Session 2016-17
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Other Bills before Parliament


 
 

1

 

House of Commons

 
 

Tuesday 5 July 2016

 

Public Bill Committee Proceedings

 

Finance Bill


 

[Third and Fourth Sittings]


 

Clause 50, Schedule 8 and Clauses 51 to 59 agreed to.

 

Mr David Gauke

 

Agreed to  50

 

Clause  60,  page  94,  line  16,  at end insert “, or

 

“(b)    

the company elects to be treated as a new entrant for the purposes of this

 

Part.”

 

Mr David Gauke

 

Agreed to  51

 

Clause  60,  page  94,  line  38,  leave out “either”

 

Mr David Gauke

 

Agreed to  52

 

Clause  60,  page  94,  line  43,  leave out “multi-IP” and insert “IP”

 

Mr David Gauke

 

Agreed to  53

 

Clause  60,  page  94,  line  43,  at end insert “, or

 

(c)    

a sub-stream consisting of income properly attributable to a particular

 

kind of IP process (a “process sub-stream”)”

 

Mr David Gauke

 

Agreed to  54

 

Clause  60,  page  95,  line  1,  leave out from “See” to second “and” and insert

 

“subsection (5) for the meaning of “IP item” and “IP process””

 

Mr David Gauke

 

Agreed to  55

 

Clause  60,  page  95,  line  2,  before “further” insert “see subsections (5A) and (6)

 

for”

 

Mr David Gauke

 

Agreed to  56

 

Clause  60,  page  95,  line  2,  at end insert “and process sub-streams”


 
 

Public Bill Committee Proceedings: 5 July 2016            

2

 

Finance Bill, continued

 
 

Mr David Gauke

 

Agreed to  57

 

Clause  60,  page  95,  line  12,  at end insert—

 

“But see section 357BIA (which provides that certain amounts allocated to a relevant IP

 

income sub-stream at Step 3 are not to be deducted from the sub-stream at this Step).”

 

Mr David Gauke

 

Agreed to  58

 

Clause  60,  page  95,  leave out lines 13 to 17

 

Mr David Gauke

 

Agreed to  59

 

Clause  60,  page  95,  line  19,  leave out from beginning to “deduct” in line 20

 

Mr David Gauke

 

Agreed to  60

 

Clause  60,  page  95,  leave out lines 40 to 47 and insert—

 

“(5)    

In this section—

 

“IP item” means—

 

(a)    

an item in respect of which a qualifying IP right held by the

 

company has been granted, or

 

(b)    

an item which incorporates one or more items within paragraph

 

(a);

 

“IP process” means—

 

(a)    

a process in respect of which a qualifying IP right held by the

 

company has been granted, or

 

(b)    

a process which incorporates one or more processes within

 

paragraph (a).

 

(5A)    

For the purposes of this section two or more IP items, or two or more IP processes,

 

may be treated as being of a particular kind if they are intended to be, or are

 

capable of being, used for the same or substantially the same purposes.”

 

Mr David Gauke

 

Agreed to  61

 

Clause  60,  page  95,  line  48,  leave out “which is properly attributable to a multi-IP

 

item”

 

Mr David Gauke

 

Agreed to  62

 

Clause  60,  page  95,  line  49,  after “sub-stream” insert “or process sub-stream”

 

Mr David Gauke

 

Agreed to  63

 

Clause  60,  page  96,  line  5,  at end insert—

 

“( )    

Any reference in this section to a qualifying IP right held by the company

 

includes a reference to a qualifying IP right in respect of which the company holds

 

an exclusive licence.”

