Law

Finance Act 2009

United Kingdom · statute

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In force since 2026-10-02, as the publisher states.

Copy read on 2026-11-08. The page it was read from

Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.

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Contents: 184 provisions

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184 provisions

119 Landfill tax: prescribed landfill site activities

Schedule 60 contains provision about charging landfill tax on prescribed activities at landfill sites.

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120 Requirement to destroy replaced vehicle registration documents

In section 22(1) of VERA 1994 (registration regulations), after paragraph (h) insert— (ha) require the destruction of a registration document where a new registration document is issued in place of it, .

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121 Hydrocarbon oil duties: minor amendments

(1) HODA 1979 is amended as follows. (2) In section 11(1) (rebate on heavy oil), omit “12”. (3) In section 14D(2) (civil penalty for supplying biodiesel or bioblend intending that it will be put to prohibited use), for “intending” substitute “ having reason to believe ”. (4) The amendment made by subsection (3) has effect in relation to supplies on or after the day on which this Act is passed.

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122 Inheritance tax: agricultural property and woodlands relief for EEA land

(1) Part 5 of IHTA 1984 (miscellaneous reliefs) is amended as follows. (2) In section 115 (agricultural property relief: preliminary), in subsection (3), insert at the end “(or, in the case of property outside the United Kingdom, the Channel Islands and the Isle of Man, if it were subject to provisions equivalent in effect to such a covenant).” (3) For subsection (5) of that section substitute— (5) This Chapter applies to agricultural property only if it is in— (a) the United Kingdom, the Channel Islands or the Isle of Man, or (b) a state, other than the United Kingdom, which is an EEA state (within the meaning given by Schedule 1 to the Interpretation Act 1978) at the time of the transfer of value in question. (4) In section 116 (agricultural property relief: the relief), insert at the end— (8) In its application to property outside the United Kingdom, the Channel Islands and the Isle of Man, this section has effect as if any reference to a right or obligation under the law of any part of the United Kingdom were a reference to an equivalent right or obligation under the law governing dispositions of that property. (5) In section 125 (woodlands relief), in paragraph (a) of subsection (1), omit “in the United Kingdom”. (6) After that subsection insert— (1A) But this section applies only if the land is in the United Kingdom or another state which is an EEA state (within the meaning given by Schedule 1 to the Interpretation Act 1978) at the time of the person's death. (7) The amendments made by this section have effect in relation to transfers of value where the tax payable but for this section (or, in the case of tax payable by instalments, the last instalment of that tax)— (a) would have been due on or after 22 April 2009, or (b) was paid or due on or after 23 April 2003. (8) Where tax falling within subsection (7) has been paid, Her Majesty's Revenue and Customs must repay the tax (together with interest under section 235(1) of IHTA 1984) if, but only if, a claim for repayment is made on or before— (a) the date determined under section 241(1) of that Act as the last date on which the claim may be made, or (b) 21 April 2010, whichever is later. (9) Where, by virtue of the amendments made by subsections (5) and (6), an election is made under section 125 of IHTA 1984, that election must be made on or before— (a) the date determined under section 125(3) as the last date on which the election may be made, or (b) 21 April 2010, whichever is later.

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123 Alternative finance investment bonds

Schedule 61 contains provision about the taxation of chargeable gains, stamp duty land tax and capital allowances for and in connection with arrangements to which section 564G of ITA 2007 or section 151N of TCGA 1992 (investment bond arrangements) applies.

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124 Mutual societies: tax consequences of transfers of business etc

(1) The Treasury may by regulations make provision for and in connection with— (a) the tax consequences of a transfer of all or part of the business or engagements of a mutual society, (b) the tax consequences of an amalgamation of mutual societies, and (c) the tax consequences of the conversion of a mutual society into a company. (2) “Mutual society” means— (a) a building society incorporated (or deemed to be incorporated) under the Building Societies Act 1986, (b) a friendly society within the meaning of the Friendly Societies Act 1992, or (c) a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014. (3) Regulations under this section may, in particular, make provision about— (a) relief from tax in respect of losses, (b) capital allowances, (c) the taxation of chargeable gains (including provision conferring relief for specified transfers and amalgamations), (d) the treatment of intangible fixed assets and goodwill, (e) the treatment of loan relationships (and matters treated as loan relationships), (f) the treatment of derivative contracts (and contracts treated as derivative contracts), (g) exemption or other relief from stamp duty, stamp duty reserve tax or stamp duty land tax, and (h) the treatment of arrangements the purpose, or one of the main purposes, of which is to secure a tax advantage. (4) Regulations under this section may, in particular— (a) modify enactments and instruments relating to tax (whenever passed or made), (b) make different provision for different cases or different purposes, and (c) make incidental, consequential or transitional provision (including provision modifying enactments and instruments, whenever passed or made). (5) Regulations under this section may include provision having effect in relation to any time before they are made if the provision does not increase any person's liability to tax. (6) Regulations under this section are to be made by statutory instrument. (7) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons. (8) In this section— “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions; “company” means a company formed and registered under the Companies Act 2006 (or treated as formed and registered under that Act); “derivative contract” has the same meaning as in Part 7 of CTA 2009 (see section 576 of that Act); “goodwill” and “intangible fixed asset” have the same meaning as in Part 8 of CTA 2009 (see sections 713 and 715 of that Act); “loan relationship” has the same meaning as in the Corporation Tax Acts (see section 302(1) and (2) of CTA 2009); “modify” includes amend, repeal or revoke; “tax” includes stamp duty; “tax advantage” means— a relief from tax (including a tax credit) or increased relief from tax, a repayment of tax or increased repayment of tax, the avoidance, reduction or delay of a charge to tax or an assessment to tax, or the avoidance of a possible assessment to tax.

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125 National Savings ordinary accounts: surplus funds

(1) As soon as practicable after the passing of this Act— (a) the Director of Savings and the Commissioners must prepare a statement showing the relevant surplus, and (b) the Commissioners must pay the relevant surplus into the Consolidated Fund. (2) The relevant surplus is the amount held by the Commissioners by virtue of section 17 of the 1971 Act (including any such amount held in investments), less the aggregate of— (a) such sums as the Treasury may determine to be equal to those expended by the Director of Savings in connection with ordinary accounts, (b) such sums as are necessary to defray the expenses incurred by the Commissioners in connection with ordinary accounts, and (c) such sums as are required to be paid into the Consolidated Fund by virtue of section 20 of the 1971 Act. (3) The Commissioners— (a) must pay into the Consolidated Fund the sums determined in accordance with subsection (2)(a), and (b) may retain the sums determined in accordance with subsection (2)(b). (4) As soon as practicable after preparing a statement under subsection (1), the Director of Savings and the Commissioners must transmit the statement to the Comptroller and Auditor General who must— (a) examine, certify and make a report on it, and (b) lay copies of the statement, together with copies of that report, before Parliament. (5) The Treasury may by order repeal or otherwise amend any enactment if the repeal or amendment appears to the Treasury to be necessary or expedient in consequence of— (a) the closure of ordinary accounts and the transfer of their balances to other accounts (see, in particular, regulations 2B to 2BB of the National Savings Bank Regulations 1972 (S.I. 1972/764)), or (b) this section. (6) An order under subsection (5) is to be made by statutory instrument. (7) No order may be made under subsection (5) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons. (8) In this section— (a) a reference to sums expended or expenses incurred in connection with ordinary accounts includes a reference to sums expended or expenses incurred in connection with the holding of amounts by virtue of section 17 of the 1971 Act (including their holding in investments), and (b) expressions used in this section and in the 1971 Act have the same meaning in this section as in that Act. (9) In this section— “the 1971 Act” means the National Savings Bank Act 1971; “enactment” includes— an enactment contained in the 1971 Act, and subordinate legislation (which has the same meaning as in the Interpretation Act 1978).

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126 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, “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, “FISMA 2000” means the Financial Services and Markets Act 2000, “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, “OTA 1983” means the Oil Taxation Act 1983, “PRTA 1980” means the Petroleum Revenue Tax Act 1980, “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, and “F(No.2)A”, followed by a year, means the Finance (No.2) Act of that year. (3) In the tables in Part 1 of Schedule 1 to CAA 2001, Part 1 of Schedule 1 to ITEPA 2003 and Part 1 of Schedule 4 to ITTOIA 2005, at the beginning insert— FA followed by a year | The Finance Act of that year F(No.2)A followed by a year | The Finance (No.2) Act of that year. (4) Omit all of the entries in those tables relating to a Finance Act or a Finance (No.2) Act. (5) In the following provisions, for “the Finance Act” substitute “ FA ” (a) in CAA 2001, sections 70G(5), 70H(3) (in both places), 70O(4)(b), 105(2A), 186(3) and (5) (as amended by paragraph 5 of Schedule 27 to FA 2008), 257(2)(a), 360B(2)(a) and 360C(2)(b) and paragraph 105(2) of Schedule 3, and (b) in ITEPA 2003, sections 420(1)(h) and 702(5B), paragraph 78(2)(b) of Schedule 2 and paragraph 54 of Schedule 7. (6) Accordingly, omit— (a) in FA 2004, in Schedule 35, paragraphs 49 and 65(2), (b) in F(No.2)A 2005, section 10(7), (c) in FA 2006, section 84(4), and (d) in FA 2008, in Schedule 25, paragraph 6.

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127 Short title

This Act may be cited as the Finance Act 2009.

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SCHEDULE 1 Income tax: abolition of non-residents' personal reliefs

Section 5 Introduction 1 Chapter 1 of Part 7 of ICTA (income tax: personal reliefs) is amended as follows. Abolition of reliefs 2 Omit— (a) section 256 (general), (b) section 256A (“adjusted net income”), (c) section 256B (“the minimum amount”), (d) section 257 (personal allowance), (e) sections 257A to 257BB (married couple's allowance etc), (f) section 257C (indexation), (g) section 265 (blind person's allowance), (h) section 273 (payments securing annuities), and (i) section 278 (non-residents). Consequential amendments 3 (1) Section 266 (life assurance premiums) is amended as follows. (2) In subsection (1)— (a) for “individual” substitute “ eligible individual ”, and (b) omit “or makes a payment falling within subsection (7) below”. (3) After that subsection insert— (1A) For the purposes of subsection (1) above an individual is an eligible individual if the individual— (a) is resident in the United Kingdom, or (b) meets the conditions in section 56(3) of ITA 2007. (4) In subsection (3), omit “(7),”. (5) In subsection (4), for “subsections (7) and” substitute “ subsection ”. (6) Omit subsection (7). (7) In subsection (8), for “and is entitled to relief by virtue of section 278(2) or (2ZA)” substitute “ (but is entitled to relief by virtue of subsection (1A)(b)) ”. 4 (1) Section 274 (limits on relief under sections 266 and 273) is amended as follows. (2) In subsection (1), omit “or other sums”. (3) In subsection (2)— (a) for “sections 266 and 273” substitute “ section 266 ”, and (b) omit “or sums”, and (c) for “the appropriate rate” substitute “ 12.5% ”. (4) Omit subsection (3). (5) In subsection (4), omit “or other sum” (in both places). (6) In the heading, for “sections 266 and 273” substitute “ section 266 ”. 5 In paragraph 6(1) of Schedule 14 (provisions ancillary to section 266), omit “, otherwise than in accordance with subsection (7) of that section,”. Repeals 6 Omit— (a) in TMA 1970— (i) in section 36(3A), “section 257BA of the principal Act or”, (ii) in section 37A, “section 257BB or 265 of the principal Act or”, and (iii) in section 43A(2A)(a), “section 257BA of the principal Act or”, (b) in FA 1988, section 33 and, in Schedule 3, paragraphs 8 and 10, (c) in FA 1989, section 33(4)(a), (5)(b), (8)(a) and (9)(b), (d) in F(No.2)A 1992, in Schedule 5, paragraphs 2, 8(4) and 9(3), (e) in FA 1993, section 107(3)(a), (f) in FA 1994, section 77(1) and (2), (g) in FA 1996, in Schedule 20, paragraph 14(3) and, in Schedule 21, paragraphs 4 to 6, (h) in FA 1997, section 56(2), (i) in FA 1998, section 27(1)(a) and, in Schedule 3, paragraph 10, (j) in FA 1999, sections 25(3), 31 and 32, (k) in FA 2000, section 39(8) and (9), (l) in ITEPA 2003, in Schedule 6, paragraph 35, (m) in FA 2004, in Schedule 35, paragraph 12, (n) in ITTOIA 2005, in Schedule 1, paragraph 124, (o) in ITA 2007— (i) in section 23, in Step 3, “or section 257 or 265 of ICTA”, (ii) in sections 26(1)(a) and 27(5), “or section 257A, 257AB, 257BA or 257BB of ICTA”, (iii) in section 423(5), “or section 257 or 265 of ICTA”, “or section 257A, 257AB, 257BA or 257BB of ICTA”, “or section 266(7) of ICTA” and “or section 273 of ICTA”, (iv) in section 811, in subsection (5), “or section 278(2) of ICTA” and, in subsection (6), “or section 257 or 265 of ICTA”, “or section 257A, 257AB, 257BA or 257BB of ICTA” and “or section 273 of ICTA”, (v) in section 833(5), “or section 278 of ICTA”, (vi) in Schedule 1, paragraphs 27 to 35, 36(5) and (6), 37 and 232(2), and (vii) in Schedule 2, Part 4, (p) in FA 2008— (i) in section 2(1) and (2), paragraph (b) and the “and” before it, (ii) in section 3, in subsection (1), “and section 257(2) of ICTA” and “and section 257(3) of ICTA” and, in subsection (2), paragraph (b) and the “and” before it, and (iii) in Schedule 39, paragraphs 18 to 20, and (q) in this Act, in section 3(1) and (2), paragraph (b) and the “and” before it. Commencement 7 The amendments made by this Schedule have effect for the tax year 2010-11 and subsequent tax years.

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SCHEDULE 2 Income tax rates

Section 6 Part 1 Amendments of ITA 2007 1 ITA 2007 is amended as follows. 2 (1) Section 6 (rates of income tax) is amended as follows. (2) In subsection (2), for “and higher rate” substitute “ , higher rate and additional rate ”. (3) In the heading, for “and higher rate” substitute “ , higher rate and additional rate ”. 3 (1) Section 8 (dividend ordinary rate and dividend upper rate) is amended as follows. (2) Insert at the end— (3) The dividend additional rate is 42.5%. (3) In the heading, for “and dividend upper rate” substitute “ , dividend upper rate and dividend additional rate ”. 4 (1) Section 10 (income charged at basic and higher rates: individuals) is amended as follows. (2) In subsection (3), insert at the end “and up to the higher rate limit.” (3) After that subsection insert— (3A) Income tax is charged at the additional rate on an individual's income above the higher rate limit. (4) After subsection (5) insert— (5A) The higher rate limit is £150,000. (5) In subsection (6), for “is” substitute “ and higher rate limit are ”. (6) In the heading, for “and higher” substitute “ , higher and additional ”. 5 (1) Section 13 (income charged at dividend ordinary and dividend upper rates: individuals) is amended as follows. (2) After subsection (2) insert— (2A) Income tax is charged at the dividend additional rate on an individual's income which— (a) is dividend income, (b) would otherwise be charged at the additional rate, and (c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005. (3) In subsection (3), for “and (2)” substitute “ to (2A) ”. (4) In subsection (4), for “or higher” substitute “ , higher or additional ”. (5) In the heading, for “and dividend upper” substitute “ , dividend upper and dividend additional ”. 6 In section 414(2)(b) (relief for gifts to charity), after “limit” insert “ and the higher rate limit ”. 7 In section 515(a) (rate of tax in respect of heritage maintenance settlements), for “higher rate” substitute “ additional rate ”. 8 (1) Section 989 (definitions) is amended as follows. (2) After the definition of “Act” insert— “additional rate” means the rate of income tax determined in pursuance of section 6(2), . (3) After the definition of “distribution” insert— “dividend additional rate” means the rate of income tax specified in section 8(3), . (4) After the definition of “higher rate” insert— “higher rate limit” has the meaning given by section 10, . 9 (1) Schedule 4 (index of defined expressions) is amended as follows. (2) After the entry relating to “Act” insert— additional rate | section 6(2) (as applied by section 989). (3) In the entry relating to “basic rate limit”, for “20(2)” substitute “ 10 ”. (4) After the entry relating to “dividends (in Chapter 1 of Part 13)” insert— dividend additional rate | section 8(3) (as applied by section 989). (5) After the entry relating to “higher rate” insert— higher rate limit | section 10 (as applied by section 989). Part 2 Amendments of other Acts FA 2004 10 Part 4 of FA 2004 (pension schemes etc) is amended as follows. 11 In section 192 (relief for pension contributions at source), for subsection (4) substitute— (4) If (apart from this section) income tax at the higher rate or the additional rate is chargeable in respect of any part of the individual's total income for the tax year, on the making of a claim the basic rate limit and the higher rate limit for the tax year in the individual's case are increased by the amount of the contribution. 12 In section 208 (unauthorised payments charge), for subsection (6) substitute— (6) The Treasury may by order amend subsection (5) so as to vary the rate of the unauthorised payments charge. (6A) An order under subsection (6) may make provision for there to be different rates in different circumstances. 13 In section 209 (unauthorised payments surcharge), for subsection (7) substitute— (7) The Treasury may by order amend subsection (6) so as to vary the rate of the unauthorised payments surcharge. (8) An order under subsection (7) may make provision for there to be different rates in different circumstances. 14 In section 215 (amount of lifetime allowance charge), after subsection (2) insert— (2A) The Treasury may by order amend subsection (2) so as to vary the rates of the lifetime allowance charge. (2B) An order under subsection (2A) may make provision for there to be different rates in different circumstances. 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 In section 240 (amount of scheme sanction charge), after subsection (3) insert— (3A) The Treasury— (a) may by order amend subsection (1) so as to vary the rate of the scheme sanction charge, and (b) may by order amend subsection (3)(a) so as to vary the percentage mentioned there. (3B) An order under subsection (3A) may make provision for there to be different rates or percentages in different circumstances. 17 In section 242 (de-registration charge), insert at the end— (5) The Treasury may by order amend subsection (4) so as to vary the rate of the de-registration charge. (6) An order under subsection (5) may make provision for there to be different rates in different circumstances. 18 (1) Section 282 (orders and regulations) is amended as follows. (2) After subsection (1) insert— (1A) No order may be made under section 208(6), 209(7), 215(2A), 227(5A), 240(3A) or 242(5) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons. (3) In subsection (2), after “Part” insert “ , if made without a draft having been approved by a resolution of the House of Commons, ”. ITTOIA 2005 19 ITTOIA 2005 is amended as follows. 20 In section 640(6)(b) (grossing-up of deemed income)— (a) omit the “and” at the end of sub-paragraph (i), and (b) insert at the end up to and including the year 2009-2010, and (iii) 50%, if the relevant tax year is the year 2010-2011 or any subsequent tax year. 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 In section 685A(3) (settlor-interested settlements), for “higher rate” substitute “ additional rate ”. 23 (1) Part 2 of Schedule 4 (index of defined expressions) is amended as follows. (2) After the entry relating to “acquisition expenditure (in Chapter 9 of Part 2)” insert— additional rate | section 6(2) of ITA 2007 (as applied by section 989 of that Act). (3) After the entry relating to “distribution” insert— the dividend additional rate | section 8(3) of ITA 2007 (as applied by section 989 of that Act). F(No.2)A 2005 24 In section 7(5) of F(No.2)A 2005 (charge to income tax on social security pension lump sum)— (a) in paragraph (d), after “basic rate limit for that year” insert “ but does not exceed the higher rate limit for that year ”, and (b) after that paragraph insert— (e) if P's Step 3 income for that year of assessment exceeds the higher rate limit for that year, the additional rate for that year. Part 3 Commencement 25 (1) The powers conferred by the amendments made by this Schedule may be exercised at any time on or after the day on which this Act is passed but not so as to make provision having effect before the tax year 2010-11. (2) Subject to that, the amendments made by this Schedule have effect for the tax year 2010-11 and subsequent tax years.

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SCHEDULE 3 VAT: supplementary charge and orders changing rate

Section 9 Part 1 Supplementary charge to VAT The charge 1 (1) There is a supplementary charge on a supply of goods or services that is treated as taking place on or after 25 November 2008 if— (a) the supply spans the date of the VAT change, (b) it is subject to VAT at the rate in force under section 2 of VATA 1994, (c) the person to whom the supply is made is not entitled under VATA 1994 to credit for, or the repayment or refund of, all of the VAT on the supply, and (d) a relevant condition is met. (2) In this Schedule “the date of the VAT change” means 1 January 2010. (3) For the cases in which a supply, other than the grant of a right to goods or services, spans the date of the VAT change and the relevant conditions in relation to such a supply, see paragraph 2. (4) For the cases in which a supply consisting of the grant of a right to goods or services spans the date of the VAT change and the relevant conditions in relation to such a supply, see paragraph 3. (5) Sub-paragraph (1) has effect subject to the exceptions made by or under Part 2 of this Schedule. (6) In this Schedule— Part 3 contains provision about liability for, and the amount of, a supplementary charge under this Schedule, Part 4 contains special provision about listed supplies, and Part 5 contains provision about administration and interpretation. (7) A supplementary charge under this Schedule is to be treated for all purposes as if it were value added tax charged in accordance with VATA 1994. Supply spanning the date of the VAT change 2 (1) For the purposes of this Schedule a supply of goods or services spans the date of the VAT change where— (a) by virtue of the issue of a VAT invoice or the receipt of a payment by the person making the supply (“the supplier”), the supply is treated as taking place before the date of the VAT change, but (b) the basic time of supply (see paragraph 4) is on or after the date of the VAT change. (2) The relevant conditions are— (a) in relation to a supply that is within sub-paragraph (1)(a) by virtue of the issue of a VAT invoice, conditions A to D, and (b) in relation to a supply that is within sub-paragraph (1)(a) by virtue of the receipt of a payment, conditions A to C. (3) Condition A is that the supplier and the person to whom the supply is made are connected with each other at any time in the period— (a) beginning with the day on which the supply is treated as taking place, and (b) ending on the date of the VAT change. (4) Paragraph 5 modifies condition A in cases involving a series of supplies. (5) Condition B is that the aggregate of the following is more than £100,000— (a) the relevant consideration for the supply, and (b) the relevant consideration for every related supply of goods or services (including every related grant of a right to goods or services) that spans the date of the VAT change (see paragraph 6). (6) Condition C is that a prepayment in respect of the supply is financed by the supplier or a person connected with the supplier (see paragraph 7). (7) In sub-paragraph (6) “prepayment”, in respect of a supply, means a payment that is received by the supplier before the basic time of supply. (8) Condition D is that full payment of the amount shown on the VAT invoice referred to in sub-paragraph (1)(a) is not due before the end of the period of 6 months beginning with the date on which the invoice is issued. (9) This paragraph does not apply in relation to a supply consisting of the grant of a right to goods or services (see paragraph 3). Grant of right spanning the date of the VAT change 3 (1) For the purposes of this Schedule a supply consisting of the grant by a person (“the grantor”) of a right to goods or services spans the date of the VAT change where— (a) that supply is treated as taking place before the date of the VAT change, (b) the goods or services are to be supplied at a discount or free of charge, and (c) the basic time of supply for the supply of some or all of the goods or services (see paragraph 4) is on or after the date of the VAT change. (2) In relation to the grant of the right, the relevant conditions are conditions A to C. (3) Condition A is that the grantor and the person to whom the right is granted are connected with each other at any time in the period— (a) beginning with the day on which the supply consisting of the grant of the right is treated as taking place, and (b) ending on the date of the VAT change or, if the right is exercised (entirely or partly) on a later date, that date (or, if more than one, the first of those dates). (4) Paragraph 5 modifies condition A in cases involving a series of supplies. (5) Condition B is that the aggregate of the following is more than £100,000— (a) the relevant consideration for the grant of the right, and (b) the relevant consideration for every related supply of goods or services (including every related grant of a right to goods or services) that spans the date of the VAT change (see paragraph 6). (6) Condition C is that the payment made in respect of the grant of the right is financed by the grantor or a person connected with the grantor (see paragraph 7). (7) In this Schedule references to a right to goods or services include— (a) any right or option with respect to such goods or services, and (b) any interest deriving from such a right or option. “Basic time of supply” 4 (1) In this Schedule the “basic time of supply” is the time given by subsection (2) or (3) of section 6 of VATA 1994 (disregarding subsections (4) to (14) of that section). (2) Sub-paragraph (1) does not apply in relation to listed supplies (see Part 4 of this Schedule). Series of supplies 5 (1) This paragraph applies where— (a) the supply or grant of a right referred to in paragraph 2 or 3 (“the affected supply or grant”) is one of a series of supplies of, or grants of a right to, the same or substantially the same goods or services, and (b) each of the supplies, and the grants of a right, in the series was or will be made in the expectation that the affected supply or grant would or will take place. (2) In condition A in paragraphs 2 and 3 the references to the supplier and the grantor include any person who makes one of the supplies or grants one of the rights in the series. “Relevant consideration” and “related” supplies 6 (1) This paragraph applies for the purposes of condition B in paragraphs 2 and 3. (2) “Relevant consideration” means— (a) in relation to a supply that is within paragraph 2(1) by virtue of the issue of a VAT invoice, the amount shown on that invoice, (b) in relation to a supply that is within paragraph 2(1) by virtue of the receipt of a payment, the amount of that payment, and (c) in relation to a grant of a right to goods or services within paragraph 3(1), the consideration for the grant of the right, but does not include any amount in respect of VAT. (3) A supply within paragraph 2(1), or a grant of a right within paragraph 3(1), is related to another such supply or grant if they are both made as part of the same scheme. (4) “Scheme” includes any arrangements, transaction or series of transactions. Financing 7 (1) This paragraph applies for the purposes of condition C in paragraphs 2 and 3. (2) A payment is financed by a person if, directly or indirectly, the person— (a) provides funds to enable the person to whom the supply is made to make the whole or part of the payment (whether the funds are provided before or after the payment is made), (b) procures the provision of such funds by another person, (c) provides funds for discharging (in whole or in part) any liability that has been or may be incurred by any person for or in connection with raising funds to enable the person to whom the supply is made to make the payment, or (d) procures that any such liability is or will be discharged (in whole or in part) by another person. (3) In sub-paragraph (2) the references to providing funds for a purpose are to— (a) making a loan of funds that are or are to be used for that purpose, (b) providing a guarantee or other security in relation to such a loan, (c) providing consideration for the issue of shares or other securities issued wholly or partly for raising those funds, (d) providing consideration for the acquisition by any person of any such shares or securities, or (e) any other transfer of assets or value as a consequence of which any of those funds are made available for that purpose. Connected persons 8 Section 1122 of CTA 2010 (connected persons) applies for the purposes of this Schedule. Receipt of payments 9 In this Schedule a reference to receipt of a payment by the person making a supply or granting a right (however expressed) includes a reference to receipt by a person to whom a right to receive it has been assigned. Power to change relevant conditions 10 (1) The Treasury may by order amend this Part of this Schedule by adding, modifying or omitting relevant conditions. (2) An order under this paragraph— (a) may make different provision for different cases, and (b) may make incidental or consequential amendments of this Schedule. Supplies treated as taking place before 31 March 2009 11 In relation to supplies treated as taking place before 31 March 2009, this Schedule has effect as if— (a) paragraphs 2(5), 3(5) and 6 (condition B) and all references to condition B were omitted, (b) in paragraph 2(6) (condition C), the words “or a person connected with the supplier” were omitted, and (c) in paragraph 3(6) (condition C), the words “or a person connected with the grantor” were omitted. Part 2 Exceptions Letting etc of assets 12 (1) This paragraph applies in relation to a supply within paragraph 2 which arises from the letting, hiring or rental of assets. (2) There is no supplementary charge under this Schedule if— (a) the period to which the VAT invoice or payment referred to in paragraph 2(1) relates does not exceed 12 months, and (b) the VAT invoice is issued, or the payment is received, in accordance with normal commercial practice in relation to the letting, hiring or rental of such assets. Condition B cases involving normal commercial practice 13 There is no supplementary charge under this Schedule on a supply of goods or services within paragraph 2 or a grant of a right to goods or services within paragraph 3 if— (a) the only relevant condition met is condition B, and (b) the supply is made, or the right is granted, in accordance with normal commercial practice in relation to the supply of, or the grant of a right to, such goods or services. Normal commercial practice 14 In this Part of this Schedule “normal commercial practice” means normal commercial practice at a time when an increase in the rate of VAT in force under section 2 of VATA 1994 is not expected. Further exceptions 15 (1) The Treasury may by order provide that there is no supplementary charge under this Schedule on supplies (including grants of rights to goods or services) of a description specified in the order. (2) An order under this paragraph may make provision having effect in relation to supplies of goods or services that are treated as taking place on or after 25 November 2008 or a later date. Part 3 Liability and amount Liability 16 (1) A supplementary charge under this Schedule on a supply within paragraph 2— (a) is a liability of the supplier (subject to sub-paragraph (3)), and (b) becomes due on the date of the VAT change (rather than at the time of supply). (2) A supplementary charge under this Schedule on a supply consisting of the grant of a right to goods or services within paragraph 3— (a) is a liability of the grantor (subject to sub-paragraph (3)), and (b) becomes due on the first occasion on or after the date of the VAT change on which the right is exercised (rather than at the time the right is granted). (3) If, on the date on which the supplementary charge becomes due, the person who would be liable to pay the charge under sub-paragraph (1) or (2)— (a) is not a taxable person, but (b) is treated as a member of a group under sections 43A to 43D of VATA 1994, the supplementary charge is a liability of the representative member of the group. Amount 17 (1) The amount of the supplementary charge on a supply within paragraph 2 is equal to the difference between— (a) the amount of VAT chargeable on the supply apart from this Schedule, and (b) the amount of VAT that would be chargeable on the supply if it were subject to VAT at the rate of 17.5%. (2) The amount of the supplementary charge on a grant of a right to goods or services within paragraph 3 is equal to the difference between— (a) the amount of VAT chargeable on the grant of the right apart from this Schedule, and (b) the amount of VAT that would be chargeable on the grant of the right if it were subject to VAT at the rate of 17.5%, (but see sub-paragraph (3)). (3) If the basic time of supply for some of those goods and services is before the date of the VAT change, sub-paragraph (2) has effect as if the references to the amount of VAT chargeable and to the amount of VAT that would be chargeable were references to the relevant proportion of each of those amounts. (4) “The relevant proportion” is— P W where— P is so much of the consideration for the grant of the right as is attributable on a just and reasonable basis to a right to the goods and services for which the basic time of supply is on or after the date of the VAT change, and W is the whole of the consideration for the grant of the right. Part 4 Listed supplies “Listed supply” 18 (1) In this Schedule “listed supply” means a supply falling within sub-paragraph (2)— (a) which is made for a consideration the whole or part of which is determined or payable periodically or from time to time, and (b) which is treated as taking place by virtue of the issue of a VAT invoice or the receipt of a payment by the person making the supply. (2) The following supplies fall within this sub-paragraph— (a) a supply of services, (b) a supply arising from the grant of a major interest in land, (c) a supply of water other than— (i) distilled water, deionised water or water of similar purity, or (ii) bottled water, (d) a supply of— (i) coal gas, water gas, producer gases or similar gases, or (ii) petroleum gases, or other gaseous hydrocarbons, in a gaseous state, (e) a supply of power, heat, refrigeration or ventilation, and (f) a supply of goods together with services in the course of the construction, alteration, demolition, repair or maintenance of a building or civil engineering work. (3) The Treasury may by order amend sub-paragraph (2) by— (a) adding or omitting any description of supply, or (b) varying any description of supply for the time being listed in that sub-paragraph. “Basic time of supply”: listed supplies 19 (1) For the purposes of this Schedule, in relation to a listed supply, “the basic time of supply” is the end of the period to which the VAT invoice or payment mentioned in paragraph 18(1) relates, except as provided in sub-paragraphs (2) and (4). (2) Where the person making the supply issues an invoice— (a) in respect of part of the listed supply to which the VAT invoice or payment mentioned in paragraph 18(1) relates, and (b) for a period (a “billing period”) ending before the end of the period to which that VAT invoice or payment relates, “the basic time of supply”, in relation to that part of the supply, is the end of the billing period. (3) For the purposes of sub-paragraph (2) the listed supply (and the consideration for the supply) must be apportioned between periods on a just and reasonable basis. (4) Where a listed supply is treated as taking place by virtue of— (a) the issue by the person making the supply of a VAT invoice relating to a premium for the grant of a tenancy or lease, or (b) the receipt by the person making the supply of such a premium, “the basic time of supply” is the date of the grant of the tenancy or lease. Part 5 Administration and interpretation Person ceasing to be taxable person before supplementary charge due 20 (1) This paragraph applies if, on the date on which a supplementary charge under this Schedule becomes due (“the due date”), the person who is liable to pay the charge under paragraph 16 is not a taxable person. (2) The supplementary charge must be accounted for by that person in accordance with VATA 1994 (and regulations made under that Act) as if it were VAT due in the last period for which the person was required to make a return by or under VATA 1994. (3) If an amount assessed as due by way of supplementary charge under this Schedule would (in the absence of this sub-paragraph) carry interest from a date earlier than the due date, it is to be treated as only carrying interest from the due date. Adjustment of contracts following the VAT change 21 (1) This paragraph applies where— (a) a contract for the supply of goods or services is made before the date of the VAT change, and (b) there is a supplementary charge under this Schedule on the supply. (2) The consideration for the supply is to be increased by an amount equal to the supplementary charge, unless the contract provides otherwise. Invoices 22 Regulations under paragraph 2A of Schedule 11 to VATA 1994 (VAT invoices) may make provision about the provision, replacement or correction of invoices in connection with a supplementary charge under this Schedule. Orders under this Schedule 23 (1) An order under this Schedule is to be made by statutory instrument. (2) A statutory instrument containing an order under this Schedule is subject to annulment in pursuance of a resolution of the House of Commons, unless it is an instrument to which sub-paragraph (4) applies. (3) Sub-paragraph (4) applies to a statutory instrument containing an order made under paragraph 10 (or under that paragraph and under other provisions) which extends the supplies that are subject to a supplementary charge under this Schedule. (4) An instrument to which this sub-paragraph applies— (a) must be laid before the House of Commons, and (b) ceases to have effect at the end of the period of 28 days beginning with the day on which it was made unless it is approved during that period by a resolution of the House of Commons. (5) In reckoning the period of 28 days no account is to be taken of any time during which Parliament is dissolved or prorogued or during which the House of Commons is adjourned for more than 4 days. (6) The order ceasing to have effect does not affect— (a) anything previously done under it, or (b) the making of a new order. Interpretation: general 24 (1) Expressions used in this Schedule and in VATA 1994 have the same meaning in this Schedule as in that Act. (2) In this Schedule— (a) “treated as taking place” means treated as taking place for the purposes of the charge to VAT, and (b) references to the person by or to whom a supply is made (however expressed) are to the person by or to whom the supply is treated as being made for the purposes of VATA 1994. Part 6 Amendments of VATA 1994 25 (1) VATA 1994 is amended as follows. (2) In section 2(2) (orders increasing or decreasing rate of VAT), after “such order” insert “ that has not previously expired or been revoked ”. (3) In section 97 (orders, rules and regulations), after subsection (4) insert— (4A) Where an order under section 2(2) is in force, the reference in subsection (4)(c)(i) of this section to the rate of VAT in force under section 2 at the time of the making of an order is a reference to the rate which would be in force at that time if no such order had been made.

