Finance Bill (HC Bill 57)

(b) before the entry for section 535 of ITTOIA 2005 insert—

• ““section 274A of ITTOIA 2005 (property business: relief for
  non-deductible costs of a dwelling-related loan),”.”

25 Enterprise investment scheme

5Schedule 5 contains amendments of Part 5 of ITA 2007 (enterprise investment
scheme).

26 Venture capital trusts

Schedule 6 contains amendments of Part 6 of ITA 2007 (venture capital trusts).

27 EIS, VCTs and EMI: meaning of “farming”

(1) 10In section 996 of ITA 2007 (meaning of “farming” and related expressions),
omit subsection (7).

(2) The amendment made by subsection (1)—

(a) in relation to the application of section 996 of ITA 2007 for the purposes
of section 192(1) of that Act, has effect in relation to shares issued on or
15after the day on which this Act is passed;

(b) in relation to the application of section 996 of that Act for the purposes
of section 303(1) of that Act, has effect for the purposes of determining
whether shares or securities issued on or after that day are to be
regarded as comprised in a company’s qualifying holdings;

(c) 20in relation to the application of section 996 for the purposes of
paragraph 16 of Schedule 5 to ITEPA 2003, has effect in relation to
options granted on or after that day.

28 Travel expenses of members of local authorities etc

(1) ITEPA 2003 is amended as follows.

(2) 25In section 229(2) (mileage allowance payments), for “section 236(1))” substitute
“sections 235A and 236(1))”.

(3) After section 235 insert—

“235A Journeys made by members of local authorities etc

(1) Subject to subsections (2) and (3), a qualifying journey made by a
30member of a relevant authority is to be treated as business travel for the
purposes of this Chapter if a qualifying payment is made by the
authority—

(a) to the member for expenses related to the member’s use for the
journey of a vehicle to which this Chapter applies, or

(b) 35to another member of the authority for carrying the member as
a passenger on the journey in a car or van.

(2) A qualifying journey is not to be treated as business travel—

(a) for the purposes of section 231, or

(b) when calculating for the purposes of that section the mileage
40allowance payments paid to the member in respect of the
journey and the approved amount for such payments.

(3) If a journey made by a member of a relevant authority is a qualifying
journey and a qualifying payment is made to the member for carrying
a passenger on the journey, the member’s journey is not to be treated as
business travel in respect of that passenger for the purposes of sections
5233 and 234 unless the passenger is also a member of the authority.

(4) A journey made by a member of a relevant authority is a “qualifying
journey” for the purposes of this section if—

(a) it is a journey between the member’s home and permanent
workplace, and

(b) 10the member’s home is situated in the area of the authority, or no
more than 20 miles outside the boundary of the area.

(5) In this section “permanent workplace” has the same meaning as in Part
5 (see section 339).

(6) The Treasury may by regulations—

(a) 15provide for bodies specified in the regulations (which must be
local authorities or bodies that have similar or related functions
or purposes) to be relevant authorities for the purposes of this
section,

(b) provide for references in this section to a member of a relevant
20authority to be read as references to a member of a description
prescribed in the regulations, and

(c) define what is meant by “qualifying payment” for the purposes
of this section.

(7) The regulations may contain transitional provision and savings.””

(4) 25In section 236 (interpretation of Chapter 2 of Part 4), after subsection (1)
insert—

“(1A) For journeys that are treated as business travel for the purposes of
certain provisions of this Chapter, see section 235A (journeys made by
members of local authorities etc).””

(5) 30After section 295 insert—

““Members of local authorities etc

295A Travel expenses of members of local authorities etc

(1) No liability to income tax arises in respect of a qualifying payment
made to a member of a relevant authority for travel expenses incurred
35by the member if—

(a) the payment is for expenses other than those related to the
member’s use of a vehicle to which Chapter 2 applies, and

(b) the expenses are not excluded by subsection (2).

(2) Expenses are excluded by this subsection if—

(a) 40they are incurred on a journey between the member’s home and
permanent workplace, and

(b) the member’s home is situated more than 20 miles outside the
boundary of the area of the relevant authority.

