Finance Bill

Session 2013 - 14
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Other Bills before Parliament

Finance Bill

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 3 — Corporation tax: general
12

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Loss relief surrenderable by non-UK resident established in EEA state
(1)
Section 107 of CTA 2010 (surrender of losses etc) is amended as follows.
(2)
After subsection (1) insert—
“(1A)
If the surrendering company is established in the EEA (within the
meaning of section 134A), it may surrender a loss or other amount
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under this Chapter only so far as conditions A and B are met.

Subsection (6A) imposes restrictions on a surrender under this
subsection.”
(3)
In subsection (2) for “The” substitute “In any other case, the”.
(4)
After subsection (6) insert—
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“(6A)
A loss or other amount may not be surrendered by virtue of subsection
(1A) if and to the extent that it, or any amount brought into account in
calculating it, corresponds to, or is represented in, amounts within
subsection (6B).
(6B)
An amount is within this subsection if, for the purposes of non-UK tax
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chargeable under the law of a territory, the amount is (in any period)
deducted from or otherwise allowed against non-UK profits of any
person.”
(5)
In subsection (7), after “subsection (6)” insert “or (6B)”.
(6)
The amendments made by this section have effect in relation to accounting
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periods beginning on or after 1 April 2013.
(7)
But for this purpose an accounting period beginning before, and ending on or
after, 1 April 2013 is to be treated as if so much of the period as falls before that
date, and so much of the period as falls on or after that date, were separate
accounting periods.
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(8)
An apportionment for the purposes of subsection (7) must be made in
accordance with section 1172 of CTA 2010 (time basis) or, if that method
produces a result that is unjust or unreasonable, on a just and reasonable basis.
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Arrangements for transfers of companies
(1)
In section 156 of CTA 2010 (definition of “arrangements” for purposes of
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sections 154 to 155B, etc)—
(a)
in subsection (2), in paragraph (b), after “include” insert “—
(i)
”,
(b)
at the end of that paragraph insert “, or
(ii)
a condition or requirement imposed by, or
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agreed with, a Minister of the Crown, the
Scottish Ministers, a Northern Ireland
department or a statutory body.”, and
(c)
after that subsection insert—
“(2A)
In subsection (2) “statutory body” means a body (other than a
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company as defined by section 1(1) of the Companies Act 2006)
established by or under a statutory provision for the purpose of
carrying out functions conferred on it by or under a statutory

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 3 — Corporation tax: general
13

provision, except that the Treasury may, by order, specify that
a body is or is not to be a statutory body for this purpose.”
(2)
In sections 154(3) and 155(3) of that Act (arrangements for transfers), for
“154A” substitute “155A”.
(3)
In section 188 of that Act (other definitions for Part 5), in subsection (1), after
5
““company”” insert “(except in section 156(2A)”.
(4)
The amendments made by this section have effect in relation to accounting
periods ending on or after 1 April 2013.
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Change in company ownership: company reconstructions
(1)
For section 676 of CTA 2010 (disallowance of trading losses where company
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reconstruction without a change of ownership) substitute—
“676
Company reconstructions
(1)
Subsection (2) applies if, before the change in ownership—
(a)
a trade carried on by another company (“the predecessor
company”) is transferred to the company, and
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(b)
the transfer is a transfer to which Chapter 1 of Part 22 applies
(transfers of trade without a change of ownership).
(2)
In determining any relief available to the company by virtue of section
944(3) (carry forward of trading losses in successor company), this
Chapter applies as if—
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(a)
references to a trade carried on by the company included the
trade as carried on by the predecessor company or by any
predecessor of that company, and
(b)
any loss sustained by the predecessor company or any
predecessor of that company had been sustained by the
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company.
(3)
Subsection (4) applies if, after the change in ownership—
(a)
a trade carried on by the company is transferred to another
company (“the successor company”), and
(b)
the transfer is a transfer to which Chapter 1 of Part 22 applies.
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(4)
In determining—
(a)
any relief available to the company under section 45 (carry
forward of trading losses), or
(b)
any relief available to the successor company or any successor
of that company by virtue of section 944(3),
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this Chapter applies as if references to a trade carried on by the
company included the trade as carried on by the successor company or
by any successor of that company.
(5)
For the purposes of this section a company (“company A”) is a
predecessor of another company (“company B”), and company B is a
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successor of company A, if the first or second condition is met.
(6)
The first condition is that Chapter 1 of Part 22 applies in relation to
company A and company B as respectively the predecessor and the
successor within the meaning of that Chapter.

