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Finance Bill (HC Bill 1)

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(b) the new shares are issued after the end of three years
beginning with the day on which the original shares were
acquired,

(c) before issuing the new shares, the company had issued
5shares which met conditions A and B of section 257L of ITA
2007, and

(d) the company issued a compliance certificate in relation to
those earlier shares for the purposes of section 257PA(1) of
ITA 2007 and in accordance with sections 257PB and 257PC
10of ITA 2007.

(7) In subsection (6) “new holding” is to be construed in accordance with
sections 126, 127, 135 and 136.

(8) In this section—

  • “ordinary share capital” has the meaning given in section 989 of
    15ITA 2007;

  • “ordinary shares”, in relation to a company, means shares
    forming part of its ordinary share capital.

3 Before Schedule 9 insert—

Section 255A

Schedule 8B Hold-over relief for gains re-invested in social enterprises

20When does the Schedule apply?

1 (1) This Schedule applies if—

(a) a chargeable gain accrues to an individual (“the investor”),

(b) the investor acquires one or more assets (“the social
holding”),

(c) 25the investor is eligible for SI relief under Part 5B of ITA
2007 in respect of the consideration given for the social
holding, and

(d) conditions A, B, C, D and E are met.

(2) Condition A is that the gain is one that accrues—

(a) 30on the disposal by the investor of an asset,

(b) in accordance with section 169N (but see sub-paragraph
(7)), or

(c) as a result of the operation of paragraph 5 in connection
with a chargeable event within paragraph 6(1)(c) or (d).

(3) 35Condition B is that the gain is one that accrues—

(a) on or after 6 April 2014, and

(b) before 6 April 2019 (but see sub-paragraph (8)).

(4) Condition C is that the investor is resident in the United
Kingdom—

(a) 40when the gain accrues, and

(b) when the social holding is acquired.

(5) Condition D is that the social holding is acquired by the investor
on the investor’s own behalf.

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(6) Condition E is that the social holding is acquired—

(a) in the 3 years beginning with the day when the gain
accrues, or

(b) in the year that ends at the beginning of that day.

(7) 5The reference in sub-paragraph (2)(b) to a gain accruing in
accordance with section 169N does not include such a gain so far
as it is chargeable to capital gains tax at the rate in section 169N(3)
(rate where entrepreneurs’ relief is available).

(8) The Treasury may by order substitute a later date for the date for
10the time being specified in sub-paragraph (3)(b).

2 (1) This Schedule also applies if—

(a) a chargeable gain accrues to an individual (“the investor”),

(b) the gain accrues as a result of the operation of paragraph 5
in connection with a chargeable event within paragraph
156(1)(a), (b) or (c),

(c) the chargeable event is either—

(i) a disposal to a social enterprise of shares in or
debentures of the social enterprise, or

(ii) the cancellation, extinguishment, redemption or
20repayment by a social enterprise of shares in or
debentures of the social enterprise,

(d) as part of the chargeable event or in connection with it, and
in place of the shares or debentures, the investor acquires
one or more assets (“the social holding”) from the social
25enterprise,

(e) other than the investor’s ceasing to hold the shares or
debentures, no detriment is suffered in return for the
acquisition of the social holding,

(f) the asset acquired, or each of the assets acquired, is a share
30in or debenture of the social enterprise,

(g) but for section 257LA of ITA 2007 (consideration for
acquisition must be wholly in cash and fully paid) the
investor would be eligible for SI relief under Part 5B of ITA
2007 in respect of the consideration given for the social
35holding, and

(h) conditions F, G, H and J are met.

(2) Condition F is that the gain is one that accrues—

(a) on or after 6 April 2014, and

(b) before 6 April 2019 (but see sub-paragraph (6)).

(3) 40Condition G is that the investor is resident in the United
Kingdom—

(a) when the gain accrues, and

(b) when the social holding is acquired.

(4) Condition H is that the social holding is acquired by the investor
45on the investor’s own behalf.

