Finance Bill (HC Bill 47)

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(2) In consequence of the amendment made by subsection (1), in F(No.2)A 2015
omit section 24(5).

27 Individual investment plans of deceased investors

(1) In Chapter 3 of Part 6 of ITTOIA 2005 (power to exempt income from
5individual investment plans from income tax), after section 694 insert—

694A Deceased investors

(1) In section 694(1) “income of an individual from investments under a
plan” includes—

(a) income (of any person) from administration-period
10investments under a plan, and

(b) income (of any person) from the estate of a deceased person
(“D”) where the whole or any part of the income of D’s personal
representatives is income from administration-period
investments under a plan.

(2) 15For the purposes of sections 694(3)(a) and (4) and 695(1) “individual”,
in relation to investments that are administration-period investments,
includes—

(a) the personal representatives of the deceased individual
concerned, and

(b) 20any other person on whose directions plan managers agree to
act in relation to the investments.

(3) In sections 699 and 701 “investor” includes a person entitled to an
exemption given by investment plan regulations by virtue of
subsection (1) of this section.

(4) 25Investments are “administration-period investments” if—

(a) an individual dies, and

(b) immediately before the individual’s death—

(i) the investments were held under a plan,

(ii) the individual was entitled to the income from the
30investments, and

(iii) as a result of investment plan regulations, the
individual’s income from investments under the plan
was exempt from income tax (either wholly or to an
extent specified in the regulations).

(5) 35Investments are also “administration-period investments” if (directly
or indirectly) they represent investments that are administration-
period investments as a result of subsection (4).

(6) Investment plan regulations may provide that investments are
administration-period investments as a result of subsection (4) or (5)
40only at times specified in, or ascertained in accordance with, the
regulations.

(7) Provision under subsection (6) may (in particular) be framed by
reference to the completion of the administration of a deceased
individual’s estate.

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(8) In the application of subsection (7) in relation to Scotland, the reference
to the completion of the administration is to be read in accordance with
section 653(2).”

(2) In section 151(2) of TCGA 1992 (Chapter 3 of Part 6 of ITTOIA 2005 applies
5with modifications in relation to regulations giving relief from capital gains tax
in respect of investments under plans)—

(a) in the words before paragraph (a), for “section 694(1) to (2)” substitute
“sections 694(1) to (2) and 694A(1)”, and

(b) after paragraph (a) insert—

(aa) 10section 694A(2) applies also for the purposes of
subsection (1) of this section,

(ab) the reference in section 694A(3) to section 694A(1) is to
be read as a reference to paragraph (aa) of this
subsection,

(ac) 15the reference in section 694A(4)(b)(iii) to the
individual’s income from investments under the plan
being exempt from income tax is to be read as a
reference to the individual being entitled to relief from
capital gains tax in respect of the investments,”.

(3) 20In section 62 of TCGA 1992 (death: general provisions), after subsection (4)
(acquisition of asset as legatee) insert—

(4A) The Treasury may by regulations make provision having effect in place
of subsection (4)(b) above in a case where there has been a time when
the personal representatives—

(a) 25held the asset acquired by the legatee, and

(b) would, if they had disposed of the asset at that time—

(i) by way of a bargain at arm’s length, and

(ii) otherwise than to a legatee,

have been entitled as a result of regulations under section 151
30(investments under plans) to relief from capital gains tax in
respect of any chargeable gain accruing on the disposal.

(4B) Provision made by regulations under subsection (4A) above may (in
particular) treat a person who acquires an asset as legatee as doing so
at a time or for a consideration, or at a time and for a consideration,
35ascertained as specified by the regulations.”

(4) In consequence of subsection (2)(a), in FA 2011 omit section 40(6)(a).

