Finance (No. 2) Bill (HL Bill 156)

(a) the investment is made at any time after the period
mentioned in section 257MNA(1)(a), and

(b) it is not the case that the conditions in section
257MNA(1)(b)(i) and (ii) are met.

(2) 5Where this section applies—

(a) the total amount of relevant investments made in the social
enterprise on or before the date when the investment is made
must not exceed £1.5 million, and

(b) the amount invested must not be more than the amount
10mentioned in subsection (3).

(3) That amount is the amount given by the formula—

(4) In subsection (3) “the aid period” means the 3 years—

(a) 25ending with the day on which the investment is made, but

(b) in the case of that day, including only the part of the day
before the investment is made.

(5) In this section “de minimis aid” means de minimis aid which fulfils
the conditions laid down—

(a) 30in Commission Regulation (EU) No. 1407/2013 (de minimis
aid) as amended from time to time, or

(b) in any EU instrument from time to time replacing the whole
or any part of that Regulation.

(6) For the purposes of subsection (3), the amount of any de minimis aid
35is the amount of the grant or, if the aid is not in the form of a grant,
the gross grant equivalent amount within the meaning of that
Regulation as amended from time to time.

(7) For the purposes of subsection (3), if—

(a) the investment or any relevant investment is made, or

(b) 40any aid is granted,

in sterling or any other currency that is not the euro, its amount is to
be converted into euros at an appropriate spot rate of exchange for
the date on which the investment is made or the aid is paid.

(8) In this section “relevant investment” has the meaning given by
45section 173A(3) (reading references in section 173A(3) to a company
as including any social enterprise).

(9) Section 173A(4) and (5) apply to determine for the purposes of this
section when a relevant investment is made.

(10) Section 257MNB (which expands the meaning of “relevant
investments made in the social enterprise”) applies for the purposes
5of each of subsections (2) and (3) above as it applies for the purposes
of section 257MNA(2).

257MND Limit on investment in shorter applicable period

(1) This section applies where condition A or condition B is met.

(2) Condition A is that—

(a) 10a company becomes a 51% subsidiary of the social enterprise
at any time during the shorter applicable period,

(b) all or part of the money raised by the investment is employed
for the purposes of a qualifying activity which consists
wholly or partly of a trade carried on by that company, and

(c) 15that trade (or part of it) was carried on by that company
before it became a 51% subsidiary as mentioned in paragraph
(a).

(3) Condition B is that all or part of the money raised by the investment
is employed for the purposes of a qualifying activity which consists
20wholly or partly of a trade which, during the shorter applicable
period, becomes a transferred trade (see subsection (9)).

(4) Where this section applies, at each time in the shorter applicable
period (“the relevant time”) the total of the relevant investments
made in the social enterprise before that time must not exceed £1.5
25million.

(5) In subsection (4) the reference to relevant investments “made in the
social enterprise” includes—

(a) relevant investments made in a company which at any time
before the relevant time has been a 51% subsidiary of the
30social enterprise,

(b) any other relevant investment made in a company to the
extent that the money raised by that relevant investment has
been employed for the purposes of a trade carried on by
another company (“company X”) which at any time before
35the relevant time has been a 51% subsidiary of the social
enterprise, and

(c) any other relevant investment made in a company if—

(i) the money raised by that relevant investment has
been employed for the purposes of a trade carried on
40by that company or another person, and

(ii) after that relevant investment was made, but before
the relevant time, that trade (or part of it) became a
transferred trade.

(6) The investments within paragraph (a) of subsection (5)—

(a) 45include investments made in a company mentioned in that
paragraph before it became a 51% subsidiary of the social
enterprise, but

(b) where a company mentioned in that paragraph is not a 51%
subsidiary of the social enterprise at the relevant time, do not
include any investments made in that company after it last
ceased to be such a subsidiary.

(7) 5For the purposes of subsection (5)(b), where company X is not a 51%
subsidiary of the social enterprise at the relevant time, any money
employed after company X last ceased to be such a subsidiary is to
be ignored.

(8) Where only a proportion of the money raised by a relevant
10investment is employed for the purposes of a trade which becomes a
transferred trade, only the corresponding proportion of that relevant
investment is to be treated as falling within subsection (5)(c).

(9) For the purposes of this section, if—

(a) before the relevant time, a trade is transferred—

(i) 15to the social enterprise,

(ii) to a company which, at the relevant time, is or has
been a 51% subsidiary of the social enterprise, or

(iii) to a partnership of which the social enterprise, or a
company within sub-paragraph (ii), is a member, and

(b) 20the trade or part of it was at any time before the transfer
carried on by another person,

the trade or part mentioned in paragraph (b) becomes a “transferred
trade” when it is transferred as mentioned in paragraph (a).

