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

(7) The amendments made by this section have effect in relation to accounting
periods beginning on or after 1 April 2014.

(8) For the purposes of subsection (7), an accounting period beginning before, and
ending on or after, 1 April 2014 is to be treated as if so much of the period as
5falls before that date, and so much of the period as falls on or after that date,
were separate accounting periods.

(9) An apportionment for the purposes of subsection (8) 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.

28 10De-grouping charges (loan relationships etc)

(1) CTA 2009 is amended as follows.

(2) In each of sections 345 and 346 (loan relationships: transferee leaving group)—

(a) in subsection (2), omit “If condition A or B is met,”, and

(b) omit subsections (3) to (5).

(3) 15In each of sections 631 and 632 (derivative contracts: transferee leaving
group)—

(a) in subsection (2), omit “If condition A or B is met,”, and

(b) omit subsections (3) and (4).

(4) An amendment made by this section has effect where the cessation of
20membership of the relevant group occurs on or after 1 April 2014.

29 Disguised distribution arrangements involving derivative contracts

(1) In Chapter 11 of Part 7 of CTA 2009 (derivative contracts: tax avoidance), after
section 695 (but before the following italic heading) insert—

“695A Disguised distribution arrangements involving derivative contracts

(1) 25This section applies if—

(a) a company (“A”) is a party to arrangements involving one or
more derivative contracts (each of which is referred to in this
section as a “specified contract”),

(b) another company (“B”) is also a party to the arrangements
30(whether or not at the same time as A),

(c) A and B are members of the same group,

(d) the arrangements result in what is, in substance, a payment
(directly or indirectly) from A to B of all or a significant part of
the profits of the business of A or of a company which is a
35member of the same group as A or B (or both) (“the profit
transfer”), and

(e) the arrangements are not arrangements of a kind which
companies carrying on the same kind of business as A would
enter into in the ordinary course of that business.

(2) 40No debits in respect of a specified contract, which—

(a) relate to the profit transfer, and

(b) apart from this section, would be brought into account by A or
B for the purposes of this Part,

are to be so brought into account.

(3) Where one or more debits in respect of a specified contract are not
brought into account by virtue of subsection (2), credits arising from the
same contract which—

(a) 5relate to the same profit transfer, and

(b) apart from this section, would be brought into account by A or
B for the purposes of this Part,

are not to be so brought into account to the extent that the total of those
credits does not exceed the total of those debits.

(4) 10Subsection (3) does not apply to any credit which arises directly or
indirectly in consequence of, or otherwise in connection with,
arrangements the main purpose of which, or one of the main purposes
of which, is the securing of a tax advantage for any person.

(5) For the purposes of this section a company is a member of the same
15group as another company if it is (or has been) a member of the same
group at a time when the arrangements mentioned in subsection (1)
have effect.

(6) In this section—

• “arrangements” includes any scheme, arrangement or
  20understanding of any kind, whether or not legally enforceable,
  involving a single transaction or two or more transactions;

• “group” has the meaning given by section 357GD of CTA 2010;

• “tax advantage” has the meaning given by section 1139 of CTA
  2010.”

(2) 25The amendment made by this section has effect in relation to accounting
periods beginning on or after 5 December 2013.

This is subject to subsections (3) to (6).

This is subject to subsections (3) to (6).

(3) In the case of a company which has an accounting period beginning before 5
30December 2013 and ending on or after that date (“the straddling period”), for
the purposes of subsections (2) and (4) so much of the straddling period as falls
before that date, and so much of that period as falls on or after that date, are
treated as separate accounting periods.

(4) The amendment does not have effect in relation to debits, arising from a
35specified contract, which relate to the profit transfer and are or would be
brought into account for an accounting period beginning on or after 5
December 2013 to the extent that the total of those debits does not exceed the
amount (if any) by which—

(a) the total amount of credits arising from that contract which—

(i) 40relate to the profit transfer, and

(ii) are or would be brought into account for the purposes of Part 7
of CTA 2009 for any accounting period ending before 5
December 2013, exceeds

(b) the total amount of debits arising from that contract which relate to the
45profit transfer and are or would be brought into account as mentioned
in paragraph (a)(ii).