(3) In this section “permanent workplace” has the same meaning as in Part
455 (see section 339).

(4) The Treasury may by regulations—

(a) provide for bodies specified in the regulations (which must be
local authorities or bodies that have similar or related functions
or purposes) to be relevant authorities for the purposes of this
5section,

(b) provide for references in this section to a member of a relevant
authority to be read as references to a member of a description
prescribed in the regulations, and

(c) define what is meant by “qualifying payment” for the purposes
10of this section.

(5) The regulations may contain transitional provision and savings.””

(6) In Schedule 1 (index of defined expressions), in the entry relating to business
travel in Chapter 2 of Part 4, for “section 236(1)” substitute “sections 235A and
236(1)”.

(7) 15The amendments made by this section have effect for the tax year 2016-17 and
subsequent tax years.

29 London Anniversary Games

(1) A duly accredited competitor who performs an Anniversary Games activity is
not liable to income tax in respect of any income arising from the activity if the
20non-residence condition is met.

(2) The following are Anniversary Games activities—

(a) competing at the Anniversary Games, and

(b) any activity that is performed during the Games period the main
purpose of which is to support or promote the Anniversary Games.

(3)
25The non-residence condition is that—

(a) the accredited competitor is non-UK resident for the tax year 2015-16,
or

(b) the accredited competitor is UK resident for the tax year 2015-16 but the
year is a split year as respects the competitor and the activity is
30performed in the overseas part of the year.

(4) Section 966 of ITA 2007 (deductions of sums representing income tax) does not
apply to any payment or transfer which gives rise to income benefiting from
the exemption under subsection (1).

(5) In this section—

• 35“Anniversary Games” means the athletics event held at the Olympic
  Stadium in London on 24 - 26 July 2015;

• “Games period” means the period—

  (a)

  beginning with 22 July 2015, and

  (b)

  ending with 28 July 2015;

• 40“income” means employment income or profits of a trade, profession or
  vocation (including profits treated as arising as result of section 13 of
  ITTOIA 2005).

(6) This section is treated as having come into force on 8 July 2015.

Corporation tax

30 R&D expenditure credits: ineligible companies

(1) CTA 2009 is amended as follows.

(2) In section 104A (R&D expenditure credits), after subsection (7) insert—

“(7A) 5Section 104WA contains provision about ineligible companies.””

(3) After section 104W insert—

““Ineligible companies

104WA Ineligible companies

(1) No claim for an R&D expenditure credit may be made in respect of
10expenditure incurred by an ineligible company.

(2) In this section, “ineligible company” means a company that is—

(a) an institution of higher education (as defined by section
1142(1)(b)),

(b) a charity, or

(c) 15a company of a description prescribed by the Treasury by
regulations.”

(a)(a)an institution of higher education (as defined by section
1142(1)(b)),

(b) a charity, or

(c) 20a company of a description prescribed by the Treasury by
regulations.””

(4) In section 1310(4) (orders and regulations subject to affirmative procedure),
before paragraph (zza) insert—

“(zzza) section 104WA (ineligible companies for the purposes of R&D
25expenditure credits),”.”

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

31 Loan relationships and derivative contracts

Schedule 7 contains provisions relating to loan relationships and derivative
30contracts.

32 Intangible fixed assets: goodwill etc

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

(2) In section 715 (application of Part 8 to goodwill), in subsection (2), at the end
insert “(see, in particular, section 816A (restrictions on goodwill and certain
35other assets))”.

(3) In section 746 (“non-trading credits” and “non-trading debits”), in subsection
(2), for paragraph (ba) substitute—

“(ba) section 816A (restrictions on goodwill and certain other assets),
and”.”

(4) 40In section 800 (introduction to Chapter 10: excluded assets), in subsection
(2)(c)—

(a) for “section 814 or 815” substitute “any of sections 814 to 816A”, and

(b) for “that section” substitute “the section concerned”.

(5) After section 816 insert—

“816A Restrictions on goodwill and certain other assets

(1) This section applies if a company acquires or creates a relevant asset.

