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

(b) begun to carry on any trade or business.

(4) N meets the continuity requirements if, and only if—

(a) the consideration for the acquisition consists only of the issue of
shares in N to the shareholders of C,

(b) 5immediately after the acquisition, each person who
immediately before the acquisition was a shareholder of C is a
shareholder of N,

(c) immediately after the acquisition, the shares in N are of the
same classes as were the shares in C immediately before the
10acquisition,

(d) immediately after the acquisition, the number of shares of any
particular class in N bears to all the shares in N the same
proportion, or as nearly as may be the same proportion, as the
number of shares of that class in C bore to all the shares in C
15immediately before the acquisition, and

(e) immediately after the acquisition, the proportion of shares of
any particular class in N held by any particular shareholder is
the same, or as nearly as may be the same, as the proportion of
shares of that class in C held by that shareholder immediately
20before the acquisition.

(5) For the purposes of this section, N is treated as acquiring all the issued
share capital of C for consideration consisting only of the issue of shares
in N to the shareholders of C if, as a result of a scheme of reconstruction
involving the cancellation of all shares in C and the issue of shares in
25N—

(a) N holds all the issued share capital of C by reason of that share
capital being issued to N by C, and

(b) only shares in N are issued to the persons who were
shareholders of C immediately before the shares in C were
30cancelled.

(6) In a case within subsection (5), subsection (4) applies as if any reference
to immediately before the acquisition were a reference to immediately
before the shares in C were cancelled.

(7) “Scheme of reconstruction” means a scheme carried out in pursuance of
35a compromise or arrangement—

(a) to which Part 26 of the Companies Act 2006 (arrangements and
reconstructions) applies, or

(b) under any corresponding provision of the law of a country or
territory outside the United Kingdom.

(8) 40Chapter 6 of Part 5 (equity holders and profits or assets available for
distribution) applies for the purposes of subsection (1)(b) and (c) as it
applies for the purposes of section 151(4).”

(5) In section 726 (interpretation of Chapter), after “acquisition” insert “and
shareholder”.

(6) 45The amendments made by this section have effect in relation to any change of
ownership which occurs on or after 1 April 2014.

37 Transfer of deductions: research and development allowances

(1) In section 730B(1) of CTA 2010 (interpretation of transfer of deductions
provisions), in paragraph (a) of the definition of “deductible amount” after
“trade,” insert “other than an amount treated as such an expense by section
5450(a) of CAA 2001 (research and development allowances treated as expenses
in calculating profits of a trade),”.

(2) The amendment made by this section has effect in relation to a qualifying
change if the relevant day is on or after 1 April 2014.

38 Tax treatment of financing costs and income

(1) 10Chapter 10 of Part 7 of TIOPA 2010 (tax treatment of financing costs and
income: interpretation) is amended as follows.

(2) In section 345 (meaning of “UK group company” and “relevant group
company”), for subsection (7) substitute—

“(7) Chapter 6 of Part 5 of CTA 2010 (equity holders and profits or assets
15available for distribution) and Chapter 3 of Part 24 of that Act
(subsidiaries) apply for the purposes of subsection (6), subject to
subsections (8) and (9).

(8) Sections 169 to 182 of CTA 2010 do not apply.

(9) In applying the remaining provisions of those Chapters for the
20purposes of subsection (6), they are to be read with all modifications
necessary to ensure that—

(a) they apply to a company or other body corporate which does
not have share capital, and to holders of corresponding
ordinary holdings in such a company or body, in a way which
25corresponds to the way they apply to companies with ordinary
share capital and holders of ordinary shares in such companies,

(b) they apply in relation to ownership through an entity (other
than a body corporate), or any trust or other arrangement, in a
way which corresponds to the way they apply to ownership
30through a company or other body corporate, and

(c) for the purposes of achieving paragraphs (a) and (b), profits or
assets are attributed to holders of corresponding ordinary
holdings in entities, trusts or other arrangements in a manner
which corresponds to the way profits or assets are attributed to
35holders of ordinary shares in a company.

(10) In this section “corresponding ordinary holding” in an entity, trust or
other arrangement means a holding or interest which provides the
holder with economic rights corresponding to those provided by a
holding of ordinary shares in a company.”