(5) In the case of credits to which subsection (6) applies, section 695A of CTA 2009
has effect as if—

(a) subsection (2) of that section applied to credits in respect of a specified
contract as it applies to debits in respect of a specified contract,

(b) subsection (3) of that section were omitted, and

(c) in subsection (4) the reference to subsection (3) were to subsection (2).

(6) 5This subsection applies to credits which, had A or B had an accounting period
beginning with 5 December 2013 and ending with 22 January 2014, would have
been brought into account for that period by A or (as the case may be) B for the
purposes of Part 7 of that Act (ignoring section 695A of CTA 2009).

30 Avoidance schemes involving the transfer of corporate profits

(1) 10In Chapter 1 of Part 20 of CTA 2009 (general calculation rules: restriction on
deductions), after section 1305 insert—

“1305A Avoidance schemes involving the transfer of corporate profits

(1) This section applies if—

(a) two companies (“A” and “B”) are party to any arrangements
15(whether or not at the same time),

(b) A and B are members of the same group,

(c) the arrangements result in what is, in substance, a payment
(directly or indirectly) from A to B of all or a significant part of
the profits of the business of A or of a company which is a
20member of the same group as A or B (or both) (“the profit
transfer”), and

(d) the main purpose or one of the main purposes of the
arrangements is to secure a tax advantage for any person
involving the profit transfer (whether by circumventing section
25695A (disguised distribution arrangements: derivative
contracts) or otherwise).

(2) A’s profits are to be calculated for corporation tax purposes as if the
profit transfer had not occurred.

(3) Accordingly—

(a) 30if (apart from this section) an amount relating to the profit
transfer would be brought into account by A as a deduction in
that calculation, no deduction is allowed in respect of that
amount, and

(b) A’s profits are to be increased by so much of the amount of the
35profit transfer as is not an amount to which paragraph (a)
applies (whether or not the profits transferred would be A’s
profits apart from the arrangements).

(4) For the purposes of this section a company is a member of the same
group as another company if it is (or has been) a member of the same
40group at a time when the arrangements mentioned in subsection (1)
have effect.

(5) Where in relation to arrangements involving one or more derivative
contracts the requirements of section 695A(1)(a) to (e) are met, nothing
in this section applies in relation to any debit in respect of any of those
45contracts.

(6) In this section—

Finance (No. 2) BillPage 33

• “arrangements” includes any scheme, arrangement or
  understanding of any kind, whether or not legally enforceable,
  involving a single transaction or two or more transactions;

• “group” has the meaning given by section 357GD of CTA 2010;

• 5“tax advantage” has the meaning given by section 1139 of CTA
  2010.”

(2) The amendment made by this section has effect in relation to payments made
on or after 19 March 2014.

31 R&D tax credits for small or medium-sized enterprises

(1) 10In section 1058 of CTA 2009 (amount of tax credit), in subsection (1)(a), for
“11%” substitute “14.5%”.

(2) The amendment made by this section has effect in relation to expenditure
incurred on or after 1 April 2014.

32 Film tax relief

(1) 15Chapter 3 of Part 15 of CTA 2009 (film tax relief) is amended as follows.

(2) In section 1198 (UK expenditure), in subsection (1), for “25%” substitute “10%”.

(3) In section 1202 (surrendering of loss and amount of film tax credit), for
subsections (2) and (3) substitute—

“(2) If the company surrenders the whole or part of that loss, the amount of
20the film tax credit to which it is entitled for the accounting period is the
sum of—

(a) 25% of so much of the loss surrendered as does not exceed the
unused 25% band, and

(b) 20% of the remainder of that loss (if any).

(3) 25“The unused 25% band” means £20 million reduced (but not below
zero) by the total amount previously surrendered under subsection (1)
(if any).”

(4) The amendments made by subsections (2) and (3) have effect in relation to
films the principal photography of which is not completed before such day as
30the Treasury may specify by order.

(5) A different day may be specified in relation to the amendments made by each
subsection.

(6) A specified day may be before the day on which the order is made, but may not
be before 1 April 2014.

(7) 35The Treasury may by order amend sections 1198(1) and 1202(2) and (3) of CTA
2009 (as amended and inserted by this section) in connection with an
application for State aid approval.

