Finance (No. 3) Bill (HC Bill 200)

Part 2 Corporation tax

CTA 2009

7 (1) CTA 2009 is amended as follows.

(2) 5In section 264 (overview of Chapter)—

(a) after subsection (2) insert—

“(2A) It matters whether an overseas property business consists of
or includes the commercial letting of furnished holiday
accommodation in one or more EEA states for the purposes
10of—

(a) Chapter 4 of Part 4 of CTA 2010 (relief for property
business losses: see section 67A of that Act),

(b) certain provisions of TCGA 1992 (see section 241A of
that Act), and

(c) 15CAA 2001 (see, for example, sections 250 and 250A of
that Act).”,

(b) in subsection (3), for “the above provisions” substitute “the
provisions mentioned in subsection (2)”, and

(c) after subsection (3) insert—

“(4) 20This Chapter also supplements the provisions mentioned in
subsection (2A) by providing in certain circumstances for the
profits of the EEA furnished holiday lettings part of an
overseas property business to be calculated separately (see
sections 250 and 250A).”

(3) 25In section 267 (meaning of “qualifying holiday accommodation”)—

(a) in subsection (2), for “140 days” substitute “210 days”, and

(b) in subsection (3), for “70 days” substitute “105 days”.

(4) In section 268 (under-used holiday accommodation: averaging elections)—

(a) in subsection (3), for “70” substitute “105”, and

(b) 30after subsection (6) insert—

“(7) This section is to apply separately in relation to
accommodation in the United Kingdom and accommodation
in EEA states other than the United Kingdom.”

(5) After section 268 insert—

“268A 35 Under-used holiday accommodation: letting condition not met

(1) This section applies if—

(a) during an accounting period a company lets qualifying
holiday accommodation,

(b) the accommodation is let by the company—

(i) 40during the next accounting period, or

(ii) during the next two accounting periods,

(c) the accommodation would (apart from this section) not be
qualifying holiday accommodation—

(i) during the accounting period mentioned in
paragraph (b)(i), or

(ii) during both of the accounting periods mentioned in
paragraph (b)(ii),

5only because of a failure to meet the letting condition (see
section 267(3)), and

(d) there was a genuine intention to meet the letting condition for
the period within subsection (1)(c)(i) or each of the periods
within subsection (1)(c)(ii) (as the case may be).

(2) 10If the company makes an election in respect of that accommodation
for any accounting period in respect of which the failure mentioned
in subsection (1)(c) occurs, the accommodation is to be treated as
qualifying holiday accommodation for that accounting period.

(3) Subsection (2) does not apply for the purposes of section 268 or
15subsection (1)(a).

(4) If an election is not made for the first of the accounting periods
within subsection (1)(c)(ii), an election may not be made for the
second.

(5) An election for an accounting period must be made within the period
20of two years beginning at the end of the accounting period.

(6) References in subsection (1)(a) and (c) to qualifying holiday
accommodation include accommodation treated as such under
section 268.”

(6) In section 269 (capital allowances and loss relief), in the heading, for “relief”
25substitute “relief: UK property business”.

(7) After section 269 insert—

“269A Capital allowances and loss relief: overseas property business

(1) If an overseas property business consists of both—

(a) the commercial letting of furnished holiday accommodation
30in one or more EEA states (“the EEA furnished holiday
lettings part”), and

(b) other businesses or transactions (“the other part”),

this section requires separate calculations to be made of the profits of
the EEA furnished holiday lettings part and the other part.

(2) 35The calculations must be made if—

(a) section 250 or 250A of CAA 2001 (giving effect to allowances
and charges) applies to the EEA furnished holiday lettings
part or the other part, or

(b) any provision of Chapter 2, 4 or 6 of Part 4 of CTA 2010 (loss
40relief) applies in relation to a loss made in either of those
parts.

(3) If there is a letting of accommodation only part of which is holiday
accommodation, such apportionments are to be made for the
purposes of this section as are just and reasonable.”

(8) 45In section 748 (assets held for purposes of property business)—

(a) in subsection (4), for paragraphs (a) to (c) substitute—

“(a) an ordinary UK property business,

(b) a UK furnished holiday lettings business,

(c) an ordinary overseas property business, or

(d) 5an EEA furnished holiday lettings business.”, and

(b) for subsection (5) substitute—

“(5) In this section—

• “commercial letting of furnished holiday
  accommodation” has the meaning given by section
  10265,

• “EEA furnished holiday lettings business” means an
  overseas property business so far as it consists of the
  commercial letting of furnished holiday
  accommodation in one or more EEA states,

• 15“ordinary overseas property business” means an
  overseas property business except so far as it is an
  EEA furnished holiday lettings business,

• “ordinary UK property business” means a UK property
  business except so far as it is a UK furnished holiday
  20lettings business, and

• “UK furnished holiday lettings business” means a UK
  property business so far as it consists of the
  commercial letting of furnished holiday
  accommodation.”

