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

(7) In this section “period of absence” has the same meaning as in section
223.”

6 (1) Section 225 (private residence occupied under terms of settlement) is
amended as follows.

(2) 5The existing text becomes subsection (1).

(3) In that subsection—

(a) in the words before paragraph (a), after “person” insert “(“B”)”;

(b) in paragraph (a), for “the occupation of the dwelling-house or part of
the dwelling-house, and” substitute “the matters dealt with in
10subsection (2),”;

(c) in paragraph (b), for “the person entitled to occupy the dwelling-
house or part of the dwelling-house;” substitute “B, and”;

(d) after paragraph (b) insert—

“(c) the notice which may be given by the trustees under
15section 222A is effective only if it is accompanied by
written notification from B agreeing to the terms of
the notice;”.

(4) After that subsection insert—

“(2) In sections 222 to 224, as applied by subsection (1), references to the
20individual, in relation to—

(a) the occupation of the dwelling-house or part of the dwelling-
house,

(b) residence in a territory, or

(c) meeting the day count test,

25are to be taken as references to B.”

7 (1) Section 225A (private residence held by personal representatives) is
amended as follows.

(2) In subsection (5)—

(a) in paragraph (a), for the words from “the occupation” to the end
30substitute “the matters dealt with in paragraph (aa),”;

(b) after paragraph (a) insert—

“(aa) in relation to the occupation of the dwelling-house or
part of the dwelling-house, residence in a territory, or
meeting the day count test, references to the
35individual are to be taken as references to a qualifying
individual,”;

(c) after paragraph (b) insert “and

(c) the notice which may be given by the personal
representatives under section 222A is effective only if
40it is accompanied by written notification from the
individual or individuals entitled to occupy the
dwelling-house or part of the dwelling-house
agreeing to the terms of the notice.”

(3) After subsection (6) insert—

“(7) 45In subsection (5)(aa) “a qualifying individual” means an
individual—

(a) who has a relevant entitlement, and

(b) by virtue of whom the first condition is met.”

8 In section 225B (disposals in connection with divorce etc), in subsection (4),
after “222(5)” insert “or 222A”.

9 In section 225E (disposals by disabled persons or persons in care homes etc),
5in subsection (6)(b), after “subsection (5) of that section” insert “or under
section 222A”.

10 The amendments made by this Schedule have effect in relation to disposals
made on or after 6 April 2015.

Section 46

SCHEDULE 10 10Plant and machinery allowances: anti-avoidance

1 CAA 2001 is amended as follows.

Transfer and long funding leaseback: restrictions on lessee’s allowances

2 (1) Section 70DA is amended as follows.

(2) After subsection (5) insert—

“(5A) 15D is nil if—

(a) S is not required to bring a disposal value into account under
this Part because of the transfer referred to in subsection
(1)(a), and

(b) at any time before that transfer S or a linked person became
20owner of the plant or machinery without incurring either
capital expenditure or qualifying revenue expenditure on its
provision.”

(3) After subsection (8) insert—

“(9) Linked person”, in relation to plant or machinery, means a person—

(a) 25who owned the plant or machinery at any time before the
transfer referred to in subsection (1)(a), and

(b) who was connected with S at any time between—

(i) the time when the person became owner of the plant
or machinery, and

(ii) 30the time of the transfer referred to in subsection (1)(a).

(10) Expenditure on the provision of plant or machinery is “qualifying
revenue expenditure” if it is expenditure of a revenue nature—

(a) that is at least equal to the amount of expenditure that would
reasonably be expected to have been incurred on the
35provision of the plant or machinery in a transaction between
persons dealing with each other at arm’s length in the open
market, or

(b) that is incurred by the manufacturer of the plant or
machinery and is at least equal to the amount that it would
40have been reasonable to expect to have been the normal cost
of manufacturing the plant or machinery.”

(4) The amendments made by this paragraph have effect in relation to cases
where the lease referred to in section 70DA(1)(b) of CAA 2001 is entered into
on or after 26 February 2015.

Restriction on qualifying expenditure on sale, hire purchase (etc) and assignment

3 (1) 5Section 218 is amended as follows.

(2) In subsection (1), for “(2) and” substitute “(2), (2A) and”.

(3) After subsection (2) insert—

“(2A) D is nil if—

(a) S is not required to bring a disposal value into account under
10this Part because of the relevant transaction, and

(b) at any time before that transaction S or a linked person
became owner of the plant or machinery without incurring
either capital expenditure or qualifying revenue expenditure
on its provision.”