 

Mr David Gauke

 

Agreed to  64

 

Clause  60,  page  98,  line  2,  leave out “357A” and insert “357A(1)”


 
 

Public Bill Committee Proceedings: 5 July 2016            

3

 

Finance Bill, continued

 
 

Mr David Gauke

 

Agreed to  65

 

Clause  60,  page  98,  line  21,  after first “income” insert “, finance income”

 

Mr David Gauke

 

Agreed to  66

 

Clause  60,  page  100,  line  41,  at end insert—

 

“357BIA 

Certain amounts not to be deducted from sub-streams at Step 4 of section

 

357BF

 

(1)    

This section applies where a company enters into an arrangement with a person

 

under which—

 

(a)    

the person assigns to the company a qualifying IP right or grants or

 

transfers to the company an exclusive licence in respect of a qualifying

 

IP right, and

 

(b)    

the company makes to the person an income-related payment.

 

(2)    

A payment is an “income-related payment” for the purposes of subsection (1) if—

 

(a)    

the obligation to make the payment arises under the arrangement by

 

reason of the amount of income the company has accrued which is

 

properly attributable to the right or licence, or

 

(b)    

the amount of the payment is determined under the arrangement by

 

reference to the amount of income the company has accrued which is so

 

attributable.

 

(3)    

If the amount of the income-related payment is allocated to a relevant IP income

 

sub-stream at Step 3 of section 357BF(2), the amount is not to be deducted from

 

the sub-stream at Step 4 of section 357BF(2) unless the payment will not affect

 

the R&D fraction for the sub-stream.”

 

Mr David Gauke

 

Agreed to  67

 

Clause  60,  page  104,  line  6,  leave out from beginning to end of line 31 on page 105

 

Mr David Gauke

 

Agreed to  68

 

Clause  60,  page  108,  line  13,  at end insert—

 

“(3A)    

If an election made by the company under section 18A of CTA 2009 (election for

 

exemption for profits or losses of company’s foreign permanent establishments)

 

applies to the relevant period, expenditure incurred by the company during the

 

period which meets conditions A and B—

 

(a)    

is not “qualifying expenditure on relevant R&D undertaken in-house”,

 

but

 

(b)    

is “qualifying expenditure on relevant R&D sub-contracted to connected

 

persons”,

 

    

so far as it is expenditure brought into account in calculating a relevant profits

 

amount, or a relevant losses amount, aggregated at section 18A(4)(a) or (b) of

 

CTA 2009 in calculating the company’s foreign permanent establishments

 

amount for the period.”


 
 

Public Bill Committee Proceedings: 5 July 2016            

4

 

Finance Bill, continued

 
 

Mr David Gauke

 

Agreed to  69

 

Clause  60,  page  108,  line  22,  leave out “incorporated in a multi-IP item” and insert

 

“—

 

(i)    

to which income in the sub-stream is attributable, or

 

(ii)    

which is incorporated in an item”

 

Mr David Gauke

 

Agreed to  70

 

Clause  60,  page  108,  line  23,  at end insert “, or

 

(c)    

in a case where the sub-stream is a process sub-stream, relates to a

 

qualifying IP right granted in respect of any process—

 

(i)    

to which income in the sub-stream is attributable, or

 

(ii)    

which is incorporated in a process to which income in the sub-

 

stream is attributable.”

 

Mr David Gauke

 

Agreed to  71

 

Clause  60,  page  109,  line  8,  leave out “65% of any” and insert “the”

 

Mr David Gauke

 

Agreed to  72

 

Clause  60,  page  109,  leave out lines 10 to 15 and insert “in making payments within

 

subsection (2).

 

(2)    

A payment is within this subsection if—

 

(a)    

it is made to a person in respect of relevant research and development

 

contracted out by the company to the person, and

 

(b)    

the company and the person are not connected (within the meaning given

 

by section 1122).”

 

Mr David Gauke

 

Agreed to  73

 

Clause  60,  page  109,  line  15,  at end insert—

 

“(3)    

If an election made by the company under section 18A of CTA 2009 (election for

 

exemption for profits or losses of company’s foreign permanent establishments)

 

applies to the relevant period, expenditure incurred by the company during the

 

period in making payments within subsection (2)—

 

(a)    

is not “qualifying expenditure on relevant R&D sub-contracted to

 

unconnected persons”, but

 

(b)    

is “qualifying expenditure on relevant R&D sub-contracted to connected

 

persons”,

 

    

so far as it is expenditure brought into account in calculating a relevant profits

 

amount, or a relevant losses amount, aggregated at section 18A(4)(a) or (b) of

 

CTA 2009 in calculating the company’s foreign permanent establishments

 

amount for the period.”


