Corporation Tax (Northern Ireland) Bill (HC Bill 170)

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—

Corporation Tax (Northern Ireland) BillPage 2

• 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”).

(5) 5Chapters 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
  company that is an SME;

• 10Chapter 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) Chapters 9 to 15 are about the way in which various credits and reliefs
15work 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
  the remediation of contaminated or derelict land;

• 20Chapter 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;

• Chapter 15 for provision about profits arising from exploitation of
  25patents 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) Chapter 17—

(a) 30defines “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
Ireland profits).

CHAPTER 2 35The 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) sets a rate under section 357IA for the year, and

(ii) 40is 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

earlier 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
5beginning of a financial year is treated as not having been so passed if
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
10set 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
15except 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
20without 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
25section 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) 30the 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
35mainstream 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) The 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
5accounting period has Northern Ireland profits of the trade or
mainstream profits of the trade, a reference to those Northern Ireland
profits or mainstream profits.

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

10Section 3(1) of this Act (corporation tax charged at main rate) has effect
subject to this subsection.

Loss 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)
15to 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) If a company has a Northern Ireland loss and a mainstream loss in the
20same accounting period—

(a) relief under section 37 is available in relation to each of those
losses 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
25may be made in either order.

(3) Where—

(a) a 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
30profits of the trade that are Northern Ireland profits and some
that are not,

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

(4) Where—

(a) 35a company makes a claim under section 37 for relief for a loss
that is not 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,

40the relief is given first, so far as possible, against the profits that are not
Northern Ireland profits.

357JC Restriction on deductions

(1) Subsection (2) applies where—

(a) a company makes a claim under section 37 for relief for a
45Northern Ireland loss (“the loss”),

(b) the profits against which the relief is claimed include profits
that 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
5than the main rate.

(2) The reference in section 37(4) (amount of deduction) to “the amount of
the loss” is to the restricted deduction for the loss, as determined under
section 357JJ (restricted deduction where Northern Ireland rate lower
than main rate).

10Loss relief in relation to Northern Ireland profits and losses: section 45

357JD Availability of relief

(1) The 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
15trade or mainstream losses of the trade, a reference to those Northern
Ireland losses or mainstream losses.

(2) Where—

(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
20of the trade that are Northern Ireland profits and some that are
not,

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

(3) Where—

(a) 25relief is given under section 45 for a loss that is not 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,

30the relief is given first, so far as possible, against the profits that are not
Northern Ireland profits.

357JE Restriction on deductions

(1) Subsection (2) applies where—

(a) relief is given under section 45 for a Northern Ireland loss (“the
35loss”),

(b) the profits against which the relief is given include profits that
are 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
40than the main rate.

(2) The reference in section 45(4)(b) (amount by which profits are reduced)
to “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) The 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
5trade 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) Section 100 (meaning of “trading loss”) has effect subject to subsection
(1).

(3) 10Where—

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

(b) the profits against which the relief is claimed include some
15profits 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 Northern Ireland profits.

(4) Where—

(a) a company makes a claim for group relief under Part 5 in
20relation to a surrenderable amount that is not 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
25as possible, against the profits that are not Northern Ireland profits.

357JG Restriction on deductions

(1) Subsection (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
30loss (“the loss”),

(b) the profits against which the relief is claimed include profits
that 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
35than the main rate.

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

(a) the 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
40deduction for the loss, as determined under section 357JJ
(restricted deduction where Northern Ireland rate lower than
main rate);

(b) the reference in paragraph (b) to “an amount equal to” part of
the surrendering company’s surrenderable amounts is, so far as
45that part comprises the loss, to the restricted deduction for the
loss, as determined under section 357JJ.

357JH 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
5this section.

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

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

(b) the limit in paragraph (a) on the amount of group relief to be
10given 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) the 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
15deduction 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
the 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
20the 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
section 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) 25In 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
losses and other surrenderable amounts in relation to which relief is to
be given on the claim.

(6) 30In 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
the deduction to be made as a result of the claim.

