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

Part 1 Income tax, corporation tax and capital gains tax

CHAPTER 1 Income tax and corporation tax charges and rate bands

Income tax

1 Charge for 2012-13 and rates for 2012-13 and subsequent tax years

(1) Income tax is charged for the tax year 2012-13, and for that tax year—

(a) the basic rate is 20%,

(b) the higher rate is 40%, and

(c) the additional rate is 50%.

(2) For the tax year 2013-14—

(a) the basic rate is 20%,

(b) the higher rate is 40%, and

(c) the additional rate is 45%.

(3) In Chapter 2 of Part 2 of ITA 2007 (rates at which income tax is charged)—

(a) in section 8(3) (dividend additional rate), for “42.5%” substitute “37.5%”,

(b) in section 9(1) (trust rate), for “50%” substitute “45%”, and

(c) in section 9(2) (dividend trust rate), for “42.5%” substitute “37.5%”.

(4) In section 394 of ITEPA 2003 (charge on relevant benefits provided under employer-financed retirement benefits scheme), in subsection (4) for “50%” substitute “45%”.

(5) In section 640 of ITTOIA 2005 (capital sums treated as income of the settlor: grossing-up of deemed income), in subsection (6)(b)—

(a) omit the “and” at the end of sub-paragraph (ii),

(b) in sub-paragraph (iii) for “or any subsequent tax year.” substitute “, 2011-12 or 2012-13, and”, and

(c) after that sub-paragraph insert—

“(iv) 45%, if the relevant year is the year 2013-14 or any subsequent tax year.”

(6) The amendments made by subsections (3) to (5) have effect for the tax year 2013-14 and subsequent tax years.

2 Basic rate limit for 2012-13

(1) For the tax year 2012-13 the amount specified in section 10(5) of ITA 2007 (basic rate limit) is replaced with “£34,370”.

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

3 Personal allowance for 2012-13 for those aged under 65

(1) For the tax year 2012-13 the amount specified in section 35(1) of ITA 2007 (personal allowance for those aged under 65) is replaced with “£8,105”.

(2) Accordingly section 57 of that Act (indexation of allowances), so far as relating to the amount specified in section 35(1) of that Act, does not apply for that tax year.

4 Personal allowances from 2013

(1) Chapter 2 of Part 3 of ITA 2007 (personal allowance etc) is amended in accordance with subsections (2) to (6).

(2) In section 35 (personal allowance for those aged under 65)—

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

“(a) was born after 5 April 1948, and”, and

(b) in the heading for “aged under 65” substitute “born after 5 April 1948”.

(3) In section 36 (personal allowance for those aged 65 to 74)—

(a) for subsection (1) substitute—

“(1) An individual who makes a claim is entitled to a personal allowance of £10,500, or (if greater) the section 35 amount, for a tax year if the individual—

(a) was born after 5 April 1938 but before 6 April 1948, and

(b) meets the requirements of section 56 (residence etc).”,

(b) in subsection (2)—

(i) for “For” substitute “If the allowance under subsection (1) is greater than the section 35 amount, for”,

(ii) in paragraph (a), for “half the excess” substitute “an amount equal to half of that excess income”, and

(iii) in paragraph (b), for the words from “amount” to the end substitute “section 35 amount.”,

(c) after that subsection insert—

“(2A) In this section “the section 35 amount” means the amount of any allowance to which the individual would be entitled under section 35 for the tax year if the individual had been born after 5 April 1948.”, and

(d) in the heading for “aged 65 to 74” substitute “born after 5 April 1938 but before 6 April 1948”.

(4) In section 37 (personal allowance for those aged 75 and over)—

(a) for subsection (1) substitute—

“(1) An individual who makes a claim is entitled to a personal allowance of £10,660, or (if greater) the section 35 amount, for a tax year if the individual—

(a) was born before 6 April 1938, and

(b) meets the requirements of section 56 (residence etc).”,

(b) in subsection (2)—

(i) for “For” substitute “If the allowance under subsection (1) is greater than the section 35 amount, for”,

(ii) in paragraph (a), for “half the excess” substitute “an amount equal to half of that excess income”, and

(iii) in paragraph (b), for the words from “amount” to the end substitute “section 35 amount.”,

(c) after that subsection insert—

“(2A) In this section “the section 35 amount” means the amount of any allowance to which the individual would be entitled under section 35 for the tax year if the individual had been born after 5 April 1948.”, and

(d) in the heading for “aged 75 and over” substitute “born before 6 April 1938”.

