Finance (No. 4) Bill (HC Bill 325)

(5) An election made under section 357A by a company that has given notice under this section does not have effect in relation to any accounting period of the company that begins before the end of the period of 5 years beginning with the day after the last day of the accounting period specified in the notice.

Partnerships

357GB Application of this Part in relation to partnerships

(1) This section applies if a firm (within the meaning of CTA 2009) carries on a trade and any partner in the firm is a company within the charge to corporation tax.

Such a partner is referred to in this section as a “corporate partner”.

Such a partner is referred to in this section as a “corporate partner”.

(2) Subject to the following provisions of this section, this Part applies in relation to the firm as it applies in relation to a company.

(3) Any election under this Part—

(a) may be made or revoked not by the firm but instead by any one or more of the corporate partners (whether jointly or otherwise), and

(b) has effect in relation to each corporate partner making or revoking it as if made or revoked by the firm.

(4) Accordingly, any reference in section 357G(3) or 357GA(3) (time limit for making or revoking elections under section 357A) to the company making or revoking the election is to be read as a reference to the corporate partner so doing.

(5) Section 1261 of CTA 2009 (accounting periods of firms) applies for the purposes of this Part as it applies for the purposes of Part 17 of that Act.

(6) Section 357B (meaning of “qualifying company”) has effect as if in subsection (1) the words “in the case of a company that is a member of a group” were omitted.

(7) For the purposes of this Part the firm meets the development condition in relation to a right to which this Part applies if—

(a) the firm has at any time carried out qualifying development in relation to the right, or

(b) there is a relevant corporate partner in the firm who meets the development condition in relation to the right.

(8) A “relevant corporate partner” is a corporate partner who is entitled to a share of at least 40% of the profits or losses of the firm for any accounting period of the firm.

(9) Section 357BD applies for the purposes of subsection (7)(a) of this section as it applies for the purposes of section 357BC.

(10) Section 357BE (active ownership condition) has effect as if the reference in subsection (4) to section 357BC(2) or (3) included a reference to subsection (7)(a) of this section.

(11) Sections 357CL and 357CM (election for small claims treatment) have effect as if—

(a) any reference to a company having one or more associated companies were a reference to any corporate partner in relation to which an election under section 357CL has effect having one or more associated companies, and

(b) any reference to a company having no associated company were a reference to each such corporate partner having no associated company.

(12) Subsection (13) applies where a corporate partner is a party to an arrangement at any time during an accounting period of the firm which produces for the corporate partner a return within section 357CB(1)(c).

(13) For the accounting period of the firm the corporate partner’s share of a profit or loss of a trade carried on by the firm is determined for corporation tax purposes as if no election under section 357A had effect in relation to the trade.

Cost-sharing arrangements

357GC Application of this Part in relation to cost-sharing arrangements

(1) This section applies where a company is a party to an arrangement under which—

(a) one of the parties to the arrangement holds a qualifying IP right or an exclusive licence in respect of such a right,

(b) each of the parties to the arrangement is required to contribute to the cost of, or perform activities for the purpose of, creating or developing the invention or any item or process incorporating the invention,

(c) under the arrangement each of those parties—

(i) is entitled to a share of any income attributable to the right or licence, or

(ii) has one or more rights in respect of the invention, and

(d) the amount of any income received by each of those parties is proportionate to its participation in the arrangement as described in paragraph (b).

(2) The company is to be treated for the purposes of this Part as if it held the qualifying IP right or (as the case may be) the exclusive licence in respect of the qualifying IP right.

(3) But this section does not apply where the arrangement produces for the company a return within section 357CB(1)(c).

(4) The reference in subsection (1)(b) to developing the invention includes developing ways in which the invention may be used or applied.

Interpretation

357GD Meaning of “group”

(1) For the purposes of this Part a company (“company A”) is a member of a group at any time if any other company is at that time associated with company A.

(2) The group consists of company A and each company in relation to which the condition in subsection (1) is met.

(3) For the purposes of this section a company (“company B”) is associated with company A at a time (“the relevant time”) if any of the following five conditions is met.

(4) The first condition is that the financial results of company A and company B, for a period that includes the relevant time, meet the consolidation condition.

(5) The second condition is that there is a connection between company A and company B for the accounting period of company A in which the relevant time falls.

(6) The third condition is that, at the relevant time, company A has a major interest in company B or company B has a major interest in company A.

(7) The fourth condition is that—

(a) the financial results of company A and a third company, for a period that includes the relevant time, meet the consolidation condition, and

(b) at the relevant time the third company has a major interest in company B.