(2) “Relevant asset” means—

(a) 5goodwill,

(b) an intangible fixed asset that consists of information which
relates to customers or potential customers of a business,

(c) an intangible fixed asset that consists of a relationship (whether
contractual or not) between a person carrying on a business and
10one or more customers of that business,

(d) an unregistered trade mark or other sign used in the course of a
business, or

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

(3) 15No debits are to be brought into account by the company for tax
purposes, in respect of the relevant asset, under Chapter 3 (debits in
respect of intangible fixed assets).

(4) Any debit brought into account by the company for tax purposes, in
respect of the relevant asset, under Chapter 4 (realisation of intangible
20fixed assets) is treated for the purposes of Chapter 6 as a non-trading
debit.””

(6) In section 844 (overview of Chapter 13: transactions between related parties),
omit subsection (2A).

(7) Omit sections 849B to 849D (restrictions relating to goodwill etc acquired from
25a related individual or firm) and the italic heading immediately before those
sections.

(8) In consequence of the amendments made by this section, in FA 2015, omit
section 26.

(9) The amendments made by this section have effect in relation to accounting
30periods beginning on or after 8 July 2015.

(10) But the amendments made by this section do not apply in a case in which a
company acquires a relevant asset if the company does so—

(a) before 8 July 2015, or

(b) in pursuance of an obligation, under a contract, that was unconditional
35before that date.

(11) For the purposes of subsection (9), an accounting period beginning before, and
ending on or after, 8 July 2015 is to be treated as if so much of the accounting
period as falls before that date, and so much of the accounting period as falls
on or after that date, were separate accounting periods.

(12) 40An apportionment for the purposes of subsection (11) must be made in
accordance with section 1172 of CTA 2010 (time basis) or, if that method
produces a result that is unjust or unreasonable, on a just and reasonable basis.

(13) For the purposes of subsection (10)(b), an obligation is “unconditional” if it
may not be varied or extinguished by the exercise of a right (whether under the
45contract or otherwise).

33 Election of designated currency by UK resident investment company

(1) Chapter 4 of Part 2 of CTA 2010 (currency) is amended as follows.

(2) Section 9A (designated currency of a UK resident investment company) is
amended as follows.

(3) 5For subsection (2) substitute—

“(2) An election under this section by a company (“X”) takes effect only if,
at the time when it is to take effect (see section 9B(1))—

(a) X is a UK resident investment company, and

(b) Condition A or Condition B is met.””

(4) 10Omit subsection (3).

(5) After subsection (8) insert—

“(9) In relation to any period of account for which a currency is X’s
designated currency as a result of an election under this section, profits
or losses of X that fall to be calculated in accordance with generally
15accepted accounting practice for corporation tax purposes must be
calculated as if—

(a) the designated currency were the functional currency of the
company, and

(b) no part of X’s business could, in accordance with generally
20accepted accounting practice, be regarded as having another
currency as its functional currency.””

(6) Section 9B (period for which election under section 9A has effect) is amended
as follows.

(7) In subsection (1), for “section 9A(2)(a)” substitute “section 9A”.

(8) 25Omit subsection (2).

(9) In subsection (3), for “section 9A(2)(a)” substitute “section 9A”.

(10) In subsection (6), for the words from the beginning to “only” substitute “A
revocation event occurs in the period of account in which X’s first accounting
period begins”.

(11) 30After subsection (6) insert—

“(6A) A revocation event also occurs in a period of account (whether or not a
period to which subsection (6) applies) if, at any time during that
period, X ceases to be a UK resident investment company.””

(12) In subsection (7)(a), for “section 9A(2)(a)” substitute “section 9A”.

(13) 35In section 17 (interpretation of Chapter), for subsection (4) substitute—

“(4) References in this Chapter to the functional currency of a company or
of part of a company’s business are references to the currency of the
primary economic environment in which the company or part
operates.””

(14) 40This section has effect in relation to periods of account beginning on or after 1
January 2016.

(15) Subsections (16) and (17) apply if a period of account of a company (“the
straddling period of account) begins before, and ends on or after, 1 January
2016.

(16) It is to be assumed, for the purposes of this section, that the straddling period
5of account consists of two separate periods of account—

(a) the first beginning with the straddling period of account and ending
immediately before 1 January 2016, and

(b) the second beginning with that day and ending with the straddling
period of account.

