Finance Bill (HC Bill 47)

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Amendments 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) 5“either”, and

(b) paragraph (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) 10after “Chapter 2 of Part 15” insert “and section 876”,

(b) for “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
15income tax at source under Chapters 3 to 5 of Part 15)—

(a) after “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),
20and

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

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

22 25In 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 In Schedule 2 to ITA 2007 omit paragraphs 154 to 156 (transitional provisions
related to Chapter 2 of Part 15 of ITA 2007).

24 30In 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) in the entry for “deposit-taker (in Chapter 2 of Part 15)”, after “Part
15” insert “and section 876”,

(c) 35omit 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) omit 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
40preceding 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) in Schedule 46 to FA 2013—

(i) in paragraph 68(1) omit paragraph (a) including the “and” at
45the end,

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

(iii) omit paragraph 70(1), and

(iv) in paragraph 71(3) omit paragraph (b) and the “and”
5preceding it, and

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

Part 4 Deduction of tax from UK public revenue dividends

26 In section 877 of ITA 2007 (duty to deduct under section 874: exception
10relating 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) Chapter 5 of Part 15 of ITA 2007 (deduction from payments of UK public
revenue dividends) is amended as follows.

(2) 15In 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) 20the National Loans Act 1939, or

(ii) the 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) 25omit subsections (1) and (2) (power in relation to securities within the
new section 893(2)(aa)), and

(b) in subsection (5) omit “(1) or”.

Part 5 Commencement

28 (1) 30The amendments made by Parts 1 and 3 of this Schedule have effect in
relation 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) 35Sub-paragraph (1) does not apply to—

(a) the 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
40to benefits conferred on or after 6 April 2016.

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

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(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.

SCHEDULE 7 Section 48 5Loan relationships and derivative contracts

Introductory

1 CTA 2009 is amended as follows.

Non-market loans

2 In Chapter 15 of Part 5 (loan relationships: tax avoidance), after section 446
10insert—

“Non-market loans

446A Non-market loans

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

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

(b) 15the 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
brought into account for the purposes of this Part, and

(d) 20in 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
of the loan relationship are not to include debits relating to the
25relevant 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
were not brought into account for the purposes of this Part,
30an 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) The non-qualifying territory condition referred to in subsection
35(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
at any such time.

(5) 40In this section—

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

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

  • 5“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
    non-qualifying territory, to tax there by reason of domicile,
    10residence 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
15to the extent that it corresponds to an amount which, as a result of the
preceding provisions of this section, has not previously been brought
into account as a debit.”

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

(6) 20No 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
into account as a debit.”

Exchange gains and losses

5 25In section 447 (exchange gains and losses on debtor relationships: loans
disregarded under Part 4 of TIOPA 2010), after subsection (4) insert—

(4A) If 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
30subsection (2)) or the proportion of the exchange gain or loss
(in the case of subsection (3)) which would be left out of
account 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
35that the debtor relationship is unmatched (an amount which
may be nil).”

6 In 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)
40applies to leave out of account only 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).”

7 In section 449 (exchange gains and losses on creditor relationships: no

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corresponding debtor relationship), after subsection (4) insert—

(4A) If the creditor 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 an asset representing the creditor
5relationship 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
amount), after subsection (4) insert—

(4A) If the creditor relationship is to any extent matched, subsections (3)
10and (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) the amount of the exchange gain or loss arising in respect of
an asset representing the creditor relationship to the extent
15that 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) For subsection (3) substitute—

(3) 20Subsections (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
relationship, or

(b) 25more 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
subsection (3)(a) case) or”;

(b) 30after “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
section 447 by the issuing company in respect of the loan
35relationship”.

(4) In subsection (5)—

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

(b) after “those debtor relationships” insert “(in a subsection (3)(b)
40case)”;

(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
relationship”.

(5) 45After subsection (5) insert—

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

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10 After section 475A insert—

“Meaning of “matched”

475B Meaning of “matched”

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

(2) 5A loan relationship of a company is matched if and to the extent
that—

(a) it 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
10liability representing the loan relationship are excluded from
being brought into account under regulations under section
328(4),

and “unmatched” is to be construed accordingly.

(3) A loan relationship is in a matching relationship with another loan
15relationship or derivative contract if one is intended by the company
to act to eliminate or substantially reduce the economic risk of the
other.

(4) In this section “economic risk” means a risk which can be attributed
to fluctuations in exchange rates between currencies over a period of
20time.

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

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

(2) 25After subsection (3) insert—

(3A) If the contract is to any extent matched, subsection (3) applies to
leave 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) 30After subsection (7) insert—

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

(4) After subsection (10) insert—

(11) For the purposes of this section a derivative contract of a company is
35matched if and to the extent that—

(a) it is in a matching relationship with another derivative
contract 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
40regulations under section 606(4)(b),

and “unmatched” is to be construed accordingly.

