118 Acquisition of new herd begun within 5 years of sale
(1) This section applies for the purpose of calculating the profits of the trade if—
(a) either all at once or over a period not longer than 12 months, the herd (“the old herd”) is sold, and
(b) the farmer acquires or starts to acquire another production herd of the same class (“the new herd”) within 5 years of the sale.
(2) Section 114 (replacement of animals in herd) applies as if a number of animals equal to—
(a) the number of animals in the old herd, or
(b) if smaller, the number of animals in the new herd,
had been sold from the old herd and replaced in that herd (but see section 119 (sale for reasons outside farmer's control)).
(3) For the purposes of section 114, the sale proceeds of an animal that is treated as a result of subsection (2) above as if it had been—
(a) sold from the old herd, and
(b) replaced in that herd by another animal (“the new animal”),
are not brought into account as a receipt until the new animal is acquired.
(4) If—
(a) the number of animals in the new herd is smaller than the number of animals in the old herd, and
(b) the difference is not substantial,
section 116 (sale of animals from herd) applies as if a number of animals equal to the difference had been sold from the old herd.
(5) If the number of animals in the new herd is smaller than the number of animals in the old herd and the difference is substantial—
(a) section 117 (sale of whole or substantial part of herd where replacement not begun within 5 years), or
(b) section 120 (sale of substantial part of herd where replacement begun within 5 years),
applies as if a number of animals equal to the difference had been sold from the old herd.
(6) If the number of animals in the new herd is larger than the number of animals in the old herd, section 113 (addition of animals to herd) applies as if a number of animals equal to the difference had been added to the old herd.
(7) For the purposes of this section—
(a) if the difference between the number of animals in the new herd and the number of animals in the old herd is equal to 20% or more of the number of animals in the old herd, the difference is substantial, but
(b) a lesser percentage than 20% is capable of being a substantial difference depending on the circumstances of the case concerned.
119 Section 118: sale for reasons outside farmer's control
(1) This section applies for the purposes of section 114, as applied by section 118(2).
(2) If—
(a) the farmer was compelled to sell the old herd for reasons wholly outside the farmer's control, and
(b) an animal (“the new animal”) that is treated as a result of section 118(2) as if it replaced an animal sold (“the old animal”) is of worse quality than the old animal,
the amount brought into account as a receipt under section 114 must not exceed the equivalent amount for the new animal.
(3) If, immediately before it was added to the herd, the new animal was part of the farmer's trading stock, “the equivalent amount for the new animal” means—
(a) in the case of an animal bred by the farmer, the cost of breeding the animal and rearing it to maturity, and
(b) in any other case, the sum of the initial cost of acquiring the animal and the cost (if any) incurred by the farmer in rearing the animal to maturity.
(4) Otherwise “the equivalent amount for the new animal” means the cost of the new animal.
120 Replacement of part sold begun within 5 years of sale
(1) This section applies for the purpose of calculating the profits of the trade if—
(a) either all at once or over a period not longer than 12 months, a substantial part of the herd is sold, and
(b) the farmer acquires or starts to acquire animals to replace the part sold within 5 years of the sale.
(2) Section 114 (replacement of animals in herd) applies so far as the animals included in the part sold are replaced (but see section 121 (sale for reasons outside farmer's control)).
(3) The sale proceeds of an animal included in the part sold are not brought into account as a receipt until the animal that replaces it in the herd is acquired.
(4) If some of the animals included in the part sold are not replaced—
(a) a profit arising from their sale is not brought into account as a receipt, and
(b) no deduction is allowed for a loss arising from their sale.
121 Section 120: sale for reasons outside farmer's control
(1) This section applies for the purposes of section 114, as applied by section 120(2).
(2) If—
(a) the farmer was compelled to sell the part of the herd for reasons wholly outside the farmer's control, and
(b) an animal (“the new animal”) that replaces an animal sold (“the old animal”) is of worse quality than the old animal,
the amount brought into account as a receipt under section 114 must not exceed the equivalent amount for the new animal.
(3) If, immediately before it was added to the herd, the new animal was part of the farmer's trading stock, “the equivalent amount for the new animal” means—
(a) in the case of an animal bred by the farmer, the cost of breeding the animal and rearing it to maturity, and
(b) in any other case, the sum of the initial cost of acquiring the animal and the cost (if any) incurred by the farmer in rearing the animal to maturity.
(4) Otherwise “the equivalent amount for the new animal” means the cost of the new animal.
(1) A herd basis election must specify the class of production herd to which it relates.
(2) A herd basis election must be made—
(a) not later than two years after the end of the first relevant accounting period (if the farmer is not a firm), or
(b) on or before the first anniversary of the normal self-assessment filing date for the tax year in which the first relevant period of account ends (if the farmer is a firm).
(3) For this purpose—
(a) “the first relevant accounting period” means the first accounting period in which the farmer making the election keeps a production herd of the class to which the election relates, and
(b) “the first relevant period of account” means the first period of account in which the firm making the election keeps a production herd of the class to which the election relates (but see subsection (8)).
(4) A herd basis election cannot relate to more than one class of production herd, but separate elections may be made for different classes.
(5) A herd basis election is irrevocable.
(6) A herd basis election has effect in relation to all production herds of the class to which it relates, including any which the farmer—
(a) has ceased to keep before making the election, or
(b) first keeps after making the election.
(7) A herd basis election has effect—
(a) for every accounting period in which the farmer carries on the trade and keeps a production herd of the class to which the election relates (if the farmer is not a firm), or
(b) for every period of account in which the farmer carries on the trade and keeps a production herd of the class to which the election relates (if the farmer is a firm).
