xmlns:atom="http://www.w3.org/2005/Atom" xmlns:atom="http://www.w3.org/2005/Atom"

U.K.

Finance (No. 2) Act 2017

2017 CHAPTER 32

An Act to grant certain duties, to alter other duties, and to amend the law relating to the national debt and the public revenue, and to make further provision in connection with finance.

[16th November 2017]

Most Gracious Sovereign

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

PART 1 U.K.Direct taxes

Income tax: employment and pensionsU.K.

1Taxable benefits: time limit for making goodU.K.

(1)Part 3 of ITEPA 2003 (employment income: earnings and benefits etc treated as earnings) is amended as follows.

(2)In section 87 (cash equivalent of benefit of non-cash voucher)—

(a)in subsection (2)(b), for “to the person incurring it” substitute “ , to the person incurring it, on or before 6 July following the relevant tax year ”, and

(b)after subsection (2) insert—

(2A)If the voucher is a non-cash voucher other than a cheque voucher, the relevant tax year is—

(a)the tax year in which the cost of provision is incurred, or

(b)if later, the tax year in which the employee receives the voucher.

(2B)If the voucher is a cheque voucher, the relevant tax year is the tax year in which the voucher is handed over in exchange for money, goods or services.

(3)In section 88(3) (time at which cheque voucher treated as handed over), at the beginning insert “ For the purposes of subsection (2) and sections 87(2B) and 87A(6), ”.

(4)In section 94(2) (cash equivalent of benefit of credit-token), in paragraph (b), for the words from “employee” to the end substitute employee—

(i)to the person incurring it, and

(ii)on or before 6 July following the tax year which contains the occasion in question.

(5)In section 105(2) (cash equivalent of benefit of living accommodation costing £75,000 or less), in paragraph (b), after “made good” insert “ , on or before 6 July following the tax year which contains the taxable period, ”.

(6)In section 106(3) (cash equivalent of benefit of living accommodation costing over £75,000), in paragraph (a), for the words from “paid” to “exceeds” substitute paid—

(i)by the employee,

(ii)in respect of the accommodation,

(iii)to the person providing it, and

(iv)on or before 6 July following the tax year which contains the taxable period,

exceeds .

(7)In section 144 (deduction for payments for private use of car)—

(a)in subsection (1)(b), for “in” substitute “ on or before 6 July following ”,

(b)in subsection (2), after “paid” insert “ as mentioned in subsection (1)(b) ”, and

(c)in subsection (3), after “paid” insert “ as mentioned in subsection (1)(b) ”.

(8)In section 151(2) (when cash equivalent of benefit of car fuel is nil)—

(a)in the words before paragraph (a) omit “in the tax year in question”,

(b)in paragraph (a), at the beginning insert “ in the tax year in question, ”, and

(c)in paragraph (b), at the end insert “ on or before 6 July following that tax year ”.

(9)In section 152(2) (car fuel: proportionate reduction of cash equivalent)—

(a)in the words before paragraph (a) omit “for any part of the tax year in question”,

(b)in paragraph (a), at the beginning insert “ for any part of the tax year in question, ”,

(c)in paragraph (b), at the beginning insert “ for any part of the tax year in question, ”, and

(d)in paragraph (c)—

(i)after “employee”, in the first place it occurs, insert

(i)for any part of the tax year in question,, and

(ii)for “and the employee does make good that expense” substitute , and

(ii)the employee does make good that expense on or before 6 July following that tax year.

(10)In section 158 (reduction for payments for private use of van)—

(a)in subsection (1)(b), for “in” substitute “ on or before 6 July following ”,

(b)in subsection (2), after “paid” insert “ as mentioned in subsection (1)(b) ”, and

(c)in subsection (3), after “paid” insert “ as mentioned in subsection (1)(b) ”.

(11)In section 162(2) (when cash equivalent of benefit of van fuel is nil)—

(a)in the words before paragraph (a) omit “in the tax year in question”,

(b)in paragraph (a), at the beginning insert “ in the tax year in question, ”, and

(c)in paragraph (b), at the end insert “ on or before 6 July following that tax year ”.

(12)In section 163(3) (van fuel: proportionate reduction of cash equivalent)—

(a)in the words before paragraph (a) omit “for any part of the tax year in question”,

(b)in paragraph (a), at the beginning insert “ for any part of the tax year in question, ”,

(c)in paragraph (b), at the beginning insert “ for any part of the tax year in question, ”, and

(d)in paragraph (c)—

(i)after “employee”, in the first place it occurs, insert

(i)for any part of the tax year in question,, and

(ii)for “and the employee does make good that expense” substitute , and

(ii)the employee does make good that expense on or before 6 July following that tax year.

(13)In section 203(2) (cash equivalent of benefit treated as earnings), for “to the persons providing the benefit” substitute “ , to the persons providing the benefit, on or before 6 July following the tax year in which it is provided ”.

(14)The amendments made by this section have effect for the purpose of calculating income tax charged for the tax year 2017-18 or any subsequent tax year.

2Taxable benefits: ultra-low emission vehiclesU.K.

(1)ITEPA 2003 is amended as follows.

(2)In section 139 (car with a CO2 emissions figure: the appropriate percentage), for subsections (1) to (6) substitute—

(1)The appropriate percentage for a year for a car with a CO2 emissions figure of less than 75 is determined in accordance with the following table.

Car Appropriate percentage
Car with CO2 emissions figure of 02%
Car with CO2 emissions figure of 1 - 50

Car with electric range figure of 130 or more

2%

Car with electric range figure of 70 - 129

5%

Car with electric range figure of 40 - 69

8%

Car with electric range figure of 30 - 39

12%

Car with electric range figure of less than 30

14%
Car with CO2 emissions figure of 51 - 5415%
Car with CO2 emissions figure of 55 - 5916%
Car with CO2 emissions figure of 60 - 6417%
Car with CO2 emissions figure of 65 - 6918%
Car with CO2 emissions figure of 70 - 7419%

(2)For the purposes of subsection (1) and the table, if a CO2 emissions figure or an electric range figure is not a whole number, round it down to the nearest whole number.

(3)The appropriate percentage for a year for a car with a CO2 emissions figure of 75 or more is whichever is the lesser of—

(a)20% plus one percentage point for each 5 grams per kilometre driven by which the CO2 emissions figure exceeds 75, and

(b)37%.

(4)For the purposes of subsection (3), if a CO2 emissions figure is not a multiple of 5, round it down to the nearest multiple of 5.

(5)In this section, an “electric range figure” is the number of miles which is the equivalent of the number of kilometres specified in an EC certificate of conformity, an EC type-approval certificate or a UK approval certificate on the basis of which a car is registered, as being the maximum distance for which the car can be driven in electric mode without recharging the battery.

(3)In section 140 (car without a CO2 emissions figure: the appropriate percentage)—

(a)in subsection (2), in the table —

(i)for “23%” substitute “ 24% ”, and

(ii)for “34%” substitute “ 35% ”;

(b)in subsection (3)(a), for “16%” substitute “ 2% ”.

(4)In section 142(2) (car first registered before 1 January 1998: the appropriate percentage), in the table—

(a)for “23%” substitute “ 24% ”, and

(b)for “34%” substitute “ 35% ”.

(5)Omit subsection 170(3).

(6)The amendments made by this section have effect for the tax year 2020-21 and subsequent tax years.

3Pensions adviceU.K.

(1)In Chapter 9 of Part 4 of ITEPA 2003, after section 308B insert—

308CProvision of pensions advice: limited exemption

(1)No liability to income tax arises in respect of—

(a)the provision of relevant pensions advice to an employee or former or prospective employee, or

(b)the payment or reimbursement of costs incurred, by or in respect of an employee or former or prospective employee, in obtaining relevant pensions advice,

if Condition A or B is met.

(2)But subsection (1) does not apply in relation to a person in a tax year so far as the value of the exemption in the person's case in that year exceeds £500.

(3)The “value of the exemption”, in relation to a person and a tax year, is the amount exempted by subsection (1) from income tax in the person's case in that year, disregarding subsection (2) for this purpose.

(4)If in a tax year there is in relation to an individual more than one person who is an employer or former employer, subsections (1) to (3) apply in relation to the individual as employee or former or prospective employee of any one of those persons separately from their application in relation to the individual as employee or former or prospective employee of any other of those persons.

(5)Relevant pensions advice”, in relation to a person, means information, or advice, in connection with—

(a)the person's pension arrangements, or

(b)the use of the person's pension funds.

(6)Condition A is that the relevant pensions advice, or payment or reimbursement, is provided under a scheme that is open—

(a)to the employer's employees generally, or

(b)generally to the employer's employees at a particular location.

(7)Condition B is that the relevant pensions advice, or payment or reimbursement, is provided under a scheme that is open generally to the employer's employees, or generally to those of the employer's employees at a particular location, who—

(a)have reached the minimum qualifying age, or

(b)meet the ill-health condition.

(8)The “minimum qualifying age”, in relation to an employee, means the employee's relevant pension age less 5 years.

(9)Relevant pension age”, in relation to an employee, means—

(a)where paragraph 22 or 23 of Schedule 36 to FA 2004 applies in relation to the employee and a registered pension scheme of which the employee is a member, the employee's protected pension age (see paragraph 22(8) and 23(8) of Schedule 36 to FA 2004), or

(b)in any other case, the employee's normal minimum pension age, as defined by section 279(1) of FA 2004.

(10)The “ill-health condition” is met by an employee if the employer is satisfied, on the basis of evidence provided by a registered medical practitioner, that the employee is (and will continue to be) incapable of carrying on his or her occupation because of physical or mental impairment.

(2)In section 228 of ITEPA 2003 (effect of exemptions on liability under provisions outside Part 2 of ITEPA 2003), in subsection (2), after paragraph (da) insert—

(db)section 308C (provision of pensions advice),.

(3)Regulation 5 of the Income Tax (Exemption of Minor Benefits) Regulations 2002 (S.I. 2002/205) (exemption in respect of the provision of pensions advice) is revoked.

(4)In regulation 2 of the Income Tax (Exemption of Minor Benefits) (Amendment) Regulations 2004 (S.I. 2004/3087) omit the inserted regulation 5.

(5)The amendments made by this section have effect for the tax year 2017-18 and subsequent tax years.

4Legal expenses etcU.K.

(1)ITEPA 2003 is amended as follows.

(2)In section 346 (deduction for employee liabilities)—

(a)in the heading, at the end insert “ and expenses ”,

(b)after paragraph B (in subsection (1)) insert—

Payment of any costs or expenses not falling within paragraph B which are incurred in connection with the employee giving evidence about matters related to the employment in, or for the purposes of—

(a)a proceeding or other process (whether or not involving the employee), or

(b)an investigation (whether or not likely to lead to any proceeding or other process involving the employee).

Payment of any costs or expenses not falling within paragraph B or BA which are incurred in connection with a proceeding or other process, or an investigation, in which—

(a)acts of the employee related to the employment, or

(b)any other matters related to the employment,

are being or are likely to be considered.,

(c)in paragraph C(b) (in subsection (1)), after “B” insert “ , BA or BB ”,

(d)in subsection (2) for “or B” substitute “ B, BA or BB ”,

(e)in subsection (2A), for “paragraph A, B or C” substitute “ any of paragraphs A to C ”, and

(f)after subsection (3) insert—

(4)In this section and section 349—

(a)acts” includes failures to act and acts are “related to the employment” if the employee was acting—

(i)in the employee's capacity as holder of the employment, or

(ii)in any other capacity in which the employee was acting in the performance of the duties of the employment,

(b)giving evidence” includes making a formal or informal statement or answering questions,

(c)proceeding or other process” includes any civil, criminal or arbitration proceedings, any disciplinary or regulatory proceedings of any kind and any process operated for resolving disputes or adjudicating on complaints, and

(d)references to a proceeding or other process or an investigation include a reference to a proceeding or other process or an investigation that is likely to take place.

(3)In section 349 (section 346: meaning of “qualifying insurance contract”), in subsection (2)—

(a)after paragraph (c) insert—

(ca)the payment of costs or expenses incurred in connection with an employee giving evidence about matters related to the employee's employment in, or for the purposes of—

(i)a proceeding or other process (whether or not involving the employee), or

(ii)an investigation (whether or not likely to lead to any proceeding or other process involving the employee),

(cb)the payment of any costs or expenses incurred in connection with a proceeding or other process, or an investigation, in which—

(i)acts of an employee related to the employment, or

(ii)any other matters related to the employment of an employee,

are being or are likely to be considered,, and

(b)in subsection (2)(d), after “(c)” insert “ , (ca) or (cb) ”.

(4)In section 409 (payments and benefits on termination of employment etc: exception for payments and benefits in respect of employee liabilities and indemnity insurance)—

(a)in the heading, for “employee liabilities” substitute “ certain legal expenses etc ”, and

(b)in subsection (3), at the end insert “ or by the employer or former employer on behalf of the individual ”.

(5)In section 410 (payments and benefits on termination of employment etc: exception for certain payments and benefits received by personal representatives of deceased individual)—

(a)in the heading for “employee liabilities” substitute “ certain legal expenses etc ”, and

(b)in subsection (3), at the end insert “ or by the former employer on behalf of the individual's personal representatives ”.

(6)In section 558 (deductions for liabilities of former employees: meaning of “deductible payment”)—

(a)after paragraph B (in subsection (1)) insert—

Payment of any costs or expenses not falling within paragraph B which are incurred in connection with the former employee giving evidence about matters related to the former employment in, or for the purposes of—

(a)a proceeding or other process (whether or not involving the former employee), or

(b)an investigation (whether or not likely to lead to any proceeding or other process involving the former employee).

Payment of any costs or expenses not falling within paragraph B or BA which are incurred in connection with a proceeding or other process, or an investigation, in which—

(a)acts of the former employee related to the former employment, or

(b)any other matters related to the former employment,

are being or are likely to be considered., and

(b)in paragraph C(b) (in subsection (1)), after “B” insert “ , BA or BB ”,

(c)in subsection (2), for “or B” substitute “ B, BA or BB ”,

(d)after subsection (3) insert—

(4)In this section and section 560—

(a)acts” includes failures to act and acts are “related to the former employment” if the former employee was acting—

(i)in the employee's capacity as holder of the former employment, or

(ii)in any other capacity in which the former employee was acting in the performance of the duties of that employment,

(b)giving evidence” includes making a formal or informal statement or answering questions,

(c)proceeding or other process” includes any civil, criminal or arbitration proceedings, any disciplinary or regulatory proceedings of any kind and any process operated for resolving disputes or adjudicating on complaints, and

(d)references to a proceeding or other process or an investigation include a reference to a proceeding or other process or an investigation that is likely to take place.

(7)In section 560 (section 558: meaning of “qualifying insurance contract”), in subsection (2)—

(a)after paragraph (c) insert—

(ca)the payment of costs or expenses incurred in connection with a former employee giving evidence about matters related to the former employment in, or for the purposes of—

(i)a proceeding or other process (whether or not involving the former employee), or

(ii)an investigation (whether or not likely to lead to any proceeding or other process involving the former employee).

(cb)the payment of any costs or expenses incurred in connection with a proceeding or other process, or an investigation, in which—

(i)acts of a former employee related to the employment, or

(ii)any other matters related to the former employment of a former employee,

are being or are likely to be considered,, and

(b)in paragraph (d), after “(c)” insert “ , (ca) or (cb) ”.

(8)The amendments made by this section have effect in relation to the tax year 2017-18 and subsequent tax years.

5Termination payments etc: amounts chargeable on employment incomeU.K.

(1)ITEPA 2003 is amended in accordance with subsections (2) to (9).

(2)In section 7(5) (list of provisions under which amounts are treated as earnings), before the “or” at the end of paragraph (c) insert—

(ca)section 402B (termination payments, and other benefits, that cannot benefit from section 403 threshold),.

(3)Before section 403 (charge on payments and benefits in excess of £30,000 threshold) insert—

402ASplit of payments and other benefits between sections 402B and 403

(1)In this Chapter “termination award” means a payment or other benefit to which this Chapter applies because of section 401(1)(a).

(2)Section 402B (termination awards not benefiting from threshold treated as earnings) applies to termination awards to the extent determined under section 402C.

(3)Section 403 (charge on payment or benefit where threshold applies) applies to termination awards so far as they are not ones to which section 402B applies.

(4)Section 403 also applies to payments and other benefits to which this Chapter applies because of section 401(1)(b) or (c) (change in duties or earnings).

402BTermination awards not benefiting from threshold to be treated as earnings

(1)The amount of a termination award to which this section applies is treated as an amount of earnings of the employee, or former employee, from the employment.

(2)See also section 7(3)(b) and (5)(ca) (which cause amounts treated as earnings under this section to be included in general earnings).

(3)Section 403(3) (when benefits are received) does not apply in relation to payments or other benefits to which this section applies.

402CThe termination awards to which section 402B applies

(1)This section has effect for the purpose of identifying the extent to which section 402B applies to termination awards in respect of the termination of the employment of the employee.

(2)In this section “relevant termination award” means a termination award that is neither—

(a)a redundancy payment, nor

(b)so much of an approved contractual payment as is equal to or less than the amount which would have been due if a redundancy payment had been payable.

(3)If the post-employment notice pay (see section 402D) in respect of the termination is greater than, or equal to, the total amount of the relevant termination awards in respect of the termination, section 402B applies to all of those relevant termination awards.

(4)If the post-employment notice pay in respect of the termination is less than the total amount of the relevant termination awards in respect of the termination but is not nil—

(a)section 402B applies to a part of those relevant termination awards, and

(b)the amount of that part is equal to the post-employment notice pay.

(5)Section 309(4) to (6) (meaning of “redundancy payment” and “approved contractual payment” etc) apply for the purposes of subsection (2) as they apply for the purposes of section 309.

402D“Post-employment notice pay”

(1)“The post-employment notice pay” in respect of a termination is (subject to subsection (11)) given by—

where—

BP, D and P are given by subsections (3) to (7), and

T is the total of the amounts of any payment or benefit received in connection with the termination which—

(a)

would fall within section 401(1)(a) but for section 401(3),

(b)

is taxable as earnings under Chapter 1 of Part 3,

(c)

is not pay in respect of holiday entitlement for a period before the employment ends, and

(d)

is not a bonus payable for termination of the employment.

(2)If the amount given by the formula in subsection (1) is a negative amount, the post-employment notice pay is nil.

(3)Subject to subsections (5) and (6)—

(4)See section 402E for the meaning of “trigger date” and “post-employment notice period”.

(5)If there is no pay period of the employee which ends before the trigger date then—

(6)If the last pay period of the employee to end before the trigger date is a month, the minimum notice (see section 402E) is given by contractual terms and is expressed to be a whole number of months, and the post-employment notice period is equal in length to the minimum notice or is otherwise a whole number of months, then—

(7)In this section “basic pay” means—

(a)employment income of the employee from the employment but disregarding—

(i)any amount received by way of overtime, bonus, commission, gratuity or allowance,

(ii)any amount received in connection with the termination of the employment,

(iii)any amount treated as earnings under Chapters 2 to 10 of Part 3 (the benefits code) or which would be so treated apart from section 64,

(iv)any amount which is treated as earnings under Chapter 12 of Part 3 (amounts treated as earnings),

(v)any amount which counts as employment income by virtue of Part 7 (income relating to securities and securities options), and

(vi)any employment-related securities that constitute earnings under Chapter 1 of Part 3 (earnings), and

(b)any amount which the employee has given up the right to receive but which would have fallen within paragraph (a) had the employee not done so.

(8)In subsection (7) “employment-related securities” has the same meaning as it has in Chapter 1 of Part 7 (see section 421B).

(9)The Treasury may by regulations amend this section for the purpose of altering the meaning of “basic pay”.

(10)A statutory instrument containing regulations under subsection (9) may not be made unless a draft of it has been laid before, and approved by a resolution of, the House of Commons.

(11)Where the purpose, or one of the purposes, of any arrangements is the avoidance of tax by causing the post-employment notice pay calculated under subsection (1) to be less than it would otherwise be, the post-employment notice pay is to be treated as the amount which the post-employment notice pay would have been but for the arrangements.

(12)In subsection (11) “arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.

402EMeaning of “trigger date” and “post-employment notice period” in section 402D

(1)Subsections (2) and (4) to (6) have effect for the purposes of section 402D (and subsection (4) has effect also for the purposes of this section).

(2)The “trigger date” is—

(a)if the termination is not a notice case, the last day of the employment, and

(b)if the termination is a notice case, the day the notice is given.

(3)For the purposes of this section, the termination is a “notice case” if the employer or employee gives notice to the other to terminate the employment, and here it does not matter—

(a)whether the notice is more or less than, or the same as, the minimum notice, or

(b)if the employment ends before the notice expires.

(4)The “minimum notice” is the minimum notice required to be given by the employer to terminate the employee's employment by notice in accordance with the law and contractual terms effective—

(a)where the termination is not a notice case—

(i)immediately before the employment ends, or

(ii)where the employment ends by agreement entered into after the start of the employment, immediately before the agreement is entered into, and

(b)where the termination is a notice case, immediately before the notice is given.

(5)The “post-employment notice period” is the period—

(a)beginning at the end of the last day of the employment, and

(b)ending with the earliest lawful termination date.

(But see subsection (8) for provision about limited-term contracts.)

(6)If the earliest lawful termination date is, or precedes, the last day of the employment, the number of days in the post-employment notice period is nil.

(7)“The earliest lawful termination date” is the last day of the period which—

(a)is equal in length to the minimum notice, and

(b)begins at the end of the trigger date.

(8)In the case of a contract of employment which is a limited-term contract and which does not include provision for termination by notice by the employer, the post-employment notice period is the period—

(a)beginning at the end of the last day of the employment, and

(b)ending with the day of the occurrence of the limiting event.

(9)If, in a case to which subsection (8) applies, on the last day of the employment the day of the occurrence of the limiting event is not ascertained or ascertainable (because, for example, the limiting event is the performance of a task), then subsection (8) has effect as if for paragraph (b) there were substituted—

(b)ending with the day on which notice would have expired if the employer had, on the last day of the employment, given to the employee the minimum notice required to terminate the contract under section 86 of the Employment Rights Act 1996 (assuming that that section applies to the employment).

(10)In this section “limited-term contract” and “limiting event” have the same meaning as in the Employment Rights Act 1996 (see section 235(2A) and (2B)).

(4)In section 403 (charges on payments and benefits which can benefit from threshold)—

(a)in subsection (1), for “Chapter” substitute “ section ”,

(b)in subsection (3), after “Chapter” insert “ (but see section 402B(3)) ”,

(c)in subsection (4), for the words from “when” to “exceeds” substitute when aggregated with—

(a)other payments or benefits in respect of the employee or former employee that are payments or benefits to which this section applies, and

(b)other payments or benefits in respect of the employee or former employee that are payments or benefits—

(i)received in the tax year 2017-18 or an earlier tax year, and

(ii)to which this Chapter applied in the tax year of receipt,

it exceeds ,

(d)in subsection (5)(a), for “Chapter” substitute “ section ”,

(e)in subsection (6), after “employment income” insert “ or, as the case may be, in relation to whom section 402B(1) provides for an amount to be treated as an amount of earnings ”, and

(f)in the heading, at the end insert “ where threshold applies ”.

(5)In section 404 (how the threshold applies)—

(a)in subsection (3)(b) (meaning of “termination or change date”), for “this Chapter” substitute “ section 403 ”, and

(b)after subsection (5) insert—

(6)In subsection (3)(b), the reference to a payment or other benefit to which section 403 applies includes a reference to a payment or other benefit—

(a)received in the tax year 2017-18 or an earlier tax year, and

(b)to which this Chapter applied in the tax year of receipt.

(6)After section 404A insert—

404BPower to vary threshold

(1)The Treasury may by regulations amend the listed provisions by substituting, for the amount for the time being mentioned in those provisions, a different amount.

(2)The listed provisions are—

(3)Regulations under this section may include transitional provision.

(4)A statutory instrument containing regulations under this section which reduce the mentioned amount may not be made unless a draft of it has been laid before, and approved by a resolution of, the House of Commons.

(7)In section 406 (exception in cases of death, injury or disability)—

(a)the existing text becomes subsection (1), and

(b)after that subsection insert—

(2)Although “injury” in subsection (1) includes psychiatric injury, it does not include injured feelings.

(8)In section 414(2) (proportionate reduction for foreign service in certain cases), for “otherwise count as employment income under this Chapter” substitute otherwise—

(a)be treated as earnings by section 402B(1), or

(b)count as employment income as a result of section 403.

(9)In section 717(4) (regulations etc not subject to negative procedure), before “or section 681F(3)” insert “ , section 402D(10) (meaning of basic pay for purpose of calculating charge on termination award), section 404B(4) (reduction of tax-free threshold for employment-termination etc payments) ”.

(10)The amendments made by this section have effect for the tax year 2018-19 and subsequent tax years.

6PAYE settlement agreementsU.K.

(1)In Chapter 5 of Part 11 of ITEPA 2003 (PAYE settlement agreements), in sections 703(a) and 704(1)(a), for “an officer of Revenue and Customs” substitute “ Her Majesty's Revenue and Customs ”.

(2)The amendment made by this section has effect in relation to the tax year 2018-19 and subsequent tax years.

7Money purchase annual allowanceU.K.

(1)Part 4 of FA 2004 is amended as follows.

(2)In section 227ZA (chargeable amount), in subsection (1)(b), for “£10,000” substitute “ £4,000 ”.

(3)In section 227B (alternative chargeable amount), in subsections (1)(b) and (2), for “£10,000” substitute “ £4,000 ”.

(4)In section 227D (pension input amounts in respect of certain hybrid arrangements), in Steps 4 and 5 of subsection (4), for “£10,000” substitute “ £4,000 ”.

(5)The amendments made by this section have effect for the tax year 2017-18 and subsequent tax years.

Income tax: investmentsU.K.

8Dividend nil rate for tax year 2018-19 etcU.K.

(1)In section 13A of ITA 2007 (income charged at the dividend nil rate), for “£5000”, in each place, substitute “ £2000 ”.

(2)The amendments made by this section have effect for the tax year 2018-19 and subsequent tax years.

9Life insurance policies: recalculating gains on part surrenders etcU.K.

(1)ITTOIA 2005 is amended as follows.

(2)After section 507 (method for making periodic calculations in part surrender or assignment cases) insert—

507ARecalculating gains under section 507

(1)An interested person may apply to an officer of Revenue and Customs for a review of a calculation under section 507 on the ground that the gain arising from it is wholly disproportionate.

(2)For the purposes of this section an interested person in relation to a calculation under section 507 is a person who would be liable for all or any part of the amount of tax that would be chargeable under this Chapter if the gain were not recalculated.

(3)Applications under subsection (1) must be—

(a)made in writing, and

(b)received by an officer of Revenue and Customs within—

(i)the four tax years following the tax year in which the gain arose, or

(ii)such longer period as the officer may agree.

(4)In considering whether the gain is wholly disproportionate, the officer may take into account (as well as the amount of the gain) any factor which the officer considers appropriate including, so far as the officer considers it appropriate to do so—

(a)the economic gain on the rights surrendered or assigned,

(b)the amount of the premiums paid under the policy or contract,

(c)the amount of tax that would be chargeable under this Chapter if the gain were not recalculated.

(5)If, following an application under subsection (1), an officer considers that the gain arising from the calculation under section 507 is wholly disproportionate, the officer must recalculate the gain on a just and reasonable basis.

(6)Following a recalculation under subsection (5), references in this Chapter (but excluding this section) to a calculation under section 507 are to be regarded as references to a recalculation under this section.

(7)Following a recalculation under subsection (5), an officer of Revenue and Customs must notify the interested person of the result of the recalculation.

(8)If two or more persons are interested persons in relation to a calculation under section 507—

(a)an application under subsection (1) may be made only by all the interested persons jointly, and

(b)subsection (7) applies as if the reference to the interested person were a reference to each of the interested persons.

(9)Following a recalculation under subsection (5), all necessary adjustments and repayments of income tax are to be made.

(10)No recalculation is to be made under this section if the gain mentioned in subsection (1) arises as a result of one or more transactions which form part of arrangements, the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person.

(11)In this section—

(3)After section 512 (available premium left for relevant transaction in certain part surrender or assignment cases) insert—

512ARecalculating gains under section 511

(1)An interested person may apply to an officer of Revenue and Customs for a review of a calculation under section 511 on the ground that the gain arising from it is wholly disproportionate.

(2)For the purposes of this section an interested person in relation to a calculation under section 511 is a person who would be liable for all or any part of the amount of tax that would be chargeable under this Chapter—

(a)if the gain were not recalculated, or

(b)if all rights under the policy or contract had been surrendered immediately after the surrender or assignment of rights which gave rise to the calculation.

(3)Applications under subsection (1) must be—

(a)made in writing, and

(b)received by an officer of Revenue and Customs within—

(i)the four tax years following the tax year in which the gain arose, or

(ii)such longer period as the officer may agree.

