Finance Act 2009

2009 Chapter 10

An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.

[21st July 2009]

Most Gracious Sovereign

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

Part 1Charges, rates, allowances, etc

Income tax

1Charge and main rates for 2009-10

1

Income tax is charged for the tax year 2009-10.

2

For that tax year—

a

the basic rate is 20%, and

b

the higher rate is 40%.

2Basic rate limit for 2009-10

1

For the tax year 2009-10 the amount specified in section 10(5) of ITA 2007 (basic rate limit) is replaced with “£37,400”.

2

Accordingly, section 21 of that Act (indexation of limits), so far as relating to the basic rate limit, does not apply for that tax year.

3Personal allowance for 2009-10 for those aged under 65

1

For the tax year 2009-10 the amount specified in—

a

section 35 of ITA 2007, and

b

section 257(1) of ICTA,

(personal allowance for those aged under 65) is replaced with “£6,475”.

2

Accordingly—

a

section 57 of ITA 2007, so far as relating to the amount specified in section 35 of that Act, and

b

section 257C of ICTA, so far as relating to the amount specified in section 257(1) of that Act,

(indexation) do not apply for the tax year 2009-10.

4Reduction of personal allowance for those with income exceeding £100,000

1

In section 35 of ITA 2007 (personal allowances for those aged under 65), the existing provision becomes subsection (1) of that section; and after that subsection insert—

2

For an individual whose adjusted net income exceeds £100,000, the allowance under subsection (1) is reduced by one-half of the excess.

3

If the amount of any allowance that remains after the operation of subsection (2) would otherwise not be a multiple of £1, it is to be rounded up to the nearest amount which is a multiple of £1.

4

For the meaning of “adjusted net income” see section 58.

2

In sections 36(2)(b) and 37(2)(b) of ITA 2007 (limit on reduction of personal allowances for those aged 65 to 74 or 75 and over), for “the amount of a personal allowance under section 35” substitute “the amount of any allowance to which the individual would be entitled under section 35 if under the age of 65 throughout the tax year”.

3

In section 57(1)(a) and (3)(a) of ITA 2007 (indexation of allowances), for “35” substitute “35(1)”.

4

The amendments made by subsections (1) and (2) have effect for the tax year 2010-11 and subsequent tax years.

5

The amendment made by subsection (3) has effect for finding allowances for the tax year 2011-12 and subsequent tax years.

5Abolition of personal reliefs for non-residents

Schedule 1 contains provision abolishing personal reliefs for non-residents.

6Additional rate, dividend additional rate, trust rates and pension tax rates

1

Section 6 of ITA 2007 (rates of income tax) is amended as follows.

2

In subsection (1), omit the “and” at the end of paragraph (b) and insert at the end

, and

d

the additional rate.

3

In subsection (3)(b), for “and dividend upper rate” substitute “, dividend upper rate and dividend additional rate”.

4

In section 9 (trust rate and dividend trust rate)—

a

in subsection (1), for “40%” substitute “50%”, and

b

in subsection (2), for “32.5%” substitute “42.5%”.

5

Schedule 2 contains provision supplementing this section (including provision about rates under Part 4 of FA 2004).

6

The amendments made by this section have effect for the tax year 2010-11 and subsequent tax years.

Corporation tax

7Charge and main rates for financial year 2010

1

Corporation tax is charged for the financial year 2010.

2

For that year the rate of corporation tax is—

a

28% on profits of companies other than ring fence profits, and

b

30% on ring fence profits of companies.

3

In subsection (2) “ring fence profits” has the same meaning as in Chapter 5 of Part 12 of ICTA (see section 502(1) and (1A) of that Act).

8Small companies’ rates and fractions for financial year 2009

1

For the financial year 2009 the small companies’ rate is—

a

21% on profits of companies other than ring fence profits, and

b

19% on ring fence profits of companies.

2

For the financial year 2009 the fraction mentioned in section 13(2) of ICTA is—

a

7/400ths in relation to profits of companies other than ring fence profits (“the standard fraction”), and

b

11/400ths in relation to ring fence profits of companies (“the ring fence fraction”).

3

See section 7(3) of FA 2008 for provision applying section 3(3) to (7) of FA 2007 in relation to profits for an accounting period any part of which falls in the financial year 2009.

4

In this section “ring fence profits” has the same meaning as in Chapter 5 of Part 12 of ICTA (see section 502(1) and (1A) of that Act).

Value added tax

9Extension of reduced standard rate and anti-avoidance provision

1

The Value Added Tax (Change of Rate) Order 2008 (S.I. 2008/3020) (reducing standard rate of value added tax to 15 per cent) is to cease to be in force on 1 January 2010 (rather than ceasing to be in force on 1 December 2009 in accordance with section 2(2) of VATA 1994).

2

Schedule 3 contains—

a

provision for a supplementary charge to value added tax on supplies spanning the date of the VAT change (see Parts 1 to 5), and

b

minor amendments of provisions about orders changing the standard rate of value added tax (see Part 6).

Stamp duty land tax

10Thresholds for residential property

1

Part 4 of FA 2003 (stamp duty land tax) has effect in relation to transactions with an effective date on or after 22 April 2009 but before 1 January 2010 as if—

a

in section 55(2) (amount of tax chargeable: general), in Table A (bands and percentages for residential property), for “£125,000” (in both places) there were substituted “£175,000”, and

b

in paragraph 2(3) of Schedule 5 (amount of tax chargeable: rent), in Table A (bands and percentages for residential property), for “£125,000” (in both places) there were substituted “£175,000”.

2

The following are revoked—

a

the Stamp Duty Land Tax (Variation of Part 4 of the Finance Act 2003) Regulations 2008 (S.I. 2008/2338), and

b

the Stamp Duty Land Tax (Exemption of Certain Acquisitions of Residential Property) Regulations 2008 (S.I. 2008/2339).

3

The revocations made by subsection (2) have effect in relation to transactions with an effective date on or after 22 April 2009.

Alcohol and tobacco duties

11Rates of alcoholic liquor duty

1

ALDA 1979 is amended as follows.

2

In section 5 (rate of duty on spirits), for “£21.35” substitute “£22.64”.

3

In section 36(1AA)(a) (standard rate of duty on beer), for “£14.96” substitute “£16.47”.

4

In section 62(1A) (rates of duty on cider)—

a

in paragraph (a) (rate of duty per hectolitre in the case of sparkling cider of a strength exceeding 5.5 per cent), for “£188.10” substitute “£207.20”,

b

in paragraph (b) (rate of duty per hectolitre in the case of cider of a strength exceeding 7.5 per cent which is not sparkling cider), for “£43.37” substitute “£47.77”, and

c

in paragraph (c) (rate of duty per hectolitre in any other case), for “£28.90” substitute “£31.83”.

5

For the table in Schedule 1 substitute—

Table of rates of duty on wine and made-wine

Part 1Wine or made-wine of a strength not exceeding 22 per cent

Description of wine or made-wine

Rates of duty per hectolitre

£

Wine or made-wine of a strength not exceeding 4 per cent

65.94

Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent

90.68

Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not being sparkling

214.02

Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent

207.20

Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent

274.13

Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent

285.33

Part 2Wine or made-wine of a strength exceeding 22 per cent

Description of wine or made-wine

Rates of duty per litre of alcohol in wine or made-wine

£

Wine or made-wine of a strength exceeding 22 per cent

22.64.

6

The following are revoked—

a

the Alcoholic Liquor Duties (Surcharges) and Tobacco Products Duty Order 2008 (S.I. 2008/3026), so far as relating to excise duty on alcoholic liquors, and

b

the Alcoholic Liquor (Surcharge on Spirits Duty) Order 2008 (S.I. 2008/3062).

7

The amendments made by this section are treated as having come into force on 23 April 2009.

12Rates of tobacco products duty

1

For the table in Schedule 1 to TPDA 1979 substitute—

Table

1. Cigarettes

An amount equal to 24 per cent of the retail price plus £114.31 per thousand cigarettes

2. Cigars

£173.13 per kilogram

3. Hand-rolling tobacco

£124.45 per kilogram

4. Other smoking tobacco and chewing tobacco

£76.12 per kilogram.

2

The Alcoholic Liquor Duties (Surcharges) and Tobacco Products Duty Order 2008 (S.I. 2008/3026), so far as relating to excise duty on tobacco products, is revoked.

3

The amendments made by this section are treated as having come into force at 6 pm on 22 April 2009.

Vehicle excise duty

13Rates for 2009-10

1

Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.

2

In paragraph 1 (general)—

a

in sub-paragraph (2) (vehicle not covered elsewhere in Schedule otherwise than with engine cylinder capacity not exceeding 1,549cc), for “£185” substitute “£190”, and

b

in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£120” substitute “£125”.

3

In paragraph 1B (graduated rates for light passenger vehicles), for the table substitute—

Table

CO2 emissions figure

Rate

(1)

(2)

(3)

(4)

Exceeding

Not exceeding

Reduced rate

Standard rate

g/km

g/km

£

£

100

120

15

35

120

140

100

120

140

150

105

125

150

165

130

150

165

185

155

175

185

225

200

215

225

390

405

The table has effect in relation to vehicles first registered under this Act before 23 March 2006 as if—

a

in column (3), in the last row, “200” were substituted for “390”, and

b

in column (4), in the last row, “215” were substituted for “405”.

4

In paragraph 1J (light goods vehicles)—

a

in sub-paragraph (a) (vehicle which is not lower-emission van), for “£180” substitute “£185”, and

b

in sub-paragraph (b) (lower-emission van), for “£120” substitute “£125”.

5

The amendments made by this section have effect in relation to licences taken out on or after 1 May 2009.

14Rates from April 2010

1

Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.

2

In paragraph 1(2) (vehicle not covered elsewhere in Schedule otherwise than with engine cylinder capacity not exceeding 1,549cc), for “£190” substitute “£205”.

3

Paragraph 1B (graduated rates for light passenger vehicles) is amended as follows.

4

For “table” substitute “tables”.

5

Omit the “and” at the end of paragraph (a).

6

Insert at the end of paragraph (b)

and

c

whether or not the duty is payable on the first vehicle licence for the vehicle.

7

For the table substitute—

Table 1Rates payable on first vehicle licence for vehicle

CO2 emissions figure

Rate

(1)

(2)

(3)

(4)

Exceeding

Not exceeding

Reduced rate

Standard rate

g/km

g/km

£

£

130

140

100

110

140

150

115

125

150

165

145

155

165

175

240

250

175

185

290

300

185

200

415

425

200

225

540

550

225

255

740

750

255

940

950

Table 2Rates payable on any other vehicle licence for vehicle

CO2 emissions figure

Rate

(1)

(2)

(3)

(4)

Exceeding

Not exceeding

Reduced rate

Standard rate

g/km

g/km

£

£

100

110

10

20

110

120

20

30

120

130

80

90

130

140

100

110

140

150

115

125

150

165

145

155

165

175

170

180

175

185

190

200

185

200

225

235

200

225

235

245

225

255

415

425

255

425

435

Table 2 has effect in relation to vehicles first registered, under this Act or under the law of a country or territory outside the United Kingdom, before 23 March 2006 as if—

a

in column (3), in the last two rows, “235” were substituted for “415” and “425”, and

b

in column (4), in the last two rows, “245” were substituted for “425” and “435”.

8

In paragraph 1J(a) (light goods vehicle which is not lower-emission van), for “£185” substitute “£200”.

9

Schedule 4 contains further provision about rates of vehicle excise duty etc.

10

The amendments made by this section have effect in relation to licences taken out on or after 1 April 2010.

Fuel duties

15Rates and rebates from Spring 2009

1

HODA 1979 is amended as follows.

2

In section 6(1A) (main rates)—

a

in paragraph (a) (unleaded petrol), for “£0.5235” substitute “£0.5419”,

b

in paragraph (aa) (aviation gasoline), for “£0.3103” substitute “£0.3334”,

c

in paragraph (b) (light oil other than unleaded petrol or aviation gasoline), for “£0.6207” substitute “£0.6391”, and

d

in paragraph (c) (heavy oil), for “£0.5235” substitute “£0.5419”.

3

In section 6AA(3) (rate of duty on biodiesel), for “£0.3235” substitute “£0.3419”.

4

In section 6AD(3) (rate of duty on bioethanol), for “£0.3235” substitute “£0.3419”.

5

In section 8(3) (road fuel gas)—

a

in paragraph (a) (natural road fuel gas), for “£0.1660” substitute “£0.1926”, and

b

in paragraph (b) (other road fuel gas), for “£0.2077” substitute “£0.2482”.

6

In section 11(1) (rebate on heavy oil)—

a

in paragraph (a) (fuel oil), for “£0.0966” substitute “£0.1”, and

b

in paragraph (b) (gas oil), for “£0.1007” substitute “£0.1042”.

7

In section 14(1) (rebate on light oil for use as furnace fuel), for “£0.0966” substitute “£0.1”.

8

In section 14A(2) (rebate on certain biodiesel), for “£0.1007” substitute “£0.1042”.

9

The amendments made by subsection (2)(b) and (c) are treated as having come into force on 1 May 2009.

10

The other amendments made by this section are treated as having come into force on 1 April 2009.

16Rates and rebates from September 2009

1

HODA 1979 is amended as follows.

2

In section 6(1A) (main rates)—

a

in paragraph (a) (unleaded petrol), for “£0.5419” substitute “£0.5619”,

b

in paragraph (aa) (aviation gasoline), for “£0.3334” substitute “£0.3457”,

c

in paragraph (b) (light oil other than unleaded petrol or aviation gasoline), for “£0.6391” substitute “£0.6591”, and

d

in paragraph (c) (heavy oil), for “£0.5419” substitute “£0.5619”.

3

In section 6AA(3) (rate of duty on biodiesel), for “£0.3419” substitute “£0.3619”.

4

In section 6AD(3) (rate of duty on bioethanol), for “£0.3419” substitute “£0.3619”.

5

In section 8(3) (road fuel gas)—

a

in paragraph (a) (natural road fuel gas), for “£0.1926” substitute “£0.2216”, and

b

in paragraph (b) (other road fuel gas), for “£0.2482” substitute “£0.2767”.

6

In section 11(1) (rebate on heavy oil)—

a

in paragraph (a) (fuel oil), for “£0.1” substitute “£0.1037”, and

b

in paragraph (b) (gas oil), for “£0.1042” substitute “£0.1080”.

7

In section 14(1) (rebate on light oil for use as furnace fuel), for “£0.1” substitute “£0.1037”.

8

In section 14A(2) (rebate on certain biodiesel), for “£0.1042” substitute “£0.1080”.

9

The amendments made by this section come into force on 1 September 2009.

Other environmental taxes and duties

17Rates of air passenger duty

1

In section 30 of FA 1994 (air passenger duty: rates), for subsections (1) to (4) substitute—

1

Air passenger duty is chargeable on the carriage of each chargeable passenger at the rate determined as follows.

2

If the passenger’s journey ends at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A—

a

if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is £11, and

b

in any other case, the rate is £22.

3

If the passenger’s journey ends at a place in a territory specified in Part 2 of Schedule 5A—

a

if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is £45, and

b

in any other case, the rate is £90.

4

If the passenger’s journey ends at a place in a territory specified in Part 3 of Schedule 5A—

a

if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is £50, and

b

in any other case, the rate is £100.

4A

If the passenger’s journey ends at any other place—

a

if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is £55, and

b

in any other case, the rate is £110.

2

Schedule 5 contains further provision about air passenger duty.

3

The amendment made by subsection (1) has effect in relation to the carriage of passengers beginning on or after 1 November 2009.

18Standard rate of landfill tax

1

In section 42(1)(a) and (2) of FA 1996 (amount of landfill tax), for “£40” substitute “£48”.

2

The amendments made by subsection (1) have effect in relation to disposals made (or treated as made) on or after 1 April 2010.

Gambling duties

19Rates of gaming duty

1

In section 11(2) of FA 1997 (rates of gaming duty), for the table substitute—

Table

Part of gross gaming yield

Rate

The first £1,929,000

15 per cent

The next £1,329,500

20 per cent

The next £2,329,000

30 per cent

The next £4,915,500

40 per cent

The remainder

50 per cent.

2

The amendment made by subsection (1) has effect in relation to accounting periods beginning on or after 1 April 2009.

20Bingo duty

1

BGDA 1981 is amended as follows.

2

In section 17(1)(b) (bingo duty chargeable at 15 per cent of bingo promotion profits), for “15” substitute “22”.

3

In paragraph 5(2)(c) of Schedule 3 (maximum prize for small-scale amusements exemption), for “£50” substitute “£70”.

4

The amendment made by subsection (2) has effect in relation to accounting periods beginning on or after 27 April 2009.

5

The amendment made by subsection (3) has effect in relation to bingo played on or after 1 June 2009.

21Amounts of duty on amusement machine licences

1

In section 23(2) of BGDA 1981 (amount of duty payable on amusement machine licence), for the table substitute—

Table

Months for which licence granted

Category A

Category B1

Category B2

Category B3

Category B4

Category C

£

£

£

£

£

£

1

500

255

200

200

180

80

2

985

490

385

385

350

45

3

1475

735

585

585

530

220

4

1965

985

775

775

705

290

5

2465

1230

970

970

875

365

6

2955

1475

1160

1160

1050

435

7

3445

1720

1355

1355

1225

505

8

3935

1965

1550

1550

1405

580

9

4430

2215

1745

1745

1580

655

10

4920

2465

1935

1935

1755

725

11

5410

2710

2130

2130

1930

795

12

5625

2815

2215

2215

2010

830.

2

The amendment made by subsection (1) has effect in relation to cases where the application for the amusement machine licence is received by the Commissioners for Her Majesty’s Revenue and Customs after 4 pm on 22 April 2009.

22Provisions affecting amount of amusement machine licence duty

1

BGDA 1981 is amended as follows.

2

Section 21 (gaming machine licences) is amended as follows.

3

Subsection (5) (excepted machines) is amended as follows.

4

In paragraph (c) (machines in case of which cost of single game does not exceed 10p and maximum value of prize for winning single game does not exceed £5)—

a

in sub-paragraph (i), omit the “and” at the end,

b

in sub-paragraph (ii), for “£5” substitute “£15”, and

c

after that sub-paragraph insert—

iii

the maximum cash component of the prize for winning a single game does not exceed £8,

5

After that paragraph insert—

ca

a gaming machine in respect of which—

i

the cost of a single game does not exceed £1,

ii

the maximum value of the prize for winning a single game does not exceed £50, and

iii

any prize that can be won is neither money nor something that can be exchanged for or used in place of money or that can be exchanged for something other than money, and

6

After that subsection insert—

6

To the extent that a prize consists of anything other than money, its value for the purposes of this section and sections 22 and 23 below is—

a

in the case of a voucher or token that may be exchanged for, or used in place of, an amount of money, that amount,

b

in the case of a voucher or token that does not fall within paragraph (a) and that may be exchanged for something other than money, the cost that the person providing the machine would incur in obtaining that thing from a person who is not a connected person, and

c

in any other case, the cost that the person providing the machine would incur in obtaining the prize from a person who is not a connected person.

7

Section 839 of the Income and Corporation Taxes Act 1988 (connected persons) applies for the purposes of subsection (6).

7

In section 22(2) (machine in respect of which benefits for winning single game do not exceed £8 to be “small-prize machine”), for “£8” substitute “£10”.

8

Section 23 (amount of duty) is amended as follows.

9

In subsection (3) (categories of machines), in the definition of Category C gaming machine, in paragraph (ii)—

a

for “50p” substitute “£1”, and

b

for “£35” substitute “£70”.

10

Omit subsection (5) (which is superseded by the amendment made by subsection (6)).

11

In consequence of the amendments made by the preceding provisions of this section, omit—

a

in FA 2000, in Schedule 2, paragraph 3(1)(b), and

b

in FA 2007, section 9(2) and (4).

12

The amendments made by this section are treated as having come into force on 1 June 2009.

Part 2Income tax, corporation tax and capital gains tax

Support for business

23Temporary extension of loss carry back provisions

Schedule 6 contains provision for a temporary extension of provisions allowing the carrying back of losses.

24First-year capital allowances for expenditure in 2009-2010

1

Part 2 of CAA 2001 (plant and machinery allowances) has effect as if—

a

in section 39 (first-year qualifying expenditure), a reference to this section were included in the list of provisions describing first-year qualifying expenditure, and

b

in the Table in section 52(3) (amount of first-year allowances), there were inserted at the end—

Expenditure qualifying under section 24 of FA 2009 (expenditure in 2009-2010)

40%

2

Expenditure is first-year qualifying expenditure under this section if—

a

it is incurred in 2009-2010,

b

it is not within any of the general exclusions in section 46(2) of CAA 2001 (subject to subsection (4)),

c

it is not special rate expenditure (as defined by section 104A of CAA 2001), and

d

it is not first-year qualifying expenditure under a provision of Chapter 4 of Part 2 of CAA 2001.

3

For the purposes of this section expenditure is incurred in 2009-2010—

a

in the case of expenditure incurred by a person within the charge to corporation tax, if it is incurred on or after 1 April 2009 but before 1 April 2010, and

b

in the case of expenditure incurred by a person within the charge to income tax, if it is incurred on or after 6 April 2009 but before 6 April 2010.

4

General exclusion 6 in section 46(2) of CAA 2001 (expenditure on provision of plant or machinery for leasing) does not prevent expenditure being first-year qualifying expenditure under this section if the plant or machinery is provided for leasing under an excluded lease of background plant or machinery for a building (as defined by section 70R of that Act).

5

Expressions used in this section and in Part 2 of CAA 2001 have the same meaning here as in that Part of that Act, subject to subsection (6).

6

In determining whether expenditure is incurred in 2009-2010, any effect of section 12 of CAA 2001 (expenditure incurred before qualifying activity carried on) on the time at which it is to be treated as incurred is to be disregarded.

25Agreements to forgo tax reliefs

1

If—

a

a person (“P”) makes arrangements under which P agrees (in whatever terms) to forgo (to any extent) tax relief or a right to tax relief (whenever arising), and

b

the Treasury designates the arrangements for the purposes of this section,

all relevant enactments are to have effect with such modifications as are necessary or expedient to give effect to the agreement.

2

The Treasury may not designate arrangements for the purposes of this section unless—

a

the arrangements have been made with the Treasury, another government department or another public body, and

b

under the arrangements, or under other arrangements, the Treasury, another government department or another public body—

i

guarantees or assumes a loss or other liability of P or another person,

ii

insures or indemnifies P or another person against a loss or other liability,

iii

agrees to make a payment to P or another person in respect of a loss or other liability of any person (whether or not the person to whom the payment is to be made), or

iv

gives other financial support or assistance to P or another person (whether in money or otherwise).

3

If P forgoes (to any extent) tax relief or a right to tax relief under subsection (1)—

a

no tax relief is to be given to P or any other person by virtue of what is forgone or anything resulting from or representing what is forgone, and

b

all relevant enactments are to have effect with such modifications as are necessary or expedient to give effect to paragraph (a).

4

In this section—

“relevant enactments” means—

a

the Corporation Tax Acts, and

b

the enactments relating to petroleum revenue tax;

“tax relief” means—

a

a reduction (by any means) of P’s liability to any tax, or

b

a payable tax credit.

5

This section has effect in relation to arrangements made on or after 22 April 2009; but that does not prevent subsections (1) and (3) from having effect in relation to times before 22 April 2009.

26Contaminated and derelict land

Schedule 7 contains provision extending Part 14 of CTA 2009 (remediation of contaminated land) to derelict land and other provision amending that Part of that Act.

27Venture capital schemes

Schedule 8 contains provision about venture capital schemes.

28Group relief: preference shares

Schedule 9 contains provision about the treatment of certain preference shares for the purposes of group relief.

29Sale of lessor companies etc: reforms

Schedule 10 contains provision amending Schedule 10 to FA 2006 (sale of lessor companies etc).

30Tax relief for business expenditure on cars and motor cycles

Schedule 11 contains provision about tax relief for business expenditure on cars and motor cycles.

31Reallocation of chargeable gain or loss within a group

Schedule 12 contains provision about the reallocation of chargeable gains and allowable losses between companies that are members of a group.

32Stock lending: chargeable gains in event of insolvency etc of borrower

Schedule 13 contains provision amending TCGA 1992 in respect of stock lending arrangements in the event of the insolvency of the borrower.

33FSCS payments representing interest

1

Chapter 2 of Part 4 of ITTOIA 2005 (interest) is amended as follows.

2

In section 369(2) (list of provisions extending what is treated as interest for certain purposes), after “bonds),” insert—

section 380A (FSCS payments representing interest),

3

After section 380 insert—

380AFSCS payments representing interest

1

Any payment representing interest which is made under the FSCS is treated as interest for the purposes of this Act.

2

“Payment representing interest” means a payment calculated in the same way as interest which would have been paid to the recipient but for the circumstances giving rise to the making of payments under the FSCS.

3

Where a payment representing interest is made net of an amount equal to a sum representing income tax that would have been deducted on the payment of interest, the amount treated as interest by this section is the aggregate of the payment representing interest and that sum.

4

This section applies to payments made under the FSCS whether or not they are made (in whole or in part) on behalf of the Treasury or any other person.

5

In this section “the FSCS” means the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000).

4

In ITA 2007, after section 979 insert—

979AFSCS payments representing interest

1

This section applies where a payment is made under the FSCS representing interest net of an amount equal to a sum representing income tax that would have been deducted on the payment of interest but for the circumstances giving rise to the making of payments under the FSCS.

2

A payment of the relevant gross amount is treated as having been made under the FSCS after there has been deducted from it a sum representing income tax of that amount.

3

That sum is accordingly taken into account under section 59B of TMA 1970 in determining the income tax payable by, or repayable to, the recipient.

4

“The relevant gross amount” means the aggregate of the amount of the payment representing interest which is made and that sum.

5

If the recipient requests it in writing, the scheme manager of the FSCS must provide the recipient with a statement showing—

a

the relevant gross amount,

b

the amount of the sum treated as deducted, and

c

the amount of the payment representing interest.

6

The duty to comply with a request under subsection (5) is enforceable by the recipient.

7

In this section—

“the FSCS” means the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000);

“payment representing interest” has the same meaning as in section 380A of ITTOIA 2005.

5

The amendments made by this section have effect in relation to payments made on or after 6 October 2008.

Foreign profits etc

34Corporation tax treatment of company distributions received

Schedule 14 contains provision about the treatment for the purposes of corporation tax of dividends and other distributions.

35Tax treatment of financing costs and income

Schedule 15 contains provision about the treatment for the purposes of corporation tax of certain financing costs and certain financing income of companies that are members of a group.

36Controlled foreign companies

Schedule 16 contains provision about controlled foreign companies.

37International movement of capital

Schedule 17 contains provision—

a

removing the existing requirements in relation to the international movement of capital in sections 765 to 767 of ICTA, and

b

imposing new reporting requirements on certain bodies corporate in relation to the international movement of capital.

38Corporation tax: foreign currency accounting

Schedule 18 contains provision about foreign currency accounting.

39Certain distributions of offshore funds taxed as interest

1

Chapter 2 of Part 4 of ITTOIA 2005 (interest) is amended as follows.

2

In section 369(2) (list of provisions extending what is treated as interest for certain purposes), after the entry relating to section 376 insert—

section 378A (offshore fund distributions),

3

After section 378 insert—

378AOffshore fund distributions

1

This section applies where—

a

a dividend is paid by an offshore fund, and

b

the offshore fund fails to meet the qualifying investments test at any time in the relevant period.

2

The dividend is treated as interest for income tax purposes.

3

For the purposes of this section, an offshore fund fails to meet the qualifying investments test if the market value of the fund’s qualifying investments exceeds 60% of the market value of all of the assets of the fund (excluding cash awaiting investment).

4

“The relevant period” means—

a

the relevant period of account of the offshore fund, or

b

if longer, the period of 12 months ending on the last day of that period.

5

“The relevant period of account” means—

a

the last period of account ending before the dividend is paid, in a case in which the profits available for distribution at the end of that period (and not used since then by distribution or otherwise) equal or exceed the amount of the dividend (aggregated with any other distribution made by the offshore fund at the same time), and

b

the period of account in which the dividend is paid, in any other case.

6

This section applies to a manufactured overseas dividend if, and only if, it is representative of a distribution to which this section would apply.

7

In this section—

“dividend” includes any distribution that (but for this section) would be treated as a dividend for income tax purposes;

“manufactured overseas dividend” has the same meaning as in Chapter 2 of Part 11 of ITA 2007 (manufactured payments);

“offshore fund” has the same meaning as in Chapter 5 of Part 17 of ICTA (see sections 756A to 756C of that Act);

“qualifying investments” has the meaning given in section 494 of CTA 2009.

4

Accordingly, in section 367 of ITTOIA 2005 (priority between Chapters within Part 4), in subsection (3)—

a

in paragraph (a), after “dividends)” insert “, 378A (offshore fund distributions)”, and

b

in paragraph (b), insert at the end “or Chapter 4 (or both)”.

5

The amendments made by this section have effect in relation to—

a

distributions arising on or after 22 April 2009, and

b

manufactured overseas dividends that are representative of a distribution arising on or after that date.

40Income tax credits for foreign distributions

Schedule 19 contains provision about income tax credits for foreign distributions.

Loan relationships and derivatives

41Loan relationships involving connected parties

Schedule 20 contains provision about loan relationships involving connected parties.

42Release of trade etc debts

1

CTA 2009 is amended as follows.

2

In section 353 (introduction to Chapter 6 of Part 5)—

a

omit subsection (3), and

b

in subsection (6), after “loss”” insert “and “release debit””.

3

In section 476(1) (definitions for purposes of Parts 5 and 6), after the definition of “profit sharing arrangements” insert—

“release debit”, in relation to a company, means a debit in respect of a release by the company of a liability under a creditor relationship of the company,

4

Section 479 (relevant non-lending relationships not involving discounts) is amended as follows.

5

In subsection (2)—

a

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

b

in paragraph (c), after “loss)” insert “or release debit”, and

c

insert at the end

, and

d

a debt in relation to which a relevant deduction has been allowed to the company and which is released.

6

In subsection (3), for “(2)” substitute “(2)(c)”.

7

After that subsection insert—

3A

In subsection (2)(d) “relevant deduction” means a deduction allowed in calculating the profits of a trade, UK property business or overseas property business.

8

Section 481 (application of Part 5 to relevant non-lending relationships) is amended as follows

9

In subsection (3)—

a

in paragraph (d), after “loss” insert “or release debit” and for “impairment, and” substitute “impairment or release,”, and

b

insert at the end

and

f

in the case of a debt in relation to which a relevant deduction has been allowed to the company and which is released, the release.

10

In subsection (4), for “(3)” substitute “(3)(d) and (e)”.

11

After that subsection insert—

4A

In subsection (3)(f) “relevant deduction” has the meaning given in section 479(3A).

12

The amendments made by this section are treated as having come into force on 22 April 2009.

43Foreign exchange matching: anti-avoidance

Schedule 21 contains anti-avoidance provisions relating to exchange gains and losses arising from loan relationships and derivative contracts.

Collective investment

44Tax treatment of participants in offshore funds

In Schedule 22—

Part 1 contains provision defining what is meant by an offshore fund for the purposes of section 41 of FA 2008 (tax treatment of participants in offshore funds), and

Part 2 contains provision about the treatment of participants in certain offshore funds under TCGA 1992.

45Power to enable dividends of investment trusts to be taxed as interest

1

The Treasury may by regulations make provision for and in connection with—

a

the designation by a company that is an investment trust or a prospective investment trust of dividends made by the company, and

b

the treatment of a designated dividend for the purposes of the Tax Acts, in specified circumstances and in the case of specified persons—

i

as a payment of yearly interest, or

ii

as interest under a loan relationship.

2

Regulations under this section may, in particular, make provision—

a

about the circumstances in which a dividend may, or may not, be designated,

b

about limits on the amounts that may be designated or treated as a payment of yearly interest or as interest under a loan relationship,

c

disapplying the duty under section 874 of ITA 2007 (deduction of sums representing income tax from payments of yearly interest) in specified circumstances,

d

about the preparation of accounts and the keeping of records by investment trusts and prospective investment trusts, and

e

about the provision by investment trusts and prospective investment trusts of information, whether to recipients of designated dividends or to other persons, including provision imposing a penalty not exceeding £3,000.

3

Regulations under this section may, in particular—

a

make provision applying enactments and instruments (with or without modification),

b

make different provision for different cases or different purposes, and

c

make incidental, consequential, supplementary or transitional provision.

4

Regulations under this section are to be made by statutory instrument.

5

A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

6

In this section—

“company” has the same meaning as in section 842 of ICTA (investment trusts);

“investment trust” means an investment trust within the meaning of section 842(1) of ICTA;

“loan relationship” has the same meaning as in the Corporation Tax Acts (see section 302(1) and (2) of CTA 2009);

“prospective investment trust” means a company that—

a

intends to seek approval under section 842 of ICTA (investment trusts), and

b

has a reasonable belief that such approval will be obtained;

“specified” means specified in regulations under this section.

Insurance etc

46Insurance companies

Schedule 23 contains provisions relating to insurance companies.

47Equalisation reserves for Lloyd’s corporate and partnership members

1

The Treasury may by regulations provide for section 444BA of ICTA (equalisation reserves) to have effect, in such cases and subject to such modifications as may be specified in the regulations, in relation to equivalent Lloyd’s reserves as it has effect in relation to equalisation reserves maintained by virtue of equalisation reserves rules.

2

For this purpose a reserve is an equivalent Lloyd’s reserve if it is maintained by a corporate or partnership member for purposes, or in a manner, such as to make it equivalent to an equalisation reserve maintained by virtue of equalisation reserves rules.

3

The regulations may include—

a

provision having effect in relation to periods before they are made, and

b

supplementary, incidental, consequential and transitional provision.

4

In this section—

“corporate member” means a body corporate which is a member of Lloyd’s;

“equalisation reserves rules” has the same meaning as in section 444BA of ICTA (see subsection (11) of that section);

“member” means underwriting member;

“partnership member” means a limited partnership formed under the law of Scotland, or a limited liability partnership formed under the law of any part of the United Kingdom, which is a member of Lloyd’s.

Simplification

48Disguised interest

Schedule 24 contains provision about the corporation tax treatment of disguised interest.

49Transfer of income streams

Schedule 25 contains provision about transfers of income streams.

50SAYE schemes

1

Schedule 26 contains provision amending Chapter 4 of Part 6 of ITTOIA 2005 (SAYE interest).

2

The amendments made by that Schedule are treated as having come into force on 29 April 2009.

Residence and domicile

51Remittance basis

Schedule 27 contains amendments about the remittance basis.

52Exemption for certain non-domiciled persons

1

In Part 14 of ITA 2007 (income tax: miscellaneous rules), after Chapter 1 insert—

Chapter 1AExemption for persons not domiciled in United Kingdom

828AIntroduction

This Chapter provides for an exemption from liability to income tax for an individual for a tax year if—

a

the individual is UK resident in the tax year but not domiciled in the United Kingdom in the tax year,

b

section 809B does not apply to the individual for the tax year, and

c

conditions A to F in section 828B are met.

828BConditions to be met

1

Condition A is that in the tax year the individual has income from an employment the duties of which are performed wholly or partly in the United Kingdom.

2

Condition B is that, if the individual’s income for the tax year consists of or includes relevant foreign earnings—

a

the amount of the relevant foreign earnings does not exceed £10,000, and

b

all of that amount is subject to a foreign tax.

3

Condition C is that, if the individual’s income for the tax year consists of or includes income that is relevant foreign income by virtue of section 830(2)(e) of ITTOIA 2005—

a

the amount of that income does not exceed £100, and

b

all of that amount is subject to a foreign tax.

4

Condition D is that the individual has no other foreign income and gains for the tax year.

5

Condition E is that the individual would not for the tax year be liable to income tax at a rate other than the basic rate or the starting rate for savings if this Chapter did not apply to the individual for the tax year.

6

Condition F is that the individual does not make a return under section 8 of TMA 1970 for the tax year.

828CThe exemption

1

The exemption is given by deducting the relevant amount from what would otherwise be the amount of the individual’s liability to income tax for the tax year under section 23.

2

“The relevant amount” is so much of the amount of the individual’s liability to income tax as is attributable to the individual’s foreign income or gains for the tax year.

3

But if for the tax year the individual’s total income is reduced by any deductions which fall to be made at Step 3 of the calculation in section 23 from the individual’s foreign income or gains for the tax year, subsection (2) has effect as if the individual’s foreign income or gains for the tax year were reduced by the amount of the deductions.

4

And if the individual is entitled under—

a

section 788 of ICTA (double taxation arrangements: relief by agreement), or

b

section 790(1) of that Act (relief for foreign tax where no double taxation arrangements),

to a tax reduction in respect of the individual’s foreign income or gains for the tax year, what would otherwise be the relevant amount is reduced by the amount of that reduction.

828DInterpretation of Chapter

1

This section applies for the purposes of this Chapter.

2

“Employed” and “employment” have the same meaning as in the employment income Parts of ITEPA 2003: see Chapter 1 of Part 2 of that Act.

3

“Foreign income and gains”, in relation to an individual, means what would be the individual’s foreign income and gains for the purposes of Chapter A1 of this Part if section 809B applied to the individual (see section 809Z7(2)).

4

“Foreign tax” means any tax chargeable under the law of a territory outside the United Kingdom.

5

“Relevant foreign earnings”, in relation to an individual, means what would be the individual’s relevant foreign earnings for the purposes of Chapter A1 of this Part if section 809B applied to the individual (see section 809Z7(3)).

2

In section 2(14) of ITA 2007 (overview), after paragraph (a) insert—

aa

exemption for persons not domiciled in United Kingdom (Chapter 1A),

3

The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.

Employment income

53Taxable benefits: cars

Schedule 28 contains provision about taxable benefits arising from cars made available to employees etc by reason of employment.

54Taxable benefit of cars: price of automatic car for disabled employee

1

Chapter 6 of Part 3 of ITEPA 2003 (taxable benefits: cars etc) is amended as follows.

2

In section 116(3) (meaning of when car is available), after “to section” insert “124A or”.

3

In section 121(1) (method of calculating cash equivalent of benefit of car), in step 1, for “124” substitute “124A”.

4

In section 122 (price of car), the existing provision becomes subsection (1) of that section and after that subsection insert—

2

This is subject to section 124A (automatic car for a disabled employee).

5

After section 124 insert—

124AAutomatic car for a disabled employee

1

This section applies where—

a

a car has automatic transmission (“the automatic car”),

b

at any time in the year when the automatic car is available to the employee (“E”), E holds a disabled person’s badge, and

c

by reason of E’s disability, E must, in the event of wanting to drive a car, drive a car which has automatic transmission.

2

If, under section 122 to 124, the price of the automatic car is more than it would have been if the automatic car had been an equivalent manual car, the price of the automatic car is to be the price of an equivalent manual car.

3

In subsection (2) “an equivalent manual car” means a car which—

a

is first registered at or about the same time as the automatic car, and

b

does not have automatic transmission, but otherwise is the closest variant available of the make and model of the automatic car.

4

For the purposes of this section a car has automatic transmission if—

a

the driver of the car is not provided with any means by which the driver may vary the gear ratio between the engine and the road wheels independently of the accelerator and the brakes, or

b

the driver is provided with such means, but they do not include—

i

a clutch pedal, or

ii

a lever which the driver may operate manually.

5

For the purposes of this section a car is available to an employee at a particular time if it is then made available, by reason of the employment and without any transfer of the property in it, to the employee.

6

The amendments made by this section have effect for the tax year 2009-10 and subsequent tax years.

55Exemption of benefit consisting of health-screening or medical check-up

1

Part 4 of ITEPA 2003 (employment income: exemptions) is amended as follows.

2

In section 266(3) (exemption of non-cash vouchers for exempt benefits), omit the “or” at the end of paragraph (e) and insert at the end

or

g

section 320B (health screening and medical check-ups).

3

In section 267(2) (exemption of credit-tokens used for exempt benefits), omit the “and” at the end of paragraph (g) and insert at the end

and

i

section 320B (health screening and medical check-ups).

4

After section 320A insert—

Health-screening and medical check-ups

320BHealth-screening and medical check-ups

1

No liability to income tax arises in respect of the provision for an employee, on behalf of an employer, of a health-screening assessment or a medical check-up.

2

Subsection (1) does not apply—

a

to more than one health-screening assessment provided in a tax year by any one employer or by any of a number of persons who are employers of the employee at the same time, or

b

to more than one medical check-up so provided.

3

In this section—

“health-screening assessment” means an assessment to identify employees who might be at particular risk of ill-health, and

“medical check-up” means a physical examination of the employee by a health professional for (and only for) determining the employee’s state of health.

5

The amendments made by this section have effect for the tax year 2009-10 and subsequent tax years.

56MEPs’ pay, allowances and pensions under European Parliament Statute

1

Part 18 of ICTA (double tax relief) has effect as if tax for the benefit of the Communities payable in respect of any income under—

a

Articles 9.1 and 10 (salaries),

b

Article 13 (transitional allowances), or

c

Article 14, 15 or 17 (pensions for old-age, incapacity and survivors),

of the Statute for Members of the European Parliament (2005/684/EC, Euratom) were payable under the law of a territory outside the United Kingdom.

2

In section 291(2)(c) of ITEPA 2003 (termination payments under section 3 of European Parliament (Pay and Pensions) Act 1979), insert at the end “or under Article 13 of the Statute for Members of the European Parliament (transitional allowances),”.

3

This section has effect for the tax year 2009-10 and subsequent tax years.

Double taxation

57Tax underlying dividends

1

In section 799(1A) of ICTA (computation of foreign tax on dividends), for “in force when the dividend was paid” substitute “applicable to profits of the company by which the dividend is received for the accounting period in which it is received or, where there is more than one such rate, the average rate over the whole of that accounting period”.

2

Section 801 of ICTA (dividends paid between related companies) is amended as follows.

3

In subsection (2), after “had been paid” insert “(at the time when the dividend mentioned in subsection (1) above is received)”.

4

In the version of section 799(1A) set out in subsection (2B), for “in force when the dividend was paid” substitute “applicable to profits of the company by which the dividend is received for the accounting period in which it is received or, where there is more than one such rate, the average rate over the whole of that accounting period”.