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SCHEDULE 4 Vehicle excise duty: further provision about rates of duty etc

Section 14 1 VERA 1994 is amended as follows. 2 (1) Section 3 (duration of licences) is amended as follows. (2) In subsection (4)(b), for “a licence taken out on the first registration under this Act of” substitute “ the first vehicle licence for ”. (3) Insert at the end— (7) Neither subsection (2) nor any order under subsection (3) permits the first vehicle licence for a vehicle to be taken out for a period of less than twelve months if the annual rate of vehicle excise duty chargeable on the licence would be lower if it were not the first vehicle licence for the vehicle. 3 (1) Section 19 (rebates) is amended as follows. (2) In subsection (1), for “from the Secretary of State the amount specified in subsection (2)” substitute “ the relevant amount from the Secretary of State ”. (3) Omit subsection (2). (4) After subsection (3) insert— (3A) Subject to subsection (3B), the relevant amount is an amount equal to one-twelfth of the annual rate of duty chargeable on the licence (at the time when it was taken out) in respect of each complete month of the period of the currency of the licence which is unexpired when the application is made. (3B) Where— (a) the licence is the first vehicle licence for the vehicle, (b) the application is made by virtue of paragraph (d), (e) or (f) of subsection (3), and (c) the annual rate of duty rate chargeable on the licence (at the time when it was taken out) would have been lower if it had not been the first vehicle licence for the vehicle, the relevant amount is an amount equal to one-twelfth of that lower annual rate of duty in respect of each such complete month. 4 (1) Section 62 (definitions) is amended as follows. (2) In subsection (1), after the definition of “exempt vehicle” insert— “first vehicle licence”, in relation to a vehicle, means (subject to subsections (1B) and (1C)) the vehicle licence for the vehicle on the issue of which the vehicle is first registered under this Act (so that, if the vehicle is first registered on the issue of a nil licence, there is no first vehicle licence in relation to it), . (3) After subsection (1A) insert— (1B) Where a vehicle is first registered under this Act on the issue of a temporary licence, the “first vehicle licence” in relation to the vehicle is the first vehicle licence subsequently issued for it. (1C) Where a vehicle— (a) has been registered under the law of a country or territory outside the United Kingdom, (b) is first registered under this Act more than 6 months after the time when it was first registered as mentioned in paragraph (a), and (c) has travelled more than 6,000 kilometres under its own power before it is first registered under this Act, there is no first vehicle licence in relation to the vehicle. 5 (1) Schedule 1 (annual rates of duty) is amended as follows. (2) In paragraph 1A (vehicles to which Part 1A applies)— (a) in sub-paragraph (1)(a), after “registered”, and (b) in sub-paragraph (5), after “registration”, insert “, under this Act or under the law of a country or territory outside the United Kingdom,”. (3) In paragraph 1C (the reduced rate)— (a) in sub-paragraph (3)(a), after “registration” insert “ , under this Act or under the law of a country or territory outside the United Kingdom, ”, (b) in sub-paragraph (3)(b), for “its” substitute “ that ”, and (c) in sub-paragraph (4), after “registration” insert “ under this Act ”. (4) In paragraph 1H (vehicles to which Part 1B applies)— (a) in sub-paragraph (1)(a), after “registered”, and (b) in sub-paragraph (3), after “registration”, insert “, under this Act or under the law of a country or territory outside the United Kingdom,”. (5) In paragraph 1K(a) (pre-2007 lower-emission vans), after “registered” insert “ , under this Act or under the law of a country or territory outside the United Kingdom, ”. (6) In paragraph 1M(a) (post-2008 lower-emission vans), after “registered” insert “ , under this Act or under the law of a country or territory outside the United Kingdom, ”. 6 (1) Paragraph 25 of Schedule 2 (exempt vehicles: light passenger vehicles with low CO2 emissions) is re-numbered as sub-paragraph (1) of that paragraph. (2) After that sub-paragraph insert— (2) A vehicle is an exempt vehicle for the appropriate period if— (a) it is a vehicle to which Part 1A of Schedule 1 applies, and (b) the applicable CO2 emissions figure (as defined in paragraph 1A(3) and (4) of that Schedule) exceeds 100g/km but does not exceed 130g/km. (3) “The appropriate period” is the period for which (if the vehicle were not an exempt vehicle by virtue of sub-paragraph (2)) the first vehicle licence for the vehicle would (if taken out) have effect. 7 (1) The amendments made by this Schedule have effect in relation to licences taken out on or after 1 April 2010. (2) But the amendments made by paragraph 5 do not have effect in relation to vehicles first registered under this Act before that date.

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SCHEDULE 5 Air passenger duty

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SCHEDULE 6 Temporary extension of carry back of losses

Section 23 Income tax 1 (1) A person who has made a loss in a trade in the tax year 2008-09 or 2009-10 may make a claim for relief under this paragraph if— (a) relief is available to the person under section 64 of ITA 2007 (trade loss relief against general income) in relation to an amount of the loss (“the section 64 amount”), and (b) condition A or B is met. (2) Condition A is that the person makes a claim under that section for relief in respect of the section 64 amount— (a) where it is a loss made in the tax year 2008-09, for either or both of the tax years 2007-08 and 2008-09, or (b) where it is a loss made in the tax year 2009-10, for either or both of the tax years 2008-09 and 2009-10. (3) Condition B is that— (a) where it is a loss made in the tax year 2008-09, for the tax years 2007-08 and 2008-09, or (b) where it is a loss made in the tax year 2009-10, for the tax years 2008-09 and 2009-10, the person's total income is nil or does not include any income from which a deduction could be made in pursuance of a claim under that section for relief in respect of the section 64 amount. (4) The amount of the loss that may be relieved under this paragraph (“the deductible amount”) is— (a) in a case where condition A is met, so much of the section 64 amount as cannot be relieved pursuant to the claim under section 64 of ITA 2007, and (b) in a case where condition B is met, the whole of the section 64 amount, (but see sub-paragraph (12)). (5) A claim for relief under this paragraph is for the deductible amount to be deducted (in accordance with sub-paragraph (6) and with whichever is applicable of sub-paragraphs (7), (8), (9) and (10))— (a) where it is a loss made in the tax year 2008-09, in either or both of the following ways— (i) in computing the person's total income for either or both of the tax years 2005-06 and 2006-07 in accordance with section 835 of ICTA, and (ii) in calculating the person's net income for the tax year 2007-08 in accordance with Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act), or (b) where it is a loss made in the tax year 2009-10, in either or both of the following ways— (i) in computing the person's total income for the tax year 2006-07 in accordance with section 835 of ICTA, and (ii) in calculating the person's net income for either or both of the tax years 2007-08 and 2008-09 in accordance with Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act). (6) A deduction is to be made only from profits of the trade (and accordingly, in relation to the tax years 2007-08 and 2008-09, subsection (2) of section 25 of ITA 2007 has effect as if this sub-paragraph were included in subsection (3) of that section). (7) This sub-paragraph explains how the deductions are to be made in a case where the loss is made in the tax year 2008-09 and the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2007-08. Step 1 Deduct the deductible amount from the profits of the trade for the tax year 2006-07. Step 2 Deduct from the profits of the trade for the tax year 2005-06 so much of the deductible amount as has not been deducted under Step 1. (8) This sub-paragraph explains how the deductions are to be made in any other case where the loss is made in the tax year 2008-09. Step 1 Deduct the deductible amount from the profits of the trade for the tax year 2007-08. Step 2 Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1. Step 3 Deduct from the profits of the trade for the tax year 2005-06 so much of the deductible amount as has not been deducted under Step 1 or 2. (9) This sub-paragraph explains how the deductions are to be made in a case where the loss is made in the tax year 2009-10 and the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2008-09. Step 1 Deduct the deductible amount from the profits of the trade for the tax year 2007-08. Step 2 Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1. (10) This sub-paragraph explains how the deductions are to be made in any other case where the loss is made in the tax year 2009-10. Step 1 Deduct the deductible amount from the profits of the trade for the tax year 2008-09. Step 2 Deduct from the profits of the trade for the tax year 2007-08 so much of the deductible amount as has not been deducted under Step 1. Step 3 Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1 or 2. (11) The provision made by the preceding provisions means that the following sections of ITA 2007 apply in relation to relief under this paragraph as in relation to relief under section 64 of that Act— (a) section 66 to 70 (restrictions on relief under section 64), (b) sections 74ZA to 74D (general restrictions on relief), (c) sections 75 to 79 (restrictions on relief under section 64 and early trade losses relief in relation to capital allowances),and (d) section 80 (restrictions on those reliefs in relation to ring fence income), ... (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) The total amount that may be deducted in accordance with sub-paragraph (7), or in accordance with Steps 2 and 3 in sub-paragraph (8), is limited to £50,000; and the total amount that may be deducted in accordance with sub-paragraph (9), or in accordance with Steps 2 and 3 in sub-paragraph (10), is also limited to £50,000. 2 (1) A claim for relief under paragraph 1 must be made— (a) where the relief is in respect of a loss made in the tax year 2008-09, on or before the first anniversary of the normal self-assessment filing date for that tax year, and (b) where the relief is in respect of a loss made in the tax year 2009-10, on or before the first anniversary of the normal self-assessment filing date for that tax year. (2) Paragraph 1 applies to professions and vocations as it applies to trades. (3) Paragraph 1 is subject to paragraph 2 of Schedule 1B to TMA 1970 (claims for loss relief involving 2 or more years). (4) Sections 61 to 63 of ITA 2007 (meaning of “making a loss in a tax year” etc and prohibition against double counting) have effect as if paragraph 1 were included in Chapter 2 of Part 4 of that Act. (5) Subsections (1) to (3) of section 127 of that Act (UK furnished holiday lettings business treated as trade) have effect as if paragraph 1 were included in Part 4 of that Act. (6) The reference in paragraph 3(1) of Schedule 2 to the Social Security Contributions and Benefits Act 1992 and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (levy of Class 4 contributions with income tax) to section 64 of ITA 2007 includes paragraph 1. Corporation tax 3 (1) Sections 37(3)(b) and 38(1) and (3) of CTA 2010 (trade loss relief against profits of same or earlier accounting period) have effect in relation to any loss to which this paragraph applies as if the references to 12 months were references to 3 years (but subject as follows). (2) This paragraph applies to any loss incurred by a company in a trade in a relevant accounting period (but subject to sub-paragraph (3)); and a relevant accounting period is one ending after 23 November 2008 and before 24 November 2010. (3) The maximum amount of loss to which this paragraph applies in the case of any company is— (a) £50,000 in relation to losses incurred in relevant accounting periods ending after 23 November 2008 and before 24 November 2009, and (b) £50,000 in relation to losses incurred in relevant accounting periods ending after 23 November 2009 and before 24 November 2010; and the overall limit or limits apply whether a loss is incurred by the company in only one relevant accounting period or losses are so incurred in more than one such period. (4) Subject to that, if in the case of the company the length of a relevant accounting period is less than one year, the maximum amount of the loss incurred in that period that may be relieved under section 37 of CTA 2010 by virtue of this paragraph is the relevant proportion of £50,000. (5) “The relevant proportion” is— RAP Y where— RAP is the number of days in the relevant accounting period, and Y is 365. (6) The reference in subsection (2) of section 40 of CTA 2010 to the loss mentioned in subsection (1)(a) of that section (so far as not a terminal loss and so far as not exceeding the allowance mentioned in subsection (1)(b) of that section) (“the section 40 loss”) has effect in relation to a relevant accounting period as a reference to so much of the section 40 loss as exceeds that which can be set off under section 37 by virtue of this paragraph.

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SCHEDULE 7 Contaminated and derelict land

Section 26 Part 1 Amendments of Part 14 of CTA 2009 1 Part 14 of CTA 2009 (remediation of contaminated land) is amended as follows. 2 In the heading of the Part, after “contaminated” insert “ or derelict ”. 3 (1) Section 1143 (overview of Part) is amended as follows. (2) In subsection (1), after “contamination” insert “ or dereliction ”. (3) In subsection (7), after “contaminated” insert “ or derelict ”. 4 (1) Section 1144 (“qualifying land remediation expenditure”) is amended as follows. (2) In subsection (1), for “E” substitute “ F ”. (3) In subsection (2), insert at the end “or a derelict state (see section 1145A)”. (4) In subsection (3), after “contaminated” insert “ or derelict ”. (5) For subsection (4) substitute— (4) Condition C is that it is— (a) in the case of land in a contaminated state, expenditure on relevant contaminated land remediation undertaken by the company (see section 1146), or (b) in the case of land in a derelict state, expenditure on relevant derelict land remediation so undertaken (see section 1146A). (6) In subsection (5), for paragraph (c) (and the “or” before it) substitute— (c) incurred in respect of relevant land remediation contracted out by the company to another person with whom the company is not connected, or (d) qualifying expenditure on connected sub-contracted land remediation (see section 1175). (7) After subsection (6) insert— (6A) Condition F is that the expenditure is not incurred on landfill tax. 5 For section 1145 substitute— Land “in a contaminated state” 1145 (1) For the purposes of this Part land is in a contaminated state if (and only if), because of something in, on or under the land, the land is in a condition such that— (a) relevant harm is being caused, or (b) there is a serious possibility that relevant harm will be caused. (2) But land is not in a contaminated state by reason of the presence in, on or under it of— (a) living organisms or decaying matter deriving from living organisms, air or water, or (b) anything present otherwise than as a result of industrial activity. (3) The Treasury may by order specify circumstances in which subsection (2) is not to apply to the extent specified in the order; and an order under this subsection may contain incidental, supplemental, consequential and transitional provision and savings. (4) In this section “relevant harm” means— (a) death of living organisms or significant injury or damage to living organisms, (b) significant pollution of controlled waters, (c) a significant adverse impact on the ecosystem, or (d) structural or other significant damage to buildings or other structures or interference with buildings or other structures that significantly compromises their use. Land “in a derelict state” 1145A For the purposes of this Part land is in a derelict state if (and only if) the land— (a) is not in productive use, and (b) cannot be put into productive use without the removal of buildings or other structures. Exclusion of nuclear sites 1145B (1) A nuclear site is not land in a contaminated state or land in a derelict state for the purposes of this Part. (2) “Nuclear site” means— (a) any site in respect of which a nuclear site licence is for the time being in force, or (b) any site in respect of which, after the revocation or surrender of a nuclear site licence, the period of responsibility of the licensee has not yet come to an end. (3) In subsection (2) “nuclear site licence”, “licensee” and “period of responsibility” have the same meaning as in the Nuclear Installations Act 1965. 6 (1) Section 1146 (“relevant land remediation”) is amended as follows. (2) In subsection (1)— (a) for “land remediation”, in relation to land” substitute “contaminated land remediation”, in relation to land which is in a contaminated state and in which a major interest has been”, and (b) for “and B” substitute “ to C ”. (3) In subsection (3)— (a) in paragraph (a), for “harm, or any pollution of controlled waters,” substitute “ relevant harm ”, and (b) omit paragraph (b) (and the “or” before it). (4) After that subsection insert— (3A) Condition C is that the activities are not— (a) activities of a description specified by order made by the Treasury, or (b) activities required by or by virtue of any enactment specified by such an order. (3B) An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings. (5) In subsection (5), for the words after “(and only if)” substitute because of something in, on or under the land by virtue of which it is contaminated land, the land is in a condition such that— (a) significant pollution of those waters is being caused, or (b) there is a serious possibility that significant pollution of those waters will be caused. (6) In the heading, after “relevant” insert “ contaminated ”. 7 After that section insert— “Relevant derelict land remediation” 1146A (1) For the purposes of this Part “relevant derelict land remediation”, in relation to land which is in a derelict state and in which a major interest has been acquired by a company, means— (a) activities in relation to which conditions A and B are met, and (b) if there are such activities, relevant preparatory activity. (2) Condition A is that the activities comprise the doing of any works, the carrying out of any operations or the taking of any steps in relation to the land in question. (3) Condition B is that the purpose of the activities is a purpose specified by order made by the Treasury. (4) An order under subsection (3) may contain incidental, supplemental, consequential and transitional provision and savings. (5) For the purposes of subsection (1)(b) “relevant preparatory activity” has the same meaning as for the purposes of subsection (1)(b) of section 1146 (see subsection (4) of that section, but reading the reference to subsection (1)(a) of that section as a reference to subsection (1)(a) of this section). 8 In the heading of Chapter 2, after “contaminated” insert “ or derelict ”. 9 (1) Section 1147 (deduction for capital expenditure) is amended as follows. (2) In subsection (2), after “that” insert “ a major interest in ”. (3) For subsection (3) substitute— (3) Condition B is that— (a) in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition, and (b) in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of— (i) 1 April 1998, and (ii) the date on which a major interest in the land was first acquired by the company or a person who was connected with the company. (3A) The Treasury may by order— (a) specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or (b) replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date. (3B) An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings. 10 (1) Section 1149 (additional deduction for qualifying land remediation expenditure) is amended as follows. (2) In subsection (2), after “that” insert “ a major interest in ”. (3) For subsection (3) substitute— (3) Condition B is that— (a) in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition, and (b) in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of— (i) 1 April 1998, and (ii) the date on which a major interest in the land was first acquired by the company or a person who was connected with the company. (3A) The Treasury may by order— (a) specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or (b) replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date. (3B) An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings. 11 (1) Section 1150 (no relief if company responsible for contamination) is amended as follows. (2) The existing provision becomes subsection (1) of that section. (3) In that subsection, for “state if the land is in that” substitute “ or derelict state if the land is in a contaminated or derelict ”. (4) After that subsection insert— (2) A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if— (a) the land is in that state wholly or partly as a result of any thing done, or omitted to be done, by a person not within subsection (1), and (b) that person, or a person connected with that person, has a relevant interest in the land. (3) For the purposes of subsection (2) a person has a relevant interest in land if the person— (a) holds any interest in, right over or licence to occupy the land (including an option to acquire any such interest, right or licence in any circumstances), or (b) has disposed of any estate or interest in the land for a consideration that to any extent reflects the impact, or likely impact, on the value of the land of the remediation of its contamination or dereliction. (5) In the heading, insert at the end “or dereliction or polluter has interest”. 12 (1) Section 1161 (relief in respect of I minus E basis: enhanced expenses payable) is amended as follows. (2) In subsection (2), after “that” insert “ a major interest in ”. (3) For subsection (3) substitute— (3) Condition B is that— (a) in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition by the company of a major interest in the land, and (b) in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of— (i) 1 April 1998, and (ii) the date on which a major interest in the land was first acquired by the company or a person who was connected with the company. (3A) The Treasury may by order— (a) specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or (b) replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date. (3B) An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings. (4) In subsection (4)— (a) for “Chapter 4” substitute “ land remediation ”, and (b) omit “(see section 1162)”. (5) Omit subsection (5). (6) In subsection (6), omit “150% of”. (7) In the heading, omit “enhanced”. (8) In the heading before the section omit “for qualifying Chapter 4 expenditure”. 13 For section 1162 substitute— Additional relief 1162 (1) If a company is entitled to relief under section 1161 for an accounting period it is also entitled to relief under this section for the period. (2) For the company to obtain the relief it must make a claim. (3) The relief is that the company may treat 50% of the qualifying Chapter 4 expenditure as expenses payable which fall to be brought into account at Step 3 in section 76(7) of ICTA (deduction for expenses payable). (4) For the purposes of this Chapter “the qualifying Chapter 4 expenditure” means— (a) the company's qualifying land remediation expenditure for the accounting period, less (b) the amount (if any) which as a result of paragraph (a) of Step 1 in section 76(7) of ICTA is not to be brought into account at that step as expenses payable for the period. 14 (1) Section 1163 (no relief if company responsible for contamination) is amended as follows. (2) The existing provision becomes subsection (1) of that section. (3) In that subsection— (a) after “1161” insert “ or 1162 ”, and (b) for “state if the land is in that” substitute “ or derelict state if the land is in a contaminated or derelict ”. (4) After that subsection insert— (2) A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if— (a) the land is in that state wholly or partly as a result of any thing done, or omitted to be done, by a person not within subsection (1), and (b) that person, or a person connected with that person, has a relevant interest in the land. (3) For the purposes of subsection (2) a person has a relevant interest in land if— (a) the person holds any interest in, right over or licence to occupy the land (including an option to acquire any such interest, right or licence in any circumstances), or (b) has disposed of any estate or interest in the land for a consideration that to any extent reflects the impact, or likely impact, on the value of the land of the remediation of its contamination or dereliction. (5) In the heading, insert at the end “or dereliction or polluter has interest”. 15 In section 1165(1)(a) (meaning of “qualifying life assurance business loss”), after “1161” insert “ or 1162 ”. 16 In section 1169(2)(c) and (3)(c) (artificially inflated claims for relief), after “1161” insert “ or 1162 ”. 17 (1) Section 1173 (expenditure incurred because of contamination) is amended as follows. (2) In subsections (1) and (2), after “contaminated” insert “ or derelict ”. (3) For subsection (3) substitute— (3) Subsection (4) applies— (a) in the case of land in a contaminated state, if the main purpose of any activities is any of those specified in section 1146(3), or (b) in the case of land in a derelict state, if the main purpose of any activities is any of those specified in section 1146A(3). (4) In the heading, insert at the end “or dereliction”. 18 Omit section 1174 (sub-contractor payments: introductory). 19 (1) Section 1175 (“qualifying expenditure on sub-contracted land remediation”: connected persons) is amended as follows. (2) After subsection (1) insert— (1A) In this section, a “sub-contractor payment” means a payment made by the company to the sub-contractor in respect of relevant land remediation contracted out by the company to the sub-contractor. (3) In subsection (2), for “sub-contracted land remediation” substitute “connected sub-contracted land remediation” for the purposes of section 1144(5)”. (4) In subsection (3)— (a) in paragraph (a), after “carrying on” insert “ or arranging for carrying on ”, and (b) in paragraph (c) for “incurred on” substitute “ in respect of ”. (5) For the heading substitute “Connected sub-contractors”. 20 Omit section 1176 (“qualifying expenditure on sub-contracted land remediation”: other cases). 21 In section 1178 (persons having a “relevant connection” to a company)— (a) after “contaminated” insert “ or derelict ”, and (b) in paragraph (b), after “when” insert “ a major interest in ”. 22 After section 1178 insert— “Major interest in land” 1178A (1) References in this Part to the acquisition of a major interest in land are to the acquisition of a freehold interest in the land or of a relevant leasehold interest in the land. (2) The reference in subsection (1) to the acquisition of a freehold interest in land is— (a) in relation to land in England and Wales, to the acquisition of an estate in fee simple absolute (whether subsisting at law or in equity), (b) in relation to land in Scotland, to the acquisition of the interest of an owner of land, and (c) in relation to land in Northern Ireland, to the acquisition of any freehold estate (whether subsisting at law or in equity). (3) The reference in subsection (1) to the acquisition of a relevant leasehold interest in land is to the acquisition by grant or assignment (or assignation) of— (a) in relation to land in England and Wales, a term of years absolute (whether subsisting at law or in equity), (b) in relation to land in Scotland, the tenant's right over or interest in a property subject to a lease, or (c) in relation to land in Northern Ireland, any leasehold estate (whether subsisting at law or in equity), in relation to which the condition in subsection (4) is met. (4) That condition is that— (a) in the case of a grant, the term of years or period of the lease is at least 7 years, and (b) in the case of an assignment (or assignation) the unexpired portion of the term or period is at least 7 years. 23 In section 1179 (definitions), omit the definitions of “harm” and “land” and the definition of “substance” (apart from the “and” at the end). Part 2 Amendments of other enactments ICTA 24 In section 76(7) of ICTA (expenses of insurance companies), in step 3— (a) for “1161” substitute “ 1162 ”, (b) for “150%” substitute “ 50% additional ”, and (c) after “contaminated” insert “ or derelict ”. FA 1998 25 In Schedule 18 to FA 1998 (company tax returns etc), in the heading of Part 9B, after “contaminated” insert “ or derelict ”. CTA 2009 26 (1) Schedule 4 to CTA 2009 (index of expressions) is amended as follows. (2) After the entry relating to “deposit back arrangements” insert— derelict state (in relation to land) (in Part 14) | section 1145A. (3) Omit the entries relating to “harm (in Part 14)” and “land (in Part 14)”. (4) After the entry relating to “major interest (in Chapter 12 of Part 8)” insert— major interest in land (in Part 14) | section 1178A. (5) After the entry relating to “relevant consortium creditor relationship (in Chapter 7 of Part 5)” insert— relevant contaminated land remediation (in Part 14) | section 1146. (6) After the entry relating to “relevant debits (in Part 8)” insert— relevant derelict land remediation (in Part 14) | section 1146A. (7) Omit the references relating to “relevant land remediation (in Part 14)”, “sub-contractor payment (and sub-contractor) (in Chapter 6 of Part 14)” and “substance (in Part 14)”. Part 3 Commencement 27 Any power to make orders which is conferred on the Treasury by virtue of an amendment of CTA 2009 made by this Schedule may be exercised at any time after this Act is passed; and any order made by virtue of any such amendment before 6 April 2010 may make provision having effect in relation to expenditure incurred on or after 1 April 2009. 28 Subject to that, the amendments made by this Schedule have effect in relation to expenditure incurred on or after 1 April 2009; and for this purpose no account is to be taken of section 61 of CTA 2009 (earlier expenditure treated as incurred when trade started).

Propose a change

SCHEDULE 8 Venture capital schemes

Section 27 Enterprise investment scheme 1 Schedule 5B to TCGA 1992 (enterprise investment scheme: re-investment) is amended as follows. 2 (1) Paragraph 1(2) (application of Schedule) is amended as follows. (2) For paragraphs (g) and (h) substitute and (g) all of the money raised by the issue of the shares (other than any of them which are bonus shares) is, no later than the time mentioned in section 175(3) of ITA 2007, employed wholly for the purpose of that activity, . (3) In the words following the paragraphs, for “conditions in paragraphs (g) and (h) above do” substitute “ condition in paragraph (g) above does ”. 3 (1) Paragraph 1A (failure of conditions of application) is amended as follows. (2) In sub-paragraph (4)— (a) omit “or (h)”, and (b) for “sub-paragraph (4A) below” substitute “ section 175(3) of ITA 2007 ”. (3) Omit sub-paragraph (4A). 4 (1) Paragraph 9 (other reconstructions and amalgamations) is amended as follows. (2) For sub-paragraph (1) substitute— (1) This paragraph applies if section 135 or 136 (company reconstructions) applies in relation to shares to which deferral relief, but not relief under Part 5 of ITA 2007 (or Chapter 3 of Part 7 of the Taxes Act), is attributable. (1A) Paragraphs 3 and 4 of this Schedule have effect as if section 135 or 136 did not apply in relation to the shares. (3) In sub-paragraph (2), for “Sub-paragraph (1) above shall not have effect to disapply section 135 or 136 where” substitute “ Sub-paragraph (1A) does not apply if ”. (4) For sub-paragraph (3) substitute— (3) Sub-paragraph (1A) does not apply if paragraph 8 applies in relation to the shares. 5 In paragraph 16 (information), omit sub-paragraph (4A). 6 (1) Section 158 of ITA 2007 (form and amount of EIS relief) is amended as follows. (2) In subsection (4), omit— (a) “Subject to subsection (5),”, and (b) “before 6 October”. (3) Omit subsection (5). 7 (1) Section 175 of that Act (use of money raised requirement) is amended as follows. (2) For subsection (1) substitute— (1) The requirement of this section is that all of the money raised by the issue of the relevant shares (other than any of them which are bonus shares) is, no later than the time mentioned in subsection (3), employed wholly for the purpose of the qualifying business activity for which it was raised. (3) In subsection (2), for “requirements in subsection (1)(a) and (b) do” substitute “ requirement in subsection (1) does ”. (4) In subsection (3)— (a) for “subsection (1)(a)” substitute “ subsection (1) ”, and (b) for “12 months” (in both places) substitute “ two years ”. Corporate venturing scheme 8 (1) Paragraph 36 of Schedule 15 to FA 2000 (corporate venturing scheme: requirement as to money raised) is amended as follows. (2) In sub-paragraph (1), for “At least 80%” substitute “ All ”. (3) Omit sub-paragraph (1A). (4) In sub-paragraph (1B), for “12 months” (in both places) substitute “ two years ”. (5) In sub-paragraph (1C), for “Sub-paragraphs (1) and (1A) are” substitute “ Sub-paragraph (1) is ”. (6) In sub-paragraph (5) omit “does not apply and the requirement of sub-paragraph (1A)”. Venture Capital Trusts 9 (1) Section 293 of ITA 2007 (use of money raised requirement) is amended as follows. (2) For subsection (1) substitute— (1) The requirement of this section is that— (a) less than two years has passed since the trading time, or (b) at least two years has passed since the trading time and all of the money raised by the issue of the relevant holding has been employed wholly for the purposes of a relevant qualifying activity. (3) Omit subsections (2) to (4). Consequential repeals 10 In consequence of the amendments made by paragraphs 2, 3 and 5, omit— (a) in FA 2001, in Schedule 15, paragraphs 26 to 28, (b) in FA 2004, in Schedule 18, paragraph 13(1)(f), and (c) in ITA 2007, in Schedule 1, paragraph 345(2)(b), (3)(a) and (13)(b). Commencement 11 The amendments made by paragraphs 2, 3, 5, 7, 8 and 10 have effect in relation to shares issued on or after 22 April 2009. 12 The amendments made by paragraph 4 have effect in relation to— (a) any exchange of shares to which section 135 of TCGA 1992 applies, where the new holding is issued on or after 22 April 2009, and (b) any arrangement within section 136(1) of that Act entered into on or after that date. 13 (1) The amendments made by paragraph 6 have effect as follows. (2) The amendments made by sub-paragraph (2) have effect in relation to shares issued in the tax year 2009-10 or a subsequent tax year. (3) The amendment made by sub-paragraph (3) has effect in relation to claims made under section 158(4) of ITA 2007 in respect of shares issued in the tax year 2009-10 or a subsequent tax year. 14 The amendments made by paragraph 9 have effect in relation to shares or securities issued on or after 22 April 2009.