(8) If the farmer is a firm and there is a change in the persons who are partners in the firm—
(a) any herd basis election made by the old firm ceases to have effect, and
(b) in relation to the new firm, “the first relevant period of account” means the first period of account in which the new firm keeps a production herd of the class to which the election relates.
123 Five year gap in which no production herd kept
(1) This section applies if a farmer—
(a) keeps a production herd of a particular class, and
(b) ceases altogether to keep herds of that class for a period of at least 5 years.
(2) If the farmer keeps a production herd of that class after the end of that period—
(a) the accounting period or (as the case may be) period of account in which the farmer starts to keep the herd is treated as the first accounting period or period of account in which the farmer keeps a production herd of that class, and
(b) any herd basis election previously made by the farmer in relation to production herds of that class ceases to have effect.
(1) This section applies if—
(a) the whole or a substantial part of a production herd kept by a farmer is slaughtered under a disease control order, and
(b) the circumstances of the slaughter are such that compensation is payable in respect of the animals slaughtered.
(2) The farmer may make a herd basis election in respect of the class of production herd involved in the slaughter as if the accounting period or (as the case may be) period of account —
(a) in which the compensation falls to be brought into account in calculating the profits of the trade, or
(b) in which it would (but for the election) fall to be so brought into account,
were the first accounting period or period of account in which the farmer keeps a production herd of that class.
(3) An election made as a result of this section has effect for that accounting period or period of account and every subsequent accounting period or period of account in which the farmer—
(a) carries on the trade, and
(b) keeps a production herd of the class to which the election relates.
(4) In this section “disease control order” means an order made under the law relating to the diseases of animals by—
(a) central government,
(b) a devolved authority,
(c) a local authority, or
(d) another public authority.
(1) This section applies if—
(a) a person carrying on a trade (the “transferor”) transfers the whole or part of a production herd to another person (the “transferee”),
(b) the transfer is not by way of sale or is by way of sale but for a price other than that which the animals sold would have fetched if sold in the open market, and
(c) the control condition or herd basis benefit condition is met.
(2) The control condition is met if—
(a) the transferor is a body of persons over which the transferee has control,
(b) the transferee is a body of persons over which the transferor has control, or
(c) both the transferor and transferee are bodies of persons and another person has control over both of them.
(3) For this purpose “body of persons” includes a firm.
(4) The herd basis benefit condition is met if—
(a) the transferor or transferee (or both) might (but for this section) have been expected to obtain a herd basis benefit as a result of the transfer or the transactions of which the transfer is one, and
(b) the herd basis benefit is the sole or main benefit, or one of the main benefits, that the person in question might have been expected to obtain.
(5) For this purpose a “herd basis benefit” is a benefit resulting from—
(a) the obtaining of a right to make a herd basis election,
(b) the herd basis rules applying or not applying, or
(c) the herd basis rules having a greater or lesser effect.
(6) For the purpose of calculating the profits of—
(a) the trade carried on by the transferor, and
(b) any trade carried on by the transferee,
the animals transferred are treated as having been sold at the price which they would have fetched if sold in the open market.
127 Further assessment etc if herd basis rules apply
(1) If the herd basis rules apply in calculating the profits of an accounting period after an assessment for that period has become final and conclusive, any assessment or repayment of tax that is necessary to give effect to the rules must be made.
(2) But repayment of tax is due only if a claim for it is made.
(1) This Chapter applies if—
(a) an animal treated as trading stock of a farming trade is slaughtered under a disease control order,
(b) the animal is not part of a production herd of a class in respect of which a herd basis election may be made under section 124, and
(c) the farm company receives or will receive compensation for the animal.
(2) Such an animal is referred to in this Chapter as a “relevant animal”.
(3) “Disease control order” has the same meaning as in section 124.
(1) The farm company may make a claim under this section.
(2) A claim may only be made in respect of the total compensation profit for an accounting period.
(3) The total compensation profit for an accounting period is the sum of the profits which the farm company makes for all the relevant animals slaughtered in that period.
(4) For the purposes of this Chapter the profit which the farm company makes for a relevant animal is—
(a) the amount by which the compensation for the animal exceeds its book value, or
(b) if the trade is carried on in partnership, the farm company’s share of that amount, determined in accordance with Part 17.
(5) Nothing in this section prevents a claim being made before the amount of the compensation has been finally determined.
(1) For the purposes of this Chapter the book value of an animal is the value shown in the accounts as the value of the animal at the start of the accounting period in which it was slaughtered.
(2) If, for an animal, no value is shown in the accounts as that value, the book value is as follows—
(a) in the case of an animal which was born in the accounting period in which it was slaughtered and did not become part of the trading stock in any other way, the book value is 75% of the compensation payable for it,
(b) in the case of an animal in relation to which section 158 (trading stock supplied by trader) or 160 (acquisitions not made in the course of trade) applies, the book value is the cost treated as incurred under section 158(2) or 160(2) as the case may be, and
(c) in any other case, the book value is the cost of acquiring the animal for the purposes of the trade.
If the farm company makes a claim under section 127B in respect of the total compensation profit for an accounting period (“period X”), the profits of the trade carried on by the farm company are to be adjusted for corporation tax purposes as follows—
Step 1
Treat the compensation payable for all of the relevant animals slaughtered in period X as a receipt of that period (regardless of when the compensation is finally determined or paid).
Step 2
If the farm company makes a profit in the trade in period X, deduct from the profits of that period an amount equal to—
the total compensation profit for period X, or
if the total compensation profit exceeds the profits of period X, such portion of the total compensation profit as will reduce the profits to nil.
Step 3
In calculating the profits for each of the 3 consecutive accounting periods following period X, include an amount equal to one third of the amount deducted by virtue of step 2.