 
 

Public Bill Committee Proceedings: 5 July 2016            

5

 

Finance Bill, continued

 
 

Mr David Gauke

 

Agreed to  74

 

Clause  60,  page  109,  line  23,  after “means” insert “the total of—

 

(a)    

any expenditure which is “qualifying expenditure on relevant R&D sub-

 

contracted to connected persons” as a result of section 357BMB(3A) or

 

357BMC(3) (certain expenditure attributed to company’s foreign

 

permanent establishments), and

 

(b)    

 

Mr David Gauke

 

Agreed to  75

 

Clause  60,  page  109,  line  23,  leave out “65% of any” and insert “the”

 

Mr David Gauke

 

Agreed to  76

 

Clause  60,  page  109,  leave out lines 25 to 30 and insert “in making payments within

 

subsection (2).

 

(2)    

A payment is within this subsection if—

 

(a)    

it is made to a person in respect of relevant research and development

 

contracted out by the company to the person, and

 

(b)    

the company and the person are connected (within the meaning given by

 

section 1122).”

 

Mr David Gauke

 

Agreed to  77

 

Clause  60,  page  109,  line  39,  leave out from “company” to end of line 41 and insert

 

“in making during the relevant period payments within any of subsections (1A), (1B) and

 

(1C).

 

(1A)    

A payment is within this subsection if it is made to a person in respect of the

 

assignment by that person to the company of a relevant qualifying IP right.

 

(1B)    

A payment is within this subsection if it is made to a person in respect of the grant

 

or transfer by that person to the company of an exclusive licence in respect of a

 

relevant qualifying IP right.

 

(1C)    

A payment is within this subsection if—

 

(a)    

it is made to a person in respect of the disclosure by that person to the

 

company of any item or process, and

 

(b)    

the company applies for and is granted a relevant qualifying IP right in

 

respect of that item or process (or any item or process derived from it).

 

(1D)    

Where the company has incurred expenditure in making a series of payments to

 

a person in respect of a single assignment, grant, transfer or disclosure, each of

 

the payments in the series is to be treated for the purposes of this section as having

 

been made on the date on which the first payment in the series was made.”

 

Mr David Gauke

 

Agreed to  78

 

Clause  60,  page  110,  line  2,  leave out “incorporated in a multi-IP item” and insert

 

“—

 

(i)    

to which income in the sub-stream is attributable, or

 

(ii)    

which is incorporated in an item”


 
 

Public Bill Committee Proceedings: 5 July 2016            

6

 

Finance Bill, continued

 
 

Mr David Gauke

 

Agreed to  79

 

Clause  60,  page  110,  line  4,  at end insert “, or

 

(c)    

in a case where the sub-stream is a process sub-stream, a qualifying IP

 

right granted in respect of a process—

 

(i)    

to which income in the sub-stream is attributable, or

 

(ii)    

which is incorporated in a process to which income in the sub-

 

stream is attributable.”

 

Mr David Gauke

 

Agreed to  80

 

Clause  60,  page  110,  line  22,  leave out “357BME” and insert “357BMD”

 

Mr David Gauke

 

Agreed to  81

 

Clause  60,  page  111,  leave out from beginning of line 8 to “, and” in line 11 and insert

 

“in each of subsections (1A), (1B) and (1C) the word “relevant” were omitted”

 

Mr David Gauke

 

Agreed to  82

 

Clause  60,  page  112,  line  25,  leave out “357A” and insert “357A(1)”

 

Mr David Gauke

 

Agreed to  83

 

Clause  60,  page  112,  line  46,  at end insert—

 

“Small claims treatment

 

357BNA 

Small claims treatment

 

(1)    

This section applies where—

 

(a)    

a company carries on only one trade during an accounting period,

 

(b)    

section 357BF applies for the purposes of determining the relevant IP

 

profits of the trade for the accounting period, and

 

(c)    

the qualifying residual profit of the trade for the accounting period does

 

not exceed whichever is the greater of—

 

(i)    

£1,000,000, and

 

(ii)    

the relevant maximum for the accounting period.