(4)In considering whether the gain is wholly disproportionate, the officer may take into account (as well as the amount of the gain) any factor which the officer considers appropriate including, so far as the officer considers it appropriate to do so—

(a)the economic gain on the rights surrendered or assigned,

(b)the amount of the premiums paid under the policy or contract,

(c)the amount of tax that would be chargeable under this Chapter if the gain were not recalculated.

(5)If, following an application under subsection (1), an officer considers that the gain arising from the calculation under section 511 is wholly disproportionate, the officer must recalculate the gain on a just and reasonable basis.

(6)Following a recalculation under subsection (5), references in this Chapter (but excluding this section) to a calculation under section 511 are to be regarded as references to a recalculation under this section.

(7)Following a recalculation under subsection (5), an officer of Revenue and Customs must notify the interested person of the result of the recalculation.

(8)If two or more persons are interested persons in relation to a calculation under section 511—

(a)an application under subsection (1) may be made only by all the interested persons jointly, and

(b)subsection (7) applies as if the reference to the interested person were a reference to each of the interested persons.

(9)Following a recalculation under subsection (5), all necessary adjustments and repayments of income tax are to be made.

(10)No recalculation is to be made under this section if the gain mentioned in subsection (1) arises as a result of one or more transactions which form part of arrangements, the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person.

(11)In this section—

(4)In section 538 (recovery of tax from trustees), after subsection (6) insert—

(7)Subsection (8) applies where—

(a)an individual has recovered an amount from trustees under this section, and

(b)subsequently the individual's liability to tax under this Chapter has been reduced (or removed) as a result of a recalculation under section 507A or 512A.

(8)The individual must repay to the trustees the amount (if any) by which the recovered amount exceeds the individual's revised entitlement.

(9)In subsection (8) the individual's revised entitlement is the amount to which the individual is entitled under this section calculated by reference to the individual's liability to tax under this Chapter as reduced (or removed) as a result of the recalculation under section 507A or 512A.

(5)The amendments made by subsection (4) have effect in relation to amounts recovered before, as well as after, the day on which this Act is passed.

10Personal portfolio bondsU.K.

In section 520 of ITTOIA 2005 (property categories), after subsection (4) insert—

(5)The Treasury may by regulations—

(a)amend the table in subsection (2) by adding, removing or amending a category of property;

(b)add, remove or amend a definition relating to any category of property in that table; and

(c)make consequential amendments.

(6)A statutory instrument containing regulations under this section which have the effect of removing a category of property from the table in subsection (2)—

(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.

(7)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 four days.

11EIS and SEIS: the no pre-arranged exits requirementU.K.

(1)ITA 2007 is amended as follows.

(2)In section 177 (EIS: the no pre-arranged exits requirement), for subsection (2) substitute—

(2)The arrangements referred to in subsection (1)(a) do not include—

(a)any arrangements with a view to such an exchange of shares, or shares and securities, as is mentioned in section 247(1), or

(b)any arrangements with a view to any shares in the issuing company being exchanged for, or converted into, shares in that company of a different class.

(3)In section 257CD (SEIS: the no pre-arranged exits requirement), for subsection (2) substitute—

(2)The arrangements referred to in subsection (1)(a) do not include—

(a)any arrangements with a view to such an exchange of shares, or shares and securities, as is mentioned in section 257HB(1), or

(b)any arrangements with a view to any shares in the issuing company being exchanged for, or converted into, shares in that company of a different class.

(4)The amendments made by this section have effect in relation to shares issued on or after 5 December 2016.

12VCTs: follow-on fundingU.K.

(1)ITA 2007 is amended as follows.

(2)In section 326 (restructuring to which sections 326A and 327 apply)—

(a)in the heading to section 326, for “section 327 applies” substitute “ sections 326A, 327 and 327A apply ”;

(b)in subsection (1), for “Sections 326A and 327 apply” substitute “ Sections 326A, 327 and 327A apply ”.

(3)After section 327 insert—

327AFollow-on funding

(1)Subsections (2) and (3) apply where—

(a)this section applies (see section 326(1)),

(b)the acquisition by the new company of all the old shares, which is provided for by the arrangements mentioned in section 326(1), takes place, and

(c)the acquisition falls within section 326(2).

(2)If, after the acquisition, another company makes an investment in the new company, section 280C (the permitted maximum age condition) has effect in relation to that investment as if—

(a)in subsection (4)(a) the reference to a relevant investment having been made in the relevant company before the end of the initial investing period included a reference to a relevant investment having been made in the old company before the acquisition and before the end of the initial investing period, and

(b)in subsection (6)(a) the reference to relevant investments made in the relevant company included a reference to relevant investments made in the old company before the acquisition.

(3)In relation to any relevant holding issued by the new company after the acquisition, section 294A (the permitted company age requirement) has effect as if—

(a)in subsection (3)(a) the reference to a relevant investment having been made in the relevant company before the end of the initial investing period included a reference to a relevant investment having been made in the old company before the acquisition and before the end of the initial investing period, and

(b)in subsection (5)(a) the reference to relevant investments made in the relevant company included a reference to relevant investments made in the old company before the acquisition.

(4)In subsection (3) “relevant holding” has the same meaning as in Chapter 4.

(4)The amendments made by this section have effect—

(a)for the purposes of section 280C of ITA 2007, in relation to investments made on or after 6 April 2017;

(b)for the purposes of section 294A of ITA 2007, in relation to relevant holdings issued on or after 6 April 2017.

13VCTs: exchange of non-qualifying shares and securitiesU.K.

(1)Section 330 of ITA 2007 (power to facilitate company reorganisations etc involving exchange of shares) is amended as follows.

(2)After subsection (1) insert—

(1A)The Treasury may by regulations make provision for the purposes of this Part for cases where—

(a)a holding of shares or securities that does not meet the requirements of Chapter 4 is exchanged for other shares or securities not meeting those requirements, and

(b)the exchange is made for genuine commercial reasons and does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

(3)In subsection (2), for “subsection (1)” substitute “ subsections (1) and (1A) ”.

(4)In subsection (3), for “The regulations” substitute “ Regulations under subsection (1) ”.

(5)After subsection (3) insert—

(3A)Regulations under subsection (1A) may, among other things, make provision—

(a)for the new shares or securities to be treated in any respect in the same way as the original shares and securities for any period;

(b)as to when the new shares or securities are to be regarded as having been acquired;

(c)as to the valuation of the original or the new shares or securities.

(6)In subsection (4), for “The regulations” substitute “ Regulations under this section ”.

(7)In subsection (6). in paragraph (c), at the beginning insert “ in the case of regulations under subsection (1) ”.

14Social investment tax reliefU.K.

Schedule 1 makes provision about income tax relief for social investments.

15Business investment reliefU.K.

(1)Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

(2)In section 809VC (qualifying investments), in subsection (1)(a), after “issued to” insert “ or acquired by ”.

(3)In section 809VD (condition relating to qualifying investments)—

(a)in subsection (1), omit the “or” at the end of paragraph (b) and after that paragraph insert—

(ba)an eligible hybrid company, or;

(b)in subsection (2)(b), for “2” substitute “ 5 ”;

(c)in subsection (3)(c), for “2” substitute “ 5 ”;

(d)after subsection (3) insert—

(3A)A company is an “eligible hybrid company” if—

(a)it is a private limited company,

(b)it is not an eligible trading company or an eligible stakeholder company,

(c)it carries on one or more commercial trades or is preparing to do so within the next 5 years,

(d)it holds one or more investments in eligible trading companies or is preparing to do so within the next 5 years, and

(e)carrying on commercial trades and making investments in eligible trading companies are all or substantially all of what it does (or of what it is reasonably expected to do once it begins operating).;

(e)in subsection (4), for “reference in subsection (3)” substitute “ references in subsections (3) and (3A) ”;

(f)in subsection (5)(a), for “2” substitute “ 5 ”.

(4)In section 809VE (commercial trades), after subsection (5) insert—

(6)A company which is a partner in a partnership is not to be regarded as carrying on a trade carried on by the partnership.

(5)In section 809VH (meaning of “potentially chargeable event”)—

(a)in subsection (1)(a), after “eligible stakeholder company” insert “ nor an eligible hybrid company ”;

(b)in subsection (1)(d), for “2-year” substitute “ 5-year ”;

(c)in subsection (2), for paragraph (b) substitute—

(b)the value is received from any person in circumstances that are directly or indirectly attributable to the investment, and;

(d)omit subsection (4);

(e)in subsection (5)—

(i)for “2-year” substitute “ 5-year ”;

(ii)in paragraph (a), for “2” substitute “ 5 ”;

(f)in subsection (6), omit the “or” at the end of paragraph (b) and after that paragraph insert—

(ba)it is an eligible hybrid company but is not trading and—

(i)it holds no investments in eligible trading companies, or

(ii)none of the eligible trading companies in which it holds investments is trading, or;

(g)in subsection (10)(b), after “eligible stakeholder company” insert “ or an eligible hybrid company ”.

(6)In section 809VJ (grace period), after subsection (2) insert—

(2A)But subsection (2B) applies instead of subsections (1) and (2) where the potentially chargeable event is a breach of the 5-year start-up rule by virtue of section 809VH(5)(b).

(2B)The grace period allowed for the steps mentioned in section 809VI(2)(a) and (2)(b) is the period of 2 years beginning with the day on which a relevant person first became aware or ought reasonably to have become aware of the potentially chargeable event referred to in subsection (2A).

(7)In section 809VN (order of disposals etc), in subsections (1)(c) and (5)(a) and (b), after “eligible stakeholder company” insert “ or eligible hybrid company ”.

(8)The amendments made by this section have effect where the relevant event as defined in section 809VA of ITA 2007 occurs on or after 6 April 2017.

Income tax: trading and property businessesU.K.

16Calculation of profits of trades and property businessesU.K.

Schedule 2 contains provision about the calculation of the profits of a trade, profession or vocation or a property business, in particular the calculation of profits on the cash basis.

17Trading and property allowancesU.K.

Schedule 3 contains provision about a trading allowance and a property allowance giving relief from income tax.

Corporation taxU.K.

18Carried-forward lossesU.K.

(1)Schedule 4 makes provision about corporation tax relief for losses and other amounts that are carried forward.

(2)The Commissioners for Her Majesty's Revenue and Customs may by regulations made by statutory instrument make provision consequential on any provision made by Schedule 4.

(3)Regulations under subsection (2)—

(a)may make provision amending or modifying any provision of the Taxes Acts (including any provision inserted by Schedule 4),

(b)may make incidental, supplemental, transitional, transitory or saving provision, and

(c)may make different provision for different purposes.

(4)A statutory instrument containing regulations under subsection (2) is subject to annulment in pursuance of a resolution of the House of Commons.

(5)In this section “the Taxes Acts” has the same meaning as in the Taxes Management Act 1970 (see section 118(1) of that Act).

19Losses: counteraction of avoidance arrangementsU.K.

(1)Any loss-related tax advantage that would (in the absence of this section) arise from relevant tax arrangements is to be counteracted by the making of such adjustments as are just and reasonable.

(2)Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of—

(a)an assessment,

(b)the modification of an assessment,

(c)amendment or disallowance of a claim,

or otherwise.

(3)For the purposes of this section arrangements are “relevant tax arrangements” if conditions A and B are met.

(4)Condition A is that the purpose, or one of the main purposes, of the arrangements is to obtain a loss-related tax advantage.

(5)Condition B is that it is reasonable to regard the arrangements as circumventing the intended limits of relief under the relevant provisions or otherwise exploiting shortcomings in the relevant provisions.

(6)In determining whether or not condition B is met all the relevant circumstances are to be taken into account, including whether the arrangements include any steps that—

(a)are contrived or abnormal, or

(b)lack a genuine commercial purpose.

(7)In this section “loss-related tax advantage” means a tax advantage as a result of a deduction (or increased deduction) under a provision mentioned in subsection (8).

(8)The provisions are—

(a)sections 457, 459, 461, 462, 463B, 463G and 463H of CTA 2009 (non-trading deficits from loan relationships);

(b)section 753 of CTA 2009 (non-trading losses on intangible fixed assets);

(c)section 1219 of CTA 2009 (management expenses etc);

(d)sections 37, 45, 45A, 45B and 45F of CTA 2010 (deductions in respect of trade losses);

(e)section 62(3) of CTA 2010 (losses of a UK property business);

(f)Part 5 of CTA 2010 (group relief);

(g)Part 5A of CTA 2010 (group relief for carried-forward losses);

(h)sections 303B, 303C and 303D of CTA 2010 (non-decommissioning losses of ring-fence trades);

(i)sections 124A, 124B and 124C of FA 2012 (carried-forward BLAGAB trade losses).

(9)In this section—

(10)This section has effect in relation to a tax advantage that relates (or would apart from this section relate) to an accounting period beginning on or after 1 April 2017 (regardless of when the arrangements in question were made).

(11)Where a tax advantage would (apart from this subsection) relate to an accounting period beginning before 1 April 2017 and ending on or after that date (“the straddling period”)—

(a)so much of the straddling period as falls before 1 April 2017, and so much of that period as falls on or after that date, are treated as separate accounting periods, and

(b)the extent (if any) to which the tax advantage relates to the second of those accounting periods is to be determined by apportioning amounts—

(i)in accordance with section 1172 of CTA 2010 (time basis), or

(ii)if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.

(12)In the case of a tax advantage as a result of a deduction (or increased deduction) under—

(a)section 463H of CTA 2009,

(b)section 62(3) of CTA 2010,

(c)section 303B, 303C or 303D of CTA 2010, or

(d)section 124A or 124C of FA 2012,

subsections (10) and (11) have effect as if the references to 1 April 2017 were to 13 July 2017.

20Corporate interest restrictionU.K.

Schedule 5 makes provision about the amounts that may be brought into account for the purposes of corporation tax in respect of interest and other financing costs.

21Museum and gallery exhibitionsU.K.

Schedule 6 makes provision about relief in respect of the production of museum and gallery exhibitions.

22Grassroots sportU.K.

(1)CTA 2010 is amended as follows.

(2)In section 1(2) (overview of Act)—

(a)omit the “and” at the end of paragraph (g), and

(b)after that paragraph insert—

(ga)relief for expenditure on grassroots sport (see Part 6A), and.

(3)In section 99(1) (group relief: losses and other amounts which may be surrendered), after paragraph (d) insert—

(da)amounts allowable as qualifying expenditure on grassroots sport (see Part 6A),.

(4)In section 105(4) (group relief: order in which amounts are treated as surrendered)—

(a)after paragraph (a) insert—

(aa)second, expenditure within section 99(1)(da),,

(b)in paragraph (b), for “second” substitute “ third ”,

(c)in paragraph (c), for “third” substitute “ fourth ”, and

(d)in paragraph (d), for “fourth” substitute “ fifth ”.

(5)After Part 6 insert—

PART 6A U.K.Relief for expenditure on grassroots sport
217ARelief for expenditure on grassroots sport

(1)A payment made by a company which is qualifying expenditure on grassroots sport (and which is not refunded) is allowed as a deduction in accordance with this section from the company's total profits in calculating the corporation tax chargeable for the accounting period in which the payment is made.

(2)The deduction is from the company's total profits for the accounting period after any other relief from corporation tax other than—

(a)relief under Part 6,

(b)group relief, and

(c)group relief for carried-forward losses.

(3)If the company is a qualifying sport body at the time of the payment, a deduction is allowed for the amount of the payment.

See section 217C for the meaning of “qualifying sport body”.

(4)If the company is not a qualifying sport body at the time of the payment, a deduction is allowed—

(a)if the payment is to a qualifying sport body, for the amount of the payment, and

(b)if the payment does not fall within paragraph (a) (a “direct payment”), in accordance with subsections (7) and (8).

(5)If at any time on or after 1 April 2017 the company receives income for use for charitable purposes which are purposes for facilitating participation in amateur eligible sport, a deduction is allowed only if, and in so far as, the payment exceeds an amount which is equal to the amount of that income which—

(a)the company does not have to bring into account for corporation tax purposes, and

(b)has not previously been taken into account under this subsection to disallow a deduction under this Part of all or any part of a payment.

See section 217B(3) for the meaning of terms used in this subsection.

(6)But in any case, the amount of the deduction is limited to the amount that reduces the company's taxable total profits for the accounting period to nil.

(7)If the total of all the direct payments made by the company in the accounting period is equal to or less than the maximum deduction for direct payments, a deduction is allowed under subsection (4)(b) in respect of that total.

(8)If the total of all the direct payments made by the company in the accounting period is more than the maximum deduction for direct payments, a deduction is allowed under subsection (4)(b) in respect of so much of that total as does not exceed the maximum deduction for direct payments.

(9)The maximum deduction for direct payments is £2,500 or, if the accounting period is shorter than 12 months, a proportionately reduced amount.

(10)The Treasury may by regulations amend subsection (9) by substituting a higher amount for the amount for the time being specified there.

217BMeaning of qualifying expenditure on grassroots sport

(1)For the purposes of this Part, a payment is qualifying expenditure on grassroots sport if—

(a)it is expenditure incurred for charitable purposes which are purposes for facilitating participation in amateur eligible sport, and

(b)apart from this Part, no deduction from total profits, or in calculating any component of total profits, would be allowed in respect of the payment.

For the meaning of charitable purposes, see sections 2, 7 and 8 of the Charities Act 2011.

(2)Where expenditure is incurred for both—

(a)charitable purposes which are purposes for facilitating participation in amateur eligible sport, and

(b)other purposes,

then, for the purposes of subsection (1), it is to be apportioned between the purposes in paragraph (a) and the purposes in paragraph (b) on a just and reasonable basis.

(3)For the purposes of section 217A(5) and subsection (1)(a)—

(a)paying a person to play or take part in a sport does not facilitate participation in amateur sport, but paying coaches or officials for their services may do so, and

(b)eligible sport” means a sport that for the time being is an eligible sport for the purposes of Chapter 9 of Part 13 (see section 661).

217CMeaning of qualifying sport body

(1)For the purposes of this Part, a “qualifying sport body” is—

(a)a recognised sport governing body;

(b)a body which is wholly owned by a recognised sport governing body.

(2)A “recognised sport governing body” is a body which is included from time to time in a list, maintained by the National Sports Councils, of governing bodies of sport recognised by them.

(3)The Treasury may by regulations—

(a)amend this section for the purpose of altering the meaning of “qualifying sport body”;

(b)designate bodies to be treated as qualifying sport bodies for the purposes of this Part.

(4)Regulations under section (3)(b) may designate a body by reference to its inclusion in a class or description of bodies.

(5)In this section “the National Sports Councils” means—

(a)the United Kingdom Sports Council,

(b)the English Sports Council,

(c)the Scottish Sports Council,

(d)the Sports Council for Wales, and

(e)the Sports Council for Northern Ireland.

(6)Regulations under subsection (3)(b) made before 1 April 2018 may include provision having effect in relation to times before the regulations are made (but not times earlier than 1 April 2017).

217DRelationship between this Part and Part 6

If, but for section 217A, an amount—

(a)would be deductible under Part 6, or

(b)would be deductible under Part 6 but for Chapter 2A of Part 6,

the amount is not deductible under this Part, and nothing in this Part affects the amount's deductibility (or non-deductibility) under Part 6.

(6)The amendments made by this section have effect for the purpose of allowing deductions for payments made on or after 1 April 2017.

(7)Where a company has an accounting period beginning before 1 April 2017 and ending on or after that date, the accounting period for the purposes of the new section 217A(9) is so much of the accounting period as falls on or after 1 April 2017.

23Profits from the exploitation of patents: cost-sharing arrangementsU.K.

(1)Part 8A of CTA 2010 (profits from the exploitation of patents) is amended as follows.

(2)After section 357BLE insert—

357BLEACases where the company is a party to a CSA

(1)Subsection (2) applies if during the relevant period—

(a)the company is a party to a cost-sharing arrangement (see section 357GC),

(b)the company incurs expenditure in making payments under the arrangement that are within section 357BLC(2) by reason of section 357GCZC, and

(c)persons who are not connected with the company make payments under the arrangement to the company in respect of relevant research and development undertaken or contracted out by the company.

(2)So much of the expenditure referred to in paragraph (b) of subsection (1) as is equal to the amount of the payments referred to in paragraph (c) of that subsection is to be disregarded in determining the R&D fraction for the sub-stream.

(3)Subsection (4) applies if during the relevant period—

(a)the company is a party to a cost-sharing arrangement,

(b)the company incurs expenditure in making payments under the arrangement that are within subsection (5), and

(c)the company receives payments under the arrangement that are within subsection (6).

(4)So much of the expenditure referred to in paragraph (b) of subsection (3) as is equal to the amount of the payments referred to in paragraph (c) of that subsection is to be disregarded in determining the R&D fraction for the sub-stream.

(5)A payment is within this subsection if—

(a)it is within section 357BLD(2) by reason of section 357GCZC, or

(b)it is within section 357BLE(2) or (3) by reason of section 357GCZD.

(6)A payment is within this subsection if—

(a)it is made by persons connected with the company in respect of relevant research and development undertaken or contracted out by the company, or

(b)it is made in respect of an assignment to the company of a relevant qualifying IP right or a grant or transfer to the company of an exclusive licence in respect of such a right.

(3)For section 357GC substitute—

357GCMeaning of “cost-sharing arrangement” etc

(1)This section applies for the purposes of this Part.

(2)A “cost-sharing arrangement” is an arrangement under which—

(a)each of the parties to the arrangement is required to contribute to the cost of, or undertake activities for the purpose of, creating or developing an item or process,

(b)each of those parties—

(i)is entitled to a share of any income attributable to the item or process, or

(ii)has one or more rights in respect of the item or process, and

(c)the amount of any income received by each of those parties is proportionate to its participation in the arrangement as described in paragraph (a).

(3)Invention”, in relation to a cost-sharing arrangement, means the item or process that is the subject of the arrangement (or any item or process incorporated within it).

357GCZAQualifying IP right held by another party to CSA

(1)This section applies if—

(a)a company is a party to a cost-sharing arrangement,

(b)another party to the arrangement (“P”) holds a qualifying IP right granted in respect of the invention, and

(c)the company does not hold an exclusive licence in respect of the right.

(2)But this section does not apply if the arrangement produces for the company a return within section 357BG(1)(c).

(3)The company is to be treated for the purposes of this Part as if it held the right.

(4)The right is to be treated for the purposes of this Part as a new qualifying IP right in relation to the company if—

(a)the company or P (or both) became a party to the arrangement on or after 1 April 2017, or

(b)the right is a new qualifying IP right in relation to P (or would be if P was a company).

(5)Subsection (4) does not apply if—

(a)the company held an exclusive licence in respect of the right immediately before it became a party to the arrangement, and

(b)that licence was granted to the company before the relevant date.

(6)The right is to be treated for the purposes of this Part as an old qualifying IP right in relation to the company if it is not to be treated as a new qualifying IP right by reason of subsection (4).

(7)Subsections (7) and (8) of section 357BP (meaning of “relevant date”) apply for the purposes of subsection (5) of this section as they apply for the purposes of subsection (6) of that section.

357GCZBExclusive licence held by another party to CSA

(1)This section applies if—

(a)a company is a party to a cost-sharing arrangement,

(b)another party to the arrangement (“P”) holds an exclusive licence in respect of a qualifying IP right granted in respect of the invention, and

(c)the company does not hold the right or another exclusive licence in respect of it.

(2)But this section does not apply if the arrangement produces for the company a return within section 357BG(1)(c).

(3)The company is to be treated for the purposes of this Part as if it held an exclusive licence in respect of the right.

(4)The right is to be treated for the purposes of this Part as a new qualifying IP right in relation to the company if—

(a)the company or P (or both) became a party to the arrangement on or after 1 April 2017, or

(b)the right is a new qualifying IP right in relation to P (or would be if P was a company).

(5)Subsection (4) does not apply if—

(a)the company held the right immediately before it became a party to the arrangement, and

(b)either—

(i)the right had been granted or issued to the company in response to an application filed before 1 July 2016, or

(ii)the right had been assigned to the company before the relevant date.

(6)Subsection (4) also does not apply if—

(a)the company held an exclusive licence in respect of the right immediately before it became a party to the arrangement, and

(b)that licence was granted to the company before the relevant date.

(7)The right is to be treated for the purposes of this Part as an old qualifying IP right in relation to the company if it is not to be treated as a new qualifying IP right by reason of subsection (4).

(8)Subsections (7) and (8) of section 357BP (meaning of “relevant date”) apply for the purposes of subsections (5) and (6) of this section as they apply for the purposes of subsections (5) and (6) of that section.

357GCZCR&D undertaken or contracted out by another party to CSA

(1)Subsection (2) applies if—

(a)a company is a party to a cost-sharing arrangement, and

(b)another party to the arrangement (“P”) undertakes research and development for the purpose of creating or developing the invention.

(2)The research and development is to be treated for the purposes of sections 357BLC and 357BLD as having been contracted out by the company to P.

(3)Subsection (4) applies if—

(a)a company is a party to a cost-sharing arrangement,

(b)another party to the arrangement (“P”) contracts out to another person (“A”) research and development for the purpose of creating or developing the invention, and

(c)the company makes a payment under the arrangement in respect of that research and development (whether to P or to A).

(4)For the purposes of sections 357BLC and 357BLD—

(a)the company is to be treated as having contracted out to P research and development which is the same as that contracted out by P to A, and

(b)the payment mentioned in subsection (3)(c) is to be treated as if it were a payment made to P in respect of the research and development the company is treated as having contracted out to P.

(5)In this section “research and development” has the meaning given by section 1138.

357GCZDAcquisition of qualifying IP rights etc by another party to CSA

(1)Subsection (2) applies if—

(a)a company is a party to a cost-sharing arrangement,

(b)a person (“A”) assigns to another party to the arrangement (“P”) a qualifying IP right,

(c)the qualifying IP right is a right in respect of the invention, and

(d)the company makes under the arrangement a payment in respect of the assignment (whether to A or to P).

(2)The payment is to be treated for the purposes of section 357BLE as if it were a payment to A in respect of the assignment by A to the company of the right.

(3)Subsection (4) applies if—

(a)a company is a party to a cost-sharing arrangement,

(b)a person (“A”) grants or transfers to another party to the arrangement (“P”) an exclusive licence in respect of qualifying IP right,

(c)the qualifying IP right is a right granted in respect of the invention, and

(d)the company makes a payment under the arrangement in respect of the grant or transfer (whether to A or to P).

(4)The payment is to be treated for the purposes of section 357BLE as if it were a payment to A in respect of the grant or transfer by A to the company of the licence.

357GCZETreatment of expenditure in connection with formation of CSA etc

(1)Where—

(a)a company makes a payment to a person (“P”) in consideration of that person entering into a cost-sharing arrangement with the company, and

(b)P holds a qualifying IP right granted in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated for the purposes of section 357BLE as if it was an amount paid in respect of the assignment to the company of the right or (as the case may be) the transfer to the company of the licence.

(2)Where—

(a)a company makes a payment to a party to a cost-sharing arrangement (“P”) in consideration of P agreeing to the company becoming a party to the arrangement (whether in place of P or in addition to P), and

(b)any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated for the purposes of section 357BLE as if it was an amount paid in respect of the assignment to the company of the right or (as the case may be) the transfer to the company of the licence.

(3)Where—

(a)a company that is a party to a cost-sharing arrangement makes a payment to another party to the arrangement in consideration of that party agreeing to the company becoming entitled to a greater share of the income attributable to the invention or acquiring additional rights in relation to the invention, and

(b)any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated for the purposes of section 357BLE as if it was an amount paid in respect of the assignment to the company of the right or (as the case may be) the transfer to the company of the licence.

357GCZFTreatment of income in connection with formation of CSA etc

(1)Where—

(a)a company receives a payment in consideration of its entering into a cost-sharing arrangement, and

(b)the company holds a qualifying IP right granted in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated as relevant IP income of the company.

(2)Where—

(a)a company that is a party to a cost-sharing arrangement receives a payment from a person in consideration of its agreeing to that person becoming a party to the arrangement (whether in place of the company or in addition to it), and

(b)any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated as relevant IP income of the company.

(3)Where—

(a)a company that is a party to a cost-sharing arrangement receives a payment from another party to the arrangement in consideration of its agreeing to that party becoming entitled to a greater share of the income attributable to the invention or acquiring additional rights in relation to the invention, and

(b)any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated as relevant IP income of the company.

(4)In section 357BP (meaning of “new qualifying IP right”) after subsection (12) insert—

(13)This section has effect subject to section 357GCZA (qualifying IP right held by another party to a cost-sharing arrangement) and section 357GCZB (exclusive licence held by another party to a cost-sharing arrangement).

(5)The amendments made by this section have effect in relation to accounting periods beginning on or after 1 April 2017.

24Hybrid and other mismatchesU.K.