(8) The fifth condition is that—

(a) there is a connection between company A and a third company for the accounting period of company A in which the relevant time falls, and

(b) at the relevant time the third company has a major interest in company B.

(9) In this section, the financial results of any two companies for any period meet “the consolidation condition” if—

(a) they are required to be fully comprised in group accounts,

(b) they would be required to be fully comprised in such accounts but for the application of an exemption, or

(c) they are in fact fully comprised in such accounts.

(10) In subsection (9) “group accounts” means accounts prepared under—

(a) section 399 of the Companies Act 2006, or

(b) any corresponding provision of the law of a country or territory outside the United Kingdom.

(11) The following provisions apply for the purposes of this section—

• sections 466 to 471 of CTA 2009 (companies connected for accounting period), and

• sections 473 and 474 of CTA 2009 (meaning of “major interest”).

357GE Other interpretation

(1) In this Part—

• “invention”, in relation to a right to which this Part applies, means the item or process in respect of which the right is granted,

• “item” includes any substance,

• “the OECD Model Tax Convention” means—

  (a)

  the version of the Model Tax Convention on Income and on Capital published in July 2010 by the Organisation for Economic Co-operation and Development (“the OECD”), or

  (b)

  such other document approved and published by the OECD in place of that (or a later) version or in place of that Convention as is designated for the time being by order made by the Treasury,

• “the OECD transfer pricing guidelines” means—

  (a)

  the version of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations published in July 2010 by the OECD, or

  (b)

  such other document approved and published by the OECD in place of that (or a later) version or in place of those Guidelines as is designated for the time being by order made by the Treasury,

  including, in either case, such material published by the OECD as part of (or by way of update or supplement to) the version or other document concerned as may be so designated, and

• “qualifying residual profit” of a trade, in relation to any accounting period, is the amount obtained by the application of Steps 1 to 4 in section 357C or (as the case may be) section 357DA in relation to the trade for the accounting period.

(2) Any reference in this Part to calculating the profits of a trade of a company for an accounting period is a reference to calculating those profits for corporation tax purposes (and any reference to the profits

or losses of a trade of a company for an accounting period is to be read accordingly).”

(2) In Schedule 4 to CTA 2010 (index of defined expressions), at the appropriate place insert—

Part 2 Amendments of TIOPA 2010

2 In Part 4 of TIOPA 2010 (transfer pricing), Chapter 3 (exemptions from basic rule) is amended as follows.

3 In section 166 (exemption for small and medium-sized enterprises), in subsection (2)(a), for “section 167” substitute “sections 167 and 167A”.

4 After section 167 insert—

“167A Small enterprises: exception from exemption: transfer pricing notice

(1) Section 166(1) does not apply in relation to any provision made or imposed if—

(a) the potentially advantaged person is a small enterprise for the chargeable period,

(b) the person meets the condition in subsection (2), and

(c) the Commissioners for Her Majesty’s Revenue and Customs give that person a notice requiring the person to calculate the profits and losses of that chargeable period in accordance with section 147(3) or (5) in the case of that provision.

(2) A person meets the condition referred to in subsection (1)(b) if—

(a) provision has been made or imposed as between the person and any other person by means of a transaction or series of transactions,

(b) the basic pre-condition in section 147 is met in respect of the provision, and

(c) the transaction, or one or more of the series of transactions, is taken into account in calculating, for the purposes of Part 8A of CTA 2010 (profits arising from the exploitation of patents etc), the relevant IP profits of a trade of a person who is or was a party to the transaction or transactions.

(3) A notice under subsection (1) is referred to in this Chapter as a transfer pricing notice.”

5 In section 170 (appeals against transfer pricing notices), in subsection (1), for the words from “on the ground that” to the end substitute “on one of the following grounds—

“that the condition in section 167A(1)(b) is not met, or

(b) that the condition in section 168(1)(a) is not met.”

6 In section 171 (tax returns where transfer pricing notice given), in subsection (3)(a), before “medium-sized” insert “small or”.

Part 3 Commencement and transitional provision

Application

7 (1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after 1 April 2013 for which an election under section 357A of CTA 2010 has effect.

(2) Sub-paragraph (3) applies where a company has an accounting period beginning before 1 April 2013 and ending on or after that date (“the straddling period”).

