Corporation Tax Act 2010

2010 CHAPTER 4

An Act to restate, with minor changes, certain enactments relating to corporation tax and certain enactments relating to company distributions; and for connected purposes.

[3rd March 2010]

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:—

Modifications etc. (not altering text)

C1 Act applied (with modifications) (8.2.2011) by The Investment Bank Special Administration Regulations 2011 (S.I. 2011/245), reg. 1, Sch. 6 Pt. 1 (with reg. 27(a))

C2 Act applied (S.) (1.4.2015) by Land and Buildings Transaction Tax (Scotland) Act 2013 (asp 11), s. 70(2), Sch. 7 para. 20 (with s. 69); S.S.I. 2015/108, art. 2

C3 Act applied (with modifications) (8.7.2021) by The Payment and Electronic Money Institution Insolvency Regulations 2021 (S.I. 2021/716), reg. 2, Sch. 3 paras. 2, 3 (with reg. 5) (as amended (4.1.2024) by S.I. 2023/1399, regs. 1(2), 4)

Part 1 U.K. Introduction

1 Overview of Act U.K.

(1) Part 2 is about calculation of the corporation tax chargeable on a company's profits, in particular—

(a) the rates at which corporation tax on profits is charged (see Chapter 2),

(b) ascertaining the amount of profits to which the rates of tax are applied (see Chapter 3), and

(c) the currency in which profits are to be calculated and expressed (see Chapter 4).

(2) [F1 Parts 3A] to 7 make provision for the following reliefs—

F2 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F3 (a) relief for companies with small profits (other than ring-fence profits) (see Part 3A),]

(b) relief for trade losses (see Chapters 2 and 3 of Part 4),

(c) relief for losses from property businesses (see Chapter 4 of Part 4),

(d) relief for losses on a disposal of shares (see Chapter 5 of Part 4),

(e) relief for losses from miscellaneous transactions (see Chapter 6 of Part 4),

(f) group relief (see Part 5),

[F4 (fa) group relief for carried-forward losses (see Part 5A),]

(g) relief for qualifying charitable donations (see Part 6), F5 ...

[F6 (ga) relief for expenditure on grassroots sport (see Part 6A), and]

(h) community investment tax relief (see Part 7).

[F7 (2A) Part 7ZA contains provision restricting the amount of certain deductions which may be made in calculating the profits of a company on which corporation tax is chargeable.]

(3) [F8 Parts 7A] to 13 make provision about special types of business and company etc, in particular—

[F9 (za) banking companies (see Part 7A),]

(a) oil activities (see Part 8),

[F10 (aa) oil contractor activities (see Part 8ZA),

(ab) profits arising from the exploitation of patents etc (see Part 8A),]

[F11 (ac) trading profits taxable at Northern Ireland rate (see Part 8B),]

[F12 (ad) restitution interest (see Part 8C),]

(b) leasing plant or machinery (see Part 9),

(c) close companies (see Part 10),

(d) charitable companies etc (see Part 11),

(e) Real Estate Investment Trusts (see Part 12),

(f) corporate beneficiaries under trusts (see Chapter 1 of Part 13),

(g) open-ended investment companies, authorised unit trusts and court investment funds (see Chapter 2 of Part 13),

F13 (h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i) securitisation companies (see Chapter 4 of Part 13),

(j) companies in liquidation or administration (see Chapter 5 of Part 13),

(k) banks etc in compulsory liquidation (see Chapter 6 of Part 13),

(l) co-operative housing associations and self-build societies (see Chapters 7 and 8 of Part 13), and

(m) community amateur sports clubs (see Chapter 9 of Part 13).

(4) Parts 14 to [F14 21C] contain provisions relating to tax avoidance, in particular with respect to—

(a) change in company ownership (see Part 14),

[F15 (aa) transfer of deductions (see Part 14A),]

[F16 (ab) carried-forward losses (see Part 14B),]

(b) transactions in securities (see Part 15),

(c) factoring of income (see Part 16),

F17 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F18 (da) manufactured dividends (see Part 17A),]

F19 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f) the sale and lease-back of assets (see Part 19),

(g) leasing plant or machinery (see Part 20), F20 ...

(h) other arrangements involving asset leasing (see Part 21) F21 ...

[F22 (i) risk transfer schemes (see Part 21A).]

[F23 (j) group mismatch schemes (see Part 21B).][F24 , and

[F25 (ja) tax mismatch schemes (see Part 21BA),]

(k) tainted donations made to charities (see Part 21C).]

(5) Part 22 contains miscellaneous provisions, including provision with respect to—

(a) transfers of trade without a change of ownership (see Chapter 1),

(b) transfers of trade to obtain balancing allowances (see Chapter 2),

(c) transfer of relief within partnerships (see Chapter 3),

(d) the surrender of tax refunds within groups of companies (see Chapter 4),

(e) the set off of income tax deductions against corporation tax (see Chapter 5),

(f) the assessment, collection and recovery of corporation tax from UK representatives of non-UK resident companies (see Chapter 6),

(g) the recovery of unpaid corporation tax due from non-UK resident companies (see Chapter 7), and

(h) exemptions (see Chapter 8).

(6) Part 23 contains provisions about the meaning of “distribution” and certain associated matters.

(7) Part 24 contains definitions that apply for the purposes of the Corporation Tax Acts and other general provisions that have effect for the purposes of those Acts.

(8) Part 25 contains provisions of general application, including definitions for the purposes of the Act.

(9) For abbreviations and defined expressions used in this Act, see section 1174 and Schedule 4.

Textual Amendments

F1 Words in s. 1(2) substituted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 19(a)

F2 S. 1(2)(a) omitted (with effect in accordance with Sch. 1 para. 22 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 1 para. 2(b)

F3 S. 1(2)(a) inserted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 19(b)

F4 S. 1(2)(fa) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 146(2)

F5 Word in s. 1(2)(g) omitted (with effect in accordance with s. 22(6) of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), s. 22(2)(a)

F6 S. 1(2)(ga) inserted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(2)(b)

F7 S. 1(2A) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 146(3)

F8 Words in s. 1(3) substituted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2015 (c. 11), Sch. 2 para. 4(a)

F9 S. 1(3)(za) inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2015 (c. 11), Sch. 2 para. 4(b)

F10 S. 1(3)(aa)(ab) inserted (retrospective to 1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 2, 6

F11 S. 1(3)(ac) inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 2 para. 5

F12 S. 1(3)(ad) inserted (18.11.2015) (with effect in accordance with s. 38(9)-(12) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 38(2)

F13 S. 1(3)(h) omitted (6.4.2014) by virtue of The Unauthorised Unit Trusts (Tax) Regulations 2013 (S.I. 2013/2819), regs. 1(3), 39(2) (with reg. 32)

F14 Figure in s. 1(4) substituted (with effect in accordance with Sch. 3 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 20(a)

F15 S. 1(4)(aa) inserted (with effect in accordance with Sch. 14 para. 3 of the amending Act) by Finance Act 2013 (c. 29), Sch. 14 para. 2(1)

F16 S. 1(4)(ab) inserted (with effect and application in accordance with Sch. 3 Pt. 2 of the amending Act) by Finance Act 2015 (c. 11), Sch. 3 para. 2

F17 S. 1(4)(d) omitted (1.1.2014) by virtue of Finance Act 2013 (c. 29), Sch. 29 paras. 42, 52(a)

F18 S. 1(4)(da) inserted (1.1.2014) by Finance Act 2013 (c. 29), Sch. 29 paras. 42(b), 52

F19 S. 1(4)(e) omitted (with effect in accordance with s. 81 of the amending Act) by virtue of Finance Act 2016 (c. 24), s. 77(2) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2))

F20 Word in s. 1(4)(g) omitted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by virtue of Finance Act 2010 (c. 13), Sch. 16 para. 2

F21 Word in s. 1(4)(h) omitted (with effect in accordance with Sch. 5 para. 6 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 5 para. 1

F22 S. 1(4)(i) inserted (with effect in accordance with Sch. 16 para. 5 of the amending Act) by Finance Act 2010 (c. 13), Sch. 16 para. 2

F23 S. 1(4)(j) inserted (with effect in accordance with Sch. 5 para. 6 of the amending Act) by Finance Act 2011 (c. 11), Sch. 5 para. 1

F24 S. 1(4)(k) and word inserted (with effect in accordance with Sch. 3 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 20(b)

F25 S. 1(4)(ja) inserted (with effect in accordance with Sch. 20 para. 6(1) of the amending Act) by Finance Act 2013 (c. 29), Sch. 20 para. 2

Part 2 U.K. Calculation of liability in respect of profits

Chapter 1 U.K. Introduction

2 Overview of Part U.K.

(1) This Part contains provisions that relate to the calculation of the corporation tax chargeable on a company's profits of an accounting period.

(2) Chapter 2 is about the rates at which corporation tax on profits is charged.

(3) Chapter 3 is about ascertaining the amount of a company's profits of an accounting period to which the rates of corporation tax applicable to the company are applied.

(4) Chapter 4 makes provision about the currency in which a company must calculate and express its profits for corporation tax purposes.

(5) For provision about the calculation of the corporation tax payable for an accounting period see paragraph 8 of Schedule 18 to FA 1998.

Chapter 2 U.K. Rates at which corporation tax on profits charged

[F26 3 Corporation tax rates U.K.

(1) Corporation tax is charged at the rate set by Parliament for the financial year as the main rate.

[F27 (2) Subsection (1) is subject to—

(a) section 18A (which provides for tax to be charged at the standard small profits rate instead of the main rate in certain cases), and

(b) any other provision of the Corporation Tax Acts which provides for corporation tax to be charged at a different rate.]]

Textual Amendments

F26 S. 3 substituted (with effect in accordance with Sch. 1 para. 22 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 3

F27 S. 3(2) substituted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 2

Chapter 3 U.K. Calculation of amount to which rates applied

4 Amount of profits to which corporation tax rates applied U.K.

(1) In the calculation under paragraph 8(1) of Schedule 18 to FA 1998 of the amount of corporation tax payable for an accounting period of a company, the first step is to apply the rate or rates of corporation tax applicable to the profits of the company of the period on which tax is chargeable.

(2) The profits of a company of an accounting period on which corporation tax is chargeable (in this Act referred to as the company's taxable total profits of the period) are found as follows—

• Step 1

  Find the company's total profits of the period (see subsection (3)).

• Step 2

  Deduct from the result of Step 1 any amounts which can be relieved against the company's total profits of the period.

(3) To find a company's total profits of an accounting period take the following steps.

• Step 1

  Find the amount in respect of which the company is chargeable for the period under the charge to corporation tax on income after any reduction required to give effect to relief from tax.

• Step 2

  Add to the result of Step 1 any amount to be included in respect of chargeable gains in the company's total profits of the accounting period (see section 8 of TCGA 1992) after any reduction required to give effect to relief from tax.

(4) Subsections (2) and (3) are subject to the provisions of the Corporation Tax Acts.

Chapter 4 U.K. Currency

The currency to be used in tax calculations U.K.

5 Basic rule: sterling to be used U.K.

(1) For corporation tax purposes the income and chargeable gains of a company for an accounting period must be calculated and expressed in sterling.

(2) See the following sections for provision about the application of subsection (1) in certain cases where profits or losses fall to be calculated in accordance with generally accepted accounting practice—

• section 6 (UK resident company operating in sterling and preparing accounts in another currency),

• section 7 (UK resident company operating in currency other than sterling and preparing accounts in another currency),

• section 8 (UK resident company preparing accounts in currency other than sterling),

• section 9 (non-UK resident company preparing accounts in currency other than sterling).

[F28 (3) See section 9C for provision about the application of subsection (1) so far as it relates to calculating chargeable gains.]

Textual Amendments

F28 S. 5(3) inserted (1.9.2013) by Finance Act 2013 (c. 29), s. 66(2)(4); S.I. 2013/1815, art. 2

6 UK resident company operating in sterling and preparing accounts in another currency U.K.

(1) This section applies if, for a period of account, in accordance with generally accepted accounting practice, a UK resident company [F29 (other than a UK resident investment company)]—

(a) prepares its accounts in a currency other than sterling, and

(b) in those accounts identifies sterling as its functional currency.

[F30 (1A) This section also applies if, for a period of account, a UK resident investment company—

(a) in accordance with generally accepted accounting practice, prepares its accounts in a currency other than sterling, and

(b) either—

(i) has sterling as its designated currency for that period of account (see sections 9A and 9B), or

(ii) if it does not have a designated currency for that period, in those accounts identifies sterling as its functional currency in accordance with generally accepted accounting practice.]

(2) Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as if the company prepared its accounts in sterling.

Textual Amendments

F29 Words in s. 6(1) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 1(2)

F30 S. 6(1A) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 1(3)

Modifications etc. (not altering text)

C4 S. 6 applied (with modifications) by 2010 c. 8, s. 371SI(2) (as inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 1)

7 UK resident company operating in currency other than sterling and preparing accounts in another currency U.K.

(1) This section applies if, for a period of account, in accordance with generally accepted accounting practice—

(a) a UK resident company [F31 (other than a UK resident investment company)] prepares its accounts in one currency,

(b) in those accounts it identifies another currency as its functional currency, and

(c) that other currency is not sterling.

[F32 (1A) This section also applies if, for a period of account, a UK resident investment company—

(a) in accordance with generally accepted accounting practice, prepares its accounts in one currency,

(b) either—

(i) has another currency as its designated currency for that period (see sections 9A and 9B), or

(ii) if it does not have a designated currency for that period, in those accounts identifies another currency as its functional currency in accordance with generally accepted accounting practice, and

(c) that other currency is not sterling.]

(2) Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

• Step 1

  Calculate those profits or losses in the [F33 relevant] currency as if the company prepared its accounts in that currency.

• Step 2

  Take the sterling equivalent of those profits or losses (see section 11).

(3) If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the [F34 relevant] currency of the company.

[F35 (4) In subsections (2) and (3) “ the relevant currency ” means the currency other than sterling referred to in subsection (1)(c) or (1A)(c). ]

Textual Amendments

F31 Words in s. 7(1)(a) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 2(2)

F32 S. 7(1A) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 2(3)

F33 Word in s. 7(2) substituted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 2(4)

F34 Word in s. 7(3) substituted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 2(5)

F35 S. 7(4) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 2(6)

Modifications etc. (not altering text)

C5 S. 7 applied (with modifications) by 2010 c. 8, s. 371SI(3) (as inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 1)

8 UK resident company preparing accounts in currency other than sterling U.K.

(1) This section applies if, for a period of account—

(a) a UK resident company prepares its accounts in a currency other than sterling (the “accounts currency”), and

(b) neither section 6 nor section 7 applies.

(2) Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

• Step 1

  Calculate those profits or losses in the accounts currency.

• Step 2

  Take the sterling equivalent of those profits or losses (see section 11).

(3) If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

9 Non-UK resident company preparing return of accounts in currency other than sterling U.K.

[F36 (1) This section applies if a non-UK resident company within the charge to corporation tax prepares its return of accounts for a period of account in a currency other than sterling (the “accounts currency”).]

(2) Profits or losses of the company for the period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated in sterling as follows—

• Step 1

  Calculate those profits or losses in the accounts currency.

• Step 2

  Take the sterling equivalent of those profits or losses (see section 11).

(3) If this section applies, assume that any sterling amount mentioned in the Corporation Tax Acts is its equivalent expressed in the accounts currency of the company.

(4) The reference in subsection (1) to the company's “return of accounts” is to a return of such accounts F37 ... as may be required under paragraph 3 of Schedule 18 to FA 1998 (company tax returns).

Textual Amendments

F36 S. 9(1) substituted (6.4.2020) by Finance Act 2019 (c. 1), Sch. 5 paras. 29(2), 35 (with Sch. 5 para. 36)

F37 Words in s. 9(4) omitted (6.4.2020) by virtue of Finance Act 2019 (c. 1), Sch. 5 paras. 29(3), 35 (with Sch. 5 para. 36)

[F38 9A Designated currency of a UK resident investment company U.K.

(1) The designated currency of a UK resident investment company is the currency which the company elects as its designated currency.

[F39 (2) An election under this section by a company (“X”) takes effect only if, at the time when it is to take effect (see section 9B(1))—

(a) X is a UK resident investment company, and

(b) Condition A or Condition B is met.]

F40 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Condition A is that a significant proportion of X's assets and liabilities are denominated in the currency.

(5) Condition B is that—

(a) the currency is the functional currency of another company, and

(b) it is reasonable to assume that the two companies will meet the consolidation condition.

(6) X and another company (“Y”) meet the consolidation condition at any time if—

(a) for a period which includes that time, the financial results of X are comprised in financial statements of Y's group prepared in accordance with acceptable accounting practice, or

(b) if no financial statements of the group are prepared in accordance with acceptable accounting practice for a period which includes that time, the financial results of X would be comprised in financial statements of Y's group for a period which includes that time if such statements were prepared in accordance with international accounting standards.

(7) In subsection (6)—

• “ financial statements of the group ” means consolidated financial statements of Y and its subsidiaries [F41 (and for this purpose “subsidiaries” has the meaning given by international accounting standards)],

• [F42 “Y's group” means a worldwide group of which Y is the ultimate parent within the meaning of Part 10 of TIOPA 2010,]

• “ acceptable accounting practice ” means—

  (a)

  international accounting standards,

  (b)

  UK generally accepted accounting practice, or

  (c)

  accounting practice which is generally accepted in the country in which Y is resident.

(8) A currency is the designated currency of X for a period of account if the election in respect of that currency has effect throughout that period (see section 9B).

[F43 (9) In relation to any period of account for which a currency is X's designated currency as a result of an election under this section, profits or losses of X that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes must be calculated as if—

(a) the designated currency were the functional currency of the company, and

(b) no part of X's business could, in accordance with generally accepted accounting practice, be regarded as having another currency as its functional currency.]

Textual Amendments

F38 Ss. 9A, 9B inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 3

F39 S. 9A(2) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(3)

F40 S. 9A(3) omitted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 34(4)

F41 Words in s. 9A(7) substituted (with effect in accordance with Sch. 8 para. 28 of the amending Act) by Finance Act 2018 (c. 3), Sch. 8 para. 27(a)

F42 Words in s. 9A(7) substituted (with effect in accordance with Sch. 8 para. 28 of the amending Act) by Finance Act 2018 (c. 3), Sch. 8 para. 27(b)

F43 S. 9A(9) inserted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(5)

9B Period for which an election under section 9A has effect U.K.

(1) An election under [F44 section 9A] takes effect at the beginning of the day specified in the election as the day on which it takes effect (which must be later than the day on which the election is made).

F45 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) An election under [F46 section 9A] may be revoked by notice of the revocation being given to an officer of Revenue and Customs before the election takes effect.

(4) Subject to that, an election has effect until immediately before—

(a) the day on which another election by X takes effect, or

(b) the day on which a revocation event occurs,

(whichever first occurs).

(5) A revocation event occurs in a period of account (other than a period to which subsection (6) applies) if, at any time during that period—

(a) it is not the case that a significant proportion of X's assets and liabilities are denominated in the currency to which the election relates, and

(b) it is not the case that the currency is the functional currency of another company which, with X, met the consolidation condition (within the meaning of section 9A(6)) at any time during the preceding period of account.

(6) [F47 A revocation event occurs in the period of account in which X's first accounting period begins] if—

(a) Condition A and not Condition B is satisfied at the beginning of that accounting period, and

(b) the condition in subsection (5)(a) is met at any time during the period of account but after the first accounting period begins.

[F48 (6A) A revocation event also occurs in a period of account (whether or not a period to which subsection (6) applies) if, at any time during that period, X ceases to be a UK resident investment company.]

(7) Subsections (8) and (9) apply if a period of account of X (“the straddling period of account”) begins before, and ends on or after, the day on which—

(a) an election under [F49 section 9A] takes effect, or

(b) a revocation event occurs.

(8) It is to be assumed, for the purposes of this Chapter, that the straddling period of account consists of two separate periods of account—

(a) the first beginning with the straddling period of account and ending immediately before that day, and

(b) the second beginning with that day and ending with the straddling period of account,

and X's profits and losses are to be computed accordingly for the purposes of corporation tax.

(9) For those purposes, it is to be assumed—

(a) that X prepares its accounts for each of the two periods in the same currency, and otherwise on the same basis, as it prepares its accounts for the straddling period of account, and

(b) that if the accounts for the straddling period of account, in accordance with generally accepted accounting practice, identify a currency as X's functional currency, the accounts for each of the two periods do likewise.

(10) In this section references to “X” are to be construed in accordance with section 9A.]

Textual Amendments

F38 Ss. 9A, 9B inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 3

F44 Words in s. 9B(1) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(7)

F45 S. 9B(2) omitted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 34(8)

F46 Words in s. 9B(3) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(9)

F47 Words in s. 9B(6) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(10)

F48 S. 9B(6A) inserted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(11)

F49 Words in s. 9B(7)(a) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(12)

[F50 9C Chargeable gains and losses of companies U.K.

(1) This section applies if—

(a) a company disposes of an asset which is a ship, an aircraft, shares or an interest in shares, and

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

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

(3) If, at any time—

(a) a company is a UK resident investment company, and

(b) the company has a designated currency (see sections 9A and 9B) which is different from its functional currency,

the company's relevant currency at that time is that designated currency.

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

• Step 1 Calculate the chargeable gain or loss in the relevant currency of the company at the time of the disposal.

• Step 2 Translate the amount of the chargeable gain or loss into sterling by reference to the spot rate of exchange on the day of the disposal.

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

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

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

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

(9) For the purposes of subsections (6) and (7)—

(a) any translation of expenditure under subsection (6) is to be done before any translation of the expenditure under subsection (7), and

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

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

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

(b) for a consideration equal to the market value of the asset,

for the purposes of this section that allowable expenditure is treated as incurred by the company at that time.

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

(a) to which section 67 of CAA 2001 applies, and

(b) which relates to plant or machinery which is a ship or aircraft.

(12) In this section—

• “allowable expenditure” means expenditure which, immediately before the disposal, was attributable to the asset under section 38(1)(a) to (c) of TCGA 1992;

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

• “shares” includes stock.]

Textual Amendments

F50 S. 9C inserted (1.9.2013) by Finance Act 2013 (c. 29), s. 66(3)(4); S.I. 2013/1815, art. 2

Translating amounts into other currencies U.K.

10 The equivalent in another currency of a sterling amount U.K.

(1) Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(3), 8(3) or 9(3) requires a sterling amount to be translated into its equivalent expressed in another currency.

(2) The translation must be made by reference to—

(a) the average exchange rate for the accounting period, or

(b) the rate mentioned in subsection (3).

(3) That rate is—

(a) if the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(b) if the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

11 Sterling equivalents: basic rule U.K.

(1) Subsection (2) applies if, for the purposes of calculating the profits or losses of a company arising in an accounting period, section 7(2), 8(2) or 9(2) requires a profit or loss to be translated into its sterling equivalent.

(2) The translation must be made by reference to—

(a) the average exchange rate for the accounting period, or

(b) the rate mentioned in subsection (3).

(3) That rate is—

(a) if the amount to be translated relates to a single transaction, an appropriate spot rate of exchange for the transaction, or

(b) if the amount to be translated relates to more than one transaction, a rate of exchange derived on a just and reasonable basis from appropriate spot rates of exchange for those transactions.

(4) Subsection (2) is subject to sections 12 and 13 (special rules where the translation is for the purpose of calculating carried-forward or carried-back amounts).

12 Sterling equivalents: carried-back amounts U.K.

(1) This section applies if, for the purpose of calculating a carried-back amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

(2) The translation must be made in accordance with whichever of the rules 1, 2 and 3 is applicable (see the table below).

Rule 1 applies if the later tax calculation currency is the same as the earlier tax calculation currency.	Rule 1 is that the loss must be translated into its sterling equivalent by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.
Rule 2 applies if— (a) the later tax calculation currency is not the same as the earlier tax calculation currency, and (b) the earlier tax calculation currency is sterling.	Rule 2 is that the loss must be translated into its sterling equivalent by reference to the spot rate of exchange for the last day of the relevant accounting period.
Rule 3 applies if— (a) the later tax calculation currency is not the same as the earlier tax calculation currency, and (b) the earlier tax calculation currency is a currency other than sterling.	Rule 3 is that the loss must be translated into its sterling equivalent by— (a) being translated into the earlier tax calculation currency by reference to the spot rate of exchange for the last day of the relevant accounting period, and (b) then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.

(3) In the table in subsection (2)—

• “the earlier tax calculation currency” means the tax calculation currency of the company in the accounting period to which the carried-back amount is to be carried back,

• “the later tax calculation currency” means the tax calculation currency of the company in the accounting period in which the loss arises, and

• “the relevant accounting period” means the latest accounting period of the company that both—

  (a)

  ends before the accounting period in which the loss arises, and

  (b)

  is a period in which the tax calculation currency of the company is the same as the earlier tax calculation currency.

13 Sterling equivalents: carried-forward amounts U.K.

(1) This section applies if, for the purpose of calculating a carried-forward amount in respect of a company, a loss (“the loss”) is required by section 7(2), 8(2) or 9(2) to be translated into its sterling equivalent.

(2) The translation must be made in accordance with whichever of rules 1, 2 and 3 is applicable (see the table below).

Rule 1 applies if the earlier tax calculation currency is the same as the later tax calculation currency.	Rule 1 is that the loss must be translated into its sterling equivalent by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.
Rule 2 applies if— (a) the earlier tax calculation currency is not the same as the later tax calculation currency, and (b) the later tax calculation currency is sterling.	Rule 2 is that the loss must be translated into its sterling equivalent by reference to the spot rate of exchange for the first day of the relevant accounting period.
Rule 3 applies if— (a) the earlier tax calculation currency is not the same as the later tax calculation currency, and (b) the later tax calculation currency is a currency other than sterling.	Rule 3 is that the loss must be translated into its sterling equivalent by— (a) being translated into the later tax calculation currency by reference to the spot rate of exchange for the first day of the relevant accounting period, and (b) then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.

(3) In the table in subsection (2)—

• “the earlier tax calculation currency” means the tax calculation currency of the company in the accounting period in which the loss arises,

• “the later tax calculation currency” means the tax calculation currency of the company in the accounting period to which the carried-forward amount is to be carried forward, and

• “the relevant accounting period” means the earliest accounting period of the company that both—

  (a)

  begins after the accounting period in which the loss arises, and

  (b)

  is a period in which the tax calculation currency of the company is the same as the later tax calculation currency.

Adjustment of sterling losses U.K.

14 Carried-back amounts U.K.

(1) This section applies if conditions A, B and C are met.

(2) Condition A is that, in accordance with generally accepted accounting practice, a UK resident company—

(a) prepares its accounts for a period of account in sterling, or

(b) prepares its accounts for a period of account in a currency other than sterling and in those accounts identifies sterling as its functional currency.

(3) Condition B is that a loss of the company for that period (“the loss”) which falls to be calculated in accordance with generally accepted accounting practice for corporation tax purposes is to be a carried-back amount.

(4) Condition C is that the tax calculation currency of the company in the accounting period to which the loss is to be carried back (“the earlier tax calculation currency”) is a currency other than sterling.

(5) The loss must be adjusted by—

(a) first being translated into the earlier tax calculation currency by reference to the spot rate of exchange for the last day of the relevant accounting period, and

(b) then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-back amount is to be set off is required to be translated under section 11.

(6) In this section “the relevant accounting period” means the latest accounting period of the company that both—

(a) ends before the accounting period in which the loss arises, and

(b) is a period in which the tax calculation currency of the company is the currency mentioned in subsection (4).

15 Carried-forward amounts U.K.

(1) This section applies if conditions A, B and C are met.

(2) Condition A is that, in accordance with generally accepted accounting practice, a UK resident company—

(a) prepares its accounts for a period of account in sterling, or

(b) prepares its accounts for a period of account in a currency other than sterling and in those accounts identifies sterling as its functional currency.

(3) Condition B is that a loss of the company for that period (“the loss”) which falls to be calculated in accordance with generally accepted accounting practice for corporation tax purposes is to be a carried-forward amount.

(4) Condition C is that the tax calculation currency of the company in the accounting period to which the loss is to be carried forward (“the later tax calculation currency”) is a currency other than sterling.

(5) The loss must be adjusted by—

(a) first being translated into the later tax calculation currency by reference to the spot rate of exchange for the first day of the relevant accounting period, and

(b) then being translated into sterling by reference to the same rate of exchange as that at which the profit against which the carried-forward amount is to be set off is required to be translated under section 11.

(6) In this section “the relevant accounting period” means the earliest accounting period of the company that both—

(a) begins after the accounting period in which the loss arises, and

(b) is a period in which the tax calculation currency of the company is the currency mentioned in subsection (4).

Interpretation U.K.

16 Sections 13(2) and 15(5): profit against which carried-forward amount to be set off U.K.

(1) This section is about the interpretation of the references in sections 13(2) and 15(5) to the profit against which a carried-forward amount is to be set off, in a case where the carried-forward amount—

(a) is one that is treated as arising in an accounting period later than that in which it in fact arises, and

(b) is accordingly deductible in calculating a profit for that later period.

(2) In such a case, the references are to be read as references to the profit in calculating which the amount is deductible, disregarding the deduction.

17 Interpretation of Chapter U.K.

(1) References in this Chapter to the accounts of a UK resident company are to—

(a) the annual accounts of the company required by Part 15 of the Companies Act 2006, or

(b) if the company is not required to prepare such accounts, the accounts which it is required to keep under the law of the territory under whose laws the company is incorporated, or

(c) if the company is not required to keep accounts as mentioned in paragraph (a) or (b), those accounts of the company that most closely correspond to accounts which it would have been required to prepare if the provisions of Part 15 of the Companies Act 2006 applied to it.

(2) In this Chapter “carried-back amount” means—

(a) an amount carried back under section 37 (relief for trade losses against total profits),

[F51 (aa) an amount carried back under section 45F (relief for terminal trade losses),]

(b) an amount carried back under section 389(2) of CTA 2009 (deficits of insurance companies), or

(c) an amount carried back by virtue of a claim under section 459(1)(b) [F52 or 463B(1)(b)] of CTA 2009 (non-trading deficits from loan relationships).

(3) In this Chapter “carried-forward amount” means—

(a) an amount carried forward under section 45 (carry forward of [F53 pre-1 April 2017] trade loss against subsequent trade profits),

[F54 (aa) an amount carried forward under section 45A (carry forward of post 1-April 2017 trade loss against total profits),

(ab) an amount carried forward under section 45B (carry forward of post-1 April 2017 trade loss against subsequent trade profits),]

(b) an amount carried forward under section 62(5) (UK property business losses),

(c) an amount carried forward under section 63(3) (company with investment business ceasing to carry on a UK property business),

(d) an amount carried forward under 66(3) (overseas property business losses),

(e) an amount carried forward under section 91(6) (losses from miscellaneous transactions),

(f) an amount carried forward under [F55 section 73 or 93 of FA 2012 for use at step 5 in section 76 of that Act (the I - E basis for insurance companies)],

F56 (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h) an amount carried forward under section 391(2) of CTA 2009 (deficits of insurance companies),

(i) an amount carried forward under section 457(3) [F57 , 463G(6) or 463H(4)] of CTA 2009 (non-trading deficits from loan relationships),

(j) an amount carried forward under section 753(3) of CTA 2009 (non-trading loss on intangible fixed assets),

(k) an amount carried forward under section 925(3) of CTA 2009 (patent income: relief for expenses), or

(l) an amount carried forward under section 1223 of CTA 2009 (expenses of management and other amounts).

[F58 (3A) In this Chapter “investment company” means a company whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived from those investments.]

[F59 (4) References in this Chapter to the functional currency of a company or of part of a company's business are references to the currency of the primary economic environment in which the company or part operates.]

(5) References in this Chapter to the tax calculation currency of a company in an accounting period are to the currency in which profits or losses of the company arising in that period that fall to be calculated in accordance with generally accepted accounting practice for corporation tax purposes are required to be calculated by virtue of section 5(1), section 6(2), Step 1 of section 7(2), Step 1 of section 8(2) or Step 1 of section 9(2).

Textual Amendments

F51 S. 17(2)(aa) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 147(2)(a)

F52 Words in s. 17(2)(c) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 147(2)(b)

F53 Words in s. 17(3)(a) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 147(3)(a)

F54 S. 17(3)(aa)(ab) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 147(3)(b)

F55 Words in s. 17(3)(f) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 216(a)

F56 S. 17(3)(g) omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 216(b)

F57 Words in s. 17(3)(i) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 147(3)(c)

F58 S. 17(3A) inserted (with effect in accordance with Sch. 7 para. 8 of the amending Act) by Finance Act 2011 (c. 11), Sch. 7 para. 4

F59 S. 17(4) substituted (18.11.2015) (with effect in accordance with s. 34(14) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 34(13)

F60 Part 3 U.K. Companies with small profits

Textual Amendments

F60 Pt. 3 omitted (with effect in accordance with Sch. 1 para. 22 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 1 para. 4

F60 The small profits rate U.K.

F60 18 Profits charged at the small profits rate U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 Marginal relief U.K.

F60 19 Marginal relief U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 20 Company with only ring fence profits U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 21 Company with ring fence profits and other profits U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 22 The ring fence amount U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 23 The remaining amount U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 The lower limit and the upper limit U.K.

F60 24 The lower limit and the upper limit U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 25 Associated companies U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 26 Section 25(3): treatment of certain non-trading companies U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 27 Attribution to persons of rights and powers of their associates U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 28 Associated companies: fixed-rate preference shares U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 29 Association through a loan creditor U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 30 Association through a trustee U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 Supplementary U.K.

F60 31 Power to obtain information U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 32 Meaning of “augmented profits” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 33 Interpretation of section 32(2) and (3) U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F60 34 Close investment-holding companies U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F61 PART 3A U.K. Companies with small profits

Textual Amendments

F61 Pt. 3A inserted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 3

Modifications etc. (not altering text)

C6 Pt. 3A excluded (9.12.2021) by S.I. 2006/964, reg. 14B(3)(c) (as inserted by The Authorised Investment Funds (Tax) (Amendment) Regulations 2021 (S.I. 2021/1270), regs. 1, 4(b))

C7 Pt. 3A excluded (9.12.2021) by S.I. 2006/964, reg. 14DA(3)(a) (as inserted by The Authorised Investment Funds (Tax) (Amendment) Regulations 2021 (S.I. 2021/1270), regs. 1, 3(2))

C8 Pt. 3A applied (with effect in accordance with Sch. 1 para. 33 of the amending Act) by 2001 c. 2, s. 99(4A) (as inserted by Finance Act 2021 (c. 26), Sch. 1 para. 16(3))

C9 Pt. 3A applied (with effect in accordance with Sch. 1 para. 33 of the amending Act) by S.I. 1998/3175, reg. 2(2A) (as inserted by Finance Act 2021 (c. 26), Sch. 1 para. 13(2)(c))

The standard small profits rate for non-ring fence profits U.K.

18A Profits charged at the standard small profits rate U.K.

(1) Corporation tax is charged at the standard small profits rate on a company's taxable total profits of an accounting period which are not ring fence profits if—

(a) the company is UK resident in the accounting period,

(b) it is not a close investment-holding company in the period, and

(c) its augmented profits of the accounting period do not exceed the lower limit.

(2) In this Act “the standard small profits rate” means a rate that—

(a) is lower than the main rate, and

(b) is set by Parliament for the financial year as the standard small profits rate.

(3) In this Part “ring fence profits” has the same meaning as in Part 8 (see section 276).

(4) In the case of a company with ring fence profits, see section 279A(3) (small ring fence profits rate chargeable on ring fence profits).

Marginal relief U.K.

18B Marginal relief for companies without ring fence profits U.K.

(1) This section applies if—

(a) a company is UK resident in an accounting period,

(b) it is not a close investment-holding company in the period,

(c) its augmented profits of the accounting period exceed the lower limit but do not exceed the upper limit, and

(d) its augmented profits of the accounting period do not include any ring fence profits.

(2) The corporation tax charged on the company's taxable total profits of the accounting period is reduced by an amount equal to—

where—

F is the standard marginal relief fraction,

U is the upper limit,

A is the amount of the augmented profits, and

N is the amount of the taxable total profits.

(3) In this Act “the standard marginal relief fraction” means the fraction set by Parliament for the financial year as the standard marginal relief fraction for the purposes of this Part.

18C Marginal relief for companies with ring fence profits U.K.

In the case of a company with ring fence profits—

(a) see section 279B (if the company's augmented profits of an accounting period consist exclusively of ring fence profits), and

(b) see section 279C (if the company's augmented profits of an accounting period consist of both ring fence profits and other profits).

The lower limit and the upper limit U.K.

18D The lower limit and the upper limit U.K.

(1) This section gives the meaning in this Part of “the lower limit” and “the upper limit” in relation to an accounting period of a company (“C”).

(2) If C has no associated company in the accounting period—

(a) the lower limit is £50,000, and

(b) the upper limit is £250,000.

(3) If C has one or more associated companies in the accounting period—

(a) the lower limit is—

(b) the upper limit is—

where N is the number of those associated companies.

(4) For an accounting period of less than 12 months the lower limit and the upper limit are proportionately reduced.

18E Associated companies U.K.

(1) For the purposes of section 18D, a company is another company's associated company in an accounting period if it is an associated company (see subsection (4)) for any part of the accounting period.

(2) The rule in subsection (1) applies to each of two or more associated companies even if they are associated companies for different parts of the accounting period.

(3) But an associated company is ignored for the purposes of section 18D if—

(a) it has not carried on a trade or business at any time in the accounting period, or

(b) it was an associated company for part only of the accounting period and has not carried on a trade or business at any time in that part of the accounting period.

(4) For the purposes of this Part, a company is an associated company of another at any time when—

(a) one of the two has control of the other, or

(b) both are under the control of the same person or persons.

(5) In subsection (4) “control” has the same meaning as in Part 10 (see sections 450 and 451).

(6) In this section—

(a) subsection (3) is subject to section 18F, and

(b) subsections (4) and (5) are subject to sections 18G to 18J.

18F Section 18E(3): treatment of certain non-trading companies U.K.

(1) Subsection (2) applies if a company carries on a business of making investments in an accounting period and throughout the period the company—

(a) carries on no trade,

(b) has one or more 51% subsidiaries, and

(c) is a passive company.

(2) The company is treated for the purposes of section 18E(3) as not carrying on a business at any time in the accounting period.

(3) A company is a passive company throughout an accounting period only if the following requirements are met—

(a) it has no assets in that period, other than shares in companies which are its 51% subsidiaries,

(b) no income arises to it in that period other than dividends,

(c) if income arises to it in that period in the form of dividends—

(i) the redistribution condition is met (see subsection (4)), and

(ii) the dividends are exempt distributions of a qualifying kind received by it (see subsection (5)),

(d) no chargeable gains accrue to it in that period,

(e) no expenses of management of the business mentioned in subsection (1) are referable to that period, and

(f) no qualifying charitable donations are deductible from the company's total profits of that period.

(4) The redistribution condition is that—

(a) the company pays dividends to one or more of its shareholders in the accounting period, and

(b) the total amount paid in the form of those dividends is at least equal to the amount of the income arising to the company in the form of dividends in that period.

(5) For the purposes of this section a distribution is an “exempt distribution of a qualifying kind” if—

(a) it is a distribution for the purposes of the Corporation Tax Acts because (and only because) it falls within paragraph A, B, G or H in section 1000(1), and

(b) it is exempt for the purposes of Part 9A of CTA 2009 (company distributions).

(6) If income arises to a company in an accounting period in the form of a dividend and the requirement in subsection (3)(c) is met in respect of the income—

(a) neither the dividend nor any asset representing it is treated as an asset of the company in that accounting period for the purposes of subsection (3)(a), and

(b) no right of the company to receive the dividend is treated as an asset of the company for the purposes of subsection (3)(a) in that period or any earlier accounting period.

18G Attribution to persons of rights and powers of their partners U.K.

(1) This section applies if—

(a) it is necessary to determine in accordance with section 18E(4) and (5) whether a company is an associated company of another company, and

(b) the relationship between the two companies is not one of substantial commercial interdependence.

(2) In the application of section 451 (meaning of “control”: rights to be attributed) for the purposes of the determination, any person to whom rights and duties fall to be attributed under subsections (4) and (5) of that section is to be treated, for the purposes of those subsections, as having no associates.

(3) The Treasury may by regulations prescribe factors that are to be taken into account in determining whether a relationship between two companies amounts to substantial commercial interdependence for the purposes of this section.

18H Associated companies: fixed-rate preference shares U.K.

(1) In determining for the purposes of section 18E(4) whether a company is under the control of another, fixed-rate preference shares held by a company are ignored if the company holding them—

(a) is not a close company,

(b) takes no part in the management or conduct of the company which issued the shares, or in the management or conduct of its business, and

(c) subscribed for the shares in the ordinary course of a business which includes the provision of finance.

(2) In this section “fixed-rate preference shares” means shares which—

(a) were issued wholly for new consideration,

(b) do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities, and

(c) do not carry any right to dividends other than dividends which—

(i) are of a fixed amount or at a fixed rate per cent of the nominal value of the shares, and

(ii) together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued.

(3) In subsection (2)(a) “new consideration” has the meaning given by section 1115.

18I Association through a loan creditor U.K.

(1) A company (“A”) is not under the control of another company (“B”) for the purposes of section 18E(4) if—

(a) B is a loan creditor of A,

(b) there is no other connection between A and B, and

(c) either—

(i) B is not a close company, or

(ii) B's relationship to A as a loan creditor arose in the ordinary course of a business which B carries on.

(2) Subsection (3) applies if—

(a) two companies (“A” and “B”) are controlled by the same person who is a loan creditor of each of them,

(b) there is no other connection between A and B, and

(c) either—

(i) the loan creditor is a company which is not a close company, or

(ii) the loan creditor's relationship to each of A and B as a loan creditor arose in the ordinary course of a business which the loan creditor carries on.

(3) In determining for the purposes of this Part whether A and B are associated with each other, rights which the loan creditor has as a loan creditor of A, or as a loan creditor of B, are ignored.

(4) In subsection (2)(a) “control” has the same meaning as in section 18E(4).

(5) In this section—

(a) “connection” includes a connection in the past as well as a connection in the present, and

(b) references to a connection between two companies include any dealings between them.

(6) In this section references to a loan creditor of a company are to be read in accordance with section 453.

18J Association through a trustee U.K.

(1) Subsection (2) applies if—

(a) two companies (“A” and “B”) are controlled by the same person by virtue of rights or powers (or both) held in trust by that person, and

(b) there is no other connection between A and B.

(2) In determining for the purposes of this Part whether A and B are associated with each other, the rights and powers mentioned in subsection (1)(a) are ignored.

(3) In subsection (1)—

(a) “control” has the same meaning as in section 18E(4),

(b) “connection” includes a connection in the past as well as a connection in the present, and

(c) the reference to a connection between A and B includes any dealings between them.

Supplementary U.K.

18K Power to obtain information U.K.

(1) This section applies if a company (“the issuing company”) appears to an officer of Revenue and Customs to be a close company.

(2) The officer may, for the purposes of this Part, by notice require the issuing company to provide the officer with—

(a) particulars of any bearer securities issued by the company,

(b) the names and addresses of the persons to whom the securities were issued, and

(c) details of the amounts issued to each person.

(3) The officer may, for the purposes of this Part, by notice require—

(a) any person to whom bearer securities were issued by the company, or

(b) any person to or through whom bearer securities issued by the company were subsequently sold or transferred,

to provide any further information that the officer reasonably requires with a view to enabling the officer to find out the names and addresses of the persons beneficially interested in the securities.

(4) In this section—

• “loan creditor” has the meaning given by section 453, and

• “securities” includes—

  (a)

  shares, stocks, bonds, debentures and debenture stock, and

  (b)

  any promissory note or other instrument evidencing indebtedness to a loan creditor of the company.

18L Meaning of “augmented profits” U.K.

(1) For the purposes of this Part a company's “augmented profits” of an accounting period are—

(a) the company's taxable total profits of that period, plus

(b) any exempt distributions of a qualifying kind received by the company (“R”) that are not excluded.

(2) For the purposes of this section a distribution is an “exempt distribution of a qualifying kind” if—

(a) it is a distribution for the purposes of the Corporation Tax Acts because (and only because) it falls within paragraph A, B, G or H in section 1000(1), and

(b) it is exempt for the purposes of Part 9A of CTA 2009 (company distributions).

(3) For the purposes of this section a distribution which R receives from a company (“C”) is excluded if—

(a) C is a 51% subsidiary of R or of a company of which R is a 51% subsidiary, or

(b) C is a trading company or relevant holding company that is a quasi-subsidiary of R.

(4) Section 18M—

(a) makes further provision for determining whether a company is a 51% subsidiary of another for the purposes of subsection (3), and

(b) defines expressions used in that subsection.

18M Interpretation of section 18L(3) U.K.

(1) This section applies for the purposes of section 18L(3).

(2) In addition to meeting the requirements of section 1154(2), a company (“A”) is a 51% subsidiary of another company (“B”) only at times when—

(a) B would be beneficially entitled to more than 50% of any profits available for distribution to equity holders of A, and

(b) B would be beneficially entitled to more than 50% of any assets of A available for distribution to its equity holders on a winding up.

(3) In determining whether or not a company is a 51% subsidiary of another company (“C”), C is treated as not owning share capital if—

(a) it owns the share capital indirectly,

(b) the share capital is owned directly by a company (“D”), and

(c) a profit on the sale of the shares would be a trading receipt for D.

(4) A company is a “trading company” if its business consists wholly or mainly of carrying on one or more trades.

(5) A company is a “relevant holding company” if its business consists wholly or mainly of holding shares in or securities of trading companies (as defined by subsection (4)) that are its 90% subsidiaries.

(6) A company is a “quasi-subsidiary” of R if—

(a) it is owned by a consortium of which R is a member,

(b) it is not a 75% subsidiary of any company, and

(c) no arrangements of any kind (whether in writing or not) exist as a result of which it could become a 75% subsidiary of any company.

(7) A company is owned by a consortium if at least 75% of the company's ordinary share capital is beneficially owned by two or more companies each of which—

(a) beneficially owns at least 5% of that capital,

(b) would be beneficially entitled to at least 5% of any profits available for distribution to equity holders of the company, and

(c) would be beneficially entitled to at least 5% of any asset of the company available for distribution to its equity holders on a winding up.

(8) The companies meeting those conditions are called the members of the consortium.

(9) Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of this section as it applies for the purposes of section 151(4)(a) and (b).

18N Close investment-holding companies U.K.

(1) For the purposes of this Part, a close company (“the candidate company”) is a close investment-holding company in an accounting period unless throughout the period it exists wholly or mainly for one or more of the permitted purposes set out in subsection (2).

There is an exception to this rule in subsection (5).

(2) The candidate company exists for a permitted purpose so far as it exists—

(a) for the purpose of carrying on a trade or trades on a commercial basis,

(b) for the purpose of making investments in land, or estates or interests in land, in cases where the land is, or is intended to be, let commercially (see subsection (3)),

(c) for the purpose of holding shares in and securities of, or making loans to, one or more companies each of which—

(i) is a qualifying company, or

(ii) falls within subsection (4),

(d) for the purpose of co-ordinating the administration of two or more qualifying companies,

(e) for the purpose of the making of investments as mentioned in paragraph (b)—

(i) by one or more qualifying companies, or

(ii) by a company which has control of the candidate company, or

(f) for the purpose of a trade or trades carried on on a commercial basis—

(i) by one or more qualifying companies, or

(ii) by a company which has control of the candidate company.

(3) For the purposes of subsection (2)(b), any letting of land is taken to be commercial unless the land is let to—

(a) a person connected with the candidate company (“a connected person”), or

(b) a person who is—

(i) the spouse or civil partner of a connected person,

(ii) a relative of a connected person, or the spouse or civil partner of a relative of a connected person,

(iii) a relative of the spouse or civil partner of a connected person, or

(iv) the spouse or civil partner of a relative of the spouse or civil partner of the connected person.

(4) A company falls within this subsection (see subsection (2)(c)(ii)) if—

(a) it is under the control of the candidate company or of a company which has control of the candidate company, and

(b) it exists wholly or mainly for the purpose of holding shares in or securities of, or of making loans to, one or more qualifying companies.

(5) If a company is wound up and was not a close investment-holding company in the accounting period that ends (by virtue of section 12(2) of CTA 2009) immediately before the winding up starts, the company is not treated for the purposes of this Part as being a close investment-holding company in the subsequent accounting period.

(6) In this section “qualifying company” means a company which—

(a) is under the control of the candidate company or of a company which has control of the candidate company, and

(b) exists wholly or mainly for either or both of the purposes mentioned in subsection (2)(a) or (b).

(7) In this section—

• “control” has the meaning given by section 450, and

• “relative” means brother, sister, ancestor or lineal descendant.]

Part 4 U.K. Loss relief

Modifications etc. (not altering text)

C10 Pt. 4 modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Risk Transformation (Tax) Regulations 2017 (S.I. 2017/1271), regs. 1(1), 10

C11 Pt. 4 excluded (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), s. 1(5)(e) (with ss. 15(1), 16(1))

Chapter 1 U.K. Introduction

35 Overview of Part U.K.

(1) This Part provides corporation tax relief for—

(a) losses made in a trade (see Chapter 2 as well as the restrictions on relief in Chapter 3 relating to limited partnerships and limited liability partnerships),

(b) losses made in a UK property business or overseas property business (see Chapter 4),

(c) losses made on a disposal of certain shares (see Chapter 5), and

(d) losses made in certain miscellaneous transactions (see Chapter 6).

(2) This Part also provides for the reduction of available relief if there is a write-off of government investment in a company (see Chapter 7).

(3) For rules about the calculation of losses for the purposes of this Part, see—

(a) section 47 of CTA 2009 (losses of a trade calculated on same basis as profits), and

(b) section 210 of CTA 2009 (which applies section 47 of that Act, so that losses of a UK property business or overseas property business are calculated on the same basis as profits).

(4) See also Part 17 of CTA 2009 for rules about how to calculate the losses of a company that is a partner in a partnership.

Chapter 2 U.K. Trade losses

Introduction U.K.

36 Introduction to Chapter U.K.

[F62 (1) This Chapter provides relief for a loss made by a company in a trade (see sections 37 to 47)]

(2) This Chapter also provides for restrictions on relief for the following cases—

(a) farming or market gardening (sections 48 to 51),

(b) dealings in commodity futures (section 52),

(c) leasing contracts and company reconstructions (section 53), and

(d) receipts of interest, dividends and royalties by a non-UK resident company (section 54).

(3) In this Chapter references to a company carrying on a trade are references to the company carrying on the trade so as to be within the charge to corporation tax in relation to the trade.

(4) In this Chapter, except in so far as the context otherwise requires—

(a) references to a trade include an office, and

(b) references to carrying on a trade include holding an office.

Textual Amendments

F62 S. 36(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 8(1)

[F63 Relief in loss-making period and carry back relief] U.K.

Textual Amendments

F63 S. 37 cross-heading substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 9

37 Relief for trade losses against total profits U.K.

(1) This section applies if, in an accounting period, a company carrying on a trade makes a loss in the trade.

(2) The company may make a claim for relief for the loss under this section (but see subsection (5)).

(3) If the company makes a claim, the relief is given by deducting the loss from the company's total profits of—

(a) the accounting period in which the loss is made (“the loss-making period”), and

(b) if the claim so requires, previous accounting periods so far as they fall (wholly or partly) within the period of 12 months ending immediately before the loss-making period begins.

(4) The amount of a deduction to be made under subsection (3) for any accounting period is the amount of the loss so far as it cannot be deducted under that subsection for a subsequent accounting period.

(5) The company may not make a claim if, in the loss-making period, the company carries on the trade wholly outside the United Kingdom.

(6) A deduction under subsection (3)(b) may be made for an accounting period only if the company—

(a) carried on the trade in the period, and

(b) did not do so wholly outside the United Kingdom.

(7) The company's claim must be made—

(a) within the period of two years after the end of the loss-making period, or

(b) within such further period as an officer of Revenue and Customs may allow.

(8) If, for an accounting period, deductions under subsection (3) are to be made for losses of different accounting periods, the deductions are to be made in the order in which the losses were made (starting with the earliest loss).

(9) Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

Modifications etc. (not altering text)

C12 S. 37 applied (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 123 (with s. 147, Sch. 17(34))

C13 S. 37 modified by 2009 c. 4, s. 1218ZDB(2) (as inserted (for specified purposes and with effect in accordance with Sch. 6 paras. 20, 21(1)(a) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 6 para. 1 (with Sch. 6 para. 21(3)))

C14 S. 37(3)(b) applied (with modifications) by 2009 c. 10, Sch. 6 para. 3(1) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 714(2) (with Sch. 2))

C15 S. 37(3)(b) modified (with application in accordance with Sch. 2 para. 4(2)(3) of the amending Act) by Finance Act 2021 (c. 26), Sch. 2 para. 4(1)

38 Limit on deduction if accounting period falls partly within 12 month period U.K.

(1) This section applies if an accounting period falls partly within the period of 12 months mentioned in section 37(3)(b).

(2) The amount of the deduction for the loss for the accounting period is not to exceed an amount equal to the overlapping proportion of the company's total profits of that period.

(3) The overlapping proportion is the same as the proportion that the part of the accounting period falling within the period of 12 months bears to the whole of the accounting period.

Modifications etc. (not altering text)

C16 S. 38(1) applied (with modifications) by 2009 c. 10, Sch. 6 para. 3(1) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 714(2) (with Sch. 2))

C17 S. 38(1)(3) modified (with application in accordance with Sch. 2 para. 4(2)(3) of the amending Act) by Finance Act 2021 (c. 26), Sch. 2 para. 4(1)

C18 S. 38(3) applied (with modifications) by 2009 c. 10, Sch. 6 para. 3(1) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 714(2) (with Sch. 2))

39 Terminal losses: extension of periods for which relief may be given U.K.

(1) This section applies if—

(a) a company ceases to carry on a trade, and

(b) the company has made a terminal loss in the trade.

(2) Sections 37(3)(b) and 38(1) and (3) have effect in relation to the terminal loss as if the references to 12 months were references to 3 years.

(3) The following are terminal losses made in the trade—

(a) the whole of any loss made by the company in the trade in an accounting period that begins during the final 12 months, and

(b) the overlapping proportion of any loss made by the company in the trade in an accounting period that ends, but does not begin, during the final 12 months.

(4) The overlapping proportion is the same as the proportion that the part of the accounting period falling within the final 12 months bears to the whole of the accounting period.

(5) “The final 12 months” means the period of 12 months ending when the company ceases to carry on the trade.

(6) This section is subject to section 41.

40 Ring fence trades: extension of periods for which relief may be given U.K.

(1) This section applies if—

(a) in an accounting period a company makes a loss in a ring fence trade (as defined in section 162 of CAA 2001),

(b) the accounting period is an accounting period [F64 for which any allowances under section 164 or [F65 by virtue of section 416ZA] of CAA 2001 are made to the company in respect of decommissioning expenditure], and

(c) not all the loss is a terminal loss (see section 39(3) above).

(2) Sections 37(3)(b) and 38(1) and (3) have effect in relation to the loss (so far as it is not a terminal loss) as if the references to 12 months were references to 3 years.

(3) But if the loss exceeds [F66 the sum of the allowances] mentioned in subsection (1)(b), subsection (2) applies in relation to the loss only so far as it does not exceed [F67 that amount].

[F68 (3A) In this section “decommissioning expenditure” has the meaning given by section 330C.]

(4) This section is subject to section 41.

Textual Amendments

F64 Words in s. 40(1)(b) substituted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 5(2)

F65 Words in s. 40(1)(b) substituted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(8)

F66 Words in s. 40(3) substituted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 5(3)(a)

F67 Words in s. 40(3) substituted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 5(3)(b)

F68 S. 40(3A) inserted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 5(4)

41 Sections 39 and 40: transfers of trade to obtain relief U.K.

Sections 39 and 40 do not apply by reason of a company ceasing to carry on a trade if—

(a) on the company ceasing to carry on the trade, any of the activities of the trade begin to be carried on by a person who is not (or by persons any or all of whom are not) within the charge to corporation tax, and

(b) the company's ceasing to carry on the trade is part of a scheme or arrangement the main purpose, or one of the main purposes, of which is to secure that either or both of those sections apply in relation to a loss by reason of the cessation.

42 Ring fence trades: further extension of period for relief U.K.

(1) This section applies if—

(a) a company makes a claim under section 37 for relief in respect of a loss made in a ring fence trade,

(b) the claim is made by virtue of section 39 or 40, and

(c) a part of the loss that is eligible for relief under section 37 cannot be so relieved because there are not enough profits from which the loss may be deducted under that section.

(2) Relief for the part of the loss that cannot be relieved under section 37 (“the unrelieved loss”) is given to the company under this section.

(3) The relief is given by deducting the unrelieved loss from the profits of the ring fence trade of an accounting period that—

(a) falls wholly or partly before the three year relief period, and

(b) ends on or after 17 April 2002.

(4) The amount of a deduction to be made under subsection (3) for any accounting period is so much of the unrelieved loss as cannot be deducted under that subsection from profits of the ring fence trade of a subsequent accounting period (but this is subject to subsections (5) and (6)).

(5) In the case of an accounting period that falls partly before the 3 year relief period, the amount given by subsection (4) is to be reduced by the proportion which the part of the accounting period falling within the 3 year relief period bears to the whole of the accounting period.

(6) In the case of an accounting period that falls partly before 17 April 2002, the amount given by subsection (4) is to be reduced by the proportion which the part of the accounting period falling before that date bears to the whole of the accounting period.

(7) If, for an accounting period, deductions under subsection (3) are to be made for losses of different accounting periods, the deductions are to be made in the order in which the losses were made (starting with the earliest first).

(8) In this section—

• “ring fence trade” has the same meaning as in section 162 of CAA 2001, and

• “3 year relief period” means the period of 3 years that applies to a claim under section 37 by virtue of section 39 or 40.

Modifications etc. (not altering text)

C19 S. 42 modified (with application in accordance with Sch. 2 para. 4(2)(3) of the amending Act) by Finance Act 2021 (c. 26), Sch. 2 para. 4(6)

43 Claim period in case of ring fence or mineral extraction trades U.K.

(1) This section applies in relation to a claim under section 37 if—

(a) as a result of section 165 of CAA 2001 (general decommissioning expenditure after ceasing ring fence trade) a company's qualifying expenditure for the accounting period in which it ceases to carry on a ring fence trade (as defined in section 162 of that Act) is increased by any amount, or

(b) as a result of section 416 [F69 or 416ZA] of CAA 2001 (expenditure on [F70 site restoration ] ) any expenditure is treated as qualifying expenditure of a company incurred on the last day of trading.

(2) So far as the claim relates to the increase mentioned in subsection (1)(a), the period of two years specified in section 37(7)(a) for making the claim is instead to be read as a reference to the period given by adding two years to the post-cessation period (within the meaning of section 165 of CAA 2001).

(3) So far as the claim relates to the expenditure mentioned in subsection (1)(b), the period of two years specified in section 37(7)(a) for making the claim is instead to be read as a reference to a period of 5 years.

Textual Amendments

F69 Words in s. 43(1)(b) inserted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(9)(a)

F70 Words in s. 43(1)(b) substituted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(9)(b)

44 Trade must be commercial or carried on for statutory functions U.K.

(1) Relief under section 37 is not available for a loss made in a trade unless for the loss-making period (see section 37(3)(a)) the trade is carried on—

(a) on a commercial basis, and

(b) with a view to the making of a profit in the trade or so as to afford a reasonable expectation of making such a profit.

(2) References in subsection (1)(b) to a profit in the trade include references to a profit in any larger undertaking of which the trade forms part.

(3) If during the loss-making period there is a change in the way in which the trade is carried on, it is treated as having been carried on throughout that period in the way in which it is being carried on by the end of that period.

(4) The restriction on relief under this section does not apply if the trade is a trade carried on in the exercise of functions conferred by or under an Act (including an Act of the Scottish Parliament).

Carry forward of trade loss relief U.K.

45 Carry forward of [F71 pre-1 April 2017] trade loss against subsequent trade profits U.K.

(1) This section applies if, in an accounting period [F72 beginning before 1 April 2017] , a company carrying on a trade makes a loss in the trade.

(2) Relief for the loss is given to the company under this section.

(3) The relief is given for that part of the loss for which no relief is given under section 37 or 42 (“the unrelieved loss”).

(4) For this purpose—

(a) the unrelieved loss is carried forward to subsequent accounting periods (so long as the company continues to carry on the trade), and

(b) the profits of the trade of any such period are reduced by the unrelieved loss so far as that loss [F73 is not] used under this paragraph to reduce the profits of an earlier period.

[F74 (4A) But the company may make a claim that the profits of the trade of an accounting period specified in the claim are not to be reduced by the unrelieved loss, or are not to be reduced by the unrelieved loss by more than an amount specified in the claim.

(4B) A claim under subsection (4A) may specify an accounting period only if it begins on or after 1 April 2017.

(4C) A claim under subsection (4A) is effective if, and only if, it is made—

(a) within the period of two years after the end of the accounting period specified in the claim, or

(b) within such further period as an officer of Revenue and Customs may allow.]

(5) In this section and [F75 , sections 45B, 45F and] 46 references to profits of the trade are references to profits of the trade chargeable to corporation tax.

(6) Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

Textual Amendments

F71 Words in s. 45 heading inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 10(2)

F72 Words in s. 45(1) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 10(3)

F73 Words in s. 45(4)(b) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 10(4)

F74 S. 45(4A)-(4C) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 10(5)

F75 Words in s. 45(5) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 10(6)

Modifications etc. (not altering text)

C20 S. 45 applied (retrospective to 1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 6, 9(1)

C21 S. 45(4) excluded (with effect in accordance with Sch. 18 para. 63 of the amending Act) by Finance Act 2016 (c. 24), Sch. 18 para. 20(10)

[F76 45A Carry forward of post-1 April 2017 trade loss against total profits U.K.

(1) This section applies if—

(a) in an accounting period (“the loss-making period”) beginning on or after 1 April 2017 a company carrying on a trade makes a loss in the trade,

(b) relief under section 37 or Part 5 (group relief) is not given for an amount of the loss (“the unrelieved amount”),

(c) the company continues to carry on the trade in the next accounting period (“the later period”), and

(d) the conditions in subsection (3) are met.

(2) But this section does not apply if the trade is a ring fence trade.

(3) The conditions are that—

(a) the trade did not become small or negligible in the loss-making period,

(b) relief under section 37 was not unavailable for the loss by reason of —

(i) section 37(5), 44, 48 or 52, or

(ii) section [F77 1179BF,] 1209, 1216DA, 1217DA, 1217MA, 1217SA or 1218ZDA of CTA 2009,

(c) relief under section 37 would not be unavailable by reason of section 44 for a loss (assuming there was one) made in the trade in the later period,

(d) if the company is a Solvency 2 insurance company the loss is not a shock loss (see subsections (9) and (10)), and

(e) the later period is not an excluded accounting period of a general insurance company.

(4) The unrelieved amount is carried forward to the later period.

(5) The company may make a claim for relief to be given in the later period for the unrelieved amount or for any part of it specified in the claim.

(6) If the company makes a claim, the relief is given by deducting the unrelieved amount, or the specified part of it, from the company's total profits of the later period.

(7) A claim under this section must be made—

(a) within the period of two years after the end of the later period, or

(b) within such further period as an officer of Revenue and Customs may allow.

(8) Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

(9) For the purposes of this section and section 45B, a loss which is partly, but not wholly, a shock loss is to be treated as if—

(a) the amount that is a shock loss, and

(b) the amount that is not,

were separate losses.

(10) In this section—

• “excluded accounting period” has the meaning given by section 269ZG;

• “general insurance company” is to be interpreted in accordance with section 269ZG(6);

• “ring fence trade” has the same meaning as in Part 8 (see section 277);

• “Solvency 2 insurance company” means an insurance company as defined in section 269ZP(2);

• “shock loss” has the meaning given by section 269ZK.

Textual Amendments

F76 Ss. 45A-45H inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 11

F77 Word in s. 45A(3)(b)(ii) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 2 para. 6(2) (with Sch. 2 paras. 16(1), 17-25)

Modifications etc. (not altering text)

C22 S. 45A(4) applied by 2009 c. 4, s. 1048(4B)-(4D) (as inserted with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act (2017 c. 32), Sch. 4 para. 133(4))

45B Carry forward of post-1 April 2017 trade loss against trade profits U.K.

(1) This section applies if—

(a) in an accounting period (“the loss-making period”) beginning on or after 1 April 2017 a company carrying on a trade makes a loss in the trade,

(b) relief under section 37 or 42 or Part 5 (group relief) is not given for an amount of the loss (“the unrelieved amount”),

(c) the company continues to carry on the trade in the next accounting period (“the later period”), and

(d) case 1, 2 or 3 applies.

• Case 1 is that any of the conditions in section 45A(3) are not met.

• Case 2 is that relief for the unrelieved amount was not available under section 45A by reason of section 1210(5), 1216DB(5) or 1217DB(5) of CTA 2009.

• Case 3 is that the trade is a ring fence trade.

(2) The unrelieved amount is carried forward to the later period.

(3) Relief for the unrelieved amount is given to the company in the later period if the company makes a profit in the trade in the later period.

(4) The relief is given by reducing the profits of the trade of the later period by the unrelieved amount.

(5) But the company may make a claim for relief not to be given in the later period for the unrelieved amount or for any part of it specified in the claim.

(6) A claim under subsection (5) is effective if, and only if, it is made—

(a) within the period of two years after the end of the later period, or

(b) within such further period as an officer of Revenue and Customs may allow.

(7) If the trade is a ring fence trade, this section has effect only in relation to so much of the loss mentioned in subsection (1)(a) as is not a non-decommissioning loss.

(8) Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

(9) In this section—

• “non-decommissioning loss” is to be interpreted in accordance with section 303A;

• “ring fence trade” has the same meaning as in Part 8 (see section 277).

(10) See also section 45A(9) (splitting for the purposes of that section and this section of losses that are partly, but not wholly, shock losses of insurance companies).

Textual Amendments

F76 Ss. 45A-45H inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 11

Modifications etc. (not altering text)

C23 S. 45B(2) applied (with effect in accordance with Sch. 4 para. 190 of the amending Act) by 2009 c. 4, s. 1048(5B)-(4D) (as inserted) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 190

45C Re-application of section 45A if loss remains after previous application U.K.

(1) This section applies if—

(a) an amount of a loss made in a trade is carried forward to an accounting period (“the later period”) of a company under section 45A(4),

(b) any of that amount is not deducted from the company's total profits of the later period on a claim under section 45A(5) or surrendered by way of group relief for carried forward-losses under Part 5A,

(c) the company continues to carry on the trade in the accounting period (“the further period”) after the later period, and

(d) the conditions in subsection (2) are met.

(2) The conditions are that—

(a) the trade did not become small or negligible in the later period,

(b) relief under section 37 would not be unavailable by reason of section 44 for a loss (assuming there was one) made in the trade in the further period, and

(c) the further period is not an excluded accounting period of a general insurance company.

(3) Subsections (4) to (8) of section 45A apply as if—

(a) references to the unrelieved amount were to so much of the amount carried forward to the later period as is not deducted or surrendered as mentioned in subsection (1)(b), and

(b) references to the later period were to the further period.

(4) In this section “excluded accounting period” and “general insurance company” have the same meaning as in section 45A.

Textual Amendments

F76 Ss. 45A-45H inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 11

45D Application of section 45B if loss remains after application of section 45A U.K.

(1) This section applies if—

(a) an amount of a loss made in a trade is carried forward to an accounting period (“the later period”) of a company under section 45A(4),

(b) any of that amount is not deducted from the company's total profits of the later period on a claim under section 45A(5) or surrendered by way of group relief for carried forward-losses under Part 5A,

(c) the company continues to carry on the trade in the accounting period (“the further period”) after the later period, and

(d) any of the conditions in section 45C(2) is not met.

(2) Subsections (2) to (8) of section 45B apply as if—

(a) references to the unrelieved amount were to so much of the amount carried forward to the later period as is not deducted or surrendered as mentioned in subsection (1)(b), and

(b) references to the later period were to the further period.

Textual Amendments

F76 Ss. 45A-45H inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 11

45E Re-application of section 45B if loss remains after previous application U.K.

(1) This section applies if—

(a) an amount of a loss made in a trade is carried forward to an accounting period (“the later period”) of a company under section 45B(2),

(b) any of that amount is not used under section 45B(4) to reduce profits of the trade for the later period, and

(c) the company continues to carry on the trade in the accounting period (“the further period”) after the later period.

(2) Subsections (2) to (8) of section 45B apply as if—

(a) references to the unrelieved amount were to so much of the amount carried forward to the later period as was not used as mentioned in subsection (1)(b), and

(b) references to the later period were to the further period.

Textual Amendments

F76 Ss. 45A-45H inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 11

45F Terminal losses: relief unrestricted by Part 7ZA and 7A U.K.

(1) This section applies if—

(a) a company makes a loss in a trade in an accounting period (the “loss-making period”),

(b) an amount of that loss is carried forward to an accounting period of the company (“the terminal period”) under section 45, 45A or 45B,

(c) relief in the terminal period is not given under section 45, 45A or (as the case may be) 45B for that amount or for any part of it, and

(d) the company ceases to carry on the trade in the terminal period.

(2) The company may make a claim for relief to be given for the unrelieved amount under this section.

(3) If the company makes a claim the relief is given by deducting the unrelieved amount from the relevant profits of the company of—

(a) the terminal period, and

(b) previous accounting periods so far as they fall (wholly or partly) within the period of 3 years ending with the end of the terminal period.

(4) But no deduction is to be made under subsection (3) for any accounting period which is—

(a) the loss-making period,

(b) a period before the loss-making period, or

(c) a period beginning before 1 April 2017.

(5) The amount of a deduction to be made under subsection (3) for any accounting period is the amount of the unrelieved amount so far as it cannot be deducted under that subsection for a subsequent accounting period.

(6) The company's claim must be made—

(a) within the period of two years after the end of the terminal period, or

(b) within such further period as an officer of Revenue and Customs may allow.

(7) In this section—

• “the unrelieved amount” means so much of the amount mentioned in subsection (1)(b) for which relief is not given in the terminal period under section 45, 45A or (as the case may be) 45B, and

• “relevant profits”, in relation to the terminal period or any previous accounting period, means—

  (a)

  the total profits of the company of the period, in a case where the unrelieved amount was carried forward to the terminal period under section 45A,

  (b)

  the profits of the trade of the period, in a case where the unrelieved amount was carried forward to the terminal period under section 45 or 45B.

(8) Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

Textual Amendments

F76 Ss. 45A-45H inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 11

[F78 45G Section 45F: accounting period falling partly within 3 year period U.K.

(1) This section applies if—

(a) a company ceases to carry on a trade in an accounting period (“the terminal period”), and

(b) a previous accounting period of the company (“the straddling period”) falls partly within the period of 3 years ending with the end of the terminal period.

(2) The sum of any deductions under section 45F from the profits of the trade of the straddling period is not to exceed an amount equal to the overlapping proportion of those profits (calculated before making those deductions).

(3) The sum of—

(a) any deductions under section 45F from the profits of the trade of the straddling period, and

(b) any deductions under that section from the total profits of the straddling period in respect of losses made in the trade,

must not exceed an amount equal to the overlapping proportion of the total profits of the straddling period (calculated before making those deductions).

(4) The overlapping proportion is the same as the proportion that the part of the straddling period falling within the period of 3 years mentioned in subsection (1)(b) bears to the whole of the straddling period.]

Textual Amendments

F76 Ss. 45A-45H inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 11

F78 S. 45G substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 21

45H Section 45F: transfers of trade to obtain relief U.K.

Section 45F does not apply by reason of a company ceasing to carry on a trade if—

(a) on the company ceasing to carry on the trade, any of the activities of the trade begin to be carried on by a person who is not (or by persons any or all of whom are not) within the charge to corporation tax, and

(b) the company's ceasing to carry on the trade is part of a scheme or arrangement the main purpose, or one of the main purposes, of which is to secure that that section applies by reason of the cessation.]

Textual Amendments

F76 Ss. 45A-45H inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 11

46 Use of trade-related interest and dividends if insufficient trade profits U.K.

[F79 (1) This section applies if in an accounting period a company carrying on a trade makes a loss in the trade and either—

(a) relief for the loss could be given in a later accounting period under section 45(4)(b) or 45B(4) but for the fact that there are no profits of the trade of the later accounting period, or

(b) the amount of relief for the loss that could be given in a later accounting period under section 45(4)(b) or 45B(4) is limited by reason of the amount of profits of the trade of the later accounting period.]

(2) [F80 For the purposes of section 45 and 45B,] Treat any interest or dividends within subsection (3) as profits of the trade of the later period.

(3) Interest or dividends are within this subsection if they—

(a) are from investments, and

(b) would be brought into account as trading receipts in calculating the profits of the trade of the later period but for the fact that they have been subjected to tax under other provisions of the Tax Acts.

Textual Amendments

F79 S. 46(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 148(2)

F80 Words in s. 46(2) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 148(3)

47 [F81 Registered societies] U.K.

(1) This section applies for the purposes of [F82 sections 45 and 45B] if the company carrying on the trade is a [F83 registered society] .

(2) The following amounts may be brought into account in calculating the profits of the trade—

(a) amounts to which the charge to corporation tax on income applies under section 299 of CTA 2009 (charge to tax on non-trading profits from loan relationships), and

(b) amounts arising from possessions out of the United Kingdom to which the charge to corporation tax on income applies under section 933 of CTA 2009 (dividends of non-UK resident company) or under section 974 of that Act (income arising from foreign holdings).

Textual Amendments

F81 S. 47 heading substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 157 (with Sch. 5)

F82 Words in s. 47(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 149

F83 Words in Act substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), Sch. 4 para. 156 (with Sch. 5)

Restrictions on relief: farming or market gardening U.K.

48 Farming or market gardening U.K.

(1) This section applies if a loss is made in a trade of farming or market gardening in an accounting period (“the current period”).

(2) Relief under section 37 is not available for the loss if a loss, calculated without regard to capital allowances, was made in the trade—

(a) in the current period, and

(b) in each accounting period falling wholly or partly within the period of 5 years (“the prior 5 years”) ending immediately before the current period begins.

(3) But this section does not prevent relief for the loss from being available if—

(a) the carrying on of the trade forms part of, and is ancillary to, a larger trading undertaking,

(b) the farming or market gardening activities meet the reasonable expectation of profit test (see section 49), or

(c) the trade was started, or treated as started, during the prior 5 years (see section 50).

(4) A loss in a trade is calculated without regard to capital allowances by ignoring—

(a) the allowances treated as expenses of the trade under CAA 2001, and

(b) the charges treated as receipts of the trade under CAA 2001.

49 Reasonable expectation of profit U.K.

(1) This section explains how the farming or market gardening activities (“the activities”) meet the reasonable expectation of profit test for the purposes of section 48(3)(b).

(2) The test is decided by reference to the expectations of a competent farmer or market gardener (a “competent person”) carrying on the activities.

(3) The test is met if—

(a) a competent person carrying on the activities in the year (“the current year”) after the prior 5 years would reasonably expect future profits (see subsection (4)), but

(b) a competent person carrying on the activities at the start of the prior period of loss (see subsection (5)) could not reasonably have expected the activities to become profitable until after the end of the current year.

(4) In determining whether a competent person carrying on the activities in the current year would reasonably expect future profits, regard must be had to—

(a) the nature of the whole of the activities, and

(b) the way in which the whole of the activities were carried on in the current year.

(5) “The prior period of loss” means—

(a) the prior 5 years, or

(b) if subsection (6) applies, the period made up of the successive accounting periods taken together as mentioned in that subsection.

(6) This subsection applies if—

(a) losses in the trade, calculated without regard to capital allowances (see section 48(4)), were made in successive accounting periods before the current year, and

(b) taken together those accounting periods amount to a period of more than 5 years ending at the end of the prior 5 years.

50 Cessation of trades U.K.

(1) For the purposes of section 48(3)(c) a trade is to be treated as ceased, and a new trade as started, in any of the following cases—

• Case 1

  A company starts or ceases to be within the charge to corporation tax in respect of a trade.

• Case 2

  There is a change in the persons carrying on a trade which involves all of the persons carrying it on before the change permanently ceasing to carry it on.

• Case 3

  There is a change in the persons carrying on a trade and—

  (a)

  immediately before the change, the trade is carried on by persons who include a company, and

  (b)

  after the change, no company that carried on the trade in partnership immediately before the change continues to carry it on in partnership.

• Case 4

  There is a change in the persons carrying on a trade and—

  (a)

  immediately before the change, no company carries on the trade in partnership, and

  (b)

  immediately after the change, the trade is carried on in partnership by persons who include a company.

(2) Subsection (1) is subject to subsections (3) and (4).

(3) A trade is not to be treated as ceased if the change in the persons carrying on the trade is a transfer to which Chapter 1 of Part 22 applies (transfers of trade without a change of ownership).

(4) In determining if there is a change in the persons carrying on a trade, subsection (1) is subject to the following rules—

• Rule 1

  A husband and wife are treated as the same person.

• Rule 2

  Individuals who are civil partners of each other are treated as the same person.

• Rule 3

  A husband or wife is treated as the same person as—

  (a)

  a company of which either of them has control, or

  (b)

  a company of which both have control.

• Rule 4

  An individual's civil partner is treated as the same person as—

  (a)

  a company of which either of the civil partners has control, or

  (b)

  a company of which both have control.

(5) In subsection (4) “control” has the same meaning as in section 450.

51 Companies treated as same person as individual U.K.

(1) This section applies for the purposes of sections 48(2) and 49(6) if, as a result of section 50(4), a company is treated as the same person as an individual.

(2) A loss in an accounting period may be determined by reference to profits and losses made by the individual in the trade in tax years (within the meaning of the Income Tax Acts).

(3) For this purpose—

(a) profits and losses made by the individual in tax years may be allocated (in whole or in part) to accounting periods in a way that is just and reasonable, and

(b) if a tax year or part of a tax year is not covered by any accounting period—

(i) the period covered by the tax year or part may be treated as if it were an accounting period, and

(ii) in accordance with paragraph (a), profits and losses may be allocated to it.

(4) Section 70(2), (3)(a), (4)(a) and (5) of ITA 2007 applies for the purpose of determining the individual's profits and losses in the trade for tax years.

Restrictions on relief: commodity futures U.K.

52 Dealings in commodity futures U.K.

(1) This section applies if—

(a) a company makes a loss in a trade of dealing in commodity futures,

(b) the company carried on the trade as a partner in a partnership, and

(c) a scheme has been effected or arrangements within subsection (3) have been made (whether by the partnership agreement or otherwise).

(2) Relief under section 37 is not available for the loss.

(3) Arrangements are within this subsection if as a result of them the sole or main benefit that might be expected to arise to the company from the company's interest in the partnership is the obtaining of a reduction in tax liability by means of relief under section 37.

(4) If relief is given in a case to which this section applies, the relief is withdrawn by the making of an assessment to corporation tax under this section.

(5) “Commodity futures” means commodity futures that are for the time being dealt in on a recognised futures exchange (as defined in section 288(6) of TCGA 1992).

Other restrictions on relief U.K.

53 Leasing contracts and company reconstructions U.K.

(1) This section applies if—

(a) under a contract a company (“the leasing company”) incurs capital expenditure on the provision of plant or machinery,

(b) the leasing company lets that plant or machinery to another person under another contract (“the leasing contract”),

(c) a first-year allowance (within the meaning of Part 2 of CAA 2001) in relation to the capital expenditure is made to the leasing company for an accounting period (“the allowance period”),

(d) arrangements within subsection (3) are in place in the allowance period, and

(e) apart from this section, relief under section 37 [F84 , 45, 45A or 45B] would be available to the leasing company in relation to losses made on the leasing contract.

(2) In the allowance period and any subsequent accounting period, no relief is available to the leasing company as mentioned in subsection (1)(e) except against profits (if any) arising under the leasing contract.

(3) Arrangements are within this subsection if, as a result of them, a successor company will be able to carry on, at some time during or after the allowance period, any part of the leasing company's trade which includes the performance of all or any of the obligations which (apart from the arrangements) would be the leasing company's obligations under the leasing contract.

(4) A company (“company S”) is a successor company if—

(a) Chapter 1 of Part 22 applies in relation to the leasing company and company S as, respectively, the predecessor and the successor within the meaning of that Chapter, or

(b) the leasing company and company S are connected with each other.

(5) “Arrangements” means arrangements of any kind (whether or not in writing).

(6) For the purposes of this section, calculate losses made on the leasing contract and profits arising under that contract as if—

(a) the performance of that contract were a trade carried on by the leasing company separately from any other trade carried on by it, and

(b) the leasing company started carrying on that separate trade at the commencement of the letting under that contract.

(7) In determining if relief is available to the leasing company as mentioned in subsection (1)(e), any losses made on the leasing contract are treated as made in a trade carried on by the leasing company separately from any other trade carried on by it.

Textual Amendments

F84 Words in s. 53(1)(e) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 150

54 Non-UK resident company: receipts of interest, dividends or royalties U.K.

(1) This section applies if—

(a) a non-UK resident company carries on a trade in the United Kingdom, and

(b) tax-exempt receipts of interest, dividends or royalties arise to the company.

(2) The receipts are not to be excluded from the profits of the trade so as to give rise to a loss to be deducted under [F85 section 37 [F86 , 45, 45A or 45B]] .

(3) For the purposes of subsection (1) a receipt is “tax-exempt” if it has been treated as tax-exempt under arrangements having effect under section 2 of TIOPA 2010.

Textual Amendments

F85 Words in s. 54(2) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 217

F86 Words in s. 54(2) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 151

Chapter 3 U.K. Limited partners and members of limited liability partnerships

Introduction U.K.

55 Introduction to Chapter U.K.

(1) This Chapter restricts the amount of relief that may be given for any loss made by a company in a trade carried on by the company—

(a) as a limited partner (see sections 56 to 58), or

(b) as a member of a limited liability partnership (an “LLP”) (see sections 59 to 61).

(2) In this Chapter persons carrying on a trade in partnership are referred to collectively as a “firm”.

Limited partners U.K.

56 Restriction on reliefs for limited partners U.K.

(1) This section applies if—

(a) at any time in an accounting period a company carries on a trade (“the limited partnership trade”) as a limited partner in a firm, and

(b) the company makes a loss in the limited partnership trade in that period (“the loss-making period”).

(2) There is a restriction on the amount of relief that may be given for the loss—

(a) under section 37 [F87 or 45A] (relief for trade losses against total profits) other than against profits of the limited partnership trade, F88 ...

(b) under Part 5 (group relief)[F89 , or

(c) under Part 5A (group relief for carried-forward losses)]

(3) The restriction is that the sum of—

(a) the amount of the relief given, and

(b) the total amount of all other relief within subsection (4),

must not exceed the company's contribution to the firm as at the time mentioned in subsection (5).

(4) Relief is within this subsection if it is given under section 37 [F90 or 45A] or Part 5 [F91 or 5A] for a loss made in the limited partnership trade by the company in an accounting period at any time during which it carries on that trade as a limited partner.

(5) The time referred to in subsection (3) is—

(a) the end of the loss-making period, or

(b) if the company ceases to carry on the limited partnership trade during that period, the time when it does so.

(6) If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the limited partnership trade and then add the results together.

Textual Amendments

F87 Words in s. 56(2)(a) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(2)(a)

F88 Word in s. 56(2)(a) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(2)(b)

F89 S. 56(2)(c) and word inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(2)(c)

F90 Words in s. 56(4) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(3)(a)

F91 Words in s. 56(4) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(3)(b)

57 Meaning of “contribution to the firm” U.K.

(1) For the purposes of section 56 the company's contribution to the firm is the sum of amounts A and B.

(2) Amount A is the amount which the company has contributed to the firm as capital less so much of that amount (if any) as is within subsection (4).

(3) In particular, the company's share of any profits of the firm is to be included in the amount which the company has contributed to the firm as capital so far as that share has been added to the firm's capital.

(4) An amount of capital is within this subsection if it is an amount which the company—

(a) has previously drawn out or received back,

(b) is or may be entitled to draw out or receive back at any time when the company is carrying on a trade as a limited partner in the firm, or

(c) is or may be entitled to require another person to reimburse to it.

(5) In subsection (4) any reference to drawing out or receiving back an amount is to doing so directly or indirectly but does not include drawing out or receiving back an amount which, because of its being drawn out or received back, is chargeable to tax as profits of a trade.

(6) Amount B is the amount of the company's total share of profits within subsection (7) except so far as—

(a) that share has been added to the firm's capital, or

(b) the company has received that share in money or money's worth.

(7) Profits are within this subsection if they are from the limited partnership trade.

(8) In determining the amount of the company's total share of profits within subsection (7) ignore the company's share of any losses from the limited partnership trade which would (apart from this subsection) reduce that amount.

(9) In subsections (3), (7) and (8) any reference to profits or losses are to profits or losses calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits or losses for tax purposes).

(10) If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, subsections (7) and (8) have effect as if references to the limited partnership trade were references to the limited partnership trade or any of the other trades.

58 Meaning of “limited partner” U.K.

(1) In sections 56 and 57 “limited partner” means a company which carries on a trade—

(a) as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907,

(b) as a partner in a firm which in substance acts as a limited partner in relation to the trade (see subsection (2)), or

(c) while the condition mentioned in subsection (3) is met in relation to the company.

(2) A company in substance acts as a limited partner in relation to a trade if the company—

(a) is not entitled to take part in the management of the trade, and

(b) is entitled to have any liabilities (or those beyond a certain limit) for debts or obligations incurred for the purposes of the trade met or reimbursed by some other person.

(3) The condition referred to in subsection (1)(c) is that—

(a) the company carries on the trade jointly with other persons,

(b) under the law of a territory outside the United Kingdom, the company is not entitled to take part in the management of the trade, and

(c) under that law, the company is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade.

(4) In the case of a company which is a limited partner as a result of subsection (1)(c), references in sections 56 and 57 to the firm are to be read as references to the relationship between the company and the other persons mentioned in subsection (3)(a).

Members of LLPs U.K.

59 Restriction on relief for members of LLPs U.K.

(1) This section applies if—

(a) a company carries on a trade (“the LLP trade”) as a member of an LLP at any time in an accounting period, and

(b) the company makes a loss in the LLP trade in that period (“the loss-making period”).

(2) There is a restriction on the amount of relief that may be given for the loss—

(a) under section 37 [F92 or 45A] (relief for trade losses against total profits) other than against profits of the LLP trade, F93 ...

(b) under Part 5 (group relief)[F94 , or

(c) under Part 5A (group relief for carried-forward losses)]

(3) The restriction is that the sum of—

(a) the amount of the relief given, and

(b) the total amount of all other relief within subsection (4),

must not exceed the company's contribution to the LLP as at the time mentioned in subsection (5).

(4) Relief is within this subsection if it is given under section 37 [F95 or 45A] or Part 5 [F96 or 5A] for a loss made in the LLP trade by the company in an accounting period at any time during which it carries on that trade as a member of an LLP.

(5) The time mentioned in subsection (3) is—

(a) the end of the loss-making period, or

(b) if the company ceases to carry on the LLP trade during that period, at the time when it does so.

(6) If the LLP is carrying on, or has carried on, other trades apart from the LLP trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the LLP trade and then add the results together.

Textual Amendments

F92 Words in s. 59(2)(a) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 153(2)(a)

F93 Word in s. 59(2)(a) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 153(2)(b)

F94 S. 59(2)(c) and word inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 153(2)(c)

F95 Words in s. 59(4) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 153(3)(a)

F96 Words in s. 59(4) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 153(3)(b)

60 Meaning of “contribution to the LLP” U.K.

(1) For the purposes of section 59 the company's contribution to the LLP at any time (“the relevant time”) is the sum of amounts A and B.

(2) Amount A is the amount which the company has contributed to the LLP as capital less so much of that amount (if any) as is within subsection (5).

(3) In particular, the company's share of any profits of the LLP is to be included in the amount which the company has contributed to the LLP as capital so far as that share has been added to the LLP's capital.

(4) In subsection (3) the reference to profits is to profits calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits for tax purposes).

(5) An amount of capital is within this subsection if it is an amount which the company—

(a) has previously drawn out or received back,

(b) draws out or receives back during the period of 5 years beginning with the relevant time,

(c) is or may be entitled to draw out or receive back at any time when it is a member of the LLP, or

(d) is or may be entitled to require another person to reimburse to it.

(6) In subsection (5) any reference to drawing out or receiving back an amount is to doing so directly or indirectly but does not include drawing out or receiving back an amount which, because of its being drawn out or received back, is chargeable to tax as profits of a trade.

(7) Amount B is the amount of the company's liability on a winding up of the LLP so far as that amount is not included in amount A.

(8) For the purposes of subsection (7) the amount of the company's liability on a winding up of the LLP is the amount which—

(a) the company is liable to contribute to the assets of the LLP in the event of the LLP being wound up, and

(b) the company remains liable to contribute for the period of at least 5 years beginning with the relevant time (or until the LLP is wound up, if that happens before the end of that period).

61 Unrelieved losses brought forward U.K.

(1) [F97 Subsection (2)] applies if—

(a) a company (“the member company”) carries on a trade as a member of an LLP at a time during an accounting period (“the current period”), and

(b) as a result of section 59, relief under section 37 or Part 5 (group relief) has not been given for an amount of loss made in the trade by the member company as a member of the LLP in a previous accounting period.

(2) For the purpose of determining the relief under section 37 or Part 5 to be given to any company, the amount of loss is treated as having been made by the member company in the current period so far as it is not excluded by subsection (3) or (4).

[F98 (2A) Subsection (2B) applies if—

(a) a company (“the member company”) carries on a trade as a member of an LLP at a time during an accounting period (“the current period”), and

(b) as a result of section 59, relief under section 45A or Part 5A (group relief for carried forward losses) has not been given for an amount of loss made in the trade by the member company as a member of the LLP in a previous accounting period.

(2B) For the purposes of determining the relief under section 45A or Part 5A to be given to any company, the amount of loss is treated as having been made by the member company in the current period so far as it is not excluded by subsection (3) or (4).]

(3) An amount of loss is excluded so far as—

(a) under this section the amount has been treated as made by the member company in a previous accounting period, and

(b) as a result of that, relief under section 37 [F99 or 45A] or Part 5 [F100 or Part 5A] has been given for the amount or would have been given had a claim been made.

(4) An amount of loss is also excluded so far as relief under the Corporation Tax Acts has been given for the amount other than as a result of this section.

Textual Amendments

F97 Words in s. 61(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 154(2)

F98 S. 61(2A)(2B) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 154(3)

F99 Words in s. 61(3) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 154(4)(a)

F100 Words in s. 61(3) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 154(4)(b)

Chapter 4 U.K. Property losses

Modifications etc. (not altering text)

C24 Pt. 4 Ch. 4 excluded (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 87(2)(3) (with s. 147, Sch. 17)

UK property businesses U.K.

62 Relief for losses made in UK property business U.K.

(1) This section applies if, in an accounting period, a company carrying on a UK property business makes a loss in the business.

(2) Relief for the loss is given to the company under this section.

(3) The relief is given by deducting the loss from the company's total profits of the accounting period.

(4) [F101 Subsections (5) to (5C) apply] if—

[F102 (a) an amount of the loss is not deducted as mentioned in subsection (3) or surrendered by way of group relief under Part 5,]

(b) the company continues to carry on the UK property business in the next accounting period.

(5) [F103 The amount]—

(a) is carried forward to the next accounting period, and

(b) is treated for the purposes of this section as a loss made by the company in the UK property business in that period.

[F104 (5A) But relief under subsection (2) for the amount is given to the company in the next accounting period only on the making by the company of a claim.

(5B) A claim may relate to the whole of the amount or to part of it only.

(5C) A claim must be made—

(a) within the period of two years after the end of the next accounting period, or

(b) within such further period as an officer of Revenue and Customs may allow.

(5D) In the application of this section to an amount of a loss previously carried forward under subsection (5), the reference in subsection (4)(a) to group relief under Part 5 is to be read as a reference to group relief for carried-forward losses under Part 5A.]

(6) Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

Textual Amendments

F101 Words in s. 62(4) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 13(2)(a)

F102 S. 62(4)(a) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 13(2)(b)

F103 Words in s. 62(5) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 13(3)

F104 S. 62(5A)-(5D) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 13(4)

Modifications etc. (not altering text)

C25 S. 62 excluded (with effect in accordance with Sch. 18 para. 63 of the amending Act) by Finance Act 2016 (c. 24), Sch. 18 para. 20(14)

63 Company with investment business ceasing to carry on UK property business U.K.

(1) This section applies if, in an accounting period, a company with investment business (as defined in [F105 section 1218B] of CTA 2009)—

(a) ceases to carry on a UK property business or to be within the charge to corporation tax in respect of such a business, but

(b) continues to be a company with investment business.

[F106 (2) Subsections (3) to (7) apply if an amount of loss made in carrying on the UK property business would be carried forward to the next accounting period under section 62(5) but for the company ceasing to carry on the business or to be within the charge to corporation tax in respect of it.]

(3) The amount of loss—

(a) is, nevertheless, carried forward to the next accounting period, and

(b) is treated for the purposes of Chapter 2 of Part 16 of CTA 2009 as an expense of management deductible for [F107 the next accounting] period or a succeeding period in accordance with that Chapter.

[F108 (4) But a deduction in respect of the amount of loss may be made under section 1219 of CTA 2009 for the next accounting period only on the making by the company of a claim.

(5) A claim may relate to the whole of the amount of the loss or to part of it only.

(6) A claim must be made—

(a) within the period of two years after the end of the next accounting period, or

(b) within such further period as an officer of Revenue and Customs may allow.

(7) Subsection (1A) of section 1219 of CTA 2009 does not apply in relation to a deduction in respect of the amount of loss made for the next accounting period.]

Textual Amendments

F105 Words in s. 63(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), s. 55(b)

F106 S. 63(2) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 14(2)

F107 Words in s. 63(3)(b) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 14(3)

F108 S. 63(4)-(7) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 14(4)

64 UK property business to be commercial or carried on for statutory functions U.K.

(1) Sections 62 and 63 apply to a UK property business only so far as it is carried on—

(a) on a commercial basis, or

(b) in the exercise of functions conferred by or under an Act (including an Act of the Scottish Parliament).

(2) A business (or part) is not carried on on a commercial basis unless it is carried on with a view to making a profit or so as to afford a reasonable expectation of making a profit.

(3) If during an accounting period there is a change in the way in which a business (or part) is carried on, it is treated as having been carried on throughout that period in the way in which it is being carried on by the end of that period.

F109 65 UK furnished holiday lettings business treated as trade U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F109 S. 65 omitted (for the purposes of corporation tax in relation to accounting periods beginning on or after 1.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 6(2), 12(2) (with Sch. 5 paras. 15, 17, 18(4), 19)

Overseas property businesses U.K.

66 Relief for losses made in overseas property business U.K.

(1) This section applies if, in an accounting period, a company carrying on an overseas property business makes a loss in the business.

(2) Relief for the loss is given to the company under this section.

(3) For this purpose—

(a) the loss is carried forward to subsequent accounting periods, and

(b) the profits of the business of any such period are reduced by the loss so far as it cannot be used under this paragraph to reduce the profits of the business of an earlier period.

(4) Relief under this section is subject to restriction or modification in accordance with provisions of the Corporation Tax Acts.

67 Overseas property business to be commercial or carried on for statutory functions U.K.

(1) Section 66 applies to an overseas property business only so far as it is carried on—

(a) on a commercial basis, or

(b) in the exercise of functions conferred by or under an Act (including an Act of the Scottish Parliament) or by or under the law of a territory outside the United Kingdom.

(2) A business (or part) is not carried on on a commercial basis unless it is carried on with a view to making a profit or so as to afford a reasonable expectation of making a profit.

(3) If during an accounting period there is a change in the way in which a business (or part) is carried on, it is treated as having been carried on throughout that period in the way in which it is being carried on by the end of that period.

F110 67A EEA furnished holiday lettings business treated as trade U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F110 S. 67A omitted (for the purposes of corporation tax in relation to accounting periods beginning on or after 1.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 6(3), 12(2) (with Sch. 5 paras. 15, 17, 18(4), 19)

[F111 Insurance companies U.K.

Textual Amendments

F111 67B and cross-heading inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 218

67B Exclusion in the case of property businesses of insurance companies U.K.

(1) This Chapter does not apply for the purpose of applying the I - E rules in relation to a loss made by an insurance company in any of its separate UK property businesses or overseas property businesses within section 86(4) of FA 2012.

(2) But in the case of a loss which is referable, in accordance with Chapter 4 of Part 2 of that Act, to the company's basic life assurance and general annuity business, see section 87(3) and (4) of that Act.]

Chapter 5 U.K. Losses on disposal of shares

Share loss relief against income U.K.

68 Share loss relief U.K.

(1) A company which has subscribed for shares in a qualifying trading company is eligible for relief under this Chapter (“share loss relief”) if—

(a) it incurs an allowable loss (for the purposes of corporation tax on chargeable gains) on the disposal of the shares in any accounting period, and

(b) it meets the eligibility conditions (see section 69).

(2) Subsection (1) applies only if the disposal of the shares is—

(a) by way of a bargain made at arm's length,

(b) by way of a distribution in the course of dissolving or winding up the qualifying trading company,

(c) a disposal within section 24(1) of TCGA 1992 (entire loss, destruction, dissipation or extinction of asset), or

(d) a deemed disposal under section 24(2) of that Act (claim that value of the asset has become negligible).

(3) Subsection (1) does not apply to any allowable loss incurred on the disposal if—

(a) the shares are the subject of an exchange or arrangement of the kind mentioned in section 135 or 136 of TCGA 1992 (company reconstructions etc), and

(b) because of section 137 of that Act, the exchange or arrangement involves a disposal of the shares.

(4) For the meaning of “qualifying trading company”, see section 78.

69 Eligibility conditions U.K.

(1) These are the eligibility conditions mentioned in section 68(1)(b) that a company which has subscribed for shares in a qualifying trading company must meet to be eligible for share loss relief on the disposal of the shares.

(2) Condition A is that the subscribing company (“the investor”) is an investment company on the date of the disposal of the shares (“the disposal date”).

(3) Condition B is that the investor has been an investment company—

(a) for a continuous period of 6 years ending on the disposal date, or

(b) for a shorter continuous period ending on the disposal date and has not before the beginning of that period been a trading company or an excluded company (see section 90(1)).

(4) Condition C is that the investor was not associated with, or a member of the same group as, the qualifying trading company at any time during the period—

(a) beginning with the date when the investor subscribed for the shares, and

(b) ending with the disposal date.

(5) For the purposes of condition C, two companies are associated with each other if—

(a) one controls the other, or

(b) both are under the control of the same person or persons.

(6) Sections 450 and 451 (which contain provision as to when a person is to be taken to have control of a company) apply for the purposes of subsection (5).

70 Entitlement to claim U.K.

(1) This section applies where a company is eligible for share loss relief.

(2) The company may make a claim for the loss to be deducted in calculating for corporation tax purposes the company's income—

(a) for the accounting period in which the loss is incurred, and

(b) if the claim so requires, for previous accounting periods so far as they fall (wholly or partly) within the period of 12 months ending immediately before the beginning of the accounting period in which the loss is incurred.

(3) The company may make a claim under subsection (2)(b) for any accounting period only if the company was an investment company throughout that period.

(4) A claim for share loss relief must be made before the end of the period of two years after the end of the accounting period in which the loss is incurred.

71 How relief works U.K.

(1) This subsection explains how deductions in respect of share loss relief claimed by a company under section 70 are to be made.

• Step 1

  Deduct the loss in calculating the company's income for the accounting period in which the loss is incurred.

• Step 2

  If not all of the loss can be deducted at Step 1, deduct the remaining loss in calculating the company's income for any accounting period falling (wholly or partly) within the 12 month period that ends immediately before the beginning of the accounting period in which the loss is incurred.

(2) The amount of a deduction to be made at Step 2 for any accounting period is the amount of the loss so far as it cannot be deducted under subsection (1) for a subsequent accounting period.

(3) Subsection (1) is subject to sections 72, 74(5) and 75 (which set limits on the amount of share loss relief that may be obtained in particular cases).

(4) A deduction at Step 2 from the income of an accounting period may be made only after all other deductions have been made from the income for that period in respect of share loss relief given for an earlier loss.

(5) Deductions made on the basis of relief claimed under Part 7 of Schedule 15 to FA 2000 (relief for losses on disposal of shares to which investment relief is attributable) must, in accordance with paragraph 70 of that Schedule, be made before making deductions for share loss relief.

(6) A claim for share loss relief does not affect any claim for a deduction under TCGA 1992 for so much of the allowable loss as is not deducted under subsection (1).

72 Limit on deduction if accounting period falls partly within 12 month period U.K.

(1) This section applies if an accounting period falls partly within the period of 12 months ending immediately before the beginning of the accounting period in which the loss is incurred.

(2) The amount of the deduction under Step 2 in section 71(1) for the accounting period is not to exceed an amount equal to the overlapping proportion of the company's income of that period.

(3) The overlapping proportion is the same as the proportion that the part of the accounting period falling within the 12 month period mentioned in subsection (1) bears to the whole of the accounting period.

Shares: subscription and disposal U.K.

73 Subscription for shares U.K.

(1) This section has effect for the purposes of this Chapter.

(2) A company subscribes for shares in another company if they are issued to the company by the other company in consideration of money or money's worth.

(3) If—

(a) a company has subscribed for, or is treated under this subsection as having subscribed for, any shares, and

(b) any corresponding bonus shares are subsequently issued to the company,

the company is treated as having subscribed for the bonus shares.

(4) If—

(a) a company subscribed for any shares (“the original shares”) on a particular date, and

(b) any corresponding bonus shares are treated as having been subscribed for by the company under subsection (3),

the company is treated as having subscribed for the bonus shares on that date.

74 Disposals of new shares U.K.

(1) This section applies if—

(a) a company disposes of shares (“the new shares”), and

(b) the new shares are, by virtue of section 127 of TCGA 1992 (reorganisation etc treated as not involving disposal), identified with other shares (“the old shares”) previously held by the company.

(2) The company is not eligible for share loss relief on the disposal of the new shares unless condition A or B is met.

This is subject to section 87(3).

(3) Condition A is that the company would have been eligible for share loss relief on a disposal of the old shares—

(a) if the company had incurred an allowable loss in disposing of them by way of a bargain made at arm's length on the occasion of the disposal that would have occurred but for section 127 of TCGA 1992, and

(b) where applicable, if this Chapter had then been in force.

(4) Condition B is that the company gave for the new shares consideration in money or money's worth other than consideration of the kind mentioned in paragraph (a) or (b) of section 128(2) of TCGA 1992 (“new consideration”).

(5) If the company relies on condition B, the amount of share loss relief on the disposal of the new shares must not exceed the amount or value of the new consideration taken into account as a deduction in calculating the amount of the loss incurred on the disposal.

75 Limits on relief U.K.

(1) Subsection (2) applies if—

(a) a company disposes of any shares for which it has subscribed in a qualifying trading company (“qualifying shares”),

(b) those shares either—

(i) form part of a section 104 holding or a 1982 holding at the time of the disposal, or

(ii) formed part of such a holding at an earlier time, and

(c) the company makes a claim under section 70 in respect of a loss incurred on the disposal.

(2) The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if the qualifying shares had not formed part of the holding.

(3) Subsection (4) applies if—

(a) a company disposes of any qualifying shares,

(b) the qualifying shares, and other shares that are not capable of being qualifying shares, are for the purposes of TCGA 1992 to be treated as acquired by a single transaction by virtue of section 105(1)(a) of that Act (disposal of shares acquired on same day etc), and

(c) the company makes a claim under section 70 in respect of a loss incurred on the disposal.

(4) The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if—

(a) the qualifying shares were to be treated as acquired by a single transaction, and

(b) the other shares were not to be so treated.

(5) Subsection (6) applies if—

(a) a company (“the investor”) disposes of any qualifying shares,

(b) the qualifying shares (taken as a single asset), and other shares in the same company that are not capable of being qualifying shares (taken as a single asset), are for the purposes of TCGA 1992 to be treated as the same asset by virtue of section 127 of that Act (reorganisation etc treated as not involving disposal), and

(c) the investor makes a claim under section 70 in respect of a loss incurred on the disposal.

References in this subsection and subsection (6) to other shares in the same company include debentures of the same company.

(6) The amount of share loss relief on the disposal is not to exceed the sums that would be allowed as deductions in calculating the amount of the loss if the qualifying shares and the other shares in the same company were not to be treated as the same asset.

(7) In this section—

• “section 104 holding” has the meaning given by section 104(3) of TCGA 1992, and

• “1982 holding” has the meaning given by section 109(1) of that Act.

(8) For the purposes of this section and section 76, shares are not capable of being qualifying shares at any time if—

(a) the company concerned acquired the shares otherwise than by subscription, [F112 or]

(b) condition C in section 78(4) was not met in relation to the issue of the shares, F113 ...

F113 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) For the purposes of subsection (5), shares are not capable of being qualifying shares at any time if they are shares of a different class from the shares mentioned in paragraph (a) of that subsection.

Textual Amendments

F112 Word in s. 75(8)(a) inserted (with effect in accordance with s. 38(3) of the amending Act) by Finance Act 2020 (c. 14), s. 38(2)(b)(i)

F113 S. 75(8)(c) and word omitted (with effect in accordance with s. 38(3) of the amending Act) by virtue of Finance Act 2020 (c. 14), s. 38(2)(b)(i)

76 Disposal of shares forming part of mixed holding U.K.

(1) This section applies if a company disposes of shares forming part of a mixed holding of shares, that is, a holding of shares in a company which includes—

(a) shares that are not capable of being qualifying shares, and

(b) other shares.

(2) Any question—

(a) whether a disposal by the company of shares forming part of the mixed holding is of qualifying shares, or

(b) as to which of any qualifying shares acquired by the company at different times such a disposal relates to,

is to be determined as provided by the following provisions of this section.

(3) Any such question as is mentioned in subsection (2) is to be determined—

(a) except in a case falling within paragraph (b)—

(i) in accordance with subsection (4), and

(ii) in the case of shares which under that subsection are identified with the whole or any part of a section 104 holding or a 1982 holding, in accordance with subsection (5),

(b) in the case of a mixed holding which includes any shares—

(i) to which investment relief is attributable under Schedule 15 to FA 2000 (corporate venturing scheme), and

(ii) which have been held continuously (within the meaning of paragraph 97 of that Schedule) from the time they were issued until the disposal,

in accordance with subsection (6).

(4) For the purposes of subsection (3)(a)(i), the question is to be determined by identifying the shares disposed of in accordance with sections 105 and 107 of TCGA 1992.

(5) For the purposes of subsection (3)(a)(ii), the question is to be determined by treating the disposal and any previous disposal by the company out of the section 104 or 1982 holding as relating to shares acquired later rather than earlier.

(6) For the purposes of subsection (3)(b), the question is to be determined—

(a) as provided by paragraph 93 of Schedule 15 to FA 2000 (identification of shares on a disposal of part of a holding where investment relief is attributable to any shares in the holding held continuously by the disposing company), but

(b) as if the references in that paragraph to a disposal had the same meaning as in the preceding provisions of this section.

(7) Any such question as is mentioned in subsection (2) which cannot be determined as provided by subsections (3) to (6) is to be determined on a just and reasonable basis.

(8) In this section “holding” means any number of shares of the same class held by one company in the same capacity, growing or diminishing as shares of that class are acquired or disposed of.

For this purpose shares are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt in on such an exchange.

(9) In this section “section 104 holding”, “1982 holding” and “qualifying shares” have the same meaning as in section 75.

77 Section 76: supplementary U.K.

(1) In a case to which section 127 of TCGA 1992 (reorganisation etc treated as not involving disposal) applies (including a case where that section applies by virtue of an enactment relating to chargeable gains), shares included in the new holding are treated for the purposes of section 76 as acquired when the original shares were acquired.

(2) Any shares held or disposed of by a nominee or bare trustee for a company are treated for the purposes of section 76 as held or disposed of by that company.

(3) In this section “new holding” and “original shares” have the same meaning as in section 127 of TCGA 1992 (or, as the case may be, that section as applied by the enactment concerned).

Qualifying trading companies: the requirements U.K.

78 Qualifying trading companies U.K.

(1) For the purposes of this Chapter a qualifying trading company is a company which meets each of conditions A to [F114 C] .

(2) Condition A is that the company either—

(a) meets each of the following requirements on the date of the disposal—

(i) the trading requirement (see section 79),

(ii) the control and independence requirement (see section 81),

(iii) the qualifying subsidiaries requirement (see section 82), and

(iv) the property managing subsidiaries requirement (see section 83), or

(b) has ceased to meet any of those requirements at a time which is not more than 3 years before that date and has not since that time been an excluded company, an investment company or a trading company.

(3) Condition B is that the company either—

(a) has met each of the requirements mentioned in condition A for a continuous period of 6 years ending on that date or at that time, or

(b) has met each of those requirements for a shorter continuous period ending on that date or at that time and has not before the beginning of that period been an excluded company, an investment company or a trading company.

(4) Condition C is that the company—

(a) met the gross assets requirement (see section 84) both immediately before and immediately after the issue of the shares in respect of which the share loss relief is claimed, and

(b) met the unquoted status requirement (see section 85) at the relevant time within the meaning of that section.

F115 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F114 Word in s. 78(1) substituted (with effect in accordance with s. 38(3) of the amending Act) by Finance Act 2020 (c. 14), s. 38(2)(b)(ii)

F115 S. 78(5) repealed (with effect in accordance with s. 38(3) of the amending Act) by Finance Act 2020 (c. 14), s. 38(1)(b)

79 The trading requirement U.K.

(1) The trading requirement is that—

(a) the company, ignoring any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, or

(b) the company is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities.

(2) If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades—

(a) the company is treated as a parent company for the purposes of subsection (1)(b), and

(b) the reference in subsection (1)(b) to the group includes the company and any existing or future company that will be its qualifying subsidiary after the intention in question is carried into effect.

This subsection does not apply at any time after the abandonment of that intention.

(3) For the purpose of subsection (1)(b) the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business.

(4) For the purpose of determining the business of a group, activities are ignored so far as they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.

(5) For the purposes of determining the business of a group, activities of a group company are ignored so far as they consist in—

(a) the holding of shares in or securities of a qualifying subsidiary of the parent company,

(b) the making of loans to another group company,

(c) the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company, or

(d) the holding and managing of property used by a group company for the purpose of research and development from which it is intended—

(i) that a qualifying trade to be carried on by a group company will be derived, or

(ii) that a qualifying trade carried on or to be carried on by a group company will benefit.

(6) Any reference in subsection (5)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time.

(7) In this section—

• “excluded activities” has the meaning given by section 192 of ITA 2007 read with sections 193 to 199 of that Act,

• “group” means a parent company and its qualifying subsidiaries,

• “group company”, in relation to a group, means the parent company or any of its qualifying subsidiaries,

• “incidental purposes” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the company in question,

• “mainly trading subsidiary” means a subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly,

• “non-qualifying activities” means—

  (a)

  excluded activities, and

  (b)

  activities (other than research and development) carried on otherwise than in the course of a trade,

• “parent company” means a company that has one or more qualifying subsidiaries,

• “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007,

• “qualifying trade” has the meaning given by section 189 of that Act, and

• “research and development” has the meaning given by section 1138 of this Act.

(8) In sections 189(1)(b) and 194(4)(c) of ITA 2007 (as applied by subsection (7) for the purposes of the definitions of “excluded activities” and “qualifying trade”) “period B” means the continuous period that is relevant for the purposes of section 78(3).

(9) In section 195 of ITA 2007 (as applied by subsection (7) for the purpose of the definition of “excluded activities”), references to the issuing company are to be read as references to the company mentioned in subsection (1).

80 Ceasing to meet trading requirement because of administration etc U.K.

(1) A company is not regarded as ceasing to meet the trading requirement merely because of anything done in consequence of the company or any of its subsidiaries being in administration or receivership.

This has effect subject to subsections (2) and (3).

(2) Subsection (1) applies only if—

(a) the entry into administration or receivership, and

(b) everything done as a result of the company concerned being in administration or receivership,

is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

(3) A company ceases to meet the trading requirement if before the time that is relevant for the purposes of section 78(2)—

(a) a resolution is passed, or an order is made, for the winding up of the company or any of its subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), any other act is done for the like purpose), or

(b) the company or any of its subsidiaries is dissolved without winding up.

This is subject to subsection (4).

(4) Subsection (3) does not apply if —

(a) the winding up is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

(b) the company continues, during the winding up, to be a trading company.

(5) References in this section to a company being “in administration” or “in receivership” are to be read in accordance with section 252 of ITA 2007.

81 The control and independence requirement U.K.

(1) The control element of the requirement is that—

(a) the company must not control (whether on its own or together with any person connected with it) any company which is not a qualifying subsidiary of the company, and

(b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 78(3) or otherwise).

(2) The independence element of the requirement is that—

(a) the company must not—

(i) be a 51% subsidiary of another company, or

(ii) be under the control of another company (or of another company and any other person connected with that other company), without being a 51% subsidiary of that other company, and

(b) no arrangements must be in existence by virtue of which the company could fail to meet paragraph (a) (whether at a time during the continuous period that is relevant for the purposes of section 78(3) or otherwise).

(3) This section is subject to section 87(3).

(4) In this section—

• “arrangements” includes any scheme, agreement or understanding (whether or not legally enforceable),

• “control”, in subsection (1)(a), is to be read in accordance with sections 450 and 451 (but see section 1124 for the meaning of “control” in subsection (2)(a)(ii)), and

• “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007.

82 The qualifying subsidiaries requirement U.K.

(1) The qualifying subsidiaries requirement is that any subsidiary that the company has must be a qualifying subsidiary of the company.

(2) In this section “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007.

83 The property managing subsidiaries requirement U.K.

(1) The property managing subsidiaries requirement is that any property managing subsidiary that the company has must be a qualifying 90% subsidiary of the company.

(2) In this section—

• “property managing subsidiary” has the meaning given by section 188(2) of ITA 2007, and

• “qualifying 90% subsidiary” has the meaning given by section 190 of that Act.

84 The gross assets requirement U.K.

(1) The gross assets requirement in the case of a single company is that the value of the company's gross assets—

(a) must not exceed £7 million immediately before the shares in respect of which the share loss relief is claimed are issued, and

(b) must not exceed £8 million immediately afterwards.

(2) The gross assets requirement in the case of a parent company is that the value of the group assets—

(a) must not exceed £7 million immediately before the shares in respect of which the share loss relief is claimed are issued, and

(b) must not exceed £8 million immediately afterwards.

(3) The value of the group assets means the sum of the values of the gross assets of each of the members of the group, ignoring any that consist in rights against, or shares in or securities of, another member of the group.

(4) In this section—

• “group” means a parent company and its qualifying subsidiaries,

• “parent company” means a company that has one or more qualifying subsidiaries,

• “qualifying subsidiary” is to be read in accordance with section 191 of ITA 2007, and

• “single company” means a company that does not have one or more qualifying subsidiaries.

85 The unquoted status requirement U.K.

(1) The unquoted status requirement is that, at the time (“the relevant time”) at which the shares in respect of which the share loss relief is claimed are issued—

(a) the company must be an unquoted company,

(b) there must be no arrangements in existence for the company to cease to be an unquoted company, and

(c) there must be no arrangements in existence for the company to become a subsidiary of another company (“the new company”) by virtue of an exchange of shares, or shares and securities, if—

(i) section 87 applies in relation to the exchange, and

(ii) arrangements have been made with a view to the new company ceasing to be an unquoted company.

(2) The arrangements referred to in subsection (1)(b) and (c)(ii) do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the company or the new company are at any subsequent time—

(a) listed on a stock exchange that is a recognised stock exchange by virtue of an order made under section 1005(1)(b) of ITA 2007, or

(b) listed on an exchange, or dealt in by any means, designated by an order made for the purposes of section 184(3)(b) or (c) of that Act,

if the order was made after the relevant time.

(3) In this section—

• “arrangements” includes any scheme, agreement or understanding (whether or not legally enforceable),

• “debenture” has the meaning given by section 738 of the Companies Act 2006, and

• “unquoted company” has the meaning given by section 184(2) of ITA 2007.

86 Power to amend requirements by Treasury order U.K.

The Treasury may by order make such amendments of sections 79 to 85 as they consider appropriate.

Qualifying trading companies: supplementary U.K.

87 Relief after an exchange of shares for shares in another company U.K.

(1) This section and section 88 apply in relation to shares if—

(a) a company (“the new company”) in which the only issued shares are subscriber shares acquires all the shares (“old shares”) in another company (“the old company”),

(b) the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company,

(c) the consideration for the new shares of each description consists wholly of old shares of the corresponding description,

(d) new shares of each description are issued to the holders of old shares of the corresponding description in respect of and in proportion to their holdings, and

(e) by virtue of section 127 of TCGA 1992 as applied by section 135(3) of that Act (company reconstructions etc), the exchange of shares is not to be treated as involving a disposal of the old shares or an acquisition of the new shares.

In this subsection references to shares, except the first and that in the expression “subscriber shares”, include securities.

(2) For the purposes of this Chapter the exchange of shares is not regarded as involving any disposal of the old shares or any acquisition of the new shares.

(3) Nothing in—

(a) section 74(2) (disposal of new shares), and

(b) section 81 (the control and independence requirement),

applies in relation to such an exchange of shares, or shares and securities, as is mentioned in subsection (1) or, in the case of section 81, arrangements with a view to such an exchange.

(4) For the purposes of this section old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.

(5) References in section 88 to “old shares”, “new shares”, “the old company” and “the new company” are to be read in accordance with this section.

88 Substitution of new shares for old shares U.K.

(1) Subsection (2) applies if, in the case of any new shares held by a company or by a nominee for a company, the old shares for which they were exchanged were shares which had been subscribed for by the company (“the investor”).

(2) This Chapter has effect in relation to any subsequent disposal or other event as if—

(a) the new shares had been subscribed for by the investor at the time when, and for the amount for which, the old shares were subscribed for by the investor,

(b) the new shares had been issued by the new company at the time when the old shares were issued to the investor by the old company, and

(c) any requirements of this Chapter which were met at any time before the exchange by the old company had been met at that time by the new company.

(3) Nothing in subsection (2) applies in relation to section 195(7) of ITA 2007 as applied by section 79(7) above for the purpose of the definition of “excluded activities”.

89 Deemed time of issue for certain shares U.K.

(1) This section applies for the purposes of the following provisions—

• F116 ...

• section 84(1)(a) and (2)(a),

• section 85(1), and

• section 88(2)(b).

(2) If—

(a) any shares (“the original shares”) have been issued to a company, or are treated under this subsection as having been issued to the company at a particular time, and

(b) any corresponding bonus shares are subsequently issued to the company,

the bonus shares are treated as having been issued at the time the original shares were issued to the company or are treated as having been so issued.

Textual Amendments

F116 Words in s. 89(1) omitted (with effect in accordance with s. 38(3) of the amending Act) by virtue of Finance Act 2020 (c. 14), s. 38(2)(b)(iii)

Interpretation U.K.

90 Interpretation of Chapter U.K.

F117 (1) In this Chapter (subject to subsections (2) to (7))—

• “bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise),

• “corresponding bonus shares”, in relation to any shares, means bonus shares which—

  (a)

  are issued in respect of those shares, and

  (b)

  are in the same company, are of the same class, and carry the same rights, as those shares,

• “excluded company” means a company which—

  (a)

  has a trade which consists wholly or mainly of dealing in land, in commodities or futures or in shares, securities or other financial instruments,

  (b)

  has a trade which is not carried on on a commercial basis and in such a way that profits in the trade can reasonably be expected to be realised,

  (c)

  is a holding company of a group other than a trading group, or

  (d)

  is a building society or a [F118 registered society] ,

• “group” (except in sections 79 and 84) means a company which has one or more 51% subsidiaries together with that or those subsidiaries,

• “holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 51% subsidiaries,

• “investment company” means a company—

  (a)

  whose business consists wholly or mainly in the making of investments, and

  (b)

  which derives the principal part of its income from the making of investments,

  but does not include the holding company of a trading group,

• [F119 “registered society” means—

  (a)

  a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014,

  (b)

  a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969, [or

  (c)

  an SCE formed in accordance with Council Regulation ( EC ) No 1435/2003 on the Statute for a European Cooperative Society, ]]

• “shares”—

  (a)

  includes stock, but

  (b)

  does not include shares or stock not forming part of a company's ordinary share capital,

• “share loss relief” has the meaning given by section 68(1),

• “trading company” means a company other than an excluded company which is—

  (a)

  a company whose business consists wholly or mainly in the carrying on of a trade or trades, or

  (b)

  the holding company of a trading group, and

• “trading group” means a group the business of whose members, when taken together, consists wholly or mainly in the carrying on of a trade or trades.

(2) For the purposes of the definition of “corresponding bonus shares” in subsection (1), shares are not treated as being of the same class unless they would be so treated if they were—

(a) included in the official UK list, and

(b) admitted to trading on the London Stock Exchange.

(3) Except as provided by subsection (4), paragraph (b) of the definition of shares in subsection (1) does not apply in the definition of “excluded company” in subsection (1) or in sections 75(3) to (6), (8) and (9) and 87(1) to (4).

(4) Paragraph (b) of that definition applies in relation to the first reference to “shares” in section 87(1).

(5) The definition of “shares” in subsection (1) does not apply in sections 79(5)(a), 84(3) and 85(1)(c) and (2).

(6) For the purposes of the definition of “trading group” in subsection (1), any trade carried on by a subsidiary which is an excluded company is treated as not constituting a trade.

(7) For the purposes of this Chapter a disposal of shares which results in an allowable loss for the purposes of corporation tax on chargeable gains is treated as made at the time when the disposal is made or treated as made for the purposes of TCGA 1992.

Textual Amendments

F117 S. 90(1) amendment to earlier affecting provision 2014 c. 14 Sch. 4 para. 158(3) (1.8.2014) by Finance Act 2014 (c. 26), Sch. 39 paras. 12, 15

F118 Words in s. 90(1) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 158(2) (with Sch. 5)

F119 Words in s. 90(1) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 158(3) (with Sch. 5) (as amended (1.8.2014) by Finance Act 2014 (c. 26), Sch. 39 paras. 12, 15)

Chapter 6 U.K. Losses from miscellaneous transactions

91 Relief for losses from miscellaneous transactions U.K.

(1) This section applies if, in an accounting period (“the loss-making period”), a company makes a loss in a transaction within subsection (2).

(2) A transaction is within this subsection if income arising from it would be miscellaneous income of the company.

(3) Relief for the loss is given to the company under this section.

(4) For this purpose the company's miscellaneous income of the loss-making period is reduced by the loss.

(5) Subsection (6) applies to the loss so far as it cannot be used under subsection (4) to reduce the company's income.

(6) The loss—

(a) is carried forward to subsequent accounting periods, and

(b) the company's miscellaneous income of any such period is reduced by the loss so far as it cannot be used under this paragraph to reduce the income of an earlier period.

(7) A company's miscellaneous income is so much of the company's income which—

(a) arises from transactions, and

(b) is chargeable to corporation tax under or by virtue of any provision to which section 1173 applies, other than regulation 18(4) of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) (offshore income gains).

Chapter 7 U.K. Write-off of government investment

92 Loss relief to be reduced if government investment is written off U.K.

(1) This section applies if an amount of government investment in a company (“the written-off amount”) is written off.

(2) The written-off amount is set off against the company's carry-forward losses as at the end of the accounting period ending last before the day of the write-off.

(3) If the written-off amount exceeds those losses, the excess is set off against the company's carry-forward losses as at the end of the next accounting period and so on until the whole of the written-off amount has been set off.

(4) In this Chapter “company” has the meaning given by section 1121 but does not include an unincorporated association.

(5) This section needs to be read with—

• section 93 (which applies if the company is in a group of companies),

• section 94 (which explains what is meant by government investment being written off and how the written-off amount is calculated), and

• section 95 (which explains what is meant by carry-forward losses).

93 Groups of companies U.K.

(1) This section applies if—

(a) at the end of an accounting period a company in which an amount of government investment is written off is in a group of companies, and

(b) under section 92(2) or (3) an amount could be set off against the company's carry-forward losses as at the end of that period (or could be so set off if there were enough of those losses).

(2) The amount may be set off (wholly or partly) against the carry-forward losses of one or more companies within subsection (3), as may be just and reasonable.

(3) A company (other than the company referred to in subsection (1)(a)) is within this subsection if at the end of the accounting period it is in the group of companies.

(4) A “group of companies” consists of a company that has one or more 51% subsidiaries, together with that or those subsidiaries.

94 Cases in which government investment is written off U.K.

(1) Government investment in a company is written off if any of the following occurs in relation to the company. This is subject to subsection (2).

• Case 1

  The company's liability to repay any money lent to it out of public funds by a Minister is extinguished. In this case the written-off amount is the amount of the liability extinguished and the write-off occurs when the liability is extinguished.

• Case 2

  Any of the company's shares for which a Minister has subscribed out of public funds are cancelled. In this case the written-off amount is the amount subscribed for the shares and the write-off occurs when the shares are cancelled.

• Case 3

  The company's commencing capital debt (see subsection (3)) is reduced otherwise than by being paid off or its public dividend capital (see subsection (4)) is reduced otherwise than by being repaid (including, in either case, a reduction to nil). In this case the written-off amount is the amount of the reduction and the write-off occurs when the reduction occurs.

(2) The written-off amount is reduced so far as it is replaced by—

(a) money lent, or a payment made, out of public funds, or

(b) shares subscribed for by a Minister for money or money's worth.

(3) “Commencing capital debt” means a debt to a Minister assumed as such under an enactment.

(4) “Public dividend capital” means an amount paid by a Minister—

(a) under an enactment in which that amount is so described, or

(b) under an enactment corresponding to an enactment in which a payment made on similar terms to another body is so described.

(5) In this section—

• “enactment” includes an Act of the Scottish Parliament, and

• “Minister” means a Minister of the Crown, the Scottish Ministers or a Northern Ireland department.

95 Meaning of “carry-forward losses” U.K.

(1) A company's carry-forward losses as at the end of an accounting period are as follows.

• Type 1

  Losses of the company to be carried forward under section 45, [F120 45A, 45B,] 62 or 66 to the next accounting period. These include losses to be treated as expenses of management of the company under section 63 for the next accounting period.

• Type 2

  Any excess of the company to be carried forward for deduction to the next accounting period under section 1223(3) of CTA 2009.

• Type 3

  Any excess of the company to be carried forward for deduction to the next accounting period under section 260(2) of CAA 2001.

• Type 4

  Any qualifying charitable donations made by the company so far as they exceed the company's profits of the accounting period and are available for surrender for the next accounting period under Part 5 (group relief).

• Type 5

  Allowable losses of the company available under section 8 of TCGA 1992 so far as not allowed for the accounting period or any previous accounting period.

(2) For the purposes of section 92(2) an amount is excluded from a company's carry-forward losses if, before the day of the write-off, a claim is made in relation to the amount under section 37 or Part 5 (group relief) [F121 or Part 5A (group relief for carried forward losses)] of this Act or section 260(3) of CAA 2001.

(3) But, for the purposes of section 92(3), any such claim made on or after that day is to be disregarded in determining the company's carry-forward losses as at the end of any accounting period.

(4) The set off of an amount against a company's carry-forward losses as at the end of any accounting period is to be done—

• first, against those within Types 1 to 4, and

• second, against those within Type 5.

Textual Amendments

F120 Words in s. 95(1) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 156(2)

F121 Words in s. 95(2) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 156(3)

96 Interaction with other tax provisions U.K.

(1) A company, in calculating its profits of a trade for corporation tax purposes, is not prevented from deducting a sum by reason only that an amount of government investment in the company is written off.

(2) Subsection (3) applies for the purposes of section 50 of TCGA 1992 and section 532 of CAA 2001 in their application in relation to a company.

(3) Expenditure is not met by a public body (as defined in section 532(2) of CAA 2001) by reason only that an amount of government investment in the company is written off.

(4) Section 464(1) of CTA 2009 does not prevent section 92 of this Act from applying if the writing-off of an amount of government investment in a company involves the extinguishment (in whole or in part) of a liability under a loan relationship.

Part 5 U.K. Group relief

Modifications etc. (not altering text)

C26 Pt. 5 applied (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 125 (with s. 147, Sch. 17)

C27 Pt. 5 excluded (with effect in accordance with Sch. 18 para. 63 of the amending Act) by Finance Act 2016 (c. 24), Sch. 18 para. 20(5)

C28 Pt. 5 modified by 2009 c. 4, s. 1218ZDB(2) (as inserted (for specified purposes and with effect in accordance with Sch. 6 paras. 20, 21(1)(a) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 6 para. 1 (with Sch. 6 para. 21(3)))

C29 Pt. 5 modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Risk Transformation (Tax) Regulations 2017 (S.I. 2017/1271), regs. 1(1), 10, 11

C30 Pt. 5 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 47(4)

C31 Pt. 5 excluded (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), s. 1(5)(e) (with ss. 15(1), 16(1))

Chapter 1 U.K. Introduction

97 Introduction to Part U.K.

(1) This Part—

(a) allows a company to surrender losses and other amounts, and

(b) enables, in certain cases involving groups or consortiums of companies, other companies to claim corporation tax relief for the losses and other amounts that are surrendered.

(2) The corporation tax relief mentioned in subsection (1) is called “group relief”.

(3) Chapter 2 allows a company within the charge to corporation tax to surrender losses and other amounts it has for an accounting period.

(4) Chapter 3 allows a non-UK resident company that is resident or carrying on a trade in the European Economic Area to surrender losses and other amounts it has for a period.

(5) Chapter 4 sets out how a company may claim group relief in respect of losses and other amounts surrendered, how group relief is given and limitations on the amount of group relief to be given on a claim.

(6) Chapter 5 explains certain key concepts for the purposes of group relief, including (in particular) how to determine if a company is a member of a group of companies or is a member of, or is owned by, a consortium.

(7) Chapter 6 contains provision about persons holding equity in companies and about distributions of companies' profits and assets (which is relevant for the purposes of sections 143(3)(b) and (c) and 144(3)(b) and (c) (in Chapter 4) and section 151(4)(a) and (b) (in Chapter 5)).

(8) Chapter 7 contains definitions that apply for the purposes of this Part and miscellaneous provisions.

(9) For provision about making claims for group relief, see Part 8 of Schedule 18 to FA 1998 (which includes provision in paragraph 76 of that Schedule for the making of assessments or other adjustments if group relief has been given which is, or has become, excessive).

Chapter 2 U.K. Surrender of company's losses etc for an accounting period

Introduction U.K.

98 Overview of Chapter U.K.

(1) This Chapter allows a company to surrender losses and other amounts it has for an accounting period.

(2) Sections 99 to 104 set out the basic provisions about the surrendering of losses and other amounts.

(3) Sections 105 to 110 place restrictions on the surrendering of losses and other amounts.

Basic provisions about surrendering losses and other amounts U.K.

99 Surrendering of losses and other amounts U.K.

(1) This section applies if a company has one or more of the following for an accounting period—

(a) a trading loss (see section 100),

(b) a capital allowance excess (see section 101),

(c) a deficit within Chapter 16 [F122 or 16A] of Part 5 of CTA 2009 (non-trading deficit on loan relationship),

(d) amounts allowable as qualifying charitable donations (see Part 6),

[F123 (da) amounts allowable as qualifying expenditure on grassroots sport (see Part 6A),]

(e) a UK property business loss (see section 102),

(f) management expenses (see section 103), and

(g) a non-trading loss on intangible fixed assets (see section 104).

(2) The company may surrender the losses and other amounts under this Chapter so far as the losses and other amounts are eligible for corporation tax relief (apart from this Part).

(3) Subsection (2) applies in relation to losses and other amounts within subsection (1)(a) to (c) even if the company has other profits in the accounting period mentioned in subsection (1) from which the losses and other amounts could be deducted.

(4) But so far as losses and other amounts are within subsection (1)(d) to (g), subsection (2) is subject to the restriction in section 105.

(5) Subsection (2) is also subject to—

(a) sections 106 to 110 (which place further restrictions on what the surrendering company may surrender),

(b) sections 432 and 433 (which restrict relief for expenses treated as incurred under Chapter 3 or 4 of Part 9), and

(c) sections 887 and 888 (which restrict relief in certain cases involving partnership losses in a business of leasing plant or machinery).

(6) Under paragraph 70(1) of Schedule 18 to FA 1998, the company surrenders losses or other amounts, so far as eligible for surrender under this Chapter, by consenting to one or more claims for group relief in relation to the amounts (see Requirement 1 in section 130).

(7) In this Part, in relation to losses or other amounts within subsection (1) that a company has for an accounting period—

• “the surrenderable amounts” means the losses or other amounts so far as eligible for surrender under this Chapter,

• “surrendering company” means the company that has the losses or other amounts, and

• “the surrender period” means the accounting period for which the company has the losses or other amounts.

Textual Amendments

F122 Words in s. 99(1)(c) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 157

F123 S. 99(1)(da) inserted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(3)

100 Meaning of “trading loss” U.K.

(1) In section 99(1)(a) “trading loss” means a loss made in a trade in the surrender period.

(2) But it does not include—

(a) a loss made in a trade carried on wholly outside the United Kingdom, or

(b) a loss that is not eligible for relief under section 37 as a result of section 44 or 48.

101 Meaning of “capital allowance excess” U.K.

(1) In section 99(1)(b) “capital allowance excess” means an excess of the kind mentioned in section 260(1) of CAA 2001 for the surrender period.

(2) In determining if there is such an excess for the surrender period and, if there is, its amount, apply section 260(1) of CAA 2001 but subject to subsections (3) and (4).

(3) Capital allowances brought forward from previous accounting periods are to be ignored.

(4) The reference in section 260(1) of CAA 2001 to a description of the company's income is to be read as a reference to that description of income before deductions for—

(a) losses of any accounting period other than the surrender period, or

(b) capital allowances.

102 Meaning of “UK property business loss” U.K.

(1) In section 99(1)(e) “UK property business loss” means a loss made in a UK property business in the surrender period.

(2) But it does not include a loss treated as made in the surrender period as a result of section 62(5).

103 Meaning of “management expenses” U.K.

(1) In section 99(1)(f) “management expenses” means expenses that are deductible for the surrender period under section 1219 of CTA 2009.

(2) But it does not include—

(a) expenses that are deductible for the surrender period as a result of section 1223 of CTA 2009, or

(b) amounts treated as expenses deductible for the surrender period as a result of section 63 above.

104 Meaning of “non-trading loss on intangible fixed assets” U.K.

(1) In section 99(1)(g) “non-trading loss on intangible fixed assets” is to be read in accordance with Part 8 of CTA 2009.

[F124 (2) But it does not include a loss treated as a non-trading loss on intangible fixed assets for the surrender period as a result of section 753(3) of CTA 2009.]

Textual Amendments

F124 S. 104(2) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 158

Restrictions on losses and other amounts that may be surrendered U.K.

105 Restriction on surrender of losses etc within section 99(1)(d) to (g) U.K.

(1) This section applies if the surrendering company has for the surrender period losses or other amounts within section 99(1)(d) to (g) (“relevant amounts”) that are eligible for corporation tax relief (apart from this Part).

(2) The surrendering company may not surrender any relevant amount under this Chapter unless the total of the relevant amounts exceeds [F125 the profit-related threshold] .

(3) If the total of the relevant amounts does exceed [F126 the profit-related threshold]—

(a) the surrendering company may surrender relevant amounts, but

(b) the total amount that may be surrendered is limited to the amount of the excess.

[F127 (3A) The profit-related threshold” is the sum of—

(a) the surrendering company's gross profits of the surrender period, and

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

(3B) Where—

(a) an accounting period of a CFC ending in the surrender period is one to which (because of paragraph 50 of Schedule 20 of FA 2012) the repeal of Chapter 4 of Part 17 of ICTA does not apply,

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

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

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

(4) If the surrendering company surrenders relevant amounts, the amount surrendered is treated as consisting of—

(a) first, donations within section 99(1)(d),

[F128 (aa) second, expenditure within section 99(1)(da),]

(b) [F129 third], losses within section 99(1)(e),

(c) [F130 fourth], expenses within section 99(1)(f), and

(d) [F131 fifth], losses within section 99(1)(g).

(5) For the purposes of this section the surrendering company's gross profits of the surrender period are its profits for that period without any of the following—

(a) a deduction in respect of any of the kinds of thing mentioned in section 99(1),

(b) a deduction falling to be made in respect of losses, allowances or other amounts of any other period (whether or not in respect of a kind of thing so mentioned), and

(c) a deduction falling to be made by virtue of section 63 of this Act or section 1223(3) of CTA 2009 (other amounts carried forward).

[F132 (5A) For the purposes of this section—

• “CFC” has the same meaning as in Part 9A of TIOPA 2010, except that in subsection (3B) it means a controlled foreign company as defined by section 747(2) of ICTA;

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

(6) This section is subject to section 305 (oil activities: availability of group relief against ring fence profits).

Textual Amendments

F125 Words in s. 105(2) substituted (with effect in accordance with s. 29(6)-(9) of the amending Act) by Finance Act 2013 (c. 29), s. 29(2)

F126 Words in s. 105(3) substituted (with effect in accordance with s. 29(6)-(9) of the amending Act) by Finance Act 2013 (c. 29), s. 29(3)

F127 S. 105(3A)(3B) inserted (with effect in accordance with s. 29(6)-(9) of the amending Act) by Finance Act 2013 (c. 29), s. 29(4)

F128 S. 105(4)(aa) inserted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(4)(a)

F129 Word in s. 105(4)(b) substituted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(4)(b)

F130 Word in s. 105(4)(c) substituted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(4)(c)

F131 Word in s. 105(4)(d) substituted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(4)(d)

F132 S. 105(5A) inserted (with effect in accordance with s. 29(6)-(9) of the amending Act) by Finance Act 2013 (c. 29), s. 29(5)

106 Restriction on losses etc surrenderable by UK resident U.K.

(1) This section applies if the surrendering company is UK resident.

(2) The surrendering company may not surrender a loss or other amount under this Chapter so far as the loss or other amount—

(a) is attributable to a permanent establishment through which the company carries on a trade outside the United Kingdom (see subsection (3)), and

(b) is, or represents, an amount within subsection (5).

(3) A loss or other amount is attributable to a permanent establishment of the surrendering company if (ignoring this section) the amount could be included in the company's surrenderable amounts for the surrender period if those amounts were determined—

(a) by reference to that establishment alone, and

(b) by applying, in relation to that establishment, principles corresponding in all material respects to those mentioned in subsection (4).

(4) The principles are those that would be applied for corporation tax purposes in determining an equivalent loss or other amount in the case of a permanent establishment through which a non-UK resident company carries on a trade in the United Kingdom.

(5) An amount is within this subsection if, for the purposes of non-UK tax (see section 187) chargeable under the law of the territory in which the permanent establishment is situated, the amount is (in any period) deductible from or otherwise allowable against non-UK profits (see section 108) of a person other than the surrendering company.

(6) Subsection (7) applies for the purposes of subsection (5) if, in order to determine if an amount is deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is deductible or otherwise allowable for tax purposes in the United Kingdom.

(7) The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned if (and only if) the surrendering company is treated as resident in that territory for the purposes of the non-UK tax.

107 Restriction on losses etc surrenderable by non-UK resident U.K.

(1) This section applies if the surrendering company is a [F133 non-UK resident [F134 company within the charge to corporation tax]].

F135 (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) F136 [F137 ... The] surrendering company may surrender a loss or other amount under this Chapter only so far as conditions A, B and C are met in relation to the loss or other amount.

(3) Condition A is that the loss or other amount is attributable to activities of the surrendering company in respect of which it is within the charge to corporation tax for the surrender period.

(4) Condition B is that the loss or other amount is not attributable to activities of the surrendering company that are double taxation exempt for the surrender period (see section 186).

(5) Condition C is that—

(a) the loss or other amount does not correspond to, and is not represented in, an amount within subsection (6), and

(b) no amount brought into account in calculating the loss or other amount corresponds to, or is represented in, an amount within subsection (6).

