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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none of the provisions repealed by paragraphs 13(2) and 15(2)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

 
 

 
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Revised 28 March 2013