(1)Part 6A of TIOPA 2010 (hybrid and other mismatches) is amended as follows.

(2)In section 259B(3) (local taxes), for “is not outside the scope of subsection (2) by reason only that” substitute “ is outside the scope of subsection (2) if ”.

(3)In section 259CC(2) (hybrid and other mismatches from financial instruments: meaning of “permitted” taxable period of a payee), for paragraph (b) substitute—

(b)the period begins at a later time and it is just and reasonable for the amount of ordinary income to arise for the period (rather than an earlier one).

(4)In section 259DD(2) (hybrid transfer deduction/non-inclusion mismatches: meaning of “permitted” taxable period of a payee), for paragraph (b) substitute—

(b)the period begins at a later time and it is just and reasonable for the amount of ordinary income to arise for the period (rather than an earlier one).

(5)In section 259EB (hybrid payer deduction/non-inclusion mismatches and their extent), after subsection (1) insert—

(1A)But there is no hybrid payer deduction/non-inclusion mismatch so far as the relevant deduction is—

(a)a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or

(b)an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.

(6)In section 259FA (deduction/non-inclusion mismatches relating to transfers by permanent establishments), after subsection (4) insert—

(4A)For the purposes of this section “the PE deduction” does not include—

(a)a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or

(b)an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.

(7)In section 259GB (hybrid payee deduction/non-inclusion mismatches and their extent), after subsection (1) insert—

(1A)But there is no hybrid payee deduction/non-inclusion mismatch so far as the relevant deduction is—

(a)a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or

(b)an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.

(8)In section 259HB (multinational payee deduction/non-inclusion mismatches and their extent), after subsection (1) insert—

(1A)But there is no multinational payee deduction/non-inclusion mismatch so far as the relevant deduction is—

(a)a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or

(b)an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.

(9)In section 259KB (imported mismatches: meaning of “excessive PE deduction” etc), after subsection (3) insert—

(3A)For the purposes of this section a “PE deduction” does not include—

(a)a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or

(b)an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.

(10)The amendment made by subsection (2)—

(a)has effect, in the case of its application to Chapter 6 of Part 6A of TIOPA 2010, in relation to excessive PE deductions in relation to which the relevant PE period begins on or after 13 July 2017,

(b)has effect, in the case of its application to Chapter 9 or 10 of that Part, in relation to accounting periods beginning on or after that date, and

(c)has effect, in the case of its application to any other Chapter of that Part, in relation to—

(i)payments made on or after date, or

(ii)quasi-payments in relation to which the payment period begins on or after that date.

(11)For the purposes of subsection (10)(a), (b) and (c)(ii), where there is a straddling period—

(a)so much of the straddling period as falls before 13 July 2017, and so much of it as falls on or after that date, are to be treated as separate accounting periods or separate taxable periods (as the case may be), and

(b)if it is necessary to apportion an amount for the straddling period to the two separate periods, it is to be apportioned—

(i)on a time basis according to the respective length of the separate periods, or

(ii)if that would produce a result that is unjust or unreasonable, on a just and reasonable basis.

(12)A “straddling period” means an accounting period or payment period (as the case may be) beginning before 13 July 2017 and ending on or after that date.

(13)Part 6A of TIOPA 2010 has effect, and is to be deemed always to have had effect, with the amendments set out in subsections (3) to (9).

25Trading profits taxable at the Northern Ireland rateU.K.

Schedule 7 contains—

(a)amendments of Part 8B of CTA 2010 (trading profits taxable at the Northern Ireland rate), and

(b)amendments consequential on or related to those amendments.

Chargeable gainsU.K.

26Elections in relation to assets appropriated to trading stockU.K.

(1)Section 161 of TCGA 1992 (appropriations to and from trading stock) is amended as follows.

(2)In subsection (3)—

(a)for “a person's appropriation of an asset for the purposes of a trade” substitute “ a case where a chargeable gain would have accrued to a person on the appropriation of an asset for the purposes of a trade as mentioned in that subsection ”, and

(b)for “the chargeable gain or increased by the amount of the allowable loss referred to in subsection (1), and where that subsection” substitute “ that chargeable gain, and where subsection (1) ”.

(3)In subsection (3ZB)—

(a)in paragraph (a)—

(i)omit “or loss”, and

(ii)omit “or an allowable loss”,

(b)in paragraph (b)—

(i)omit “, or increased by the amount of any loss,” and

(ii)omit “or allowable loss”, and

(c)in paragraph (c), at the end insert “ and a loss which accrues on that disposal which is not ATED-related is also unaffected by the election ”.

(4)The amendments made by this section have effect in relation to appropriations of assets made on or after 8 March 2017.

27Substantial shareholding exemptionU.K.

(1)Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with substantial shareholding) is amended as follows.

(2)Omit the following (which relate to requirements to be met by investing company)—

(a)in paragraph 1(2), “the investing company and”;

(b)in paragraph 3—

(i)in sub-paragraph (2)(b), “(but see sub-paragraph (3) below)”;

(ii)sub-paragraph (3);

(iii)in sub-paragraph (4), “of paragraph 18(1)(b) and”;

(c)in the heading to Part 3, “investing company and”;

(d)paragraph 18 and the preceding italic heading;

(e)in paragraph 23(3), “a member of a trading group or”.

(3)In paragraph 7 (substantial shareholding requirement), for “two” substitute “ six ”.

(4)In paragraph 10 (effect of earlier no-gain/no-loss transfer), in sub-paragraph (2)(b), after “but for” insert “ subsection (1A) or ”.

(5)In paragraph 19 (requirements relating to company invested in)—

(a)in sub-paragraph (1)(b), at the beginning insert “ in a case where sub-paragraph 1A) applies, ”;

(b)after sub-paragraph (1) insert—

(1A)This sub-paragraph applies where—

(a)the disposal is a disposal to a person connected with the investing company, or

(b)the requirement in paragraph 7 is met by virtue of paragraph 15A.;

(c)at the end insert—

(4)Section 1122 of CTA 2010 (meaning of “connected” persons) applies for the purposes of sub-paragraph (1A)(a).

(6)The amendments made by this section have effect in relation to disposals made on or after 1 April 2017.

28Substantial shareholding exemption: institutional investorsU.K.

(1)Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with substantial shareholding) is amended as follows.

(2)After paragraph 3 insert—

3ASubsidiary exemption: qualifying institutional investors

(1)This paragraph applies in relation to a gain or loss accruing to a company (“the investing company”) on a disposal of shares or an interest in shares in another company (“the company invested in”).

(2)This paragraph applies if—

(a)the requirement in paragraph 7 is met (substantial shareholder requirement),

(b)the requirement in paragraph 19 is not met (requirement relating to company invested in), and

(c)the investing company is not a disqualified listed company.

(3)If, immediately before the disposal, 80% or more of the ordinary share capital of the investing company is owned by qualifying institutional investors, no chargeable gain or loss accrues on the disposal.

(4)If, immediately before the disposal, at least 25% but less than 80% of the ordinary share capital of the investing company is owned by qualifying institutional investors, the amount of the chargeable gain or loss accruing on the disposal is reduced by the percentage of the ordinary share capital of the investing company which is owned by the qualifying institutional investors.

(5)A company is a “disqualified listed company” for the purposes of this Part of this Schedule if—

(a)any of the shares forming part of the ordinary share capital of the company are listed on a recognised stock exchange,

(b)the company is not a qualifying institutional investor, and

(c)the company is not a qualifying UK REIT

(6)In sub-paragraph (5)(c) “qualifying UK REIT” means a UK REIT within the meaning of Part 12 of CTA 2010 which—

(a)meets the condition in section 528(4)(b) of that Act (company not a close company by virtue of having an institutional investor as a participant), or

(b)by virtue of section 443 of that Act (companies controlled by or on behalf of Crown) is not treated as a close company.

(1)This paragraph applies for the purposes of paragraph 3A.

(2)A person “owns” ordinary share capital if the person owns it—

(a)directly,

(b)indirectly, or

(c)partly directly and partly indirectly.

(3)Sections 1155 to 1157 of CTA 2010 (meaning of “indirect ownership” and calculation of amounts owned indirectly) apply for the purposes of sub-paragraph (2).

(4)For the purposes of sections 1155 to 1157 of CTA 2010 as applied by sub-paragraph (3)—

(a)ordinary share capital may not be owned through a disqualified listed company;

(b)treat references to a body corporate as including an exempt unauthorised unit trust (and references to ordinary share capital, in the case of such a trust, as references to units in the trust).

(5)A person is also to be regarded as owning ordinary share capital in a company in circumstances where a person would, under paragraphs 12 and 13 of this Schedule, be regarded as holding shares in a company.

(6)Where the assets of a partnership include ordinary share capital of a company, each partner is to be regarded as owning a proportion of that share capital equal to the partner's proportionate interest in that ordinary share capital.

(7)In this Schedule “exempt unauthorised unit trust” has the same meaning as in the Unauthorised Unit Trusts (Tax) Regulations 2013 (SI 2013/2819).

(3)After paragraph 8 insert—

8A(1)This paragraph applies in a case where at least 25% of the ordinary share capital of the investing company is owned by qualifying institutional investors.

(2)The investing company also holds a “substantial shareholding” in the company invested in for the purposes of this Schedule if—

(a)the investing company holds ordinary shares, or interests in ordinary shares, in the company invested in the cost of which on acquisition was at least £20,000,000, and

(b)by virtue of those shares or interests or any other shares or interests in shares in the company invested in, the investing company—

(i)is beneficially entitled to not less than a proportionate percentage of the profits available for distribution to equity holders of the company invested in, and

(ii)would be beneficially entitled on a winding up to not less than a proportionate percentage of the assets of the company invested in available for distribution to equity holders.

(3)In sub-paragraph (2)—

(4)For the purposes of sub-paragraph (2)(a) it does not matter whether there was a single acquisition or a series of acquisitions.

(5)If—

(a)the percentage (“the actual percentage”) of the profits or assets to which the investing company is, or would be, beneficially entitled as mentioned in sub-paragraph (2)(b)(i) or (ii) is less than the proportionate percentage, but

(b)having regard to the proportion that the actual percentage bears to the proportionate percentage, the difference can reasonably be regarded as insignificant,

the investing company is treated as meeting the condition in sub-paragraph (2)(b)(i) or (ii) (as the case may be).

(6)Paragraph 3B (owning ordinary share capital) applies for the purposes of sub-paragraph (1).

(7)Paragraph 8(2) applies for the purposes of sub-paragraph (2).

(8)In this paragraph “ordinary shares” means shares in the ordinary share capital of the company invested in.

(4)In paragraph 9 (aggregation), in sub-paragraph (1), for “paragraph 7” substitute “ paragraphs 7 and 8A(2) ”.

(5)After paragraph 30 insert—

30AMeaning of “qualifying institutional investor”

(1)In this Schedule “qualifying institutional investor” means a person falling within any of A to G below.

()0Pension schemes

The trustee or manager of—

(a)a registered pension scheme, other than an investment-regulated pension scheme, or

(b)an overseas pension scheme, other than one which would be an investment-regulated pension scheme if it were a registered pension scheme.

Investment-regulated pension scheme” has the same meaning as in Part 1 of Schedule 29A to the Finance Act 2004.

Overseas pension scheme” has the same meaning as in Part 4 of that Act.

()0Life assurance businesses

A company carrying on life assurance business, if immediately before the disposal its interest in the investing company is held as part of its long-term business fixed capital.

Life assurance business” has the meaning given in section 56 of the Finance Act 2012.

Section 137 of that Act applies for the purposes of determining whether an interest forms part of the long-term business fixed capital of a company.

()0Sovereign wealth funds etc

A person who cannot be liable for corporation tax or income tax (as relevant) on the ground of sovereign immunity.

()0Charities

A charity.

()0Investment trusts

An investment trust.

()0Authorised investment funds

An authorised investment fund which meets the genuine diversity of ownership condition throughout the accounting period of the fund in which the disposal is made.

Authorised investment fund” has the same meaning as in the Authorised Investment Funds (Tax) Regulations 2006 (SI 2006/964).

Regulation 9A of the Authorised Investment Funds (Tax) Regulations 2006 (genuine diversity of ownership) applies for this purpose.

()0Exempt unauthorised unit trusts

The trustees of an exempt unauthorised unit trust, where the trust meets the genuine diversity of ownership condition throughout the accounting period of the trust in which the disposal is made.

Regulation 9A of the Authorised Investment Funds (Tax) Regulations 2006 (genuine diversity of ownership) applies for this purpose (treating references to an authorised investment fund as including an exempt unauthorised unit trust).

(2)The Treasury may by regulations amend this Schedule so as to add or remove a person as a “qualifying institutional investor” (and may in particular do so by changing the conditions subject to which a person is a qualifying institutional investor).

(6)In paragraph 31 (index), at the appropriate places insert—

Exempt unauthorised unit trustparagraph 3B(7)
Qualifying institutional investorparagraph 30A.

(7)The amendments made by this section have effect in relation to disposals made on or after 1 April 2017.

Domicile, overseas property etcU.K.

29Deemed domicile: income tax and capital gains taxU.K.

(1)In Chapter 2A of Part 14 of ITA 2007 (income tax liability: domicile), after section 835B insert—

835BADeemed domicile

(1)This section has effect for the purposes of the provisions of the Income Tax Acts or TCGA 1992 which apply this section.

(2)An individual not domiciled in the United Kingdom at a time in a tax year (“the relevant tax year”) is to be regarded as domiciled in the United Kingdom at that time if—

(a)condition A is met, or

(b)condition B is met.

(3)Condition A is that—

(a)the individual was born in the United Kingdom,

(b)the individual's domicile of origin was in the United Kingdom, and

(c)the individual is UK resident for the relevant tax year.

(4)Condition B is that the individual has been UK resident for at least 15 of the 20 tax years immediately preceding the relevant tax year.

(5)But Condition B is not met if—

(a)the individual is not UK resident for the relevant tax year, and

(b)there is no tax year beginning after 5 April 2017 and preceding the relevant tax year in which the individual was UK resident.

(2)Schedule 8 contains—

(a)provision applying section 835BA of ITA 2007, and

(b)further provision relating to this section.

30Deemed domicile: inheritance taxU.K.

(1)In section 267 of IHTA 1984 (persons treated as domiciled in the United Kingdom), in subsection (1)—

(a)in paragraph (a), omit the final “or”;

(b)after that paragraph insert—

(aa)he is a formerly domiciled resident for the tax year in which the relevant time falls (“the relevant tax year”), or;

(c)for paragraph (b) substitute—

(b)he was resident in the United Kingdom—

(i)for at least fifteen of the twenty tax years immediately preceding the relevant tax year, and

(ii)for at least one of the four tax years ending with the relevant tax year.

(2)In that section, omit subsection (3).

(3)In that section, in subsection (4), for “in any year of assessment” substitute “ for any tax year ”.

(4)In section 48 of that Act (settlements: excluded property)—

(a)in subsection (3)(b), for “and (3D)” substitute “ to (3E) ”;

(b)in subsection (3A)(b), for “subsection (3B)” substitute “ subsections (3B) and (3E) ”;

(c)after subsection (3D) insert—

(3E)In a case where the settlor of property comprised in a settlement is not domiciled in the United Kingdom at the time the settlement is made, the property is not excluded property by virtue of subsection (3) or (3A) above at any time in a tax year if the settlor was a formerly domiciled resident for that tax year.

(5)In section 64 of that Act (charge at ten-year anniversary), in subsection (1B), after “was made” insert “ and is not a formerly domiciled resident for the tax year in which the ten-year anniversary falls ”.

(6)In section 65 of that Act (charge at other times), after subsection (7A) insert—

(7B)Tax shall not be charged under this section by reason only that property comprised in a settlement becomes excluded property by virtue of section 48(3E) ceasing to apply in relation to it.

(7)In section 82 of that Act (excluded property)—

(a)for subsection (1) substitute—

(1)In a case where, apart from this section, property to which section 80 or 81 applies would be excluded property by virtue of section 48(3)(a) above, that property shall not be taken to be excluded property at any time (“the relevant time”) for the purposes of this Chapter (except sections 78 and 79) unless Conditions A and B are satisfied.;

(b)in subsection (2), for “the condition in subsection (3) below” substitute “ Condition A ”;

(c)in subsection (3), for “The condition” substitute “ Condition A ”;

(d)after subsection (3) insert—

(4)Condition B referred to in subsection (1) above is—

(a)in the case of property to which section 80 above applies, that the person who is the settlor in relation to the settlement first mentioned in that section, and

(b)in the case of property to which subsection (1) or (2) of section 81 above applies, that the person who is the settlor in relation to the first or second of the settlements mentioned in that subsection,

was not a formerly domiciled resident for the tax year in which the relevant time falls.

(8)In section 272 of that Act (interpretation)—

(a)for the definition of “foreign-owned” substitute—

foreign-owned”, in relation to property at any time, means property—

(a)in the case of which the person beneficially entitled to it is at that time domiciled outside the United Kingdom, or

(b)if the property is comprised in a settlement, in the case of which the settlor—

(i)is not a formerly domiciled resident for the tax year in which that time falls, and

(ii)was domiciled outside the United Kingdom when the property became comprised in the settlement;;

(b)at the appropriate place insert—

formerly domiciled resident”, in relation to a tax year, means a person—

(a)who was born in the United Kingdom,

(b)whose domicile of origin was in the United Kingdom,

(c)who was resident in the United Kingdom for that tax year, and

(d)who was resident in the United Kingdom for at least one of the two tax years immediately preceding that tax year;.

(9)The amendments made by this section have effect in relation to times after 5 April 2017, subject to subsections (10) to (12).

(10)The amendment to section 267(1) of IHTA 1984 made by subsection (1)(c) does not have effect in relation to a person if—

(a)the person is not resident in the United Kingdom for the relevant tax year, and

(b)there is no tax year beginning after 5 April 2017 and preceding the relevant tax year in which the person was resident in the United Kingdom.

In this subsection “relevant tax year” is to be construed in accordance with section 267(1) of IHTA 1984 as amended by subsection (1).

(11)The amendment to section 267(1) of IHTA 1984 made by subsection (1)(c) also does not have effect in determining—

(a)whether settled property which became comprised in the settlement on or before that date is excluded property for the purposes of IHTA 1984;

(b)the settlor's domicile for the purposes of section 65(8) of that Act in relation to settled property which became comprised in the settlement on or before that date;

(c)whether, for the purpose of section 65(8) of that Act, the condition in section 82(3) of that Act is satisfied in relation to such settled property.

(12)Despite subsection (2), section 267(1) of IHTA 1984, as originally enacted, shall continue to be disregarded in determining—

(a)whether settled property which became comprised in the settlement on or before 9 December 1974 is excluded property for the purposes of IHTA 1984;

(b)the settlor's domicile for the purposes of section 65(8) of that Act in relation to settled property which became comprised in the settlement on or before that date;

(c)whether, for the purpose of section 65(8) of that Act, the condition in section 82(3) of that Act is satisfied in relation to such settled property.

(13)Subsections (14) and (15) apply if an amount of inheritance tax—

(a)would not be charged but for the amendments made by this section, or

(b)is, because of those amendments, greater than it would otherwise have been.

(14)Section 233 of IHTA 1984 (interest on unpaid inheritance tax) applies in relation to the amount of inheritance tax as if the reference, in the closing words of subsection (1) of that section, to the end of the period mentioned in paragraph (a), (aa), (b) or (c) of that subsection were a reference to—

(a)the end of that period, or

(b)if later, the end of the month immediately following the month in which this Act is passed.

(15)Subsection (1) of section 234 of IHTA 1984 (cases where inheritance tax payable by instalments carries interest only from instalment dates) applies in relation to the amount of inheritance tax as if the reference, in the closing words of that subsection, to the date at which an instalment is payable were a reference to—

(a)the date at which the instalment is payable, or

(b)if later, the end of the month immediately following the month in which this Act is passed.

(16)Subsection (17) applies if—

(a)a person is liable as mentioned in section 216(1)(c) of IHTA 1984 (trustee liable on 10-year anniversary, and other trust cases) for an amount of inheritance tax charged on an occasion, and

(b)but for the amendments made by this section—

(i)no inheritance tax would be charged on that occasion, or

(ii)a lesser amount of inheritance tax would be charged on that occasion.

(17)Section 216(6)(ad) of IHTA 1984 (delivery date for accounts required by section 216(1)(c)) applies in relation to the account to be delivered in connection with the occasion as if the reference to the expiration of the period of 6 months from the end of the month in which the occasion occurs were a reference to—

(a)the expiration of that period, or

(b)if later, the end of the month immediately following the month in which this Act is passed.

31Settlements and transfer of assets abroad: value of benefitsU.K.

Schedule 9 makes provision about the value of benefits received in relation to settlements and the transfer of assets abroad.

32Exemption from attribution of carried interest gainsU.K.

(1)TCGA 1992 is amended as follows.

(2)In section 13(1A) (attribution of gains to members of non-resident companies)—

(a)omit the “or” at the end of paragraph (a), and

(b)at the end of paragraph (b), insert , or

(c)a chargeable gain treated as accruing under section 103KA(2) or (3) (carried interest gains).

(3)In section 86 (attribution of gains to settlors with interest in non-resident or dual resident settlements), after subsection (4ZA) insert—

(4ZB)Where (apart from this subsection) the amount mentioned in subsection (1)(e) would include an amount of chargeable gains treated as accruing under section 103KA(2) or (3) (carried interest gains), the amount of the gains is to be disregarded for the purposes of subsection (1)(e).

(4)In section 87 (non-UK resident settlements: attribution of gains to beneficiaries), after subsection (5A) insert—

(5B)Where (apart from this subsection) the amount mentioned in subsection (4)(a) would include an amount of chargeable gains treated as accruing under section 103KA(2) or (3) (carried interest gains), the amount of the gains is to be disregarded for the purposes of determining the section 2(2) amount.

(5)The amendments made by this section have effect in relation to chargeable gains treated as accruing under section 103KA(2) or (3) of TCGA 1992 at any time before, as well as after, the passing of this Act.

33Inheritance tax on overseas property representing UK residential propertyU.K.

Schedule 10 makes provision about the extent to which overseas property is excluded property for the purposes of inheritance tax, in cases where the value of the overseas property is attributable to residential property in the United Kingdom.

Disguised remunerationU.K.

34Employment income provided through third partiesU.K.

(1)In section 554XA of ITEPA 2003 (employment income provided through third parties: exclusion for payments in respect of a tax liability), in subsection (2), omit paragraphs (a) and (b).

(2)The amendment made by subsection (1) has effect in relation to relevant steps taken on or after 21 July 2017.

(3)Schedule 11 makes provision about the application of Part 7A of ITEPA 2003 in relation to loans and quasi-loans that are outstanding on 5 April 2019.

35Trading income provided through third partiesU.K.

(1)ITTOIA 2005 is amended as follows.

(2)After section 23 insert—

Trading income provided through third partiesU.K.
23AApplication of section 23E: conditions

(1)Section 23E (tax treatment of relevant benefits) applies if Conditions A to E are met.

(2)Condition A is that a person (“T”) is or has been carrying on a trade (the “relevant trade”) alone or in partnership.

(3)Condition B is that—

(a)there is an arrangement (“the arrangement”) in connection with the relevant trade to which T is a party or which otherwise (wholly or partly) covers or relates to T, and

(b)it is reasonable to suppose that, in essence—

(i)the arrangement, or

(ii)the arrangement so far as it covers or relates to T,

is (wholly or partly) a means of providing, or is otherwise concerned with the provision of, relevant benefits.

(4)Condition C is that—

(a)a relevant benefit arises to T, or a person who is or has been connected with T, in pursuance of the arrangement, or

(b)a relevant benefit arises to any other person in pursuance of the arrangement and any of the enjoyment conditions (see section 23F) is met in relation to the relevant benefit.

(5)Condition D is that it is reasonable to suppose that the relevant benefit (directly or indirectly) represents, or has arisen or derives from, or is otherwise connected with, the whole or part of a qualifying third party payment.

(6)Condition E is that it is reasonable to suppose that a tax advantage would be obtained by T, or a person who is or has been connected with T, as a result of the arrangement.

(7)For the purposes of subsection (3) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.

(8)In this section and sections 23B to 23H, “this group of sections” means this section and those sections.

(9)The provisions of this group of sections apply to professions and vocations as they apply to trades.

(10)See Schedule 12 to F(No.2)A 2017 for provision about the application of this group of sections in relation to loans and quasi-loans that are outstanding on 5 April 2019.

23BMeaning of “relevant benefit”

(1)The following provisions apply for the purposes of this group of sections.

(2)Relevant benefit” means any payment (including a payment by way of a loan), a transfer of money's worth, or any other benefit.

(3)The assumption of a liability of T by another person is to be treated as the provision of a relevant benefit to T.

(4)The assumption, by a person other than T, of a liability of a person (“C”) who is or has been connected with T, is to be treated as the provision of a relevant benefit to C.

(5)Loan” includes—

(a)any form of credit;

(b)a payment that is purported to be made by way of a loan.

23CMeaning of “qualifying third party payment”

(1)The following provisions apply for the purposes of this group of sections.

(2)A payment is a “third party payment” if it is made (by T or another person) to—

(a)T acting as trustee, or

(b)any person other than T.

(3)A third party payment is a “qualifying third party payment” if the deduction condition or the trade connection condition is met in relation to the payment.

(4)The “deduction condition” is met in relation to a payment if—

(a)a deduction for the payment is made in calculating the profits of the relevant trade, or

(b)where the relevant trade is or has been carried on in partnership, a deduction for the payment is made in calculating the amount on which T is liable to income tax in respect of the profits of the trade.

(5)The “trade connection condition” is met in relation to a payment if it is reasonable to suppose that in essence—

(a)the payment is by way of consideration for goods or services provided in the course of the relevant trade, or

(b)there is some other connection (direct or indirect) between the payment and the provision of goods or services in the course of the relevant trade.

(6)For the purposes of subsection (5) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.

23DOther definitions

(1)The following provisions apply for the purposes of this group of sections.

(2)Arrangement” includes any agreement, understanding, scheme, settlement, trust, transaction or series of transactions (whether or not legally enforceable).

(3)A “tax advantage” includes—

(a)relief or increased relief from tax,

(b)repayment or increased repayment of tax,

(c)avoidance or reduction of a charge to tax or an assessment to tax,

(d)avoidance of a possible assessment to tax,

(e)deferral of a payment of tax or advancement of a repayment of tax, and

(f)avoidance of an obligation to deduct or account for tax.

(4)Section 993 of ITA 2007 (meaning of “connected” persons) applies for the purposes of this group of sections as if subsection (4) of that section 993 were omitted.

23ETax treatment of relevant benefits

(1)Where this section applies (see section 23A), the relevant benefit amount is to be treated for income tax purposes as profits of the relevant trade for—

(a)the tax year in which the relevant benefit arises, or

(b)if T has ceased to carry on the relevant trade in a tax year (the “earlier tax year”) before the tax year referred to in paragraph (a), the earlier tax year.

(2)For the purposes of this section, “the relevant benefit amount” means—

(a)if the relevant benefit is a payment otherwise than by way of a loan, an amount equal to the amount of the payment,

(b)if the relevant benefit is a payment by way of loan, an amount equal to the principal amount lent, or

(c)in any other case, an amount equal to the value of the relevant benefit.

(3)For the purposes of subsection (2)(c), the value of a relevant benefit is—

(a)its market value at the time it arises, or

(b)if higher, the cost of providing it.

(4)In subsection (3) “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.

23FRelevant benefits: persons other than T

(1)For the purposes of section 23A(4), the enjoyment conditions are—

(a)that the relevant benefit, or part of it, is in fact so dealt with by any person as to be calculated at some time to enure for the benefit of T;

(b)that the arising of the relevant benefit operates to increase the value to T of any assets—

(i)which T holds, or

(ii)which are held for the benefit of T;

(c)that T receives, or is entitled to receive, at any time any benefit provided or to be provided out of, or deriving or to be derived from, the relevant benefit (or part of it);

(d)where the relevant benefit is the payment of a sum of money (including a payment by way of loan), that T may become entitled to the beneficial enjoyment of the sum or part of the sum if one or more powers are exercised or successively exercised (and for these purposes it does not matter who may exercise the powers or whether they are exercisable with or without the consent of another person);

(e)where the relevant benefit is the payment of a sum of money (including a payment by way of loan), that T is able in any manner to control directly or indirectly the application of the sum or part of the sum.

(2)Where an enjoyment condition is met in relation to part only of a relevant benefit, that part is to be treated as a separate benefit for the purposes of section 23A(4).

(3)In subsection (1) references to T include references to a person who is or has been connected with T.

(4)In determining whether any of the enjoyment conditions is met in relation to a relevant benefit, regard must be had to the substantial result and effect of all the relevant circumstances.

