceeds £3,600, or (b) could exceed £3,600 as a result of—

(i) the exercise of any one or more relevant options conferred by one or more relevant policies, or

(ii) so far as not covered by sub-paragraph (i), the application of one or more terms of one or more relevant policies relating to increases in premiums.

(2) For the purposes of sub-paragraph (1)— (a) so much of a premium payable under a relevant policy as is charged

on the grounds that an exceptional risk of death or disability is involved is to be left out of account in determining the premiums payable under the policy,

(b) so much of the first premium payable under a relevant policy the liability for the payment of which—

(i) is discharged in accordance with paragraph 15(2) below, or (ii) in the case of a policy in relation to which paragraph 3 below

applies, is discharged under a provision of the policy falling within paragraph 3(4)(c),

is to be left out of account in determining the premiums payable under the policy (subject to sub-paragraph (3) below),

(c) in determining the premiums payable under a relevant policy any provision for the waiver of premiums by reason of a person's disability is to be ignored, and

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(d) “relevant period” means any period of 12 months beginning at or after the time when the event falling within paragraph A1(3) or A2(3) above (“the relevant event”) occurs.

(3) The maximum amount that may be left out of account under sub- paragraph (2)(b) in the case of a relevant policy is—

where N is the number of complete years for which ran— a the other policy involved, or b if there is more than one other policy involved, the policy which ran

for the most number of complete years.

(4) For the purposes of this paragraph the following are “relevant policies”— (a) the policy to which the relevant event relates, and (b) any other policy—

(i) which is a qualifying policy, and (ii) under which the individual is a beneficiary.

(5) But neither a protected policy nor a pure protection policy is to be a relevant policy by virtue of sub-paragraph (4)(b).

(6) Sub-paragraph (7) applies if this paragraph is to be applied in the case of an individual in consequence of two or more events occurring at the same time (including where one or more of the events falls within paragraph A1(3) above and one or more of the events falls within paragraph A2(3) above).

(7) For the purpose of applying this paragraph in the case of the individual in consequence of any of the events, sub-paragraph (4)(a) has effect as if the reference to the policy to which the relevant event relates were a reference to all the policies to which the events, taken together, relate.

(8) But sub-paragraph (7) does not apply, and sub-paragraph (9) applies instead, if—

(a) all the policies in question are policies issued by the same issuer, and (b) each of them has an unique identifier in a series of unique identifiers

which the issuer gives to policies issued by it.

(9) For the purpose of applying this paragraph in the case of the individual in consequence of any of the events, an event relating to a policy (“policy A”) is treated as occurring before an event relating to another policy (“policy B”) if, in the issuer's series of unique identifiers, policy A's unique identifier comes before policy B's unique identifier.

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Protected policies A4 (1) This paragraph applies for the purposes of this Part of this Schedule.

(2) A policy is “protected” if— (a) it is issued in respect of an insurance made before 21 March 2012, or (b) it is issued in respect of an insurance made on or after 21 March

2012 where— (i) it is a new policy in relation to an earlier policy,

(ii) it is issued in substitution for the earlier policy (and not on its maturity), and

(iii) the earlier policy is a protected policy (whether by virtue of paragraph (a) or this paragraph).

(3) A policy which is protected ceases to be protected if it becomes a restricted relief qualifying policy.

(4) A policy issued as mentioned in sub-paragraph (2)(b) is not protected if— (a) its issue is an event falling within paragraph A2(3) above, and (b) after that event it is a restricted relief qualifying policy.

How to determine if an individual is a beneficiary under a policy A5 (1) This paragraph applies for the purposes of this Part of this Schedule in

determining if an individual is a beneficiary under a policy.

(2) An individual is a beneficiary under a policy if the individual beneficially owns—

(a) any rights under the policy, or (b) any share in any rights under the policy.

(3) An individual is a beneficiary under a policy if— (a) any rights under the policy are, or any share in any rights under the

policy is, held on non-charitable trusts created by the individual, and (b) those rights are, or that share is, not beneficially owned by any

individual.

(4) The following provisions of ITTOIA 2005 apply for the purposes of sub- paragraph (3)(a)—

(a) section 465(6), and (b) the definition of “non-charitable trust” in section 545(1).

(5) An individual is a beneficiary under a policy if— (a) any rights under the policy are, or any share in any rights under the

policy is, held as security for a debt of the individual, and (b) those rights are, or that share is, not beneficially owned by any

individual.

Further definitions A6 (1) In this Part of this Schedule—

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(a) “new policy” has the meaning given in paragraph 17 below, (b) references to the variation of a policy are to a variation in relation

to which paragraph 18 below applies, (c) “pure protection policy” means a policy—

(i) which has no surrender value and is not capable of acquiring a surrender value, or

(ii) under which the benefits payable cannot exceed the amount of the premiums paid except on death or in respect of disability, and

(d) “relevant option”, in relation to a policy, means an option conferred by the policy on the person to whom it is issued to have another policy substituted for it or to have any of its terms changed.

(2) For the purposes of this Part of this Schedule a “deceased beneficiary event” occurs if, in connection with the death of an individual (“D”) who was a beneficiary under a policy, an individual (“B”) becomes a beneficiary under that policy by reference (wholly or partly) to any rights, or to any share in any rights, by reference to which D was a beneficiary (wholly or partly).

For this purpose, it does not matter if B is already a beneficiary under the policy.

(3) For the purposes of this Part of this Schedule an assignment is a “mortgage endowment assignment” if—

(a) the policy to which the assignment relates secures a capital sum payable either—

(i) on survival for a specified term, or (ii) on earlier death or on earlier death or disability,

3 At the beginning of Part 1 (qualifying conditions) insert—

“RULES FOR QUALIFYING POLICIES

Rights to be beneficially owned by individuals only B1 (1) Sub-paragraph (2) applies in relation to a policy issued in respect of an

insurance made on or after 6 April 2013.

(2) In order for the policy to be a qualifying policy, when it is issued all the rights under it must be beneficially owned by (and only by)—

(a) one individual, or (b) two or more individuals taken together.

(This is the case notwithstanding any other provision of this Schedule.)

(3) Sub-paragraph (2) does not apply if the policy is protected.

(4) A policy is “protected” if it is a new policy (as defined in paragraph 17 below) in relation to—

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(a) a policy issued in respect of an insurance made before 21 March 2012, or

(b) a policy which is protected (whether by virtue of paragraph (a) or this paragraph).

Assignments B2 (1) Sub-paragraph (2) applies if any rights under a qualifying policy are, or any

share in any rights under a qualifying policy is, assigned on or after 6 April 2013.

(2) The policy is not to be a qualifying policy after the assignment (notwithstanding any other provision of this Schedule).

(3) Sub-paragraph (2) does not apply if— (a) the assignment is from an individual by way of security for a debt

of the individual, (b) the assignment is to an individual on the discharge of a debt of the

individual secured by the rights or share, (c) the assignment is from an individual to the individual's spouse or

civil partner, (d) the assignment is to an individual in pursuance of an order made by

a court, (e) the assignment is to an individual in pursuance of a legally

enforceable obligation relating to a divorce or the dissolution of a civil partnership,

(f) the assignment is from an individual and, as a result of the assignment, the rights assigned are, or the share assigned is, held on trusts created by the individual,

(g) the assignment is to an individual and, as a result of the assignment, the rights assigned are, or the share assigned is, no longer held on trusts, or

(h) the assignment— (i) is to the personal representatives of a deceased individual,

or (ii) is to an individual where, as a result of the assignment,

a deceased beneficiary event (see paragraph A6(2) above) occurs.

(4) Section 465(6) of ITTOIA 2005 applies for the purposes of sub- paragraph (3)(f).

(5) The Commissioners for Her Majesty's Revenue and Customs may by regulations provide that sub-paragraph (2) does not apply if prescribed conditions are met in relation to the assignment.

“Prescribed” means prescribed by the regulations.

(6) Regulations under sub-paragraph (5) may— (a) make different provision for different cases or circumstances, and (b) contain incidental, supplementary, consequential, transitional,

transitory or saving provision.

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(7) See paragraphs A1 and A2 above which may apply in consequence of an assignment falling within sub-paragraph (3) or (5).

Required statements B3 (1) Sub-paragraph (2) applies if any of the following events occurs—

(a) the issue of a policy in respect of an insurance made on or after 6 April 2013;

(b) the variation of a policy on or after 6 April 2013 where paragraph 18 below applies in relation to the variation and as a result of the variation—

(i) the period over which premiums are payable under the policy is or could be lengthened, or

(ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased,

or both; (c) a premium limit event in relation to a protected policy on or after 6

April 2013 (see paragraph A2(9) to (12) above); (d) an event on or after 6 April 2013 which would be a premium limit

event in relation to a protected policy but for paragraph A2(12) above;

(e) the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) above;

(f) a deceased beneficiary event (see paragraph A6(2) above) on or after 6 April 2013;

(g) the conditions in paragraph 24(3) below being fulfilled for the first time in respect of a new non-resident policy where—

(i) the conditions are fulfilled for the first time on or after 6 April 2013, and

(ii) but for the conditions being fulfilled, the policy could not be a qualifying policy because of paragraph 24(2).

(2) Each individual who is a beneficiary under the policy must, before the end of the statement period, make to the issuer of the policy a statement dealing with the prescribed matters.

(3) If an individual does not comply with sub-paragraph (2) the policy is not to be a qualifying policy after the event (notwithstanding any other provision of this Schedule).

(4) In sub-paragraph (1)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation.

(5) Sub-paragraph (2)— (a) does not apply in the case of an event mentioned in sub-

paragraph (1)(a), (e), (f) or (g) if the policy is a pure protection policy, and

(b) does not apply in the case of an event mentioned in sub- paragraph (1)(b), (c) or (d) if the policy is a pure protection policy both before and after the event.

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“Pure protection policy” has the meaning given by paragraph A6(1)(c) above.

(6) Sub-paragraph (2) does not apply in the case of an event mentioned in sub- paragraph (1)(e) where the assignment falls within paragraph B2(3)(e) above and is a mortgage endowment assignment.

“Mortgage endowment assignment” is to be read in accordance with paragraph A6(3) above.

(7) The Commissioners for Her Majesty's Revenue and Customs may by regulations provide that an individual is not required to comply with sub- paragraph (2) if prescribed conditions are met.

“Prescribed” means prescribed by the regulations.

(8) Accordingly, if by virtue of regulations under sub-paragraph (7) an individual is not required to comply with sub-paragraph (2), sub- paragraph (3) does not apply because that individual does not comply with sub-paragraph (2).

(9) In sub-paragraph (2)— (a) the reference to an individual who is a beneficiary under the policy

is to be read in accordance with paragraph A5 above, (b) “the statement period” means—

(i) the period of 3 months after the day on which the event occurs, or

(ii) if the event occurs before the day on which the first regulations under paragraph (c) below come into force, the period of 3 months after that day,

or such longer period as an officer of Revenue and Customs may allow, and

(10) An officer of Revenue and Customs may allow a longer period for the purposes of sub-paragraph (9)(b) only if—

(a) the individual in question has made a request in writing to an officer of Revenue and Customs for a longer period to be allowed, and

(b) such an officer is satisfied— (i) that there is a reasonable excuse for the required statement

not having been made within the period mentioned in sub- paragraph (9)(b)(i) or (ii), and

(ii) that the request under paragraph (a) was made without unreasonable delay after the reasonable excuse ceased.

(11) Sub-paragraph (12) applies in relation to a policy if the obligations under the policy of its issuer are at any time the obligations of another person (“the transferee”) to whom there has been a transfer of the whole or any part of a business previously carried on by the issuer.

(12) In relation to that time, in sub-paragraph (2) the reference to the issuer of the policy is to be read as a reference to the transferee.

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(13) Regulations under sub-paragraph (7) or (9)(c) may— (a) make different provision for different cases or circumstances, and (b) contain incidental, supplementary, consequential, transitional,

transitory or saving provision.” 4 (1) Paragraph 17 (substitutions) is amended as follows.

(2) In sub-paragraph (2) before paragraph (a) insert— “(za) the new policy cannot be a qualifying policy if the old policy was

not a qualifying policy by virtue of— (i) paragraph A1(2), B1(2), B2(2) or B3(3) above, or

(ii) sub-paragraph (i) above or this sub-paragraph;”.

(3) In sub-paragraph (2)(a) after the first “not” insert “ and paragraph (za) above does not apply ”.

(4) In sub-paragraph (4) for “(2)” substitute “ (2)(a) to (c) ”.

(5) After sub-paragraph (4) insert—

“(5) In determining under sub-paragraph (2)(a) to (c) above whether the new policy would apart from this paragraph be a qualifying policy, paragraph A1 above is not to be applied in relation to the issue of the new policy; but this does not stop that paragraph being applied in relation to the issue of the new policy after this paragraph has been applied.”

5 In paragraph 25 (application of paragraph 17 in cases involving new non-resident policies) after sub-paragraph (2) insert—

“(2A) In determining for the purposes of sub-paragraph (2)(a) above whether a policy would, apart from paragraph 24, have been a qualifying policy, paragraphs A1 and B1 to B3 above are to be ignored.

(But this does not affect the application of any of those paragraphs in relation to the new policy.)”.

6 (1) In section 55 of FA 1995 (qualifying life insurance policies: disapplication of paragraph 21 of Schedule 15 to ICTA from appointed date) in subsection (3) after “subject” insert “ to paragraphs A1(2), B2(2) and B3(3) of that Schedule and ”.

(2) The amendment made by this paragraph is treated as having come into force on the appointed date (see section 55(9) of FA 1995).

PART 2

RESTRICTED RELIEF QUALIFYING POLICIES 7 Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc)

is amended as follows. 8 After section 463 insert—

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“463A Restricted relief qualifying policies: disapplication of section 485 etc

(1) This section applies for the purpose of determining if an individual is liable for tax charged under this Chapter.

(2) In relation to an event occurring on or after 6 April 2013, section 485 (disregard of certain events in relation to qualifying policies) does not apply in relation to a policy (“policy X”) which is a restricted relief qualifying policy (see paragraph A2 of Schedule 15 to ICTA).

(3) If an individual is liable for tax charged under this Chapter as a result of subsection (2), the gain on which the tax is charged in the case of the individual is reduced by the following amount—

where—

G is the amount of the gain (apart from this subsection),

TAP is the total amount of premiums payable under policy X during the policy X period so far as they are allowable premiums as determined in accordance with section 463B, and

TP is the total amount of premiums payable under policy X during the policy X period.

(4) If section 528 also applies in the case of the individual in relation to the gain, subsection (3) is to be applied to the gain before section 528 and, accordingly, the reduction to be made under section 528 is to be determined by reference to the gain as reduced by subsection (3).

(5) The following subsections apply for the purposes of this section (except subsection (2)) and section 463B.

(6) “The policy X period” means the period for which policy X has run before the chargeable event occurs.

(7) Subsections (8) and (9) apply if policy X is a new policy in relation to another policy.

(8) For the purposes of subsection (6) policy X is to be taken to have run— (a) from the issue of the other policy, or (b) if the other policy was also a new policy in relation to an earlier

policy, from the issue of the earlier policy, and so on.

(9) References to premiums payable under policy X are to be read as including references to premiums payable under any earlier policy taken into account under subsection (8).

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(10) The following are to be left out of account in determining the premiums payable under a policy—

(a) so much of a premium as is charged on the grounds that an exceptional risk of death or disability is involved;

(b) subject to subsection (11), so much of the first premium payable the liability for the payment of which—

(i) is discharged in accordance with paragraph 15(2) of Schedule 15 to ICTA, or

(ii) in the case of a policy in relation to which paragraph 3 of that Schedule applies, is discharged under a provision of the policy falling within paragraph 3(4)(c) of that Schedule.

(11) The maximum amount that may be left out of account under subsection (10) (b) in the case of a policy is—

where N is the number of complete years for which ran— a the other policy involved, or b if there is more than one other policy involved, the policy which ran

for the most number of complete years.

(12) In determining the premiums payable under a policy any provision for the waiver of premiums by reason of a person's disability is to be ignored.

(13) “New policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA.

463B Restricted relief qualifying policies: allowable premiums

(1) This section sets out how to determine the extent to which premiums payable under policy X during the policy X period are allowable premiums for the purposes of section 463A(3).

(2) A premium payable under policy X is allowable if it is payable before the restricted relief date.

(3) In this section “the restricted relief date” means— (a) 6 April 2013, or (b) if later, the date on which policy X became a restricted relief

qualifying policy.

(4) Premiums payable under policy X in a relevant premium period are allowable so far as they do not exceed in total the premium limit for the period.

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(5) In subsection (4) “relevant premium period” means— (a) any period of one year which—

(i) begins with a relevant date, and (ii) ends in the policy X period, and

(b) if it is not covered by paragraph (a), the period which— (i) begins with the last relevant date to fall within the policy X

period, and (ii) ends at the end of the policy X period.

(6) In subsection (5) “relevant date” means— (a) the restricted relief date, or (b) any anniversary of the restricted relief date.

(7) For the purposes of subsection (4) “the premium limit” for a relevant premium period is determined in accordance with subsections (8) to (10).

(8) Determine the premiums payable in the relevant premium period under policies related to policy X.

(9) If the total of those premiums is £3,600 or more, the premium limit is nil (and, accordingly, no premiums payable under policy X in the relevant premium period are allowable).

(10) If the total of those premiums is less than £3,600, the premium limit is the difference between that total and £3,600.

(11) Subsection (4) does not apply if, at the time policy X became a restricted relief qualifying policy, any policy related to policy X was itself a restricted relief qualifying policy.

(12) For the purposes of this section a policy is “related” to policy X if it met the following requirements at the time policy X became a restricted relief qualifying policy—

(a) the policy is a qualifying policy under which the individual is a beneficiary (as determined in accordance with paragraph A5 of Schedule 15 to ICTA);

(b) the policy is neither a protected policy nor a pure protection policy.

(13) In subsection (12)(b)— “protected policy” is to be read in accordance with paragraph A4

of Schedule 15 to ICTA, and “pure protection policy” has the meaning given by paragraph

A6(1)(c) of that Schedule.

(14) A policy which is a new policy in relation to a policy “related” to policy X (whether by virtue of subsection (12) or this subsection) is also “related” to policy X if it meets the requirements of subsection (12)(a) and (b) when issued.

(15) A policy ceases to be “related” to policy X if it ceases to meet those requirements.

(16) If policy X is a restricted relief qualifying policy as provided for by paragraph A2(14) of Schedule 15 to ICTA, references in this section to policy

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X becoming a restricted relief qualifying policy are to be read as references to the policy determined under subsection (17) becoming a restricted relief qualifying policy.

(17) The policy is— (a) the policy (“policy Y”) in relation to which policy X was the new

policy, or (b) if policy Y was also a restricted relief qualifying policy as provided

for by paragraph A2(14) of Schedule 15 to ICTA, the policy in relation to which policy Y was the new policy,

and so on.

(18) The following subsections apply for the purposes of this section if— (a) a premium (“premium A”) is payable under policy X on a day (“day

A”) which is on or after 21 March 2012 but before 6 April 2013, and (b) the next premium payable under policy X is payable on a day (“day

B”) which is— (i) on or after 6 April 2013, and

(ii) more than one month after day A.

(19) Premium A is to be treated as if, instead of being one premium payable on day A, it were a series of premiums payable at monthly intervals with the first premium in the series payable on day A.

(20) The number of premiums in the series is equal to the number of complete months falling within the period beginning with day A and ending with day B.

(21) The amount of each premium in the series is the amount of premium A divided by the number of premiums in the series.

463C Restricted relief qualifying policies: personal representatives and trustees with deceased settlors

(1) This section applies for the purpose of determining if personal representatives are liable for tax charged under this Chapter as provided for by section 466.

(2) This section also applies for the purpose of determining if trustees are liable for tax charged under this Chapter as provided for by section 467 where—

(a) condition B in that section is met, and (b) the person who created the trusts has died.

(3) In relation to an event occurring on or after 6 April 2013, section 485 (disregard of certain events in relation to qualifying policies) does not apply in relation to a policy if the policy is a restricted relief qualifying policy (see paragraph A2 of Schedule 15 to ICTA).

(4) If any personal representatives or trustees are liable for tax charged under this Chapter as a result of subsection (3), section 463A(3) is to apply in the case of the personal representatives or the trustees—

(a) as if the reference to the individual were to the personal representatives or to the trustees, and

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(b) as if the restricted relief qualifying policy were policy X.

(5) For this purpose— (a) in section 463B(12)(a) the reference to the individual is to be read

as a reference to the deceased, and (b) a policy—

(i) which would otherwise have ceased to be “related” to policy X for the purposes of section 463B on the deceased's death, but

(ii) which continues to run after the deceased's death, is to be treated as “related” to policy X after the deceased's death.

(6) A policy which is a new policy (as defined in paragraph 17 of Schedule 15 to ICTA) in relation to a policy treated as “related” to policy X under subsection (5)(b) or this subsection is also to be treated as “related” to policy X if, apart from the deceased's death, it would meet the requirements of section 463B(12)(a) and (b) on its issue.

(7) A policy treated as “related” to policy X under subsection (5)(b) or (6) ceases to be so treated if, apart from the deceased's death, it would cease to meet the requirements of section 463B(12)(a) and (b).

(8) If section 528A also applies in the case of the personal representatives or the trustees in relation to the gain, section 463A(3) is to be applied to the gain before section 528A and, accordingly, the reduction to be made under section 528A is to be determined by reference to the gain as reduced by section 463A(3).

463D Restricted relief qualifying policies: assignments and events following assignments etc

(1) This section applies if— (a) paragraph A1 of Schedule 15 to ICTA applies in relation to a policy

by virtue of paragraph A1(8) in consequence of an event relating to the policy (“the relevant event”),

(b) after the relevant event, the policy is not a qualifying policy by virtue of paragraph A1(2), and

(c) in relation to an event occurring after the relevant event— (i) an individual is liable for tax charged under this Chapter on

a gain from the policy, and (ii) but for the application of paragraph A1 in relation to the

policy, section 463A(3) would have applied in the case of the individual so as to reduce the gain.

(2) Section 463A(3) is to apply in the case of the individual in relation to the gain as if the policy were policy X.

(3) But, for this purpose, section 463B(5) has effect as if the references to the policy X period were to the part of that period falling before the relevant event.

(4) If section 528 also applies in the case of the individual in relation to the gain, section 463A(3) is to be applied to the gain before section 528 and,

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accordingly, the reduction to be made under section 528 is to be determined by reference to the gain as reduced by section 463A(3).

463E Transitional protection for policies issued in respect of insurances made on or after 21 March 2012 but before 6 April 2013

(1) This section applies if— (a) a policy (“policy Z”) is issued, (b) the issue of policy Z is an event falling within paragraph A2(3) of

Schedule 15 to ICTA by virtue of paragraph (e), (c) after its issue, policy Z is a qualifying policy but not a restricted

relief qualifying policy, (d) policy Z is varied on or after 6 April 2013 and the variation is an

event falling within paragraph A1(3) of Schedule 15, (e) after the variation, policy Z is not a qualifying policy by virtue of

paragraph A1(2) of that Schedule, (f) in relation to an event occurring after the variation, an individual is

liable for tax charged under this Chapter on a gain from policy Z, and (g) but for the application of paragraph A1 of Schedule 15 in relation

to policy Z, the individual would not have been liable because of section 485.

(2) The gain on which the tax is charged in the case of the individual is reduced by the following amount—

where—

G is the amount of the gain (apart from this subsection),

TPV is the total amount of premiums payable under policy Z before the variation, and

TP is the total amount of premiums payable under policy Z before the chargeable event.

(3) If section 528 also applies in the case of the individual in relation to the gain, subsection (2) is to be applied to the gain before section 528 and, accordingly, the reduction to be made under section 528 is to be determined by reference to the gain as reduced by subsection (2).

(4) Section 463A(10) to (12) applies for the purposes of subsection (2).” 9 In section 485 (disregard of certain events in relation to qualifying policies) after

subsection (7) insert—

“(8) This section is subject to sections 463A and 463C.”

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PART 3

INFORMATION POWERS 10 After section 552ZA of ICTA insert—

“552ZB Regulations in relation to qualifying policies

(1) The Commissioners for Her Majesty's Revenue and Customs may make regulations—

(a) requiring relevant persons— (i) to provide prescribed information to persons who apply

for the issue of qualifying policies or who are, or may be, required to make statements under paragraph B3(2) of Schedule 15;

(ii) to provide to an officer of Revenue and Customs prescribed information about qualifying policies which have been issued by them or in relation to which they are or have been a relevant transferee;

(b) making such provision (not falling within paragraph (a)) as the Commissioners think fit for securing that an officer of Revenue and Customs is able—

(i) to ascertain whether there has been or is likely to be any contravention of the requirements of the regulations or of paragraph B3(2) of Schedule 15;

(ii) to verify any information provided to an officer of Revenue and Customs as required by the regulations.

(2) The provision that may be made by virtue of subsection (1)(b) includes, in particular, provision requiring relevant persons to make available books, documents and other records for inspection by or on behalf of an officer of Revenue and Customs.

(3) The regulations may— (a) make different provision for different cases or circumstances, and (b) contain incidental, supplementary, consequential, transitional,

transitory or saving provision.

(4) In this section— “prescribed” means prescribed by the regulations, “qualifying policy” includes a policy which would be a qualifying

policy apart from— (a) paragraph A1(2), B1(2), B2(2) or B3(3) of Schedule 15, or (b) paragraph 17(2)(za) of that Schedule (including as applied by

paragraph 18), and “relevant person” means a person—

(a) who issues, or has issued, qualifying policies, or (b) who is, or has been, a relevant transferee in relation to

qualifying policies.

(5) For the purposes of this section a person (“X”) is at any time a “relevant transferee” in relation to a qualifying policy if the obligations under the

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policy of its issuer are at that time the obligations of X as a result of there having been a transfer to X of the whole or any part of a business previously carried on by the issuer.”

11 In section 552B of ICTA (duties of overseas insurers' tax representatives) in subsection (2)—

(a) after paragraph (b) omit “and”, and (b) after paragraph (c) insert “and

(d) any duties imposed by regulations under section 552ZB,”. 12 In section 98 of TMA 1970 (special returns etc), in the second column of the

Table, after the entry for regulations under section 552ZA(6) of ICTA insert— “ regulations under section 552ZB; ”.

SCHEDULE 10 Section 26

TRANSFER OF ASSETS ABROAD

PART 1

INTRODUCTION 1 Chapter 2 of Part 13 of ITA 2007 (tax avoidance: transfer of assets abroad) is

amended as follows.

PART 2

NEW EXEMPTION FOR GENUINE TRANSACTIONS ETC 2 (1) Section 718 (meaning of “person abroad” etc) is amended as follows.

(2) For subsection (1) substitute—

“(1) In this Chapter “person abroad” means— (a) a person who is resident outside the United Kingdom, or (b) an individual who is domiciled outside the United Kingdom.”

(3) Omit subsection (2)(a). 3 In section 720 (charge to tax on income treated as arising under section 721) in

subsection (7)— (a) for “742” substitute “ 742A ”, and (b) after “transaction” insert “ , etc ”.

4 In section 727 (charge to tax on income treated as arising under section 728) in subsection (5)—

(a) for “742” substitute “ 742A ”, and (b) after “transaction” insert “ , etc ”.

5 In section 731 (charge to tax on income treated as arising under section 732) in subsection (4)—

(a) for “742” substitute “ 742A ”, and

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(b) after “transaction” insert “ , etc ”. 6 (1) Section 736 (exemptions: introduction) is amended as follows.

(2) In subsection (1) for “742” substitute “ 742A ”.

(3) After subsection (2) insert—

“(2A) The exemption given by section 742A applies only in the case of a relevant transaction effected on or after 6 April 2012.”

7 After section 742 insert—

“742A Post-5 April 2012 transactions: exemption for genuine transactions

(1) Subsection (2) applies for the purpose of determining the liability of an individual to tax under this Chapter by reference to a relevant transaction if—

(a) the transaction is effected on or after 6 April 2012, and (b) conditions A and B are met.

(2) Income is to be left out of account so far as the individual satisfies an officer of Revenue and Customs that it is attributable to the transaction.

(3) Condition A is that— (a) were, viewed objectively, the transaction to be considered to be a

genuine transaction having regard to any arrangements under which it is effected and any other relevant circumstances, and

(b) were the individual to be liable to tax under this Chapter by reference to the transaction,

the individual's liability to tax would, in contravention of a relevant treaty provision, constitute an unjustified and disproportionate restriction on a freedom protected under that relevant treaty provision.

