Finance Bill

House of Commons

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 4 — Pensions
26

“relevant requirement” means—
(a)
a requirement imposed by regulations under subsection
(4), or
(b)
a requirement imposed by virtue of Part 1 of Schedule 36
to FA 2008 (powers to obtain information and
5
documents).”
(8)
In section 280(1) of that Act (abbreviations), insert at the appropriate place—
““FA 2008” means the Finance Act 2008,”.
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Overseas pension schemes: information and inspection powers
(1)
Part 6 of Schedule 36 to FA 2008 (information and inspection powers: special
10
cases) is amended as follows.
(2)
In paragraph 34B (registered pension schemes etc)—
(a)
in sub-paragraph (2), omit the “or” at the end of paragraph (b) and, at
the end of paragraph (c) insert—
“(d)
a QROPS or former QROPS, or
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(e)
an annuity purchased with sums or assets held for the
purposes of a QROPS or former QROPS.”;
(b)
after sub-paragraph (4) insert—
   “(4A)
In relation to a notice to which this paragraph applies that
refers only to information or documents relating to a matter
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within sub-paragraph (2)(d) or (e), paragraph 20 (old
documents) has effect as if the reference to 6 years were to 10
years.”;
(c)
after sub-paragraph (7) insert—
   “(7A)
Where the notice relates to a matter within sub-paragraph
25
(2)(d) or (e), the officer of Revenue and Customs who gives
the notice must give a copy of the notice to the scheme
manager in relation to the pension scheme.”;
(d)
in sub-paragraph (8), for “and (7)” substitute “to (7A)”.
(3)
In paragraph 34C (registered pension schemes etc: interpretation), insert at the
30
appropriate places—
““QROPS” and “former QROPS” have the meanings given by
section 169(8) of FA 2004;”;
““scheme manager”, in relation to a pension scheme, has the
meaning given by section 169(3) of FA 2004.”
35
(4)
In paragraphs 34B and 34C of Schedule 36 to FA 2008, references to a former
QROPS include a scheme that ceased to be a QROPS before this Act was
passed.

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
27

Chapter 5
Other provisions
Employee shareholder shares
54
Employee shareholder shares
Schedule 22 contains—
5
(a)
provision about employee shareholder shares, and
(b)
provision for an exemption from income tax in connection with advice
relating to proposed employee shareholder agreements.
Seed enterprise investment scheme
55
SEIS: income tax relief
10
(1)
ITA 2007 is amended as follows.
(2)
In section 29 (tax reductions: supplementary), in subsection (4B), after the entry
for Chapter 1 of Part 5 insert—
“Chapter 1 of Part 5A (SEIS relief),”.
(3)
In section 32 (liability not dealt with in the calculation), after the entry for
15
section 235 insert—
“under section 257G (withdrawal or reduction of SEIS relief),”.
(4)
In section 257DG (the control and independence requirement), for subsection
(2) substitute—
“(2)
The independence element of the requirement is that—
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(a)
the issuing company must not at any time in period A (ignoring
any on-the-shelf period) be within subsection (2A), and
(b)
no arrangements must be in existence at any time in period A by
virtue of which the issuing company could be within that
subsection (whether during period A or otherwise).
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(2A)
The issuing company is within this subsection at any time if it is under
the control of any other company (or of another company and any other
person connected with that other company).
(2B)
In subsection (2)(a) “on-the-shelf period” means a period during which
the issuing company—
30
(a)
has not issued any shares other than subscriber shares, and
(b)
has not begun to carry on, or make preparations for carrying on,
any trade or business.”
(5)
The amendments made by subsections (2) and (3) have effect for the tax year
2013-14 and subsequent tax years.
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(6)
The amendment made by subsection (4) has effect in relation to shares issued
on or after 6 April 2013.

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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56
SEIS: re-investment relief
(1)
Schedule 5BB to TCGA 1992 (seed enterprise investment scheme: re-
investment) is amended as follows.
(2)
In paragraph 1 (SEIS re-investment relief)—
(a)
in sub-paragraph (2)—
5
(i)
in paragraph (a), after “the tax year 2012-13” insert “or the tax
year 2013-14 (the year in question being referred to in this
Schedule as “the relevant year”)”, and
(ii)
in paragraph (b), for “that year” substitute “the relevant year”,
(b)
in sub-paragraph (3)(a), for “tax year 2012-13” substitute “relevant
10
year”, and
(c)
for sub-paragraph (5) substitute—
“(5)
The relevant percentage of the available SEIS expenditure is to
be set against a corresponding amount of the original gain.
(5A)
In sub-paragraph (5)—
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“the available SEIS expenditure” means so much of the
SEIS expenditure as—
(a)
is specified in the claim,
(b)
is unused, and
(c)
does not exceed so much of the original gain as
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is unmatched;
“the relevant percentage” means—
(a)
if the relevant year is the tax year 2012-13, 100%,
and
(b)
if the relevant year is the tax year 2013-14, 50%.”
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(3)
In paragraph 2 (restrictions on relief under paragraph 1)—
(a)
in sub-paragraph (1), for “tax year 2012-13” substitute “relevant year”,
and
(b)
in sub-paragraph (2)—
(i)
for “tax year 2012-13” substitute “relevant year”, and
30
(ii)
for “that tax year” substitute “that year”.
(4)
In paragraph 5 (removal or reduction of relief) in sub-paragraph (2) for “2012-
13” substitute “in which the shares were issued”.
(5)
Accordingly, in section 150G of TCGA (which introduces Schedule 5BB), for
“tax year 2012-13” substitute “tax years 2012-13 and 2013-14”.
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Disincorporation
57
Disincorporation relief
(1)
A claim for relief under this section (“disincorporation relief”) may be made
where—
(a)
a company transfers its business to some or all of the shareholders of
40
the company,
(b)
the transfer of the business is a qualifying business transfer (see section
58), and

