Finance (No. 2) Bill (HC Bill 190)

(c) references to a business within section 1007(2) or (as the case
may be) 1015(2) are to be treated as references to a business
within subsection (2).

(9) If, in relation to the chargeable event, the amount of relief available
5would otherwise be more than the total amount of employment
income of E charged to tax under ITEPA 2003, the amount of relief is
(notwithstanding any other provision of this Chapter) limited to the
total amount of that income so charged.

(10) If relief is available to more than one company as a result of the same
10chargeable event, relief may only be given to one of them in respect
of that event.

1025B Application of Chapter where original relief a consequence of section
1007A, 1015A or 1015B

(1) This section applies if the original relief is available under—

(a) 15Chapter 2 as a consequence of section 1007A, or

(b) Chapter 3 as a consequence of section 1015A or 1015B.

(2) If the original relief is available as a consequence of section 1007A or
1015B, subsection (2) of the section concerned applies for the
purposes of this Chapter.

(3) 20If, in relation to a chargeable event, the amount of relief available
would otherwise be more than the total amount of employment
income of the employee charged to tax under ITEPA 2003, the
amount of relief is (notwithstanding any other provision of this
Chapter) limited to the total amount of that income so charged.

(4) 25If relief is available to more than one company as a result of the same
chargeable event, relief may only be given to one of them in respect
of that event.

(5) No relief is available as a result of the employee’s death.”

42 In Chapter 5 (additional corporation tax relief in cases involving convertible
30securities), after section 1030 insert—

“1030A Application of Chapter: employees of overseas companies who take
up employment with, or work for, a UK company

(1) This section applies if—

(a) a person (“E”) has, or had, an employment (“the overseas
35employment”) with a non-UK resident company not within
the charge to corporation tax (“the overseas company”),

(b) E or another person acquired convertible securities because
of the overseas employment (whether or not pursuant to an
option),

(c) 40the case is not within section 1030(1) or (2),

(d) relief under Chapter 2 or 3 would have been available to the
overseas company in relation to the acquisition if—

(i) in a case in which the convertible securities were not
shares, they had been shares in relation to which the
45conditions set out in section 1008 or (as the case may
be) 1016 were met, and

(ii) at all material times, the overseas company had
carried on a business within subsection (2) (“a
qualifying business”) and the overseas employment
had related to that business,

(e) 5E has a UK employment with a UK company (see subsections
(3) and (4)),

(f) the UK employment is in relation to a qualifying business
carried on by the UK company,

(g) an event occurs that is a chargeable event (within the
10meaning given by section 1032 modified in accordance with
subsections (6) and (7)) in relation to the convertible
securities, and

(h) because of the UK employment, an amount of employment
income of E is charged to tax under ITEPA 2003 in relation to
15the chargeable event.

For the purposes of paragraph (d) it does not matter if the amount of
the relief would have been calculated as nil.

(2) A business is within this subsection so far as—

(a) it is carried on by a company, and

(b) 20the company is within the charge to corporation tax in
relation to the profits of the business or would be but for
section 18A.

(3) A company is a “UK company” if it is a UK resident company or a
non-UK resident company within the charge to corporation tax.

(4) 25E has a “UK employment” with a UK company if—

(a) E is employed by the UK company, or

(b) E is not employed by the UK company but provides, and is
obliged to provide, personal service to the UK company, in
the course of performing the duties of the overseas
30employment (in which case, references to the UK
employment are to the personal service E provides).

(5) Relief under this Chapter is available to the UK company as a result
of the chargeable event.

(6) References in this Chapter to the original relief (other than in section
351030B) are to be treated as references to the relief that would have
been available as mentioned in subsection (1)(d).

(7) For the purposes of section 1032(2), references to the employing
company in the conditions set out in section 1008 or (as the case may
be) 1016 are to be read as references to the overseas company or the
40UK company.

(8) In section 1033(3) (amount of relief available on occurrence of
chargeable event), the reference to the employee is to be read as a
reference to E.

