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Finance (No. 3) BillPage 20

(ii) (before sub-paragraph (i) applies) there ceases to
be a connection between the two groups.

(3) After that subsection insert—

(2AA) Where this subsection applies—

(a) 5in a case within subsection (2A)(d)(ii), for the purposes of this
section (other than subsection (2A)) as it applies as respects the
acquisition, company A and any associated company are to be
treated as having ceased to be members of the second group at
the time the connection between the two groups ceases,

(b) 10subsection (1) has effect in relation to company A’s ceasing to be
a member of the second group as if it had been the second group
of which both companies had been members at the time of the
acquisition, and

(c) subsection (2) may operate to prevent subsection (1) applying
15by virtue of paragraph (b), unless subsection (2AB) applies.

(2AB) This subsection applies if company A’s ceasing to be a member of the
first group at the same time as one or more associated companies forms
part of arrangements the main purpose, or one of the main purposes, of
which is the avoidance of a liability to corporation tax.

(4) 20In subsection (2B) for “if, at the time when company A ceases to be a member
of the second group” substitute “at a particular time if, at that time,”.

(5) The amendments made by this section have effect in relation to a company in
any case in which the time of the company’s ceasing to be a member of the first
group is on or after 23 March 2011.

32 25Leasing businesses

Schedule 6 contains provision about leasing businesses carried on by
companies alone or in partnership.

33 Long funding finance leases

(1) Chapter 6 of Part 2 of CAA 2001 (which includes provision about lessees under
30long funding leases) is amended as follows.

(2) In section 70C (long funding finance lease: amount of capital expenditure),
after subsection (4) insert—

(4A) But where the minimum lease payments include a relievable amount,
the present value of that amount must be excluded in determining the
35commencement PVMLP.

(4B) An amount (“amount X”) is a relievable amount if—

(a) an arrangement is in place under which all or part of any
residual amount (as defined in section 70YE) is guaranteed by
the lessee or a person connected with the lessee,

(b) 40amount X is within the minimum lease payments because of
that arrangement (see subsection (1)(a) of that section), and

(c) it is reasonable to assume that, were amount X to be incurred
under the arrangement, relief would be available as a result

Finance (No. 3) BillPage 21

(beyond relief, by virtue of this section and section 70E, because
amount X is within those minimum lease payments).

(4C) In deciding for the purposes of subsection (4B)(c) whether relief would
be available as a result, no account is to be taken of—

(a) 5any part of the arrangement other than the part by virtue of
which all or part of the residual amount is guaranteed, or

(b) any other arrangement connected with the arrangement or
forming part of a set of arrangements that includes the
arrangement.

(3) 10In section 70D (long funding finance lease: additional expenditure: allowances
for lessee), after subsection (1) insert—

(1A) Any increase attributable to a relievable amount is to be ignored for the
purposes of subsection (1)(d).

(1B) Subsections (4B) and (4C) of section 70C apply (with any necessary
15modifications) for the purposes of this section as for the purposes of
that section.

(4) In section 70E (disposal events and disposal values), in subsection (2C)(b), after
“section 70YE)” insert “other than any relievable payment”.

(5) In that section, after subsection (2D) insert—

(2DA) 20A payment (“payment X”) is a relievable payment if—

(a) an arrangement is in place under which all or part of any
residual amount (as defined in section 70YE) is guaranteed by
the lessee or a person connected with the lessee,

(b) payment X is within the minimum lease payments because of
25that arrangement (see subsection (1)(a) of that section), and

(c) it is reasonable to assume that relief would be available as a
result of making payment X (beyond relief, by virtue of section
70C or 70D and this section, because payment X is within those
minimum lease payments).

(2DB) 30For the purposes of subsection (2DA)(c)—

(a) “relief” has the meaning given in section 70C, and

(b) subsection (4C) of that section applies as it applies for the
purposes of subsection (4B)(c) of that section.

(6) The amendments made by subsections (2) and (3) have effect in cases where the
35arrangement is entered into on or after 9 March 2011.

(7) The amendments made by subsections (4) and (5) have effect in relation to
payments made on or after 9 March 2011 (regardless of when the arrangement
was entered into).

34 Investment companies

40Schedule 7 contains provision about investment companies.

Finance (No. 3) BillPage 22

Exemptions and reliefs

35 Reduction in childcare relief for higher earners

Schedule 8 contains provision for reducing childcare relief for higher earners.