(4) 15In subsection (3), for the words from the beginning to “transaction,”
substitute “Otherwise,”.

(5) After that subsection insert—

“(3A) Linked person”, in relation to plant or machinery, means a person—

(a) who owned the plant or machinery at any time before the
20relevant transaction, and

(b) who was connected with S at any time between—

(i) the time when the person became owner of the plant
or machinery, and

(ii) the time of the relevant transaction.

(3B) 25Expenditure on the provision of plant or machinery is “qualifying
revenue expenditure” if it is expenditure of a revenue nature—

(a) that is at least equal to the amount of expenditure that would
reasonably be expected to have been incurred on the
provision of the plant or machinery in a transaction between
30persons dealing with each other at arm’s length in the open
market, or

(b) that is incurred by the manufacturer of the plant or
machinery and is at least equal to the amount that it would
have been reasonable to expect to have been the normal cost
35of manufacturing the plant or machinery.”

(6) The amendments made by this paragraph have effect in relation to
expenditure of B’s that is incurred on or after 26 February 2015.

Transfer followed by hire-purchase etc: restrictions on hirer’s allowances

4 (1) Section 229A is amended as follows.

(2) 40After subsection (5) insert—

“(5A) D is nil if—

(a) S is not required to bring a disposal value into account under
this Part because of the transfer referred to in subsection
(1)(a), and

(b) at any time before that transfer S or a linked person became
5owner of the plant or machinery without incurring either
capital expenditure or qualifying revenue expenditure on its
provision.”

(3) After subsection (9) insert—

“(10) Linked person”, in relation to plant or machinery, means a person—

(a) 10who owned the plant or machinery at any time before the
transfer referred to in subsection (1)(a), and

(b) who was connected with S at any time between—

(i) the time when the person became owner of the plant
or machinery, and

(ii) 15the time of the transfer referred to in subsection (1)(a).

(11) Expenditure on the provision of plant or machinery is “qualifying
revenue expenditure” if it is expenditure of a revenue nature—

(a) that is at least equal to the amount of expenditure that would
reasonably be expected to have been incurred on the
20provision of the plant or machinery in a transaction between
persons dealing with each other at arm’s length in the open
market, or

(b) that is incurred by the manufacturer of the plant or
machinery and is at least equal to the amount that it would
25have been reasonable to expect to have been the normal cost
of manufacturing the plant or machinery.”

(4) The amendments made by this paragraph have effect in relation to cases
where the contract referred to in section 229A(1)(c) of CAA 2001 is entered
into on or after 26 February 2015.

30Restriction on qualifying expenditure on sale, hire purchase (etc) and assignment: VAT

5 (1) Section 242 is amended as follows.

(2) After subsection (4) insert—

“(4A) D is nil if—

(a) S is not required to bring a disposal value into account under
35this Part because of the relevant transaction, and

(b) at any time before that transaction S or a linked person
became owner of the plant or machinery without incurring
either capital expenditure or qualifying revenue expenditure
on its provision.”

(3) 40In subsection (5), for the words from the beginning to “transaction,”
substitute “Otherwise,”.

(4) In subsection (6)—

(a) omit paragraph (a), and

(b) in paragraph (b), for “the smallest amount under subsection (5)”
45substitute “subsection (5) applies and the smallest amount under
that subsection”.

(5) After that subsection insert—

“(7) Linked person”, in relation to plant or machinery, means a person—

(a) who owned the plant or machinery at any time before the
relevant transaction, and

(b) 5who was connected with S at any time between—

(i) the time when the person became owner of the plant
or machinery, and

(ii) the time of the relevant transaction.

(8) Expenditure on the provision of plant or machinery is “qualifying
10revenue expenditure” if it is expenditure of a revenue nature—

(a) that is at least equal to the amount of expenditure that would
reasonably be expected to have been incurred on the
provision of the plant or machinery in a transaction between
persons dealing with each other at arm’s length in the open
15market, or

(b) that is incurred by the manufacturer of the plant or
machinery and is at least equal to the amount that it would
have been reasonable to expect to have been the normal cost
of manufacturing the plant or machinery.”

(6) 20The amendments made by this paragraph have effect in relation to
expenditure of B’s that is incurred on or after 26 February 2015.

Section 47

SCHEDULE 11 Extension of ring fence expenditure supplement

Amendments of Chapter 5 of Part 8 of CTA 2010

1 25Chapter 5 of Part 8 of CTA 2010 (ring fence expenditure supplement) is
amended as follows.

