Corporation Tax (Northern Ireland) Bill (HC Bill 149)

Corporation Tax (Northern Ireland) BillPage 80

Chapter 7 firm, be an NI rate activity treated as a separate
trade, and

(c) the partnership subsequently becomes a Northern Ireland
Chapter 7 firm.

(4) 5The expenditure is to be treated as incurred on the first day of the
first chargeable period in which the partnership is a Northern
Ireland Chapter 7 firm.

(5) In this section “Northern Ireland regional establishment” has the
same meaning as in Part 8B of CTA 2010 (see Chapter 5 of that Part
10as read, in relation to a partnership, with section 357WA(4) of that
Act).

15 (1) Section 450 (giving effect to allowances and charges) is amended as follows.

(2) The existing provision becomes subsection (1) of the section.

(3) After that subsection insert—

(2) 15This section is subject to section 6E (giving effect to allowances and
charges: NI rate activity cases).

Dredging allowances

16 In section 484 (dredging allowances), after subsection (2) insert—

(2A) If a company or partnership is as a result of section 6D (NI rate
20activity treated as separate trade) treated for the purpose of this Act
as carrying on two separate trades, each of them is for the purposes
of this Part to be treated as a qualifying trade if the separate trades
would together be so treated.

17 (1) Section 489 (giving effect to allowances) is amended as follows.

(2) 25The existing provision becomes subsection (1) of the section.

(3) After that subsection insert—

(2) This section is subject to section 6E (giving effect to allowances and
charges: NI rate activity cases).

Part 5 30Consequential amendments

18 In Schedule 1 (index of defined expressions) insert at the appropriate
places—

the corporate partner calculation (in
relation to a trade carried on by a
Northern Ireland firm)
section 6D(3)”

35
NI rate activity section 6C”
“NIRE company section 6A”
“Northern Ireland Chapter 6 firm section 6B(3)”
“Northern Ireland Chapter 7 firm section 6B(4)”

Corporation Tax (Northern Ireland) BillPage 81

“Northern Ireland firm section 6B(2)”
“Northern Ireland SME company section 6A

Part 6 Transitional provisions

5Interpretation

19 (1) In this Part of this Schedule “the transition period”, in relation to a company
or partnership, means the accounting period of the company or partnership
that begins, or is treated by section 5(6) as beginning, on the commencement
day.

(2) 10In sub-paragraph (1) “the commencement day” has the meaning given by
section 5(4).

Plant and machinery allowances: allocation of unrelieved expenditure to pools

20 (1) This paragraph applies to a company or partnership if—

(a) in the case of a company, the company is a NIRE company or
15Northern Ireland SME company in the transition period, or

(b) in the case of a partnership, the partnership is a Northern Ireland
Chapter 6 firm or a Northern Ireland Chapter 7 firm in the transition
period.

(2) If at the beginning of the transition period—

(a) 20an NI rate activity carried on by the company begins to be treated by
section 15(2ZA) of CAA 2001 as a separate qualifying activity for the
purposes of Part 2 of that Act (plant and machinery allowances), or

(b) an NI rate activity carried on by the partnership begins to be treated
by section 15(2ZB) of CAA 2001 as a separate qualifying activity for
25the purposes of Part 2 of that Act so far as relating to the corporate
partner calculation,

the fact that the NI rate activity begins to be so treated does not give rise to
a disposal event within section 61(1)(e) or (f) of that Act.

(3) The amount of any unrelieved qualifying expenditure in any main pool
30falling to be carried forward under section 59 of CAA 2001 to the transition
period is to be apportioned on a just and reasonable basis to become—

(a) a main pool that is to be treated as relating to plant and machinery
used for the purposes of the NI rate activity, and

(b) a main pool that is to be treated as relating to plant and machinery
35used for the purposes of the main rate activity.

(4) The amount of any unrelieved qualifying expenditure in any special rate
pool falling to be carried forward under section 59 of CAA 2001 to the
transition period is to be apportioned on a just and reasonable basis to
become—

(a) 40a special rate pool that is to be treated as relating to plant and
machinery used for the purposes of the NI rate activity, and

(b) a special rate pool that is to be treated as relating to plant and
machinery used for the purposes of the main rate activity.

(5) Sub-paragraph (6) applies where—

Corporation Tax (Northern Ireland) BillPage 82

(a) unrelieved qualifying expenditure in a single asset pool falls to be
carried forward under section 59 of CAA 2001 to the transition
period, and

(b) immediately before the transition period the plant or machinery is
5used—

(i) partly for the purposes of activities that become the NI rate
activity, and

(ii) partly for the purposes of activities that become the main rate
activity.

(6) 10The unrelieved qualifying expenditure is to be treated for the purposes of
Chapter 16ZA of Part 2 of CAA 2001 as if the allocation to the single asset
pool were under section 212ZB of that Act.

(7) “Main rate activity” means the qualifying activity to which the qualifying
expenditure relates, except so far as it is an NI rate activity.

(8) 15Other expressions used in this paragraph and in Part 2 of CAA 2001 as
amended by this Schedule have the same meaning as in that Part.

