Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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Effect of disincorporation relief
(1)
In Part 5 of TCGA 1992 (transfer of business assets), in Chapter 1 (general
provisions), after section 162A insert—
“Transfer of business from company to shareholders
162B
Disincorporation relief: assets (including pre-FA 2002 goodwill)
5
(1)
This section applies where—
(a)
a company transfers its business to some or all of the
shareholders of the company, and
(b)
a claim for disincorporation relief in respect of the transfer has
been made under section 57 of the Finance Act 2013.
10
(2)
The disposal and acquisition of any qualifying asset of the business
included in the transfer is to be deemed to be for a consideration equal
to the lower of—
(a)
the sums allowable under section 38 as a deduction in the
computation of the gain accruing to the company on the
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disposal of the asset in question, and
(b)
the market value of the asset.
(3)
In subsection (2) a “qualifying asset” means—
(a)
goodwill, or
(b)
an interest in land which is not held as trading stock.
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(4)
But subsection (2) does not apply to the goodwill of the business if
section 162C applies to it.
162C
Disincorporation relief: post-FA 2002 goodwill
(1)
This section applies where—
(a)
a company transfers its business to some or all of the
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shareholders of the company,
(b)
a claim for disincorporation relief in respect of the transfer has
been made under section 57 of the Finance Act 2013, and
(c)
section 849A of CTA 2009 (disincorporation relief: transfer
values for post-FA 2002 goodwill) applies to the transfer of the
30
goodwill of the business.
(2)
The acquisition of the goodwill of the business is deemed to be for a
consideration equal to the value at which the goodwill is treated as
transferred by virtue of section 849A of CTA 2009.”
(2)
In Part 8 of CTA 2009 (intangible fixed assets), Chapter 13 (transactions
35
between related parties) is amended as follows.
(3)
In section 844 (overview of Chapter), in subsection (2) for “849” substitute
“849A”.
(4)
In section 845 (transfer between company and related party treated as at
market value), in subsection (4) (exceptions to basic rule)—
40
(a)
omit the “and” at the end of paragraph (ca), and
(b)
after paragraph (d) insert “, and
(e)
section 849A (disincorporation relief: transfer values for
post-FA 2002 goodwill).”

Finance (No. 2) Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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(5)
After section 849 insert—
“849A
Disincorporation relief: transfer values for post-FA 2002 goodwill
(1)
This section applies where—
(a)
a company transfers its business to some or all of the
shareholders of the company, and
5
(b)
a claim for disincorporation relief in respect of the transfer has
been made under section 57 of the Finance Act 2013.
(2)
If section 735 applies to the transfer of the goodwill of the business, the
transfer is treated for the purposes of this Part as being at the lower of—
(a)
the tax written-down value of the goodwill, and
10
(b)
its market value.
(3)
If section 736 applies to the transfer of the goodwill of the business, the
transfer is treated for the purposes of this Part as being at the lower of—
(a)
the cost of the goodwill, and
(b)
its market value.
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(4)
If section 738 applies to the transfer of the goodwill of the business, the
proceeds of realisation of the goodwill are treated for the purposes of
this Part as being nil.
(5)
In subsection (2)(a) the reference to the tax written-down value of the
goodwill is to its tax written-down value immediately before the
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transfer.
(6)
In subsection (3)(a) “the cost of the goodwill” means the cost recognised
for tax purposes (determined in accordance with section 736(6) and (7)).
(7)
In this section market value has the meaning given in section 845(5).”
(6)
The amendments made by this section have effect in relation to a transfer of a
25
business with a business transfer date of 1 April 2013 or a later date.
Capital gains
61
Attribution of gains to members of non-resident companies
(1)
TCGA 1992 is amended as follows.
(2)
In subsection (4) of section 13 (members to whom rule for attributing gains to
30
members of non-resident companies does not apply), for “one tenth” substitute
“one quarter”.
(3)
In subsection (5) of that section (cases where rule for attributing gains to
members of non-resident companies does not apply), after the “or” at the end
of paragraph (b) insert—
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“(ca)
a chargeable gain accruing on the disposal of an asset used, and
used only, for the purposes of economically significant
activities carried on by the company wholly or mainly outside
the United Kingdom, or
(cb)
a chargeable gain accruing to the company on a disposal of an
40
asset where it is shown that neither—
(i)
the disposal of the asset by the company, nor