Propose a change

SCHEDULE 11 Tax relief for business expenditure on cars and motor cycles

Section 30 Part 1 Capital allowances Plant and machinery allowances for cars and motor cycles 1 Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows. 2 In section 38B (general exclusions from AIA qualifying expenditure), in general exclusion 2, for “81” substitute “ 268A ”. 3 In section 46(2) (general exclusions from first year allowances), in general exclusion 2, for “81” substitute “ 268A ”. 4 Omit sections 74 to 79 (cars above the cost threshold). 5 Omit section 81 (extended meaning of “car”) and section 82 (qualifying hire cars). 6 In section 84 (cases in which short-life asset treatment is ruled out), in the Table, in item 3, in the first column, for “81” substitute “ 268A ”. 7 (1) Section 104A (special rate expenditure) is amended as follows. (2) In subsection (1)— (a) in paragraph (a), after “the” insert “ first ”, (b) omit “and” at the end of paragraph (c), and (c) insert at the end , and (e) expenditure incurred on or after the second relevant date on the provision of a car that is not a main rate car. (3) In subsection (2), after “The” insert “ first ”. (4) After that subsection insert— (3) The second relevant date is— (a) for corporation tax purposes, 1 April 2009, and (b) for income tax purposes, 6 April 2009. (4) In this section— “car” has the meaning given in section 268A; “main rate car” has the meaning given in section 104AA. 8 After that section insert— Meaning of “main rate car” 104AA (1) “Main rate car” means— (a) a car that is first registered before 1 March 2001, (b) a car that has low CO2 emissions, or (c) a car that is electrically-propelled. (2) For the purposes of this section a car has low CO2 emissions if it meets conditions A and B. (3) Condition A is that, when the car is first registered, it is so registered on the basis of a qualifying emissions certificate. (4) Condition B is that the applicable CO2 emissions figure in relation to the car does not exceed 160 grams per kilometre driven. (5) The Treasury may by order amend the amount from time to time specified in subsection (4). (6) An order under subsection (5) may contain transitional provision and savings. (7) In this section— “applicable CO2 emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C; “car” has the meaning given in section 268A; “electrically-propelled” has the meaning given in section 268B. 9 After section 104E insert— Special rate cars: discontinued activity continued by relevant company 104F (1) This section applies if— (a) a company (“the taxpayer”) has incurred special rate expenditure within section 104A(1)(e) (expenditure on a car other than a main rate car) to which section 104C applies (allocation to special rate pool), (b) the qualifying activity carried on by the taxpayer is permanently discontinued, and (c) conditions A, B and C are met. (2) Condition A is that the qualifying activity carried on by the taxpayer consisted of or included (other than incidentally) making cars available to other persons. (3) Condition B is that, at any time in the 6 months after the taxpayer's qualifying activity is permanently discontinued, the qualifying activity of a group relief company consists of or includes (other than incidentally) making cars available to other persons. (4) Condition C is that the balancing allowance (“SBA”) to which the taxpayer would be entitled (but for this section) in respect of the special rate pool is greater than— BC – OBA where— BC is the total of the balancing charges (if any) to which the taxpayer is liable for the final chargeable period in respect of any pool, and OBA is the total of the balancing allowances to which the taxpayer is entitled for that period in respect of any pool other than the special rate pool. For the purposes of this section if BC – OBA is a negative amount it is to be treated as if it were nil. (5) The balancing allowance to which the taxpayer is entitled in respect of the special rate pool is reduced to an amount equal to BC — OBA. (6) The relevant company is to be treated as having incurred qualifying expenditure within section 104A(1)(e) (“notional expenditure”), whether or not the relevant company owns cars previously owned by the taxpayer. (7) The amount of the notional expenditure is an amount equal to the amount by which SBA exceeds BC — OBA. (8) The relevant company is to be treated as having incurred the notional expenditure on the day after the end of the taxpayer's final chargeable period. (9) If part of the chargeable period in which the relevant company is treated as incurring expenditure under this section (“the acquisition period”) overlaps with the taxpayer's penultimate chargeable period— (a) the part of the expenditure which is proportional to that part of the acquisition period is not to be taken into account in determining the relevant company's available qualifying expenditure for the acquisition period, but (b) this does not prevent that part of the expenditure being taken into account in determining the relevant company's available qualifying expenditure for any subsequent chargeable period. (10) In this section— “car” has the meaning given in section 268A; “company” means any body corporate; “group relief company” means— a company to which group relief under Chapter 4 of Part 10 of ICTA would be available (on the making of a claim) in respect of balancing allowances surrendered by the taxpayer in the taxpayer's final chargeable period, and a company to which such relief would be available (on the making of a claim) in respect of balancing allowances surrendered by a company within paragraph (a); “main rate car” has the meaning given in section 104AA; “penultimate chargeable period” means the chargeable period preceding the final chargeable period; “the relevant company” means the group relief company mentioned in subsection (3) or, if there is more than one, the one— nominated by the taxpayer not more than 6 months after the end of the taxpayer's final chargeable period, or in the absence of such a nomination, nominated by Her Majesty's Revenue and Customs. 10 After section 208 insert— Cars: disposal value in avoidance cases 208A (1) This section applies if— (a) a disposal value is required to be brought into account under section 61, (b) the disposal event is that the person ceases to own a section 206 car because of a sale or the performance of a contract, and (c) allowances under this Part in respect of the person's expenditure under that transaction are restricted under section 217 or 218 (anti-avoidance). (2) A car is a section 206 car if expenditure on the provision of the car is required to be allocated to a single asset pool under that section. (3) The disposal value to be brought into account is— (a) the market value of the car at the time of the disposal event, or (b) if less, the capital expenditure incurred, or treated as incurred, on the provision of the car by the person disposing of it. (4) The person acquiring the car is to be treated as having incurred capital expenditure on its provision of an amount equal to the disposal value required to be brought into account under subsection (3). (5) In this section “car” has the meaning given in section 268A. 11 After section 268 insert— Cars etc Meaning of “car” and “motor cycle” 268A (1) In this Part “car” means a mechanically propelled road vehicle other than— (a) a motor cycle, (b) a vehicle of a construction primarily suited for the conveyance of goods or burden of any description, or (c) a vehicle of a type not commonly used as a private vehicle and unsuitable for such use. (2) In this Part “motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988. Electrically-propelled vehicles 268B For the purposes of this Part a vehicle is electrically-propelled only if— (a) it is propelled solely by electrical power, and (b) that power is derived from— (i) a source external to the vehicle, or (ii) an electrical storage battery which is not connected to any source of power when the vehicle is in motion. Terms relating to emissions 268C (1) In this Part “qualifying emissions certificate”, in relation to a vehicle, means an EC certificate of conformity, or a UK approval certificate, that specifies— (a) in the case of a vehicle other than a bi-fuel vehicle, a CO2 emissions figure in terms of grams per kilometre driven, or (b) in the case of a bi-fuel vehicle, separate CO2 emissions figures in terms of grams per kilometre driven for different fuels. (2) For the purposes of this Part, in relation to a vehicle other than a bi-fuel vehicle, the applicable CO2 emissions figure is— (a) where the qualifying emissions certificate specifies only one CO2 emissions figure, that figure, and (b) where the certificate specifies more than one CO2 emissions figure, the figure specified as the CO2 emissions (combined) figure. (3) For the purposes of this Part, in relation to a bi-fuel vehicle, the applicable CO2 emissions figure is— (a) where the qualifying emissions certificate specifies more than one CO2 emissions figure in relation to each fuel, the lowest CO2 emissions (combined) figure specified, and (b) in any other case, the lowest CO2 figure specified by the certificate. (4) In this section— “bi-fuel”, in relation to a vehicle, means capable of being propelled by— petrol and road fuel gas, or diesel and road fuel gas; “diesel” means any diesel fuel within the definition in Article 2 of Directive 98/70/EC of the European Parliament and of the Council; “EC certificate of conformity” means a certificate of conformity issued by a manufacturer under any provision of the law of a member State implementing Article 6 of Council Directive 70/156/EEC, as amended; “petrol” has the meaning given by Article 2 of Directive 98/70/EC of the European Parliament and of the Council; “road fuel gas” has the same meaning as in section 171(1) of ITEPA 2003; “UK approval certificate” means a certificate issued under— section 58(1) or (4) of the Road Traffic Act 1988, or Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I. 1)). Consequential amendments of CAA 2001 12 CAA 2001 is amended as follows. 13 In section 33 (personal security), omit subsection (7). 14 (1) Section 45D (expenditure on cars with low carbon dioxide emissions) is amended as follows. (2) In subsection (1), for paragraph (c) substitute— (c) the car— (i) is electrically-propelled, or (ii) has low CO2 emissions, and . (3) In subsection (2), for “a car with low CO2 emissions is a car which” substitute “ a car has low CO2 emissions if it ”. (4) In subsection (3), for the words from “an EC certificate” to the end substitute “ a qualifying emissions certificate. ” (5) In subsection (4), for “in the case of” substitute “ in relation to ”. (6) Omit subsections (5) and (6). (7) In subsection (8)— (a) after “car” insert “ is to a car within the meaning of section 268A, except that it ”, and (b) omit paragraph (b) (and the “but” before it). (8) Omit subsections (9) and (10). (9) After subsection (10) insert— (11) In this section— “applicable CO2 emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C; “electrically-propelled” has the meaning given in section 268B. 15 In section 54(3) (single asset pools), omit “section 74 (car above the cost threshold)”. 16 In section 55(6) (determination of entitlement or liability), after “subject to” insert “ section 104F (special rate cars: discontinued activity continued by relevant company) and ”. 17 In section 65(3) (the final chargeable period), for “sections 77(1) and” substitute “ section ”. 18 In section 66 (list of provisions about disposal values)— (a) omit the entry in the list relating to section 79, and (b) insert at the appropriate place— section 208A | cars: disposal value in avoidance cases . 19 (1) In section 84 (cases in which short-life asset treatment is ruled out), the Table is amended as follows. (2) In item 3, for the words in the second column substitute “The car is a hire car for a disabled person (as defined by section 268D).” (3) In item 4, in the second column, insert “The expenditure is incurred on the provision of a car which is a hire car for a disabled person (as defined by section 268D)”. (4) In item 5, in the second column, for “within section 82(4) (cars hired out to persons receiving disability allowances etc)” substitute “ a hire car for a disabled person (as defined by section 268D) ”. 20 (1) Section 86 (short-life assets) is amended as follows. (2) In subsection (2)(b), for “main pool” substitute “ appropriate pool ”. (3) After subsection (4) insert— (5) In subsection (2)(b) “appropriate pool” means— (a) in the case of expenditure incurred on the provision of a car that is not a main rate car (as defined by section 104AA), the special rate pool, and (b) in any other case, the main pool. 21 In section 96 (expenditure on cars excluded from being long-life asset expenditure), for “car (as defined by section 81)” substitute “ car or motor cycle (as defined by section 268A) ”. 22 After section 268C (inserted by this Part of this Schedule) insert— Hire cars for disabled persons 268D (1) For the purposes of this Part a car is a hire car for a disabled person if it is provided wholly or mainly for hire to, or the carriage of, disabled persons in the ordinary course of a trade. (2) “Disabled person” means a person in receipt of— (a) a disability living allowance under— (i) the Social Security Contributions and Benefits Act 1992, or (ii) the Social Security Contributions and Benefits (Northern Ireland) Act 1992, because of entitlement to the mobility component, (b) a mobility supplement under a scheme made under the Personal Injuries (Emergency Provisions) Act 1939, (c) a mobility supplement under an Order in Council made under section 12 of the Social Security (Miscellaneous Provisions) Act 1977, or (d) a payment that appears to the Treasury to be similar to those mentioned in paragraphs (a) to (c) and that is specified by order made by the Treasury. 23 (1) Part 2 of Schedule 1 (defined expressions) is amended as follows. (2) In the entry relating to “car (in Part 2)”, for “section 81” substitute “ section 268A ”. (3) Insert at the appropriate places— applicable CO2 emissions figure (in Part 2) | section 268C electrically-propelled (in Part 2) | section 268B hire car for a disabled person (in Part 2) | section 268D motor cycle (in Part 2) | section 268A qualifying emissions certificate (in Part 2) | section 268C . 24 In Schedule 3 (transitionals and savings), omit paragraph 19 (cars above the cost threshold) and the headings immediately before it. Consequential repeal 25 In consequence of the amendments made by this Part of this Schedule, in FA 2002, in Schedule 19, omit paragraph 6. Commencement and transitionals: introduction 26 For the purposes of this Part of this Schedule— (a) the first relevant date is— (i) for corporation tax purposes, 1 April 2009, and (ii) for income tax purposes, 6 April 2009, (b) the second relevant date is— (i) for corporation tax purposes, 1 August 2009, and (ii) for income tax purposes, 6 August 2009, and (c) the third relevant date is— (i) for corporation tax purposes, 1 April 2014, and (ii) for income tax purposes, 6 April 2014. 27 (1) For the purposes of this Part of this Schedule “new expenditure” means— (a) expenditure incurred on or after the first relevant date, and (b) expenditure incurred before that date to which sub-paragraph (2) applies, and expenditure that is not new expenditure is “old expenditure”. (2) This sub-paragraph applies to expenditure if— (a) it is incurred under an agreement for the provision of a car entered into after 8 December 2008, and (b) under that agreement the car is not required to be made available before the second relevant date. (3) For the purposes of sub-paragraph (2) an agreement is entered into on the date on which the following conditions are met— (a) there is a contract in writing for the provision of the car, (b) the contract is unconditional or, if it is conditional, the conditions have been met, and (c) no terms remain to be agreed. Commencement 28 (1) The amendments made by this Part of this Schedule have effect in relation to new expenditure (subject to sub-paragraph (2)). (2) The repeal of section 79 of CAA 2001 and the amendments made by paragraphs 10 and 18 have effect in cases in which a person ceases to own a car or motor cycle if the expenditure incurred on the provision of the car or motor cycle is new expenditure. 29 (1) The repeal of sections 74 to 78 of CAA 2001 and the amendments made by paragraphs 15 and 17 have effect in relation to old expenditure, but only for chargeable periods beginning on or after the third relevant date. (2) The repeal of section 79 of CAA 2001 and the amendment made by paragraph 18(a) have effect in cases in which a person ceases to own a car or motor cycle if the expenditure incurred on the provision of the car or motor cycle is old expenditure, but only for chargeable periods beginning on or after the third relevant date. Transitionals 30 (1) This paragraph applies where expenditure incurred by a person on the provision of a car or motor cycle includes both new expenditure and old expenditure. (2) The new expenditure and the old expenditure are to be treated as if they were incurred on the provision of separate (but identical) cars or motor cycles. (3) Any amount required to be brought into account in connection with a disposal event in respect of the car or motor cycle mentioned in sub-paragraph (1) is to be apportioned on a just and reasonable basis. 31 (1) This paragraph applies where— (a) old expenditure is required to be allocated to a single asset pool by section 74 of CAA 2001, (b) there is unrelieved expenditure in that pool at the end of a transitional chargeable period, and (c) the unrelieved expenditure is not required to be allocated to a single asset pool by any other provision of Part 2 of that Act. (2) The unrelieved expenditure must be carried forward to the main pool. (3) A “transitional chargeable period” is one that begins before the third relevant date and ends on or after the day before the third relevant date. 32 An order made under section 82(4)(d) of CAA 2001 (qualifying hire cars for disabled persons) before the day on which this Act is passed (and not revoked before that day) has effect as if it had also been made under section 268D(2)(d) of that Act (hire cars for disabled persons) (inserted by this Part of this Schedule). Interpretation 33 In this Part of this Schedule— (a) “car” and “motor cycle” have the meaning given in section 268A of CAA 2001 (inserted by paragraph 11), and (b) other expressions used in this Part of this Schedule and in Part 2 of CAA 2001 have the same meaning here as in that Part of that Act. Part 2 Restrictions on deductions for hire expenses Income tax 34 ITTOIA 2005 is amended as follows. 35 In section 31(1)(b) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”. 36 (1) Section 48 (rules restricting deductions from profits: car or motor cycle hire) is amended as follows. (2) In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute which is not— (a) a car that is first registered before 1 March 2001, (b) a car that has low CO2 emissions, (c) a car that is electrically propelled, or (d) a qualifying hire car. (3) In subsection (2), for the words from “multiplying” to the end substitute “ 15% ”. (4) In subsection (4), for “multiplying it by the fraction in subsection (2)” substitute “ 15% ”. (5) In subsection (4A)(a), (b) and (c), omit “or motor cycle”. (6) Omit subsection (5). (7) In the heading, omit “or motor cycle”. 37 (1) Section 49 (car or motor cycle hire: supplementary) is amended as follows. (2) In subsection (1)— (a) omit “or motor cycle”, (b) omit “one”, (c) before paragraph (a) insert— (za) a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988), , and (d) in paragraphs (a) and (b), insert at the beginning “a vehicle”. (3) After that subsection insert— (1A) In section 48— “a car that has low CO2 emissions” has the same meaning as in section 104AA of CAA 2001 (special rate expenditure: main rate car); “electrically propelled” has the meaning given in section 268B of that Act. (4) In subsection (2)— (a) omit “or motor cycle” (in each place), (b) omit paragraph (c), and (c) insert at the end— (d) is leased under a long-funding lease (within the meaning of section 70G of CAA 2001). (5) In subsection (6), omit “and section 48”. (6) In the heading, omit “or motor cycle”. 38 Omit section 50 (hiring cars with low carbon dioxide emissions). 39 After that section insert— Short-term hiring in and long-term hiring out 50A (1) Section 48 does not apply to expenses incurred by a person (“the taxpayer”) on the hiring of a car if condition A or B is met. (2) Condition A is that— (a) the expenses are incurred in respect of the making available of the car to the taxpayer for a period (“the hire period”) of not more than 45 consecutive days, and (b) if the car is made available to the taxpayer (whether by the same person or different persons) for one or more periods linked to the hire period, the hire period and the linked period or periods, taken together, consist of not more than 45 days. (3) Condition B is that the expenses are incurred in respect of a period (“the sub-hire period”) throughout which the taxpayer makes the car available to another person (“the customer”) and— (a) the sub-hire period consists of more than 45 consecutive days, or (b) if the taxpayer makes the car available to the customer throughout one or more periods linked to the sub-hire period, the sub-hire period and the linked period or periods, taken together, consist of more than 45 days, but see subsection (4). (4) Condition B is not met if— (a) the customer is an employee of the taxpayer or of a person connected with the taxpayer, or (b) during all or part of the sub-hire period (or any period linked to the sub-hire period), the customer makes any car available to an employee of the taxpayer under arrangements with the taxpayer or with a person connected with the taxpayer. (5) Neither condition A nor condition B is met if the car is hired under arrangements the purpose, or one of the main purposes, of which is— (a) to disapply or reduce the effect of section 48, or (b) other avoidance of tax. (6) For the purposes of condition B the expenses incurred by the taxpayer on the hiring of the car must be apportioned between— (a) the sub-hire period, and (b) the remainder of the period during which the car is made available to the taxpayer, according to the respective lengths of those periods. (7) A period of consecutive days (“the main period”) is linked to— (a) a period of consecutive days that ends not more than 14 days before the main period begins, (b) a period of consecutive days that begins not more than 14 days after the main period ends, and (c) a period of consecutive days linked to a period in paragraph (a) or (b). (8) For the purposes of this section, where arrangements for the hiring of a car include arrangements for the provision of a replacement car in the event that the first car is not available, the first car and any replacement car are to be treated as if they were the same car. (9) In this section (and section 50B) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions. Connected persons: application of section 48 50B (1) This section applies where connected persons incur expenses on the hiring of the same car for the same period and— (a) section 48 would (but for this section) apply to the expenses of two or more of those persons, or (b) section 48 and section 56 of CTA 2009 would (but for this section and section 58B of that Act) each apply to the expenses of at least one of those persons. (2) This section only applies where one or more of the persons mentioned in subsection (1)(a) or (b) incurs the expenses under commercial arrangements (and such a person is referred to below as a “commercial lessee”). (3) In relation to the expenses mentioned in subsection (1) to which section 48 would (but for this section) apply, section 48 only applies to the following— (a) where there is one commercial lessee, any such expenses incurred by that lessee, and (b) where there is more than one, any such expenses incurred by the first commercial lessee in the chain of arrangements for the hiring of the car for the period. (4) In this section— (a) references to expenses incurred by a commercial lessee include expenses incurred in that or any other capacity, and (b) “commercial arrangements” means arrangements the terms of which are such as would reasonably have been expected if the parties to the arrangements had been dealing at arm's length. 40 In section 247(1) (other rules about what counts as post-cessation receipts), omit “or motor cycle”. 41 In section 272(2) (profits of a property business: application of trading income rules), in the entry in the Table relating to sections 48 to 50— (a) for “50” substitute “ 50B ”, and (b) omit “or motor cycle”. 42 In section 274(1)(b) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”. 43 In section 354(2) (other rules about what counts as post-cessation receipts), omit “or motor cycle”. 44 In Schedule 2 (transitionals and savings), omit paragraphs 16 and 17 (and the heading before them). Corporation tax 45 CTA 2009 is amended as follows. 46 In section 51(1)(b)(i) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”. 47 (1) Section 56 (rules restricting deductions from profits: car or motor cycle hire) is amended as follows. (2) In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute which is not— (a) a car that is first registered before 1 March 2001, (b) a car that has low CO2 emissions, (c) a car that is electrically propelled, or (d) a qualifying hire car. (3) In subsection (2), for the words from “multiplying” to the end substitute “ 15% ”. (4) In subsection (4), for “multiplying it by the fraction in subsection (2)” substitute “ 15% ”. (5) In subsection (5)(a), (b) and (c), omit “or motor cycle”. (6) Omit subsection (6). (7) In the heading, omit “or motor cycle”. 48 (1) Section 57 (car or motor cycle hire: supplementary) is amended as follows. (2) In subsection (1)— (a) omit “or motor cycle”, (b) omit “one”, (c) before paragraph (a) insert— (za) a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988), , and (d) in paragraphs (a) and (b), insert at the beginning “a vehicle”. (3) After that subsection insert— (1A) In section 56— “a car that has low CO2 emissions” has the same meaning as in section 104AA of CAA 2001 (special rate expenditure: main rate car); “electrically propelled” has the meaning given in section 268B of that Act. (4) In subsection (2)— (a) omit “or motor cycle” (in each place), (b) omit paragraph (c), and (c) insert at the end— (d) is leased under a long-funding lease (within the meaning of section 70G of CAA 2001). (5) In subsection (6), omit “and section 56”. (6) In the heading, omit “or motor cycle”. 49 Omit section 58 (hiring cars with low CO2 emissions before 1 April 2013). 50 After section 58 insert— Short-term hiring in and long-term hiring out 58A (1) Section 56 does not apply to expenses incurred by a company (“the taxpayer”) on the hiring of a car if condition A or B is met. (2) Condition A is that— (a) the expenses are incurred in respect of the making available of the car to the taxpayer for a period (“the hire period”) of not more than 45 consecutive days, and (b) if the car is made available to the taxpayer (whether by the same person or different persons) for one or more periods linked to the hire period, the hire period and the linked period or periods, taken together, consist of not more than 45 days. (3) Condition B is that the expenses are incurred in respect of a period (“the sub-hire period”) throughout which the taxpayer makes the car available to another person (“the customer”) and— (a) the sub-hire period consists of more than 45 consecutive days, or (b) if the taxpayer makes the car available to the customer throughout one or more periods linked to the sub-hire period, the sub-hire period and the linked period or periods, taken together, consist of more than 45 days, but see subsection (4). (4) Condition B is not met if— (a) the customer is an employee or officer of the taxpayer or of a person connected with the taxpayer, or (b) during all or part of the sub-hire period (or any period linked to the sub-hire period), the customer makes any car available to an employee or officer of the taxpayer under arrangements with the taxpayer or with a person connected with the taxpayer. (5) Neither condition A nor condition B is met if the car is hired under arrangements the purpose, or one of the main purposes, of which is— (a) to disapply or reduce the effect of section 56, or (b) other avoidance of tax. (6) For the purposes of condition B the expenses incurred by the taxpayer on the hiring of the car must be apportioned between— (a) the sub-hire period, and (b) the remainder of the period during which the car is made available to the taxpayer, according to the respective lengths of those periods. (7) A period of consecutive days (“the main period”) is linked to— (a) a period of consecutive days that ends not more than 14 days before the main period begins, (b) a period of consecutive days that begins not more than 14 days after the main period ends, and (c) a period of consecutive days linked to a period in paragraph (a) or (b). (8) For the purposes of this section, where arrangements for the hiring of a car include arrangements for the provision of a replacement car in the event that the first car is not available, the first car and any replacement car are to be treated as if they were the same car. (9) In this section (and section 58B) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions. Connected persons: application of section 56 58B (1) This section applies where connected persons incur expenses on the hiring of the same car for the same period and— (a) section 56 would (but for this section) apply to the expenses of two or more of those persons, or (b) section 56 and section 48 of ITTOIA 2005 would (but for this section and section 50B of that Act) each apply to the expenses of at least one of those persons. (2) This section only applies where one or more of the persons mentioned in subsection (1)(a) or (b) incurs the expenses under commercial arrangements (and such a person is referred to below as a “commercial lessee”). (3) In relation to the expenses mentioned in subsection (1) to which section 56 would (but for this section) apply, section 56 only applies to the following— (a) where there is one commercial lessee, any such expenses incurred by that lessee, and (b) where there is more than one, any such expenses incurred by the first commercial lessee in the chain of arrangements for the hiring of the car for the period. (4) In this section— (a) references to expenses incurred by a commercial lessee include expenses incurred in that or any other capacity, and (b) “commercial arrangements” means arrangements the terms of which are such as would reasonably have been expected if the parties to the arrangements had been dealing at arm's length. 51 In section 191(1) (other rules about what counts as post-cessation receipts), omit “or motor cycle”. 52 In section 210(2) (profits of a property business: application of trading income rules), in the entry in the Table relating to sections 56 to 58— (a) for “58” substitute “ 58B ”, and (b) omit “or motor cycle”. 53 In section 214(1)(b)(i) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”. 54 In section 283(2) (other rules about what counts as post-cessation receipts), omit “or motor cycle”. 55 In section 865(3)(a) (debits for expenditure not generally deductible for tax purposes), omit “or motor cycle”. 56 In section 1231(3) (absence of accounts), omit “or motor cycle”. 57 (1) Section 1251 (car or motor cycle hire: companies with investment business) is amended as follows. (2) In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute which is not— (a) a car that is first registered before 1 March 2001, (b) a car that has low CO2 emissions, (c) a car that is electrically propelled, or (d) a qualifying hire car. (3) In subsection (2), for the words from “multiplying” to the end substitute “ 15% ”. (4) In subsection (4)(b), for “multiply that amount by the fraction set out in subsection (2) above” substitute “ reduce that amount by 15% ”. (5) In subsection (5)(a), (b) and (c), omit “or motor cycle”. (6) Omit subsection (6). (7) In subsection (7)— (a) omit “or motor cycle”, and (b) for “58 (hiring cars with low CO2 emissions before 1 April 2013)” substitute “ 58A (short-term hiring in and long-term hiring out) ”. (8) After that subsection insert— (8) For the purposes of section 58B of this Act and section 50B of ITTOIA 2005 (connected persons: application of restrictions), this section is to be treated as if it were part of section 56 of this Act. (9) In the heading, omit “or motor cycle”. 58 In Schedule 2 (transitionals and savings), omit paragraphs 16 and 17 (and the heading before them). 59 ICTA is amended as follows. 60 (1) Section 76ZN (car or motor cycle hire: expenses of insurance companies) is amended as follows. (2) In subsection (1)— (a) in paragraph (a), omit “or motor cycle”, and (b) for paragraphs (b) and (c) substitute— (b) the car is not— (i) a car that is first registered before 1 March 2001, (ii) a car that has low CO2 emissions (as defined in section 104AA of the Capital Allowances Act), (iii) a car that is electrically propelled (as defined in section 268B of that Act), or (iv) a qualifying hire car. (3) After that subsection insert— (1A) Subsection (2) does not apply if condition A or condition B in section 58A of CTA 2009 (short-term hiring in and long-term hiring out) is met. (4) In subsection (2), for the words from “multiplying” to the end substitute “ 15% ”. (5) In subsection (5), for the words from “multiplying” to the end substitute “ 15% ”. (6) In subsection (6)(a), (b) and (c), omit “or motor cycle”. (7) Omit subsection (7). (8) In subsection (8), omit “or motor cycle” (in both places). (9) After that subsection insert— (9) For the purposes of section 50B of ITTOIA 2005 and section 58B of CTA 2009 (connected persons: application of restrictions), this section is to be treated as if it were part of section 56 of CTA 2009. 61 Omit section 76ZO (hiring cars (but not motor cycles) with low CO2 emissions before 1 April 2013). 62 (1) Section 578A (rules restricting deductions: car or motor cycle hire) is amended as follows. (2) In subsection (2), for paragraphs (a) and (b) substitute which is not— (a) a car that is first registered before 1 March 2001, (b) a car that has low CO2 emissions (as defined in section 104AA of the Capital Allowances Act), (c) a car that is electrically propelled (as defined in section 268B of that Act), or (d) a qualifying hire car. (3) Omit subsections (2A) and (2B). (4) After subsection (2B) insert— (2C) This section does not apply to the hiring of a car where condition A or condition B in section 58A of CTA 2009 (short-term hiring in and long-term hiring out) is met. (5) In subsection (3), for the words from “multiplying” to the end substitute “ 15% ”. (6) In subsection (4), for “multiplying it by the fraction in subsection (3) above” substitute “ 15% ”. (7) After that subsection insert— (5) For the purposes of section 50B of ITTOIA 2005 (connected persons: application of restrictions), this section is to be treated as if it were part of section 48 of that Act. 63 (1) Section 578B (expenditure on car or motor cycle hire: supplementary) is amended as follows. (2) In subsection (1)— (a) omit “one”, (b) before paragraph (a) insert— (za) a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988), , (c) in paragraphs (a) and (b), insert at the beginning “a vehicle”, and (d) omit the words after paragraph (b). (3) In subsection (2)— (a) omit paragraph (b), and (b) insert at the end— (c) it is leased under a long-funding lease (within the meaning of section 70G of the Capital Allowances Act). (4) In subsection (3), omit “section 578A and”. (5) Omit subsection (4). Consequential repeals 64 In consequence of the amendments made by this Part of this Schedule, omit— (a) in FA 2008, section 77(4)(b), and (b) in CTA 2009, in Schedule 1, paragraph 45. Commencement 65 For the purposes of this Part of this Schedule— (a) the first relevant date is— (i) for corporation tax purposes, 1 April 2009, and (ii) for income tax purposes, 6 April 2009, and (b) the second relevant date is— (i) for corporation tax purposes, 1 April 2010, and (ii) for income tax purposes, 6 April 2010, and 66 (1) The amendments made by this Part of this Schedule have effect in relation to deductions for expenses incurred on the hiring of a car or motor cycle under an agreement under which the hire period begins on or after the first relevant date (but see paragraph 67). (2) For the purposes of this paragraph and paragraph 67, the hire period, in relation to an agreement, begins on the first day on which the car or motor cycle is required to be made available for use under the agreement. Election for new regime not to apply in certain cases 67 (1) This paragraph applies where— (a) a person incurs expenses on the hiring of a car or motor cycle under an agreement entered into on or before 8 December 2008, and (b) the hire period begins before the second relevant date. (2) If the person makes an election under this paragraph, none of the amendments made by this Part of this Schedule has effect in relation to any deduction for expenses incurred by the person on the hiring of the car or motor cycle under the agreement. (3) The election must be made by notice given to an officer of Revenue and Customs— (a) for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends, and (b) for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period. (4) “The relevant chargeable period” means the first chargeable period (as defined in section 6 of CAA 2001) in which any expenditure by the person on the provision of the car or motor cycle under the agreement was incurred. (5) The election is irrevocable. (6) All such assessments and adjustments of assessments are to be made as are necessary to give effect to the election. (7) For the purpose of this paragraph, an agreement is entered into on the first date on which the following conditions are met— (a) there is a contract in writing for the use of the car or motor cycle by the person, (b) the contract is unconditional or, if it is conditional, the conditions have been met, and (c) no terms remain to be agreed. Saving 68 The repeal of section 82 of CAA 2001 (meaning of “qualifying hire car”) by Part 1 of this Schedule does not affect the continued operation of the following provisions until they are repealed by this Part of this Schedule— (a) section 578B(2)(b) of ICTA, (b) section 49(2)(c) of ITTOIA 2005, and (c) section 57(2)(c) of CTA 2009.

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SCHEDULE 12 Reallocation of chargeable gain or loss within a group

Section 31 Main provisions 1 In TCGA 1992, for section 171A substitute— Election to reallocate gain or loss to another member of the group 171A (1) This section applies where— (a) a chargeable gain or an allowable loss accrues to a company (“company A”) in respect of an asset (or would so accrue but for an election under this section), (b) at the time of accrual, company A and another company (“company B”) are members of the same group, and (c) had company A disposed of the asset to company B immediately before the time of accrual, section 171(1) would have applied. (2) In determining for the purposes of subsection (1)(c) whether subsection (1) of section 171 would have applied, it is to be assumed that subsection (1A)(b) of that section read— (b) that, at the time of the disposal, company B is resident in the United Kingdom, or carrying on a trade in the United Kingdom through a permanent establishment there. (3) In this section “the time of accrual” means the time the chargeable gain or allowable loss accrues to company A (or would so accrue but for an election under this section). (4) Companies A and B may make a joint election to transfer the chargeable gain or allowable loss, or such part of it as is specified in the election, from company A to company B. (5) An election under this section must be made— (a) by notice to an officer of Revenue and Customs, and (b) no later than two years after the end of the accounting period of company A in which the time of accrual falls. (6) An election, or two or more elections made simultaneously, is or are of no effect if, taken together with each earlier election (if any) made in respect of the same gain or loss, it or they would (apart from this subsection) have effect in relation to an amount exceeding the gain or loss. (7) This section does not apply in relation to a chargeable gain or allowable loss that accrues by virtue of section 179. For provision as to the reallocation within a group of gains and losses arising on such a disposal, see section 179A. (8) For the effect of an election under this section, see section 171B. Election under section 171A: effect 171B (1) This section applies where an election is made under section 171A. (2) The effect of the election is that the chargeable gain or allowable loss, or such amount of it as is specified in the election, is treated as accruing not to company A but to company B. (3) The gain or loss treated as accruing to company B is to be taken to accrue at the time that, had the election not been made, it would have accrued to company A. (4) Where company B is not resident in the United Kingdom, the gain or loss treated as accruing to it is to be taken to accrue in respect of a chargeable asset held by it. (5) For this purpose an asset is a “chargeable asset” in relation to a company at any time if any gain accruing to the company on a disposal of the asset by the company at that time would be a chargeable gain and would by virtue of section 10B form part of its chargeable profits for corporation tax purposes. (6) Any payment made by company A to company B or by company B to company A, in pursuance of an agreement between them in connection with the election— (a) is not to be taken into account in computing profits or losses of either company for corporation tax purposes, and (b) is not for any purposes of the Corporation Tax Acts to be regarded as a distribution, provided it does not exceed the amount of the chargeable gain or allowable loss that is treated, as a result of the election, as accruing to company B. Elections under section 171A: insurance companies 171C (1) This section applies where — (a) an election is made under section 171A in relation to a gain or loss, and (b) company B is an insurance company. (2) For the purposes of section 171A(1)(c), section 440(3) of the Taxes Act (disposals of certain assets by and to insurance companies to fall outside the rule in section 171) is to be disregarded. (3) Subsection (2) does not apply if— (a) company A is an insurance company, and (b) the gain or loss arose in respect of the disposal of an asset that, immediately before the disposal, was part of that company's long-term insurance fund. (4) The chargeable gain or allowable loss treated as accruing to company B as a result of the election is to be treated as arising in respect of an asset that is not part of company B's long-term insurance fund. (5) In this section “insurance company” and “long-term insurance fund” have the same meaning as in Chapter 1 of Part 12 of the Taxes Act (see section 431(2) of that Act). Consequential amendments 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 In consequence of the amendment made by paragraph 1, omit— (a) in FA 2000, section 101, (b) in FA 2001, section 77, (c) in FA 2003, in Schedule 33, paragraph 17, and (d) in F(No.2)A 2005, section 36. Commencement 5 The amendments made by this Schedule have effect in relation to chargeable gains and allowable losses accruing on or after the day on which this Act is passed.