5

The amendment made by subsection (3) has effect in relation to dividends paid to a company falling within section 801(1A) of ICTA if they are paid on or after 22 April 2009.

6

The other amendments made by this section have effect in relation to dividends paid on or after 1 April 2008.

58Manufactured overseas dividends

Schedule 29 contains provision about the amount of overseas tax treated as withheld in relation to certain manufactured overseas dividends.

59Payments by reference to foreign tax etc

1

Part 18 of ICTA (double taxation relief) is amended as follows.

2

Before section 805 insert—

804GReduction in credit: payment by reference to foreign tax

1

This section applies if—

a

credit for foreign tax falls to be allowed to a person (“P”) under any arrangements, and

b

a payment is made by a tax authority to P, or any person connected with P, by reference to the foreign tax.

2

The amount of that credit is to be reduced by an amount equal to that payment.

3

Section 839 applies for the purposes of determining whether or not a person is connected with P.

3

Section 806 (time limit for claims etc) is amended as follows.

4

In subsection (2)—

a

after “arrangements” insert “is reduced under section 804G, or”,

b

for “to which the adjustment gives rise” substitute “to which the reduction or adjustment gives rise”, and

c

for “all such assessments, adjustments” substitute “all such assessments, reductions, adjustments”.

5

In subsection (3)—

a

in paragraph (b), after “subsequently” insert “reduced under section 804G or”, and

b

in the words after paragraph (b), after “Board that” insert “a reduction has been made or that”.

6

In subsections (4) and (5), for “the adjustment” substitute “the reduction or adjustment”.

7

In subsection (6)—

a

for “any adjustment” substitute “any reduction or adjustment”, and

b

after “allowed” insert “has been reduced or”.

8

Section 811 (deduction for foreign tax where no credit allowable) is amended as follows.

9

After subsection (3) insert—

3A

If—

a

income of any person (“P”) is treated under subsection (1) as reduced by a sum paid in respect of tax on that income in the place where the income has arisen (“foreign tax”), and

b

a payment is made by a tax authority to P, or any person connected with P, by reference to the foreign tax,

the amount of P’s income is to be increased by an amount equal to the payment made to P or the connected person.

3B

Section 839 applies for the purposes of determining whether or not a person is connected with P.

10

In subsection (4)—

a

before “nothing” insert “or the amount of P’s income is increased under subsection (3A),”,

b

for “adjustment gives rise” substitute “adjustment or increase gives rise”,

c

for “all such assessments, adjustments” substitute “all such assessments, adjustments, increases”, and

d

insert at the end “or increase under subsection (3A) falls to be made”.

11

In subsection (5)—

a

in paragraph (b), after “United Kingdom” insert “or an increase under subsection (3A)”, and

b

in the words after paragraph (b), after “adjustment” insert “or increase”.

12

In subsections (6), (7) and (8), after “adjustment” insert “or increase”.

13

The amendments made by this section have effect in relation to payments made on or after 22 April 2009.

60Anti-fragmentation

1

Part 18 of ICTA (double taxation relief) is amended as follows.

2

In section 798A (section 797: trade income), after subsection (3) insert—

3A

Subsection (3) is subject to subsection (3B) if—

a

the taxpayer is a bank or a company connected with a bank, and

b

the amount of the included funding costs is significantly less than the amount of the notional funding costs.

3B

The amount of the notional funding costs is to be included in the subsection (3) total, but only to the extent that it exceeds the amount of the included funding costs.

3C

In subsections (3A) and (3B) and this subsection—

“bank” has the meaning given by section 840A;

“connected” has the meaning given by section 839;

“included funding costs” means the total of the funding costs that are—

a

incurred by the taxpayer, or any company connected with the taxpayer, in respect of capital used to fund the relevant transaction, and

b

included in the subsection (3) total (before the application of subsection (3B));

“notional funding costs” means the funding costs that the relevant bank would incur (on the basis of its average funding costs) in respect of the capital that would be needed to wholly fund the relevant transaction if that transaction were funded in that way (and for this purpose “relevant bank” means the bank that is the taxpayer, or with which the taxpayer is connected);

“relevant transaction” means the transaction, arrangement or asset from which the income or gain arises;

“subsection (3) total” means the amount to be taken into account under subsection (3) for the purposes of section 797(1).

3

Section 798B (section 798A: special cases), after subsection (4) insert—

4A

Income of a person (“D”) is to be treated for the purposes of section 798A as trade income (if it is not otherwise trade income) of D in a case where—

a

the income is received by D as part of a scheme or arrangement entered into by D and a connected person (“C”),

b

if C had received the income, it would be reasonable to assume that it would be trade income of C, and

c

a main purpose of the scheme or arrangement is to produce the result that section 798A will not have effect in relation to the income because it is received by D.

4B

For the purposes of subsection (4A)(b) it is to be assumed that, in the case of any relevant transaction to which a relevant person is a party, C were that party to that transaction.

4C

In subsections (4A) and (4B) and this subsection—

“connected person” means a person with whom D is connected (within the meaning of section 839);

“relevant person” means—

a

D, or

b

any other connected person who is a party to the scheme or arrangement;

“relevant transaction” means any of the transactions giving rise to the income.

4

The amendments made by this section have effect in relation to a credit for foreign tax which relates to—

a

a payment of foreign tax on or after 22 April 2009, or

b

income received on or after that date in respect of which foreign tax has been deducted at source.

Miscellaneous anti-avoidance provisions

61Financial arrangements avoidance

Schedule 30 contains provision to counter avoidance involving financial arrangements.

62Transfers of trade to obtain terminal loss relief

1

In section 393A of ICTA (set off of losses against profits of same or earlier accounting period), after subsection (2D) insert—

2E

But subsection (2A) above 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 subsection (2A) above applies to a loss by reason of the cessation.

2

The amendment made by subsection (1) has effect in relation to cessations of a trade on or after 21 May 2009.

63Sale of lessor companies etc: anti-avoidance

Schedule 31 contains provision amending Schedule 10 to FA 2006 (sale of lessor companies etc) to prevent avoidance.

64Leases of plant or machinery

Schedule 32 contains provision about leases of plant or machinery.

65Long funding leases of films

Schedule 33 contains provision about long funding leases of films.

66Real Estate Investment Trusts

Schedule 34 contains provision about Real Estate Investment Trusts.

67Deductions for employee liabilities

1

ITEPA 2003 is amended as follows.

2

In section 346 (deduction for employee liabilities), after subsection (2) insert—

2A

Nor is a deduction allowed for a payment which falls within paragraph A, B or C if the payment is made in pursuance of arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax.

3

After section 556 insert—

556ADeductible payments made pursuant to tax avoidance arrangements

No deduction may be made under section 555 if the deductible payment is made in pursuance of arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax.

4

The amendments made by this section have effect in relation to payments made on or after 12 January 2009 (irrespective of when the arrangements are made).

68Employment loss relief

1

In section 128 of ITA 2007 (employment loss relief against general income), after subsection (5) insert—

5A

No claim may be made in respect of the loss if and to the extent that it is made as a result of anything done in pursuance of arrangements the main purpose, or one of the main purposes, of which is the avoidance of tax.

2

The amendment made by subsection (1)—

a

has effect in relation to a loss made in the tax year 2009-10 or a subsequent tax year, and

b

has effect in relation to a loss made in the tax year 2008-09 if or to the extent that it is occasioned by an act or omission occurring on or after 12 January 2009.

3

Where a person has made a claim under section 128 of ITA 2007 during the relevant period, no penalty is payable by the person on the ground that any return, statement or declaration made in connection with the claim contained an inaccuracy if it would not have done so but for the amendment made by subsection (1).

For this purpose “the relevant period” is the period—

a

beginning with 12 January 2009, and

b

ending with 1 April 2009.

4

Subsection (2) of section 59C of TMA 1970 (surcharge on unpaid tax) has effect in relation to tax which would not be payable but for the amendment made by subsection (1) as if the reference in that subsection to the due date were to the later of 1 April 2009 and the due date.

69No loss relief for losses from contracts for life insurance etc

1

In section 152(8) of ITA 2007 (losses from miscellaneous transactions: cases that are not “section 1016 income”), after “ICTA” insert “or Chapter 9 of Part 4 of ITTOIA 2005”.

2

The amendment made by subsection (1) has effect in relation to losses made in the tax year 2009-10 or a subsequent tax year.

3

That amendment also has effect for the tax year 2008-09 in relation to a loss arising to a person under a policy of life insurance, a contract for a life annuity or a contract constituting a capital redemption policy if—

a

the policy is issued in respect of an insurance made, or the contract is made, on or after 1 April 2009,

b

the policy or contract is varied on or after that date so as to increase the benefits secured (any exercise of rights conferred by the policy or contract being regarded for this purpose as a variation),

c

there is an assignment (or assignation) to the person (whether or not for money or money’s worth) on or after that date of the rights, or a share of the rights, conferred by the policy or contract, or

d

all or part of the rights conferred by the policy or contract become held on or after that date as a security for a debt of the person.

4

Where—

a

a person has made a claim under section 152 of ITA 2007 for the tax year 2008-09 or an earlier tax year in respect of a loss, and

b

by virtue of the amendment made by subsection (1) no claim could have been made in respect of the loss had it been made in the tax year 2009-10,

no deduction may be made for the tax year 2009-10 or a subsequent tax year in accordance with step 2 or 3 in section 153 of ITA 2007 in respect of the loss.

70Intangible fixed assets and goodwill

1

Part 8 of CTA 2009 (intangible fixed assets) is amended as follows.

2

In section 712(1) (meaning of “intangible asset”), insert at the end “(and includes an internally-generated intangible asset)”.

3

In section 715 (application of Part 8 to goodwill)—

a

in subsection (3), insert at the end “(and includes internally-generated goodwill)”, and

b

insert at the end—

4

For the purposes of this Part, goodwill is treated as created in the course of carrying on the business in question.

4

In section 883 (assets treated as created or acquired when expenditure incurred)—

a

in subsection (1), for paragraph (b) substitute—

b

has effect subject to the provisions specified in subsection (2).

b

in subsection (2)(a), omit “internally-generated”,

c

in subsection (2)(b), for “certain other internally-generated assets” substitute “assets representing non-qualifying expenditure”, and

d

in subsection (3), omit “to which this section applies”.

5

In section 884 (internally-generated goodwill: time of creation)—

a

omit “internally-generated”,

b

for the words from “before” to the end substitute

a

before (and not on or after) 1 April 2002 in a case in which the business in question was carried on at any time before that date by the company or a related party, and

b

on or after 1 April 2002 in any other case.

c

in the heading, omit “Internally-generated”.

6

In section 885 (certain other internally-generated assets: time of creation)—

a

in subsection (1)(b), omit “internally-generated”,

b

in subsection (7), for the words from “before” to the end substitute

a

before (and not on or after) 1 April 2002 in a case in which the asset in question was held at any time before that date by the company or a related party, and

b

on or after 1 April 2002 in any other case.

c

in the heading, for “Certain other internally-generated assets” substitute “Assets representing non-qualifying expenditure”.

7

The amendments made by this section have effect in relation to accounting periods beginning on or after 22 April 2009 (and, in relation to those accounting periods, are to be treated as always having had effect).

8

For the purposes of subsection (7) an accounting period beginning before, and ending on or after, 22 April 2009 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.

71Taxable benefit of living accommodation: lease premiums

1

Chapter 5 of Part 3 of ITEPA 2003 (taxable benefits: living accommodation) is amended as follows.

2

In section 105 (cash equivalent: cost of accommodation not over £75,000)—

a

in subsection (3), after “is” insert “(subject to subsections (4) and (4A))”, and

b

for subsection (4) substitute—

4

Subsection (4A) applies where—

a

a rental amount is payable by the person (“P”) at whose cost the accommodation is provided in respect of the whole or part of the taxable period (“the relevant period”), and

b

the amount so payable is payable at an annual rate greater than the annual value.

4A

Where this subsection applies—

a

subsection (3) does not apply to the relevant period, and

b

instead the “rental value of the accommodation” for the relevant period is the rental amount payable by P in respect of the relevant period.

4B

A reference in subsection (4) or (4A) to a rental amount payable by P in respect of the relevant period is to the sum of—

a

any rent for the period payable by P, and

b

any amount attributed to the period in respect of a lease premium (see sections 105A and 105B).

3

After that section insert—

105ALease premiums

1

For the purposes of section 105(4B)(b) an amount is attributed to the relevant period “in respect of a lease premium” if—

a

the property consists of premises, or a part of premises, that are subject to a lease,

b

the premises are not mainly used by P for a purpose other than the provision of living accommodation to which this Chapter applies,

c

the lease is for a term of 10 years or less, and

d

the net amount payable by P in relation to the lease by way of lease premium is greater than zero.

2

The amount so attributed is—

AC×Cmath

where—

A is the relevant period (in days),

B is the term of the lease (in days), and

C is the net amount payable by P in relation to the lease by way of lease premium.

3

For provision about the application of this section in relation to certain leases with break clauses, see section 105B.

4

For the purposes of this section the net amount payable by P in relation to a lease by way of lease premium is—

a

the total amount (if any) that has been paid, or is or will become payable, by P in relation to the lease by way of lease premium, less

b

any amount within paragraph (a) that has been repaid or is or will become repayable.

5

In this section and section 105B “lease premium” means any premium payable—

a

under a lease, or

b

otherwise under the terms on which a lease is granted.

6

In the application of this section to Scotland “premium” includes a grassum.

105BLease premiums in the case of leases with break clauses

1

This section applies to a lease (“the original lease”) that contains one or more relevant break clauses.

2

For the purposes of this section—

a

“break clause” means a provision of a lease that gives a person a right to terminate it so that its term is shorter than it otherwise would be, and

b

a break clause contained in the original lease is “relevant” if the right to terminate the lease that it confers is capable of being exercised in such a way that the term of the original lease is 10 years or less.

3

For the purposes of section 105A—

a

the term of the original lease, and

b

the net amount payable by P in relation to the lease by way of lease premium,

are to be determined on the assumption that any relevant break clause is exercised in such a way that the term of the lease is as short as possible.

4

If a relevant break clause is not in fact exercised in such a way that the term of the original lease is as short as possible, the parties to the lease are treated for the purposes of section 105A as if they were parties to another lease (a “notional lease”) the term of which—

a

begins immediately after the time at which the term of the original lease would have ended, if that break clause had been so exercised, and

b

ends at the time mentioned in subsection (5).

5

The term of a notional lease ends—

a

at the time the term of the original lease would end, on the assumption that any relevant break clause that is exercisable only after the beginning of the term of the notional lease is exercised in such a way that the term of the original lease is as short as possible, or

b

if earlier, the tenth anniversary of the beginning of the term of the original lease.

6

For the purposes of section 105A the net amount payable by P in relation to a notional lease by way of lease premium is, in the case of a notional lease the term of which ends under paragraph (a) of subsection (5)—

a

the net amount that would be payable by P in relation to the original lease by way of lease premium on the assumption mentioned in that paragraph, less

b

any part of that amount that has already been attributed to a period in respect of a lease premium under section 105(4B)(b).

7

For the purposes of section 105A the net amount payable by P in relation to a notional lease by way of lease premium is, in the case of a notional lease the term of which ends under paragraph (b) of subsection (5), the relevant proportion of—

a

the net amount that would be payable by P in relation to the original lease by way of lease premium, on the assumption that no break clause is exercised, less

b

any part of that amount that has already been attributed to a period in respect of a lease premium under section 105(4B)(b).

8

In subsection (7) “the relevant proportion” means—

DEmath

where—

D is the term of the notional lease (in days), and

E is the sum of—

a

the term of the notional lease (in days), and

b

the number of days by which the term of the original lease would exceed 10 years, on the assumption that no break clause is exercised.

4

The amendments made by this section have effect in relation to—

a

any lease entered into on or after 22 April 2009, and

b

subject to subsection (5), any lease entered into before that date the term of which is extended on or after that date.

5

In relation to a lease of the kind mentioned in subsection (4)(b) the amendments made by this section have effect—

a

as if the additional term of the lease created by the extension were the whole of the term of the lease, and

b

ignoring any lease premium payable in respect of the unextended term of the lease.

6

In this section “lease premium” has the same meaning as in sections 105A and 105B of ITEPA 2003.

Part 3Pensions

72Special annual allowance charge etc

Schedule 35 contains provision for and in connection with a special annual allowance charge in respect of pension schemes.

73Financial assistance scheme

1

The Treasury may by regulations make provision for and in connection with—

a

the application of the relevant taxes in relation to the financial assistance scheme, and

b

the application of the relevant taxes in relation to any person in connection with the financial assistance scheme.

2

“The financial assistance scheme” means the scheme provided for by regulations under section 286 of the Pensions Act 2004.

3

The provision that may be made by regulations under this section includes provision imposing any of the relevant taxes (as well as provisions for exemptions or reliefs).

4

The relevant taxes are—

a

income tax,

b

capital gains tax,

c

corporation tax,

d

inheritance tax,

e

value added tax,

f

stamp duty land tax,

g

stamp duty, and

h

stamp duty reserve tax.

5

Regulations under this section may, in particular, include provision for and in connection with the taxation of payments made by virtue of regulations under section 286 of the Pensions Act 2004.

6

The exemptions and reliefs that may be given by regulations under this section include, in particular, exemption from charges to income tax, corporation tax or capital gains tax in respect of—

a

income arising from any assets held or managed by, or receipts of, the person who manages the financial assistance scheme (“the scheme manager”) and any chargeable gains arising from the disposal of any such assets, and

b

the receipt of fraud compensation payments (within the meaning of Part 2 of the Pensions Act 2004: see section 182(1) of that Act).

7

Regulations under this section may include provision having effect in relation to any time before they are made if the provision does not increase any person’s liability to tax.

8

The provision made by regulations under this section may be framed as provision applying with appropriate modifications provisions having effect in relation to registered pension schemes; and for this purpose “registered pension scheme” means a pension scheme within the meaning of Part 4 of FA 2004 which is registered under Chapter 2 of that Part of that Act.

9

Regulations under this section may include—

a

provision amending any enactment or instrument, and

b

consequential, supplementary and transitional provision.

10

Regulations under this section are to be made by statutory instrument.

11

A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

74FSCS intervention in relation to insurance in connection with pensions

1

The Treasury may by regulations make provision for and in connection with the application of the relevant taxes in relation to circumstances in which there is relevant intervention under the FSCS.

2

“Relevant intervention” means—

a

anything done under, or while seeking to make, arrangements for securing continuity of insurance in connection with registered pension schemes,

b

anything done as part of measures for safeguarding policyholders in connection with registered pension schemes, or

c

the payment of compensation in connection with registered pension schemes.

3

“The FSCS” means the Financial Services Compensation Scheme (established under Part 15 of FISMA 2000).

4

The provision that may be made by regulations under this section includes provision imposing any of the relevant taxes (as well as provisions for exemptions or reliefs).

5

The relevant taxes are—

a

income tax,

b

capital gains tax,

c

corporation tax,

d

inheritance tax,

e

stamp duty land tax,

f

stamp duty, and

g

stamp duty reserve tax.

6

Regulations under this section may include provision having effect in relation to any time before they are made if the provision does not increase any person’s liability to tax.

7

The provision made by regulations under this section may be framed as provision modifying, or applying with appropriate modifications, provisions having effect in relation to registered pension schemes.

8

Regulations under this section may include—

a

provision amending any enactment or instrument, and

b

consequential, supplementary and transitional provision.

9

Regulations under this section are to be made by statutory instrument.

10

A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

11

In this section “registered pension scheme” means a pension scheme within the meaning of Part 4 of FA 2004 which is registered under Chapter 2 of that Part of that Act.

75Power to make retrospective non-charging provision

1

In section 282 of FA 2004 (orders and regulations under Part 4), insert at the beginning—

A1

Any order or regulations made by the Treasury or the Commissioners for Her Majesty’s Revenue and Customs under this Part may include provision having effect in relation to times before the order is, or regulations are, made if that provision does not increase any person’s liability to tax.

A2

Subsection (A1) does not limit any specific power to make provision by an order or regulations in relation to times before the order is, or regulations are, made.

2

In consequence of the amendment made by subsection (1), omit the following provisions of Part 4 of FA 2004—

a

section 164(2)(d),

b

section 281(4),

c

section 283(3C),

d

in Schedule 28, paragraphs 3(2CA) and 17(4A), and

e

in Schedule 29A, paragraph 9(2).

3

In consequence of subsection (2), omit—

a

in FA 2006, in Schedule 23, paragraph 34(4), and

b

in FA 2008, in Schedule 29, paragraph 2.

Part 4Value added tax

76Place of supply of services etc

Schedule 36 contains provisions about the place of supply of services for the purposes of value added tax and related matters.

77Repayment to those in business in other States

1

VATA 1994 is amended as follows.

2

In subsection (3) of section 39 (repayment of VAT to those in business overseas)—

a

in the words before paragraph (a), after “such cases” insert “and to such extent”,

b

in sub-paragraph (ii) of paragraph (b), after “Act” insert “in respect of such period as may be prescribed” and omit the “and” at the end,

c

after that paragraph insert—

ba

for and in connection with the payment of interest to or by the Commissioners (including in relation to the repayment of interest wrongly paid), and

d

in paragraph (c), for “methods by which” substitute “time by which and manner in which claims must be made,”.

3

After that section insert—

39AApplications for forwarding of VAT repayment claims to other member States

The Commissioners must make arrangements for dealing with applications made to the Commissioners by taxable persons, in accordance with Council Directive 2008/9/EC, for the forwarding to the tax authorities of another member State of claims for refunds of VAT on—

a

supplies to them in that member State, or

b

the importation of goods by them into that member State from places outside the member States.

4

In section 83(1) (appeals), after paragraph (h) insert—

ha

any decision of the Commissioners to refuse to make a repayment under a scheme under section 39;

78Information relating to cross-border supplies of services to taxable recipients

1

Paragraph 2 of Schedule 11 to VATA 1994 (accounting for VAT and submission of particulars of transactions etc) is amended as follows.

2

In sub-paragraph (3), for “which involve the movement of goods between member States” substitute “to which this sub-paragraph applies”.

3

After that paragraph insert—

3ZA

Sub-paragraph (3) above applies to—

a

transactions involving the movement of goods between member States, and

b

transactions involving the supply of services to a person in a member State other than the United Kingdom who is required to pay VAT on the supply in accordance with provisions of the law of that other member State giving effect to Article 196 of Council Directive 2006/112/EC.

79Effect of VAT changes on arbitration of rent for agricultural holdings

1

In paragraph 4(2) of Schedule 2 to the Agricultural Holdings Act 1986 (frequency of arbitrations of rent: changes in rent to be disregarded), insert at the end—

d

an increase or reduction of rent arising from—

i

the exercise of an option to tax under Schedule 10 to the Value Added Tax Act 1994,

ii

the revocation of such an option, or

iii

a change in the rate of value added tax applicable to grants of interests in or rights over land in respect of which such an option has effect.

2

Paragraph 4(2)(d) of Schedule 2 to that Act (as inserted by subsection (1)) includes an increase or reduction of rent arising from an option, revocation or change in rate that takes effect before the day on which this Act is passed.

3

The references in that provision and in subsection (2) to an option to tax, or to the exercise or revocation of such an option, under Schedule 10 to VATA 1994 include a reference to an election to waive exemption, or to the making or revocation of such an election, under that Schedule (as it had effect before 1 June 2008).

Part 5Stamp taxes

Stamp duty land tax

80Exercise of collective rights by tenants of flats

1

Section 74 of FA 2003 (collective enfranchisement by leaseholders) is amended as follows.

2

For subsection (1) substitute—

1

This section applies where a chargeable transaction is entered into by a person or persons nominated or appointed by qualifying tenants of flats contained in premises in exercise of—

a

a right under Part 1 of the Landlord and Tenant Act 1987 (right of first refusal), or

b

a right under Chapter 1 of Part 1 of the Leasehold Reform, Housing and Urban Development Act 1993 (right to collective enfranchisement).

3

In subsection (2)—

a

omit “In that case,”, and

b

for “flats in respect of which the right of collective enfranchisement is being exercised” substitute “qualifying flats contained in the premises”.

4

For subsection (4) substitute—

4

In this section—

“flat” and “qualifying tenant” have the same meaning as in the Chapter or Part of the Act conferring the right being exercised;

“qualifying flat” means a flat that is held by a qualifying tenant who is participating in the exercise of the right.

5

For the heading substitute “Exercise of collective rights by tenants of flats”.

6

Accordingly, in section 55(5) of that Act (amount of tax chargeable), for “collective enfranchisement by leaseholders” substitute “exercise of collective rights by tenants of flats”.

7

The amendments made by this section have effect in relation to transactions with an effective date on or after 22 April 2009.

81Registered providers of social housing

1

Part 4 of FA 2003 (stamp duty land tax) is amended as follows.

2

Section 71 (certain acquisitions by registered social landlord) is amended as follows.

3

Insert at the beginning—

A1

A land transaction under which the purchaser is a profit-making registered provider of social housing is exempt from charge if the transaction is funded with the assistance of a public subsidy.

4

In subsection (4), for “subsection (1)(c)” substitute “this section”.

5

Schedule 9 (right to buy etc) is amended as follows.

6

In paragraph 5 (shared ownership leases: “qualifying body” etc)—

a

in sub-paragraph (2), insert at the end—

g

a registered provider of social housing that is not within paragraph (b) (subject to sub-paragraph (2A)).

b

after that sub-paragraph insert—

2A

A registered provider of social housing within sub-paragraph (2)(g) (“R”) is only a qualifying body in relation to a lease of premises if the following has been funded with the assistance of a grant or other financial assistance under section 19 of the Housing and Regeneration Act 2008—

a

the purchase or construction of the premises by R (or a person connected with R), or

b

the adaptation of the premises by R (or a person connected with R) for use as a dwelling.

2B

Section 839 of the Taxes Act 1988 (connected persons) has effect for the purposes of sub-paragraph (2A).

7

In paragraph 7 (shared ownership trusts: introduction)—

a

in sub-paragraph (3), omit “(within the meaning of paragraph 5(2))”, and

b

insert at the end—

7

In Condition 2 “qualifying body” means—

a

a qualifying body within the meaning of paragraph 5(2)(a) to (f), or

b

a registered provider of social housing within paragraph 5(2)(g) (subject to sub-paragraph (8)).

8

A registered provider of social housing within paragraph 5(2)(g) (“R”) is only a qualifying body in relation to a shared ownership trust if the following has been or is being funded with the assistance of a grant or other financial assistance under section 19 of the Housing and Regeneration Act 2008—

a

the purchase or construction of the trust property by R (or a person connected with R), or

b

the adaptation of the trust property by R (or a person connected with R) for use as a dwelling.

9

Section 839 of the Taxes Act 1988 (connected persons) has effect for the purposes of sub-paragraph (8).

8

The amendments made by this section have effect in relation to transactions with an effective date on or after the day on which this Act is passed.

82Rent to shared ownership

1

In Schedule 9 to FA 2003 (stamp duty land tax: right to buy etc), insert at the end—

13Rent to shared ownership lease: charge to tax

1

The chargeable consideration for transactions forming part of a rent to shared ownership lease scheme is determined in accordance with this paragraph.

2

A “rent to shared ownership lease scheme” means a scheme or arrangement under which a qualifying body—

a

grants an assured shorthold tenancy of a dwelling to a person (“the tenant”) or persons (“the tenants”), and

b

subsequently grants a shared ownership lease of the dwelling or another dwelling to the tenant or one or more of the tenants.

3

The following transactions are to be treated as if they were not linked to each other—

a

the grant of the assured shorthold tenancy,

b

the grant of the shared ownership lease, and

c

any other land transaction between the qualifying body and the tenant, or any of the tenants, entered into as part of the scheme.

4

For the purpose of determining the effective date of the grant of the shared ownership lease, the possession of the dwelling by the tenant or tenants pursuant to the assured shorthold tenancy is to be disregarded.

5

In this paragraph—

“assured shorthold tenancy” has the same meaning as in Part 1 of the Housing Act 1988;

“qualifying body” has the same meaning as in paragraph 5;

“shared ownership lease” has the same meaning as in paragraph 4A.

14Rent to shared ownership trust: charge to tax

1

The chargeable consideration for transactions forming part of a rent to shared ownership trust scheme is determined in accordance with this paragraph.

2

A “rent to shared ownership trust scheme” means a scheme or arrangement under which—

a

a qualifying body grants an assured shorthold tenancy of a dwelling to a person (“the tenant”) or persons (“the tenants”), and

b

the tenant, or one or more of tenants, subsequently becomes the purchaser under a shared ownership trust of the dwelling, or another dwelling, under which the qualifying body is the social landlord.

3

The following transactions are to be treated as if they were not linked to each other—

a

the grant of the assured shorthold tenancy,

b

the declaration of the shared ownership trust, and

c

any other land transaction between the qualifying body and the tenant, or any of the tenants, entered into as part of the scheme.

4

For the purpose of determining the effective date of the declaration of the shared ownership trust, the possession of the dwelling by the tenant or tenants pursuant to the assured shorthold tenancy is to be disregarded.

5

In this paragraph—

“assured shorthold tenancy” has the same meaning as in Part 1 of the Housing Act 1988;

“qualifying body” has the same meaning as in paragraph 5;

“social landlord” and “purchaser”, in relation to a shared ownership trust, have the same meaning as in paragraph 7.

2

The amendment made by subsection (1) has effect in relation to cases in which the effective date of the grant of the shared ownership lease or the declaration of the shared ownership trust is on or after 22 April 2009.

3

Paragraphs 13(4) and 14(4) of Schedule 9 to FA 2003 (inserted by this section) have effect for the purposes of subsection (2).

Stock lending arrangements

83Stamp taxes in event of insolvency

1

Schedule 37 contains provision amending Part 3 (stamp duty) and Part 4 (stamp duty reserve tax) of FA 1986 in respect of repurchase and stock lending arrangements in the event of the insolvency of one of the parties.

2

The amendments made by that Schedule have effect where the insolvency in question occurs on or after 1 September 2008.

3

This section and that Schedule cease to have effect—

a

in relation to the amendments made to Part 3 of FA 1986, when the repeal of sections 80 to 85 of that Act (by Part 6 of Schedule 19 to, and in accordance with sections 107 to 109 of, FA 1990) comes into force, and

b

in relation to the amendment made to Part 4 of FA 1986, when the repeal of that Part (by Part 7 of Schedule 19 to, and in accordance with section 110 of, FA 1990) comes into force.

Part 6Oil

84Capital allowances for oil decommissioning expenditure

Schedule 38 contains provision about capital allowances for oil decommissioning expenditure.

85Blended oil

Schedule 39 contains provision about the treatment of blended oil for the purposes of petroleum revenue tax.

86Chargeable gains

Schedule 40 contains provision about chargeable gains in oil trades.

87Oil assets put to other uses

Schedule 41 contains provision about oil production assets put to certain other uses.

88Former licensees and former oil fields

Schedule 42 contains provision about the treatment of certain former licensees and former oil fields for the purposes of petroleum revenue tax.

89Abolition of provisional expenditure allowance

Schedule 43 contains provision abolishing provisional expenditure allowance.

90Supplementary charge: reduction for certain new oil fields

1

Schedule 44 contains provision for the reduction of the supplementary charge under section 501A of ICTA on companies that are, or have been, licensees in new oil fields.

2

In section 501A of ICTA, after subsection (11) insert—

12

This section is subject to Schedule 44 to the Finance Act 2009.

3

This section and Schedule 44 have effect in relation to accounting periods ending on or after 22 April 2009.

91Miscellaneous amendments

Schedule 45 contains miscellaneous amendments relating to oil taxation.

Part 7Administration

Standards and values

92HMRC Charter

1

In CRCA 2005, after section 16 insert—

16ACharter of standards and values

1

The Commissioners must prepare a Charter.

2

The Charter must include standards of behaviour and values to which Her Majesty’s Revenue and Customs will aspire when dealing with people in the exercise of their functions.

3

The Commissioners must—

a

regularly review the Charter, and

b

publish revisions, or revised versions, of it when they consider it appropriate to do so.

4

The Commissioners must, at least once every year, make a report reviewing the extent to which Her Majesty’s Revenue and Customs have demonstrated the standards of behaviour and values included in the Charter.

2

The duty imposed by section 16A(1) of CRCA 2005 must be complied with before the end of 2009.

93Duties of senior accounting officers of qualifying companies

1

Schedule 46 contains provision about the duties of senior accounting officers of qualifying companies.

2

That Schedule has effect in relation to financial years (within the meaning of the Companies Act 2006) beginning on or after the day on which this Act is passed.

94Publishing details of deliberate tax defaulters

1

The Commissioners may publish information about any person if—

a

in consequence of an investigation conducted by the Commissioners, one or more relevant tax penalties is found to have been incurred by the person, and

b

the potential lost revenue in relation to the penalty (or the aggregate of the potential lost revenue in relation to each of the penalties) exceeds £25,000.

2

A “relevant tax penalty” is—

a

a penalty under paragraph 1 of Schedule 24 to FA 2007 (inaccuracy in taxpayer’s document) in respect of a deliberate inaccuracy on the part of the person,

b

a penalty under paragraph 1A of that Schedule (inaccuracy in taxpayer’s document attributable to deliberate supply of false information or deliberate withholding of information by person),

c

a penalty under paragraph 1 of Schedule 41 to FA 2008 (failure to notify) in respect of a deliberate failure on the part of the person, or

d

a penalty under paragraph 2 (unauthorised VAT invoice), 3 (putting product to use attracting higher duty etc) or 4 (handling goods subject to unpaid excise duty) of that Schedule in respect of deliberate action by the person.

3

“Potential lost revenue”, in relation to a penalty, has the meaning given by—

a

paragraphs 5 to 8 of Schedule 24 to FA 2007, or

b

paragraphs 7 to 11 of Schedule 41 to FA 2008,

in relation to the inaccuracy, failure or action to which the penalty relates.

4

The information that may be published is—

a

the person’s name (including any trading name, previous name or pseudonym),

b

the person’s address (or registered office),

c

the nature of any business carried on by the person,

d

the amount of the penalty or penalties and the potential lost revenue in relation to the penalty (or the aggregate of the potential lost revenue in relation to each of the penalties),

e

the periods or times to which the inaccuracy, failure or action giving rise to the penalty (or any of the penalties) relates, and

f

any such other information as the Commissioners consider it appropriate to publish in order to make clear the person’s identity.

5

The information may be published in any manner that the Commissioners consider appropriate.

6

Before publishing any information the Commissioners must—

a

inform the person that they are considering doing so, and

b

afford the person reasonable opportunity to make representations about whether it should be published.

7

No information may be published before the day when the penalty becomes final (or the latest day when any of the penalties becomes final).

8

No information may be published for the first time after the end of the period of one year beginning with that day (or that latest day).

9

No information may be published (or continue to be published) after the end of the period of one year beginning with the day on which it is first published.

10

No information may be published if the amount of the penalty is reduced under—

a

paragraph 10 of Schedule 24 to FA 2007, or

b

paragraph 13 of Schedule 41 to FA 2008,

(reductions for disclosure) to the full extent permitted.

11

For the purposes of this section a penalty becomes final—

a

if it has been assessed, when the time for any appeal or further appeal relating to it expires or, if later, any appeal or final appeal relating to it is finally determined, or

b

if a contract is made between the Commissioners and the person under which the Commissioners undertake not to assess the penalty or (if it has been assessed) not to take proceedings to recover it, at the time when the contract is made.

12

The Treasury may by order vary the amount for the time being specified in subsection (1).

13

This section comes into force on a day appointed by order made by the Treasury.

14

Orders under this section are to be made by statutory instrument.

15

A statutory instrument containing an order under subsection (12) is subject to annulment in pursuance of a resolution of the House of Commons.

16

In this section “the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs.

Information etc

95Amendment of information and inspection powers

1

Schedule 47 contains amendments of Schedule 36 to FA 2008 (information and inspection powers).

2

The Treasury may by order make any incidental, supplemental, consequential, transitional or transitory provision or saving which appears appropriate in consequence of, or otherwise in connection with, Schedule 36 to FA 2008 or Schedule 47.

3

An order under this section may—

a

make different provision for different purposes, and

b

make provision amending, repealing or revoking an enactment or instrument (whenever passed or made).

4

An order under this section is to be made by statutory instrument.

5

A statutory instrument containing an order under this section is subject to annulment in pursuance of a resolution of the House of Commons.

96Extension of information and inspection powers to further taxes

1

In paragraph 63(1) of Schedule 36 to FA 2008 (information and inspection powers: meaning of “tax”), for paragraph (e) (and the “and” before it) substitute—

e

insurance premium tax,

f

inheritance tax,

g

stamp duty land tax,

h

stamp duty reserve tax,

i

petroleum revenue tax,

j

aggregates levy,

k

climate change levy,

l

landfill tax, and

m

relevant foreign tax,

2

Schedule 48 contains further amendments of that Schedule.

3

The amendments made by this section and Schedule 48 come into force on such day as the Treasury may by order appoint.

4

An order under subsection (3) may—

a

appoint different days for different purposes, and

b

contain transitional provision and savings.

5

The Treasury may by order make any incidental, supplemental, consequential, transitional or transitory provision or saving which appears appropriate in consequence of, or otherwise in connection with, this section and Schedule 48.

6

An order under subsection (5) may—

a

make different provision for different purposes, and

b

make provision amending, repealing or revoking an enactment or instrument (whenever passed or made).

7

An order under this section is to be made by statutory instrument.

8

A statutory instrument containing an order under subsection (5) is subject to annulment in pursuance of a resolution of the House of Commons.

97Powers to obtain contact details for debtors

Schedule 49 contains provision about the powers of officers of Revenue and Customs to obtain contact details of debtors.

98Record-keeping

1

Schedule 50 contains provision about obligations to keep records.

2

The amendments made by that Schedule come into force on such day as the Treasury may by order made by statutory instrument appoint.

Assessments, claims etc

99Time limits for assessments, claims etc

1

Schedule 51 contains provision about time limits for assessments, claims etc.

2

The amendments made by that Schedule come into force on such day as the Treasury may by order made by statutory instrument appoint.

3

An order under subsection (2)—

a

may make different provision for different purposes, and

b

may include transitional provision and savings.

100Recovery of overpaid tax etc

1

Schedule 52 contains provision for and in connection with the recovery of overpaid income tax, capital gains tax and corporation tax.

2

The amendments made by that Schedule have effect in relation to claims made on or after 1 April 2010.

3

The Treasury may by order make any incidental, supplemental, consequential, transitional or transitory provision or saving which appears appropriate in consequence of, or otherwise in connection with, that Schedule.

4

An order under this section may—

a

make different provision for different purposes, and

b

make provision modifying an enactment or instrument (whenever passed or made).

5

“Modifying” includes amending, repealing or revoking.

6

An order under this section is to be made by statutory instrument.

7

A statutory instrument containing an order under this section is subject to annulment in pursuance of a resolution of the House of Commons.

Interest

101Late payment interest on sums due to HMRC

1

This section applies to any amount that is payable by a person to HMRC under or by virtue of an enactment.

2

But this section does not apply to—

a

an amount of corporation tax,

b

an amount of petroleum revenue tax, or

c

an amount of any description specified in an order made by the Treasury.

3

An amount to which this section applies carries interest at the late payment interest rate from the late payment interest start date until the date of payment.

4

The late payment interest start date in respect of any amount is the date on which that amount becomes due and payable.

5

In Schedule 53—

a

Part 1 makes special provision as to the amount on which late payment interest is calculated,

b

Part 2 makes special provision as to the late payment interest start date,

c

Part 3 makes special provision as to the date to which late payment interest runs, and

d

Part 4 makes provision about the effect that the giving of a relief has on late payment interest.

6

Subsection (3) applies even if the late payment interest start date is a non-business day within the meaning of section 92 of the Bills of Exchange Act 1882.

7

Late payment interest is to be paid without any deduction of income tax.

8

Late payment interest is not payable on late payment interest.

9

For the purposes of this section any reference to the payment of an amount to HMRC includes a reference to its being set off against an amount payable by HMRC (and, accordingly, the reference to the date on which an amount is paid includes a reference to the date from which the set-off takes effect).

102Repayment interest on sums to be paid by HMRC

1

This section applies to—

a

any amount that is payable by HMRC to any person under or by virtue of an enactment, and

b

a relevant amount paid by a person to HMRC that is repaid by HMRC to that person or to another person.

2

But this section does not apply to—

a

an amount constituting a repayment of corporation tax,

b

an amount constituting a repayment of petroleum revenue tax, or

c

an amount of any description specified in an order made by the Treasury.

3

An amount to which this section applies carries interest at the repayment interest rate from the repayment interest start date until the date on which the payment or repayment is made.

4

In Schedule 54—

a

Parts 1 and 2 define the repayment interest start date, and

b

Part 3 makes supplementary provision.

5

Subsection (3) applies even if the repayment interest start date is a non-business day within the meaning of section 92 of the Bills of Exchange Act 1882.

6

Repayment interest is not payable on an amount payable in consequence of an order or judgment of a court having power to allow interest on the amount.

7

Repayment interest is not payable on repayment interest.

8

For the purposes of this section—

a

“relevant amount” means any sum that was paid in connection with any liability (including any purported or anticipated liability) to make a payment to HMRC under or by virtue of an enactment, and

b

any reference to the payment or repayment of an amount by HMRC includes a reference to its being set off against an amount owed to HMRC (and, accordingly, the reference to the date on which an amount is paid or repaid by HMRC includes a reference to the date from which the set-off takes effect).

103Rates of interest

1

The late payment interest rate is the rate provided for in regulations made by the Treasury under this subsection.

2

The repayment interest rate is the rate provided for in regulations made by the Treasury under this subsection.

3

Regulations under subsection (1) or (2)—

a

may make different provision for different purposes,

b

may either themselves specify a rate of interest or make provision for such a rate to be determined (and to change from time to time) by reference to such rate, or the average of such rates, as may be referred to in the regulations,

c

may provide for rates to be reduced below, or increased above, what they otherwise would be by specified amounts or by reference to specified formulae,

d

may provide for rates arrived at by reference to averages to be rounded up or down,

e

may provide for circumstances in which alteration of a rate of interest is or is not to be take place, and

f

may provide that alterations of rates are to have effect for periods beginning on or after a day determined in accordance with the regulations in relation to interest running from before that day as well as from or from after that day.