(17) 10For the purposes of this section, it is to be assumed—

(a) that the company prepares its accounts for each of the two periods in
the same currency, and otherwise on the same basis, as it prepares its
accounts for the straddling period of account, and

(b) that if the accounts for the straddling period of account, in accordance
15with generally accepted accounting practice, identify a currency as the
company’s functional currency, the accounts for each of the two
periods do likewise.

34 Group relief

(1) In section 133 of CTA 2010 (claims for group relief: consortium conditions 2
20and 3)—

(a) in subsection (1)—

(i) at the end of paragraph (e) insert “and”, and

(ii) omit paragraph (g) and the “and” before it,

(b) in subsection (2)—

(i) 25at the end of paragraph (e) insert “and”, and

(ii) omit paragraph (g) and the “and” before it, and

(c) omit subsections (5) to (8).

(2) Accordingly—

(a) in section 129(2) of CTA 2010 for “134A” substitute “134”,

(b) 30in section 130(2) of that Act—

(i) in paragraph (c), for “and (3) to (8)” substitute “, (3) and (4)”, and

(ii) in paragraph (d), for “(8)” substitute “(4)”,

(c) omit section 134A of that Act, and

(d) in Schedule 6 to the Finance (No. 3) Act 2010, omit paragraphs 4(4) and
355.

(3) The amendments made by this section have effect in relation to accounting
periods beginning on or after 10 December 2014.

35 CFC charge: abolition of relief

(1) In Part 9A of TIOPA 2010 (controlled foreign companies), omit section 371UD
40(relief against sum charged).

(2) Accordingly, omit the following provisions—

(a) in CTA 2010, section 398D(6) and (6A);

(b) in FA 2012, in Schedule 20, paragraph 38;

(c) in FA 2015, in Schedule 2, paragraphs 6 and 8;

(d) in the Corporation Tax (Northern Ireland) Act 2015, in Schedule 2,
paragraph 3.

(3) The amendments made by this section have effect in relation to accounting
periods of CFCs beginning on or after 8 July 2015.

(4) 5Subsection (5) applies where a CFC has an accounting period beginning before
8 July 2015 and ending on or after that date (“the straddling period”).

(5) For the purposes of determining the relief to which a chargeable company in
relation to the straddling period is entitled under section 371UD of TIOPA
2010, or on the making of a claim would be so entitled—

(a) 10so much of the straddling period as falls before 8 July 2015, and so
much of that period as falls on or after that date, are treated as separate
accounting periods, and

(b) any amount charged on the company in accordance with section 371BC
of TIOPA 2010 in relation to the straddling period is to be apportioned
15on a just and reasonable basis between those two periods.

(6) In this section, “CFC”, “accounting period” in relation to a CFC, and
“chargeable company” have the same meanings as in Part 9A of TIOPA 2010.

36 CFC charge: tax avoidance involving carried-forward losses

(1) Part 14B of CTA 2010 (tax avoidance involving carried-over losses) is amended
20as follows.

(2) In section 730G (disallowance of deductions for relevant carried-forward
losses), in subsection (4), after “a relevant corporation tax advantage” insert “or
a relevant CFC charge advantage”.

(3) In that section, after subsection (5) insert—

“(5A) 25In this section “relevant CFC charge advantage” means a CFC charge
advantage involving the deductible amount mentioned in subsection
(3).””

(4) In that section, in subsection (7)—

(a) in paragraph (a)—

(i) 30for “the” substitute “any”;

(ii) omit the final “and”;

(b) after that paragraph insert—

“(aa) any relevant CFC charge advantage, and”;”

(c) in paragraph (b), at the end insert “or the relevant CFC charge
35advantage”.

(5) In that section, in subsection (8), after “subsection (7)(a)” insert “, (aa)”.

(6) In section 730H (interpretation), in subsection (1), after the definition of
“arrangements” insert—

• “““CFC charge advantage” means the avoidance or reduction of a
  40charge or assessment to a charge under Part 9A of TIOPA 2010
  (controlled foreign companies);”.”