(4) In subsection (3) “relevant treaty provision” means— (a) Title II or IV of Part Three of the Treaty on the Functioning of the

European Union, (b) Part II or III of the EEA agreement, or (c) the provision of any subsequent treaty replacing a provision

mentioned in paragraph (a) or (b).

(5) Condition B is that the individual satisfies an officer of Revenue and Customs that, viewed objectively, the transaction must be considered to be a genuine transaction having regard to any arrangements under which it is effected and any other relevant circumstances.

(6) Without prejudice to the generality of subsection (3)(a) or (5), in order for the transaction to be considered to be a genuine transaction the transaction must not—

(a) be on terms other than those that would have been made between persons not connected with each other dealing at arm's length, or

(b) be a transaction that would not have been entered into between such persons so dealing,

having regard to any arrangements under which the transaction is effected and any other relevant circumstances.

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(7) Subsection (8) applies if any asset or income falling within subsection (12) is used for the purposes of, or is received in the course of, activities carried on in a territory outside the United Kingdom by a person (“the relevant person”) through a business establishment which the relevant person has in that territory.

(8) Without prejudice to the generality of subsection (3)(a) or (5), in order for the transaction to be considered to be a genuine transaction the activities mentioned in subsection (7) must consist of the provision by the relevant person of goods or services to others on a commercial basis and involve—

(a) the use of staff in numbers, and with competence and authority, (b) the use of premises and equipment, and (c) the addition of economic value, by the relevant person, to those to

whom the goods or services are provided, commensurate with the size and nature of those activities.

(9) In subsection (8)(a) “staff” means employees, agents or contractors of the relevant person.

(10) To determine if a person has a “business establishment” in a territory outside the United Kingdom, apply sections 1141, 1142(1) and 1143 of CTA 2010 as if in those provisions—

(a) references to a company were to a person, and (b) references to a permanent establishment were to a business

establishment.

(11) Subsection (6) does not apply if— (a) the relevant transfer is made by an individual who makes it wholly—

(i) for personal reasons (and not commercial reasons), and (ii) for the personal benefit (and not the commercial benefit) of

other individuals, and (b) no consideration is given (directly or indirectly) for the relevant

transfer or otherwise for any benefit received by any individual mentioned in paragraph (a)(ii),

and all assets and income falling within subsection (12) are dealt with accordingly.

(12) The assets and income falling within this subsection are— (a) any of the assets transferred by the relevant transfer; (b) any assets directly or indirectly representing any of the assets

transferred; (c) any income arising from any assets within paragraph (a) or (b); (d) any assets directly or indirectly representing the accumulations of

income arising from any assets within paragraph (a) or (b).

(13) In subsections (11) and (12) references to the relevant transfer are to— (a) if the transaction mentioned in subsection (1) is a relevant transfer,

the transfer, or (b) if the transaction so mentioned is an associated operation, the

relevant transfer to which it relates.

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(14) Subsection (15) applies if— (a) subsection (2) would apply in relation to a transaction but for

the individual being unable to satisfy an officer of Revenue and Customs for the purposes of condition B that the transaction meets the requirements set out in subsection (6), but

(b) the individual does satisfy an officer of Revenue and Customs that those requirements are met in relation to a part of the transaction.

(15) Subsection (2) applies as if the reference to the transaction were to that part of the transaction.”

8 In section 751 (the Tribunal's jurisdiction on appeals) after paragraph (d) insert— “(da) section 742A (post-5 April 2012 transactions: exemption for

genuine transactions),”. 9 (1) The amendments made by paragraph 2 above have effect in relation to times on or

after 6 April 2012.

(2) The amendments made by paragraphs 3 to 8 above have effect for the tax year 2012-13 and subsequent tax years.

PART 3

AMENDMENTS RELATING TO THE CHARGES UNDER SECTIONS 720 AND 727

Main provision 10 (1) Section 721 (individuals with power to enjoy income as a result of a relevant

transaction) is amended as follows.

(2) In subsection (3) after “the income” insert “ of the person abroad ”.

(3) Before subsection (4) insert—

“(3B) The amount of the income treated as arising under subsection (1) is equal to the amount of the income of the person abroad (subject to sections 724 and 725).

(3C) Subsection (1) does not apply if— (a) the individual is liable for income tax charged on the income of the

person abroad by virtue of a charge not contained in this Chapter, and

(b) all that income tax has been paid.”

(4) In subsection (4) after “the income” insert “ of the person abroad ”.

(5) Omit subsection (5)(a). 11 (1) Section 724 (special rules where benefit provided out of income of person abroad)

is amended as follows.

(2) In subsection (2) after “on” insert “ an amount equal to ”.

(3) In subsection (3)— (a) for “on” substitute “ by reference to ”, and

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(b) after “previous tax year” insert “ under this Chapter ”. 12 (1) Section 725 (reduction in amount charged where controlled foreign company

involved) is amended as follows.

(2) In subsection (1), as substituted by paragraph 22 of Schedule 20 to FA 2012, for paragraph (b) and the “ and ” before it substitute—

“(b) an amount of income is treated as arising to an individual under section 721 for a tax year, and

(c) the income mentioned in section 721(2) is or includes a sum forming part of the CFC's chargeable profits for that accounting period.”

(3) After subsection (2) insert—

“(2A) In a case in which section 724 applies, the reference to S in the formula in subsection (2) is to be read as a reference to X% of S.

(2B) “X%” is determined as follows—

where—

A is the amount on which the individual is liable as determined under section 724(2), and

I is the amount of the income mentioned in section 721(2).”

(4) In relation to cases in which the amendments made by paragraph 22 of Schedule 20 to FA 2012 are to be ignored in accordance with paragraph 50(9) of that Schedule, the amendment made by sub-paragraph (5) below has effect instead of the amendment made by sub-paragraph (2) above.

(5) In subsection (1) for paragraph (c) and the “and” before it substitute— “(c) an amount of income is treated as arising to an individual under

section 721 for a tax year, and (d) the income mentioned in section 721(2) is or includes a sum forming

part of the controlled foreign company's chargeable profits for that accounting period.”

13 In section 726 (non-UK domiciled individuals to whom remittance basis applies) in subsection (2) for “the extent” substitute “ the corresponding extent ”.

14 (1) Section 728 (individuals receiving capital sums as a result of a relevant transaction) is amended as follows.

(2) After subsection (1) insert—

“(1A) The amount of the income treated as arising under subsection (1) is equal to the amount of the income of the person abroad (subject to subsection (2)).”

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(3) In subsection (2) for the words from “it applies” to the end substitute “if— (a) in subsection (1) of that section—

(i) the reference to section 721 were a reference to this section, and

(ii) the reference to section 721(2) were a reference to subsection (1)(a) of this section, and

(b) subsections (2A) and (2B) of that section were omitted.”

(4) After subsection (2) insert—

“(2A) Subsection (1) does not apply if— (a) the individual is liable for income tax charged on the income of the

person abroad by virtue of a charge not contained in this Chapter, and

(b) all that income tax has been paid.”

(5) Omit subsection (3)(a). 15 In section 730 (non-UK domiciled individuals to whom remittance basis applies)

in subsection (2) for “the extent” substitute “ the corresponding extent ”. 16 (1) Section 743 (no duplication of charges) is amended as follows.

(2) After subsection (2) insert—

“(2A) Subsection (2B) applies if— (a) in the case of an individual, an amount of income is taken into

account in charging income tax under section 720 or 727, and (b) the individual subsequently receives that income.

(2B) The income received is treated as not being the individual's income for income tax purposes.”

(3) In subsection (3) for “subsections (1) and (2)” substitute “ this section ”.

(4) Omit subsection (4). 17 (1) Section 744 (meaning of taking income into account in charging income tax for

section 743) is amended as follows.

(2) In subsection (1) for “743(1) and (2)” substitute “ 743 ”.

(3) In subsection (2)— (a) in paragraph (a) omit “or value of the benefit”, and (b) in paragraph (b) for “income charged” substitute “ the income mentioned in

section 721(2) ”.

(4) In subsection (3) for “that income” substitute “ the income mentioned in section 728(1)(a) ”.

18 (1) Section 745 (rates of tax applicable to income charged under sections 720 and 727 etc) is amended as follows.

(2) In subsection (1) for “so far as it” substitute “ if (and to the corresponding extent that) the income mentioned in section 721(2) or 728(1)(a) ”.

(3) For subsections (3) and (4) substitute—

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“(3) Subsection (4) applies to income treated as arising to an individual under section 721 or 728 so far as subsection (1) does not apply to it.

(4) The charge to income tax under section 720 or 727 operates by treating the income as if it were income within section 19(2) (meaning of “dividend income”) if the income mentioned in section 721(2) or 728(1)(a) would be dividend income were it the income of the individual.”

19 In section 746 (deductions and reliefs where individual charged under section 720 or 727) for subsection (2) substitute—

“(2) For the purpose of determining the deductions and reliefs allowed to the individual, the individual is to be treated as if the individual had actually received the amount by reference to which the income treated as arising to the individual under section 721 or 728 is determined.”

Commencement and transitional provision 20 (1) The amendments made by this Part of this Schedule have effect for the tax year

2013-14 and subsequent tax years.

(2) They have effect in relation to relevant transfers occurring before 6 April 2013 as well as relevant transfers occurring on or after that date.

21 (1) Sections 721(3C) and 728(2A) of ITA 2007 (as inserted by paragraphs 10(3) and 14(4) above) have effect only if the income of the person abroad arises to that person on or after 6 April 2013.

(2) The amendments made by paragraphs 10(5) and 14(5) above have no effect in relation to income arising to a person abroad before 6 April 2013.

SCHEDULE 11 Section 27

DEDUCTION OF INCOME TAX AT SOURCE ETC

Deduction from interest payable on compensation 1 Chapter 3 of Part 15 of ITA 2007 (deduction from certain payments of yearly

interest) is amended as follows. 2 In section 874 (duty to deduct from certain payments of yearly interest), after

subsection (5) insert—

“(5A) For the purposes of subsection (1) a payment of interest which is payable to an individual in respect of compensation is to be treated as a payment of yearly interest (irrespective of the period in respect of which the interest is paid).

(5B) But the Commissioners for Her Majesty's Revenue and Customs may make regulations which provide that subsection (5A) does not apply in the circumstances prescribed in the regulations.”

3 In section 875 (interest paid by building societies), at the end insert “ unless it is treated as a payment of yearly interest by virtue of section 874(5A). ”

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4 In section 878 (interest paid by banks), after subsection (1) insert—

“(1A) But that duty does apply to such a payment if it is treated as a payment of yearly interest by virtue of section 874(5A).”

Deduction from yearly interest: specialties 5 In section 874 of ITA 2007 (duty to deduct from certain payments of yearly interest),

after subsection (6) insert—

“(6A) In determining for the purposes of subsection (1) whether a payment of interest arises in the United Kingdom no account is to be taken of the location of any deed which records the obligation to pay the interest.”

Payment of interest in kind 6 After section 370 of ITTOIA 2005 insert—

“370A Valuation of interest not paid in cash

(1) This section applies to the payment of an amount of interest in the form of— (a) goods or services, or (b) a voucher.

(2) Where this section applies by virtue of subsection (1)(a), the amount of the payment is to be taken to be equal to the market value, at the time the payment is made, of the goods or services.

(3) Where this section applies by virtue of subsection (1)(b), the amount of the payment is to be taken to be equal to whichever is the higher of—

(a) the face value of the voucher, (b) the amount of money for which the voucher is capable of being

exchanged, or (c) the market value, at the time the payment is made, of any goods or

services for which the voucher is capable of being exchanged.

(4) In this section references to a voucher are to a voucher, stamp or similar document or token which is capable of being exchanged for money, goods or services.”

7 In section 380 of that Act (funding bonds), in subsection (3), at the end insert “ (but does not include any instrument providing for payment in the form of goods or services or a voucher) ”.

8 In section 939 of ITA 2007 (duty to retain bonds where issue treated as payment of interest), in subsection (6), at the end insert “ (but does not include any instrument providing for payment in the form of goods or services or a voucher) ”.

9 In section 975 of that Act (statements about deduction of income tax), in subsection (1)—

(a) after “if” insert “— (a)”, and

(b) at the end insert “, and

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(b) the person is not under a duty to provide a statement under section 975A”.

10 After section 975 of that Act insert—

“975A Statements about certain payments of interest

(1) Subsection (2) applies if a person makes a payment of interest of which the whole or part is in the form of goods or services or a voucher.

(2) The person must provide the recipient of the payment with a statement showing—

(a) the gross amount of the payment, (b) the amount of the sum deducted under any provision of Chapters 2

to 7 or under section 919 or 928 (if any), (c) the actual amount paid, and (d) the date on which the payment was made.

(3) The amounts mentioned in paragraphs (a) to (c) of subsection (2) are to be calculated in accordance with section 370A of ITTOIA 2005.

(4) Subsection (5) applies where a person— (a) is treated as making a payment of an amount of interest (“the deemed

interest”) by virtue of section 413 of CTA 2009 or section 380 of ITTOIA 2005 (funding bonds), and

(b) is under a duty under section 939(2) to retain funding bonds equal in value to income tax on the deemed interest at the basic rate.

(5) The person must provide the recipient of the funding bonds with a statement showing—

(a) the gross amount of the deemed interest, (b) the sum representing income tax which the person is treated under

section 939(3) as having deducted by retaining funding bonds, (c) the amount of the deemed interest after the deduction of that sum,

and (d) the date on which the deemed interest is treated as being paid.

(6) The amount of the deemed interest is to be calculated in accordance with section 413 of CTA 2009 or section 380 of ITTOIA 2005, as the case may require.

(7) A statement under this section must be provided in writing to the recipient on the date that the payment is made or (as the case may be) the date that the deemed interest is treated as being paid.

(8) The duty to comply with this section is enforceable by the recipient.

(9) In this section— (a) references to a voucher are to a voucher, stamp or similar document

or token which is capable of being exchanged for money, goods or services, and

(b) “funding bonds” has the same meaning as in Chapter 12 (see section 939(6)).”

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11 In section 413 of CTA 2009 (issue of funding bonds), in subsection (3), at the end insert “ (but does not include any instrument providing for payment in the form of goods or services or a voucher) ”.

Commencement 12 (1) The amendments made by paragraphs 1 to 4 have effect—

(a) in relation to any payment of interest by a building society which is made on or after 1 September 2013, and

(b) in relation to any other payment of interest which is made on or after 1 October 2013.

(2) The amendments made by paragraphs 5 to 11 have effect in relation to any payment of interest which is made on or after the day on which this Act is passed.

SCHEDULE 12 Section 28

DISGUISED INTEREST

Key amendments to Part 4 of ITTOIA 2005 1 Part 4 of ITTOIA 2005 (savings and investment income) is amended in accordance

with paragraphs 2 and 3. 2 In section 365(1) (overview of Part 4)—

(a) after paragraph (a) insert— “(aa) Chapter 2A (disguised interest),”, and

(b) omit paragraph (k). 3 After Chapter 2 insert—

“CHAPTER 2A

DISGUISED INTEREST

381A Charge to tax on disguised interest

(1) This Chapter applies where a person is party to an arrangement which produces for the person a return in relation to any amount which is economically equivalent to interest.

(2) Income tax is charged on the return if the return is not charged to income tax under or as a result of any other provision of this Act or any other Act.

(3) Subsection (2) does not apply to a return that would be charged to income tax under or as a result of another provision but for an exemption.

(4) For the purposes of this Chapter a return produced for a person by an arrangement in relation to any amount is “economically equivalent to interest” if (and only if)—

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(a) it is reasonable to assume that it is a return by reference to the time value of that amount of money,

(b) it is at a rate reasonably comparable to what is (in all the circumstances) a commercial rate of interest, and

(c) at the relevant time there is no practical likelihood that it will cease to be produced in accordance with the arrangement unless the person by whom it falls to be produced is prevented (by reason of insolvency or otherwise) from producing it.

(5) In subsection (4)(c) “the relevant time” means the time when the person becomes party to the arrangement or, if later, when the arrangement begins to produce a return for the person.

(6) In this Chapter “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

381B Income charged

Tax is charged under this Chapter on the full amount of the return, or any part of the return, arising in the tax year.

381C Person liable

The person liable for any tax charged under this Chapter is the person receiving or entitled to the return or the part of the return.

381D Avoidance of double taxation

(1) This section applies if at any time a tax other than income tax (“the other tax”) is charged in relation to a return on which income tax is charged under this Chapter.

(2) In order to avoid a double charge to tax in respect of the return, a person may make a claim for one or more consequential adjustments to be made in respect of the other tax.

(3) On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.

(4) Consequential adjustments may be made— (a) in respect of any period, (b) by way of an assessment, the modification of an assessment, the

amendment of a claim, or otherwise, and (c) despite any time limit imposed by or under any enactment.

381E Exception for returns from certain shares

(1) This Chapter does not apply in relation to an arrangement that produces a return for a person, in relation to an amount, which is economically equivalent to interest where—

(a) the arrangement involves only excluded shares, and

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(b) no relevant arrangement has been made (by any person) in relation to those excluded shares.

(2) For the purposes of this section shares are excluded shares if they are admitted to trading on a regulated market and—

(a) they were issued before 6 April 2013, or (b) if issued on or after that date, at the time of issue no arrangements

involving only the shares would produce a return, in relation to an amount, which is economically equivalent to interest.

(3) In subsection (2) “regulated market” has the same meaning as in Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments (see Article 4.1(14)).

(4) For the purposes of this section an arrangement is relevant, in relation to excluded shares, where—

(a) the arrangement is made on or after 6 April 2013, and (b) it is reasonable to assume that the main purpose, or one of the

main purposes, of the arrangement is to secure that arrangements involving only the shares produce a return, in relation to an amount, which is economically equivalent to interest.”

Consequential amendments 4 The following amendments are in consequence of the amendments made by

paragraphs 2(a) and 3.

TCGA 1992 5 TCGA 1992 is amended as follows. 6 In section 37 (consideration chargeable to tax on income), after subsection (2) insert

—

“(2A) Subsection (1) is not to be taken as excluding from the consideration so taken into account any money or money's worth which is, or is taken into account in computing, a return on which income tax is charged under Chapter 2A of Part 4 of ITTOIA 2005 (disguised interest) (but see section 381D of that Act).”

7 In section 39 (exclusion of expenditure by reference to tax on income), after subsection (3) insert—

“(3A) This section is not to be taken as excluding, from the sums allowable under section 38 as a deduction in the computation of the gain, expenditure allowable as a deduction in computing a return on which income tax is charged under Chapter 2A of Part 4 of ITTOIA 2005 (disguised interest) (but see section 381D of that Act).”

8 Omit sections 148A to 148C (provision dealing with the capital gains tax consequences of Chapter 12 of Part 4 of ITTOIA 2005).

9 (1) Section 263A (agreements for sale and repurchase of securities) is amended as follows.

(2) Before subsection (1) insert—

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“(A1) For the purposes of this section there is a repo in respect of securities if— (a) a person (“the original owner”) has agreed to sell the securities to

another person (“the interim holder”), and (b) the original owner or a person connected with the original owner—

(i) is required to buy back the securities by the agreement or a related agreement,

(ii) is required to buy back the securities as a result of the exercise of an option acquired under the agreement or a related agreement, or

(iii) exercises an option to buy back the securities which was acquired under the agreement or a related agreement.”

(3) In subsection (1), for the words from “falling” to “repos)” substitute “ where under a repo in respect of securities the original owner has transferred the securities to the interim holder ”.

(4) Omit subsection (5). 10 After section 263A insert—

“263AA Section 263A: interpretation

(1) Subsections (2) to (7) apply for the purposes of section 263A.

(2) References to buying back securities include references to— (a) buying similar securities, and (b) in the case of a person connected with the person who is the original

owner under the repo, buying the securities sold by the original owner or similar securities.

(3) Subsection (2) applies even if the person buying the securities has not held them before.

(4) References to repurchase or a repurchaser are to be read accordingly.

(5) For the purposes of subsection (2) securities are similar if they give their holders—

(a) the same rights against the same persons as to capital and distributions, interest and dividends, and

(b) the same remedies to enforce those rights.

(6) Subsection (5) applies even if there is a difference in— (a) the total nominal amounts of the securities, (b) the form in which they are held, or (c) the manner in which they can be transferred.

(7) Agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).

(8) In section 263A and this section “securities” means— (a) shares in a company wherever resident, (b) loan stock or other securities of—

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(i) the government of the United Kingdom, (ii) a local authority in the United Kingdom,

(iii) another public authority in the United Kingdom, (iv) a company resident in the United Kingdom or other body

resident in the United Kingdom, or (c) shares, loan stock, stock or other securities issued by—

(i) a government, local authority or other public authority of a territory outside the United Kingdom, or

(ii) another body of persons not resident in the United Kingdom.”

11 (1) Section 263F (power to modify repo provisions: non-standard repo cases) is amended as follows.

(2) In subsection (2), for the words from “cases” to the end substitute “ any case mentioned in section 263A(1). ”

(3) For subsection (9) substitute—

“(9) Post-agreement fluctuations” are fluctuations in the value of— (a) securities transferred in pursuance of the original sale, or (b) representative securities,

which occur in the period after the making of the agreement for the original sale.

(10) “Representative securities” are securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale.”

12 In section 263G (power to modify repo provisions: redemption arrangements)— (a) in subsection (2), for the words from “cases” to the end substitute “ any

case mentioned in section 263A(1). ”, and (b) omit subsection (4).

ITTOIA 2005 13 (1) ITTOIA 2005 is amended as follows.

(2) Omit Chapter 12 of Part 4 (disposals of futures and options involving guaranteed returns).

(3) In section 687(2) (application of charge to tax), at the end insert “ or to income falling within Chapter 2A of Part 4 ”.

(4) In Schedule 1 (consequential amendments), omit paragraph 435.

(5) In Schedule 2 (transitionals and savings), omit paragraph 95.

(6) In Schedule 4 (abbreviations and defined expressions), omit the entry for “future (in Chapter 12 of Part 4)”.

FA 2007 14 In Schedule 14 of FA 2007 (sale and repurchase of securities: minor and

consequential amendments), omit paragraphs 22 and 23.

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ITA 2007 15 (1) ITA 2007 is amended as follows.

(2) Omit the following provisions (which deal with deemed manufactured payments and repos)—

(a) section 596(5), (b) sections 597 to 605, (c) section 606(1) to (7) and (9) and (10), and (d) sections 607 to 614.

(3) In Schedule 1 (minor and consequential amendments), omit paragraphs 310, 543 and 544.

(4) In Schedule 2 (transitionals and savings), omit paragraphs 112 to 124.

(5) In Schedule 4 (index of defined expressions)— (a) omit the entries for—

“company UK REIT (in Chapter 4 of Part 11)”,

“distribution (in Chapter 4 of Part 11)”,

“gross amount (in Chapter 4 of Part 11)”,

“group (in Chapter 4 of Part 11)”,

“group UK REIT (in Chapter 4 of Part 11)”,

“Manufactured dividend (in Chapter 4 of Part 11)”,

“principal company (in Chapter 4 of Part 11)”,

“property rental business (in Chapter 4 of Part 11)”, and

““the repurchase price of the securities (in Chapter 4 of Part 11)”, and

(b) in the entry for “distribution (except in Chapter 4 of Part 11)”, omit “(except in Chapter 4 of Part 11)”.

CTA 2010 16 In Schedule 1 of CTA 2010 (minor and consequential amendments), omit

paragraphs 540 to 543 and 544(a), (c) and (d).

FA 2010 17 In Schedule 6 of FA 2010 (charities etc), omit paragraph 21(4).

Commencement and transitional provision 18 (1) Subject to sub-paragraph (2), the amendments made by this Schedule have effect for

the tax year 2013-2014 and subsequent tax years.

(2) Chapter 2A of Part 4 of ITTOIA 2005 does not apply in relation to an arrangement that produces a return for a person, in relation to an amount, which is economically equivalent to interest if—

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(a) the person became party to the arrangement before 6 April 2013, and (b) none of the provisions repealed by paragraphs 13(2) and 15(2) applied in

relation to the arrangement before that date.

SCHEDULE 13 Section 33

CHANGE IN OWNERSHIP OF SHELL COMPANY: RESTRICTION OF RELIEF

Amendments of Part 14 of CTA 2010 1 (1) Part 14 of CTA 2010 (change in company ownership) is amended as follows.

(2) In section 672 (overview of Part)— (a) after subsection (3) insert—

“(3A) Chapter 5A restricts relief for certain non-trading deficits and losses where there is a change of ownership of a shell company.”;

(b) in subsection (7), omit the “and” at the end of paragraph (b) and after that paragraph insert—

“(ba) shell company”, see section 705A, and”.

(3) After Chapter 5 insert—

“CHAPTER 5A

SHELL COMPANIES: RESTRICTIONS ON RELIEF

Introduction

705A Introduction to Chapter

(1) This Chapter applies where there is a change in the ownership of a shell company.

(2) In this Chapter— “the change in ownership” means the change in ownership

mentioned in subsection (1); “the company” means the company mentioned in subsection (1); “shell company” means a company that—

(a) is not carrying on a trade, (b) is not a company with investment business, and (c) is not carrying on a UK property business.

705B Notional split of accounting period in which change in ownership occurs

(1) This section applies for the purposes of this Chapter.

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(2) The accounting period in which the change in ownership occurs (“the actual accounting period”) is treated as two separate accounting periods (“notional accounting periods”), the first ending with the change and the second consisting of the remainder of the period.

(3) The amounts for the actual accounting period in column 1 of the table in section 705F(2) are apportioned to the two notional accounting periods in accordance with section 705F.

(4) In this Chapter “the actual accounting period” and “notional accounting periods” have the same meaning as in this section.

Restrictions on relief

705C Restriction on debits to be brought into account

(1) This section has effect for the purpose of restricting the debits to be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of the company's loan relationships.

(2) The debits to be brought into account for the purposes of Part 5 of CTA 2009 for—

(a) the accounting period beginning immediately after the change in ownership, or

(b) any subsequent accounting period, do not include relevant non-trading debits so far as amount A exceeds amount B.

(3) Amount A is the sum of— (a) the amount of those relevant non-trading debits, and (b) the amount of any relevant non-trading debits which have been

brought into account for the purposes of that Part for any previous accounting period ending after the change in ownership.

(4) Amount B is the amount of the taxable total profits of the accounting period ending with the change in ownership.

(5) For the meaning of “relevant non-trading debit”, see section 730.

705D Restriction on carry forward of non-trading deficit from loan relationships

(1) This section has effect for the purpose of restricting the carry forward of a non-trading deficit from the company's loan relationships under Part 5 of CTA 2009 (loan relationships).

(2) Subsection (3) applies if the non-trading deficit in column 1 of row 4 of the table in section 705F(2) is apportioned in accordance with section 705F to the first notional accounting period.

(3) None of that non-trading deficit may be carried forward to— (a) the accounting period beginning immediately after the change in

ownership, or

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(b) any subsequent accounting period.

705E Restriction on relief for non-trading loss on intangible fixed assets

(1) This section has effect for the purpose of restricting relief under section 753 of CTA 2009 (treatment of non-trading losses) in respect of a non-trading loss on intangible fixed assets.

(2) Relief under section 753 of CTA 2009 against the total profits of the same accounting period is available only in relation to each of the notional accounting periods considered separately.

(3) A non-trading loss on intangible fixed assets for an accounting period beginning before the change in ownership may not be—

(a) carried forward under section 753(3) of that Act to an accounting period ending after the change in ownership, or

(b) treated under that section as if it were a non-trading debit of that period.

Apportionment of amounts

705F Apportionment of amounts

(1) This section applies for the purposes of this Chapter.

(2) Any amount for the actual accounting period in column 1 of the following table is to be apportioned to the two notional accounting periods in accordance with the corresponding method of apportionment in column 2 of the table.

Row 1. Amount to be apportioned 2. Method of apportionment 1 The amount for the actual accounting

period of any adjusted non-trading profits from the company's loan relationships (see section 705G(2))).

Apportion the amount in column 1 on a time basis according to the respective lengths of the two notional accounting periods.

2 The amount for the actual accounting period of any adjusted non-trading deficit from the company's loan relationships (see section 705G(3)).

Apportion the amount in column 1 on a time basis according to the respective lengths of the two notional accounting periods.

3 The amount of any non-trading debit that falls to be brought into account for the actual accounting period for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of any debtor relationship of the company.

(1) If condition A in section 705G(4) is met, apportion the amount in column 1 by reference to the time of accrual of the amount to which the debit relates.

(2) If condition B in section 705G(5) is met, apportion the amount in

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column 1 to the first notional accounting period.

4 The amount of any non-trading deficit carried forward to the actual accounting period under section 457(1) of CTA 2009 (basic rule for deficits: carry forward to accounting periods after deficit period).

