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

A

BILL

TO

Make provision for and in connection with the creation of a Northern Ireland
rate of corporation tax.

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—

1 Trading profits taxable at the Northern Ireland rate

After Part 8A of CTA 2010 insert—

Part 8B Trading profits taxable at the Northern Ireland rate

CHAPTER 1 5Introductory

357H Introduction

(1) This Part is about the Northern Ireland rate of corporation tax and the
application of that rate to Northern Ireland profits.

(2) Chapter 2 is about how the Northern Ireland rate is determined.

(3) 10Chapter 3

(a) applies the Northern Ireland rate to Northern Ireland profits;

(b) makes provision about the operation of certain reliefs for
trading losses that are given against profits.

(4) Chapters 4 and 5 define expressions used in this Part in connection with
15the determination of a company’s Northern Ireland profits; see—

  • Chapter 4 for definitions of “Northern Ireland company”,
    “qualifying trade”, “SME” and “Northern Ireland employer”;

  • Chapter 5 for provision about whether a company has a Northern
    Ireland regional establishment (a “NIRE”).

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(5) Chapters 6 and 7 contain rules for determining whether profits or losses
of a trade are “Northern Ireland profits” or “Northern Ireland losses”;
see—

  • Chapter 6 for rules applying in the case of a Northern Ireland
    5company that is an SME;

  • Chapter 7 for rules applying in the case of a Northern Ireland
    company that is not an SME.

(6) Chapter 8 is about the treatment of intangible fixed assets in relation to
Northern Ireland companies.

(7) 10Chapters 9 to 15 are about the way in which various credits and reliefs
work in relation to Northern Ireland companies; see—

  • Chapter 9 for provision about R&D expenditure credits and relief
    for expenditure relating to research and development;

  • Chapter 10 for provision about relief for expenditure relating to
    15the remediation of contaminated or derelict land;

  • Chapter 11 for provision about film tax relief;

  • Chapter 12 for provision about television production;

  • Chapter 13 for provision about video games development;

  • Chapter 14 for provision about theatrical productions;

  • 20Chapter 15 for provision about profits arising from exploitation of
    patents etc.

(8) Chapter 16 contains rules for determining whether profits or losses of a
trade are “Northern Ireland profits” or “Northern Ireland losses” in the
case of a company that is a partner in a Northern Ireland firm.

(9) 25Chapter 17

(a) defines “excluded trade” and “excluded activity” (profits of
which are not Northern Ireland profits), and

(b) contains power to make provision about the meaning of “back-
office activities” (profits imputed to which may be Northern
30Ireland profits).

CHAPTER 2 The Northern Ireland rate

357I The Northern Ireland rate

(1) The Northern Ireland rate for a financial year is—

(a) if a resolution of the Northern Ireland Assembly—

(i) 35sets a rate under section 357IA for the year, and

(ii) is passed before the beginning of the year,

the rate set by the resolution;

(b) if the Northern Ireland rate for the year is not determined under
paragraph (a), but the Northern Ireland rate for one or more
40earlier financial years was determined under that paragraph,
the rate for the most recent of those earlier years;

(c) otherwise, the main rate.

(2) For the purposes of subsection (1)(a)(ii), a resolution passed before the
beginning of a financial year is treated as not having been so passed if

Corporation Tax (Northern Ireland) BillPage 3

it is cancelled by a resolution under section 357IA that is itself passed
before the beginning of the year.

357IA Power of Northern Ireland Assembly to set Northern Ireland rate

(1) The Northern Ireland Assembly (“the Assembly”) may by resolution
5set the Northern Ireland rate for one or more financial years specified
in the resolution.

(2) The Assembly may by resolution cancel a resolution under subsection
(1).

(3) A resolution under this section may not be passed by the Assembly
10except in pursuance of a recommendation which—

(a) is made by the Minister of Finance and Personnel, and

(b) is signified to the Assembly by the Minister or on the Minister’s
behalf.

(4) A resolution under this section may not be passed by the Assembly
15without cross-community support.

(5) Section 63 of the Northern Ireland Act 1998 (financial acts of the
Assembly) does not apply to a resolution under this section.

(6) This section authorises the setting of a nil rate.