(12) A derivative contract is in a matching relationship with another
derivative contract or loan relationship if one is intended by the

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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
to fluctuations in exchange rates between currencies over a period of
5time.

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

Commencement

12 (1) The amendments made by this Schedule have effect in relation to accounting
10periods 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
15to be treated as separate accounting periods.

SCHEDULE 8 Section 53 Tax relief for production of orchestral concerts

Part 1 Amendment of CTA 2009

1 20After Part 15C of CTA 2009 insert—

“Part 15D Orchestra tax relief

CHAPTER 1 Introduction
Overview
1217P 25 Overview

(1) This Part is about the production of orchestral concerts, and applies
for 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
30relation to a concert.

(3) Chapter 2 is about the taxation of the activities of a production
company 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,
35and

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(b) provision about the calculation of the profits and losses of
that 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
5series—

(a) by way of additional deductions to be made in calculating the
profits 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,

10and describes the conditions a company must meet to qualify for
orchestra tax relief.

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

(6) Chapter 5 provides—

(a) 15for 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
that must be met for such relief to be given are not actually
met.

20Interpretation
1217PA “Orchestral concert”

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

(2) 25But 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) the concert is to consist of or include a competition or contest,
or

(c) 30the 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
made for the purpose of using it (or an edited version of it) in any of
the following ways—

(a) 35broadcast, 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
(by digital or other means);

(c) use as a soundtrack (or part of a soundtrack) to a television,
40radio, 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
public at the commercial cinema.

(4) In this section—

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

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

1217PB Production company

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

(a) 5is responsible for putting on the concert from the start of the
production process to the finish, including employing or
engaging the performers,

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

(c) 10makes an effective creative, technical and artistic
contribution to the concert, and

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

(2) No more than one company can be the production company in
15relation to a concert.

(3) If more than one company meets the conditions in subsection (1) in
relation to a concert, the company that is most directly engaged in
the activities mentioned in that subsection is the production
company.

(4) 20If no company meets the conditions in subsection (1), there is no
production company in relation to the concert.

CHAPTER 2 Taxation of activities of production company
Separate orchestral trade
1217Q Separate orchestral trade

(1) 25Subsection (2) applies to a company in relation to a concert if—

(a) the company qualifies for orchestra tax relief in relation to the
production of the concert (see section 1217RA(2)), and

(b) the concert is not included in a concert series in relation to
which the company has made an election under subsection
30(4).

(2) The company’s activities in relation to the production of the concert
are treated as a trade separate from any other activities of the
company (including activities in relation to the production of any
other concert).

(3) 35Subsections (4) and (5) apply to a company in relation to concerts in
a series if the conditions in section 1217RA(4)(a), (b), (c) and (d) are
met in relation to the company and the concert series.

(4) The company may, for the purposes of this Part, make an election in
relation to the concert series.

40See section 1217QA for provision about making an election.

(5) Where the company makes an election in relation to a concert series
(and accordingly qualifies for orchestra tax relief in relation to the

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production of the series), the company’s activities in relation to the
production of the concert series are treated as a trade separate from
any other activities of the company (including activities in relation to
the production of any other concert).

(6) 5In this Part the separate trade mentioned in subsection (2) or (5) is
called the “separate orchestral trade”.

(7) If the separate orchestral trade relates to a single concert, the
company is treated as beginning to carry on that trade—

(a) at the beginning of the pre-performance stage of the concert,
10or

(b) if earlier, at the time of the first receipt by the company of any
income from the production of the concert.

1217QA Election for concert series

(1) An election under section 1217Q(4) must be made by the company by
15notice in writing to an officer of Her Majesty’s Revenue and Customs
before the date of the first concert in the series.

(2) An election has effect in relation to the orchestral concerts specified
in it, and must also specify which of those concerts (if any) are not to
be qualifying orchestral concerts (see section 1217RA(3)).

(3) 20An election—

(a) may have effect in relation to concerts in two or more
accounting periods, and

(b) is irrevocable.

(4) If the separate orchestral trade relates to a concert series, the
25company is treated as beginning to carry on that trade—

(a) at the beginning of the pre-performance stage of the first
concert in the series, or

(b) if earlier, at the time of the first receipt by the company of any
income from the production of the concert series.

30Profits and losses of separate orchestral trade
1217QB Calculation of profits or losses of separate orchestral trade

(1) This section applies for the purpose of calculating the profits or
losses of the separate orchestral trade.

(2) For the first period of account during which the separate orchestral
35trade is carried on, the following are brought into account—

(a) as a debit, the costs of the production of the concert or concert
series incurred to date;

(b) as a credit, the proportion of the estimated total income from
that production treated as earned at the end of that period.

(3) 40For subsequent periods of account the following are brought into
account—

(a) as a debit, the difference between the amount (“C”) of the
costs of the production of the concert or concert series
incurred to date and the amount corresponding to C for the
45previous period, and