(7) In section 146 (conditions 2 and 3: companies in link company’s group),
35the 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) In section 148 (conditions 1 and 2: surrendering company in group of
companies), the reference in subsection (5) to the maximum amount of
40group 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) In section 149 (conditions 1 and 3: claimant company in group of
companies), the reference in subsection (5) to the maximum amount of
45group 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.

Transfers 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
5ownership) applies to the transfer of a trade, and

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

(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
10the predecessor in the transferred trade were to the Northern Ireland
loss or mainstream loss.

Restricted deductions

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

(1) The amount of the restricted deduction for a Northern Ireland loss for
15the purposes of section 357JC(2), 357JE(2) or 357JG(2) is the amount
determined under subsection (2) or (3).

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

(3) 25If the profit period falls within more than one financial year, the
amount of the restricted deduction for the loss is—

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

Step 1

35Apportion the unmatched loss between the financial years on a time
basis according to the respective lengths of the parts of the profit period
falling 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—

5

where—

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

• MR is the main rate for the financial year.

Step 3

10Add 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) an amount of a loss is “matched” if relief in relation to the loss
is given against Northern Ireland profits, and

(b) 15an 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
given by section 357JC(1), 357JE(1) or 357JG(1) (as the case may be).

CHAPTER 4 Basic definitions

20Application of Chapter

357K Application of Chapter

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

Meaning of “Northern Ireland company”

357KA “Northern Ireland company”

(1) 25A company is a “Northern Ireland company” in an accounting period
if—

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

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

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

(a) 30is 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) is not an SME in relation to the period, and

(b) has a NIRE in the period.

(4) 35For the meaning of—

• “qualifying trade”, see section 357KB;

• “SME”, see section 357KC;

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

Corporation Tax (Northern Ireland) BillPage 10

• “NIRE”, see Chapter 5.

Meaning of “qualifying trade”

357KB “Qualifying trade”

(1) “Qualifying trade” means a trade carried on by a company (otherwise
5than 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.

(2) If an election by a company for the purposes of this subsection has
10effect, “qualifying trade” also includes a trade carried on by the
company (otherwise than in partnership) where—

(a) the trade is an excluded trade within—

(i) section 357XB (lending and investment),

(ii) section 357XC (investment management), or

(iii) 15section 357XE (re-insurance trade), and

(b) the trade includes any back-office activities.

(3) An election for the purposes of subsection (2)—

(a) must be made by notice to an officer of Revenue and Customs,

(b) must specify the first accounting period (“the specified
20accounting period”) in relation to which it is to have effect,

(c) must be made before the end of the period of 12 months
beginning with the end of the specified accounting period, and

(d) if made in accordance with paragraphs (a) to (c)—

(i) has effect in relation to the specified accounting period
25and subsequent accounting periods, and

(ii) is irrevocable.

(4) For the meaning of “excluded trade”, and for power to make provision
about the meaning of “back-office activities”, see Chapter 17.

Meaning of “SME”

357KC 30 “SME”

(1) A company is an “SME” in relation to an accounting period if the
company is a micro, small or medium-sized enterprise as defined in the
Annex—

(a) in that accounting period, or

(b) 35in each accounting period any part of which falls within the
period of 12 months preceding that accounting period.

(2) In this section “the Annex” means the Annex to Commission
Recommendation No 2003/361/EC of 6 May 2003.

(3) For the purposes of this Part the Annex has effect with the following
40modifications.

(4) Where any enterprise is in liquidation or administration, the rights of
the liquidator or administrator (in that capacity) are to be left out of

account when applying Article 3(3)(b) in determining for the purposes
of this Part whether—

(a) that enterprise, or

(b) any other enterprise (including that of the liquidator or
5administrator),

is an SME.

(5) Article 3 has effect as if paragraph 5 (declaration in good faith where
control cannot be determined etc) were omitted.

(6) In Article 4, the first sentence of paragraph 1 has effect as if the data to
10apply to—

(a) the headcount of staff, and

(b) the financial amounts,

were the data relating to the accounting period or periods mentioned in
subsection (1) above (instead of the period referred to in that sentence)
15and calculated on an annual basis.