Reliefs: enterprise investment scheme, venture capital trusts etc

28 EIS, SEIS and VCTs: exclusion of energy generation

(1) In section 192(1) of ITA 2007 (meaning of “excluded activities”: EIS and SEIS),
40for paragraphs (ka) to (kc) substitute—

(ka) generating or exporting electricity or making electricity
generating capacity available,

(kb) generating heat,

(kc) generating any form of energy not within paragraph (ka) or
45(kb),

(kd) producing gas or fuel, and”.

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(2) In section 303(1) of ITA 2007 (meaning of “excluded activities”: VCTs), for
paragraphs (ka) to (kc) substitute—

(ka) generating or exporting electricity or making electricity
generating capacity available,

(kb) 5generating heat,

(kc) generating any form of energy not within paragraph (ka) or
(kb),

(kd) producing gas or fuel, and”.

(3) In consequence of subsection (1), ITA 2007 is amended as follows—

(a) 10in section 192(2)—

(i) for paragraph (g) substitute and

(g) section 198A (export of electricity).”;

(ii) omit paragraph (h);

(b) in section 198A—

(i) 15in the heading, omit “subsidised generation or”;

(ii) omit subsections (3) to (9);

(c) omit section 198B.

(4) In consequence of subsection (2), ITA 2007 is amended as follows—

(a) in section 303(2)—

(i) 20for paragraph (g) substitute and

(g) section 309A (export of electricity).”;

(ii) omit paragraph (h);

(b) in section 309A—

(i) in the heading, omit “subsidised generation or”;

(ii) 25omit subsections (3) to (9);

(c) omit section 309B.

(5) The amendments made by subsections (1) and (3) have effect in relation to
shares issued on or after 6 April 2016.

(6) The amendments made by subsections (2) and (4) have effect in relation to
30relevant holdings issued on or after 6 April 2016.

29 EIS and VCTs: definition of certain periods

(1) In section 175A of ITA 2007 (EIS: the permitted maximum age requirement)—

(a) in subsection (7) for the words from “five” to the end substitute
“relevant five year period.”;

(b) 35after that subsection insert—

(7A) Subject to subsection (7B), the relevant five year period is the
five year period which ends immediately before the beginning
of the last accounts filing period.

(7B) If the last accounts filing period ends more than 12 months
40before the issue date, the relevant five year period is the five
year period which ends 12 months before the issue date.”

(2) In section 252A of ITA 2007 (EIS: meaning of “knowledge-intensive
company”)—

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(a) in subsection (4), in the definition of “the relevant three preceding
years”, for the words from “means” to the end substitute “means,
subject to subsection (4A), the three consecutive years the last of which
ends immediately before the beginning of the last accounts filing
5period.”;

(b) after that subsection insert—

(4A) If the last accounts filing period ends more than 12 months
before the date on which the relevant shares are issued, the
relevant three preceding years are the three consecutive years
10the last of which ends 12 months before the date on which the
relevant shares are issued.”

(3) In section 280C of ITA 2007 (VCTs: the permitted maximum age condition)—

(a) in subsection (8) for the words from “five” to the end substitute
“relevant five year period.”;

(b) 15after that subsection insert—

(8A) Subject to subsection (8B), the relevant five year period is the
five year period which ends immediately before the beginning
of the last accounts filing period.

(8B) If the last accounts filing period ends more than 12 months
20before the investment date, the relevant five year period is the
five year period which ends 12 months before the investment
date.”

(4) In section 294A of ITA 2007 (VCTs: the permitted company age requirement)—

(a) in subsection (7) for the words from “five” to the end substitute
25“relevant five year period.”;

(b) after that subsection insert—

(7A) Subject to subsection (7B), the relevant five year period is the
five year period which ends immediately before the beginning
of the last accounts filing period.

(7B) 30If the last accounts filing period ends more than 12 months
before the investment date, the relevant five year period is the
five year period which ends 12 months before the investment
date.”