If the farm company permanently ceases to carry on the farming trade before the end of the second consecutive accounting period following period X, step 3 in section 127D is to be replaced by the following two steps—
Step 3
Divide the amount deducted by virtue of step 2 by the number of accounting periods (“the remaining accounting periods”) in which, or in any part of which, the farm company carried on the farming trade, starting with period X.
Step 4
In calculating the profits for each of the remaining accounting periods, include the amount resulting from the division in step 3.
(1) A claim under section 127B must be made on or before the first anniversary of the filing date for the company tax return of the farm company for period X (see paragraph 14 of Schedule 18 to FA 1998).
(2) If the profits for an accounting period are to be adjusted or further adjusted in accordance with this Chapter after an assessment for that period has become final and conclusive, any assessment or repayment or discharge of tax that is necessary to give effect to this Chapter must be made.
(3) But repayment or discharge of tax is due only if a claim for it is made.
In this Chapter—
“animal” means any animal or other living creature;
“farming trade” means a trade of farming;
“the farm company”, in relation to a farming trade, means the company that (alone or in partnership) carries on that trade;
“the total compensation profit” has the meaning given by section 127B.
(1) This section applies for the purpose of calculating the profits of a company's trade if—
(a) the company carries on a banking business, an insurance business or a business consisting wholly or partly of dealing in securities, and
(b) a profit on the sale of securities held by the company would be brought into account in calculating the trading profits of that business.
(2) Profits and losses from the securities that in accordance with generally accepted accounting practice are—
(a) calculated by reference to the fair value of the securities, and
(b) recognised in the company's statement of recognised gains and losses or statement of changes in equity,
are brought into account in calculating the profits of the trade.
(3) But subsection (2) does not apply—
(a) to an amount so far as deriving from or otherwise relating to an amount brought into account under that subsection in an earlier period of account, or
(b) to an amount recognised for accounting purposes by way of correction of a fundamental error.
(4) In this section “securities” includes—
(a) shares,
(b) rights of unit holders in unit trust schemes to which TCGA 1992 applies as a result of section 99 of TCGA 1992, and
(c) in the case of a company with no share capital, interests in the company possessed by members of the company,
but does not include a loan relationship (within the meaning of Part 5).
129 Conversion etc of securities held as circulating capital
(1) This section applies for the purpose of calculating the profits of a company's trade if—
(a) the company carries on a banking business, an insurance business or a business consisting wholly or partly of dealing in securities,
(b) a transaction falling within subsection (2) occurs in relation to securities (“the original holding”), and
(c) a profit on the sale of the securities would be brought into account in calculating the trading profits of that business.
(2) A transaction falls within this subsection if—
(a) it results in a new holding being treated as the same as the original holding as a result of sections 126 to 136 of TCGA 1992 (roll-over relief in cases of conversion etc), or
(b) it is treated, as a result of section 134 of TCGA 1992 (compensation stock), as an exchange for a new holding which does not involve a disposal of the original holding.
(3) This section does not apply to securities in respect of which unrealised profits or losses, calculated by reference to the fair value of the securities at the end of the period of account, are taken into account in the period of account in which the transaction occurs.
(4) The transaction is treated as not involving a disposal of the original holding and the new holding is treated as the same asset as the original holding.
(5) But if, under the transaction, the company carrying on the trade—
(a) receives consideration in addition to the new holding, or
(b) becomes entitled to receive such consideration,
subsection (4) applies as if the references to the original holding were to the proportion of the original holding given by the following fraction.
(6) The fraction is—
NH
NH
+
C
where—
NH is the market value of the new holding at the time of the transaction, and
C is the market value of the consideration at the time of the transaction or (if the consideration is cash) the amount of the consideration.
(7) In determining whether subsection (2)(a) applies as a result of section 135 or 136 of TCGA 1992, the reference to capital gains tax in section 137(1) of TCGA 1992 is to be read as a reference to income tax.
(8) In this section “securities” includes—
(a) shares,
(b) rights of unit holders in unit trust schemes to which TCGA 1992 applies as a result of section 99 of TCGA 1992, and
(c) in the case of a company with no share capital, interests in the company possessed by members of the company.
(1) This section applies for the purpose of calculating the trading profits of—
(a) insurance business other than business in relation to which section 111 of FA 2012 applies, or
(b) any category of such business.
(2) A receipt that is exempt for the purposes of Part 9A (company distributions) is not brought into account in calculating the profits of the trade.
130A Insurers in financial difficulties: write-down orders
(1) A receipt or expense that is attributable to the operation of a write-down order, or to a write-down order ceasing to have effect, is not brought into account in calculating the profits of a trade.
(2) In this section “write-down order” means an order under section 377A of the Financial Services and Markets Act 2000 (court order writing down liabilities of insurer).
(1) In calculating the profits of a trade carried on by a building society, a deduction is allowed for incidental costs of obtaining finance by means of issuing shares in the society if—
(a) the shares are qualifying shares for the purposes of section 117(4) of TCGA 1992, and
(b) the condition in subsection (2) is met.
(2) The condition is that the amount of any—
(a) dividend or other distribution, or
(b) interest,
payable in respect of the shares is deductible in calculating, for corporation tax purposes, the profits of the society's trade.
(3) But a deduction is not allowed by virtue of subsection (1) so far as the costs fall to be brought into account as debits for the purposes of Part 5 (loan relationships).
(4) “Incidental costs of obtaining finance” means expenses—
(a) which are incurred on fees, commissions, advertising, printing and other incidental matters, and
(b) which are incurred wholly and exclusively for the purpose of obtaining the finance, providing security for it or repaying it.
(5) Expenses incurred wholly and exclusively for the purpose of—
(a) obtaining finance, or
(b) providing security for it,
are incidental costs of obtaining the finance even if it is not in fact obtained.