(7) The amendments made by this section have effect for the purposes of
calculating the taxable total profits of companies for accounting periods
beginning on or after after 8 July 2015.

(8) For the purposes of the amendments made by this section, where a company
has an accounting period beginning before 8 July 2015 and ending on or after
that date (“the straddling period”)—

(a) so much of the straddling period as falls before 8 July 2015, and so
5much of that period as falls on or after that date, are treated as separate
accounting periods, and

(b) any amounts brought into account for the purposes of calculating the
taxable total profits of the company for the straddling period are to be
apportioned to the two separate accounting periods—

(i) 10in accordance with section 1172 of CTA 2010, and

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

Income tax and corporation tax

37 Changes in trading stock not made in course of trade

(1) 15In section 161 of CTA 2009 (changes in trading stock: transfer pricing rules to
take precedence), after subsection (1) insert—

“(1A) Subsection (1B) applies in relation to a disposal or acquisition if—

(a) by virtue of subsection (1), section 159 or 160 does not apply,
and

(b) 20the market value amount is greater than the Part 4 TIOPA
amount.

(1B) An amount equal to the market value amount less the Part 4 TIOPA
amount is to be brought into account in calculating the profits of the
trade (in addition to the Part 4 TIOPA amount).

(1C) 25In subsections (1A) and (1B)—

• “market value amount” means the amount referred to in section
  159(2)(a) or 160(2)(a);

• “Part 4 TIOPA amount” means the amount which, following the
  application of Part 4 of TIOPA 2010 to the relevant
  30consideration, is brought into account in respect of the relevant
  consideration in calculating the profits of the trade.””

(2) In section 172F of ITTOIA 2005 (changes in trading stock: transfer pricing rules
to take precedence), after subsection (1) insert—

“(1A) Subsection (1B) applies in relation to a disposal or acquisition if—

(a) 35by virtue of subsection (1), section 172D or 172E does not apply,
and

(b) the market value amount is greater than the Part 4 TIOPA
amount.

(1B) An amount equal to the market value amount less the Part 4 TIOPA
40amount is to be brought into account in calculating the profits of the
trade (in addition to the Part 4 TIOPA amount).

(1C) In subsections (1A) and (1B)—

• “market value amount” means the amount referred to in section
  172D(2)(a) or 172E(2)(a);

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• “Part 4 TIOPA amount” means the amount which, following the
  application of Part 4 of TIOPA 2010 to the relevant
  consideration, is brought into account in respect of the relevant
  consideration in calculating the profits of the trade.””

(3) 5The amendments made by this section apply in relation to a disposal or
acquisition made on or after 8 July 2015, unless it is made pursuant to an
obligation, under a contract, that was unconditional before that date.

(4) For the purposes of subsection (3), an obligation is “unconditional” if it may not
be varied or extinguished by the exercise of a right (whether under the contract
10or otherwise).

38 Valuation of trading stock on cessation

(1) In section 162 of CTA 2009 (valuation of trading stock on cessation), after
subsection (2) (transfer pricing rules to take precedence) insert—

“(2A) Subsection (2B) applies if—

(a) 15by virtue of subsection (2), no valuation of the stock under this
Chapter is required, and

(b) the market value of the stock is greater than the Part 4 TIOPA
amount.

(2B) An amount equal to the market value of the stock less the Part 4 TIOPA
20amount is to be brought into account in calculating the profits of the
trade (in addition to the Part 4 TIOPA amount).

(2C) In subsections (2A) and (2B)—

• “market value”, in relation to stock, is the value the stock would
  have been determined to have if it had been valued in
  25accordance with sections 164 to 167, and

• “Part 4 TIOPA amount” is the amount which, following the
  application of Part 4 of TIOPA 2010 in relation to the provision
  referred to in subsection (2), is brought into account in respect
  of that provision in calculating the profits of the trade.””

(2) 30In section 173 of ITTOIA 2005 (valuation of trading stock on cessation), after
subsection (2) (transfer pricing rules to take precedence) insert—

“(2A) Subsection (2B) applies if—

(a) by virtue of subsection (2), no valuation of the stock under this
Chapter is required, and

(b) 35the market value of the stock is greater than the Part 4 TIOPA
amount.

