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Finance (No. 2) BillPage 130

Power to make consequential changes
269BE Power to make consequential changes

(1) The Treasury may by regulations make such amendments of this
Part as they consider appropriate in consequence of—

(a) 5any change made to, or replacement of, the Financial Services
and Markets Act 2000 (Regulated Activities) Order 2001 (S.I.
2001/544) (or any replacement);

(b) any change made to, or replacement of, the FCA Handbook
or the PRA Handbook (or any replacement);

(c) 10any change in international accounting standards or US
GAAP;

(d) any regulatory requirement, or change to any regulatory
requirement, imposed by EU legislation, or by or under any
Act (whenever adopted, enacted or made).

(2) 15In this section—

CHAPTER 3 Restrictions on obtaining certain deductions
20Introduction
269C Overview of Chapter

(1) This Chapter contains provision restricting the amount of certain
deductions which a banking company may make in calculating its
taxable total profits for an accounting period.

(2) 25Sections 269CA to 269CD contain the restrictions.

(3) Sections 269CE to 269CH contain exceptions to the restrictions.

(4) Section 269CK contains anti-avoidance provision.

(5) Sections 269CL to 269CN contain supplementary provision and
definitions.

(6) 30For the meaning of “banking company”, see section 269B.

Restrictions on obtaining certain deductions
269CA Restriction on deductions for trading losses

(1) This section has effect for determining the taxable total profits of a
banking company for an accounting period.

(2) 35Any deduction made by the company for the accounting period in
respect of a pre-2015 carried-forward trading loss may not exceed
50% of the company’s relevant trading profits for the accounting
period.

Finance (No. 2) BillPage 131

Section 269CD contains provision for calculating a company’s
relevant trading profits for an accounting period (see step 5 in
subsection (1) of that section).

(3) 5But subsection (2) does not apply where the amount given by step 1
in section 269CD(1) is not greater than nil.

(4) In this Chapter “pre-2015 carried-forward trading loss”, in relation to
a company and an accounting period (“the current accounting
period”), means a loss which—

(a) 10was made in a trade of the company in an accounting period
ending before 1 April 2015, and

(b) is carried forward to the current accounting period under
section 45 (carry forward of trade loss against subsequent
trade profits).

(5) 15See also sections 269CE to 269CH (losses to which restrictions do not
apply).

269CB Restriction on deductions for non-trading deficits from loan
relationships

(1) This section has effect for determining the taxable total profits of a
20banking company for an accounting period.

(2) Any deduction made by the company for the accounting period in
respect of a pre-2015 carried-forward non-trading deficit may not
exceed 50% of the company’s relevant non-trading profits for the
accounting period.

25Section 269CD contains provision for calculating a company’s
relevant non-trading profits for an accounting period (see step 6 in
subsection (1) of that section).

(3) But subsection (2) does not apply where the amount given by step 1
in section 269CD(1) is not greater than nil.

(4) 30In this Chapter “pre-2015 carried-forward non-trading deficit”, in
relation to a company and an accounting period (“the current
accounting period”), means a non-trading deficit—

(a) which the company had from its loan relationships under
section 301(6) of CTA 2009 for an accounting period ending
35before 1 April 2015, and

(b) which is carried forward under section 457 of that Act (carry
forward of deficits to accounting periods after deficit period)
to be set off against non-trading profits of the current
accounting period.

(5) 40In subsection (4) “non-trading profits” has the same meaning as in
section 457 of CTA 2009.

(6) See also sections 269CE to 269CH (losses to which restrictions do not
apply).

269CC Restriction on deductions for management expenses etc

(1) 45This section has effect for determining the taxable total profits of a
banking company for an accounting period.

Finance (No. 2) BillPage 132

(2) Any deduction made by the company for the accounting period in
respect of pre-2015 carried-forward management expenses may not
exceed the relevant maximum (see subsection (7)).

(3) But subsection (2) does not apply where the amount given by step 1
5in section 269CD(1) is not greater than nil.

(4) In this Chapter “pre-2015 carried-forward management expenses”,
in relation to a company and an accounting period (“the current
accounting period”), means amounts falling within subsection (5) or
(6).

10See also sections 269CE to 269CH (losses to which restrictions do not
apply).

(5) The amounts within this subsection are amounts—

(a) which fall within subsection (2) of section 1223 of CTA 2009
(carrying forward expenses of management and other
15amounts),

(b) which—

(i) for the purposes of Chapter 2 of Part 16 of CTA 2009
are referable to an accounting period ending before 1
April 2015, or

(ii) 20in the case of qualifying charitable donations, were
made in such an accounting period, and

(c) which are treated by section 1223(3) of CTA 2009 as expenses
of management deductible for the current accounting period.