(6) But the following are not incidental costs of obtaining finance—
(a) sums paid because of losses resulting from movements in the rate of exchange between different currencies,
(b) sums paid for the purpose of protecting against such losses,
(c) the cost of repaying qualifying shares so far as attributable to their being repayable at a premium or having been issued at a discount, and
(d) stamp duty.
(1) This section applies if a trade is carried on by a registered society and—
(a) the society does not sell to persons who are not its members, or
(b) the number of shares in the society is not limited by the society's rules or practice.
(2) In calculating the profits of the trade, a deduction is allowed for sums which meet conditions A and B.
(3) Condition A is that—
(a) the sum represents a discount, rebate, dividend or bonus granted by the society to a member or other person (“the recipient”),
(b) the discount, rebate, dividend or bonus is in respect of—
(i) amounts paid or payable by the recipient, or
(ii) amounts paid or payable to the recipient,
on account of the recipient's transactions with the society, and
(c) those transactions are taken into account in calculating the society's profits chargeable under this Part.
(4) Condition B is that the sum mentioned in subsection (2) is calculated by reference to—
(a) the amounts paid or payable by or to the recipient, or
(b) the size of the transactions,
and not by reference to the amount of any share or interest in the capital of the society.
(5) See also section 1056 of CTA 2010 (dividend or bonus to which this section applies is not treated as a distribution).
133A Compensation payments: restriction of deductions
(1) In calculating the profits of a trade carried on by a company (“company A”) no deduction is allowed for expenses incurred by the company if and so far as—
(a) the expenses are in respect of amounts of relevant compensation (see subsection (3)), and
(b) the disclosure condition is met in relation to the expenses (see section 133C).
(2) Subsection (1) does not apply to expenses which are excluded by section 133D.
(3) In relation to company A, “relevant compensation” means compensation which is paid or payable—
(a) to or for the benefit of a customer of company A in respect of relevant conduct (see subsection (6)) of company A, or
(b) to or for the benefit of a customer of a qualifying company in respect of relevant conduct of that qualifying company (but see subsection (4)).
(4) Compensation paid or payable as mentioned in subsection (3)(b) is not relevant compensation so far as it is paid or payable under arrangements entered into between company A and the qualifying company on arm's length terms.
(5) “Qualifying company”, in relation to company A, means a company which is associated with company A (see section 133L) at the time when the expenses in question are recognised for accounting purposes.
(6) For the purposes of this section conduct of a company is “relevant conduct” if the conduct occurs—
(a) on or after 29 April 1988, and
(b) at a time when the company is a banking company (see section 133E).
(7) For the purposes of subsection (1) it does not matter whether the compensation is paid, or to be paid, by company A or another person.
(8) In this section—
“compensation”, “payment” and references to compensation “paid or payable” in respect of relevant conduct of a company, are to be read in accordance with section 133K;
“conduct” includes any act or omission;
“customer” has the meaning given by section 133J.
133B Companies affected by section 133A: amounts treated as received
(1) This section applies where a company incurs in an accounting period expenses which would, but for section 133A, be deductible in calculating the profits of a trade carried on by that company.
(2) An amount equal to 10% of the relevant sum is to be brought into account as a receipt in calculating the profits of the trade.
(3) The amount is treated as arising at the end of the accounting period.
(4) In this section “the relevant sum” means the total amount of the expenses which as a result of section 133A are not deductible in calculating the profits of the trade for the accounting period.
(1) In relation to expenses incurred by a company (“company A”) in respect of amounts of relevant compensation, the “disclosure condition” is met if—
(a) a relevant document indicates that the company—
(i) is or has been, or
(ii) will become,
liable to pay compensation in respect of a particular matter and the relevant compensation can reasonably be regarded as relating to that matter, or
(b) a relevant document refers to disciplinary action taken or to be taken by a regulator in respect of a particular matter and the relevant compensation can reasonably be regarded as relating to that matter.
(2) A disclosure in a relevant document is to be disregarded for the purposes of paragraph (a) of subsection (1) if the disclosure is concerned with liability to pay compensation to or for the benefit of one (and only one) customer of the company concerned in respect of a single error in the conduct of the company concerned.
(3) In subsection (2) “the company concerned” means company A or a company which is associated with company A (see section 133L).
(4) For the purposes of subsection (1)(a) it does not matter whether the indication is express or implicit (or how it is expressed or conveyed) provided that it is reasonably clear from the relevant document that the company is or has been, or will become, liable to pay compensation in respect of the matter concerned.
(5) In this section “a relevant document” means—
(a) relevant accounts,
(b) a relevant statutory report, or
(c) a relevant listing disclosure.
(6) For the purposes of this section the following are “relevant accounts” in relation to expenses incurred by company A—
(a) company A's statutory accounts for a relevant period, and
(b) relevant consolidated accounts for a relevant period.
(7) For the purposes of this section, any of the following is a “relevant statutory report” in relation to company A if the report in question is prepared for a relevant period—
(a) any published report prepared by the directors of the company for the purposes of any provision of the legislation under which company A is registered or, as the case may be, established;
(b) any published consolidated report prepared for such purposes, if the company is included in the consolidation.
(8) In this section “relevant listing disclosure” means a disclosure required—
(a) by rules under section 73A of FISMA 2000, or
(b) by virtue of a requirement imposed by or under a corresponding provision of the law of a territory outside the United Kingdom,
if the disclosure is made in the period of 5 years ending at the end of the period of account in which the expenses are recognised for accounting purposes.
(9) In this section “relevant period”, in relation to expenses incurred by company A, means—
(a) the period of account in which the expenses are recognised for accounting purposes, or
(b) any period which begins not more than 5 years before, and ends not later than, the end of that period.