(3) 40In section 353A (effect of Part 7 on parties to capital market arrangements), in
subsection (4), before paragraph (a) insert—

“(za) the conditions that must be met for an election to be made;”.

(4) The amendment made by subsection (2) has effect in relation to periods of
account of the worldwide group starting on or after 5 December 2013.

CHAPTER 4 Other provisions

Pensions

39 Pension flexibility: drawdown

(1) In section 165(1) of FA 2004 (rules about payment of pension by registered
5scheme to member) in pension rule 5 (payments of drawdown pension in a
year not to exceed 120% of basis amount for year) for “120%” substitute
“150%”.

(2) In section 167(1) of FA 2004 (rules about payment of pension death benefits by
registered scheme in respect of member) in pension death benefit rule 4
10(payments of dependants’ drawdown pension not to exceed 120% of basis
amount for year) for “120%” substitute “150%”.

(3) In paragraph 14A(2) of Schedule 28 to FA 2004 (amount of minimum income
requirement for flexible drawdown by member) for “£20,000” substitute
“£12,000”.

(4) 15In paragraph 24C(2) of Schedule 28 to FA 2004 (amount of minimum income
requirement for flexible drawdown by dependant) for “£20,000” substitute
“£12,000”.

(5) In consequence of subsections (1) and (2), in FA 2013 omit section 50(1) and (2).

(6) The amendments made by subsections (1), (2) and (5) have effect in relation to
20pension drawdown years beginning on or after 27 March 2014.

(7) The amendment made by subsection (3) has effect in relation to declarations
made under section 165(3A) of FA 2004 on or after 27 March 2014.

(8) The amendment made by subsection (4) has effect in relation to declarations
made under section 167(2A) of FA 2004 on or after 27 March 2014.

40 25Pension flexibility: taking low-value pension rights as lump sum

(1) In paragraph 7(4) of Schedule 29 to FA 2004 (amount of commutation limit for
purposes of trivial commutation lump sum) for “£18,000” substitute “£30,000”.

(2) In paragraph 8 of Schedule 29 to FA 2004 (value of crystallised pension rights
for trivial commutation purposes)—

(a) 30in sub-paragraph (1)(a) omit “, as adjusted under sub-paragraph (2)”,

(b) in sub-paragraph (1)(b) omit “, as adjusted under sub-paragraph (3)”,
and

(c) omit sub-paragraphs (2) and (3), as originally enacted and as
substituted by FA 2013.

(3) 35In consequence of subsection (1), in FA 2011 omit paragraph 4(2) of Schedule
18.

(4) In consequence of subsection (2)(c), in FA 2013 omit paragraph 8(4) of Schedule
22.

(5) In article 23C(4) of the Taxation of Pension Schemes (Transitional Provisions)
Order 2006 (S.I. 2006/572) (modifications of Schedule 29 to FA 2004) in the
inserted paragraph 7A(1)(a) (limit at or below which additional sums can be
trivial commutation lump sums) for “£2,000” substitute “£10,000”.

(6) 5In the Registered Pension Schemes (Authorised Payments) Regulations 2009
(S.I. 2009/1171)—

(a) in each of regulations 6(1)(b), 8(1)(a), 11(1)(c), 11A(1)(b) and 12(1)(e)
(limit at or below which certain payments by registered pension
scheme can be authorised payments) for “£2,000” substitute “£10,000”,

(b) 10in regulation 10(3)(b) (certain payments by registered pension scheme
which can be authorised payments if value of member’s pension rights
is not more than £18,000) for “£18,000” substitute “£30,000”,

(c) in regulation 11(1)(d) (upper limit on total value of member’s benefits
under the scheme which would make the payment and all related
15schemes) for “£2,000” substitute “£10,000”,

(d) in regulation 11A(2) (may not be more than one previous payment
under regulation 11A) for “one payment” substitute “two payments”,
and

(e) in regulation 12(4) (certain payments by registered pension scheme can
20be authorised payments only if property held in respect of at least 20
members exceeds £2,000) for “£2,000” substitute “£10,000”.

(7) In consequence of subsection (6)(b), in the Registered Pension Schemes
(Miscellaneous Amendments) Regulations 2011 (S.I. 2011/1751) omit
regulation 8(4).