(5) In section 331A of ITA 2007 (VCTs: meaning of “knowledge-intensive
35company”)—

(a) in subsection (5), in the definition of “the relevant three preceding
years”, for the words from “means” to the end substitute “means,
subject to subsection (5A), the three consecutive years the last of which
ends immediately before the beginning of the last accounts filing
40period.”;

(b) after that subsection insert—

(5A) If the last accounts filing period ends more than 12 months
before the applicable time, the relevant three preceding years
are the three consecutive years the last of which ends 12 months
45before the applicable time.”

(6) The amendments made by this section are to be treated as always having had
effect; but this is subject to section 30.

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30 EIS and VCTs: election

(1) If a company (“the relevant company”) makes an election for this section to
apply, then—

(a) the amendments made by subsection (1) of section 29 do not apply in
5relation to shares issued by the relevant company in the material
period,

(b) the amendments made by subsection (2) of that section do not apply for
the purposes of determining whether, at the date of issue of any shares
issued by the company in the material period, the company is a
10knowledge-intensive company for the purposes of Part 5 of ITA 2007,

(c) the amendments made by subsection (3) of that section do not apply in
relation to investments made in the relevant company in the material
period,

(d) the amendments made by subsection (4) of that section do not apply for
15the purposes of determining whether the requirement of section 294A
of ITA 2007 is met in relation to any holding of shares or securities
issued by the relevant company in the material period, and

(e) the amendments made by subsection (5) of that section do not apply for
the purposes of determining whether, at any time in the material period
20which is the applicable time within the meaning given by section 331A
of ITA 2007, the relevant company is a knowledge-intensive company
for the purposes of Part 6 of ITA 2007.

(2) Amendments that by reason of an election under this section do not apply in
relation to particular shares or investments or for particular purposes are also
25to be treated as never having applied in relation to those shares or investments
or for those purposes.

(3) Any election under this section must be made in writing and signed by a
director of the relevant company.

(4) Where a company has made an election under this section—

(a) 30it must include a statement that the election has been made in any
compliance statement subsequently provided by it under section 204(2)
of ITA 2007 in respect of an issue of shares made by it in the material
period, and

(b) it must provide a copy of the election to each company to which it has
35issued shares or securities in the material period.

(5) An election under this section is irrevocable.

(6) In this section “the material period” means the period beginning with 18
November 2015 (the date when F(No. 2)A 2015 was passed) and ending with 5
April 2016.

31 40VCTs: requirements for giving approval

(1) Section 274 of ITA 2007 (requirements for the giving of approval) is amended
as follows.

(2) In the table in subsection (2), after the entry beginning “The 70% eligible shares

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condition” insert—

“The non-qualifying
investments
condition

The company has not made and
will not make, in the relevant
period, an investment which is
5neither of the following—

(a)

an investment that on the
date it is made is included
in the company’s
qualifying holdings;

(b)

10an investment falling
within subsection (3A).”




(3) In subsection (3), in each of paragraphs (f), (g) and (h), for “(3A)” substitute
“(3ZA)”.

(4) After subsection (3) insert—

(3ZA) 15In the second column of the table in subsection (2), in the entries for the
investment limits condition, the permitted maximum age condition
and the no business acquisition condition, any reference to an
investment made by the company in a company does not include an
investment falling within subsection (3A).”

(5) 20In subsection (3A) for the words from “In the second” to “does not include”
substitute “Investments made by a company (“the investor”) fall within this
subsection if they are”.

(6) In subsection (5)(c), for the words from “made by” to “(3A)” substitute “falling
within subsection (3A) may be held by the company”.

(7) 25The amendments made by this section have effect in relation to investments
made on or after 6 April 2016.

Reliefs: peer-to-peer lending

32 Income tax relief for irrecoverable peer-to-peer loans

(1) ITA 2007 is amended as follows.