(6) The amounts within this subsection are amounts of loss which—

(a) 25were made in an accounting period ending before 1 April
2015, and

(b) are treated by section 63(3) (carrying forward certain losses
made by company with investment business which ceases to
carry on UK property business) as expenses of management
30deductible for the current accounting period for the purposes
of Chapter 2 of Part 16 of CTA 2009.

(7) The relevant maximum is determined as follows—

Step 1

Calculate 50% of the company’s relevant profits for the accounting
35period.

Section 269CD contains provision for calculating a company’s
relevant profits for an accounting period.

Step 2

Calculate the sum of any deductions made by the company for the
40accounting period which are—

(a) deductions in respect of a pre-2015 carried-forward trading
loss, or

(b) deductions in respect of a pre-2015 carried-forward non-
trading deficit.

45Step 3

The relevant maximum is the difference between the amount given
by step 1 and the amount given by step 2.

If the amount given by step 1 does not exceed the amount given by
step 2, the relevant maximum is nil.

Finance (No. 2) BillPage 133

269CD Relevant profits

(1) To determine a company’s relevant profits for an accounting
period—

Step 1

5Calculate the company’s total profits for the accounting period,
ignoring any pre-2015 carried-forward trading losses or pre-2015
carried-forward non-trading deficits.

(If the amount given by this step is not greater than nil, no further
steps are to be taken: see sections 269CA(3), 269CB(3) and 269CC(3).)

10Step 2

Divide the amount given by step 1 into profits that are profits of a
trade of the company (the company’s “trade profits”) and profits that
are not profits of a trade of the company (the company’s “non-
trading profits”).

15Step 3

Calculate the proportion (“the trading proportion”) of the amount
given by step 1 that consists of the company’s trade profits and the
proportion (“the non-trading proportion”) of that amount that
consists of its non-trading profits.

20Step 4

Calculate the sum of any amounts which can be relieved against the
company’s total profits for the accounting period (as calculated in
accordance with step 1), ignoring the amount of any excluded
deductions for the accounting period (see subsection (2)).

25Step 5

Deduct the trading proportion of the amount given by step 4 from
the company’s trade profits for the accounting period.

The amount given by this step is the company’s relevant trading
profits for the accounting period.

30If the amount given by this step is not greater than nil, the company’s
relevant trading profits for the accounting period are nil.

Step 6

Deduct the non-trading proportion of the amount given by step 4
from the company’s non-trading profits for the accounting period.

35The amount given by this step is the company’s relevant non-trading
profits for the accounting period.

If the amount given by this step is not greater than nil, the company’s
relevant non-trading profits for the accounting period are nil.

Step 7

40The company’s relevant profits for the accounting period are the
sum of its relevant trading profits for the accounting period and its
relevant non-trading profits for the accounting period.

Finance (No. 2) BillPage 134

(2) The following are “excluded deductions” in relation to an accounting
period (“the current accounting period”)—

(a) a deduction made in respect of pre-2015 carried-forward
management expenses;

(b) 5a deduction for relief under section 37 (relief for trade losses
against total profits) in relation to a loss made in an
accounting period after the current accounting period;

(c) a deduction for relief under section 260(3) of CAA 2001
(special leasing of plant or machinery: carry-back of excess
10allowances) in relation to capital allowances for an
accounting period after the current accounting period;

(d) a deduction for relief under section 459 of CTA 2009 (non-
trading deficits from loan relationships) in relation to a deficit
for a deficit period after the current accounting period.

15Losses to which restrictions do not apply
269CE Losses arising before company began banking activity

(1) In this section “the first banking accounting period”, in relation to a
company, means the accounting period in which the company first
begins to carry on a relevant regulated activity.

(2) 20References in this Chapter to a pre-2015 carried-forward trading loss
do not include a loss which was made in a trade of a company in an
accounting period ending before the first banking accounting period.

(3) References in this Chapter to a pre-2015 carried-forward non-trading
deficit do not include a non-trading deficit which a company had
25from its loan relationships under section 301(6) of CTA 2009 for an
accounting period ending before the first banking accounting period.

(4) References in this Chapter to pre-2015 carried-forward management
expenses, in relation to a company, do not include—

(a) any amounts falling within section 269CC(5) which—

(i) 30for the purposes of Chapter 2 of Part 16 of CTA 2009
are referable to an accounting period ending before
the first banking accounting period, or

(ii) in the case of qualifying charitable donations, were
made in an accounting period ending before the first
35banking accounting period, or

(b) any amounts of loss falling within section 269CC(6) which
were made in an accounting period ending before the first
banking accounting period.

(5) Section 269CL contains provision for determining when a company
40first begins to carry on a relevant regulated activity.