(5) Condition J is that the social holding is acquired—

(a) in the 3 years beginning with the day when the gain
accrues, or

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(b) in the year that ends at the beginning of that day.

(6) The Treasury may by order substitute a later date for the date for
the time being specified in sub-paragraph (2)(b).

(7) In this paragraph “debenture” includes any instrument creating or
5acknowledging indebtedness.

Interpretation of Schedule

3 (1) In the following provisions of this Schedule—

  • “the amount invested” means, in a case where this Schedule
    applies because of paragraph 1, the consideration
    10mentioned in paragraph 1(1)(c),

  • “the investor” means the individual mentioned in paragraph
    1(1)(a) or, as the case may be, paragraph 2(1)(a),

  • “the original gain” means the chargeable gain mentioned in
    paragraph 1(1)(a) or, as the case may be, paragraph 2(1)(a),
    15and

  • “the social holding” means the asset or assets mentioned in
    paragraph 1(1)(b) or, as the case may be, paragraph 2(1)(d).

(2) In this Schedule, a “disposal within marriage or civil partnership”
is a disposal to which section 58 (certain disposals between
20spouses or civil partners) applies.

Claim to hold gain over while invested in a social enterprise

4 (1) The investor may make a claim for the original gain to be
reduced—

(a) in a case within paragraph 1, by the amount invested, or by
25a part of that amount specified in the claim, or

(b) in a case within paragraph 2, to the extent specified in the
claim,

but, in either case, subject as follows.

(2) The reduction may not be more than the original gain or, if the
30original gain has already been reduced under one or more of the
listed provisions, the reduction may not be more than the reduced
gain.

(3) In a case within paragraph 1, the claim may not relate to any part
of the amount invested that under any of the listed provisions has
35already been set against a chargeable gain.

(4) The “listed provisions” are—

(a) sub-paragraph (1),

(b) Schedule 5B, and

(c) paragraph 1(5) of Schedule 5BB.

(5) 40The total of all reductions claimed by the investor under sub-
paragraph (1) in any tax year must not be more than £1,000,000.

(6) If there is relief by way of a reduction under sub-paragraph (1)
then, for the purposes of this Schedule, that relief—

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(a) is attributable to the asset or assets that form the social
holding, but

(b) ceases to be attributable to any particular asset, or to any
particular part of a particular asset, when—

(i) 5a chargeable event occurs in relation to that asset or
part, or

(ii) the person holding the asset or part dies.

Held-over gain treated as accruing on disposal etc of the qualifying investment

5 (1) This paragraph applies if there has been a reduction under
10paragraph 4(1).

(2) A chargeable gain equal to the amount of the reduction is treated
as accruing when a chargeable event occurs in relation to the social
holding without any chargeable event having previously occurred
in relation to any of the holding.

(3) 15When a chargeable event occurs in relation to part only of the
social holding without any chargeable event having previously
occurred in relation to any of that part, a chargeable gain
calculated in accordance with sub-paragraph (4) is treated as
accruing.

(4) 20The calculation is—

Step 1

Subtract from the amount of the reduction any chargeable gains
previously treated as accruing as a result of the operation of sub-
paragraph (3).

25Step 2

Attribute a proportionate part of the amount calculated at Step 1
to each part of the social holding held, immediately before the
occurrence of the chargeable event in question, by the investor or
a person who has acquired any part of the holding from the
30investor on a disposal within marriage or civil partnership.

Step 3

Chargeable events

6 (1) A chargeable event occurs in relation to an asset that forms the
whole or any part of the social holding if (after the acquisition of
35the holding)—

(a) the investor disposes of the asset otherwise than by way of
a disposal within marriage or civil partnership,

(b) the asset is disposed of, otherwise than by way of a
disposal to the investor, by a person who acquired the
40asset on a disposal made within marriage or civil
partnership,

(c) the asset is cancelled, extinguished, redeemed or repaid, or

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(d) any of the conditions in Chapters 3 and 4 of Part 5B of ITA
2007 for the investor’s eligibility for SI relief under that
Part in respect of the amount invested fails to be met.

