Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
354

      (4)
The reference in sub-paragraph (3) to an election being included in
a return includes an election being included by virtue of an
amendment of the return.
      (5)
All such adjustments are to be made, whether by way of discharge
or repayment of tax, the making of assessments or otherwise, as
5
are required to give effect to an election.
      (6)
In this paragraph “chargeable interest” has the same meaning as in
Part 3 of the Finance Act 2013 (annual tax on enveloped dwellings)
(see section 104 of that Act).
Cases where election made or assets acquired after 5 April 2013
10
6     (1)
This paragraph applies if—
(a)
an election is made by P under paragraph 5 in respect of
the chargeable interest which (or a part of which) is the
subject of the relevant high value disposal, or
(b)
the chargeable interest (or part) disposed of by the relevant
15
high value disposal was not held by P throughout the
period beginning with 5 April 2013 and ending with the
disposal.
      (2)
The ATED-related gain or loss accruing on the relevant high value
disposal is computed as follows.
20

Step 1

Determine the amount of the gain or loss which would accrue to
P, ignoring section 2B and this Schedule (but not the remainder of
this Step).

For this purpose, the amount of the gain or loss is to be computed
25
(whether or not that would otherwise be the case) as if P were
within the charge to capital gains tax (but not within the charge to
corporation tax on chargeable gains).

Step 2

An amount equal to the relevant fraction of that gain or loss is the
30
ATED-related gain or loss accruing on the relevant high value
disposal.
      (3)
The gain or loss accruing on the relevant high value disposal
which is not ATED-related is to be computed as follows.

Step 1
35

In a case where there is a gain under Step 1 of sub-paragraph (2)—
     (a)
determine the amount of the gain remaining after the
deduction of the ATED-related gain, and
     (b)
adjust the remaining gain by reducing it by an amount
equal to the notional indexation allowance.
40

That adjusted gain is the gain accruing on the relevant high value
disposal which is not ATED-related.

Step 2

In a case where there is a loss under Step 1 of sub-paragraph (2),
determine the amount of the loss remaining after deduction of the
45
ATED-related loss.

That remaining loss is the loss accruing on the relevant high value
disposal which is not ATED-related.

Finance (No. 2) Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 2 — Other amendments
355

      (4)
“Notional indexation allowance” means the relevant fraction of
the indexation allowance which would be made under Chapter 4
of Part 2 in determining the gain under Step 1 in sub-paragraph (2)
were that gain being computed for corporation tax purposes.
      (5)
Subject to sub-paragraph (6), “the relevant fraction”—
5
(a)
in sub-paragraph (2) has the same meaning as in
paragraph 3(4), and
(b)
in sub-paragraph (4) has the same meaning as in
paragraph 4(6).
      (6)
For the purpose of determining the relevant fraction under sub-
10
paragraph (5), paragraph 3(5) has effect as if the relevant
ownership period began on the day on which P acquired the
interest or, if later, 31 March 1982.
Adjustments of ATED chargeable days
7     (1)
This paragraph applies where, as a result of a claim under section
15
103(3) of the Finance Act 2013 (adjustment of chargeable amount),
or an amendment of or adjustment to such a claim, there is an
alteration in the number of ATED chargeable days.
      (2)
All such adjustments are to be made, whether by way of discharge
or repayment of tax, the making of assessments or otherwise, as
20
are required to give effect to any change in liability to tax as a
result of that alteration.”
17
In Schedule 7A (restriction on set-off of pre-entry losses), after paragraph 10
insert—
“10A
Section 161(3ZB)(a) and (b) does not apply to a loss if, in the
25
absence of an election under section 161(3ZA), the loss would have
been a pre-entry loss.”
Part 2
Other amendments
Corporation Tax Act 2009
30
18
In section 2 of CTA 2009 (charge to corporation tax), after subsection (2)
insert—
“(2A)
But in subsection (2) “chargeable gains” does not include gains
chargeable to capital gains tax under section 2B of TCGA 1992
(companies etc chargeable to capital gains tax on ATED-related gains
35
on relevant high value disposals).”
Corporation Tax Act 2010
19    (1)
Section 32 of CTA 2010 (meaning of “augmented profits”) is amended as
follows.
      (2)
In subsection (1), in paragraph (a) after “company’s” insert “adjusted”.
40

Finance (No. 2) Bill
Schedule 25 — Community investment tax relief
356

      (3)
After that subsection insert—
“(1A)
A company’s “adjusted taxable total profits” of a period are what
would have been the company’s taxable total profits of the period in
the absence of sections 1(2A), 2B and 8(4A) of TCGA 1992 and section
2(2A) of CTA 2009 (certain gains on relevant high value disposals by
5
companies etc chargeable to capital gains tax not corporation tax).”
Part 3
Commencement
20
The amendments made by this Schedule have effect in relation to disposals
occurring on or after 6 April 2013.
10
Schedule 25
Section 71