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

F138 (6A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F139 (6B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) But an amount is not to be taken to be within subsection (6) F140 ... by reason only that it is—

(a) an amount of profits brought into account for the purpose of being excluded from non-UK profits of the person, or

(b) an amount brought into account in calculating an amount of profits brought into account as mentioned in paragraph (a).

(8) Subsection (9) applies for the purposes of subsection (6) if, in order to determine if an amount is deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is deductible or otherwise allowable for tax purposes in the United Kingdom.

(9) The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned.

F141 (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F142 (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F133 Words in s. 107(1) substituted (with effect in accordance with s. 81 of the amending Act) by Finance Act 2016 (c. 24), s. 76(10) (and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2))

F134 Words in s. 107(1) substituted (6.4.2020) by Finance Act 2019 (c. 1), Sch. 5 paras. 30, 35 (with Sch. 5 para. 36)

F135 S. 107(1A) omitted (with effect in accordance with Sch. 4 para. 5 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(2)(a)

F136 Words in s. 107(2) omitted (with effect in accordance with Sch. 4 para. 5 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(2)(b)

F137 Words in s. 107(2) substituted (with effect in accordance with s. 30(6)-(8) of the amending Act) by Finance Act 2013 (c. 29), s. 30(3)

F138 S. 107(6A) omitted (with effect in accordance with Sch. 4 para. 5 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(2)(a)

F139 S. 107(6B) omitted (with effect in accordance with Sch. 4 para. 5 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(2)(a)

F140 Words in s. 107(7) omitted (with effect in accordance with Sch. 4 para. 5 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(2)(c)

F141 S. 107(10) omitted (with effect in accordance with Sch. 4 para. 5 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(2)(a)

F142 S. 107(11) omitted (with effect in accordance with Sch. 4 para. 5 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(2)(a)

108 Meaning of “non-UK profits” U.K.

(1) In sections 106 and 107 “non-UK profits”, in relation to a person, means—

(a) amounts within subsection (2), or

(b) amounts taken into account in calculating amounts within subsection (2).

(2) Amounts are within this subsection if they—

(a) are taken for the purposes of the non-UK tax in question to be the amount of the profits, income or gains on which (after allowing for deductions) the person is charged with that tax, and

(b) are not amounts corresponding to, and are not represented in, the total profits of any person of any accounting period.

(3) For the purposes of subsection (2)(b) amounts that arise from activities of a non-UK resident company that are double taxation exempt for an accounting period (see section 186) are excluded from the company's total profits of that period.

109 Restriction on losses etc surrenderable by dual resident U.K.

(1) This section applies if in the surrender period the surrendering company is UK resident and is also within a charge to non-UK tax under the law of a territory because—

(a) it derives its status as a company from that law,

(b) its place of management is in that territory, or

(c) it is for some other reason treated under that law as resident in that territory for the purposes of that tax.

(2) If condition A, B or C is met, the surrendering company may not surrender any losses or other amounts under this Chapter.

(3) Condition A is that the surrendering company is not a trading company throughout the surrender period.

(4) Condition B is that in the surrender period the surrendering company carries on a trade of such a description that the company's main function, or one of its main functions, consists of one or more of the following activities.

• Activity 1

  Acquiring and holding shares, securities or investments of any other kind (whether directly or indirectly).

• Activity 2

  Making, under loan relationships, payments in relation to which debits fall to be brought into account for the purposes of Part 5 of CTA 2009.

• Activity 3

  Making payments which are qualifying charitable donations.

• Activity 4

  Making payments similar to those within Activity 3 but which are deductible in calculating the profits of the surrendering company for corporation tax purposes.

• Activity 5

  Obtaining funds for the purposes of, or otherwise in connection with, any of Activities 1 to 4.

(5) Condition C is that in the surrender period the surrendering company carries on one or more of Activities 1 to 5—

(a) to an extent that does not appear to be justified by any trade which it carries on, or

(b) for a purpose that does not appear to be appropriate to any such trade.

110 Restriction on surrender of losses etc from alternative finance arrangements U.K.

(1) This section applies if the surrendering company is prevented from obtaining a deduction in respect of an amount by section 520 of CTA 2009 (provision not at arm's length: non-deductibility of relevant return).

(2) The amount may not be surrendered under this Chapter.

F143 Chapter 3 U.K. Surrenders made by non-UK resident company resident or trading in the EEA

Textual Amendments

F143 Pt. 5 Ch. 3 omitted (with effect in accordance with Sch. 4 para. 4 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(3)

Introduction U.K.

F143 111 Overview of Chapter U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 112 EEA related definitions U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Basic provisions about surrendering losses and other amounts U.K.

F143 113 Steps to determine extent to which loss etc can be surrendered U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conditions that must be met U.K.

F143 114 The equivalence condition U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 115 The EEA tax loss condition: companies resident in EEA territory U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 116 The EEA tax loss condition: companies not resident in EEA territory U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 117 The qualifying loss condition: general U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 118 The qualifying loss condition: relief for current and previous periods U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 119 The qualifying loss condition: relief for future periods U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 120 The qualifying loss condition: non-UK tax relief in another territory U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 121 The precedence condition U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other rules, assumptions and exclusions U.K.

F143 122 Assumptions to be made in recalculating EEA amount U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 123 Assumptions as to UK residence U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 124 Assumptions as to places in which activities carried on U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 125 Assumptions as to accounting periods U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 126 Assumptions in relation to capital allowances U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 127 Amounts excluded because of certain arrangements U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F143 128 Rules for recalculating EEA amount U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 4 U.K. Claims for group relief

Introduction U.K.

129 Overview of Chapter U.K.

(1) This Chapter sets out how a company may claim group relief, how group relief is given and limitations on the amount of group relief to be given on a claim.

(2) [F144 Sections 130 to [F145 134]] deal with claims in relation to surrenderable amounts under Chapter 2.

F146 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Section 137 deals with how group relief is given.

(5) Sections 138 to 142 set out a limitation on the amount of group relief to be given on any claim.

(6) Sections 143 to 149 set out limitations on the amount of group relief to be given on claims based on consortium condition 1, consortium condition 2 or consortium condition 3 (see Requirement 3 in section 130).

Textual Amendments

F144 Words in s. 129(2) substituted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 2

F145 Word in s. 129(2) substituted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 35(2)(a)

F146 S. 129(3) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(2)

Surrenderable amounts under Chapter 2 U.K.

130 Group relief claims on amounts surrenderable under Chapter 2 U.K.

(1) This section applies in relation to the surrendering company's surrenderable amounts for the surrender period under Chapter 2.

(2) A company (“the claimant company”) may make a claim for group relief for an accounting period (“the claim period”) in relation to those amounts (in whole or in part) if the following requirements are met.

• Requirement 1

  The surrendering company consents to the claim.

• Requirement 2

  There is a period (“the overlapping period”) that is common to the claim period and the surrender period.

• Requirement 3

  At a time during the overlapping period—

  (a)

  the group condition is met (see section 131),

  (b)

  consortium condition 1 is met (see section 132),

  (c)

  consortium condition 2 is met (see section [F147 section 133(1)[F148 , (3) and (4)]]), or

  (d)

  consortium condition 3 is met (see [F149 section 133(2) to [F150 (4)]]).

(3) More than one company may make a claim for group relief in relation to any surrenderable amounts (but the giving of group relief in relation to any claim is subject to the provisions of this Chapter).

Textual Amendments

F147 Words in s. 130(2)(c) substituted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 3(a)

F148 Words in s. 130(2)(c) substituted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 35(2)(b)(i)

F149 Words in s. 130(2)(d) substituted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 3(b)

F150 Word in s. 130(2)(d) substituted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 35(2)(b)(ii)

Modifications etc. (not altering text)

C32 S. 130(2) applied by 1998 c. 36, Sch. 18 para. 70(1) (as substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 114(2))

131 The group condition U.K.

(1) The group condition is met if the surrendering company and the claimant company—

(a) are members of the same group of companies (see section 152), and

(b) are both UK related.

(2) For the meaning of “UK related” in subsection (1)(b) and in sections 132 and 133, see section 134.

132 Consortium condition 1 U.K.

(1) Consortium condition 1 is met if subsection (2) or (3) applies.

(2) This subsection applies if—

(a) the surrendering company is a trading company or a holding company,

(b) the surrendering company is owned by a consortium,

(c) the claimant company is a member of the consortium, and

(d) both companies are UK related.

(3) This subsection applies if—

(a) the claimant company is a trading company or a holding company,

(b) the claimant company is owned by a consortium,

(c) the surrendering company is a member of the consortium, and

(d) both companies are UK related.

(4) But consortium condition 1 is not met if a profit on a sale within subsection (5) by the company that is the member of the consortium would be a trading receipt of the member.

(5) A sale is within this subsection if it is a sale of—

(a) the share capital the member owns in the company owned by the consortium, or

(b) if that company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), the share capital the member owns in the holding company in question.

133 Consortium conditions 2 and 3 U.K.

(1) Consortium condition 2 is met if—

(a) the surrendering company is a trading company or a holding company,

(b) the surrendering company is owned by a consortium,

(c) the claimant company is not a member of the consortium,

(d) the claimant company is a member of the same group of companies as a third company (“the link company”),

(e) the link company is a member of the consortium, F151 ... [F152 and]

[F153 (f) the surrendering company and the claimant company are both UK related, F154 ...

F154 (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(2) Consortium condition 3 is met if—

(a) the claimant company is a trading company or a holding company,

(b) the claimant company is owned by a consortium,

(c) the surrendering company is not a member of the consortium,

(d) the surrendering company is a member of the same group of companies as a third company (“the link company”),

(e) the link company is a member of the consortium, F155 ... [F156 and]

[F157 (f) the surrendering company and the claimant company are both UK related, F158 ...

F158 (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(3) But neither consortium condition 2 nor consortium condition 3 is met if a profit on a sale within subsection (4) by the link company would be a trading receipt of that company.

(4) A sale is within this subsection if it is a sale of—

(a) the share capital the link company owns in the company (“the consortium company”) owned by the consortium as mentioned in subsection (1)(b) or (2)(b), or

(b) if the consortium company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), the share capital the link company owns in the holding company in question.

F159 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F159 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F159 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F159 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F151 Word in s. 133(1)(e) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 4(2)(a)

F152 Word in s. 133(1)(e) inserted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 35(1)(a)(i)

F153 S. 133(1)(f)(g) substituted for s. 133(1)(f) (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 4(2)(b)

F154 S. 133(1)(g) and preceding word omitted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 35(1)(a)(ii)

F155 Word in s. 133(2)(e) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 4(3)(a)

F156 Word in s. 133(2)(e) inserted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 35(1)(b)(i)

F157 S. 133(2)(f)(g) substituted for s. 133(2)(f) (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 4(3)(b)

F158 S. 133(2)(g) and preceding word omitted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 35(1)(b)(ii)

F159 S. 133(5)-(8) omitted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 35(1)(c)

134 Meaning of “UK related” company U.K.

For the purposes of sections 131 to 133 a company is UK related if—

(a) it is a UK resident company, or

(b) it is a non-UK resident company [F160 within the charge to corporation tax].

Textual Amendments

F160 Words in s. 134(b) substituted (with effect in accordance with s. 24(3) of the amending Act) by Finance Act 2019 (c. 1), s. 24(1)

F161 134A Companies “established in the EEA” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F161 S. 134A omitted (18.11.2015) (with effect in accordance with s. 35(3) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 35(2)(c)

F162 ... U.K.

Textual Amendments

F162 S. 135 136 and cross-heading omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(3)

F162 135 Group relief claims on amounts surrenderable under Chapter 3 U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F162 136 The EEA group condition U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Giving of group relief U.K.

137 Deduction from total profits U.K.

(1) If the claimant company makes a claim as mentioned in section 130 F163 ..., the group relief is given by the making of a deduction from the claimant company's total profits of the claim period.

(2) The amount of the deduction is—

(a) an amount equal to the surrendering company's surrenderable amounts for the surrender period, or

(b) if the claim is in relation to only part of those amounts, an amount equal to that part.

(3) Subsection (2) is subject to—

(a) subsections (4) to (7),

(b) the limitation set out in sections 138 to 142 that applies in relation to all claims for group relief,

(c) the limitations set out in sections 143 to 149 that apply in relation to claims based on consortium condition 1, consortium condition 2 or consortium condition 3,

(d) Chapter 3 of Part 4 (relief in cases involving trading losses made in limited partnerships or limited liability partnerships), and

(e) section 305(1) (group relief in cases involving oil activities etc).

(4) The deduction is to be made—

(a) before deductions for relief within subsection (5), but

(b) after all other deductions to be made at Step 2 in section 4(2) (apart from deductions for group relief on other claims).

(5) The deductions within this subsection are deductions for relief—

(a) under section 37 in relation to a loss made in an accounting period after the claim period,

(b) under section 260(3) of CAA 2001 in relation to capital allowances for an accounting period after the claim period, F164 ...

(c) under section 389[F165 , 459 or 463B] of CTA 2009 in relation to a deficit for a deficit period after the claim period[F166 , and

F167 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F168 (e) of a type to which section 269ZB(2), 269ZBA(2), 269ZC(2) or 269ZD(2) of Part 7ZA (restrictions on deductions for carried-forward losses and other amounts) could apply.]

(6) For the purposes of subsection (4)(b) it is to be assumed that the claimant company has claimed all relief available to it for the claim period under section 37 of this Act or section 260(3) of CAA 2001.

(7) Corporation tax relief is not to be given more than once for the same amount, whether—

(a) by giving group relief and by giving some other relief (for any accounting period) to the surrendering company, or

(b) by giving group relief more than once.

Textual Amendments

F163 Words in s. 137(1) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(4)

F164 Word in s. 137(5)(b) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 159(a)

F165 Words in s. 137(5)(c) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 159(b)

F166 S. 137(5)(d) and word inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 159(c)

F167 S. 137(5)(d) omitted (with effect in accordance with Sch. 8 para. 17 of the amending Act) by virtue of Finance Act 2021 (c. 26), Sch. 8 para. 4(a)

F168 S. 137(5)(e) inserted (with effect in accordance with Sch. 8 para. 17 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 4(b)

Modifications etc. (not altering text)

C33 S. 137(7) applied by 2012 c. 14, ss. 124A(6), 124B(7), 124C(7) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 26)

General limitation on amount of group relief to be given U.K.

138 Limitation on amount of group relief applying to all claims U.K.

The amount of group relief to be given on a claim (“the current claim”) is limited to—

(a) the unused part of the surrenderable amounts (see section 139), or

(b) if less, the unrelieved part of the claimant company's available total profits of the claim period (see section 140).

Modifications etc. (not altering text)

C34 Ss. 138-142 applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 10(1)

C35 Ss. 138-142 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 11 (with ss. 15(1), 16(1), 17)

139 Unused part of the surrenderable amounts U.K.

(1) The unused part of the surrenderable amounts is the amount equal to—

(a) the surrenderable amount for the overlapping period (see subsection (2)), less

(b) the amount of prior surrenders for that period (see subsections (3) to (5)).

(2) To determine the surrenderable amount for the overlapping period—

(a) take the proportion of the surrender period included in the overlapping period, and

(b) apply that proportion to the surrenderable amounts for the surrender period.

The surrenderable amount for the overlapping period is the amount given as a result of paragraph (b).

(3) To determine the amount of prior surrenders for the overlapping period—

(a) identify any prior claims for the purposes of this section (see subsection (4)), and

(b) take the steps set out in subsection (5) in relation to each such claim.

The amount of prior surrenders for the overlapping period is the total of the previously used amounts given at Step 3 in subsection (5) for all the prior claims.

(4) A claim is a prior claim for the purposes of this section if—

(a) it is a claim by any company for group relief in respect of the whole or a part of the amounts that, in relation to the current claim, are the surrendering company's surrenderable amounts for the surrender period,

(b) it is made before the current claim, and

(c) it has not been withdrawn.

(5) These are the steps referred to in subsection (3)(b) to be taken in relation to each prior claim.

• Step 1

  Identify the overlapping period for the prior claim.

• Step 2

  Identify any period that is common to the overlapping period for the current claim and the overlapping period for the prior claim. If there is a common period, go to Step 3. If there is no common period, there is no previously used amount in relation to the prior claim (and ignore Step 3).

• Step 3

  Determine the previously used amount of group relief in relation to the prior claim (see subsection (6)).

(6) To determine the previously used amount of group relief in relation to a prior claim—

(a) take the proportion of the overlapping period for the prior claim that is included in the common period identified at Step 2 in relation to that claim, and

(b) apply that proportion to the amount of group relief given on the prior claim.

The previously used amount of group relief in relation to the prior claim is the amount given as a result of paragraph (b).

(7) For the meaning of “the overlapping period” see section 142.

Modifications etc. (not altering text)

C34 Ss. 138-142 applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 10(1)

C35 Ss. 138-142 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 11 (with ss. 15(1), 16(1), 17)

140 Unrelieved part of claimant company's available total profits U.K.

(1) The unrelieved part of the claimant company's available total profits of the claim period is the amount equal to—

(a) the company's available total profits for the overlapping period (see subsection (2)), less

(b) the amount of previously claimed group relief for that period (see subsection (3)).

(2) To determine the available total profits for the overlapping period—

(a) take the proportion of the claim period included in the overlapping period, and

(b) apply that proportion to the available total profits of the claim period.

The available total profits for the overlapping period is the amount given as a result of paragraph (b).

(3) To determine the amount of previously claimed group relief for the overlapping period—

(a) identify any prior claims for the purposes of this section (see subsection (4)), and

(b) take the steps set out in subsection (5) in relation to each such claim.

The amount of previously claimed group relief for the overlapping period is the total of the previously claimed amounts given at Step 3 in subsection (5) for all the prior claims.

(4) A claim is a prior claim for the purposes of this section if—

(a) it is a claim by the claimant company for group relief which would be given by way of a deduction from the company's total profits of the claim period,

(b) it is made before the current claim, and

(c) it has not been withdrawn.

(5) These are the steps referred to in subsection (3)(b) to be taken in relation to each prior claim.

• Step 1

  Identify the overlapping period for the prior claim.

• Step 2

  Identify any period that is common to the overlapping period for the current claim and the overlapping period for the prior claim. If there is a common period, go to Step 3. If there is no common period, there is no previously claimed amount in relation to the prior claim (and ignore Step 3).

• Step 3

  Determine the previously claimed amount of group relief in relation to the prior claim (see subsection (6)).

(6) To determine the previously claimed amount of group relief in relation to a prior claim—

(a) take the proportion of the overlapping period for the prior claim that is included in the common period identified at Step 2 in relation to that claim, and

(b) apply that proportion to the amount of group relief given on the prior claim.

The previously claimed amount of group relief in relation to the prior claim is the amount given as a result of paragraph (b).

(7) In this section references to the claimant company's “available total profits” are references to its total profits after the deductions mentioned in section 137(4)(b).

(8) Further, if the claimant company is non-UK resident its available total profits do not include any part of its total profits that arise from activities that are double taxation exempt for the claim period (see section 186) (so far as those profits are not covered by the deductions mentioned in section 137(4)(b)).

(9) For the meaning of “the overlapping period” see section 142.

Modifications etc. (not altering text)

C34 Ss. 138-142 applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 10(1)

C35 Ss. 138-142 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 11 (with ss. 15(1), 16(1), 17)

C36 S. 140 modified (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 10(2)(a)

141 Sections 139 and 140: supplementary U.K.

(1) If two or more claims for group relief are made at the same time, for the purposes of sections 139 and 140 treat the claims as made—

(a) in such order as the company making them may elect or the companies making them may jointly elect, or

(b) if no such election is made, in such order as an officer of Revenue and Customs may direct.

(2) For the purposes of Step 3 in subsection (5) of each of sections 139 and 140 the amount of group relief given on a prior claim is determined on the basis that relief is given on the claim before it is given on any later claim.

(3) If the use of the proportion mentioned in section 139(2) or (6), or in section 140(2) or (6), would, in the circumstances of a particular case, produce a result that is unjust or unreasonable, the proportion is to be modified so far as necessary to produce a result that is just and reasonable.

Modifications etc. (not altering text)

C34 Ss. 138-142 applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 10(1)

C35 Ss. 138-142 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 11 (with ss. 15(1), 16(1), 17)

142 Meaning of “the overlapping period” U.K.

(1) In sections 139 and 140 “the overlapping period”, in relation to a claim for group relief, means the period that is common to the claim period and the surrender period (see Requirement 2 in section 130(2) F169 ...).

(2) But if during any part of the overlapping period the group relief condition is not met, that part is treated as not forming part of the overlapping period but instead as forming—

(a) a part of the surrender period that is not included in the overlapping period, and

(b) a part of the claim period that is not included in the overlapping period.

(3) The group relief condition is the condition on which the claim for group relief is based, that is—

• the group condition,

• consortium condition 1,

• consortium condition 2,

• [F170 or, consortium condition 3.]

Textual Amendments

F169 Words in s. 142(1) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(5)(a)

F170 Words in s. 142(3) substituted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by Finance Act 2022 (c. 3), Sch. 4 para. 1(5)(b)

Modifications etc. (not altering text)

C34 Ss. 138-142 applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 10(1)

C35 Ss. 138-142 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 11 (with ss. 15(1), 16(1), 17)

C37 S. 142 modified (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 10(2)(b)

Limitations on group relief if claim based on consortium condition 1, 2 or 3 U.K.

143 Condition 1: surrendering company owned by consortium U.K.

(1) This section applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 1, and

(b) it is the surrendering company that is owned by the consortium.

(2) The group relief to be given on the claim is limited to the ownership proportion of the surrenderable amount for the overlapping period (see section 139(2) to determine the surrenderable amount for the overlapping period).

(3) The ownership proportion is the same as the lowest of the following proportions—

(a) the proportion of the ordinary share capital of the surrendering company that is beneficially owned by the claimant company,

(b) the proportion of any profits available for distribution to equity holders of the surrendering company to which the claimant company is beneficially entitled (see Chapter 6), F171 ...

(c) the proportion of any assets of the surrendering company available for distribution to such equity holders on a winding up to which the claimant company would be beneficially entitled (see Chapter 6) [F172 , and

(d) the proportion of the voting power in the surrendering company that is directly possessed by the claimant company.]

(4) For the purposes of subsection (3)—

(a) the proportions mentioned in [F173 paragraphs (a) to (d)] of that subsection are those prevailing during the overlapping period, and

(b) if any of those proportions changes during that period, use the average of that proportion during that period.

(5) If the surrendering company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), references in subsection (3) to the surrendering company are to be read as references to the holding company in question.

(6) In this section “the overlapping period” is to be read in accordance with section 142.

Textual Amendments

F171 Word in s. 143(3)(b) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 7(2)(a)

F172 S. 143(3)(d) and word inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 7(2)(b)

F173 Words in s. 143(4)(a) substituted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 7(3)

144 Condition 1: claimant company owned by consortium U.K.

(1) This section applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 1, and

(b) it is the claimant company that is owned by the consortium.

(2) The group relief to be given on the claim is limited to the ownership proportion of the claimant company's [F174 available total profits] of the overlapping period (see section 140(2) to determine the [F174 available total profits] of the overlapping period).

(3) The ownership proportion is the same as the lowest of the following proportions—

(a) the proportion of the ordinary share capital of the claimant company that is beneficially owned by the surrendering company,

(b) the proportion of any profits available for distribution to equity holders of the claimant company to which the surrendering company is beneficially entitled (see Chapter 6), F175 ...

(c) the proportion of any assets of the claimant company available for distribution to such equity holders on a winding up to which the surrendering company would be beneficially entitled (see Chapter 6) [F176 , and

(d) the proportion of the voting power in the claimant company that is directly possessed by the surrendering company.]

(4) For the purposes of subsection (3)—

(a) the proportions mentioned in [F177 paragraphs (a) to (d)] of that subsection are those prevailing during the overlapping period, and

(b) if any of those proportions changes during that period, use the average of that proportion during that period.

(5) If the claimant company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), references in subsection (3) to the claimant company are to be read as references to the holding company in question.

(6) In this section “the overlapping period” is to be read in accordance with section 142.

Textual Amendments

F174 Words in s. 144(2) substituted (with effect in accordance with art. 1(3) of the amending S.I.) by The Tax Law Rewrite Acts (Amendment) Order 2013 (S.I. 2013/463), arts. 1(2), 10

F175 Word in s. 144(3)(b) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 8(2)(a)

F176 S. 144(3)(d) and word inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 8(2)(b)

F177 Words in s. 144(4)(a) substituted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 8(3)

145 Conditions 2 and 3: limitations in sections 143 and 144 U.K.

(1) This section applies if the claimant company makes a claim for group relief based on consortium condition 2 or consortium condition 3.

(2) If the claim is based on consortium condition 2, the limitation on group relief in section 143(2) applies in relation to the claim, but for this purpose references in section 143(3) to the claimant company are to be read as references to the link company.

(3) If the claim is based on consortium condition 3, the limitation on group relief in section 144(2) applies in relation to the claim, but for this purpose references in section 144(3) to the surrendering company are to be read as references to the link company.

146 Conditions 2 and 3: companies in link company's group U.K.

(1) If the claimant company makes a claim for group relief based on consortium condition 2, the amount of group relief to be given on the claim is limited by subsections (2) and (3).

(2) There is a limit on the amount of group relief that can be given, in total, on consortium claims made by the link company and group companies in relation to the surrendering company's surrenderable amounts for the surrender period.

(3) That limit is the maximum amount of group relief that could be given to the link company in relation to those amounts on consortium claims—

(a) assuming that no consortium claims in relation to those amounts were made by group companies based on consortium condition 2, F178 ...

[F179 (aa) assuming that the link company was UK related, and ]

(b) ignoring any lack of profits of the link company from which deductions could be made as mentioned in section 137(1).

(4) If the claimant company makes a claim for group relief based on consortium condition 3, the amount of group relief to be given on the claim is limited by subsections (5) to (7).

(5) There is a limit on the amount of group relief that can be given, in total, to the claimant company for the claim period on consortium claims made in relation to losses and other amounts surrendered by the link company and group companies.

(6) That limit is the same as the limit that, as a result of section 144(2), would apply for the purposes of a consortium claim made by the claimant company for the claim period in relation to losses or other amounts surrendered by the link company[F180 , assuming that the link company was UK related].

(7) In determining the limit that would apply as a result of section 144(2) it is to be assumed that the accounting period of the link company is the same as the accounting period of the claimant company.

(8) In this section—

• “consortium claim” means a claim for group relief based on consortium condition 1, consortium condition 2 or consortium condition 3, F181 ...

• “group company”, for the purpose of determining in accordance with this section a limitation on the amount of group relief to be given on a claim based on consortium condition 2 or consortium condition 3, means a company that is a member of the same group of companies as the link company (other than the link company itself)[F182 , and

• “UK related”, in relation to a company, has the meaning given by section 134.]

Textual Amendments

F178 Word in s. 146(3)(a) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 6(2)(a)

F179 S. 146(3)(aa) inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 6(2)(b)

F180 Words in s. 146(6) inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 6(3)

F181 Word in s. 146(8) omitted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 6(4)(a)

F182 Words in s. 146(8) inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 6(4)(b)

[F183 146A Conditions 1 and 2: surrendering company not controlled by claimant company etc U.K.

(1) This section applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 1,

(b) it is the surrendering company that is owned by the consortium, and

(c) during any part of the overlapping period, arrangements within subsection (3) are in place which enable a person to prevent the claimant company, either alone or together with one or more other companies that are members of the consortium, from controlling the surrendering company.

(2) This section also applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 2, and

(b) during any part of the overlapping period, arrangements within subsection (3) are in place which enable a person to prevent the link company, either alone or together with one or more other companies that are members of the consortium, from controlling the surrendering company.

(3) Arrangements are within this subsection if—

(a) the company, either alone or together with one or more other companies that are members of the consortium, would control the surrendering company, but for the existence of the arrangements, and

(b) the arrangements form part of a scheme the main purpose, or one of the main purposes, of which is to enable the claimant company to obtain a tax advantage under this Chapter.

(4) The group relief to be given on the claim is to be determined as if the surrenderable amount for the overlapping period were 50% of what it would be but for this section (see section 139(2) to determine the surrenderable amount for the overlapping period).

(5) In this section “ the overlapping period ” is to be read in accordance with section 142.

(6) Section 1139 (“tax advantage”) applies for the purposes of this section.

Textual Amendments

F183 Ss. 146A, 146B inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 9

146B Conditions 1 and 3: claimant company not controlled by surrendering company etc U.K.

(1) This section applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 1,

(b) it is the claimant company that is owned by the consortium, and

(c) during any part of the overlapping period, arrangements within subsection (3) are in place which enable a person to prevent the surrendering company, either alone or together with one or more other companies that are members of the consortium, from controlling the claimant company.

(2) This section also applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 3, and

(b) during any part of the overlapping period, arrangements within subsection (3) are in place which enable a person to prevent the link company, either alone or together with one or more other companies that are members of the consortium, from controlling the claimant company.

(3) Arrangements are within this subsection if—

(a) the company, either alone or together with one or more other companies that are members of the consortium, would control the claimant company, but for the existence of the arrangements, and

(b) the arrangements form part of a scheme the main purpose, or one of the main purposes, of which is to enable the claimant company to obtain a tax advantage under this Chapter.

(4) The group relief to be given on the claim is to be determined as if the claimant company's total profits for the overlapping period were 50% of what they would be but for this section (see section 140(2) to determine the total profits for the overlapping period).

(5) In this section “ the overlapping period ” is to be read in accordance with section 142.

(6) Section 1139 (“tax advantage”) applies for the purposes of this section.]

Textual Amendments

F183 Ss. 146A, 146B inserted (with effect in accordance with Sch. 6 para. 10 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 6 para. 9

147 Conditions 1 and 2: surrenderable amounts including trading loss U.K.

(1) This section applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 1,

(b) it is the surrendering company that is owned by the consortium,

(c) the surrendering company's surrenderable amounts for the surrender period include a loss within section 99(1)(a), and

(d) the surrendering company has profits (of any description) of that period from which the loss could be deducted under section 37.

(2) This section also applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 2,

(b) the surrendering company's surrenderable amounts for the surrender period include a loss within section 99(1)(a), and

(c) the surrendering company has profits (of any description) of that period from which the loss could be deducted under section 37.

(3) The amount of group relief to be given on the claim is to be determined on the assumption that—

(a) the surrendering company makes a claim under section 37 in relation to the loss mentioned in subsection (1)(c) or (2)(b), and

(b) relief under that section is to be given in relation to the loss before the group relief is given.

(4) If section 148 also applies in relation to the claim for group relief, in giving effect to subsection (3) of this section the surrenderable amounts for the purposes of subsections (3) and (4) of that section are to be reduced by the amount of relief to be given on the surrendering company's claim as mentioned in subsection (3)(b) of this section.

148 Conditions 1 and 2: surrendering company in group of companies U.K.

(1) This section applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 1,

(b) it is the surrendering company that is owned by the consortium, and

(c) the surrendering company is also a member of a group of companies.

(2) This section also applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 2, and

(b) the surrendering company is a member of a group of companies.

[F184 (3) In the case of the claim (“the current claim”) the surrendering company’s surrenderable amounts for the surrender period are to be treated as reduced (but not below nil) by the group’s potential relief.]

(5) The group's potential relief is the maximum amount of group relief that could be given if every claim that could be made based on the group condition in respect of the surrenderable amounts was in fact made (and for this purpose it is to be assumed that the maximum possible claim is made in each case).

(6) Before determining the maximum amount of potential group relief under subsection (5), take account of any claim made before the current claim that—

(a) is a claim for group relief based on the group condition, and

(b) is in relation to losses or other amounts surrendered by a member of the same group of companies as the surrendering company (other than the surrendering company itself).

Textual Amendments

F184 S. 148(3) substituted for s. 148(3)(4) (with effect in accordance with art. 1(3) of the amending S.I.) by The Tax Law Rewrite Acts (Amendment) Order 2013 (S.I. 2013/463), arts. 1(2), 11

149 Conditions 1 and 3: claimant company in group of companies U.K.

(1) This section applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 1,

(b) it is the claimant company that is owned by the consortium, and

(c) the claimant company is also a member of a group of companies.

(2) This section also applies if—

(a) the claimant company makes a claim for group relief based on consortium condition 3, and

(b) the claimant company is a member of a group of companies.

[F185 (3) In the case of the claim (“the current claim”) the claimant company’s available total profits of the claim period are to be treated as reduced (but not below nil) by the group’s potential relief.]

(5) The group's potential relief is the maximum amount of group relief that could be claimed by the claimant company for the claim period on claims based on the group condition.

(6) Before determining the maximum amount of potential group relief under subsection (5), take account of any claim made before the current claim that—

(a) is a claim for group relief based on the group condition made by another member of the same group of companies as the claimant company, and

(b) is in relation to losses or other amounts surrendered by a company that is also a member of that group.

Textual Amendments

F185 S. 149(3) substituted for s. 149(3)(4) (with effect in accordance with art. 1(3) of the amending S.I.) by The Tax Law Rewrite Acts (Amendment) Order 2013 (S.I. 2013/463), arts. 1(2), 12

Chapter 5 U.K. Subsidiaries, groups and consortiums

Introduction U.K.

150 Overview of Chapter U.K.

(1) This Chapter explains how to determine if a company—

(a) is a 75% or 90% subsidiary of another company (see section 151),

(b) is a member of a group of companies (see section 152),

(c) is owned by a consortium (see section 153), or

(d) is a member of a consortium (see section 153).

(2) Sections 154 to 156 qualify those explanations in cases involving transfers of companies.

Explanations of terms U.K.

151 Meaning of “75% subsidiary” and “90% subsidiary” U.K.

(1) In this Part “75% subsidiary” and “90% subsidiary” are to be read in accordance with Chapter 3 of Part 24, but subject to subsections (2) to (4).

(2) In applying the definition of “75% subsidiary” in section 1154(3), share capital of a [F186 registered society ] is to be treated as if it were ordinary share capital.

(3) If—

(a) a company (“the shareholder”) directly owns shares in another company, and

(b) a profit on the sale of those shares would be a trading receipt of the shareholder,

the shareholder is treated as not being the owner of those shares for the purpose of determining if any company is a 75% subsidiary of any other company.

(4) If a company (“the subsidiary”) would, apart from this subsection, be treated as a 75% or 90% subsidiary of another company (“the parent”) at any time, the subsidiary is not to be so treated unless at that time the parent—

(a) is beneficially entitled to at least 75% or 90% (as the case may be) of any profits available for distribution to equity holders of the subsidiary (see Chapter 6), and

(b) would be beneficially entitled to at least 75% or 90% (as the case may be) of any assets of the subsidiary available for distribution to such equity holders on a winding up (see Chapter 6).

Textual Amendments

F186 Words in s. 151(2) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 159 (with Sch. 5)

Modifications etc. (not altering text)

C38 S. 151(4) applied (with effect in accordance with Sch. 16 para. 62 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 16 para. 56(3)

152 Groups of companies U.K.

For the purposes of this Part two companies are members of the same group of companies if—

(a) one is the 75% subsidiary of the other, or

(b) both are 75% subsidiaries of a third company.

153 Companies owned by consortiums and members of consortiums U.K.

(1) For the purposes of this Part a company is owned by a consortium if—

(a) the company is not a 75% subsidiary of any company, and

(b) at least 75% of the company's ordinary share capital is beneficially owned by other companies each of which beneficially owns at least 5% of that capital.

(2) The other companies each owning at least 5% of the share capital are the members of the consortium for the purposes of this Part.

(3) If—

(a) a trading company is a 90% subsidiary of a holding company and is not a 75% subsidiary of any company apart from the holding company, and

(b) as a result of subsection (1), the holding company is owned by a consortium,

then for the purposes of this Part the trading company is also owned by the consortium.

Modifications etc. (not altering text)

C39 S. 153 applied by 1998 c. 36, Sch. 18 para. 71A(4) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 116)

Arrangements for transfers of companies U.K.

154 Arrangements for transfer of member of group of companies etc U.K.

(1) This section applies if, apart from this section, one company (“the first company”) and another company (“the second company”) would be members of the same group of companies.

(2) For the purposes of this Part the companies are not members of the same group of companies if—

(a) one of the companies has surrenderable amounts for an accounting period (“the current period”), and

(b) arrangements within subsection (3) are in place.

(3) Arrangements are within this subsection if they have any of the following effects [F187 (but see sections [F188 155A ] and 155B)].

• Effect 1

  At some time during or after the current period, the first company or any successor of it—

  (a)

  could cease to be a member of the same group of companies as the second company, and

  (b)

  could become a member of the same group of companies as a third company (see subsection (4)).

• Effect 2

  At some time during or after the current period a person (other than the first or second company) has or could obtain, or persons together (other than those companies) have or could obtain, control of the first company but not of the second company.

• Effect 3

  At some time during or after the current period, a third company could start to carry on the whole or a part of a trade that at a time during the current period is carried on by the first company and could do so—

  (a)

  as the successor of the first company, or

  (b)

  as the successor of another company which is not a third company and which started to carry on the whole or a part of the trade during or after the current period.

(4) A “third company” means a company that is not, apart from any arrangements within subsection (3), a member of the same group of companies as the first company.

Textual Amendments

F187 Words in s. 154(3) inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(2)

F188 Word in s. 154(3) substituted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(2)

Modifications etc. (not altering text)

C40 S. 154 applied (with modifications) (with effect in accordance with Sch. 7 para. 40 of the amending Act) by 2010 c. 8, s. 259ZME(3) (as inserted by Finance Act 2021 (c. 26), Sch. 7 para. 15(3))

C41 S. 154 applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 11

C42 S. 154 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 12 (with ss. 15(1), 16(1), 17)

155 Arrangements for transfer of company owned by consortium etc U.K.

(1) This section applies if, apart from this section, a trading company would be owned by a consortium.

(2) The trading company is not owned by the consortium if—

(a) for an accounting period (“the current period”) the trading company or a member of the consortium has surrenderable amounts, and

(b) arrangements within subsection (3) are in place.

(3) Arrangements are within this subsection if they have any of the following effects [F189 (but see sections [F190 155A] and 155B)].

• Effect 1

  The trading company or a successor of it could, at some time during or after the current period, become a 75% subsidiary of a third company (see subsection (4)).

• Effect 2

  Any person who owns, or any persons who together own, less than 50% of the ordinary share capital of the trading company—

  (a)

  has, or together have, control of the trading company, or

  (b)

  could obtain such control at some time during or after the current period.

• Effect 3

  Any person (“P”), either alone or together with persons connected with P—

  (a)

  holds or could obtain at least 75% of the qualifying votes, or

  (b)

  controls or could control the exercise of at least 75% of those votes.

  For this purpose—

  • “connected” is to be read in accordance with section 1122 but as if subsection (4) of that section were omitted, and

  • “qualifying votes” means the votes which may be cast in a poll taken at a general meeting of the trading company held during or after the current period.

• Effect 4

  A third company could start to carry on the whole or a part of a trade that at a time during the current period is carried on by the trading company and could do so—

  (a)

  as the successor of the trading company, or

  (b)

  as the successor of another company which is not a third company and which started to carry on the whole or a part of the trade during or after the current period.

(4) A “third company” means a company that is not, apart from any arrangements within subsection (3), a member of the same group of companies as the trading company.

(5) If the trading company would, apart from this section, be owned by a consortium as a result of section 153(3) (consortiums involving holding companies)—

(a) references in this section (apart from references under Effect 4) to the trading company are to be read as including references to the holding company concerned, and

(b) Effect 3 does not apply if P is that holding company.

Textual Amendments

F189 Words in s. 155(3) inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(3)

F190 Word in s. 155(3) substituted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(2)

[F191 155A Certain arrangements not within sections 154 and 155 U.K.

(1) Arrangements entered into by a joint venture company which, apart from this section, would be arrangements within section 154(3) or 155(3) are not to be treated as such arrangements if and so long as—

(a) the arrangements fall within subsection (2), and

(b) none of the contingencies mentioned in subsection (3) to which the arrangements relate has occurred.

(2) Arrangements fall within this subsection if they are—

(a) an agreement which provides for the transfer of shares or securities in the joint venture company to one or more members of that company on, or as a result of, one or more contingencies mentioned in subsection (3) occurring, or

(b) a provision in a constitutional document of the joint venture company which provides for the suspension of a member’s voting rights on, or as a result of, one or more of those contingencies occurring.

(3) The contingencies referred to in subsections (1)(b) and (2) are—

(a) the voluntary departure of a member,

(b) the commencement of the liquidation, administration, administrative receivership or receivership of, or the entering into of a voluntary arrangement by, a member under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 or the commencement, or entering into, of equivalent proceedings or arrangements under the law of any country or territory outside the United Kingdom,

(c) a serious deterioration in the financial condition of a member,

(d) a change of control of a member,

(e) a default by a member in performing its obligations under any agreement between the members or with the joint venture company (which, for this purpose, includes any constitutional document of the joint venture company),

(f) an external change in the commercial circumstances in which the joint venture company operates such that its viability is threatened,

(g) an unresolved disagreement between members, and

(h) any contingency of a similar kind to that mentioned in any of paragraphs (a) to (g) which is provided for, but not intended to happen, when the arrangements in question are entered into.

(4) This section does not apply if a member could alone or together with connected persons dictate the terms or timing of—

(a) the transfer of shares or securities, or

(b) the suspension of a member’s voting rights,

in advance of one or more of the contingencies occurring.

(5) For the purposes of subsection (4) members are not connected with each other by reason only of their membership of the joint venture company.

(6) In this section—

• “connected” has the same meaning as in section 1122;

• “constitutional document” means a memorandum of association, articles of association or any other similar document regulating the affairs of the joint venture company;

• “joint venture company” means a company which—

  (a)

  has two or more member companies, and

  (b)

  carries on a commercial activity governed by an agreement regulating the affairs of its members;

• “member” means a holder of shares or securities in the joint venture company.

Textual Amendments

F191 Ss. 155A, 155B inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(1)

Modifications etc. (not altering text)

C43 S. 155A applied (with modifications) (with effect in accordance with Sch. 7 para. 40 of the amending Act) by 2010 c. 8, s. 259ZME(3) (as inserted by Finance Act 2021 (c. 26), Sch. 7 para. 15(3))

C44 Ss. 155A-156 applied (with modifications) (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 11

C45 Ss. 155A-156 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 12 (with ss. 15(1), 16(1), 17)

155B Certain mortgage arrangements not within sections 154 and 155 U.K.

(1) Arrangements entered into by a company which, apart from this section, would be arrangements within section 154(3) or 155(3) are not to be treated as such arrangements if and so long as—

(a) the arrangements are a mortgage, secured by way of shares or securities in the company, which on default or the happening of any other event allows the mortgagee to exercise its rights against the mortgagor, and

(b) the mortgagee has not exercised its rights against the mortgagor.

(2) This section does not apply if the mortgagee—

(a) possesses greater rights in respect of the shares or securities which are the subject of the mortgage than it requires to protect its interest as mortgagee, or

(b) could alone or together with connected persons dictate the terms or timing of the default or the happening of any other event which allows it to exercise its rights against the mortgagor.

(3) For the purposes of subsection (2)(b) the mortgagee is not, by reason only of the mortgage, connected with a company whose shares or securities are the subject of the mortgage.

(4) In this section—

• “connected” has the same meaning as in section 1122;

• “mortgage” means—

  (a)

  in England and Wales, and Northern Ireland, any legal or equitable charge, and

  (b)

  in Scotland, any right in security,

• (and section 1166(1) (definition of “mortgage”: Scotland) does not apply).]

Textual Amendments

F191 Ss. 155A, 155B inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(1)

Modifications etc. (not altering text)

C44 Ss. 155A-156 applied (with modifications) (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 11

C45 Ss. 155A-156 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 12 (with ss. 15(1), 16(1), 17)

C46 S. 155B applied (with modifications) (with effect in accordance with Sch. 7 para. 40 of the amending Act) by 2010 c. 8, s. 259ZME(3) (as inserted by Finance Act 2021 (c. 26), Sch. 7 para. 15(3))

156 Sections 154 and 155: supplementary U.K.

(1) This section applies for the purposes of sections 154 [F192 to 155B].

(2) “Arrangements”—

(a) means arrangements of any kind (whether or not in writing), but

(b) does not include [F193 — ]

(i) a power of a Minister of the Crown, the Scottish Ministers or a Northern Ireland department to give directions to a statutory body as to the disposal of assets belonging to the body or to a subsidiary of the body.[F194 , or

(ii) a condition or requirement imposed by, or agreed with, a Minister of the Crown, the Scottish Ministers, a Northern Ireland department or a statutory body.]

[F195 (2A) In subsection (2) “statutory body” means a body (other than a company as defined by section 1(1) of the Companies Act 2006) established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision, except that the Treasury may, by order, specify that a body is or is not to be a statutory body for this purpose.]

(3) A company is the successor of another company if it carries on a trade which, in whole or in part, the other company used to carry on and the circumstances are such that—

(a) Chapter 1 of Part 22 (transfers of trade without a change of ownership) applies in relation to the companies as, respectively, the successor and the predecessor within the meaning of that Chapter, or

(b) the two companies are connected with each other in accordance with section 1122.

Textual Amendments

F192 Words in s. 156(1) substituted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 13(4)

F193 Words in s. 156(2)(b) renumbered as s. 156(2)(b)(i) (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(1)(a)

F194 S. 156(2)(b)(ii) and word inserted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(1)(b)

F195 S. 156(2A) inserted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(1)(c)

Modifications etc. (not altering text)

C44 Ss. 155A-156 applied (with modifications) (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 11

C45 Ss. 155A-156 applied (with modifications) (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 1 para. 12 (with ss. 15(1), 16(1), 17)

C47 S. 156 applied (with modifications) (with effect in accordance with Sch. 7 para. 40 of the amending Act) by 2010 c. 8, s. 259ZME(3) (as inserted by Finance Act 2021 (c. 26), Sch. 7 para. 15(3))

Chapter 6 U.K. Equity holders and profits or assets available for distribution

Modifications etc. (not altering text)

C48 Pt. 5 Ch. 6 applied (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), ss. 241(6), 381(1) (with Sch. 9 paras. 1-9, 22)

C49 Pt. 5 Ch. 6 applied (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), ss. 345(7), 381(1) (with Sch. 9 paras. 1-9, 22, 31)

C50 Pt. 5 Ch. 6 applied (with modifications) by Taxation of Chargeable Gains Act 1992 (c. 12), s. 252(10) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 252 (with Sch. 2))

C51 Pt. 5 Ch. 6 applied (with modifications) by Taxation of Chargeable Gains Act 1992 (c. 12), s. 170(8) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 242(4) (with Sch. 2))

C52 Pt. 5 Ch. 6 applied (with modifications) by Finance Act 2009 (c. 4), s. 772(1)(2) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 646 (with Sch. 2))

C53 Pt. 5 Ch. 6 applied (with modifications) by Taxation of Chargeable Gains Act 1992 (c. 12), Sch. 7AC para. 8(2) (as substituted (with effect in accordance with s. 1184(1) of the amending Act) by 2010 c. 4, s. 1184(1), Sch. 1 para. 269(3) (with Sch. 2))

C54 Pt. 5 Ch. 6 applied by Capital Allowances Act 2001 (c. 2), ss. 212G(5), 212H(2) (as inserted (with effect in accordance with Sch. 4 para. 5, 6 of the amending Act) by 2010 c. 13, Sch. 4 para. 2)

C55 Pt. 5 Ch. 6 applied (with modifications) by 2007 c. 3, s. 257BF(3)(4) (as inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 6 para. 1)

C56 Pt. 5 Ch. 6 applied by 1992 c. 12, s. 236T(2) (as inserted (with effect in accordance with Sch. 37 paras. 2, 3 of the amending Act) by Finance Act 2014 (c. 26), Sch. 37 para. 1)

C57 Pt. 5 Ch. 6 applied by 2007 c. 3, s. 257MV(8) (as inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 1)

C58 Pt. 5 Ch. 6 applied by 2010 c. 8, s. 345(7)-(10) (as substituted (with effect in accordance with s. 39(4) of the amending Act) by Finance Act 2014 (c. 26), s. 39(2))

C59 Pt. 5 Ch. 6 applied (26.3.2015) by Finance Act 2015 (c. 11), Sch. 16 para. 7(5)

C60 Pt. 5 Ch. 6 applied (with modifications) (S.) (1.4.2015) by Land and Buildings Transaction Tax (Scotland) Act 2013 (asp 11), s. 70(2), Sch. 10 paras. 47, 48, Sch. 11 paras. 40, 41 (with s. 69); S.S.I. 2015/108, art. 2

C61 Pt. 5 Ch. 6 applied (E.W.) (1.4.2018) by Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 (anaw 1), s. 81(2)(3), Sch. 16 para. 3(7)(8); S.I. 2018/34, art. 3

C62 Pt. 5 Ch. 6 applied (with modifications) by 1992 c. 12, s. 169S(3D)(3E) (as substituted (with effect in accordance with Sch. 16 para. 4(4) of the amending Act) by Finance Act 2019 (c. 1), Sch. 16 para. 2(4)

C63 Pt. 5 Ch. 6 applied in part (with effect in accordance with s. 51 of the amending Act) by Finance Act 2022 (c. 3), s. 50(2)(3)

C64 Pt. 5 Ch. 6 applied (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(2) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

C65 Pt. 5 Ch. 6 applied (with modifications) (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), s. 307

Introduction U.K.

157 Introduction to Chapter U.K.

(1) This Chapter applies for the purposes of sections 143(3)(b) and (c), 144(3)(b) and (c) and 151(4)(a) and (b).

(2) For the purposes of this Chapter—

(a) “new consideration” has the meaning given by section 1115, and

(b) all loans are regarded as being securities.

Equity holders U.K.

158 Meaning of “equity holder” U.K.

(1) An equity holder of a company (“the relevant company”) is any person who—

(a) holds ordinary shares in the company (see section 160), or

(b) is a loan creditor of the company in relation to a loan other than a normal commercial loan (see section 162).

(2) For the purposes of subsection (1)(b) a person is a loan creditor of a company if the person is a creditor in respect of any redeemable loan capital issued by the company or in respect of a debt incurred by the company—

(a) for any money borrowed or capital assets acquired by the company,

(b) for any right to receive income created in favour of the company, or

(c) for consideration the value of which to the company was, at the time when the debt was incurred, substantially less than the amount of the debt (including any premium on the debt).

(3) Subsection (1) is subject to section 159.

Modifications etc. (not altering text)

C66 S. 158(1)(b) modified (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 4 (with reg. 8)

159 Use of relevant company's assets U.K.

(1) Subsection (2) applies if—

(a) a person (“P”) has, directly or indirectly, provided new consideration for any shares or securities in the relevant company,

(b) assets of the relevant company are used by P for the purposes of a trade carried on by P or are used by a person connected with P for the purposes of a trade carried on by that connected person, and

(c) in respect of those assets an allowance within subsection (3) has been made to the relevant company.

(2) P (and no other person) is to be treated as being an equity holder in relation to the shares or securities mentioned in subsection (1)(a).

(3) The allowances within this subsection are—

(a) an annual investment allowance, within the meaning of Chapter 5 of Part 2 of CAA 2001, in relation to expenditure incurred by the relevant company on the provision of plant or machinery,

(b) a first-year allowance, within the meaning of that Chapter, in relation to expenditure so incurred,

(c) a writing-down allowance, within the meaning of that Chapter, in relation to expenditure so incurred, and

(d) an allowance under Chapter 3 of Part 6 of CAA 2001 in relation to expenditure incurred by the relevant company on research and development (within the meaning of that Part).

(4) If—

(a) P is a bank,

(b) the only new consideration provided by P is provided in the normal course of banking business by way of a normal commercial loan (see section 162), and

(c) the cost to the relevant company of the assets mentioned in subsection (1)(b) is less than the amount of the new consideration,

the reference in subsection (2) to the shares or securities is to be read as a reference to only so much of that normal commercial loan as is equal to that cost of those assets.

Modifications etc. (not altering text)

C67 S. 159(4)(b) modified (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 4 (with reg. 8)

160 Meaning of “ordinary shares” U.K.

(1) For the purposes of section 158(1)(a) “ordinary shares” means shares other than restricted preference shares.

(2) For the purposes of subsection (1) restricted preference shares are shares that meet each of conditions A to E.

(3) Condition A is that the shares are issued for consideration which is or includes new consideration.

(4) Condition B is that the shares do not carry any right to conversion into shares or securities other than a right to conversion into—

(a) shares to which section 164(1) applies,

(b) securities to which section 164(2) applies, or

(c) shares or securities in the relevant company's quoted parent company (see section 164(3) to (7)).

(5) Condition C is that the shares do not carry any right to the acquisition of shares or securities.

(6) Condition D is that the shares—

(a) do not carry a right to dividends, or

(b) carry a restricted right to dividends (see section 161).

(7) Condition E is that the shares, on repayment, do not carry rights to an amount exceeding the new consideration mentioned in subsection (3) except so far as those rights are reasonably comparable with those generally carried by fixed dividend shares listed on a recognised stock exchange.

Modifications etc. (not altering text)

C68 S. 160 modified by 1988 c. 1, Sch. 25 para. 2(7A) (as inserted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 147(2)(b) (with Sch. 2))

C69 S. 160 excluded (1.3.2013) by The Building Societies (Core Capital Deferred Shares) Regulations 2013 (S.I. 2013/460), regs. 1(1), 3(2)(c) (with reg. 1(2))

C70 S. 160(2)-(7) applied (with modifications) by 1992 c. 12, Sch. 1A para. 9 (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

161 Meaning of “restricted right to dividends” U.K.

(1) For the purposes of condition D in section 160, a right to dividends carried by shares in a company is a “restricted right to dividends” if—

(a) the dividends represent no more than a reasonable commercial return on the new consideration received by the company in respect of the shares, and

(b) subsection (2), (3) or (4) applies.

(2) This subsection applies if—

(a) the dividends are of a fixed amount or are at a fixed percentage rate of the nominal value of the shares, and

(b) the company is not entitled, by virtue of any term subject to which the shares are issued or held, to reduce the amount of, or not to pay, any of the dividends.

(3) This subsection applies if—

(a) the dividends are of a fluctuating percentage rate of the nominal value of the shares, and

(b) the company is not entitled, by virtue of any term subject to which the shares are issued or held, to reduce the amount of, or not to pay, any of the dividends.

(4) This subsection applies if paragraph (a) of subsection (2) or (3) is met but paragraph (b) of that subsection is not met and—

(a) the company is only entitled to reduce the amount of, or not to pay, any of the dividends in special circumstances, or

(b) having regard to all the circumstances, it is reasonable to assume that the company is only likely to reduce the amount of, or not to pay, any of the dividends in special circumstances.

(5) For the purposes of subsection (3)(a) dividends are of a “fluctuating percentage rate” of the nominal value of shares if the rate fluctuates in accordance with—

(a) a standard published rate of interest,

(b) the retail prices index, or

(c) any other general index of prices similar to the retail prices index that is published by the government, or by an agent of the government, of the country or territory in whose currency the shares are denominated.

(6) For the purposes of subsection (4) a company reduces the amount of, or does not pay, dividends “in special circumstances” if—

(a) at the time the dividend is or would be payable, the company is in severe financial difficulties, or

(b) the company does so for the purpose of following a recommendation of a relevant regulatory body.

(7) The Treasury may by order specify circumstances in which a company is to be treated as in severe financial difficulties for the purposes of subsection (6)(a).

(8) In subsection (6)(b) “relevant regulatory body” means—

[F196 (a) in relation to a dividend paid by a company that is a PRA-authorised person for the purposes of the FISMA, the Prudential Regulation Authority,

(aa) in relation to a dividend paid by a company that is authorised for the purposes of the FISMA but does not fall within paragraph (a), the Financial Conduct Authority, and]

(b) in relation to a dividend paid by any other company, a body discharging functions in relation to the company under the law of a country or territory outside the United Kingdom that correspond to functions discharged by the Financial Services Authority in relation to a company authorised as mentioned in paragraph (a).

Textual Amendments

F196 S. 161(8)(a)(aa) substituted for s. 161(8)(a) (1.4.2013) by Financial Services Act 2012 (c. 21), s. 122(3), Sch. 18 para. 129(2) (with Sch. 20); S.I. 2013/423, art. 3, Sch.

Modifications etc. (not altering text)

C71 Ss. 161-164 applied (with modifications) by 1992 c. 12, Sch. 1A para. 9 (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

162 Meaning of “normal commercial loan” U.K.

(1) For the purposes of sections 158(1)(b) and 159(4)(b) “normal commercial loan” means a loan—

(a) which is of or includes new consideration, and

(b) in relation to which each of conditions A to D is met.

[F197 (1B) For those purposes, “normal commercial loan” also includes a hybrid capital instrument (within the meaning of section 475C of CTA 2009).]

F198 (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Condition A is that the loan does not carry any right to conversion into shares or securities other than a right to conversion into—

(a) shares to which section 164(1) applies,

(b) securities to which section 164(2) applies, or

(c) shares or securities in [F199 a quoted unconnected company (see section 164(2A)) or in] the relevant company's quoted parent company (see section 164(3) to (7)).

(3) Condition B is that the loan does not carry any right to the acquisition of shares or securities.

(4) Condition C is that the loan does not entitle the loan creditor to any amount by way of interest which—

(a) depends to any extent on the results of the relevant company's business or on the results of any part of that business,

(b) depends to any extent on the value of any of the relevant company's assets, or

(c) exceeds a reasonable commercial return on the new consideration lent.

This subsection needs to be read with section 163.

(5) Condition D is that the loan is a loan in relation to which the loan creditor is entitled, on repayment, to an amount which—

(a) does not exceed the new consideration lent, or

(b) is reasonably comparable with the amount generally repayable (in relation to an equal amount of new consideration) under the terms of issue of securities listed on a recognised stock exchange.

Textual Amendments

F197 S. 162(1B) inserted (with effect in accordance with Sch. 20 para. 10(a) of the amending Act) by Finance Act 2019 (c. 1), Sch. 20 para. 6

F198 S. 162(1A) repealed (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 12(a)(i)

F199 Words in s. 162(2)(c) inserted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(2)

Modifications etc. (not altering text)

C71 Ss. 161-164 applied (with modifications) by 1992 c. 12, Sch. 1A para. 9 (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

163 Normal commercial loans: company's results or value of assets U.K.

(1) Interest is not within section 162(4)(a) by reason only that the terms of the loan provide for the rate of interest—

(a) to be reduced if the results of the relevant company's business or any part of the business improve, or

(b) to be increased if such results worsen.

(2) Interest is not within section 162(4)(b) by reason only that the terms of the loan provide for the rate of interest—

(a) to be reduced if the value of any of the relevant company's assets increases, or

(b) to be increased if the value of any such assets decreases.

(3) Subsection (4) applies if—

(a) a loan is made to the relevant company for the purpose of facilitating the acquisition of land,

(b) the loan is made on the basis mentioned in subsection (5), and

(c) none of the land that the loan is used to acquire is acquired with a view to resale at a profit.

(4) Interest on the loan is not within section 162(4)(b) by reason only that the terms of the loan are such that the only way the loan creditor can enforce payment of an amount due is by exercising rights granted by way of security over the land that the loan is used to acquire.

(5) The basis referred to in subsection (3)(b) is that—

(a) the whole of the loan is to be applied in the acquisition of land by the relevant company or in meeting incidental costs incurred wholly and exclusively for the purpose of obtaining the loan or providing security for the loan,

(b) the payment of any amount due in connection with the loan to the person making it is to be secured on the land that the loan is used to acquire, and

(c) no other security is to be required for the payment of any such amount.

(6) “Incidental costs” means expenditure on fees, commissions, advertising, printing or other incidental matters.

Modifications etc. (not altering text)

C71 Ss. 161-164 applied (with modifications) by 1992 c. 12, Sch. 1A para. 9 (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

164 Sections 160 and 162: supplementary U.K.

(1) This subsection applies to any shares—

(a) in relation to which conditions A, C, D and E in section 160 are met, and

(b) which do not carry any rights to conversion into shares or securities other than rights to conversion into shares or securities in the relevant company's quoted parent company (see subsections (3) to (6)).

(2) This subsection applies to any securities—

(a) which represent a loan of or including new consideration,

(b) in relation to which conditions B, C and D in section 162 are met, and

(c) which do not carry any rights to conversion into shares or securities other than rights to conversion into shares or securities in [F200 a quoted unconnected company (see subsection (2A)) or in] the relevant company's quoted parent company.

[F201 (2A) For the purposes of this section and section 162 a company is a quoted unconnected company if (and only if)—

(a) its ordinary shares are listed on a recognised stock exchange, and

(b) it is not connected with the relevant company.]

(3) For the purposes of this section and sections 160 and 162 a company (“the candidate company”) is the relevant company's quoted parent company if (and only if)—

(a) the relevant company is a 75% subsidiary of the candidate company,

(b) the candidate company is not a 75% subsidiary of any company, and

(c) the candidate company's ordinary shares are listed on a recognised stock exchange.

(4) [F202 In the case of a company whose] ordinary share capital is divided into two or more classes, [F203 subsections (2A)(a) and (3)(c) are] met only if its ordinary shares of each class are listed on a recognised stock exchange.

(5) In [F204 this section] “ordinary shares” means shares forming part of ordinary share capital.

(6) Subsection (7) applies if, in determining under subsection (3)(a) whether the relevant company is a 75% subsidiary of the candidate company, it is necessary to know, for the purposes of subsection (1)(b) or (2)(c) or section 160(4)(c) or 162(2)(c), whether the candidate company is the relevant company's quoted parent company.

(7) It is to be assumed for those purposes that the candidate company is the relevant company's quoted parent company.

Textual Amendments

F200 Words in s. 164(2)(c) inserted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(3)

F201 S. 164(2A) inserted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(4)

F202 Words in s. 164(4) substituted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(5)(a)

F203 Words in s. 164(4) substituted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(5)(b)

F204 Words in s. 164(5) substituted (with effect in accordance with s. 32(7) of the amending Act) by Finance Act 2012 (c. 14), s. 32(6)

Modifications etc. (not altering text)

C71 Ss. 161-164 applied (with modifications) by 1992 c. 12, Sch. 1A para. 9 (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

F205 164A Loan forming part of tier two capital U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F205 S. 164A repealed (with effect in accordance with reg. 1(2)(3) of the amending S.I.) by The Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209), regs. 1(1), 12(a)(ii)

Company's entitlement to profits or assets available for distribution: basic provisions U.K.

165 Proportion of profits available for distribution to which company is entitled U.K.

(1) This section applies for the purpose of determining the proportion to which a company (“company A”) is, at any time, beneficially entitled of any profits available for distribution to the equity holders of another company (“company B”).

(2) The proportion is the proportion to which company A would, at that time, be beneficially entitled on a distribution in money to the equity holders of company B (“the profit distribution”) of—

(a) an amount of profits equal to company B's total profits of the relevant accounting period (see section 168), or

(b) if there are no such total profits, profits of £100.

(3) It does not matter for the purposes of subsection (2) if any of company B's total profits are not actually distributed.

(4) If company B is non-UK resident, company B's total profits are to be calculated as if it were UK resident.

(5) For the purposes of the profit distribution, it is to be assumed that no payment is made by way of repayment of share capital or of the principal secured by any loan unless that payment is a distribution.

(6) Subject to subsection (5), if an equity holder is entitled as such to a payment which (apart from this subsection) would not be a distribution, the equity holder is nevertheless to be treated as entitled to the payment on the profit distribution.

Modifications etc. (not altering text)

C72 S. 165 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

166 Proportion of assets available for distribution to which company is entitled U.K.

(1) This section applies for the purpose of determining the proportion to which a company (“company A”) would, at any time, be beneficially entitled of any assets available for distribution to the equity holders of another company (“company B”) on a winding up.

(2) The proportion is the proportion to which company A would, at that time, be beneficially entitled if company B were to be wound up and on that winding up (“the notional winding up”) the value of assets available for distribution to company B's equity holders were equal to—

(a) the assets amount minus the liabilities amount, or

(b) if the assets amount does not exceed the liabilities amount or if company B's balance sheet is prepared to a date other than the end of the relevant accounting period (see section 168), £100.

(3) The “assets amount” is the amount of company B's assets as shown in its balance sheet as at the end of the relevant accounting period.

(4) The “liabilities amount” is the amount of company B's liabilities as shown in that balance sheet but excluding liabilities to equity holders as such.

(5) If, on the notional winding up, an equity holder would be entitled as such to an amount of assets which (apart from this subsection) would not be a distribution of assets, the equity holder is nevertheless treated as entitled to the amount on the distribution of assets on the notional winding up.

(6) Subsection (7) applies if—

(a) an equity holder (“E”) of company B provided new consideration for any shares or securities in company B in relation to which E is an equity holder,

(b) company B makes a loan to E or any person connected with E or acquires shares or securities in E or any person so connected, and

(c) in making that loan or acquiring those shares or securities, company B applies, directly or indirectly, an amount (“the returned amount”) corresponding to the whole or any part of the new consideration.

(7) The following amounts are to be reduced by the returned amount—

(a) the assets amount, and

(b) the amount of assets to which E is beneficially entitled on the notional winding up.

Modifications etc. (not altering text)

C73 S. 166 modified by 2007 c. 3, s. 257MV(9) (as inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 1)

C74 S. 166 applied (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

167 Profits or assets available for distribution and entitlement: supplementary U.K.

(1) References to profits or assets available for distribution to equity holders of a company do not include references to any profits or assets available for distribution to any equity holder otherwise than as an equity holder.

(2) References to a company being beneficially entitled to profits or assets are references to the company being so entitled—

(a) directly,

(b) through another company or other companies, or

(c) partly directly and partly through another company or other companies.

(3) If a person is an equity holder in relation to shares or securities as a result of section 159, that person (and no other) is to be treated as being beneficially entitled to any distribution of profits or assets attributable to those shares or securities.

168 Meaning of “the relevant accounting period” U.K.

(1) For the purpose of determining the proportion of profits or assets to which company A would be beneficially entitled as mentioned in section 165(2) or 166(2) at any time, “the relevant accounting period” is the accounting period of company B in which that time falls.

F206 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F207 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F206 S. 168(2) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(6)

F207 S. 168(3) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(6)

Company's entitlement to profits or assets available for distribution: supplementary U.K.

169 Application and interpretation of sections 170 to 182 U.K.

(1) Sections 170 to 182 apply for the purpose of determining the proportion of profits or assets to which company A would be beneficially entitled as mentioned in section 165(2) or 166(2) at any time.

(2) In those sections—

• [F208 “arrangements”—

  (a)

  means arrangements of any kind (whether or not in writing), but

  (b)

  does not include a condition or requirement imposed by, or agreed with, a Minister of the Crown, the Scottish Ministers, a Northern Ireland department or a statutory body,]

• “company A's proportion” means the proportion of profits or assets to which company A would be beneficially entitled as mentioned in section 165(2) or 166(2) at the relevant time,

• “distribution rights” means rights in relation to dividends or interest or assets on a winding up,

• “the participating equity holders”, in relation to the determining of company A's proportion, means the equity holders of company B—

  (a)

  to whom the profit distribution would be made, or

  (b)

  who would be entitled to participate in the notional winding up, and

• “the relevant time” means the time mentioned in subsection (1) when the beneficial entitlement of company A is to be determined.

[F209 (3) In subsection (2) “statutory body” means a body (other than a company as defined by section 1(1) of the Companies Act 2006) established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision, except that the Treasury may, by order, specify that a body is or is not to be a statutory body for this purpose.]

Textual Amendments

F208 Words in s. 169(2) substituted (with effect in accordance with s. 40(4) of the amending Act) by Finance Act 2014 (c. 26), s. 40(2)(a)

F209 S. 169(3) inserted (with effect in accordance with s. 40(4) of the amending Act) by Finance Act 2014 (c. 26), s. 40(2)(b)

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

170 Shares or securities with limited rights U.K.

(1) This section applies if, at the relevant time, one or more of the participating equity holders holds, as such, shares or securities with distribution rights that are limited (wholly or partly) by reference to a specified amount or amounts.

(2) Determine what company A's proportion would be if all those distribution rights were waived so far as they are so limited.

The result is referred to as “the alternative proportion”.

(3) If the alternative proportion is less than what company A's proportion would be ignoring this section, then company A's proportion is taken to be the alternative proportion.

(4) Subsection (3) is subject to sections 175, 176, 178 and 180.

(5) For the purposes of subsection (1) a limitation on a right may operate—

(a) by specifying the capital or amount of profits by reference to which a distribution is calculated, or

(b) in any other way.

(6) But in a case to which section 180 applies (see section 179), limitations that are covered by Case 1 in section 179 are ignored for the purposes of subsection (1).

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

C76 S. 170(3) applied (with modifications) (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(a) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

171 Shares or securities with temporary rights U.K.

(1) Section 172 applies if, at the relevant time, one or more of the participating equity holders holds, as such, shares or securities—

(a) which have rights within subsection (2), or

(b) in relation to which arrangements within subsection (3) are in place.

(2) The rights within this subsection are distribution rights of such a kind that if—

(a) the profit distribution were to be made, or

(b) the notional winding up were to occur,

at a time after the relevant accounting period, the equity holder's entitlement at that time would be different from the equity holder's entitlement at the relevant time.

(3) The arrangements within this subsection are arrangements of such a kind that if—

(a) effect were to be given to the arrangements, and

(b) the profit distribution were to be made, or the notional winding up were to occur, at a time after the relevant accounting period,

then, as a result of effect being given to the arrangements, the equity holder's entitlement at that time would be different from the equity holder's entitlement at the relevant time.

(4) The references in subsections (2) and (3) to the equity holder's entitlement at a time are references to the proportion to which the equity holder would be beneficially entitled (as the case may be)—

(a) of profits on the profit distribution if it were made at that time, or

(b) of assets on the notional winding up if it occurred at that time.

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

172 Company A's proportion if shares etc have temporary rights U.K.

(1) If this section applies, determine what company A's proportion would be if the rights of all participating equity holders at the relevant time were the same as what they would be at the relevant future time.

The result is referred to as “the alternative proportion”.

(2) For the purposes of subsection (1)—

(a) “the relevant future time” means the time after the relevant accounting period mentioned in subsection (2) or (3) of section 171 (as the case may be), and

(b) assume that effect is given to all arrangements (if any) within subsection (3) of that section.

(3) If the alternative proportion is less than what company A's proportion would be ignoring this section, then company A's proportion is taken to be the alternative proportion.

(4) Subsection (3) is subject to sections 175, 177, 178 and 180.

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

C77 S. 172(3) applied (with modifications) (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(a) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

173 Cases in which option arrangements are in place U.K.

(1) Section 174 applies if option arrangements are in place at the relevant time.

(2) “Option arrangements” means arrangements in relation to which conditions A and B are met [F210 (but see sections 174A and 174B)].

(3) Condition A is that the effect of the arrangements is that there could be a change in—

(a) the proportion of profits to which any of the participating equity holders would be beneficially entitled on the profit distribution if it were made at a time after the relevant time, or

(b) the proportion of assets to which any of the participating equity holders would be beneficially entitled on the notional winding up if it occurred at a time after the relevant time.

(4) Condition B is that, under the arrangements, the change could result from the exercise of—

(a) a right to acquire ordinary shares in company B (see section 160) or securities in company B, or

(b) a right to require a person to acquire such shares or securities.

(5) For the purposes of subsection (4)—

(a) it does not matter whether or not the shares or securities were issued before the arrangements were put in place,

(b) “right” does not include a right within subsection (6), and

(c) “securities” does not include normal commercial loans (as defined by section 162).

(6) A right is within this subsection if it—

(a) is a right of an individual to acquire shares,

(b) was obtained because of the individual's office or employment as a director or employee of company B, and

(c) was obtained in accordance with a share option scheme at a time when the scheme was an approved share option scheme.

(7) In subsection (6)(c)—

• “share option scheme” means—

  (a)

  an SAYE option scheme within the meaning of the SAYE code (see section 516(4) of ITEPA 2003), or

  (b)

  a CSOP scheme within the meaning of the CSOP code (see section 521(4) of ITEPA 2003), and

• “approved” means—

  (a)

  in relation to an SAYE option scheme, approved under Schedule 3 to ITEPA 2003, and

  (b)

  in relation to a CSOP scheme, approved under Schedule 4 to ITEPA 2003.

Textual Amendments

F210 Words in s. 173(2) inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 14(2)

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

174 Company A's proportion if option arrangements in place U.K.

(1) If this section applies, take the following steps.

• Step 1

  Identify all option rights under the option arrangements (or sets of arrangements if more than one) which exist at the relevant time but which have not become effective at or before that time.“Option rights” means rights of the kind mentioned in section 173(4)(a) or (b), and such a right becomes “effective” when the shares or securities to which it relates are acquired as a result of its exercise.

• Step 2

  Identify each possible state of affairs that could subsist at the relevant time if the option rights identified at Step 1, or any of them or any combination of them, became effective at that time. For this purpose it does not matter if an option right cannot actually become effective at or before the relevant time.

• Step 3

  Take each state of affairs identified at Step 2 and—

  (a)

  identify what the rights and duties of the participating equity holders would be at the relevant time if the state of affairs were to subsist at that time, and

  (b)

  determine what company A's proportion would be if those rights and duties were the rights and duties of the participating equity holders at the relevant time.

• Step 4

  Identify the lowest proportion determined under paragraph (b) of Step 3. That proportion is referred to as “the alternative proportion”.

(2) If the alternative proportion is less than what company A's proportion would be ignoring this section, then company A's proportion is taken to be the alternative proportion.

(3) Subsection (2) is subject to sections 176 to 178 and 180.

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

C78 S. 174 applied (with modifications) (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(b) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

[F211 174A Certain option arrangements not within section 173 U.K.

(1) Arrangements entered into by a joint venture company which, apart from this section, would be option arrangements within section 173 are not to be treated as such arrangements if and so long as—

(a) the arrangements are within subsection (2), and

(b) none of the contingencies mentioned in subsection (3) to which the arrangements relate has occurred.

(2) Arrangements are within this subsection if they are—

(a) an agreement which provides for the transfer of shares or securities in the joint venture company to one or more members of that company on, or as a result of, one or more contingencies mentioned in subsection (3) occurring, or

(b) a provision in a constitutional document of the joint venture company which provides for the suspension of a member’s voting rights on, or as a result of, one or more of those contingencies occurring.

(3) The contingencies referred to in subsections (1)(b) and (2) are—

(a) the voluntary departure of a member,

(b) the commencement of the liquidation, administration, administrative receivership or receivership of, or the entering into of a voluntary arrangement by, a member under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 or the commencement, or entering into, of equivalent proceedings or arrangements under the law of any country or territory outside the United Kingdom,

(c) a serious deterioration in the financial condition of a member,

(d) a change of control of a member,

(e) a default by a member in performing its obligations under any agreement between the members or with the joint venture company (which, for this purpose, includes any constitutional document of the joint venture company),

(f) an external change in the commercial circumstances in which the joint venture company operates such that its viability is threatened,

(g) an unresolved disagreement between members, and

(h) any contingency of a similar kind to that mentioned in any of paragraphs (a) to (g) which is provided for, but not intended to happen, when the option arrangements in question are entered into.

(4) This section does not apply if a member could alone or together with connected persons dictate the terms or timing of—

(a) the transfer of shares or securities, or

(b) the suspension of a member’s voting rights,

in advance of one or more of the contingencies occurring.

(5) For the purposes of subsection (4) members are not connected with each other by reason only of their membership of the joint venture company.

(6) In this section—

• “connected” has the same meaning as in section 1122;

• “constitutional document” means a memorandum of association, articles of association or any other similar document regulating the affairs of the joint venture company;

• “joint venture company” means a company which—

  (a)

  has two or more member companies, and

  (b)

  carries on a commercial activity governed by an agreement regulating the affairs of its members;

• “member” means a holder of shares or securities in the joint venture company.

Textual Amendments

F211 Ss. 174A, 174B inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 14(1)

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

174B Certain mortgage arrangements not within section 173 U.K.

(1) Arrangements entered into by a company which, apart from this section, would be option arrangements within section 173 are not to be treated as such arrangements if and so long as—

(a) the arrangements are a mortgage, secured by way of shares or securities in the company, which on default or the happening of any other event allows the mortgagee to exercise its rights against the mortgagor, and

(b) the mortgagee has not exercised its rights against the mortgagor.

(2) This section does not apply if the mortgagee—

(a) possesses greater rights in respect of the shares or securities which are the subject of the mortgage than it requires to protect its interest as mortgagee, or

(b) could alone or together with connected persons dictate the terms or timing of the default or the happening of any other event which allows it to exercise its rights against the mortgagor.

(3) For the purposes of subsection (2)(b) the mortgagee is not by reason only of the mortgage connected with a company whose shares or securities are the subject of the mortgage.

(4) In this section—

• “connected” has the same meaning as in section 1122;

• “mortgage” means—

  (a)

  in England and Wales, and Northern Ireland, any legal or equitable charge, and

  (b)

  in Scotland, any right in security,

• (and section 1166(1) (definition of “mortgage”: Scotland) does not apply).]

Textual Amendments

F211 Ss. 174A, 174B inserted (with effect in accordance with art. 15 of the amending S.I.) by The Enactment of Extra-Statutory Concessions Order 2012 (S.I. 2012/266), arts. 1, 14(1)

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

175 Cases in which both sections 170 and 172 apply U.K.

(1) This section applies in a case in which sections 170 and 172 apply but section 174 does not.

(2) Determine what company A's proportion would be—

(a) on the basis mentioned in section 170(2),

(b) on the basis mentioned in section 172(1),

(c) on those bases taken together, and

(d) ignoring sections 170 and 172.

(3) Company A's proportion is taken to be the lowest proportion determined under subsection (2).

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

C79 S. 175(3) applied (with modifications) (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(c) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

176 Cases in which both sections 170 and 174 apply U.K.

(1) This section applies in a case in which sections 170 and 174 apply but section 172 does not.

(2) Determine what company A's proportion would be—

(a) on the basis mentioned in section 170(2),

(b) on the basis mentioned at Step 4 in section 174,

(c) on those bases taken together, and

(d) ignoring sections 170 and 174.

(3) Company A's proportion is taken to be the lowest proportion determined under subsection (2).

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

C80 S. 176(3) applied (with modifications) (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(c) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

177 Cases in which both sections 172 and 174 apply U.K.

(1) This section applies in a case in which sections 172 and 174 apply but section 170 does not.

(2) Determine what company A's proportion would be—

(a) on the basis mentioned in section 172(1),

(b) on the basis mentioned at Step 4 in section 174,

(c) on those bases taken together, and

(d) ignoring sections 172 and 174.

(3) Company A's proportion is taken to be the lowest proportion determined under subsection (2).

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

C81 S. 177(3) applied (with modifications) (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(c) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

178 Cases in which sections 170, 172 and 174 all apply U.K.

(1) This section applies in a case in which sections 170, 172 and 174 all apply.

(2) Determine what company A's proportion would be—

(a) on the basis mentioned in section 170(2),

(b) on the basis mentioned in section 172(1),

(c) on the basis mentioned at Step 4 in section 174,

(d) on the bases mentioned in sections 170(2) and 172(1) taken together,

(e) on the bases mentioned in section 170(2) and at Step 4 in section 174 taken together,

(f) on the bases mentioned in section 172(1) and at Step 4 in section 174 taken together,

(g) on the bases mentioned in section 170(2), section 172(1) and at Step 4 in section 174 taken together, and

(h) ignoring sections 170, 172 and 174.

(3) Company A's proportion is taken to be the lowest proportion determined under subsection (2).

Modifications etc. (not altering text)

C75 Ss. 169-178 applied (with modifications) (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 5(4) (as amended (11.7.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 4 para. 10)

C82 S. 178(3) applied (with modifications) (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(c) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

179 Cases in which surrendering or claimant company is non-UK resident U.K.

(1) If the surrendering company or the claimant company is non-UK resident at the relevant time, section 180 applies as mentioned in subsections (2) and (3) in the cases set out in subsection (4).

(2) Section 180 applies in the application of this Chapter for the purposes of sections 143(3)(b) and (c) and 144(3)(b) and (c) if the non-UK resident company is owned by the consortium at the relevant time.

(3) Section 180 applies in the application of this Chapter for the purposes of section 151(4)(a) and (b) in determining if the non-UK resident company is a 75% or 90% subsidiary of another company at the relevant time.

F212 ...

(4) The cases in which section 180 applies are as follows.

• Case 1

  One or more of the participating equity holders holds, as such, shares or securities with distribution rights that have effect (wholly or partly) by reference to whether or not, or to what extent, the profits or assets distributed are referable to company B's UK trade (see section 182).

• Case 2

  Section 174 applies and any of the proportions to be determined under paragraph (b) of Step 3 in that section would differ according to whether or not, or to what extent, the profits or assets distributed are referable to company B's UK trade.

Textual Amendments

F212 Words in s. 179(3) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(7)

Modifications etc. (not altering text)

C83 Ss. 179-182 modified (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(d) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

180 Company A's proportion if non-UK resident involved U.K.

(1) If this section applies—

(a) go to subsection (2) if the case is one in which none of sections 170, 172 and 174 applies, and

(b) go to subsection (3) if the case is one in which any of sections 170, 172, and 174 applies.

(2) If the case is as mentioned in subsection (1)(a)—

(a) determine what company A's proportion would be using the assumptions set out in section 181, and

(b) if the proportion so determined (“the alternative proportion”) is less than what company A's proportion would be ignoring this section, then company A's proportion is taken to be the alternative proportion.

(3) If the case is as mentioned in subsection (1)(b), take the following steps.

• Step 1

  Determine, in each way required by the applicable sections, what company A's proportion would be ignoring this section. A proportion determined at this step is referred to as a “normal proportion”.

• Step 2

  Determine, in each way required by the applicable sections, what company A's proportion would be using the assumptions set out in section 181. A proportion determined at this step is referred to as a “section 181 proportion”.

• Step 3

  If a section 181 proportion determined in a required way is less than the normal proportion determined in that way, for the purposes of the applicable sections use the section 181 proportion instead of the normal proportion.

(4) In subsection (3) “the applicable sections” means any of sections 170, 172 and 174 that applies in the case mentioned in subsection (1)(b), together with whichever (if any) of sections 175 to 178 that applies in that case.

Modifications etc. (not altering text)

C83 Ss. 179-182 modified (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(d) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

181 Assumptions to be applied if non-UK resident company involved U.K.

(1) The assumptions referred to in section 180 are as follows.

• Assumption 1

  The profit distribution or the distribution on the notional winding up is confined to a distribution of the profits or assets referable to company B's UK trade (see section 182).

• Assumption 2

  Section 165(2) (in the case of a profit distribution) is applied on the basis that the amount of company B's total profits referred to in that subsection does not exceed the amount of those profits referable to its UK trade.

• Assumption 3

  Section 166(3) and (4) (in the case of a distribution on a notional winding up) is applied on the basis that the amount of company B's assets and liabilities referred to in those subsections does not exceed the amount of those assets and liabilities referable to its UK trade.

• Assumption 4

  None of the ordinary equity holders has a beneficial entitlement to the profits or assets referable to company B's UK trade that is greater than the proportion of the distribution in question to which the equity holder would be beneficially entitled—

  (a)

  if Assumptions 1 to 3 were ignored, and

  (b)

  if it would otherwise be less, the distribution were £100.

(2) In subsection (1) “ordinary equity holder” means an equity holder whose beneficial entitlement on the profit distribution or the distribution on the notional winding up does not differ according to whether or not, or the extent to which, the profits or assets distributed are referable to company B's UK trade.

Modifications etc. (not altering text)

C83 Ss. 179-182 modified (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(d) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

182 Assets etc referable to UK trade U.K.

Profits, assets or liabilities of company B are referable to company B's UK trade so far as they—

(a) are attributable to, or used for the purposes of, activities the income or chargeable gains from which are or (if there were any) would be brought into account in calculating company B's total profits of any accounting period, and

(b) are not attributable to, or used for the purposes of, activities which are double taxation exempt for any accounting period (see section 186).

Modifications etc. (not altering text)

C83 Ss. 179-182 modified (temp.) (with effect in accordance with Sch. 10 para. 43 of the amending Act) by Finance Act 2022 (c. 3), Sch. 10 para. 6(3)(d) (as amended (5.1.2023) by The Finance Act 2022, Schedule 10 (Public Interest Business Protection Tax) (Substitution of Date) Regulations 2022 (S.I. 2022/1321), regs. 1, 2(2))

Chapter 7 U.K. Miscellaneous provisions and interpretation of Part

Miscellaneous U.K.

183 Payments for group relief U.K.

(1) This section applies if—

(a) the surrendering company and the claimant company have an agreement between them in relation to losses and other amounts of the surrendering company (“the agreed loss amounts”),

(b) group relief is given to the claimant company in relation to the agreed loss amounts, and

(c) as a result of the agreement the claimant company makes a payment to the surrendering company that does not exceed the total amount of the agreed loss amounts.

(2) The payment—

(a) is not to be taken into account in determining the profits or losses of either company for corporation tax purposes, and

(b) for corporation tax purposes is not to be regarded as a distribution.

184 References to “allowance” in CAA 2001 U.K.

References in CAA 2001 (apart from Parts 6 and 10) to an allowance include references to an allowance which would be made—

(a) but for the giving of group relief, or

(b) but for that and for a lack of profits or other income.

Interpretation U.K.

185 “Trading company” and “holding company” U.K.

(1) In this Part “trading company” means a company the business of which consists wholly or mainly in the carrying on of a trade or trades.

(2) In this Part “holding company” means a company the business of which consists wholly or mainly in the holding of shares or securities of companies that—

(a) are its 90% subsidiaries (see section 151), and

(b) are trading companies.

186 When activities of a company are double taxation exempt U.K.

(1) For the purposes of this Part activities of a company are double taxation exempt for an accounting period if, because of double taxation arrangements, the income and chargeable gains (if any) arising for that period from the activities are to be ignored in determining the company's chargeable profits for that period.

(2) In determining if any activities are double taxation exempt, assume that any claim that must be made before effect is given to any provision of double taxation arrangements is made.

(3) “Double taxation arrangements” means arrangements which have effect under section 2(1) of TIOPA 2010 (double taxation relief by agreement with territories outside the United Kingdom).

187 “Non-UK tax” U.K.

(1) In this Part “non-UK tax” means a tax chargeable under the law of a territory outside the United Kingdom which—

(a) is charged on income and corresponds to United Kingdom income tax, or

(b) is charged on income or chargeable gains or both and corresponds to United Kingdom corporation tax.

(2) A tax is not outside the scope of subsection (1) by reason only that it—

(a) is chargeable under the law of a province, state or other part of a country, or

(b) is levied by or on behalf of a municipality or other local body.

188 Other definitions U.K.

(1) In this Part—

• “the claimant company ” has the meaning given by section 130(2) F213 ...,

• “the claim period” has the meaning given by section 130(2) F214 ...,

• “company” means any body corporate[F215 (except in [F216 sections 156(2A) and 169(3)]] ,

• “group relief” has the meaning given by section 97(2),

• “profits” means income and chargeable gains, except in so far as the context otherwise requires,

• “the surrenderable amounts” has the meaning given by section 99(7) F217 ...,

• “surrendering company” has the meaning given by section 99(7) F218 ...,

• “the surrender period” has the meaning given by section 99(7) F219 ....

(2) In this Part, except in so far as the context otherwise requires—

(a) references to a trade include an office, and

(b) references to carrying on a trade include holding an office.

Textual Amendments

F213 Words in s. 188(1) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(8)(a)

F214 Words in s. 188(1) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(8)(b)

F215 Words in s. 188(1) inserted (with effect in accordance with s. 31(4) of the amending Act) by Finance Act 2013 (c. 29), s. 31(3)

F216 Words in s. 188(1) substituted (with effect in accordance with s. 40(4) of the amending Act) by Finance Act 2014 (c. 26), s. 40(3)

F217 Words in s. 188(1) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(8)(c)

F218 Words in s. 188(1) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(8)(d)

F219 Words in s. 188(1) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(8)(e)

[F220 PART 5A U.K. Group relief for carried-forward losses

Textual Amendments

F220 Pt. 5A inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 23

Modifications etc. (not altering text)

C84 Pt. 5A excluded (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), s. 1(5)(e) (with ss. 15(1), 16(1))

CHAPTER 1 U.K. Introduction

188AA Introduction to Part U.K.

(1) This Part—

(a) allows a company to surrender losses and other amounts that have been carried forward to an accounting period of the company (see Chapter 2), and

(b) enables, in certain cases involving groups or consortiums of companies, other companies to claim corporation tax relief for the losses and other amounts that are surrendered (see Chapter 3).

(2) Chapters 4 and 5 contain limitations on the amount of corporation tax relief which may be given on a claim under Chapter 3.

(3) See Chapter 5 for definitions that apply for the purposes of this Part and miscellaneous provisions.

(4) The corporation tax relief mentioned in this section is called “group relief for carried-forward losses.

CHAPTER 2 U.K. Surrender of company's carried-forward losses etc

188BA Overview of Chapter U.K.

(1) This Chapter allows a company to surrender losses and other amounts that have been carried forward to an accounting period of the company.

(2) Section 188BB sets out the basic provisions about the surrendering of losses and other amounts.

(3) Sections 188BC to 188BJ place restrictions on the surrendering of losses and other amounts.

188BB Surrender of carried-forward losses and other amounts U.K.

(1) Subsection (2) applies if—

(a) a loss or other amount is carried forward to an accounting period of a company under any of the following provisions—

(i) section 463G(6) of CTA 2009 (carry forward of post-1 April 2017 non-trading deficit from loan relationships);

(ii) section 753(3) of that Act (carry forward of non-trading loss on intangible fixed assets);

(iii) section 1223 of that Act (carry forward of expenses of management of investment business);

(iv) section 45A(4) of this Act (carry forward of post-1 April 2017 trade loss);

(v) sections 62(5)(a) and 63(3)(a) of this Act (carry forward of loss made in UK property business); or

(b) section 303C of this Act (excess carried forward non-decommissioning losses of ring fence trade: relief against total profits) applies in relation to an amount.

(2) The company may surrender the loss or other amount under this Chapter so far as the loss or other amount is eligible for corporation tax relief (apart from this Part).

(3) Subsection (4) applies if any of a BLAGAB trade loss made by an insurance company for an accounting period is carried forward to an accounting period of the company (“the later period”) under section 124A(2) or 124C(3) of FA 2012.

(4) The company may surrender the remaining carried forward amount under this Chapter so far as that amount is eligible for corporation tax relief (apart from this Part).

(5) In subsection (4) “the remaining carried forward amount” means so much of the amount carried forward (as mentioned in subsection (3)) as cannot be deducted under section 124A(5) or 124C(6) of FA 2012 from the company's BLAGAB trade profit (if any) of the later period.

(6) Under paragraph 70(1) of Schedule 18 to FA 1998, the company surrenders losses or other amounts, so far as eligible for surrender under this Chapter, by consenting to one or more claims for group relief for carried-forward losses in relation to the amounts (see requirement 1 in section 188CB(3) and requirement 1 in section 188CC(3)).

(7) In this Part, in relation to losses or other amounts within subsection (1) or (4) that a company has carried forward to an accounting period—

• “the surrenderable amounts” means those losses and other amounts so far as eligible for surrender under this Chapter,

• “surrendering company” means the company that has the losses or other amounts,

• “the surrender period” means the accounting period to which the losses and other amounts have been carried forward.

(8) See sections 188BC to 188BJ for provisions restricting what the surrendering company may surrender under this section.

188BC Restriction on surrendering pre-1 April 2017 losses etc U.K.

(1) The surrendering company may not surrender under this Chapter—

(a) a loss carried forward to the surrender period under section 753(3) of CTA 2009 in so far as the loss is made up of an amount previously carried forward under that section from an accounting period beginning before 1 April 2017,

(b) expenses carried forward to the surrender period under section 1223 of CTA 2009 if the expenses were first deductible under section 1219 of that Act for an accounting period beginning before that date, or

(c) a loss carried forward to the surrender period under section 62(5)(a) or 63(3)(a) of this Act if the loss was made in an accounting period beginning before that date.

(2) The surrendering company may not surrender under this Chapter a qualifying charitable donation carried forward to the surrender period under section 1223 of CTA 2009.

188BD Restriction where investment business has become small or negligible U.K.

(1) The surrendering company may not surrender under this Chapter—

(a) a loss carried forward to the surrender period under section 753(3) of CTA 2009 if an investment business carried on by the surrendering company became small or negligible before the beginning of that period,

(b) expenses carried forward to the surrender period under section 1223 of CTA 2009 if the surrendering company's investment business became small or negligible before the beginning of that period, or

(c) a loss carried forward to the surrender period under section 62(5)(a) or 63(3)(a) if the surrendering company's investment business became small or negligible before the beginning of that period.

(2) In this section—

(a) “company with investment business” has the same meaning as in Part 16 of CTA 2009 (see section 1218B of that Act);

(b) references to a company's investment business are to be construed in accordance with section 1219(2) of CTA 2009.

[F221 188BE Restriction where surrendering company could use losses etc itself U.K.

The surrendering company may not surrender under this Chapter any loss or other amount carried forward to the surrender period to the extent that the loss or other amount could be deducted from the total profits of the company for the period at Step 2 of section 4(2).]

Textual Amendments

F221 S. 188BE substituted (with effect in accordance with Sch. 8 para. 17 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 6

188BF Restriction where surrendering company has no income-generating assets U.K.

The surrendering company may not surrender any losses or other amounts under this Chapter if at the end of the surrender period the surrendering company has no assets capable of producing income.

188BG Restrictions for certain insurance companies U.K.

(1) If the surrendering company is a general insurance company and the surrender period is an excluded accounting period, the company may not surrender under this Chapter—

(a) a loss carried forward to the surrender period under section 753(3) of CTA 2009;

(b) expenses carried forward to the surrender period under section 1223 of CTA 2009;

(c) a loss carried forward to the surrender period under section 62(5)(a) or 63(3)(a).

(2) In subsection (1) “excluded accounting period” and “general insurance company” are to be interpreted in accordance with section 269ZG.

(3) If the surrendering company is a Solvency 2 insurance company it may not surrender under this Chapter—

(a) a loss carried forward to the surrender period under section 753(3) of CTA 2009,

(b) expenses carried forward to the surrender period under section 1223 of CTA 2009, F222 ...

(c) a loss carried forward to the surrender period under section 62(5)(a) or 63(3)(a), [F223 or

(d) a BLAGAB trade loss carried forward to the surrender period under section 124A(2) or 124C(3) of FA 2012,]

so far as the loss is, or (as the case may be) the expenses are, a shock loss.

Textual Amendments

F222 Word in s. 188B(3)(b) omitted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 23(a)

F223 S. 188B(3)(d) and word inserted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 23(b)

188BH Restriction on surrender of losses etc made when UK resident U.K.

(1) This section applies in relation to a loss or other amount carried forward to the surrender period if the surrendering company was UK resident during the loss-making period.

(2) The surrendering company may not surrender the loss or other amount under this Chapter so far as the loss or other amount—

(a) is attributable to a permanent establishment through which the company carried on a trade outside the United Kingdom during the loss-making period (see subsection (3)), and

(b) is, or represents, an amount within subsection (5).

(3) A loss or other amount is attributable to a permanent establishment of the surrendering company if (ignoring this section) the amount could be included in the company's surrenderable amounts for the surrender period if those amounts were determined—

(a) by reference to that establishment alone, and

(b) by applying, in relation to that establishment, principles corresponding in all material respects to those mentioned in subsection (4).

(4) The principles are those that would be applied for corporation tax purposes in determining an equivalent loss or other amount in the case of a permanent establishment through which a non-UK resident company carried on a trade in the United Kingdom.

(5) An amount is within this subsection if, for the purposes of non-UK tax chargeable under the law of the territory in which the permanent establishment was situated, the amount is or at any time has been (in any period) deductible from or otherwise allowable against non-UK profits of a person other than the surrendering company.

(6) Subsection (7) applies for the purposes of subsection (5) if, in order to determine if an amount is or at any time has been deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is or has been deductible or otherwise allowable for tax purposes in the United Kingdom.

(7) The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned if (and only if) the surrendering company is treated as resident in that territory for the purposes of the non-UK tax.

(8) In this section and section 188BI—

• “the loss-making period”, in relation to a loss or other amount, means the accounting period in which the loss was made or the amount arose,

• “non-UK tax” has the meaning it has in Part 5 (see section 187), and

• “non-UK profits” has the meaning given by section 108.

188BI Restriction on surrender of losses made when non-UK resident U.K.

(1) This section applies in relation to a loss or other amount carried forward to the surrender period if during the loss-making period the surrendering company was a non-UK resident [F224 company within the charge to corporation tax].

F225 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) F226 ... The surrendering company may surrender the loss or other amount under this Chapter only so far as conditions A, B and C are met in relation to the loss or amount.

(4) Condition A is that the loss or other amount is attributable to activities of the surrendering company in respect of which it is within the charge to corporation tax for the loss-making period.

(5) Condition B is that the loss or other amount is not attributable to activities of the surrendering company that are double taxation exempt for the loss-making period (within the meaning given by section 186).

(6) Condition C is that—

(a) the loss or other amount does not correspond to, and is not represented in, an amount with subsection (7), and

(b) no amount brought into account in calculating the loss or other amount corresponds to, or is represented in, an amount within subsection (7).

(7) An amount is within this subsection if, for the purposes of non-UK tax chargeable under the law of a territory, the amount is or at any time has been (in any period) deductible from or otherwise allowable against non-UK profits of any person.

F227 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F228 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) But an amount is not to be taken to be within subsection (7) F229 ... by reason only that it is—

(a) an amount of profits brought into account for the purpose of being excluded from non-UK profits of the person, or

(b) an amount brought into account in calculating an amount of profits brought into account as mentioned in paragraph (a).

(11) Subsection (12) applies for the purposes of subsection (7) if, in order to determine if an amount is or at any time has been deductible or otherwise allowable for the purposes of non-UK tax chargeable under the law of a territory, it is necessary under that law to know if the amount (or a corresponding amount) is or at any time has been deductible or otherwise allowable for tax purposes in the United Kingdom.

(12) The amount is to be treated as deductible or otherwise allowable for the purposes of the non-UK tax chargeable under the law of the territory concerned.

F230 (13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F231 (14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F224 Words in s. 188BI(1) substituted (6.4.2020) by Finance Act 2019 (c. 1), Sch. 5 paras. 31, 35 (with Sch. 5 para. 36)

F225 S. 188BI(2) omitted (with effect in accordance with Sch. 4 para. 6 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(4)(a)

F226 Words in s. 188BI(3) omitted (with effect in accordance with Sch. 4 para. 6 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(4)(b)

F227 S. 188BI(8) omitted (with effect in accordance with Sch. 4 para. 6 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(4)(a)

F228 S. 188BI(9) omitted (with effect in accordance with Sch. 4 para. 6 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(4)(a)

F229 Words in s. 188BI(10) omitted (with effect in accordance with Sch. 4 para. 6 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(4)(c)

F230 S. 188BI(13) omitted (with effect in accordance with Sch. 4 para. 6 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(4)(a)

F231 S. 188BI(14) omitted (with effect in accordance with Sch. 4 para. 6 of the amending Act) by virtue of Finance Act 2022 (c. 3), s. 24(4)(a)

188BJ Restriction on surrender losses etc made when dual resident U.K.

The surrendering company may not surrender a loss or other amount under this Chapter if the company was not eligible to surrender the loss or other amount under Chapter 2 of Part 5 by reason of section 109 (restriction on losses etc surrenderable by dual resident).

CHAPTER 3 U.K. Claims for group relief for carried-forward losses

Introduction U.K.

188CA Overview of Chapter U.K.

This Chapter sets out how a company may claim group relief for carried-forward losses and how the relief is given.

Claiming group relief for carried-forward losses U.K.

188CB Claims in relation to all the surrenderable amounts U.K.

(1) This section applies in relation to the surrendering company's surrenderable amounts for the surrender period under Chapter 2.

(2) If the requirements in subsection (3) are met, a company (“the claimant company”) may make a claim for group relief for carried-forward losses for an accounting period (“the claim period”) in relation to the surrenderable amounts.

(3) The requirements are as follows—

• Requirement 1 The surrendering company consents to the claim.

• Requirement 2 There is a period (“the overlapping period”) that is common to the claim period and the surrender period.

• Requirement 3 At a time during the overlapping period—

  (a)

  the group condition is met (see section 188CE)

  (b)

  consortium condition 1 is met (see section 188CF), or

  (c)

  consortium condition 2 is met (see section 188CG).

(4) A claim under this section may relate to the whole of the surrenderable amounts or to part of them only.

(5) This section is subject to section 188CD (claim not allowed by company with unused carried-forward losses of its own).

Modifications etc. (not altering text)

C85 S. 188CB(3) applied (with effect in accordance with Sch. 4 para. 190 of the amending Act) by 1998 c. 36, Sch. 18 para. 70(1) (as substituted) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 114(2)

188CC Claims in relation to the surrenderable amounts that are attributable to a specified accounting period U.K.

(1) This section applies in relation to the surrendering company's surrenderable amounts for the surrender period under Chapter 2.

(2) If the requirements in subsection (3) are met, a company (“the claimant company”) may make a claim for group relief for carried-forward losses for an accounting period (“the claim period”) in relation to the surrenderable amounts that are attributable to an accounting period of the surrendering company specified in the claim (“the specified loss-making period”).

(3) The requirements are as follows—

• Requirement 1 The surrendering company consents to the claim.

• Requirement 2 There is a period (“the overlapping period”) that is common to the claim period and the surrender period.

• Requirement 3 Consortium condition 3 (see section 188CH) or consortium condition 4 (see section 188CI) is met throughout a period which—

  (a)

  begins before or during the specified loss-making period, and

  (b)

  ends during or after the overlapping period.

(4) A claim under this section may relate to the whole of the surrenderable amounts attributable to the specified loss-making period or to part of them only.

(5) This section is subject to section 188CD (claim not allowed by company with unused carried-forward losses of its own)

Modifications etc. (not altering text)

C86 S. 188CC(3) applied (with effect in accordance with Sch. 4 para. 190 of the amending Act) by 1998 c. 36, Sch. 18 para. 70(1) (as substituted) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 114(2)

188CD Claim not allowed by company with unused carried-forward losses of its own U.K.

A company may not make a claim for group relief for carried-forward losses for an accounting period if—

(a) any amount carried forward to that period under any provision mentioned in section 188BB(1), or any amount which is carried forward to that period and falls within section 124B(1)(b) of FA 2012, is not deducted in full from the total profits of the company for that period at Step 2 of section 4(2),

(b) the company makes a claim under section 458(1) of CTA 2009 for any amount of a deficit to be excepted from being set off against profits of that period,

(c) the company makes a claim under section 45(4A) that the profits of a trade of that period are not to be reduced or are not to be reduced by more than a specified amount, or

(d) the company makes a claim under section 45B(5) for relief not to be given in that period for an amount of a loss or for a specified part of an amount of a loss.

188CE The group condition U.K.

(1) The group condition is met if the surrendering company and the claimant company—

(a) are members of the same group of companies, and

(b) are both UK related.

(2) For the meaning of “UK related” in subsection (1)(b) and in sections 188CF to 188CI, see section 188CJ.

188CF Consortium condition 1 U.K.

(1) Consortium condition 1 is met if—

(a) the claimant company is a trading company or a holding company,

(b) the claimant company is owned by a consortium,

(c) the surrendering company is a member of the consortium, and

(d) both companies are UK related.

(2) But consortium condition 1 is not met if a profit on a sale within subsection (3) by the surrendering company would be a trading receipt of the surrendering company.

(3) A sale is within this subsection if it is a sale of—

(a) the share capital the surrendering company owns in the claimant company, or

(b) if the claimant company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), the share capital the surrendering company owns in the holding company in question.

188CG Consortium condition 2 U.K.

(1) Consortium condition 2 is met if—

(a) the claimant company is a trading company or a holding company,

(b) the claimant company is owned by a consortium,

(c) the surrendering company is not a member of the consortium,

(d) the surrendering company is a member of the same group of companies as a third company (“the link company”),

(e) the link company is a member of the consortium,

(f) the surrendering company and the claimant company are both UK related.

(2) But consortium condition 2 is not met if a profit on a sale within subsection (3) by the link company would be a trading receipt of that company.

(3) A sale is within this subsection if it is a sale of—

(a) the share capital the link company owns in the claimant company, or

(b) if the claimant company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), the share capital the link company owns in the holding company in question.

188CH Consortium condition 3 U.K.

(1) Consortium condition 3 is met if—

(a) the surrendering company is a trading company or a holding company,

(b) the surrendering company is owned by a consortium,

(c) the claimant company is a member of the consortium, and

(d) both companies are UK related.

(2) But consortium condition 3 is not met if a profit on a sale within subsection (3) by the claimant company would be a trading receipt of the claimant company.

(3) A sale is within this subsection if it is a sale of—

(a) the share capital the claimant company owns in the surrendering company, or

(b) if the surrendering company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), the share capital the claimant company owns in the holding company in question.

188CI Consortium condition 4 U.K.

(1) Consortium condition 4 is met if—

(a) the surrendering company is a trading company or a holding company,

(b) the surrendering company is owned by a consortium,

(c) the claimant company is not a member of the consortium,

(d) the claimant company is a member of the same group of companies as a third company (“the link company”),

(e) the link company is a member of the consortium, and

(f) the claimant company and the surrendering company are both UK related.

(2) But consortium condition 4 is not met if a profit on a sale within subsection (3) by the link company would be a trading receipt of that company.

(3) A sale is within this subsection if it is a sale of—

(a) the share capital the link company owns in the surrendering company, or

(b) if the surrendering company is owned by the consortium as a result of section 153(3) (consortiums involving holding companies), the share capital the link company owns in the holding company in question.

188CJ Meaning of “UK related” company U.K.

For the purpose of sections 188CE to 188CI a company is UK related if—

(a) it is a UK resident company, or

(b) it is a non-UK resident company [F232 within the charge to corporation tax].

Textual Amendments

F232 Words in s. 188CJ(b) substituted (with effect in accordance with s. 24(3) of the amending Act) by Finance Act 2019 (c. 1), s. 24(2)

Giving group relief for carried-forward losses U.K.

188CK Deductions from total profits U.K.

(1) If a claimant company makes a claim under section 188CB or 188CC, the group relief for carried-forward losses is given by the making of a deduction from the claimant company's total profits of the claim period.

(2) In the case of a claim under section 188CB, the amount of the deduction under subsection (1) is—

(a) an amount equal to the surrendering company's surrenderable amounts for the surrender period, or

(b) if the claim is in relation to only part of those amounts, an amount equal to that part.

(3) Subsection (2) is subject to—

(a) subsections (6) to (9),

(b) the limitations set out in Chapter 4, and

(c) section 269ZD (restriction on deductions from total profits).

(4) In the case of a claim under section 188CC, the amount of the deduction under subsection (1) is—

(a) an amount equal to the surrendering company's surrenderable amounts for the surrender period that are attributable to the specified loss-making period, or

(b) if the claim is in relation to only part of those amounts, an amount equal to that part.

(5) Subsection (4) is subject to—

(a) subsections (6) to (9),

(b) the limitations set out in Chapter 5, and

(c) section 269ZD (restriction on deductions from total profits).

(6) A deduction under subsection (1) is to be made—

(a) before deductions for relief within subsection (7), but

(b) after all other deductions to be made at Step 2 in section 4(2) (apart from deductions for group relief for carried-forward losses on other claims).

(7) The deductions within this subsection are deductions for relief—

(a) under section 37 in relation to a loss made in an accounting period after the claim period,

(b) under section 260(3) of CAA 2001 in relation to capital allowances for an accounting period after the claim period, and

(c) under section 389 or 463B of CTA 2009 in relation to a deficit of a deficit period after the claim period.

(8) For the purposes of subsection (6)(b) it is to be assumed that the claimant company has claimed all relief available to it for the claim period under section 37 of this Act or section 260(3) of CAA 2001.

(9) Corporation tax relief is not to be given more than once for the same amount, whether—

(a) by giving group relief for carried-forward losses and by giving some other relief (for any accounting period) to the surrendering company, or

(b) by giving group relief for carried-forward losses more than once.

CHAPTER 4 U.K. Limitations on relief: claims under section 188CB

Introduction U.K.

188DA Overview U.K.

This Chapter sets out limitations on the amount of relief which may be given on a claim under section 188CB.

General limitation on amount of relief U.K.

188DB Limitation on amount of relief applying to all claims under section 188CB U.K.

(1) The amount of group relief for carried-forward losses to be given on a claim under section 188CB (“the current claim”) is limited to whichever is the lesser of—

(a) the amount mentioned in subsection (2), and

(b) the amount mentioned in subsection (3).

(2) The amount referred to in subsection (1)(a) is the unused part of the surrenderable amounts (see section 188DC).

(3) The amount referred to in subsection (1)(b) is the difference between—

(a) the claimant company's relevant maximum for the overlapping period (see section 188DD), and

(b) the amount of previously claimed group relief for carried-forward losses for the overlapping period (see section 188DE).

Modifications etc. (not altering text)

C87 Ss. 188DB-188DG applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 18(1)

188DC Unused part of the surrenderable amounts U.K.

(1) The unused part of the surrenderable amounts is the amount equal to—

(a) the surrenderable amount for the overlapping period (see subsection (2)), less

(b) the amount of prior surrenders for that period (see subsections (3) to (5)).

(2) To determine the surrenderable amount for the overlapping period—

(a) take the proportion of the surrender period included in the overlapping period, and

(b) apply that proportion to the surrenderable amounts for the surrender period.

The surrenderable amount for the overlapping period is the amount given as a result of paragraph (b).

(3) To determine the amount of prior surrenders for the overlapping period—

(a) identify any prior claims for the purposes of this section (see subsection (4)), and

(b) take the steps set out in subsection (5) in relation to each such claim.

The amount of prior surrenders for the overlapping period is the total of the previously used amounts given at step 3 in subsection (5) for all the prior claims.

(4) A claim is a prior claim for the purposes of this section if—

(a) it is either—

(i) a claim under section 188CB by any company which relates to the same amounts as the current claim, or

(ii) a claim under section 188CC by any company which relates to amounts included in the amounts to which the current claim relates,

(b) it is made before the current claim, and

(c) it has not been withdrawn.

(5) These are the steps referred to in subsection (3)(b) to be taken in relation to each prior claim.

• Step 1 Identify the overlapping period for the prior claim.

• Step 2 Identify any period that is common to the overlapping period for the current claim and the overlapping period for the prior claim. If there is a common period, go to step 3. If there is no common period, there is no previously used amount in relation to the prior claim (and ignore step 3).

• Step 3 Determine the previously used amount of group relief for carried-forward losses in relation to the prior claim (see subsection (6)).

(6) To determine the previously used amount of group relief for carried-forward losses in relation to a prior claim—

(a) take the proportion of the overlapping period for the prior claim that is included in the common period identified at step 2 in relation to that claim, and

(b) apply that proportion to the amount of group relief for carried-forward losses given on the prior claim.

The previously used amount of group relief for carried-forward losses in relation to the prior claim is the amount given as a result of paragraph (b).

(7) For the meaning of the “overlapping period” see section 188DG.

Modifications etc. (not altering text)

C87 Ss. 188DB-188DG applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 18(1)

C88 S. 188DC(4)(a)(ii) modified (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 18(2)(a)

188DD Claimant company's relevant maximum for overlapping period U.K.

(1) The claimant company's relevant maximum for the overlapping period is determined as follows—

• Step 1 Calculate the claimant company's relevant maximum for the claim period in accordance with section 269ZD(4).

• Step 2 Deduct from that amount the sum of—

  (a)

  any deductions made by the company for the claim period

  (i)

  under section 45(4)(b) or 45B(4), or

  (ii)

  under section 303B or 303D by virtue of section 304(5),

  (b)

  any deductions made by the company for the claim period under section 457(3) or 463H(5) of CTA 2009,

  (c)

  any deductions made by the company for the claim period under section 124(5), 124A(5) or 124C(6) of FA 2012, and

  (d)

  any deductions made by the company for the claim period which are deductions within any of paragraphs (a) to (i) and (k) of section 269ZD(3).

• Step 3 Take the proportion of the claim period included in the overlapping period and apply that proportion to the amount arrived at under step 2.

(2) In step 2 of subsection (1)—

(a) in paragraph (a)(i), the references to deductions under section 45(4)(b) or 45B(4) do not include deductions that would be ignored for the purposes of section 269ZB by reason of—

(i) section 1209(3), 1210(5A) or 1211(7A) of CTA 2009 (losses of film trade),

(ii) section 1216DA(3), 1216DB(5A) or 1216DC(7A) of that Act (losses of television programme trade),

(iii) section 1217DA(3), 1217DB(5A) or 1217DC(7A) of that Act (losses of video game trade),

(iv) section 1217MA(3) or 1217MC(9) of that Act (losses of theatrical trade),

(v) section 1217SA(3) or 1217SC(9) of that Act (losses of orchestral trade),

(vi) section 1218ZDA(3) or 1218ZDC(9) of that Act (losses of museum or gallery exhibition trade),

F233 (vii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(viii) section 269ZJ(1) (insurance companies: shock losses),

(ix) section 304(7) (certain losses of ring fence trades), or

(x) section 356NJ(2) (pre-1 April 2017 loss arising from oil contractor activities);

(b) in paragraph (b) the reference to a deduction under section 463H(5) does not include the deduction of a shock loss.

(3) If the amount of the claimant company's [F234 qualifying] profits for the claim period (calculated in accordance with [F235 subsection (3A)]) is less than the amount of the claimant company's deductions allowance for the claim period (determined in accordance with section [F236 269ZDA]), subsection (1) has effect as if step 1 was modified as follows—

Step 1 Calculate the claimant company's [F234 qualifying] profits for the claim period in accordance with [F235 subsection (3A)].

[F237 (3A) The claimant company’s “qualifying profits” for the claim period are—

(a) the amount given by paragraph (1) of step 1 in section 269ZF(3) in determining the company’s [F238 modified total profits] for the period, less

(b) the amount given by paragraph (1) of step 2 in section 269ZF(3) [F239 which could be relieved against] those profits for the period.]

F240 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) Subsection (2) is to be ignored if subsection (3) applies.

Textual Amendments

F233 S. 188DD(2)(a)(vii) omitted (for the purposes of corporation tax in relation to accounting periods beginning on or after 1.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 6(4), 12(2) (with Sch. 5 paras. 15, 17, 18(4), 19)

F234 Word in s. 188DD(3) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 24(2)(a)

F235 Words in s. 188DD(3) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 24(2)(b)

F236 Word in s. 188DD(3) substituted (with effect in accordance with Sch. 8 para. 18 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 7(2)

F237 S. 188DD(3A) inserted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 24(3)

F238 Words in s. 188DD(3A)(a) substituted (with effect in accordance with Sch. 8 para. 18 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 7(3)(a)

F239 Words in s. 188DD(3A)(b) substituted (with effect in accordance with Sch. 8 para. 18 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 7(3)(b)

F240 S. 188DD(4) omitted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 2

Modifications etc. (not altering text)

C87 Ss. 188DB-188DG applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 18(1)

C89 S. 188DD excluded (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 194(2)

C90 S. 188DD modified (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 18(2)(b)

188DE Previously claimed group relief for carried-forward losses U.K.

(1) To determine the amount of previously claimed group relief for carried-forward losses for the overlapping period—

(a) identify any prior claims for the purposes of this section (see subsection (2)), and

(b) take the steps set out in subsection (3) in relation to each such claim.

The amount of previously claimed group relief for carried-forward losses for the overlapping period is the total of the previously claimed amounts given at step 3 in subsection (3) for all the prior claims.

(2) A claim is a prior claim for the purposes of this section if—

(a) it is a claim under section 188CB or 188CC by the claimant company for group relief for carried-forward losses which would be given by way of a deduction from the company's total profits of the claim period,

(b) it is made before the current claim, and

(c) it has not been withdrawn.

(3) These are the steps referred to in subsection (1)(b) to be taken in relation to each prior claim.

• Step 1 Identify the overlapping period for the prior claim.

• Step 2 Identify any period that is common to the overlapping period for the current claim and the overlapping period for the prior claim. If there is a common period, go to step 3. If there is no common period, there is no previously claimed amount in relation to the prior claim (and ignore step 3).

• Step 3 Determine the previously claimed amount of group relief for carried forward losses in relation to the prior claim (see subsection (4)).

(4) To determine the previously claimed amount of group relief for carried-forward losses in relation to a prior claim—

(a) take the proportion of the overlapping period for the prior claim that is included in the common period identified at step 2 in relation to that claim, and

(b) apply that proportion to the amount of group relief for carried-forward losses given on the prior claim.

The previously claimed amount of group relief for carried-forward losses in relation to the prior claim is the amount given as a result of paragraph (b).

Modifications etc. (not altering text)

C87 Ss. 188DB-188DG applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 18(1)

C91 S. 188DE(2)(a) modified (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 18(2)(c)

188DF Sections 188DC to 188DE: supplementary U.K.

(1) If two or more claims for group relief for carried-forward losses are made at the same time, for the purpose of section 188DC and 188DE treat the claims as made—

(a) in such order as the company making them may elect or the companies making them may jointly elect, or

(b) if no such election is made, in such order as an officer of Revenue and Customs may direct.

(2) For the purpose of step 3 in each of section 188DC(5) and 188DE(3) the amount of group relief for carried-forward losses given on a prior claim is determined on the basis that relief is given on the claim before it is given on any later claim.

(3) If the use of any proportion mentioned in subsection (4), would, in the circumstances of a particular case, produce a result that is unjust or unreasonable, the proportion is to be modified so far as necessary to produce a result that is just and reasonable.

(4) The proportions are those found in—

(a) section 188DC(2),

(b) section 188DC(6),

(c) step 3 in section 188DD(1), and

(d) section 188DE(4)

Modifications etc. (not altering text)

C87 Ss. 188DB-188DG applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 18(1)

188DG Sections 188DC and 188DE: meaning of “the overlapping period” U.K.

(1) In sections 188DC and 188DE “the overlapping period”, in relation to a claim for group relief for carried-forward losses, means the period that is common to the claim period and the surrender period (see Requirement 2 in section 188CB(3) and Requirement 2 in section 188CC(3)).

(2) But if during any part of the overlapping period the relief condition is not met, that part is treated as not forming part of the overlapping period but instead as forming—

(a) a part of the surrender period that is not included in the overlapping period, and

(b) a part of the claim period that is not included in the overlapping period.

(3) The relief condition is the condition on which the claim for group relief for carried forward losses is based, that is—

• the group condition,

• consortium condition 1,

• consortium condition 2,

• consortium condition 3, or

• consortium condition 4.

Modifications etc. (not altering text)

C87 Ss. 188DB-188DG applied (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 18(1)

C92 S. 188DG modified (1.4.2022 in relation to accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 51(1), Sch. 7 para. 18(2)(d)

Further limitations on amount of relief if claim based on consortium conditions 1 or 2 U.K.

188DH Condition 1: ownership proportion U.K.

(1) This section applies if—

(a) the claimant company makes a claim under section 188CB for group relief for carried-forward losses, and

(b) the claim is based on consortium condition 1.

(2) The relief to be given on the claim is limited to the ownership proportion of the claimant company's relevant maximum for the overlapping period (see section 188DD to determine the claimant company's relevant maximum for the overlapping period).

(3) The ownership proportion is the same as the lowest of the following proportions prevailing during the overlapping period—

(a) the proportion of the ordinary share capital of the claimant company that is beneficially owned by the surrendering company,

(b) the proportion of any profits available for distribution to equity holders of the claimant company to which the surrendering company is beneficially entitled,

(c) the proportion of any assets of the claimant company available for distribution to such equity holders on a winding up to which the surrendering company would be beneficially entitled, and

(d) the proportion of the voting power in the claimant company that is directly possessed by the surrendering company.

(4) If any of the proportions in subsection (3) changes during the overlapping period, use the average of that proportion during that period.

(5) If the claimant company is owned by the consortium company as a result of section 153(3) (consortium company involving holding companies), references in subsection (3) to the claimant company are to be read as references to the holding company in question.

(6) In this section “the overlapping period” is to be read in accordance with section 188DG.

(7) Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of subsection (3)(b) and (c).

188DI Condition 2: ownership proportion U.K.

(1) This section applies if—

(a) the claimant company makes a claim under section 188CB for group relief for carried-forward losses, and

(b) the claim is based on consortium condition 2.

(2) The limitation on relief in section 188DH applies in relation to the claim, but for this purpose references in section 188DH(3) to the surrendering company are to be read as reference to the link company.

188DJ Condition 2: companies in link company's group U.K.

(1) Where—

(a) the claimant company makes a claim under section 188CB, and

(b) the claim is based on consortium condition 2,

the amount of relief to be given on the claim is limited by subsections (2) and (3).

(2) There is a limit on the amount of group relief for carried-forward losses that can be given, in total, to the claimant company for the claim period on consortium claims made in relation to losses and other amounts surrendered by the link company and group companies.

(3) That limit is the same as the limit that, as a result of section 188DH(2), would apply for the purposes of a consortium claim made by the claimant company for the claim period in relation to losses or other amounts surrendered by the link company, assuming that the link company was UK related.

(4) In determining the limit that would apply as a result of section 188DH(2) it is to be assumed that the accounting period of the link company is the same as the accounting period of the claimant company.

(5) In this section—

• “consortium claim” means a claim for group relief for carried-forward losses under section 188CB,

• “group company” means a company that is a member of the same group of companies as the link company (other than the link company itself), and

• “UK related”, in relation to a company, has the meaning given by section 188CJ.

188DK Conditions 1 and 2: claimant company not controlled by surrendering company etc U.K.

(1) This section applies if—

(a) the claimant company makes a claim under section 188CB for group relief for carried-forward losses,

(b) the claim is based on consortium condition 1, and

(c) during any part of the overlapping period, arrangements within subsection (3) are in place which enable a person to prevent the surrendering company, either alone or together with one or more other companies that are members of the consortium, from controlling the claimant company.

(2) This section also applies if—

(a) the claimant company makes a claim under section 188CB for group relief for carried-forward losses,

(b) the claim is based on consortium condition 2, and

(c) during any part of the overlapping period, arrangements within subsection (3) are in place which enable a person to prevent the link company, either alone or together with one or more other companies that are members of the consortium, from controlling the claimant company.

(3) Arrangements are within this subsection if—

(a) the company, either alone or together with one or more other companies that are members of the consortium, would control the claimant company, but for the existence of the arrangements, and

(b) the arrangements form part of a scheme the main purpose, or one of the main purposes, of which is to enable the claimant company to obtain a tax advantage under this Chapter.

(4) The relief to be given on the claim is to be determined as if the claimant company's relevant maximum for the overlapping period was 50% of what it would be but for this section (see section 188DD to determine the claimant company's relevant maximum for the overlapping period).

(5) In this section “the overlapping period” is to be read in accordance with section 188DG

(6) Section 1139 (“tax advantage”) applies for the purposes of this section.

188DL Conditions 1 and 2: claimant company in group of companies U.K.

(1) This section applies if—

(a) the claimant company makes a claim under section 188CB based on consortium condition 1 or 2, and

(b) the claimant company is a member of a group of companies.

(2) In determining the claimant company's relevant maximum for the overlapping period under section 188DD, the amount calculated at step 1 of that section is to be treated as reduced (but not below nil) by the group's potential relief.

(3) The group's potential relief is the sum of—

(a) the maximum amount of group relief for carried-forward losses that could be claimed by the claimant company for the claim period on claims under section 188CB based on the group condition, and

(b) the maximum amount of group relief under Part 5 that could be claimed by the claimant company for the claim period on claims under section 130 based on the group condition.

(4) Before determining the maximum amount of potential group relief for carried-forward losses or potential group relief under subsection (3) take account of any claim made before the claim mentioned in subsection (1) that—

(a) is a claim for group relief or group relief for carried-forward losses based on the group condition made by another member of the same group of companies as the claimant company, and

(b) is in relation to losses or other amounts surrendered.

CHAPTER 5 U.K. Limitations on relief: claims under section 188CC

Introduction U.K.

188EA Overview of Chapter U.K.

This Chapter sets out limitations on the amount of relief which may be given on a claim under section 188CC.

General limitation on amount of relief U.K.

188EB Limitation on amount of relief applying to all claims under section 188CC U.K.

(1) The amount of group relief for carried-forward losses to be given on a claim under section 188CC (“the current claim”) is limited to whichever is the lesser of—

(a) the amount mentioned in subsection (2),

(b) the amount mentioned in subsection (3), and

(c) the amount mentioned in subsection (4).

(2) The amount referred to in subsection (1)(a) is the unused part of the surrenderable amounts that are attributable to the specified loss-making period (see section 188EC).

(3) The amount referred to in subsection (1)(b) is the difference between—

(a) the claimant company's relevant maximum for the overlapping period (see section 188ED), and

(b) the amount of previously claimed group relief for carried-forward losses for the overlapping period (see section 188EE).

(4) The amount referred to in subsection (1)(c) is the potential Part 5 group relief amount (see section 188EF).

188EC Unused part of surrenderable amounts attributable to specified loss-making period U.K.

(1) The unused part of the surrenderable amounts that are attributable to the specified loss-making period is the amount equal to—

(a) the surrenderable amount for the overlapping period (see subsection (2)), less

(b) the amount of prior surrenders for that period (see subsections (3) to (5)).

(2) To determine the surrenderable amount for the overlapping period—

(a) take the proportion of the surrender period included in the overlapping period, and

(b) apply that proportion to the surrenderable amounts for the surrender period that are attributable to the specified loss-making period.

The surrenderable amount for the overlapping period is the amount given as a result of paragraph (b).

(3) To determine the amount of prior surrenders for the overlapping period—

(a) identify any prior claims for the purposes of this section (see subsection (4)), and

(b) take the steps set out in subsection (5) in relation to each such claim.

The amount of prior surrenders for the overlapping period is the total of the previously used amounts given at step 3 in subsection (5) for all the prior claims.

(4) A claim is a prior claim for the purposes of this section if—

(a) it is either—

(i) a claim under section 188CB by any company which relates to the amounts to which the current claim relates (as well as any other amounts), or

(ii) a claim under section 188CC by any company which relates to the same amounts to which the current claim relates,

(b) it is made before the current claim, and

(c) it has not been withdrawn.

(5) These are the steps referred to in subsection (3)(b) to be taken in relation to each prior claim.

• Step 1 Identify the overlapping period for the prior claim.

• Step 2 Identify any period that is common to the overlapping period for the current claim and the overlapping period for the prior claim. If there is a common period, go to step 3. If there is no common period, there is no previously used amount in relation to the prior claim (and ignore step 3).

• Step 3 Determine the previously used amount of group relief for carried-forward losses in relation to the prior claim (see subsections (6) to (8)).

(6) To determine the previously used amount of group relief for carried-forward losses in relation to a prior claim made under section 188CB—

• Step 1 Take the proportion of the overlapping period for the prior claim that is included in the common period identified at step 2 in subsection (5) in relation to that claim.

• Step 2 Apply that proportion to the amount of group relief for carried-forward losses given on the claim.

• Step 3 Multiply the amount arrived at under step 2 by the fraction set out in subsection (7).

(7) The fraction is—

where—

A is the sum of the surrenderable amounts that are attributable to the specified loss-making period, and

B is the sum of all the surrenderable amounts.

(8) To determine the previously used amount of group relief for carried-forward losses in relation to a prior claim made under section 188CC—

(a) take the proportion of the overlapping period for the prior claim that is included in the common period identified at step 2 in subsection (5) in relation to that claim, and

(b) apply that proportion to the amount of group relief for carried-forward losses given on the prior claim.

The previously used amount of group relief for carried-forward losses in relation to the prior claim is the amount given as a result of paragraph (b).

188ED Claimant company's relevant maximum for the overlapping period U.K.

(1) The claimant company's relevant maximum for the overlapping period is determined as follows—

• Step 1 Calculate the claimant company's relevant maximum for the claim period in accordance with section 269ZD(4).

• Step 2 Deduct from that amount the sum of—

  (a)

  any deductions made by the company for the claim period

  (i)

  under section 45(4)(b) or 45B(4), or

  (ii)

  under section 303B or 303D by virtue of section 304(5),

  (b)

  any deduction made by the company for the claim period under section 457(3) or 463H(5) of CTA 2009,

  (c)

  any deductions made by the company for the claim period under section 124(5), 124A(5) or 124C(6) of FA 2012, and

  (d)

  any deductions made by the company for the claim period which are deductions within any of paragraphs (a) to (i) and (k) of section 269ZD(3).

• Step 3 Take the proportion of the claim period included in the overlapping period and apply that proportion to the amount arrived at under step 2.

(2) In step 2 of subsection (1)—

(a) in paragraph (a)(i), the references to deductions under section 45(4)(b) or 45B(4) do not include deductions that would be ignored for the purposes of section 269ZB by reason of—

(i) section 1209(3), 1210(5A) or 1211(7A) of CTA 2009 (losses of film trade),

(ii) section 1216DA(3), 1216DB(5A) or 1216DC(7A) of that Act (losses of television programme trade),

(iii) section 1217DA(3), 1217DB(5A) or 1217DC(7A) of that Act (losses of video game trade),

(iv) section 1217MA(3) or 1217MC(9) of that Act (losses of theatrical trade),

(v) section 1217SA(3) or 1217SC(9) of that Act (losses of orchestral trade),

(vi) section 1218ZDA(3) or 1218ZDC(9) of that Act (losses of museum or gallery exhibition trade),

F241 (vii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(viii) section 269ZJ(1) (insurance companies: shock losses),

(ix) section 304(7) (certain losses of ring fence trades), or

(x) section 356NJ(2) (pre-1 April 2017 loss arising from oil contractor activities);

(b) in paragraph (b) the reference to a deduction under section 463H(5) does not include the deduction of a shock loss.

(3) If the amount of the claimant company's [F242 qualifying] profits for the claim period (calculated in accordance with [F243 subsection (3A)]) is less than the amount of the claimant company's deductions allowance for the claim period (determined in accordance with section 269ZD(6)), subsection (1) has effect as if step 1 was modified as follows—

Step 1 Calculate the claimant company's [F242 qualifying] profits for the claim period in accordance with [F243 subsection (3A)].

[F244 (3A) The claimant company’s “qualifying profits” for the claim period are—

(a) the amount given by paragraph (1) of step 1 in section 269ZF(3) in determining the company’s qualifying trading profits and qualifying non-trading profits for the period, less

(b) the amount given by paragraph (1) of step 2 in section 269ZF(3) in determining those profits for the period.]

F245 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) Subsection (2) is to be ignored if subsection [F246 (3)] applies.

Textual Amendments

F241 S. 188ED(2)(a)(vii) omitted (20.3.2025 for the purposes of corporation tax in relation to accounting periods beginning on or after 1.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 6(5), 12(2) (with Sch. 5 paras. 15, 17, 18(4), 19)

F242 Word in s. 188ED(3) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 25(2)(a)

F243 Words in s. 188ED(3) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 25(2)(b)

F244 S. 188ED(3A) inserted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 25(3)

F245 S. 188ED(4) omitted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 3(a)

F246 Word in s. 188ED(5) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 3(b)

Modifications etc. (not altering text)

C93 S. 188ED excluded (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 194(2)

188EE Previously claimed group relief for carried-forward losses U.K.

(1) To determine the amount of previously claimed group relief for carried-forward losses for the overlapping period—

(a) identify any prior claims for the purposes of this section (see subsection (2)), and

(b) take the steps set out in subsection (3) in relation to each such claim.

The amount of previously claimed group relief for carried-forward losses for the overlapping period is the total of the previously claimed amounts given at step 3 in subsection (3) for all the prior claims.

(2) A claim is a prior claim for the purposes of this section if—

(a) it is a claim under section 188CB or 188CC by the claimant company for group relief for carried-forward losses which would be given by way of a deduction from the company's total profits of the claim period,

(b) it is made before the current claim, and

(c) it has not been withdrawn.

(3) These are the steps referred to in subsection (1)(b) to be taken in relation to each prior claim.

• Step 1 Identify the overlapping period for the prior claim.

• Step 2 Identify any period that is common to the overlapping period for the current claim and the overlapping period for the prior claim. If there is a common period, go to Step 3. If there is no common period, there is no previously claimed amount in relation to the prior claim (and ignore step 3).

• Step 3 Determine the previously claimed amount of group relief for carried forward losses in relation to the prior claim (see subsection (4)).

(4) To determine the previously claimed amount of group relief for carried-forward losses in relation to a prior claim—

(a) take the proportion of the overlapping period for the prior claim that is included in the common period identified at step 2 in subsection (3) in relation to that claim, and

(b) apply that proportion to the amount of group relief for carried-forward losses given on the prior claim.

The previously claimed amount of group relief for carried-forward losses in relation to the prior claim is the amount given as a result of paragraph (b).

188EF The potential Part 5 group relief amount U.K.

(1) The potential Part 5 group relief amount is determined as follows—

• Step 1 Calculate the maximum amount of group relief that could have been given to the claimant company under Part 5 in relation to losses or other amounts within section 99(1) which the surrendering company had for the specified loss-making period. In applying this step, ignore any lack of profits of the claimant company from which deductions could have been made as mentioned in section 137(1).

• Step 2 Deduct from the amount arrived at under step 1 the amount of any group relief actually given to the claimant company under Part 5 in relation to losses or other amounts within section 99(1) which the surrendering company had for the specified loss-making period.

• Step 3 Multiply the amount arrived at following step 2 by the fraction in subsection (2).

• Step 4 Deduct from the amount arrived at following step 3 any group relief for carried-forward losses previously given to the claimant company on claims under section 188CC which are related to the current claim.

(2) The fraction referred to in step 3 is—

where—

A is the sum of the losses or other amounts within section 99(1)(a), (c), (e), (f) and (g) which the surrendering company had for the specified loss-making period, and

B is the sum of the losses or other amounts within section 99(1) (a) to (g) which the surrendering company had for the specified loss-making period.

(3) References in subsection (2) to losses or other amounts are references to losses or other amounts only in so far as they were eligible for surrender under Chapter 2 of Part 5.

(4) A claim under section 188CC is related to the current claim if the surrendering company and the specified loss-making period are the same in relation to both claims.

188EG Sections 188EC to 188EE: supplementary U.K.

(1) If two or more claims for group relief for carried-forward losses are made at the same time, for the purpose of section 188EC and 188EE treat the claims as made—

(a) in such order as the company making them may elect or the companies making them may jointly elect, or

(b) if no such election is made, in such order as an officer of Revenue and Customs may direct.

(2) For the purpose of step 3 in each of sections 188EC(5) and 188EE(3) the amount of group relief for carried-forward losses given on a prior claim is determined on the basis that relief is given on the claim before it is given on any later claim.

(3) If the use of any proportion mentioned in subsection (4), would, in the circumstances of a particular case, produce a result that is unjust or unreasonable, the proportion is to be modified so far as necessary to produce a result that is just and reasonable.

(4) The proportions are those found in—

(a) section 188EC(2)(a),

(b) step 1 in section 188EC(6),

(c) section 188EC(8)(a),

(d) step 3 in section 188ED(1), and

(e) section 188EE(4)(a).

188EH Sections 188EC and 188EE: meaning of “the overlapping period” U.K.

(1) In sections 188EC and 188EE “the overlapping period”, in relation to a claim for group relief for carried-forward losses, means the period that is common to the claim period and the surrender period (see Requirement 2 in section 188CB(3) and Requirement 2 in section 188CC(3)).

(2) But if during any part of the overlapping period the relief condition is not met, that part is treated as not forming part of the overlapping period but instead as forming—

(a) a part of the surrender period that is not included in the overlapping period, and

(b) a part of the claim period that is not included in the overlapping period.

(3) The relief condition is the condition on which the claim for group relief for carried forward losses is based, that is—

• the group condition,

• consortium condition 1,

• consortium condition 2,

• consortium condition 3, or

• consortium condition 4.

Further limitations on amount of relief that apply in particular cases U.K.

188EI Condition 4: companies in link company's group U.K.

(1) Where—

(a) the claimant company makes a claim under section 188CC, and

(b) the claim is based on consortium condition 4

the amount of relief to be given on the claim is limited by subsections (2) and (3).

(2) There is a limit on the amount of group relief for carried-forward losses that can be given, in total, on relevant consortium claims made by the link company and group companies.

(3) That limit is the maximum amount of group relief for carried-forward losses that could be given to the link company on relevant consortium claims—

(a) assuming that no relevant consortium claims were made by group companies based on consortium condition 4,

(b) assuming that the link company was UK related, and

(c) ignoring any lack of profits of the link company from which deductions could be made as mentioned in section 188CK(1).

(4) In this section—

• “consortium claim” means a claim made under section 188CC for group relief for carried-forward losses,

• “group company” means a company that is a member of the same group of companies as the link company (other than the link company),

• “relevant consortium claim” means a consortium claim in relation to which the surrendering company, the surrender period and the specified loss-making period are the same as is the case for the claim mentioned in subsection (1), and

• “UK related”, in relation to a company, has the meaning given by section 188CJ.

188EJ Condition 3 or 4: surrendering company not controlled by claimant company etc U.K.

(1) This section applies if—

(a) the claimant company makes a claim under section 188CC for group relief for carried-forward losses,

(b) the claim is based on consortium condition 3, and

(c) during any part of the overlapping period, arrangements within subsection (3) are in place which enable a person to prevent the claimant company, either alone or together with one or more other companies that are members of the consortium, from controlling the surrendering company.

(2) This section also applies if—

(a) the claimant company makes a claim under section 188CC for group relief for carried-forward losses,

(b) the claim is based on consortium condition 4, and

(c) during any part of the overlapping period, arrangements within subsection (3) are in place which enable a person to prevent the link company, either alone or together with one or more other companies that are members of the consortium, from controlling the surrendering company.

(3) Arrangements are within this subsection if—

(a) the company, either alone or together with one or more other companies that are members of the consortium, would control the surrendering company, but for the existence of the arrangements, and

(b) the arrangements form part of a scheme the main purpose, or one of the main purposes, of which is to enable the claimant company to obtain a tax advantage under this Chapter.

(4) The relief to be given on the claim is to be determined as if the surrenderable amount for the overlapping period were 50% of what it would be but for this section (see section 188EC(2) to determine the surrenderable amount for the overlapping period).

(5) In this section “the overlapping period” is to be read in accordance with section 188EH.

(6) Section 1139 (“tax advantage”) applies for the purposes of this section.

188EK Condition 3 or 4: surrendering company in group of companies U.K.

(1) This section applies if—

(a) the claimant company makes a claim under section 188CC for group relief for carried-forward losses, and

(b) the surrendering company is a member of a group of companies.

(2) The surrendering company's surrenderable amounts for the surrender period that are attributable to the specified loss-making period are to be treated as reduced (but not below nil) by the relevant amount.

(3) To determine the relevant amount—

• Step 1 Calculate the group's potential relief.

• Step 2 Multiply the amount arrived at under step 1 by the fraction set out in subsection (6).

(4) The group's potential relief is the maximum amount of group relief for carried-forward losses that could be given if every claim that could be made based on the group condition in respect of the surrenderable amounts for the surrender period was in fact made (and for this purpose it is to be assumed that the maximum possible claim is made in each case).

(5) Before determining the maximum amount of potential group relief for carried-forward losses under subsection (4), take account of any claim made before the current claim that—

(a) is a claim for group relief for carried-forward losses based on the group condition, and

(b) is in relation to losses or other amounts surrendered by a member of the same group of companies as the surrendering company (other than the surrendering company itself).

(6) The fraction mentioned in step 2 in subsection (3) is—

where—

A is the sum of the surrendering company's surrenderable amounts for the surrender period that are attributable to the specified loss-making period, and

B is the sum of all the surrendering company's surrenderable amounts for the surrender period.

CHAPTER 6 U.K. Miscellaneous provisions and interpretation of Part

Miscellaneous U.K.

188FA Payments for group relief for carried-forward losses U.K.

(1) This section applies if—

(a) the surrendering company and the claimant company have an agreement between them in relation to losses and other amounts of the surrendering company (“the agreed loss amounts”),

(b) group relief for carried-forward losses is given to the claimant company in relation to the agreed loss amounts, and

(c) as a result of the agreement the claimant company makes a payment to the surrendering company that does not exceed the total amount of the agreed loss amounts.