(7) In this section “cross-community support” has the meaning given by
20section 4(5) of the Northern Ireland Act 1998.

CHAPTER 3 Northern Ireland rate applied to Northern Ireland profits and losses

Introductory
357J Introductory

(1) Section 357JA contains provision about—

(a) 25the charge to corporation tax on Northern Ireland profits and
mainstream profits, and

(b) the rate at which Northern Ireland profits are charged.

(2) The subsequent provisions of this Chapter contain provision—

(a) about the availability of relief for Northern Ireland losses and
30mainstream losses, and

(b) restricting the amount of relief given for Northern Ireland losses
in certain circumstances.

Profits chargeable to corporation tax and rates
357JA Profits chargeable to corporation tax and rates

(1) 35The reference in section 35 of CTA 2009 (charge to tax on trade profits)
to the profits of a trade is, where a company carrying on a trade in an
accounting period has Northern Ireland profits of the trade or
mainstream profits of the trade, a reference to those Northern Ireland
profits or mainstream profits.

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(2) Northern Ireland profits are charged to corporation tax at the Northern
Ireland rate.

Section 3(1) of this Act (corporation tax charged at main rate) has effect
subject to this subsection.

5Loss relief in relation to Northern Ireland profits and losses: section 37
357JB Availability of relief

(1) The reference in section 37(1) (relief for trade losses against total profits)
to a loss in the trade is, where a company carrying on a trade in an
accounting period has Northern Ireland losses of the trade or
10mainstream losses of the trade, a reference to those Northern Ireland
losses or mainstream losses.

(2) If a company has a Northern Ireland loss and a mainstream loss in the
same accounting period—

(a) relief under section 37 is available in relation to each of those
15losses separately (so that the company may make a claim in
relation to only one, or claims in relation to both), and

(b) where the company makes claims in relation to both, the claims
may be made in either order.

(3) Where—

(a) 20a company makes a claim under section 37 for relief for a
Northern Ireland loss, and

(b) the profits against which the relief is claimed include some
profits of the trade that are Northern Ireland profits and some
that are not,

25the relief is given first, so far as possible, against the Northern Ireland
profits.

(4) Where—

(a) a company makes a claim under section 37 for relief for a loss
that is not a Northern Ireland loss, and

(b) 30the profits against which the relief is claimed include some
profits of the trade that are Northern Ireland profits and some
that are not,

the relief is given first, so far as possible, against the profits that are not
Northern Ireland profits.

357JC 35 Restriction on deductions

(1) Subsection (2) applies where—

(a) a company makes a claim under section 37 for relief for a
Northern Ireland loss (“the loss”),

(b) the profits against which the relief is claimed include profits
40that are not Northern Ireland profits, and

(c) at any time during the accounting period for which the relief is
claimed (“the profit period”), the Northern Ireland rate is lower
than the main rate.

(2) The reference in section 37(4) (amount of deduction) to “the amount of
45the loss” is to the restricted deduction for the loss, as determined under

Corporation Tax (Northern Ireland) BillPage 5

section 357JJ (restricted deduction where Northern Ireland rate lower
than main rate).

Loss relief in relation to Northern Ireland profits and losses: section 45
357JD Availability of relief

(1) 5The reference in section 45(1) (carry forward of trade loss against
subsequent profits) to a loss in the trade is, where a company carrying
on a trade in an accounting period has Northern Ireland losses of the
trade or mainstream losses of the trade, a reference to those Northern
Ireland losses or mainstream losses.

(2) 10Where—

(a) relief is given under section 45 for a Northern Ireland loss, and

(b) the profits against which the relief is given include some profits
of the trade that are Northern Ireland profits and some that are
not,

15the relief is given first, so far as possible, against the Northern Ireland
profits.

(3) Where—

(a) relief is given under section 45 for a loss that is not a Northern
Ireland loss, and

(b) 20the profits against which the relief is given include some profits
of the trade that are Northern Ireland profits and some that are
not,

the relief is given first, so far as possible, against the profits that are not
Northern Ireland profits.

357JE 25 Restriction on deductions

(1) Subsection (2) applies where—

(a) relief is given under section 45 for a Northern Ireland loss (“the
loss”),

(b) the profits against which the relief is given include profits that
30are not Northern Ireland profits, and

(c) at any time during the accounting period for which the relief is
given (“the profit period”), the Northern Ireland rate is lower
than the main rate.