(3) For the purposes of Part 8A of CTA 2010—

(a) so much of the straddling period as falls before 1 April 2013, and so much of that period as falls on or after that date, are treated as separate accounting periods, and

(b) any amounts brought into account for the purposes of calculating for corporation tax purposes the profits of any trade of the company for the straddling period are apportioned to the two separate accounting periods on such basis as is just and reasonable.

Special treatment of profits from patents etc to be phased in

8 (1) In each of the financial years in the Table below, the reference to RP in the formula in section 357A(3) of CTA 2010 is to be read as a reference to the percentage of RP given for that year—

(2) Sub-paragraph (3) applies where there is a set-off amount in relation to any trade of a company for an accounting period falling wholly or partly within a financial year mentioned in the Table in sub-paragraph (1) (“the relevant year”) and—

(a) section 357EB of CTA 2010 (allocation of set-off amount within group) applies in relation to the set-off amount (or so much of it as remains after the operation of section 357EA(2) of that Act) for a relevant accounting period falling wholly or partly within the financial year following the relevant year, or

(b) section 357EC of that Act (carry-forward of set-off amount) applies in relation to the set-off amount (or so much of it as remains after the operation of section 357EA(2) or 357EB(2) of that Act).

(3) For the purposes of section 357EB or (as the case may be) 357EC of CTA 2010 there is to be deducted from the relevant amount an amount equal to the appropriate fraction of that amount.

(4) The appropriate fraction is—

where P is—

“(a) the percentage given as the percentage of RP by that Table for the financial year following the relevant year, or

(b) where the relevant year is the financial year 2016, 100%.”

(5) If a company’s accounting period falls within more than one financial year—

(a) the amount of any relevant IP profits of a trade of the company for the accounting period, and

(b) where sub-paragraph (3) applies, the relevant amount (within the meaning of that sub-paragraph),

must for the purposes of this paragraph be apportioned between the financial years in which the accounting period falls on such basis as is just and reasonable.

(6) In this paragraph—

• “relevant accounting period” has the meaning given by section 357EB(3) of CTA 2010,

• “relevant IP profits”, in relation to a trade of a company for an accounting period, has the same meaning in this paragraph as in Part 8A of that Act, and

• “set-off amount”, in relation to a trade of a company for an accounting period, is to be read in accordance with Chapter 5 of that Act.

Section 20

SCHEDULE 3 Relief for expenditure on R&D

Introductory

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

Amount of relief for expenditure on R&D by small or medium-sized enterprises (“SMEs”)

2 (1) Chapter 2 (relief for SMEs: cost of R&D incurred by SME) is amended as follows.

(2) In section 1044 (additional deduction in calculating profits of trade), in subsection (8), for “100%” substitute “125%”.

(3) In section 1045 (alternative treatment for pre-trading expenditure: deemed trading loss), in subsection (7), for “200%” substitute “225%”.

(4) In section 1055 (tax credit: meaning of “Chapter 2 surrenderable loss”), in subsection (2)(b), for “200%” substitute “225%”.

(5) In section 1058 (amount of tax credit), in subsection (1)(a), for “12.5%” substitute “11%”.

Removal of R&D threshold

3 (1) Chapter 2 (relief for SMEs: cost of R&D incurred by SME) is amended as follows.

(2) In section 1043 (overview of Chapter), in subsection (3), omit paragraph (e) (but not the “and” after it).

(3) In section 1044 (additional deduction in calculating profits of trade), omit subsection (3).

(4) In section 1045 (alternative treatment for pre-trading expenditure: deemed trading loss)—

(a) in subsection (1), omit “, B”, and

(b) omit subsection (3).

(5) Omit section 1050 (R&D threshold).

4 (1) Chapter 3 (relief for SMEs: R&D sub-contracted to SME) is amended as follows.

(2) In section 1063 (additional deduction in calculating profits of trade)—

(a) in subsection (1), omit “, B”, and

(b) omit subsection (3).

(3) Omit section 1064 (R&D threshold).

5 (1) Chapter 4 (relief for SMEs: subsidised and capped expenditure on R&D ) is amended as follows.

(2) In section 1068 (additional deduction in calculating profits of trade)—

(a) in subsection (1), omit “, B”, and

(b) omit subsection (3).

(3) Omit section 1069 (R&D threshold).

6 (1) Chapter 5 (relief for large companies) is amended as follows.

(2) In section 1074 (additional deduction in calculating profits of trade)—

(a) in subsection (1), omit “, B”, and

(b) omit subsection (3).

(3) Omit section 1075 (R&D threshold).