(9) For the purposes of section 1035(2) (giving relief), as that provision
45has effect by virtue of subsection (6), in section 1013(2) to (5) or (as
the case may be) 1021(2) to (5)—

(a) references to the employing company are to be treated as
references to the UK company,

(b) the reference to the relevant employment is to be treated as a
reference to the UK employment, and

(c) references to a business within section 1007(2) or (as the case
may be) 1015(2) are to be treated as references to a business
5within subsection (2).

(10) If, in relation to the chargeable event, the amount of relief available
would otherwise be more than the total amount of employment
income of E charged to tax under ITEPA 2003, the amount of relief is
(notwithstanding any other provision of this Chapter) limited to the
10total amount of that income so charged.

(11) If relief is available to more than one company as a result of the same
chargeable event, relief may only be given to one of them in respect
of that event.

1030B Application of Chapter where original relief a consequence of section
151007A, 1015A or 1015B

(1) This section applies if the original relief is, or would have been,
available under—

(a) Chapter 2 as a consequence of section 1007A, or

(b) Chapter 3 as a consequence of section 1015A or 1015B.

(2) 20If the original relief is, or would have been, available as a
consequence of section 1007A or 1015B, subsection (2) of the section
concerned applies for the purposes of this Chapter.

(3) Section 1007A(5), 1015A(4) or (as the case may be) 1015B(5) applies
for the purposes of section 1032(2).

(4) 25If, in relation to a chargeable event, the amount of relief available
would otherwise be more than the total amount of employment
income of the employee charged to tax under ITEPA 2003, the
amount of relief is (notwithstanding any other provision of this
Chapter) limited to the total amount of that income so charged.

(5) 30If relief is available to more than one company as a result of the same
chargeable event, relief may only be given to one of them in respect
of that event.

(6) No relief is available as a result of the employee’s death.”

Part 4 35Commencement etc

43 Part 1 and paragraphs 36 to 39, 41 and 42 of Part 3 of this Schedule come into
force on 6 April 2015.

44 The amendments made by Part 1 have effect on and after that date in relation
to employment-related securities and employment-related securities
40options irrespective of the date of the acquisition.

45 The Treasury may by regulations—

(a) make transitional provision or savings in connection with the
coming into force of any of the provisions mentioned in paragraph
43;

(b) make consequential, incidental or supplementary provision in
connection with any of those provisions.

46 (1) Regulations made under paragraph 45 may—

(a) modify any provision made by or under an Act (including paragraph
544 of this Schedule), as the Treasury think appropriate;

(b) make different provision for different cases or different
circumstances.

(2) In sub-paragraph (1)(a) “modify” includes amend, repeal or revoke.

Section 50

SCHEDULE 8 10Venture capital trusts

Time limits for making assessments

1 (1) In section 270 of ITA 2007 (assessment on withdrawal or reduction of relief),
in subsection (1), after “obtained” insert “, and may be made at any time not
more than 6 years after the end of that tax year”.

(2) 15The amendment made by this paragraph has effect in relation to
assessments made on or after 6 April 2014 (including those made for tax
years ending before that date).

Linked sales

2 (1) After section 264 of ITA 2007 insert—

“264A 20 Restricting relief where there is a linked sale

(1) This section applies where—

(a) an individual subscribes for shares (“the relevant shares”) in
a VCT (“the VCT”), and

(b) there is at least one linked sale of other shares by the
25individual.

(2) For the purposes of this Part, the amount the individual subscribes
for the shares is to be treated as reduced (but not below nil) by the
total consideration given for the linked sales of other shares.

This is subject to subsection (3).

30This is subject to subsection (3).

(3) If a sale is linked in relation to more than one subscription for
shares—

(a) the consideration for it is to be applied to reduce
subscriptions under subsection (2) in the order in which the
35subscriptions are made, and

(b) accordingly, to the extent that any consideration has been
used to reduce an earlier subscription, it is not available to
reduce a later one.

