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Finance (No. 2) Act 2017

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6(1)In the italic heading before section 257M, after “enterprise” insert “ : general ”.U.K.

(2)Omit sections 257MA and 257MB (which are superseded by the provision inserted by sub-paragraph (3) below).

(3)After section 257MN insert—

Limits on amounts that may be investedU.K.
257MNAMaximum amount where investment made in first 7 years

(1)This section applies where—

(a)the investment is made before the end of the period of 7 years beginning with the relevant first commercial sale, or

(b)the investment is made after that period but—

(i)a relevant investment was made in the social enterprise before the end of that period, and

(ii)some or all of the money raised by that relevant investment was employed for the purposes of (or of part of) the qualifying activity for which the money raised by the investment is employed.

(2)Where this section applies, the total amount of relevant investments made in the social enterprise on or before the date when the investment is made must not exceed £1.5 million.

(3)The reference in subsection (2) to relevant investments “made in the social enterprise” is to be read with section 257MNB.

(4)In this section—

  • qualifying activity” means—

    (a)

    a qualifying trade within paragraph (a) of section 257ML(1) carried on by the social enterprise or a 90% social subsidiary of the social enterprise, or

    (b)

    an activity within paragraph (b) of section 257ML(1) so carried on;

  • the relevant first commercial sale” has the meaning given by section 175A(6), reading—

    (a)

    references to the issuing company as references to the social enterprise,

    (b)

    references to the issue date as references to the investment date, and

    (c)

    references to money raised by the issue of the relevant shares as references to money raised by the investment;

  • relevant investment” has the meaning given by section 173A(3) (reading references in section 173A(3) to a company as including any social enterprise).

(5)Section 173A(4) and (5) apply to determine for the purposes of this section when a relevant investment is made.

(6)Where the social enterprise is an accredited social impact contractor—

(a)the reference in subsection (1)(a) to the relevant first commercial sale is to be read as a reference to the date on which the social enterprise first entered into a social impact contract;

(b)the reference in subsection (1)(b) to the qualifying activity mentioned there is to be read as a reference to the carrying out of the social impact contract for which the money raised by the investment is employed.

(7)For provision about maximum amounts where this section does not apply, see section 257MNC.

257MNBSection 257MNA: supplementary

(1)In section 257MNA(2) the reference to relevant investments “made in the social enterprise” includes—

(a)relevant investments made in a company which, at the material date, is or has been a 51% subsidiary of the social enterprise,

(b)any other relevant investment made in a company to the extent that the money raised by that relevant investment has been employed for the purposes of a trade carried on by another company (“company X”) which, at the material date, is or has been a 51% subsidiary of the social enterprise, and

(c)any other relevant investment made in a company if—

(i)the money raised by that relevant investment has been employed for the purposes of a trade carried on by that company or another person, and

(ii)after that relevant investment was made, but on or before the material date, that trade became a transferred trade (see subsection (5)).

(2)The investments within paragraph (a) of subsection (1)—

(a)include investments made in a company mentioned in that paragraph before it became a 51% subsidiary of the social enterprise, but

(b)where a company mentioned in that paragraph is not a 51% subsidiary of the social enterprise at the material date, do not include any investments made in that company after it last ceased to be such a subsidiary.

(3)For the purposes of subsection (1)(b), where company X is not a 51% subsidiary of the social enterprise at the material date, any money employed after company X last ceased to be such a subsidiary is to be ignored.

(4)Where only a proportion of the money raised by a relevant investment is employed for the purposes of a trade which becomes a transferred trade, only the corresponding proportion of that relevant investment is to be treated as falling within subsection (1)(c).

(5)For the purposes of this section, if—

(a)on or before the material date a trade is transferred—

(i)to the social enterprise,

(ii)to a company which, at the material date, is or has been a 51% subsidiary of the social enterprise, or

(iii)to a partnership of which the social enterprise, or a company within sub-paragraph (ii), is a member, and

(b)the trade or part of it was at any time before the transfer carried on by another person,

the trade or part mentioned in paragraph (b) becomes a “ transferred trade ” when it is transferred as mentioned in paragraph (a).

(6)The cases within subsection (5)(a)—

(a)include the case where the trade is transferred to a company within subsection (5)(a)(ii), or a partnership of which such a company is a member, before the company became a 51% subsidiary of the social enterprise, but

(b)where a company within subsection (5)(a)(ii) is not a 51% subsidiary of the social enterprise at the material date, do not include the case where the trade is transferred to that company, or a partnership of which that company is a member, after that company last ceased to be such a subsidiary.

(7)In this section—

  • the material date” means the date on which the investment is made;

  • relevant investment” has the meaning given by section 173A(3) (reading references in section 173A(3) to a company as including any social enterprise).

(8)Section 173A(4) and (5) apply to determine for the purposes of this section when a relevant investment is made.

(9)Section 173A(6) and (7) (meaning of “trade” etc) apply also for the purposes of this section.

257MNCMaximum amount for cases outside section 257MNA

(1)This section applies where—

(a)the investment is made at any time after the period mentioned in section 257MNA(1)(a), and

(b)it is not the case that the conditions in section 257MNA(1)(b)(i) and (ii) are met.

(2)Where this section applies—

(a)the total amount of relevant investments made in the social enterprise on or before the date when the investment is made must not exceed £1.5 million, and

(b)the amount invested must not be more than the amount mentioned in subsection (3).

(3)That amount is the amount given by the formula—

where—

T is the total of any relevant investments made in the social enterprise in the aid period,

M is the total of any de minimis aid, other than relevant investments, that is granted during the aid period—

(a)

to the social enterprise, or

(b)

to a qualifying subsidiary of the social enterprise at a time when it is such a subsidiary,

RCG is the highest rate at which capital gains tax is charged in the aid period, and

RSI is the highest SI rate in the aid period.

