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Finance (No. 2) BillPage 30

(a) in relation to debtor relationships entered into by a company on or after
3 December 2014, and

(b) in relation to debtor relationships entered into by a company before 3
December 2014, where the relevant period (within the meaning of
5section 407 of CTA 2009) begins on or after 1 January 2016.

(8) Subsections (6)(b) and (7)(b) are subject to subsections (9) to (14).

(9) In the case of a company which has an accounting period beginning before 1
January 2016 and ending on or after that date (“the straddling period”), so
much of the straddling period as falls before that date, and so much of that
10period as falls on or after that date, are treated for the purposes of subsections
(6)(b) and (7)(b) as separate accounting periods.

(10) If a debtor relationship entered into by a company before 3 December 2014 is
modified on or after 3 December 2014 and before 1 January 2016, subsections
(2)(a) and (b), (3) and (4) have effect in relation to that debtor relationship
15where the actual accrual period (within the meaning of Chapter 8 of Part 5 of
CTA 2009) begins on or after the date on which the modification takes effect.

(11) For the purposes of subsection (10) a debtor relationship of a company is
modified if—

(a) there is a material change in the terms of the relationship, or

(b) 20there is a change in the person standing in the position of creditor.

(12) If a the terms of a deeply discounted security issued by a company before 3
December 2014 are modified on or after 3 December 2014 and before 1 January
2016, subsections (2)(c) and (d) and (5) have effect in relation to the debtor
relationship represented by that security where the relevant period (within the
25meaning of section 407 of CTA 2009) begins on or after the day on which the
modification takes effect.

(13) For the purposes of subsection (12) the terms of a deeply discounted security
are modified if—

(a) there is a material change in the terms of the security, or

(b) 30there is a change in the person standing in the position of creditor.

(14) Where subsection (10) or (12) applies, an accounting period is to be taken for
the purposes of that subsection to end immediately before the day on which the
modification takes effect, and a new accounting period is to be taken for those
purposes to begin with that day.

26 35Intangible fixed assets: goodwill etc acquired from a related party

(1) Part 8 of CTA 2009 (intangible fixed assets) is amended as follows.

(2) In section 746 (“non-trading credits” and “non-trading debits”), in subsection
(2), omit the “and” at the end of paragraph (b) and after that paragraph insert—

(ba) sections 849C(3)(b) and 849D(3) (certain debits relating to
40goodwill etc acquired from a related individual or firm), and.

(3) In section 844 (overview of Chapter 13), after subsection (2) insert—

(2A) Sections 849B to 849D contain restrictions relating to debits in respect of
goodwill and certain other assets acquired by a company from—

(a) an individual who is a related party in relation to the company,
45or

Finance (No. 2) BillPage 31

(b) a firm with a member who is an individual and a related party
in relation to the company.

(4) After section 849A insert—

Transfers of goodwill etc to company by related individual or firm
849B 5Circumstances in which restrictions on debits in respect of goodwill
etc apply

(1) This section applies if—

(a) a company (“C”) acquires a relevant asset directly or indirectly
from an individual or a firm (“the transferor”), and

(b) 10at the time of the acquisition—

(i) if the transferor is an individual, the transferor is a
related party in relation to C, or

(ii) if the transferor is a firm, any individual who is a
member of the transferor is a related party in relation to
15C.

(2) “Relevant asset” means—

(a) goodwill in a business, or part of a business, carried on by the
transferor,

(b) an intangible fixed asset that consists of information which
20relates to customers or potential customers of a business, or part
of a business, carried on by the transferor,

(c) an intangible fixed asset that consists of a relationship (whether
contractual or not) that the transferor has with one or more
customers of a business, or part of a business, carried on by the
25transferor,

(d) an unregistered trade mark or other sign used in the course of a
business, or part of a business, carried on by the transferor, or

(e) a licence or other right in respect of an asset (“the licensed
asset”) within any of paragraphs (a) to (d).