Community investment tax relief
Income tax: carry forward of relief
1
Part 7 of ITA 2007 (community investment tax relief) is amended as follows.
2
In section 335 (form and amount of CITR) in subsection (3) for “this purpose”
15
substitute “the purposes of this section and section 335A”.
3
After section 335 insert—
“335A
Carry forward of CITR
(1)
This section applies if—
(a)
the investor is entitled to a tax reduction for a relevant tax
20
year under section 335 in respect of the investment, but
(b)
the amount of the tax reduction is not fully deducted at Step
6 for that relevant tax year.
(2)
The amount (“the excess amount”) not deducted is treated as follows.
(3)
For each subsequent relevant tax year for which the investor—
25
(a)
is entitled to a tax reduction under section 335 in respect of
the investment, and
(b)
makes a claim under this subsection,

the investor is also entitled to a tax reduction under this subsection
which is given effect at Step 6.
30
(4)
The amount of the tax reduction under subsection (3) for any
relevant tax year is the excess amount so far as it has not been
deducted at Step 6 for any earlier relevant tax year by virtue of that
subsection.
(5)
In this section “Step 6” means Step 6 of the calculation in section 23.”
35

Finance (No. 2) Bill
Schedule 25 — Community investment tax relief
357

4
In section 357 (attribution of CITR) after subsection (4) insert—
“(4A)
In the case of CITR under section 335A, in subsection (4)(a) the
reference to the year is to be read as a reference to the year mentioned
in section 335A(1)(a).”
5     (1)
Section 361 (disposal of securities or shares during 5 year period) is
5
amended as follows.
      (2)
For subsection (3) substitute—
“(3)
Subsections (3A) to (3H) apply if—
(a)
the disposal is a qualifying disposal, and
(b)
the investor has made a claim under section 335 in respect of
10
the former investment for a tax year (“tax year X”).
(3A)
Subsection (3B) applies if the total of the following CITR does not
exceed A—
(a)
any CITR attributable to the former investment in respect of
tax year X given under section 335, and
15
(b)
any CITR attributable to the former investment in respect of
later tax years given under section 335A where tax year X is
the tax year mentioned in section 335A(1)(a).
(3B)
All CITR falling within subsection (3A)(a) or (b) must be withdrawn.
(3C)
If the total of the CITR falling within subsection (3A)(a) or (b) exceeds
20
A, that total must be reduced by A.
(3D)
For the purposes of subsection (3C) CITR given in a later tax year
must be reduced before CITR given in an earlier tax year.
(3E)
For the purposes of subsections (3A) and (3C) “A” is an amount equal
to 5% of the amount or value of the consideration (if any) which the
25
investor receives for the former investment.
(3F)
If—
(a)
the total of the CITR falling within subsection (3A)(a) or (b)
(“B”) is less than
(b)
the amount (“C”) which is equal to 5% of the invested amount
30
in respect of the former investment for tax year X,

“A” is to be reduced by multiplying it by the fraction—
(3G)
If the amount of CITR attributable to the former investment in
respect of a tax year has been reduced before the CITR is obtained,
the amount referred to in subsection (3F) as B is to be treated for the
35
purposes of that subsection as the amount it would have been
without the reduction.
(3H)
Subsection (3G) does not apply to a reduction by virtue of section 358
(attribution: bonus shares).”
      (3)
Omit subsections (5) to (7).
40
6
The amendments made by paragraphs 1 to 5 above have effect in relation to
investments made on or after 6 April 2013.

Finance (No. 2) Bill
Schedule 25 — Community investment tax relief
358

Corporation tax: carry forward of relief
7
Part 7 of CTA 2010 (community investment tax relief) is amended as follows.
8     (1)
Section 220 (form and amount of CITR) is amended as follows.
      (2)
For subsection (3) substitute—
“(3)
The amount of that reduction for the relevant accounting period is
5
5% of the invested amount in respect of the investment for the
period.”
      (3)
In subsection (4) for “this purpose” substitute “the purposes of this section
and section 220A”.
9
After section 220 insert—
10
“220A
Carry forward of CITR
(1)
This section applies if—
(a)
the investor is entitled to a reduction in its liability for
corporation tax for a relevant accounting period under
section 220 in respect of the investment, but
15
(b)
the amount of the reduction is not fully deducted at Step 2 for
that relevant accounting period.
(2)
The amount (“the excess amount”) not deducted is treated as follows.
(3)
For each subsequent relevant accounting period for which the
investor—
20
(a)
is entitled to a reduction in its liability for corporation tax
under section 220 in respect of the investment, and
(b)
makes a claim under this subsection,

the investor is also entitled to a reduction in its liability for
corporation tax under this subsection.
25
(4)
The amount of the reduction under subsection (3) for any relevant
accounting period is the excess amount so far as it has not been
deducted at Step 2 for any earlier relevant accounting period by
virtue of that subsection.
(5)
In this section “Step 2” means the second step in paragraph 8(1) of
30
Schedule 18 to FA 1998 (calculation of tax payable).”
10
In section 240 (attribution of CITR) after subsection (4) insert—
“(4A)
In the case of CITR under section 220A, in subsection (4)(a) the
reference to the period is to be read as a reference to the period
mentioned in section 220A(1)(a).”
35
11    (1)
Section 244 (disposal of securities or shares during 5 year period) is
amended as follows.
      (2)
For subsection (3) substitute—
“(3)
Subsections (3A) to (3H) apply if—
(a)
the disposal is a qualifying disposal, and
40
(b)
the investor has made a claim under section 220 in respect of
the former investment for an accounting period (“period X”).

