Finance Bill

House of Commons

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
354

(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
chargeable to, or an ATED-related loss allowable for the
purposes of, capital gains tax by virtue of section 2B; or”.
5
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
10
made by virtue of section 185(2), and
(b)
that gain or loss is an ATED-related gain chargeable to, or an
ATED-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.
15
(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)
is 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
20
ATED-related gain or loss accruing on a relevant high value
disposal.
(4)
Nothing 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
25
185(2).”
14
In section 271 (miscellaneous exemptions)—
(a)
in subsection (1A), after “registered pension scheme” insert “or an
overseas pension scheme”, and
(b)
in subsection (10), for the words after “above” substitute “—
30
“investments” includes futures contracts and options contracts;
“overseas pension scheme” has the same meaning as in Part 4 of
the Finance Act 2004 (see section 150(7) of that Act).”
15
In section 288 (interpretation), in subsection (1), at the appropriate places
insert—
35
““ATED-related”, in relation to a gain or loss, is to be construed
in accordance with section 57A and Schedule 4ZZA;”;
““relevant high value disposal” has the meaning given by
section 2C;”.

Finance Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
355

16
After Schedule 4 insert—
“Schedule 4ZZA
relevant high value disposals: gains and losses
Introductory
1
This Schedule applies for the purposes of determining in relation
5
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
to P on the disposal.
10
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
15
gain or loss accruing to P which is not ATED-related.
3     (1)
An 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
20
which (in the absence of section 2B and this Schedule) would have
accrued 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
25
loss accruing to P 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).
      (4)
“The relevant fraction” is—
30

where—

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

“TD” is the total number of days in the relevant ownership period.
      (5)
“The relevant ownership period” means the period beginning
35
with 6 April 2013 and ending with the day before the day on which
the 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.
40

Finance Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
356

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

Step 1

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

Step 2
5

In a case where there is a notional post-April 2013 gain—
     (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
10
indexation allowance.

Step 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.
15

Step 4

Add—
      (a)
the amount of any gain or loss determined under Step 1,
and
      (b)
the amount of any adjusted gain determined under Step 2
20
or (as the case may be) any loss determined under Step 3,

(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.
25

If the result is a negative amount, that amount (expressed as a
positive number) is the loss 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
which would have accrued on 5 April 2013 had the interest been
30
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
otherwise be the case) as if P were within the charge to corporation
35
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)
“Notional indexation allowance” means the relevant fraction of an
40
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
high value disposal were that gain being computed for
45
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.

Finance Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
357

      (6)
“The relevant fraction” is—

where “CD” and “TD” have the same meaning as in paragraph
3(4).
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
5
paragraphs 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
10
the 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
15
amendment of the return.
      (5)
All such adjustments are to be made, whether by way of discharge
or 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
20
Part 3 of the Finance Act 2013 (annual tax on enveloped dwellings)
(see section 105 of that Act).
Cases 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
25
the chargeable interest which (or a part of which) is the
subject of the relevant high value disposal, or
(b)
the 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
30
disposal.
      (2)
The ATED-related gain or loss accruing on the relevant high value
disposal is computed as follows.

Step 1

Determine the amount of the gain or loss which would accrue to
35
P, ignoring section 2B and this Schedule (but not the remainder of
this Step).

For 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
40
corporation tax on chargeable gains).

Step 2

Finance Bill
Schedule 24 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
358


An amount equal to the relevant fraction of that gain or loss is the
ATED-related gain or loss accruing on the relevant high value
disposal.
      (3)
The gain or loss accruing on the relevant high value disposal
which is not ATED-related is to be computed as follows.
5

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
deduction of the ATED-related gain, and
     (b)
adjust the remaining gain by reducing it by an amount
10
equal to the notional indexation allowance.

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

Step 2

In a case where there is a loss under Step 1 of sub-paragraph (2),
15
determine the amount of the loss remaining after deduction of the
ATED-related loss.

That remaining loss is the loss accruing on the relevant high value
disposal which is not ATED-related.
      (4)
“Notional indexation allowance” means the relevant fraction of
20
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)
Subject to sub-paragraph (6), “the relevant fraction”—
(a)
in sub-paragraph (2) has the same meaning as in
25
paragraph 3(4), and
(b)
in sub-paragraph (4) has the same meaning as in
paragraph 4(6).
      (6)
For the purpose of determining the relevant fraction under sub-
paragraph (5), paragraph 3(5) has effect as if the relevant
30
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)
This paragraph applies where, as a result of a claim under section
104(3) of the Finance Act 2013 (adjustment of chargeable amount),
35
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
or repayment of tax, the making of assessments or otherwise, as
are required to give effect to any change in liability to tax as a
40
result of that alteration.”
17
In Schedule 7A (restriction on set-off of pre-entry losses), after paragraph 10
insert—
“10A
Section 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
45
been a pre-entry loss.”