(2) The reference in section 45(4)(b) (amount by which profits are reduced)
35to “the unrelieved loss” is to the restricted deduction for the loss, as
determined under section 357JJ (restricted deduction where Northern
Ireland rate lower than main rate).

Loss relief in relation to Northern Ireland profits and losses: Part 5
357JF Availability of relief

(1) 40The reference in section 99(1)(a) (group relief: surrendering of losses
and other amounts) to a trading loss is, where a company carrying on a
trade in an accounting period has Northern Ireland losses of the trade
or mainstream losses of the trade, a reference to those Northern Ireland
losses or mainstream losses.

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(2) Section 100 (meaning of “trading loss”) has effect subject to subsection
(1).

(3) Where—

(a) a company makes a claim for group relief under Part 5 in
5relation to a surrenderable amount that is a Northern Ireland
loss, and

(b) the profits against which the relief is claimed include some
profits that are Northern Ireland profits and some that are not,

the relief in relation to that surrenderable amount is given first, so far
10as possible, against the Northern Ireland profits.

(4) Where—

(a) a company makes a claim for group relief under Part 5 in
relation to a surrenderable amount that is not a Northern
Ireland loss, and

(b) 15the profits against which the relief is claimed include some
profits that are Northern Ireland profits and some that are not,

the relief in relation to that surrenderable amount is given first, so far
as possible, against the profits that are not Northern Ireland profits.

357JG Restriction on deductions

(1) 20Subsection (2) applies where—

(a) a company makes a claim for group relief under Part 5 in
relation to a surrenderable amount that is a Northern Ireland
loss (“the loss”),

(b) the profits against which the relief is claimed include profits
25that are not Northern Ireland profits, and

(c) at any time during the accounting period for which the relief is
claimed (“the profit period”), the Northern Ireland rate is lower
than the main rate.

(2) In section 137(2) (amount of deduction)—

(a) 30the reference in paragraph (a) to “an amount equal to” the
surrendering company’s surrenderable amounts is, so far as
those surrenderable amounts comprise the loss, to the restricted
deduction for the loss, as determined under section 357JJ
(restricted deduction where Northern Ireland rate lower than
35main rate);

(b) the reference in paragraph (b) to “an amount equal to” part of
the surrendering company’s surrenderable amounts is, so far as
that part comprises the loss, to the restricted deduction for the
loss, as determined under section 357JJ.

357JH 40 Modifications of Chapter 4 of Part 5

(1) Chapter 4 of Part 5 (claims for group relief) has effect, in relation to a
claim under that Chapter in relation to surrenderable amounts that
include a Northern Ireland loss, subject to the following provisions of
this section.

(2) 45In section 138 (limitation on amount of group relief applying to all
claims)—

(a) paragraphs (a) and (b) are treated as imposing separate limits;

Corporation Tax (Northern Ireland) BillPage 7

(b) the limit in paragraph (a) on the amount of group relief to be
given on a claim has effect as a limit on the amount of losses and
other surrenderable amounts in relation to which relief is to be
given on the claim;

(c) 5the limit in paragraph (b) on the amount of group relief to be
given on a claim has effect as a limit on the amount of the
deduction to be made as a result of the claim.

(3) In section 139(6)(b) (unused part of the surrenderable amounts), and in
section 141(2) so far as it applies in relation to section 139, references to
10the amount of group relief given on a claim are to the amount of losses
and other surrenderable amounts in relation to which relief is given on
the claim.

(4) In section 140(6)(b) (unrelieved part of claimant company’s available
total profits), and in section 141(2) so far as it applies in relation to
15section 140, references to the amount of group relief given on a claim
are to the amount of the deduction made as a result of the claim.

(5) In section 143 (limitation on group relief where surrendering company
owned by consortium), the limit in subsection (2) on the amount of
group relief to be given on a claim has effect as a limit on the amount of
20losses and other surrenderable amounts in relation to which relief is to
be given on the claim.

(6) In section 144 (limitation on group relief where claimant company
owned by consortium), the limit in subsection (2) on the amount of
group relief to be given on a claim has effect as a limit on the amount of
25the deduction to be made as a result of the claim.