(3) 30“The relevant business or part”, in relation to a relevant asset, means—

(a) in the case of a relevant asset within subsection (2)(e), the
business, or part of a business, mentioned in the paragraph of
subsection (2) within which the licensed asset falls, and

(b) in any other case, the business, or part of a business, mentioned
35in the paragraph of that subsection within which the relevant
asset falls.

(4) In a case in which the relevant asset is goodwill, section 849C applies
if—

(a) the transferor acquired all or part of the relevant business or
40part in one or more third party acquisitions as part of which the
transferor acquired goodwill, and

(b) the relevant asset is acquired by C as part of an acquisition of all
of the relevant business or part.

(5) In a case in which the relevant asset is not goodwill, section 849C
45applies if—

(a) the transferor acquired the relevant asset in a third party
acquisition, and

Finance (No. 2) BillPage 32

(b) the relevant asset is acquired by C as part of an acquisition of all
of the relevant business or part.

(6) In a case not within subsection (4) or (5), section 849D applies.

(7) The transferor acquires something in a “third party acquisition” if—

(a) 5the transferor acquires it from a company and, at the time of that
acquisition—

(i) if the transferor is an individual, the transferor is not a
related party in relation to the company, or

(ii) if the transferor is a firm, no individual who is a member
10of the transferor is a related party in relation to the
company, or

(b) the transferor acquires it from a person (“P”) who is not a
company and, at the time of that acquisition—

(i) if the transferor is an individual, P is not connected with
15the transferor, or

(ii) if the transferor is a firm, no individual who is a member
of the transferor is connected with P.

This is subject to subsection (9).

(8) In subsection (7)(b) “connected” has the same meaning as in Chapter 12
20(see section 842).

(9) An acquisition is not a “third party acquisition” if its main purpose, or
one of its main purposes, is for any person to obtain a tax advantage
(within the meaning of section 1139 of CTA 2010).

849C Restrictions in a case within section 849B(4) or (5)

(1) 25This section contains restrictions relating to certain debits in respect of
a relevant asset in a case within section 849B(4) or (5) (and in this section
terms defined in section 849B have the same meaning as they have in
that section).

(2) If a debit is to be brought into account by C for tax purposes, in respect
30of the relevant asset, under a provision of Chapter 3 (debits in respect
of intangible fixed assets), the amount of that debit is—


D × AM

where—

  • D is the amount of the debit that would be brought into account
    35disregarding this section (and, accordingly, for the purposes of
    any calculation of the tax written-down value of the relevant
    asset needed to determine D, this section’s effect in relation to
    any debits previously brought into account is to be
    disregarded), and

  • 40AM is the appropriate multiplier (see subsection (6)).

(3) If, but for this section, a debit would be brought into account by C for
tax purposes, in respect of the relevant asset, under a provision of
Chapter 4 (realisation of intangible fixed assets), two debits are to be
brought into account under that provision instead—

(a) 45a debit determined in accordance with subsection (4), and

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(b) a debit determined in accordance with subsection (5), which is
to be treated for the purposes of Chapter 6 as a non-trading
debit (“the non-trading debit”).

(4) The amount of the debit determined in accordance with this subsection
5is—


D × AM

where—

  • D is the amount of the debit that would be brought into account
    under Chapter 4 disregarding this section (and, accordingly, for
    10the purposes of any calculation of the tax written-down value of
    the relevant asset needed to determine D, this section’s effect in
    relation to any debits previously brought into account is to be
    disregarded), and

  • AM is the appropriate multiplier (see subsection (6)).

(5) 15The amount of the non-trading debit is—


D − TD

where—

  • D is the amount of the debit that would be brought into account
    under Chapter 4 disregarding this section (but, for the purposes
    20of any calculation of the tax written-down value of the relevant
    asset needed to determine D, this section’s effect in relation to
    any debits previously brought into account is not to be
    disregarded), and

  • TD is the amount of the debit determined in accordance with
    25subsection (4).

(6) The appropriate multiplier is the lesser of 1 and—


where—

  • RAVTPA is the relevant accounting value of third party
    30acquisitions (see subsections (7) to (9)), and

  • CEA is the expenditure incurred by C for, or in connection with,
    the acquisition of the relevant asset that is—

    (a)

    capitalised by C for accounting purposes, or

    (b)

    recognised in determining C’s profit or loss without
    35being capitalised for accounting purposes,

    subject to any adjustments under this Part or Part 4 of TIOPA
    2010.