23GAnti-avoidance

(1)In determining whether section 23E applies in relation to a relevant benefit, no regard is to be had to any arrangements the main purpose, or one of the main purposes, of which is to secure that section 23E does not apply in relation to the whole, or any part, of—

(a)the relevant benefit, or

(b)the relevant benefit and one or more other relevant benefits (whether or not all arising to the same person).

(2)Where arrangements are disregarded under subsection (1), and a relevant benefit (or part of it)—

(a)would, if the arrangements were not disregarded, arise before 6 April 2017, but

(b)would, when the arrangements are disregarded, arise on or after that date,

the relevant benefit (or part) is to be regarded for the purposes of this group of sections as arising on the date on which it would arise apart from the arrangements.

23HDouble taxation

(1)This section applies where—

(a)income tax is charged on an individual by virtue of the application of section 23E in relation to a relevant benefit amount, and

(b)at any time, a tax (whether income tax or another tax) is charged on the individual or another person otherwise than by virtue of the application of section 23E in relation to the relevant benefit concerned.

(2)In order to avoid a double charge to tax, the individual may make a claim for one or more consequential adjustments to be made in respect of the tax charged as mentioned in subsection (1)(b).

(3)On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.

(4)The value of any consequential adjustments must not exceed the lesser of—

(a)the income tax charged on the individual as mentioned in subsection (1)(a), and

(b)the tax charged as mentioned in subsection (1)(b).

(5)Consequential adjustments may be made—

(a)in respect of any period,

(b)by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and

(c)despite any time limit imposed by or under any enactment.

(3)In section 7(2) (income charged: profits of a tax year) at the end insert “(including amounts treated as profits of the tax year under section 23E(1)).

(4)The amendments made by this section have effect in relation to relevant benefits arising on or after 6 April 2017.

(5)Schedule 12 contains provision about the application of new sections 23A to 23H of ITTOIA 2005 in relation to loans and quasi-loans that are outstanding on 5 April 2019.

36Disguised remuneration schemes: restriction of income tax reliefU.K.

(1)Section 38 of ITTOIA 2005 (restriction of deductions: employee benefit contributions) is amended in accordance with subsections (2) to (5).

(2)After subsection (1) insert—

(1A)No deduction is allowed under this section in respect of employee benefit contributions for a period of account which starts more than 5 years after the end of the period of account in which the contributions are made.

(3)After subsection (2) insert—

(2AA)Subsection (2) is subject to subsections (1A) and (2AB).

(2AB)Where subsection (3C) applies, no deduction is allowed for an amount in respect of the contributions for the period except so far as the amount is a qualifying amount (see subsection (3D)).

(4)After subsection (3) insert—

(3A)Subsection (3) is subject to subsections (1A) and (3B).

(3B)Where subsection (3C) applies, an amount disallowed under subsection (2) is allowed as a deduction for a subsequent period only so far as it is a qualifying amount.

(3C)This subsection applies where the provision of qualifying benefits out of, or by way of, the contributions gives rise both to an employment income tax charge and to an NIC charge.

(3D)An amount in respect of employee benefit contributions is a “qualifying amount” if the relevant tax charges are paid before the end of the relevant period (and are not repaid).

(3E)For the purposes of subsection (3D)—

(a)the “relevant tax charges”, in relation to an amount, are the employment income tax charge and the NIC charge arising in respect of benefits which are provided out of, or by way of, that amount, and

(b)the “relevant period” is the period of 12 months immediately following the end of the period of account for which the deduction for the employee benefit contributions would (apart from this section) be allowable.

(3F)For the purposes of subsections (3C) and (3E), “employment income tax charge” and “NIC charge” have the meaning given by section 40(7).

(5)After subsection (3F) (inserted by subsection (4)) insert—

(3G)Subsection (3H) applies where—

(a)a deduction would, apart from this section, be allowable for an amount (the “remuneration amount”) in respect of employees' remuneration, and

(b)in consequence of the payment of the employees' remuneration, employee benefit contributions are made, or are to be made, in respect of the remuneration amount.

(3H)In calculating for income tax purposes the profits of a trade, the deduction referred to in subsection (3G)(a) is to be treated as a deduction in respect of employee benefit contributions made or to be made (and is to be treated as not being a deduction in respect of employees' remuneration).

(6)Section 866 of ITTOIA 2005 (employee benefit contributions: non-trades and non-property businesses) is amended in accordance with subsections (7) to (10).

(7)After subsection (2) insert—

(2A)No deduction is allowed under this section in respect of employee benefit contributions for a period of account which starts more than 5 years after the end of the period of account in which the contributions are made.

(8)After subsection (3) insert—

(3A)Subsection (3) is subject to subsections (2A) and (3B).

(3B)Where subsection (4C) applies, no deduction is allowed for an amount in respect of the contributions for the period except so far as the amount is a qualifying amount (see subsection (4D)).

(9)After subsection (4) insert—

(4A)Subsection (4) is subject to subsections (2A) and (4B).

(4B)Where subsection (4C) applies, an amount disallowed under subsection (3) is allowed as a deduction for a subsequent period only so far as it is a qualifying amount.

(4C)This subsection applies where the provision of qualifying benefits out of, or by way of, the contributions gives rise both to an employment income tax charge and to an NIC charge.

(4D)An amount in respect of employee benefit contributions is a “qualifying amount” if the relevant tax charges are paid before the end of the relevant period (and are not repaid).

(4E)For the purposes of subsection (4D)—

(a)the “relevant tax charges”, in relation to an amount, are the employment income tax charge and the NIC charge arising in respect of benefits which are provided out of, or by way of, that amount, and

(b)the “relevant period” is the period of 12 months immediately following the end of the period of account for which the deduction for the employee benefit contributions would (apart from this section) be allowable.

(4F)For the purposes of subsections (4C) and (4E), “employment income tax charge” and “NIC charge” have the meaning given by section 40(7).

(10)After subsection (4F) (inserted by subsection (9)) insert—

(4G)Subsection (4H) applies where—

(a)a deduction would, apart from this section, be allowable for an amount (the “remuneration amount”) in respect of employees' remuneration, and

(b)in consequence of the payment of the employees' remuneration, employee benefit contributions are made, or are to be made, in respect of the remuneration amount.

(4H)In calculating for income tax purposes a person's profits or other income, the deduction referred to in subsection (4G)(a) is to be treated as a deduction in respect of employee benefit contributions made or to be made (and is to be treated as not being a deduction in respect of employees' remuneration).

(11)The amendments made by subsections (2) to (4) and (7) to (9) have effect in relation to employee benefit contributions made, or to be made, on or after 6 April 2017.

(12)The amendments made by subsections (5) and (10) have effect in relation to remuneration paid on or after 6 April 2017.

37Disguised remuneration schemes: restriction of corporation tax reliefU.K.

(1)Section 1290 of CTA 2009 (restriction of deductions: employee benefit contributions) is amended in accordance with subsections (2) to (5).

(2)After subsection (1) insert—

(1A)No deduction is allowed under this section in respect of employee benefit contributions for a period of account which starts more than 5 years after the end of the period of account in which the contributions are made.

(3)After subsection (2) insert—

(2A)Subsection (2) is subject to subsections (1A) and (2B).

(2B)Where subsection (3C) applies, no deduction is allowed for an amount in respect of the contributions for the period except so far as the amount is a qualifying amount (see subsection (3D)).

(4)After subsection (3) insert—

(3A)Subsection (3) is subject to subsections (1A) and (3B).

(3B)Where subsection (3C) applies, an amount disallowed under subsection (2) is allowed as a deduction for a subsequent period only so far as it is a qualifying amount.

(3C)This subsection applies where the provision of qualifying benefits out of, or by way of, the contributions gives rise both to an employment income tax charge and to an NIC charge.

(3D)An amount in respect of employee benefit contributions is a “qualifying amount” if the relevant tax charges are paid before the end of the relevant period (and are not repaid).

(3E)For the purposes of subsection (3D)—

(a)the “relevant tax charges”, in relation to an amount, are the employment income tax charge and the NIC charge arising in respect of benefits which are provided out of, or by way of, that amount, and

(b)the “relevant period” is the period of 12 months immediately following the end of the period of account for which the deduction for the employee benefit contributions would (apart from this section) be allowable.

(3F)For the purposes of subsections (3C) and (3E), “employment income tax charge” and “NIC charge” have the meaning given by section 1292(7).

(5)After subsection (3F) (inserted by subsection (4)) insert—

(3G)Subsection (3H) applies where—

(a)a deduction would, apart from this section, be allowable for an amount (the “remuneration amount”) in respect of employees' remuneration, and

(b)in consequence of the payment of the employees' remuneration, employee benefit contributions are made, or are to be made, in respect of the remuneration amount.

(3H)In calculating for corporation tax purposes the profits of a company, the deduction referred to in subsection (3G)(a) is to be treated as a deduction in respect of employee benefit contributions made or to be made (and is to be treated as not being a deduction in respect of employees' remuneration).

(6)The amendments made by subsections (2) to (4) have effect in relation to employee benefit contributions made, or to be made, on or after 1 April 2017.

(7)The amendment made by subsection (5) has effect in relation to remuneration paid on or after 1 April 2017.

Capital allowancesU.K.

38First-year allowance for expenditure on electric vehicle charging pointsU.K.

(1)CAA 2001 is amended as follows.

(2)In section 39 (first-year qualifying expenditure) after the entry for section 45E insert—

section 45EAexpenditure on plant or machinery for electric vehicle charging point.

(3)After section 45E insert—

45EAExpenditure on plant or machinery for electric vehicle charging point

(1)Expenditure is first-year qualifying expenditure if—

(a)it is incurred in the relevant period,

(b)it is expenditure on plant or machinery for an electric vehicle charging point where the plant or machinery is unused and not second-hand, and

(c)it is not excluded by section 46 (general exclusions).

(2)For the purposes of this section expenditure on plant or machinery for an electric vehicle charging point is expenditure on plant or machinery installed solely for the purpose of charging electric vehicles.

(3)The “relevant period” is the period beginning with 23 November 2016 and ending with—

(a)in the case of expenditure incurred by a person within the charge to corporation tax, 31 March 2019, and

(b)in the case of expenditure incurred by a person within the charge to income tax, 5 April 2019.

(4)The Treasury may by regulations amend subsection (3) so as to extend the relevant period.

(5)In this section—

(4)In section 46 (general exclusions), in subsection (1) after the entry for section 45E insert— “ section 45EA (expenditure on plant or machinery for electric vehicle charging point) ”.

(5)In section 52 (amount of first-year allowances)—

(a)in the table in subsection (3), after the entry for expenditure qualifying under section 45E insert—

Expenditure qualifying under section 45EA (expenditure on plant or machinery for electric vehicle charging point)100%

(b)after subsection (3) insert—

(3A)Subsection (3B) applies where the Treasury make regulations under section 45EA(4) (power to extend relevant period).

(3B)The regulations may amend the amount specified in column 2 of the Table in subsection (3) for expenditure qualifying under section 45EA, but only in relation to expenditure incurred after the date on which the relevant period would have ended but for the regulations.

Transactions in UK landU.K.

39Disposals concerned with land in United KingdomU.K.

(1)The FA 2016 amendments have effect (so far as they would not otherwise have effect) in relation to—

(a)amounts that are recognised in GAAP accounts drawn up for any period of account beginning on or after 8 March 2017, or

(b)in the case of a straddling period, amounts that would be recognised in GAAP accounts drawn up for a period of account beginning on 8 March 2017 and ending when the straddling period ends.

(2)In subsection (1)—

(3)In section 161 of TCGA 1992 (appropriations to and from stock), in subsection (5)(a), for “CTA 2010” substitute “ ITA 2007 ”.

(4)Section 79(10) of FA 2016 (which substitutes paragraph (a) of section 161(5) of TCGA 1992) is to be regarded as always having had effect with the amendment made by subsection (3).

Co-ownership authorised contractual schemesU.K.

40Co-ownership authorised contractual schemes: capital allowancesU.K.

In Part 2 of CAA 2001 (plant and machinery), in Chapter 20 (supplementary provisions), after the Chapter heading insert—

Co-ownership authorised contractual schemesU.K.
262AACo-ownership schemes: carrying on qualifying activity

(1)This section applies where the participants in a co-ownership authorised contractual scheme together carry on a qualifying activity.

(2)Each participant in the scheme is for the purposes of this Part to be regarded as carrying on the qualifying activity.

(3)Subsection (2) applies in relation to a participant only to the extent that the profits or gains arising to the participant from the qualifying activity are, or (if there were any) would be, chargeable to tax.

(4)But in determining for the purposes of subsection (1) whether or to what extent the participants in a co-ownership authorised contractual scheme together carry on a qualifying activity, assume that profits or gains arising to all participants from the qualifying activity are, or (if there were any) would be, chargeable to tax.

262ABCo-ownership schemes: election

(1)The operator of a co-ownership authorised contractual scheme may make an election under this section.

(2)The election must specify an accounting period of the scheme as the first accounting period in relation to which the election has effect.

(3)That first accounting period must not—

(a)be longer than 12 months, or

(b)begin before 1 April 2017.

(4)The election has effect for that first accounting period and all subsequent accounting periods of the scheme.

(5)The election is irrevocable.

(6)The election is made by notice to an officer of Revenue and Customs.

262ACCo-ownership schemes: calculation of allowance after election

(1)This section applies where an election under section 262AB has effect for an accounting period of a co-ownership authorised contractual scheme (“the relevant period”).

(2)The operator of the scheme is to calculate the allowances that would be available to the scheme under this Part in relation to the relevant period on the basis of the assumptions in subsection (3).

(3)The assumptions are—

(a)the scheme is a person;

(b)the relevant period is a chargeable period for the purposes of this Act;

(c)any qualifying activity carried on by the participants in the scheme together is carried on by the scheme;

(d)property which was subject to the scheme at the beginning of the first accounting period for which the election has effect—

(i)ceased to be owned by the participants at that time, and

(ii)was acquired by the scheme at that time;

(e)the disposal value to be brought into account in relation to the cessation of ownership and the acquisition referred to in paragraph (d) is the tax written-down value;

(f)any property which became subject to the scheme at a time during an accounting period for which the election has effect was acquired by the scheme at that time;

(g)property which ceased to be subject to the scheme at any such time ceased to be owned by the scheme at that time;

(h)the disposal value to be brought into account in relation to the cessation of ownership referred to in paragraph (g) is the tax written-down value;

(i)the scheme is not entitled to a first-year allowance or an annual investment allowance in respect of any expenditure.

(4)The operator of the co-ownership authorised contractual scheme must allocate to each participant in the scheme a proportion (which may be zero) of the allowances calculated under this section.

(5)The allocation is to be on the basis of what is just and reasonable.

(6)In determining what is just and reasonable—

(a)regard is to be had in particular to the relative size of each participant's holding of units in the scheme;

(b)no regard is to be had to—

(i)whether or to what extent a participant is liable to income tax or corporation tax, or

(ii)any other circumstances relating to a participant's liability to tax.

(7)If the participants in the scheme together carry on more than one qualifying activity, the calculation and allocation under this section are to be made separately for each activity.

(8)The proportion of an allowance allocated by the operator to a participant under this section for a qualifying activity is the total amount of the allowance available to the participant under this Part in relation to the relevant period by virtue of carrying on that activity as a participant in the scheme.

(9)In this section “tax written-down value”, in relation to any cessation of ownership or acquisition, means such amount as would give rise to neither a balancing allowance nor a balancing charge.

(10)For the purposes of subsection (9) assume that expenditure to which the disposal value relates is in its own pool.

(11)For the purposes of subsections (3)(c) and (9), assume that profits or gains arising to all participants from the qualifying activity are, or (if there were any) would be, chargeable to tax.

262ADCo-ownership schemes: effect of election for participants

(1)This section has effect where an election under section 262AB is made by the operator of a co-ownership authorised contractual scheme.

(2)For the purposes of sections 61(1) and 196(1) (disposal events and values)—

(a)a participant in the scheme is to be regarded as ceasing to own the participant's interest in the property subject to the scheme at the beginning of the first accounting period of the scheme for which the election has effect, and

(b)the disposal value to be brought into account in relation to that cessation of ownership is the tax written-down value.

(3)In subsection (2)(b) “tax written-down value” means such amount as would give rise to neither a balancing allowance nor a balancing charge.

(4)For the purposes of subsection (3) assume that—

(a)expenditure to which the disposal value relates is in its own pool;

(b)profits or gains arising to all participants from the qualifying activity are, or (if there were any) would be, chargeable to tax.

262AECo-ownership schemes: effect of election for purchasers

(1)This section has effect where—

(a)an election under section 262AB is made by the operator of a co-ownership authorised contractual scheme,

(b)property consisting of a fixture ceased to be subject to the scheme at any time in an accounting period for which the election has effect,

(c)in a calculation made by the operator of the scheme under section 262AC(2) the assumption in section 262AC(3)(g) was made in relation to that fixture, and

(d)a person (“the current owner”) is treated as the owner of the fixture as a result of incurring capital expenditure on its provision (“the new expenditure”).

(2)In determining the current owner's qualifying expenditure—

(a)if the disposal value statement requirement is not satisfied, the new expenditure is to be treated as nil, and

(b)in any other case, any amount of the new expenditure which exceeds the assumed disposal value is to be left out of account (or, if such an amount has already been taken into account, is to be treated as an amount that should never have been taken into account).

(3)The disposal value statement requirement is that—

(a)the operator of the scheme has, no later than 2 years after the date when the fixture ceased to be property subject to the scheme, made a written statement of the assumed disposal value, and

(b)the current owner has obtained that statement or a copy of it (directly or indirectly) from the operator of the scheme.

(4)Sections 185 (fixture on which a plant and machinery allowance has been claimed) and 187A (effect of changes in ownership of fixture) do not apply in relation to the new expenditure.

(5)In this section “assumed disposal value” means the disposal value that, in making the calculation referred to in subsection (1)(c), was assumed to be brought into account pursuant to section 262AC(3)(h).

262AFCo-ownership schemes: definitions relating to schemes

In sections 262AA to 262AE and this section—

41Co-ownership authorised contractual schemes: information requirementsU.K.

(1)The Treasury may by regulations impose requirements on the operator of a co-ownership authorised contractual scheme in relation to—

(a)the provision of information to participants in the scheme;

(b)the provision of information to Her Majesty's Revenue and Customs.

(2)Regulations under subsection (1)(a) may be made only for the purpose of enabling participants in a co-ownership authorised contractual scheme to meet their tax obligations in the United Kingdom with respect to their interests in the scheme.

(3)Regulations under subsection (1)(b) may in particular require the provision of information about—

(a)who the participants in the scheme were in any accounting period of the scheme;

(b)the number and classes of units in the scheme in any such period;

(c)the amount of income per unit of any class in any such period;

(d)what information has been provided to participants.

(4)Regulations under this section may specify—

(a)the time when information is to be provided;

(b)the form and manner in which information is to be provided.

(5)Regulations under this section may make provision for the imposition of penalties in respect of contravention of, or non-compliance with, the regulations, including provision—

(a)for Her Majesty's Revenue and Customs to exercise a discretion as to the amount of a penalty, and

(b)about appeals in relation to the imposition of a penalty.

(6)Regulations under this section may in particular be framed by reference to an accounting period of a co-ownership authorised contractual scheme beginning on or after 1 April 2017.

(7)Regulations under this section may contain consequential, supplementary and transitional provision.

(8)Regulations under this section must be made by statutory instrument.

(9)A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

(10)In this section—

42Co-ownership authorised contractual schemes: offshore fundsU.K.

(1)The Treasury may by regulations make provision about how participants in a co-ownership authorised contractual scheme are to be treated for income tax purposes or corporation tax purposes in relation to investments made for the purposes of the scheme in an offshore fund.

(2)Regulations under subsection (1) may, among other things, make provision—

(a)for the operator of a co-ownership authorised contractual scheme to allocate to participants in the scheme amounts relating to investments made for the purposes of the scheme in an offshore fund;

(b)for those amounts to be regarded as income of the participants to whom they are allocated;

(c)as to when that income is to be brought into account for income tax purposes or corporation tax purposes.

(3)Regulations under this section may—

(a)modify an enactment (whenever passed or made);

(b)contain consequential, supplementary and transitional provision.

(4)Regulations under this section must be made by statutory instrument.

(5)A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

(6)References in this section to investments made for the purposes of a co-ownership authorised contractual scheme in an offshore fund include investments so made through one or more other co-ownership authorised contractual schemes.

(7)In this section—

PART 2 U.K.Indirect taxes

43Air passenger duty: rates of duty from 1 April 2018U.K.

(1)In section 30 of FA 1994 (air passenger duty: rates of duty), in subsection (4A) (long haul rates of duty)—

(a)in paragraph (a), for “£75” substitute “ £78 ”;

(b)in paragraph (b), for “£150” substitute “ £156 ”.

(2)The amendments made by this section have effect in relation to the carriage of passengers beginning on or after 1 April 2018.

44Petroleum revenue tax: elections for oil fields to become non-taxableU.K.

(1)In Schedule 20B to FA 1993, for paragraphs 2 to 12 substitute—

Method of election

2An election must be made in writing.

3An election must be notified to the Commissioners.

4An election is deemed to have been made on the date on which notification of the election was sent to the Commissioners.

Effect of election

5If an election is made, the field ceases to be taxable with effect from the start of the first chargeable period to begin after the election is made.

No unrelievable field losses from field

6From the start of the first chargeable period to begin after an election is made, no allowable loss that accrues from the oil field is an allowable unrelievable field loss for the purposes of petroleum revenue tax.

Interpretation

7(1)In this Schedule—

(2)Expressions used in this Schedule and in Part 1 of the Oil Taxation Act 1975 have the same meaning in this Schedule as in Part 1 of that Act.

(2)In OTA 1975, in section 6(1A), for “paragraph 5” substitute “ paragraph 6 ”.

(3)In FA 1980, in paragraph 15(9A) of Schedule 17, for “paragraph 5” substitute “ paragraph 6 ”.

(4)The amendment made by this section is to be treated as having come into force on 23 November 2016.

45Gaming duty: ratesU.K.

(1)In section 11(2) of FA 1997 (rates of gaming duty), for the table substitute—

TABLE

Part of gross gaming yieldRate
The first £2,423,50015%
The next £1,670,50020%
The next £2,925,50030%
The next £6,175,50040%
The remainder50%.

(2)The amendment made by this section has effect in relation to accounting periods beginning on or after 1 April 2017.

46Remote gaming duty: freeplayU.K.

(1)Part 3 of FA 2014 (general betting duty, pool betting duty and remote gaming duty) is amended in accordance with subsections (2) to (8).

(2)In section 159 (remote gaming duty: gaming payments), for subsection (4) substitute—

(4)For the purposes of this Chapter—

(a)where the chargeable person participates in the remote gaming in reliance on an offer which waives all of a gaming payment, the person is to be treated as having made a gaming payment of the amount which would have been required to be paid without the offer (“the full amount”), and

(b)where the chargeable person participates in the remote gaming in reliance on an offer which waives part of a gaming payment, the person is to be treated as having made an additional gaming payment of the difference between the gaming payment actually made and the full amount.

(5)Where a person is treated by subsection (4) as having made a gaming payment, the payment is to be treated for the purposes of this Chapter—

(a)as having been made to the gaming provider at the time when the chargeable person begins to participate in the remote gaming to which it relates, and

(b)as not having been—

(i)returned, or

(ii)assigned to a gaming prize fund.

(6)The Commissioners may by regulations make further provision about how a gaming payment which a person is treated as having made under subsection (4) is to be treated for the purposes of this Chapter.

(7)This section has effect subject to section 159A.

(3)After section 159 insert—

159APlay using the results of successful freeplay

(1)Where a chargeable person participates in remote gaming, an amount is not to be taken into account in determining the “gaming payment” (if any) under section 159 so far as the amount is paid out of money in relation to which the first and second conditions are met (“excluded winnings”).

(2)The first condition is that the money has been won by participation in the gaming either—

(a)in reliance on an offer which waives all or part of a gaming payment, or

(b)in a case where the gaming payment was paid out of money in relation to which this condition and the second condition were met.

(3)The second condition is that the chargeable person is not entitled to use the money otherwise than for the purpose of participation in the gaming.

(4)Subsection (5) applies where—

(a)a chargeable person participates in remote gaming in reliance on an offer which waives all or part of a gaming payment, and

(b)that offer has been won in the course of the person's participation in the gaming (and the person was not given the choice of receiving a different benefit instead of the offer).

(5)The amount which would, apart from this subsection, be treated by section 159(4)(a) or (b) as a gaming payment (or additional gaming payment) is not to be so treated.

(6)For the purposes of this section, where a payment is made out of moneys which include both excluded winnings and money which is not excluded winnings (the “other funds”), the payment is not taken to be made out of excluded winnings except so far as the amount of the payment exceeds the amount of those other funds.

(7)In this section “money” includes any amount credited and any other money's worth.

(4)In section 160 (remote gaming duty: prizes)—

(a)in subsection (1), in the opening words, after “account” insert “ only ”,

(b)omit subsection (2),

(c)in subsection (3), at the end insert “ (but where a gaming payment is returned by being credited to an account this subsection has effect subject to subsection (1)) ”, and

(d)at the end insert—

(9)This section has effect subject to section 160A.

(5)After section 160 insert—

160APrizes: freeplay

(1)Where a prize is a freeplay offer (whether or not in the form of a voucher) which does not fall within section 160(4)—

(a)for the purposes of sections 156 and 157, the expenditure on the prize is nil, and

(b)subsections (5) to (7) of section 160 do not apply in relation to the prize.

(2)Where a prize is a voucher which gives the recipient a choice of using it in place of money for freeplay or as whole or partial payment for another benefit, section 160(5)(b) has effect as if after “used” there were inserted “ if it is used as payment for a benefit other than freeplay ”.

(3)In this section—

(6)In section 188 (gaming), after subsection (2) insert—

(3)But a game is not a “game of chance” for the purposes of this Part if—

(a)it can only be played with the participation of two or more persons, and

(b)no amounts are paid or required to be paid—

(i)in respect of entitlement to participate in the game, or

(ii)otherwise for, on account of or in connection with participation in the game.

(7)In section 190 (index), in the Table, in the entry for “game of chance”, for “188(1)(b)” substitute “ 188(1)(b) and (3) ”.

(8)In section 194(4) (regulations under Part 3 to which the procedure in section 194(5) is to apply), before paragraph (a), insert—

(za)regulations under section 159(6);.

(9)The amendments made by this section have effect with respect to accounting periods beginning on or after 1 August 2017.

47Tobacco products manufacturing machinery: licensing schemeU.K.

(1)After section 8U of TPDA 1979 insert—

8VTobacco products manufacturing machinery: licensing scheme

(1)In this section “tobacco products manufacturing machinery” means machinery that is designed primarily for use for the purpose of (or for purposes including) manufacturing tobacco products.

(2)The Commissioners may by regulations—

(a)prohibit a person from purchasing, acquiring, owning or being in possession of, or carrying out other specified activities in respect of, an item of tobacco products manufacturing machinery, except in accordance with a licence granted under the regulations;

(b)provide that if a person contravenes the prohibition in relation to an item of tobacco products manufacturing machinery, the machinery is liable to forfeiture.

(3)The regulations may provide that the prohibition does not apply—

(a)in relation to persons, or items of tobacco products manufacturing machinery, of a specified description;

(b)in specified circumstances.

(4)Regulations under this section may include provision—

(a)imposing obligations on licensed persons;

(b)for a licensed person who fails to comply with a condition or restriction of a licence, or with an obligation imposed by the regulations, to be liable to a penalty of the amount for the time being specified in section 9(2)(b) of the Finance Act 1994;

(c)for exceptions from liability to a penalty under the regulations;

(d)for the assessment and recovery of a penalty, including provision for two or more contraventions to be treated as a single contravention for the purposes of assessment;

(e)for the Commissioners, if they think it right because of special circumstances, to remit, reduce (including reduce to nil) or stay a penalty, or agree a compromise in relation to proceedings for a penalty;

(f)about reviews by the Commissioners, or by an officer of Revenue and Customs, of decisions in connection with licensing and the imposition of penalties under the regulations and about appeals against those decisions (which may include provision for specified decisions of the Commissioners to be treated as if they were listed in section 13A(2) of, or Schedule 5 to, the Finance Act 1994);

(g)for the Customs and Excise Management Act 1979 to have effect in relation to licensed persons as it has effect in relation to revenue traders, subject to such modifications as may be specified in the regulations.

(5)The Commissioners may, by or under regulations under this section, make provision—

(a)regulating the grant of licences, including provision about the circumstances in which a licence may be granted and the requirements to be met by or in relation to the applicant (which may include a requirement that the applicant is a fit and proper person to hold a licence);

(b)about the form, manner and content of an application for or in respect of a licence;

(c)for licences to be subject to specified conditions or restrictions;

(d)regulating the variation or revocation of a licence, or of any condition or restriction to which a licence is subject;

(e)about the renewal, surrender or transfer of a licence;

(f)for communications by or with the Commissioners in connection with a licence to be made electronically;

(g)as to the arrangements for licensing bodies corporate which are members of the same group (as defined in the regulations);

(h)for members of a group to be jointly and severally liable for any penalties imposed under the regulations.