In this sub-paragraph “asset” includes part of an asset.

(2) 5In the event of the death of—

(a) the investor, or

(b) a person who, on a disposal within marriage or civil
partnership, has acquired the whole or any part of the
social holding,

10nothing which occurs at or after the time of death is a chargeable
event in relation to any part of the holding held by the deceased
person immediately before the time of death.

(3) If a person makes a disposal of assets of a particular class while
retaining other assets of that class—

(a) 15assets of that class acquired by the person on an earlier day
are treated for the purposes of this Schedule as disposed of
before assets of that class acquired by the person on a later
day, and

(b) assets of that class acquired by the person on the same day
20are treated for the purposes of this Schedule as disposed of
in the following order—

(i) first, any to which neither relief under this
Schedule, nor SI relief under Part 5B of ITA 2007, is
attributable,

(ii) 25next, any to which relief under this Schedule, but
not SI relief under that Part, is attributable,

(iii) next, any to which SI relief under that Part, but not
relief under this Schedule, is attributable, and

(iv) finally, any to which both SI relief under that Part,
30and relief under this Schedule, are attributable.

(4) For the purposes of sub-paragraph (3), assets—

(a) to which relief under this Schedule is attributable, and

(b) which have not been held continuously by the investor
since the social holding was acquired,

35are treated as having been acquired when the social holding was
acquired if SI relief under Part 5B of ITA 2007 is not also
attributable to them.

(5) For the purposes of sub-paragraph (3), assets—

(a) to which SI relief under Part 5B of ITA 2007 is attributable,
40and

(b) which were transferred to an individual as mentioned in
section 257T of ITA 2007 (transfers between spouses or
civil partners),

are treated as having been acquired when the social holding was
45acquired.

(6) Chapter 1 of Part 4 of this Act has effect subject to sub-paragraphs
(3) to (5).

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(7) Sections 104, 105 and 106A do not apply to assets to which relief
under this Schedule is attributable if SI relief under Part 5B of ITA
2007 is not also attributable to them.

(8) Where, at the time of a chargeable event, an asset that formed the
5whole or any part of the social holding is treated for the purposes
of this Act as represented by assets which consist of or include
assets other than that asset—

(a) so much of the original gain as is attributable to the asset is
treated, in determining for the purposes of this paragraph
10the amount of the original gain to be treated as attributable
to each of those assets, as apportioned in such manner as
may be just and reasonable between those assets, and

(b) as between different assets treated as representing the
same asset, sub-paragraphs (3) to (5) apply with the
15necessary modifications in relation to those assets as they
would apply in relation to the asset.

(9) In order to determine, for the purposes of sub-paragraph (8), the
amount of the original gain attributable to any asset, a
proportionate part of the amount of the original gain is to be
20attributed to each asset that forms the whole or any part of so
much of the social holding as is held, immediately before the
occurrence of the chargeable event in question, by the investor or
a person who has acquired any part of the social holding from the
investor on a disposal within marriage or civil partnership.

(10) 25In subsections (8) and (9) references to the original gain are to so
much of the original gain as remains after deduction from it of the
amount of any chargeable gain treated as accruing as a result of
the previous operation of paragraph 5.

Person to whom held-over gain is treated as accruing

7 (1) 30This paragraph applies where a chargeable gain is treated as
accruing as a result of the operation of paragraph 5.

(2) If the chargeable event is a disposal, that chargeable gain is treated
as accruing to the person who makes the disposal.

(3) If the chargeable event occurs—

(a) 35when an asset, or part of an asset, is cancelled,
extinguished, redeemed or repaid, or

(b) when a condition, for eligibility for relief in respect of the
consideration given for the acquisition of an asset, fails to
be met,

40that chargeable gain is treated as accruing to the person who holds
the asset, or part, when the chargeable event occurs.

