Finance Bill (HC Bill 49)

(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) 5After 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
10Chapter 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
15or 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) 20any 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) 25In 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 30Termination 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
35the 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
40amended 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 5 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) 10The 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.

15Other 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
20the 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
25the 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) 30In 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
5of 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

10Schedule 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) 15In 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,
20nothing 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),
25after 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
30treated 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
5impairment 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
10paragraph (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) 15In 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
  20before 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
  25period 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)

  30in 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) 35in 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
40paragraph), 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
45and 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
5released 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) 10the 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
15section—

“(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
20impairment 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-
25connection 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
30ended 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
35applies 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
40date.

(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
45by 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) 5the 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
10debtor, 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
15enforceable), 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
20accordance 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
25subsection (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) 30CTA 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
35periods) 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) 40in 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 joining tonnage tax group)”.

(4) After section 394 insert—

“394ZA Company joining tonnage tax group

There is a relevant change in the relationship between A and a principal
company of A on any day if—

(a) 5on that day A becomes a member of a tonnage tax group for the
purposes of Schedule 22 to FA 2000 without entering tonnage
tax on that day, or

(b) the day ends immediately before the day on which, for the
purposes of that Schedule, A both becomes a member of a
10tonnage tax group and 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
15subsection) 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
20394ZA.”

(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
25periods) 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) 30in 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) 35For 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) 40there is a relevant change in the relationship between the
successor and a principal company of the successor within
section 394ZA (company joining tonnage tax group), 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) 45In Schedule 22 to FA 2000 (tonnage tax), after paragraph 79 insert—

“79A (1) This paragraph applies if—

(a) a balancing charge under this Part of this Schedule arises to
the company on the disposal of any plant or machinery, and

(b) the plant or machinery is taken into account in calculating
income that the company is treated as receiving under section
5383 or 417 of the Corporation Tax Act 2010 (sales of lessors)
as a result of section 394ZA of that Act (company joining
tonnage tax group).

(2) The balancing charge is to be reduced by the relevant part of the sales
of lessors expense so far as relief has not previously been given for
10that expense (whether under this sub-paragraph or otherwise).

(3) “The sales of lessors expense” means—

(a) the expense which the company is treated as incurring under
section 383 or 417 of the Corporation Tax Act 2010 as a result
of section 394ZA of that Act, or

(b) 15if section 386 or 419 of that Act applies or has applied, the
expense which derives from the expense within paragraph
(a).

(4) If the sales of lessors expense is incurred at a time when the company
is in tonnage tax, the “relevant part” of that expense is so much of it
20as, on a just and reasonable basis, is attributable to the matters set out
in paragraph 56(1)(a) or (b).

(5) If—

(a) the sales of lessors expense is not incurred at a time when the
company is in tonnage tax,

(b) 25that expense is taken into account in calculating a loss made
by the company in a trade, and

(c) the loss is one to which paragraph 56 applies,

the “relevant part” of the sales of lessors expense is so much of the
apportioned loss as, on a just and reasonable basis, is derived from
30the sales of lessors expense.

(6) The reference here to the apportioned loss is to the loss that is
attributable to the matters set out in paragraph 56(1)(a) or (b).”

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

(a) where the income arises as a result of a company becoming a member
35of a tonnage tax group on or after 21 March 2012 and entering tonnage
tax at the same time,

(b) where the income arises as a result of a company becoming a member
of a tonnage tax group on or after 23 April 2012 without entering
tonnage tax at the same time, or

(c) 40where the relevant day is on or after 21 March 2012 (in any case not
within paragraph (a) or (b)).

(10) The amendments made by subsections (3) to (5) and (8) have effect—

(a) where a company becomes a member of a tonnage tax group on or after
21 March 2012 and enters tonnage tax at the same time, or

(b) 45where a company becomes a member of a tonnage tax group on or after
23 April 2012 without entering tonnage tax at the same time.

(11) The amendment made by subsection (7) has effect—

(a) except in a case within paragraph (b), where the transfer day is on or
after 21 March 2012, and

(b) in a case where the relevant change in the relationship occurs as a result
of a company becoming a member of a tonnage tax group without
5entering tonnage tax at the same time, where the transfer day is on or
after 23 April 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
10share 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) 15The 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) 20as 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
25more 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.

(3F) If—

(a) a corporate member enters into a quota share contract, and

(b) 30the main purpose, or one of the main purposes, of entering into
it was to secure that amounts payable by the member under the
contract were not dealt with on the basis set out in subsection
(3G),

the contract is treated for the purposes of subsections (3C) to (3E) as if
35it were a stop-loss insurance (and, accordingly, the amounts payable
under it are treated for those purposes as premiums).

(3G) Amounts are dealt with on the basis set out in this subsection if they are
treated as payable in the underwriting year in which the profits or
losses arising to a corporate member directly from its membership of
40one or more syndicates are declared.”

(2) The amendment made by this section has effect in relation to—

(a) any stop-loss insurance (as defined by section 230(1) of FA 1994) taken
out on or after 6 December 2011, or

(b) any quota share contract (as defined by section 225(4) of FA 1994)
45entered into on or after that date.

(3) If before 6 December 2011 a corporate member enters into a multi-year
contract—

(a) insurance is to be regarded for the purposes of subsection (2)(a) as
taken out on the anniversary date of the contract which falls on or after
5the day on which this Act is passed, and

(b) premiums payable under the insurance in respect of an underwriting
year beginning on or after that day are premiums falling to be dealt
with in accordance with the amendment made by this section.

(4) For this purpose—

• 10“multi-year contract” means a contract which (unless cancelled) operates
  in respect of successive underwriting years, and

• “the anniversary date of the contract” means the date which is the
  anniversary of the date on which the contract was entered into.

(5) If—

(a) 15before 6 December 2011 a corporate member enters into a contract for
insurance in respect of an underwriting year, and

(b) on or after 6 December 2011 the contract is renewed in respect of a
further underwriting year (whether as a result of the exercise of an
option conferred by the contract or otherwise),

20insurance is to be regarded for the purposes of subsection (2)(a) as taken out on
the date of the renewal.

26 Abolition of relief for equalisation reserves: general insurers

(1) Sections 444BA to 444BD of ICTA (equalisation reserves) are repealed.

(2) In consequence of the repeal of those sections, omit—

(a) 25in TMA 1970, in the second column of the table in section 98, the entry
relating to regulations under section 444BB of ICTA and the entry
relating to regulations under section 444BD of ICTA,

(b) in FA 1996, section 166 and Schedule 32,

(c) in FA 2003, in section 153(1)(a), the reference “444BB(3)(b),”,

(d) 30in CTA 2009, paragraphs 155 and 156 of Schedule 1, and

(e) in TIOPA 2010, paragraph 9 of Schedule 8.

(3) The amendments made by this section have effect in relation to accounting
periods ending on or after such day (“the specified day”) as is specified in an
order made by the Treasury (and different days may be specified for different
35cases).

(4) In the case of an insurance company’s existing equalisation or equivalent
reserve—

(a) an amount equal to one-sixth of the amount of the reserve is to be
treated as a receipt of the company’s business in the calendar year in
40which the specified day falls, and

(b) an amount equal to one-sixth of the amount of the reserve is to be
treated as a receipt of the company’s business in each of the next five
calendar years.

(5) If there are different accounting periods falling in a calendar year, a receipt
45arising as a result of subsection (4) is apportioned between those periods in
proportion to the number of days of the calendar year falling in those periods.