36 Childcare: salary sacrifice etc and the national minimum wage

(1) 5In section 270A of ITEPA 2003 (limited exemption for qualifying childcare
vouchers), after subsection (5) insert—

(5A) Where the scheme under which the vouchers are provided involves—

(a) relevant salary sacrifice arrangements, or

(b) relevant flexible remuneration arrangements,

10Condition C is not prevented from being met by reason only that the
scheme is not open to relevant low-paid employees.

(5B) In subsection (5A)—

(2) In section 318A of that Act (exemption for childcare other than employer-
30provided care), after subsection (5) insert—

(5A) Where the scheme under which the care is provided involves—

(a) relevant salary sacrifice arrangements, or

(b) relevant flexible remuneration arrangements,

Condition C is not prevented from being met by reason only that the
35scheme is not open to relevant low-paid employees.

(5B) In subsection (5A)—

(3) The amendments made by this section have effect for the tax year 2005-06 and
subsequent tax years.

37 Accommodation expenses of MPs

(1) 10In section 292 of ITEPA 2003 (accommodation expenses of MPs), after
subsection (4) insert—

(5) The reference in subsection (1) to a payment made to a member of the
House of Commons under section 5(1) of the Parliamentary Standards
Act 2009 includes a payment made under that section to another person
15at the direction of a member (see section 6(7) of that Act).

(2) The amendment made by this section has effect in relation to payments made
under section 5(1) of the Parliamentary Standards Act 2009 on or after 1
November 2010.

38 Experts seconded to European Union bodies

(1) 20In Chapter 8 of Part 4 of ITEPA 2003 (employment income: special kinds of
employment), after section 304 insert—

304A Experts seconded to other European Union bodies

(1) No liability to income tax arises in respect of any subsistence
allowances paid by a relevant EU body to persons who, because of their
25expertise in matters relating to the subject matter of the functions of the
relevant EU body, have been seconded to the body by their employers.

(2) Each of the following is a “relevant EU body”—

(a) the European Medicines Agency, established as the European
Agency for the Evaluation of Medicinal Products by Council
30Regulation (EEC) No 2309/93 of 22 July 1993,

(b) the European Police College, established by Council Decision of
20 September 2005 (2005/681/JHA),

(c) the European Banking Authority, established by Regulation
(EU) No 1093/2010 of 24 November 2010, and

(d) 35any other body established by an EU instrument which is
designated as a relevant EU body for the purposes of this
section by an order made by the Treasury.

(2) The amendment made by this section has effect in relation to subsistence
allowances paid in respect of periods beginning on or after 1 January 2011.

39 40Employment income: exemption for fees relating to monitoring schemes

(1) In Chapter 11 of Part 4 of ITEPA 2003 (employment income: miscellaneous

Finance (No. 3) BillPage 24

exemptions), after section 326 insert—

Monitoring schemes
326A Fees relating to monitoring schemes relating to vulnerable persons

(1) No liability to income tax arises by virtue of the payment or
5reimbursement of a fee in respect of an application to join the scheme
administered under section 44 of the Protection of Vulnerable Groups
(Scotland) Act 2007 (asp 14)2007 (asp 14) (scheme to collate and disclose information
about individuals working with vulnerable persons).

(2) The Treasury may by order amend subsection (1) so as—

(a) 10to add to the fees covered by that subsection a fee of a specified
kind payable in connection with a scheme for England and
Wales or Northern Ireland which corresponds to the scheme
administered under section 44 of the Protection of Vulnerable
Groups (Scotland) Act 2007, or

(b) 15to amend or remove a reference to a fee added under paragraph
(a).

(2) The amendment made by this section has effect for the tax year 2010-11 and
subsequent tax years.

40 Individual investment plans for children

(1) 20Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans)
is amended in accordance with subsections (2) to (5).

(2) In section 694 (income from individual investment plans), after subsection (1)
insert—

(1A) In subsection (1) “income of an individual from investments under a
25plan” includes income from investments which is treated as the
individual’s income by virtue of section 629 (income paid to relevant
children of settlor).

(3) After section 695 insert—

695A Investment plans for children

(1) 30This section applies where investment plan regulations provide that
income of a child from investments under a plan (a “child plan”) is
exempt from income tax (either wholly or to such extent as is specified
in the regulations).

(2) In addition to any provision which may be made by virtue of any other
35provision of this Chapter, investment plan regulations may—

(a) specify descriptions of persons by whom investments may be
made for a child,

(b) provide that withdrawals may be made only in the
circumstances specified in the regulations, and

(c) 40provide that, in the case of a child who is under 16, the plan
managers may act only on the direction of a person of a
description specified in the regulations.