(4) A sale of shares (“the sold shares”) is “linked” if conditions A and B
40are met.

(5) Condition A is that the sold shares are in—

(a) the VCT, or

(b) a company which is (or later becomes) a successor or
predecessor of the VCT.

(6) Condition B is that—

(a) 5the individual subscribes for the relevant shares in
circumstances where—

(i) the purchase of the sold shares from the individual
was conditional upon the individual subscribing for
shares in the VCT, or

(ii) 10the individual’s subscription for shares in the VCT
was conditional upon that purchase, or

(b) the subscription for the relevant shares and the sale of the
sold shares are within 6 months of each other (irrespective of
which came first).

(7) 15A company (“company X”) is a “successor or predecessor of the
VCT” if—

(a) there is a merger of two or more companies for the purposes
of Chapter 5 (see section 323) and—

(i) the VCT is one of the merged companies and
20company X is “the successor company” (as defined by
that section), or

(ii) the VCT is “the successor company” and company X
is one of the merged companies, or

(b) section 327 (effect of restructuring of VCT) applies and—

(i) 25the VCT is “the old company” and company X is “the
new company” for the purposes of that section, or

(ii) company X is “the old company” and the VCT is “the
new company” for those purposes.

(8) This section does not apply if, or to the extent that, the subscription
30for the relevant shares is a result of the individual electing to reinvest
dividends payable to the individual on shares in the VCT, in
acquiring further shares in the VCT.”

(2) The amendment made by this paragraph has effect in relation to claims for
relief by reference to shares issued on or after 6 April 2014.

35Approval of VCT: return of capital

3 (1) Section 281 of ITA 2007 (withdrawal of VCT approval of a company) is
amended as follows.

(2) In subsection (1), omit the “or” at the end of paragraph (d) and after
paragraph (e) insert—

“(f) 40that, while it has been a VCT, the company has issued shares
and, before the end of the restricted period, the company,
other than for the purpose of redeeming or repurchasing any
of those shares, has—

(i) made a payment to all or any of its shareholders of an
45amount representing (directly or indirectly) a
repayment of its share capital, whether that
distribution was made out of a reserve arising from a
reduction of share capital or otherwise,

(ii) where the shares were issued at a premium, made a
payment to all or any of its shareholders of an amount
representing (directly or indirectly) that premium or
any part of it, whether that distribution was made out
5of a share premium reserve or otherwise, or

(iii) used an amount which represents (directly or
indirectly) the company’s share capital or an amount
by which that share capital has been diminished, or,
where the shares were issued a premium, that
10premium (or any part of it), to pay up new shares to
be allotted to all or any of its shareholders.”

(3) After that subsection insert—

“(1A) In subsection (1)(f)—

• “payment”—

  (a)

  15does not include any distribution of assets made in
  connection with the winding up of the company, but

  (b)

  does include every other description of distribution of
  the company’s assets to its members,

  and for this purpose “distribution” includes (but is not
  20limited to) a distribution within the meaning of section 989,

• “reduction of share capital” has the same meaning as in section
  1027A(2) of CTA 2010, and

• “the restricted period” means the period of 3 years beginning at
  the end of the accounting period of the company in which the
  25shares were issued.”

(4) The amendments made by this paragraph have effect in relation to shares
issued on or after 6 April 2014.

Nominees

4 (1) After section 330 of ITA 2007 insert—

30“Nominees

330A Nominees

Shares subscribed for, issued to, held by or disposed of for an
individual by a nominee are treated for the purposes of this Part as
subscribed for, issued to, held by or disposed of by the individual.”

(2) 35In section 284 of that Act (power to make regulations as to procedure), in
subsection (1)(d), after “persons” include “(including nominees)”.