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 3 — Corporation tax: general
14

(7)
The second condition is that—
(a)
Chapter 1 of Part 22 applies in relation to company A and a
third company (“company C”) as respectively the predecessor
and the successor within the meaning of that Chapter, and
(b)
company C is (whether by virtue of the first condition or this
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condition) a predecessor of company B.”
(2)
The amendment made by subsection (1) has effect in relation to changes in
ownership that occur on or after 20 March 2013.
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Change in company ownership: shell companies
Schedule 13—
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(a)
inserts into Part 14 of CTA 2010 (change in company ownership) a new
Chapter 5A (shell companies: restrictions on relief), and
(b)
makes consequential provision.
Other reliefs
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R&D expenditure credits
15

Schedule 14 contains provision about R&D expenditure credits.
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Relief for television production and video games development
(1)
Schedule 15 contains provision about television production.
(2)
Schedule 16 contains provision about video games development.
(3)
Schedule 17 contains consequential amendments.
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Exemption from charge
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Health service bodies: exemption
In section 986 of CTA 2010 (exemption from corporation tax: meaning of
“health service body”), insert the following entries at the appropriate places in
the table—
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“a clinical commissioning group
section 1I of the National

Health Service Act 2006”

“Health and Social Care Information
section 252 of the Health and

Centre
Social Care Act 2012”

“National Health Service
section 1H of the National

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Commissioning Board
Health Service Act 2006”

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 3 — Corporation tax: general
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“National Institute for Health and
section 232 of the Health and

Care Excellence
Social Care Act 2012”.

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Chief constables etc (England and Wales): exemption
(1)
In Chapter 8 of Part 22 of CTA 2010 (exemptions), after section 987 insert—
“Police
5
987A
Chief constables etc (England and Wales)
The following are not liable to corporation tax—
(a)
a chief constable of a police force maintained under section 2 of
the Police Act 1996;
(b)
the Commissioner of Police of the Metropolis.”
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(2)
The amendment made by this section is treated as having come into force on
16 January 2012, but, in relation to any time before 22 November 2012, section
987A of CTA 2010 has effect as if paragraph (a) were omitted.
Other provisions
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Real estate investment trusts: UK REITs which invest in other UK REITs
15
Schedule 18 amends Part 12 of CTA 2010 (real estate investment trusts).
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Corporation tax relief for employee share acquisitions etc
(1)
Chapter 6 of Part 12 of CTA 2009 (relief for employee share acquisitions:
relationship between relief under Part 12 and other reliefs) is amended as
follows.
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(2)
For section 1038 substitute—
“1038
Exclusion of other deductions
(1)
Subsection (2) applies if relief is or, apart from condition 2 in section
1009(1), would be available under this Part.

For this purpose, it does not matter if the amount of the relief is or
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would be calculated as nil.
(2)
Except as provided for by this Part, for the purpose of calculating any
company’s profits for corporation tax purposes for any accounting
period, no deduction is allowed—
(a)
in relation to the provision of the shares or to any matter
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connected with the provision of the shares, or
(b)
so far as not covered by paragraph (a) in a case in which the
shares are acquired pursuant to an option, in relation to the
option or to any matter connected with the option.
(3)
In a case in which section 1022 has applied, in subsection (2)(b)
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references to the option cover the new option and any relevant earlier
qualifying option.

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 3 — Corporation tax: general
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(4)
For the purposes of subsection (2) it does not matter if the accounting
period in question falls wholly before or after the time at which the
shares are acquired.
(5)
In a case in which the shares are acquired under an employee share
scheme, the deductions disallowed by subsection (2) include (in
5
particular) deductions for amounts paid or payable by the employing
company in relation to the participation of the employee in the scheme.
(6)
But subsection (2) does not disallow deductions for—
(a)
expenses incurred in setting up the scheme,
(b)
expenses incurred in meeting, or contributing to, the costs of
10
administering the scheme,
(c)
the costs of borrowing for the purposes of the scheme, or
(d)
fees, commission, stamp duty, stamp duty reserve tax, and
similar incidental expenses of acquiring the shares.
(7)
“Employee share scheme” means a scheme or arrangement for enabling
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shares to be acquired because of persons’ employment.
(8)
In a case in which relief is or, apart from condition 2 in section 1009(1),
would be available under Chapter 5 by virtue of section 1030(2),
subsection (2) does not disallow deductions in relation to the provision
of the convertible securities.”
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(3)
After section 1038 insert—
“1038A
Exclusion of deductions for share options: shares not acquired
(1)
Subsection (2) applies if—
(a)
a person obtains an option to acquire shares and the
requirements of section 1015(1)(a) to (c) are met in relation to the
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obtaining of the option, or
(b)
so far as not covered by paragraph (a), a person obtains an
option to acquire shares and the obtaining of the option is
connected with an option previously obtained in a case covered
by paragraph (a) or this paragraph.
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(2)
For the purpose of calculating any company’s profits for corporation
tax purposes for any accounting period, no deduction is allowed in
relation to—
(a)
the option, or
(b)
any matter connected with the option,
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unless the shares are acquired pursuant to the option.
(3)
For the purposes of subsection (2) it does not matter if the accounting
period in question falls wholly before or after the time at which the
option is obtained.
(4)
In a case in which the shares would be acquired under an employee
40
share scheme, the deductions disallowed by subsection (2) include (in
particular) deductions for amounts paid or payable by the employing
company in relation to the participation of the employee in the scheme.
(5)
But subsection (2) does not disallow deductions for—
(a)
expenses incurred in setting up the scheme,
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Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 3 — Corporation tax: general
17