(2) The payment—

(a) is not to be taken into account in determining the profits or losses of either company for corporation tax purposes, and

(b) for corporation tax purposes is not to be regarded as a distribution.

Interpretation U.K.

188FB Subsidiaries, groups and consortiums U.K.

Chapter 5 of Part 5 (which explains certain key concepts for the purposes of Part 5, including (in particular) how to determine if a company is a member of a group of companies or is a member of, or is owned by a consortium) applies for the purposes of this Part as it applies for the purposes of Part 5.

188FC “Trading company” and “holding company” U.K.

(1) In this Part “trading company” means a company the business of which consists wholly or mainly in the carrying on of a trade.

(2) In this Part “holding company” means a company the business of which consists wholly or mainly in the holding of shares or securities that—

(a) are its 90% subsidiaries, and

(b) are trading companies.

188FD Other definitions U.K.

(1) In this Part—

• “the claimant company” has the meaning given by section 188CB(2) or 188CC(2),

• “the claim period” has the meaning given by section 188CB(2) or 188CC(2),

• “company” means any body corporate,

• “group relief for carried-forward losses” has the meaning given by section 188AA(4),

• “profits” means income and chargeable gains, except in so far as the context otherwise requires,

• “shock loss” has the meaning given by section 269ZK,

• “Solvency 2 insurance company” means an insurance company as defined in section 269ZP(2),

• “the specified loss-making period”, in relation to a claim for group relief for carried forward losses made under section 188CC, has the meaning given by subsection (2) of that section,

• “the surrenderable amounts” has the meaning given by section 188BB(7),

• “surrendering company” has the meaning given by 188BB(7), and

• “the surrender period” has the meaning given by section 188BB(7).

(2) In this Part, except in so far as the context otherwise requires—

(a) references to a trade include an office, and

(b) reference to carrying on a trade include holding an office.]

Part 6 U.K. Charitable donations relief

Chapter 1 U.K. Nature of relief

189 Relief for qualifying charitable donations U.K.

(1) Qualifying charitable donations made by a company are allowed as deductions from the company's total profits in calculating the corporation tax chargeable for an accounting period.

(2) They are deducted from the company's total profits for the period after any other relief from corporation tax other than group relief [F247 and group relief for carried-forward losses].

(3) The amount of the deduction is limited to the amount that reduces the company's taxable total profits for the period to nil.

(4) Except as otherwise provided, a deduction is allowed only in respect of qualifying charitable donations made by the company in the accounting period concerned.

(5) The above provisions are subject to [F248 Chapter 2A of this Part,] [F249 section 939F and to any other] express exceptions in the Corporation Tax Acts.

Textual Amendments

F247 Words in s. 189(2) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 160

F248 Words in s. 189(5) inserted (with effect in accordance with s. 35(13)(14) of the amending Act) by Finance Act 2014 (c. 26), s. 35(2)

F249 Words in s. 189(5) substituted (with effect in accordance with Sch. 3 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 21

190 Qualifying charitable donations: meaning U.K.

(1) The following are qualifying charitable donations for corporation tax purposes—

(a) payments which are qualifying payments for the purposes of Chapter 2 (certain payments to charity), and

(b) amounts treated as qualifying charitable donations under Chapter 3 (certain disposals of investments to charity).

(2) However, no payment that is otherwise deductible from total profits, or in calculating any component of total profits, is a qualifying charitable donation.

Chapter 2 U.K. Certain payments to charity

Qualifying payments U.K.

191 Qualifying payments U.K.

(1) A payment made to a charity by a company is a qualifying payment for the purposes of this Chapter if each of conditions A to F is met.

(2) Condition A is that the payment is a payment of a sum of money.

(3) Condition B is that the payment is not subject to a condition as to repayment (but see section 192).

(4) Condition C is that the company making the payment is not itself a charity.

(5) Condition D is that the payment is not disqualified under section 193 (associated acquisition etc by the charity).

(6) Condition E is that the payment is not disqualified under section 194 (certain distributions).

(7) Condition F is that the payment is not disqualified under section 195 (associated benefits).

192 Condition as to repayment U.K.

(1) If—

(a) a company makes a payment to a charity (“the charitable payment”),

(b) the charity makes a payment to the company (“the repayment”), and

(c) each of conditions A to D is met,

the charitable payment is not subject to a condition as to repayment.

(2) Condition A is that the company is wholly owned by the charity, or by a number of charities that include the charity.

(3) Condition B is that the charitable payment is of an amount which the company estimates to be the amount necessary to reduce to nil the company's taxable total profits for the accounting period in which the payment is made (“the relevant period”).

(4) Condition C is that the only purpose for which the charity makes the repayment is to adjust the amount of the charitable payment so that it is of the amount actually necessary to reduce to nil the company's taxable total profits for the relevant period.

(5) Condition D is that the repayment is made no later than 12 months after the end of the relevant period.

(6) If subsection (1) applies—

(a) the repayment is not non-charitable expenditure for the purposes of section 493 or 515 of this Act or section 543(1)(f) of ITA 2007, F250 ...

[F251 (aa) the repayment is not non-qualifying expenditure for the purposes of Chapter 9 of Part 13 (see section 661(5)), and]

(b) paragraphs 56 and 62 (but not 64) of Schedule 18 to FA 1998 (supplementary claims or elections) apply to the repayment.

Textual Amendments

F250 Word in s. 192(6)(a) omitted (with effect in accordance with s. 35(13)(14) of the amending Act) by virtue of Finance Act 2014 (c. 26), s. 35(3)

F251 S. 192(6)(aa) inserted (with effect in accordance with s. 35(13)(14) of the amending Act) by Finance Act 2014 (c. 26), s. 35(3)

193 Associated acquisition etc U.K.

(1) A payment is disqualified under this section if—

(a) it is conditional on an acquisition of property by the charity from the company or a person associated with the company,

(b) it is associated with such an acquisition, or

(c) it is part of an arrangement involving such an acquisition.

(2) An acquisition by way of gift is to be ignored for the purposes of this section.

194 Distributions U.K.

(1) A payment is disqualified under this section if it is to be regarded as a distribution by reason of any provision of the Taxes Acts (within the meaning of TMA 1970) except section 1020 (transfers of assets or liabilities treated as distributions).

F252 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) A payment (other than a dividend) made by a company which is wholly owned by a charity is not to be regarded as a distribution for the purposes of subsection (1).

Textual Amendments

F252 S. 194(2) omitted (with effect in accordance with s. 33(6) of the amending Act) by virtue of Finance Act 2012 (c. 14), s. 33(5)(a)

195 Associated benefits U.K.

(1) A payment is disqualified under this section if—

(a) benefits are associated with the payment, and

(b) the restrictions on benefits associated with a payment are breached.

(2) Sections 196 to 198 apply for these purposes.

196 Associated benefits: meaning U.K.

For the purposes of this Chapter a benefit is associated with a payment if—

(a) it is received by the company which made the payment or by a person associated with the company, and

(b) it is received in consequence of making the payment.

197 Restrictions on associated benefits U.K.

(1) For the purposes of this Chapter the restrictions on benefits associated with a payment are breached if condition A or B is met.

(2) Condition A is that the total value of the benefits associated with the payment exceeds the variable limit, which is—

[F253 (a) in a case where the amount of the payment is £100 or less, 25% of that amount, and

(b) in a case where the amount of the payment exceeds £100, the sum of £25 and 5% of the amount of the excess.]

(3) Condition B is that the sum of the following total values is more than [F254 £2,500]—

(a) the total value of the benefits associated with the payment, and

(b) the total value of the benefits (if any) associated with each relevant prior payment.

(4) A relevant prior payment is a payment—

(a) which has already been made by the company to the charity in the accounting period, and

(b) which is a qualifying payment.

(5) This section needs to be read with section 198.

Textual Amendments

F253 S. 197(2)(a)(b) substituted for s. 197(2)(a)-(c) (with effect in accordance with s. 40(4) of the amending Act) by Finance Act 2019 (c. 1), s. 40(3)

F254 Sum in s. 197(3) substituted (with effect in accordance with s. 41(5) of the amending Act) by Finance Act 2011 (c. 11), s. 41(2)

198 Payments and benefits linked to periods of less than 12 months U.K.

(1) This section modifies the application of section 197(2) in relation to a payment if condition A, B, C or D is met.

(2) Condition A is that a benefit associated with the payment relates to a period of less than 12 months.

(3) Condition B is that a benefit associated with the payment consists of a right to receive benefits at intervals over a period of less than 12 months.

(4) Condition C is that a benefit associated with the payment is one of a series of benefits which are—

(a) received at intervals, and

(b) associated with a series of payments made at intervals of less than 12 months.

(5) Condition D is that—

(a) a benefit associated with the payment is not one of a series of benefits received at intervals, and

(b) the payment is one of a series of payments made at intervals of less than 12 months.

(6) If condition A, B or C is met, then for the purposes of section 197(2)—

(a) the value of the benefit is taken to be the annual equivalent of its actual value, and

(b) the amount of the payment is taken to be the annual equivalent of its actual amount.

(7) If condition D is met, the amount of the payment is taken for the purposes of section 197(2) to be the annual equivalent of its actual amount.

(8) The annual equivalent of the value of a benefit, or of the amount of a payment, is found as follows.

• Step 1

  Multiply the value or amount by 365.

• Step 2

  If condition A or B is met in relation to the benefit (and neither condition C nor condition D is met in relation to it) divide the result by the number of days in the period of less than 12 months referred to in subsection (2) or (as the case may be) subsection (3).

If condition C or D is met in relation to the benefit, divide the result by the average number of days in the intervals of less than 12 months referred to in subsection (4)(b) or (as the case may be) subsection (5)(b).

Payment attributed to earlier period U.K.

199 Payment attributed to earlier accounting period U.K.

(1) This section applies if—

(a) a company makes a qualifying payment,

(b) the company is wholly owned by a charity, and

(c) the company makes a claim for the payment (or part of it) to be treated as a qualifying charitable donation made in an accounting period falling wholly or partly within the period of 9 months ending with the date of the making of the payment.

(2) The payment (or part) is to be treated for corporation tax purposes as a qualifying charitable donation made in that accounting period and not in any later period.

(3) A claim must be made within the period of two years immediately following the accounting period in which the payment is made or such longer period as an officer of Revenue and Customs may allow.

Interpretation U.K.

200 Company wholly owned by a charity U.K.

(1) For the purposes of this Chapter a company is wholly owned by a charity if condition A or B is met.

(2) Condition A is that—

(a) the company has an ordinary share capital, and

(b) every part of that share capital is owned by a charity (whether or not the same charity).

(3) Condition B is that—

(a) the company is limited by guarantee, and

(b) every beneficiary of the company is or must be a charity or a company wholly owned by a charity.

(4) Ordinary share capital of a company is treated as owned by a charity if a charity—

(a) directly or indirectly owns that share capital within the meaning of Chapter 3 of Part 24, or

(b) would be taken so to own it if references in that Chapter to a body corporate included references to a charity which is not a body corporate.

[F255 (4A) In the case of a charity which is a registered club, ordinary share capital of a company is treated as owned by a charity if the charity beneficially owns that share capital.]

(5) A beneficiary of a company is a person who—

(a) is beneficially entitled to participate in the company's divisible profits, or

(b) will be beneficially entitled to share in any of the company's net assets available for distribution on its winding up.

Textual Amendments

F255 S. 200(4A) inserted (with effect in accordance with s. 35(13)(14) of the amending Act) by Finance Act 2014 (c. 26), s. 35(4)

Modifications etc. (not altering text)

C94 S. 200 applied (with modifications) by 2007 c. 3, s. 809ZJ(9) (as inserted (with effect in accordance with Sch. 3 paras. 27, 28 of the amending Act) by Finance Act 2011 (c. 11), Sch. 3 para. 1)

201 Associated persons U.K.

For the purposes of this Chapter a person is associated with a company if the person is connected with—

(a) the company, or

(b) a person connected with the company.

202 “Charity” U.K.

In this Chapter “charity” [F256 includes]—

F257 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F258 (aa) a registered club,]

(b) a scientific research association (as defined in section 469),

(c) the Trustees of the National Heritage Memorial Fund, [F259 or]

(d) the Historic Buildings and Monuments Commission for England, F260 ...

F260 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F256 Word in s. 202 substituted (with effect in accordance with art. 21 of the commencing S.I.) by Finance Act 2010 (c. 13), Sch. 6 paras. 27(2)(a), 34(2); S.I. 2012/736, art. 21

F257 S. 202(a) omitted (with effect in accordance with art. 21 of the commencing S.I.) by virtue of Finance Act 2010 (c. 13), Sch. 6 paras. 27(2)(b), 34(2); S.I. 2012/736, art. 21

F258 S. 202(aa) inserted (with effect in accordance with s. 35(13)(14) of the amending Act) by Finance Act 2014 (c. 26), s. 35(5)

F259 Word in s. 202(2)(c) inserted (1.4.2012) by The Public Bodies (Abolition of the National Endowment for Science, Technology and the Arts) Order 2012 (S.I. 2012/964), arts. 1(2), 3(1), Sch.

F260 S. 202(2)(e) and word omitted (1.4.2012) by virtue of The Public Bodies (Abolition of the National Endowment for Science, Technology and the Arts) Order 2012 (S.I. 2012/964), arts. 1(2), 3(1), Sch.

[F261 202A “Registered club” U.K.

In this Chapter “registered club” has the meaning given by section 658(6) (clubs registered as community amateur sports clubs).]

Textual Amendments

F261 S. 202A inserted (with effect in accordance with s. 35(13)(14) of the amending Act) by Finance Act 2014 (c. 26), s. 35(6)

[F262 CHAPTER 2A U.K. Payments to community amateur sports clubs: anti-abuse

Textual Amendments

F262 Pt. 6 Ch. 2A inserted (with effect in accordance with s. 35(13)-(15) of the amending Act) by Finance Act 2014 (c. 26), s. 35(7)

202B Restriction on relief for payments to community amateur sports clubs U.K.

(1) Subsection (2) applies if—

(a) one or more qualifying payments are made by a company to a registered club (“the club”) in an accounting period (“the current period”),

(b) the company is wholly owned, or controlled, by the club or by a number of charities which include the club, for all or part of that period, and

(c) inflated member-related expenditure is incurred by the company in that period.

(2) For the purposes of section 189 (relief for qualifying charitable donations), the total amount of those qualifying payments is treated as reduced (but not below nil) by the total amount of that inflated member-related expenditure.

(3) Subsection (4) applies if—

(a) the total amount of that expenditure exceeds the total amount of those payments, and

(b) the company made one or more qualifying payments to the club in an earlier accounting period ending not more than 6 years before the end of the current period.

(4) For the purposes of section 189, the total amount of the qualifying payments made in the earlier accounting period is treated as reduced (but not below nil) by the amount of the excess.

(5) If subsection (3)(b) applies in relation to more than one earlier accounting period—

(a) subsection (4) applies to treat amounts paid in later accounting periods as reduced in priority to amounts paid in earlier ones (until the excess is exhausted or all amounts have been reduced to nil), and

(b) in applying subsection (4) in relation to an accounting period, the reference to the excess is to be read as a reference to so much of it as exceeds the total amount of qualifying payments which, under that subsection, have previously been reduced to nil by the excess.

(6) For the purposes of subsections (3) and (4), a reference to the total amount of qualifying payments made in an earlier accounting period is to the total amount of those payments after—

(a) any reduction under subsection (2), and

(b) any previous reduction under subsection (4).

(7) Such adjustments must be made (whether by way of the making of assessments or otherwise) as may be required in consequence of subsections (4) to (6).

(8) Section 200 (company wholly owned by a charity) applies for the purposes of this section.

(9) For the purposes of this section, the club controls the company if it has the power to secure—

(a) by means of the holding of shares or the possession of voting power in relation to the company or any other company, or

(b) as a result of any powers conferred by the articles of association or other document regulating the company or any other company,

that the affairs of the company are conducted in accordance with the club's wishes.

(10) For the purposes of this section two or more charities (including the club) control the company if, acting together, they have the power to secure, as mentioned in paragraph (a) or (b) of subsection (9), that the affairs of the company are conducted in accordance with the wishes of those charities.

(11) In this section—

• “charity” has the same meaning as in Chapter 2,

• “qualifying payment” means a qualifying payment for the purposes of Chapter 2, and

• “registered club” has the same meaning as in Chapter 2,

and any reference to a member of the club includes a reference to a person connected with a member of the club.

202C “Inflated member-related expenditure” U.K.

(1) This section applies for the purposes of section 202B.

(2) “Inflated member-related expenditure” means—

(a) employment expenditure incurred in respect of the employment of a member of the club, by the company, where that employment is otherwise than on an arm's length basis, or

(b) expenditure incurred on a supply of goods and services to the club by—

(i) a member of the club, or

(ii) a member-controlled body,

otherwise than on an arm's length basis.

(3) But if the features of an employment or supply which cause it to be otherwise than on an arm's length basis, when taken together, are more advantageous to the company than if the employment or supply had been on an arm's length basis, any expenditure incurred in respect of the employment or on the supply is not inflated member-related expenditure.

(4) A company is “member-controlled” if a member of the club has (or two or more members acting together have) the power to secure—

(a) by means of the holding of shares or the possession of voting power in relation to that or any other body corporate, or

(b) as a result of any powers conferred by the articles of association or other document regulating that or any other body corporate,

that the affairs of the company are conducted in accordance with the wishes of the member (or, as the case may be, members).

(5) A partnership is “member-controlled” if a member of the club has (or two or more members acting together have) the right to a share of more than half the assets, or of more than half the income, of the partnership.

(6) In this section any reference to a member of the club includes a reference to a person connected with a member of the club.

(7) For the purposes of subsection (2)(a), the Treasury may by regulations specify—

(a) descriptions of expenditure which is to be treated as employment expenditure incurred in respect of the employment of a member of a club;

(b) descriptions of expenditure which is not to be so treated.

(8) Section 1171(4) (orders and regulations subject to negative resolution procedure) does not apply to any regulations made under subsection (7) if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.]

Chapter 3 U.K. Certain disposals to charity

Amounts treated as qualifying charitable donations U.K.

203 Certain disposals of investments U.K.

(1) This section applies if—

(a) a company disposes of the whole of the beneficial interest in a qualifying investment to a charity,

(b) the disposal is otherwise than by way of a bargain made at arm's length,

(c) the company is not itself a charity, and

(d) the company makes a claim.

(2) The relievable amount is treated for corporation tax purposes as a qualifying charitable donation made by the company in the accounting period in which the disposal is made.

(3) No relief in respect of the disposal is to be given under section 105 of CTA 2009 (gifts of trading stock to charities etc).

(4) For the calculation of the relievable amount, see section 206.

(5) If the qualifying investment is a qualifying interest in land, this section is subject to—

• section 213 (certificates),

• section 214 (qualifying interests in land held jointly),

• section 215 (calculation of relievable amount etc where joint disposal), and

• section 216 (disqualifying events).

204 Meaning of qualifying investment U.K.

(1) In this Chapter “qualifying investment” means any of the following—

(a) shares or securities which are listed on a recognised stock exchange or dealt in on a designated market in the United Kingdom,

(b) units in an authorised unit trust,

(c) shares in an open-ended investment company,

(d) an interest in an offshore fund, and

(e) a qualifying interest in land.

(2) In this section—

• “offshore fund” has the meaning given by section 355 of TIOPA 2010, and

• “open-ended investment company” is to be read in accordance with sections 613 and 615.

(3) In paragraph (a) of subsection (1) “designated” means designated by an order made by the Commissioners for Her Majesty's Revenue and Customs for the purposes of that paragraph.

(4) An order under subsection (3)—

(a) may designate a market by name or by reference to a class or description of market,

(b) may vary or revoke a previous order under that subsection.

205 Meaning of qualifying interest in land U.K.

(1) In this Chapter “qualifying interest in land” means—

(a) a freehold interest in land in the United Kingdom, or

(b) a leasehold interest in land in the United Kingdom which is a term of years absolute.

This is subject to subsections (2) to (5).

(2) Subsection (3) applies if a company with a beneficial interest in a freehold or leasehold interest mentioned in subsection (1)(a) or (b) makes a disposal to a charity of—

(a) the whole of the beneficial interest, and

(b) an easement, servitude, right or privilege so far as benefiting the land in question.

(3) The disposal mentioned in subsection (2)(b) is regarded for the purposes of this Chapter as a disposal by the company of the whole of its beneficial interest in a qualifying interest in land separate from the disposal mentioned in subsection (2)(a).

(4) If a company which has a freehold or leasehold interest in land in the United Kingdom grants a lease for a term of years absolute to a charity of the whole or part of the land, the grant of the lease is regarded for the purposes of this Chapter as a disposal by the company of the whole of the beneficial interest in the leasehold interest so granted.

(5) Neither an agreement to acquire a freehold interest nor an agreement for a lease is a qualifying interest in land.

(6) In the application of this section to Scotland—

(a) references to a freehold interest in land are to the interest of the owner,

(b) references to a leasehold interest in land which is a term of years absolute are to a tenant's right over or interest in a property subject to a lease,

(c) references to an agreement for a lease do not include missives of let that constitute an actual lease, and

(d) the reference in subsection (4) to granting a lease for a term of years absolute is to granting a lease.

206 The relievable amount U.K.

(1) If the disposal is a gift, the relievable amount is given by the formula—

where—

V is the value of the net benefit to the charity at, or immediately after, the time when the disposal is made (whichever is less),

IC is the amount of the incidental costs of making the disposal to the company making it, and

B is the total value of any benefits received in consequence of making the disposal by the company making the disposal or a person connected with the company.

(2) If the disposal is at an undervalue, the relievable amount is given by the formula—

where—

E is the amount (if any) by which V (as defined in subsection (1)) exceeds the amount or value of the consideration for the disposal,

C is given by subsection (4), and

B is as defined in subsection (1).

(3) But if the amount given by the formula in subsection (1) or (2) is a negative amount, the relievable amount is nil.

(4) C is found as follows.

• Step 1

  Calculate the consideration for which the disposal is treated as made for the purposes of TCGA 1992 as a result of section 257(2)(a) of that Act (in case of disposal to charity etc, consideration to be such that no gain or loss accrues).

• Step 2

  Find the excess (if any) of the amount calculated at step 1 over the amount or value of the consideration for the disposal.

If there is such an excess, C is the amount of that excess or, if less, the amount of the incidental costs of making the disposal to the company making it.

If there is no such excess, C is nil.

(5) This section needs to be read with—

(a) section 207 (incidental costs of making disposal),

(b) section 208 (consideration), and

(c) sections 209 to 212 (value of net benefit to charity).

207 Incidental costs of making disposal U.K.

References in section 206 to the incidental costs of making the disposal to the company making it are to—

(a) fees, commission or remuneration paid for the professional services of a surveyor, valuer, auctioneer, accountant, agent or legal adviser which are wholly and exclusively incurred by the company for the purposes of the disposal,

(b) costs of transfer or conveyance wholly and exclusively incurred by the company for the purposes of the disposal,

(c) costs of advertising to find a buyer, and

(d) costs reasonably incurred in making any valuation or apportionment required for the purposes of this Chapter.

208 Consideration U.K.

If the disposal is at an undervalue, section 48 of TCGA 1992 (consideration due after time of disposal) applies in relation to the calculation of the relievable amount as it applies in relation to the calculation of a gain.

Value of net benefit to charity U.K.

209 Value of net benefit to charity U.K.

(1) For the purposes of this Chapter the value of the net benefit to a charity is—

(a) the [F263 relevant] value of the qualifying investment, or

(b) if the charity is, or becomes, subject to a disposal-related obligation, the [F263 relevant] value of the qualifying investment reduced by the total amount of the disposal-related liabilities of the charity.

[F264 (1A) In subsection (1) “ relevant value ” means—

(a) where subsection (1B) applies, the lower of the market value and the acquisition value, and

(b) otherwise, the market value.

(1B) This subsection applies where—

(a) the qualifying investment, or anything from which it derives or which it represents (whether in whole or in part and whether directly or indirectly), was acquired by the company making the disposal within the period of 4 years ending with the day on which the disposal is made,

(b) the acquisition was made as part of a scheme, and

(c) the main purpose, or one of the main purposes, of the company in entering into the scheme was to obtain relief, or an increased amount of relief, as a result of this Chapter.

(1C) In subsection (1B) “ scheme ” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions. ]

(2) This section is supplemented by—

(a) section 210 (market value of qualifying investments),

[F265 (aa) section 210A (acquisition value of qualifying investments),]

(b) section 211 (meaning of disposal-related obligation), and

(c) section 212 (meaning and amount of disposal-related liability).

Textual Amendments

F263 Word in s. 209(1) substituted (with effect in accordance with Sch. 7 paras. 9, 10 of the amending Act) by Finance Act 2010 (c. 13), Sch. 7 para. 6(2)

F264 S. 209(1A)-(1C) inserted (with effect in accordance with Sch. 7 paras. 9, 10 of the amending Act) by Finance Act 2010 (c. 13), Sch. 7 para. 6(3)

F265 S. 209(2)(aa) inserted (with effect in accordance with Sch. 7 paras. 9, 10 of the amending Act) by Finance Act 2010 (c. 13), Sch. 7 para. 6(4)

210 Market value of qualifying investments U.K.

(1) For the purposes of this Chapter the market value of a qualifying investment is determined in accordance with sections 272 to 274 of TCGA 1992 (subject to Part I of Schedule 11 to that Act).

(2) But, in the case of an interest in an offshore fund for which separate buying and selling prices are published regularly by the managers of the fund, the market value for the purposes of this Chapter is an amount equal to the buying price (that is the lower price) published on—

(a) the day of the disposal, or

(b) if none were published on that day, the latest day on which the prices were published before that day.

(3) In this section “offshore fund” has the meaning given by section 355 of TIOPA 2010.

[F266 210A Acquisition value of qualifying investments U.K.

(1) For the purposes of this Chapter the acquisition value of a qualifying investment disposed of by a company is—

(a) where the qualifying investment was acquired by the company within the period of 4 years ending with the day on which the disposal is made, the cost to the company of acquiring it, or

(b) where something from which the qualifying investment derives or which it represents was so acquired, such proportion of the cost to the company of acquiring that thing as is just and reasonable to attribute to the qualifying investment.

(2) A reference in subsection (1) to the cost to the company of an acquisition is to—

(a) the consideration given by the company for the acquisition, less

(b) any amount that is received in connection with the acquisition, by the company or a person connected with it, as part of the scheme in question.]

Textual Amendments

F266 S. 210A inserted (with effect in accordance with Sch. 7 paras. 9, 10 of the amending Act) by Finance Act 2010 (c. 13), Sch. 7 para. 7

211 Meaning of “disposal-related obligation” U.K.

(1) For the purposes of this Chapter an obligation is a “disposal-related obligation”, in relation to a qualifying investment, if condition A or B is met in relation to it.

(2) The obligation may be to any person (whether or not the company making the disposal or a person connected with it).

(3) Condition A is that it is reasonable to suppose that the disposal of the qualifying investment to the charity would not have been made in the absence of the obligation.

(4) Condition B is that the obligation (whether in whole or in part) relates to, is framed by reference to, or is conditional on the charity receiving, the qualifying investment or a disposal-related investment.

(5) In applying condition A all the circumstances must be taken into account (including in particular the difference in the value of the net benefit to the charity calculated under section 209(1)(a) and that value calculated under section 209(1)(b) on the assumption that the obligation under consideration is a disposal-related obligation).

(6) In subsection (4) “disposal-related investment” means any of the following—

(a) an asset of the same class or description as the qualifying investment (irrespective of size, quantity or amount),

(b) an asset derived from, or representing, the qualifying investment, whether in whole or in part and whether directly or indirectly, and

(c) an asset from which the qualifying investment is derived, or which the qualifying investment represents, whether in whole or in part and whether directly or indirectly.

(7) In this section “obligation” includes a reference to each of the following—

(a) a scheme, arrangement or understanding of any kind, whether or not legally enforceable, and

(b) a series of obligations (whether or not between the same parties).

212 Meaning and amount of “disposal-related liability” U.K.

(1) For the purposes of this Chapter a liability is a “disposal-related liability” in the case of a qualifying investment if it is a liability of the charity under a disposal-related obligation in relation to the qualifying investment.

(2) If the disposal-related obligation is contingent, the amount to be brought into account for the purposes of section 209 at any time in respect of the disposal-related liability, so far as contingent, is—

(a) if the contingency occurs, the amount or value of the liability actually incurred in consequence of the occurrence of the contingency, or

(b) if the contingency does not occur, nil.

Special provisions about qualifying interests in land U.K.

213 Certificate required from charity U.K.

(1) This section applies if the qualifying investment is a qualifying interest in land.

(2) A company may not make a claim under section 203 unless the company has received a certificate given by or on behalf of the charity.

(3) The certificate must—

(a) describe the qualifying interest in land,

(b) specify the date of the disposal, and

(c) state that the charity has acquired the qualifying interest in land.

214 Qualifying interests in land held jointly U.K.

(1) This section applies if the qualifying investment is a qualifying interest in land.

(2) It applies if two or more persons (“the owners”)—

(a) are jointly beneficially entitled to the qualifying interest in land, or

(b) are, taken together, beneficially entitled in common to the qualifying interest in land.

(3) Relief as a result of this Chapter is available if—

(a) at least one of the owners is a qualifying company, and

(b) all the owners dispose of the whole of their beneficial interests in the qualifying interest in land to the charity.

(4) Relief as a result of this Chapter is available to each of the owners which is a qualifying company (and section 215 applies).

(5) A company is a qualifying company if it is not itself a charity.

(6) Subsection (7) applies if one or more of the owners is not a company.

(7) For the purpose of determining whether the owners' beneficial interests are disposed of as mentioned in subsection (3)(b), section 205(2) to (4) applies as if references to a company included references to a person who is not a company.

215 Calculation of relievable amount etc where joint disposal of interest in land U.K.

(1) If relief as a result of this Chapter is available because of section 214, this section applies for the purpose of finding—

(a) the relievable amount, and

(b) the amount of relief to be given to a qualifying company.

(2) If one or more of the owners is an individual, subsections (3) and (4) apply.

(3) The relievable amount is taken to be the relievable amount calculated for the purposes of Chapter 3 of Part 8 of ITA 2007.

(4) The amount of relief to be given to a qualifying company as a result of this Chapter is calculated on the basis that the reference in section 203(2) to the relievable amount is read as a reference to such share of the relievable amount found under subsection (3) above as is allocated to the company by the agreement mentioned in section 442(5) of ITA 2007.

(5) If none of the owners is an individual, subsections (6) to (9) apply.

(6) Calculate the relievable amount under this Chapter as if—

(a) the owners were a single qualifying company, and

(b) the disposals of the owners' beneficial interests were a single disposal by that single company of the whole of the beneficial interest in the qualifying interest in land.

(7) In particular, calculate the consideration mentioned at Step 1 in section 206(4) by—

(a) calculating, for each owner, the consideration for which the disposal of the owner's beneficial interest is treated as made for the purposes of TCGA 1992 as a result of section 257(2)(a) of that Act, and

(b) adding together all the consideration calculated under paragraph (a).

(8) If one or more of the owners is not a qualifying company, in calculating the relievable amount make just and reasonable adjustments to reduce the relievable amount to reflect the fact that relief as a result of this Chapter is not available to that owner or to those owners.

(9) The amount of relief to be given to a qualifying company as a result of this Chapter is calculated on the basis that the reference in section 203(2) to the relievable amount is read as a reference to such share of the relievable amount found under subsections (6) to (8) above as is allocated to the company by an agreement made between those owners which are qualifying companies.

216 Disqualifying events U.K.

(1) This section applies if the qualifying investment is a qualifying interest in land.

(2) If a disqualifying event occurs at any time in the provisional period, the following are treated as never having been entitled to relief as a result of this Chapter in respect of the disposal of the qualifying interest in land—

(a) in a case where sections 214 and 215 do not apply, the company which made the disposal, and

(b) in a case where those sections apply, each qualifying company which is an owner.

(3) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (2).

(4) A disqualifying event occurs if a person mentioned in subsection (5) becomes (otherwise than for full consideration in money or money's worth)—

(a) entitled to an interest or right in relation to all or part of the land to which the disposal relates, or

(b) party to an arrangement under which he enjoys some right in relation to all or part of that land.

(5) The persons are—

(a) in a case where sections 214 and 215 do not apply, the company which made the disposal or a person connected with that company, and

(b) in a case where those sections apply, a person who is an owner or a person connected with such a person.

(6) A disqualifying event does not occur if a person becomes entitled to an interest or right as mentioned in subsection (4)(a) as a result of a disposition of property on death (whether the disposition is effected by will, under the law relating to intestacy or otherwise).

(7) “The provisional period” is the period beginning with the date of the disposal of the qualifying interest in land and ending with the sixth anniversary of the end of the accounting period in which the disposal was made.

Interpretation U.K.

217 “Charity” U.K.

In this Chapter “charity” [F267 includes]—

F268 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the Trustees of the National Heritage Memorial Fund, [F269 or]

(c) the Historic Buildings and Monuments Commission for England, F270 ...

F270 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F267 Word in s. 217 substituted (with effect in accordance with art. 21 of the commencing S.I.) by Finance Act 2010 (c. 13), Sch. 6 paras. 27(3)(a), 34(2); S.I. 2012/736, art. 21

F268 S. 217(a) omitted (with effect in accordance with art. 21 of the commencing S.I.) by virtue of Finance Act 2010 (c. 13), Sch. 6 paras. 27(3)(b), 34(2); S.I. 2012/736, art. 21

F269 Word in s. 217 inserted (1.4.2012) by The Public Bodies (Abolition of the National Endowment for Science, Technology and the Arts) Order 2012 (S.I. 2012/964), arts. 1(2), 3(1), Sch.

F270 S. 217(d) and word omitted (1.4.2012) by virtue of The Public Bodies (Abolition of the National Endowment for Science, Technology and the Arts) Order 2012 (S.I. 2012/964), arts. 1(2), 3(1), Sch.

[F271 PART 6A U.K. Relief for expenditure on grassroots sport

Textual Amendments

F271 Pt. 6A inserted (with effect in accordance with s. 22(6) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 22(5)

217A Relief for expenditure on grassroots sport U.K.

(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.

217B Meaning of qualifying expenditure on grassroots sport U.K.

(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).

217C Meaning of qualifying sport body U.K.

(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).

217D Relationship between this Part and Part 6 U.K.

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.]

Part 7 U.K. Community investment tax relief

Chapter 1 U.K. Introduction

CITR U.K.

218 Meaning of “CITR” U.K.

This Part provides for community investment tax relief (“CITR”), that is, entitlement to tax reductions in respect of amounts invested by companies in community development finance institutions.

219 Eligibility for CITR U.K.

(1) A company (“the investor”) which makes an investment (“the investment”) in a body is eligible for CITR in respect of the investment if—

(a) at the time the investment is made the body is accredited as a community development finance institution under Chapter 2 of Part 7 of ITA 2007,

(b) the investment is a qualifying investment (see Chapter 2 of this Part), and

(c) the general conditions of Chapter 3 of this Part are met.

(2) In this Part references to “the CDFI” are to the body in which the investment is made.

220 Form and amount of CITR U.K.

(1) If the investor is eligible for CITR in respect of the investment, the investor may make a claim in respect of the investment for any one or more of the relevant accounting periods.

(2) If the investor makes a claim for a relevant accounting period, the investor is entitled to a reduction in the amount of its liability for corporation tax for that period.

[F272 (3) The amount of that reduction for the relevant accounting period is 5% of the invested amount in respect of the investment for the period.]

(4) For [F273 the purposes of this section and section 220A ] the “relevant” accounting periods are—

(a) the accounting period in which the investment date falls, and

(b) each of the accounting periods in which the subsequent 4 anniversaries of that date fall.

(5) The investor is entitled to make a claim for CITR for a relevant accounting period if—

(a) the investor considers that the conditions for the CITR are for the time being met, and

(b) the investor has received a tax relief certificate (see section 229) relating to the investment from the CDFI,

but a claim may not be made before the end of the accounting period to which the claim relates.

(6) Subsection (5) is subject to the following provisions—

(a) section 236 (loans: no claim after disposal or excessive repayments or receipts of value),

(b) section 237 (securities or shares: no claim after disposal or excessive receipts of value),

(c) section 238 (no claim after loss of accreditation by the CDFI), and

(d) section 239 (accreditation of investor).

Textual Amendments

F272 S. 220(3) substituted (with effect in accordance with Sch. 27 para. 12 of the amending Act) by Finance Act 2013 (c. 29), Sch. 27 para. 8(2)

F273 Words in s. 220(4) substituted (with effect in accordance with Sch. 27 para. 12 of the amending Act) by Finance Act 2013 (c. 29), Sch. 27 para. 8(3)

[F274 220A Carry forward of CITR U.K.

(1) This section applies if—

(a) the investor is entitled to a reduction in its liability for corporation tax for a relevant accounting period under section 220 in respect of the investment, but

(b) the amount of the reduction is not fully deducted at Step 2 for that relevant accounting period.

(2) The amount (“the excess amount”) not deducted is treated as follows.

(3) For each subsequent relevant accounting period for which the investor—

(a) is entitled to a reduction in its liability for corporation tax under section 220 in respect of the investment, and

(b) makes a claim under this subsection,

the investor is also entitled to a reduction in its liability for corporation tax under this subsection.

(4) The amount of the reduction under subsection (3) for any relevant accounting period is the excess amount so far as it has not been deducted at Step 2 for any earlier relevant accounting period by virtue of that subsection.

(5) In this section “Step 2” means the second step in paragraph 8(1) of Schedule 18 to FA 1998 (calculation of tax payable).]

Textual Amendments

F274 S. 220A inserted (with effect in accordance with Sch. 27 para. 12 of the amending Act) by Finance Act 2013 (c. 29), Sch. 27 para. 9

[F275 220B Limit on State aid U.K.

(1) The reductions that may be made in the amount of the investor's liability for corporation tax under section 220 or 220A for an accounting period (“the current accounting period”) are limited as follows.

(2) The sum of the following amounts must not exceed [euro]200,000—

(a) so far as it represents aid granted to the investor, the total amount of reductions made in the amount of the investor's liability for corporation tax under section 220 or 220A—

(i) for the current accounting period, or

(ii) any earlier accounting period which ends during the relevant 3-year period, and

(b) the total of any de minimis aid granted to the investor during the relevant 3-year period which does not fall within paragraph (a).

(3) In subsection (2) “the relevant 3-year period” means the period of 3 years ending at the end of the current accounting period.

(4) Subsection (2) is to be read as if it were contained in Article 2 of Commission Regulation (EC) No. 1998/2006 (de minimis aid).]

Textual Amendments

F275 S. 220B inserted (with effect in accordance with Sch. 27 para. 13(2)(3) of the amending Act) by Finance Act 2013 (c. 29), Sch. 27 para. 13(1)

Miscellaneous U.K.

221 Meaning of “making an investment” U.K.

(1) For the purposes of this Part, a company makes an investment in a body at any time when—

(a) the company makes a loan (whether secured or unsecured) to the body, or

(b) an issue of securities of or shares in the body, for which the company has subscribed, is made to the company.

(2) The following provisions of this section apply for the purposes of subsection (1)(a).

(3) A company does not make a loan to a body if—

(a) the body uses overdraft facilities provided by the company, or

(b) the company subscribes for or otherwise acquires securities of the body.

(4) If the loan agreement authorises the body to draw down amounts of the loan over a period of time, the loan is treated as made at the time when the first amount is drawn down.

222 Determination of “the invested amount” U.K.

(1) This section applies for the purpose of determining “the invested amount” in respect of any loan, securities or shares included in the investment.

This is subject to sections 246(2) and 252 (which adjust “the invested amount” in certain cases where value is received).

(2) In the case of a loan, the invested amount is—

(a) for the accounting period in which the investment date falls, the average capital balance for the first year of the 5 year period,

(b) for the accounting period in which the first anniversary of the investment date falls, the average capital balance for the second year of the 5 year period, and

(c) for any subsequent accounting period—

(i) the average capital balance for the period of 12 months beginning with the anniversary of the investment date falling in the accounting period concerned, or

(ii) if less, the average capital balance for the period of 6 months beginning 18 months after the investment date.

(3) In the case of securities or shares, the invested amount for an accounting period is the amount subscribed by the investor for the securities or shares.

(4) For the purposes of this section, the average capital balance of the loan for a period is the mean of the daily balances of capital outstanding during the period.

223 Meaning of “the 5 year period” and “the investment date” U.K.

In this Part—

• “the 5 year period” means the period of 5 years beginning with the investment date, and

• “the investment date” means the day the investment is made.

224 Overview of other Chapters of Part U.K.

In this Part—

(a) Chapter 4 provides for limitations on claims and the attribution of CITR to investments,

(b) Chapter 5 provides for CITR to be withdrawn or reduced in the circumstances mentioned in that Chapter, and

(c) Chapter 6 contains supplementary and general provision.

Chapter 2 U.K. Qualifying investments

225 Qualifying investments: introduction U.K.

For the purposes of this Part the investment is a “qualifying investment” in the CDFI if—

(a) the investment consists of—

(i) a loan in relation to which the conditions of section 226 are met,

(ii) securities in relation to which the conditions of section 227 are met, or

(iii) shares in relation to which the conditions of section 228 are met,

(b) the investor receives from the CDFI a valid tax relief certificate in relation to the investment (see section 229), and

(c) the requirements of section 230 (no pre-arranged protection against risks) are met.

226 Conditions to be met in relation to loans U.K.

(1) Condition A of this section is that either—

(a) the CDFI receives from the investor, on the investment date, the full amount of the loan, or

(b) if the loan agreement authorises the CDFI to draw down amounts of the loan over a period of time, the end of that period is not later than 18 months after the investment date.

(2) Condition B is that the loan must not carry any present or future right to be converted into or exchanged for a loan which is, or securities, shares or other rights which are, redeemable within the 5 year period.

(3) Condition C is that the loan must not have been made on terms that allow any person to require—

(a) the repayment during the first two years of the 5 year period of any of the loan capital advanced in those two years,

(b) the repayment during the third year of that period of more than 25% of the loan capital outstanding at the end of those two years,

(c) the repayment before the end of the fourth year of that period of more than 50% of that loan capital, or

(d) the repayment before the end of that period of more than 75% of that loan capital.

(4) Subsection (3) does not apply if the CDFI is required to make the repayment as a result of its failure to meet any obligation of the loan agreement which—

(a) is imposed merely because of the commercial risks to which the investor is exposed as lender under that agreement, and

(b) is no more likely to be breached than any obligation that might reasonably have been agreed in respect of the loan in the absence of this Part.

(5) The Treasury may by order substitute any other percentage for any percentage for the time being specified in subsection (3).

(6) Any such substitution is to have effect in relation to loans made by a company on or after the date specified in the order.

227 Conditions to be met in relation to securities U.K.

(1) Condition A of this section is that the securities must be—

(a) subscribed for wholly in cash, and

(b) fully paid for on the investment date.

(2) Condition B is that the securities must not carry—

(a) any present or future right to be redeemed within the 5 year period, or

(b) any present or future right to be converted into or exchanged for a loan which is, or securities, shares or other rights which are, redeemable within that period.

(3) For the purposes of subsection (1)(b), securities are not fully paid for if there is any undertaking to pay cash to the CDFI at a future date in connection with the acquisition of the securities.

228 Conditions to be met in relation to shares U.K.

(1) Condition A of this section is that the shares must be—

(a) subscribed for wholly in cash, and

(b) fully paid up on the investment date.

(2) Condition B is that the shares must not carry—

(a) any present or future right to be redeemed during the 5 year period, or

(b) any present or future right to be converted into or exchanged for a loan which is, or securities, shares or other rights which are, redeemable within that period.

(3) For the purposes of subsection (1)(b) shares are not fully paid up if there is any undertaking to pay cash to the CDFI at a future date in connection with the acquisition of the shares.

229 Tax relief certificates U.K.

(1) A “tax relief certificate” means a certificate issued by the CDFI in respect of the investment which is in the form specified by the Commissioners for Her Majesty's Revenue and Customs.

(2) The CDFI must not issue tax relief certificates under this section in respect of investments made in the CDFI in an accreditation period if the total value of—

(a) those investments, and

(b) any investments to which subsection (3) applies,

will exceed the limit for that period.

(3) This subsection applies to investments—

(a) which have been made in the CDFI in the accreditation period, and

(b) in respect of which the CDFI has issued tax relief certificates under section 348 of ITA 2007 (which makes in relation to income tax provision corresponding to that made by this section).

(4) The limit for an accreditation period is—

(a) [F276 £25 million] if the CDFI is accredited for the period as a retail community development finance institution (see section 340(8) of ITA 2007), and

(b) [F277 £100 million] in any other case.

(5) For the purposes of subsection (2) the value of an investment made in the CDFI is—

(a) if the investment consists of a loan—

(i) the amount of the loan, or

(ii) if the loan agreement authorises the CDFI to draw down amounts of the loan over a period of time, the amount committed under the loan agreement, and

(b) if the investment consists of securities or shares, the amount subscribed for them.

(6) The Treasury may by order substitute any other amount for any amount for the time being specified in subsection (4).

(7) Any such substitution is to have effect in relation to such accreditation periods as may be specified in the order; and those periods may, if the substitution increases an amount for the time being specified in subsection (4), include periods beginning before the order comes into force.

(8) Any tax relief certificate issued in contravention of subsection (2) is invalid.

(9) A body is liable to a penalty of not more than £3,000 if it issues a tax relief certificate which is made fraudulently or negligently.

(10) An accreditation period is a period for which accreditation of the CDFI has effect under Chapter 2 of Part 7 of ITA 2007.

Textual Amendments

F276 Sum in s. 229(4)(a) substituted (with effect in relation to accreditation periods ending on or after 1.6.2023) by The Community Investment Tax Relief (Amendment of Investment Limits) Regulations 2023 (S.I. 2023/518), regs. 1, 3(a)

F277 Sum in s. 229(4)(b) substituted (with effect in relation to accreditation periods ending on or after 1.6.2023) by The Community Investment Tax Relief (Amendment of Investment Limits) Regulations 2023 (S.I. 2023/518), regs. 1, 3(b)

230 No pre-arranged protection against risks U.K.

(1) Any arrangements—

(a) under which the investment is made, or

(b) made, before the investor makes the investment, in relation to or in connection with the making of the investment,

must not include excluded arrangements.

(2) For the purposes of subsection (1) “excluded arrangements”—

(a) means arrangements the main purpose or one of the main purposes of which is (by means of any insurance, indemnity or guarantee or otherwise) to provide partial or complete protection for the investor against what would otherwise be the risks attached to making the investment, but

(b) does not include any arrangements which are confined to the provision for the investor of any protection against those risks which might reasonably be expected to be provided for commercial reasons if the investment were made in the course of a business of banking.

(3) For the purposes of this section “arrangements” includes any scheme, agreement or understanding (whether or not legally enforceable).

Chapter 3 U.K. General conditions

231 No control of CDFI by investor U.K.

(1) The investor must not control the CDFI at any time during the 5 year period.

(2) In this section references to the investor include any person connected with the investor.

(3) If the CDFI is a body corporate, the question whether the investor controls the CDFI is, for the purposes of this section, determined in accordance with section 1124.

This is subject to subsection (6).

(4) In any other case the investor is treated, for those purposes, as having control of the CDFI if the investor has power to secure, as a result of—

(a) the possession of voting power in the CDFI, or

(b) any powers conferred by the constitution of, or any other document regulating, the CDFI,

that the affairs of the body are conducted in accordance with the investor's wishes.

This is subject to subsections (5) and (6).

(5) If—

(a) the CDFI is a partnership, and

(b) the investor is a member of that partnership,

for the purposes of determining in accordance with this section whether the investor controls the CDFI, the other members of that partnership are not, as a result of their membership of the CDFI, treated as partners of the investor.

(6) In determining whether the investor controls the CDFI there are attributed to the investor (so far as it would not otherwise be the case)—

(a) any rights or powers that the investor is entitled to acquire at a future date or will, at a future date, become entitled to acquire, and

(b) any rights or powers which another person holds on behalf of the investor or may be required to exercise, by direction, on the investor's behalf.

232 Investor must have beneficial ownership U.K.

(1) The investor must be the sole beneficial owner of the investment when it is made.

(2) If the investment consists of a loan, the person beneficially entitled to repayment of the loan is treated as the beneficial owner of the loan for the purposes of this Part.

233 Investor must not be accredited U.K.

The investor must not be accredited as a community development finance institution under Chapter 2 of Part 7 of ITA 2007 on the investment date.

234 No acquisition of share in partnership U.K.

(1) If the CDFI is a partnership, the investment must not consist of or include any amount of capital contributed by the investor on becoming a member of the partnership.

(2) For this purpose the amount of capital contributed by the investor on becoming a member of the partnership includes any amount which—

(a) purports to be provided by the investor by way of loan capital, and

(b) is accounted for as partners' capital in the accounts of the partnership.

235 No tax avoidance purpose U.K.

The investment must not be made as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

Chapter 4 U.K. Limitations on claims and attribution

Limitations on claims U.K.

236 Loans: no claim after disposal or excessive repayments or receipts of value U.K.

(1) If the investment consists of a loan, no claim may be made for an accounting period if—

(a) the investor disposes of the whole or any part of the loan before the qualifying date relating to that period,

(b) at any time after the investment is made but before that qualifying date, the amount of the capital outstanding on the loan is reduced to nil, or

(c) before that qualifying date, paragraphs (a) and (b) of section 245(1) (repayments of loan in 5 year period exceeding permitted limits) apply in relation to the investment (whether by virtue of section 246 (receipts of value treated as repayments) or otherwise).

(2) For the purposes of subsection (1)(a) any repayment of the loan is to be ignored.

(3) For the purposes of this section the qualifying date relating to an accounting period is the next anniversary of the investment date to occur after the end of that period.

237 Securities or shares: no claim after disposal or excessive receipts of value U.K.

(1) If the investment consists of securities or shares, a claim made for an accounting period must relate only to those securities or shares held by the investor, as sole beneficial owner, continuously throughout the period—

(a) beginning when the investment is made, and

(b) ending immediately before the qualifying date relating to the accounting period.

(2) No claim may be made for an accounting period if before the qualifying date relating to that period paragraphs (a) to (d) of section 247(1) (receipts of value in the 6 year period exceeding permitted limits) apply in relation to the investment or any part of it.

(3) For the purposes of this section the qualifying date relating to an accounting period is the next anniversary of the investment date to occur after the end of that period.

238 No claim after loss of accreditation by the CDFI U.K.

(1) If the CDFI ceases to be accredited under Chapter 2 of Part 7 of ITA 2007 with effect from a time within the 5 year period, no claim in respect of the investment may be made—

(a) for the relevant accounting period, or

(b) for any later accounting period.

(2) To find the relevant accounting period proceed under the rest of this section, in which references to the time of accreditation ceasing are to the time with effect from which the CDFI ceases to be accredited.

(3) If the time of accreditation ceasing falls within the first year of the 5 year period, the relevant accounting period is the accounting period in which the investment date fell.

(4) In any other case the relevant accounting period is—

(a) the accounting period in which the last anniversary of the investment date before the time of accreditation ceasing fell, or

(b) if the time of accreditation ceasing itself falls on an anniversary of the investment date, the accounting period in which that anniversary falls.

239 Accreditation of investor U.K.

(1) This section applies where the investor becomes accredited under Chapter 2 of Part 7 of ITA 2007 with effect from a time within the 5 year period.

(2) No claim in respect of the investment may be made—

(a) for the relevant accounting period, or

(b) for any later accounting period.

(3) To find the relevant accounting period proceed under the rest of this section, in which references to the time of accreditation are to the time with effect from which the investor becomes accredited.

(4) If the time of accreditation falls within the first year of the 5 year period, the relevant accounting period is the accounting period in which the investment date fell.

(5) In any other case the relevant accounting period is—

(a) the accounting period in which the last anniversary of the investment date before the time of accreditation fell, or

(b) if the time of accreditation itself falls on an anniversary of the investment date, the accounting period in which that anniversary falls.

Attribution U.K.

240 Attribution: general U.K.

(1) In this Part references to the CITR attributable to any loan, securities or shares in respect of an accounting period are read as references to the reduction which—

(a) is made in the investor's liability to corporation tax for that period, and

(b) is attributed to that loan, or those securities or shares, in accordance with this section and section 241.

This is subject to the provisions of Chapter 5 for the withdrawal or reduction of CITR.

(2) Subsections (3) and (4) apply if the investor's liability to corporation tax is reduced for an accounting period under this Part.

(3) If the reduction is obtained because of one loan, or securities or shares included in one issue, the amount of the tax reduction is attributed to that loan or those securities or shares.

(4) If the reduction is obtained because of a loan or loans, securities or shares included in two or more investments, the reduction—

(a) is apportioned between the loan or loans, securities or shares in each of those investments in the same proportions as the invested amounts in respect of the loan or loans, securities or shares for the period, and

(b) is attributed to that loan or those loans, securities or shares accordingly.

[F278 (4A) In the case of CITR under section 220A, in subsection (4)(a) the reference to the period is to be read as a reference to the period mentioned in section 220A(1)(a).]

(5) If under this section an amount of any reduction of corporation tax is attributed to any securities in the same issue, a proportionate part of that amount is attributed to each security.

(6) If under this section an amount of any reduction of corporation tax is attributed to any shares in the same issue, a proportionate part of that amount is attributed to each of those shares.

(7) If CITR attributable to a loan or any securities or shares falls to be withdrawn under Chapter 5, the CITR attributable to that loan or each of those securities or shares is reduced to nil.

(8) If CITR attributable to any securities or shares falls to be reduced under that Chapter by any amount, the CITR attributable to each of those securities or shares is reduced by a proportionate part of that amount.

Textual Amendments

F278 S. 240(4A) inserted (with effect in accordance with Sch. 27 para. 12 of the amending Act) by Finance Act 2013 (c. 29), Sch. 27 para. 10

241 Attribution: bonus shares U.K.

(1) This section applies if—

(a) corresponding bonus shares are issued to the investor in respect of any shares (“the original shares”) included in the investment, and

(b) the original shares have been continuously held by the investor, as sole beneficial owner, from the time they were issued until the issue of the bonus shares.

(2) A proportionate part of any amount attributed to the original shares, in respect of an accounting period, immediately before the bonus shares are issued is attributed to each of the shares in the holding consisting of the original shares and the bonus shares, in respect of that period.

(3) After the issue of the bonus shares this Part applies as if—

(a) the original issue had included the bonus shares, and

(b) the bonus shares had been held by the investor, as sole beneficial owner, continuously from the time the original shares were issued until the bonus shares were issued.

(4) In this section—

• “corresponding bonus shares” means bonus shares that are in the same company, are of the same class, and carry the same rights as the original shares,

• “original issue” means the issue of shares forming the investment.

Chapter 5 U.K. Withdrawal or reduction of CITR

Introduction U.K.

242 Introduction to Chapter U.K.

(1) This Chapter provides for CITR to be withdrawn or reduced under—

(a) section 243 (disposal of loan during 5 year period),

(b) section 244 (disposal of securities or shares during 5 year period),

(c) section 245 (repayment of loan capital during 5 year period),

(d) section 246 (value received by investor during 6 year period: loans),

(e) section 247 (value received by investor during 6 year period: securities or shares),

(f) section 254 (CITR subsequently found not to have been due).

(2) This Chapter also provides for the manner in which CITR is to be withdrawn or reduced (see section 255).

(3) In this Chapter “the 6 year period” in relation to the investment is the period of 6 years beginning 12 months before the investment date.

Disposals U.K.

243 Disposal of loan during 5 year period U.K.

(1) If the investment consists of a loan and within the 5 year period—

(a) the investor disposes of the whole of the investment, otherwise than by way of a permitted disposal, or

(b) the investor disposes of a part of the investment,

any CITR attributable to the investment in respect of any accounting period must be withdrawn.

(2) For the purposes of this section—

(a) a disposal is “permitted” if—

(i) it is by way of a distribution in the course of dissolving or winding up the CDFI,

(ii) it is a disposal within section 24(1) of TCGA 1992 (entire loss, destruction, dissipation or extinction of asset),

(iii) it is a deemed disposal under section 24(2) of that Act (claim that value of asset has become negligible), or

(iv) it is made after the CDFI has ceased to be accredited under Chapter 2 of Part 7 of ITA 2007, and

(b) a full or partial repayment of the loan is not treated as giving rise to a disposal.

244 Disposal of securities or shares during 5 year period U.K.

(1) This section applies if the investment consists of securities or shares and—

(a) the investor disposes of the whole or any part of the investment (“the former investment”) within the 5 year period,

(b) the CDFI has not ceased to be accredited under Chapter 2 of Part 7 of ITA 2007 before the disposal, and

(c) the disposal does not arise as a result of an event within section 249(1)(a) (repayment, redemption or repurchase of securities or shares included in the investment).

(2) If the disposal is not a qualifying disposal, any CITR attributable to the former investment in respect of any accounting period must be withdrawn.

[F279 (3) Subsections (3A) to (3H) apply if—

(a) the disposal is a qualifying disposal, and

(b) the investor has made a claim under section 220 in respect of the former investment for an accounting period (“period X”).

(3A) Subsection (3B) applies if the total of the following CITR does not exceed A—

(a) any CITR attributable to the former investment in respect of period X given under section 220, and

(b) any CITR attributable to the former investment in respect of later accounting periods given under section 220A where period X is the accounting period mentioned in section 220A(1)(a).

(3B) All CITR falling within subsection (3A)(a) or (b) must be withdrawn.

(3C) If the total of the CITR falling within subsection (3A)(a) or (b) exceeds A, that total must be reduced by A.

(3D) For the purposes of subsection (3C) CITR given in a later accounting period must be reduced before CITR given in an earlier accounting period.

(3E) For the purposes of subsections (3A) and (3C) “A” is an amount equal to 5% of the amount or value of the consideration (if any) which the investor receives for the former investment.

(3F) If—

(a) the total of the CITR falling within subsection (3A)(a) or (b)(“B”) is less than

(b) the amount (“C”) which is equal to 5% of the invested amount in respect of the former investment for period X,

“A” is to be reduced by multiplying it by the fraction—

(3G) If the amount of CITR attributable to the former investment in respect of an accounting period has been reduced before the CITR is obtained, the amount referred to in subsection (3F) as B is to be treated for the purposes of that subsection as the amount it would have been without the reduction.

(3H) Subsection (3G) does not apply to a reduction by virtue of section 241 (attribution: bonus shares).]

(4) For the purposes of this section “qualifying disposal” means a disposal that is—

(a) by way of a bargain made at arm's length, or

(b) a permitted disposal (within the meaning of section 243).

(5) F280 ...

F280 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F280 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F280 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F280 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F279 S. 244(3)-(3H) substituted for s. 244(3) (with effect in accordance with Sch. 27 para. 12 of the amending Act) by Finance Act 2013 (c. 29), Sch. 27 para. 11(2)

F280 S. 244(5)-(7) omitted (with effect in accordance with Sch. 27 para. 12 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 27 para. 11(3)

Repayment of loans U.K.

245 Repayment of loan capital during 5 year period U.K.

(1) If the investment consists of a loan and—

(a) the average capital balance of the loan for the third, fourth or final year of the 5 year period is less than the permitted balance for the year in question, and

(b) the difference between those balances is not an amount of insignificant value,

any CITR attributable to the investment in respect of any accounting period must be withdrawn.

(2) For the purposes of this section—

• “the average capital balance” of the loan for a period is the mean of the daily balances of capital outstanding during that period, ignoring any non-standard repayments of the loan made in that period or at any earlier time, and

• “the permitted balance” of the loan is—

  (a)

  for the third year of the 5 year period, 75% of the average capital balance for the period of 6 months beginning 18 months after the investment date,

  (b)

  for the fourth year of that period, 50% of that balance, and

  (c)

  for the final year of that period, 25% of that balance.

(3) For the purposes of subsection (2) a repayment of the loan is a non-standard repayment if subsection (4) or (5) applies.

(4) This subsection applies if the repayment is made at the choice or discretion of the CDFI, and not as a direct or indirect consequence of any obligation provided for under the terms of the loan agreement.

(5) This subsection applies if the repayment is made as a result of the failure of the CDFI to meet any obligation of the loan agreement which—

(a) is imposed merely because of the commercial risks to which the investor is exposed as lender under that agreement, and

(b) is no more likely to be breached than any obligation that might reasonably have been agreed in respect of the loan in the absence of this Part.

(6) For the purposes of this section “an amount of insignificant value” means an amount which—

(a) is not more than £1,000, or

(b) if it is more than £1,000, is insignificant in relation to the average capital balance of the loan for the year of the 5 year period in question.

Receipts of value U.K.

246 Value received by investor during 6 year period: loans U.K.

(1) This section applies if the investment consists of a loan and the investor receives any value (other than an amount of insignificant value) from the CDFI during the 6 year period (see section 249 for provision about when value is received).

(2) The investor is treated for the purposes of—

(a) section 222 (determination of “invested amount”), and

(b) section 245 (repayments of loan capital),

as having received a repayment of the loan of an amount equal to the amount of the value received.

(3) For those purposes the repayment is treated as made—

(a) if the value is received in the first or second year of the 6 year period, at the beginning of that second year, and

(b) if the value is received in a later year of that period, at the beginning of the year in question.

(4) For the purposes of section 245 the repayment is treated as a repayment other than a non-standard repayment (within the meaning of that section).

(5) For the purposes of this section “an amount of insignificant value” means an amount of value which—

(a) is not more than £1,000, or

(b) if it is more than £1,000, is insignificant in relation to the average capital balance of the loan for the year of the 6 year period in which the value is received.

(6) For the purposes of subsection (5)(b)—

(a) “the average capital balance” of the loan for a year is the mean of the daily balances of capital outstanding during the year (ignoring the receipt of value in question), and

(b) any value received in the first year of the 6 year period is treated as received at the beginning of the second year of that period.

(7) This section is subject to section 251 (value received if there is more than one investment).

(8) Value received is ignored, for the purposes of this section, so far as the CITR attributable to any loan, securities or shares in respect of any one or more accounting periods has already been reduced or withdrawn on its account.

247 Value received by investor during 6 year period: securities or shares U.K.

(1) This section applies if the investment consists of securities or shares and—

(a) the investor receives any value (other than an amount of insignificant value) from the CDFI during the 6 year period (see section 249 for provision about when value is received),

(b) the investment or a part of it is held by the investor at the time the value is received and has been held by the investor, as sole beneficial owner, continuously since the investment was made (“the continuing investment”),

(c) the receipt is wholly or partly in excess of the permitted level of receipts in respect of the continuing investment, and

(d) the amount of that excess is not an amount of insignificant value.

(2) Any CITR attributable to the continuing investment in respect of any accounting period must be withdrawn.

(3) For the purposes of subsection (1) the permitted level of receipts is exceeded if—

(a) any amount of value is received by the investor (ignoring any amounts of insignificant value) in the first 3 years of the 6 year period, or

(b) the total amount of value received by the investor (ignoring any amounts of insignificant value)—

(i) before the beginning of the fifth year of that period, exceeds 25% of the invested capital,

(ii) before the beginning of the final year of that period, exceeds 50% of the invested capital, or

(iii) before the end of that period, exceeds 75% of the invested capital.

(4) In this section—

• “the invested capital”, in relation to the continuing investment, means the amount subscribed for the securities or shares concerned, and

• “an amount of insignificant value” means an amount of value which—

  (a)

  is not more than £1,000, or

  (b)

  if it is more than £1,000, is insignificant in relation to the amount subscribed by the investor for the securities or shares included in the continuing investment.

(5) This section is subject to section 251 (value received if there is more than one investment).

(6) Value received is ignored, for the purposes of this section, so far as CITR attributable to any loan, securities or shares in respect of any one or more accounting periods has already been reduced or withdrawn on its account.

248 Receipts of insignificant value to be added together U.K.

(1) This section applies if—

(a) value is received (“the relevant receipt”) by the investor from the CDFI at any time during the 6 year period relating to the investment (see section 249 for provision about when value is received),

(b) the investor has received from the CDFI one or more receipts of insignificant value at a time or times—

(i) during that period, but

(ii) not later than the time of the relevant receipt, and

(c) the total amount of the value of the receipts within paragraphs (a) and (b) is not an amount of insignificant value.

(2) The investor is treated for the purposes of this Part as if the relevant receipt had been a receipt of an amount of value equal to that total amount.

(3) A receipt does not fall within subsection (1)(b) if the whole or any part of it has previously formed part of a total amount falling within subsection (1)(c).

(4) For the purposes of this section “an amount of insignificant value” means an amount of value which—

(a) is not more than £1,000, or

(b) if it is more than £1,000, is insignificant in relation to the relevant amount.

(5) If the investment consists of a loan, the relevant amount for the purposes of subsection (4) is—

(a) if the relevant receipt is received in the first or second year of the 6 year period, the average capital balance of the loan for the second year of that period, and

(b) if the relevant receipt is received in a later year, the average capital balance of the loan for the year in question.

(6) For the purposes of subsection (5)—

(a) the average capital balance of the loan for a year is the mean of the daily balances of capital outstanding during the year, and

(b) the relevant receipt and any receipts within subsection (1)(b) are ignored when calculating the average capital balance for the year in question.

(7) If the investment consists of securities or shares, the relevant amount for the purposes of subsection (4) is—

(a) if the relevant receipt is received in the first year of the 6 year period, the amount subscribed for the securities or shares, and

(b) in any other case, the amount subscribed for such of the securities or shares as—

(i) are held by the investor at the time the relevant receipt is received, and

(ii) have been held by the investor, as sole beneficial owner, continuously since the investment was made.

(8) This section is subject to section 251 (value received if there is more than one investment).

249 When value is received U.K.

(1) For the purposes of this Chapter the investor receives value from the CDFI at any time when the CDFI—

(a) repays, redeems or repurchases any securities or shares included in the investment,

(b) releases or waives any liability of the investor to the CDFI or discharges, or undertakes to discharge, any liability of the investor to a third person,

(c) makes a loan or advance to the investor which has not been repaid in full before the investment is made,

(d) provides a benefit or facility for—

(i) the investor or any associate of the investor, or

(ii) a director or employee of the investor or any associate of a director or employee of the investor,

(e) disposes of an asset to the investor for no consideration or for a consideration of an amount or value which is less than the market value of the asset,

(f) acquires an asset from the investor for a consideration of an amount or value which is more than the market value of the asset, or

(g) makes a payment to the investor other than a qualifying payment.

(2) But if the investor is a bank, the investor does not receive value from the CDFI when the CDFI makes a deposit with the investor in the course of the CDFI's ordinary banking arrangements with the investor.

(3) For the purposes of subsection (1)(b) the CDFI is treated as having released or waived a liability if the liability is not discharged within 12 months of the time when it ought to have been discharged.

(4) For the purposes of subsection (1)(c) the following are treated as loans made by the CDFI to the investor—

(a) the amount of any debt due from the investor to the CDFI (other than an ordinary trade debt), and

(b) the amount of any debt due from the investor to a third person which has been assigned to the CDFI.

(5) For the purposes of this section—

(a) references to a debt or liability do not, in relation to a person, include references to any debt or liability which would be discharged by the making by that person of a qualifying payment,

(b) references to a benefit or facility do not include references to any benefit or facility provided in circumstances such that, if a payment had been made of an amount equal to its value, that payment would have been a qualifying payment, and

(c) any reference to a payment or disposal to a person includes a reference to a payment or disposal made to that person indirectly or to that person's order or for that person's benefit.

(6) In subsection (5) references to “a person” include references to any other person who, at any time in the 6 year period, is connected with that person, whether or not the other person is so connected at the material time.

(7) In this section—

• “bank” has the meaning given by section 1120,

• “qualifying payment” means—

  (a)

  any payment by any person for any goods, services or facilities provided by the investor (in the course of the investor's trade or otherwise) which is reasonable in relation to the market value of those goods, services or facilities,

  (b)

  the payment by any person of any interest which represents no more than a reasonable commercial return on money lent to that person,

  (c)

  the payment by any company of any dividend or other distribution which does not exceed a normal return on any investment in shares in or securities of that company,

  (d)

  any payment for the acquisition of an asset which does not exceed its market value,

  (e)

  the payment by any person, as rent for any property occupied by the person, of an amount which is not more than a reasonable and commercial rent for the property, and

  (f)

  a payment in discharge of an ordinary trade debt, and

• “ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business if any credit given—

  (a)

  is for not more than 6 months, and

  (b)

  is not longer than that normally given to customers of the person carrying on the trade or business.

250 The amount of value received U.K.

(1) In a case falling within a provision listed in column 1 of the following table, the amount of value received for the purposes of this Chapter is given by the corresponding entry in column 2 of the table.

Provision	The amount of value received
Section 249(1)(a)	The amount received by the investor
Section 249(1)(b)	The amount of the liability
Section 249(1)(c)	The amount of the loan or advance, less the amount of any repayment made before the investment is made
Section 249(1)(d)(i)	The cost to the CDFI of providing the benefit or facility, less any consideration given for it by the investor or any associate of the investor
Section 249(1)(d)(ii)	The cost to the CDFI of providing the benefit or facility, less any consideration given for it by the investor or any associate of the investor or by a person within subsection (2)
Section 249(1)(e) or (f)	The difference between the market value of the asset and the consideration (if any) received for it
Section 249(1)(g)	The amount of the payment

(2) The persons within this subsection are—

(a) in a case where the benefit or facility was provided to a director or employee, the director or employee or any associate of the director or employee, and

(b) in a case where the benefit or facility was provided to an associate of a director or employee, the associate or the director or employee.

251 Value received if there is more than one investment U.K.

(1) This section applies if—

(a) the investor makes two or more investments in the CDFI,

(b) the investor is eligible for and claims CITR in respect of those investments, and

(c) the investor receives value (other than value within section 249(1)(a)) which is received within the 6 year periods relating to two or more of those investments.

(2) Sections 246, 247, 248 and 252 have effect in relation to each investment referred to in subsection (1)(c) as if the amount of the value received were reduced by multiplying it by the fraction—

where—

A is the appropriate amount in respect of the investment in question, and

B is the sum of that amount and the appropriate amount or amounts in respect of the other investment or investments.

(3) If the investment consists of a loan, the appropriate amount for the purposes of subsection (2) is—

(a) if the value is received in the first or second year of the 6 year period, the average capital balance of the loan for the second year of that period, and

(b) if the value is received in a later year, the average capital balance of the loan for the year in question.

(4) For the purposes of subsection (3)—

(a) the average capital balance of the loan for a year is the mean of the daily balances of capital outstanding during the year, and

(b) the receipt of value is ignored when calculating the average capital balance for the year in question.

(5) If the investment consists of securities or shares, the appropriate amount for the purposes of subsection (2) is—

(a) if the value is received in the first year of the 6 year period, the amount subscribed for the securities or shares, and

(b) in any other case, the amount subscribed for such of the securities or shares as—

(i) are held by the investor at the time the value is received, and

(ii) have been held by the investor, as sole beneficial owner, continuously since the investment was made.

252 Effect of receipt of value on future claims U.K.

(1) This section applies if the investment consists of securities or shares and—

(a) the investor receives any value (other than an amount of insignificant value) from the CDFI during the 6 year period, and

(b) the investment or a part of it is held by the investor at the time the value is received and has been held by the investor, as sole beneficial owner, continuously since the investment was made (“the continuing investment”),

but no CITR attributable to the continuing investment is withdrawn under section 247 as a result of the receipt.

(2) For the purposes of calculating any CITR in respect of any securities or shares included in the continuing investment for any relevant accounting period, the amount subscribed for the securities or shares included in the continuing investment is treated as reduced by the amount of the value received.

(3) For this purpose the “relevant” accounting periods are—

(a) any accounting period ending on or after the anniversary of the investment date immediately before the receipt of value, or

(b) if the value was received on an anniversary of the investment date, any accounting period ending on or after that anniversary.

(4) For the purposes of this section “an amount of insignificant value” means an amount of value which—

(a) is not more than £1,000, or

(b) if it is more than £1,000, is insignificant in relation to the amount subscribed by the investor for the securities or shares included in the continuing investment.

(5) This section is subject to section 251 (value received if there is more than one investment).

253 Receipts of value by or from connected persons U.K.

In sections 246 to 252, if the context permits, references to the investor or the CDFI include references to any person who at any time in the 6 year period relating to the investment is connected with the investor or, as the case may be, the CDFI, whether or not the person is connected at the material time.

CITR not due U.K.

254 CITR subsequently found not to have been due U.K.

If any CITR has been obtained which is subsequently found not to have been due, the CITR must be withdrawn.

Manner of withdrawal or reduction U.K.

255 Manner of withdrawal or reduction of CITR U.K.

(1) This section applies if any CITR has been obtained which falls to be withdrawn or reduced under this Chapter.

(2) The CITR must be withdrawn or reduced by making an assessment to corporation tax for the accounting period for which the CITR was obtained.

(3) An assessment under subsection (2) may be made at any time not more than 6 years after the end of the accounting period for which the CITR was obtained.

(4) Subsection (3) is not to be taken to limit the application of paragraph 46(2A) of Schedule 18 to the Finance Act 1998 (loss of tax brought about deliberately).

Chapter 6 U.K. Supplementary and general

Alternative finance arrangements U.K.

256 Meaning of “loan” and “interest” U.K.

(1) In this Part—

(a) references to a “loan” include references to alternative finance arrangements, and

(b) references to “interest” include references to alternative finance return.

(2) In subsection (1)—

• “alternative finance arrangements” means arrangements to which any of the following applies—

  (a)

  section 503 of CTA 2009 (purchase and resale arrangements),

  (b)

  section 505 of that Act (deposit arrangements),

  (c)

  section 506 of that Act (profit share agency arrangements), and

• “alternative finance return” has the meaning given by section 511 and 513(1) and (2) of that Act.

(3) Subsection (1) needs to be read with—

(a) section 257, in the case of arrangements to which section 503 of CTA 2009 applies,

(b) section 258, in the case of arrangements to which section 505 of that Act applies, and

(c) section 259, in the case of arrangements to which section 506 of that Act applies.

257 Purchase and resale arrangements U.K.

(1) This section applies if, under arrangements to which section 503 of CTA 2009 applies, a person (“the first purchaser”) purchases an asset that is sold to another person (“the second purchaser”).

(2) This Part has effect in relation to the arrangements in accordance with subsections (3) to (9).

(3) The first purchaser is treated as making a loan to the second purchaser.

(4) The amount of the loan is treated as being equal to the first purchase price.

(5) If the arrangements provide that the first purchaser will transfer ownership of the asset to the second purchaser in instalments—

(a) references to the loan being drawn down over a period of time include references to the asset being transferred to the second purchaser in instalments,

(b) references to the date on which the first amount of the loan is drawn down include references to the date on which the first instalment is transferred to the second purchaser, and

(c) references to the amount drawn down at a given date include references to the value of the instalments transferred at that date.

(6) In calculating the amount of capital outstanding on the loan, each payment of the second purchase price (or part of the second purchase price), as reduced by any amount of alternative finance return (within the meaning of Chapter 6 of Part 6 of CTA 2009) included within each payment, is treated as repayment of the loan capital.

(7) References to the beneficial owner of the loan include references to the person beneficially entitled to payment of the second purchase price.

(8) References to the disposal of the whole or any part of the loan include references to the disposal of the right to receive payment of the whole or any part of the outstanding second purchase price.

(9) If arrangements to which section 503 of CTA 2009 applies are, by virtue of this section, qualifying investments under Chapter 2 of this Part, paragraph (f) of section 249(1) above is to be ignored in relation to the arrangements concerned.

(10) In this section “the first purchase price” and “the second purchase price” have the same meaning as in section 503 of CTA 2009.

258 Deposit arrangements U.K.

(1) This section applies if, under arrangements to which section 505 of CTA 2009 applies, a person (“the depositor”) deposits money with a financial institution.

(2) This Part has effect in relation to the arrangements in accordance with subsections (3) to (9).

(3) The depositor is treated as making a loan to the financial institution.

(4) The amount of the loan is treated as being equal to the money deposited under the arrangements.

(5) If the arrangements provide that the depositor will deposit a sum of money with the financial institution in instalments—

(a) references to the loan being drawn down over a period of time include references to the depositor depositing a sum of money with the financial institution in instalments,

(b) references to the date on which the first amount of the loan is drawn down include references to the date on which the first instalment is deposited with the financial institution, and

(c) references to the amount drawn down at a given date include references to the value of the instalments deposited with the financial institution at that date.

(6) The capital outstanding on the loan is treated as being equal to the balance of the repayable deposit.

(7) References to any repayment of the loan include references to any repayment of the deposit.

(8) References to the beneficial owner of the loan include references to the person beneficially entitled to repayment of the deposit.

(9) References to the disposal of the whole or any part of the loan include references to the disposal of the right to receive repayment of the whole or any part of the deposit.

(10) In this section “financial institution” has the same meaning as in Chapter 6 of Part 6 of CTA 2009 (see section 502 of that Act).

259 Profit share agency arrangements U.K.

(1) This section applies if, under arrangements to which section 506 of CTA 2009 applies, a person (“the principal”) appoints a financial institution as agent.

(2) This Part has effect in relation to the arrangements in accordance with subsections (3) to (9).

(3) The principal is treated as making a loan to the agent.

(4) The amount of the loan is treated as being equal to the money provided by the principal to the agent under the arrangements.

(5) If the arrangements provide that the principal will provide a sum of money to the agent in instalments—

(a) references to the loan being drawn down over a period of time include references to the principal providing a sum of money to the agent in instalments,

(b) references to the date on which the first amount of the loan is drawn down include references to the date on which the first instalment is provided to the agent, and

(c) references to the amount drawn down at a given date include references to the value of the instalments provided to the agent at that date.

(6) The capital outstanding on the loan is treated as being equal to the balance of the repayable money provided to the agent.

(7) References to any repayment of the loan include references to any repayment of the money provided to the agent.

(8) References to the beneficial owner of the loan include references to the person beneficially entitled to repayment of the money provided to the agent.

(9) References to the disposal of the whole or any part of the loan include references to the disposal of the right to receive repayment of the whole or any part of the money provided to the agent.

(10) In subsection (1) “financial institution” has the same meaning as in Chapter 6 of Part 6 of CTA 2009 (see section 502 of that Act).

Miscellaneous U.K.

260 Information to be provided by the investor U.K.

(1) If—

(a) the investor has obtained CITR in respect of the investment, and

(b) an event occurs because of which CITR attributable to the investment in respect of any accounting period falls to be withdrawn or reduced by virtue of section 243, 244, 245 or 247,

the investor must give an officer of Revenue and Customs a notice containing particulars of the event.

(2) Subject to subsection (3), a notice under subsection (1) must be given not later than the end of the period of 12 months beginning with the end of the accounting period in which the event occurred.

(3) If—

(a) the investor is required to give a notice as a result of the receipt of value by a person connected with the investor (see section 253), and

(b) the end of the period of 60 days beginning when the investor comes to know of that event is later than the final notice date under subsection (2),

the notice must be given before the end of that 60 day period.

261 Disclosure U.K.

(1) No obligation as to secrecy or other restriction on the disclosure of information imposed by statute or otherwise prevents the disclosure of information—

(a) by the Secretary of State to an officer of Revenue and Customs for the purpose of assisting Her Majesty's Revenue and Customs to discharge their functions under the Corporation Tax Acts so far as relating to matters arising under this Part, or

(b) by an officer of Revenue and Customs to the Secretary of State for the purpose of assisting the Secretary of State to discharge the Secretary of State's functions in connection with this Part.

(2) Information obtained by such disclosure is not to be further disclosed except for the purposes of legal proceedings arising out of the functions referred to.

262 Nominees U.K.

(1) For the purposes of this Part—

(a) loans made by or to, or disposed of by, a nominee for a person are treated as made by or to, or disposed of by, that person, and

(b) securities or shares subscribed for by, issued to, acquired or held by or disposed of by a nominee for a person are treated as subscribed for by, issued to, acquired or held by or disposed of by that person.

(2) For the purposes of subsection (1) references to things done by or to a nominee for a person include things done by or to a bare trustee for a person.

263 Application for postponement of tax pending appeal U.K.

No application may be made under section 55(3) or (4) of TMA 1970 (application for postponement of payment of tax pending appeal) on the ground that a company is eligible for CITR unless a claim for the CITR has been duly made by the company under this Part.

264 Identification of securities or shares on a disposal U.K.

(1) This section applies for the purpose of identifying the securities or shares disposed of in any case where—

(a) the investor disposes of part of a holding of securities or shares (“the holding”), and

(b) the holding includes securities or shares to which CITR is attributable in respect of one or more accounting periods that have been held continuously by the investor from the time they were issued until the disposal.

(2) Any disposal by the investor of securities or shares included in the holding which have been acquired by the investor on different days is treated as relating to those acquired on an earlier day rather than to those acquired on a later day.

(3) If there is a disposal by the investor of securities or shares included in the holding which have been acquired by the investor on the same day, any of those securities or shares—

(a) to which CITR is attributable, and

(b) which have been held by the investor continuously from the time they were issued until the time of disposal,

are treated as disposed of after any other securities or shares included in the holding which were acquired by the investor on that day.

(4) For the purposes of this section a holding of securities is any number of securities of a company which—

(a) carry the same rights,

(b) were issued under the same terms, and

(c) are held by the investor in the same capacity.

It does not matter for this purpose that the number of the securities grows or diminishes as securities carrying those rights and issued under those terms are acquired or disposed of.

(5) For the purposes of this section a holding of shares is any number of shares in a company which—

(a) are of the same class, and

(b) are held by the investor in the same capacity.

It does not matter for this purpose that the number of the shares grows or diminishes as shares of that class are acquired or disposed of.

(6) In a case to which section 127 of TCGA 1992 (equation of original shares and new holding) applies, shares comprised in the new holding are to be treated for the purposes of subsections (2) and (3) as acquired when the original shares were acquired.

(7) In subsection (6)—

(a) the reference to section 127 of TCGA 1992 includes a reference to that section as it is applied by virtue of any enactment relating to chargeable gains, and

(b) “original shares” and “new holding” have the same meaning as in section 127 of TCGA 1992 or (as the case may be) that section as applied by virtue of the enactment in question.

Definitions U.K.

265 Meaning of “issue of securities or shares” U.K.

(1) In this Part—

(a) references (however expressed) to an issue of securities of any body are to such securities of that body as carry the same rights and are issued under the same terms and on the same day, and

(b) references (however expressed) to an issue of shares in any body are to such shares in that body as are of the same class and issued on the same day.

(2) In this Part references (however expressed) to an issue of securities of or shares in a body to a company are to such of the securities or shares in an issue of securities of or shares in that body as are issued to that company in one capacity.

266 Meaning of “disposal” U.K.

(1) Subject to subsection (2), in this Part “disposal” is read in accordance with TCGA 1992, and related expressions are read accordingly.

(2) An investor is treated as disposing of any securities or shares which but for section 151BC(1) of TCGA 1992 the investor—

(a) would be treated as exchanging for other securities or shares by virtue of section 136 of that Act, or

(b) would be so treated but for section 137(1) of that Act (which restricts section 136 to genuine reconstructions).

267 Construction of references to being “held continuously” U.K.

(1) This section applies if for the purposes of this Part it becomes necessary to determine whether the investor has held the investment (or any part of it) continuously throughout any period.

(2) The investor is not treated as having held the investment (or any part of it) continuously throughout a period if the investor—

(a) is treated, under any provision of TCGA 1992, as having disposed of and immediately re-acquired the investment (or part) at any time during the period, or

(b) is treated as having disposed of the investment (or part) at any such time, by virtue of section 266(2) above.

268 Meaning of “associate” U.K.

(1) In this Part “associate”, in relation to a person, means—

(a) any relative or partner of that person,

(b) the trustee or trustees of any settlement in relation to which that person, or any relative of that person (living or dead), is or was a settlor, and

(c) if that person has an interest in any shares or obligations of a company which are subject to any trust or are part of the estate of a deceased person—

(i) the trustee or trustees of the settlement concerned or, as the case may be, the personal representatives of the deceased, and

(ii) if that person is a company, any other company which has an interest in those shares or obligations.

(2) In subsection (1)(a) and (b) “relative” means spouse or civil partner, ancestor or lineal descendant.

(3) In subsection (1)(b) “settlor” and “settlement” have the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).

269 Minor definitions etc U.K.

(1) In this Part—

• “body” includes an unincorporated association, and

• “bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise).

(2) For the purposes of this Part shares in a company are not treated as being of the same class unless they would be so treated if they were—

(a) included in the official UK list, and

(b) admitted to trading on the London Stock Exchange.

(3) For the purposes of this Part the market value at any time of any asset is the price which it might reasonably be expected to fetch on a sale at that time in the open market free from any interest or right which exists by way of security in or over it.

(4) In this Part—

(a) references to CITR obtained by the investor in respect of any investment (or part of an investment) include references to CITR obtained by the investor in respect of that investment (or part) at any time after the investor has disposed of it, and

(b) references to the withdrawal or reduction of CITR obtained by the investor in respect of the investment (or any part of it) include references to the withdrawal or reduction of CITR obtained in respect of that investment (or part) at any such time.

(5) In the case of any condition that cannot be met until a future date—

(a) references in this Part to a condition being met for the time being are to nothing having occurred to prevent its being met, and

(b) references to its continuing to be met are to nothing occurring to prevent its being met.

[F281 PART 7ZA U.K. Restrictions on obtaining certain deductions

Textual Amendments

F281 Pt. 7ZA inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 16

Modifications etc. (not altering text)

C95 Pt. 7ZA modified (retrospective to 29.10.2018) by Finance Act 2020 (c. 14), Sch. 4 para. 46

C96 Pt. 7ZA modified by 1992 c. 12, Sch. 7A para. 6(1C) (as inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 18(4), 42 (with Sch. 4 paras. 43-46))

C97 Pt. 7ZA applied (with modifications) (with effect in accordance with Sch. 4 para. 43(1) of the amending Act) by Finance Act 2020 (c. 14), Sch. 4 para. 44(4)

C98 Pt. 7ZA applied (with modifications) (with application in accordance with Sch. 4 para. 45(1)(2) of the amending Act) by Finance Act 2020 (c. 14), Sch. 4 para. 45(4)

C99 Pt. 7ZA disapplied (24.2.2022) by Finance Act 2022 (c. 3), Sch. 2 para. 21

Introduction U.K.

269ZA Overview of Part U.K.

This Part contains provision restricting the amount of certain deductions which a company may make in calculating its taxable total profits for an accounting period.

Restrictions on obtaining certain deductions U.K.

269ZB Restriction on deductions from trading profits U.K.

(1) This section has effect for determining the taxable total profits of a company for an accounting period.

(2) The sum of any deductions made by the company for the accounting period which fall within subsection (3) may not exceed the relevant maximum.

But this is subject to subsection (10).

(3) The following deductions fall within this subsection—

(a) any deductions under section 45(4)(b) or 45B;

(b) any deduction under section 303B(4) or 303D(5), so far as it is a restricted deduction.

(4) For the purposes of this section a deduction under section 303B(4) or 303D(5) is a “restricted deduction” so far as it would not be available but for section 304(5) (reduction of income derived from related activities).

(5) In this section the “relevant maximum” means the sum of—

(a) 50% of the company's relevant trading profits for the accounting period, and

(b) the company's trading profits deductions allowance for the accounting period.

(6) Section 269ZF contains provision for determining a company's relevant trading profits for an accounting period.

(7) A company's “trading profits deductions allowance” for an accounting period—

(a) is so much of the company's deductions allowance for the period as is specified in the company's tax return as its trading profits deductions allowance for the period, and

(b) accordingly, is nil if no amount of the company's deductions allowance for the period is so specified.

(8) An amount specified under subsection (7)(a) as a company's trading profits deductions allowance for an accounting period may not exceed the difference between—

(a) the amount of the company's deductions allowance for the period, and

[F282 (b) the total of—

(i) the amount of the company’s total non-trading profits deductions allowance for the period (see section 269ZC(3A)), and

(ii) in the case of an insurance company, any amount specified for the period under section 269ZFC(5)(a) (BLAGAB deductions allowance).]

F283 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) Subsection (2) does not apply in relation to a company for an accounting period where, in determining the company's relevant trading profits, the amount given by step 1 in section 269ZF(3) is not greater than nil.

Textual Amendments

F282 S. 269ZB(8)(b) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 25(2), 42 (with Sch. 4 paras. 43-46)

F283 S. 269ZB(9) omitted (with effect in relation to accounting periods beginning on or after 1.4.2020) by virtue of Finance Act 2020 (c. 14), Sch. 4 paras. 25(3), 42 (with Sch. 4 paras. 43-46)

Modifications etc. (not altering text)

C100 S. 269ZB modified by 2009 c. 4, s. 1209(3) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 28(3))

C101 S. 269ZB modified by 2009 c. 4, s. 1210(5A) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 29(6))

C102 S. 269ZB modified by 2009 c. 4, s. 1211(7A) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 30(5))

C103 S. 269ZB modified by 2009 c. 4, s. 1216DA(3) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 32(3))

C104 S. 269ZB modified by 2009 c. 4, s. 1216DB(5A) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 33(6))

C105 S. 269ZB modified by 2009 c. 4, s. 1216DC(7A) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 34(5))

C106 S. 269ZB modified by 2009 c. 4, s. 1217DA(3) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 36(3))

C107 S. 269ZB modified by 2009 c. 4, s. 1217DB(5A) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 37(6))

C108 S. 269ZB modified by 2009 c. 4, s. 1217DC(7A) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 38(5))

C109 S. 269ZB modified by 2009 c. 4, s. 1217MA(3) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 40(4))

C110 S. 269ZB modified by 2009 c. 4, s. 1217MC(9) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 42(5))

C111 S. 269ZB modified by 2009 c. 4, s. 1217SA(3) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 44(4))

C112 S. 269ZB modified by 2009 c. 4, s. 1217SC(9) (as inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 46(5))

C113 S. 269ZB modified by 2009 c. 4, s. 1218ZDA(3) (as inserted (for specified purposes and with effect in accordance with Sch. 6 paras. 20, 21(1)(a) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 6 para. 1 (with Sch. 6 para. 21(3))

[F284 269ZBA Restriction on deductions from chargeable gains U.K.

(1) This section has effect for determining the taxable total profits of a company for an accounting period.

(2) The sum of any deductions made by the company for the accounting period under section 2A(1)(b) of TCGA 1992 (allowable losses accruing in earlier accounting periods) may not exceed the relevant maximum.

But this is subject to subsection (7).

(3) In this section the “relevant maximum” means the sum of—

(a) 50% of the company’s relevant chargeable gains for the accounting period, and

(b) the amount of the company’s chargeable gains deductions allowance for the accounting period.

(4) Section 269ZF contains provision for determining a company’s relevant chargeable gains for an accounting period.

(5) A company’s “chargeable gains deductions allowance” for an accounting period—

(a) is so much of the company’s deductions allowance for the period as is specified in the company’s tax return as its chargeable gains deductions allowance for the period, and

(b) accordingly, is nil if no amount of the company’s deductions allowance for the period is so specified.

(6) An amount specified under subsection (5)(a) as a company’s chargeable gains deductions allowance for an accounting period may not exceed the difference between—

(a) the amount of the company’s deductions allowance for the period, and

(b) the total of any amounts specified for the period under—

(i) section 269ZB(7)(a) (trading profits deductions allowance),

(ii) section 269ZC(5)(a) (non-trading income profits deductions allowance), and

(iii) in the case of an insurance company, section 269ZFC(5)(a) (BLAGAB deductions allowance).

(7) Subsection (2) does not apply in relation to a company for an accounting period where, in determining the company’s qualifying chargeable gains for the period, the amount given by step 1 in section 269ZF(3) is not greater than nil.]

Textual Amendments

F284 S. 269ZBA inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 2, 42 (with Sch. 4 paras. 43-46)

269ZC Restriction on deductions from non-trading profits U.K.

(1) This section has effect for determining the taxable total profits of a company for an accounting period.

(2) The sum of any deductions made by the company for the accounting period under section 457(3) and 463H(5) of CTA 2009 (carry forward of non-trading deficits from loan relationships against subsequent non-trading profits) may not exceed [F285 the difference between—

(a) the relevant maximum, and

(b) the amount of any deductions made by the company for the accounting period under section 2A(1)(b) of TCGA 1992 (allowable losses accruing in earlier accounting periods).]

But this is subject to subsection (8).

[F286 (3) In this section the “relevant maximum” means the sum of—

(a) 50% of the company’s total relevant non-trading profits for the accounting period, and

(b) the amount of the company’s total non-trading profits deductions allowance for the accounting period.

(3A) A company’s “total non-trading profits deductions allowance” for the accounting period is the sum of—

(a) the company’s non-trading income profits deductions allowance (see subsection (5)), and

(b) the company’s chargeable gains deductions allowance (see section 269ZBA(5)).]

(4) Section 269ZF contains provisions for determining a company's [F287 total relevant non-trading profits] for an accounting period.

(5) A company's [F288 “non-trading income profits deductions allowance”] for an accounting period—

(a) is so much of the company's deductions allowance for the period as is specified in the company's tax return as its [F288 non-trading income profits deductions allowance] for the period, and

(b) accordingly, is nil if no amount of the company's deductions allowance for the period is so specified.

(6) An amount specified under subsection (5)(a) as a company's [F289 non-trading income profits deductions allowance] for an accounting period may not exceed the difference between—

(a) the amount of the company's deductions allowance for the period, and

[F290 (b) the total of any amounts specified for the period under—

(i) section 269ZB(7)(a) (trading profits deductions allowance),

(ii) section 269ZBA(5)(a) (chargeable gains deductions allowance), and

(iii) in the case of an insurance company, section 269ZFC(5)(a) (BLAGAB deductions allowance).]

F291 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) Subsection (2) does not apply in relation to a company for an accounting period where, in determining the company's [F292 qualifying non-trading income profits and qualifying chargeable gains] for the period, the amount given by step 1 in section 269ZF(3) is not greater than nil.

Textual Amendments

F285 Words in s. 269ZC(2) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 3(2), 42 (with Sch. 4 paras. 43-46)

F286 S. 269ZC(3)(3A) substituted for s. 269ZC(3) (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 3(3), 42 (with Sch. 4 paras. 43-46)

F287 Words in s. 269ZC(4) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 3(4), 42 (with Sch. 4 paras. 43-46)

F288 Words in s. 269ZC(5) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 3(5), 42 (with Sch. 4 paras. 43-46)

F289 Words in s. 269ZC(6) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 3(6)(a), 42 (with Sch. 4 paras. 43-46)

F290 S. 269ZC(6)(b) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 3(6)(b), 42 (with Sch. 4 paras. 43-46)

F291 S. 269ZC(7) omitted (with effect in relation to accounting periods beginning on or after 1.4.2020) by virtue of Finance Act 2020 (c. 14), Sch. 4 paras. 26, 42 (with Sch. 4 paras. 43-46)

F292 Words in s. 269ZC(8) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 3(7), 42 (with Sch. 4 paras. 43-46)

269ZD Restriction on deductions from total profits U.K.

(1) This section has effect for determining the taxable total profits of a company for an accounting period.

(2) The sum of any relevant deductions made by the company for the accounting period may not exceed the difference between—

(a) the relevant maximum, and

(b) the sum of—

(i) any deductions falling within section 269ZB(3) (carry forward of trade loss against subsequent trade profits) made by the company for the accounting period,

[F293 (ia) any deductions made by the company for the accounting period under section 2A(1)(b) of TCGA 1992 (allowable losses accruing in earlier accounting periods),] F294 ...

(ii) any deductions made by the company for the accounting period under sections 457(3) and 463H(5) of CTA 2009 (carry forward of non-trading deficits from loan relationships against subsequent non-trading profits), F295 ... [F296 and

(iia) any deductions of non-BLAGAB allowable losses from the shareholders’ share of BLAGAB chargeable gains made for the accounting period under section 2A(1)(b) of TCGA 1992, as permitted by section 210A(2A)(b) of that Act.]

F295 (iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

But this is subject to subsection (7) F297 ....

(3) The following deductions made for an accounting period are “relevant deductions” for the purposes of this section—

(a) a deduction under section 463G of CTA 2009 (carry forward of non-trading deficit against total profits);

(b) a deduction under section 753 of CTA 2009 (non-trading losses on intangible fixed assets) in respect of a loss treated by subsection (3) of that section (carry forward of losses) as if it were a loss of the accounting period;

(c) a deduction under section 1219 of CTA 2009 (expenses of management of a company's investment business) in respect of an amount treated by section 1223(3) of that Act (carrying forward of expenses of management and other amounts) as expenses of management deductible for the accounting period;

(d) a deduction under section 1219 of CTA 2009 (expenses of management of a company's investment business) in respect of a loss treated by section 63(3) (carrying forward of certain losses made by company with investment business which ceases to carry on UK property business) as an expense of management deductible for the accounting period;

(e) a deduction under section 37 (relief for trade losses against total profits) made in reliance on section 1210(3), 1216DB(3), 1217DB(3), 1217MB(2), 1217SB(2) or 1218ZDB(2) of CTA 2009;

(f) a deduction under section 45A (carry forward of trade loss against total profits);

(g) a deduction under section 62(3) (relief for losses made in UK property business) in respect of a loss treated by subsection (5)(b) of that section (carry forward of losses) as a loss made by the company in the accounting period;

(h) a deduction under section 303C (excess carried forward non-decommissioning losses of ring fence trade: relief against total profits);

(i) a deduction under Part 5 (group relief) made in respect of a loss surrendered under that Part in reliance on section 1210(3), 1216DB(3), 1217DB(3), 1217MB(2), 1217SB(2) or 1218ZDB(2) of CTA 2009;

(j) a deduction under Part 5A (group relief for carried-forward losses);

(k) a deduction under section 124B of FA 2012 (deduction from total profits of excess carried-forward BLAGAB trade losses),

(but see section 269ZJ (insurance companies: shock losses).

(4) In this section the “relevant maximum” means the sum of—

(a) 50% of the company's relevant profits for the accounting period [F298 (see section 269ZFA)], and

(b) the amount of the company's deductions allowance for the accounting period.

F299 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F300 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F301 (7) Subsection (2) does not apply in relation to a company for an accounting period where the amount given by paragraph (1) of step 1 in section 269ZF(3) is not greater than nil.]

Textual Amendments

F293 S. 269ZD(2)(b)(ia) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 para. 4, 42 (with Sch. 4 paras. 43-46)

F294 Word in s. 269ZD(2)(b) omitted (with effect in relation to accounting periods beginning on or after 1.4.2020) by virtue of Finance Act 2020 (c. 14), Sch. 4 paras. 14(2)(a), 42 (with Sch. 4 paras. 43-46)

F295 S. 269ZD(2)(b)(iii) and word omitted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 6(2)(a)(ii)

F296 S. 269ZD(2)(b)(iia) and word inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 14(2)(b), 42 (with Sch. 4 paras. 43-46)

F297 Words in s. 269ZD(2) omitted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 6(2)(b)

F298 Words in s. 269ZD(4)(a) inserted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 6(3)

F299 S. 269ZD(5) omitted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 6(4)

F300 S. 269ZD(6) omitted (with effect in relation to accounting periods beginning on or after 1.4.2020) by virtue of Finance Act 2020 (c. 14), Sch. 4 paras. 27, 42 (with Sch. 4 paras. 43-46)

F301 S. 269ZD(7) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 6(5)

[F302 269ZDA References to a company’s “deductions allowance” U.K.

(1) This section applies for the purposes of sections 269ZB to 269ZD and 269ZFC.

(2) A company’s “deductions allowance” for an accounting period is to be determined in accordance with section 269ZR where, at any time in that period—

(a) the company is a member of a group (see section 269ZZB), and

(b) one or more other companies within the charge to corporation tax are members of that group.

(3) Otherwise, a company’s “deductions allowance” for an accounting period is to be determined in accordance with section 269ZW.

(4) But subsections (2) and (3) are subject to section 269ZYA (deductions allowance for company without a source of chargeable income).]

Textual Amendments

F302 S. 269ZDA inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 28, 42 (with Sch. 4 paras. 43-46)

F303 269ZE Restriction on deductions from total profits: insurance companies U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F303 S. 269ZE omitted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 7

Relevant profits U.K.

269ZF “Relevant trading profits”[F304 , “total relevant non-trading profits” etc] U.K.

(1) A company's “relevant trading profits” for an accounting period are—

(a) the company's qualifying trading profits for the accounting period (see subsection (3)), less

(b) the company's trading profits deductions allowance for the accounting period (see section 269ZB(7)).

But if the allowance mentioned in paragraph (b) exceeds the profits mentioned in paragraph (a), the company's “relevant trading profits” for the accounting period are nil.

(2) A company's [F305 “relevant non-trading income profits”] for an accounting period are—

(a) the company's [F306 qualifying non-trading income profits] for the accounting period (see subsection (3)), less

(b) the company's [F307 non-trading income profits deductions allowance] for the accounting period (see section 269ZC(5)).

But if the allowance mentioned in paragraph (b) exceeds the profits mentioned in paragraph (a), the company's [F305 “relevant non-trading income profits”] for the accounting period are nil.

[F308 (2A) A company’s “relevant chargeable gains” for an accounting period are—

(a) the company’s qualifying chargeable gains for the accounting period (see subsection (3)), less

(b) the company’s chargeable gains deductions allowance for the accounting period (see section 269ZBA(5)).

But if the allowance mentioned in paragraph (b) exceeds the qualifying chargeable gains mentioned in paragraph (a), the company’s “relevant chargeable gains” for the accounting period are nil.

(2B) A company’s “total relevant non-trading profits” for an accounting period are—

(a) the sum of—

(i) the company’s qualifying non-trading income profits for the period, and

(ii) the company’s qualifying chargeable gains for the period, less

(b) the company’s total non-trading profits deductions allowance for the period (see section 269ZC(3A)).]

(3) To determine a company's qualifying trading profits[F309 , qualifying non-trading income profits and qualifying chargeable gains] for an accounting period—

• Step 1 - modified total profits

  (1)

  Calculate the company's total profits for the accounting period.

  (2)

  For the purposes of this subsection assume that the company's total profits for the accounting period are to be calculated with the modifications set out in subsection (4).

  (3)

  If the company's total profits for the accounting period (as modified under paragraph (2)) are not greater than nil, the company's qualifying trading profits[F310 , qualifying non-trading income profits and qualifying chargeable gains] for the accounting period are [F311 each] nil.

  (4)

  Otherwise, proceed with steps 2 to 5.

• Step 2 - negative amount for apportioning under step 4

  (1)

  Calculate the sum (“the step 2 amount”) of any amounts which (on the assumption set out in paragraph (2) of step 1), could be relieved against the company's total profits of the accounting period.

  (2)

  But in calculating that [F312 sum—]

  (a)

  ignore the amount of any excluded deductions for the accounting period (see subsection (5)) [F313 , and

  (b)

  ignore any amount (or any part of any amount) which could be relieved against the company’s total profits of the accounting period on the making of a claim in respect of the amount (or part) if a claim is not in fact made in respect of it.].

  (3)

  If the company's total profits for the accounting period (as modified under step 1(2)) do not exceed the amount given by this step, the qualifying trading profits[F314 , qualifying non-trading income profits and qualifying chargeable gains] are [F315 each] nil.

  (4)

  Otherwise, proceed with steps 3 to 5.

• [F316 Step 3 - trading profits, non-trading income profits and chargeable gains

  Divide the company’s total profits for the accounting period (as modified under step 1(2)) into—

  (a)

  profits of a trade of the company (the company’s “trading profits”),

  (b)

  profits, other than chargeable gains, that are not profits of a trade of the company (the company’s “non-trading income profits”), and

  (c)

  chargeable gains included in the total profits (the company’s “chargeable gains”).

• Step 4 - apportionment of the step 2 amount

  (1)

  Allocate the whole of the step 2 amount to one of, or between two or all of, the following—

  (a)

  the company’s trading profits,

  (b)

  the company’s non-trading income profits, and

  (c)

  the company’s chargeable gains.

  (2)

  Reduce, but not below nil, each of the company’s trading profits, non-trading income profits and chargeable gains by the amount (if any) allocated to it under paragraph (1).

• Step 5 - amount of qualifying trading profits, qualifying non-trading income profits and qualifying chargeable gains

  The amounts resulting from step 3, after any reduction under step 4, are—

  (a)

  in the case of the amount in step 3(a), the company’s qualifying trading profits,

  (b)

  in the case of the amount in step 3(b), the company’s qualifying nontrading income profits, and

  (c)

  in the case of the amount in step 3(c), the company’s qualifying chargeable gains.]

(4) For the purposes of subsection (3) the company's total profits for an accounting period are to be calculated with the following modifications—

(a) ignore any income so far as it falls within, and is dealt with under, Part 9A of CTA 2009 (company distributions);

(b) ignore any ring fence profits (as defined in section 276);

(c) ignore any contractor's ring fence profits (as defined in section 356LD);

(d) if the company is an insurance company, ignore any I-E profit (see section 141(2) of FA 2012);

(e) make no deductions under sections 45(4)(b) and 45B (carry forward of trade loss against subsequent trade profits) other than deductions that would be ignored for the purposes of section 269ZB by reason of—

(i) section 1209(3), 1210(5A) or 1211(7A) of CTA 2009 (losses of film trade),

(ii) section 1216DA(3), 1216DB(5A) or 1216DC(7A) of that Act (losses of television programme trade),

(iii) section 1217DA(3), 1217DB(5A) or 1217DC(7A) of that Act (losses of video game trade),

(iv) section 1217MA(3) or 1217MC(9) of that Act (losses of theatrical trade),

(v) section 1217SA(3) or 1217SC(9) of that Act (losses of orchestral trade),

(vi) section 1218ZDA(3) or 1218ZDC(9) of that Act (losses of museum or gallery exhibition trade),

F317 (vii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(viii) section 269ZJ(1) (insurance companies: shock losses),

(ix) section 304(7) (certain losses of ring fence trades), or

(x) section 356NJ(2) (pre-1 April 2017 loss arising from oil contractor activities);

(f) make no restricted deductions (as defined in section 269ZB(4)) under section 303B(4) or 303D(5)); F318 ...

(g) make no deductions under section 457(3) or 463H(5) of CTA 2009 (carry forward of non-trading deficits from loan relationships against subsequent non-trading profits), other than deductions that would be ignored for the purposes of section 269ZC by reason of section 269ZJ(2) (insurance companies: shock losses)[F319 ; and

(h) make no deductions under section 2A(1)(b) of TCGA 1992 (allowable losses accruing in earlier accounting periods).]

(5) The following are “excluded deductions” for an accounting period (“the current accounting period”)—

(a) a deduction for the current accounting period which is a relevant deduction for the purposes of section 269ZD (see subsection (3) of that section);

(b) a deduction under section 37 (relief for trade losses against total profits) in relation to a loss made in an accounting period after the current accounting period;

(c) a deduction under section 45F (terminal losses);

(d) a deduction under section 260(3) of CAA 2001 (special leasing of plant or machinery: carry back of excess allowances) in relation to capital allowances for an accounting period after the current accounting period; and

(e) a deduction under section 463E of CTA 2009 (non-trading deficit from loan relationships) in relation to a deficit for a period after the current accounting period.

Textual Amendments

F304 Words in s. 269ZF heading substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 29(6), 42 (with Sch. 4 paras. 43-46)

F305 Words in s. 269ZF(2) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 29(2)(a), 42 (with Sch. 4 paras. 43-46)

F306 Words in s. 269ZF(2)(a) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 29(2)(b), 42 (with Sch. 4 paras. 43-46)

F307 Words in s. 269ZF(2)(b) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 29(2)(c), 42 (with Sch. 4 paras. 43-46)

F308 S. 269ZF(2A)(2B) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 5, 42 (with Sch. 4 paras. 43-46)

F309 Words in s. 269ZF(3) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 29(3), 42 (with Sch. 4 paras. 43-46)

F310 Words in s. 269ZF(3) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 29(4)(a), 42 (with Sch. 4 paras. 43-46)

F311 Word in s. 269ZF(3) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 29(4)(b), 42 (with Sch. 4 paras. 43-46)

F312 Words in s. 269F(3) substituted (retrospectively) by Finance Act 2021 (c. 26), Sch. 8 paras. 9(a), 19

F313 Words in s. 269F(3) inserted (retrospectively) by Finance Act 2021 (c. 26), Sch. 8 paras. 9(b), 19

F314 Words in s. 269ZF(3) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 29(5)(a), 42 (with Sch. 4 paras. 43-46)

F315 Word in s. 269ZF(3) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 29(5)(b), 42 (with Sch. 4 paras. 43-46)

F316 Words in s. 269ZF(3) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 6, 42 (with Sch. 4 paras. 43-46)

F317 S. 269ZF(4)(e)(vii) omitted (for the purposes of corporation tax in relation to accounting periods beginning on or after 1.4.2025) by virtue of Finance Act 2025 (c. 8), Sch. 5 paras. 6(6), 12(2) (with Sch. 5 paras. 15, 17, 18(4), 19)

F318 Word in s. 269ZF(4)(f) omitted (with effect in relation to accounting periods beginning on or after 1.4.2020) by virtue of Finance Act 2020 (c. 14), Sch. 4 paras. 7(a), 42 (with Sch. 4 paras. 43-46)

F319 S. 269ZF(4)(h) and word inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 7(b), 42 (with Sch. 4 paras. 43-46)

[F320 269ZFA “Relevant profits” U.K.

(1) A company’s “relevant profits” for an accounting period are—

(a) the company’s qualifying profits for the accounting period, less

(b) the company’s deductions allowance for the accounting period (see [F321 section 269ZDA]).

[F322 But if the allowance mentioned in paragraph (b) exceeds the profits mentioned in paragraph (a), the company’s “relevant profits” for the accounting period are nil.]

(2) A company’s “qualifying profits” for an accounting period are—

(a) the amount given by paragraph (1) of step 1 in section 269ZF(3) in determining the company’s [F323 modified total profits] for the accounting period, less

(b) the amount given by paragraph (1) of step 2 in section 269ZF(3) [F324 which could be relieved against] those profits for the accounting period.]

Textual Amendments

F320 S. 269ZFA inserted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 8

F321 Words in s. 269ZFA(1)(b) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 30(2), 42 (with Sch. 4 paras. 43-46)

F322 Words in s. 269ZFA(1) inserted (retrospectively) by Finance Act 2021 (c. 26), Sch. 8 paras. 10, 19

F323 Words in s. 269ZFA(2)(a) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 30(3)(a), 42 (with Sch. 4 paras. 43-46)

F324 Words in s. 269ZFA(2)(b) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 30(3)(b), 42 (with Sch. 4 paras. 43-46)

[F325 Modifications for certain insurance companies U.K.

Textual Amendments

F325 S. 269ZFB and cross-heading inserted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 9

269ZFB Modifications for certain insurance companies U.K.

(1) This section has effect for determining the taxable total profits of a company for an accounting period if the company—

(a) is an insurance company, and

(b) carries on basic life assurance and general annuity business in the period.

(2) A reference in section 269ZD(7) and section 269ZFA(2) to the amount given by a paragraph of a step in section 269ZF(3) is to be read as a reference to the amount that would be so given if—

(a) section 269ZF(4)(a) did not require income referable to a company’s basic life assurance and general annuity business to be ignored unless it falls within, and is dealt with under, Part 9A of CTA 2009 by reason of an election under section 931R of that Act, and

(b) section 269ZF(4)(d) required only the policyholders’ share of any I-E profit (as determined in accordance with section 103 of FA 2012) to be ignored [F326 and provided that no deductions of non-BLAGAB allowable losses from the shareholders’ share of BLAGAB chargeable gains are to be made under section 2A(1)(b) of TCGA 1992, as permitted by section 210A(2A)(b) of that Act].

(3) In this section—

• “basic life assurance and general annuity business” has the meaning given by section 57 of FA 2012, and

• “insurance company” has the meaning given by section 65 of that Act.]

Textual Amendments

F326 Words in s. 269ZFB(2)(b) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 14(3), 42 (with Sch. 4 paras. 43-46)

[F327 269ZFC Restriction on deductions of non-BLAGAB allowable losses from BLAGAB chargeable gains U.K.

(1) This section has effect for determining the taxable total profits of an insurance company for an accounting period.

(2) The sum of any deductions of non-BLAGAB allowable losses from the shareholders’ share of BLAGAB chargeable gains made by an insurance company for an accounting period under section 2A(1)(b) of TCGA 1992, as permitted by section 210A(2A)(b) of that Act, may not exceed the relevant maximum.

(3) In this section, the “relevant maximum” means the sum of—

(a) 50% of the company’s relevant BLAGAB chargeable gains for the accounting period, and

(b) the amount of the company’s BLAGAB deductions allowance for the accounting period.

(4) A company’s “relevant BLAGAB chargeable gains” for an accounting period are—

(a) the shareholders’ share of the BLAGAB chargeable gains for the accounting period, after any reduction under section 210A(2A)(a) of TCGA 1992, less

(b) the amount of the company’s BLAGAB deductions allowance for the accounting period.

But if the allowance mentioned in paragraph (b) exceeds the shareholders’ share of the BLAGAB chargeable gains mentioned in paragraph (a), the company’s “relevant BLAGAB chargeable gains” for the accounting period are nil.

(5) A company’s “BLAGAB deductions allowance” for an accounting period—

(a) is so much of the company’s deductions allowance for the period as is specified in the company’s tax return as its BLAGAB deductions allowance for the period, and

(b) accordingly, is nil if no amount of the company’s deductions allowance for the period is so specified.

(6) An amount specified under subsection (5)(a) as the company’s BLAGAB deductions allowance for an accounting period may not exceed the difference between—

(a) the amount of the company’s deductions allowance for the period, and

(b) the total of any amounts specified for the period under section 269ZB(7)(a) (trading profits deductions allowance), section 269ZBA(5)(a) (chargeable gains deductions allowance) and section 269ZC(5)(a) (non-trading income profits deductions allowance).

(7) In this section, “BLAGAB chargeable gains”, “insurance company” and “the shareholders’ share of BLAGAB chargeable gains” have the same meaning as in section 210A of TCGA 1992.]

Textual Amendments

F327 S. 269ZFC inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 13, 42 (with Sch. 4 paras. 43-46)

Exclusion for certain general insurance companies U.K.

269ZG General insurance companies: excluded accounting periods U.K.

(1) Nothing in sections 269ZB to [F328 269ZD] has effect for determining the taxable total profits of a general insurance company for an excluded accounting period.

(2) An accounting period of a general insurance company is an “excluded accounting period” if conditions A and B are met.

(3) Condition A is that—

(a) the company is subject to insolvency procedures (see section 269ZH) at the end of the accounting period,

(b) immediately before it became subject to insolvency procedures the company—

(i) was unable to pay its debts as they fell due, and

(ii) met the non-viability condition, and

(c) the company's liabilities in respect of qualifying latent claims (see section 269ZI) were the main factor contributing to the company's meeting the non-viability condition at that time.

(4) Condition B is that—

(a) at the end of the accounting period the company meets the non-viability condition, and

(b) the company's liabilities in respect of qualifying latent claims are the main factor contributing to the company's meeting that condition at that time.

(5) At any time, a general insurance company meets the non-viability condition if there is no realistic prospect that it will subsequently write any new insurance business.

(6) For the purposes of this section a person who carries on the activity of effecting or carrying out contracts of general insurance is a “general insurance company” if—

(a) the person has permission under Part 4A of the Financial Services and Markets Act 2000 to carry on that activity,

F329 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F330 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) The definition in subsection (6) is subject to the following qualifications—

(a) a friendly society within the meaning of Part 3 of FA 2012 is not a general insurance company, and

(b) an insurance special purpose vehicle (as defined in section 139 of FA 2012) is not a general insurance company.

(8) In this section—

• “contract of general insurance” means a contract of a type described in Part 1 of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544);

• “liability” includes a contingent or prospective liability.

Textual Amendments

F328 Word in s. 269ZG(1) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 31, 42 (with Sch. 4 paras. 43-46)

F329 S. 269ZG(6)(b) omitted (31.12.2020) by virtue of The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 17(5) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

F330 S. 269ZG(6)(c) omitted (31.12.2020) by virtue of The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 17(5) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

269ZH “Insolvency procedures” U.K.

(1) For the purposes of section 269ZG a company is subject to insolvency procedures if—

(a) it is in liquidation,

(b) it is in administration,

(c) it is in receivership, or

(d) a relevant scheme has effect in relation to it.

(2) A company is “in liquidation” for the purposes of this section if—

(a) it is in liquidation within the meaning of section 247 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19), or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(3) A company is “in administration” for the purposes of this section if—

(a) it is in administration within the meaning of Schedule B1 to the Insolvency Act 1986 or Schedule B1 to the Insolvency (Northern Ireland) Order 1989, or

(b) there is in force in relation to it under the law of a country or territory outside the United Kingdom any appointment corresponding to the appointment of an administrator under either of those Schedules.

(4) A company is “in receivership” for the purposes of this section if there is in force in relation to it—

(a) an order for the appointment of an administrative receiver, a receiver and manager or a receiver under Chapter 1 or 2 of Part 3 of the Insolvency Act 1986 or Part 4 of the Insolvency (Northern Ireland Order) 1989, or

(b) any corresponding order under the law of a country or territory outside the United Kingdom.

(5) In this section “relevant scheme” means a compromise or arrangement—

(a) under section 425 of the Companies Act 1985, Article 418 of the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) or Part 26 [F331 or 26A] of the Companies Act 2006, or

(b) under any corresponding provision of the law of a country or territory outside the United Kingdom.

Textual Amendments

F331 Words in s. 269ZH(5)(a) inserted (26.6.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), s. 49(1), Sch. 9 para. 43(2) (with ss. 2(2), 5(2))

269ZI “Qualifying latent claims” U.K.

(1) This section applies for the purposes of section 269ZG.

(2) Where a general insurance company has a liability in respect of a claim, the claim is a “qualifying latent claim” if conditions A to C are met.

(3) In this section “claim” means a claim (whether actual or potential) under an insurance policy.

(4) Condition A is that—

(a) the claim is of a type that was not reasonably foreseeable at the time when the insurance policy concerned was entered into, and

(b) it is likely that, had the company foreseen that type of claim, the price or other terms of the policy would have been significantly different.

(5) Condition B is that the latency period associated with that type of claim (see subsection (7)) is more than 10 years.

(6) Condition C is that the insurance policy, or the part of the insurance policy under which the claim is or would be made, is—

(a) an employer's liability policy, or

(b) a public or products liability policy.

(7) The “latency period” associated with a type of claim is the mean period for claims of the type between—

(a) the insured event giving rise to the claim, and

(b) notification of the claim.

(8) The mean period mentioned in subsection (7) is to be determined as at the end of the accounting period mentioned in section 269ZG(2).

(9) In this section—

• “employer's liability policy” means an insurance policy against the risks of the person insured incurring liabilities to the insured's employees for injury, illness or death arising out of their employment during the course of business;

• “general insurance company” is to be interpreted in accordance with section 269ZG;

• “insurance policy” includes any contract of insurance;

• “liability” includes a contingent or prospective liability;

• “public or products liability policy” means an insurance policy against the risks of the person insured incurring liabilities to third parties for damage to property, injury, illness or death, arising in the course of the insured's business.

269ZJ Exclusion of shock losses from restrictions U.K.

(1) If a shock loss is—

(a) carried forward to an accounting period of an insurance company (see section 269ZP(2)), and

(b) deducted under section 45B (post-1 April 2017 trade losses carried forward against trade profits),

the deduction is to be treated as not falling within section 269ZB(3).

(2) If a shock loss is—

(a) carried forward to an accounting period of an insurance company, and

(b) deducted under section 463H of CTA 2009 (carry forward of unrelieved non-trading deficit from loan relationships against non-trading profits),

the company is to be treated for the purposes of sections 269ZC and 269ZD(2)(b)(ii) as not having made that deduction.

(3) If an insurance company makes a deduction of (or in respect of) a shock loss, that deduction is not a “relevant deduction” for the purposes of section 269ZD (restriction on deductions from total profits).

F332 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F332 S. 269ZJ(4) omitted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 10 para. 10

269ZK Meaning of “shock loss”: requirement to make a claim U.K.

(1) If the conditions in subsection (3) are met, an insurance company may make a claim in respect of—

(a) a loss or other amount (the “specified loss”), and

(b) a period of 12 months (“the specified period”) which is a solvency shock period (see section 269ZM).

(2) A claim may specify more than one 12 month period under subsection (1)(b) (but periods specified by an insurance company under this section may not overlap with one another).

(3) The conditions are that—

(a) the accounting period (for corporation tax purposes) in which the specified loss arises (“the loss-making period”) begins on or after 1 April 2017,

(b) the specified loss is, or is capable of being, carried forward to a subsequent accounting period, and

(c) the loss-making period and the specified period have one or more days in common.

(4) A claim under this section must be made within—

(a) the period of two years after the end of the loss-making period, or

(b) such further period as an officer of Revenue and Customs allows.

(5) If—

(a) a claim is made under this section, and

(b) the whole of the loss-making period is, or falls within, the specified period,

the specified loss is a “shock loss”.

(6) If—

(a) a claim is made under this section, and

(b) the loss-making period falls partly, but not wholly, in the specified period,

the specified loss is a “shock loss” so far as it is attributable to the specified period.

(7) For the purposes of subsection (6) the specified loss is “attributable to” the specified period in the proportion—

Where P is the number of days of the loss-making period that fall within the specified period and N is the number of days in the loss-making period.

(8) If the method in subsection (7) would produce a result that is unjust or unreasonable, the apportionment of the specified loss for the purposes of subsection (6) is to be made on a just and reasonable basis.

269ZL Further provision about claims under section 269ZK U.K.

(1) A claim under section 269ZK is not effective unless—

(a) the claim—

(i) states the company's solvency capital requirement at the beginning of the specified period,

(ii) states the company's shock loss threshold for that period, and sets out the calculation of that amount (as described in steps 2 to 5 of 269ZN(1)), and

(iii) states the amount of the company's solvency loss for that period (see section 269ZO), and

(b) the company submits with the claim—

(i) information (“the submitted information”) corresponding to the information specified in the template mentioned in point (i), (j) or (k) (as the case requires) of Article 4 of the technical standards implementing Regulation, and

(ii) a report provided by the appropriate person which meets the condition in subsection (2).

(2) The condition is that the report includes an opinion confirming that—

(a) the submitted information is prepared in all material respects in accordance with any relevant requirements which would apply if the submitted information were disclosed as part of the company's report on solvency and financial condition,

(b) the calculation of the company's shock loss threshold (not including step 1(a) of section 269ZN(1)) complies in all material respects with section 269ZN, and

(c) the company's solvency loss is calculated in all material respects in accordance with section 269ZO.

(3) In this section “relevant requirements” means—

(a) requirements under rules made by the Prudential Regulation Authority, and

(b) requirements under any directly applicable EU regulation made under the Solvency 2 Directive.

(4) In this section “the appropriate person” means—

(a) the company's chief actuary, or

(b) (if the company is not a PRA-authorised person) a person with equivalent functions.

(5) Subsections (1)(b)(i), (2)(a) and (3) have effect in relation to a third-country insurance undertaking as if it were an insurance undertaking.

269ZM Meaning of “solvency shock period” U.K.

A period of 12 months is a “solvency shock period” in relation to an insurance company if the company has a solvency loss for that period (see section 269ZO) which exceeds the company's shock loss threshold for that period (see section 269ZN).

269ZN Determination of shock loss threshold U.K.

(1) A company's shock loss threshold for a 12 month period is determined as follows.

• Step 1

  (a)

  Calculate the company's solvency capital requirement at the beginning of that period.

  (b)

  But any adjustment for the loss-absorbing capacity of deferred taxes is to be calculated, and applied, on the assumption that that period is a solvency shock period in relation to the company.

  (c)

  The resulting amount is the company's “adjusted SCR”.

• Step 2 Calculate the deductible amount (see subsection (2)) for each relevant ring-fenced fund of the company.

• Step 3 Deduct the total of the amounts found under step 2 from the company's adjusted SCR.

• Step 4 Multiply the amount found under step 3 by 90%.

• Step 5 The result is the company's shock loss threshold for the period.

(2) The deductible amount for a relevant ring-fenced fund is the lesser of A and B, where—

(a) A is the amount of basic own funds within that fund at the beginning of the period (or zero, if greater);

(b) B is the notional solvency capital requirement for that fund at the beginning of that period.

(3) But in calculating amount A for the purposes of subsection (2)—

(a) no account is to be taken of the value of future transfers attributable to shareholders;

(b) a restricted own-fund item within the fund is to be disregarded if the company's with-profits actuary provides a written opinion confirming that the condition in subsection (4) is met.

(4) The condition is that—

(a) the item is available as a restricted own-fund item pursuant to conditional support arrangements, and

(b) if at the time mentioned in subsection (2)(a) or any subsequent time (when the conditional support arrangements are in place) the value of the company's interest in the item were to be (or is in fact) greater than zero, that value would be recognised for the purposes of a balance sheet drawn up at the time in question by the company in accordance with generally accepted accounting practice.

(5) In this section “conditional support arrangements” means arrangements under which the relevant restrictions would cease to apply if specified conditions relating to the financial strength of the fund were met.

(6) In subsection (5) “the relevant restrictions” means the restrictions on transferability as a result of which the item is a restricted own-fund item.

(7) In this section “adjustment for the loss-absorbing capacity of deferred taxes” means—

(a) an adjustment pursuant to Article 103(c) of the Solvency 2 Directive, or

(b) any corresponding adjustment made pursuant to Subsection 3 of Section 4 of Chapter 6 of Title 1 of the Solvency 2 Directive (solvency capital requirement full and partial internal models).

(8) Where the company is a third-country insurance undertaking—

(a) steps 1(b) and 2 to 5 of subsection (1), and

(b) subsections (2) to (7),

have effect with any modifications that are appropriate as a result of the reference in step 1(a) of subsection (1) to the “solvency capital requirement” having effect in accordance with section 269ZP(1)(b).

269ZO Calculation of solvency loss U.K.

(1) An insurance company's solvency loss (if any) for a 12 month period is determined as follows.

(2) Calculate, in the manner set out in subsections (5) to (11)—

(a) whether the total amount of the company's basic own funds at the beginning of the period (“opening BOF”) exceeds the total amount of the company's basic own funds at the end of the period (“closing BOF”), and

(b) if so, the amount by which opening BOF exceeds closing BOF.

(3) The company has a solvency loss for the 12 month period only if an excess of opening BOF over closing BOF is found under subsection (2)(a).

(4) The amount found under subsection (2)(b) is the amount of the solvency loss.

(5) The method of calculation under subsection (2) must fairly represent the method by which the company calculates its solvency capital requirement.

But this is subject to subsections (6) to (10).

(6) Closing BOF is to be calculated on the assumption that the 12 month period mentioned in subsection (1) is a solvency shock period in relation to the company.

(7) The following adjustments are to be made in calculating the company's basic own funds at the beginning and end of the period—

1 Find (with respect to each of those times) what that amount would be in the absence of this subsection.

2 Find the surplus in respect of each relevant ring-fenced fund of the company (at the time in question).

3 Deduct the total of the amounts found under paragraph 2 from the amount found under paragraph 1.

The result is to be taken to be the amount of the company's basic own funds at the beginning, or (as the case may be) the end, of the period.

(8) The surplus in respect of a relevant ring-fenced fund (at any time) is equal to—

(a) the amount of basic own funds attributable to policyholders, or

(b) zero, if greater.

(9) For any relevant ring-fenced fund, the amount of basic own funds attributable to policyholders (at any time) is equal to—

where—

A is the amount of basic own funds within the relevant ring-fenced fund;

B is the total of any items in the fund that fall within subsection (10).

(10) The items are—

(a) the value of future transfers attributable to shareholders;

(b) any restricted own-fund item in relation to which the company's with-profits actuary provides a written opinion confirming that the condition in subsection (4) of section 269ZN is met.

(11) In subsection (5) the reference to the “method” of a calculation is to the—

(a) taking into account, and

(b) leaving out of account,

of variations in items of basic own funds for the purposes of the calculation.

(12) If the company is a third-country insurance undertaking, subsections (1) to (11) have effect in relation to it as if it were an insurance undertaking.

269ZP Interpretation of sections 269ZJ to 269ZO U.K.

(1) In sections 269ZJ to 269ZO “solvency capital requirement”—

(a) in relation to an insurance undertaking or a reinsurance undertaking, means the solvency capital requirement pursuant to Section 4 of Chapter 6 of Title 1 of the Solvency 2 Directive;

(b) in relation to a third-country insurance undertaking, means the amount that would be the undertaking's solvency capital requirement pursuant to Section 4 of Chapter 6 of Title 1 of the Solvency 2 Directive if that undertaking were an insurance undertaking.

(2) In sections 269ZJ to 269ZO and this section—

• “actuarial function”, in relation to a PRA-authorised person, has the meaning given by the PRA Rulebook;

• “basic own funds” is to be interpreted in accordance with Article 88 of the Solvency 2 Directive;

• “chief actuary”, in relation to a PRA-authorised person, means a person who has the function of having responsibility for the actuarial function;

• “insurance company” means a company which is an insurance undertaking, a reinsurance undertaking or a third-country insurance undertaking;

• “insurance undertaking” has the meaning given in Article 13(1) of the Solvency 2 Directive;

• “notional solvency capital requirement”, in relation to a ring-fenced fund, has the same meaning as in Commission Delegated Regulation (EU) 2015/35 supplementing the Solvency 2 Directive;

• “PRA-authorised person” has the same meaning as in the Financial Services and Markets Act 2000 (see section 2B(5) of that Act);

• “the PRA Rulebook” means the Rulebook made by the Prudential Regulation Authority under the Financial Services and Markets Act 2000 (as that Rulebook has effect from time to time);

• “reinsurance undertaking” has the meaning given in Article 13(4) of the Solvency 2 Directive;

• “relevant ring-fenced fund” means a ring-fenced fund that is a with-profits fund;

• “report on solvency and financial condition” means a report on solvency and financial condition pursuant to Article 51 of the Solvency 2 Directive;

• “restricted own-fund item” is to be interpreted in accordance with Article 80(2) of Commission Delegated Regulation (EU) 2015/35 supplementing the Solvency 2 Directive;

• “ring-fenced fund” has the same meaning as in Commission Delegated Regulation (EU) 2015/35 supplementing the Solvency 2 Directive;

• “Solvency 2 Directive” means Directive 2009/138/EC of the European Parliament and the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II);

• “technical standards implementing Regulation” means Commission Implementing Regulation (EU) 2015/2452 of 2 December 2015 laying down implementing technical standards with regard to the procedures, formats and templates of the solvency and financial condition report in accordance with the Solvency 2 Directive;

• “third-country insurance undertaking” means an undertaking that has received authorisation under Article 162 of the Solvency 2 Directive from the Prudential Regulation Authority or the Financial Conduct Authority;

• “value of future transfers attributable to shareholders” has the same meaning as in Article 80 of Commission Delegated Regulation (EU) 2015/35 supplementing the Solvency 2 Directive;

• “with-profits fund” has the meaning given by the Glossary forming part of the PRA Rulebook;

• “with-profits actuary” has the meaning given by the Glossary forming part of the Handbook made by the Financial Conduct Authority under the Financial Services and Markets Act 2000 (as that Handbook has effect from time to time).

269ZQ Power to amend U.K.

(1) The Treasury may by regulations make such amendments of the provisions mentioned in subsection (2) as they consider appropriate in consequence of—

(a) any change made to, or replacement of, the PRA Rulebook or the FCA Handbook;

(b) any regulatory requirement, or change to a regulatory requirement, imposed by EU legislation, or by or under any Act (whenever adopted, enacted or made).

(2) The provisions are—

(a) sections 269ZJ to 269ZP,

(b) sections 124A to [F333 124C] of FA 2012.

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

(4) In this section—

• “the PRA Rulebook” means the Rulebook made by the Prudential Regulation Authority under the Financial Services and Markets Act 2000 (as that Rulebook has effect from time to time);

• “the FCA Handbook means the Handbook made by the Financial Conduct Authority under the Financial Services and Markets Act 2000 (as that Handbook has effect from time to time).

Textual Amendments

F333 Word in s. 269ZQ(2)(b) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 11

Deductions allowance U.K.

269ZR Deductions allowance for company in a group U.K.

(1) This section makes provision as to the deductions allowance of a company for an accounting period where, at any time in the period—

(a) the company is a member of a group, and

(b) one or more other companies within the charge to corporation tax are members of that group.

(2) The company's deductions allowance for the accounting period is the sum of—

(a) any amounts of group deductions allowance allocated to the company for the period in accordance with sections 269ZS to 269ZV, and

(b) the appropriate amount of non-group deductions allowance of the company for the period,

up to a limit of £5,000,000.

(3) The “appropriate amount of non-group deductions allowance” of the company, for the accounting period, is—

where—

“DNG” is the number of days in the period on which the company is not a member of a group that has another member that is a company within the charge to corporation tax, and

“DAC” is the total number of days in the period.

(4) If the accounting period is less than 12 months—

(a) the appropriate amount of non-group deductions allowance, and

(b) the limit in subsection (2),

are proportionally reduced.

[F334 (5) See section 269ZYA for further provision about the deductions allowance for a company without a source of chargeable income which is a member of a group.]

Textual Amendments

F334 S. 269ZR(5) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 32, 42 (with Sch. 4 paras. 43-46)

269ZS Group deductions allowance and the nominated company U.K.

(1) This section applies where—

(a) two or more members of a group are companies within the charge to corporation tax, and

(b) all the companies within the charge to corporation tax that are members of the group together nominate (“the group allowance nomination”) one of their number (“the nominated company”) for the purposes of this Part.

(2) The “group deductions allowance” for the group is £5,000,000 for each accounting period of the nominated company throughout which the group allowance nomination has effect.

(3) If the group allowance nomination takes effect, or ceases to have effect, part of the way through an accounting period of the nominated company, the “group deductions allowance” for the group for that period is—

where—

“DN” is the number of days in the accounting period on which a group allowance nomination that nominates the nominated company in relation to the group has effect, and

“DAC” is the total number of days in the accounting period.

(4) If an accounting period of the nominated company is less than 12 months, the group deductions allowance for that period is proportionally reduced.

(5) A group allowance nomination must state the date on which it is to take effect (which may be earlier than the date the nomination is made).

(6) A group allowance nomination is of no effect unless it is signed by the appropriate person on behalf of each company that is, when the nomination is made, a member of the group and within the charge to corporation tax.

(7) A group allowance nomination ceases to have effect—

(a) immediately before the date on which a new group allowance nomination in respect of the group takes effect,

(b) upon the appropriate person in relation to a company within the charge to corporation tax that is a member of the group notifying an officer of Revenue and Customs, in writing, that the group allowance nomination is revoked, or

(c) upon the nominated company ceasing to be a company within the charge to corporation tax or ceasing to be a member of the group.

(8) The Commissioners for Her Majesty's Revenue and Customs may by regulations make further provision about a group allowance nomination or any notification under this section including, in particular, provision—

(a) about the form and manner in which a nomination or notification may be made,

(b) about how a nomination may be revoked and the form and manner of such revocation,

(c) requiring a person to notify HMRC of the making or revocation of a nomination,

(d) requiring a person to give information to HMRC in connection with the making or revocation of a nomination or the giving of a notification,

(e) imposing time limits in relation to making or revoking a nomination or giving a notification, and

(f) providing that a nomination or its revocation, or a notification, is of no effect, or ceases to have effect, if time limits or other requirements under the regulations are not met.

(9) In this Part “the appropriate person”, in relation to a company, means—

(a) the proper officer of the company, or

(b) such other person as may for the time being have the express, implied or apparent authority of the company to act on its behalf for the purposes of this Part.

(10) Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company officers: meaning of “proper officer”) apply for the purposes of subsection (9) as they apply for the purposes of that section.

[F335 269ZSA Group allowance nomination: former groups U.K.

(1) This section applies where—

(a) a group ceases to be a group for the purposes of this Part (because the companies that were members of the group no longer together meet the condition in section 269ZZB(2)), and

(b) immediately before the group ceased to be a group for the purposes of this Part—

(i) two or more members of the group were companies within the charge to corporation tax, and

(ii) no group allowance nomination under section 269ZS had effect in relation to the group.

(2) All the companies that were, immediately before the group ceased to be a group for the purposes of this Part, members of the group and within the charge to corporation tax may together nominate (“the group allowance nomination”) one of their number (“the nominated company”) for the purposes of this Part.

(3) It is irrelevant for the purposes of subsection (2) whether or not the companies (including the nominated company) are within the charge to corporation tax when the nomination is made.

(4) A group allowance nomination under this section has effect during the period—

(a) beginning with the date on which it is stated to take effect (see section 269ZS(5), as it has effect by virtue of subsection (5)(a) of this section), and

(b) ending immediately before the group ceased to be a group for the purposes of this Part.

(5) For the purposes of this Part, treat a group allowance nomination under this section as a group allowance nomination under section 269ZS, but that section is to apply to a group allowance nomination under this section subject to the following modifications—

(a) section 269ZS(5) has effect as if, for the words in brackets, there were substituted “ (which must be earlier than the date on which the group ceased to be a group for the purposes of this Part) ”;

(b) section 269ZS(6) has effect as if, for the words “is, when the nomination is made”, there were substituted “ was, immediately before the group ceased to be a group for the purposes of this Part ”;

(c) section 269ZS(7) does not apply (but see subsection (4) of this section);

(d) in section 269ZS(8), ignore references to the revocation of a group allowance nomination (however expressed).

(6) Only one group allowance nomination under this section may be made in respect of a group.]

Textual Amendments

F335 S. 269ZSA inserted (with effect in accordance with Sch. 8 para. 16 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 2 (with Sch. 8 para. 22)

269ZT Group allowance allocation statement: submission U.K.

(1) A company must submit a group allowance allocation statement to HMRC for each of its accounting periods in which it is the nominated company in relation to a group.

This is subject to subsections (2) [F336 to (3A)].

(2) If a company ceases to be the nominated company in relation to a group before it submits a group allowance allocation statement to HMRC for an accounting period—

(a) that company may not submit the statement, and

(b) the company that is for the time being the nominated company in relation to the group must do so.

(3) But if a new group allowance nomination in respect of the group takes effect on a date before it is made, that does not affect the validity of the submission of any group allowance allocation statement submitted before the date the new nomination is made.

[F337 (3A) A company need not submit a group allowance allocation statement to HMRC for an accounting period if the statement would, if submitted, allocate no amount of group deductions allowance in accordance with section 269ZV(3)(f).]

(4) A group allowance allocation statement under this section must be received by HMRC [F338 on or before whichever is the latest of the following dates—

(a) the first anniversary of the filing date for the company tax return for the accounting period to which the statement relates;

(b) if notice of enquiry (within the meaning of Schedule 18 to FA 1998) is given into a company tax return of a company for an accounting period for which an amount of group deductions allowance is, or could be, allocated by the statement, 30 days after the enquiry is completed;

(c) if, after such an enquiry, an officer of Revenue and Customs amends the return under paragraph 34(2) of that Schedule, 30 days after the notice of amendment is issued;

(d) if an appeal is brought against such an amendment, 30 days after the date on which the appeal is finally determined.]

(5) A group allowance allocation statement under this section may be submitted at a later time if an officer of Revenue and Customs allows it.

(6) A group allowance allocation statement under this section must comply with the requirements of section 269ZV.

Textual Amendments

F336 Words in s. 269ZT(1) substituted (with effect in accordance with Sch. 8 para. 17 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 11(2)

F337 S. 269ZT(3A) inserted (with effect in accordance with Sch. 8 para. 17 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 11(3)

F338 Words in s. 269ZT(4) substituted (with effect in accordance with Sch. 8 para. 17 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 11(4)

269ZU Group allowance allocation statement: submission of revised statement U.K.

(1) This section applies if a group allowance allocation statement has been submitted under section 269ZT, or this section, in respect of an accounting period of a company that is, or was, a nominated company (“the nominee's accounting period”).

(2) A revised group allowance allocation statement in respect of the nominee's accounting period may be submitted to HMRC by the company that is for the time being the nominated company in relation to the group.

