Finance (No. 2) Bill (HC Bill 193)

(b) the companies which had an amount of carried-forward loss
allowance immediately before the allocation, and the amount
of carried-forward loss allowance which each of those
companies had at that time, and

(c) 5the companies which have an amount of carried-forward loss
allowance immediately after the allocation (“the relevant
companies”), and the amount of carried-forward loss
allowance which each of those companies has.

(5) The revised statement of allocation must be given to HMRC on or
10before—

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

(b) if earlier, the first day after the allocation on which a
15company tax return of any of the relevant companies is
amended so as to include such a designation.

This is subject to subsection (6).

(6) An officer of Revenue and Customs may provide that the revised
statement of allocation may be given to HMRC on or before a later
20day specified by the officer.

(7) An allocation made under subsection (3) is not effective unless the
requirements of this section have been complied with.

(8) Except as provided for by this section, a revised statement of
allocation that has been given to HMRC under this section may not
25be amended or withdrawn.

Anti-avoidance

269CK Profits arising from tax arrangements to be disregarded

(1) This section applies if conditions A to C are met.

(2) Condition A is that—

(a) 30the amount given by step 1 in section 269CD(1) as the total
profits of a banking company for an accounting period
includes profits which arise to the banking company as a
result of any arrangements (“the tax arrangements”), and

(b) in the absence of those profits (“the additional profits”) any
35deduction which the banking company would be entitled to
make for the accounting period in respect of any relevant
carried-forward losses would be reduced.

(3) Condition B is that the main purpose, or one of the main purposes,
of the tax arrangements is to secure a relevant corporation tax
40advantage—

(a) for the banking company, or

(b) if there are any companies connected with that company, for
the banking company and those connected companies (taken
together).

(4) 45In this section “relevant corporation tax advantage” means a
corporation tax advantage involving—

(a) the additional profits, and

(b) the deduction of any relevant carried-forward losses from
those profits.

(5) Condition C is that, at the time when the tax arrangements were
5entered into, it would have been reasonable to assume that the tax
value of the tax arrangements would be greater than the non-tax
value of the tax arrangements.

(6) The “tax value” of the tax arrangements is the total value of—

(a) the relevant corporation tax advantage, and

(b) 10any other economic benefits derived by—

(i) the banking company, or

(ii) if there are any companies connected with that
company, the banking company and those connected
companies (taken together),

15as a result of securing the relevant corporation tax advantage.

(7) The “non-tax value” of the tax arrangements is the total value of any
economic benefits, other than those falling within subsection (6)(a) or
(b), derived by—

(a) the banking company, or

(b) 20if there are any companies connected with that company, the
banking company and those connected companies (taken
together),

as a result of the tax arrangements.

(8) If this section applies, the additional profits are not to be taken into
25account in calculating the banking company’s relevant profits for the
accounting period (see section 269CD).

(9) In this section—

• “arrangements” includes any agreement, understanding,
  scheme, transaction or series of transactions (whether or not
  30legally enforceable);

• “corporation tax advantage” means—

  (a)

  a relief from corporation tax or increased relief from
  corporation tax,

  (b)

  a repayment of corporation tax or increased
  35repayment of corporation tax,

  (c)

  the avoidance or reduction of a charge to corporation
  tax or an assessment to corporation tax,

  (d)

  the avoidance of a possible assessment to corporation
  tax, or

  (e)

  40the deferral of a payment of corporation tax or
  advancement of a repayment of corporation tax.

Supplementary

269CL When a company first begins to carry on relevant regulated activities

(1) For the purposes of this Chapter, a company first begins to carry on
45a relevant regulated activity on a particular day if the company—

(a) begins to carry on a relevant regulated activity on that day,
and

(b) has not carried on any relevant regulated activity before that
day.

5This is subject to subsection (2).

(2) Where—

(a) there is a transfer of a trade, and

(b) immediately before the transfer the predecessor carried on a
relevant regulated activity,

10the successor is to be treated as having first begun to carry on a
relevant regulated activity on the day on which the predecessor first
began to carry on such an activity.

(3) Section 940B (meaning of “transfer of a trade” etc) applies for the
purposes of this section as it applies for the purposes of Chapter 1 of
15Part 22.