Apportion the whole of the amount in column 1 to the first notional accounting period.

5 The amount of any non-trading credits or debits in respect of intangible fixed assets that fall to be brought into account for the actual accounting period under section 751 of CTA 2009 (non-trading gains and losses), but excluding any amount within column 1 of row 6.

Apportion to each notional accounting period the credits or debits that would fall to be brought into account in that period if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice.

6 The amount of any non-trading loss on intangible fixed assets carried forward to the actual accounting period under section 753(3) of CTA 2009 and treated under that section as if it were a non-trading debit of that period.

Apportion the whole of the amount in column 1 to the first notional accounting period.

7 Any other amounts by reference to which the profits or losses of the actual accounting period would (but for this Chapter) be calculated.

Apportion the amount in column 1 on a time basis according to the respective lengths of the two notional accounting periods.

(3) If any method of apportionment in column 2 of the table in subsection (2) would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable.

(4) For the meaning of certain expressions used in this section, see section 705G.

705G Meaning of certain expressions in section 705F

(1) This section applies for the purposes of the table in section 705F(2).

(2) For the purposes of column 1 of row 1 of the table, the amount for the actual accounting period of any adjusted non-trading profits from the company's loan relationships is the amount which would be the amount of the profits from those relationships chargeable under section 299 of CTA 2009 (charge to tax on non-trading profits) if, in calculating that amount, amounts for that period within column 1 of row 3 or 4 of the table were disregarded.

(3) For the purposes of column 1 of row 2 of the table, the amount for the actual accounting period of any adjusted non-trading deficit from the company's loan relationships is the amount which would be the amount of the non-trading deficit from those relationships if, in calculating that amount, amounts for that period within column 1 of row 3 or 4 of the table were disregarded.

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(4) Condition A is that— (a) the amount in column 1 of row 3 of the table is determined on an

amortised cost basis of accounting, and (b) none of the following provisions applies—

(i) section 373 of CTA 2009 (late interest treated as not accruing until paid in some cases),

(ii) section 407 of that Act (postponement until redemption of debits for connected companies' deeply discounted securities), or

(iii) section 409 of that Act (postponement until redemption of debits for close companies' deeply discounted securities).

(5) Condition B is that— (a) the amount in column 1 of row 3 of the table is determined on an

amortised cost basis of accounting, and (b) any of the provisions mentioned in subsection (4)(b) applies.”

(4) In section 721 (when things other than share capital may be taken into account: Chapters 2 to 5)—

(a) in the heading, for “5” substitute “ 5A ”; (b) in subsection (1), for “5” substitute “ 5A ”; (c) in subsection (4), for “or 5” substitute “ , 5 or 5A ”.

(5) In section 725 (provision applying for the purposes of Chapters 2 to 5)— (a) in the heading, for “5” substitute “ 5A ”; (b) in subsection (1), for “5” substitute “ 5A ”.

(6) In section 730 (meaning of “relevant non-trading debit”)— (a) in subsection (1), for “and 696” substitute “ , 696 and 705C ”; (b) in subsections (3)(c), (4)(c) and (5)(b) for “or 696” substitute “ , 696 or 705C

”.

Consequential amendments 2 In Schedule 4 to that Act (index of defined expressions) insert at the appropriate

places—

“the actual accounting period (in Chapter 5A of Part 14) section 705B(4)”

“the change in ownership (in Chapter 5A of Part 14) section 705A(2)”

“the company (in Chapter 5A of Part 14) section 705A(2)”

“notional accounting periods (in Chapter 5A of Part 14) section 705B(4)”

“shell company (in Chapter 5A of Part 14) section 705A(2)”.

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Commencement 3 The amendments made by this Schedule have effect in relation to changes in

ownership that occur on or after 20 March 2013.

SCHEDULE 14 Section 34

TRANSFER OF DEDUCTIONS

New Part 14A of CTA 2010 1 After Part 14 of CTA 2010 insert—

“PART 14A

TRANSFER OF DEDUCTIONS

730A Overview

(1) This Part makes provision restricting the circumstances in which deductible amounts may be brought into account where there has been a qualifying change in relation to a company.

(2) For the meaning of “deductible amount” and “qualifying change” see section 730B.

730B Interpretation of Part

(1) In this Part— “arrangements” includes any agreement, understanding, scheme,

transaction or series of transactions (whether or not legally enforceable),

“C” means the company mentioned in section 730A(1), “deductible amount” means—

(a) an expense of a trade, (b) an expense of a UK property business or an overseas property

business, (c) an expense of management of a company's investment

business within the meaning of section 1219 of CTA 2009, (d) a non-trading debit within the meaning of Parts 5 and 6 of

CTA 2009 (loan relationships and derivative contracts) (see section 301(2) of that Act), or

(e) a non-trading debit within the meaning of Part 8 of CTA 2009 (intangible fixed assets) (see section 746 of that Act),

but does not include any amount that has been taken into account in determining RTWDV within the meaning of Chapter 16A of Part 2 of CAA 2001 (restrictions on allowance buying) (see section 212K of that Act),

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“qualifying change”, in relation to a company, has the same meaning as in that Chapter, and

“the relevant day” means the day on which the qualifying change in relation to C occurred.

(2) In this Part, references to bringing an amount into account “as a deduction” in any period are to bringing it into account as a deduction in that period—

(a) in calculating profits, losses or other amounts for corporation tax purposes, or

(b) from profits or other amounts chargeable to corporation tax.

730C Disallowance of deductible amounts: relevant claims

(1) This section applies where a relevant claim is made for an accounting period ending on or after the relevant day.

(2) “Relevant claim” means a claim by C, or a company connected with C, under —

(a) section 37 (relief for trade losses against total profits), or (b) Chapter 4 of Part 5 (group relief).

(3) A deductible amount that meets conditions A and B may not be the subject of, or brought into account as a deduction in, the claim.

(4) But subsection (3) does not exclude any amount which could have been the subject of, or brought into account as a deduction in, the claim in the absence of the qualifying change.

(5) Condition A is that, on the relevant day, it is highly likely that the amount, or any part of it, would (disregarding this Part) be the subject of, or brought into account as a deduction in, a relevant claim for an accounting period ending on or after the relevant day.

(6) Any question as to what is “highly likely” on the relevant day for the purposes of subsection (5) is to be determined having regard to—

(a) any arrangements made on or before that day, and (b) any events that take place on or before that day.

(7) Condition B is that the main purpose, or one of the main purposes, of change arrangements is for the amount (whether or not together with other deductible amounts) to be the subject of, or brought into account as a deduction in, a relevant claim for an accounting period ending on or after the relevant day.

(8) “Change arrangements” means any arrangements made to bring about, or otherwise connected with, the qualifying change.

(9) This section does not apply to a deductible amount if, and to the extent that— (a) section 730D(2) applies to it, or (b) for the purposes of section 432, a loss, or any part of a loss, to which

section 433(2) applies derives from it.

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730D Disallowance of deductible amounts: profit transfers

(1) This section applies where arrangements (“the profit transfer arrangements”) are made which result in—

(a) an increase in the total profits of C, or of a company connected with C, or

(b) a reduction of any loss or other amount for which relief from corporation tax could (disregarding this section) have been given to C or a company connected with C,

in any accounting period ending on or after the relevant day.

(2) A deductible amount that meets conditions D and E may not be brought into account by C, nor any company connected with C, as a deduction in any accounting period ending on or after the relevant day.

(3) Condition D is that, on the relevant day, it is highly likely that the amount, or any part of it, would (disregarding this Part) be brought into account by C, or any company connected with C, as a deduction in any accounting period ending on or after the relevant day.

(4) Any question as to what is “highly likely” on the relevant day for the purposes of subsection (3) is to be determined having regard to—

(a) any arrangements made on or before that day, and (b) any events that take place on or before that day.

(5) Condition E is that the main purpose, or one of the main purposes, of the profit transfer arrangements is to bring the amount (whether or not together with other deductible amounts) into account as a deduction in any accounting period ending on or after the relevant day.

(6) Subsection (7) applies if— (a) (disregarding subsection (7)) subsection (2) would prevent a

deductible amount being brought into account by a company as a deduction in any accounting period ending on or after the relevant day, and

(b) in the absence of the profit transfer arrangements and disregarding any deductible amounts, the company would have an amount of total profits for that accounting period.

(7) Subsection (2) applies only in relation to such proportion of the deductible amount mentioned in subsection (6)(a) as is just and reasonable.”

Consequential amendments 2 (1) In section 1(4) of CTA 2010 (overview of Act), after paragraph (a) insert—

“(aa) transfer of deductions (see Part 14A),”.

(2) In section 432 of that Act (sale of lessors: restriction on relief for certain expenses), after subsection (1) insert—

“(1A) For the purposes of subsection (1), an expense is to be disregarded if, and to the extent that, section 730D(2) (disallowance of deductible amounts: profit transfers) applies to it.”

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(3) In Schedule 4 to that Act (index of defined expressions), insert at the appropriate places—

“arrangements (in Part 14A) section 730B”

“as a deduction (in Part 14A) section 730B”

“C (in Part 14A) section 730B”

“deductible amount (in Part 14A) section 730B”

“qualifying change (in Part 14A) section 730B”

“the relevant day (in Part 14A) section 730B”.

Commencement and transitional provision 3 (1) The amendments made by this Schedule have effect in relation to a qualifying change

if the relevant day is on or after 20 March 2013.

(2) But those amendments do not have effect if before that date— (a) the arrangements made to bring about the qualifying change were entered

into, or (b) there was an agreement, or common understanding, between the parties to

those arrangements as to the principal terms on which the qualifying change would be brought about.

(3) If— (a) the relevant day in relation to a qualifying change is before 26 June 2013, or (b) paragraph (a) or (b) of sub-paragraph (2) was satisfied before that date,

those amendments have effect in relation to the qualifying change as if section 730C(9)(b) were omitted.

SCHEDULE 15 Section 35

R&D EXPENDITURE CREDITS

PART 1

AMENDMENTS OF CTA 2009 1 In Part 3 of CTA 2009 (trading income), after Chapter 6 insert—

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“CHAPTER 6A

TRADE PROFITS: R&D EXPENDITURE CREDITS

Claims for credits

104A R&D expenditure credits

(1) A company carrying on a trade may make a claim for an amount (an “R&D expenditure credit”) to be brought into account as a receipt in calculating the profits of the trade for an accounting period.

(2) The company is entitled to an R&D expenditure credit for the accounting period if the company has qualifying R&D expenditure which is allowable as a deduction in calculating for corporation tax purposes the profits of the trade for the accounting period.

(3) In the case of a company that is a small or medium-sized enterprise in the accounting period, the company's “qualifying R&D expenditure” means—

(a) its qualifying expenditure on sub-contracted R&D (see section 104C),

(b) its subsidised qualifying expenditure (see section 104F), and (c) its capped R&D expenditure (see section 104I).

(4) In the case of a company that is a large company throughout the accounting period, the company's “qualifying R&D expenditure” means—

(a) its qualifying expenditure on in-house direct research and development (see section 104J),

(b) its qualifying expenditure on contracted out research and development (see section 104K), and

(5) The amount of an R&D expenditure credit to which a company is entitled is determined in accordance with section 104M.

(6) Section 104N contains provision about the effect of a successful claim for an R&D expenditure credit.

(7) Sections 104U to 104W contain provision about insurance companies and group companies.

(8) Section 104X contains anti-avoidance provision.

(9) Section 104Y contains definitions.

(10) For information about the procedure for making claims under this Chapter, see Schedule 18 to FA 1998, in particular Part 9A of that Schedule.

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104B Restriction on claiming relief under Part 13 and credit for same expenditure

A company may not make a claim for an R&D expenditure credit and for relief under Part 13 (additional relief for expenditure on research and development) in respect of the same expenditure.

SMEs: qualifying expenditure on sub-contracted R&D

104C Qualifying expenditure on sub-contracted R&D

(1) For the purposes of this Chapter a company's “qualifying expenditure on sub- contracted R&D” means expenditure incurred by it that meets conditions A and B.

(2) Condition A is that the expenditure is incurred on research and development contracted out to the company by—

(a) a large company, or (b) any person otherwise than in the course of carrying on a chargeable

trade.

(3) A “chargeable trade” is— (a) a trade, profession or vocation carried on wholly or partly in the

United Kingdom, the profits of which are chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005, or

(b) a trade carried on wholly or partly in the United Kingdom, the profits of which are chargeable to corporation tax under Chapter 2 of this Part.

(4) Condition B is that the expenditure is expenditure to which section 104D or 104E applies.

104D Expenditure on sub-contracted R&D undertaken in-house

(1) This section applies to expenditure on research and development contracted out to a company if conditions A, B and C are met.

(2) Condition A is that the research and development is undertaken by the company itself.

(3) Condition B is that the expenditure is— (a) incurred on staffing costs (see section 1123), (b) incurred on software or consumable items (see section 1125), (c) qualifying expenditure on externally provided workers (see

section 1127), or (d) incurred on relevant payments to the subjects of a clinical trial (see

section 1140).

(4) Condition C is that the expenditure is attributable to relevant research and development in relation to the company.

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(5) See sections 1124, 1126 and 1132 for provision about when expenditure within subsection (3)(a), (b) or (c) is attributable to relevant research and development.

104E Expenditure on sub-contracted R&D not undertaken in-house

(1) This section applies to expenditure on research and development contracted out to a company if conditions A, B and C are met.

(2) Condition A is that the expenditure is incurred in making payments to— (a) a qualifying body, (b) an individual, or (c) a firm, each member of which is an individual,

in respect of research and development contracted out by the company to the body, individual or firm.

(3) Condition B is that the research and development is undertaken by the body, individual or firm itself.

(4) Condition C is that the expenditure is attributable to relevant research and development in relation to the company.

(5) See sections 1124, 1126 and 1132 for provision about when particular kinds of expenditure are attributable to relevant research and development.

SMEs: subsidised qualifying expenditure

104F Subsidised qualifying expenditure

For the purposes of this Chapter a company's “subsidised qualifying expenditure” means—

(a) its subsidised qualifying expenditure on in-house direct research and development (see section 104G), and

(b) its subsidised qualifying expenditure on contracted out research and development (see section 104H).

104G Subsidised qualifying expenditure on in-house direct R&D

(1) A company's “subsidised qualifying expenditure on in-house direct research and development” means expenditure incurred by it in relation to which each of conditions A to D is met.

(2) Condition A is that the expenditure is subsidised.

section 1127), or (d) incurred on relevant payments to the subjects of a clinical trial (see

section 1140).

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(4) Condition C is that the expenditure is attributable to relevant research and development undertaken by the company itself.

(5) Condition D is that the expenditure is not incurred by the company in carrying on activities which are contracted out to the company by any person.

(6) See sections 1124, 1126 and 1132 for provision about when expenditure within subsection (3)(a), (b) or (c) is attributable to relevant research and development.

104H Subsidised qualifying expenditure on contracted out R&D

(1) A company's “subsidised qualifying expenditure on contracted out research and development” means expenditure—

(a) which is incurred by it in making the qualifying element of a sub- contractor payment (see sections 1134 to 1136), and

(b) in relation to which each of conditions A to E is met.

(2) Condition A is that the expenditure is subsidised.

(3) Condition B is that the sub-contractor is— (a) a qualifying body, (b) an individual, or (c) a firm, each member of which is an individual.

(4) Condition C is that the body, individual or firm concerned undertakes the contracted out research and development itself.

(5) Condition D is that the expenditure is attributable to relevant research and development in relation to the company.

(6) Condition E is that the expenditure is not incurred by the company in carrying on activities which are contracted out to the company by any person.

(7) See sections 1124, 1126 and 1132 for provision about when particular kinds of expenditure are attributable to relevant research and development.

SMEs: capped R&D expenditure

104I Capped R&D expenditure

For the purposes of this Chapter a company's “capped R&D expenditure” means any expenditure—

(a) in respect of which the company is not entitled to relief under Chapter 2 of Part 13 merely because of section 1113 (cap on R&D aid),

(b) which is not qualifying expenditure on sub-contracted R&D, and (c) which would have been qualifying R&D expenditure had the

company been a large company throughout the accounting period in question.

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Large companies: qualifying R&D expenditure

104J Qualifying expenditure on in-house direct R&D

(1) A company's “qualifying expenditure on in-house direct research and development” means expenditure incurred by it in relation to which conditions A, B and C are met.

(2) Condition A is that the expenditure is— (a) incurred on staffing costs (see section 1123), (b) incurred on software or consumable items (see section 1125), (c) qualifying expenditure on externally provided workers (see

section 1127), or (d) incurred on relevant payments to the subjects of a clinical trial (see

section 1140).

(3) Condition B is that the expenditure is attributable to relevant research and development undertaken by the company itself.

(4) Condition C is that, if the expenditure is incurred in carrying on activities contracted out to the company, the activities are contracted out by—

(a) a large company, or (b) any person otherwise than in the course of carrying on a chargeable

trade.

(5) A “chargeable trade” is— (a) a trade, profession or vocation carried on wholly or partly in the

United Kingdom, the profits of which are chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005, or

(b) a trade carried on wholly or partly in the United Kingdom, the profits of which are chargeable to corporation tax under Chapter 2 of this Part.

(6) See sections 1124, 1126 and 1132 for provision about when expenditure within subsection (2)(a), (b) or (c) is attributable to relevant research and development.

104K Qualifying expenditure on contracted out R&D

(1) A company's “qualifying expenditure on contracted out research and development” means expenditure incurred by it in relation to which each of conditions A to D is met.

(2) Condition A is that the expenditure is incurred in making payments to— (a) a qualifying body, (b) an individual, or (c) a firm, each member of which is an individual,

in respect of research and development contracted out by the company to the body, individual or firm concerned (“the contracted out R&D”).

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(3) Condition B is that the body, individual or firm concerned undertakes the contracted out R&D itself.

(4) Condition C is that the expenditure is attributable to relevant research and development in relation to the company.

(5) Condition D is that, if the contracted out R&D is itself contracted out to the company, it is contracted out by—

(a) a large company, or (b) any person otherwise than in the course of carrying on a chargeable

trade.

(6) A “chargeable trade” is— (a) a trade, profession or vocation carried on wholly or partly in the

United Kingdom, the profits of which are chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005, or

(b) a trade carried on wholly or partly in the United Kingdom, the profits of which are chargeable to corporation tax under Chapter 2 of this Part.

(7) See sections 1124, 1126 and 1132 for provision about when particular kinds of expenditure are attributable to relevant research and development.

104L Qualifying expenditure on contributions to independent R&D

(1) A company's “qualifying expenditure on contributions to independent research and development” means expenditure incurred by it in relation to which each of conditions A to E is met.

(2) Condition A is that the expenditure is incurred in making payments to— (a) a qualifying body, (b) an individual, or (c) a firm, each member of which is an individual,

for the purpose of funding research and development carried on by the body, individual or firm concerned (“the funded R&D”).

(3) Condition B is that the funded R&D is relevant research and development in relation to the company.

(4) Condition C is that the funded R&D is not contracted out to the qualifying body, individual or firm concerned by another person.

(5) Condition D is that, if the payment is made to an individual, the company is not connected with the individual when the payment is made.

(6) Condition E is that, if the payment is made to a firm (other than a qualifying body), the company is not connected with any member of the firm when the payment is made.

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Amount of credit

104M Amount of R&D expenditure credit

(1) The amount of the R&D expenditure credit to which a company is entitled for an accounting period is the relevant percentage of the amount of the company's qualifying R&D expenditure for the period.

(2) In the case of a ring fence trade, the relevant percentage is 49%.

In this subsection “ring fence trade” has the meaning given by section 277 of CTA 2010.

(3) In any other case, the relevant percentage is 10%.

(4) The Treasury may by order replace the percentage for the time being specified in subsection (2) or (3) with a different percentage.

(5) An order under subsection (4) may contain incidental, supplemental, consequential and transitional provision and savings.

Payment of credit

104N Payment of R&D expenditure credit

(1) This section applies if a company is entitled to an R&D expenditure credit for an accounting period under this Chapter.

(2) The amount to which the company is entitled in respect of the R&D expenditure credit (“the set-off amount”) is to be treated in the following way—

Step 1 The set-off amount is to be applied in discharging any liability of the company to pay corporation tax for the accounting period. If any of the set-off amount is remaining, go to step 2. Step 2 If the amount remaining after step 1 is greater than the net value of the set-off amount (see subsection (3)), that amount is to be reduced to the net value of the set-off amount. For provision about the treatment of the amount deducted under this step from the amount remaining after step 1, see section 104O. Step 3 If the amount remaining after step 2 is greater than the company's total expenditure on workers for the accounting period (see section 104P)—

(a) that amount is to be reduced to the amount of that expenditure (which may be nil), and

(b) the amount deducted under paragraph (a) from the amount remaining after step 2 is to be treated for the purposes of this section as an amount of R&D expenditure credit to which the company is entitled for its next accounting period.

If any of the set-off amount is remaining, go to step 4. Step 4 The amount remaining after step 3 is to be applied in discharging any liability of the company to pay corporation tax for any other

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accounting period. If any of the set-off amount is remaining, go to step 5. Step 5 If the company is a member of a group, it may surrender the whole or any part of the amount remaining after step 4 to any other member of the group (see section 104R). If no such surrender is made, or any of the set-off amount is otherwise remaining, go to step 6. Step 6 The amount remaining after step 5 is to be applied in discharging any other liability of the company to pay a sum to the Commissioners under or by virtue of an enactment or under a contract settlement. If any of the set-off amount is remaining, go to step 7. Step 7 The amount remaining after step 6 is payable to the company by an officer of Revenue and Customs. But this is subject to section 104S (restrictions on payment of R&D expenditure credit).

(3) To determine the net value of the set-off amount for the purposes of step 2 in subsection (2), deduct from the set-off amount amount A and, in the case of a ring fence trade, amount B.

Amount A is the amount equal to the corporation tax that would be chargeable on the set-off amount if—

(a) it did not include any amount treated as an amount of R&D expenditure credit for the accounting period by virtue of step 3 in subsection (2), and

(b) it was an amount of profits (or in the case of a ring fence trade, ring fence profits) of the company for the accounting period and corporation tax on such profits was chargeable at the main rate.

Amount B is the amount equal to the supplementary charge that would be chargeable on the set-off amount if—

(a) it did not include any amount treated as an amount of R&D expenditure credit for the accounting period by virtue of step 3 in subsection (2), and

(b) it was an amount of adjusted ring fence profits for the accounting period.

(4) In this section— “adjusted ring fence profits” has the meaning given by

section 330(2) of CTA 2010, “the Commissioners” means the Commissioners for Her

Majesty's Revenue and Customs, “contract settlement” means an agreement made in connection

with any person's liability to make a payment to the Commissioners under or by virtue of an enactment,

“ring fence profits” has the meaning given by section 276 of CTA 2010, and

“ring fence trade” has the meaning given by section 277 of CTA 2010.

104O Amounts deducted by way of tax adjustment

(1) This section applies if—

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(a) a company is entitled to an R&D expenditure credit for an accounting period under this Chapter, and

(b) the amount of the set-off amount remaining after step 1 in section 104N(2) is greater than the net value of the set-off amount.

(2) An amount equal to the difference between— (a) the amount remaining after step 1 in section 104N(2), and (b) the net value of the set-off amount,

(“the step 2 amount”) is to be applied in discharging any liability of the company to pay corporation tax for any subsequent accounting period.

This is subject to subsection (3).

(3) If the company is a member of a group, it may surrender the whole or any part of the step 2 amount to any other member of the group (the “relevant group member”).

In such a case, section 104R(3) applies to the amount surrendered as it applies to an amount of R&D expenditure credit surrendered under step 5 in section 104N(2).

(4) If any of the amount surrendered under subsection (3) is remaining after the operation of step 3 in section 104R(3), it is to be treated for the purposes of this section as if it had not been surrendered to the relevant group member.

(5) Any amounts to be applied under subsection (2) or (3) in discharging any liability of a company to pay corporation tax for an accounting period are to be so applied before any amounts that may be so applied under step 1, 4 or 5 in section 104N(2).

(6) The surrender by a company of the whole or any part of the step 2 amount to another company under this section—

(a) is not to be taken into account in determining the profits or losses of either company for corporation tax purposes, and

(b) for corporation tax purposes is not to be regarded as the making of a distribution.

(7) Any reference in this section to the set-off amount, or the net value of the set-off amount, is to be read in accordance with section 104N.

104P Total expenditure on workers

(1) For the purposes of section 104N, the amount of a company's total expenditure on workers for an accounting period is the sum of—

(a) the relevant portion of the company's staffing costs for the period (see subsection (2)), and

(b) if the company is a member of a group and has incurred expenditure on any externally provided workers, the relevant portion of any staffing costs for the period incurred by another member of the group (the “relevant group company”) in providing any of those workers for the company (see subsection (3)).

(2) The relevant portion of the company's staffing costs for an accounting period is the amount of those costs that—

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(a) are paid to, or in respect of, directors or employees who are directly and actively engaged in relevant research and development (whether they are wholly or partly so engaged), and

(b) form part of the total amount of the company's PAYE and NIC liabilities for the accounting period (see section 104Q).

(3) The relevant portion of any staffing costs for an accounting period incurred by a relevant group company in providing externally provided workers for the company is the sum of the amounts to be determined in the case of each of those workers as follows—

Step 1 Calculate the amount of expenditure that— (a) has been incurred by the relevant group company in providing

the externally provided worker for the company, (b) has been incurred on staffing costs, and (c) forms part of the total amount of the relevant group company's

PAYE and NIC liabilities for the accounting period (see section 104Q).

Step 2 Calculate the percentage (the “appropriate percentage”) given by—

where—

R is the amount of the company's qualifying expenditure on the externally provided worker that has been taken into account in calculating the amount of the company's qualifying R&D expenditure for the period, and

T is the total amount of the company's qualifying expenditure on the externally provided worker. Step 3 The amount to be determined in the case of the externally provided worker is the appropriate percentage of the amount given by step 1.

104Q Total amount of company's PAYE and NIC liabilities

(1) For the purposes of section 104P the total amount of a company's PAYE and NIC liabilities for an accounting period is the sum of—

(a) amount A, and (b) amount B.

(2) Amount A is the total amount of income tax for which the company is required to account to an officer of Revenue and Customs under PAYE regulations for the accounting period.

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(3) In calculating amount A disregard any deduction the company is authorised to make in respect of child tax credit or working tax credit.

(4) Amount B is the total amount of Class 1 national insurance contributions for which the company is required to account to an officer of Revenue and Customs for the accounting period.

(5) In calculating amount B disregard any deduction the company is authorised to make in respect of payments of statutory sick pay, statutory maternity pay, child tax credit or working tax credit.

(6) In a case where the company is required to account for any amount of income tax or Class 1 national insurance contributions for a payment period that does not fall wholly within the accounting period, the portion of that amount to be included in the total amount of the company's PAYE and NIC liabilities for the accounting period is to be determined on such basis as is just and reasonable in all the circumstances.

104R Surrender of credit to other group companies

(1) This section applies if— (a) a company is entitled to an R&D expenditure credit under this

Chapter for an accounting period (“the surrender period”), and (b) the company surrenders the whole or any part of the credit to another

member of the group (the “relevant group member”) under step 5 in section 104N(2).

(2) In this section an accounting period of a relevant group member is a “relevant accounting period” if there is a period (“the overlapping period”) that is common to the accounting period and the surrender period.

(3) The amount surrendered is to be applied in discharging any liability of the relevant group member to pay corporation tax for any relevant accounting period as follows—

Step 1 Take the proportion of the relevant accounting period included in the overlapping period. Apply that proportion to the amount of corporation tax payable by the relevant group member for the relevant accounting period. Step 2 Take the proportion of the surrender period included in the overlapping period. Apply that proportion to the amount surrendered to the relevant group member. Step 3 The amount given by step 2 is to be applied in discharging the amount given by step 1.

(4) If any of the amount surrendered is remaining after the operation of step 3 in subsection (3), it is to be treated for the purposes of section 104N as if it had not been surrendered to the relevant group member.

(5) The surrender by a company of the whole or any part of an R&D expenditure credit to another company under step 5 in section 104N(2)—

(a) is not to be taken into account in determining the profits or losses of either company for corporation tax purposes, and

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(b) for corporation tax purposes is not to be regarded as the making of a distribution.

104S Restrictions on payment of R&D expenditure credit

(1) This section applies if— (a) a company is entitled to an R&D expenditure credit for an

accounting period under this Chapter, and (b) an amount of the R&D expenditure credit is payable to the company

under step 7 of section 104N(2).

