Finance (No. 2) Bill (HC Bill 155)

Part 2 Deduction of tax from yearly interest: exception for deposit-takers

2 In section 876 of ITA 2007 (interest paid by deposit-takers), for subsections
(1) and (2) substitute—

“(1) 5The duty to deduct a sum representing income tax under section 874
does not apply to a payment of interest on an investment if—

(a) the payment is made by a deposit-taker, and

(b) when the payment is made, the investment is a relevant
investment.

(1A) 10In this section “deposit-taker”, “investment” and “relevant
investment” have the meaning given by Chapter 2.”

Part 3 Amendments of or relating to Chapter 2 of Part 15 of ITA 2007

Amendments of Chapter 2 of Part 15 of ITA 2007

3 15Chapter 2 of Part 15 of ITA 2007 (deduction of income tax at source by
deposit-takers and building societies) is amended in accordance with
paragraphs 4 to 18.

4 For the Chapter heading substitute “Meaning of “relevant investment” for
purposes of section 876”.

5 (1) 20Section 850 (overview of Chapter) is amended as follows.

(2) For subsection (1) substitute—

“(1) This Chapter has effect for the purposes of section 876 (duty under
section 874 to deduct tax from payments of yearly interest: exception
for deposit-takers).”

(3) 25Omit subsection (2) (which introduces sections 851 and 852).

(4) In subsection (4)(b) (which introduces sections 858 to 870), for “858”
substitute “863”.

(5) In subsection (5) (which introduces sections 871 to 873), for “871 to”
substitute “872 and”.

(6) 30In subsection (6) (interpretation), for the words from “Chapter—” to
“crediting” substitute “Chapter, crediting”.

6 Omit section 852 (power to disapply section 851).

7 In section 853(1) (meaning of “deposit-taker”), after “In this Chapter” insert
“and section 876”.

8 35In section 854(3) (meaning of “relevant investment” in section 851(1)(b)), for
“851(1)(b)” substitute “876(1)(b)”.

9 For section 855(1) (meaning of “investment”) substitute—

“(1) In this Chapter, and section 876, “investment” means a deposit with
a deposit-taker.”

10 (1) Section 856 (meaning of “relevant investment”) is amended as follows.

(2) In subsection (1), for “this Chapter” substitute “section 876”.

(3) In subsection (2) (exceptions), for “858” substitute “863”.

11 In section 857 (treating investments as being or not being relevant
5investments) omit “or building society” in each place.

12 Omit—

(a) sections 858 to 861 (investments which are not relevant investments
and in relation to which duty under section 874 does not apply), and

(b) the italic heading preceding section 858.

13 10In the italic heading preceding section 863, for “Other investments”
substitute “Investments”.

14 In sections 863, 864, 865 and 868(4) (investments with deposit-takers or
building societies) omit “or building society” in each place.

15 Omit sections 868(3), 869 and 870(2) (investments with building societies).

16 15Omit section 871 (power to make regulations to give effect to Chapter).

17 In section 872 (power to amend Chapter)—

(a) in subsection (2) (different provision for different deposit-takers)—

(i) for “which amends this Chapter in its application to deposit-
takers may do so” substitute “may amend this Chapter”, and

(ii) 20in each of paragraphs (a) and (b), for “relation” substitute “its
application”, and

(b) omit subsections (4) and (5) (which refer to provisions repealed by
this Act).

18 Omit section 873(3) to (6) (interpretation of section 861).

25Amendments relating to Chapter 2 of Part 15 of ITA 2007

19 In Schedule 12 to FA 1988 (transfer of building society’s business to a
company), in paragraph 6(1) (treatment for tax purposes of benefits
conferred in connection with a transfer) omit—

(a) “either”, and

(b) 30paragraph (b) (benefit not to be subject to deduction of tax under
Chapter 2 of Part 15 of ITA 2007), and the “or” preceding it.

