(b) if the disposed of interest is a partnership asset, the
responsible partners, or

(c) if the disposed of interest is held for the purposes of a
relevant collective investment scheme, the person who has
5day-to-day control over the management of the property
subject to the scheme,

has or have been within the charge to annual tax on enveloped
dwellings with respect to that single-dwelling interest on one or
more days in the relevant ownership period which are not relievable
10days in relation to the interest.

(5) Condition D is that the amount or value of the consideration for the
disposal exceeds the threshold amount (see section 2D).

(6) In this section and section 2D—

• “chargeable interest” has the same meaning as in Part 3 of the
  15Finance Act 2013 (annual tax on enveloped dwellings) (see
  section 104 of that Act (chargeable interest));

• “dwelling” has the same meaning as in that Part (see section 110
  of that Act);

• “relevant collective investment scheme” has the same meaning
  20as in section 2B;

• “the relevant ownership period” means the period which
  begins—

  (a)

  if an election has been made under paragraph 5 of
  Schedule 4ZZA, with the day on which P acquired the
  25chargeable interest or, if later, 31 March 1982, and

  (b)

  in any other case, with the day on which P acquired
  the chargeable interest or, if later, 6 April 2013,

  and ends with the day before the day on which the disposal
  occurs;

• 30“relievable day” means a day which is “relievable” by virtue of
  any of the provisions mentioned in section 130 of the Finance
  Act 2013 (ATED: effect of reliefs) and in respect of which a
  claim has been made under section 103(3) of that Act;

• “the responsible partners” has the same meaning as in section
  3593 of that Act;

• “single-dwelling interest” has the same meaning as in Part 3 of
  that Act;

and a reference to being “within the charge” to annual tax on
enveloped dwellings with respect to a single-dwelling interest is to
40be read in accordance with section 168(2) of that Act.

(7) For the purposes of Condition C—

(a) Part 3 of the Finance Act 2013 applies, in relation to any part
of the relevant ownership period falling before 1 April 2013,
as if section 91(8)(a) of that Act (first chargeable period for
45ATED) read “the period beginning with 31 March 1982 and
ending with 31 March 1983”, and

(b) when determining whether any day falling before 1 April
2013 is a relievable day, the definition of “relievable day” in
subsection (6) above is to read as if the words “and in respect
50of which a claim has been made under section 103(3) of that
Act” were omitted.

2D “The threshold amount”

(1) This section applies to determine “the threshold amount” in relation
to a disposal which meets Conditions A to C in section 2C (“the
current disposal”).

(2) 5If—

(a) the current disposal is not a part disposal of an asset, and

(b) P has not made any relevant related disposals,

the threshold amount is £2 million, subject to subsection (5) (joint
interests).

(3) 10If paragraphs (a) and (b) of subsection (2) do not both apply, the
threshold amount is the relevant fraction of £2 million, subject to
subsection (5) (joint interests).

(4) “The relevant fraction” is—

(5) If the disposed of interest is a share of the whole of—

(a) a chargeable interest, or

(b) a part of a chargeable interest,

35subsections (2) and (3) have effect as if the references to “£2 million”
were to the joint share fraction of that amount.

(6) The joint share fraction is the fraction of the whole of the chargeable
interest or part represented by the disposed of interest.

(7) “Relevant related disposal”, in relation to the current disposal,
40means any disposal by P which—

(a) meets Conditions A to C in section 2C in circumstances
where the single-dwelling interest referred to in Condition C
is—

(i) the single-dwelling interest by virtue of which
45Condition C is met in relation to the current disposal,
or

(ii) another single-dwelling interest in the same dwelling
as that interest, and

(b) was made in the period of 6 years ending with the day on
which the current disposal occurs, but not before 6 April
52013.

2E Restriction of losses

(1) This section applies where (ignoring this section)—

(a) a disposal would be a relevant high value disposal, but for a
failure to meet condition D in section 2C,

(b) 10if it were a relevant high value disposal, an ATED-related
loss would accrue to a person (other than an excluded
person) in a tax year on the disposal, and

(c) the total of the sums allowable as a deduction under section
38 in relation to the disposal exceeds the threshold amount in
15relation to the disposal.