(10) In this section, in relation to a company—
“relevant compensation” has the meaning given by section 133A(3);
“statutory accounts” means accounts prepared for the purposes of any provision of the legislation under which the company is registered or, as the case may be, established;
“relevant consolidated accounts” means consolidated accounts prepared for any such purposes, if the company is included in the consolidation.
(1) Expenses in respect of relevant compensation are excluded by this section if the compensation is in respect of—
(a) an administrative error,
(b) the failure of a computer or electronic system, or
(c) loss or damage which is wholly or mainly attributable to an unconnected third party.
(2) In subsection (1) “third party” means a person who is neither the company mentioned in section 133A(1) nor (if different) the company in respect of whose conduct the compensation is paid or payable (see section 133A(3)(b)).
(3) For the purposes of this section a third party (“TP”) is an “unconnected third party” unless—
(a) TP was, at the time of the relevant actions, connected with the company mentioned in section 133A(1) or (if different) the company in respect of whose conduct the compensation is paid or payable, or
(b) in taking one or more of the relevant actions, TP was acting under arrangements with the company mentioned in paragraph (a) or (as the case may be) either of the companies mentioned in paragraph (a).
(4) In this section “the relevant actions” means the actions as a result of which the loss or damage is wholly or mainly attributable to TP (and references to actions or the taking of actions include failures to act).
(5) Section 1122 of CTA 2010 (meaning of “connected persons”) applies for the purposes of this section, but subject to the following modification.
(6) Section 1122 has effect as if after subsection (8) there were inserted—
(9) A person (“A”) is connected with any person who is an employee of A or by whom A is employed.
(10) For the purposes of this section any director or other officer of a company is to be treated as employed by that company.
(1) For the purposes of section 133A, a company is a “banking company”—
(a) at a time when it meets conditions A to D,
(b) at a time when it meets condition A and is a member of a partnership which meets conditions B to D, or
(c) if it is a building society.
In subsections (2) to (6), “the relevant entity” means the company or partnership.
(2) Condition A is that the company is not an excluded company (see section 133F).
(3) Condition B—
(a) in relation to any time on or after 1 December 2001, is that the relevant entity is an authorised person for the purposes of FISMA 2000 (see section 31 of that Act);
(b) in relation to any time before that date, is that the relevant entity—
(i) was at that time an authorised person under Chapter 3 of Part 1 of the Financial Services Act 1986 (persons authorised to carry on investment business),
(ii) was authorised under the Banking Act 1987, or
(iii) was entitled by virtue of the Banking Co-ordination (Second Council Directive) Regulations 1992 (S.I. 1992/3218) to accept deposits (within the meaning of the Banking Act 1987) in the United Kingdom.
(4) Condition C is that—
(a) the relevant entity's activities include the relevant regulated activity described in the provision mentioned in section 133G(1)(a), or
(b) the relevant entity is an investment bank (see section 133H) whose activities consist wholly or mainly of any of the relevant regulated activities described in the provisions mentioned in section 133G(1)(b) to (f).
(5) Condition D is that the relevant entity carries on that relevant regulated activity, or those relevant regulated activities, wholly or mainly in the course of trade.
(6) Where the relevant entity carries on activities outside the United Kingdom, Condition B is met—
(a) in relation to any time on or after 1 December 2001, if the relevant entity would be required to be an authorised person for the purposes of FISMA 2000 (see section 31 of that Act) in order to carry on any of those activities in the United Kingdom at that time;
(b) in relation to any time before that date, if in order to carry on those activities in the United Kingdom at that time the relevant entity—
(i) would have been required to be an authorised person under Chapter 3 of Part 1 of the Financial Services Act 1986 (persons authorised to carry on investment business), or
(ii) would have been required either to be authorised under the Banking Act 1987 or to be entitled by virtue of the Banking Co-ordination (Second Council Directive) Regulations 1992 (S.I. 1992/3218) to accept deposits (within the meaning of the Banking Act 1987) in the United Kingdom.
(7) In this section “partnership” includes—
(a) a limited liability partnership, and
(b) an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership,
and “member”, in relation to a partnership, is to be read accordingly.
(8) For the meaning of “relevant regulated activity”, see section 133G.
(1) This section gives the meaning of “excluded company” for the purposes of section 133E.
(2) A company is an “excluded company” at any time (in an accounting period) when the company is—
(a) an insurance company or an insurance special purpose vehicle;
(b) a company which is a member of a group and does not carry on any relevant regulated activities otherwise than on behalf of an insurance company or an insurance special purpose vehicle which is a member of the group;
(c) a company which does not carry on any relevant regulated activities otherwise than as the manager of a pension scheme;
(d) an investment trust;
(e) a company which does not carry on any relevant regulated activities other than asset management activities;
(f) an exempt commodities firm;
(g) a company which does not carry on any relevant regulated activities otherwise than for the purpose of trading in commodities or commodity derivatives;
(h) a company which does not carry on any relevant regulated activities otherwise than for the purpose of dealing in contracts for differences—
(i) as principal with persons all or all but an insignificant proportion of whom are retail clients, or
(ii) with any other person to enable the company or that other person to deal in contracts for differences as principal with persons all or all but an insignificant proportion of whom are retail clients;
(i) a friendly society;
(j) a society registered as a credit union under the Co-operative and Community Benefit Societies Act 2014 or the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12));
(k) a building society.
(2A) A company is also an “excluded company” at any time (in an accounting period) if—
(a) the company would fall within a relevant relieving provision but for one (and only one) line of business which it carries on,
(b) that line of business does not involve the relevant regulated activity described in the provision mentioned in section 133G(1)(a), and
(c) the company's activities in that line of business would not, on their own, result in it being —
(i) in relation to a time on or after 1 January 2022, an FCA investment firm that meets the conditions in section 133H(1B);
(ii) in relation to a time before that date,
both a 730k firm and a full scope investment firm.