(3) They may also provide—

Finance (No. 3) BillPage 25

(a) that any assignment of, or agreement to assign, investments
under a child plan, and any charge on or agreement to charge
any such investments, is void,

(b) that, on the bankruptcy of a child with investments under a
5child plan, the entitlement to those investments does not pass to
any trustee or other person acting on behalf of the child’s
creditors, and

(c) that, where a contract is entered into by or on behalf of a child
who is 16 or over in connection with a child plan under which
10investments are held—

(i) by the child, or

(ii) by another child in relation to whom the child has
parental responsibility,

the contract has effect as if the child had been 18 or over when
15it was entered into.

(4) Where, by virtue of provision made in investment plan regulations
under subsection (2)(a), investments are made for a child under a child
plan, for the purposes of this Chapter the child is treated as having
made those investments.

(5) 20In this section—

and any reference to investments being held by a child includes a
35reference to investments being held by plan managers on behalf of the
child by virtue of section 696(1).

(4) In section 699 (non-entitlement to exemption), at the end insert—

(9) In this section references to an investor include an individual entitled
to an exemption given by investment plan regulations by virtue of
40section 694(1A).

(5) In section 701 (general and supplementary powers), at the end insert—

(6) In this section references to an investor include an individual entitled
to an exemption given by investment plan regulations by virtue of
section 694(1A).

(6) 45In section 151 of TCGA 1992 (personal equity plans), in subsection (2)—

(a) for “section 694(1) and (2)” substitute “section 694(1) to (2)”, and

(b) for the words from “but with” to the end substitute “but with the

Finance (No. 3) BillPage 26

following modifications—

(a) any reference to income tax is to be read as a reference to
capital gains tax,

(b) the reference in section 695A(1) to the case where
5regulations provide that income of a child from
investments under a plan is exempt from income tax is
to be read as a reference to the case where regulations
provide that a child who invests under a plan is entitled
to relief from capital gains tax in respect of the
10investments,

(c) the reference in section 695A(4) to that Chapter is to be
read as a reference to this section, and

(d) that Chapter has effect as if sections 699(9) and 701(6)
were omitted.

41 15Gift aid: increase of limits on total value of benefits associated with gifts

(1) In section 418 of ITA 2007 (gifts to charities by individuals: restrictions on
associated benefits), in subsection (3), for “£500” substitute “£2,500”.

(2) In section 197 of CTA 2010 (gifts to charities by companies: restrictions on
associated benefits), in subsection (3), for “£500” substitute “£2,500”.

(3) 20Accordingly, omit section 60(1)(b) of FA 2007.

(4) The amendments made by subsections (1) and (3) have effect in relation to gifts
made on or after 6 April 2011.

(5) The amendment made by subsection (2) has effect in relation to gifts made in
an accounting period ending on or after 1 April 2011.

42 25Enterprise investment scheme: amount of relief

(1) Part 5 of ITA 2007 (enterprise investment scheme) is amended in accordance
with subsections (2) to (4).

(2) In section 158 (form and amount of EIS relief), in subsection (2A) for “20%”
substitute “30%”.

(3) 30In the following provisions for “EIS rate” substitute “EIS original rate”—

(a) section 209(3);

(b) section 210(1)(b);

(c) section 213(2);

(d) section 220(1)(b);

(e) 35section 224(2);

(f) section 229(1)(b).

(4) After section 256 insert—

256A Meaning of “the EIS original rate”

In this Part “the EIS original rate”, in relation to EIS relief, means the EIS
40rate for the tax year for which the EIS relief was obtained.

(5) In Schedule 4 to that Act (index of defined expressions), at the appropriate
place insert—

Finance (No. 3) BillPage 27

EIS original
rate (in Part 5)
section 256A

(6) This section comes into force on such day as the Treasury may by order
appoint.

(7) 5The amendments made by this section have effect in relation to the tax year
2011-12 and subsequent tax years.

(8) But where the EIS relief attributable to shares was obtained for the tax year
2007-08 or an earlier tax year, the references to the EIS original rate in the
provisions mentioned in paragraph (a) to (f) of subsection (3) are to be read as
10references to 20%.

43 Relief for expenditure on R&D by SMEs

(1) Part 13 of CTA 2009 (additional relief for expenditure on research and
development) is amended as follows.

(2) Chapter 2 (relief for small or medium-sized enterprises (“SMEs”)) is amended
15in accordance with subsections (3) to (6).

(3) In section 1044 (additional deduction in calculating profits of trade), in
subsection (8), for “75%” substitute “100%”.