(2)In section 9 of TPDA 1979 (regulations), in subsection (1A), for “or 8U” substitute “ , 8U or 8V ”.

PART 3 U.K.Fulfilment businesses

48Carrying on a third country goods fulfilment businessU.K.

(1)For the purposes of this Part a person carries on a third country goods fulfilment business if the person, by way of business—

(a)stores third country goods which are owned by a person who is not established in a Member State, or

(b)stores third country goods on behalf of a person who is not established in a Member State,

at a time when the conditions in subsection (2) are met in relation to the goods.

(2)The conditions are that—

(a)there has been no supply of the goods in the United Kingdom for the purposes of VATA 1994, and

(b)the goods are being offered for sale in the United Kingdom or elsewhere.

(3)But a person does not carry on a third country goods fulfilment business if the person's activities within subsection (1) are incidental to the carriage of the goods.

(4)Goods are “third country” goods if they have been imported from a place outside the Member States within the meaning of section 15 of VATA 1994.

(5)Whether a person is established in a Member State is to be determined in accordance with Article 10 of Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax.

Commencement Information

I1Pt. 3: s. 48 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I2S. 48 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

49Requirement for approvalU.K.

(1)A person may not carry on a third country goods fulfilment business otherwise than in accordance with an approval given by the Commissioners under this section.

(2)The Commissioners may approve a person to carry on a third country goods fulfilment business only if they are satisfied that the person is a fit and proper person to carry on the business.

(3)The Commissioners may approve a person to carry on a third country goods fulfilment business for such periods and subject to such conditions or restrictions as they may think fit or as they may by regulations made by them prescribe.

(4)The Commissioners may at any time for reasonable cause vary the terms of, or revoke, an approval under this section.

(5)In this Part “approved person” means a person approved under this section to carry on a third country goods fulfilment business.

Commencement Information

I3Pt. 3: s. 49 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I4S. 49 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

50Register of approved personsU.K.

(1)The Commissioners must maintain a register of approved persons.

(2)The register is to contain such information relating to approved persons as the Commissioners consider appropriate.

(3)The Commissioners may make publicly available such information contained in the register as they consider necessary to enable those who deal with a person who carries on a third country goods fulfilment business to determine whether the person in question is an approved person in relation to that activity.

(4)The information may be made available by such means (including the internet) as the Commissioners consider appropriate.

Commencement Information

I5Pt. 3: s. 50 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I6S. 50 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

51Regulations relating to approval, registration etc.U.K.

(1)The Commissioners may by regulations make provision—

(a)regulating the approval and registration of persons under this Part,

(b)regulating the variation or revocation of any such approval or registration, or of any condition or restriction to which such an approval or registration is subject,

(c)about the register maintained under section 50,

(d)regulating the carrying on of a third country goods fulfilment business, and

(e)imposing obligations on approved persons.

(2)The regulations may, in particular, make provision—

(a)requiring applications, and other communications with the Commissioners, to be made electronically;

(b)as to the procedure for the approval and registration of bodies corporate which are members of the same group;

(c)requiring approved persons to keep and make available for inspection such records as may be prescribed by or under the regulations.

Commencement Information

I7Pt. 3: s. 51 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I8S. 51 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

52Disclosure of information by HMRCU.K.

(1)The Commissioners may disclose to an approved person information held by Her Majesty's Revenue and Customs in connection with a function of Her Majesty's Revenue and Customs, but only for the purpose mentioned in subsection (2).

(2)The purpose is to assist the approved person in complying with obligations imposed on that person by virtue of section 51.

(3)An approved person to whom information is disclosed under subsection (1)—

(a)may use the information only for the purpose of complying with obligations imposed on that person by virtue of section 51, and

(b)may not further disclose the information except with the consent of the Commissioners.

(4)Section 19 of the Commissioners for Revenue and Customs Act 2005 (offence) applies to a disclosure in contravention of subsection (3)(b) as it applies to a disclosure, in contravention of section 20(9) of that Act, of revenue and customs information relating to a person whose identity is specified in the disclosure or can be deduced from it.

Commencement Information

I9Pt. 3: s. 52 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I10S. 52 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

53OffenceU.K.

(1)A person who—

(a)carries on a third country goods fulfilment business, and

(b)is not an approved person,

commits an offence.

(2)In proceedings for an offence under subsection (1) it is a defence to show that the person did not know, and had no reasonable grounds to suspect, that the person—

(a)was carrying on a third country goods fulfilment business, or

(b)was not an approved person.

(3)A person is taken to have shown the fact mentioned in subsection (2) if—

(a)sufficient evidence of that fact is adduced to raise an issue with respect to it, and

(b)the contrary is not proved beyond reasonable doubt.

(4)A person guilty of an offence under this section is liable on summary conviction—

(a)in England and Wales, to imprisonment for a term not exceeding 12 months, or a fine, or both;

(b)in Scotland, to imprisonment for a term not exceeding 12 months, or a fine not exceeding the statutory maximum, or both;

(c)in Northern Ireland, to imprisonment for a term not exceeding 6 months, or a fine not exceeding the statutory maximum, or both.

(5)A person guilty of an offence under this section is liable on conviction on indictment to—

(a)imprisonment for a period not exceeding 7 years,

(b)a fine, or

(c)both.

(6)In relation to an offence committed before the commencement of section 154(1) of the Criminal Justice Act 2003 the reference in subsection (4)(a) to 12 months is to be read as a reference to 6 months.

Commencement Information

I11Pt. 3: s. 53 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I12S. 53 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

54ForfeitureU.K.

(1)If a person—

(a)carries on a third country goods fulfilment business, and

(b)is not an approved person,

any goods within subsection (2) are liable to forfeiture under CEMA 1979.

(2)Goods are within this subsection if—

(a)they are stored by the person, and

(b)their storage by the person constitutes, or has constituted, the carrying on of a third country goods fulfilment business by the person.

Commencement Information

I13Pt. 3: s. 54 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I14S. 54 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

55PenaltiesU.K.

(1)Schedule 13 provides for a penalty to be payable by a person who carries on a third country goods fulfilment business and is not an approved person.

(2)The Commissioners may make regulations (“penalty regulations”) imposing a penalty for the contravention of—

(a)any condition or restriction imposed under this Part;

(b)regulations under this Part.

(3)The amount of a penalty imposed by the penalty regulations is to be specified in the regulations, but must not exceed £3,000.

(4)The penalty regulations may make provision for the assessment and recovery of a penalty imposed by the regulations.

(5)The Commissioners may by regulations make provision for corporate bodies which are members of the same group to be jointly and severally liable for any penalties imposed under—

(a)Schedule 13;

(b)penalty regulations.

Commencement Information

I15Pt. 3: s. 55 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I16S. 55 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

56AppealsU.K.

(1)FA 1994 is amended as follows.

(2)In section 13A(2) (customs and excise reviews and appeals: relevant decisions) after paragraph (gb) insert—

(gc)any decision by HMRC that a person is liable to a penalty, or as to the amount of a person's liability, under—

(i)regulations under section 55 of the Finance (No. 2) Act 2017, or

(ii)Schedule 13 to that Act;.

(3)In Schedule 5 to that Act (decisions subject to review and appeal) after paragraph 9A insert—

The Finance (No. 2) Act 2017

9BAny decision for the purposes of Part 3 of the Finance (No. 2) Act 2017 (third country goods fulfilment businesses) as to—

(a)whether or not, and in which respects, any person is to be, or to continue to be, approved and registered, or

(b)the conditions or restrictions subject to which any person is approved and registered.

Commencement Information

I17Pt. 3: s. 56 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I18S. 56 in force at 1.4.2018 for the purposes of the amendments made by that section by S.I. 2018/298, reg. 2(2)

57RegulationsU.K.

(1)Regulations under this Part may—

(a)make provision which applies generally or only for specified cases or purposes;

(b)make different provision for different cases or purposes;

(c)include incidental, consequential, transitional or transitory provision;

(d)confer a discretion on the Commissioners;

(e)make provision by reference to a notice to be published by the Commissioners.

(2)Regulations under this Part are to be made by statutory instrument.

(3)A statutory instrument containing regulations under this Part is subject to annulment in pursuance of a resolution of the House of Commons.

(4)This section does not apply to regulations under section 59 (commencement).

Commencement Information

I19Pt. 3: s. 57 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I20S. 57 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

58InterpretationU.K.

(1)In this Part—

(2)For the purposes of this Part two or more bodies corporate are members of a group if—

(a)one of them controls each of the others,

(b)one person (whether a body corporate or an individual) controls all of them, or

(c)two or more individuals carrying on a business in partnership control all of them.

(3)A body corporate is to be taken to control another body corporate if—

(a)it is empowered by or under legislation to control that body's activities, or

(b)it is that body's holding company within the meaning of section 1159 of, and Schedule 6 to, the Companies Act 2006.

(4)An individual or individuals are to be taken to control a body corporate if the individual or individuals (were the individual or individuals a company) would be that body's holding company within the meaning of section 1159 of, and Schedule 6 to, the Companies Act 2006.

Commencement Information

I21Pt. 3: s. 58 in force for at Royal Assent for specified purposes, see s. 59(1)(a)

I22S. 58 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

59CommencementU.K.

(1)This Part comes into force—

(a)so far as it confers powers to make regulations, on the day on which this Act is passed, and

(b)for all other purposes, on such day as the Commissioners may by regulations made by statutory instrument appoint.

(2)Regulations under subsection (1)(b) may appoint different days for different purposes.

Commencement Information

I23Pt. 3: s. 59 in force at Royal Assent for specified purposes, see s. 59(1)(a)

I24S. 59 in force at 1.4.2019 in so far as not already in force by S.I. 2018/298, reg. 2(1)

PART 4 U.K.Administration, avoidance and enforcement

Reporting and record-keepingU.K.

Prospective

60Digital reporting and record-keeping for income tax etcU.K.

(1)TMA 1970 is amended as set out in subsections (2) and (3).

(2)After section 12B insert—

Digital reporting and record-keepingU.K.
12CDigital reporting and record-keeping

Schedule A1 (digital reporting and record-keeping) has effect.

(3)Before Schedule 1AA insert—

Section 12C

SCHEDULE A1U.K.Digital reporting and record-keeping
PART 1U.K.Application
Application: personsU.K.

1(1)This Schedule applies to a person within the charge to income tax who, otherwise than in partnership, carries on (or has carried on)—

(a)a trade, profession or vocation the profits of which are chargeable to income tax under Part 2 of ITTOIA 2005,

(b)a property business the profits of which are chargeable to income tax under Part 3 of ITTOIA 2005, or

(c)any other activity which may give rise to profits or other income chargeable to income tax under Part 2 or 3 of ITTOIA 2005.

(2)This is subject to paragraph 2.

2(1)This Schedule does not apply to—

(a)the trustees of a charitable trust, or

(b)the trustees of an exempt unauthorised unit trust (within the meaning of the Unauthorised Unit Trusts (Tax) Regulations 2013 (S.I. 2013/2819)),

unless the trustees elect for this Schedule to apply to them.

(2)This Schedule does not apply to a person in respect of an excluded activity unless the person elects for this Schedule to apply to the person in respect of the excluded activity.

(3)The following are excluded activities—

(a)the underwriting business of a member of Lloyd's (within the meaning of section 184 of the Finance Act 1993),

(b)holding shares in respect of which a distribution may be made which is chargeable to income tax under Part 3 of ITTOIA 2005 by virtue of section 548(6) of CTA 2010 (distributions to shareholders in real estate investment trusts), and

(c)participating in an open-ended investment company which may make distributions chargeable to income tax under Part 3 of ITTOIA 2005 by virtue of regulation 69Z18 of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964) (property income distributions).

(4)The Commissioners may by regulations make provision about elections under this paragraph and the withdrawal of such elections, including provision—

(a)about how an election may be made or withdrawn, and

(b)about the period for which an election or withdrawal has effect.

Application: partnershipsU.K.

3(1)This Schedule applies to a partnership if one or more of the partners is within the charge to income tax.

(2)This is subject to paragraph 4.

4(1)If all the activities of a partnership which may give rise to profits or income are excluded activities, this Schedule does not apply to the partnership unless the partnership elects for this Schedule to apply to it.

(2)The following are excluded activities—

(a)the underwriting business of a Lloyd's partnership (as defined in section 184(1) of the Finance Act 1993),

(b)holding shares in respect of which a distribution may be made which is chargeable to income tax under Part 3 of ITTOIA 2005 by virtue of section 548(6) of CTA 2010 (distributions to shareholders in real estate investment trusts), and

(c)participating in an open-ended investment company which may make distributions chargeable to income tax under Part 3 of ITTOIA 2005 by virtue of regulation 69Z18 of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964) (property income distributions).

(3)The Commissioners may by regulations make provision about elections under this paragraph and the withdrawal of such elections, including provision—

(a)about how an election may be made or withdrawn, and

(b)about the period for which an election or withdrawal has effect.

Nominated partnersU.K.

5(1)Requirements imposed by regulations under this Schedule on a partnership are to be met by a nominated partner.

(2)A “nominated partner” is a partner nominated for the purposes of this Schedule—

(a)by the partners, or

(b)by the Commissioners.

(3)A nomination, or a revocation of a nomination, by the partners does not have effect until notice of the revocation or nomination is given to HMRC.

(4)The Commissioners may by regulations make provision about nominations and the revocation of nominations, including provision about the circumstances in which the Commissioners may nominate a partner.

(5)In this Act references to a nominated partner are to a partner nominated for the purposes of this Schedule.

PART 2U.K.Digital reporting and record-keeping
InterpretationU.K.

6In this Part of this Schedule “business”—

(a)in relation to a person to whom this Schedule applies (see paragraphs 1 and 2), means the activity by virtue of which this Schedule applies to the person (and if more than one, means each of them), and

(b)in relation to a partnership to which this Schedule applies (see paragraphs 3 and 4), means any activity of the partnership.

Periodic updatesU.K.

7(1)The Commissioners may by regulations require a person or partnership to whom this Schedule applies to provide to HMRC, by electronic communications, specified information about the business of the person or partnership.

(2)The information which may be specified includes any information (“financial information”) relevant to calculating profits, losses or income of the business, including information about receipts and expenses.

(3)The regulations may require information to be provided at or for specified intervals, times or periods.

(4)The regulations may not require financial information about the business to be provided more often than once every 3 months.

End of period statementU.K.

8(1)The Commissioners may by regulations require a person to whom this Schedule applies to provide to HMRC, by electronic communications, a statement containing specified information about the person's business in relation to each relevant period.

(2)Relevant period” means—

(a)in relation to a business the profits or income of which are chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005, a basis period (see Chapter 15 of that Part), and

(b)otherwise, a tax year.

(3)The information which may be specified includes any information relevant to calculating profits, losses or income of the business for the relevant period, including information about receipts and expenses.

(4)Regulations under this paragraph may require the statement to include a declaration to the effect that the information included in it is correct and complete.

(5)An end of period statement for a tax year must be provided to HMRC at or before—

(a)the time at which the person delivers a return under section 8 or 8A for the tax year (see section 8(7)(c) and 8A(7)(c)), or

(b)if earlier, the end of 31 January following the tax year.

(6)In this Act—

(a)references to an end of period statement are to a statement required by regulations under this paragraph;

(b)references to an end of period statement for a tax year are to an end of period statement for that tax year or, where the relevant period is a basis period, for the basis period for that tax year.

Facility for complying with notice to file under section 8 or 8AU.K.

9The Commissioners may by regulations make provision for the establishment and use of a facility enabling a person to whom this Schedule applies to file or deliver, by electronic communications—

(a)anything which under section 8(1AB) may be required to be filed or delivered by a notice to file under section 8;

(b)anything which under section 8A(1AB) may be required to be filed or delivered by a notice to file under section 8A.

Partnership returnU.K.

10(1)The Commissioners may by regulations require a partnership to which this Schedule applies to provide to HMRC, by electronic communications, a return containing specified information about the partnership's business in relation to each tax year.

(2)The information which may be specified includes any information which is or may be required to be included in a section 12AA partnership return, including information in respect of any partners within the charge to corporation tax.

(3)In particular, the information which may be specified includes the information required to be included in a section 12AA partnership return by section 12AB (partnership statements).

(4)Regulations under this paragraph may require the return to include a declaration to the effect that the information included in it is correct and complete.

(5)A Schedule A1 partnership return for a tax year must be provided to HMRC on or before 31 January following the tax year.

(6)In this Act—

(a)references to a Schedule A1 partnership return are to a return required by regulations under this paragraph, and

(b)references to a partnership statement, in relation to a Schedule A1 partnership return, are to information required to be included in the return by virtue of sub-paragraph (3).

(7)In the Taxes Acts, unless the contrary intention appears, a reference (whether general or specific) to a return under, or a return required under, this Act includes a reference to a Schedule A1 partnership return.

Record-keepingU.K.

11(1)The Commissioners may by regulations require a person or partnership to whom this Schedule applies to—

(a)keep specified records relating to the business in electronic form, and

(b)preserve those records in electronic form for a specified period.

(2)The records which may be specified are any records the Commissioners consider relevant to ascertaining information required to be provided by regulations under this Part of this Schedule.

(3)A requirement imposed by regulations under this paragraph is in addition to, and not in place of, any other requirement that the person or partnership keep and preserve records (or keep and preserve records in a particular form).

(4)Paragraph 5(1) (requirements imposed on partnership to be met by nominated partner) does not apply to requirements imposed by regulations under this paragraph.

12(1)This paragraph applies where requirements imposed by regulations under paragraph 11 for any period are not complied with.

(2)The person, or in the case of a partnership each relevant partner, is liable for a penalty.

(3)Relevant partner” means any person who was a partner in the partnership at any time during the period in question.

(4)The amount of the penalty must not exceed £3,000.

(5)A person or relevant partner is not liable to a penalty under this paragraph in relation to a period if the person or relevant partner is liable to a penalty under section 12B(5) in relation to that period.

Electronic communications and records: supplementary powersU.K.

13(1)This paragraph applies to regulations under paragraphs 7, 8, 9, 10 and 11.

(2)The regulations may (amongst other things) make provision—

(a)as to the electronic form to be taken by information provided and records kept or preserved,

(b)requiring persons to prepare and keep records of information provided by means of electronic communications,

(c)for the production of the contents of records kept or preserved in accordance with regulations under this Part of this Schedule,

(d)as to conditions that must be complied with in connection with the use of electronic communications or the keeping or preservation of electronic records,

(e)for treating information as not having been provided or records as not having been kept or preserved unless conditions are complied with,

(f)for determining the time at which and person by whom information is taken to have been delivered, and

(g)for authenticating information or records.

(3)The regulations may also make provision (which may include provision for the application of conclusive or other presumptions) about the manner of proving for any purpose—

(a)whether any use of electronic communications is to be taken as having resulted in the provision of information,

(b)the time at which information was provided,

(c)the person by whom information was provided,

(d)the contents of any information provided,

(e)the contents of any records, and

(f)any other matter for which provision may be made by the regulations.

(4)The regulations may allow or require use to be made of intermediaries in connection with—

(a)the provision of information by means of electronic communications, and

(b)the authentication or security of anything transmitted by any such means.

(5)The regulations may—

(a)allow any authorisation or requirement for which the regulations may provide to be given by means of a specific or general direction given by the Commissioners, and

(b)provide that the conditions of an authorisation or requirement are to be taken to be satisfied only where the Commissioners are satisfied as to specified matters.

(6)The regulations may provide—

(a)that information provided must meet standards of accuracy and completeness set by specific or general directions given by the Commissioners, and

(b)that failure to meet those standards may be treated as a failure to provide the information, or as a failure to comply with the requirements of the regulations.

PART 3U.K.Exemptions
Exemption for the digitally excludedU.K.

14(1)The Commissioners must by regulations make provision—

(a)for a person to be exempt from requirements imposed by regulations under paragraphs 7, 8 and 11 if the Commissioners are satisfied that the person is digitally excluded, and

(b)for a partnership to be exempt from requirements imposed by regulations under paragraphs 7, 10 and 11 if the Commissioners are satisfied that the partnership is digitally excluded.

(2)A person is digitally excluded if the digital exclusion condition is met in relation to the person.

(3)A partnership is digitally excluded if the digital exclusion condition is met in relation to each partner.

(4)The digital exclusion condition is met in relation to a person or partner if—

(a)the person or partner is a practising member of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records, or

(b)for any reason (including age, disability or location) it is not reasonably practicable for the person or partner to use electronic communications or to keep electronic records.

Further exemptionsU.K.

15(1)The Commissioners may by regulations make provision for further exemptions.

(2)The exemptions for which provision may be made include exemptions based on income or other financial criteria.

PART 4U.K.Supplementary provision
AppealsU.K.

16(1)An appeal may be brought against any decision made by the Commissioners, or by an officer of Revenue and Customs, under regulations under this Schedule.

(2)Notice of an appeal under this paragraph must be given to HMRC within 30 days after the day on which notice of the decision is given.

(3)The notice of appeal must—

(a)be in writing, and

(b)specify the grounds of appeal.

InterpretationU.K.

17[F1(1)]Any power in this Schedule to require the provision of information includes power to require the provision of accounts, statements and documents relating to that information.

[F2(2)Where a partnership (“the reporting partnership”) includes a partner which is itself a partnership, references in this Schedule to a partner include an indirect partner in the reporting partnership.

Section 12AA(1C) (meaning of “indirect partner”) applies for the purposes of this sub-paragraph.]

RegulationsU.K.

18(1)Regulations under this Schedule may—

(a)make provision which applies generally or only for specified cases or purposes;

(b)make different provision for different cases or purposes;

(c)include incidental, supplemental, consequential, saving, transitional or transitory provision;

(d)make provision for matters to be specified by the Commissioners in accordance with the regulations.

(2)Sub-paragraph (1)(d) does not apply to any interval, time or period specified by virtue of paragraph 7(3) (which may be specified only by the regulations).

(3)Regulations under this Schedule may make provision for a person or partnership to whom this Schedule applies, but who would not otherwise be subject to a requirement imposed by the regulations, to elect to be subject to that requirement.

(4)Regulations under this Schedule may provide that, for the purposes of any provision of this Schedule or of the regulations, a change in the accounting date of a business is to be disregarded (and its period of account determined accordingly).

(5)The power to make regulations under this Schedule is exercisable by statutory instrument.

(6)A statutory instrument containing regulations under this Schedule is subject to annulment in pursuance of a resolution of the House of Commons.

(4)Subsections (1) to (3) come into force on such day as the Treasury may by regulations made by statutory instrument appoint.

(5)Regulations under subsection (4) may appoint different days for different purposes.

Textual Amendments

F1Word in s. 60 inserted (15.3.2018) by Finance Act 2018 (c. 3), Sch. 6 para. 7(2)(a)

F2Words in s. 60 inserted (15.3.2018) by Finance Act 2018 (c. 3), Sch. 6 para. 7(2)(b)

61Digital reporting and record-keeping for income tax etc: further amendmentsU.K.

(1)Schedule 14 contains provision amending TMA 1970 and other Acts.

(2)The Commissioners for Her Majesty's Revenue and Customs may by regulations amend or modify any provision of the Taxes Acts in consequence of the provision made by section 60 or Schedule 14.

(3)Regulations under subsection (2) may make transitional, transitory or saving provision.

(4)Regulations under subsection (2) must be made by statutory instrument.

(5)A statutory instrument containing regulations under subsection (2) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(6)Subsections (1) to (5) and Schedule 14 come into force on such day as the Treasury may by regulations made by statutory instrument appoint.

(7)Regulations under subsection (6) may appoint different days for different purposes.

Commencement Information

I25S. 61(6)(7) in force at Royal Assent, see s. 61(6)

62Digital reporting and record-keeping for VATU.K.

(1)Schedule 11 to VATA 1994 (administration, collection and enforcement) is amended as set out in subsections (2) to (4).

(2)In paragraph 2 (accounting and payment)—

(a)in sub-paragraph (1) for “and the making of returns” substitute “ , the making of returns and the submission of information ”;

(b)after sub-paragraph (11) insert—

(11A)Regulations under this paragraph may include incidental, supplemental, consequential, saving, transitional or transitory provision.

(3)In paragraph 6 (duty of taxable person to keep records)—

(a)omit sub-paragraph (4);

(b)at the end insert—

(5)The Commissioners may by regulations make provision about the form in which, and means by which, records are to be kept and preserved.

(6)Regulations under sub-paragraph (5) may—

(a)make different provision for different cases;

(b)provide for any provision of the regulations to be subject to conditions or exceptions specified in writing by the Commissioners;

(c)include incidental, supplemental, consequential, saving, transitional or transitory provision.

(7)If regulations under sub-paragraph (5) make provision requiring records to be kept or preserved in electronic form they must make provision for a taxable person to be exempt from those requirements for any month (“the current month”) if—

(a)the value of the person's taxable supplies, in the period of one year ending with the month before the current month, was less than the VAT threshold, and

(b)the person was not subject to those requirements in the month before the current month.

(8)The regulations may modify the exemption for cases where a business or part of a business carried on by a taxable person is transferred to another person as a going concern.

(9)The “VAT threshold” means the amount specified in paragraph 1(1)(a) of Schedule 1 on the first day of the current month.

(10)Regulations under sub-paragraph (5) requiring records to be kept or preserved in electronic form may (among other things) make provision—

(a)as to the electronic form in which records are to be kept or preserved,

(b)for the production of the contents of records kept or preserved in accordance with the regulations,

(c)as to conditions that must be complied with in connection with the keeping or preservation of electronic records,

(d)for treating records as not having been kept or preserved unless conditions are complied with,

(e)for authenticating records,

(f)about the manner of proving for any purpose the contents of any records (including provision for the application of conclusive or other presumptions).

(11)Regulations under sub-paragraph (5) requiring records to be kept or preserved in electronic form may—

(a)allow any authorisation or requirement for which the regulations may provide to be given by means of a specific or general direction given by the Commissioners,

(b)provide that the conditions of an authorisation or requirement are to be taken to be satisfied only where the Commissioners are satisfied as to specified matters.

(4)In paragraph 6A (power to direct keeping of records), for sub-paragraph (7) substitute—

(7)Regulations under paragraph 6(5) apply for the purposes of this paragraph as they apply for the purposes of paragraph 6.

(5)In section 83(1) of VATA 1994 (appealable decisions), for paragraph (zc) substitute—

(zc)a decision of the Commissioners about the application of any provision of regulations under paragraph 2 or 6 of Schedule 11, or of regulations under section 135 or 136 of the Finance Act 2002 relating to VAT, which—

(i)requires returns to be made or information to be submitted by electronic communications, or

(ii)requires records to be kept or preserved in electronic form,

(including in particular a decision as to whether such a requirement applies and a decision to impose a penalty).

(6)Subsections (3)(a) and (4) of this section come into force when the first regulations under paragraph 6(5) of Schedule 11 to VATA 1994 come into force.

(7)Regulations under paragraph 6(5) of Schedule 11 to VATA 1994 may not make provision requiring records to be kept or preserved in electronic form which has effect before 1 April 2019.

Commencement Information

I26S. 62(1)(2)(3)(b)(5)-(7) in force at Royal Assent, see s. 62(6)

EnquiriesU.K.

63Partial closure noticesU.K.

Schedule 15 makes provision for partial closure notices in respect of enquiries under sections 9A, 12ZM and 12AC of TMA 1970 and Schedule 18 to FA 1998.

Avoidance etcU.K.

64Errors in taxpayers' documentsU.K.

(1)Schedule 24 to FA 2007 (penalties for errors) is amended as set out in subsections (2) and (3).

(2)After paragraph 3 insert—

3AErrors related to avoidance arrangements

(1)This paragraph applies where a document of a kind listed in the Table in paragraph 1 is given to HMRC by a person (“P”) and the document contains an inaccuracy which—

(a)falls within paragraph 1(2), and

(b)arises because the document is submitted on the basis that particular avoidance arrangements (within the meaning of paragraph 3B) had an effect which in fact they did not have.

(2)It is to be presumed that the inaccuracy was careless, within the meaning of paragraph 3, unless—

(a)the inaccuracy was deliberate on P's part, or

(b)P satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that P took reasonable care to avoid inaccuracy.

(3)In considering whether P took reasonable care to avoid inaccuracy, HMRC and (on an appeal notified to the tribunal) the tribunal must take no account of any evidence of any reliance by P on advice where the advice is disqualified.

