Finance Bill

Session 2012 - 13
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Finance Bill

Finance Bill
Schedule 5 — Tax treatment of financing costs and income
199

8
In Chapter 6 (tax avoidance), before section 306 insert—
“305A
Schemes preventing this Part applying to a large group
(1)
This section applies in relation to a period of account of a large group
of entities if, apart from this section, this Part would not apply in
relation to that period because of a failure by the group to meet the
5
requirement of section 337(1)(b) (the worldwide group must contain
one or more relevant group companies) throughout that period.
(2)
If conditions A and B are met, this Part applies to the group as it
would have applied had the scheme mentioned in condition A not
been entered into.
10
(3)
Condition A is that—
(a)
at or before the end of the period of account, a scheme is
entered into, and
(b)
the main purpose, or one of the main purposes, for which a
person becomes or is party to the scheme is to secure that the
15
requirement of section 337(1)(b) is not met by the group
throughout that period.
(4)
Condition B is that the scheme is not an excluded scheme.”
9     (1)
Section 313 (the financing expense amounts of a company) is amended as
follows.
20
      (2)
In subsection (6), for “the same proportion” substitute “such proportion as is
just and reasonable”.
      (3)
After that subsection insert—
“(6A)
An amount may be reduced to nil under subsection (6).”
10    (1)
Section 314 (the financing income amounts of a company) is amended as
25
follows.
      (2)
In subsection (6), for “the same proportion” substitute “such proportion as is
just and reasonable”.
      (3)
After that subsection insert—
“(6A)
An amount may be reduced to nil under subsection (6).”
30
11
In section 316 (group treasury companies), omit subsection (4).
12    (1)
Section 329 (the tested expense amount) is amended as follows.
      (2)
In subsection (3), for “arises as a result of a transaction that takes place”
substitute “accrues”.
      (3)
After subsection (5) insert—
35
“(6)
But subsection (5) does not apply if an election under section 331ZA
has effect for the period of account.”
13    (1)
Section 330 (the tested income amount) is amended as follows.
      (2)
In subsection (3), for “arises as a result of a transaction that takes place”
substitute “accrues”.
40

Finance Bill
Schedule 5 — Tax treatment of financing costs and income
200

      (3)
After subsection (5) insert—
“(6)
But subsection (5) does not apply if an election under section 331ZA
has effect for the period of account.”
14
After section 331 insert—
“331ZA
Elections disapplying sections 329(5) and 330(5)
5
(1)
The relevant reporting body of the worldwide group may elect that
sections 329(5) and 330(5) are not to apply in relation to the group.
(2)
The election must specify—
(a)
the first period of account of the worldwide group in relation
to which it has effect, and
10
(b)
the name and tax reference of—
(i)
each company that is a UK group company at the time
the election is made, and
(ii)
any other company that was a UK group company at
any time during the period beginning at the same
15
time as that period of account and ending when the
election is made.
(3)
An election has effect for the specified period of account and
subsequent periods of account of the worldwide group (unless
withdrawn under subsection (4) or replaced by a further election
20
made in relation to the group).
(4)
The relevant reporting body of the worldwide group may withdraw
an election with effect from the beginning of the period of account
specified in the withdrawal.
(5)
“The relevant reporting body” means—
25
(a)
if an appointment under section 288 has effect in relation to
the specified period of account, the company appointed
under that section, and
(b)
if such an appointment does not have effect, the companies
which are UK group companies at the relevant time, acting
30
jointly.

But the companies within paragraph (b) do not include any company
that is a dormant company throughout the specified period of
account.
(6)
An election or withdrawal must—
35
(a)
be made by notice in writing to an officer of Revenue and
Customs, and
(b)
be received by HMRC within 12 months of the end of the
specified period of account.
(7)
The notice must be signed—
40
(a)
in a case within paragraph (a) of subsection (5), by the
appropriate person in relation to the company appointed
under section 288, and
(b)
in a case within paragraph (b) of that subsection, by the
appropriate person in relation to each company within that
45
paragraph.