Claims: procedure

8 (1) Sections 257P(1), 257PA(1) and 257PB to 257PD of ITA 2007—

(a) apply in relation to a claim under this Schedule in respect
45of the social holding as they apply in relation to a claim
under Part 5B to ITA 2007 in respect of an investment, and

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(b) as they so apply, have effect as if any reference to the
requirements for relief under that Part were a reference to
the conditions for the application of this Schedule.

(2) In section 257PE(2) of ITA 2007 (power to make consequential
5amendments etc when amending provision about claims for SI
relief) “enactment” includes (in particular) sub-paragraph (1).

Section 64

SCHEDULE 11 Extended ring fence expenditure supplement for onshore activities

1 In Part 8 of CTA 2010 (oil activities), after Chapter 5 insert—

CHAPTER 5A 10Extended ring fence expenditure supplement for onshore activities

Introduction

329A Overview of Chapter

(1) This Chapter entitles a company carrying on a ring fence trade, on
making a claim in respect of an accounting period, to an additional
15supplement in respect of—

(a) qualifying pre-commencement onshore expenditure
incurred before the date the trade is set up and commenced,

(b) losses incurred in the trade which relate to onshore oil-
related activities,

(c) 20some or all of the supplement allowed in respect of earlier
periods under Chapter 5, and

(d) the additional supplement allowed in respect of earlier
periods under this Chapter.

(2) Sections 329B to 329H make provision about the application and
25interpretation of this Chapter.

(3) Sections 329I to 329M make provision about additional supplement
in relation to expenditure incurred by the company—

(a) with a view to carrying on a ring fence trade, but

(b) in an accounting period before the company sets up and
30commences that trade.

(4) Sections 329N to 329T make provision about additional supplement
in relation to losses incurred in carrying on the ring fence trade.

(5) There is a limit (of 4) on the number of accounting periods in respect
of which a company may claim additional supplement.

(6) 35In determining the amount of additional supplement allowable,
reductions fall to be made in respect of—

(a) disposal receipts in respect of any asset representing
qualifying pre-commencement onshore expenditure,

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(b) onshore ring fence losses that could be deducted under
section 37 (relief for trade losses against total profits) or
section 42 (ring fence trades: further extension of period for
relief) from ring fence profits of earlier periods,

(c) 5onshore ring fence losses incurred in earlier periods that fall
to be used under section 45 (carry forward of trade loss
against subsequent trade profits) to reduce profits of
succeeding periods, and

(d) unrelieved group ring fence profits.

10Application and interpretation

329B Qualifying companies

(1) This Chapter applies in relation to any company which—

(a) carries on a ring fence trade, or

(b) is engaged in any activities with a view to carrying on a ring
15fence trade.

(2) In this Chapter such a company is referred to as a “qualifying
company”.

329C Onshore and offshore oil-related activities

(1) This section applies for the purposes of this Chapter.

(2) 20“Onshore oil-related activities” has the same meaning as in Chapter
8 (supplementary charge: onshore allowance) (see section 356BA).

(3) “Offshore oil-related activities” means oil-related activities that are
not onshore oil-related activities.

329D Accounting periods and straddling periods

(1) 25In this Chapter, in the case of a qualifying company—

  • “the commencement period” means the accounting period in
    which the company sets up and commences its ring fence
    trade,

  • “post-commencement period” means an accounting period
    30ending on or after 5 December 2013—

    (a)

    which is the commencement period, or

    (b)

    which ends after the commencement period, and

  • “pre-commencement period” means an accounting period
    ending—

    (a)

    35on or after 5 December 2013, and

    (b)

    before the commencement period.

(2) For the purposes of this Chapter, a company not within the charge to
corporation tax which incurs any expenditure is to be treated as
having such accounting periods as it would have if—

(a) 40it carried on a trade consisting of the activities in respect of
which the expenditure is incurred, and

(b) it had started to carry on that trade when it started to carry on
the activities in the course of which the expenditure is
incurred.

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(3) In this Chapter, “straddling period” means an accounting period
beginning before and ending on or after 5 December 2013.