7 (1) Chapter 7 (relief for SMEs and large companies: vaccine research etc) is amended as follows.

(2) In section 1085 (overview of Chapter), in subsection (5), omit paragraph (c).

(3) In section 1087 (deduction in calculating profits of trade)—

(a) in subsection (1), omit “, B”, and

(b) omit subsection (3).

(4) In section 1092 (SMEs: deemed trading loss for pre-trading expenditure), omit subsection (3).

(5) Omit section 1097 (R&D threshold).

8 In consequence of the amendments made by paragraphs 3 to 7, in Schedule 4 to CTA 2009 omit each of the entries for “R&D threshold”.

Company not a going concern when in administration or liquidation

9 Chapter 2 (relief for SMEs: cost of R&D incurred by SME) is amended as follows.

10 (1) Section 1046 (relief only available where company is going concern) is amended as follows.

(2) At the end of subsection (2) insert—

“This is subject to subsection (2A).”

(3) After subsection (2) insert—

“(2A) A company is not a going concern at any time if it is in administration or liquidation at that time.

(2B) For the purposes of this section a company is in administration if—

(a) it is in administration under Part 2 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(2C) For the purposes of this section a company is in liquidation if—

(a) it is in liquidation within the meaning of section 247 of that Act or Article 6 of that Order, or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.”

11 (1) Section 1057 (tax credit only available where company is going concern) is amended as follows.

(2) At the end of subsection (4) insert—

“This is subject to subsection (4A).”

(3) After subsection (4) insert—

“(4A) A company is not a going concern at any time if it is in administration or liquidation at that time.

(4B) For the purposes of this section a company is in administration if—

(a) it is in administration under Part 2 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(4C) For the purposes of this section a company is in liquidation if—

(a) it is in liquidation within the meaning of section 247 of that Act or Article 6 of that Order, or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.”

12 Chapter 7 (relief for SMEs and large companies: vaccine research etc) is amended as follows.

13 (1) Section 1094 (relief only available to SME where company is going concern) is amended as follows.

(2) At the end of subsection (2) insert—

“This is subject to subsection (2A).”

(3) After subsection (2) insert—

“(2A) A company is not a going concern at any time if it is in administration or liquidation at that time.

(2B) For the purposes of this section a company is in administration if—

(a) it is in administration under Part 2 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(2C) For the purposes of this section a company is in liquidation if—

(a) it is in liquidation within the meaning of section 247 of that Act or Article 6 of that Order, or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.”

14 (1) Section 1106 (tax credit only available where company is going concern) is amended as follows.

(2) At the end of subsection (4) insert—

“This is subject to subsection (4A).”

(3) After subsection (4) insert—

“(4A) A company is not a going concern at any time if it is in administration or liquidation at that time.

(4B) For the purposes of this section a company is in administration if—

(a) it is in administration under Part 2 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.

(4C) For the purposes of this section a company is in liquidation if—

(a) it is in liquidation within the meaning of section 247 of that Act or Article 6 of that Order, or

(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.”

Removal of limit on amount of tax credit based on PAYE and NIC liabilities

15 (1) Chapter 2 (relief for SMEs: cost of R&D incurred by SME) is amended as follows.

(2) In section 1058 (amount of tax credit), in subsection (1), omit paragraph (b) (and the “or” before it).

(3) Omit section 1059 (total amount of company’s PAYE and NIC liabilities).

Abolition of vaccine research relief for SMEs

16 (1) Section 1039 (overview of Part 13) is amended as follows.

(2) In subsection (6), for the words from “companies” to “companies)” substitute “large companies”.

(3) In subsection (7)—

(a) for “Chapters 2 and 7 also provide” substitute “Chapter 2 also provides”, and

(b) in paragraph (a), omit “or 7”.

17 In section 1042 (“relevant research and development”), in subsection (3), omit “SMEs and”.

18 In section 1046 (relief only available where company is going concern), in subsection (2)(b), omit “or Chapter 7”.

19 In section 1057 (tax credit only available where company is going concern), in subsection (4)(b), omit “or Chapter 7”.

20 Chapter 7 (relief for SMEs and large companies: vaccine research etc) is amended as set out in paragraphs 21 to 30.

21 (1) Section 1085 (overview of Chapter) is amended as follows.

(2) In subsection (1), for the words from “companies” to “companies)” substitute “large companies”.

(3) For subsection (3) substitute—

“(3) The relief available is a deduction under section 1087 (the amount of which is determined under section 1091).”

(4) Omit subsection (4).