(2) For the purposes of this Act—

(a) the disposal is to be treated as a relevant high value disposal
(and section 57A and Schedule 4ZZA apply accordingly), and

(b) the ATED-related loss which accrues on the disposal is to be
20restricted to the amount which would have been that loss had
the consideration for the disposal been £1 greater than the
threshold amount in relation to the disposal.

(3) In a case where paragraph 2 of Schedule 4ZZA applies (calculation
of gains or losses on disposals of assets held on 5 April 2013), the
25reference in subsection (1)(c) to the disposal is to be read as a
reference to the notional disposal referred to in paragraph 3(2) of that
Schedule (disposal on which notional post-April 2013 gain or loss
accrues).

(4) Nothing in subsection (2)(b) restricts any loss which is not ATED-
30related, or affects any gain (whether or not ATED-related), accruing
on the relevant high value disposal.

(5) In this section—

• “excluded” has the meaning given by section 2B(2);

• “the threshold amount” has the meaning given by section 2D.

2F 35Tapering relief for gains

(1) This section applies to an ATED-related gain which accrues on a
relevant high value disposal and is chargeable to capital gains tax by
virtue of section 2B.

(2) There is excluded from the gain so much of it as exceeds five-thirds
40of the difference between—

(a) the amount or value of the consideration, and

(b) the threshold amount (within the meaning of section 2D) in
relation to the disposal.

(3) But where the relevant fraction is less than 1, subsection (2) has effect
45as if the amount determined under that subsection were the relevant
fraction of that amount.

(4) “The relevant fraction”—

(a) in a case where the ATED-related gain is determined in
accordance with paragraph 3 of Schedule 4ZZA, has the
meaning given by paragraph 3(4) of that Schedule, and

(b) 5in a case where the ATED-related gain is determined in
accordance with paragraph 6 of that Schedule, has the same
meaning as in paragraph 6(5)(a) of that Schedule.

(5) Nothing in this section restricts any gain which is not ATED-related,
or affects any loss (whether or not ATED-related), accruing on the
10relevant high value disposal.”

5 In section 4 (rates of capital gains tax), after subsection (3) insert—

“(3A) The rate of capital gains tax in respect of gains chargeable under
section 2B accruing to a person in a tax year is 28%.”

6 In section 8 (company’s total profits to include chargeable gains), after
15subsection (4) insert—

“(4A) Nothing in this section applies in relation to an ATED-related gain
chargeable to, or an ATED-related loss allowable for the purposes of,
capital gains tax by virtue of section 2B.”

7 In section 13 (attribution of gains to members of non-resident companies),
20after subsection (1) insert—

“(1A) But this section does not apply if the gain is an ATED-related gain
chargeable to capital gains tax by virtue of section 2B (capital gains
tax on ATED-related gains).”

8 In section 16 (computation of losses), in subsection (3) after “section” insert
25“2B,”.

9 In Part 2, after Chapter 4 insert—

“CHAPTER 5 Computation of gains and losses: relevant high value disposals

57A Gains and losses on relevant high value disposals

(1) Schedule 4ZZA makes provision about the computation of gains and
30losses on relevant high value disposals, including provision about
whether a gain or loss is ATED-related or not.

(2) But if the effect of Schedule 4ZZA applying in relation to a disposal
would be that no ATED-related gain or loss accrues on the disposal,
for the purposes of this Act the gain or loss on the disposal is to be
35computed ignoring that Schedule (and is not ATED-related).”

10 After section 100 insert—

“100A Exemption for certain EEA UCITS

(1) ATED-related gains accruing on relevant high value disposals made
by an EEA UCITS which is not an open-ended investment company
40or a unit trust scheme are not chargeable gains under section 2B.

(2) In this section—

Finance (No. 2) BillPage 344

• “EEA UCITS” has the same meaning as in Part 17 of the
  Financial Services and Markets Act 2000 (see section 237 of
  that Act);

• “unit trust scheme” has same meaning as in that Part (see
  5section 237(1) of that Act);

• “open-ended investment company” has the same meaning as in
  that Part (see section 236(1) of that Act).”

11 (1) Section 161 (appropriations to and from stock) is amended as follows.

(2) In subsection (1) for “subsection (3)” substitute “subsections (3) to (3ZB)”.