(3) But if a new group allowance nomination in respect of the group takes effect on a date before it is made, that does not affect the validity of the submission of any revised group allowance allocation statement submitted before the date the new nomination is made.

(4) A revised group allowance allocation statement may be submitted on or before whichever is the latest of the following dates—

(a) the first anniversary of the filing date for the company tax return for the nominee's accounting period,

(b) if notice of enquiry (within the meaning of Schedule 18 to FA 1998) is given into a relevant company tax return, 30 days after the enquiry is completed,

(c) if, after such an enquiry, an officer of Revenue and Customs amends the return under paragraph 34(2) of that Schedule, 30 days after the notice of amendment is issued,

(d) if an appeal is brought against such an amendment, 30 days after the date on which the appeal is finally determined.

(5) A revised group allowance allocation statement may be submitted at a later time if an officer of Revenue and Customs allows it.

(6) In this section “relevant company tax return” means a company tax return of a company for an accounting period for which an amount of group deductions allowance was, or could have been, allocated by a previous group allowance allocation statement in respect of the nominee's accounting period.

(7) The references in subsection (4) to an enquiry into a relevant company tax return do not include an enquiry resulting from an amendment of such a return where—

(a) the scope of the enquiry is limited as mentioned in paragraph 25(2) of Schedule 18 to FA 1998 (enquiry into amendments when time limit for enquiry into return as originally submitted is passed), and

(b) the amendment relates only to the allocation of group deductions allowance for the nominee's accounting period.

(8) A group allowance allocation statement under this section must comply with the requirements of section 269ZV.

269ZV Group allowance allocation statement: requirements and effects U.K.

(1) This section applies in relation to a group allowance allocation statement submitted under section 269ZT or 269ZU.

(2) The statement must be signed by the appropriate person in relation to the company giving the statement.

(3) The statement must—

(a) identify the group to which it relates,

(b) specify the accounting period, of the company that is or was the nominated company, to which the statement relates (“the nominee's accounting period”),

(c) specify the days in the nominee's accounting period on which that company was the nominated company in relation to the group or state that that company was the nominated company throughout the period,

(d) state the group deductions allowance the group has for the nominee's accounting period,

(e) list one or more of the companies that were members of the group and within the charge to corporation tax in the nominee's accounting period (“listed companies”),

(f) allocate amounts of the group deductions allowance to the listed companies, and

(g) for each amount of group deductions allowance allocated to a listed company, specify the accounting period of the listed company for which it is allocated.

(4) An amount of group deductions allowance allocated to a listed company must be allocated to that company for an accounting period that falls wholly or partly in the nominee's accounting period.

(5) The maximum amount of group deductions allowance that may be allocated, by the group allowance allocation statement, to a listed company for an accounting period of that company is—

where—

“DAP” is the number of days in the accounting period of the listed company that are—

(a)

days in the nominee's accounting period [F339 on which the nominee was the nominated company in relation to the group], and

(b)

days on which the [F340 listed] company was a member of the group,

“DNAP” is the number of days in the nominee's accounting period [F341 on which the nominee was the nominated company in relation to the group], and

“GSA” is the group deductions allowance of the group for the nominee's accounting period.

[F342 (5A) In its application in relation to a listed company that is the ultimate parent (see section 269ZZB(3)) of each other company in the group, subsection (5) has effect as if after “the group” in paragraph (b) of the definition of DAP there was inserted “and was not a member of any other group]

(6) The sum of the amounts allocated to listed companies by the group allowance allocation statement may not exceed the group deductions allowance for the nominee's accounting period.

(7) If a group allowance allocation statement is submitted that does not comply with subsection (5) or (6), the company that is, for the time being, the nominated company in relation to the group must submit a revised group allowance allocation statement that does comply with those subsections within 30 days of the date on which the group allowance allocation statement that did not comply was submitted or within such further period as an officer of Revenue and Customs allows.

(8) If a group allowance allocation statement—

(a) complies with those subsections when it is submitted, but

(b) subsequently ceases to comply with either of them,

the company that is, for the time being, the nominated company in relation to the group must submit a revised group allowance allocation statement that does comply with those subsections within 30 days of the date on which the group allowance allocation statement ceased to comply with one of those subsections or within such further period as an officer of Revenue and Customs allows.

(9) If a company fails to comply with subsection (7) or (8), an officer of Revenue and Customs may by written notice to the company amend the group allowance allocation statement as the officer thinks fit for the purpose of making it comply with subsections (5) and (6).

(10) An officer of Revenue and Customs who issues a notice under subsection (9) to a company must, at the same time, send a copy of the notice to each of the listed companies.

(11) The time limits otherwise applicable to the amendment of a company tax return do not apply to any such amendment to the extent that it is made in consequence of a group allowance allocation statement being submitted in accordance with section 269ZT or 269ZU.

(12) The Commissioners for Her Majesty's Revenue and Customs may by regulations make further provision about a group allowance allocation statement including, in particular, provision—

(a) about the form of a statement and the manner in which it is to be submitted,

(b) requiring a person to give information to HMRC in connection with a statement,

(c) as to the circumstances in which a statement that is not received by the time specified in section 269ZU(4) is to be treated as if it were so received, and

(d) as to the circumstances in which a statement that does not comply with the requirements of this section is to be treated as if it did comply.

Textual Amendments

F339 Words in s. 269ZV(5) inserted (with effect in accordance with Sch. 8 para. 20 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 12(a)(i)

F340 Word in s. 269ZV(5) inserted (with effect in accordance with Sch. 8 para. 20 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 12(a)(ii)

F341 Words in s. 269ZV(5) inserted (with effect in accordance with Sch. 8 para. 20 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 12(b)

F342 S. 269ZV(5A) inserted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 12

[F343 269ZVA Group allowance allocation statement: former groups U.K.

(1) This section applies where—

(a) a group ceases to be a group for the purposes of this Part (because the companies that were members of the group no longer together meet the condition in section 269ZZB(2)), and

(b) immediately before the group ceased to be a group for the purposes of this Part, a group allowance nomination had effect in relation to the group (including a group allowance nomination made after that event under section 269ZSA).

(2) Sections 269ZT to 269ZV have effect subject to the following modifications—

(a) section 269ZT(2)(a) does not apply to the company that was the nominated company under the group allowance nomination mentioned in subsection (1)(b) (accordingly, that company may submit a group allowance allocation statement under section 269ZT);

(b) for the purposes of sections 269ZT(2)(b), 269ZU(2) and 269ZV(7) and (8), treat the company that was the nominated company under the group allowance nomination mentioned in subsection (1)(b) as the company that is, for the time being, the nominated company in relation to the group;

(c) section 269ZV(5A) has effect as if the reference to a listed company that is the ultimate parent of a group were to a listed company that was the ultimate parent of the group immediately before the group ceased to be a group for the purposes of this Part.]

Textual Amendments

F343 S. 269ZVA inserted (with effect in accordance with Sch. 8 para. 16 of the amending Act) by Finance Act 2021 (c. 26), Sch. 8 para. 3 (with Sch. 8 para. 23)

269ZW Deductions allowance for company not in a group U.K.

(1) This section makes provision as to the deductions allowance of a company for an accounting period where section 269ZR (deductions allowance for company in a group) does not apply.

(2) The company's deductions allowance for the accounting period is £5,000,000.

(3) If the accounting period is less than 12 months, the company's deductions allowance for the period is proportionally reduced.

[F344 (4) See section 269ZYA for further provision about the deductions allowance for a company without a source of chargeable income.]

Textual Amendments

F344 S. 269ZW(4) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 33, 42 (with Sch. 4 paras. 43-46)

[F345 269ZWA Increase of deductions allowance for insolvent companies U.K.

(1) This section applies in relation to a company if—

(a) the company has gone into insolvent liquidation (see subsection (4)), or

(b) a corresponding situation exists in relation to the company in a country or territory outside the United Kingdom.

(2) The company’s deductions allowance for a winding up accounting period (as determined in accordance with section 269ZR or 269ZW) is to be treated (for all purposes) as increased by—

(a) the amount of chargeable gains accruing to the company in the accounting period after deducting any allowable losses accruing to the company in the period, or

(b) if lower, the amount of any allowable losses previously accruing to the company, so far as not previously deducted under section 2A(1) of TCGA 1992.

(3) In determining the amount of chargeable gains accruing to the company in a winding up accounting period for the purposes of subsection (2), ignore—

(a) any chargeable gains (but not any allowable losses) accruing to the company on the disposal of an asset if—

(i) section 171(1) of TCGA 1992 (transfers within a group: no gain no loss) applied in relation to the disposal by which the company acquired the asset (the “no gain/no loss disposal”),

(ii) the asset was acquired by the company, by virtue of the no gain/no loss disposal, in a winding up accounting period, and

(iii) the company making the no gain/no loss disposal has not, at that time, gone into insolvent liquidation, and

(b) any chargeable gains (but not any allowable losses) transferred to the company in accordance with an election made under section 171A of TCGA 1992 (election to reallocate gain or loss to another member of the group) if—

(i) the election is made in a winding up accounting period, and

(ii) the company from which the chargeable gain is transferred has not, at the time the election is made, gone into insolvent liquidation.

(4) For the purposes of this section, a company has gone into insolvent liquidation if—

(a) it has gone into liquidation, within the meaning of section 247(2) of the Insolvency Act 1986 or article 6(2) of the Insolvency (Northern Ireland) Order 1989 (SI 1989/2405 (NI 19), and

(b) at the time it goes into liquidation, its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.

(5) In this section a “winding up accounting period” means—

(a) the accounting period of the company that begins when the winding up starts (within the meaning of section 12(7) of CTA 2009), and

(b) each subsequent accounting period.]

Textual Amendments

F345 S. 269ZWA inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 8, 42 (with Sch. 4 paras. 43-46)

269ZX Increase of deductions allowance [F346 in connection with onerous or impaired leases] U.K.

(1) This section applies if—

(a) a [F347 relevant credit] is brought into account in calculating a company's specified profits for an accounting period, and

(b) the amount of the company's specified profits for the accounting period is greater than nil.

[F348 (1A) In this section “relevant credit” means a relevant reversal credit, a relevant remeasurement credit or a relevant variable lease payment (see sections 269ZY and 269ZYZA).]

(2) For the purposes of this section a company's “specified profits” for an accounting period are the sum of—

(a) the company's total profits for the accounting period, calculated with the modifications set out in section 269ZF(4), and

(b) any I-E profit of the company for the accounting period.

(3) The company's deductions allowance for the accounting period (as determined in accordance with section 269ZR or 269ZW) is to be treated (for all purposes) as increased by—

(a) the amount of the [F349 relevant credit (or, if there is more than one, the sum of the relevant credits)], or

(b) if lower, the amount of the specified profits.

Textual Amendments

F346 Words in s. 269ZX heading substituted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(3)

F347 Words in s. 269ZX(1)(a) substituted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(4)

F348 S. 269ZX(1A) inserted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(5)

F349 Words in s. 269ZX(3)(a) substituted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(6)

269ZY Meaning of “relevant reversal credit” U.K.

(1) For the purposes of section 269ZX a “relevant reversal credit” is a credit, or other income, brought into account in respect of the relevant reversal (see subsections (3) and (5)) of [F350 —

(a) a relevant onerous lease provision (see subsection (2)), or

(b) a relevant right-of-use asset impairment loss (see subsection (2A)).]

(2) A provision in the accounts of a company (“C”) is a “relevant onerous lease provision” if—

(a) the provision relates to a lease of land under which C is the tenant (and “L” is the landlord),

(b) the provision is required, for [F351 accounting] purposes, as a provision for an onerous lease, and

(c) the lease was entered into at arm's length.

[F352 (2A) A loss in the accounts of a company (“C”) is a “relevant right-of-use asset impairment loss” if—

(a) the loss relates to an asset (a “right-of-use asset”) recognised in the accounts to reflect C’s right to use land as the tenant under a lease (where “L” is the landlord),

(b) the loss is required to be recognised, for accounting purposes, because the right-of-use asset is impaired, and

(c) the lease was entered into at arm’s length.]

(3) The reversal (in whole or in part) of a relevant onerous lease provision [F353 or a relevant right-of-use asset impairment loss] is a “relevant reversal” if—

(a) the reversal is required for [F354 accounting] purposes as a result of an arrangement (“C's arrangement”) made at arm's length under which C's obligations under the lease are varied or cancelled,

(b) subsection (4) does not apply, and

(c) at least one of conditions X, Y and Z in subsection (7) is met.

(4) This subsection applies if—

(a) C and L are connected at the time when C's arrangement is made, or

(b) the landlord who granted the lease (whether that was L or another person) and the tenant to whom it was granted (whether that was C or another person) were connected at the time when the lease was granted.

(5) The reversal (in whole or in part) of a relevant onerous lease provision [F355 or a relevant right-of-use asset impairment loss] is a “relevant reversal” if—

(a) the lease has been granted out of a lease (“the superior lease”),

(b) L and C are members of the same group of companies,

(c) the reversal would be a relevant reversal by virtue of subsection (3) if the condition in subsection (3)(b) (lack of connection between C and L) were met,

(d) the terms of C's arrangement substantially reflect those of an arrangement (“L's arrangement”) made at arm's length under which L's obligations under the superior lease are varied or cancelled, and

(e) subsection (6) does not apply.

(6) This subsection applies if—

(a) at the time when L's arrangement is made, the landlord under the superior lease (“S”) is connected with L or C, or

(b) the landlord who granted the superior lease (whether that is S or another person) and the tenant to whom it was granted (whether that was L or another person) were connected at the time when that lease was granted.

(7) The conditions mentioned in subsection (3)(c) are as follows.

• Condition X is that—

  (a)

  it is reasonable to suppose that immediately before C's arrangement was made there was a material risk that at some time within the next 12 months C would be unable to pay its debts as they fell due, and

  (b)

  the sole or main purpose of C's arrangement was to avert that risk (whether directly or indirectly).

  Debts due to a person connected with C are to be regarded as not being debts for the purposes of paragraph (a).

• Condition Y is that C is in insolvent administration.

• Condition Z is that C's arrangement is, or is part of, a statutory insolvency arrangement.

(8) In this section “statutory insolvency arrangement” means—

(a) a voluntary arrangement that has taken effect under, or as a result of, the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/ 2405 (N.I. 19)),

(b) a compromise or arrangement that has taken effect under Part 26 [F356 or 26A] of the Companies Act 2006, or

(c) an arrangement or compromise of a kind corresponding to any of those mentioned in paragraph (a) or (b) that has taken effect under, or as a result of, the law of a country or territory outside the United Kingdom,

(and for the purposes of this section an arrangement which is, or is part of, a statutory insolvency arrangement is taken to be “made” when the statutory insolvency arrangement takes effect).

(9) For the purposes of this section a company in administration is in insolvent administration if—

(a) it entered administration under Schedule B1 to the Insolvency Act 1986, or Schedule B1 to the Insolvency (Northern Ireland) Order 1989, at a time when its assets were insufficient for the payment of its debts and other liabilities and the expenses of the administration, or

(a) under the law of a country or territory outside the United Kingdom circumstances corresponding to those mentioned in paragraph (a) exist.

[F357 (9A) For the purposes of subsection (2A)(b), where a company’s accounts previously included provision for an onerous lease, any right-of-use asset included in the accounts in respect of that lease is to be treated as impaired, unless there has been a material change of circumstances.]

(10) In the application of subsection (5) to Scotland, the reference to the lease having been granted out of the superior lease is to the lease being a sublease of land subject to the superior lease.

(11) Section 152 (groups of companies) applies for the purposes of this section as it applies for the purposes of Part 5.

(12) For the purposes of this section any question whether a person is connected with another is to be determined in accordance with section 1122.

Textual Amendments

F350 Words in s. 269ZY(1) substituted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(8)

F351 Word in s. 269ZY(2)(b) substituted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(9)

F352 S. 269ZY(2A) inserted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(10)

F353 Words in s. 269ZY(3) inserted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(11)(a)

F354 Word in s. 269ZY(3)(a) substituted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(11)(b)

F355 Words in s. 269ZY(5) inserted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(12)

F356 Words in s. 269ZY(8)(b) inserted (26.6.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), s. 49(1), Sch. 9 para. 43(3) (with ss. 2(2), 5(2))

F357 S. 269ZY(9A) inserted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(13)

[F358 269ZYZA Other relevant credits U.K.

(1) For the purposes of section 269ZX a “relevant remeasurement credit” is a credit, or other income, brought into account in respect of a relevant remeasurement excess.

(2) There is a “relevant remeasurement excess” where—

(a) a company (“C”) is the tenant under a lease of land (and “L” is the landlord),

(b) C’s accounts include a relevant right-of-use asset impairment loss in connection with the lease,

(c) under an arrangement (“C’s arrangement”) made at arm’s length, C’s obligations under the lease are varied or cancelled,

(d) as a result of C’s arrangement, C is required, for accounting purposes, to remeasure the lease liability in relation to the lease,

(e) the remeasurement results in the lease liability being reduced by an amount which exceeds the amount of the right-of-use asset recognised in relation to the lease (taking account of any right-of-use asset impairment loss), and

(f) the relevant requirements are met (see subsection (5)).

(3) For the purposes of section 269ZX a variable lease payment is “relevant” if it is a credit, or other income, brought into account in circumstances described in subsection (4).

(4) Those circumstances are where—

(a) a company (“C”) is the tenant under a lease of land (and “L” is the landlord),

(b) C’s accounts include a relevant right-of-use asset impairment loss in connection with the lease,

(c) under an arrangement (“C’s arrangement”) made at arm’s length, there is a change in the payments that would have been payable by C under the lease on or before 30 June 2022,

(d) the change would not have been made if it were not for coronavirus,

(e) for accounting purposes, C opts to record the change by means of variable lease payments (rather than by remeasuring its lease liability in relation to the lease), and

(f) the relevant requirements are met (see subsection (5)).

(5) For the purposes of subsections (2) and (4), the relevant requirements are met if—

(a) the requirements in section 269ZY(3)(b) and (c), or

(b) the requirements in section 269ZY(3)(c) and (5)(a), (b), (d) and (e),

are met in relation to C, L and C’s arrangement (as defined in subsection (2) or (4), as appropriate).

(6) In determining whether a company is required to account as described in subsection (2)(d), ignore any option the company has to account as described in subsection (4)(e).

(7) The Treasury may by regulations substitute for the date for the time being specified in subsection (4)(c) such later date as they consider appropriate.

(8) In this section—

• “coronavirus” means severe acute respiratory syndrome coronavirus 2;

• “lease liability”, in relation to a company and a lease, means a liability recognised in the company’s accounts to reflect the company’s obligations as tenant under the lease;

• “right-of-use asset”, in relation to a company and a lease, means an asset recognised in the company’s accounts to reflect the company’s right to use land as the tenant under the lease;

• “relevant right-of-use impairment loss” has the meaning given in section 269ZY(2A).]

Textual Amendments

F358 S. 269ZYZA inserted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(14)

[F359 269ZYA Deductions allowance for company without a source of chargeable income U.K.

(1) This section applies in relation to a company and a financial year (“the relevant financial year”) if—

(a) the company has no source of chargeable income (see subsection (2)) throughout the relevant financial year, and

(b) if the company is a member of a group (see section 269ZZB) at any time during the relevant financial year, each other company that is, at any time during the relevant financial year, a member of the group has no source of chargeable income throughout the relevant financial year.

(2) For the purposes of this section and section 269ZYB, a company “has no source of chargeable income” if the company is either—

(a) not within the charge to corporation tax, or

(b) chargeable to corporation tax only because of a chargeable gain accruing to the company on the disposal of an asset.

(3) A company may make a claim under this section in respect of an accounting period if—

(a) the accounting period falls wholly within the relevant financial year, and

(b) the company is chargeable to corporation tax for the accounting period only because of a chargeable gain accruing to the company on the disposal of an asset.

(4) If a claim is made by a company under this section in respect of an accounting period (a “claim AP”), the company’s deductions allowance for the claim AP is the lower of—

(a) the available deductions allowance amount (see subsection (9)),

(b) the total amount of allowable losses accruing to the company in any previous accounting period, so far as not previously deducted under section 2A(1)(a) or (b) of TCGA 1992, and

(c) the chargeable gains accruing to the company in the claim AP.

(5) A claim under this section in respect of an accounting period—

(a) must be made within the period of two years after the end of the accounting period, but

(b) may not be made before the end of the relevant financial year.

(6) Sections 269ZR to 269ZY (deductions allowances) do not apply to a claim AP.

(7) Subsection (8) applies if—

(a) there is at least one claim AP falling wholly within the relevant financial year, and

(b) there is at least one accounting period falling wholly within the relevant financial year in respect of which no claim is made under this section (an “alternative AP”).

(8) The company’s deductions allowance for an alternative AP is the lower of—

(a) the deductions allowance that would be available, ignoring the effect of this section (see sections 269ZR to 269ZY), and

(b) the available deductions allowance amount (see subsection (9)).

(9) For the purposes of this section, the “available deductions allowance amount” is—

(a) £5,000,000, less

(b) the total of the deductions allowance amounts (if any) already claimed by—

(i) the company, and

(ii) if the company is a member of a group at any time during the relevant financial year, each other company that is, at any time during the relevant financial year, a member of the group,

in respect of each claim AP and alternative AP that falls wholly within the relevant financial year.

(10) In this section, references to the deductions allowance amounts claimed by a company in respect of an accounting period—

(a) for a claim AP, are references to any deductions allowance claimed by the company under this section in respect of the period, and

(b) for an alternative AP, are references to any other amount specified in the company’s tax return as its chargeable gains deductions allowance for the period.

(11) For the purposes of subsection (9)(b), in the cases listed in the first column of the table below, the rules in the second column apply to determine the order in which deductions allowance amounts are to be treated as claimed in respect of the accounting periods—

Case	Rule
1. There is a claim AP and another claim AP starting on the same day or a different day.	The order in which the claims under this section are made.
2. There is an alternative AP (“AP1”) and another alternative AP (“AP2”) starting on a later day.	AP1 before AP2.
3. There is an alternative AP and another alternative AP starting on the same day.	The order in which the tax returns for the alternative APs are delivered.
4. There is a claim AP and an alternative AP starting on the same day, an earlier day or a later day.	The claim AP before the alternative AP.

Textual Amendments

F359 Ss. 269ZYA, 269ZYB inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 10, 42 (with Sch. 4 paras. 43-46)

269ZYB Provisional application of section 269ZYA U.K.

(1) This section applies in relation to a company and an accounting period if—

(a) the conditions in section 269ZYA(3)(a) and (b) are met in relation to the accounting period, and

(b) the company’s tax return for the accounting period is delivered before the end of the financial year in which the accounting period falls (“the relevant financial year”).

(2) The company may make a declaration in the return for the accounting period that—

(a) at all earlier times in the relevant financial year—

(i) the company had no source of chargeable income (see section 269ZYA(2)), and

(ii) if the company is a member of a group, each other member of the group had no source of chargeable income, and

(b) the person intends to make a claim under section 269ZYA(3) in respect of the accounting period.

(3) Until the declaration ceases to have effect, section 269ZYA has effect as if the company had made a claim under that section.

(4) The declaration ceases to have effect if—

(a) it is withdrawn,

(b) it is superseded by a claim made under section 269ZYA, or

(c) the company or, if the company is a member of a group, another member of the group, acquires a source of chargeable income before the end of the relevant financial year.

(5) So far as not previously ceasing to have effect under subsection (4), the declaration ceases to have effect two years after the end of the accounting period in respect of which it is made.

(6) If the declaration ceases to have effect, all necessary adjustments must be made, by assessment, amendment of returns or otherwise.

(7) Subsection (6) applies despite any limitation on the time within which assessments or amendments may be made.]

Textual Amendments

F359 Ss. 269ZYA, 269ZYB inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 10, 42 (with Sch. 4 paras. 43-46)

269ZZ Company tax return to specify amount of deductions allowance U.K.

(1) A company's tax return for an accounting period must specify—

(a) the amount of the company's deductions allowance for the period,

[F360 (aa) if section 269ZWA (increase of deductions allowance for insolvent companies) applies, what that amount would be without the increase provided for by subsection (2) of that section,] and

(b) if section 269ZX (increase of deductions allowance [F361 in connection with onerous or impaired leases]) applies, what that amount would be without the increase provided for by subsection (3) of that section.

(2) But subsection (1) applies only if the company makes for the accounting period a deduction to which section 269ZB(2), [F362 269ZBA(2),] 269ZC(2)[F363 , 269ZD(2) or 269ZFC(2)] applies.

Textual Amendments

F360 S. 269ZZ(1)(aa) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 9, 42 (with Sch. 4 paras. 43-46)

F361 Words in s. 269ZZ(1)(b) substituted (with effect in accordance with s. 30(17)-(19) of the amending Act) by Finance Act 2022 (c. 3), s. 30(15)

F362 Word in s. 269ZZ(2) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 34(a), 42 (with Sch. 4 paras. 43-46)

F363 Words in s. 269ZZ(2) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 34(b), 42 (with Sch. 4 paras. 43-46)

269ZZA Excessive specifications of deductions allowance U.K.

(1) This section applies if a company's tax return for an accounting period specifies an excessive amount as—

(a) the company's deductions allowance for the period,

(b) the company's trading profits deductions allowance for the period,

[F364 (ba) the company’s chargeable gains deductions allowance for the period,]

(c) the company's [F365 non-trading income profits deductions allowance] for the period,

(d) the company's contractor's ring fence profits deductions allowance for the period, or

[F366 (da) the company’s BLAGAB deductions allowance for the period.]

F367 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The company must, so far as it may do so, amend the company tax return so that the amount specified is not excessive.

(3) If an officer of Revenue and Customs considers that an undue amount of relief has been given as a consequence of the amount specified being excessive, the officer may make an assessment to tax in the amount which in the officer's opinion ought to be charged.

(4) If—

(a) the amount specified became excessive in consequence of an alteration being made to the amount of group deductions allowance allocated to the company for the accounting period concerned, and

(b) the company has failed, or is unable, to amend its company tax return in accordance with subsection (2),

an assessment under subsection (3) is not out of time if it is made within 12 months of the date on which the alteration took place.

(5) The power in subsection (3) is without prejudice to the power to make a discovery assessment under paragraph 41(1) of Schedule 18 to FA 1998.

Textual Amendments

F364 S. 269ZZA(1)(ba) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 35(2), 42 (with Sch. 4 paras. 43-46)

F365 Words in s. 269ZZA(1)(c) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 35(3), 42 (with Sch. 4 paras. 43-46)

F366 S. 269ZZA(1)(da) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 35(4), 42 (with Sch. 4 paras. 43-46)

F367 S. 269ZZA(1)(e) omitted (with effect in relation to accounting periods beginning on or after 1.4.2020) by virtue of Finance Act 2020 (c. 14), Sch. 4 paras. 35(5), 42 (with Sch. 4 paras. 43-46)

269ZZB Meaning of “group” U.K.

(1) In this Part “group” means two or more companies which together meet the following condition.

(2) The condition is that one of the companies is—

(a) the ultimate parent of each of the other companies, and

(b) is not the ultimate parent of any other company.

(3) A company (“A”) is the “ultimate parent” of another company (“B”) if—

(a) A is the parent of B, and

(b) no company is the parent of both A and B.

(4) A company (“A”) is the “parent” of another company (“B”) if—

(a) B is a 75% subsidiary of A,

(b) A is beneficially entitled to at least 75% of any profits available for distribution to equity holders of B, or

(c) A would be beneficially entitled to at least 75% of any assets of B available for distribution to its equity holders on a winding up.

(5) The following apply for the purposes of subsection (4)—

(a) Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) other than sections 169 to 182, and

(b) Chapter 3 of Part 24 (subsidiaries).

This is subject to subsections (6) and (7).

(6) In applying Chapter 3 of Part 24 for the purposes of subsection (4)—

(a) share capital of a registered society is to be treated as if it were ordinary share capital, and

(b) a company (“the shareholder”) that directly owns shares in another company is to be treated as not owning those shares if a profit on their sale would be a trading receipt of the shareholder.

(7) In applying Chapter 6 of Part 5 (other than sections 169 to 182) and Chapter 3 of Part 24 for the purposes of subsection (4), they are to be read with all modifications necessary to ensure that—

(a) they apply to a company which does not have share capital, and to holders of corresponding ordinary holdings in such a company, in a way which corresponds to the way they apply to companies with ordinary share capital and holders of ordinary shares in such companies,

(b) they apply to a company which is an unincorporated association in a way which corresponds to the way they apply to companies which are bodies corporate,

(c) they apply in relation to ownership through an entity (other than a company), or any trust or other arrangement, in a way which corresponds to the way they apply to ownership through a company, and

(d) for the purposes of achieving paragraphs (a) to (c), profits or assets are attributed to holders of corresponding ordinary holdings in unincorporated associations, entities, trusts or other arrangements in a manner which corresponds to the way profits or assets are attributed to holders of ordinary shares in a company which is a body corporate.

(8) In this section “corresponding ordinary holding” in an unincorporated association, entity, trust or other arrangement means a holding or interest which provides the holder with economic rights corresponding to those provided by a holding of ordinary shares in a body corporate]

[F368 (9) For the purposes of the application of this Part in relation to a collective investment vehicle to which paragraph 4 of Schedule 5AAA to TCGA 1992 applies, the reference in paragraph 4(2) of that Schedule to “relevant purposes” is to be treated as including a reference to the purposes of this section.]

Textual Amendments

F368 S. 269ZZB(9) inserted (with effect in relation to accounting periods beginning on or after 1.4.2020) by Finance Act 2020 (c. 14), Sch. 4 paras. 11, 42 (with Sch. 4 paras. 43-46)

[F369 PART 7A U.K. Banking companies

Textual Amendments

F369 Pt. 7A inserted (with effect in accordance with Sch. 2 para. 7-9 of the amending Act) by Finance Act 2015 (c. 11), Sch. 2 para. 1

CHAPTER 1 U.K. Introduction

269A Overview of Part U.K.

(1) This Part contains provision about banking companies.

(2) Chapter 2 defines “banking company” and contains other definitions applying for the purposes of this Part.

(3) Chapter 3 contains provision restricting the amount of certain deductions which a banking company may make in calculating its taxable total profits for an accounting period.

[F370 (4) Chapter 4 contains provision for a surcharge on banking companies.]

Textual Amendments

F370 S. 269A(4) inserted (18.11.2015) (with effect in accordance with Sch. 3 Pt. 3 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 3 para. 5

CHAPTER 2 U.K. Key definitions

“Banking company” U.K.

269B Meaning of “banking company” U.K.

(1) In this Part “banking company”, in relation to an accounting period, means—

(a) a company which meets conditions A to E,

(b) a company which—

(i) meets conditions A and B, and

(ii) is a member of a partnership which meets conditions C to E, or

(c) a building society.

In subsections (4) to (6) “the relevant entity” means the company or the partnership (as the case may be).

(2) Condition A is that at any time during the accounting period the company—

(a) is a UK resident company, or

(b) is a company which carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

(3) Condition B is that the company is not an excluded entity at any time during the accounting period (see section 269BA).

(4) Condition C is that, at any time during the accounting period, the relevant entity is an authorised person for the purposes of FISMA 2000 (see section 31 of that Act).

[F371 (5) Condition D is that, at any time in the accounting period—

(a) the relevant entity's activities include the relevant regulated activity described in the provision mentioned in section 269BB(a), or

(b) the relevant entity is an investment bank (see subsection (6A)) whose activities consist wholly or mainly of any of the relevant regulated activities described in the provisions mentioned in section 269BB(b) to (f).]

(6) Condition E is that the relevant entity carries on that relevant regulated activity, or those relevant regulated activities, wholly or mainly in the course of trade.

[F372 (6A) The relevant entity is an “investment bank” if—

[F373 (a) it is an FCA investment firm that meets the conditions in subsection (6B), or]

(b) it is designated by the Prudential Regulation Authority under article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (dealing in investments as principal: designation by PRA).]

[F374 (6B) An FCA investment firm meets the conditions in this subsection if it has a permanent minimum capital requirement of £750,000 and is not—

(a) a limited activity firm,

(b) a limited licence firm,

(c) a local firm, or

(d) a matched principal trading firm.

(6C) In subsection (6B)—

• “limited activity firm” means an investment firm that—

  (a)

  deals on own account only for the purpose of fulfilling or executing a client order or for the purpose of gaining entrance to a clearing and settlement system or a recognised exchange when acting in an agency capacity or executing a client order; or

  (b)

  meets all the following conditions—

  (i)

  it does not hold client money or securities;

  (ii)

  it undertakes only dealing on own account;

  (iii)

  it has no external customers; and

  (iv)

  its execution and settlement transactions take place under the responsibility of a clearing institution and are guaranteed by that clearing institution;

• “limited licence firm” means an investment firm that is not authorised to provide the investment services and activities of—

  (a)

  dealing on own account; or

  (b)

  underwriting of financial instruments or placing of financial instruments on a firm commitment basis;

• “local firm” means a firm—

  (a)

  dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or

  (b)

  dealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such a firm is assumed by clearing members of the same markets;

• “matched principal trading firm” means an investment firm that executes investors’ orders for financial instruments and meets the following conditions—

  (a)

  the firm only holds financial instruments for its own account as a result of its failure to match investors’ orders precisely;

  (b)

  the total market value of all such positions is no more than 15% of the firm’s initial capital;

  (c)

  such positions are incidental and provisional in nature and strictly limited to the time required to carry out the transaction in question.

(6D) In determining, for the purposes of subsection (6B), whether an FCA investment firm has a permanent minimum capital requirement of £750,000, any transitional provision in the FCA Handbook is to be disregarded.]

(7) See also section 269BC (which contains definitions of terms used in this section).

Textual Amendments

F371 S. 269B(5) substituted (retrospective to 26.3.2015) by Finance (No. 2) Act 2015 (c. 33), s. 20(9)(10)(a)

F372 S. 269B(6A) inserted (retrospective to 26.3.2015) by Finance (No. 2) Act 2015 (c. 33), s. 20(9)(10)(b)

F373 S. 269B(6A)(a) substituted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 7(2)

F374 S. 269B(6B)-(6D) inserted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 7(3)

269BA Excluded entities U.K.

(1) For the purposes of section 269B “excluded entity” means any of the following entities—

(a) an insurance company or an insurance special purpose vehicle;

(b) an entity which is a member of a group and does not carry on any relevant regulated activities otherwise than on behalf of an insurance company or insurance special purpose vehicle which is a member of the group;

(c) an entity which does not carry on any relevant regulated activities otherwise than as the manager of a pension scheme;

(d) an investment trust;

(e) an entity which does not carry on any relevant regulated activities other than asset management activities;

F375 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F376 (fa) a commodity and emission allowance dealer;]

(g) an entity which does not carry on any relevant regulated activities otherwise than for the purpose of trading in commodities or commodity derivatives;

(h) an entity which does not carry on any relevant regulated activities otherwise than for the purpose of dealing in contracts for differences—

(i) as principal with persons all or all but an insignificant proportion of whom are retail clients, or

(ii) with another person to enable the entity or other person to deal in contracts for differences as principal with persons all or all but an insignificant proportion of whom are retail clients;

(i) a society incorporated under the Friendly Societies Act 1992;

(j) a society registered as a credit union under the Co-operative and Community Benefit Societies Act 2014 or the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12));

(k) a building society.

[F377 (1A) For the purposes of section 269B an entity is also an “excluded entity” if—

(a) the entity would fall within a relevant relieving provision but for one (and only one) line of business which it carries on,

(b) that line of business does not involve the relevant regulated activity described in the provision mentioned in section 269BB(a), and

(c) the entity's activities in that line of business would not, on their own, result in it being [F378 an FCA investment firm that meets the conditions in section 269B(6B)].

(1B) For the purposes of subsection (1A) the “relevant relieving provisions” are paragraphs (b), (c), (e), (g) and (h) of subsection (1).]

(2) For the meaning of “relevant regulated activity”, see section 269BB.

See also section 269BC (which contains definitions of other terms used in this section).

Textual Amendments

F375 S. 269BA(1)(f) omitted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by virtue of The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 8(2)(a)

F376 S. 269BA(1)(fa) inserted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 8(2)(b)

F377 S. 269BA(1A)(1B) inserted (15.9.2016) by Finance Act 2016 (c. 24), s. 56(8)

F378 Words in s. 269BA(1A)(c) substituted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 8(3)

269BB Relevant regulated activities U.K.

In this Part “relevant regulated activity” means an activity which is a regulated activity for the purposes of FISMA 2000 by virtue of any of the following provisions of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544)—

(a) article 5 (accepting deposits);

(b) article 14 (dealing in investments as principal);

(c) article 21 (dealing in investments as agent);

(d) article 25 (arranging deals in investments);

[F379 (da) article 25DA (operating an organised trading facility), but only where dealing on own account in relation to sovereign debt instruments for which there is no liquid market (within the meaning of the FCA Handbook);]

(e) article 40 (safeguarding and administering investments);

(f) article 61 (entering into regulated mortgage contracts).

Textual Amendments

F379 S. 269BB(da) inserted (5.4.2022 with application in relation to any accounting period beginning on or after 5.4.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(7)(8)(11), 9

269BC Banking companies: supplementary definitions U.K.

(1) This section contains definitions of terms used in sections 269B to 269BB (and this section).

(2) “Asset management activities” means activities which consist (or, if they were carried on in the United Kingdom, would consist) of any or all of the following—

(a) acting as the operator of a collective investment scheme (within the meaning of Part 17 of FISMA 2000: see sections 235 and 237 of that Act),

(b) acting as a discretionary investment manager for clients none of which is a linked entity (see subsection (3)), and

(c) acting as an authorised corporate director.

(3) In subsection (2)(b) “linked entity”, in relation to an entity (“E”), means—

(a) a member of the same group as E,

(b) a company in which a company which is a member of the same group as E has a major interest (within the meaning of Part 5 of CTA 2009: see section 473 of that Act), or

(c) a partnership the members of which include an entity—

(i) which is a member of the same group as E, and

(ii) whose share of the profits or losses of a trade carried on by the partnership for an accounting period of the partnership any part of which falls within the relevant accounting period is at least a 40% share (see Part 17 of CTA 2009 for provisions about shares of partnership profits and losses).

“The relevant accounting period” means the accounting period referred to in section 269B(3).

(4) “Building society” has the same meaning as in the Building Societies Act 1986.

[F380 (4A) “FCA investment firm” has the meaning given by section 143A of FISMA 2000.]

(5) “Insurance company” and “insurance special purpose vehicle” have the meanings given by sections 65 and 139 of FA 2012 respectively.

(6) “Partnership” includes—

(a) a limited liability partnership, and

(b) an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership,

and “member”, in relation to a partnership, is to be read accordingly.

(7) The terms in subsection (8)—

(a) in relation to a PRA-authorised person, have the meaning given by the [F381 PRA Rulebook];

(b) in relation to any other authorised person, have the meaning given by the FCA Handbook.

(8) The terms referred to in subsection (7) are—

• “authorised corporate director”;

• F382 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “contracts for differences”;

• “discretionary investment manager”;

• F382 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F383 ...

• F382 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F383 ...

• F383 ...

• “pension scheme”;

• “principal”;

• “retail client”.

[F384 (8A) The following terms have the meaning given by the FCA Handbook -

• “commodity and emission allowance dealer”;

• “dealing on own account”;

• “financial instrument”;

• “initial capital”;

• “investment firm”;

• “market value”;

• “permanent minimum capital requirement”.]

F385 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) A company or partnership which would be [F386 an FCA investment firm that meets the conditions in section 269B(6B)] by virtue of activities carried on in the United Kingdom but for the fact that its registered office (or, if it does not have a registered office, its head office) is not in the United Kingdom is to be treated as being one for the purposes of section 269B.

(11) In [F387 this Chapter]—

• “authorised person” and “PRA-authorised person” have the same meaning as in FISMA 2000;

• “the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000 (as that Handbook has effect from time to time);

• “the PRA [F388 Rulebook]” means the [F388 Rulebook] made by the Prudential Regulation Authority under FISMA 2000 (as that [F388 Rulebook] has effect from time to time).

Textual Amendments

F380 S. 269BC(4A) inserted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 10(2)

F381 Words in s. 269BC(7) substituted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 10(3)

F382 Words in s. 269BC(8) omitted (retrospective to 26.3.2015) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 20(9)(12)(a)

F383 Words in s. 269BC(8) omitted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by virtue of The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 10(4)

F384 S. 269BC(8A) inserted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 10(5)

F385 S. 269BC(9) omitted (retrospective to 26.3.2015) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 20(9)(12)(b)

F386 Words in s. 269BC(10) substituted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 10(6)

F387 Words in s. 269BC(11) substituted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 10(7)(a)

F388 Word in s. 269BC(11) substituted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 10(7)(b)

“Group” U.K.

269BD Meaning of “group” U.K.

(1) In this Part “group” means a group for the purposes of—

(a) those provisions of international accounting standards relating to the preparation of consolidated financial statements (whether or not the company that is the parent within the meaning of those provisions (“the parent company”) prepares financial statements under those standards), or

(b) in a case where subsection (2) applies, those provisions of US GAAP which relate to the preparation of consolidated financial statements.

(2) This subsection applies if—

(a) as at the end of a period of account of the parent company—

(i) the parent company is resident in a territory outside the United Kingdom,

(ii) generally accepted accounting practice for companies resident in that territory is or includes US GAAP, and

(iii) the parent company is a parent for the purposes of those provisions of US GAAP which relate to the preparation of consolidated financial statements (as well as being a parent for the purposes of the provisions mentioned in subsection (1)(a)), and

(b) the parent company prepares consolidated financial statements for the period of account under US GAAP.

(3) Accordingly, for the purposes of this Part a company is a member of a group if—

(a) it is the parent company in relation to the group, or

(b) it is a member of the group for the purposes of the provisions mentioned in subsection (1)(a) or (b) (as the case may be).

(4) In this section “US GAAP” means United States Generally Accepted Accounting Principles.

(5) Section 1127(1) and (3) (meaning of “generally accepted accounting practice”) do not apply for the purposes of this section.

[F389 Powers to amend] U.K.

Textual Amendments

F389 S. 269BE cross-heading substituted (10.6.2021) by Finance Act 2021 (c. 26), s. 134(3)

269BE [F390 Powers to amend] U.K.

(1) The Treasury may by regulations make such amendments of this Part as they consider appropriate in consequence of—

(a) any change made to, or replacement of, the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) (or any replacement);

(b) any change made to, or replacement of, the FCA Handbook or the [F391 PRA Rulebook] (or any replacement);

(c) any change in international accounting standards or US GAAP;

(d) any regulatory requirement, or change to any regulatory requirement, imposed by EU legislation, or by or under any Act (whenever adopted, enacted or made).

[F392 (1A) The Treasury may by regulations—

(a) amend sections 269B to 269BD;

(b) amend other provisions of this Part in consequence of provision made under paragraph (a).

(1B) Regulations under this section may include transitional provision.

(1C) Regulations under this section made on or before 30 June 2022 may have retrospective effect in relation to any accounting period ending on or after 1 January 2022.

(1D) A statutory instrument containing (whether alone or with other provision) regulations under subsection (1A) may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.]

(2) In this section—

• “the FCA Handbook” and “the [F393 PRA Rulebook]” have the meaning given by section 269BC(11);

• “US GAAP” has the meaning given by section 269BD(4).

Textual Amendments

F390 S. 269BE heading substituted (10.6.2021) by Finance Act 2021 (c. 26), s. 134(4)(a)

F391 Words in s. 269BE(1)(b) substituted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 11

F392 S. 269BE(1A)-(1D) inserted (10.6.2021) by Finance Act 2021 (c. 26), s. 134(4)(b)

F393 Words in s. 269BE(2) substituted (5.4.2022 with application in relation to any accounting period beginning on or after 1.1.2022) by The Taxation of Banks (Amendments to the Corporation Tax Act 2009, Corporation Tax Act 2010 and Finance Act 2011) Regulations 2022 (S.I. 2022/286), regs. 1(2)(5)(6), 11

CHAPTER 3 U.K. Restrictions on obtaining certain deductions

Introduction U.K.

269C Overview of Chapter U.K.

(1) This Chapter contains provision restricting the amount of certain deductions which a banking company may make in calculating its taxable total profits for an accounting period.

[F394 (1A) This Chapter applies in relation to a banking company in addition to Part 7ZA (which contains provision restricting the amount of certain deductions which any kind of company may make in calculating its taxable total profits for an accounting period).]

(2) Sections 269CA to [F395 269CC] contain the restrictions.

(3) Sections 269CE to 269CH contain exceptions to the restrictions.

(4) Section 269CK contains anti-avoidance provision.

(5) Sections 269CL to 269CN contain supplementary provision and definitions.

(6) For the meaning of “banking company”, see section 269B.

Textual Amendments

F394 S. 269C(1A) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 17(2)

F395 Word in s. 269C(2) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 17(3)

Restrictions on obtaining certain deductions U.K.

269CA Restriction on deductions for trading losses U.K.

(1) This section has effect for determining the taxable total profits of a banking company for an accounting period.

(2) Any deduction made by the company for the accounting period in respect of a pre-2015 carried-forward trading loss may not exceed [F396 25%] of the company's relevant trading profits for the accounting period.

Section [F397 269ZF] contains provision for calculating a company's relevant trading profits for an accounting period (see F398 ... subsection (1) of that section).

(3) But subsection (2) does not apply [F399 in relation to a banking company for an accounting period where, in determining the company's relevant trading profits for the period, the amount given by step 1 in section 269ZF(3) is not greater than nil] .

(4) In this Chapter “pre-2015 carried-forward trading loss”, in relation to a company and an accounting period (“the current accounting period”), means a loss which—

(a) was made in a trade of the company in an accounting period ending before 1 April 2015, and

(b) is carried forward to the current accounting period under section 45 (carry forward of trade loss against subsequent trade profits).

(5) See also sections 269CE to 269CH (losses to which restrictions do not apply).

Textual Amendments

F396 Word in s. 269CA(2) substituted (with effect in accordance with s. 57(5) of the amending Act) by Finance Act 2016 (c. 24), s. 57(2)

F397 Word in s. 269CA(2) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 18(2)(a)

F398 Words in s. 269CA(2) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 18(2)(b)

F399 Words in s. 269CA(3) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 18(3)

269CB Restriction on deductions for non-trading deficits from loan relationships U.K.

(1) This section has effect for determining the taxable total profits of a banking company for an accounting period.

(2) Any deduction made by the company for the accounting period in respect of a pre-2015 carried-forward non-trading deficit may not exceed [F400 25%] of the company's [F401 total relevant non-trading profits] for the accounting period.

Section [F402 269ZF] contains provision for calculating a company's [F401 total relevant non-trading profits] for an accounting period (see [F403 subsection (2B)] of that section).

(3) But subsection (2) does not apply [F404 in relation to a banking company for an accounting period where, in determining the company's [F405 total relevant non-trading profits] for the period, the amount given by step 1 in section 269ZF(3) is not greater than nil].

(4) In this Chapter “pre-2015 carried-forward non-trading deficit”, in relation to a company and an accounting period (“the current accounting period”), means a non-trading deficit—

(a) which the company had from its loan relationships under section 301(6) of CTA 2009 for an accounting period ending before 1 April 2015, and

(b) which is carried forward under section 457 of that Act (carry forward of deficits to accounting periods after deficit period) to be set off against non-trading profits of the current accounting period.

(5) In subsection (4) “non-trading profits” has the same meaning as in section 457 of CTA 2009.

(6) See also sections 269CE to 269CH (losses to which restrictions do not apply).

Textual Amendments

F400 Word in s. 269CB(2) substituted (with effect in accordance with s. 57(5) of the amending Act) by Finance Act 2016 (c. 24), s. 57(3)

F401 Words in s. 269CB(2) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020 of the amending Act) by Finance Act 2020 (c. 14), Sch. 4 paras. 37(2)(a), 42 (with Sch. 4 paras. 43-46)

F402 Word in s. 269CB(2) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 19(2)(a)

F403 Words in s. 269CB(2) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020 of the amending Act) by Finance Act 2020 (c. 14), Sch. 4 paras. 37(2)(b), 42 (with Sch. 4 paras. 43-46)

F404 Words in s. 269CB(3) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 19(3)

F405 Words in s. 269CB(3) substituted (with effect in relation to accounting periods beginning on or after 1.4.2020 of the amending Act) by Finance Act 2020 (c. 14), Sch. 4 paras. 37(3), 42 (with Sch. 4 paras. 43-46)

269CC Restriction on deductions for management expenses etc U.K.

(1) This section has effect for determining the taxable total profits of a banking company for an accounting period.

(2) Any deduction made by the company for the accounting period in respect of pre-2015 carried-forward management expenses may not exceed the relevant maximum (see subsection (7)).

(3) But subsection (2) [F406 is subject to subsection (8)].

(4) In this Chapter “pre-2015 carried-forward management expenses”, in relation to a company and an accounting period (“the current accounting period”), means amounts falling within subsection (5) or (6).

See also sections 269CE to 269CH (losses to which restrictions do not apply).

(5) The amounts within this subsection are amounts—

(a) which fall within subsection (2) of section 1223 of CTA 2009 (carrying forward expenses of management and other amounts),

(b) which—

(i) for the purposes of Chapter 2 of Part 16 of CTA 2009 are referable to an accounting period ending before 1 April 2015, or

(ii) in the case of qualifying charitable donations, were made in such an accounting period, and

(c) which are treated by section 1223(3) of CTA 2009 as expenses of management deductible for the current accounting period.

(6) The amounts within this subsection are amounts of loss which—

(a) were made in an accounting period ending before 1 April 2015, and

(b) are treated by section 63(3) (carrying forward certain losses made by company with investment business which ceases to carry on UK property business) as expenses of management deductible for the current accounting period for the purposes of Chapter 2 of Part 16 of CTA 2009.

(7) The relevant maximum is determined as follows—

• Step 1 Calculate [F407 25%] of the company's relevant profits for the accounting period. Section [F408 269ZFA] contains provision for calculating a company's relevant profits for an accounting period.

• Step 2 Calculate the sum of any deductions made by the company for the accounting period [F409 under—

  (a)

  section 45 (carry forward of pre-1 April 2017 trade loss against subsequent trade profits),

  (b)

  section 45B (carry forward of post-1 April 2017 trade loss against subsequent trade profits), or

  (c)

  section 457 of CTA 2009 (carry forward of pre-1 April 2017 non-trading deficits from loan relationships).]

• Step 3 The relevant maximum is the difference between the amount given by step 1 and the amount given by step 2. If the amount given by step 1 does not exceed the amount given by step 2, the relevant maximum is nil.

[F410 (8) Subsection (2) does not apply in relation to a banking company for an accounting period where, in determining the company's relevant profits for the period, the amount given by step 1 in section 269ZF(3) is not greater than nil.]

Textual Amendments

F406 Words in s. 269CC(3) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 20(2)

F407 Word in s. 269CC(7) substituted (with effect in accordance with s. 57(5) of the amending Act) by Finance Act 2016 (c. 24), s. 57(4)

F408 Word in s. 269CC(7) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 13

F409 Words in s. 269CC(7) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 20(3)(b)

F410 S. 269CC(8) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 20(4)

F411 269CD Relevant profits U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F411 S. 269CD omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 21

Losses to which restrictions do not apply U.K.

269CE Losses arising before company began banking activity U.K.

(1) In this section “the first banking accounting period”, in relation to a company, means the accounting period in which the company first begins to carry on a relevant regulated activity.

(2) References in this Chapter to a pre-2015 carried-forward trading loss do not include a loss which was made in a trade of a company in an accounting period ending before the first banking accounting period.

(3) References in this Chapter to a pre-2015 carried-forward non-trading deficit do not include a non-trading deficit which a company had from its loan relationships under section 301(6) of CTA 2009 for an accounting period ending before the first banking accounting period.

(4) References in this Chapter to pre-2015 carried-forward management expenses, in relation to a company, do not include—

(a) any amounts falling within section 269CC(5) which—

(i) for the purposes of Chapter 2 of Part 16 of CTA 2009 are referable to an accounting period ending before the first banking accounting period, or

(ii) in the case of qualifying charitable donations, were made in an accounting period ending before the first banking accounting period, or

(b) any amounts of loss falling within section 269CC(6) which were made in an accounting period ending before the first banking accounting period.

(5) Section 269CL contains provision for determining when a company first begins to carry on a relevant regulated activity.

269CF Losses arising in company's start-up period U.K.

(1) References in this Chapter to a pre-2015 carried-forward trading loss do not include a loss which was made in a trade of a company in an accounting period ending in the company's start-up period.

(2) References in this Chapter to a pre-2015 carried-forward non-trading deficit do not include a non-trading deficit which a company had from its loan relationships under section 301(6) of CTA 2009 for an accounting period ending in the company's start-up period.

(3) References in this Chapter to pre-2015 carried-forward management expenses, in relation to a company, do not include—

(a) any amounts falling within section 269CC(5) which—

(i) for the purposes of Chapter 2 of Part 16 of CTA 2009 are referable to an accounting period ending in the company's start-up period, or

(ii) in the case of qualifying charitable donations, were made in such an accounting period, or

(b) any amounts of loss falling within section 269CC(6) which were made in an accounting period ending in the company's start-up period.

(4) For the purposes of this Chapter any amounts which, by virtue of subsections (1) to (3), are not relevant carried-forward losses of a company are to be regarded as having been taken into account in determining the taxable total profits of the company for accounting periods ending before 1 April 2015 before any amounts which are relevant carried-forward losses of the company.

(5) Subsection (6) applies where a company has an accounting period (“the straddling period”) beginning before, and ending after, the last day of its start-up period.

(6) For the purposes of this section—

(a) so much of the straddling period as falls within the start-up period, and so much of the straddling period as falls outside the start-up period, are treated as separate accounting periods, and

(b) any relevant carried-forward losses of the company for the straddling period are apportioned to the two separate accounting periods—

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

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

(7) In subsection (6)(b) the reference to any relevant carried-forward losses of the company “for” the straddling period is a reference to—

(a) any pre-2015 carried-forward trading loss which was made in a trade of the company in the straddling period,

(b) any pre-2015 carried-forward non-trading deficit which the company had from its loan relationships for the straddling period, and

(c) any pre-2015 carried-forward management expenses which are referable to, or were made in, the straddling period (as the case may be).

(8) For provision about determining a company's start-up period, see section 269CG.

269CG The “start-up period” U.K.

(1) In this Chapter the “start-up period”, in relation to a company (“company C”), means the period of 5 years beginning with the day on which company C first begins to carry on a relevant regulated activity (“the start-up day”).

This is subject to the following provisions of this section.

(2) If on the start-up day—

(a) company C is a member of a group,

(b) there are one or more other members of the group that have carried on a relevant regulated activity while a member of the group, and

(c) none of those members first began to carry on such an activity more than 5 years before the start-up day,

company C's start-up period is the period beginning with the start-up day and ending with the relevant group period.

(3) The “relevant group period”, in relation to a group, means the period of 5 years beginning with the earliest day on which any member of the group first began to carry on a relevant regulated activity.

(4) If on the start-up day—

(a) company C is a member of a group,

(b) there are one or more other members of the group that have carried on a relevant regulated activity while a member of the group, and

(c) any of those members first began to carry on such an activity more than 5 years before the start-up day,

company C does not have a start-up period.

(5) This subsection applies if—

(a) on a day falling within company C's start-up period (“the relevant day”), company C becomes a member of a group,

(b) one or more of the members of the group which on the relevant day carry on a relevant regulated activity first began to do so before the beginning of company C's start-up period, and

(c) the relevant regulated activities carried on by company C do not form a significant proportion of the relevant regulated activities carried on immediately after the relevant day by the members of the group as a whole.

(6) Where subsection (5) applies, company C's start-up period—

(a) in the case where any of the members of the group first began to carry on a relevant regulated activity more than 5 years before the relevant day, ends immediately before the relevant day;

(b) in any other case, ends with the relevant group period.

(7) This subsection applies if—

(a) on a day falling within company C's start-up period (“the relevant day”), another company that carries on a relevant regulated activity (“the new member”) becomes a member of a group of which company C is a member,

(b) the new member first began to carry on a relevant regulated activity before the beginning of company C's start-up period, and

(c) the relevant regulated activities carried on by the new member form a significant proportion of the relevant regulated activities carried on immediately after the relevant day by the members of the group as a whole.

(8) Where subsection (7) applies, company C's start-up period—

(a) in the case where the new member first began to carry on a relevant regulated activity more than 5 years before the relevant day, ends immediately before the relevant day;

(b) in any other case, ends with the relevant group period.

(9) Any reference in this section to being, or becoming, a member of a group includes a reference to being, or becoming, a member of a partnership; and references to the “relevant group period” are to be read accordingly.

(10) Section 269CL contains provision for determining when a company first begins to carry on a relevant regulated activity.

269CH Losses covered by carried-forward loss allowance U.K.

(1) This section applies to a banking company if—

(a) it is a building society, or

(b) an amount of carried-forward loss allowance is allocated to the company by a building society in accordance with section 269CI or 269CJ.

(2) If a banking company to which this section applies has an amount of carried-forward loss allowance (see subsection (5)), the company may designate as unrestricted losses any losses which, in relation to any accounting period, would (in the absence of this section) be relevant carried-forward losses.

(3) A loss designated under this section as an unrestricted loss is to be treated for the purposes of this Chapter as if it were not a relevant carried-forward loss.

(4) The amount of losses which a company may designate at any time must not exceed the amount of carried-forward loss allowance which the company has at that time.

(5) The amount of carried-forward loss allowance which a company has at any time is the difference between the company's maximum available carried-forward loss allowance and the total amount of losses designated by the company under this section before that time.

(6) The “maximum available carried-forward loss allowance” is—

(a) in the case of a building society which has not made an allocation under section 269CI, £25,000,000;

(b) in the case of a building society which has made an allocation under section 269CI, the amount given by—

where—

A is £25,000,000,

B is the sum of—

(a)

any amounts which it has allocated to another company under section 269CI, and

(b)

any amounts allocated to another company under section 269CJ which immediately before the allocation were amounts of carried-forward loss allowance which the building society had, and

C is the sum of any amounts allocated to the building society under section 269CJ;

(c) in the case of any other company, the total amount of carried-forward loss allowance allocated to the company under section 269CI or 269CJ.

(7) References in this Chapter to an amount of carried-forward loss allowance allocated to a company are references to an amount allocated to the company under section 269CI or 269CJ.

(8) For the meaning of “relevant carried-forward loss”, see section 269CN.

(9) For information about the procedure for making a designation under this section, see Schedule 18 to FA 1998, in particular Part 9E of that Schedule.

269CI Allocation of carried-forward loss allowance within a group U.K.

(1) This section applies where a building society—

(a) is a member of a group, and

(b) has an amount of carried-forward loss allowance (see section 269CH(5)).

(2) The building society may allocate some or all of that amount of carried-forward loss allowance to any other member of the group which is a banking company.

(3) Where a building society makes an allocation under subsection (2), it must give HMRC a statement (a “statement of allocation”) which specifies—

(a) the amount of carried-forward loss allowance which the building society had immediately before it made the allocation,

(b) the companies (“the relevant companies”) to which an amount of carried-forward loss allowance has been allocated,

(c) the amount of carried-forward loss allowance allocated to each of the relevant companies, and

(d) the total amount of carried-forward loss allowance allocated by the building society.

(4) The statement of allocation must be given to HMRC on or before—

(a) the first day after the allocation on which the building society, or any of the relevant companies, delivers a company tax return which includes a designation made under section 269CH, or

(b) if earlier, the first day after the allocation on which a company tax return of the building society, or any of the relevant companies, is amended so as to include such a designation.

This is subject to subsection (5).

(5) An officer of Revenue and Customs may provide that the statement of allocation may be given to HMRC on or before a later day specified by the officer.

(6) An allocation made under subsection (2) is not effective unless the requirements of this section have been complied with.

(7) A statement of allocation that has been given to HMRC under this section may not be amended or withdrawn.

This is subject to section 269CJ.

269CJ Re-allocation of carried-forward loss allowance U.K.

(1) This section applies where—

(a) a building society is a member of a group,

(b) the building society has given HMRC a statement of allocation in accordance with section 269CI,

(c) the building society, or any other member of the group that is a banking company, (the “designating company”) would, if it had an amount (or an additional amount) of carried-forward loss allowance, be able to designate an amount of losses under section 269CH equal to that amount, and

(d) that amount is greater than the amount of carried-forward loss allowance which the building society could allocate under section 269CI.

(2) In this section the “available carried-forward loss allowance” means the total of any amounts of carried-forward loss allowance which any member of the group, other than the designating company, has (see section 269CH(5)).

(3) The building society may—

(a) allocate some or all of the available carried-forward loss allowance to the designating company, and

(b) provide that, to the extent that any of the amount allocated to the designating company under this subsection is an amount of carried-forward loss allowance which, immediately before the allocation, was an amount allocated to another company, that amount is no longer allocated to that other company.

(4) Where a building society makes an allocation under subsection (3), it must give HMRC a statement (a “revised statement of allocation”) which specifies—

(a) the amount of the available carried-forward loss allowance immediately before the allocation,

(b) the companies which had an amount of carried-forward loss allowance immediately before the allocation, and the amount of carried-forward loss allowance which each of those companies had at that time, and

(c) the companies which have an amount of carried-forward loss allowance immediately after the allocation (“the relevant companies”), and the amount of carried-forward loss allowance which each of those companies has.

(5) The revised statement of allocation must be given to HMRC on or before—

(a) the first day after the allocation on which any of the relevant companies delivers a company tax return which includes a designation made under section 269CH, or

(b) if earlier, the first day after the allocation on which a company tax return of any of the relevant companies is amended so as to include such a designation.

This is subject to subsection (6).

(6) An officer of Revenue and Customs may provide that the revised statement of allocation may be given to HMRC on or before a later day specified by the officer.

(7) An allocation made under subsection (3) is not effective unless the requirements of this section have been complied with.

(8) Except as provided for by this section, a revised statement of allocation that has been given to HMRC under this section may not be amended or withdrawn.

Anti-avoidance U.K.

269CK Profits arising from tax arrangements to be disregarded U.K.

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

(2) Condition A is that—

(a) the amount given by step 1 in section 269CD(1) as the total profits of a banking company for an accounting period includes profits which arise to the banking company as a result of any arrangements (“the tax arrangements”), and

(b) in the absence of those profits (“the additional profits”) any deduction which the banking company would be entitled to make for the accounting period in respect of any relevant carried-forward losses would be reduced.

(3) Condition B is that the main purpose, or one of the main purposes, of the tax arrangements is to secure a relevant corporation tax advantage—

(a) for the banking company, or

(b) if there are any companies connected with that company, for the banking company and those connected companies (taken together).

(4) In this section “relevant corporation tax advantage” means a corporation tax advantage involving—

(a) the additional profits, and

(b) the deduction of any relevant carried-forward losses from those profits.

(5) Condition C is that, at the time when the tax arrangements were entered into, it would have been reasonable to assume that the tax value of the tax arrangements would be greater than the non-tax value of the tax arrangements.

(6) The “tax value” of the tax arrangements is the total value of—

(a) the relevant corporation tax advantage, and

(b) any other economic benefits derived by—

(i) the banking company, or

(ii) if there are any companies connected with that company, the banking company and those connected companies (taken together),

as a result of securing the relevant corporation tax advantage.

(7) The “non-tax value” of the tax arrangements is the total value of any economic benefits, other than those falling within subsection (6)(a) or (b), derived by—

(a) the banking company, or

(b) if there are any companies connected with that company, the banking company and those connected companies (taken together),

as a result of the tax arrangements.

(8) If this section applies, the additional profits are not to be taken into account in calculating the banking company's relevant profits for the accounting period (see section 269CD).

(9) In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

• “corporation tax advantage” means—

  (a)

  a relief from corporation tax or increased relief from corporation tax,

  (b)

  a repayment of corporation tax or increased repayment of corporation tax,

  (c)

  the avoidance or reduction of a charge to corporation tax or an assessment to corporation tax,

  (d)

  the avoidance of a possible assessment to corporation tax, or

  (e)

  the deferral of a payment of corporation tax or advancement of a repayment of corporation tax.

Supplementary U.K.

269CL When a company first begins to carry on relevant regulated activities U.K.

(1) For the purposes of this Chapter, a company first begins to carry on a relevant regulated activity on a particular day if the company—

(a) begins to carry on a relevant regulated activity on that day, and

(b) has not carried on any relevant regulated activity before that day.

This is subject to subsection (2).

(2) Where—

(a) there is a transfer of a trade, and

(b) immediately before the transfer the predecessor carried on a relevant regulated activity,

the successor is to be treated as having first begun to carry on a relevant regulated activity on the day on which the predecessor first began to carry on such an activity.

(3) Section 940B (meaning of “transfer of a trade” etc) applies for the purposes of this section as it applies for the purposes of Chapter 1 of Part 22.

269CM Joint venture companies U.K.

(1) Where a company (“the joint venturer”), together with one or more other persons, jointly controls another company that is a joint venture (“the joint venture company”), the joint venture company is to be treated for the purposes of this Chapter as a member of any group of which the joint venturer is a member.

(2) References in subsection (1) to a joint venture and to jointly controlling a company that is a joint venture are to be read in accordance with those provisions of international accounting standards which relate to joint ventures.

269CN Other definitions U.K.

In this Chapter—

• “banking company” has the meaning given by section 269B;

• “building society” has the same meaning as in the Building Societies Act 1986 [F412 except that it also includes a bank established under the Savings Bank (Scotland) Act 1819];

• “company tax return” has the same meaning as in Schedule 18 to FA 1998;

• “group” has the meaning given by section 269BD;

• “HMRC” means Her Majesty's Revenue and Customs;

• “partnership” includes—

  (a)

  a limited liability partnership, and

  (b)

  an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership,

  and “member”, in relation to a partnership, is to be read accordingly;

• “pre-2015 carried-forward management expenses” has the meaning given by section 269CC(4);

• “pre-2015 carried-forward non-trading deficit” has the meaning given by section 269CB(4);

• “pre-2015 carried-forward trading loss” has the meaning given by section 269CA(4);

• “relevant carried-forward loss” means—

  (a)

  a pre-2015 carried-forward trading loss,

  (b)

  a pre-2015 carried-forward non-trading deficit, or

  (c)

  any pre-2015 carried-forward management expenses;

• F413 ...

• “relevant profits”, in relation to a company, [F414 has the meaning given by section [F415 269ZFA]] ;

• “relevant regulated activity” has the meaning given by section 269BB;

• “relevant trading profits”, in relation to a company, [F416 has the meaning given by section 269ZF(1)];

• “start-up period”, in relation to a company, has the meaning given by section 269CG.]

• [F417 “total relevant non-trading profits”, in relation to a company, has the meaning given by section 269ZF(2B).]

Textual Amendments

F412 Words in s. 269CN inserted (retrospective to 1.4.2015) by Finance (No. 2) Act 2015 (c. 33), s. 19(1)(2)

F413 Words in s. 269CN omitted (with effect in relation to accounting periods beginning on or after 1.4.2020 of the amending Act) by virtue of Finance Act 2020 (c. 14), Sch. 4 paras. 38(a), 42 (with Sch. 4 paras. 43-46)

F414 Words in s. 269CN substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 22(3)

F415 Word in s. 269CN substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 14

F416 Words in s. 269CN substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 22(4)

F417 Words in s. 269CN inserted (with effect in relation to accounting periods beginning on or after 1.4.2020 of the amending Act) by Finance Act 2020 (c. 14), Sch. 4 paras. 38(b), 42 (with Sch. 4 paras. 43-46)

[F418 CHAPTER 4 U.K. Surcharge on banking companies

Textual Amendments

F418 Pt. 7A Ch. 4 inserted (with effect in accordance with Sch. 3 Pt. 3 of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 3 para. 1

Overview U.K.

269D Overview of Chapter U.K.

(1) This Chapter contains provision for, and in connection with, a surcharge on the profits of banking companies.

(2) Section 269DA provides for a sum to be charged on the surcharge profits of a banking company, in excess of the company's surcharge allowance, as if it were an amount of corporation tax.

(3) Section 269DB defines “non-banking group relief” for the purposes of calculating a company's surcharge profits.

(4) Section 269DC defines “non-banking or pre-2016 loss relief” for the purposes of calculating a company's surcharge profits.

[F419 (4A) Section 269DCA defines “non-banking transferred-in loss relief” for the purposes of calculating a company’s surcharge profits.]

(5) Section 269DD defines “relevant transferred-out gain” and “non-banking transferred-in gain” for the purposes of calculating a company's surcharge profits.

(6) Sections 269DE to 269DK contain provision for, and in connection with, determining a company's surcharge allowance.

(7) Sections 269DL and 269DM apply enactments relating to corporation tax to sums charged under section 269DA, modify those enactments and make other provision about administration and double taxation.

(8) Section 269DN contains anti-avoidance provision.

(9) Section 269DO contains provision about the interpretation of this Chapter.

(10) Chapter 2 (key definitions) contains provision about the interpretation of this Part that is relevant to this Chapter (see, in particular, section 269B (read with section 269DO(2) to (7)) for the meaning of “banking company” and section 269BD for the meaning of “group”).

Textual Amendments

F419 S. 269D(4A) inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2020 (c. 14), s. 33(2)

The surcharge U.K.

269DA Surcharge on banking companies U.K.

(1) If a company is a banking company in relation to an accounting period (a “chargeable accounting period”), a sum equal to [F420 3%] of its surcharge profits for the period, so far as they exceed its surcharge allowance for the period, is to be charged on the company as if it were an amount of corporation tax chargeable on the company.

(2) For the purposes of this Chapter, a company's “surcharge profits” for a chargeable accounting period are—

TTP + NBGR + [F421 NBGRCF +] NBPLR + [F422 NBTILR +] RTOG − NBTIG − RDEC

where—

“TTP” is the taxable total profits of the company of the chargeable accounting period;

“NBGR” is the amount (if any) of non-banking group relief that is given in determining those taxable total profits (see section 269DB);

[F423 “NBGRCF” is the amount (if any) of non-banking group relief for carried-forward losses that is given in determining those taxable total profits (see section 269DBA);]

“NBPLR” is the amount (if any) of non-banking or pre-2016 loss relief (see section 269DC);

[F424 “NBTILR” is the amount (if any) of non-banking transferred-in loss relief (see section 269DCA);]

“RTOG” means the sum of any relevant transferred-out gains (see section 269DD);

“NBTIG” means the sum of any non-banking transferred-in gains (see section 269DD);

“RDEC” means any amount brought into account by the company under [F425 Chapter 1A of Part 13 of CTA 2009 (R&D expenditure credit)] as a receipt in calculating the profits of a trade for the chargeable accounting period.

(3) A company's “surcharge allowance” for a chargeable accounting period is to be determined in accordance with section 269DE where, at any time in that period—

(a) the company is a member of a group, and

(b) one or more other banking companies are members of that group.

(4) Otherwise, a company's “surcharge allowance” for a chargeable accounting period is to be determined in accordance with section 269DJ.

Textual Amendments

F420 Word in s. 269DA(1) substituted (1.4.2023 for accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 6(1)(3)

F421 Variable in formula in s. 269DA(2) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 161(a)

F422 Word in s. 269DA(2) inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2020 (c. 14), s. 33(3)(a)

F423 Words in s. 269DA(2) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 161(b)

F424 Words in s. 269DA(2) inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2020 (c. 14), s. 33(3)(b)

F425 Words in s. 269DA(2) substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(2), 16; S.I. 2024/286, reg. 2

Non-banking group relief U.K.

269DB Meaning of “non-banking group relief” U.K.

(1) In section 269DA(2), “non-banking group relief” means group relief that relates to losses or other amounts that the surrendering company has for a surrender period in relation to which it is not—

(a) a banking company, F426 ...

F426 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F427 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F427 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F427 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F427 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F427 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F427 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F427 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F426 S. 269DB(1)(b) and word omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(9)(a)

F427 S. 269DB(2)-(8) omitted (with effect in accordance with Sch. 4 para. 4(1) of the amending Act) by virtue of Finance Act 2022 (c. 3), Sch. 4 para. 1(9)(b)

[F428 269DBA Meaning of “non-banking group relief for carried-forward losses” U.K.

(1) In section 269DA(2) “non-banking group relief for carried-forward losses” means group relief for carried-forward losses that relates to losses or other amounts that the surrendering company has for a surrender period in relation to which it is not a banking company.

(2) In this section “surrendering company” and “surrender period” have the same meaning as in Part 5A (see section 188FD).]

Textual Amendments

F428 S. 269DBA inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 162

Non-banking or pre-2016 loss relief U.K.

269DC Meaning of “non-banking or pre-2016 loss relief” U.K.

(1) In section 269DA(2), “non-banking or pre-2016 loss relief” means the aggregate of—

(a) any amounts that are deducted in determining the taxable total profits of the company of the chargeable accounting period, in respect of—

(i) a non-banking or pre-2016 carried-forward trading loss,

(ii) a non-banking or pre-2016 carried-forward non-trading deficit,

(iii) non-banking or pre-2016 carried-forward management expenses,

(iv) a non-banking or pre-2016 carried-forward UK property loss,

(v) a non-banking or pre-2016 carried-forward overseas property loss,

(vi) a non-banking or pre-2016 carried-forward excess capital allowance on special leasing,

(vii) a non-banking or pre-2016 carried-forward miscellaneous loss, or

(viii) a non-banking or pre-2016 carried-forward capital loss, and

(b) any used amount, for the chargeable accounting period, in respect of a non-banking or pre-2016 non-trading loss on intangible fixed assets.

(2) For the purposes of this section—

(a) a “non-banking” accounting period is an accounting period in relation to which the company was not a banking company, and

(b) a “pre-2016” accounting period is an accounting period of the company ending before 1 January 2016.

(3) “A non-banking or pre-2016 carried-forward trading loss” means a loss which—

(a) was made in a trade of the company in a non-banking or pre-2016 accounting period, and

(b) is carried forward to the chargeable accounting period under section 45[F429 , 45A or 45B] (carry forward of trade loss against subsequent F430 ... profits).

(4) “A non-banking or pre-2016 carried-forward non-trading deficit” means a non-trading deficit—

(a) which the company had from its loan relationships under section 301(6) of CTA 2009 for a non-banking or pre-2016 accounting period, and

(b) which is carried forward under section 457 [F431 , 463G or 463H] of that Act (carry forward of deficits to accounting periods after deficit period) to be set off against F432 ... profits of the chargeable accounting period.

F433 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) “Non-banking or pre-2016 management expenses” means amounts that fall within subsection (7) or (8).

(7) The amounts within this subsection are amounts—

(a) which fall within subsection (2) of section 1223 of CTA 2009 (carry forward of expenses of management and other amounts),

(b) which—

(i) for the purposes of Chapter 2 of Part 16 of CTA 2009 are referable to a non-banking or pre-2016 accounting period, or

(ii) in the case of qualifying charitable donations, were made in such an accounting period, and

(c) which are treated by section 1223(3) of CTA 2009 as expenses of management deductible for the chargeable accounting period.

(8) The amounts within this subsection are amounts of loss which—

(a) were made in a non-banking or pre-2016 accounting period, and

(b) are treated by section 63(3) (carry forward of certain losses made by company with investment business which ceases to carry on UK property business) as expenses of management deductible for the chargeable accounting period for the purposes of Chapter 2 of Part 16 of CTA 2009.

(9) “A non-banking or pre-2016 carried-forward UK property loss” means a loss which—

(a) was made by the company in a UK property business in a non-banking or pre-2016 accounting period, and

(b) is carried forward to the chargeable accounting period under section 62(5) (carry forward of UK property business loss to be treated as loss of subsequent accounting period).

(10) “A non-banking or pre-2016 carried-forward overseas property loss” means a loss which—

(a) was made by the company in an overseas property business in a non-banking or pre-2016 accounting period, and

(b) is carried forward to the chargeable accounting period under section 66(3) (carry forward of overseas property business loss against subsequent losses of that kind).

(11) “A non-banking or pre-2016 carried-forward excess capital allowance on special leasing” means an amount of capital allowance—

(a) to which the company was entitled for a non-banking or pre-2016 accounting period, and

(b) which must be deducted under section 260 of CAA 2001 (special leasing: corporation tax, excess allowance) from income of the company for the chargeable accounting period.

(12) “A non-banking or pre-2016 carried-forward miscellaneous loss” means a loss which—

(a) was made by the company in a transaction within subsection (2) of section 91 (relief for losses from miscellaneous transactions) in a non-banking or pre-2016 accounting period, and

(b) is carried forward to the chargeable accounting period under subsection (6) of that section (carry forward of miscellaneous losses against miscellaneous income).

(13) “A non-banking or pre-2016 carried-forward capital loss” means an allowable loss which—

(a) accrued to the company in a non-banking or pre-2016 accounting period F434 ..., and

(b) is to be deducted under section [F435 2A(1)(b)] of TCGA 1992 (deduction of allowable losses from previous accounting periods) from the total amount of chargeable gains accruing to the company in the chargeable accounting period.

F436 (14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F437 (15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(16) The company has “a non-banking or pre-2016 non-trading loss on intangible fixed assets” if it had a non-trading loss under section 751 of CTA 2009 (non-trading gains and losses) on intangible fixed assets in the relevant accounting period.

(17) The “relevant accounting period” is—

(a) if in relation to any accounting period beginning on or after 1 January 2016 the company was not a banking company, its most recent non-banking accounting period, and

(b) in any other case, the company's last pre-2016 accounting period (if any).

(18) If all or part of the non-banking or pre-2016 non-trading loss on intangible fixed assets is carried forward as a non-trading debit to the accounting period following the relevant accounting period under section 753(3) of CTA 2009 (“the initially carried-forward debit”), there is a “used amount”, for the chargeable accounting period, in respect of that loss if—

(a) the initially carried-forward debit exceeds the aggregate of any used amounts, for any previous chargeable accounting periods, in respect of that loss, and

(b) there are any non-trading credits for the chargeable accounting period or a non-trading loss on intangible fixed assets is to be set off against the company's total profits for that period under section 753(1) of that Act.

(19) If there is a used amount for the chargeable accounting period in respect of the non-banking or pre-2016 non-trading loss on intangible fixed assets it is to be calculated in accordance with subsections (20) and (21).

(20) If the remaining carried-forward debit for the chargeable accounting period (see subsection (22)) does not exceed the aggregate of—

(a) any non-trading credits for that period, and

(b) any amount of non-trading loss on intangible fixed assets that is to be set off against the profits of the company for that period under section 753(1) of CTA 2009,

the used amount, for that period, in respect of the non-banking or pre-2016 non-trading loss on intangible fixed assets is equal to the remaining carried-forward debit for that period.

(21) If the remaining carried-forward debit for the chargeable accounting period exceeds the aggregate of any amounts within paragraph (a) or (b) of subsection (20), the used amount, for that period, in respect of the non-banking or pre-2016 non-trading loss on intangible fixed assets is equal to the aggregate of those amounts.

(22) In subsections (18) to (21)—

• “non-trading credit” means a non-trading credit in respect of intangible fixed assets for the purposes of Part 8 of CTA 2009;

• “the remaining carried-forward debit”, in relation to the chargeable accounting period, means the amount of the excess referred to in subsection (18)(a).

Textual Amendments

F429 Words in s. 269DC(3)(b) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 163(2)(a)

F430 Word in s. 269DC(3)(b) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 163(2)(b)

F431 Words in s. 269DC(4)(b) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 163(3)(a)

F432 Words in s. 269DC(4)(b) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 163(3)(b)

F433 S. 269DC(5) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 163(4)

F434 Words in s. 269DC(13)(a) omitted (with effect in accordance with s. 33(6) of the amending Act) by virtue of Finance Act 2020 (c. 14), s. 33(4)(a)(i)

F435 Word in s. 269DC(13)(b) substituted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2020 (c. 14), s. 33(4)(a)(ii)

F436 S. 269DC(14) omitted (with effect in accordance with s. 33(6) of the amending Act) by virtue of Finance Act 2020 (c. 14), s. 33(4)(b)

F437 S. 269DC(15) omitted (with effect in accordance with s. 33(6) of the amending Act) by virtue of Finance Act 2020 (c. 14), s. 33(4)(b)

[F438 269DCA Meaning of “non-banking transferred-in loss relief” U.K.

(1) In section 269DA(2), “non-banking transferred-in loss relief” means the sum of any amounts that are deducted under section 2A of TCGA 1992 in determining the taxable total profits of the company of the chargeable accounting period in respect of an allowable loss, or any part of an allowable loss, that accrued to the company as a result of a non-banking loss transfer.

(2) A “non-banking loss transfer” is a transfer to the company of the whole or any part of an allowable loss, by an election under section 171A of TCGA 1992 (reallocation within group), from a non-banking company.

(3) In this section “non-banking company” means a company that is not a banking company at the time that the allowable loss, or such part of it as the election transfers, is treated as accruing by virtue of the election (see, in particular, section 171B(3) of TCGA 1992).]

Textual Amendments

F438 S. 269DCA inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2020 (c. 14), s. 33(5)

269DD Meaning of “relevant transferred-out gain” and “non-banking transferred-in gain” U.K.

(1) This section has effect for the purposes of section 269DA(2).

(2) A “relevant transferred-out gain” means a chargeable gain, or any part of a chargeable gain, that—

(a) is transferred from the company, by an election under section 171A of TCGA 1992 (reallocation within group), to a non-banking company, and

(b) would have accrued to the company in the chargeable accounting period but for that election.

(3) A “non-banking transferred-in gain” means a chargeable gain, or any part of a chargeable gain, that—

(a) is transferred to the company, by an election under section 171A of TCGA 1992, from a non-banking company, and

(b) accrues to the company in the chargeable accounting period as a result of the election.

(4) In this section “non-banking company” means a company that is not a banking company at the time that the chargeable gain, or such part of it as the election transfers, is treated as accruing by virtue of the election (see, in particular, section 171B(3) of TCGA 1992).

The surcharge allowance U.K.

269DE Surcharge allowance for banking company in a group containing other banking companies U.K.

(1) This section makes provision as to the surcharge allowance of a banking company for a chargeable accounting period where, at any time in the period—

(a) the banking company is a member of a group, and

(b) one or more other banking companies are members of that group.

(2) The banking company's surcharge allowance for the chargeable accounting period is so much of its available surcharge allowance for the period as it specifies in its company tax return as its surcharge allowance for the period.

(3) The banking company's “available surcharge allowance” for the chargeable accounting period is the sum of—

(a) any amounts of group surcharge allowance allocated to the company for the period in accordance with sections 269DF to 269DI, and

(b) the appropriate amount of non-group surcharge allowance of the company for the period,

up to a limit of [F439 £100,000,000].

(4) The “appropriate amount of non-group surcharge allowance” of the company, for the chargeable accounting period, is—

[F440 ]

where—

“DNG” is the number of days in the period on which the company is not a member of a group that has another member that is a banking company;

“DAC” is the total number of days in the period.

(5) If the chargeable accounting period is less than 12 months—

(a) the appropriate amount of non-group surcharge allowance, and

(b) the limit in subsection (3),

are proportionally reduced.

(6) The sum of—

(a) any amount specified under subsection (2) for the chargeable accounting period, and

(b) any amount that is specified under section 371BI(2) of TIOPA 2010 (calculation of CFC charge on banking companies) for the period,

may not exceed the available surcharge allowance for the period.

(7) Section 269DK contains provision about what happens if the requirement in subsection (6) is not met.

Textual Amendments

F439 Sum in S. 269DE(3) substituted (1.4.2023 for accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 6(2)(a)(3)

F440 S. 269DE(4): in the formula the sum "£100,000,000" is substituted for "£25,000,000" (1.4.2023 for accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 6(2)(a)(3)

269DF Group surcharge allowance and the nominated company U.K.

(1) This section applies where—

(a) two or more members of a group are banking companies, and

(b) all the banking companies that are members of the group together nominate (the “group allowance nomination”) one of their number (the “nominated company”) for the purposes of this Chapter.

(2) The “group surcharge allowance” for the group is [F441 £100,000,000] for each accounting period of the nominated company throughout which the group allowance nomination has effect.

(3) If the group allowance nomination takes effect, or ceases to have effect, part of the way through an accounting period of the nominated company, the “group surcharge allowance” for the group for that period is—

[F442 ]

where—

“DN” is the number of days in the accounting period on which a group allowance nomination that nominates the nominated company in relation to the group has effect, and

“DAC” is the total number of days in the accounting period.

(4) If an accounting period of the nominated company is less than 12 months, the group surcharge allowance for that period is proportionally reduced.

(5) A group allowance nomination must state the date on which it is to take effect (which may be earlier than the date the nomination is made).

(6) A group allowance nomination is of no effect unless it is signed by the appropriate person on behalf of each company that is, when the nomination is made, a member of the group and a banking company.

(7) A group allowance nomination ceases to have effect—

(a) immediately before the date on which a new group allowance nomination in respect of the group takes effect,

(b) upon the appropriate person in relation to a banking company that is a member of the group notifying an officer of Revenue and Customs, in writing, that the group allowance nomination is revoked, or

(c) upon the nominated company ceasing to be a banking company or ceasing to be a member of the group.

(8) The Commissioners for Her Majesty's Revenue and Customs may by regulations make further provision about a group allowance nomination or any notification under this section including, in particular, provision—

(a) about the form and manner in which a nomination or notification may be made,

(b) about how a nomination may be revoked and the form and manner of such revocation,

(c) requiring a person to notify HMRC of the making or revocation of a nomination,

(d) requiring a person to give information to HMRC in connection with the making or revocation of a nomination or the giving of a notification,

(e) imposing time limits in relation to making or revoking a nomination or giving a notification, and

(f) providing that a nomination or its revocation, or a notification, is of no effect, or ceases to have effect, if time limits or other requirements under the regulations are not met.

(9) In this Chapter “the appropriate person”, in relation to a company, means—

(a) the proper officer of the company, or

(b) such other person as may for the time being have the express, implied or apparent authority of the company to act on its behalf for the purposes of this Chapter.

(10) Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company officers: meaning of “proper officer”) apply for the purposes of subsection (9) as they apply for the purposes of that section.

Textual Amendments

F441 Sum in S. 269DF(2) substituted (1.4.2023 for accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 6(2)(b)(3)

F442 S. 269DF(3): in the formula the sum "£100,000,000" is substituted for "£25,000,000" (1.4.2023 for accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 6(2)(b)(3)

269DG Group allowance allocation statement: submission U.K.

(1) A company must submit a group allowance allocation statement to HMRC for each of its accounting periods in which it is the nominated company in relation to a group.

This is subject to subsections (2) and (3).

(2) If a company ceases to be the nominated company in relation to a group before it submits a group allowance allocation statement to HMRC for an accounting period—

(a) that company may not submit the statement, and

(b) the company that is for the time being the nominated company in relation to the group must do so.

(3) But if a new group allowance nomination in respect of the group takes effect on a date before it is made, that does not affect the validity of the submission of any group allowance allocation statement submitted before the date the new nomination is made.

(4) A group allowance allocation statement under this section must be received by HMRC within 12 months of the end of the accounting period, of the nominated company, to which it relates.

(5) A group allowance allocation statement under this section may be submitted at a later time if an officer of Revenue and Customs allows it.

(6) A group allowance allocation statement under this section must comply with the requirements of section 269DI.

269DH Group allowance allocation statement: submission of revised statement U.K.

(1) This section applies if a group allowance allocation statement has been submitted under section 269DG, or this section, in respect of an accounting period of a company that is, or was, a nominated company (“the nominee's accounting period”).

(2) A revised group allowance allocation statement in respect of the nominee's accounting period may be submitted to HMRC by the company that is for the time being the nominated company in relation to the group.

(3) But if a new group allowance nomination in respect of the group takes effect on a date before it is made, that does not affect the validity of the submission of any revised group allowance allocation statement submitted before the date the new nomination is made.

(4) A revised group allowance allocation statement may be submitted on or before whichever is the latest of the following dates—

(a) the last day of the period of 36 months after the end of the nominee's accounting period;

(b) if notice of enquiry (within the meaning of Schedule 18 to FA 1998) is given into a relevant company tax return, 30 days after the enquiry is completed;

(c) if, after such an enquiry, an officer of Revenue and Customs amends the return under paragraph 34(2) of that Schedule, 30 days after the notice of amendment is issued;

(d) if an appeal is brought against such an amendment, 30 days after the date on which the appeal is finally determined.

(5) A revised group allowance allocation statement may be submitted at a later time if an officer of Revenue and Customs allows it.

(6) In this section “relevant company tax return” means a company tax return of a banking company for a chargeable accounting period for which an amount of group surcharge allowance was, or could have been, allocated by a previous group allowance allocation statement in respect of the nominee's accounting period.

(7) The references in subsection (4) to an enquiry into a relevant company tax return do not include an enquiry resulting from an amendment of such a return where—

(a) the scope of the enquiry is limited as mentioned in paragraph 25(2) of Schedule 18 to FA 1998 (enquiry into amendments when time limit for enquiry into return as originally submitted is passed), and

(b) the amendment relates only to the allocation of group surcharge allowance for the nominee's accounting period.

(8) A group allowance allocation statement under this section must comply with the requirements of section 269DI.

269DI Group allowance allocation statement: requirements and effect U.K.

(1) This section applies in relation to a group allowance allocation statement submitted under section 269DG or 269DH.

(2) The statement must be signed by the appropriate person in relation to the company giving the statement.

(3) The statement must—

(a) identify the group to which it relates,

(b) specify the accounting period, of the company that is or was the nominated company, to which the statement relates (“the nominee's accounting period”),

(c) specify the days in the nominee's accounting period on which that company was the nominated company in relation to the group or state that that company was the nominated company throughout the period,

(d) state the group surcharge allowance the group has for the nominee's accounting period,

(e) list one or more of the banking companies that were members of the group in the nominee's accounting period (“listed banking companies”),

(f) allocate amounts of the group surcharge allowance to the listed banking companies, and

(g) for each amount of group surcharge allowance allocated to a listed banking company, specify the chargeable accounting period of the listed banking company for which it is allocated.

(4) An amount of group surcharge allowance allocated to a listed banking company must be allocated to that company for a chargeable accounting period that falls wholly or partly in the nominee's accounting period.

(5) The maximum amount of group surcharge allowance that may be allocated, by the group allowance allocation statement, to a listed banking company for a chargeable accounting period of that company is—

where—

“DAP” is the number of days in the chargeable accounting period that are in the nominee's accounting period;

“DNAP” is the number of days in the nominee's accounting period;

“GSA” is the group surcharge allowance of the group for the nominee's accounting period.

(6) The sum of the amounts allocated to listed banking companies by the group allowance allocation statement may not exceed the group surcharge allowance for the nominee's accounting period.

(7) If a group allowance allocation statement is submitted that does not comply with subsection (5) or (6), the company that is, for the time being, the nominated company in relation to the group must submit a revised group allowance allocation statement that does comply with those subsections within 30 days of the date on which the group allowance allocation statement that did not comply was submitted.

(8) If a group allowance allocation statement—

(a) complies with those subsections when it is submitted, but

(b) subsequently ceases to comply with either of them,

the company that is, for the time being, the nominated company in relation to the group must submit a revised group allowance allocation statement that does comply with those subsections within 30 days of the date on which the group allowance allocation statement ceased to comply with one of those subsections.

(9) If a company fails to comply with subsection (7) or (8), an officer of Revenue and Customs may by written notice to the company amend the group allowance allocation statement as the officer thinks fit for the purpose of making it comply with subsections (5) and (6).

(10) An officer of Revenue and Customs who issues a notice under subsection (9) to a company must, at the same time, send a copy of the notice to each of the listed banking companies.

(11) The time limits otherwise applicable to the amendment of a company tax return do not apply to any such amendment to the extent that it is made in consequence of a group allowance allocation statement being submitted in accordance with section 269DG or 269DH.

(12) The Commissioners for Her Majesty's Revenue and Customs may by regulations make further provision about a group allowance allocation statement including, in particular, provision—

(a) about the form of a statement and the manner in which it is to be submitted,

(b) requiring a person to give information to HMRC in connection with a statement,

(c) as to the circumstances in which a statement that is not received by the time specified in section 269DG(4) or 269DH(4) is to be treated as if it were so received, and

(d) as to circumstances in which a statement that does not comply with the requirements of this section is to be treated as if it did comply.

269DJ Surcharge allowance for company not in a group containing other banking companies U.K.

(1) This section makes provision as to the surcharge allowance of a banking company for a chargeable accounting period where section 269DE (surcharge allowance for banking company in a group containing other banking companies) does not apply.

(2) The banking company's surcharge allowance for the chargeable accounting period is so much of its available surcharge allowance for the period as it specifies in its company tax return as its surcharge allowance for that period.

(3) The banking company's “available surcharge allowance” for the chargeable accounting period is [F443 £100,000,000.]

(4) If the chargeable accounting period is less than 12 months, the banking company's available surcharge allowance for the period is proportionally reduced.

(5) The sum of—

(a) any amount specified under subsection (2) for the chargeable accounting period, and

(b) any amount that is specified under section 371BI(2) of TIOPA 2010 (calculation of CFC charge on banking companies) for the period,

may not exceed the available surcharge allowance for the period.

(6) Section 269DK contains provision about what happens if the requirement in subsection (5) is not met.

Textual Amendments

F443 Sum in S. 269DJ(3) substituted (1.4.2023 for accounting periods beginning on or after that date) by Finance Act 2022 (c. 3), s. 6(2)(c)(3)

269DK Excessive specifications of available surcharge allowance U.K.

(1) This section applies if—

(a) a banking company's company tax return for a chargeable accounting period—

(i) specifies an amount under section 269DE(2) or 269DJ(2) as its surcharge allowance for the period, or

(ii) specifies an amount under section 371BI(2) of TIOPA 2010 (calculation of CFC charge on banking companies) for the period, and

(b) the requirement in section 269DE(6) or (as the case may be) 269DJ(5) is not met.

(2) The company must, so far at it may do so, amend the company tax return so that the requirement is met.

(3) If an officer of Revenue and Customs considers that, as a consequence of the requirement not being met, an insufficient sum has been charged on the company under section 269DA, or at step 5 in section 371BC(1) of TIOPA 2010, for the chargeable accounting period, the officer may make an assessment to tax in the amount which in the officer's opinion ought to be charged.

(4) The power in subsection (3) is without prejudice to the power to make a discovery assessment under paragraph 41(1) of Schedule 18 to FA 1998.

(5) If an assessment under subsection (3) is made because a company fails, or is unable, to amend its company tax return in accordance with subsection (2) in consequence of the amount of group surcharge allowance allocated to it for an accounting period being altered, the assessment is not out of time if it is made within 12 months of the date on which the alteration took place.

Application of Corporation Tax Acts: administration, double taxation etc U.K.

269DL Application of enactments applying to corporation tax: assessment, recovery, double taxation etc U.K.

(1) The provision in section 269DA relating to the charging of a sum as if it were an amount of corporation tax is to be taken as applying all enactments applying generally to corporation tax.

(2) But this is subject to—

(a) the provisions of the Taxes Acts,

(b) any necessary modifications, and

(c) subsection (5).

(3) The enactments mentioned in subsection (1) include—

(a) those relating to returns of information and the supply of accounts, statements and reports,

(b) those relating to the assessing, collecting and receiving of corporation tax,

(c) those conferring or regulating a right of appeal, and

(d) those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom.

(4) Accordingly, TMA 1970 is to have effect as if any reference to corporation tax included a sum chargeable under section 269DA as if it were an amount of corporation tax (but this does not limit subsections (1) to (3)).

(5) In the Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) Regulations 1999 (S.I. 1999/358) or any further regulations made under section 32 of FA 1998 (unrelieved surplus advance corporation tax)—

(a) references to corporation tax do not include a sum chargeable on a banking company under section 269DA as if it were an amount of corporation tax, and

(b) references to profits charged to corporation tax do not include surcharge profits.

(6) Part 2 of TIOPA 2010 (double taxation relief) applies to a sum chargeable under section 269DA as if it were an amount of corporation tax, subject to subsections (7) to (9).

In those subsections, “credit for foreign tax” means a credit allowable under that Part.

(7) A non-banking or pre-2016 carried-forward credit for foreign tax is not to be allowed against a sum chargeable on a company under section 269DA, for a chargeable accounting period, as if it were an amount of corporation tax.

(8) “A non-banking or pre-2016 carried-forward credit for foreign tax” is a credit for foreign tax in respect of an amount—

(a) which was an amount of a credit for foreign tax that would (ignoring section 42 of TIOPA 2010) have been allowable against corporation tax of the kind mentioned in section 72(1)(a) of that Act in an accounting period of the company—

(i) in relation to which the company was not a banking company, or

(ii) ending before 1 January 2016, and

(b) which is treated under paragraph (a) of section 73(1) of that Act as if it were foreign tax of the kind mentioned in that paragraph in relation to the chargeable accounting period.

(9) Any credit for foreign tax that is allowable against—

(a) corporation tax for an accounting period, and

(b) a sum chargeable for that period under section 269DA as if it were an amount of corporation tax,

is to be allowed against the corporation tax first, before any of the credit then remaining is allowed against the sum so chargeable.

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

269DM Payments in respect of the surcharge: information to be provided U.K.

(1) This section applies if—

(a) a sum is chargeable on a company (“the chargeable company”) under section 269DA, for a chargeable accounting period, as if it were an amount of corporation tax, and

(b) a payment is made (whether or not by the chargeable company) that is wholly or partly in respect of that sum.

(2) The responsible company must notify an officer of Revenue and Customs in writing, on or before the date the payment is made, of the amount of the payment that is in respect of the sum that is chargeable under section 269DA.

(3) “The responsible company” is—

(a) if the chargeable company is party to relevant group payment arrangements, the company that is, under those arrangements, to discharge the liability of the chargeable company to pay corporation tax for the chargeable accounting period, and

(b) otherwise, the chargeable company.

(4) “Relevant group payment arrangements” means arrangements under section 59F(1) of TMA 1970 (arrangements for paying of tax on behalf of group members) that relate to the chargeable accounting period.

(5) The requirement in subsection (2) is to be treated, for the purposes of Part 7 of Schedule 36 to FA 2008 (information and inspection powers: penalties), as a requirement in an information notice.

(6) This section is subject to any provision to the contrary in regulations under section 59E of TMA 1970 (further provision as to when corporation tax is due and payable).

Anti-avoidance U.K.

269DN Profit and loss shifting to avoid or reduce surcharge liability U.K.

(1) Subsection (3) applies in relation to a banking company if—

(a) there are arrangements that result in a relevant transfer, and

(b) the main purpose, or one of the main purposes, of the arrangements is to avoid, or reduce, a sum being charged on the banking company under section 269DA.

(2) There is a “relevant transfer” if there is, in substance—

(a) a transfer (directly or indirectly) of all or a significant part of the surcharge profits of the banking company, for a chargeable accounting period, to a non-banking company, or

(b) a transfer (directly or indirectly) of a loss or deductible amount to the banking company, for a chargeable accounting period, from a non-banking company, resulting in the elimination or significant reduction of the banking company's surcharge profits for that period.

(3) For the purposes of section 269DA, the surcharge profits of the banking company, for the chargeable accounting period, are to be taken to be what they would have been had the relevant transfer not taken place.

(4) In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

• “CFC” and “chargeable company” have the same meaning as in Part 9A of TIOPA 2010 (controlled foreign companies) (see section 371VA of that Act);

• “deductible amount” means—

  (a)

  an expense of a trade, other than an amount treated as such an expense by section 450(a) of CAA 2001 (research and development allowances treated as expenses in calculating profits of a trade),

  (b)

  an expense of a UK property business or overseas property business,

  (c)

  an expense of management of a company's investment business within the meaning of section 1219 of CTA 2009,

  (d)

  a non-trading debit within the meaning of Parts 5 and 6 of CTA 2009 (loan relationships and relationships treated as such) (see section 301(2) of that Act), or

  (e)

  a non-trading debit within the meaning of Part 8 of CTA 2009 (intangible fixed assets) (see section 746 of that Act);

• “non-banking company” means a company that, at any time when the arrangements mentioned in subsection (1) have effect, is neither—

  (a)

  a banking company, nor

  (b)

  a CFC in relation to which a banking company is a chargeable company.

Interpretation U.K.

269DO Interpretation U.K.

(1) In this Chapter—

• “the appropriate person” has the meaning given by 269DF(9);

• “banking company”, subject to subsections (2) to (7), has the meaning given by section 269B;

• “chargeable accounting period” has the meaning given by section 269DA(1);

• “company tax return” has the same meaning as in Schedule 18 to FA 1998;

• “group” has the meaning given by section 269BD;

• “group allowance allocation statement” means a group allowance allocation statement submitted under section 269DG or 269DH;

• “group allowance nomination” has the meaning given by section 269DF(1);

• “group surcharge allowance” has the meaning given by section 269DF;

• “HMRC” means Her Majesty's Revenue and Customs;

• “nominated company” has the meaning given by section 269DF(1);

• “surcharge allowance” has the meaning given by section 269DA(3) and (4);

• “surcharge profits” has the meaning given by section 269DA(2).

(2) Subsections (3) to (7) apply for the purposes of determining whether a company is a banking company for the purposes of this Chapter.

(3) Condition D in section 269B(5) is not met by reason of the relevant entity accepting deposits in a period if—

(a) the liabilities shown in the relevant entity's balance sheet for that period, so far as they result from it accepting deposits, do not amount to a substantial proportion of the entity's total liabilities and equity shown in that balance sheet, and

(b) if the company is a member of a group at any time in that period, no other company is a member of the group, and a UK deposit-taker, at any time in the period.

(4) In subsection (3)(b) “UK deposit-taker” means—

(a) a UK resident company that accepts deposits, or

(b) a non-UK resident company that accepts deposits in the course of carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

(5) For the purposes of section 269BA(1)(e) (exclusion of entities carrying on only asset management activities), an entity does not carry on a relevant regulated activity other than asset management activities by accepting deposits if—

(a) accepting deposits is ancillary to asset management activities the entity carries on, and

(b) the entity would not accept deposits but for the fact that it carries on asset management activities.

[F444 (5A) For the purposes of section 269BA(1A) (extension of certain exclusions under subsection (1) of that section) a line of business carried on by a company is not regarded as involving the relevant regulated activity described in the provision mentioned in section 269BB(a) if—

(a) the carrying on of that activity is ancillary to asset management activities the company carries on, and

(b) the company would not carry that activity on but for the fact that it carries on asset management activities.]

(6) In [F445 subsections (5) and (5A)] “asset management activities” has the meaning given by section 269BC(2).

(7) For the purposes of subsections (3) to (5) references to accepting deposits are to carrying on activity which is (or, if it were carried on in the United Kingdom, would be) a regulated activity for the purposes of FISMA 2000 by virtue of article 5 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) (accepting deposits).]

Textual Amendments

F444 S. 269DO(5A) inserted (15.9.2016) by Finance Act 2016 (c. 24), s. 56(9)(a)

F445 Words in s. 269DO(6) substituted (15.9.2016) by Finance Act 2016 (c. 24), s. 56(9)(b)

Part 8 U.K. Oil activities

Chapter 1 U.K. Introduction

270 Overview of Part U.K.

(1) This Part is about the corporation tax treatment of oil activities [F446 but also needs to be read with the Energy (Oil and Gas) Profits Levy Act 2022 (which imposes a tax in relation to ring fence profits)].

(2) Chapter 2 contains basic definitions used in this Part.

(3) Chapter 3 treats oil-related activities as a separate trade.

(4) Chapter 4 makes provision about the calculation of profits from oil activities.

(5) Chapter 5 makes provision about ring fence expenditure supplement.

F447 (5A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) Chapter 6 makes provision about the supplementary charge in respect of ring fence trades.

[F448 (6A) Chapter 6A makes provision about the reduction of supplementary charge by an allowance for certain expenditure incurred in relation to qualifying oil fields for the purposes of oil-related activities.]

F449 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F450 (7A) Chapter 8 makes provision about the reduction of supplementary charge by an allowance for capital expenditure incurred for the purposes of onshore oil-related activities.]

[F451 (7B) Chapter 9 makes provision about the reduction of supplementary charge by an allowance for certain expenditure incurred in relation to a cluster area for the purposes of oil-related activities.]

(8) For the meaning of—

(a) “oil-related activities”, see section 274, [F452 and]

(b) “ring fence trade”, see section 277, F453 ...

F453 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F446 Words in s. 270(1) inserted (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), Sch. 2 para. 4 (with ss. 15(1), 16(1))

F447 S. 270(5A) omitted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 11 para. 11

F448 S. 270(6A) inserted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 2015 (c. 11), Sch. 14 para. 2(2)

F449 S. 270(7) omitted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 14 para. 2(3)

F450 S. 270(7A) inserted (with effect in accordance with Sch. 15 para. 6(1) of the amending Act) by Finance Act 2014 (c. 26), Sch. 15 para. 5(2)(a)

F451 S. 270(7B) inserted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 2015 (c. 11), Sch. 14 para. 2(4)

F452 Word in s. 270(8)(a) inserted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 2015 (c. 11), Sch. 14 para. 2(5)(a)

F453 S. 270(8)(c) and preceding word omitted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 14 para. 2(5)(b)

Chapter 2 U.K. Basic definitions

271 “Associated companies” U.K.

(1) For the purposes of this Part two companies are associated with one another if—

(a) one is a 51% subsidiary of the other,

(b) each is a 51% subsidiary of a third company,

(c) one is owned by a consortium of which the other is a member,

(d) one has control of the other, or

(e) both are under the control of the same person.

(2) For the purposes of this section—

(a) a company is owned by a consortium if at least 75% of the company's ordinary share capital is beneficially owned by other companies each of which beneficially owns at least 5% of that capital, and

(b) the other companies each owning at least 5% of that capital are the members of the consortium.

(3) In this section “control” has the same meaning as in Part 10 (close companies) (see sections 450 and 451).

272 “Oil extraction activities” U.K.

(1) In this Part “oil extraction activities” means activities within any of subsections (2) to (5) (but see also section 291(6)).

(2) Activities of a company in searching for oil in the United Kingdom or a designated area or causing such searching to be carried out for it.

(3) Activities of a company in extracting, or causing to be extracted for it, oil at any place in the United Kingdom or a designated area under rights which—

(a) authorise the extraction, and

(b) are held by it or by a company associated with it.

(4) Activities of a company in transporting, or causing to be transported for it, oil extracted at any such place not on dry land under rights which—

(a) authorise the extraction, and

(b) are held as mentioned in subsection (3)(b),

if the transportation meets condition A or B (see subsections (6) and (7)).

(5) Activities of a company in effecting, or causing to be effected for it, the initial treatment or initial storage of oil won from any oil field under rights which—

(a) authorise its extraction, and

(b) are held as mentioned in subsection (3)(b).

(6) Condition A is that the transportation is to the place where the oil is first landed in the United Kingdom.

(7) Condition B is that the transportation—

(a) is to the place in the United Kingdom, or

(b) in the case of oil first landed in another country, is to the place in that or any other country (other than the United Kingdom),

at which the seller in a sale at arm's length could reasonably be expected to deliver it (or, if there is more than one such place, the one nearest to the place of extraction).

(8) The definition of “initial storage” in section 12(1) of OTA 1975 applies for the purposes of this section.

(9) But in its application for those purposes in relation to the company mentioned in subsection (5) and to oil won from any one oil field, that definition is to have effect as if the reference to the maximum daily production rate of oil for the field mentioned in that definition were to a share of that maximum daily production rate proportionate to that company's share of the oil won from that field.

(10) In this section “initial treatment” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act).

273 “Oil rights” U.K.

In this Part “oil rights” means—

(a) rights to oil to be extracted at any place in the United Kingdom or a designated area, or

(b) rights to interests in or to the benefit of such oil.

274 “Oil-related activities” U.K.

In this Part “oil-related activities” means—

(a) oil extraction activities, and

(b) any activities consisting of the acquisition, enjoyment or exploitation of oil rights.

275 “Ring fence income” U.K.

In this Part “ring fence income” means income arising from oil extraction activities or oil rights.

276 “Ring fence profits” U.K.

In this Part “ring fence profits”, in relation to an accounting period, means—

(a) if in accordance with section 197(3) of TCGA 1992 a company has an aggregate gain for that period, that gain and that company's ring fence income (if any) for that period, or

(b) otherwise, that company's ring fence income for that period.

277 “Ring fence trade” U.K.

In this Part “ring fence trade” means activities which—

(a) are within the definition of “oil-related activities” in section 274, and

(b) constitute a separate trade (whether because of section 279 or otherwise).

278 Other definitions U.K.

In this Part—

• “chargeable period” has the same meaning as in Part 1 of OTA 1975 (see section 1(3) of that Act),

• “designated area” means an area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964,

• “oil” means any substance won or capable of being won under the authority of a licence granted under Part 1 of the Petroleum Act 1998 or the Petroleum (Production) Act (Northern Ireland) 1964 (c. 28 (N.I.)), other than methane gas won in the course of operations for making and keeping mines safe,

• [F454 “ the OGA ” means the Oil and Gas Authority,]

• “oil field” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act),

• “OTA 1975” means the Oil Taxation Act 1975, and

• “participator” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act).

Textual Amendments

F454 Words in s. 278 inserted (1.10.2016) by The Petroleum (Transfer of Functions) Regulations 2016 (S.I. 2016/898), regs. 1(2), 15(2)

Chapter 3 U.K. Deemed separate trade

279 Oil-related activities treated as separate trade U.K.

If a company carries on any oil-related activities as part of a trade, those activities are treated for the purposes of the charge to corporation tax on income as a separate trade, distinct from all other activities carried on by the company as part of the trade.

[F455 CHAPTER 3A U.K. Rates at which corporation tax is charged on ring fence profits

Textual Amendments

F455 Pt. 8 Ch. 3A inserted (with effect in accordance with Sch. 1 para. 22 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 5(3)

The rates U.K.

279A Corporation tax rates on ring fence profits U.K.

(1) Corporation tax is charged on ring fence profits at the main ring fence profits rate.

(2) But subsection (3) provides for tax to be charged at the small ring fence profits rate instead of the main ring fence profits rate in certain circumstances.

(3) Corporation tax is charged at the small ring fence profits rate on a company's ring fence profits of an accounting period if—

(a) the company is UK resident in the accounting period,

[F456 (ab) it is not a close investment-holding company in the period,] and

(b) its augmented profits of the accounting period do not exceed the lower limit.

(4) In this Act—

• “the main ring fence profits rate” means 30%, and

• “the small ring fence profits rate” means 19%.

Textual Amendments

F456 S. 279A(3)(ab) inserted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 5

Marginal relief U.K.

279B Company with only ring fence profits U.K.

(1) This section applies if—

(a) a company is UK resident in an accounting period,

[F457 (ab) it is not a close investment-holding company in the period,]

(b) its augmented profits of the accounting period—

(i) exceed the lower limit, but

(ii) do not exceed the upper limit, and

(c) its augmented profits of that period consist exclusively of ring fence profits.

(2) The corporation tax charged on the company's taxable total profits of the accounting period is reduced by an amount equal to—

where—

R is the [F458 ring fence marginal] relief fraction,

U is the upper limit,

A is the amount of the augmented profits, and

N is the amount of the taxable total profits.

(3) In this Chapter “the [F459 ring fence marginal] relief fraction” means 11/400ths.

Textual Amendments

F457 S. 279B(1)(ab) inserted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 6(a)

F458 Words in s. 279B(2) substituted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 6(b)

F459 Words in s. 279B(3) substituted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 6(c)

279C Company with ring fence profits and other profits U.K.

(1) This section applies if—

(a) a company is UK resident in an accounting period,

[F460 (ab) it is not a close investment-holding company in the period,]

(b) its augmented profits of the accounting period—

(i) exceed the lower limit, but

(ii) do not exceed the upper limit, and

(c) its augmented profits of that period consist of both ring fence profits and other profits.

[F461 (2) The corporation tax charged on the company's taxable total profits of the accounting period is reduced by the total of—

(a) the sum equal to the ring fence marginal relief fraction of the ring fence amount, and

(b) the sum equal to the standard marginal relief fraction of the remaining amount.]

Textual Amendments

F460 S. 279C(1)(ab) inserted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 7(2)

F461 S. 279C(2) substituted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 7(3)

279D The ring fence amount U.K.

(1) In section 279C “the ring fence amount” means the amount given by the formula—

(2) In this section—

UR is the amount given by multiplying the upper limit by—

AR is the total amount of any ring fence profits that form part of the augmented profits of the accounting period,

NR is the total amount of any ring fence profits that form part of the taxable total profits of the accounting period, and

A is the amount of the augmented profits of the accounting period.

[F462 279DA The remaining amount U.K.

(1) In section 279C “the remaining amount” means the amount given by the formula—

(2) In this section—

• UZ is the amount given by multiplying the upper limit by—

  

• AZ is the total amount of any profits other than ring fence profits that form part of the augmented profits of the accounting period,

• NZ is the total amount of any profits other than ring fence profits that form part of the taxable total profits of the accounting period, and

• A is the amount of the augmented profits of the accounting period.]

Textual Amendments

F462 S. 279DA inserted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 8

The lower limit and the upper limit U.K.

279E The lower limit and the upper limit U.K.

(1) This section gives the meaning in this Chapter of “the lower limit” and “the upper limit” in relation to an accounting period of a company (“A”).

(2) [F463 If A has no associated company] in the accounting period—

(a) the lower limit is [F464 £50,000], and

(b) the upper limit is [F465 £250,000].

(3) [F466 If A has one or more associated companies] in the accounting period—

(a) the lower limit is—F467

and

(b) the upper limit is—F468

where N is the number of those related 51% group companies.

(4) For an accounting period of less than 12 months the lower limit and the upper limit are proportionately reduced.

Textual Amendments

F463 Words in s. 279E(2) substituted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 9(2)(a)

F464 Sum in s. 279E(2)(a) substituted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 9(2)(b)

F465 Sum in 2. 279E(2)(b) substituted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 9(2)(c)

F466 Words in s. 279E(3) substituted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 9(3)(a)

F467 S. 279E(3)(a): "£50,000" substituted for "£300,000" (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 9(3)(b)

F468 S. 279E(3)(b): “£250,000” substituted for “£1,500,000” (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 9(3)(c)

[F469 Supplementary U.K.

Textual Amendments

F469 S. 279EA and cross-heading inserted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 10

279EA Interpretation etc U.K.

(1) The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D apply for the purposes of section 279E.

(2) Section 18K (power to obtain information) applies for the purposes of this Part as it applies for the purposes of Part 3A.

(3) For the purposes of this Chapter—

• “augmented profits” has the same meaning as in Part 3A (see sections 18L and 18M), and

• “close investment-holding company” has the same meaning as in that Part (see section 18N).]]

Related 51% group companies U.K.

F470 279F “Related 51% group company” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F470 Ss. 279F-279H omitted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by virtue of Finance Act 2021 (c. 26), Sch. 1 para. 11

Augmented profits U.K.

F470 279G “Augmented profits” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F470 Ss. 279F-279H omitted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by virtue of Finance Act 2021 (c. 26), Sch. 1 para. 11

F470 279H Interpretation of section 279G(3) and (4) U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F470 Ss. 279F-279H omitted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by virtue of Finance Act 2021 (c. 26), Sch. 1 para. 11

Chapter 4 U.K. Calculation of profits

Oil valuation U.K.

280 Disposal to be valued by reference to section 2(5A) of OTA 1975 U.K.

(1) This section applies if each of conditions A to G is met.

(2) Condition A is that oil is won from an oil field in the United Kingdom.

(3) Condition B is that there is a disposal of the oil by a company.

(4) Condition C is that the disposal is a disposal of the oil by the company crude in a sale at arm's length (as defined in paragraph 1 of Schedule 3 to OTA 1975).

(5) Condition D is that the circumstances are such that the price received or receivable—

(a) falls to be taken into account under section 2(5)(a) of that Act in calculating for petroleum revenue tax purposes the assessable profit or allowable loss accruing to the company in a chargeable period from the oil field, or

(b) would fall to be so taken into account, had the oil field been a taxable field (as defined in section 185 of FA 1993).

(6) Condition E is that the terms of the contract are such as are described in the opening words of section 2(5A) of OTA 1975 (transportation etc).

(7) Condition F is that, but for subsection (9), the company is not entitled to a transportation allowance in respect of the oil in calculating ring fence profits.

(8) Condition G is that the company does not claim a transportation allowance in respect of the oil in calculating for corporation tax purposes any profits that are not ring fence profits.

(9) Section 2(5A) of OTA 1975 is to apply in determining the amount which the company is to bring into account for the purposes of the charge to corporation tax on income in respect of the disposal as it applies (or would apply) for petroleum revenue tax purposes.

(10) In this section “transportation allowance”, in relation to any oil, means—

(a) a deduction in respect of the expense of transporting the oil as mentioned in the opening words of section 2(5A) of OTA 1975,

(b) a deduction in respect of any costs of or incidental to the transportation of the oil as so mentioned, or

(c) any such reduction in the price to be regarded as received or receivable for the oil as would result from the application of section 2(5A) of OTA 1975, if that provision applied for corporation tax purposes.

281 Valuation where market value taken into account under section 2 of OTA 1975 U.K.

(1) This section applies if a person disposes of oil in circumstances such that the market value of the oil—

(a) falls to be taken into account under section 2 of OTA 1975, otherwise than by virtue of paragraph 6 of Schedule 3 to that Act, in calculating for petroleum revenue tax purposes the assessable profit or allowable loss accruing to that person in a chargeable period from an oil field, or

(b) would so fall but for section 10 of that Act.

(2) For the purposes of the charge to corporation tax on income, the disposal of the oil, and its acquisition by the person to whom it was disposed of, are to be treated as having been for a consideration equal to the market value of the oil—

(a) as so taken into account under section 2 of that Act, or

(b) as would have been so taken into account under that section but for section 10 of that Act.

282 Valuation where disposal not sale at arm's length U.K.

(1) This section applies if conditions A, B and C are met.

(2) Condition A is that a person disposes of oil acquired by the person—

(a) in the course of oil extraction activities carried on by the person, or

(b) as a result of oil rights held by the person.

(3) Condition B is that the disposal is not a sale at arm's length (as defined in paragraph 1 of Schedule 3 to OTA 1975).

(4) Condition C is that section 281 does not apply in relation to the disposal.

(5) For the purposes of the charge to corporation tax on income, the disposal of the oil, and its acquisition by the person to whom it was disposed of, are to be treated as having been for a consideration equal to the market value of the oil.

(6) Paragraphs 2 and 3A of Schedule 3 to OTA 1975 (definition of market value of oil including light gases) apply for the purposes of this section as they apply for the purposes of Part 1 of that Act, but with the following modifications.

(7) Those modifications are that—

(a) any reference in paragraph 2 to the notional delivery day for the actual oil is to be read as a reference to the day on which the oil is disposed of as mentioned in this section, and

(b) paragraph 2(4) is to be treated as omitted.

283 Valuation where excess of nominated proceeds U.K.

(1) This section applies if an excess of nominated proceeds for a chargeable period—

(a) is taken into account in calculating a company's profits under section 2(5)(e) of OTA 1975, or

(b) would have been so taken into account if the company were chargeable to tax under OTA 1975 in respect of an oil field.

(2) For the purposes of the charge to corporation tax on income, the amount of the excess is to be added to the consideration which the company is treated as having received in respect of oil disposed of by it in the period.

(3) For corporation tax purposes, that amount is to be available to the company as a deduction in calculating the profits of any trade which (whether because of section 279 or otherwise) does not consist of activities falling within the definition of “oil-related activities” in section 274.

284 Valuation where relevant appropriation but no disposal U.K.

(1) This section applies if conditions A and B are met.

(2) Condition A is that a company makes a relevant appropriation of oil without disposing of it.

(3) Condition B is that the company does so in circumstances such that the market value of the oil—

(a) falls to be taken into account under section 2 of OTA 1975 in calculating for petroleum revenue tax purposes the assessable profit or allowable loss accruing to it in a chargeable period from an oil field, or

(b) would so fall but for section 10 of that Act.

(4) For the purposes of the charge to corporation tax on income, the company is to be treated as having, at the time of the appropriation—

(a) sold the oil in the course of the separate trade consisting of activities falling within the definition of “oil-related activities” in section 274, and

(b) purchased it in the course of the separate trade consisting of activities not so falling.

(5) For those purposes, that sale and purchase is to be treated as having been at a price equal to the market value of the oil—

(a) as so taken into account under section 2 of OTA 1975, or

(b) as would have been so taken into account under that section but for section 10 of that Act.

(6) In this section “relevant appropriation” has the meaning given by section 12(1) of OTA 1975.

285 Valuation where appropriation to refining etc U.K.

(1) This section applies if conditions A, B and C are met.

(2) Condition A is that a company appropriates oil acquired by it—

(a) in the course of oil extraction activities carried on by it, or

(b) as a result of oil rights held by it.

(3) Condition B is that the oil is appropriated to refining or to any use except the production purposes of an oil field (as defined in section 12(1) of OTA 1975).

(4) Condition C is that section 284 does not apply in relation to the appropriation.

(5) For the purposes of the charge to corporation tax on income—

(a) the company is to be treated as having, at the time of the appropriation, sold and purchased the oil as mentioned in section 284(4)(a) and (b), and

(b) that sale and purchase is to be treated as having been at a price equal to the market value of the oil.

(6) Paragraphs 2 and 3A of Schedule 3 to OTA 1975 (definition of market value of oil including light gases) apply for the purposes of this section as they apply for the purposes of Part 1 of that Act, but with the following modifications.

(7) Those modifications are that—

(a) any reference in paragraph 2 to the notional delivery day for the actual oil is to be read as a reference to the day on which the oil is appropriated as mentioned in this section,

(b) any reference in paragraphs 2 and 2A to oil being relevantly appropriated is to be read as a reference to its being appropriated as mentioned in this section, and

(c) paragraph 2(4) is to be treated as omitted.

[F471 Hire of relevant assets U.K.

Textual Amendments

F471 S. 285A and cross-heading inserted (retrospective to 1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 3, 6

285A Restriction on hire etc of relevant assets to be brought into account U.K.

(1) This section applies if—

(a) oil contractor activities are, or are to be, carried out, and

(b) a company that carries on a ring fence trade makes, or is to make, one or more payments under a lease of a relevant asset, or part of a relevant asset, which is, or is to be, provided, operated or used in the relevant offshore service in question.

(2) The total amount that may be brought into account in respect of the payments for the purposes of calculating the company's ring fence profits in an accounting period is limited to the hire cap.

(3) The “hire cap” is an amount equal to the relevant percentage of TC for the accounting period, subject to subsection (4).

(4) If payments in relation to which subsection (2) or section 356N(2) (restriction on hire for oil contractors under Part 8ZA) applies are also made, or to be made, by one or more other companies in respect of the relevant asset or part, the “hire cap” is to be such proportion of the amount mentioned in subsection (3) as is just and reasonable, having regard (in particular) to the amounts of the payments made, or to be made, by each company.

(5) The “relevant percentage” and TC are to be determined in accordance with section 356N(5) to (16).

(6) To the extent that, by virtue of this section, payments within subsection (1)(b) cannot be brought into account for the purposes of calculating the company's ring fence profits in an accounting period, the payments may be—

(a) allowed as a deduction from the company's total profits for the accounting period, or

(b) treated as a surrenderable amount of the company for the accounting period for the purposes of Part 5 (group relief) (see section 99(7)) as if they were a trading loss,

but this is subject to subsection (7).

(7) No deduction may be made by virtue of subsection (6) from total profits so far as they are ring fence profits or contractor's ring fence profits.

(8) If the company or an associated person enters into arrangements the main purpose or one of the main purposes of which is to secure that subsection (2) does not apply in relation to one or more payments to any extent, that subsection applies in relation to the payments to the extent that it would not otherwise do so.

(9) In subsection (8) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(10) In this section—

• “associated person” has the meaning given by section 356LB;

• “contractor's ring fence profits” has the meaning given by section 356LD;

• “oil contractor activities” and “relevant offshore service” have the meaning given by section 356L;

• “relevant asset” has the meaning given by section 356LA;

• “lease” has the meaning given by section 868.]

Loan relationships U.K.

286 Restriction on debits to be brought into account U.K.

(1) Debits may not be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of a company's loan relationships in any way that results in a reduction of what would otherwise be the company's ring fence profits, but this is subject to subsections (2) to (4).

(2) Subsection (1) does not apply so far as a loan relationship is in respect of money borrowed by the company which has been—

(a) used to meet expenditure incurred by the company in carrying on oil extraction activities or in acquiring oil rights otherwise than from a connected person, or

(b) appropriated to meeting expenditure to be so incurred by the company.

(3) Subsection (1) does not apply, in the case of debits falling to be brought into account as a result of section 329 of CTA 2009 in respect of a loan relationship that has not been entered into, so far as the relationship would have been one entered into for the purpose of borrowing money to be used or appropriated as mentioned in subsection (2).

(4) Subsection (1) does not apply, in the case of debits in respect of a loan relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies, so far as—

(a) the payment of interest under the relationship is expenditure incurred as mentioned in subsection (2)(a), or

(b) the exchange loss arising from the relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure.

(5) If a debit—

(a) falls to be brought into account for the purposes of Part 5 of CTA 2009 in respect of a loan relationship of a company, but

(b) as a result of this section cannot be brought into account in a way that results in any reduction of what would otherwise be the company's ring fence profits,

the debit is to be brought into account for those purposes as a non-trading debit despite anything in section 297 of that Act.

(6) References in this section to a loan relationship, in relation to the borrowing of money, do not include a relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies.

287 Restriction on credits to be brought into account U.K.

(1) Credits in respect of exchange gains from a company's loan relationships may not be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in any way that results in an increase of what would otherwise be the company's ring fence profits, but this is subject to subsections (2) to (4).

(2) Subsection (1) does not apply so far as a loan relationship is in respect of money borrowed by the company which has been—

(a) used to meet expenditure incurred by the company in carrying on oil extraction activities or in acquiring oil rights otherwise than from a connected person, or

(b) appropriated to meeting expenditure to be so incurred by the company.

(3) Subsection (1) does not apply, in the case of credits falling to be brought into account as a result of section 329 of CTA 2009 in respect of a loan relationship that has not been entered into, so far as the relationship would have been one entered into for the purpose of borrowing money to be used or appropriated as mentioned in subsection (2).

(4) Subsection (1) does not apply, in the case of credits in respect of a loan relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies, so far as—

(a) the payment of interest under the relationship is expenditure incurred as mentioned in subsection (2)(a), or

(b) the exchange gain arising from the relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure.

(5) If a credit—

(a) falls to be brought into account for the purposes of Part 5 of CTA 2009 in respect of any loan relationship of a company, but

(b) as a result of this section cannot be brought into account in a way that results in any increase of what would otherwise be the company's ring fence profits,

the credit is to be brought into account for those purposes as a non-trading credit despite anything in section 297 of that Act.

(6) Section 286(6) applies for the purposes of this section.

[F472 287A Restriction where debits or credits relate to decommissioning security settlement U.K.

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

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

(3) In subsection (2)—

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

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

Textual Amendments

F472 S. 287A inserted (with effect in accordance with s. 87(3) of the amending Act) by Finance Act 2013 (c. 29), s. 87(1)

Sale and lease-back U.K.

288 Sale and lease-back U.K.

(1) This section applies if conditions A, B and C are met.

(2) Condition A is that a company (“the seller”) carrying on a trade has disposed of—

(a) an asset which was used for the purposes of that trade, or

(b) an interest in such an asset.

(3) Condition B is that the asset is used, under a lease, by the seller or a company associated with the seller (“the lessee”) for the purposes of a ring fence trade carried on by the lessee.

(4) Condition C is that the lessee uses the asset before the end of the period of two years beginning with the disposal.

(5) Subsection (6) applies to so much (if any) of the expenditure incurred by the lessee under the lease as—

[F473 (a) falls, in accordance with generally accepted accounting practice, to be treated in the accounts of the lessee—

(i) as a finance charge, or

(ii) as an interest expense where any such expenditure would fall to be treated in those accounts as a finance charge if the lessee were required under generally accepted accounting practice to determine whether that expenditure should be so treated,

(aa) if the lease is a right-of-use lease which is a long funding finance lease, falls, in accordance with generally accepted accounting practice, to be treated in the accounts of the lessee as an interest expense, or]

(b) falls, if the lease is a long funding operating lease, to be deductible in calculating the profits of the lessee for corporation tax purposes (after first making against any such expenditure any reductions falling to be made as a result of section 379 (lessee under long funding operating lease)).

But subsection (6) is subject to subsection (7).

(6) The expenditure is not allowable in calculating for the purposes of Part 3 of CTA 2009 the profits of the ring fence trade.

(7) Expenditure is not to be disallowed because of subsection (6) so far as the disposal mentioned in subsection (2) is made for a consideration which—

(a) is used to meet expenditure incurred by the seller in carrying on oil extraction activities or in acquiring oil rights otherwise than from a company associated with the seller, or

(b) is appropriated to meeting expenditure to be so incurred by the seller.

(8) If any expenditure—

(a) would, but for subsection (6), be allowable in calculating for the purposes of Part 3 of CTA 2009 the profits of the ring fence trade for an accounting period, but

(b) because of that subsection is not so allowable,

the expenditure is to be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) as if it were a non-trading debit in respect of a loan relationship of the lessee for that period.

(9) In this section—

• [F474 “long funding finance lease”, “long funding operating lease” and “right-of-use lease” have the meanings given in Part 2 of CAA 2001 (see section 70YI(1) of that Act),]

• “lease”, in relation to an asset, has the same meaning as in Chapter 3 of Part 19 (see section 868).

Textual Amendments

F473 S. 288(5)(a)(aa) substituted for s. 288(5)(a) (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 4(2)(a)

F474 Words in s. 288(9) substituted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 4(2)(b)

Regional development grants U.K.

289 Reduction of expenditure by reference to regional development grant U.K.

(1) This section applies if conditions A and B are met.

(2) Condition A is that a person has incurred expenditure (by way of purchase, rent or otherwise) on the acquisition of an asset in a transaction to which paragraph 2 of Schedule 4 to OTA 1975 applies (transactions between connected persons or otherwise than at arm's length).

(3) Condition B is that the expenditure incurred by the other person mentioned in that paragraph in acquiring, bringing into existence or enhancing the value of the asset as mentioned in that paragraph—

(a) has been or is to be met by a regional development grant, and

(b) falls (in whole or in part) to be taken into account under Part 2 or 6 of CAA 2001 (capital allowances relating to plant and machinery or research and development).

(4) Subsection (5) applies for the purposes of the charge to corporation tax on the income arising from the activities of the person mentioned in subsection (2) which are treated by section 279 as a separate trade for those purposes.

(5) The expenditure mentioned in subsection (2) is to be reduced by the amount of the regional development grant mentioned in subsection (3).

(6) In this section “regional development grant” means a grant falling within section 534(1) of CAA 2001 (Northern Ireland regional development grant).

290 Adjustment as a result of regional development grant U.K.

(1) This section applies if conditions A, B and C are met.

(2) Condition A is that expenditure incurred by a company in relation to an asset in an accounting period (“the initial period”) has been or is to be met by a regional development grant.

(3) Condition B is that, despite the provisions of section 534(2) and (3) of CAA 2001 (Northern Ireland regional development grants) and section 289 of this Act, in determining that company's liability to corporation tax for the initial period, the whole or some part of that expenditure falls to be taken into account under Part 2 or 6 of CAA 2001.

(4) Condition C is that—

(a) expenditure on the asset becomes allowable under section 3 or 4 of OTA 1975 in an accounting period (an “adjustment period”) subsequent to the initial period, or

(b) the proportion of any such expenditure which is allowable in an adjustment period is different as compared with the initial period.

(5) There is to be redetermined for the purposes of subsections (7) and (8) the amount of the expenditure mentioned in subsection (2) which would have been taken into account as mentioned in subsection (3) if the circumstances mentioned in subsection (4) had existed in the initial period.

(6) According to whether the amount as so redetermined is greater or less than the amount actually taken into account as mentioned in subsection (3), the difference is referred to in subsections (7) and (8) as the increase or the reduction in the allowance.

(7) If there is an increase in the allowance, an amount of capital expenditure equal to the increase is to be treated, for the purposes of Part 2 or 6 of CAA 2001, as having been incurred by the company concerned in the adjustment period on an extension of, or addition to, the asset mentioned in subsection (2).

(8) If there is a reduction in the allowance, the company concerned is to be treated, for the purpose of determining its liability to corporation tax, as having received in the adjustment period, as income of the trade in connection with which the expenditure mentioned in subsection (2) was incurred, a sum equal to the amount of the reduction in the allowance.

(9) In this section “regional development grant” has the meaning given by section 289(6).

Tariff receipts etc U.K.

291 Tariff receipts etc U.K.

(1) Subsection (5) applies to a sum which meets conditions A, B and C.

(2) Condition A is that the sum constitutes a tariff receipt F475 ... of a person who is a participator in an oil field.

(3) Condition B is that the sum constitutes consideration in the nature of income rather than capital.

(4) Condition C is that the sum would not, but for subsection (5), be treated as mentioned in that subsection.

(5) The sum is to be treated as a receipt of the separate trade mentioned in section 279.

(6) So far as they would not otherwise be so treated, the activities—

(a) of a participator in an oil field, or

(b) of a person connected with the participator,

in making available an asset in a way which gives rise to tariff receipts F476 ... of the participator are to be treated for the purposes of this Part as oil extraction activities.

(7) In determining for the purposes of subsection (2) whether a sum constitutes a tariff receipt F477 ... of a person who is a participator, no account may be taken of any sum which—

(a) is in fact received or receivable by a person connected with the participator, and

(b) constitutes a tariff receipt F477 ... of the participator.

But in relation to the person by whom such a sum is actually received, subsection (2) has effect as if the person were a participator and as if condition A were met.

(8) References in this section to a person connected with a participator include a person with whom the person is associated, within the meaning of paragraph 11 of Schedule 2 to the Oil Taxation Act 1983, but section 1176(1) of this Act (meaning of “connected” persons) does not apply for the purposes of this section.

[F478 (9) In this section, “tariff receipt” has the meaning given by section 291A.

(10) So far as it would not otherwise be the case, anything that constitutes a tariff receipt or a tax-exempt tariffing receipt for the purposes of the Oil Taxation Act 1983 is to be treated as a “tariff receipt” for the purposes of this section.]

Textual Amendments

F475 Words in s. 291(2) omitted (with effect in accordance with s. 22(5) of the amending Act) by virtue of Finance Act 2018 (c. 3), s. 22(4)(a)

F476 Words in s. 291(6) omitted (with effect in accordance with s. 22(5) of the amending Act) by virtue of Finance Act 2018 (c. 3), s. 22(4)(b)

F477 Words in s. 291(7) omitted (with effect in accordance with s. 22(5) of the amending Act) by virtue of Finance Act 2018 (c. 3), s. 22(4)(c)

F478 S. 291(9)(10) substituted for s. 291(9) (with effect in accordance with s. 22(5) of the amending Act) by Finance Act 2018 (c. 3), s. 22(2)

[F479 291A Meaning of “tariff receipt” U.K.

(1) A “tariff receipt” of a participator in an oil field is the amount or value of any consideration received or receivable by the person in respect of—

(a) the use of a ring fence asset, or

(b) the provision of services or other business facilities (of whatever kind) in connection with the use, otherwise than by the participator, of a ring fence asset.

(2) “Ring fence asset” means a qualifying asset which is, or has been, used wholly or partly for the purposes of a ring fence trade.

(3) “Qualifying asset” means an asset other than—

(a) land or an interest in land, or

(b) a building or structure which—

(i) is situated on land, and

(ii) does not fall within any of sub-paragraphs (i) to (iv) of paragraph (c) of section 3(4) of OTA 1975 (allowable expenditure: exclusions).

(4) But an amount does not constitute a tariff receipt if the amount—

(a) is, in relation to the person giving it, expenditure in respect of interest or any other pecuniary obligation incurred in obtaining a loan or any other form of credit,

(b) is referable to the use of a qualifying asset for, or the provision of services or facilities in connection with, deballasting, or

(c) is referable to other use of an asset, except use wholly or partly for an oil purpose.

(5) Any consideration which includes an amount within subsection (4)(a) to (c) is to be apportioned in a just and reasonable manner.

(6) In subsection (4)(c), the reference to use of an asset for an oil purpose is a reference to—

(a) use in connection with an oil field (including use giving rise to receipts which, for the purposes of this Part, are tariff receipts), and

(b) use for any other purpose (apart from a purpose falling within section 3(1)(b) of OTA 1975 (allowable expenditure: payment in connection with a relevant licence)) of a separate trade consisting of oil-related activities.

Textual Amendments

F479 Ss. 291A, 291B inserted (with effect in accordance with s. 22(5) of the amending Act) by Finance Act 2018 (c. 3), s. 22(3)

291B Tariff receipts: counteraction of avoidance arrangements U.K.

(1) Subsection (2) applies if an arrangement has been entered into, the main purpose or one of the main purposes of which is to obtain a tax advantage by reference to section 291.

(2) The relevant tax advantage is to be counteracted by the making of such adjustments as are just and reasonable.

(3) 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.

(4) In this section—

• “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

• “tax advantage” has the meaning given by section 1139.]

Textual Amendments

F479 Ss. 291A, 291B inserted (with effect in accordance with s. 22(5) of the amending Act) by Finance Act 2018 (c. 3), s. 22(3)

Abandonment guarantees U.K.

292 [F480 Expenditure on abandonment guarantees] U.K.

(1) Subsection (2) applies if, as a result of section 3(1)(hh) of OTA 1975 (obtaining abandonment guarantee), expenditure incurred by a participator in an oil field is allowable (in whole or in part) for petroleum revenue tax purposes under section 3 of that Act.

[F481 (1A) Subsection (2) also applies if expenditure incurred by a participator in an oil field would be so allowable as a result of section 3(1)(hh) of that Act but for the fact that the oil field is a non-taxable oil field within the meaning of Part 3 of FA 1993 (see section 185 of that Act).]

(2) So far as [F482 the expenditure mentioned in subsection (1) or (1A) is or would be so allowable] , it is to be allowed as a deduction in calculating the participator's ring fence income.

F483 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F483 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F484 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) In this Chapter—

• “abandonment guarantee” has the same meaning as it has for the purposes of [F485 section 3 of OTA 1975] (see section 104 of [F486 FA 1991 ] ), and

• “the guarantor” and “the relevant participator” have the same meaning as in section 104 of that Act.

Textual Amendments

F480 S. 292 heading substituted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 18(4)

F481 S. 292(1A) inserted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 2(2)(a)

F482 Words in s. 292(2) substituted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 2(2)(b)

F483 S. 292(3)(4) omitted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 31 para. 7(2)

F484 S. 292(5) omitted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 31 para. 18(2)

F485 Words in s. 292(6) substituted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 18(3)(a)

F486 Words in s. 292(6) substituted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 18(3)(b)

F487 293 Relief for reimbursement expenditure under abandonment guarantees U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F487 S. 293 omitted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 31 para. 7(3)

F488 294 Payment under abandonment guarantee not immediately applied U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F488 Ss. 294, 295 omitted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 31 para. 19

F488 295 Amounts excluded from section 293(1) U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F488 Ss. 294, 295 omitted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 31 para. 19

Abandonment expenditure U.K.

296 [F489 Introduction to section 297] U.K.

(1) [F490 Section 297 applies ] if—

(a) paragraph 2A of Schedule 5 to OTA 1975 applies, F491 ..., and

(b) the default payment falls (in whole or part) to be attributed to the contributing participator under paragraph 2A(2) of that Schedule [F492 , or would fall to be so attributed if a claim under paragraph 2A(2) of that Schedule were made] .

[F493 (1A) The condition in subsection (1)(b) is to be treated as met for the purposes of this section if it would be met but for the fact that the contributing participator is (or was) a participator in an oil field that is a non-taxable oil field within the meaning of Part 3 of FA 1993 (see section 185 of that Act).]

(2) In section 297 “the additional abandonment expenditure” means the amount which is [F494 or would be ] attributed to the contributing participator as mentioned in subsection (1)(b) (whether representing the whole or only part of the default payment).

(3) In this Chapter “default payment”, “the defaulter” and “contributing participator” have the same meaning as in paragraph 2A of Schedule 5 to OTA 1975.