(7) In section 146 (conditions 2 and 3: companies in link company’s group),
the limit in subsections (2) and (3) on the amount of group relief to be
given on a claim has effect as a limit on the amount of the deduction to
be made as a result of the claim.

(8) 30In section 148 (conditions 1 and 2: surrendering company in group of
companies), the reference in subsection (5) to the maximum amount of
group relief that could be given has effect as a reference to the
maximum amount of losses and other surrenderable amounts in
relation to which relief could be given.

(9) 35In section 149 (conditions 1 and 3: claimant company in group of
companies), the reference in subsection (5) to the maximum amount of
group relief that could be claimed by the claimant company has effect
as a reference to the maximum amount of the deduction that could be
made as a result of claims by the claimant company.

40Transfers of trade without a change of ownership: Chapter 1 of Part 22
357JI Transfers of trade without a change of ownership

(1) This section applies where—

(a) Chapter 1 of Part 22 (transfers of trade without a change of
ownership) applies to the transfer of a trade, and

(b) 45a loss made by the predecessor in the transferred trade is a
Northern Ireland loss or a mainstream loss.

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(2) Section 944 (modified application of Chapter 2 of Part 4) has effect as if
the references in subsections (2) and (3) of that section to a loss made by
the predecessor in the transferred trade were to the Northern Ireland
loss or mainstream loss.

5Restricted deductions
357JJ Restricted deduction: Northern Ireland rate lower than main rate

(1) The amount of the restricted deduction for a Northern Ireland loss for
the purposes of section 357JC(2), 357JE(2) or 357JG(2) is the amount
determined under subsection (2) or (3).

(2) 10If the profit period falls within only one financial year, the amount of
the restricted deduction for the loss is—


where—

  • NIR is the Northern Ireland rate in the financial year;

  • 15MR is the main rate in the financial year;

  • L1 is the amount of the loss that is unmatched;

  • L2 is the amount of the loss (if any) that is matched.

(3) If the profit period falls within more than one financial year, the
amount of the restricted deduction for the loss is—


20

X + L2

where—

  • X is the amount of the loss that is unmatched (“the unmatched
    loss”), adjusted in accordance with subsection (4);

  • L2 is the amount of the loss (if any) that is matched.

(4) 25To adjust the unmatched loss for the purposes of subsection (3), take
the following steps—

Step 1

Apportion the unmatched loss between the financial years on a time
basis according to the respective lengths of the parts of the profit period
30falling within those years.

Step 2

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


35

where—

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

  • MR is the main rate for the financial year.

Step 3

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Add together each amount reduced under step 2 and each amount
apportioned under step 1 but not reduced under step 2.

(5) For the purposes of this section—

(a) 5an amount of a loss is “matched” if relief in relation to the loss
is given against Northern Ireland profits, and

(b) an amount of a loss is “unmatched” if relief in relation to the loss
is given against profits that are not Northern Ireland profits.

(6) In this section “the loss” and “the profit period” have the meanings
10given by section 357JC(1), 357JE(1) or 357JG(1) (as the case may be).

CHAPTER 4 Basic definitions

Application of Chapter
357K Application of Chapter

The definitions in this Chapter apply for the purposes of this Part.

15Meaning of “Northern Ireland company”
357KA “Northern Ireland company”

(1) A company is a “Northern Ireland company” in an accounting period
if—

(a) the company carries on a qualifying trade in the period, and

(b) 20the SME condition or the large company condition is met.

(2) The “SME condition” is that the company—

(a) is an SME in relation to the period, and

(b) is a Northern Ireland employer in relation to the period.

(3) The “large company condition” is that the company—

(a) 25is not an SME in relation to the period, and

(b) has a NIRE in the period.

(4) For the meaning of—

  • “qualifying trade”, see section 357KB;

  • SME”, see section 357KC;

  • 30“Northern Ireland employer”, see section 357KD;

  • “NIRE”, see Chapter 5.

Meaning of “qualifying trade”
357KB “Qualifying trade”

(1) “Qualifying trade” means a trade carried on by a company (otherwise
35than in partnership) where—

(a) the company is within the charge to corporation tax in relation
to the trade, and

(b) the trade is not an excluded trade.