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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(c)
the business transfer date falls within the period of 5 years beginning
with 1 April 2013.
(2)
As to the consequences of a claim for disincorporation relief being made, see—
sections 162B and 162C of TCGA 1992;
section 849A of CTA 2009.
5
(3)
In this section and sections 58 to 60 “the business transfer date”, in relation to
the transfer of a business, is the date on which the business is transferred.

For this purpose, where the business is transferred under a contract—
(a)
the date on which the business is transferred is to be determined in
accordance with section 28 of TCGA 1992, and
10
(b)
if the business in question is transferred by more than one contract,
then for the purposes of that section the contract under which the
business is transferred is to be taken to be the contract under which the
goodwill of the business is transferred.
(4)
This section and sections 58 and 59 apply to a transfer of a business with a
15
business transfer date of 1 April 2013 or a later date.
58
Qualifying business transfer
(1)
The transfer of a business from a company to some or all of the shareholders of
the company is a qualifying business transfer for the purposes of section 57 if
conditions A to E are met.
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(2)
Condition A is that the business is transferred as a going concern.
(3)
Condition B is that the business is transferred together with all of the assets of
the business, or together with all of those assets other than cash.
(4)
Condition C is that the total market value of the qualifying assets of the
business included in the transfer does not exceed £100,000.
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(5)
Condition D is that all of the shareholders to whom the business is transferred
are individuals.
(6)
Condition E is that each of those shareholders held shares in the company
throughout the period of 12 months ending with the business transfer date.
(7)
For the purposes of condition D, the reference to individuals includes an
30
individual acting as a member of a partnership, but does not include an
individual acting as a member of a limited liability partnership.
(8)
Section 60 of TCGA 1992 (nominees and bare trustees) applies for the purposes
of this section as it applies for the purposes of that Act.
(9)
In this section “market value”, in relation to an asset, means the price which the
35
asset might reasonably be expected to fetch on a sale in the open market.
(10)
In this section a “qualifying asset” means—
(a)
goodwill, or
(b)
an interest in land which is not held as trading stock.
59
Making a claim
40
(1)
A claim for disincorporation relief under section 57—

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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(a)
is to be made jointly by the company and all of the shareholders to
whom the business is transferred, and
(b)
is irrevocable.
(2)
Any claim for disincorporation relief must be made within the period of 2 years
beginning with the business transfer date.
5
60
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)
10
(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.
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(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
20
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
30
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
35
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
40
between related parties) is amended as follows.

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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(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)—
(a)
omit the “and” at the end of paragraph (ca), and
5
(b)
after paragraph (d) insert “, and
(e)
section 849A (disincorporation relief: transfer values for
post-FA 2002 goodwill).”
(5)
After section 849 insert—
“849A
Disincorporation relief: transfer values for post-FA 2002 goodwill
10
(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.
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(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
(b)
its market value.
(3)
If section 736 applies to the transfer of the goodwill of the business, the
20
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.
(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
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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
transfer.
(6)
In subsection (3)(a) “the cost of the goodwill” means the cost recognised
30
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
business with a business transfer date of 1 April 2013 or a later date.
Capital gains
35
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
members of non-resident companies does not apply), for “one tenth” substitute
“one quarter”.
40
(3)
In subsection (5) of that section (cases where rule for attributing gains to

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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members of non-resident companies does not apply), after the “or” at the end
of 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
5
the United Kingdom, or
(cb)
a 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,
10

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—
“13A
Section 13(5): interpretation
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(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
accommodation, which is situated outside the United Kingdom,
20
and
(b)
the accommodation has for each relevant period been furnished
holiday accommodation of which a person has made a
commercial letting.
(2)
For the purposes of subsection (1)(b) each of the following is “a relevant
25
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
accommodation (or interest or right) for a period longer than 36
30
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).
(3)
The reference in subsection (1)(b) to the commercial letting of furnished
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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
were a reference to a relevant period as defined by subsection
40
(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
on a commercial basis and involve—
45
(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,