2 In section 307 (overview of Chapter), in subsection (5) for “6” substitute “10”.

3 In section 309 (accounting periods), in subsection (4), for the words from
“Chapter” to the end substitute “Chapter—

(a) 30in relation to straddling periods (see sections 311, 324 and
327(4) to (7)), and

(b) in relation to accounting periods which begin before, but end
on or after, 5 December 2013 (see sections 311(1C), 318A and
328A).”

4 (1) 35Section 311 (limit on number of accounting periods for which supplement
may be claimed) is amended as follows.

(2) In subsection (1) for “6” substitute “10”.

(3) After subsection (1) insert—

“(1A) In this Chapter—

• 40“the initial 6 periods” means the first 6 accounting periods (in
  chronological order) for which the company claims
  supplement under this Chapter;

Finance (No. 2) BillPage 265

• “the additional 4 periods” means the 4 accounting periods after
  the initial 6 periods for which the company claims
  supplement under this Chapter.

(1B) None of the additional 4 periods may be accounting periods
5beginning before 5 December 2013.

(1C) But, where—

(a) a company has an accounting period which begins before 5
December 2013 and ends on or after that date, and

(b) that accounting period falls after the initial 6 accounting
10periods,

so much of that accounting period as falls before 5 December 2013
and so much of it as falls on or after that date are treated as separate
accounting periods for the purposes of this Chapter.”

(4) In the heading of the section after “Limit on number” insert “etc”.

5 15In section 316 (the mixed pool of qualifying pre-commencement expenditure
and supplement previously allowed), after subsection (5) insert—

“(6) This section is subject to section 318A (adjustment of pool to remove
pre-2013 expenditure after the initial 6 periods).”

6 In section 317 (reduction in respect of disposal receipts under CAA 2001), at
20the end insert—

“(4) This section is subject to section 318A(5) (exclusion of deductible
amounts in respect of pre-2013 expenditure when determining pre-
commencement supplement for additional 4 periods).”

7 After section 318 insert—

“318A 25 Adjustment of pool to remove pre-2013 expenditure after the initial 6
periods

(1) This section applies for the purposes of determining the amount of
any pre-commencement supplement on any claim made by a
company for supplement under this Chapter in respect of an
30accounting period which is one of the additional 4 periods.

(2) The pool which (under section 316) the company is to be taken to
have had, at all times in the pre-commencement periods of the
company, is to be taken to have been reduced at the time specified in
subsection (4).

(3) 35The amount of the reduction is the sum of—

(a) the relevant amount (if any) which the company carries
forward under Schedule 19B to ICTA,

(b) the total amount of qualifying pre-commencement
expenditure allocated to the pool for pre-commencement
40periods beginning before 5 December 2013, and

(c) the total amount of the company’s pre-commencement
supplement allocated to the pool for pre-commencement
periods beginning before that date.

(4) The time is—

(a) 45immediately after the last of the initial 6 periods, or

(b) if later, 5 December 2013.

(5) Subsection (3) of section 317 (reduction in respect of disposal receipts
under CAA 2001) has effect as if the reference in paragraph (a) of that
subsection to “all such events” did not include events occurring in
5relation to an asset representing expenditure incurred before 5
December 2013.

(6) Where a company has a pre-commencement period (“the straddling
2013 period”) which begins before 5 December 2013 and ends on or
after that date, for the purposes of making a reduction under this
10section—

(a) so much of the straddling 2013 period as falls before 5
December 2013 (“the pre-2013 period”), and

(b) so much of that period as falls on or after that date (“the post-
2013 period”),

15are to be treated as separate pre-commencement periods.

(7) Accordingly, any amount of qualifying pre-commencement
expenditure, and any amount of the company’s pre-commencement
supplement, allocated to the pool for the straddling 2013 period is to
be—

(a) 20apportioned between the pre-2013 period and the post-2013
period in proportion to the number of days in each, and

(b) treated as allocated to the pool in question for the period in
question (rather than the straddling 2013 period).

(8) If the basis of the apportionment in subsection (7) would work
25unjustly or unreasonably in the company’s case, the company may
elect for the apportionment to be made on another basis that is just
and reasonable and specified in the election.”

8 (1) Section 326 (the ring fence pool) is amended as follows.

(2) In subsection (3), for “the following provisions of this Chapter” substitute
30“sections 327 and 328”.

(3) In subsection (4), after “made”, in the first place, insert “under section 327 or
328”.