(5) In section 41 (allowances in year of death), omit subsections (2) and (3).

(6) In section 57 (indexation of allowances)—

(a) in subsection (1)—

(i) in paragraph (a) for “aged under 65” substitute “born after 5 April 1948”, and

(ii) omit paragraphs (b) and (c), and

(b) in subsection (3)(a), for “, 36(1), 37(1),” substitute “and”.

(7) In section 508A of ICTA (contemplative religious communities: profits exempt from corporation tax), in subsections (5) and (9)(b) for “under 65” substitute “born after 5 April 1948”.

(8) The amendments made by this section have effect for the tax year 2013-14 and subsequent tax years.

Corporation tax

5 Main rate of corporation tax for financial year 2012

(1) In section 5(2)(a) of FA 2011 (main corporation tax rate for financial year 2012 on profits other than ring fence profits), for “25%” substitute “24%”.

(2) The amendment made by this section is treated as having come into force on 1 April 2012.

6 Charge and main rate for financial year 2013

(1) Corporation tax is charged for the financial year 2013.

(2) For that year the rate of corporation tax is—

(a) 23% on profits of companies other than ring fence profits, and

(b) 30% on ring fence profits of companies.

(3) In subsection (2) “ring fence profits” has the same meaning as in Part 8 of CTA 2010 (see section 276 of that Act).

7 Small profits rate and fractions for financial year 2012

(1) For the financial year 2012 the small profits rate is—

(a) 20% on profits of companies other than ring fence profits, and

(b) 19% on ring fence profits of companies.

(2) For the purposes of Part 3 of CTA 2010, for that year—

(a) the standard fraction is 1/100th, and

(b) the ring fence fraction is 11/400ths.

(3) In subsection (1) “ring fence profits” has the same meaning as in Part 8 of that Act (see section 276 of that Act).

CHAPTER 2 Income tax: general

Child benefit

8 High income child benefit charge

Schedule 1 contains provision for and in connection with a high income child benefit charge.

Anti-avoidance

9 Post-cessation trade or property relief: tax-generated payments or events

(1) Part 4 of ITA 2007 (loss relief) is amended as follows.

(2) In section 96(7) (post-cessation trade relief), after paragraph (b) insert—

“(ba) section 98A (denial of relief for tax-generated payments or events),”.

(3) After section 98 insert—

“98A Denial of relief for tax-generated payments or events

(1) Post-cessation trade relief is not available to a person in respect of a payment or an event which is made or occurs directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements (and, accordingly, no section 261D claim may be made in respect of the payment or event).

(2) For this purpose “relevant tax avoidance arrangements” means arrangements—

(a) to which the person is a party, and

(b) the main purpose, or one of the main purposes, of which is the obtaining of a reduction in tax liability as a result of the availability of post-cessation trade relief (whether by making a claim for that relief or a section 261D claim).

(3) In this section—

(a) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

(b) “section 261D claim” means a claim under section 261D of TCGA 1992.”

(4) In section 125(6) (post-cessation property relief), after paragraph (b) insert—

“(ba) section 98A (denial of relief for tax-generated payments or events),”.

(5) The amendments made by subsections (2) and (3) have effect in relation to—

(a) payments which are made on or after 12 January 2012 except where they are made pursuant to an unconditional obligation in a contract made before that date, or

(b) events which occur on or after that date.

(6) The amendment made by subsection (4) has effect in relation to—

(a) payments which are made on or after 13 March 2012 except where they are made pursuant to an unconditional obligation in a contract made before that date, or

(b) events which occur on or after that date.

(7) In subsections (5)(a) and (6)(a) “an unconditional obligation” means an obligation which may not be varied or extinguished by the exercise of a right (whether under the contract or otherwise).

(8) For the purposes of subsections (5)(b) and (6)(b) section 98 of ITA 2007 applies for determining when an event occurs.

10 Property loss relief against general income: tax-generated agricultural expenses

(1) Chapter 4 of Part 4 of ITA 2007 (losses from property businesses) is amended as follows.