(8) In this section “State aid approval” means approval that the provision made by
this section, to the extent that it constitutes the granting of aid to which any of
40the provisions of Article 107 or 108 of the Treaty on the Functioning of the
European Union applies, is, or would be, compatible with the internal market,
within the meaning of Article 107 of that Treaty.

(9) An order under subsection (7) may—

(a) make incidental, supplemental, consequential, transitional or saving
provision;

(b) contain provision having effect in relation to films mentioned in
5subsection (4).

33 Television tax relief: activities to be treated as separate trade

(1) Part 15A of CTA 2009 (television production) is amended as follows.

(2) In section 1216A (overview), in subsection (3)(a), for “its” substitute “each
qualifying”.

(3) 10In section 1216B (activities of television production company treated as a
separate trade)—

(a) in subsection (1), after the second “a” insert “qualifying”;

(b) in subsection (2), for “television” substitute “qualifying relevant”;

(c) at the end insert—

“(5) 15In this section “qualifying relevant programme” means a
relevant programme in relation to which the conditions for
television tax relief are met (see section 1216C(2)).”

34 Video games development

(1) Part 15B of CTA 2009 (video games development) is amended as follows.

(2) 20In section 1217A (overview), in subsection (3)(a), for “its” substitute “each
qualifying”.

(3) In section 1217AE—

(a) in the heading, for “UK” substitute “EEA”;

(b) for subsection (1) substitute—

“(1) 25In this Part, “EEA expenditure”, in relation to a video game,
means expenditure on goods or services that are provided from
within the European Economic Area.”;

(c) in subsection (2), for “UK expenditure and non-UK expenditure”
substitute “EEA expenditure and non-EEA expenditure”.

(4) 30In section 1217B (activities of video games development company treated as a
separate trade)—

(a) in subsection (1), after the second “a” insert “qualifying”;

(b) in subsection (2), after the second “other” insert “qualifying”;

(c) at the end insert—

“(5) 35In this section “qualifying video game” means a video game in
relation to which the conditions for video games tax relief are
met (see section 1217C(2)).”

(5) In section 1217CF (additional deduction for qualifying expenditure)—

(a) after subsection (3) insert—

“(3A) 40But if the core expenditure on the video game includes sub-
contractor payments which (in total) exceed £1 million, the
excess is not “qualifying expenditure”.”;

(b) in subsection (4)(a), for “subsection (3)” substitute “subsections (3) and
(3A)”;

(c) at the end insert—

“(5) In this section, “sub-contractor payment” means a payment
5made by the company to another person in respect of work on
design, production or testing of the video game that is
contracted out by the company to the person.”

(6) In the following provisions, for “UK expenditure” substitute “EEA
expenditure”—

(a) 10section 1217C(2)(c);

(b) the heading above section 1217CE;

(c) the heading of section 1217CE;

(d) section 1217CE(1);

(e) the heading of section 1217EB;

(f) 15section 1217EB(1)(a) and (b) and (3).

(7) In Schedule 4 to CTA 2009 (index of defined expressions)—

(a) omit the entry for “UK expenditure (in Part 15B)”;

(b) at the appropriate place insert—

(8) The amendments made by this section have effect in relation to accounting
periods beginning on or after the day specified in an order made by the
Treasury under paragraph 3 of Schedule 17 to FA 2013 (and sub-paragraphs (3)
and (4) of that paragraph apply accordingly).

35 25Community amateur sports clubs

(1) Part 6 of CTA 2010 (charitable donations relief: payments to charity) is
amended in accordance with subsections (2) to (7).

(2) In section 189 (relief for charitable donations), in subsection (5), after “subject
to” insert “Chapter 2A of this Part,”.

(3) 30In section 192 (condition as to repayment), in subsection (6), omit the “and” at
the end of paragraph (a) and after that paragraph insert—

“(aa) the repayment is not non-qualifying expenditure for the
purposes of Chapter 9 of Part 13 (see section 661(5)), and”.

(4) In section 200 (company wholly owned by a charity), after subsection (4)
35insert—

“(4A) In the case of a charity which is a registered club, ordinary share capital
of a company is treated as owned by a charity if the charity beneficially
owns that share capital.”