(7) Article 4 has effect as if the following provisions were omitted—

(a) in paragraph 1, the second sentence (data to be taken into
account from date of closure of accounts);

(b) paragraph 2 (no change of status unless enterprise’s change of
20size sustained over two consecutive periods);

(c) paragraph 3 (genuine estimate in case of newly established
enterprise).

Meaning of “Northern Ireland employer”

357KD “Northern Ireland employer”

25A company is a “Northern Ireland employer” in relation to an
accounting period if the Northern Ireland workforce conditions are
met—

(a) in relation to that accounting period, or

(b) in relation to the period of 12 months preceding that accounting
30period.

357KE Northern Ireland workforce conditions

(1) The Northern Ireland workforce conditions, in relation to a period,
are—

(a) that 75% or more of the working time that is spent in the United
35Kingdom during the period by members of the company’s
workforce is spent in Northern Ireland, and

(b) that 75% or more of the company’s workforce expenses that are
attributable to working time spent in the United Kingdom
during the period by members of the company’s workforce are
40attributable to time spent in Northern Ireland.

(2) References in this section to members of the company’s workforce are
to—

(a) directors of the company,

(b) employees of the company, and

(c) 45externally provided workers in relation to the company.

(3) In subsection (2) “externally provided worker”, in relation to a
company, has the same meaning as in Part 13 of CTA 2009 (see section
1128 of that Act).

(4) References in this section to the working time spent by members of the
5company’s workforce in a place are to the total time spent by those
persons in that place while providing services to the company.

(5) The reference in subsection (1)(b) to “the company’s workforce
expenses” is, where the period is an accounting period of the company,
to the total of the deductions made by the company in the period in
10respect of members of the workforce in calculating the profits of any
trade carried on by the company.

(6) The reference in subsection (1)(b) to “the company’s workforce
expenses” is, where the period is not an accounting period of the
company, to the total of—

(a) 15the deductions made by the company in any accounting period
falling wholly within the period, and

(b) the appropriate proportion of the deductions made by the
company in any accounting period falling partly within the
period,

20in respect of members of the workforce in calculating the profits of any
trade carried on by the company.

(7) For the purposes of subsection (6)(b), “the appropriate proportion” is to
be determined by reference to the number of days in the periods
concerned.

(8) 25The Commissioners for Her Majesty’s Revenue and Customs may by
regulations specify descriptions of deduction that are, or are not, to be
regarded for the purposes of this section as made in respect of members
of a company’s workforce.

(9) Regulations under this section—

(a) 30may make different provision for different purposes;

(b) may make incidental, supplemental, consequential and
transitional provision and savings.

CHAPTER 5 Northern Ireland regional establishments

General

357L 35 Northern Ireland regional establishments of companies

(1) A company has a Northern Ireland regional establishment (referred to
in this Part as a “NIRE”) if (and only if)—

(a) the company has a fixed place of business in Northern Ireland
through which the business of the company is wholly or partly
40carried on, or

(b) an agent acting on behalf of the company has and habitually
exercises in Northern Ireland authority to do business on behalf
of the company.

(2) For this purpose a “fixed place of business” includes (without prejudice
to the generality of that expression)—

(a) a place of management,

(b) a branch,

(c) 5an office,

(d) a factory,

(e) a workshop,

(f) an installation or structure for the exploration of natural
resources,

(g) 10a mine, an oil or gas well, a quarry or any other place of
extraction of natural resources, and

(h) a building site or construction or installation project.

(3) Subsection (1) is subject to sections 357LA and 357LB.

Circumstances where there is no NIRE

357LA 15 Agent of independent status

(1) A company is not regarded as having a NIRE by reason of the fact that
it carries on business in Northern Ireland through an agent of
independent status acting in the ordinary course of the agent’s
business.

(2) 20Sections 357LC to 357LI apply for the purpose of supplementing
subsection (1) in relation to transactions carried out on behalf of a
company by a person in Northern Ireland acting as—

(a) a broker (section 357LC),

(b) an investment manager (sections 357LD to 357LH), or

(c) 25a members’ or managing agent at Lloyd’s (section 357LI).

357LB Alternative finance arrangements

(1) Subsection (2) applies if alternative finance return is paid to a company.

