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

(2) After the heading “CLASS 7A” insert—

“Assets within heads A and B below.

Head A”

(3) Before the heading “CLASS 8” insert—

5“Head B

Payment entitlements under the basic payment scheme (that is, the
scheme of income support for farmers in pursuance of Regulation (EU)
No 1307/2013 of the European Parliament and of the Council).”

(4) The amendments made by this section have effect where the disposal of the old
10assets (or an interest in them) or the acquisition of the new assets (or an interest
in them) is on or after 20 December 2013.

58 Capital gains roll-over relief: intangible fixed assets

(1) In section 156ZB of TCGA 1992 (intangible fixed assets: interaction with relief
under Chapter 7 of Part 8 of CTA 2009), in subsection (1), for “This section”
15substitute “Subsection (2)”.

(2) In Chapter 14 of Part 8 of CTA 2009 (intangible fixed assets: miscellaneous
provisions), after section 870 insert—

“Roll-over relief under TCGA 1992

870A Claims for relief made under sections 152 and 153 of TCGA 1992

(1) 20Subsection (2) applies where—

(a) a company has made a claim for relief under section 152 or 153
of TCGA 1992 (roll-over relief) during the period beginning
with 1 April 2009 and ending with 19 March 2014, and

(b) the relief claimed relates to disposal proceeds that are applied
25in acquiring an intangible fixed asset within the meaning of this
Part.

(2) The company is treated for the purposes of this Part as if the cost of the
asset recognised for tax purposes were reduced on 19 March 2014 by
the amount in respect of which the relief under section 152 or 153 of
30TCGA 1992 is given.

(3) But the effect of subsection (2) must not be to reduce the tax written-
down value of the asset to below nil.

(4) The references to adjustments in sections 742(3) and 743(3) (assets
written down) include any adjustment required by subsection (2).”

(3) 35The amendment made by subsection (1) has effect in relation to claims for relief
under section 152 or 153 of TCGA 1992 made on or after 19 March 2014.

(4) The amendment made by subsection (2) has effect in relation to accounting
periods beginning on or after 19 March 2014.

(5) For the purposes of subsection (4), an accounting period beginning before, and
40ending on or after, 19 March 2014 is to be treated as if so much of the period as
falls before that date, and so much of the period as falls on or after that date,
were separate accounting periods.

59 Avoidance involving losses

(1) In section 184G of TCGA 1992 (avoidance involving losses: schemes converting
income to capital)—

(a) for subsections (2) and (3) substitute—

“(2) 5Condition A is that a receipt or other amount arises to a
company directly or indirectly in consequence of, or otherwise
in connection with, any arrangements.

(3) Condition B is that—

(a) that amount falls to be taken into account in calculating
10a chargeable gain (the “relevant gain”) which accrues to
a company (“the relevant company”), and

(b) losses accrue (or have accrued) to the relevant company
(whether before or after or as part of the
arrangements).”, and

(b) 15in subsection (4), for “the receipt” substitute “the amount mentioned in
subsection (2)”.

(2) In section 184H of that Act (avoidance involving losses: schemes securing
deductions)—

(a) in subsection (2)(b), omit “on any disposal of any asset”,

(b) 20for subsection (3) substitute—

“(3) Condition B is that the relevant company, or a company
connected with the relevant company, becomes entitled to an
income deduction directly or indirectly in consequence of, or
otherwise in connection with, the arrangements.”,

(c) 25in subsection (4), for paragraph (a) substitute—

“(a) that income deduction, and”, and

(d) in subsection (10), after the definition of “arrangements” insert—

• ““income deduction” means—

  (a)

  a deduction in calculating income for
  30corporation tax purposes, or

  (b)

  a deduction from total profits,”.

(3) The amendments made by this section have effect—

(a) in relation to arrangements entered into on or after 30 January 2014, and

(b) in relation to arrangements entered into before that date but only to the
35extent that any chargeable gain accrues on a disposal which occurs on
or after that date.

Capital allowances

60 Extension of capital allowances

(1) Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

(2) 40In section 45D (expenditure on cars with low carbon dioxide emissions), after
subsection (1) insert—

“(1A) The Treasury may by order amend subsection (1)(a) so as to extend the
period specified.”

