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Finance (No. 3) BillPage 160

(9) If the lease also relates to land or assets that are not plant or
machinery, the present value of the lease is so much of the present
value of the amounts mentioned in subsection (2) as is attributable to
the plant or machinery on a just and reasonable apportionment.

(10) 5In this section, “qualifying UK or foreign tax” and “residual amount”
have the meaning given in section 70YE of CAA 2001.

Consequential amendments

23 In section 267A of CAA 2001 (restriction on effect of election), in subsection
(2), for “is qualifying leased plant or machinery” substitute “falls within
10section 387(7) of CTA 2010 (if the business is carried on otherwise than in
partnership) or within section 410(6) of that Act (if the business is carried on
in partnership)”.

24 In section 948 of CTA 2010 (modified application of CAA 2001), in
subsection (6), before paragraph (a) insert—

(za) 15section 398G of this Act (sale of lessors: transfers into and out
of A after election under section 398A),.

25 (1) Section 950 of CTA 2010 (transfers of trades involving business of leasing
plant or machinery) is amended as follows.

(2) In subsection (5), for the words from “its market value” to the end substitute
20“the higher of—

(a) its ascribed value immediately before the transfer of the
trade, and

(b) the disposal value that the predecessor would be required to
bring into account under Part 2 of CAA 2001 in respect of it
25as a result of the transfer of the trade.

(3) In subsection (6)—

(a) before the definition of “business of leasing plant or machinery”
insert—

(b) omit the definition of “market value”.

26 (1) In Schedule 4 to CTA 2010 (index of defined expressions), omit the entry for
35“market value (in relation to plant or machinery) (in Chapters 3 to 6 of Part
9)”.

(2) In that Schedule, insert the following entry at the appropriate place—

ascribed value (in relation to plant or
machinery) (in Chapters 3 to 6 of Part 9)
section 437A.

40Application of new provisions

27 (1) The amendments made by paragraphs 2 to 5 and 7 to 15, and the general
paragraphs so far as relevant to those amendments, have effect where the

Finance (No. 3) BillPage 161

relevant day (as defined for the purposes of the amended provision) falls on
or after 23 March 2011.

(2) The amendment made by paragraph 6(3), and the general paragraphs so far
as relevant to that amendment, have effect in relation to disposal events
5taking place on or after 23 March 2011 (including in cases where the election
was made before that date).

(3) The amendments made by paragraphs 6(2) and 23 to 25, and the general
paragraphs so far as relevant to those amendments, have effect in relation to
transfers or successions taking place on or after 23 March 2011 (including, in
10the case of the amendment made by paragraph 6(2), where the election was
made before that date).

(4) The general paragraphs are—

(a) paragraph 1,

(b) paragraphs 16 to 22, and

(c) 15paragraph 26.

Section 34

SCHEDULE 7 Investment companies

Amendments of Chapter 4 of Part 2 of CTA 2010

1 (1) Section 6 of CTA 2010 (UK resident company operating in sterling and
20preparing accounts in another currency) is amended as follows.

(2) In subsection (1), after “company” insert “(other than a UK resident
investment company)”.

(3) After that subsection insert—

(1A) This section also applies if, for a period of account, a UK resident
25investment company—

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

(b) either—

(i) has sterling as its designated currency for that period
30of account (see sections 9A and 9B), or

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

2 (1) 35Section 7 of that Act (UK resident company operating in currency other than
sterling and preparing accounts in another currency) is amended as follows.

(2) In subsection (1), in paragraph (a), after “company” insert “(other than a UK
resident investment company)”.

(3) After that subsection insert—

(1A) 40This section also applies if, for a period of account, a UK resident
investment company—

Finance (No. 3) BillPage 162

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

(b) either—

(i) has another currency as its designated currency for
5that period (see sections 9A and 9B), or

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

(c) 10that other currency is not sterling.

(4) In subsection (2), in step 1, for “functional” substitute “relevant”.

(5) In subsection (3) for “functional” substitute “relevant”.

(6) After that subsection insert—

(4) In subsections (2) and (3) “the relevant currency” means the currency
15other than sterling referred to in subsection (1)(c) or (1A)(c).

3 After section 9 of that Act insert—

9A Designated currency of a UK resident investment company

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

(2) 20A company (“X”) may elect a currency as its designated currency
only if—

(a) at the time the election is made condition A or B is met, or

(b) the election is made in the period (if any) beginning with the
company’s incorporation and ending immediately before its
25first accounting period.

(3) But an election made under subsection (2)(b) is void if, at the time X’s
first accounting period begins, neither condition A nor condition B is
met.