25CTA 2010

8 (1) CTA 2010 is amended as follows.

(2) In section 65 (UK furnished holiday lettings business treated as trade)—

(a) in subsection (3), after “Part” insert “(but as modified below)”,

(b) in subsection (4), omit “Accordingly”, and

(c) 30after that subsection insert—

“(4A) Chapter 2 applies as if sections 37 to 44 and 48 to 54 were
omitted.”

(3) After section 67 (overseas property business to be commercial or carried on
for statutory functions) insert—

“67A 35EEA furnished holiday lettings business treated as trade

(1) This section applies if a company carries on an EEA furnished
holiday lettings business.

(2) “EEA furnished holiday lettings business” means an overseas
property business so far as it consists of the commercial letting of
40furnished holiday accommodation (within the meaning of Chapter 6
of Part 4 of CTA 2009) in one or more EEA states.

(3) For the purposes of this Part (but as modified below) the company is
treated as carrying on a single trade—

(a) which consists of every commercial letting of furnished
holiday accommodation comprised in the company’s EEA
furnished holiday lettings business, and

(b) in relation to which the profits of which are chargeable to
5corporation tax under Chapter 2 of Part 3 of CTA 2009.

(4) Sections 66 and 67 apply in relation to the company’s overseas
property business as if the lettings mentioned in subsection (3)(a)
were not included in it.

(5) Chapter 2 applies as if sections 37 to 44 and 48 to 54 were omitted.

(6) 10If there is a letting of accommodation only part of which is furnished
holiday accommodation, just and reasonable apportionments are to
be made for the purpose of determining what is comprised in the
trade treated as carried on.”

Commencement

9 15Subject to paragraphs 10 and 11, this Part has effect in relation to accounting
periods beginning on or after 1 April 2011.

10 Paragraph 7(3) and (4)(a) have effect in relation to accounting periods
beginning on or after 1 April 2012 (but do not have effect in relation to
relevant periods which begin before, and end on or after, 1 April 2012).

11 20Paragraph 7(5) has effect where the accounting period mentioned in section
268A(1)(a) of CTA 2009 begins on or after 1 April 2010.

Part 3 Capital allowances

CAA 2001

12 (1) 25CAA 2001 is amended as follows.

(2) After section 13A (use for other purposes of plant or machinery previously
used for long funding lease) insert—

“13B Use for other purposes of plant or machinery: property businesses

(1) This section applies if a person who has been using plant or
30machinery for the purposes of a relevant qualifying activity—

(a) ceases to use the plant or machinery for that purpose without
ceasing to use it for the purposes of another relevant
qualifying activity (“the other activity”) carried on by the
person, and

(b) 35on the date of the cessation, owns the plant or machinery as a
result of having incurred capital expenditure on its provision
for the purposes of the other activity.

(2) The person is to be treated—

(a) as having incurred capital expenditure (“notional
40expenditure”) on the provision of the plant or machinery for
the purposes of the other activity on the day after the
cessation,

(b) as owning the plant or machinery as a result of having
incurred that expenditure, and

(c) as if the plant or machinery on or after that day were different
plant or machinery from the plant or machinery before that
5day.

(3) Subject to subsection (4), the amount of the notional expenditure is
the market value of the plant or machinery on the date of cessation.

(4) If the market value is greater than the actual expenditure, the amount
of the notional expenditure is the amount of the actual expenditure.

(5) 10“Relevant qualifying activity” means—

(a) ordinary UK property business or UK furnished holiday
lettings business, or

(b) ordinary overseas property business or EEA furnished
holiday lettings business,

15(as the case may be).”

(3) In section 15 (qualifying activities)—

(a) in subsection (1)(b), after “ordinary” insert “UK”,

(b) in subsection (1)(c), for “furnished” substitute “UK furnished”,

(c) in subsection (1)(d), for “overseas” substitute “ordinary overseas”,

(d) 20after subsection (1)(d) insert—

“(da) an EEA furnished holiday lettings business,”,

(e) in subsection (3)(a), after “ordinary” insert “UK”, and

(f) in subsection (3)(b), for “overseas” substitute “ordinary overseas”.