Know-how allowances: allocation of unrelieved expenditure to pools

21 (1) This paragraph applies if—

(a) in the case of a company, the company is a NIRE company or a
20Northern Ireland SME company in the transition period, or

(b) in the case of a partnership, the company is a Northern Ireland firm
in the transition period.

(2) Subsection (3) applies if at the beginning of the transition period—

(a) an NI rate activity carried on by the company begins to be treated by
25section 6D of CAA 2001 as a separate qualifying trade for the
purposes of Part 7 of that Act (know-how allowances), or

(b) an NI rate activity carried on by the partnership begins to be treated
by section 6D of CAA 2001 as a separate qualifying trade for the
purposes of Part 7 of that Act so far as relating to the corporate
30partner calculation.

(3) The amount of any unrelieved qualifying expenditure in any pool falling to
be carried forward under section 461 of CAA 2001 from the previous
chargeable period is to be apportioned on a just and reasonable basis to
become—

(a) 35a pool that is to be treated as relating to the NI rate activity, and

(b) a pool that is to be treated as relating to the main rate activity.

(4) “Main rate activity” means the trade to which the qualifying expenditure
relates, except so far as it is an NI rate activity.

(5) Other expressions used in this paragraph and in Part 7 of CAA 2001 as
40amended by this Schedule have the same meaning as in that Part.

Corporation Tax (Northern Ireland) BillPage 83

Section 3

SCHEDULE 2 Other amendments

Part 1 Further amendments connected with Northern Ireland rate

5Realisation of intangible fixed assets

1 After section 738 of CTA 2009 insert—

738A Realisation of assets previously subject to Northern Ireland rate

(1) This section applies if—

(a) a company is required by section 735, 736 or 738 to bring into
10account for tax purposes a credit or debit on the realisation of
an intangible fixed asset in an accounting period (“the
relevant period”),

(b) the company is not a Northern Ireland company as defined
by section 357KA of CTA 2010 in the relevant period,

(c) 15the asset is not a pre-commencement asset for the purposes of
Chapter 8 of Part 8B of CTA 2010 (trading profits taxable at
the Northern Ireland rate: intangible fixed assets),

(d) the credit or debit is treated for the purposes of that Chapter
as including a Northern Ireland element, and

(e) 20at any time during the relevant period, the Northern Ireland
rate is lower than the main rate.

(2) The amount of the credit or debit to be brought into account for tax
purposes under section 735, 736 or 738 is reduced by an amount
determined under this section (“the appropriate reduction”).

(3) 25If the relevant period falls within only one financial year, the
appropriate reduction is—


where—

  • E is the Northern Ireland element of the credit or debit (see
    30subsection (5));

  • MR is the main rate for the financial year;

  • NIR is the Northern Ireland rate for the financial year.

(4) If the relevant period falls within more than one financial year, take
the following steps to find the appropriate reduction—

35Step 1

Apportion the Northern Ireland element of the credit or debit (see
subsection (5)) between the financial years on a time basis according
to the respective lengths of the parts of the relevant period falling
within those years.

40Step 2

Corporation Tax (Northern Ireland) BillPage 84

Where an amount is apportioned under step 1 to a financial year in
which the Northern Ireland rate is lower than the main rate, multiply
that amount by the following fraction—


5

where—

  • MR is the main rate for the financial year;

  • NIR is the Northern Ireland rate for the financial year.

Step 3

10To find the appropriate reduction, add together each amount
determined under step 2.

(5) In subsections (3) and (4), the “Northern Ireland element” of the
credit or debit is an amount determined in accordance with sections
357OE to 357OG of CTA 2010.

15Controlled foreign companies

2 (1) Section 371BC of TIOPA 2010 (charging the CFC charge) is amended as
follows.

(2) In subsection (3), in the definition of “the appropriate rate”, after “subject to”
insert “subsection (4) and”.

(3) 20After subsection (3) insert—

(4) In determining “the appropriate rate”, it must be assumed that all of
CC’s profits of the relevant corporation tax accounting period on
which corporation tax is chargeable are chargeable at the main rate
rather than the Northern Ireland rate.

3 (1) 25Section 371UD of TIOPA 2010 (relief against sum charged) is amended as
follows.

(2) After subsection (4) insert—

(4A) But if, in a case within subsection (7)(b)(i) or (vi), the relevant
allowance is a loss that is for the purposes of Part 8B of CTA 2010
30(trading profits taxable at the Northern Ireland rate) a Northern
Ireland loss, “the relevant sum” is the sum equal to the appropriate
Northern Ireland rate on so much of that relevant allowance as is
specified in the claim.

(3) In subsection (7), before the “and” at the end of paragraph (a) insert—

(aa) 35the appropriate Northern Ireland rate” means—

(i) the Northern Ireland rate of corporation tax for the
relevant corporation tax accounting period, or

(ii) if different Northern Ireland rates apply in different
parts of the relevant corporation tax accounting
40period, the average rate over the whole of the relevant
corporation tax accounting period,.