(8) 25The amendments made by subsections (1) to (4) have effect for commutation
periods beginning on or after 27 March 2014 and do so irrespective of whether
the nominated date is before, on or after 27 March 2014.

(9) The amendment made by subsection (5)—

(a) has effect for lump sums paid on or after 27 March 2014, and

(b) 30is to be treated as having been made by the Treasury under the powers
to make orders conferred by section 283(2) of FA 2004.

(10) The amendments made by subsection (6) and (7) have effect for payments
made on or after 27 March 2014.

(11) The amendments made by subsection (6) are to be treated as having been made
35by the Commissioners for Her Majesty’s Revenue and Customs under the
powers to make regulations conferred by section 164(1)(f) and (2) of FA 2004.

41 Transitional provision for new standard lifetime allowance for 2014-15 etc

Schedule 4 contains transitional provision in relation to the new standard
lifetime allowance for the tax year 2014-15 etc.

42 40Taxable specific income: effect on pension input amount for non-UK schemes

(1) Schedule 34 to FA 2004 (application of certain charges to non-UK pension
schemes) is amended as follows.

(2) In paragraph 10 (pension input amount for cash balance and defined benefits

arrangements), for sub-paragraph (2) substitute—

“(2) The appropriate fraction is—

where—

• EI is the total amount of employment income of the individual
  5from any relevant employment or employments for the tax
  year, excluding any such income which is exempt income
  (within the meaning of section 8 of ITEPA 2003),

• TE is so much of EI as constitutes taxable earnings from any
  such employment (within the meaning of section 10(2) of that
  10Act), and

• TSI is so much of EI as constitutes taxable specific income from
  any such employment (within the meaning of section 10(3) to
  (5) of that Act).”

(3) In paragraph 11 (pension input amount for other money purchase
15arrangements), for sub-paragraph (2) substitute—

“(2) The appropriate fraction is—

where—

• EI is the total amount of employment income of the individual
  20from any employment or employments with the employer
  for the tax year, excluding any such income which is exempt
  income (within the meaning of section 8 of ITEPA 2003),

• TE is so much of EI as constitutes taxable earnings from any
  such employment (within the meaning of section 10(2) of that
  25Act), and

• TSI is so much of EI as constitutes taxable specific income from
  any such employment (within the meaning of section 10(3) to
  (5) of that Act).”

(4) The amendments made by this section have effect for the tax year 2014-2015
30and subsequent tax years.

43 Pension schemes

Schedule 5 makes provision in relation to pension schemes.

Sporting events

44 Glasgow Grand Prix

(1) 35An accredited competitor who performs a Grand Prix activity is not liable to
income tax in respect of any income arising from the activity if the non-
residence condition is met.

(2) The following are Grand Prix activities—

(a) competing at the Glasgow Grand Prix, and

(b) any activity that is performed during the games period the main
purpose of which is to support or promote the Glasgow Grand Prix.

(3) The non-residence condition is that—

(a) the accredited competitor is non-UK resident for the tax year 2014-15,
5or

(b) the accredited competitor is UK resident for the tax year 2014-15 but the
year is a split year as respects the competitor and the activity is
performed in the overseas part of the year.

(4) Section 966 of ITA 2007 (deduction of sums representing income tax) does not
10apply to any payment or transfer which gives rise to income benefiting from
the exemption under subsection (1).

(5) In this section—

• “accredited competitor” means a person to whom an accreditation card in
  the athletes’ category has been issued by the company named UK
  15Athletics Limited which was incorporated on 16 December 1998;

• “the games period” means the period—

  (a)

  beginning with 5 July 2014, and

  (b)

  ending with 14 July 2014;

• “the Glasgow Grand Prix” means the Glasgow Grand Prix athletics event
  20held at Hampden Park Stadium in Glasgow in July 2014;

• “income” means employment income or profits of a trade, profession or
  vocation (including profits treated as arising as a result of section 13 of
  ITTOIA 2005).

(6) This section is treated as having come into force on 6 April 2014.

45 25Major sporting events: power to provide for tax exemptions

(1) Where a major sporting event is to be held in the United Kingdom, the
Treasury may make regulations providing for exemption from income tax and
corporation tax in relation to the event.

