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(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) 5Chapter 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) 10Omit 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) 15Omit 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) 20in 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 25In 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) 30Section 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) 35A 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—

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(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
5territory 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) 10a 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) 15At 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) 20For 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
25territory 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) 30a 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) 35Section 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) 40A 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.
451989/2405 (N.I. 19)), or

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(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) 5it 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) 10Section 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) 15A 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.
201989/2405 (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) 25it 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.

30Removal 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) 35Omit 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) 40In subsection (7)—

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

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(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
5subsection (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) 10Section 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
15which 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
20of 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
25follows.

(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) 30For 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) 35in 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
40of relief
”.

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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 5Omit 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
10corporation 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) 15Section 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) 20Omit 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
25claims 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),
30omit “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) 35in 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.

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(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
5in 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) 10in 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
15has 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) 20In 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) 25after ““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) 30for “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) 35If—

(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
40were 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

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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
5to 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

10SCHEDULE 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) 15Section 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) 20Omit 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,
25condition 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) 30In 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
35substitute “an institutional investor”.

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(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
5237(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
10authorised 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
15by 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
20company (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) 25the 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
30Financial Services and Markets (Regulated Activities) Order
2001 (S.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
35territory 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) 40in England, section 111 of the Housing and
Regeneration Act 2008;

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

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

(iv) 45in Northern Ireland, Article 14 of the Housing
(Northern Ireland) Order 1992 (S.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.

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(4B) The Treasury may by regulations amend the definition of
“institutional investor” by inserting, omitting or amending a
description of person in subsection (4A).

5 In section 558 (demergers: disposal of asset) in subsections (3) and (6) for “C
5to F” substitute “C, E and F”.

6 In section 559 (demergers: company leaving group UK REIT) in subsections
(6) and (9) for “C to F” substitute “C, E and F”.

7 In section 561 (notice of breach of relevant Chapter 2 condition) after
subsection (4) insert—

(5) 10The following subsections apply in relation to condition D in section
528.

(6) In accordance with section 527(6) and (7), a notification does not have
to be given under subsection (1) or (2) if condition D ceases to be met
during the first 3-year period.

(7) 15If condition D is not met at the start of the first day after the end of
the first 3-year period, for the purposes of subsections (1) to (4)
condition D is treated as having ceased to be met at the start of that
day.

(8) In subsections (6) and (7) “the first 3-year period” has the meaning
20given by section 527(8).

8 (1) Section 562 (breach of conditions C and D in section 528) is amended as
follows.

(2) In the heading for “conditions C and D” substitute “condition C”.

(3) In subsection (1) for the words from “or D” to “conditions)” substitute “in
25section 528”.

(4) In subsection (2)—

(a) for “both conditions C and D are” substitute “condition C is”, and

(b) for “breaches are” substitute “breach is”.

(5) Omit subsections (3) and (4).

(6) 30In subsection (5)—

(a) in paragraph (a) for “either condition C or D” substitute “condition
C”, and

(b) in paragraph (b) omit “or (3)”.

9 After section 562 insert—

562A 35 Breach of condition D in section 528 (conditions for company)

(1) This section makes provision about cases relating to breaches of
condition D in section 528 in relation to—

(a) the principal company of a group UK REIT, or

(b) a company UK REIT.

(2) 40In accordance with section 527(6) and (7), a breach of condition D
during the first 3-year period is to be ignored.

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(3) If condition D is not met at the start of the first day after the end of
the first 3-year period, the group or company (as the case may be) is
to be treated as having ceased to be a UK REIT at the end of the first
3-year period.

(4) 5If condition D is not met at any time after the start of the day
mentioned in subsection (3), the group or company (as the case may
be) is to be treated as having ceased to be a UK REIT at—

(a) the end of the accounting period preceding the accounting
period in which the breach began, or

(b) 10if later, the end of the first 3-year period.

(5) Neither subsection (3) nor subsection (4) applies if condition D is not
met as a result of—

(a) the principal company of a group UK REIT becoming a
member of another group UK REIT, or

(b) 15a company UK REIT becoming a member of a group UK
REIT,

and, accordingly, the breach is to be ignored.

(6) Subsection (4) does not apply if—

(a) condition D is not met as a result of anything done (or not
20done) by a person other than the company in question, and

(b) the company remedies the breach not later than the end of the
accounting period after that in which the breach began,

and, accordingly, the breach is to be ignored.

(7) But if, in a case within subsection (6), the breach of condition D is not
25remedied by the time mentioned in that subsection, the group or
company (as the case may be) is treated as having ceased to be a UK
REIT at the end of the accounting period in which the breach began.

(8) In this section “the first 3-year period” has the meaning given by
section 527(8).

10 (1) 30Section 572 (termination by notice given by HMRC) is amended as follows.

(2) In subsection (2) after “573,” insert “573A,”.

(3) After subsection (5) insert—

(5A) Subsection (4)(a) has effect subject to section 573A(8).

11 After section 573 insert—

573A 35 Notice under section 572: condition D in section 528 not met

(1) An officer of Revenue and Customs may give a notice under section
572(1) if—

(a) at any time during the first 3-year period, condition D in
section 528 is not met, and

(b) 40as at that time, subsection (2) has applied to a member of the
group or the company (as the case may be) for a period
exceeding 3 years or for a number of periods which in total
exceed 3 years.

(2) This subsection applies to a company at any time when—

(a) 45the company is, or is a member of, a UK REIT,

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