Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 13 — Change in ownership of shell company: restriction of relief
235

“group (in Chapter 4 of Part 11)”,
“group UK REIT (in Chapter 4 of Part 11)”,
“Manufactured dividend (in Chapter 4 of Part 11)”,
“principal company (in Chapter 4 of Part 11)”,
“property rental business (in Chapter 4 of Part 11)”, and
5
“the repurchase price of the securities (in Chapter 4 of Part 11)”,
and
(b)
in the entry for “distribution (except in Chapter 4 of Part 11)”, omit
“(except in Chapter 4 of Part 11)”.
CTA 2010
10
16
In Schedule 1 of CTA 2010 (minor and consequential amendments), omit
paragraphs 540 to 543 and 544(a), (c) and (d).
FA 2010
17
In Schedule 6 of FA 2010 (charities etc), omit paragraph 21(4).
Commencement and transitional provision
15
18    (1)
Subject to sub-paragraph (2), the amendments made by this Schedule have
effect for the tax year 2013-2014 and subsequent tax years.
      (2)
Chapter 2A of Part 4 of ITTOIA 2005 does not apply in relation to an
arrangement that produces a return for a person, in relation to an amount,
which is economically equivalent to interest if—
20
(a)
the person became party to the arrangement before 6 April 2013, and
(b)
none of the provisions repealed by paragraphs 13(2) and 15(2)
applied in relation to the arrangement before that date.
Schedule 13
Section 33

Change in ownership of shell company: restriction of relief
25
Amendments of Part 14 of CTA 2010
1     (1)
Part 14 of CTA 2010 (change in company ownership) is amended as follows.
      (2)
In section 672 (overview of Part)—
(a)
after subsection (3) insert—
“(3A)
Chapter 5A restricts relief for certain non-trading deficits and
30
losses where there is a change of ownership of a shell
company.”;
(b)
in subsection (7), omit the “and” at the end of paragraph (b) and after
that paragraph insert—
“(ba)
“shell company”, see section 705A, and”.
35

Finance (No. 2) Bill
Schedule 13 — Change in ownership of shell company: restriction of relief
236

      (3)
After Chapter 5 insert—
“Chapter 5A
Shell companies: restrictions on relief
Introduction
705A
Introduction to Chapter
5
(1)
This Chapter applies where there is a change in the ownership of a
shell company.
(2)
In this Chapter—
“the change in ownership” means the change in ownership
mentioned in subsection (1);
10
“the company” means the company mentioned in subsection
(1);
“shell company” means a company that—
(a)
is not carrying on a trade,
(b)
is not a company with investment business, and
15
(c)
is not carrying on a UK property business.
705B
Notional split of accounting period in which change in ownership
occurs
(1)
This section applies for the purposes of this Chapter.
(2)
The accounting period in which the change in ownership occurs
20
(“the actual accounting period”) is treated as two separate
accounting periods (“notional accounting periods”), the first ending
with the change and the second consisting of the remainder of the
period.
(3)
The amounts for the actual accounting period in column 1 of the
25
table in section 705F(2) are apportioned to the two notional
accounting periods in accordance with section 705F.
(4)
In this Chapter “the actual accounting period” and “notional
accounting periods” have the same meaning as in this section.
Restrictions on relief
30
705C
Restriction on debits to be brought into account
(1)
This section has effect for the purpose of restricting the debits to be
brought into account for the purposes of Part 5 of CTA 2009 (loan
relationships) in respect of the company’s loan relationships.
(2)
The debits to be brought into account for the purposes of Part 5 of
35
CTA 2009 for—
(a)
the accounting period beginning immediately after the
change in ownership, or
(b)
any subsequent accounting period,

do not include relevant non-trading debits so far as amount A
40
exceeds amount B.

Finance (No. 2) Bill
Schedule 13 — Change in ownership of shell company: restriction of relief
237