(2) If at the time of claiming the credit the company was not a going concern (see section 104T)—

(a) the company is not entitled to be paid that amount, and (b) that amount is extinguished.

(3) But if the company becomes a going concern on or before the last day on which an amendment of the company's tax return for the accounting period could be made under paragraph 15 of Schedule 18 to FA 1998, the company is entitled to be paid that amount.

(4) If the company's tax return for the accounting period is enquired into by an officer of Revenue and Customs—

(a) no payment of that amount need be made before the officer's enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998), but

(b) the officer may make a payment on a provisional basis of such amount as the officer thinks fit.

(5) No payment of that amount need be made if the company has outstanding PAYE and NIC liabilities for the period.

(6) A company has outstanding PAYE and NIC liabilities for an accounting period if it has not paid to an officer of Revenue and Customs any amount that it is required to pay—

(a) under PAYE regulations, or (b) in respect of Class 1 national insurance contributions,

for payment periods ending in the accounting period.

104T “Going concern”

(1) For the purposes of section 104S(2) and (3) a company is a going concern if—

(a) its latest published accounts were prepared on a going concern basis, and

(b) nothing in those accounts indicates that they were only prepared on that basis because of an expectation that the company would receive R&D expenditure credits under this Chapter.

This is subject to subsection (2).

(2) A company is not a going concern at any time if it is in administration or liquidation at that time.

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(3) For the purposes of this section a company is in administration if— (a) it is in administration under Part 2 of the Insolvency Act 1986 or Part

3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(4) For the purposes of this section a company is in liquidation if— (a) it is in liquidation within the meaning of section 247 of that Act or

Article 6 of that Order, or (b) a corresponding situation under the law of a country or territory

outside the United Kingdom exists in relation to the company.

(5) Section 436(2) of the Companies Act 2006 (meaning of “publication” of documents) has effect for the purposes of this section.

Insurance companies

104U Insurance companies treated as large companies

(1) This section applies if an insurance company— (a) carries on life assurance business in an accounting period, and (b) is a small or medium-sized enterprise in the period.

(2) For the purposes of this Chapter the company is to be treated as if it were not such an enterprise in the period (and accordingly is to be treated as a large company for the purposes of this Chapter).

(3) Section 1119 (meaning of “small or medium-sized enterprise”), as it has effect for the purposes of this Chapter (see section 104Y), is to be read subject to this section.

104V Entitlement to credit: I minus E basis

(1) This section applies if— (a) for an accounting period, an insurance company is charged to tax

in respect of its basic life assurance and general annuity business in accordance with the I-E rules, and

(b) the calculation of the company's charge to tax for the period in respect of that business does not involve the calculation of any BLAGAB trade profit or loss of the company.

(2) Section 104A has effect as if— (a) the reference in subsection (1) to calculating the profits of a trade

were a reference to calculating the I-E profit of the basic life assurance and general annuity business carried on by the company, and

(b) the reference in subsection (2) to qualifying R&D expenditure allowable as a deduction in calculating the profits of a trade for an accounting period were a reference to any such expenditure that

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would be allowable as such a deduction if the company were to calculate its BLAGAB trade profit or loss for the period.

(3) Any receipt to be brought into account by virtue of this section is to be treated for the purposes of section 92 of FA 2012 (certain BLAGAB trading receipts to count as deemed I-E receipts) as if it had been taken into account in calculating the company's BLAGAB trade profit or loss for the period.

(4) In this section “BLAGAB trade profit” and “BLAGAB trade loss” have the meaning given by section 136 of FA 2012.

Group companies

104W R&D expenditure of group companies

(1) This section applies if— (a) a company (“A”) incurs expenditure on making a payment to

another company (“B”) in respect of activities contracted out by A to B,

(b) the activities would, if carried out by A, be research and development of A (taken together with A's other activities), and

(2) If the activities are undertaken by B itself, they are to be treated for the purposes of this Chapter (so far as it would not otherwise be the case) as research and development undertaken by B itself.

(3) If B makes a payment to a third party (“C”), any of the activities— (a) contracted out by B to C, and (b) undertaken by C itself,

are to be treated for the purposes of this Chapter (so far as it would not otherwise be the case) as research and development contracted out by B to C.

Anti-avoidance

104X Artificially inflated claims for credit

(1) To the extent that a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be disregarded for the purpose of determining for an accounting period R&D expenditure credits to which a company is entitled under this Chapter.

(2) Arrangements are entered into wholly or mainly for a “disqualifying purpose” if their main object, or one of their main objects, is to enable a company to obtain—

(a) an R&D expenditure credit under this Chapter to which it would not otherwise be entitled, or

(b) an R&D expenditure credit under this Chapter of a greater amount than that to which it would otherwise be entitled.

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(3) In this section “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

Interpretation

104Y Interpretation

(1) In this Chapter the following terms have the same meaning as they have in Part 13 (additional relief for expenditure on R&D)—

“large company” (see section 1122), “payment period” (see section 1141), “qualifying body” (see section 1142), “relevant research and development” (see section 1042), “research and development” (see section 1041), “small or medium-sized enterprise” (see section 1119).

(2) The following sections apply for the purposes of this Chapter as they apply for the purposes of Part 13—

sections 1123 and 1124 (staffing costs), sections 1125 and 1126 (software or consumable items), sections 1127 to 1132 (qualifying expenditure on externally provided workers), sections 1133 to 1136 (sub-contractor payments), section 1138 (“subsidised expenditure”), section 1140 (relevant payments to the subjects of a clinical trial).

(3) For the purposes of this Chapter two companies are members of the same group if they are members of the same group of companies for the purposes of Part 5 of CTA 2010 (group relief).”

2 (1) Part 13 of CTA 2009 (additional relief for expenditure on research and development) is amended as follows.

(2) After section 1040 (and before the cross-heading “Interpretation”) insert—

“1040A R&D expenditure credits

(1) For provision enabling a company carrying on a trade to make a claim for an amount in respect of expenditure on research and development (an “R&D expenditure credit”) to be brought into account as a receipt in calculating the profits of the trade for an accounting period, see Chapter 6A of Part 3.

(2) For provision prohibiting a company from making a claim for an R&D expenditure credit and for relief under this Part in respect of the same expenditure, see section 104B.”

(3) In section 1138 (meaning of “subsidised expenditure”), in subsection (3), omit the “and” at the end of paragraph (a) and after paragraph (b) insert—

“(c) R&D expenditure credits under Chapter 6A of Part 3.” 3 In Schedule 4 to CTA 2009 (index of defined expressions), at the appropriate place

insert—

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“capped R&D expenditure (in Chapter 6A of Part 3)

section 104I”;

“large company (in Chapter 6A of Part 3) section 1122 (as applied by section 104Y)”;

“payment period (in Chapter 6A of Part 3)

section 1141 (as applied by section 104Y)”;

“qualifying body (in Chapter 6A of Part 3)

section 1142 (as applied by section 104Y)”;

“qualifying expenditure on sub- contracted R&D (in Chapter 6A of Part 3)

section 104C”;

“qualifying R&D expenditure (in Chapter 6A of Part 3)

section 104A”;

“relevant payment to the subject of a clinical trial (in Chapter 6A of Part 3)

section 1140 (as applied by section 104Y)”;

“relevant research and development (in Chapter 6A of Part 3)

section 1042 (as applied by section 104Y)”;

“research and development (in Chapter 6A of Part 3)

section 1041 (as applied by section 104Y)”;

“small or medium-sized enterprise (in Chapter 6A of Part 3)

section 1119 (as applied by section 104Y)”;

“software or consumable items (in Chapter 6A of Part 3)

section 1125 (as applied by section 104Y)”;

“staffing costs (in Chapter 6A of Part 3) section 1123 (as applied by section 104Y)”;

“subsidised qualifying expenditure (in Chapter 6A of Part 3)

section 104F”.

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PART 2

CONSEQUENTIAL AMENDMENTS

FA 1998 4 Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is

amended as follows. 5 In paragraph 10(2) (other claims and elections to be included in return), after “first-

year tax credits” insert “ , R&D expenditure credits ”. 6 (1) Paragraph 52 (recovery of excessive repayments etc) is amended as follows.

(2) In sub-paragraph (2), after paragraph (b) insert— “(bza) R&D expenditure credit under Chapter 6A of Part 3 of the

Corporation Tax Act 2009,”.

(3) In sub-paragraph (5)— (a) after paragraph (a) insert—

“(aa) an amount of R&D expenditure credit paid to a company for an accounting period,”;

(b) after “paragraph (a),” insert “ (aa), ”. 7 (1) Part 9A (claims for R&D tax relief) is amended as follows.

(2) In paragraph 83A (introduction), for the words after “applies” substitute “to— (a) claims for R&D expenditure credits under Chapter 6A of Part 3 of

the Corporation Tax Act 2009, and (b) claims for R&D tax relief under Part 13 of that Act.”

(3) In paragraph 83C (content of claim), before “relief” insert “ credit or ”.

(4) Accordingly, the heading of the Part becomes “ CLAIMS FOR R&D EXPENDITURE CREDITS OR R&D TAX RELIEF ”.

FA 2007 8 In Schedule 24 to FA 2007 (penalties for errors), in paragraph 28(fa) (definition of

“corporation tax credit”), after sub-paragraph (i) insert— “(ia) an R&D expenditure credit under Chapter 6A of Part 3 of

CTA 2009,”.

CTA 2010 9 Part 8A of CTA 2010 (profits arising from the exploitation of patents etc) is

amended as follows. 10 In section 357CG (adjustments in calculating profits of trade), in subsection (4),

after “amounts to be deducted are” insert “— (a) the amount of any R&D expenditure credits (within the meaning

of Chapter 6A of Part 3 of CTA 2009) brought into account in calculating the profits of the trade for the accounting period, and

(b)”.

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11 In section 357CK (deductions that are not routine deductions), in subsection (3)— (a) in paragraph (a), the words from “for which” to the end become sub-

paragraph (i); (b) after that sub-paragraph insert “, or

(ii) in respect of which the company is entitled to an R&D expenditure credit for the accounting period under Chapter 6A of Part 3 of CTA 2009,”;

(c) at the beginning of paragraph (b) insert “ where the company obtains an additional deduction as mentioned in paragraph (a)(i), ”.

PART 3

ABOLITION OF CERTAIN RELIEF UNDER PART 13 OF CTA 2009

Amendments of Part 13 of CTA 2009 12 Part 13 of CTA 2009 (additional relief for expenditure on research and

development) is amended as follows. 13 (1) Section 1039 (overview of Part) is amended as follows.

(2) In subsection (3)— (a) for “Chapters 2 to 4” substitute “ Chapter 2 ”; (b) omit paragraphs (b) and (c).

(3) Omit subsection (4).

(4) In subsection (5)— (a) for “Chapters 2 to 5” substitute “ Chapter 2 ”; (b) omit paragraphs (b) and (c).

14 Omit Chapter 3 (relief for SMEs: R&D sub-contracted to SME). 15 Omit Chapter 4 (relief for SMEs: subsidised and capped expenditure on R&D). 16 Omit Chapter 5 (relief for large companies). 17 (1) Section 1081 (insurance companies treated as large companies) is amended as

follows.

(2) In subsection (2), for “Chapters 2 to 5” substitute “ Chapter 2 ”.

(3) Omit subsection (3). 18 Omit section 1082 (R&D expenditure of group companies). 19 Omit section 1083 (refunds of expenditure treated as income chargeable to tax). 20 (1) Section 1084 (artificially inflated claims for relief or tax credit) is amended as

follows.

(2) In subsection (2)(a), for “Chapters 2 to 5” substitute “ Chapter 2 ”.

(3) In subsection (3)(a) and (b), for “Chapters 2 to 5” substitute “ Chapter 2 ”. 21 In section 1119 (meaning of “small or medium-sized enterprise”), in subsection (3),

for “Chapters 2 to 5” substitute “ Chapter 2 ”.

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22 In section 1133 (meaning of “sub-contractor” etc), in subsection (3), omit “section 1072(1)(a),”.

Consequential amendments 23 In Schedule 4 to CTA 2009 (index of defined expressions), omit the following

entries— “ capped R&D expenditure (in Part 13) ”, “ qualifying Chapter 3 expenditure (in Part 13) ”, “ qualifying Chapter 4 expenditure (in Part 13) ”, and “ qualifying Chapter 5 expenditure (in Part 13) ”.

24 (1) CTA 2010 is amended as follows.

(2) In section 312 (ring fence expenditure supplement: qualifying pre-commencement expenditure), omit subsections (8) and (9).

(3) In section 1173, in Part 1 of the table in subsection (2), omit the entry relating to section 1083(5) of CTA 2009.

(4) In Schedule 1, omit paragraph 671. 25 In section 13 of F(No.3)A 2010, omit subsections (4) and (5). 26 (1) FA 2012 is amended as follows.

(2) In section 78(3), omit the entry relating to section 1080(2) of CTA 2009.

(3) In Schedule 16, omit paragraph 190.

PART 4

COMMENCEMENT AND TRANSITIONAL PROVISION 27 The amendments made by Parts 1 and 2 of this Schedule have effect in relation to

expenditure incurred on or after 1 April 2013. 28 Subject to paragraph 29, the amendments made by Part 3 of this Schedule have

effect in relation to expenditure incurred on or after 1 April 2016. 29 (1) If a company claims an R&D expenditure credit under section 104A of CTA 2009

for an accounting period beginning before 1 April 2016, the amendments made by Part 3 of this Schedule are treated as having effect in relation to expenditure incurred by the company on or after the first day of that accounting period.

(2) But in a case where the accounting period includes 1 April 2013, those amendments are treated as having effect in relation to expenditure incurred by the company on or after that day.

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SCHEDULE 16 Section 36

TAX RELIEF FOR TELEVISION PRODUCTION

PART 1

AMENDMENTS OF CTA 2009 1 After Part 15 of CTA 2009 insert—

“PART 15A

TELEVISION PRODUCTION

CHAPTER 1

INTRODUCTION

Introductory

1216A Overview of Part

(1) This Part is about television production.

(2) Sections 1216AA to 1216AJ contain definitions and other provisions about interpretation that apply for the purposes of this Part. See, in particular—

(a) section 1216AB, which explains what is meant by a “relevant programme”, and

(b) section 1216AE, which explains how a company comes to be treated as the television production company in relation to a relevant programme.

(3) Chapter 2 is about the taxation of the activities of a television production company and includes—

(a) provision for the company's activities in relation to its relevant programme to be treated as a separate trade, and

(b) provision about the calculation of the profits and losses of that trade.

(4) Chapter 3 is about relief (called “television tax relief”) which can be given to a television production company—

(a) by way of additional deductions to be made in calculating the profits or losses of the company's separate trade, or

(b) by way of a payment (a “television tax credit”) to be made on the company's surrender of losses from that trade.

(5) Chapter 4 is about the relief which can be given for losses made by a television production company in its separate trade, including provision for certain such losses to be transferred to other separate trades.

(6) Chapter 5 provides—

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(a) for relief under Chapters 3 and 4 to be given on a provisional basis, and

(b) for such relief to be withdrawn if it turns out that conditions that must be met for such relief to be given are not actually met.

Meaning of “television programme”, “relevant programme” etc

1216AA “Television programme”

(1) This section applies for the purposes of this Part.

(2) “Television programme” means any programme (with or without sounds) which—

(a) is produced to be seen on television, and (b) consists of moving or still images or of legible text or of a

combination of those things.

(3) In subsection (2) “television” includes the internet.

(4) Any television programmes that are commissioned together under the same agreement are treated as a single television programme.

(5) A television programme is completed when it is first in a form in which it can reasonably be regarded as ready for broadcast to the general public.

1216AB “Relevant programme”

(1) This section applies for the purposes of this Part.

(2) A television programme is a “relevant programme” if— (a) conditions A and B are met, and (b) in the case of a television programme that is not animation,

conditions C and D are met.

(3) Condition A is that the programme is— (a) a drama, (b) a documentary, or (c) animation.

For further provision about these terms, see section 1216AC.

(4) Condition B is that the programme is not an excluded programme (see section 1216AD).

(5) Condition C is that the slot length in relation to the programme is greater than 30 minutes.

(6) Condition D is that the average core expenditure per hour of slot length in relation to the programme is not less than £1 million.

For the meaning of “core expenditure”, see section 1216AG.

(7) “Slot length”, in relation to a television programme, means the period of time which the programme is commissioned to fill.

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1216AC Types of programme eligible to be relevant programmes

(1) This section applies for the purposes of this Part.

(2) A programme is a “drama” if— (a) it consists wholly or mainly of a depiction of events, (b) the events are depicted (wholly or mainly) by one or more persons

performing, and (c) the whole or a major proportion of what is done by the person or

persons performing, whether by way of speech, acting, singing or dancing, involves the playing of a role,

and for these purposes “drama” includes comedy.

(3) A drama or documentary that includes animation is to be treated as animation if the core expenditure on the completed animation constitutes at least 51% of the total core expenditure on the completed programme.

1216AD Excluded programmes

(1) For the purposes of this Part a television programme is an excluded programme if it falls within any of the Heads set out in the following subsections—

(a) subsection (2) (advertisements etc), (b) subsection (3) (current affairs etc), (c) subsection (4) (entertainment shows), (d) subsection (5) (competitions), (e) subsection (6) (live performances), (f) subsection (7) (training programmes).

(2) Head 1 is any advertisement or other promotional programme.

(3) Head 2 is any news or current affairs programme or discussion programme.

(4) Head 3 is any quiz show, game show, panel show, variety show, chat show or similar entertainment.

(5) Head 4 is any programme consisting of or including— (a) a competition or contest, or (b) the results of a competition or contest.

(6) Head 5 is any broadcast of a live event or of a theatrical or artistic performance given otherwise than for the purpose of being filmed.

(7) Head 6 is any programme produced for training purposes.

Other interpretation

1216AE Television production company

(1) For the purposes of this Part “television production company” is to be read in accordance with this section.

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(2) There cannot be more than one television production company in relation to a relevant programme.

(3) A company is the television production company in relation to a relevant programme if the company (otherwise than in partnership)—

(a) is responsible— (i) for pre-production, principal photography and post-

production of the programme, and (ii) for delivery of the programme,

(b) is actively engaged in production planning and decision-making during pre-production, principal photography and post-production, and

(4) A company is the television production company in relation to a relevant programme that is a qualifying co-production if the company (otherwise than in partnership)—

(a) is a co-producer, and (b) makes an effective creative, technical and artistic contribution to the

programme.

(5) If there is more than one company meeting the description in subsection (3) or (4), the company that is most directly engaged in the activities referred to in that subsection is the television production company in relation to the relevant programme.

(6) If there is no company meeting the description in subsection (3) or (4), there is no television production company in relation to the relevant programme.

(7) A company may elect to be regarded as a company which does not meet the description in subsection (3) or (4).

(8) The election— (a) must be made by the company by being included in its company tax

return for an accounting period (and may be included in the return originally made or by amendment), and

(b) may be withdrawn by the company only by amending its company tax return for that accounting period.

(9) The election has effect in relation to relevant programmes which commence principal photography in that or any subsequent accounting period.

1216AF “Television production activities” etc

(1) In this Part “television production activities”, in relation to a relevant programme, means the activities involved in development, pre-production, principal photography and post-production of the programme.

(2) If all or any of the images in a relevant programme are generated by computer, references in this Part to principal photography are to be read as references to, or as including, the generation of those images.

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(3) The Treasury may by regulations— (a) amend subsections (1) and (2), (b) provide that specified activities are or are not to be regarded as

television production activities or as television production activities of a particular description, and

(c) provide that, in relation to a specified description of relevant programme, references to television production activities of a particular description are to be read as references to such activities as may be specified.

“Specified” means specified in the regulations.

1216AG “Production expenditure” and “core expenditure”

(1) This section applies for the purposes of this Part.

(2) “Production expenditure”, in relation to a relevant programme, means expenditure on television production activities in connection with the programme.

(3) “Core expenditure”, in relation to a relevant programme, means production expenditure on pre-production, principal photography and post-production of the programme.

1216AH “UK expenditure” etc

(1) In this Part “UK expenditure”, in relation to a relevant programme, means expenditure on goods or services that are used or consumed in the United Kingdom.

(2) Any apportionment of expenditure as between UK expenditure and non- UK expenditure for the purposes of this Part is to be made on a just and reasonable basis.

(3) The Treasury may by regulations amend subsection (1).

1216AI “Qualifying co-production” and “co-producer”

In this Part— (a) “qualifying co-production” means a relevant programme that is

eligible to be certified as a British programme under section 1216CB as a result of an agreement between Her Majesty's Government in the United Kingdom and any other government, international organisation or authority, and

(b) “co-producer” means a person who is a co-producer for the purposes of the agreement mentioned in paragraph (a).

1216AJ “Company tax return”

In this Part “company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1)).

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CHAPTER 2

TAXATION OF ACTIVITIES OF TELEVISION PRODUCTION COMPANY

Separate programme trade

1216B Activities of television production company treated as a separate trade

(1) This Chapter applies for corporation tax purposes to a company that is the television production company in relation to a relevant programme.

(2) The company's activities in relation to the programme are treated as a trade separate from any other activities of the company (including any activities in relation to any other television programme).

(3) In this Chapter the separate trade is called “the separate programme trade”.

(4) The company is treated as beginning to carry on the separate programme trade—

(a) when pre-production begins, or (b) if earlier, when any income from the relevant programme is received

by the company.

1216BA Calculation of profits or losses of separate programme trade

(1) This section applies for the purpose of calculating the profits or losses of the separate programme trade.

(2) For the first period of account the following are brought into account— (a) as a debit, the costs of the relevant programme incurred (and

represented in work done) to date, and (b) as a credit, the proportion of the estimated total income from the

relevant programme treated as earned at the end of that period.

(3) For subsequent periods of account the following are brought into account— (a) as a debit, the difference between the amount of the costs of the

relevant programme incurred (and represented in work done) to date and the corresponding amount for the previous period, and

(b) as a credit, the difference between the proportion of the estimated total income from the relevant programme treated as earned at the end of that period and the corresponding amount for the previous period.

(4) The proportion of the estimated total income treated as earned at the end of a period of account is given by—

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where—

C is the total to date of costs incurred (and represented in work done),

T is the estimated total cost of the relevant programme, and

I is the estimated total income from the relevant programme.

Supplementary

1216BB Income from the relevant programme

(1) References in this Chapter to income from the relevant programme are to any receipts by the company in connection with the making or exploitation of the programme.

(2) This includes— (a) receipts from the sale of the programme or rights in it, (b) royalties or other payments for use of the programme or aspects of

it (for example, characters or music), (c) payments for rights to produce games or other merchandise, and (d) receipts by the company by way of a profit share agreement.

(3) Receipts that (apart from this subsection) would be regarded as of a capital nature are treated as being of a revenue nature.

1216BC Costs of the relevant programme

(1) References in this Chapter to the costs of the relevant programme are to expenditure incurred by the company on—

(a) television production activities in connection with the programme, or

(b) activities with a view to exploiting the programme.

(2) This is subject to any provision of the Corporation Tax Acts prohibiting the making of a deduction, or restricting the extent to which a deduction is allowed, in calculating the profits of a trade.

(3) Expenditure that (apart from this subsection) would be regarded as of a capital nature by reason only of being incurred on the creation of an asset (the relevant programme) is treated as being of a revenue nature.

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1216BD When costs are taken to be incurred

(1) For the purposes of this Chapter costs are incurred when they are represented in the state of completion of the work in progress.

(2) Accordingly— (a) payments in advance for work to be done are ignored until the work

has been carried out, and (b) deferred payments are recognised to the extent that the work is

represented in the state of completion.

(3) The costs incurred on the relevant programme are taken to include an amount that has not been paid only if it is the subject of an unconditional obligation to pay.

(4) If an obligation is linked to income being earned from the relevant programme, no amount is to be brought into account in respect of the costs of the obligation unless an appropriate amount of income is or has been brought into account.

1216BE Pre-trading expenditure

(1) This section applies if, before the company began to carry on the separate programme trade, it incurred expenditure on development of the relevant programme.

(2) The expenditure may be treated as expenditure of the separate programme trade and as if incurred immediately after the company began to carry on that trade.

(3) If expenditure so treated has previously been taken into account for other tax purposes, the company must amend any relevant company tax return accordingly.

(4) Any amendment or assessment necessary to give effect to subsection (3) may be made despite any limitation on the time within which an amendment or assessment may normally be made.

1216BF Estimates

Estimates for the purposes of this Chapter must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances.

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CHAPTER 3

TELEVISION TAX RELIEF

Introductory

1216C Availability and overview of television tax relief

(1) This Chapter applies for corporation tax purposes to a company that is the television production company in relation to a relevant programme.

(2) Relief under this Chapter (“television tax relief”) is available to the company if the conditions specified in the following sections are met in relation to the programme—

(a) section 1216CA (intended for broadcast), (b) section 1216CB (British programme), and (c) section 1216CE (UK expenditure).

(3) Television tax relief is given by way of— (a) additional deductions (see sections 1216CF and 1216CG), and (b) television tax credits (see sections 1216CH to 1216CJ).

(4) But television tax relief is not available in respect of any expenditure if— (a) the company is entitled to an R&D expenditure credit under Chapter

6A of Part 3 in respect of the expenditure, or (b) the company has obtained relief under Part 13 (additional relief

for expenditure on research and development) in respect of the expenditure.

(5) Sections 1216CK to 1216CN contain provision about unpaid costs, artificially inflated claims and confidentiality of information.

(6) In this Chapter “the separate programme trade” means the company's separate trade in relation to the relevant programme (see section 1216B).

(7) See Schedule 18 to FA 1998 (in particular, Part 9D) for information about the procedure for making claims for television tax relief.

“Intended for broadcast”

1216CA Intended for broadcast

(1) The relevant programme must be intended for broadcast to the general public.

(2) Whether this condition is met is determined when television production activities begin, so that—

(a) where a relevant programme is originally intended for broadcast, this condition continues to be met even if that ceases to be the intention, and

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(b) where a relevant programme is not originally intended for broadcast, this condition is not met even if that becomes the intention.

British programmes

1216CB British programme

(1) The relevant programme must be certified by the Secretary of State as a British programme.

(2) The Secretary of State, with the approval of the Treasury, may by regulations specify conditions which must be met by a relevant programme before it may be certified as a British programme.

These conditions are known as the “cultural test”.

(3) Regulations under subsection (2) may— (a) specify different conditions in relation to different descriptions of

relevant programme, (b) provide that specified descriptions of programme may not be

certified as a British programme, and (c) enable the Secretary of State to direct that any provision made by

virtue of paragraph (b) does not apply to a programme that meets specified conditions.

“Specified” means specified in the regulations.

(4) Regulations under subsection (2) are to be made by statutory instrument.

(5) A statutory instrument containing regulations under subsection (2) is subject to annulment in pursuance of a resolution of the House of Commons.

(6) Sections 1216CC and 1216CD contain further provision about certification of programmes as British programmes, including provision about applications for, and withdrawal of, certification.

1216CC Applications for certification

(1) An application for certification of a relevant programme as a British programme is to be made to the Secretary of State by the television production company.

(2) The application may be for an interim or final certificate.

(3) An interim certificate is a certificate that— (a) is granted before the programme is completed, and (b) states that the programme, if completed in accordance with the

proposals set out in the application, will be a British programme.

(4) A final certificate is a certificate that— (a) is granted after the programme is completed, and (b) states that the programme is a British programme.

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(5) The applicant must provide the Secretary of State with any documents or information which the Secretary of State requires in order to determine the application.

(6) The Secretary of State may require information provided for the purposes of the application to be accompanied by a statutory declaration, made by the person providing it, as to the truth of the information.

(7) The Secretary of State may by regulations make provision supplementing this section, including—

(a) provision about the form of applications, (b) provision about the particulars and evidence necessary for satisfying

the Secretary of State that a programme meets the cultural test, and (c) provision that any statutory declaration which is required by

subsection (6) to be made by any person may be made on the person's behalf by such person as is specified in the regulations.

(8) Regulations under subsection (7) are to be made by statutory instrument.

(9) A statutory instrument containing regulations under subsection (7) is subject to annulment in pursuance of a resolution of the House of Commons.

1216CD Certification and withdrawal of certification

(1) If the Secretary of State is satisfied that the requirements are met for interim or final certification of a relevant programme as a British programme, the Secretary of State must certify the programme accordingly.

(2) If the Secretary of State is not satisfied that those requirements are met, the Secretary of State must refuse the application.

(3) An interim certificate— (a) may be given subject to conditions, and (unless the Secretary of State

directs otherwise) is of no effect if the conditions are not met, and (b) may be expressed to expire after a specified period, and (unless the

Secretary of State directs otherwise) ceases to have effect at the end of that period.