104Supplementary

1

In sections 101 to 103—

“HMRC” means Her Majesty’s Revenue and Customs;

“late payment interest” means interest payable under section 101;

“repayment interest” means interest payable under section 102;

“revenue” has the meaning given in section 5(4) of CRCA 2005.

2

A reference to the date on which an amount becomes due and payable is a reference to the date (however described) on or before which the amount must be paid.

3

Sections 101 to 103 come into force on such day as the Treasury may by order appoint.

4

An order under subsection (3)—

a

may commence a provision generally or only for specified purposes, and

b

may appoint different days for different provisions or for different purposes.

5

The Treasury may by order make any incidental, supplemental, consequential, transitional, transitory or saving provision which may appear appropriate in consequence of, or otherwise in connection with, those sections.

6

An order under subsection (5) may include provision amending, repealing or revoking any provision of any Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).

7

An order under subsection (5) may make different provision for different purposes.

8

The following are to be made by statutory instrument—

a

orders under section 101(2) or 102(2),

b

regulations under section 103(1) or (2), and

c

orders under subsection (3) or (5).

9

A statutory instrument containing—

a

an order under section 101(2) or 102(2),

b

regulations under section 103(1) or (2),

c

an order under subsection (5) which includes provision amending or repealing any provision of an Act,

is subject to annulment in pursuance of a resolution of the House of Commons.

105Miscellaneous amendments

1

Section 239 of ITA 2007 (date from which interest is chargeable when EIS relief is withdrawn or reduced) is amended as follows.

2

In subsection (1)—

a

for “in column 1 of the following table” substitute “in subsection (2)”,

b

for “given by the corresponding entry in column 2 of the table” substitute “31 January next following the tax year for which the assessment is made”, and

c

omit the table.

3

For subsection (2) substitute—

2

The provisions are—

section 163,

section 164,

section 173A,

any of sections 181 to 188,

section 209,

section 212(1),

section 213,

section 224,

section 232, and

section 233.

4

In the following provisions, for the words from “the same rate” to the end substitute “the rate applicable under section 178 of the Finance Act 1989”—

a

section 48(1) of FA 1975 (interest on repayment of estate duty), and

b

section 235(1) of IHTA 1984 (interest on overpaid inheritance tax).

5

In section 178(2) of FA 1989 (setting of rates of interest)—

a

after paragraph (g) insert—

ga

section 48(1) of the Finance Act 1975,

b

in paragraph (k), after “sections 233” insert “, 235(1)”.

6

The following provisions (which require HMRC to make an order specifying the new rate of interest when that rate is changed by operation of regulations) are omitted—

a

section 178(5) of FA 1989, and

b

section 197(5) of FA 1996.

Penalties

106Penalties for failure to make returns etc

1

Schedule 55 contains provision for imposing penalties on persons in respect of failures to make returns and other documents relating to liabilities for tax.

2

That Schedule comes into force on such day as the Treasury may by order appoint.

3

An order under subsection (2)—

a

may commence a provision generally or only for specified purposes, and

b

may appoint different days for different provisions or for different purposes.

4

The Treasury may by order make any incidental, supplemental, consequential, transitional, transitory or saving provision which may appear appropriate in consequence of, or otherwise in connection with, Schedule 55.

5

An order under subsection (4) may include provision amending, repealing or revoking any provision of any Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).

6

An order under subsection (4) may make different provision for different purposes.

7

An order under this section is to be made by statutory instrument.

8

A statutory instrument containing an order under subsection (4) which includes provision amending or repealing any provision of an Act is subject to annulment in pursuance of a resolution of the House of Commons.

107Penalties for failure to pay tax

1

Schedule 56 contains provision for imposing penalties on persons in respect of failures to comply with obligations to pay tax.

2

That Schedule comes into force on such day as the Treasury may by order appoint.

3

An order under subsection (2)—

a

may commence a provision generally or only for specified purposes, and

b

may appoint different days for different provisions or for different purposes.

4

The Treasury may by order make any incidental, supplemental, consequential, transitional, transitory or saving provision which may appear appropriate in consequence of, or otherwise in connection with, Schedule 56.

5

An order under subsection (4) may include provision amending, repealing or revoking any provision of any Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).

6

An order under subsection (4) may make different provision for different purposes.

7

An order under this section is to be made by statutory instrument.

8

A statutory instrument containing an order under subsection (4) which includes provision amending or repealing any provision of an Act is subject to annulment in pursuance of a resolution of the House of Commons.

108Suspension of penalties during currency of agreement for deferred payment

1

This section applies if—

a

a person (“P”) fails to pay an amount of tax falling within the Table in subsection (5) when it becomes due and payable,

b

P makes a request to an officer of Revenue and Customs that payment of the amount of tax be deferred, and

c

an officer of Revenue and Customs agrees that payment of that amount may be deferred for a period (“the deferral period”).

2

P is not liable to a penalty for failing to pay the amount mentioned in subsection (1) if—

a

the penalty falls within the Table, and

b

P would (apart from this subsection) become liable to it between the date on which P makes the request and the end of the deferral period.

3

But if—

a

P breaks the agreement (see subsection (4)), and

b

an officer of Revenue and Customs serves on P a notice specifying any penalty to which P would become liable apart from subsection (2),

P becomes liable, at the date of the notice, to that penalty.

4

P breaks an agreement if—

a

P fails to pay the amount of tax in question when the deferral period ends, or

b

the deferral is subject to P complying with a condition (including a condition that part of the amount be paid during the deferral period) and P fails to comply with it.

5

The taxes and penalties referred to in subsections (1) and (2) are—

Tax

Penalty

Income tax or capital gains tax

Surcharge under section 59C(2) or (3) of TMA 1970

Value added tax

Surcharge under section 59(4) or 59A(4) of VATA 1994

Aggregates levy

Penalty interest under paragraph 5 of Schedule 5 to FA 2001

Climate change levy

Penalty interest under paragraph 82 of Schedule 6 to FA 2000

Landfill tax

Penalty interest under paragraph 27(2) of Schedule 5 to FA 1996

Insurance premium tax

Penalty under paragraph 15(2) or (3) of Schedule 7 to FA 1994 which is payable by virtue of paragraph 15(1)(a) of that Schedule.

Any duty of excise

Penalty under section 9(2) or (3) of FA 1994 which is imposed for a failure to pay an amount of any duty of excise or an amount payable on account of any such duty.

6

If the agreement mentioned in subsection (1)(c) is varied at any time by a further agreement between P and an officer of Revenue and Customs, this section applies from that time to the agreement as varied.

7

The Treasury may by order amend the Table by adding or removing a tax or a penalty.

8

An order under subsection (7) is to be made by statutory instrument.

9

A statutory instrument containing an order under subsection (7) is subject to annulment in pursuance of a resolution of the House of Commons.

10

In this section, except in the entries in the Table, “penalty” includes surcharge and penalty interest.

11

This section has effect where the agreement mentioned in subsection (1)(c) is made on or after 24 November 2008.

109Miscellaneous amendments

Schedule 57 contains amendments of Schedule 24 to FA 2007 (penalties for errors), Schedule 41 to FA 2008 (penalties for failure to notify and certain other wrongdoing) and certain other enactments relating to penalties.

Miscellaneous

110Recovery of debts using PAYE regulations

Schedule 58 contains provision about the recovery of debts by means of deductions from PAYE income in accordance with PAYE regulations.

111Managed payment plans

1

This section applies where a person (“P”) has entered into a managed payment plan in respect of—

a

an amount on account of income tax which is to become payable in accordance with section 59A(2) of TMA 1970,

b

an amount of income tax or capital gains tax which is to become payable in accordance with section 59B of that Act, or

c

an amount of corporation tax which is to become payable in accordance with section 59D of that Act.

2

P enters into a managed payment plan in respect of an amount if—

a

P agrees to pay, and an officer of Revenue and Customs agrees to accept payment of, the amount by way of instalments,

b

the instalments to be paid before the due date are balanced by the instalments to be paid after it (see subsections (8) to (10)), and

c

the agreement meets such other requirements as may be specified in regulations made by the Commissioners.

3

But this section does not apply, in the case of an amount of corporation tax, where an arrangement under section 36 of FA 1998 (payment of tax by members of a group of companies) has been made in relation to the amount.

4

If P pays all of the instalments in accordance with the plan, P is to be treated as having paid, on the due date, the total of those instalments.

5

If P—

a

pays one or more instalments in accordance with the plan, but

b

fails to pay one or more later instalments in accordance with it,

P is to be treated as having paid, on the due date, the total of the instalments paid before the failure (but this is subject to subsection (6)).

6

Where—

a

subsection (5) applies in a case where the first failure to pay an instalment occurs before the due date, and

b

P would (in the absence of a managed payment plan) be entitled to be paid interest on any amount paid before that date,

then, despite that subsection, P is entitled to be paid that interest.

7

Where—

a

subsection (5) applies,

b

P makes one or more payments after the due date (whether or not in accordance with the plan), and

c

an officer of Revenue and Customs gives P a notice specifying any or all of those payments,

P is not liable to a penalty or surcharge for failing to pay the amount of the specified payments on or before the due date.

8

The instalments to be paid before the due date are balanced by those to be paid after it if the time value of the instalments to be paid before that date is equal, or approximately equal, to the time value of the instalments to be paid after it.

9

The time value of the instalments to be paid before the due date is the total of the time value of each of the instalments to be paid before that date (and the time value of the instalments to be paid after that date is to be construed accordingly).

10

The time value of an instalment is—

A×Tmath

where—

A is the amount of the instalment, and

T is the number of days before, or after, the due date that the instalment is to be paid.

11

The Commissioners may by regulations make provision for the purpose of determining when an amount is approximately equal to another amount.

12

Regulations under this section may make different provision for different cases.

13

In this section—

“the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;

“the due date”, in relation to an amount mentioned in subsection (1), means the date on which it becomes payable.

14

This section has effect where the due date falls after the day on which this Act is passed.

112Customs and excise enforcement: movements between member States

1

Section 4 of F(No.2)A 1992 (cases in which customs and excise enforcement powers can be used in relation to movement of persons or things between member States) is amended as follows.

2

In subsection (1), after “subsection” insert “(1A) or”.

3

After that subsection insert—

1A

The first case in which a power to which this section applies may be exercised as mentioned in subsection (1) above is where it is necessary to exercise the power in order to ascertain whether the movement in question is or is not in fact between different member States.

4

In subsection (2), for the words from the beginning to “or that” substitute “The second case in which a power to which this section applies may be exercised as mentioned in subsection (1) above is where”.

Part 8Miscellaneous

Gambling

113VAT exemption for gaming participation fees

1

Group 4 of Schedule 9 to VATA 1994 (exemptions: betting, gaming and lotteries) is amended as follows.

2

In Note (1), omit paragraph (b) (granting of right to play game of chance not exempted unless within Note (5)).

3

Omit Notes (5) to (11).

4

The Value Added Tax (Betting, Gaming and Lotteries) Order 2007 (S.I. 2007/2163) is revoked.

5

Omit—

a

in BGDA 1981, sections 19(3)(b) and 26E(2), and

b

in FA 1997, section 11(9)(a).

6

The amendments made by this section are treated as having come into force on 27 April 2009.

114Gaming duty

1

FA 1997 is amended as follows.

2

Section 10 (gaming duty) is amended as follows.

3

For subsection (2) substitute—

2

Subject as follows, this section applies to—

a

casino games, and

b

equal chance gaming.

4

In subsection (3)(e), after “Article” insert “77,”.

5

After subsection (3A) insert—

3AA

This section does not apply to the playing of a game in respect of which bingo duty or lottery duty is chargeable or would be chargeable but for an express exception.

6

In subsection (3C)(a), after “in” insert “organising or”.

7

For subsection (4) substitute—

4

This section does not apply—

a

in Great Britain, to the playing of a game where the provision of facilities for its playing falls within section 269 of the Gambling Act 2005 (equal chance gaming at members’ or commercial clubs and miners’ welfare institutes), or

b

in Northern Ireland, to the playing of a game to which Article 128 of the Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985 (certain clubs) applies.

8

In subsection (5), for “add to the games mentioned in subsection (2) above” substitute “provide that any specified game is or is not to be a casino game or equal chance gaming for the purposes of this section”.

9

In subsection (6), for “this section, or in an order under subsection (5) above,” substitute “an order under subsection (5) above”.

10

Section 14 (subordinate legislation) is amended as follows.

11

In subsection (2), for “or 11(11) above” substitute “providing that any game is to be a casino game or equal chance gaming or any order under section 11(11)”.

12

Insert at the end—

4

A statutory instrument containing an order under section 10(5) that does not provide for any game to be a casino game or equal chance gaming is subject to annulment in pursuance of a resolution of the House of Commons.

13

Section 15(3) (interpretation) is amended as follows.

14

After the definition of “accounting period” insert—

“casino games” means games of chance which are not equal chance gaming (but subject to any order under section 10(5));

15

After the definition of “dutiable gaming” insert—

“equal chance gaming”—

a

in Great Britain, means gaming which does not involve playing or staking against a bank (however described, and whether or not controlled or administered by a player) and in which the chances are equally favourable to all participants, and

b

in Northern Ireland, means gaming in respect of which none of the conditions specified in Article 55 of the Betting, Gaming, Lotteries and Amusements (Northern Ireland) Order 1985 is met,

(but subject to any order under section 10(5));

16

In consequence of the preceding provisions, omit—

a

in FA 2002, section 11, and

b

in FA 2007, in Schedule 25, paragraph 17(4).

17

The amendments made by this section are to be treated as having come into force on 27 April 2009.

18

But those amendments do not give rise to a duty under paragraph 6(3)(a) of Schedule 1 to FA 1997 (requirement to notify premises) before 25 May 2009.

115Remote bingo etc

1

BGDA 1981 is amended as follows.

2

In section 17 (bingo duty), after subsection (2) insert—

2A

Bingo duty is not charged on the playing of bingo which is not licensed bingo if remote gaming duty is charged on the provision of facilities for playing it.

3

In section 26H (remote gaming duty: exemptions), after subsection (2) insert—

2A

Subsection (2) does not prevent remote gaming duty being charged in respect of the provision of facilities for the playing of bingo which is not licensed bingo (as to the meaning of which terms see section 20C).

4

The amendments made by this section have effect in relation to games of bingo that begin to be played on or after 1 July 2009.

116Meaning of “gaming machine” and “gaming”

1

BGDA 1981 is amended as follows.

2

Section 25 (meaning of “amusement machine”) is amended as follows.

3

For subsection (1A) substitute—

1A

In this Act “gaming machine” means a machine which is designed or adapted for use by individuals for gambling (whether or not it can also be used for other purposes).

1B

But a machine is not a gaming machine to the extent that—

a

it is designed or adapted for use to bet on future real events,

b

it is designed or adapted for the playing of bingo and bingo duty is, or but for paragraphs 1 to 5 of Schedule 3 would be, charged under section 17 on the playing of the bingo, or

c

it is designed or adapted for the playing of a real game of chance and the playing of the game is dutiable gaming for the purposes of section 10 of the Finance Act 1997, or would be dutiable gaming but for subsections (3) and (4) of that section.

4

In subsection (1C), for “constructed” substitute “designed”.

5

Insert at the end—

5

For the purposes of this section—

a

a reference to gambling is to—

i

gaming, or

ii

betting,

b

“machine” has the same meaning as in the Gambling Act 2005 (see section 235(3)(a)),

c

a reference to a machine being designed or adapted for a purpose includes a reference to a machine to which anything has been done as a result of which it can reasonably be expected to be used for that purpose,

d

a reference to a machine being adapted includes a reference to computer software being installed on it,

e

“real” has the meaning given by section 353(1) of the Gambling Act 2005,

f

“game of chance” has the meaning given by section 6(2) of that Act, and

g

“bingo” includes any version of that game, whatever name it is called.

6

The Treasury may by order amend this section.

6

In section 33 (interpretation)—

a

in subsection (1), in the definition of “gaming”, omit “within the meaning of Group 4 of Schedule 9 to the Value Added Tax Act 1994”, and

b

after that subsection insert—

1A

In the definition of “gaming” in subsection (1)—

a

“game of chance” has the meaning given by section 6(2) of the Gambling Act 2005,

b

“playing a game of chance” is to be read in accordance with section 6(3) of that Act, and

c

“prize” does not include the opportunity to play the game again.

Climate change levy

117Taxable commodities ineligible for reduced-rate supply

1

Schedule 6 to FA 2000 (climate change levy) is amended as follows.

2

In paragraph 44 (reduced rate for supplies covered by climate change agreement), after sub-paragraph (2) insert—

2A

The Secretary of State may—

a

give a certificate that includes provision specifying one or more descriptions of taxable commodity as being ineligible for reduced-rate supply,

b

vary a certificate so that it includes provision (or further provision) specifying one or more descriptions of taxable commodity as being ineligible for reduced-rate supply, or

c

vary a certificate so that it ceases to include the provision (or some of the provision) specifying one or more descriptions of taxable commodity as being ineligible for reduced-rate supply.

2B

A taxable supply of a taxable commodity to a facility is not a reduced-rate supply if, at the time of the supply, the commodity falls within a description that is specified (by virtue of sub-paragraph (2A)(a) or (b)) in the certificate relating to the facility.

2C

The Secretary of State may only include provision in a certificate by virtue of sub-paragraph (2A)(a) or (b)—

a

if the Treasury consents in writing to the specification before the specification is made, and

b

if, and for as long as, the result is compatible with the common market by virtue of Commission Regulation (EC) No. 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty establishing the European Community (General block exemption Regulation) (O.J. 2008 No. L214/3).

2D

In sub-paragraphs (2A) to (2C) “certificate” means such a certificate as is mentioned in sub-paragraph (1)(a).

3

In consequence of subsection (2)—

a

in paragraph 44(2), after “subject to” insert “sub-paragraphs (2A) to (2D) and”, and

b

in paragraph 147 (general interpretation), in the definition of “reduced-rate supply”, after “subject to” insert “paragraph 44(2A) to (2D) and”.

118Removal of reduced rate where targets not met

1

Schedule 59 contains provision for removing the reduced rate of climate change levy where the targets set by a climate change agreement have not been met.

2

The amendments made by that Schedule have effect where the certification period begins on or after 1 April 2009.

Other environmental taxes and duties

119Landfill tax: prescribed landfill site activities

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

120Requirement to destroy replaced vehicle registration documents

In section 22(1) of VERA 1994 (registration regulations), after paragraph (h) insert—

ha

require the destruction of a registration document where a new registration document is issued in place of it,

121Hydrocarbon oil duties: minor amendments

1

HODA 1979 is amended as follows.

2

In section 11(1) (rebate on heavy oil), omit “12”.

3

In section 14D(2) (civil penalty for supplying biodiesel or bioblend intending that it will be put to prohibited use), for “intending” substitute “having reason to believe”.

4

The amendment made by subsection (3) has effect in relation to supplies on or after the day on which this Act is passed.

Other matters

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

1

Part 5 of IHTA 1984 (miscellaneous reliefs) is amended as follows.

2

In section 115 (agricultural property relief: preliminary), in subsection (3), insert at the end “(or, in the case of property outside the United Kingdom, the Channel Islands and the Isle of Man, if it were subject to provisions equivalent in effect to such a covenant).”

3

For subsection (5) of that section substitute—

5

This Chapter applies to agricultural property only if it is in—

a

the United Kingdom, the Channel Islands or the Isle of Man, or

b

a state, other than the United Kingdom, which is an EEA state (within the meaning given by Schedule 1 to the Interpretation Act 1978) at the time of the transfer of value in question.

4

In section 116 (agricultural property relief: the relief), insert at the end—

8

In its application to property outside the United Kingdom, the Channel Islands and the Isle of Man, this section has effect as if any reference to a right or obligation under the law of any part of the United Kingdom were a reference to an equivalent right or obligation under the law governing dispositions of that property.

5

In section 125 (woodlands relief), in paragraph (a) of subsection (1), omit “in the United Kingdom”.

6

After that subsection insert—

1A

But this section applies only if the land is in the United Kingdom or another state which is an EEA state (within the meaning given by Schedule 1 to the Interpretation Act 1978) at the time of the person’s death.

7

The amendments made by this section have effect in relation to transfers of value where the tax payable but for this section (or, in the case of tax payable by instalments, the last instalment of that tax)—

a

would have been due on or after 22 April 2009, or

b

was paid or due on or after 23 April 2003.

8

Where tax falling within subsection (7) has been paid, Her Majesty’s Revenue and Customs must repay the tax (together with interest under section 235(1) of IHTA 1984) if, but only if, a claim for repayment is made on or before—

a

the date determined under section 241(1) of that Act as the last date on which the claim may be made, or

b

21 April 2010,

whichever is later.

9

Where, by virtue of the amendments made by subsections (5) and (6), an election is made under section 125 of IHTA 1984, that election must be made on or before—

a

the date determined under section 125(3) as the last date on which the election may be made, or

b

21 April 2010,

whichever is later.

123Alternative finance investment bonds

Schedule 61 contains provision about the taxation of chargeable gains, stamp duty land tax and capital allowances for and in connection with arrangements falling within section 48A of FA 2005 (alternative finance investment bonds).

124Mutual societies: tax consequences of transfers of business etc

1

The Treasury may by regulations make provision for and in connection with—

a

the tax consequences of a transfer of all or part of the business or engagements of a mutual society,

b

the tax consequences of an amalgamation of mutual societies, and

c

the tax consequences of the conversion of a mutual society into a company.

2

“Mutual society” means—

a

a building society incorporated (or deemed to be incorporated) under the Building Societies Act 1986,

b

a friendly society within the meaning of the Friendly Societies Act 1992, or

c

an industrial and provident society registered (or deemed to be registered) under the Industrial and Provident Societies Act 1965.

3

Regulations under this section may, in particular, make provision about—

a

relief from tax in respect of losses,

b

capital allowances,

c

the taxation of chargeable gains (including provision conferring relief for specified transfers and amalgamations),

d

the treatment of intangible fixed assets and goodwill,

e

the treatment of loan relationships (and matters treated as loan relationships),

f

the treatment of derivative contracts (and contracts treated as derivative contracts),

g

exemption or other relief from stamp duty, stamp duty reserve tax or stamp duty land tax, and

h

the treatment of arrangements the purpose, or one of the main purposes, of which is to secure a tax advantage.

4

Regulations under this section may, in particular—

a

modify enactments and instruments relating to tax (whenever passed or made),

b

make different provision for different cases or different purposes, and

c

make incidental, consequential or transitional provision (including provision modifying enactments and instruments, whenever passed or made).

5

Regulations under this section may include provision having effect in relation to any time before they are made if the provision does not increase any person’s liability to tax.

6

Regulations under this section are to be made by statutory instrument.

7

A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

8

In this section—

“arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions;

“company” means a company formed and registered under the Companies Act 2006 (or treated as formed and registered under that Act);

“derivative contract” has the same meaning as in Part 7 of CTA 2009 (see section 576 of that Act);

“goodwill” and “intangible fixed asset” have the same meaning as in Part 8 of CTA 2009 (see sections 713 and 715 of that Act);

“loan relationship” has the same meaning as in the Corporation Tax Acts (see section 302(1) and (2) of CTA 2009);

“modify” includes amend, repeal or revoke;

“tax” includes stamp duty;

“tax advantage” means—

a

a relief from tax (including a tax credit) or increased relief from tax,

b

a repayment of tax or increased repayment of tax,

c

the avoidance, reduction or delay of a charge to tax or an assessment to tax, or

d

the avoidance of a possible assessment to tax.

125National Savings ordinary accounts: surplus funds

1

As soon as practicable after the passing of this Act—

a

the Director of Savings and the Commissioners must prepare a statement showing the relevant surplus, and

b

the Commissioners must pay the relevant surplus into the Consolidated Fund.

2

The relevant surplus is the amount held by the Commissioners by virtue of section 17 of the 1971 Act (including any such amount held in investments), less the aggregate of—

a

such sums as the Treasury may determine to be equal to those expended by the Director of Savings in connection with ordinary accounts,

b

such sums as are necessary to defray the expenses incurred by the Commissioners in connection with ordinary accounts, and

c

such sums as are required to be paid into the Consolidated Fund by virtue of section 20 of the 1971 Act.

3

The Commissioners—

a

must pay into the Consolidated Fund the sums determined in accordance with subsection (2)(a), and

b

may retain the sums determined in accordance with subsection (2)(b).

4

As soon as practicable after preparing a statement under subsection (1), the Director of Savings and the Commissioners must transmit the statement to the Comptroller and Auditor General who must—

a

examine, certify and make a report on it, and

b

lay copies of the statement, together with copies of that report, before Parliament.

5

The Treasury may by order repeal or otherwise amend any enactment if the repeal or amendment appears to the Treasury to be necessary or expedient in consequence of—

a

the closure of ordinary accounts and the transfer of their balances to other accounts (see, in particular, regulations 2B to 2BB of the National Savings Bank Regulations 1972 (S.I. 1972/764)), or

b

this section.

6

An order under subsection (5) is to be made by statutory instrument.

7

No order may be made under subsection (5) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

8

In this section—

a

a reference to sums expended or expenses incurred in connection with ordinary accounts includes a reference to sums expended or expenses incurred in connection with the holding of amounts by virtue of section 17 of the 1971 Act (including their holding in investments), and

b

expressions used in this section and in the 1971 Act have the same meaning in this section as in that Act.

9

In this section—

“the 1971 Act” means the National Savings Bank Act 1971;

“enactment” includes—

a

an enactment contained in the 1971 Act, and

b

subordinate legislation (which has the same meaning as in the Interpretation Act 1978).

Part 9Final provisions

126Interpretation

1

In this Act—

“ALDA 1979” means the Alcoholic Liquor Duties Act 1979,

“BGDA 1981” means the Betting and Gaming Duties Act 1981,

“CAA 2001” means the Capital Allowances Act 2001,

“CRCA 2005” means the Commissioners for Revenue and Customs Act 2005,

“CTA 2009” means the Corporation Tax Act 2009,

“FISMA 2000” means the Financial Services and Markets Act 2000,

“HODA 1979” means the Hydrocarbon Oil Duties Act 1979,

“ICTA” means the Income and Corporation Taxes Act 1988,

“IHTA 1984” means the Inheritance Tax Act 1984,

“ITA 2007” means the Income Tax Act 2007,

“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003,

“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005,

“OTA 1975” means the Oil Taxation Act 1975,

“OTA 1983” means the Oil Taxation Act 1983,

“PRTA 1980” means the Petroleum Revenue Tax Act 1980,

“TCGA 1992” means the Taxation of Chargeable Gains Act 1992,

“TMA 1970” means the Taxes Management Act 1970,

“TPDA 1979” means the Tobacco Products Duty Act 1979,

“VATA 1994” means the Value Added Tax Act 1994, and

“VERA 1994” means the Vehicle Excise and Registration Act 1994.

2

In this Act—

“FA”, followed by a year, means the Finance Act of that year, and

“F(No.2)A”, followed by a year, means the Finance (No.2) Act of that year.

3

In the tables in Part 1 of Schedule 1 to CAA 2001, Part 1 of Schedule 1 to ITEPA 2003 and Part 1 of Schedule 4 to ITTOIA 2005, at the beginning insert—

FA followed by a year

The Finance Act of that year

F(No.2)A followed by a year

The Finance (No.2) Act of that year.

4

Omit all of the entries in those tables relating to a Finance Act or a Finance (No.2) Act.

5

In the following provisions, for “the Finance Act” substitute “FA”—

a

in CAA 2001, sections 70G(5), 70H(3) (in both places), 70O(4)(b), 105(2A), 186(3) and (5) (as amended by paragraph 5 of Schedule 27 to FA 2008), 257(2)(a), 360B(2)(a) and 360C(2)(b) and paragraph 105(2) of Schedule 3, and

b

in ITEPA 2003, sections 420(1)(h) and 702(5B), paragraph 78(2)(b) of Schedule 2 and paragraph 54 of Schedule 7.

6

Accordingly, omit—

a

in FA 2004, in Schedule 35, paragraphs 49 and 65(2),

b

in F(No.2)A 2005, section 10(7),

c

in FA 2006, section 84(4), and

d

in FA 2008, in Schedule 25, paragraph 6.

127Short title

This Act may be cited as the Finance Act 2009.

SCHEDULES

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

Section 5

1Introduction

Chapter 1 of Part 7 of ICTA (income tax: personal reliefs) is amended as follows.

2Abolition of reliefs

Omit—

a

section 256 (general),

b

section 256A (“adjusted net income”),

c

section 256B (“the minimum amount”),

d

section 257 (personal allowance),

e

sections 257A to 257BB (married couple’s allowance etc),

f

section 257C (indexation),

g

section 265 (blind person’s allowance),

h

section 273 (payments securing annuities), and

i

section 278 (non-residents).

Consequential amendments

3

1

Section 266 (life assurance premiums) is amended as follows.

2

In subsection (1)—

a

for “individual” substitute “eligible individual”, and

b

omit “or makes a payment falling within subsection (7) below”.

3

After that subsection insert—

1A

For the purposes of subsection (1) above an individual is an eligible individual if the individual—

a

is resident in the United Kingdom, or

b

meets the conditions in section 56(3) of ITA 2007.

4

In subsection (3), omit “(7),”.

5

In subsection (4), for “subsections (7) and” substitute “subsection”.

6

Omit subsection (7).

7

In subsection (8), for “and is entitled to relief by virtue of section 278(2) or (2ZA)” substitute “(but is entitled to relief by virtue of subsection (1A)(b))”.

4

1

Section 274 (limits on relief under sections 266 and 273) is amended as follows.

2

In subsection (1), omit “or other sums”.

3

In subsection (2)—

a

for “sections 266 and 273” substitute “section 266”, and

b

omit “or sums”, and

c

for “the appropriate rate” substitute “12.5%”.

4

Omit subsection (3).

5

In subsection (4), omit “or other sum” (in both places).

6

In the heading, for “sections 266 and 273” substitute “section 266”.

5

In paragraph 6(1) of Schedule 14 (provisions ancillary to section 266), omit “, otherwise than in accordance with subsection (7) of that section,”.

6Repeals

Omit—

a

in TMA 1970—

i

in section 36(3A), “section 257BA of the principal Act or”,

ii

in section 37A, “section 257BB or 265 of the principal Act or”, and

iii

in section 43A(2A)(a), “section 257BA of the principal Act or”,

b

in FA 1988, section 33 and, in Schedule 3, paragraphs 8 and 10,

c

in FA 1989, section 33(4)(a), (5)(b), (8)(a) and (9)(b),

d

in F(No.2)A 1992, in Schedule 5, paragraphs 2, 8(4) and 9(3),

e

in FA 1993, section 107(3)(a),

f

in FA 1994, section 77(1) and (2),

g

in FA 1996, in Schedule 20, paragraph 14(3) and, in Schedule 21, paragraphs 4 to 6,

h

in FA 1997, section 56(2),

i

in FA 1998, section 27(1)(a) and, in Schedule 3, paragraph 10,

j

in FA 1999, sections 25(3), 31 and 32,

k

in FA 2000, section 39(8) and (9),

l

in ITEPA 2003, in Schedule 6, paragraph 35,

m

in FA 2004, in Schedule 35, paragraph 12,

n

in ITTOIA 2005, in Schedule 1, paragraph 124,

o

in ITA 2007—

i

in section 23, in Step 3, “or section 257 or 265 of ICTA”,

ii

in sections 26(1)(a) and 27(5), “or section 257A, 257AB, 257BA or 257BB of ICTA”,

iii

in section 423(5), “or section 257 or 265 of ICTA”, “or section 257A, 257AB, 257BA or 257BB of ICTA”, “or section 266(7) of ICTA” and “or section 273 of ICTA”,

iv

in section 811, in subsection (5), “or section 278(2) of ICTA” and, in subsection (6), “or section 257 or 265 of ICTA”, “or section 257A, 257AB, 257BA or 257BB of ICTA” and “or section 273 of ICTA”,

v

in section 833(5), “or section 278 of ICTA”,

vi

in Schedule 1, paragraphs 27 to 35, 36(5) and (6), 37 and 232(2), and

vii

in Schedule 2, Part 4,

p

in FA 2008—

i

in section 2(1) and (2), paragraph (b) and the “and” before it,

ii

in section 3, in subsection (1), “and section 257(2) of ICTA” and “and section 257(3) of ICTA” and, in subsection (2), paragraph (b) and the “and” before it, and

iii

in Schedule 39, paragraphs 18 to 20, and

q

in this Act, in section 3(1) and (2), paragraph (b) and the “and” before it.

7Commencement

The amendments made by this Schedule have effect for the tax year 2010-11 and subsequent tax years.

SCHEDULE 2Income tax rates

Section 6

Part 1Amendments of ITA 2007

1

ITA 2007 is amended as follows.

2

1

Section 6 (rates of income tax) is amended as follows.

2

In subsection (2), for “and higher rate” substitute “, higher rate and additional rate”.

3

In the heading, for “and higher rate” substitute “, higher rate and additional rate”.

3

1

Section 8 (dividend ordinary rate and dividend upper rate) is amended as follows.

2

Insert at the end—

3

The dividend additional rate is 42.5%.

3

In the heading, for “and dividend upper rate” substitute “, dividend upper rate and dividend additional rate”.

4

1

Section 10 (income charged at basic and higher rates: individuals) is amended as follows.

2

In subsection (3), insert at the end “and up to the higher rate limit.”

3

After that subsection insert—

3A

Income tax is charged at the additional rate on an individual’s income above the higher rate limit.

4

After subsection (5) insert—

5A

The higher rate limit is £150,000.

5

In subsection (6), for “is” substitute “and higher rate limit are”.

6

In the heading, for “and higher” substitute “, higher and additional”.

5

1

Section 13 (income charged at dividend ordinary and dividend upper rates: individuals) is amended as follows.

2

After subsection (2) insert—

2A

Income tax is charged at the dividend additional rate on an individual’s income which—

a

is dividend income,

b

would otherwise be charged at the additional rate, and

c

is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005.

3

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

4

In subsection (4), for “or higher” substitute “, higher or additional”.

5

In the heading, for “and dividend upper” substitute “, dividend upper and dividend additional”.

6

In section 414(2)(b) (relief for gifts to charity), after “limit” insert “and the higher rate limit”.

7

In section 515(a) (rate of tax in respect of heritage maintenance settlements), for “higher rate” substitute “additional rate”.

8

1

Section 989 (definitions) is amended as follows.

2

After the definition of “Act” insert—

“additional rate” means the rate of income tax determined in pursuance of section 6(2),

3

After the definition of “distribution” insert—

“dividend additional rate” means the rate of income tax specified in section 8(3),

4

After the definition of “higher rate” insert—

“higher rate limit” has the meaning given by section 10,

9

1

Schedule 4 (index of defined expressions) is amended as follows.

2

After the entry relating to “Act” insert—

additional rate

section 6(2) (as applied by section 989).

3

In the entry relating to “basic rate limit”, for “20(2)” substitute “10”.

4

After the entry relating to “dividends (in Chapter 1 of Part 13)” insert—

dividend additional rate

section 8(3) (as applied by section 989).

5

After the entry relating to “higher rate” insert—

higher rate limit

section 10 (as applied by section 989).

Part 2Amendments of other Acts

FA 2004

10

Part 4 of FA 2004 (pension schemes etc) is amended as follows.

11

In section 192 (relief for pension contributions at source), for subsection (4) substitute—

4

If (apart from this section) income tax at the higher rate or the additional rate is chargeable in respect of any part of the individual’s total income for the tax year, on the making of a claim the basic rate limit and the higher rate limit for the tax year in the individual’s case are increased by the amount of the contribution.

12

In section 208 (unauthorised payments charge), for subsection (6) substitute—

6

The Treasury may by order amend subsection (5) so as to vary the rate of the unauthorised payments charge.

6A

An order under subsection (6) may make provision for there to be different rates in different circumstances.

13

In section 209 (unauthorised payments surcharge), for subsection (7) substitute—

7

The Treasury may by order amend subsection (6) so as to vary the rate of the unauthorised payments surcharge.

8

An order under subsection (7) may make provision for there to be different rates in different circumstances.

14

In section 215 (amount of lifetime allowance charge), after subsection (2) insert—

2A

The Treasury may by order amend subsection (2) so as to vary the rates of the lifetime allowance charge.

2B

An order under subsection (2A) may make provision for there to be different rates in different circumstances.

15

In section 227 (annual allowance charge), after subsection (5) insert—

5A

The Treasury may by order amend subsection (4) so as to vary the rate of the annual allowance charge.

5B

An order under subsection (5A) may make provision for there to be different rates in different circumstances.

16

In section 240 (amount of scheme sanction charge), after subsection (3) insert—

3A

The Treasury—

a

may by order amend subsection (1) so as to vary the rate of the scheme sanction charge, and

b

may by order amend subsection (3)(a) so as to vary the percentage mentioned there.

3B

An order under subsection (3A) may make provision for there to be different rates or percentages in different circumstances.

17

In section 242 (de-registration charge), insert at the end—

5

The Treasury may by order amend subsection (4) so as to vary the rate of the de-registration charge.

6

An order under subsection (5) may make provision for there to be different rates in different circumstances.

18

1

Section 282 (orders and regulations) is amended as follows.

2

After subsection (1) insert—

1A

No order may be made under section 208(6), 209(7), 215(2A), 227(5A), 240(3A) or 242(5) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

3

In subsection (2), after “Part” insert “, if made without a draft having been approved by a resolution of the House of Commons,”.

ITTOIA 2005

19

ITTOIA 2005 is amended as follows.

20

In section 640(6)(b) (grossing-up of deemed income)—

a

omit the “and” at the end of sub-paragraph (i), and

b

insert at the end

up to and including the year 2009-2010, and

iii

50%, if the relevant tax year is the year 2010-2011 or any subsequent tax year.

21

In section 669(3) (reduction in residuary income: inheritance tax on accrued income)—

a

in paragraph (a), after “charged at” insert “the additional rate or”, and

b

in paragraph (b), after “charged at” insert “the dividend additional rate or”.

22

In section 685A(3) (settlor-interested settlements), for “higher rate” substitute “additional rate”.

23

1

Part 2 of Schedule 4 (index of defined expressions) is amended as follows.

2

After the entry relating to “acquisition expenditure (in Chapter 9 of Part 2)” insert—

additional rate

section 6(2) of ITA 2007 (as applied by section 989 of that Act).

3

After the entry relating to “distribution” insert—

the dividend additional rate

section 8(3) of ITA 2007 (as applied by section 989 of that Act).

24F(No.2)A 2005

In section 7(5) of F(No.2)A 2005 (charge to income tax on social security pension lump sum)—

a

in paragraph (d), after “basic rate limit for that year” insert “but does not exceed the higher rate limit for that year”, and

b

after that paragraph insert—

e

if P’s Step 3 income for that year of assessment exceeds the higher rate limit for that year, the additional rate for that year.

Part 3Commencement

25

1

The powers conferred by the amendments made by this Schedule may be exercised at any time on or after the day on which this Act is passed but not so as to make provision having effect before the tax year 2010-11.

2

Subject to that, the amendments made by this Schedule have effect for the tax year 2010-11 and subsequent tax years.

SCHEDULE 3VAT: supplementary charge and orders changing rate

Section 9

Part 1Supplementary charge to VAT

1The charge

1

There is a supplementary charge on a supply of goods or services that is treated as taking place on or after 25 November 2008 if—

a

the supply spans the date of the VAT change,

b

it is subject to VAT at the rate in force under section 2 of VATA 1994,

c

the person to whom the supply is made is not entitled under VATA 1994 to credit for, or the repayment or refund of, all of the VAT on the supply, and

d

a relevant condition is met.

2

In this Schedule “the date of the VAT change” means 1 January 2010.

3

For the cases in which a supply, other than the grant of a right to goods or services, spans the date of the VAT change and the relevant conditions in relation to such a supply, see paragraph 2.

4

For the cases in which a supply consisting of the grant of a right to goods or services spans the date of the VAT change and the relevant conditions in relation to such a supply, see paragraph 3.

5

Sub-paragraph (1) has effect subject to the exceptions made by or under Part 2 of this Schedule.

6

In this Schedule—

Part 3 contains provision about liability for, and the amount of, a supplementary charge under this Schedule,

Part 4 contains special provision about listed supplies, and

Part 5 contains provision about administration and interpretation.

7

A supplementary charge under this Schedule is to be treated for all purposes as if it were value added tax charged in accordance with VATA 1994.

2Supply spanning the date of the VAT change

1

For the purposes of this Schedule a supply of goods or services spans the date of the VAT change where—

a

by virtue of the issue of a VAT invoice or the receipt of a payment by the person making the supply (“the supplier”), the supply is treated as taking place before the date of the VAT change, but

b

the basic time of supply (see paragraph 4) is on or after the date of the VAT change.

2

The relevant conditions are—

a

in relation to a supply that is within sub-paragraph (1)(a) by virtue of the issue of a VAT invoice, conditions A to D, and

b

in relation to a supply that is within sub-paragraph (1)(a) by virtue of the receipt of a payment, conditions A to C.

3

Condition A is that the supplier and the person to whom the supply is made are connected with each other at any time in the period—

a

beginning with the day on which the supply is treated as taking place, and

b

ending on the date of the VAT change.

4

Paragraph 5 modifies condition A in cases involving a series of supplies.

5

Condition B is that the aggregate of the following is more than £100,000—

a

the relevant consideration for the supply, and

b

the relevant consideration for every related supply of goods or services (including every related grant of a right to goods or services) that spans the date of the VAT change (see paragraph 6).

6

Condition C is that a prepayment in respect of the supply is financed by the supplier or a person connected with the supplier (see paragraph 7).

7

In sub-paragraph (6) “prepayment”, in respect of a supply, means a payment that is received by the supplier before the basic time of supply.

8

Condition D is that full payment of the amount shown on the VAT invoice referred to in sub-paragraph (1)(a) is not due before the end of the period of 6 months beginning with the date on which the invoice is issued.

9

This paragraph does not apply in relation to a supply consisting of the grant of a right to goods or services (see paragraph 3).

3Grant of right spanning the date of the VAT change

1

For the purposes of this Schedule a supply consisting of the grant by a person (“the grantor”) of a right to goods or services spans the date of the VAT change where—

a

that supply is treated as taking place before the date of the VAT change,

b

the goods or services are to be supplied at a discount or free of charge, and

c

the basic time of supply for the supply of some or all of the goods or services (see paragraph 4) is on or after the date of the VAT change.