(10) The cases within subsection (9)(a)—

(a) 25include the case where the trade is transferred to a company
within subsection (9)(a)(ii), or a partnership of which such a
company is a member, before the company became a 51%
subsidiary of the social enterprise, but

(b) where a company within subsection (9)(a)(ii) is not a 51%
30subsidiary of the social enterprise at the relevant time, do not
include the case where the trade is transferred to that
company, or a partnership of which that company is a
member, after that company last ceased to be such a
subsidiary.

(11) 35In this section—

• “qualifying activity” has the same meaning as in section
  257MNA (see subsection (4) of that section);

• “relevant investment” has the meaning given by section 173A(3)
  (reading references in section 173A(3) to a company as
  40including any social enterprise).

(12) Section 173A(4) and (5) apply to determine for the purposes of this
section when a relevant investment is made.

(13) Section 173A(6) and (7) (meaning of “trade” etc) apply also for the
purposes of this section.

257MNE Power to amend limits on amounts that may be invested

(1) The Treasury may by regulations substitute a different figure for the
figure for the time being specified in section 257MNA(2), 257MNC(2)
or (3) or 257MND(4).

(2) 5Regulations under this section may make incidental, supplemental,
consequential, transitional or saving provision.

(3) Regulations under this section may not be made unless a draft of the
instrument containing them has been laid before, and approved by a
resolution of, the House of Commons.””

(4) 10In section 1014 (orders and regulations), in subsection (5)(b) (orders and
regulations excluded from subsection (4)) for sub-paragraph (iiia)
substitute—

“(“iiia) section 257MNE (social investment relief:
amendment of limits on investments),”.”

15Number of employees limit

7 In section 257MH (the number of employees requirement), in each of
subsections (1) and (2) for “500” substitute “250”.

Financial health requirement

8 After section 257MI insert—

“257MIA 20 The financial health requirement

(1) The social enterprise must meet the financial health requirement at
the beginning of the shorter applicable period.

(2) The financial health requirement is that the social enterprise is not in
difficulty.

(3) 25The social enterprise is “in difficulty” if it is reasonable to assume
that it would be regarded as a firm in difficulty for the purposes of
the Community Guidelines on State Aid for Rescuing and
Restructuring Firms in Difficulty (2004/C 244/02).””

Purposes for which money raised can be used

9 (1) 30Section 257MM (requirement to use money raised and to trade for minimum
period) is amended as follows.

(2) After subsection (3) insert—

“(3A) Employing money on the repayment of a loan does not amount to
employing the money for the funded purpose.””

(3) 35In subsection (7)(c) after “(3),” insert “(3A),”.

Excluded activities

10 (1) Section 257MQ (meaning of “excluded activity”) is amended as set out in
sub-paragraphs (2) to (4).

(2) In subsection (1)—

(a) in paragraph (b) omit “(but see subsection (2))”;

(b) after paragraph (b) insert—

“(ba) leasing (including letting ships on charter or other
assets on hire),

(bb) 5receiving royalties or licence fees,

(bc) operating or managing nursing homes or residential
care homes or managing property used as a nursing
home or residential care home (see section 257MQA),

(bd) generating electricity, exporting electricity (see
10subsection (3)) or making electricity generating
capacity available,

(be) generating heat,

(bf) generating any form of energy not within paragraph
(bd) or (be),

(bg) 15producing gas or fuel,”;”

(c) omit paragraph (f) (subsidised generation or export of electricity).

(3) Omit subsection (2).

(4) After subsection (2) insert—

“(3) For the purposes of subsection (1)(bd) electricity is exported if it is
20exported onto a distribution system or transmission system (within
the meaning of section 4 of the Electricity Act 1989).””

(5) After section 257MQ insert—

“257MQA Excluded activities: nursing homes and residential care homes

(1) This section supplements section 257MQ(1)(bc).

(2) 25“Nursing home” means any establishment which exists wholly or
mainly for the provision of nursing care—

(a) for persons suffering from sickness, injury or infirmity, or

(b) for women who are pregnant or have given birth.

(3) “Residential care home” means any establishment which exists
30wholly or mainly for the provision of residential accommodation,
together with board and personal care, for persons in need of
personal care because of—

(a) old age,

(b) mental or physical disability,

(c) 35past or present dependence on alcohol or drugs,

(d) any past illnesses, or

(e) past or present mental disorder.

(4) The activities of a person are not to be taken to fall within section
257MQ(1)(bc) unless that person has an estate or interest in, or is in
40occupation of, the nursing home or residential care home in
question.””

(6) Omit section 257MS (subsidised generation or export of electricity).

Part 2 Consequential amendments

11 (1) ITA 2007 is amended as follows.

