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
5relation to that period because of a failure by the group to meet the
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
10been entered into.

(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
15person becomes or is party to the scheme is to secure that the
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
20follows.

(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) 25Section 314 (the financing income amounts of a company) is amended as
follows.

(2) In subsection (6), for “the same proportion” substitute “such proportion as is
just and reasonable”.

(3) After that subsection insert—

“(6A) 30An amount may be reduced to nil under subsection (6).”

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) 35After subsection (5) insert—

“(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”
40substitute “accrues”.

(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 5 Elections disapplying sections 329(5) and 330(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
10to which it has effect, and

(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
15any time during the period beginning at the same
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
20withdrawn under subsection (4) or replaced by a further election
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) 25“The relevant reporting body” means—

(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
30which are UK group companies at the relevant time, acting
jointly.

But the companies within paragraph (b) do not include any company
that is a dormant company throughout the specified period of
account.

(6) 35An election or withdrawal must—

(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) 40The notice must be signed—

(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
45appropriate person in relation to each company within that
paragraph.

(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
  5express, implied or apparent authority of the
  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
  10officer”) apply as they apply for the purposes of that section;

• “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
  15withdrawal is made;

• “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
  20specified under subsection (4).”

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
25“relevant group company”) has effect as if references to the
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) 30In paragraph (b)(i)—

(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) 35In paragraph (c) omit the words from “or an entity that would be a collective
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) 40financial statements of the worldwide group are drawn up in
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) 45those statements are to be ignored, and

(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
5this Part applies).”

18 After section 348 insert—

“348A Financial statements: business combinations to which the worldwide
group is a party

(1) Subsection (2) applies where—

(a) 10a business combination or demerger occurs to which the
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) 15any other group which is party to the relevant event,
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
20ends after the relevant event (“the straddling period”).

(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) 25IAS financial statements had been drawn up in respect of
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) 30the period beginning with the relevant event and
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) 35a group is party to a business combination or demerger if the
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 40In section 351 (expressions taking their meaning from international
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—

• 45““dormant company” means—

  (a)

  a company that is “dormant” within the meaning of
  section 1169 of the Companies Act 2006, or

  Finance BillPage 204

  (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(5) (transfer pricing: tax calculations to be based on arm’s
  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
10any relevant accounting change resulting from a change in
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
15an ultimate parent of a group and its subsidiaries.

(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
20election or other specified circumstances.

(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
25with that pre-commencement period.

(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) 30This subsection applies if the regulations contain any provision
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
35House of Commons.

(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;

• 40“accounting standard” includes any statement of practice,
  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.”

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
5periods of account of the worldwide group ending on or after the day on
which this Act is passed.

Section 38

SCHEDULE 6 Seed enterprise investment scheme

Part 1 10The scheme

1 In ITA 2007, after Part 5 (enterprise investment scheme) insert—

“ Part 5A Seed enterprise investment scheme

CHAPTER 1 Introduction

15SEIS 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.

(2) 20In 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
25time 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—

(a) 30the 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)
35are met in respect of the relevant shares (see Chapter 3), and

(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) 5is eligible for SEIS relief in respect of any amount subscribed
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
10the shares were issued (“the current tax year”).

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
15subscribed for shares issued in that year in respect of which
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
2023.

(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,

25the individual so claims, subsections (1) and (2) apply as if, in respect
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 30 Meaning of “period A” and “period B”

(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) 35ending immediately before the termination date relating to
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
40the shares.

(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.

257AD Overview of other Chapters of Part

In this Part—

(a) Chapter 5 provides for the attribution of SEIS relief to shares
and the making of claims for such relief,

(b) 5Chapter 6 provides for SEIS relief to be withdrawn or
reduced in the circumstances mentioned in that Chapter,

(c) Chapter 7 makes provision with respect to the procedure for
the withdrawal or reduction of SEIS relief, and

(d) Chapter 8 contains supplementary and general provisions.

257AE 10 CGT reliefs relating to SEIS

(1) Section 150E of TCGA 1992 makes provision about gains or losses on
the disposal of shares to which SEIS relief is attributable.

(2) Schedule 5BB to that Act provides relief in respect of the re-
investment under SEIS of the proceeds of assets disposed of in
15circumstances where there would otherwise be a chargeable gain.