(5) In section 202 (meaning of “charity”), before paragraph (b) insert—

“(aa) 40a registered club,”.

(6) After that section insert—

“202A Registered club”

In this Chapter “registered club” has the meaning given by section
658(6) (clubs registered as community amateur sports clubs).”

(7) 5After Chapter 2 insert—

“ CHAPTER 2A Payments to community amateur sports clubs: anti-abuse

202B Restriction on relief for payments to community amateur sports clubs

(1) Subsection (2) applies if—

(a) 10one or more qualifying payments are made by a company to a
registered club (“the club”) in an accounting period (“the
current period”),

(b) the company is wholly owned, or controlled, by the club or by
a number of charities which include the club, for all or part of
15that period, and

(c) inflated member-related expenditure is incurred by the
company in that period.

(2) For the purposes of section 189 (relief for qualifying charitable
donations), the total amount of those qualifying payments is treated as
20reduced (but not below nil) by the total amount of that inflated
member-related expenditure.

(3) Subsection (4) applies if—

(a) the total amount of that expenditure exceeds the total amount of
those payments, and

(b) 25the company made one or more qualifying payments to the club
in an earlier accounting period ending not more than 6 years
before the end of the current period.

(4) For the purposes of section 189, the total amount of the qualifying
payments made in the earlier accounting period is treated as reduced
30(but not below nil) by the amount of the excess.

(5) If subsection (3)(b) applies in relation to more than one earlier
accounting period—

(a) subsection (4) applies to treat amounts paid in later accounting
periods as reduced in priority to amounts paid in earlier ones
35(until the excess is exhausted or all amounts have been reduced
to nil), and

(b) in applying subsection (4) in relation to an accounting period,
the reference to the excess is to be read as a reference to so much
of it as exceeds the total amount of qualifying payments which,
40under that subsection, have previously been reduced to nil by
the excess.

(6) For the purposes of subsections (3) and (4), a reference to the total
amount of qualifying payments made in an earlier accounting period is
to the total amount of those payments after—

(a) any reduction under subsection (2), and

(b) 5any previous reduction under subsection (4).

(7) Such adjustments must be made (whether by way of the making of
assessments or otherwise) as may be required in consequence of
subsections (4) to (6).

(8) Section 200 (company wholly owned by a charity) applies for the
10purposes of this section.

(9) For the purposes of this section, the club controls the company if it has
the power to secure—

(a) by means of the holding of shares or the possession of voting
power in relation to the company or any other company, or

(b) 15as a result of any powers conferred by the articles of association
or other document regulating the company or any other
company,

that the affairs of the company are conducted in accordance with the
club’s wishes.

(10) 20For the purposes of this section two or more charities (including the
club) control the company if, acting together, they have the power to
secure, as mentioned in paragraph (a) or (b) of subsection (9), that the
affairs of the company are conducted in accordance with the wishes of
those charities.

(11) 25In this section—

• “charity” has the same meaning as in Chapter 2,

• “qualifying payment” means a qualifying payment for the
  purposes of Chapter 2, and

• “registered club” has the same meaning as in Chapter 2,

30and any reference to a member of the club includes a reference to a
person connected with a member of the club.

202C “Inflated member-related expenditure”

(1) This section applies for the purposes of section 202B.

(2) “Inflated member-related expenditure” means—

(a) 35employment expenditure incurred in respect of the
employment of a member of the club, by the company, where
that employment is otherwise than on an arm’s length basis, or

(b) expenditure incurred on a supply of goods and services to the
club by—

(i) 40a member of the club, or

(ii) a member-controlled body,

otherwise than on an arm’s length basis.

(3) But if the features of an employment or supply which cause it to be
otherwise than on an arm’s length basis, when taken together, are more
45advantageous to the company than if the employment or supply had
been on an arm’s length basis, any expenditure incurred in respect of

the employment or on the supply is not inflated member-related
expenditure.

