Finance Bill (HC Bill 79)

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(a) so 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 amounts brought into account for the purposes of calculating the
5taxable total profits of the company for the straddling period are to be
apportioned to the two separate accounting periods—

(i) in 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.

10Income tax and corporation tax

37 Changes in trading stock not made in course of trade

(1) In 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) 15by virtue of subsection (1), section 159 or 160 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
20amount 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
    159(2)(a) or 160(2)(a);

  • 25“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.”

(2) In section 172F of ITTOIA 2005 (changes in trading stock: transfer pricing rules
30to 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 172D or 172E does not apply,
and

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

(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) In subsections (1A) and (1B)—

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

  • “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
    45consideration in calculating the profits of the trade.”

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(3) The 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
5be varied or extinguished by the exercise of a right (whether under the contract
or 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) 10Subsection (2B) applies if—

(a) by 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) 15An 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) In subsections (2A) and (2B)—

  • “market value”, in relation to stock, is the value the stock would
    20have been determined to have if it had been valued in
    accordance 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
    25of that provision in calculating the profits of the trade.”

(2) In 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
30Chapter 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
amount is to be brought into account in calculating the profits of the
35trade (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
    accordance with sections 175 to 178, and

  • 40“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.”

(3) The amendments made by this section apply in relation to a cessation of trade
45on or after 8 July 2015.

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39 Transfer 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
5where—

(a) by 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
10amount is to be brought into account for the purposes of corporation
tax 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);

  • 15“Part 4 TIOPA amount” means the amount which, following the
    application 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
20takes place on or after 8 July 2015, unless it takes place pursuant to an
obligation, 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).

25Income tax and capital gains tax

40 Carried 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 30 Carried interest

(1) This 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) 35carried 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
40equal to the amount of the carried interest less any permitted
deductions, and

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(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
specified in subsection (2), a chargeable gain of an amount equal to the
5amount 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) it is brought into account in calculating the profits of a trade of
10A 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
(6) as is just and reasonable.

(6) 15The 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
consideration in respect of co-investments),

(b) 20any 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
meaning of section 8 of that Act), and

(c) 25any 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
(1)(a) (and section 119A(5) applies for the purposes of this
30paragraph 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
of a right to it from another individual for consideration given in
35money 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) In this section—

  • 40“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;

  • “co-investment repayment or return” means a repayment in whole
    45or in part of, or a return on, a co-investment;

  • “trade” includes profession or vocation.

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103KB Carried interest: consideration on disposal etc of right

(1) For 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
5individual at the time of the disposal, loss or cancellation.

(2) But subsection (1) does not apply if and to the extent that the
consideration 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
10amount of consideration received or receivable by an individual as
specified in subsection (1), the market value of a right to carried interest
falls to be determined.

(4)
If—

(a) there is any contract, agreement, arrangement or condition
15which makes provision to which subsection (5), (6) or (7)
applies, and

(b) the 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) 20This subsection applies to provision under which—

(a) there will be a transfer, reversion or forfeiture of the right to
carried 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
25beneficially entitled to it, and

(c) that person will not be entitled on the transfer, reversion or
forfeiture 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
30the transfer, reversion or forfeiture.

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

(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) 35the right of that person to retain the right to carried interest or
proceeds of its sale, or

(c) any 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
40retention of the right to carried interest, or the exercise of a right
conferred by it, may result in a disadvantage to—

(a) the 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) 45For 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.

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103KC Carried interest: foreign chargeable gains

In 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
5extent that the individual performs the services referred to in section
103KA(1)(a) outside the United Kingdom.

103KD 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
10purpose, or one of the main purposes, of which is to secure that that
section does not to any extent apply in relation to—

(a) the individual, or

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

103KE Carried interest: avoidance of double taxation

(1) 15This section applies where—

(a) capital gains tax is charged on an individual by virtue of section
103KA 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
20by him or her, and

(c) any sum so charged is not a permissible deduction under
section 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
25of 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
make 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
30lesser of—

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

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

(5) Consequential adjustments may be made—

(a) 35in respect of any period,

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

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

103KF Interpretation of Chapter 5

(1) 40For 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
Chapter 5E of Part 13 of ITA 2007.

(2) In this Chapter—

  • “arrangements” has the same meaning as in Chapter 5E of Part 13
    45of ITA 2007 (see 809EZE of that Act);

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  • “carried interest”, in relation to arrangements referred to in section
    103KA(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”
    5have the same meanings as in Chapter 5E of Part 13 of that Act
    (see sections 809EZA(6) and 809EZE of that Act).”

(2) The 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
10partnership or partnerships before that date.

(3) But in relation to subsections (3) to (8) of section 103KB of TCGA 1992 as
inserted 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
15meanings as in Chapter 5 of Part 3 of TCGA 1992 (as inserted by subsection (1)
of this section).

41 Disguised investment management fees

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

(2A) 20For the purposes of subsection (2)(b), the return on the investment is
reasonably comparable to the return to external investors on the
investments 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,
25and

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

(2) 30The 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
were 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.

35Part 5 Excise duties and other taxes

Vehicle excise duty

42 Vehicle excise duty

(1) VERA 1994 is amended as follows.