(2B) For the purposes of subsection (2A) the “relevant relieving provisions” are paragraphs (b), (c), (e), (g) and (h) of subsection (2).
(3) In this section “asset management activities” means activities which consist (or, if they were carried on in the United Kingdom, would consist) of any or all of the following—
(a) acting as the operator of a collective investment scheme (see subsection (5)),
(b) managing investments on a discretionary basis for clients none of which is a linked entity (see subsection (6)), and
(c) acting as an authorised corporate director.
(4) In subsection (2)(f) “exempt commodities firm” means—
(za) in relation to a time on or after 1 January 2022, a commodity and emission allowance dealer;
(a) in relation to a time on or after 1 January 2014 but before 1 January 2022, an exempt IFPRU commodities firm, as defined by the FCA Handbook at that time,
(b) in relation to a time on or after 1 April 2013 but before 1 January 2014, an exempt BIPRU commodities firm, as defined by the PRA Handbook at that time,
(c) in relation to a time on or after 1 January 2007 but before 1 April 2013, an exempt BIPRU commodities firm, as defined by the Handbook of the Financial Services Authority at that time, and
(d) in relation to a time before 1 January 2007, an exempt BIPRU commodities firm as defined by the Handbook of the Financial Services Authority as in force on 1 January 2007.
(5) In subsection (3)(a) “operator of a collective investment scheme”—
(a) in relation to times on and after 25 February 2001, has the same meaning as in Part 17 of FISMA 2000 (see sections 235 and 237 of that Act);
(b) in relation to times before that date, has the same meaning as in the Financial Services Act 1986.
(6) In subsection (3)(b) “linked entity”, in relation to a company (“C”), means—
(a) a member of the same group as C;
(b) a company in which a company which is a member of the same group as C has a major interest, or
(c) a partnership the members of which include an entity—
(i) which is a member of the same group as C, and
(ii) whose share of the profits or losses of a trade carried on by the partnership for an accounting period of the partnership any part of which falls within the accounting period mentioned in the opening words of subsection (2) is at least a 40% share (see Part 17 for provisions about shares of partnership profits and losses).
(7) In this section—
“730k firm”—
in relation to any time on or after 1 January 2014 but before 1 January 2022, means an IFPRU 730k firm,
in relation to any time before 1 January 2014, means a BIPRU 730k firm;
“authorised corporate director”—
in relation to any time on or after 1 April 2013, has the meaning given by the FCA Handbook at that time;
in relation to any time before 1 April 2013, has the meaning given by the FCA Handbook as in force on 1 April 2013;
“BIPRU 730k firm” and “full scope BIPRU investment firm” have the same meaning as in subsections (2) to (4) of section 133H;
“commodity and emission allowance dealer” has the meaning given by the FCA Handbook at the time in question;
“contract for differences” has the meaning given by section 582;
“the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000;
“FCA investment firm” has the meaning given by section 143A of FISMA 2000;
“friendly society” means a registered friendly society or an incorporated friendly society;
“full scope investment firm”—
in relation to any time on or after 1 January 2014 but before 1 January 2022, means a full scope IFPRU investment firm,
in relation to any time before 1 January 2014, means a full scope BIPRU investment firm;
“group” has the same meaning as in Part 7A of CTA 2010 (see section 269BD of that Act);
“IFPRU 730k firm” and “full scope IFPRU investment firm” have the meaning given by the FCA Handbook at the time in question;
“incorporated friendly society” means a society incorporated under the Friendly Societies Act 1992;
“insurance company” has the meaning given by section 133I;
“insurance special purpose vehicle” has the meaning given by section 139 of FA 2012;
“major interest” has the same meaning as in Part 5 (see section 473);
“partnership” has the same meaning as in section 133E;
“the PRA Handbook”, means the Handbook made by the Prudential Regulation Authority under FISMA 2000;
“registered friendly society” has the same meaning as in the Friendly Societies Act 1992 (and includes any society that as a result of section 96(2) of the Friendly Societies Act 1992 is treated as a registered friendly society);
“relevant regulated activity” has the meaning given by section 133G;
“retail client”—
in relation to any time on or after 1 April 2013, has the meaning given by the FCA Handbook at that time;
in relation to any time before 1 April 2013, has the meaning given by the FCA Handbook as in force on 1 April 2013.
(1) In sections 133E and 133F “relevant regulated activity” means an activity which is a regulated activity for the purposes of FISMA 2000 by virtue of any of the following provisions of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544)—
(a) article 5 (accepting deposits);
(b) article 14 (dealing in investments as principal);
(c) article 21 (dealing in investments as agent);
(d) article 25 (arranging deals in investments);
(da) article 25DA (operating an organised trading facility), but only where dealing on own account in relation to sovereign debt instruments for which there is no liquid market (within the meaning of the Handbook made by the Financial Conduct Authority under FISMA 2000);
(e) article 40 (safeguarding and administering investments);
(f) article 61 (regulated mortgage contracts).
(2) In determining whether an activity carried on at any time before 1 December 2001 was at that time a relevant regulated activity, it is to be assumed that FISMA 2000 and the order mentioned in subsection (1) were in force in the form in which they had effect on 1 December 2001.
(1) This section gives the meaning of “investment bank” for the purposes of section 133E; and in this section “the relevant entity” has the same meaning as in subsections (2) to (6) of that section.
(1A) At any time on or after 1 January 2022, the relevant entity is an investment bank if—
(a) it is an FCA investment firm that meets the conditions in subsection (1B), or
(b) it is designated by the Prudential Regulation Authority under Article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (dealing in investments as principal: designation by PRA).