(2B) An amount equal to the market value of the stock less the Part 4 TIOPA
amount is to be brought into account in calculating the profits of the
trade (in addition to the Part 4 TIOPA amount).

(2C) 40In subsections (2A) and (2B)—

• “market value”, in relation to stock, is the value the stock would
  have been determined to have if it had been valued in
  accordance with sections 175 to 178, and

• “Part 4 TIOPA amount” is the amount which, following the
  45application of Part 4 of TIOPA 2010 in relation to the provision

  Finance BillPage 50

  referred to in subsection (2), is brought into account in respect
  of that provision in calculating the profits of the trade.””

(3) The amendments made by this section apply in relation to a cessation of trade
on or after 8 July 2015.

39 5Transfer of intangible assets not at arm’s length

(1) In section 846 of CTA 2009 (transfers of intangible assets not at arm’s length),
after subsection (1) insert—

“(1A) Subsection (1B) applies in relation to the transfer of an intangible asset
where—

(a) 10by virtue of subsection (1), section 845 does not apply, and

(b) the market value of the asset is greater than the Part 4 TIOPA
amount.

(1B) An amount equal to the market value of the asset less the Part 4 TIOPA
amount is to be brought into account for the purposes of corporation
15tax in relation to the transfer (in addition to the Part 4 TIOPA amount).

(1C) In subsections (1A) and (1B)—

• “market value”, in relation to an asset, has the meaning given in
  section 845(5);

• “Part 4 TIOPA amount” means the amount which, following the
  20application of Part 4 of TIOPA 2010 in relation to the
  consideration for the transfer, is brought into account in respect
  of the consideration for the purposes of corporation tax.””

(2) The amendment made by this section applies in relation to a transfer which
takes place on or after 8 July 2015, unless it takes place pursuant to an
25obligation, under a contract, that was unconditional before that date.

(3) For the purposes of subsection (2), an obligation is “unconditional” if it may not
be varied or extinguished by the exercise of a right (whether under the contract
or otherwise).

Income tax and capital gains tax

40 30Carried interest

(1) In Part 3 of TCGA 1992 (individuals, partnerships, trusts and collective
investment schemes etc), after section 103K insert—

““CHAPTER 5 Carried interest

103KA Carried interest

(1) 35This section applies where—

(a) an individual (“A”) performs investment management services
directly or indirectly in respect of an investment scheme under
arrangements involving at least one partnership, and

(b) carried interest arises to A under the arrangements.

(2) If the carried interest arises to A in connection with the disposal of one
or more assets of the partnership or partnerships—

(a) the amount of the chargeable gain accruing to A on the disposal
in respect of the carried interest is to be treated as an amount
5equal to the amount of the carried interest less any permitted
deductions, and

(b) the chargeable gain is to be treated as accruing to A at the time
the carried interest arises.

(3) If the carried interest arises to A in circumstances other than those
10specified in subsection (2), a chargeable gain of an amount equal to the
amount of the carried interest less any permitted deductions is to be
treated as accruing to A at the time the carried interest arises.

(4) Subsections (2) and (3) do not apply in relation to carried interest to the
extent that—

(a) 15it is brought into account in calculating the profits of a trade of
A for the purposes of income tax for any tax year, or

(b) it constitutes a co-investment repayment or return.

(5) For the purpose of subsections (2) and (3) “permitted deductions” in
relation to A means such parts of the amounts specified in subsection
20(6) as is just and reasonable.

(6) The amounts referred to in subsection (5) are—

(a) the amount of any consideration in money given to the scheme
by or on behalf of A wholly and exclusively for entering into the
arrangements referred to in subsection (1)(a) (but not
25consideration in respect of co-investments),

(b) any amount that constituted earnings of A under Chapter 1 of
Part 3 of ITEPA 2003 (earnings) in respect of A’s entering into
those arrangements (but not any earnings in respect of co-
investments or any amount of exempt income within the
30meaning of section 8 of that Act), and

(c) any amount which, by reason of events occurring no later than
the time the carried interest arises, counts as income of A under
the enactments referred to in section 119A(3) in respect of A’s
participation in the arrangements referred to in subsection
35(1)(a) (and section 119A(5) applies for the purposes of this
paragraph as it applies for the purposes of section 119A(4)).