2

In relation to the grant of the right, the relevant conditions are conditions A to C.

3

Condition A is that the grantor and the person to whom the right is granted are connected with each other at any time in the period—

a

beginning with the day on which the supply consisting of the grant of the right is treated as taking place, and

b

ending on the date of the VAT change or, if the right is exercised (entirely or partly) on a later date, that date (or, if more than one, the first of those dates).

4

Paragraph 5 modifies condition A in cases involving a series of supplies.

5

Condition B is that the aggregate of the following is more than £100,000—

a

the relevant consideration for the grant of the right, and

b

the relevant consideration for every related supply of goods or services (including every related grant of a right to goods or services) that spans the date of the VAT change (see paragraph 6).

6

Condition C is that the payment made in respect of the grant of the right is financed by the grantor or a person connected with the grantor (see paragraph 7).

7

In this Schedule references to a right to goods or services include—

a

any right or option with respect to such goods or services, and

b

any interest deriving from such a right or option.

4“Basic time of supply”

1

In this Schedule the “basic time of supply” is the time given by subsection (2) or (3) of section 6 of VATA 1994 (disregarding subsections (4) to (14) of that section).

2

Sub-paragraph (1) does not apply in relation to listed supplies (see Part 4 of this Schedule).

5Series of supplies

1

This paragraph applies where—

a

the supply or grant of a right referred to in paragraph 2 or 3 (“the affected supply or grant”) is one of a series of supplies of, or grants of a right to, the same or substantially the same goods or services, and

b

each of the supplies, and the grants of a right, in the series was or will be made in the expectation that the affected supply or grant would or will take place.

2

In condition A in paragraphs 2 and 3 the references to the supplier and the grantor include any person who makes one of the supplies or grants one of the rights in the series.

6“Relevant consideration” and “related” supplies

1

This paragraph applies for the purposes of condition B in paragraphs 2 and 3.

2

“Relevant consideration” means—

a

in relation to a supply that is within paragraph 2(1) by virtue of the issue of a VAT invoice, the amount shown on that invoice,

b

in relation to a supply that is within paragraph 2(1) by virtue of the receipt of a payment, the amount of that payment, and

c

in relation to a grant of a right to goods or services within paragraph 3(1), the consideration for the grant of the right,

but does not include any amount in respect of VAT.

3

A supply within paragraph 2(1), or a grant of a right within paragraph 3(1), is related to another such supply or grant if they are both made as part of the same scheme.

4

“Scheme” includes any arrangements, transaction or series of transactions.

7Financing

1

This paragraph applies for the purposes of condition C in paragraphs 2 and 3.

2

A payment is financed by a person if, directly or indirectly, the person—

a

provides funds to enable the person to whom the supply is made to make the whole or part of the payment (whether the funds are provided before or after the payment is made),

b

procures the provision of such funds by another person,

c

provides funds for discharging (in whole or in part) any liability that has been or may be incurred by any person for or in connection with raising funds to enable the person to whom the supply is made to make the payment, or

d

procures that any such liability is or will be discharged (in whole or in part) by another person.

3

In sub-paragraph (2) the references to providing funds for a purpose are to—

a

making a loan of funds that are or are to be used for that purpose,

b

providing a guarantee or other security in relation to such a loan,

c

providing consideration for the issue of shares or other securities issued wholly or partly for raising those funds,

d

providing consideration for the acquisition by any person of any such shares or securities, or

e

any other transfer of assets or value as a consequence of which any of those funds are made available for that purpose.

8Connected persons

Section 839 of ICTA (connected persons) applies for the purposes of this Schedule.

9Receipt of payments

In this Schedule a reference to receipt of a payment by the person making a supply or granting a right (however expressed) includes a reference to receipt by a person to whom a right to receive it has been assigned.

10Power to change relevant conditions

1

The Treasury may by order amend this Part of this Schedule by adding, modifying or omitting relevant conditions.

2

An order under this paragraph—

a

may make different provision for different cases, and

b

may make incidental or consequential amendments of this Schedule.

11Supplies treated as taking place before 31 March 2009

In relation to supplies treated as taking place before 31 March 2009, this Schedule has effect as if—

a

paragraphs 2(5), 3(5) and 6 (condition B) and all references to condition B were omitted,

b

in paragraph 2(6) (condition C), the words “or a person connected with the supplier” were omitted, and

c

in paragraph 3(6) (condition C), the words “or a person connected with the grantor” were omitted.

Part 2Exceptions

12Letting etc of assets

1

This paragraph applies in relation to a supply within paragraph 2 which arises from the letting, hiring or rental of assets.

2

There is no supplementary charge under this Schedule if—

a

the period to which the VAT invoice or payment referred to in paragraph 2(1) relates does not exceed 12 months, and

b

the VAT invoice is issued, or the payment is received, in accordance with normal commercial practice in relation to the letting, hiring or rental of such assets.

13Condition B cases involving normal commercial practice

There is no supplementary charge under this Schedule on a supply of goods or services within paragraph 2 or a grant of a right to goods or services within paragraph 3 if—

a

the only relevant condition met is condition B, and

b

the supply is made, or the right is granted, in accordance with normal commercial practice in relation to the supply of, or the grant of a right to, such goods or services.

14Normal commercial practice

In this Part of this Schedule “normal commercial practice” means normal commercial practice at a time when an increase in the rate of VAT in force under section 2 of VATA 1994 is not expected.

15Further exceptions

1

The Treasury may by order provide that there is no supplementary charge under this Schedule on supplies (including grants of rights to goods or services) of a description specified in the order.

2

An order under this paragraph may make provision having effect in relation to supplies of goods or services that are treated as taking place on or after 25 November 2008 or a later date.

Part 3Liability and amount

16Liability

1

A supplementary charge under this Schedule on a supply within paragraph 2—

a

is a liability of the supplier (subject to sub-paragraph (3)), and

b

becomes due on the date of the VAT change (rather than at the time of supply).

2

A supplementary charge under this Schedule on a supply consisting of the grant of a right to goods or services within paragraph 3—

a

is a liability of the grantor (subject to sub-paragraph (3)), and

b

becomes due on the first occasion on or after the date of the VAT change on which the right is exercised (rather than at the time the right is granted).

3

If, on the date on which the supplementary charge becomes due, the person who would be liable to pay the charge under sub-paragraph (1) or (2)—

a

is not a taxable person, but

b

is treated as a member of a group under sections 43A to 43D of VATA 1994,

the supplementary charge is a liability of the representative member of the group.

17Amount

1

The amount of the supplementary charge on a supply within paragraph 2 is equal to the difference between—

a

the amount of VAT chargeable on the supply apart from this Schedule, and

b

the amount of VAT that would be chargeable on the supply if it were subject to VAT at the rate of 17.5%.

2

The amount of the supplementary charge on a grant of a right to goods or services within paragraph 3 is equal to the difference between—

a

the amount of VAT chargeable on the grant of the right apart from this Schedule, and

b

the amount of VAT that would be chargeable on the grant of the right if it were subject to VAT at the rate of 17.5%,

(but see sub-paragraph (3)).

3

If the basic time of supply for some of those goods and services is before the date of the VAT change, sub-paragraph (2) has effect as if the references to the amount of VAT chargeable and to the amount of VAT that would be chargeable were references to the relevant proportion of each of those amounts.

4

“The relevant proportion” is—

PWmath

where—

P is so much of the consideration for the grant of the right as is attributable on a just and reasonable basis to a right to the goods and services for which the basic time of supply is on or after the date of the VAT change, and

W is the whole of the consideration for the grant of the right.

Part 4Listed supplies

18“Listed supply”

1

In this Schedule “listed supply” means a supply falling within sub-paragraph (2)—

a

which is made for a consideration the whole or part of which is determined or payable periodically or from time to time, and

b

which is treated as taking place by virtue of the issue of a VAT invoice or the receipt of a payment by the person making the supply.

2

The following supplies fall within this sub-paragraph—

a

a supply of services,

b

a supply arising from the grant of a major interest in land,

c

a supply of water other than—

i

distilled water, deionised water or water of similar purity, or

ii

bottled water,

d

a supply of—

i

coal gas, water gas, producer gases or similar gases, or

ii

petroleum gases, or other gaseous hydrocarbons, in a gaseous state,

e

a supply of power, heat, refrigeration or ventilation, and

f

a supply of goods together with services in the course of the construction, alteration, demolition, repair or maintenance of a building or civil engineering work.

3

The Treasury may by order amend sub-paragraph (2) by—

a

adding or omitting any description of supply, or

b

varying any description of supply for the time being listed in that sub-paragraph.

19“Basic time of supply”: listed supplies

1

For the purposes of this Schedule, in relation to a listed supply, “the basic time of supply” is the end of the period to which the VAT invoice or payment mentioned in paragraph 18(1) relates, except as provided in sub-paragraphs (2) and (4).

2

Where the person making the supply issues an invoice—

a

in respect of part of the listed supply to which the VAT invoice or payment mentioned in paragraph 18(1) relates, and

b

for a period (a “billing period”) ending before the end of the period to which that VAT invoice or payment relates,

“the basic time of supply”, in relation to that part of the supply, is the end of the billing period.

3

For the purposes of sub-paragraph (2) the listed supply (and the consideration for the supply) must be apportioned between periods on a just and reasonable basis.

4

Where a listed supply is treated as taking place by virtue of—

a

the issue by the person making the supply of a VAT invoice relating to a premium for the grant of a tenancy or lease, or

b

the receipt by the person making the supply of such a premium,

“the basic time of supply” is the date of the grant of the tenancy or lease.

Part 5Administration and interpretation

20Person ceasing to be taxable person before supplementary charge due

1

This paragraph applies if, on the date on which a supplementary charge under this Schedule becomes due (“the due date”), the person who is liable to pay the charge under paragraph 16 is not a taxable person.

2

The supplementary charge must be accounted for by that person in accordance with VATA 1994 (and regulations made under that Act) as if it were VAT due in the last period for which the person was required to make a return by or under VATA 1994.

3

If an amount assessed as due by way of supplementary charge under this Schedule would (in the absence of this sub-paragraph) carry interest from a date earlier than the due date, it is to be treated as only carrying interest from the due date.

21Adjustment of contracts following the VAT change

1

This paragraph applies where—

a

a contract for the supply of goods or services is made before the date of the VAT change, and

b

there is a supplementary charge under this Schedule on the supply.

2

The consideration for the supply is to be increased by an amount equal to the supplementary charge, unless the contract provides otherwise.

22Invoices

Regulations under paragraph 2A of Schedule 11 to VATA 1994 (VAT invoices) may make provision about the provision, replacement or correction of invoices in connection with a supplementary charge under this Schedule.

23Orders under this Schedule

1

An order under this Schedule is to be made by statutory instrument.

2

A statutory instrument containing an order under this Schedule is subject to annulment in pursuance of a resolution of the House of Commons, unless it is an instrument to which sub-paragraph (4) applies.

3

Sub-paragraph (4) applies to a statutory instrument containing an order made under paragraph 10 (or under that paragraph and under other provisions) which extends the supplies that are subject to a supplementary charge under this Schedule.

4

An instrument to which this sub-paragraph applies—

a

must be laid before the House of Commons, and

b

ceases to have effect at the end of the period of 28 days beginning with the day on which it was made unless it is approved during that period by a resolution of the House of Commons.

5

In reckoning the period of 28 days no account is to be taken of any time during which Parliament is dissolved or prorogued or during which the House of Commons is adjourned for more than 4 days.

6

The order ceasing to have effect does not affect—

a

anything previously done under it, or

b

the making of a new order.

24Interpretation: general

1

Expressions used in this Schedule and in VATA 1994 have the same meaning in this Schedule as in that Act.

2

In this Schedule—

a

“treated as taking place” means treated as taking place for the purposes of the charge to VAT, and

b

references to the person by or to whom a supply is made (however expressed) are to the person by or to whom the supply is treated as being made for the purposes of VATA 1994.

Part 6Amendments of VATA 1994

25

1

VATA 1994 is amended as follows.

2

In section 2(2) (orders increasing or decreasing rate of VAT), after “such order” insert “that has not previously expired or been revoked”.

3

In section 97 (orders, rules and regulations), after subsection (4) insert—

4A

Where an order under section 2(2) is in force, the reference in subsection (4)(c)(i) of this section to the rate of VAT in force under section 2 at the time of the making of an order is a reference to the rate which would be in force at that time if no such order had been made.

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

Section 14

1

VERA 1994 is amended as follows.

2

1

Section 3 (duration of licences) is amended as follows.

2

In subsection (4)(b), for “a licence taken out on the first registration under this Act of” substitute “the first vehicle licence for”.

3

Insert at the end—

7

Neither subsection (2) nor any order under subsection (3) permits the first vehicle licence for a vehicle to be taken out for a period of less than twelve months if the annual rate of vehicle excise duty chargeable on the licence would be lower if it were not the first vehicle licence for the vehicle.

3

1

Section 19 (rebates) is amended as follows.

2

In subsection (1), for “from the Secretary of State the amount specified in subsection (2)” substitute “the relevant amount from the Secretary of State”.

3

Omit subsection (2).

4

After subsection (3) insert—

3A

Subject to subsection (3B), the relevant amount is an amount equal to one-twelfth of the annual rate of duty chargeable on the licence (at the time when it was taken out) in respect of each complete month of the period of the currency of the licence which is unexpired when the application is made.

3B

Where—

a

the licence is the first vehicle licence for the vehicle,

b

the application is made by virtue of paragraph (d), (e) or (f) of subsection (3), and

c

the annual rate of duty rate chargeable on the licence (at the time when it was taken out) would have been lower if it had not been the first vehicle licence for the vehicle,

the relevant amount is an amount equal to one-twelfth of that lower annual rate of duty in respect of each such complete month.

4

1

Section 62 (definitions) is amended as follows.

2

In subsection (1), after the definition of “exempt vehicle” insert—

“first vehicle licence”, in relation to a vehicle, means (subject to subsections (1B) and (1C)) the vehicle licence for the vehicle on the issue of which the vehicle is first registered under this Act (so that, if the vehicle is first registered on the issue of a nil licence, there is no first vehicle licence in relation to it),

3

After subsection (1A) insert—

1B

Where a vehicle is first registered under this Act on the issue of a temporary licence, the “first vehicle licence” in relation to the vehicle is the first vehicle licence subsequently issued for it.

1C

Where a vehicle—

a

has been registered under the law of a country or territory outside the United Kingdom,

b

is first registered under this Act more than 6 months after the time when it was first registered as mentioned in paragraph (a), and

c

has travelled more than 6,000 kilometres under its own power before it is first registered under this Act,

there is no first vehicle licence in relation to the vehicle.

5

1

Schedule 1 (annual rates of duty) is amended as follows.

2

In paragraph 1A (vehicles to which Part 1A applies)—

a

in sub-paragraph (1)(a), after “registered”, and

b

in sub-paragraph (5), after “registration”,

insert “, under this Act or under the law of a country or territory outside the United Kingdom,”.

3

In paragraph 1C (the reduced rate)—

a

in sub-paragraph (3)(a), after “registration” insert “, under this Act or under the law of a country or territory outside the United Kingdom,”,

b

in sub-paragraph (3)(b), for “its” substitute “that”, and

c

in sub-paragraph (4), after “registration” insert “under this Act”.

4

In paragraph 1H (vehicles to which Part 1B applies)—

a

in sub-paragraph (1)(a), after “registered”, and

b

in sub-paragraph (3), after “registration”,

insert “, under this Act or under the law of a country or territory outside the United Kingdom,”.

5

In paragraph 1K(a) (pre-2007 lower-emission vans), after “registered” insert “, under this Act or under the law of a country or territory outside the United Kingdom,”.

6

In paragraph 1M(a) (post-2008 lower-emission vans), after “registered” insert “, under this Act or under the law of a country or territory outside the United Kingdom,”.

6

1

Paragraph 25 of Schedule 2 (exempt vehicles: light passenger vehicles with low CO2 emissions) is re-numbered as sub-paragraph (1) of that paragraph.

2

After that sub-paragraph insert—

2

A vehicle is an exempt vehicle for the appropriate period if—

a

it is a vehicle to which Part 1A of Schedule 1 applies, and

b

the applicable CO2 emissions figure (as defined in paragraph 1A(3) and (4) of that Schedule) exceeds 100g/km but does not exceed 130g/km.

3

“The appropriate period” is the period for which (if the vehicle were not an exempt vehicle by virtue of sub-paragraph (2)) the first vehicle licence for the vehicle would (if taken out) have effect.

7

1

The amendments made by this Schedule have effect in relation to licences taken out on or after 1 April 2010.

2

But the amendments made by paragraph 5 do not have effect in relation to vehicles first registered under this Act before that date.

SCHEDULE 5Air passenger duty

Section 17

Amendments

1

Chapter 4 of Part 1 of FA 1994 (air passenger duty) is amended as follows.

2

1

Section 30 (rates of duty) is amended as follows.

2

After subsection (8) insert—

8A

The Treasury may by order amend Schedule 5A.

3

Omit subsections (9) to (9B).

3

For section 39 substitute—

39Schemes for simplified operation of Chapter

1

This section applies if the Commissioners consider that, having regard to difficulties encountered or expected to be encountered by any registered operator in obtaining and recording information about passengers and their journeys, it is appropriate for this Chapter to have effect in relation to the registered operator in accordance with a special accounting scheme.

2

The Commissioners may agree with the registered operator that this Chapter is to have effect in relation to the registered operator in accordance with a special accounting scheme agreed between the Commissioners and the registered operator (but subject to subsection (4)).

3

A special accounting scheme is a scheme which makes provision for methods of calculating—

a

how many persons are to be regarded for the purposes of this Chapter as chargeable passengers carried by chargeable aircraft operated by a registered operator, and

b

how many of those are to be so regarded as having been so carried on journeys in respect of which duty is chargeable at any particular rate.

4

The Commissioners may publish a notice specifying terms and conditions subject to which special accounting schemes are to have effect.

5

Where the Commissioners and a registered operator have agreed that this Chapter is to have effect in relation to the registered operator in accordance with a special accounting scheme, this Chapter has effect in relation to the registered operator in accordance with the scheme (and with any notice under subsection (4) which has been published by the Commissioners and not withdrawn) for the period agreed by the Commissioners and the registered operator.

6

The Commissioners and the registered operator may at any time agree to vary the special accounting scheme for the future.

7

The Commissioners may at any time terminate the operation of the special accounting scheme—

a

on the application of the registered operator, or

b

where they have reasonable grounds for doing so,

by giving notice to the registered operator.

4

In section 42(4) (orders), after “chargeable passengers” insert “, or to increase the rate of air passenger duty to be charged on the carriage of any chargeable passengers whose journeys end in any place,”.

5

After Schedule 5 insert—

SCHEDULE 5AAir passenger duty: territories etc

Part 1Part 1 territories

Albania

Finland

Latvia

Portugal (including Madeira)

Algeria

France (including Corsica)

Libya

Romania

Andorra

Germany

Liechtenstein

Russian Federation, west of the Urals

Austria

Gibraltar

Lithuania

San Marino

Azores

Greece

Luxembourg

Serbia

Belarus

Greenland

Former Yugoslav Republic of Macedonia

Slovak Republic

Belgium

Guernsey

Malta

Slovenia

Bosnia and Herzegovina

Hungary

Moldova

Spain (including the Balearic Islands and the Canary Islands)

Bulgaria

Iceland

Monaco

Sweden

Croatia

Republic of Ireland

Montenegro

Switzerland

Cyprus

Isle of Man

Morocco

Tunisia

Czech Republic

Italy (including Sicily and Sardinia)

Netherlands

Turkey

Denmark (including the Faroe Islands)

Jersey

Norway (including Svalbard)

Ukraine

Estonia

Republic of Kosovo

Poland

Western Sahara

Part 2Part 2 territories

Afghanistan

Egypt

Kazakhstan

Saudi Arabia

Armenia

Equatorial Guinea

Kuwait

Senegal

Azerbaijan

Eritrea

Kyrgyzstan

Sierra Leone

Bahrain

Ethiopia

Lebanon

Sudan

Benin

Gabon

Liberia

Syria

Bermuda

Gambia

Mali

Tajikistan

Burkina Faso

Georgia

Mauritania

Togo

Cameroon

Ghana

Niger

Turkmenistan

Canada

Guinea

Nigeria

Uganda

Cape Verde

Guinea-Bissau

Oman

United Arab Emirates

Central African Republic

Iran

Pakistan

United States of America

Chad

Iraq

Qatar

Uzbekistan

Democratic Republic of Congo

Israel and the Occupied Palestinian Territories

Russian Federation, east of the Urals

Yemen

Republic of Congo

Ivory Coast

Saint Pierre and Miquelon

Djibouti

Jordan

Sao Tome and Principe

Part 3Part 3 territories

Angola

Cuba

Macao SAR

Saint Helena

Anguilla

Dominica

Madagascar

Saint Lucia

Antigua and Barbuda

Dominican Republic

Malawi

Saint Martin

Aruba

Ecuador

Maldives

Saint Vincent and the Grenadines

Ascension Island

El Salvador

Martinique

Seychelles

Bahamas

French Guiana

Mauritius

Somalia

Bangladesh

Grenada

Mayotte

South Africa

Barbados

Guadeloupe

Mexico

Sri Lanka

Belize

Guatemala

Mongolia

Suriname

Bhutan

Guyana

Montserrat

Swaziland

Botswana

Haiti

Mozambique

Tanzania

Brazil

Honduras

Namibia

Thailand

British Indian Ocean Territory

Hong Kong SAR

Nepal

Trinidad and Tobago

British Virgin Islands

India

Netherlands Antilles

Turks and Caicos Islands

Burma

Jamaica

Nicaragua

Venezuela

Burundi

Japan

Panama

Vietnam

Cayman Islands

Kenya

Puerto Rico

Virgin Islands

China

North Korea

Reunion

Zambia

Colombia

South Korea

Rwanda

Zimbabwe.

Comoros

Laos

Saint Barthelemy

Costa Rica

Lesotho

Saint Christopher and Nevis (St Kitts and Nevis)

6Consequential repeals

In consequence of the amendments made by section 17 and this Schedule, omit—

a

in FA 1995, section 15,

b

in FA 2000, in section 18—

i

subsections (1) to (5), and

ii

subsection (7),

c

in FA 2002, section 121, and

d

in FA 2007, section 12.

Commencement etc

7

The amendments made by paragraphs 2(3) and 6(a), (b)(i), (c) and (d) have effect in relation to the carriage of passengers beginning on or after 1 November 2009.

8

1

No agreement for Chapter 4 of Part 1 of FA 1994 to have effect in relation to a registered operator in accordance with a special accounting scheme pursuant to section 39 of FA 1994 as substituted by paragraph 3 may be made so as to have effect as respects the carriage of passengers beginning before 1 November 2009.

2

Nothing in this Schedule affects the continuing operation of, or of schemes prepared under, that section as it has effect immediately before this Act is passed as respects the carriage of passengers beginning before 1 November 2009.

SCHEDULE 6Temporary extension of carry back of losses

Section 23

Income tax

1

1

A person who has made a loss in a trade in the tax year 2008-09 or 2009-10 may make a claim for relief under this paragraph if—

a

relief is available to the person under section 64 of ITA 2007 (trade loss relief against general income) in relation to an amount of the loss (“the section 64 amount”), and

b

condition A or B is met.

2

Condition A is that the person makes a claim under that section for relief in respect of the section 64 amount—

a

where it is a loss made in the tax year 2008-09, for either or both of the tax years 2007-08 and 2008-09, or

b

where it is a loss made in the tax year 2009-10, for either or both of the tax years 2008-09 and 2009-10.

3

Condition B is that—

a

where it is a loss made in the tax year 2008-09, for the tax years 2007-08 and 2008-09, or

b

where it is a loss made in the tax year 2009-10, for the tax years 2008-09 and 2009-10,

the person’s total income is nil or does not include any income from which a deduction could be made in pursuance of a claim under that section for relief in respect of the section 64 amount.

4

The amount of the loss that may be relieved under this paragraph (“the deductible amount”) is—

a

in a case where condition A is met, so much of the section 64 amount as cannot be relieved pursuant to the claim under section 64 of ITA 2007, and

b

in a case where condition B is met, the whole of the section 64 amount,

(but see sub-paragraph (12)).

5

A claim for relief under this paragraph is for the deductible amount to be deducted (in accordance with sub-paragraph (6) and with whichever is applicable of sub-paragraphs (7), (8), (9) and (10))—

a

where it is a loss made in the tax year 2008-09, in either or both of the following ways—

i

in computing the person’s total income for either or both of the tax years 2005-06 and 2006-07 in accordance with section 835 of ICTA, and

ii

in calculating the person’s net income for the tax year 2007-08 in accordance with Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act), or

b

where it is a loss made in the tax year 2009-10, in either or both of the following ways—

i

in computing the person’s total income for the tax year 2006-07 in accordance with section 835 of ICTA, and

ii

in calculating the person’s net income for either or both of the tax years 2007-08 and 2008-09 in accordance with Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act).

6

A deduction is to be made only from profits of the trade (and accordingly, in relation to the tax years 2007-08 and 2008-09, subsection (2) of section 25 of ITA 2007 has effect as if this sub-paragraph were included in subsection (3) of that section).

7

This sub-paragraph explains how the deductions are to be made in a case where the loss is made in the tax year 2008-09 and the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2007-08.

Step 1

Deduct the deductible amount from the profits of the trade for the tax year 2006-07.

Step 2

Deduct from the profits of the trade for the tax year 2005-06 so much of the deductible amount as has not been deducted under Step 1.

8

This sub-paragraph explains how the deductions are to be made in any other case where the loss is made in the tax year 2008-09.

Step 1

Deduct the deductible amount from the profits of the trade for the tax year 2007-08.

Step 2

Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1.

Step 3

Deduct from the profits of the trade for the tax year 2005-06 so much of the deductible amount as has not been deducted under Step 1 or 2.

9

This sub-paragraph explains how the deductions are to be made in a case where the loss is made in the tax year 2009-10 and the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2008-09.

Step 1

Deduct the deductible amount from the profits of the trade for the tax year 2007-08.

Step 2

Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1.

10

This sub-paragraph explains how the deductions are to be made in any other case where the loss is made in the tax year 2009-10.

Step 1

Deduct the deductible amount from the profits of the trade for the tax year 2008-09.

Step 2

Deduct from the profits of the trade for the tax year 2007-08 so much of the deductible amount as has not been deducted under Step 1.

Step 3

Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1 or 2.

11

The provision made by the preceding provisions means that the following sections of ITA 2007 apply in relation to relief under this paragraph as in relation to relief under section 64 of that Act—

a

section 66 to 70 (restrictions on relief under section 64),

b

sections 74B to 74D (general restrictions on relief),

c

sections 75 to 79 (restrictions on relief under section 64 and early trade losses relief in relation to capital allowances),

d

section 80 (restrictions on those reliefs in relation to ring fence income), and

e

section 81 (restrictions on those reliefs in relation to dealings in commodity futures).

12

The total amount that may be deducted in accordance with sub-paragraph (7), or in accordance with Steps 2 and 3 in sub-paragraph (8), is limited to £50,000; and the total amount that may be deducted in accordance with sub-paragraph (9), or in accordance with Steps 2 and 3 in sub-paragraph (10), is also limited to £50,000.

2

1

A claim for relief under paragraph 1 must be made—

a

where the relief is in respect of a loss made in the tax year 2008-09, on or before the first anniversary of the normal self-assessment filing date for that tax year, and

b

where the relief is in respect of a loss made in the tax year 2009-10, on or before the first anniversary of the normal self-assessment filing date for that tax year.

2

Paragraph 1 applies to professions and vocations as it applies to trades.

3

Paragraph 1 is subject to paragraph 2 of Schedule 1B to TMA 1970 (claims for loss relief involving 2 or more years).

4

Sections 61 to 63 of ITA 2007 (meaning of “making a loss in a tax year” etc and prohibition against double counting) have effect as if paragraph 1 were included in Chapter 2 of Part 4 of that Act.

5

Subsections (1) to (3) of section 127 of that Act (UK furnished holiday lettings business treated as trade) have effect as if paragraph 1 were included in Part 4 of that Act.

6

The reference in paragraph 3(1) of Schedule 2 to the Social Security Contributions and Benefits Act 1992 and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (levy of Class 4 contributions with income tax) to section 64 of ITA 2007 includes paragraph 1.

3Corporation tax

1

Section 393A of ICTA (losses: set off against profits of same or earlier accounting period) has effect in relation to any loss to which this paragraph applies as if, in subsection (2) of that section, “3 years” were substituted for “twelve months” (but subject as follows).

2

This paragraph applies to any loss incurred by a company in a trade in a relevant accounting period (but subject to sub-paragraph (3)); and a relevant accounting period is one ending after 23 November 2008 and before 24 November 2010.

3

The maximum amount of loss to which this paragraph applies in the case of any company is—

a

£50,000 in relation to losses incurred in relevant accounting periods ending after 23 November 2008 and before 24 November 2009, and

b

£50,000 in relation to losses incurred in relevant accounting periods ending after 23 November 2009 and before 24 November 2010;

and the overall limit or limits apply whether a loss is incurred by the company in only one relevant accounting period or losses are so incurred in more than one such period.

4

Subject to that, if in the case of the company the length of a relevant accounting period is less than one year, the maximum amount of the loss incurred in that period that may be set off under section 393A of ICTA by virtue of this paragraph is the relevant proportion of £50,000.

5

“The relevant proportion” is—

RAPYmath

where—

RAP is the number of days in the relevant accounting period, and

Y is 365.

6

The reference in subsection (2C) of section 393A of ICTA to so much of the loss referred to in that subsection not falling within subsection (2B) of that section as does not exceed the amount of the allowance mentioned in subsection (2C)(b) (“the subsection (2C) loss”) has effect in relation to a relevant accounting period as a reference to so much of the subsection (2C) loss as exceeds that which can be set off under section 393A of ICTA by virtue of this paragraph.

SCHEDULE 7Contaminated and derelict land

Section 26

Part 1Amendments of Part 14 of CTA 2009

1

Part 14 of CTA 2009 (remediation of contaminated land) is amended as follows.

2

In the heading of the Part, after “contaminated” insert “or derelict”.

3

1

Section 1143 (overview of Part) is amended as follows.

2

In subsection (1), after “contamination” insert “or dereliction”.

3

In subsection (7), after “contaminated” insert “or derelict”.

4

1

Section 1144 (“qualifying land remediation expenditure”) is amended as follows.

2

In subsection (1), for “E” substitute “F”.

3

In subsection (2), insert at the end “or a derelict state (see section 1145A)”.

4

In subsection (3), after “contaminated” insert “or derelict”.

5

For subsection (4) substitute—

4

Condition C is that it is—

a

in the case of land in a contaminated state, expenditure on relevant contaminated land remediation undertaken by the company (see section 1146), or

b

in the case of land in a derelict state, expenditure on relevant derelict land remediation so undertaken (see section 1146A).

6

In subsection (5), for paragraph (c) (and the “or” before it) substitute—

c

incurred in respect of relevant land remediation contracted out by the company to another person with whom the company is not connected, or

d

qualifying expenditure on connected sub-contracted land remediation (see section 1175).

7

After subsection (6) insert—

6A

Condition F is that the expenditure is not incurred on landfill tax.

5

For section 1145 substitute—

1145Land “in a contaminated state”

1

For the purposes of this Part land is in a contaminated state if (and only if), because of something in, on or under the land, the land is in a condition such that—

a

relevant harm is being caused, or

b

there is a serious possibility that relevant harm will be caused.

2

But land is not in a contaminated state by reason of the presence in, on or under it of—

a

living organisms or decaying matter deriving from living organisms, air or water, or

b

anything present otherwise than as a result of industrial activity.

3

The Treasury may by order specify circumstances in which subsection (2) is not to apply to the extent specified in the order; and an order under this subsection may contain incidental, supplemental, consequential and transitional provision and savings.

4

In this section “relevant harm” means—

a

death of living organisms or significant injury or damage to living organisms,

b

significant pollution of controlled waters,

c

a significant adverse impact on the ecosystem, or

d

structural or other significant damage to buildings or other structures or interference with buildings or other structures that significantly compromises their use.

1145ALand “in a derelict state”

For the purposes of this Part land is in a derelict state if (and only if) the land—

a

is not in productive use, and

b

cannot be put into productive use without the removal of buildings or other structures.

1145BExclusion of nuclear sites

1

A nuclear site is not land in a contaminated state or land in a derelict state for the purposes of this Part.

2

“Nuclear site” means—

a

any site in respect of which a nuclear site licence is for the time being in force, or

b

any site in respect of which, after the revocation or surrender of a nuclear site licence, the period of responsibility of the licensee has not yet come to an end.

3

In subsection (2) “nuclear site licence”, “licensee” and “period of responsibility” have the same meaning as in the Nuclear Installations Act 1965.

6

1

Section 1146 (“relevant land remediation”) is amended as follows.

2

In subsection (1)—

a

for “land remediation”, in relation to land” substitute “contaminated land remediation”, in relation to land which is in a contaminated state and in which a major interest has been”, and

b

for “and B” substitute “to C”.

3

In subsection (3)—

a

in paragraph (a), for “harm, or any pollution of controlled waters,” substitute “relevant harm”, and

b

omit paragraph (b) (and the “or” before it).

4

After that subsection insert—

3A

Condition C is that the activities are not—

a

activities of a description specified by order made by the Treasury, or

b

activities required by or by virtue of any enactment specified by such an order.

3B

An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.

5

In subsection (5), for the words after “(and only if)” substitute

because of something in, on or under the land by virtue of which it is contaminated land, the land is in a condition such that—

a

significant pollution of those waters is being caused, or

b

there is a serious possibility that significant pollution of those waters will be caused.

6

In the heading, after “relevant” insert “contaminated”.

7

After that section insert—

1146A“Relevant derelict land remediation”

1

For the purposes of this Part “relevant derelict land remediation”, in relation to land which is in a derelict state and in which a major interest has been acquired by a company, means—

a

activities in relation to which conditions A and B are met, and

b

if there are such activities, relevant preparatory activity.

2

Condition A is that the activities comprise the doing of any works, the carrying out of any operations or the taking of any steps in relation to the land in question.

3

Condition B is that the purpose of the activities is a purpose specified by order made by the Treasury.

4

An order under subsection (3) may contain incidental, supplemental, consequential and transitional provision and savings.

5

For the purposes of subsection (1)(b) “relevant preparatory activity” has the same meaning as for the purposes of subsection (1)(b) of section 1146 (see subsection (4) of that section, but reading the reference to subsection (1)(a) of that section as a reference to subsection (1)(a) of this section).

8

In the heading of Chapter 2, after “contaminated” insert “or derelict”.

9

1

Section 1147 (deduction for capital expenditure) is amended as follows.

2

In subsection (2), after “that” insert “a major interest in”.

3

For subsection (3) substitute—

3

Condition B is that—

a

in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition, and

b

in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of—

i

1 April 1998, and

ii

the date on which a major interest in the land was first acquired by the company or a person who was connected with the company.

3A

The Treasury may by order—

a

specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or

b

replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date.

3B

An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.

10

1

Section 1149 (additional deduction for qualifying land remediation expenditure) is amended as follows.

2

In subsection (2), after “that” insert “a major interest in”.

3

For subsection (3) substitute—

3

Condition B is that—

a

in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition, and

b

in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of—

i

1 April 1998, and

ii

the date on which a major interest in the land was first acquired by the company or a person who was connected with the company.

3A

The Treasury may by order—

a

specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or

b

replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date.

3B

An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.

11

1

Section 1150 (no relief if company responsible for contamination) is amended as follows.

2

The existing provision becomes subsection (1) of that section.

3

In that subsection, for “state if the land is in that” substitute “or derelict state if the land is in a contaminated or derelict”.

4

After that subsection insert—

2

A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if—

a

the land is in that state wholly or partly as a result of any thing done, or omitted to be done, by a person not within subsection (1), and

b

that person, or a person connected with that person, has a relevant interest in the land.

3

For the purposes of subsection (2) a person has a relevant interest in land if the person—

a

holds any interest in, right over or licence to occupy the land (including an option to acquire any such interest, right or licence in any circumstances), or

b

has disposed of any estate or interest in the land for a consideration that to any extent reflects the impact, or likely impact, on the value of the land of the remediation of its contamination or dereliction.

5

In the heading, insert at the end “or dereliction or polluter has interest”.

12

1

Section 1161 (relief in respect of I minus E basis: enhanced expenses payable) is amended as follows.

2

In subsection (2), after “that” insert “a major interest in”.

3

For subsection (3) substitute—

3

Condition B is that—

a

in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition by the company of a major interest in the land, and

b

in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of—

i

1 April 1998, and

ii

the date on which a major interest in the land was first acquired by the company or a person who was connected with the company.

3A

The Treasury may by order—

a

specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or

b

replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date.

3B

An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.

4

In subsection (4)—

a

for “Chapter 4” substitute “land remediation”, and

b

omit “(see section 1162)”.

5

Omit subsection (5).

6

In subsection (6), omit “150% of”.

7

In the heading, omit “enhanced”.

8

In the heading before the section omit “for qualifying Chapter 4 expenditure”.

13

For section 1162 substitute—

1162Additional relief

1

If a company is entitled to relief under section 1161 for an accounting period it is also entitled to relief under this section for the period.

2

For the company to obtain the relief it must make a claim.

3

The relief is that the company may treat 50% of the qualifying Chapter 4 expenditure as expenses payable which fall to be brought into account at Step 3 in section 76(7) of ICTA (deduction for expenses payable).

4

For the purposes of this Chapter “the qualifying Chapter 4 expenditure” means—

a

the company’s qualifying land remediation expenditure for the accounting period, less

b

the amount (if any) which as a result of paragraph (a) of Step 1 in section 76(7) of ICTA is not to be brought into account at that step as expenses payable for the period.

14

1

Section 1163 (no relief if company responsible for contamination) is amended as follows.

2

The existing provision becomes subsection (1) of that section.

3

In that subsection—

a

after “1161” insert “or 1162”, and

b

for “state if the land is in that” substitute “or derelict state if the land is in a contaminated or derelict”.

4

After that subsection insert—

2

A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if—

a

the land is in that state wholly or partly as a result of any thing done, or omitted to be done, by a person not within subsection (1), and

b

that person, or a person connected with that person, has a relevant interest in the land.

3

For the purposes of subsection (2) a person has a relevant interest in land if—

a

the person holds any interest in, right over or licence to occupy the land (including an option to acquire any such interest, right or licence in any circumstances), or

b

has disposed of any estate or interest in the land for a consideration that to any extent reflects the impact, or likely impact, on the value of the land of the remediation of its contamination or dereliction.

5

In the heading, insert at the end “or dereliction or polluter has interest”.

15

In section 1165(1)(a) (meaning of “qualifying life assurance business loss”), after “1161” insert “or 1162”.

16

In section 1169(2)(c) and (3)(c) (artificially inflated claims for relief), after “1161” insert “or 1162”.

17

1

Section 1173 (expenditure incurred because of contamination) is amended as follows.

2

In subsections (1) and (2), after “contaminated” insert “or derelict”.

3

For subsection (3) substitute—

3

Subsection (4) applies—

a

in the case of land in a contaminated state, if the main purpose of any activities is any of those specified in section 1146(3), or

b

in the case of land in a derelict state, if the main purpose of any activities is any of those specified in section 1146A(3).

4

In the heading, insert at the end “or dereliction”.

18

Omit section 1174 (sub-contractor payments: introductory).

19

1

Section 1175 (“qualifying expenditure on sub-contracted land remediation”: connected persons) is amended as follows.

2

After subsection (1) insert—

1A

In this section, a “sub-contractor payment” means a payment made by the company to the sub-contractor in respect of relevant land remediation contracted out by the company to the sub-contractor.

3

In subsection (2), for “sub-contracted land remediation” substitute “connected sub-contracted land remediation” for the purposes of section 1144(5)”.

4

In subsection (3)—

a

in paragraph (a), after “carrying on” insert “or arranging for carrying on”, and

b

in paragraph (c) for “incurred on” substitute “in respect of”.

5

For the heading substitute “Connected sub-contractors”.

20

Omit section 1176 (“qualifying expenditure on sub-contracted land remediation”: other cases).

21

In section 1178 (persons having a “relevant connection” to a company)—

a

after “contaminated” insert “or derelict”, and

b

in paragraph (b), after “when” insert “a major interest in”.

22

After section 1178 insert—

1178A“Major interest in land”

1

References in this Part to the acquisition of a major interest in land are to the acquisition of a freehold interest in the land or of a relevant leasehold interest in the land.

2

The reference in subsection (1) to the acquisition of a freehold interest in land is—

a

in relation to land in England and Wales, to the acquisition of an estate in fee simple absolute (whether subsisting at law or in equity),

b

in relation to land in Scotland, to the acquisition of the interest of an owner of land, and

c

in relation to land in Northern Ireland, to the acquisition of any freehold estate (whether subsisting at law or in equity).

3

The reference in subsection (1) to the acquisition of a relevant leasehold interest in land is to the acquisition by grant or assignment (or assignation) of—

a

in relation to land in England and Wales, a term of years absolute (whether subsisting at law or in equity),

b

in relation to land in Scotland, the tenant’s right over or interest in a property subject to a lease, or

c

in relation to land in Northern Ireland, any leasehold estate (whether subsisting at law or in equity),

in relation to which the condition in subsection (4) is met.

4

That condition is that—

a

in the case of a grant, the term of years or period of the lease is at least 7 years, and

b

in the case of an assignment (or assignation) the unexpired portion of the term or period is at least 7 years.

23

In section 1179 (definitions), omit the definitions of “harm” and “land” and the definition of “substance” (apart from the “and” at the end).

Part 2Amendments of other enactments

24ICTA

In section 76(7) of ICTA (expenses of insurance companies), in step 3—

a

for “1161” substitute “1162”,

b

for “150%” substitute “50% additional”, and

c

after “contaminated” insert “or derelict”.

25FA 1998

In Schedule 18 to FA 1998 (company tax returns etc), in the heading of Part 9B, after “contaminated” insert “or derelict”.