(7) In a case in which this section applies by virtue of subsection (4) of
section 849B, the relevant accounting value of third party acquisitions
40is the notional accounting value of the goodwill mentioned in
paragraph (a) of that subsection (“the previously acquired goodwill”).

(8) In a case in which this section applies by virtue of subsection (5) of
section 849B, the relevant accounting value of third party acquisitions
is the notional accounting value of the relevant asset.

(9) 45The “notional accounting value” of the previously acquired goodwill,
or of the relevant asset, is what its accounting value would have been
in GAAP-compliant accounts drawn up by the transferor—

Finance (No. 2) BillPage 34

(a) immediately before the relevant asset was acquired by C, and

(b) on the basis that the relevant business or part was a going
concern.

849D Restrictions in a case within section 849B(6)

(1) 5This section contains restrictions relating to certain debits in respect of
a relevant asset in a case within section 849B(6) (and in this section
terms defined in section 849B have the same meaning as they have in
that section).

(2) No debits are to be brought into account by C for tax purposes, in
10respect of the relevant asset, under Chapter 3 (debits in respect of
intangible fixed assets).

(3) Any debit brought into account by C for tax purposes, in respect of the
relevant asset, under Chapter 4 (realisation of intangible fixed assets) is
treated for the purposes of Chapter 6 as a non-trading debit.

(5) 15The amendments made by this section—

(a) have effect in relation to accounting periods beginning on or after 3
December 2014, and

(b) apply in relation to a relevant asset acquired by C on or after that date,
unless C acquires the asset in pursuance of an obligation, under a
20contract, that was unconditional before that date.

(6) If the relevant asset is acquired by C—

(a) before 24 March 2015, or

(b) in pursuance of an obligation, under a contract, that was unconditional
before that date,

25section 849B of CTA 2009 has effect as if in subsection (1)(a) of that section
“directly or indirectly” were omitted.

(7) For the purposes of subsection (5)(a), an accounting period beginning before,
and ending on or after, 3 December 2014 is to be treated as if so much of the
period as falls before that date, and so much of the period as falls on or after
30that date, were separate accounting periods.

(8) For the purposes of subsections (5)(b) and (6)(b), an obligation is
“unconditional” if it may not be varied or extinguished by the exercise of a
right (whether under the contract or otherwise).

27 Amount of relief for expenditure on research and development

(1) 35CTA 2009 is amended as follows.

(2) In Chapter 6A of Part 3 (trade profits: R&D expenditure credits), in section
104M (amount of R&D expenditure credit), in subsection (3), for “10%”
substitute “11%”.

(3) In Chapter 2 of Part 13 (relief for SMEs: cost of R&D incurred by SME)—

(a) 40in section 1044 (additional deduction in calculating profits of trade), in
subsection (8), for “125%” substitute “130%”,

(b) in section 1045 (alternative treatment for pre-trading expenditure:
deemed trading loss), in subsection (7), for “225%” substitute “230%”,
and

Finance (No. 2) BillPage 35

(c) in section 1055 (tax credit: meaning of “Chapter 2 surrenderable loss”),
in subsection (2)(b), for “225%” substitute “230%”.

(4) In consequence of subsection (3), in Schedule 3 to FA 2012, omit paragraph 2(2)
to (4).

(5) 5The amendments made by this section have effect in relation to expenditure
incurred on or after 1 April 2015.

28 Expenditure on research and development: consumable items

(1) CTA 2009 is amended as follows.

(2) In Part 13 (additional relief for expenditure on research and development), in
10section 1126 (software or consumable items: attributable expenditure), after
subsection (6) insert—

(7) This section is subject to sections 1126A and 1126B.