Textual Amendments

F489 S. 296 heading substituted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 20(b)

F490 Words in s. 296(1) substituted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 20(a)

F491 Words in s. 296(1)(a) omitted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 31 para. 2(3)(a)

F492 Words in s. 296(1)(b) inserted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 2(3)(b)

F493 S. 296(1A) inserted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 2(3)(c)

F494 Words in s. 296(2) inserted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 2(3)(d)

297 Relief for expenditure incurred by a participator in meeting defaulter's abandonment expenditure U.K.

(1) Relief by way of capital allowance, or a deduction in calculating ring fence income, is to be available to the contributing participator in respect of the additional abandonment expenditure if any such relief or deduction would have been available to the defaulter if—

(a) the defaulter had incurred the additional abandonment expenditure, and

(b) at the time that that expenditure was incurred the defaulter continued to carry on a ring fence trade.

(2) The basis of qualification for or entitlement to any relief or deduction which is available to the contributing participator under this section is to be determined on the assumption that the conditions in subsection (1)(a) and (b) are met.

(3) But, subject to subsection (2), any such relief or deduction is to be available in the same way as if the additional abandonment expenditure had been incurred by the contributing participator for the purposes of the ring fence trade carried on by the contributing participator.

F495 298 Reimbursement by defaulter in respect of certain abandonment expenditure U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F495 S. 298 omitted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 31 para. 10

[F496 Receipts arising from decommissioning U.K.

Textual Amendments

F496 S. 298A and cross-heading inserted (with effect in accordance with Sch. 31 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 31 para. 21

298A Receipts arising from decommissioning U.K.

(1) This section applies if—

(a) a company that is or has been carrying on a ring fence trade (“the defaulter”) has defaulted on a liability under—

(i) a relevant agreement, or

(ii) an abandonment programme,

to make a payment towards decommissioning expenditure,

(b) another company that is or has been carrying on a ring fence trade (“the contributing company”) pays an amount (“the relevant contribution”) in or towards meeting the whole or part of the default, and

(c) the amount of the relevant contribution is less than the sum of the amounts within subsection (2).

(2) The amounts within this subsection are—

(a) any payments made (directly or indirectly) to the contributing company by the guarantor under an abandonment guarantee as a result of the defaulter defaulting on the liability,

(b) any reimbursement payments, and

(c) any relief from tax which the contributing company obtains in respect of the relevant contribution.

(3) The difference between—

(a) the sum of the amounts within subsection (2), and

(b) the relevant contribution,

(“the relevant difference”) is to be treated as a receipt (in the nature of income) of the contributing company's ring fence trade for the relevant accounting period (see subsection (4)).

(4) “The relevant accounting period” means the accounting period that includes the day on which the Secretary of State certifies that the relevant abandonment programme has been satisfactorily completed (“the certification date”).

This is subject to subsections (5) and (6).

(5) If the contributing company has ceased to carry on the ring fence trade before the certification date, “the relevant accounting period” is the last accounting period of the trade.

(6) If the contributing company has ceased to be within the charge to corporation tax in respect of the ring fence trade before the certification date, “the relevant accounting period” is the accounting period during or at the end of which the contributing company ceased to be within the charge to corporation tax in respect of the trade.

(7) The relevant difference is to be determined—

(a) in a case where subsection (5) or (6) applies, at the end of the calendar year in which the certification date falls, and

(b) in any other case, at the end of the relevant accounting period.

(8) In a case where subsection (5) or (6) applies, any corporation tax chargeable for the relevant accounting period by virtue of this section is due and payable as if it were corporation tax for an accounting period beginning with the certification date.

(9) Any additional assessment to corporation tax required in order to take account of a receipt arising under this section may be made at any time not later than 4 years after the end of the calendar year in which the certification date falls.

(10) In this section—

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

• “decommissioning expenditure” has the meaning given by section 330C,

• “reimbursement payment” means any payment made to the contributing company by the defaulter in reimbursing the contributing company in respect of, or otherwise making good to the contributing company, the whole or any part of the relevant contribution,

• “the relevant abandonment programme” means the abandonment programme in respect of which the decommissioning expenditure mentioned in subsection (1)(a) was incurred, and

• “relevant agreement” has the meaning given by section 104(5)(a) of FA 1991.]

Deduction of PRT in calculating income for corporation tax purposes U.K.

299 Deduction of PRT in calculating income for corporation tax purposes U.K.

(1) This section applies if a participator in an oil field has paid any petroleum revenue tax with which the participator was chargeable for a chargeable period.

(2) In calculating for corporation tax the amount of the participator's income arising from oil extraction activities or oil rights in the relevant accounting period, there is to be deducted an amount equal to that petroleum revenue tax.

(3) There are to be made all such adjustments of assessments to corporation tax as are required in order to give effect to subsection (2).

(4) In this section “the relevant accounting period”, in relation to any petroleum revenue tax paid by a company, means—

(a) the accounting period of the company in or at the end of which the chargeable period for which that tax was charged ends, or

(b) if that chargeable period ends after the accounting period of the company in or at the end of which the company—

(i) ceases to carry on the trade giving rise to the income referred to above, or

(ii) ceases to be within the charge to corporation tax in respect of the trade,

that accounting period.

300 Effect of repayment of PRT: general rule U.K.

(1) This section applies if some or all of the petroleum revenue tax in respect of which a deduction has been made under section 299(2) is subsequently repaid.

(2) The deduction is to be reduced or extinguished accordingly.

(3) Any additional assessment to corporation tax required in order to give effect to subsection (2) may be made at any time not later than 4 years after the end of the calendar year in which the petroleum revenue tax was repaid.

(4) This section is subject to section 301.

301 Effect of repayment of PRT: special rule U.K.

(1) This section applies if, in a case where paragraph 17 of Schedule 2 to OTA 1975 applies, an amount of petroleum revenue tax in respect of which a deduction has been made under section 299(2) is repaid as a result of an assessment under that Schedule or an amendment of such an assessment.

(2) As regards so much of that repayment as constitutes the appropriate repayment—

(a) section 300 does not apply, and

(b) the following provisions apply in relation to the company which is entitled to the repayment.

(3) In calculating for corporation tax the amount of the company's income arising in the relevant accounting period from oil extraction activities or oil rights there is to be added an amount equal to the appropriate repayment (but this is subject to subsections (4) and (5)).

(4) Subsection (5) applies if—

(a) two or more carried back losses give rise to the appropriate repayment,

(b) the operative chargeable period in relation to each of the carried back losses is not the same, and

(c) if this section were applied separately in relation to each of the carried back losses there would be more than one relevant accounting period.

(5) The appropriate repayment is to be treated as apportioned between each of the relevant accounting periods mentioned in subsection (4)(c) in such a way as to secure that the amount added as a result of subsection (3) in relation to each of those relevant accounting periods is what it would have been if—

(a) relief for each of the carried back losses for which there is a different operative chargeable period had been given by a separate assessment or amendment of an assessment under Schedule 2 to OTA 1975, and

(b) relief for a carried back loss accruing in an earlier chargeable period had been so given before relief for a carried back loss accruing in a later chargeable period.

(6) Any additional assessment to corporation tax required in order to give effect to the addition of an amount as a result of subsection (3) may be made at any time not later than 4 years after the end of the calendar year in which the repayment of petroleum revenue tax comprising the appropriate repayment is made.

(7) In this section—

• “allowable loss” has the same meaning as in Part 1 of OTA 1975 (see section 2 of that Act),

• “the appropriate repayment” has the meaning given by paragraph 17(2) of Schedule 2 to that Act,

• “carried back loss”, in relation to the appropriate repayment, means an allowable loss—

  (a)

  which falls within paragraph 17(1)(a) of Schedule 2 to OTA 1975, and

  (b)

  which (alone or together with one or more other carried back losses) gives rise to the appropriate repayment,

• “the operative chargeable period”, in relation to a carried back loss, means the chargeable period in which the loss accrued, and

• “the relevant accounting period”, in relation to the company which is entitled to the appropriate repayment, means—

  (a)

  the accounting period in or at the end of which the operative chargeable period ends,

  (b)

  if the company ceases to carry on its ring fence trade before the end of the operative chargeable period, the last accounting period of that trade, or

  (c)

  if the company ceases to be within the charge to corporation tax in respect of that trade before the end of the operative chargeable period, the accounting period during or at the end of which the company ceased to be within the charge to corporation tax in respect of that trade.

Modifications etc. (not altering text)

C114 S. 301 restricted (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), s. 1(5)(d) (with ss. 15(1), 16(1))

Interest on repayment of PRT or APRT U.K.

302 Interest on repayment of PRT or APRT U.K.

(1) Subsection (3) applies if any amount of petroleum revenue tax paid by a participator in an oil field is, under any provision of Part 1 of OTA 1975, repaid to the participator with interest.

(2) Subsection (3) also applies if interest is paid to a participator under paragraph 10(4) of Schedule 19 to FA 1982 (interest on advance petroleum revenue tax which becomes repayable).

(3) The interest paid is to be disregarded in calculating the participator's income for corporation tax purposes.

Relief U.K.

303 Management expenses U.K.

No deduction under section 1219 of CTA 2009 (expenses of management of a company's investment business) is to be allowed from a company's ring fence profits.

[F497 303A Introduction to sections 303B to 303D: post-1 April 2017 non-decommissioning losses of ring fence trades U.K.

(1) This section has effect for the purposes of sections 303B to 303D.

(2) A loss made by a company in a ring fence trade is a “non-decommissioning loss” so far as it is not attributable to expenditure which is relevant expenditure in relation to a decommissioning relief agreement.

(3) Where a company makes a loss for an accounting period in a ring fence trade, the amount (if any) of that loss that is “attributable to” expenditure which is relevant expenditure in relation to a decommissioning relief agreement is equal to—

(a) the total amount of such expenditure brought into account in calculating that loss, or

(b) if lower, the amount of the loss.

(4) Expenditure is “relevant expenditure” in relation to a decommissioning relief agreement if it is decommissioning expenditure (as defined in section 81 of FA 2013) to which the provision of the agreement described in section 80(2)(b) of that Act relates.

In this subsection the reference to section 81 of FA 2013 is to that section as it has effect when the agreement in question is made.

(5) In this section “decommissioning relief agreement” has the meaning given by section 80 of FA 2013.

Textual Amendments

F497 Ss. 303A-303D inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 48

Modifications etc. (not altering text)

C115 Ss. 303A-303D excluded (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), s. 1(5)(e) (with ss. 15(1), 16(1))

303B Carry forward of losses against subsequent profits U.K.

(1) This section applies if—

(a) in an accounting period beginning on or after 1 April 2017 (“the loss-making period”) a company makes a non-decommissioning loss in a ring fence trade,

(b) relief under—

• section 37 or 42, or

• Part 5 (group relief),

is not given for an amount of the loss (“the unrelieved amount”), and

(c) the company continues to carry on the ring fence trade in the next accounting period (“the later period”).

(2) The unrelieved amount is carried forward to the later period.

(3) Relief for the unrelieved amount is given to the company in the later period if the company makes a profit in the trade for the later period.

(4) The relief is given by reducing the profits of the trade in the later period by the unrelieved amount.

(5) Relief under this section is subject to restriction or modification in accordance with the provisions of the Corporation Tax Acts.

Textual Amendments

F497 Ss. 303A-303D inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 48

Modifications etc. (not altering text)

C115 Ss. 303A-303D excluded (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), s. 1(5)(e) (with ss. 15(1), 16(1))

303C Excess carried forward losses: relief against total profits U.K.

(1) This section applies if—

(a) an amount of a non-decommissioning loss made in a ring fence trade is carried forward to an accounting period of a company (“the later period”) under section 303B(2) or 303D(3), and

(b) any of that amount (“the unrelieved amount”) is not deducted under section 303B(4) or 303D(5) (as the case may be) from the company's profits of the trade (if any) of the later period.

(2) The company may make a claim for relief to be given for the unrelieved amount under this section (but see subsection (4)).

(3) If the company makes a claim, the relief is given by deducting the unrelieved amount, or any part of it specified in the claim, from the company's total profits of the later period.

(4) The company may not make a claim if—

(a) the ring fence trade became small or negligible in the loss-making period or any intervening period,

(b) relief under section 37 was unavailable for the non-decommissioning loss by reason of section 37(5) or 44, or

(c) relief under section 37 would be unavailable by reason of section 44 for a loss (assuming there was one) made in the ring fence trade in the later period or any intervening period.

(5) In subsection (4)—

• “intervening period” means an accounting period of the company which begins after the loss-making period and before the later period, and

• “the loss-making period” means the accounting period of the company in which the non-decommissioning loss was made.

(6) A claim under this section must be made—

(a) within the period of two years after the end of the later period, or

(b) within such further period as an officer of Revenue and Customs may allow.

(7) Relief under this section is subject to restriction or modification in accordance with the provisions of the Corporation Tax Acts.

Textual Amendments

F497 Ss. 303A-303D inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 48

Modifications etc. (not altering text)

C115 Ss. 303A-303D excluded (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), s. 1(5)(e) (with ss. 15(1), 16(1))

303D Further carry forward against subsequent profits of loss not fully used U.K.

(1) This section applies if—

(a) an amount of a loss made in a ring fence trade is carried forward to an accounting period (“the later period”) of a company under section 303B(2) or subsection (3) of this section,

(b) any of that amount is unrelieved in the later period, and

(c) the company continues to carry on the ring fence trade in the accounting period (“the further period”) after the later period.

(2) An amount carried forward as mentioned in subsection (1)(a) is “unrelieved in the later period” so far as it is not—

(a) deducted under section 303B(4) or subsection (5) of this section from the company's profit (if any) of the later period,

(b) deducted from the company's total profits of the later period on a claim under section 303C, or

(c) surrendered by way of group relief for carried-forward losses under Part 5A of CTA 2010.

(3) So much of the amount mentioned in subsection (1)(a) as is unrelieved in the later period is carried forward to the further period.

(4) Relief for the amount carried forward under subsection (3) (“the remaining carried forward amount”) is given to the company in the further period if the company has a profit in the trade for that period.

(5) The relief is given by reducing the profits of the trade of the further period by the remaining carried forward amount.

(6) Relief under this section is subject to restriction or modification in accordance with the provisions of the Corporation Tax Acts.]

Textual Amendments

F497 Ss. 303A-303D inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 48

Modifications etc. (not altering text)

C115 Ss. 303A-303D excluded (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), s. 1(5)(e) (with ss. 15(1), 16(1))

304 Losses U.K.

(1) Relief in respect of a loss incurred by a company may not be given under section 37 (relief for trade losses against total profits) against that company's ring fence profits except so far as the loss arises from oil extraction activities or from oil rights.

[F498 (1A) Relief in respect of a loss incurred by a company may not be given against that company's ring fence profits under any provision listed in subsection (1B).

(1B) The provisions are—

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

(b) section 45A (carry forward of trade loss against total profits);

(c) section 62(3) (relief for losses made in UK property business).]

(2) Subsection (5) applies if conditions A and B are met.

(3) Condition A is that a company incurs a loss in an accounting period in activities (“separate activities”) which, for that or any subsequent accounting period, are treated by section 279 as a separate trade for the purposes of the charge to corporation tax on income.

(4) Condition B is that any of the company's trading income in any subsequent accounting period is derived from activities (“related activities”) which are not part of the separate activities but which would together with those activities constitute a single trade, were it not for section 279.

(5) The loss may be used under section 45 [F499 45B, 303B(4) or 303D(5)] (carry forward of trade loss against subsequent trade profits) to reduce so much of the company's trading income in any subsequent accounting period as is derived from the related activities.

(6) Subsection (5) applies despite anything in section 279.

[F500 (7) A deduction in respect of a loss made in a ring fence trade is to be ignored for the purposes of section 269ZB (restriction on deductions from trading profits) if the deduction is under—

(a) section 45 (carry forward of pre-1 April 2017 trade loss against subsequent profits), or

(b) section 45B (carry forward of post-1 April 2017 trade loss against [F501 trade] profits).]

Textual Amendments

F498 S. 304(1A)(1B) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 49(2)

F499 Words in s. 304(5) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 49(3)

F500 S. 304(7) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 49(4)

F501 Word in s. 304(7)(b) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 15

305 Group relief [F502 and group relief for carried-forward losses] U.K.

(1) On a claim for group relief made by a claimant company in relation to a surrendering company, group relief may not be allowed against the claimant company's ring fence profits except so far as the claim relates to losses incurred by the surrendering company that arose from oil extraction activities or from oil rights.

[F503 (1A) On a claim under Chapter 3 of Part 5A, group relief for carried-forward losses may not be allowed against the claimant company's ring fence profits.]

(2) In section 105 (restriction on surrender of losses etc within section 99(1)(d) to (g)) the references to the surrendering company's gross profits of the surrender period do not include the company's relevant ring fence profits for that period.

(3) The company's “relevant ring fence profits” for that period are—

(a) if for that period there are no qualifying charitable donations made by the company that are allowable under Part 6 (charitable donations relief), the company's ring fence profits for that period, or

(b) otherwise, so much of the company's ring fence profits for that period as exceeds the amount of the qualifying charitable donations made by the company that are allowable under section 189 for that period.

[F504 (4) In this section—

• “claimant company” is to be read in accordance with Part 5 (see section 188) or Part 5A (see sections 188CB(2) and 188CC(2)), as the case requires;

• “surrendering company” is to be read in accordance with Part 5 (see section 188).]

Textual Amendments

F502 Words in s. 305 heading inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 50(2)

F503 S. 305(1A) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 50(3)

F504 S. 305(4) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 50(4)

306 Capital allowances U.K.

(1) A capital allowance may not to any extent be given effect under section 259 or 260 of CAA 2001 (special leasing) by deduction from a company's ring fence profits.

(2) But subsection (1) does not apply to a capital allowance which falls to be made to a company for any accounting period in respect of an asset which—

(a) is used in the relevant accounting period by a company associated with it, and

(b) is so used in carrying on oil extraction activities.

(3) “The relevant accounting period” means that for which the allowance in question first falls to be made to the company (whether or not it can to any extent be given effect in that period under section 259 of CAA 2001).

Chapter 5 U.K. Ring fence expenditure supplement

Introduction U.K.

307 Overview of Chapter U.K.

(1) This Chapter entitles a company carrying on a ring fence trade, on making a claim in respect of an accounting period, to a supplement in respect of—

(a) qualifying pre-commencement expenditure incurred before the trade is set up and commenced,

(b) losses incurred in the trade, and

(c) some or all of the supplement allowed in respect of earlier periods.

(2) Sections 308 to 314 make provision about the application and interpretation of this Chapter.

(3) Sections 315 to 320 make provision about supplement in relation to expenditure incurred by the company—

(a) with a view to carrying on a ring fence trade, but

(b) in an accounting period before the company sets up and commences that trade.

(4) Sections 321 to 329 make provision about supplement in relation to losses incurred in carrying on the ring fence trade.

(5) There is a limit (of [F505 10]) on the number of accounting periods in respect of which a company may claim supplement.

(6) In determining the amount of supplement allowable, reductions fall to be made in respect of—

(a) disposal receipts in respect of any asset representing qualifying pre-commencement expenditure.

(b) ring fence losses that could be deducted under section 37 (relief for trade losses against total profits) or section 42 (ring fence trades: further extension of period for relief) from ring fence profits of earlier periods,

[F506 (c) relief given under sections 45, 45B, 303B, 303C and 303D for ring fence losses carried forward from earlier periods,]

(d) unrelieved group ring fence profits.

Textual Amendments

F505 Word in s. 307(5) substituted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 2

F506 S. 307(6)(c) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 51

Application and interpretation U.K.

308 Qualifying companies U.K.

(1) This Chapter applies in relation to any company which—

(a) carries on a ring fence trade, or

(b) is engaged in any activities with a view to carrying on a ring fence trade.

(2) In this Chapter such a company is referred to as a “qualifying company”.

309 Accounting periods U.K.

(1) In this Chapter, in the case of a qualifying company—

• “the commencement period” means the accounting period in which the company sets up and commences its ring fence trade,

• “post-commencement period” means an accounting period beginning on or after 1 January 2006—

  (a)

  which is the commencement period, or

  (b)

  which ends after the commencement period, and

• “pre-commencement period” means an accounting period—

  (a)

  beginning on or after 1 January 2006, and

  (b)

  ending before the commencement period.

(2) For the purposes of this Chapter, a company not within the charge to corporation tax which incurs any expenditure is to be treated as having such accounting periods as it would have if—

(a) it carried on a trade consisting of the activities in respect of which the expenditure is incurred, and

(b) it had started to carry on that trade when it started to carry on the activities in the course of which the expenditure is incurred.

(3) In the case of an accounting period (a “straddling period”) of a qualifying company beginning before 1 January 2006 and ending on or after that date—

(a) so much of the straddling period as falls before 1 January 2006, and

(b) so much of the straddling period as falls on or after that date,

are treated as separate accounting periods for the purposes of this Chapter.

(4) But special provision is made elsewhere in this [F507 Chapter—

(a) in relation to straddling periods (see sections 311, 324 and 327(4) to (7)), and

(b) in relation to accounting periods which begin before, but end on or after, 5 December 2013 (see sections 311(1C), 318A and 328A).]

Textual Amendments

F507 Words in s. 309(4) substituted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 3

310 The relevant percentage U.K.

(1) For the purposes of this Chapter, the relevant percentage for an accounting period is [F508 10%].

(2) The Treasury may by order vary the percentage for the time being specified in subsection (1) for such accounting periods as may be specified in the order.

Textual Amendments

F508 Figure in s. 310(1) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Corporation Tax (Variation of the Relevant Percentage) Order 2011 (S.I. 2011/2885), arts. 1(2), 2

311 Limit on number [F509 etc] of accounting periods for which supplement may be claimed U.K.

(1) A company may claim supplement under this Chapter in respect of no more than [F510 10] accounting periods.

[F511 (1A) In this Chapter—

• “the initial 6 periods” means the first 6 accounting periods (in chronological order) for which the company claims supplement under this Chapter;

• “the additional 4 periods” means the 4 accounting periods after the initial 6 periods for which the company claims supplement under this Chapter.

(1B) None of the additional 4 periods may be accounting periods beginning before 5 December 2013.

(1C) But, where—

(a) a company has an accounting period which begins before 5 December 2013 and ends on or after that date, and

(b) that accounting period falls after the initial 6 accounting periods,

so much of that accounting period as falls before 5 December 2013 and so much of it as falls on or after that date are treated as separate accounting periods for the purposes of this Chapter.]

(2) The accounting periods in respect of which claims are made need not be consecutive.

(3) A claim for supplement by the company under Schedule 19B to ICTA (exploration expenditure supplement) in respect of an accounting period is to count for the purposes of this section as a claim for supplement under this Chapter in respect of that accounting period.

(4) But, if the company makes a claim for supplement under this Chapter in respect of the deemed accounting period, any claim for supplement by the company under Schedule 19B to ICTA in respect of the Schedule 19B deemed accounting period is to be ignored for the purposes of this section.

(5) In subsection (4)—

• “the deemed accounting period” means the deemed accounting period under section 309(3) beginning on 1 January 2006, and

• “the Schedule 19B deemed accounting period” means the deemed accounting period under paragraph 3(3) of Schedule 19B to ICTA ending before 1 January 2006.

Textual Amendments

F509 Word in s. 311 heading inserted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 4(4)

F510 Word in s. 311(1) substituted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 4(2)

F511 S. 311(1A)-(1C) inserted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 4(3)

312 Qualifying pre-commencement expenditure U.K.

(1) For the purposes of this Chapter, expenditure is “qualifying pre-commencement expenditure” if it meets each of conditions A to D.

(2) Condition A is that the expenditure is incurred on or after 1 January 2006.

(3) Condition B is that the expenditure is incurred in the course of oil extraction activities.

(4) Condition C is that the expenditure is incurred by a company with a view to carrying on a ring fence trade but before the company sets up and commences the ring fence trade.

(5) Condition D is that the expenditure—

(a) is subsequently allowable as a deduction in calculating the profits of the ring fence trade for the commencement period (whether or not any part of it is so allowable for any post-commencement period), or

(b) is relevant R&D expenditure incurred by an SME.

(6) For the purposes of this section, expenditure incurred by a company is “relevant R&D expenditure incurred by an SME” if—

(a) the company makes an election under section 1045 of CTA 2009 (alternative treatment for pre-trading expenditure: deemed trading loss) in respect of that expenditure, but

(b) the company does not make a claim for an R&D tax credit under section 1054 of that Act in respect of that expenditure.

(7) In the case of any qualifying pre-commencement expenditure which is relevant R&D expenditure incurred by an SME, the amount of that expenditure is treated for the purposes of this Chapter as being equal to 150% of its actual amount.

F512 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F512 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F512 S. 312(8)(9) omitted (with effect in accordance with Sch. 15 paras. 28, 29 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 15 para. 24(2)

313 Unrelieved group ring fence profits for accounting periods U.K.

(1) There is an amount of unrelieved group ring fence profits for an accounting period of a qualifying company (“company Q”) if—

(a) the company and any other company (“company X”) are members of the same group, and

(b) company X has an amount of taxable ring fence profits (see section 314) for a corresponding accounting period.

(2) An accounting period of company X corresponds to an accounting period of company Q if—

(a) it coincides with, or falls wholly within, the accounting period of company Q, or

(b) it falls partly within the accounting period of company Q.

(3) If an accounting period of company X—

(a) coincides with an accounting period of company Q, or

(b) falls wholly within an accounting period of company Q,

there is, for the accounting period of company Q, an amount of unrelieved group ring fence profits equal to the whole of company X's taxable ring fence profits for its accounting period.

(4) If an accounting period of company X falls partly within an accounting period of company Q—

(a) there is an amount of unrelieved group ring fence profits for the accounting period of company Q, and

(b) that amount is an amount equal to the part of company X's taxable ring fence profits for its accounting period that is attributable, on an apportionment in accordance with section 1172, to the part of that period which falls within the accounting period of company Q.

(5) For the purposes of this section, two companies are members of the same group if they are members of the same group of companies within the meaning of Part 5 (group relief).

(6) This section applies for the purposes of this Chapter.

314 Taxable ring fence profits for an accounting period U.K.

For the purposes of this Chapter, a company has taxable ring fence profits for an accounting period if it has an amount of ring fence profits which is chargeable to corporation tax for that accounting period after any group relief claimed under Part 5 (group relief).

Pre-commencement supplement U.K.

315 Supplement in respect of a pre-commencement accounting period U.K.

(1) If—

(a) a qualifying company incurs qualifying pre-commencement expenditure in respect of a ring fence trade, and

(b) the expenditure is incurred before the commencement period,

the company may claim supplement under this section (“pre-commencement supplement”) in respect of one or more pre-commencement periods.

(2) Any pre-commencement supplement allowed on a claim in respect of a pre-commencement period is to be treated as expenditure—

(a) which is incurred by the company in the commencement period, and

(b) which is allowable as a deduction in calculating the profits of the ring fence trade for that period.

(3) The amount of the supplement for any pre-commencement period in respect of which a claim under this section is made is the relevant percentage for that period of the reference amount for that period.

(4) If the pre-commencement period is a period of less than 12 months, the amount of the supplement for the period (apart from this subsection) is to be reduced proportionally.

(5) Sections 316 to 319 have effect for the purpose of determining the reference amount for a pre-commencement period.

316 The mixed pool of qualifying pre-commencement expenditure and supplement previously allowed U.K.

(1) For the purpose of determining the amount of any pre-commencement supplement, a qualifying company is to be taken to have had, at all times in the pre-commencement periods of the company, a continuing mixed pool of—

(a) the relevant amount (if any) which the company carries forward under Schedule 19B to ICTA,

(b) qualifying pre-commencement expenditure, and

(c) pre-commencement supplement.

(2) The pool is to be taken to have consisted of—

(a) the relevant amount (if any) which the company carries forward under Schedule 19B to ICTA,

(b) the company's qualifying pre-commencement expenditure, allocated to the pool for each pre-commencement period in accordance with subsection (3), and

(c) the company's pre-commencement supplement, allocated to the pool for each pre-commencement period in accordance with subsection (4).

(3) To allocate qualifying pre-commencement expenditure to the pool for any pre-commencement period, take the following steps—

• Step 1

  Count as eligible expenditure for that period so much of the qualifying pre-commencement expenditure mentioned in section 315(1) as was incurred in that period.

• Step 2

  Find the total of all the eligible expenditure for that period (amount E).

• Step 3

  If section 317 applies, reduce amount E in accordance with that section.

• Step 4

  If section 318 applies, reduce (or, as the case may be, further reduce) amount E in accordance with that section.

And so much of amount E as remains after making those reductions is to be taken to have been added to the pool in that period

(4) If any pre-commencement supplement is allowed on a claim in respect of a pre-commencement period, the amount of that supplement is to be taken to have been added to the pool in that period.

(5) In this section references to the relevant amount (if any) which the company carries forward under Schedule 19B to ICTA are to the amount (if any) in its mixed pool for the purposes of Part 3 of Schedule 19B to ICTA immediately before 1 January 2006.

[F513 (6) This section is subject to section 318A (adjustment of pool to remove pre-2013 expenditure after the initial 6 periods).]

Textual Amendments

F513 S. 316(6) inserted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 5

317 Reduction in respect of disposal receipts under CAA 2001 U.K.

(1) This section applies in the case of the qualifying company if—

(a) it incurs qualifying pre-commencement expenditure in respect of a ring fence trade in any pre-commencement period,

(b) it would, on the relevant assumption, be entitled to an allowance under any provision of CAA 2001 in respect of that expenditure,

(c) an event occurs in relation to any asset representing the expenditure in any pre-commencement period, and

(d) the event would, on the relevant assumption, require a disposal value (the “deductible amount”) to be brought into account under any provision of CAA 2001 for any pre-commencement period.

(2) The relevant assumption is that the company was carrying on the ring fence trade—

(a) when the expenditure was incurred, and

(b) when the event giving rise to the disposal value occurred.

(3) For the purpose of allocating qualifying pre-commencement expenditure to the pool for each pre-commencement period—

(a) find the total amount of the disposal values in the case of all such events (amount D), and

(b) taking later periods before earlier periods, reduce (but not below nil) amount E for any pre-commencement period by setting against it so much of amount D as does not fall to be set against amount E for a later pre-commencement period.

[F514 (4) This section is subject to section 318A(5) (exclusion of deductible amounts in respect of pre-2013 expenditure when determining pre-commencement supplement for additional 4 periods).]

Textual Amendments

F514 S. 317(4) inserted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 6

318 Reduction in respect of unrelieved group ring fence profits U.K.

(1) This section applies if there is an amount of unrelieved group ring fence profits for a pre-commencement period.

(2) For the purpose of allocating qualifying pre-commencement expenditure to the pool for that period—

(a) find so much (if any) of amount E for that period as remains after any reduction falling to be made under section 317, and

(b) reduce that amount (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period.

[F515 318A Adjustment of pool to remove pre-2013 expenditure after the initial 6 periods U.K.

(1) This section applies for the purposes of determining the amount of any pre-commencement supplement on any claim made by a company for supplement under this Chapter in respect of an accounting period which is one of the additional 4 periods.

(2) The pool which (under section 316) the company is to be taken to have had, at all times in the pre-commencement periods of the company, is to be taken to have been reduced at the time specified in subsection (4).

(3) The amount of the reduction is the sum of—

(a) the relevant amount (if any) which the company carries forward under Schedule 19B to ICTA,

(b) the total amount of qualifying pre-commencement expenditure allocated to the pool for pre-commencement periods beginning before 5 December 2013, and

(c) the total amount of the company's pre-commencement supplement allocated to the pool for pre-commencement periods beginning before that date.

(4) The time is—

(a) immediately after the last of the initial 6 periods, or

(b) if later, 5 December 2013.

(5) Subsection (3) of section 317 (reduction in respect of disposal receipts under CAA 2001) has effect as if the reference in paragraph (a) of that subsection to “all such events” did not include events occurring in relation to an asset representing expenditure incurred before 5 December 2013.

(6) Where a company has a pre-commencement period (“the straddling 2013 period”) which begins before 5 December 2013 and ends on or after that date, for the purposes of making a reduction under this section—

(a) so much of the straddling 2013 period as falls before 5 December 2013 (“the pre-2013 period”), and

(b) so much of that period as falls on or after that date (“the post-2013 period”),

are to be treated as separate pre-commencement periods.

(7) Accordingly, any amount of qualifying pre-commencement expenditure, and any amount of the company's pre-commencement supplement, allocated to the pool for the straddling 2013 period is to be—

(a) apportioned between the pre-2013 period and the post-2013 period in proportion to the number of days in each, and

(b) treated as allocated to the pool in question for the period in question (rather than the straddling 2013 period).

(8) If the basis of the apportionment in subsection (7) would work unjustly or unreasonably in the company's case, the company may elect for the apportionment to be made on another basis that is just and reasonable and specified in the election.]

Textual Amendments

F515 S. 318A inserted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 7

319 The reference amount for a pre-commencement period U.K.

For the purposes of section 315, the reference amount for a pre-commencement period is the amount in the pool at the end of the period—

(a) after the addition to the pool of any qualifying pre-commencement expenditure allocated to the pool for that period in accordance with section 316(3), but

(b) before determining, and adding to the pool, the amount of any pre-commencement supplement claimed in respect of the period.

320 Claims for pre-commencement supplement U.K.

(1) Any claim for pre-commencement supplement in respect of a pre-commencement period must be made as a claim for the commencement period.

(2) Paragraph 74 of Schedule 18 to FA 1998 (company tax returns etc: time limit for claims for group relief) applies in relation to a claim for pre-commencement supplement as it applies in relation to a claim for group relief.

Post-commencement supplement U.K.

321 Supplement in respect of a post-commencement period U.K.

(1) A qualifying company which incurs a ring fence loss (see section 323) in any post-commencement period may claim supplement under this section (“post-commencement supplement”) in respect of—

(a) that period, or

(b) any subsequent accounting period in which it carries on its ring fence trade.

(2) Any post-commencement supplement allowed on a claim in respect of a post-commencement period [F516 beginning before 1 April 2017] is to be treated for the purposes of the Corporation Tax Acts (other than the post-commencement supplement provisions or Part 4 of Schedule 19B to ICTA) as if it were a loss—

(a) which is incurred in carrying on the ring fence trade in that period, and

(b) which falls in whole to be used under section 45 (carry forward of [F517 pre-1 April 2017] trade loss against subsequent trade profits) to reduce trading income from the ring fence trade in succeeding accounting periods.

[F518 (2A) Any post-commencement supplement allowed on a claim in respect of a post-commencement period beginning on or after 1 April 2017 is to be treated for the purposes of the Corporation Tax Acts (other than the post-commencement supplement provisions or Part 4 of Schedule 19B to ICTA) as if it were a loss—

(a) which is incurred in carrying on the ring fence trade in that period, and

(b) which falls in whole to be used under section 45B (carry forward of post-1 April 2017 trade loss against subsequent trade profits) to reduce trading income from the ring fence trade in succeeding accounting periods.]

(3) Paragraph 74 of Schedule 18 to FA 1998 (company tax returns etc: time limit for claims for group relief) applies in relation to a claim for post-commencement supplement as it applies in relation to a claim for group relief.

(4) In this Chapter “the post-commencement supplement provisions” means this section and sections 322 to 329.

Textual Amendments

F516 Words in s. 321(2) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 52(2)(a)

F517 Words in s. 321(2)(b) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 52(2)(b)

F518 S. 321(2A) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 52(3)

322 Amount of post-commencement supplement for a post-commencement period U.K.

(1) The amount of the post-commencement supplement for any post-commencement period in respect of which a claim under section 321 is made is the relevant percentage for that period of the reference amount for that period.

(2) If the post-commencement period is a period of less than 12 months, the amount of the supplement for the period (apart from this subsection) is to be reduced proportionally.

(3) Sections 325 to 329 have effect for the purpose of determining the reference amount for a post-commencement period.

323 Ring fence losses U.K.

(1) If—

(a) in any post-commencement period (“the period of the loss”) a qualifying company carrying on a ring fence trade incurs a loss in the trade, and

[F519 (b) some or all of the loss falls to be carried forward to the following accounting period under section 45, 45B or 303B (carry forward of trade losses against subsequent profits)]

so much of the loss as falls to be so [F520 carried forward] is a “ring fence loss” of the company.

(2) In determining for the purposes of the post-commencement supplement provisions how much of a loss incurred in a ring fence trade falls to be [F521 carried forward] as mentioned in subsection (1)(b), the following assumptions are to be made.

(3) The first assumption is that every claim is made that could be made by the company under section 37 (relief for trade losses against total profits) to deduct losses incurred in the ring fence trade from ring fence profits of earlier post-commencement periods.

(4) The second assumption is that (where appropriate) section 42 (ring fence trades: further extension of period for relief) applies in relation to every such claim under section 37.

(5) This section is subject to section 324 (special rule for straddling periods).

(6) This section has effect for the purposes of the post-commencement supplement provisions.

Textual Amendments

F519 S. 323(1)(b) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 53(2)(a)

F520 Words in s. 323(1) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 53(2)(b)

F521 Words in s. 323(2) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 53(3)

324 Special rule for straddling periods U.K.

(1) This section applies if the period of the loss is the deemed accounting period under section 309(3) beginning on 1 January 2006 (“the deemed accounting period”).

(2) The amount of ring fence loss in the deemed accounting period is determined as follows—

• Step 1

  Calculate so much of the ring fence loss in the straddling period as, for the purposes of Part 4 of Schedule 19B to ICTA, is attributable to qualifying E&A allowances for the straddling period. The amount given by this step is “the qualifying Schedule 19B amount”.

• Step 2

  Calculate so much of the ring fence loss in the straddling period as is attributable to allowances for the straddling period under Part 6 of CAA 2001 in respect of relevant expenditure. For the purposes of this step “relevant expenditure” means expenditure incurred by the company on or after 1 January 2006 which, but for that fact, would be qualifying E&A expenditure for the purposes of Schedule 19B to ICTA. For the purposes of this step a ring fence loss is attributable to those allowances so far as the amount of the loss (less the qualifying Schedule 19B amount) does not exceed the amount of those allowances for that period. The amount given by this step is “the amount of the post-1 January 2006 E&A allowances”.

• Step 3

  Deduct the qualifying Schedule 19B amount and the amount of the post-1 January 2006 E&A allowances from the amount of the ring fence loss in the straddling period.

• Step 4

  Apportion the remaining amount of that loss (if any) to the deemed accounting period in proportion to the number of days in the deemed accounting period that fall in the straddling period. The amount given by this step is “the amount of the apportioned loss”

• Step 5

  The amount of the ring fence loss in the deemed accounting period is the amount of the apportioned loss plus the amount of the post-1 January 2006 E&A allowances.

(3) In this section “the straddling period”, in relation to a qualifying company, means an accounting period of the company—

(a) beginning before 1 January 2006, and

(b) ending on or after that date,

disregarding section 309(3).

(4) In this section references to the ring fence loss in the straddling period are to that loss determined on the assumption that the straddling period is the period of the loss for the purposes of section 323.

(5) This section has effect for the purposes of the post-commencement supplement provisions.

325 The pool of ring fence losses and the pool of non-qualifying Schedule 19B losses U.K.

(1) For the purpose of determining the amount of any post-commencement supplement, a qualifying company is to be taken at all times in its post-commencement periods to have a continuing mixed pool (the “ring fence pool”) of—

(a) the carried forward qualifying Schedule 19B amount (if any),

(b) the company's ring fence losses, and

(c) post-commencement supplement.

(2) The ring fence pool continues even if the amount in it is nil.

(3) For the purpose of determining the amount of any post-commencement supplement, a qualifying company is also to be taken in its post-commencement periods to have a non-qualifying pool consisting of the carried forward non-qualifying Schedule 19B amount.

(4) But the non-qualifying pool ceases to exist when the amount in it is reduced to nil.

(5) In this section—

• “the carried forward qualifying Schedule 19B amount”, in relation to a qualifying company, means the amount in its qualifying pool for the purposes of Part 4 of Schedule 19B to ICTA immediately before 1 January 2006, and

• “the carried forward non-qualifying Schedule 19B amount”, in relation to a qualifying company, means the amount in its non-qualifying pool for the purposes of Part 4 of Schedule 19B to that Act immediately before 1 January 2006.

326 The ring fence pool U.K.

(1) The ring fence pool consists of—

(a) the carried forward qualifying Schedule 19B amount (if any),

(b) the company's ring fence losses, allocated to the pool in accordance with subsection (2)(a), and

(c) the company's post-commencement supplement, allocated to the pool in accordance with subsection (2)(b).

(2) The allocation of ring fence losses and post-commencement supplement to the pool is made as follows—

(a) the amount of a ring fence loss is added to the pool in the period of the loss, and

(b) if any post-commencement supplement is allowed on a claim in respect of a post-commencement period, the amount of that supplement is added to the pool in that period.

(3) The amount in the ring fence pool is subject to reductions in accordance with [F522 sections 327 and 328].

(4) If a reduction in the amount in the ring fence pool falls to be made [F523 under section 327 or 328] in any accounting period, the reduction is to be made—

(a) after the addition to the pool of the amount of any ring fence losses allocated to the pool in that period in accordance with subsection (2)(a), but

(b) before determining, and adding to the pool, the amount of any supplement claimed in respect of the period,

and references to the amount in the pool are to be read accordingly.

(5) In this section “the carried forward qualifying Schedule 19B amount”, in relation to a qualifying company, means the amount in its qualifying pool for the purposes of Part 4 of Schedule 19B to ICTA immediately before 1 January 2006.

[F524 (6) This section is subject to section 328A (adjustment of pool to remove pre-2013 losses after the initial 6 periods).]

Textual Amendments

F522 Words in s. 326(3) substituted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 8(2)

F523 Words in s. 326(4) inserted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 8(3)

F524 S. 326(6) inserted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 8(4)

[F525 327 Reductions in respect of relief for carried-forward ring fence losses U.K.

(1) Reductions are to be made in accordance with this section in a post-commencement period if the relevant amount for the period (see subsection (4)) is not nil.

(2) If the company has a non-qualifying pool, the amount in the non-qualifying pool is to be reduced (but not below nil) by setting against it a sum equal to the relevant amount for the post-commencement period.

(3) If—

(a) any of that sum remains after being so set against the amount in the non-qualifying pool, or

(b) the company does not have a non-qualifying pool,

the amount in the ring fence pool is to be reduced (but not below nil) by setting against it so much of that sum as so remains or (as the case may be) a sum equal to the relevant amount for the post-commencement period.

(4) For the purposes of this section, the relevant amount for a post-commencement period is the sum of—

(a) the amount of any relief given in respect of ring fence losses in the post-commencement period under sections 45, 45B, 303B, 303C and 303D, and

(b) the amount of any relief prevented from being given in respect of ring fence losses in the post-commencement period by claims made under sections 45(4A) and 45B(5).]

Textual Amendments

F525 S. 327 substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 54

328 Reductions in respect of unrelieved group ring fence profits U.K.

(1) If there is an amount of unrelieved group ring fence profits for a post-commencement period, reductions are to be made in that period in accordance with this section.

(2) If, after making any reductions that fall to be made in accordance with section 327, the company does not have a non-qualifying pool, the remaining amount in the ring fence pool is to be reduced (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period.

(3) If, after making any reductions that fall to be made in accordance with section 327, the company has an amount in a non-qualifying pool, the amount in that pool is to be reduced (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period.

(4) If any of that sum remains after being so set against the amount in the non-qualifying pool, the remaining amount in the ring fence pool is to be reduced (but not below nil) by setting against it so much of that sum as so remains.

(5) For the purposes of this section references to the remaining amount in the ring fence pool are references to so much (if any) of the amount in the ring fence pool as remains after making any reductions that fall to be made in accordance with section 327.

[F526 328A Adjustment of pool to remove pre-2013 losses after the initial 6 periods U.K.

(1) This section applies for the purposes of determining the amount of any post-commencement supplement on any claim in respect of any of the additional 4 periods.

(2) The ring fence pool is to be taken to have been reduced at the time specified in subsection (6).

(3) The amount of the reduction is the amount of the total pre-2013 pool reduced (but not below nil) by the amount of the total pre-2013 reduction.

(4) “The amount of the total pre-2013 pool” means the sum of—

(a) the carried forward qualifying Schedule 19B amount (within the meaning of section 326(5)) which is in the pool at the time specified in subsection (6) (if any),

(b) the total amount of the company's ring fence losses added to the pool in post-commencement periods beginning before 5 December 2013,

(c) if the commencement period begins on or after 5 December 2013, so much of any ring fence loss added to the pool in that period as does not exceed the sum of—

(i) any pre-commencement expenditure added to the pool in a pre-commencement period ending before 5 December 2013, and

(ii) any pre-commencement supplement allowed in respect of such a pre-commencement period, and

(d) the total amount of the company's post-commencement supplement added to the pool in post-commencement periods beginning before that date.

(5) “The amount of the total pre-2013 reduction” means the total amount of the reductions in the ring fence pool falling to be made under section 327 or 328 in post-commencement periods beginning before the time specified in subsection (6).

(6) The time is—

(a) immediately after the last of the 6 initial periods, or

(b) if later, 5 December 2013.

(7) The amount (if any) in the non-qualifying pool under section 325(3) is reduced to nil (and so ceases to exist under section 325(4)).

(8) Section 318A(6) (“the straddling 2013 period”) applies for the purposes of making a reduction under this section as it applies for the purposes of making a reduction under section 318A.

(9) Accordingly—

(a) any ring fence loss of the company added to the pool in the straddling 2013 period is to be apportioned between the pre-2013 period and the post-2013 period in proportion to the number of days in each and treated as allocated to the pool for the period in question;

(b) any amount of the company's post-commencement supplement allocated to the pool for the straddling period is to be apportioned between the pre-2013 period and the post-2013 period in proportion to the number of days in each and treated as allocated to the pool for the period in question;

(c) the total amount of reductions in the ring fence pool falling to be made in the straddling period is apportioned between the pre-2013 period and the post-2013 period in proportion to the number of days in each and treated as a reduction falling to be made in the period in question.

(10) If the basis of the apportionment in subsection (9)(a), (b) or (c) would work unjustly or unreasonably in the company's case, the company may elect for the apportionment to be made on another basis that is just and reasonable and specified in the election.

(11) Once a reduction in the pool has been made under this section—

(a) [F527 no account is to be taken of a loss in determining under section 327(4) the relevant amount for a post-commencement period ] if and to the extent that the loss is represented by the reduction made under this section, and

(b) if and to the extent that losses are represented by the reduction they are to be used under section 45 to reduce any profits of a post-commencement period before [F528 any such profits are reduced by the use under section 45, 45B, 303B, 303C and 303D of ring fence losses that are not represented by the reduction].]

Textual Amendments

F526 S. 328A inserted (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 10

F527 Words in s. 328A(11)(a) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 55(a)

F528 Words in s. 328A(11)(b) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 55(b)

329 The reference amount for a post-commencement period U.K.

For the purposes of section 322 the reference amount for a post-commencement period is so much of the amount in the ring fence pool as remains after making any reductions required by section 327 or 328.

F529 CHAPTER 5A U.K. Extended ring fence expenditure supplement for onshore activities

Textual Amendments

F529 Pt. 8 Ch. 5A repealed (with effect in accordance with Sch. 11 para. 14 of the amending Act) by Finance Act 2015 (c. 11), Sch. 11 para. 13(1)

Introduction U.K.

329A Overview of Chapter U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Application and interpretation U.K.

329B Qualifying companies U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329C Onshore and offshore oil-related activities U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329D Accounting periods and straddling periods U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329E The relevant percentage U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329F Restrictions on accounting periods for which additional supplement may be claimed U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329G Qualifying pre-commencement onshore expenditure U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329H Unrelieved group ring fence profits U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pre-commencement additional supplement U.K.

329I Additional supplement in respect of a pre-commencement accounting period U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329J The mixed pool of qualifying pre-commencement onshore expenditure and supplement previously allowed U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329K Reduction in respect of disposal receipts under CAA 2001 U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329L Reduction in respect of unrelieved group ring fence profits U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329M The reference amount for a pre-commencement period U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Post-commencement additional supplement U.K.

329N Supplement in respect of post-commencement period U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329O Amount of post-commencement additional supplement for a post-commencement period U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329P Onshore ring fence losses U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329Q The onshore ring fence pool U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329R Reductions in respect of utilised onshore ring fence losses U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329S Reductions in respect of unrelieved group ring fence profits U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

329T The reference amount for a post-commencement period U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 6 U.K. Supplementary charge in respect of ring fence trades

330 Supplementary charge in respect of ring fence trades U.K.

(1) If a company carries on a ring fence trade in an accounting period, a sum equal to [F530 10%] of its adjusted ring fence profits for that period is to be charged on the company as if it were an amount of corporation tax chargeable on the company.

(2) A company's “adjusted ring fence profits” for an accounting period are the amount which, on the assumption mentioned in subsection (3), would be determined for that period as the [F531 company's ring fence profits] chargeable to corporation tax.

[F532 See also sections 330A and 330B (which provide for the amount of adjusted ring fence profits to be further adjusted where decommissioning expenditure has been taken into account).]

(3) The assumption is that financing costs are left out of account in calculating—

(a) the amount of the profits or loss of any ring fence trade of the company for an accounting period, and

(b) if for any such period the whole or part of any loss relief is surrendered to the company in accordance with section 305(1), the amount of that relief or part.

(4) See also section 331 (meaning of financing costs etc).

[F533 (5) This Chapter is subject to—

(a) Chapter 6A (reduction of supplementary charge: investment allowance),

(b) Chapter 8 (reduction of supplementary charge: onshore allowance), and

(c) Chapter 9 (reduction of supplementary charge: cluster area allowance).]

Textual Amendments

F530 Word in s. 330(1) substituted (with effect in accordance with s. 58(2)-(5) of the amending Act) by Finance Act 2016 (c. 24), s. 58(1)

F531 Words in s. 330(2) substituted (retrospective to 6.12.2011) by Finance Act 2012 (c. 14), s. 182(1)(2)

F532 Words in s. 330(2) inserted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 2

F533 S. 330(5) substituted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 2015 (c. 11), Sch. 14 para. 3

[F534 330ZA Ordering of allowances U.K.

(1) In this section “relieving Chapter” means any of the following—

(a) Chapter 6A (reduction of supplementary charge: investment allowance);

(b) Chapter 8 (reduction of supplementary charge: onshore allowance);

(c) Chapter 9 (reduction of supplementary charge: cluster area allowance).

(2) Where a company has allowances under more than one relieving Chapter available for reducing the adjusted ring fence profits that are to be chargeable under section 330(1) for an accounting period, the company may choose the order in which the relieving Chapters in question are to be applied.

(3) In any relieving Chapter, “adjusted ring fence profits”, in relation to a company and an accounting period, means the adjusted ring fence profits which would (ignoring all relieving Chapters except those which the company chooses to apply before that Chapter) be taken into account in calculating the supplementary charge on the company under section 330(1) for the accounting period.]

Textual Amendments

F534 S. 330ZA inserted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 2015 (c. 11), Sch. 14 para. 4

[F535 330A Decommissioning expenditure taken into account in calculating ring fence profits U.K.

(1) This section applies where—

(a) any decommissioning expenditure is taken into account in calculating the amount mentioned in paragraph (a) of subsection (3) of section 330 or the amount mentioned in paragraph (b) of that subsection, and

(b) if that expenditure were not so taken into account, the amount of the adjusted ring fence profits of the company for the accounting period would be greater than nil.

(2) In calculating for the purposes of section 330(1) the amount of the adjusted ring fence profits of the company for the accounting period, there is to be added an amount equal to the appropriate fraction of the used-up amount of that expenditure.

(3) For the purposes of this section—

• “the appropriate fraction” is

  

  where SC is the percentage specified in section 330(1) for the accounting period, and

• “the used-up amount”, in relation to any expenditure, is the difference between—

  (a)

  the adjusted ring fence profits of the company for the accounting period determined in the absence of this section (which may be nil), and

  (b)

  what the adjusted ring fence profits of the company for that accounting period would be if that expenditure were not taken into account as mentioned in subsection (1).

(4) In determining for the purposes of this section whether, and to what extent, any losses which have been taken into account as mentioned in subsection (1) are attributable to decommissioning expenditure—

(a) assume that any amounts of any other expenditure which could be taken into account in calculating those losses are taken into account before any amounts of decommissioning expenditure, and

(b) where any losses have been surrendered in accordance with Part 5, the company must specify, in accordance with a basis determined jointly by the company, the surrendering company (if different) and any other claimant company, whether any of those losses is attributable to decommissioning expenditure.

(5) But if paragraph (a) of subsection (4) would work unfavourably in the company's case, the company may elect for that paragraph not to apply in relation to it and for any amounts of expenditure which could be taken into account in calculating those losses instead to be taken into account in the order specified in the election.

(6) In determining for the purposes of this section the used-up amount of decommissioning expenditure, assume that any other amounts that could be deducted in calculating the adjusted ring fence profits of the company for the accounting period have already been so deducted.

(7) But if subsection (6) would work unfavourably in the company's case, the company may elect for that subsection not to apply in relation to it and for any amounts that could be deducted in calculating those adjusted ring fence profits instead to be deducted in the order specified in the election.

(8) For the purposes of this section, any deduction made under section 330B is to be disregarded.

(9) This section does not apply in relation to any accounting period for which the percentage specified in section 330(1) is less than or equal to 20% (including any accounting period beginning before 24 March 2011 and ending on or after that date).

(10) In this section—

• “claimant company” and “surrendering company” are to be read in accordance with Part 5 (see section 188), and

• “decommissioning expenditure” has the meaning given by section 330C.]

Textual Amendments

F535 Ss. 330A-330C inserted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 3

Modifications etc. (not altering text)

C116 Ss. 330A 330B excluded (with application in accordance with s. 48(3) of the amending Act) by Finance Act 2015 (c. 11), s. 48(5)(6)

[F535 330B Decommissioning expenditure taken into account for PRT purposes U.K.

(1) This section applies where—

(a) any decommissioning expenditure is taken into account in calculating the assessable profit accruing to a participator in any chargeable period from an oil field, F536 ...

(b) if that expenditure were not so taken into account, the amount of petroleum revenue tax with which the participator would be chargeable in respect of the field for the chargeable period would be greater than nil.

[F537 , and

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

[F538 (2) In calculating for the purposes of section 330(1) the amount of the participator's adjusted ring fence profits for the accounting period, there is to be deducted the amount given by—

where—

RP is the relevant percentage of the decommissioning expenditure,

AF is the appropriate fraction, and

D is the PRT difference.]

(3) For the purposes of this section—

• [F539 “the relevant percentage of the decommissioning expenditure” is the percentage of that expenditure that is the used-up amount referred to in subsection (1)(c),]

• “the appropriate fraction” is

  

  where SC is the percentage specified in section 330(1) for the F540 ... accounting period, and

• “the PRT difference” is the difference between—

  (a)

  the amount of petroleum revenue tax with which the participator is chargeable for the chargeable period (which may be nil), and

  (b)

  the amount of petroleum revenue tax with which the participator would be chargeable for that chargeable period if the decommissioning expenditure were not taken into account as mentioned in [F541 subsection (1)(a) ] .

(4) In determining for the purposes of this section whether, and to what extent, any allowable losses which have been taken into account as mentioned in [F542 subsection (1)(a)] are attributable to decommissioning expenditure, assume that any amounts of any other expenditure which could be taken into account in calculating those losses are taken into account before any amounts of decommissioning expenditure.

(5) But if subsection (4) would work unfavourably in the participator's case, the participator may elect for that subsection not to apply in relation to it and for any amounts of expenditure which could be taken into account in calculating those losses instead to be taken into account in the order specified in the election.

(6) This section does not apply in relation to any accounting period for which the percentage specified in section 330(1) is less than or equal to 20% (including any accounting period beginning before 24 March 2011 and ending on or after that date).

(7) In this section—

• “assessable profit” and “allowable loss” have the same meaning as in Part 1 of OTA 1975 (see section 2 of that Act),

• “decommissioning expenditure” has the meaning given by section 330C, and

• F543 ...]

• [F544 “the used-up amount”, in relation to any expenditure, has the same meaning as in section 330A (see subsection (3) of that section).]

Textual Amendments

F535 Ss. 330A-330C inserted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 3

F536 Word in s. 330B(1)(a) omitted (with effect in accordance with s. 88(7) of the amending Act) by virtue of Finance Act 2013 (c. 29), s. 88(2)

F537 S. 330B(1)(c) and word inserted (with effect in accordance with s. 88(7) of the amending Act) by Finance Act 2013 (c. 29), s. 88(2)

F538 S. 330B(2) substituted (with effect in accordance with s. 88(7) of the amending Act) by Finance Act 2013 (c. 29), s. 88(3)

F539 Words in s. 330B(3) inserted (with effect in accordance with s. 88(7) of the amending Act) by Finance Act 2013 (c. 29), s. 88(4)(a)

F540 Word in s. 330B(3) omitted (with effect in accordance with s. 88(7) of the amending Act) by virtue of Finance Act 2013 (c. 29), s. 88(4)(b)

F541 Words in s. 330B(3) substituted (with effect in accordance with s. 88(7) of the amending Act) by Finance Act 2013 (c. 29), s. 88(4)(c)

F542 Words in s. 330B(4) substituted (with effect in accordance with s. 88(7) of the amending Act) by Finance Act 2013 (c. 29), s. 88(5)

F543 Words in s. 330B(7) omitted (with effect in accordance with s. 88(7) of the amending Act) by virtue of Finance Act 2013 (c. 29), s. 88(6)(a)

F544 Words in s. 330B(7) inserted (with effect in accordance with s. 88(7) of the amending Act) by Finance Act 2013 (c. 29), s. 88(6)(b)

Modifications etc. (not altering text)

C116 Ss. 330A 330B excluded (with application in accordance with s. 48(3) of the amending Act) by Finance Act 2015 (c. 11), s. 48(5)(6)

[F535 330C Meaning of “decommissioning expenditure” U.K.

(1) In sections 330A and 330B “decommissioning expenditure” means expenditure incurred in connection with—

(a) demolishing any plant or machinery,

(b) preserving any plant or machinery pending its reuse or demolition,

(c) preparing any plant or machinery for reuse,

(d) arranging for the reuse of any plant or machinery, or

(e) the restoration of any land.

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

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

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

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

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

Textual Amendments

F535 Ss. 330A-330C inserted (with effect in accordance with Sch. 21 para. 6 of the amending Act) by Finance Act 2012 (c. 14), Sch. 21 para. 3

331 Meaning of “financing costs” etc U.K.

(1) This section applies for the purposes of section 330.

(2) “Financing costs” means the costs of debt finance.

(3) In calculating the costs of debt finance for an accounting period the matters to be taken into account include—

(a) any costs giving rise to debits in respect of debtor relationships of the company under Part 5 of CTA 2009 (loan relationships), other than debits in respect of exchange losses from such relationships,

(b) any exchange gain or loss from a debtor relationship of the company in relation to debt finance,

(c) any credit or debit falling to be brought into account in accordance with Part 7 of CTA 2009 (derivative contracts) in relation to debt finance,

(d) the financing cost implicit in a payment under a finance lease,

[F545 (da) if the company is the lessee under a right-of-use lease which is a long funding finance lease, any costs falling, in accordance with generally accepted accounting practice, to be treated in the accounts of the company as interest expenses,]

(e) if the company is the lessee under a long funding operating lease, the amount deductible in respect of payments under the lease in calculating the profits of the lessee for corporation tax purposes (after first making against any such amount any reductions falling to be made as a result of section 379 (lessee under long funding operating lease)), and,

(f) any other costs arising from what would be considered in accordance with generally accepted accounting practice to be a financing transaction.

(4) If an amount representing the whole or part of a payment falling to be made by a company—

(a) falls (or would fall) to be treated as a finance charge[F546 , or an interest expense,] under a finance lease for the purposes of accounts which relate to that company and one or more other companies and are prepared in accordance with generally accepted accounting practice, but

(b) is not so treated in the accounts of the company,

the amount is to be treated as a financing cost within subsection (3)(d).

(5) If—

(a) in calculating the adjusted ring fence profits of a company for an accounting period, an amount falls to be left out of account as a result of subsection (3)(d), but

(b) the whole or any part of that amount is repaid,

the repayment is also to be left out of account in calculating the adjusted ring fence profits of the company for any accounting period.

[F547 (6) In this section “finance lease” means a lease which—

(a) under generally accepted accounting practice—

(i) falls (or would fall) to be treated, in the accounts of the lessee or a person connected with the lessee, as a finance lease or loan, or

(ii) is comprised in arrangements which fall (or would fall) to be so treated, or

(b) if the lease is a right-of-use lease—

(i) would fall to be treated in those accounts as a finance lease, or

(ii) is comprised in arrangements which would fall to be so treated,

were the lessee or person connected with the lessee required under generally accepted accounting practice to determine whether the lease falls, or arrangements fall, to be so treated.]

(7) For the purposes of applying subsection (6)(b), the lessee and any person connected with the lessee are to be treated as being companies which are incorporated in a part of the United Kingdom.

(8) Section 1176(1) (meaning of “connected” persons) does not apply for the purposes of this section.

(9) In this section—

• “accounts”, in relation to a company, includes accounts which—

  (a)

  relate to two or more companies of which that company is one, and

  (b)

  are drawn up in accordance with generally accepted accounting practice,

• “debtor relationship” has the meaning given by section 302(6) of CTA 2009,

• “exchange gains” and “exchange losses” are to be read in accordance with section 475 of CTA 2009, F548 ...

• [F549 “lease” means any arrangements which provide for an asset to be leased or otherwise made available by a person to another person (“the lessee”), and

• “long funding finance lease”, “long funding operating lease” and “right-of-use lease” have the meanings given in Part 2 of CAA 2001 (see section 70YI(1) of that Act).]

• “long funding operating lease” means a long funding operating lease for the purposes of Part 2 of CAA 2001 (see section 70YI(1) of that Act).

Textual Amendments

F545 S. 331(3)(da) inserted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 4(3)(a)

F546 Words in s. 331(4)(a) inserted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 4(3)(b)

F547 S. 331(6) substituted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 4(3)(c)

F548 Word in s. 331(9) omitted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by virtue of Finance Act 2019 (c. 1), Sch. 14 para. 4(3)(d)(i)

F549 Words in s. 331(9) inserted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 4(3)(d)(ii)

332 Assessment, recovery and postponement of supplementary charge U.K.

(1) The provisions of section 330(1) relating to the charging of a sum as if it were an amount of corporation tax are to be taken as applying all enactments applying generally to corporation tax.

(2) But this is subject to—

(a) the provisions of the Taxes Acts,

(b) any necessary modifications, and

(c) subsection (5).

(3) The enactments mentioned in subsection (1) include—

(a) those relating to returns of information and the supply of accounts, statements and reports,

(b) those relating to the assessing, collecting and receiving of corporation tax,

(c) those conferring or regulating a right of appeal, and

(d) those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom.

(4) Accordingly TMA 1970 is to have effect as if any reference to corporation tax included a sum chargeable under section 330(1) as if it were an amount of corporation tax (but this does not limit subsections (1) to (3)).

(5) In the Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) Regulations 1999 (S.I. 1999/358) or any further regulations made under section 32 of FA 1998 (unrelieved surplus advance corporation tax)—

(a) references to corporation tax do not include a sum chargeable on a company under section 330(1) as if it were corporation tax, and

(b) references to profits charged to corporation tax do not include adjusted ring fence profits, within the meaning of section 330.

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

[F550 CHAPTER 6A U.K. Supplementary charge: investment allowance

Textual Amendments

F550 Pt. 8 Ch. 6A inserted (with effect in accordance with Sch. 12 para. 5 7 8 of the amending Act) by Finance Act 2015 (c. 11), Sch. 12 para. 2

Modifications etc. (not altering text)

C117 Pt. 8 Ch. 6A restricted (26.3.2015) by Finance Act 2015 (c. 11), Sch. 13 para. 6(2)

Introduction U.K.

332A Overview U.K.

(1) This Chapter sets out how relief for certain expenditure incurred in relation to a qualifying oil field is given by way of reduction of a company's adjusted ring fence profits.

(2) The Chapter includes provision about—

(a) the oil fields that are qualifying oil fields (section 332B);

(b) the expenditure that is investment expenditure (section 332BA);

(c) the generation of allowance by the incurring of relievable investment expenditure in relation to a qualifying oil field (sections 332C and 332CA);

(d) restrictions on the expenditure that is relievable (sections 332D to 332DC);

(e) how allowance is activated by relevant income from the same oil field (sections 332F to 332FC and 332H to 332HB) in order to be available for reducing adjusted ring fence profits (sections 332E and 332EA);

(f) the division of an accounting period into reference periods where a company has different shares of the equity in a qualifying oil field at different times in the period (section 332G);

(g) the transfer of allowance where shares of the equity in a qualifying oil field are disposed of (sections 332I to 332IB).

(3) For provision about the conversion of field allowance under Chapter 7 (as it had effect before 1 April 2015) into allowance under this Chapter, see paragraphs 7 and 8 of Schedule 12 to FA 2015.

“Qualifying oil field” and “investment expenditure” U.K.

332B Meaning of “qualifying oil field” U.K.

In this Chapter “qualifying oil field” means an oil field that is not wholly or partly included in a cluster area (see section 356JD).

332BA Meaning of “investment expenditure” U.K.

(1) For the purposes of this Chapter, expenditure incurred by a company is “investment” expenditure only if it is—

(a) capital expenditure, or

(b) expenditure of such other description as may be prescribed by the Treasury by regulations.

(2) Regulations under subsection (1)(b) may provide for any of the provisions of the regulations to have effect in relation to expenditure incurred before the regulations are made.

(3) But subsection (2) does not apply to any provision of amending or revoking regulations which has the effect that expenditure of any description ceases to be investment expenditure.

(4) Regulations under subsection (1)(b) may—

(a) make different provision for different purposes;

(b) make transitional provision and savings.

Investment allowance U.K.

332C Generation of investment allowance U.K.

(1) Subsection (2) applies where a company—

(a) is a participator in a qualifying oil field, and

(b) incurs any relievable investment expenditure on or after 1 April 2015 in relation to the oil field.

(2) The company is to hold an amount of allowance equal to 62.5% of the amount of the expenditure.

Allowance held under this Chapter is called “investment allowance”.

(3) For the purposes of this section investment expenditure incurred by a company is “relievable” only if, and so far as, it is incurred for the purposes of oil-related activities (see section 274).

(4) Subsections (1) to (3) are subject to—

(a) section 332D (which prevents expenditure on the acquisition of an asset from being relievable in certain circumstances),

(b) section 332DA (which restricts relievable expenditure in relation to an oil field that previously qualified for a field allowance under Chapter 7 as a new oil field),

(c) section 332DB (which restricts relievable expenditure in relation to a project by reference to which an oil field previously qualified for a field allowance under Chapter 7 as an additionally-developed oil field), and

(d) section 332DC (which prevents certain expenditure from being relievable if it relates to an oil field in respect of which onshore allowance may be obtained under Chapter 8).

(5) Investment allowance is said in this Chapter to be “generated” at the time when the investment expenditure is incurred (see section 332K) and is referred to as being generated—

(a) “by” the company concerned;

(b) “in” the qualifying oil field concerned.

(6) Where—

(a) investment expenditure is incurred only partly for the purposes of oil-related activities, or

(b) the oil-related activities for the purposes of which investment expenditure is incurred are carried on only partly in relation to a particular qualifying oil field,

the expenditure is to be attributed to the activities or field concerned on a just and reasonable basis.

332CA Expenditure incurred before field is determined U.K.

(1) This section applies to expenditure incurred by a company on or after 1 April 2015 for the purposes of oil-related activities if or to the extent that the following conditions are met.

(2) The conditions are—

(a) that the expenditure was in respect of an area,

(b) that, at the time the expenditure was incurred, the area had not been determined under Schedule 1 to OTA 1975 to be an oil field,

(c) that the area is subsequently determined under that Schedule to be an oil field, and

(d) that the company is a licensee in the oil field.

(3) Where this section applies in relation to an amount of expenditure, that amount is treated for the purposes of this Chapter as incurred by the company—

(a) in relation to the oil field, and

(b) at the time when the area is determined under Schedule 1 to OTA 1975 to be an oil field.

Restrictions on relievable expenditure U.K.

332D Expenditure on acquisition of asset: disqualifying conditions U.K.

(1) Investment expenditure incurred by a company (“the acquiring company”) on the acquisition of an asset [F551 (“the acquisition concerned”)] is not relievable expenditure for the purposes of section 332C if either of the disqualifying conditions in this section applies to the asset.

(2) The first disqualifying condition is that investment expenditure incurred before the [F552 acquisition concerned,] by the acquiring company or another company, in acquiring, [F553 leasing,] bringing into existence or enhancing the value of the asset was relievable under section 332C.

(3) The second disqualifying condition is that—

(a) the asset—

(i) is the whole or part of the equity in a qualifying oil field, or

(ii) is acquired in connection with a transfer to the acquiring company of the whole or part of the equity in a qualifying oil field,

(b) expenditure was incurred before the [F554 acquisition concerned,] by the acquiring company or another company, in acquiring, [F555 leasing,] bringing into existence or enhancing the value of the asset, and

(c) any of that expenditure—

(i) related to the qualifying oil field, and

(ii) would have been relievable under section 332C if this Chapter had been fully in force and had applied to expenditure incurred at that time.

(4) For the purposes of subsection (3)(a)(ii) it does not matter whether the asset is acquired at the time of the transfer.

[F556 (5) In subsection (3)(c) “this Chapter” means the provisions of this Chapter, and of any regulations made under this Chapter, as those provisions have effect at the time when the investment expenditure mentioned in subsection (1) is incurred.

(6) Subsections (7) and (8) apply where investment expenditure mentioned in subsection (1) would, in the absence of this section, be relievable under section 332C by reason of section 332CA (treatment of expenditure incurred before field is determined).

(7) Where this subsection applies—

(a) subsection (2) is to be read as if after “was” there were inserted “ , or has become, ”, and

(b) in determining for the purposes of subsection (2) or (3)(b) whether particular expenditure was incurred “before” the acquisition concerned—

(i) paragraph (b) of section 332CA(3) is to be ignored, and

(ii) accordingly, that expenditure is to be taken (for the purposes of determining whether it was incurred before the acquisition concerned) to have been incurred when it was actually incurred.

(8) Where this subsection applies, in determining whether the second disqualifying condition applies to the asset—

(a) the reference in subsection (3)(a)(i) to a qualifying oil field is to be read as including an area which, at the time of the acquisition concerned, had not been determined to be an oil field but which has subsequently become a qualifying oil field,

(b) the reference in subsection (3)(a)(ii) to a qualifying oil field is to be read as including an area which, at the time of the transfer, had not been determined to be an oil field but which has subsequently become a qualifying oil field,

(c) the reference in subsection (3)(c)(i) to “the qualifying oil field” is to be read accordingly, and

(d) the following sub-paragraph is to be treated as substituted for subsection (3)(c)(ii)—

“(ii) would have been relievable under section 332C if this Chapter had been fully in force and had applied to expenditure incurred at the time when that expenditure was actually incurred and the area in question had been a qualifying oil field at that time.”

(9) In subsection (8)(a) and (b) “determined” means determined under Schedule 1 to OTA 1975.

(10) In this section any reference to expenditure which was incurred by a company in “leasing” an asset is to expenditure incurred by the company under an agreement under which the asset was leased to the company.]

Textual Amendments

F551 Words in s. 332D(1) inserted (with effect in accordance with s. 59(6) of the amending Act) by Finance Act 2016 (c. 24), s. 59(2)

F552 Words in s. 332D(2) substituted (with effect in accordance with s. 59(6) of the amending Act) by Finance Act 2016 (c. 24), s. 59(3)(a)

F553 Word in s. 332D(2) inserted (with effect in accordance with s. 59(6) of the amending Act) by Finance Act 2016 (c. 24), s. 59(3)(b)

F554 Words in s. 332D(3)(b) substituted (with effect in accordance with s. 59(6) of the amending Act) by Finance Act 2016 (c. 24), s. 59(4)(a)

F555 Word in s. 332D(3)(b) inserted (with effect in accordance with s. 59(6) of the amending Act) by Finance Act 2016 (c. 24), s. 59(4)(b)

F556 S. 332D(5)-(10) inserted (with effect in accordance with s. 59(6) of the amending Act) by Finance Act 2016 (c. 24), s. 59(5)

332DA Restriction where field qualified for field allowance as new field U.K.

(1) This section applies to expenditure which—

(a) is incurred by a company in relation to an oil field that was for the purposes of Chapter 7 a new oil field with an authorisation day before 1 January 2016,

(b) would in the absence of this section be relievable under section 332C, and

(c) is not excluded from this section by—

(i) subsection (5) (material completion),

(ii) subsection (7) (company without share of equity), or

(iii) subsection (8) (additionally-developed oil fields).

In the following provisions of this section, expenditure to which this section applies is referred to as “relevant expenditure”.

(2) Relevant expenditure incurred by a company on any day (“the relevant day”) is not relievable expenditure for the purposes of section 332C except—

(a) if immediately before the relevant day the cumulative total of relevant expenditure attributable to the company's share of the equity in the oil field (see subsection (3)) exceeds the relevant field threshold (see subsection (4)), or

(b) to the extent that, in a case not within paragraph (a), the amount of relevant expenditure incurred on the relevant day, when added to that cumulative total, exceeds the relevant field threshold.

(3) The “cumulative total of relevant expenditure attributable to the company's share of the equity in the oil field” at any time is the total amount of relevant expenditure which is incurred by the company during the period beginning with the start date and ending with that time, but this is subject to sections 332IA(3) and 332IB(4) (which relate to the disposal and acquisition of equity in an oil field).

In this subsection “the start date” means 1 April 2015 or, if later, the authorisation day (within the meaning of Chapter 7) for the field.

(4) The “relevant field threshold” is an amount given by the formula—

where—

F is the total field allowance for the oil field, as originally determined under section 356 for the purposes of Chapter 7;

E is the company's share of the equity in the oil field at the end of the relevant day.

(5) This section does not apply to expenditure which is incurred on or after the day determined by the [F557 relevant national authority] as that on which the relevant project was materially completed.

[F558 (5A) The relevant national authority” is—

(a) where the relevant project relates to a field that is wholly within the Welsh onshore area (as defined in section 8A of the Petroleum Act 1998), the Welsh Ministers;

(b) otherwise, the OGA.]

(6) “The relevant project” means—

(a) in a case that fell within section 351(1)(a), the development described in the field development plan for the field, and

(b) in a case that fell within section 351(1)(b) or (c), the programme of development for the field.

(7) This section does not apply to expenditure incurred by a company if—

(a) at the time when the expenditure is incurred, the company is not a licensee in the oil field, and

(b) the expenditure is incurred in making an asset available in a way which gives rise to tariff receipts (as defined by section 15(3) of the Oil Taxation Act 1983) or tax-exempt tariffing receipts (as defined by section 6A(2) of that Act).

(8) This section does not apply to expenditure to which section 332DB applies.

Textual Amendments

F557 Words in s. 332DA(5) substituted (1.10.2018) by Wales Act 2017 (c. 4), s. 71(4), Sch. 6 para. 25(2) (with Sch. 7 paras. 1, 6); S.I. 2017/1179, reg. 4(b)

F558 S. 332DA(5A) inserted (1.10.2018) by Wales Act 2017 (c. 4), s. 71(4), Sch. 6 para. 25(3) (with Sch. 7 paras. 1, 6); S.I. 2017/1179, reg. 4(b)

332DB Restriction where project in additionally-developed field qualified for field allowance U.K.

(1) This section applies to expenditure which—

(a) is incurred by a company in relation to a project by reference to which an oil field was immediately before 1 April 2015 an additionally-developed oil field for the purposes of Chapter 7,

(b) would in the absence of this section be relievable under section 332C, and

(c) is not excluded from this section by subsection (5) (material completion) or subsection (6) (company without share of project-related reserves).

In the following provisions of this section, expenditure to which this section applies is referred to as “relevant expenditure”.

(2) Relevant expenditure incurred by a company in relation to a project on any day (“the relevant day”) is not relievable expenditure for the purposes of section 332C except—

(a) if immediately before the relevant day the cumulative total of relevant expenditure attributable to the company's share of project-related reserves (see subsection (3)) exceeds the relevant project threshold (see subsection (4)), or

(b) to the extent that, in a case not within paragraph (a), the amount of relevant expenditure incurred on the relevant day, when added to that cumulative total, exceeds the relevant project threshold.

(3) The “cumulative total of relevant expenditure attributable to the company's share of project-related reserves” at any time is the total amount of relevant expenditure which is incurred by the company during the period beginning with 1 April 2015 and ending with that time, but this is subject to sections 332IA(5) and 332IB(6) (which relate to the disposal and acquisition of shares in project-related reserves).

(4) The “relevant project threshold” is an amount given by the formula—

where—

F is the total field allowance for the oil field in relation to the project, as originally determined under section 356A for the purposes of Chapter 7;

E is the company's share of project-related reserves at the end of the relevant day.

(5) This section does not apply to expenditure which is incurred on or after the day determined by the [F559 OGA] as that on which the project was materially completed.

(6) This section does not apply to expenditure incurred by a company if—

(a) the company does not, at the time when the expenditure is incurred, hold a share of project-related reserves, and

(b) the expenditure is incurred in making an asset available in a way which gives rise to tariff receipts (as defined by section 15(3) of the Oil Taxation Act 1983) or tax-exempt tariffing receipts (as defined by section 6A(2) of that Act).

(7) In this section “project-related reserves”, in relation to a project and an oil field, means the additional reserves of oil that the oil field has as a result of the project.

Textual Amendments

F559 Word in s. 332DB(5) substituted (1.10.2016) by The Petroleum (Transfer of Functions) Regulations 2016 (S.I. 2016/898), regs. 1(2), 15(4)

332DC Restriction relating to fields qualifying for onshore allowance U.K.

(1) This section applies to investment expenditure which is incurred—

(a) for the purposes of onshore oil-related activities in respect of an oil field which is a qualifying site within the meaning of section 356C (generation of onshore allowance), and

(b) on a day at the beginning of which neither of the disqualifying conditions in section 356CA (disqualifying conditions for section 356C(4)(b)) is met.

(2) Expenditure to which this section applies is not relievable expenditure for the purposes of section 332C.

(3) In this section “onshore oil-related activities” has the same meaning as in Chapter 8 (see section 356BA).

Reduction of adjusted ring fence profits U.K.

332E Reduction of adjusted ring fence profits U.K.

(1) A company's adjusted ring fence profits for an accounting period are to be reduced by the cumulative total amount of activated allowance for the accounting period (but are not to be reduced below zero).

(2) In relation to a company and an accounting period, the “cumulative total amount of activated allowance” is—

where—

A is the total of any amounts of activated allowance the company has, for any qualifying oil fields, for the accounting period (see section 332F(2)) or for reference periods within the accounting period (see section 332H(1)), and

C is any amount carried forward to the period under section 332EA.

332EA Carrying forward of activated allowance U.K.

(1) This section applies where, in the case of a company and an accounting period, the cumulative total amount of activated allowance (see section 332E(2)) is greater than the adjusted ring fence profits.

(2) The difference is carried forward to the next accounting period.

Activated and unactivated allowance: basic calculation rules U.K.

332F Activation of allowance: no change of equity share U.K.

(1) This section applies where—

(a) for the whole or part of an accounting period, a company is a licensee in a qualifying oil field,

(b) the accounting period is not divided into reference periods (see section 332G),

(c) the company holds, for the accounting period and the qualifying oil field, a closing balance of unactivated allowance (see section 332FA) which is greater than zero, and

(d) the company has relevant income from the qualifying oil field for the accounting period.

(2) The amount of activated allowance the company has for that accounting period and that qualifying oil field is the smallest of—

(a) the closing balance of unactivated allowance held for the accounting period and the oil field;

(b) [F560 the total amount of] the company's relevant income from that oil field for that accounting period;

(c) in a case where section 332FB applies, the relevant activation limit for the accounting period and the oil field (see subsection (2) of that section).

[F561 (3) For the purposes of this Chapter, income is relevant income of a company from a qualifying oil field for an accounting period if it is—

(a) production income of the company from any oil extraction activities carried on in that oil field that is taken into account in calculating the company's adjusted ring fence profits for the accounting period, or

(b) income that—

(i) is income of such description (whether or not relating to the oil field) as may be prescribed by the Treasury by regulations, and

(ii) is taken into account as mentioned in paragraph (a).

(4) The Treasury may by regulations make such amendments of this Chapter as the Treasury consider appropriate in consequence of, or in connection with, any provision contained in regulations under subsection (3)(b).

(5) Regulations under subsection (3)(b) or (4) may provide for any of the provisions of the regulations to have effect in relation to accounting periods ending before (or current when) the regulations are made.

(6) But subsection (5) does not apply to—

(a) any provision of amending or revoking regulations under subsection (3)(b) which has the effect that income of any description is to cease to be treated as relevant income of a company from a qualifying oil field for an accounting period, or

(b) provision made under subsection (4) in consequence of or in connection with provision within paragraph (a).

(7) Regulations under this section may make transitional provision or savings.

(8) 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.]

[F562 (9) Where a tariff receipt of the company relates only partly to the oil field mentioned in subsection (1), for the purposes of subsection (3)(b) the tariff receipt is to be attributed to the oil field on a just and reasonable basis.

(10) If the company has entered into any arrangements the purpose, or one of the main purposes of which is—

(a) to cause income to fall within subsection (3)(b), or

(b) to advance the time at which any income falls within that provision,

any income arising in connection with the arrangement is not regarded as a tariff receipt for the purposes of subsection (3)(b).

(11) In subsection (10) “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).]

Textual Amendments

F560 Words in s. 332F(2)(b) inserted (15.9.2016) by Finance Act 2016 (c. 24), s. 60(2)

F561 Ss. 332F(3)-(8) substituted for s. 332F(3) (15.9.2016) by Finance Act 2016 (c. 24), s. 60(3)

F562 Ss. 332F(9)-(11) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Investment Allowance and Cluster Area Allowance (Relevant Income Tariff Receipts) Regulations 2019 (S.I. 2019/63), regs. 1(1), 4(2)

332FA The closing balance of unactivated allowance for an accounting period U.K.

The closing balance of unactivated allowance held by a company for an accounting period and a qualifying oil field is—

where—

• P is the amount of investment allowance generated by the company in the qualifying oil field in the accounting period (including any amount treated under section 332IB(1) as generated by the company in that field in that accounting period);

• Q is any amount carried forward from an immediately preceding accounting period under section 332FC(1) or from an immediately preceding reference period under section 332HB(1).

332FB Activation limit for former additionally-developed fields U.K.

(1) This section applies to a company for an accounting period in relation to an oil field if—

(a) immediately before 1 April 2015 the oil field was an additionally-developed oil field for the purposes of Chapter 7 as a result of a project that fell within section 349A(1), and

(b) the project is not an excluded project (see subsection (3)).

(2) For the purposes of section 332F(2)(c), the “relevant activation limit” for the accounting period and the oil field is the amount that would be the closing balance of unactivated allowance held by the company for the accounting period if paragraph 7(3) of Schedule 12 to FA 2015 (conversion of unactivated field allowance) had never applied to any allowance attributable to the project.

(3) The project is an “excluded” project if condition A or condition B is met.

(4) Condition A is that—

(a) a substantial amount of work has been done in relation to the project, and

(b) the accounting period begins on or after the first day of the year of expected first production for the project.

(5) The “year of expected first production” for the project is the year that was notified to the Secretary of State, on or before the day on which the project was authorised by the Secretary of State, as the calendar year in which additional reserves of oil were expected to be first won from the field as a result of the project.

(6) Condition B is that the accounting period begins on or after the day determined under section 332DB(5) as that on which the project was materially completed.

332FC Carrying forward of unactivated allowance U.K.

(1) If, in the case of an accounting period of a company and a qualifying oil field, the amount given by subsection (2) is greater than zero, that amount is treated as investment allowance held by the company for that oil field for the next period (and is treated as held with effect from the beginning of that period).

(2) The amount is—

where—

U is the closing balance of unactivated allowance held for the accounting period and the qualifying oil field (see section 332FA);

A is the amount of activated allowance that the company has for the accounting period and the qualifying oil field (see section 332F(2));

T is any amount that is required by section 332IA(1) (reduction of allowance if equity disposed of) to be deducted in connection with a disposal or disposals made on the day following the end of the accounting period.

(3) If the accounting period is followed by a reference period of the company belonging to that qualifying oil field (see section 332G), “the next period” means that period.

(4) If subsection (3) does not apply “the next period” means the next accounting period of the company.

Changes in equity share: reference periods U.K.

332G Reference periods U.K.

(1) This section applies where—

(a) a company is a licensee in a qualifying oil field for the whole or part of an accounting period, and

(b) the company has different shares of the equity in the field on different days in the accounting period.

(2) For the purposes of this Chapter, the accounting period is to be divided into as many consecutive periods (called “reference periods”) as are necessary to secure that—

(a) a reference period begins with the first day of the accounting period,

(b) a reference period begins with the date of each disposal or acquisition of a share of the equity in the qualifying oil field that is made by the company in that accounting period (not including acquisitions or disposals made on the first day of the accounting period), and

(c) a reference period ends with the last day of the accounting period.

(3) Each such reference period “belongs to” the qualifying oil field concerned.

Changes in equity share: activation of allowance U.K.

332H Activation of allowance: reference periods U.K.

(1) The amount (if any) of activated allowance that a company has for a qualifying oil field for a reference period is the smallest of the following—

(a) the total amount of unactivated allowance that is attributable to the reference period and the oil field (see section 332HA);

(b) the company's relevant income from the oil field for the reference period (see subsection (2));

(c) in a case where section 332FB (activation limit applying in case of certain fields) applies, the relevant activation limit for the reference period and the oil field (see subsection (3)).

(2) The company's relevant income from the oil field for the reference period is so much of the company's relevant income from the oil field for the accounting period (see section 332F(3)) as arises in the reference period.

(3) If section 332FB (activation limit applying in case of certain fields) applies in relation to the oil field for the accounting period in which the reference period falls, the “relevant activation limit” for the reference period and the oil field is the amount that would be the total amount of unactivated allowance attributable to the reference period and the oil field if paragraph 7(3) of Schedule 12 to FA 2015 (conversion of unactivated field allowance) had never applied to any allowance attributable to the project in question.

332HA Unactivated amounts attributable to a reference period U.K.

(1) For the purposes of section 332H(1)(a), the total amount of unactivated allowance attributable to a reference period and a qualifying oil field is—

where—

P is the amount of allowance generated by the company in the reference period in the oil field (including any amount treated under section 332IB(1) as generated by the company in that oil field in that reference period);

Q is the amount given by subsection (2) or (3).

(2) Where the reference period is not immediately preceded by another reference period but is preceded by an accounting period of the company, Q is equal to the amount (if any) that is to be carried forward from that preceding accounting period under section 332FC(1).

(3) Where the reference period is immediately preceded by another reference period, Q is equal to the amount (if any) carried forward under section 332HB(1).

332HB Carry-forward of unactivated allowance from a reference period U.K.

(1) If, in the case of a reference period (“RP1”) of a company, the amount given by subsection (2) is greater than zero, that amount is treated as investment allowance held by the company for the qualifying oil field for the next period (and is treated as held with effect from the beginning of that period).

(2) The amount is—

where—

U is the total amount of unactivated allowance attributable to the reference period and the qualifying oil field (see section 332HA(1));

A is the amount of activated allowance that the company has for the qualifying oil field for the reference period (see section 332H(1));

T is any amount that is required by section 332IA(1) (reduction of allowance if equity disposed of) to be deducted in connection with a disposal or disposals made on the day following the end of the reference period.

(3) If RP1 is immediately followed by another reference period of the company (belonging to the same qualifying oil field), “the next period” means that reference period.

(4) If subsection (3) does not apply, “the next period” means the next accounting period of the company.

Transfers of allowance on disposal of equity share U.K.

332I Introduction to sections 332IA and 332IB U.K.

(1) Sections 332IA and 332IB apply where—

(a) a company (“the transferor”) disposes of the whole or part of its share of the equity in a qualifying oil field, and

(b) one or more of the following conditions is met.

(2) The “unactivated allowance condition” is that immediately before the disposal the transferor holds unactivated investment allowance for the oil field.

(3) The “section 332DA expenditure condition” is that—

(a) immediately before the disposal the company has for the purposes of section 332DA (restriction where field qualified for field allowance as new field) a cumulative total of relevant expenditure attributable to its share of the equity in the oil field, and

(b) the date of the disposal falls before any date determined under section 332DA(5) (material completion).

(4) The “section 332DB expenditure condition” is that—

(a) immediately before the disposal the company has for the purposes of section 332DB (restriction where project in additionally-developed field qualified for field allowance) a cumulative total of relevant expenditure attributable to its share of project-related reserves in relation to the oil field, and

(b) the date of the disposal falls before any date determined under section 332DB(5) (material completion).

(5) In sections 332IA and 332IB—

(a) each of the companies to which a share of the equity is disposed of is referred to as “a transferee”, and

(b) references to conditions are to be read in accordance with this section.

332IA Reduction of allowance if equity is disposed of U.K.

(1) If the unactivated allowance condition is met, the following amount is to be deducted in calculating the total amount of unactivated investment allowance attributable to the qualifying oil field concerned that is to be carried forward under section 332FC or 332HB from an accounting period or reference period of the transferor—

where—

U and A are—

(a)

in the case of a disposal made on the day following the end of an accounting period, the same as in section 332FC(2) (in its application to that period), or

(b)

in the case of a disposal made on the day following the end of a reference period, the same as in section 332HB(2) (in its application to that period);

E1 is the transferor's share of the equity in the qualifying oil field immediately before the disposal;

E2 is the transferor's share of the equity in the qualifying oil field immediately after the disposal.

(2) Subsection (3) applies if the section 332DA expenditure condition is met.

(3) As from the beginning of the accounting period or reference period that begins with the day on which the disposal is made, the following amount is to be deducted in calculating for the purposes of section 332DA the cumulative total of relevant expenditure attributable to the transferor's share of the equity in the oil field—

where—

X is the cumulative total of relevant expenditure attributable to the transferor's share of the equity in the oil field (for the purposes of section 332DA), determined immediately before the disposal;

E1 and E2 have the same meaning as in subsection (1).

(4) Subsection (5) applies if the section 332DB expenditure condition is met.

(5) As from the beginning of the accounting period or reference period that begins with the day on which the disposal is made, the following amount is to be deducted in calculating for the purposes of section 332DB the cumulative total of relevant expenditure attributable to the transferor's share of project-related reserves—

where—

X is the cumulative total of relevant expenditure attributable to the transferor's share of project-related reserves (for the purposes of section 332DB), determined immediately before the disposal;

E1 is the transferor's share, immediately before the disposal, of the additional reserves of oil that the oil field has as a result of the project;

E2 is the transferor's share, immediately after the disposal, of the additional reserves of oil that the oil field has as a result of the project.

332IB Acquisition of allowance if equity acquired U.K.

(1) If the unactivated allowance condition is met, a transferee is treated as generating in the qualifying oil field concerned, at the beginning of the reference period or accounting period of the transferee that begins with the day on which the disposal is made, investment allowance of the amount given by subsection (2).

(2) The amount is—

where—

R is the amount determined for the purposes of the deduction under section 332IA(1);

E3 is the share of the equity in the qualifying oil field that the transferee has acquired from the transferor;

E1 and E2 are the same as in section 332IA(1).

(3) Subsection (4) applies if the section 332DA expenditure condition is met.

(4) A transferee is treated for the purposes of section 332DA(3) as having incurred in respect of the qualifying oil field, at the beginning of the reference period or accounting period of the transferee that begins with the day on which the disposal is made, expenditure of the following amount—

where—

R is the amount determined for the purposes of the deduction under section 332IA(3);

E1, E2 and E3 have the same meaning as in subsection (2).

(5) Subsection (6) applies if the section 332DB expenditure condition is met.

(6) A transferee is treated for the purposes of section 332DB(3) as having incurred in respect of the project, at the beginning of the reference period or accounting period of the transferee that begins with the day on which the disposal is made, expenditure of the following amount—

where—

R is the amount determined for the purposes of the deduction under section 332IA(5);

E3 is the share of the project-related reserves that the transferee has acquired from the transferor;

E1 and E2 have the same meaning as in section 332IA(5).

(7) In subsection (6) “project-related reserves” means the additional reserves of oil that the oil field has as a result of the project.

Miscellaneous U.K.

332J Adjustments U.K.

(1) This section applies if there is any alteration in a company's adjusted ring fence profits for an accounting period after this Chapter has effect in relation to the profits.

(2) Any necessary adjustments to the operation of this Chapter (whether in relation to the profits or otherwise) are to be made (including any necessary adjustments to the effect of section 332E on the profits or to the calculation of the amount to be carried forward under section 332EA).

332JA Regulations amending specified percentages U.K.

(1) The Treasury may by regulations substitute a different percentage for the percentage that is at any time specified in any of the following provisions—

(a) section 332C(2) (calculation of allowance as a percentage of investment expenditure);

(b) section 332DA(4) (calculation of relevant field threshold in relation to former new field);

(c) section 332DB(4) (calculation of relevant project threshold in relation to former additionally-developed field).

(2) Regulations under subsection (1) may include transitional provision.

Interpretation U.K.

332K When expenditure is incurred U.K.

(1) Section 5 of CAA 2001 (when capital expenditure is incurred) applies for the purposes of this Chapter as for the purposes of that Act.

(2) Regulations under section 332BA(1)(b) may make provision about when any expenditure that is investment expenditure as a result of the regulations is to be treated for the purposes of this Chapter as incurred.

(3) This section is subject to section 332CA(3).

332KA Other definitions U.K.

In this Chapter (except where otherwise specified)—

• “adjusted ring fence profits”, in relation to a company and an accounting period, is to be read in accordance with section 330ZA;

• “cumulative total amount of activated allowance” has the meaning given by section 332E(2);

• “investment allowance” has the meaning given by section 332C(2);

• “licence” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act);

• “licensee” has the same meaning as in Part 1 of OTA 1975;

• “relevant income”, in relation to a qualifying oil field and an accounting period, has the meaning given by section 332F(3).]

F563 Chapter 7 U.K. REDUCTION OF SUPPLEMENTARY CHARGE FOR ELIGIBLE OIL FIELDS

Textual Amendments

F563 Pt. 8 Ch. 7 omitted (with effect in accordance with Sch. 12 para. 6-8 of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 12 para. 3

Reduction of adjusted ring fence profits U.K.

333 Reduction of adjusted ring fence profits U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pool of field allowances U.K.

334 Company's pool of field allowances U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

335 Carrying part of pool of field allowances into following period U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

336 Carrying whole of pool of field allowances into following period U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Field allowance: when held and unactivated amount U.K.

337 Licensee to hold field allowance U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

338 Holding a field allowance on acquisition of equity share U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

339 Unactivated amount of field allowance U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

No change in equity share: activation of allowance U.K.

340 Introduction to section 341 U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

341 Activation of field allowance U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in equity share: activation of allowance U.K.

342 Introduction to sections 343 and 344 U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

343 Reference periods U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

344 Activation of field allowance U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in equity share: transfer of field allowance U.K.

345 Introduction to sections 346 and 347 U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

346 Reduction of field allowance if equity disposed of U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

347 Acquisition of field allowance if equity acquired U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Miscellaneous U.K.

348 Adjustments U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

349 Orders U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation U.K.

349A “Additionally-developed oil field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

350 “New oil field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

351 “Authorisation of development of an oil field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

352 “Qualifying oil field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

353 “Small oil field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

354 “Ultra heavy oil field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

355 “Ultra high pressure/high temperature oil field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

355A “Large deep water oil field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

355B “Large shallow water gas field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

355C “Deep water gas field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

356 “Total field allowance for a new oil field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

356A “Total field allowance for an additionally-developed oil field” U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

356AA Other definitions U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

357 Other definitions U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F564 CHAPTER 8 U.K. Supplementary charge: onshore allowance

Textual Amendments

F564 Pt. 8 Ch. 8 inserted (with effect in accordance with Sch. 15 paras. 6(1), 9(2) of the amending Act) by Finance Act 2014 (c. 26), Sch. 15 para. 3

Introduction U.K.

356B Overview U.K.

This Chapter sets out how relief for certain capital expenditure incurred for the purposes of onshore oil-related activities is given by way of reduction of a company's adjusted ring fence profits, and includes provision about—

(a) the need for allowance held for a site to be activated by relevant income from the same site in order for the allowance to be available for reducing adjusted ring fence profits,

(b) elections by a company to transfer allowance between different sites in which it is a licensee (see section 356F), and

(c) mandatory transfers of allowance where shares in the equity in a licensed area are disposed of (see sections 356H to 356HB and the related provisions in sections 356G to 356GD).

356BA “Onshore oil-related activities” U.K.

(1) In this Chapter “onshore oil-related activities” means activities of a company which are carried on onshore and—

(a) fall within any of subsections (1) to (4) of section 356BB, or

(b) consist of the acquisition, enjoyment or exploitation of oil rights.

(2) Activities of a company are carried on “onshore” if they are authorised—

(a) under a landward licence under Part 1 of the Petroleum Act 1998 or the Petroleum (Production) Act 1934, or

(b) under a licence under the Petroleum (Production) Act (Northern Ireland) 1964.

(3) In subsection (2)(a) “landward licence” means a licence in respect of an area which falls within the definition of “landward area” in the regulations pursuant to which the licence was applied for.

356BB The activities U.K.

(1) Activities of a company in searching for oil or causing such searching to be carried out for the company.

(2) Activities of a company in extracting oil, or causing oil to be extracted for it, under rights which—

(a) authorise the extraction, and

(b) are held by it or by a company associated with it.

(3) Activities of a company in transporting, or causing to be transported for it, oil extracted under rights which—

(a) authorise the extraction, and

(b) are held as mentioned in subsection (2)(b),

but only if the transportation meets the condition in subsection (5).

(4) Activities of the company in effecting, or causing to be effected for it, the initial treatment or initial storage of oil won from any site under rights which—

(a) authorise its extraction, and

(b) are held as mentioned in subsection (2)(b).

(5) The condition mentioned in subsection (3) is that the transportation is to a place at which the seller in a sale at arm's length could reasonably be expected to deliver it (or, if there is more than one such place, the one nearest to the place of extraction).

(6) In this section “initial storage”—

(a) means, in relation to oil won from a site, the storage of a quantity of oil won from the site not exceeding 10 times the relevant share of the maximum daily production rate of oil for the site as planned or achieved (whichever is greater), but

(b) does not include the matters excluded by paragraphs (a) to (c) of the definition of “initial storage” in section 12(1) of OTA 1975;

and in this subsection “the relevant share” means a share proportionate to the company's share of oil won from the site concerned.

(7) In this section “initial treatment” has the meaning given by section 12(1) of OTA 1975; but for this purpose that definition is to be read as if the references in it to an oil field were to a site.

356BC “Site” U.K.

In this Chapter “site” (except in the expression “drilling and extraction site”) means—

(a) a drilling and extraction site that is not used in connection with any oil field, or

(b) an oil field (whether or not one or more drilling and extraction sites are used in connection with it).

Onshore allowance U.K.

356C Generation of onshore allowance U.K.

(1) Subsection (2) applies where a company incurs any relievable capital expenditure in relation to a qualifying site.

(2) The company is to hold an amount of allowance equal to 75% of the amount of the expenditure.

(3) “Qualifying site” means a site whose development (in whole or in part) is authorised for the first time on or after 5 December 2013.

(4) Capital expenditure incurred by a company is “relievable” only if, and so far as—

(a) it is incurred for the purposes of onshore oil-related activities (see section 356BA), and

(b) neither of the disqualifying conditions is met at the beginning of the day on which the expenditure is incurred (see section 356CA).

[F565 (4A) Subsections (1) to (4) are subject to section 356CAA (which prevents expenditure on the acquisition of an asset from being relievable in certain circumstances).]

(5) Allowance held under this Chapter is called “onshore allowance”.

(6) Onshore allowance is said in this Chapter to be “generated” at the time when the capital expenditure is incurred (see section 356JA).

(7) Onshore allowance is referred to in this Chapter as being generated—

(a) “by” the company concerned,

(b) “at” the site concerned.

(8) Where capital expenditure is incurred only partly for the purposes of onshore oil-related activities, or the onshore oil-related activities for the purposes of which capital expenditure is incurred are carried on only partly in relation to a particular site, the expenditure is to be attributed to the site concerned on a just and reasonable basis.

(9) In this section, references to authorisation of development of a site—

(a) in the case of a site which is an oil field, are to be read in accordance with [F566 section 356IB];

(b) in the case of a drilling and extraction site, are to be read in accordance with section 356J.

Textual Amendments

F565 S. 356C(4A) inserted (with effect in accordance with s. 61(4) of the amending Act) by Finance Act 2016 (c. 24), s. 61(2)

F566 Words in s. 356C(9)(a) substituted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 2015 (c. 11), Sch. 14 para. 5

356CA Disqualifying conditions for section 356C(4)(b) U.K.

(1) The first disqualifying condition is that production from the site is expected to exceed 7,000,000 tonnes.

(2) The second disqualifying condition is that production from the site has exceeded 7,000,000 tonnes.

(3) For the purposes of this section 1,100 cubic metres of gas at a temperature of 15 degrees celsius and pressure of one atmosphere is to be counted as equivalent to one tonne.

[F567 356CAA Expenditure on acquisition of asset: further disqualifying conditions U.K.

(1) Capital expenditure incurred by a company (“the acquiring company“) on the acquisition of an asset (“the acquisition concerned”) is not relievable capital expenditure for the purposes of section 356C if subsection (2), (3) or (8) applies to the asset.

(2) This subsection applies to the asset if capital expenditure incurred before the acquisition concerned, by the acquiring company or another company, in acquiring, bringing into existence or enhancing the value of the asset was relievable under section 356C.

(3) This subsection applies to the asset if—

(a) the asset—

(i) is the whole or part of the equity in a qualifying site, or

(ii) is acquired in connection with a transfer to the acquiring company of the whole or part of the equity in a qualifying site,

(b) capital expenditure was incurred before the acquisition concerned, by the acquiring company or another company, in acquiring, bringing into existence or enhancing the value of the asset, and

(c) any of that expenditure—

(i) related to the qualifying site, and

(ii) would have been relievable under section 356C if this Chapter had been fully in force and had applied to expenditure incurred at that time.

(4) For the purposes of subsection (3)(a)(ii) it does not matter whether the asset is acquired at the time of the transfer.

(5) In subsection (3)(c) “this Chapter” means the provisions of this Chapter as those provisions have effect at the time when the capital expenditure mentioned in subsection (1) is incurred.

(6) The reference in subsection (3)(c)(i) to the qualifying site includes an area that, although not a qualifying site when the expenditure mentioned in subsection (3)(b) was incurred, subsequently became the qualifying site.

(7) Where expenditure mentioned in subsection (3)(b) related to an area which subsequently became the qualifying site, the following sub-paragraph is to be treated as substituted for subsection (3)(c)(ii)—

“(ii) would have been relievable under section 356C if the area in question had been a qualifying site when the expenditure was incurred, or if the area in question had been such a site at that time and this Chapter had been fully in force and had applied to expenditure incurred at that time.”

(8) This subsection applies to the asset if—

(a) capital expenditure mentioned in subsection (1) would, in the absence of this section, be relievable under section 356C by reason of an election under section 356CB (treatment of expenditure not related to an established site), and

(b) capital expenditure which was incurred before the acquisition concerned, by the acquiring company or another company, in acquiring, bringing into existence or enhancing the value of the asset, either—

(i) has become relievable under section 356C by reason of an election under section 356CB, or

(ii) would be so relievable if such an election were made in respect of that expenditure.

(9) In determining for the purposes of subsection (8)(b) whether particular expenditure was incurred “before” the acquisition concerned—

(a) paragraph (b) of section 356CB(6) is to be ignored, and

(b) accordingly, that expenditure is to be taken (for the purposes of determining whether it was incurred before the acquistion concerned) to have been incurred when it was actually incurred.

(10) For the purposes of subsection (8)(b)(ii) it does not matter if an election is not in fact capable of being made.]

Textual Amendments

F567 S. 356CAA inserted (with effect in accordance with s. 61(4) of the amending Act) by Finance Act 2016 (c. 24), s. 61(3)

356CB Expenditure not related to an established site U.K.

(1) A company may make an election under this section in relation to capital expenditure incurred by it for the purposes of onshore oil-related activities if the appropriate condition is met.

(2) The appropriate condition is that at the time of the election no site can be identified as a site in relation to which the expenditure has been incurred.

(3) An election may not be made before the beginning of the third accounting period of the company after that in which the expenditure is incurred.

(4) An election must specify—

(a) the expenditure in question,

(b) a site (“the specified site”) every part of which is, or is part of, an area in which the company is a licensee, and

(c) an accounting period of the company (“the specified accounting period”).

(5) The specified accounting period must not be earlier than the accounting period in which the election is made.

(6) Where a company makes an election under this section in relation to an amount of expenditure, that amount is treated for the purposes of this Chapter as incurred by the company—

(a) in relation to the specified site, and

(b) at the beginning of the specified accounting period.

Reduction of adjusted ring fence profits U.K.

356D Reduction of adjusted ring fence profits U.K.

(1) A company's adjusted ring fence profits for an accounting period are to be reduced by the cumulative total amount of activated allowance for the accounting period (but are not to be reduced below zero).

(2) In relation to a company and an accounting period, the “cumulative total amount of activated allowance” is—

where—

A is the total of any amounts of activated allowance the company has, for any sites, for the accounting period (see section 356E(2)) or for reference periods within the accounting period (see section 356GB(1)), and

C is any amount carried forward to the period under section 356DA.

356DA Carrying forward of activated allowance U.K.

(1) This section applies where, in the case of a company and an accounting period—

(a) the cumulative total amount of activated allowance (see section 356D(2)), is greater than

(b) the adjusted ring fence profits.

(2) The difference is carried forward to the next accounting period.

F568 356DB Companies with both field allowances and onshore allowance U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F568 S. 356DB omitted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 14 para. 6

Activated and unactivated allowance: basic calculation rules U.K.

356E Activation of allowance: no change of equity share U.K.

(1) This section applies where—

(a) a company is a licensee in a licensed area for the whole or part (“the licensed part”) of an accounting period,

(b) the company's share of the equity in the site is the same throughout the accounting period or, as the case requires, throughout the licensed part of the accounting period,

(c) the licensed area is or contains a site,

(d) the company holds, for the accounting period and the site, a closing balance of unactivated allowance (see section 356EA) that is greater than zero, and

(e) the company has relevant income from the site for the accounting period.

(2) The amount of activated allowance the company has for that accounting period and that site is the smaller of—

(a) the closing balance of unactivated allowance held for the accounting period and the site;

(b) the company's relevant income for that accounting period from that site.

(3) In this Chapter “relevant income”, in relation to a site and an accounting period of a company, means production income of the company from any oil extraction activities carried on at the site that is taken into account in calculating the company's adjusted ring fence profits for the accounting period.

356EA The closing balance of unactivated allowance for an accounting period U.K.

The closing balance of unactivated allowance held by a company for an accounting period and a site is—

where—

P is the amount of onshore allowance generated by the company in the accounting period at the site (including any amount treated under section 356F(7) or 356HB(1) as generated by the company in that accounting period at that site);

Q is any amount carried forward from an immediately preceding accounting period under section 356EB(2) or from an immediately preceding reference period under section 356GC;

R is any amount deducted in accordance with section 356GD(1) (reduction of allowance if equity disposed of).

356EB Carrying forward of unactivated allowance U.K.

(1) This section applies where X is greater than Y in the case of an accounting period of a company and a site, where—

• X is the closing balance of unactivated allowance for the accounting period and the site;

• Y is the company's relevant income for the accounting period from that site.

(2) An amount equal to the difference between X and Y is treated as onshore allowance held by the company for that site for the next accounting period (and is treated as held with effect from the beginning of that period).

Transfer of allowances between sites U.K.

356F Transfer of allowances between sites U.K.

(1) This section applies if a company has, with respect to a site, an amount (“N”) of onshore allowance available to carry forward to an accounting period—

(a) under section 356EB(2), or

(b) by virtue of section 356GC(3).

(2) The company may elect to transfer the whole or part of that amount to another site (“site B”), if the appropriate conditions are met.

(3) The appropriate conditions are that—

(a) every part of site B is, or is part of, an area in which the company is a licensee, and

(b) the election is made no earlier than the beginning of the third accounting period of the company after that in which the allowance was generated.

(4) For the purposes of subsection (3)(b), a company may regard an amount of onshore allowance held by it for a site as generated in a particular accounting period if the amount does not exceed—

where—

A is the amount of onshore allowance generated in that accounting period for that site;

T is the total amount of onshore allowance generated in that period for that site that has already been transferred under this section.

(5) An election must specify—

(a) the amount of onshore allowance to be transferred;

(b) the site at which it was generated;

(c) the site to which it is transferred;

(d) the accounting period in which it was generated.

(6) Where a company makes an election under subsection (2), then—

(a) if the company elects to transfer the whole of N, no amount is available to be carried forward under section 356EB(2) or (as the case may be) by virtue of section 356GC(3);

(b) if the company elects to transfer only part of N, the amount available to be carried forward as mentioned in subsection (1) is reduced by the amount transferred.

(7) Where an amount of onshore allowance is transferred to a site as a result of an election, this Chapter has effect as if the allowance is generated at that site at the beginning of the accounting period in which the election is made.

Changes in equity share: activation of allowance U.K.

356G Introduction to sections 356GA to 356GD U.K.

(1) Sections 356GA to 356GD apply to a company in respect of an accounting period and a licensed area that is or contains a site, if the following conditions are met—

(a) the company is a licensee in the licensed area for the whole, or for part, of the accounting period;

(b) the company has different shares (greater than zero) of the equity in the licensed area at different times during the accounting period.

(2) In a case where a company has three or more different shares of the equity in a licensed area during a particular day, sections 356GA to 356GD (in particular, provisions relating to the beginning or end of a day) have effect subject to the necessary modifications.

356GA Reference periods U.K.

(1) For the purposes of sections 356GB to 356GD, the accounting period, or (if the company is not a licensee for the whole of the accounting period) the part or parts of the accounting period for which the company is a licensee, are to be divided into reference periods (each of which “belongs to” the site concerned).

(2) A reference period is a period of consecutive days that meets the following conditions—

(a) at the beginning of each day in the period, the company is a licensee in the licensed area;

(b) at the beginning of each day in the period, the company's share of the equity in the licensed area is the same;

(c) each day in the period falls within the accounting period.

356GB Activation of allowance: reference periods U.K.

(1) The amount (if any) of activated allowance that a company has with respect to a site for a reference period is the smaller of the following—

(a) the company's relevant income from the site in the reference period;

(b) the total amount of unactivated allowance that is attributable to the reference period and the site (see section 356GD).

(2) The company's relevant income from the site in the reference period is—

where—

I is the company's relevant income from the site in the whole of the accounting period;

R is the number of days in the reference period;

L is the number of days in the accounting period for which the company is a licensee in the licensed area concerned.

356GC Carry-forward of unactivated allowance from a reference period U.K.

(1) If, in the case of a reference period (“RP1”) of a company, the amount mentioned in subsection (1)(b) of section 356GB exceeds the amount mentioned in subsection (1)(a) of that section, an amount equal to the difference between those amounts is treated as onshore allowance held by the company for the site concerned for the next period.

(2) If RP1 is immediately followed by another reference period of the company (belonging to the same site), “the next period” means that reference period.

(3) If subsection (2) does not apply, “the next period” means the next accounting period of the company.

356GD Unactivated amounts attributable to a reference period U.K.

(1) For the purposes of section 356GB(1)(b), the total amount of unactivated allowance attributable to a reference period and a site is—

where—

P is the amount of allowance generated by the company in the reference period at the site (including any amount treated under section 356F(7) or 356HB(1) as generated by the company in that accounting period at that site);

Q is the amount given by subsection (2) or (3);

R is any amount to be deducted under section 356HA(1) in respect of a disposal of the whole or part of the company's share of the equity in a licensed area that is or contains the site.

(2) Where the reference period is not immediately preceded by another reference period but is preceded by an accounting period of the company, Q is equal to the amount (if any) that is to be carried forward from that preceding accounting period under section 356EB(2).

(3) Where the reference period is immediately preceded by another reference period, Q is equal to the amount carried forward by virtue of section 356GC(2).

Transfers of allowance on disposal of equity share U.K.

356H Introduction to sections 356HA and 356HB U.K.

(1) Sections 356HA and 356HB apply where a company (“the transferor”)—

(a) disposes of the whole or part of its share of the equity in a licensed area that is or contains a site;

(b) immediately before the disposal holds (unactivated) onshore allowance for the site concerned.

(2) Each company to which a share of the equity is disposed of is referred to in section 356HB as “a transferee”.

356HA Reduction of allowance if equity disposed of U.K.

(1) The following amount is to be deducted, in accordance with section 356GD(1), in calculating the total amount of unactivated allowance attributable to a reference period and a site—

where—

F is the pre-transfer total of unactivated allowance for the reference period that ends with the day on which the disposal is made;

E1 is the transferor's share of the equity in the licensed area immediately before the disposal;

E2 is the transferor's share of the equity in the licensed area immediately after the disposal.

(2) The “pre-transfer total of unactivated allowance” for a reference period is—

where P and Q are the same as in section 356GD.

356HB Acquisition of allowance if equity acquired U.K.

(1) A transferee is treated as generating at the site concerned, at the beginning of the reference period or accounting period of the transferee that begins with, or because of, the disposal, onshore allowance of the amount given by subsection (2).

(2) The amount is—

where—

R is the amount determined for the purposes of the deduction under section 356HA(1);

E3 is the share of equity in the licensed area that the transferee has acquired from the transferor;

E1 and E2 are the same as in section 356HA.

Miscellaneous U.K.

356I Adjustments U.K.

(1) This section applies if there is any alteration in a company's adjusted ring fence profits for an accounting period after this Chapter has effect in relation to the profits.

(2) Any necessary adjustments to the operation of this Chapter (whether in relation to the profits or otherwise) are to be made (including any necessary adjustments to the effect of section 356D on the profits or to the calculation of the amount to be carried forward under section 356DA).

356IA Orders U.K.

(1) The Treasury may by order substitute a different percentage for the percentage that is at any time specified in section 356C(2) (calculation of allowance as a percentage of capital expenditure).

(2) The Treasury may by order amend the number that is at any time specified in section 356CA(1) or (2) (cap on production, or estimated production, at a site for the purposes of onshore allowance).

(3) An order under subsection (1) or (2) may include transitional provision.

Interpretation U.K.

[F569 356IB “Authorisation of development”: oil fields U.K.

(1) In this Chapter a reference to authorisation of development of an oil field is a reference to a national authority—

(a) granting a licensee consent for development of the field,

(b) serving on a licensee a programme of development for the field, or

(c) approving a programme of development for the field.

(2) In this section—

• “consent for development”, in relation to an oil field, does not include consent which is limited to the purpose of testing the characteristics of an oil-bearing area,

• “development”, in relation to an oil field, means winning oil from the field otherwise than in the course of searching for oil or drilling wells, and

• “national authority” means—

  (a)

  the [F570 OGA], F571 ...

  (aza)

  [F572 the Scottish Ministers,]

  (aa)

  [F573 the Welsh Ministers, or]

  (b)

  a Northern Ireland department.]

Textual Amendments

F569 S. 356IB inserted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 2015 (c. 11), Sch. 14 para. 7

F570 Word in s. 356IB(2) substituted (1.10.2016) by The Petroleum (Transfer of Functions) Regulations 2016 (S.I. 2016/898), regs. 1(2), 15(5)

F571 Word in s. 356IB(2) omitted (1.10.2018) by virtue of Wales Act 2017 (c. 4), s. 71(4), Sch. 6 para. 26(a) (with Sch. 7 paras. 1, 6); S.I. 2017/1179, reg. 4(b)

F572 Words in s. 356IB(2) inserted (1.10.2018 immediately after 2017 c. 4, Sch. 6 Pt. 2 comes into force) by The Scotland Act 2016 (Onshore Petroleum) (Consequential Amendments) Regulations 2018 (S.I. 2018/79), regs. 1(3), 12(1)

F573 Words in s. 356IB(2) inserted (1.10.2018) by Wales Act 2017 (c. 4), s. 71(4), Sch. 6 para. 26(b) (with Sch. 7 paras. 1, 6); S.I. 2017/1179, reg. 4(b)

Modifications etc. (not altering text)

C118 S. 356IB(2) modified (temp.) (9.2.2018) by The Scotland Act 2016 (Onshore Petroleum) (Consequential Amendments) Regulations 2018 (S.I. 2018/79), regs. 1(2), 7(1) (with art. 2)

356J “Authorisation of development”: drilling and extraction sites U.K.

(1) References in this Chapter to authorisation of development of a site are to be interpreted as follows in relation to a drilling and extraction site that is situated in, or used in connection with, a licensed area.

(2) The references are to be read as references to a national authority—

(a) granting a licensee consent for development of the licensed area,

(b) serving on a licensee a programme of development for the licensed area, or

(c) approving a programme of development for the licensed area.

(3) References in subsection (2) to a “licensee” are to a licensee in the licensed area mentioned in subsection (1).

(4) In this section—

• “consent for development”, in relation to a licensed area, does not include consent which is limited to the purpose of testing the characteristics of an oil-bearing area;

• “development”, in relation to a licensed area, means winning oil from the licensed area otherwise than in the course of searching for oil or drilling wells;

• “national authority” means—

  (a)

  the [F574 OGA], F575 ...

  (aza)

  [F576 the Scottish Ministers,]

  (aa)

  [F577 the Welsh Ministers, or]

  (b)

  a Northern Ireland Department.

Textual Amendments

F574 Word in s. 356J(4) substituted (1.10.2016) by The Petroleum (Transfer of Functions) Regulations 2016 (S.I. 2016/898), regs. 1(2), 15(6)

F575 Word in s. 356J(4) omitted (1.10.2018) by virtue of Wales Act 2017 (c. 4), s. 71(4), Sch. 6 para. 27(a) (with Sch. 7 paras. 1, 6); S.I. 2017/1179, reg. 4(b)

F576 Words in s. 356J(4) inserted (1.10.2018 immediately after 2017 c. 4, Sch. 6 Pt. 2 comes into force) by The Scotland Act 2016 (Onshore Petroleum) (Consequential Amendments) Regulations 2018 (S.I. 2018/79), regs. 1(3), 12(2)

F577 Words in s. 356J(4) inserted (1.10.2018) by Wales Act 2017 (c. 4), s. 71(4), Sch. 6 para. 27(b) (with Sch. 7 paras. 1, 6); S.I. 2017/1179, reg. 4(b)

Modifications etc. (not altering text)

C119 S. 356J(4) modified (temp.) (9.2.2018) by The Scotland Act 2016 (Onshore Petroleum) (Consequential Amendments) Regulations 2018 (S.I. 2018/79), regs. 1(2), 7(2) (with art. 2)

356JA When capital expenditure is incurred U.K.

Section 5 of CAA 2001 (when capital expenditure is incurred) applies for the purposes of this Chapter as for the purposes of that Act.

356JB Other definitions U.K.

In this Chapter (except where otherwise specified)—

• “adjusted ring fence profits”, in relation to a company and an accounting period, [F578 is to be read in accordance with section 330ZA];

• “cumulative total amount of activated allowance” has the meaning given by section 356D(2);

• “licence” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act);

• “licensed area” has the same meaning as in Part 1 of OTA 1975;

• “licensee” has the same meaning as in Part 1 of OTA 1975;

• “onshore allowance” has the meaning given by section 356C(5);

• “relevant income”, in relation to an onshore site and an accounting period, has the meaning given by section 356E(3);

• “site” has the meaning given by section 356BC.]

Textual Amendments

F578 Words in s. 356JB substituted (with effect in accordance with Sch. 14 para. 10 of the amending Act) by Finance Act 2015 (c. 11), Sch. 14 para. 8

[F579 CHAPTER 9 U.K. Supplementary charge: cluster area allowance

Textual Amendments

F579 Pt. 8 Ch. 9 inserted (26.3.2015) by Finance Act 2015 (c. 11), Sch. 13 para. 2

Modifications etc. (not altering text)

C120 Pt. 8 Ch. 9 restricted (26.3.2015) by Finance Act 2015 (c. 11), Sch. 13 para. 6(2)

Introduction U.K.

356JC Overview U.K.

(1) This Chapter sets out how relief for certain expenditure incurred in relation to a cluster area is given by way of reduction of a company's adjusted ring fence profits.

(2) The Chapter includes provision about—

(a) the determination of cluster areas (sections 356JD and 356JDA);

(b) the meaning of investment expenditure (section 356JE);

(c) the generation of allowance by the incurring of relievable investment expenditure in relation to a cluster area (section 356JF);

(d) how allowance is activated by relevant income from the same cluster area (sections 356JH to 356JHB and 356JJ to 356JJB) in order to be available for reducing adjusted ring fence profits (sections 356JG and 356JGA);

(e) the division of an accounting period into reference periods where a company has different shares of the equity in a licensed area or sub-area at different times in the period (section 356JI);

(f) the transfer of allowance where shares of the equity in a licensed area or sub-area are disposed of (sections 356JK to 356JKB);

(g) elections to treat allowance attributable to an unlicensed part of a cluster area as if it were attributable to a licensed area or sub-area in the cluster area (section 356JL).

Determination of cluster areas U.K.

356JD Meaning of “cluster area” U.K.

(1) In this Part “cluster area” means an offshore area which the [F580 OGA] determines to be a cluster area.

(2) A cluster area is treated as not including any previously authorised oil field (or any part of such an oil field) (see section 356JDA).

(3) An area is “offshore” for the purposes of this section if the whole of it lies on the seaward side of the baselines from which the territorial sea of the United Kingdom is measured.

(4) Before determining an area to be a cluster area the [F580 OGA] must—

(a) give written notice of the proposed determination to every person who is a licensee in respect of a licensed area or sub-area which is wholly or partly included in the proposed cluster area and to any other licensee whose interests appear to the [F580 OGA] to be affected, and

(b) publish a notice of the proposed determination on a website that is, and indicates that it is, kept by or on behalf of the [F580 OGA].

(5) The [F580 OGA] must consider any representations made in writing and within 30 days of the date of the publication of the notice under subsection (4)(b) (or, in the case of representations made by a person to whom notice is given under subsection (4)(a), within 30 days of receipt of the notice, if later).

(6) A determination under this section—

(a) has effect from the day on which it is published,

(b) may be in any form the [F580 OGA] thinks appropriate, and

(c) must assign to the cluster area an identifying number or other designation.

(7) After making a determination the [F580 OGA] must—

(a) give written notice of the determination to every person who is a licensee in respect of a licensed area or sub-area which is wholly or partly included in the cluster area and any other person to whom notice of the proposed determination was given;

(b) publish a notice of the determination on a website that is, and indicates that it is, kept by or on behalf of the [F580 OGA].

(8) The [F580 OGA] may vary or revoke a determination made under this section, and subsections (4), (5), (6)(a) and (b) and (7) are to apply as if the variation or revocation were a new determination.

Textual Amendments

F580 Word in s. 356JD substituted (1.10.2016) by The Petroleum (Transfer of Functions) Regulations 2016 (S.I. 2016/898), regs. 1(2), 15(7)

356JDA Meaning of “previously authorised oil field” U.K.

(1) In section 356JD “previously authorised oil field”, in relation to a cluster area, means an oil field, other than a decommissioned oil field, whose development (in whole or in part) was authorised for the first time before the relevant day.

(2) An oil field is a “decommissioned oil field” in relation to a cluster area if, immediately before the relevant day, all assets of the oil field which are relevant assets have been decommissioned.

(3) In this section, “relevant day”, in relation to an oil field and a cluster area, means the date of publication of the first determination, or variation of a determination, under section 356JD as a result of which the oil field is (ignoring section 356JD(2)) wholly or partly included in the cluster area.

(4) Sub-paragraphs (2) to (9) of paragraph 7 of Schedule 1 to OTA 1975 apply for the purpose of determining whether relevant assets of an oil field are decommissioned as they apply for the purpose of determining whether qualifying assets of a relevant area are decommissioned.

(5) For the purposes of this section, an asset is a relevant asset of an oil field if—

(a) it has at any time been a qualifying asset (within the meaning of the Oil Taxation Act 1983) in relation to any participator in the field, and

(b) it has at any time been used for the purpose of winning oil from the field.

(6) In this section references to authorisation of development of an oil field are to be interpreted in accordance with section 356IB.

(7) See also paragraph 5 of Schedule 13 to FA 2015, as a result of which certain proposed determinations made before the day on which that Act is passed are treated as made under section 356JD for the purposes of this Chapter.

Meaning of “investment expenditure” U.K.

356JE Meaning of “investment expenditure” U.K.

(1) For the purposes of this Chapter, expenditure incurred by a company is “investment” expenditure only if it is—

(a) capital expenditure, or

(b) expenditure of such other description as may be prescribed by the Treasury by regulations.

(2) Regulations under subsection (1)(b) may provide for any of the provisions of the regulations to have effect in relation to expenditure incurred before the regulations are made.

(3) But subsection (2) does not apply to any provision of amending or revoking regulations which has the effect that expenditure of any description ceases to be investment expenditure.

(4) Regulations under subsection (1)(b) may—

(a) make different provision for different purposes;

(b) make transitional provision and savings.

Cluster area allowance U.K.

356JF Generation of cluster area allowance U.K.

(1) Subsection (2) applies where a company—

(a) is a licensee in a licensed area or sub-area which is wholly or partly included in a cluster area, and

(b) incurs any relievable investment expenditure on or after 3 December 2014 in relation to the cluster area.

(2) The company is to hold an amount of allowance equal to 62.5% of the amount of the expenditure.

Allowance held under this Chapter is called “cluster area allowance”.

(3) For the purposes of this section investment expenditure incurred by a company is “relievable” only if, and so far as, it is incurred for the purposes of oil-related activities (see section 274).

(4) Subsections (1) to (3) are subject to section 356JFA (which prevents expenditure on the acquisition of an asset from being relievable in certain circumstances).

(5) Cluster area allowance is said in this Chapter to be “generated” at the time when the investment expenditure is incurred (see section 356JN) and is referred to as being generated—

(a) “by” the company concerned;

(b) “in” the cluster area concerned.

(6) Where—

(a) investment expenditure is incurred only partly for the purposes of oil-related activities, or

(b) the oil-related activities for the purposes of which investment expenditure is incurred are carried on only partly in relation to a particular cluster area,

the expenditure is to be attributed to the activities or area concerned on a just and reasonable basis.

356JFA Expenditure on acquisition of asset: disqualifying conditions U.K.

(1) Investment expenditure incurred by a company (“the acquiring company”) on the acquisition of an asset is not relievable expenditure for the purposes of section 356JF if either of the disqualifying conditions in this section applies to the asset.

(2) The first disqualifying condition is that investment expenditure incurred before the acquisition, by the acquiring company or another company, in acquiring, [F581 leasing,] bringing into existence or enhancing the value of the asset was relievable under section 356JF.

(3) The second disqualifying condition is that—

(a) the asset—

(i) is the whole or part of the equity in a licensed area or sub-area, or

(ii) is acquired in connection with a transfer to the acquiring company of the whole or part of the equity in a licensed area or sub-area,

(b) expenditure was incurred, at any time before the acquisition, by the acquiring company or another company, in acquiring, [F582 leasing,] bringing into existence or enhancing the value of the asset, and

(c) any of that expenditure—

(i) related to the cluster area, and

(ii) would have been relievable under section 356JF if this Chapter had applied to expenditure incurred at that time.

(4) For the purposes of subsection (3)(a)(ii), it does not matter whether the asset is acquired at the time of the transfer.

[F583 (5) In this section any reference to expenditure which was incurred by a company in “leasing” an asset is to expenditure incurred by the company under an agreement under which the asset was leased to the company.]

Textual Amendments

F581 Word in s. 356JFA(2) inserted (with effect in accordance with s. 62(5) of the amending Act) by Finance Act 2016 (c. 24), s. 62(2)

F582 Word in s. 356JFA(3)(b) inserted (with effect in accordance with s. 62(5) of the amending Act) by Finance Act 2016 (c. 24), s. 62(3)

F583 S. 356JFA(5) inserted (with effect in accordance with s. 62(5) of the amending Act) by Finance Act 2016 (c. 24), s. 62(4)

Reduction of adjusted ring fence profits U.K.

356JG Reduction of adjusted ring fence profits U.K.

(1) A company's adjusted ring fence profits for an accounting period are to be reduced by the cumulative total amount of activated allowance for the accounting period (but are not to be reduced below zero).

(2) In relation to a company and an accounting period, the “cumulative total amount of activated allowance” is—

where—

A is the total of any amounts of activated allowance the company has, for any cluster areas, for the accounting period (see section 356JH(2)) or for reference periods within the accounting period (see section 356JJ(1)), and

C is any amount carried forward to the period under section 356JGA.

356JGA Carrying forward of activated allowance U.K.

(1) This section applies where, in the case of a company and an accounting period, the cumulative total amount of activated allowance (see section 356JG(2)) is greater than the adjusted ring fence profits.

(2) The difference is carried forward to the next accounting period.

Activated and unactivated allowance: basic calculation rules U.K.

356JH Activation of allowance: no change of equity share U.K.

(1) This section applies where—

(a) for the whole or part of an accounting period, a company is a licensee in a licensed area or sub-area which is wholly or partly included in a cluster area,

(b) the accounting period is not divided into reference periods (see section 356JI),

(c) the company holds, for the accounting period and the cluster area, a closing balance of unactivated allowance (see section 356JHA) which is greater than zero, and

(d) the company has relevant income from the cluster area for the accounting period.

(2) The amount of activated allowance the company has for that accounting period and that cluster area is the smaller of—

(a) the closing balance of unactivated allowance held for the accounting period and the cluster area;

(b) [F584 the total amount of] the company's relevant income for that accounting period from that cluster area.

[F585 (3) For the purposes of this Chapter, income is relevant income of a company from a cluster area for an accounting period if it is—

(a) production income of the company from any oil extraction activities carried on in that area that is taken into account in calculating the company's adjusted ring fence profits for the accounting period, or

(b) income that—

(i) is income of such description (whether or not relating to the cluster area) as may be prescribed by the Treasury by regulations, and

(ii) is taken into account as mentioned in paragraph (a).

(4) The Treasury may by regulations make such amendments of this Chapter as the Treasury consider appropriate in consequence of, or in connection with, any provision contained in regulations under subsection (3)(b).

(5) Regulations under subsection (3)(b) or (4) may provide for any of the provisions of the regulations to have effect in relation to accounting periods ending before (or current when) the regulations are made.

(6) But subsection (5) does not apply to—

(a) any provision of amending or revoking regulations under subsection (3)(b) which has the effect that income of any description is to cease to be treated as relevant income of a company from a cluster area for an accounting period, or

(b) provision made under subsection (4) in consequence of or in connection with provision within paragraph (a).

(7) Regulations under this section may make transitional provision or savings.

(8) 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.]

[F586 (9) Where a tariff receipt of the company relates only partly to the cluster area mentioned in subsection (1), for the purposes of subsection (3)(b) the tariff receipt is to be attributed to the cluster area on a just and reasonable basis.

(10) If the company has entered into any arrangements the purpose, or one of the main purposes of which is—

(a) to cause income to fall within subsection (3)(b), or

(b) to advance the time at which any income falls within that provision,

any income arising in connection with the arrangement is not regarded as a tariff receipt for the purposes of subsection (3)(b).

(11) In subsection (10) “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).]

Textual Amendments

F584 Words in s. 356JH(2)(b) inserted (15.9.2016) by Finance Act 2016 (c. 24), s. 63(2)

F585 Ss. 356JH(3)-(8) substituted for s. 356JH(3) (15.9.2016) by Finance Act 2016 (c. 24), s. 63(3)

F586 Ss. 356JH(9)-(11) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Investment Allowance and Cluster Area Allowance (Relevant Income Tariff Receipts) Regulations 2019 (S.I. 2019/63), regs. 1(1), 4(3)

356JHA The closing balance of unactivated allowance for an accounting period U.K.

The closing balance of unactivated allowance held by a company for an accounting period and a cluster area is—

where—

P is the amount of cluster area allowance generated by the company in the cluster area in the accounting period (including any amount treated under section 356JKB(1) as generated by the company in that cluster area in that accounting period);

Q is any amount carried forward from an immediately preceding accounting period under section 356JHB(1) or from an immediately preceding reference period under section 356JJB(1).

356JHB Carrying forward of unactivated allowance U.K.

(1) If, in the case of an accounting period of a company and a cluster area, the amount given by subsection (2) is greater than zero, that amount is treated as cluster area allowance held by the company for that cluster area for the next period (and is treated as held with effect from the beginning of that period).

(2) The amount is—

where—

U is the closing balance of unactivated allowance held for the accounting period and the cluster area;

A is the amount of activated allowance that the company has for the accounting period and the cluster area (see section 356JH(2));

T is the sum of any amounts transferred by the company under section 356JK in connection with a disposal or disposals made on the day following the end of the accounting period.

(3) If the accounting period is followed by a reference period of the company belonging to that cluster area (see section 356JI), “the next period” means that period.

(4) If subsection (3) does not apply “the next period” means the next accounting period of the company.

Changes in equity share: reference periods U.K.

356JI Reference periods U.K.

(1) This section applies where—

(a) a company is a licensee for the whole or part of an accounting period in one or more licensed areas or sub-areas (“the relevant areas”) which are wholly or partly included in a cluster area, and

(b) in the case of at least one of the relevant areas, the company has different shares of the equity in the area on different days in the accounting period.

(2) For the purposes of this Chapter, the accounting period is to be divided into as many consecutive periods (called “reference periods”) as are necessary to secure that—

(a) a reference period begins with the first day of the accounting period,

(b) a reference period begins with the date of each disposal or acquisition of a share of the equity in any of the relevant areas that is made by the company in that accounting period (not including acquisitions or disposals made on the first day of the accounting period), and

(c) a reference period ends with the last day of the accounting period.

(3) Each such reference period “belongs to” the cluster area concerned.

Changes in equity share: activation of allowance U.K.

356JJ Activation of allowance: reference periods U.K.

(1) The amount (if any) of activated allowance that a company has for a cluster area for a reference period is the smaller of the following—

(a) the company's relevant income from the cluster area for the reference period;

(b) the total amount of unactivated allowance that is attributable to the reference period and the cluster area (see section 356JJA).

(2) The company's relevant income from the cluster area for the reference period is so much of the company's relevant income from the cluster area for the accounting period (see section 356JH(3)) as arises in the reference period.

356JJA Unactivated amounts attributable to a reference period U.K.

(1) For the purposes of section 356JJ(1)(b), the total amount of unactivated allowance attributable to a reference period and a cluster area is—

where—

P is the amount of allowance generated by the company in the reference period in the cluster area (including any amount treated under section 356JKB(1) as generated by the company in that area in that reference period);

Q is the amount given by subsection (2) or (3).

(2) Where the reference period is not immediately preceded by another reference period but is preceded by an accounting period of the company, Q is equal to the amount (if any) that is to be carried forward from that preceding accounting period under section 356JHB(1).

(3) Where the reference period is immediately preceded by another reference period, Q is equal to the amount (if any) carried forward under section 356JJB(1).

356JJB Carry-forward of unactivated allowance from a reference period U.K.

(1) If, in the case of a reference period (“RP1”) of a company, the amount given by subsection (2) is greater than zero, that amount is treated as cluster area allowance held by the company for the cluster area concerned for the next period.

(2) The amount is—

where—

U is the total amount of unactivated allowance attributable to the reference period and the cluster area (see section 356JJA);

A is the amount of activated allowance that the company has for the cluster area for the reference period (see section 356JJ);

T is the sum of any amounts transferred by the company under section 356JK in connection with a disposal or disposals made on the day following the end of the reference period.

(3) If RP1 is immediately followed by another reference period of the company (belonging to the same cluster area), “the next period” means that reference period.

(4) If subsection (3) does not apply, “the next period” means the next accounting period of the company.

Transfers of allowance on disposal of equity share U.K.

356JK Disposal of equity share: transfer of allowance U.K.

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

(a) a company (“the transferor”) makes a disposal, on the day following the end of an accounting period or reference period, of the whole or part of its share of the equity in a licensed area or sub-area which is wholly or partly included in a cluster area (“the relevant cluster area”), and

(b) the maximum transferable amount is greater than zero.

Each company to which a share of the equity is disposed of is referred to in this section as a “transferee”.

(2) The transferor may, by an election, transfer to the transferee (or transferees) a specified amount of cluster area allowance (greater than zero) which—

(a) is not less than the minimum transferable amount, and

(b) is not more than the maximum transferable amount.

(3) If the transferor does not make an election under subsection (2), the minimum transferable amount of cluster area allowance (if greater than zero) is transferred to the transferee (or transferees).

(4) An election under subsection (2)—

(a) must be made within the 60 days beginning with the date of the disposal,

(b) must—

(i) specify the date of the disposal and the amount of cluster area allowance transferred, and

(ii) identify the transferees, and

(c) is irrevocable.

(5) The minimum transferable amount is—

where—

G is so much of the total generated allowance for the relevant cluster area (see subsection (6)) as is attributable on a just and reasonable basis to the licensed area or sub-area mentioned in subsection (1);

A is the total of any amounts of allowance which have, in relation to any accounting period or reference period of the transferor ending before the date of the disposal, been activated under section 356JH or 356JJ in relation to the relevant cluster area;

E1 is the transferor's share of the equity in the licensed area or sub-area immediately before the disposal;

E2 is the transferor's share of the equity in the licensed area or sub-area immediately after the disposal.

(6) In the definition of “G” in subsection (5), “the total generated allowance for the relevant cluster area” means the total of—

(a) all amounts of cluster area allowance generated by the transferor in that cluster area before the date of the disposal, and

(b) any amounts treated under section 356JKB(1) as so generated on the date of the disposal.

(7) The maximum transferable amount is—

where—

M is the smaller of—

(a)

G (as defined in subsection (5)), and

(b)

the transferor's pre-transfer total of unactivated allowance for the relevant cluster area;

E1 and E2 have the same meaning as in subsection (5).

(8) In subsection (7) the transferor's “pre-transfer total of unactivated allowance for the relevant cluster area” means—

where—

P and Q are—

(a)

if the disposal is made on the day following the end of an accounting period, the same as in section 356JHA (in its application to that period), or

(b)

if the disposal is made on the day following the end of a reference period, the same as in section 356JJA(1) (in its application to that period);

A is—

(a)

if the disposal is made on the day following the end of an accounting period, the same as in section 356JHB(2) (in its application to that period), or

(b)

if the disposal is made on the day following the end of a reference period, the same as in section 356JJB(2) (in its application to that period);

S is the total of any amounts of allowance transferred by the transferor in connection with any prior disposals (see section 356JKA) made in relation to the relevant cluster area on the day on which the disposal is made.

(9) For the effect of a transfer of cluster area allowance in relation to the transferor, see—

(a) for disposals made on the day following the end of an accounting period, section 356JHB (reduction of unactivated allowance carried forward from accounting period), or

(b) for disposals made on the day following the end of a reference period, section 356JJB (reduction of unactivated allowance carried forward from reference period).

356JKA More than one disposal on a single day U.K.

(1) Subsections (2) to (4) apply where a company makes, on a single day and in relation to a single cluster area, more than one disposal falling within section 356JK(1)(a).

(2) The company may, by an election, choose the order of priority of the disposals for the purposes of section 356JK(8).

(3) A disposal which is placed higher in the order of priority than another disposal is a “prior disposal” in relation to the other for the purposes of the definition of “S” in section 356JK(8).

(4) An election under subsection (2) is irrevocable.

356JKB Effect of transfer of allowance for transferee U.K.

(1) Where a transfer of cluster area allowance is made under section 356JK, each transferee is treated as generating in the cluster area concerned, at the beginning of the accounting period or reference period of the transferee that begins with the day on which the disposal is made, cluster area allowance of the amount given by subsection (2).