(2) In section 117(3) (overview of Chapter), for “section 127A” substitute “sections 127A and 127B”.

(3) In section 120(7) (deduction of property losses from general income), at the end insert “and section 127B (no relief for tax-generated agricultural expenses)”.

(4) After section 127A insert—

“127B No relief for tax-generated agricultural expenses

(1) This section applies if—

(a) in a tax year a person makes a loss in a UK property business or overseas property business (whether carried on alone or in partnership),

(b) the business has a relevant agricultural connection for the purposes of section 120 (see section 123(3) to (7)), and

(c) any allowable agricultural expenses deducted in calculating the loss arise directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements.

(2) No property loss relief against general income may be given to the person for so much of the applicable amount of the loss as is attributable to expenses falling within subsection (1)(c).

(3) For the purposes of subsection (2), the applicable amount of the loss is to be treated as attributable to expenses falling within subsection (1)(c)before anything else.

(4) In subsection (1) “relevant tax avoidance arrangements” means arrangements—

(a) to which the person is a party, and

(b) the main purpose, or one of the main purposes, of which is the obtaining of a reduction in tax liability by means of property loss relief against general income.

(5) In subsection (4) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

(6) In this section “the applicable amount of the loss” has the meaning given by section 122 and “allowable agricultural expenses” has the meaning given by section 123.”

(5) The amendments made by this section have effect in relation to expenses arising directly or indirectly in consequence of, or otherwise in connection with—

(a) arrangements which are entered into on or after 13 March 2012, or

(b) any transaction forming part of arrangements which is entered into on or after that date.

(6) But those amendments do not have effect where the arrangements are, or any such transaction is, entered into pursuant to an unconditional obligation in a contract made before that date.

(7) “An unconditional obligation” means an obligation which may not be varied or extinguished by the exercise of a right (whether under the contract or otherwise).

11 Gains from contracts for life insurance etc

(1) In Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc), after section 473 insert—

“473A Connected policies or contracts treated as single policy or contract

(1) Policies or contracts which are connected with each other are treated as a single policy or contract for the purposes of this Chapter.

(2) A policy or contract is “connected” with another policy or contract if—

(a) they meet the condition in subsection (3) in relation to each other, and

(b) the terms on which either of them is issued are significantly more or less favourable than would reasonably be expected if the other were ignored or any policy or contract meeting the condition in that subsection in relation to either of them were ignored.

(3) A policy or contract meets the condition in this subsection in relation to another policy or contract if—

(a) they are at any time simultaneously in force, and

(b) either of them is issued with reference to the other or with a view to enabling the other to be issued on particular terms or facilitating its being issued on those terms.

(4) If—

(a) there is a policy or contract (“A”) with which two or more other policies or contracts are connected as a result of subsection (2), but

(b) the other policies or contracts are not connected with each other as a result of that subsection,

A and the other policies or contracts are (as a result of this subsection) to be regarded as “connected” with each other.”

(2) In section 491(2) of that Act (calculating gains from contracts for life insurance etc: general rules), in the definition of “PG”, at the end insert “but only in so far as those gains have been, or fall to be, taken into account in calculating the total income of a person as a result of this Chapter or Chapter 2 of Part 13 of ITA 2007”.

(3) In section 552 of ICTA (information: duty of insurers), for subsection (13) substitute—

“(13) For the purposes of this section—

(a) section 491(2) of ITTOIA 2005 is taken to have effect as if, in the definition of “PG”, the words from “but” to the end were omitted, and

(b) no account is to be taken of the effect of section 541A of that Act.”

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

(a) any policy issued in respect of an insurance made on or after 21 March 2012, or

(b) any contract made on or after that date.

(5) The amendments made by this section also have effect in the case of any insurance or contract made before 21 March 2012 if on or after that date—

(a) the policy or contract is varied with the result that there is an increase in the benefits secured,

(b) there is an assignment of rights, or a share of the rights, conferred by the policy or contract (whether or not for money’s worth), or

(c) some or all of the rights conferred by the policy or contract become held as security for a debt.

(6) For the purposes of subsection (5)(a)—

(a) an exercise of rights conferred by a policy or contract is to count as a variation of the policy or contract, and

(b) the reference to an increase in the benefits secured by a policy or contract includes an increase in the benefits secured by another policy or contract with which the policy or contract is connected (within the meaning given by section 473A of ITTOIA 2005, as inserted by subsection (1)).