(5) For subsection (5) substitute—

“(5) Sections 1098 to 1102 contain provision about when a company’s expenditure is “qualifying Chapter 7 expenditure” for the purposes of obtaining relief and when such expenditure is “for” an accounting period.”

(6) Omit subsection (6).

(7) In subsection (7), omit “or R&D tax credits”.

22 (1) Section 1087 (deduction in calculating profits of trade) is amended as follows.

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

(3) After subsection (4) insert—

“(4A) Condition D is that the company is a large company throughout the period.”

(4) For subsection (7) substitute—

“(7) For the amount of the deduction see section 1091.”

(5) In subsection (9)—

(a) in paragraph (a), omit “large”,

(b) omit paragraph (b), and

(c) in paragraph (d), for “sections 1099 and 1100” substitute “section 1100”.

23 (1) In section 1088 (large companies: declaration about effect of relief), in subsection (1), omit “large”.

(2) Accordingly, the heading of that section becomes “Declaration about effect of relief”.

24 Omit sections 1089 and 1090 (which relate only to SMEs).

25 (1) In section 1091 (large companies: amount of deduction), in subsection (1), omit paragraph (b) (and the “and” before it).

(2) Accordingly, the heading of that section becomes “Amount of deduction”.

26 Omit sections 1092 to 1096 and 1099 (which relate only to SMEs).

27 (1) In section 1100 (large companies: qualifying expenditure “for” an accounting period), for subsection (1) substitute—

“(1) A company’s qualifying Chapter 7 expenditure is “for” an accounting period if it is allowable as a deduction in calculating for corporation tax purposes the profits for the period of a trade carried on by the company.”

(2) Accordingly, the heading of that section becomes “Qualifying expenditure “for” an accounting period”.

28 Omit sections 1103 to 1111 (tax credits).

29 (1) Section 1112 (artificially inflated claims for relief or tax credit) is amended as follows.

(2) In subsection (1), for “the purposes mentioned in subsection (2)” substitute “the purpose of determining for an accounting period relief to which a company is entitled under this Chapter”.

(3) Omit subsection (2).

(4) In subsection (3)—

(a) at the end of paragraph (a) insert “or”, and

(b) omit paragraphs (c) and (d).

(5) Accordingly, the heading of that section becomes “Artificially inflated claims for relief”.

30 The heading of Chapter 7 becomes “Relief for large companies: vaccine research etc”.

31 (1) Chapter 8 (cap on aid for R&D ) is amended as follows.

(2) In section 1113 (cap on R&D aid under Chapter 2 or 7), in subsection (4)(b), omit “SMEs and”.

(3) In section 1115 (“the tax credits”), in subsection (1), omit “or 7”.

32 In consequence of the amendments made by paragraphs 16 to 31—

(a) in Schedule 4 to CTA 2009 (index of defined expressions), omit the entry for “Chapter 7 surrenderable loss”,

(b) in Schedule 1 to CTA 2010, omit paragraphs 672 to 674, and

(c) in section 43 of FA 2011, omit subsections (7) to (11).

Qualifying expenditure on externally provided workers

33 Chapter 9 (supplementary) is amended as follows.

34 (1) Section 1128 (“externally provided worker”) is amended as follows.

(2) In subsection (7), for “the staff provider” substitute “a person other than the company (the “staff controller”)”.

(3) After subsection (8) insert—

“(9) In sections 1129 to 1131 references to “staff controller” are to be read in accordance with subsection (7).”

35 (1) Section 1129 (connected persons) is amended as follows.

(2) In subsection (1), for paragraphs (b) and (c) substitute—

“(b) the company, the staff provider and (if different) the staff controller (or staff controllers) are all connected, and

(c) in accordance with generally accepted accounting practice—

(i) the whole of the staff provision payment has been brought into account in determining the staff provider’s profit or loss for a relevant period, and

(ii) all of the relevant expenditure of each staff controller has been brought into account in determining the staff controller’s profit or loss for a relevant period.”

(3) In subsection (2)(b), for “the staff provider’s relevant expenditure” substitute “the aggregate of the relevant expenditure of each staff controller”.

(4) In subsection (3)—

(a) for “of the staff provider” substitute “, in relation to a staff controller,”, and

(b) in paragraph (a), for “staff provider” substitute “staff controller”.

(5) In subsection (4)—

(a) after ““Relevant period”” insert “, in relation to a person,”, and

(b) in paragraph (a), for “staff provider” substitute “person”.