329E The relevant percentage

(1) For the purposes of this Chapter, the relevant percentage for an
5accounting period is 10%.

(2) The Treasury may by order vary the percentage for the time being
specified in subsection (1) for such accounting periods as may be
specified in the order.

329F Restrictions on accounting periods for which additional supplement
10may be claimed

(1) A company may claim additional supplement under this Chapter in
respect of no more than 4 accounting periods.

(2) The accounting periods in respect of which claims are made need not
be consecutive.

(3) 15The additional supplement under this Chapter—

(a) is additional to any supplement allowed under Chapter 5,
but

(b) may only be claimed for accounting periods which fall after 6
accounting periods for which supplement is allowed as a
20result of claims by the company under Chapter 5.

329G Qualifying pre-commencement onshore expenditure

(1) For the purposes of this Chapter, expenditure is “qualifying pre-
commencement onshore expenditure” if it meets Conditions A to D.

(2) Condition A is that the expenditure is incurred on or after 5
25December 2013.

(3) Condition B is that the expenditure is incurred in the course of oil
extraction activities which are onshore oil-related activities.

(4) Condition C is that the expenditure is incurred by a company with a
view to carrying on a ring fence trade, but before the company sets
30up and commences that ring fence trade.

(5) Condition D is that the expenditure—

(a) is subsequently allowable as a deduction in calculating the
profits of the ring fence trade for the commencement period
(whether or not any part of it is so allowable for any post-
35commencement period), or

(b) is relevant R&D expenditure incurred by an SME.

(6) For the purposes of this section, expenditure incurred by a company
is “relevant R&D expenditure incurred by an SME” if—

(a) the company makes an election under section 1045 of CTA
402009 (alternative treatment for pre-trading expenditure:
deemed trading loss) in respect of that expenditure, but

(b) the company does not make a claim for an R&D tax credit
under section 1054 of that Act in respect of that expenditure.

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(7) In the case of any qualifying pre-commencement onshore
expenditure which is relevant R&D expenditure incurred by an SME,
the amount of that expenditure is treated for the purposes of this
Chapter as being equal to 150% of its actual amount.

(8) 5In the case of any qualifying pre-commencement onshore
expenditure which is relevant R&D expenditure incurred by a large
company, the amount of that expenditure is treated for the purposes
of this Chapter as being equal to 125% of its actual amount.

(9) In subsection (8) “relevant R&D expenditure incurred by a large
10company” means qualifying Chapter 5 expenditure, as defined in
section 1076 of CTA 2009.

329H Unrelieved group ring fence profits

In this Chapter “unrelieved group ring fence profits” has the same
meaning as in Chapter 5 (see sections 313 and 314).

15Pre-commencement additional supplement

329I Additional supplement in respect of a pre-commencement accounting
period

(1) If—

(a) a qualifying company incurs qualifying pre-commencement
20onshore expenditure in respect of a ring fence trade, and

(b) the expenditure is incurred before the commencement
period,

the company may claim additional supplement under this section
(“pre-commencement additional supplement”) in respect of one or
25more pre-commencement periods.

This is subject to section 329F(3)(b).

This is subject to section 329F(3)(b).

(2) Any pre-commencement additional supplement allowed on a claim
in respect of a pre-commencement period is to be treated as
30expenditure—

(a) which is incurred by the company in the commencement
period, and

(b) which is allowable as a deduction in calculating the profits of
the ring fence trade for that period.

(3) 35The amount of the additional supplement for any pre-
commencement period in respect of which a claim under this section
is made is the relevant percentage for that period of the reference
amount for that period.

(4) Sections 329J to 329M have effect for the purpose of determining the
40reference amount for a pre-commencement period.

(5) If a pre-commencement period is a period of less than 12 months, the
amount of the additional supplement for the period (apart from this
subsection) is to be reduced proportionally.

(6) Any claim for pre-commencement additional supplement in respect
45of a pre-commencement period must be made as a claim for the
commencement period.