(3)
Amount A is the sum of—
(a)
the amount of those relevant non-trading debits, and
(b)
the amount of any relevant non-trading debits which have
been brought into account for the purposes of that Part for
any previous accounting period ending after the change in
5
ownership.
(4)
Amount B is the amount of the taxable total profits of the accounting
period ending with the change in ownership.
(5)
For the meaning of “relevant non-trading debit”, see section 730.
705D
Restriction on carry forward of non-trading deficit from loan
10
relationships
(1)
This section has effect for the purpose of restricting the carry forward
of a non-trading deficit from the company’s loan relationships under
Part 5 of CTA 2009 (loan relationships).
(2)
Subsection (3) applies if the non-trading deficit in column 1 of row 4
15
of the table in section 705F(2) is apportioned in accordance with
section 705F to the first notional accounting period.
(3)
None of that non-trading deficit may be carried forward to—
(a)
the accounting period beginning immediately after the
change in ownership, or
20
(b)
any subsequent accounting period.
705E
Restriction on relief for non-trading loss on intangible fixed assets
(1)
This section has effect for the purpose of restricting relief under
section 753 of CTA 2009 (treatment of non-trading losses) in respect
of a non-trading loss on intangible fixed assets.
25
(2)
Relief under section 753 of CTA 2009 against the total profits of the
same accounting period is available only in relation to each of the
notional accounting periods considered separately.
(3)
A non-trading loss on intangible fixed assets for an accounting
period beginning before the change in ownership may not be—
30
(a)
carried forward under section 753(3) of that Act to an
accounting period ending after the change in ownership, or
(b)
treated under that section as if it were a non-trading debit of
that period.
Apportionment of amounts
35
705F
Apportionment of amounts
(1)
This section applies for the purposes of this Chapter.
(2)
Any amount for the actual accounting period in column 1 of the
following table is to be apportioned to the two notional accounting
periods in accordance with the corresponding method of
40
apportionment in column 2 of the table.

Finance (No. 2) Bill
Schedule 13 — Change in ownership of shell company: restriction of relief
238

Row
1. Amount to be apportioned
2. Method of apportionment

1
The amount for the actual
Apportion the amount in

accounting period of any
column 1 on a time basis

adjusted non-trading profits
according to the respective

from the company’s loan
lengths of the two notional

5

relationships (see section
accounting periods.

705G(2))).

2
The amount for the actual
Apportion the amount in

accounting period of any
column 1 on a time basis

adjusted non-trading deficit from
according to the respective

10

the company’s loan relationships
lengths of the two notional

(see section 705G(3)).
accounting periods.

3
The amount of any non-trading
(1) If condition A in section

debit that falls to be brought into
705G(4) is met, apportion the

account for the actual accounting
amount in column 1 by reference

15

period for the purposes of Part 5
to the time of accrual of the

of CTA 2009 (loan relationships)
amount to which the debit

in respect of any debtor
relates.

relationship of the company.

(2) If condition B in section

20

705G(5) is met, apportion the

amount in column 1 to the first

notional accounting period.

4
The amount of any non-trading
Apportion the whole of the

deficit carried forward to the
amount in column 1 to the first

25

actual accounting period under
notional accounting period.

section 457(1) of CTA 2009 (basic

rule for deficits: carry forward to

accounting periods after deficit

period).

30

5
The amount of any non-trading
Apportion to each notional

credits or debits in respect of
accounting period the credits or

intangible fixed assets that fall to
debits that would fall to be

be brought into account for the
brought into account in that

actual accounting period under
period if it were a period of

35

section 751 of CTA 2009 (non-
account for which accounts were

trading gains and losses), but
drawn up in accordance with

excluding any amount within
generally accepted accounting

column 1 of row 6.
practice.

6
The amount of any non-trading
Apportion the whole of the

40

loss on intangible fixed assets
amount in column 1 to the first

carried forward to the actual
notional accounting period.

accounting period under section

753(3) of CTA 2009 and treated

under that section as if it were a

45

non-trading debit of that period.

Finance (No. 2) Bill
Schedule 13 — Change in ownership of shell company: restriction of relief
239

Row
1. Amount to be apportioned
2. Method of apportionment

7
Any other amounts by reference
Apportion the amount in

to which the profits or losses of
column 1 on a time basis

the actual accounting period
according to the respective

would (but for this Chapter) be
lengths of the two notional

5

calculated.
accounting periods.

(3)
If any method of apportionment in column 2 of the table in
subsection (2) would work unjustly or unreasonably in any case,
such other method is to be used as is just and reasonable.
(4)
For the meaning of certain expressions used in this section, see
10
section 705G.
705G
Meaning of certain expressions in section 705F
(1)
This section applies for the purposes of the table in section 705F(2).
(2)
For the purposes of column 1 of row 1 of the table, the amount for the
actual accounting period of any adjusted non-trading profits from
15
the company’s loan relationships is the amount which would be the
amount of the profits from those relationships chargeable under
section 299 of CTA 2009 (charge to tax on non-trading profits) if, in
calculating that amount, amounts for that period within column 1 of
row 3 or 4 of the table were disregarded.
20
(3)
For the purposes of column 1 of row 2 of the table, the amount for the
actual accounting period of any adjusted non-trading deficit from
the company’s loan relationships is the amount which would be the
amount of the non-trading deficit from those relationships if, in
calculating that amount, amounts for that period within column 1 of
25
row 3 or 4 of the table were disregarded.
(4)
Condition A is that—
(a)
the amount in column 1 of row 3 of the table is determined on
an amortised cost basis of accounting, and
(b)
none of the following provisions applies—
30
(i)
section 373 of CTA 2009 (late interest treated as not
accruing until paid in some cases),
(ii)
section 407 of that Act (postponement until
redemption of debits for connected companies’
deeply discounted securities), or
35
(iii)
section 409 of that Act (postponement until
redemption of debits for close companies’ deeply
discounted securities).
(5)
Condition B is that—
(a)
the amount in column 1 of row 3 of the table is determined on
40
an amortised cost basis of accounting, and
(b)
any of the provisions mentioned in subsection (4)(b) applies.”
      (4)
In section 721 (when things other than share capital may be taken into
account: Chapters 2 to 5)—
(a)
in the heading, for “5” substitute “5A”;
45