(2) The company is not regarded as having a NIRE merely by virtue of
anything done for the purposes of the alternative finance
30arrangements—

(a) by the other party to the arrangements, or

(b) by any other person acting for the company in relation to the
arrangements.

(3) In subsection (1) “alternative finance return” means alternative finance
35return within the application of—

(a) section 564I, 564K or 564L(2) or (3) of ITA 2007, or

(b) section 511, 512 or 513(2) or (3) of CTA 2009.

(4) In subsection (2) the reference to “the alternative finance arrangements”
is a reference to the alternative finance arrangements under which the
40alternative finance return mentioned in subsection (1) is paid.

Brokers

357LC The independent broker condition

(1) This section applies if a transaction is carried out on behalf of a
company in the course of the company’s trade by a person in Northern
5Ireland acting as a broker.

(2) In relation to the transaction, the broker is regarded for the purposes of
section 357LA(1) as an agent of independent status acting in the
ordinary course of the broker’s business if (and only if) each of
conditions A to D is met.

(3) 10Condition A is that at the time of the transaction the broker is carrying
on the business of a broker.

(4) Condition B is that the transaction is carried out in the ordinary course
of that business.

(5) Condition C is that the remuneration which the broker receives in
15respect of the transaction for the provision of the services of a broker to
the company is not less than is customary for that class of business.

(6) Condition D is that the broker does not fall (apart from this subsection)
to be treated as a NIRE of the company in relation to any other
transaction of any kind carried out in the same accounting period of the
20company as the transaction in question.

Investment managers

357LD The independent investment manager conditions

(1) This section applies if an investment transaction is carried out on behalf
of a company in the course of the company’s trade by a person in
25Northern Ireland acting as an investment manager.

(2) In relation to the investment transaction, the investment manager is
regarded for the purposes of section 357LA(1) as an agent of
independent status acting in the ordinary course of the investment
manager’s business if (and only if) each of conditions A to E is met (“the
30independent investment manager conditions”).

(3) Condition A is that at the time of the transaction the investment
manager is carrying on a business of providing investment
management services.

(4) Condition B is that the transaction is carried out in the ordinary course
35of that business.

(5) Condition C is that, when the investment manager acts on behalf of the
company in relation to the transaction, the relationship between them,
having regard to its legal, financial and commercial characteristics, is a
relationship between persons carrying on independent businesses
40dealing with each other at arm’s length.

(6) Condition D is that the requirements of the 20% rule are met (see
section 357LE).

(7) Condition E is that the remuneration which the investment manager
receives in respect of the transaction for the provision of investment

management services to the company is not less than is customary for
that class of business.

357LE Investment managers: the 20% rule

(1) The requirements of the 20% rule are met if conditions A and B are met.

(2) 5Condition A is that, in relation to a qualifying period, it has been or is
the intention of the investment manager and the persons connected
with the investment manager that at least 80% of the company’s
relevant disregarded income should consist of amounts to which none
of them has a beneficial entitlement.

(3) 10Condition B is that, so far as there is a failure to fulfil that intention, that
failure—

(a) is attributable (directly or indirectly) to matters outside the
control of the investment manager and persons connected with
the investment manager, and

(b) 15does not result from a failure of any of them to take such steps
as may be reasonable for mitigating the effect of those matters
in relation to the fulfilment of that intention.

357LF Section 357LE: interpretation

(1) This section applies for the purposes of section 357LE.

(2) 20A “qualifying period” means—

(a) the accounting period of the company in which the transaction
in question is carried out, or

(b) a period of not more than 5 years comprising two or more
complete accounting periods including that one.

(3) 25The “relevant disregarded income” of the company for a qualifying
period is the total of the company’s income for the accounting periods
comprised in the qualifying period which derives from transactions—

(a) carried out by the investment manager on the company’s
behalf, and

(b) 30in relation to which the investment manager does not (apart
from the requirements of the 20% rule) fall to be treated as a
NIRE of the company.

(4) A person has a “beneficial entitlement” to relevant disregarded income
if the person has or may acquire a beneficial entitlement that is, or
35would be, attributable to the relevant disregarded income as a result of
having an interest or other rights mentioned in subsection (5).