269CM Joint venture companies

(1) Where a company (“the joint venturer”), together with one or more
other persons, jointly controls another company that is a joint
venture (“the joint venture company”), the joint venture company is
20to be treated for the purposes of this Chapter as a member of any
group of which the joint venturer is a member.

(2) References in subsection (1) to a joint venture and to jointly
controlling a company that is a joint venture are to be read in
accordance with those provisions of international accounting
25standards which relate to joint ventures.

269CN Other definitions

In this Chapter—

• “banking company” has the meaning given by section 269B;

• “building society” has the same meaning as in the Building
  30Societies Act 1986;

• “company tax return” has the same meaning as in Schedule 18
  to FA 1998;

• “group” has the meaning given by section 269BD;

• “HMRC” means Her Majesty’s Revenue and Customs;

• 35“partnership” includes—

  (a)

  a limited liability partnership, and

  (b)

  an entity established under the law of a territory
  outside the United Kingdom of a similar character to
  a partnership,

  40and “member”, in relation to a partnership, is to be read
  accordingly;

• “pre-2015 carried-forward management expenses” has the
  meaning given by section 269CC(4);

• “pre-2015 carried-forward non-trading deficit” has the meaning
  45given by section 269CB(4);

• “pre-2015 carried-forward trading loss” has the meaning given
  by section 269CA(4);

Finance (No. 2) BillPage 143

• “relevant carried-forward loss” means—

  (a)

  a pre-2015 carried-forward trading loss,

  (b)

  a pre-2015 carried-forward non-trading deficit, or

  (c)

  any pre-2015 carried-forward management expenses;

• 5“relevant non-trading profits”, in relation to a company, means
  the amount given by step 6 in section 269CD(1);

• “relevant profits”, in relation to a company, means the amount
  given by step 7 in section 269CD(1);

• “relevant regulated activity” has the meaning given by section
  10269BB;

• “relevant trading profits”, in relation to a company, means the
  amount given by step 5 in section 269CD(1);

• “start-up period”, in relation to a company, has the meaning
  given by section 269CG.”

15Part 2 Consequential amendments

FA 1998

2 In Schedule 18 to FA 1998 (company tax returns, assessments and related
matters), after Part 9D insert—

20“ Part 9E Designation of losses as unrestricted losses for the purposes of
Chapter 3 of Part 7A of the Corporation Tax Act 2010

83Y Introduction

(1) This Part of this Schedule applies to the designation of losses
25within sub-paragraph (2) as unrestricted losses by a banking
company under section 269CH of the Corporation Tax Act 2010
(losses covered by carried-forward loss allowance).

(2) The losses mentioned in sub-paragraph (1) are losses which, in
relation to any accounting period, would (in the absence of that
30section) be relevant carried-forward losses.

(3) Expressions used in this Part of this Schedule and in Chapter 3 of
Part 7A of the Corporation Tax Act 2010 have the same meaning
in this Part of this Schedule as they have in that Chapter.

83YA Designation to be made in company tax return

(1) 35A designation to which this Part of this Schedule applies must be
made by being included in the company’s tax return for the
accounting period for which the company makes a deduction in
respect of the losses.

(2) It may be included in the return originally made or by
40amendment.

83YB Identification of losses

Where a company designates any relevant carried-forward loss in
a company tax return, the return must specify—

(a) the amount of the loss, and

(b) 5whether the loss is—

(i) a pre-2015 carried-forward trading loss,

(ii) a pre-2015 carried-forward non-trading deficit, or

(iii) pre-2015 carried-forward management expenses.

83YC Amendment or withdrawal of designation

10A designation to which this Part of this Schedule applies may be
amended or withdrawn by the company only by amending its
company tax return.”

CTA 2009

3 In section 1223 of CTA 2009 (carrying forward expenses of management and
15other amounts), in subsection (1)—

(a) the words after “because” become paragraph (a), and

(b) after that paragraph insert “, or

(b) in the case of amounts falling within subsection (2)(c),
section 269CC of CTA 2010 (restriction on deductions
20for management expenses) has effect for the
accounting period.”

CTA 2010

4 In section 1 of CTA 2010 (overview of Act), in subsection (3)—

(a) for “Parts 8” substitute “Parts 7A”, and

(b) 25before paragraph (a) insert—

“(za) banking companies (see Part 7A),”.