(1B) An FCA investment firm meets the conditions in this subsection if it has a permanent minimum capital requirement of £750,000 and is not—
(a) a limited activity firm,
(b) a limited licence firm,
(c) a local firm, or
(d) a matched principal trading firm.
(1C) In subsection (1B)—
“limited activity firm” means an investment firm that—
deals on own account only for the purpose of fulfilling or executing a client order or for the purpose of gaining entrance to a clearing and settlement system or a recognised exchange when acting in an agency capacity or executing a client order; or
meets all the following conditions—
it does not hold client money or securities;
it undertakes only dealing on own account;
it has no external customers; and
its execution and settlement transactions take place under the responsibility of a clearing institution and are guaranteed by that clearing institution;
“limited licence firm” means an investment firm that is not authorised to provide the investment services and activities of—
dealing on own account; or
underwriting of financial instruments or placing of financial instruments on a firm commitment basis;
“local firm” means a firm—
dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or
dealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such a firm is assumed by clearing members of the same markets;
“matched principal trading firm” means an investment firm that executes investors’ orders for financial instruments and meets the following conditions—
the firm only holds financial instruments for its own account as a result of its failure to match investors’ orders precisely;
the total market value of all such positions is no more than 15% of the firm’s initial capital;
such positions are incidental and provisional in nature and strictly limited to the time required to carry out the transaction in question.
(1D) In determining, for the purposes of subsection (1B), whether an FCA investment firm has a permanent minimum capital requirement of £750,000, any transitional provision in the FCA Handbook is to be disregarded.
(1E) In subsections (1A) to (1D), the following terms have the meaning given by the FCA Handbook—
“dealing on own account”
“financial instrument”;
“initial capital”;
“investment firm”;
“market value”;
“permanent minimum capital requirement”.
(2) At any time on or after 1 January 2014 but before 1 January 2022, the relevant entity is an investment bank if—
(a) it is both an IFPRU 730k firm and a full scope IFPRU investment firm, or
(b) it is designated by the Prudential Regulation Authority under article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (dealing in investments as principal: designation by PRA).
(3) At any time on or after 1 January 2007 but before 1 January 2014, the relevant entity was an investment bank if it was both a BIPRU 730k firm and a full scope BIPRU investment firm.
(4) At any time before 1 January 2007, the relevant entity was an investment bank if it would have been both a BIPRU 730k firm and a full scope BIPRU investment firm if the Handbook of the Financial Services Authority in force on 1 January 2007 had been in force at that earlier time.
(5) In subsections (2) to (4)—
“IFPRU 730k firm” and “full scope IFPRU investment firm” have the meaning given by the FCA Handbook at the time in question;
“BIPRU 730k firm” and “full scope BIPRU investment firm”—
in relation to any time on or after 1 April 2013 have the meaning given by the PRA Handbook at that time;
in relation to any time on or after 1 January 2007 but before 1 April 2013, have the meaning given by the Handbook of the Financial Services Authority at that time;
in relation to any time before 1 January 2007, have the meaning given by the Handbook of the Financial Services Authority as in force on 1 January 2007.
(6) If the relevant entity would at any time be an investment bank under subsection (1A)(a), (2)(a), (3) or (4) by virtue of activities carried on in the United Kingdom but for the fact that its registered office (or, if it does not have a registered office, its head office) is not in the United Kingdom, the relevant entity is to be treated for the purposes of section 133E as being an investment bank.
(7) In this section—
“the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000;
“FCA investment firm” has the meaning given by section 143A of FISMA 2000;
“the PRA Handbook” means the Handbook made by the Prudential Regulation Authority under FISMA 2000.
(1) For the purposes of section 133F a person who carries on the activity of effecting or carrying out contracts of insurance is an “insurance company” if—
(a) the person has permission under Part 4A of FISMA 2000 to carry on that activity,
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) In relation to times in the period beginning with 1 December 2001 and ending with 31 March 2013, the reference in subsection (1)(a) to Part 4A of FISMA 2000 is to be read as a reference to Part 4 of that Act
(3) In relation to times before 1 December 2001, this section has effect as if the following were substituted for subsection (1)—
(1) For the purposes of section 133F a person who carries on the activity of effecting or carrying out contracts of insurance is an “insurance company” if the person is—
(a) authorised under section 3 or 4 of the Insurance Companies Act 1982, or
(b) an EC company within the meaning of the Insurance Companies Act 1982 which, by virtue of paragraph 1 or 8 of Schedule 2F to that Act, was able to carry on direct insurance business through a branch in the United Kingdom or provide insurance in the United Kingdom.
(1) For the purposes of sections 133A and 133C, a person (“P”) is a “customer” in relation to a company (“company A”) if—
(a) P uses, has used or may have contemplated using a financial service provided by company A, or
(b) has relevant rights or interests in relation to a financial service provided by company A.
(2) In subsection (1) “financial service” means a service provided—
(a) in carrying on regulated activities,
(b) in communicating, or approving the communication by others of, invitations or inducements to engage in investment activity, or
(c) in providing relevant ancillary services (if company A is an investment firm or credit institution).
(3) P has a “relevant right or interest” in relation to any service if P has a right or interest—
(a) which is derived from, or is otherwise attributable to, the use of the service by another person, or
(b) which may be adversely affected by the use of the service by persons acting on P's behalf or in a fiduciary capacity in relation to P.
(4) If company A is providing a service as a trustee, the persons who are, have been, or may have been, beneficiaries of the trust are to be treated as persons who use, have used, or may have contemplated using, the service.
(5) A person who deals with company A in the course of company A providing a service is to be treated as using the service.