26CTA 2009

1

Schedule 4 to CTA 2009 (index of expressions) is amended as follows.

2

After the entry relating to “deposit back arrangements” insert—

derelict state (in relation to land) (in Part 14)

section 1145A.

3

Omit the entries relating to “harm (in Part 14)” and “land (in Part 14)”.

4

After the entry relating to “major interest (in Chapter 12 of Part 8)” insert—

major interest in land (in Part 14)

section 1178A.

5

After the entry relating to “relevant consortium creditor relationship (in Chapter 7 of Part 5)” insert—

relevant contaminated land remediation (in Part 14)

section 1146.

6

After the entry relating to “relevant debits (in Part 8)” insert—

relevant derelict land remediation (in Part 14)

section 1146A.

7

Omit the references relating to “relevant land remediation (in Part 14)”, “sub-contractor payment (and sub-contractor) (in Chapter 6 of Part 14)” and “substance (in Part 14)”.

Part 3Commencement

27

Any power to make orders which is conferred on the Treasury by virtue of an amendment of CTA 2009 made by this Schedule may be exercised at any time after this Act is passed; and any order made by virtue of any such amendment before 6 April 2010 may make provision having effect in relation to expenditure incurred on or after 1 April 2009.

28

Subject to that, the amendments made by this Schedule have effect in relation to expenditure incurred on or after 1 April 2009; and for this purpose no account is to be taken of section 61 of CTA 2009 (earlier expenditure treated as incurred when trade started).

SCHEDULE 8Venture capital schemes

Section 27

Enterprise investment scheme

1

Schedule 5B to TCGA 1992 (enterprise investment scheme: re-investment) is amended as follows.

2

1

Paragraph 1(2) (application of Schedule) is amended as follows.

2

For paragraphs (g) and (h) substitute

and

g

all of the money raised by the issue of the shares (other than any of them which are bonus shares) is, no later than the time mentioned in section 175(3) of ITA 2007, employed wholly for the purpose of that activity,

3

In the words following the paragraphs, for “conditions in paragraphs (g) and (h) above do” substitute “condition in paragraph (g) above does”.

3

1

Paragraph 1A (failure of conditions of application) is amended as follows.

2

In sub-paragraph (4)—

a

omit “or (h)”, and

b

for “sub-paragraph (4A) below” substitute “section 175(3) of ITA 2007”.

3

Omit sub-paragraph (4A).

4

1

Paragraph 9 (other reconstructions and amalgamations) is amended as follows.

2

For sub-paragraph (1) substitute—

1

This paragraph applies if section 135 or 136 (company reconstructions) applies in relation to shares to which deferral relief, but not relief under Part 5 of ITA 2007 (or Chapter 3 of Part 7 of the Taxes Act), is attributable.

1A

Paragraphs 3 and 4 of this Schedule have effect as if section 135 or 136 did not apply in relation to the shares.

3

In sub-paragraph (2), for “Sub-paragraph (1) above shall not have effect to disapply section 135 or 136 where” substitute “Sub-paragraph (1A) does not apply if”.

4

For sub-paragraph (3) substitute—

3

Sub-paragraph (1A) does not apply if paragraph 8 applies in relation to the shares.

5

In paragraph 16 (information), omit sub-paragraph (4A).

6

1

Section 158 of ITA 2007 (form and amount of EIS relief) is amended as follows.

2

In subsection (4), omit—

a

“Subject to subsection (5),”, and

b

“before 6 October”.

3

Omit subsection (5).

7

1

Section 175 of that Act (use of money raised requirement) is amended as follows.

2

For subsection (1) substitute—

1

The requirement of this section is that all of the money raised by the issue of the relevant shares (other than any of them which are bonus shares) is, no later than the time mentioned in subsection (3), employed wholly for the purpose of the qualifying business activity for which it was raised.

3

In subsection (2), for “requirements in subsection (1)(a) and (b) do” substitute “requirement in subsection (1) does”.

4

In subsection (3)—

a

for “subsection (1)(a)” substitute “subsection (1)”, and

b

for “12 months” (in both places) substitute “two years”.

8Corporate venturing scheme

1

Paragraph 36 of Schedule 15 to FA 2000 (corporate venturing scheme: requirement as to money raised) is amended as follows.

2

In sub-paragraph (1), for “At least 80%” substitute “All”.

3

Omit sub-paragraph (1A).

4

In sub-paragraph (1B), for “12 months” (in both places) substitute “two years”.

5

In sub-paragraph (1C), for “Sub-paragraphs (1) and (1A) are” substitute “Sub-paragraph (1) is”.

6

In sub-paragraph (5) omit “does not apply and the requirement of sub-paragraph (1A)”.

9Venture Capital Trusts

1

Section 293 of ITA 2007 (use of money raised requirement) is amended as follows.

2

For subsection (1) substitute—

1

The requirement of this section is that—

a

less than two years has passed since the trading time, or

b

at least two years has passed since the trading time and all of the money raised by the issue of the relevant holding has been employed wholly for the purposes of a relevant qualifying activity.

3

Omit subsections (2) to (4).

10Consequential repeals

In consequence of the amendments made by paragraphs 2, 3 and 5, omit—

a

in FA 2001, in Schedule 15, paragraphs 26 to 28,

b

in FA 2004, in Schedule 18, paragraph 13(1)(f), and

c

in ITA 2007, in Schedule 1, paragraph 345(2)(b), (3)(a) and (13)(b).

Commencement

11

The amendments made by paragraphs 2, 3, 5, 7, 8 and 10 have effect in relation to shares issued on or after 22 April 2009.

12

The amendments made by paragraph 4 have effect in relation to—

a

any exchange of shares to which section 135 of TCGA 1992 applies, where the new holding is issued on or after 22 April 2009, and

b

any arrangement within section 136(1) of that Act entered into on or after that date.

13

1

The amendments made by paragraph 6 have effect as follows.

2

The amendments made by sub-paragraph (2) have effect in relation to shares issued in the tax year 2009-10 or a subsequent tax year.

3

The amendment made by sub-paragraph (3) has effect in relation to claims made under section 158(4) of ITA 2007 in respect of shares issued in the tax year 2009-10 or a subsequent tax year.

14

The amendments made by paragraph 9 have effect in relation to shares or securities issued on or after 22 April 2009.

SCHEDULE 9Group relief: preference shares

Section 28

Amendments of Schedule 18 to ICTA

1

Schedule 18 to ICTA (definitions relating to group relief) is amended as follows.

2

1

Paragraph 1 is amended as follows.

2

In sub-paragraph (2), for “fixed-rate” substitute “relevant”.

3

In sub-paragraph (3)—

a

for “fixed-rate” substitute “relevant”,

b

for paragraph (c) substitute—

c

either—

i

do not carry a right to dividends, or

ii

carry a right to dividends to which paragraph 1A applies; and

c

in paragraph (d), for “that new consideration” substitute “the new consideration received by the company in respect of the issue of the shares”.

3

After that paragraph insert—

1A

1

This paragraph applies to a right to dividends carried by shares in a company if—

a

the dividends represent no more than a reasonable commercial return on the new consideration received by the company in respect of the issue of the shares, and

b

condition A, B or C is met.

2

Condition A is that—

a

the dividends are of a fixed amount or at a fixed rate per cent 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

Condition B is that—

a

the dividends are of a rate per cent of the nominal value of the shares and the rate fluctuates in accordance with—

i

a standard published rate of interest, or

ii

the retail prices index, or any similar general index of prices which is published by the government, or by an agent of the government, of the country or territory in whose currency the shares are denominated, 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

Condition C is that condition A or B would be met but for sub-paragraph (2)(b) or (3)(b), and—

a

the company is only entitled to reduce the amount of, or not to pay, any of the dividends in relevant 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 relevant circumstances.

5

For the purposes of sub-paragraph (4) a company reduces the amount of, or does not pay, dividends “in relevant circumstances” if—

a

at the time the dividend is or would be payable, the company is in severe financial difficulties, or

b

it does so for the purpose of following a recommendation of a relevant regulatory body.

6

The Treasury may by order specify circumstances in which a company is to be treated as in severe financial difficulties for the purposes of sub-paragraph (5)(a).

7

In sub-paragraph (5)(b) “relevant regulatory body” means—

a

in relation to a dividend paid by a company that is authorised for the purposes of the Financial Services and Markets Act 2000, the Financial Services 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).

8

In this paragraph “new consideration” has the same meaning as in section 254.

4

In paragraph 5B(4)(b), for “fixed-rate” substitute “relevant”.

5Commencement

The amendments made by this Schedule have effect for accounting periods beginning on or after 1 January 2008.

Election to opt out of changes in relation to pre-existing etc shares

6

If a company so elects, the amendments made by this Schedule do not have effect in relation to shares issued by the company—

a

before 18 December 2008, or

b

on or after that date under an agreement entered into before that date.

7

An election under paragraph 6—

a

must be made by the company by being included in its company tax return for the first accounting period of the company beginning on or after 1 January 2008 (and may be included in the return originally made or by amendment), and

b

is irrevocable.

8Paragraph 2(7) of Schedule 25 to ICTA

The amendments made by this Schedule do not have effect for the purposes of paragraph 2(7) of Schedule 25 to ICTA (controlled foreign companies: definition of non-voting fixed-rate preference shares).

SCHEDULE 10Sale of lessor companies etc: reforms

Section 29

1Introduction

Schedule 10 to FA 2006 (sale etc of lessor companies etc) is amended as follows.

2Paragraph 7

1

Paragraph 7 (provision for purposes of condition A in paragraph 6) is amended as follows.

2

In sub-paragraph (8)(b), for “acquires any plant or machinery directly or indirectly from a person who is connected with the company” substitute “acquired any plant or machinery in circumstances in which this paragraph applies”.

3

For sub-paragraph (9) substitute—

9

Paragraph (b) of sub-paragraph (8) above 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.

3Paragraph 13A

After paragraph 13 insert—

13ANo qualifying change of ownership where principal company’s interest in consortium company unchanged

1

This paragraph applies if—

a

a company (“company A”) is owned by a consortium, and

b

a relevant change in the relationship between company A and a principal company of company A occurs on any day,

but the principal company’s interest in company A remains unchanged.

2

For the purposes of this Schedule, there is no qualifying change of ownership in relation to company A on that day as a result of that change in that relationship.

3

For the purposes of this paragraph the principal company’s interest in company A remains unchanged if the percentage of the ordinary share capital of company A that is beneficially owned directly or indirectly by the principal company is the same at the beginning and end of that day.

4

Section 838(2) and (4) to (10) of ICTA apply for construing sub-paragraph (3).

4Paragraph 17

1

Paragraph 17 (meaning of “PM” in paragraph 16) is amended as follows.

2

In sub-paragraph (7)(b), for “acquires any plant or machinery directly or indirectly from a person who is connected with the company” substitute “acquired any plant or machinery in circumstances in which this paragraph applies”.

3

For sub-paragraph (8) substitute—

8

Paragraph (b) of sub-paragraph (7) above 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.

5Paragraph 23

In paragraph 23 (leasing business carried on by company in partnership: change in company’s interest in business), for sub-paragraph (6) substitute—

6

This paragraph is subject to paragraph 23A and is supplemented by paragraph 24.

6Paragraph 23A

After that paragraph insert—

23A

1

Paragraph 23 does not apply where conditions A, B and C are met.

2

Condition A is that at the end of the relevant day none of the companies by which the business was carried on any longer have any share in the profits or loss of the business.

3

Condition B is that, in consequence of what happens on the relevant day, the disposal value of all of the plant and machinery which was used for the purposes of the business and in respect of which capital allowances have been claimed is to be brought into account under section 61 of CAA 2001.

4

Condition C is that the disposal value to be brought into account in relation to all of the plant or machinery is the price which the plant or machinery would fetch in the open market on that day.

7Paragraph 32

1

Paragraph 32 (leasing business carried on by a company in partnership: amount of expense) is amended as follows.

2

In sub-paragraph (1)—

a

in sub-paragraph (c), for “increases at any time on” substitute “is greater at the end of that day than at the start of”, and

b

in sub-paragraph (d), omit “at that time” (in both places).

3

For sub-paragraph (3) substitute—

3

The appropriate percentage is—

OCIPCDmath

where—

OCI is the increase in the other company’s percentage share in the profits or losses of the business which is wholly attributable to the change in the partner company’s interest in the business, and

PCD is the decrease in the partner company’s percentage share in the profits or losses of the business.

8Paragraph 39

1

Paragraph 39 (relief for expense otherwise giving rise to carried forward loss) is amended as follows.

2

In sub-paragraph (1)—

a

in paragraph (c), insert at the end “or a later accounting period,”,

b

in paragraph (d), after “company” insert “after the accounting period in which the loss is made”, and

c

in paragraph (e), for “12 months beginning with” substitute “5 years beginning immediately after”.

3

In subsection (1A)—

a

in paragraph (b), for “, and” substitute “or a later accounting period,”,

b

in paragraph (c), after “company” insert “after the accounting period in which the loss is made”, and

c

after that paragraph insert

and

d

the subsequent accounting period starts within the period of 5 years beginning with the day that is the relevant day within the meaning of paragraph 23(1) and does not start as a result of paragraph 3 or 33.

4

In sub-paragraph (2)—

a

after “33” insert “or this sub-paragraph”, and

b

for “an expense” substitute “giving rise to an expense of the relevant amount”.

5

After that sub-paragraph insert—

2A

The relevant amount is the amount of the loss treated as an expense increased by—

D365×Rmath

where—

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.

6

In sub-paragraph (3), after “The” insert “amount of the”.

7

In sub-paragraph (4)—

a

after “33” insert “or this paragraph”, and

b

for “the expense under that paragraph” substitute “that expense”.

9Commencement

1

The amendments made by paragraph 8 have effect in relation to losses incurred in accounting periods ending on or after 22 April 2009.

2

The other amendments made by this Schedule have effect where the relevant day is on or after that date.

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

Section 30

Part 1Capital allowances

Plant and machinery allowances for cars and motor cycles

1

Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

2

In section 38B (general exclusions from AIA qualifying expenditure), in general exclusion 2, for “81” substitute “268A”.

3

In section 46(2) (general exclusions from first year allowances), in general exclusion 2, for “81” substitute “268A”.

4

Omit sections 74 to 79 (cars above the cost threshold).

5

Omit section 81 (extended meaning of “car”) and section 82 (qualifying hire cars).

6

In section 84 (cases in which short-life asset treatment is ruled out), in the Table, in item 3, in the first column, for “81” substitute “268A”.

7

1

Section 104A (special rate expenditure) is amended as follows.

2

In subsection (1)—

a

in paragraph (a), after “the” insert “first”,

b

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

c

insert at the end

, and

e

expenditure incurred on or after the second relevant date on the provision of a car that is not a main rate car.

3

In subsection (2), after “The” insert “first”.

4

After that subsection insert—

3

The second relevant date is—

a

for corporation tax purposes, 1 April 2009, and

b

for income tax purposes, 6 April 2009.

4

In this section—

“car” has the meaning given in section 268A;

“main rate car” has the meaning given in section 104AA.

8

After that section insert—

104AAMeaning of “main rate car”

1

“Main rate car” means—

a

a car that is first registered before 1 March 2001,

b

a car that has low CO2 emissions, or

c

a car that is electrically-propelled.

2

For the purposes of this section a car has low CO2 emissions if it meets conditions A and B.

3

Condition A is that, when the car is first registered, it is so registered on the basis of a qualifying emissions certificate.

4

Condition B is that the applicable CO2 emissions figure in relation to the car does not exceed 160 grams per kilometre driven.

5

The Treasury may by order amend the amount from time to time specified in subsection (4).

6

An order under subsection (5) may contain transitional provision and savings.

7

In this section—

“applicable CO2 emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C;

“car” has the meaning given in section 268A;

“electrically-propelled” has the meaning given in section 268B.

9

After section 104E insert—

104FSpecial rate cars: discontinued activity continued by relevant company

1

This section applies if—

a

a company (“the taxpayer”) has incurred special rate expenditure within section 104A(1)(e) (expenditure on a car other than a main rate car) to which section 104C applies (allocation to special rate pool),

b

the qualifying activity carried on by the taxpayer is permanently discontinued, and

c

conditions A, B and C are met.

2

Condition A is that the qualifying activity carried on by the taxpayer consisted of or included (other than incidentally) making cars available to other persons.

3

Condition B is that, at any time in the 6 months after the taxpayer’s qualifying activity is permanently discontinued, the qualifying activity of a group relief company consists of or includes (other than incidentally) making cars available to other persons.

4

Condition C is that the balancing allowance (“SBA”) to which the taxpayer would be entitled (but for this section) in respect of the special rate pool is greater than—

BC-OBAmath

where—

BC is the total of the balancing charges (if any) to which the taxpayer is liable for the final chargeable period in respect of any pool, and

OBA is the total of the balancing allowances to which the taxpayer is entitled for that period in respect of any pool other than the special rate pool.

For the purposes of this section if BC − OBA is a negative amount it is to be treated as if it were nil.

5

The balancing allowance to which the taxpayer is entitled in respect of the special rate pool is reduced to an amount equal to BC — OBA.

6

The relevant company is to be treated as having incurred qualifying expenditure within section 104A(1)(e) (“notional expenditure”), whether or not the relevant company owns cars previously owned by the taxpayer.

7

The amount of the notional expenditure is an amount equal to the amount by which SBA exceeds BC — OBA.

8

The relevant company is to be treated as having incurred the notional expenditure on the day after the end of the taxpayer’s final chargeable period.

9

If part of the chargeable period in which the relevant company is treated as incurring expenditure under this section (“the acquisition period”) overlaps with the taxpayer’s penultimate chargeable period—

a

the part of the expenditure which is proportional to that part of the acquisition period is not to be taken into account in determining the relevant company’s available qualifying expenditure for the acquisition period, but

b

this does not prevent that part of the expenditure being taken into account in determining the relevant company’s available qualifying expenditure for any subsequent chargeable period.

10

In this section—

“car” has the meaning given in section 268A;

“company” means any body corporate;

“group relief company” means—

a

a company to which group relief under Chapter 4 of Part 10 of ICTA would be available (on the making of a claim) in respect of balancing allowances surrendered by the taxpayer in the taxpayer’s final chargeable period, and

b

a company to which such relief would be available (on the making of a claim) in respect of balancing allowances surrendered by a company within paragraph (a);

“main rate car” has the meaning given in section 104AA;

“penultimate chargeable period” means the chargeable period preceding the final chargeable period;

“the relevant company” means the group relief company mentioned in subsection (3) or, if there is more than one, the one—

a

nominated by the taxpayer not more than 6 months after the end of the taxpayer’s final chargeable period, or

b

in the absence of such a nomination, nominated by Her Majesty’s Revenue and Customs.

10

After section 208 insert—

208ACars: disposal value in avoidance cases

1

This section applies if—

a

a disposal value is required to be brought into account under section 61,

b

the disposal event is that the person ceases to own a section 206 car because of a sale or the performance of a contract, and

c

allowances under this Part in respect of the person’s expenditure under that transaction are restricted under section 217 or 218 (anti-avoidance).

2

A car is a section 206 car if expenditure on the provision of the car is required to be allocated to a single asset pool under that section.

3

The disposal value to be brought into account is—

a

the market value of the car at the time of the disposal event, or

b

if less, the capital expenditure incurred, or treated as incurred, on the provision of the car by the person disposing of it.

4

The person acquiring the car is to be treated as having incurred capital expenditure on its provision of an amount equal to the disposal value required to be brought into account under subsection (3).

5

In this section “car” has the meaning given in section 268A.

11

After section 268 insert—

Cars etc

268AMeaning of “car” and “motor cycle”

1

In this Part “car” means a mechanically propelled road vehicle other than—

a

a motor cycle,

b

a vehicle of a construction primarily suited for the conveyance of goods or burden of any description, or

c

a vehicle of a type not commonly used as a private vehicle and unsuitable for such use.

2

In this Part “motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988.

268BElectrically-propelled vehicles

For the purposes of this Part a vehicle is electrically-propelled only if—

a

it is propelled solely by electrical power, and

b

that power is derived from—

i

a source external to the vehicle, or

ii

an electrical storage battery which is not connected to any source of power when the vehicle is in motion.

268CTerms relating to emissions

1

In this Part “qualifying emissions certificate”, in relation to a vehicle, means an EC certificate of conformity, or a UK approval certificate, that specifies—

a

in the case of a vehicle other than a bi-fuel vehicle, a CO2 emissions figure in terms of grams per kilometre driven, or

b

in the case of a bi-fuel vehicle, separate CO2 emissions figures in terms of grams per kilometre driven for different fuels.

2

For the purposes of this Part, in relation to a vehicle other than a bi-fuel vehicle, the applicable CO2 emissions figure is—

a

where the qualifying emissions certificate specifies only one CO2 emissions figure, that figure, and

b

where the certificate specifies more than one CO2 emissions figure, the figure specified as the CO2 emissions (combined) figure.

3

For the purposes of this Part, in relation to a bi-fuel vehicle, the applicable CO2 emissions figure is—

a

where the qualifying emissions certificate specifies more than one CO2 emissions figure in relation to each fuel, the lowest CO2 emissions (combined) figure specified, and

b

in any other case, the lowest CO2 figure specified by the certificate.

4

In this section—

“bi-fuel”, in relation to a vehicle, means capable of being propelled by—

a

petrol and road fuel gas, or

b

diesel and road fuel gas;

“diesel” means any diesel fuel within the definition in Article 2 of Directive 98/70/EC of the European Parliament and of the Council;

“EC certificate of conformity” means a certificate of conformity issued by a manufacturer under any provision of the law of a member State implementing Article 6 of Council Directive 70/156/EEC, as amended;

“petrol” has the meaning given by Article 2 of Directive 98/70/EC of the European Parliament and of the Council;

“road fuel gas” has the same meaning as in section 171(1) of ITEPA 2003;

“UK approval certificate” means a certificate issued under—

a

section 58(1) or (4) of the Road Traffic Act 1988, or

b

Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I. 1)).

Consequential amendments of CAA 2001

12

CAA 2001 is amended as follows.

13

In section 33 (personal security), omit subsection (7).

14

1

Section 45D (expenditure on cars with low carbon dioxide emissions) is amended as follows.

2

In subsection (1), for paragraph (c) substitute—

c

the car—

i

is electrically-propelled, or

ii

has low CO2 emissions, and

3

In subsection (2), for “a car with low CO2 emissions is a car which” substitute “a car has low CO2 emissions if it”.

4

In subsection (3), for the words from “an EC certificate” to the end substitute “a qualifying emissions certificate.”

5

In subsection (4), for “in the case of” substitute “in relation to”.

6

Omit subsections (5) and (6).

7

In subsection (8)—

a

after “car” insert “is to a car within the meaning of section 268A, except that it”, and

b

omit paragraph (b) (and the “but” before it).

8

Omit subsections (9) and (10).

9

After subsection (10) insert—

11

In this section—

“applicable CO2 emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C;

“electrically-propelled” has the meaning given in section 268B.

15

In section 54(3) (single asset pools), omit “section 74 (car above the cost threshold)”.

16

In section 55(6) (determination of entitlement or liability), after “subject to” insert “section 104F (special rate cars: discontinued activity continued by relevant company) and”.

17

In section 65(3) (the final chargeable period), for “sections 77(1) and” substitute “section”.

18

In section 66 (list of provisions about disposal values)—

a

omit the entry in the list relating to section 79, and

b

insert at the appropriate place—

section 208A

cars: disposal value in avoidance cases

19

1

In section 84 (cases in which short-life asset treatment is ruled out), the Table is amended as follows.

2

In item 3, for the words in the second column substitute “The car is a hire car for a disabled person (as defined by section 268D).”

3

In item 4, in the second column, insert “The expenditure is incurred on the provision of a car which is a hire car for a disabled person (as defined by section 268D)”.

4

In item 5, in the second column, for “within section 82(4) (cars hired out to persons receiving disability allowances etc)” substitute “a hire car for a disabled person (as defined by section 268D)”.

20

1

Section 86 (short-life assets) is amended as follows.

2

In subsection (2)(b), for “main pool” substitute “appropriate pool”.

3

After subsection (4) insert—

5

In subsection (2)(b) “appropriate pool” means—

a

in the case of expenditure incurred on the provision of a car that is not a main rate car (as defined by section 104AA), the special rate pool, and

b

in any other case, the main pool.

21

In section 96 (expenditure on cars excluded from being long-life asset expenditure), for “car (as defined by section 81)” substitute “car or motor cycle (as defined by section 268A)”.

22

After section 268C (inserted by this Part of this Schedule) insert—

268DHire cars for disabled persons

1

For the purposes of this Part a car is a hire car for a disabled person if it is provided wholly or mainly for hire to, or the carriage of, disabled persons in the ordinary course of a trade.

2

“Disabled person” means a person in receipt of—

a

a disability living allowance under—

i

the Social Security Contributions and Benefits Act 1992, or

ii

the Social Security Contributions and Benefits (Northern Ireland) Act 1992,

because of entitlement to the mobility component,

b

a mobility supplement under a scheme made under the Personal Injuries (Emergency Provisions) Act 1939,

c

a mobility supplement under an Order in Council made under section 12 of the Social Security (Miscellaneous Provisions) Act 1977, or

d

a payment that appears to the Treasury to be similar to those mentioned in paragraphs (a) to (c) and that is specified by order made by the Treasury.

23

1

Part 2 of Schedule 1 (defined expressions) is amended as follows.

2

In the entry relating to “car (in Part 2)”, for “section 81” substitute “section 268A”.

3

Insert at the appropriate places—

applicable CO2 emissions figure (in Part 2)

section 268C

electrically-propelled (in Part 2)

section 268B

hire car for a disabled person (in Part 2)

section 268D

motor cycle (in Part 2)

section 268A

qualifying emissions certificate (in Part 2)

section 268C

24

In Schedule 3 (transitionals and savings), omit paragraph 19 (cars above the cost threshold) and the headings immediately before it.

25Consequential repeal

In consequence of the amendments made by this Part of this Schedule, in FA 2002, in Schedule 19, omit paragraph 6.

Commencement and transitionals: introduction

26

For the purposes of this Part of this Schedule—

a

the first relevant date is—

i

for corporation tax purposes, 1 April 2009, and

ii

for income tax purposes, 6 April 2009,

b

the second relevant date is—

i

for corporation tax purposes, 1 August 2009, and

ii

for income tax purposes, 6 August 2009, and

c

the third relevant date is—

i

for corporation tax purposes, 1 April 2014, and

ii

for income tax purposes, 6 April 2014.

27

1

For the purposes of this Part of this Schedule “new expenditure” means—

a

expenditure incurred on or after the first relevant date, and

b

expenditure incurred before that date to which sub-paragraph (2) applies,

and expenditure that is not new expenditure is “old expenditure”.

2

This sub-paragraph applies to expenditure if—

a

it is incurred under an agreement for the provision of a car entered into after 8 December 2008, and

b

under that agreement the car is not required to be made available before the second relevant date.

3

For the purposes of sub-paragraph (2) an agreement is entered into on the date on which the following conditions are met—

a

there is a contract in writing for the provision of the car,

b

the contract is unconditional or, if it is conditional, the conditions have been met, and

c

no terms remain to be agreed.

Commencement

28

1

The amendments made by this Part of this Schedule have effect in relation to new expenditure (subject to sub-paragraph (2)).

2

The repeal of section 79 of CAA 2001 and the amendments made by paragraphs 10 and 18 have effect in cases in which a person ceases to own a car or motor cycle if the expenditure incurred on the provision of the car or motor cycle is new expenditure.

29

1

The repeal of sections 74 to 78 of CAA 2001 and the amendments made by paragraphs 15 and 17 have effect in relation to old expenditure, but only for chargeable periods beginning on or after the third relevant date.

2

The repeal of section 79 of CAA 2001 and the amendment made by paragraph 18(a) have effect in cases in which a person ceases to own a car or motor cycle if the expenditure incurred on the provision of the car or motor cycle is old expenditure, but only for chargeable periods beginning on or after the third relevant date.

Transitionals

30

1

This paragraph applies where expenditure incurred by a person on the provision of a car or motor cycle includes both new expenditure and old expenditure.

2

The new expenditure and the old expenditure are to be treated as if they were incurred on the provision of separate (but identical) cars or motor cycles.

3

Any amount required to be brought into account in connection with a disposal event in respect of the car or motor cycle mentioned in sub-paragraph (1) is to be apportioned on a just and reasonable basis.

31

1

This paragraph applies where—

a

old expenditure is required to be allocated to a single asset pool by section 74 of CAA 2001,

b

there is unrelieved expenditure in that pool at the end of a transitional chargeable period, and

c

the unrelieved expenditure is not required to be allocated to a single asset pool by any other provision of Part 2 of that Act.

2

The unrelieved expenditure must be carried forward to the main pool.

3

A “transitional chargeable period” is one that begins before the third relevant date and ends on or after the day before the third relevant date.

32

An order made under section 82(4)(d) of CAA 2001 (qualifying hire cars for disabled persons) before the day on which this Act is passed (and not revoked before that day) has effect as if it had also been made under section 268D(2)(d) of that Act (hire cars for disabled persons) (inserted by this Part of this Schedule).

33Interpretation

In this Part of this Schedule—

a

“car” and “motor cycle” have the meaning given in section 268A of CAA 2001 (inserted by paragraph 11), and

b

other expressions used in this Part of this Schedule and in Part 2 of CAA 2001 have the same meaning here as in that Part of that Act.

Part 2Restrictions on deductions for hire expenses

Income tax

34

ITTOIA 2005 is amended as follows.

35

In section 31(1)(b) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

36

1

Section 48 (rules restricting deductions from profits: car or motor cycle hire) is amended as follows.

2

In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute

which is not—

a

a car that is first registered before 1 March 2001,

b

a car that has low CO2 emissions,

c

a car that is electrically propelled, or

d

a qualifying hire car.

3

In subsection (2), for the words from “multiplying” to the end substitute “15%”.

4

In subsection (4), for “multiplying it by the fraction in subsection (2)” substitute “15%”.

5

In subsection (4A)(a), (b) and (c), omit “or motor cycle”.

6

Omit subsection (5).

7

In the heading, omit “or motor cycle”.

37

1

Section 49 (car or motor cycle hire: supplementary) is amended as follows.

2

In subsection (1)—

a

omit “or motor cycle”,

b

omit “one”,

c

before paragraph (a) insert—

za

a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988),

d

in paragraphs (a) and (b), insert at the beginning “a vehicle”.

3

After that subsection insert—

1A

In section 48—

“a car that has low CO2 emissions” has the same meaning as in section 104AA of CAA 2001 (special rate expenditure: main rate car);

“electrically propelled” has the meaning given in section 268B of that Act.

4

In subsection (2)—

a

omit “or motor cycle” (in each place),

b

omit paragraph (c), and

c

insert at the end—

d

is leased under a long-funding lease (within the meaning of section 70G of CAA 2001).

5

In subsection (6), omit “and section 48”.

6

In the heading, omit “or motor cycle”.

38

Omit section 50 (hiring cars with low carbon dioxide emissions).

39

After that section insert—

50AShort-term hiring in and long-term hiring out

1

Section 48 does not apply to expenses incurred by a person (“the taxpayer”) on the hiring of a car if condition A or B is met.

2

Condition A is that—

a

the expenses are incurred in respect of the making available of the car to the taxpayer for a period (“the hire period”) of not more than 45 consecutive days, and

b

if the car is made available to the taxpayer (whether by the same person or different persons) for one or more periods linked to the hire period, the hire period and the linked period or periods, taken together, consist of not more than 45 days.

3

Condition B is that the expenses are incurred in respect of a period (“the sub-hire period”) throughout which the taxpayer makes the car available to another person (“the customer”) and—

a

the sub-hire period consists of more than 45 consecutive days, or

b

if the taxpayer makes the car available to the customer throughout one or more periods linked to the sub-hire period, the sub-hire period and the linked period or periods, taken together, consist of more than 45 days,

but see subsection (4).

4

Condition B is not met if—

a

the customer is an employee of the taxpayer or of a person connected with the taxpayer, or

b

during all or part of the sub-hire period (or any period linked to the sub-hire period), the customer makes any car available to an employee of the taxpayer under arrangements with the taxpayer or with a person connected with the taxpayer.

5

Neither condition A nor condition B is met if the car is hired under arrangements the purpose, or one of the main purposes, of which is—

a

to disapply or reduce the effect of section 48, or

b

other avoidance of tax.

6

For the purposes of condition B the expenses incurred by the taxpayer on the hiring of the car must be apportioned between—

a

the sub-hire period, and

b

the remainder of the period during which the car is made available to the taxpayer,

according to the respective lengths of those periods.

7

A period of consecutive days (“the main period”) is linked to—

a

a period of consecutive days that ends not more than 14 days before the main period begins,

b

a period of consecutive days that begins not more than 14 days after the main period ends, and

c

a period of consecutive days linked to a period in paragraph (a) or (b).

8

For the purposes of this section, where arrangements for the hiring of a car include arrangements for the provision of a replacement car in the event that the first car is not available, the first car and any replacement car are to be treated as if they were the same car.

9

In this section (and section 50B) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions.

50BConnected persons: application of section 48

1

This section applies where connected persons incur expenses on the hiring of the same car for the same period and—

a

section 48 would (but for this section) apply to the expenses of two or more of those persons, or

b

section 48 and section 56 of CTA 2009 would (but for this section and section 58B of that Act) each apply to the expenses of at least one of those persons.

2

This section only applies where one or more of the persons mentioned in subsection (1)(a) or (b) incurs the expenses under commercial arrangements (and such a person is referred to below as a “commercial lessee”).

3

In relation to the expenses mentioned in subsection (1) to which section 48 would (but for this section) apply, section 48 only applies to the following—

a

where there is one commercial lessee, any such expenses incurred by that lessee, and

b

where there is more than one, any such expenses incurred by the first commercial lessee in the chain of arrangements for the hiring of the car for the period.

4

In this section—

a

references to expenses incurred by a commercial lessee include expenses incurred in that or any other capacity, and

b

“commercial arrangements” means arrangements the terms of which are such as would reasonably have been expected if the parties to the arrangements had been dealing at arm’s length.

40

In section 247(1) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

41

In section 272(2) (profits of a property business: application of trading income rules), in the entry in the Table relating to sections 48 to 50—

a

for “50” substitute “50B”, and

b

omit “or motor cycle”.

42

In section 274(1)(b) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

43

In section 354(2) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

44

In Schedule 2 (transitionals and savings), omit paragraphs 16 and 17 (and the heading before them).

Corporation tax

45

CTA 2009 is amended as follows.

46

In section 51(1)(b)(i) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

47

1

Section 56 (rules restricting deductions from profits: car or motor cycle hire) is amended as follows.

2

In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute

which is not—

a

a car that is first registered before 1 March 2001,

b

a car that has low CO2 emissions,

c

a car that is electrically propelled, or

d

a qualifying hire car.

3

In subsection (2), for the words from “multiplying” to the end substitute “15%”.

4

In subsection (4), for “multiplying it by the fraction in subsection (2)” substitute “15%”.

5

In subsection (5)(a), (b) and (c), omit “or motor cycle”.

6

Omit subsection (6).

7

In the heading, omit “or motor cycle”.

48

1

Section 57 (car or motor cycle hire: supplementary) is amended as follows.

2

In subsection (1)—

a

omit “or motor cycle”,

b

omit “one”,

c

before paragraph (a) insert—

za

a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988),

d

in paragraphs (a) and (b), insert at the beginning “a vehicle”.

3

After that subsection insert—

1A

In section 56—

“a car that has low CO2 emissions” has the same meaning as in section 104AA of CAA 2001 (special rate expenditure: main rate car);

“electrically propelled” has the meaning given in section 268B of that Act.

4

In subsection (2)—

a

omit “or motor cycle” (in each place),

b

omit paragraph (c), and

c

insert at the end—

d

is leased under a long-funding lease (within the meaning of section 70G of CAA 2001).

5

In subsection (6), omit “and section 56”.

6

In the heading, omit “or motor cycle”.

49

Omit section 58 (hiring cars with low CO2 emissions before 1 April 2013).

50

After section 58 insert—

58AShort-term hiring in and long-term hiring out

1

Section 56 does not apply to expenses incurred by a company (“the taxpayer”) on the hiring of a car if condition A or B is met.

2

Condition A is that—

a

the expenses are incurred in respect of the making available of the car to the taxpayer for a period (“the hire period”) of not more than 45 consecutive days, and

b

if the car is made available to the taxpayer (whether by the same person or different persons) for one or more periods linked to the hire period, the hire period and the linked period or periods, taken together, consist of not more than 45 days.

3

Condition B is that the expenses are incurred in respect of a period (“the sub-hire period”) throughout which the taxpayer makes the car available to another person (“the customer”) and—

a

the sub-hire period consists of more than 45 consecutive days, or

b

if the taxpayer makes the car available to the customer throughout one or more periods linked to the sub-hire period, the sub-hire period and the linked period or periods, taken together, consist of more than 45 days,

but see subsection (4).

4

Condition B is not met if—

a

the customer is an employee or officer of the taxpayer or of a person connected with the taxpayer, or

b

during all or part of the sub-hire period (or any period linked to the sub-hire period), the customer makes any car available to an employee or officer of the taxpayer under arrangements with the taxpayer or with a person connected with the taxpayer.

5

Neither condition A nor condition B is met if the car is hired under arrangements the purpose, or one of the main purposes, of which is—

a

to disapply or reduce the effect of section 56, or

b

other avoidance of tax.

6

For the purposes of condition B the expenses incurred by the taxpayer on the hiring of the car must be apportioned between—

a

the sub-hire period, and

b

the remainder of the period during which the car is made available to the taxpayer,

according to the respective lengths of those periods.

7

A period of consecutive days (“the main period”) is linked to—

a

a period of consecutive days that ends not more than 14 days before the main period begins,

b

a period of consecutive days that begins not more than 14 days after the main period ends, and

c

a period of consecutive days linked to a period in paragraph (a) or (b).

8

For the purposes of this section, where arrangements for the hiring of a car include arrangements for the provision of a replacement car in the event that the first car is not available, the first car and any replacement car are to be treated as if they were the same car.

9

In this section (and section 58B) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions.

58BConnected persons: application of section 56

1

This section applies where connected persons incur expenses on the hiring of the same car for the same period and—

a

section 56 would (but for this section) apply to the expenses of two or more of those persons, or

b

section 56 and section 48 of ITTOIA 2005 would (but for this section and section 50B of that Act) each apply to the expenses of at least one of those persons.

2

This section only applies where one or more of the persons mentioned in subsection (1)(a) or (b) incurs the expenses under commercial arrangements (and such a person is referred to below as a “commercial lessee”).

3

In relation to the expenses mentioned in subsection (1) to which section 56 would (but for this section) apply, section 56 only applies to the following—

a

where there is one commercial lessee, any such expenses incurred by that lessee, and

b

where there is more than one, any such expenses incurred by the first commercial lessee in the chain of arrangements for the hiring of the car for the period.

4

In this section—

a

references to expenses incurred by a commercial lessee include expenses incurred in that or any other capacity, and

b

“commercial arrangements” means arrangements the terms of which are such as would reasonably have been expected if the parties to the arrangements had been dealing at arm’s length.

51

In section 191(1) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

52

In section 210(2) (profits of a property business: application of trading income rules), in the entry in the Table relating to sections 56 to 58—

a

for “58” substitute “58B”, and

b

omit “or motor cycle”.

53

In section 214(1)(b)(i) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

54

In section 283(2) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

55

In section 865(3)(a) (debits for expenditure not generally deductible for tax purposes), omit “or motor cycle”.

56

In section 1231(3) (absence of accounts), omit “or motor cycle”.

57

1

Section 1251 (car or motor cycle hire: companies with investment business) is amended as follows.

2

In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute

which is not—

a

a car that is first registered before 1 March 2001,

b

a car that has low CO2 emissions,

c

a car that is electrically propelled, or

d

a qualifying hire car.

3

In subsection (2), for the words from “multiplying” to the end substitute “15%”.

4

In subsection (4)(b), for “multiply that amount by the fraction set out in subsection (2) above” substitute “reduce that amount by 15%”.

5

In subsection (5)(a), (b) and (c), omit “or motor cycle”.

6

Omit subsection (6).

7

In subsection (7)—

a

omit “or motor cycle”, and

b

for “58 (hiring cars with low CO2 emissions before 1 April 2013)” substitute “58A (short-term hiring in and long-term hiring out)”.

8

After that subsection insert—

8

For the purposes of section 58B of this Act and section 50B of ITTOIA 2005 (connected persons: application of restrictions), this section is to be treated as if it were part of section 56 of this Act.

9

In the heading, omit “or motor cycle”.

58

In Schedule 2 (transitionals and savings), omit paragraphs 16 and 17 (and the heading before them).

59

ICTA is amended as follows.

60

1

Section 76ZN (car or motor cycle hire: expenses of insurance companies) is amended as follows.

2

In subsection (1)—

a

in paragraph (a), omit “or motor cycle”, and

b

for paragraphs (b) and (c) substitute—

b

the car is not—

i

a car that is first registered before 1 March 2001,

ii

a car that has low CO2 emissions (as defined in section 104AA of the Capital Allowances Act),

iii

a car that is electrically propelled (as defined in section 268B of that Act), or

iv

a qualifying hire car.

3

After that subsection insert—

1A

Subsection (2) does not apply if condition A or condition B in section 58A of CTA 2009 (short-term hiring in and long-term hiring out) is met.

4

In subsection (2), for the words from “multiplying” to the end substitute “15%”.

5

In subsection (5), for the words from “multiplying” to the end substitute “15%”.

6

In subsection (6)(a), (b) and (c), omit “or motor cycle”.

7

Omit subsection (7).

8

In subsection (8), omit “or motor cycle” (in both places).

9

After that subsection insert—

9

For the purposes of section 50B of ITTOIA 2005 and section 58B of CTA 2009 (connected persons: application of restrictions), this section is to be treated as if it were part of section 56 of CTA 2009.

61

Omit section 76ZO (hiring cars (but not motor cycles) with low CO2 emissions before 1 April 2013).

62

1

Section 578A (rules restricting deductions: car or motor cycle hire) is amended as follows.