 

(2)    

The company may make any of the following elections for the accounting

 

period—

 

(a)    

a notional royalty election (see section 357BNB),

 

(b)    

a small claims figure election (see section 357BNC), and

 

(c)    

a global streaming election (see section 357BND).

 

    

This is subject to subsections (3) and (4).

 

(3)    

The company may not make a notional royalty election, a small claims figure

 

election or a global streaming election for the accounting period if—

 

(a)    

the qualifying residual profit of the trade for the accounting period

 

exceeds £1,000,000,

 

(b)    

section 357BF applied for the purposes of determining the relevant IP

 

profits of the trade for any previous accounting period beginning within

 

the relevant 4-year period, and


 
 

Public Bill Committee Proceedings: 5 July 2016            

7

 

Finance Bill, continued

 
 

(c)    

the company did not make a notional royalty election, a small claims

 

figure election or (as the case may be) a global streaming election for that

 

previous accounting period.

 

(4)    

The company may not make a small claims figure election for the accounting

 

period if—

 

(a)    

the qualifying residual profit of the trade for the accounting period

 

exceeds £1,000,000,

 

(b)    

section 357C or 357DA applied for the purposes of determining the

 

relevant IP profits of the trade for any previous accounting period

 

beginning within the relevant 4-year period, and

 

(c)    

the company did not make an election under section 357CL for small

 

claims treatment for that previous accounting period.

 

(5)    

In subsections (3) and (4) “the relevant 4-year period” means the period of 4 years

 

ending with the beginning of the accounting period mentioned in subsection

 

(1)(a).

 

(6)    

For the purposes of this section, the “qualifying residual profit” of a trade of a

 

company for an accounting period is the amount which (assuming the company

 

did not make an election under this section) would be equal to the aggregate of

 

the relevant IP income sub-streams established at Step 2 in section 357BF(2) in

 

determining the relevant IP profits of the trade for the accounting period,

 

following the deductions from those sub-streams required by Step 4 in section

 

357BF(2) (ignoring the amount of any sub-stream which is not greater than nil

 

following those deductions).

 

(7)    

For the purposes of this section, the “relevant maximum” for an accounting

 

period of a company is—

 

(a)    

in a case where no company is a related 51% group company of the

 

company in the accounting period, £3,000,000;

 

(b)    

in a case where one or more companies are related 51% group companies

 

of the company in the accounting period, the amount given by the

 

formula—
equation: over[string["£3,000,000"],plus[num[1.0000000000000000,"1"],char[N]]]

 

    

where N is the number of those related 51% group companies in relation

 

to which an election under section 357A(1) has effect for the accounting

 

period.

 

(8)    

For an accounting period of less than 12 months, the relevant maximum is

 

proportionally reduced.

 

357BNB 

Notional royalty election

 

(1)    

Subsection (2) applies where a company has made a notional royalty election for

 

an accounting period under section 357BNA(2)(a).

 

(2)    

In its application for the purposes of determining the relevant IP profits of the

 

trade of the company for the accounting period, section 357BHA (notional

 

royalty) has effect as if—

 

(a)    

in subsection (2) for “the appropriate percentage” there were substituted

 

“75%”, and

 

(b)    

subsections (3) to (6) were omitted.

 

357BNC 

Small claims figure election

 

(1)    

Subsection (2) applies where a company has made a small claims figure election

 

for an accounting period under section 357BNA(2)(b).


 
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Revised 05 July 2016