(5) The interests and rights referred to in subsection (4) are—

(a) an interest (whether or not an interest giving a right to an
immediate payment of a share in the profits or gains) in
40property in which the whole or any part of the relevant
disregarded income is represented, or

(b) an interest in, or other rights in relation to, the company.

357LG Application of 20% rule to collective investment schemes

(1) This section applies if amounts arise or accrue to the company as a
45participant in a collective investment scheme.

(2) It applies for the purpose of determining whether the requirements of
the 20% rule are met in relation to a transaction carried out for the
purposes of the scheme (so far as the transaction is one in respect of
which amounts so arise or accrue).

(3) 5In applying this section the following assumptions are to be made—

(a) that all the transactions carried out for the purposes of the
scheme are carried out on behalf of a company (“the assumed
company”) which is—

(i) constituted for the purposes of the scheme, and

(ii) 10not resident in the United Kingdom, and

(b) that the participants do not have any rights in respect of the
amounts arising or accruing in respect of those transactions,
other than the rights which, if they held shares in the assumed
company, would be their rights as shareholders.

(4) 15If the scheme is such that the assumed company would not be regarded
for tax purposes as carrying on a trade in the United Kingdom in
relation to the accounting period in which the transaction was carried
out, the requirements of the 20% rule are to be treated as met in relation
to a transaction carried out for the purposes of the scheme.

(5) 20If the scheme is such that the assumed company would be so regarded
for tax purposes, sections 357LE and 357LF have effect in relation to a
transaction carried out for the purposes of the scheme as if—

(a) references to the company were references to the assumed
company, and

(b) 25references to the company’s relevant disregarded income for a
qualifying period were references to the sum of the amounts
that would, for accounting periods comprised in the qualifying
period, be chargeable to tax on the assumed company as profits
deriving from the transactions—

(i) 30carried out by the investment manager, and

(ii) assumed to be carried out on behalf of the company.

(6) In this section—

• “collective investment scheme” has the meaning given by section
  235 of FISMA 2000;

• 35“participant”, in relation to a collective investment scheme, is to be
  read in accordance with that section.

357LH Meaning of “investment manager” and “investment transaction”

In this Chapter “investment manager” and “investment transaction”
have the same meanings as in Chapter 2 of Part 24 (see section 1150(1)).

40Lloyd’s agents

357LI Lloyd’s agents

(1) This section applies if a transaction is carried out on behalf of a
company in the course of the company’s trade by a person in Northern
Ireland acting as a members’ agent or managing agent at Lloyd’s.

(2) 45In relation to the transaction, the person is regarded for the purposes of
section 357LA(1) as an agent of independent status acting in the

ordinary course of the person’s business if conditions A, B and C are
met.

(3) Condition A is that the company is a member of Lloyd’s.

(4) Condition B is that the transaction is carried out in the course of the
5company’s underwriting business.

(5) Condition C is that the person acting on behalf of the company in
relation to the transaction acts as members’ agent or as managing agent
of the syndicate in question.

(6) For the purposes of this section—

(a) 10a company is a member of Lloyd’s if it is a corporate member
within the meaning of Chapter 5 of Part 4 of FA 1994;

(b) “members’ agent” and “managing agent” are to be read in
accordance with section 230 of that Act.

Supplementary

357LJ 15 Investment managers: disregard of certain chargeable profits

(1) This section applies if—

(a) an investment manager carries out one or more investment
transactions on behalf of a company (whether or not the
investment manager also carries out other transactions of any
20kind on behalf of the company), and

(b) the investment manager falls to be treated as a NIRE of the
company (whether because the independent investment
manager conditions are not met in relation to such investment
transactions or otherwise).

(2) 25In determining under Chapter 7 of this Part the amount of profits
attributable to the NIRE represented by the investment manager acting
as an agent on behalf of the company, chargeable profits deriving from
an investment transaction carried out by the investment manager on
behalf of the company are to be disregarded in either of the following
30two cases—

Case 1

The independent investment manager conditions are met in relation to
the investment transaction.