(4) An interim certificate ceases to have effect when a final certificate is issued.

(5) If it appears to the Secretary of State that a relevant programme certified under this Part ought not to have been certified, the Secretary of State may revoke its certification.

(6) Unless the Secretary of State directs otherwise, a certificate that is revoked is treated as never having had effect.

UK expenditure

1216CE UK expenditure

(1) At least 25% of the core expenditure on the relevant programme incurred—

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(a) in the case of a British programme that is not a qualifying co- production, by the company, and

(b) in the case of a qualifying co-production, by the co-producers, must be UK expenditure.

(2) The Treasury may by regulations amend the percentage specified in subsection (1).

Additional deductions

1216CF Additional deduction for qualifying expenditure

(1) If television tax relief is available to the company, it may (on making a claim) make an additional deduction in respect of qualifying expenditure on the relevant programme.

(2) The deduction is made in calculating the profit or loss of the separate programme trade.

(3) In this Chapter “qualifying expenditure” means core expenditure on the relevant programme that falls to be taken into account under Chapter 2 in calculating the profit or loss of the separate programme trade for tax purposes.

(4) The Treasury may by regulations— (a) amend subsection (3), and (b) provide that expenditure of a specified description is or is not to be

regarded as qualifying expenditure.

1216CG Amount of additional deduction

(1) For the first period of account during which the separate programme trade is carried on, the amount of the additional deduction is—

where E is— a so much of the qualifying expenditure as is UK expenditure, or b if less, 80% of the total amount of qualifying expenditure.

(2) For any period of account after the first, the amount of the additional deduction is given by—

where—

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E is— (a) so much of the qualifying expenditure incurred to date as is UK

expenditure, or (b) if less, 80% of the total amount of qualifying expenditure incurred to

date, and

P is the total amount of the additional deductions given for previous periods.

(3) The Treasury may by regulations amend this section.

Television tax credits

1216CH Television tax credit claimable if company has surrenderable loss

(1) If television tax relief is available to the company, it may claim a television tax credit for an accounting period in which it has a surrenderable loss.

(2) The company's surrenderable loss in an accounting period is— (a) the company's available loss for the period in the separate

programme trade (see subsection (3)), or (b) if less, the available qualifying expenditure for the period (see

subsections (5) and (6)).

(3) The company's available loss for an accounting period is given by—

where—

L is the amount of the company's loss for the period in the separate programme trade, and

RUL is the amount of any relevant unused loss of the company (see subsection (4)).

(4) The “relevant unused loss” of a company is so much of any available loss of the company for the previous accounting period as has not been—

(a) surrendered under section 1216CI(1), or (b) carried forward under section 45 of CTA 2010 and set against profits

of the separate programme trade.

(5) For the first period of account during which the separate programme trade is carried on, the available qualifying expenditure is the amount that is E for that period for the purposes of section 1216CG(1).

(6) For any period of account after the first, the available qualifying expenditure is given by—

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where—

E is the amount that is E for that period for the purposes of section 1216CG(2), and

S is the total amount previously surrendered under section 1216CI(1).

(7) If a period of account of the separate programme trade does not coincide with an accounting period, any necessary apportionments are to be made by reference to the number of days in the periods concerned.

1216CI Surrendering of loss and amount of television tax credit

(1) The company may surrender the whole or part of its surrenderable loss in an accounting period.

(2) If the company surrenders the whole or part of that loss, the amount of the television tax credit to which it is entitled for the accounting period is 25% of the amount of the loss surrendered.

(3) The company's available loss for the accounting period is reduced by the amount surrendered.

1216CJ Payment in respect of television tax credit

(1) If the company— (a) is entitled to a television tax credit for a period, and (b) makes a claim,

the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) must pay to the company the amount of the credit.

(2) An amount payable in respect of— (a) a television tax credit, or (b) interest on a television tax credit under section 826 of ICTA,

may be applied in discharging any liability of the company to pay corporation tax.

To the extent that it is so applied the Commissioners' liability under subsection (1) is discharged.

(3) If the company's company tax return for the accounting period is enquired into by the Commissioners, no payment in respect of a television tax credit for that period need be made before the Commissioners' enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998).

In those circumstances the Commissioners may make a payment on a provisional basis of such amount as they consider appropriate.

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(4) No payment need be made in respect of a television tax credit for an accounting period before the company has paid to the Commissioners any amount that it is required to pay for payment periods ending in that accounting period—

(a) under PAYE regulations, (b) under section 966 of ITA 2007 (visiting performers), or (c) in respect of Class 1 national insurance contributions under Part 1

of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

(5) A payment in respect of a television tax credit is not income of the company for any tax purpose.

Miscellaneous

1216CK No account to be taken of amount if unpaid

(1) In determining for the purposes of this Chapter the amount of costs incurred on a relevant programme at the end of a period of account, ignore any amount that has not been paid 4 months after the end of that period.

(2) This is without prejudice to the operation of section 1216BD (when costs are taken to be incurred).

1216CL Artificially inflated claims for additional deduction or tax credit

(1) So far as a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be ignored in determining for any period—

(a) any additional deduction which a company may make under this Chapter, and

(b) any television tax credit to be given to a company.

(2) Arrangements are entered into wholly or mainly for a disqualifying purpose if their main object, or one of their main objects, is to enable a company to obtain—

(a) an additional deduction under this Chapter to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled, or

(b) a television tax credit to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled.

(3) “Arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

1216CM Confidentiality of information

(1) Section 18(1) of the Commissioners for Revenue and Customs Act 2005 (restriction on disclosure by Revenue and Customs officials) does not

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prevent disclosure to the Secretary of State for the purposes of the Secretary of State's functions under any of the provisions listed in subsection (2).

(2) The provisions referred to in subsection (1) are— (a) sections 1216CB to 1216CD (certification of relevant programmes

as British), (b) sections 1217CB to 1217CD (certification of video games as

British), and (c) Schedule 1 to the Films Act 1985 (certification of films as British).

(3) Information so disclosed may be disclosed to the British Film Institute.

(4) The Treasury may by order amend subsection (3)— (a) so as to substitute for the person or body specified in that subsection

a different person or body, or (b) in consequence of a change in the name of the person or body so

specified.

(5) A person to whom information is disclosed under subsection (1) or (3) may not otherwise disclose it except—

(a) for the purposes of the Secretary of State's functions under any of the provisions listed in subsection (2),

(b) if the disclosure is authorised by an enactment, (c) in pursuance of an order of a court, (d) for the purposes of a criminal investigation or legal proceedings

(whether civil or criminal) connected with the operation of any of Parts 15 to 15B of this Act or Schedule 1 to the Films Act 1985,

(e) with the consent of the Commissioners for Her Majesty's Revenue and Customs, or

(f) with the consent of each person to whom the information relates.

1216CN Wrongful disclosure

(1) A person (“X”) commits an offence if— (a) X discloses revenue and customs information relating to a person

(as defined in section 19(2) of the Commissioners for Revenue and Customs Act 2005),

(b) the identity of the person to whom the information relates is specified in the disclosure or can be deduced from it, and

(2) If a person (“Y”) is charged with an offence under subsection (1), it is a defence for Y to prove that Y reasonably believed—

(a) that the disclosure was lawful, or (b) that the information had already and lawfully been made available

to the public.

(3) A person guilty of an offence under subsection (1) is liable— (a) on conviction on indictment, to imprisonment for a term not

exceeding two years or a fine or both, or (b) on summary conviction, to imprisonment for a term not exceeding

12 months or a fine not exceeding the statutory maximum or both.

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(4) A prosecution for an offence under subsection (1) may be brought in England and Wales only—

(a) by the Director of Revenue and Customs Prosecutions, or (b) with the consent of the Director of Public Prosecutions.

(5) A prosecution for an offence under subsection (1) may be brought in Northern Ireland only—

(a) by the Commissioners for Her Majesty's Revenue and Customs, or (b) with the consent of the Director of Public Prosecutions for Northern

Ireland.

(6) In the application of this section— (a) in England and Wales, in relation to an offence committed before the

commencement of section 282 of the Criminal Justice Act 2003, or (b) in Northern Ireland,

the reference in subsection (3)(b) to 12 months is to be read as a reference to 6 months.

CHAPTER 4

PROGRAMME LOSSES

1216D Application of sections 1216DA and 1216DB

(1) Sections 1216DA and 1216DB apply to a company that is the television production company in relation to a relevant programme.

(2) In those sections— “the completion period” means the accounting period of the

company— (a) in which the relevant programme is completed, or (b) if the company does not complete the relevant programme, in

which it abandons television production activities in relation to the programme,

“loss relief” includes any means by which a loss might be used to reduce the amount in respect of which the company, or any other person, is chargeable to tax,

“pre-completion period” means an accounting period of the company before the completion period, and

“the separate programme trade” means the company's separate trade in relation to the relevant programme (see section 1216B).

1216DA Restriction on use of losses while programme in production

(1) This section applies if in a pre-completion period a loss is made in the separate programme trade.

(2) The loss is not available for loss relief except to the extent that it may be carried forward under section 45 of CTA 2010 to be set against profits of the separate programme trade in a subsequent period.

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1216DB Use of losses in later periods

(1) This section applies to the following accounting periods of the company (“relevant later periods”)—

(a) the completion period, and (b) any subsequent accounting period during which the separate

programme trade continues.

(2) Subsection (3) applies if a loss made in the separate programme trade is carried forward under section 45 of CTA 2010 from a pre-completion period to a relevant later period.

(3) So much (if any) of the loss as is not attributable to television tax relief (see subsection (6)) may be treated for the purposes of loss relief as if it were a loss made in the period to which it is carried forward.

(4) Subsection (5) applies if in a relevant later period a loss is made in the separate programme trade.

(5) The amount of the loss that may be— (a) deducted from total profits of the same or an earlier period under

section 37 of CTA 2010, or (b) surrendered as group relief under Part 5 of that Act,

is restricted to the amount (if any) that is not attributable to television tax relief (see subsection (6)).

(6) The amount of a loss in any period that is attributable to television tax relief is calculated by deducting from the total amount of the loss the amount there would have been if there had been no additional deduction under Chapter 3 in that or any earlier period.

(7) This section does not apply to a loss to the extent that it is carried forward or surrendered under section 1216DC.

1216DC Terminal losses

(1) This section applies if— (a) a company (“company A”) is the television production company in

relation to a qualifying programme, (b) company A ceases to carry on its separate trade in relation to that

programme (“trade X”) (see section 1216B), and (c) if company A had not ceased to carry on trade X, it could have

carried forward an amount under section 45 of CTA 2010 to be set against profits of trade X in a later period (“the terminal loss”).

(2) If on cessation of trade X company A— (a) is the television production company in relation to another

qualifying programme, and (b) is carrying on its separate trade in relation to that programme (“trade

Y”), it may (on making a claim) make an election under subsection (3).

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(3) The election is to have the terminal loss (or a part of it) treated as if it were a loss brought forward under section 45 of CTA 2010 to be set against the profits of trade Y in the first accounting period beginning after the cessation and so on.

(4) Subsection (5) applies if on cessation of trade X— (a) there is another company (“company B”) that is the television

production company in relation to a qualifying programme, (b) company B is carrying on its separate trade in relation to that

programme (“trade Z”), and (c) company B is in the same group as company A for the purposes of

Part 5 of CTA 2010 (group relief).

(5) Company A may surrender the terminal loss (or a part of it) to company B.

(6) On the making of a claim by company B the amount surrendered is treated as if it were a loss brought forward by company B under section 45 of CTA 2010 to be set against the profits of trade Z of the first accounting period of that company beginning after the cessation and so on.

(7) The Treasury may, in relation to the surrender of a loss under subsection (5) and the resulting claim under subsection (6), make provision by regulations corresponding, subject to such adaptations or other modifications as appear to them to be appropriate, to that made by Part 8 of Schedule 18 to FA 1998 (company tax returns: claims for group relief).

(8) “Qualifying programme” means a relevant programme in relation to which the conditions for television tax relief are met (see 1216C(2)).

CHAPTER 5

PROVISIONAL ENTITLEMENT TO RELIEF

1216E Introduction

(1) In this Chapter— “the company” means the television production company in

relation to a relevant programme, “the completion period” means the accounting period of the

company— (a) in which the relevant programme is completed, or (b) if the company does not complete the relevant programme, in

which it abandons television production activities in relation to it,

“interim accounting period” means any earlier accounting period of the company during which television production activities are carried on in relation to the relevant programme,

“interim certificate” and “final certificate” have the meaning given by section 1216CC,

“the separate programme trade” means the company's separate trade in relation to the relevant programme (see section 1216B), and

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“special television relief” means— (a) television tax relief, or (b) relief under section 1216DC (transfer of terminal losses from

one relevant programme to another).

(2) The company's company tax return for the completion period must state that the relevant programme has been completed or that the company has abandoned television production activities in relation to it (as the case may be).

1216EA Certification as a British programme

(1) The company is not entitled to special television relief for an interim accounting period unless its company tax return for the period is accompanied by an interim certificate.

(2) If an interim certificate ceases to be in force (otherwise than on being superseded by a final certificate) or is revoked, the company—

(a) is not entitled to special television relief for any period for which its entitlement depended on the certificate, and

(b) must amend accordingly its company tax return for any such period.

(3) If the relevant programme is completed by the company— (a) its company tax return for the completion period must be

accompanied by a final certificate, (b) if that requirement is met, the final certificate has effect for the

completion period and for any interim accounting period, and (c) if that requirement is not met, the company—

(i) is not entitled to special television relief for any period, and (ii) must amend accordingly its company tax return for any

period for which such relief was claimed.

(4) If the company abandons television production activities in relation to the relevant programme—

(a) its company tax return for the completion period may be accompanied by an interim certificate, and

(b) the abandonment of television production activities does not affect any entitlement to special television relief in that or any previous accounting period.

(5) If a final certificate is revoked, the company— (a) is not entitled to special television relief for any period, and (b) must amend accordingly its company tax return for any period for

which such relief was claimed.

1216EB The UK expenditure condition

(1) The company is not entitled to special television relief for an interim accounting period unless—

(a) its company tax return for the period states the amount of planned core expenditure on the relevant programme that is UK expenditure, and

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(b) that amount is such as to indicate that the condition in section 1216CE (the UK expenditure condition) will be met on completion of the programme.

If those requirements are met, the company is provisionally treated in relation to that period as if that condition was met.

(2) If such a statement is made but it subsequently appears that the condition will not be met on completion of the programme, the company—

(a) is not entitled to special television relief for any period for which its entitlement depended on such a statement, and

(b) must amend accordingly its company tax return for any such period.

(3) When the relevant programme is completed or the company abandons television production activities in relation to it (as the case may be), the company's company tax return for the completion period must be accompanied by a final statement of the amount of core expenditure on the programme that is UK expenditure.

(4) If that statement shows that the condition in section 1216CE is not met, the company—

(a) is not entitled to special television relief for any period, and (b) must amend accordingly its company tax return for any period for

which such relief was claimed.

1216EC Time limit for amendments and assessments

Any amendment or assessment necessary to give effect to the provisions of this Chapter may be made despite any limitation on the time within which an amendment or assessment may normally be made.”

PART 2

COMMENCEMENT 2 (1) Any power conferred on the Secretary of State or the Treasury by virtue of this

Schedule to make regulations or an order comes into force on the day on which this Act is passed.

(2) So far as not already brought into force by sub-paragraph (1), the amendments made by this Schedule come into force in accordance with provision contained in an order made by the Treasury.

(3) An order under sub-paragraph (2)— (a) may make different provision for different purposes; (b) may make such adaptations of Part 15A of CTA 2009 as appear to be

necessary or expedient in consequence of other provisions of this Act not yet having come into force.

3 (1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after 1 April 2013.

(2) Sub-paragraph (3) applies where a company has an accounting period beginning before 1 April 2013 and ending on or after that date (“the straddling period”).

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(3) For the purposes of Part 15A of CTA 2009— (a) so much of the straddling period as falls before 1 April 2013, and so much

of that period as falls on or after that date, are treated as separate accounting periods, and

(b) any amounts brought into account for the purposes of calculating for corporation tax purposes the profits of any trade of the company for the straddling period are apportioned to the two separate accounting periods on such basis as is just and reasonable.

SCHEDULE 17 Section 36

TAX RELIEF FOR VIDEO GAMES DEVELOPMENT

PART 1

AMENDMENTS OF CTA 2009 1 After Part 15A of CTA 2009 (inserted by Schedule 16 above) insert—

“PART 15B

VIDEO GAMES DEVELOPMENT

CHAPTER 1

INTRODUCTION

Introductory

1217A Overview of Part

(1) This Part is about video games development.

(2) Sections 1217AA to 1217AF contain definitions and other provisions about interpretation that apply for the purposes of this Part. See, in particular—

(a) section 1217AA, which contains provision about the meaning of “video game”, and

(b) section 1217AB, which explains how a company comes to be treated as the video games development company in relation to a video game.

(3) Chapter 2 is about the taxation of the activities of a video games development company and includes—

(a) provision for the company's activities in relation to its video game to be treated as a separate trade, and

(b) provision about the calculation of the profits and losses of that trade.

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(4) Chapter 3 is about relief (called “video games tax relief”) which can be given to a video games development company—

(a) by way of additional deductions to be made in calculating the profits or losses of the company's separate trade, or

(b) by way of a payment (a “video game tax credit”) to be made on the company's surrender of losses from that trade.

(5) Chapter 4 is about the relief which can be given for losses made by a video games development company in its separate trade, including provision for certain such losses to be transferred to other separate trades.

(6) Chapter 5 provides— (a) for relief under Chapters 3 and 4 to be given on a provisional basis,

and (b) for such relief to be withdrawn if it turns out that conditions that

must be met for such relief to be given are not actually met.

Interpretation

1217AA “Video game” etc

(1) This section applies for the purposes of this Part.

(2) “Video game” does not include— (a) anything produced for advertising or promotional purposes, or (b) anything produced for the purposes of gambling (within the meaning

of the Gambling Act 2005).

(3) References to a video game include the game's soundtrack.

(4) A video game is completed when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and made available to the general public.

1217AB Video games development company

(1) For the purposes of this Part “video games development company” is to be read in accordance with this section.

(2) There cannot be more than one video games development company in relation to a video game.

(3) A company is the video games development company in relation to a video game if the company (otherwise than in partnership)—

(a) is responsible for designing, producing and testing the video game, (b) is actively engaged in planning and decision-making during the

design, production and testing of the video game, and (c) directly negotiates, contracts and pays for rights, goods and services

in relation to the video game.

(4) If there is more than one company meeting the description in subsection (3), the company that is most directly engaged in the activities referred to in that

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subsection is the video games development company in relation to the video game.

(5) If there is no company meeting the description in subsection (3), there is no video games development company in relation to the video game.

(6) A company may elect to be regarded as a company which does not meet the description in subsection (3).

(7) The election— (a) must be made by the company by being included in its company tax

return for an accounting period (and may be included in the return originally made or by amendment), and

(b) may be withdrawn by the company only by amending its company tax return for that accounting period.

(8) The election has effect in relation to video games which begin to be produced in that or any subsequent accounting period.

1217AC “Video game development activities” etc

(1) In this Part “video game development activities”, in relation to a video game, means the activities involved in designing, producing and testing the video game.

(2) The Treasury may by regulations— (a) amend subsection (1), (b) provide that specified activities are or are not to be regarded as

video game development activities or as video game development activities of a particular description, and

(c) provide that, in relation to a specified description of video game, references to video game development activities of a particular description are to be read as references to such activities as may be specified.

“Specified” means specified in the regulations.

1217AD “Core expenditure”

(1) In this Part “core expenditure”, in relation to a video game, means expenditure on designing, producing and testing the video game.

(2) But the following descriptions of expenditure are not to be regarded as core expenditure for the purposes of this Part—

(a) any expenditure incurred in designing the initial concept for a video game;

(b) any expenditure incurred in debugging a completed video game or carrying out any maintenance in connection with such a video game.

1217AE “UK expenditure” etc

(1) In this Part “UK expenditure”, in relation to a video game, means expenditure on goods or services that are used or consumed in the United Kingdom.

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(2) Any apportionment of expenditure as between UK expenditure and non- UK expenditure for the purposes of this Part is to be made on a just and reasonable basis.

(3) The Treasury may by regulations amend subsection (1).

1217AF “Company tax return”

In this Part “company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1)).

CHAPTER 2

TAXATION OF ACTIVITIES OF VIDEO GAMES DEVELOPMENT COMPANY

Separate video game trade

1217B Activities of video games development company treated as a separate trade

(1) This Chapter applies for corporation tax purposes to a company that is the video games development company in relation to a video game.

(2) The company's activities in relation to the video game are treated as a trade separate from any other activities of the company (including any activities in relation to any other video game).

(3) In this Chapter the separate trade is called “the separate video game trade”.

(4) The company is treated as beginning to carry on the separate video game trade—

(a) when the design of the video game begins, or (b) if earlier, when any income from the video game is received by the

company.

1217BA Calculation of profits or losses of separate video game trade

(1) This section applies for the purpose of calculating the profits or losses of the separate video game trade.

(2) For the first period of account the following are brought into account— (a) as a debit, the costs of the video game incurred (and represented in

work done) to date, and (b) as a credit, the proportion of the estimated total income from the

video game treated as earned at the end of that period.

(3) For subsequent periods of account the following are brought into account— (a) as a debit, the difference between the amount of the costs of the

video game incurred (and represented in work done) to date and the corresponding amount for the previous period, and

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(b) as a credit, the difference between the proportion of the estimated total income from the video game treated as earned at the end of that period and the corresponding amount for the previous period.

(4) The proportion of the estimated total income treated as earned at the end of a period of account is given by—

where—

C is the total to date of costs incurred (and represented in work done),

T is the estimated total cost of the video game, and

I is the estimated total income from the video game.

Supplementary

1217BB Income from the video game

(1) References in this Chapter to income from the video game are to any receipts by the company in connection with the production or exploitation of the video game.

(2) This includes— (a) receipts from the sale of the video game or rights in it, (b) royalties or other payments for use of the video game or aspects of

it (for example, characters or music), (c) payments for rights to produce games or other merchandise, and (d) receipts by the company by way of a profit share agreement.

(3) Receipts that (apart from this subsection) would be regarded as of a capital nature are treated as being of a revenue nature.

1217BC Costs of the video game

(1) References in this Chapter to the costs of the video game are to expenditure incurred by the company on—

(a) video game development activities in connection with the video game, or

(b) activities with a view to exploiting the video game.

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(3) Expenditure that (apart from this subsection) would be regarded as of a capital nature by reason only of being incurred on the creation of an asset (the video game) is treated as being of a revenue nature.

1217BD When costs are taken to be incurred

(1) For the purposes of this Chapter costs are incurred when they are represented in the state of completion of the work in progress.

(2) Accordingly— (a) payments in advance for work to be done are ignored until the work

has been carried out, and (b) deferred payments are recognised to the extent that the work is

represented in the state of completion.

(3) The costs incurred on the video game are taken to include an amount that has not been paid only if it is the subject of an unconditional obligation to pay.

(4) If an obligation is linked to income being earned from the video game, no amount is to be brought into account in respect of the costs of the obligation unless an appropriate amount of income is or has been brought into account.

1217BE Estimates

Estimates for the purposes of this Chapter must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances.

CHAPTER 3

VIDEO GAMES TAX RELIEF

Introductory

1217C Availability and overview of video games tax relief

(1) This Chapter applies for corporation tax purposes to a company that is the video games development company in relation to a video game.

(2) Relief under this Chapter (“video games tax relief”) is available to the company if the conditions specified in the following sections are met in relation to the video game—

(a) section 1217CA (intended for supply), (b) section 1217CB (British video game), and (c) section 1217CE (UK expenditure).

(3) Video games tax relief is given by way of— (a) additional deductions (see sections 1217CF and 1217CG), and (b) video game tax credits (see sections 1217CH to 1217CJ).

(4) But video games tax relief is not available in respect of any expenditure if—

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(a) the company is entitled to an R&D expenditure credit under Chapter 6A of Part 3 in respect of the expenditure, or

(b) the company has obtained relief under Part 13 (additional relief for expenditure on research and development) in respect of the expenditure.

(5) Sections 1217CK to 1217CN contain provision about unpaid costs, artificially inflated claims and confidentiality of information.

(6) In this Chapter “the separate video game trade” means the company's separate trade in relation to the video game (see section 1217B).

(7) See Schedule 18 to FA 1998 (in particular, Part 9D) for information about the procedure for making claims for video games tax relief.

“Intended for supply”

1217CA Intended for supply

(1) The video game must be intended for supply to the general public.

(2) Whether this condition is met is determined when video game production activities begin, so that—

(a) where a video game is originally intended for supply, this condition continues to be met even if that ceases to be the intention, and

(b) where a video game is not originally intended for supply, this condition is not met even if that becomes the intention.

British video games

1217CB British video game

(1) The video game must be certified by the Secretary of State as a British video game.

(2) The Secretary of State, with the approval of the Treasury, may by regulations specify conditions which must be met by a video game before it may be certified as a British video game.

These conditions are known as the “cultural test”.

(3) Regulations under subsection (2) may— (a) specify different conditions in relation to different descriptions of

video game, (b) provide that specified descriptions of video game may not be

certified as a British video game, and (c) enable the Secretary of State to direct that any provision made by

virtue of paragraph (b) does not apply to a video game that meets specified conditions.

“Specified” means specified in the regulations.

(4) Regulations under subsection (2) are to be made by statutory instrument.

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(5) A statutory instrument containing regulations under subsection (2) is subject to annulment in pursuance of a resolution of the House of Commons.

(6) Sections 1217CC and 1217CD contain further provision about certification of video games as British video games, including provision about applications for, and withdrawal of, certification.

1217CC Applications for certification

(1) An application for certification of a video game as a British video game is to be made to the Secretary of State by the video games development company.

(2) The application may be for an interim or final certificate.

(3) An interim certificate is a certificate that— (a) is granted before the video game is completed, and (b) states that the video game, if completed in accordance with the

proposals set out in the application, will be a British video game.

(4) A final certificate is a certificate that— (a) is granted after the video game is completed, and (b) states that the video game is a British video game.

(5) The applicant must provide the Secretary of State with any documents or information which the Secretary of State requires in order to determine the application.

(7) The Secretary of State may by regulations make provision supplementing this section, including—

(a) provision about the form of applications, (b) provision about the particulars and evidence necessary for satisfying

the Secretary of State that a video game meets the cultural test, and (c) provision that any statutory declaration which is required by

subsection (6) to be made by any person may be made on the person's behalf by such person as is specified in the regulations.

(8) Regulations under subsection (7) are to be made by statutory instrument.

(9) A statutory instrument containing regulations under subsection (7) is subject to annulment in pursuance of a resolution of the House of Commons.

1217CD Certification and withdrawal of certification

(1) If the Secretary of State is satisfied that the requirements are met for interim or final certification of a video game as a British video game, the Secretary of State must certify the video game accordingly.

(2) If the Secretary of State is not satisfied that those requirements are met, the Secretary of State must refuse the application.

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(3) An interim certificate— (a) may be given subject to conditions, and (unless the Secretary of State

directs otherwise) is of no effect if the conditions are not met, and (b) may be expressed to expire after a specified period, and (unless the

Secretary of State directs otherwise) ceases to have effect at the end of that period.

(4) An interim certificate ceases to have effect when a final certificate is issued.

(5) If it appears to the Secretary of State that a video game certified under this Part ought not to have been certified, the Secretary of State may revoke its certification.

(6) Unless the Secretary of State directs otherwise, a certificate that is revoked is treated as never having had effect.

UK expenditure

1217CE UK expenditure

(1) At least 25% of the core expenditure on the video game incurred by the company must be UK expenditure.

(2) The Treasury may by regulations amend the percentage specified in subsection (1).

Additional deductions

1217CF Additional deduction for qualifying expenditure

(1) If video games tax relief is available to the company, it may (on making a claim) make an additional deduction in respect of qualifying expenditure on the video game.

(2) The deduction is made in calculating the profit or loss of the separate video game trade.

(3) In this Chapter “qualifying expenditure” means core expenditure on the video game that falls to be taken into account under Chapter 2 in calculating the profit or loss of the separate video game trade for tax purposes.

(4) The Treasury may by regulations— (a) amend subsection (3), and (b) provide that expenditure of a specified description is or is not to be

regarded as qualifying expenditure.

1217CG Amount of additional deduction

(1) For the first period of account during which the separate video game trade is carried on, the amount of the additional deduction is—

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where E is— a so much of the qualifying expenditure as is UK expenditure, or b if less, 80% of the total amount of qualifying expenditure.