(2) 30After section 412 insert—

“CHAPTER 1A Irrecoverable peer-to-peer loans
The relief
412A Relief for irrecoverable peer-to-peer loans

(1) 35A person (“L”) is entitled to relief under this section if—

(a) L has made a peer-to-peer loan (“the relevant loan”),

(b) the loan was made through an operator,

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(c) L has not assigned the right to recover the principal of the loan,
and

(d) any outstanding amount of the principal of the loan has, on or
after 6 April 2015, become irrecoverable.

(2) 5But if the outstanding amount became irrecoverable before 6 April 2016
L is entitled to relief under this section only on the making of a claim.

(3) The relief is given by deducting the outstanding amount in calculating
L’s net income for the tax year in which the amount became
irrecoverable (see Step 2 of the calculation in section 23).

(4) 10The deduction under this section is to be made only from income
arising from the payment to L of interest on—

(a) the relevant loan, and

(b) any other loan within subsection (5) or (6).

(5) A loan is within this subsection if—

(a) it is a peer-to-peer loan made by L, and

(b) it was made through the operator through whom the relevant
15loan was made.

(6) A loan is within this subsection if—

(a) the loan was made by someone other than L,

(b) the right to receive interest on the loan has been assigned to L,

(c) the right was assigned through the operator through whom the
20relevant loan was made, and

(d) either—

(i) L is a person within paragraph (a), (b) or (c) of section
412I(4), or

(ii) the recipient of the loan is a person within one of those
25paragraphs and the loan is a personal or small loan.

(7) The amount deducted under this section is limited in accordance with
section 25(4) and (5).

(8) In this section “irrecoverable” means irrecoverable other than by legal
proceedings or by the exercise of any right granted by way of security
30for the loan.

412B Claims for additional relief: sideways relief

(1) A person (“L”) may make a claim for relief under this section if—

(a) L is entitled to relief under section 412A in respect of any
outstanding amount of the principal of a loan (“the relevant
35loan”), but

(b) in the tax year in relation to which L is entitled to that relief (“the
relevant year”)—

(i) L has no income of the kind mentioned in section
412A(4) from which to deduct the outstanding amount,
40or

(ii) L has insufficient income of that kind to enable the
outstanding amount to be deducted in full under that
section.

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(2) The claim is for the outstanding amount or (in a case within subsection
45(1)(b)(ii)) the part of the outstanding amount not capable of being

deducted under section 412A to be deducted under this section in
calculating L’s net income for the relevant year.

(3) The deduction under this section is to be made only from income
arising from the payment to L of interest on loans within subsection (4)
5or (5).

(4) A loan is within this subsection if—

(a) it is a peer-to-peer loan made by L, and

(b) it was made through an operator who is not the operator
through whom the relevant loan was made.

(5) 10A loan is within this subsection if—

(a) the loan was made by someone other than L,

(b) the right to receive interest on the loan has been assigned to L,

(c) that right was assigned through an operator who is not the
operator through whom the relevant loan was made, and

(d) 15either—

(i) L is a person within paragraph (a), (b) or (c) of section
412I(4), or

(ii) the recipient of the loan is a person within one of those
paragraphs and the loan is a personal or small loan.

(6) 20The amount deducted under this section is limited in accordance with
section 25(4) and (5).

412C Claims for additional relief: carry-forward relief

(1) A person (“L”) may make a claim for relief under this section if—

(a) L is entitled to relief under section 412A in respect of any
25outstanding amount of the principal of a loan (“the relevant
loan”), but

(b) in the tax year in relation to which L is entitled to that relief (“the
relevant year”)—

(i) L has no income of the kind mentioned in section
30412A(4) or section 412B(3) from which to deduct the
outstanding amount, or

(ii) L has insufficient income of that kind to enable the
outstanding amount to be deducted in full under those
sections.

(2) 35The claim is for the outstanding amount or (in a case within subsection
(1)(b)(ii)) the part of the outstanding amount not capable of being
deducted under sections 412A and 412B to be deducted under this
section in calculating L’s net income for the four tax years following the
relevant year.