(6) In this section—
“credit institution” has the meaning given by section 1H(8) of FISMA 2000;
“engage in investment activity” has the meaning given in section 21 of FISMA 2000;
“investment firm” has the same meaning as in FISMA 2000 (see section 424A of that Act);
“regulated activities” has the same meaning as in FISMA 2000 (see section 22 of that Act);
“relevant ancillary services” means has the meaning given by section 1H(8) of FISMA 2000.
(1) In sections 133A to 133D references to compensation which is paid or payable “in respect of” relevant conduct include compensation which is paid (or to be paid)—
(a) in connection with a claim by the customer for compensation in respect of the conduct, or
(b) in circumstances where there is reason to suspect that company A may (or might in the absence of the payment) be or become liable to pay compensation in respect of relevant conduct—
(i) to the customer, or
(ii) in one or more of a class of cases which includes the customer's case.
(2) In sections 133A to 133D and this section “compensation” includes any form of redress, whether monetary or non-monetary, and accordingly includes interest.
References in those sections to “payment” are to be interpreted accordingly.
(3) In subsection (1)—
“claim” includes any claim or request, however made;
“customer” has the meaning given by section 133J;
“relevant conduct” is to be interpreted in accordance with section 133A(6).
(1) For the purposes of sections 133A and 133C a company (“company B”) is associated with another company (“company A”) at a time (“the relevant time”) if any of the following 5 conditions is met.
(2) The first condition is that the financial results of company A and company B, for a period that includes the relevant time, meet the consolidation condition.
(3) The second condition is that there is a connection between company A and company B for the accounting period of company A in which the relevant time falls.
(4) The third condition is that, at the relevant time, company A has a major interest in company B or company B has a major interest in company A.
(5) The fourth condition is that—
(a) the financial results of company A and a third company, for a period that includes the relevant time, meet the consolidation condition (see subsection (7)), and
(b) at the relevant time the third company has a major interest in company B.
(6) The fifth condition is that—
(a) there is a connection (see subsection (9)) between company A and a third company for the accounting period of company A in which the relevant time falls, and
(b) at the relevant time the third company has a major interest in company B.
(7) In this section, the financial results of any two companies for any period meet the “consolidation condition” if—
(a) they are required to be comprised in group accounts,
(b) they would be required to be comprised in group accounts but for the application of an exemption, or
(c) they are in fact comprised in such accounts.
(8) In subsection (7), “group accounts” means accounts prepared under—
(a) section 399 of the Companies Act 2006, or
(b) any corresponding provision of the law of a territory outside the United Kingdom.
(9) Sections 466 to 471 (companies connected for accounting period) apply for the purposes of this section.
(10) In this section “major interest” has the same meaning as in Part 5 (see section 473).
133M Application of sections 133A and 133B in relation to corporate partner
(1) If a firm carries on a trade and any partner in the firm (“the corporate partner”) is within the charge to corporation tax, this section applies in determining the profits of the trade, in relation to the corporate partner, in accordance with section 1259(3) or (4).
(2) No deduction is allowed for expenses incurred by the firm if and so far as section 133A would prevent the expenses from being deductible if the firm were, and at all relevant times had been, a company.
(3) In its application for the purposes of subsection (2), section 133A is to be read subject to subsections (4) to (6).
(4) Section 133A(3)(b) is to be disregarded.
(5) Conduct of the firm is “relevant conduct” if the conduct occurs—
(a) on or after 29 April 1988, and
(b) at a time when—
(i) the corporate partner is for the purposes of section 133A a banking company, and
(ii) the firm would not (if references in section 133F(2) and (3) to companies included firms) be an excluded company for the purposes of section 133E.
(6) The disclosure condition in section 133C may be met by a relevant document relating to the liability of the corporate partner (as well as by a relevant document relating to the liability of the firm).
(7) Where in any accounting period of the firm (as defined by section 1261) the firm incurs expenses which but for section 133A (as read with subsections (2) to (6)) would be deductible in calculating the profits of the trade, the profits of the firm's trade are to be determined as if the references in section 133B to a company were a reference to the firm.
(1) The Treasury may by regulations make such amendments of sections 133A to 133L as they consider appropriate in consequence of—
(a) any change made to, or replacement of, the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) or the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (or any replacement);
(b) any change made to, or replacement of, the FCA Handbook or the PRA Handbook (or any replacement);
(c) any regulatory requirement, or change to any regulatory requirement, imposed by EU legislation, or by or under any Act (whenever adopted, enacted or made).
(2) The Treasury may by regulations—
(a) amend sections 133A(1) and 133C for the purpose of varying the class of expenses to which section 133A(1) applies;
(b) amend section 133D for the purpose of adding cases to those for the time being listed in subsection (1) of that section;
(c) amend section 133D for any other purpose;
(d) amend any of sections 133E to 133I;
(e) amend section 133M.
(3) Regulations under this section may include transitional provision.
(3A) Regulations under this section made on or before 30 June 2022 may have retrospective effect in relation to any time on or after 1 January 2022.
(4) A statutory instrument containing only regulations under subsection (1) or (2)(b) is subject to annulment in pursuance of a resolution of the House of Commons.
(5) Any other statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.
(6) In this section—
“the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000 (as that Handbook has effect from time to time);
“the PRA Handbook” means the Handbook made by the Prudential Regulation Authority under FISMA 2000 (as that Handbook has effect from time to time).
(1) This section applies for the purpose of calculating the profits of a trade of dealing in land.
(2) If the company carrying on the trade buys woodlands in the United Kingdom in the course of the trade, the part of the cost of the woodlands which is attributable to trees or saleable underwood growing on the land is ignored.
(3) If—
(a) the woodlands are subsequently sold in the course of the trade, and
(b) any of the trees or underwood are still growing on the land at the time of the sale,
the part of the price that is equal to the amount ignored under subsection (2) for those trees or that underwood is ignored.