(2) 40In 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”;

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

(c) after Part 1A insert—

5“Part 1AA Light Passenger Vehicles Registered On or After 1 April 2017
1GA Vehicles 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
10or territory outside the United Kingdom, on or after 1 April
2017, and

(b) is 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
15light passenger vehicle, and

(ii) specifies a CO2 emissions figure in terms of grams per
kilometre driven.

(2) In sub-paragraph (1)(b)(i) a “light passenger vehicle” has the
meaning given by paragraph 1A(2).

(3) 20The following provisions of Part 1A of this Schedule apply for the
purposes of this Part of this Schedule as they apply for the purposes
of that Part—

(a) paragraph 1A(3) and (4) (meaning of “the applicable CO2
emissions figure”);

(b) 25paragraph 1A(5) (effect of subsequent modifications);

(c) paragraphs 1C and 1D (the reduced rate and the standard
rate);

(d) paragraph 1G (meaning of “EU certificate of conformity” and
UK approval certificate”).

1GB 30Exemption from paying duty on first vehicle licence for certain vehicles

(1) No vehicle excise duty shall be paid on the first vehicle licence for a
vehicle to which this Part of this Schedule applies if the vehicle is
within sub-paragraph (2) or (3).

(2) A vehicle is within this sub-paragraph if—

(a) 35its applicable CO2 emissions figure is 0 g/km, and

(b) it is not an exempt vehicle by reason of paragraph 25(4) of
Schedule 2 (because of sub-paragraph (5) of that paragraph).

(3) A vehicle is within this sub-paragraph if—

(a) its applicable CO2 emissions figure exceeds 0 g/km but does
40not exceed 50 g/km, and

(b) condition A, B or C in paragraph 1C is met.

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1GC Graduated rates of duty payable on first vehicle licence

For the purpose of determining the rate at which vehicle excise duty
is to be paid on the first vehicle licence for a vehicle to which this Part
of this Schedule applies, the annual rate of duty applicable to the
5vehicle shall be determined in accordance with the following table by
reference to—

(a) the applicable CO2 emissions figure, and

(b) whether the vehicle qualifies for the reduced rate of duty or
is liable to the standard rate of duty.

CO2 emissions figure 10Rate
(1) (2) (3) (4)
Exceeding g/km Not exceeding
g/km
Reduced rate Standard rate
0 50 10
50 75 15 1525
75 90 90 100
90 100 110 120
100 110 130 140
110 130 150 160
130 150 190 20200
150 170 490 500
170 190 790 800
190 225 1190 1200
225 255 1690 1700
255 1990 252000
1GD Rates of duty payable on any other vehicle licence for vehicle

(1) For the purpose of determining the rate at which vehicle excise duty
is to be paid on any other vehicle licence for a vehicle to which this
Part of this Schedule applies, the annual rate of vehicle excise
30applicable to the vehicle is—

(a) the reduced rate of £130, if the vehicle qualifies for the
reduced rate, or

(b) the standard rate of £140, if the vehicle is liable to the
standard rate.

(2) 35But sub-paragraph (1) does not apply where paragraph 1GE(2) or (4)
applies.

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1GE Higher rates of duty: vehicles with a price exceeding £40,000

(1) Sub-paragraph (2) applies for the purpose of determining the rate at
which vehicle excise duty is to be paid on any other vehicle licence
for a vehicle to which this Part applies if—

(a) 5the price of the vehicle exceeds £40,000,

(b) the vehicle was first registered, under this Act or under the
law of a country or territory outside the United Kingdom,
less than six years before the date on which the licence has
effect, and

(c) 10the vehicle’s applicable CO2 emissions figure exceeds 0 g/
km.

(2) The annual rate of vehicle excise duty applicable to the vehicle is—

(a) £440, if the vehicle qualifies for the reduced rate, or

(b) £450, if the vehicle is liable to the standard rate.

(3) 15Sub-paragraph (4) applies for the purpose of determining the rate at
which vehicle excise duty is to be paid on any other vehicle licence
for a vehicle to which this Part applies if—

(a) the price of the vehicle exceeds £40,000;

(b) the vehicle was first registered, under this Act or under the
20law of a country or territory outside the United Kingdom,
less than six years before the date on which the licence has
effect, and

(c) the vehicle’s applicable CO2 emissions figure is 0 g/km.

(4) The annual rate of vehicle excise duty applicable to the vehicle is
25£310.

1GF Calculating the price of a vehicle

(1) For the purposes of paragraph 1GE(1)(a) and (3)(a) the price of a
vehicle is—

(a) in a case where the vehicle has a list price, the sum of—

(i) 30that price, and

(ii) the price of any non-standard accessory which is
attached to the vehicle when it is first registered
under this Act, or

(b) in a case where the vehicle does not have a list price, its
35notional price.

(2) The reference in sub-paragraph (1)(a)(ii) to the price of a non-
standard accessory is to—

(a) its list price, if it has one, or

(b) its notional price, if it has no list price.

(3) 40Sections 123, 124, 125 and 127 to 130 of the Income Tax (Earnings and
Pensions) Act 2003 apply for the purpose of defining terms used in
this paragraph as they apply for the purpose of defining terms used
in Chapter 6 of Part 3 of that Act, but with the modifications specified
in sub-paragraph (4).

(4) 45The modifications are as follows—

(a) references to a car are to be read as references to a vehicle;