20 (1) In section 564Q(1) of ITA 2007 (alternative finance return: deduction of
income tax at source under Chapter 2 of Part 15)—

(a) after “Chapter 2 of Part 15” insert “and section 876”,

(b) 35for “deduction by deposit-takers and building societies” substitute
“exception for deposit-takers”, and

(c) after “Chapter 2 of that Part” insert “and section 876”.

(2) In section 564Q(5) of ITA 2007 (alternative finance return: deduction of
income tax at source under Chapters 3 to 5 of Part 15)—

(a) 40after “of Part 15” insert “except section 876”, and

(b) for “those Chapters” substitute “those provisions”.

21 In section 847 of ITA 2007 (overview of Part 15)—

(a) in subsection (2) omit paragraph (a) (which introduces Chapter 2),
and

(b) in subsection (5) (which introduces Chapters containing provision
connected with the duties to deduct), before paragraph (a) insert—

“(za) 5Chapter 2 (interpretation of section 876 in Chapter 3:
exception for deposit-takers),”.

22 In section 946 of ITA 2007 (collection of tax deducted at source: payments to
which Chapter applies) omit paragraph (a) (payments from which
deductions required to be made under section 851).

23 10In Schedule 2 to ITA 2007 omit paragraphs 154 to 156 (transitional provisions
related to Chapter 2 of Part 15 of ITA 2007).

24 In Schedule 4 to ITA 2007 (index of defined expressions)—

(a) omit the entry for “beneficiary under a discretionary or
accumulation settlement (in Chapter 2 of Part 15)”,

(b) 15in the entry for “deposit-taker (in Chapter 2 of Part 15)”, after “Part
15” insert “and section 876”,

(c) omit the entry for “dividend (in Chapter 2 of Part 15)”,

(d) in the entry for “investment (in Chapter 2 of Part 15)”, after “Part 15”
insert “and section 876”, and

(e) 20omit the entry for “relevant investment (in Chapter 2 of Part 15)”.

25 In consequence of the amendments made by Part 1 of this Schedule and the
preceding provisions of this Part of this Schedule—

(a) in Schedule 1 to ITA 2007 omit paragraph 277,

(b) in Schedule 1 to FA 2008 omit paragraph 25,

(c) 25in Schedule 46 to FA 2013—

(i) in paragraph 68(1) omit paragraph (a) including the “and” at
the end,

(ii) in paragraph 69(1) omit paragraph (a) including the “and” at
the end,

(iii) 30omit paragraph 70(1), and

(iv) in paragraph 71(3) omit paragraph (b) and the “and”
preceding it, and

(d) in FA 2014 omit section 3(4).

Part 4 35Deduction of tax from UK public revenue dividends

26 In section 877 of ITA 2007 (duty to deduct under section 874: exception
relating to UK public revenue dividends)—

(a) for “in respect of” substitute “that is”, and

(b) after “dividend” insert “(as defined by section 891)”.

27 (1) 40Chapter 5 of Part 15 of ITA 2007 (deduction from payments of UK public
revenue dividends) is amended as follows.

(2) In section 893(2) (securities which are gross-paying government
securities)—

(a) before the “or” at the end of paragraph (a) insert—

“(aa) securities, so far as they are not gilt-edged securities,
issued or treated as issued under—

(i) the National Loans Act 1939, or

(ii) 5the National Loans Act 1968,”, and”

(b) in paragraph (b), for “894(1) or (3)” substitute “894(3)”.

(3) In section 894 (power to direct that securities are gross-paying government
securities)—

(a) omit subsections (1) and (2) (power in relation to securities within the
10new section 893(2)(aa)), and

(b) in subsection (5) omit “(1) or”.

Part 5 Commencement

28 (1) The amendments made by Parts 1 and 3 of this Schedule have effect in
15relation to—

(a) interest paid or credited on or after 6 April 2016, and

(b) dividends or other distributions paid by a building society on or after
that date.

(2) Sub-paragraph (1) does not apply to—

(a) 20the repeals in Schedule 12 to FA 1988;

(b) the amendments in section 564Q of ITA 2007;

(c) the repeal of paragraph 277 of Schedule 1 to ITA 2007.