(4) Condition A is that a significant proportion of X’s assets and
30liabilities are denominated in the currency.

(5) Condition B is that—

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

(b) it is reasonable to assume that the two companies will meet
35the consolidation condition.

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

(a) for a period which includes that time, the financial results of
X are comprised in financial statements of Y’s group
40prepared in accordance with acceptable accounting practice,
or

(b) if no financial statements of the group are prepared in
accordance with acceptable accounting practice for a period
which includes that time, the financial results of X would be
45comprised in financial statements of Y’s group for a period

Finance (No. 3) BillPage 163

which includes that time if such statements were prepared in
accordance with international accounting standards.

(7) In subsection (6)—

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

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

(1) 20An election under section 9A(2)(a) takes effect at the beginning of the
first period of account of X beginning after the election is made.

(2) An election under section 9A(2)(b) is treated as taking effect at the
time of X’s incorporation.

(3) An election has effect until the end of the first period of account of X
25in which—

(a) X makes another election, or

(b) a revocation event occurs.

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

(a) 30it is not the case that a significant proportion of X’s assets and
liabilities are denominated in the currency to which the
election relates, and

(b) it is not the case that the currency is the functional currency
of another company which, with X, met the consolidation
35condition (within the meaning of section 9A(6)) at any time
during the preceding period of account.

(5) Where the election is made under section 9A(2)(b), a revocation
event occurs in the period of account in which X’s first accounting
period begins only if—

(a) 40Condition A and not Condition B is satisfied at the beginning
of that accounting period, and

(b) the condition in subsection (4)(a) is met at any time during
the period of account but after the first accounting period
begins.

(6) 45In this section references to “X” are to be construed in accordance
with section 9A.

Finance (No. 3) BillPage 164

4 In section 17 of that Act (interpretation of Chapter 4 of Part 2), after
subsection (3) insert—

(3A) In this Chapter “investment company” means a company whose
business consists wholly or mainly in the making of investments and
5the principal part of whose income is derived from those
investments.

Amendments of ICTA

5 In Schedule 24 to ICTA (assumptions for calculating chargeable profits,
creditable tax and corresponding United Kingdom tax of foreign
10companies), in paragraph 4 (reliefs under Corporation Tax Acts dependent
upon the making of a claim or election), after sub-paragraph (2) insert—

(2B) For the purposes of sub-paragraph (1) an election under section
9A of CTA 2010 (designated currency of a UK resident investment
company) is not to be regarded as an election upon which relief
15under the Corporation Tax Acts is dependent, and sub-paragraph
(2)(b) does not apply in relation to such an election.

(2C) But if, by notice given to an officer of the Board, the United
Kingdom resident company which has or, as the case may be, any
two or more United Kingdom resident companies which together
20have, a majority interest in the company so request, the company
shall be assumed (subject to section 9A(2) of CTA 2010) to have
made an election under section 9A of that Act in the form specified
in the notice (and accordingly that section and section 9B of that
Act apply to determine the effect (if any) of that election).

25Amendments of CTA 2009

6 (1) Section 328 of CTA 2009 (loan relationships: exchange gains and losses) is
amended as follows.

(2) In subsection (2), after “subsections” insert “(2A),”.

(3) After that subsection insert—

(2A) 30Subsection (1) does not apply to an exchange gain or loss of an
investment company (within the meaning of section 17 of CTA 2010)
which would not have arisen but for—

(a) an election made by the company under section 9A of that
Act (designated currency of investment companies) taking
35effect, or ceasing to have effect, from the beginning of the
period of account of the company in which the gain or loss
arises (“the relevant period”), or

(b) a change in the company’s functional currency (within the
meaning of section 17(4) of that Act) as between the relevant
40period and a period of account ending in the 12 months
immediately preceding that period.

7 (1) Section 606 of that Act (derivative contracts: exchange gains and losses) is
amended as follows.

(2) In subsection (2), after “subsections” insert “(2A),”.

Finance (No. 3) BillPage 165

(3) After that subsection insert—

(2A) Subsection (1) does not apply to an exchange gain or loss of an
investment company (within the meaning of section 17 of CTA 2010)
which would not have arisen but for—

(a) 5an election made by the company under section 9A of that
Act (designated currency of investment companies) taking
effect or ceasing to have effect from the beginning of the
period of account of the company in which the gain or loss
arises (“the relevant period”), or

(b) 10a change in the company’s functional currency (within the
meaning of section 17(4) of that Act) as between the relevant
period and a period of account ending in the 12 months
immediately preceding that period.