12 Settlements: income originating from settlors other than individuals

(1) ITTOIA 2005 is amended as follows.

(2) In section 627 (income where settlor retains an interest: exceptions), at the end insert—

“(4) The rule in section 624(1) does not apply in relation to income which—

(a) arises under a settlement, and

(b) originates from any settlor who was not an individual.”

(3) In section 645 (property or income originating from settlor), in subsection (2), for “section 644” substitute “sections 627 and 644”.

(4) The amendments made by this section have effect in relation to income arising on or after 21 March 2012.

Reliefs

13 Champions League final 2013

(1) No liability to income tax arises in respect of any income from the 2013 Champions League final that arises to a person who is—

(a) an employee or contractor of an overseas team that competes in the final, and

(b) non-UK resident at the time of the final.

(2) The reference in subsection (1) to income from the 2013 Champions League final is to income related to duties or services performed by the person in the United Kingdom in connection with the final.

(3) The exemption under subsection (1) does not apply to—

(a) income that arises as a result of a contract entered into after the final, or of any amendment, after the final, of a contract entered into before the end of the final, or

(b) income that is the subject of tax avoidance arrangements.

(4) Income is the subject of tax avoidance arrangements if—

(a) arrangements have been made which, but for subsection (3)(b), would result in a person obtaining an exemption under subsection (1) for the income, and

(b) those arrangements, or other arrangements of which they form part, have as their main purpose, or one of their main purposes, the obtaining of that exemption.

(5) Section 966 of ITA 2007 (deduction of sums representing income tax) does not apply to any payment or transfer which gives rise to income benefiting from the exemption under subsection (1).

(6) In this section—

• “the 2013 Champions League final” means the final of the UEFA Champions League 2012/2013 competition held in England in 2013;

• “contractor”, in relation to an overseas team, means an individual who is not an employee of the team but who performs services for the team—

  (a)

  under the terms of a contract with the team, or

  (b)

  under the terms of a contract, or that individual’s employment, with a company which is a member of the same group of companies as the team (within the meaning given by section 152 of CTA 2010);

• “employee” and “employment” are to be read in accordance with section 4 of ITEPA 2003;

• “income” means employment income or profits of a trade, profession or vocation (including profits treated as arising as a result of section 13 or 14 of ITTOIA 2005);

• “overseas team” means a football club which is not a member of the Football Association, the Scottish Football Association, the Football Association of Wales or the Irish Football Association.

14 Cars: security features not to be regarded as accessories

(1) ITEPA 2003 is amended as follows.

(2) In section 125 (meaning of “accessory” and related terms) after subsection (3) insert—

“(3A) Subsection (2) needs to be read with section 125A (security features not to be regarded as accessories).”

(3) After that section insert—

“125A Security features not to be regarded as accessories

(1) This section applies where a car made available to an employee has a relevant security feature.

(2) The relevant security feature is not an accessory for the purposes of this Chapter if it is provided in order to meet a threat to the employee’s personal physical security which arises wholly or mainly because of the nature of the employee’s employment.

(3) In this section “relevant security feature” means—

(a) armour designed to protect the car’s occupants from explosions or gunfire,

(b) bullet-resistant glass,

(c) any modification to the car’s fuel tank designed to protect the tank’s contents from explosions or gunfire (including by making the tank self-sealing), and

(d) any modification made to the car in consequence of anything which is a relevant security feature by virtue of paragraph (a), (b) or (c).

(4) The Treasury may by regulations amend the definition of “relevant security feature” in subsection (3).”

(4) In Part 2 of Schedule 1 (index of defined expressions), in the entry for “accessory”, in the second column for “section 125(2)” substitute “sections 125(2) and 125A(2)”.

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

15 Termination payments to MPs ceasing to hold office

(1) In section 291 of ITEPA 2003 (exemptions: termination payments to MPs and others ceasing to hold office), for subsection (2)(a) substitute—

“(a) made under section 5(1) of the Parliamentary Standards Act 2009 in connection with a person’s ceasing to be a member of the House of Commons,”.

(2) The amendment made by this section has effect in relation to grants and payments made on or after 1 April 2012.