(3) In section 45DA (expenditure on zero-emission goods vehicles), after
subsection (1) insert—

“(1A) The Treasury may by order amend subsection (1)(a) so as to extend the
period specified.”

(4) 5In section 45E (expenditure on plant or machinery for gas refuelling station),
after subsection (1) insert—

“(1A) The Treasury may by order amend subsection (1)(a) so as to extend the
period specified.”

(5) In section 45K (expenditure on plant and machinery for used in designated
10assisted areas)—

(a) in subsection (1), in paragraph (b) for “5 years” substitute “8 years”, and

(b) after that subsection insert—

“(1A) The Treasury may by order amend subsection (1)(b) so as to
extend the period specified.”

61 15Business premises renovation allowances

(1) Section 360B of CAA 2001 (business premises renovation allowances: meaning
of “qualifying expenditure”) is amended in accordance with subsections (2) to
(6).

(2) For subsection (1) substitute—

“(1) 20In this Part “qualifying expenditure” means capital expenditure
incurred before the expiry date—

(a) in respect of which Conditions A and B are met, and

(b) which is not excluded by subsection (3), (3B) or (3D).”

(3) After subsection (2) insert—

“(2A) 25Condition A is that the expenditure is incurred on—

(a) the conversion of a qualifying building into qualifying business
premises,

(b) the renovation of a qualifying building if it is or will be
qualifying business premises, or

(c) 30repairs to a qualifying building or, where the building is part of
a building, to the building of which the qualifying building
forms part, to the extent that the repairs are incidental to
expenditure within paragraph (a) or (b).

(2B) Condition B is that the expenditure is incurred on—

(a) 35building works,

(b) architectural or design services,

(c) surveying or engineering services,

(d) planning applications, or

(e) statutory fees or statutory permissions.

(2C) 40But Condition B is treated as met in respect of expenditure incurred on
matters not mentioned in that Condition to the extent that that
expenditure (in total) does not exceed 5% of the qualifying expenditure
incurred on the matters mentioned in subsection (2B)(a) to (c).”

(4) In subsection (3)—

(a) for “not qualifying expenditure” substitute “excluded”, and

(b) in paragraph (d), for “as defined by section 173(1)” substitute “(as
defined by section 173(1)) and falls within subsection (3A)”.

(5) 5After that subsection insert—

“(3A) The fixtures which fall within this subsection are—

(a) integral features within the meaning of section 33A (taking
account of section 33A(6) and any provision for the time being
made under section 33A(7)) or part of such a feature;

(b) 10automatic control systems for opening and closing doors,
windows and vents;

(c) window cleaning installations;

(d) fitted cupboards and blinds;

(e) protective installations such as lightning protection, sprinkler
15and other equipment for containing or fighting fires, fire alarm
systems and fire escapes;

(f) building management systems;

(g) cabling in connection with telephone, audio-visual data
installations and computer networking facilities, which are
20incidental to the occupation of the building;

(h) sanitary appliances, and bathroom fittings which are hand
driers, counters, partitions, mirrors or shower facilities;

(i) kitchen and catering facilities for producing and storing food
and drink for the occupants of the building;

(j) 25signs;

(k) public address systems;

(l) intruder alarm systems.

(3B) Expenditure is excluded if, and to the extent that, it exceeds the market
value amount for the works, services or other matters to which it
30relates.

(3C) “The market value amount” means the amount of expenditure which it
would have been normal and reasonable to incur on the works, services
or other matters—

(a) in the market conditions prevailing when the expenditure was
35incurred, and

(b) assuming the transaction as a result of which the expenditure
was incurred was between persons dealing with each other at
arm’s length in the open market.

(3D) Expenditure is excluded if the qualifying building was used at any time
40during the period of 12 months ending with the day on which the
expenditure is incurred.”

(6) In subsection (5), after “regulations” insert “—

“amend this section so as to add a description of fixture to the list
in subsection (3A), or vary or remove a description of fixture in
45that list;

(b)”

(7) After that section insert—

“360BA Expenditure not treated as qualifying expenditure if delay in
carrying out works etc

(1) This section applies where—

(a) 5(ignoring this section) qualifying expenditure is incurred on
works, services or other matters in a chargeable period, and

(b) those works, services or other matters are not completed or
provided before the end of the period of 36 months beginning
with the date the expenditure was incurred.