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SCHEDULE 13 Chargeable gains in stock lending: insolvency etc of borrower

Section 32 1 TCGA 1992 is amended as follows. 2 (1) Section 263B (stock lending arrangements) is amended as follows. (2) In subsection (2), for “section 263C(2)” substitute “ sections 263C(2) and 263CA(3) and (5) ”. (3) In subsection (4)— (a) in paragraph (a), insert at the end “for a consideration equal to their market value at that time”, (b) in paragraph (b), after “at that time” insert “ for that consideration ”, and (c) insert at the end (not as part of paragraph (c))— “ This subsection does not apply where section 263CA (insolvency of borrower) applies. ” (4) In subsection (7), omit the definition of “interest”. 3 After section 263C (stock lending involving redemption) insert— Stock lending: insolvency etc of borrower 263CA (1) This section applies where, in the case of any stock lending arrangement— (a) the borrower (B) becomes insolvent after the lender (L) has transferred the securities, (b) as a result of the insolvency, the requirement for B to make a transfer back to L will not be complied with as regards some or all of the securities, (c) collateral is used (whether directly or indirectly) to enable L to acquire securities (“replacement securities”) of the same description as the securities which will not be transferred back, and (d) the replacement securities are acquired before the end of the period of 30 days beginning with the day on which B becomes insolvent (“the insolvency date”). (2) In accordance with section 263B(2), the transfer of the securities under the arrangement is not to be regarded as a disposal by L for the purposes of this Act (but this is subject to subsection (5)). (3) B is to be treated for the purposes of this Act as having acquired the securities which will not be transferred back to L; and that acquisition is to be treated— (a) as being made on the insolvency date, and (b) as being for a consideration equal to their market value on that date. (4) The acquisition of the replacement securities is to be treated, as regards L, as if it were a transfer back of securities in accordance with the arrangement (so that, in accordance with section 263B(2), that acquisition is not regarded as an acquisition by L for the purposes of this Act). (5) If the number of replacement securities is less than the number of securities which B is treated as having acquired, L is to be treated for the purposes of this Act as having made a disposal, at the insolvency date, of the difference (“the deemed disposal”). (6) The consideration for the deemed disposal is— (a) where all the collateral is used to enable L to acquire replacement securities, nil, and (b) where not all the collateral is so used, the difference between— (i) the market value (at the insolvency date) of the number of securities which could have been acquired using the collateral, and (ii) the market value (at that date) of the number of securities which were in fact so acquired. (7) But if L at any time receives any amount (whether arising out of B's insolvency or otherwise) in respect of B's liability to L in respect of the securities which are treated under subsection (5) as having been disposed of by L that amount is to be treated as a chargeable gain accruing at that time to L. (8) The liability mentioned in subsection (7) is not to be treated as giving rise to a relevant non-lending relationship for the purposes of Part 6 of CTA 2009 (relationships treated as loan relationships etc). (9) For the purposes of this section, B becomes insolvent— (a) if a company voluntary arrangement takes effect under Part 1 of the Insolvency Act 1986, (b) if an administration application (within the meaning of Schedule B1 to that Act) is made or a receiver or manager, or an administrative receiver, is appointed, (c) on the commencement of a creditor's voluntary winding up (within the meaning of Part 4 of that Act) or a winding up by the court under Chapter 6 of that Part, (d) if an individual voluntary arrangement takes effect under Part 8 of that Act, (e) on the presentation of a bankruptcy petition (within the meaning of Part 9 of that Act), (f) if a compromise or arrangement takes effect under Part 26 of the Companies Act 2006, (g) if a bank insolvency order takes effect under Part 2 of the Banking Act 2009, (h) if a bank administration order takes effect under Part 3 of that Act, or (i) on the occurrence of any corresponding event which has effect under or as a result of the law of Scotland or Northern Ireland or a country or territory outside the United Kingdom. (10) In this section— (a) “collateral” means an amount of money or other property which— (i) is provided under the arrangement (or under arrangements of which the arrangement forms part), and (ii) is payable to or made available for the benefit of L for the purpose of securing the discharge of the requirement to transfer any or all of the securities back to L, and (b) any expression used in this section and in section 263B has the same meaning as in that section. 4 (1) The amendments made by paragraphs 2(2) and (3)(c) and 3 apply— (a) in any case where B becomes insolvent on or after 24 November 2008, and (b) where L makes an election under this paragraph, in any case where B becomes insolvent in the period beginning on 1 September 2008 and ending on 23 November 2008. (2) An election under sub-paragraph (1)(b) must relate to all stock lending arrangements in which L is the lender and B is the borrower and must be made— (a) where L is a company (within the meaning given by section 288(1) of TCGA 1992), no later than the second anniversary of the end of the accounting period of L in which 23 November 2008 falls, and (b) otherwise, no later than 31 January 2011. (3) Where section 263CA (inserted by paragraph 3) applies to any case which occurs before a period for which CTA 2009 has effect, the reference in subsection (8) of that section to a relevant non-lending relationship for the purposes of Part 6 of that Act is to be read as a reference to a relationship to which section 100 of FA 1996 applies.

Propose a change

SCHEDULE 14 Corporation tax treatment of company distributions

Section 34 Part 1 Insertion of new Part 9A of CTA 2009 1 In CTA 2009, after Part 9 insert— Part 9A Company distributions Chapter 1 The charge to tax Charge to tax on distributions received 931A (1) The charge to corporation tax on income applies to any dividend or other distribution of a company, but only if the distribution is not exempt. (2) Subsection (1) does not apply in the case of a distribution of a capital nature. (3) For provision as to whether a distribution is exempt, see— Chapter 2 (distributions received by small companies), and Chapter 3 (distributions received by companies that are not small). Chapter 2 Exemption of distributions received by small companies Exemption from charge to tax 931B A dividend or other distribution of a company that is received in an accounting period of the recipient in which the recipient is a small company is exempt if— (a) the payer is a resident of (and only of) the United Kingdom or a qualifying territory at the time that the distribution is received, (b) the distribution is not of a kind mentioned in paragraph (d) or (e) of section 209(2) of ICTA (certain non-dividend distributions), (c) no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution, and (d) the distribution is not made as part of a tax advantage scheme. Meaning of “qualifying territory” 931C (1) For the purpose of section 931B a territory is a “qualifying territory” if— (a) arrangements to which section 788 of ICTA applies (“double taxation relief arrangements”) have effect in relation to the territory, and (b) the arrangements contain a non-discrimination provision. (2) The Treasury may by regulations— (a) provide that a territory specified in or of a description specified in the regulations that does not satisfy subsection (1)(a) or (b) is a qualifying territory for the purpose of section 931B, and (b) provide that a territory so specified or described that satisfies subsection (1)(a) and (b) is not a qualifying territory for that purpose. (3) For the purpose of section 931B a company is a resident of a territory if, under the laws of the territory, the company is liable to tax there— (a) by reason of its domicile, residence or place of management, but (b) not in respect only of income from sources in that territory or capital situated there. (4) In subsection (1) “non-discrimination provision”, in relation to double taxation relief arrangements, means a provision to the effect that nationals of a state which is a party to those arrangements (a “contracting state”) are not to be subject in any other contracting state to— (a) any taxation, or (b) any requirement connected with taxation, which is other or more burdensome than the taxation and connected requirements to which nationals of that other state in the same circumstances (in particular with respect to residence) are or may be subjected. (5) In subsection (4) “national”, in relation to a contracting state, includes— (a) an individual possessing the nationality or citizenship of the contracting state, and (b) a legal person, partnership or association deriving its status as such from the laws in force in that contracting state. (6) Regulations under this section may— (a) describe a territory by reference to the double taxation relief arrangements for the time being in force in relation to the territory, (b) make different provision in relation to different descriptions of company, and (c) make provision having effect in relation to accounting periods current on the day on which the regulations are made. Chapter 3 Exemption of distributions received by companies that are not small Exemption from charge to tax 931D A dividend or other distribution of a company that is received in an accounting period of the recipient in which the recipient is not a small company is exempt if— (a) the distribution falls into an exempt class (see sections 931E to 931Q), (b) the distribution is not of a kind mentioned in paragraph (d) or (e) of section 209(2) of ICTA (certain non-dividend distributions), and (c) no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution. Exempt classes Distributions from controlled companies 931E (1) A dividend or other distribution falls into an exempt class if condition A or B is met. (2) Condition A is that the recipient controls the payer. (3) Condition B is that— (a) the recipient is one of two persons who, taken together, control the payer, (b) the recipient is a person in whose case the 40% test in section 755D(3) of ICTA is satisfied, and (c) the other is a person in whose case the 40% test in section 755D(4) of ICTA is satisfied. (4) Section 755D of ICTA (meaning of “control” etc) applies for the purposes of this section. (5) As so applied, that section has effect with the omission of subsection (6)(c) and (d). Distributions in respect of non-redeemable ordinary shares 931F A dividend or other distribution falls into an exempt class if it is made in respect of a share that— (a) is an ordinary share, and (b) is not redeemable. Distributions in respect of portfolio holdings 931G (1) A dividend or other distribution falls into an exempt class if the recipient— (a) holds less than 10% of the issued share capital of the payer, (b) is entitled to less than 10% of the profits available for distribution to holders of the issued share capital of the payer, and (c) would be entitled on a winding up to less than 10% of the assets of the company available for distribution to holders of the issued share capital of the payer. (2) Where the payer has more than one class of share, references in subsection (1) to the issued share capital of the payer are to issued share capital of the same class as the share in respect of which the distribution is made. (3) For the purposes of this section shares are not of the same class if the amounts paid up on them (otherwise than by way of premium) are different. Dividends derived from transactions not designed to reduce tax 931H (1) A dividend falls into an exempt class if it is paid in respect of relevant profits. (2) In this section “relevant profits” means any profits available for distribution at the time that the dividend is paid, other than profits that reflect the results of a transaction, or of one or more of a series of transactions, where— (a) the transaction or series of transactions achieve a reduction (other than a negligible reduction) in United Kingdom tax, and (b) the purpose or one of the main purposes of that transaction or series of transactions is to achieve that reduction. (3) A dividend that falls into an exempt class otherwise than by virtue of this section is for the purposes of this section treated, so far as possible, as paid in respect of relevant profits. (4) Any other dividend is for the purposes of this section treated, so far as possible, as paid in respect of profits other than relevant profits. (5) Where by virtue of subsection (4) part of a dividend is treated as paid in respect of relevant profits and part is treated as paid in respect of profits other than relevant profits, the two parts are treated for the purposes of this Part and Part 18 of ICTA (double taxation relief) as separate dividends. Dividends in respect of shares accounted for as liabilities 931I A dividend falls into an exempt class if the dividend is paid in respect of a share to which, at the time of the payment, section 521C (shares accounted for as liabilities treated as loan relationships) does not apply only because the condition in subsection (1)(f) of that section is not met. Exempt classes: anti-avoidance Schemes involving manipulation of controlled company rules 931J (1) This section applies to a dividend that would, apart from this section, fall into an exempt class by virtue of section 931E. (2) The dividend does not fall into an exempt class by virtue of that section if— (a) the dividend is paid as part of a scheme the main purpose, or one of the main purposes, of which is to secure that dividends of the payer received by the recipient fall into an exempt class by virtue of that section, and (b) the following condition is met. (3) The condition is that the dividend is paid in respect of pre-control profits. (4) A dividend that falls into an exempt class otherwise than by virtue of section 931E is for the purposes of this section treated, so far as possible, as paid in respect of profits other than pre-control profits. (5) Any other dividend is for the purposes of this section treated, so far as possible, as paid in respect of pre-control profits. (6) In this section “pre-control profits” means any profits available for distribution at the time the dividend is paid that arose at a time when neither condition A nor condition B in section 931E was met. (7) Where— (a) the condition in subsection (2)(a) is met, and (b) by virtue of subsection (5) part of a dividend is treated as paid in respect of pre-control profits and part is treated as paid in respect of profits other than pre-control profits, the two parts are treated for the purposes of this Part and Part 18 of ICTA (double taxation relief) as separate dividends. Schemes involving quasi-preference or quasi-redeemable shares 931K (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class by virtue of section 931F. (2) The distribution does not fall into an exempt class by virtue of that section if— (a) the distribution is made as part of a scheme the main purpose, or one of the main purposes, of which is to secure that distributions of the payer received by the recipient fall into an exempt class by virtue of that section, and (b) the following condition is met. (3) The condition is that the distribution is made in respect of a share that— (a) would not be an ordinary share, or (b) would be redeemable, were the rights under the scheme of each relevant person to be attached to the share. Schemes involving manipulation of portfolio holdings rule 931L (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class by virtue of section 931G. (2) The distribution does not fall into an exempt class by virtue of that section if— (a) the distribution is made as part of a scheme the main purpose, or one of the main purposes, of which is to secure that distributions of the payer received by the recipient fall into an exempt class by virtue of that section, and (b) the following condition is met. (3) The condition is that the distribution would not fall into an exempt class by virtue of section 931G if the reference in subsection (1) of that section to the recipient were to all relevant persons taken together. Schemes in the nature of loan relationships 931M (1) This section applies to a dividend or other distribution that does not fall into an exempt class by virtue of section 931E but would, apart from this section, fall into an exempt class otherwise than by virtue of that section. (2) The distribution does not fall into an exempt class if— (a) the distribution is made as part of a tax advantage scheme, and (b) conditions A to C are met. (3) Condition A is that the distribution constitutes part of a return in relation to an amount that is produced by the scheme for a relevant person, or two or more relevant persons taken together. (4) Condition B is that the return is economically equivalent to interest. (5) For this purpose a return produced for a person or persons by a scheme in relation to an amount is “economically equivalent to interest” if (and only if)— (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 a commercial rate of interest, and (c) at the time the scheme is entered into by the person or any of the persons, there is no practical likelihood that it will cease to be produced in accordance with the scheme. (6) Condition C is that there is a connection between the payer and the recipient for the accounting period of the payer in which the distribution is made. (7) Section 466 (companies connected for an accounting period) applies for the purposes of subsection (6) as if that subsection were a provision of Part 5 to which that section is applied (but this does not affect the application of section 1316(1) (meaning of connected persons) for the purposes of any other provision of this Part). Schemes involving distributions for which deductions are given 931N (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class. (2) The distribution does not fall into an exempt class if— (a) the distribution is made as part of a tax advantage scheme, and (b) the following condition is met. (3) The condition is that a deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of an amount determined by reference to the distribution. Schemes involving payments for distributions 931O (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class. (2) The distribution does not fall into an exempt class if— (a) the distribution is made as part of a tax advantage scheme, and (b) the following condition is met. (3) The condition is that the scheme includes a payment, or the giving up of a right to income, by a relevant person where— (a) the payment is made, or the right to income is given up, under a liability incurred for consideration in money or money's worth all or any of which consists of, or of the right to receive, the distribution, and (b) in the case of a payment, the conditions in subsections (2) and (4) to (7) of section 1301 (restriction of deductions for annual payments) apply to the payment. Schemes involving payments not on arm's length terms 931P (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class. (2) The distribution does not fall into an exempt class if— (a) the distribution is made as part of a tax advantage scheme, and (b) the following condition is met. (3) The condition is that— (a) the scheme includes a payment or receipt, or the giving up of a right to income, by a relevant person in respect of goods or services, and (b) the amount of the payment or receipt, or the amount of income given up, differs from the amount the relevant person would have paid, received or given up in respect of those goods or services had the distribution not been made. (4) This section does not apply to a scheme that consists of a transaction or series of transactions in relation to which Schedule 28AA to ICTA (provision not at arms length between parties under common control) applies. Schemes involving diversion of trade income 931Q (1) This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class. (2) The distribution does not fall into an exempt class if— (a) the distribution is made as part of a scheme entered into by the recipient and another relevant person (“C”), (b) if C had received the distribution, it would be reasonable to assume that the distribution would be dealt with under Part 3 (trading income), and (c) the main purpose, or one of the main purposes, of the scheme is to produce the result that the distribution is dealt with under this Part because it is received by the recipient. (3) For the purposes of subsection (2)(b) it is to be assumed that, in the case of any relevant transaction to which a relevant person other than C is a party, C were that party to that transaction. (4) In this section “relevant transaction” means any of the transactions giving rise to the distribution. Chapter 4 Supplementary Election that distribution should not be exempt Election that distribution should not be exempt 931R (1) This section applies where, apart from this section, a distribution (“the distribution”) would be exempt. (2) If the recipient so elects, the distribution is not exempt. (3) An election under this section must be made on or before the second anniversary of the end of the accounting period in which the distribution is received. (4) Subsection (5) applies where the distribution is a dividend that is treated for certain purposes of Part 18 of ICTA (double taxation relief) as two separate dividends by virtue of section 801C of that Act (separate streaming of dividend so far as representing an ADP dividend of a CFC). (5) If the recipient so elects— (a) the distribution is to be treated for the purposes of this Part as if it were an ADP dividend and a separate residual dividend as provided for in that section of that Act, and (b) the ADP dividend is not exempt. (6) The reference in subsection (4) to section 801C of ICTA is to that section as it continues to have effect in accordance with paragraph 8(1) of Schedule 16 to FA 2009 in relation to dividends paid on or after 1 July 2009 for accounting periods beginning before that day. Interpretation Meaning of “small company” 931S (1) For the purposes of this Part a company is a “small company” in an accounting period if it is in that period a micro or small enterprise, as defined in the Annex to Commission Recommendation 2003/361/EC of 6 May 2003. (2) But a company is not a “small company” in an accounting period if it is at any time in that period— (a) an open-ended investment company, (b) an authorised unit trust scheme, (c) an insurance company, or (d) a friendly society. (3) In subsection (2)— “open-ended investment company” has the meaning given by section 236 of FISMA 2000; “authorised unit trust scheme” means a unit trust scheme (within the meaning given by section 237 of FISMA 2000) in relation to which a order under section 243 of that Act (authorisation orders) is in force; “insurance company” has the meaning given by section 431 of ICTA; “friendly society” has the meaning given by section 466(2) of ICTA. Meaning of “payer”, “recipient” and “relevant person” 931T In this Part— “the payer”, in relation to a distribution, means the company that makes the distribution; “the recipient”, in relation to a distribution, means the company that receives the distribution; “a relevant person”, in relation to a distribution, means— the company that receives the distribution, or any person connected with that company. Meaning of “ordinary share” and “redeemable” 931U (1) In this Part “ordinary share” means a share that does not carry any present or future preferential right to dividends or to a company's assets on its winding up. (2) A share is regarded as “redeemable” for the purposes of this Part only if it is redeemable as a result of its terms of issue (or any collateral arrangements)— (a) requiring redemption, (b) entitling the holder to require redemption, or (c) entitling the issuing company to redeem. Meaning of “scheme” and “tax advantage scheme” 931V “(1) For the purposes of 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; “tax advantage scheme” means a scheme the main purpose, or one of the main purposes, of which is to obtain a tax advantage (other than a negligible tax advantage). (2) In this section “tax advantage” has the meaning given by section 840ZA of ICTA. Boundary provisions Provisions which must be given priority over this Part 931W (1) Any income so far as it falls within— (a) this Part, and (b) Chapter 2 of Part 3 (income taxed as trade profits), is dealt with under Part 3. (2) Any income so far as it falls within— (a) this Part, and (b) Chapter 3 of Part 4 (profits of property businesses) so far as the Chapter relates to a UK property business, is dealt with under Part 4. (3) Any income so far as it falls within— (a) this Part, and (b) Chapter 1 of Part 12 of ICTA (insurance companies), is dealt with under that Chapter. Part 2 Other amendments ICTA 2 ICTA is amended as follows. 3 In section 13(7) (small companies' relief), omit “resident in the United Kingdom”. 4 (1) Section 505(1)(c) (charitable companies: general) is amended as follows. (2) After sub-paragraph (ii) insert— (iizza) from tax under Part 9A of CTA 2009 (company distributions), . (3) Omit sub-paragraph (iib). 5 (1) Section 95ZA (taxation of UK distributions received by insurance companies) is amended as follows. (2) In subsection (1), for “section 1285” substitute “ section 130(2) ”. (3) In subsection (2)(a), omit “resident in the United Kingdom”. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 In section 795 (double taxation relief: computation of income subject to foreign tax), omit subsection (3A). 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Omit sections 806A to 806K (double taxation relief in relation to foreign dividends: onshore pooling and utilisation of eligible unrelieved foreign tax). 10 In section 826 (interest on tax overpaid), omit subsection (7BC). 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 In paragraph 5(3)(c) of Schedule 27 (distributing funds: United Kingdom equivalent profits)— (a) for “section 1285” substitute “ Chapter 2 or 3 of Part 9A ”, and (b) omit “in like manner as if they were dividends or distributions of a company resident outside the United Kingdom”. 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FA 1989 15 FA 1989 is amended as follows. 16 (1) Section 85A (life assurance: excess adjusted Case I profits) is amended as follows. (2) In paragraph (a) of subsection (6), for “distributions received by the company in the accounting period from companies resident in the United Kingdom” substitute “ non-taxable distributions received by the company in the accounting period ”. (3) After that subsection insert— (6A) In this section “non-taxable distribution” means— (a) a distribution that is exempt for the purposes of Part 9A of the Corporation Tax Act 2009 (company distributions), and (b) does not include any amount withheld from the distribution on account of tax payable under the laws of a territory outside the United Kingdom. 17 (1) Section 89 (life assurance: policy holders' share of profits) is amended as follows. (2) In subsection (2)(b), for “distributions received from companies resident in the United Kingdom” substitute “ non-taxable distributions received ”. (3) In subsection (7), after the definition of “Case I profits” insert— “non-taxable distribution” has the same meaning as in section 85A. FA 1994 18 In section 219 of FA 1994 (taxation of profits of Lloyd's underwriters etc)— (a) in subsection (3), omit “Subject to subsection (4A) below,”, and (b) omit subsections (4), (4A) and (4C). FA 2006 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CTA 2009 20 CTA 2009 is amended as follows. 21 In section 1(2) (overview of Act), before the “and” at the end of paragraph (f) insert— (fa) Part 9A (company distributions), . 22 For section 130 (traders receiving distributions etc) substitute— Insurers Insurers receiving distributions etc 130 (1) This section applies for the purpose of calculating the trading profits of— (a) insurance business other than life assurance business, 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. 23 In section 932(1) (overview of Part 10), omit paragraph (a). 24 Omit Chapter 2 of Part 10 (taxation of dividends from non-UK resident companies). 25 (1) Section 974 (charge to tax in relation to sale of foreign dividend coupons) is amended as follows. (2) In subsection (3)(a), after “realisation of” insert “ taxable ”. (3) In subsection (4), after “sale of” insert “ taxable ”. (4) After subsection (4) insert— (4A) For the purposes of subsections (3) and (4) a dividend coupon is “taxable” if the associated dividend would not have been exempt for the purposes of Part 9A (company distributions) had it been paid to the holder of the shares. 26 In section 982(1)(a) and (2)(a) (boundary provisions for Part 10), omit “2,”. 27 Omit section 1285 (exemption for distributions of UK resident companies). 28 In section 1310(4) (orders and regulations subject to affirmative resolution procedure in House of Commons), before paragraph (a) insert— (za) section 931C (meaning of “qualifying territory”), . 29 In Schedule 4 (index of defined expressions), insert at the appropriate places— ordinary share (in Part 9A) | section 931U ; the payer (in Part 9A) | section 931T ; the recipient (in Part 9A) | section 931T ; redeemable (in Part 9A) | section 931U ; a relevant person (in Part 9A) | section 931T ; scheme (in Part 9A) | section 931V ; small company (in Part 9A) | section 931S ; tax advantage scheme (in Part 9A) | section 931V . Consequential repeals 30 In consequence of the amendments made by this Schedule, omit— (a) in F(No.2)A 1997, section 22(2) and (3)(a), (b) in FA 2000, in Schedule 30, paragraphs 8(4)(c), 21 and 22, (c) in FA 2001, in Schedule 27, paragraphs 1(3), 4 and 5, (d) in FA 2008, in Schedule 39, paragraph 25, and (e) in CTA 2009, in Schedule 1, paragraphs 174(4)(c), 252 to 254 and 392(4) and (5). Part 3 Commencement etc Commencement 31 The amendments made by this Schedule have effect in relation to distributions paid on or after 1 July 2009 (“the commencement date”). Transitional provision 32 (1) This paragraph contains transitional provision in relation to the commencement of Part 9A of CTA 2009 (as inserted by paragraph 1). (2) In section 931H— (a) a reference to a transaction that is one of a series of transactions does not include a transaction where each transaction in the series was entered into more than 12 months before the commencement date, (b) a reference to any other transaction does not include a transaction entered into more than 12 months before the commencement date, and (c) a reference to a dividend that falls into (or does not fall into) an exempt class otherwise than by virtue of that section is, in relation to a dividend paid before the commencement date, to a dividend that would have so fallen (or not so fallen) had that section had effect in relation to the dividend. (3) In section 931J— (a) a reference to profits available for distribution that arose at any time does not include such profits that arose in a period of account ending more than 12 months before the commencement date, and (b) a reference to a dividend that falls into (or does not fall into) an exempt class otherwise than by virtue of section 931E is, in relation to a dividend paid before the commencement date, to a dividend that would have so fallen (or not so fallen) had that section had effect in relation to the dividend.

Propose a change

SCHEDULE 15 Tax treatment of financing costs and income

Section 35 Part 1 Introduction Overview 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 2 Application of this Schedule Application of Schedule 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UK net debt of the worldwide group for period of account of worldwide group 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net debt of a company 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Worldwide gross debt of worldwide group for period of account of worldwide group 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References to amounts disclosed in balance sheet of relevant group company 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualifying financial services groups 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualifying activities 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lending activities and activities ancillary to lending activities 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance activities and insurance related activities 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relevant dealing in financial instruments 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UK trading income of the worldwide group 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Worldwide trading income of the worldwide group 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency accounting 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 3 Disallowance of deductions Application of Part and meaning of “total disallowed amount” 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “company to which this Part applies” 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appointment of authorised company for relevant period of account 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “the reporting body” 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of allocated disallowances: submission 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of allocated disallowances: submission of revised statement 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of allocated disallowances: requirements 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of allocated disallowances: effect 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company tax returns 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Power to make regulations about statement of allocated disallowances 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Failure of reporting body to submit statement of allocated disallowances 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Powers to make regulations in relation to reductions required under paragraph 25 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 4 Exemption of financing income Application of Part and meaning of “total disallowed amount” 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “company to which this Part applies” 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appointment of authorised company for relevant period of account 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “the reporting body” 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of allocated exemptions: submission 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of allocated exemptions: submission of revised statement 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of allocated exemptions: requirements 33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of allocated exemptions: effect 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Company tax returns 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Power to make regulations about statement of allocated exemptions 36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Failure of reporting body to submit statement of allocated exemptions 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Power to make regulations in relation to reductions required under paragraph 37 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balancing payments between group companies: no charge to, or relief from, tax 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 5 Intra-group financing income where payer denied deduction Exemption from tax for certain financing income received from certain EEA companies 40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “relevant associate” 41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “tax-resident” and “EEA territory” 42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualifying EEA tax relief for payment in the current period or a previous period 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualifying EEA tax relief for payment in future period 44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References to tax of a territory 45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financing income amounts of a company 46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 6 Anti-avoidance Schemes involving manipulation of rules in Part 2 47 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schemes involving manipulation of rules in Parts 3 and 4 48 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “relevant net deduction” 49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Calculation of amounts 50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “carried-back amount” and “carried-forward amount” 51 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schemes involving manipulation of rules in Part 5 52 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “scheme” and “excluded scheme” 53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 7 “Financing expense amount” and “financing income amount” The financing expense amounts of a company 54 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The financing income amounts of a company 55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretation of paragraphs 54 and 55 56 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group treasury companies 57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate investment trusts 58 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Companies engaged in oil extraction activities 59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intra-group short-term finance: financing expense 60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intra-group short-term finance: financing income 61 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term loan relationships 62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stranded deficits in non-trading loan relationships: financing expense 63 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stranded deficits in non-trading loan relationships: financing income 64 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stranded management expenses in non-trading loan relationships: financing expense 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stranded management expenses in non-trading loan relationships: financing income 66 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charities 67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Educational and public bodies 68 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interpretation of paragraphs 57 to 68 69 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 8 The “tested expense amount” and “tested income amount” The tested expense amount 70 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The tested income amount 71 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Companies with net financing deduction or net financing income that is small 72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 9 The “available amount” The available amount 73 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group members with income from oil extraction subject to particular tax treatment in UK 74 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group members with income from shipping subject to particular tax treatment in UK 75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group members with income from property rental subject to particular tax treatment in UK 76 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of accounting expressions used in this Part 77 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 10 Other interpretative provisions The worldwide group 78 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “group” 79 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “ultimate parent” 80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “corporate entity” 81 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “relevant non-corporate entity” 82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treatment of entities stapled to corporate entities or relevant non-corporate entities 83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treatment of business combinations 84 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “large” in relation to a group 85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “UK group company” and “relevant group company” 86 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial statements of the worldwide group 87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-compliant financial statements of worldwide group 88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-existent financial statements of worldwide group 89 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References to amounts disclosed in financial statements 90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Translation of amounts disclosed in financial statements into sterling 91 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expressions taking their meaning from international accounting standards 92 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “relevant accounting period” 93 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Meaning of “the Commissioners” and “HMRC” 94 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 11 Consequential amendments and commencement Consequential amendments 95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commencement 97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Anti-avoidance: change of period of account of worldwide group 98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transitional provision 99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Propose a change