16 Employment income exemptions: armed forces

(1) Chapter 8 of Part 4 of ITEPA 2003 (exemptions: special kinds of employees) is amended as follows.

(2) In section 297A (exemption for Operational Allowance), in subsection (2), for “by the Secretary of State” substitute “under a Royal Warrant made under section 333 of the Armed Forces Act 2006”.

(3) In section 297B (exemption for Council Tax Relief), in subsection (2), for “by the Secretary of State” substitute “under a Royal Warrant made under section 333 of the Armed Forces Act 2006”.

(4) After that section insert—

“297C Armed forces: Continuity of Education Allowance

(1) No liability to income tax arises in respect of payments of the Continuity of Education Allowance to or in respect of members of the armed forces of the Crown during their employment under the Crown or after their deaths.

(2) The Continuity of Education Allowance is an allowance designated as such under a Royal Warrant made under section 333 of the Armed Forces Act 2006.”

(5) The amendments made by this section have effect in relation to payments made on or after 6 April 2012.

Other provisions

17 Taxable benefits: “the appropriate percentage” for cars for 2014-15

(1) In section 139 of ITEPA 2003 (car with a CO₂ emissions figure: the appropriate percentage), for subsections (2) and (3) substitute—

“(2) If the car’s CO₂ emissions figure is less than the relevant threshold for the year, the appropriate percentage for the year is—

(a) if the car’s CO₂ emissions figure for the year does not exceed 75 grams per kilometre driven, 5%, and

(b) otherwise, 11%.

(3) If the car’s CO₂ emissions figure is equal to the relevant threshold for the year, the appropriate percentage for the year is 12% (“the threshold percentage”).”

(2) The amendment made by this section has effect for the tax year 2014-15 and subsequent tax years.

18 Qualifying time deposits

(1) In section 866 of ITA 2007 (qualifying time deposits), in subsection (1), after “deposit” insert “made before 6 April 2012”.

(2) The amendment made by this section is treated as having come into force on 6 April 2012.

CHAPTER 3 Corporation tax: general

Support for business

19 Profits arising from the exploitation of patents etc

Schedule 2 contains provision about the treatment for corporation tax purposes of profits arising from the exploitation of patents etc.

20 Relief for expenditure on R&D ;

Schedule 3 contains provision about corporation tax relief for expenditure on research and development.

21 Real estate investment trusts

Schedule 4 amends Part 12 of CTA 2010 (real estate investment trusts).

Anti-avoidance

22 Treatment of the receipt of manufactured overseas dividends

(1) Part 17 of CTA 2010 (manufactured payments and repos) is amended as follows.

(2) In section 793 (company receiving manufactured overseas dividend from UK resident etc: amount treated as withheld on account of overseas tax), after subsection (7) insert—

“(8) If, in accordance with this section, the amount mentioned in section 792(3)(b) is not the amount deducted under section 922(2) of ITA 2007, nothing in the Tax Acts is to be read as having the effect that, in relation to the persons mentioned in section 792(2) for the purposes mentioned there, the difference between those amounts is to be regarded as an amount on account of income tax.”

(3) In section 812 (deemed manufactured payments: stock lending arrangements), after subsection (5) insert—

“(5A) Where section 792 or 794 has effect in accordance with subsection (4) or (5), nothing in the Tax Acts is to be read as having the effect that, in relation to the persons mentioned in section 792(2) or 794(2) for the purposes mentioned there, the amount that would otherwise have been treated as an amount withheld on account of overseas tax is to be regarded as an amount on account of income tax.”

(4) The amendments made by this section have effect in relation to overseas dividends (within the meaning of Part 17 of CTA 2010) paid on or after 15 September 2011.

23 Loan relationships: debts becoming held by connected company

(1) Chapter 6 of Part 5 of CTA 2009 (loan relationships: connected companies and impairment losses and releases of debt) is amended as follows.

(2) In section 362 (parties becoming connected where creditor’s rights subject to impairment adjustment)—

(a) in subsection (1)—

(i) omit paragraph (c) (impairment in pre-connection carrying value of creditor’s loan relationship), and

(ii) omit the “and” before that paragraph and, at the end of paragraph (a), insert “and”,

(b) for subsections (3) and (4) substitute—

“(3) The amount treated as released is the amount (if any) by which the pre-connection carrying value in D’s accounts exceeds the pre-connection carrying value in C’s accounts.