(4) In section 16 (ordinary property business)—

(a) 25in the heading, after “ordinary” insert “UK”,

(b) after ““ordinary” insert ““UK”, and

(c) for “furnished” substitute “UK furnished”.

(5) In section 17 (furnished holiday lettings businesses)—

(a) in the heading, for “Furnished” substitute “UK furnished”,

(b) 30in subsection (1), for ““furnished” substitute ““UK furnished”, and

(c) in subsection (2), after “All” insert “such”.

(6) After section 17 insert—

“17A Ordinary overseas property business

In this Part “ordinary overseas property business” means an
35overseas property business except in so far as it is an EEA furnished
holiday lettings business.

17B EEA furnished holiday lettings businesses

(1) In this Part “EEA furnished holiday lettings business” means an
overseas property business which consists in, or so far as it consists
40in, the commercial letting of furnished holiday accommodation in
one or more EEA states.

(2) All such commercial lettings of furnished holiday accommodation
made by a particular person or partnership or body of persons are to
be treated as one qualifying activity.

(3) Subsections (3) and (4) of section 17 are to apply for the purposes of
this section as they apply for the purposes of that section.”

(7) In section 28(1) and (2) (thermal insulation of buildings)

(a) after “ordinary” insert “UK”, and

(b) 5for “overseas” substitute “ordinary overseas”.

(8) In section 33(8) (personal security)—

(a) in paragraph (b), after “ordinary” insert “UK”,

(b) in paragraph (c), for “furnished” substitute “UK furnished”,

(c) in paragraph (d), for “overseas” substitute “ordinary overseas”, and

(d) 10omit the “or” at the end of paragraph (d), and after that paragraph
insert—

“(da) an EEA furnished holiday lettings business, or”.

(9) In section 35(1) (expenditure on plant or machinery for use in dwelling-
house not qualifying expenditure in certain cases)—

(a) 15in paragraph (a), after “ordinary” insert “UK”, and

(b) in paragraph (b), for “overseas” substitute “ordinary overseas”.

(10) In section 63(3) (cases in which disposal value is nil)—

(a) in paragraph (b), after “ordinary” insert “UK”,

(b) in paragraph (c), for “furnished” substitute “UK furnished”,

(c) 20in paragraph (d), for “overseas” substitute “ordinary overseas”, and

(d) omit the “or” at the end of paragraph (d), and after that paragraph
insert—

“(da) an EEA furnished holiday lettings business, or”.

(11) In section 248 (ordinary property businesses)—

(a) 25in the heading, after “Ordinary” insert “UK”, and

(b) after “ordinary” insert “UK”.

(12) In section 249 (furnished holiday lettings businesses)—

(a) in the heading, for “Furnished” substitute “UK furnished”, and

(b) in subsection (1), for “furnished” substitute “UK furnished”.

(13) 30In section 250 (overseas property businesses)—

(a) in the heading, for “Overseas” substitute “Ordinary overseas”, and

(b) for “overseas” substitute “ordinary overseas”.

(14) After section 250 insert—

“250A EEA furnished holiday lettings businesses

(1) 35If the qualifying activity of a person who is entitled or liable to an
allowance or charge for a chargeable period is an EEA furnished
holiday lettings business, the allowance or charge is to be given effect
in calculating the profits of that business by treating—

(a) the allowance as an expense of that business, and

(b) 40the charge as a receipt of that business.

(2) Section 67A of CTA 2010 (letting of EEA furnished holiday
accommodation treated as trade for purposes of loss relief rules, etc)
applies to profits calculated in accordance with subsection (1).”

(15) In section 536(5)(a) (contributions not made by public bodies and not eligible
for tax relief)—

(a) in sub-paragraph (i), after “ordinary” insert “UK”,

(b) in sub-paragraph (ii), for “furnished” substitute “UK furnished”,

(c) 5in sub-paragraph (iii), for “overseas” substitute “ordinary overseas”,
and

(d) after sub-paragraph (iii) insert—

“(iiia) an EEA furnished holiday lettings business;”.