(2) For any period of account after the first, the amount of the additional deduction is given by—

where—

E is— (a) so much of the qualifying expenditure incurred to date as is UK

expenditure, or (b) if less, 80% of the total amount of qualifying expenditure incurred to

date, and

P is the total amount of the additional deductions given for previous periods.

(3) The Treasury may by regulations amend this section.

Video game tax credits

1217CH Video game tax credit claimable if company has surrenderable loss

(1) If video games tax relief is available to the company, it may claim a video game tax credit for an accounting period in which it has a surrenderable loss.

(2) The company's surrenderable loss in an accounting period is— (a) the company's available loss for the period in the separate video

game trade (see subsection (3)), or (b) if less, the available qualifying expenditure for the period (see

subsections (5) and (6)).

(3) The company's available loss for an accounting period is given by—

where—

L is the amount of the company's loss for the period in the separate video game trade, and

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RUL is the amount of any relevant unused loss of the company (see subsection (4)).

(4) The “relevant unused loss” of a company is so much of any available loss of the company for the previous accounting period as has not been—

(a) surrendered under section 1217CI(1), or (b) carried forward under section 45 of CTA 2010 and set against profits

of the separate video game trade.

(5) For the first period of account during which the separate video game trade is carried on, the available qualifying expenditure is the amount that is E for that period for the purposes of section 1217CG(1).

(6) For any period of account after the first, the available qualifying expenditure is given by—

where—

E is the amount that is E for that period for the purposes of section 1217CG(2), and

S is the total amount previously surrendered under section 1217CI(1).

(7) If a period of account of the separate video game trade does not coincide with an accounting period, any necessary apportionments are to be made by reference to the number of days in the periods concerned.

1217CI Surrendering of loss and amount of video game tax credit

(1) The company may surrender the whole or part of its surrenderable loss in an accounting period.

(2) If the company surrenders the whole or part of that loss, the amount of the video game tax credit to which it is entitled for the accounting period is 25% of the amount of the loss surrendered.

(3) The company's available loss for the accounting period is reduced by the amount surrendered.

1217CJ Payment in respect of video game tax credit

(1) If the company— (a) is entitled to a video game tax credit for a period, and (b) makes a claim,

the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) must pay to the company the amount of the credit.

(2) An amount payable in respect of— (a) a video game tax credit, or

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(b) interest on a video game tax credit under section 826 of ICTA, may be applied in discharging any liability of the company to pay corporation tax.

To the extent that it is so applied the Commissioners' liability under subsection (1) is discharged.

(3) If the company's company tax return for the accounting period is enquired into by the Commissioners, no payment in respect of a video game tax credit for that period need be made before the Commissioners' enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998).

In those circumstances the Commissioners may make a payment on a provisional basis of such amount as they consider appropriate.

(4) No payment need be made in respect of a video game tax credit for an accounting period before the company has paid to the Commissioners any amount that it is required to pay for payment periods ending in that accounting period—

(a) under PAYE regulations, (b) under section 966 of ITA 2007 (visiting performers), or (c) in respect of Class 1 national insurance contributions under Part 1

of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

(5) A payment in respect of a video game tax credit is not income of the company for any tax purpose.

Miscellaneous

1217CK No account to be taken of amount if unpaid

(1) In determining for the purposes of this Chapter the amount of costs incurred on a video game at the end of a period of account, ignore any amount that has not been paid 4 months after the end of that period.

(2) This is without prejudice to the operation of section 1217BD (when costs are taken to be incurred).

1217CL Artificially inflated claims for additional deduction or tax credit

(1) So far as a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be ignored in determining for any period—

(a) any additional deduction which a company may make under this Chapter, and

(b) any video game tax credit to be given to a company.

(2) Arrangements are entered into wholly or mainly for a disqualifying purpose if their main object, or one of their main objects, is to enable a company to obtain—

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(a) an additional deduction under this Chapter to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled, or

(b) a video game tax credit to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled.

(3) “Arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

1217CM Confidentiality of information

(1) Section 18(1) of the Commissioners for Revenue and Customs Act 2005 (restriction on disclosure by Revenue and Customs officials) does not prevent disclosure to the Secretary of State for the purposes of the Secretary of State's functions under any of the provisions listed in subsection (2).

(2) The provisions referred to in subsection (1) are— (a) sections 1216CB to 1216CD (certification of relevant programmes

as British), (b) sections 1217CB to 1217CD (certification of video games as

British), and (c) Schedule 1 to the Films Act 1985 (certification of films as British).

(3) Information so disclosed may be disclosed to the British Film Institute.

(4) The Treasury may by order amend subsection (3)— (a) so as to substitute for the person or body specified in that subsection

a different person or body, or (b) in consequence of a change in the name of the person or body so

specified.

(5) A person to whom information is disclosed under subsection (1) or (3) may not otherwise disclose it except—

(a) for the purposes of the Secretary of State's functions under any of the provisions listed in subsection (2),

(b) if the disclosure is authorised by an enactment, (c) in pursuance of an order of a court, (d) for the purposes of a criminal investigation or legal proceedings

(whether civil or criminal) connected with the operation of any of Parts 15 to 15B of this Act or Schedule 1 to the Films Act 1985,

(e) with the consent of the Commissioners for Her Majesty's Revenue and Customs, or

(f) with the consent of each person to whom the information relates.

1217CN Wrongful disclosure

(1) A person (“X”) commits an offence if— (a) X discloses revenue and customs information relating to a person

(as defined in section 19(2) of the Commissioners for Revenue and Customs Act 2005),

(b) the identity of the person to whom the information relates is specified in the disclosure or can be deduced from it, and

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(2) If a person (“Y”) is charged with an offence under subsection (1), it is a defence for Y to prove that Y reasonably believed—

(a) that the disclosure was lawful, or (b) that the information had already and lawfully been made available

to the public.

(3) A person guilty of an offence under subsection (1) is liable— (a) on conviction on indictment, to imprisonment for a term not

exceeding two years or a fine or both, or (b) on summary conviction, to imprisonment for a term not exceeding

12 months or a fine not exceeding the statutory maximum or both.

(4) A prosecution for an offence under subsection (1) may be brought in England and Wales only—

(a) by the Director of Revenue and Customs Prosecutions, or (b) with the consent of the Director of Public Prosecutions.

(5) A prosecution for an offence under subsection (1) may be brought in Northern Ireland only—

(a) by the Commissioners for Her Majesty's Revenue and Customs, or (b) with the consent of the Director of Public Prosecutions for Northern

Ireland.

(6) In the application of this section— (a) in England and Wales, in relation to an offence committed before the

commencement of section 282 of the Criminal Justice Act 2003, or (b) in Northern Ireland,

the reference in subsection (3)(b) to 12 months is to be read as a reference to 6 months.

CHAPTER 4

VIDEO GAME LOSSES

1217D Application of sections 1217DA and 1217DB

(1) Sections 1217DA and 1217DB apply to a company that is the video games development company in relation to a video game.

(2) In those sections— “the completion period” means the accounting period of the

company— (a) in which the video game is completed, or (b) if the company does not complete the video game, in which it

abandons video game development activities in relation to the video game,

“loss relief” includes any means by which a loss might be used to reduce the amount in respect of which the company, or any other person, is chargeable to tax,

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“pre-completion period” means an accounting period of the company before the completion period, and

“the separate video game trade” means the company's separate trade in relation to the video game (see section 1217B).

1217DA Restriction on use of losses while video game in development

(1) This section applies if in a pre-completion period a loss is made in the separate video game trade.

(2) The loss is not available for loss relief except to the extent that it may be carried forward under section 45 of CTA 2010 to be set against profits of the separate video game trade in a subsequent period.

1217DB Use of losses in later periods

(1) This section applies to the following accounting periods of the company (“relevant later periods”)—

(a) the completion period, and (b) any subsequent accounting period during which the separate video

game trade continues.

(2) Subsection (3) applies if a loss made in the separate video game trade is carried forward under section 45 of CTA 2010 from a pre-completion period to a relevant later period.

(3) So much (if any) of the loss as is not attributable to video games tax relief (see subsection (6)) may be treated for the purposes of loss relief as if it were a loss made in the period to which it is carried forward.

(4) Subsection (5) applies if in a relevant later period a loss is made in the separate video game trade.

(5) The amount of the loss that may be— (a) deducted from total profits of the same or an earlier period under

section 37 of CTA 2010, or (b) surrendered as group relief under Part 5 of that Act,

is restricted to the amount (if any) that is not attributable to video games tax relief (see subsection (6)).

(6) The amount of a loss in any period that is attributable to video games tax relief is calculated by deducting from the total amount of the loss the amount there would have been if there had been no additional deduction under Chapter 3 in that or any earlier period.

(7) This section does not apply to a loss to the extent that it is carried forward or surrendered under section 1217DC.

1217DC Terminal losses

(1) This section applies if— (a) a company (“company A”) is the video games development

company in relation to a qualifying video game,

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(b) company A ceases to carry on its separate trade in relation to that video game (“trade X”) (see section 1217B), and

(c) if company A had not ceased to carry on trade X, it could have carried forward an amount under section 45 of CTA 2010 to be set against profits of trade X in a later period (“the terminal loss”).

(2) If on cessation of trade X company A— (a) is the video games development company in relation to another

qualifying video game, and (b) is carrying on its separate trade in relation to that video game (“trade

Y”), it may (on making a claim) make an election under subsection (3).

(4) Subsection (5) applies if on cessation of trade X— (a) there is another company (“company B”) that is the video games

development company in relation to a qualifying video game, (b) company B is carrying on its separate trade in relation to that video

game (“trade Z”), and (c) company B is in the same group as company A for the purposes of

Part 5 of CTA 2010 (group relief).

(5) Company A may surrender the terminal loss (or a part of it) to company B.

(8) “Qualifying video game” means a video game in relation to which the conditions for video games tax relief are met (see 1217C(2)).

CHAPTER 5

PROVISIONAL ENTITLEMENT TO RELIEF

1217E Introduction

(1) In this Chapter— “the company” means the video games development company in

relation to a video game,

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“the completion period” means the accounting period of the company—

(a) in which the video game is completed, or (b) if the company does not complete the video game, in which it

abandons video game development activities in relation to it, “interim accounting period” means any earlier accounting period

of the company during which video game development activities are carried on in relation to the video game,

“interim certificate” and “final certificate” have the meaning given by section 1217CC,

“the separate video game trade” means the company's separate trade in relation to the video game (see section 1217B), and

“special video games relief” means— (a) video games tax relief, or (b) relief under section 1217DC (transfer of terminal losses from

one video game to another).

(2) The company's company tax return for the completion period must state that the video game has been completed or that the company has abandoned video game development activities in relation to it (as the case may be).

1217EA Certification as a British video game

(1) The company is not entitled to special video games relief for an interim accounting period unless its company tax return for the period is accompanied by an interim certificate.

(2) If an interim certificate ceases to be in force (otherwise than on being superseded by a final certificate) or is revoked, the company—

(a) is not entitled to special video games relief for any period for which its entitlement depended on the certificate, and

(b) must amend accordingly its company tax return for any such period.

(3) If the video game is completed by the company— (a) its company tax return for the completion period must be

accompanied by a final certificate, (b) if that requirement is met, the final certificate has effect for the

completion period and for any interim accounting period, and (c) if that requirement is not met, the company—

(i) is not entitled to special video games relief for any period, and

(ii) must amend accordingly its company tax return for any period for which such relief was claimed.

(4) If the company abandons video game development activities in relation to the video game—

(a) its company tax return for the completion period may be accompanied by an interim certificate, and

(b) the abandonment of video game development activities does not affect any entitlement to special video games relief in that or any previous accounting period.

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(5) If a final certificate is revoked, the company— (a) is not entitled to special video games relief for any period, and (b) must amend accordingly its company tax return for any period for

which such relief was claimed.

1217EB The UK expenditure condition

(1) The company is not entitled to special video games relief for an interim accounting period unless—

(a) its company tax return for the period states the amount of planned core expenditure on the video game that is UK expenditure, and

(b) that amount is such as to indicate that the condition in section 1217CE (the UK expenditure condition) will be met on completion of the video game.

If those requirements are met, the company is provisionally treated in relation to that period as if that condition was met.

(2) If such a statement is made but it subsequently appears that the condition will not be met on completion of the video game, the company—

(a) is not entitled to special video games relief for any period for which its entitlement depended on such a statement, and

(b) must amend accordingly its company tax return for any such period.

(3) When the video game is completed or the company abandons video game development activities in relation to it (as the case may be), the company's company tax return for the completion period must be accompanied by a final statement of the amount of core expenditure on the video game that is UK expenditure.

(4) If that statement shows that the condition in section 1217CE is not met, the company—

(a) is not entitled to special video games relief for any period, and (b) must amend accordingly its company tax return for any period for

which such relief was claimed.

1217EC Time limit for amendments and assessments

Any amendment or assessment necessary to give effect to the provisions of this Chapter may be made despite any limitation on the time within which an amendment or assessment may normally be made.”

PART 2

COMMENCEMENT 2 (1) Any power conferred on the Secretary of State or the Treasury by virtue of this

Schedule to make regulations or an order comes into force on the day on which this Act is passed.

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(2) So far as not already brought into force by sub-paragraph (1), the amendments made by this Schedule come into force in accordance with provision contained in an order made by the Treasury.

(3) An order under sub-paragraph (2)— (a) may make different provision for different purposes; (b) may provide for those amendments to be treated as having come into force

on a day earlier than the day on which the order is made or this Act is passed; (c) may make such adaptations of Part 15B of CTA 2009 as appear to be

necessary or expedient in consequence of other provisions of this Act not yet having come into force.

3 (1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after the day specified for the purposes of this paragraph in an order made by the Treasury (“the specified day”).

(2) An order under sub-paragraph (1) may specify a day earlier than the day on which the order is made or this Act is passed.

(3) Sub-paragraph (4) applies where a company has an accounting period beginning before the specified day and ending on or after that day (“the straddling period”).

(4) For the purposes of Part 15B of CTA 2009— (a) so much of the straddling period as falls before the specified day, and so

much of that period as falls on or after that day, are treated as separate accounting periods, and

4 (1) The Treasury may by order make such amendments of this Schedule as are necessary for the purpose of complying with any undertakings given to the European Commission, or any conditions imposed by the Commission, in connection with an application for State aid approval.

(2) In this paragraph “State aid approval” means approval that the provision made by Part 15B of CTA 2009, to the extent that it constitutes the granting of aid to which any of the provisions of Article 107 or 108 of the Treaty on the Functioning of the European Union applies, is, or would be, compatible with the internal market, within the meaning of Article 107 of that Treaty.

(3) An order under this paragraph may— (a) make incidental, supplemental, consequential, transitional or saving

provision, including provision amending Schedule 18; (b) contain provision having effect in relation to times before the order is made

or this Act is passed.

(4) A statutory instrument that contains (whether alone or with other provisions) an order under this paragraph may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

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SCHEDULE 18 Section 36

TELEVISION AND VIDEO GAMES TAX RELIEF: CONSEQUENTIAL AMENDMENTS

ICTA 1 (1) Section 826 of ICTA (interest on tax overpaid) is amended as follows.

(2) In subsection (1), after paragraph (f) insert— “(fa) a payment of television tax credit falls to be made to a company; or (fb) a payment of video game tax credit falls to be made to a company;

or”.

(3) In subsection (3C), after “film tax credit” insert “ , television tax credit or video game tax credit ”.

(4) In subsection (8A)(b)(ii), after “film tax credit” insert “ or television tax credit or video game tax credit ”.

(5) In subsection (8BA), after “film tax credit” (in both places) insert “ or television tax credit or video game tax credit ”.

FA 1998 2 Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is

amended as follows. 3 (1) Paragraph 10 (other claims and elections to be included in return) is amended as

follows.

(2) In sub-paragraph (4), for “film tax relief” substitute “ tax relief under Part 15, 15A or 15B of the Corporation Tax Act 2009 ”.

(3) After sub-paragraph (5) insert—

“(6) An election under section 1216AE(7) of the Corporation Tax Act 2009 (election not to be a television production company) can only be made by being included in a company tax return (see section 1216AE(8)(a) of that Act).

(7) An election under section 1217AB(6) of the Corporation Tax Act 2009 (election not to be a video games development company) can only be made by being included in a company tax return (see section 1217AB(7)(a) of that Act).”

4 (1) Paragraph 52 (recovery of excessive overpayments etc) is amended as follows.

(2) In sub-paragraph (2), after paragraph (bd) insert— “(be) television tax credit under Part 15A of that Act,

(bf) video game tax credit under Part 15B of that Act,”.

(3) In sub-paragraph (5)— (a) after paragraph (af) insert—

“(ag) an amount of television tax credit paid to a company for an accounting period,

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(ah) an amount of video game tax credit paid to a company for an accounting period,”;

(b) after “(ae)” insert “ , (ag), (ah) ”. 5 (1) Part 9D (claims for film tax relief) is amended as follows.

(2) In paragraph 83S (introduction), for “film tax relief” substitute “the following reliefs —

(a) film tax relief, (b) television tax relief, (c) video games tax relief.”

(3) The heading of that Part becomes “ CLAIMS FOR TAX RELIEF UNDER PART 15, 15A OR 15B OF THE CORPORATION TAX ACT 2009 ”.

CAA 2001 6 In Schedule A1 to CAA 2001 (first-year tax credits), in paragraph 11(4), omit the

“and” at the end of paragraph (b) and after paragraph (c) insert— “(d) Chapter 3 of Part 15A of that Act (television tax credits), and (e) Chapter 3 of Part 15B of that Act (video game tax credits).”

FA 2007 7 In Schedule 24 to FA 2007 (penalties for errors), in paragraph 28(fa) (meaning of

“corporation tax credit”), omit the “or” at the end of sub-paragraph (iv) and after that sub-paragraph insert—

“(iva) a television tax credit under Chapter 3 of Part 15A of that Act,

(ivb) a video game tax credit under Chapter 3 of Part 15B of that Act, or”.

CTA 2009 8 In Chapter 6A of Part 3 of CTA 2009 (trade profits: R&D expenditure credits), after

section 104B insert—

“104BA Restriction on claiming other tax reliefs

(1) For provision prohibiting an R&D expenditure credit being given under this Chapter and relief being given under Chapter 3 of Part 15 (film tax relief), see section 1195(3A).

(2) For provision prohibiting an R&D expenditure credit being given under this Chapter and relief being given under Chapter 3 of Part 15A (television tax relief), see section 1216C(4).

(3) For provision prohibiting an R&D expenditure credit being given under this Chapter and relief being given under Chapter 3 of Part 15B (video games tax relief), see section 1217C(4).”

9 In Part 8 of CTA 2009 (intangible fixed assets), in Chapter 10 (excluded assets), after section 808 insert—

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“808A Assets representing production expenditure on certain TV programmes

(1) This Part does not apply to an intangible fixed asset held by a television production company so far as it represents production expenditure on a television programme to which Chapter 2 of Part 15A (taxation of activities of television production company) applies.

(2) In this section— (a) “television programme” has the same meaning as in Part 15A (see

section 1216AA), (b) “television production company” has the same meaning as in that

Part (see section 1216AE), and (c) “production expenditure” has the same meaning as in that Part (see

section 1216AG(2)).

808B Assets representing core expenditure on video games

(1) This Part does not apply to an intangible fixed asset held by a video games development company so far as it represents core expenditure on a video game to which Chapter 2 of Part 15B (taxation of activities of video games development company) applies.

(2) In this section— (a) “video game” has the same meaning as in Part 15B (see

section 1217AA), (b) “video games development company” has the same meaning as in

that Part (see section 1217AB), and (c) “core expenditure” has the same meaning as in that Part (see

section 1217AD).” 10 In Part 13 of CTA 2009 (additional relief for expenditure on research and

development), after section 1040 insert—

“1040ZA Restriction on claiming other tax reliefs

(1) For provision prohibiting relief being given under this Part and under Chapter 3 of Part 15 (film tax relief), see section 1195(3A).

(2) For provision prohibiting relief being given under this Part and under Chapter 3 of Part 15A (television tax relief), see section 1216C(4).

(3) For provision prohibiting relief being given under this Part and under Chapter 3 of Part 15B (video games tax relief), see section 1217C(4).”

11 Part 15 of CTA 2009 (film tax relief) is amended as follows. 12 In section 1195 (availability and overview of film tax relief), after subsection (3)

insert—

“(3A) But film tax relief is not available in respect of any expenditure if— (a) the company is entitled to an R&D expenditure credit under Chapter

6A of Part 3 in respect of the expenditure, or

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(b) the company has obtained relief under Part 13 (additional relief for expenditure on research and development) in respect of the expenditure.”

13 (1) Section 1206 (confidentiality of information) is amended as follows.

(2) In subsection (1), for the words from “Schedule 1” to the end substitute “ any of the provisions listed in subsection (1A) ”.

(3) After subsection (1) insert—

“(1A) The provisions referred to in subsection (1) are— (a) sections 1216CB to 1216CD (certification of relevant programmes

as British), (b) sections 1217CB to 1217CD (certification of video games as

British), and (c) Schedule 1 to the Films Act 1985 (certification of films as British).”

(4) In subsection (2), for “UK Film Council” substitute “ British Film Institute ”.

(5) After that subsection insert—

“(2A) The Treasury may by order amend subsection (2)— (a) so as to substitute for the person or body specified in that subsection

a different person or body, or (b) in consequence of a change in the name of the person or body so

specified.”

(6) In subsection (3)— (a) in paragraph (a), for the words from “Schedule 1” to the end substitute “ any

of the provisions listed in subsection (1A) ”; (b) in paragraph (d), for “that Schedule or this Part” substitute “ any of Parts 15

to 15B of this Act or Schedule 1 to the Films Act 1985 ”. 14 (1) In section 1310 of CTA 2009 (orders and regulations), subsection (4) is amended

as follows.

(2) Omit the “or” at the end of paragraph (e) and after that paragraph insert— “(ea) section 1216AF(3) (meaning of “television production activities”

etc), (eb) section 1216AH(3) (meaning of “UK expenditure” etc), (ec) section 1216CE(2) (UK expenditure), (ed) section 1216CF(4) (additional deduction for qualifying

expenditure), (ee) section 1216CG(3) (amount of additional deduction), (ef) section 1217AC(2) (meaning of “video games development

activities” etc), (eg) section 1217AE(3) (meaning of “UK expenditure” etc), (eh) section 1217CE(2) (UK expenditure), (ei) section 1217CF(4) (additional deduction for qualifying

expenditure), (ej) section 1217CG(3) (amount of additional deduction),”.

15 (1) Schedule 4 to CTA 2009 (index of defined expressions) is amended as follows.

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(2) At the appropriate place insert—

“the company (in Chapter 5 of Part 15A) section 1216E(1)”;

“company tax return (in Part 15A) section 1216AJ”;

“the completion period (in Chapter 5 of Part 15A)

section 1216E(1)”;

“co-producer (in Part 15A) section 1216AI”;

“core expenditure (in Part 15A) section 1216AG(3)”;

“costs of the relevant programme (in Chapter 2 of Part 15A)

section 1216BC”;

“final certificate (in Chapter 5 of Part 15A) section 1216CC”;

“income from the relevant programme (in Chapter 2 of Part 15A)

section 1216BB”;

“interim accounting period (in Chapter 5 of Part 15A)

section 1216E(1)”;

“interim certificate (in Chapter 5 of Part 15A) section 1216CC”;

“principal photography (in Part 15A) section 1216AF(2)”;

“production expenditure (in Part 15A) section 1216AG(2)”;

“qualifying co-production (in Part 15A) section 1216AI”;

“qualifying expenditure (in Chapter 3 of Part 15A)

section 1216CF(3)”;

“relevant programme (in Part 15A) section 1216AB”;

“the separate programme trade (in Chapters 2, 3 and 5 of Part 15A)

section 1216B(3)”;

“special television relief (in Chapter 5 of Part 15A)

section 1216E(1)”;

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“television production activities (in Part 15A) section 1216AF”;

“television production company (in Part 15A) section 1216AE”;

“television programme (in Part 15A) section 1216AA”;

“television tax relief (in Part 15A) section 1216C(2)”;

“UK expenditure (in Part 15A) section 1216AH”.

(3) At the appropriate place insert—

“the company (in Chapter 5 of Part 15B) section 1217E(1)”;

“company tax return (in Part 15B) section 1217AF”;

“the completion period (in Chapter 5 of Part 15B)

section 1217E(1)”;

“core expenditure (in Part 15B) section 1217AD”;

“costs of the video game (in Chapter 2 of Part 15B)

section 1217BC”;

“final certificate (in Chapter 5 of Part 15B) section 1217CC”;

“income from the video game (in Chapter 2 of Part 15B)

section 1217BB”;

“interim accounting period (in Chapter 5 of Part 15B)

section 1217E(1)”;

“interim certificate (in Chapter 5 of Part 15B) section 1217CC”;

“qualifying expenditure (in Chapter 3 of Part 15B)

section 1217CF(3)”;

“the separate video game trade (in Chapters 2, 3 and 5 of Part 15B)

section 1217B(3)”;

“special video games relief (in Chapter 5 of Part 15B)

section 1217E(1)”;

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“UK expenditure (in Part 15B) section 1217AE”;

“video game (in Part 15B) section 1217AA”;

“video games development activities (in Part 15B)

section 1217AC”;

“video games development company (in Part 15B)

section 1217AB”;

“video games tax relief (in Part 15B) section 1217C(2)”.

FA 2009 16 In Schedule 54A to FA 2009 (further provision as to late payment interest and

repayment interest), in paragraph 2(2), omit the “or” at the end of paragraph (d) and after paragraph (e) insert—

“(f) a payment of television tax credit under Chapter 3 of Part 15 of CTA 2009 for an accounting period, or

(g) a payment of video game tax credit under Chapter 3 of Part 15B of CTA 2009 for an accounting period.”

CTA 2010 17 Part 8A of CTA 2010 (profits arising from the exploitation of patents etc) is

amended as follows. 18 (1) Section 357CG (adjustments in calculating profits of trade) is amended as follows.

(2) In subsection (3), omit the “and” at the end of paragraph (a) and after paragraph (b) insert—

“(c) the amount of any additional deduction for the accounting period obtained by the company under Part 15A of CTA 2009 in respect of qualifying expenditure on a television programme, and

(d) the amount of any additional deduction for the accounting period obtained by the company under Part 15B of CTA 2009 in respect of qualifying expenditure on a video game.”

(3) After subsection (5) insert—

“(5A) In a case where— (a) the company is—

(i) a television production company in relation to a television programme, or

(ii) a video games development company in relation to a video game, and

(b) there is a shortfall in qualifying expenditure in relation to the separate programme trade or (as the case may be) the separate video game trade for a relevant accounting period (see section 357CHA),

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the amount of qualifying expenditure brought into account in calculating the profits of the trade for that accounting period is to be increased by the amount mentioned in section 357CHA(2).”

(4) In subsection (6)— (a) for “subsection (5)” substitute “ subsections (5) and (5A) ”; (b) before the definition of “R&D expenditure” insert—

““qualifying expenditure”— (a) in relation to a company that is a television production

company, has the same meaning as in Chapter 3 of Part 15A of CTA 2009, and

(b) in relation to a company that is a video games development company, has the same meaning as in Chapter 3 of Part 15B of that Act,”;

““the separate programme trade”, in relation to a television production company, has the same meaning as in Chapter 2 of Part 15A of CTA 2009 (see section 1216B), “the separate video game trade”, in relation to a video games development company, has the same meaning as in Chapter 2 of Part 15B of CTA 2009 (see section 1217B), “television production company” has the same meaning as in Part 15A of CTA 2009 (see section 1216AE), and “video games development company” has the same meaning as in Part 15B of CTA 2009 (see section 1217AB).”

19 After section 357CH insert—

“357CHA Shortfall in qualifying expenditure

(1) There is a shortfall in qualifying expenditure in relation to the separate programme trade of a television production company or (as the case may be) the separate video game trade of a video games development company for a relevant accounting period if the actual qualifying expenditure of the trade for the accounting period (as adjusted under subsections (8) to (11)) is less than 75% of the average amount of qualifying expenditure.

(2) The amount that is to be added to the actual qualifying expenditure for the purposes of section 357CG(5A) is an amount equal to the difference between —

(a) 75% of the average amount of qualifying expenditure, and (b) the actual qualifying expenditure, as adjusted under subsections (8)

to (11).

(3) In this section— (a) the “actual qualifying expenditure” of a trade of a company for

an accounting period is the amount of qualifying expenditure that (ignoring section 357CG(5A)) is brought into account in calculating the profits of the trade for the accounting period, and

(b) the following terms have the meaning given by section 357CG(6)—

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“qualifying expenditure”, “relevant accounting period”, “the separate programme trade”, “the separate video game trade”, “television production company”, “video games development company”.