SCHEDULE 16 Controlled foreign companies

Section 36 Part 1 Abolition of acceptable distribution policy exemption Abolition of acceptable distribution policy exemption 1 (1) ICTA is amended as follows. (2) In section 748(1) (cases where apportionment under section 747(3) does not apply), omit paragraph (a) (including the “or” at the end). (3) In Schedule 25 (supplementary provision in relation to cases where apportionment under section 747(3) does not apply), omit Part 1 (acceptable distribution policy). Consequential amendments 2 (1) ICTA is amended as follows. (2) Omit section 754A (returns where it is not established whether acceptable distribution policy applies). (3) In section 801 (dividends paid between related companies: relief for UK and third country taxes), omit subsections (2A)(aa), (2B), (6) and (7). (4) Omit section 801C (double taxation relief: separate streaming of dividend so far as representing an ADP dividend of a CFC). (5) In section 803A (foreign taxation of group as single entity), omit subsection (1A). (6) In Schedule 24 (assumptions for calculating chargeable profits, creditable tax and corresponding UK tax of foreign companies), omit— (a) in paragraph 1(3A), paragraph (b)(ii) (and the “and” before it) and the words “or which is an ADP exempt period” (in both places), (b) paragraph 1(6), (c) paragraph (b) of paragraph 2(1) (and the “or” before it), (d) paragraph (b) of paragraph 4(1A) (and the “or” before it), (e) paragraph 4(3A), (f) in paragraph 9(1)(c), “, and is not to be assumed by virtue of paragraph 2(1)(b) above to have been resident,”, and (g) paragraph (b) of paragraph 10(1) (and the “or” before it). 3 In paragraph 116 of Schedule 29 to FA 2002 (assumptions for calculating chargeable profits of CFCs in connection with intangible fixed assets), omit paragraph (b) of sub-paragraph (2) (and the “or” before it). 4 In section 870 of CTA 2009 (assumptions for calculating chargeable profits of CFCs in connection with intangible fixed assets), omit— (a) paragraph (b) of subsection (3) (and the “or” before it), and (b) subsection (7). 5 In consequence of the amendments made by paragraphs 1 to 4, omit— (a) in FA 1990, section 67(3)(b) and (c), (b) in FA 1994, section 134, (c) in FA 1996, in Schedule 36, paragraphs 3(3), (8) and (9) and 4(2) and (3)(b), (d) in FA 1998, in Schedule 17, paragraphs 10, 17(2) to (5) and 26 to 28, (e) in FA 1999, section 88, (f) in FA 2000, in Schedule 30, paragraph 13, (g) in FA 2001, section 82, (h) in FA 2005, sections 89 and 90, (i) in FA 2007, in Schedule 7, paragraph 56, (j) in FA 2008, section 64(4) and, in Schedule 17, paragraph 29, and (k) in this Act, section 57(4). Commencement 6 The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies beginning on or after 1 July 2009. Periods straddling 1 July 2009 7 (1) Where a controlled foreign company has an accounting period (“the straddling accounting period”) that— (a) begins before 1 July 2009, and (b) ends on or after that date, the straddling accounting period is to be treated as split. (2) Where this paragraph provides that the straddling accounting period is to be treated as “split”— (a) that part of the straddling accounting period that falls before 1 July 2009 and that part of the straddling accounting period that falls on or after that date are to be treated for the purposes of Chapter 4 of Part 17, and Part 18, of ICTAand Part 2 of TIOPA 2010 as separate accounting periods, and (b) the company's chargeable profits for the straddling accounting period, and its creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a just and reasonable basis. Transitional provision 8 (1) The amendments made by this Part do not affect the application of sections 801, 801C or 803A of, or Part 1 of Schedule 25 to, ICTA in relation to dividends paid on or after 1 July 2009 if they are paid for accounting periods beginning before that date. (2) Sub-paragraph (3) applies where a dividend of a controlled foreign company is paid during the second of the two accounting periods provided for by paragraph 7(2). (3) For the purposes of Part 1 of Schedule 25 to ICTA, section 799 of that Act has effect as if the reference in subsection (3)(c) to the last period for which accounts of the company were made up which ended before the dividend became payable were to the first of the two accounting periods provided for by paragraph 7(2). Interpretation 9 The following expressions have the same meaning for the purposes of this Part as they have for the purposes of Chapter 4 of Part 17 of ICTA— “accounting period”; “chargeable profits”; “controlled foreign company”; “creditable tax”. Part 2 Amendment of exempt activities exemption Abolition of special rules for holding companies other than local holding companies 10 (1) Part 2 of Schedule 25 to ICTA (exempt activities) is amended as follows. (2) In paragraph 6 (definition of exempt activities)— (a) in sub-paragraph (1)(c), for “(2), (3), (4) or (4A)” substitute “ (2) or (3) ”, (b) in sub-paragraph (3)(b), omit “or superior holding companies”, (c) omit sub-paragraphs (4) to (4BB), (d) in sub-paragraph (5)— (i) for “sub-paragraphs (3) to (4B)” substitute “ sub-paragraph (3) ”, and (ii) omit “or superior holding company”, (e) in sub-paragraph (5ZA), omit “or superior holding company”, (f) in sub-paragraph (5ZB), omit “or superior holding company”, (g) in sub-paragraph (5A), for “sub-paragraphs (3) to (4B)” substitute “ sub-paragraph (3) ”, (h) omit sub-paragraph (5B), (i) in sub-paragraph (5C), omit “or superior holding company”, and (j) in sub-paragraph (6), for “sub-paragraphs (1) to (4BB) above” substitute “ this paragraph ”. (3) In paragraph 8(3) (paragraph 6(1)(b) condition), omit “or superior holding company”. (4) In paragraph 12 (definition of “holding company” etc)— (a) in sub-paragraph (1), for “paragraph 12A below and in” substitute “ in ”, (b) in sub-paragraph (4), omit “or (4), as the case may be,”, and (c) in sub-paragraph (5)— (i) in the words before paragraph (a), for “sub-paragraphs (3) and (4)” substitute “ sub-paragraph (3) ”, and (ii) in paragraph (a), omit “or superior holding company”. (5) Omit paragraph 12A (definition of “superior holding company” etc). 11 In consequence of the amendments made by paragraph 10, omit— (a) in FA 1998, in Schedule 17, paragraphs 30(4)(a), (5), (6) and (8), 31, 32(2) and (3)(a) and 33, (b) in FA 2000, in Schedule 31, paragraph 7(2) to (7), (10) and (11), and (c) in FA 2003, in Schedule 42, paragraph 2(2). Commencement 12 (1) The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies beginning on or after the commencement date. (2) For this purpose “the commencement date” means— (a) in relation to a controlled foreign company other than a qualifying holding company, 1 July 2009, ... (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) The amendments made by this Part have no effect in relation to a qualifying holding company. Meaning of “qualifying holding company” and “exempt holding company” 13 (1) In this Part “qualifying holding company” means a controlled foreign company that was an exempt holding company in relation to the last accounting period to end before 1 July 2009. (2) For the purposes of sub-paragraph (1) paragraphs 14 and 15 are to be disregarded. (3) For the purposes of this Part a company is an “exempt holding company” in relation to an accounting period if— (a) throughout the period the company is, within the meaning of Part 2 of Schedule 25 to ICTA, engaged in exempt activities, and (b) paragraph 6(4) or (4A) of that Schedule applies to the company in relation to the period. Periods straddling 1 July 2009 14 (1) Where a controlled foreign company has an accounting period (“the straddling accounting period”) that— (a) begins before 1 July 2009, and (b) ends on or after that date, the straddling accounting period is to be treated as split. (2) Where this paragraph provides that the straddling accounting period is to be treated as “split”— (a) that part of the straddling accounting period that falls before 1 July 2009 and that part of the straddling accounting period that falls on or after that date are to be treated for the purposes of Chapter 4 of Part 17 of ICTA as separate accounting periods, and (b) the company's gross income for the straddling accounting period, and its chargeable profits and creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a time basis according to the respective lengths of the periods. Qualifying holding companies: periods straddling 1 July 2012 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualifying holding companies: definition of “relevant accounting period” 16 For the purposes of paragraph 17 an accounting period of a qualifying holding company is a “relevant accounting period” if it— (a) begins on or after 1 July 2009 but before 1 January 2013, ... (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualifying holding companies: treatment during three years before 1 July 2012 17 (1) In its application in relation to a relevant accounting period of a qualifying holding company, Part 2 of Schedule 25 to ICTA has effect subject to the modifications in this paragraph. (2) Sub-paragraph (4) or (4A) of paragraph 6 applies to a company only if— (a) the condition specified in that sub-paragraph is met, and (b) conditions A and B are met. (3) Condition A is that at all material times the company was a member of a group with the same ultimate corporate parent. (4) For this purpose the following times are “material”— (a) the beginning of 9 December 2008, and (b) all times during the accounting period in question. (5) Condition B is that amount X does not exceed amount Y. (6) Amount X is the amount of the company's gross income in the accounting period in question that is non-qualifying gross income. (7) Amount Y is (subject to sub-paragraph (8))— (a) where there are three reference periods in relation to the company, the greatest of the amounts of the company's non-qualifying gross income in each of those periods, (b) where there are two reference periods in relation to the company, the greater of the amounts of the company's non-qualifying gross income in each of those periods, (c) where there is one reference period in relation to the company, the amount of the company's non-qualifying gross income in that period, or (d) where there is no reference period in relation to the company, the amount of the company's non-qualifying gross income in the period of 12 months ending with 9 December 2008. (8) Where the number of days in the period by reference to which amount X is determined is not the same as the number of days in the period by reference to which amount Y is determined, amount Y is to be multiplied by— DX DY where— DX is the number of days in the period by reference to which amount X is determined, and DY is the number of days in the period by reference to which amount Y is determined. (9) In this paragraph— “non-qualifying gross income” means gross income that does not satisfy the test in paragraph 6(3), (4) or (4A) of Schedule 25 to ICTA; “a reference period”, in relation to a company, means an accounting period of the company that— is one of the last three accounting periods of the company to end before 9 December 2008, and is an accounting period in relation to which the company is an exempt holding company. Meaning of “ultimate corporate parent” and “group” for the purposes of paragraph 17(3) 18 (1) In paragraph 17(3) the “ultimate corporate parent”, in relation to a group, means a member of the group that— (a) is a body corporate, and (b) is not a subsidiary (whether direct or indirect) of another body corporate. (2) A reference in this paragraph to a body corporate does not include— (a) the Crown, (b) a Minister of the Crown, (c) a government department, (d) a Northern Ireland department, or (e) a foreign sovereign power. (3) In paragraph 17(3) and this paragraph “group” has the meaning for the time being given by international accounting standards. (4) In this paragraph “subsidiary” has the meaning for the time being given by international accounting standards. Reference periods: anti-avoidance 19 (1) This paragraph applies where, on or after 9 December 2008, a company alters its accounting date so that any period (“period A”) that would otherwise have fallen in an accounting period ending on or after 9 December 2008 falls instead in an accounting period ending before that date. (2) The reference in paragraph (a) of the definition of “a reference period” in paragraph 17(9) to 9 December 2008 is to be treated as a reference to the beginning of period A. Interpretation 20 The following expressions have the same meaning for the purposes of this Part as they have for the purposes of Chapter 4 of Part 17 of ICTA— “accounting period”; “chargeable profits”; “control”; “controlled foreign company”; “creditable tax”; “gross income”. Part 3 Reduction in chargeable profits for certain financing income Reduction in chargeable profits for certain financing income 21 ICTA is amended as follows. 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 After section 751A insert— Reduction in chargeable profits for certain financing income 751AA (1) This section applies if— (a) an apportionment under section 747(3) falls to be made as regards an accounting period (“the relevant accounting period”) of a controlled foreign company, (b) the chargeable profits of the controlled foreign company for the relevant accounting period would, apart from this section, include an amount of income in respect of a payment made by another company (“the payer”), (c) the amount that the payer brings into account for the purposes of corporation tax in respect of the payment is reduced (in part or in full) by virtue of Part 3 of Schedule 15 to FA 2009 (tax treatment of financing costs and income), and (d) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in the relevant accounting period. (2) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period (“the chargeable profits”) to be reduced by an amount (“the specified amount”) specified in the application (including to nil). (3) If the Commissioners grant the application— (a) the chargeable profits are treated as reduced by the specified amount, and (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in the chargeable profits, for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose). (4) The Commissioners may grant the application only if they are satisfied that the specified amount does not exceed the relevant amount. (5) In subsection (4) “the relevant amount” means the amount (if any) by which it is just and reasonable that the chargeable profits should be treated as reduced, having regard to the effect of Parts 3 and 4 of Schedule 15 to FA 2009 on amounts brought into account for the purposes of corporation tax by the payer, or any other company. 24 (1) Section 751B (supplementary) is amended as follows. (2) In the heading, for “Section 751A” substitute “ Sections 751A and 751AA ”. (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) In subsection (8)— (a) after “ “the relevant amount”” insert — (a) in the case of an appeal in respect of the refusal of an application under section 751A, , and (b) after “mentioned in that subsection” insert , and (b) in the case of an appeal in respect of the refusal of an application under section 751AA, has the meaning given by subsection (5) of that section. (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commencement 25 (1) The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies ending on or after 1 January 2010. (2) For this purpose “accounting period” and “controlled foreign company” have the same meaning as they have for the purposes of Chapter 4 of Part 17 of ICTA.

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SCHEDULE 17 International movement of capital

Section 37 Part 1 Abolition of existing regime 1 In ICTA, omit— (a) section 765 (prior Treasury consent required for certain transactions involving movement of capital outside Europe), (b) section 765A (HMRC to be given information about certain transactions involving movement of capital within Europe), (c) section 766 (offence of failure to comply with section 765), and (d) section 767 (interpretation). 2 In section 98 of TMA 1970 (special returns etc)— (a) omit subsection (5), (b) in the first column of the Table, omit “section 765A(2)(b);”, and (c) in the second column of the Table, omit “section 765A(2)(a);”. 3 In consequence of the amendments made by paragraphs 1 and 2, omit— (a) in FA 1988, section 105(6), and (b) in FA 1990, section 68(1), (2) and (3)(b) to (d). Part 2 Reporting requirement Reporting requirement 4 (1) If a UK corporate parent is a reporting body at the time a reportable event takes place or a reportable transaction is carried out, it must, within 6 months of that time, make a report to an officer of Revenue and Customs. (2) The report must contain such information relating to the event or transaction, or persons connected with the event or transaction, as is specified in regulations made by the Commissioners. (3) The purpose of the report is to enable the Commissioners to consider whether the event or transaction results, directly or indirectly, in an advantage for any person in respect of corporation tax or any other tax or duty. (4) In this Schedule “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs. Meaning of “reporting body” 5 (1) For the purposes of this Schedule a body corporate (“body A”) is a reporting body at any time if, at that time— (a) it is a UK corporate parent, and (b) condition A, B, C or D is met. (2) Condition A is that body A is not controlled by a body corporate resident outside the United Kingdom. (3) Condition B is that— (a) body A is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”), and (b) no other relevant UK body corporate is controlled by the foreign parent. (4) Condition C is that — (a) body A is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”), (b) one or more other UK corporate parents are controlled by the foreign parent, and (c) body A is not a party to an arrangement under paragraph 6. (5) Condition D is that— (a) body A is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”), (b) one or more other UK corporate parents are controlled by the foreign parent, and (c) body A is a party to an arrangement under paragraph 6 and is the nominated reporting body under that arrangement. Groups with more than one UK corporate parent: nomination of single reporting body 6 (1) Sub-paragraph (2) applies where— (a) a UK corporate parent is controlled by a body corporate resident outside the United Kingdom (“the foreign parent”), and (b) one or more other UK corporate parents are controlled by the foreign parent. (2) Two or more of the UK corporate parents controlled by the foreign parent may enter into an arrangement under which one of their number (“the nominated reporting body”) is nominated to exercise, on behalf of all of them, the functions conferred under this Schedule on a reporting body. (3) A party to an arrangement under this paragraph may withdraw from the arrangement. (4) The Commissioners may by regulations make provision about entering into and withdrawing from an arrangement under this paragraph. (5) Regulations under sub-paragraph (4) may, in particular, include provision— (a) as to the form and manner in which bodies may enter into, or a body may withdraw from, an arrangement, (b) requiring a person to give information to HMRC in connection with entering into or withdrawing from an arrangement, and (c) as to circumstances in which a body is to be treated as having withdrawn from an arrangement. Meaning of “UK corporate parent” 7 In this Schedule “UK corporate parent” means a body corporate that— (a) is resident in the United Kingdom, (b) controls one or more bodies corporate that are not resident in the United Kingdom, and (c) is not controlled by— (i) a body corporate that is resident in the United Kingdom, or (ii) two or more bodies corporate taken together each of which is resident in the United Kingdom. Reportable events and transactions 8 (1) For the purposes of this Schedule an event or transaction is “reportable”, in relation to a reporting body, if— (a) it is of a value exceeding £100 million, (b) it is within sub-paragraph (2), and (c) it is not an excluded transaction (see paragraph 9). (2) An event or transaction is within this sub-paragraph if— (a) it is an issue of shares or debentures by a foreign subsidiary, (b) it is a transfer by the reporting body, or a transfer caused or permitted by the reporting body, of shares or debentures of a foreign subsidiary in which the reporting body has an interest, (c) where the reporting body is a party to an arrangement under paragraph 6, it is a transfer by another party to the arrangement, or a transfer caused or permitted by such a party, of shares or debentures of a foreign subsidiary in which that party has an interest, (d) it results in a foreign subsidiary becoming, or ceasing to be, a controlling partner in a partnership, or (e) it is of a description specified in regulations made by the Commissioners. (3) For the purposes of sub-paragraph (2)(d) a foreign subsidiary is a “controlling partner” in a partnership if, whether alone or taken together with one or more other partners that are subsidiaries, it controls the partnership. (4) The Commissioners may by regulations make provision about how the value of an event or transaction is to be determined for the purposes of this paragraph. (5) Regulations under sub-paragraph (4) may, in particular, in the case of a transaction that is one of a series of transactions, include provision attributing to the transaction the value of other transactions in the series. (6) Regulations under this paragraph may— (a) make provision by reference to standards or other documents issued by any person, or (b) make different provision for different cases or purposes. (7) The Commissioners may by order amend sub-paragraph (1)(a) so as to substitute a higher amount for the amount for the time being mentioned there. Excluded transactions 9 (1) For the purposes of this Schedule a transaction is “excluded” if— (a) it is carried out in the ordinary course of a trade, (b) all the parties to the transaction are, at the time the transaction is carried out, resident in the same territory, (c) it consists in giving to the bankers of a foreign subsidiary any security for the payment of any sum due or to become due from it to them by reason of any transaction entered into with it by them in the ordinary course of their business as bankers, (d) it consists in a foreign subsidiary giving to an insurance company any security for the payment of any sum due or to become due from that subsidiary to that company by reason of any transaction entered into with that subsidiary by that company in the ordinary course of that company's business by way of investment of its funds, or (e) it is of a description specified in regulations made by the Commissioners. (2) Regulations under sub-paragraph (1)(e)— (a) may make provision by reference to standards or other documents issued by any person, and (b) may make different provision for different cases or purposes. Penalty for failure to comply with reporting requirement 10 In section 98 of TMA 1970 (special returns etc), in the second column of the Table, insert at the end “paragraph 4 of Schedule 17 to FA 2009.” Regulations and orders 11 (1) Regulations and orders under this Schedule are to be made by statutory instrument. (2) A statutory instrument containing regulations or an order under this Schedule is subject to annulment in pursuance of a resolution of the House of Commons. Interpretation 12 (1) For the purposes of this Schedule “control”, in relation to a body corporate, means the power of a person to secure— (a) by means of the holding of shares or the possession of voting power in or in relation to the body or any other body corporate, or (b) by virtue of any powers conferred by the articles of association or other document regulating the body or any other body corporate, that the affairs of the body are conducted in accordance with that person's wishes. (2) Where two or more persons, taken together, have the power mentioned in sub-paragraph (1), they are taken for the purposes of this Schedule to control the body corporate. (3) For the purposes of this Schedule “control” in relation to a partnership, means the right to a share of more than 50% of the assets, or of more than 50% of the income, of the partnership. (4) In this Schedule— “foreign” means resident outside the United Kingdom; “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar character to a partnership, and “partner” is to be read accordingly; “subsidiary”, in relation to a reporting body, means a body corporate that is controlled by— the reporting body, or where the reporting body is a party to an arrangement under paragraph 6, any party to the arrangement. (5) Section 150 of TIOPA 2010 (meaning of “transaction” and “series of transactions”) applies for the purposes of this Schedule. Part 3 Commencement etc Commencement 13 This Schedule has effect in relation to events taking place and transactions carried out on or after 1 July 2009. Transitional provision 14 (1) In its application in relation to an event taking place or a transaction carried out before 1 October 2009, paragraph 4(1) has effect as if it required any report under that provision to be made before 1 April 2010. (2) Any regulations under this Schedule that are made within the period of one year beginning on the day on which this Act is passed may be made so as to have effect from any time on or after 1 July 2009.

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SCHEDULE 19 Income tax credits for foreign distributions

Section 40 ITTOIA 2005 1 ITTOIA 2005 is amended as follows. 2 (1) Section 397A (tax credits for distributions of non-UK resident companies: UK residents and eligible non-UK residents) is amended as follows. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) In subsection (7), omit the definition of “minority shareholder”. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (1) Section 397C (meaning of “minority shareholder”) is amended as follows. (2) In subsection (1)— (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) omit “non-UK resident”. (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 In section 873 (orders and regulations), after subsection (3) insert— (4) Further, subsection (2) does not apply if any other Parliamentary procedure is expressly provided to apply in relation to the order or regulations. Consequential amendments of other Acts 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 In ICTA— (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) in section 840ZA(3)(b) (meaning of “tax advantage”), after “397(1)” insert “ or 397A(1) ”. 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 In ITA 2007— (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . for “397A(2)” substitute “ 397A(1) ”. Commencement 14 (1) The amendments made by this Schedule have effect in relation to— (a) qualifying distributions arising on or after 22 April 2009, (b) cash dividends paid over to a person under paragraph 68(4) of Schedule 2 of ITEPA 2003 on or after 22 April 2009, (c) dividends treated under section 407 of ITTOIA 2005 as paid to a person on or after 22 April 2009, and (d) manufactured overseas dividends that are representative of a distribution within paragraph (a), (b) or (c). (2) In this paragraph— “manufactured overseas dividend” has the same meaning as in Chapter 2 of Part 11 of ITA 2007; “qualifying distribution” has the meaning given in section 989 of ITA 2007. (3) Section 873(4) of ITTOIA 2005 (inserted by paragraph 8), so far as relating to any order or regulations made after the passing of FA 2016 under any provision of ITTOIA 2005 other than section 397BA of that Act, has effect as if sub-paragraph (1) did not apply in relation to it.

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SCHEDULE 20 Loan relationships: connected parties

Section 41 Introduction 1 Part 5 of CTA 2009 (loan relationships) is amended as follows. Section 374 2 (1) Section 374 (late interest: connection between debtor and person standing in position of creditor) is amended as follows. (2) In subsection (1)— (a) in paragraph (b), after “company” insert “ ( ”, and (b) insert at the end (not as part of paragraph (b))— “ and the condition in subsection (1A) is met. ” (3) After that subsection insert— (1A) The condition is that C is— (a) resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, or (b) effectively managed in a non-taxing non-qualifying territory at any such time. (4) Insert at the end— (3) For the purposes of this section— (a) “non-qualifying territory” has the meaning given by paragraph 5E of Schedule 28AA to ICTA, (b) a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management, and (c) “resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management. Sections 375 and 376 3 (1) Section 375 (late interest: loans to close companies by participators etc) is amended as follows. (2) In subsection (1), insert at the end (not as part of paragraph (b))— “ and, where subsection (4A) applies, the non-qualifying territory condition is met. ” (3) In subsections (3)(b) and (4)(b), after “resident” insert “ for tax purposes ”. (4) After subsection (4) insert— (4A) This subsection applies if C is a company; and the non-qualifying territory condition is that C is— (a) resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, or (b) effectively managed in a non-taxing non-qualifying territory at any such time. 4 (1) Section 376 (interpretation of section 375) is amended as follows. (2) In subsection (5), for the definition of “resident” substitute— “resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management, and . (3) Insert at the end— (6) For the purposes of section 375, a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management. Section 377 5 (1) Section 377 (late interest: party to loan relationship having major interest in other party) is amended as follows. (2) The existing provision becomes subsection (1) of that section. (3) In that subsection, omit the “and” at the end of paragraph (a) and insert at the end and (c) the condition in subsection (2) is met. (4) After that subsection insert— (2) The condition is that C is— (a) resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, or (b) effectively managed in a non-taxing non-qualifying territory at any such time. (3) For the purposes of this section— (a) “non-qualifying territory” has the meaning given by paragraph 5E of Schedule 28AA to ICTA, (b) a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management, and (c) “resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management. Section 407 6 (1) Section 407 (postponement until redemption of debits for connected companies' deeply discounted securities) is amended as follows. (2) In subsection (1)— (a) in paragraph (b), after “company” insert “ (“the creditor company” , (b) omit the “and” at the end of paragraph (d), and (c) insert at the end , and (f) the condition in subsection (1A) is met. (3) After that subsection insert— (1A) The condition is that the creditor company is— (a) resident for tax purposes in a non-qualifying territory at any time in the relevant period, or (b) effectively managed in a non-taxing non-qualifying territory at any such time. (4) Insert at the end— (6) For the purposes of this section— (a) “non-qualifying territory” has the meaning given by paragraph 5E of Schedule 28AA to ICTA, (b) a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management, and (c) “resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management. Sections 409 and 410 7 Section 409(1) (postponement until redemption of debits for close companies' deeply discounted securities)— (a) in paragraph (b), after “there is a person” insert “ ( ”, and (b) insert at the end (not as part of paragraph (d))— “ and, where it applies, the non-qualifying territory condition is met. ” 8 (1) Section 410 (interpretation of section 409) is amended as follows. (2) In subsections (3)(b) and (4)(b), after “resident” insert “ for tax purposes ”. (3) After subsection (4) insert— (4A) The non-qualifying territory condition applies if C is a company; and the non-qualifying territory condition is that C is— (a) resident for tax purposes in a non-qualifying territory at any time in the relevant period, or (b) effectively managed in a non-taxing non-qualifying territory at any such time. (4) In subsection (5), for the definition of “resident” substitute— “resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management, and . (5) After that subsection insert— (5A) For the purposes of this section, a non-qualifying territory is “non-taxing” if companies are not under its law liable to tax by reason of domicile, residence or place of management. Commencement and transitional provision 9 (1) The amendments made by this Schedule have effect where the actual accrual period (within the meaning of Chapter 8 of Part 5 of CTA 2009), or the relevant period (within the meaning of section 407(1) or 409(1) of that Act), begins on or after 1 April 2009. (2) But a company may elect that any or all of the amendments made by this Schedule do not have effect in relation to the first accounting period for which they would otherwise apply. (3) However, no election may be made under sub-paragraph (2) in relation to an accounting period ending after 31 March 2011. (4) An election under sub-paragraph (2) must be made in the corporation tax return for the accounting period in relation to which the election is to have effect.

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SCHEDULE 21 Foreign exchange: anti-avoidance

Section 43 Loan relationships 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivative contracts 4 Chapter 3 of Part 7 of CTA 2009 (derivative contracts: credits and debits to be brought into account) is amended as follows. 5 For the heading before section 606 (exchange gains and losses) substitute— “ Exchange gains and losses ”. 6 (1) Section 606 is amended as follows (2) In subsection (3), for paragraph (a) (together with the “and” at the end) substitute— (a) condition A or B is met, and . (3) In subsection (4), for the words from “so much” to “currency as” substitute an exchange gain or loss of a company so far as— (a) condition A is met, and (b) it . (4) After that subsection insert— (4A) Condition A is that the exchange gain or loss arises in relation to a derivative contract whose underlying subject matter consists wholly or partly of currency. (4B) Condition B is that the exchange gain or loss arises as a result of the translation from one currency to another of the profit or loss of part of the company's business. (4C) Subsection (4D) applies where— (a) condition A is met, and (b) the amount that is recognised in respect of the exchange gain or loss as mentioned in subsection (3)(b) (“the recognised gain or loss”) is not calculated by reference to spot rates of exchange. (4D) Where this subsection applies— (a) the recognised gain or loss is to be treated for the purposes of this Part as comprising two separate exchange gains or losses, namely— (i) an exchange gain or loss calculated by reference to spot rates of exchange, and (ii) a residual exchange gain or loss, and (b) subsections (3) and (4) do not have effect in relation to the residual exchange gain or loss. (5) After subsection (4D) (inserted by sub-paragraph (4) above) insert— (4E) Subsections (3) and (4) do not have effect to disapply subsection (1) in the case of an exchange gain arising in an accounting period of a company so far as— (a) the exchange gain arises in relation to a derivative contract whose underlying subject matter consists wholly or partly of currency, (b) the derivative contract is part of arrangements that have a one-way exchange effect in relation to the company in the accounting period (see section 606A), and (c) the arrangements cause the company or any other company to gain a tax advantage (other than a negligible tax advantage). 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Immediately before section 607 (pre-contract or abortive expenses) insert— “ Miscellaneous ”. Interpretation 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consequential revocation 10 The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2006 (S.I. 2006/843) are revoked. Commencement 11 (1) The amendments made by this Schedule have effect— (a) in relation to exchange gains and losses arising in accounting periods beginning on or after 22 April 2009, and (b) subject to the following provisions of this paragraph, in relation to exchange gains and losses arising in straddling accounting periods. (2) In this paragraph “straddling accounting period” means an accounting period that— (a) begins before 22 April 2009, and (b) ends on or after that date. (3) An exchange gain or loss that arises in a straddling accounting period in relation to— (a) an asset or liability representing a loan relationship, or (b) a derivative contract, is to be treated for the purposes of this paragraph as if it were made up of two amounts. (4) Those two amounts are the exchange gains or losses that would arise in relation to the loan relationship or derivative contract in— (a) that part of the period that falls before 22 April 2009, and (b) that part of the period that falls on or after that date, if those parts were separate accounting periods. (5) The amendments made by this Schedule have effect, in relation to an exchange gain or loss of the kind mentioned in sub-paragraph (3), as if the gain or loss were the amount determined in relation to it under sub-paragraph (4)(b).

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SCHEDULE 22 Offshore funds

Section 44 Part 1 Meaning of “offshore fund” FA 2008 1 FA 2008 is amended as follows. 2 Before section 41 (tax treatment of participants in offshore funds) insert— Meaning of “offshore fund” 40A (1) This section and sections 40B to 40G have effect for this group of sections. (2) “Offshore fund” means— (a) a mutual fund constituted by a body corporate resident outside the United Kingdom, (b) a mutual fund under which property is held on trust for the participants where the trustees of the property are not resident in the United Kingdom, or (c) a mutual fund constituted by other arrangements that create rights in the nature of co-ownership where the arrangements take effect by virtue of the law of a territory outside the United Kingdom (but see subsection (3)). (3) Subsection (2)(c) does not include a mutual fund constituted by two or more persons carrying on a trade or business in partnership. (4) “This group of sections” means this section and sections 40B to 42A. (5) References to participants in arrangements (or a fund) are to persons taking part in the arrangements (or the arrangements constituting the fund), whether by becoming the owner of, or of any part of, the property that is the subject of the arrangements or otherwise (and references to participation in arrangements or a fund, however expressed, are to be read accordingly). (6) In this section— “body corporate” does not include a limited liability partnership; “co-ownership” is not restricted to the meaning of that term in the law of any part of the United Kingdom. Meaning of “mutual fund” etc 40B (1) “Mutual fund” means arrangements with respect to property of any description, including money, that meet conditions A to C, subject to— (a) sections 40C and 40D, and (b) the exceptions made by or under sections 40E to 40G. (2) Condition A is that the purpose or effect of the arrangements is to enable the participants— (a) to participate in the acquisition, holding, management or disposal of the property, or (b) to receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income. (3) Condition B is that the participants do not have day-to-day control of the management of the property. (4) For the purpose of condition B a participant does not have day-to-day control of the management of property by virtue of having a right to be consulted or to give directions. (5) Condition C is that, under the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis calculated entirely, or almost entirely, by reference to— (a) the net asset value of the property that is the subject of the arrangements, or (b) an index of any description. (6) The Treasury may by regulations amend condition C. Umbrella arrangements 40C (1) In the case of umbrella arrangements— (a) each part of the umbrella arrangements is to be treated as separate arrangements (subject to section 40D), and (b) the umbrella arrangements are to be disregarded. (2) “Umbrella arrangements” means arrangements which provide for separate pooling of the contributions of the participants and the profits or income out of which payments are made to them. (3) References to a part of umbrella arrangements are to the arrangements relating to a separate pool. Arrangements comprising more than one class of interest 40D (1) Where there is more than one class of interest in arrangements (the “main arrangements”)— (a) the arrangements relating to each class of interest are to be treated as separate arrangements, and (b) the main arrangements are to be disregarded. (2) In relation to umbrella arrangements, “class of interest” does not include a part of the umbrella arrangements (but there may be more than one class of interest in a part of umbrella arrangements). Meaning of “mutual fund”: exceptions 40E (1) Arrangements are not a mutual fund if— (a) under the terms of the arrangements, a reasonable investor participating in the arrangements would expect to be able to realise all or part of an investment in the arrangements on a basis mentioned in condition C in section 40B only in the event of the winding up, dissolution or termination of the arrangements, and (b) condition X or Y is met. (2) Condition X is that the arrangements are not designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements. (3) Condition Y is that— (a) the arrangements are designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements, and (b) condition Y1, Y2 or Y3 is met. (4) Condition Y1 is that none of the assets that are the subject of the arrangements are relevant income-producing assets. (5) Condition Y2 is that, under the terms of the arrangements, the participants in the arrangements are not entitled to the income from the assets that are the subject of the arrangements or any benefit arising from such income. (6) Condition Y3 is that— (a) under the terms of the arrangements, after deductions for reasonable expenses, any income produced by the assets that are the subject of the arrangements is required to be paid or credited to the participants, and (b) a participant who is an individual resident in the United Kingdom would be charged to income tax on the amounts paid or credited. (7) Condition Y is not met if the arrangements are designed to produce a return for participants that equates, in substance, to the return on an investment of money at interest. (8) For the purposes of this section, the fact that arrangements provide for a vote or other action that may lead to the winding up, dissolution or termination of the arrangements does not, by itself, mean that the arrangements are designed to wind up, dissolve or terminate on a date stated in or determinable under the arrangements. Meaning of “relevant income-producing assets” 40F (1) “Relevant income-producing assets” means assets that produce income on which, if they were held directly by an individual resident in the United Kingdom, the individual would be charged to income tax (subject to the following provisions of this section). (2) An asset is not a relevant income-producing asset if the asset is hedged, provided that no income is expected to arise from— (a) the asset (taking account of the hedging), or (b) any product of the hedging arrangements. (3) Cash awaiting investment is not a relevant income-producing asset, provided that the cash, and any income that it produces while awaiting investment, is invested as soon as reasonably practicable in assets that are not relevant income-producing assets. Meaning of “mutual fund”: powers to vary exceptions 40G (1) The Treasury may by regulations amend or repeal any provision of section 40E or 40F. (2) The Treasury may by regulations provide that arrangements are not a mutual fund— (a) in specified circumstances, or (b) if they are of a specified description. (3) Regulations under this section may include provision having effect in relation to the tax year and accounting periods current on the day on which the regulations are made. 3 (1) Section 41 (tax treatment of participants in offshore funds) is amended as follows. (2) In subsection (2), omit the definition of “offshore fund” (and the “and” before it). (3) Omit subsections (3) to (9). 4 (1) Section 42 (regulations under section 41: supplementary) is amended as follows. (2) In subsection (2), for paragraphs (a) and (b) substitute— (a) an offshore fund comprising a part of umbrella arrangements, and (b) an offshore fund comprising arrangements relating to a class of interest in other arrangements (see section 40D). (3) In subsection (3), for the words from “may” to the end substitute , in particular— (a) repeal Chapter 5 of Part 17 of ICTA (offshore funds), and (b) make provision consequential on the repeal of provisions of that Chapter. (4) In subsection (4)(e), insert at the end “and savings”. (5) For subsection (5) substitute— (5) Regulations under section 41 may, in particular, provide for provisions to have effect in relation to the tax year, or accounting periods, current on the day on which the regulations are made. (6) In subsection (6), for “and “offshore fund” have” substitute “ has ”. 5 After that section insert— Regulations: procedure 42A (1) Regulations under this group of sections are to be made by statutory instrument. (2) The following regulations may not be made unless a draft of the instrument containing them has been laid before, and approved by a resolution of, the House of Commons— (a) regulations under section 40B(6), (b) regulations under section 40G(1), and (c) the first regulations under section 41(1). (3) A statutory instrument containing any other regulations under this group of sections is subject to annulment in pursuance of a resolution of the House of Commons, unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons. Restriction on regulation-making power under section 41 of FA 2008 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part 2 Application of TCGA 1992 to offshore funds TCGA 1992 7 TCGA 1992 is amended as follows. 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Accordingly, in the title of Part 3 and in the title of Chapter 3 of that Part, insert at the end “etc”. 10 In section 288(1) (interpretation), in the definition of “company”, for “section 99” substitute “ sections 99 and 103A ”. Consequential provision 11 (1) In TMA 1970, in— (a) section 25(9) (issuing houses, stockbrokers, auctioneers, etc), and (b) section 28(2) (non-resident companies and trusts), after “sections 99” insert “ , 103A ”. (2) In section 1165 of CTA 2010— (a) in subsection (1) for “section 99 of TCGA 1992 (application of that Act to unit trust schemes)” substitute “ sections 99 and 103A of TCGA 1992 (application of that Act to unit trust schemes and to certain offshore funds) ”, and (b) in subsection (3) for “section 99 of TCGA 1992” substitute “ sections 99 and 103A of TCGA 1992 ”. (3) In ITTOIA 2005— (a) in section 149(4) (taxation of amounts taken to reserves), at the end of paragraph (b) (before the “and”) insert— (ba) rights of participants in certain offshore funds to which TCGA 1992 applies as a result of section 103A of TCGA 1992, , and (b) in section 150(8) (conversion etc of securities held as circulating capital), after paragraph (c) insert— (ca) rights of participants in certain offshore funds to which TCGA 1992 applies as a result of section 103A of TCGA 1992, . (4) In section 834(5) of the Companies Act 2006 (investment company: condition as to holdings in other companies), in the definition of “company” and “shares”, after “sections 99” insert “ , 103A ”. (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commencement: general 12 (1) The amendments made by this Part of this Schedule have effect in relation to the acquisition, holding and disposal of rights in a relevant offshore fund on or after the commencement day, subject to paragraphs 13 and 15. (2) In this paragraph and paragraphs 15 to 18 “the commencement day” means— (a) in relation to the acquisition, holding and disposal of rights by a person subject to the charge to capital gains tax, 1 December 2009, and (b) in relation to the acquisition, holding and disposal of rights by a person subject to the charge to corporation tax, such day as the Treasury may by order appoint. Commencement: certain consequential amendments 13 (1) The amendment made by sub-paragraph (1)(a) of paragraph 11 comes into force on 1 December 2009 (and has effect as if section 103A of TCGA 1992 had effect from that date in relation to the issue, placing, acquisition, holding and disposal of rights in relevant offshore funds by any person). (2) The amendments made by sub-paragraphs (2), (4) and (5) of paragraph 11 come into force in accordance with an order made by the Treasury. Commencement orders 14 (1) An order under paragraph 12(2)(b) or 13(2)— (a) may make different provision for different cases or different purposes, and (b) may include transitional provision and savings. (2) Section 1171(4) of CTA 2010, section 287(3) of TCGA 1992 and section 1014(4) of ITA 2007 (orders etc subject to annulment) do not apply in relation to such an order. Election modifying commencement 15 (1) This paragraph applies if a person makes an election— (a) for capital gains tax purposes, in respect of a relevant tax year, or (b) for corporation tax purposes, in respect of a relevant accounting period. (2) The amendments made by this Part of this Schedule (other than the amendments made by paragraph 11(1)(a), (2), (4) and (5)) have effect, and are to be treated as always having had effect, in relation to the acquisition, holding and disposal by the person of rights in a relevant offshore fund on or after the first day of that tax year or accounting period (“the election day”). (3) Sub-paragraph (4) applies if, in respect of any time on or after the election day but before the commencement day, the relevant offshore fund was not certified as a distributing fund under Part 3 of Schedule 27 to ICTA (distributing funds: certification procedure). (4) The acquisition, holding or disposal by the person of rights in the fund at that time is to be treated as the acquisition, holding or disposal of rights in an offshore fund that is so certified. (5) In this paragraph and paragraph 16— “relevant accounting period” means an accounting period beginning on or after 1 April 2003 but before the day appointed under paragraph 12(2)(b); “relevant tax year” means the tax year 2003-04 and any subsequent tax year up to and including the tax year 2009-2010. Making an election 16 (1) An election under paragraph 15 must be made— (a) for capital gains tax purposes, by being included in a relevant return under TMA 1970, and (b) for corporation tax purposes, by being included in a relevant company tax return. (2) A return under TMA 1970 is relevant if it is for— (a) the tax year in respect of which the election is made, or (b) a subsequent relevant tax year. (3) A company tax return is relevant if it is for— (a) the accounting period in respect of which the election is made, or (b) a subsequent relevant accounting period. (4) The references in sub-paragraph (1) to an election being included in a return include an election being included by virtue of an amendment of the return. (5) An election under paragraph 15 is irrevocable. Giving effect to elections 17 If, in order to give effect to an election under paragraph 15, any adjustments are required, whether by the discharge or repayment of tax, the making of assessments or otherwise— (a) the adjustments must be made, and (b) any time limit for making the adjustments is to be disregarded. Modification of acquisition cost 18 (1) This paragraph applies where a participant in a relevant offshore fund— (a) holds rights in a relevant offshore fund immediately before the effective date, and (b) disposes of those rights on or after that date. (2) For the purposes of TCGA 1992 the participant is to be treated as if the acquisition cost for those rights were the pre-commencement acquisition cost. (3) “The effective date” means— (a) if the participant has made an election under paragraph 15, the election day, or (b) otherwise, the commencement day. (4) “Acquisition cost” means the total of the consideration, costs and expenditure described in section 38(1)(a) and (b) of TCGA 1992 (acquisition and disposal costs etc). (5) “Pre-commencement acquisition cost” means the total of the consideration, costs and expenditure that would have been allowable as a deduction under section 38(1)(a) and (b) of TCGA 1992 if the participant had disposed of the rights immediately before the effective date.