(16) In Schedule A1 (first-year tax credits)—

(a) 10in paragraph 5(1), for “a UK property business other than a furnished
holiday lettings business” substitute “an ordinary UK property
business or an ordinary overseas property business”,

(b) in paragraph 11(1), for “or a furnished holiday lettings business”
substitute “, a UK furnished holiday lettings business or an EEA
15furnished holiday lettings business”,

(c) in paragraph 12(1), for “a UK property business other than a
furnished holiday lettings business” substitute “an ordinary UK
property business or an ordinary overseas property business”,

(d) in paragraph 20—

(i) 20in sub-paragraph (a), for “or a furnished holiday lettings
business” substitute “, a UK furnished holiday lettings
business or an EEA furnished holiday lettings business”, and

(ii) in sub-paragraph (c), for “a UK property business (other than
a furnished holiday lettings business)” substitute “an
25ordinary UK property business or an ordinary overseas
property business”, and

(e) in paragraph 21(1)—

(i) for “a UK” substitute “an ordinary UK”, and

(ii) for “overseas” substitute “ordinary overseas”.

(17) 30In Part 2 of Schedule 1—

(a) omit the entries for “furnished holiday lettings business” and
“ordinary property business”, and

(b) at the appropriate place insert—

Commencement

13 This Part has effect—

(a) for corporation tax purposes, in relation to chargeable periods
beginning on or after 1 April 2011, and

(b) for income tax purposes, in relation to chargeable periods beginning
on or after 6 April 2011.

Part 4 Chargeable gains

5TCGA 1992

14 (1) TCGA 1992 is amended as follows.

(2) In section 241 (furnished holiday lettings)—

(a) in the heading, for “Furnished” substitute “UK furnished”,

(b) in subsection (3A), omit “Schedule 6 (retirement relief etc)”, and

(c) 10in subsection (4), after “furnished holiday accommodation” insert “in
the United Kingdom”.

(3) After that section insert—

“241A EEA furnished holiday lettings

(1) The following provisions of this section shall have effect with respect
15to the treatment for the purposes of tax on chargeable gains of the
commercial letting of furnished holiday accommodation in EEA
states other than the United Kingdom.

(2) For the purposes of this section as it applies to capital gains tax, the
“commercial letting of furnished holiday accommodation” has the
20same meaning as it has for the purposes of Chapter 6 of Part 3 of
ITTOIA 2005.

(3) For the purposes of this section as it applies to corporation tax in
respect of chargeable gains, the “commercial letting of furnished
holiday accommodation” has the same meaning as it has for the
25purposes of Chapter 6 of Part 4 of CTA 2009.

(4) Subject to subsections (6) to (10) below, for the purposes of the
provisions mentioned in subsection (5) below—

(a) any overseas property business which consists of, or so far as
it consists of, the commercial letting of furnished holiday
30accommodation in one or more EEA states shall be treated as
a trade, and

(b) all such lettings made by a particular person or partnership
or body of persons shall be treated as one trade.

(5) The provisions referred to in subsection (4) above are—

• 35sections 152 to 157 (roll-over relief on replacement of business
  assets),

• section 165 (gifts relief),

• section 169S(1) (entrepreneurs’ relief),

• section 253 (relief for loans to traders), and

• 40Schedule 7AC (exemptions for disposals by companies with
  substantial shareholdings).

(6) Subject to subsection (7) below, for the purposes of the provisions
mentioned in subsection (5) above as they apply by virtue of this

section, where in any chargeable period a person makes a
commercial letting of furnished holiday accommodation in an EEA
state other than the United Kingdom—

(a) the accommodation shall be taken to be used in that period
5only for the purposes of the trade of making such lettings,
and

(b) that trade shall be taken to be carried on throughout that
period.

(7) Subsection (6) does not apply to any part of a chargeable period
10during which the accommodation is neither let commercially nor
available to be so let unless it is prevented from being so let or
available by any works of construction or repair.

(8) Where—

(a) a gain to which section 222 applies accrues to any individual
15on the disposal of an asset, and

(b) by virtue of subsection (4) above the amount or value of the
consideration for the acquisition of the asset is treated as
reduced under section 152 or 153,

the gain to which section 222 applies shall be reduced by the amount
20of the reduction mentioned in paragraph (b) above.

(9) Where there is a letting of accommodation only part of which is
holiday accommodation such apportionments shall be made for the
purposes of this section as are just and reasonable.

(10) Where a person has been charged to tax in respect of chargeable
25gains otherwise than in accordance with the provisions of this
section, such assessment, reduction or discharge of an assessment,
or, where a claim for repayment is made, such repayment, shall be
made as may be necessary to give effect to those provisions.

(11) In this section “overseas property business” means—

(a) 30an overseas property business within the meaning of the
Income Tax Acts (see section 989 of ITA 2007), or

(b) a overseas property business within the meaning of the
Corporation Tax Acts (see section 1119 of CTA 2010).”

Commencement etc

15 35Subject to paragraph 16, this Part has effect—