(3) 10After subsection (3) insert—

“(3ZA) But if the person—

(a) meets the requirement of paragraph (a) or (b) of subsection
(3), and

(b) (ignoring any election under this section) would be treated
15under subsection (1) as making a relevant high value disposal
on which an ATED-related gain chargeable to, or loss
allowable for the purposes of, capital gains tax under section
2B would accrue,

the person may not elect under subsection (3) but may elect for
20subsection (3ZB) to apply.

(3ZB) Subject to subsection (4), where an election is made for this
subsection to apply—

(a) a gain or loss accruing on the disposal under subsection (1)
which is not ATED-related is not a chargeable gain or an
25allowable loss,

(b) the market value of the asset at the time of the appropriation
is, for the purposes of computing the profits of the trade for
the purposes of tax, to be treated as reduced by the amount of
any gain, or increased by the amount of any loss, which
30would be a chargeable gain or allowable loss but for
paragraph (a), and

(c) the chargeable gain or allowable loss which accrues on that
disposal and is ATED-related is unaffected by the election.”

(4) In subsection (3A), after “subsection (3)” insert “or (3ZA)”.

(5) 35In subsection (4), after “subsection (3)” insert “or (3ZA)”.

12 In section 171 (transfers within a group: general provisions), in subsection
(2), after paragraph (b) insert—

“(ba) a relevant high value disposal on which (ignoring subsection
(1)) there accrues to company A an ATED-related gain
40chargeable to, or an ATED-related loss allowable for the
purposes of, capital gains tax by virtue of section 2B; or”.

13 After section 187 insert—

“187A Deemed disposal under section 185: ATED-related gains and losses

(1) This section applies if—

(a) (ignoring subsections (2) and (3)) a gain or loss would accrue
to a company on a disposal of an asset deemed to have been
made by virtue of section 185(2), and

(b) that gain or loss is an ATED-related gain chargeable to, or an
5ATED-related loss allowable for the purposes of, capital
gains tax under section 2B.

(2) That gain or loss does not accrue to the company on that disposal.

(3) But, on a subsequent disposal of the whole or part of the asset, the
whole or a corresponding part of the gain or loss—

(a) 10is deemed to accrue to the company (in addition to any gain
or loss that actually accrues on that subsequent disposal), and

(b) (if that would not otherwise be the case) is to be treated as an
ATED-related gain or loss accruing on a relevant high value
disposal.

(4) 15Nothing in this section affects the treatment, for the purposes of this
Act, of any gain or loss which is not ATED-related and accrues on the
disposal of the asset deemed to have been made by virtue of section
185(2).”

14 In section 271 (miscellaneous exemptions)—

(a) 20in subsection (1A), after “registered pension scheme” insert “or an
overseas pension scheme”, and

(b) in subsection (10), for the words after “above” substitute “—

• “investments” includes futures contracts and options contracts;

• “overseas pension scheme” has the same meaning as in Part 4 of
  25the Finance Act 2004 (see section 150(7) of that Act).”

15 In section 288 (interpretation), in subsection (1), at the appropriate places
insert—

• ““ATED-related”, in relation to a gain or loss, is to be construed
  in accordance with section 57A and Schedule 4ZZA;”;

• 30““relevant high value disposal” has the meaning given by
  section 2C;”.

16 After Schedule 4 insert—

“Schedule 4ZZA relevant high value disposals: gains and losses

Introductory

1 35This Schedule applies for the purposes of determining in relation
to a relevant high value disposal made by a person (“P”)—

(a) whether a gain or loss which is ATED-related accrues to P
on the disposal, and

(b) whether a gain or loss which is not ATED-related accrues
40to P on the disposal.

Assets held on 5 April 2013: no paragraph 5 election

2 If the interest disposed of was held by P on 5 April 2013—

(a) paragraph 3 applies for the purposes of computing the
gain or loss accruing to P which is ATED-related, and

(b) paragraph 4 applies for the purposes of computing the
gain or loss accruing to P which is not ATED-related.

3 (1) 5An amount equal to the relevant fraction of the notional post-April
2013 gain or loss is the ATED-related gain or loss (as the case may
be).

(2) “Notional post-April 2013 gain or loss” means the gain or loss
which (in the absence of section 2B and this Schedule) would have
10accrued on the relevant high value disposal had P acquired the
interest on 5 April 2013 for a consideration equal to its market
value on that date.