(4)In subsection (3) “the aid period” means the 3 years—

(a)ending with the day on which the investment is made, but

(b)in the case of that day, including only the part of the day before the investment is made.

(5)In this section “de minimis aid” means de minimis aid which fulfils the conditions laid down—

(a)in Commission Regulation (EU) No. 1407/2013 (de minimis aid) as amended from time to time, or

(b)in any EU instrument from time to time replacing the whole or any part of that Regulation.

(6)For the purposes of subsection (3), the amount of any de minimis aid is the amount of the grant or, if the aid is not in the form of a grant, the gross grant equivalent amount within the meaning of that Regulation as amended from time to time.

(7)For the purposes of subsection (3), if—

(a)the investment or any relevant investment is made, or

(b)any aid is granted,

in sterling or any other currency that is not the euro, its amount is to be converted into euros at an appropriate spot rate of exchange for the date on which the investment is made or the aid is paid.

(8)In this section “relevant investment” has the meaning given by section 173A(3) (reading references in section 173A(3) to a company as including any social enterprise).

(9)Section 173A(4) and (5) apply to determine for the purposes of this section when a relevant investment is made.

(10)Section 257MNB (which expands the meaning of “relevant investments made in the social enterprise”) applies for the purposes of each of subsections (2) and (3) above as it applies for the purposes of section 257MNA(2).

257MNDLimit on investment in shorter applicable period

(1)This section applies where condition A or condition B is met.

(2)Condition A is that—

(a)a company becomes a 51% subsidiary of the social enterprise at any time during the shorter applicable period,

(b)all or part of the money raised by the investment is employed for the purposes of a qualifying activity which consists wholly or partly of a trade carried on by that company, and

(c)that trade (or part of it) was carried on by that company before it became a 51% subsidiary as mentioned in paragraph (a).

(3)Condition B is that all or part of the money raised by the investment is employed for the purposes of a qualifying activity which consists wholly or partly of a trade which, during the shorter applicable period, becomes a transferred trade (see subsection (9)).

(4)Where this section applies, at each time in the shorter applicable period (“the relevant time”) the total of the relevant investments made in the social enterprise before that time must not exceed £1.5 million.

(5)In subsection (4) the reference to relevant investments “made in the social enterprise” includes—

(a)relevant investments made in a company which at any time before the relevant time has been a 51% subsidiary of the social enterprise,

(b)any other relevant investment made in a company to the extent that the money raised by that relevant investment has been employed for the purposes of a trade carried on by another company (“company X”) which at any time before the relevant time has been a 51% subsidiary of the social enterprise, and

(c)any other relevant investment made in a company if—

(i)the money raised by that relevant investment has been employed for the purposes of a trade carried on by that company or another person, and

(ii)after that relevant investment was made, but before the relevant time, that trade (or part of it) became a transferred trade.

(6)The investments within paragraph (a) of subsection (5)—

(a)include investments made in a company mentioned in that paragraph before it became a 51% subsidiary of the social enterprise, but

(b)where a company mentioned in that paragraph is not a 51% subsidiary of the social enterprise at the relevant time, do not include any investments made in that company after it last ceased to be such a subsidiary.

(7)For the purposes of subsection (5)(b), where company X is not a 51% subsidiary of the social enterprise at the relevant time, any money employed after company X last ceased to be such a subsidiary is to be ignored.

(8)Where only a proportion of the money raised by a relevant investment is employed for the purposes of a trade which becomes a transferred trade, only the corresponding proportion of that relevant investment is to be treated as falling within subsection (5)(c).

(9)For the purposes of this section, if—

(a)before the relevant time, a trade is transferred—

(i)to the social enterprise,

(ii)to a company which, at the relevant time, is or has been a 51% subsidiary of the social enterprise, or

(iii)to a partnership of which the social enterprise, or a company within sub-paragraph (ii), is a member, and

(b)the trade or part of it was at any time before the transfer carried on by another person,

the trade or part mentioned in paragraph (b) becomes a “ transferred trade ” when it is transferred as mentioned in paragraph (a).

(10)The cases within subsection (9)(a)—

(a)include the case where the trade is transferred to a company within subsection (9)(a)(ii), or a partnership of which such a company is a member, before the company became a 51% subsidiary of the social enterprise, but

(b)where a company within subsection (9)(a)(ii) is not a 51% subsidiary of the social enterprise at the relevant time, do not include the case where the trade is transferred to that company, or a partnership of which that company is a member, after that company last ceased to be such a subsidiary.

(11)In this section—

  • qualifying activity” has the same meaning as in section 257MNA (see subsection (4) of that section);

  • relevant investment” has the meaning given by section 173A(3) (reading references in section 173A(3) to a company as including any social enterprise).

(12)Section 173A(4) and (5) apply to determine for the purposes of this section when a relevant investment is made.

(13)Section 173A(6) and (7) (meaning of “trade” etc) apply also for the purposes of this section.

257MNEPower to amend limits on amounts that may be invested

(1)The Treasury may by regulations substitute a different figure for the figure for the time being specified in section 257MNA(2), 257MNC(2) or (3) or 257MND(4).

(2)Regulations under this section may make incidental, supplemental, consequential, transitional or saving provision.

(3)Regulations under this section may not be made unless a draft of the instrument containing them has been laid before, and approved by a resolution of, the House of Commons.

(4)In section 1014 (orders and regulations), in subsection (5)(b) (orders and regulations excluded from subsection (4)) for sub-paragraph (iiia) substitute—

(iiia)section 257MNE (social investment relief: amendment of limits on investments),.

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