For the purposes of this Act no other deduction may be made from the
amount of the carried interest referred to in subsection (2) or (3).

(7) Where the carried interest arises to A by virtue of his or her acquisition
40of a right to it from another individual for consideration given in
money by or on behalf of A, the amount of the chargeable gain accruing
to A under subsection (2) or (3) is, on the making of a claim by A under
this subsection, to be regarded as reduced by the amount of the
consideration.

(8) 45In this section—

• “co-investment”, in relation to A, means an investment made
  directly or indirectly by A in the scheme, where there is no
  return on the investment which is not an arm’s length return
  within the meaning of section 809EZB(2) of ITA 2007;

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• “co-investment repayment or return” means a repayment in whole
  or in part of, or a return on, a co-investment;

• “trade” includes profession or vocation.

103KB Carried interest: consideration on disposal etc of right

(1) 5For the purposes of section 103KA, consideration received or receivable
by an individual for the disposal, loss or cancellation of a right to
carried interest is to be treated as carried interest arising to that
individual at the time of the disposal, loss or cancellation.

(2) But subsection (1) does not apply if and to the extent that the
10consideration is a disguised fee arising to the individual for the
purposes of section 809EZA of ITA 2007.

(3) Subsection (4) applies where, for the purposes of determining the
amount of consideration received or receivable by an individual as
specified in subsection (1), the market value of a right to carried interest
15falls to be determined.

(4)
If—

(a) there is any contract, agreement, arrangement or condition
which makes provision to which subsection (5), (6) or (7)
applies, and

(b) 20the market value of the right to carried interest is less than it
would be but for that provision,

that provision is to be disregarded in determining the market value.

(5) This subsection applies to provision under which—

(a) there will be a transfer, reversion or forfeiture of the right to
25carried interest if certain circumstances do or do not arise,

(b) as a result of the transfer, reversion or forfeiture the person by
whom the right to carried interest is held will cease to be
beneficially entitled to it, and

(c) that person will not be entitled on the transfer, reversion or
30forfeiture to receive in respect of the right to carried interest an
amount of at least its market value (determined as if there were
no provision for transfer, reversion or forfeiture) at the time of
the transfer, reversion or forfeiture.

(6)
This subsection applies to provision under which there is a restriction
35on—

(a) the freedom of the person by whom the right to carried interest
is held to dispose of it or proceeds of its sale,

(b) the right of that person to retain the right to carried interest or
proceeds of its sale, or

(c) 40any other right conferred by the right to carried interest,

not being provision to which subsection (5) applies.

(7) This subsection applies to provision under which the disposal or
retention of the right to carried interest, or the exercise of a right
conferred by it, may result in a disadvantage to—

(a) 45the person by whom the right to carried interest is held,

(b) any person connected with that person,

not being provision to which subsection (5) or (6) applies.

(8) For the purposes of subsection (7) whether a person is connected with
another person is to be determined in accordance with section 993 of
ITA 2007.

103KC Carried interest: foreign chargeable gains

5In a case where section 103KA applies, a chargeable gain accruing or
treated as accruing to an individual in respect of carried interest is a
foreign chargeable gain within the meaning of section 12 only to the
extent that the individual performs the services referred to in section
103KA(1)(a) outside the United Kingdom.

103KD 10 Carried interest: anti-avoidance

In determining whether section 103KA applies in relation to an
individual, no regard is to be had to any arrangements the main
purpose, or one of the main purposes, of which is to secure that that
section does not to any extent apply in relation to—

(a) 15the individual, or

(b) the individual and one or more other individuals.

103KE Carried interest: avoidance of double taxation

(1) This section applies where—

(a) capital gains tax is charged on an individual by virtue of section
20103KA in respect of any carried interest,

(b) at any time, tax (whether income tax or another tax) charged on
the individual in relation to that carried interest has been paid
by him or her, and

(c) any sum so charged is not a permissible deduction under
25section 103KA(6)(b) or (c).