(3) The repeals mentioned in sub-paragraph (2)(a) and (c) have effect in relation
to benefits conferred on or after 6 April 2016.

(4) 25The amendments mentioned in sub-paragraph (2)(b) have effect in relation
to alternative finance return paid on or after 6 April 2016.

(5) The amendments made by Part 2 of this Schedule, and the amendments
made by this Schedule in sections 893 and 894 of ITA 2007, have effect in
relation to interest paid on or after 6 April 2016.

Section 45

30SCHEDULE 7 Loan relationships and derivative contracts

Introductory

1 CTA 2009 is amended as follows.

Non-market loans

2 35In Chapter 15 of Part 5 (loan relationships: tax avoidance), after section 446

insert—

““Non-market loans

446A Non-market loans

(1) This section applies as respects any accounting period if—

(a) 5a company has a debtor relationship in the period,

(b) the amount recognised in the company’s accounts in respect
of the debt at the time the company became party to the
debtor relationship was less than the transaction price,

(c) credits in respect of the whole or part of the discount were not
10brought into account for the purposes of this Part, and

(d) in a case where the creditor is a company, the non-qualifying
territory condition is met.

(2) The debits which are to be brought into account for the accounting
period for the purposes of this Part by the debtor company in respect
15of the loan relationship are not to include debits relating to the
relevant discount amount, to the extent that that amount is referable
to the accounting period.

(3) In this section “relevant discount amount” means—

(a) in a case where credits in respect of the whole of the discount
20were not brought into account for the purposes of this Part,
an amount equal to the whole discount, and

(b) in a case where credits in respect of part of the discount were
not brought into account for the purposes of this Part, an
amount equal to that part of the discount.

(4) 25The non-qualifying territory condition referred to in subsection
(1)(d) is that the creditor company is—

(a) resident for tax purposes in a non-qualifying territory at any
time in the accounting period, or

(b) effectively managed in a non-taxing non-qualifying territory
30at any such time.

(5) In this section—

• “discount” means the difference between the two amounts
  referred to in subsection (1)(b);

• “non-qualifying territory” has the meaning given in section 173
  35of TIOPA 2010;

• “non-taxing non-qualifying territory” means a non-qualifying
  territory under whose law companies are not liable to tax by
  reason of domicile, residence or place of management;

• “resident for tax purposes” means liable, under the law of the
  40non-qualifying territory, to tax there by reason of domicile,
  residence or place of management.”

Transfer pricing

3 In section 446 (loan relationships: bringing transfer-pricing adjustments into

account), after subsection (7) insert—

“(8) No credit is to be brought into account for the purposes of this Part
to the extent that it corresponds to an amount which, as a result of the
preceding provisions of this section, has not previously been brought
5into account as a debit.”

4 In section 693 (derivative contracts: bringing transfer-pricing adjustments
into account), after subsection (5) insert—

“(6) No credit is to be brought into account for the purposes of this Part
to the extent that it corresponds to an amount which, as a result of the
10preceding provisions of this section, has not previously been brought
into account as a debit.”

Exchange gains and losses

5 In section 447 (exchange gains and losses on debtor relationships: loans
disregarded under Part 4 of TIOPA 2010), after subsection (4) insert—

“(4A) 15If the debtor relationship is to any extent matched, subsections (2)
and (3) apply to leave out of account only the lesser of—

(a) the amount of the exchange gain or loss (in the case of
subsection (2)) or the proportion of the exchange gain or loss
(in the case of subsection (3)) which would be left out of
20account apart from this subsection, and

(b) the amount of the exchange gain or loss arising in respect of
a liability representing the debtor relationship to the extent
that the debtor relationship is unmatched (an amount which
may be nil).”

6 25In section 448 (exchange gains and losses on debtor relationships: equity
notes where holder associated with issuer), after subsection (2) insert—

“(3) If the debtor relationship is to any extent matched, subsection (2)
applies to leave out of account only the amount of the exchange gain
or loss arising in respect of a liability representing the debtor
30relationship to the extent that the debtor relationship is unmatched
(an amount which may be nil).”

