Finance Bill

House of Commons

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 18 — Real estate investment trusts: UK REITs which invest in other UK REITs
312

(7)
A distribution falls within this subsection if—
(a)
it is made by a company UK REIT to a shareholder of the
company which is—
(i)
a member of a group UK REIT, or
(ii)
another company UK REIT, and
5
(b)
it is a distribution in respect of profits or gains (or both) of
property rental business of the company.
(8)
In subsection (7) the reference to a distribution made by a company
UK REIT includes a reference to a distribution made by the post-
cessation company.”
10
8
In section 550 (attribution of distributions) in subsection (2)—
(a)
for paragraph (a) substitute—
“(a)
first, to distributions in satisfaction of the requirement
of section 530(1)(a) or 530(4)(a) (as the case may be),
(aa)
second, to distributions in satisfaction of the
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requirement of section 530(1)(b) or 530(4)(b) (as the
case may be),”,
(b)
in paragraph (b) for “second” substitute “third”,
(c)
in paragraph (c) for “third” substitute “fourth”,
(d)
in paragraph (d) for “fourth” substitute “fifth”, and
20
(e)
in paragraph (e) for “fifth” substitute “sixth”.
9
In section 588 (joint ventures: effect of notice under section 586) after
subsection (6) insert—
“(7)
Subsections (3) to (6) apply (in particular) for the purpose of
interpreting section 549A(5)(a)(i) and (7)(a)(i).”
25
10
In section 589 (joint ventures: effect of notice under section 587) after
subsection (6) insert—
“(7)
Subsections (3) to (6) apply (in particular) for the purpose of
interpreting section 549A(5)(a)(i) and (7)(a)(i).”
11
In section 605 (property rental business: exclusion of business producing
30
listed income) after subsection (1) insert—
“(1A)
But see section 549A which treats income falling within class 7 of the
table as profits of property rental business.”
12
In Chapter 18 of Part 15 of ITA 2007 (deduction of income tax at source) in
sections 973 and 974 (which relate to distributions made by UK REITs) after
35
subsection (6) insert—
“(7)
In relation to references to profits of property rental business, see
section 549A of CTA 2010.”
13    (1)
The amendments made by paragraph 4 above have effect for accounting
periods beginning on or after the day on which this Act is passed.
40
      (2)
The amendment made by paragraph 7 above has effect in relation to
distributions as follows—
(a)
in the case of a distribution received by a member of a group UK
REIT, the amendment has effect if the distribution is received in an

Finance Bill
Schedule 19 — Tax mismatch schemes
313

accounting period of the principal company of the group beginning
on or after the day on which this Act is passed, and
(b)
in the case of a distribution received by a company UK REIT, the
amendment has effect if the distribution is received in an accounting
period of the company beginning on or after the day on which this
5
Act is passed,

and the other amendments made by this Schedule have effect accordingly.
Schedule 19
Section 41

Tax mismatch schemes
1
CTA 2010 is amended in accordance with paragraphs 2 to 4.
10
2
In section 1(4) (overview of Act), after paragraph (j) insert—
“(ja)
tax mismatch schemes (see Part 21BA),”.
3
After Part 21B insert—
“Part 21BA
Tax mismatch schemes
15
938O
Losses and profits from tax mismatch scheme to be disregarded
(1)
This section applies to a company that is (at any time) a party to a tax
mismatch scheme.
(2)
No scheme loss or profit made by the company in any accounting
period in relation to the scheme is to be brought into account as a
20
debit or credit for the purposes of Part 5 of CTA 2009 (loan
relationships) or Part 7 of that Act (derivative contracts).
(3)
An amount that would, apart from this section, be brought into
account for the purposes of Part 5 or 7 of that Act as respects any
matter—
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(a)
is treated, for the purposes of section 464(1) or (as the case
may be) 699(1) of that Act (priority of Part 5 or 7 for
corporation tax purposes), as if it were so brought into
account, and
(b)
accordingly, may not be brought into account for any other
30
corporation tax purposes as respects that matter.
938P
  Meaning of “tax mismatch scheme”
(1)
A scheme is a tax mismatch scheme if condition A or B is met.
(2)
Condition A is that, at the time the scheme is entered into, there is no
practical likelihood that the scheme will fail to secure a relevant tax
35
advantage of £2 million or more.
(3)
The Treasury may by order substitute a higher amount for the
amount for the time being specified in subsection (2).
(4)
Any such substitution is to have effect in relation to schemes entered
into on or after the day on which the order comes into force.
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Finance Bill
Schedule 19 — Tax mismatch schemes
314