(2) The amount is—

where—

T is the total amount of cluster area allowance transferred in connection with the disposal;

E3 is the share of equity in the licensed area or sub-area that the transferee has acquired from the transferor;

E1 and E2 are the same as in section 356JK(5).

(3) In this section references to the transferor and the transferees are to be read in accordance with section 356JK(1).

Use of allowance attributable to unlicensed area U.K.

356JL Use of allowance attributable to unlicensed area U.K.

(1) Subsection (2) applies where—

(a) a company (“C”) disposes of the whole or part of its share of the equity in a licensed area or sub-area (“area A”),

(b) that area is wholly or partly included in a cluster area, and

(c) C has generated in the cluster area, on or before the day of the disposal, cluster area allowance which is wholly or partly attributable to an unlicensed area (“area U”) in the cluster area.

(2) C may, by an election, assign to area A, or to any other relevant licensed area or sub-area in the cluster area, so much of the total of generated allowance for the cluster area as is attributable to area U.

(3) The reference in subsection (2) to a “relevant” licensed area or sub-area is to a licensed area or sub-area in which C is a licensee.

(4) In subsection (2), “the total of generated allowance for the cluster area” means the total of all amounts of cluster area allowance generated by C in the cluster area at any time on or before the day of the disposal (including any amounts treated under section 356JKB(1) as so generated).

(5) An election under this section must be made within the 60 days beginning with the date of the disposal and must specify—

(a) the amount of cluster area allowance transferred,

(b) the unlicensed area to which it was attributable, and

(c) the licensed area or sub-area to which it is assigned.

(6) An election under this section is irrevocable.

(7) Where an amount of cluster area allowance is assigned to a licensed area or sub-area by an election under this section, that amount is taken, for the purposes of this Chapter—

(a) to have been attributable to that licensed area or sub-area with effect from the beginning of the day on which the disposal is made, and

(b) never to have been attributable to area U.

(8) In this section—

• “attributable” means attributable on a just and reasonable basis;

• “unlicensed area” means an area which is not (and is not part of) a licensed area or sub-area.

Miscellaneous U.K.

356JM Adjustments U.K.

(1) This section applies if there is any alteration in a company's adjusted ring fence profits for an accounting period after this Chapter has effect in relation to the profits.

(2) Any necessary adjustments to the operation of this Chapter (whether in relation to the profits or otherwise) are to be made (including any necessary adjustments to the effect of section 356JG on the profits or to the calculation of the amount to be carried forward under section 356JGA).

356JMA Regulations amending percentage in section 356JF(2) U.K.

(1) The Treasury may by regulations substitute a different percentage for the percentage that is at any time specified in section 356JF(2) (calculation of allowance as a percentage of investment expenditure).

(2) Regulations under subsection (1) may include transitional provision.

Interpretation U.K.

356JN When capital expenditure is incurred U.K.

(1) Section 5 of CAA 2001 (when capital expenditure is incurred) applies for the purposes of this Chapter as for the purposes of that Act.

(2) Regulations under section 356JE(1)(b) may make provision about when any expenditure that is investment expenditure as a result of the regulations is to be treated for the purposes of this Chapter as incurred.

356JNA Licensed sub-areas U.K.

Where any person is entitled to a share of equity in a licensed area which relates to part only of that area—

(a) that part is referred to in this Chapter as a “licensed sub-area”, and

(b) the share of equity is referred to in this Chapter as a share of equity in the licensed sub-area,

and references to a licensee in a licensed sub-area are to be interpreted accordingly.

356JNB Other definitions U.K.

In this Chapter (except where otherwise specified)—

• “adjusted ring fence profits”, in relation to a company and an accounting period, is to be read in accordance with section 330ZA;

• “cluster area allowance” has the meaning given by section 356JF(2);

• “cumulative total amount of activated allowance” has the meaning given by section 356JG(2);

• “licence” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act);

• “licensed area” has the same meaning as in Part 1 of OTA 1975;

• “licensee” has the same meaning as in Part 1 of OTA 1975 (but see also section 356JNA);

• “relevant income”, in relation to a cluster area and an accounting period, has the meaning given by section 356JH(3).]

[F587 PART 8ZA U.K. Oil contractors

Textual Amendments

F587 Pt. 8ZA inserted (retrospective to 1.4.2014) by Finance Act 2014 (c. 26), Sch. 16 paras. 4, 6

CHAPTER 1 U.K. Introduction

356K Overview of Part U.K.

(1) This Part is about the corporation tax treatment of oil contractor activities.

(2) Chapter 2 contains basic definitions used in this Part.

(3) Chapter 3 treats oil contractor activities as a separate trade.

(4) Chapter 4 makes provision about the calculation of profits from oil contractor activities.

(5) For the meaning of oil contractor activities, see section 356L.

CHAPTER 2 U.K. Basic definitions

356L “Oil contractor activities” etc U.K.

(1) The definitions in this section have effect for the purposes of this Part.

(2) “Oil contractor activities” means activities carried on by a company (“the contractor”), which are not oil-related activities (within the meaning of section 274), but are—

(a) exploration or exploitation activities in, or in connection with, which the contractor provides, operates or uses a relevant asset (see section 356LA) in a relevant offshore service, or

(b) otherwise carried on in, or in connection with, the provision by the contractor of a relevant offshore service.

(3) The contractor provides a “relevant offshore service” if the contractor provides, operates or uses a relevant asset in, or in connection with, the carrying on of exploration or exploitation activities in a relevant offshore area by the contractor or any other associated person.

(4) “Exploration or exploitation activities” means activities carried on in connection with the exploration or exploitation of the seabed and subsoil and their natural resources.

(5) “Relevant offshore area” means—

(a) the territorial sea of the United Kingdom;

(b) the areas designated by Order in Council under section 1(7) of the Continental Shelf Act 1964.

356LA “Relevant asset” U.K.

(1) In this Part “relevant asset” means an asset within subsection (2) in respect of which conditions A and B are met.

(2) An asset is within this subsection if it is a structure that—

(a) can be moved from place to place (whether or not under its own power) without major dismantling or modification, and

(b) can be used to—

(i) drill for the purposes of searching for, or extracting, oil, or

(ii) provide accommodation for individuals who work on or from another structure used in a relevant offshore area for, or in connection with, exploration or exploitation activities (“offshore workers”).

(3) But an asset is not within subsection (2)(b)(ii) if it is reasonable to suppose that its use to provide accommodation for offshore workers is unlikely to be more than incidental to another use, or other uses, to which the asset is likely to be put.

(4) In subsection (2)—

• “oil” means any substance capable of being won under the authority of a licence granted under Part 1 of the Petroleum Act 1998 or the Petroleum (Production) Act (Northern Ireland) 1964;

• “structure” includes a ship or other vessel.

(5) Condition A is that the asset, or any part of the asset, is leased (whether by the contractor or not) from an associated person other than the contractor.

(6) Condition B is that the asset is of the requisite value.

(7) The asset is of the “requisite value” if its market value is £2,000,000 or more.

(8) The Treasury may by regulations modify the meaning of “requisite value”.

(9) Regulations under subsection (8) may—

(a) amend this section,

(b) make different provision for different cases or different purposes, and

(c) make incidental, consequential, supplementary or transitional provision or savings.

356LB “Associated person” U.K.

(1) For the purposes of this Part each of the following is an “associated person”—

(a) the contractor,

(b) any person who is, or has been, connected with the contractor,

(c) any person who has acted, acts or is to act, together with the contractor to provide a service, and

(d) any person who is connected with a person falling within paragraph (b) or (c).

(2) A person does not act together with the contractor to provide a service by reason only of leasing an asset, to any person, which is provided, operated or used in the service.

356LC “Lease” U.K.

In this Part “lease” has the meaning given by section 868 and “leased” and “leasing” are to be construed accordingly.

356LD “Contractor's ring fence profits” U.K.

In this Part the “contractor's ring fence profits”, in relation to an accounting period, means the contractor's income arising from oil contractor activities for that period.

CHAPTER 3 U.K. Deemed separate trade

356M Oil contractor activities treated as separate trade U.K.

If the contractor carries on oil contractor activities as part of a trade, those activities are treated for the purposes of the charge to corporation tax on income as a separate trade, distinct from all other activities carried on by the contractor as part of the trade.

CHAPTER 4 U.K. Calculation of profits

Hire of relevant assets U.K.

356N Restriction on hire etc of relevant assets to be brought into account U.K.

(1) This section applies if the contractor makes, or is to make, one or more payments under a lease of—

(a) a relevant asset, or

(b) part of a relevant asset.

(2) The total amount that may be brought into account in respect of the payments for the purposes of calculating the contractor's ring fence profits in an accounting period is limited to the hire cap.

(3) The “hire cap” is an amount equal to the relevant percentage of TC for the accounting period, subject to subsection (4).

(4) If payments in relation to which subsection (2) or section 285A(2) (restriction on hire for company carrying on a ring fence trade under Part 8) applies are also made, or to be made, by one or more other companies in respect of the relevant asset or part, the “hire cap” is to be such proportion of the amount mentioned in subsection (3) as is just and reasonable, having regard (in particular) to the amounts of the payments made, or to be made, by the contractor and each other company.

(5) Subject to subsection (7), the “relevant percentage” is—

where—

UROS is the number of days in the accounting period that the relevant asset is provided, operated or used in a relevant offshore service, and

TU is the number of days in the accounting period that the relevant asset is provided, operated or used (whether or not in a relevant offshore service).

(6) Accordingly, the relevant percentage is zero if the relevant asset is not provided, operated or used in the accounting period.

(7) If the accounting period is less than 12 months, the relevant percentage is to be proportionally reduced.

(8) TC is—

(9) Unless subsection (11) applies, OC is the sum of—

(a) any consideration given for the acquisition of the relevant asset or part when it was first acquired by an associated person, and

(b) any expenses incurred by an associated person in connection with that acquisition (other than the costs of financing the acquisition).

This is subject to subsections (12) and (13).

(10) Subsection (11) applies if the relevant asset or part—

(a) is leased by an associated person from a person who is not an associated person, and

(b) has never been owned by an associated person.

(11) OC is the sum of—

(a) the consideration that it is reasonable to suppose would have been given for the acquisition of the relevant asset or part, if it had been acquired by an associated person by way of a bargain at arm's length at the time it was first leased as mentioned in subsection (10)(a), and

(b) the expenses (other than the costs of financing the acquisition) that it is reasonable to suppose would have been incurred by an associated person in connection with such an acquisition.

This is subject to subsections (12) and (13).

(12) If the relevant asset or part was first acquired by an associated person, or (as the case may be) first leased as mentioned in subsection (10)(a), before the beginning of the accounting period, OC does not include any part of the consideration mentioned in subsection (9)(a) or (as the case may be) (11)(a) that it is reasonable to attribute to anything that no longer forms part of the relevant asset or part at the beginning of the accounting period.

(13) If the relevant asset or part was first acquired by an associated person, or (as the case may be) first leased as mentioned in subsection (10)(a), in the accounting period, OC for the accounting period is—

where—

D is the total number of days in the accounting period,

DBA is the number of days in the accounting period before the day on which the relevant asset or part was first acquired or first leased, and

OC is the amount given by subsection (9) or (as the case may be) (11).

(14) CE is capital expenditure on the relevant asset or part (other than capital expenditure in respect of its acquisition or the acquisition of a lease of it) incurred by an associated person—

(a) after it was first acquired by an associated person or (as the case may be) was first leased as mentioned in subsection (10)(a), and

(b) before the end of the accounting period.

This is subject to subsections (15) and (16).

(15) CE does not include any capital expenditure mentioned in subsection (14) that is—

(a) incurred before the beginning of the accounting period, and

(b) not reflected in the state or nature of the relevant asset or part at the beginning of the accounting period.

(16) If any capital expenditure mentioned in subsection (14) is incurred on a day in the accounting period, the amount of CE for the accounting period in respect of that capital expenditure is—

where—

D is the total number of days in the accounting period,

DBI is the number of days in the accounting period before the day on which that capital expenditure is incurred, and

CEA is the amount of that capital expenditure.

356NA Restriction on hire: further provision U.K.

(1) The Treasury may by regulations modify the “relevant percentage” for the purposes of section 356N or 285A.

(2) Regulations under subsection (1) may—

(a) amend section 356N or section 285A,

(b) make different provision for different cases or different purposes, and

(c) make incidental, consequential, supplementary or transitional provision or savings.

(3) To the extent that, by virtue of section 356N, payments within subsection (1) of that section cannot be brought into account for the purposes of calculating the contractor's ring fence profits in an accounting period, the payments may be—

(a) allowed as a deduction from the contractor's total profits for the accounting period, or

(b) treated as a surrenderable amount of the contractor for the accounting period for the purposes of Part 5 (group relief) (see section 99(7)) as if they were a trading loss,

subject to subsection (4).

(4) No deduction may be made by virtue of subsection (3) from total profits so far as they are contractor's ring fence profits or ring fence profits for the purposes of Part 8.

(5) If an associated person enters into arrangements the main purpose or one of the main purposes of which is to secure that section 356N(2) does not apply in relation to one or more payments to any extent, that provision applies in relation to the payments to the extent it would not otherwise do so.

(6) In subsection (5) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

Loan relationships U.K.

356NB Restriction on debits to be brought into account U.K.

(1) Debits may not be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of the contractor's loan relationships in any way that results in a reduction of what would otherwise be the contractor's ring fence profits, but this is subject to subsections (2) to (4).

(2) Subsection (1) does not apply so far as a loan relationship is in respect of money borrowed by the contractor which has been—

(a) used to meet expenditure incurred by the contractor in carrying on oil contractor activities, or

(b) appropriated to meeting expenditure to be so incurred by the contractor.

(3) Subsection (1) does not apply, in the case of debits falling to be brought into account as a result of section 329 of CTA 2009 (pre-loan relationship and abortive expenses) in respect of a loan relationship that has not been entered into, so far as the relationship would have been one entered into for the purpose of borrowing money to be used or appropriated as mentioned in subsection (2).

(4) Subsection (1) does not apply, in the case of debits in respect of a loan relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies, so far as—

(a) the payment of interest under the relationship is expenditure incurred as mentioned in subsection (2)(a), or

(b) the exchange loss arising from the relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure.

(5) If a debit—

(a) falls to be brought into account for the purposes of Part 5 of CTA 2009 in respect of a loan relationship of the contractor, but

(b) as a result of this section cannot be brought into account in a way that results in any reduction of what would otherwise be the contractor's ring fence profits,

the debit is to be brought into account for those purposes as a non-trading debit despite anything in section 297 of that Act.

(6) References in this section to a loan relationship, in relation to the borrowing of money, do not include a relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies.

356NC Restriction on credits to be brought into account U.K.

(1) Credits in respect of exchange gains from the contractor's loan relationships may not be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in any way that results in an increase of what would otherwise be the contractor's ring fence profits, but this is subject to subsections (2) to (4).

(2) Subsection (1) does not apply so far as a loan relationship is in respect of money borrowed by the contractor which has been—

(a) used to meet expenditure incurred by the contractor in carrying on oil contractor activities, or

(b) appropriated to meeting expenditure to be so incurred by the contractor.

(3) Subsection (1) does not apply, in the case of credits falling to be brought into account as a result of section 329 of CTA 2009 (pre-loan relationship and abortive expenses) in respect of a loan relationship that has not been entered into, so far as the relationship would have been one entered into for the purpose of borrowing money to be used or appropriated as mentioned in subsection (2).

(4) Subsection (1) does not apply, in the case of credits in respect of a loan relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies, so far as—

(a) the payment of interest under the relationship is expenditure incurred as mentioned in subsection (2)(a), or

(b) the exchange gain arising from the relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure.

(5) If a credit—

(a) falls to be brought into account for the purposes of Part 5 of CTA 2009 in respect of a loan relationship of the contractor, but

(b) as a result of this section cannot be brought into account in a way that results in any increase of what would otherwise be the contractor's ring fence profits,

the credit is to be brought into account for those purposes as a non-trading credit despite anything in section 297 of that Act.

(6) Section 356NB(6) applies for the purposes of this section.

Relief U.K.

356ND Management expenses U.K.

No deduction under section 1219 of CTA 2009 (expenses of management of a company's investment business) is to be allowed from the contractor's ring fence profits.

356NE Losses U.K.

[F588 (1)] Relief in respect of a loss incurred by the contractor [F589 (or an amount of such a loss)] may not be given under section 37 (relief for trade losses against total profits) [F590 or section 45A (carry forward of post-1 April 2017 trade loss against total profits)] against the contractor's ring fence profits except so far as the loss [F591 (or amount)] arises from oil contractor activities.

[F592 (2) Relief in respect of a loss incurred by the contractor may not be given against the contractor's ring fence profits under any provision listed in subsection (3).

(3) The provisions are—

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

(b) section 62(3) (relief for losses made in UK property business);

(c) section 303C(3) (excess carried forward non-decommissioning losses of ring fence trade: relief against total profits).]

Textual Amendments

F588 S. 356NE renumbered as s. 356NE(1) (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 57(2)

F589 Words in s. 356NE(1) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 57(3)(a)

F590 Words in s. 356NE(1) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 57(3)(b)

F591 Words in s. 356NE(1) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 57(3)(c)

F592 S. 356NE(2)(3) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 57(4)

356NF Group relief [F593 and group relief for carried-forward losses] U.K.

(1) On a claim for group relief made by a claimant company in relation to a surrendering company, group relief may not be allowed against the claimant company's contractor's ring fence profits except so far as the claim relates to losses incurred by the surrendering company that arose from oil contractor activities.

(2) In section 105 (restriction on surrender of losses etc within section 99(1)(d) to (g)) the references to the surrendering company's gross profits of the surrender period do not include the company's relevant contractor's ring fence profits for that period.

(3) The company's “relevant contractor's ring fence profits” for that period are—

(a) if for that period there are no qualifying charitable donations made by the company that are allowable under Part 6 (charitable donations relief), the company's contractor's ring fence profits for that period, or

(b) otherwise, so much of the contractor's ring fence profits of the company for that period as exceeds the amount of the qualifying charitable donations made by the company that are allowable under section 189 for that period.

[F594 (3A) On a claim under Chapter 3 of Part 5A, group relief for carried-forward losses may not be allowed against the claimant company's contractor's ring fence profits, except so far as the claim relates to losses incurred by the surrendering company that arose from oil contractor activities.]

[F595 (4) In this section—

• “claimant company” is to be read in accordance with Part 5 (see section 188) or Part 5A (see sections 188CB(2) and 188CC(2)), as the case requires;

• “surrendering company” is to be read in accordance with Part 5 (see section 188) or Part 5A (see section 188BB(7)), as the case requires.]

Textual Amendments

F593 Words in s. 356NF heading inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 58(2)

F594 S. 356NF(3A) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 58(3)

F595 S. 356NF(4) substituted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 58(4)

356NG Capital allowances U.K.

A capital allowance may not to any extent be given effect under section 259 or 260 of CAA 2001 (special leasing) by deduction from the contractor's ring fence profits.]

[F596 Restriction on obtaining certain deductions U.K.

Textual Amendments

F596 Ss. 356NH-356NJ and cross-heading inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 59

356NH Restriction on deductions from contractor's ring fence profits U.K.

(1) For the purpose of determining the contractor's taxable total profits for an accounting period, the sum of any relevant deductions from total profits made by the contractor for the accounting period may not exceed the relevant Part 8ZA maximum.

(2) In this section “relevant deduction from total profits” means—

(a) any deduction of a loss (or an amount of a loss) under section 45(4)(b) (carry forward of pre-1 April 2017 loss against subsequent profits), so far as the loss arises from oil contractor activities,

(b) any deduction of a loss (or an amount of a loss) under section 45A (carry forward of post-1 April 2017 trade loss against total profits), so far as the amount is set against the contractor's ring fence profits, and

(c) any deduction of a loss or other amount under Part 5A (group relief for carried-forward losses), so far as the amount in question is set against the contractor's ring fence profits.

(3) In this section “the relevant Part 8ZA maximum” means the sum of—

(a) 50% of the contractor's ring fence profits for the accounting period, and

(b) the amount of the contractor's ring fence profits deductions allowance for the period.

356NI Deductions allowances where company has contractor's ring fence profits U.K.

(1) This section applies if a company (“C”) has contractor's ring fence profits for an accounting period.

(2) Subsections (3) to (6) set out how to determine, for the accounting period—

(a) C's deductions allowance for the purposes of Part 7ZA (restrictions on obtaining certain deductions), and

(b) C's contractor's ring fence profits deductions allowance.

(3) Determine in accordance with Part 7ZA what C's deductions allowance for the period would be in the absence of this section (and call this “amount A”).

(4) Determine C's contractor's ring fence profits deductions allowance for the period in accordance with subsection (5).

(5) C's “contractor's ring fence profits deductions allowance” for an accounting period—

(a) is so much of amount A as is specified in C's company tax return as its contractor's ring fence profits deductions allowance for the period, and

(b) accordingly, is nil if no amount is so specified.

(6) Subsection (7) applies if a relevant reversal credit is brought into account in calculating C's contractor's ring fence profits for the accounting period.

In this subsection the reference to bringing into account a relevant reversal credit is to be interpreted in accordance with section 269ZY.

(7) C's contractor's ring fence profits deductions allowance for the accounting period (as determined in accordance with subsection (5)) is to be treated for all purposes as increased by—

(a) the amount of the relevant reversal credit, or

(b) if lower, the amount of the contractor's ring fence profits for the accounting period.

(8) C's deductions allowance for the period for the purposes of Part 7ZA is to be taken to be an amount equal to amount A less the amount of C's ring fence profits deductions allowance for the period.

356NJ Modification of provisions restricting the use of losses U.K.

(1) The following deductions are to be treated as not being relevant deductions for the purposes of section 269ZD (restrictions on deductions from total profits)—

(a) the deduction of a loss (or an amount of a loss) under section 45A (carry forward of post- 1 April 2017 trade loss against total profits), so far as the amount is set against the company's contractor's ring fence profits for the accounting period;

(b) the deduction under Part 5A (group relief for carried-forward losses) of a loss or other amount, so far as the amount is set against the company's contractor's ring fence profits for the accounting period.

(2) A deduction under section 45(4)(b) (carry forward of pre-1 April 2017 trade loss against subsequent profits) of a loss arising from oil contractor activities is to be ignored for the purposes of section 269ZB of CTA 2010 (restriction on deductions from trading profits).]

[F597 PART 8ZB U.K. Transactions in UK land

Textual Amendments

F597 Pt. 8ZB inserted (with effect in accordance with s. 81 of the amending Act and also with effect in accordance with Finance (No. 2) Act 2017 (c. 32), s. 39(1)(2))) by Finance Act 2016 (c. 24), s. 77(1)

Modifications etc. (not altering text)

C121 Pt. 8ZB applied (with modifications) by 1992 c. 12, Sch. 1A para. 4(6) (as inserted (with effect in accordance with Sch. 1 paras. 120, 123 of the amending Act) by Finance Act 2019 (c. 1), Sch. 1 para. 14)

Introduction U.K.

356OA Overview of Part U.K.

This Part contains provision about the corporation tax treatment of certain profits and gains realised from disposals concerned with land in the United Kingdom.

Amounts treated as profits of a trade U.K.

356OB Disposals of land in the United Kingdom U.K.

(1) Section 356OC(1) applies (subject to subsection (3) of that section) if—

(a) a person within subsection (2)(a), (b) or (c) realises a profit or gain from a disposal of any land in the United Kingdom, and

(b) any of conditions A to D is met in relation to the land.

(2) The persons referred to in subsection (1) are—

(a) the person acquiring, holding or developing the land,

(b) a person who is associated with the person in paragraph (a) at a relevant time, and

(c) a person who is a party to, or concerned in, an arrangement within subsection (3).

(3) An arrangement is within this subsection if—

(a) it is effected with respect to all or part of the land, and

(b) it enables a profit or gain to be realised—

(i) by any indirect method, or

(ii) by any series of transactions.

(4) Condition A is that the main purpose, or one of the main purposes, of acquiring the land was to realise a profit or gain from disposing of the land.

(5) Condition B is that the main purpose, or one of the main purposes, of acquiring any property deriving its value from the land was to realise a profit or gain from disposing of the land.

(6) Condition C is that the land is held as trading stock.

(7) Condition D is that (in a case where the land has been developed) the main purpose, or one of the main purposes, of developing the land was to realise a profit or gain from disposing of the land when developed.

(8) In this section “relevant time” means any time in the period beginning when the activities of the project begin and ending 6 months after the disposal mentioned in subsection (1).

(9) In this section “the project” means all activities carried out for any of the following purposes—

(a) the purposes of dealing in or developing the land, and

(b) any other purposes mentioned in Conditions A to D.

(10) For the purposes of this section a person (“A”) is associated with another person (“B”) if—

(a) A is connected with B by virtue of any of subsections (5) to (7) of section 1122 (read in accordance with section 1123), or

(b) A is related to B (see section 356OT).

356OC Disposals of land: profits treated as trading profits U.K.

(1) The profit or gain is to be treated for corporation tax purposes as profits of a trade carried on by the chargeable company (see section 356OG).

(2) If the chargeable company is non-UK resident, that trade is the company's trade of dealing in or developing UK land (as defined in section 5B of CTA 2009).

(3) But subsection (1) does not apply to a profit or gain so far as it would (apart from this section) be brought into account as income in calculating profits (of any person)—

(a) for corporation tax purposes, or

(b) for income tax purposes.

(4) The profits are treated as arising in the accounting period of the chargeable company in which the profit or gain is realised.

(5) This section applies in relation to gains which are capital in nature as it applies in relation to other gains.

356OD Disposals of property deriving its value from land in the United Kingdom U.K.

(1) Section 356OE applies (subject to subsection (3) of that section) if—

(a) a person realises a profit or gain from a disposal of any property which (at the time of the disposal) derives at least 50% of its value from land in the United Kingdom,

(b) the person is a party to, or concerned in, an arrangement concerning some or all of the land mentioned in paragraph (a) (“the project land”), and

(c) the arrangement meets the condition in subsection (2).

(2) The condition is that the main purpose, or one of the main purposes, of the arrangement is to—

(a) deal in or develop the project land, and

(b) realise a profit or gain from a disposal of property deriving the whole or part of its value from that land.

356OE Disposals within section 356OD: profits treated as trading profits U.K.

(1) The relevant amount is to be treated for corporation tax purposes as profits of a trade carried on by the chargeable company.

(2) If the chargeable company is non-UK resident, that trade is the company's trade of dealing in or developing UK land.

(3) But subsection (1) does not apply to an amount so far as it would (apart from this section) be brought into account as income in calculating profits (of any person)—

(a) for corporation tax purposes, or

(b) for income tax purposes.

(4) The profits are treated as arising in the accounting period of the chargeable company in which the profit or gain is realised.

(5) In this section the “relevant amount” means so much (if any) of the profit or gain mentioned in section 356OD(1) as is attributable, on a just and reasonable apportionment, to the relevant UK assets.

(6) In this section “the relevant UK assets” means any land in the United Kingdom from which the property mentioned in section 356OD(1) derives any of its value (at the time of the disposal mentioned in that subsection).

(7) This section applies in relation to gains which are capital in nature as it applies in relation to other gains.

356OF Profits and losses U.K.

(1) Sections 356OB to 356OE have effect as if they included provision about losses corresponding to the provision they make about profits and gains.

(2) Accordingly, in the following sections of this Part references to a “profit or gain” include a loss.

Person to whom profits attributed U.K.

356OG The chargeable company U.K.

(1) For the purposes of sections 356OC and 356OE the general rule is that the “chargeable company” is the company (“C”) that realises the profit or gain (as mentioned in section 356OB(1) or 356OD(1)).

(2) The general rule in subsection (1) is subject to the special rules in subsections (4) to (6).

(3) But those special rules do not apply in relation to a profit or gain to which section 356OH(3) (fragmented activities) applies.

(4) If all or any part of the profit or gain accruing to C is derived from value provided directly or indirectly by another person (“B”) which is a company, B is the “chargeable company”.

(5) Subsection (4) applies whether or not the value is put at the disposal of C.

(6) If all or any part of the profit or gain accruing to C is derived from an opportunity of realising a profit or gain provided directly or indirectly by another person (“D”) which is a company, D is “the chargeable company” (unless the case falls within subsection (4)).

(7) For the meaning of “another person” see section 356OO.

Anti-fragmentation U.K.

356OH Fragmented activities U.K.

(1) Subsection (3) applies if—

(a) a company (“C”) disposes of any land in the United Kingdom,

(b) any of conditions A to D in section 356OB is met in relation to the land, and

(c) a person (“R”) who is associated with C at a relevant time has made a relevant contribution to activities falling within subsection (2).

(2) The following activities fall within this subsection—

(a) the development of the land,

(b) any other activities directed towards realising a profit or gain from the disposal of the land.

(3) For the purposes of this Part, the profit or gain (if any) realised by C from the disposal is to be taken to be what that profit or gain would be if R were not a distinct person from C (and, accordingly, as if everything done by or in relation to R had been done by or in relation to C).

(4) Subsection (5) applies to any amount which is paid (directly or indirectly) by R to C for the purposes of meeting or reimbursing the cost of corporation tax which C is liable to pay as a result of the application of subsection (3) in relation to R and C.

(5) The amount—

(a) is not to be taken into account in calculating profits or losses of either R or C for the purposes of income tax or corporation tax, and

(b) is not for any purpose of the Corporation Tax Acts to be regarded as a distribution.

(6) In subsection (1) “relevant time” means any time in the period beginning when the activities of the project begin and ending 6 months after the disposal.

(7) For the purposes of this section any contribution made by R to activities falling within subsection (2) is a “relevant contribution” unless the profit made or to be made by R in respect of the contribution is insignificant having regard to the size of the project.

(8) In this section “contribution” means any kind of contribution, including, for example—

(a) the provision of professional or other services, or

(b) a financial contribution (including the assumption of a risk).

(9) For the purposes of this section R is “associated” with C if—

(a) R is connected with C by virtue of any of subsections (5) to (7) of section 1122 (read in accordance with section 1123), or

(b) R is related to C (see section 356OT).

(10) In this section “the project” means all activities carried out for any of the following purposes—

(a) the purposes of dealing in or developing the land, and

(b) any other purposes mentioned in Conditions A to D in section 356OB.

Calculation of profit or gain on disposal U.K.

356OI Calculation of profit or gain on disposal U.K.

For the purposes of this Part, the profit or gain (if any) from a disposal of any property is to be calculated according to the principles applicable for calculating the profits of a trade under Part 3 of CTA 2009, subject to any modifications that may be appropriate (and for this purpose the same rules are to apply in calculating losses from a disposal as apply in calculating profits).

356OJ Apportionments U.K.

Any apportionment (whether of expenditure, consideration or any other amount) that is required to be made for the purposes of this Part is to be made on a just and reasonable basis.

Arrangements for avoiding tax U.K.

356OK Arrangements for avoiding tax U.K.

(1) Subsection (3) applies if an arrangement has been entered into the main purpose or one of the main purposes of which is to enable a company to obtain a relevant tax advantage.

(2) In subsection (1) the reference to obtaining a relevant tax advantage includes obtaining a relevant tax advantage by virtue of any provisions of double taxation arrangements, but only in a case where the relevant tax advantage is contrary to the object and purpose of the provisions of the double taxation arrangements (and subsection (3) has effect accordingly, regardless of anything in section 6(1) of TIOPA 2010).

(3) The tax advantage is to be counteracted by means of adjustments.

(4) For this purpose adjustments may be made (whether by an officer of Revenue and Customs or by the company) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.

(5) In this section “relevant tax advantage” means a tax advantage in relation to corporation tax charged (or which would, if the tax advantage were not obtained, be charged) in respect of amounts treated as profits of a trade by virtue of this Part.

(6) In this section—

• “double taxation arrangements” means arrangements which have effect under section 2(1) of TIOPA 2010 (double taxation relief by agreement with territories outside the United Kingdom);

• “tax advantage” has the meaning given by section 1139.

Exemption U.K.

356OL Profits attributable to period before relevant activities etc began U.K.

(1) Subsection (2) applies if—

(a) subsection (1) of section 356OC applies because Condition D in section 356OB is met (land developed with purpose of realising a gain from its disposal when developed), and

(b) part of the profit or gain mentioned in that subsection is fairly attributable to a period before the intention to develop was formed.

(2) Section 356OC(1) has effect as if the person mentioned in section 356OB(1) had not realised that part of the profit or gain.

(3) Subsection (4) applies if—

(a) section 356OE(1) applies, and

(b) part of the profit or gain mentioned in section 356OE(5) is fairly attributable to a period before the person mentioned in section 356OD(1) was a party to, or concerned in, the arrangement in question.

(4) Section 356OE has effect as if the person had not realised that part of the profit or gain.

(5) In applying this section account must be taken of the treatment under Part 3 of CTA 2009 (trading income) of a company which appropriates land as trading stock.

Other supplementary provisions U.K.

356OM Tracing value U.K.

(1) This section applies if it is necessary to determine the extent to which the value of any property or right is derived from any other property or right for the purposes of this Part.

(2) Value may be traced through any number of companies, partnerships, trusts and other entities or arrangements.

(3) The property held by a company, partnership or trust must be attributed to the shareholders, partners, beneficiaries or other participants at each stage in whatever way is appropriate in the circumstances.

(4) In this section—

• “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar nature to a partnership; and “partners”, in relation to such arrangements, is to be construed accordingly;

• “trust” includes arrangements—

  (a)

  which have effect under the law of a country or territory outside the United Kingdom; and

  (b)

  under which persons acting in a fiduciary capacity hold and administer property on behalf of other persons,

  and “beneficiaries”, in relation to such arrangements, is to be construed accordingly.

356ON Relevance of transactions, arrangements, etc U.K.

(1) In determining whether section 356OC(1) or 356OE(1) applies, account is to be taken of any method, however indirect, by which—

(a) any property or right is transferred or transmitted, or

(b) the value of any property or right is enhanced or diminished.

(2) Accordingly—

(a) the occasion of the transfer or transmission of any property or right, however indirect, and

(b) the occasion when the value of any property or right is enhanced,

may be an occasion on which section 356OC(1) or 356OE(1) applies.

(3) Subsections (1) and (2) apply in particular—

(a) to sales, contracts and other transactions made otherwise than for full consideration or for more than full consideration,

(b) to any method by which any property or right, or the control of any property or right, is transferred or transmitted by assigning—

(i) share capital or other rights in a company,

(ii) rights in a partnership, or

(iii) an interest in settled property,

(c) to the creation of an option affecting the disposition of any property or right and the giving of consideration for granting it,

(d) to the creation of a requirement for consent affecting such a disposition and the giving of consideration for granting it,

(e) to the creation of an embargo affecting such a disposition and the giving of consideration for releasing it, and

(f) to the disposal of any property or right on the winding up, dissolution or termination of a company, partnership or trust.

Interpretation U.K.

356OO “Another person” U.K.

(1) In this Part references to “other” persons are to be interpreted in accordance with subsections (2) to (4).

(2) A partnership or partners in a partnership may be regarded as a person or persons distinct from the individuals or other persons who are for the time being partners.

(3) The trustees of settled property may be regarded as persons distinct from the individuals or other persons who are for the time being the trustees.

(4) Personal representatives may be regarded as persons distinct from the individuals or other persons who are for the time being personal representatives.

356OP “Arrangement” U.K.

(1) In this Part “arrangement” (except in the phrase “double taxation arrangements”) includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable).

(2) For the purposes of this Part any number of transactions may be regarded as constituting a single arrangement if—

(a) a common purpose can be discerned in them, or

(b) there is other sufficient evidence of a common purpose.

356OQ “Disposal” U.K.

(1) In this Part references to a “disposal” of any property include any case in which the property is effectively disposed of (whether wholly or in part, as mentioned in subsection (2))—

(a) by one or more transactions, or

(b) by any arrangement.

(2) For the purposes of this Part—

(a) references to a disposal of land or any other property include a part disposal of the property, and

(b) there is a part disposal of property (“the asset”) where on a person making a disposal, any form of property derived from the asset remains undisposed of (including in cases where an interest or right in or over the asset is created by the disposal, as well as where it subsists before the disposal).

356OR “Land” and related expressions U.K.

(1) In this Part “land” includes—

(a) buildings and structures,

(b) any estate, interest or right in or over land, and

(c) land under the sea or otherwise covered by water.

(2) In this Part references to property deriving its value from land include—

(a) any shareholding in a company deriving its value directly or indirectly from land,

(b) any partnership interest deriving its value directly or indirectly from land,

(c) any interest in settled property deriving its value directly or indirectly from land, and

(d) any option, consent or embargo affecting the disposition of land.

356OS References to realising a gain U.K.

(1) For the purposes of sections 356OB(1) and 356OD(1) it does not matter whether the person (“P”) realising the profit or gain in question realises it for P or another person.

(2) For the purposes of subsection (1), if, for example by a premature sale, a person (“A”) directly or indirectly transmits the opportunity of realising a profit or gain to another person (“B”), A realises B's profit or gain for B.

356OT Related parties U.K.

(1) For the purposes of this Part a person (“A”) is related to another person (“B”)—

(a) throughout any period for which A and B are consolidated for accounting purposes,

(b) on any day on which the participation condition is met in relation to them, or

(c) on any day on which the 25% investment condition is met in relation to them.

(2) A and B are consolidated for accounting purposes for a period if—

(a) their financial results for a period are required to be comprised in group accounts,

(b) their financial results for the period would be required to be comprised in group accounts but for the application of an exemption, or

(c) their financial results for a period are in fact comprised in group accounts.

(3) In subsection (2) “group accounts” means accounts prepared under—

(a) section 399 of the Companies Act 2006, or

(b) any corresponding provision of the law of a territory outside the United Kingdom.

(4) The participation condition is met in relation to A and B (“the relevant parties”) on a day if, within the period of 6 months beginning with that day—

(a) one of the relevant parties directly or indirectly participates in the management, control or capital of the other, or

(b) the same person or persons directly or indirectly participate in the management, control or capital of each of the relevant parties.

(5) The 25% investment condition is met in relation to A and B if—

(a) one of them has a 25% investment in the other, or

(b) a third person has a 25% investment in each of them.

(6) Section 259NC of TIOPA 2010 applies for the purposes of determining whether a person has a “25% investment” in another person for the purposes of this section as it applies for the purposes of section 259NB(2) of that Act.

(7) In Chapter 2 of Part 4 of TIOPA 2010, sections 157(2), 158(4), 159(2) and 160(2) (which are about the interpretation of references to direct and indirect participation) apply in relation to subsection (4) as they apply in relation to subsection (4) of section 259NA of that Act.]

[F598 PART 8A U.K. Profits arising from the exploitation of patents etc

Textual Amendments

F598 Pt. 8A inserted (with effect in accordance with Sch. 2 paras. 7, 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 2 para. 1(1)

CHAPTER 1 U.K. Reduced corporation tax rate for profits from patents etc

357A Election for special treatment of profits from patents etc U.K.

(1) A company may elect that any relevant IP profits of a trade of the company for an accounting period for which it is a qualifying company are chargeable at a lower rate of corporation tax.

(2) An election under subsection (1) is to be given effect by allowing a deduction to be made in calculating for corporation tax purposes the profits of the trade for the period.

(3) The amount of the deduction is—F599

where—

RP is the relevant IP profits of the trade of the company,

[F600 “AR” means, in relation to a company—

(a)

in a case where corporation tax is charged at the standard small profits rate on the company’s taxable total profits of the accounting period mentioned in subsection (1) which are not ring fence profits, that rate, or

(b)

in any other case, the main rate of corporation tax.]

IPR is the special IP rate of corporation tax.

(4) The special IP rate of corporation tax is 10%.

(5) Chapter 2 specifies when a company is a qualifying company.

[F601 (6) Chapter 2A makes provision for determining the relevant IP profits or relevant IP losses of a trade of a company for an accounting period in a case where—

(a) the accounting period begins on or after 1 July 2021, or

(b) the company is a new entrant (see subsection (11)).

(7) Chapters 2B, 3 and 4 make provision for determining the relevant IP profits or relevant IP losses of a trade of a company for an accounting period in various cases where—

(a) the accounting period begins before 1 July 2021, and

(b) the company is not a new entrant.]

(8) Chapter 5 makes provision in relation to the relevant IP losses of a trade.

(9) Chapter 6 contains anti-avoidance provisions.

(10) Chapter 7 contains supplementary provision.

[F602 (11) A company is a “new entrant” for the purposes of this Part if—

(a) the first accounting period for which the company's election (or most recent election) under subsection (1) has effect begins on or after 1 July 2016, or

(b) the company elects to be treated as a new entrant for the purposes of this Part.]

Textual Amendments

F599 S. 357A(3) formula: word “AR” substituted for word “MR” in both places it occurs (for accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), s. 11(1)(a)(2)

F600 Words in s, 357A(3) substituted (for accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), s. 11(1)(b)(2)

F601 S. 357A(6)(7) substituted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(2)(a)

F602 S. 357A(11) inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(2)(b)

CHAPTER 2 U.K. Qualifying companies

357B Meaning of “qualifying company” U.K.

(1) A company is a qualifying company for an accounting period if—

(a) condition A or B is met, and

(b) in the case of a company that is a member of a group, condition C is met.

(2) Condition A is that, at any time during the accounting period, the company—

(a) holds any qualifying IP rights, or

(b) holds an exclusive licence in respect of any qualifying IP rights.

For the meaning of “exclusive licence”, see section 357BA.

(3) Condition B is that—

(a) the company has held a qualifying IP right or an exclusive licence in respect of such a right,

(b) the company has received income in respect of an event which occurred in relation to the right or licence, or any part of which so occurred, at a time when—

(i) the company was a qualifying company, and

(ii) an election under [F603 section 357A(1)] had effect in relation to it, and

(c) the income falls to be taxed in the accounting period.

(4) A right is a qualifying IP right for the purposes of this Part if—

(a) it is a right to which this Part applies (see [F604 sections 357BB and 357BBA]), and

(b) the company meets the development condition in relation to the right (see section 357BC).

(5) Condition C is that the company meets the active ownership condition for the accounting period (see section 357BE).

Textual Amendments

F603 Words in s. 357B(3)(b)(ii) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 2

F604 Words in s. 357B(4)(a) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(2); 2020 c. 1, Sch. 5 para. 1(1)

357BA Meaning of “exclusive licence” U.K.

(1) In this Part “exclusive licence”, in relation to a right (“the principal right”), means a licence which—

(a) is granted by the person who holds either the principal right or an exclusive licence in respect of the principal right (“the proprietor”), and

(b) confers on the person holding the licence (“the licence-holder”), or on the licence-holder and persons authorised by it, the rights in respect of the principal right that are listed in subsection (2).

(2) The rights are—

(a) one or more rights conferred to the exclusion of all other persons (including the proprietor) in one or more countries or territories, and

(b) the right—

(i) to bring proceedings without the consent of the proprietor or any other person in respect of any infringement of the rights within paragraph (a), or

(ii) to receive the whole or the greater part of any damages awarded in respect of any such infringement.

(3) Where the licence-holder has any right within subsection (2)(b) by virtue of any enactment or rule of law, the right is to be regarded for the purposes of this section as conferred by the licence.

(4) Where—

(a) a company (“C”) that is a member of a group holds either a right to which this Part applies or an exclusive licence in respect of such a right, and

(b) C confers on another company that is a member of the group all of the rights held by C in respect of the invention,

that other company is to be treated for the purposes of this Part as holding an exclusive licence in respect of that right.

(5) For the purposes of subsection (4) it does not matter if the rights conferred by C do not include the right to enforce, assign or grant a licence of any of those rights.

357BB Rights to which this Part applies U.K.

(1) This Part applies to the following rights—

(a) a patent granted under the Patents Act 1977,

(b) a patent granted under the European Patent Convention,

(c) a right of a specified description which corresponds to a right within paragraph (a) or (b) and is granted under the law of a specified EEA state,

(d) a supplementary protection certificate, [F605 and]

(e) any plant breeders' rights granted in accordance with Part 1 of the Plant Varieties Act 1997,

F606 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Where—

(a) directions are in force under section 22 of the Patents Act 1977 (information prejudicial to national security or safety of public) with respect to an application for a patent under that Act, and

(b) the person making the application has been notified under section 18(4) of that Act that the application complies with the requirements of the Act and the rules,

the person is to be treated for the purposes of this Part as if the person had been granted the patent under that Act.

[F607 (3) Where a product benefits from marketing protection (see subsection (4)) or data protection (see subsection (5)), the person who holds the relevant marketing authorisation in respect of the product (see subsection (6A)) is to be treated for the purposes of this Part as having been granted a right to which this Part applies in respect of the product.

(4) A product benefits from marketing protection if—

(a) a marketing authorisation under the Human Medicines Regulations 2012 has been granted in respect of the product and the period during which a generic of the product may be prevented from being sold by reason of regulation 51(8) of those Regulations has not expired;

(b) an orphan marketing authorisation under the Human Medicines Regulations 2012 has been granted in respect of the product and the prohibition arising in connection with that authorisation under regulation 58D(1) of those Regulations remains in force;

(c) a marketing authorisation to which paragraph 6 of Schedule 33A to the Human Medicines Regulations 2012 applies has been granted in respect of the product and the holder of the authorisation continues to benefit from marketing exclusivity by reason of sub-paragraph (4)(f) or (7) of that paragraph;

(d) a marketing authorisation under the Veterinary Medicines Regulations 2013 has been granted in respect of the product and the period during which an equivalent of the product may be prevented from being placed on the market by paragraph 11(3) of Schedule 1 to those Regulations has not expired.

(5) A product benefits from data protection if—

(a) a marketing authorisation in respect of the product under the Human Medicines Regulations 2012 has been granted or varied in circumstances giving rise to the prohibition in regulation 51(16) or 64A(3) of those Regulations and that prohibition remains in force;

(b) a marketing authorisation under Regulation (EC) No 1107/2009 has been granted in respect of the product and data relating to the product benefits from data protection under Article 59 of that Regulation.]

(6) The reference to data in [F608 subsection (5)(b)] does not include a study necessary for the renewal or review of a marketing authorisation granted in respect of the product in accordance with Regulation (EC) No 1107/2009.

[F609 (6A) In subsection (3) the relevant marketing authorisation is the marketing authorisation by reference to which it is determined that the product benefits from marketing protection or data protection.]

(7) In this section—

• “European Patent Convention” means the Convention on the Grant of European Patents,

• [F610 “Regulation (EC) No 1107/2009” means Regulation (EC) No 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the placing of plant protection products on the market,]

• “rules” means rules made under section 123 of the Patents Act 1977,

• “specified” means specified in an order made by the Treasury, and

• “supplementary protection certificate” means a certificate issued under—

  (a)

  Council Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products, or

  (b)

  Regulation (EC) No 1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products.

(8) The Treasury may by order—

(a) amend this section so as to make provision about the circumstances in which a product benefits from marketing or data protection for the purposes of [F611 subsection (3)];

F612 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) An order made under this section may make any incidental, supplemental, consequential, transitional or saving provision, including provision amending or modifying this Part.

Textual Amendments

F605 Word in s. 357BB(1)(d) inserted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(a)(i); 2020 c. 1, Sch. 5 para. 1(1)

F606 S. 357BB(1)(f) omitted (31.12.2020) by virtue of The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(a)(ii); 2020 c. 1, Sch. 5 para. 1(1)

F607 S. 357BB(3)-(5) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(b); 2020 c. 1, Sch. 5 para. 1(1)

F608 Words in s. 357BB(6) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(c); 2020 c. 1, Sch. 5 para. 1(1)

F609 S. 357BB(6A) inserted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(d); 2020 c. 1, Sch. 5 para. 1(1)

F610 Words in s. 357BB(7) inserted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(e); 2020 c. 1, Sch. 5 para. 1(1)

F611 Words in s. 357BB(8)(a) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(f)(i); 2020 c. 1, Sch. 5 para. 1(1)

F612 S. 357BB(8)(b) omitted (31.12.2020) by virtue of The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(3)(f)(ii); 2020 c. 1, Sch. 5 para. 1(1)

[F613 357BBA. Rights to which this Part applies: EU rights U.K.

(1) This Part applies to the following rights—

(a) an EU supplementary protection certificate, and

(b) any Community plant variety rights granted under Council Regulation (EC) No 2100/94.

(2) Where—

(a) a person holds a marketing authorisation in respect of any product in accordance with any legislation having effect in EU law, and

(b) the product benefits from EU marketing protection (see subsection (3)) or EU data protection (see subsection (4)),

the person is to be treated for the purposes of this Part as having been granted a right to which this Part applies in respect of the product.

(3) A product benefits from EU marketing protection if—

(a) the product benefits from marketing protection by virtue of Article 14.11 of Regulation (EC) No 726/2004 of the European Parliament and of the Council of 31 March 2004 laying down Community procedures for the authorisation and supervision of medical products for human use, or

(b) any of the following prohibitions is in force—

(i) the prohibition on placing on the market a generic of the product imposed by Article 10.1 of Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to medicinal products for human use,

(ii) the prohibition imposed by Article 8.1 of Regulation (EC) No 141/2000 of the European Parliament and the Council of 16 December 1999 on orphan medicinal products, and

(iii) the prohibition on placing on the market a generic of the product imposed by Article 13.1 of Directive 2001/82/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to veterinary medicinal products.

(4) A product benefits from EU data protection if—

(a) the product benefits from the data exclusivity conferred by Article 10.5 of Directive 2001/83/EC of the European Parliament and of the Council,

(b) the prohibition on referring to the results of tests or trials in relation to the product imposed by Article 74a of that Directive is in force, or

(c) data relating to the product benefits from data protection under Article 59 of Regulation (EC) No 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the placing of plant protection products on the market.

(5) The reference to data in subsection (4)(c) does not include a study necessary for the renewal or review of a marketing authorisation granted in respect of the product in accordance with Regulation (EC) No 1107/2009.

(6) In this section “EU supplementary protection certificate” means a certificate issued under—

(a) Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products, or

(b) Regulation (EC) No 1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products.

(7) A reference in this section to any EU legislation is a reference to that legislation as it has effect in EU law.

(8) The Treasury may by regulations—

(a) amend this section so as to make provision about the circumstances in which a product benefits from EU marketing protection or EU data protection for the purposes of subsection (2);

(b) make such provision amending any reference in this section to EU legislation as appears to the Treasury appropriate in consequence of any EU legislation amending or replacing that EU legislation.

(9) Regulations under subsection (8) may make any incidental, supplemental, consequential, transitional or saving provision, including provision amending or modifying this Part.]

Textual Amendments

F613 S. 357BBA inserted (31.12.2020) by The Taxes (Amendments) (EU Exit) (No. 2) Regulations 2019 (S.I. 2019/818), regs. 1(2), 8(4); 2020 c. 1, Sch. 5 para. 1(1)

357BC The development condition U.K.

(1) A company meets the development condition in relation to a right if condition A, B, C or D is met.

Section 357BD (meaning of “qualifying development”) applies for the purposes of this section.

(2) Condition A is that—

(a) the company has at any time carried out qualifying development in relation to the right, and

(b) the company has not ceased to be, or become, a controlled member of a group since that time.

(3) Condition B is that—

(a) the company has at any time carried out qualifying development in relation to the right,

(b) the company has ceased to be, or become, a controlled member of a group since that time,

(c) the company has, for a period of 12 months beginning with the day on which it ceased to be, or became, a controlled member of the group, performed activities of the same description as those that constituted the qualifying development, and

(d) the company remains a member of that group or (as the case may be) does not become a controlled member of any other group.

(4) Condition C is that—

(a) the company is a member of a group,

(b) another company that is or has been a member of the group has carried out qualifying development in relation to the right, and

(c) that other company was a member of the group at the time it carried out the qualifying development.

(5) Condition D is that—

(a) the company is a member of a group,

(b) another company that is or has been a member of the group has carried out qualifying development in relation to the right,

(c) that other company (“T”) or, where another member of the group begins to carry on the trade which T carried on immediately before becoming a member of the group, either or both of those companies have, while carrying on that trade as a member of the group, performed activities of the same description as those that constituted the qualifying development, and

(d) those activities of those companies, taken together, have been performed for a period of 12 months beginning with the day on which T became a member of the group.

(6) For the purposes of conditions A and B, a company becomes a controlled member of a group at any time if—

(a) another company (“P”) either becomes the holder of a major interest in the company, or begins to control the company, at that time, and

(b) immediately before that time the company was not associated with P or with any company associated with P immediately before that time.

(7) For the purposes of conditions A and B, a company ceases to be a controlled member of a group at any time if—

(a) every other company which immediately before that time held a major interest in, or controlled, the company ceases to do so, and

(b) as a result the company ceases to be associated with any of those companies.

(8) Where—

(a) a company ceases to be a controlled member of a group at any time, and

(b) at that time the company holds a major interest in, or controls, any other company,

that other company is to be treated for the purposes of conditions A and B as also having ceased to be a controlled member of the group at that time.

(9) In subsections (6) and (7) “associated” is to be read in accordance with section 357GD(3).

(10) The following provisions apply for the purposes of subsections (6) to (8)—

• section 472 of CTA 2009 (meaning of “control”), and

• sections 473 and 474 of CTA 2009 (meaning of “major interest”).

(11) A company that meets the development condition in relation to a right by virtue of the performance of the activities mentioned in subsection (3) or (5) for the period of 12 months so mentioned is to be regarded as meeting that condition in relation to the right during that period (as well as at any other time when the company meets the condition).

357BD Meaning of “qualifying development” U.K.

(1) A company carries out “qualifying development” in relation to a right if—

(a) it creates, or significantly contributes to the creation of, the invention, or

(b) it performs a significant amount of activity for the purposes of developing the invention or any item or process incorporating the invention.

(2) The reference in subsection (1)(b) to developing the invention includes developing ways in which the invention may be used or applied.

(3) For the purposes of section 357BC it does not matter whether the qualifying development was carried out before or after—

(a) the company, or

(b) where the company is a member of a group, any member of the group,

became the holder of the right or (as the case may be) an exclusive licence in respect of the right.

357BE The active ownership condition U.K.

(1) A company meets the active ownership condition for an accounting period if all or almost all of the qualifying IP rights held by the company in that accounting period are rights in respect of which condition A or B is met.

(2) Condition A is that during the accounting period the company performs a significant amount of management activity in relation to the rights.

(3) In subsection (2) “management activity”, in relation to any qualifying IP rights, means formulating plans and making decisions in relation to the development or exploitation of the rights.

(4) Condition B is that the company meets the development condition in relation to the rights by virtue of section 357BC(2) or (3).

(5) Any reference in this section to a qualifying IP right held by the company includes a reference to a qualifying IP right in respect of which the company holds an exclusive licence.

[F614 CHAPTER 2A U.K. Relevant IP profits: cases mentioned in section 357A(6)

Textual Amendments

F614 Pt. 8A Chs. 2A, 2B inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(3)

Steps for calculating relevant IP profits of a trade U.K.

357BF Relevant IP profits U.K.

(1) This section applies for the purposes of determining the relevant IP profits of a trade of a company for an accounting period in a case where—

(a) the accounting period begins on or after 1 July 2021, or

(b) the company is a new entrant (see section 357A(11)).

(2) To determine the relevant IP profits—

• Step 1 Take any amounts which are brought into account as credits in calculating the profits of the trade for the accounting period, other than any amounts of finance income (see section 357BG), and divide them into two “streams”, amounts of relevant IP income (see sections 357BH to 357BHC) and amounts that are not amounts of relevant IP income. The stream consisting of relevant IP income is “the relevant IP income stream”; the other stream is the “standard income stream”.

• Step 2 Divide the relevant IP income stream into “relevant IP income sub-streams” so that each sub-stream is—

  (a)

  a sub-stream consisting of income properly attributable to a particular qualifying IP right (an “individual IP right sub-stream”),

  (b)

  a sub-stream consisting of income properly attributable to a particular kind of IP item (a “product sub-stream”), or

  (c)

  a sub-stream consisting of income properly attributable to a particular kind of IP process (a “process sub-stream”).

  See subsection (5) for the meaning of “IP item” and “IP process” and see subsections (6) and (7) for further provision in connection with product sub-streams and process sub-streams.

• Step 3 Take any amounts which are brought into account as debits in calculating the profits of the trade for the accounting period, other than any excluded debits (see section 357BI), and allocate them on a just and reasonable basis between the standard income stream and each of the relevant IP income sub-streams.

• Step 4 Deduct from each relevant IP income sub-stream—

  (a)

  the amounts allocated to the sub-stream at Step 3, and

  (b)

  the routine return figure for the sub-stream (see section 357BJ).

  But see section 357BIA (which provides that certain amounts allocated to a relevant IP income sub-stream at Step 3 are not to be deducted from the sub-stream at this Step).

• Step 5 Deduct from each relevant IP income sub-stream which is greater than nil following Step 4 the marketing assets return figure for the sub-stream (see section 357BK).

• Step 6 Multiply the amount of each relevant IP income sub-stream (following the deductions required at Steps 4 and 5) by the R&D fraction for the sub-stream (see section 357BL).

• Step 7 Add together the amounts of the relevant IP income sub-streams (following Step 6).

• Step 8 If the company has made an election under section 357BM (which provides in certain circumstances for profits arising before the grant of a right to be treated as relevant IP profits), add to the amount given by Step 7 any amount determined in accordance with subsection (3) of that section.

(3) If the amount given by subsection (2) is greater than nil, that amount is the relevant IP profits of the trade for the accounting period.

(4) If the amount given by subsection (2) is less than nil, that amount is the relevant IP losses of the trade for the accounting period (see Chapter 5).

(5) In this section—

• “IP item” means—

  (a)

  an item in respect of which a qualifying IP right held by the company has been granted, or

  (b)

  an item which incorporates one or more items within paragraph (a);

• “IP process” means—

  (a)

  a process in respect of which a qualifying IP right held by the company has been granted, or

  (b)

  a process which incorporates one or more processes within paragraph (a).

(6) For the purposes of this section two or more IP items, or two or more IP processes, may be treated as being of a particular kind if they are intended to be, or are capable of being, used for the same or substantially the same purposes.

(7) Income may be allocated at Step 2 of subsection (2) to a product sub-stream or process sub-stream only if—

(a) it would not be reasonably practicable to apportion the income between individual IP right sub-streams, or

(b) it would be reasonably practicable to do that but doing so would result in it not being reasonably practicable to apply any of the remaining steps in subsection (2).

(8) Any reference in this section to a qualifying IP right held by the company includes a reference to a qualifying IP right in respect of which the company holds an exclusive licence.

Finance income U.K.

357BG Finance income U.K.

(1) For the purposes of this Part “finance income”, in relation to a trade of a company, means—

(a) any credits which are treated as receipts of the trade by virtue of—

(i) section 297 of CTA 2009 (credits in respect of loan relationships), or

(ii) section 573 of CTA 2009 (credits in respect of derivative contracts),

(b) any amount which in accordance with generally accepted accounting practice falls to be recognised as arising from a financial asset, and

(c) any return, in relation to an amount, which—

(i) is produced for the company by an arrangement to which it is a party, and

(ii) is economically equivalent to interest.

(2) In subsection (1)—

• “economically equivalent to interest” is to be construed in accordance with section 486B(2) and (3) of CTA 2009, and

• “financial asset” means a financial asset as defined for the purposes of generally accepted accounting practice.

(3) For the purposes of subsection (1)(c), the amount of a return is the amount which by virtue of the return would, in calculating the company's chargeable profits, be treated under section 486B of CTA 2009 (disguised interest to be regarded as profit from loan relationship) as profit arising to the company from a loan relationship.

But, in calculating that profit for the purposes of this subsection, sections 486B(7) and 486C to 486E of that Act are to be ignored.

Relevant IP income U.K.

357BH Relevant IP income U.K.

(1) For the purposes of this Part “relevant IP income” means income falling within any of the Heads set out in—

(a) subsection (2) (sales income),

(b) subsection (6) (licence fees),

(c) subsection (7) (proceeds of sale etc),

(d) subsection (8) (damages for infringement), and

(e) subsection (9) (other compensation).

This is subject to section 357BHB (excluded income).

(2) Head 1 is income arising from the sale by the company of any of the following items—

(a) items in respect of which a qualifying IP right held by the company has been granted (“qualifying items”);

(b) items incorporating one or more qualifying items;

(c) items that are wholly or mainly designed to be incorporated into items within paragraph (a) or (b).

(3) For the purposes of this Part an item and its packaging are not to be treated as a single item, unless the packaging performs a function that is essential for the use of the item for the purposes for which it is intended to be used.

(4) In subsection (3) “packaging”, in relation to an item, means any form of container or other packaging used for the containment, protection, handling, delivery or presentation of the item, including by way of attaching the item to, or winding the item round, some other article.

(5) In a case where a qualifying item and an item that is designed to incorporate that item (“the parent item”) are sold together as, or as part of, a single unit for a single price, the reference in subsection (2)(b) to an item incorporating a qualifying item includes a reference to the parent item.

(6) Head 2 is income consisting of any licence fee or royalty which the company receives under an agreement granting another person any of the following rights only—

(a) a right in respect of any qualifying IP right held by the company,

(b) any other right in respect of a qualifying item or process, and

(c) in the case of an agreement granting any right within paragraph (a) or (b), a right granted for the same purposes as those for which that right was granted.

In this subsection “qualifying process” means a process in respect of which a qualifying IP right held by the company has been granted.

(7) Head 3 is any income arising from the sale or other disposal of a qualifying IP right or an exclusive licence in respect of such a right.

(8) Head 4 is any amount received by the company in respect of an infringement, or alleged infringement, of a qualifying IP right held by the company at the time of the infringement or alleged infringement.

(9) Head 5 is any amount of damages, proceeds of insurance or other compensation, other than an amount in respect of an infringement or alleged infringement of a qualifying IP right, which is received by the company in respect of an event and—

(a) is paid in respect of any items that fell within subsection (2) at the time of that event, or

(b) represents a loss of income which would, if received by the company at the time of that event, have been relevant IP income.

(10) But income is not relevant IP income by virtue of subsection (8) or (9) unless the event in respect of which the income is received, or any part of that event, occurred at a time when—

(a) the company was a qualifying company, and

(b) an election under section 357A(1) had effect in relation to it.

(11) In a case where the whole of that event does not occur at such a time, subsection (8) or (9) (as the case may be) applies only to so much of the amount received by the company in respect of the event as on a just and reasonable apportionment is properly attributable to such a time.

(12) Any reference in this section to a qualifying IP right held by the company includes a reference to a qualifying IP right in respect of which the company holds an exclusive licence.

357BHA Notional royalty U.K.

(1) This section applies where—

(a) a company holds a qualifying IP right or an exclusive licence in respect of a qualifying IP right,

(b) the qualifying IP right falls within paragraph (a), (b) or (c) of section 357BB(1), and

(c) the income of a trade of the company for an accounting period includes income (“IP-derived income”) which—

(i) arises from things done by the company that involve the exploitation by the company of the qualifying IP right, and

(ii) is not relevant IP income, finance income or excluded income.

(2) The company may elect that the appropriate percentage of the IP-derived income is to be treated for the purposes of this Part as if it were relevant IP income.

(3) The “appropriate percentage” is the proportion of the IP-derived income which the company would pay another person (“P”) for the right to exploit the qualifying IP right in the accounting period concerned if the company were not otherwise able to exploit it.

(4) For the purposes of determining the appropriate percentage under this section, assume that—

(a) the company and P are dealing at arm's length,

(b) the company, or the company and persons authorised by it, will have the right to exploit the qualifying IP right to the exclusion of any other person (including P),

(c) the company will have the same rights in relation to the qualifying IP right as it actually has,

(d) the right to exploit the qualifying IP right is conferred on the relevant day,

(e) the appropriate percentage is determined at the beginning of the accounting period concerned,

(f) the appropriate percentage will apply for each succeeding accounting period for which the company will have the right to exploit the qualifying IP right, and

(g) no income other than IP-derived income will arise from anything done by the company that involves the exploitation by the company of the qualifying IP right.

(5) In subsection (4)(d) “the relevant day” means—

(a) the first day of the accounting period concerned, or

(b) if later, the day on which the company first began to hold the qualifying IP right or licence.

(6) In determining the appropriate percentage, the company must act in accordance with—

(a) Article 9 of the OECD Model Tax Convention, and

(b) the OECD transfer pricing guidelines.

(7) In this section “excluded income” means any income falling within either of the Heads in section 357BHB.

357BHB Excluded income U.K.

(1) For the purposes of this Part income falling within either of the Heads set out in the following subsections is not relevant IP income—

(a) subsection (2) (ring fence income),

(b) subsection (3) (income attributable to non-exclusive licences).

(2) Head 1 is income arising from oil extraction activities or oil rights.

In this subsection “oil extraction activities” and “oil rights” have the same meaning as in Part 8 (see sections 272 and 273).

(3) Head 2 is income which on a just and reasonable apportionment is properly attributable to a licence (a “non-exclusive licence”) held by the company which—

(a) is a licence in respect of an item or process, but

(b) is not an exclusive licence in respect of a qualifying IP right.

(4) In a case where—

(a) a company holds an exclusive licence in respect of a qualifying IP right, and

(b) the licence also confers on the company (or on the company and persons authorised by it) any right in respect of the invention otherwise than to the exclusion of all other persons,

the licence is to be treated for the purposes of this Part as if it were two separate licences, one an exclusive licence that does not confer any such rights, and the other a non-exclusive licence conferring those rights.

357BHC Mixed sources of income U.K.

(1) This section applies to any income that—

(a) is mixed income, or

(b) is paid under a mixed agreement.

(2) “Mixed income” means the proceeds of sale where an item falling within subsection (2) of section 357BH and an item not falling within that subsection are sold together as, or as part of, a single unit for a single price.

(3) A “mixed agreement” is an agreement providing for—

(a) one or more of the matters in paragraphs (a) to (c) of subsection (4), and

(b) one or more of the matters in paragraphs (d) to (g) of that subsection.

(4) The matters are—

(a) the sale of an item falling within section 357BH(2),

(b) the grant of any right falling within paragraph (a), (b) or (c) of section 357BH(6),

(c) a sale or disposal falling within section 357BH(7),

(d) the sale of any other item,

(e) the grant of any other right,

(f) any other sale or disposal,

(g) the provision of any services.

(5) So much of the income as on a just and reasonable apportionment is properly attributable to—

(a) the sale of an item falling within section 357BH(2),

(b) the grant of any right falling within paragraph (a), (b) or (c) of section 357BH(6), or

(c) a sale or disposal falling within section 357BH(7),

is to be regarded for the purposes of this Part as relevant IP income.

(6) But where the amount of income that on such an apportionment is properly attributable to any of the matters in paragraphs (d) to (g) of subsection (4) is a trivial proportion of the income to which this section applies, all of that income is to be regarded for the purposes of this Part as relevant IP income.

Excluded debits etc U.K.

357BI Excluded debits U.K.

For the purposes of this Part “excluded debits” means—

(a) the amount of any debits which are treated as expenses of a trade by virtue of—

(i) section 297 of CTA 2009 (debits in respect of loan relationships), or

(ii) section 573 of CTA 2009 (debits in respect of derivative contracts),

(b) the amount of any additional deduction for an accounting period obtained by a company under Part 13 of CTA 2009 for expenditure on research and development in relation to a trade,

(c) the amount of any additional deduction for an accounting period obtained by a company under Part 15A of CTA 2009 in respect of qualifying expenditure on a television programme,

(d) the amount of any additional deduction for an accounting period obtained by a company under Part 15B of CTA 2009 in respect of qualifying expenditure on a video game, and

(e) the amount of any additional deduction for an accounting period obtained by a company under Part 15C of CTA 2009 in respect of qualifying expenditure on a theatrical production.

357BIA Certain amounts not to be deducted from sub-streams at Step 4 of section 357BF U.K.

(1) This section applies where a company enters into an arrangement with a person under which—

(a) the person assigns to the company a qualifying IP right or grants or transfers to the company an exclusive licence in respect of a qualifying IP right, and

(b) the company makes to the person an income-related payment.

(2) A payment is an “income-related payment” for the purposes of subsection (1) if—

(a) the obligation to make the payment arises under the arrangement by reason of the amount of income the company has accrued which is properly attributable to the right or licence, or

(b) the amount of the payment is determined under the arrangement by reference to the amount of income the company has accrued which is so attributable.

(3) If the amount of the income-related payment is allocated to a relevant IP income sub-stream at Step 3 of section 357BF(2), the amount is not to be deducted from the sub-stream at Step 4 of section 357BF(2) unless the payment will not affect the R&D fraction for the sub-stream.”

Routine return figure U.K.

357BJ Routine return figure U.K.

(1) This section applies for the purpose of calculating the routine return figure for a relevant IP income sub-stream established at Step 2 in section 357BF(2) in determining the relevant IP profits of a trade of a company for an accounting period.

(2) The routine return figure for the sub-stream is 10% of the aggregate of any routine deductions which—

(a) have been made by the company in calculating the profits of the trade for the accounting period, and

(b) have been allocated to the sub-stream at Step 3 in section 357BF(2).

For the meaning of “routine deductions”, see sections 357BJA and 357BJB.

(3) In a case where—

(a) the company (“C”) is a member of a group,

(b) another member of the group has incurred expenses on behalf of C,

(c) had they been incurred by C, C would have made a deduction in respect of the expenses in calculating the profits of the trade for the accounting period,

(d) the deduction would have been a routine deduction, and

(e) the deduction would have been allocated to the sub-stream at Step 3 in section 357BF(2),

C is to be treated for the purposes of subsection (2) as having made such a routine deduction and as having allocated the deduction to the sub-stream.

(4) Where expenses have been incurred by any member of the group on behalf of C and any other member of the group, subsection (3) applies in relation to so much of the amount of the expenses as on a just and reasonable apportionment may properly be regarded as incurred on behalf of C.

357BJA Routine deductions U.K.

(1) For the purposes of this Part, “routine deductions” means deductions falling within any of the Heads set out in—

(a) subsection (2) (capital allowances),

(b) subsection (3) (costs of premises),

(c) subsection (4) (personnel costs),

(d) subsection (5) (plant and machinery costs),

(e) subsection (6) (professional services), and

(f) subsection (7) (miscellaneous services).

This is subject to section 357BJB (deductions that are not routine deductions).

(2) Head 1 is any allowances under CAA 2001.

(3) Head 2 is any deductions made by the company in respect of any premises occupied by the company.

(4) Head 3 is any deductions made by the company in respect of—

(a) any director or employee of the company, or

(b) any externally provided workers.

(5) Head 4 is any deductions made by the company in respect of any plant or machinery used by the company.

(6) Head 5 is any deductions made by the company in respect of any of the following services—

(a) legal services, other than IP-related services;

(b) financial services, including—

(i) insurance services, and

(ii) valuation or actuarial services;

(c) services provided in connection with the administration or management of the company's directors and employees;

(d) any other consultancy services.

(7) Head 6 is any deductions made by the company in respect of any of the following services—

(a) the supply of water, fuel or power;

(b) telecommunications services;

(c) computing services, including computer software;

(d) postal services;

(e) the transportation of any items;

(f) the collection, removal and disposal of refuse.

(8) In this section—

• “externally provided worker” has the same meaning as in Part 13 of CTA 2009 (see section 1128 of that Act),

• “IP-related services” means services provided in connection with—

  (a)

  any application for a right to which this Part applies, or

  (b)

  any proceedings relating to the enforcement of any such right,

• “premises” includes any land,

• “telecommunications service” means any service that consists in the provision of access to, and of facilities for making use of, any telecommunication system (whether or not one provided by the person providing the service), and

• “telecommunication system” means any system (including the apparatus comprised in it) which exists for the purpose of facilitating the transmission of communications by any means involving the use of electrical or electromagnetic energy.

(9) The Treasury may by regulations amend this section.

357BJB Deductions that are not routine deductions U.K.

(1) For the purposes of this Part a deduction is not a “routine deduction” if it falls within any of the Heads set out in—

(a) subsection (2) (loan relationships and derivative contracts),

(b) subsection (3) (R&D expenses),

(c) subsection (4) (capital allowances for R&D or patents),

(d) subsection (5) (R&D-related employee share acquisitions),

[F615 (da) subsection (7A) (expenditure on the production of films, television programmes and video games),]

(e) subsection (8) (television production expenditure),

(f) subsection (9) (video games development expenditure).

(2) Head 1 is any debits which are treated as expenses of the trade by virtue of—

(a) section 297 of CTA 2009 (debits in respect of loan relationships), or

(b) section 573 of CTA 2009 (debits in respect of derivative contracts).

(3) Head 2 is—

(a) the amount of any expenditure on research and development in relation to the trade—

(i) for which an additional deduction for the accounting period is obtained by the company under Part 13 of CTA 2009, or

(ii) in respect of which the company is entitled to an R&D expenditure credit for the accounting period under [F616 Chapter 1A of that Part], and

(b) where the company obtains an additional deduction as mentioned in paragraph (a)(i), the amount of that additional deduction.

(4) Head 3 is any allowances under—

(a) Part 6 of CAA 2001 (research and development allowances), or

(b) Part 8 of CAA 2001 (patent allowances).

(5) Head 4 is the appropriate proportion of any deductions allowed under Part 12 of CTA 2009 (relief for employee share acquisitions) in a case where—

(a) shares are acquired by an employee or another person because of the employee's employment by the company, and

(b) the employee is wholly or partly engaged directly and actively in relevant research and development (within the meaning of section 1042 of CTA 2009).

(6) In subsection (5) “the appropriate proportion”, in relation to a deduction allowed in respect of an employee, is the proportion of the staffing costs in respect of the employee which are attributable to relevant research and development for the purposes of Part 13 of CTA 2009 (see section 1124 of that Act).

“Staffing costs” has the same meaning as in that Part (see section 1123 of that Act).

(7) Subsections (5) and (6) of section 1124 of CTA 2009 apply for the purposes of subsection (5)(b) as they apply for the purposes of that section.

[F617 (7A) Head 4A is the amount of any expenditure in respect of which the company is entitled to an audiovisual expenditure credit or video game expenditure credit under Part 14A of CTA 2009.]

(8) Head 5 is—

(a) the amount of any qualifying expenditure on a television programme for which an additional deduction for the accounting period is obtained by the company under Part 15A of CTA 2009, and

(b) the amount of that additional deduction.

(9) Head 6 is—

(a) the amount of any qualifying expenditure on a video game for which an additional deduction for the accounting period is obtained by the company under Part 15B of CTA 2009, and

(b) the amount of that additional deduction.

(10) The Treasury may by regulations amend this section.

Textual Amendments

F615 S. 357BJB(1)(da) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 2 para. 6(3)(a)(i) (with Sch. 2 paras. 16(1), 17-25)

F616 Words in s. 357BJB(3)(a)(ii) substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(3)(a), 16; S.I. 2024/286, reg. 2

F617 S. 357BJB(7A) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 2 para. 6(3)(a)(ii) (with Sch. 2 paras. 16(1), 17-25)

Marketing assets return figure U.K.

357BK Marketing assets return figure U.K.

(1) The marketing assets return figure for a relevant IP income sub-stream is—

where—

NMR is the notional marketing royalty in respect of the sub-stream (see section 357BKA), and

AMR is the actual marketing royalty in respect of the sub-stream (see section 357BKB).

(2) Where—

(a) AMR is greater than NMR, or

(b) the difference between NMR and AMR is less than 10% of the amount of the relevant IP income sub-stream following the deductions required by Step 4 in section 357BF(2),

the marketing assets return figure for the sub-stream is nil.

357BKA Notional marketing royalty U.K.

(1) The notional marketing royalty in respect of a relevant IP income sub-stream is the appropriate percentage of the income allocated to that sub-stream at Step 2 in section 357BF(2).

(2) The “appropriate percentage” is the proportion of that income which the company would pay another person (“P”) for the right to exploit the relevant marketing assets in the accounting period concerned if the company were not otherwise able to exploit them.

(3) For the purposes of this section a marketing asset is a “relevant marketing asset” in relation to a relevant IP income sub-stream if the sub-stream includes any income arising from things done by the company that involve the exploitation by the company of that marketing asset.

(4) For the purpose of determining the appropriate percentage under this section, assume that—

(a) the company and P are dealing at arm's length,

(b) the company, or the company and persons authorised by it, will have the right to exploit the relevant marketing assets to the exclusion of any other person (including P),

(c) the company will have the same rights in relation to the relevant marketing assets as it actually has,

(d) the right to exploit the relevant marketing assets is conferred on the relevant day,

(e) the appropriate percentage is determined at the beginning of the accounting period concerned,

(f) the appropriate percentage will apply for each succeeding accounting period for which the company will have the right to exploit the relevant marketing assets, and

(g) no income other than income within the relevant IP income sub-stream will arise from anything done by the company that involves the exploitation by the company of the relevant marketing assets.

(5) In subsection (4)(d) “the relevant day”, in relation to a relevant marketing asset, means—

(a) the first day of the accounting period concerned, or

(b) if later, the day on which the company first acquired the relevant marketing asset or the right to exploit the asset.

(6) In determining the appropriate percentage, the company must act in accordance with—

(a) Article 9 of the OECD Model Tax Convention, and

(b) the OECD transfer pricing guidelines.

(7) In this section “marketing asset” means any of the following (whether or not capable of being transferred or assigned)—

(a) anything in respect of which proceedings for passing off could be brought, including a registered trade mark (within the meaning of the Trade Marks Act 1994),

(b) anything that corresponds to a marketing asset within paragraph (a) and is recognised under the law of a country or territory outside the United Kingdom,

(c) any signs or indications (so far as not falling within paragraph (a) or (b)) which may serve, in trade, to designate the geographical origin of goods or services, and

(d) any information which relates to customers or potential customers of the company, or any other member of a group of which the company is a member, and is intended to be used for marketing purposes.

357BKB Actual marketing royalty U.K.

(1) The actual marketing royalty for a relevant IP income sub-stream is the aggregate of any sums which—

(a) were paid by the company for the purposes of acquiring any relevant marketing assets or the right to exploit any such assets, and

(b) have been allocated to the sub-stream at Step 3 in section 357BF(2).

(2) In this section “relevant marketing asset” has the same meaning as in section 357BKA.

R&D fraction U.K.

357BL Introduction U.K.

(1) Sections 357BLA to 357BLH apply for the purpose of determining the R&D fraction for a relevant IP income sub-stream established at Step 2 in section 357BF(2) in determining the relevant IP profits of a trade of a company for an accounting period.

(2) In sections 357BLA to 357BLH, references to “the sub-stream”, “the trade”, “the company” and “the accounting period” are to the relevant IP income sub-stream, the trade, the company and the accounting period referred to in subsection (1).

357BLA The R&D fraction U.K.

(1) The R&D fraction for the sub-stream is the lesser of 1 and—

where—

D is the company's qualifying expenditure on relevant R&D undertaken in-house (see section 357BLB),

S1 is the company's qualifying expenditure on relevant R&D sub-contracted to unconnected persons (see section 357BLC),

S2 is the company's qualifying expenditure on relevant R&D sub-contracted to connected persons (see section 357BLD), and

A is the company's qualifying expenditure on the acquisition of relevant qualifying IP rights (see section 357BLE).

(2) This section is subject to section 357BLH (R&D fraction: increase for exceptional circumstances).

357BLB Qualifying expenditure on relevant R&D undertaken in-house U.K.

(1) In section 357BLA, the company's “qualifying expenditure on relevant R&D undertaken in-house” means the expenditure incurred by the company during the relevant period which meets conditions A and B.

(2) Condition A is that the expenditure is—

(a) incurred on staffing costs,

(b) incurred on software [F618 , data licences, cloud computing services] or consumable items,

(c) qualifying expenditure on externally provided workers, or

(d) incurred on relevant payments to the subjects of clinical trials.

(3) Condition B is that the expenditure is attributable to relevant research and development undertaken by the company itself.

(4) If an election made by the company under section 18A of CTA 2009 (election for exemption for profits or losses of company's foreign permanent establishments) applies to the relevant period, expenditure incurred by the company during the period which meets conditions A and B—

(a) is not “qualifying expenditure on relevant R&D undertaken in-house”, but

(b) is “qualifying expenditure on relevant R&D sub-contracted to connected persons”,

so far as it is expenditure brought into account in calculating a relevant profits amount, or a relevant losses amount, aggregated at section 18A(4)(a) or (b) of CTA 2009 in calculating the company's foreign permanent establishments amount for the period.

(5) In this section and sections 357BLC and 357BLD, “relevant research and development” means research and development (within the meaning of section 1138) which—

(a) in a case where the sub-stream is an individual IP right sub-stream, relates to the qualifying IP right to which the income in the sub-stream is attributable,

(b) in a case where the sub-stream is a product sub-stream, relates to a qualifying IP right granted in respect of any item—

(i) to which income in the sub-stream is attributable, or

(ii) which is incorporated in an item to which income in the sub-stream is attributable, or

(c) in a case where the sub-stream is a process sub-stream, relates to a qualifying IP right granted in respect of any process—

(i) to which income in the sub-stream is attributable, or

(ii) which is incorporated in a process to which income in the sub-stream is attributable.

(6) Research and development “relates” to a qualifying IP right for the purposes of subsection (5) if—

(a) it creates, or contributes to the creation of, the invention,

(b) it is undertaken for the purpose of developing the invention,

(c) it is undertaken for the purpose of developing ways in which the invention may be used or applied, or

(d) it is undertaken for the purpose of developing any item or process incorporating the invention.

(7) The following provisions of CTA 2009 apply for the purposes of this section—

(a) section 1123 (meaning of “staffing costs”),

(b) section 1124 (when staffing costs are attributable to relevant research and development),

(c) section 1125 (meaning of “software [F619 , data licences, cloud computing services] or consumable items”),

(d) sections 1126 to 1126B (when software [F620 , data licences, cloud computing services] or consumable items are attributable to relevant research and development),

(e) sections 1127 to 1131 (meaning of “qualifying expenditure on externally provided workers”), [F621 as those provisions had effect before the amendments made by paragraph 9 of Schedule 1 to FA 2024,]

(f) section 1132 (when qualifying expenditure on externally provided workers is attributable to relevant research and development), and

(g) section 1140 (meaning of “relevant payments to the subjects of clinical trials”),

and in the application of those provisions for the purposes of this section any reference to “relevant research and development” is to be read as a reference to relevant research and development within the meaning given by subsection (5).

Textual Amendments

F618 Words in s. 357BLB(2)(b) inserted (with effect in relation to accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 1 para. 9(a), 20

F619 Words in s. 357BLB(7)(c) inserted (with effect in relation to accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 1 para. 9(b)(i), 20

F620 Words in s. 357BLB(7)(d) inserted (with effect in relation to accounting periods beginning on or after 1.4.2023) by Finance (No. 2) Act 2023 (c. 30), Sch. 1 para. 9(b)(ii), 20

F621 Words in s. 357BLB(7)(e) inserted (1.4.2024 with effect in relation to accounting periods beginning on or after that date of the commencing S.I.) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(3)(b), 16; S.I. 2024/286, reg. 2

357BLC Qualifying expenditure on relevant R&D sub-contracted to unconnected persons U.K.

(1) In section 357BLA, the company's “qualifying expenditure on relevant R&D sub-contracted to unconnected persons” means the expenditure incurred by the company during the relevant period in making payments within subsection (2).

(2) A payment is within this subsection if—

(a) it is made to a person in respect of relevant research and development contracted out by the company to the person, and

(b) the company and the person are not connected (within the meaning given by section 1122).

(3) If an election made by the company under section 18A of CTA 2009 (election for exemption for profits or losses of company's foreign permanent establishments) applies to the relevant period, expenditure incurred by the company during the period in making payments within subsection (2)—

(a) is not “qualifying expenditure on relevant R&D sub-contracted to unconnected persons”, but

(b) is “qualifying expenditure on relevant R&D sub-contracted to connected persons”,

so far as it is expenditure brought into account in calculating a relevant profits amount, or a relevant losses amount, aggregated at section 18A(4)(a) or (b) of CTA 2009 in calculating the company's foreign permanent establishments amount for the period.

(4) Where a payment is made to a person in respect of relevant research and development contracted out to the person and in respect of other matters, so much of the payment as is properly attributable to other matters is to be disregarded for the purposes of this section.

357BLD Qualifying expenditure on relevant R&D sub-contracted to connected persons U.K.

(1) In section 357BLA, the company's “qualifying expenditure on relevant R&D sub-contracted to connected persons” means the total of—

(a) any expenditure which is “qualifying expenditure on relevant R&D sub-contracted to connected persons” as a result of section 357BLB(4) or 357BLC(3) (certain expenditure attributed to company's foreign permanent establishments), and

(b) the expenditure incurred by the company during the relevant period in making payments within subsection (2).

(2) A payment is within this subsection if—

(a) it is made to a person in respect of relevant research and development contracted out by the company to the person, and

(b) the company and the person are connected (within the meaning given by section 1122).

(3) Where a payment is made to a person in respect of relevant research and development contracted out to the person and in respect of other matters, so much of the payment as is properly attributable to other matters is to be disregarded for the purposes of this section.

357BLE Qualifying expenditure on acquisition of relevant qualifying IP rights U.K.

(1) In section 357BLA, the company's “qualifying expenditure on the acquisition of relevant qualifying IP rights” means the expenditure incurred by the company in making during the relevant period payments within any of subsections (2), (3) and (4).

(2) A payment is within this subsection if it is made to a person in respect of the assignment by that person to the company of a relevant qualifying IP right.

(3) A payment is within this subsection if it is made to a person in respect of the grant or transfer by that person to the company of an exclusive licence in respect of a relevant qualifying IP right.

(4) A payment is within this subsection if—

(a) it is made to a person in respect of the disclosure by that person to the company of any item or process, and

(b) the company applies for and is granted a relevant qualifying IP right in respect of that item or process (or any item or process derived from it).

(5) Where the company has incurred expenditure in making a series of payments to a person in respect of a single assignment, grant, transfer or disclosure, each of the payments in the series is to be treated for the purposes of this section as having been made on the date on which the first payment in the series was made.

(6) “Relevant qualifying IP right” means—

(a) in a case where the sub-stream is an individual IP right sub-stream, the qualifying IP right to which the income in the sub-stream is attributable,

(b) in a case where the sub-stream is a product sub-stream, a qualifying IP right granted in respect of an item—

(i) to which income in the sub-stream is attributable, or

(ii) which is incorporated in an item to which income in the sub-stream is attributable, or

(c) in a case where the sub-stream is a process sub-stream, a qualifying IP right granted in respect of a process—

(i) to which income in the sub-stream is attributable, or

(ii) which is incorporated in a process to which income in the sub-stream is attributable.

[F622 357BLEA Cases where the company is a party to a CSA U.K.

(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.]

Textual Amendments

F622 S. 357BLEA inserted (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(2)

357BLF Meaning of the “relevant period” etc U.K.

(1) Subsections (2) to (6) define “the relevant period” for the purposes of sections 357BLB to 357BLE.

(2) The “relevant period” is the period which—

(a) ends with the last day of the accounting period, and

(b) begins on the relevant day or such earlier day as the company may elect.

This is subject to subsection (6).

(3) The “relevant day” is 1 July 2013 in a case where—

(a) the accounting period begins before 1 July 2021, and

(b) the company is a new entrant (see section 357A(11)).

(4) The “relevant day” is 1 July 2016 in any other case.

(5) A day elected under subsection (2)(b) must not be more than 20 years before the last day of the accounting period.

(6) If the last day of the accounting period is, or is after, 1 July 2036 the “relevant period” is the period of 20 years ending with that day.

(7) Expenditure incurred by the company is to be treated for the purposes of sections 357BLB to 357BLD as incurred during the relevant period if (and only if) the expenditure is allowable as a deduction in calculating for corporation tax purposes the profits of the trade for an accounting period which falls, in whole or in part, within the relevant period.

357BLG Cases where the company is a new entrant with insufficient information about pre-enactment expenditure U.K.

(1) This section applies if—

(a) the accounting period begins before 1 July 2021 and the company is a new entrant (so that subsection (3) of section 357BLF applies), and

(b) the company has insufficient information about its expenditure in the period which begins with 1 July 2013 and ends with 30 June 2016 to be able to calculate the R&D fraction for the sub-stream.

(2) If the accounting period begins on or after 1 July 2019, the company may elect that, for the purposes of enabling it to determine the R&D fraction for the sub-stream, section 357BLF is to have effect as if in subsection (3) for “1 July 2013” there were substituted “ 1 July 2016 ”.

(3) If the accounting period begins before 1 July 2019 the company may elect that, for the purposes of enabling it to determine the R&D fraction for the sub-stream, sections 357BL to 357BLE are to have effect as if—

(a) any reference in those sections to the relevant period were to the period of three years ending with the last day of the accounting period,

(b) in section 357BLB, for subsections (5) and (6) there were substituted—

“(5) In this section and sections 357BLC and 357BLD, “relevant research and development” means research and development (within the meaning of section 1138) which relates to the trade.”, and

(c) in section 357BLE—

(i) in each of subsections (2), (3) and (4) the word “relevant” were omitted, and

(ii) subsection (6) were omitted.

357BLH R&D fraction: increase for exceptional circumstances U.K.

(1) The company may elect to increase the R&D fraction for the sub-stream by the amount mentioned in subsection (2) if (but for the increase)—

(a) it would not be less than 0.325, and

(b) it would, because of exceptional circumstances, be less than the value fraction for the sub-stream (see subsection (3)).

(2) The amount of the increase referred to in subsection (1) is the amount which is equal to the difference between the R&D fraction (before the increase) and the value fraction.

(3) The “value fraction” for the sub-stream is the fraction which, on a just and reasonable assessment, represents the proportion of the value of the relevant qualifying IP rights which is properly attributable to research and development undertaken at any time—

(a) by the company itself, or

(b) on behalf of the company by persons not connected with it.

(4) An election under subsection (1) is made by the company giving notice to an officer of Revenue and Customs.

(5) The notice must be given on or before the last day on which an amendment of the company's tax return for the accounting period could be made under paragraph 15 of Schedule 18 to FA 1998.

(6) In this section—

• “relevant qualifying IP rights” has the same meaning as in section 357BLE, and

• “research and development” has the meaning given by section 1138.

(7) Section 1122 (meaning of “connected” persons”) applies for the purposes of this section.

Profits arising before grant of right U.K.

357BM Profits arising before grant of right U.K.

(1) This section applies where a company—

(a) holds a right mentioned in paragraph (a), (b) or (c) of section 357BB(1) (rights to which this Part applies) or an exclusive licence in respect of such a right, or

(b) would hold such a right or licence but for the fact that the company disposed of any rights in the invention or (as the case may be) the licence before the right was granted.

(2) The company may elect that, for the purposes of determining the relevant IP profits of a trade of the company for the accounting period in which the right is granted, there is to be added the amount determined in accordance with subsection (3) (the “ additional amount ”).

(3) The additional amount is the difference between—

(a) the aggregate of the relevant IP profits of the trade for each relevant accounting period, and

(b) the aggregate of what the relevant IP profits of the trade for each relevant accounting period would have been if the right had been granted on the relevant day.

(4) For the purposes of determining the additional amount, the amount of any relevant IP profits to which section 357A does not apply by virtue of Chapter 5 (relevant IP losses) is to be disregarded.

(5) In this section “relevant accounting period” means—

(a) the accounting period of the company in which the right is granted, and

(b) any earlier accounting period of the company which meets the conditions in subsection (6).

(6) The conditions mentioned in subsection (5)(b) are—

(a) that it is an accounting period for which an election made by the company under section 357A(1) has effect,

(b) that it is an accounting period for which the company is a qualifying company, and

(c) that it ends on or after the relevant day.

(7) In this section “the relevant day” is the later of—

(a) the first day of the period of 6 years ending with the day on which the right is granted, and

(b) the day on which—

(i) the application for the grant of the right was filed, or

(ii) in the case of a company that holds an exclusive licence in respect of the right, the licence was granted.

(8) Where the company would be a qualifying company for an accounting period but for the fact that the right had not been granted at any time during that accounting period, the company is to be treated for the purposes of this section as if it were a qualifying company for that accounting period.

(9) Where the company would be a qualifying company for the accounting period in which the right was granted but for the fact that the company disposed of the rights or licence mentioned in subsection (1)(b) before the right was granted, the company is to be treated for the purposes of section 357A as if it were a qualifying company for that accounting period.

Small claims treatment U.K.

357BN Small claims treatment U.K.

(1) This section applies where—

(a) a company carries on only one trade during an accounting period,

(b) section 357BF applies for the purposes of determining the relevant IP profits of the trade for the accounting period, and

(c) the qualifying residual profit of the trade for the accounting period does not exceed whichever is the greater of—

(i) £1,000,000, and

(ii) the relevant maximum for the accounting period.

(2) The company may make any of the following elections for the accounting period—

(a) a notional royalty election (see section 357BNA),

(b) a small claims figure election (see section 357BNB), and

(c) a global streaming election (see section 357BNC).

This is subject to subsections (3) and (4).

(3) The company may not make a notional royalty election, a small claims figure election or a global streaming election for the accounting period if—

(a) the qualifying residual profit of the trade for the accounting period exceeds £1,000,000,

(b) section 357BF applied for the purposes of determining the relevant IP profits of the trade for any previous accounting period beginning within the relevant 4-year period, and

(c) the company did not make a notional royalty election, a small claims figure election or (as the case may be) a global streaming election for that previous accounting period.

(4) The company may not make a small claims figure election for the accounting period if—

(a) the qualifying residual profit of the trade for the accounting period exceeds £1,000,000,

(b) section 357C or 357DA applied for the purposes of determining the relevant IP profits of the trade for any previous accounting period beginning within the relevant 4-year period, and

(c) the company did not make an election under section 357CL for small claims treatment for that previous accounting period.

(5) In subsections (3) and (4) “the relevant 4-year period” means the period of 4 years ending with the beginning of the accounting period mentioned in subsection (1)(a).

(6) For the purposes of this section, the “qualifying residual profit” of a trade of a company for an accounting period is the amount which (assuming the company did not make an election under this section) would be equal to the aggregate of the relevant IP income sub-streams established at Step 2 in section 357BF(2) in determining the relevant IP profits of the trade for the accounting period, following the deductions from those sub-streams required by Step 4 in section 357BF(2) (ignoring the amount of any sub-stream which is not greater than nil following those deductions).

(7) For the purposes of this section, the “relevant maximum” for an accounting period of a company is—

(a) in a case where [F623 the company has no associated company] in the accounting period, £3,000,000;

(b) in a case where [F624 one or more companies are related 51% group companies of the company] in the accounting period, the amount given by the formula—

where N is the number of [F625 those associated] companies in relation to which an election under section 357A(1) has effect for the accounting period.

(8) For an accounting period of less than 12 months, the relevant maximum is proportionally reduced.

[F626 (9) The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D apply for the purposes of this section.]

Textual Amendments

F623 Words in s. 357BN(7)(a) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 20(2)(a)

F624 Words in s. 357BN(7)(b) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 20(2)(b)

F625 Words in s. 357BN(7) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 20(2)(c)

F626 S. 357BN(9) inserted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 20(3)

357BNA Notional royalty election U.K.

(1) Subsection (2) applies where a company has made a notional royalty election for an accounting period under section 357BN(2)(a).

(2) In its application for the purposes of determining the relevant IP profits of the trade of the company for the accounting period, section 357BHA (notional royalty) has effect as if—

(a) in subsection (2) for “the appropriate percentage” there were substituted “ 75% ”, and

(b) subsections (3) to (6) were omitted.

357BNB Small claims figure election U.K.

(1) Subsection (2) applies where a company has made a small claims figure election for an accounting period under section 357BN(2)(b).

(2) In its application for the purposes of determining the relevant IP profits of the trade of the company for the accounting period, section 357BF(2) (steps for calculating relevant IP profits) has effect as if in Step 5—

(a) for “marketing assets return figure” there was substituted “ small claims figure ”, and

(b) for “(see section 357BK)” there was substituted “ (see section 357BNB(3)) ”.

(3) Subsections (4) to (9) apply for the purpose of calculating the small claims figure for a relevant IP income sub-stream established at Step 2 in section 357BF(2) in determining the relevant IP profits of a trade of a company for an accounting period.

(4) If 75% of the qualifying residual profit of the trade for the accounting period is lower than the small claims threshold, the small claims figure for the sub-stream is 25% of the amount of the sub-stream following Step 4 in section 357BF(2).

(5) If 75% of the qualifying residual profit of the trade for the accounting period is higher than the small claims threshold, the small claims figure for the sub-stream is the amount given by—

where—

A is the amount of the sub-stream following the deductions required by Step 4 in section 357BF(2),

QRP is the qualifying residual profit of the trade of the company for the accounting period, and

SCT is the small claims threshold.

(6) If [F627 the company has no associated company] in the accounting period, the small claims threshold is £1,000,000.

(7) If [F628 the company has one or more associated companies] in the accounting period, the small claims threshold is—

where N is the number of [F629 those associated] companies in relation to which an election under section 357A(1) has effect for the accounting period.

(8) For an accounting period of less than 12 months, the small claims threshold is proportionately reduced.

(9) Subsection (6) of section 357BN (meaning of “qualifying residual profit”) applies for the purposes of subsection (4) and (5) of this section.

[F630 (10) The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D apply for the purposes of this section.]

Textual Amendments

F627 Words in s. 357BNB(6) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 21(2)

F628 Words in s. 357BNB(7) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 21(3)(a)

F629 Words in s. 357BNB(7) substituted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 21(3)(b)

F630 S. 357BNB(10) inserted (with effect in accordance with Sch. 1 para. 33 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 21(4)

357BNC Global streaming election U.K.

(1) Subsection (2) applies where a company has made a global streaming election for an accounting period under section 357BN(2)(c).

(2) In its application for the purpose of determining the relevant IP profits of the trade of the company for the accounting period, this Chapter has effect with the following modifications.

(3) In subsection (2) of section 357BF (relevant IP profits)—

(a) omit Step 2,

(b) in Step 3 for “each of the relevant IP income sub-streams” substitute “ the relevant IP income stream ”,

(c) in Step 4—

(i) in the words before paragraph (a), for “each” substitute “ the ”,

(ii) for “sub-stream”, in each place it occurs, substitute “ stream ”,

(d) in Step 5—

(i) at the beginning insert “ If the relevant IP income stream is greater than nil following Step 4, ”,

(ii) for the words from “each” to “Step 4” substitute “ the stream ”,

(iii) for “sub-stream”, in the second place it occurs, substitute “ stream ”,

(e) in Step 6—

(i) for “each relevant IP income sub-stream” substitute “ the relevant IP income stream ”,

(ii) for “sub-stream”, in the second place it occurs, substitute “ stream ”,

(f) omit Step 7, and

(g) in Step 8 for “given by Step 7” substitute “ of the relevant IP income stream following Step 6 ”.

(4) In subsection (3) of that section for “given by” substitute “ of the relevant IP income stream following the Steps in ”.

(5) In subsection (4) of that section for “given by” substitute “ of the relevant IP income stream following the Steps in ”.

(6) Omit subsections (5) to (7) of that section.

(7) In section 357BIA(3) (certain amounts not to be deducted from sub-streams at Step 4 of section 357BF)—

(a) for “a relevant IP income sub-stream” substitute “ the relevant IP income stream ”;

(b) for “sub-stream”, in the second and third places it occurs, substitute “ stream ”.

(8) In section 357BJ (routine return figure)—

(a) for “sub-stream”, in each place it occurs, substitute “ stream ”, and

(b) in subsection (1) for “Step 2” substitute “ Step 1 ”.

(9) In section 357BK (marketing asset return figure) for “sub-stream”, in each place it occurs, substitute “ stream ”.

(10) In section 357BKA (notional marketing royalty)—

(a) for “sub-stream”, in each place it occurs, substitute “ stream ”, and

(b) in subsection (1) for “Step 2” substitute “ Step 1 ”.

(11) In section 357BKB (actual marketing royalty) for “sub-stream”, in each place it occurs, substitute “ stream ”.

(12) In section 357BL (R&D fraction: introduction)—

(a) for “sub-stream” (in each place it occurs) substitute “ stream ”, and

(b) in subsection (1) for “Step 2” substitute “ Step 1 ”.

(13) In section 357BLA(1) (R&D fraction) for “sub-stream” substitute “ stream ”.

(14) In section 357BLB(5) (qualifying expenditure on relevant R&D undertaken in-house) for the words after “1138)” substitute “ which relates to a qualifying IP right to which income in the stream is attributable ”.

(15) In section 357BLE(6) (qualifying expenditure on acquisition of relevant qualifying IP rights) for the words from “means” to the end substitute “ means a qualifying IP right to which income in the stream is attributable ”.

(16) In section 357BLG (cases where the company is a new entrant with insufficient information about pre-enactment expenditure) for “sub-stream”, in each place it occurs, substitute “ stream ”.

(17) In section 357BLH (R&D fraction: increase for exceptional circumstances) for “sub-stream”, in each place it occurs, substitute “ stream ”.

(18) In section 357BNB (small claims figure election)—

(a) for “sub-stream”, in each place it occurs, substitute “ stream ”, and

(b) in subsection (3) for “Step 2” substitute “ Step 1 ”.

CHAPTER 2B U.K. Relevant IP profits: cases mentioned in section 357A(7): income from new IP

357BO Relevant IP profits U.K.

(1) Section 357BF applies, with the modifications set out in section 357BQ, for the purposes of determining the relevant IP profits of a trade of a company for an accounting period in a case where—

(a) the accounting period begins before 1 July 2021,

(b) the company is not a new entrant (see section 357A(11)), and

(c) any amount of relevant IP income brought into account as a credit in calculating the profits of the trade for the accounting period is properly attributable to a new qualifying IP right (see section 357BP).

(2) Where it is necessary for the purposes of section 357BF, as applied by this section, to determine the R&D fraction for a relevant IP income sub-stream, the company concerned is to be treated for the purposes of sections 357BLF and 357BLG as if it were a new entrant.

(3) Where section 357BF applies by reason of this section for the purposes of determining the relevant IP profits of a trade of a company for an accounting period, the company may not make a global streaming election for the accounting period under section 357BN(2)(c).

357BP Meaning of “new qualifying IP right” and “old qualifying IP right” U.K.

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

(2) “New qualifying IP right”, in relation to a company, means a qualifying IP right which meets condition A, B or C.

(3) “Old qualifying IP right”, in relation to a company, means a qualifying IP right which does not meet any of those conditions.

(4) Condition A is that the right was granted or issued to the company in response to an application filed on or after the relevant date.

(5) Condition B is that the right was assigned to the company on or after the relevant date.

(6) Condition C is that an exclusive licence in respect of the right was granted to the company on or after the relevant date.

(7) The “relevant date” for the purposes of subsections (4), (5) and (6) is 1 July 2016; but this is subject to subsection (8).

(8) The “relevant date” for the purposes of subsections (5) and (6) is 2 January 2016 if—

(a) the company and the person who assigned the right or granted the licence were connected at the time of the assignment or grant,

(b) the main purpose, or one of the main purposes, of the assignment of the right or the grant of the licence was the avoidance of a foreign tax,

(c) the person who assigned the right or granted the licence was not within the charge to corporation tax at the time of the assignment or grant, and

(d) the person who assigned the right or granted the licence was not liable at the time of the assignment or grant to a foreign tax which is designated for the purposes of this section by regulations made by the Treasury.

(9) Regulations may be made under subsection (8)(d) which designate a foreign tax only if it appears to the Treasury that the tax may be charged at a reduced rate under provisions of the law of the country or territory concerned which correspond to the provisions of this Part.

(10) Regulations may not be made under subsection (8)(d) after 31 December 2016.

(11) In this section “foreign tax” means a tax under the law of a country or territory outside the United Kingdom.

(12) Section 1122 (meaning of “connected” persons) applies for the purposes of this section.

[F631 (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).]

Textual Amendments

F631 S. 357BP(13) inserted (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(4)

357BQ The modifications U.K.

(1) The modifications of section 357BF referred to in section 357BO(1) are as follows.

(2) Omit subsection (1).

(3) In subsection (2)—

(a) in Step 2—

(i) before paragraph (a) insert—

“(aa) a sub-stream consisting of income properly attributable to old qualifying IP rights (“an old IP rights sub-stream”),”,

(ii) in paragraph (a) before “qualifying IP right” insert “ new ”,

(iii) in the words after paragraph (c) for “and (7)” substitute “ to (7E) ”,

(b) in Step 6, for “relevant IP income sub-stream” substitute “ individual IP right sub-stream, each product sub-stream and each process sub-stream ”, and

(c) for Step 7 substitute— “Step 7 Add together—

(a) the amount of any old IP rights sub-stream (following Steps 4 and 5), and

(b) the amount of each of the individual IP right sub-streams, each of the product sub-streams and each of the process sub-streams (following Step 6).”

(4) In subsection (7) for paragraph (a) substitute—

“(a) it would not be reasonably practicable to apportion the income between—

(i) individual IP rights sub-streams, or

(ii) individual IP rights sub-streams and an old IP rights sub-stream, or”.

(5) After subsection (7) insert—

“(7A) Subsections (7B) to (7E) apply where—

(a) income which is properly attributable to an IP item or IP process may in accordance with subsection (7) be allocated at Step 2 of subsection (2) to a product sub-stream or process sub-stream, and

(b) the IP item or IP process incorporates—

(i) at least one item or process in respect of which an old qualifying IP right held by the company has been granted, and

(ii) at least one item or process in respect of which a new qualifying IP right held by the company has been granted.

(7B) If—

(a) the value of the IP item or IP process is wholly or mainly attributable to the incorporation in it of the items or processes referred to in subsection (7A)(b)(i), or

(b) the old IP percentage for the IP item or IP process is 80% or more,

the income properly attributable to the IP item or IP process may be treated as if it were properly attributable to old qualifying IP rights only; and, accordingly, the income may be allocated at Step 2 of subsection (2) to an old qualifying IP rights sub-stream (rather than to a product sub-stream or process sub-stream).

(7C) If the old IP percentage for the IP item or IP process is less than 80% but not less than 20%, that percentage of the income which is properly attributable to the IP item or IP process may be treated as if it were properly attributable to old qualifying IP rights only; and, accordingly, that percentage of the income may be allocated at Step 2 of subsection (2) to an old IP rights sub-stream (and the remainder is to be allocated to a product sub-stream or process sub-stream).

(7D) Where by reason of subsection (7C) only part of the income properly attributable to the IP item or IP process is allocated to a product sub-stream or process sub-stream, the IP item or IP process is to be treated, in determining the R&D fraction for the sub-stream, as if it did not incorporate the items or processes referred to in subsection (7A)(b)(i).

(7E) For the purposes of subsection (7B) and (7C), the “old IP percentage” for an IP item or IP process is the percentage found by the following calculation—

where—

O is the number of items or processes incorporated in the IP item or IP process in respect of which an old qualifying IP right held by the company has been granted, and

T is the number of items or processes incorporated in the IP item or IP process in respect of which an old or a new qualifying IP right held by the company has been granted.”]

CHAPTER 3 U.K. Relevant IP profits [F632 : cases mentioned in section 357A(7): no income from new IP]

Textual Amendments

F632 Words in Pt. 8A Ch. 3 heading inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 3

Steps for calculating relevant IP profits of a trade U.K.

357C Relevant IP profits U.K.

[F633 (A1) This section applies for the purposes of determining the relevant IP profits of a trade of a company for an accounting period in a case where—

(a) the accounting period began before 1 July 2021,

(b) the company is not a new entrant (see section 357A(11)), and

(c) none of the amounts of relevant IP income brought into account as credits in calculating the profits of the trade for the accounting period is properly attributable to a new qualifying IP right (see section 357BP).

But see also section 357D (alternative method of calculating relevant IP profits in such a case).]

(1) To determine the relevant IP profits F634 ...—

• Step 1 Calculate the total gross income of the trade for the accounting period (see section 357CA).

• Step 2 Calculate the percentage (“X%”) given by the following formula—

  

  where—

  “RIPI” is so much of the total gross income of the trade for the accounting period as is relevant IP income (see sections [F635 357BH to 357BHC] ), and

  “TI” is the total gross income of the trade for the accounting period.

• Step 3 Calculate X% of the profits of the trade for the accounting period. If there are no such profits, calculate X% of the losses of the trade (expressed as a negative figure) for the accounting period. In calculating the profits of the trade for the purposes of this step, make any adjustments required by section 357CG (and references in this step to the profits or losses of the trade are to be read subject to any such adjustments).

• Step 4 Deduct from the amount given by Step 3 the routine return figure [F636 in relation to the trade for the accounting period] (see section 357CI). The amount given by this step is the “qualifying residual profit”.

  If the amount of the qualifying residual profit is not greater than nil, go to Step 7.

• Step 5 If the company has [F637 made an election under section 357CL] for small claims treatment, calculate the small claims amount in relation to the trade (see section 357CM). If the company has not, go to Step 6.

• Step 6 Deduct from the qualifying residual profit the marketing assets return figure [F638 in relation to the trade for the accounting period] (see section 357CN).

• Step 7 If the company has made an election under section 357CQ (which provides in certain circumstances for profits arising before the grant of a right to be treated as relevant IP profits), add to the amount given by Step 5 or 6 (or, if the amount of the qualifying residual profit was not greater than nil, Step 4) any amount determined in accordance with subsection (3) of that section.

(2) If the amount given by subsection (1) is greater than nil, that amount is the relevant IP profits of the trade for the accounting period.

(3) If the amount given by subsection (1) is less than nil, that amount is the relevant IP losses of the trade for the accounting period (see Chapter 5).

Textual Amendments

F633 S. 357C(A1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 4(2)

F634 Words in s. 357C(1) omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 4(3)(a)

F635 Words in s. 357C(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 4(3)(b)

F636 Words in s. 357C(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 4(3)(c)

F637 Words in s. 357C(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 4(3)(d)

F638 Words in s. 357C(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 4(3)(e)

Total gross income of trade U.K.

357CA Total gross income of a trade U.K.

(1) For the purposes of this Part the “total gross income” of a trade of a company for an accounting period is the aggregate of the amounts falling within the Heads set out in—

(a) subsection (3) (revenue),

(b) subsection (5) (compensation),

(c) subsection (6) (adjustments),

(d) subsection (7) (proceeds from intangible fixed assets),

(e) subsection (8) (profits from patent rights).

(2) But the total gross income of the trade does not include any finance income (see [F639 section 357BG] ).

(3) Head 1 is any amounts which—

(a) in accordance with generally accepted accounting practice (“GAAP”) are recognised as revenue in the company's profit and loss account or income statement for the accounting period, and

(b) are brought into account as credits in calculating the profits of the trade for the accounting period.

(4) Where the company does not draw up accounts for an accounting period in accordance with GAAP, the reference in subsection (3)(a) to any amounts which in accordance with GAAP are recognised as revenue in the company's profit and loss account or income statement for the accounting period is to be read as a reference to any amounts which would be so recognised if the company had drawn up such accounts for that accounting period.

(5) Head 2 is any amounts of damages, proceeds of insurance or other compensation (so far as not falling within Head 1) which are brought into account as credits in calculating the profits of the trade for the accounting period.

(6) Head 3 is any amounts (so far as not falling within Head 1) which are brought into account as receipts under section 181 of CTA 2009 (adjustment on change of basis) in calculating the profits of the trade for the accounting period.

(7) Head 4 is any amounts (so far as not falling within Head 1) which are brought into account as credits under Chapter 4 of Part 8 of CTA 2009 (realisation of intangible fixed assets) in calculating the profits of the trade for the accounting period.

(8) Head 5 is any profits from the sale by the company of the whole or part of any patent rights held for the purposes of the trade which are taxed under section 912 of CTA 2009 in the accounting period.

Textual Amendments

F639 Words in s. 357CA(2) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 5

F640 357CB Finance income U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F640 Ss. 357CB-357CF omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 6

Relevant IP income U.K.

F640 357CC Relevant IP income U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F640 Ss. 357CB-357CF omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 6

F640 357CD Notional royalty U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F640 Ss. 357CB-357CF omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 6

F640 357CE Excluded income U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F640 Ss. 357CB-357CF omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 6

F640 357CF Mixed sources of income U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F640 Ss. 357CB-357CF omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 6

Calculating profits of trade U.K.

357CG Adjustments in calculating profits of trade U.K.

(1) This section applies for the purposes of determining [F641 under section 357C] the relevant IP profits of a trade of a company for an accounting period.

(2) In calculating the profits of the trade for the accounting period—

(a) there are to be added the amounts in subsection (3), and

(b) there are to be deducted the amounts in subsection (4).

(3) The amounts to be added are—

(a) the amount of any debits which are treated as expenses of the trade by virtue of—

(i) section 297 of CTA 2009 (debits in respect of loan relationships), or

(ii) section 573 of CTA 2009 (debits in respect of derivative contracts), F642 ...

(b) the amount of any additional deduction for the accounting period obtained by the company under Part 13 of CTA 2009 for expenditure on research and development in relation to the trade.

[F643 (c) the amount of any additional deduction for the accounting period obtained by the company under Part 15A of CTA 2009 in respect of qualifying expenditure on a television programme, F644 ...

(d) the amount of any additional deduction for the accounting period obtained by the company under Part 15B of CTA 2009 in respect of qualifying expenditure on a video game] [F645 , and

(e) the amount of any additional deduction for the accounting period obtained by the company under Part 15C of CTA 2009 in respect of qualifying expenditure on a theatrical production.]

(4) The amounts to be deducted are [F646 —

(a) the amount of any R&D expenditure credits (within the meaning of [F647 Chapter 1A of Part 13]) brought into account in calculating the profits of the trade for the accounting period, and]

[F648 (aa) the amount of any audiovisual expenditure credit or video game expenditure credit under Part 14A of CTA 2009 brought into account in calculating the profits of the trade for the accounting period,]

(b) any amounts of finance income brought into account in calculating the profits of the trade for the accounting period.

(For the meaning of “finance income”, see [F649 section 357BG].)

(5) In a case where there is a shortfall in R&D expenditure in relation to the trade for a relevant accounting period (see section 357CH), the amount of R&D expenditure brought into account in calculating the profits of the trade for that accounting period is to be increased by the amount mentioned in section 357CH(2).

[F650 (5A) In a case where—

(a) the company is—

(i) a television production company in relation to a television programme, or

(ii) a video games development company in relation to a video game, and

(b) there is a shortfall in qualifying expenditure in relation to the separate programme trade or (as the case may be) the separate video game trade for a relevant accounting period (see section 357CHA),

the amount of qualifying expenditure brought into account in calculating the profits of the trade for that accounting period is to be increased by the amount mentioned in section 357CHA(2).]

(6) For the purposes of [F651 subsections (5) and (5A)] —

• [F652 “qualifying expenditure”—

• (a)

  in relation to a company that is a television production company, has the same meaning as in Chapter 3 of Part 15A of CTA 2009, F653 ...

  (b)

  in relation to a company that is a video games development company, has the same meaning as in Chapter 3 of Part 15B of that Act] [F654 , and

  (c)

  in relation to a company that is the production company (as defined in section 1217FC of that Act) in relation to a theatrical production, has the same meaning as in Part 15C of that Act,]

• “R&D expenditure” means expenditure on research and development in relation to the trade,

• “relevant accounting period”, in relation to a company, means—

  (a)

  the first accounting period for which—

  (i)

  the company is a qualifying company, and

  (ii)

  an election under [F655 section 357A(1)] has effect in relation to it, and

  (b)

  each accounting period that begins before the end of the period of 4 years beginning with that accounting period, F656 ...

• “research and development” means activities, other than oil and gas exploration and appraisal, that fall to be treated as research and development in accordance with generally accepted accounting practice.

• [F657 “the separate programme trade”, in relation to a television production company, has the same meaning as in Chapter 2 of Part 15A of CTA 2009 (see section 1216B),

• “the separate video game trade”, in relation to a video games development company, has the same meaning as in Chapter 2 of Part 15B of CTA 2009 (see section 1217B),

• “television production company” has the same meaning as in Part 15A of CTA 2009 (see section 1216AE), F658 ...

• [F659 “theatrical production” has the same meaning as in Part 15C of CTA 2009 (see section 1217FA of that Act), and]

• “video games development company” has the same meaning as in Part 15B of CTA 2009 (see section 1217AB).]

Textual Amendments

F641 Words in s. 357CG(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 7(2)

F642 Word in s. 357CG(3)(a) omitted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 18 paras. 18(2), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F643 S. 357CG(3)(c)(d) inserted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 18(2), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F644 Word in s. 357CG(3)(c) omitted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 4 paras. 15(2), 16; S.I. 2014/2228, art. 2

F645 S. 357CG(3)(e) and word inserted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by Finance Act 2014 (c. 26), Sch. 4 paras. 15(2), 16; S.I. 2014/2228, art. 2

F646 Words in s. 357CG(4) inserted (with effect in accordance with Sch. 15 para. 27 of the amending Act) by Finance Act 2013 (c. 29), Sch. 15 para. 10(a)

F647 Words in s. 357CG(4)(a) substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(3)(c), 16; S.I. 2024/286, reg. 2

F648 S. 357CG(4)(aa) inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 2 para. 6(3)(b) (with Sch. 2 paras. 16(1), 17-25)

F649 Words in s. 357CG(4) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 7(3)

F650 S. 357CG(5A) inserted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 18(3), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F651 Words in s. 357CG(6) substituted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 18(4)(a), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F652 Words in s. 357CG(6) inserted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 18(4)(b), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F653 Word in s. 357CG(6) omitted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 4 paras. 15(3)(a), 16; S.I. 2014/2228, art. 2

F654 Words in s. 357CG(6) inserted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by Finance Act 2014 (c. 26), Sch. 4 paras. 15(3)(a), 16; S.I. 2014/2228, art. 2

F655 Words in s. 357CG(6) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 7(4)

F656 Word in s. 357CG(6) omitted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 18 paras. 18(4)(c), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F657 Words in s. 357CG(6) inserted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 18(4)(d), 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

F658 Word in s. 357CG(6) omitted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 4 paras. 15(3)(b), 16; S.I. 2014/2228, art. 2

F659 Words in s. 357CG(6) inserted (with effect in accordance with Sch. 4 para. 17 of the amending Act) by Finance Act 2014 (c. 26), Sch. 4 paras. 15(3)(b), 16; S.I. 2014/2228, art. 2

357CH Shortfall in R&D expenditure U.K.

(1) There is a shortfall in R&D expenditure in relation to a trade of a company for a relevant accounting period if the actual R&D expenditure of the trade for the accounting period (as adjusted under subsections (8) to (11)) is less than 75% of the average amount of R&D expenditure.

(2) The amount that is to be added to the actual R&D expenditure for the purposes of section 357CG(5) is an amount equal to the difference between—

(a) 75% of the average amount of R&D expenditure, and

(b) the actual R&D expenditure, as adjusted under subsections (8) to (11).

(3) In this section—

(a) the “actual R&D expenditure” of a trade of a company for an accounting period is the amount of R&D expenditure that (ignoring section 357CG(5)) is brought into account in calculating the profits of the trade for the accounting period, and

(b) “R&D expenditure” and “relevant accounting period” have the meaning given by section 357CG(6).

(4) The average amount of R&D expenditure is—

where—

E is the amount of R&D expenditure that—

(a)

has been incurred by the company during the relevant period, and

(b)

has been brought into account in calculating the profits of the trade for any accounting period ending before the first relevant accounting period, and

N is the number of days in the relevant period.

(5) The relevant period is the shorter of—

(a) the period of 4 years ending immediately before the first relevant accounting period, and

(b) the period beginning with the day on which the company begins to carry on the trade and ending immediately before the first relevant accounting period.

(6) For a relevant accounting period of less than 12 months, the average amount of R&D expenditure is proportionately reduced.

(7) Subsections (8) to (11) apply for the purposes of determining—

(a) whether there is a shortfall in R&D expenditure for a relevant accounting period, and

(b) if there is such a shortfall, the amount to be added by virtue of subsection (2).

(8) If the amount of the actual R&D expenditure for a relevant accounting period is greater than the average amount of R&D expenditure, the difference between the two amounts is to be added to the actual R&D expenditure for the next relevant accounting period.

(9) If—

(a) there is not a shortfall in R&D expenditure for a relevant accounting period, but

(b) in the absence of any additional amount, there would be a shortfall in R&D expenditure for that accounting period,

the remaining portion of the additional amount is to be added to the actual R&D expenditure for the next relevant accounting period.

(10) For the purposes of this section—

• “additional amount”, in relation to a relevant accounting period, means any amount added to the actual R&D expenditure for that accounting period by virtue of subsection (8), (9) or (11), and

• “the remaining portion” of an additional amount is so much of that amount as exceeds the difference between—

  (a)

  the actual R&D expenditure for the relevant accounting period in the absence of the additional amount, and

  (b)

  75% of the average amount of R&D expenditure.

(11) If—

(a) there is not a shortfall in R&D expenditure for a relevant accounting period, and

(b) there would not be a shortfall in R&D expenditure for that accounting period in the absence of any additional amount,

the additional amount is to be added to the actual R&D expenditure for the next relevant accounting period (in addition to any additional amount so added by virtue of subsection (8)).

[F660 357CHA Shortfall in qualifying expenditure U.K.

(1) There is a shortfall in qualifying expenditure in relation to the separate programme trade of a television production company or (as the case may be) the separate video game trade of a video games development company for a relevant accounting period if the actual qualifying expenditure of the trade for the accounting period (as adjusted under subsections (8) to (11)) is less than 75% of the average amount of qualifying expenditure.

(2) The amount that is to be added to the actual qualifying expenditure for the purposes of section 357CG(5A) is an amount equal to the difference between—

(a) 75% of the average amount of qualifying expenditure, and

(b) the actual qualifying expenditure, as adjusted under subsections (8) to (11).

(3) In this section—

(a) the “actual qualifying expenditure” of a trade of a company for an accounting period is the amount of qualifying expenditure that (ignoring section 357CG(5A)) is brought into account in calculating the profits of the trade for the accounting period, and

(b) the following terms have the meaning given by section 357CG(6)—

• “qualifying expenditure”,

• “relevant accounting period”,

• “the separate programme trade”,

• “the separate video game trade”,

• “television production company”,

• “video games development company”.

(4) The average amount of qualifying expenditure is—

where—

E is the amount of qualifying expenditure that—

(a)

has been incurred by the company during the relevant period, and

(b)

has been brought into account in calculating the profits of the trade for any accounting period ending before the first relevant accounting period, and

N is the number of days in the relevant period.

(5) The relevant period is the shorter of—

(a) the period of 4 years ending immediately before the first relevant accounting period, and

(b) the period beginning with the day on which the company begins to carry on the trade and ending immediately before the first relevant accounting period.

(6) For a relevant accounting period of less than 12 months, the average amount of qualifying expenditure is proportionately reduced.

(7) Subsections (8) to (11) apply for the purposes of determining—

(a) whether there is a shortfall in qualifying expenditure for a relevant accounting period, and

(b) if there is such a shortfall, the amount to be added by virtue of subsection (2).

(8) If the amount of the actual qualifying expenditure for a relevant accounting period is greater than the average amount of qualifying expenditure, the difference between the two amounts is to be added to the actual qualifying expenditure for the next relevant accounting period.

(9) If—

(a) there is not a shortfall in qualifying expenditure for a relevant accounting period, but

(b) in the absence of any additional amount, there would be a shortfall in qualifying expenditure for that accounting period,

the remaining portion of the additional amount is to be added to the actual qualifying expenditure for the next relevant accounting period.

(10) For the purposes of this section—

• “additional amount”, in relation to a relevant accounting period, means any amount added to the actual qualifying expenditure for that accounting period by virtue of subsection (8), (9) or (11), and

• “the remaining portion” of an additional amount is so much of that amount as exceeds the difference between—

  (a)

  the actual qualifying expenditure for the relevant accounting period in the absence of the additional amount, and

  (b)

  75% of the average amount of qualifying expenditure.

(11) If—

(a) there is not a shortfall in qualifying expenditure for a relevant accounting period, and

(b) there would not be a shortfall in qualifying expenditure for that accounting period in the absence of any additional amount,

the additional amount is to be added to the actual qualifying expenditure for the next relevant accounting period (in addition to any additional amount so added by virtue of subsection (8)).]

Textual Amendments

F660 S. 357CHA inserted (with effect in accordance with Sch. 18 para. 23 of the amending Act) by Finance Act 2013 (c. 29), Sch. 18 paras. 19, 22; S.I. 2013/1817, art. 2(2); S.I. 2014/1962, art. 2(3)

Routine return figure U.K.

357CI Routine return figure U.K.

(1) To determine the routine return figure in relation to a trade of a company for an accounting period—

• Step 1 Take the aggregate of any routine deductions made by the company in calculating the profits of the trade for the accounting period. For the meaning of “routine deductions”, see [F661 sections 357BJA and 357BJB] .

• Step 2 Multiply that amount by 0.1.

• Step 3 Calculate X% of the amount given by Step 2.“X%” is the percentage given by Step 2 in section 357C(1).

(2) In a case where—

(a) the company (“C”) is a member of a group,

(b) another member of the group incurs expenses on behalf of C,

(c) had they been incurred by C, C would have made a deduction in respect of the expenses in calculating the profits of the trade for the accounting period, and

(d) the deduction would have been a routine deduction,

C is to be treated for the purposes of subsection (1) as having made such a routine deduction.

(3) Where expenses are incurred by any member of the group on behalf of C and any other member of the group, subsection (2) applies in relation to so much of the amount of the expenses as on a just and reasonable apportionment may properly be regarded as incurred on behalf of C.

Textual Amendments

F661 Words in s. 357CI(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 8

F662 357CJ Routine deductions U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F662 S. 357CK omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 9

F662 357CK Deductions that are not routine deductions U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F662 S. 357CK omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 9

Election for small claims treatment U.K.

357CL Companies eligible to elect for small claims treatment U.K.

(1) A company may [F663 make an election under this section] for small claims treatment for an accounting period if condition A or B is met in relation to the accounting period.

(2) Condition A is that the aggregate of the amounts of qualifying residual profit of each trade of the company for the accounting period does not exceed £1,000,000.

(3) Condition B is that—

(a) the aggregate of the amounts of qualifying residual profit of each trade of the company for the accounting period does not exceed the relevant maximum, and

(b) the company did not take Step 6 in section 357C(1) or 357DA(1) for the purpose of calculating the relevant IP profits of any trade of the company for any previous accounting period beginning within the relevant 4-year period.

(4) In subsection (3)(b) “the relevant 4-year period” means the period of 4 years ending immediately before the accounting period mentioned in subsection (3)(a).

(5) If [F664 no other company is a related 51% group company of the company] in the accounting period, the relevant maximum is £3,000,000.

(6) If [F665 one or more other companies are related 51% group companies of the company,] in the accounting period, the relevant maximum is—

where N is the number of [F666 those related 51% group] companies in relation to which an election under [F667 section 357A(1)] has effect for the accounting period.

(7) For an accounting period of less than 12 months, the relevant maximum is proportionately reduced.

(8) Any amount of qualifying residual profit of a trade of the company that is not greater than nil is to be disregarded for the purposes of this section.

F668 (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F663 Words in s. 357CL(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 10(2)

F664 Words in s. 357CL(5) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(2)(a)

F665 Words in s. 357CL(6) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(2)(b)(i)

F666 Words in s. 357CL(6) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(2)(b)(ii)

F667 Words in s. 357CL(6) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 10(3)

F668 S. 357CL(9) omitted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 1 para. 13(2)(c)

357CM Small claims amount U.K.

(1) This section applies where a company [F669 makes an election under section 357CL] for small claims treatment for an accounting period.

(2) The small claims amount in relation to each trade of the company for the accounting period is—

(a) if the amount in subsection (3) is lower than the small claims threshold, 75% of the qualifying residual profit of the trade for the accounting period;

(b) in any other case, the amount given by—

where—

SCT is the small claims threshold, and

T is the number of trades of the company.

(3) The amount referred to in subsection (2)(a) is—

where QRP is the aggregate of the amounts of qualifying residual profit of each trade of the company for the accounting period (but see subsection (4)).

(4) Any amount of qualifying residual profit of a trade of the company that is not greater than nil is to be disregarded for the purposes of subsection (3).

(5) If [F670 no other company is a related 51% group company of the company] in the accounting period, the small claims threshold is £1,000,000.

(6) If [F671 one or more other companies are related 51% group companies of the company, ] in the accounting period, the small claims threshold is—

where N is the number of [F672 those related 51% group] companies in relation to which an election under section 357A has effect for the accounting period.

(7) For an accounting period of less than 12 months, the small claims threshold is proportionately reduced.

F673 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F669 Words in s. 357CM(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 11

F670 Words in s. 357CM(5) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(3)(a)

F671 Words in s. 357CM(6) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(3)(b)(i)

F672 Words in s. 357CM(6) substituted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 13(3)(b)(ii)

F673 S. 357CM(8) omitted (with effect in accordance with Sch. 1 para. 21 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 1 para. 13(3)(c)

Marketing assets return figure U.K.

357CN Marketing assets return figure U.K.

(1) The marketing assets return figure in relation to a trade of a company for an accounting period is—

where—

NMR is the notional marketing royalty in respect of the trade for the accounting period (see section 357CO), and

AMR is the actual marketing royalty in respect of the trade for the accounting period (see section 357CP).

(2) Where—

(a) AMR is greater than NMR, or

(b) the difference between NMR and AMR is less than 10% of the qualifying residual profit of the trade for the accounting period,

the marketing assets return figure is nil.

357CO Notional marketing royalty U.K.

(1) The notional marketing royalty in respect of a trade of a company for an accounting period is the appropriate percentage of the relevant IP income for that accounting period.

In this section “relevant IP income”, in relation to a trade of a company for an accounting period, means so much of the total gross income of the trade for the accounting period as is relevant IP income.

(2) The “appropriate percentage” is the proportion of any relevant IP income for an accounting period which the company would pay another person (“P”) for the right to exploit the relevant marketing assets in that accounting period if the company were not otherwise able to exploit them.

(3) For the purposes of this section a marketing asset is a “relevant marketing asset” in relation to an accounting period if the relevant IP income of the trade of the company for the accounting period includes any income arising from things done by the company that involve the exploitation by the company of that marketing asset.

(4) For the purposes of determining the appropriate percentage under this section, assume that—

(a) the company and P are dealing at arm's length,

(b) the company, or the company and persons authorised by it, will have the right to exploit the relevant marketing assets to the exclusion of any other person (including P),

(c) the company will have the same rights in relation to the relevant marketing assets as it actually has,

(d) the right to exploit the relevant marketing assets is conferred on the relevant day,

(e) the appropriate percentage for the accounting period is determined at the beginning of the accounting period,

(f) the appropriate percentage for the accounting period will apply for each succeeding accounting period for which the company will have the right to exploit the relevant marketing assets, and

(g) no income other than relevant IP income will arise from anything done by the company that involves the exploitation by the company of the relevant marketing assets.

(5) In subsection (4)(d) “the relevant day”, in relation to a relevant marketing asset, means—

(a) the first day of the accounting period, or

(b) if later, the day on which the company first acquired the relevant marketing asset or the right to exploit the asset.

(6) In determining the appropriate percentage, the company must act in accordance with—

(a) Article 9 of the OECD Model Tax Convention, and

(b) the OECD transfer pricing guidelines.

(7) In this section “marketing asset” means any of the following (whether or not capable of being transferred or assigned)—

(a) anything in respect of which proceedings for passing off could be brought, including a registered trade mark (within the meaning of the Trade Marks Act 1994),

(b) anything that corresponds to a marketing asset within paragraph (a) and is recognised under the law of a country or territory outside the United Kingdom,

(c) any signs or indications (so far as not falling within paragraph (a) or (b)) which may serve, in trade, to designate the geographical origin of goods or services, and

(d) any information which relates to customers or potential customers of the company, or any other member of a group of which the company is a member, and is intended to be used for marketing purposes.

357CP Actual marketing royalty U.K.

(1) The actual marketing royalty in respect of a trade of a company for an accounting period is X% of the aggregate of any sums which—

(a) were paid by the company for the purposes of acquiring any relevant marketing assets, or the right to exploit any such assets, and

(b) were brought into account as debits in calculating the profits of the trade for the accounting period.

(2) In this section—

• “relevant marketing assets” has the same meaning as in section 357CO, and

• “X%” is the percentage given by Step 2 in section 357C(1).

Profits arising before grant of right U.K.

357CQ Profits arising before grant of right U.K.

(1) This section applies where a company—

(a) holds a right mentioned in paragraph (a), (b) or (c) of section 357BB(1) (rights to which this Part applies) or an exclusive licence in respect of such a right, or

(b) would hold such a right or licence but for the fact that the company disposed of any rights in the invention or (as the case may be) the licence before the right was granted.

(2) The company may elect that, for the purposes of determining the relevant IP profits of a trade of the company for the accounting period in which the right is granted, there is to be added the amount determined in accordance with subsection (3) (the “ additional amount ”).

(3) The additional amount is the difference between—

(a) the aggregate of the relevant IP profits of the trade for each relevant accounting period, and

(b) the aggregate of what the relevant IP profits of the trade for each relevant accounting period would have been if the right had been granted on the relevant day.

(4) For the purposes of determining the additional amount, the amount of any relevant IP profits to which section 357A does not apply by virtue of Chapter 5 (relevant IP losses) is to be disregarded.

(5) In this section “relevant accounting period” means—

(a) the accounting period of the company in which the right is granted, and

(b) any earlier accounting period of the company which meets the conditions in subsection (6).

(6) The conditions mentioned in subsection (5)(b) are—

(a) that it is an accounting period for which an election made by the company under section 357A has effect,

(b) that it is an accounting period for which the company is a qualifying company, and

(c) that it ends on or after the relevant day.

(7) In this section “the relevant day” is the later of—

(a) the first day of the period of 6 years ending with the day on which the right is granted, or

(b) the day on which—

(i) the application for the grant of the right was filed, or

(ii) in the case of a company that holds an exclusive licence in respect of the right, the licence was granted.

(8) Where the company would be a qualifying company for an accounting period but for the fact that the right had not been granted at any time during that accounting period, the company is to be treated for the purposes of this section as if it were a qualifying company for that accounting period.

(9) Where the company would be a qualifying company for the accounting period in which the right was granted but for the fact that the company disposed of the rights or licence mentioned in subsection (1)(b) before the right was granted, the company is to be treated for the purposes of section 357A as if it were a qualifying company for that accounting period.

CHAPTER 4 U.K. Streaming

357D Alternative method of calculating relevant IP profits: “streaming” U.K.

(1) A company may elect to apply section 357DA (instead of section 357C) for the purposes of determining the relevant IP profits of any trade of the company for an accounting period [F674 in a case where—

( a) the accounting period began before 1 July 2021,

(b) the company is not a new entrant (see section 357A(11)), and

(c) none of the amounts of relevant IP income brought into account as credits in calculating the profits of the trade for the accounting period is properly attributable to a new qualifying IP right (see section 357BP).]

(2) An election made under subsection (1) is known as a “streaming election”.

(3) A streaming election has effect—

(a) for the accounting period for which it is made, and

(b) for each subsequent accounting period.

This is subject to section 357DB.

[F675 (4) A company must apply section 357DA (instead of section 357C) for the purposes of determining the relevant IP profits of a trade of the company for an accounting period in a case mentioned in subsection (1) if any of the mandatory streaming conditions in section 357DC is met in relation to the trade for the period.]

Textual Amendments

F674 Words in s. 357D(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 12(2)

F675 S. 357D(4) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 12(3)

357DA Relevant IP profits U.K.

(1) To determine the relevant IP profits of a trade of a company for an accounting period in accordance with this section—

• Step 1 Take any amounts which are brought into account as credits in calculating the profits of the trade for the accounting period, other than any amounts of finance income (see [F676 section 357BG]), and divide them into two “streams”, amounts of relevant IP income (see [F677 sections 357BH to 357BHC]) and amounts that are not amounts of relevant IP income. The stream consisting of relevant IP income is “the relevant IP income stream”.

• Step 2 Take any amounts which are brought into account as debits in calculating the profits of the trade for the accounting period, other than any amounts referred to in section 357CG(3), and allocate them on a just and reasonable basis between the two streams. (See also section 357CG(5).)

• Step 3 Deduct from the relevant IP income stream the amounts allocated to that stream under Step 2.

• Step 4 Deduct from the amount given by Step 3 the routine return figure [F678 in relation to the trade for the accounting period] (see subsection (4)). The amount given by this step is the “qualifying residual profit”.

  If the amount of the qualifying residual profit is not greater than nil, go to Step 7.

• Step 5 If the company has [F679 made an election under section 357CL] for small claims treatment, calculate the small claims amount in relation to the trade (see section 357CM). If the company has not, go to Step 6.

• Step 6 Deduct from the qualifying residual profit the marketing assets return figure [F680 in relation to the trade for the accounting period] (see section 357CN and subsection (6)).

• Step 7 If the company has made an election under section 357CQ (which provides in certain circumstances for profits arising before the grant of a right to be treated as relevant IP profits), add to the amount given by Step 5 or 6 (or, if the amount of the qualifying residual profit was not greater than nil, Step 4) any amount determined in accordance with subsection (3) of that section.

(2) If the amount given by subsection (1) is greater than nil, that amount is the relevant IP profits of the trade for the accounting period.

(3) If the amount given by subsection (1) is less than nil, that amount is the relevant IP losses of the trade for the accounting period (see Chapter 5).

(4) The routine return figure, in relation to a trade of a company for an accounting period, is 10% of the aggregate of any routine deductions which—

(a) have been made by the company in calculating the profits of the trade for the accounting period, and

(b) have been allocated to the relevant IP income stream under Step 2.

In this subsection “routine deductions” is to be read in accordance with [F681 sections 357BJA and 357BJB].

(5) Subsections (2) and (3) of section 357CI have effect for the purposes of subsection (4) of this section as they have effect for the purposes of that section.

(6) For the purposes of determining the marketing assets return figure in Step 6, section 357CP (actual marketing royalty) has effect as if the reference to X% of the aggregate of any sums falling within subsection (1) of that section were a reference to the aggregate of any such sums which have been allocated to the relevant IP income stream under Step 2.

Textual Amendments

F676 Words in s. 357DA(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(2)(a)(i)

F677 Words in s. 357DA(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(2)(a)(ii)

F678 Words in s. 357DA(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(2)(b)

F679 Words in s. 357DA(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(2)(c)

F680 Words in s. 357DA(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(2)(d)

F681 Words in s. 357DA(4) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 13(3)

357DB Method of allocation U.K.

(1) In this section “method of allocation” means the method of allocating, for the purposes of Step 2 in section 357DA(1), the amounts mentioned in that step.

(2) A company that applies section 357DA for the purposes of determining the relevant IP profits of a trade of the company for an accounting period must use the same method of allocation in relation to the trade for that accounting period as it used in the last accounting period of the company for which it applied that section for the purposes of determining the relevant IP profits of the trade.

(3) But subsection (2) does not apply if there is a change of circumstances relating to the trade which makes the use of that method of allocation in relation to the trade for the accounting period inappropriate.

(4) In such a case, the company may—

(a) use a different method of allocation in relation to the trade for the accounting period (and subsection (2) applies accordingly for subsequent accounting periods), or

(b) elect not to apply section 357DA for the purposes of determining the relevant IP profits of the trade for the accounting period.

(5) Subsection (4)(b) does not prevent the company making a fresh streaming election in relation to the trade for any subsequent accounting period.

357DC The mandatory streaming conditions U.K.

(1) Mandatory streaming condition A is met in relation to a trade of a company for an accounting period if—

(a) any amount brought into account as a credit in calculating the profits of the trade for the accounting period is not fully recognised as revenue for the accounting period, and

(b) the amount, or the aggregate of any such amounts, is substantial.

(2) An amount is a “substantial” amount for the purposes of this section if it is greater than—

(a) £2,000,000, or

(b) 20% of the total gross income of the trade for the accounting period,

whichever is the lower.

(3) But an amount is not a substantial amount for the purposes of this section if it does not exceed £50,000.

(4) The reference in subsection (1)(a) to an amount brought into account as a credit includes a reference to any amount brought into account by virtue of section 147 of TIOPA 2010 (basic transfer-pricing rule).

(5) Mandatory streaming condition B is met in relation to a trade of a company for an accounting period if the total gross income of the trade for the accounting period includes—

(a) relevant IP income, and

(b) a substantial amount of licensing income that is not relevant IP income.