Finance (No. 2) Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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(ii)
the acquisition or holding of the asset by the company,

formed part of a scheme or arrangements of which the main
purpose, or one of the main purposes, was avoidance of liability
to capital gains tax or corporation tax, or”.
(4)
After section 13 insert—
5
“13A
Section 13(5): interpretation
(1)
For the purposes of section 13(5)(b) a disposal of an asset is to be
regarded as a disposal of an asset used for the purposes of a trade
carried on wholly outside the United Kingdom by a company if—
(a)
the asset is accommodation, or an interest or right in
10
accommodation, which is situated outside the United Kingdom,
and
(b)
the accommodation has for each relevant period been furnished
holiday accommodation of which a person has made a
commercial letting.
15
(2)
For the purposes of subsection (1)(b) each of the following is “a relevant
period”—
(a)
the period of 12 months ending with the date of the disposal
and each of the two preceding periods of 12 months, or
(b)
if the company has been the beneficial owner of the
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accommodation (or interest or right) for a period longer than 36
months, the period of 12 months ending with the date of the
disposal and each of the preceding periods of 12 months
throughout which the company has been the beneficial owner
of the accommodation (or interest or right).
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(3)
The reference in subsection (1)(b) to the commercial letting of furnished
holiday accommodation is to be read in accordance with Chapter 6 of
Part 4 of CTA 2009, but—
(a)
as if sections 266, 268 and 268A were omitted, and
(b)
as if, in section 267(1), the reference to an accounting period
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were a reference to a relevant period as defined by subsection
(2) above.
(4)
For the purposes of section 13(5)(ca) activities carried on by a company
are “economically significant activities” if they are activities which
consist of the provision by the company of goods or services to others
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on a commercial basis and involve—
(a)
the use of staff in numbers, and with competence and authority,
(b)
the use of premises and equipment, and
(c)
the addition of economic value, by the company, to those to
whom the goods or services are provided,
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commensurate with the size and nature of those activities.
(5)
In subsection (4) “staff” means employees, agents or contractors of the
company.”
(5)
The amendments made by this section have effect in relation to disposals made
on or after 6 April 2012.
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(6)
But, in the case of a disposal made on or after that date but before 6 April 2013,
a person to whom a part of a chargeable gain or allowable loss would (but for

Finance (No. 2) Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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the amendments made by this section) have accrued on the disposal may make
an election in writing for section 13 of TCGA 1992 to apply in relation to the
disposal without those amendments.
(7)
An election under subsection (6) in respect of a disposal must be made—
(a)
in the case of a person within the charge to capital gains tax, within 4
5
years from the end of the tax year in which the disposal was made, and
(b)
in the case of a person within the charge to corporation tax, within 4
years from the end of the accounting period in which the disposal was
made.
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Heritage maintenance settlements
10
(1)
In section 169D of TCGA 1992 (gifts to settlor-interested settlements etc:
exceptions to sections 169B and 169C), in subsection (1), after “elected” insert “,
or could have elected,”.
(2)
The amendment made by this section has effect for the tax year 2012-13 and
subsequent tax years.
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63
EMI options and entrepreneurs’ relief etc
Schedule 23 makes provision for capital gains tax purposes in connection with
shares acquired under options which are qualifying options under the EMI
code.
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Charge on certain high value disposals by companies etc
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Schedule 24 contains provision for a new capital gains tax charge on gains
accruing to companies etc on certain high value disposals.
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Currency used in tax calculations: chargeable gains and losses
(1)
Chapter 4 of Part 2 of CTA 2010 (currency) is amended as follows.
(2)
In section 5 (basic rule: sterling to be used), after subsection (2) insert—
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“(3)
See section 9C for provision about the application of subsection (1) so
far as it relates to calculating chargeable gains.”
(3)
After section 9B insert—
“9C
Chargeable gains and losses of companies
(1)
This section applies if—
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(a)
a company disposes of an asset which is a ship, an aircraft,
shares or an interest in shares, and
(b)
at any time beginning with the company’s acquisition of the
asset (or, if earlier, the time allowable expenditure was first
incurred in respect of the asset) and ending with the disposal,
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the company’s relevant currency is not sterling.
(2)
A company’s relevant currency at any time is its functional currency at
that time, subject to subsection (3).
(3)
If, at any time—
(a)
a company is a UK resident investment company, and
40

Finance (No. 2) Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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(b)
the company has a designated currency (see sections 9A and 9B)
which is different from its functional currency,

the company’s relevant currency at that time is that designated
currency.
(4)
If the relevant currency of the company at the time of the disposal is not
5
sterling, the chargeable gain or loss accruing to the company on the
disposal must be calculated as follows—

Step 1

Calculate the chargeable gain or loss in the relevant currency of
the company at the time of the disposal.
10

Step 2

Translate the amount of the chargeable gain or loss into sterling
by reference to the spot rate of exchange on the day of the
disposal.
(5)
In any case, subsections (6) to (10) apply for the purposes of calculating
15
the chargeable gain or loss.
(6)
Where any allowable expenditure is incurred in a currency which is not
the company’s relevant currency at the time it is incurred, that
expenditure is to be translated into that relevant currency by reference
to the spot rate of exchange for the day on which it is incurred.
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(7)
Where, at any time after any allowable expenditure is incurred but
before the asset is disposed of, there is a change in the company’s
relevant currency, that expenditure is to be translated (or, if it has
previously been translated under this section, further translated) into
the relevant currency of the company immediately following the
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change, by reference to the spot rate of exchange for the day of the
change.
(8)
Any amount of consideration for the disposal which is given in a
currency other than the company’s relevant currency is to be translated
into that relevant currency by reference to the spot rate of exchange on
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the day of disposal.
(9)
For the purposes of subsections (6) and (7)—
(a)
any translation of expenditure under subsection (6) is to be
done before any translation of the expenditure under
subsection (7), and
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(b)
if subsection (7) applies as a result of more than one change in
the company’s relevant currency, it is to be applied in relation
to each change in the order the changes were made (with the
earliest first).
(10)
Where, by virtue of any enactment, the company was at any time
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treated for the purposes of corporation tax on chargeable gains as
acquiring the asset—
(a)
for a consideration of such amount as would secure that neither
a gain nor a loss would accrue to the person disposing of the
asset, or
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(b)
for a consideration equal to the market value of the asset,

