Finance (No. 2) Bill (HC Bill 154)

(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
5shareholders 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.

(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) 10the tax written-down value of the goodwill, and

(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) 15its market value.

(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
20goodwill is to its tax written-down value immediately before the
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) 25The amendments made by this section have effect in relation to a transfer of a
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) 30In subsection (4) of section 13 (members to whom rule for attributing gains to
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
35of paragraph (b) insert—

“(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) 40a chargeable gain accruing to the company on a disposal of an
asset where it is shown that neither—

(i) the disposal of the asset by the company, nor

(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) 5After section 13 insert—

“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) 10the asset is accommodation, or an interest or right in
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
15commercial letting.

(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) 20if the company has been the beneficial owner of the
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
25of the accommodation (or interest or right).

(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) 30as if, in section 267(1), the reference to an accounting period
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
35consist of the provision by the company of goods or services to others
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
40whom the goods or services are provided,

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
45on or after 6 April 2012.

(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

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) 5in the case of a person within the charge to capital gains tax, within 4
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.

62 10Heritage maintenance settlements

(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
15subsequent tax years.

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.

64 20Charge on certain high value disposals by companies etc

Schedule 24 contains provision for a new capital gains tax charge on gains
accruing to companies etc on certain high value disposals.

65 Currency used in tax calculations: chargeable gains and losses

(1) Chapter 4 of Part 2 of CTA 2010 (currency) is amended as follows.

(2) 25In section 5 (basic rule: sterling to be used), after subsection (2) insert—

“(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) 30This section applies if—

(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
35incurred in respect of the asset) and ending with the disposal,
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) 40a company is a UK resident investment company, and

(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) 5If the relevant currency of the company at the time of the disposal is not
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
10the company at the time of the disposal.

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) 15In any case, subsections (6) to (10) apply for the purposes of calculating
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
20to the spot rate of exchange for the day on which it is incurred.

(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
25the relevant currency of the company immediately following the
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
30into that relevant currency by reference to the spot rate of exchange on
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
35subsection (7), and

(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) 40Where, by virtue of any enactment, the company was at any time
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
45asset, or

(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.

(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) 5In this section—

• “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
  10TCGA 1992 (see paragraph 29 of that Schedule);

• “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 15Allowances for energy-saving plant and machinery: Northern Ireland

(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
20corresponding scheme having effect in Northern Ireland,”, and

(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) 25Except as provided by subsection (6), in the case of expenditure
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) 30In the heading, for “payments under Energy Act 2008 schemes” substitute
“feed-in tariffs and renewable heat incentives”.

67 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) 35in subsection (1)(a), for “2013” substitute “2015”, and

(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
40car”), in subsection (4) for “160” substitute “130”.

(4) Accordingly, in section 77 of FA 2008 omit—

(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) 5The amendment made by subsection (3) has effect in relation to expenditure
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,

10section 49(1A) of ITTOIA 2005 and section 57(1A) of CTA 2009 apply on or after
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) 15in the case of corporation tax, 1 April 2013.

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”.

69 First-year allowance to be available for ships and railway assets

(1) 20In section 46(2) of CAA 2001 (general exclusions from first-year allowance),
omit—

(a) general exclusion 3 (ships), and

(b) general exclusion 4 (railway assets),

and the italicised headings preceding them.

(2) 25The amendments made by this section have effect for expenditure incurred on
or after 1 April 2013.

70 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) 30personal independence payment under the Welfare Reform Act
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
35Compensation) Act 2004,”.

(2) The amendment made by this section has effect in relation to expenditure
incurred on or after 1 April 2013.

Miscellaneous

71 Community investment tax relief

Schedule 25 makes provision about community investment tax relief.

72 Lease premium relief

5Schedule 26 makes provision in relation to relief for lease premiums.

73 Manufactured payments: stock lending arrangements

(1) Section 596 of ITA 2007 (deemed manufactured payments: stock lending
arrangements) is amended in accordance with subsections (2) and (3).

(2) For subsection (1) substitute—

“(1) 10This section applies if conditions A to C are met.

(1A) Condition A is that there is a stock lending arrangement in respect of
securities.

(1B) Condition B is that a dividend or interest on the securities is paid, as a
result of the arrangement, to a person other than the person who is the
15lender under the arrangement.

(1C) Condition C is that—

(a) no provision is made for securing that the lender receives
payments representative of the dividend or interest, or

(b) provision is made for securing that the lender receives—

(i) 20payments representative of the dividend or interest, and

(ii) another benefit in respect of the dividend or interest
(including the release of the whole or part of any liability
to pay an amount).”

(3) In subsection (2), for paragraph (a) substitute—

“(a) 25were required, under the arrangement—

(i) in a case falling within paragraph (a) of subsection (1C),
to pay the lender an amount representative of the
dividend or interest, or

(ii) in a case falling within paragraph (b) of that subsection,
30to pay the lender an amount representative of the
dividend or interest but deducting from that amount
any payment mentioned in sub-paragraph (i) of that
paragraph on which tax has been, or is to be, charged,
and”.

(4) 35Section 812 of CTA 2010 (deemed manufactured payments: stock lending
arrangements) is amended in accordance with subsections (5) to (7).

(5) For subsection (1) substitute—

“(1) This section applies if conditions A to C are met.

(1A) Condition A is that there is a stock lending arrangement in respect of
40securities.

(1B) Condition B is that a dividend or interest on the securities is paid, as a
result of the arrangement, to a person other than the person who is the
lender under the arrangement.