(6) In subsection (5)—

(a) for “the staff provider’s expenditure” substitute “the expenditure of a staff controller”, and

(b) for “the staff provider” substitute “a staff controller”.

(7) In subsection (7), for “staff provider” substitute “a staff controller”.

36 (1) Section 1130 (election for connected persons treatment) is amended as follows.

(2) For subsection (1) substitute—

“(1) If—

(a) a company makes a staff provision payment, and

(b) the company, the staff provider and (if different) the staff controller (or staff controllers) are not all connected,

they may jointly elect that section 1129 is to apply to them as if they were all connected.”

(3) In subsection (2), for “must be made” substitute “has effect”.

37 In section 1131 (qualifying expenditure on externally provided workers: other cases), in subsection (1), for paragraph (b) (but not the “and” following

it) substitute—

“(b) the company, the staff provider and (if different) the staff controller (or staff controllers) are not all connected,”.

Application

38 The amendments made by paragraphs 2 and 16 to 37 have effect in relation to expenditure incurred on or after 1 April 2012.

39 The amendments made by paragraphs 3 to 8 and 15 have effect in relation to accounting periods ending on or after 1 April 2012.

40 The amendments made by paragraphs 9 to 14 have effect in relation to claims or elections made on or after 1 April 2012.

Section 21

SCHEDULE 4 Real estate investment trusts

Introduction

1 Part 12 of CTA 2010 (real estate investment trusts) is amended as follows.

Being a UK REIT: conditions for company - close companies

2 (1) Section 525 (becoming a UK REIT: supplementary provision) is amended as follows.

(2) In subsection (1)(c) for “the conditions” substitute “conditions A, B, C, E and F”.

(3) In subsection (4)(a) omit “D,”.

(4) Omit subsections (5) to (8).

3 In section 527 (being a UK REIT in relation to an accounting period) after subsection (4) insert—

“(5) Subsections (2)(a) and (3)(a) are also subject to subsections (6) to (8).

(6) If the accounting period ends during the first 3-year period, condition D in section 528 does not have to be met.

(7) If the accounting period begins, but does not end, during the first 3- year period, condition D in section 528 only has to be met throughout the part of the accounting period falling after the end of the first 3- year period.

(8) In subsections (6) and (7) “the first 3-year period” means the period of 3 years beginning with the date specified in the notice given under section 523 or 524.”

4 (1) Section 528 (conditions for company) is amended as follows.

(2) In subsection (4)(b) for the words from “a limited partnership” to the end substitute “an institutional investor”.

(3) After subsection (4) insert—

“(4A) Institutional investor” means any of the following persons—

(a) the trustee or manager of—

(i) an authorised unit trust scheme (as defined in section 237(3) of FISMA 2000), or

(ii) a unit trust scheme (as defined in section 237(1) of FISMA 2000) which is authorised under the law of a territory outside the United Kingdom in a way which makes it, under that law, the equivalent of an authorised unit trust scheme (as defined in section 237(3) of that Act);

(b) a company—

(i) which is an open-ended investment company (as defined in section 236(1) of FISMA 2000) incorporated by virtue of regulations under section 262 of that Act, or

(ii) which is incorporated under the law of a territory outside the United Kingdom and is, under that law, the equivalent of an open-ended investment company (as defined in section 236(1) of FISMA 2000);

(c) a person acting on behalf of a limited partnership which is a collective investment scheme (as defined in section 235 of FISMA 2000);

(d) the trustee or manager of a pension scheme (as defined in section 150(1) of FA 2004);

(e) a person acting in the course of a long-term insurance business (that is, the activity of effecting or carrying out contracts of long-term insurance within the meaning of the Financial Services and Markets (Regulated Activities) Order 2001 (S.I. 2001/544S.I. 2001/544)) who—

(i) is authorised under FISMA 2000 to carry on such business, or

(ii) has an equivalent authorisation under the law of a territory outside the United Kingdom to carry on such business;

(f) a charity;

(g) a person registered under any of the following provisions (which provide for registers of social landlords)—

(i) in England, section 111 of the Housing and Regeneration Act 2008;

(ii) in Scotland, section 20 of the Housing (Scotland) Act 2010 (asp 17)2010 (asp 17);

(iii) in Wales, section 1 of the Housing Act 1996;

(iv) in Northern Ireland, Article 14 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725S.I. 1992/1725 (N.I. 15));

(h) a person who cannot be liable for corporation tax or income tax (as relevant) on the ground of sovereign immunity.