(4) After subsection (5) insert—

“(6) This section is subject to section 328A (adjustment of pool to remove
35pre-2013 losses after the initial 6 periods).”

9 In section 327 (reductions in respect of utilised ring fence losses), after
subsection (3) insert—

“(3A) Subsection (3) is subject to section 328A(11).”

10 After section 328 insert—

“328A 40 Adjustment of pool to remove pre-2013 losses after the initial 6
periods

(1) This section applies for the purposes of determining the amount of
any post-commencement supplement on any claim in respect of any
of the additional 4 periods.

(2) The ring fence pool is to be taken to have been reduced at the time
specified in subsection (6).

(3) The amount of the reduction is the amount of the total pre-2013 pool
reduced (but not below nil) by the amount of the total pre-2013
5reduction.

(4) “The amount of the total pre-2013 pool” means the sum of—

(a) the carried forward qualifying Schedule 19B amount (within
the meaning of section 326(5)) which is in the pool at the time
specified in subsection (6) (if any),

(b) 10the total amount of the company’s ring fence losses added to
the pool in post-commencement periods beginning before 5
December 2013,

(c) if the commencement period begins on or after 5 December
2013, so much of any ring fence loss added to the pool in that
15period as does not exceed the sum of—

(i) any pre-commencement expenditure added to the
pool in a pre-commencement period ending before 5
December 2013, and

(ii) any pre-commencement supplement allowed in
20respect of such a pre-commencement period, and

(d) the total amount of the company’s post-commencement
supplement added to the pool in post-commencement
periods beginning before that date.

(5) “The amount of the total pre-2013 reduction” means the total amount
25of the reductions in the ring fence pool falling to be made under
section 327 or 328 in post-commencement periods beginning before
the time specified in subsection (6).

(6) The time is—

(a) immediately after the last of the 6 initial periods, or

(b) 30if later, 5 December 2013.

(7) The amount (if any) in the non-qualifying pool under section 325(3)
is reduced to nil (and so ceases to exist under section 325(4)).

(8) Section 318A(6) (“the straddling 2013 period”) applies for the
purposes of making a reduction under this section as it applies for
35the purposes of making a reduction under section 318A.

(9) Accordingly—

(a) any ring fence loss of the company added to the pool in the
straddling 2013 period is to be apportioned between the pre-
2013 period and the post-2013 period in proportion to the
40number of days in each and treated as allocated to the pool
for the period in question;

(b) any amount of the company’s post-commencement
supplement allocated to the pool for the straddling period is
to be apportioned between the pre-2013 period and the post-
452013 period in proportion to the number of days in each and
treated as allocated to the pool for the period in question;

(c) the total amount of reductions in the ring fence pool falling to
be made in the straddling period is apportioned between the
pre-2013 period and the post-2013 period in proportion to the

number of days in each and treated as a reduction falling to
be made in the period in question.

(10) If the basis of the apportionment in subsection (9)(a), (b) or (c) would
work unjustly or unreasonably in the company’s case, the company
5may elect for the apportionment to be made on another basis that is
just and reasonable and specified in the election.

(11) Once a reduction in the pool has been made under this section—

(a) nothing in section 327 applies to require a reduction in the
pool in respect of the use under section 45 of a loss if and to
10the extent that the loss is represented by the reduction made
under this section, and

(b) if and to the extent that losses are represented by the
reduction they are to be used under section 45 to reduce any
profits of a post-commencement period before ring fence
15losses of the company the use of which would trigger a
reduction of the ring fence pool under section 327.”

Abolition of extended ring fence expenditure supplement for onshore activities

11 In section 270 of CTA 2010 (overview of Part 8) omit subsection (5A).

12 (1) Schedule 4 to CTA 2010 (index of defined expressions) is amended as
20follows.

(2) The following definitions are inserted at the appropriate places—

(3) The following definitions are omitted—

13 (1) In Part 8 of CTA 2010, Chapter 5A (extended ring fence expenditure
supplement for onshore activities) is repealed.

(2) 25Accordingly, section 69 of and Schedule 14 to FA 2014 are also repealed.

Commencement

14 The amendments made by this Schedule have effect in relation to accounting
periods ending on or after 5 December 2013.

Section 49

SCHEDULE 12 30Supplementary charge: investment allowance

Part 1 Amendments of Part 8 of CTA 2010

1 Part 8 of CTA 2010 (oil activities) is amended in accordance with paragraphs
2 and 3.