(2)
10To the extent that it relates to so much of those works, services or other
matters as are not completed or provided before the end of that period,
the expenditure is to be treated for the purposes of this Part as never
having been incurred (unless and until subsection (6) applies).

(3) All such assessments and adjustments of assessments are to be made as
15are necessary to give effect to subsection (2).

(4) If a person who has made a tax return becomes aware that, after making
it, anything in it has become incorrect because of the operation of this
section, the person must give notice to an officer of Revenue and
Customs specifying how the return needs to be amended.

(5) 20The notice must be given within 3 months beginning with the day on
which the person first became aware that anything in the return had
become incorrect because of the operation of this section.

(6) If, at any time after the end of the period mentioned in subsection (1)(b),
those works, services or other matters are completed or provided, the
25expenditure to which subsection (2) applies is to be treated for the
purposes of this Part as incurred at that time.”

(8) For section 360L of that Act (grants affecting entitlement to allowances)
substitute—

“360L Grants affecting entitlement to allowances

(1) 30No initial allowance or writing-down allowance under this Part is to be
made in respect of qualifying expenditure in respect of a qualifying
building if a relevant grant or relevant payment is made towards—

(a) that expenditure, or

(b) any other expenditure which is incurred by any person in
35respect of the same building, and on the same single investment
project as that expenditure.

(2) An initial allowance or writing-down allowance made in respect of
qualifying expenditure is to be withdrawn if—

(a) after it is made, a relevant grant or relevant payment is made
40towards that expenditure, or

(b) within the period of 3 years beginning when that expenditure
was incurred, a relevant grant or relevant payment is made
towards any other expenditure which is incurred by any person
in respect of the same building, and on the same single
45investment project, as that expenditure.

(3) All such assessments and adjustments of assessments are to be made as
are necessary to give effect to subsection (2).

(4) If a person who has made a return becomes aware that, after making it,
anything in it has become incorrect because of the operation of this
5section, that person must give notice to an officer of Revenue and
Customs specifying how the return needs to be amended.

(5) The notice must be given within 3 months beginning with the day on
which the person first became aware that anything in the return had
become incorrect because of the operation of this section.

(6) 10In this section—

• “General Block Exemption Regulation” means Commission
  Regulation (EC) No 800/2008 (General block exemption
  Regulation);

• “relevant grant or relevant payment” means a grant or payment
  15which is—

  (a)

  a State aid, other than an allowance under this Part, or

  (b)

  a grant or subsidy, other than a State aid, which the
  Treasury by order declares to be relevant for the
  purposes of the withholding of allowances under this
  20Part;

• “single investment project” has the same meaning as in the
  General Block Exemption Regulation.

(7) Nothing in this section limits references to “State aid” to State aid which
is required to be notified to and approved by the European
25Commission.

(8) The Treasury may by order amend this section to make provision
consequential upon the General Block Exemption Regulation being
replaced by another instrument.”

(9) In section 360M of that Act (when balancing adjustments are made), in
30subsection (4) for “7” substitute “5”.

(10) Subject to subsection (11), the amendments made by this section have effect for
expenditure incurred on or after the specified day.

(11) Section 360L of CAA 2001 (inserted by subsection (7)) has effect—

(a) in relation to a relevant grant or relevant payment made at any time
35(whether before or on or after the specified day) towards expenditure
incurred on or after that day, and

(b) in relation to a relevant grant or relevant payment made on or after the
specified day towards expenditure incurred before that day.

(12) “The specified day” means—

(a) 40for income tax purposes, 6 April 2014, and

(b) for corporation tax purposes, 1 April 2014.

62 Mineral extraction allowances: activities not within charge to tax

(1) CAA 2001 is amended as follows.

(2) In section 394(2) (meaning of mineral extraction trade), after “deposits” insert
“but to the extent only that the profits or gains from that trade are, or (if there
were any) would be, chargeable to tax”.