(4)Advice is “disqualified” if any of the following applies—

(a)the advice was given to P by an interested person;

(b)the advice was given to P as a result of arrangements made between an interested person and the person who gave the advice;

(c)the person who gave the advice did not have appropriate expertise for giving the advice;

(d)the advice took no account of P's individual circumstances;

(e)the advice was addressed to, or given to, a person other than P;

but this is subject to sub-paragraphs (5) and (7).

(5)Where (but for this sub-paragraph) advice would be disqualified under any of paragraphs (a) to (c) of sub-paragraph (4), the advice is not disqualified under that paragraph if at the relevant time P—

(a)has taken reasonable steps to find out whether the advice falls within that paragraph, and

(b)reasonably believes that it does not.

(6)In sub-paragraph (4) “an interested person” means—

(a)a person, other than P, who participated in the avoidance arrangements or any transaction forming part of them, or

(b)a person who for any consideration (whether or not in money) facilitated P's entering into the avoidance arrangements.

(7)Where (but for this sub-paragraph) advice would be disqualified under paragraph (a) of sub-paragraph (4) because it was given by a person within sub-paragraph (6)(b), the advice is not disqualified under that paragraph if—

(a)the person giving the advice had appropriate expertise for giving it,

(b)the advice took account of P's individual circumstances, and

(c)at the time when the question whether the advice is disqualified arises—

(i)Condition E in paragraph 3B(5) is met in relation to the avoidance arrangements, but

(ii)none of Conditions A to D in paragraph 3B(5) is or has at any time been met in relation to them.

(8)If the document mentioned in sub-paragraph (1) is given to HMRC by P as a personal representative of a deceased person (“D”)—

(a)sub-paragraph (4) is to be read as if—

(i)the references in paragraphs (a) and (b) to P were to P or D;

(ii)the reference in paragraph (d) to P were to D, and

(iii)the reference in paragraph (e) to a person other than P were to a person who is neither P nor D,

(b)sub-paragraph (6) is to be read as if—

(i)the reference in paragraph (a) to P were a reference to the person to whom the advice was given, and

(ii)the reference in paragraph (b) to P were to D (or, where P also participated in the avoidance arrangements, P or D), and

(c)sub-paragraph (7) is to be read as if the reference in paragraph (b) to P were to D.

(9)In this paragraph—

(1)In paragraph 3A “avoidance arrangements” means, subject to sub-paragraph (3), arrangements which fall within sub-paragraph (2).

(2)Arrangements fall within this sub-paragraph if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes, of the arrangements.

(3)Arrangements are not avoidance arrangements for the purposes of paragraph 3A if (although they fall within sub-paragraph (2))—

(a)they are arrangements which accord with established practice, and

(b)HMRC had, at the time the arrangements were entered into, indicated its acceptance of that practice.

(4)If, at any time, any of Conditions A to E is met in relation to particular arrangements—

(a)for the purposes of this Schedule the arrangements are to be taken to fall within (and always to have fallen within) sub-paragraph (2), and

(b)in relation to the arrangements, sub-paragraph (3) (and the reference to it in sub-paragraph (1)) are to be treated as omitted.

This does not prevent arrangements from falling within sub-paragraph (2) other than by reason of one or more of Conditions A to E being met.

(5)Conditions A to E are as follows—

(a)Condition A is that the arrangements are DOTAS arrangements within the meaning given by section 219(5) and (6) of FA 2014;

(b)Condition B is that the arrangements are disclosable VAT arrangements or disclosable indirect tax arrangements for the purposes of Schedule 18 to FA 2016 (see paragraphs 8A to 9A of that Schedule);

(c)Condition C is that both of the following apply—

(i)P has been given a notice under a provision mentioned in sub-paragraph (6) stating that a tax advantage arising from the arrangements is to be counteracted, and

(ii)that tax advantage has been counteracted under section 209 of FA 2013;

(d)Condition D is that a follower notice under section 204 of FA 2014 has been given to P by reference to the arrangements (and not withdrawn) and—

(i)the necessary corrective action for the purposes of section 208 of FA 2014 has been taken in respect of the denied advantage, or

(ii)the denied advantage has been counteracted otherwise than as mentioned in sub-paragraph (i);

(e)Condition E is that a tax advantage asserted by reference to the arrangements has been counteracted (by an assessment, an amendment of a return or claim, or otherwise) on the basis that an avoidance-related rule applies in relation to P's affairs.

(6)The provisions referred to in sub-paragraph (5)(c)(i) are—

(a)paragraph 12 of Schedule 43 to FA 2013 (general anti-abuse rule: notice of final decision);

(b)paragraph 8 or 9 of Schedule 43A to that Act (pooled or bound arrangements: notice of final decision);

(c)paragraph 8 of Schedule 43B to that Act (generic referrals: notice of final decision).

(7)In sub-paragraph (5)(d) the reference to giving a follower notice to P includes giving a partnership follower notice in respect of a partnership return in relation to which P is a relevant partner; and for the purposes of this sub-paragraph—

(a)relevant partner” has the meaning given by paragraph 2(5) of Schedule 31 to FA 2014;

(b)a partnership follower notice is given “in respect of” the partnership return mentioned in paragraph 2(2)(a) or (b) of that Schedule.

(8)For the purposes of sub-paragraph (5)(d) it does not matter whether the denied advantage has been dealt with—

(a)wholly as mentioned in one or other of sub-paragraphs (i) and (ii) of sub-paragraph (5)(d), or

(b)partly as mentioned in one of those sub-paragraphs and partly as mentioned in the other;

and “the denied advantage” has the same meaning as in Chapter 2 of Part 4 of FA 2014 (see section 208(3) of and paragraph 4(3) of Schedule 31 to that Act).

(9)For the purposes of sub-paragraph (5)(e) a tax advantage has been “asserted by reference to” the arrangements if a return, claim or appeal has been made by P on the basis that the tax advantage results from the arrangements.

(10)In this paragraph—

(3)In paragraph 18, after sub-paragraph (5) insert—

(6)Paragraph 3A applies where a document is given to HMRC on behalf of P as it applies where a document is given to HMRC by P (and in paragraph 3B(9) the reference to P includes a person acting on behalf of P).

(4)In FA 2014, omit section 276 (which is superseded by the provision inserted by subsections (2) and (3)).

(5)The amendments made by this section have effect in relation to any document of a kind listed in the Table in paragraph 1 of Schedule 24 to FA 2007 which—

(a)is given to HMRC on or after the day on which this Act is passed, and

(b)relates to a tax period that—

(i)begins on or after 6 April 2017, and

(ii)ends on or after the day on which this Act is passed.

(6)In subsection (5) “tax period”, and the reference to giving a document to HMRC, have the same meaning as in Schedule 24 to FA 2007 (see paragraph 28 of that Schedule).

65Penalties for enablers of defeated tax avoidanceU.K.

Schedule 16 makes provision for penalties for persons who enable tax avoidance which is defeated.

66Disclosure of tax avoidance schemes: VAT and other indirect taxesU.K.

(1)Schedule 17 contains provision about the disclosure of tax avoidance schemes involving VAT or other indirect taxes.

(2)In consequence of the provision made by Schedule 17, section 58A of, and Schedule 11A to, VATA 1994 (disclosure of VAT avoidance schemes) cease to have effect to require a person to disclose any scheme which—

(a)is first entered into by that person on or after 1 January 2018,

(b)constitutes notifiable arrangements under Schedule 17,

(c)implements proposals which are notifiable proposals under Schedule 17.

(3)No scheme or proposed scheme may be notified to the Commissioners under paragraph 9 of Schedule 11A to VATA 1994 (voluntary notification of schemes) on or after 1 January 2018.

(4)This section and Schedule 17 come into force—

(a)so far as is necessary for enabling the making of regulations under that Schedule, on the passing of this Act, and

(b)for all other purposes, on 1 January 2018.

Commencement Information

I27S. 66 in force at Royal Assent for specified purposes and at 1.1.2018 otherwise, see s. 66(4)

67Requirement to correct certain offshore tax non-complianceU.K.

Schedule 18 makes provision for and in connection with requiring persons to correct any offshore tax non-compliance subsisting on 6 April 2017.

68Penalty for transactions connected with VAT fraud etcU.K.

(1)VATA 1994 is amended as follows.

(2)After section 69B (penalty for breach of record-keeping requirements imposed by directions) insert—

69CTransactions connected with VAT fraud

(1)A person (T) is liable to a penalty where—

(a)T has entered into a transaction involving the making of a supply by or to T (“the transaction”), and

(b)conditions A to C are satisfied.

(2)Condition A is that the transaction was connected with the fraudulent evasion of VAT by another person (whether occurring before or after T entered into the transaction).

(3)Condition B is that T knew or should have known that the transaction was connected with the fraudulent evasion of VAT by another person.

(4)Condition C is that HMRC have issued a decision (“the denial decision”) in relation to the supply which—

(a)prevents T from exercising or relying on a VAT right in relation to the supply,

(b)is based on the facts which satisfy conditions A and B in relation to the transaction, and

(c)applies a relevant principle of EU case law (whether or not in circumstances that are the same as the circumstances in which any relevant case was decided by the European Court of Justice).

(5)In this section “VAT right” includes the right to deduct input tax, the right to apply a zero rate to international supplies and any other right connected with VAT in relation to a supply.

(6)The relevant principles of EU case law for the purposes of this section are the principles established by the European Court of Justice in the following cases—

(a)joined Cases C-439/04 and C-440/04 Axel Kittel v. Belgian State; Belgium v. Recolta Recycling (denial of right to deduct input tax), and

(b)Case C-273/11 (b)Mecsek-Gabona Kft v Nemzeti Adó- és Vámhivatal Dél-dunántúli Regionális Adó Főigazgatósága (denial of right to zero rate),

as developed or extended by that Court (whether before or after the coming into force of this section) in other cases relating to the denial or refusal of a VAT right in order to prevent abuses of the VAT system.

(7)The penalty payable under this section is 30% of the potential lost VAT.

(8)The potential lost VAT is—

(a)the additional VAT which becomes payable by T as a result of the denial decision,

(b)the VAT which is not repaid to T as a result of that decision, or

(c)in a case where as a result of that decision VAT is not repaid to T and additional VAT becomes payable by T, the aggregate of the VAT that is not repaid and the additional VAT.

(9)Where T is liable to a penalty under this section the Commissioners may assess the amount of the penalty and notify it to T accordingly.

(10)No assessment of a penalty under this section may be made more than two years after the denial decision is issued.

(11)The assessment of a penalty under this section may be made immediately after the denial decision is made (and notice of the assessment may be given to T in the same document as the notice of the decision).

(12)Where by reason of actions involved in making a claim to exercise or rely on a VAT right in relation to a supply T—

(a)is liable to a penalty for an inaccuracy under paragraph 1 of Schedule 24 to the Finance Act 2007 for which T has been assessed (and the assessment has not been successfully appealed against by T or withdrawn), or

(b)is convicted of an offence (whether under this Act or otherwise),

those actions do not give rise to liability to a penalty under this section.

69DPenalties under section 69C: officers' liability

(1)Where—

(a)a company is liable to a penalty under section 69C, and

(b)the actions of the company which give rise to that liability were attributable to an officer of the company (“the officer”),

the officer is liable to pay such portion of the penalty (which may be equal to or less than 100%) as HMRC may specify in a notice given to the officer (a “decision notice”).

(2)Before giving the officer a decision notice HMRC must—

(a)inform the officer that they are considering doing so, and

(b)afford the officer the opportunity to make representations about whether a decision notice should be given or the portion that should be specified.

(3)A decision notice—

(a)may not be given before the amount of the penalty due from the company has been assessed (but it may be given immediately after that has happened), and

(b)may not be given more than two years after the denial decision relevant to that penalty was issued.

(4)Where the Commissioners have specified a portion of the penalty in a decision notice given to the officer—

(a)section 70 applies to the specified portion as to a penalty under section 69C,

(b)the officer must pay the specified portion before the end of the period of 30 days beginning with the day on which the notice is given,

(c)section 76(9) applies as if the decision notice were an assessment notified under section 76, and

(d)a further decision notice may be given in respect of a portion of any additional amount assessed in an additional assessment.

(5)HMRC may not recover more than 100% of the penalty through issuing decision notices in relation to two or more persons.

(6)A person is not liable to pay an amount by virtue of this section if the actions of the company concerned are attributable to the person by reference to conduct for which the person has been convicted of an offence.

In this subsection “conduct” includes omissions.

(7)In this section “company” means a body corporate or unincorporated association but does not include a partnership, a local authority or a local authority association.

(8)In its application to a body corporate other than a limited liability partnership “officer” means—

(a)a director (including a shadow director within the meaning of section 251 of the Companies Act 2006),

(b)a manager, or

(c)a secretary.

(9)In in its application to a limited liability partnership “officer” means a member.

(10)In its application in any other case, “officer” means—

(a)a director,

(b)a manager,

(c)a secretary, or

(d)any other person managing or purporting to manage any of the company's affairs.

69EPublication of details of persons liable to penalties under section 69C

(1)The Commissioners may publish information about a person if—

(a)in consequence of an investigation the person has been found liable to one or more penalties under section 69C (the amount of which has been assessed), and

(b)the potential lost VAT in relation to the penalty (or the aggregate of the potential lost VAT in relation to each of the penalties) exceeds £50,000.

(2)The information that may be published under subsection (1) is—

(a)the person's name (including any trading name, previous name or pseudonym),

(b)the person's address (or registered office),

(c)the nature of any business carried on by the person,

(d)the amount of the penalty or penalties in question,

(e)the periods or times to which the actions giving rise to the penalty or penalties relate,

(f)any other information that the Commissioners consider it appropriate to publish in order to make clear the person's identity.

(3)In a case where—

(a)the requirements in subsection (1)(a) and (b) are met in relation to a penalty or penalties for which a company is liable,

(b)information about the company is published by virtue of this section,

(c)a person (“the officer”) has been given a decision notice under section 69D specifying a portion of the penalty (or, if there is more than one penalty, of any of the penalties) payable by the company as a portion which the officer is liable to pay, and

(d)the amount (or, if the decision notice specifies portions of more than one penalty, the aggregate amount) which the officer is liable to pay under the decision notice exceeds £25, 000,

the Commissioners may publish information about the officer.

(4)The information that may be published under subsection (3) is—

(a)the officer's name,

(b)the officer's address,

(c)the officer's position (or former position) in the company,

(d)the amount of any penalty imposed on the company of which a portion is payable by the officer under the decision notice and the portion so payable,

(e)the periods or times to which the actions giving rise to any such penalty relate,

(f)any other information that the Commissioners consider it appropriate to publish in order to make clear the officer's identity.

(5)Information published under this section may be published in any manner that the Commissioners consider appropriate.

(6)Before publishing any information under this section the Commissioners must—

(a)inform the person or officer to which it relates that they are considering doing so (in the case of an officer, on the assumption that they publish information about the company), and

(b)afford the person or officer the opportunity to make representations about whether it should be published.

(7)No information may be published under subsection (1) before the day on which the penalty becomes final or, where more than one penalty is involved, the latest day on which any of the penalties becomes final.

(8)No information may be published under subsection (1) for the first time after the end of the period of one year beginning with that day.

(9)No information may be published under subsection (3) before whichever is the later of—

(a)the day mentioned in subsection (7), and

(b)the day on which the decision notice given to the officer becomes final.

(10)No information may be published under subsection (3) for the first time after the end of the period of one year beginning with the later of the two days mentioned in subsection (9).

(11)No information may be published (or continue to be published) under subsection (1) or (3) after the end of the period of three years beginning with the day mentioned in subsection (7).

(12)For the purposes of this section a penalty or a decision notice becomes final when the time for any appeal or further appeal relating to it expires or, if later, any appeal or final appeal relating to it is finally determined.

(13)The Treasury may by regulations made by statutory instrument—

(a)amend subsection (1) to vary the amount for the time being specified in paragraph (b), or

(b)amend subsection (3) to vary the amount for the time being specified in paragraph (d).

(14)A statutory instrument containing regulations under subsection (13) is subject to annulment in pursuance of a resolution of the House of Commons.

(3)In section 70 (mitigation of penalties)—

(a)in the heading, for “and 67” substitute “ , 67, 69A and 69C ”,

(b)in subsection (1) for “or 69A” substitute “ , 69A or 69C ”, and

(c)after subsection (4) insert—

(5)In the application of subsections (3) and (4) in relation to a penalty under section 69C, subsection (4) has effect with the omission of paragraphs (b) and (c).

(4)In section 76 (assessment of amounts due by way of penalty etc), in subsection (1)(b) for “to 69B” (in both places) substitute “ to 69C ”.

(5)In section 83(1) (appeals), after paragraph (n) insert—

(na)any liability to a penalty under section 69C, any assessment of a penalty under that section or the amount of such an assessment;

(nb)the giving of a decision notice under section 69D or the portion of a penalty assessed under section 69C which is specified in such a notice;.

(6)After paragraph 21 of Schedule 24 to FA 2007 (penalties for errors: double jeopardy) insert—

21ZA(1)A person is not liable to a penalty under paragraph 1 in respect of an inaccuracy if—

(a)the inaccuracy involves a claim by the person to exercise or rely on a VAT right (in relation to a supply) that has been denied or refused by HMRC as mentioned in subsection (4) of section 69C of VATA 1994, and

(b)the person has been assessed to a penalty under that section (and the assessment has not been successfully appealed against or withdrawn).

(2)In sub-paragraph (1)(a) “VAT right” has the same meaning as in section 69C of VATA 1994.

(7)Section 69C does not apply in relation to transactions entered into before this section comes into force.

InformationU.K.

69Data-gathering from money service businessesU.K.

(1)In Part 2 of Schedule 23 to FA 2011 (data-gathering powers: relevant data-holders), after paragraph 13C insert—

Money service businesses

13D(1)A person is a relevant data-holder if the person—

(a)carries on any of the activities in sub-paragraph (2) by way of business,

(b)is a relevant person within the meaning of regulation 8(1) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692), and

(c)is not an excluded credit institution.

(2)The activities referred to in sub-paragraph (1)(a) are—

(a)operating a currency exchange office;

(b)transmitting money (or any representation of monetary value) by any means;

(c)cashing cheques which are made payable to customers.

(3)An excluded credit institution is a credit institution which has permission to carry on the regulated activity of accepting deposits—

(a)under Part 4A of the Financial Services and Markets Act 2000 (permission to carry on regulated activities), or

(b)resulting from Part 2 of Schedule 3 to that Act (exercise of passport rights by EEA firms).

(4)Sub-paragraph (3) is to be read with section 22 of and Schedule 2 to the Financial Services and Markets Act 2000, and any order under that section (classes of regulated activities).

(5)In this paragraph “credit institution” has the meaning given by Article 4.1(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.

(2)This section applies in relation to relevant data with a bearing on any period (whether before, on or after the day on which this Act is passed).

PART 5 U.K.Final

70Northern Ireland welfare payments: updating statutory referenceU.K.

In section 44(2) of FA 2016 (tax treatment of supplementary welfare payments: Northern Ireland) for “the Housing Benefit (Amendment) Regulations (Northern Ireland) 2016 (S.R. (N.I.) 2016 No. 258)” substitute “ the Housing Benefit (Amendment No. 2) Regulations (Northern Ireland) 2016 (S.R. (N.I.) 2016 No. 326) ”.

71InterpretationU.K.

In this Act the following abbreviations are references to the following Acts.

CAA 2001Capital Allowances Act 2001
CEMA 1979Customs and Excise Management Act 1979
CTA 2009Corporation Tax Act 2009
CTA 2010Corporation Tax Act 2010
CT(NI)A 2015Corporation Tax (Northern Ireland) Act 2015
FA, followed by a yearFinance Act of that year
F(No.2)A, followed by a yearFinance (No.2) Act of that year
F(No.3)A, followed by a yearFinance (No.3) Act of that year
ICTAIncome and Corporation Taxes Act 1988
IHTA 1984Inheritance Tax Act 1984
ITA 2007Income Tax Act 2007
ITEPA 2003Income Tax (Earnings and Pensions) Act 2003
ITTOIA 2005Income Tax (Trading and Other Income) Act 2005
OTA 1975Oil Taxation Act 1975
TCGA 1992Taxation of Chargeable Gains Act 1992
TIOPA 2010Taxation (International and Other Provisions) Act 2010
TMA 1970Taxes Management Act 1970
TPDA 1979Tobacco Products Duty Act 1979
VATA 1994Value Added Tax Act 1994

72Short titleU.K.

This Act may be cited as the Finance (No. 2) Act 2017.

SCHEDULES

Section 14

SCHEDULE 1U.K.Social investment tax relief

PART 1 U.K.Amendments of Part 5B of ITA 2007

IntroductoryU.K.

1ITA 2007 is amended as follows.

Date by which investment must be made to qualify for SI reliefU.K.

2In section 257K(1)(a)(iii) (date by which investment must be made to qualify for SI relief) for “6 April 2019” substitute “ 6 April 2021 ”.

The existing investments requirementU.K.

3After section 257LD insert—

257LDAThe existing investments requirement

(1)If at the time immediately before the investment is made the investor holds any shares in or debentures of—

(a)the social enterprise, or

(b)a company which at that time is a qualifying subsidiary of the social enterprise,

those shares or debentures must be risk finance investments or (in the case of shares) permitted subscriber shares.

(2)A share or debenture is a “risk finance investment” for the purposes of this section if—

(a)it is a share that was issued to the investor, or a debenture of which the investor is the holder in return for advancing an amount, and

(b)at any time, a compliance statement under section 205, 257ED or 257PB is provided in respect of it or of shares or investments including it.

(3)Subscriber shares are “permitted subscriber shares” for the purposes of this section if—

(a)they were issued to the investor and have been continuously held by the investor since they were issued, or

(b)they were acquired by the investor at a time when the company which issued them—

(i)had issued no shares other than subscriber shares, and

(ii)had not begun to carry on or make preparations for carrying on any trade or business.

(4)In this section “debenture” is to be read in accordance with section 257L(6).

The no disqualifying arrangements requirementU.K.

4After section 257LE insert—

257LEAThe no disqualifying arrangements requirement

(1)The investment must not be made, and money raised by the social enterprise from the making of the investment must not be employed,—

(a)in consequence or anticipation of disqualifying arrangements, or

(b)otherwise in connection with disqualifying arrangements.

(2)Arrangements are “disqualifying arrangements” if—

(a)the main purpose, or one of the main purposes, of the arrangements is to secure both that an activity is or will be carried on by the social enterprise or a 90% social subsidiary of the social enterprise and that—

(i)one or more persons (whether or not including any party to the arrangements) may obtain relevant tax relief in respect of a qualifying investment which raises money for the purposes of that activity, or

(ii)shares issued by the social enterprise which raise money for the purposes of that activity may comprise part of the qualifying holdings of a VCT,

(b)that activity is the relevant qualifying activity, and

(c)one or both of conditions A and B are met.

(3)Condition A is that, as a (direct or indirect) result of the money raised by the investment being employed as required by section 257MM, an amount representing the whole or the majority of the amount raised is, in the course of the arrangements, paid to or for the benefit of a relevant person or relevant persons.

(4)Condition B is that, in the absence of the arrangements, it would have been reasonable to expect that the whole or greater part of the component activities of the relevant qualifying activity would have been carried on as part of another business by a relevant person or relevant persons.

(5)For the purposes of this section it is immaterial whether the social enterprise is a party to the arrangements.

(6)In this section—

(7)“Relevant tax relief”—

(a)in relation to a qualifying debt investment, means SI relief in respect of that investment;

(b)in relation to shares, means one or more of the following—

(i)SI relief in respect of the shares;

(ii)EIS relief (within the meaning of Part 5) in respect of the shares;

(iii)SEIS relief (within the meaning of Part 5A) in respect of the shares;

(iv)relief under Chapter 6 of Part 4 (losses on disposal of shares) in respect of the shares;

(v)relief under section 150A or 150E of TCGA 1992 (EIS and SEIS) in respect of the shares;

(vi)relief under Schedule 5B to that Act (EIS: reinvestment) in consequence of which deferral relief is attributable to the shares (see paragraph 19(2) of that Schedule);

(vii)relief under Schedule 5BB to that Act (SEIS: re-investment) in consequence of which SEIS re-investment relief is attributable to the shares (see paragraph 4 of that Schedule).

5(1)Section 257SH (power to require information where reason to believe SI relief may not be due because of certain kinds of arrangements, etc) is amended as follows.U.K.

(2)In subsection (1) after “257LE,” insert “ 257LEA, ”.

(3)In subsection (4) at the appropriate place insert—

Section 257LEAThe investor, the social enterprise, any person controlling the social enterprise and any person whom an officer of Revenue and Customs has reason to believe may be a party to the arrangements in question

Limits on amounts that may be investedU.K.

6(1)In the italic heading before section 257M, after “enterprise” insert “ : general ”.U.K.

(2)Omit sections 257MA and 257MB (which are superseded by the provision inserted by sub-paragraph (3) below).

(3)After section 257MN insert—

Limits on amounts that may be investedU.K.
257MNAMaximum amount where investment made in first 7 years

(1)This section applies where—

(a)the investment is made before the end of the period of 7 years beginning with the relevant first commercial sale, or

(b)the investment is made after that period but—

(i)a relevant investment was made in the social enterprise before the end of that period, and

(ii)some or all of the money raised by that relevant investment was employed for the purposes of (or of part of) the qualifying activity for which the money raised by the investment is employed.

(2)Where this section applies, the total amount of relevant investments made in the social enterprise on or before the date when the investment is made must not exceed £1.5 million.

(3)The reference in subsection (2) to relevant investments “made in the social enterprise” is to be read with section 257MNB.

(4)In this section—

(5)Section 173A(4) and (5) apply to determine for the purposes of this section when a relevant investment is made.

(6)Where the social enterprise is an accredited social impact contractor—

(a)the reference in subsection (1)(a) to the relevant first commercial sale is to be read as a reference to the date on which the social enterprise first entered into a social impact contract;

(b)the reference in subsection (1)(b) to the qualifying activity mentioned there is to be read as a reference to the carrying out of the social impact contract for which the money raised by the investment is employed.

(7)For provision about maximum amounts where this section does not apply, see section 257MNC.

257MNBSection 257MNA: supplementary

(1)In section 257MNA(2) the reference to relevant investments “made in the social enterprise” includes—

(a)relevant investments made in a company which, at the material date, is or has been a 51% subsidiary of the social enterprise,

(b)any other relevant investment made in a company to the extent that the money raised by that relevant investment has been employed for the purposes of a trade carried on by another company (“company X”) which, at the material date, is or has been a 51% subsidiary of the social enterprise, and

(c)any other relevant investment made in a company if—

(i)the money raised by that relevant investment has been employed for the purposes of a trade carried on by that company or another person, and

(ii)after that relevant investment was made, but on or before the material date, that trade became a transferred trade (see subsection (5)).

(2)The investments within paragraph (a) of subsection (1)—

(a)include investments made in a company mentioned in that paragraph before it became a 51% subsidiary of the social enterprise, but

(b)where a company mentioned in that paragraph is not a 51% subsidiary of the social enterprise at the material date, do not include any investments made in that company after it last ceased to be such a subsidiary.

(3)For the purposes of subsection (1)(b), where company X is not a 51% subsidiary of the social enterprise at the material date, any money employed after company X last ceased to be such a subsidiary is to be ignored.

(4)Where only a proportion of the money raised by a relevant investment is employed for the purposes of a trade which becomes a transferred trade, only the corresponding proportion of that relevant investment is to be treated as falling within subsection (1)(c).

(5)For the purposes of this section, if—

(a)on or before the material date a trade is transferred—

(i)to the social enterprise,

(ii)to a company which, at the material date, is or has been a 51% subsidiary of the social enterprise, or

(iii)to a partnership of which the social enterprise, or a company within sub-paragraph (ii), is a member, and

(b)the trade or part of it was at any time before the transfer carried on by another person,

the trade or part mentioned in paragraph (b) becomes a “ transferred trade ” when it is transferred as mentioned in paragraph (a).

(6)The cases within subsection (5)(a)—

(a)include the case where the trade is transferred to a company within subsection (5)(a)(ii), or a partnership of which such a company is a member, before the company became a 51% subsidiary of the social enterprise, but

(b)where a company within subsection (5)(a)(ii) is not a 51% subsidiary of the social enterprise at the material date, do not include the case where the trade is transferred to that company, or a partnership of which that company is a member, after that company last ceased to be such a subsidiary.

(7)In this section—

(8)Section 173A(4) and (5) apply to determine for the purposes of this section when a relevant investment is made.

(9)Section 173A(6) and (7) (meaning of “trade” etc) apply also for the purposes of this section.

257MNCMaximum amount for cases outside section 257MNA

(1)This section applies where—

(a)the investment is made at any time after the period mentioned in section 257MNA(1)(a), and

(b)it is not the case that the conditions in section 257MNA(1)(b)(i) and (ii) are met.