Finance (No. 2) Bill
Schedule 14 — R&D expenditure credits
Part 1 — Amendments of CTA 2009
240

(b)
in subsection (1), for “5” substitute “5A”;
(c)
in subsection (4), for “or 5” substitute “, 5 or 5A”.
      (5)
In section 725 (provision applying for the purposes of Chapters 2 to 5)—
(a)
in the heading, for “5” substitute “5A”;
(b)
in subsection (1), for “5” substitute “5A”.
5
      (6)
In section 730 (meaning of “relevant non-trading debit”)—
(a)
in subsection (1), for “and 696” substitute “, 696 and 705C”;
(b)
in subsections (3)(c), (4)(c) and (5)(b) for “or 696” substitute “, 696 or
705C”.
Consequential amendments
10
2
In Schedule 4 to that Act (index of defined expressions) insert at the
appropriate places—

“the actual accounting period (in Chapter 5A of Part 14)
section 705B(4)”

“the change in ownership (in Chapter 5A of Part 14)
section 705A(2)”

“the company (in Chapter 5A of Part 14)
section 705A(2)”

15

“notional accounting periods (in Chapter 5A of Part 14)
section 705B(4)”

“shell company (in Chapter 5A of Part 14)
section 705A(2)”.

Commencement
3
The amendments made by this Schedule have effect in relation to changes in
ownership that occur on or after 20 March 2013.
20
Schedule 14
Section 34

R&D expenditure credits
Part 1
Amendments of CTA 2009
1
In Part 3 of CTA 2009 (trading income), after Chapter 6 insert—
25
“Chapter 6A
Trade profits: R&D expenditure credits
Claims for credits
104A
R&D expenditure credits
(1)
A company carrying on a trade may make a claim for an amount (an
30
“R&D expenditure credit”) to be brought into account as a receipt in
calculating the profits of the trade for an accounting period.

Finance (No. 2) Bill
Schedule 14 — R&D expenditure credits
Part 1 — Amendments of CTA 2009
241

(2)
The company is entitled to an R&D expenditure credit for the
accounting period if the company has qualifying R&D expenditure
which is allowable as a deduction in calculating for corporation tax
purposes the profits of the trade for the accounting period.
(3)
In the case of a company that is a small or medium-sized enterprise
5
in the accounting period, the company’s “qualifying R&D
expenditure” means—
(a)
its qualifying expenditure on sub-contracted R&D (see
section 104C),
(b)
its subsidised qualifying expenditure (see section 104F), and
10
(c)
its capped R&D expenditure (see section 104I).
(4)
In the case of a company that is a large company throughout the
accounting period, the company’s “qualifying R&D expenditure”
means—
(a)
its qualifying expenditure on in-house direct research and
15
development (see section 104J),
(b)
its qualifying expenditure on contracted out research and
development (see section 104K), and
(c)
its qualifying expenditure on contributions to independent
research and development (see section 104L).
20
(5)
The amount of an R&D expenditure credit to which a company is
entitled is determined in accordance with section 104M.
(6)
Section 104N contains provision about the effect of a successful claim
for an R&D expenditure credit.
(7)
Sections 104U to 104W contain provision about insurance companies
25
and group companies.
(8)
Section 104X contains anti-avoidance provision.
(9)
Section 104Y contains definitions.
(10)
For information about the procedure for making claims under this
Chapter, see Schedule 18 to FA 1998, in particular Part 9A of that
30
Schedule.
104B
Restriction on claiming relief under Part 13 and credit for same
expenditure

A company may not make a claim for an R&D expenditure credit and
for relief under Part 13 (additional relief for expenditure on research
35
and development) in respect of the same expenditure.
SMEs: qualifying expenditure on sub-contracted R&D
104C
Qualifying expenditure on sub-contracted R&D
(1)
For the purposes of this Chapter a company’s “qualifying
expenditure on sub-contracted R&D” means expenditure incurred
40
by it that meets conditions A and B.
(2)
Condition A is that the expenditure is incurred on research and
development contracted out to the company by—
(a)
a large company, or