(1C) Condition C is that—

(a) 5no provision is made for securing that the lender receives
payments representative of the dividend or interest, or

(b) provision is made for securing that the lender receives—

(i) payments representative of the dividend or interest, and

(ii) another benefit in respect of the dividend or interest
10(including the release of the whole or part of any liability
to pay an amount).”

(6) In subsection (2), for paragraph (a) substitute—

“(a) were required, under the arrangement—

(i) in a case falling within paragraph (a) of subsection (1C),
15to pay the lender an amount representative of the
dividend or interest, or

(ii) in a case falling within paragraph (b) of that subsection,
to pay the lender an amount representative of the
dividend or interest but deducting from that amount
20any payment mentioned in sub-paragraph (i) of that
paragraph on which tax has been, or is to be, charged,
and”.

(7) After subsection (6) insert—

“(7) This section has effect regardless of section 358 of CTA 2009 (exclusion
25of credits on release of connected companies debts) or any other
provision of Part 5 of that Act (loan relationships) which prevents a
credit from being brought into account.”

(8) The amendments made by this section have effect in relation to cases in which
a dividend or interest is paid, or is treated as paid, on or after 5 December 2012.

74 30Manufactured payments: general

Schedule 27 contains provision for, and in connection with, the application of
the Tax Acts to manufactured payment relationships and payments
representative of dividends and interest.

75 Relationship between rules prohibiting and allowing deductions

(1) 35In section 31 of ITTOIA 2005 (trade profits: relationship between rules
prohibiting and allowing deductions)—

(a) after subsection (1) insert—

“(1A) But, if the relevant permissive rule would allow a deduction in
calculating the profits of a trade in respect of an amount which
40arises directly or indirectly in consequence of, or otherwise in
connection with, relevant tax avoidance arrangements, that
rule—

(a) does not have priority under subsection (1)(a), and

(b) is subject to any relevant prohibitive rule in this Part
(and to the provisions mentioned in subsection (1)(b)).”,
and”

(b) after subsection (3) insert—

“(4) 5In this section “relevant tax avoidance arrangements” means
arrangements—

(a) to which the person carrying on the trade is a party, and

(b) the main purpose, or one of the main purposes, of which
is the obtaining of a tax advantage (within the meaning
10of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding,
scheme, transaction or series of transactions (whether or not
legally enforceable).”

(2) In section 274 of ITTOIA 2005 (property businesses: relationship between rules
15prohibiting and allowing deductions)—

(a) after subsection (1) insert—

“(1A) But, if the relevant permissive rule would allow a deduction in
calculating the profits of a property business in respect of an
amount which arises directly or indirectly in consequence of, or
20otherwise in connection with, relevant tax avoidance
arrangements, that rule—

(a) does not have priority under subsection (1)(a), and

(b) is subject to any relevant prohibitive rule in this Part
(and to the provisions mentioned in subsection (1)(b)).”,
25and”

(b) after subsection (3) insert—

“(3A) In this section “relevant tax avoidance arrangements” means
arrangements—

(a) to which the person carrying on the property business is
30a party, and

(b) the main purpose, or one of the main purposes, of which
is the obtaining of a tax advantage (within the meaning
of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding,
35scheme, transaction or series of transactions (whether or not
legally enforceable).”

(3) In section 51 of CTA 2009 (trade profits: relationship between rules prohibiting
and allowing deductions)—

(a) after subsection (1) insert—

“(1A) 40But, if the relevant permissive rule would allow a deduction in
calculating the profits of a trade in respect of an amount which
arises directly or indirectly in consequence of, or otherwise in
connection with, relevant tax avoidance arrangements, that
rule—

(a) 45does not have priority under subsection (1)(a), and

(b) is subject to any relevant prohibitive rule (and to the
provisions mentioned in subsection (1)(b)).”, and

(b) after subsection (3) insert—

“(4) In this section “relevant tax avoidance arrangements” means
arrangements—

(a) to which the company carrying on the trade is a party,
5and

(b) the main purpose, or one of the main purposes, of which
is the obtaining of a tax advantage (within the meaning
of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding,
10scheme, transaction or series of transactions (whether or not
legally enforceable).”

(4) In section 214 of CTA 2009 (property businesses: relationship between rules
prohibiting and allowing deductions)—

(a) after subsection (1) insert—

“(1A) 15But, if the relevant permissive rule would allow a deduction in
calculating the profits of a property business in respect of an
amount which arises directly or indirectly in consequence of, or
otherwise in connection with, relevant tax avoidance
arrangements, that rule—

(a) 20does not have priority under subsection (1)(a), and

(b) is subject to any relevant prohibitive rule (and to the
provisions mentioned in subsection (1)(b)).”, and

(b) after subsection (3) insert—

“(3A) In this section “relevant tax avoidance arrangements” means
25arrangements—

(a) to which the company carrying on the property business
is a party, and

(b) the main purpose, or one of the main purposes, of which
is the obtaining of a tax advantage (within the meaning
30of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding,
scheme, transaction or series of transactions (whether or not
legally enforceable).”

(5) The amendments made by this section have effect in relation to deductions in
35respect of amounts which arise directly or indirectly in consequence of, or
otherwise in connection with—

(a) arrangements which are entered into on or after 21 December 2012, or

(b) any transaction forming part of arrangements which is entered into on
or after that date.

(6) 40But those amendments do not have effect where the arrangements are, or any
such transaction is, entered into pursuant to an unconditional obligation in a
contract made before that date.

(7) “An unconditional obligation” means an obligation which may not be varied
or extinguished by the exercise of a right (whether under the contract or
45otherwise).