(4) The average amount of qualifying expenditure is—

where—

E is the amount of qualifying expenditure that— (a) has been incurred by the company during the relevant period, and (b) has been brought into account in calculating the profits of the trade

for any accounting period ending before the first relevant accounting period, and

N is the number of days in the relevant period.

(5) The relevant period is the shorter of— (a) the period of 4 years ending immediately before the first relevant

accounting period, and (b) the period beginning with the day on which the company begins to

carry on the trade and ending immediately before the first relevant accounting period.

(6) For a relevant accounting period of less than 12 months, the average amount of qualifying expenditure is proportionately reduced.

(7) Subsections (8) to (11) apply for the purposes of determining— (a) whether there is a shortfall in qualifying expenditure for a relevant

accounting period, and (b) if there is such a shortfall, the amount to be added by virtue of

subsection (2).

(8) If the amount of the actual qualifying expenditure for a relevant accounting period is greater than the average amount of qualifying expenditure, the difference between the two amounts is to be added to the actual qualifying expenditure for the next relevant accounting period.

(9) If— (a) there is not a shortfall in qualifying expenditure for a relevant

accounting period, but (b) in the absence of any additional amount, there would be a shortfall

in qualifying expenditure for that accounting period,

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the remaining portion of the additional amount is to be added to the actual qualifying expenditure for the next relevant accounting period.

(10) For the purposes of this section— “additional amount”, in relation to a relevant accounting period,

means any amount added to the actual qualifying expenditure for that accounting period by virtue of subsection (8), (9) or (11), and

“the remaining portion” of an additional amount is so much of that amount as exceeds the difference between—

(a) the actual qualifying expenditure for the relevant accounting period in the absence of the additional amount, and

(b) 75% of the average amount of qualifying expenditure.

(11) If— (a) there is not a shortfall in qualifying expenditure for a relevant

accounting period, and (b) there would not be a shortfall in qualifying expenditure for that

accounting period in the absence of any additional amount, the additional amount is to be added to the actual qualifying expenditure for the next relevant accounting period (in addition to any additional amount so added by virtue of subsection (8)).”

20 (1) Section 357CK (deductions that are not routine deductions) is amended as follows.

(2) In subsection (1), at the end insert— “(e) subsection (7A) (television production expenditure),

(f) subsection (7B) (video games development expenditure).”

(3) After subsection (7) insert—

“(7A) Head 5 is— (a) the amount of any qualifying expenditure on a television programme

for which an additional deduction for the accounting period is obtained by the company under Part 15A of CTA 2009, and

(b) the amount of that additional deduction.

(7B) Head 6 is— (a) the amount of any qualifying expenditure on a video game for which

an additional deduction for the accounting period is obtained by the company under Part 15B of CTA 2009, and

(b) the amount of that additional deduction.”

Consequential renumbering 21 (1) Sections 1217 and 1218 of CTA 2009 are renumbered as follows—

(a) section 1217 becomes section 1218A, and (b) section 1218 becomes section 1218B.

(2) In the following provisions of CTA 2009, for “section 1218” substitute “ section 1218B ”

section 985(3), section 999(4),

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section 1000(3), section 1013(3), and section 1021(3).

(3) In Schedule 4 to CTA 2009— (a) in the entry for “company with investment business (in Part 16)”, for

“section 1218(1) and (2)” substitute “ section 1218B(1) and (2) ”, and (b) in the entry for “investment business in a company (in Part 16)”, for

“section 1218(3)” substitute “ section 1218B(3) ”.

(4) In section 18 of CAA 2001, for “section 1218” substitute “ section 1218B ”.

Commencement 22 (1) The amendments made by this Schedule come into force in accordance with

provision contained in an order made by the Treasury.

(2) An order under sub-paragraph (1)— (a) may make different provision for different purposes; (b) may provide for any of those amendments to be treated as having come into

force on a day earlier than the day on which the order is made or this Act is passed;

(c) may make such adaptations of provisions of this Schedule brought into force as appear to be necessary or expedient in consequence of other provisions of this Act not yet having come into force.

23 (1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after the relevant day.

(2) “The relevant day” is— (a) in the case of amendments relating to Part 15A of CTA 2009, 1 April 2013,

and (b) in the case of amendments relating to Part 15B of that Act, the day specified

by order for the purposes of paragraph 3 of Schedule 17.

(3) For provision about the case where a company has an accounting period beginning before the relevant day and ending on or after that day, see paragraph 3(3) of Schedule 16 or (as the case may be) paragraph 3(4) of Schedule 17.

SCHEDULE 19 Section 39

REAL ESTATE INVESTMENT TRUSTS: UK REITS WHICH INVEST IN OTHER UK REITS 1 Part 12 of CTA 2010 (real estate investment trusts) is amended as follows. 2 (1) Section 530 (condition as to distribution of profits) is amended as follows.

(2) For subsection (1) substitute—

“(1) In the case of a group UK REIT, the condition in this section is met in relation to an accounting period if—

(a) so much of the group's UK profits arising in the period as are UK REIT investment profits (see section 549A), and

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(b) at least 90% of the rest of the group's UK profits arising in the period, are distributed by the principal company of the group on or before the filing date for the principal company's tax return for the period (see paragraph 14 of Schedule 18 to FA 1998).”

(3) For subsection (4) substitute—

“(4) In the case of a company UK REIT, the condition in this section is met in relation to an accounting period if—

(a) so much of the profits of the company's property rental business arising in the period as are UK REIT investment profits (see section 549A), and

(b) at least 90% of the rest of the profits of the company's property rental business arising in the period,

are distributed on or before the filing date for the company's tax return for the period (see paragraph 14 of Schedule 18 to FA 1998).

(4A) For the purposes of subsection (4) profits of the company's property rental business are to be calculated in accordance with section 599.”

3 (1) Section 530A (condition as to distribution of profits: increase in profits after delivery of tax return) is amended as follows.

(2) In subsection (2) for “530(1)(c)” substitute “ 530(1) ”.

(3) In subsection (6) for “530(4)(b)” substitute “ 530(4) ”.

(4) After subsection (9) insert—

“(10) This section cannot be relied upon to satisfy the requirement of section 530(1)(a) or (4)(a).”

4 (1) Section 531 (conditions as to balance of business) is amended as follows.

(2) After subsection (4) insert—

“(4A) In the case of a group, for the purposes of subsections (1) and (2) a distribution falling within section 549A(6) or (8) received by a member of the group is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(5).

(4B) In the case of a company, for the purposes of subsections (1) and (3) a distribution falling within section 549A(6) or (8) received by the company is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(5).”

(3) In subsection (5)(b) after “cash” insert “ or relevant UK REIT shares ”.

(4) In subsection (6)(b) after “cash” insert “ and relevant UK REIT shares ”.

(5) After subsection (8) insert—

“(9) In this section “relevant UK REIT shares” means— (a) in the case of a group UK REIT, shares held by a member of the

group in the principal company of another group UK REIT or in a company UK REIT, and

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(b) in the case of a company UK REIT, shares held by the company in the principal company of a group UK REIT or in another company UK REIT.”

5 (1) Section 548 (distributions: liability to tax) is amended as follows.

(2) In subsection (5) after “2009)” insert “ so far as the distribution is a distribution of exempt profits ”.

(3) In subsection (6) after “2005)” insert “ so far as the distribution is a distribution of exempt profits ”.

(4) After subsection (8) insert—

“(9) This section does not apply in relation to a distribution falling within section 549A(6) or (8) so far as the distribution is a distribution of exempt profits.

(10) For the purposes of this Chapter a distribution is a “distribution of exempt profits” so far as the distribution falls within section 550(2)(a), (aa), (c) or (d).

(11) In applying section 550 for the purposes of subsection (10) in relation to a distribution made by the principal company of a post-cessation group or by a post-cessation company—

(a) subsection (1)(a) is to be read as referring to the principal company of the post-cessation group, or (as the case may be)

(b) subsection (1)(b) is to be read as referring to the post-cessation company.”

6 (1) Section 549 (distributions: supplementary) is amended as follows.

(2) In subsections (2) and (2A) after “shareholder” insert “ so far as they are distributions of exempt profits ”.

(3) After subsection (3) insert—

“(3A) Relevant distribution” does not include a distribution falling within section 549A(6) or (8) so far as the distribution is a distribution of exempt profits.”

(4) In subsection (4) after the first “shareholder” insert “ (so far as they are distributions of exempt profits) ”.

7 After section 549 insert—

“549A Distributions from one UK REIT to another UK REIT

(1) If a company receives a distribution falling within subsection (6) or (8), the distribution is to be treated as profits of a property rental business carried on by the company in the United Kingdom.

Such profits are referred to in this Part as “UK REIT investment profits”.

(2) The property rental business mentioned in subsection (1) is to be treated as separate from any other property rental business of the company.

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(3) References to profits of property rental business or UK property rental business are to be read as including UK REIT investment profits accordingly, including where the profits referred to are otherwise profits calculated in accordance with international accounting standards or section 599.

(4) Section 549(2) and (2A) applies in relation to distributions falling within subsection (6) or (8) as it applies in relation to relevant distributions.

(5) Subsection (1) applies in relation to a distribution only so far as the distribution is a distribution of exempt profits.

This is subject to section 531(4A) and (4B).

(6) A distribution falls within this subsection if— (a) it is made by the principal company of a group UK REIT to a

shareholder of the company which is— (i) a member of another group UK REIT, or

(ii) a company UK REIT, and (b) it is a distribution of amounts shown in the financial statements

under section 532(2)(a) (statement of group's property rental business) as—

(i) profits or gains (or both) of UK members of the group, or (ii) profits or gains (or both) of UK property rental business of

non-UK members of the group.

(7) In subsection (6) the reference to a distribution made by the principal company includes a reference to a distribution made by the principal company of the post-cessation group.

(8) A distribution falls within this subsection if— (a) it is made by a company UK REIT to a shareholder of the company

which is— (i) a member of a group UK REIT, or

(ii) another company UK REIT, and (b) it is a distribution in respect of profits or gains (or both) of property

rental business of the company.

(9) In subsection (8) the reference to a distribution made by a company UK REIT includes a reference to a distribution made by the post-cessation company.”

8 In section 550 (attribution of distributions) in subsection (2)— (a) for paragraph (a) substitute—

“(a) first, to distributions in satisfaction of the requirement of section 530(1)(a) or 530(4)(a) (as the case may be),

(aa) second, to distributions in satisfaction of the requirement of section 530(1)(b) or 530(4)(b) (as the case may be),”,

(b) in paragraph (b) for “second” substitute “ third ”, (c) in paragraph (c) for “third” substitute “ fourth ”, (d) in paragraph (d) for “fourth” substitute “ fifth ”, and (e) in paragraph (e) for “fifth” substitute “ sixth ”.

9 In section 588 (joint ventures: effect of notice under section 586) after subsection (6) insert—

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“(7) Subsections (3) to (6) apply (in particular) for the purpose of interpreting section 549A(6)(a)(i) and (8)(a)(i).”

10 In section 589 (joint ventures: effect of notice under section 587) after subsection (6) insert—

“(7) Subsections (3) to (6) apply (in particular) for the purpose of interpreting section 549A(6)(a)(i) and (8)(a)(i).”

11 In section 605 (property rental business: exclusion of business producing listed income) after subsection (1) insert—

“(1A) But see section 549A which treats income falling within class 7 of the table as profits of property rental business.”

12 In Chapter 18 of Part 15 of ITA 2007 (deduction of income tax at source) in sections 973 and 974 (which relate to distributions made by UK REITs) after subsection (6) insert—

“(7) In relation to references to profits of property rental business, see section 549A of CTA 2010.”

13 (1) The amendments made by paragraph 4(3) to (5) above have effect for accounting periods beginning on or after the day on which this Act is passed.

(2) Subject to what follows, the amendments made by paragraphs 5 to 7 above have effect in relation to distributions received on or after the day on which this Act is passed.

(3) A distribution received by a member of a group UK REIT does not fall within section 549A(6) or (8) of CTA 2010 if it is received in an accounting period of the principal company of the group beginning before the day on which this Act is passed.

(4) A distribution received by a company UK REIT does not fall within section 549A(6) or (8) of CTA 2010 if it is received in an accounting period of the company beginning before the day on which this Act is passed.

SCHEDULE 20 Section 42

TAX MISMATCH SCHEMES 1 CTA 2010 is amended in accordance with paragraphs 2 to 4. 2 In section 1(4) (overview of Act), after paragraph (j) insert—

“(ja) tax mismatch schemes (see Part 21BA),”. 3 After Part 21B insert—

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“PART 21BA

TAX MISMATCH SCHEMES

938O Losses and profits from tax mismatch scheme to be disregarded

(1) This section applies to a company that is (at any time) a party to a tax mismatch scheme.

(2) No scheme loss or profit made by the company in any accounting period in relation to the scheme is to be brought into account as a debit or credit for the purposes of Part 5 of CTA 2009 (loan relationships) or Part 7 of that Act (derivative contracts).

(3) An amount that would, apart from this section, be brought into account for the purposes of Part 5 or 7 of that Act as respects any matter—

(a) is treated, for the purposes of section 464(1) or (as the case may be) 699(1) of that Act (priority of Part 5 or 7 for corporation tax purposes), as if it were so brought into account, and

(b) accordingly, may not be brought into account for any other corporation tax purposes as respects that matter.

938P Meaning of “tax mismatch scheme”

(1) A scheme is a tax mismatch scheme if condition A or B is met.

(2) Condition A is that, at the time the scheme is entered into, there is no practical likelihood that the scheme will fail to secure a relevant tax advantage of £2 million or more.

(3) The Treasury may by order substitute a higher amount for the amount for the time being specified in subsection (2).

(4) Any such substitution is to have effect in relation to schemes entered into on or after the day on which the order comes into force.

(5) Condition B is that— (a) the purpose, or one of the main purposes, of the company in entering

into the scheme is to obtain the chance of securing a relevant tax advantage (of any amount), and

(b) at the time the scheme is entered into— (i) there is no chance that the scheme will secure a relevant tax

disadvantage, or (ii) there is such a chance, but the expected value of the scheme

is nevertheless a positive amount.

(6) If, at the time the company enters into the scheme, there are chances that the scheme would, if carried out, secure different relevant tax advantages or disadvantages in different circumstances, the amounts and probabilities of each must be taken into account in determining the expected value of the scheme.

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(7) In determining whether condition A or B is met, it is to be assumed that the parties to the scheme carry it out.

(8) Where, at the time the scheme is entered into, the length of the scheme period is uncertain, condition A or B is met if it would be met on any reasonable assumption as to the length of the scheme period.

(9) In determining whether condition A or B is met, section 938O (scheme profits and losses to be left out of account) is to be disregarded.

938Q Meaning of “scheme loss” and “scheme profit”

(1) A loss or profit made by a company in an accounting period is a “scheme loss” or “scheme profit” in relation to a tax mismatch scheme if the loss or profit—

(a) arises from a transaction, or series of transactions, that forms part of the scheme,

(b) is, or is comprised in, an amount that is brought into account as a debit or credit for the purposes of Part 5 or 7 of CTA 2009, and

(2) The first asymmetry condition is that the loss or profit affects the amount of any relevant tax advantage secured by the scheme.

(3) Where, at the end of the accounting period— (a) it is not certain whether the scheme will secure a relevant tax

advantage, or (b) it is not certain what the amount of the relevant tax advantage

secured by the scheme will be, a loss or profit is to be treated as meeting the first asymmetry condition if, at that time, there is a chance that the scheme will secure a relevant tax advantage and that the loss or profit will affect its amount.

(4) Where— (a) a loss or profit meets the conditions in subsection (1)(a) and (b), and (b) a part, but not the whole, of the loss or profit meets the first

asymmetry condition, only that part of the loss or profit is a “scheme loss” or “scheme profit”.

(5) The second asymmetry condition is that the loss or profit— (a) does not meet the first asymmetry condition, but (b) arises from a transaction, or series of transactions, that might (if

events had turned out differently) have given rise to a loss or profit that would have done so.

(6) References in this section to a loss or profit include a loss or profit arising in respect of interest or expenses.

(7) In determining whether the condition in subsection (1)(b) or the first or second asymmetry condition is met, section 938O (scheme profits and losses to be left out of account) is to be disregarded.

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938R Meaning of “relevant tax advantage” etc and “the scheme period”

(1) In this Part “relevant tax advantage”, in relation to a scheme, means an economic profit that—

(a) is made by the company over the scheme period, (b) meets the condition in subsection (3), and (c) is not negligible.

(2) In this Part “relevant tax disadvantage”, in relation to a scheme, means an economic loss that—

(a) is made by the company over the scheme period, (b) meets the condition in subsection (3), and (c) is not negligible.

(3) The condition is that the economic profit or loss arises as a result of asymmetries in the way that the company brings, or does not bring, amounts into account as debits and credits for the purposes of Part 5 or 7 of CTA 2009.

(4) A reference in this section to asymmetries includes, in particular— (a) asymmetries relating to quantification, and (b) asymmetries relating to timing.

(5) In this section— (a) a reference to an economic profit includes an increase in an

economic profit and a decrease in an economic loss, and (b) a reference to an economic loss includes an increase in an economic

loss and a decrease in an economic profit.

(6) In this Part “the scheme period”, in relation to a scheme, means the period during which the scheme has effect.

938S Meaning of references to economic profits and losses

(1) An economic profit or loss is to be computed for the purposes of this Part taking into account, in particular—

(a) profits and losses made as a result of the operation of the Corporation Tax Acts, and

(b) any adjustments required to reflect the time value of money.

(2) In determining for the purposes of this Part the amount of an economic profit or loss made by the company over the scheme period, profits and losses made by the company are to be taken into account only to the extent that they are attributable to times at which the company is a party to the scheme.

938T Tax capacity assumption

(1) This section applies for the purpose of determining whether a scheme will, or might, secure a relevant tax advantage.

(2) The economic profits and losses made by the company over the scheme period must be calculated on the assumption that the company—

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(a) obtains the full tax benefit of any loss made by the company in relation to a loan relationship or a derivative contract during the period, and

(b) incurs the full tax cost of any profit made by the company in relation to a loan relationship or a derivative contract during the period.

(3) The “full tax benefit” of a loss is the reduction in the liability of the company to corporation tax that would result if—

(a) the loss were brought into account as a debit or as a reduction in a credit for the purposes of Part 5 or 7 of CTA 2009, and

(b) the company's profits chargeable to corporation tax, disregarding the loss, were equal to the debit (or the reduction in the credit) determined by reference to the loss.

(4) The “full tax cost” of a profit is the increase in the liability of the company to corporation tax that would result if—

(a) the profit were brought into account as a credit or as a reduction in a debit for the purposes of Part 5 or 7 of CTA 2009, and

(b) the company's profits chargeable to corporation tax, disregarding the profit, were nil.

938U Meaning of “scheme”

In this Part “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions.

938V Priority

For the purposes of this Part the following provisions are to be treated as of no effect—

(a) section 441 of CTA 2009 (loan relationships for unallowable purposes);

(b) section 690 of that Act (derivative contracts for unallowable purposes);

4 In Schedule 4 (index of defined expressions), at the appropriate places insert—

“economic loss (in Part 21BA) section 938S”

“economic profit (in Part 21BA) section 938S”

“relevant tax advantage (in Part 21BA) section 938R”

“relevant tax disadvantage (in Part 21BA) section 938R”

“scheme (in Part 21BA) section 938U”

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“scheme loss (in Part 21BA) section 938Q”

“the scheme period (in Part 21BA) section 938R”

“scheme profit (in Part 21BA) section 938Q”.

““a tax mismatch scheme (in Part 21BA) section 938P”.

5 In section 231(8) of TIOPA 2010 (tax arbitrage: overview), for the words from “section” to the end substitute “ sections 938N and 938V of CTA 2010 (this Part treated as of no effect for the purposes of Parts 21B and 21BA of CTA 2010 (group mismatch and tax mismatch schemes)). ”

6 (1) The amendments made by this Schedule have effect in relation to schemes entered into at any time (including any time before the commencement date).

(2) But section 938O in Part 21BA of CTA 2010 (as inserted by paragraph 3 of this Schedule) does not apply to—

(a) scheme losses or profits that relate to a time before the commencement date, or

(b) scheme profits that relate to a time on or after that date but are made in relation to a scheme entered into before that date.

(3) In this paragraph “the commencement date” means 5 December 2012.

SCHEDULE 21 Section 46

COMMUNITY AMATEUR SPORTS CLUBS

Introductory 1 Chapter 9 of Part 13 of CTA 2010 (community amateur sports clubs) is amended

as follows.

Meaning of “open to the whole community” 2 (1) Section 659 (meaning of “open to the whole community”) is amended as follows.

(2) In subsection (1), for paragraph (c) substitute— “(c) the costs associated with membership of the club for any year do not

represent a significant obstacle to membership of the club, use of its facilities or full participation in its activities (see subsection (2A)).”

(3) After subsection (2) insert—

“(2A) For the purposes of subsection (1)(c) the costs associated with membership of a club for any year represent a significant obstacle to membership of the club, use of its facilities or full participation in its activities if—

(a) those costs exceed the amount specified for the year for the purposes of this subsection in regulations made by the Treasury, and

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(b) the club has not made such arrangements as are necessary to secure that those costs do not represent such an obstacle.

(2B) The Treasury may by regulations make provision supplementing subsection (2A), including—

(a) provision as to what constitutes full participation in a club's activities;

(b) provision as to costs that are, or are not, to be regarded as the costs associated with membership of a club;

(2C) The provision that may be made by regulations under this section includes— (a) different provision for different purposes, and (b) provision having effect in relation to times before the regulations

are made.

(2D) Section 1171(4) (orders and regulations subject to negative resolution procedure) does not apply to any regulations made under this section if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.”

(4) For subsection (3) substitute—

“(3) A club is not prevented from being “open to the whole community” for the purposes of section 658 merely because it charges different fees for different descriptions of person.”

Meaning of “organised on an amateur basis” 3 (1) Section 660 (meaning of “organised on an amateur basis”) is amended as follows.

(2) In subsection (1), omit the “and” after paragraph (b) and after that paragraph insert— “(ba) it does not exceed the limit on paid players (see subsection (5A)),

and”.

(3) In subsection (4)(g)— (a) after “travel” insert “ or subsistence ”, and (b) for “travelling to away matches” substitute “ in connection with away

matches ”.

(4) After subsection (4) insert—

“(4A) In subsection (4)(g) “subsistence expenses” means expenses on food, drink and temporary living accommodation.”

(5) After subsection (5) insert—

“(5A) A club does not exceed the limit on paid players for the purposes of subsection (1) if—

(a) the number of persons paid to play for the club does not at any time exceed the specified maximum,

(b) the number of such persons in any year does not exceed the specified maximum for that year,

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(c) the amount paid to any such person in any year in respect of activities undertaken for the club does not exceed the specified maximum for that year, and

(d) the total amount paid to such persons in any year in respect of activities undertaken for the club does not exceed the specified maximum for that year.

“Specified” means specified in regulations made by the Treasury.

(5B) The Treasury may by regulations make provision supplementing subsection (5A), including—

(a) provision as when a person is, or is not, to be regarded as a person paid to play for a club, and

(b) provision about calculating for the purposes of subsection (5A) the amount paid to such a person.”

(6) After subsection (7) insert—

“(8) The Treasury may by regulations make further provision as to when a club is “organised on an amateur basis” for the purposes of section 658.

(9) The provision that may be made by regulations under subsection (8) includes —

(a) provision as to the conditions which a club must meet in order to be “organised on an amateur basis” for the purposes of section 658;

(b) provision as to what are, or are not, to be regarded as “ordinary benefits of an amateur sports club” for the purposes of subsection (1);

(c) provision about persons who are, or are not, to be regarded as guests of a member of a club for the purposes of subsection (1).

(10) Regulations made under subsection (8) may amend this section or make other amendments to this Chapter.

(11) A statutory instrument that contains (whether alone or with other provisions) regulations under subsection (8) that amend this section or make other amendments to this Chapter may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”

(7) After subsection (11) insert—

“(12) The provision that may be made by regulations under this section includes— (a) different provision for different purposes, and (b) provision having effect in relation to times before the regulations

are made.

(13) Section 1171(4) (orders and regulations subject to negative resolution procedure) does not apply to any regulations made under this section if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.”

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Clubs consisting mainly of social members 4 In section 658 (meaning of “community amateur sports club”), in subsection (1A)

(c), for “section 661” substitute “ sections 660A and 661 ”. 5 After section 660 insert—

“660A Clubs consisting mainly of social members

(1) A club is not to be regarded as a club that has as its main purpose the provision of facilities for, and the promotion of participation in, one or more eligible sports if the percentage of its members who are social members exceeds the percentage specified for the purposes of this section in regulations made by the Treasury.

(2) A member is a “social member” for the purposes of this section if the member does not participate, or participates only occasionally, in the sporting activities of the club.

(3) The Treasury may by regulations make provision— (a) as to activities that are, or are not, to be regarded as “sporting

activities” of a club; (b) as to the circumstances in which a member of a club is, or is not, to

be regarded as participating in the sporting activities of the club; (c) as to the circumstances in which a member of a club is, or is not, to

be regarded as participating only occasionally in those activities.

(4) The provision that may be made by regulations under this section includes— (a) different provision for different purposes, and (b) provision having effect in relation to times before the regulations

are made.

(5) Section 1171(4) (orders and regulations subject to negative resolution procedure) does not apply to any regulations made under this section if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.”

Exemptions 6 In section 662 (exemption from corporation tax for UK trading income), after

subsection (5) insert—

“(5A) The Treasury may by order amend the figure for the time being specified as the relevant threshold in subsection (5)(a).

(5B) A statutory instrument containing an order under subsection (5A) that amends that figure so as to substitute a lower figure may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.”

7 In section 663 (exemption from corporation tax for UK property income), after subsection (5) insert—

“(5A) The Treasury may by order amend the figure for the time being specified as the relevant threshold in subsection (5)(a).

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Power to specify income condition 8 (1) The Treasury may by regulations provide that a club is not entitled to be registered

as a community amateur sports club under section 658 of CTA 2010 unless it meets one or more conditions relating to income received by the club.

(2) The provision that may be made by regulations under this paragraph includes, in particular—

(a) provision restricting the amount of income, or income of a specified description, that a community amateur sports club may receive for a period, and

(b) provision prohibiting such a club from receiving income of a specified description.

“Specified” means specified in the regulations.

(3) Regulations made under this paragraph may— (a) amend Chapter 9 of Part 13 of CTA 2010, (b) make different provision for different purposes, and (c) contain provision having effect in relation to times before the regulations are

made or this Act is passed.

(4) A statutory instrument that contains (whether alone or with other provisions) regulations under this paragraph may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

Commencement 9 (1) Any power conferred on the Treasury under or by virtue of this Schedule to make

regulations or an order comes into force on the day on which this Act is passed (and may be exercised to make provision having effect in relation to times before this Act is passed).

(2) So far as not already brought into force by virtue of sub-paragraph (1), the amendments made by this Schedule come into force in accordance with provision contained in an order made by the Treasury.

(3) An order made under sub-paragraph (2) may— (a) provide for such amendments to be treated as having come into force on a

date not earlier than 1 April 2010; (b) make transitional provision or savings.

10 (1) In a case where a club that was registered as a community amateur sports club before the day on which this Act is passed ceases to be entitled to be registered as such by virtue of this Schedule, an officer of Revenue and Customs may not cancel the club's registration with effect from a date earlier than that day.

(2) But sub-paragraph (1) does not prevent the cancellation of the club's registration if the officer is satisfied that—

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(a) any information provided by a person (“P”) at the time of registration was inaccurate, and

(b) the inaccuracy was careless (within the meaning of paragraph 3 of Schedule 24 to FA 2007) or deliberate on P's part.

SCHEDULE 22 Section 48

TRANSITIONAL PROVISION RELATING TO REDUCTION IN STANDARD LIFETIME ALLOWANCE ETC

PART 1

“FIXED PROTECTION 2014” 1 (1) This paragraph applies on or after 6 April 2014 in the case of an individual—

(a) who, on that date, has one or more arrangements under— (i) a registered pension scheme, or

(ii) a relieved non-UK pension scheme of which the individual is a relieved member,

(b) in relation to whom paragraph 7 of Schedule 36 to FA 2004 (primary protection) does not make provision for a lifetime allowance enhancement factor,

(d) in whose case paragraph 14 of Schedule 18 to FA 2011 (transitional provision relating to new standard lifetime allowance for the tax year 2012-13) does not apply on that date,

if notice of intention to rely on it is given to an officer of Revenue and Customs.