Corporation Tax (Northern Ireland) BillPage 85

Part 2 Consequential amendments

4 CTA 2010 is amended as follows.

5 In section 1(3) (overview), before paragraph (b) insert—

(ac) 5trading profits taxable at Northern Ireland rate (see Part
8B),.

6 In Schedule 4 (index of defined expressions), insert at the appropriate
places—

the accounting period (in Chapter 6 of
Part 8B)
section 357M(2)
10
“the accounting period (in Chapter 7 of
Part 8B)
section 357N(2)
“back-office activities (in Part 8B) section 357XI
“the commencement day (in Chapter 8 of
Part 8B)
section 357OP
15
“the company (in Chapter 6 of Part 8B) section 357M(2)
“the company (in Chapter 7 of Part 8B) section 357N(2)
“excluded activity (in Part 8B) Chapter 17 of Part 8B”
“excluded trade (in Part 8B) Chapter 17 of Part 8B”
“exclusive licence (in Chapter 15 of Part
8B)
20section 357VE
“firm (in Chapter 16 of Part 8B) section 357W(3)
“intangible fixed asset (in Chapter 8 of
Part 8B)
section 357O(2)
“investment manager (in Chapter 5 of
Part 8B)
25section 1150(1) (applied by
section 357LH)”
“investment transaction (in Chapter 5 of
Part 8B)
section 1150(1) (applied by
section 357LH)”
“large company condition (in Part 8B) section 357KA
“mainstream losses (in Part 8B) 30sections 357MA and 357NA
“mainstream profits (in Part 8B) sections 357MA and 357NA
“mainstream qualifying land
remediation loss (in Chapter 10 of Part
8B)
section 357QB(3)

“NIRE (in Part 8B) 35Chapter 5 of Part 8B”

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“Northern Ireland company (in Part 8B) section 357KA
“Northern Ireland element (in Chapter 8
of Part 8B)
section 357OP
“Northern Ireland employer (in Part 8B) section 357KD
“Northern Ireland expenditure (in
Chapters 9 to 14 of Part 8B)
5sections 357P(2), 357Q(2), 357R(2), 357S(2), 357T(2) and
357U(2)
“Northern Ireland firm (in Part 8B) section 357WA
“Northern Ireland intangibles credits (in
Chapter 8 of Part 8B)
section 357OP
“Northern Ireland intangibles debits (in
Chapter 8 of Part 8B)
10section 357OP
“Northern Ireland losses (in Part 8B) sections 357MA and 357NA
“Northern Ireland profits (in Part 8B) sections 357MA and 357NA
“Northern Ireland qualifying Chapter 2
expenditure (in Chapter 9 of Part 8B)
section 357P(2)
15
“Northern Ireland qualifying Chapter 7
expenditure (in Chapter 9 of Part 8B)
section 357P(2)
“Northern Ireland qualifying land
remediation expenditure (in Chapter 10
of Part 8B)
section 357Q(2)

20
“Northern Ireland qualifying land
remediation loss (in Chapter 10 of Part
8B)
section 357QB(3)

“Northern Ireland rate section 357I
“pre-commencement asset (in Chapter 8
of Part 8B)
25section 357OP
“qualifying Chapter 2 expenditure (in
Chapter 9 of Part 8B)
section 357P(2)
“qualifying Chapter 7 expenditure (in
Chapter 9 of Part 8B)
section 357P(2)
30
“qualifying expenditure (in Chapter 11
of Part 8B)
section 357R(2)
“qualifying expenditure (in Chapter 12
of Part 8B)
section 357S(2)
“qualifying expenditure (in Chapter 13
of Part 8B)
35section 357T(2)
“qualifying expenditure (in Chapter 14
of Part 8B)
section 357U(2)

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“qualifying IP right (in Chapter 15 of
Part 8B)
section 357VE
“qualifying land remediation
expenditure (in Chapter 10 of Part 8B)
section 357Q(2)
“qualifying partnership trade (in Part 8B) 5section 357WB
“qualifying trade (in Part 8B) section 357KB
“realisation credit (in Chapter 8 of Part
8B)
section 357OP
“realisation debit (in Chapter 8 of Part
8B)
section 357OP
10
“relevant IP profits (in Chapter 15 of Part
8B)
section 357VE
“relevant period (in Chapter 15 of Part
8B)
section 357VE
“roll-over relief (in Chapter 8 of Part 8B) 15section 357OP
“the separate film trade (in Chapter 11 of
Part 8B)
section 357R(2)
“the separate programme trade (in
Chapter 12 of Part 8B)
section 357S(2)
“the separate theatrical trade (in Chapter
14 of Part 8B)
20section 357U(2)
“the separate video game trade (in
Chapter 13 of Part 8B)
section 357T(2)
SME (in Part 8B) section 357KC
SME condition (in Part 8B) 25section 357KA
“trade (in Part 8B) section 357NK
“the trade (in Chapter 6 of Part 8B) section 357M(2)
“the trade (in Chapter 7 of Part 8B) section 357N(2)