(3) After section 1126 insert—

1126A Attributable expenditure: special rules

(1) 15Expenditure on consumable items is not to be treated as attributable to
relevant research and development if—

(a) the relevant research and development relates to an item that is
produced in the course of the research and development,

(b) the consumable items form part of the item produced,

(c) 20the item produced is transferred by a relevant person for
consideration in money or money’s worth, and

(d) the transfer is made in the ordinary course of the relevant
person’s business.

(2) Expenditure on consumable items is not to be treated as attributable to
25relevant research and development if—

(a) the relevant research and development relates to a process of
producing an item,

(b) the consumable items form part of an item produced in the
course of that research and development,

(c) 30the item produced is transferred by a relevant person for
consideration in money or money’s worth, and

(d) the transfer is made in the ordinary course of the relevant
person’s business.

(3) If—

(a) 35the item produced as described in subsection (1) or (2) may be
divided, and

(b) only a proportion (“the appropriate proportion”) of that item is
transferred by a relevant person as described in subsection
(1)(c) and (d) or (2)(c) and (d),

40the appropriate proportion of the expenditure on the consumable items
is not to be treated as attributable to the relevant research and
development.

(4) If—

Finance (No. 2) BillPage 36

(a) a number of items are produced in the course of the relevant
research and development described in subsection (2), and

(b) only a proportion (“the appropriate proportion”) of those items
is transferred by a relevant person as described in subsection
5(2)(c) and (d),

the appropriate proportion of the expenditure on the consumable items
is not to be treated as attributable to the relevant research and
development.

(5) A reference in this section to producing an item includes a reference to
10preparing an item for transfer.

(6) For the purposes of this section a consumable item forms part of an item
produced if—

(a) it is incorporated into the item produced, or

(b) it is turned into, or it and other materials are turned into, the
15item produced or a part of the item produced.

(7) A reference in this section to the transfer of an item is a reference to—

(a) the transfer of ownership of an item to another person (whether
by sale or otherwise), or

(b) the transfer of possession of an item to another person (whether
20by letting on hire or otherwise),

and a reference to the transfer of an item includes, where the item is
incorporated into another item, the transfer of that other item.

(8) For the purposes of this section the provision of information obtained
in testing an item is not to be regarded as consideration for the transfer
25of that item.

(9) For the purposes of this section a transfer of an item produced in the
course of research and development is not to be regarded as a transfer
in the ordinary course of business if the item being transferred is waste.

(10) In this section—

Finance (No. 2) BillPage 37

1126B Attributable expenditure: further provision

(1) The Treasury may by regulations make provision for the purpose of
identifying when expenditure on consumable items is attributable to
relevant research and development, including provision modifying the
5effect of section 1126 or 1126A.

(2) Regulations under this section may include provision about—

(a) the circumstances in which expenditure on consumable items
employed directly in relevant research and development is, or
is not, to be treated as attributable to that relevant research and
10development;

(b) the circumstances in which consumable items are, or are not, to
be treated as employed directly in relevant research and
development.

(3) Regulations under this section may—

(a) 15make different provision for different purposes;

(b) make incidental, consequential, supplementary or transitional
provision or savings.

(4) Regulations under this section may amend—

(a) section 1126;

(b) 20section 1126A;

(c) any other provision of this Act, if that is appropriate in
consequence of provision made under paragraph (a) or (b).

(5) Regulations under this section may make provision that has effect in
relation to expenditure incurred before the making of the regulations,
25provided that it does not increase any person’s liability to tax.

(4) In each of the following, after “1126” insert “to 1126B”—

(a) section 104D(5);

(b) section 104E(5);

(c) section 104G(6);

(d) 30section 104H(7);

(e) section 104J(6);

(f) section 104K(7);

(g) section 1052(7);

(h) section 1053(6);

(i) 35section 1066(5);

(j) section 1067(5);

(k) section 1071(7);

(l) section 1072(8);

(m) section 1077(6);

(n) 40section 1078(7);

(o) section 1101(7);

(p) section 1102(6).

(5) In section 104Y(2), for “and 1126” substitute “to 1126B”.

(6) In section 1310(4) (orders and regulations subject to affirmative procedure),

Finance (No. 2) BillPage 38

after paragraph (za) insert—

(zb) section 1126B (provision about when expenditure on
consumable items is attributable to relevant research and
development),.