(4) In subsection (3)—

• “the pre-connection carrying value in D’s accounts” means the amount that would be the carrying value of the liability representing the loan relationship in D’s accounts if a period of account had ended immediately before C and D became connected, and

• “the pre-connection carrying value in C’s accounts” means—

  (a)

  in any case where C was a party to the loan relationship as creditor on the last day of the period of account ending immediately before the one in which C and D became connected, the cost of the asset representing the loan relationship which would be given on that day on an amortised cost basis of accounting, and

  (b)

  in any other case, the amount or value of any consideration given by C for the acquisition of the asset representing the loan relationship.”, and”

(c) in subsection (5)—

(i) in the opening words, for “the carrying value is determined taking no account of—” substitute “no account is to be taken of—”,

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

(iii) omit paragraph (c) (together with the “or” before that paragraph), and

(d) in the heading, at the end insert “etc”.

(3) After section 363 insert—

“363A Arrangements for avoiding section 361 or 362

(1) This section applies in any case where arrangements are entered into and the main purpose, or one of the main purposes, of any party in entering into them (or any part of them) is—

(a) to avoid an amount being treated as released under section 361 or 362, or

(b) to reduce the amount which is treated as released under section 361 or 362.

(2) The arrangements (or part of the arrangements) are not to achieve that effect (so that an amount, or a greater amount, falls to be treated as released under section 361 or 362).

(3) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).”

(4) The amendments made by subsection (2) have effect as follows—

(a) the amendments made by paragraphs (a), (b) and (d) have effect in

relation to any case where the companies become connected on or after 27 February 2012, but if the companies become connected on or after that date but before 1 April 2012 section 362 of CTA 2009 has effect as if the following were substituted for subsections (3) and (4) of that section—

“(3) The amount treated as released is whichever is the greater of the following amounts—

(a) the amount (if any) that the pre-connection carrying value in C’s accounts would have been adjusted for impairment if a period of account had ended immediately before the companies became connected, and

(b) the amount (if any) by which the pre-connection carrying value in D’s accounts exceeds the pre-connection carrying value in C’s accounts.

(4) In subsection (3) “the pre-connection carrying value”, in relation to C’s accounts or D’s accounts, means the amount that would be the carrying value of the asset or liability representing the loan relationship in the accounts if a period of account had ended immediately before the companies became connected.”, and”

(b) the amendments made by paragraph (c) have effect in relation to any case where the companies become connected on or after 1 April 2012,

and section 363 of CTA 2009 applies for the purposes of this subsection as it applies for the purposes of sections 361 to 362 of that Act.

(5) The amendment made by subsection (3) has effect in relation to—

(a) arrangements entered into on or after 27 February 2012, or

(b) arrangements entered into before that date where the amount is treated as released, or would have been treated as released, on or after that date.

(6) But subsection (5)(b) does not apply if the amount is treated as released, or would have been treated as released, pursuant to an unconditional obligation in a contract made before 27 February 2012.

(7) An “unconditional” obligation is one which may not be varied or extinguished by the exercise of a right (whether under the contract or otherwise).

(8) The conditions in section 361(1)(a) to (c) of CTA 2009 are treated as met (and the remaining provisions of that section have effect accordingly) in any case where—

(a) arrangements are entered into by any party at any time,

(b) directly or indirectly in consequence of, or otherwise in connection with, those arrangements a company (“C”) becomes a party to a loan relationship as creditor,

(c) the time at which C becomes a party to the loan relationship falls on or after 1 December 2011 but before 27 February 2012,

(d) directly or indirectly in consequence of, or otherwise in connection with, those arrangements C subsequently becomes connected with another company (“D”) which is a party to the loan relationship as debtor, and

(e) that subsequent time falls before 27 February 2012.

(9) For the purposes of subsection (8)—

(a) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

(b) the reference to C becoming connected with D is to be read in accordance with section 363 of CTA 2009.

(10) Subsections (8) and (9) are to have effect as if they were contained in Part 5 of CTA 2009 (and the cases in which section 361 of CTA 2009 has effect in accordance with subsection (8) include any case where C or D is a member of a firm which becomes or is a party to the loan relationship and in that case references to C or D (other than references to the connection which C or D has with a company) are references to the firm).