Commencement

8 (1) 15The amendments made by this Schedule have effect in relation to periods of
account beginning on or after 1 April 2011.

(2) An election may be made or revoked for the purposes of section 9A of CTA
2010 (as inserted by paragraph 3) at any time on or after 9 December 2010.

(3) An election made before the day on which this Act is passed must be made
20by notice in writing to an officer of Revenue and Customs.

(4) Schedule 1A to TMA 1970 does not apply to an election made before the day
on which this Act is passed.

Section 35

SCHEDULE 8 Reduction in childcare relief for higher earners

25Introduction

1 ITEPA 2003 is amended as follows.

Childcare vouchers

2 (1) Section 270A (limited exemption for qualifying childcare vouchers) is
amended as follows.

(2) 30In subsection (2), for “C” substitute “D”.

(3) After subsection (5B) (inserted by section 36) insert—

(5C) Condition D is that the employer has, at the required time, made an
estimate of the employee’s relevant earnings amount for the tax year
in respect of which the voucher is provided (see section 270B).

(4) 35In paragraph (a) of subsection (6), for “£55” substitute “the appropriate
amount”.

Finance (No. 3) BillPage 166

(5) After that subsection insert—

(6ZA) In subsection (6)(a) “the appropriate amount”, in the case of an
employee, means—

(a) if the relevant earnings amount in the case of the employee
5for the tax year, as estimated in accordance with subsection
(5C), exceeds the higher rate limit for the tax year, £22,

(b) if the relevant earnings amount in the case of the employee
for the tax year, as so estimated, exceeds the basic rate limit
for the tax year but does not exceed the higher rate limit for
10the tax year, £28, and

(c) otherwise, £55.

(6) In subsection (11)—

(a) for “exempt amount” (in each place) substitute “amounts”,

(b) for “(6) above” substitute “(6ZA) above”, and

(c) 15for “318A(6)” substitute “318A(6A)”.

3 After section 270A insert—

270B Meaning of “relevant earnings amount” and “required time”

(1) For the purposes of section 270A, the “relevant earnings amount”, in
the case of an employee provided with vouchers by an employer for
20any qualifying week in a tax year, means—

(a) the aggregate of—

(i) the amount of any relevant earnings for the tax year
from employment by the employer, and

(ii) any amounts treated under Chapters 2 to 12 of Part 3
25as earnings from such employment, less

(b) the aggregate of any excluded amounts.

(2) But if the employee becomes employed by the employer during the
tax year, what would otherwise be the amount of the aggregate
mentioned in subsection (1)(a) is the relevant multiple of that
30amount; and the relevant multiple is—


where RD is the number of days in the period beginning with the day
on which the employee becomes employed by the employer and
ending with the tax year.

(3) 35In subsection (1)(a) “relevant earnings” means—

(a) salary, wages or fees, and

(b) any other earnings specified in regulations made by the
Treasury under this paragraph.

(4) In subsection (1)(b) “excluded amounts” means amounts specified in
40regulations made by the Treasury under this subsection.

(5) In section 270A “the required time”, in the case of an employee,
means—

(a) if the employee joins the scheme under which the vouchers
are provided at a time during the tax year, that time, and

(b) 45otherwise, the beginning of the tax year.

Finance (No. 3) BillPage 167

(6) For the purposes of subsection (5)(a) the employee is taken to join the
scheme as soon as—

(a) the employer has agreed that vouchers will be provided
under the scheme for the employee, and

(b) 5there is a child falling within section 270A(3)(a) or (b) in
relation to the employee.

(7) The Treasury may by order amend this section.

Childcare provided otherwise than at employer’s premises etc

4 (1) Section 318A (limited exemption for childcare provided otherwise than at
10employer’s premises etc) is amended as follows.

(2) In subsection (1), for “C” substitute “D”.

(3) After subsection (5B) (inserted by section 36) insert—

(5C) Condition D is that the employer has, at the required time, made an
estimate of the employee’s relevant earnings amount for the tax year
15in respect of which the care is provided (see section 318AA).

(4) In subsection (6), for “£55” substitute “the appropriate amount”.

(5) After that subsection insert—

(6A) In subsection (6) “the appropriate amount”, in the case of an
employee, means—

(a) 20if the relevant earnings amount in the case of the employee
for the tax year, as estimated in accordance with subsection
(5C), exceeds the higher rate limit for the tax year, £22,

(b) if the relevant earnings amount in the case of the employee
for the tax year, as so estimated, exceeds the basic rate limit
25for the tax year but does not exceed the higher rate limit for
the tax year, £28, and

(c) otherwise, £55.