(3) In section 399 (expenditure excluded from being qualifying expenditure), after
5subsection (1) insert—

“(1A) Expenditure incurred by a person for the purposes of a mineral
extraction trade is not qualifying expenditure if—

(a) when the expenditure is incurred, the person is carrying on the
trade but the trade is not at that time a mineral extraction trade,
10or

(b) the person has not begun to carry on the trade when the
expenditure is incurred and, when the person begins to carry on
the trade, the trade is not a mineral extraction trade.

(1B) Section 577(2) (references to commencement etc of a trade) does not
15apply to subsection (1A).”

(4) In section 160 (expenditure treated as incurred for purposes of mineral
extraction trade)—

(a) the existing text becomes subsection (1), and

(b) after that subsection insert—

“(2) 20Subsection (1) does not apply to expenditure if—

(a) when it is incurred, the person is carrying on the trade
but the trade is not at that time a mineral extraction
trade, or

(b) when it is incurred, the person has not begun to carry on
25the trade and, when the person begins to carry on the
trade, the trade is not a mineral extraction trade.

(3) Section 577(2) (references to commencement etc of a trade) does
not apply to subsection (2).”

(5) For section 161(4)(a) (pre-trading expenditure on plant or machinery for
30mineral exploration and access), substitute—

“(a) pre-trading expenditure” means capital expenditure
incurred—

(i) before the day on which a person begins to carry on a
trade that is a mineral extraction trade, but

(ii) 35only if there is no prior time when the person carried on
that trade and the trade was not a mineral extraction
trade,”.

(6) After section 161(4) insert—

“(4A) Section 577(2) (references to commencement etc of a trade) does not
40apply to subsection (4)(a).”

(7) After section 431 (discontinuance of trade) insert—

“431A Foreign permanent establishment exemption

(1) Subsection (2) applies if—

(a) an election under section 18A of CTA 2009 has effect in relation
45to a company, and

(b) the company carries on any trade which consists of, or includes,
the working of a source of mineral deposits.

(2) That trade so far as carried on through one or more permanent
establishments outside the United Kingdom is treated for the purposes
5of this Part as a trade—

(a) separate from any other trade of the company, and

(b) all the profits and gains from which are not, or (if there were
any) would not be, chargeable to tax.

431B Disposal value: no allowance/no charge cases

(1) 10If—

(a) an election under section 18A of CTA 2009 has effect in relation
to a company, and

(b) the operation of sections 431A and 421(1)(b)(ii) and (2) requires
the company to bring the disposal value of an asset into
15account,

the disposal value is such an amount as gives rise to neither a balancing
allowance nor a balancing charge.

(2) Subsection (1) does not apply if—

(a) the company’s qualifying expenditure in respect of the asset
20exceeds £5 million,

(b) the company has claimed any capital allowance in respect of
any of that expenditure, and

(c) the company has, at any time in a relevant accounting period,
used the asset otherwise than for the purposes of a permanent
25establishment outside the United Kingdom.

(3) In subsection (2)(c) “relevant accounting period” means an accounting
period ending before, but ending not more than 6 years before, “the
relevant day” as defined by section 18F of CTA 2009.

431C Notional allowances

(1) 30Subsection (2) applies if—

(a) an election under section 18A of CTA 2009 has effect in relation
to a company, and

(b) but for section 18A of CTA 2009 and section 431A(2)(b), an
allowance under this Part (“the notional allowance”) could be
35claimed under section 3(1) in respect of assets provided for the
purposes of a permanent establishment outside the United
Kingdom through which business is or has been carried on by
the company.

(2) The notional allowance (and any charge in connection with it which
40would have arisen if the allowance had been claimed) is to be made
automatically and reflected in any calculation, for any relevant
accounting period of the company, of the profits or losses attributable
to business carried on by the company through such a permanent
establishment.

(3) 45Subsection (4) applies if, at the time an election under section 18A of
CTA 2009 takes effect in relation to a company, the company is, by
reason of sections 431A and 421(1)(b)(ii) and (2), required to bring into

account the disposal value of any asset provided for the purposes of a
foreign permanent establishment through which business is or has
been carried on by the company.