7 In section 449 (exchange gains and losses on creditor relationships: no
corresponding debtor relationship), after subsection (4) insert—

“(4A) If the creditor relationship is to any extent matched, subsection (2)
35applies to leave out of account only the amount of the exchange gain
or loss arising in respect of an asset representing the creditor
relationship to the extent that the creditor relationship is unmatched
(an amount which may be nil).”

8 In section 451 (exception to section 449 where loan exceeds arm’s length
40amount), after subsection (4) insert—

“(4A) If the creditor relationship is to any extent matched, subsections (3)
and (4) apply to leave out of account only the lesser of—

(a) the proportion of the exchange gain or loss which would be
left out of account apart from this subsection, and

(b) 45the amount of the exchange gain or loss arising in respect of
an asset representing the creditor relationship to the extent

that the creditor relationship is unmatched (an amount which
may be nil).”

9 (1) Section 452 (exchange gains and losses where loan not on arm’s length
terms) is amended as follows.

(2) 5For subsection (3) substitute—

“(3) Subsections (4) and (5) apply if, because of a claim made under
section 192(1) of TIOPA 2010, or because of the claim that is assumed
to be made under subsection (2)—

(a) one company is treated for any purpose as having a debtor
10relationship, or

(b) more than one company is treated for any purpose as having
a debtor relationship represented by the same liability.”

(3) In subsection (4)—

(a) after “exchange gains” insert “from that debtor relationship (in a
15subsection (3)(a) case) or”;

(b) after “those debtor relationships” insert “(in a subsection (3)(b)
case)”;

(c) for the words from “debits” to the end substitute “exchange gains or
the proportion of the exchange gains to be left out of account under
20section 447 by the issuing company in respect of the loan
relationship”.

(4) In subsection (5)—

(a) after “exchange losses” insert “from that debtor relationship (in a
subsection (3)(a) case) or”;

(b) 25after “those debtor relationships” insert “(in a subsection (3)(b)
case)”;

(c) for the words from “credits” to the end substitute “exchange losses
or the proportion of the exchange losses to be left out of account
under section 447 by the issuing company in respect of the loan
30relationship”.

(5) After subsection (5) insert—

“(5A) In this section “issuing company” is to be construed in accordance
with section 191(1)(a) of TIOPA 2010.”

10 After section 475A insert—

35““Meaning of “matched”

475B Meaning of “matched”

(1) This section applies for the purposes of this Part.

(2) A loan relationship of a company is matched if and to the extent
that—

(a) 40it is in a matching relationship with another loan relationship
or a derivative contract of the company, or

(b) exchange gains or losses arising in relation to an asset or
liability representing the loan relationship are excluded from
being brought into account under regulations under section
45328(4),

and “unmatched” is to be construed accordingly.

(3) A loan relationship is in a matching relationship with another loan
relationship or derivative contract if one is intended by the company
to act to eliminate or substantially reduce the economic risk of the
5other.

(4) In this section “economic risk” means a risk which can be attributed
to fluctuations in exchange rates between currencies over a period of
time.

(5) In this section “derivative contract” has the same meaning as in Part
107 (see section 576).”

11 (1) Section 694 (derivative contracts: exchange gains and losses) is amended as
follows.

(2) After subsection (3) insert—

“(3A) If the contract is to any extent matched, subsection (3) applies to
15leave out of account only the amount of the exchange gains or losses
arising to the company in relation to the contract to the extent that
the contract is unmatched (an amount which may be nil).”

(3) After subsection (7) insert—

“(7A) Subsections (5) to (7) apply only to the extent that the contract is
20unmatched.”

(4) After subsection (10) insert—

“(11) For the purposes of this section a derivative contract of a company is
matched if and to the extent that—

(a) it is in a matching relationship with another derivative
25contract or loan relationship of the company, or

(b) exchange gains or losses arising in relation to the derivative
contract are excluded from being brought into account under
regulations under section 606(4)(b),

and “unmatched” is to be construed accordingly.