Section 53

SCHEDULE 9 Tax relief for social investments

Part 1 New Part 5B of ITA 2007

1 5In ITA 2007, after Part 5A (seed enterprise investment scheme) insert—

“ Part 5B Tax relief for social investments

CHAPTER 1 Introduction

257J Meaning of “SI relief” and “social enterprise”

(1) 10This Part provides for income tax relief for social investments (“SI
relief”), that is, entitlement to tax reductions in respect of amounts
invested in social enterprises by individuals.

(2) In this Part “social enterprise” means—

(a) a community interest company,

(b) 15a community benefit society (see section 257JB) that is not a
charity,

(c) a charity, or

(d) any other body prescribed, or of a description prescribed, by
an order made by the Treasury.

(3) 20An order under subsection (2)(d) may make provision as to the
bodies which are social enterprises for the purposes of this Part at
times before the order comes into force or FA 2014 is passed but,
where a body is a social enterprise for the purposes of this Part as a
result of an order under subsection (2)(d) that has come into force, no
25subsequent order under subsection (2)(d) may undo that result in
respect of times before the subsequent order comes into force.

257JA Form and amount of relief

(1) If an individual—

(a) is eligible for SI relief in respect of any amount, and

(b) 30makes a claim in respect of all or some of the amount,

the individual is entitled to a tax reduction for the tax year in which
the amount was invested.

This is subject to the provisions of this Part.

This is subject to the provisions of this Part.

(2) 35The amount of the reduction to which an individual is entitled under
this Part for any particular tax year is the amount equal to tax, at the
SI rate for that year, on—

(a) the amount or, as the case may be, the sum of the amounts
invested in that year in respect of which the individual is
40eligible for and claims SI relief, or

(b) if less, £1 million.

(3) The tax reduction is given effect at Step 6 in section 23.

(4) If an individual—

(a) is eligible for and claims SI relief in respect of an amount, and

(b) 5makes a claim for part of that amount to be treated for the
purposes of subsections (1) and (2) as if it had been invested
not in the tax year in which it was actually invested but in the
preceding tax year,

those subsections apply, and the individual’s liability to tax for both
10tax years is determined, in accordance with the claim.

(5) In this Part “the SI rate” means 30%.

257JB Meaning of “community benefit society”

(1) In this Part “community benefit society” means a body that—

(a) is registered as a community benefit society under the 2014
15Act,

(b) is a pre-commencement society (within the meaning of the
2014 Act) that meets the condition in section 2(2)(a)(ii) of the
2014 Act, or

(c) is a society registered, or treated as registered, under section
201 of the Industrial and Provident Societies Act (Northern
Ireland) 1969 in the case of which the condition in section
1(2)(b) of that Act is fulfilled,

and in respect of which the condition in subsection (2) is met.

(2) The condition is that—

(a) 25the body is of a kind prescribed by regulation 5 of, and

(b) the body’s rules include a rule in the terms set out in
Schedule 1 to,

the Community Benefit Societies (Restriction on Use of Assets)
Regulations 2006 (S.I. 2006/264) or the Community Benefit Societies
30(Restriction on Use of Assets) Regulations (Northern Ireland) 2006
(S.R. 2006/258).

(3) The Treasury may by order amend this section for the purpose of—

(a) replacing—

(i) the condition in subsection (2), or

(ii) 35the condition, or all or any of the conditions, for the
time being replacing the condition in subsection (2),

with one or more other conditions;

(b) varying—

(i) the condition in subsection (2), or

(ii) 40the condition, or any of the conditions, for the time
being replacing the condition in subsection (2);

(c) dispensing with—

(i) the condition in subsection (2), or

(ii) the condition, or all or any of the conditions, for the
45time being replacing the condition in subsection (2).

(4) In this section—

Finance (No. 2) BillPage 328

• “the 2014 Act” means the Co-operative and Community Benefit
  Societies Act 2014;

• “the 2010 Act” means the Co-operative and Community Benefit
  Societies and Credit Unions Act 2010.