Finance (No. 2) BillPage 135

269CF Losses arising in company’s start-up period

(1) References in this Chapter to a pre-2015 carried-forward trading loss
do not include a loss which was made in a trade of a company in an
accounting period ending in the company’s start-up period.

(2) 5References in this Chapter to a pre-2015 carried-forward non-trading
deficit do not include a non-trading deficit which a company had
from its loan relationships under section 301(6) of CTA 2009 for an
accounting period ending in the company’s start-up period.

(3) References in this Chapter to pre-2015 carried-forward management
10expenses, in relation to a company, do not include—

(a) any amounts falling within section 269CC(5) which—

(i) for the purposes of Chapter 2 of Part 16 of CTA 2009
are referable to an accounting period ending in the
company’s start-up period, or

(ii) 15in the case of qualifying charitable donations, were
made in such an accounting period, or

(b) any amounts of loss falling within section 269CC(6) which
were made in an accounting period ending in the company’s
start-up period.

(4) 20For the purposes of this Chapter any amounts which, by virtue of
subsections (1) to (3), are not relevant carried-forward losses of a
company are to be regarded as having been taken into account in
determining the taxable total profits of the company for accounting
periods ending before 1 April 2015 before any amounts which are
25relevant carried-forward losses of the company.

(5) Subsection (6) applies where a company has an accounting period
(“the straddling period”) beginning before, and ending after, the last
day of its start-up period.

(6) For the purposes of this section—

(a) 30so much of the straddling period as falls within the start-up
period, and so much of the straddling period as falls outside
the start-up period, are treated as separate accounting
periods, and

(b) any relevant carried-forward losses of the company for the
35straddling period are apportioned to the two separate
accounting periods—

(i) in accordance with section 1172 (time basis), or

(ii) if that method would produce a result that is unjust or
unreasonable, on a just and reasonable basis.

(7) 40In subsection (6)(b) the reference to any relevant carried-forward
losses of the company “for” the straddling period is a reference to—

(a) any pre-2015 carried-forward trading loss which was made
in a trade of the company in the straddling period,

(b) any pre-2015 carried-forward non-trading deficit which the
45company had from its loan relationships for the straddling
period, and

(c) any pre-2015 carried-forward management expenses which
are referable to, or were made in, the straddling period (as the
case may be).

Finance (No. 2) BillPage 136

(8) For provision about determining a company’s start-up period, see
section 269CG.

269CG The “start-up period”

(1) In this Chapter the “start-up period”, in relation to a company
5(“company C”), means the period of 5 years beginning with the day
on which company C first begins to carry on a relevant regulated
activity (“the start-up day”).

This is subject to the following provisions of this section.

(2) If on the start-up day—

(a) 10company C is a member of a group,

(b) there are one or more other members of the group that have
carried on a relevant regulated activity while a member of the
group, and

(c) none of those members first began to carry on such an activity
15more than 5 years before the start-up day,

company C’s start-up period is the period beginning with the start-
up day and ending with the relevant group period.

(3) The “relevant group period”, in relation to a group, means the period
of 5 years beginning with the earliest day on which any member of
20the group first began to carry on a relevant regulated activity.

(4) If on the start-up day—

(a) company C is a member of a group,

(b) there are one or more other members of the group that have
carried on a relevant regulated activity while a member of the
25group, and

(c) any of those members first began to carry on such an activity
more than 5 years before the start-up day,

company C does not have a start-up period.

(5) This subsection applies if—

(a) 30on a day falling within company C’s start-up period (“the
relevant day”), company C becomes a member of a group,

(b) one or more of the members of the group which on the
relevant day carry on a relevant regulated activity first began
to do so before the beginning of company C’s start-up period,
35and

(c) the relevant regulated activities carried on by company C do
not form a significant proportion of the relevant regulated
activities carried on immediately after the relevant day by the
members of the group as a whole.

(6) 40Where subsection (5) applies, company C’s start-up period—

(a) in the case where any of the members of the group first began
to carry on a relevant regulated activity more than 5 years
before the relevant day, ends immediately before the relevant
day;

(b) 45in any other case, ends with the relevant group period.

(7) This subsection applies if—

Finance (No. 2) BillPage 137

(a) on a day falling within company C’s start-up period (“the
relevant day”), another company that carries on a relevant
regulated activity (“the new member”) becomes a member of
a group of which company C is a member,

(b) 5the new member first began to carry on a relevant regulated
activity before the beginning of company C’s start-up period,
and

(c) the relevant regulated activities carried on by the new
member form a significant proportion of the relevant
10regulated activities carried on immediately after the relevant
day by the members of the group as a whole.

(8) Where subsection (7) applies, company C’s start-up period—

(a) in the case where the new member first began to carry on a
relevant regulated activity more than 5 years before the
15relevant day, ends immediately before the relevant day;

(b) in any other case, ends with the relevant group period.