5 In Schedule 4 to CTA 2010 (index of defined expressions), at the appropriate
place insert—

TIOPA 2010

6 (1) In Part 9A of TIOPA 2010 (controlled foreign companies), in Chapter 21
(management), section 371UD (relief against sum charged) is amended as
follows.

(2) 30In subsection (2), after “relevant allowance” insert “(but see subsection (9))”.

(3) At the end insert—

“(9) A company which is a banking company (within the meaning of Part
7A of CTA 2010) for the relevant corporation tax accounting period
may not make a claim under subsection (2) in respect of a relevant
35allowance consisting of—

(a) a pre-2015 carried-forward non-trading deficit (within the
meaning of Chapter 3 of Part 7A of that Act), or

(b) pre-2015 carried-forward management expenses (within the
meaning of that Chapter).”

Part 3 Commencement and anti-forestalling provision

Commencement

7 (1) The amendments made by paragraphs 1 to 5 of this Schedule have effect for
5the purposes of calculating the taxable total profits of companies for
accounting periods beginning on or after 1 April 2015.

(2) But section 269CK of CTA 2010 (inserted by this Schedule) does not have
effect in relation to any arrangements made before 3 December 2014.

(3) Sub-paragraph (4) applies where a company has an accounting period
10beginning before 1 April 2015 and ending on or after that date (“the
straddling period”).

(4) For the purposes of Chapter 3 of Part 7A of CTA 2010—

(a) so much of the straddling period as falls before 1 April 2015, and so
much of that period as falls on or after that date, are treated as
15separate accounting periods, and

(b) the profits or losses of the company for the straddling period are
apportioned to the two separate accounting periods—

(i) in accordance with section 1172 of CTA 2010 (time basis), or

(ii) if that method would produce a result that is unjust or
20unreasonable, on a just and reasonable basis.

8 (1) The amendments made by paragraph 6 of this Schedule (and the
amendments made by paragraphs 1 to 5, so far as relating to those
amendments) have effect for accounting periods of CFCs beginning on or
after 1 April 2015.

(2) 25Sub-paragraph (3) applies where a CFC has an accounting period beginning
before 1 April 2015 and ending on or after that date (“the straddling
period”).

(3) For the purposes of the amendments made by paragraph 6—

(a) so much of the straddling period as falls before 1 April 2015, and so
30much of that period as falls on or after that date, are treated as
separate accounting periods, and

(b) any amount charged on a company in accordance with section 371BC
of TIOPA 2010 in relation to the straddling period is apportioned to
the two separate accounting periods—

(i) 35on a time basis according to the respective lengths of the
separate accounting periods, or

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

(4) In determining whether an amount falls within section 371UD(9)(a) or (b) of
40TIOPA 2010 (inserted by this Schedule), paragraph 7(3) and (4) applies as it
applies for the purposes of Chapter 3 of Part 7A of CTA 2010.

(5) In this paragraph “CFC” has the same meaning as in Part 9A of TIOPA 2010.

Anti-forestalling provision

9 (1) This sub-paragraph applies if—

(a) for the purposes of corporation tax a banking company has profits
(“pre-commencement profits”) for an accounting period ending
5before 1 April 2015,

(b) in the absence of this paragraph the banking company would, for
corporation tax purposes, be entitled to deduct from the pre-
commencement profits for the accounting period an amount in
respect of any relevant carried-forward losses,

(c) 10the pre-commencement profits arise as a result of any arrangements
entered into on or after 3 December 2014, and

(d) the main purpose, or one of the main purposes, of the arrangements
is to secure a corporation tax advantage as a result of the fact that
Chapter 3 of Part 7A of CTA 2010 (inserted by this Schedule) is not to
15have effect for the accounting period for which the deduction would
be made.

(2) If sub-paragraph (1) applies, the banking company is not entitled to deduct
from the pre-commencement profits any amount in respect of the relevant
carried-forward losses.

(3) 20Sub-paragraph (1) does not apply in relation to a banking company which
falls within section 269B(5)(b) of CTA 2010 (inserted by this Schedule).

(4) In this paragraph—

• “arrangements” includes any agreement, understanding, scheme,
  transaction or series of transactions (whether or not legally
  25enforceable);

• “corporation tax advantage” means—

  (a)

  a relief from corporation tax or increased relief from
  corporation tax,

  (b)

  a repayment of corporation tax or increased repayment of
  30corporation tax,

  (c)

  the avoidance or reduction of a charge to corporation tax or
  an assessment to corporation tax,

  (d)

  the avoidance of a possible assessment to corporation tax, or

  (e)

  the deferral of a payment of corporation tax or advancement
  35of a repayment of corporation tax.