Finance Bill
Schedule 25 — Community investment tax relief
359

Part 2
Other amendments
Corporation Tax Act 2009
18
In section 2 of CTA 2009 (charge to corporation tax), after subsection (2)
insert—
5
“(2A)
But in subsection (2) “chargeable gains” does not include gains
chargeable to capital gains tax under section 2B of TCGA 1992
(companies etc chargeable to capital gains tax on ATED-related gains
on relevant high value disposals).”
Corporation Tax Act 2010
10
19    (1)
Section 32 of CTA 2010 (meaning of “augmented profits”) is amended as
follows.
      (2)
In subsection (1), in paragraph (a) after “company’s” insert “adjusted”.
      (3)
After that subsection insert—
“(1A)
A company’s “adjusted taxable total profits” of a period are what
15
would have been the company’s taxable total profits of the period in
the absence of sections 1(2A), 2B and 8(4A) of TCGA 1992 and section
2(2A) of CTA 2009 (certain gains on relevant high value disposals by
companies etc chargeable to capital gains tax not corporation tax).”
Part 3
20
Commencement
20
The amendments made by this Schedule have effect in relation to disposals
occurring on or after 6 April 2013.
Schedule 25
Section 72

Community investment tax relief
25
Income tax: carry forward of relief
1
Part 7 of ITA 2007 (community investment tax relief) is amended as follows.
2
In section 335 (form and amount of CITR) in subsection (3) for “this purpose”
substitute “the purposes of this section and section 335A”.
3
After section 335 insert—
30
“335A
Carry forward of CITR
(1)
This section applies if—
(a)
the investor is entitled to a tax reduction for a relevant tax
year under section 335 in respect of the investment, but

Finance Bill
Schedule 25 — Community investment tax relief
360

(b)
the amount of the tax reduction is not fully deducted at Step
6 for that relevant tax year.
(2)
The amount (“the excess amount”) not deducted is treated as follows.
(3)
For each subsequent relevant tax year for which the investor—
(a)
is entitled to a tax reduction under section 335 in respect of
5
the investment, and
(b)
makes a claim under this subsection,

the investor is also entitled to a tax reduction under this subsection
which is given effect at Step 6.
(4)
The amount of the tax reduction under subsection (3) for any
10
relevant tax year is the excess amount so far as it has not been
deducted at Step 6 for any earlier relevant tax year by virtue of that
subsection.
(5)
In this section “Step 6” means Step 6 of the calculation in section 23.”
4
In section 357 (attribution of CITR) after subsection (4) insert—
15
“(4A)
In the case of CITR under section 335A, in subsection (4)(a) the
reference to the year is to be read as a reference to the year mentioned
in section 335A(1)(a).”
5     (1)
Section 361 (disposal of securities or shares during 5 year period) is
amended as follows.
20
      (2)
For subsection (3) substitute—
“(3)
Subsections (3A) to (3H) apply if—
(a)
the disposal is a qualifying disposal, and
(b)
the investor has made a claim under section 335 in respect of
the former investment for a tax year (“tax year X”).
25
(3A)
Subsection (3B) applies if the total of the following CITR does not
exceed A—
(a)
any CITR attributable to the former investment in respect of
tax year X given under section 335, and
(b)
any CITR attributable to the former investment in respect of
30
later tax years given under section 335A where tax year X is
the tax year mentioned in section 335A(1)(a).
(3B)
All CITR falling within subsection (3A)(a) or (b) must be withdrawn.
(3C)
If the total of the CITR falling within subsection (3A)(a) or (b) exceeds
A, that total must be reduced by A.
35
(3D)
For the purposes of subsection (3C) CITR given in a later tax year
must be reduced before CITR given in an earlier tax year.
(3E)
For the purposes of subsections (3A) and (3C) “A” is an amount equal
to 5% of the amount or value of the consideration (if any) which the
investor receives for the former investment.
40
(3F)
If—
(a)
the total of the CITR falling within subsection (3A)(a) or (b)
(“B”) is less than