(11) For the purpose of applying section 361 of CTA 2009 in accordance with subsection (8) no account is to be taken of anything done on or after 27 February 2012.

(12) If section 361 of CTA 2009 has effect in accordance with subsection (8), section 362 of that Act does not apply.

24 Companies carrying on businesses of leasing plant or machinery

(1) CTA 2010 is amended as follows.

(2) In section 385 (sales of lessors: no carry back of the expense)—

(a) for subsections (2) and (3) substitute—

“(2) No part of a loss may be deducted under section 37(3)(b) (relief for trade losses against total profits of earlier accounting periods) from so much of the company’s total profits as derive from the income.

(3) For the purpose of determining how much of those profits derive from the income, those profits are to be calculated on the basis that the income is the final amount to be added.”, and

(b) in the heading, for “No carry back of the expense” substitute “No carry back of loss against the income”.

(3) In section 392 (sales of lessors: “relevant change in relationship”), at the end insert “or section 394ZA (company moving into tonnage tax)”.

(4) After section 394 insert—

“394ZA Company moving into tonnage tax

There is a relevant change in the relationship between A and a principal company of A on any day if the day ends immediately before the day on which, for the purposes of Schedule 22 to FA 2000, A enters tonnage tax.”

(5) In section 394A (sales of lessors: “qualifying change of ownership”)—

(a) the existing text becomes subsection (1), and

(b) after that subsection insert—

“(2) If the qualifying change of ownership would (but for this subsection) occur on any day as a result of—

(a) section 393 or 394ZA, or

(b) section 394 or 394ZA,

it is treated instead for the purposes of the sales of lessors Chapters as occurring on that day solely as a result of section 394ZA.”

(6) In section 427 (sales of lessors: no carry back of the expense)—

(a) for subsections (2) and (3) substitute—

“(2) No part of a loss may be deducted under section 37(3)(b) (relief for trade losses against total profits of earlier accounting periods) from so much of the company’s total profits as derive from the income.

(3) For the purpose of determining how much of those profits derive from the income, those profits are to be calculated on the basis that the income is the final amount to be added.”, and

(b) in the heading, for “No carry back of the expense” substitute “No carry back of loss against the income”.

(7) In section 950 (transfers of trade without a change of ownership: transfers of trade involving business of leasing plant or machinery), after subsection (3) insert—

“(3A) For the purposes of subsection (2)(a) the principal company or companies of the predecessor immediately before the transfer are not to be regarded as the same as the principal company or companies of the successor immediately afterwards (so far as they would otherwise have been so regarded) if—

(a) there is a relevant change in the relationship between the successor and a principal company of the successor within section 394ZA (company moving into tonnage tax), and

(b) that change occurs on or before the transfer day (whether the change occurs on or after 21 March 2012 or before that date).”

(8) The amendments made by subsections (2) and (6) have effect—

(a) where the income arises as a result of a company entering tonnage tax for the purposes of Schedule 22 to FA 2000 on or after 21 March 2012, or

(b) where the relevant day is on or after that date.

(9) The amendments made by subsections (3) to (5) have effect where a company enters tonnage tax for the purposes of Schedule 22 to FA 2000 on or after 21 March 2012.

(10) The amendment made by subsection (7) has effect where the transfer day is on or after 21 March 2012.

Insurance

25 Corporate members of Lloyd’s: stop-loss insurance and quota share contracts

(1) In section 225 of FA 1994 (corporate members of Lloyd’s: stop-loss and quota share insurance), after subsection (3B) insert—

“(3C) Subsection (3D) applies to any premium which is payable by a corporate member under a stop-loss insurance taken out in respect of

its underwriting business and in relation to which section 220(2)(a) does not apply.

(3D) The premium is to be treated for the purposes of the Corporation Tax Acts—

(a) as an amount that arises to the member directly from its membership of the syndicate or syndicates in relation to the activities of which the stop-loss insurance was taken out, and

(b) as if it were payable in the underwriting year in which the profits or losses arising to the member directly from its membership of the syndicate or syndicates concerned are declared.

(3E) If a premium is payable under a stop-loss insurance in respect of two or more underwriting years, the amount of the premium treated, as a result of subsection (3D)(b), as payable in each of those years is to be determined on a just and reasonable basis.