5 After section 318A insert—

318AA Meaning of “relevant earnings amount” and “required time”

(1) 30For the purposes of section 318A, “relevant earnings amount”, in the
case of an employee provided with care by an employer for any
qualifying week in a tax year, means—

(a) the aggregate of—

(i) the amount of any relevant earnings for the tax year
35from employment by the employer, and

(ii) any amounts treated under Chapters 2 to 12 of Part 3
as earnings from such employment, less

(b) the aggregate of any excluded amounts.

(2) But if the employee becomes employed by the employer during the
40tax year, what would otherwise be the amount of the aggregate
mentioned in subsection (1)(a) is the relevant multiple of that
amount; and the relevant multiple is—


Finance (No. 3) BillPage 168

where RD is the number of days in the period beginning with the day
on which the employee becomes employed by the employer and
ending with the tax year.

(3) In subsection (1)—

(4) In section 318A “the required time”, in the case of an employee,
10means—

(a) if the employee joins the scheme under which the care is
provided at a time during the tax year, that time, and

(b) otherwise, the beginning of the tax year.

(5) For the purposes of subsection (5)(a) the employee is taken to join the
15scheme as soon as—

(a) the employer has agreed that care will be provided under the
scheme for the employee, and

(b) there is a child falling within section 318A(3)(a) or (b) in
relation to the employee.

(6) 20The Treasury may by order amend this section.

6 In subsection (1) of section 318D (childcare: power to vary exempt
amount)—

(a) for “318A(6)” substitute “318A(6A)”, and

(b) for “exempt amount) so as to substitute a different sum of money for
25that” substitute “amounts which are the exempt amount) so as to
substitute different sums of money for those”;

and, accordingly, in the heading of that section, after “vary” insert “amounts
which are the
”.

Commencement and transitional provision

7 30The amendments made by this Schedule have effect for the tax year 2011-12
and subsequent tax years.

8 (1) But the amendments made by paragraphs 2(2) to (5) and 3 to 5 do not apply
for a tax week in the case of an employee and employer and a scheme if—

(a) the employee joined the scheme before 6 April 2011,

(b) 35the employee has not ceased to be employed by the employer during
the period beginning with that date and ending with the tax week,
and

(c) during that period there has not been a continuous period of 52
weeks throughout which vouchers were not, or care was not, being
40provided for the employee under the scheme.

(2) For the purposes of sub-paragraph (1) the employee is taken to join the
scheme as soon as—

(a) the employer has agreed that vouchers, or care, will be provided
under the scheme for the employee, and

(b) 45there is a child falling within section 270A(3)(a) or (b), or section
318A(3)(a) or (b), of ITEPA 2003 in relation to the employee.

Finance (No. 3) BillPage 169

9 Regulations made under section 270B(3)(b) or (4) of ITEPA 2003 (inserted by
paragraph 3) on or before 31 December 2011 may have retrospective effect
in relation to the tax year 2011-12.

10 The amendments made by paragraphs 2(6) and 6 do not prevent the making
5of provision under section 270A(11)(a) or 318D(1) of ITEPA 2003 in relation
to sections 270A(6) and 318A(6) of that Act as, by virtue of paragraph 8, they
continue to have effect otherwise than as amended by this Schedule.

Section 44

SCHEDULE 9 Value shifting

10Amendments of TCGA 1992

1 In section 30 of TCGA 1992 (tax-free benefits)—

(a) in subsection (1)(a) omit “or a relevant asset”,

(b) for subsection (2) substitute—

(2) But, for the purposes of corporation tax, this section does not
15have effect if the disposal of the asset is a disposal by a
company of shares in, or securities of, another company (as to
which see section 31)., and

(c) omit subsection (8).

2 For sections 31 to 34 of TCGA 1992 (which make provision about disposals
20by companies of shares in or securities of other companies) substitute—

31 Disposal of shares or securities by a company

(1) For the purposes of corporation tax, subsection (2) has effect as
respects the disposal by a company (“the disposing company”) of
shares in, or securities of, another company if—

(a) 25arrangements have been made whereby the value of those
shares or securities, or any relevant asset, is materially
reduced,

(b) the main purpose, or one of the main purposes, of the
arrangements is to obtain a tax advantage, and

(c) 30the arrangements do not consist solely of the making of an
exempt distribution.

(2) Any allowable loss or chargeable gain accruing on the disposal is to
be calculated as if the consideration for the disposal were increased
by such amount as is just and reasonable having regard to—

(a) 35the arrangements, and

(b) any charge to, or relief from, corporation tax that, in the
absence of this section, would arise in consequence of the
disposal or the arrangements.

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