(2) The regulations may, in particular—

(a) 30exempt specified classes of person, income or activity from income tax;

(b) exempt specified classes of person, profit, income or activity from
corporation tax;

(c) provide for specified classes of activity to be disregarded in
determining for fiscal purposes whether a person has a permanent
35establishment in the United Kingdom;

(d) disapply a duty on a person to deduct a sum representing income tax
before making a payment.

(3) The regulations may specify classes of person wholly or partly by reference
to—

(a) 40residence outside the United Kingdom, determined in accordance with
the regulations;

(b) documents issued or authority given by persons exercising functions in
connection with the sporting event.

(4) Regulations under this section—

(a) 45may apply (with or without modifications) or disapply any enactment,

(b) may modify, amend, repeal or revoke any enactment,

(c) may make different provision for different purposes, and

(d) may include incidental, consequential, supplementary or transitional
provision.

(5) Regulations under this section may not be made unless a draft of the
5instrument containing them has been laid before, and approved by a resolution
of, the House of Commons.

(6) In this section, “enactment” includes an enactment contained in subordinate
legislation (within the meaning of the Interpretation Act 1978), and includes an
enactment whenever passed or made.

10Employee share schemes

46 Share incentive plans: increases in maximum annual awards etc

(1) Schedule 2 to ITEPA 2003 (share incentive plans) is amended as follows.

(2) In paragraph 35(1) (free shares: maximum annual award) for “£3,000”
substitute “£3,600”.

(3) 15In paragraph 46(1) (partnership shares: maximum amount of deductions from
employee’s salary) for “£1,500” substitute “£1,800”.

(4) The amendments made by this section are treated as having come into force on
6 April 2014.

47 Share incentive plans: power to adjust maximum annual awards etc

(1) 20Schedule 2 to ITEPA 2003 (share incentive plans) is amended as follows.

(2) In paragraph 35 (free shares: maximum annual award) after sub-paragraph (2)
insert—

“(2A) The Treasury may by order amend sub-paragraph (1) by substituting
for any amount for the time being specified there an amount
25specified in the order.”

(3) In paragraph 46 (partnership shares: maximum amount of deductions from
employee’s salary) after sub-paragraph (5) insert—

“(6) The Treasury may by order amend sub-paragraph (1) by substituting
for any amount for the time being specified there an amount
30specified in the order.”

(4) In paragraph 60 (matching shares: maximum ratio of matching shares to
partnership shares) after sub-paragraph (3) insert—

“(4) The Treasury may by order amend sub-paragraph (2) by substituting
for any ratio for the time being specified there a ratio specified in the
35order.”

48 Employee share schemes

Schedule 6 makes provision in relation to employee share schemes.

49 Employment-related securities etc

Schedule 7 contains provision relating to employment-related securities.

Investment reliefs

50 Venture capital trusts

5Schedule 8 contains provision about venture capital trusts.

51 Removing time limit on seed enterprise investment scheme relief

(1) Section 257A of ITA 2007 (meaning of “SEIS relief” and commencement) is
amended as follows.

(2) For subsection (3) (which limits SEIS relief to shares issued on or after 6 April
102012 but before 6 April 2017) substitute—

“(3) This Part has effect in relation to shares issued on or after 6 April 2012
only.”

(3) Omit subsection (4) (which allows the Treasury to extend SEIS relief by order).

52 Removing time limit on CGT relief in respect of re-investment under SEIS

(1) 15In Schedule 5BB to TCGA 1992 (seed enterprise investment scheme: re-
investment), in paragraph 1 (SEIS re-investment relief)—

(a) in sub-paragraph (2)(a), for “or the tax year 2013-14” substitute “or any
subsequent tax year”, and

(b) in sub-paragraph (5A), in the definition of “the relevant percentage”, in
20paragraph (b), for “the tax year 2013-14” substitute “any subsequent tax
year”.

(2) Accordingly, in section 150G of TCGA 1992 (which introduces Schedule 5BB),
omit “in the tax years 2012-13 and 2013-14”.

Social investment relief

53 25Relief for investments in social enterprises

(1) Schedule 9 makes provision for and in connection with social investment tax
relief.

(2) Schedule 10 makes provision for relief under TCGA 1992 in connection with
investments in social enterprises.