Finance Bill
Schedule 5 — Tax treatment of financing costs and income
201

(8)
For the purposes of this section—
“the appropriate person”, in relation to a company, means—
(a)
the proper officer of the company, or
(b)
such other person as may for the time being have the
express, implied or apparent authority of the
5
company to act on its behalf for the purposes of this
Part,
and subsections (3) and (4) of section 108 of TMA 1970
(responsibility of company officers: meaning of “proper
officer”) apply as they apply for the purposes of that section;
10
“relevant time” means—
(a)
in the case of an election, the time the election is made,
and
(b)
in the case of a withdrawal of an election, the time the
withdrawal is made;
15
“specified period of account” means—
(a)
in the case of an election, the period specified under
subsection (2)(a), and
(b)
in the case of a withdrawal of an election, the period
specified under subsection (4).”
20
15    (1)
Section 337 (meaning of “the worldwide group”) is amended as follows.
      (2)
The existing provision becomes subsection (1).
      (3)
After that subsection insert—
“(2)
For the purposes of subsection (1), section 345(3) to (7) (meaning of
“relevant group company”) has effect as if references to the
25
worldwide group were to the group of entities mentioned in
subsection (1).”
16    (1)
In section 339 (meaning of “ultimate parent”), subsection (1) is amended as
follows.
      (2)
In paragraph (b)(i)—
30
(a)
for “not” substitute “neither”, and
(b)
after “applies” insert “nor an entity formed under the law of a
territory outside the United Kingdom which would be a partnership
if formed under the law of any part of the United Kingdom”.
      (3)
In paragraph (c) omit the words from “or an entity that would be a collective
35
investment scheme but for the fact that it is a body corporate”.
17
In section 348 (non-existent financial statements of the worldwide group),
after subsection (5) insert—
“(6)
Subsection (7) applies if—
(a)
financial statements of the worldwide group are drawn up in
40
respect of a period (“the whole period”), but
(b)
the worldwide group was in existence for only part of that
period (“the relevant part”).
(7)
For the purposes of this Part (other than subsection (7))—
(a)
those statements are to be ignored, and
45

Finance Bill
Schedule 5 — Tax treatment of financing costs and income
202

(b)
subsections (2) to (5) apply to the relevant part as they apply
to the relevant period,

(and, accordingly, neither the whole period nor the remainder of it is
to be treated as a period of account of the worldwide group to which
this Part applies).”
5
18
After section 348 insert—
“348A
Financial statements: business combinations to which the worldwide
group is a party
(1)
Subsection (2) applies where—
(a)
a business combination or demerger occurs to which the
10
worldwide group is party (“the relevant event”),
(b)
as a result of the relevant event, there is a change in the
identity of the ultimate parent of—
(i)
the worldwide group, or
(ii)
any other group which is party to the relevant event,
15
and
(c)
financial statements of the worldwide group are drawn up,
or (in the absence of this section) would be treated as drawn
up under section 348, for a period which begins before and
ends after the relevant event (“the straddling period”).
20
(2)
This Part (apart from this section) applies as if—
(a)
no financial statements of the worldwide group had been
drawn up for the straddling period,
(b)
section 348 did not apply to that period, and
(c)
IAS financial statements had been drawn up in respect of
25
each of the following—
(i)
the period beginning at the same time as the
straddling period and ending immediately before the
relevant event, and
(ii)
the period beginning with the relevant event and
30
ending at the same time as the straddling period.
(3)
For the purposes of this section—
(a)
“demerger” means a transaction by which one or more
groups cease to be members of a group,
(b)
a group is party to a business combination or demerger if the
35
business combination or demerger affects one or more
members of the group, and
(c)
the reference to “IAS financial statements” is to be construed
in accordance with section 348(5).”
19
In section 351 (expressions taking their meaning from international
40
accounting standards), in subsection (1), before the entry for “effective
interest method” insert—
““business combination”,”.
20
In section 353 (other expressions), at the appropriate place insert—
““dormant company” means—
45
(a)
a company that is “dormant” within the meaning of
section 1169 of the Companies Act 2006, or

Finance Bill
Schedule 5 — Tax treatment of financing costs and income
203

(b)
a company of an equivalent description which is
incorporated outside the United Kingdom,
other than, in the case of paragraph (a), a company in respect
of which adjustments fall to be made under section 147(3) or
(5) (transfer pricing: tax calculations to be based on arm’s
5
length not actual provision),”.
21
After section 353A insert—
“353AA
Power to make regulations where accounting standards change
(1)
The Treasury may by regulations amend this Part to take account of
any relevant accounting change resulting from a change in
10
accounting standards.
(2)
“Relevant accounting change” means a change in the way in which a
company is permitted or required for accounting purposes to
present, or disclose amounts in, consolidated financial statements of
an ultimate parent of a group and its subsidiaries.
15
(3)
“Change in accounting standards” means the issue, revocation,
amendment or recognition of, or withdrawal of recognition from, an
accounting standard by an accounting body.
(4)
Regulations under this section may make provision subject to an
election or other specified circumstances.
20
(5)
Regulations under this section may apply to a pre-commencement
period if they make provision in relation to a relevant accounting
change which may or must be adopted, for accounting purposes, for
a period of account, or part of a period of account, which coincides
with that pre-commencement period.
25
(6)
A statutory instrument containing regulations under this section to
which subsection (7) applies may not be made unless a draft of the
instrument has been laid before and approved by a resolution of the
House of Commons.
(7)
This subsection applies if the regulations contain any provision
30
which has or may have the effect of increasing any person’s liability
to tax.
(8)
Any other statutory instrument containing regulations under this
section is subject to annulment in pursuance of a resolution of the
House of Commons.
35
(9)
In this section—
“accounting body” means the International Accounting
Standards Board or the Accounting Standards Board, or a
successor body to either of those Boards;
“accounting standard” includes any statement of practice,
40
guidance or other similar document;
“pre-commencement period”, in relation to regulations, means
an accounting period, or part of an accounting period, which
begins before the regulations are made.”

Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
204

22    (1)
The amendment made by paragraph 21 has effect in relation to any change
in accounting standards made on or after the day on which this Act is
passed.
      (2)
The other amendments made by this Schedule have effect in relation to
periods of account of the worldwide group ending on or after the day on
5
which this Act is passed.
Schedule 6
Section 38

Seed enterprise investment scheme
Part 1
The scheme
10
1
In ITA 2007, after Part 5 (enterprise investment scheme) insert—
“Part 5A
Seed enterprise investment scheme
Chapter 1
Introduction
15
SEIS relief
257A
Meaning of “SEIS relief” and commencement
(1)
This Part provides for SEIS income tax relief (“SEIS relief”), that is,
entitlement to tax reductions in respect of amounts subscribed by
individuals for shares in companies carrying on new businesses.
20
(2)
In this Part “SEIS” stands for the seed enterprise investment scheme.
(3)
This Part has effect only in relation to shares issued—
(a)
on or after 6 April 2012, but
(b)
before 6 April 2017.
(4)
The Treasury may by order substitute a later date for the date for the
25
time being specified in subsection (3)(b).
257AA
Eligibility for SEIS relief

An individual (“the investor”) is eligible for SEIS relief in respect of
an amount subscribed by the investor on the investor’s own behalf
for an issue of shares in a company (“the issuing company”) if—
30
(a)
the shares (“the relevant shares”) are issued to the investor,
(b)
the investor is a qualifying investor in relation to the relevant
shares (see Chapter 2),
(c)
the general requirements (including requirements as to the
purpose of the issue of shares and the use of money raised)
35
are met in respect of the relevant shares (see Chapter 3), and

Finance Bill
Schedule 6 — Seed enterprise investment scheme
Part 1 — The scheme
205

(d)
the issuing company is a qualifying company in relation to
the relevant shares (see Chapter 4).
257AB
Form and amount of SEIS relief
(1)
If an individual—
(a)
is eligible for SEIS relief in respect of any amount subscribed
5
for shares, and
(b)
makes a claim in respect of all or some of the shares included
in the issue,

the individual is entitled to a tax reduction for the tax year in which
the shares were issued (“the current tax year”).
10

This is subject to the provisions of this Part.
(2)
The amount of the tax reduction to which the individual is entitled is
the amount equal to tax at the SEIS rate for the current tax year on—
(a)
the amount or, as the case may be, the sum of the amounts
subscribed for shares issued in that year in respect of which
15
the individual is eligible for and claims SEIS relief, or
(b)
if less, £100,000.
(3)
In this Part “the SEIS rate” means 50%.
(4)
The tax reduction is given effect at Step 6 of the calculation in section
23.
20
(5)
If in the case of any issue of shares—
(a)
which are issued in the current tax year, and
(b)
in respect of the amount subscribed for which the individual
is eligible for SEIS relief,

the individual so claims, subsections (1) and (2) apply as if, in respect
25
of such part of that issue as may be specified in the claim, the shares
had been issued in the preceding tax year, and the individual’s
liability to tax for both tax years is determined accordingly.
Miscellaneous
257AC
Meaning of “period A” and “period B”
30
(1)
This section applies for the purposes of this Part in relation to any
shares issued by a company.
(2)
“Period A” means the period—
(a)
beginning with the incorporation of the company, and
(b)
ending immediately before the termination date relating to
35
the shares.
(3)
“Period B” means the period—
(a)
beginning with the issue of the shares, and
(b)
ending immediately before the termination date relating to
the shares.
40
(4)
In this section “the termination date”, in relation to the shares, means
the third anniversary of the date on which the shares are issued.