(2)Where this section applies—

(a)the total amount of relevant investments made in the social enterprise on or before the date when the investment is made must not exceed £1.5 million, and

(b)the amount invested must not be more than the amount mentioned in subsection (3).

(3)That amount is the amount given by the formula—

where—

T is the total of any relevant investments made in the social enterprise in the aid period,

M is the total of any de minimis aid, other than relevant investments, that is granted during the aid period—

(a)

to the social enterprise, or

(b)

to a qualifying subsidiary of the social enterprise at a time when it is such a subsidiary,

RCG is the highest rate at which capital gains tax is charged in the aid period, and

RSI is the highest SI rate in the aid period.

(4)In subsection (3) “the aid period” means the 3 years—

(a)ending with the day on which the investment is made, but

(b)in the case of that day, including only the part of the day before the investment is made.

(5)In this section “de minimis aid” means de minimis aid which fulfils the conditions laid down—

(a)in Commission Regulation (EU) No. 1407/2013 (de minimis aid) as amended from time to time, or

(b)in any EU instrument from time to time replacing the whole or any part of that Regulation.

(6)For the purposes of subsection (3), the amount of any de minimis aid is the amount of the grant or, if the aid is not in the form of a grant, the gross grant equivalent amount within the meaning of that Regulation as amended from time to time.

(7)For the purposes of subsection (3), if—

(a)the investment or any relevant investment is made, or

(b)any aid is granted,

in sterling or any other currency that is not the euro, its amount is to be converted into euros at an appropriate spot rate of exchange for the date on which the investment is made or the aid is paid.

(8)In this section “relevant investment” has the meaning given by section 173A(3) (reading references in section 173A(3) to a company as including any social enterprise).

(9)Section 173A(4) and (5) apply to determine for the purposes of this section when a relevant investment is made.

(10)Section 257MNB (which expands the meaning of “relevant investments made in the social enterprise”) applies for the purposes of each of subsections (2) and (3) above as it applies for the purposes of section 257MNA(2).

257MNDLimit on investment in shorter applicable period

(1)This section applies where condition A or condition B is met.

(2)Condition A is that—

(a)a company becomes a 51% subsidiary of the social enterprise at any time during the shorter applicable period,

(b)all or part of the money raised by the investment is employed for the purposes of a qualifying activity which consists wholly or partly of a trade carried on by that company, and

(c)that trade (or part of it) was carried on by that company before it became a 51% subsidiary as mentioned in paragraph (a).

(3)Condition B is that all or part of the money raised by the investment is employed for the purposes of a qualifying activity which consists wholly or partly of a trade which, during the shorter applicable period, becomes a transferred trade (see subsection (9)).

(4)Where this section applies, at each time in the shorter applicable period (“the relevant time”) the total of the relevant investments made in the social enterprise before that time must not exceed £1.5 million.

(5)In subsection (4) the reference to relevant investments “made in the social enterprise” includes—

(a)relevant investments made in a company which at any time before the relevant time has been a 51% subsidiary of the social enterprise,

(b)any other relevant investment made in a company to the extent that the money raised by that relevant investment has been employed for the purposes of a trade carried on by another company (“company X”) which at any time before the relevant time has been a 51% subsidiary of the social enterprise, and

(c)any other relevant investment made in a company if—

(i)the money raised by that relevant investment has been employed for the purposes of a trade carried on by that company or another person, and

(ii)after that relevant investment was made, but before the relevant time, that trade (or part of it) became a transferred trade.

(6)The investments within paragraph (a) of subsection (5)—

(a)include investments made in a company mentioned in that paragraph before it became a 51% subsidiary of the social enterprise, but

(b)where a company mentioned in that paragraph is not a 51% subsidiary of the social enterprise at the relevant time, do not include any investments made in that company after it last ceased to be such a subsidiary.

(7)For the purposes of subsection (5)(b), where company X is not a 51% subsidiary of the social enterprise at the relevant time, any money employed after company X last ceased to be such a subsidiary is to be ignored.

(8)Where only a proportion of the money raised by a relevant investment is employed for the purposes of a trade which becomes a transferred trade, only the corresponding proportion of that relevant investment is to be treated as falling within subsection (5)(c).

(9)For the purposes of this section, if—

(a)before the relevant time, a trade is transferred—

(i)to the social enterprise,

(ii)to a company which, at the relevant time, is or has been a 51% subsidiary of the social enterprise, or

(iii)to a partnership of which the social enterprise, or a company within sub-paragraph (ii), is a member, and

(b)the trade or part of it was at any time before the transfer carried on by another person,

the trade or part mentioned in paragraph (b) becomes a “ transferred trade ” when it is transferred as mentioned in paragraph (a).

(10)The cases within subsection (9)(a)—

(a)include the case where the trade is transferred to a company within subsection (9)(a)(ii), or a partnership of which such a company is a member, before the company became a 51% subsidiary of the social enterprise, but

(b)where a company within subsection (9)(a)(ii) is not a 51% subsidiary of the social enterprise at the relevant time, do not include the case where the trade is transferred to that company, or a partnership of which that company is a member, after that company last ceased to be such a subsidiary.

(11)In this section—

(12)Section 173A(4) and (5) apply to determine for the purposes of this section when a relevant investment is made.

(13)Section 173A(6) and (7) (meaning of “trade” etc) apply also for the purposes of this section.

257MNEPower to amend limits on amounts that may be invested

(1)The Treasury may by regulations substitute a different figure for the figure for the time being specified in section 257MNA(2), 257MNC(2) or (3) or 257MND(4).

(2)Regulations under this section may make incidental, supplemental, consequential, transitional or saving provision.

(3)Regulations under this section 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.

(4)In section 1014 (orders and regulations), in subsection (5)(b) (orders and regulations excluded from subsection (4)) for sub-paragraph (iiia) substitute—

(iiia)section 257MNE (social investment relief: amendment of limits on investments),.

Number of employees limitU.K.

7In section 257MH (the number of employees requirement), in each of subsections (1) and (2) for “500” substitute “ 250 ”.

Financial health requirementU.K.

8After section 257MI insert—

257MIAThe financial health requirement

(1)The social enterprise must meet the financial health requirement at the beginning of the shorter applicable period.

(2)The financial health requirement is that the social enterprise is not in difficulty.

(3)The social enterprise is “in difficulty” if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02).

Purposes for which money raised can be usedU.K.

9(1)Section 257MM (requirement to use money raised and to trade for minimum period) is amended as follows.U.K.

(2)After subsection (3) insert—

(3A)Employing money on the repayment of a loan does not amount to employing the money for the funded purpose.

(3)In subsection (7)(c) after “(3),” insert “ (3A), ”.

Excluded activitiesU.K.

10(1)Section 257MQ (meaning of “excluded activity”) is amended as set out in sub-paragraphs (2) to (4).U.K.

(2)In subsection (1)—

(a)in paragraph (b) omit “(but see subsection (2))”;

(b)after paragraph (b) insert—

(ba)leasing (including letting ships on charter or other assets on hire),

(bb)receiving royalties or licence fees,

(bc)operating or managing nursing homes or residential care homes or managing property used as a nursing home or residential care home (see section 257MQA),

(bd)generating electricity, exporting electricity (see subsection (3)) or making electricity generating capacity available,

(be)generating heat,

(bf)generating any form of energy not within paragraph (bd) or (be),

(bg)producing gas or fuel,;

(c)omit paragraph (f) (subsidised generation or export of electricity).

(3)Omit subsection (2).

(4)After subsection (2) insert—

(3)For the purposes of subsection (1)(bd) electricity is exported if it is exported onto a distribution system or transmission system (within the meaning of section 4 of the Electricity Act 1989).

(5)After section 257MQ insert—

257MQAExcluded activities: nursing homes and residential care homes

(1)This section supplements section 257MQ(1)(bc).

(2)Nursing home” means any establishment which exists wholly or mainly for the provision of nursing care—

(a)for persons suffering from sickness, injury or infirmity, or

(b)for women who are pregnant or have given birth.

(3)Residential care home” means any establishment which exists wholly or mainly for the provision of residential accommodation, together with board and personal care, for persons in need of personal care because of—

(a)old age,

(b)mental or physical disability,

(c)past or present dependence on alcohol or drugs,

(d)any past illnesses, or

(e)past or present mental disorder.

(4)The activities of a person are not to be taken to fall within section 257MQ(1)(bc) unless that person has an estate or interest in, or is in occupation of, the nursing home or residential care home in question.

(6)Omit section 257MS (subsidised generation or export of electricity).

PART 2 U.K.Consequential amendments

11(1)ITA 2007 is amended as follows.U.K.

(2)In section 178A (EIS: the no disqualifying arrangements requirement), in subsection (6), in the definition of “relevant tax relief” after paragraph (b) insert—

(ba)SI relief under Part 5B in respect of the shares;.

(3)In section 257CF (SEIS: the no disqualifying arrangements requirement), in subsection (6), in the definition of “relevant tax relief” after paragraph (b) insert—

(ba)SI relief under Part 5B in respect of the shares;.

(4)In section 299A (VCTs: the no disqualifying arrangements requirement), in subsection (6), in the definition of “relevant tax relief” after paragraph (c) insert—

(ca)SI relief (within the meaning of Part 5B) in respect of the shares;.

12In Schedule 6 to FA 2015 (investment reliefs: excluded activities) omit paragraph 13 (which is superseded by paragraph 10 of this Schedule).

13In Part 2 of Schedule 24 to FA 2016 (tax advantages about which information may be obtained from certain persons), after the entry relating to relief granted to investors in a company under the enterprise investment scheme insert—

Relief granted to investors in a social enterprisePart 5B of ITA 2007The social enterprise

PART 3 U.K.Commencement

14(1)The amendments made by paragraphs 3 and 6 to 9 have effect in relation to investments made on or after 6 April 2017.U.K.

(2)Nothing in sub-paragraph (1) prevents investments made before 6 April 2017 from constituting “relevant investments” for any purpose of section 257MNA, 257MNB, 257MNC or 257MND of ITA 2007.

(3)Subject to sub-paragraph (4), the amendments made by paragraphs 4 and 5 have effect in relation to investments made on or after 6 April 2017.

(4)Arrangements which include any transaction entered into before 6 April 2017 are not “disqualifying arrangements” for the purposes of section 257LEA of ITA 2007.

15The amendments made by paragraph 10—

(a)so far as they apply for the purposes of section 257JD of ITA 2007, come into force on 6 April 2017;

(b)so far as they apply for the purposes of sections 257MJ and 257MP of ITA 2007, have effect in relation to investments made on or after 6 April 2017.

16(1)Subject to sub-paragraph (3), the amendments made by paragraph 11(2) and (3) have effect in relation to shares issued on or after 6 April 2017.U.K.

(2)Subject to sub-paragraph (3), the amendment made by paragraph 11(4) has effect for the purpose of determining whether shares or securities issued on or after 6 April 2017 are to be regarded as comprised in a company's qualifying holdings.

(3)The amendments made by paragraph 11 do not have effect for the purposes of determining any question whether particular arrangements which include any transaction entered into before 6 April 2017 are “disqualifying arrangements” for the purposes of section 178A, 257CF or 299A of ITA 2007.

Section 16

SCHEDULE 2U.K.Trades and property businesses: calculation of profits

PART 1 U.K.Trades etc: amendments of ITTOIA 2005

1ITTOIA 2005 is amended as follows.

2For section 33A (cash basis: capital expenditure) substitute—

33ACash basis: capital expenditure

(1)This section applies in relation to the calculation of the profits of a trade on the cash basis.

(2)No deduction is allowed for an item of a capital nature incurred on, or in connection with, the acquisition or disposal of a business or part of a business.

(3)No deduction is allowed for an item of a capital nature incurred on, or in connection with, education or training.

(4)No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of—

(a)any asset that is not a depreciating asset (see subsections (6) and (7)),

(b)any asset not acquired or created for use on a continuing basis in the trade,

(c)a car (see subsection (14)),

(d)land,

(e)a non-qualifying intangible asset (see subsections (8) to (11)), or

(f)a financial asset (see subsection (12)).

(5)But subsection (4)(d) does not prevent a deduction being made for expenditure that—

(a)is incurred on the provision of a depreciating asset which, in being provided, is installed or otherwise fixed to land so as to become, in law, part of the land, but

(b)is not incurred on, or in connection with, the provision of—

(i)a building,

(ii)a wall, floor, ceiling, door, gate, shutter or window or stairs,

(iii)a waste disposal system,

(iv)a sewerage or drainage system, or

(v)a shaft or other structure in which a lift, hoist, escalator or moving walkway may be installed.

(6)An asset is a “depreciating” asset if, on the date the item of a capital nature is incurred, it is reasonable to expect that before the end of 20 years beginning with that date—

(a)the useful life of the asset will end, or

(b)the asset will decline in value by 90% or more.

(7)The useful life of an asset ends when it could no longer be of use to any person for any purpose as an asset of a business.

(8)Intangible asset” means anything that is capable of being an intangible asset within the meaning of FRS 105 and, in particular, includes—

(a)an internally-generated intangible asset, and

(b)intellectual property.

(9)An intangible asset is “non-qualifying” unless, by virtue of having a fixed maximum duration, it must cease to exist before the end of 20 years beginning with the date on which the item of a capital nature is incurred.

(10)An intangible asset is “non-qualifying” if it consists of a right, whether conditional or not, to obtain an intangible asset without a fixed maximum duration by virtue of which that asset must, assuming the right is exercised at the last possible time, cease to exist before the end of 20 years beginning with the date on which the item of a capital nature is incurred.

(11)Where—

(a)the trader has an intangible asset, and

(b)the trader grants a licence or any other right in respect of that asset to another person,

any intangible asset that consists of a licence or other right granted to the trader in respect of the intangible asset mentioned in paragraph (a) is “non-qualifying”.

(12)A “financial asset” means any right under or in connection with—

(a)a financial instrument, or

(b)an arrangement that is capable of producing a return that is economically equivalent to a return produced under any financial instrument.

(13)A reference to acquisition, provision, alteration or disposal includes potential acquisition, provision, alteration or (as the case may be) disposal.

(14)In this section—

3In section 95A (application of Chapter 6 of Part 2 (trade profits: receipts) to the cash basis)—

(a)the existing text becomes subsection (1),

(b)in that subsection, omit the entry relating to section 96A, and

(c)after that subsection insert—

(2)Section 96A makes provision about capital receipts in certain cases where the profits of a trade are calculated on the cash basis or have previously been calculated on the cash basis (and see also section 96B).

4(1)Section 96A (cash basis: capital receipts) is amended as follows.U.K.

(2)For the heading substitute “ Capital receipts under, or after leaving, cash basis ”.

(3)For subsections (1) to (3) substitute—

(1)This section applies in relation to a trade carried on by a person in two cases—

(a)Case 1 (see subsections (2) to (3A)), and

(b)Case 2 (see subsections (3B) to (3E)).

(2)Case 1 is a case in which conditions A and B are met.

(3)Condition A is that the person receives disposal proceeds or a capital refund in relation to an asset at a time when an election under section 25A (cash basis for trades) has effect in relation to the trade.

For the meaning of “disposal proceeds” and “capital refund” see subsections (3F) and (3G).

(3A)Condition B is that—

(a)an amount of capital expenditure (see subsection (3H)) relating to the asset has been brought into account in calculating the profits of the trade on the cash basis, or

(b)an amount of capital expenditure relating to the asset which—

(i)has been incurred (or treated as incurred) by the person before the tax year for which the person last entered the cash basis, and

(ii)is cash basis deductible in relation to that tax year (see section 96B(4)),

has been brought into account in calculating the profits of the trade for a tax year for which no election under section 25A had effect in relation to the trade.

(3B)Case 2 is a case in which—

(a)condition C is met, and

(b)condition D or E is met.

(3C)Condition C is that disposal proceeds or a capital refund arise to the person in relation to an asset at a time—

(a)when no election under section 25A has effect in relation to the trade, and

(b)which is after a time when such an election had had effect in relation to the trade.

(3D)Condition D is that an amount of capital expenditure relating to the asset—

(a)has been paid at a time when an election under section 25A had effect in relation to the trade,

(b)has been brought into account in calculating the profits of the trade on the cash basis, and

(c)on the assumption that an election under section 25A had not had effect at the time the expenditure was paid, would not have been qualifying expenditure.

(3E)Condition E is that an amount of capital expenditure relating to the asset has been brought into account in calculating the profits of the trade for a tax year—

(a)for which no election under section 25A had effect in relation to the trade, and

(b)which is before the tax year for which the person last entered the cash basis.

The reference in this subsection to expenditure brought into account does not include a reference to expenditure brought into account under CAA 2001 (see section 96B(5)).

(3F)Disposal proceeds” means—

(a)any proceeds arising from the disposal of an asset or any part of it,

(b)any proceeds arising from the grant of any right in respect of, or any interest in, the asset, or

(c)any amount of damages, proceeds of insurance or other compensation received in respect of the asset.

See also subsections (4) and (5) for circumstances in which a person is to be regarded as disposing of an asset.

(3G)Capital refund” means an amount that is (in substance) a refund of capital expenditure relating to an asset.

(3H)Capital expenditure” means expenditure of a capital nature incurred, or treated as incurred, on or in connection with—

(a)the provision, alteration or disposal of an asset, or

(b)the potential provision, alteration or disposal of an asset.

(3I)The disposal proceeds or capital refund mentioned in condition A or (as the case may be) condition C are to be brought into account as a receipt in calculating the profits of the trade.

(3J)In a case where only part of the total capital expenditure incurred, or treated as incurred, by the person in relation to the asset has been brought into account in calculating the profits of the trade (whether or not on the cash basis), the amount brought into account under subsection (3I) is proportionately reduced.

The reference in this subsection to expenditure brought into account includes a reference to expenditure brought into account under CAA 2001 (see section 96B(5)).

(3K)Subsection (3I) does not apply if the whole of the amount which would otherwise be brought into account under that subsection—

(a)has already been brought into account as a receipt in calculating the profits of the trade under this section,

(b)is brought into account as a receipt in calculating the profits of the trade under any other provision of this Part (except section 240D(3) (assets not fully paid for)), or

(c)is brought into account under any Part of CAA 2001 as a disposal value.

(3L)If part of the amount which would otherwise be brought into account under subsection (3I) has already been or is brought into account as mentioned in subsection (3K), subsection (3I) applies in relation to the remainder of that amount.

(4)Omit subsection (7).

5After section 96A insert—

96BSection 96A: supplementary provision

(1)This section has effect for the purposes of section 96A.

(2)Any question as to whether or to what extent expenditure is brought into account in calculating the profits of a trade is to be determined on such basis as is just and reasonable in all the circumstances.

(3)A person carrying on a trade “enters the cash basis” for a tax year if—

(a)an election under section 25A has effect in relation to the trade for the tax year, and

(b)no such election had effect in relation to the trade for the previous tax year.

(4)Expenditure is “cash basis deductible” in relation to a tax year if, on the assumption that the expenditure was paid in that tax year, a deduction would be allowed in respect of the expenditure in calculating the profits of the trade on the cash basis for that tax year.

(5)Expenditure is “brought into account under CAA 2001” in calculating the profits of a trade if and to the extent that—

(a)a capital allowance made under Part 2, 5, 6, 7 or 8 of that Act in respect of the expenditure is treated as an expense in calculating those profits (see, for example, section 247 of that Act), or

(b)qualifying expenditure (within the meaning of Part 2, 7 or 8 of CAA 2001) is allocated to a pool for the trade and is set-off against different disposal receipts.

(6)An amount of qualifying expenditure is “set-off against different disposal receipts” if—

(a)the amount would have been unrelieved qualifying expenditure carried forward in the pool for the trade, but

(b)the amount is not so carried forward because (and only because) one or more disposal values in respect of one or more assets, other than the asset in respect of which the qualifying expenditure was incurred (or treated as incurred), have at any time been brought into account in that pool.

(7)For the purposes of subsection (6), an amount of qualifying expenditure incurred (or treated as incurred) by a person is not to be regarded as not carried forward because the person enters the cash basis.

(8)In this section and in section 96A—

6In section 106D (capital receipts), for “(cash basis: capital receipts)” substitute “ (capital receipts under, or after leaving, cash basis) ”.

7(1)Section 240C (unrelieved qualifying expenditure) is amended as follows.U.K.

(2)For the heading substitute “ Unrelieved qualifying expenditure: Parts 2, 7 and 8 of CAA 2001 ”.

(3)In subsection (1)(b), after “unrelieved qualifying expenditure” insert “ relating to the trade ”.

(4)In subsection (3), for “the relevant portion of the expenditure” substitute “ any cash basis deductible amount of the expenditure ”.

(5)For subsection (4) substitute—

(4)A “cash basis deductible amount” of the expenditure means any amount of the expenditure for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the current tax year.

(6)In subsection (5), for “The relevant portion” substitute “ Any cash basis deductible amount ”.

(7)After subsection (5) insert—

(5A)For the purposes of subsection (1)(b), in determining the unrelieved qualifying expenditure the person has to carry forward, disregard sections 59(4), 461A(1) and 475A(1) of CAA 2001 (which provide that an amount is not to be carried forward as unrelieved qualifying expenditure when a person enters the cash basis).

(8)For subsection (6) substitute—

(6)In this section “unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of—

(a)Part 2 of CAA 2001 (see section 59(1) and (2) of that Act),

(b)Part 7 of that Act (see section 461 of that Act), or

(c)Part 8 of that Act (see section 475 of that Act).

8After section 240C insert—

240CAUnrelieved qualifying expenditure: Part 5 of CAA 2001

(1)This section applies if a person carrying on a mineral extraction trade enters the cash basis for a tax year (“the current tax year”).

(2)But this section does not apply if section 240D applies.

(3)In calculating the profits of the trade for the current tax year, a deduction is allowed for any amount of expenditure—

(a)which would, apart from section 419A(1) of CAA 2001, have been unrelieved qualifying expenditure for the current tax year, and

(b)for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the current tax year.

(4)In this section—

9(1)Section 240D (assets not fully paid for) is amended as follows.U.K.

(2)In subsection (1)(b), for “obtained” to the end substitute “ incurred relevant expenditure, and ”.

(3)After subsection (1) insert—

(1A)Relevant expenditure” means expenditure—

(a)for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the tax year, and

(b)in respect of which the person has obtained capital allowances under Part 2, 5, 6, 7 or 8 of CAA 2001.

(4)In subsection (4), for “The amount of any capital allowance obtained in respect of expenditure on the provision of any plant or machinery” substitute “ Any question as to whether or to what extent expenditure is relevant expenditure, or as to whether or to what extent any capital allowance obtained is in respect of relevant expenditure, ”.

(5)In subsection (5), after “given” insert “ under Part 2 of CAA 2001 ”.

(6)Omit subsection (6).

10In section 786(6) (meaning of “rent-a-room receipts”), for “(capital receipts)” substitute “ (capital receipts under, or after leaving, cash basis) ”.

11In section 805(5) (meaning of “qualifying care receipts”), for “(capital receipts)” substitute “ (capital receipts under, or after leaving, cash basis) ”.

PART 2 U.K.Property businesses: amendments of ITTOIA 2005

12ITTOIA 2005 is amended as follows.

13In Chapter 3 of Part 3 (profits of property businesses: basic rules), after section 271 insert—

Basis of calculation of profitsU.K.

271ABasis of calculation of profits: GAAP required

(1)The profits of a property business for a tax year must be calculated in accordance with GAAP if condition A, B, C, D or E is met.

(2)Condition A is that the business is carried on at any time in the tax year by—

(a)a company,

(b)a limited liability partnership,

(c)a corporate firm, or

(d)the trustees of a trust.

(3)For the purposes of subsection (2) a firm is a “corporate firm” if a partner in the firm is not an individual.

(4)Condition B is that the cash basis receipts for the tax year exceed £150,000.

(5)In subsection (4) “the cash basis receipts for the tax year” means the total of the amounts that would be brought into account as receipts in calculating the profits of the property business for the tax year on the cash basis (see section 271D).

(6)If the property business is carried on for only part of the tax year, the sum given in subsection (4) is proportionately reduced.

(7)Condition C is that—

(a)the property business is carried on by an individual (“P”),

(b)a share of joint property income is brought into account in calculating the profits of the business for the tax year,

(c)a share of that joint property income is brought into account in calculating the profits for the tax year of a property business carried on by another individual (“Q's property business”), and

(d)the profits of Q's property business for the tax year are calculated in accordance with GAAP.

(8)In subsection (7) “joint property income” means income to which P and Q are treated for income tax purposes as beneficially entitled in equal shares by virtue of section 836 of ITA 2007.

(9)Condition D is that—

(a)an allowance under Part 3A of CAA 2001 (business premises renovation allowances) is made at any time in calculating the profits of the property business, and

(b)if the profits of the business were to be calculated in accordance with GAAP for the tax year, there would be a day in the tax year on which the occurrence of a balancing event (within the meaning of that Part) would give rise to a balancing adjustment for the tax year (see section 360M of that Act).

(10)Condition E is that an election under this subsection made by the person who is or has been carrying on the property business has effect in relation to the business for the tax year.

(11)An election under subsection (10) must be made on or before the first anniversary of the normal self-assessment filing date for the tax year for which the election is made.

(12)The Treasury may by regulations—

(a)amend subsection (2);

(b)amend subsection (4) so as to substitute another sum for the sum for the time being specified in that subsection.

(13)A statutory instrument containing regulations under subsection (12) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(14)Subsection (13) does not apply if the regulations omit one or more paragraphs of subsection (2) and make no other provision.

271BCalculation of profits in accordance with GAAP

(1)In this Part, references to calculating the profits of a property business in accordance with GAAP are to calculating the profits in accordance with generally accepted accounting practice, subject to any adjustment required or authorised by law in calculating profits for income tax purposes.

(2)A requirement under this Part to calculate profits in accordance with GAAP does not—

(a)require a person to comply with the requirements of the Companies Act 2006 or subordinate legislation made under that Act except as to the basis of calculation, or

(b)impose any requirements as to audit or disclosure.

(3)See section 272 (application of trading income rules: GAAP) which applies only where profits are calculated in accordance with GAAP.

271CBasis of calculation of profits: cash basis required

The profits of a property business for a tax year must be calculated on the cash basis if none of conditions A, B, C, D or E in section 271A is met.

271DCalculation of profits on the cash basis

(1)In this Part, references to calculating the profits of a property business on the cash basis are to calculating the profits in accordance with subsections (2) and (3).

(2)In calculating the profits, receipts of the business are brought into account at the time they are received, and expenses of the business are brought into account at the time they are paid.

(3)Subsection (2) is subject to any adjustment required or authorised by law in calculating profits for income tax purposes.

(4)For provision about the application of Chapter 4 (profits of property businesses: lease premiums etc) in relation to profits calculated on the cash basis, see section 276A.

(5)For provision about the application of Chapter 5 (rules about deductions and receipts) in relation to profits calculated on the cash basis, see section 307A.

(6)The following provisions apply only where profits are calculated on the cash basis—

(a)section 272ZA (application of trading income rules: cash basis), and

(b)Chapter 7A (cash basis: adjustments for capital allowances).

14In the italic heading before section 272, at the end insert : application of trading income rules.

15After that italic heading insert—

271EProfits of a property business: application of trading income rules

(1)The profits of a property business are calculated in the same way as the profits of a trade.

(2)But this is subject to—

(a)section 272, which limits the rule in subsection (1) in relation to a property business whose profits are calculated in accordance with GAAP, and

(b)section 272ZA, which limits that rule in relation to a property business whose profits are calculated on the cash basis.

16(1)Section 272 (profits of a property business: application of trading income rules) is amended as follows.U.K.

(2)For the heading substitute “ Application of trading income rules: GAAP ”.

(3)Omit subsection (1).

(4)In subsection (2), for the words before the table substitute “ In relation to a property business whose profits are calculated in accordance with GAAP, the provisions of Part 2 (trading income) which apply as a result of section 271E(1) are limited to the following— ”.

(5)In the table in subsection (2), omit the entry relating to section 25 (generally accepted accounting practice).