Propose a change

SCHEDULE 23 Insurance companies

Section 46 Transfer from non technical account not to be receipt 1 (1) In section 83 of FA 1989 (receipts to be taken into account), after subsection (2) insert— (2AZA) No amount shown as transfer from non technical account in line 32 of Form 58 in respect of the whole of the company's long-term business in the periodical return for a period of account is to be taken into account as a receipt of the period of account. (2) The amendment made by sub-paragraph (1) has effect in relation to periods of account ending on or after 22 April 2009. (3) But, in relation to a period of account of a company beginning before that date, that amendment has effect only insofar as the amount shown as transfer from non technical account in line 32 of Form 58 covering the whole of the company's long-term business in the periodical return for the period of account is attributable to transfers made on or after that date. No deduction for capital allocations to with-profits policy holders 2 (1) In section 82 of FA 1989 (calculation of profits), after subsection (2) insert— (2A) But amounts are not allowed as such a deduction if they— (a) are allocated to holders of policies under which they are eligible to participate in surplus, (b) are of a capital nature, and (c) are not funded from amounts brought into account as part of total income in line 19 of the revenue account prepared for the purposes of Chapter 9 of the Prudential Sourcebook (Insurers) in respect of the whole of the company's long-term business. (2B) For the purposes of subsection (2A) above payments made in connection with the reattribution of inherited estate are to be regarded as being of a capital nature. (2) The amendment made by sub-paragraph (1) has effect in relation to amounts allocated on or after 22 April 2009 to holders of policies under which they are eligible to participate in surplus. Limits on loss relief for addition to non-profit funds 3 (1) In ICTA, after section 434A insert— Reduced loss relief for additions to non-profit funds 434AZA (1) Where this section applies in the case of a company carrying on life assurance business, relief allowable under section 393A or Chapter 4 of Part 10 in respect of losses incurred by the company in the life assurance business in an accounting period is reduced in accordance with section 434AZB. (2) This section applies in the case of a company where— (a) there has been a relevant addition to one or more non-profit funds in a period of account ending no later than the accounting period (“the relevant period of account”) (see subsection (3)), (b) the company is not a non-profit company in relation to the relevant period of account and has not elected under subsection (9) of section 83YA of the Finance Act 1989 to be treated for the purposes of that section as if it were, and (c) condition A or B is met, and, if the relevant period of account is not the period of account ending with the accounting period (“the current period of account”), condition C is also met. (3) For the purposes of subsection (2), there is a relevant addition to a non-profit fund in the relevant period of account if an amount is shown as a transfer from non-technical account in line 32 of the Form 58 of the non-profit fund in the periodical return for that period of account. (4) Condition A is that there is a relevant book value election in relation to assets of a non-profit fund of the company. (5) For the purposes of subsection (4), there is a relevant book value election in relation to assets of a non-profit fund if an amount is shown in relation to the non-profit fund as the excess of the value of net admissible assets in line 51 of the Form 14 of the non-profit fund in the periodical return for the current period of account. (6) Condition B is that the company is party to arrangements the main purpose, or one of the main purposes, of which is to reduce the relevant admissible value of assets of a non-profit fund of the company, other than any structural assets. (7) For the purposes of subsection (6) (and section 434AZB), the “relevant admissible value” means the value reflected in line 89 of Form 13 of the periodical return for the current period of account. (8) Condition C is that the surplus arising since the last valuation shown in line 34 of the Form 58 of the non-profit fund, or any of the non-profit funds, in relation to which condition A or B is met in the periodical return for the current period of account is a negative amount. Additions to non-profit funds: amount of loss reduction 434AZB (1) The amount of the relief allowable as mentioned in section 434AZA(1) is reduced by whichever of the following is the least— (a) the amount of the loss, (b) the amount specified in subsection (2), and (c) the amount specified in subsection (4). (2) The amount mentioned in subsection (1)(b) is— (a) where only condition A in section 434AZA is met, the relevant amount relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant amounts relating to them, (b) where only condition B is met, the amount of the relevant reduction relating to the non-profit fund in relation to which it is met or (where it is met in relation to more than one non-profit fund) the sum of the relevant reductions relating to them, and (c) where both condition A and condition B are met, the aggregate of the amounts in paragraphs (a) and (b). (3) In subsection (2)— (a) “relevant amount”, in relation to a non-profit fund, means the amount shown in relation to the non-profit fund as the excess of the value of net admissible assets in line 51 of the Form 14 of the non-profit fund in the periodical return for the current period of account (as reduced by any amount which has had effect to reduce relief for losses for a previous accounting period), and (b) “relevant reduction”, in relation to a non-profit fund, means the reduction of the relevant admissible value of assets of the non-profit fund (other than structural assets) which is attributable to the arrangements (as so reduced). (4) The amount mentioned in subsection (1)(c) is— (a) if the relevant period of account is the current period of account, the amount referred to in section 434AZA(3) in the case of the non-profit fund, or of each of the non-profit funds, to which there has been a relevant addition in the relevant period of account, and (b) otherwise, so much of the amount shown in line 31 of the Form 58 of the non-profit fund or non-profit funds in the periodical return for the current period of account as is attributable to the amount so referred to. Sections 434AZA and 434AZB: supplementary 434AZC (1) For the purposes of sections 434AZA and 434AZB, a non-profit fund required to support a with-profits fund is to be treated as not being a non-profit fund. (2) Sections 434AZA and 434AZB apply to a non-profit part of a with-profits fund as if references to something shown in the Form 14 or Form 58 of the non-profit fund in a periodical return were to what would be so shown if there were a Form 14 or Form 58 of the non-profit part of the with-profits fund in the periodical return. (3) In sections 434AZA and 434AZB— “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and “structural assets” has the same meaning as in section 83XA of the Finance Act 1989 (see subsection (3) of that section and any regulations made under it). (2) The amendment made by sub-paragraph (1) has effect in relation to accounting periods ending on or after 22 April 2009 unless— (a) to the extent that section 434AZA would otherwise apply because condition A in that section is met in relation to a non-profit fund, the relevant addition to the non-profit fund was made before that date, or (b) to the extent that section 434AZA would otherwise apply because condition B in that section is so met, the relevant addition to the non-profit fund and the arrangements were both made before that date. FAFTS and contingent loans 4 (1) In paragraph 4(5) of Schedule 17 to FA 2008 (financing-arrangement-funded transfers: companies with unrepaid contingent loan liabilities before first period of account beginning on or after 1 January 2008), in the definition of “R”, after “(7)(a) of that section” insert “ in respect of amounts brought into account as transfers to non-technical account for periods of account beginning on or after 1 January 2008 ”. (2) The amendment made by sub-paragraph (1) has effect in relation to periods of account beginning on or after 1 January 2008. Apportionment: foreign business assets 5 (1) Section 432E of ICTA (section 432B apportionment: participating funds) is amended as follows. (2) In subsection (3)(a), omit “and foreign business assets”. (3) In subsection (4), in the definition of “A”, omit “and foreign business assets”. (4) In subsection (4A), omit “or foreign business assets”. 6 In consequence of the amendments made by paragraph 5, omit— (a) paragraph 19(4)(a) and (6) of Schedule 7 to FA 2007, and (b) paragraph 10(3)(c) of Schedule 17 to FA 2008. 7 (1) The amendments made by paragraphs 5 and 6 have effect in relation to periods of account beginning on or after 1 January 2009 and ending on or after 22 April 2009. (2) But an insurance company may, in its company tax return for— (a) an accounting period beginning on or after 1 January 2008 but before 1 January 2009, or (b) an accounting period beginning on or after 1 January 2009 and ending before 22 April 2009, elect that the amendments made by paragraphs 5 and 6 have effect in relation to that accounting period. Value shifting attributable to transfer of business 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Propose a change

SCHEDULE 24 Disguised interest

Section 48 Amendments of Part 6 of CTA 2009 1 Part 6 of CTA 2009 (relationships treated as loan relationships etc) is amended as follows. 2 (1) Section 477(2) (overview of Part 6) is amended as follows. (2) After paragraph (a) insert— (aa) Chapter 2A (disguised interest), . (3) For paragraph (f) substitute— (f) Chapter 6A (shares accounted for as liabilities), . 3 After Chapter 2 insert— Chapter 2A Disguised interest Overview 486A (1) This Chapter provides for Part 5 to apply in relation to returns which are economically equivalent to interest (see section 486B). (2) For exclusions from this Chapter, see— (a) section 486C (return otherwise taxable), (b) section 486D (arrangement having no tax avoidance purpose), and (c) section 486E (excluded shares). Disguised interest to be regarded as profit from loan relationship 486B (1) Where a company is party to an arrangement which produces for the company a return in relation to any amount which is economically equivalent to interest, Part 5 applies as if the return were a profit arising to the company from a loan relationship. (2) For the purposes of this Chapter a return produced for a company by an arrangement in relation to any amount is “economically equivalent to interest” if (and only if)— (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. (3) In subsection (2)(c) “the relevant time” means the time when the company becomes party to the arrangement or, if later, when the arrangement begins to produce a return for the company. (4) The credits and debits to be brought into account for the purposes of Part 5 in respect of the return must be determined on an amortised cost basis of accounting. (5) But if any of the return is not recognised in determining the company's profit or loss for any period it is to be treated as recognised using an amortised cost basis of accounting. (6) Where two or more persons are party to an arrangement which produces a return such as is mentioned in subsection (1)— (a) for the persons (when taken together), but (b) not for either (or any) of them individually, this section applies as if there were a profit arising to such (if any) of them as are companies from a loan relationship of so much of the return as is just and reasonable. (7) The only amounts which may be brought into account for corporation tax purposes in relation to a return such as is mentioned in subsection (1) in the case of any company are those which are brought into account in accordance with this section (but see section 486C). (8) In subsection (4) “credits” and “debits” include exchange gains and losses arising as a result of translating at different times the carrying value of the return or the amount by reference to which the return falls to be produced. (9) In this Chapter “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), other than one which constitutes a finance lease (within the meaning given by section 219 of CAA 2001). Exclusion where return otherwise taxable 486C (1) This Chapter does not apply to an arrangement which produces a return for a company if or to the extent that the return— (a) is charged to corporation tax as income of the company or brought into account as income of the company for corporation tax purposes no later than the time when amounts are brought into account in relation to the return in accordance with section 486B, (b) arises from anything that would produce credits or debits in relation to the company under Part 7 (derivative contracts) or Part 8 (intangible fixed assets) but for any exception relating to particular credits or debits, or (c) arises from anything that would produce credits or debits in relation to the company under Part 5 apart from this Chapter but for any exception relating to particular credits or debits. (2) Subsection (1)(b) does not disapply this Chapter in the case of a return in relation to which section 641 (derivative contracts taxed on chargeable gains basis) applies. Exclusion where arrangement has no tax avoidance purpose 486D (1) This Chapter does not apply in relation to a return produced by an arrangement to which a company is a party unless it is reasonable to assume that the main purpose, or one of the main purposes, of the company being a party to the arrangement is to obtain a relevant tax advantage. (2) But a company for which a return is produced by an arrangement to which this Chapter would otherwise be prevented from applying by subsection (1) may elect that this Chapter is to apply in relation to the return. (3) An election under subsection (2)— (a) may not be made by a company if section 486B applies to the company in relation to the return in accordance with subsection (6) of that section, (b) must be made no later than the time when the arrangement begins to produce a return for the company, and (c) is irrevocable. (4) In this section “obtain a relevant tax advantage” means secure that the return (or any part of it) is produced in a way which means that its treatment for corporation tax purposes is more advantageous to the company than it would be if it were— (a) charged to corporation tax as income of the company, or (b) brought into account as income of the company for corporation tax purposes, at the time when amounts would be brought into account in relation to the return in accordance with section 486B. (5) Nothing in this section applies in relation to a company for an accounting period if the company is an excluded controlled foreign company. (6) For this purpose a company is an excluded controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA)— (a) are apportioned for the accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or (b) are not so apportioned because of section 748(1) of that Act. Excluded shares 486E (1) This Chapter does not apply in relation to an accounting period (“the relevant accounting period”) of a company (“the holding company”) for which an arrangement produces a return for the company if the arrangement involves only relevant shares held by the company throughout the relevant period. (2) In this section “the relevant period” means the period— (a) beginning with the later of— (i) the time when the holding company becomes party to the arrangement, and (ii) the time when the arrangement begins to produce a return for the company, and (b) ending with the earliest of— (i) the end of the relevant accounting period, (ii) the time when the holding company ceases to be party to the arrangement, and (iii) the time when the arrangement ceases to produce a return for the company. (3) For the purposes of this section an arrangement “involves only” relevant shares if (and only if) the return produced reflects only an increase in the fair value of the shares. (4) For the purposes of subsection (3)— (a) “fair value”, in relation to relevant shares held by the holding company, means an amount which the company would obtain from a knowledgeable and willing purchaser of the shares dealing at arm's length, and (b) there is an increase in the fair value of shares even if the increase is realised by the payment of a distribution in respect of the shares. (5) In this section “relevant shares” means shares which, throughout the relevant period, are— (a) fully paid-up shares of a relevant company, or (b) shares of a company, other than a relevant company, which would be accounted for as a liability by the company in which they are shares in accordance with generally accepted accounting practice and which produce for the holding company a return in relation to any amount which is economically equivalent to interest (as to which see Chapter 6A). (6) For the purposes of subsection (5)(a) shares are fully paid-up if there are no actual or contingent obligations— (a) to meet unpaid calls on the shares, or (b) to make a contribution to the capital of the company in which they are shares that could affect the value of the shares. (7) For the purposes of subsection (5) a company is “a relevant company” if— (a) it and the holding company are connected companies, (b) it is a relevant joint venture company, or (c) it is a relevant controlled foreign company. (8) Section 466 (companies connected for an accounting period) applies for the purposes of subsection (7)(a). (9) For the purposes of subsection (7)(b) a company is a relevant joint venture company if— (a) the holding company is one of two persons who, taken together, control it, (b) the holding company is a person in whose case the 40% test in section 755D(3) of ICTA is satisfied, and (c) the other is a person in whose case the 40% test in section 755D(4) of ICTA is satisfied. (10) Section 755D of ICTA (meaning of “control” etc) applies for the purposes of subsection (9)(a) as for those of Chapter 4 of Part 17 of that Act (controlled foreign companies), except that no rights and powers are attributed to a person by subsection (6)(c) or (d) of that section. (11) For the purposes of subsection (7)(c) a company is a relevant controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA)— (a) are apportioned to the holding company for the relevant accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or (b) are not so apportioned because of section 748(1) or (3) of that Act. (12) Section 550(3) (repos: ignoring effect on borrower of sale of securities) does not apply for the purposes of this section. 4 After Chapter 6 insert— Chapter 6A Shares accounted for as liabilities Introduction to Chapter 521A (1) This Chapter contains rules for Part 5 (and the other provisions of the Corporation Tax Acts) to apply in some cases as if at some times in the accounting period of a company (“A”) which holds shares of a certain kind in another company (“B”) the shares were rights under a creditor relationship of A. (2) See, in particular— (a) section 521B (application of Part 5 to some shares as rights under creditor relationship), and (b) section 521C (which describes the shares to which the rules apply). (3) In this Chapter references to the investing company are to A and references to the issuing company are to B. (4) For the purposes of this Chapter, the definition of “share” in section 476(1) only applies so far as it provides that “share” does not include a share in a building society. (5) Section 550(3) (repos: ignoring effect on borrower of sale of securities) does not apply for the purposes of this Chapter. (6) See section 116B of TCGA 1992 for the effect for chargeable gains purposes of shares beginning or ceasing to be shares to which section 521C applies. Application of Part 5 to certain shares as rights under creditor relationship 521B (1) This section applies in relation to the times in a company's accounting period when— (a) the company holds a share in another company, and (b) section 521C (shares accounted for as liabilities) applies to the share. (2) Part 5 (and the other provisions of the Corporation Tax Acts) apply as if at those times— (a) the share were rights under a creditor relationship of the investing company, and (b) any distribution in respect of the share were not a distribution (and accordingly is within Part 5). (3) Where Part 5 applies in relation to the investing company in accordance with subsection (2) it so applies as if the issuing company stood in the position of debtor as respects the debt in question. (4) No debits are to be brought into account by the investing company as respects the share but this does not affect debits to be brought into account in respect of exchange gains or losses. (5) Subsection (2)(b) does not affect the operation of Part 1 of Schedule 25 of ICTA (controlled foreign companies: acceptable distribution policy) (including as it continues to have effect in accordance with paragraph 8(1) of Schedule 16 to FA 2009). (6) In this Chapter references to “the share” are to the share mentioned in subsection (1). Shares accounted for as liabilities 521C (1) This section applies to the share if— (a) the share would be accounted for by the issuing company as a liability in accordance with generally accepted accounting practice, (b) the share produces for the investing company a return in relation to any amount which is economically equivalent to interest, (c) the issuing company and the investing company are not connected companies, (d) the condition in subsection (4) is met, (e) the share is not an excepted share (see section 521D), and (f) the investing company holds the share for an unallowable purpose (see section 521E). (2) For the purposes of this section a return produced for a company by an arrangement in relation to any amount is “economically equivalent to interest” if (and only if)— (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. (3) In subsection (2)(c) “the relevant time” means the time when the investing company first holds the share or, if later, when the share begins to produce a return for the investing company. (4) The condition mentioned in subsection (1)(d) is that the share does not fall to be treated for the accounting period in question as if it were rights under a creditor relationship of the investing company because of section 490 (holdings in OEICs, unit trusts and offshore funds treated as creditor relationship rights). (5) Section 466 (companies connected for an accounting period) applies for the purposes of this section. Excepted shares 521D (1) A share is an excepted share for the purposes of section 521C if it is— (a) a qualifying publicly-issued share (see subsection (2)), or (b) a share which mirrors a public issue (see subsections (3) and (4)). (2) A share is a “qualifying publicly-issued share” if— (a) it was issued by a company as part of an issue of shares to persons not connected with the company, and (b) less than 10% of the shares in that issue are held by the investing company or persons connected with it. (3) The first case where shares (“the mirroring shares”) mirror a public issue is where— (a) a company (“company A”) issues shares (“the public issue”) to persons not connected with the company, (b) within 7 days of that issue, one or more other companies (“companies BB”) issue the mirroring shares to company A on the same terms as the public issue or substantially the same terms, (c) company A and companies BB are associated companies (see subsection (5)), and (d) the total nominal value of the mirroring shares does not exceed the nominal value of the public issue. (4) The second case where shares (“the second level mirroring shares”) mirror a public issue is where, in the circumstances of the first case— (a) within 7 days of the public issue, one or more other companies (“companies CC”) issue the second level mirroring shares to one or more of companies BB on the same terms as the public issue or substantially the same terms, (b) company A, companies BB and companies CC are associated companies (see subsection (5)), and (c) the total nominal value of the second-level mirroring shares does not exceed the nominal value of the public issue. (5) For the purposes of subsections (3) and (4) companies are associated companies if they are members of the same group of companies for the purposes of Chapter 4 of Part 10 of ICTA (group relief) (see section 413(3)(a) of that Act). Unallowable purpose 521E (1) For the purposes of section 521C, the investing company holds the share for an unallowable purpose if the main purpose, or one of the main purposes for which the company holds the share is to obtain a relevant tax advantage. (2) But the investing company may elect that this Chapter is to apply in relation to the share even though it would otherwise be prevented from applying by subsection (1)(f) of that section. (3) An election under subsection (2)— (a) must be made no later than the time when the investing company first holds the share or, if later, when the share begins to produce a return for the investing company, and (b) is irrevocable. (4) In this section “obtain a relevant tax advantage” means secure that the return produced by the share (or any part of it) is received in a way that means that its treatment for corporation tax purpose is more advantageous to the investing company than it would be if it were— (a) charged to corporation tax as income of the investing company, or (b) brought into account as income of the investing company for corporation tax purposes, at the time when amounts would be brought into account in relation to the return in accordance with section 521B. (5) Nothing in this section applies in relation to the investing company for an accounting period if it is an excluded controlled foreign company. (6) For this purpose the investing company is an excluded controlled foreign company if any of its chargeable profits (within the meaning of Chapter 4 of Part 17 of ICTA)— (a) are apportioned for the accounting period in accordance with section 752 of ICTA by virtue of section 747(3) of that Act, or (b) are not so apportioned because of section 748(1) of that Act. Shares becoming or ceasing to be shares to which section 521B applies 521F (1) This section applies if at any time section 521B begins or ceases to apply in the case of a share held by the investing company. (2) The investing company is treated for the purposes of Part 5— (a) as having disposed of the share immediately before that time for consideration of an amount equal to the notional carrying value of the share at that time, and (b) as having immediately reacquired it for consideration of the same amount. (3) In subsection (2) “notional carrying value”, in relation to the share, means the amount which would have been its carrying value in the accounts of the investing company if a period of account had ended immediately before section 521B began or ceased to apply in the case of the share and the investing company. (4) For the purposes of subsection (3) “carrying value” has the same meaning as it has for the purposes of section 316 (see section 317). Amendments and repeals 5 (1) Section 116B of TCGA 1992 (shares beginning or ceasing to be shares to which section 523 of CTA 2009 applies) is amended as follows. (2) In subsection (1) and the heading, for “522” substitute “ 521B ”. (3) In subsection (1)(b), for “its fair value” substitute “ the notional carrying value of the share ”. (4) In subsection (2), for the definition of “fair value” substitute— “notional carrying value” has the same meaning as in subsection (2) of section 521F of CTA 2009 (see subsection (3) of that section), . (5) In that subsection, in the definition of “investing company”— (a) for “7” substitute “ 6A ”, and (b) for “with guaranteed returns) (see section 522(3)” substitute “ accounted for as liabilities) (see section 521A(3) ”. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (1) Schedule 4 to CTA 2009 (index of expressions) is amended as follows. (2) After the entry relating to “approved, approval (in relation to a share incentive plan) (in Chapter 1 of Part 11)” insert— arrangement (in Chapter 2A of Part 6) | section 486B(9) . (3) Omit the entry relating to “the associated transactions condition (in Chapter 7 of Part 6)”. (4) After the entry relating to “effective 51% subsidiary (in Part 8)” insert— economically equivalent to interest (in Chapter 2A of Part 6) | section 486B(2) . (5) For the entry relating to “the investing company (in Chapter 7 of Part 5)” substitute— the investing company (in Chapter 6A of Part 6) | section 521A(3) . (6) For the entry relating to “the investing company (in Chapter 7 of Part 5)” substitute— the issuing company (in Chapter 6A of Part 6) | section 521A(3) . (7) Omit the entries relating to “the increasing value condition (in Chapter 7 of Part 6)” and “the redemption return condition (in Chapter 7 of Part 6)”. (8) In the entry relating to “share (in Part 5 and in Part 6 except for Chapter 7 of that Part)”, for “7” substitute “ 6A ”. (9) For the entries relating to “share (in Chapter 7 of Part 6)” and “the share (in Chapter 7 of Part 6) substitute— share (in Chapter 6A of Part 6) | section 521A(4) the share (in Chapter 6A of Part 6) | section 521B(6) . Repeals 8 In consequence of the amendments made by this Schedule, omit— (a) in ICTA— (i) section 736C (deemed interest: cash collateral under stock lending arrangement), and (ii) section 736D (quasi-stock lending arrangements and quasi-cash collateral), (b) in FA 2004, sections 131 to 133 (companies in partnership), and (c) in CTA 2009— (i) Chapter 7 of Part 6 (shares with guaranteed returns etc), (ii) Chapter 8 of that Part (returns from partnerships), and (iii) section 547 (repo under arrangement designed to produce quasi-interest: tax avoidance). 9 Omit the following provisions (which relate to the provisions repealed by paragraph 8)— (a) in ICTA, sections 736B(4) and 807A(2B), (b) in TCGA 1992, section 171(3A), (c) in F(No.2)A 2005, in Schedule 7, paragraphs 5 and 9, (d) in FA 2006, in Schedule 6, paragraphs 3 and 4, (e) in ITA 2007, in Schedule 1, paragraphs 172 and 373, and (f) in CTA 2009, in Schedule 1, paragraphs 215 and 571. 10 In section 542(2) of CTA 2009 (introduction to Chapter 10 of Part 6), for “547” substitute “ 546 ”. Commencement 11 The amendments made by paragraphs 2(2) and 3 have effect in relation to any arrangement which produces for a company a return which is economically equivalent to interest if the company becomes a party to the arrangement on or after 22 April 2009. 12 The amendments (and repeals) made by paragraphs 2(3) and 4 to 10 come into force on 22 April 2009. 13 (1) This paragraph applies where any of the provisions repealed by paragraph 8 applies in relation to anything done by a company before 22 April 2009 which amounts to becoming party to an arrangement (within the meaning given by section 486B(9) of CTA 2009). (2) The company is to be treated for the purposes of Chapter 2A of Part 6 of CTA 2009 as having become a party to the arrangement on that date. (3) But this paragraph does not apply in circumstances in which paragraph 15 does. 14 (1) This paragraph applies where Chapter 7 of Part 6 of CTA 2009 applies in relation to a share held by a company immediately before 22 April 2009. (2) Section 116B(1) of TCGA 1992 is to be treated as applying as if section 523 of CTA 2009 ceased to apply in relation to the share on that date. (3) But this paragraph does not apply if paragraph 15 applies in relation to the share and the company. 15 (1) This paragraph applies where— (a) Chapter 7 of Part 6 of CTA 2009 applies in relation to a share held by a company immediately before 22 April 2009 by reason of the redemption return condition being met (see section 529 of that Act) (or would so apply but for the share not being designed to produce a return which equates in substance to the return on an investment of money at a commercial rate of interest), and (b) section 521B of CTA 2009 applies in relation to the share and the company on 22 April 2009. (2) Part 5 of CTA 2009 applies as if the company had acquired the share on 22 April 2009 for an amount equal to the notional carrying value of the share on that date. (3) In sub-paragraph (2) “notional carrying value” has the same meaning as in section 521F(2) of CTA 2009 (see subsection (3) of that section). (4) Section 521F of CTA 2009 does not apply by virtue of the coming into force of section 521B of that Act. 16 An election under— (a) section 486D(2) of CTA 2009, or (b) section 521E(2) of that Act, relating to a return which begins to be produced before 1 August 2009 can be made at any time before that date but only in relation to any return produced on or after the day on which the election is made.