(4) A company is “member-controlled” if a member of the club has (or two
or more members acting together have) the power to secure—

(a) by means of the holding of shares or the possession of voting
5power in relation to that or any other body corporate, or

(b) as a result of any powers conferred by the articles of association
or other document regulating that or any other body corporate,

that the affairs of the company are conducted in accordance with the
wishes of the member (or, as the case may be, members).

(5) 10A partnership is “member-controlled” if a member of the club has (or
two or more members acting together have) the right to a share of more
than half the assets, or of more than half the income, of the partnership.

(6) In this section any reference to a member of the club includes a
reference to a person connected with a member of the club.

(7) 15For the purposes of subsection (2)(a), the Treasury may by regulations
specify—

(a) descriptions of expenditure which is to be treated as
employment expenditure incurred in respect of the
employment of a member of a club;

(b) 20descriptions of expenditure which is not to be so treated.

(8) Section 1171(4) (orders and regulations subject to negative resolution
procedure) does not apply to any regulations made under subsection
(7) if a draft of the statutory instrument containing them has been laid
before, and approved by a resolution of, the House of Commons.”

(8) 25Chapter 9 of Part 13 of that Act (other special types of company: community
amateur sports clubs) is amended in accordance with subsections (9) to (12).

(9) After section 661D (but before the italic heading) insert—

“661E Tax treatment of gifts of money from companies

If a registered club receives a gift of a sum of money from a company
30which is not a charity, the gift is treated as an amount in respect of
which the registered club is chargeable to corporation tax, under the
charge to corporation tax on income.

But this is subject to section 664 (exemption for interest, gift aid and
company gift income).”

(10) 35In section 664 (exemption for interest and gift aid income)—

(a) in subsection (1), omit the “and” after paragraph (a) and after
paragraph (b) insert “, and

“(c) its company gift income for that period,”,

(b) in that subsection, for “and gift aid income” substitute “, gift aid income
40and company gift income”, and

(c) in subsection (3), after “this section—” insert—

• ““company gift income”, in relation to a club, means gifts
  of money made to the club by companies which are not
  charities,”.

(11) In section 665A (claims in relation to interest and gift aid income), in subsection
(1)(b) for “and gift aid” substitute “, gift aid and company gift”.

(12) Accordingly—

(a) in the italic heading before section 661D, omit “qualifying for gift aid
5relief”,

(b) in the heading for section 664, for “and gift aid” substitute “, gift aid
and company gift”

(c) in the heading for section 665A, for “and gift aid” substitute “, gift aid
and company gift”.

(13) 10The amendments made by this section have effect in relation to payments
made on or after 1 April 2014.

(14) But the amendments made by subsections (1) to (7) are to be ignored for the
purposes of section 199 of CTA 2010 (payment attributed to earlier accounting
period) if the claim mentioned in subsection (1)(c) of that section is in respect
15of an accounting period ending before 1 April 2014.

(15) The earlier accounting periods mentioned in section 202B(3) of CTA 2010 (see
subsection (7) of this section) do not include any accounting period ending
before 1 April 2014.

36 Changes in company ownership

(1) 20Part 14 of CTA 2010 (change in company ownership) is amended as follows.

(2) In section 688 (meaning of “significant increase in the amount of a company’s
capital”), in subsection (2), for paragraph (b) and the “or” before it substitute “,
and

“(b) is at least 125% of amount A.”

(3) 25In section 723 (changes in indirect ownership), in subsection (1), after “section
724” insert “or 724A”.

(4) After section 724 insert—

“724A Disregard of change in parent company

(1) Where a new company (“N”) acquires all the issued share capital of
30another company (“C”), the resulting ownership change is disregarded
for the purposes of Chapters 2 to 6 if, immediately after that acquisition
(“the acquisition”), N—

(a) possesses all of the voting power in C,

(b) is beneficially entitled to 100% of any profits available for
35distribution to equity holders of C,

(c) would be beneficially entitled to 100% of any assets of C
available for distribution to its equity holders in the event of a
winding up of C or in any other circumstances, and

(d) meets the continuity requirements.

(2) 40“The resulting ownership change” means the change in the ownership
of C by reason of Condition A in section 719 being met in relation to the
acquisition.

(3) A company is “new” if, before the acquisition, it has neither—

(a) issued any shares other than subscriber shares, nor