(b)
expenses incurred in meeting, or contributing to, the costs of
administering the scheme,
(c)
the costs of borrowing for the purposes of the scheme, or
(d)
fees, commission, stamp duty, stamp duty reserve tax, and
similar incidental expenses of acquiring the shares.
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(6)
“Employee share scheme” means a scheme or arrangement for enabling
shares to be acquired because of persons’ employment.
(7)
Subsection (2) does not disallow deductions for—
(a)
amounts on which the employee is subject to a charge under
ITEPA 2003,
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(b)
amounts on which the employee would have been subject to a
charge under ITEPA 2003 had the employee been a UK
employee at all material times, or
(c)
if the employee has died, amounts on which the employee
would have been subject to a charge under ITEPA 2003 had the
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employee been alive.
(8)
“UK employee” is to be read in accordance with section 1017(4).”
(4)
For the purposes of the following subsections—
“pre-20 March 2013 relevant accounting period” means an accounting
period which begins before 20 March 2013 but ends on or after that
20
date, and
“relevant accounting period” means an accounting period which ends on
or after 20 March 2013.
(5)
The amendment made by subsection (2) above has effect for the purpose of
disallowing deductions for relevant accounting periods.
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For this purpose, it does not matter if the acquisition of shares which gives rise,
or would give rise, to the relief under Part 12 of CTA 2009 occurs before a
company’s first relevant accounting period.
(6)
But the amendment made by subsection (2) above has no effect for the purpose
of disallowing a deduction for a pre-20 March 2013 relevant accounting period
30
where the acquisition of shares which gives rise, or would give rise, to the relief
under Part 12 of CTA 2009 occurs before 20 March 2013.
(7)
The amendment made by subsection (3) above has effect for the purpose of
disallowing deductions for relevant accounting periods.

For this purpose, it does not matter if the option is obtained before a company’s
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first relevant accounting period.
(8)
But the amendment made by subsection (3) above has no effect for the purpose
of disallowing a deduction for a pre-20 March 2013 relevant accounting period
where—
(a)
the option is obtained before 20 March 2013, and
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(b)
before that date, an event (for example, the lapse or cancellation of the
option) occurs in consequence of which the shares cannot be acquired
pursuant to the option.
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Derivative contracts: property total return swaps etc
(1)
Chapter 7 of Part 7 of CTA 2009 (chargeable gains arising in relation to
45
derivative contracts) is amended as follows.

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 3 — Corporation tax: general
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(2)
In section 643 (contracts relating to land or certain tangible movable
property)—
(a)
in subsection (1), for “and C” substitute “, C and D”, and
(b)
after subsection (4) insert—
“(4A)
Condition D is that no two or more of the parties to the
5
derivative contract are connected persons.”
(3)
In section 650 (property based total return swaps)—
(a)
in subsection (1), for “to F” substitute “to H”, and
(b)
after subsection (7) insert—
“(8)
Condition G is that no two or more of the parties to the
10
derivative contract are connected persons.
(9)
Condition H is that the securing of a tax advantage is neither the
main purpose, nor one of the main purposes, for which the
company is a party to the derivative contract.

“Tax advantage” has the meaning given by section 1139 of CTA
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2010.”
(4)
In section 659 (meaning of “relevant credits” and “relevant debits”), after
subsection (4) insert—
“(4A)
But if the derivative contract has effect such that the return arising from
the contract, so far as calculated by reference to that index, is calculated
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by reference to a percentage (“the capped percentage”) which is closer
to zero than the full percentage change in that index over that period
(or which is zero even though there has been a change in that index), for
the purposes of subsection (4) R% is the capped percentage.”
(5)
The amendments made by this section have effect in relation to accounting
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periods beginning on or after 5 December 2012.
(6)
But, for the purposes of subsection (5), an accounting period beginning before,
and ending on or after, 5 December 2012 is to be treated as if so much of the
period as falls before that date, and so much of the period as falls on or after
that date, were separate accounting periods.
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Corporation tax: tax mismatch schemes
Schedule 19 contains provision about tax mismatch schemes.
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Tier two capital
(1)
CTA 2010 is amended as follows.
(2)
In section 162 (meaning of “normal commercial loan”), after subsection (1)
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insert—
“(1A)
For those purposes, “normal commercial loan” also includes any loan
which is not a normal commercial loan by virtue of subsection (1) but is
such a loan by virtue of section 164A(1) (loan forming part of tier two
capital).”
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