(2) Part 4 of FA 2004 has effect in relation to the individual as if the standard lifetime allowance were the greater of the standard lifetime allowance and £1,500,000.

(3) But this paragraph ceases to apply if on or after 6 April 2014— (a) there is benefit accrual in relation to the individual under an arrangement

under a registered pension scheme, (b) there is an impermissible transfer into any arrangement under a registered

pension scheme relating to the individual, (c) a transfer of sums or assets held for the purposes of, or representing accrued

rights under, any such arrangement is made that is not a permitted transfer, or (d) an arrangement relating to the individual is made under a registered pension

scheme otherwise than in permitted circumstances.

(4) For the purposes of sub-paragraph (3)(a) there is benefit accrual in relation to the individual under an arrangement—

(a) in the case of a money purchase arrangement that is not a cash balance arrangement, if a relevant contribution is paid under the arrangement on or after 6 April 2014,

(b) in the case of a cash balance arrangement or a defined benefits arrangement, if there is an increase in the value of the individual's rights under

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the arrangement at any time on or after that date (but subject to sub- paragraph (11)), and

individual under the arrangement include money purchase benefits other than cash balance benefits, if a relevant contribution is paid under the arrangement on or after 6 April 2014, and

(ii) in any case, if there is an increase in the value of the individual's rights under the arrangement at any time on or after that date (but subject to sub-paragraph (11)).

(5) For the purposes of sub-paragraphs (4)(b) and (c)(ii) and (11) whether there is an increase in the value of the individual's rights under the arrangement (and its amount if there is) is to be determined—

(a) in the case of a cash balance arrangement (or a hybrid arrangement under which cash balance benefits may be provided to or in respect of the individual under the arrangement), by reference to whether there is an increase in the amount that would, on the valuation assumptions, be available for the provision of benefits to or in respect of the member (and, if there is, the amount of the increase), and

(b) in the case of a defined benefits arrangement (or a hybrid arrangement under which defined benefits may be provided to or in respect of the individual under the arrangement), by reference to whether there is an increase in the benefits amount.

(6) For the purposes of sub-paragraph (5)(b) “the benefits amount” is—

where—

LS is the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement (otherwise than by commutation of pension);

P is the annual rate of the pension which would, on the valuation assumptions, be payable to the individual under the arrangement;

RVF is the relevant valuation factor.

(7) Paragraph 17A of Schedule 36 to FA 2004 (impermissible transfers) applies for the purposes of sub-paragraph (3)(b) but as if the references to a relevant existing arrangement were to the arrangement and the reference in sub-paragraph (2) to 5 April 2006 were to 5 April 2014.

(8) Sub-paragraphs (7) to (8B) of paragraph 12 of Schedule 36 to FA 2004 (when there is a permitted transfer) apply for the purposes of sub-paragraph (3)(c); and where there is a permitted transfer—

(a) if it is a permitted transfer by virtue of sub-paragraph (8)(a) of paragraph 12, this paragraph applies in relation to the arrangement to which the transfer is made,

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(b) if it is a permitted transfer by virtue of sub-paragraph (8)(b) of that paragraph, this paragraph applies in relation to the arrangement to which the transfer is made as if it were the same as that from which it is made, and

(c) if it is a permitted transfer by virtue of sub-paragraph (8)(c) of that paragraph, this paragraph applies in relation to the arrangement to which the transfer is made as if it were the same as that from which it is made and (if the employment is transferred) as if the employment with the transferee were the employment with the transferor.

(9) Sub-paragraphs (2A) to (2C) of paragraph 12 of Schedule 36 to FA 2004 (“permitted circumstances”) apply for the purposes of sub-paragraph (3)(d).

(10) Paragraph 14 of Schedule 36 to FA 2004 (when a relevant contribution is paid under an arrangement) applies for the purposes of sub-paragraph (4)(a) and (c)(i).

(11) Increases in the value of the individual's rights under an arrangement are to be ignored for the purposes of sub-paragraph (4)(b) or (c)(ii) if in no tax year do they exceed the relevant percentage.

(12) The relevant percentage, in relation to a tax year, means— (a) where the arrangement (or a predecessor arrangement) includes provision

for the value of the rights of the individual to increase during the tax year at an annual rate specified in the rules of the pension scheme (or a predecessor registered pension scheme) on 11 December 2012—

(i) that percentage (or, where more than one arrangement includes such provision, the higher or highest of the percentages specified), plus

(ii) the relevant statutory increase percentage; (b) otherwise—

(i) the percentage by which the consumer prices index for the month of September in the previous tax year is higher than it was for the September before that (or nil per cent if it is not higher), or

(ii) if higher, the relevant statutory increase percentage.

(13) In sub-paragraph (12)(a)— “predecessor arrangement”, in relation to an arrangement, means another

arrangement (under the same or another registered pension scheme) from which some or all of the sums or assets held for the purposes of the arrangement directly or indirectly derive;

“predecessor registered pension scheme”, in relation to a pension scheme, means another registered pension scheme from which some or all of the sums or assets held for the purposes of the arrangement under the pension scheme directly or indirectly derive.

(14) In sub-paragraph (12) “the relevant statutory increase percentage”, in relation to a tax year, means the percentage increase in the value of the individual's rights under the arrangement during the tax year so far as it is attributable solely to one or more of the following—

(a) an increase in accordance with section 15 of the Pension Schemes Act 1993 or section 11 of the Pension Schemes (Northern Ireland) Act 1993 (increase of guaranteed minimum where commencement of guaranteed minimum pension postponed);

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(b) a revaluation in accordance with section 16 of the Pension Schemes Act 1993 or section 12 of the Pension Schemes (Northern Ireland) Act 1993 (early leavers: revaluation of earnings factors);

(c) a revaluation in accordance with Chapter 2 of Part 4 of the Pension Schemes Act 1993 or the Pension Schemes (Northern Ireland) Act 1993 (early leavers: revaluation of accrued benefits);

(d) a revaluation in accordance with Chapter 3 of Part 4 of the Pension Schemes Act 1993 or the Pension Schemes (Northern Ireland) Act 1993 (early leavers: protection of increases in guaranteed minimum pensions);

(e) the application of section 67 of the Equality Act 2010 (sex equality rule for occupational pension schemes).

(15) Sub-paragraph (16) applies in relation to a tax year if— (a) the arrangement is a defined benefits arrangement which is under an annuity

contract treated as a registered pension scheme under section 153(8) of FA 2004,

(b) the contract provides for the value of the rights of the individual to be increased during the tax year at an annual rate specified in the contract, and

(c) the contract limits the annual rate to the percentage increase in the retail prices index over a 12 month period specified in the contract.

(16) Sub-paragraph (12)(b)(i) applies as if it referred instead to the annual rate of the increase in the value of the rights during the tax year.

(17) For the purposes of sub-paragraph (15)(c) the 12 month period must end during the 12 month period preceding the month in which the increase in the value of the rights occurs.

(18) Subject to sub-paragraphs (19) to (21), sub-paragraph (3) applies in relation to an individual who is a relieved member of a relieved non-UK pension scheme as if the relieved non-UK pension scheme were a registered pension scheme; and the other sub-paragraphs of this paragraph apply accordingly.

(19) Sub-paragraphs (20) and (21) apply for the purposes of sub-paragraph (3)(a)(instead of sub-paragraph (4)) in determining if there is benefit accrual in relation to an individual under an arrangement under a relieved non-UK pension scheme of which the individual is a relieved member.

(20) There is benefit accrual in relation to the individual under the arrangement if there is a pension input amount under sections 230 to 237 of FA 2004 (as applied by Schedule 34 to that Act) greater than nil in respect of the arrangement for a tax year; and, in such a case, the benefit accrual is treated as occurring at the end of the tax year.

(21) There is also benefit accrual in relation to the individual under the arrangement if— (a) in a tax year there occurs a benefit crystallisation event in relation to

the individual (whether in relation to the arrangement or to any other arrangement under any pension scheme or otherwise), and

(b) had the tax year ended immediately before the benefit crystallisation event, there would have been a pension input amount under sections 230 to 237 of FA 2004 greater than nil in respect of the arrangement for the tax year,

and, in such a case, the benefit accrual is treated as occurring immediately before the benefit crystallisation event.

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(22) Expressions used in this paragraph and Part 4 of FA 2004 (pension schemes) have the same meaning in this paragraph as in that Part.

(23) In particular, references to a relieved non-UK pension scheme or a relieved member of such a scheme are to be read in accordance with paragraphs 13(3) and (4) and 18 of Schedule 34 to FA 2004 (application of lifetime allowance charge provisions to members of overseas pension schemes).

2 (1) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend paragraph 1.

(2) Regulations under this paragraph may (for example) add to the cases in which paragraph 1 is to apply or is to cease to apply.

(3) Regulations under this paragraph may include provision having effect in relation to a time before the regulations are made; but—

(a) the time must be no earlier than 6 April 2014, and (b) the provision must not increase any person's liability to tax.

3 (1) The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision specifying how any notice required to be given to an officer of Revenue and Customs under paragraph 1 is to be given.

(2) In sub-paragraph (1) the reference to paragraph 1 is to that paragraph as amended from time to time by regulations under paragraph 2.

4 (1) Regulations under paragraph 2 or 3 may include supplementary or incidental provision.

(2) The powers to make regulations under paragraphs 2 and 3 are exercisable by statutory instrument.

(3) A statutory instrument containing regulations under paragraph 2 or 3 is subject to annulment in pursuance of a resolution of the House of Commons.

PART 2

OTHER PROVISION 5 Part 4 of FA 2004 (pension schemes) is amended as follows. 6 (1) Section 218 (standard lifetime allowance etc) is amended as follows.

(2) After subsection (5B) insert—

“(5BA) Where the operation of a lifetime allowance enhancement factor is provided for by any of sections 220, 222, 223 and 224 and the time mentioned in the definition of SLA in the section concerned fell within the period consisting of the tax year 2012-13 and the tax year 2013-14, subsection (4) has effect as if the amount to be multiplied by LAEF were £1,500,000 if that is greater than SLA.

(5BB) Where more than one lifetime allowance enhancement factor operates, subsection (5BA) does not apply if subsection (5A) or (5B) applies.”

(3) After subsection (5C) insert—

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“(5D) Where benefit crystallisation event 7 occurs on or after 6 April 2014 by reason of the payment of a relevant lump sum death benefit in respect of the death of the individual during the period consisting of the tax year 2012-13 and the tax year 2013-14, the standard lifetime allowance at the time of the benefit crystallisation event is £1,500,000.”

(4) The amendments made by this paragraph have effect for the tax year 2014-15 and subsequent tax years.

7 (1) In section 219 (availability of individual's lifetime allowance) after subsection (5) insert—

“(5A) If paragraph 7 of Schedule 36 (primary protection) makes provision for a lifetime allowance enhancement factor in relation to the individual, subsection (5) has effect as if CSLA were £1,500,000 if that is greater than CSLA.”

(2) The amendment made by this paragraph has effect for cases in which the time of the current benefit crystallisation event falls on or after 6 April 2014.

8 (1) Part 1 of Schedule 29 (authorised lump sums: lump sum rule) is amended as follows.

(2) In paragraph 2 (which applies for the purpose of determining pension commencement lump sums) after sub-paragraph (8) insert—

“(9) Sub-paragraph (10) applies if the member is a protected individual (but not if this paragraph applies with the modifications set out in paragraph 27 or 28 of Schedule 36).

(10) Sub-paragraphs (6) and (7) have effect as if CSLA were £1,500,000 if that is greater than CSLA.

(11) The member is a “protected individual” if— (a) paragraph 7 of Schedule 36 (primary protection) makes provision

for a lifetime allowance enhancement factor in relation to the member, or

(b) at the time the member becomes entitled to the lump sum, paragraph 12 of that Schedule (enhanced protection) applies in relation to the member.”

(3) The amendment made by sub-paragraph (2) has effect for cases in which the member becomes entitled to the lump sum on or after 6 April 2014.

(4) In paragraph 8 (which applies for the purpose of determining trivial commutation lump sums) for sub-paragraphs (2) and (3) substitute—

“(2) The adjustment referred to in sub-paragraph (1)(a) is the multiplication of the value of the member's relevant crystallised pension rights on 5 April 2006 by—

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where CL is the commutation limit on the nominated date.

(3) The adjustment referred to in sub-paragraph (1)(b) is the multiplication of the amount crystallised by a previous benefit crystallisation event by—

where—

CL is the commutation limit on the nominated date, and

BCL is the commutation limit when the previous benefit crystallisation event occurred.”

(5) The amendment made by sub-paragraph (4) has effect for cases in which the nominated date falls on or after 6 April 2014.

SCHEDULE 23 Section 55

EMPLOYEE SHAREHOLDER SHARES

PART 1

INCOME TAX TREATMENT OF EMPLOYEE SHAREHOLDER SHARES 1 ITEPA 2003 is amended in accordance with paragraphs 2 to 15. 2 In section 19(2) (time of receipt of non-money earnings), at the appropriate place

insert— “ section 226A (amount treated as earnings: employee shareholder shares). ”

3 In Chapter 12 of Part 3, after section 226 insert—

“Shares of employee shareholders

226A Amount treated as earnings

(1) This section applies if shares having a market value of no less than £2000 are acquired by an employee in consideration of an employee shareholder agreement.

(2) An amount calculated in accordance with subsection (3) is to be treated as earnings from the employment, in respect of the acquisition of the shares, for the tax year in which they are acquired.

But this is subject to subsection (4).

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(3) The amount is—

where— a MV is an amount equal to the market value of the shares; b P is any payment the employee is treated as making for the shares under

section 226B.

But if P exceeds MV, the amount is nil.

(4) If the shares are acquired pursuant to an employment-related securities option, subsection (2) does not apply.

(5) If subsection (2) applies, nothing else constitutes earnings under this Part from the employment in respect of the acquisition of the shares.

(6) For the purposes of this section and sections 226B to 226D— shares are “acquired” by an employee if the employee becomes beneficially entitled to them (and they are acquired at the time when the employee becomes so entitled); “employee shareholder agreement” means an agreement by virtue of which an employee is an employee shareholder (see section 205A(1) (a) to (d) of the Employment Rights Act 1996); “employee shareholder share” means a share acquired by an employee in consideration of an employee shareholder agreement; “employee” and “employer company”, in relation to an employee shareholder agreement, mean the individual and the company which enter into the agreement; “employment-related securities option” has the same meaning as in Chapter 5 of Part 7 (see section 471(5)); “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act; and the market value of shares is their market value on the day on which they are acquired (but see also subsection (7)).

(7) For the purposes of subsection (1), the market value of the shares is to be determined ignoring—

(a) any election under section 431 (election for market value of restricted shares to be calculated as if not restricted), and

(b) section 437 (market value of convertible securities to be determined as if not convertible).

226B Deemed payment for employee shareholder shares

(1) This section applies if shares having a market value of no less than £2000 are acquired by an employee in consideration of an employee shareholder agreement.

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(2) Where all the shares acquired in consideration of the agreement are acquired on the same day, the employee is to be treated, for the purposes of this Act, as having made on that day a payment of £2000 for those shares.

(3) Where— (a) shares are acquired by the employee in consideration of the

agreement on more than one day, and (b) of those shares, shares having a market value of not less than £2000

are acquired on the first of those days, the employee is to be treated for the purposes of this Act as having made, on the first of those days, a payment of £2000 for the shares acquired on that day.

(4) If the market value of the shares acquired by the employee on the day mentioned in subsection (2) or (3)(b) exceeds £2000, the amount of the payment under subsection (2) or (3) which the employee is to be treated as having made for each of the shares is an amount equal to the appropriate proportion of the market value of that share.

(5) The “appropriate proportion” is the following—

where V is the total market value of the shares acquired by the employee on the day.

(6) This section is subject to— (a) section 226C (only one payment deemed to be made under

agreements with associated companies), and (b) section 226D (no deemed payment if shareholder or a connected

person has a material interest in the company).

(7) Except as provided by this section, for the purposes of this Act the employee is to be treated as having given no consideration for shares acquired in consideration of the agreement.

(8) Section 226A(7) applies for the purposes of this section as it applies for the purposes of section 226A(1).

226C Only one payment deemed to be made under associated agreements

(1) An employee who is treated as having made a payment under section 226B for shares acquired in consideration of an employee shareholder agreement (“the relevant agreement”) is not to be treated as having made a payment for any other qualifying shares.

(2) “Qualifying shares” means employee shareholder shares in— (a) the employer company in relation to the relevant agreement, or

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(b) an associated company of that company, which are acquired by the employee in consideration of an agreement within subsection (3).

(3) An agreement is within this subsection if it is— (a) another employee shareholder agreement with the same employer

company, or (b) an employee shareholder agreement with an associated company of

that company.

(4) For the purposes of this section— (a) a company is an “associated company” of another if—

(i) one of the two has control of the other, or (ii) both are under the control of the same person or persons, and

(b) if a company controls another when an employee shareholder agreement is entered into with the employee, paragraph (a) applies as if that continued to be the case (in addition to any other circumstances) when any subsequent employee shareholder agreement is entered into with that employee.

(5) But subsection (4)(b) does not apply as between two companies if— (a) one of the companies has been dissolved, (b) the period of two years beginning with the date of the dissolution

has passed, and (c) the employee has not, at any time in that period, been engaged in

any office or employment (including engagement under a contract for services) with any company which is an associated company of the dissolved company.

(6) In this section “control” is to be read in accordance with sections 450 and 451 of CTA 2010.

226D Shareholder or connected person having material interest in company

(1) No payment is treated as made under section 226B in respect of any shares if, on the date on which the shares are acquired—

(a) the employee has a material interest in the employer company or a relevant parent undertaking, or

(b) the employee is connected with an individual who has a material interest in the employer company or a relevant parent undertaking.

(2) No payment is treated as made under section 226B in respect of any shares if—

(a) at any time in the period of one year ending with the date on which the shares are acquired, the employee had a material interest in the employer company or a relevant parent undertaking, or

(b) on the date on which the shares are acquired, the employee is connected with an individual who, at any time in the period of one year ending with that date, had a material interest in the employer company or a relevant parent undertaking.

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(3) Subsections (4) and (5) define “material interest” for the purposes of this section.

Those subsections must be read together with subsections (6) to (8).

(4) An individual (“A”) has a material interest in a company if at least 25% of the voting rights in the company are exercisable—

(a) by A, (b) by persons connected with A, or (c) by A and persons connected with A together.

(5) If a company is a close company, an individual (“A”) has a material interest in it if—

(a) A, (b) persons connected with A, or (c) A and persons connected with A together,

possess such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive at least 25% of the assets that would then be available for distribution among the participators.

(6) For the purposes of subsection (1), A is to be treated as having a material interest in a company at any time if either of the following conditions is met.

(7) The first condition is that— (a) A, (b) persons connected with A, or (c) A and persons connected with A together,

have an entitlement to acquire such rights as would (together with any existing rights) give A a material interest in the company.

(8) The second condition is that there are arrangements in place between— (a) the employer company or a relevant parent undertaking, and (b) A, or persons connected with A, or A and persons connected with

A together, which enable A or those persons to acquire such rights as would (together with any existing rights) give A a material interest in the company.

(9) In this section— “arrangements” includes any agreement, understanding, scheme,

transaction or series of transactions (whether or not legally enforceable);

“close company” includes a company that would be a close company but for—

(a) section 442(a) of CTA 2010 (exclusion of companies not resident in the United Kingdom), or

(b) sections 446 and 447 of CTA 2010 (exclusion of certain quoted companies);

“relevant parent undertaking” means any parent undertaking of the employer company and for this purpose “parent undertaking” is

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to be read in accordance with section 1162 of the Companies Act 2006.”

4 In consequence of the amendment made by paragraph 3— (a) in the heading to Chapter 12 of Part 3, for “PAYMENTS” substitute “ OTHER

AMOUNTS ”, and (b) before section 221 insert the heading “Payments”.

5 In section 428 (restricted securities: amount of charge on occurrence of chargeable event), in subsection (7), after paragraph (b) insert—

“(ba) any amount treated as earnings from the employee's employment under section 226A (employee shareholder shares: amount treated as earnings) in respect of the acquisition of the employment-related securities (other than an amount of exempt income),”.

6 In section 431 (election for full or partial disapplication of Chapter 2 (restricted securities)), in subsection (3), after paragraph (a) insert—

“(aa) determining any amount that is to be treated as earnings from the employment where section 226A applies (employee shareholder shares: amount treated as earnings),”.

7 In section 437 (convertible securities: adjustment of charge), in subsection (1) (a), after “charge)” insert “ , section 226A (employee shareholder shares: amount treated as earnings) ”.

8 In section 446B (charge on acquisition of securities with artificially depressed market value), in subsection (4), after paragraph (b) insert—

“(ba) section 226A (employee shareholder shares: amount treated as earnings),”.

9 In section 446T (securities acquired for less than market value: amount of notional loan), in subsection (3), after paragraph (b) insert—

10 In section 446V (Chapter 3C to be additional to other income tax charges), after paragraph (b) insert—

“(ba) section 226A (employee shareholder shares: amount treated as earnings),”.

11 In section 452 (shares in research institution spin-out companies: market value on acquisition), in subsection (2), after paragraph (a) insert—

“(aa) determining any amount that is to be treated as earnings from the employment under section 226A (employee shareholder shares: amount treated as earnings),”.

12 In section 479 (securities options: amount of gain realised on chargeable event), after subsection (3) insert—

“(3A) Sections 226B to 226D (deemed payment for acquisition of employee shareholder shares) provide for the determination of the amount of consideration, if any, which is given for employee shareholder shares (within the meaning of section 226A(6)).”

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13 In section 531 (enterprise management incentives: limitation of charge where shares acquired below market value), after subsection (3) insert—

“(3A) Sections 226B to 226D (deemed payment for acquisition of employee shareholder shares) provide for the determination of the amount, if any, for which employee shareholder shares (within the meaning of section 226A(6)) are acquired.”

14 (1) Section 532 (enterprise management incentives: consequences after disqualifying events) is amended as follows.

(2) After subsection (4) insert—

“(4A) Sections 226B to 226D (deemed payment for acquisition of employee shareholder shares) provide for the determination of the amount, if any, for which employee shareholder shares (within the meaning of section 226A(6)) are acquired.”

(3) In subsection (5), for “those subsections” substitute “ subsections (2) and (3) ”. 15 In section 554N (exclusions: other cases involving employment-related securities

etc), in subsection (7)(b), after “Part 3” insert “ , or an amount treated under section 226A as earnings of A, ”.

16 In Chapter 3 of Part 4 of ITTOIA 2005 (tax on dividends etc from UK companies), after section 385 insert—

“Purchase by company of exempt employee shareholder shares

385A No charge to tax on purchase by company of exempt employee shareholder shares

(1) No tax is charged under this Chapter on the amount or value of a payment made by a company on the purchase of shares from an individual if—

(a) the payment is made in respect of shares in the company, (b) the shares are exempt employee shareholder shares, and (c) at the time of the disposal, the individual is not an employee of, or an

office-holder in, the employer company or an associated company of that company.

(2) In this section— “exempt employee shareholder share”, “employer company” and

“associated company” have the same meaning as in sections 236B to 236D of TCGA 1992 (capital gains tax treatment of employee shareholder shares);

“in respect of shares in the company” has the same meaning as in Part 23 of CTA 2010 (company distributions) (see section 1113 of that Act).”

PART 2

CAPITAL GAINS TAX EXEMPTION FOR EMPLOYEE SHAREHOLDER SHARES 17 TCGA 1992 is amended as follows.

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18 In section 58(2) (spouses and civil partners: disposals excepted from the usual rule) —

(a) omit “or” at the end of paragraph (a), and (b) after paragraph (b) insert “, or

19 (1) Section 149AA (restricted and convertible employment-related securities) is amended as follows.

(2) In subsection (1) for “Where” substitute “ Subject to subsection (1A), where ”.

(3) After that subsection insert—

“(1A) Where an individual has acquired an asset consisting of shares which, on acquisition, became employee shareholder shares—

(a) the consideration for the acquisition is (subject to section 119A) to be taken to be equal to any amount that constituted earnings under Chapter 1 of Part 3 of ITEPA 2003 (earnings) or section 226A of that Act (employee shareholder shares), and

(b) no other consideration is to be treated as having been given for the acquisition of the shares.”

(4) In subsection (2)— (a) for “Subsection (1) above applies” substitute “ Subsections (1) and (1A)

apply ”, and (b) for “is” substitute “ are ”.

(5) After subsection (6) insert—

“(6A) For the purposes of subsection (1A)— “employee shareholder share” has the meaning given in

section 236B(3) (exemption for employee shareholder shares), and shares are “acquired” by an individual if the individual becomes

beneficially entitled to them (and they are so acquired at the time when the individual becomes so entitled).”

(6) In subsection (7)— (a) for “In subsection (1) the” substitute “ In subsections (1) and (1A) a ”, and (b) after “ITEPA 2003” insert “ or was treated as earnings under section 226A

of that Act ”.

(7) Accordingly, in the heading for that section, after “securities” insert “ and employee shareholder shares ”.

20 After section 236A insert—

“Employee shareholders

236B Exemption for employee shareholder shares

(1) A gain which accrues on the first disposal of an exempt employee shareholder share is not a chargeable gain.

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(2) A share is an exempt employee shareholder share if it is— (a) an employee shareholder share, and (b) exempt in accordance with sections 236C and 236D.

(3) In this section and sections 236C to 236G— shares are “acquired” by an employee if the employee becomes beneficially entitled to them (and they are acquired at the time when the employee becomes so entitled); “employee shareholder share” means a share acquired in consideration of an employee shareholder agreement and held by the employee; “employee shareholder agreement” means an agreement by virtue of which an employee is an employee shareholder (see section 205A(1) (a) to (d) of the Employment Rights Act 1996); “employee” and “employer company”, in relation to an employee shareholder agreement, mean the individual and the company which enter into the agreement.

236C Only first £50,000 of shares under associated agreements to be exempt

(1) An employee shareholder share acquired in consideration of an employee shareholder agreement (“the relevant agreement”) is exempt for the purposes of section 236B only if, immediately after its acquisition, the total value of qualifying shares which have been acquired by the employee does not exceed £50,000.

(2) “Qualifying share” means an employee shareholder share in— (a) the employer company in relation to the relevant agreement, or (b) an associated company of that company,

which is acquired by the employee in consideration of an agreement within subsection (3).

(3) An agreement is within this subsection if it is— (a) the relevant agreement, (b) another employee shareholder agreement with the same employer

company, or (c) an employee shareholder agreement with an associated company of

that company.

(4) For the purposes of this section— (a) a company is an “associated company” of another if—

(i) one of the two has control of the other, or (ii) both are under the control of the same person or persons, and

(5) But subsection (4)(b) does not apply as between two companies if— (a) one of the companies has been dissolved,

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(b) the period of two years beginning with the date of the dissolution has passed, and

(c) the employee has not, at any time in that period, been engaged in any office or employment (including engagement under a contract for services) with any company which is an associated company of the dissolved company.

(6) If a number of qualifying shares are acquired by an employee on a day and— (a) before that day, the value of qualifying shares that have been

acquired by the employee does not exceed £50,000, and (b) at the end of that day, that value does exceed that sum,

the appropriate proportion of the shares (rounded down, if necessary, to the nearest share) is to be treated for the purposes of subsection (1) as having been acquired separately and before the others.

(7) The “appropriate proportion” is the following—

where—

B is the value of qualifying shares acquired before the day;

T is the total value of qualifying shares acquired on the day.

(8) For the purposes of this section, the value of a share (at any time) is its unrestricted market value at the time when it was acquired by the employee.

(9) The unrestricted market value of a share when it is acquired by an employee is what the market value of the share would be immediately after the acquisition, but for any restriction.

For this purpose “restriction” has the meaning given by section 432(8) of ITEPA 2003 (restricted securities for the purposes of Chapter 2 of Part 7 of that Act).

236D Shares not exempt if shareholder or connected person has material interest in company

(1) An employee shareholder share is not exempt for the purposes of section 236B if, on the date on which the share is acquired—

(a) the employee has a material interest in the employer company or a relevant parent undertaking, or

(b) the employee is connected with an individual who has a material interest in the employer company or a relevant parent undertaking.

(2) An employee shareholder share is not exempt for the purposes of section 236B if—

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(a) at any time in the period of one year ending with the date on which the share is acquired, the employee had a material interest in the employer company or a relevant parent undertaking, or

(b) on the date on which the share is acquired, the employee is connected with an individual who, at any time in the period of one year ending with that date, had a material interest in the employer company or a relevant parent undertaking.