(4) In section 1045 (alternative treatment for pre-trading expenditure: deemed
trading loss), in subsection (7), for “175%” substitute “200%”.

(5) 20In section 1055 (tax credit: meaning of “Chapter 2 surrenderable loss”), in
subsection (2)(b), for “175%” substitute “200%”.

(6) In section 1058 (amount of tax credit), in subsection (1)(a), for “14%” substitute
“12.5%”.

(7) Chapter 7 (relief for SMEs and large companies: vaccine research etc) is
25amended in accordance with subsections (8) to (11).

(8) In section 1089 (SMEs: amount of deduction), in subsection (2), for “40%”
substitute “20%”.

(9) In section 1090 (modification of section 1089 for larger SMEs), in subsection (2),
for “40%” substitute “20%”.

(10) 30In section 1092 (SMEs: deemed trading loss for pre-trading expenditure), in
subsection (8)—

(a) in paragraph (a), for “40%” substitute “20%”, and

(b) in paragraph (b), for “140%” substitute “120%”.

(11) In section 1104 (tax credit: meaning of “Chapter 7 surrenderable loss”), in
35subsection (5), for “140%” substitute “120%”.

(12) This section comes into force on such day as the Treasury may by order
appoint.

(13) The amendments made by this section have effect in relation to expenditure
incurred on or after 1 April 2011.

Finance (No. 3) BillPage 28

Chargeable gains

44 Value shifting

Schedule 9 contains provision about value shifting.

45 Company ceasing to be member of a group

5Schedule 10 contains provision about the consequences, for the purposes of
corporation tax on chargeable gains, of a company ceasing to be a member of a
group.

46 Pre-entry losses

Schedule 11 contains provision about losses accruing to a company before the
10time when it becomes a member of a group of companies and losses accruing
on assets held by a company at such a time.

Foreign profits

47 Controlled foreign companies

Schedule 12 contains provision in relation to controlled foreign companies.

48 15Profits of foreign permanent establishments etc

Schedule 13 contains provision about the profits of foreign permanent
establishments of UK resident companies etc.

Investment trusts

49 Meaning of “investment trust”

(1) 20Chapter 4 of Part 24 of CTA 2010 (investment trusts) is amended as follows.

(2) For section 1158 (meaning of “investment trust” in the Corporation Tax Acts)
substitute—

1158 Meaning of “investment trust”

(1) For the purposes of the Corporation Tax Acts a company is an
25“investment trust” with respect to an accounting period if—

(a) conditions A to C are met throughout the period, and

(b) the company is approved for the period by the Commissioners
for Her Majesty’s Revenue and Customs (see section 1159).

(2) Condition A is that the business of the company consists of investing its
30funds in shares, land or other assets with the aim of spreading
investment risk and giving members of the company the benefit of the
results of the management of its funds.

(3) Condition B is that the shares making up the company’s ordinary share
capital (or, if there are such shares of more than one class, those of each
35class) are admitted to trading on a regulated market.

Finance (No. 3) BillPage 29

(4) For this purpose “regulated market” has the same meaning as in
Directive 2004/39/EC of the European Parliament and of the Council
on markets in financial instruments (see Article 4.1(14)).

(5) Condition C is that the company is not—

(a) 5a venture capital trust (within the meaning of Part 6 of ITA
2007), or

(b) a company UK REIT (within the meaning of Part 12 of this Act).

(6) The Treasury may by regulations provide—

(a) for one or both of conditions A and B to be treated as met in the
10cases, and subject to any conditions, specified in the regulations,
and

(b) for the period for which the condition or conditions are treated
as met.

(7) The Treasury may also by regulations amend subsection (3) or (4).

(8) 15A statutory instrument containing the first regulations under
subsection (6) may not be made unless a draft of the instrument has
been laid before and approved by a resolution of the House of
Commons.

(9) Any other statutory instrument containing regulations under this
20section is subject to annulment in pursuance of a resolution of the
House of Commons.

(3) For section 1159 (conditions for approval) substitute—

1159 Approval

(1) The Treasury may by regulations make provision about the approval of
25a company for an accounting period for the purposes of section
1158(1)(b), including provision about—

(a) applications for approval,

(b) the determination of applications for approval,

(c) requirements to be met by the company while approved,

(d) 30the withdrawal of approval by notice, or

(e) the consequences of the withdrawal of approval.

(2) The regulations may, in particular—

(a) include provision under which an application for approval—

(i) is to be made by reference to the accounting period in
35which the application is made or such earlier or later
accounting period as may be specified in the
application, and

(ii) is to constitute an application for approval for that and
all subsequent accounting periods,

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