(5)
Condition B is that—
(a)
the purpose, or one of the main purposes, of the company in
entering into the scheme is to obtain the chance of securing a
relevant tax advantage (of any amount), and
(b)
at the time the scheme is entered into—
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(i)
there is no chance that the scheme will secure a
relevant tax disadvantage, or
(ii)
there is such a chance, but the expected value of the
scheme is nevertheless a positive amount.
(6)
If, at the time the company enters into the scheme, there are chances
10
that the scheme would, if carried out, secure different relevant tax
advantages or disadvantages in different circumstances, the
amounts and probabilities of each must be taken into account in
determining the expected value of the scheme.
(7)
In determining whether condition A or B is met, it is to be assumed
15
that the parties to the scheme carry it out.
(8)
Where, at the time the scheme is entered into, the length of the
scheme period is uncertain, condition A or B is met if it would be met
on any reasonable assumption as to the length of the scheme period.
(9)
In determining whether condition A or B is met, section 938O
20
(scheme profits and losses to be left out of account) is to be
disregarded.
938Q
  Meaning of “scheme loss” and “scheme profit”
(1)
A loss or profit made by a company in an accounting period is a
“scheme loss” or “scheme profit” in relation to a tax mismatch
25
scheme if the loss or profit—
(a)
arises from a transaction, or series of transactions, that forms
part of the scheme,
(b)
is, or is comprised in, an amount that is brought into account
as a debit or credit for the purposes of Part 5 or 7 of CTA 2009,
30
and
(c)
meets the first or second asymmetry condition.
(2)
The first asymmetry condition is that the loss or profit affects the
amount of any relevant tax advantage secured by the scheme.
(3)
Where, at the end of the accounting period—
35
(a)
it is not certain whether the scheme will secure a relevant tax
advantage, or
(b)
it is not certain what the amount of the relevant tax
advantage secured by the scheme will be,

a loss or profit is to be treated as meeting the first asymmetry
40
condition if, at that time, there is a chance that the scheme will secure
a relevant tax advantage and that the loss or profit will affect its
amount.
(4)
Where—
(a)
a loss or profit meets the conditions in subsection (1)(a) and
45
(b), and

Finance Bill
Schedule 19 — Tax mismatch schemes
315

(b)
a part, but not the whole, of the loss or profit meets the first
asymmetry condition,

only that part of the loss or profit is a “scheme loss” or “scheme
profit”.
(5)
The second asymmetry condition is that the loss or profit—
5
(a)
does not meet the first asymmetry condition, but
(b)
arises from a transaction, or series of transactions, that might
(if events had turned out differently) have given rise to a loss
or profit that would have done so.
(6)
References in this section to a loss or profit include a loss or profit
10
arising in respect of interest or expenses.
(7)
In determining whether the condition in subsection (1)(b) or the first
or second asymmetry condition is met, section 938O (scheme profits
and losses to be left out of account) is to be disregarded.
938R
  Meaning of “relevant tax advantage” etc and “the scheme period”
15
(1)
In this Part “relevant tax advantage”, in relation to a scheme, means
an economic profit that—
(a)
is made by the company over the scheme period,
(b)
meets the condition in subsection (3), and
(c)
is not negligible.
20
(2)
In this Part “relevant tax disadvantage”, in relation to a scheme,
means an economic loss that—
(a)
is made by the company over the scheme period,
(b)
meets the condition in subsection (3), and
(c)
is not negligible.
25
(3)
The condition is that the economic profit or loss arises as a result of
asymmetries in the way that the company brings, or does not bring,
amounts into account as debits and credits for the purposes of Part 5
or 7 of CTA 2009.
(4)
A reference in this section to asymmetries includes, in particular—
30
(a)
asymmetries relating to quantification, and
(b)
asymmetries relating to timing.
(5)
In this section—
(a)
a reference to an economic profit includes an increase in an
economic profit and a decrease in an economic loss, and
35
(b)
a reference to an economic loss includes an increase in an
economic loss and a decrease in an economic profit.
(6)
In this Part “the scheme period”, in relation to a scheme, means the
period during which the scheme has effect.
938S
  Meaning of references to economic profits and losses
40
(1)
An economic profit or loss is to be computed for the purposes of this
Part taking into account, in particular—
(a)
profits and losses made as a result of the operation of the
Corporation Tax Acts, and
(b)
any adjustments required to reflect the time value of money.
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Finance Bill
Schedule 19 — Tax mismatch schemes
316

(2)
In determining for the purposes of this Part the amount of an
economic profit or loss made by the company over the scheme
period, profits and losses made by the company are to be taken into
account only to the extent that they are attributable to times at which
the company is a party to the scheme.
5
938T
  Tax capacity assumption
(1)
This section applies for the purpose of determining whether a
scheme will, or might, secure a relevant tax advantage.
(2)
The economic profits and losses made by the company over the
scheme period must be calculated on the assumption that the
10
company—
(a)
obtains the full tax benefit of any loss made by the company
in relation to a loan relationship or a derivative contract
during the period, and
(b)
incurs the full tax cost of any profit made by the company in
15
relation to a loan relationship or a derivative contract during
the period.
(3)
The “full tax benefit” of a loss is the reduction in the liability of the
company to corporation tax that would result if—
(a)
the loss were brought into account as a debit or as a reduction
20
in a credit for the purposes of Part 5 or 7 of CTA 2009, and
(b)
the company’s profits chargeable to corporation tax,
disregarding the loss, were equal to the debit (or the
reduction in the credit) determined by reference to the loss.
(4)
The “full tax cost” of a profit is the increase in the liability of the
25
company to corporation tax that would result if—
(a)
the profit were brought into account as a credit or as a
reduction in a debit for the purposes of Part 5 or 7 of CTA
2009, and
(b)
the company’s profits chargeable to corporation tax,
30
disregarding the profit, were nil.
938U
  Meaning of “scheme”