Finance (No. 2) Bill
Schedule 25 — Community investment tax relief
359

(3A)
Subsection (3B) applies if the total of the following CITR does not
exceed A—
(a)
any CITR attributable to the former investment in respect of
period X given under section 220, and
(b)
any CITR attributable to the former investment in respect of
5
later accounting periods given under section 220A where
period X is the accounting period mentioned in section
220A(1)(a).
(3B)
All CITR falling within subsection (3A)(a) or (b) must be withdrawn.
(3C)
If the total of the CITR falling within subsection (3A)(a) or (b) exceeds
10
A, that total must be reduced by A.
(3D)
For the purposes of subsection (3C) CITR given in a later accounting
period must be reduced before CITR given in an earlier accounting
period.
(3E)
For the purposes of subsections (3A) and (3C) “A” is an amount equal
15
to 5% of the amount or value of the consideration (if any) which the
investor receives for the former investment.
(3F)
If—
(a)
the total of the CITR falling within subsection (3A)(a) or (b)
(“B”) is less than
20
(b)
the amount (“C”) which is equal to 5% of the invested amount
in respect of the former investment for period X,

“A” is to be reduced by multiplying it by the fraction—
(3G)
If the amount of CITR attributable to the former investment in
respect of an accounting period has been reduced before the CITR is
25
obtained, the amount referred to in subsection (3F) as B is to be
treated for the purposes of that subsection as the amount it would
have been without the reduction.
(3H)
Subsection (3G) does not apply to a reduction by virtue of section 241
(attribution: bonus shares).”
30
      (3)
Omit subsections (5) to (7).
12
The amendments made by paragraphs 7 to 11 above have effect in relation
to investments made in accounting periods beginning on or after 1 April
2013.
Corporation tax: limit on State aid
35
13    (1)
In Part 7 of CTA 2010 (community investment tax relief) after section 220A
(as inserted by paragraph 9 above) insert—
“220B
Limit on State aid
(1)
The reductions that may be made in the amount of the investor’s
liability for corporation tax under section 220 or 220A for an
40
accounting period (“the current accounting period”) are limited as
follows.

Finance (No. 2) Bill
Schedule 26 — Lease premium relief
360

(2)
The sum of the following amounts must not exceed €200,000—
(a)
so far as it represents aid granted to the investor, the total
amount of reductions made in the amount of the investor’s
liability for corporation tax under section 220 or 220A—
(i)
for the current accounting period, or
5
(ii)
any earlier accounting period which ends during the
relevant 3-year period, and
(b)
the total of any de minimis aid granted to the investor during
the relevant 3-year period which does not fall within
paragraph (a).
10
(3)
In subsection (2) “the relevant 3-year period” means the period of 3
years ending at the end of the current accounting period.
(4)
Subsection (2) is to be read as if it were contained in Article 2 of
Commission Regulation (EC) No. 1998/2006 (de minimis aid).”
      (2)
The amendment made by this paragraph has effect for the purpose of
15
limiting CITR in respect of investments made on or after 1 April 2013.
      (3)
CITR in respect of investments made before that date is to be ignored for the
purposes of section 220B(2) of CTA 2010.
Schedule 26
Section 72

Lease premium relief
20
Income tax
1
ITTOIA 2005 is amended as follows.
2
In section 61 (tenants occupying land for purposes of trade treated as
incurring expenses) after subsection (5) insert—
“(5A)
No expense is to be determined under this section by reference to the
25
taxed receipt if section 292(4B) or (4C) applies.”
3
In section 292 (tenants under taxed leases treated as incurring expenses)
after subsection (4) insert—
“(4A)
No expense is to be determined under this section by reference to the
taxed receipt if subsection (4B) or (4C) applies.
30
(4B)
This subsection applies if there would have been no taxed receipt but
for the application of Rule 1 in section 303 in determining the
effective duration of the lease.
(4C)
This subsection applies if there would have been no taxed receipt but
for the application of Rule 1 in section 243 of CTA 2009 in
35
determining the effective duration of the lease for the purposes of
Chapter 4 of Part 4 of that Act.”
4
The amendments made by paragraphs 2 and 3 above have effect in relation
to leases granted on or after 6 April 2013.