(3) For the purposes of sub-paragraph (2), the amount of the gain or
loss accruing to P is to be computed (whether or not that would
15otherwise 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).

(4) “The relevant fraction” is—

“CD” is the number of days in the relevant ownership period
which are ATED chargeable days;

(5) “The relevant ownership period” means the period beginning
with 6 April 2013 and ending with the day before the day on which
25the relevant high value disposal occurs.

(6) “ATED chargeable day” means any day by virtue of which
condition C in section 2C(4) is met in relation to the relevant high
value disposal.

4 (1) The gain or loss accruing on the relevant high value disposal
30which is not ATED-related is computed as follows.

Step 1

Determine the amount of the notional pre-April 2013 gain or loss.

Step 2

In a case where there is a notional post-April 2013 gain—

• 35(a) determine the amount of that gain remaining after the
  deduction of the ATED-related gain determined under
  paragraph 3, and

• (b) adjust that remaining gain by reducing it by the notional
  indexation allowance.

40Step 3

In a case where there is a notional post-April 2013 loss, determine
the amount of that loss remaining after deduction of the ATED-
related loss determined under paragraph 3.

Step 4

45Add—

• (a)the amount of any gain or loss determined under Step 1,
  and

• (b)the amount of any adjusted gain determined under Step 2
  or (as the case may be) any loss determined under Step 3,

5(treating any amount which is a loss as a negative amount).

If the result is a positive amount, that amount is the gain on the
relevant high value disposal which is not ATED-related.

(2) “The notional pre-April 2013 gain or loss” means the gain or loss
10which would have accrued on 5 April 2013 had the interest been
disposed of for a consideration equal to its market value on that
date.

(3) For the purposes of sub-paragraph (2), the amount of the gain or
loss accruing to P is to be computed (whether or not that would
15otherwise be the case) as if P were within the charge to corporation
tax on chargeable gains (but not within the charge to capital gains
tax).

(4) Paragraph 3(2) and (3) (meaning of “notional post-April 2013 gain
or loss”) also applies for the purposes of this paragraph.

(5) 20“Notional indexation allowance” means the relevant fraction of an
amount equal to the difference between—

(a) the indexation allowance which (in the absence of section
2B and this Schedule) would be made under Chapter 4 of
Part 2 in determining the gain accruing on the relevant
25high value disposal were that gain being computed for
corporation tax purposes, and

(b) the indexation allowance which is made under Chapter 4
of Part 2 in determining the notional pre-April 2013 gain.

(6) “The relevant fraction” is—

30

Election for paragraph 2 to 4 not to apply to a chargeable interest

5 (1) A person may make an election under this paragraph for
35paragraphs 2 to 4 not to apply in relation to a chargeable interest
held by (or any part of which is held by) the person on 5 April
2013.

(2) An election is irrevocable.

(3) An election must be made by being included in a tax return under
40the Management Act for the tax year in which the first relevant
high value disposal by the person of the chargeable interest (or
any part of it) on or after 6 April 2013 occurs.

(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
5or repayment of tax, the making of assessments or otherwise, as
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).

10Cases where election made or assets acquired after 5 April 2013

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) 15the chargeable interest (or part) disposed of by the relevant
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
20disposal is computed as follows.

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).

25For this purpose, the amount of the gain or loss is to be computed
(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

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

Step 1

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
  35deduction of the ATED-related gain, and

• (b) adjust the remaining gain by reducing it by an amount
  equal to the notional indexation allowance.

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

40Step 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
ATED-related loss.

(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) 5Subject to sub-paragraph (6), “the relevant fraction”—

(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)
10For the purpose of determining the relevant fraction under sub-
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) 15This paragraph applies where, as a result of a claim under section
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
20or repayment of tax, the making of assessments or otherwise, as
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 25Section 161(3ZB)(a) and (b) does not apply to a loss if, in the
absence of an election under section 161(3ZA), the loss would have
been a pre-entry loss.”

Part 2 Other amendments

30Corporation Tax Act 2009

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
35(companies etc chargeable to capital gains tax on ATED-related gains
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) 40In subsection (1), in paragraph (a) after “company’s” insert “adjusted”.