2

In subsection (2), for paragraphs (a) and (b) substitute

which is not—

a

a car that is first registered before 1 March 2001,

b

a car that has low CO2 emissions (as defined in section 104AA of the Capital Allowances Act),

c

a car that is electrically propelled (as defined in section 268B of that Act), or

d

a qualifying hire car.

3

Omit subsections (2A) and (2B).

4

After subsection (2B) insert—

2C

This section does not apply to the hiring of a car where condition A or condition B in section 58A of CTA 2009 (short-term hiring in and long-term hiring out) is met.

5

In subsection (3), for the words from “multiplying” to the end substitute “15%”.

6

In subsection (4), for “multiplying it by the fraction in subsection (3) above” substitute “15%”.

7

After that subsection insert—

5

For the purposes of section 50B of ITTOIA 2005 (connected persons: application of restrictions), this section is to be treated as if it were part of section 48 of that Act.

63

1

Section 578B (expenditure on car or motor cycle hire: supplementary) is amended as follows.

2

In subsection (1)—

a

omit “one”,

b

before paragraph (a) insert—

za

a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988),

c

in paragraphs (a) and (b), insert at the beginning “a vehicle”, and

d

omit the words after paragraph (b).

3

In subsection (2)—

a

omit paragraph (b), and

b

insert at the end—

c

it is leased under a long-funding lease (within the meaning of section 70G of the Capital Allowances Act).

4

In subsection (3), omit “section 578A and”.

5

Omit subsection (4).

64Consequential repeals

In consequence of the amendments made by this Part of this Schedule, omit—

a

in FA 2008, section 77(4)(b), and

b

in CTA 2009, in Schedule 1, paragraph 45.

Commencement

65

For the purposes of this Part of this Schedule—

a

the first relevant date is—

i

for corporation tax purposes, 1 April 2009, and

ii

for income tax purposes, 6 April 2009, and

b

the second relevant date is—

i

for corporation tax purposes, 1 April 2010, and

ii

for income tax purposes, 6 April 2010, and

66

1

The amendments made by this Part of this Schedule have effect in relation to deductions for expenses incurred on the hiring of a car or motor cycle under an agreement under which the hire period begins on or after the first relevant date (but see paragraph 67).

2

For the purposes of this paragraph and paragraph 67, the hire period, in relation to an agreement, begins on the first day on which the car or motor cycle is required to be made available for use under the agreement.

67Election for new regime not to apply in certain cases

1

This paragraph applies where—

a

a person incurs expenses on the hiring of a car or motor cycle under an agreement entered into on or before 8 December 2008, and

b

the hire period begins before the second relevant date.

2

If the person makes an election under this paragraph, none of the amendments made by this Part of this Schedule has effect in relation to any deduction for expenses incurred by the person on the hiring of the car or motor cycle under the agreement.

3

The election must be made by notice given to an officer of Revenue and Customs—

a

for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends, and

b

for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.

4

“The relevant chargeable period” means the first chargeable period (as defined in section 6 of CAA 2001) in which any expenditure by the person on the provision of the car or motor cycle under the agreement was incurred.

5

The election is irrevocable.

6

All such assessments and adjustments of assessments are to be made as are necessary to give effect to the election.

7

For the purpose of this paragraph, an agreement is entered into on the first date on which the following conditions are met—

a

there is a contract in writing for the use of the car or motor cycle by the person,

b

the contract is unconditional or, if it is conditional, the conditions have been met, and

c

no terms remain to be agreed.

68Saving

The repeal of section 82 of CAA 2001 (meaning of “qualifying hire car”) by Part 1 of this Schedule does not affect the continued operation of the following provisions until they are repealed by this Part of this Schedule—

a

section 578B(2)(b) of ICTA,

b

section 49(2)(c) of ITTOIA 2005, and

c

section 57(2)(c) of CTA 2009.

SCHEDULE 12Reallocation of chargeable gain or loss within a group

Section 31

1Main provisions

In TCGA 1992, for section 171A substitute—

171AElection to reallocate gain or loss to another member of the group

1

This section applies where—

a

a chargeable gain or an allowable loss accrues to a company (“company A”) in respect of an asset (or would so accrue but for an election under this section),

b

at the time of accrual, company A and another company (“company B”) are members of the same group, and

c

had company A disposed of the asset to company B immediately before the time of accrual, section 171(1) would have applied.

2

In determining for the purposes of subsection (1)(c) whether subsection (1) of section 171 would have applied, it is to be assumed that subsection (1A)(b) of that section read—

b

that, at the time of the disposal, company B is resident in the United Kingdom, or carrying on a trade in the United Kingdom through a permanent establishment there.

3

In this section “the time of accrual” means the time the chargeable gain or allowable loss accrues to company A (or would so accrue but for an election under this section).

4

Companies A and B may make a joint election to transfer the chargeable gain or allowable loss, or such part of it as is specified in the election, from company A to company B.

5

An election under this section must be made—

a

by notice to an officer of Revenue and Customs, and

b

no later than two years after the end of the accounting period of company A in which the time of accrual falls.

6

An election, or two or more elections made simultaneously, is or are of no effect if, taken together with each earlier election (if any) made in respect of the same gain or loss, it or they would (apart from this subsection) have effect in relation to an amount exceeding the gain or loss.

7

This section does not apply in relation to a chargeable gain or allowable loss that accrues by virtue of section 179.

For provision as to the reallocation within a group of gains and losses arising on such a disposal, see section 179A.

8

For the effect of an election under this section, see section 171B.

171BElection under section 171A: effect

1

This section applies where an election is made under section 171A.

2

The effect of the election is that the chargeable gain or allowable loss, or such amount of it as is specified in the election, is treated as accruing not to company A but to company B.

3

The gain or loss treated as accruing to company B is to be taken to accrue at the time that, had the election not been made, it would have accrued to company A.

4

Where company B is not resident in the United Kingdom, the gain or loss treated as accruing to it is to be taken to accrue in respect of a chargeable asset held by it.

5

For this purpose an asset is a “chargeable asset” in relation to a company at any time if any gain accruing to the company on a disposal of the asset by the company at that time would be a chargeable gain and would by virtue of section 10B form part of its chargeable profits for corporation tax purposes.

6

Any payment made by company A to company B or by company B to company A, in pursuance of an agreement between them in connection with the election—

a

is not to be taken into account in computing profits or losses of either company for corporation tax purposes, and

b

is not for any purposes of the Corporation Tax Acts to be regarded as a distribution,

provided it does not exceed the amount of the chargeable gain or allowable loss that is treated, as a result of the election, as accruing to company B.

171CElections under section 171A: insurance companies

1

This section applies where —

a

an election is made under section 171A in relation to a gain or loss, and

b

company B is an insurance company.

2

For the purposes of section 171A(1)(c), section 440(3) of the Taxes Act (disposals of certain assets by and to insurance companies to fall outside the rule in section 171) is to be disregarded.

3

Subsection (2) does not apply if—

a

company A is an insurance company, and

b

the gain or loss arose in respect of the disposal of an asset that, immediately before the disposal, was part of that company’s long-term insurance fund.

4

The chargeable gain or allowable loss treated as accruing to company B as a result of the election is to be treated as arising in respect of an asset that is not part of company B’s long-term insurance fund.

5

In this section “insurance company” and “long-term insurance fund” have the same meaning as in Chapter 1 of Part 12 of the Taxes Act (see section 431(2) of that Act).

Consequential amendments

2

In section 179A of TCGA 1992 (reallocation within group of gain or loss accruing under section 179), for subsection (5) substitute—

5

An election, or two or more elections made simultaneously, is or are of no effect if, taken together with each earlier election (if any) made in respect of the same gain or loss, it or they would (apart from this subsection) have effect in relation to an amount exceeding the gain or loss.

3

1

Section 136(2) of FA 2006 (Real Estate Investment Trusts: availability of group reliefs) is amended as follows.

2

For paragraph (a) substitute—

a

section 171 (transfer of assets within group),

aa

sections 171A to 171C (reallocation of gain or loss within a group),

3

In paragraph (b), for “reallocation or rollover of gain” substitute “degrouping: reallocation of gain or loss, or rollover of gain,”.

4

In consequence of the amendment made by paragraph 1, omit—

a

in FA 2000, section 101,

b

in FA 2001, section 77,

c

in FA 2003, in Schedule 33, paragraph 17, and

d

in F(No.2)A 2005, section 36.

5Commencement

The amendments made by this Schedule have effect in relation to chargeable gains and allowable losses accruing on or after the day on which this Act is passed.

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

Section 32

1

TCGA 1992 is amended as follows.

2

1

Section 263B (stock lending arrangements) is amended as follows.

2

In subsection (2), for “section 263C(2)” substitute “sections 263C(2) and 263CA(3) and (5)”.

3

In subsection (4)—

a

in paragraph (a), insert at the end “for a consideration equal to their market value at that time”,

b

in paragraph (b), after “at that time” insert “for that consideration”, and

c

insert at the end (not as part of paragraph (c))—

This subsection does not apply where section 263CA (insolvency of borrower) applies.

4

In subsection (7), omit the definition of “interest”.

3

After section 263C (stock lending involving redemption) insert—

263CAStock lending: insolvency etc of borrower

1

This section applies where, in the case of any stock lending arrangement—

a

the borrower (B) becomes insolvent after the lender (L) has transferred the securities,

b

as a result of the insolvency, the requirement for B to make a transfer back to L will not be complied with as regards some or all of the securities,

c

collateral is used (whether directly or indirectly) to enable L to acquire securities (“replacement securities”) of the same description as the securities which will not be transferred back, and

d

the replacement securities are acquired before the end of the period of 30 days beginning with the day on which B becomes insolvent (“the insolvency date”).

2

In accordance with section 263B(2), the transfer of the securities under the arrangement is not to be regarded as a disposal by L for the purposes of this Act (but this is subject to subsection (5)).

3

B is to be treated for the purposes of this Act as having acquired the securities which will not be transferred back to L; and that acquisition is to be treated—

a

as being made on the insolvency date, and

b

as being for a consideration equal to their market value on that date.

4

The acquisition of the replacement securities is to be treated, as regards L, as if it were a transfer back of securities in accordance with the arrangement (so that, in accordance with section 263B(2), that acquisition is not regarded as an acquisition by L for the purposes of this Act).

5

If the number of replacement securities is less than the number of securities which B is treated as having acquired, L is to be treated for the purposes of this Act as having made a disposal, at the insolvency date, of the difference (“the deemed disposal”).

6

The consideration for the deemed disposal is—

a

where all the collateral is used to enable L to acquire replacement securities, nil, and

b

where not all the collateral is so used, the difference between—

i

the market value (at the insolvency date) of the number of securities which could have been acquired using the collateral, and

ii

the market value (at that date) of the number of securities which were in fact so acquired.

7

But if L at any time receives any amount (whether arising out of B’s insolvency or otherwise) in respect of B’s liability to L in respect of the securities which are treated under subsection (5) as having been disposed of by L that amount is to be treated as a chargeable gain accruing at that time to L.

8

The liability mentioned in subsection (7) is not to be treated as giving rise to a relevant non-lending relationship for the purposes of Part 6 of CTA 2009 (relationships treated as loan relationships etc).

9

For the purposes of this section, B becomes insolvent—

a

if a company voluntary arrangement takes effect under Part 1 of the Insolvency Act 1986,

b

if an administration application (within the meaning of Schedule B1 to that Act) is made or a receiver or manager, or an administrative receiver, is appointed,

c

on the commencement of a creditor’s voluntary winding up (within the meaning of Part 4 of that Act) or a winding up by the court under Chapter 6 of that Part,

d

if an individual voluntary arrangement takes effect under Part 8 of that Act,

e

on the presentation of a bankruptcy petition (within the meaning of Part 9 of that Act),

f

if a compromise or arrangement takes effect under Part 26 of the Companies Act 2006,

g

if a bank insolvency order takes effect under Part 2 of the Banking Act 2009,

h

if a bank administration order takes effect under Part 3 of that Act, or

i

on the occurrence of any corresponding event which has effect under or as a result of the law of Scotland or Northern Ireland or a country or territory outside the United Kingdom.

10

In this section—

a

“collateral” means an amount of money or other property which—

i

is provided under the arrangement (or under arrangements of which the arrangement forms part), and

ii

is payable to or made available for the benefit of L for the purpose of securing the discharge of the requirement to transfer any or all of the securities back to L, and

b

any expression used in this section and in section 263B has the same meaning as in that section.

4

1

The amendments made by paragraphs 2(2) and (3)(c) and 3 apply—

a

in any case where B becomes insolvent on or after 24 November 2008, and

b

where L makes an election under this paragraph, in any case where B becomes insolvent in the period beginning on 1 September 2008 and ending on 23 November 2008.

2

An election under sub-paragraph (1)(b) must relate to all stock lending arrangements in which L is the lender and B is the borrower and must be made—

a

where L is a company (within the meaning given by section 288(1) of TCGA 1992), no later than the second anniversary of the end of the accounting period of L in which 23 November 2008 falls, and

b

otherwise, no later than 31 January 2011.

3

Where section 263CA (inserted by paragraph 3) applies to any case which occurs before a period for which CTA 2009 has effect, the reference in subsection (8) of that section to a relevant non-lending relationship for the purposes of Part 6 of that Act is to be read as a reference to a relationship to which section 100 of FA 1996 applies.

SCHEDULE 14Corporation tax treatment of company distributions

Section 34

Part 1Insertion of new Part 9A of CTA 2009

1

In CTA 2009, after Part 9 insert—

Part 9ACompany distributions

Chapter 1The charge to tax

931ACharge to tax on distributions received

1

The charge to corporation tax on income applies to any dividend or other distribution of a company, but only if the distribution is not exempt.

2

Subsection (1) does not apply in the case of a distribution of a capital nature.

3

For provision as to whether a distribution is exempt, see—

Chapter 2 (distributions received by small companies), and

Chapter 3 (distributions received by companies that are not small).

Chapter 2Exemption of distributions received by small companies

931BExemption from charge to tax

A dividend or other distribution of a company that is received in an accounting period of the recipient in which the recipient is a small company is exempt if—

a

the payer is a resident of (and only of) the United Kingdom or a qualifying territory at the time that the distribution is received,

b

the distribution is not of a kind mentioned in paragraph (d) or (e) of section 209(2) of ICTA (certain non-dividend distributions),

c

no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution, and

d

the distribution is not made as part of a tax advantage scheme.

931CMeaning of “qualifying territory”

1

For the purpose of section 931B a territory is a “qualifying territory” if—

a

arrangements to which section 788 of ICTA applies (“double taxation relief arrangements”) have effect in relation to the territory, and

b

the arrangements contain a non-discrimination provision.

2

The Treasury may by regulations—

a

provide that a territory specified in or of a description specified in the regulations that does not satisfy subsection (1)(a) or (b) is a qualifying territory for the purpose of section 931B, and

b

provide that a territory so specified or described that satisfies subsection (1)(a) and (b) is not a qualifying territory for that purpose.

3

For the purpose of section 931B a company is a resident of a territory if, under the laws of the territory, the company is liable to tax there—

a

by reason of its domicile, residence or place of management, but

b

not in respect only of income from sources in that territory or capital situated there.

4

In subsection (1) “non-discrimination provision”, in relation to double taxation relief arrangements, means a provision to the effect that nationals of a state which is a party to those arrangements (a “contracting state”) are not to be subject in any other contracting state to—

a

any taxation, or

b

any requirement connected with taxation,

which is other or more burdensome than the taxation and connected requirements to which nationals of that other state in the same circumstances (in particular with respect to residence) are or may be subjected.

5

In subsection (4) “national”, in relation to a contracting state, includes—

a

an individual possessing the nationality or citizenship of the contracting state, and

b

a legal person, partnership or association deriving its status as such from the laws in force in that contracting state.

6

Regulations under this section may—

a

describe a territory by reference to the double taxation relief arrangements for the time being in force in relation to the territory,

b

make different provision in relation to different descriptions of company, and

c

make provision having effect in relation to accounting periods current on the day on which the regulations are made.

Chapter 3Exemption of distributions received by companies that are not small

931DExemption from charge to tax

A dividend or other distribution of a company that is received in an accounting period of the recipient in which the recipient is not a small company is exempt if—

a

the distribution falls into an exempt class (see sections 931E to 931Q),

b

the distribution is not of a kind mentioned in paragraph (d) or (e) of section 209(2) of ICTA (certain non-dividend distributions), and

c

no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution.

Exempt classes

931EDistributions from controlled companies

1

A dividend or other distribution falls into an exempt class if condition A or B is met.

2

Condition A is that the recipient controls the payer.

3

Condition B is that—

a

the recipient is one of two persons who, taken together, control the payer,

b

the recipient is a person in whose case the 40% test in section 755D(3) of ICTA is satisfied, and

c

the other is a person in whose case the 40% test in section 755D(4) of ICTA is satisfied.

4

Section 755D of ICTA (meaning of “control” etc) applies for the purposes of this section.

5

As so applied, that section has effect with the omission of subsection (6)(c) and (d).

931FDistributions in respect of non-redeemable ordinary shares

A dividend or other distribution falls into an exempt class if it is made in respect of a share that—

a

is an ordinary share, and

b

is not redeemable.

931GDistributions in respect of portfolio holdings

1

A dividend or other distribution falls into an exempt class if the recipient—

a

holds less than 10% of the issued share capital of the payer,

b

is entitled to less than 10% of the profits available for distribution to holders of the issued share capital of the payer, and

c

would be entitled on a winding up to less than 10% of the assets of the company available for distribution to holders of the issued share capital of the payer.

2

Where the payer has more than one class of share, references in subsection (1) to the issued share capital of the payer are to issued share capital of the same class as the share in respect of which the distribution is made.

3

For the purposes of this section shares are not of the same class if the amounts paid up on them (otherwise than by way of premium) are different.

931HDividends derived from transactions not designed to reduce tax

1

A dividend falls into an exempt class if it is paid in respect of relevant profits.

2

In this section “relevant profits” means any profits available for distribution at the time that the dividend is paid, other than profits that reflect the results of a transaction, or of one or more of a series of transactions, where—

a

the transaction or series of transactions achieve a reduction (other than a negligible reduction) in United Kingdom tax, and

b

the purpose or one of the main purposes of that transaction or series of transactions is to achieve that reduction.

3

A dividend that falls into an exempt class otherwise than by virtue of this section is for the purposes of this section treated, so far as possible, as paid in respect of relevant profits.

4

Any other dividend is for the purposes of this section treated, so far as possible, as paid in respect of profits other than relevant profits.

5

Where by virtue of subsection (4) part of a dividend is treated as paid in respect of relevant profits and part is treated as paid in respect of profits other than relevant profits, the two parts are treated for the purposes of this Part and Part 18 of ICTA (double taxation relief) as separate dividends.

931IDividends in respect of shares accounted for as liabilities

A dividend falls into an exempt class if the dividend is paid in respect of a share to which, at the time of the payment, section 521C (shares accounted for as liabilities treated as loan relationships) does not apply only because the condition in subsection (1)(f) of that section is not met.

Exempt classes: anti-avoidance

931JSchemes involving manipulation of controlled company rules

1

This section applies to a dividend that would, apart from this section, fall into an exempt class by virtue of section 931E.

2

The dividend does not fall into an exempt class by virtue of that section if—

a

the dividend is paid as part of a scheme the main purpose, or one of the main purposes, of which is to secure that dividends of the payer received by the recipient fall into an exempt class by virtue of that section, and

b

the following condition is met.

3

The condition is that the dividend is paid in respect of pre-control profits.

4

A dividend that falls into an exempt class otherwise than by virtue of section 931E is for the purposes of this section treated, so far as possible, as paid in respect of profits other than pre-control profits.

5

Any other dividend is for the purposes of this section treated, so far as possible, as paid in respect of pre-control profits.

6

In this section “pre-control profits” means any profits available for distribution at the time the dividend is paid that arose at a time when neither condition A nor condition B in section 931E was met.

7

Where—

a

the condition in subsection (2)(a) is met, and

b

by virtue of subsection (5) part of a dividend is treated as paid in respect of pre-control profits and part is treated as paid in respect of profits other than pre-control profits,

the two parts are treated for the purposes of this Part and Part 18 of ICTA (double taxation relief) as separate dividends.

931KSchemes involving quasi-preference or quasi-redeemable shares

1

This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class by virtue of section 931F.

2

The distribution does not fall into an exempt class by virtue of that section if—

a

the distribution is made as part of a scheme the main purpose, or one of the main purposes, of which is to secure that distributions of the payer received by the recipient fall into an exempt class by virtue of that section, and

b

the following condition is met.

3

The condition is that the distribution is made in respect of a share that—

a

would not be an ordinary share, or

b

would be redeemable,

were the rights under the scheme of each relevant person to be attached to the share.

931LSchemes involving manipulation of portfolio holdings rule

1

This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class by virtue of section 931G.

2

The distribution does not fall into an exempt class by virtue of that section if—

a

the distribution is made as part of a scheme the main purpose, or one of the main purposes, of which is to secure that distributions of the payer received by the recipient fall into an exempt class by virtue of that section, and

b

the following condition is met.

3

The condition is that the distribution would not fall into an exempt class by virtue of section 931G if the reference in subsection (1) of that section to the recipient were to all relevant persons taken together.

931MSchemes in the nature of loan relationships

1

This section applies to a dividend or other distribution that does not fall into an exempt class by virtue of section 931E but would, apart from this section, fall into an exempt class otherwise than by virtue of that section.

2

The distribution does not fall into an exempt class if—

a

the distribution is made as part of a tax advantage scheme, and

b

conditions A to C are met.

3

Condition A is that the distribution constitutes part of a return in relation to an amount that is produced by the scheme for a relevant person, or two or more relevant persons taken together.

4

Condition B is that the return is economically equivalent to interest.

5

For this purpose a return produced for a person or persons by a scheme in relation to an amount is “economically equivalent to interest” if (and only if)—

a

it is reasonable to assume that it is a return by reference to the time value of that amount of money,

b

it is at a rate reasonably comparable to a commercial rate of interest, and

c

at the time the scheme is entered into by the person or any of the persons, there is no practical likelihood that it will cease to be produced in accordance with the scheme.

6

Condition C is that there is a connection between the payer and the recipient for the accounting period of the payer in which the distribution is made.

7

Section 466 (companies connected for an accounting period) applies for the purposes of subsection (6) as if that subsection were a provision of Part 5 to which that section is applied (but this does not affect the application of section 1316(1) (meaning of connected persons) for the purposes of any other provision of this Part).

931NSchemes involving distributions for which deductions are given

1

This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

2

The distribution does not fall into an exempt class if—

a

the distribution is made as part of a tax advantage scheme, and

b

the following condition is met.

3

The condition is that a deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of an amount determined by reference to the distribution.

931OSchemes involving payments for distributions

1

This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

2

The distribution does not fall into an exempt class if—

a

the distribution is made as part of a tax advantage scheme, and

b

the following condition is met.

3

The condition is that the scheme includes a payment, or the giving up of a right to income, by a relevant person where—

a

the payment is made, or the right to income is given up, under a liability incurred for consideration in money or money’s worth all or any of which consists of, or of the right to receive, the distribution, and

b

in the case of a payment, the conditions in subsections (2) and (4) to (7) of section 1301 (restriction of deductions for annual payments) apply to the payment.

931PSchemes involving payments not on arm’s length terms

1

This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

2

The distribution does not fall into an exempt class if—

a

the distribution is made as part of a tax advantage scheme, and

b

the following condition is met.

3

The condition is that—

a

the scheme includes a payment or receipt, or the giving up of a right to income, by a relevant person in respect of goods or services, and

b

the amount of the payment or receipt, or the amount of income given up, differs from the amount the relevant person would have paid, received or given up in respect of those goods or services had the distribution not been made.

4

This section does not apply to a scheme that consists of a transaction or series of transactions in relation to which Schedule 28AA to ICTA (provision not at arms length between parties under common control) applies.

931QSchemes involving diversion of trade income

1

This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

2

The distribution does not fall into an exempt class if—

a

the distribution is made as part of a scheme entered into by the recipient and another relevant person (“C”),

b

if C had received the distribution, it would be reasonable to assume that the distribution would be dealt with under Part 3 (trading income), and

c

the main purpose, or one of the main purposes, of the scheme is to produce the result that the distribution is dealt with under this Part because it is received by the recipient.

3

For the purposes of subsection (2)(b) it is to be assumed that, in the case of any relevant transaction to which a relevant person other than C is a party, C were that party to that transaction.

4

In this section “relevant transaction” means any of the transactions giving rise to the distribution.

Chapter 4Supplementary

Election that distribution should not be exempt

931RElection that distribution should not be exempt

1

This section applies where, apart from this section, a distribution (“the distribution”) would be exempt.

2

If the recipient so elects, the distribution is not exempt.

3

An election under this section must be made on or before the second anniversary of the end of the accounting period in which the distribution is received.

4

Subsection (5) applies where the distribution is a dividend that is treated for certain purposes of Part 18 of ICTA (double taxation relief) as two separate dividends by virtue of section 801C of that Act (separate streaming of dividend so far as representing an ADP dividend of a CFC).

5

If the recipient so elects—

a

the distribution is to be treated for the purposes of this Part as if it were an ADP dividend and a separate residual dividend as provided for in that section of that Act, and

b

the ADP dividend is not exempt.

6

The reference in subsection (4) to section 801C of ICTA is to that section as it continues to have effect in accordance with paragraph 8(1) of Schedule 16 to FA 2009 in relation to dividends paid on or after 1 July 2009 for accounting periods beginning before that day.

Interpretation

931SMeaning of “small company”

1

For the purposes of this Part a company is a “small company” in an accounting period if it is in that period a micro or small enterprise, as defined in the Annex to Commission Recommendation 2003/361/EC of 6 May 2003.

2

But a company is not a “small company” in an accounting period if it is at any time in that period—

a

an open-ended investment company,

b

an authorised unit trust scheme,

c

an insurance company, or

d

a friendly society.

3

In subsection (2)—

“open-ended investment company” has the meaning given by section 236 of FISMA 2000;

“authorised unit trust scheme” means a unit trust scheme (within the meaning given by section 237 of FISMA 2000) in relation to which a order under section 243 of that Act (authorisation orders) is in force;

“insurance company” has the meaning given by section 431 of ICTA;

“friendly society” has the meaning given by section 466(2) of ICTA.

931TMeaning of “payer”, “recipient” and “relevant person”

In this Part—

“the payer”, in relation to a distribution, means the company that makes the distribution;

“the recipient”, in relation to a distribution, means the company that receives the distribution;

“a relevant person”, in relation to a distribution, means—

a

the company that receives the distribution, or

b

any person connected with that company.

931UMeaning of “ordinary share” and “redeemable”

1

In this Part “ordinary share” means a share that does not carry any present or future preferential right to dividends or to a company’s assets on its winding up.

2

A share is regarded as “redeemable” for the purposes of this Part only if it is redeemable as a result of its terms of issue (or any collateral arrangements)—

a

requiring redemption,

b

entitling the holder to require redemption, or

c

entitling the issuing company to redeem.

931VMeaning of “scheme” and “tax advantage scheme”

1

For the purposes of this Part—

“scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions;

“tax advantage scheme” means a scheme the main purpose, or one of the main purposes, of which is to obtain a tax advantage (other than a negligible tax advantage).

2

In this section “tax advantage” has the meaning given by section 840ZA of ICTA.

Boundary provisions

931WProvisions which must be given priority over this Part

1

Any income so far as it falls within—

a

this Part, and

b

Chapter 2 of Part 3 (income taxed as trade profits),

is dealt with under Part 3.

2

Any income so far as it falls within—

a

this Part, and

b

Chapter 3 of Part 4 (profits of property businesses) so far as the Chapter relates to a UK property business,

is dealt with under Part 4.

3

Any income so far as it falls within—

a

this Part, and

b

Chapter 1 of Part 12 of ICTA (insurance companies),

is dealt with under that Chapter.

Part 2Other amendments

ICTA

2

ICTA is amended as follows.

3

In section 13(7) (small companies’ relief), omit “resident in the United Kingdom”.

4

1

Section 505(1)(c) (charitable companies: general) is amended as follows.

2

After sub-paragraph (ii) insert—

iizza

from tax under Part 9A of CTA 2009 (company distributions),

3

Omit sub-paragraph (iib).

5

1

Section 95ZA (taxation of UK distributions received by insurance companies) is amended as follows.

2

In subsection (1), for “section 1285” substitute “section 130(2)”.

3

In subsection (2)(a), omit “resident in the United Kingdom”.

6

1

Section 231 (tax credits for certain recipients of qualifying distributions) is amended as follows.

2

In subsection (1)—

a

omit “and section 219(4B) of the Finance Act 1994”,

b

for “resident in the United Kingdom makes a” substitute “(whether resident in the United Kingdom or outside the United Kingdom) makes an exempt”, and

c

for “another such company” substitute “a company resident in the United Kingdom”.

3

After subsection (1A) insert—

1B

For the purposes of subsection (1) a qualifying distribution is “exempt” if it is exempt for the purposes of Part 9A of CTA 2009 (company distributions).

7

In section 795 (double taxation relief: computation of income subject to foreign tax), omit subsection (3A).

8

1

Section 799 (double taxation relief: computation of underlying tax in respect of a dividend) is amended as follows.

2

In subsection (3) (as it has effect as amended by paragraph 8 of Schedule 30 to FA 2000)—

a

before paragraph (a) insert—

za

if the dividend is received in an accounting period of the recipient in which the recipient is not a small company, and the dividend is a relevant dividend, the profits in respect of which the dividend is paid;

b

in paragraph (a), insert at the beginning “in a case not falling under paragraph (za),”, and

c

in paragraph (c), insert at the beginning “in a case not falling under paragraph (za),”.

3

After subsection (3) insert—

3A

For the purposes of subsection (3)—

a

“small company” has the same meaning as in Part 9A of CTA 2009 (company distributions),

b

“relevant dividend” means a dividend that, for the purposes of section 931H of that Act (dividends derived from transactions not designed to reduce tax), is treated as paid in respect of profits other than relevant profits (see subsection (4) of that section), and

c

the profits in respect of which a dividend is paid are the profits in respect of which the dividend is treated as paid for the purposes of that section.

9

Omit sections 806A to 806K (double taxation relief in relation to foreign dividends: onshore pooling and utilisation of eligible unrelieved foreign tax).

10

In section 826 (interest on tax overpaid), omit subsection (7BC).

11

1

Paragraph 2 of Schedule 23A (manufactured dividends on UK equities: general) is amended as follows.

2

After sub-paragraph (1) insert—

1A

Sub-paragraphs (1C) to (1E) apply where—

a

a manufactured dividend is paid by a dividend manufacturer, and

b

the dividend of which the manufactured dividend is representative is taxable.

1B

For this purpose a dividend is “taxable” if—

a

it is received by the dividend manufacturer and the charge to corporation tax on income applies to it, or

b

it is received by a person other than the dividend manufacturer and the charge to corporation tax on income would have applied to it if it had been received by the dividend manufacturer.

1C

Where the dividend manufacturer carries on a trade to which the manufactured dividend relates, and neither sub-paragraph (1D) nor (1E) applies, the manufactured dividend is to be treated as an expense of the trade.

1D

Where the dividend manufacturer has investment business to which the manufactured dividend relates, the manufactured dividend is to be treated as expenses of management of the business for the purposes of Part 16 of CTA 2009.

1E

Where the dividend manufacturer carries on life assurance business to which the manufactured dividend relates, the manufactured dividend is to be treated as if, to the extent that it is referable to basic life assurance and general annuity business, it were an expense payable falling to be brought into account at step 3 of section 76(7).

1F

For the purposes of sub-paragraph (1E), the manufactured dividend is to be treated as referable to basic life assurance and general annuity business to the extent that the dividend of which it is representative—

a

is received by the dividend manufacturer and is so referable by virtue of section 432A, or

b

is received by a person other than the dividend manufacturer, and would have been so referable by virtue of section 432A if it had it been received by the dividend manufacturer.

3

In sub-paragraph (2), omit paragraph (b) (and the “and” before it).

4

After sub-paragraph (3) insert—

3A

In its application in relation to a manufactured dividend by virtue of sub-paragraph (2) or (3), Part 9A of CTA 2009 (company distributions) has effect subject to the following modification.

3B

The modification is that—

a

the definition of “the payer” in section 931T is to be treated as omitted, and

b

references in that Part to the payer are to be treated as references to the company that pays the dividend of which the manufactured dividend is representative.

12

1

Paragraph 4 of Schedule 23A (manufactured overseas dividends) is amended as follows.

2

For sub-paragraph (1A) substitute—

1A

Sub-paragraphs (1C) to (1E) apply where the overseas dividend of which the manufactured overseas dividend is representative is taxable.

1B

For this purpose an overseas dividend is “taxable” if—

a

it is received by the overseas dividend manufacturer and the charge to corporation tax on income applies to it, or

b

it is received by a person other than the overseas dividend manufacturer and the charge to corporation tax on income would have applied to it if it had been received by the overseas dividend manufacturer.

1C

Where the overseas dividend manufacturer carries on a trade to which the manufactured overseas dividend relates, and neither sub-paragraph (1D) nor (1E) applies, the manufactured overseas dividend is to be treated as an expense of the trade.

1D

Where the overseas dividend manufacturer has investment business to which the manufactured overseas dividend relates, the manufactured overseas dividend is to be treated as expenses of management of the business for the purposes of Part 16 of CTA 2009.

1E

Where the overseas dividend manufacturer carries on life assurance business to which the manufactured overseas dividend relates, the manufactured overseas dividend is to be treated as if, to the extent that it is referable to basic life assurance and general annuity business, it were an expense payable falling to be brought into account at step 3 of section 76(7).

1F

For the purposes of sub-paragraph (1E), the manufactured overseas dividend is to be treated as referable to basic life assurance and general annuity business to the extent that the overseas dividend of which it is representative—

a

is received by the overseas dividend manufacturer and is so referable by virtue of section 432A, or

b

is received by a person other than the dividend manufacturer, and would have been so referable by virtue of section 432A if it had it been received by the dividend manufacturer.

3

After sub-paragraph (4) insert—

4A

In its application in relation to a manufactured overseas dividend by virtue of sub-paragraph (4), Part 9A of CTA 2009 (company distributions) has effect—

a

as if the manufactured overseas dividend were an overseas dividend on the overseas securities in question, and

b

subject to the following modification.

4B

The modification is that—

a

the definition of “the payer” in section 931T is to be treated as omitted, and

b

references in that Part to the payer are to be treated as references to the company that pays the dividend of which the manufactured overseas dividend is representative.

13

In paragraph 5(3)(c) of Schedule 27 (distributing funds: United Kingdom equivalent profits)—

a

for “section 1285” substitute “Chapter 2 or 3 of Part 9A”, and

b

omit “in like manner as if they were dividends or distributions of a company resident outside the United Kingdom”.

14

In paragraph 5 of Schedule 28AA (provision not at arm’s length), after sub-paragraph (7) insert—

8

For the purposes of sub-paragraph (1) section 209(2)(d) (excessive interest etc treated as distribution) is to be disregarded.

FA 1989

15

FA 1989 is amended as follows.

16

1

Section 85A (life assurance: excess adjusted Case I profits) is amended as follows.

2

In paragraph (a) of subsection (6), for “distributions received by the company in the accounting period from companies resident in the United Kingdom” substitute “non-taxable distributions received by the company in the accounting period”.

3

After that subsection insert—

6A

In this section “non-taxable distribution” means—

a

a distribution that is exempt for the purposes of Part 9A of the Corporation Tax Act 2009 (company distributions), and

b

does not include any amount withheld from the distribution on account of tax payable under the laws of a territory outside the United Kingdom.

17

1

Section 89 (life assurance: policy holders’ share of profits) is amended as follows.

2

In subsection (2)(b), for “distributions received from companies resident in the United Kingdom” substitute “non-taxable distributions received”.

3

In subsection (7), after the definition of “Case I profits” insert—

“non-taxable distribution” has the same meaning as in section 85A.

18FA 1994

In section 219 of FA 1994 (taxation of profits of Lloyd’s underwriters etc)—

a

in subsection (3), omit “Subject to subsection (4A) below,”, and

b

omit subsections (4), (4A) and (4C).

19FA 2006

In Schedule 17 to FA 2006 (group REITs modifications), in paragraph 32 (non-UK resident members), omit sub-paragraph (7).

CTA 2009

20

CTA 2009 is amended as follows.

21

In section 1(2) (overview of Act), before the “and” at the end of paragraph (f) insert—

fa

Part 9A (company distributions),

22

For section 130 (traders receiving distributions etc) substitute—

Insurers

130Insurers receiving distributions etc

1

This section applies for the purpose of calculating the trading profits of—

a

insurance business other than life assurance business, or

b

any category of such business.

2

A receipt that is exempt for the purposes of Part 9A (company distributions) is not brought into account in calculating the profits of the trade.

23

In section 932(1) (overview of Part 10), omit paragraph (a).

24

Omit Chapter 2 of Part 10 (taxation of dividends from non-UK resident companies).

25

1

Section 974 (charge to tax in relation to sale of foreign dividend coupons) is amended as follows.

2

In subsection (3)(a), after “realisation of” insert “taxable”.

3

In subsection (4), after “sale of” insert “taxable”.

4

After subsection (4) insert—

4A

For the purposes of subsections (3) and (4) a dividend coupon is “taxable” if the associated dividend would not have been exempt for the purposes of Part 9A (company distributions) had it been paid to the holder of the shares.

26

In section 982(1)(a) and (2)(a) (boundary provisions for Part 10), omit “2,”.

27

Omit section 1285 (exemption for distributions of UK resident companies).

28

In section 1310(4) (orders and regulations subject to affirmative resolution procedure in House of Commons), before paragraph (a) insert—

za

section 931C (meaning of “qualifying territory”),

29

In Schedule 4 (index of defined expressions), insert at the appropriate places—

ordinary share (in Part 9A)

section 931U

the payer (in Part 9A)

section 931T

the recipient (in Part 9A)

section 931T

redeemable (in Part 9A)

section 931U

a relevant person (in Part 9A)

section 931T

scheme (in Part 9A)

section 931V

small company (in Part 9A)

section 931S

tax advantage scheme (in Part 9A)

section 931V

30Consequential repeals

In consequence of the amendments made by this Schedule, omit—

a

in F(No.2)A 1997, section 22(2) and (3)(a),

b

in FA 2000, in Schedule 30, paragraphs 8(4)(c), 21 and 22,

c

in FA 2001, in Schedule 27, paragraphs 1(3), 4 and 5,

d

in FA 2008, in Schedule 39, paragraph 25, and

e

in CTA 2009, in Schedule 1, paragraphs 174(4)(c), 252 to 254 and 392(4) and (5).

Part 3Commencement etc

31Commencement

The amendments made by this Schedule have effect in relation to distributions paid on or after 1 July 2009 (“the commencement date”).

32Transitional provision

1

This paragraph contains transitional provision in relation to the commencement of Part 9A of CTA 2009 (as inserted by paragraph 1).

2

In section 931H—

a

a reference to a transaction that is one of a series of transactions does not include a transaction where each transaction in the series was entered into more than 12 months before the commencement date,

b

a reference to any other transaction does not include a transaction entered into more than 12 months before the commencement date, and

c

a reference to a dividend that falls into (or does not fall into) an exempt class otherwise than by virtue of that section is, in relation to a dividend paid before the commencement date, to a dividend that would have so fallen (or not so fallen) had that section had effect in relation to the dividend.

3

In section 931J—

a

a reference to profits available for distribution that arose at any time does not include such profits that arose in a period of account ending more than 12 months before the commencement date, and

b

a reference to a dividend that falls into (or does not fall into) an exempt class otherwise than by virtue of section 931E is, in relation to a dividend paid before the commencement date, to a dividend that would have so fallen (or not so fallen) had that section had effect in relation to the dividend.

SCHEDULE 15Tax treatment of financing costs and income

Section 35

Part 1Introduction

1Overview

1

Part 2 contains provision for determining whether this Schedule applies in relation to any particular period of account of the worldwide group.

2

Part 3 provides for the disallowance of certain financing expenses of relevant group companies arising in a period of account of the worldwide group to which this Schedule applies.

The total of the amounts disallowed is the amount by which the tested expense amount (defined in Part 8) exceeds the available amount (defined in Part 9).

3

Part 4 provides for the exemption from the charge to corporation tax of certain financing income of UK group companies where financing expenses of relevant group companies have been disallowed under Part 3.

4

Part 5 provides for the exemption from the charge to corporation tax of certain intra-group financing income of UK group companies where the paying company is denied a deduction for tax purposes otherwise than under this Schedule.

5

Part 6 contains rules connected with tax avoidance.

6

Part 7 defines “financing expense amounts” and “financing income amounts” of a company for a period of account of the worldwide group, which are amounts that would, apart from this Schedule, be brought into account for the purposes of corporation tax.

7

Part 8 defines the “tested expense amount” and the “tested income amount” of the worldwide group for a period of account of the group, which are totals deriving from the financing expense amounts and financing income amounts of certain group companies.

8

Part 9 defines the “available amount” for a period of account of the worldwide group, which derives from certain financing costs disclosed in the group’s consolidated financial statements.

9

Part 10 contains further interpretative provisions.

10

Part 11 contains consequential provision and provision about commencement.

Part 2Application of this Schedule

2Application of Schedule

1

This Schedule applies to any period of account of the worldwide group for which—

a

the UK net debt of the group (see paragraphs 3 and 4), exceeds

b

75% of the worldwide gross debt of the group (see paragraph 5).

2

But a period of account that is within sub-paragraph (1) is not a period of account to which this Schedule applies if the worldwide group is a qualifying financial services group in that period (see paragraph 7).

3

The Treasury may by order amend sub-paragraph (1)(b) by substituting a higher or lower percentage for the percentage for the time being specified there.

4

No order may be made under sub-paragraph (3) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

5

An order under sub-paragraph (3) may only have effect in relation to periods of account of the worldwide group beginning after the date on which the order is made.

3UK net debt of the worldwide group for period of account of worldwide group

1

The reference in paragraph 2 to the “UK net debt” of the worldwide group for a period of account of the group is to the sum of the net debt amounts of each company that was a relevant group company at any time during the period.

2

In this paragraph “net debt amount”, in relation to a company, means the average of—

a

the net debt of the company as at that company’s start date, and

b

the net debt of the company as at that company’s end date.