CHAPTER 2 The investor

Introduction

257B Overview of Chapter

The investor is a qualifying investor in relation to the relevant shares
20if the requirements of this Chapter are met as to—

(a) no employee investors (see section 257BA),

(b) no substantial interest in the issuing company (see section
257BB),

(c) no related investment arrangements (see section 257BC),

(d) 25no linked loans (see section 257BD), and

(e) no tax avoidance (see section 257BE).

The requirements

257BA The no employee investors requirement

(1) Neither the investor nor an associate of the investor may, at any time
30during period B, be an employee of the issuing company or of any
qualifying subsidiary of that company.

(2) For this purpose a person is not to be treated as an employee of the
issuing company, or of any qualifying subsidiary of that company, at
any time when the person is a director of that company.

257BB 35 The no substantial interest in the issuing company requirement

The investor must not have a substantial interest in the issuing
company at any time during period A.

257BC The no related investment arrangements requirement

The investor (“P”) must not subscribe for the relevant shares as part
of an arrangement which provides for another person to subscribe
for shares in another company in which P, or any other individual
5who is party to the arrangement, has a substantial interest.

257BD The no linked loan requirement

(1) No linked loan is to be made by any person, at any time in period A,
to the investor or an associate of the investor.

(2) In this section “linked loan” means any loan which—

(a) 10would not have been made, or

(b) would not have been made on the same terms,

if the investor had not subscribed for the relevant shares, or had not
been proposing to do so.

(3) References in this section to the making by any person of a loan to the
15investor or an associate of the investor include a reference—

(a) to the giving by that person of any credit to the investor or
any associate of the investor, and

(b) to the assignment to that person of a debt due from the
investor or any associate of the investor.

257BE 20 The no tax avoidance requirement

The relevant shares must be subscribed for by the investor for
genuine commercial reasons, and not as part of a scheme or
arrangement the main purpose or one of the main purposes of which
is the avoidance of tax.

25Meaning of substantial interest in a company

257BF Persons with a substantial interest in a company

(1) An individual has a substantial interest in a company if the
individual directly or indirectly possesses or is entitled to acquire
more than 30% of—

(a) 30the ordinary share capital of the company or any subsidiary
of the company,

(b) the issued share capital of the company or any such
subsidiary, or

(c) the voting power in the company or any such subsidiary.

(2) 35An individual has a substantial interest in a company if the
individual directly or indirectly possesses or is entitled to acquire
such rights as would—

(a) in the event of the winding up of the company or any
subsidiary of the company, or

(b) 40in any other circumstances,

entitle the individual to receive more than 30% of the assets of the
company or subsidiary (“the company in question”) which would
then be available for distribution to equity holders of the company in
question.

(3) For the purposes of subsection (2)—

(a) the persons who are equity holders of the company in
question, and

(b) the percentage of the assets of the company in question to
5which the individual would be entitled,

are determined in accordance with Chapter 6 of Part 5 of CTA 2010.

(4) In making that determination—

(a) references in section 166 of that Act to company A are to be
read as references to an equity holder, and

(b) 10references in that section to a winding up are to be read as
including a reference to any other circumstances in which
assets of the company in question are available for
distribution to its equity holders.

(5) An individual does not have a substantial interest in a company
15merely because one or more shares in the company are held by the
individual or by an associate of the individual, at a time when the
company—

(a) has not issued any shares other than subscriber shares, and

(b) has not begun to carry on, or make preparations for carrying
20on, any trade or business.

(6) An individual has a substantial interest in a company if the
individual has control of the company or any subsidiary of that
company.

(7) For the purposes of this section—

(a) 25an individual is treated as entitled to acquire anything which
the individual is entitled to acquire at a future date or will at
a future date be entitled to acquire, and

(b) there is attributed to any individual any rights or powers of
any other person who is an associate of the individual.

(8) 30In this section “subsidiary”, in relation to a company, means a
company which at any time in period A is a 51% subsidiary of the
company, whether or not it is such a subsidiary while the individual
concerned has, or is entitled to acquire, such capital, voting power,
rights or control as are mentioned in this section.

CHAPTER 3 35General requirements

Introduction

257C Overview of Chapter

The general requirements are met in respect of the relevant shares if
the requirements of this Chapter are met as to—

(a) 40the shares (see section 257CA),

(b) the purpose of the issue (see section 257CB),

(c) the spending of the money raised (see section 257CC),

(d) no pre-arranged exits (see section 257CD),