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SCHEDULE 25 Transfers of income streams

Section 49 Part 2 Non-corporate transferors 7 In ITA 2007, after section 809 insert— Chapter 5A Transfers of income streams Application of Chapter 809AZA (1) This Chapter applies where— (a) a person within the charge to income tax (“the transferor”) makes a transfer to another person (“the transferee”) of a right to relevant receipts (see subsection (2)), and (b) (subject to subsection (3)) the transfer of the right is not a consequence of the transfer to the transferee of an asset from which the right to relevant receipts arises. (2) “Relevant receipts” means any income— (a) which (but for the transfer) would be charged to income tax as income of the transferor, or (b) which (but for the transfer) would be brought into account in calculating profits of the transferor for the purposes of income tax. (3) Despite paragraph (b) of subsection (1), this Chapter applies if the transfer of the right is a consequence of the transfer to the transferee of all rights under an agreement for annual payments; and for the purposes of that paragraph the transfer of an asset under a sale and repurchase agreement is not to be regarded as a transfer of the asset. (4) Section 809AZB makes provision as to the consequences of this Chapter applying. (5) For exclusions from this Chapter, see— (a) section 809AZC (amount otherwise taxed), (b) section 809AZD (certain annuities), and (c) section 809AZE (transfer by way of security). (6) Section 809AZF makes special provision about transfers of partnership shares. (7) Section 809AZG contains supplementary provisions. Value of transferred income stream treated as income 809AZB (1) The relevant amount (see subsection (2)) is to be treated as income of the transferor chargeable to income tax in the same way and to the same extent as that in which the relevant receipts— (a) would have been chargeable to income tax, or (b) would have been brought into account in calculating any profits for the purposes of income tax, but for the transfer of the right to relevant receipts. (2) The relevant amount is— (a) (except where paragraph (b) applies) the amount of the consideration for the transfer of the right, or (b) where the amount of any such consideration is substantially less than the market value of the right at the time when the transfer takes place (or where there is no consideration for the transfer of the right), the market value of the right at that time. (3) The income under subsection (1) is to be treated as arising in the chargeable period of the transferor in which the transfer takes place. (4) But subsection (5) applies if (apart from the transfer) any of the relevant receipts— (a) would have been brought into account in accordance with Part 2 or 3 of ITTOIA 2005 (trading income and property income) in calculating any profits for the purposes of income tax, and (b) in accordance with generally accepted accounting practice, would have been recognised otherwise than wholly in the chargeable period in which the transfer takes place. (5) If this subsection applies, the income under subsection (1) is to be treated as arising— (a) to the extent that it does not exceed the amount of the consideration for the transfer of the right, in the chargeable period or periods for which, in accordance with generally accepted accounting practice, the consideration for the transfer is recognised for accounting purposes in a profit and loss account or income statement of the transferor, and (b) otherwise, in the chargeable period or periods for which, in accordance with generally accepted accounting practice, the consideration for the transfer would be so recognised if it were of an amount equal to the market value of the right at the time when the transfer takes place. (6) But if in a case where the transferor is a company it at any time becomes reasonable to assume that the income (to any extent) is not, or would not be, treated by subsection (5) as arising in an accounting period of the transferor, the income is to that extent to be treated as arising immediately before that time. Exception: amount otherwise taxed 809AZC This Chapter does not apply if and to the extent that the income under section 809AZB(1) is (apart from this Chapter)— (a) charged to tax as income of the transferor, (b) brought into account in calculating the profits of the transferor, or (c) brought into account under CAA 2001. Exception: certain annuities 809AZD This Chapter does not apply to a transfer of a right to— (a) annual payments under a life annuity as defined in section 473(2) of ITTOIA 2005, or (b) annual payments under an annuity which is pension income within the meaning of Part 9 of ITEPA 2003 (see section 566(2) of that Act). Exception: transfer by way of security 809AZE This Chapter does not apply if the consideration for the transfer is the advance under an arrangement that is a structured finance arrangement for the purposes of section 774A or 774C of ICTA in relation to the transferor or a partnership in which the transferor is a partner. Partnership shares 809AZF (1) For the purposes of this Chapter a transfer of a right to relevant receipts consisting of the reduction in a transferor's share in the profits or losses of a partnership is to be regarded as a consequence of a transfer of an asset from which the right arose (that is, the partnership property) if condition A or B is met. (2) Condition A is that there is a reduction of the transferor's share in the partnership property and the reduction in the transferor's share in the profits or losses is proportionate to that reduction. (3) Condition B is that it is not the main purpose, or one of the main purposes, of the transfer to secure that the relevant receipts are not charged to income tax or corporation tax as income of any partner or brought into account as income of any partner for the purpose of either of those taxes. Interpretation 809AZG (1) For the purposes of this Chapter— (a) the grant or surrender of a lease of land is to be regarded as a transfer of the land, and (b) the disposal of an interest in an oil licence (within the meaning of section 809 of CTA 2009) is to be regarded as a transfer of the oil licence. (2) The Treasury may by order make other provision for securing that other transactions are to be regarded as transfers of assets for those purposes. (3) In this Chapter— (a) references to a transfer include sale, exchange, gift and assignment (or assignation) and any other arrangement which equates in substance to a transfer, and (b) references to a transfer taking place are, in the case of an arrangement other than a sale, exchange, gift or assignment (or assignation), to the making of the arrangement. (4) A transfer to or by any partnership of which the transferor or transferee is a member, and a transfer to the trustees of any trust of which the transferor is a beneficiary, counts as a transfer in relation to which this Chapter applies. Part 3 Company transferees 8 (1) Part 6 of CTA 2009 (relationships treated as loan relationships etc) is amended as follows. (2) In section 477(2) (overview of Part 6), after paragraph (aa) (inserted by Schedule 24) insert— (ab) Chapter 2B (transferred income streams), . (3) After Chapter 2A (inserted by Schedule 24) insert— Chapter 2B Transferred income streams Introduction to Chapter 486F (1) This Chapter provides for Part 5 to apply in relation to a company to which an income stream transfer is made (“the transferee”). (2) An “income stream transfer” is a transfer by a person (“the transferor”) to which either of the following provisions applies— (a) Part 1 of Schedule 25 to FA 2009 (transfers of income streams by companies), or (b) Chapter 5A of Part 13 of ITA 2007 (transfers of income streams by individuals). Consideration to be treated as loan relationship 486G (1) For the purposes of this Part— (a) the consideration for the transfer of the right to relevant receipts is to be treated as a money debt which is owed to the transferee by the person by whom the relevant receipts fall to be paid, and (b) the transfer is to be treated as a transaction for the lending of money from which that debt is treated as arising. (2) For the meaning of “relevant receipts” see paragraph 1(2) of Schedule 25 to FA 2009 or section 809AZA(2) of ITA 2007. Part 4 Consequential amendments and repeals 9 (1) In ICTA, omit— (a) section 730 (transfers of rights to receive distributions in respect of shares), (b) section 775A (transfers of rights to receive annual payments), (c) section 785A (rent factoring of leases of plant or machinery), and (d) in section 786 (transactions associated with loans or credit)— (i) in subsection (5), “assigns,”, “(without a sale or transfer of the property)” and “assigned,”, (ii) in subsection (5ZA), “assigned,”, and (iii) in subsection (5A), “assigned,”. (2) In ITTOIA 2005, omit— (a) in Chapter 11 of Part 4 (transactions in deposits)— (i) in section 551(2), the words after “of it”, and (ii) in section 552(1), paragraph (e) and the “and” before it, and (b) Chapter 13 of Part 4 (sales of foreign dividend coupons). (3) Omit the following provisions (which relate to the provisions repealed by sub-paragraphs (1) and (2))— (a) in TMA 1970, in section 98, in column 1 of the Table, the entry relating to section 730(8) of ICTA, (b) in ICTA, in section 774E(1), the second sentence, (c) in FA 1996, in Schedule 7, paragraph 23, (d) in FA 2004, section 135, (e) in ITTOIA 2005, in Schedule 1, paragraph 300, (f) in F(No.2)A 2005, in Schedule 7, paragraphs 2 and 4, (g) in FA 2006, in Schedule 6, paragraph 7, (h) in ITA 2007— (i) in section 1016, in Part 3 of the table, the entry relating to section 730(4) of ICTA, and (ii) in Schedule 1, paragraphs 183 and 545, and (i) in CTA 2009, in Schedule 1, paragraphs 214 and 230. (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) In section 2(13) of ITA 2007, omit the “and” at the end of paragraph (d) and insert at the end or (f) transfers of income streams (Chapter 5A). (6) Schedule 4 to that Act (index of defined expressions) is amended as follows. (7) After the entry relating to “transfer (in Chapter 2 of Part 13)” insert— transfer (in Chapter 5A of Part 13) | Section 809AZF(3) . (8) After the entry relating to “transferor (in Part 12)” insert— transfer taking place (in Chapter 5A of Part 13) | Section 809AZF(3) . Part 5 Commencement 10 This Schedule has effect in relation to transfers on or after 22 April 2009.

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SCHEDULE 26 Certification of SAYE savings arrangements

Section 50 1 Chapter 4 of Part 6 of ITTOIA 2005 (SAYE interest) is amended as follows. Transfer of certain functions from Treasury to HMRC 2 (1) Section 705 (certification of arrangements) is amended as follows. (2) In subsections (1) and (2), for “Treasury” (in each place) substitute “ Commissioners ”. (3) After subsection (4) insert— (5) In this Chapter “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs. 3 In section 706(1) and (2) (withdrawal and variation of certifications etc), for “Treasury” substitute “ Commissioners ”. 4 In section 707(1) (authorisation of providers), for “Treasury” substitute “ Commissioners ”. 5 (1) Section 708 (withdrawal and variation of authorisations) is amended as follows. (2) In subsections (1) and (2), for “Treasury” substitute “ Commissioners ”. (3) In subsection (4), for “Treasury of its” substitute “ Commissioners of their ”. Removal of requirement that notice be sent by post 6 In the following provisions omit “by post”— (a) section 706(2)(b) (notification of withdrawal and variation of certifications etc), and (b) section 708(2)(b) (notification of withdrawal and variation of authorisations). Reduction of notice period for withdrawals and variations 7 In section 706(2)(b) (notification of withdrawal and variation of certifications etc), for “28 days” substitute “ 15 days ”. Power to provide for withdrawals and variations not to affect certain contracts 8 In section 706(3) (transitional provision for withdrawals and variations of certifications), for the words from “the operation of” to the end substitute— (a) the operation of the arrangement concerned before that date, (b) contracts made under that arrangement before that date, or (c) where the notice so provides, contracts which are of a description specified in the notice and are made under that arrangement after that date.

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SCHEDULE 27 Remittance basis

Section 51 Part 1 Amendments of ITA 2007 1 Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows. 2 In section 809C (claim for remittance basis by long-term UK resident: nomination of foreign income and gains to which section 809H(2) is to apply), after subsection (5) insert— (5A) The references to income tax in subsection (5) do not include income tax under section 424 (gift aid). 3 (1) Section 809D (application of remittance basis without claim where unremitted foreign income and gains under £2,000) is amended as follows. (2) In subsection (1), insert at the end (not as part of paragraph (c))— “ unless condition A or condition B is met. ” (3) After that subsection insert— (1A) Condition A is that the individual is not domiciled in the United Kingdom in that year and conditions A to F in section 828B are met. (1B) Condition B is that the individual gives notice in a return under section 8 of TMA 1970 that this section is not to apply in relation to the individual for that year. 4 (1) Section 809E (application of remittance basis without claim: other cases) is amended as follows. (2) In subsection (1), for paragraph (c) substitute— (c) for that year the individual either has no UK income or gains or has no UK income and gains other than taxed investment income not exceeding £100. (3) In that subsection, insert at the end (not as part of paragraph (e))— “ unless the individual gives notice in a return under section 8 of TMA 1970 that this section is not to apply in relation to the individual for that year. ” (4) After subsection (2) insert— (2A) For the purposes of subsection (1)(c) “taxed investment income” means UK income or gains consisting of payments within section 946 from which a sum representing income tax has been deducted. 5 In section 809H (claim for remittance basis by long-term UK resident: charge), after subsection (5) insert— (5A) The references to income tax in subsection (5) do not include income tax under section 424 (gift aid). 6 (1) Section 809L (meaning of “remitted to the United Kingdom”) is amended as follows. (2) Omit subsection (8). (3) In subsection (9), for “income or chargeable gains are used in respect of a debt include cases where income or chargeable gains are” substitute “ property (including income or chargeable gains) is used in respect of a debt include cases where the property is ”. 7 (1) Section 809M (meaning of “relevant person” for purposes of sections 809L, 809N and 809O) is amended as follows. (2) In subsection (2)(e), insert at the end “or a company which is a 51% subsidiary of such a close company”. (3) In subsection (3), after paragraph (c) insert— (ca) “participator”, in relation to a close company, means a person who is a participator in relation to the company for the purposes of section 419 of ICTA (see sections 417(1) and 419(7) of that Act), (cb) “51% subsidiary” has the same meaning as in the Corporation Tax Acts (see section 838 of ICTA), . 8 In section 809P (amount remitted), insert at the end— (13) If the property forms part of a set only part of which is in the United Kingdom, the amount remitted is such portion of what it would have been had the complete set been brought to, or received or used in, the United Kingdom when the part was as is just and reasonable (having regard to the part of the set which is there). 9 (1) Section 809T (foreign chargeable gains accruing on disposals made other than for full consideration) is amended as follows. (2) In subsection (1)(b), after “amount” insert “ at least ”. (3) In the heading, for “other” substitute “ otherwise ”. 10 (1) Section 809X (property which is exempt property) is amended as follows. (2) In subsection (4), omit “that derive from relevant foreign income”. (3) In subsection (5), omit “of any description that derives from relevant foreign income”. 11 (1) Section 809Z5 (notional remitted amount) is amended as follows. (2) In subsection (1), omit “of income”. (3) Omit subsections (2) and (3). Part 2 Amendments of other Acts TCGA 1992 12 In section 14A(3)(b) of TCGA 1992 (section 13: non-UK domiciled individuals), after “amount” insert “ at least ”. ITTOIA 2005 13 In section 648 of ITTOIA 2005 (income arising under a settlement), for subsections (2) to (5) substitute— (2) But if, in a tax year, the settlor is not UK resident, references in this Chapter to income arising under a settlement do not include income arising under the settlement in that tax year in respect of which the settlor, if actually entitled to it, would not be chargeable to income tax by deduction or otherwise because of not being UK resident. (3) And if, for a tax year, section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the settlor, references in this Chapter to income arising under a settlement include in relation to any relevant foreign income arising under the settlement in that tax year only such of it as is remitted to the United Kingdom (in that tax year or any subsequent tax year) in circumstances such that, if the settlor remitted it, the settlor would be chargeable to income tax. (4) See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc. (5) Where subsection (3) applies the remitted income is treated for the purposes of this Chapter as arising under the settlement in the tax year in which it is remitted. FA 2008 14 In paragraph 86 of Schedule 7 to FA 2008 (remittance basis: transitional provisions), after sub-paragraph (4) insert— (4A) For the purposes of sub-paragraph (4), section 648(2) to (5) of ITTOIA 2005 (and corresponding earlier enactments) do not apply (so that relevant foreign income which arose under a settlement in the tax year 2007-08 or any earlier tax year is to be treated as income for the tax year in which it arose). Part 3 Commencement 15 (1) The amendments made by paragraphs 2 to 5, 10, 11(2) and 14 have effect for the tax year 2008-09 and subsequent tax years. (2) The other amendments made by this Schedule come into force on 22 April 2009.

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SCHEDULE 28 Taxable benefits: cars

Section 53 Introduction 1 Chapter 6 of Part 3 of ITEPA 2003 (taxable benefits: cars) is amended as follows. Abolition of “price cap” 2 (1) Section 121(1) (method of calculating cash equivalent of benefit of car) is amended as follows. (2) In step 3, insert at the end— “ The resulting amount is the interim sum. ” (3) Omit step 4 (interim sum to be £80,000 if step 3 amount exceeds £80,000). 3 In section 145(5) (modifications of provisions where car temporarily replaced), for “step 4” substitute “ step 3 ”. 4 In section 147(1) and (2) (classic cars), for “amount carried forward from” substitute “ interim sum calculated under ”. 5 In section 170(1) (Treasury orders increasing various amounts), omit paragraph (a) (amount in step 4 of section 121(1)). Cars with CO2 emissions figures: the appropriate percentage 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Electrically propelled cars: the appropriate percentage 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 In section 142 (special provision for cars registered before 1998)— (a) in subsection (3) (cars without internal combustion engine with reciprocating pistons), for the words after “year is” substitute “ 32% ”, and (b) omit subsection (4) (definition of electrically propelled car). Consequential repeal 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commencement 10 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) The other amendments made by this Schedule have effect for the tax year 2011-12 and subsequent tax years.

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SCHEDULE 30 Financial arrangements avoidance

Section 61 Interest payments: arrangements appearing very likely to produce post-tax advantage 1 (1) In ITA 2007, after section 384 insert— Restriction on relief where arrangements minimise risk to borrower 384A (1) Relief is not to be given under this Chapter for interest paid by a person on a loan if— (a) the loan is made to the person (“the borrower”) as part of arrangements which appear very likely to produce a post-tax advantage, and (b) the arrangements seem to have been designed to reduce any income tax or capital gains tax to which the borrower (or any person whose circumstances are like those of the borrower) would be liable apart from the arrangements. (2) Arrangements “appear very likely” to produce a post-tax advantage if (and only if) it would be reasonable to assume from either or both of— (a) the likely effect of the arrangements, and (b) the circumstances in which the arrangements, or any parts of the arrangements, are entered into or effected, that there is no risk, or only an insignificant risk, that they will not produce a post-tax advantage. (3) “Produce a post-tax advantage” means give rise to a sum or sums— (a) payable to the borrower or a person connected with the borrower, or (b) payable to any other person for the benefit of the borrower or a person connected with the borrower, of an amount (or aggregate amount) which, after making the appropriate tax adjustments, is equal to or greater than the relevant amount. (4) “The relevant amount” is the aggregate of— (a) the amount required to meet the borrower's obligations in respect of the loan, and (b) any amount which is used by the borrower in the same way as that which entitles the borrower to relief under this Chapter in respect of the loan and is not money lent to the borrower under any loan. (5) If, with a view to securing that the condition in subsection (1)(a) is not met, the arrangements make provision for securing that, in all or any circumstances in which they do not produce a post-tax advantage, they will produce a broadly compensatory amount, the arrangements are to be regarded for the purposes of subsection (2) as making provision for securing the production of a post-tax advantage in those circumstances. (6) “Produce a broadly compensatory amount” means give rise to a sum or sums payable as mentioned in subsection (3) of an amount (or aggregate amount) which, after making the appropriate tax adjustments, is not significantly less than the relevant amount. (7) For the purposes of subsections (3) and (6) causing the value of an asset to be obtainable, directly or indirectly, by a person is to be treated as equivalent to giving rise to a sum payable to the person of an amount equal to that value. (8) To make the appropriate tax adjustments for the purpose of subsection (3) or (6)— (a) if A exceeds B, deduct the amount of the excess from the amount (or aggregate amount), and (b) if B exceeds A, add the amount of the excess to the amount (or aggregate amount). (9) For the purposes of subsection (8)— A is the amount of any income tax, any capital gains tax and any tax under the law of a territory outside the United Kingdom to which the borrower is liable in consequence of the arrangements, and B is the amount by which the borrower's liability to income tax and capital gains tax is (or apart from subsection (1) would be) reduced in consequence of the arrangements. (10) Arrangements seem to have been designed to reduce any income tax or capital gains tax to which the borrower (or any person whose circumstances are like those of the borrower) would be liable apart from the arrangements if (and only if) it would be reasonable to assume from either or both of— (a) the likely effect of the arrangements, and (b) the circumstances in which the arrangements, or any parts of the arrangements, are entered into or effected, that the arrangements, or any parts of the arrangements, are designed to do so. (11) In this section “arrangements” means arrangements consisting of any number of agreements, understandings, schemes, transactions or other arrangements (whether or not legally enforceable); but in subsections (1)(a), (2), (5) and (9) the references to arrangements also include any related transactions. (12) In subsection (11) “related transactions” means transactions in the case of which it is reasonable to assume from either or both of— (a) the likely effect of the transactions, and (b) the circumstances in which the transactions are entered into or effected, that the transactions would not have been entered into or effected independently of the arrangements. (13) Transactions are not prevented from being related transactions just because the transactions— (a) are not between the same parties, or (b) are not between parties to the arrangements. (2) The amendment made by sub-paragraph (1) has effect in relation to interest paid on or after 19 March 2009. Amounts not fully recognised for accounting purposes 2 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) In section 317(5) of CTA 2009 (carrying value), before paragraph (a) insert— (za) sections 311 and 312 (amounts not fully recognised for accounting purposes), . (8) The amendments made by this paragraph have effect in relation to periods of account beginning on or after 22 April 2009. (9) But for the purposes of sub-paragraph (8) a period of account beginning before, and ending on or after, 22 April 2009 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. 3 (1) In CTA 2009, after section 599 insert— Amounts not fully recognised for accounting purposes: introduction 599A (1) Section 599B applies for the purpose of determining the credits and debits which a company is to bring into account for a period for the purposes of this Part in the following case. (2) The case is where— (a) the company is, or is treated as, a party to a derivative contract in the period, (b) condition A or B is met, and (c) an amount is not fully recognised for the period in respect of the contract as a result of the application of generally accepted accounting practice in relation to the contract and the contribution or securities referred to in the condition that is met. (3) Condition A is that— (a) an amount (a “relevant capital contribution”) has at any time been contributed to the company which forms part of its capital for the period, and (b) an amount is not fully recognised for the period in respect of the relevant capital contribution as a result of the application of generally accepted accounting practice in relation to the derivative contract and the relevant contribution. (4) It does not matter for the purposes of subsection (3) whether the contribution forms part of the company's share capital or other capital for the period. (5) Condition B is that— (a) the company has issued securities that form part of its capital for the period, and (b) an amount is not fully recognised for the period in respect of the securities as a result of the application of generally accepted accounting practice in relation to the derivative contract and the securities. (6) For the purposes of this section an amount is not fully recognised for a period in respect of a contract of a company, a contribution to it or securities issued by it if— (a) no amount in respect of the contract, contribution or securities is recognised in determining its profit or loss for the period, or (b) an amount is so recognised in respect of only part of the contract, contribution or securities. Determination of credits and debits where amounts not fully recognised 599B (1) In determining the credits and debits which a company is to bring into account for the period referred to in section 599A(1) for the purposes of this Part in respect of the derivative contract mentioned in section 599A(2), the assumption in subsection (2) is to be made. (2) The assumption is that an amount in respect of the whole of the contract in question is recognised in determining the company's profit or loss for the period. (3) The credits and debits which are to be brought into account for the purposes of this Part by the company in respect of the contract are to be determined on the basis of fair value accounting. (2) In section 702(3) of CTA 2009 (carrying value), before paragraph (c) insert— (ca) sections 599A and 599B (amounts not fully recognised for accounting purposes), . (3) The amendments made by this paragraph have effect in relation to periods of account beginning on or after 22 April 2009. (4) But for the purposes of sub-paragraph (3) a period of account beginning before, and ending on or after, 22 April 2009 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. Loan relationships involving connected debtor and creditor where debits exceed credits 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credits and debits for manufactured interest 5 (1) In section 540(3) of CTA 2009 (manufactured interest treated as interest under loan relationship), insert at the end “and the credits and debits to be brought into account in respect of manufactured interest for any period are those that are recognised in determining the company's profit or loss for the period in accordance with generally accepted accounting practice (but subject to the provisions of Part 5, including, in particular, section 307(3) and to paragraph 7A of Schedule 23A to ICTA).” (2) In section 97(2) of FA 1996 (equivalent provision for accounting periods ending before 1 April 2009), insert at the end “and the credits and debits to be brought into account in respect of manufactured interest for any period are those that are recognised in determining the company's profit or loss for the period in accordance with generally accepted accounting practice (but subject to the provisions of this Chapter (including, in particular, section 84(1)) and to paragraph 7A of Schedule 23A to the Taxes Act 1988).” (3) The amendments made by this paragraph have effect in relation to manufactured interest whenever paid, apart from payments treated under section 737A(5) of ICTA as made before 27 January 2009.

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SCHEDULE 32 Leases of plant or machinery

Section 64 Disposal values: commencement of long funding finance leases 1 (1) Section 61 of CAA 2001 (disposal events and disposal values) is amended as follows. (2) In the Table in subsection (2), for item 5A substitute— 5A. Commencement of the term of a long funding finance lease of the plant or machinery. | The greater of— the market value of the plant or machinery at the commencement of the term of the lease, and the qualifying lease payments. (3) After subsection (5) insert— (5A) In item 5A of the Table “qualifying lease payments” means the minimum payments under the lease (including any initial payment), excluding the following— (a) so much of any payment as, under generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment in respect of the lease, (b) so much of any payment as represents charges for services, and (c) so much of any payment as represents qualifying UK or foreign tax (within the meaning of section 70YE) to be paid by the lessor. (4) Omit subsections (6) to (9). 2 Accordingly, in FA 2008, in Schedule 20, omit paragraph 4. 3 (1) Section 25A of TCGA 1992 (long funding leases of plant or machinery: deemed disposals) is amended as follows. (2) In subsection (2)(a), for “the value described in subsection (4)(a) or (b)” substitute “ the relevant disposal value ”. (3) For subsections (4) to (4D) substitute— (4) “Relevant disposal value” means— (a) in relation to a long funding finance lease, the disposal value described in item 5A of the table in section 61(2) of the Capital Allowances Act (disposal values), and (b) in relation to a long funding operating lease, the disposal value described in item 5B of that table. (4) In subsection (5), omit “ “market value”,”. 4 Accordingly, in FA 2008, in Schedule 20, omit paragraph 5. 5 (1) The amendments made by paragraphs 1 and 2 have effect in relation to leases whose inception is on or after 13 November 2008. (2) The amendments made by paragraphs 3 and 4 have effect in relation to leases whose inception is on or after 22 April 2009. Disposal values: termination etc of long funding leases 6 In section 66 of CAA 2001 (list of provisions outside Chapter 5 of Part 2 of that Act about disposal values), in the list, insert at the appropriate place— section 70E | long funding leases: disposal events and disposal values . 7 (1) Section 70E of CAA 2001 (long funding leases: disposal events and disposal values) is amended as follows. (2) In subsection (1), for paragraph (c) substitute— (c) a relevant event occurs. (3) After that subsection insert— (1A) A relevant event occurs if— (a) the lease terminates, (b) the plant or machinery begins to be used wholly or partly for purposes other than those of the qualifying activity, or (c) the qualifying activity is permanently discontinued. (4) In subsection (2)(a), for “termination of the lease” substitute “ relevant event ”. (5) For subsections (3) to (8) substitute— (2A) The amount of the disposal value is— ( QE - QA ) + R where— QE is the person's qualifying expenditure on the provision of the plant or machinery, QA is the qualifying amount (see subsections (2B) to (2E)), and R is any relevant rebate (see subsections (2F) and (2G)). (2B) In the case of a long funding operating lease, “the qualifying amount” means the aggregate amount of the reductions made under section 502K of ICTA or section 148I of ITTOIA 2005 for periods of account in which the person was the lessee. (2C) In the case of a long funding finance lease, “the qualifying amount” means the aggregate of— (a) the payments made to the lessor by the person under the lease (including any initial payment), and (b) the payments made to the lessor by the person under a guarantee of any residual amount (as defined in section 70YE), subject to subsection (2D). (2D) The following are excluded from the “qualifying amount” under subsection (2C)— (a) so much of any payment as, in accordance with generally accepted accounting practice, falls (or would fall) to be shown in the person's accounts as finance charges in respect of the lease, (b) so much of any payment as represents charges for services, and (c) so much of any payment as represents qualifying UK or foreign tax (within the meaning of section 70YE) to be paid by the lessor. (2E) In the case of a long funding finance lease that is not a transaction at arm's length, “the qualifying amount” includes only so much of the amounts described in subsection (2C) as would reasonably be expected to have been paid if the lease had been such a transaction. (2F) “Relevant rebate” means— (a) in a case falling within subsection (1A)(a), any amount calculated by reference to the termination value that is payable for the benefit (directly or indirectly) of the person or another person connected with that person, or (b) in a case falling within subsection (1A)(b) or (c), any such amount that would have been so payable if, when the relevant event occurred, the lease had terminated and the plant or machinery had been sold for its market value at that time. (2G) In the case of a lease that is not a transaction at arm's length, “relevant rebate” includes any amount that would reasonably be expected to have fallen within subsection (2F) if the lease had been such a transaction. (2H) The amount of the disposal value brought into account under this section cannot be less than nil. (6) In subsection (9), for “termination of the lease” substitute “ relevant event ”. 8 The amendments made by paragraphs 6 and 7 have effect in relation to cases where the relevant event occurs on or after 13 November 2008. Capital receipts treated as income 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer and long funding leaseback: restrictions on lessee's allowances 12 In section 51A(10) of CAA 2001 (annual investment allowances), insert at the appropriate place— “ section 70DA(2) (transfer and long funding leaseback: no annual investment allowance for lessee), ”. 13 In section 52(5) of CAA 2001 (first-year allowances), insert at the appropriate place— “ section 70DA(2) (transfer and long funding leaseback: no first-year allowance for lessee), ”. 14 In section 57(3) of CAA 2001 (available qualifying expenditure), insert at the appropriate place— “ section 70DA (transfer and long funding leaseback); ”. 15 In CAA 2001, after section 70D insert— Transfer and long funding leaseback: restrictions on lessee's allowances 70DA (1) This section applies where— (a) a person (“S”) transfers plant or machinery to another person (“B”), (b) at any time after the date of the transfer, the plant or machinery is available to be used by S, or a person (other than B) who is connected with S (“CS”), under a plant or machinery lease, and (c) that lease is a long funding lease. (2) No annual investment allowance or first-year allowance is to be made in respect of the expenditure of S or CS under the lease. (3) The amount, if any, by which E exceeds D is to be left out of account in determining the available qualifying expenditure of S or CS. (4) E is the capital expenditure of S or CS on the provision of the plant or machinery under the long funding lease. (5) If S is required to bring a disposal value into account under this Part because of the transfer referred to in subsection (1)(a), D is that disposal value. (6) Otherwise, D is whichever of the following is the smallest— (a) the market value of the plant or machinery; (b) if S incurred capital expenditure on the provision of the plant or machinery before the transfer referred to in subsection (1)(a), the amount of that expenditure; (c) if a person connected with S incurred capital expenditure on the provision of the plant or machinery before that transfer, the amount of that expenditure. (7) Section 70Y(3) applies to references in this section to a transfer of plant or machinery by a person. (8) For the purposes of this section a transfer involving the grant of a lease takes place on the commencement of the term of the lease. 16 In section 70H of CAA 2001 (lessee: requirement for tax return treating lease as long funding lease), after subsection (1B) insert— (1C) In a case in which paragraphs (a) and (b) of subsection (1) of section 70DA (leaseback of plant or machinery) are satisfied, subsection (1) of this section does not apply to the lease referred to in section 70DA(1)(b). 17 The amendments made by paragraphs 12 to 16 have effect in relation to cases where the commencement of the term of the lease referred to in subsection (1)(b) of section 70DA of CAA 2001 is on or after 13 November 2008. Transfer followed by hire-purchase etc: restrictions on hirer's allowances 18 In section 51A(10) of CAA 2001 (annual investment allowances), after “218A” insert “ , 229A(2) ”. 19 In section 52(5) of CAA 2001 (first-year allowances), after “217” insert “ , 229A(2) ”. 20 In section 57(3) of CAA 2001 (available qualifying expenditure), after “228(2)” insert “ , 229A ”. 21 In CAA 2001, after section 229 insert— Transfer followed by hire-purchase etc: restrictions on hirer's allowances 229A (1) This section applies where— (a) a person (“S”) transfers plant or machinery to another person (“B”), (b) at any time after the date of the transfer, the plant or machinery is available to be used by S, or a person (other than B) who is connected with S (“CS”), (c) it is available to be so used under a contract which provides that S or CS is to or may become the owner of the plant or machinery on the performance of the contract, and (d) S or CS incurs capital expenditure on the provision of the plant or machinery under that contract. (2) No annual investment allowance or first-year allowance is to be made in respect of the expenditure of S or CS under the contract. (3) The amount, if any, by which E exceeds D is to be left out of account in determining the available qualifying expenditure of S or CS. (4) E is the capital expenditure of S or CS on the provision of the plant or machinery under the contract referred to in subsection (1)(c). (5) If S is required to bring a disposal value into account under this Part because of the transfer referred to in subsection (1)(a), D is that disposal value. (6) Otherwise, D is whichever of the following is the smallest— (a) the market value of the plant or machinery; (b) if S incurred capital expenditure on the provision of the plant or machinery before the transfer referred to in subsection (1)(a), the amount of that expenditure; (c) if a person connected with S incurred capital expenditure on the provision of the plant or machinery before that transfer, the amount of that expenditure. (7) Sections 214 and 215 do not apply in relation to the contract referred to in subsection (1)(c). (8) Section 70Y(3) applies to references in this section to a transfer of plant or machinery by a person. (9) For the purposes of this section a transfer involving the grant of a lease takes place on the commencement of the term of the lease. 22 The amendments made by paragraphs 18 to 21 have effect in relation to cases where the contract referred to in subsection (1)(c) of section 229A of CAA 2001 is entered into on or after 13 November 2008. Finance leaseback 23 In section 216(1)(b)(i) of CAA 2001 (sale and leaseback etc), after “S” insert “ or by a person (other than B) who is connected with S ”. 24 In section 221(1)(b)(i) of CAA 2001 (meaning of “sale and finance leaseback”), for “a qualifying activity carried on by S” substitute “ an activity carried on by S or by a person (other than B) who is connected with S, ”. 25 The amendment made by paragraph 23 has effect— (a) where the date of the transaction referred to in section 216(1)(a) of CAA 2001 is on or after 22 April 2009, and (b) for the purposes of section 227 of that Act (which applies section 216(1)(b) of that Act), where the date of the transaction referred to in section 227(1)(a) is on or after 22 April 2009. 26 The amendment made by paragraph 24 has effect— (a) where the date of the transaction referred to in section 221(1)(a) of CAA 2001 is on or after 22 April 2009, and (b) for the purposes of section 228A of that Act (which applies section 221(1)(b) of that Act), where the date of the transaction referred to in section 228A(2)(a) is on or after 22 April 2009. Interpretation 27 In this Schedule “commencement” and “inception” have the meaning given in section 70YI(1) of CAA 2001.

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SCHEDULE 33 Long funding leases of films

Section 65 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 In ITTOIA 2005, after section 148FC insert— Cases where ss 148A to 148F do not apply: films 148FD (1) If a person is or has been a lessor under a long funding lease of a film, sections 148A to 148F do not apply in respect of the lease. (2) “Film” has the same meaning as in Part 15 of CTA 2009 (see section 1181 of that Act). 3 The amendments made by paragraph 2 have effect where the inception of the long funding lease is on or after 13 November 2008 (“the relevant date”). 4 Paragraphs 5 to 8 apply in respect of a long funding finance lease of a film— (a) whose inception is before the relevant date, and (b) which has not terminated before that date. 5 (1) ...section 148A of ITTOIA 2005 (rental earnings) does not apply to a period of account within sub-paragraph (2). (2) A period of account is within this sub-paragraph if— (a) it begins on or after the relevant date, and (b) no rentals due (wholly or partly) in respect of any part of the period of account were due under the lease before the relevant date. 6 (1) For the purpose of calculating the profits of the lessor under the lease for a period of account— (a) that ends on or after the relevant date, and (b) that is not within paragraph 5(2), treat the lessor as receiving for that period of account income attributable to the lease of an amount equal to the relevant amount (in addition to any amount brought into account under ... section 148A(2) of ITTOIA 2005). (2) The “relevant amount” is an amount equal to so much of the rentals as— (a) become due on or after the relevant date, and (b) are due wholly or partly in respect of the period of account, as would not reasonably be regarded as reflected in the rental earnings for that period of account. (3) If any rental is paid for a period (“the rental period”) which— (a) begins before the relevant date, or (b) is not wholly within the period of account, for the purposes of sub-paragraph (2) treat the amount of that rental as equal to the amount apportioned (on a time basis) in respect of so much of the rental period as falls on or after the relevant date and within the period of account. 7 ... section 148B of ITTOIA 2005 (exceptional items) does not apply in relation to any profit or loss arising on or after the relevant date. 8 (1) If ...section 148C of ITTOIA 2005 (lessor making termination payment) applies in respect of the termination of the lease on or after the relevant date, a deduction is allowed (in calculating the profits of the lessor) in respect of any sum calculated by reference to the termination value paid to the lessee. (2) The amount of the deduction is (if it would otherwise exceed that amount) limited to the total amount brought into account in respect of the lease by virtue of paragraph 5 or 6. 9 For the purposes of paragraphs 3 to 8— (a) “film” has the same meaning as in Part 15 of CTA 2009 (see section 1181 of that Act), (b) “rental earnings” has the same meaning as in ... section 148A of ITTOIA 2005, and (c) Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about long funding leases) applies.