For the meaning of “net debt”, see paragraph 4.

3

Where the amount determined in accordance with sub-paragraph (2) is less than £3 million, the net debt amount of the company is nil.

4

Where a company is dormant (within the meaning given by section 1169 of the Companies Act 2006) at all times in the period beginning with that company’s start date and ending with that company’s end date, the net debt amount of the company is nil.

5

The Treasury may by order amend sub-paragraph (3) by substituting a higher or lower amount for the amount for the time being specified there.

6

No order may be made under sub-paragraph (5) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

7

An order under sub-paragraph (5) may only have effect in relation to periods of account of the worldwide group beginning after the date on which the order is made.

8

In this Part—

a

“the start date” of a company means the first day of the period of account of the worldwide group or, if later, the first day in the period on which the company was a relevant group company, and

b

“the end date” of a company means the last day of the period of account of the worldwide group or, if earlier, the last day in the period on which the company was a relevant group company.

4Net debt of a company

1

References in paragraph 3 to the “net debt” of a company as at any date are to—

a

the sum of the company’s relevant liabilities as at that date, less

b

the sum of the company’s relevant assets as at that date.

2

The amount determined in accordance with sub-paragraph (1) may be a negative amount.

3

For the purposes of this paragraph a company’s “relevant liabilities” as at any date are the amounts that are disclosed in the balance sheet of the company as at that date in respect of—

a

amounts borrowed (whether by way of overdraft or other short term or long term borrowing),

b

liabilities in respect of finance leases, or

c

amounts of such other description as may be specified in regulations made by the Commissioners.

4

For the purposes of this paragraph a company’s “relevant assets” as at any date are the amounts that are disclosed in the balance sheet of the company as at that date in respect of—

a

cash and cash equivalents,

b

amounts loaned (whether by way of overdraft or other short term or long term loan),

c

net investments, or net cash investments, in finance leases,

d

securities of Her Majesty’s government or of the government of any other country or territory, or

e

amounts of such other description as may be specified in regulations made by the Commissioners.

5

Expressions used in sub-paragraphs (3)(a) and (b) and (4)(a) to (c) have the meaning for the time being given by generally accepted accounting practice.

5Worldwide gross debt of worldwide group for period of account of worldwide group

1

The reference in paragraph 2 to the “worldwide gross debt” of the worldwide group for a period of account of the group is to the average of—

a

the sum of the relevant liabilities of the group as at the day before the first day of the period, and

b

the sum of the relevant liabilities of the group as at the last day of the period.

2

For the purposes of this paragraph the “relevant liabilities” of the worldwide group as at any date are the amounts that are disclosed in the balance sheet of the group as at that date in respect of—

a

amounts borrowed (whether by way of overdraft or other short term or long term borrowing),

b

liabilities in respect of finance leases, or

c

amounts of such other description as may be specified in regulations made by the Commissioners.

3

Expressions used in sub-paragraph (2)(a) and (b) have the meaning for the time being given by the accounting standards in accordance with which the financial statements of the group are drawn up.

4

For provision about references in this Schedule to financial statements of the worldwide group, and amounts disclosed in financial statements, see paragraphs 87 to 90.

6References to amounts disclosed in balance sheet of relevant group company

1

This paragraph applies for the purpose of construing references in paragraph 4 to amounts disclosed in the balance sheet of a relevant group company as at any date (“the relevant date”).

2

Where the company—

a

is not a foreign company, and

b

does not draw up a balance sheet as at the relevant date,

the references are to the amounts that would be disclosed in a balance sheet of the company as at that date, were one drawn up in accordance with generally accepted accounting practice.

3

Where the company—

a

is a foreign company, and

b

draws up a balance sheet (“a UK permanent establishment balance sheet”) as at the relevant date in respect of the company’s permanent establishment in the United Kingdom that treats the establishment as a distinct and separate enterprise,

the references are to amounts in that balance sheet.

4

Where the company—

a

is a foreign company, and

b

does not draw up a UK permanent establishment balance sheet as at the relevant date,

the references are to the amounts that would be disclosed in a UK permanent establishment balance sheet as at that date, were one drawn up in accordance with generally accepted accounting practice.

5

For the purposes of this paragraph a relevant group company is a “foreign company” if it is not resident in the United Kingdom and is carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

7Qualifying financial services groups

1

The worldwide group is a qualifying financial services group in a period of account if the trading income condition—

a

is met in relation to that period, or

b

is not met in relation to that period, but only because of losses incurred by the group in respect of activities that are normally reported on a net basis in financial statements prepared in accordance with international accounting standards.

2

The trading income condition is met in relation to a period of account if—

a

all or substantially all of the UK trading income of the worldwide group for that period, or

b

all or substantially all of the worldwide trading income of the worldwide group for that period,

is derived from qualifying activities (see paragraph 8).

3

In this Part, in relation to a period of account of the worldwide group—

“UK trading income” means the sum of the trading income for that period of each company that was a relevant group company at any time during that period (see paragraph 12);

“worldwide trading income” means the trading income for that period of the worldwide group (see paragraph 13).

8Qualifying activities

In this Part “qualifying activities” means—

a

lending activities and activities that are ancillary to lending activities (see paragraph 9),

b

insurance activities and insurance-related activities (see paragraph 10), and

c

relevant dealing in financial instruments (see paragraph 11).

9Lending activities and activities ancillary to lending activities

1

In this Part “lending activities” means any of the following activities—

a

acceptance of deposits or other repayable funds;

b

lending of money, including consumer credit, mortgage credit, factoring (with or without recourse) and financing of commercial transactions (including forfeiting);

c

finance leasing (as lessor);

d

issuing and administering means of payment;

e

provision of guarantees or commitments to provide money;

f

money transmission services;

g

provision of alternative finance arrangements;

h

other activities carried out in connection with activities falling within any of paragraphs (a) to (g).

2

Activities that are ancillary to lending activities are not qualifying activities for the purposes of this Part if the income derived from the ancillary activities forms a significant part of the total of—

a

that income, and

b

the income derived from lending activities of the worldwide group in the period of account.

3

In sub-paragraph (2) “income” means the gross income or net income that would be taken into account for the purposes of paragraph 7 in calculating the UK or worldwide trading income of the worldwide group for the period of account.

4

The Commissioners may by order—

a

amend sub-paragraph (1), and

b

make other amendments of this paragraph in consequence of any amendment of sub-paragraph (1).

5

In sub-paragraph (1)(h), and in the references to ancillary activities in this paragraph and paragraph 8(a), “activities” includes buying, holding, managing and selling assets.

6

In this paragraph “alternative finance arrangements” has the same meaning as in Chapter 6 of Part 6 of CTA 2009.

10Insurance activities and insurance related activities

1

In this Part “insurance activities” means—

a

the effecting or carrying out of contracts of insurance by a regulated insurer, and

b

investment business that arises directly from activities falling within paragraph (a).

2

In this Part “insurance-related activities” means—

a

activities that are ancillary to insurance activities, and

b

activities that—

i

are of the same kind as activities carried out for the purposes of insurance activities,

ii

are not actually carried out for those purposes, and

iii

would not be carried out but for insurance activities being carried out.

3

Sub-paragraph (2) is subject to sub-paragraph (4).

4

Activities that fall within sub-paragraph (2)(a) or (b) (“the relevant activities”) are not insurance-related activities if the income derived from the relevant activities forms a significant part of the total of—

a

that income, and

b

the income derived from insurance activities of the worldwide group in the period of account.

5

In sub-paragraph (4) “income” means the gross income or net income that would be taken into account for the purposes of paragraph 7 in calculating the UK or worldwide trading income of the worldwide group for the period of account.

6

In this paragraph—

“activities” includes buying, holding, managing and selling assets;

“contract of insurance” has the same meaning as in Chapter 1 of Part 12 of ICTA;

“regulated insurer” means a member of the worldwide group that—

a

is authorised under the law of any territory to carry on insurance business, or

b

is a member of a body or organisation that is so authorised.

11Relevant dealing in financial instruments

1

In this Part “financial instrument” means anything that is a financial instrument for any purpose of the FSA Handbook.

2

For the purposes of this Part, a dealing in a financial instrument is a “relevant dealing” if—

a

it is a dealing other than in the capacity of a broker, and

b

profits or losses on the dealing form part of the trading profits or losses of a business.

3

In this paragraph “broker” includes any person offering to sell securities to, or purchase securities from, members of the public generally.

12UK trading income of the worldwide group

1

This paragraph applies in relation to paragraph 7 for calculating the UK trading income of the worldwide group for a period of account.

2

The trading income for that period of a relevant group company is the aggregate of—

a

the gross income calculated in accordance with sub-paragraph (3), and

b

the net income calculated in accordance with sub-paragraph (4).

3

The income referred to in sub-paragraph (2)(a) is the gross income—

a

arising from the activities of the relevant group company (other than net-basis activities), and

b

accounted for as such under generally accepted accounting practice,

without taking account of any deductions (whether for expenses or otherwise).

4

The income referred to in sub-paragraph (2)(b) is the net income arising from the net-basis activities of the relevant group company that—

a

is accounted for as such under generally accepted accounting practice, or

b

would be accounted for as such if income arising from such activities were accounted for under generally accepted accounting practice.

5

Sub-paragraphs (3) and (4) are subject to sub-paragraph (6).

6

In a case where a proportion of an accounting period of a relevant group company does not fall within the period of account of the worldwide group, the gross income or net income for that accounting period of the company is to be reduced, for the purposes of this paragraph, by that proportion.

7

Gross income or net income is to be disregarded for the purposes of sub-paragraph (2) if the income arises in respect of an amount payable by another member of the worldwide group that is either a UK group company or a relevant group company.

8

In this paragraph “net-basis activity” means activity that is normally reported on a net basis in financial statements prepared in accordance with generally accepted accounting practice.

13Worldwide trading income of the worldwide group

1

This paragraph applies in relation to paragraph 7 for calculating the worldwide trading income of the worldwide group for a period of account.

2

The trading income for that period of the worldwide group is the aggregate of—

a

the gross income calculated in accordance with sub-paragraph (3), and

b

the net income calculated in accordance with sub-paragraph (4).

3

The income referred to in sub-paragraph (2)(a) is the gross income—

a

arising from the activities of worldwide group (other than net-basis activities), and

b

disclosed as such in the financial statements of the worldwide group,

without taking account of any deductions (whether for expenses or otherwise).

4

The income referred to in sub-paragraph (2)(b) is the net income arising from the net-basis activities of the worldwide group that—

a

is accounted for as such under international accounting standards, or

b

would be accounted for as such if income arising from such activities were accounted for under international accounting standards.

5

In this paragraph “net-basis activity” means activity that is normally reported on a net basis in financial statements prepared in accordance with international accounting standards.

6

For provision about references in this Schedule to financial statements of the worldwide group, and amounts disclosed in financial statements, see paragraphs 87 to 90.

14Foreign currency accounting

1

Subject to the following provisions of this paragraph, references in this Part to an amount disclosed in a balance sheet of a relevant group company, or of the worldwide group, as at any date are, where the amount is expressed in a currency other than sterling, to that amount translated into its sterling equivalent, translated by reference to the spot rate of exchange for that date.

2

Sub-paragraph (3) applies in relation to a period of account of the worldwide group if all the amounts disclosed in balance sheets (whether of relevant group companies, or of the worldwide group) that are relevant to a calculation under this Part in relation to that period are expressed in the same currency (“the relevant foreign currency”) and that currency is not sterling.

3

Where this sub-paragraph applies—

a

references in this Schedule to an amount disclosed in a balance sheet of a relevant group company, or of the worldwide group, are to that amount expressed in the relevant foreign currency, and

b

for the purposes of determining under paragraph 3 the net debt amount of a company, the reference in sub-paragraph (3) of that paragraph to £3 million is to be read as a reference to the relevant amount.

4

For this purpose “the relevant amount” means the average of—

a

£3 million expressed in the relevant foreign currency, translated by reference to the spot rate of exchange for the company’s start date, and

b

£3 million expressed in the relevant foreign currency, translated by reference to the spot rate of exchange for the company’s end date.

Part 3Disallowance of deductions

15Application of Part and meaning of “total disallowed amount”

1

This Part applies where, for a period of account of the worldwide group to which this Schedule applies (“the relevant period of account”)—

a

the tested expense amount (see Part 8), exceeds

b

the available amount (see Part 9).

2

In this Part “the total disallowed amount” means the difference between the amounts referred to in paragraphs (a) and (b) of sub-paragraph (1).

16Meaning of “company to which this Part applies”

References in this Part to a company to which this Part applies are to a company that is a relevant group company at any time during the relevant period of account.

17Appointment of authorised company for relevant period of account

1

The companies to which this Part applies may appoint one of their number to exercise functions conferred under this Part on the reporting body in relation to the relevant period of account.

2

An appointment under this paragraph is of no effect unless it is signed on behalf of each company to which this Part applies by the appropriate person.

3

The Commissioners may by regulations make further provision about an appointment under this paragraph including, in particular, provision—

a

about the form and manner in which an appointment may be made,

b

about how an appointment may be revoked and the form and manner of such revocation,

c

requiring a person to notify HMRC of the making or revocation of an appointment and about the form and manner of such notification,

d

requiring a person to give information to HMRC in connection with the making or revocation of an appointment,

e

imposing time limits in relation to making or revoking an appointment,

f

providing that an appointment or its revocation is of no effect, or ceases to have effect, if time limits or other requirements under the regulations are not met, and

g

about cases where a company is not a relevant group company at all times during the relevant period of account.

4

In this paragraph “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 Schedule.

5

Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company officers: meaning of “proper officer”) apply for the purposes of this paragraph as they apply for the purposes of that section.

18Meaning of “the reporting body”

In this Part “the reporting body” means—

a

in a case in which an appointment under paragraph 17 has effect in relation to the relevant period of account, the company appointed under that paragraph, and

b

in a case in which such an appointment does not have effect in relation to the relevant period of account, the companies to which this Part applies, acting jointly.

19Statement of allocated disallowances: submission

1

The reporting body must submit a statement (a “statement of allocated disallowances”) in relation to the relevant period of account to HMRC.

2

A statement submitted under this paragraph must be received by HMRC within 12 months of the end of the relevant period of account.

3

A statement submitted under this paragraph must comply with the requirements of paragraph 21.

20Statement of allocated disallowances: submission of revised statement

1

Where the reporting body has submitted a statement of allocated disallowances under paragraph 19 or this paragraph, it may submit a revised statement to HMRC.

2

A statement submitted under this paragraph must be received by HMRC within 36 months of the end of the relevant period of account.

3

A statement submitted under this paragraph must comply with the requirements of paragraph 21.

4

A statement submitted under this paragraph—

a

must indicate the respects in which it differs from the previous statement, and

b

supersedes the previous statement.

21Statement of allocated disallowances: requirements

1

This paragraph applies in relation to a statement of allocated disallowances submitted under paragraph 19 or 20.

2

The statement must be signed—

a

in a case in which an appointment under paragraph 17 has effect in relation to the relevant period of account, by the appropriate person in relation to the company appointed under that paragraph, or

b

in a case in which such an appointment does not have effect in relation to the relevant period of account, by the appropriate person in relation to each company to which this Part applies.

3

The statement must show—

a

the tested expense amount,

b

the available amount, and

c

the total disallowed amount.

4

The statement must—

a

list one or more companies to which this Part applies, and

b

in relation to each listed company, specify one or more financing expense amounts for the relevant period of account that are to be disallowed, and give the relevant details in relation to each such amount.

5

For this purpose “the relevant details”, in relation to a financing expense amount, are—

a

which of conditions A, B or C in paragraph 54 is met in relation to the amount, and

b

the relevant accounting period of the company in which the amount would, apart from this Schedule, be brought into account for the purposes of corporation tax.

6

The sum of the amounts specified under sub-paragraph (4)(b) must equal the total disallowed amount.

7

In this paragraph “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 Schedule.

8

Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company officers: meaning of “proper officer”) apply for the purposes of this paragraph as they apply for the purposes of that section.

9

For the meaning of “financing expense amount”, see Part 7.

22Statement of allocated disallowances: effect

A financing expense amount of a company to which this Part applies that is specified in a statement of allocated disallowances under paragraph 21(4)(b) is not to be brought into account by the company for the purposes of corporation tax.

23Company tax returns

1

This paragraph applies where—

a

a company to which this Part applies has delivered a company tax return for a relevant accounting period, and

b

as a result of the submission of a revised statement of allocated disallowances under paragraph 20—

i

there is a change in the amount of profits on which corporation tax is chargeable for the period, or

ii

any other information contained in the return is incorrect.

2

The company is treated as having amended its company tax return for the accounting period so as to reflect the change mentioned in sub-paragraph (1)(b)(i) or to correct the information mentioned in sub-paragraph (1)(b)(ii).

24Power to make regulations about statement of allocated disallowances

The Commissioners may by regulations make further provision about a statement of allocated disallowances 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 circumstances in which a statement that is not received by the time specified in paragraph 19(2) or 20(2) 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 paragraph 21 is to be treated as if it did so comply.

25Failure of reporting body to submit statement of allocated disallowances

1

This paragraph applies if no statement of allocated disallowances is submitted under paragraph 19 that complies with the requirements of paragraph 21.

2

Each company to which this Part applies that has a net financing deduction for the relevant period of account that is greater than nil must reduce the amounts that it brings into account in relevant accounting periods in respect of financing expense amounts.

3

The total of the reductions required to be made by a company by virtue of sub-paragraph (2) is—

NFDTEA×TDAmath

where—

NFD is the net financing deduction of the company for the relevant period of account (see paragraph 70(2)),

TEA is the tested expense amount for the relevant period of account (see paragraph 70(1)), and

TDA is the total disallowed amount (see paragraph 15(2)).

4

The particular financing expense amounts that must be reduced, and the amounts by which they must be reduced, must be determined in accordance with regulations made by the Commissioners.

5

Regulations under this paragraph may, in particular, include provision—

a

conferring a discretion on a company required to make reductions under this paragraph as to the particular financing expense amounts that are to be reduced,

b

requiring a company required to make reductions under this paragraph to notify another relevant group company of the particular reductions made, and

c

as to the times by which such notices must be sent and as to information that must accompany such notices.

26Powers to make regulations in relation to reductions required under paragraph 25

1

The Commissioners may by regulations make provision for the purpose of securing that a company required under paragraph 25 to reduce the amounts that it brings into account in respect of financing expense amounts for the relevant period of account (“a company required to make default reductions”) has sufficient information to determine their amount.

2

Provision that may be made in regulations under sub-paragraph (1) includes provision requiring one or more members of the worldwide group to send specified information to a company required to make default reductions.

3

The Commissioners may by regulations make provision about cases in which (whether as a result of non-compliance with regulations made under sub-paragraph (1) or otherwise) a company required to make default reductions does not possess specified information.

4

Provision that may be made in regulations under sub-paragraph (3) includes provision as to assumptions that may or must be made in determining the amount of a reduction under paragraph 25 of a financing expense amount.

5

The Commissioners may by regulations make provision for determining a time later than that determined under paragraph 15(4) of Schedule 18 to FA 1998 (amendment of return by company) before which a company required to make default reductions may amend its company tax return so as to reflect a reduction under paragraph 25.

6

In this paragraph “specified” means specified in regulations under this paragraph.

Part 4Exemption of financing income

27Application of Part and meaning of “total disallowed amount”

1

This Part applies where, for a period of account of the worldwide group to which this Schedule applies (“the relevant period of account”)—

a

the tested expense amount (see Part 8), exceeds

b

the available amount (see Part 9).

2

In this Part the “total disallowed amount” means the difference between the amounts referred to in paragraphs (a) and (b) of sub-paragraph (1).

28Meaning of “company to which this Part applies”

References in this Part to a company to which this Part applies are to a company that is a UK group company at any time during the relevant period of account.

29Appointment of authorised company for relevant period of account

1

The companies to which this Part applies may appoint one of their number to exercise functions conferred under this Part on the reporting body in relation to the relevant period of account.

2

An appointment under this paragraph is of no effect unless it is signed on behalf of each company to which this Part applies by the appropriate person.

3

The Commissioners may by regulations make further provision about an appointment under this paragraph including, in particular, provision—

a

about the form and manner in which an appointment may be made or revoked,

b

requiring a person to notify HMRC of the making or revocation of an appointment and about the form and manner of such notification,

c

requiring a person to give information to HMRC in connection with the making or revocation of an appointment,

d

imposing time limits in relation to making or revoking an appointment,

e

that an appointment or its revocation is of no effect, or ceases to have effect, if time limits or other requirements under the regulations are not met, and

f

about cases where a company does not meet condition A in paragraph 86, or is not a member of the worldwide group, at all times during the relevant period of account.

4

In this paragraph “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 Schedule.

5

Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company officers: meaning of “proper officer”) apply for the purposes of this paragraph as they apply for the purposes of that section.

30Meaning of “the reporting body”

In this Part “the reporting body” means—

a

in a case in which an appointment under paragraph 29 has effect in relation to the relevant period of account, the company appointed under that paragraph, and

b

in a case in which such an appointment does not have effect in relation to the relevant period of account, the companies to which this Part applies, acting jointly.

31Statement of allocated exemptions: submission

1

The reporting body must submit a statement (a “statement of allocated exemptions”) in relation to the relevant period of account to HMRC.

2

A statement submitted under this paragraph must be received by HMRC within 12 months of the end of the relevant period of account.

3

A statement submitted under this paragraph must comply with the requirements of paragraph 33.

32Statement of allocated exemptions: submission of revised statement

1

Where the reporting body has submitted a statement of allocated exemptions under paragraph 31 or this paragraph, it may submit a revised statement to HMRC.

2

A statement submitted under this paragraph must be received by HMRC within 36 months of the end of the relevant period of account.

3

A statement submitted under this paragraph must comply with the requirements of paragraph 33.

4

A statement submitted under this paragraph—

a

must indicate the respects in which it differs from the previous statement, and

b

supersedes the previous statement.

33Statement of allocated exemptions: requirements

1

This paragraph applies in relation to a statement of allocated exemptions submitted under paragraph 31 or 32.

2

The statement must be signed—

a

in a case in which an appointment under paragraph 29 has effect in relation to the relevant period of account, by the appropriate person in relation to the company appointed under that paragraph, or

b

in a case in which such an appointment does not have effect in relation to the relevant period of account, by the appropriate person in relation to each company to which this Part applies.

3

The statement must show—

a

the tested expense amount,

b

the available amount, and

c

the total disallowed amount.

4

The statement must—

a

list one or more companies to which this Part applies, and

b

in relation to each listed company, specify one or more financing income amounts for the relevant period of account that are to be exempted, and give the relevant details in relation to each such amount.

5

For this purpose “the relevant details”, in relation to a financing income amount, are—

a

which of conditions A, B or C in paragraph 55 is met in relation to the amount, and

b

the relevant accounting period of the company in which the amount would, apart from this Schedule, be brought into account for the purposes of corporation tax.

6

The sum of the amounts specified under sub-paragraph (4)(b) must not exceed the lower of—

a

total disallowed amount, and

b

the tested income amount (see Part 8).

7

In this paragraph “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 Schedule.

8

Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company officers: meaning of “proper officer”) apply for the purposes of this paragraph as they apply for the purposes of that section.

9

For the meaning of “financing income amount”, see Part 7.

34Statement of allocated exemptions: effect

A financing income amount of a company to which this Part applies that is specified in a statement of allocated exemptions under paragraph 33(4)(b) is not to be brought into account by the company for the purposes of corporation tax.

35Company tax returns

1

This paragraph applies where—

a

a company to which this Part applies has delivered a company tax return for a relevant accounting period, and

b

as a result of the submission of a revised statement of allocated exemptions under paragraph 32—

i

there is a change in the amount of profits on which corporation tax is chargeable for the period, or

ii

any other information contained in the return is incorrect.

2

The company is treated as having amended its company tax return for the accounting period so as to reflect the change mentioned in sub-paragraph (1)(b)(i) or to correct the information mentioned in sub-paragraph (1)(b)(ii).

36Power to make regulations about statement of allocated exemptions

The Commissioners may by regulations make further provision about a statement of allocated exemptions 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 circumstances in which a statement that is not received by the time specified in paragraph 31(2) or 32(2) 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 paragraph 33 is to be treated as if it did so comply.

37Failure of reporting body to submit statement of allocated exemptions

1

This paragraph applies if no statement of allocated exemptions is submitted under paragraph 31 that complies with the requirements of paragraph 33.

2

Subject to the following provisions of this paragraph, each financing income amount for the relevant period of account of each company to which this Part applies is to be reduced to nil.

3

In this paragraph “unrestricted reduction” means a reduction of a financing income amount for the relevant period of account of a company to which this Part applies, determined in accordance with sub-paragraph (2).

4

Sub-paragraph (5) applies if—

a

the total of the unrestricted reductions, exceeds

b

the lower of—

i

the total disallowed amount, and

ii

the tested income amount.

5

Each unrestricted reduction is to be reduced by—

URTUR×Xmath

where—

UR is the unrestricted reduction in question,

TUR is the total of the unrestricted reductions, and

X is the excess mentioned in sub-paragraph (4).

38Power to make regulations in relation to reductions required under paragraph 37

1

The Commissioners may by regulations make provision for the purpose of securing that a company required under paragraph 37 to reduce the amounts that it brings into account in respect of financing income amounts for the relevant period of account (“a company required to make default reductions”) has sufficient information to determine their amount.

2

Provision that may be made in regulations under sub-paragraph (1) includes provision requiring one or more members of the worldwide group to send specified information to a company required to make default reductions.

3

The Commissioners may by regulations make provision about cases in which (whether as a result of non-compliance with regulations made under sub-paragraph (1) or otherwise) a company required to make default reductions does not possess specified information.

4

Provision that may be made in regulations under sub-paragraph (3) includes provision as to assumptions that may or must be made in determining the amount of a reduction under paragraph 37 of a financing income amount.

5

The Commissioners may by regulations make provision for determining a time later than that determined under paragraph 15(4) of Schedule 18 to FA 1998 (amendment of return by company) before which a company required to make default reductions may amend its company tax return so as to reflect a reduction under paragraph 37.

6

In this paragraph “specified” means specified in regulations under this paragraph.

39Balancing payments between group companies: no charge to, or relief from, tax

1

This paragraph applies where—

a

one or more financing income amounts of a company (“company A”) for the relevant period of account are—

i

by virtue of paragraph 34, not brought into account, or

ii

by virtue of paragraph 37, reduced,

b

one or more financing expense amounts of another company (“company B”) for the relevant period of account are—

i

by virtue of paragraph 22, not brought into account, or

ii

by virtue of paragraph 25, reduced,

c

company A makes one or more payments (“the balancing payments”) to company B, and

d

the sole or main reason for making the balancing payments is that the conditions in paragraphs (a) and (b) are met.

2

To the extent that the sum of the balancing payments does not exceed the amount specified in sub-paragraph (3), those payments—

a

are not to be taken into account in computing profits or losses of either company A or company B for the purposes of corporation tax, and

b

are not to be regarded as distributions for any of the purposes of the Corporation Tax Acts.

3

The amount referred to in sub-paragraph (2) is the lower of—

a

the sum of the financing income amounts mentioned in sub-paragraph (1)(a), and

b

the sum of the financing expense amounts mentioned in sub-paragraph (1)(b).

Part 5Intra-group financing income where payer denied deduction

40Exemption from tax for certain financing income received from certain EEA companies

1

A financing income amount of a company that is a member of the worldwide group (“the recipient”) is not to be brought into account for the purposes of corporation tax if—

a

it arises as a result of a payment by another company that is a member of the worldwide group (“the payer”),

b

the payment is received during a period of account of the worldwide group to which this Schedule applies, and

c

conditions A, B and C are met.

2

Condition A is that, at the time the payment is received, the payer is a relevant associate of the recipient (see paragraph 41).

3

Condition B is that, at the time the payment is received—

a

the payer is tax-resident in an EEA territory (see paragraph 42), and

b

the payer is liable to a tax of that territory that is chargeable by reference to profits, income or gains arising to the payer.

4

Condition C is that—

a

qualifying EEA tax relief for the payment is not available to the payer in the period in which the payment is made (“the current period”) or any previous period (see paragraph 43), and

b

qualifying EEA tax relief for the payment is not available to the payer in any period after the current period (see paragraph 44).

5

For the meaning of “financing income amount”, see paragraph 46.

41Meaning of “relevant associate”

For the purposes of this Part the payer is a “relevant associate” of the recipient if—

a

the payer is a parent of the recipient,

b

the payer is a 75% subsidiary of the recipient, or

c

the payer is a 75% subsidiary of a parent of the recipient.

42Meaning of “tax-resident” and “EEA territory”

1

For the purposes of this Part the payer is “tax-resident” in a territory if it is liable, under the law of that territory, to tax by reason of domicile, residence or place of management.

2

In this Part “EEA territory” means a territory outside the United Kingdom that is within the European Economic Area.

43Qualifying EEA tax relief for payment in the current period or a previous period

1

For the purposes of this Part qualifying EEA tax relief for a payment is not available to the payer in the current period or a previous period if conditions A and B are met in relation to the payment.

2

Condition A is that no deduction calculated by reference to the payment can be taken into account in calculating any profits, income or gains that—

a

arise to the payer in the current period or any previous period, and

b

are chargeable to any tax of the United Kingdom or an EEA territory for the current period or any previous period.

3

Condition B is that no relief determined by reference to the payment can be given in the current period or any previous period for the purposes of any tax of the United Kingdom or an EEA territory by—

a

the payment of a credit,

b

the elimination or reduction of a tax liability, or

c

any other means of any kind.

4

Conditions A and B are not met in relation to the payment unless every step is taken (whether by the payer or any other person) to secure that deductions are taken into account as mentioned in sub-paragraph (2) and reliefs are given as mentioned in sub-paragraph (3).

5

Conditions A and B are not met in relation to the payment unless they would be met disregarding a failure to obtain a deduction or relief by virtue of—

a

this Schedule, or

b

provision made as a result of double taxation arrangements between any two territories (including provision sanctioned by associated enterprise rules contained in such arrangements).

6

For this purpose—

a

arrangements are “double taxation arrangements” if they are arrangements made between any two territories with a view to affording relief from double taxation, and

b

“associated enterprise rules” means —

i

rules that, on the passing of this Act, were contained in Article 9 of the Model Tax Convention on Income and on Capital published by the Organisation for Economic Co-operation and Development, or

ii

any rules in the same or equivalent terms.

44Qualifying EEA tax relief for payment in future period

1

For the purposes of this Part qualifying EEA tax relief for a payment is not available to the payer in a period after the current period if conditions A and B are met in relation to the payment.

2

Condition A is that no deduction calculated by reference to the payment can be taken into account in calculating any profits, income or gains that—

a

might arise to the payer in any period after the current period, and

b

would, if they did so arise, be chargeable to any tax of the United Kingdom or an EEA territory for any period after the current period.

3

Condition B is that no relief determined by reference to the payment can be given in any period after the current period for the purposes of any tax of the United Kingdom or an EEA territory by—

a

the payment of a credit,

b

the elimination or reduction of a tax liability, or

c

any other means of any kind.

4

The question whether a deduction can be taken into account as mentioned in sub-paragraph (2) or a relief can be given as mentioned in sub-paragraph (3), is to be determined by reference to the position immediately after the end of the current period.

5

Conditions A and B are not met in relation to the payment unless they would be met disregarding a failure to obtain a deduction or relief by virtue of—

a

this Schedule, or

b

provision made as a result of double taxation arrangements between any two territories (including provision sanctioned by associated enterprise rules contained in such arrangements).

6

For this purpose—

a

arrangements are “double taxation arrangements” if they are arrangements made between any two territories with a view to affording relief from double taxation, and

b

“associated enterprise rules” means—

i

rules that, on the passing of this Act, were contained in Article 9 of the Model Tax Convention on Income and on Capital published by the Organisation for Economic Co-operation and Development, or

ii

any rules in the same or equivalent terms.

45References to tax of a territory

1

References in this Part to a tax of the United Kingdom are to income tax or corporation tax.

2

References in this Part to a tax of a territory outside the United Kingdom are to a tax chargeable under the law of that territory that—

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.

3

For the purposes of this paragraph a tax chargeable under the law of a territory outside the United Kingdom does not fail to correspond to income or corporation tax just because—

a

it is chargeable under the law of a province, state or other part of a country, or

b

it is levied by or on behalf of a municipality or other local body.

46Financing income amounts of a company

1

References in this Part to a “financing income amount” of a company are (subject to sub-paragraph (6)) to any amount that meets condition A, B or C.

2

Condition A is that the amount is a credit that—

a

would, apart from this Part, be brought into account by the company for the purposes of corporation tax,

b

would be so brought into account in respect of a loan relationship—

i

under Part 3 of CTA 2009 by virtue of section 297 of that Act (loan relationships for purposes of trade), or

ii

under Part 5 of that Act (other loan relationships), and

c

is not an excluded credit.

3

A credit is “excluded” if it is in respect of—

a

the reversal of an impairment loss,

b

an exchange gain, or

c

a profit from a related transaction.

4

Condition B is that the amount is an amount that would, apart from this Part, be brought into account by the company for the purposes of corporation tax in respect of the financing income implicit in amounts received under finance leases.

5

Condition C is that the amount is an amount that would, apart from this Part, be brought into account by the company for the purposes of corporation tax in respect of the financing income receivable on debt factoring, or any similar transaction.

6

The provisions of Part 7 apply in relation to an amount that is a financing income amount of a company by virtue of meeting condition A, B or C in this paragraph as they apply in relation to an amount that is a financing income amount of a relevant group company by virtue of meeting condition A, B or C in paragraph 55.

Part 6Anti-avoidance

47Schemes involving manipulation of rules in Part 2

1

A period of account of the worldwide group that, apart from this paragraph, is not within paragraph 2(1) is treated as within that provision if conditions A to C are met.

2

Condition A is that—

a

at any time before the end of the period, a scheme is entered into, and

b

if the scheme had not been entered into, the period would have been within paragraph 2(1).

3

Condition B is that the main purpose, or one of the main purposes, of any party to the scheme on entering into the scheme is to secure that the period is not within paragraph 2(1).

4

Condition C is that the scheme is not an excluded scheme.

48Schemes involving manipulation of rules in Parts 3 and 4

1

Where conditions A to C are met in relation to a period of account of the worldwide group (“the relevant period of account”), the tested expense amount, the tested income amount and the available amount for the period are to be calculated in accordance with paragraph 50.

2

Condition A is that—

a

at any time before the end of the relevant period of account, a scheme is entered into, and

b

the main purpose, or one of the main purposes, of any party to the scheme on entering into it is to secure that the amount of the relevant net deduction (within the meaning given by paragraph 49) is lower than it would be if that amount were calculated in accordance with paragraph 50.

3

Condition B is that a result of the scheme is that—

a

the sum of the profits of UK group companies that arise in relevant accounting periods and that are chargeable to corporation tax is less than it would be if that sum were determined in accordance with paragraph 50, or

b

the sum of the losses of UK group companies that arise in relevant accounting periods (other than any taken into account in calculating profits within paragraph (a)) and that are capable of being a carried-back amount or a carried-forward amount is higher than it would be if that sum were determined in accordance with paragraph 50.

4

Condition C is that the scheme is not an excluded scheme.

5

In a case where—

a

a profit or loss arises in an accounting period of a UK group company, and

b

a proportion of that period does not fall within the relevant period of account,

the profit or loss is to be reduced, for the purposes of condition B, by the same proportion.

49Meaning of “relevant net deduction”

1

In paragraph 48(2) the “relevant net deduction” means—

a

the amount by which the total disallowed amount exceeds the tested income amount, or

b

if the total disallowed amount does not exceed the tested income amount, nil.

2

In this paragraph the “total disallowed amount” means—

a

the amount by which the tested expense amount exceeds the available amount, or

b

if the tested expense amount does not exceed the available amount, nil.

50Calculation of amounts

1

References in paragraph 48 to the calculation of any amount or sum in accordance with this paragraph are to the calculation of that amount or sum on the following assumptions.

2

The assumptions are that—

a

the scheme in question was not entered into, and

b

instead, anything that it is more likely than not would have been done or not done, had this Schedule not had effect in relation to the relevant period of account, was done or not done.

51Meaning of “carried-back amount” and “carried-forward amount”

1

In paragraph 48 “carried-back amount” means—

a

an amount carried back under section 393A(1)(b) of ICTA (trading losses),

b

an amount carried back by virtue of a claim under section 459(1)(b) of CTA 2009 (non-trading deficits from loan relationships), or

c

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

2

In paragraph 48 “carried-forward amount” means—

a

an amount carried forward under section 76(12) or (13) of ICTA (certain expenses of insurance companies),

b

an amount carried forward under section 392A(2) or (3) of ICTA (UK property business losses),

c

an amount carried forward under section 392B(1)(b) of ICTA (overseas property business losses),

d

an amount carried forward under section 393(1) of ICTA (trading losses),

e

an amount carried forward under section 396(1) of ICTA (losses from miscellaneous transactions),

f

an amount carried forward under section 436A(4) of ICTA (insurance companies: losses from gross roll-up business),

g

an amount carried forward under section 8(1)(b) of TCGA 1992 (allowable losses),

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) 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).

52Schemes involving manipulation of rules in Part 5

1

This paragraph applies to a financing income amount of a company received during a period of account of the worldwide group if—

a

apart from this paragraph, the financing income amount would, by virtue of paragraph 40, not be brought into account for the purposes of corporation tax, and

b

conditions A to C are met.

2

Condition A is that, at any time before the financing income amount is received, a scheme is entered into that secures that any of the conditions in sub-paragraphs (2) to (4) of paragraph 40 (“the relevant paragraph 40 condition”) is met in relation to the amount.

3

Condition B is that the purpose, or one of the main purposes, of any party to the scheme on entering into the scheme is to secure that the relevant paragraph 40 condition is met.

4

Condition C is that the scheme is not an excluded scheme.

5

Where this paragraph applies to a financing income amount, the relevant paragraph 40 condition is treated as not met in relation to the amount.

6

Paragraph 46 (meaning of references to a “financing income amount” of a company) applies for the purposes of this paragraph.

53Meaning of “scheme” and “excluded scheme”

1

For the purposes of this Part “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions.

2

For the purposes of this Part a scheme is “excluded” if it is of a description specified in regulations made by the Commissioners.

3

Regulations under sub-paragraph (2) may make different provision for different purposes.

Part 7“Financing expense amount” and “financing income amount”

54The financing expense amounts of a company

1

References in this Schedule to a “financing expense amount” of a company for a period of account of the worldwide group are to any amount that meets condition A, B or C.

2

Condition A is that the amount is a debit that—

a

would, apart from this Schedule, be brought into account in a relevant accounting period of the company,

b

would be so brought into account in respect of a loan relationship—

i

under Part 3 of CTA 2009 by virtue of section 297 of that Act (loan relationships for purposes of trade), or

ii

under Part 5 of that Act (other loan relationships), and

c

is not an excluded debit.

3

A debit is “excluded” if it is in respect of—

a

an impairment loss,

b

an exchange loss, or

c

a related transaction.

4

Condition B is that the amount is an amount that would, apart from this Schedule, be brought into account for the purposes of corporation tax in a relevant accounting period of the company in respect of the financing cost implicit in payments made under finance leases.

5

Condition C is that the amount is an amount that would, apart from this Schedule, be brought into account for the purposes of corporation tax in a relevant accounting period of the company in respect of the financing cost payable on debt factoring, or any similar transaction.

6

In a case where—

a

a debit or other amount would, apart from this Schedule, be brought into account in an accounting period, and

b

a proportion of that period does not fall within the period of account of the worldwide group,

the debit or other amount is to be reduced, for the purposes of this paragraph, by the same proportion.

7

This paragraph is subject to paragraphs 57 to 68.

55The financing income amounts of a company

1

References in this Schedule (except in Part 5 and paragraph 52) to a “financing income amount” of a company for a period of account of the worldwide group are to any amount that meets condition A, B or C.

2

Condition A is that the amount is a credit that—

a

would, apart from this Schedule, be brought into account in a relevant accounting period of the company,

b

would be so brought into account in respect of a loan relationship—

i

under Part 3 of CTA 2009 by virtue of section 297 of that Act (loan relationships for purposes of trade), or

ii

under Part 5 of that Act (other loan relationships), and

c

is not an excluded credit.

3

A credit is “excluded” if it is in respect of—

a

the reversal of an impairment loss,

b

an exchange gain, or

c

a profit from a related transaction.

4

Condition B is that the amount is an amount that would, apart from this Schedule, be brought into account for the purposes of corporation tax in a relevant accounting period of the company in respect of the financing income implicit in amounts received under finance leases.

5

Condition C is that the amount is an amount that would, apart from this Schedule, be brought into account for the purposes of corporation tax in a relevant accounting period of the company in respect of the financing income receivable on debt factoring, or any similar transaction.

6

In a case where—

a

a credit or other amount would, apart from this Schedule, be brought into account in an accounting period, and

b

a proportion of that period does not fall within the period of account of the worldwide group,

the credit or other amount is to be reduced, for the purposes of this paragraph, by the same proportion.

7

This paragraph is subject to paragraphs 57 to 68.

56Interpretation of paragraphs 54 and 55

In paragraphs 54 and 55 the following expressions have the same meaning as they have in Part 5 of the Corporation Tax Act 2009 (loan relationships)—

“exchange gain” and “exchange loss”;

“impairment”;

“impairment loss”;

“related transaction”.

57Group treasury companies

1

This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is—

a

a financing expense amount of a group treasury company by virtue of meeting condition A, B or C in paragraph 54, or

b

a financing income amount of a group treasury company by virtue of meeting condition A, B or C in paragraph 55.

2

The relevant amount, and all other amounts that are relevant amounts in respect of the group treasury company and the relevant period, are treated as not being a financing expense amount or a financing income amount of the group treasury company, but only if that company makes an election for the purposes of this paragraph in respect of the relevant period.

3

An election under this paragraph must be made within 3 years after the end of the relevant period.

4

If two or more members of the worldwide group are group treasury companies in the relevant period, an election under this paragraph made by any of them is not valid unless each of them makes such an election in respect of the relevant period before the end of the 3 year period mentioned in sub-paragraph (3).