(2) In order to avoid a double charge to tax, the individual may make a
claim for one or more consequential adjustments to be made in respect
of the capital gains tax charged as mentioned in subsection (1)(a).

(3) On a claim under this section an officer of Revenue and Customs must
30make such of the consequential adjustments claimed (if any) as are just
and reasonable.

(4) The value of any consequential adjustments made must not exceed the
lesser of—

(a) the capital gains tax charged as mentioned in subsection (1)(a),
35and

(b) the tax charged as mentioned in subsection (1)(b).

(5) Consequential adjustments may be made—

(a) in respect of any period,

(b) by way of an assessment, the modification of an assessment, the
40amendment of a claim, or otherwise, and

(c) despite any time limit imposed by or under an enactment.

103KF Interpretation of Chapter 5

(1) For the purposes of this Chapter, carried interest “arises” to an
individual if, and only if, it arises to him or her for the purposes of
45Chapter 5E of Part 13 of ITA 2007.

(2) In this Chapter—

• “arrangements” has the same meaning as in Chapter 5E of Part 13
  of ITA 2007 (see 809EZE of that Act);

• “carried interest”, in relation to arrangements referred to in section
  5103KA(1)(a), has the same meaning as in section 809EZB of ITA
  2007 (see sections 809EZC and 809EZD of that Act);

• “investment scheme” and “investment management services”
  have the same meanings as in Chapter 5E of Part 13 of that Act
  (see sections 809EZA(6) and 809EZE of that Act).””

(2) 10The amendment made by subsection (1) has effect in relation to carried interest
arising on or after 8 July 2015 under any arrangements, unless the carried
interest arises in connection with the disposal of an asset or assets of a
partnership or partnerships before that date.

(3) But in relation to subsections (3) to (8) of section 103KB of TCGA 1992 as
15inserted by subsection (1), subsection (2) has effect as if the reference to 8 July
2015 (and the reference to “that date”) were a reference to 15 July 2015.

(4) In subsection (2), “arise”, “arrangements” and “carried interest” have the same
meanings as in Chapter 5 of Part 3 of TCGA 1992 (as inserted by subsection (1)
of this section).

41 20Disguised investment management fees

(1) In section 809EZB of ITA 2007 (disguised investment management fees:
meaning of “management fee”), after subsection (2) insert—

“(2A) For the purposes of subsection (2)(b), the return on the investment is
reasonably comparable to the return to external investors on the
25investments referred to in subsection (2)(a) if (and only if)—

(a) the rate of return on the investment is reasonably comparable to
the rate of return to external investors on those investments,
and

(b) any other factors relevant to determining the size of the return
30on the investment are reasonably comparable to the factors
determining the size of the return to external investors on those
investments.””

(2) The amendment made by this section has effect in relation to sums arising on
or after 8 July 2015 (whenever the arrangements under which the sums arise
35were made).

(3) In subsection (2), “arise” has the same meaning as it has for the purposes of
Chapter 5E of Part 13 of ITA 2007.

Part 5 Excise duties and other taxes

40Vehicle excise duty

42 Vehicle excise duty

(1) VERA 1994 is amended as follows.

(2) In Schedule 1 (annual rates of duty)—

(a) in the heading to Part 1A (light passenger vehicles: graduated rates of
duty) after “VEHICLES” insert “REGISTERED BEFORE 1 APRIL 2017”;

(b) in paragraph 1A (vehicles to which Part 1A applies) in sub-paragraph
5(1)(a) for “on or after 1 March 2001” substitute “, after 28 February 2001
but before 1 April 2017”;

(c) after Part 1A insert—

““Part 1AA Light Passenger Vehicles Registered On or After 1 April 2017

1GA 10Vehicles to which this Part applies etc

(1) This Part of this Schedule applies to a vehicle which—

(a) is first registered, under this Act or under the law of a country
or territory outside the United Kingdom, on or after 1 April
2017, and

(b) 15is so registered on the basis of an EU certificate of conformity
or UK approval certificate that—

(i) identifies the vehicle as having been approved as a
light passenger vehicle, and