(6) In subsection (5) “licensing income” means income consisting of any licence fee, royalty or other payment which the company has received under an agreement granting another person any right in respect of any intellectual property held by the company.

“Intellectual property” has the meaning given by section 712(3) of CTA 2009.

(7) Mandatory streaming condition C is met in relation to a trade of a company for an accounting period if the total gross income of the trade for the accounting period includes—

(a) income that is not relevant IP income, and

(b) a substantial amount of relevant Head 2 income.

(8) Income is “relevant Head 2 income” for the purposes of subsection (7) if—

(a) it is relevant IP income received under an agreement falling within subsection (6) of [F682 section 357BH] , and

(b) every qualifying IP right—

(i) in respect of which a right within paragraph (a) of that subsection is granted by the agreement, or

(ii) which is granted in respect of an invention in respect of which a right within paragraph (b) of that subsection is granted by the agreement,

is a right in respect of which the company holds an exclusive licence.

(9) In a case where—

(a) relevant IP income is received under an agreement falling within [F683 section 357BH(6)] , but

(b) the condition in paragraph (b) of subsection (8) above is not met,

so much of the relevant IP income as on a just and reasonable apportionment is attributable to any qualifying IP right falling within that paragraph is relevant Head 2 income for the purposes of subsection (7).

Textual Amendments

F682 Words in s. 357DC(8)(a) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 14(2)

F683 Words in s. 357DC(9)(a) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 14(3)

CHAPTER 5 U.K. Relevant IP losses

357E Company with relevant IP losses: set-off amount U.K.

Where a company would be entitled to make a deduction under section 357A(2) in calculating the profits of a trade of the company for an accounting period but for the fact that there are relevant IP losses of the trade for the accounting period, there is a “set-off amount” in relation to the trade of the company for the accounting period which is equal to the amount of the relevant IP losses.

357EA Effect of set-off amount on company with more than one trade U.K.

(1) This section applies where—

(a) there is a set-off amount in relation to a trade of a company for an accounting period, and

(b) the company carries on any other trade.

(2) The set-off amount is to be reduced (but not to below nil) by any relevant IP profits of that other trade for the accounting period.

(3) Section 357A does not apply in relation to so much of the amount of relevant IP profits of that other trade for the accounting period as is equal to the amount by which the set-off amount is reduced under subsection (2).

357EB Allocation of set-off amount within a group U.K.

(1) This section applies where—

(a) there is a set-off amount in relation to a trade of a company for an accounting period,

(b) the company is a member of a group, and

(c) the set-off amount has not been reduced to nil by the operation of section 357EA(2).

(2) The set-off amount (or so much of it as remains after the operation of section 357EA(2)) is to be reduced (but not to below nil) by any relevant IP profits of a trade of a relevant group member for the relevant accounting period.

(3) For the purposes of this section—

(a) “relevant group member” means another member of the group that has made an election under [F684 section 357A(1)] and is a qualifying company for the relevant accounting period, and

(b) “relevant accounting period”, in relation to a company, means the accounting period of the company in or at the end of which the accounting period mentioned in subsection (1)(a) ends.

(4) Section 357A does not apply in relation to so much of the amount of relevant IP profits of the trade of the relevant group member for the relevant accounting period as is equal to the amount by which the set-off amount (or so much of it as remains after the operation of section 357EA(2)) is reduced under subsection (2).

(5) Where there is more than one relevant group member, the relevant group members may jointly determine the order in which subsection (2) is to apply to them.

(6) If no determination is made under subsection (5), subsection (2) is to apply first to the trade that has the greatest amount of relevant IP profits of any trade of any of the relevant group members for a relevant accounting period, then to the trade that has the second greatest amount of relevant IP profits of any of those trades for such a period, and so on.

Textual Amendments

F684 Words in s. 357EB(3)(a) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 15

357EC Carry-forward of set-off amount U.K.

(1) This section applies where—

(a) there is a set-off amount in relation to a trade of a company for an accounting period, and

(b) the set-off amount has not been reduced to nil by the operation of section 357EA(2) or 357EB(2).

(2) The set-off amount (or so much of it as remains after the operation of section 357EA(2) or 357EB(2)) is to be reduced (but not to below nil) by the amount of any relevant IP profits of the trade of the company for the current accounting period.

The “current accounting period” is the accounting period immediately following the accounting period mentioned in subsection (1)(a).

(3) Section 357A does not apply in relation to so much of the amount of relevant IP profits of the trade of the company for the current accounting period as is equal to the amount by which the set-off amount (or so much of it as remains after the operation of section 357EA(2) or 357EB(2)) is reduced under subsection (2).

(4) If any portion of the set-off amount remains after the operation of subsection (2), that portion (“the remaining portion”) is to be treated as the set-off amount in relation to the trade of the company for the current accounting period (and the provisions of this Chapter apply accordingly).

(5) If there are relevant IP losses of the trade of the company for the current accounting period, the set-off amount in relation to the trade of the company for that accounting period is the aggregate of the remaining portion and an amount equal to the amount of those relevant IP losses (and the provisions of this Chapter apply accordingly).

357ED Company ceasing to carry on trade, etc U.K.

(1) This section applies where—

(a) there is a set-off amount in relation to a trade of a company for an accounting period, and

(b) at any time in the accounting period immediately following that accounting period, the company meets any of the conditions in subsection (2).

(2) The conditions are—

(a) that the company ceases to carry on the trade,

(b) that the company ceases to be within the charge to corporation tax in respect of the trade, or

(c) that any election made by the company under [F685 section 357A(1)] ceases to have effect.

(3) Sections 357EA to 357EC continue to have effect in relation to the set-off amount subject to the following provisions of this section.

(4) Section 357EB has effect as if—

(a) the reference in subsection (1)(b) to the company being a member of a group were a reference to the company having been a member of the group at the time referred to in subsection (1)(b) of this section,

(b) for subsection (2) there were substituted—

“(2) The set-off amount (or so much of it as remains after the operation of section 357EA(2)) is to become, or be added to, the set-off amount in relation to a trade of a relevant group member for the relevant accounting period.”,

(c) subsection (4) were omitted,

(d) for the words after “determine” in subsection (5) there were substituted “ the relevant group member to which subsection (2) is to apply ”, and

(e) for subsection (6) there were substituted—

“(6) If no determination is made under subsection (5), subsection (2) is to apply to the trade that has the greatest amount of relevant IP profits of any trade of any of the relevant group members for a relevant accounting period.

(7) If there is no relevant group member with any relevant IP profits of a trade for the relevant accounting period, subsection (2) is to apply to the trade that has the greatest set-off amount in relation to any trade of any of the relevant group members for a relevant accounting period.”

(5) Sections 357EA to 357EC cease to have effect in relation to the set-off amount in relation to the trade of the company for an accounting period if—

(a) the company is not carrying on any other trade in that accounting period, and

(b) in the case of a company that was a member of a group at the time referred to in subsection (1)(b) of this section, none of the members of the group is a relevant group member (within the meaning of section 357EB).

(6) In such a case, the set-off amount (so far as remaining after the operation of those sections) is to be reduced to nil.

Textual Amendments

F685 Words in s. 357ED(2)(c) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 16

357EE Transfer of a trade between group members U.K.

(1) This section applies where—

(a) there is a set-off amount in relation to a trade of a company for an accounting period,

(b) the company is a member of a group,

(c) the company ceases to carry on the trade, and

(d) another company (“the transferee”) that is a member of the group begins to carry on that trade.

(2) For the purposes of this Chapter an amount equal to the set-off amount is to become, or be added to, the set-off amount in relation to the trade of the transferee for the accounting period in which the transferee begins to carry on the trade.

357EF Payments between group members in consequence of section 357EB U.K.

(1) This section applies if—

(a) there is a set-off amount in relation to a trade of a company for an accounting period,

(b) subsection (2) of section 357EB has effect in relation to a relevant group member for the relevant accounting period (within the meaning of that section),

(c) the company and the relevant group member have an agreement between them in relation to the relevant IP losses of the company, and

(d) as a result of the agreement the company makes a payment to the relevant group member that does not exceed the reduction in the relevant IP profits of the relevant group member arising under section 357EB(4).

(2) The payment—

(a) is not to be taken into account in determining the profits or losses of either company for corporation tax purposes, and

(b) is not for any purposes of the Corporation Tax Acts to be regarded as a distribution.

(3) In a case where section 357ED applies (company ceasing to carry on trade, etc), the reference in subsection (1)(d) to the reduction in the relevant IP profits of the relevant group member is to be read as a reference to the amount that becomes, or is added to, the set-off amount in relation to a trade of the relevant group member for the relevant accounting period under section 357EB(2).

CHAPTER 6 U.K. Anti-avoidance

Licences conferring exclusive rights U.K.

357F Licences conferring exclusive rights U.K.

A licence that confers any right in respect of a qualifying IP right to the exclusion of all other persons is not to be regarded as an exclusive licence if the main purpose, or one of the main purposes, of conferring the right is to secure that the licence is an exclusive licence for the purposes of this Part.

Incorporation of qualifying items U.K.

357FA Incorporation of qualifying items U.K.

(1) Income arising from the sale of any item that incorporates a qualifying item is not relevant IP income if the main purpose, or one of the main purposes, of incorporating the qualifying item is to secure that income arising from any such sale is relevant IP income.

(2) “Qualifying item” has the same meaning as in section [F686 357BH(2)] .

Textual Amendments

F686 Word in s. 357FA(2) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 17

Tax advantage schemes U.K.

357FB Tax advantage schemes U.K.

(1) This section applies where—

(a) a company is entitled to make a deduction under section 357A(2) in calculating the profits of a trade of the company for an accounting period,

(b) the company is or has at any time been a party to a scheme, and

(c) the main purpose, or one of the main purposes, of the company or, where the company is a member of a group, any member of the group in being a party to the scheme is (or was) to obtain the chance of securing a relevant tax advantage.

(2) There is a “relevant tax advantage” for the purposes of this section if—

(a) (apart from this section) there would be an increase in the amount of any deduction made under section 357A(2) in calculating the profits of a trade of the company or (as the case may be) any other member of the group for any accounting period, and

(b) the increase would arise from—

(i) the avoidance of the operation of any provision of this Part,

(ii) artificially inflating the amount of relevant IP income brought into account in calculating those profits (see subsection (3)), F687 ...

(iii) a mismatch between relevant IP income and expenditure (see subsection (4))[F688 , or

(iv) an R&D fraction (see subsection (4A)) being greater than it would be but for the scheme.]

(3) The reference in subsection (2)(b) to artificially inflating the amount of relevant IP income brought into account in calculating the profits mentioned in subsection (2)(a) is a reference to doing any of the following—

(a) bringing into account in calculating those profits an amount of relevant IP income that wholly or substantially corresponds to an increase in the amounts brought into account as debits in calculating those profits;

(b) bringing into account in calculating those profits an additional amount of relevant IP income that wholly or substantially corresponds to a decrease in the amount of income that is not relevant IP income which is brought into account in calculating those profits.

(4) For the purposes of this section there is a mismatch between relevant IP income and expenditure if—

(a) any relevant IP income brought into account in calculating the profits mentioned in subsection (2)(a) is attributable to any qualifying IP right or an exclusive licence in respect of any such right, and

(b) any expenditure incurred in relation to that right is brought into account in calculating the profits of a trade of the company or (as the case may be) any other member of the group for an accounting period for which an election under [F689 section 357A(1)] did not have effect.

[F690 (4A) The reference in subsection (2)(b)(iv) to an R&D fraction is a reference to such a fraction as is mentioned at Step 6 of section 357BF(2).]

(5) The amount of the deduction which may be made by the company for the accounting period mentioned in subsection (1)(a) is the amount that would secure that no relevant tax advantage arises (and may be nil).

(6) In this section “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions.

Textual Amendments

F687 Word in s. 357FB(2)(b)(ii) omitted (with effect in accordance with s. 64(7) of the amending Act) by virtue of Finance Act 2016 (c. 24), s. 64(4)(a)(i)

F688 S. 357FB(2)(b)(iv) and word inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(4)(a)(ii)

F689 Words in s. 357FB(4)(b) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 18

F690 S. 357FB(4A) inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(4)(b)

CHAPTER 7 U.K. Supplementary

Elections under section 357A U.K.

357G Making of election under [F691 section 357A(1) or (11)(b)] U.K.

(1) An election made by a company under [F692 section 357A(1) or (11)(b)] is made by giving notice to an officer of Revenue and Customs.

(2) The notice must specify the first accounting period of the company for which the election is to have effect.

(3) The notice must be given on or before the last day on which an amendment of the company's tax return for that accounting period could be made under paragraph 15 of Schedule 18 to FA 1998.

(4) The election has effect in relation to each trade carried on by the company.

(5) Subject to section 357GA, the election has effect for the accounting period specified in the notice and all subsequent accounting periods of the company.

Textual Amendments

F691 Words in s. 357G heading substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 19(2)

F692 Words in s. 357G(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 19(3)

357GA Revocation of election made under [F693 section 357A(1)] U.K.

(1) A company may revoke an election made by it under [F694 section 357A(1)] by giving notice to an officer of Revenue and Customs.

(2) The notice must specify the first accounting period of the company for which the revocation is to have effect.

(3) The notice must be given on or before the last day on which an amendment of the company's tax return for that accounting period could be made under paragraph 15 of Schedule 18 to FA 1998.

(4) The revocation has effect in relation to the accounting period specified in the notice and all subsequent accounting periods of the company.

(5) An election made under [F695 section 357A(1)] by a company that has given notice under this section does not have effect in relation to any accounting period of the company that begins before the end of the period of 5 years beginning with the day after the last day of the accounting period specified in the notice.

Textual Amendments

F693 Words in s. 357GA heading substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 20(2)

F694 Words in s. 357GA(1) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 20(3)

F695 Words in s. 357GA(5) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 20(4)

Partnerships U.K.

357GB Application of this Part in relation to partnerships U.K.

(1) This section applies if a firm (within the meaning of CTA 2009) carries on a trade and any partner in the firm is a company within the charge to corporation tax.

Such a partner is referred to in this section as a “corporate partner”.

(2) Subject to the following provisions of this section, this Part applies in relation to the firm as it applies in relation to a company.

(3) Any election under this Part—

(a) may be made or revoked not by the firm but instead by any one or more of the corporate partners (whether jointly or otherwise), and

(b) has effect in relation to each corporate partner making or revoking it as if made or revoked by the firm.

(4) Accordingly, any reference in section 357G(3) or 357GA(3) (time limit for making or revoking elections under section 357A) to the company making or revoking the election is to be read as a reference to the corporate partner so doing.

(5) Section 1261 of CTA 2009 (accounting periods of firms) applies for the purposes of this Part as it applies for the purposes of Part 17 of that Act.

(6) Section 357B (meaning of “qualifying company”) has effect as if in subsection (1) the words “in the case of a company that is a member of a group” were omitted.

(7) For the purposes of this Part the firm meets the development condition in relation to a right to which this Part applies if—

(a) the firm has at any time carried out qualifying development in relation to the right, or

(b) there is a relevant corporate partner in the firm who meets the development condition in relation to the right.

(8) A “relevant corporate partner” is a corporate partner who is entitled to a share of at least 40% of the profits or losses of the firm for any accounting period of the firm.

(9) Section 357BD applies for the purposes of subsection (7)(a) of this section as it applies for the purposes of section 357BC.

(10) Section 357BE (active ownership condition) has effect as if the reference in subsection (4) to section 357BC(2) or (3) included a reference to subsection (7)(a) of this section.

(11) Sections [F696 357BK, 357BKA] 357CL and 357CM (election for small claims treatment) have effect as if—

(a) any reference to a company having one or more associated companies were a reference to any corporate partner in relation to which an election under section [F697 357BK or] 357CL has effect having one or more associated companies, and

(b) any reference to a company having no associated company were a reference to each such corporate partner having no associated company.

(12) Subsection (13) applies where a corporate partner is a party to an arrangement at any time during an accounting period of the firm which produces for the corporate partner a return within [F698 section 357BG(1)(c)] .

(13) For the accounting period of the firm the corporate partner's share of a profit or loss of a trade carried on by the firm is determined for corporation tax purposes as if no election under section 357A had effect in relation to the trade.

Textual Amendments

F696 Words in s. 357GB(11) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 21(2)(a)

F697 Words in s. 357GB(11)(a) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 21(2)(b)

F698 Words in s. 357GB(12) substituted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 21(3)

Cost-sharing arrangements U.K.

[F699 357GC Meaning of “cost-sharing arrangement U.K.

(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).

Textual Amendments

F699 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZA Qualifying IP right held by another party to CSA U.K.

(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.

Textual Amendments

F699 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZB Exclusive licence held by another party to CSA U.K.

(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.

Textual Amendments

F699 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZC R&D undertaken or contracted out by another party to CSA U.K.

(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.

Textual Amendments

F699 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZD Acquisition of qualifying IP rights etc by another party to CSA U.K.

(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.

Textual Amendments

F699 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZE Treatment of expenditure in connection with formation of CSA etc U.K.

(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.

Textual Amendments

F699 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

357GCZF Treatment of income in connection with formation of CSA etc U.K.

(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.]

Textual Amendments

F699 Ss. 357GC-357GCZF substituted for s. 357GC (with effect in accordance with s. 23(5) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), s. 23(3)

[F700 Transferred trades U.K.

Textual Amendments

F700 S. 357GCA and cross-heading inserted (with effect in accordance with s. 64(7) of the amending Act) by Finance Act 2016 (c. 24), s. 64(5)

357GCA Application of this Part in relation to transferred trades U.K.

(1) Where—

(a) a company (“the transferor”) ceases to carry on a trade which involves the exploitation of a qualifying IP right (“the relevant qualifying IP right”),

(b) the transferor assigns the relevant qualifying IP right, or grants or transfers an exclusive licence in respect of it, to another company (“the transferee”), and

(c) the transferee begins to carry on the trade,

the following provisions apply in determining under this Part the relevant IP profits of the trade carried on by the transferee.

(2) The transferee is to be treated as not being a new entrant if—

(a) an election under section 357A(1) has effect in relation to the transferor on the date of the assignment, grant or transfer mentioned in subsection (1)(b) (“the transfer date”), and

(b) the first accounting period of the transferor for which that election had effect began before 1 July 2016.

(3) The relevant qualifying IP right is to be treated as being an old qualifying IP right in relation to the transferee if by reason of section 357BP it is an old qualifying IP right in relation to the transferor.

(4) Expenditure incurred prior to the transfer date by the transferor which is attributable to relevant research and development undertaken by the transferor is to be treated for the purposes of section 357BLB as if it is expenditure incurred by the transferee which is attributable to relevant research and development undertaken by the transferee.

(5) Expenditure incurred prior to the transfer date by the transferor in making a payment to a person in respect of relevant research and development contracted out by the transferor to that person is to be treated for the purposes of sections 357BLC and 357BLD as if it is expenditure incurred by the transferee in making a payment to that person in respect of relevant research and development contracted out by the transferee to that person.

(6) Expenditure incurred prior to the transfer date by the transferor in making a payment in connection with the relevant qualifying IP right which is within subsection (2), (3) or (4) of section 357BLE is to be treated for the purposes of that section as if it is expenditure incurred by the transferee in making a payment in connection with that right which is within one of those subsections.

(7) Expenditure incurred by the transferee in making a payment to the transferor in respect of the assignment, grant or transfer mentioned in subsection (1)(b) is to be ignored for the purposes of section 357BLE.

(8) In this section—

• “trade” includes part of a trade, and

• “relevant research and development” means research and development which relates to the relevant qualifying IP right.

(9) For the purposes of this section research and development “relates” to the relevant qualifying IP right if—

(a) it creates, or contributes to the creation of the invention,

(b) it is undertaken for the purpose of developing the invention,

(c) it is undertaken for the purpose of developing ways in which the invention may be used or applied, or

(d) it is undertaken for the purpose of developing any item or process incorporating the invention.]

Interpretation U.K.

357GD Meaning of “group” U.K.

(1) For the purposes of this Part a company (“company A”) is a member of a group at any time if any other company is at that time associated with company A.

(2) The group consists of company A and each company in relation to which the condition in subsection (1) is met.

(3) For the purposes of this section a company (“company B”) is associated with company A at a time (“the relevant time”) if any of the following five conditions is met.

(4) The first condition is that the financial results of company A and company B, for a period that includes the relevant time, meet the consolidation condition.

(5) The second condition is that there is a connection between company A and company B for the accounting period of company A in which the relevant time falls.

(6) The third condition is that, at the relevant time, company A has a major interest in company B or company B has a major interest in company A.

(7) The fourth condition is that—

(a) the financial results of company A and a third company, for a period that includes the relevant time, meet the consolidation condition, and

(b) at the relevant time the third company has a major interest in company B.

(8) The fifth condition is that—

(a) there is a connection between company A and a third company for the accounting period of company A in which the relevant time falls, and

(b) at the relevant time the third company has a major interest in company B.

(9) In this section, the financial results of any two companies for any period meet “the consolidation condition” if—

(a) they are required to be fully comprised in group accounts,

(b) they would be required to be fully comprised in such accounts but for the application of an exemption, or

(c) they are in fact fully comprised in such accounts.

(10) In subsection (9) “group accounts” means accounts prepared under—

(a) section 399 of the Companies Act 2006, or

(b) any corresponding provision of the law of a country or territory outside the United Kingdom.

(11) The following provisions apply for the purposes of this section—

• sections 466 to 471 of CTA 2009 (companies connected for accounting period), and

• sections 473 and 474 of CTA 2009 (meaning of “major interest”).

357GE Other interpretation U.K.

(1) In this Part—

• “invention”, in relation to a right to which this Part applies, means the item or process in respect of which the right is granted,

• “item” includes any substance,

• “the OECD Model Tax Convention” means—

  (a)

  the version of the Model Tax Convention on Income and on Capital published in July 2010 by the Organisation for Economic Co-operation and Development (“the OECD”), or

  (b)

  such other document approved and published by the OECD in place of that (or a later) version or in place of that Convention as is designated for the time being by order made by the Treasury,

• “the OECD transfer pricing guidelines” [F701 has the same meaning as “the transfer pricing guidelines” in section 164 of TIOPA 2010]

• [F702 “ payment ” includes payment in money's worth.]

• F703 ...

[F704 (1A) In Chapters 3 and 4 of this Part “qualifying residual profit” of a trade, in relation to any accounting period, is the amount obtained by the application of Steps 1 to 4 in section 357C or (as the case may be) section 357DA in relation to the trade for the accounting period.]

(2) Any reference in this Part to calculating the profits of a trade of a company for an accounting period is a reference to calculating those profits for corporation tax purposes (and any reference to the profits or losses of a trade of a company for an accounting period is to be read accordingly).]

Textual Amendments

F701 Words in s. 357GE(1) substituted (with effect in accordance with s. 75(4) of the amending Act) by Finance Act 2016 (c. 24), s. 75(2)

F702 Words in s. 357GE(1) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 23(2)(a)

F703 Words in s. 357GE(1) omitted (15.9.2016) by virtue of Finance Act 2016 (c. 24), Sch. 9 para. 23(2)(b)

F704 S. 357GE(1A) inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 9 para. 23(3)

[F705 PART 8B U.K. Trading profits taxable at the Northern Ireland rate

Textual Amendments

F705 Pt. 8B inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), s. 1

CHAPTER 1 U.K. Introductory

357H Introduction U.K.

(1) This Part is about the Northern Ireland rate of corporation tax and the application of that rate to Northern Ireland profits.

(2) Chapter 2 is about how the Northern Ireland rate is determined.

(3) Chapter 3—

(a) applies the Northern Ireland rate to Northern Ireland profits;

(b) makes provision about the operation of certain reliefs for trading losses that are given against profits.

(4) Chapters 4 and 5 define expressions used in this Part in connection with the determination of a company's Northern Ireland profits; see—

• Chapter 4 for definitions of “Northern Ireland company”, “qualifying trade”, “SME” and “Northern Ireland employer”;

• Chapter 5 for provision about whether a company has a Northern Ireland regional establishment (a “NIRE”).

(5) Chapters 6 and 7 contain rules for determining whether profits or losses of a trade are “Northern Ireland profits” or “Northern Ireland losses”; see—

• Chapter 6 for rules applying in the case of a Northern Ireland company that is an SME [F706 and is a Northern Ireland employer];

• Chapter 7 for rules applying in the case of a Northern Ireland company [F707 that—

  (a)

  is an SME that is not a Northern Ireland employer and has made the requisite election, or

  (b)

  is not an SME.]

(6) Chapter 8 is about the treatment of intangible fixed assets in relation to Northern Ireland companies.

(7) Chapters 9 to 15 are about the way in which various credits and reliefs work in relation to Northern Ireland companies; see—

• Chapter 9 for provision about R&D expenditure credits and relief for expenditure relating to research and development;

• Chapter 10 for provision about relief for expenditure relating to the remediation of contaminated or derelict land;

• Chapter 11 for provision about film tax relief;

• Chapter 12 for provision about television production;

• Chapter 13 for provision about video games development;

• Chapter 14 for provision about theatrical productions;

• [F708 Chapter 14A for provision about orchestra tax relief;]

• [F709 Chapter 14B for provision about museums and galleries exhibition tax relief;]

• Chapter 15 for provision about profits arising from exploitation of patents etc.

(8) Chapter 16 contains rules for determining whether profits or losses of a trade are “Northern Ireland profits” or “Northern Ireland losses” in the case of a company that is a partner in a Northern Ireland firm.

(9) Chapter 17—

(a) defines “excluded trade” and “excluded activity” (profits of which are not Northern Ireland profits), and

(b) contains power to make provision about the meaning of “back-office activities” (profits imputed to which may be Northern Ireland profits).

Textual Amendments

F706 Words in s. 357H(5) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 2(2)(a)

F707 Words in s. 357H(5) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 2(2)(b)

F708 Words in s. 357H(7) inserted (with effect in accordance with Sch. 8 para. 18(1) of the amending Act) by Finance Act 2016 (c. 24), Sch. 8 para. 13

F709 Words in s. 357H(7) inserted (with effect in accordance with Sch. 6 para. 20 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 6 para. 16

CHAPTER 2 U.K. The Northern Ireland rate

357I The Northern Ireland rate U.K.

(1) The Northern Ireland rate for a financial year is—

(a) if a resolution of the Northern Ireland Assembly—

(i) sets a rate under section 357IA for the year, and

(ii) is passed before the beginning of the year,

the rate set by the resolution;

(b) if the Northern Ireland rate for the year is not determined under paragraph (a), but the Northern Ireland rate for one or more earlier financial years was determined under that paragraph, the rate for the most recent of those earlier years;

(c) otherwise, the main rate.

(2) For the purposes of subsection (1)(a)(ii), a resolution passed before the beginning of a financial year is treated as not having been so passed if it is cancelled by a resolution under section 357IA that is itself passed before the beginning of the year.

357IA Power of Northern Ireland Assembly to set Northern Ireland rate U.K.

(1) The Northern Ireland Assembly (“the Assembly”) may by resolution set the Northern Ireland rate for one or more financial years specified in the resolution.

(2) The Assembly may by resolution cancel a resolution under subsection (1).

(3) A resolution under this section may not be passed by the Assembly except in pursuance of a recommendation which—

(a) is made by the [F710 Minister of Finance], and

(b) is signified to the Assembly by the Minister or on the Minister's behalf.

(4) A resolution under this section may not be passed by the Assembly without cross-community support.

(5) Section 63 of the Northern Ireland Act 1998 (financial acts of the Assembly) does not apply to a resolution under this section.

(6) This section authorises the setting of a nil rate.

(7) In this section “cross-community support” has the meaning given by section 4(5) of the Northern Ireland Act 1998.

Textual Amendments

F710 Words in s. 357IA substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 26

CHAPTER 3 U.K. Northern Ireland rate applied to Northern Ireland profits and losses

Introductory U.K.

357J Introductory U.K.

(1) Section 357JA contains provision about—

(a) the charge to corporation tax on Northern Ireland profits and mainstream profits, and

(b) the rate at which Northern Ireland profits are charged.

(2) The subsequent provisions of this Chapter contain provision—

(a) about the availability of relief for Northern Ireland losses and mainstream losses, and

(b) restricting the amount of relief given for Northern Ireland losses in certain circumstances.

Profits chargeable to corporation tax and rates U.K.

357JA Profits chargeable to corporation tax and rates U.K.

(1) The reference in section 35 of CTA 2009 (charge to tax on trade profits) to the profits of a trade is, where a company carrying on a trade in an accounting period has Northern Ireland profits of the trade or mainstream profits of the trade, a reference to those Northern Ireland profits or mainstream profits.

(2) Northern Ireland profits are charged to corporation tax at the Northern Ireland rate.

Section 3(1) of this Act (corporation tax charged at main rate) has effect subject to this subsection.

Loss relief in relation to Northern Ireland profits and losses: [F711 Chapter 2 of Part 4] U.K.

Textual Amendments

F711 Words in s. 357JB cross-heading substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 94

[F712 357JB Availability of relief U.K.

(1) The references in section 37 and sections 45A to 45F (relief for trade losses) to a loss are, where a company carrying on a trade in an accounting period has Northern Ireland losses of the trade or mainstream losses of the trade, references to those Northern Ireland losses or mainstream losses.

(2) If a company has a Northern Ireland loss and a mainstream loss in the same accounting period, sections 37 and 45A to 45F have effect in relation to each of those losses separately.

(3) If by reason of this section a company is entitled under section 37(2), 45A(5), 45B(5) or 45F(2) to make a claim in relation to a Northern Ireland loss (or an amount of such a loss) and a claim in relation to a mainstream loss (or an amount of such a loss), the company may make—

(a) one of those claims only, or

(b) both of those claims in either order.

(4) Where—

(a) relief is given under section 37, 45A, 45B or 45F for a Northern Ireland loss (or an amount of such a loss), and

(b) the profits against which the relief is given includes some profits of the trade that are Northern Ireland profits and some that are not,

the relief is given first, so far as possible, against the Northern Ireland profits.

(5) Where—

(a) relief is given under section 37, 45, 45A, 45B or 45F for a loss (or an amount of a loss) that is not a Northern Ireland loss, and

(b) the profits against which the relief is given include some profits of the trade that are Northern Ireland profits and some that are not,

the relief is given first, so far as possible, against the profits that are not Northern Ireland profits.

Textual Amendments

F712 Ss. 357JB, 357JC substituted for ss. 357JB-357JE (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 95

357JC Restriction on deductions U.K.

(1) Subsection (2) applies where—

(a) relief is given under section 37 for a Northern Ireland loss (“the loss”),

(b) the profits against which the relief is given include profits that are not Northern Ireland profits, and

(c) at any time during the accounting period for which the relief is given (“the profit period”) the Northern Ireland rate is lower than the main rate.

(2) The reference in section 37(4) to “the amount of the loss” is to the restricted deduction for the loss, as determined under section 357JJ (restricted deduction where Northern Ireland rate lower than main rate).

(3) Subsection (4) applies where—

(a) relief is given under section 45A, 45B or 45F for an amount of a Northern Ireland loss (“the loss”),

(b) the profits against which the relief is given include profits that are not Northern Ireland profits, and

(c) at any time during the accounting period for which the relief is given (“the profit period”), the Northern Ireland rate is lower than the main rate.

(4) The reference in section 45A(6), 45B(4) or (as the case may be) 45F(5) to “the unrelieved amount” is to so much of that amount as is equal to the restricted deduction for the loss, as determined under section 357JJ.]

Textual Amendments

F712 Ss. 357JB, 357JC substituted for ss. 357JB-357JE (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 95

Loss relief in relation to Northern Ireland profits and losses: section 45 U.K.

F712 357JD Availability of relief U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F712 Ss. 357JB, 357JC substituted for ss. 357JB-357JE (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 95

F712 357JE Restriction on deductions U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F712 Ss. 357JB, 357JC substituted for ss. 357JB-357JE (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 95

Loss relief in relation to Northern Ireland profits and losses: Part 5 U.K.

357JF Availability of relief U.K.

(1) The reference in section 99(1)(a) (group relief: surrendering of losses and other amounts) to a trading loss is, where a company carrying on a trade in an accounting period has Northern Ireland losses of the trade or mainstream losses of the trade, a reference to those Northern Ireland losses or mainstream losses.

(2) Section 100 (meaning of “trading loss”) has effect subject to subsection (1).

(3) Where—

(a) a company makes a claim for group relief under Part 5 in relation to a surrenderable amount that is a Northern Ireland loss, and

(b) the profits against which the relief is claimed include some profits that are Northern Ireland profits and some that are not,

the relief in relation to that surrenderable amount is given first, so far as possible, against the Northern Ireland profits.

(4) Where—

(a) a company makes a claim for group relief under Part 5 in relation to a surrenderable amount that is not a Northern Ireland loss, and

(b) the profits against which the relief is claimed include some profits that are Northern Ireland profits and some that are not,

the relief in relation to that surrenderable amount is given first, so far as possible, against the profits that are not Northern Ireland profits.

357JG Restriction on deductions U.K.

(1) Subsection (2) applies where—

(a) a company makes a claim for group relief under Part 5 in relation to a surrenderable amount that is a Northern Ireland loss (“the loss”),

(b) the profits against which the relief is claimed include profits that are not Northern Ireland profits, and

(c) at any time during the accounting period for which the relief is claimed (“the profit period”), the Northern Ireland rate is lower than the main rate.

(2) In section 137(2) (amount of deduction)—

(a) the reference in paragraph (a) to “an amount equal to” the surrendering company's surrenderable amounts is, so far as those surrenderable amounts comprise the loss, to the restricted deduction for the loss, as determined under section 357JJ (restricted deduction where Northern Ireland rate lower than main rate);

(b) the reference in paragraph (b) to “an amount equal to” part of the surrendering company's surrenderable amounts is, so far as that part comprises the loss, to the restricted deduction for the loss, as determined under section 357JJ.

357JH Modifications of Chapter 4 of Part 5 U.K.

(1) Chapter 4 of Part 5 (claims for group relief) has effect, in relation to a claim under that Chapter in relation to surrenderable amounts that include a Northern Ireland loss, subject to the following provisions of this section.

(2) In section 138 (limitation on amount of group relief applying to all claims)—

(a) paragraphs (a) and (b) are treated as imposing separate limits;

(b) the limit in paragraph (a) on the amount of group relief to be given on a claim has effect as a limit on the amount of losses and other surrenderable amounts in relation to which relief is to be given on the claim;

(c) the limit in paragraph (b) on the amount of group relief to be given on a claim has effect as a limit on the amount of the deduction to be made as a result of the claim.

(3) In section 139(6)(b) (unused part of the surrenderable amounts), and in section 141(2) so far as it applies in relation to section 139, references to the amount of group relief given on a claim are to the amount of losses and other surrenderable amounts in relation to which relief is given on the claim.

(4) In section 140(6)(b) (unrelieved part of claimant company's available total profits), and in section 141(2) so far as it applies in relation to section 140, references to the amount of group relief given on a claim are to the amount of the deduction made as a result of the claim.

(5) In section 143 (limitation on group relief where surrendering company owned by consortium), the limit in subsection (2) on the amount of group relief to be given on a claim has effect as a limit on the amount of losses and other surrenderable amounts in relation to which relief is to be given on the claim.

(6) In section 144 (limitation on group relief where claimant company owned by consortium), the limit in subsection (2) on the amount of group relief to be given on a claim has effect as a limit on the amount of the deduction to be made as a result of the claim.

(7) In section 146 (conditions 2 and 3: companies in link company's group), the limit in subsections (2) and (3) on the amount of group relief to be given on a claim has effect as a limit on the amount of the deduction to be made as a result of the claim.

(8) In section 148 (conditions 1 and 2: surrendering company in group of companies), the reference in subsection (5) to the maximum amount of group relief that could be given has effect as a reference to the maximum amount of losses and other surrenderable amounts in relation to which relief could be given.

(9) In section 149 (conditions 1 and 3: claimant company in group of companies), the reference in subsection (5) to the maximum amount of group relief that could be claimed by the claimant company has effect as a reference to the maximum amount of the deduction that could be made as a result of claims by the claimant company.

[F713 Loss relief in relation to Northern Ireland profits and losses: Part 5A U.K.

Textual Amendments

F713 Ss. 357JHA-357JHD and cross-heading inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 96

357JHA Availability of relief U.K.

(1) The reference in section 188BB(1)(a) (group relief for carried-forward losses: surrendering of carried-forward losses and other amounts) to a loss carried forward to an accounting period of a company under section 45A(4) is, where a company has Northern Ireland losses or mainstream losses carried forward to an accounting period under that section, a reference to those Northern Ireland losses or mainstream losses.

(2) Where—

(a) a company makes a claim for group relief for carried-forward losses under Part 5A in relation to a surrenderable amount that is a Northern Ireland loss, and

(b) the profits against which the relief is claimed include some profits that are Northern Ireland profits and some that are not,

the relief in relation to that surrenderable amount is given first, so far as possible, against the Northern Ireland profits.

(3) Where—

(a) a company makes a claim for group relief for carried-forward losses under Part 5A in relation to a surrenderable amount that is not a Northern Ireland loss, and

(b) the profits against which the relief is claimed include some profits that are Northern Ireland profits and some that are not,

the relief in relation to that surrenderable amount is given first, so far as possible, against the profits that are not Northern Ireland profits.

357JHB Restriction on deductions U.K.

(1) Subsection (2) applies where—

(a) a company makes a claim for group relief for carried-forward losses under Part 5A in relation to a surrenderable amount that is a Northern Ireland loss (“the loss”),

(b) the profits against which the relief is claimed include profits that are not Northern Ireland profits, and

(c) at any time during the accounting period for which the relief is claimed (“the profit period”), the Northern Ireland rate is lower than the main rate.

(2) In section 188CK(2) and (4) (amount of deduction)—

(a) the reference in paragraph (a) to “an amount equal to” the surrendering company's surrenderable amounts is, so far as those surrenderable amounts comprise the loss, to the restricted deduction for the loss, as determined under section 357JJ (restricted deduction where Northern Ireland rate lower than main rate);

(b) the reference in paragraph (b) to “an amount equal to” part of the surrendering company's surrenderable amounts is, so far as that part comprises the loss, to the restricted deduction for the loss, as determined under section 357JJ.

357JHC Modifications of Chapter 4 of Part 5A U.K.

(1) Chapter 4 of Part 5A (limitations on group relief for carried-forward losses: claims under section 188CB) has effect, in relation to a claim under section 188CB in relation to surrenderable amounts that include a Northern Ireland loss, subject to the following provisions of this section.

(2) In section 188DB(1) (limitation on amount of group relief for carried-forward losses applying to all claims under section 188CB)—

(a) paragraphs (a) and (b) are treated as imposing separate limits;

(b) the limit in paragraph (a) on the amount of group relief for carried-forward losses to be given on a claim under section 188CB has effect as a limit on the amount of losses and other surrenderable amounts in relation to which relief is to be given on the claim;

(c) the limit in paragraph (b) on the amount of group relief for carried-forward losses to be given on a claim under section 188CB has effect as a limit on the amount of the deduction to be made as a result of the claim.

(3) In section 188DC(6)(b) (unused part of the surrenderable amounts), and in section 188DF(2) so far as it applies in relation to section 188DC, references to the amount of group relief for carried-forward losses given on a claim are to the amount of losses and other surrenderable amounts in relation to which relief is given on the claim.

(4) In section 188DE(4)(b) (previously claimed group relief for carried-forward losses), and in section 188DF(2) so far as it applies in relation to section 188DE, references to the amount of group relief for carried-forward losses given on a claim are to the amount of the deduction made as a result of the claim.

(5) In section 188DH (limitation on group relief for carried-forward losses where claim under section 188CB is based on consortium condition 1), the limit in subsection (2) on the amount of group relief for carried-forward losses to be given on a claim has effect as a limit on the amount of the deduction to be made as a result of the claim.

(6) In section 188DL (limitation on group relief for carried-forward losses where claim under section 188CB is made by member of a group of companies)—

(a) the reference in subsection (3)(a) to the maximum amount of group relief for carried-forward losses that could be claimed by the claimant company has effect as a reference to the maximum amount of the deduction that could be made as a result of claims by the claimant company, and

(b) the reference in subsection (3)(b) to the maximum amount of group relief under Part 5 that could be claimed by the claimant company has effect as a reference to the maximum amount of the deduction that could be made as a result of claims by the claimant company.

357JHD Modifications of Chapter 5 of Part 5A U.K.

(1) Chapter 5 of Part 5A (limitations on group relief for carried-forward losses: claims under section 188CC) has effect, in relation to a claim under section 188CC in relation to surrenderable amounts that include a Northern Ireland loss, subject to the following provisions of this section.

(2) In section 188EB(1) (limitation on amount of group relief for carried-forward losses applying to all claims under section 188CC)—

(a) paragraphs (a), (b) and (c) are treated as imposing separate limits;

(b) the limit in paragraph (a) on the amount of group relief for carried-forward losses to be given on a claim under section 188CC has effect as a limit on the amount of losses and other surrenderable amounts in relation to which relief is to be given on the claim;

(c) the limits in paragraphs (b) and (c) on the amount of group relief for carried-forward losses to be given on a claim under section 188CC have effect as limits on the amount of the deduction to be made as a result of the claim.

(3) In section 188EC(6) and (8)(b) (unused part of the surrenderable amounts attributable to the specified-loss making period), and in section 188EG(2) so far as it applies in relation to section 188EC, references to the amount of group relief for carried-forward losses given on a claim are to the amount of losses and other surrenderable amounts in relation to which relief is given on the claim.

(4) In section 188EE(4)(b) (previously claimed group relief for carried-forward losses), and in section 188EG(2) so far as it applies in relation to section 188EE, references to the amount of group relief for carried-forward losses given on a claim are to the amount of the deduction made as a result of the claim.

(5) In section 188EI (condition 4: companies in link company's group), the limit in subsections (2) and (3) on the amount of group relief for carried-forward losses to be given on a claim has effect as a limit on the amount of the deduction to be made as a result on the claim.

(6) In section 188EK (condition 3 or 4: surrendering company in group of companies), the reference in subsection (4) to the maximum amount of group relief for carried-forward losses that could be given has effect as a reference to the maximum amount of losses and other surrenderable amounts in relation to which relief could be given.]

Transfers of trade without a change of ownership: Chapter 1 of Part 22 U.K.

357JI Transfers of trade without a change of ownership U.K.

(1) This section applies where—

(a) Chapter 1 of Part 22 (transfers of trade without a change of ownership) applies to the transfer of a trade, and

(b) a loss made by the predecessor in the transferred trade is a Northern Ireland loss or a mainstream loss.

(2) [F714 Sections 943A to 944C (which modify the application of Chapter 2 of Part 4) have effect as if the references in those sections] to a loss made by the predecessor in the transferred trade were to the Northern Ireland loss or mainstream loss.

Textual Amendments

F714 Words in s. 357JI(2) substituted (with effect in accordance with Sch. 10 para. 32 of the amending Act) by Finance Act 2019 (c. 1), Sch. 10 para. 27

Restricted deductions U.K.

357JJ Restricted deduction: Northern Ireland rate lower than main rate U.K.

(1) The amount of the restricted deduction for a Northern Ireland loss for the purposes of section [F715 357JC(2) or (4), 357JG(2) or 357JHB(2)] is the amount determined under subsection (2) or (3).

(2) If the profit period falls within only one financial year, the amount of the restricted deduction for the loss is—

where—

NIR is the Northern Ireland rate in the financial year;

MR is the main rate in the financial year;

L1 is the amount of the loss that is unmatched;

L2 is the amount of the loss (if any) that is matched.

(3) If the profit period falls within more than one financial year, the amount of the restricted deduction for the loss is—

where—

X is the amount of the loss that is unmatched (“the unmatched loss”), adjusted in accordance with subsection (4);

L2 is the amount of the loss (if any) that is matched.

(4) To adjust the unmatched loss for the purposes of subsection (3), take the following steps—

• Step 1 Apportion the unmatched loss between the financial years on a time basis according to the respective lengths of the parts of the profit period falling within those years.

• Step 2 Where an amount is apportioned under step 1 to a financial year in which the Northern Ireland rate is lower than the main rate, reduce that amount by multiplying it by the following fraction—

  

  where—

  • NIR is the Northern Ireland rate for the financial year;

  • MR is the main rate for the financial year.

• Step 3 Add together each amount reduced under step 2 and each amount apportioned under step 1 but not reduced under step 2.

(5) For the purposes of this section—

(a) an amount of a loss is “matched” if relief in relation to the loss is given against Northern Ireland profits, and

(b) an amount of a loss is “unmatched” if relief in relation to the loss is given against profits that are not Northern Ireland profits.

(6) In this section “the loss” and “the profit period” have the meanings given by section [F716 357JC(1) or (3), 357JG(1) or 357JHB(1)] (as the case may be).

Textual Amendments

F715 Words in s. 357JJ(1) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 97(a)

F716 Words in s. 357JJ(6) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 97(b)

CHAPTER 4 U.K. Basic definitions

Application of Chapter U.K.

357K Application of Chapter U.K.

The definitions in this Chapter apply for the purposes of this Part.

Meaning of “Northern Ireland company” U.K.

357KA “Northern Ireland company” U.K.

(1) A company is a “Northern Ireland company” in an accounting period if—

(a) the company carries on a qualifying trade in the period, and

(b) [F717 the SME (Northern Ireland employer) condition, the SME (election) condition] or the large company condition is met.

(2) The “ [F718 SME (Northern Ireland employer) condition] ” is that the company—

(a) is an SME in relation to the period, and

(b) is a Northern Ireland employer in relation to the period.

[F719 (2A) The “SME (election) condition” is that—

(a) the company is an SME in relation to the period,

(b) the company is not a Northern Ireland employer in relation to the period,

(c) the company has a NIRE in the period,

(d) the company is not a disqualified close company in relation to the period, and

(e) an election by the company for the purposes of this subsection has effect in relation to the period.]

(3) The “large company condition” is that the company—

(a) is not an SME in relation to the period, and

(b) has a NIRE in the period.

[F720 (3A) An election for the purposes of subsection (2A)—

(a) must be made by notice to an officer of Revenue and Customs,

(b) must specify the accounting period in relation to which it is to have effect (“the specified accounting period”),

(c) must be made before the end of the period of 12 months beginning with the end of the specified accounting period, and

(d) if made in accordance with paragraphs (a) to (c) has effect in relation to the specified accounting period.]

(4) For the meaning of—

• “qualifying trade”, see section 357KB;

• “SME”, see section 357KC;

• “Northern Ireland employer”, see section 357KD;

• [F721 “disqualified close company”, see section 357KEA;]

• “NIRE”, see Chapter 5.

Textual Amendments

F717 Words in s. 357KA(1)(b) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 3(2)

F718 Words in s. 357KA(2) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 3(3)

F719 S. 357KA(2A) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 3(4)

F720 S. 357KA(3A) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 3(6)

F721 Words in s. 357KA(4) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 3(5)

Meaning of “qualifying trade” U.K.

357KB “Qualifying trade” U.K.

(1) “Qualifying trade” means a trade carried on by a company (otherwise than in partnership) where—

(a) the company is within the charge to corporation tax in relation to the trade, and

(b) the trade is not an excluded trade.

(2) If an election by a company for the purposes of this subsection has effect, “qualifying trade” also includes a trade carried on by the company (otherwise than in partnership) where—

(a) the trade is an excluded trade within—

(i) section 357XB (lending and investment),

(ii) section 357XC (investment management), or

(iii) section 357XE (re-insurance trade), and

(b) the trade includes any back-office activities.

(3) An election for the purposes of subsection (2)—

(a) must be made by notice to an officer of Revenue and Customs,

(b) must specify the first accounting period (“the specified accounting period”) in relation to which it is to have effect,

(c) must be made before the end of the period of 12 months beginning with the end of the specified accounting period, and

(d) if made in accordance with paragraphs (a) to (c)—

(i) has effect in relation to the specified accounting period and subsequent accounting periods, and

(ii) is irrevocable.

(4) For the meaning of “excluded trade”, and for power to make provision about the meaning of “back-office activities”, see Chapter 17.

Meaning of “SME” U.K.

357KC “SME” U.K.

(1) A company is an “SME” in relation to an accounting period if the company is a micro, small or medium-sized enterprise as defined in the Annex—

(a) in that accounting period, or

(b) in each accounting period any part of which falls within the period of 12 months preceding that accounting period.

(2) In this section “the Annex” means the Annex to Commission Recommendation No 2003/361/EC of 6 May 2003.

(3) For the purposes of this Part the Annex has effect with the following modifications.

(4) Where any enterprise is in liquidation or administration, the rights of the liquidator or administrator (in that capacity) are to be left out of account when applying Article 3(3)(b) in determining for the purposes of this Part whether—

(a) that enterprise, or

(b) any other enterprise (including that of the liquidator or administrator),

is an SME.

(5) Article 3 has effect as if paragraph 5 (declaration in good faith where control cannot be determined etc) were omitted.

(6) In Article 4, the first sentence of paragraph 1 has effect as if the data to apply to—

(a) the headcount of staff, and

(b) the financial amounts,

were the data relating to the accounting period or periods mentioned in subsection (1) above (instead of the period referred to in that sentence) and calculated on an annual basis.

(7) Article 4 has effect as if the following provisions were omitted—

(a) in paragraph 1, the second sentence (data to be taken into account from date of closure of accounts);

(b) paragraph 2 (no change of status unless enterprise's change of size sustained over two consecutive periods);

(c) paragraph 3 (genuine estimate in case of newly established enterprise).

Meaning of “Northern Ireland employer” U.K.

357KD “Northern Ireland employer” U.K.

A company is a “Northern Ireland employer” in relation to an accounting period if the Northern Ireland workforce conditions are met—

(a) in relation to that accounting period, or

(b) in relation to the period of 12 months preceding that accounting period.

357KE Northern Ireland workforce conditions U.K.

(1) The Northern Ireland workforce conditions, in relation to a period, are—

(a) that 75% or more of the working time that is spent in the United Kingdom during the period by members of the company's workforce is spent in Northern Ireland, and

(b) that 75% or more of the company's workforce expenses that are attributable to working time spent in the United Kingdom during the period by members of the company's workforce are attributable to time spent in Northern Ireland.

(2) References in this section to members of the company's workforce are to—

(a) directors of the company,

(b) employees of the company, F722 ...

(c) externally provided workers in relation to the company[F723 , and

(d) in the case of a close company, or of a company which would be a close company if it were UK resident, individuals who are participators in the company.]

(3) In subsection (2) “externally provided worker”, in relation to a company, has the same meaning as in Part 13 of CTA 2009 (see section 1128 of that Act).

(4) References in this section to the working time spent by members of the company's workforce in a place are to the total time spent by those persons in that place while providing services to the company.

(5) The reference in subsection (1)(b) to “the company's workforce expenses” is, where the period is an accounting period of the company, to the total of the deductions made by the company in the period in respect of members of the workforce in calculating the profits of any trade carried on by the company.

(6) The reference in subsection (1)(b) to “the company's workforce expenses” is, where the period is not an accounting period of the company, to the total of—

(a) the deductions made by the company in any accounting period falling wholly within the period, and

(b) the appropriate proportion of the deductions made by the company in any accounting period falling partly within the period,

in respect of members of the workforce in calculating the profits of any trade carried on by the company.

(7) For the purposes of subsection (6)(b), “the appropriate proportion” is to be determined by reference to the number of days in the periods concerned.

[F724 (7A) In this section “participator” has the same meaning as in sections 1064 to 1067 (see sections 1068 and 1069).

(7B) In determining for the purposes of this section the amount of working time that is spent in any place by a participator in the company, time spent by the participator in that place is to be included where—

(a) the time is spent by the participator in providing services to a person other than the company (“the third party”), and

(b) condition A or B is met.

(7C) Condition A is that the provision of the services results in a payment being made (whether directly or indirectly) to the company by—

(a) the third party, or

(b) a person connected with the third party.

(7D) Condition B is that—

(a) the company holds a right that it acquired (whether directly or indirectly) from the participator, and

(b) any payment in connection with that right is made (whether directly or indirectly) to the company by—

(i) the third party, or

(ii) a person connected with the third party.

(7E) Section 1122 (connected persons) applies for the purposes of this section.]

(8) The Commissioners for Her Majesty's Revenue and Customs may by regulations specify descriptions of deduction that are, or are not, to be regarded for the purposes of this section as made in respect of members of a company's workforce.

(9) Regulations under this section—

(a) may make different provision for different purposes;

(b) may make incidental, supplemental, consequential and transitional provision and savings.

Textual Amendments

F722 Word in s. 357KE(2)(b) omitted (16.11.2017) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 4(2)(a)

F723 S. 357KE(2)(d) and word inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 4(2)(b)

F724 S. 357KE(7A)-(7E) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 4(3)

[F725 Meaning of “disqualified close company” U.K.

Textual Amendments

F725 S. 357KEA and cross-heading inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 5

357KEA “Disqualified close company” U.K.

(1) A company is a “disqualified close company” in relation to a period if—

(a) the company is a close company, or would be a close company if it were UK resident, at any time in the period, and

(b) conditions A and B are met.

(2) Condition A is that the company has a NIRE in the period as a result of tax-avoidance arrangements.

(3) Condition B is that—

(a) 50% or more of the working time that is spent in the United Kingdom during the period by members of the company's workforce is working time spent by participators in the company otherwise than in Northern Ireland, or

(b) 50% or more of the company's workforce expenses that are attributable to working time spent in the United Kingdom during the period by members of the company's workforce are attributable to working time spent by participators in the company otherwise than in Northern Ireland.

(4) For the purposes of this section “tax avoidance arrangements” means arrangements the sole or main purpose of which is to secure that any profits or losses of the company for the period are Northern Ireland profits or losses.

(5) In subsection (4) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(6) The following provisions apply for the purposes of this section as they apply for the purposes of section 357KE (Northern Ireland workforce conditions)—

(a) subsections (2) to (5) and (7A) to (7E) of that section;

(b) regulations made under that section.

(7) In its application by virtue of subsection (6), subsection (5) of section 357KE has effect as if the reference in it to subsection (1)(b) of that section were to subsection (3)(b) of this section.]

CHAPTER 5 U.K. Northern Ireland regional establishments

General U.K.

357L Northern Ireland regional establishments of companies U.K.

(1) A company has a Northern Ireland regional establishment (referred to in this Part as a “NIRE”) if (and only if)—

(a) the company has a fixed place of business in Northern Ireland through which the business of the company is wholly or partly carried on, or

(b) an agent acting on behalf of the company has and habitually exercises in Northern Ireland authority to do business on behalf of the company.

(2) For this purpose a “fixed place of business” includes (without prejudice to the generality of that expression)—

(a) a place of management,

(b) a branch,

(c) an office,

(d) a factory,

(e) a workshop,

(f) an installation or structure for the exploration of natural resources,

(g) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, and

(h) a building site or construction or installation project.

(3) Subsection (1) is subject to sections 357LA and 357LB.

Circumstances where there is no NIRE U.K.

357LA Agent of independent status U.K.

(1) A company is not regarded as having a NIRE by reason of the fact that it carries on business in Northern Ireland through an agent of independent status acting in the ordinary course of the agent's business.

(2) Sections 357LC to 357LI apply for the purpose of supplementing subsection (1) in relation to transactions carried out on behalf of a company by a person in Northern Ireland acting as—

(a) a broker (section 357LC),

(b) an investment manager (sections 357LD to 357LH), or

(c) a members' or managing agent at Lloyd's (section 357LI).

357LB Alternative finance arrangements U.K.

(1) Subsection (2) applies if alternative finance return is paid to a company.

(2) The company is not regarded as having a NIRE merely by virtue of anything done for the purposes of the alternative finance arrangements—

(a) by the other party to the arrangements, or

(b) by any other person acting for the company in relation to the arrangements.

(3) In subsection (1) “alternative finance return” means alternative finance return within the application of—

(a) section 564I, 564K or 564L(2) or (3) of ITA 2007, or

(b) section 511, 512 or 513(2) or (3) of CTA 2009.

(4) In subsection (2) the reference to “the alternative finance arrangements” is a reference to the alternative finance arrangements under which the alternative finance return mentioned in subsection (1) is paid.

Brokers U.K.

357LC The independent broker condition U.K.

(1) This section applies if a transaction is carried out on behalf of a company in the course of the company's trade by a person in Northern Ireland acting as a broker.

(2) In relation to the transaction, the broker is regarded for the purposes of section 357LA(1) as an agent of independent status acting in the ordinary course of the broker's business if (and only if) each of conditions A to D is met.

(3) Condition A is that at the time of the transaction the broker is carrying on the business of a broker.

(4) Condition B is that the transaction is carried out in the ordinary course of that business.

(5) Condition C is that the remuneration which the broker receives in respect of the transaction for the provision of the services of a broker to the company is not less than is customary for that class of business.

(6) Condition D is that the broker does not fall (apart from this subsection) to be treated as a NIRE of the company in relation to any other transaction of any kind carried out in the same accounting period of the company as the transaction in question.

Investment managers U.K.

357LD The independent investment manager conditions U.K.

(1) This section applies if an investment transaction is carried out on behalf of a company in the course of the company's trade by a person in Northern Ireland acting as an investment manager.

(2) In relation to the investment transaction, the investment manager is regarded for the purposes of section 357LA(1) as an agent of independent status acting in the ordinary course of the investment manager's business if (and only if) each of conditions A to E is met (“the independent investment manager conditions”).

(3) Condition A is that at the time of the transaction the investment manager is carrying on a business of providing investment management services.

(4) Condition B is that the transaction is carried out in the ordinary course of that business.

(5) Condition C is that, when the investment manager acts on behalf of the company in relation to the transaction, the relationship between them, having regard to its legal, financial and commercial characteristics, is a relationship between persons carrying on independent businesses dealing with each other at arm's length.

(6) Condition D is that the requirements of the 20% rule are met (see section 357LE).

(7) Condition E is that the remuneration which the investment manager receives in respect of the transaction for the provision of investment management services to the company is not less than is customary for that class of business.

357LE Investment managers: the 20% rule U.K.

(1) The requirements of the 20% rule are met if conditions A and B are met.

(2) Condition A is that, in relation to a qualifying period, it has been or is the intention of the investment manager and the persons connected with the investment manager that at least 80% of the company's relevant disregarded income should consist of amounts to which none of them has a beneficial entitlement.

(3) Condition B is that, so far as there is a failure to fulfil that intention, that failure—

(a) is attributable (directly or indirectly) to matters outside the control of the investment manager and persons connected with the investment manager, and

(b) does not result from a failure of any of them to take such steps as may be reasonable for mitigating the effect of those matters in relation to the fulfilment of that intention.

357LF Section 357LE: interpretation U.K.

(1) This section applies for the purposes of section 357LE.

(2) A “qualifying period” means—

(a) the accounting period of the company in which the transaction in question is carried out, or

(b) a period of not more than 5 years comprising two or more complete accounting periods including that one.

(3) The “relevant disregarded income” of the company for a qualifying period is the total of the company's income for the accounting periods comprised in the qualifying period which derives from transactions—

(a) carried out by the investment manager on the company's behalf, and

(b) in relation to which the investment manager does not (apart from the requirements of the 20% rule) fall to be treated as a NIRE of the company.

(4) A person has a “beneficial entitlement” to relevant disregarded income if the person has or may acquire a beneficial entitlement that is, or would be, attributable to the relevant disregarded income as a result of having an interest or other rights mentioned in subsection (5).

(5) The interests and rights referred to in subsection (4) are—

(a) an interest (whether or not an interest giving a right to an immediate payment of a share in the profits or gains) in property in which the whole or any part of the relevant disregarded income is represented, or

(b) an interest in, or other rights in relation to, the company.

357LG Application of 20% rule to collective investment schemes U.K.

(1) This section applies if amounts arise or accrue to the company as a participant in a collective investment scheme.

(2) It applies for the purpose of determining whether the requirements of the 20% rule are met in relation to a transaction carried out for the purposes of the scheme (so far as the transaction is one in respect of which amounts so arise or accrue).

(3) In applying this section the following assumptions are to be made—

(a) that all the transactions carried out for the purposes of the scheme are carried out on behalf of a company (“the assumed company”) which is—

(i) constituted for the purposes of the scheme, and

(ii) not resident in the United Kingdom, and

(b) that the participants do not have any rights in respect of the amounts arising or accruing in respect of those transactions, other than the rights which, if they held shares in the assumed company, would be their rights as shareholders.

(4) If the scheme is such that the assumed company would not be regarded for tax purposes as carrying on a trade in the United Kingdom in relation to the accounting period in which the transaction was carried out, the requirements of the 20% rule are to be treated as met in relation to a transaction carried out for the purposes of the scheme.

(5) If the scheme is such that the assumed company would be so regarded for tax purposes, sections 357LE and 357LF have effect in relation to a transaction carried out for the purposes of the scheme as if—

(a) references to the company were references to the assumed company, and

(b) references to the company's relevant disregarded income for a qualifying period were references to the sum of the amounts that would, for accounting periods comprised in the qualifying period, be chargeable to tax on the assumed company as profits deriving from the transactions—

(i) carried out by the investment manager, and

(ii) assumed to be carried out on behalf of the company.

(6) In this section—

• “collective investment scheme” has the meaning given by section 235 of FISMA 2000;

• “participant”, in relation to a collective investment scheme, is to be read in accordance with that section.

357LH Meaning of “investment manager” and “investment transaction” U.K.

In this Chapter “investment manager” and “investment transaction” have the same meanings as in Chapter 2 of Part 24 (see section 1150(1)).

Lloyd's agents U.K.

357LI Lloyd's agents U.K.

(1) This section applies if a transaction is carried out on behalf of a company in the course of the company's trade by a person in Northern Ireland acting as a members' agent or managing agent at Lloyd's.

(2) In relation to the transaction, the person is regarded for the purposes of section 357LA(1) as an agent of independent status acting in the ordinary course of the person's business if conditions A, B and C are met.

(3) Condition A is that the company is a member of Lloyd's.

(4) Condition B is that the transaction is carried out in the course of the company's underwriting business.

(5) Condition C is that the person acting on behalf of the company in relation to the transaction acts as members' agent or as managing agent of the syndicate in question.

(6) For the purposes of this section—

(a) a company is a member of Lloyd's if it is a corporate member within the meaning of Chapter 5 of Part 4 of FA 1994;

(b) “members' agent” and “managing agent” are to be read in accordance with section 230 of that Act.

Supplementary U.K.

357LJ Investment managers: disregard of certain chargeable profits U.K.

(1) This section applies if—

(a) an investment manager carries out one or more investment transactions on behalf of a company (whether or not the investment manager also carries out other transactions of any kind on behalf of the company), and

(b) the investment manager falls to be treated as a NIRE of the company (whether because the independent investment manager conditions are not met in relation to such investment transactions or otherwise).

(2) In determining under Chapter 7 of this Part the amount of profits attributable to the NIRE represented by the investment manager acting as an agent on behalf of the company, chargeable profits deriving from an investment transaction carried out by the investment manager on behalf of the company are to be disregarded in either of the following two cases—

• Case 1 The independent investment manager conditions are met in relation to the investment transaction.

• Case 2 The independent investment manager conditions, other than Condition D in section 357LD(6) (the 20% rule), are met in relation to the investment transaction.

(3) But if case 2 applies in relation to the investment transaction, chargeable profits deriving from the transaction are to be disregarded only to the extent that they do not represent relevant disregarded income of the company to which the investment manager or a person connected with the investment manager has or has had any beneficial entitlement.

(4) In subsection (3) “relevant disregarded income” and “beneficial entitlement” have the meanings given in section 357LF.

357LK Miscellaneous U.K.

(1) For the purposes of this Chapter a person is regarded as carrying out a transaction on behalf of another if the person—

(a) undertakes the transaction, whether on behalf of or to the account of the other, or

(b) gives instructions for it to be so carried out by another.

(2) In the case of a person who acts as a broker or investment manager as part only of a business, this Chapter has effect as if that part were a separate business.

CHAPTER 6 U.K. Northern Ireland profits and losses etc: SMEs [F726 that are Northern Ireland employers]

Textual Amendments

F726 Words in Pt. 8B Ch. 6 heading inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 6

357M Introductory U.K.

(1) This Chapter applies to a company that is a Northern Ireland company in an accounting period by virtue of the [F727 SME (Northern Ireland employer) condition] in section 357KA.

(2) In this Chapter—

(a) a reference to “the company” or “the accounting period” is to the company or accounting period mentioned in subsection (1);

(b) a reference to “the trade” is to any qualifying trade carried on by the company in the period.

(3) Section 357MA contains provision under which profits or losses of the trade for the accounting period are—

(a) Northern Ireland profits or losses of the trade,

(b) mainstream profits or losses of the trade, or

(c) a combination of—

(i) profits or losses within paragraph (a), and

(ii) profits or losses within paragraph (b).

(4) Further provision under which profits or losses of the trade may be Northern Ireland profits or losses of the trade, or mainstream profits or losses of the trade, is contained in—

(a) Chapters 8 to 15 of this Part, and

(b) CAA 2001 (see section 6E of that Act).

(5) This Chapter has effect for the purposes of this Part.

Textual Amendments

F727 Words in s. 357M(1) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 7

357MA Northern Ireland profits or losses and mainstream profits or losses U.K.

(1) Where the trade is a qualifying trade by virtue of section 357KB(1) (trade other than excluded trade), the profits or losses of the trade for the accounting period are Northern Ireland profits or Northern Ireland losses of the trade for the period to the extent that they do not arise from an excluded activity.

(2) Subsection (1)—

(a) does not apply in relation to any profits or losses of the trade that form part of the Northern Ireland profits or losses of the trade by virtue of any provision apart from this section, and

(b) is subject to any provision apart from this section under which profits or losses of the trade are mainstream profits or losses of the trade.

(3) Where the trade is a qualifying trade by virtue of section 357KB(2) (excluded trade with back-office activities), the profits, if any, determined under section 357MB as back-office profits of the trade for the accounting period are Northern Ireland profits of the trade for the period.

(4) The profits or losses of the trade for the accounting period are mainstream profits or mainstream losses of the trade for the period to the extent that they are not Northern Ireland profits or Northern Ireland losses by virtue of subsection (1) or (3) or any provision apart from this section.

(5) Subsection (4) does not apply in relation to any profits or losses of the trade that form part of the mainstream profits or losses of the trade by virtue of any provision apart from this section.

357MB Profit imputed to back-office activities U.K.

(1) To determine for the purposes of section 357MA(3) the back-office profits of the qualifying trade for the accounting period, take the following steps—

• Step 1 Multiply each back-office deduction by the relevant percentage.

• Step 2 Add together each amount calculated under step 1.

(2) In subsection (1)—

• “back-office deduction” means a deduction—

  (a)

  to which the company is entitled in calculating the profits of the trade for the period, and

  (b)

  which is in respect of back-office activities;

• “the relevant percentage” means 5%.

(3) The Treasury may by regulations amend subsection (2) so as to substitute a different percentage for the percentage for the time being specified there.

(4) Regulations under this section—

(a) may make different provision for different purposes (including, in particular, different trades or different back-office activities);

(b) may make incidental, supplemental, consequential and transitional provision and savings.

CHAPTER 7 U.K. Northern Ireland profits and losses etc: [F728 SMEs that are not Northern Ireland employers and] large companies

Textual Amendments

F728 Words in Pt. 8B Ch. 7 heading inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 8

Introductory U.K.

357N Introductory U.K.

(1) This Chapter applies to a company that is a Northern Ireland company in an accounting period by virtue of [F729 the SME (election) condition or] the large company condition in section 357KA.

(2) In this Chapter—

(a) a reference to “the company” or “the accounting period” is to the company or accounting period mentioned in subsection (1);

(b) a reference to “the trade” is to any qualifying trade carried on by the company in the period.

(3) Section 357NA contains provision under which profits or losses of the trade for the accounting period are—

(a) Northern Ireland profits or losses of the trade,

(b) mainstream profits or losses of the trade, or

(c) a combination of—

(i) profits or losses within paragraph (a), and

(ii) profits or losses within paragraph (b).

(4) Further provision under which profits or losses of the trade may be Northern Ireland profits or losses of the trade, or mainstream profits or losses of the trade, is contained in—

(a) Chapters 8 to 15 of this Part, and

(b) CAA 2001 (see section 6E of that Act).

(5) This Chapter has effect for the purposes of this Part.

Textual Amendments

F729 Words in s. 357N(1) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 9

Northern Ireland profits or losses and mainstream profits or losses U.K.

357NA Northern Ireland profits or losses and mainstream profits or losses U.K.

(1) Where the trade is a qualifying trade by virtue of section 357KB(1) (trade other than excluded trade), the profits or losses of the trade for the accounting period are Northern Ireland profits or Northern Ireland losses of the trade for the period to the extent that they—

(a) do not arise from an excluded activity,

(b) arise directly or indirectly through or from the company's NIRE, or from property or rights used by, or held by, or for, the company's NIRE, and

(c) are attributable to the company's NIRE.

(2) Subsection (1)—

(a) does not apply in relation to any profits or losses of the trade that form part of the Northern Ireland profits or losses of the trade by virtue of any provision apart from this section, and

(b) is subject to any provision apart from this section under which profits or losses of the trade are mainstream profits or losses of the trade.

(3) Where the trade is a qualifying trade by virtue of section 357KB(2) (excluded trade with back-office activities), the profits, if any, determined under section 357NB as Northern Ireland back-office profits of the trade for the accounting period are Northern Ireland profits of the trade for the period.

(4) The profits or losses of the trade for the accounting period are mainstream profits or mainstream losses of the trade for the period to the extent that they are not Northern Ireland profits or Northern Ireland losses by virtue of subsection (1) or (3) or any provision apart from this section.

(5) Subsection (4) does not apply in relation to any profits or losses of the trade that form part of the mainstream profits or losses of the trade by virtue of any provision apart from this section.

(6) Sections 357NC to 357NI contain provision for determining the amount of profits or losses of a trade that are attributable to the company's NIRE.

(7) See also section 357LJ (investment managers: disregard of certain chargeable profits), which provides for profits of certain investment transactions to be disregarded in determining the amount of profits attributable to a NIRE.

357NB Profit imputed to Northern Ireland back-office activities U.K.

(1) To determine for the purposes of section 357NA(3) the Northern Ireland back-office profits of the trade for the accounting period, take the following steps—

• Step 1 Multiply each Northern Ireland back-office deduction by the relevant percentage.

• Step 2 Add together each amount calculated under step 1.

(2) In subsection (1)—

• “Northern Ireland back-office deduction” means a deduction—

  (a)

  to which the company is entitled in calculating the profits of the trade for the period, and

  (b)

  which is in respect of back-office activities carried on in Northern Ireland;

• “the relevant percentage” means 5%.

(3) The Treasury may by regulations amend subsection (2) so as to substitute a different percentage for the percentage for the time being specified there.

(4) Regulations under this section—

(a) may make different provision for different purposes (including, in particular, different trades or different back-office activities);

(b) may make incidental, supplemental, consequential and transitional provision and savings.

The separate enterprise principle U.K.

357NC The separate enterprise principle U.K.

(1) The profits of the company that are attributable to its NIRE are those that the NIRE would have made if it were a distinct and separate enterprise which—

(a) engaged in the same or similar activities under the same or similar conditions, and

(b) dealt wholly independently with the company.

(2) In applying subsection (1) it is to be assumed that—

(a) the NIRE has the same credit rating as the company, and

(b) the NIRE has such equity and loan capital as it could reasonably be expected to have in the circumstances specified in that subsection.

(3) In this Chapter the principle in subsection (1) (read with subsection (2)) is called “the separate enterprise principle”.

357ND Transactions treated as being on arm's length terms U.K.

In accordance with the separate enterprise principle, transactions between the company's NIRE and any other part of the company are treated as taking place on such terms as would have been agreed between parties dealing at arm's length.

357NE Provision of goods or services for NIRE U.K.

(1) This section applies if the company provides its NIRE with goods or services.

(2) If the goods or services are of a kind that the company supplies, in the ordinary course of business, to third parties dealing with it at arm's length, the matter is dealt with as a transaction to which the separate enterprise principle applies.

(3) If not, the matter is dealt with as an expense incurred by the company for the purposes of its NIRE (see section 357NF).

Rules about deductions and receipts U.K.

357NF Allowable deductions U.K.

(1) A deduction is allowed in calculating the profits attributable to the company's NIRE for any allowable expenses incurred for the purposes of the NIRE.

(2) Expenses incurred for the purposes of the NIRE include executive and general administrative expenses so incurred, whether in Northern Ireland or elsewhere.

(3) It does not matter whether the expenses are incurred by, or reimbursed by, the NIRE.

(4) The amount of expenses to be taken into account under subsection (1) is the actual cost to the company.

(5) “Allowable expenses”, means expenses of a kind in respect of which a deduction is allowed for corporation tax purposes or (in the case of a company that is not UK-resident) would be so allowed if incurred by a UK resident company.

357NG Deductions attributable to the NIRE for costs U.K.

A deduction is allowed in calculating the profits attributable to the company's NIRE for any costs that would have been incurred on the assumptions in section 357NC(2).

357NH Payments and receipts in respect of intangible assets U.K.

(1) No deduction is allowed in calculating the profits attributable to the company's NIRE for royalties paid, or other similar payments made, by the NIRE to any other part of the company in respect of the use of intangible assets held by the company.

(2) But a deduction is allowed in calculating the profits attributable to the NIRE for any contribution by the NIRE to the costs of creation of an intangible asset.

(3) No receipt is to be brought into account in calculating the profits attributable to the NIRE for royalties or other similar amounts received from any other part of the company in respect of the use of intangible assets held by the company for the purposes of the NIRE.

(4) But a receipt is to be brought into account in calculating profits attributable to the NIRE for any contribution received by the NIRE in respect of the costs of creation of an intangible asset.

(5) In this section “intangible asset”—

(a) includes any intellectual property (as defined in section 712(3) of CTA 2009), and

(b) subject to that, has the meaning it has for accounting purposes.

357NI Interest or other financing costs and receipts U.K.

(1) No deduction is allowed in calculating the profits attributable to the company's NIRE for payments of interest or other financing costs by the NIRE to any other part of the company.

(2) No receipt is to be brought into account in calculating profits attributable to the NIRE for interest or other financing income received from any other part of the company.

Supplementary U.K.

357NJ Losses U.K.

This Part applies in relation to the attribution of losses to a company's NIRE as it applies to the attribution of profits.

357NK Trade includes office U.K.

In this Part, except so far as the context otherwise requires—

(a) references to a trade include an office, and

(b) references to carrying on a trade including holding an office.

CHAPTER 8 U.K. Intangible fixed assets

Introductory U.K.

357O Introductory U.K.

(1) This Chapter makes provision about amounts which are treated by section 747 of CTA 2009 (intangible fixed assets held for purposes of trade) as receipts or expenses of a trade carried on by a Northern Ireland company.

(2) In this Chapter “intangible fixed asset” has the same meaning as in Part 8 of CTA 2009 (see section 713 of that Act).

Calculating Northern Ireland profits or Northern Ireland losses U.K.

357OA Rules affecting calculation of Northern Ireland profits or losses U.K.

(1) If a company is a Northern Ireland company in an accounting period, this section applies to the debits and credits that are given effect under section 747 of CTA 2009 (intangible fixed assets held for purposes of trade) as receipts or expenses of the company's trade in calculating the profits of the trade.

(2) The Northern Ireland intangibles credits and Northern Ireland intangibles debits form part of the Northern Ireland profits or Northern Ireland losses of the trade.

(3) Any other credits or debits to which this section applies form part of the mainstream profits or mainstream losses of the trade.

(4) For the meaning of “Northern Ireland intangibles credits”, see section 357OB(2)(a) and (3) and 357OC(2).

(5) For the meaning of “Northern Ireland intangibles debits”, see section 357OB(2)(b) and (4) and 357OC(3).

Northern Ireland intangibles credits and Northern Ireland intangibles debits U.K.

357OB Northern Ireland intangibles credits and debits: SMEs [F730 that are Northern Ireland employers] U.K.

(1) This section applies to a company that—

(a) is a Northern Ireland company in an accounting period by virtue of the [F731 SME (Northern Ireland employer) condition] in section 357KA, and

(b) carries on a trade which is a qualifying trade by virtue of section 357KB(1) (trade other than excluded trade).

(2) If the company does not carry on an excluded activity—

(a) the Northern Ireland intangibles credits for the accounting period are—

(i) the credits treated by section 747(2) of CTA 2009 as receipts of the qualifying trade for the period, except credits in respect of pre-commencement assets and realisation credits, and

(ii) the Northern Ireland element of each realisation credit for the period, and

(b) the Northern Ireland intangibles debits for the accounting period are—

(i) the debits treated by section 747(3) of CTA 2009 as expenses of the qualifying trade for the period, except debits in respect of pre-commencement assets and realisation debits, and

(ii) the Northern Ireland element of each realisation debit for the period.

(3) If the company carries on an excluded activity, the Northern Ireland intangibles credits for the accounting period are—

(a) the credits treated by section 747(2) of CTA 2009 as receipts of the qualifying trade for the period, to the extent that—

(i) they are neither credits in respect of pre-commencement assets nor realisation credits, and

(ii) they are not attributable to assets held for the purposes of the excluded activity, and

(b) the Northern Ireland element of each realisation credit for the period.

(4) If the company carries on an excluded activity, the Northern Ireland intangibles debits for the accounting period are—

(a) the debits treated by section 747(3) of CTA 2009 as expenses of the qualifying trade for the period, to the extent that—

(i) they are neither debits in respect of pre-commencement assets nor realisation debits, and

(ii) they are not attributable to assets held for the purposes of the excluded activity, and

(b) the Northern Ireland element of each realisation debit for the period.

(5) For the meaning of “pre-commencement asset”, see section 357OH.

(6) For the meaning of a “realisation credit” and “realisation debit” and of the “Northern Ireland element” of either, see sections 357OD and 357OE.

Textual Amendments

F730 Words in s. 357OB heading inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 10(2)

F731 Words in s. 357OB(1)(a) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 10(3)

357OC Northern Ireland intangibles credits and debits: [F732 SMEs that are not Northern Ireland employers and] large companies U.K.

(1) This section applies to a company that is a Northern Ireland company in an accounting period by virtue of [F733 the SME (election) condition or] the large company condition in section 357KA.

(2) The Northern Ireland intangibles credits for the accounting period are—

(a) the credits treated by section 747(2) of CTA 2009 as receipts of the qualifying trade for the period, to the extent that—

(i) they are neither credits in respect of pre-commencement assets nor realisation credits,

(ii) they are not attributable to assets held for the purposes of an excluded activity, and

(iii) they would in accordance with the separate enterprise principle in section 357NC be attributed to the company's NIRE, and

(b) the Northern Ireland element of each realisation credit for the period.

(3) The Northern Ireland intangibles debits for the accounting period are—

(a) the debits treated by section 747(3) of CTA 2009 as expenses of the qualifying trade for the period, to the extent that—

(i) they are neither debits in respect of pre-commencement assets nor realisation debits,

(ii) they are not attributable to assets held for the purposes of an excluded activity, and

(iii) they would in accordance with the separate enterprise principle in section 357NC be attributed to the company's NIRE, and

(b) the Northern Ireland element of each realisation debit for the period.

(4) For the meaning of “pre-commencement asset”, see section 357OH.

(5) For the meaning of a “realisation credit” and “realisation debit” and of the “Northern Ireland element” of either, see sections 357OD and 357OE.

Textual Amendments

F732 Words in s. 357OC heading inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 11(2)

F733 Words in s. 357OC(1) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 11(3)

Realisation credits and realisation debits U.K.

357OD “Realisation credit” and “realisation debit” U.K.

In this Chapter, a “realisation credit” or “realisation debit”, in relation to a trade carried on by a company in an accounting period, means a credit or debit which—

(a) is brought into account by the company under Part 8 of CTA 2009 for the period as a result of Chapter 4 of that Part (realisation of intangible fixed assets),

(b) is treated under section 747 of that Act as a receipt or expense of the trade, and

(c) does not relate to a pre-commencement asset.

357OE The Northern Ireland element of a realisation credit or debit U.K.

(1) This section has effect for the purposes of this Chapter.

(2) A realisation credit or realisation debit can have a “Northern Ireland element” only if—

(a) the intangible fixed asset to which it relates has been held by the company, in an accounting period in which it was a Northern Ireland company, wholly or partly for the purposes of a qualifying trade carried on by the company, except so far as the trade consists of an excluded activity, or

(b) in the case of a realisation credit, roll-over relief was previously given in respect of an asset which was so held.

(3) The “Northern Ireland element” of a realisation credit or realisation debit is determined in accordance with section 357OF or 357OG.

(4) “Roll-over relief” means relief under Chapter 7 of Part 8 of CTA 2009 (roll-over relief in case of realisation and reinvestment).

357OF Northern Ireland element: general rule U.K.

(1) If a realisation credit or realisation debit arises under section 735 of CTA 2009 (asset written down for tax purposes), its Northern Ireland element is determined by the formula—

where—

A is the amount of the realisation credit or realisation debit;

NI is the total net Northern Ireland debits (see subsection (2));

C is the cost of the asset recognised for tax purposes, as defined by section 742(2) or 743(2) of CTA 2009;

TWDV is the tax written-down value of the asset within the meaning of Part 8 of CTA 2009 (see Chapter 5 of that Part).

(2) In subsection (1) “the total net Northern Ireland debits” means—

(a) in a case within section 742 of CTA 2009, the total debits previously brought into account for tax purposes under Part 8 of CTA 2009 in respect of the asset so far as they were Northern Ireland intangibles debits for the purposes of this Chapter, less the total credits previously so brought into account for tax purposes so far as they were Northern Ireland intangibles credits for the purposes of this Chapter, or

(b) in a case within section 743 of CTA 2009, the total debits previously brought into account for tax purposes under Part 8 of CTA 2009 in respect of the asset so far as they were Northern Ireland intangibles debits for the purposes of this Chapter.

(3) Subsection (4) applies if—

(a) a realisation credit or realisation debit arises under section 736 of CTA 2009 (asset shown in balance sheet and not written down for tax purposes), or

(b) a realisation credit arises under section 738 of CTA 2009 (asset not shown in balance sheet).

(4) The Northern Ireland element of the realisation credit or realisation debit is such proportion of the realisation credit or realisation debit as can on a just and reasonable basis be attributed to the holding of the asset for the purposes of the relevant Northern Ireland trade.

(5) This section does not apply to a realisation credit if section 357OG (cases involving roll-over relief) applies.

(6) In this section “the relevant Northern Ireland trade” means the qualifying trade carried on by the company in an accounting period in which it was a Northern Ireland company, except so far as the trade consists of an excluded activity.

357OG Northern Ireland element: credits where roll-over relief involved U.K.

(1) This section applies if a realisation credit relates to an asset (“the new asset”) whose cost recognised for tax purposes is reduced as a result of roll-over relief previously given on the realisation of another asset (“the old asset”).

(2) To calculate the Northern Ireland element of the realisation credit on the realisation of the new asset, take the following steps—

• Step 1 Calculate the part (if any) of the realisation credit that is attributable to the total net debits in respect of the new asset.

• Step 2 Calculate the Northern Ireland element of the result of Step 1 by applying to it the proportion that the total net Northern Ireland debits bears to the total net debits.

• Step 3 If the realisation credit exceeds the total net debits, calculate any part of the excess that is attributable to the reduction in the cost of the new asset recognised for tax purposes that resulted from the roll-over relief.

• Step 4 If, in the absence of roll-over relief, a proportion of the realisation credit on the realisation of the old asset would in accordance with section 357OF have been a Northern Ireland element, calculate the Northern Ireland element of the result of Step 3 by applying that proportion to it.

• Step 5 If any remaining amount of the realisation credit has not been attributed under Step 1 or 3, calculate the Northern Ireland element of that remaining amount by determining how much of that remaining amount can on a just and reasonable basis be attributed to the holding of the new asset for the purposes of the relevant Northern Ireland trade.

(3) The Northern Ireland element of the realisation credit is the total of the Northern Ireland elements calculated at Steps 2, 4 and 5.

(4) In this section—

• “the relevant Northern Ireland trade” means the qualifying trade carried on by the company in an accounting period in which it was a Northern Ireland company, except so far as the trade consists of an excluded activity;

• “the total net debits” means—

  (a)

  in a case within section 742 of CTA 2009, the total debits previously brought into account for tax purposes under Part 8 of CTA 2009 in respect of the asset, less the total credits previously so brought into account (if any), or

  (b)

  in a case within section 743 of CTA 2009, the total debits previously brought into account for tax purposes under Part 8 of CTA 2009 in respect of the asset;

• “the total net Northern Ireland debits” has the meaning given by section 357OF(2).

Pre-commencement assets U.K.

357OH Pre-commencement asset U.K.

(1) An intangible fixed asset is a “pre-commencement asset” if it was created before the commencement day.

(2) “The commencement day” has the meaning given by section 5(4) of the Corporation Tax (Northern Ireland) Act 2015.

(3) Subsections (1) and (2) have effect for the purposes of this Chapter.

(4) The general rule is that intangible fixed assets are treated for the purposes of subsection (1) as having been created before the commencement day if they were held (by the company or another person) at any time before that day.

(5) The general rule is subject to the following provisions—

(a) section 357OI (goodwill);

(b) section 357OJ (assets representing production expenditure on films).

357OI Goodwill U.K.

For the purposes of section 357OH(1) (pre-commencement asset), goodwill is treated as created—

(a) before the commencement day in a case in which the business in question was carried on by the company or any other person at any time before that day, and

(b) on or after the commencement day in any other case.

357OJ Assets representing production expenditure on films U.K.

(1) In determining for the purposes of section 357OH(1) (pre-commencement asset) whether an asset representing production expenditure on a film was created before the commencement day or on or after that day, the asset is treated as created when the film is completed.

(2) In this section—

(a) “completed” has the same meaning as in Part 15 of CTA 2009 (see section 1181(5) of that Act),

(b) “film” has the same meaning as in that Part (see section 1181 of that Act), and

(c) “production expenditure” has the same meaning as in that Part (see section 1184 of that Act).

357OK Fungible assets U.K.

(1) This section and section 357OL have effect for the purposes of this Chapter in relation to assets to which section 858 of CTA 2009 (treatment of fungible assets) applies.

(2) Section 858 of CTA 2009 applies as if—

(a) pre-commencement assets, and

(b) intangible fixed assets that are not pre-commencement assets,

were assets of different kinds.

(3) If section 858 of CTA 2009 applies (whether or not it is a case where subsection (2) has effect)—

(a) a single asset comprising pre-commencement assets is treated as itself being a pre-commencement asset, and

(b) a single asset comprising intangible fixed assets that are not pre-commencement assets is treated as itself being an asset which is not a pre-commencement asset.

357OL Realisation and acquisition of fungible assets U.K.

(1) Subsection (2) applies if—

(a) a company realises a fungible asset, and

(b) apart from section 357OK(2), the asset would be treated as part of a single asset comprising both pre-commencement assets and assets that are not pre-commencement assets.

(2) The realisation is treated as diminishing the single asset of the company comprising pre-commencement assets in priority to diminishing the single asset of the company comprising assets that are not pre-commencement assets.

(3) Fungible assets acquired by a company that would not otherwise be treated as pre-commencement assets are so treated so far as they are identified, in accordance with the following rules, with pre-commencement assets realised by the company.

(4) Rule 1 is that assets acquired are identified with pre-commencement assets of the same kind realised by the company within the period beginning 30 days before and ending 30 days after the date of the acquisition.

(5) The reference in subsection (4) to assets “of the same kind” is to assets that are, or but for section 357OK(2) would be, treated as part of a single asset because of section 858 of CTA 2009.

(6) Rule 2 is that assets realised earlier are identified before assets realised later.

(7) Rule 3 is that assets acquired earlier are identified before assets acquired later.

(8) In this section—

• “fungible asset” means an intangible fixed asset to which section 858 of CTA 2009 applies;

• “realisation”, in relation to a fungible asset, has the same meaning as in Part 8 of CTA 2009 (see sections 734 and 856 of that Act).

Assets treated as pre-commencement assets U.K.

357OM Assets whose value derives from pre-commencement assets U.K.

(1) This section applies if—

(a) on or after the commencement day a company (“the acquiring company”) acquires an intangible fixed asset (“the acquired asset”) from a person (“the transferor”),

(b) the acquired asset is created on or after the commencement day,

(c) the value of the acquired asset derives in whole or in part from any other asset (“the other asset”), and

(d) the other asset meets the pre-commencement status conditions.

(2) In the hands of the acquiring company the acquired asset is treated for the purposes of this Chapter as a pre-commencement asset so far as its value derives from the other asset.

(3) If only part of the value of the acquired asset derives from the other asset, this Chapter has effect as if there were separate assets representing the part that does so derive and the part that does not so derive.

(4) For the purposes of this section the cases in which the value of an asset may be derived from any other asset include any case where—

(a) assets have been merged or divided,

(b) assets have changed their nature, or

(c) rights or interests in or over assets have been created or extinguished.

(5) Section 357ON supplements this section.

357ON The pre-commencement status conditions U.K.

(1) For the purposes of section 357OM(1) the other asset meets the pre-commencement status conditions if—

(a) it was created before the commencement day, or

(b) on or after the commencement day the other asset has been a pre-commencement asset in the hands of the transferor or any other person.

(2) Any apportionment necessary for the purposes of section 357OM(3) must be made on a just and reasonable basis.

(3) Sections 357OH(4), 357OI and 357OJ (provisions explaining when assets are treated as created) apply for the purposes of section 357OM as they apply for the purposes of section 357OH(1).

(4) Expressions used in this section have the same meaning as in section 357OM.

357OO Assets acquired in connection with disposals of pre-commencement assets U.K.

(1) This section applies if—

(a) a person disposes of an asset which—

(i) in the case of an intangible fixed asset, is a pre-commencement asset, or

(ii) in the case of any other asset, was created before the commencement day, and

(b) a company acquires an intangible fixed asset directly or indirectly in consequence of the disposal or otherwise in connection with it.

(2) The acquired asset is treated for the purposes of this Chapter as a pre-commencement asset in the company's hands.

(3) For the purposes of this section a person “disposes of” an asset if—

(a) for the purposes of TCGA 1992, the person makes a part disposal of the asset or any other disposal of it,

(b) in the case of an intangible fixed asset, there is for the purposes of Part 8 of CTA 2009 a realisation of the asset, or

(c) the person grants a licence in respect of the asset.

(4) For the purposes of this section it does not matter whether—

(a) the asset that the person disposes of is the same asset as the acquired asset,

(b) the acquired asset is acquired at the time of the disposal, or

(c) the acquired asset is acquired by merging assets or otherwise.

Interpretation U.K.

357OP Interpretation of Chapter U.K.

In this Chapter—

• “the commencement day” has the meaning given by section 357OH(2);

• “the Northern Ireland element”, in relation to a realisation credit or realisation debit, is to be read in accordance with section 357OE;

• “Northern Ireland intangibles credits” means credits brought into account under Part 8 of CTA 2009 that are in accordance with section 357OB(2)(a) or (3) or section 357OC(2) Northern Ireland intangibles credits;

• “Northern Ireland intangibles debits” means debits brought into account under Part 8 of CTA 2009 that are in accordance with section 357OB(2)(b) or (4) or section 357OC(3) Northern Ireland intangibles debits;

• “pre-commencement asset” has the meaning given by section 357OH;

• “realisation credit” and “realisation debit” are to be read in accordance with section 357OD;

• “roll-over relief” has the meaning given by section 357OE.

CHAPTER 9 U.K. Research and development expenditure

Introductory U.K.

357P Introduction and interpretation U.K.

(1) This Chapter makes provision about the operation of—

[F734 (a) Chapter 1A of Part 13 (R&D expenditure credit), and

(b) Chapter 2 of that Part (relief for loss-making, R&D-intensive SMEs).]

F735 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

in relation to expenditure incurred by a company in an accounting period in which it is a Northern Ireland company.

(2) In this Chapter—

(a) “Northern Ireland expenditure” means expenditure incurred in a trade to the extent that the expenditure forms part of the Northern Ireland profits or Northern Ireland losses of the trade;

(b) “qualifying Chapter 2 expenditure” has the same meaning as in Part 13 of CTA 2009 (see section 1051 of that Act);

(c) “Northern Ireland qualifying Chapter 2 expenditure” means so much of any qualifying Chapter 2 expenditure as forms part of the Northern Ireland profits or Northern Ireland losses of a trade;

F736 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F736 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F734 S. 357P(1)(a)(b) substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(a), 16; S.I. 2024/286, reg. 2

F735 S. 357P(1)(c) omitted (with effect in accordance with s. 47(15) of the amending Act) by virtue of Finance Act 2016 (c. 24), s. 47(11)(a)(ii)

F736 S. 357P(2)(d)(e) omitted (with effect in accordance with s. 47(15) of the amending Act) by virtue of Finance Act 2016 (c. 24), s. 47(11)(b)

[F737 Chapter 1A of Part 13] of CTA 2009 U.K.

Textual Amendments

F737 Words in s. 357PA cross-heading substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(b), 16; S.I. 2024/286, reg. 2

357PA R&D expenditure credit F738 ... U.K.

(1) This section applies where—

(a) a company is entitled to an R&D expenditure credit under [F739 Chapter 1A of Part 13] of CTA 2009 (R&D expenditure credits) for an accounting period in relation to a qualifying trade, and

(b) the company is a Northern Ireland company in the period.

(2) The R&D expenditure credit forms part of the mainstream profits or mainstream losses of the trade.

Textual Amendments

F738 Words in s. 357PA heading omitted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by virtue of Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(c)(i), 16; S.I. 2024/286, reg. 2

F739 Words in s. 357PA(1)(a) substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(c)(ii), 16; S.I. 2024/286, reg. 2

Chapter 2 of Part 13 of CTA 2009 U.K.

357PB Additional deduction under section 1044 of CTA 2009 U.K.

(1) This section applies where—

(a) a company is entitled to corporation tax relief under section 1044 of CTA 2009 (additional deduction in calculating profits of a trade) for an accounting period in relation to any qualifying Chapter 2 expenditure,

(b) the company is a Northern Ireland company in the period, and

(c) some or all of the qualifying Chapter 2 expenditure is Northern Ireland qualifying Chapter 2 expenditure.

(2) Section 1044(8) of CTA 2009 (amount of additional deduction) has effect, in relation to the Northern Ireland qualifying Chapter 2 expenditure, as if the percentage specified in that provision were the adjusted percentage.

(3) For the purposes of this section “the adjusted percentage” means—

where—

A is the percentage specified in section 1044(8) of CTA 2009;

MR is the main rate for the financial year in which the expenditure is incurred;

NIR is the Northern Ireland rate for the financial year in which the expenditure is incurred.

(4) So much of the additional deduction under section 1044 of CTA 2009 as is (by virtue of this section) calculated by reference to the adjusted percentage forms part of Northern Ireland profits or Northern Ireland losses of the trade.

357PC Tax credit under section 1054 of CTA 2009: entitlement U.K.

(1) Section 1055 of CTA 2009 (meaning of “Chapter 2 surrenderable loss”) does not apply to a company in relation to a qualifying trade it carries on in an accounting period in which it is a Northern Ireland company (and the following provisions of this section apply instead).

(2) The company has a Chapter 2 surrenderable loss in the period for the purposes of Chapter 2 of Part 13 of CTA 2009 if—

(a) it obtains an additional deduction under section 1044 of CTA 2009 in the accounting period in calculating the profits of the trade, and

(b) it has—

(i) a Northern Ireland loss of the trade in the period, or

(ii) a mainstream loss of the trade in the period.

(3) In this Chapter—

(a) “Northern Ireland Chapter 2 surrenderable loss” means a Chapter 2 surrenderable loss that a company has by virtue of subsection (2)(b)(i);

(b) “mainstream Chapter 2 surrenderable loss” means a Chapter 2 surrenderable loss that a company has by virtue of subsection (2)(b)(ii).

(4) The amount of a Northern Ireland Chapter 2 surrenderable loss is—

(a) so much of the Northern Ireland loss in question as is unrelieved, or

(b) if less, the Northern Ireland qualifying Chapter 2 expenditure in respect of which the relief was obtained, multiplied by the adjusted section 1044 percentage.

(5) The amount of a mainstream Chapter 2 surrenderable loss is—

(a) so much of the mainstream loss in question as is unrelieved, or

(b) if less, the qualifying Chapter 2 expenditure in respect of which the relief was obtained that is not Northern Ireland qualifying Chapter 2 expenditure, multiplied by the percentage specified in section 1055(2)(b) of CTA 2009.

(6) For the purposes of this section “the adjusted section 1044 percentage” means—

where—

A is percentage specified in section 1044(8) of CTA 2009;

MR is the main rate for the financial year in which the expenditure is incurred;

NIR is the Northern Ireland rate for the financial year in which the expenditure is incurred.

(7) Section 1056 of CTA 2009 (amount of trading loss which is unrelieved) applies for the purposes of this section.

(8) In the application of section 1056 of CTA 2009 by virtue of subsection (7), subsection (2)(c) of that section has effect as if the reference to any loss surrendered under Part 5 of CTA 2010 were—

(a) where the trading loss in question is a Northern Ireland loss, to any of that Northern Ireland loss surrendered under that Part;

(b) where the trading loss in question is a mainstream loss, to any of that mainstream loss surrendered under that Part.

357PD Tax credit under section 1054 of CTA 2009: amount of tax credit U.K.

(1) Section 1058(1) of CTA 2009 (amount of tax credit) does not apply to a company in relation to a qualifying trade it carries on in an accounting period in which it is a Northern Ireland company (and the following provisions of this section apply instead).

[F740 (2) The amount of the R&D tax credit to which the company is entitled for the accounting period is, where the company has a Northern Ireland Chapter 2 surrenderable loss but does not have a mainstream Chapter 2 surrenderable loss, the lesser of—

(a) the amount of the Northern Ireland Chapter 2 surrenderable loss multiplied by the relevant percentage, and

(b) the amount [F741 of the cap by reference to the company’s PAYE and NIC liabilities for the accounting period].

F742 (2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F743 (3) The amount of the R&D tax credit to which the company is entitled for the accounting period is, where the company has a mainstream Chapter 2 surrenderable loss but does not have a Northern Ireland Chapter 2 surrenderable loss, the lesser of—

(a) the amount of the mainstream Chapter 2 surrenderable loss multiplied by the percentage specified in section 1058(1)(a) of CTA 2009, and

(b) the amount [F744 of the cap by reference to the company’s PAYE and NIC liabilities for the accounting period].

F745 (3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(4) The amount of the R&D tax credit to which the company is entitled for the accounting period is, where the company has both a Northern Ireland Chapter 2 surrenderable loss and a mainstream Chapter 2 surrenderable loss, the [F746 lesser of—

(a) the sum of—

(i) the amount of the Northern Ireland Chapter 2 surrenderable loss multiplied by the relevant percentage, and

(ii) the amount of the mainstream Chapter 2 surrenderable loss multiplied by the percentage specified in section 1058(1)(a) of CTA 2009, and

(b) the amount [F747 of the cap by reference to the company’s PAYE and NIC liabilities for the accounting period].]

F748 (4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) For the purposes of this section “the relevant percentage” means—

where—

A is the percentage specified in section 1058(1)(a) of CTA 2009;

B is the percentage specified in section 1044(8) of CTA 2009;

C is the adjusted section 1044 percentage as defined by section 357PC(6).

[F749 (6) Sections 1112B to 1112E of CTA 2009 (determination of cap by reference to PAYE and NIC liabilities) apply for the purposes of subsections (2)(b), (3)(b) and (4)(b) as they apply for the purposes of section 1058(1) of CTA 2009.]

Textual Amendments

F740 S. 357PD(2)(2A) substituted for s. 357PD(2) (10.6.2021) by Finance Act 2021 (c. 26), Sch. 4 para. 2

F741 Words in s. 357PD(2)(b) substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(d)(i), 16; S.I. 2024/286, reg. 2

F742 S. 357PD(2A) omitted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by virtue of Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(d)(ii), 16; S.I. 2024/286, reg. 2

F743 S. 357PD(3)(3A) substituted for s. 357PD(3) (10.6.2021) by Finance Act 2021 (c. 26), Sch. 4 para. 3

F744 Words in s. 357PD(3)(b) substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(d)(i), 16; S.I. 2024/286, reg. 2

F745 S. 357PD(3A) omitted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by virtue of Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(d)(ii), 16; S.I. 2024/286, reg. 2

F746 S. 357PD(4)(a)(b) and words substituted (10.6.2021) by Finance Act 2021 (c. 26), Sch. 4 para. 4

F747 Words in s. 357PD(4)(b) substituted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(d)(i), 16; S.I. 2024/286, reg. 2

F748 S. 357PD(4A) omitted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by virtue of Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(d)(ii), 16; S.I. 2024/286, reg. 2

F749 S. 357PD(6) inserted (1.4.2024 with effect in relation to accounting periods beginning on or after that date) by Finance Act 2024 (c. 3), Sch. 1 paras. 13(4)(d)(iii), 16; S.I. 2024/286, reg. 2

357PE Restriction on losses carried forward where tax credit claimed U.K.

(1) Section 1062(2) and (3) of CTA 2009 (restriction on losses carried forward where tax credit claimed) do not apply to a company in relation to a qualifying trade it carries on in an accounting period in which it is a Northern Ireland company (and the following provisions of this section apply instead).

(2) For the purposes of section 45 of CTA 2010 (relief for trading losses against future trading profits)—

(a) if the company has a Northern Ireland loss in the accounting period, that loss is treated as reduced by the amount of the surrendered Northern Ireland loss for the period, and

(b) if the company has a mainstream loss in the accounting period, that loss is treated as reduced by the amount of the surrendered mainstream loss for the period.

(3) For the purposes of this section—

(a) the “amount of the surrendered Northern Ireland loss” for the period means the amount of the Northern Ireland Chapter 2 surrenderable loss in respect of which the company claims an R&D tax credit for the period, and

(b) the “amount of the surrendered mainstream loss” for the period means the amount of the mainstream Chapter 2 surrenderable loss in respect of which the company claims an R&D tax credit for the period.

Chapter 7 of Part 13 of CTA 2009 U.K.

F750 357PF Additional deduction under section 1087 of CTA 2009 U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F750 S. 357PF omitted (with effect in accordance with s. 47(15) of the amending Act) by virtue of Finance Act 2016 (c. 24), s. 47(12)

CHAPTER 10 U.K. Remediation of contaminated or derelict land

Introductory U.K.

357Q Introduction and interpretation U.K.

(1) This Chapter makes provision about the operation of Part 14 of CTA 2009 (remediation of contaminated or derelict land) in relation to expenditure incurred by a company in an accounting period in which it is a Northern Ireland company.

(2) In this Chapter—

(a) “Northern Ireland expenditure” means expenditure incurred in a trade to the extent that the expenditure forms part of the Northern Ireland profits or Northern Ireland losses of the trade;

(b) “qualifying land remediation expenditure” has the same meaning as in Part 14 of CTA 2009 (see section 1144 of that Act);

(c) “Northern Ireland qualifying land remediation expenditure” means so much of any qualifying land remediation expenditure as forms part of the Northern Ireland profits or Northern Ireland losses of a trade.

Additional deduction under section 1149 of CTA 2009 U.K.

357QA Additional deduction U.K.

(1) This section applies where—

(a) a company is entitled to corporation tax relief under section 1149 of CTA 2009 (additional deduction for qualifying land remediation expenditure) for an accounting period in relation to any qualifying land remediation expenditure,

(b) the company is a Northern Ireland company in the period, and

(c) some or all of the qualifying land remediation expenditure is Northern Ireland qualifying land remediation expenditure.

(2) Section 1149(8) of CTA 2009 (amount of additional deduction) has effect, in relation to the Northern Ireland qualifying land remediation expenditure, as if the percentage specified in that provision were the adjusted percentage.

(3) For the purposes of this section “the adjusted percentage” means—

where—

A is the percentage specified in section 1149(8) of CTA 2009;

MR is the main rate for the financial year in which the expenditure is incurred;

NIR is the Northern Ireland rate for the financial year in which the expenditure is incurred.

(4) So much of the additional deduction under section 1149 of CTA 2009 as is (by virtue of this section) calculated by reference to the adjusted percentage forms part of the Northern Ireland profits or Northern Ireland losses of the trade.

Tax credit under section 1151 of CTA 2009 U.K.

357QB Tax credit: entitlement U.K.

(1) Section 1152 of CTA 2009 (meaning of “qualifying land remediation loss”) does not apply to a company in relation to a qualifying trade it carries on in an accounting period in which it is a Northern Ireland company (and the following provisions of this section apply instead).

(2) The company has a qualifying land remediation loss in the period for the purposes of Chapter 3 of Part 14 of CTA 2009 if—

(a) it obtains an additional deduction under section 1149 of CTA 2009 in the accounting period in calculating the profits of the trade, and

(b) it has—

(i) a Northern Ireland loss of the trade in the period, or

(ii) a mainstream loss of the trade in the period.

(3) In this Chapter—

(a) “Northern Ireland qualifying land remediation loss” means a qualifying land remediation loss that a company has by virtue of subsection (2)(b)(i);

(b) “mainstream qualifying land remediation loss” means a qualifying land remediation loss that a company has by virtue of subsection (2)(b)(ii).

(4) The amount of a Northern Ireland qualifying land remediation loss is—

(a) so much of the Northern Ireland loss in question as is unrelieved, or

(b) if less, the Northern Ireland qualifying land remediation expenditure in respect of which the relief was obtained, multiplied by the adjusted section 1152 percentage.

(5) The amount of a mainstream qualifying land remediation loss is—

(a) so much of the mainstream loss in question as is unrelieved, or

(b) if less, the qualifying land remediation expenditure in respect of which the relief was obtained that is not Northern Ireland qualifying [F751 land remediation] expenditure, multiplied by the percentage specified in section 1152(2)(b) of CTA 2009.

(6) For the purposes of this section “the adjusted section 1152 percentage” means—

where—

A is percentage specified in section 1149(8) of CTA 2009;

MR is the main rate for the financial year in which the expenditure is incurred;

NIR is the Northern Ireland rate for the financial year in which the expenditure is incurred.

(7) Section 1153 of CTA 2009 (amount of trading loss which is unrelieved) applies for the purposes of this section.

(8) In the application of section 1153 of CTA 2009 by virtue of subsection (7), subsection (1)(c) of that section has effect as if the reference to any loss surrendered under Part 5 of CTA 2010 were—

(a) where the trading loss in question is a Northern Ireland loss, to any of that Northern Ireland loss surrendered under that Part;

(b) where the trading loss in question is a mainstream loss, to any of that mainstream loss surrendered under that Part.

Textual Amendments

F751 Words in s. 357QB(5)(b) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 27

357QC Tax credit: amount of tax credit U.K.

(1) Section 1154(1) of CTA 2009 (amount of tax credit) does not apply to a company in relation to a qualifying trade it carries on in an accounting period in which it is a Northern Ireland company (and the following provisions of this section apply instead).

(2) The amount of the land remediation tax credit to which the company is entitled for the accounting period is, where the company—

(a) has a Northern Ireland qualifying land remediation loss, but

(b) does not have a mainstream qualifying land remediation loss,

the amount of the loss mentioned in paragraph (a) multiplied by the relevant percentage.

(3) The amount of the land remediation tax credit to which the company is entitled for the accounting period is, where the company—

(a) has a mainstream qualifying land remediation loss, but

(b) does not have a Northern Ireland qualifying land remediation loss,

the amount of the loss mentioned in paragraph (a) multiplied by the percentage specified in section 1154(1) of CTA 2009.

(4) The amount of the land remediation tax credit to which the company is entitled for the accounting period is, where the company has both a Northern Ireland qualifying land remediation loss and a mainstream qualifying land remediation loss, the sum of—

(a) the amount of the Northern Ireland qualifying land remediation loss multiplied by the relevant percentage, and

(b) the amount of the mainstream qualifying land remediation loss multiplied by the percentage specified in section 1154(1) of CTA 2009.

(5) For the purposes of this section “the relevant percentage” means—

where—

A is the percentage specified in section 1154(1) of CTA 2009;

B is the percentage specified in section 1149(8) of CTA 2009;

C is the adjusted section 1152 percentage as defined by section 357QB(6).

357QD Restriction on losses carried forward where tax credit claimed U.K.

(1) In section 1158 of CTA 2009 (restriction on losses carried forward where tax credit claimed), subsection (2) and subsection (5) so far as applying for the purposes of subsection (2) do not apply to a company in relation to a qualifying trade it carries on in an accounting period in which it is a Northern Ireland company (and the following provisions of this section apply instead).

(2) If the company in the accounting period—

(a) claims a land remediation tax credit to which it is entitled, and

(b) has a Northern Ireland loss,

that loss is treated for the purposes of section 45 of CTA 2010 (relief for trading losses against future trading profits) as reduced by the amount of the surrendered Northern Ireland loss for the period.

(3) If the company in the accounting period—

(a) claims a land remediation tax credit to which it is entitled, and

(b) has a mainstream loss,

that loss is treated for the purposes of section 45 of CTA 2010 as reduced by the amount of the surrendered mainstream loss for the period.

(4) For the purposes of this section—

(a) the “amount of the surrendered Northern Ireland loss” for the period means the amount of the Northern Ireland qualifying land remediation loss in respect of which the company claims a tax credit for the period, and

(b) the “amount of the surrendered mainstream loss” for the period means the amount of the mainstream qualifying land remediation loss in respect of which the company claims a tax credit for the period.

[F752 Chapter 10A U.K. Films, television programmes and video games qualifying for expenditure credit

Textual Amendments

F752 Pt. 8B Ch. 10A inserted (22.2.2024) by Finance Act 2024 (c. 3), Sch. 2 para. 6(4) (with Sch. 2 paras. 16(1), 17-25)

Introduction U.K.

357QE Application and interpretation U.K.

(1) This Chapter makes provision about the interaction between this Part and Part 14A of CTA 2009 (films, television programmes and video games).

(2) This Chapter applies if—

(a) a company is a Northern Ireland company in an accounting period,

(b) the company is treated under Part 14A of CTA 2009 as carrying on a separate trade in that period (see 1179B of that Act), and

(c) that trade is a qualifying trade.

(3) References in this Chapter to “the Northern Ireland company”, “the accounting period” and “the separate trade” are to be read accordingly.

Expenditure credit U.K.

357QF Expenditure credit to count towards mainstream profits or losses U.K.

(1) Subsection (2) applies if, under section 1179CB of CTA 2009 (expenditure credit under Part 14A of CTA 2009 to be taxable receipt), the Northern Ireland company brings an amount of audiovisual expenditure credit or video game expenditure credit into account in calculating the profits of the separate trade for the accounting period.

(2) The amount is to form part of the mainstream profits or mainstream losses of the trade for that period.

Losses of separate trade U.K.

357QG Carrying forward of production losses U.K.

(1) If the accounting period is a pre-completion period within the meaning of section 1179BF of CTA 2009 (carrying forward of production losses in separate trade), that section applies in relation to the separate trade and that accounting period subject to the following provisions.

(2) In subsection (1) of that section, the reference to a loss is to be read as a reference to—

(a) any Northern Ireland losses, or

(b) any mainstream losses;

and the rest of that section is to be read accordingly.

(3) Subsection (4) applies if the Northern Ireland company has in the accounting period—

(a) both Northern Ireland losses of the separate trade and mainstream profits of that trade, or

(b) both mainstream losses of the separate trade and Northern Ireland profits of that trade.

(4) The company may, despite section 1179BF(2) of CTA 2009, claim under section 37 (relief for trade losses against total profits) for—

(a) relief for those Northern Ireland losses against those mainstream profits, or

(b) relief for those mainstream losses against those Northern Ireland profits.

357QH Transfer of terminal loss U.K.

(1) Subsection (2) applies if—

(a) the Northern Ireland company ceases to carry on the separate trade in the accounting period,

(b) as a result, section 1179BG of CTA 2009 (transfer of terminal loss in separate production trade to other production or group company) applies, and

(c) the amount in respect of which it applies (see subsection (1)(b) of that section) represents a Northern Ireland loss.

(2) The references to a loss in subsections (2) and (3)(b) of that section are to be read as references to a Northern Ireland loss.]

CHAPTER 11 U.K. Film tax relief

Introductory U.K.

357R Introduction and interpretation U.K.

(1) This Chapter makes provision about the operation of Part 15 of CTA 2009 (film tax relief) in relation to expenditure incurred by a company in an accounting period in which it is a Northern Ireland company.

(2) In this Chapter—

(a) “Northern Ireland expenditure” means expenditure incurred in a trade to the extent that the expenditure forms part of the Northern Ireland profits or Northern Ireland losses of the trade;

(b) “the separate film trade” has the same meaning as in Chapter 3 of Part 15 of CTA 2009 (see section 1195(5) of that Act);

(c) “qualifying expenditure” has the same meaning as in that Chapter (see section 1199(3) of that Act).

(3) References in Part 15 of CTA 2009 to “film tax relief” include relief under this Chapter.

Film tax relief U.K.

357RA Northern Ireland additional deduction U.K.

(1) In this Chapter “a Northern Ireland additional deduction” means so much of a deduction under section 1199 of CTA 2009 (additional deduction for qualifying expenditure) as is calculated by reference to qualifying expenditure that is Northern Ireland expenditure.

(2) A Northern Ireland additional deduction forms part of the Northern Ireland profits or Northern Ireland losses of the separate film trade.

357RB Northern Ireland supplementary deduction U.K.

(1) This section applies where—

(a) a company is entitled under section 1199 of CTA 2009 to an additional deduction in calculating the profit or loss of the separate film trade in an accounting period,

(b) the company is a Northern Ireland company in the period,

(c) the additional deduction is wholly or partly a Northern Ireland additional deduction, and

(d) any of the following conditions is met—

(i) the company does not have a surrenderable loss in the accounting period;

(ii) the company has a surrenderable loss in the accounting period, but does not make a claim under section 1201 of CTA 2009 (film tax credit claimable if company has surrenderable loss) for the period;

(iii) the company has a surrenderable loss in the accounting period and makes a claim under that section for the period, but the amount of Northern Ireland losses surrendered on the claim is less than the Northern Ireland additional deduction.

(2) The company is entitled to make another deduction (“a Northern Ireland supplementary deduction”) in respect of qualifying expenditure.

(3) See section 357RC for provision about the amount of the Northern Ireland supplementary deduction.

(4) The Northern Ireland supplementary deduction—

(a) is made in calculating the profit or loss of the separate film trade, and

(b) forms part of the Northern Ireland profits or Northern Ireland losses of the separate film trade.

(5) In this section “surrenderable loss” has the meaning given by section 1201 of CTA 2009.

357RC Northern Ireland supplementary deduction: amount U.K.

(1) This section contains provision for the purposes of section 357RB(2) about the amount of the Northern Ireland supplementary deduction.

(2) If the accounting period falls within only one financial year, the amount of the Northern Ireland supplementary deduction is—

where—

A is the amount of the Northern Ireland additional deduction brought into account in the accounting period;

B is the amount of Northern Ireland losses surrendered in any claim under section 1201 of CTA 2009 for the accounting period;

MR is the main rate for the financial year;

NIR is the Northern Ireland rate for the financial year.

(3) If the accounting period falls within more than one financial year, the amount of the Northern Ireland supplementary deduction is determined by taking the following steps.

• Step 1 Calculate, for each financial year, the amount that would be the Northern Ireland supplementary deduction for the accounting period if it fell within only that financial year (see subsection (2)).

• Step 2 Multiply each amount calculated under step 1 by the proportion of the accounting period that falls within the financial year for which it is calculated.

• Step 3 Add together each amount found under step 2.

357RD Film tax credit: Northern Ireland supplementary deduction ignored U.K.

For the purpose of determining the available loss of a company under section 1201 of CTA 2009 (film tax credit claimable if company has surrenderable loss) for any accounting period, any Northern Ireland supplementary deduction made by the company in the period (and any Northern Ireland supplementary deduction made in any previous accounting period) is to be ignored.

357RE Artificially inflated claims for additional deduction U.K.

Section 1205(1)(a) and (2)(a) of CTA 2009 (artificially inflated claims for additional deduction or film tax credit) has effect as if references to an additional deduction under Chapter 3 of Part 15 of that Act included a Northern Ireland supplementary deduction under this Chapter.

Film losses U.K.

357RF Restriction on use of losses while film is in production U.K.

(1) Section 1209 of CTA 2009 (restriction on use of losses while film is in production) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the separate film trade in a pre-completion period is, if the company is a Northern Ireland company in that period, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in [F753 subsections (2) and (3)] of that section are to be read accordingly.

(3) Subsection (4) applies if a Northern Ireland company has, in a pre-completion period—

(a) both Northern Ireland losses of the trade and mainstream profits of the trade, or

(b) both mainstream losses of the trade and Northern Ireland profits of the trade.

(4) The company may make a claim under section 37 (relief for trade losses against total profits) for relief for the losses mentioned in subsection (3)(a) or (b).

(5) But relief on such a claim is available only—

(a) in the case of a claim for relief for Northern Ireland losses, against mainstream profits of the trade of the same period;

(b) in the case of a claim for relief for mainstream losses, against Northern Ireland profits of the trade of the same period.

(6) In this section “a pre-completion period” has the same meaning as in section 1209 of CTA 2009 (see section 1208(2) of that Act).

Textual Amendments

F753 Words in s. 357RF(2) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 98

357RG Use of losses in later periods U.K.

(1) Section 1210 of CTA 2009 (restriction on use of losses in later periods) has effect subject as follows.

(2) The reference in subsection (2) of that section to a loss made in the separate film trade is, in relation to a loss made in a period in which the company is a Northern Ireland company, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (3) and (6) of that section are to be read accordingly.

(3) The reference in subsection (4) of that section to a loss made in the separate film trade in a relevant later period is, where the company is a Northern Ireland company in the period, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (5) [F754 , (5A)] and (6) of that section are to be read accordingly.

(4) Subsection (6) of that section has effect, in relation to Northern Ireland losses, as if the reference to an additional deduction under Chapter 3 of Part 15 of that Act included a reference to a Northern Ireland supplementary deduction under this Chapter.

Textual Amendments

F754 Words in s. 357RG(3) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 99

357RH Terminal losses U.K.

(1) Section 1211 of CTA 2009 (terminal losses) has effect subject as follows.

(2) Where—

(a) a company makes an election under subsection (3) of that section (election to treat terminal loss as loss brought forward of different trade) in relation to all or part of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.

(3) Where—

(a) a company makes a claim under subsection (6) of that section (claim to treat terminal loss as loss brought forward by different company) in relation to part or all of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.

CHAPTER 12 U.K. Television production

Introductory U.K.

357S Introduction and interpretation U.K.

(1) This Chapter makes provision about the operation of Part 15A of CTA 2009 (television production) in relation to expenditure incurred by a company in an accounting period in which it is a Northern Ireland company.

(2) In this Chapter—

(a) “Northern Ireland expenditure” means expenditure incurred in a trade to the extent that the expenditure forms part of the Northern Ireland profits or Northern Ireland losses of the trade;

(b) “the separate programme trade” has the same meaning as in Chapter 3 of Part 15A of CTA 2009 (see section 1216C(6) of that Act);

(c) “qualifying expenditure” has the same meaning as in that Chapter (see section 1216CF(3) of that Act).

(3) References in Part 15A of CTA 2009 to “television tax relief” include relief under this Chapter.

Television tax relief U.K.

357SA Northern Ireland additional deduction U.K.

(1) In this Chapter “a Northern Ireland additional deduction” means so much of a deduction under section 1216CF of CTA 2009 (additional deduction for qualifying expenditure) as is calculated by reference to qualifying expenditure that is Northern Ireland expenditure.

(2) A Northern Ireland additional deduction forms part of the Northern Ireland profits or Northern Ireland losses of the separate programme trade.

357SB Northern Ireland supplementary deduction U.K.

(1) This section applies where—

(a) a company is entitled under section 1216CF of CTA 2009 to an additional deduction in calculating the profit or loss of the separate programme trade in an accounting period,

(b) the company is a Northern Ireland company in the period,

(c) the additional deduction is wholly or partly a Northern Ireland additional deduction, and

(d) any of the following conditions is met—

(i) the company does not have a surrenderable loss in the accounting period;

(ii) the company has a surrenderable loss in the accounting period, but does not make a claim under section 1216CH of CTA 2009 (television tax credit claimable if company has surrenderable loss) for the period;

(iii) the company has a surrenderable loss in the accounting period and makes a claim under that section for the period, but the amount of Northern Ireland losses surrendered on the claim is less than the Northern Ireland additional deduction.

(2) The company is entitled to make another deduction (“a Northern Ireland supplementary deduction”) in respect of qualifying expenditure.

(3) See section 357SC for provision about the amount of the Northern Ireland supplementary deduction.

(4) The Northern Ireland supplementary deduction—

(a) is made in calculating the profit or loss of the separate programme trade, and

(b) forms part of the Northern Ireland profits or Northern Ireland losses of the separate programme trade.

(5) In this section “surrenderable loss” has the meaning given by section 1216CH of CTA 2009.

357SC Northern Ireland supplementary deduction: amount U.K.

(1) This section contains provision for the purposes of section 357SB(2) about the amount of the Northern Ireland supplementary deduction.

(2) If the accounting period falls within only one financial year, the amount of the Northern Ireland supplementary deduction is—

where—

A is the amount of the Northern Ireland additional deduction brought into account in the accounting period;

B is the amount of Northern Ireland losses surrendered in any claim under section 1216CH of CTA 2009 for the accounting period;

MR is the main rate for the financial year;

NIR is the Northern Ireland rate for the financial year.

(3) If the accounting period falls within more than one financial year, the amount of the Northern Ireland supplementary deduction is determined by taking the following steps.

• Step 1 Calculate, for each financial year, the amount that would be the Northern Ireland supplementary deduction for the accounting period if it fell within only that financial year (see subsection (2)).

• Step 2 Multiply each amount calculated under step 1 by the proportion of the accounting period that falls within the financial year for which it is calculated.

• Step 3 Add together each amount found under step 2.

357SD Tax credit: Northern Ireland supplementary deduction ignored U.K.

For the purpose of determining the available loss of a company under section 1216CH of CTA 2009 (television tax credit claimable if company has surrenderable loss) for any accounting period, any Northern Ireland supplementary deduction made by the company in the period (and any Northern Ireland supplementary deduction made in any previous accounting period) is to be ignored.

357SE Artificially inflated claims for additional deduction U.K.

Section 1216CL(1)(a) and (2)(a) of CTA 2009 (artificially inflated claims for additional deduction or tax credit) has effect as if references to an additional deduction under Chapter 3 of Part 15A of that Act included a Northern Ireland supplementary deduction under this Chapter.

Programme losses U.K.

357SF Restriction on use of losses while programme in production U.K.

(1) Section 1216DA of CTA 2009 (restriction on use of losses while programme in production) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the separate programme trade in a pre-completion period is, if the company is a Northern Ireland company in that period, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in [F755 subsections (2) and (3)] of that section are to be read accordingly.

(3) Subsection (4) applies if a Northern Ireland company has, in a pre-completion period—

(a) both Northern Ireland losses of the trade and mainstream profits of the trade, or

(b) both mainstream losses of the trade and Northern Ireland profits of the trade.

(4) The company may make a claim under section 37 (relief for trade losses against total profits) for relief for the losses mentioned in subsection (3)(a) or (b).

(5) But relief on such a claim is available only—

(a) in the case of a claim for relief for Northern Ireland losses, against mainstream profits of the trade of the same period;

(b) in the case of a claim for relief for mainstream losses, against Northern Ireland profits of the trade of the same period.

(6) In this section “a pre-completion period” has the same meaning as in section 1216DA of CTA 2009 (see section 1216D(2) of that Act).

Textual Amendments

F755 Words in s. 357SF(2) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 100

357SG Use of losses in later periods U.K.

(1) Section 1216DB of CTA 2009 (use of losses in later periods) has effect subject as follows.

(2) The reference in subsection (2) of that section to a loss made in the separate programme trade is, in relation to a loss made in a period in which the company is a Northern Ireland company, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (3) and (6) of that section are to be read accordingly.

(3) The reference in subsection (4) of that section to a loss made in the separate programme trade in a relevant later period is, where the company is a Northern Ireland company in the period, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (5)[F756 , (5A)] and (6) of that section are to be read accordingly.

(4) Subsection (6) of that section has effect, in relation to Northern Ireland losses, as if the reference to an additional deduction under Chapter 3 of Part 15A of that Act included a reference to a Northern Ireland supplementary deduction under this Chapter.

Textual Amendments

F756 Word in s. 357SG(3) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 101

357SH Terminal losses U.K.

(1) Section 1216DC of CTA 2009 (terminal losses) has effect subject as follows.

(2) Where—

(a) a company makes an election under subsection (3) of that section (election to treat terminal loss as loss brought forward of different trade) in relation to all or part of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.

(3) Where—

(a) a company makes a claim under subsection (6) of that section (claim to treat terminal loss as loss brought forward by different company) in relation to part or all of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.

CHAPTER 13 U.K. Video games development

Introductory U.K.

357T Introduction and interpretation U.K.

(1) This Chapter makes provision about the operation of Part 15B of CTA 2009 (video games development) in relation to expenditure incurred by a company in an accounting period in which it is a Northern Ireland company.

(2) In this Chapter—

(a) “Northern Ireland expenditure” means expenditure incurred in a trade to the extent that the expenditure forms part of the Northern Ireland profits or Northern Ireland losses of the trade;

(b) “the separate video game trade” has the same meaning as in Chapter 3 of Part 15B of CTA 2009 (see section 1217C(6) of that Act);

(c) “qualifying expenditure” has the same meaning as in that Chapter (see section 1217CF(3) of that Act).

(3) References in Part 15B of CTA 2009 to “video games tax relief” include relief under this Chapter.

Video games tax relief U.K.

357TA Northern Ireland additional deduction U.K.

(1) In this Chapter “a Northern Ireland additional deduction” means so much of a deduction under section 1217CF of CTA 2009 (additional deduction for qualifying expenditure) as is calculated by reference to qualifying expenditure that is Northern Ireland expenditure.

(2) A Northern Ireland additional deduction forms part of the Northern Ireland profits or Northern Ireland losses of the separate video game trade.

357TB Northern Ireland supplementary deduction U.K.

(1) This section applies where—

(a) a company is entitled under section 1217CF of CTA 2009 to an additional deduction in calculating the profit or loss of the separate video game trade in an accounting period,

(b) the company is a Northern Ireland company in the period,

(c) the additional deduction is wholly or partly a Northern Ireland additional deduction, and

(d) any of the following conditions is met—

(i) the company does not have a surrenderable loss in the accounting period;

(ii) the company has a surrenderable loss in the accounting period, but does not make a claim under section 1217CH of CTA 2009 (video game tax credit claimable if company has surrenderable loss) for the period;

(iii) the company has a surrenderable loss in the accounting period and makes a claim under that section for the period, but the amount of Northern Ireland losses surrendered on the claim is less than the Northern Ireland additional deduction.

(2) The company is entitled to make another deduction (“a Northern Ireland supplementary deduction”) in respect of qualifying expenditure.

(3) See section 357TC for provision about the amount of the Northern Ireland supplementary deduction.

(4) The Northern Ireland supplementary deduction—

(a) is made in calculating the profit or loss of the separate video game trade, and

(b) forms part of the Northern Ireland profits or Northern Ireland losses of the separate video game trade.

(5) In this section “surrenderable loss” has the meaning given by section 1217CH of CTA 2009.

357TC Northern Ireland supplementary deduction: amount U.K.

(1) This section contains provision for the purposes of section 357TB(2) about the amount of the Northern Ireland supplementary deduction.

(2) If the accounting period falls within only one financial year, the amount of the Northern Ireland supplementary deduction is—

where—

A is the amount of the Northern Ireland additional deduction brought into account in the accounting period;

B is the amount of Northern Ireland losses surrendered in any claim under section 1217CH of CTA 2009 for the accounting period;

MR is the main rate for the financial year;

NIR is the Northern Ireland rate for the financial year.

(3) If the accounting period falls within more than one financial year, the amount of the Northern Ireland supplementary deduction is determined by taking the following steps.

• Step 1 Calculate, for each financial year, the amount that would be the Northern Ireland supplementary deduction for the accounting period if it fell within only that financial year (see subsection (2)).

• Step 2 Multiply each amount calculated under step 1 by the proportion of the accounting period that falls within the financial year for which it is calculated.

• Step 3 Add together each amount found under step 2.

357TD Tax credit: Northern Ireland supplementary deduction ignored U.K.

For the purpose of determining the available loss of a company under section 1217CH of CTA 2009 (video game tax credit claimable if company has surrenderable loss) for any accounting period, any Northern Ireland supplementary deduction made by the company in the period (and any Northern Ireland supplementary deduction made in any previous accounting period) is to be ignored.

357TE Artificially inflated claims for additional deduction U.K.

Section 1217CL(1)(a) and (2)(a) of CTA 2009 (artificially inflated claims for additional deduction or film tax credit) has effect as if references to an additional deduction under Chapter 3 of Part 15B of that Act included a Northern Ireland supplementary deduction under this Chapter.

Video game losses U.K.

357TF Restriction on use of losses while video game in development U.K.

(1) Section 1217DA of CTA 2009 (restriction on use of losses while video game in development) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the separate video game trade in a pre-completion period is, if the company is a Northern Ireland company in that period, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in [F757 subsections (2) and (3)] of that section are to be read accordingly.

(3) Subsection (4) applies if a Northern Ireland company has, in a pre-completion period—

(a) both Northern Ireland losses of the trade and mainstream profits of the trade, or

(b) both mainstream losses of the trade and Northern Ireland profits of the trade.

(4) The company may make a claim under section 37 (relief for trade losses against total profits) for relief for the losses mentioned in subsection (3)(a) or (b).

(5) But relief on such a claim is available only—

(a) in the case of a claim for relief for Northern Ireland losses, against mainstream profits of the trade of the same period;

(b) in the case of a claim for relief for mainstream losses, against Northern Ireland profits of the trade of the same period.

(6) In this section “a pre-completion period” has the same meaning as in section 1217DA of CTA 2009 (see section 1217D(2) of that Act).

Textual Amendments

F757 Words in s. 357TF(2) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 102

357TG Use of losses in later periods U.K.

(1) Section 1217DB of CTA 2009 (use of losses in later periods) has effect subject as follows.

(2) The reference in subsection (2) of that section to a loss made in the separate video game trade is, in relation to a loss made in a period in which the company is a Northern Ireland company, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (3) and (6) of that section are to be read accordingly.

(3) The reference in subsection (4) of that section to a loss made in the separate video game trade in a relevant later period is, where the company is a Northern Ireland company in the period, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (5)[F758 , (5A)] and (6) of that section are to be read accordingly.

(4) Subsection (6) of that section has effect, in relation to Northern Ireland losses, as if the reference to an additional deduction under Chapter 3 of Part 15B of that Act included a reference to a Northern Ireland supplementary deduction under this Chapter.

Textual Amendments

F758 Word in s. 357TG(3) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 103

357TH Terminal losses U.K.

(1) Section 1217DC of CTA 2009 (terminal losses) has effect subject as follows.

(2) Where—

(a) a company makes an election under subsection (3) of that section (election to treat terminal loss as loss brought forward of different trade) in relation to all or part of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.

(3) Where—

(a) a company makes a claim under subsection (6) of that section (claim to treat terminal loss as loss brought forward by different company) in relation to part or all of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.

CHAPTER 14 U.K. Theatrical productions

Introductory U.K.

357U Introduction and interpretation U.K.

(1) This Chapter makes provision about the operation of Part 15C of CTA 2009 (theatrical productions) in relation to expenditure incurred by a company in an accounting period in which it is a Northern Ireland company.

(2) In this Chapter—

(a) “Northern Ireland expenditure” means expenditure incurred in a trade to the extent that the expenditure forms part of the Northern Ireland profits or Northern Ireland losses of the trade;

(b) “the separate theatrical trade” has the same meaning as in Part 15C of CTA 2009 (see section 1217I of that Act);

(c) “qualifying expenditure” has the same meaning as in that Part (see section 1217JA of that Act).

Tax relief for theatrical productions U.K.

357UA Northern Ireland additional deduction U.K.

(1) In this Chapter “a Northern Ireland additional deduction” means so much of a deduction under section 1217H of CTA 2009 (claim for additional deduction) as is calculated by reference to qualifying expenditure that is Northern Ireland expenditure.

(2) A Northern Ireland additional deduction forms part of the Northern Ireland profits or Northern Ireland losses of the separate theatrical trade.

357UB Northern Ireland supplementary deduction U.K.

(1) This section applies where—

(a) a company is entitled under section 1217H of CTA 2009 to an additional deduction in calculating the profit or loss of the separate theatrical trade in an accounting period,

(b) the company is a Northern Ireland company in the period,

(c) the additional deduction is wholly or partly a Northern Ireland additional deduction, and

(d) any of the following conditions is met—

(i) the company does not have a surrenderable loss in the accounting period;

(ii) the company has a surrenderable loss in the accounting period, but does not make a claim under section 1217K of CTA 2009 (theatre tax credit claimable if company has surrenderable loss) for the period;

(iii) the company has a surrenderable loss in the accounting period and makes a claim under that section for the period, but the amount of Northern Ireland losses surrendered on the claim is less than the Northern Ireland additional deduction.

(2) The company is entitled to make another deduction (“a Northern Ireland supplementary deduction”) in respect of qualifying expenditure.

(3) See section 357UC for provision about the amount of the Northern Ireland supplementary deduction.

(4) The Northern Ireland supplementary deduction—

(a) is made in calculating the profit or loss of the separate theatrical trade, and

(b) forms part of the Northern Ireland profits or Northern Ireland losses of the separate theatrical trade.

(5) In this section “surrenderable loss” has the meaning given by section 1217KA of CTA 2009.

357UC Northern Ireland supplementary deduction: amount U.K.

(1) This section contains provision for the purposes of section 357UB(2) about the amount of the Northern Ireland supplementary deduction.

(2) If the accounting period falls within only one financial year, the amount of the Northern Ireland supplementary deduction is—

where—

A is the amount of the Northern Ireland additional deduction brought into account in the accounting period;

B is the amount of Northern Ireland losses surrendered in any claim under section 1217K of CTA 2009 for the accounting period;

MR is the main rate for the financial year;

NIR is the Northern Ireland rate for the financial year.

(3) If the accounting period falls within more than one financial year, the amount of the Northern Ireland supplementary deduction is determined by taking the following steps.

• Step 1 Calculate, for each financial year, the amount that would be the Northern Ireland supplementary deduction for the accounting period if it fell within only that financial year (see subsection (2)).

• Step 2 Multiply each amount calculated under step 1 by the proportion of the accounting period that falls within the financial year for which it is calculated.

• Step 3 Add together each amount found under step 2.

357UD Tax credit: Northern Ireland supplementary deduction ignored U.K.

For the purpose of determining the available loss of a company under section 1217KA of CTA 2009 (amount of surrenderable loss) for any accounting period, any Northern Ireland supplementary deduction made by the company in the period (and any Northern Ireland supplementary deduction made in any previous accounting period) is to be ignored.

357UE Transactions not entered into for genuine commercial reasons U.K.

Section 1217LB of CTA 2009 (transactions not entered into for genuine commercial reasons) has effect as if the reference in subsection (2)(a) to an additional deduction under Part 15C of that Act included a reference to a Northern Ireland supplementary deduction under this Chapter.

Use of losses U.K.

357UF Restriction on use of losses before completion period U.K.

(1) Section 1217MA of CTA 2009 (restriction on use of losses before completion period) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the separate theatrical trade in an accounting period preceding the completion period is, if the company is a Northern Ireland company in that period, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in [F759 subsections (2) and (3)] of that section are to be read accordingly.

(3) Subsection (4) applies if a Northern Ireland company has, in an accounting period preceding the completion period—

(a) both Northern Ireland losses of the trade and mainstream profits of the trade, or

(b) both mainstream losses of the trade and Northern Ireland profits of the trade.

(4) The company may make a claim under section 37 (relief for trade losses against total profits) for relief for the losses mentioned in subsection (3)(a) or (b).

(5) But relief on such a claim is available only—

(a) in the case of a claim for relief for Northern Ireland losses, against mainstream profits of the trade of the same period;

(b) in the case of a claim for relief for mainstream losses, against Northern Ireland profits of the trade of the same period.

(6) In this section “the completion period” has the same meaning as in section 1217MA of CTA 2009 (see section 1217M(2) of that Act).

Textual Amendments

F759 Words in s. 357UF(2) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 104

357UG Use of losses in the completion period U.K.

(1) Section 1217MB of CTA 2009 (use of losses in the completion period) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the separate theatrical trade is, in relation to a loss made in a period in which the company is a Northern Ireland company, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (2) and (4) of that section are to be read accordingly.

(3) The references in subsection (3) of that section to a loss made in the separate theatrical trade in the completion period are, where the company is a Northern Ireland company in the period, references to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsection (4) of that section are to be read accordingly.

(4) Subsection (4) of that section has effect, in relation to Northern Ireland losses, as if the reference to an additional deduction under section 1217H of CTA 2009 included a reference to a Northern Ireland supplementary deduction under this Chapter.

357UH Terminal losses U.K.

(1) Section 1217MC of CTA 2009 (terminal losses) has effect subject as follows.

(2) Where—

(a) a company makes an election under subsection (2) of that section (election to treat terminal loss as loss brought forward of different trade) in relation to all or part of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

subsection (3) of that section has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.

(3) Where—

(a) a company makes a claim under subsection (6) of that section (claim to treat terminal loss as loss brought forward by different company) in relation to part or all of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.

Provisional entitlement to relief U.K.

357UI Provisional entitlement to relief U.K.

Section 1217N(3) of CTA 2009 (provisional entitlement to relief: definition of “the relieving provisions”) has effect as if the reference to section 1217H of CTA 2009 included section 357UB of this Act.

[F760 CHAPTER 14A U.K. Orchestra tax relief

Textual Amendments

F760 Pt. 8B Ch. 14A inserted (with effect in accordance with Sch. 8 para. 18(1) of the amending Act) by Finance Act 2016 (c. 24), Sch. 8 para. 14

Introductory U.K.

357UJ Introduction and interpretation U.K.

(1) This Chapter makes provision about the operation of Part 15D of CTA 2009 (orchestra tax relief) in relation to expenditure incurred by a company in an accounting period in which it is a Northern Ireland company.

(2) In this Chapter—

(a) “Northern Ireland expenditure” means expenditure incurred in a trade to the extent that the expenditure forms part of the Northern Ireland profits or Northern Ireland losses of the trade;

(b) the “separate orchestral trade” has the same meaning as in Part 15D of CTA 2009 (see section 1217Q(6) of that Act);

(c) “qualifying expenditure” has the same meaning as in Chapter 3 of that Part (see section 1217RF of that Act).

(3) References in Part 15D of CTA 2009 to “orchestra tax relief” include relief under this Chapter.

Orchestra tax relief U.K.

357UK Northern Ireland additional deduction U.K.

(1) In this Chapter “a Northern Ireland additional deduction” means so much of a deduction under section 1217RD of CTA 2009 (claim for additional deduction) as is calculated by reference to qualifying expenditure that is Northern Ireland expenditure.

(2) A Northern Ireland additional deduction forms part of the Northern Ireland profits or Northern Ireland losses of the separate orchestral trade.

357UL Northern Ireland supplementary deduction U.K.

(1) This section applies where—

(a) a company is entitled under section 1217RD of CTA 2009 to an additional deduction in calculating the profit or loss of the separate orchestral trade in an accounting period,

(b) the company is a Northern Ireland company in the period,

(c) the additional deduction is wholly or partly a Northern Ireland additional deduction, and

(d) any of the following conditions is met—

(i) the company does not have a surrenderable loss in the accounting period;

(ii) the company has a surrenderable loss in the accounting period, but does not make a claim under section 1217RG of CTA 2009 (orchestra tax credit claimable if company has surrenderable loss) for the period;

(iii) the company has a surrenderable loss in the accounting period and makes a claim under that section for the period, but the amount of Northern Ireland losses surrendered on the claim is less than the Northern Ireland additional deduction.