5

A company is a group treasury company in the relevant period if the following conditions are met.

6

The first condition is that the company is a member of the worldwide group.

7

The second condition is that the company undertakes treasury activities for the worldwide group in the relevant period (whether or not it also undertakes other activities).

8

The third condition is that—

a

if the company is the only company to meet the first and second conditions in the relevant period, or the only other companies to meet those conditions are not UK group companies, at least 90% of the relevant income of the company for the relevant period is group treasury revenue, or

b

if the company and one or more other companies each of which is a UK group company meet the first and second conditions in the relevant period, at least 90% of the aggregate relevant income of those companies for the relevant period is group treasury revenue.

9

For the purposes of this paragraph a company undertakes treasury activities for the worldwide group in the relevant period if, in that period, it does one or more of the following things in relation to, or on behalf of, the worldwide group or any of its members—

a

managing surplus deposits of money or overdrafts,

b

making or receiving deposits of money,

c

lending money,

d

subscribing for or holding shares in another company which is a UK group company and a group treasury company,

e

investing in debt securities, and

f

hedging assets, liabilities, income or expenses.

10

For the purposes of this paragraph “group treasury revenue”, in relation to a company, means revenue—

a

arising from the treasury activities that the company undertakes for the worldwide group, and

b

accounted for as such under generally accepted accounting practice;

before any deduction (whether for expenses or otherwise).

11

But revenue consisting of a dividend or other distribution is not group treasury revenue unless it is a dividend or distribution from a company that is, in the relevant period—

a

a UK group company, and

b

a group treasury company.

12

In this paragraph—

“debt security” has the same meaning as in the FSA Handbook;

“relevant income”, in relation to a company, means income—

a

arising from the activities of the company, and

b

accounted for as such under generally accepted accounting practice,

before any deduction (whether for expenses or otherwise);

“relevant period” means the period of account of the worldwide group to which the relevant amount relates.

58Real estate investment trusts

1

This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is—

a

a financing expense amount of a company by virtue of meeting condition A in paragraph 54, or

b

a financing income amount of a company by virtue of meeting condition A in paragraph 55.

2

The relevant amount is treated as not being a financing expense amount or a financing income amount of the company if the finance arrangement is one to which section 211 of CTA 2009 does not apply by virtue of section 120(3)(a) of FA 2006.

59Companies engaged in oil extraction activities

1

This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is—

a

a financing expense amount of a company by virtue of meeting condition A or condition B in paragraph 54, or

b

a financing income amount of a company by virtue of meeting condition A or condition B in paragraph 55.

2

The relevant amount is treated as not being a financing expense amount or a financing income amount of the company if the following conditions are met.

3

The first condition is that the company is treated, in the accounting period in which the amount is brought into account, as carrying on a ring fence trade (see section 502 of ICTA).

4

The second condition is that the amount falls to be brought into account in calculating the profits of that trade for that accounting period.

60Intra-group short-term finance: financing expense

1

This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company (“company A”) by virtue of meeting condition A in paragraph 54.

2

The relevant amount is treated as not being a financing expense amount of company A, but only if an election is made for this purpose.

3

Such an election may not be made unless the following conditions are met.

4

The first condition is that company A and the other party to the loan relationship (“company B”) are both members of the worldwide group.

5

The second condition is that the finance arrangement is a short-term loan relationship as respects the period of account of the worldwide group.

6

An election under this paragraph may only be made—

a

jointly by company A and company B, and

b

within 36 months of the end of the period of account of the worldwide group to which the relevant amount relates.

7

An election under this paragraph is irrevocable.

8

In this paragraph “short-term loan relationship” has the meaning given in paragraph 62.

61Intra-group short-term finance: financing income

1

This paragraph applies where—

a

under paragraph 60, the relevant amount is treated as not being a financing expense amount of company A, and

b

apart from this paragraph, the relevant amount is a financing income amount of company B by virtue of meeting condition A in paragraph 55.

2

The relevant amount is treated as not being a financing income amount of company B.

3

In this paragraph “company A” and “company B” have the same meanings as in paragraph 60.

62Short-term loan relationships

1

For the purposes of paragraph 60 the finance arrangement is a short-term loan relationship as respects the period of account of the worldwide group (“the relevant period”) if—

a

regulations made by the Commissioners provide for it to be so, or

b

one or other of the following conditions is met.

2

The first condition is that the finance arrangement does not terminate during the relevant period and—

a

to the extent that the finance arrangement provides for the creation of money debt, its terms require all money debt created under it to be settled within 12 months of money debt first being created under it, and

b

to the extent that the finance arrangement is otherwise a loan relationship, its terms provide for it to terminate within 12 months of its coming into force.

3

The second condition is that the finance arrangement terminates during, or after the end of, the relevant period and—

a

to the extent that the relationship provided for the creation of money debt, all money debt created under it was settled within 12 months of money debt first being created under it, and

b

to the extent that the relationship was otherwise a loan relationship, it terminated within 12 months of its coming into force.

4

The Treasury may by regulations make provision about other circumstances in which the finance arrangement is to be taken not to be a short-term loan relationship as respects—

a

the relevant period, or

b

any part or parts of the relevant period.

5

Regulations under sub-paragraph (4) may include provision for the finance arrangement to be taken never to have been a short-term loan relationship as respects the relevant period or the part or parts of it.

6

No regulations may be made under sub-paragraph (4) unless a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.

7

The Commissioners may by regulations make provision (including provision conferring a discretion on the Commissioners) about circumstances in which regulations under sub-paragraph (4) are not to apply in relation to the finance arrangements.

63Stranded deficits in non-trading loan relationships: financing expense

1

This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company (“company A”) by virtue of meeting condition A in paragraph 54.

2

The relevant amount is to be treated as not being a financing expense amount of company A, but only if an election is made for this purpose.

3

Such an election may not be made unless the following conditions are met.

4

The first condition is that company A and the other party to the loan relationship (“company B”) are both members of the worldwide group.

5

The second condition is that company B—

a

is resident in the United Kingdom, or

b

is not resident in the United Kingdom and is carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

6

The third condition is that, under section 457 of CTA 2009, company B carries forward an amount of non-trading deficit and sets it off against non-trading profits of an accounting period that falls wholly or partly within the period of account of the worldwide group.

7

The fourth condition is that the amount of non-trading deficit carried forward and set off is equal to, or greater than, the relevant amount.

8

An election under this paragraph may only be made—

a

jointly by company A and company B, and

b

within 36 months of the end of the period of account of the worldwide group to which the relevant amount relates.

64Stranded deficits in non-trading loan relationships: financing income

1

This paragraph applies where—

a

under paragraph 63, the relevant amount is treated is not being a financing expense amount of company A, and

b

apart from this paragraph, the relevant amount is a financing income amount of company B by virtue of meeting condition A in paragraph 55.

2

The relevant amount is treated as not being a financing income amount of company B.

3

In this paragraph “company A” and “company B” have the same meanings as in paragraph 63.

65Stranded management expenses in non-trading loan relationships: financing expense

1

This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company (“company A”) by virtue of meeting condition A in paragraph 54.

2

The relevant amount is treated as not being a financing expense amount of company A, but only if an election is made for this purpose.

3

Such an election may not be made unless the following conditions are met.

4

The first condition is that company A and the other party to the finance arrangement (“company B”) are both members of the worldwide group.

5

The second condition is that company B is a company with investment business (within the meaning of Part 16 of CTA 2009) and—

a

is resident in the United Kingdom, or

b

is not resident in the United Kingdom and is carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

6

The third condition is that company B is allowed a deduction under section 1219 of CTA 2009 (expenses of management of a company’s investment business) in respect of an accounting period that falls wholly or partly within the period of account of the worldwide group (“the relevant period”).

7

The fourth condition is that the amount of the deduction allowed is equal to, or greater than, the relevant amount.

8

The fifth condition is that the calculation of company B’s total profits for the relevant period for the purposes of corporation tax results in a loss if company B’s credit is not included in that calculation.

9

An election under this paragraph may only be made—

a

jointly by company A and company B, and

b

within 36 months of the end of the period of account of the worldwide group to which the relevant amount relates.

10

In this paragraph “company B’s credit” means the credit to company B that arises from the debit to company A by virtue of which condition A in paragraph 54 is met.

66Stranded management expenses in non-trading loan relationships: financing income

1

This paragraph applies where—

a

under paragraph 65, the relevant amount is treated is not being a financing expense amount of company A, and

b

apart from this paragraph, the relevant amount is a financing income amount of company B by virtue of meeting condition A in paragraph 55.

2

The relevant amount is treated as not being a financing income amount of company B.

3

In this paragraph “company A” and “company B” have the same meanings as in paragraph 65.

67Charities

1

This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company by virtue of meeting condition A, B or C in paragraph 54.

2

The relevant amount is treated as not being a financing expense amount of the company if the creditor is a charity.

3

In this paragraph—

“charity” means any body of persons or trust established for charitable purposes only;

“creditor” means—

a

in a case where the relevant amount is a debit that meets condition A in paragraph 54, the loan creditor who receives the payment in relation to which the relevant amount arises;

b

in a case where the relevant amount meets condition B or C in paragraph 54, the recipient of the payment in relation to which the relevant amount arises.

68Educational and public bodies

1

This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company by virtue of meeting condition A, B or C in paragraph 54.

2

The relevant amount is treated as not being a financing expense amount of the company if the creditor is—

a

a designated educational establishment,

b

a health service body,

c

a local authority, or

d

a person that is prescribed, or is of a description of persons prescribed, in an order made by the Commissioners for the purposes of this paragraph.

3

The Commissioners may not prescribe a person, or a description of persons, for the purposes of this paragraph unless they are satisfied that the person, or each of the persons within the description, has functions some or all of which are of a public nature.

4

In this paragraph—

“creditor” means—

a

in a case where the relevant amount is a debit that meets condition A in paragraph 54, the loan creditor who receives the payment in relation to which the relevant amount arises;

b

in a case where the relevant amount meets condition B or C in paragraph 54, the recipient of the payment in relation to which the relevant amount arises;

“designated educational establishment” has the same meaning as in section 105 of CTA 2009;

“health service body” has the same meaning as in section 519A of ICTA.

69Interpretation of paragraphs 57 to 68

In paragraphs 57 to 68 “finance arrangement” means—

a

in the case of an amount that is a debit or credit that meets the condition in paragraph 54(2) or 55(2), the loan relationship to which the debit or credit relates;

b

in the case of an amount that meets the condition in paragraph 54(4) or 55(4), the finance lease to which the amount relates;

c

in the case of an amount that meets the condition in paragraph 54(5) or 55(5), the debt factoring or similar transaction to which the amount relates.

Part 8The “tested expense amount” and “tested income amount”

70The tested expense amount

1

References in this Schedule to the “tested expense amount” for a period of account of the worldwide group are to the sum of the net financing deductions of each relevant group company.

2

References in this Schedule to the “net financing deduction” of a company for a period of account of the worldwide group are to—

a

the sum of the company’s financing expense amounts for the period (see paragraph 54), less

b

the sum of the company’s financing income amounts for the period (see paragraph 55).

3

References in sub-paragraph (2) to a company’s financing expense amounts or financing income amounts for a period of account of the worldwide group do not include any amount that arises as a result of a transaction that takes place at a time at which the company is not a relevant group company.

4

Where the amount determined in accordance with sub-paragraph (2) is negative, the net financing deduction of the company for the period is nil.

5

Where the amount determined in accordance with sub-paragraph (2) is small (see paragraph 72), the net financing deduction of the company for the period is nil.

71The tested income amount

1

References in this Schedule to the “tested income amount” for the period of account of the worldwide group are to the sum of the net financing incomes of each UK group company.

2

The reference in sub-paragraph (1) to the “net financing income” of a company for a period of account of the worldwide group is to—

a

the sum of the company’s financing income amounts for the period (see paragraph 55), less

b

the sum of the company’s financing expense amounts for the period (see paragraph 54).

3

References in sub-paragraph (2) to a company’s financing expense amounts or financing income amounts for a period of account of the worldwide group do not include any amount that arises as a result of a transaction that takes place at a time at which the company is not a UK group company.

4

Where the amount determined in accordance with sub-paragraph (2) is negative, the net financing income of the company for the period is nil.

5

Where the amount determined in accordance with sub-paragraph (2) is small (see paragraph 72), the net financing income of the company for the period is nil.

72Companies with net financing deduction or net financing income that is small

1

An amount determined in accordance with paragraph 70(2) or 71(2) is “small” if it is less than £500,000.

2

The Treasury may by order amend sub-paragraph (1) by substituting a higher or lower amount for the amount for the time being specified there.

3

No order may be made under sub-paragraph (2) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

4

An order under sub-paragraph (2) may only have effect in relation to periods of account of the worldwide group beginning after the date on which the order is made.

Part 9The “available amount”

73The available amount

1

References in this Schedule to the “available amount” for a period of account of the worldwide group are to the sum of the amounts disclosed in the financial statements of the group for that period in respect of—

a

interest payable on amounts borrowed,

b

amortisation of discounts relating to amounts borrowed,

c

amortisation of premiums relating to amounts borrowed,

d

amortisation of ancillary costs relating to amounts borrowed,

e

the financing cost implicit in payments made under finance leases,

f

the financing cost relating to debt factoring, or

g

amounts of such other description as may be specified in regulations made by the Commissioners.

2

An amount that falls within any of paragraphs (a) to (g) of sub-paragraph (1) is to be disregarded for the purposes of that sub-paragraph to the extent that—

a

the amount represents a dividend payable in respect of preference shares, and

b

those shares are recognised as a liability in the financial statements of the group for the period.

74Group members with income from oil extraction subject to particular tax treatment in UK

1

In calculating the available amount, an amount disclosed in the financial statements of the worldwide group (“the external finance amount”) must be disregarded if the following conditions are met.

2

Condition A is that a member of the worldwide group is treated in a relevant accounting period as carrying on a ring fence trade (see section 502 of ICTA).

3

Condition B is that the external finance amount falls to be brought into account for the purposes of corporation tax in calculating the profits of that trade for that accounting period.

4

In this paragraph “relevant accounting period”, in relation to a member of the worldwide group, means an accounting period of the member that falls wholly or partly within the period of account.

75Group members with income from shipping subject to particular tax treatment in UK

1

In calculating the available amount, an amount disclosed in the financial statements of the worldwide group (“the external finance amount”) must be disregarded if the following conditions are met.

2

Condition A is that a member of the worldwide group is, for a relevant accounting period, a tonnage tax company for the purposes of Schedule 22 to FA 2000.

3

Condition B is that the external finance amount—

a

is taken into account in computing relevant shipping profits of that company for that accounting period, or

b

comprises deductible finance costs outside the ring fence, to the extent that they are adjusted under paragraph 61 or 62 of Schedule 22 to FA 2000.

4

In this paragraph—

“relevant accounting period”, in relation to a member of the worldwide group, means an accounting period of the member that falls wholly or partly within the period of account;

“relevant shipping profits” has the same meaning as in Schedule 22 to FA 2000 (see Part 6 of that Schedule).

76Group members with income from property rental subject to particular tax treatment in UK

1

In calculating the available amount, an amount disclosed in the financial statements of the worldwide group (“the external finance amount”) must be disregarded if the following conditions are met.

2

Condition A is that a member of the worldwide group is treated in a relevant accounting period as carrying on a separate business under section 113 of FA 2006 (ring-fencing of tax exempt business).

3

Condition B is that the external finance amount falls to be brought into account in calculating the profits arising from that business in that accounting period.

4

In this paragraph “relevant accounting period”, in relation to a member of the worldwide group, means an accounting period of the member that falls wholly or partly within the period of account.

77Meaning of accounting expressions used in this Part

Subject to any provision to the contrary, expressions used in this Part have the meaning for the time being given by international accounting standards.

Part 10Other interpretative provisions

78The worldwide group

In this Schedule “the worldwide group” means any group of entities that—

a

is large, and

b

contains one or more relevant group companies.

79Meaning of “group”

1

Subject to sub-paragraphs (2) and (3), in this Schedule “group” has the meaning for the time being given by international accounting standards.

2

Where a group would (apart from this sub-paragraph) contain more than one ultimate parent, each of those ultimate parents, together with its subsidiaries, is to be treated as a separate group.

3

An entity that is a parent of the ultimate parent of a group is to be treated as not being a member of the group.

4

Sub-paragraphs (2) and (3) do not apply for the purposes of paragraph 80.

80Meaning of “ultimate parent”

1

For the purposes of this Schedule “ultimate parent”, in relation to a group, means an entity that—

a

is a member of the group,

b

is a corporate entity or a relevant non-corporate entity,

c

is not a subsidiary (whether direct or indirect) of a corporate entity or a relevant non-corporate entity, and

d

is not a collective investment scheme.

2

In this paragraph “collective investment scheme” has the meaning given by section 235 of FISMA 2000.

81Meaning of “corporate entity”

1

In this Schedule “corporate entity” means (subject to sub-paragraph (4))—

a

a body corporate incorporated under the laws of any part of the United Kingdom or any other country or territory, or

b

any other entity that meets conditions A and B.

2

Condition A is that the person or persons who have an interest in the entity hold shares in the entity, or interests corresponding to shares.

3

Condition B is that the amount of profits to which each person who has an interest in the entity is entitled depends upon a decision that—

a

is taken by the entity or members of the entity, and

b

is taken after the period in which the profits arise.

4

The following are not corporate entities for the purposes of this Schedule—

a

the Crown,

b

a Minister of the Crown,

c

a government department,

d

a Northern Ireland department, or

e

a foreign sovereign power.

82Meaning of “relevant non-corporate entity”

1

In this Schedule “relevant non-corporate entity” means an entity—

a

that is not a corporate entity, and

b

in relation to which conditions A and B are met.

2

Condition A is that shares or other interests in the entity are listed on a recognised stock exchange.

3

Condition B is that the shares or other interests in the entity are sufficiently widely held.

4

For this purpose shares or other interests in an entity are “sufficiently widely held” if no participator in the entity holds more than 10% by value of all the shares or other interests in the entity.

5

Section 417(1) of ICTA (meaning of participator) applies for the purposes of this paragraph.

6

In the application of that provision for those purposes, references to a company are to be treated as references to an entity.

83Treatment of entities stapled to corporate entities or relevant non-corporate entities

1

Where a corporate entity is stapled to another entity, the two entities are treated for the purposes of this Schedule as if—

a

they were one entity, and

b

that one entity were a corporate entity.

2

Where a relevant non-corporate entity is stapled to another entity, the two entities are treated as if—

a

they were one entity, and

b

that one entity were a relevant non-corporate entity.

3

For the purposes of this paragraph an entity (“entity A”) is “stapled” to another (“entity B”) if, in consequence of the nature of the rights attaching to the shares or other interests in entity A (including any terms or conditions attaching to the right to transfer the interests), it is necessary or advantageous for a person who has, disposes of or acquires shares or other interests in entity A also to have, to dispose of or to acquire shares or other interests in entity B.

84Treatment of business combinations

1

This paragraph applies where two corporate entities are—

a

not subsidiaries of the same entity, but

b

are treated under international accounting standards as a single economic entity by reason of being a business combination achieved by contract.

2

The two entities are treated for the purposes of this Schedule as if—

a

they were one entity, and

b

that one entity were a corporate entity.

85Meaning of “large” in relation to a group

1

For the purposes of this Schedule a group is “large” at any time if (and only if) any member of the group is not at that time within the category of micro, small and medium-sized enterprises as defined in the Annex to Commission Recommendation 2003/361/EC of 6 May 2003 (“the Annex”).

2

In its application by virtue of sub-paragraph (1), the Annex has effect subject to the following qualifications.

3

Where a member of the group 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).

4

Article 3 has effect with the omission of paragraph (5) (declaration in good faith where control cannot be determined etc).

5

The first sentence of Article 4(1) has effect as if the reference to the latest approved accounting period of a member of the group were to the current accounting period of that member.

6

Article 4 has effect with the omission of—

a

the second sentence of paragraph (1) (data to be taken into account from date of closure of accounts),

b

paragraph (2) (no change of status unless ceilings exceeded for two consecutive periods), and

c

paragraph (3) (estimate in case of newly established enterprise).

86Meaning of “UK group company” and “relevant group company”

1

This paragraph applies for the purposes of this Schedule.

2

A company is a “UK group company” if—

a

it meets condition A, and

b

it is a member of the worldwide group.

3

A company is a “relevant group company” if—

a

it meets condition A, and

b

it meets condition B.

4

Condition A is that the company—

a

is resident in the United Kingdom, or

b

is not resident in the United Kingdom and is carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

5

Condition B is that the company is either—

a

the ultimate parent of the worldwide group, or

b

a relevant subsidiary of the ultimate parent of the worldwide group.

6

A company is a “relevant subsidiary” of the ultimate parent of the worldwide group if the company is a member of the worldwide group and—

a

the company is a 75% subsidiary of the ultimate parent,

b

the ultimate parent is beneficially entitled to at least 75% of any profits available for distribution to equity holders of the company, or

c

the ultimate parent would be beneficially entitled to at least 75% of any assets of the company available for distribution to its equity holders on a winding-up.

7

Schedule 18 to ICTA (equity holders and profits or assets available for distribution) applies in relation to sub-paragraph (6)(b) and (c) as it applies in relation to section 413(7) of that Act.

87Financial statements of the worldwide group

1

This paragraph applies for the purposes of this Schedule.

2

References to financial statements of the worldwide group are to consolidated financial statements of the ultimate parent and its subsidiaries; and references to a balance sheet of the worldwide group are to be read accordingly.

3

References to a period of account of the worldwide group are to a period in respect of which financial statements of the worldwide group are drawn up.

88Non-compliant financial statements of worldwide group

1

This paragraph applies where—

a

financial statements of the worldwide group are drawn up in respect of a period,

b

those financial statements are not acceptable, and

c

the amounts disclosed in those financial statements are materially different from those that would be disclosed in IAS financial statements for the period.

2

This Schedule (apart from this paragraph) applies as if IAS financial statements had been drawn up in respect of the period.

3

For the purposes of this paragraph financial statements are “acceptable” if—

a

they are drawn up in accordance with international accounting standards,

b

they meet such conditions relating to accounting standards, or accounting principles or practice, as may be specified in regulations made by the Commissioners, or

c

conditions A to C are met.

4

Condition A is that—

a

the companies whose results are included in the financial statements, and

b

the companies whose results would be included in IAS financial statements of the worldwide group for the same period, were such statements drawn up,

are the same.

5

Condition B is that—

a

the transactions whose results are reflected in the amounts mentioned in paragraph 73(1)(a) to (g) in the financial statements, and

b

the transactions whose results would be reflected in those amounts in IAS financial statements of the worldwide group for the same period, were such statements drawn up,

are the same.

6

Condition C is that the amounts mentioned in paragraph 73(1)(a) to (d) in the financial statements are calculated using the effective interest method.

7

In this paragraph references to IAS financial statements of the worldwide group for a period are to financial statements of the group for the period drawn up in accordance with international accounting standards.

89Non-existent financial statements of worldwide group

1

This paragraph applies where financial statements of the worldwide group are not drawn up in respect of a period (“the relevant period”).

2

If the relevant period is 12 months or less, this Schedule (apart from this paragraph) applies as if IAS financial statements had been drawn up in respect of the relevant period.

3

If the relevant period is more than 12 months, this Schedule (apart from this paragraph) applies as if IAS financial statements had been drawn up in respect of each period to which sub-paragraph (4) applies.

4

This sub-paragraph applies to a period if—

a

it is the first period of 12 months falling within the relevant period,

b

it is a period of 12 months falling within the relevant period that begins immediately after the end of the period mentioned in paragraph (a), or immediately after the end of a period determined under this paragraph, or

c

it is a period of less than 12 months that—

i

begins immediately after the end of the period mentioned in paragraph (a) or after the end of a period determined under paragraph (b), and

ii

ends at the end of the relevant period.

5

In this paragraph references to IAS financial statements of the worldwide group for a period are to financial statements of the group for the period drawn up in accordance with international accounting standards.

90References to amounts disclosed in financial statements

1

References in this Schedule to amounts disclosed in financial statements include an amount comprised in an amount so disclosed.

2

References in this Schedule to amounts disclosed in financial statements do not include, in the case of an amount that—

a

is an amount mentioned in paragraph 73(1)(a) to (g), and

b

has been capitalised and is accordingly included in the balance sheet comprised in the financial statements,

any part of that amount that was included in a balance sheet comprised in financial statements for an earlier period.

3

References in this Schedule to amounts disclosed in financial statements do not include—

a

any amount disclosed in respect of a group pension scheme, or

b

any amount disclosed in respect of any entity that is not a member of the group.

91Translation of amounts disclosed in financial statements into sterling

1

References in this Schedule (except in Part 2) to an amount disclosed in financial statements for a period are, where the amount is expressed in a currency other than sterling, to that amount translated into its sterling equivalent.

2

The exchange rate by reference to which the amount is to be translated is the average rate of exchange for the period calculated from daily spot rates.

92Expressions taking their meaning from international accounting standards

1

For the purposes of this Schedule the following expressions have the meaning for the time being given by international accounting standards—

“effective interest method”;

“entity”;

“parent”;

“subsidiary”.

2

The Commissioners may by order amend this paragraph.

93Meaning of “relevant accounting period”

For the purposes of this Schedule a “relevant accounting period” of a company, in relation to a period of account of the worldwide group, means any accounting period that falls wholly or partly within the period of account of the worldwide group.

94Meaning of “the Commissioners” and “HMRC”

In this Schedule—

“the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;

“FSA Handbook” means the Handbook made by the Financial Services Authority under FISMA 2000;

“HMRC” means Her Majesty’s Revenue and Customs.

Part 11Consequential amendments and commencement

Consequential amendments

95

In section 98 of TMA 1970 (special returns etc), in the first column of the Table, insert at the end—

regulations under paragraph 24, 25, 26, 36 or 38 of Schedule 15 to FA 2009.

96

In paragraph 5 of Schedule 28AA to ICTA (provision not at arm’s length), after sub-paragraph (8) (as inserted by paragraph 14 of Schedule 14 to this Act) insert—

9

For the purposes of sub-paragraph (1), Schedule 15 to FA 2009 (tax treatment of financing costs and income) is to be disregarded.

97Commencement

This Schedule has effect in relation to periods of account of the worldwide group—

a

that begin on or after 1 January 2010, or

b

to which paragraph 98 applies.

98Anti-avoidance: change of period of account of worldwide group

This paragraph applies to a period of account of the worldwide group (“the relevant period of account”) if—

a

the ultimate parent of the group changes the date to which financial statements of the group are drawn up,

b

as a result of the change, the relevant period of account—

i

begins before 1 January 2010, and

ii

includes a period that would, if the change had not been made, have fallen within a period of account beginning on or after that date, and

c

the main purpose, or one of the main purposes, of the ultimate parent of the group in making the change is to secure that the first period of account in relation to which this Schedule has effect does not include any period falling within the relevant period of account.

99Transitional provision

1

An amount that would, apart from this paragraph, meet condition A, B or C in paragraph 54 (definition of “financing expense amount”) does not meet that condition if it is a debit that, but for a relevant enactment, would be brought into account for the purposes of corporation tax in an accounting period beginning before 1 January 2010.

2

For this purpose the following are “relevant enactments”—

a

section 373 of CTA 2009 (late interest treated as not accruing until paid in some cases),

b

section 407 of that Act (postponement until redemption of debits for connected companies’ deeply discounted securities),

c

section 409 of that Act (postponement until redemption of debits for close companies’ deeply discounted securities), and

d

regulation 3A of the Loan Relationships and Derivative Contracts (Change of Accounting Practice) Regulations 2004 (S.I. 2004/3271) (prescribed debits and credits brought into account over prescribed period).

3

An amount that would, apart from this paragraph, meet condition A, B or C in paragraph 55 (definition of “financing income amount”) does not meet that condition if it is a credit that, but for the regulation mentioned in sub-paragraph (2)(d) of this paragraph, would be brought into account for the purposes of corporation tax in an accounting period beginning before 1 January 2010.

SCHEDULE 16Controlled foreign companies

Section 36

Part 1Abolition of acceptable distribution policy exemption

1Abolition of acceptable distribution policy exemption

1

ICTA is amended as follows.

2

In section 748(1) (cases where apportionment under section 747(3) does not apply), omit paragraph (a) (including the “or” at the end).

3

In Schedule 25 (supplementary provision in relation to cases where apportionment under section 747(3) does not apply), omit Part 1 (acceptable distribution policy).

Consequential amendments

2

1

ICTA is amended as follows.

2

Omit section 754A (returns where it is not established whether acceptable distribution policy applies).

3

In section 801 (dividends paid between related companies: relief for UK and third country taxes), omit subsections (2A)(aa), (2B), (6) and (7).

4

Omit section 801C (double taxation relief: separate streaming of dividend so far as representing an ADP dividend of a CFC).

5

In section 803A (foreign taxation of group as single entity), omit subsection (1A).

6

In Schedule 24 (assumptions for calculating chargeable profits, creditable tax and corresponding UK tax of foreign companies), omit—

a

in paragraph 1(3A), paragraph (b)(ii) (and the “and” before it) and the words “or which is an ADP exempt period” (in both places),

b

paragraph 1(6),

c

paragraph (b) of paragraph 2(1) (and the “or” before it),

d

paragraph (b) of paragraph 4(1A) (and the “or” before it),

e

paragraph 4(3A),

f

in paragraph 9(1)(c), “, and is not to be assumed by virtue of paragraph 2(1)(b) above to have been resident,”, and

g

paragraph (b) of paragraph 10(1) (and the “or” before it).

3

In paragraph 116 of Schedule 29 to FA 2002 (assumptions for calculating chargeable profits of CFCs in connection with intangible fixed assets), omit paragraph (b) of sub-paragraph (2) (and the “or” before it).

4

In section 870 of CTA 2009 (assumptions for calculating chargeable profits of CFCs in connection with intangible fixed assets), omit—

a

paragraph (b) of subsection (3) (and the “or” before it), and

b

subsection (7).

5

In consequence of the amendments made by paragraphs 1 to 4, omit—

a

in FA 1990, section 67(3)(b) and (c),

b

in FA 1994, section 134,

c

in FA 1996, in Schedule 36, paragraphs 3(3), (8) and (9) and 4(2) and (3)(b),

d

in FA 1998, in Schedule 17, paragraphs 10, 17(2) to (5) and 26 to 28,

e

in FA 1999, section 88,

f

in FA 2000, in Schedule 30, paragraph 13,

g

in FA 2001, section 82,

h

in FA 2005, sections 89 and 90,

i

in FA 2007, in Schedule 7, paragraph 56,

j

in FA 2008, section 64(4) and, in Schedule 17, paragraph 29, and

k

in this Act, section 57(4).

6Commencement

The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies beginning on or after 1 July 2009.

7Periods straddling 1 July 2009

1

Where a controlled foreign company has an accounting period (“the straddling accounting period”) that—

a

begins before 1 July 2009, and

b

ends on or after that date,

the straddling accounting period is to be treated as split.

2

Where this paragraph provides that the straddling accounting period is to be treated as “split”—

a

that part of the straddling accounting period that falls before 1 July 2009 and that part of the straddling accounting period that falls on or after that date are to be treated for the purposes of Chapter 4 of Part 17, and Part 18, of ICTA as separate accounting periods, and

b

the company’s chargeable profits for the straddling accounting period, and its creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a just and reasonable basis.

8Transitional provision

1

The amendments made by this Part do not affect the application of sections 801, 801C or 803A of, or Part 1 of Schedule 25 to, ICTA in relation to dividends paid on or after 1 July 2009 if they are paid for accounting periods beginning before that date.

2

Sub-paragraph (3) applies where a dividend of a controlled foreign company is paid during the second of the two accounting periods provided for by paragraph 7(2).

3

For the purposes of Part 1 of Schedule 25 to ICTA, section 799 of that Act has effect as if the reference in subsection (3)(c) to the last period for which accounts of the company were made up which ended before the dividend became payable were to the first of the two accounting periods provided for by paragraph 7(2).

9Interpretation

The following expressions have the same meaning for the purposes of this Part as they have for the purposes of Chapter 4 of Part 17 of ICTA—

“accounting period”;

“chargeable profits”;

“controlled foreign company”;

“creditable tax”.

Part 2Amendment of exempt activities exemption

Abolition of special rules for holding companies other than local holding companies

10

1

Part 2 of Schedule 25 to ICTA (exempt activities) is amended as follows.

2

In paragraph 6 (definition of exempt activities)—

a

in sub-paragraph (1)(c), for “(2), (3), (4) or (4A)” substitute “(2) or (3)”,

b

in sub-paragraph (3)(b), omit “or superior holding companies”,

c

omit sub-paragraphs (4) to (4BB),

d

in sub-paragraph (5)—

i

for “sub-paragraphs (3) to (4B)” substitute “sub-paragraph (3)”, and

ii

omit “or superior holding company”,

e

in sub-paragraph (5ZA), omit “or superior holding company”,

f

in sub-paragraph (5ZB), omit “or superior holding company”,

g

in sub-paragraph (5A), for “sub-paragraphs (3) to (4B)” substitute “sub-paragraph (3)”,

h

omit sub-paragraph (5B),

i

in sub-paragraph (5C), omit “or superior holding company”, and

j

in sub-paragraph (6), for “sub-paragraphs (1) to (4BB) above” substitute “this paragraph”.

3

In paragraph 8(3) (paragraph 6(1)(b) condition), omit “or superior holding company”.

4

In paragraph 12 (definition of “holding company” etc)—

a

in sub-paragraph (1), for “paragraph 12A below and in” substitute “in”,

b

in sub-paragraph (4), omit “or (4), as the case may be,”, and

c

in sub-paragraph (5)—

i

in the words before paragraph (a), for “sub-paragraphs (3) and (4)” substitute “sub-paragraph (3)”, and

ii

in paragraph (a), omit “or superior holding company”.

5

Omit paragraph 12A (definition of “superior holding company” etc).

11

In consequence of the amendments made by paragraph 10, omit—

a

in FA 1998, in Schedule 17, paragraphs 30(4)(a), (5), (6) and (8), 31, 32(2) and (3)(a) and 33,

b

in FA 2000, in Schedule 31, paragraph 7(2) to (7), (10) and (11), and

c

in FA 2003, in Schedule 42, paragraph 2(2).

12Commencement

1

The amendments made by this Part have effect in relation to accounting periods of controlled foreign companies beginning on or after the commencement date.

2

For this purpose “the commencement date” means—

a

in relation to a controlled foreign company other than a qualifying holding company, 1 July 2009, and

b

in relation to a qualifying holding company, 1 July 2011.

13Meaning of “qualifying holding company” and “exempt holding company”

1

In this Part “qualifying holding company” means a controlled foreign company that was an exempt holding company in relation to the last accounting period to end before 1 July 2009.

2

For the purposes of sub-paragraph (1) paragraphs 14 and 15 are to be disregarded.

3

For the purposes of this Part a company is an “exempt holding company” in relation to an accounting period if—

a

throughout the period the company is, within the meaning of Part 2 of Schedule 25 to ICTA, engaged in exempt activities, and

b

paragraph 6(4) or (4A) of that Schedule applies to the company in relation to the period.

14Periods straddling 1 July 2009

1

Where a controlled foreign company has an accounting period (“the straddling accounting period”) that—

a

begins before 1 July 2009, and

b

ends on or after that date,

the straddling accounting period is to be treated as split.

2

Where this paragraph provides that the straddling accounting period is to be treated as “split”—

a

that part of the straddling accounting period that falls before 1 July 2009 and that part of the straddling accounting period that falls on or after that date are to be treated for the purposes of Chapter 4 of Part 17 of ICTA as separate accounting periods, and

b

the company’s gross income for the straddling accounting period, and its chargeable profits and creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a time basis according to the respective lengths of the periods.

15Qualifying holding companies: periods straddling 1 July 2011

1

Where a qualifying holding company has an accounting period (“the straddling accounting period”) that—

a

begins before 1 July 2011, and

b

ends on or after that date,

the straddling accounting period is to be treated as split.

2

Where this paragraph provides that a straddling accounting period of a company is to be treated as “split”—

a

that part of the straddling accounting period that falls before 1 July 2011 and that part of the straddling accounting period that falls on or after that date are to be treated for the purposes of Chapter 4 of Part 17 of ICTA as separate accounting periods, and

b

the company’s gross income for the straddling accounting period, and its chargeable profits and creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a time basis according to the respective lengths of the periods.

16Qualifying holding companies: definition of “relevant accounting period”

For the purposes of paragraph 17 an accounting period of a qualifying holding company is a “relevant accounting period” if it—

a

begins on or after 1 July 2009, and

b

ends on or before the 1 July 2011.

17Qualifying holding companies: treatment during two years before 1 July 2011

1

In its application in relation to a relevant accounting period of a qualifying holding company, Part 2 of Schedule 25 to ICTA has effect subject to the modifications in this paragraph.

2

Sub-paragraph (4) or (4A) of paragraph 6 applies to a company only if—

a

the condition specified in that sub-paragraph is met, and

b

conditions A and B are met.

3

Condition A is that at all material times the company was a member of a group with the same ultimate corporate parent.

4

For this purpose the following times are “material”—

a

the beginning of 9 December 2008, and

b

all times during the accounting period in question.

5

Condition B is that amount X does not exceed amount Y.

6

Amount X is the amount of the company’s gross income in the accounting period in question that is non-qualifying gross income.

7

Amount Y is (subject to sub-paragraph (8))—

a

where there are three reference periods in relation to the company, the greatest of the amounts of the company’s non-qualifying gross income in each of those periods,

b

where there are two reference periods in relation to the company, the greater of the amounts of the company’s non-qualifying gross income in each of those periods,

c

where there is one reference period in relation to the company, the amount of the company’s non-qualifying gross income in that period, or

d

where there is no reference period in relation to the company, the amount of the company’s non-qualifying gross income in the period of 12 months ending with 9 December 2008.

8

Where the number of days in the period by reference to which amount X is determined is not the same as the number of days in the period by reference to which amount Y is determined, amount Y is to be multiplied by—

DXDYmath

where—

DX is the number of days in the period by reference to which amount X is determined, and

DY is the number of days in the period by reference to which amount Y is determined.

9

In this paragraph—

“non-qualifying gross income” means gross income that does not satisfy the test in paragraph 6(3), (4) or (4A) of Schedule 25 to ICTA;

“a reference period”, in relation to a company, means an accounting period of the company that—

a

is one of the last three accounting periods of the company to end before 9 December 2008, and

b

is an accounting period in relation to which the company is an exempt holding company.

18Meaning of “ultimate corporate parent” and “group” for the purposes of paragraph 17(3)

1

In paragraph 17(3) the “ultimate corporate parent”, in relation to a group, means a member of the group that—

a

is a body corporate, and

b

is not a subsidiary (whether direct or indirect) of another body corporate.

2

A reference in this paragraph to a body corporate does not include—

a

the Crown,

b

a Minister of the Crown,

c

a government department,

d

a Northern Ireland department, or

e

a foreign sovereign power.

3

In paragraph 17(3) and this paragraph “group” has the meaning for the time being given by international accounting standards.

4

In this paragraph “subsidiary” has the meaning for the time being given by international accounting standards.

19Reference periods: anti-avoidance

1

This paragraph applies where, on or after 9 December 2008, a company alters its accounting date so that any period (“period A”) that would otherwise have fallen in an accounting period ending on or after 9 December 2008 falls instead in an accounting period ending before that date.

2

The reference in paragraph (a) of the definition of “a reference period” in paragraph 17(9) to 9 December 2008 is to be treated as a reference to the beginning of period A.

20Interpretation

The following expressions have the same meaning for the purposes of this Part as they have for the purposes of Chapter 4 of Part 17 of ICTA—

“accounting period”;

“chargeable profits”;

“control”;

“controlled foreign company”;

“creditable tax”;

“gross income”.

Part 3Reduction in chargeable profits for certain financing income

Reduction in chargeable profits for certain financing income

21

ICTA is amended as follows.

22

In the following provisions, after “751A” insert “or 751AA”—

a

section 747(3A) and (5A) (imputation of chargeable profits and creditable tax of controlled foreign companies),

b

section 749(10) (residence),

c

section 749A(9) (elections and designations under section 749: supplementary provisions), and

d

section 750(3)(ab) (territories with a lower level of taxation).

23

After section 751A insert—

751AAReduction in chargeable profits for certain financing income

1

This section applies if—

a

an apportionment under section 747(3) falls to be made as regards an accounting period (“the relevant accounting period”) of a controlled foreign company,

b

the chargeable profits of the controlled foreign company for the relevant accounting period would, apart from this section, include an amount of income in respect of a payment made by another company (“the payer”),

c

the amount that the payer brings into account for the purposes of corporation tax in respect of the payment is reduced (in part or in full) by virtue of Part 3 of Schedule 15 to FA 2009 (tax treatment of financing costs and income), and

d

a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in the relevant accounting period.

2

The UK resident company may make an application to the Commissioners for Her Majesty’s Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period (“the chargeable profits”) to be reduced by an amount (“the specified amount”) specified in the application (including to nil).

3

If the Commissioners grant the application—

a

the chargeable profits are treated as reduced by the specified amount, and

b

the controlled foreign company’s creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in the chargeable profits,

for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose).

4

The Commissioners may grant the application only if they are satisfied that the specified amount does not exceed the relevant amount.

5

In subsection (4) “the relevant amount” means the amount (if any) by which it is just and reasonable that the chargeable profits should be treated as reduced, having regard to the effect of Parts 3 and 4 of Schedule 15 to FA 2009 on amounts brought into account for the purposes of corporation tax by the payer, or any other company.

24

1

Section 751B (supplementary) is amended as follows.

2

In the heading, for “Section 751A” substitute “Sections 751A and 751AA”.

3

In subsections (1), (2), (3) (in each place) and (5), after “751A” insert “or 751AA”.

4

In subsection (8)—

a

after ““the relevant amount”” insert

a

in the case of an appeal in respect of the refusal of an application under section 751A,

b

after “mentioned in that subsection” insert

, and

b

in the case of an appeal in respect of the refusal of an application under section 751AA, has the meaning given by subsection (5) of that section.

5

In subsection (10)—

a

after “751A” insert “or 751AA”, and

b

after “751A(1)” insert “or 751AA(1)”.

25Commencement