for the purposes of this section that allowable expenditure is treated as
incurred by the company at that time.

Finance (No. 2) Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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(11)
For the purposes of this section, a reference to a ship or aircraft includes
a reference to the benefit of a contract—
(a)
to which section 67 of CAA 2001 applies, and
(b)
which relates to plant or machinery which is a ship or aircraft.
(12)
In this section—
5
“allowable expenditure” means expenditure which, immediately
before the disposal, was attributable to the asset under section
38(1)(a) to (c) of TCGA 1992;
“interest in shares” has the same meaning as in Schedule 7AC to
TCGA 1992 (see paragraph 29 of that Schedule);
10
“shares” includes stock.”
(4)
The amendments made by this section come into force in accordance with
provision made by the Treasury by order.
Capital allowances
66
Allowances for energy-saving plant and machinery: Northern Ireland
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(1)
Section 45AA of CAA 2001 (section 45A exclusion: payments under Energy Act
2008 schemes) is amended as follows.
(2)
In subsection (1)—
(a)
in paragraph (a), after “(feed-in tariffs)” insert “, or under a
corresponding scheme having effect in Northern Ireland,”, and
20
(b)
in paragraph (b), after “of that Act” insert “or section 113 of the Energy
Act 2011”.
(3)
In subsection (5), for “subsection (6)” substitute “subsections (5A) and (6)”.
(4)
After that subsection insert—
“(5A)
Except as provided by subsection (6), in the case of expenditure
25
incurred on plant or machinery used or for use in Northern Ireland, the
relevant date is—
(a)
for corporation tax purposes, 1 April 2013, and
(b)
for income tax purposes, 6 April 2013.”
(5)
In the heading, for “payments under Energy Act 2008 schemes” substitute
30
“feed-in tariffs and renewable heat incentives”.
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Cars with low carbon dioxide emissions
(1)
In section 45D of CAA 2001 (first year qualifying expenditure on cars with low
carbon dioxide emissions)—
(a)
in subsection (1)(a), for “2013” substitute “2015”, and
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(b)
in subsection (4), for “110” substitute “95”.
(2)
In section 46 of that Act (general exclusions), in subsection (5) omit “section
45D,”.
(3)
In section 104AA of that Act (special rate expenditure: meaning of “main rate
car”), in subsection (4) for “160” substitute “130”.
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(4)
Accordingly, in section 77 of FA 2008 omit—

Finance (No. 2) Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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(a)
subsection (2), and
(b)
subsection (3).
(5)
The amendments made by subsections (1)(b), (2) and (4)(b) have effect in
relation to expenditure incurred on or after 1 April 2013.
(6)
The amendment made by subsection (3) has effect in relation to expenditure
5
incurred on or after the relevant date.
(7)
But in relation to expenditure incurred on the hiring of a car—
(a)
for a period of hire which begins before the relevant date, and
(b)
under a contract entered into before that date,

section 49(1A) of ITTOIA 2005 and section 57(1A) of CTA 2009 apply on or after
10
the relevant date as if the amendment made by subsection (3) did not have
effect.
(8)
“The relevant date” means—
(a)
in the case of income tax, 6 April 2013, and
(b)
in the case of corporation tax, 1 April 2013.
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68
Gas refuelling stations: extension of time limit for capital allowance
In section 45E(1)(a) of CAA 2001 (time limit for incurring of expenditure
qualifying for first-year allowance), for “2013” substitute “2015”.
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First-year allowance to be available for ships and railway assets
(1)
In section 46(2) of CAA 2001 (general exclusions from first-year allowance),
20
omit—
(a)
general exclusion 3 (ships), and
(b)
general exclusion 4 (railway assets),

and the italicised headings preceding them.
(2)
The amendments made by this section have effect for expenditure incurred on
25
or after 1 April 2013.
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Hire cars for disabled persons
(1)
In section 268D of CAA 2001 (hire cars for disabled persons), in subsection (2),
after paragraph (a) insert—
“(aa)
personal independence payment under the Welfare Reform Act
30
2012, or the corresponding provision having effect in Northern
Ireland, because of entitlement to the mobility component,
(ab)
armed forces independence payment under a scheme
established under section 1 of the Armed Forces (Pensions and
Compensation) Act 2004,”.
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(2)
The amendment made by this section has effect in relation to expenditure
incurred on or after 1 April 2013.