(2) The company is entitled to make another deduction (“a Northern Ireland supplementary deduction”) in respect of qualifying expenditure.

(3) See section 357UM for provision about the amount of the Northern Ireland supplementary deduction.

(4) The Northern Ireland supplementary deduction—

(a) is made in calculating the profit or loss of the separate orchestral trade, and

(b) forms part of the Northern Ireland profits or Northern Ireland losses of the separate orchestral trade.

(5) In this section “surrenderable loss” has the meaning given by section 1217RH of CTA 2009.

357UM Northern Ireland supplementary deduction: amount U.K.

(1) This section contains provision for the purposes of section 357UL(2) about the amount of the Northern Ireland supplementary deduction.

(2) If the accounting period falls within only one financial year, the amount of the Northern Ireland supplementary deduction is—

where—

A is the amount of the Northern Ireland additional deduction brought into account in the accounting period;

B is the amount of Northern Ireland losses surrendered in any claim under section 1217RG of CTA 2009 for the accounting period;

MR is the main rate for the financial year;

NIR is the Northern Ireland rate for the financial year.

(3) If the accounting period falls within more than one financial year, the amount of the Northern Ireland supplementary deduction is determined by taking the following steps.

• Step 1 Calculate, for each financial year, the amount that would be the Northern Ireland supplementary deduction for the accounting period if it fell within only that financial year (see subsection (2)).

• Step 2 Multiply each amount calculated under step 1 by the proportion of the accounting period that falls within the financial year for which it is calculated.

• Step 3 Add together each amount found under step 2.

357UN Orchestra tax credit: Northern Ireland supplementary deduction ignored U.K.

For the purpose of determining the available loss of a company under section 1217RH of CTA 2009 (amount of surrenderable loss) for any accounting period, any Northern Ireland supplementary deduction made by the company in the period (and any Northern Ireland supplementary deduction made in any previous accounting period) is to be ignored.

Losses of separate orchestral trade U.K.

357UO Restriction on use of losses before completion period U.K.

(1) Section 1217SA of CTA 2009 (restriction on use of losses before completion period) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the separate orchestral trade in an accounting period preceding the completion period is, if the company is a Northern Ireland company in that period, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in [F761 subsections (2) and (3)] of that section are to be read accordingly.

(3) Subsection (4) applies if a Northern Ireland company has, in an accounting period preceding the completion period—

(a) both Northern Ireland losses of the trade and mainstream profits of the trade, or

(b) both mainstream losses of the trade and Northern Ireland profits of the trade.

(4) The company may make a claim under section 37 (relief for trade losses against total profits) for relief for the losses mentioned in subsection (3)(a) or (b).

(5) But relief on such a claim is available only—

(a) in the case of a claim for relief for Northern Ireland losses, against mainstream profits of the trade of the same period;

(b) in the case of a claim for relief for mainstream losses, against Northern Ireland profits of the trade of the same period.

(6) In this section “the completion period” has the same meaning as in section 1217SA of CTA 2009 (see section 1217S(2) of that Act).

Textual Amendments

F761 Words in s. 357UO(2) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 105

357UP Use of losses in the completion period U.K.

(1) Section 1217SB of CTA 2009 (use of losses in the completion period) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the separate orchestral trade is, in relation to a loss made in a period in which the company is a Northern Ireland company, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (2) and (4) of that section are to be read accordingly.

(3) The references in subsection (3) of that section to a loss made in the separate orchestral trade in the completion period are, where the company is a Northern Ireland company in the period, references to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsection (4) of that section are to be read accordingly.

(4) Subsection (4) of that section has effect, in relation to Northern Ireland losses, as if the reference to an additional deduction under Chapter 3 of Part 15D of CTA 2009 included a reference to a Northern Ireland supplementary deduction under this Chapter.

357UQ Terminal losses U.K.

(1) Section 1217SC of CTA 2009 (terminal losses) has effect subject as follows.

(2) Where—

(a) a company makes an election under subsection (3) of that section (election to treat terminal loss as loss brought forward of different trade) in relation to all or part of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.

(3) Where—

(a) a company makes a claim under subsection (6) of that section (claim to treat terminal loss as loss brought forward by different company) in relation to part or all of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.]

[F762 CHAPTER 14B U.K. Museums and galleries exhibition tax relief

Textual Amendments

F762 Pt. 8B Ch. 14B inserted (with effect in accordance with Sch. 6 para. 20 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 6 para. 17

Introductory U.K.

357UR Introduction and interpretation U.K.

(1) This Chapter makes provision about the operation of Part 15E of CTA 2009 (museums and galleries exhibition tax relief) in relation to expenditure incurred by a company in an accounting period in which it is a Northern Ireland company.

(2) In this Chapter—

(a) “Northern Ireland expenditure” means expenditure incurred in a trade to the extent that the expenditure forms part of the Northern Ireland profits or Northern Ireland losses of the trade;

(b) “the separate exhibition trade” has the same meaning as in Part 15E of CTA 2009 (see section 1218ZB(3) of that Act);

(c) “qualifying expenditure” has the same meaning as in Chapter 3 of that Part (see section 1218ZCG of that Act).

(3) References in Part 15E of CTA 2009 to “museums and galleries exhibition tax relief” include relief under this Chapter.

Museums and galleries exhibition tax relief U.K.

357US Northern Ireland additional deduction U.K.

(1) In this Chapter “a Northern Ireland additional deduction” means so much of a deduction under section 1218ZCE of CTA 2009 (claim for additional deduction) as is calculated by reference to qualifying expenditure that is Northern Ireland expenditure.

(2) A Northern Ireland additional deduction forms part of the Northern Ireland profits or Northern Ireland losses of the separate exhibition trade.

357UT Northern Ireland supplementary deduction U.K.

(1) This section applies where—

(a) a company is entitled under section 1218ZCE of CTA 2009 to an additional deduction in calculating the profit or loss of the separate exhibition trade in an accounting period,

(b) the company is a Northern Ireland company in the period,

(c) the additional deduction is wholly or partly a Northern Ireland additional deduction, and

(d) any of the following conditions is met—

(i) the company does not have a surrenderable loss in the accounting period;

(ii) the company has a surrenderable loss in the accounting period, but does not make a claim under section 1218ZCH of CTA 2009 (museums and galleries exhibition tax credit claimable if company has surrenderable loss) for the period;

(iii) the company has a surrenderable loss in the accounting period and makes a claim under that section for the period, but the amount of Northern Ireland losses surrendered on the claim is less than the Northern Ireland additional deduction.

(2) The company is entitled to make another deduction (“a Northern Ireland supplementary deduction”) in respect of qualifying expenditure.

(3) See section 357UU for provision about the amount of the Northern Ireland supplementary deduction.

(4) The Northern Ireland supplementary deduction—

(a) is made in calculating the profit or loss of the separate exhibition trade, and

(b) forms part of the Northern Ireland profits or Northern Ireland losses of the separate exhibition trade.

(5) In this section “surrenderable loss” has the meaning given by section 1218ZCI of CTA 2009.

357UU Northern Ireland supplementary deduction: amount U.K.

(1) This section contains provision for the purposes of section 357UT(2) about the amount of the Northern Ireland supplementary deduction.

(2) If the accounting period falls within only one financial year, the amount of the Northern Ireland supplementary deduction is—

where—

A is the amount of the Northern Ireland additional deduction brought into account in the accounting period;

B is the amount of Northern Ireland losses surrendered in any claim under section 1218ZCH of CTA 2009 for the accounting period;

MR is the main rate for the financial year;

NIR is the Northern Ireland rate for the financial year.

(3) If the accounting period falls within more than one financial year, the amount of the Northern Ireland supplementary deduction is determined by taking the following steps.

• Step 1 Calculate, for each financial year, the amount that would be the Northern Ireland supplementary deduction for the accounting period if it fell within only that financial year (see subsection (2)).

• Step 2 Multiply each amount calculated under step 1 by the proportion of the accounting period that falls within the financial year for which it is calculated.

• Step 3 Add together each amount found under step 2.

357UV Museums and galleries exhibition tax credit: Northern Ireland supplementary deduction ignored U.K.

For the purpose of determining the available loss of a company under section 1218ZCI of CTA 2009 (amount of surrenderable loss) for any accounting period, any Northern Ireland supplementary deduction made by the company in the period (and any Northern Ireland supplementary deduction made in any previous accounting period) is to be ignored.

Losses of separate exhibition trade U.K.

357UW Restriction on use of losses before completion period U.K.

(1) Section 1218ZDA of CTA 2009 (restriction on use of losses before completion period) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the separate exhibition trade in an accounting period preceding the completion period is, if the company is a Northern Ireland company in that period, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (2) and (3) of that section are to be read accordingly.

(3) Subsection (4) applies if a Northern Ireland company has, in an accounting period preceding the completion period—

(a) both Northern Ireland losses of the trade and mainstream profits of the trade, or

(b) both mainstream losses of the trade and Northern Ireland profits of the trade.

(4) The company may make a claim under section 37 (relief for trade losses against total profits) for relief for the losses mentioned in subsection (3)(a) or (b).

(5) But relief on such a claim is available only—

(a) in the case of a claim for relief for Northern Ireland losses, against mainstream profits of the trade of the same period;

(b) in the case of a claim for relief for mainstream losses, against Northern Ireland profits of the trade of the same period.

(6) In this section “the completion period” has the same meaning as in section 1218ZDA of CTA 2009 (see section 1218ZD(2) of that Act).

357UX Use of losses in the completion period U.K.

(1) Section 1218ZDB of CTA 2009 (use of losses in the completion period) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the separate exhibition trade is, in relation to a loss made in a period in which the company is a Northern Ireland company, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (2) and (4) of that section are to be read accordingly.

(3) The references in subsection (3) of that section to a loss made in the separate exhibition trade in the completion period are, where the company is a Northern Ireland company in the period, references to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsection (4) of that section are to be read accordingly.

(4) Subsection (4) of that section has effect, in relation to Northern Ireland losses, as if the reference to an additional deduction under Chapter 3 of Part 15E of CTA 2009 included a reference to a Northern Ireland supplementary deduction under this Chapter.

357UY Terminal losses U.K.

(1) Section 1218ZDC of CTA 2009 (terminal losses) has effect subject as follows.

(2) Where—

(a) a company makes an election under subsection (3) of that section (election to treat terminal loss as loss brought forward of different trade) in relation to all or part of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.

(3) Where—

(a) a company makes a claim under subsection (6) of that section (claim to treat terminal loss as loss brought forward by different company) in relation to part or all of a terminal loss, and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.]

CHAPTER 15 U.K. Profits arising from the exploitation of patents etc

Introductory U.K.

357V Introductory U.K.

(1) This Chapter makes provision about the operation of Part 8A (profits arising from the exploitation of patents etc) in relation to an accounting period in which a company is a Northern Ireland company.

(2) If a company—

(a) has made an election under section 357A (election for special treatment of profits from patents etc) with respect to a trade of the company in relation to an accounting period, and

(b) is a Northern Ireland company in that period,

Part 8A has effect subject to the provisions of this Chapter.

(3) In this Chapter “the relevant period” means the accounting period mentioned in subsection (2).

Modification of deduction U.K.

357VA Modification of section 357A U.K.

(1) Section 357A(2) has effect as if the reference to allowing a deduction to be made in calculating for corporation tax purposes the profits of the trade for the period were a reference to allowing a mainstream deduction and a Northern Ireland deduction to be made in accordance with this section.

(2) The mainstream deduction is to be calculated in accordance with section 357A(3), but as if in the formula in that provision “RP” referred to the relevant mainstream IP profits of the trade.

(3) The relevant mainstream IP profits of the trade are so much of the relevant IP profits of the trade of the company as are not by virtue of section 357VB or 357VC relevant Northern Ireland IP profits of the trade.

(4) The amount of the Northern Ireland deduction is—

where—

RNIP is the relevant Northern Ireland IP profits of the company, as determined under section 357VB or 357VC,

NIR is the Northern Ireland rate of corporation tax, and

IPR is the special IP rate of corporation tax specified in section 357A(4).

(5) The Northern Ireland deduction is allowed only if in the relevant period, or part of the relevant period, the Northern Ireland rate is higher than the special IP rate of corporation tax.

(6) The mainstream deduction—

(a) is made in calculating for corporation tax purposes the profits of the trade for the period, and

(b) is treated as forming part of the mainstream profits or mainstream losses of the trade.

(7) The Northern Ireland deduction—

(a) is made in calculating for corporation tax purposes the profits of the trade for the period, and

(b) is treated as forming part of the Northern Ireland profits or Northern Ireland losses of the trade.

“Relevant Northern Ireland IP profits” U.K.

357VB Relevant Northern Ireland IP profits: SMEs [F763 that are Northern Ireland employers] U.K.

(1) This section applies if—

(a) the company is a Northern Ireland company in the relevant period by virtue of the [F764 SME (Northern Ireland employer) condition] in section 357KA, and

(b) the trade is not an excluded trade.

(2) The company's “relevant Northern Ireland IP profits” are its relevant IP profits of the trade for the period but—

(a) calculated without taking into account any amounts which are—

(i) treated by section 747 of CTA 2009 as receipts or expenses of the trade for the period, but

(ii) do not under section 357OA form part of the Northern Ireland profits or Northern Ireland losses of the trade for the period, and

(b) excluding so much of its relevant IP profits as are attributable to a qualifying IP right or an exclusive licence in respect of a qualifying IP right which (in either case) is held by the company for the purposes of an excluded activity.

Textual Amendments

F763 Words in s. 357VB heading inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 12(2)

F764 Words in s. 357VB(1)(a) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 12(3)

357VC Relevant Northern Ireland IP profits: [F765 SMEs that are not Northern Ireland employers and] large companies U.K.

(1) This section applies if—

(a) the company is a Northern Ireland company in the relevant period by virtue of [F766 the SME (election) condition or] the large company condition in section 357KA, and

(b) the trade is a qualifying trade by virtue of section 357KB(1) (trade other than excluded trade).

(2) The company has “relevant Northern Ireland IP profits” for the period only if IP-related profits that (in accordance with Chapters 6 to 8) form part of its Northern Ireland profits or Northern Ireland losses for the period amount to Northern Ireland profits (rather than losses).

(3) The company's “relevant Northern Ireland profits” for the period are the appropriate proportion of the relevant IP profits.

(4) The “appropriate proportion” is—

where—

NI is so much of the IP-related profits as (in accordance with Chapters 6 to 8) forms part of its Northern Ireland profits;

P is the IP-related profits.

(5) In this section the “IP-related profits” means the profits of the company's trade for the accounting period attributable to—

(a) qualifying IP rights held by the company, or

(b) exclusive licences held by the company in respect of qualifying IP rights.

Textual Amendments

F765 Words in s. 357VC heading inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 13(2)

F766 Words in s. 357VC(1)(a) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 13(3)

Relevant IP losses U.K.

357VD Relevant IP losses U.K.

(1) If any of the set-off provisions prevents section 357A from applying to an amount of relevant IP profits of the trade of the company for the relevant period, sections 357VA to 357VC have effect as if references to the relevant IP profits of the trade were references to the relevant IP profits reduced by that amount.

(2) The “set-off provisions” are—

(a) subsection (3) of section 357EA (effect of set-off amount on company with more than one trade),

(b) subsection (4) of section 357EB (allocation of set-off amount within a group), and

(c) subsection (3) of section 357EC (carry-forward of set-off amount).

Interpretation U.K.

357VE Interpretation of Chapter U.K.

In this Chapter—

• “exclusive licence”, in relation to a right, has the same meaning as in Part 8A (see section 357BA);

• “qualifying IP right” has the same meaning as in Part 8A (see section 357B(4));

• “relevant IP profits”, in relation to the trade of a company, is to be read in accordance with Chapter 3 of Part 8A (but subject to section 357VD);

• “relevant period” has the meaning given by section 357V.

CHAPTER 16 U.K. Northern Ireland profits and losses etc: partnerships

357W Introductory U.K.

(1) This Chapter makes provision under which profits or losses of a trade carried on by a company as a partner in a Northern Ireland firm are—

(a) Northern Ireland profits or losses of the trade,

(b) mainstream profits or losses of the trade, or

(c) a combination of—

(i) profits or losses within paragraph (a), and

(ii) profits or losses within paragraph (b).

(2) This Chapter has effect for the purposes of this Part.

(3) In this Chapter “firm” has the same meaning as in CTA 2009 (see section 1257(1) of that Act).

357WA Meaning of “Northern Ireland firm” U.K.

(1) A firm is a “Northern Ireland firm” in an accounting period of the firm (“the firm's accounting period”) if—

(a) the firm carries on a qualifying partnership trade in the period, and

(b) the [F767 SME (Northern Ireland employer) partnership condition, the SME (election) partnership condition] or the large partnership condition is met.

(2) The “[F768 SME (Northern Ireland employer) partnership condition]” is that the firm—

(a) is an SME in relation to the firm's accounting period, and

(b) is a Northern Ireland employer in relation to that period.

[F769 (2A) The “SME (election) partnership condition” is that—

(a) the firm is an SME in relation to the firm's accounting period,

(b) the firm is not a Northern Ireland employer in relation to that period,

(c) the firm has a NIRE in that period,

(d) the firm is not a disqualified firm in relation to the period, and

(e) an election by the firm for the purposes of this subsection has effect in relation to that period.]

(3) The “large partnership condition” is that the firm—

(a) is not an SME in relation to the firm's accounting period, and

(b) has a NIRE in that period.

[F770 (3A) An election for the purposes of subsection (2A)—

(a) must be made by notice to an officer of Revenue and Customs,

(b) must specify the accounting period in relation to which it is to have effect (“the specified accounting period”),

(c) must be made before the end of the period of 12 months beginning with the end of the specified accounting period, and

(d) if made in accordance with paragraphs (a) to (c) has effect in relation to the specified accounting period.]

(4) In their application [F771 in relation to a firm], the provisions mentioned in subsection (5) have effect as if—

(a) references to a company were to a firm, and

[F772 (b) references to the Northern Ireland workforce conditions were to the Northern Ireland workforce partnership conditions (see section 357WBA).]

(5) The provisions are—

(a) section 357KC (meaning of “SME”);

(b) section 357KD (meaning of “Northern Ireland employer”);

F773 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) Chapter 5 (Northern Ireland regional establishments);

(e) section 1128 of CTA 2009 (meaning of “externally provided worker”).

(6) A reference in this Chapter, in relation to a Northern Ireland firm, to “the firm's trade” is to the trade mentioned in subsection (1).

Textual Amendments

F767 Words in s. 357WA(1)(b) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 14(2)

F768 Words in s. 357WA(2) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 14(3)

F769 S. 357WA(2A) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 14(4)

F770 S. 357WA(3A) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 14(5)

F771 Words in s. 357WA(4) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 14(6)(a)

F772 S. 357WA(4)(b) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 14(6)(b)

F773 S. 357WA(5)(c) omitted (16.11.2017) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 14(7)

357WB Meaning of “qualifying partnership trade” U.K.

(1) “Qualifying partnership trade” means a trade carried on by a firm where the trade is not an excluded trade.

(2) If an election by a firm for the purposes of this subsection has effect, “qualifying partnership trade” also includes a trade carried on by the firm where—

(a) the trade is an excluded trade within—

(i) section 357XB (lending and investment),

(ii) section 357XC (investment management), or

(iii) section 357XE (re-insurance trade), and

(b) the trade includes any back-office activities.

(3) An election for the purposes of subsection (2)—

(a) must be made by notice to an officer of Revenue and Customs,

(b) must specify the first accounting period of the firm (“the specified accounting period”) in relation to which it is to have effect,

(c) must be made before the end of the period of 12 months beginning with the end of the specified accounting period, and

(d) if made in accordance with paragraphs (a) to (c)—

(i) has effect in relation to the specified accounting period and subsequent accounting periods, and

(ii) is irrevocable.

(4) For the meaning of “excluded trade”, and for power to make provision about the meaning of “back-office activities”, see Chapter 17.

[F774 357WBA Northern Ireland workforce partnership conditions U.K.

(1) The Northern Ireland workforce partnership conditions, in relation to a period, are—

(a) that 75% or more of the working time that is spent in the United Kingdom during the period by members of the firm's workforce is spent in Northern Ireland, and

(b) that 75% or more of the firm's workforce expenses that are attributable to working time spent in the United Kingdom during the period by members of the firm's workforce are attributable to time spent in Northern Ireland.

(2) References in this section to members of the firm's workforce are to—

(a) employees of the firm,

(b) externally provided workers in relation to the firm, and

(c) individuals who are partners in the firm.

(3) In subsection (2) “externally provided worker”, in relation to a firm, has the same meaning as in Part 13 of CTA 2009 (see section 1128 of that Act).

In the application of section 1128 of that Act for the purposes of subsection (2), references to a company are to be read as references to a firm and references to a director are to be treated as omitted.

(4) References in this section to the working time spent by members of the firm's workforce in a place are to the total time spent by those persons in that place while providing services to the firm.

(5) References in this section to “the firm's workforce expenses” are, where the period is an accounting period of the firm, to the total of the deductions made by the firm in the period in respect of members of the firm's workforce in calculating the profits of the firm's trade.

(6) References in this section to “the firm's workforce expenses” are, where the period is not an accounting period of the firm, to the total of—

(a) the deductions made by the firm in any accounting period falling wholly within the period, and

(b) the appropriate proportion of the deductions made by the firm in any accounting period falling partly within the period,

in respect of members of the firm's workforce in calculating the profits of the firm's trade.

(7) For the purposes of subsection (6)(b), “the appropriate proportion” is to be determined by reference to the number of days in the periods concerned.

(8) The Commissioners for Her Majesty's Revenue and Customs may by regulations specify descriptions of deduction that are, or are not, to be regarded for the purposes of this section as made in respect of members of a firm's workforce.

(9) Regulations under this section—

(a) may make different provision for different purposes;

(b) may make incidental, supplemental, consequential and transitional provision and savings.

(10) Section 357WBB contains supplementary provision applying for the purposes of this section.

Textual Amendments

F774 Ss. 357WBA-357WBC inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 15

357WBB Section 357WBA: supplementary U.K.

(1) References in section 357WBA or this section to a partner in the firm include any person entitled to a share of income of the firm.

(2) In determining for the purposes of section 357WBA the amount of working time that is spent in any place by a partner in the firm, time spent by the partner in that place is to be included where—

(a) the time is spent by the partner in providing services to a person other than the firm (“the third party”), and

(b) condition A or B is met.

(3) Condition A is that the provision of the services results in a payment being made (whether directly or indirectly) to the firm by—

(a) the third party, or

(b) a person connected with the third party.

(4) Condition B is that—

(a) the firm holds a right that it acquired (whether directly or indirectly) from the partner, and

(b) any payment in connection with that right is made (whether directly or indirectly) to the firm by—

(i) the third party, or

(ii) a person connected with the third party.

(5) Section 1122 (connected persons) applies for the purposes of this section.

(6) References in section 357WBA to deductions made in respect of the members of the firm's workforce in calculating profits of the firm's trade include, in relation to a partner in the firm, the appropriate notional consideration for services provided by the partner (see subsections (7) and (8)).

(7) For the purposes of subsection (6), “the appropriate notional consideration for services” provided by a partner is—

(a) the amount which the partner would receive in consideration for services provided to the firm by the partner during the period in question, were the consideration to be calculated on the basis mentioned in subsection (8), less

(b) any amount actually received in consideration for such services which is not included in the partner's profit share.

(8) The consideration mentioned in subsection (7)(a) is to be calculated on the basis that the partner is not a partner in the firm and is acting at arm's length from the firm.

Textual Amendments

F774 Ss. 357WBA-357WBC inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 15

357WBC “Disqualified firm” U.K.

(1) For the purposes of this Chapter, a firm is a “disqualified firm” in relation to a period if conditions A and B are met.

(2) Condition A is that the firm has a NIRE in the period as a result of tax-avoidance arrangements.

(3) Condition B is that—

(a) 50% or more of the working time that is spent in the United Kingdom during the period by members of the firm's workforce is working time spent by partners otherwise than in Northern Ireland, or

(b) 50% or more of the firm's workforce expenses that are attributable to working time spent in the United Kingdom during the period by members of the firm's workforce are attributable to working time spent by partners otherwise than in Northern Ireland.

(4) For the purposes of this section “tax avoidance arrangements” means arrangements the sole or main purpose of which is to secure that any profits or losses of the firm for the period are Northern Ireland profits or losses.

(5) In subsection (4) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(6) The following provisions apply for the purposes of this section as they apply for the purposes of section 357WBA (Northern Ireland workforce partnership conditions)—

(a) subsections (2) to (5) of that section;

(b) regulations made under that section;

(c) section 357WBB.]

Textual Amendments

F774 Ss. 357WBA-357WBC inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 15

357WC Northern Ireland profits etc of firm determined under Chapter 6 U.K.

(1) This section applies where conditions A and B are met.

(2) Condition A is that a firm is a Northern Ireland firm in an accounting period (“the firm's accounting period”) by virtue of the [F775 SME (Northern Ireland employer) partnership condition] in section 357WA.

(3) Condition B is that a partner in the firm is a company (“the corporate partner”) that is—

(a) within the charge to corporation tax in relation to the firm's trade, and

(b) an SME in relation to an accounting period of the corporate partner which—

(i) is the same as the firm's accounting period, or

(ii) overlaps (to any extent) the firm's accounting period.

(4) Section 357MA (profits or losses of trade that are Northern Ireland profits or losses etc: SMEs)—

(a) applies in relation to the profits or losses of the firm's trade for the firm's accounting period that are determined under section 1259(3) or (4) of CTA 2009 in relation to the corporate partner, but

(b) so applies only for the purpose of allocating (under Part 17 of that Act) a share of those profits or losses to an accounting period within subsection (3)(b).

(5) Further provision under which profits or losses of the firm's trade may in relation to the corporate partner be Northern Ireland profits or losses of the trade or mainstream profits or losses of the trade is contained in—

(a) Chapters 8 and 15, and

(b) CAA 2001 (see section 6E of that Act).

(6) Section 357WH makes further provision about the operation of Part 17 of CTA 2009 in cases in which the profits or losses of the firm's trade determined in relation to the corporate partner are Northern Ireland profits, Northern Ireland losses, mainstream profits or mainstream losses.

Textual Amendments

F775 Words in s. 357WC(2) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 16

357WD Northern Ireland profits etc of firm determined under Chapter 7 U.K.

[F776 (1) This section applies where—

(a) a company (“the corporate partner”) is a partner in a firm at any time during an accounting period of the firm (“the firm's accounting period”) and is within the charge to corporation tax in relation to the firm's trade, and

(b) condition A or B is met.

(2) Condition A is that the firm is a Northern Ireland firm in the firm's accounting period by virtue of the SME (election) partnership condition or the large partnership condition in section 357WA.

(3) Condition B is that—

(a) the firm is a Northern Ireland firm in the firm's accounting period by virtue of the SME (Northern Ireland employer) partnership condition in section 357WA, and

(b) the corporate partner is not an SME in relation to an accounting period of the corporate partner which is the same as, or overlaps (to any extent), the firm's accounting period.]

(4) Section 357NA (profits or losses of trade that are Northern Ireland profits or losses etc: [F777 SMEs that are not Northern Ireland employers and] large companies)—

(a) applies in relation to the profits or losses of the firm's trade for the firm's accounting period that are determined under section 1259(3) or (4) of CTA 2009 in relation to the corporate partner, but

(b) in a case in which condition B is met, so applies only for the purpose of allocating under Part 17 of that Act a share of those profits or losses to an accounting period within subsection (3)(b).

(5) Further provision under which profits or losses of the firm's trade may in relation to the corporate partner be Northern Ireland profits or losses of the trade or mainstream profits or losses of the trade is contained in—

(a) Chapters 8 and 15, and

(b) CAA 2001 (see section 6E of that Act).

(6) Section 357WH makes further provision about the operation of Part 17 of CTA 2009 in cases in which the profits or losses of the firm's trade determined in relation to the corporate partner are Northern Ireland profits, Northern Ireland losses, mainstream profits or mainstream losses.

Textual Amendments

F776 S. 357WD(1)-(3) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 17(2)

F777 Words in s. 357WD(4) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 17(3)

357WE Sections 357WC and 357WD: interpretation U.K.

(1) Section 357MA (profits or losses of trade that are Northern Ireland profits or losses etc: SMEs) as applied by section 357WC(4), and the other provisions of Chapter 6 so far as they apply for the purposes of section 357MA as so applied, have effect as if—

(a) references to the qualifying trade were to the firm's trade;

(b) references to the company were to the firm;

(c) references to the accounting period were to the firm's accounting period;

(d) the reference in section 357MA(1) to a qualifying trade by virtue of section 357KB(1) were to a qualifying partnership trade by virtue of section 357WB(1);

(e) the reference in section 357MA(3) to a qualifying trade by virtue of section 357KB(2) were to a qualifying partnership trade by virtue of section 357WB(2).

F778 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Section 357NA (profits or losses of trade that are Northern Ireland profits or losses etc: large companies) as applied by section 357WD(4), and the other provisions of Chapter 7 so far as they apply for the purposes of section 357NA as so applied, have effect as if—

(a) references to the qualifying trade were to the firm's trade;

(b) references to the company were to the firm;

(c) references to the accounting period were to the firm's accounting period;

(d) in section 357NA(1) the reference to a qualifying trade by virtue of section 357KB(1) were to a qualifying partnership trade by virtue of section 357WB(1),

(e) in section 357NA(3) the reference to a qualifying trade by virtue of section 357KB(2) were to a qualifying partnership trade by virtue of section 357WB(2);

(f) in section 357NF(5), the reference to a UK resident company were to a UK resident firm.

Textual Amendments

F778 S. 357WE(2) omitted (16.11.2017) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 18

357WF Application of section 747 of CTA 2009 to Northern Ireland firm U.K.

Chapter 8 (intangible fixed assets) has effect in relation to a Northern Ireland firm as if—

(a) references to a qualifying trade were to a qualifying partnership trade;

(b) references to a company were to a firm;

(c) references to an accounting period of a company were to an accounting period of a firm;

(d) references to a Northern Ireland company were to a Northern Ireland firm;

(e) references to the [F779 SME (Northern Ireland employer) condition] in section 357KA were to the [F780 SME (Northern Ireland employer) partnership condition] in section 357WA;

[F781 (ea) references to the SME (election) condition in section 357KA were to the SME (election) partnership condition in section 357WA;]

(f) references to the large company condition in section 357KA were to the large partnership condition in section 357WA;

(g) the reference in section 357OB(1)(b) to a qualifying trade by virtue of section 357KB(1) were to a qualifying partnership trade by virtue of section 357WB(1).

Textual Amendments

F779 Words in s. 357WF(e) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 19(2)(a)

F780 Words in s. 357WF(e) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 19(2)(b)

F781 S. 357WF(ea) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 19(3)

357WG Application of Part 8A to Northern Ireland firm U.K.

Chapter 15 (profits arising from the exploitation of patents etc) has effect in relation to a Northern Ireland firm as if—

(a) except in relation to the making of elections under section 357A, references to a company were to the firm,

(b) references to a Northern Ireland company were to a Northern Ireland firm,

(c) references to the trade were to the firm's trade,

(d) the reference in section 357V(2) to an election made by the company were to an election made by a corporate partner as defined by section 357GB(1),

(e) the reference in 357V(2) to Part 8A were to Part 8A so far as relating to the corporate partner which made the election,

(f) references to an accounting period of a company were to an accounting period of the firm,

(g) the reference in section 357VB to the [F782 SME (Northern Ireland employer) condition] in section 357KA were to the [F783 SME (Northern Ireland employer) partnership condition] in section 357WA, and

[F784 (h) references in section 357VC to—

(i) the SME (election) condition in section 357KA were to the SME (election) partnership condition in section 357WA;

(ii) the large company condition in section 357KA were to the large partnership condition in section 357WA;

(iii) a qualifying trade by virtue of section 357KB(1) were to a qualifying partnership trade by virtue of section 357WB(1).]

Textual Amendments

F782 Words in s. 357WG(g) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 20(2)(a)

F783 Words in s. 357WG(g) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 20(2)(b)

F784 S. 357WG(h) substituted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 7 para. 20(3)

357WH Allocation of Northern Ireland profits etc of firm to company U.K.

(1) This section applies where the profits or losses of a firm's trade that are determined under section 1259(3) or (4) of CTA 2009 in relation to a company (“company A”) are—

(a) Northern Ireland profits or losses of the trade,

(b) mainstream profits or losses of the trade, or

(c) a combination of—

(i) profits or losses within paragraph (a), and

(ii) profits or losses within paragraph (b).

(2) Section 1262(1) of CTA 2009 (allocation of firm's profits or losses between partners) applies so as to allocate to company A a share of the profits or losses mentioned in subsection (1)(a) to (c).

For this purpose, in a case within subsection (1)(c), the firm's profit-sharing arrangements are treated as applying separately in relation to each of those profits or losses.

(3) In section 1263 of CTA 2009 (profit-making period in which some partners have losses)—

(a) where subsection (1) of that section applies so that company A's share of the profit of the trade is neither a profit nor a loss, that subsection applies so that company A is treated as having no Northern Ireland profit, no Northern Ireland loss, no mainstream profit and no mainstream loss;

(b) where subsection (2) of that section applies so that company A's share of the profit of the trade is reduced, that subsection applies so that any Northern Ireland profit, Northern Ireland loss, mainstream profit or mainstream loss of company A is reduced by the same proportion.

(4) In section 1264 of CTA 2009 (loss-making period in which some partners have profits)—

(a) where subsection (1) of that section applies so that company A's share of the loss of the trade is neither a profit nor a loss, that subsection applies so that company A is treated as having no Northern Ireland profit, no Northern Ireland loss, no mainstream profit and no mainstream loss;

(b) where subsection (2) of that section applies so that company A's share of the loss of the trade is reduced, that subsection applies so that any Northern Ireland profit, Northern Ireland loss, mainstream profit or mainstream loss of company A is reduced by the same proportion.

CHAPTER 17 U.K. Excluded trades, excluded activities and back-office activities

Introductory U.K.

357X Introduction U.K.

(1) This Chapter makes provision—

(a) specifying trades that are “excluded trades” for the purposes of this Part (see sections 357XA to 357XE), and

(b) specifying activities that are “excluded activities” for the purposes of this Part (see sections 357XF and 357XG).

(2) This Chapter also contains—

(a) a power to alter the meaning of “excluded trade” or “excluded activity” for the purposes of this Part (see section 357XH), and

(b) a power to make provision about the meaning of “back-office activities” for the purposes of this Part (see section 357XI).

Excluded trades U.K.

357XA Oil activities U.K.

(1) A trade is an “excluded trade” if it is a ring fence trade.

(2) In this section “ring fence trade” has the same meaning as in Part 8 (oil activities) (see section 277).

357XB Lending and investment U.K.

(1) A trade is an “excluded trade” if it consists of or includes—

(a) a lending activity, or

(b) a relevant regulated activity.

(2) But a trade is not an “excluded trade” by virtue of subsection (1) where it is carried on by an insurance company (within the meaning given by section 65 of FA 2012).

(3) In this section “lending activity” means—

(a) lending of money, including consumer credit, mortgage credit, factoring (with or without recourse), and financing of commercial transactions (including forfeiting),

(b) finance leasing (as lessor),

(c) issuing and administering means of payment,

(d) provision of guarantees or commitments to provide money,

(e) money transmission services,

(f) provision of alternative finance arrangements, or

(g) other activities carried on in connection with activities falling within any of paragraphs (a) to (f).

(4) In this section “relevant regulated activity” means an activity which is a regulated activity for the purposes of FISMA 2000 by virtue of any of the following provisions of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544)—

(a) article 5 (accepting deposits),

(b) article 14 (dealing in investments as principal),

(c) article 21 (dealing in investments as agent),

(d) article 25 (arranging deals in investments),

(e) article 40 (safeguarding and administering investments), and

(f) article 61 (entering into regulated mortgage contracts).

357XC Investment management U.K.

(1) A trade is an “excluded trade” if it consists of or includes portfolio management, or risk management, in relation to—

(a) a UCITS, or

(b) an AIF.

(2) In subsection (1)—

[F785 (a) “UCITS” means—

(i) a UCITS within the meaning given by section 236A of the Financial Services and Markets Act 2000; or

(ii) an undertaking established in Gibraltar which is a UCITS under the law of Gibraltar which implemented Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities;]

(b) “AIF” has the meaning given in regulation 3 of the Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773).

Textual Amendments

F785 S. 357XC(2)(a) substituted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 17(6) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

357XD Insurance: long-term business U.K.

A trade is an “excluded trade” if it consists of or includes long-term business (within the meaning given by section 63(1) of FA 2012).

357XE Re-insurance trade U.K.

(1) A trade is an “excluded trade” if it consists of re-insurance.

(2) In this Part “re-insurance” includes retrocession.

Excluded activities U.K.

357XF Re-insurance activity U.K.

The activity of effecting or carrying out re-insurance contracts is an “excluded activity”.

357XG Exploration and exploitation of UK sector of continental shelf U.K.

(1) An activity is an “excluded activity” if it is—

(a) an exploration or exploitation activity, or

(b) an activity carried on in connection with exploration or exploitation rights.

(2) In this section—

• “exploration or exploitation activity” means an activity carried on in connection with the exploration or exploitation of so much of the sea-bed and subsoil and their natural resources as is situated in the UK sector of the continental shelf;

• “exploration or exploitation rights” means rights to assets to be produced by exploration or exploitation activities or to interests in or to the benefit of such assets;

• “the UK sector of the continental shelf” means the areas designated by Order in Council under section 1(7) of the Continental Shelf Act 1964.

Powers U.K.

357XH Power to amend definition of “excluded trade” or “excluded activity” U.K.

(1) The Treasury may by regulations amend this Chapter so as to alter the meaning of “excluded trade” or “excluded activity” for the purposes of this Part.

(2) Regulations under this section may only be made if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.

(3) Regulations under this section—

(a) may make different provision for different purposes;

(b) may make incidental, supplemental, consequential and transitional provision and savings.

357XI Power to make provision about meaning of “back-office activities” U.K.

(1) The Treasury may by regulations make provision about the meaning of “back-office activities” for the purposes of this Part.

(2) Regulations under this section may, in particular—

(a) specify activities that are, or are not, back-office activities, or

(b) specify circumstances in which activities are, or are not, to be regarded as back-office activities.

(3) Regulations under this section—

(a) may make different provision for different purposes;

(b) may make incidental, supplemental, consequential and transitional provision and savings.]

[F786 PART 8C U.K. Restitution interest

Textual Amendments

F786 Pt. 8C inserted (18.11.2015) (with effect in accordance with s. 38(9)-(12) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 38(3)

CHAPTER 1 U.K. Amounts taxed as restitution interest

357YA Charge to corporation tax on restitution interest U.K.

[F787 (1)] The charge to corporation tax on income applies to restitution interest arising to a company.

[F788 (2) In subsection (1) the reference to a company does not include a charitable company.]

Textual Amendments

F787 S. 357YA renumbered as s. 357YA(1) (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 5(a)

F788 S. 357YA(2) inserted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 5(b)

357YB Restitution interest chargeable as income U.K.

(1) Profits arising to a company which consist of restitution interest are chargeable to tax as income under this Part (regardless of whether the profits are of an income or capital nature).

[F789 (1A) In subsection (1) the reference to a company does not include a charitable company.]

(2) In this Part references to “profits” are to be interpreted in accordance with section 2(2) of CTA 2009.

Textual Amendments

F789 S. 357YB(1A) inserted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 6

357YC Meaning of “restitution interest” U.K.

(1) In this Part “restitution interest” means profits in relation to which Conditions A to C are met.

(2) Condition A is that the profits are interest paid or payable by the Commissioners [F790 for Her Majesty’s Revenue and Customs] in respect of [F791 a company’s right (or possible right) to restitution] with regard to either of the following matters (or alleged matters)—

(a) the payment of an amount to the Commissioners under a mistake of law relating to a taxation matter, or

(b) the unlawful collection by the Commissioners of an amount in respect of taxation.

(3) Condition B is that—

(a) a court has made a final determination that the Commissioners are liable to pay the interest, or

[F792 (b) the Commissioners have in final settlement of a claim in respect of the right (or possible right) mentioned in subsection (2) entered into an agreement under which a person is entitled to be paid, or is to retain, the interest.]

(4) Condition C is that the interest determined to be due, or agreed upon, as mentioned in subsection (3) is not limited to simple interest at a [F793 rate equivalent to or lower than a] statutory rate (see section 357YU).

(5) Subsection (4) does not prevent so much of an amount of interest determined to be due, or agreed upon, as represents or is calculated by reference to simple interest at a [F794 rate equivalent to or lower than a] statutory rate from falling within the definition of “restitution interest”.

(6) For the purposes of subsection (2) it does not matter whether the interest is paid or payable—

(a) pursuant to a judgment or order of a court,

(b) as an interim payment in court proceedings,

(c) under an agreement to settle a claim, or

(d) in any other circumstances.

(7) For the purposes of this section—

(a) “interest” includes an amount equivalent to interest, and

(b) an amount paid or payable by the Commissioners as mentioned in subsection (2) is “equivalent to interest” so far as it is an amount determined by reference to the time value of money.

(8) For the purposes of this section a determination made by a court is “final” if the determination cannot be varied on appeal (whether because of the absence of any right of appeal, the expiry of a time limit for making an appeal without an appeal having been brought, the refusal of permission to appeal, the abandonment of an appeal or otherwise).

(9) Any power to grant permission to appeal out of time is to be disregarded for the purposes of subsection (8).

Textual Amendments

F790 Words in s. 357YC(2) inserted (with effect in accordance with reg. 3 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 13

F791 Words in s. 357YC(2) substituted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 7(a)

F792 S. 357YC(3)(b) substituted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 7(b)

F793 Words in s. 357YC(4) inserted (15.1.2026) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2025 (S.I. 2025/1253), regs. 1, 3(a)

F794 Words in s. 357YC(5) inserted (15.1.2026) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2025 (S.I. 2025/1253), regs. 1, 3(b)

357YD Further provision about amounts included, or not included, in “restitution interest” U.K.

(1) Interest paid to a company is not restitution interest for the purposes of this Part if—

(a) Condition B was not met in relation to the interest until after the interest was paid, and

(b) the amount paid was limited to simple interest at a [F795 rate equivalent to or lower than a] statutory rate

(2) Subsection (1) does not prevent so much of a relevant amount of interest determined to be due, agreed upon or otherwise paid as represents or is calculated by reference to simple interest at a [F796 rate equivalent to or lower than a] statutory rate from falling within the definition of “restitution interest”.

(3) In subsection (2) “relevant amount of interest” means an amount of interest the whole of which was paid before Condition B was met in relation to it.

(4) Section 357YC(7) applies in relation to this section as in relation to section 357YC.

Textual Amendments

F795 Words in s. 357YD(1)(b) inserted (15.1.2026) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2025 (S.I. 2025/1253), regs. 1, 4(a)

F796 Words in s. 357YD(2) inserted (15.1.2026) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2025 (S.I. 2025/1253), regs. 1, 4(b)

[F797 357YDA Life insurance companies: amounts representing policyholder income U.K.

(1) This section applies if—

(a) an amount of interest paid or payable by the Commissioners for Her Majesty’s Revenue and Customs would (but for this section) be restitution interest arising to a company, and

(b) were this Part not to have effect, that amount would be taken into account under section 73 of FA 2012 (the I-E basis) as income chargeable for an accounting period of the company that is referable to its basic life assurance and general annuity business.

(2) So much (if any) of the amount as represents policyholder income is to be treated for the purposes of this Part as if it were not restitution interest.

(3) To determine how much (if any) of the amount mentioned in subsection (1) (amount “A”) represents policyholder income, take the following steps—

Step 1

(a) Take so much of amount A as consists of non-ACT interest (“the non-ACT amount”).

(b) Determine how much (in total) of the non-ACT amount is to be assigned to with-profits funds (one or more) of the company.

Call this total amount “P”.

In this step “non-ACT interest” means interest which is not interest in respect of advance corporation tax.

Step 2

Determine how much of P is to be assigned to each of the with-profits funds concerned.

This is the “assignable amount” in the case of each fund.

Step 3

In the case of each fund mentioned in step 2, determine in what proportions profits of the fund concerned are to be divided between policyholders and shareholders under the distribution policy for the fund.

Step 4

Express the policyholders’ proportion (as determined under step 3) as a percentage of the whole.

This is the “policyholder percentage” for the fund.

Step 5

Multiply each assignable amount by the policyholder percentage for the fund in question.

The result is the “policyholder amount” in the case of each fund.

Step 6

Amount A “represents policyholder income” so far as it does not exceed the total policyholder amounts found under step 5.

(4) For the purposes of subsection (3) “the distribution policy for the fund” means the basis on which the company has decided profits of the fund are to be divided between policyholders and shareholders.

(5) The distribution policy for a with-profits fund is to be determined as at the time when the interest arises, and with particular reference to—

(a) any relevant information in the company’s articles of association, and

(b) any relevant information or document published by the company in connection with obligations under the FCA Handbook.

(6) In this section—

• “the FCA Handbook” means the Handbook made by the Financial Conduct Authority under the Financial Services and Markets Act 2000, and

• “interest” has the same meaning as in section 357YC.]

Textual Amendments

F797 S. 357YDA inserted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 8

357YE Period in which amounts are to be brought into account U.K.

(1) The amounts to be brought into account as restitution interest for any period for the purposes of this Part are those that are recognised in determining the company's profit or loss for the period in accordance with generally accepted accounting practice.

(2) If Condition A in section 357YC is met, in relation to any amount, after the end of the period for which the amount is to be brought into account as restitution interest in accordance with subsection (1), any necessary adjustments are to be made; and any time limits for the making of adjustments are to be disregarded for this purpose.

357YF Companies without GAAP-compliant accounts U.K.

(1) If a company—

(a) draws up accounts which are not GAAP-compliant accounts, or

(b) does not draw up accounts at all,

this Part applies as if GAAP-compliant accounts had been drawn up.

(2) Accordingly, references in this Part to amounts recognised for accounting purposes are references to amounts that would have been recognised if GAAP-compliant accounts had been drawn up for the period of account in question and any relevant earlier period.

(3) For this purpose a period of account is relevant to a later period if the accounts for the later period rely to any extent on amounts derived from the earlier period.

(4) In this section “GAAP-compliant accounts” means accounts drawn up in accordance with generally accepted accounting practice.

357YG Restitution interest: appeals made out of time U.K.

(1) This section applies where—

(a) an amount of interest (“the interest”) arises to a company as restitution interest for the purposes of this Part,

(b) Condition B in section 357YC is met in relation to the interest as a result of the making by a court of a final determination as mentioned in subsection (3)(a) of that section,

(c) on a late appeal (or a further appeal subsequent to such an appeal) a court reverses that determination, or varies it so as to negative it, and

(d) the determination reversing or varying the determination by virtue of which Condition B was met is itself a final determination.

(2) This Part has effect as if the interest had never been restitution interest.

(3) If—

(a) the Commissioners for Her Majesty's Revenue and Customs have under section 357YO(2) deducted a sum representing corporation tax from the interest, or

(b) a sum has been paid as corporation tax in respect of the interest under section 357YQ,

that sum is treated for all purposes as if it had never been paid to, or deducted or held by, the Commissioners as or in respect of corporation tax.

(4) Any adjustments are to be made that are necessary in accordance with this section; and any time limits applying to the making of adjustments are to be ignored.

(5) In this section—

• “final determination” has the same meaning as in section 357YC;

• “late appeal” means an appeal which is made by reason of a court giving leave to appeal out of time.

357YH Countering effect of avoidance arrangements U.K.

(1) Any F798 ... tax advantages that would (in the absence of this section) arise from relevant avoidance arrangements are to be counteracted by the making of such adjustments as are just and reasonable in relation to amounts to be brought into account for the purposes of this Part.

(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 an assessment, the modification of an assessment, amendment or otherwise.

(3) For the meaning of “relevant avoidance arrangements” and “[F799 tax advantage]” see section 357YI.

Textual Amendments

F798 Word in s. 357YH(1) omitted (with effect in accordance with reg. 3 of the amending S.I.) by virtue of The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 14(a)

F799 Words in s. 357YH(3) substituted (with effect in accordance with reg. 3 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 14(b)

357YI Interpretation of section 357YH U.K.

(1) This section applies for the interpretation of section 357YH (and this section).

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

(3) Arrangements are “relevant avoidance arrangements” if their main purpose, or one of their main purposes, is to enable a company to obtain a tax advantage in relation to the application of the charge to tax at the restitution payments rate.

(4) But arrangements are not “relevant avoidance arrangements” if the obtaining of any tax advantages that would (in the absence of section 357YH) arise from them can reasonably be regarded as consistent with wholly commercial arrangements.

(5) “Tax advantage” includes—

(a) a repayment of tax or increased repayment of tax,

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

(c) the avoidance of a possible assessment to tax,

(d) deferral of a payment of tax or advancement of a repayment of tax, or

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

(6) In subsection (5)(b) and (c) the references to avoidance or reduction include an avoidance or reduction effected by receipts accruing in such a way that the recipient does not bear tax on them as restitution interest under this Part.

357YJ Examples of results that may indicate exclusion not applicable U.K.

[F800 (1)] Each of the following is an example of something which might indicate that arrangements whose main purpose, or one of whose main purposes, is to enable a company to obtain a F801 ... tax advantage are not excluded by section 357YI(4) from being “relevant avoidance arrangements” for the purposes of section 357YH—

(a) existing the elimination or reduction for the purposes of this Part of amounts chargeable as restitution interest arising to the company in connection with a particular claim, if for economic purposes other or greater profits arise to the company in connection with the claim;

(b) preventing or delaying the recognition as an item of profit or loss of an amount that would apart from the arrangements be recognised in the company's accounts as an item of profit or loss, or be so recognised earlier;

(c) ensuring that a receipt is treated for accounting purposes in a way in which it would not have been treated in the absence of some other transaction forming part of the arrangements.

[F802 (2) In this section “arrangements” and “tax advantage” have the meaning given by section 357YI.]

Textual Amendments

F800 S. 357J renumbered as s. 257J(1) (with effect in accordance with reg. 3 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 15(a)

F801 Words in s. 357YJ(1) omitted (with effect in accordance with reg. 3 of the amending S.I.) by virtue of The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 15(b)

F802 S. 357YJ(2) inserted (with effect in accordance with reg. 3 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 15(c)

CHAPTER 2 U.K. Application of restitution payments rate

357YK Corporation tax rate on restitution interest U.K.

(1) Corporation tax is charged on restitution interest at the restitution payments rate.

(2) The “restitution payments rate” is 45%.

357YL Exclusion of reliefs, set-offs etc U.K.

(1) Under subsection (3) of section 4 (amounts to which rates of corporation tax applied) the amounts to be added together to find a company's “total profits” do not include amounts of restitution interest on which corporation tax is chargeable under this Part.

(2) No reliefs or set-offs may be given against so much of the corporation tax to which a company is liable for an accounting period as is equal to the amount of corporation tax chargeable on the company for the period at the restitution payments rate.

(3) In subsection (2) “reliefs and set-offs” includes, but is not restricted to, those listed in the second step of paragraph 8(1) of Schedule 18 to FA 1998.

(4) Amounts of income tax or corporation tax, or any other amounts, which may be set off against a company's overall liability to income tax and corporation tax for an accounting period may not be set off against so much of the corporation tax to which the company is liable for the period as is equal to the amount of corporation tax chargeable at the restitution payments rate.

CHAPTER 3 U.K. Migration, transfers of rights etc

357YM Assignment of rights to person not chargeable to corporation tax U.K.

(1) Subsection (4) applies if—

[F803 (a) a chargeable company (“the transferor”) transfers to a person who either—

(i) is not a company, or

(ii) is a non-qualifying company,

a right in respect of a claim, or possible claim, for restitution,]

(b) the transfer is made on or after 21 October 2015, and

(c) conditions A and B are met.

(2) Condition A is that the main purpose, or one of the main purposes, of the transfer is to secure a tax advantage for any person in relation to the application of the charge to tax on restitution interest under this Part.

(3) Condition B is that as a result of that transfer (or that transfer together with further transfers of the rights) restitution interest arises to a person who [F804 either—

(a) is not a company, or

(b) is a non-qualifying company.]

(4) Any restitution interest which arises as mentioned in Condition B is treated for corporation tax purposes as restitution interest arising to the transferor.

[F805 (5) For the purposes of this section a company is a “chargeable company” if it meets the first and second conditions.

• The first condition is that the company is UK resident or carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

• The second condition is that the company is not a charitable company and would not be exempt from corporation tax on restitution interest (were such interest to arise to it).

(5A) For the purposes of this section a company is a “non-qualifying company” if—

(a) it is non-UK resident, or

(b) it is a charitable company, or would be exempt from corporation tax on restitution interest (were such interest to arise to it).]

(6) In this section “tax advantage” has the meaning given by section 357YI.

Textual Amendments

F803 S. 357YM(1)(a) substituted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 10(a)

F804 Words in s. 357YM(3) substituted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 10(b)

F805 S. 357YM(5)(5A) substituted for s. 357YM(5) (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 10(c)

357YN Migration of company with claim to restitution interest U.K.

(1) This section applies where—

(a) restitution interest arises to a non-UK resident company,

(b) the rights in respect of which the company is entitled to the restitution interest had (to any extent) accrued when the company ceased to be UK resident, and

(c) the company's main purpose, or one of its main purposes, in changing its residence was to secure a tax advantage for any person in relation to the application of the charge to tax on restitution interest under this Part.

(2) The company is treated as a UK resident company for the purposes of the application of this Part in relation to so much of that restitution interest as is attributable to relevant accrued rights.

(3) “Relevant accrued rights” means rights which had accrued to the company when it ceased to be UK resident.

(4) The company is to be treated for the purposes of sections 185 and 187 of TCGA 1992 as not having disposed of its assets on ceasing to be resident in the United Kingdom, so far as its assets at that time consisted of rights to receive restitution interest.

(5) Any adjustments that are necessary as a result of subsection (4) are to be made; and any time limits for the making of adjustments are to be ignored for this purpose.

[F806 357YNA Transfer of rights: restitution interest arising after a winding up or dissolution U.K.

(1) Subsection (2) applies if an amount of restitution interest which is paid or payable to a person would be treated under section 357YM(4) as arising to a company (“the transferor”) but for the fact that the company no longer exists at the time when the restitution interest arises.

(2) If an officer of Revenue and Customs gives a related company a notice under this subsection in respect of the restitution interest, the restitution interest is treated for corporation tax purposes as restitution interest arising to that company.

(3) Subsection (4) applies if an amount of restitution interest which is paid or payable to a person would apart from this section be treated by virtue of section 357YM(4) as arising to a company which has been wound up (“the transferor”).

(4) If an officer of Revenue and Customs gives a related company a notice under this subsection in respect of the restitution interest, the restitution interest is treated for corporation tax purposes as restitution interest arising not to the transferor but to that company.

(5) A notice under subsection (2) or (4) must specify—

(a) the amount of the restitution interest, and

(b) the date on which it is paid or payable.

(6) A notice under subsection (2) or (4) in respect of an amount of restitution interest must be given by the later of—

(a) the date on which the amount is paid or payable, or

(b) the time when any notice under section 357YQ(2) in respect of the amount is given to the related company.

Textual Amendments

F806 Ss. 357YNA, 357YNB inserted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 11

357YNB Meaning of “related company” U.K.

(1) A company is a “related company” for the purposes of section 357YNA(2) if at any time in the relevant period (see subsection (5)) that company was a member of the same group as the transferor (see section 357YNA(1)).

(2) A company is a “related company” for the purposes of section 357YNA(4) if at any time in the relevant period (see subsection (6)) that company was a member of the same group as the transferor (see section 357YNA(3)).

(3) For the purposes of this section two companies are members of the same group if—

(a) one is a 51% subsidiary of the other, or

(b) both are 51% subsidiaries of a third company.

(4) In subsection (1) “the relevant period” means the period which—

(a) begins—

(i) if the transferor was not wound up before it was dissolved, at the beginning of the 12 months ending with the date on which the company is dissolved,

(ii) if the transferor was wound up before it was dissolved, at the beginning of the 12 months before the commencement of the winding up, and

(b) ends when the amount mentioned in section 357YNA(1) is paid or becomes payable (whichever is later).

(5) In subsection (2) the “relevant period” means the period which—

(a) begins at the beginning of the 12 months before the commencement of the winding up of the transferor, and

(b) ends when the amount mentioned in section 357YNA(3) is paid or becomes payable (whichever is later).]

Textual Amendments

F806 Ss. 357YNA, 357YNB inserted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 11

CHAPTER 4 U.K. Payment and collection of tax on restitution interest

357YO Duty to deduct tax from payments of restitution interest U.K.

(1) Subsection (2) applies if the Commissioners for Her Majesty's Revenue and Customs pay an amount of interest in relation to which Conditions 1 and 2 are met and—

(a) the amount is (when the payment is made) restitution interest on which a company is chargeable to corporation tax under this Part, or

(b) a company would be chargeable to corporation tax under this Part on the interest paid if it were (at that time) restitution interest.

(2) The Commissioners must, on making the payment—

(a) deduct from it a sum representing corporation tax on the amount at the restitution payments rate, and

(b) give the company a written notice stating the amount of the gross payment and the amount deducted from it.

(3) Condition 1 is that the Commissioners are liable to pay, or have agreed or determined to pay, the interest in respect of a company's claim for restitution with regard to—

(a) the payment of an amount to the Commissioners under a mistake of law relating to a taxation matter, or

(b) the unlawful collection by the Commissioners of an amount in respect of taxation.

(4) Condition 2 is that the interest is not limited to simple interest at a [F807 rate equivalent to or lower than a] statutory rate.

In determining whether or not this condition is met, all amounts which the Commissioners are liable to pay, or have agreed or determined to pay in respect of the claim are to be considered together.

(5) For the purposes of Condition 1 it does not matter whether the Commissioners are liable to pay, or (as the case may be) have agreed or determined to pay, the interest—

(a) pursuant to a judgment or order of a court,

(b) as an interim payment in court proceedings,

(c) under an agreement to settle a claim, or

(d) in any other circumstances.

(6) For the purposes of subsection (2) the restitution payments rate is to be applied to the gross payment, that is to the payment before deduction of a sum representing corporation tax in accordance with this section.

(7) For the purposes of this section—

(a) “interest” includes an amount equivalent to interest, and

(b) an amount which the Commissioners pay as mentioned in subsection (1) is “equivalent to interest” so far as it is an amount determined by reference to the time value of money.

Textual Amendments

F807 Words in s. 357YO(4) inserted (15.1.2026) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2025 (S.I. 2025/1253), regs. 1, 5

357YP Treatment of amounts deducted under section 357YO U.K.

(1) An amount deducted from an interest payment in accordance with section 357YO(2)

[F808 (a) is treated for all purposes as paid by the company mentioned in section 357YO(1) on account of the company's liability, or potential liability, to corporation tax charged on the interest payment, as restitution interest, under this Part][F809 , and

(b) is accordingly to be treated for corporation tax purposes as going towards the discharging of the company’s liability to pay, for the accounting period concerned, tax charged under this Part (as calculated under paragraph 2 of the fifth step of paragraph 8(1) of Schedule 18 to FA 1998).]

(2) Subsections (3) and (4) apply if—

(a) the Commissioners [F810 for Her Majesty’s Revenue and Customs] have, on paying an amount which is not (when the payment is made) restitution interest, made a deduction under section 357YO(2) from the gross payment (see section 357YO(6)), and

(b) a company becomes liable to repay the net amount to the Commissioners, or it otherwise becomes clear that the gross amount cannot, or will not, become restitution interest.

(3) If the condition in subsection (2)(b) is met in circumstances where the company is not liable to repay the net amount to the Commissioners, the Commissioners must—

(a) repay to the company the amount treated under subsection (1) as paid by the company, and

(b) make any other necessary adjustments;

and any time limits applying to the making of adjustments are to be ignored.

(4) If the condition in subsection (2)(b) is met by virtue of a company becoming liable to repay to the Commissioners the amount paid as mentioned in subsection (2)(a)—

(a) this Part has effect as if the company were liable to repay the gross payment to the Commissioners, and

(b) the amount deducted by the Commissioners as mentioned in subsection (2)(a) is to be treated for the purposes of this Part as money repaid by the company in partial satisfaction of its liability to repay the gross amount.

(5) Subsections (3) and (4) have effect with the appropriate modifications if the condition in subsection (2)(b) is met in relation to part but not the whole of the gross amount mentioned in subsection (2)(a).

(6) In this section “the net amount”, in relation to a payment made under deduction of tax in accordance with section 357YO(2), means the amount paid after deduction of tax.

Textual Amendments

F808 Words in s. 357YP(1) renumbered as s. 357YP(1)(a) (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 12(a)

F809 S. 357YP(1)(b) inserted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 12(b)

F810 Words in s. 357YP(2)(a) inserted (with effect in accordance with reg. 3 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 16

357YQ Assessment of tax chargeable on restitution interest U.K.

(1) An officer of Revenue and Customs may make an assessment of the amounts in which, in the officer's opinion, a company is chargeable to corporation tax under this Part for a period specified in the assessment.

[F811 (1A) An assessment under this section may be made at any time before the later of—

(a) the end of the period of 2 years after the end of the accounting period in which Condition B in section 357YC is met, and

(b) the end of any period within which the assessment may otherwise be made under any other provision of the Taxes Acts (within the meaning of section 118(1) of TMA 1970).]

(2) Notice of an assessment under this section must be served on the company, stating the date on which the assessment is issued.

(3) An assessment may include an assessment of the amount of restitution income arising to the company in the period and any other matters relevant to the calculation of the amounts in which the company is chargeable to corporation tax under this Part for the period.

(4) Notice of an assessment under this section may be accompanied by notice of any determination by an officer of Revenue and Customs relating to the dates on which amounts of tax become due and payable under this section or to amounts treated under section 357YP as paid on account of corporation tax.

(5) The company must pay the amount assessed as payable for the accounting period by the end of the period of 30 days beginning with the date on which the company is given notice of the assessment.

Textual Amendments

F811 S. 357YQ(1A) inserted (15.1.2026) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2025 (S.I. 2025/1253), regs. 1, 6

357YR Interest on excessive amounts withheld U.K.

(1) If an amount deducted under section 357YO(2) in respect of an amount of interest exceeds the amount which should have been deducted, the Commissioners [F812 for Her Majesty’s Revenue and Customs] are liable to pay interest on the excess from the material date until the date on which the excess is repaid.

(2) The “material date” is the date on which tax was deducted from the interest.

(3) Interest under subsection (1) is to be paid at the rate applicable under section 178 of FA 1989.

Textual Amendments

F812 Words in s. 357YR(1) inserted (with effect in accordance with reg. 3 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 17

357YS Appeal against deduction U.K.

(1) An appeal may be brought against the deduction by the Commissioners for Her Majesty's Revenue and Customs from a payment of a sum representing corporation tax in compliance, or purported compliance, with section 357YO(2).

(2) Notice of appeal must be given [F813 to Her Majesty’s Revenue and Customs] —

(a) in writing,

(b) within 30 days after the giving of the notice under section 357YO(2).

Textual Amendments

F813 Words in s. 357YS(2) inserted (with effect in accordance with reg. 3 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 18

357YT Amounts taxed at restitution payments rate to be outside instalment payments regime U.K.

For the purposes of regulations under section 59E of TMA 1970 (further provision as to when corporation tax due and payable), tax charged at the restitution payments rate is to be disregarded in determining the amount of corporation tax payable by a company for an accounting period.

CHAPTER 5 U.K. Supplementary provisions

357YU Interpretation U.K.

(1) In this Part “court” includes a tribunal.

(2) In this Part “statutory rate” (in relation to interest) means a rate which is equal to a rate specified—

(a) for purposes relating to taxation, and

(b) in, or in a provision made under, an Act.

357YV Relationship of Part with other corporation tax provisions U.K.

(1) So far as restitution interest is charged to corporation tax under this Part it is not chargeable to corporation tax under any other provision [F814 (including Part 2 of FA 2012: but see also section 357YDA)].

(2) This Part has effect regardless of section 464(1) of CTA 2009 (priority of loan relationship provisions).

Textual Amendments

F814 Words in s. 357YV inserted (with effect in accordance with reg. 2 of the amending S.I.) by The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I. 2017/364), regs. 1, 9

357YW Power to amend U.K.

(1) The Treasury may by regulations amend this Part (apart from this section).

(2) Regulations under this section—

(a) may not widen the description of the type of payments that are chargeable to corporation tax under this Part;

(b) may not remove or prejudice any right of appeal;

(c) may not increase the rate at which tax is charged on restitution interest under this Part;

(d) may not enable any provision of this Part to have effect in relation to the subject matter of any claim which has been finally determined before 21 October 2015.

(3) Subject to subsection (2), regulations under this section may have retrospective effect.

(4) For the purposes of this section a claim is “finally determined” if a court has disposed of the claim by a final determination or the claimant and the Commissioners for Her Majesty's Revenue and Customs have entered into an agreement in final settlement of the claim.

(5) Section 357YC(8) (which defines when a determination made by a court is final) has effect for the purposes of this section as for the purposes of section 357YC.

(6) Regulations under this section may include incidental, supplementary or transitional provision.

(7) A statutory instrument containing regulations under this section must be laid before the House of Commons.

(8) The regulations cease to have effect at the end of the period of 28 days beginning with the day on which they are made unless, during that period, the regulations are approved by a resolution of the House of Commons.

(9) In reckoning the 28-day period, no account is to be taken of any time during which—

(a) Parliament is dissolved or prorogued, or

(b) the House of Commons is adjourned for more than 4 days.

(10) Regulations ceasing to have effect by virtue of subsection (8) does not affect—

(a) anything previously done under the regulations, or

(b) the making of new regulations.]

Part 9 U.K. Leasing plant or machinery

Chapter 1 U.K. Introduction

358 Introduction to Part U.K.

(1) This Part makes provision about the taxation of leasing transactions involving companies.

(2) Chapter 2 makes provision about the treatment for corporation tax purposes of companies which are lessors or lessees under long funding leases of plant or machinery.

(3) The sales of lessors Chapters make provision about the taxation of a company which is within the charge to corporation tax in respect of a business of leasing plant or machinery (within the meaning of Chapter 3 or 4)—

(a) on the sale of, or certain other changes in interests in, the company, and

(b) in certain circumstances where the company's interest in the business changes.

(4) In this Part “the sales of lessors Chapters” means Chapters 3 to 6.

(5) In the sales of lessors Chapters—

(a) Chapter 3 deals with the case of a qualifying change of ownership in relation to the company where it carries on the business otherwise than in partnership,

(b) Chapter 4 deals with—

(i) the case of a qualifying change in the company's interest in the business where it carries on the business in partnership with other persons, and

(ii) the case of a qualifying change of ownership in relation to any such company,

(c) Chapter 5 contains anti-avoidance provisions, and

(d) Chapter 6 provides for the general interpretation of those Chapters.

(6) For the meaning of “qualifying change of ownership” in the sales of lessors Chapters, see sections 392 to 398.

(7) For the meaning of “qualifying change in a company's interest in a business” in Chapter 4, see section 415.

Chapter 2 U.K. Long funding leases of plant or machinery

Introduction U.K.

359 Overview of Chapter U.K.

(1) This Chapter makes provision about the calculation for corporation tax purposes of the profits of companies which are—

(a) lessors of plant or machinery under long funding finance leases (see sections 360 to 362),

(b) lessors of plant or machinery under long funding operating leases (see sections 363 to 369),

(c) lessees of plant or machinery under long funding finance leases (see sections 377 and 378), or

(d) lessees of plant or machinery under long funding operating leases (see sections 379 and 380).

(2) Sections 370 to 376 make provision about cases where sections 360 to 369 are not to apply.

(3) For the meaning of expressions used in this section and in this Chapter generally, see section 381 and, in particular—

(a) subsection (1) of that section (which provides for the application of Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about long funding leases) to this Chapter), and

(b) subsections (2) and (3) of that section (which specify the provisions of that Chapter in which some expressions used in this Chapter are defined).

Lessors under long funding finance leases U.K.

360 Lessor under long funding finance lease: rental earnings U.K.

(1) This section applies for any period of account of a company in which it is the lessor of any plant or machinery under a long funding finance lease.

(2) The amount to be brought into account as the lessor's income from the lease for the period is the amount of the rental earnings in respect of the lease for the period.

(3) The amount of those rental earnings is the amount which, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment for that period in respect of the lease.

(4) If the lease is one which, in accordance with such practice, falls (or would fall) to be treated as a loan for the period of account, so much of the rentals under the lease as falls (or would fall) to be treated as interest is treated for the purposes of this section as rental earnings.

361 Lessor under long funding finance lease: exceptional items U.K.

(1) This section applies if—

(a) a company is or has been the lessor under a long funding finance lease, and

(b) an exceptional profit or loss arises to the company in connection with the lease.

(2) A profit or loss is exceptional for the purposes of subsection (1) if—

(a) in accordance with generally accepted accounting practice it falls (or would fall) to be recognised for accounting purposes in a period of account, but

(b) apart from this section, it would not be brought into account in calculating the profits of the company for corporation tax purposes.

(3) Such a profit is treated for corporation tax purposes as income of the company attributable to the lease.

(4) Such a loss is treated for corporation tax purposes as a revenue expense incurred by the company in connection with the lease.

(5) It does not matter for the purposes of this section whether the profit or loss is of an income or capital nature.

(6) The reference in subsection (2) to an amount falling to be recognised for accounting purposes in a period of account is a reference to an amount falling to be recognised for accounting purposes in—

(a) the company's profit and loss account, income statement or statement of comprehensive income for that period,

(b) the company's statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity or statement of income and retained earnings for that period, or

(c) any other statement of items taken into account in calculating the company's profits or losses for that period.

362 Lessor under long funding finance lease making termination payment U.K.

(1) This section applies if—

(a) a company is or has been the lessor under a long funding finance lease,

(b) the lease terminates, and

(c) a sum calculated by reference to the termination value is paid to the lessee.

(2) No deduction in respect of the sum is allowed in calculating the profits of the company for corporation tax purposes.

(3) This section does not prevent a deduction in respect of a sum so far as it is brought into account in determining the company's rental earnings.

(4) For the meaning of “termination value”, see section 381(3)(m).

Lessors under long funding operating leases U.K.

363 Lessor under long funding operating lease: periodic deduction U.K.

(1) This section applies if a company is the lessor of any plant or machinery under a long funding operating lease for the whole or part of a period of account.

(2) A deduction is allowed in calculating the profits of the company for the period of account for corporation tax purposes.

(3) The amount of the deduction is so much of the expected gross reduction in value over the term of the lease as is attributable to the period of account.

(4) The expected gross reduction in value over the term of the lease is—

(a) the starting value of the plant or machinery, less

(b) the amount which at the commencement of the term of the lease is expected to be its residual value (or, if section 365 applies, would have been expected to be that value had that value been estimated at that time).

(5) The expected gross reduction in value over the term of the lease that is attributable to the period of account is found by apportioning that reduction on a time basis according to the proportion of the term of the lease that falls in the period of account.

(6) For the meaning of “starting value”, see—

(a) section 364 (“starting value”: general), and

(b) section 365 (“starting value” where plant or machinery originally unqualifying).

(7) For the meaning of “residual value”, see section 381(4).

364 “Starting value”: general U.K.

(1) This section is about the meaning of “starting value” in section 363 in relation to a long funding operating lease (“the section 363 lease”).

(2) But this section does not apply if the conditions in section 365(2) (“starting value” where plant or machinery originally unqualifying) are met.

(3) If the only use of the plant or machinery by the lessor has been the leasing of it under the section 363 lease as a qualifying activity, the starting value is the amount of the expenditure incurred by the lessor on the provision of the plant or machinery (“cost”).

(4) If subsection (3) does not apply, the starting value depends on the last previous use of the plant or machinery by the lessor.

(5) If that use was the leasing of it under another long funding operating lease as a qualifying activity, the starting value is the market value of the plant or machinery at the commencement of the term of the section 363 lease (“market value”).

(6) If that use was the leasing of it under a long funding finance lease as a qualifying activity, the starting value is the value at which the plant or machinery is recognised in the books or other finance records of the lessor at the commencement of the term of the section 363 lease.

(7) If that use was for the purposes of a qualifying activity other than leasing under a long funding lease, the starting value is the lower of cost and market value.

(8) For the meaning of “qualifying activity”, see section 381(4).

365 “Starting value” where plant or machinery originally unqualifying U.K.

(1) This section applies if the conditions in subsection (2) are met in relation to a long funding operating lease to which section 363 applies.

(2) The conditions are that—

(a) the lessor owns the plant or machinery as a result of having incurred expenditure on its provision for purposes other than those of a qualifying activity,

(b) the plant or machinery is brought into use by the lessor for the purposes of a qualifying activity on or after 1 April 2006, and

(c) that qualifying activity is the leasing of the plant or machinery under the lease.

(3) For the purposes of section 363 the starting value is the lower of—

(a) first use market value, and

(b) first use amortised market value.

(4) “First use market value” means the market value of the plant or machinery at the time when it is first brought into use for the purposes of the qualifying activity.

(5) “First use amortised value” means the value that the plant or machinery would have at the time when it is first brought into use for the purposes of the qualifying activity on the assumptions in subsection (6).

(6) The assumptions are that—

(a) the cost of acquiring the plant or machinery had been written off on a straight line basis over its remaining useful economic life, and

(b) any further capital expenditure incurred had been written off on a straight line basis over so much of its remaining economic life as remains at the time when the expenditure is incurred.

(7) For the meaning of “qualifying activity”, “remaining useful economic life” and writing off on a straight line basis, see section 381(4), (3)(i) and (5) respectively.

366 Long funding operating lease: lessor's additional expenditure U.K.

(1) This section applies if in any period of account—

(a) a company is the lessor of any plant or machinery under a long funding operating lease,

(b) the company incurs capital expenditure in relation to the plant or machinery (the “additional expenditure”), and

(c) the additional expenditure is not reflected in the market value of the plant or machinery at the commencement time (see subsection (7)).

(2) An additional deduction is allowed in calculating the profits of the company for each period of account—

(a) which ends after the incurring of the additional expenditure, and

(b) in which the company is the lessor of the plant or machinery under the lease.

(3) The amount of the deduction is so much of the expected reduction in value of the additional expenditure (“the expected reduction”) as is attributable to the period of account.

(4) The expected reduction is the amount of the additional expenditure, less the remaining residual value of the plant or machinery resulting from that expenditure.

(5) For how to determine that remaining residual value, see—

(a) section 367 (determination of remaining residual value resulting from lessor's first additional expenditure), and

(b) section 368 (determination of remaining residual value resulting from lessor's further additional expenditure).

(6) The amount of the expected reduction attributable to the period of account is found by apportioning that reduction on a time basis according to the proportion of the term of the lease that falls in the period of account.

(7) In this section “the commencement time” means—

(a) except where section 365 applies, the commencement of the term of the lease, and

(b) if that section applies, the time when the plant or machinery is first brought into use by the lessor for the purposes of the qualifying activity.

367 Determination of remaining residual value resulting from lessor's first additional expenditure U.K.

(1) This section sets out how the remaining residual value of the plant or machinery resulting from the additional expenditure (“RRV”) is determined for the purposes of section 366(4) if section 366 has not applied in relation to any previous additional expenditure incurred by the company in relation to the leased plant or machinery.

(2) RRV depends on whether—

(a) the amount (“ARV”) which is expected to be the residual value of the plant or machinery at the time when the additional expenditure is incurred, exceeds

(b) the amount (“CRV”) which at the commencement of the term of the lease is expected to be its residual value (or, if section 365 applies, would have been expected to be that value had that value been estimated at that time).

(3) If ARV exceeds CRV, RRV is the part of the excess that is a result of the additional expenditure.

(4) Otherwise, RRV is nil.

(5) For the meaning of “residual value”, see section 381(4).

368 Determination of remaining residual value resulting from lessor's further additional expenditure U.K.

(1) This section sets out how the remaining residual value of the plant or machinery resulting from the additional expenditure (“RRV”) is determined for the purposes of section 366(4) if section 366 has applied in relation to previous additional expenditure incurred by the company in relation to the leased plant or machinery.

(2) RRV depends on whether—

(a) the amount (“FARV”) which is expected to be the residual value of the plant or machinery at the time when the further additional expenditure is incurred, exceeds

(b) the sum of the amounts in subsection (3).

(3) Those amounts are—

(a) the amount which at the commencement of the term of the lease is expected to be the residual value of the plant or machinery (or, if section 365 applies, would have been expected to be that value had that value been estimated at that time), and

(b) any amounts that were subtracted under section 366(4) as the remaining residual value of the plant or machinery resulting from the previous additional expenditure.

(4) If FARV exceeds the sum of the amounts in subsection (3), RRV is the portion of the excess that is a result of the further additional expenditure.

(5) Otherwise, RRV is nil.

(6) For the meaning of “residual value”, see section 381(4).

369 Lessor under long funding operating lease: termination of lease U.K.

(1) This section applies in calculating the profits of a company for corporation tax purposes if it is the lessor immediately before the termination of a long funding operating lease.

(2) If the termination amount (see section 381(3)(l)) exceeds the sum of the amounts in subsection (3), an amount equal to the excess is treated as income of the company attributable to the lease arising in the period of account in which it terminates.

(3) The amounts referred to in subsection (2) are—

(a) the total amounts paid to the lessee that are calculated by reference to the termination value (see section 381(3)(m)),

(b) the excess relevant value for section 363 (see subsection (6)), and

(c) the excess expenditure for section 366 (see subsection (7)).

(4) If the sum of the amounts in subsection (3) exceeds the termination amount, the excess is treated as a revenue expense incurred by the company in connection with the lease in the period of account in which it terminates.

(5) No deduction is allowed in respect of any sums within subsection (3)(a).

(6) “The excess relevant value for section 363” is the amount (if any) by which—

(a) the starting value of the plant or machinery for the purposes of section 363(4) (lessor under long funding operating lease: periodic deduction), exceeds

(b) the total of the deductions allowable under section 363 for periods of account for the whole or part of which the company was the lessor.

(7) “The excess expenditure for section 366” is the amount (if any) by which—

(a) the total of any amounts of capital expenditure incurred by the company which constitute additional expenditure in the case of the lease for the purposes of section 366 (long funding operating lease: lessor's additional expenditure), exceeds

(b) the total of any deductions allowable under section 366 for periods of account for the whole or part of which the company was the lessor.

Cases where sections 360 to 369 do not apply U.K.

370 Plant or machinery held as trading stock U.K.

(1) Sections 360 to 369 do not apply in relation to a long funding lease in the case of a company which is or has been the lessor of any plant or machinery under the lease if the condition in subsection (2) is met.

(2) The condition is that any part of the expenditure incurred by the company on the acquisition of the plant or machinery for leasing under the lease—

(a) is allowable as a deduction (apart from sections 360 to 369) in calculating its profits or losses for corporation tax purposes, and

(b) is so allowable as a result of the plant or machinery forming part of its trading stock.

(3) For the purposes of this section the cases in which expenditure incurred by a company on the acquisition of any plant or machinery for leasing under a lease is allowable as such a deduction include any case where—

(a) the company becomes entitled to the deduction at any time after the expenditure is incurred, and

(b) the deduction arises as a result of the plant or machinery forming part of its trading stock at that time.

371 Adjustments where sections 360 to 369 subsequently disapplied by section 370 U.K.

(1) This section applies if—

(a) at any time any of sections 360 to 369 has applied for determining the amounts to be taken into account in calculating the profits or losses of a company for corporation tax purposes, and

(b) subsequently the condition in section 370(2) is met.

(2) If this section applies—

(a) the amounts mentioned in subsection (1)(a), and

(b) any other amounts which, as a result of section 370, are to be taken into account in calculating the profits or losses of the company for corporation tax purposes,

are subject to such adjustments as are just and reasonable.

(3) All such assessments and adjustments of assessments are to be made as are necessary to give effect to this section.

372 Lessor also lessee under non-long funding lease U.K.

(1) This section applies if—

(a) a company is the lessee of any plant or machinery under a lease (“lease A”),

(b) lease A is not a long funding lease,

(c) the company enters into a lease (“lease B”) of any of that plant or machinery (as lessor), and

(d) lease B is a long funding lease.

(2) Sections 360 to 369 do not apply in relation to lease B.

(3) This section must be treated as never having applied in relation to lease B if lease A—

(a) becomes a long funding lease as a result of section 70H of CAA 2001 (tax return by lessee treating lease as long funding lease), and

(b) has not ceased to be such a lease.

373 Other avoidance U.K.

(1) Sections 360 to 369 do not apply in relation to a long funding lease in the case of a company which is or has been the lessor of any plant or machinery under the lease if conditions A, B and C are met.

(2) Condition A is that the lease forms part of any arrangement entered into by the company which includes one or more other transactions.

(3) Condition B is that the main purpose, or one of the main purposes, of the arrangement is to secure that, over the lease period, there would be a substantial difference between the GAAP total and the tax total.

(4) “The GAAP total” means the sum of the amounts under the arrangement which are, in accordance with generally accepted accounting practice—

(a) recognised in determining the company's profit or loss for any period, or

(b) taken into account in calculating the amounts which are so recognised.

(5) “The tax total” means the sum of the amounts under the arrangement which would (apart from this section) be taken into account in calculating the profits or losses of the company for corporation tax purposes.

(6) Condition C is that the difference referred to in subsection (3) would be attributable (wholly or partly) to the application of any of sections 360 to 369 in relation to the company by reference to the plant or machinery under the lease.

(7) This section is supplemented by sections 374 and 375.

374 Provision supplementing section 373 U.K.

(1) It does not matter whether the arrangement referred to in condition A in section 373(2) is entered into before, after or at the inception of the long funding lease.

(2) It does not matter whether the parties to any transaction which forms part of that arrangement differ from the parties to any of the other transactions.

(3) The cases in which two or more transactions are to be taken as forming part of an arrangement for the purposes of section 373 include any case in which it would be reasonable to assume that one or more of them—

(a) would not have been entered into independently of the other or others, or

(b) if entered into independently of the other or others, would not have taken the same form or been on the same terms.

(4) For the purposes of condition B in section 373(3) “the lease period” means the period which—

(a) begins with the inception of the lease, and

(b) ends with the end of the term of the lease.

(5) The reference in section 373(4) to an amount being recognised in determining a company's profit or loss for a period is to an amount being recognised for accounting purposes in—

(a) the company's profit and loss account, income statement or statement of comprehensive income for that period,

(b) the company's statement of total recognised gains and losses, statement of recognised income and expense, statement of changes in equity or statement of income and retained earnings for that period, or

(c) any other statement of items taken into account in calculating the company's profits or losses for that period.

375 Adjustments where sections 360 to 369 subsequently disapplied by section 373 U.K.

(1) This section applies if—

(a) at any time any of sections 360 to 369 has applied for determining the amounts to be taken into account in calculating the profits or losses of the company for corporation tax purposes, and

(b) subsequently conditions A, B and C in section 373 are met.

(2) If this section applies—

(a) the amounts mentioned in subsection (1)(a), and

(b) any other amounts which, as a result of section 373, are to be taken into account in calculating the profits or losses of the company for corporation tax purposes,

are subject to such adjustments as are just and reasonable.

(3) All such assessments and adjustments of assessments are to be made as are necessary to give effect to this section.

376 Films U.K.

(1) If a company is or has been a lessor under a long funding lease of a film, sections 360 to 369 do not apply in respect of the lease.

(2) “Film” has the same meaning as in Part 15 of CTA 2009 (see section 1181 of that Act).

Lessees under long funding finance leases U.K.

377 Lessee under long funding finance lease: limit on deductions U.K.

(1) This section applies if a company is the lessee of any plant or machinery under a long funding finance lease for the whole or part of any period of account.

(2) In calculating the company's profits for the period of account for corporation tax purposes, the amount deducted in respect of amounts payable under the lease must not exceed the finance charges.

(3) In subsection (2) “the finance charges” means the amounts which, in accordance with generally accepted accounting practice, fall (or would fall) to be shown in the company's accounts as finance charges[F815 , or interest expenses,] in respect of the lease.

(4) If the lease is one which, in accordance with such practice, falls (or would fall), to be treated as a loan, subsections (2) and (3) apply as if the lease were one which, in accordance with such practice, fell to be treated as a finance lease.

Textual Amendments

F815 Words in s. 377(3) inserted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 4(4)

[F816 377A Lessee under long funding finance leases: right-of-use leases U.K.

(1) This section applies if—

(a) for the whole or part of any period of account, a company is the lessee of any plant or machinery under a right-of-use lease that is a long funding finance lease,

(b) there is a change in the amounts payable under the lease, and

(c) as a result of the change and in accordance with generally accepted accounting practice—

(i) a remeasurement of the lease liability is shown in the person’s accounts for the period of account, or

(ii) a deduction is shown in those accounts other than as an interest expense under the lease or an amount of depreciation, or an impairment, in respect of the right-of-use asset arising from the lease.

(2) In calculating the company’s profits for the period of account, the amount deducted in respect of amounts payable under the lease (after taking account of any limitation as a result of section 377) is to be increased or decreased so as to take account of the remeasurement or deduction mentioned in subsection (1)(c).

(3) No adjustment is to be made under subsection (2) if the remeasurement or deduction results in the company being treated by section 70D of CAA 2001 (long funding finance lease: additional expenditure: allowances for lessee) as having incurred further capital expenditure on the provision of the plant or machinery.]

Textual Amendments

F816 S. 377A inserted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 4(5)

378 Lessee under long funding finance lease: termination U.K.

(1) This section applies if—

(a) a company is or has been the lessee under a long funding finance lease, and

(b) in connection with the termination of the lease, a payment calculated by reference to the termination value falls to be made to the company.

(2) The payment is not to be brought into account in determining the profits of the company for any period of account for corporation tax purposes.

(3) Subsection (2) does not affect the amount of any disposal value that falls to be brought into account by the company under CAA 2001.

(4) For the meaning of “termination value”, see section 381(3)(m).

Lessees under long funding operating leases U.K.

379 Lessee under long funding operating lease U.K.

(1) This section applies if a company is the lessee of any plant or machinery under a long funding operating lease for the whole or part of any period of account.

(2) The deductions allowed in calculating the profits of the company for the period of account for corporation tax purposes are reduced.

(3) The amount of the reduction is so much of the expected gross reduction in value over the term of the lease as is attributable to the period of account.

(4) The expected gross reduction in value over the term of the lease is the starting value of the plant or machinery, less its expected end value.

(5) For the meaning of “starting value”, see section 380.

(6) The expected end value of plant or machinery is the amount which—

(a) at the commencement of the term of the lease is expected to be its market value at the end of the term, or

(b) if section 380(3) applies, would have been expected to be that value had that value been estimated at the commencement of the term.

(7) The expected gross reduction in value over the term of the lease that is attributable to the period of account is found by apportioning that reduction on a time basis according to the proportion of the term of the lease that falls in the period of account.

380 “Starting value” in section 379 U.K.

(1) This section is about the meaning of “starting value” in section 379 in relation to a long funding operating lease (“the section 379 lease”).

(2) Except where subsection (3) applies, the starting value is the market value of the plant or machinery at the commencement of the term of the section 379 lease.

(3) This subsection applies if the lessee—

(a) has the use of the plant or machinery as a result of having incurred expenditure on its provision for purposes other than those of a qualifying activity, but

(b) brings the plant or machinery into use for the purposes of a qualifying activity on or after 1 April 2006.

(4) If subsection (3) applies, the starting value is the lower of—

(a) first use market value, and

(b) first use amortised market value.

(5) “First use market value” means the market value of the plant or machinery at the time when it is first brought into use for the purposes of the qualifying activity.

(6) “First use amortised market value” means the value that the plant or machinery would have at the time when it is first brought into use for the purposes of the qualifying activity on the assumption in subsection (7).

(7) That assumption is that the market value of the plant or machinery at the commencement of the term of the section 379 lease had been written off on a straight line basis over its remaining useful economic life.

(8) For the meaning of “qualifying activity”, “remaining useful economic life” and writing off on a straight line basis, see section 381(4), (3)(i) and (5) respectively.

Interpretation U.K.

381 Interpretation of Chapter U.K.

(1) Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about long funding leases) applies in relation to this Chapter as it applies in relation to that Part.

(2) Accordingly—

• “the finance lease test” means the finance lease test in section 70N of CAA 2001,

• “long funding lease” has the meaning given by section 70G of that Act,

• [F817 “long funding finance lease” means—

  (a)

  in relation to any person, a long funding lease that meets the finance lease test as a result of section 70N(1)(a) of that Act, or

  (b)

  in relation to a lessee, a right-of-use lease (see section 70YI(1) of that Act) which is a long funding lease—

  (i)

  that meets the lease payments test in section 70O of that Act or the useful economic life test in section 70P of that Act, but

  (ii)

  is not a lease that, before a relevant change of classification (see section 70YA(11) of that Act), was a long funding operating lease;]

• “long funding operating lease” means a long funding lease that is not a long funding finance lease.

(3) As to the meaning of the following other expressions used in this Chapter and defined in Chapter 6A of Part 2 of CAA 2001, see—

(a) for “commencement”, in relation to the term of a lease, section 70YI(1) of that Act,

(b) for “inception”, section 70YI(1) of that Act,

(c) for “lease”, section 70YI(1) of that Act,

(d) for “lessee”, section 70YI(1) of that Act,

(e) for “lessor”, section 70YI(1) of that Act,

(f) for “market value”, in relation to plant or machinery, section 70YI(2) of that Act,

(g) for “plant or machinery”, in relation to a lease, section 70YI(3) of that Act,

(h) for “plant or machinery lease”, section 70YI(1) of that Act,

(i) for “remaining useful economic life”, section 70YI(1) of that Act,

(j) for “the term”, in relation to a lease, section 70YI(1) of that Act,

(k) for “termination”, section 70YI(1) of that Act,

(l) for “termination amount”, section 70YG of that Act, and

(m) for “termination value”, section 70YH of that Act.

(4) In this Chapter—

• “qualifying activity” has the same meaning as in Part 2 of CAA 2001, and

• “residual value”, in relation to any plant or machinery leased under a long funding operating lease, means—

  (a)

  the estimated market value of the plant or machinery on a disposal at the end of the term of the lease, less

  (b)

  the estimated costs of that disposal.

(5) Any reference in this Chapter to a sum being written off on a straight line basis over a period of time (the “writing-off period”) is a reference to—

(a) the sum being apportioned between each of the periods of account in which any part of the writing-off period falls,

(b) that apportionment being made on a time basis, according to the proportion of the writing-off period that falls in each of the periods of account, and

(c) the sum being written off accordingly.

Textual Amendments

F817 Words in s. 381(2) substituted (with effect in accordance with Sch. 14 para. 6(1) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 4(6)

Chapter 3 U.K. Sales of lessors: leasing business carried on by a company alone

Introduction U.K.

382 Introduction to Chapter U.K.

(1) This Chapter applies if there is a [F818 relevant change in the relationship between] a company carrying on a business of leasing plant or machinery otherwise than in partnership with other persons [F819 and a principal company of the company.].

(2) For the meaning of “business of leasing plant or machinery”, see sections 387 to 391.

(3) For the meaning of [F820 “relevant change in the relationship between a company and a principal company of the company”, see sections 392 to 394.]

(4) As to cases where there is a qualifying change of ownership in relation to a company carrying on a business of leasing plant or machinery in partnership with other persons, see Chapter 4.

Textual Amendments

F818 Words in s. 382(1) substituted (with effect in accordance with Sch. 18 para. 9 of the amending Act) by Finance Act 2010 (c. 13), Sch. 18 para. 2(2)(a)

F819 Words in s. 382(1) inserted (with effect in accordance with Sch. 18 para. 9 of the amending Act) by Finance Act 2010 (c. 13), Sch. 18 para. 2(2)(b)

F820 Words in s. 382(3) substituted (with effect in accordance with Sch. 18 para. 9 of the amending Act) by Finance Act 2010 (c. 13), Sch. 18 para. 2(3)

Income and matching expense in different accounting periods U.K.

383 Income and matching expense in different accounting periods U.K.

(1) This section applies if on any day (“the relevant day”)—

(a) a company carries on a business of leasing plant or machinery otherwise than in partnership,

(b) the company is within the charge to corporation tax in respect of the business, and

(c) there is a qualifying change of ownership in relation to the company.

[F821 (1A) For the meaning of “qualifying change of ownership”, see sections 394A to 398A.]

(2) On the relevant day—

(a) the company is treated as receiving an amount of income, and

(b) the accounting period of the company ends.

(3) The income—

(a) is treated as a receipt of the business, and

(b) is brought into account in calculating for corporation tax purposes the profits of the business for that accounting period.

(4) On the day following the relevant day—

(a) the company is treated as incurring an expense, and

(b) a new accounting period of the company begins.

(5) The expense—

(a) is treated as an expense of the business, and

(b) is allowed as a deduction in calculating for corporation tax purposes the profits of the business for that new accounting period.

(6) This section is supplemented by sections 384 to 386.

Textual Amendments

F821 S. 383(1A) inserted (with effect in accordance with Sch. 18 para. 9 of the amending Act) by Finance Act 2010 (c. 13), Sch. 18 para. 3

384 Amount of income and expense U.K.

(1) The amount of the income under section 383 is calculated in accordance with sections 399 to 407.

(2) The amount of the expense under section 383 is the same as the amount of the income.

385 [F822 No carry back of loss against the income] U.K.

(1) This section applies if the business carried on by the company is a trade carried on wholly or partly in the United Kingdom the profits of which are chargeable to corporation tax under Chapter 2 of Part 3 of CTA 2009 (trading income).

[F823 (2) No part of a loss may be deducted under section 37(3)(b) (relief for trade losses against total profits of earlier accounting periods) [F824 or section 45F (relief for terminal trade losses)] from so much of the company's total profits as derive from the income.

(3) For the purpose of determining how much of those profits derive from the income, those profits are to be calculated on the basis that the income is the final amount to be added.]

Textual Amendments

F822 Words in s. 385 heading substituted (with effect in accordance with s. 24(9) of the amending Act) by Finance Act 2012 (c. 14), s. 24(2)(b)

F823 S. 385(2)(3) substituted (with effect in accordance with s. 24(9) of the amending Act) by Finance Act 2012 (c. 14), s. 24(2)(a)

F824 Words in s. 385(2) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 164

386 Relief for expense otherwise giving rise to carried forward loss U.K.

(1) This section applies if—

(a) there is a qualifying change of ownership in relation to a company on any day (“the relevant day”),

(b) on the following day the company is treated under section 383 as incurring an expense of a business and an accounting period of the company (“period 1”) begins,

(c) the company makes a loss in period 1 or a later accounting period,

(d) apart from this section some or all of that loss (“the carried forward loss”) would be carried forward to the next accounting period of the company after the accounting period in which the loss is made (“the subsequent period”),

(e) some or all of the carried forward loss (“the derived loss”) derives from—

(i) the expense under section 383, or

(ii) an expense treated as arising under subsection (2) and allowed as a deduction for the accounting period in which the loss is made, and

(f) the subsequent period starts within the period of 5 years beginning immediately after the relevant day and does not start as a result of section 383 or 425.

(2) Instead of being so carried forward, the derived loss is to be treated for corporation tax purposes as giving rise to an expense of an amount equal to—

where—

DL is the derived loss,

D is the number of days in the accounting period in which the loss is made, and

R is the percentage rate applicable to section 826 of ICTA under section 178 of FA 1989.

(3) The amount of the expense under this section is allowed as a deduction in calculating for corporation tax purposes the profits of the business for the subsequent period.

(4) For the purpose of determining how much of the carried forward loss derives from the expense under section 383 or an expense within subsection (1)(e)(ii), the loss is to be calculated on the basis that that expense is the final amount to be deducted.

“Business of leasing plant or machinery” U.K.

387 “Business of leasing plant or machinery” U.K.

(1) This section determines for the purposes of this Chapter whether, on any day (“the relevant day”), a company (“the relevant company”) carries on a business of leasing plant or machinery.

(2) A business carried on by the relevant company is a business of leasing plant or machinery on the relevant day if condition A or B is met.

(3) Condition A is that at least half of the relevant plant or machinery value relates to [F825 plant or machinery falling within subsection (7)].

(4) Subsection (3) is supplemented by section 388.

[F826 (5) Condition B is that at least half of the relevant company's income in the past 12 months derives from plant or machinery falling within subsection (7).]

(6) Subsection (5) is supplemented by section 391.

[F827 (7) Plant or machinery falls within this subsection if—

(a) it is or at any time in the past 12 months has been leased out by the relevant company or a qualifying associate,

(b) the lease under which it is or has been leased out is a plant or machinery lease but not an excluded lease of background plant or machinery for a building (see section 437(3)), and

(c) if the plant or machinery satisfies paragraph (a) only because it is or has been leased out by a qualifying associate, the lessee under the lease is or was someone other than the relevant company.

(8) For the purposes of subsection (7)—

(a) plant or machinery is “leased out” by a person if it is subject to a plant or machinery lease under which that person is a lessor,

(b) “ associate ” means a person connected with the relevant company (see also subsection (9)), and

(c) a person is a “qualifying associate” if the person is an associate at the start of the relevant day or at any earlier time in the past 12 months (whether or not a time when the plant or machinery was leased out by the person).

(9) If the relevant company is owned by a consortium or is a qualifying 75% subsidiary of a company owned by a consortium, the reference in subsection (8)(b) to a person connected with the relevant company also includes—

(a) any member of the consortium, and

(b) any person connected with such a member.

(10) A reference in this section to the past 12 months is to the period of 12 months ending with the relevant day.]

Textual Amendments

F825 Words in s. 387(3) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11) , Sch. 6 para. 2(2)

F826 S. 387(5) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11) , Sch. 6 para. 2(3)

F827 S. 387(7)-(10) substituted for s. 387(7)(8) (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11) , Sch. 6 para. 2(4)

388 “Relevant plant or machinery value” for condition A in section 387 U.K.

(1) This section applies for the purposes of condition A in section 387.

(2) The relevant plant or machinery value is the sum of the amounts in subsection (3), but subject to section 390 (relevant plant or machinery value where relevant company lessee under long funding lease etc).

(3) The amounts are—

(a) the amounts (if any) that would be shown in respect of plant or machinery in the appropriate balance sheet of the relevant company drawn up as at the start of the relevant day, and

(b) the amounts (if any) that would be shown in the appropriate balance sheet of the relevant company drawn up as at the end of the relevant day in respect of relevant transferred plant or machinery.

(4) For the purposes of subsection (3)(b) plant or machinery is “relevant transferred plant or machinery” if an amount in respect of it would be shown in the appropriate balance sheet of an associated company drawn up as at the start of the relevant day.

(5) This section is supplemented by section 389.

389 Provision supplementing section 388 U.K.

(1) For the purposes of section 388 and this section the amounts shown in the appropriate balance sheet of any company in respect of any plant or machinery are—

(a) the amounts shown in that balance sheet as the net book value (or carrying amount) in respect of the plant or machinery, and

(b) the amounts shown in that balance sheet as the net investment in respect of finance leases of the plant or machinery.

(2) If—

(a) any of the plant or machinery is a fixture in any land (see section 437(5)), and

(b) the amount which falls (or would fall) to be shown in an appropriate balance sheet as the net book value (or carrying amount) of the land includes (or would include) an amount in respect of the fixture,

the amount of the net book value (or carrying amount) in respect of the fixture is determined on a just and reasonable basis.

(3) If—

(a) any of the plant or machinery is subject to a finance lease (see section 437(4)), and

(b) any land or other asset which is not plant or machinery is subject to that lease,

the amount of the net investment in respect of the finance lease of that plant or machinery is determined on a just and reasonable basis.

(4) In section 388 and this section any reference to any amount shown in the appropriate balance sheet of a company is to the amount which, on the assumptions in subsection (5), falls (or would fall) to be shown in a balance sheet of the company.

(5) The assumptions are—

(a) that the balance sheet is drawn up in accordance with generally accepted accounting practice, and

(b) that, if the company acquired any plant or machinery in circumstances in which this paragraph applies, the plant or machinery had been acquired for an amount equal to its [F828 ascribed value] as at the relevant day.

(6) Paragraph (b) of subsection (5) applies if—

(a) the relevant day falls on or after 22 March 2006,

(b) the plant or machinery was acquired directly or indirectly from a person who was connected with the company when the acquisition took place, and

(c) either the acquisition took place on or after 5 December 2005 or the person from whom the plant or machinery was so acquired was also connected with the company on that date.

Textual Amendments

F828 Words in s. 389(5)(b) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 3

390 Relevant plant or machinery value where relevant company lessee under long funding lease etc U.K.

(1) Any amount included in the amounts mentioned in section 388(2) in respect of plant or machinery to which this section applies is to be deducted from the sum mentioned in that section.

(2) But the [F829 ascribed value] as at the relevant day of any plant or machinery to which this section applies is to be added to that sum or, if that sum is nil, is the relevant plant or machinery value.

(3) This section applies to plant or machinery if—

(a) condition A or B is met at the start of the relevant day, or

(b) the plant or machinery is acquired by the relevant company from an associated company on the relevant day and condition A or B is met at the end of that day.

(4) Condition A is that the relevant company is the lessee of the plant or machinery under a long funding finance lease or a long funding operating lease.

(5) Condition B is that the relevant company is treated as the owner of the plant or machinery under section 67 of CAA 2001 (hire purchase and similar contracts).

Textual Amendments

F829 Words in s. 390(2) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 4

391 Relevant company's income for condition B in section 387 U.K.

(1) This section applies for the purposes of condition B in section 387.

(2) The reference to the relevant company's income is to its income as calculated for corporation tax purposes.

(3) Any apportionment necessary to determine the amount of the relevant company's income attributable to the period of 12 months ending with the relevant day is to be made on a time basis.

(4) But—

(a) that basis does not apply if it would work in an unjust or unreasonable way in relation to any person, and

(b) in that case the apportionment is to be made instead on a just and reasonable basis.

(5) The proportion of the income that derives from [F830 plant or machinery falling within section 387(7)] is to be determined on a just and reasonable basis.

Textual Amendments

F830 Words in s. 391(5) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 5

[F831 “Relevant change in relationship” ] U.K.

Textual Amendments

F831 S. 392 and cross-heading substituted (with effect in accordance with Sch. 18 para. 9 of the amending Act) by Finance Act 2010 (c. 13) , Sch. 18 para. 4

[F831 392 “Relevant change in relationship” U.K.

For the purposes of the sales of lessors Chapters there is a relevant change in the relationship between a company (“A”) and a principal company of A on any day in any of the circumstances in section 393 or 394 (qualifying 75% subsidiaries and consortium relationships) [F832 or section 394ZA (company joining tonnage tax group)]].

Textual Amendments

F832 Words in s. 392 inserted (with effect in accordance with s. 24(10) of the amending Act) by Finance Act 2012 (c. 14), s. 24(3)

393 Qualifying 75% subsidiaries U.K.

(1) A company (“B”) is a principal company of A if—

(a) A is a qualifying 75% subsidiary of B, and

(b) B is not a qualifying 75% subsidiary of another company.

(2) There is a relevant change in the relationship between A and B (as a principal company) on any day if A ceases to be a qualifying 75% subsidiary of B on that day.

(3) A company (“C”) is a principal company of A if—

(a) A is a qualifying 75% subsidiary of B,

(b) B is a qualifying 75% subsidiary of C, and

(c) C is not a qualifying 75% subsidiary of another company.

(4) There is a relevant change in the relationship between A and C (as a principal company) on any day if—

(a) A ceases to be a qualifying 75% subsidiary of B on that day, or

(b) B ceases to be a qualifying 75% subsidiary of C on that day.

(5) If C is a qualifying 75% subsidiary of another company (“D”), D is a principal company of A unless D is a qualifying 75% subsidiary of another company, and so on.

(6) Accordingly, there is a relevant change in the relationship between A and a principal company of A on any day if—

(a) in determining which company is a principal company, regard is had to any company which is a qualifying 75% subsidiary of another, and

(b) that company ceases to be a qualifying 75% subsidiary of the other on that day.

(7) This section is supplemented by section 398 (“qualifying 75% F833 ... subsidiary” etc).

Textual Amendments

F833 Words in s. 393(7) omitted (with effect in accordance with s. 29(8) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 29(2)

394 Consortium relationships U.K.

(1) A company (“E”) is a principal company of A if—

(a) A is owned by a consortium of which E is a member, or

(b) A is a qualifying [F834 75%] subsidiary of a company owned by a consortium of which E is a member,

and E is not a qualifying 75% subsidiary of another company.

(2) There is a relevant change in the relationship between A and E (as a principal company) on any day if the ownership proportion at the end of the day is less than the ownership proportion at the start of the day.

(3) In this section “the ownership proportion” is whichever is the lowest of the following percentages—

(a) the percentage of the ordinary share capital of A that is beneficially owned by E,

(b) the percentage to which E is beneficially entitled of any profits available for distribution to equity holders of A, and

(c) the percentage to which E would be beneficially entitled of any assets of A available for distribution to its equity holders on a winding up.

(4) But if A is a qualifying [F835 75%] subsidiary of a company, subsection (3) is to be read as if references to that company were substituted for references to A.

(5) A company (“F”) is a principal company of A if, in a case where E is a qualifying 75% subsidiary of F but F is not a qualifying 75% subsidiary of another company—

(a) A is owned by a consortium of which E is a member, or

(b) A is a qualifying [F836 75%] subsidiary of a company owned by a consortium of which E is a member.

(6) There is a relevant change in the relationship between A and F (as a principal company) on any day if—

(a) the ownership proportion at the end of the day is less than the ownership proportion at the start of the day, or

(b) E ceases to be a qualifying 75% subsidiary of F on that day.

(7) If F is a qualifying 75% subsidiary of another company (“G”), G is a principal company of A unless G is a qualifying 75% subsidiary of another company, and so on.

(8) Accordingly, there is a relevant change in the relationship between A and a principal company of A on any day if—

(a) in determining which company is a principal company, regard is had to any company which is a qualifying 75% subsidiary of another, and

(b) that company ceases to be a qualifying 75% subsidiary of the other on that day,

(as well as if the ownership proportion at the end of the day is less than the ownership proportion at the start of the day).

(9) This section is supplemented by—

(a) section 397 (companies owned by consortiums and members of consortiums), and

(b) section 398 (“qualifying 75% F837 ... subsidiary” etc).

Textual Amendments

F834 Figure in s. 394(1)(b) substituted (with effect in accordance with s. 29(8) of the amending Act) by Finance Act 2010 (c. 13), s. 29(3)(a)

F835 Figure in s. 394(4) substituted (with effect in accordance with s. 29(8) of the amending Act) by Finance Act 2010 (c. 13), s. 29(3)(a)

F836 Figure in s. 394(5)(b) substituted (with effect in accordance with s. 29(8) of the amending Act) by Finance Act 2010 (c. 13), s. 29(3)(a)

F837 Words in s. 394(9)(b) omitted (with effect in accordance with s. 29(8) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 29(3)(b)

[F838 394ZA Company joining tonnage tax group U.K.

There is a relevant change in the relationship between A and a principal company of A on any day if—

(a) on that day A becomes a member of a tonnage tax group for the purposes of Schedule 22 to FA 2000 without entering tonnage tax on that day, or

(b) the day ends immediately before the day on which, for the purposes of that Schedule, A both becomes a member of a tonnage tax group and enters tonnage tax.]

Textual Amendments

F838 S. 394ZA inserted (with effect in accordance with s. 24(10) of the amending Act) by Finance Act 2012 (c. 14), s. 24(4)

[F839 “Qualifying change of ownership” U.K.

Textual Amendments

F839 S. 394A and cross-heading inserted (with effect in accordance with Sch. 18 para. 9 of the amending Act) by Finance Act 2010 (c. 13), Sch. 18 para. 5

394A “Qualifying change of ownership” U.K.

[F840 (1)] For the purposes of the sales of lessors Chapters there is a qualifying change of ownership in relation to a company (“A”) on any day if there is a relevant change in the relationship on that day between A and a principal company of A unless any of the following apply—

(a) section 395(2),

(b) section 396(2), or

(c) section 398A(2) or (5).

[F841 (2) If the qualifying change of ownership would (but for this subsection) occur on any day as a result of—

(a) section 393 or 394ZA, or

(b) section 394 or 394ZA,

it is treated instead for the purposes of the sales of lessors Chapters as occurring on that day solely as a result of section 394ZA.]]

Textual Amendments

F840 S. 394A(1) renumbered (with effect in accordance with s. 24(10) of the amending Act) by Finance Act 2012 (c. 14), s. 24(5)(a)

F841 S. 394A(2) inserted (with effect in accordance with s. 24(10) of the amending Act) by Finance Act 2012 (c. 14), s. 24(5)(b)

395 No qualifying change of ownership in certain intra-group reorganisations U.K.

(1) This section applies if—

(a) a relevant change in the relationship between a company (“A”) and a principal company of A occurs on any day,

(b) that change occurs by reference to A or any other company ceasing to be a qualifying 75% subsidiary on that day, and

(c) A, and every company by reference to which that change occurs, are qualifying 75% subsidiaries of the principal company concerned at the start and end of that day.

(2) For the purposes of the sales of lessors Chapters, there is no qualifying change of ownership in relation to A on that day as a result of that change in the relationship.

396 No qualifying change of ownership where principal company's interest in consortium company unchanged U.K.

(1) This section applies if—

(a) a company (“A”) is owned by a consortium, and

(b) a relevant change in the relationship between A and a principal company of A occurs on any day,

but the principal company's interest in A remains unchanged.

(2) For the purposes of the sales of lessors Chapters, there is no qualifying change of ownership in relation to A on that day as a result of that change in that relationship.

(3) For the purposes of this section the principal company's interest in A remains unchanged if the percentage of the ordinary share capital of A that is beneficially owned directly or indirectly by the principal company is the same at the beginning and end of that day.

(4) Sections 1155 to 1157 apply for construing subsection (3).

397 Companies owned by consortiums and members of consortiums U.K.

(1) This section defines what a company being owned by, or a member of, a consortium means for the purposes of the sales of lessors Chapters.

(2) A company is owned by a consortium if—

(a) it is not a qualifying 75% subsidiary of any company,

(b) at least 75% of its ordinary share capital is beneficially owned between them by other companies, and

(c) none of those other companies owns less than 5% of that capital.

(3) Those other companies are the members of the consortium.

398 “Qualifying 75% F842 ... subsidiary” etc U.K.

(1) For the purposes of the sales of lessors Chapters, a company (“the subsidiary company”) is a qualifying 75% subsidiary of another company (“the parent company”) if condition A or B is met and condition C is met.

(2) Condition A is that—

(a) the subsidiary company has ordinary share capital, and

(b) the subsidiary company is a 75% subsidiary of the parent company.

(3) Condition B is that—

(a) the subsidiary company does not have ordinary share capital, and

(b) the parent company has control of the subsidiary company.

(4) Condition C is that the parent company—

(a) is beneficially entitled to at least 75% of any profits available for distribution to equity holders of the subsidiary company, and

(b) would be beneficially entitled to at least 75% of any assets of the subsidiary company available for distribution to its equity holders on a winding up.

F843 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F844 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) Chapter 6 of Part 5 (equity holders and profits or assets available for distribution)—

(a) applies for the purposes of section 394(3)(b) and (c) (including that section as applied for the purposes of section 406(5)) and of section 405(5)(b) and (c) as that Chapter applies for the purposes of section 143(3)(b) and (c) (condition 1: surrendering company owned by consortium) and section 144(3)(b) and (c) (condition 1: claimant company owned by consortium), and

(b) applies for the purposes of subsection (4)(a) and (b) as that Chapter applies for the purposes of section 151(4)(a) and (b) (meaning of “ 75% subsidiary ”F845 ...).

(8) But in a case where the subsidiary company does not have ordinary share capital, Chapter 6 of Part 5 applies for those purposes as if the members of that company were equity holders of that company for the purposes of that Chapter.

Textual Amendments

F842 Words in s. 398 heading omitted (with effect in accordance with s. 29(8) of the amending Act) by virtue of Finance Act 2010 (c. 13) , s. 29(4)

F843 S. 398(5) omitted (with effect in accordance with s. 29(8) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 29(4)(a)

F844 S. 398(6) omitted (with effect in accordance with s. 29(8) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 29(4)(a)

F845 Words in s. 398(7)(b) omitted (with effect in accordance with s. 29(8) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 29(4)(b)

[F846 Election out of qualifying change of ownership U.K.

Textual Amendments

F846 Ss. 398A-398G and cross-heading inserted (with effect in accordance with Sch. 18 para. 9 of the amending Act) by Finance Act 2010 (c. 13), Sch. 18 para. 6 (with Sch. 18 paras. 11-13)

398A Election out of qualifying change of ownership U.K.

(1) This section applies if—

(a) on any day [F847 before 23 March 2011 ] (“ the relevant day ”) a company (“A”) carries on a business of leasing plant or machinery otherwise than in partnership,

(b) there is a relevant change in the relationship between A and a principal company of A (“P”) on the relevant day, and

(c) an election that this section is to apply is made by A.

(2) For the purposes of the sales of lessors Chapters, there is no qualifying change of ownership in relation to A on the relevant day as a result of the change in the relationship but—

(a) subsections (2)(b) and (4)(b) of section 383 nevertheless apply,

(b) section 398D (and section 398C so far as relating to it) has effect during the relevant period, and

(c) sections 398E to 398G (and section 398C so far as relating to section 398E) have effect on the relevant day and during the relevant period.

(3) “The relevant period” is the period—

(a) beginning with the day after the relevant day, and

(b) ending with the day on which there is next a relevant change in the relationship between A and a principal company of A falling within subsection (4) (or continuing indefinitely if there is not another such relevant change).

(4) A relevant change in the relationship between A and a principal company of A falls within this subsection if, as a result of it, the (unadjusted) basic amount (see section 399) is (or, but for a further election, would be) treated as a receipt of the business of leasing plant or machinery carried on by A.

(5) Where during the relevant period there is a relevant change in the relationship between A and a principal company of A but the relevant period is not brought to an end by it, for the purposes of the sales of lessors Chapters there is no qualifying change of ownership in relation to A as a result of the change in the relationship.

Textual Amendments

F847 Words in s. 398A(1)(a) inserted (retrospective to 23.3.2011) by Finance Act 2011 (c. 11), s. 54(1)(2)

398B The election U.K.

(1) The election under section 398A must state the date of the relevant day.

(2) The election must be made—

(a) by notice to an officer of Revenue and Customs, and

(b) during the period of two years beginning with the relevant day.

(3) The election is irrevocable.

(4) All such assessments and adjustments of assessments are to be made as are necessary to give effect to the election.

398C Special treatment of A's trade or business that includes leasing U.K.

(1) Sections 398D and 398E make special provision about the trade or property business consisting of or including A's business of leasing plant or machinery.

(2) In those sections “ the relevant activity ” means—

(a) if A's business of leasing plant or machinery constitutes or forms part of a trade, that trade, and

(b) if it forms part of a property business, that property business.

398D Restrictions on use of losses etc U.K.

(1) No loss may be deducted under—

(a) Chapter 2 of Part 4,

(b) section 62, or

(c) section 189,

from so much of the total profits of A as are attributable to the carrying on of the relevant activity except to the extent that the loss or charge is attributable to the carrying on of the relevant activity.

(2) Group relief is not to be given under Part 5 against so much of the total profits of A as are attributable to the carrying on of the relevant activity.

[F848 (2A) Group relief for carried-forward losses is not to be given under Part 5A against so much of the total profits of A as are attributable to the carrying on of the relevant activity.]

(3) No deficit may be set off under section 461 of CTA 2009 (non-trading deficit from loan relationship) against profits attributable to the carrying on of the relevant activity except to the extent that the deficit is attributable to the carrying on of the relevant activity.

(4) No loss may be set off under section 753 of CTA 2009 (non-trading loss on intangible fixed assets) against so much of the total profits of A as are attributable to the carrying on of the relevant activity except to the extent that the loss or charge is attributable to the carrying on of the relevant activity.

(5) No deduction is to be allowed under section 1219 of CTA 2009 (expenses of management of investment business) from so much of the total profits of A as are attributable to the carrying on of the relevant activity except to the extent that the expenses concerned are attributable to the carrying on of the relevant activity.

F849 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F849 (6A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) If A would otherwise be a tonnage tax company under Schedule 22 to FA 2000 (tonnage tax) it is to be treated as not being such a company.

Textual Amendments

F848 S. 398D(2A) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 165

F849 S. 398D(6)(6A) omitted (18.11.2015) (with effect in accordance with s. 36(3)-(5) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), s. 36(2)(a)

398E Restriction on artificial losses or reductions in profits U.K.

(1) This section applies if any expenditure incurred by A in carrying on the relevant activity has an unallowable purpose.

(2) In calculating the profits or losses of A for any accounting period for the purposes of corporation tax so much of the expenditure as, on a just and reasonable apportionment, is attributable to the unallowable purpose is to be left out of account.

(3) Expenditure has an unallowable purpose if the main purpose, or one of the main purposes, of A in incurring it is to obtain a relevant tax advantage (“the unallowable purpose”).

(4) A “relevant tax advantage” is—

(a) a reduction in the profits which, for the purposes of corporation tax, are attributable to the carrying on of the relevant activity by A,

(b) the creation of a loss which, for those purposes, is so attributable, or

(c) an increase in losses which, for those purposes, are so attributable.

398F Limit on availability of capital allowances to A U.K.

(1) Expenditure incurred by A in providing plant or machinery is not qualifying expenditure for the purposes of Part 2 of CAA 2001 if the expenditure is incurred on the acquisition or creation of an independent asset.

(2) An asset is an “independent” asset if, in the normal course of business—

(a) it could be used individually (whether or not it could also be used in conjunction with another asset or other assets as a constituent part of a single asset consisting of more than one asset (a “combined asset”)), or

(b) it could be used (at different times) as a constituent part of different combined assets.

398G Transfers into and out of A U.K.

(1) Section 948 does not apply where A is the predecessor or the successor.

F850 ( 2 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F851 (3) If any event occurs that requires A to bring the disposal value of plant or machinery into account under Part 2 of CAA 2001, that Part has effect as if the disposal value that A is required to bring into account were the higher of—

(a) the disposal value determined in accordance with that Part, and

(b) the ascribed value of the plant or machinery.

(4) Section 265 of CAA 2001 (successions) is subject to this section. ]]

Textual Amendments

F850 S. 398G(2) omitted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 6 para. 6(2)

F851 S. 398G(3)(4) substituted for s. 398G(3) (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 6(3)

The amount of the income U.K.

399 The amount of the income: the basic amount U.K.

(1) This section determines the amount of the income under section 383 when a qualifying change of ownership in relation to a company carrying on a business of leasing plant or machinery occurs on any day.

(2) The amount of the income is found by—

(a) applying the formula in subsection (3) to give the basic amount, and

(b) making any adjustment in accordance with any of sections 404 to 406 to the basic amount.

(3) The formula is—

(4) For this purpose—

• “ PM ” has the meaning given by sections 400 to 402, and

• “ TWDV ” has the meaning given by section 403.

(5) In those sections references to the relevant company and the relevant day are to the company and the day mentioned in subsection (1).

400 “PM” in section 399 U.K.

(1) For the purposes of this section and sections 401 and 402 references to plant or machinery, in the case of any company, include all plant or machinery, whether or not subject to a lease, except for plant or machinery within subsection (2).

(2) Plant or machinery is within this subsection if—

(a) the company has not incurred expenditure on its provision that is qualifying expenditure for the purposes of Part 2 of CAA 2001,

(b) the company is a lessor of it under a long funding lease,

(c) as a result of section 67 of that Act (hire-purchase and similar contracts) it is treated for the purposes of that Part as owned by a person other than the company, or

(d) it is to be ignored as a result of section 407(2) (migration).

(3) For the purposes of section 399, “PM” is the sum of—

(a) the amounts (if any) which would be shown in respect of plant or machinery in the appropriate balance sheet of the relevant company drawn up as at the start of the relevant day, and

(b) the amounts (if any) which would be shown in the appropriate balance sheet of the relevant company drawn up as at the end of the relevant day in respect of relevant transferred plant or machinery.

(4) For the purposes of subsection (3)(b), plant or machinery is “relevant transferred plant or machinery” if an amount in respect of it would be shown in the appropriate balance sheet of an associated company drawn up as at the start of the relevant day.

(5) This section is supplemented by section 401 and is subject to section 402 (“PM” where relevant company lessee under long funding lease etc ).

401 Provisions supplementing section 400 U.K.

(1) For the purposes of section 400 and this section the amounts shown in the appropriate balance sheet of any company in respect of any plant or machinery are—

(a) the amounts shown in that balance sheet as the net book value (or carrying amount) in respect of the plant or machinery, and

(b) the amounts shown in that balance sheet as the net investment in respect of finance leases of the plant or machinery.

(2) If—

(a) any of the plant or machinery is a fixture in any land (see section 437(5)), and

(b) the amount which falls (or would fall) to be shown in an appropriate balance sheet as the net book value (or carrying amount) of the land includes (or would include) an amount in respect of the fixture,

the amount of the net book value (or carrying amount) in respect of the fixture is determined on a just and reasonable basis.

(3) If—

(a) any of the plant or machinery is subject to a finance lease (see section 437(4)), and

(b) any land or asset which is not plant or machinery is subject to that lease,

the amount of the net investment in respect of the finance lease of that plant or machinery is determined on a just and reasonable basis.

(4) In section 400 and this section any reference to any amount shown in the appropriate balance sheet of a company is to the amount which, on the assumptions in subsection (5), falls (or would fall) to be shown in a balance sheet of the company.

(5) The assumptions are—

(a) that the balance sheet is drawn up in accordance with generally accepted accounting practice, and

(b) that, if the company acquired any plant or machinery in circumstances in which this paragraph applies, the plant or machinery had been acquired for an amount equal to its [F852 ascribed value] as at the relevant day.

(6) Paragraph (b) of subsection (5) applies if—

(a) the relevant day falls on or after 22 March 2006,

(b) the plant or machinery was acquired directly or indirectly from a person who was connected with the company when the acquisition took place, and

(c) either the acquisition took place on or after 5 December 2005 or the person from whom the plant or machinery was so acquired was also connected with the company on that date.

Textual Amendments

F852 Words in s. 401(5)(b) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 7

402 “PM” where relevant company lessee under long funding lease etc U.K.

(1) Any amount included in the amounts mentioned in paragraph (a) or (b) of section 400(3) in respect of plant or machinery to which this section applies is to be deducted from the sum mentioned in that section.

(2) But the [F853 ascribed value] as at the relevant day of any plant or machinery to which this section applies is to be added to that sum or, if that sum is nil, is “PM”.

(3) This section applies to plant or machinery if—

(a) condition A or B is met at the start of the relevant day, or

(b) the plant or machinery is acquired by the relevant company from an associated company on the relevant day and condition A or B is met at the end of that day.

(4) Condition A is that the relevant company is the lessee of the plant or machinery under a long funding finance lease or a long funding operating lease.

(5) Condition B is that the relevant company is treated as the owner of the plant or machinery under section 67 of CAA 2001 (hire purchase and similar contracts).

Textual Amendments

F853 Words in s. 402(2) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 8

403 “TWDV” in section 399 U.K.

(1) For the purposes of section 399, “ TWDV ” means the sum of—

(a) the total amount of unrelieved qualifying expenditure in single asset pools for the new chargeable period that is carried forward in the pools from the previous chargeable period under section 59 of CAA 2001,

(b) the total amount of unrelieved qualifying expenditure in class pools for the new chargeable period that is carried forward in the pools from the previous chargeable period under that section, and

(c) the amount of unrelieved qualifying expenditure in the main pool for the new chargeable period that is carried forward in the pool from the previous chargeable period under that section.

(2) For the purposes of this section—

(a) “ the new chargeable period ” means the accounting period of the relevant company that begins on the day following the relevant day (see section 383(4)(b)), and

[F854 (b) in calculating the amounts of unrelieved qualifying expenditure mentioned in subsection (1)(a) to (c), any part of those amounts that is relevant new expenditure is to be left out of account.]

[F855 (3) Relevant new expenditure” means—

(a) expenditure attributable to plant or machinery acquired by the relevant company on the relevant day except for plant or machinery acquired on that day from an associated company, and

(b) expenditure incurred on the relevant day but attributable to plant or machinery acquired by the relevant company before that day.

(4) In subsection (3)—

(a) “ acquired ” includes brought into use or made available for use for the first time for the purposes of the business, and

(b) a reference to anything acquired or incurred includes anything treated as acquired or treated as incurred.]

Textual Amendments

F854 S. 403(2)(b) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 9(2)

F855 S. 403(3)(4) inserted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 9(3)

404 Amount to be nil if basic amount negative U.K.

If the basic amount given by the formula in section 399(3) is a negative amount, the amount is taken instead to be nil.

405 Adjustment to the basic amount: qualifying 75% subsidiaries U.K.

(1) This section applies if—

(a) the qualifying change of ownership occurs on any day as a result of section 393 (qualifying 75% subsidiaries),

(b) the change occurs by reference to a company (“A”) ceasing to be a qualifying 75% subsidiary of another company (“B”) on that day, and

(c) on that day A meets one of the conditions in subsection (2).

(2) The conditions are—

(a) that A becomes owned by a consortium of which B is a member, or

(b) that A becomes a qualifying [F856 75%] subsidiary of a company owned by a consortium of which B is a member.

(3) The basic amount is adjusted so that the amount of the income is limited to the appropriate percentage of the basic amount.

(4) The appropriate percentage is found by subtracting the ownership percentage at the end of the day from 100%.

(5) For this purpose “the ownership percentage” is whichever is the lowest of the following percentages—

(a) the percentage of the ordinary share capital of A that is beneficially owned by B,

(b) the percentage to which B is beneficially entitled of any profits available for distribution to equity holders of A, and

(c) the percentage to which B would be beneficially entitled of any assets of A available for distribution to its equity holders on a winding up.

(6) But if A becomes a qualifying [F857 75%] subsidiary of a company, subsection (5) is to be read as if references to that company were substituted for references to A.

Textual Amendments

F856 Figure in s. 405(2)(b) substituted (with effect in accordance with s. 29(8) of the amending Act) by Finance Act 2010 (c. 13), s. 29(5)

F857 Figure in s. 405(6) substituted (with effect in accordance with s. 29(8) of the amending Act) by Finance Act 2010 (c. 13), s. 29(5)

406 Adjustment to the basic amount: consortium relationships U.K.

(1) This section applies if the qualifying change of ownership occurs as a result of section 394 (consortium relationships).

(2) In a case where that change arises only because the ownership proportion at the end of the day on which the change occurs is less than the ownership proportion at the start of the day, the amount of the income is limited to the appropriate proportion of the basic amount.

(3) The appropriate proportion is found by subtracting the ownership proportion at the end of the day from the ownership proportion at the start of the day.

(4) In any other case, the amount of the income is limited to the ownership proportion at the start of the day on which the change occurs of the basic amount.

(5) In this section “ the ownership proportion ” has the same meaning as in section 394 (see section 394(3) and (4)).

407 Migration U.K.

(1) This section applies if on any day (“ the relevant day ”)—

(a) a company begins to be within the charge to corporation tax in respect of a business of leasing plant or machinery which it carries on otherwise than in partnership, and

(b) a qualifying change of ownership in relation to the company occurs.

(2) For the purposes of this Chapter, any plant or machinery is to be ignored in calculating the amount of the income treated as received on the relevant day if an amount would be shown in respect of it in a balance sheet of the company drawn up immediately before that day in accordance with generally accepted accounting practice.

“Associated company” U.K.

408 “Associated company” U.K.

(1) This section gives the meaning of “ associated company ” for the purposes of this Chapter.

(2) References to an associated company in any provision other than subsection (6)(b) are to a company which is an associated company of the company that is the relevant company for the purposes of that provision on the day that is the relevant day for those purposes.

(3) A company is an “associated company” of another company on any day if, at the start of that day—

(a) one of the two has control of the other, or

(b) both are under the control of the same person or persons,

(4) Section 450 (meaning of “ control ” for the purposes of Part 10 (close companies)) applies for the purposes of subsection (3).

(5) Subsection (6) applies if at the start of any day a company (“the consortium company”)—

(a) is owned by a consortium, or

(b) is a qualifying [F858 75%] subsidiary of a company owned by a consortium.

(6) On that day the following companies are also associated companies of the consortium company—

(a) any relevant member of the consortium on that day, and

(b) any company which is an associated company of any relevant member of the consortium on that day.

(7) For the purposes of subsection (6) a member of the consortium is a “relevant” member on any day if—

(a) it is a member of the consortium at the start of the day,

(b) one or more qualifying changes of ownership occur in relation to the consortium company on that day, and

(c) any of those changes occur in a case where the member of the consortium is regarded as “ E ” for the purposes of section 394 (consortium relationships).

Textual Amendments

F858 Figure in s. 408(5)(b) substituted (with effect in accordance with s. 29(8) of the amending Act) by Finance Act 2010 (c. 13), s. 29(6)

Chapter 4 U.K. Sales of lessors: leasing business carried on by a company in partnership

Introduction U.K.

409 Introduction to Chapter U.K.

(1) This Chapter applies if, in the case of a company carrying on a business of leasing plant or machinery in partnership with other persons—

(a) there is a qualifying change in the company's interest in the business, (see sections 415 and 416), or

(b) there is a qualifying change of ownership in relation to the company (see sections 392 to 398).

(2) Sections 417 to 424 apply in the case mentioned in subsection (1)(a).

(3) Sections 425 to 429 apply in the case mentioned in subsection (1)(b).

(4) Sections 410 to 414 determine for the purposes of this Chapter whether on any day a business carried on by a company in partnership with other persons is a business of leasing plant or machinery.

(5) In sections 410 to 414—

(a) that day is referred to as “the relevant day”,

(b) that company is referred to as “the partner company”, and

(c) that partnership is referred to as “the partnership”.

(6) Elsewhere in this Chapter references to the partner company are to the company referred to in subsection (1)(a) or, as the case may be, subsection (1)(b).

“Business of leasing plant or machinery” U.K.

410 “Business of leasing plant or machinery” U.K.

(1) A business carried on by the partnership is a business of leasing plant or machinery on the relevant day if condition A or B is met.

(2) Condition A is that at least half of the relevant plant or machinery value relates to [F859 plant or machinery falling within subsection (6)].

(3) Subsection (2) is supplemented by section 411.

[F860 (4) Condition B is that at least half of the partnership's income in the past 12 months derives from plant or machinery falling within subsection (6).]

(5) Subsection (4) is supplemented by section 414.

[F861 (6) Plant or machinery falls within this subsection if—

(a) it is or at any time in the past 12 months has been leased out by the partnership or a qualifying associate,

(b) the lease under which it is or has been leased out is a plant or machinery lease but not an excluded lease of background plant or machinery for a building (see section 437(3)), and

(c) if the plant or machinery satisfies paragraph (a) only because it is or has been leased out by a qualifying associate, the lessee under the lease is or was someone other than the partnership.

(7) For the purposes of subsection (6)—

(a) plant or machinery is “leased out” by a person if it is subject to a plant or machinery lease under which that person is a lessor,

(b) “ associate ” means a person who is a partner in the partnership or connected with a partner in the partnership (see also subsection (8)), and

(c) a person is a “qualifying associate” if the person is an associate at the start of the relevant day or at any earlier time in the past 12 months (whether or not a time when the plant or machinery was leased out by the person).

(8) In relation to a corporate partner who is owned by a consortium or is a qualifying 75% subsidiary of a company owned by a consortium, the reference in subsection (7)(b) to a person connected with a partner also includes—

(a) any member of the consortium, and

(b) any person connected with such a member.

(9) A reference in this section to the past 12 months is to the period of 12 months ending with the relevant day.]

Textual Amendments

F859 Words in s. 410(2) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 11(2)

F860 S. 410(4) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 11(3)

F861 S. 410(6)-(9) substituted for s. 410(6)(7) (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 11(4)

411 “Relevant plant or machinery value” for condition A in section 410 U.K.

(1) This section applies for the purposes of condition A in section 410.

(2) The relevant plant or machinery value is the sum of the amounts in subsection (3), but subject to section 413 (relevant plant or machinery value where partnership lessee under long funding lease).

(3) The amounts are—

(a) the amounts (if any) that would be shown in respect of plant or machinery in the appropriate balance sheet of the partnership drawn up as at the start of the relevant day, and

(b) the amounts (if any) that would be shown in the appropriate balance sheet of the partnership drawn up as at the end of the relevant day in respect of relevant transferred plant or machinery.

(4) For the purposes of subsection (3)(b) plant or machinery is “relevant transferred plant or machinery” if an amount in respect of it would be shown in the appropriate balance sheet of any company mentioned in subsection (5) drawn up as at the start of the relevant day.

(5) Those companies are—

(a) the partner company,

(b) any company which is an associated company of the partner company on the relevant day (see section 430),

(c) any other corporate partner in relation to whose interest in the business there is a qualifying change on the relevant day,

(d) any other corporate partner in relation to which there is a qualifying change of ownership on the relevant day, and

(e) any company which is an associated company of any other corporate partner mentioned in paragraph (c) or (d) on the relevant day.

(6) For the purposes of subsection (5) “any other corporate partner” means a company which—

(a) carries on the business at the start of the relevant day, and

(b) is within the charge to corporation tax in respect of the business.

(7) This section is supplemented by section 412.

412 Provision supplementing section 411 U.K.

(1) For the purposes of section 411 and this section the amounts shown in the appropriate balance sheet of the partnership or, as the case may be, any company in respect of any plant or machinery are—

(a) the amounts shown in that balance sheet as the net book value (or carrying amount) in respect of the plant or machinery, and

(b) the amounts shown in that balance sheet as the net investment in respect of finance leases of the plant or machinery.

(2) If—

(a) any of the plant or machinery is a fixture in any land (see section 437(5)), and

(b) the amount which falls (or would fall) to be shown in an appropriate balance sheet as the net book value (or carrying amount) of the land includes (or would include) an amount in respect of the fixture,

the amount of the net book value (or carrying amount) in respect of the fixture is determined on a just and reasonable basis.

(3) If—

(a) any of the plant or machinery is subject to a finance lease (see section 437(4)), and

(b) any land or other asset which is not plant or machinery is subject to that lease,

the amount of the net investment in respect of the finance lease of that plant or machinery is determined on a just and reasonable basis.

(4) In section 411 and this section any reference to any amount shown in the appropriate balance sheet of the partnership or a company is to the amount which, on the assumptions in subsection (5), falls (or would fall) to be shown in a balance sheet of the partnership or, as the case may be, the company.

(5) The assumptions are that—

(a) the balance sheet is drawn up in accordance with generally accepted accounting practice, and

(b) if the partnership acquired any plant or machinery in circumstances in which this paragraph applies, the plant or machinery had been acquired for an amount equal to its [F862 ascribed value] as at the relevant day.

(6) Paragraph (b) of subsection (5) applies if—

(a) the relevant day falls on or after 22 March 2006,

(b) the plant or machinery was acquired directly or indirectly from a person who was connected with the partnership when the acquisition took place, and

(c) either the acquisition took place on or after 5 December 2005 or the person from whom the plant or machinery was so acquired was also connected with the partnership on that date.

Textual Amendments

F862 Words in s. 412(5)(b) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 12

413 Relevant plant or machinery value where partnership lessee under long funding lease etc U.K.

(1) Any amount included in the amounts mentioned in section 411(2) in respect of plant or machinery to which this section applies is to be deducted from the sum mentioned in that section.

(2) But the [F863 ascribed value] as at the relevant day of any plant or machinery to which this section applies is to be added to that sum or, if that sum is nil, is the relevant plant or machinery value.

(3) This section applies to plant or machinery if—

(a) condition A or B is met at the start of the relevant day, or

(b) the plant or machinery is acquired by the partnership from any company mentioned in section 411(5) on the relevant day and condition A or B is met at the end of that day.

(4) Condition A is that the partnership is the lessee of the plant or machinery under a long funding finance lease or a long funding operating lease.

(5) Condition B is that the partnership is treated as the owner of the plant or machinery under section 67 of CAA 2001 (hire purchase and similar contracts).

Textual Amendments

F863 Words in s. 413(2) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 13

414 Partnership's income for condition B in section 410 U.K.

(1) This section applies for the purposes of condition B in section 410.

(2) The reference to the partnership's income is to its income as calculated for corporation tax purposes.

(3) Any apportionment necessary to determine the amount of the partnership's income attributable to the period of 12 months ending with the relevant day is to be made on a time basis.

(4) But—

(a) that basis does not apply if it would work in an unjust or unreasonable way in relation to any person, and

(b) in that case the apportionment is to be made instead on a just and reasonable basis.

(5) The proportion of the income that derives from [F864 plant or machinery falling within section 410(6)] is to be determined on a just and reasonable basis.

Textual Amendments

F864 Words in s. 414(5) substituted (with effect in accordance with Sch. 6 para. 27 of the amending Act) by Finance Act 2011 (c. 11), Sch. 6 para. 14

“Qualifying change” in company's interest in a business U.K.

415 “Qualifying change” in company's interest in a business U.K.

(1) For the purposes of the sales of lessors Chapters there is a qualifying change in a company's interest in a business on any day if its relevant percentage share at the end of the day is less than its relevant percentage share at the start of the day.

(2) In this section “relevant percentage share”, in relation to a company's interest in a business, means its percentage share in the profits or loss of the business (determined in accordance with section 416).

(3) For the purposes of this section any reference to a company's share in the profits or loss of the business includes a nil share (whether as a result of the dissolution of the partnership or otherwise).

416 Determining the percentage share in the profits or loss of business U.K.

(1) For the purposes of this Chapter a company's percentage share in the profits or loss of a business at any time is determined on a just and reasonable basis.

(2) In making that determination, regard must be had, in particular, to any matter that would be taken into account in determining under section 1262 of CTA 2009 (but without regard to sections 1263 and 1264 of that Act) the company's share at that time in the profits or loss of the business.

Qualifying changes in partner company's interest in business U.K.

417 Partner company's income and other companies' matching expense U.K.

(1) This section applies if on any day (“the relevant day”)—

(a) the partner company carries on a business of leasing plant or machinery in partnership with other persons,

(b) the partner company is within the charge to corporation tax in respect of the business, and

(c) there is a qualifying change in the partner company's interest in the business on the relevant day (see sections 415 and 416).

(2) On the relevant day—

(a) the partner company is treated as receiving an amount of income, and

(b) any other company which carries on the business on that day and which is within the charge to corporation tax in respect of the business is treated as incurring an expense.

(3) The income—

(a) is treated as a receipt of the partner company's notional business (see subsection (6)), and

(b) is brought into account in calculating for corporation tax purposes the profits of that business for the accounting period in which it is treated as received.

(4) Except where subsection (5) applies, the expense—

(a) is treated as an expense of the other company's notional business, and

(b) is allowed as a deduction in calculating for corporation tax purposes the profits of that business for the accounting period in which it is treated as incurred.

(5) If at the end of the relevant day the other company is the only person carrying on the business, the expense—

(a) is treated as an expense incurred by the other company in its carrying on of the business (at a time when it is the only person carrying it on), and

(b) is allowed as a deduction in calculating for corporation tax purposes the profits of the business for the accounting period in which it is treated as incurred.

(6) In this Chapter a company's “notional business” means the business the profits or losses of which are determined, in relation to the company, under section 1259 of CTA 2009 (calculation of firm's profits and losses).

(7) This section is supplemented by sections 418 and 419.

(8) This section is subject to section 420 (exception: companies carrying on business ceasing to share in its profits).

418 Amount of income and expense U.K.

(1) The amount of the income under section 417 is calculated in accordance with sections 421 to 423.

(2) The amount of the expense of the other company under section 417 is calculated in accordance with section 424.

419 Relief for expense otherwise giving rise to carried forward loss U.K.

(1) This section applies if—

(a) a company is treated under section 417(5) as incurring an expense in an accounting period of the company (“period 1”),

(b) the company makes a loss in period 1 or a later accounting period,

(c) apart from this section some or all of that loss (“the carried forward loss”) would be carried forward to the next accounting period of the company after the accounting period in which the loss is made (“the subsequent period”),

(d) some or all of the carried forward loss (“the derived loss”) derives from—

(i) the expense under section 417(5), or