17After section 272 insert—

272ZAApplication of trading income rules: cash basis

(1)In relation to a property business whose profits are calculated on the cash basis, the provisions of Part 2 (trading income) which apply as a result of section 271E(1) are limited to the following—

In Chapter 3 (basic rules)—
section 26losses calculated on same basis as profits
section 28Amoney's worth
section 29interest
In Chapter 4 (rules restricting deductions)—
section 34expenses not wholly and exclusively for trade and unconnected losses
sections 38 to 42 and 44employee benefit contributions
sections 45 to 47business entertainment and gifts
section 52exclusion of double relief for interest
section 53social security contributions
section 54penalties, interest and VAT surcharges
section 55crime-related payments
section 55Aexpenditure on integral features
In Chapter 5 (rules allowing deductions)—
section 57pre-trading expenses
sections 58 and 59incidental costs of obtaining finance
section 69payments for restrictive undertakings
sections 70 and 71seconded employees
section 72payroll deduction schemes: contributions to agents' expenses
sections 73 to 75counselling and retraining expenses
sections 76 to 80redundancy payments etc
section 81personal security expenses
sections 82 to 86contributions to local enterprise organisations or urban regeneration companies
sections 86A and 86Bcontributions to flood and coastal erosion risk management projects
sections 87 and 88scientific research
sections 89 and 90expenses connected with patents, designs and trade marks
section 91payments to Export Credits Guarantee Department
In Chapter 6 (receipts)—
section 96capital receipts
section 97debts incurred and later released
section 104distribution of assets of mutual concerns
section 105(1) and (2)(b) and (c)industrial development grants
section 106sums recovered under insurance policies etc
In Chapter 6A (amounts not reflecting commercial transactions)—
section 106Camounts not reflecting commercial transactions
section 106Dcapital receipts
section 106Egifts to charities etc
In Chapter 7 (gifts to charities etc)—
section 109receipt by donor or connected person of benefit attributable to certain gifts

(2)In those provisions, the expression “this Part” is to be read as a reference to those provisions as applied by subsection (1) and to the other provisions of Part 3.

(3)In section 106D, the reference to subsection (4) or (5) of section 96A is to be read as a reference to subsection (2), (3) or (5) of section 307F (deemed capital receipts under, or after leaving, cash basis).

18After section 272ZA insert— “ Calculation of profits: other general rules ”.

19In section 272A (restricting deductions for finance costs related to residential property), after subsection (6) insert—

(7)See also section 307D (cash basis: modification of deduction for costs of loans).

20(1)Section 274 (relationship between rules prohibiting and allowing deductions) is amended as follows.U.K.

(2)For subsection (1)(b) substitute—

(b)is subject to—

(i)section 36 (unpaid remuneration), as applied by section 272,

(ii)section 38 (employee benefit contributions), as applied by sections 272 and 272ZA,

(iii)section 48 (car hire), as applied by section 272,

(iv)section 55 (crime-related payments), as applied by sections 272 and 272ZA,

(v)section 272A (finance costs), and

(vi)section 307D (cash basis: modification of deduction for costs of loans).

(3)In subsection (3)—

(a)after “section 272” insert “ , or sections 38 and 55 as applied by section 272ZA ”, and

(b)for “section 272A” insert “ sections 272A and 307D ”.

(4)In subsection (4), after “section 272” insert “ or 272ZA ”.

21In section 276(5) (introduction: profits of property businesses: lease premiums etc), after “292” insert “ ; but see also section 276A ”.

22After section 276 insert—

276AApplication of Chapter to property businesses using cash basis

The following provisions of this Chapter do not apply in calculating the profits of a property business on the cash basis—

(a)sections 291 to 294 (tenants under taxed leases: deductions), and

(b)sections 296 and 298 (ICTA modifications).

23In Chapter 5 of Part 3 (profits of property businesses: other rules about receipts and deductions), after the Chapter heading insert—

Cash basis: application of ChapterU.K.

307ACash basis: application of Chapter

(1)The following provisions of this Chapter apply only where the profits of a property business are calculated on the cash basis—

(a)section 307B (cash basis: capital expenditure),

(b)section 307C (cash basis: deduction for costs of loans), and

(c)section 307D (cash basis: modification of deduction for costs of loans).

(2)Sections 307E and 307F make provision about capital receipts in certain cases where the profits of a property business are calculated on the cash basis or have previously been calculated on the cash basis.

Property businesses using cash basisU.K.

307BCash basis: capital expenditure

(1)This section applies in relation to the calculation of the profits of a property business on the cash basis.

(2)No deduction is allowed for an item of a capital nature incurred on, or in connection with, the acquisition or disposal of a business or part of a business.

(3)No deduction is allowed for an item of a capital nature incurred on, or in connection with, education or training.

(4)No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of land.

(5)But subsection (4) does not prevent a deduction being made for expenditure that—

(a)is incurred on the provision of a depreciating asset which, in being provided, is installed or otherwise fixed to qualifying land (see subsection (8)) so as to become, in law, part of the land, but

(b)is not incurred on, or in connection with, the provision of—

(i)a building,

(ii)a wall, floor, ceiling, door, gate, shutter or window or stairs,

(iii)a waste disposal system,

(iv)a sewerage or drainage system, or

(v)a shaft or other structure in which a lift, hoist, escalator or moving walkway may be installed.

(6)No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of an asset for use in ordinary residential property (see subsection (8)). But see section 311A (replacement domestic items relief).

(7)If an asset is provided partly for use in ordinary residential property and partly for other purposes, such apportionment of the expenditure incurred on, or in connection with, the provision, alteration or disposal of the asset is to be made for the purposes of subsection (6) as is just and reasonable.

(8)In relation to the calculation of profits for a tax year—

(a)ordinary residential property” means a dwelling-house or part of a dwelling-house in relation to which an ordinary property business (see subsection (9)) is carried on in the tax year, and

(b)qualifying land” means land not falling within paragraph (a).

(9)Ordinary property business” means—

(a)so much of a UK property business as does not consist of the commercial letting of furnished holiday accommodation (within the meaning of Chapter 6) in the UK, or

(b)so much of an overseas property business as does not consist of the commercial letting of furnished holiday accommodation in one or more EEA states.

(10)No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of—

(a)any asset that is not a depreciating asset (see subsections (11) and (12)),

(b)any asset not acquired or created for use on a continuing basis in the property business,

(c)a car (see subsection (20)),

(d)a non-qualifying intangible asset (see subsections (13) to (16)), or

(e)a financial asset (see subsection (17)).

(11)An asset is a “depreciating” asset if, on the date the item of a capital nature is incurred, it is reasonable to expect that before the end of 20 years beginning with that date—

(a)the useful life of the asset will end, or

(b)the asset will decline in value by 90% or more.

(12)The useful life of an asset ends when it could no longer be of use to any person for any purpose as an asset of a business.

(13)Intangible asset” means anything that is capable of being an intangible asset within the meaning of FRS 105 and, in particular, includes—

(a)an internally-generated intangible asset, and

(b)intellectual property.

(14)An intangible asset is “non-qualifying” unless, by virtue of having a fixed maximum duration, it must cease to exist before the end of 20 years beginning with the date on which the item of a capital nature is incurred.

(15)An intangible asset is “non-qualifying” if it consists of a right, whether conditional or not, to obtain an intangible asset without a fixed maximum duration by virtue of which that asset must, assuming the right is exercised at the last possible time, cease to exist before the end of 20 years beginning with the date on which the item of a capital nature is incurred.

(16)Where—

(a)the person carrying on the property business (“P”) has an intangible asset, and

(b)P grants a licence or any other right in respect of that asset to another person,

any intangible asset that consists of a licence or other right granted to P in respect of the intangible asset mentioned in paragraph (a) is “non-qualifying”.

(17)A “financial asset” means any right under or in connection with—

(a)a financial instrument, or

(b)an arrangement that is capable of producing a return that is economically equivalent to a return produced under any financial instrument.

(18)A reference to acquisition, provision, alteration or disposal includes potential acquisition, provision, alteration or (as the case may be) disposal.

(19)If there is a letting of accommodation only part of which is furnished holiday accommodation, such apportionments as are just and reasonable in all the circumstances are to be made for the purposes of this section.

(20)In this section—

307CCash basis: deduction for costs of loans

(1)Section 307D applies in calculating the profits of a property business for a tax year if conditions A to D are met.

(2)Condition A is that the profits of the business are calculated on the cash basis for the tax year.

(3)Condition B is that a deduction for costs of a loan is allowed in calculating the profits of the business for the tax year or, ignoring section 272A (restricting deductions for finance costs related to residential property) and section 307D (cash basis: modification of deduction for costs of loans), would be so allowed. In this section such a loan is referred to as a “relevant loan”.

(4)Condition C is that an amount of the principal of one or more relevant loans is outstanding at the end time (and a relevant loan in respect of which such an amount is outstanding at the end time is referred to in this section as an “outstanding relevant loan”).

(5)Condition D is that—

where—

L is the total outstanding amount of relevant loans (see subsections (6) and (7)), and

V is the sum of the values of all relevant properties (see subsections (8) to (10)).

(6)The “total outstanding amount of relevant loans”—

(a)if there is only one outstanding relevant loan, is the outstanding business amount of that loan, and

(b)if there are two or more outstanding relevant loans, is found by calculating the outstanding business amount of each such loan and adding those amounts together.

(7)The “outstanding business amount” of a relevant loan is given by—

where—

A is the amount of the principal of the loan which is outstanding at the end time,

X is the amount of the deduction for costs of the loan that would be allowed, apart from sections 272A and 307D, in calculating the profits of the business for the tax year, and

Y is the amount of the deduction for costs of the loan that would be allowed, apart from the wholly and exclusively rule and sections 272A and 307D, in calculating the profits of the business for the tax year.

(8)A property is a “relevant property” if—

(a)it is involved in the property business at the end time, or

(b)although it is not involved in the business at the end time—

(i)it was last involved in the business at an earlier time in the tax year, and

(ii)the person carrying on the business holds the property throughout the period beginning with that earlier time and ending with the end time.

(9)The “value” of a relevant property is the total of—

(a)the market value of the property at the time that it is first involved in the property business, and

(b)such amount of any expenditure of a capital nature incurred by the person carrying on the business in respect of the property as is not brought into account in calculating the profits of the business for the tax year or any previous tax year.

(10)A property is “involved in the property business” if it is a property whose exploitation forms the whole or part of the business.

(11)The “end time” is—

(a)the time immediately before the end of the tax year, or

(b)if in the tax year the person carrying on the business permanently ceases to carry it on, the time immediately before the person permanently ceases to carry on the business.

(12)Costs”, in relation to a loan, means—

(a)interest on the loan,

(b)an amount in connection with the loan that, for the person receiving or entitled to the amount, is a return in relation to the loan which is economically equivalent to interest, or

(c)incidental costs of obtaining finance by means of the loan.

(13)Section 58(2) to (4) (meaning of “incidental costs of obtaining finance”) apply for the purposes of subsection (12)(c).

(14)In this section—

307DCash basis: modification of deduction for costs of loans

(1)Where section 307C provides that this section applies in calculating the profits of a property business for a tax year, the amount which is allowed as a deduction for costs of a loan in calculating the profits for the tax year is the non-adjusted deduction multiplied by the relevant fraction. This is subject to section 272A (restricting deductions for finance costs related to residential property).

(2)The non-adjusted deduction” means the deduction for costs of the loan that would be allowed, apart from section 272A and this section, in calculating the profits of the business for the tax year.

(3)The relevant fraction” means—

where V and L have the same meaning as in section 307C.

(4)For the meaning of “costs of a loan” see section 307C.

Property businesses that use, or have used, cash basisU.K.

307ECapital receipts under, or after leaving, cash basis

(1)This section applies in relation to a property business carried on by a person in two cases—

(a)Case 1 (see subsections (2) to (4)), and

(b)Case 2 (see subsections (5) to (8)).

(2)Case 1 is a case in which conditions A and B are met.

(3)Condition A is that the person receives disposal proceeds or a capital refund in relation to an asset in a tax year for which the profits of the property business are calculated on the cash basis (see section 271D).

For the meaning of “disposal proceeds” and “capital refund” see subsections (9) and (10).

(4)Condition B is that—

(a)an amount of capital expenditure (see subsection (11)) relating to the asset has been brought into account in calculating the profits of the property business on the cash basis, or

(b)an amount of relevant capital expenditure (see subsection (17)) relating to the asset has been brought into account in calculating the profits of the property business in accordance with GAAP (see section 271B)—

(i)by means of a deduction allowed under section 58 or 59 (incidental costs of obtaining finance) (as applied by section 272) or section 311A (replacement domestic items relief), or

(ii)under CAA 2001 (see subsection (20)).

(5)Case 2 is a case in which—

(a)condition C is met, and

(b)condition D or E is met.

(6)Condition C is that disposal proceeds or a capital refund arise to the person in relation to an asset in a tax year—

(a)for which the profits of the property business are calculated in accordance with GAAP, and

(b)which is after a tax year for which the profits of the business had been calculated on the cash basis.

(7)Condition D is that an amount of capital expenditure relating to the asset—

(a)has been paid in a tax year for which the profits of the property business were calculated on the cash basis,

(b)has been brought into account in calculating the profits of the business on the cash basis, and

(c)on the assumption that the profits had not been calculated on the cash basis at the time the expenditure was paid, would not have been qualifying expenditure.

(8)Condition E is that—

(a)an amount of capital expenditure relating to the asset has been brought into account in calculating the profits of the property business for a tax year in accordance with GAAP by means of a deduction allowed under section 58 or 59 (as applied by section 272) or section 311A, and

(b)that tax year is before the tax year for which the person last entered the cash basis.

(9)Disposal proceeds” means—

(a)any proceeds arising from the disposal of an asset or any part of it,

(b)any proceeds arising from the grant of any right in respect of, or any interest in, the asset, or

(c)any amount of damages, proceeds of insurance or other compensation received in respect of the asset.

See also section 307F for circumstances in which a person is to be regarded as disposing of an asset.

(10)Capital refund” means an amount that is (in substance) a refund of capital expenditure relating to an asset.

(11)Capital expenditure” means expenditure of a capital nature incurred, or treated as incurred, on or in connection with—

(a)the provision, alteration or disposal of an asset, or

(b)the potential provision, alteration or disposal of an asset.

(12)The disposal proceeds or capital refund mentioned in condition A or (as the case may be) condition C are to be brought into account as a receipt in calculating the profits of the property business.

(13)In a case where only part of the total capital expenditure incurred, or treated as incurred, by the person in relation to the asset has been brought into account in calculating the profits of the property business (whether or not on the cash basis), the amount brought into account under subsection (12) is proportionately reduced. The reference in this subsection to expenditure brought into account includes a reference to expenditure brought into account under CAA 2001 (see subsection (20)).

(14)Subsection (12) does not apply if the whole of the amount which would otherwise be brought into account under that subsection—

(a)has already been brought into account as a receipt in calculating the profits of the property business under this section,

(b)is brought into account as a receipt in calculating the profits of the business under any other provision of this Part (except section 334D(4) (assets not fully paid for)), or

(c)is brought into account under Part 2 or 3A of CAA 2001 as a disposal value.

The reference to any other provision of this Part in paragraph (b) includes a reference to any provision applied by section 272 or 272ZA.

(15)If part of the amount which would otherwise be brought into account under subsection (12) has already been or is brought into account as mentioned in subsection (14), subsection (12) applies in relation to the remainder of that amount.

(16)For the purposes of this section, any question as to whether or to what extent expenditure is brought into account in calculating the profits of a property business is to be determined on such basis as is just and reasonable in all the circumstances.

(17)In subsection (4)(b) “relevant capital expenditure” means capital expenditure which—

(a)has been incurred (or treated as incurred) by the person before the tax year for which the person last entered the cash basis, and

(b)is cash basis deductible in relation to that tax year.

(18)For the purposes of this section, a person carrying on a property business “enters the cash basis” for a tax year if the profits of the business are calculated—

(a)on the cash basis for the tax year, and

(b)in accordance with GAAP for the previous tax year.

(19)Expenditure is “cash basis deductible” in relation to a tax year if, on the assumption that the expenditure was paid in that tax year, a deduction would be allowed in respect of the expenditure in calculating the profits of the property business on the cash basis for that tax year.

(20)For the purposes of this section, expenditure is “brought into account under CAA 2001” in calculating the profits of a property business if and to the extent that—

(a)a capital allowance made under Part 2 of that Act in respect of the expenditure is treated as an expense in calculating those profits (see sections 248 to 250A of that Act), or

(b)qualifying expenditure (within the meaning of Part 2 of CAA 2001) is allocated to a pool for a relevant qualifying activity and is set-off against different disposal receipts.

(21)An amount of qualifying expenditure is “set-off against different disposal receipts” if—

(a)the amount would have been unrelieved qualifying expenditure carried forward in the pool for the relevant qualifying activity, but

(b)the amount is not so carried forward because (and only because) one or more disposal values in respect of one or more assets, other than the asset in respect of which the qualifying expenditure was incurred (or treated as incurred), have at any time been brought into account in that pool.

(22)For the purposes of subsections (20) and (21), an activity is a “relevant qualifying activity” if—

(a)it is a qualifying activity mentioned in section 15(1)(b) to (da) of CAA 2001 (property business activities), and

(b)the property business consists of or includes that qualifying activity.

(23)For the purposes of subsection (21), an amount of qualifying expenditure incurred (or treated as incurred) by a person is not to be regarded as not carried forward because the person enters the cash basis.

(24)In this section—

307FDeemed capital receipts under, or after leaving, cash basis

(1)This section makes provision supplementary to section 307E.

(2)If—

(a)at any time a person ceases to use an asset or any part of it for the purposes of a property business (other than in the circumstances mentioned in subsection (5)), but

(b)the person does not dispose of the asset (or that part) at that time,

the person is to be regarded for the purposes of section 307E as disposing of the asset (or that part) at that time for an amount equal to the market value amount.

(3)If at any time there is a material increase in the person's non-business use of an asset or any part of it, the person is to be regarded for the purposes of section 307E as disposing of the asset (or that part) at that time for an amount equal to the relevant proportion of the market value amount.

(4)For the purposes of subsection (3)—

(a)there is an increase in a person's non-business use of an asset (or part of an asset) if—

(i)the proportion of the person's use of the asset (or that part) that is for the purposes of the property business decreases, and

(ii)the proportion of the person's use of the asset (or that part) that is for other purposes (the “non-business use”) increases;

(b)“the relevant proportion” is the difference between—

(i)the proportion of the person's use of the asset (or part of the asset) that is non-business use, and

(ii)the proportion of the person's use of the asset (or that part) that was non-business use before the increase mentioned in subsection (3).

(5)If—

(a)the property business in respect of which capital expenditure relating to an asset has been brought into account as mentioned in section 307E is an overseas property business, and

(b)there is a move overseas,

the person is to be regarded for the purposes of section 307E as disposing of the asset at the time of the move overseas for an amount equal to the market value amount.

(6)For the purposes of subsection (5) there is a “move overseas” if—

(a)the person ceases to be UK resident, or

(b)the tax year is, as respects the person, a split year, and the overseas part of the tax year is the later part.

(7)The move overseas occurs—

(a)in a case falling within subsection (6)(a), on the last day of the tax year for which the person is UK resident, or

(b)in a case falling within subsection (6)(b), on the last day of the UK part of the tax year.

(8)In this section—

24In section 311A (replacement domestic items relief), in subsection (15)—

(a)for the definition of “the capital expenditure rule” substitute—

the capital expenditure rule” means—

(a)in relation to a property business whose profits are calculated in accordance with GAAP, section 33 (capital expenditure), as applied by section 272, and

(b)in relation to a property business whose profits are calculated on the cash basis, section 307B (cash basis: capital expenditure);;

(b)in the definition of “the wholly and exclusively rule”—

(i)omit “the rule in”, and

(ii)after “section 272” insert “ or 272ZA ”.

25In section 315 (deduction for expenditure on sea walls), after subsection (6) insert—

(7)In calculating the profits of a property business on the cash basis, any reference in this section to the incurring of expenditure is to the paying of expenditure.

26In section 322 (commercial letting of furnished holiday accommodation), after paragraph (za) in subsections (2) and (2A) insert—

(zaa)section 307B (cash basis: capital expenditure),.

27After section 329 insert—

329AApplication of Chapter where cash basis used

This Chapter applies if—

(a)the profits of a property business are calculated—

(i)on the cash basis for a tax year (see section 271D), and

(ii)in accordance with GAAP (see section 271B) for the following tax year, or

(b)the profits of a property business are calculated—

(i)in accordance with GAAP for a tax year, and

(ii)on the cash basis for the following tax year.

28In section 331 (income charged)—

(a)the existing text becomes subsection (1), and

(b)after that subsection insert—

(2)This is subject to section 334A (spreading on leaving cash basis and related election).

29After section 334 insert—

Spreading of adjustment income on leaving cash basisU.K.

334ASpreading on leaving cash basis and related election

Sections 239A (spreading on leaving cash basis) and 239B (election to accelerate charge under section 239A) apply for the purposes of this Chapter as they apply for the purposes of Chapter 17 of Part 2, but as if—

(a)for section 239A(1) there were substituted—

(1)This section applies if the profits of a property business are calculated—

(a)on the cash basis for a tax year (see section 271D), and

(b)in accordance with GAAP (see section 271B) for the following tax year., and

(b)any reference to section 239A or 239B were to the section concerned as applied by this section.

CHAPTER 7AU.K.Cash basis: adjustments for capital allowances

334B“Entering the cash basis”

For the purposes of this Chapter, a person carrying on a property business enters the cash basis for a tax year if the profits of the business are calculated—

(a)on the cash basis for the tax year (see section 271D), and

(b)in accordance with GAAP (see section 271B) for the previous tax year.

334CUnrelieved qualifying expenditure

(1)This section applies if—

(a)a person carrying on a property business enters the cash basis for a tax year (“the current tax year”), and

(b)the person would, apart from section 59(4A) of CAA 2001, have unrelieved qualifying expenditure relating to a relevant property business activity to carry forward from the chargeable period which is the previous tax year.

(2)But this section does not apply if section 334D applies.

(3)In calculating the profits of the property business for the current tax year, a deduction is allowed for any cash basis deductible amount of the expenditure relating to each relevant property business activity.

(4)A “cash basis deductible amount” of the expenditure means any amount of the expenditure for which a deduction would be allowed in calculating the profits of the property business on the cash basis on the assumption that the expenditure was paid in the current tax year.

(5)Any cash basis deductible amount of the expenditure is to be determined on such basis as is just and reasonable in all the circumstances.

(6)In this section—

334DAssets not fully paid for

(1)This section applies if—

(a)a person carrying on a property business enters the cash basis for a tax year (“the current tax year”),

(b)at any time before the end of the chargeable period which is the previous tax year the person has incurred relevant expenditure, and

(c)not all of the relevant expenditure has actually been paid by the person.

(2)Relevant expenditure” means expenditure on plant or machinery—

(a)for which a deduction would be allowed in calculating the profits of the property business on the cash basis on the assumption that the expenditure was paid in the current tax year, and

(b)in respect of which the person has obtained capital allowances.

(3)If the amount of the relevant expenditure that the person has actually paid exceeds the amount of capital allowances given in respect of the relevant expenditure, the difference is to be deducted in calculating the profits of the property business for the current tax year.

(4)If the amount of the relevant expenditure that the person has actually paid is less than the amount of capital allowances given in respect of the relevant expenditure, the difference is to be treated as a receipt in calculating the profits of the property business for the current tax year.

(5)Any question as to whether or to what extent expenditure is relevant expenditure, or as to whether or to what extent any capital allowance obtained is in respect of relevant expenditure, is to be determined on such basis as is just and reasonable in all the circumstances.

(6)If the amount of capital allowances given in respect of the relevant expenditure has been reduced under section 205 or 207 of CAA 2001 (reduction where asset provided or used only partly for qualifying activity), the amount of the relevant expenditure that the person has actually paid is to be proportionately reduced for the purposes of this section.

334EEffect of election where predecessor and successor are connected persons

(1)This section applies if—

(a)a person carrying on a property business enters the cash basis for a tax year,

(b)the person is the successor for the purposes of section 266 of CAA 2001, and

(c)as a result of an election under that section, relevant plant or machinery is treated as sold by the predecessor to the successor at any time during the tax year.

(2)The provisions of this Chapter have effect in relation to the successor as if everything done to or by the predecessor had been done to or by the successor.

(3)Any expenditure actually incurred by the successor on acquiring the relevant plant or machinery is to be ignored for the purposes of calculating the profits of the property business for the tax year.

(4)In this section—

30In section 351 (income charged), after subsection (2) insert—

(3)Further to subsection (2), section 254 applies for the purposes of this Chapter as if for subsection (2A) of that section there were substituted—

(2A)If the time immediately before the person permanently ceases to carry on the UK property business falls in a cash basis tax year, assume for the purposes of subsection (2) that the profits of the business are calculated on the cash basis.

(4)For the purposes of sections 254 (as so applied) and 353, a tax year is “a cash basis tax year” in relation to a property business if the profits of the business for the tax year are calculated on the cash basis (see section 271D).

31In section 353 (basic meaning of “post-cessation receipt”), after subsection (1) insert—

(1A)If the time immediately before a person permanently ceases to carry on a UK property business falls in a cash basis tax year (see section 351(4)), a sum is to be treated as a post-cessation receipt only if it would have been brought into account in calculating the profits of the business on the cash basis had it been received at that time.

32In section 356 (application to businesses within the charge to corporation tax), in subsection (1), for “section 355” substitute “ sections 353(1A) and 355, and in the modification of section 254 in section 351(3) ”.

33In section 786 (meaning of “rent-a-room receipts”), after subsection (6) insert—

(6A)Subsections (6B) and (7) apply if—

(a)the receipts would otherwise be brought into account in calculating the profits of a UK property business, and

(b)the profits are calculated on the cash basis (see section 271D).

(6B)Any amounts brought into account under section 307E (capital receipts under, or after leaving, cash basis) as a receipt in calculating the profits of the property business are to be treated as receipts within paragraph (a) of subsection (1) above.

34In section 860 (adjustment income), in subsection (5), after “Chapter 17 of Part 2” insert “ , or under section 239B as applied to property businesses by section 334A, ”.

35In section 866 (employee benefit contributions: non-trades and non-property businesses), in subsection (7)(b), for “section 272” substitute “ sections 272 and 272ZA ”.

36In section 867 (business entertainment and gifts: non-trades and non-property businesses), in subsection (7)(b), for “section 272” substitute “ sections 272 and 272ZA ”.

37In section 868 (social security contributions: non-trades etc), in subsection (6)(b), for “section 272” insert “ sections 272 and 272ZA ”.

38In section 869 (penalties, interest and VAT surcharges: non-trades etc), in subsection (6)(b), for “section 272” substitute “ sections 272 and 272ZA ”.

39In section 870 (crime-related payments: non-trades and non-property businesses), in subsection (4)(b), for “section 272” substitute “ sections 272 and 272ZA ”.

40In section 872 (losses calculated on same basis as miscellaneous income), in subsection (4)(b), for “section 272” substitute “ sections 272 and 272ZA ”.

41In Part 2 of Schedule 4 (index of defined expressions), at the appropriate place insert—

the cash basis (in Part 3)section 271D
in accordance with GAAP (in Part 3)section 271B.

PART 3 U.K.Trades etc: amendments of other Acts

TMA 1970U.K.

42In section 42 of TMA 1970 (procedure for making claims etc), in subsection (7)(e), after “194” insert “ , 271A(10) ”.

TCGA 1992U.K.

43TCGA 1992 is amended as follows.

44In section 37 (consideration chargeable to tax on income), after subsection (1) insert—

(1A)There is to be excluded from the consideration for a disposal of an asset taken into account in the computation of the gain a sum equal to any amount that is taken into account by the person making the disposal as a receipt under section 96A or 307E of ITTOIA 2005 (capital receipts under, or after leaving, cash basis) as a result of the operation of any deemed disposal provision in relation to the asset.

(1B)But subsection (1A) applies only to the extent that the sum has not been excluded from the consideration for an earlier disposal of the asset.

(1C)The following are “deemed disposal provisions”—

(a)in relation to trades, professions and vocations, subsections (4) and (5) of section 96A of ITTOIA 2005 (which provide for circumstances in which a person is to be regarded as disposing of an asset for the purposes of that section), and

(b)in relation to property businesses, section 307F of ITTOIA 2005 (which provides for circumstances in which a person is to be regarded as disposing of an asset for the purposes of section 307E of that Act).

45(1)Section 41 (restriction of losses by reference to capital allowances etc) is amended as follows.U.K.

(2)In subsection (4), after paragraph (a) insert—

(zaa)any deduction allowable in respect of capital expenditure in calculating profits on the cash basis (see sections 33A and 307B of ITTOIA 2005),.

(3)After subsection (6) insert—

(6A)Where—

(a)capital allowances have been made or may be made in respect of expenditure, and

(b)the capital allowances include a deduction mentioned in subsection (4)(zaa),

the capital allowances to be taken into account under this section are to be regarded as equal to the total amount of expenditure which has qualified for capital allowances less any balancing charge to which the person making the disposal is liable under the Capital Allowances Act.

(4)In subsection (7), after “Capital Allowances Act,” insert “ and subsection (6A) does not apply, ”.

(5)After subsection (8) insert—

(9)In this section—

(a)in relation to a trade, profession or vocation, references to calculating profits on the cash basis are to calculating the profits of a trade, profession or vocation in relation to which an election under section 25A of ITTOIA 2005 (cash basis for trades) has effect, and

(b)in relation to a property business, references to calculating profits on the cash basis are to be construed in accordance with section 271D of that Act (calculation of profits of property businesses on the cash basis).

(10)In this section—