In this Part “scheme” includes any scheme, arrangements or
understanding of any kind whatever, whether or not legally
enforceable, involving a single transaction or two or more
35
transactions.
938V
  Priority

For the purposes of this Part the following provisions are to be
treated as of no effect—
(a)
section 441 of CTA 2009 (loan relationships for unallowable
40
purposes);
(b)
section 690 of that Act (derivative contracts for unallowable
purposes);
(c)
Part 6 of TIOPA 2010 (tax arbitrage);
(d)
Part 7 of that Act (tax treatment of financing costs and
45
income).”

Finance Bill
Schedule 20 — Community amateur sports clubs
317

4
In Schedule 4 (index of defined expressions), at the appropriate places
insert—

“economic loss (in Part 21BA)
section 938S”

“economic profit (in Part 21BA)
section 938S”

“relevant tax advantage (in Part 21BA)
section 938R”

5

“relevant tax disadvantage (in Part 21BA)
section 938R”

“scheme (in Part 21BA)
section 938U”

“scheme loss (in Part 21BA)
section 938Q”

“the scheme period (in Part 21BA)
section 938R”

“scheme profit (in Part 21BA)
section 938Q”.

10

“a tax mismatch scheme (in Part 21BA)
section 938P”.

5
In section 231(8) of TIOPA 2010 (tax arbitrage: overview), for the words from
“section” to the end substitute “sections 938N and 938V of CTA 2010 (this
Part treated as of no effect for the purposes of Parts 21B and 21BA of CTA
2010 (group mismatch and tax mismatch schemes)).”
15
6     (1)
The amendments made by this Schedule have effect in relation to schemes
entered into at any time (including any time before the commencement
date).
      (2)
But section 938O in Part 21BA of CTA 2010 (as inserted by paragraph 3 of
this Schedule) does not apply to—
20
(a)
scheme losses or profits that relate to a time before the
commencement date, or
(b)
scheme profits that relate to a time on or after that date but are made
in relation to a scheme entered into before that date.
      (3)
In this paragraph “the commencement date” means 5 December 2012.
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Schedule 20
Section 45

Community amateur sports clubs
Introductory
1
Chapter 9 of Part 13 of CTA 2010 (community amateur sports clubs) is
amended as follows.
30
Meaning of “open to the whole community”
2     (1)
Section 659 (meaning of “open to the whole community”) is amended as
follows.

Finance Bill
Schedule 20 — Community amateur sports clubs
318

      (2)
In subsection (1), for paragraph (c) substitute—
“(c)
the costs associated with membership of the club for any year
do not represent a significant obstacle to membership of the
club, use of its facilities or full participation in its activities
(see subsection (2A)).”
5
      (3)
After subsection (2) insert—
“(2A)
For the purposes of subsection (1)(c) the costs associated with
membership of a club for any year represent a significant obstacle to
membership of the club, use of its facilities or full participation in its
activities if—
10
(a)
those costs exceed the amount specified for the year for the
purposes of this subsection in regulations made by the
Treasury, and
(b)
the club has not made such arrangements as are necessary to
secure that those costs do not represent such an obstacle.
15
(2B)
The Treasury may by regulations make provision supplementing
subsection (2A), including—
(a)
provision as to what constitutes full participation in a club’s
activities;
(b)
provision as to costs that are, or are not, to be regarded as the
20
costs associated with membership of a club;
(c)
provision about calculating the amount of the costs
associated with membership of a club for any year.
(2C)
The provision that may be made by regulations under this section
includes—
25
(a)
different provision for different purposes, and
(b)
provision having effect in relation to times before the
regulations are made.
(2D)
Section 1171(4) (orders and regulations subject to negative resolution
procedure) does not apply to any regulations made under this
30
section if a draft of the statutory instrument containing them has
been laid before, and approved by a resolution of, the House of
Commons.”
      (4)
For subsection (3) substitute—
“(3)
A club is not prevented from being “open to the whole community”
35
for the purposes of section 658 merely because it charges different
fees for different descriptions of person.”
Meaning of “organised on an amateur basis”
3     (1)
Section 660 (meaning of “organised on an amateur basis”) is amended as
follows.
40
      (2)
In subsection (1), omit the “and” after paragraph (b) and after that paragraph
insert—
“(ba)
it does not exceed the limit on paid players (see subsection
(5A)), and”.
      (3)
In subsection (4)(g)—
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