(9) Any reference in this section to being, or becoming, a member of a
group includes a reference to being, or becoming, a member of a
partnership; and references to the “relevant group period” are to be
20read accordingly.

(10) Section 269CL contains provision for determining when a company
first begins to carry on a relevant regulated activity.

269CH Losses covered by carried-forward loss allowance

(1) This section applies to a banking company if—

(a) 25it is a building society, or

(b) an amount of carried-forward loss allowance is allocated to
the company by a building society in accordance with section
269CI or 269CJ.

(2) If a banking company to which this section applies has an amount of
30carried-forward loss allowance (see subsection (5)), the company
may designate as unrestricted losses any losses which, in relation to
any accounting period, would (in the absence of this section) be
relevant carried-forward losses.

(3) A loss designated under this section as an unrestricted loss is to be
35treated for the purposes of this Chapter as if it were not a relevant
carried-forward loss.

(4) The amount of losses which a company may designate at any time
must not exceed the amount of carried-forward loss allowance
which the company has at that time.

(5) 40The amount of carried-forward loss allowance which a company has
at any time is the difference between the company’s maximum
available carried-forward loss allowance and the total amount of
losses designated by the company under this section before that
time.

(6) 45The “maximum available carried-forward loss allowance” is—

(a) in the case of a building society which has not made an
allocation under section 269CI, £25,000,000;

Finance (No. 2) BillPage 138

(b) in the case of a building society which has made an allocation
under section 269CI, the amount given by—


(A − B) + C

5where—

(c) in the case of any other company, the total amount of carried-
forward loss allowance allocated to the company under
section 269CI or 269CJ.

(7) 20References in this Chapter to an amount of carried-forward loss
allowance allocated to a company are references to an amount
allocated to the company under section 269CI or 269CJ.

(8) For the meaning of “relevant carried-forward loss”, see section
269CN.

(9) 25For information about the procedure for making a designation under
this section, see Schedule 18 to FA 1998, in particular Part 9E of that
Schedule.

269CI Allocation of carried-forward loss allowance within a group

(1) This section applies where a building society—

(a) 30is a member of a group, and

(b) has an amount of carried-forward loss allowance (see section
269CH(5)).

(2) The building society may allocate some or all of that amount of
carried-forward loss allowance to any other member of the group
35which is a banking company.

(3) Where a building society makes an allocation under subsection (2), it
must give HMRC a statement (a “statement of allocation”) which
specifies—

(a) the amount of carried-forward loss allowance which the
40building society had immediately before it made the
allocation,

(b) the companies (“the relevant companies”) to which an
amount of carried-forward loss allowance has been allocated,

(c) the amount of carried-forward loss allowance allocated to
45each of the relevant companies, and

(d) the total amount of carried-forward loss allowance allocated
by the building society.

(4) The statement of allocation must be given to HMRC on or before—

Finance (No. 2) BillPage 139

(a) the first day after the allocation on which the building
society, or any of the relevant companies, delivers a company
tax return which includes a designation made under section
269CH, or

(b) 5if earlier, the first day after the allocation on which a
company tax return of the building society, or any of the
relevant companies, is amended so as to include such a
designation.

This is subject to subsection (5).

(5) 10An officer of Revenue and Customs may provide that the statement
of allocation may be given to HMRC on or before a later day
specified by the officer.

(6) An allocation made under subsection (2) is not effective unless the
requirements of this section have been complied with.

(7) 15A statement of allocation that has been given to HMRC under this
section may not be amended or withdrawn.

This is subject to section 269CJ.

269CJ Re-allocation of carried-forward loss allowance

(1) This section applies where—

(a) 20a building society is a member of a group,

(b) the building society has given HMRC a statement of
allocation in accordance with section 269CI,

(c) the building society, or any other member of the group that is
a banking company, (the “designating company”) would, if it
25had an amount (or an additional amount) of carried-forward
loss allowance, be able to designate an amount of losses
under section 269CH equal to that amount, and

(d) that amount is greater than the amount of carried-forward
loss allowance which the building society could allocate
30under section 269CI.

(2) In this section the “available carried-forward loss allowance” means
the total of any amounts of carried-forward loss allowance which
any member of the group, other than the designating company, has
(see section 269CH(5)).

(3) 35The building society may—

(a) allocate some or all of the available carried-forward loss
allowance to the designating company, and

(b) provide that, to the extent that any of the amount allocated to
the designating company under this subsection is an amount
40of carried-forward loss allowance which, immediately before
the allocation, was an amount allocated to another company,
that amount is no longer allocated to that other company.

(4) Where a building society makes an allocation under subsection (3), it
must give HMRC a statement (a “revised statement of allocation”)
45which specifies—

(a) the amount of the available carried-forward loss allowance
immediately before the allocation,

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