(7) 5The amendments made by this section have effect in relation to expenditure
incurred on or after 1 April 2015.

29 Film tax relief

(1) Part 15 of CTA 2009 (film production) is amended as follows.

(2) In section 1184 (definitions of terms including “limited-budget film”)—

(a) 10omit subsections (2) and (3), and

(b) in the heading for that section omit “and “limited-budget film””.

(3) For section 1200(3) (film tax relief: amount of additional deduction: rate of
enhancement) substitute—

(3) The rate of enhancement is 100%.

(4) 15In section 1202 (surrendering of loss and amount of film tax credit)—

(a) in subsection (2) for “R is the payable credit rate (see subsection (3))”
substitute “R is 25%”, and

(b) omit subsection (3).

(5) Omit section 1215 (film tax relief on basis that film is limited-budget film).

(6) 20In Schedule 4 (index of defined expressions) omit the entry for “limited-budget
film”.

(7) In consequence of subsection (4), in section 32 of FA 2014—

(a) omit subsection (3),

(b) in subsection (4) for “amendments made by subsections (2) and (3)
25have” substitute “amendment made by subsection (2) has”,

(c) omit subsection (5), and

(d) in subsection (7) for “sections 1198(1) and 1202(2) and (3)” substitute
“section 1198(1)”.

(8) The amendments made by this section have effect in relation to films the
30principal photography of which is not completed before such day as the
Treasury may specify by regulations.

(9) The specified day may be before the day on which the regulations are made,
but may not be before 1 April 2015.

(10) Section 1171(4) of CTA 2010 (orders and regulations subject to negative
35resolution procedure) does not apply in relation to any regulations made
under subsection (8).

30 Reliefs for makers of children’s television programmes

(1) Part 15A of CTA 2009 (television production reliefs) is amended as follows.

(2) In section 1216AB(2) (programmes that are not animation can be relevant
40programmes only if conditions C and D are met in addition to conditions A and

Finance (No. 2) BillPage 39

B) for “not animation” substitute “neither animation nor a children’s
programme”.

(3) In section 1216AB(3) (condition A: types of programme that can be relevant
programmes)—

(a) 5omit the “or” after paragraph (b), and

(b) after paragraph (c) insert , or

(d) a children’s programme.

(4) In section 1216AC (types of programme: definitions) after subsection (2)
insert—

(2A) 10A programme is a children’s programme if, when television
production activities begin, it is reasonable to expect that the persons
who will make up the programme’s primary audience will be under
the age of 15.

(5) In section 1216AD(1) (meaning of “excluded programme”) after “For the
15purposes of this Part” insert “, but subject to section 1216ADA,”.

(6) After section 1216AD insert—

1216ADA Certain children’s programmes not to be excluded programmes

(1) A children’s programme is not an excluded programme for the
purposes of this Part if—

(a) 20the programme falls within—

(i) sub-head 3A set out in subsection (2), or

(ii) Head 4 set out in section 1216AD(5), and

(b) the prize total (see subsection (3)) does not exceed £1,000.

(2) Sub-head 3A is any quiz show or game show.

(3) 25“The prize total” for a programme is the total of—

(a) the amount of each relevant prize that is a money prize, and

(b) the amount spent on each other relevant prize by, or on behalf
of, its provider,

and here “relevant prize” means a prize offered in connection with
30participation in a quiz, game, competition or contest in, or promoted
by, the programme.

(4) The Treasury may by regulations amend subsection (1)(b) for the
purpose of increasing the amount of the money limit for the time being
specified in subsection (1)(b).

(7) 35The amendments made by this section have effect in relation to accounting
periods beginning on or after 1 April 2015.

(8) Subsections (9) and (10) apply where—

(a) a company has an accounting period beginning before, and ending on
or after, 1 April 2015 (“the straddling period”),

(b) 40in the part of the straddling period beginning with 1 April 2015 and
ending with the end of the straddling period, the company carries on
activities in relation to a television programme that—

(i) is within the definition of “children’s programme” given by the
new section 1216AC(2A), but

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