30Capital gains

54 Relief on disposal of private residence

(1) TCGA 1992 is amended as follows.

(2) In section 223 (relief on disposal of private residence: amount of relief)—

(a) in subsections (1) and (2)(a), for “36 months” substitute “18 months”;

(b) omit subsections (5) and (6);

(c) in subsection (8), omit the “and” after paragraph (aa) and after that
paragraph insert—

“(ab) section 225E (disposals by disabled persons or persons
5in care homes etc), and”.

(3) After section 225D insert—

“225E Disposals by disabled persons or persons in care homes etc

(1) This section applies where a gain to which section 222 applies accrues
to an individual and—

(a) 10the conditions in subsection (2) are met, or

(b) the conditions in subsection (3) are met.

(2) The conditions mentioned in subsection (1)(a) are that at the time of the
disposal—

(a) the individual is a disabled person or a long-term resident in a
15care home, and

(b) the individual does not have any other relevant right in relation
to a private residence.

(3) The conditions mentioned in subsection (1)(b) are that at the time of the
disposal—

(a) 20the individual’s spouse or civil partner is a disabled person or a
long-term resident in a care home, and

(b) neither the individual nor the individual’s spouse or civil
partner has any other relevant right in relation to a private
residence.

(4) 25Where this section applies, the references in section 223(1) and (2)(a) to
18 months are treated as references to 36 months.

(5) An individual is a “long-term resident” in a care home at the time of the
disposal if at that time the individual —

(a) is resident there, and

(b) 30has been resident there, or can reasonably be expected to be
resident there, for at least three months.

(6) An individual has “any other relevant right in relation to a private
residence” at the time of the disposal if—

(a) at that time—

(i) 35the individual owns or holds an interest in a dwelling-
house or part of a dwelling-house other than that in
relation to which the gain accrued, or

(ii) the trustees of a settlement own or hold an interest in a
dwelling-house or part of a dwelling-house other than
40that in relation to which the gain accrued, and the
individual is entitled to occupy that dwelling-house or
part under the terms of the settlement, and

(b) section 222 would have applied to any gain accruing to the
individual or trustees on the disposal at that time of, or of that
45interest in, that dwelling house or part (or would have applied
if a notice under subsection (5) of that section had been given).

(7) In the application of this section in relation to a gain to which section
222 applies by virtue of section 225 (private residence occupied under
terms of settlement)—

(a) the reference in subsection (1) of this section to an individual is
5to the trustees of the settlement;

(b) the references in subsections (2) to (6) of this section to the
individual are to the person entitled under the terms of the
settlement, as mentioned in section 225.

(8) In this section—

• 10“care home” means an establishment that provides
  accommodation together with nursing or personal care;

• “disabled person” has the meaning given by Schedule 1A to FA
  2005.”

(4) The amendments made by this section have effect in relation to disposals made
15on or after 6 April 2014.

55 Remittance basis and split year treatment

(1) Section 12 of TCGA 1992 (non-UK domiciled individuals to whom remittance
basis applies) is amended as follows.

(2) After subsection (1) insert—

“(1A) 20But it does not apply to foreign chargeable gains accruing to an
individual in the overseas part of a split year as respects that
individual, regardless of the part of the year (the overseas part or the
UK part) in which the foreign chargeable gains are remitted.”

(3) The amendment made by this section has effect in relation to gains accruing on
25or after 6 April 2013.

56 Termination of life interest and death of life tenant: disabled persons

(1) TCGA 1992 is amended as follows.

(2) In section 72 (termination of life interest on death of person entitled)—

(a) in subsection (1B)(a)(iii), for “within section 89B(1)(c) or (d)” substitute
30“, within the meaning given by section 89B”, and

(b) at the end insert—

“(6) An interest which is a disabled person’s interest by virtue of
section 89B(1)(a) or (b) of the Inheritance Tax Act 1984 is to be
treated as an interest in possession for the purposes of this
35section.”

(3) In section 73(3) (death of life tenant: exclusion of chargeable gain), for “to (5)”
substitute “to (6)”.

(4) The amendments made by this section have effect in relation to deaths
occurring on or after 5 December 2013.

57 40Capital gains roll-over relief: relevant classes of assets

(1) Section 155 of TCGA 1992 (relevant classes of assets) is amended as follows.