(5) 5While neither the 2014 Act, nor section 1 of the 2010 Act, is in force,
subsection (1) of this section has effect as if for paragraphs (a) and (b)
of that subsection there were substituted—

“(a) is a society registered, or treated as registered, under section 1
of the Industrial and Provident Societies Act 1965 in the case of
10which the condition in section 1(2)(b) of that Act is fulfilled, or”.

(6) If section 1 of the 2010 Act (registration of societies) comes into force
before the 2014 Act comes into force then, with effect from the
coming into force of that section and until the coming into force of
the 2014 Act, subsection (1) of this section has effect as if for
15paragraphs (a) and (b) of that subsection there were substituted—

“(a) is registered as a community benefit society under section 1 of
the Industrial and Provident Societies Act 1965 (“the 1965 Act”),

(b) is a pre-2010 Act society (as defined by section 4A(1) of the 1965
Act) that meets the condition in section 1(3) of the 1965 Act, or”.

(7) 20In the event that section 2 of the 2010 Act (renaming of the 1965 Act)
is brought into force before its repeal by the 2014 Act takes effect
then, with effect from the coming into force of that section,
subsections (5) and (6) of this section have effect as if, in the
provisions which they substitute, the references to the Industrial and
25Provident Societies Act 1965 were references to the Co-operative and
Community Benefit Societies and Credit Unions Act 1965.

257JC Charities that are trusts

In this Part, a reference to a company includes a reference to a charity
that is a trust.

CHAPTER 2 30Eligibility for relief: basic rule and key definitions

Eligibility

257K Eligibility for SI relief

(1) An individual (“the investor”) who invests in a social enterprise is
eligible for SI relief in respect of the amount invested if—

(a) 35the investment is made—

(i) by the investor on the investor’s own behalf,

(ii) on or after 6 April 2014, and

(iii) before 6 April 2019 (but see subsection (4)), and

(b) the conditions set out in Chapters 3 and 4 are met.

(2) 40The investor is not eligible for SI relief in respect of the amount
invested if—

(a) the investor has obtained in respect of that amount, or any
part of it, relief under—

(i) Part 5 (enterprise investment scheme),

(ii) Part 5A (seed enterprise investment scheme), or

(iii) Part 7 (community investment tax relief), or

(b) that amount, or any part of it, has under Schedule 5B to
5TCGA 1992 (enterprise investment scheme: re-investment)
been set against a chargeable gain.

(3) Investments made by, subscribed for, issued to, held by or disposed
of for an individual by a nominee are treated for the purposes of this
Part as made by, subscribed for, issued to, held by or disposed of by
10the individual.

(4) The Treasury may by order substitute a later date for the date for
time being specified in subsection (1)(a)(iii).

Key definitions

257KA Key to reading the rest of the Part

15 In the following provisions of this Part (except section 257N), a
reference to—

• “the amount invested”,

• “the investment”,

• “the investor”, or

• 20“the social enterprise”,

is to be read in accordance with section 257K(1).

257KB When investment is made, and “investment date”

(1) For the purposes of this Part “the investment date” means the date on
which the investment is made.

(2) 25So far as the investment is in shares, for the purposes of this Part it is
made when the shares are issued to the investor by the social
enterprise.

(3) If the investment, so far as it is in qualifying debt investments (see
section 257L), involves making the only advance covered by the
30debenture or debentures concerned, for the purposes of this Part it is
made—

(a) when the social enterprise issues the debenture or debentures
to the investor, or

(b) in a case where there is to be no such issuing, when the
35debenture or debentures, so far as relating to the advance,
take effect between the social enterprise and the investor.

(4) If the investment, so far as it is in qualifying debt investments,
involves making the first of multiple advances covered by the
debenture or debentures concerned, for the purposes of this Part it is
40made—

(a) when the social enterprise issues the debenture or debentures
to the investor, or

(b) in a case where there is to be no such issuing, when the
debenture or debentures, so far as relating to all of those
45advances, take effect between the social enterprise and the
investor.