(12) 30A derivative contract is in a matching relationship with another
derivative contract or loan relationship if one is intended by the
company to act to eliminate or substantially reduce the economic risk
of the other.

(13) In this section “economic risk” means a risk which can be attributed
35to fluctuations in exchange rates between currencies over a period of
time.

(14) In this section “loan relationship” has the same meaning as in Part 5
(see section 302).”

Commencement

12 (1) 40The amendments made by this Schedule have effect in relation to accounting
periods beginning on or after 1 April 2016.

(2) For the purposes of sub-paragraph (1), where the accounting period of a
company begins before 1 April 2016 and ends on or after that date (the

“straddling period”), so much of the straddling period as falls before that
date, and so much of the straddling period as falls on or after that date, are
to be treated as separate accounting periods.

Section 50

SCHEDULE 8 5Tax relief for production of orchestral concerts

Part 1 Amendment of CTA 2009

1 After Part 15C of CTA 2009 insert—

““Part 15D 10Orchestra tax relief

CHAPTER 1 Introduction

Overview

1217P Overview

(1) This Part is about the production of orchestral concerts, and applies
15for corporation tax purposes.

(2) This Chapter explains what is meant by “orchestral concert” and
how a company comes to be treated as the production company in
relation to a concert.

(3) Chapter 2 is about the taxation of the activities of a production
20company and includes—

(a) provision for the company’s activities in relation to its
concert, or its concert series, to be treated as a separate trade,
and

(b) provision about the calculation of the profits and losses of
25that trade.

(4) Chapter 3 is about relief (called “orchestra tax relief”) which may be
given to a production company in relation to its concert or concert
series—

(a) by way of additional deductions to be made in calculating the
30profits or losses of the company’s separate trade, or

(b) by way of a payment (an “orchestra tax credit”) to be made on
the company’s surrender of losses from that trade,

and describes the conditions a company must meet to qualify for
orchestra tax relief.

(5) 35Chapter 4 contains provision about the use of losses of the separate
trade (including provision about relief for terminal losses).

(6) Chapter 5 provides—

(a) for relief under Chapters 3 and 4 to be given on a provisional
basis, and

(b) for such relief to be withdrawn if it turns out that conditions
5that must be met for such relief to be given are not actually
met.

Interpretation

1217PA “Orchestral concert”

(1) In this Part “orchestral concert” means a concert by an orchestra,
10ensemble, group or band consisting wholly or mainly of
instrumentalists who are the primary focus of the concert.

(2) But a concert is not an orchestral concert if—

(a) the main purpose, or one of the main purposes, of the concert
is to advertise or promote any goods or services,

(b) 15the concert is to consist of or include a competition or contest,
or

(c) the making of a relevant recording is the main object of the
production company’s activities in relation to the concert.

(3) A recording of a concert is a “relevant recording” if the recording is
20made for the purpose of using it (or an edited version of it) in any of
the following ways—

(a) broadcast, at the time of the concert or later, to the general
public;

(b) release, at the time of the concert or later, to the paying public
25(by digital or other means);

(c) use as a soundtrack (or part of a soundtrack) to a television,
radio, theatre, video game or similar production for
broadcast, exhibition or release to the general public;

(d) use in a film (or part of a film) for exhibition to the paying
30public at the commercial cinema.

(4) In this section—

• “broadcast” means broadcast by any means (including
  television, radio or the internet);

• “film” has the same meaning as in Part 15 (see section 1181).

1217PB 35 Production company

(1) A company is the production company in relation to a concert if the
company (acting otherwise than in partnership)—

(a) is responsible for putting on the concert from the start of the
production process to the finish, including employing or
40engaging the performers,

(b) is actively engaged in decision-making in relation to the
concert,

(c) makes an effective creative, technical and artistic
contribution to the concert, and

(d) 45directly negotiates for, contracts for and pays for rights,
goods and services in relation to the concert.