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SCHEDULE 36 VAT: place of supply of services etc

Section 76 Part 1 Amendments coming into force in 2010 1 VATA 1994 is amended as follows. 2 In section 6(14A) (time of supply), omit “In relation to any services of a description specified in an order under section 7(11),”. 3 (1) Section 7 (place of supply) is amended as follows. (2) In subsection (1), omit “or services”. (3) Omit subsection (10). (4) In subsection (11), omit “or services” (in each place). (5) In the heading, insert at the end “ of goods ”. 4 After that section insert— Place of supply of services 7A (1) This section applies for determining, for the purposes of this Act, the country in which services are supplied. (2) A supply of services is to be treated as made— (a) in a case in which the person to whom the services are supplied is a relevant business person, in the country in which the recipient belongs, and (b) otherwise, in the country in which the supplier belongs. (3) The place of supply of a right to services is the same as that in which the supply of the services would be treated as made if made by the supplier of the right to the recipient of the right (whether or not the right is exercised); and for this purpose a right to services includes any right, option or priority with respect to the supply of services and an interest deriving from a right to services. (4) For the purposes of this Act a person is a relevant business person in relation to a supply of services if the person— (a) is a taxable person within the meaning of Article 9 of Council Directive 2006/112/EC, (b) is registered under this Act, (c) is identified for the purposes of VAT in accordance with the law of a member State other than the United Kingdom, or (d) is registered under an Act of Tynwald for the purposes of any tax imposed by or under an Act of Tynwald which corresponds to value added tax, and the services are received by the person otherwise than wholly for private purposes. (5) Subsection (2) has effect subject to Schedule 4A. (6) The Treasury may by order— (a) amend subsection (4), (b) amend Schedule 4A, or (c) otherwise make provision for exceptions from either or both of the paragraphs of subsection (2). (7) An order under subsection (6) may include incidental, supplemental, consequential and transitional provision. 5 (1) Section 8 (reverse charge on supplies received from abroad) is amended as follows. (2) For subsections (1) and (2) substitute— (1) Where services are supplied by a person who belongs in a country other than the United Kingdom in circumstances in which this subsection applies, this Act has effect as if (instead of there being a supply of the services by that person)— (a) there were a supply of the services by the recipient in the United Kingdom in the course or furtherance of a business carried on by the recipient, and (b) that supply were a taxable supply. (2) Subsection (1) above applies if— (a) the recipient is a relevant business person who belongs in the United Kingdom, and (b) the place of supply of the services is inside the United Kingdom, and, where the supply of the services is one to which any paragraph of Part 1 or 2 of Schedule 4A applies, the recipient is registered under this Act. (3) After subsection (4) insert— (4A) Subsection (1) does not apply to services of any of the descriptions specified in Schedule 9. (4) In subsection (5), for “add to, or vary, Schedule 5” substitute “ amend subsection (4A) by altering the descriptions of services specified in that subsection ”. (5) Omit subsection (6). (6) In subsection (7)— (a) for “add to or vary Schedule 5” substitute “ amend subsection (4A) ”, and (b) for “addition to or variation of that Schedule” substitute “ amendment of that subsection ”. (7) In subsection (8)— (a) for “addition to or variation of that Schedule” substitute “ amendment of subsection (4A) ”, and (b) for “the Schedule” substitute “ that subsection ”. 6 For section 9 substitute— Place where supplier or recipient of services belongs 9 (1) This section has effect for determining for the purposes of section 7A (or Schedule 4A) or section 8, in relation to any supply of services, whether a person who is the supplier or recipient belongs in one country or another. (2) A person who is a relevant business person is to be treated as belonging in the relevant country. (3) In subsection (2) “the relevant country” means— (a) if the person has a business establishment, or some other fixed establishment, in a country (and none in any other country), that country, (b) if the person has a business establishment, or some other fixed establishment or establishments, in more than one country, the country in which the relevant establishment is, and (c) otherwise, the country in which the person's usual place of residence is. (4) In subsection (3)(b) “relevant establishment” means whichever of the person's business establishment, or other fixed establishments, is most directly concerned with the supply. (5) A person who is not a relevant business person is to be treated as belonging in the country in which the person's usual place of residence is. (6) In this section “usual place of residence”, in relation to a body corporate, means the place where it is legally constituted. 7 (1) Section 43 (groups of companies) is amended as follows. (2) In subsection (2A)— (a) in paragraph (a), for “falling within Schedule 5” substitute “ to which section 7A(2)(a) applies made ”, and (b) in paragraph (c)— (i) omit “falling within paragraphs 1 to 8 of Schedule 5”, and (ii) insert at the end “and section 7A(2)(a) applied to the supply”. (3) In subsection (2D)— (a) in paragraph (c)— (i) omit “falling within paragraphs 1 to 8 of Schedule 5”, and (ii) insert at the end “ and section 7A(2)(a) applied to the supply ”, and (b) in the words after the paragraphs, for “falling within that Schedule,” substitute “ to which section 7A(2)(a) applies, ”. (4) In subsection (2E)(b), for “there are services falling within paragraphs 1 to 8 of Schedule 5 which, if used by the transferor for making supplies falling within that Schedule,” substitute “ there is a supply to which section 7A(2)(a) applies of services which, if used by the transferor for making such a supply, ”. 8 (1) Section 96 (interpretation) is amended as follows. (2) In subsection (1), after the definition of “regulations” insert— “relevant business person” has the meaning given by section 7A(4); . (3) In subsection (8), omit “(subject to any provision made under section 8(6))”. 9 Section 97(4)(a) (orders subject to requirement of Parliamentary approval after making), after “5(4)” insert “ , 7A(6) ”. 10 Section 97A(1) (place of supply orders: transitional provision), for “on or after 17th March 1998 under section 7(11)” substitute “ under section 7A(6) ”. 11 After Schedule 4 insert— SCHEDULE 4A Place of supply of services: special rules Section 7A Part 1 General exceptions Services relating to land 1 (1) A supply of services to which this paragraph applies is to be treated as made in the country in which the land in connection with which the supply is made is situated. (2) This paragraph applies to— (a) the grant, assignment or surrender of any interest in or right over land, (b) the grant, assignment or surrender of a personal right to call for or be granted any interest in or right over land, (c) the grant, assignment or surrender of a licence to occupy land or any other contractual right exercisable over or in relation to land (including the provision of holiday accommodation, seasonal pitches for caravans and facilities at caravan parks for persons for whom such pitches are provided and pitches for tents and camping facilities), (d) the provision in an hotel, inn, boarding house or similar establishment of sleeping accommodation or of accommodation in rooms which are provided in conjunction with sleeping accommodation or for the purpose of a supply of catering, (e) any works of construction, demolition, conversion, reconstruction, alteration, enlargement, repair or maintenance of a building or civil engineering work, and (f) services such as are supplied by estate agents, auctioneers, architects, surveyors, engineers and others involved in matters relating to land. (3) In sub-paragraph (2)(c) “holiday accommodation” includes any accommodation in a building, hut (including a beach hut or chalet), caravan, houseboat or tent which is advertised or held out as holiday accommodation or as suitable for holiday or leisure use. (4) In sub-paragraph (2)(d) “similar establishment” includes premises in which there is provided furnished sleeping accommodation, whether with or without the provision of board or facilities for the preparation of food, which are used by, or held out as being suitable for use by, visitors or travellers. Passenger transport 2 (1) A supply of services consisting of the transportation of passengers (or of any luggage or motor vehicles accompanying passengers) is to be treated as made in the country in which the transportation takes place, and (in a case where it takes place in more than one country) in proportion to the distances covered in each. (2) For the purposes of sub-paragraph (1) transportation which takes place partly outside the territorial jurisdiction of a country is to be treated as taking place wholly in the country if— (a) it takes place in the course of a journey between two points in the country (whether or not as part of a longer journey involving travel to or from another country), and (b) the means of transport used does not (except in an emergency or involuntarily) stop, put in or land in another country in the course of the journey between those two points. (3) For the purposes of sub-paragraph (1) a pleasure cruise is to be regarded as the transportation of passengers (so that services provided as part of a pleasure cruise are to be treated as supplied in the same place as the transportation of the passengers). (4) In sub-paragraph (3) “pleasure cruise” includes a cruise wholly or partly for education or training. Hiring of means of transport 3 (1) A supply of services consisting of the short-term hiring of a means of transport is to be treated as made in the country in which the means of transport is actually put at the disposal of the person by whom it is hired. But this is subject to sub-paragraphs (3) and (4). (2) For the purposes of this Schedule the hiring of a means of transport is “short-term” if it is hired for a continuous period not exceeding— (a) if the means of transport is a vessel, 90 days, and (b) otherwise, 30 days. (3) Where— (a) a supply of services consisting of the hiring of a means of transport would otherwise be treated as made in the United Kingdom, and (b) the services are to any extent effectively used and enjoyed in a country which is not a member State, the supply is to be treated to that extent as made in that country. (4) Where— (a) a supply of services consisting of the hiring of a means of transport would otherwise be treated as made in a country which is not a member State, and (b) the services are to any extent effectively used and enjoyed in the United Kingdom, the supply is to be treated to that extent as made in the United Kingdom. Cultural, educational and entertainment services etc 4 (1) A supply of services to which this paragraph applies is to be treated as made in the country in which the services are physically carried out. (2) This paragraph applies to the provision of— (a) services relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities (including fairs and exhibitions), and (b) ancillary services relating to such activities, including services of organisers of such activities. Restaurant and catering services: general 5 (1) A supply of services to which this paragraph applies is to be treated as made in the country in which the services are physically carried out. (2) This paragraph applies to the provision of restaurant services and the provision of catering services, other than the provision of services to which paragraph 6 applies. the European Union on-board restaurant and catering services 6 (1) A supply of services consisting of (a) the provision of restaurant services, or (b) the provision of catering services, on board a ship, aircraft or train in connection with the transportation of passengers during an intra-EC passenger transport operation is to be treated as made in the country in which the relevant point of departure is located. (2) An intra-EC passenger transport operation is a passenger transport operation which, or so much of a passenger transport operation as,— (a) has as the first place at which passengers can embark a place which is within the European Union , (b) has as the last place at which passengers who embarked in a member State can disembark a place which is within the the European Union , and (c) does not include a stop at a place which is not within the European Union and at which passengers can embark or passengers who embarked in a member State can disembark. (3) “Relevant point of departure”, in relation to an intra-EC passenger transport operation, is the first place in the intra-EC passenger transport operation at which passengers can embark. (4) A place is within the the European Union if it is within any member State. (5) For the purposes of this paragraph the return stage of a return passenger transport operation is to be regarded as a separate passenger transport operation; and for this purpose— (a) a return passenger transport operation is one which takes place in more than one country but is expected to end in the country in which it begins, and (b) the return stage of a return passenger transport operation is the part of it which ends in the country in which it began and begins with the last stop at a place at which there has not been a previous stop during it. Hiring of goods 7 (1) Where— (a) a supply of services consisting of the hiring of any goods other than a means of transport would otherwise be treated as made in the United Kingdom, and (b) the services are to any extent effectively used and enjoyed in a country which is not a member State, the supply is to be treated to that extent as made in that country. (2) Where— (a) a supply of services consisting of the hiring of any goods other than a means of transport would otherwise be treated as made in a country which is not a member State, and (b) the services are to any extent effectively used and enjoyed in the United Kingdom, the supply is to be treated to that extent as made in the United Kingdom. Telecommunication and broadcasting services 8 (1) This paragraph applies to a supply of services consisting of the provision of— (a) telecommunication services, or (b) radio or television broadcasting services. (2) In this Schedule “telecommunication services” means services relating to the transmission, emission or reception of signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including— (a) the related transfer or assignment of the right to use capacity for such transmission, emission or reception, and (b) the provision of access to global information networks. (3) Where— (a) a supply of services to which this paragraph applies would otherwise be treated as made in the United Kingdom, and (b) the services are to any extent effectively used and enjoyed in a country which is not a member State, the supply is to be treated to that extent as made in that country. (4) Where— (a) a supply of services to which this paragraph applies would otherwise be treated as made in a country which is not a member State, and (b) the services are to any extent effectively used and enjoyed in the United Kingdom, the supply is to be treated to that extent as made in the United Kingdom. Part 2 Exceptions relating to supplies made to relevant business person Electronically-supplied services 9 (1) Where— (a) a supply of services consisting of the provision of electronically supplied services to a relevant business person would otherwise be treated as made in the United Kingdom, and (b) the services are to any extent effectively used and enjoyed in a country which is not a member State, the supply is to be treated to that extent as made in that country. (2) Where— (a) a supply of services consisting of the provision of electronically supplied services to a relevant business person would otherwise be treated as made in a country which is not a member State, and (b) the services are to any extent effectively used and enjoyed in the United Kingdom, the supply is to be treated to that extent as made in the United Kingdom. (3) Examples of what are electronically supplied services for the purposes of this Schedule include— (a) website supply, web-hosting and distance maintenance of programmes and equipment, (b) the supply of software and the updating of software, (c) the supply of images, text and information, and the making available of databases, (d) the supply of music, films and games (including games of chance and gambling games), (e) the supply of political, cultural, artistic, sporting, scientific, educational or entertainment broadcasts (including broadcasts of events), and (f) the supply of distance teaching. (4) But where the supplier of a service and the supplier's customer communicate via electronic mail, this does not of itself mean that the service provided is an electronically supplied service for the purposes of this Schedule. Part 3 Exceptions relating to supplies not made to relevant business person Intermediaries 10 (1) A supply of services to which this paragraph applies is to be treated as made in the same country as the supply to which it relates. (2) This paragraph applies to a supply to a person who is not a relevant business person consisting of the making of arrangements for a supply by or to another person or of any other activity intended to facilitate the making of such a supply. Transport of goods: general 11 (1) A supply of services to a person who is not a relevant business person consisting of the transportation of goods is to be treated as made in the country in which the transportation takes place, and (in a case where it takes place in more than one country) in proportion to the distances covered in each. (2) For the purposes of sub-paragraph (1) transportation which takes place partly outside the territorial jurisdiction of a country is to be treated as taking place wholly in the country if— (a) it takes place in the course of a journey between two points in the country (whether or not as part of a longer journey involving travel to or from another country), and (b) the means of transport used does not (except in an emergency or involuntarily) stop, put in or land in another country in the course of the journey between those two points. (3) This paragraph does not apply to a transportation of goods beginning in one member State and ending in another (see paragraph 12). Intra-Community transport of goods 12 A supply of services to a person who is not a relevant business person consisting of the transportation of goods which begins in one member State and ends in another is to be treated as made in the member State in which the transportation begins. Ancillary transport services 13 (1) A supply to a person who is not a relevant business person of ancillary transport services is to be treated as made where the services are physically performed. (2) “Ancillary transport services” means loading, unloading handling and similar activities. Valuation services etc 14 A supply to a person who is not a relevant business person of services consisting of the valuation of, or carrying out of work on, goods is to be treated as made where the services are physically performed. Electronic services 15 A supply consisting of the provision by a person who belongs in a country which is not a member State (other than the Isle of Man) of electronically supplied services (as to the meaning of which see paragraph 9(3) and (4)) to a person (“the recipient”) who— (a) is not a relevant business person, and (b) belongs in a member State, is to be treated as made in the country in which the recipient belongs. Other services provided to recipient belonging outside EC 16 (1) A supply consisting of the provision to a person (“the recipient”) who— (a) is not a relevant business person, and (b) belongs in a country which is not a member State (other than the Isle of Man), of services to which this paragraph applies is to be treated as made in the country in which the recipient belongs. (2) This paragraph applies to— (a) transfers and assignments of copyright, patents, licences, trademarks and similar rights, (b) the acceptance of any obligation to refrain from pursuing or exercising (in whole or in part) any business activity or any rights within paragraph (a), (c) advertising services, (d) services of consultants, engineers, consultancy bureaux, lawyers, accountants, and similar services, data processing and provision of information, other than any services relating to land, (e) banking, financial and insurance services (including reinsurance), other than the provision of safe deposit facilities, (f) the provision of access to, and of transport or transmission through, natural gas and electricity distribution systems and the provision of other directly linked services, (g) the supply of staff, (h) the letting on hire of goods other than means of transport, (i) telecommunication services (as to the meaning of which see paragraph 8(2)), (j) radio and television broadcasting services, and (k) electronically supplied services (as to the meaning of which see paragraph 9(3) and (4)). 12 Omit Schedule 5 (services supplied where received). 13 In Article 5 of the Value Added Tax (Tour Operators) Order 1987 (S.I. 1987/1806)— (a) omit paragraph (1), and (b) in paragraph (2) after “treated” insert “ for the purposes of this Act ”, and treat that article as made under section 7A(6)(c) of VATA 1994 (inserted by paragraph 4). 14 (1) The powers contained in section 7A(6) of VATA 1994 (inserted by paragraph 4) may be exercised at any time on or after the day on which this Act is passed. (2) The amendments made by paragraph 7 come into force on 1 January 2010; but the references in section 43 of VATA 1994 (as amended by that paragraph) to a supply to which section 7A(2) of that Act applies includes a supply of services falling within paragraphs 1 to 8 of Schedule 5 made before that date. (3) Subject to that, the amendments made by this Part have effect in relation to supplies made on or after 1 January 2010. Part 2 Amendments coming into force in 2011 Admission to cultural, educational and entertainment activities etc 15 (1) Schedule 4A to VATA 1994 (inserted by paragraph 11) is amended as follows. (2) Omit paragraph 4. (3) After paragraph 9 insert— Admission to cultural, educational and entertainment activities etc 9A (1) A supply to a relevant business person of services to which this paragraph applies is to be treated as made in the country in which the events in question actually take place. (2) This paragraph applies to the provision of— (a) services in respect of admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events (including fairs and exhibitions), and (b) ancillary services relating to admission to such events. (4) After paragraph 14 insert— Cultural, educational and entertainment services etc 14A (1) A supply to a person who is not a relevant business person of services to which this paragraph applies is to be treated as made in the country in which the activities concerned actually take place. (2) This paragraph applies to the provision of— (a) services relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities (including fairs and exhibitions), and (b) ancillary services relating to such activities, including services of organisers of such activities. 16 The amendments made by this Part have effect in relation to supplies made on or after 1 January 2011. Part 3 Amendments coming into force in 2013 17 In Schedule 4A to VATA 1994 (inserted by paragraph 11), after paragraph 13 insert— Long-term hiring of means of transport 13A (1) A supply to a person who is not a relevant business person (“the recipient”) of services consisting of the long-term hiring of a means of transport is to be treated as made in the country in which the recipient belongs. But this is subject to sub-paragraph (2) and paragraph 3(3) and (4). (2) A supply to a person who is not a relevant business person (“the recipient”) of services consisting of the long-term hiring of a pleasure boat which is actually put at the disposal of the recipient at the supplier's business establishment, or some other fixed establishment of the supplier, is to be treated as made in the country where the pleasure boat is actually put at the disposal of the recipient. (3) For the purposes of this Schedule, the hiring of a means of transport is “long-term” if it is not short-term (as to the meaning of which see paragraph 3(2)). 18 The amendment made by this Part has effect in relation to supplies made on or after 1 January 2013. Part 4 Transitional provisions 19 (1) This paragraph applies where— (a) amendments made by this Schedule provide for a supply of services to be treated as made in the United Kingdom, (b) the supply would not have fallen to be so treated apart from the amendments, and (c) the services are treated under the law of a member State other than the United Kingdom as supplied in that member State before the commencement date. (2) The supply is not to be treated as made in the United Kingdom. (3) “The commencement date” means the date specified by this Schedule as that on or after which a supply must be made if it is to be treated as made in the United Kingdom by virtue of the amendments.

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SCHEDULE 37 Stock lending: stamp taxes in the event of insolvency

Section 83 Part 1 Stamp duty 1 FA 1986 is amended as follows. 2 In Part 3 (stamp duty), after section 80C insert— Repurchases and stock lending: replacement stock on insolvency 80D (1) This section applies where— (a) A and B have entered into an arrangement falling within section 80C(1), (b) the conditions in subsection (2A) or (3) of that section are met, (c) stock is transferred to A or A's nominee, and (d) the conditions in subsection (2) below are met. (2) The conditions in this subsection are that— (a) A and B are not connected persons within the meaning of section 839 of the Taxes Act 1988, (b) after B has transferred stock under the arrangement, A or B becomes insolvent, (c) it becomes apparent (whether before or after the insolvency occurs) that, as a result of the insolvency, stock will not be transferred to B or B's nominee in accordance with the arrangement, (d) the party who does not become insolvent (“the solvent party”) or the solvent party's nominee acquires replacement stock, and (e) the replacement stock is acquired before the end of the period of 30 days beginning with the day on which the insolvency occurs (“the insolvency date”). (3) Where collateral is provided under the arrangement (or under arrangements of which that arrangement forms part), stamp duty is not chargeable on any instrument transferring to the solvent party or the solvent party's nominee— (a) replacement stock acquired using the collateral (whether directly or indirectly), or (b) where the solvent party uses the whole of the value of the collateral to acquire replacement stock, any further replacement stock. (4) Where no collateral is provided as mentioned in subsection (3), stamp duty is not chargeable on any instrument transferring replacement stock to the solvent party or the solvent party's nominee. (5) Subsections (3) and (4) may apply as regards more than one instrument (and where those subsections apply as regards more than one instrument, the instruments may be executed by different persons). (6) But those subsections apply only as regards replacement stock up to the amount of stock which will not be transferred as a result of the insolvency. (7) An instrument on which stamp duty is not chargeable by virtue only of subsection (3) or (4) is not to be deemed to be duly stamped unless it has been stamped with a stamp denoting that it is not chargeable with any duty. (8) Despite section 122(1) of the Stamp Act 1891, the stamp mentioned in subsection (7) may be a stamp of such kind as the Commissioners for Her Majesty's Revenue and Customs may prescribe. (9) For the purposes of this section a person becomes insolvent— (a) if a company voluntary arrangement takes effect under Part 1 of the Insolvency Act 1986, (b) if an administration application (within the meaning of Schedule B1 to that Act) is made or a receiver or manager, or an administrative receiver, is appointed, (c) on the commencement of a creditor's voluntary winding up (within the meaning of Part 4 of that Act) or a winding up by the court under Chapter 6 of that Part, (d) if an individual voluntary arrangement takes effect under Part 8 of that Act, (e) on the presentation of a bankruptcy petition (within the meaning of Part 9 of that Act), (f) if a compromise or arrangement takes effect under Part 26 of the Companies Act 2006, (g) if a bank insolvency order takes effect under Part 2 of the Banking Act 2009, (h) if a bank administration order takes effect under Part 3 of that Act, or (i) on the occurrence of any corresponding event which has effect under or as a result of the law of Scotland or Northern Ireland or a country or territory outside the United Kingdom. (10) In this section— “collateral” means an amount of money or other property which is payable to, or made available for the benefit of, a party to an arrangement or that party's nominee for the purpose of securing the discharge of the requirement to transfer stock to that party or the nominee; “replacement stock”, in the event of a party to an arrangement becoming insolvent, is stock of the same kind as the stock which will not be transferred to the other party or that party's nominee as a result of the insolvency. 3 (1) In consequence of the amendment made by paragraph 2, section 88(1C) (disregard of certain instruments falling within section 80C(1)) is amended as follows. (2) At the beginning of the words after paragraph (c) insert “ then, if section 80D does not apply, ”. Part 2 Stamp duty reserve tax 4 Part 4 of FA 1986 (stamp duty reserve tax) is amended as follows. 5 After section 89AA insert— Section 87: exception for repurchases and stock lending in case of insolvency 89AB (1) This section applies where— (a) P and Q have entered into an arrangement falling within section 89AA(1), (b) the only reason that the conditions in subsection (2A) or (3) of that section are not met is that chargeable securities of the same kind and amount as those transferred to P or P's nominee are not transferred to Q or Q's nominee, and (c) the conditions in subsection (2) below are met. (2) The conditions in this subsection are that— (a) P and Q are not connected persons within the meaning of section 839 of the Taxes Act 1988, (b) after Q has transferred securities under the arrangement, either P or Q becomes insolvent, (c) it becomes apparent (whether before or after the insolvency occurs) that, as a result of the insolvency, securities will not be transferred to Q or Q's nominee in accordance with the arrangement. (3) Section 87 does not apply as regards an agreement to transfer chargeable securities to P or P's nominee, or Q or Q's nominee, in accordance with the arrangement. (4) Subsections (5) and (6) apply if— (a) the party who does not become insolvent (“the solvent party”) or the solvent party's nominee acquires replacement securities, and (b) the replacement securities are acquired before the end of the period of 30 days beginning with the day on which the insolvency occurs (“the insolvency date”). (5) Where collateral is provided under the arrangement (or under arrangements of which that arrangement forms part), section 87 does not apply as regards any agreement to transfer to the solvent party or the solvent party's nominee— (a) replacement securities acquired using the collateral (whether directly or indirectly), or (b) where the solvent party uses the whole of the value of the collateral to acquire replacement securities, any further replacement securities. (6) Where no collateral is provided as mentioned in subsection (5), section 87 does not apply as regards any agreement to transfer replacement securities to the solvent party or the solvent party's nominee. (7) Subsections (5) and (6) may apply as regards more than one agreement (and where those subsections apply as regards more than one agreement, the agreements may be with different persons). (8) But those subsections apply only as regards replacement securities up to the amount of securities which will not be transferred as a result of the insolvency. (9) For the purposes of this section a person becomes insolvent— (a) if a company voluntary arrangement takes effect under Part 1 of the Insolvency Act 1986, (b) if an administration application (within the meaning of Schedule B1 to that Act) is made or a receiver or manager, or an administrative receiver, is appointed, (c) on the commencement of a creditor's voluntary winding up (within the meaning of Part 4 of that Act) or a winding up by the court under Chapter 6 of that Part, (d) if an individual voluntary arrangement takes effect under Part 8 of that Act, (e) on the presentation of a bankruptcy petition (within the meaning of Part 9 of that Act), (f) if a compromise or arrangement takes effect under Part 26 of the Companies Act 2006, (g) if a bank insolvency order takes effect under Part 2 of the Banking Act 2009, (h) if a bank administration order takes effect under Part 3 of that Act, or (i) on the occurrence of any corresponding event which has effect under or as a result of the law of Scotland or Northern Ireland or a country or territory outside the United Kingdom. (10) In this section— “collateral” means an amount of money or other property which is payable to, or made available for the benefit of, a party to an arrangement or that party's nominee for the purpose of securing the discharge of the requirement to transfer securities to that party or the nominee; “replacement securities”, in the event of a party to an arrangement becoming insolvent, are chargeable securities of the same kind as the securities which will not be transferred to the other party or that party's nominee as a result of the insolvency.

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SCHEDULE 38 Capital allowances for oil decommissioning expenditure

Section 84 1 CAA 2001 is amended as follows. 2 (1) Section 163 (meaning of “general decommissioning expenditure”) is amended as follows. (2) In subsection (1), for “(3) and (4)” substitute “ (3) to (4) ”. (3) After subsection (3) insert— (3A) The expenditure must have been incurred wholly or substantially in complying with— (a) an approved abandonment programme, (b) a condition to which the approval of an abandonment programme is subject, or (c) a condition imposed by the Secretary of State, or an agreement made with the Secretary of State— (i) before the approval of an abandonment programme, and (ii) in relation to the decommissioning of the plant or machinery. (4) In subsection (5)(b), insert at the beginning “ “abandonment programme”, “approval” and “approved” (in relation to an abandonment programme),”. 3 (1) Section 164 (general decommissioning expenditure incurred before cessation of ring fence trade) is amended as follows. (2) For subsection (1) substitute— (1) A person (“R”) carrying on a ring fence trade may elect to have a special allowance made to R for a chargeable period (the “relevant chargeable period”) if conditions A and B are met. (1A) Condition A is that one or more of these paragraphs applies— (a) R incurs general decommissioning expenditure in the relevant chargeable period in respect of decommissioning carried out in that period; (b) R incurs general decommissioning expenditure in the relevant chargeable period in respect of decommissioning carried out in a previous chargeable period; (c) R incurred general decommissioning expenditure in a previous chargeable period in respect of decommissioning that has not been carried out until the relevant chargeable period. (1B) Condition B is that the plant or machinery concerned has been brought into use for the purposes of the ring fence trade. (3) In subsection (2)(a), for the words from “the chargeable period” to the end substitute “ the relevant chargeable period, and ”. (4) In subsection (3)— (a) in paragraph (a), omit the “and” at the end, and (b) after that paragraph insert— (aa) the chargeable period in which the expenditure was incurred, (ab) the decommissioning to which the expenditure relates, (ac) the chargeable period in which the decommissioning was carried out, and . (5) In subsection (4)(a), for the words from “the chargeable period” to the end substitute “ the relevant chargeable period, and ”. (6) In subsection (5), for the words from “a chargeable period” to the end substitute “ the relevant chargeable period is equal to the amount of the general decommissioning expenditure to which the election relates. ” (7) After that subsection insert— (5A) But subsection (5) is subject to subsections (5B) and (6). (5B) If an amount of general decommissioning expenditure to which the election relates is disproportionate to the relevant decommissioning carried out in the specified decommissioning period then, for the purposes of this section, the election is to be taken to specify only the allowable expenditure. (5C) The application of subsection (5B) to an amount of general decommissioning expenditure does not prevent a person from making an election under this section for a subsequent chargeable period specifying the non-allowable expenditure. (5D) In subsections (5B) and (5C)— “allowable expenditure”, in relation to general decommissioning expenditure, means the amount of the expenditure that is proportionate to the relevant decommissioning carried out in the specified decommissioning period; “non-allowable expenditure”, in relation to general decommissioning expenditure, means so much of that expenditure as is not allowable expenditure; “relevant decommissioning”, in relation to general decommissioning expenditure, means the decommissioning to which the expenditure relates; “specified decommissioning period”, in relation to relevant decommissioning, means the chargeable period specified in the election as the period in which the decommissioning was carried out; “specified expenditure period”, in relation to general decommissioning expenditure, means the chargeable period specified in the election as the period in which the expenditure was incurred. 4 (1) Section 165 (general decommissioning expenditure after ceasing ring fence trade) is amended as follows. (2) In subsection (1), for paragraph (b) substitute— (b) the decommissioning condition is met in relation to a notional accounting period, and . (3) After that subsection insert— (1A) The decommissioning condition is met in relation to a notional accounting period (the “relevant period”) if one or more of these paragraphs applies— (a) the former trader incurs general decommissioning expenditure in the relevant period in respect of decommissioning carried out in that period, (b) the former trader incurs general decommissioning expenditure in the relevant period in respect of decommissioning carried out in— (i) a previous notional accounting period, or (ii) a chargeable period falling before the first notional accounting period, and (c) the former trader incurred general decommissioning expenditure in— (i) a previous notional accounting period, or (ii) a chargeable period falling before the first notional accounting period, in respect of decommissioning that has not been carried out until the relevant period. (1B) “Notional accounting period” 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; but there are to be no notional accounting periods after the end of the post-cessation period. (1C) “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 (6A) and (6B)), and (c) the end of the post-cessation period. (4) In subsection (3)— (a) after “applies” insert “ in relation to a notional accounting period ”, and (b) in paragraph (a), after “relevant decommissioning cost” insert “ for that period, or the aggregate of all the relevant decommissioning costs for that period, ”. (5) In subsection (4), for the definition of “the relevant decommissioning cost” substitute— “relevant decommissioning cost”, for a notional accounting period, means the amount by which general decommissioning expenditure falling within paragraph (a), (b) or (c) of subsection (1A) in relation to that period exceeds any amounts received before or during that period for the remains of any plant or machinery on whose demolition any of the general decommissioning expenditure was incurred. (6) After subsection (4A) insert— (4B) If an amount of general decommissioning expenditure is disproportionate to the relevant decommissioning carried out in the decommissioning period then, for the purposes of this section, only the allowable expenditure is to be taken to have been incurred in the expenditure period. (4C) The application of subsection (4B) to an amount of general decommissioning expenditure does not prevent the non-allowable expenditure from being taken into account under this section in relation to a subsequent notional accounting period. (4D) In subsections (4B) and (4C)— “allowable expenditure”, in relation to general decommissioning expenditure, means the amount of the expenditure that is proportionate to the relevant decommissioning carried out in the decommissioning period; “decommissioning period”, in relation to relevant decommissioning, means the notional accounting period or chargeable period in which the decommissioning was carried out; “expenditure period”, in relation to general decommissioning expenditure, means the notional accounting period or chargeable period in which the expenditure was incurred; “non-allowable expenditure”, in relation to general decommissioning expenditure, means so much of that expenditure as is not allowable expenditure; “relevant decommissioning”, in relation to general decommissioning expenditure, means the decommissioning to which the expenditure relates. (7) After subsection (6) insert— (6A) 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 company's activities, subsection (1C)(b) applies with reference to the accounting date of such one of the trades as the former trader may determine. (6B) 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 (6A) is inappropriate, the Commissioners may 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. 5 The amendments made by this Schedule have effect in relation to expenditure incurred on or after 22 April 2009.

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