(3) 40The deduction under this section is to be made only from income
arising from the payment to L of interest on—

(a) the relevant loan, and

(b) any other loan within subsection (4) or (5).

(4) A loan is within this subsection if—

(a) 45it is a peer-to-peer loan made by L, and

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(b) it was made through an operator (whether or not that operator
is the operator through whom the relevant loan was made).

(5) A loan is within this subsection if—

(a) the loan was made by someone other than L,

(b) 5the right to receive interest on the loan has been assigned to L,

(c) that right was assigned through an operator (whether or not
that operator is the operator through whom the relevant loan
was made), and

(d) either—

(i) 10L is a person within paragraph (a), (b) or (c) of section
412I(4), or

(ii) the recipient of the loan is a person within one of those
paragraphs and the loan is a personal or small loan.

(6) This section needs to be read with section 412D (how relief works).

412D 15How carry-forward relief works

(1) This subsection explains how deductions are to be made under section
412C.

The amount to be deducted at any step is limited in accordance with
section 25(4) and (5).

20 Step 1 Deduct the outstanding amount or (in a case within section
412C(1)(b)(ii)) the part of the outstanding amount not capable of being
deducted under sections 412A and 412B from the lending income for
the first tax year following the relevant year.

Step 2 Deduct from the lending income for the second tax year
25following the relevant year any part of the outstanding amount not
previously deducted.

Step 3 Apply Step 2 in relation to the lending income for the third and
fourth tax years following the relevant year, stopping if all of the
outstanding amount is deducted.

(2) 30In this section—

  • “lending income” means income of a kind mentioned in section
    412C(3);

  • “relevant year” has the meaning given by section 412C(1)(b).

Supplementary provisions
412E 35Subsequent recovery of peer-to-peer loans

(1) This section applies where—

(a) any amount of the principal of a loan has been deducted under
this Chapter in calculating a person’s net income for a tax year,
and

(b) 40the person subsequently recovers that amount or any part of it.

(2) The amount recovered is to be treated for the purposes of this Act as if
it were interest on the loan paid to the person at the time it was
recovered.

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(3) For the purposes of this section, a person is to be treated as recovering
an amount if the person (or any other person at his or her direction)
receives any money or money’s worth—

(a) in satisfaction of the person’s right to recover that amount, or

(b) 5in consideration of the person’s assignment of the right to
recover it;

and where a person assigns such a right otherwise than by way of a
bargain made at arm’s length the person shall be treated as receiving
money or money’s worth equal to the market value of the right at the
10time of the assignment.

412F Assigned loans treated as made by the assignee etc

(1) This section applies where—

(a) a person (“A”) is assigned the right to recover the principal of a
loan,

(b) 15the right is assigned through an operator (“O”),

(c) A makes a payment in consideration of the assignment, and

(d) A does not further assign the right.

(2) The loan is to be treated for the purposes of section 412A(1) as—

(a) having been made by A, and

(b) 20having been made through O.

(3) The amount (if any) of the principal of the loan which is treated as
irrecoverable may not exceed the amount which is arrived at by—

(a) taking the amount of the payment mentioned in subsection
(1)(c), and

(b) 25deducting any amount of the principal of the loan previously
recovered by A.

412G Nominees etc

For the purposes of this Chapter—

(a) a loan or a payment made by or to a nominee or bare trustee for
30a person is treated as made by or to that person, and

(b) a right assigned by or to a nominee or bare trustee for a person
is treated as assigned by or to that person.

412H Interaction with other reliefs

(1) Subsection (2) applies in relation to a loan if any person has obtained
35income tax relief (other than under this Chapter) which is properly
attributable to the loan.

(2) The amount (if any) of the principal of the loan which is treated as
irrecoverable may not exceed the amount which is arrived at by—

(a) taking the amount of the principal of the loan, and

(b) 40deducting the amount of the relief mentioned in subsection (1).

Interpretation
412I Meaning of “loan”, “peer-to-peer loan” and related terms

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