(4) For the purposes of subsections (1) and (2), the company is treated as
having incurred at that time, for the purposes of the trade mentioned in
5section 431A(2), qualifying expenditure of an amount equal to that
disposal value.

(5) In subsection (2) “relevant accounting period” in relation to a company
by which an election under section 18A of CTA 2009 is made, means an
accounting period of the company to which the election applies (as to
10which see section 18F of that Act).”

(8) The amendments made by subsections (1) to (6) of this section have effect—

(a) for the purposes of corporation tax, in relation to claims made on or
after 1 April 2014, and

(b) for the purposes of income tax, in relation to claims made on or after 6
15April 2014,

and in relation to those claims the amendments are treated as always having
had effect.

(9) The amendment made by subsection (7) has effect in relation to elections under
section 18A of CTA 2009 which start to have effect on or after 1 April 2014.

63 20Mineral extraction allowances: expenditure on planning permission

(1) Part 5 of CAA 2001 (mineral extraction allowances) is amended as follows.

(2) In section 396 (meaning of “mineral exploration and access”), in subsection (2)
for “if planning permission is not granted” substitute “and not as expenditure
on acquiring a mineral asset”.

(3) 25In section 398 (relationship between main types of qualifying expenditure),
after “Subject to” insert “section 396(2) and”.

(4) The amendments made by this section have effect in relation to expenditure
incurred on or after the day on which this Act is passed.

Oil and gas

64 30Extended ring fence expenditure supplement for onshore activities

Schedule 11 contains provision about an extended ring fence expenditure
supplement in connection with onshore oil-related activities.

65 Supplementary charge: onshore allowance

Schedule 12 contains provision about the reduction of adjusted ring fence
35profits by means of an onshore allowance.

66 Oil and gas: reinvestment after pre-trading disposal

(1) In Chapter 2 of Part 6 of TCGA 1992 (oil and mineral industries), after section

198I insert—

“198J Oil and gas: reinvestment after pre-trading disposal

(1) This section applies if a company which is an E&A company makes a
disposal of, or of the company’s interest in, relevant E&A assets and
that disposal is—

(a) 5a disposal of, or of an interest in, a UK licence which relates to
an undeveloped area, or

(b) a disposal of an asset used in an area covered by a licence under
Part 1 of the Petroleum Act 1998 or the Petroleum (Production)
Act (Northern Ireland) 1964 which authorises the company to
10undertake E&A activities.

(2) If—

(a) the consideration which the company obtains for the disposal is
applied by the company, within the permitted reinvestment
period—

(i) 15on E&A expenditure at a time when the company is an
E&A company, or

(ii) on oil assets taken into use, and used only, for the
purposes of a ring fence trade carried on by it, and

(b) the company makes a claim under this subsection in relation to
20the disposal,

any gain accruing to the company on the disposal is not a chargeable
gain.

(3) If part only of the amount or value of the consideration for the disposal
is applied as described in subsection (2)(a)—

(a) 25subsection (2) does not apply, but

(b) subsection (4) applies if all of the amount or value of the
consideration is so applied except for a part which is less than
the amount of the gain (whether all chargeable gain or not)
accruing on the disposal.

(4) 30If the company makes a claim under this subsection in relation to the
disposal, the company is to be treated for the purposes of this Act as if
the amount of the gain accruing on the disposal were reduced to the
amount of the part mentioned in subsection (3)(b) (and, if not all
chargeable gain, with a proportionate reduction in the amount of the
35chargeable gain).

(5) The incurring of expenditure is within “the permitted reinvestment
period” if the expenditure is incurred in the period beginning 12
months before and ending 3 years after the disposal, or at such earlier
or later time as the Commissioners for Her Majesty’s Revenue and
40Customs may by notice allow.

(6) Subsections (6), (7), (10) and (11) of section 152 apply for the purposes
of this section as they apply for the purposes of section 152, except
that—

(a) in subsection (6) the reference to a trade is to be read as a
45reference to E&A activities or a ring fence trade,

(b) in subsection (7), the reference to the old assets is to be read as a
reference to the assets disposed of as mentioned in subsection
(1) of this section, and