(5) Terms used in this paragraph and in Chapter 3 of Part 7A of CTA 2010 have
the same meaning in this paragraph as in that Chapter; and, so far as
necessary for the purposes of this sub-paragraph, that Part is to be treated as
having come into force on the same day as this paragraph.

(6) 40This paragraph is treated as having come into force on 3 December 2014.

(7) Sub-paragraph (8) applies where a company has an accounting period
beginning before 1 April 2015 and ending on or after that date (“the
straddling period”).

(8) For the purposes of this paragraph—

(a) 45so much of the straddling period as falls before 1 April 2015, and so
much of that period as falls on or after that date, are treated as
separate accounting periods, and

(b) the profits or losses of the company for the straddling period are
apportioned to the two separate accounting periods—

(i) in accordance with section 1172 of CTA 2010 (time basis), or

(ii) if that method would produce a result that is unjust or
5unreasonable, on a just and reasonable basis.

Section 33

SCHEDULE 3 Tax avoidance involving carried-forward losses

Part 1 Amendments of CTA 2010

1 10In CTA 2010, after Part 14A insert—

“ Part 14B Tax avoidance involving carried-forward losses

730E Overview

(1) This Part makes provision restricting the circumstances in which a
15company may make a deduction in respect of a relevant carried-
forward loss.

(2) For the meaning of “relevant carried-forward loss”, see section 730F.

730F Meaning of “relevant carried-forward loss”

(1) In this Part “relevant carried-forward loss” means any of the
20following—

(a) a carried-forward trading loss (see subsection (2)),

(b) a carried-forward non-trading deficit (see subsection (3)),

(c) any carried-forward management expenses (see subsection
(4)).

(2) 25“Carried-forward trading loss”, in relation to a company and an
accounting period, means a loss in a trade of the company which is
carried forward from a previous accounting period under section 45
(carry forward of trade loss against subsequent trade profits).

(3) “Carried-forward non-trading deficit”, in relation to a company and
30an accounting period, means a non-trading deficit which the
company has from its loan relationships under section 301(6) of CTA
2009 and which is carried forward from a previous accounting
period under section 457 of that Act (carry forward of deficits to
accounting periods after deficit period).

(4) 35“Carried-forward management expenses”, in relation to a company
and an accounting period, means—

(a) any amounts which—

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

(ii) are treated by subsection (3) of that section as
5expenses of management deductible for the period,
and

(b) any amounts which 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
10expenses of management deductible for the period for the
purposes of Chapter 2 of Part 16 of CTA 2009.

730G Disallowance of deductions for relevant carried-forward losses

(1) This section applies if conditions A to E are met.

(2) Condition A is that—

(a) 15for the purposes of corporation tax a company has profits
(“relevant profits”) for an accounting period,

(b) the relevant profits arise to the company as a result of any
arrangements (“the tax arrangements”), and

(c) in the absence of this section the company (“the relevant
20company”) would, for corporation tax purposes, be entitled
to deduct from the relevant profits for the period an amount
in respect of any relevant carried-forward losses.

(3) Condition B is that—

(a) the relevant company, or a company connected with that
25company, brings a deductible amount into account as a
deduction for an accounting period, and

(b) it is reasonable to assume that neither the company, nor any
company connected with it, would have brought that amount
into account as a deduction for that period but for the tax
30arrangements.

(4) Condition C is that the main purpose, or one of the main purposes,
of the tax arrangements is to secure a relevant corporation tax
advantage—

(a) for the relevant company, or

(b) 35if there are any companies connected with that company, for
the relevant company and those connected companies (taken
together).

(5) In this section “relevant corporation tax advantage” means a
corporation tax advantage involving—

(a) 40the deductible amount mentioned in subsection (3), and

(b) the deduction of any relevant carried-forward losses from the
relevant profits.

(6) Condition D is that, at the time when the tax arrangements were
entered into, it would have been reasonable to assume that the tax
45value of the tax arrangements would be greater than the non-tax
value of the tax arrangements.

(7) The “tax value” of the tax arrangements is the total value of—

(a) the relevant corporation tax advantage, and