(2) In section 178A (EIS: the no disqualifying arrangements requirement), in
5subsection (6), in the definition of “relevant tax relief” after paragraph (b)
insert—

“(ba) SI relief under Part 5B in respect of the shares;”.”

(3) In section 257CF (SEIS: the no disqualifying arrangements requirement), in
subsection (6), in the definition of “relevant tax relief” after paragraph (b)
10insert—

“(ba) SI relief under Part 5B in respect of the shares;”.”

(4) In section 299A (VCTs: the no disqualifying arrangements requirement), in
subsection (6), in the definition of “relevant tax relief” after paragraph (c)
insert—

“(ca) 15SI relief (within the meaning of Part 5B) in respect of the
shares;”.”

12 In Schedule 6 to FA 2015 (investment reliefs: excluded activities) omit
paragraph 13 (which is superseded by paragraph 10 of this Schedule).

13 In Part 2 of Schedule 24 to FA 2016 (tax advantages about which information
20may be obtained from certain persons), after the entry relating to relief
granted to investors in a company under the enterprise investment scheme
insert—

Part 3 Commencement

14 (1) The amendments made by paragraphs 3 and 6 to 9 have effect in relation to
investments made on or after 6 April 2017.

(2) 30Nothing in sub-paragraph (1) prevents investments made before 6 April
2017 from constituting “relevant investments” for any purpose of section
257MNA, 257MNB, 257MNC or 257MND of ITA 2007.

(3) Subject to sub-paragraph (4), the amendments made by paragraphs 4 and 5
have effect in relation to investments made on or after 6 April 2017.

(4) 35Arrangements which include any transaction entered into before 6 April
2017 are not “disqualifying arrangements” for the purposes of section
257LEA of ITA 2007.

15 The amendments made by paragraph 10—

(a) so far as they apply for the purposes of section 257JD of ITA 2007,
40come into force on 6 April 2017;

(b) so far as they apply for the purposes of sections 257MJ and 257MP of
ITA 2007, have effect in relation to investments made on or after 6
April 2017.

16 (1) Subject to sub-paragraph (3), the amendments made by paragraph 11(2) and
5(3) have effect in relation to shares issued on or after 6 April 2017.

(2) Subject to sub-paragraph (3), the amendment made by paragraph 11(4) has
effect for the purpose of determining whether shares or securities issued on
or after 6 April 2017 are to be regarded as comprised in a company’s
qualifying holdings.

(3) 10The amendments made by paragraph 11 do not have effect for the purposes
of determining any question whether particular arrangements which
include any transaction entered into before 6 April 2017 are “disqualifying
arrangements” for the purposes of section 178A, 257CF or 299A of ITA 2007.

Section 29

SCHEDULE 9 15Relief for carried-forward losses

Part 1 Amendment of general rules about carrying forward losses

Non-trading deficits from loan relationships

1 Part 5 of CTA 2009 (loan relationships) is amended as follows.

2 20In the heading of Chapter 16 (non-trading deficits) at the end insert “: pre-1
April 2017 deficits and charities”.

3 In section 456 (introduction to Chapter 16) in subsection (1)—

(a) after “if” insert “—

(a) ”, and”

(b) 25at the end insert “, and

(b) either—

(i) that accounting period begins before 1 April
2017, or

(ii) at the end of that accounting period the
30company is a charity”.”

4 After section 463 insert—

““CHAPTER 16A Non-trading deficits: post 1 April 2017 deficits

463A Introduction to Chapter

(1) This Chapter applies if—

(a) 35for any accounting period beginning on or after 1 April 2017
a company has a non-trading deficit from its loan
relationships under section 301(6), and

(b) at the end of that accounting period the company is not a
charity.

(2) In this Chapter “the deficit” and “the deficit period” mean that deficit
and that period respectively.

(3) 5Sections 463B and 463C deal with claims to set off the deficit against
profits of the deficit period or earlier periods.

(4) Sections 463D to 463F deal with the consequences of such claims.

(5) Sections 463G to 463I provide for so much of the deficit as is not—

(a) set off against profits under section 463B, or

(b) 10surrendered as group relief under Part 5 of CTA 2010,

to be carried forward to later accounting periods.

463B Claim to set off deficit against profits of deficit period or earlier
periods

(1) The company may make a claim for the whole or part of the deficit—

(a) 15to be set off against any profits of the company (of whatever
description) for the deficit period, or

(b) to be carried back to be set off against profits for earlier
accounting periods.

(2) No claim may be made under subsection (1) in respect of so much of
20the deficit as is surrendered as group relief under Part 5 of CTA 2010.

(3) For time limits and other provisions applicable to claims under
subsection (1), see section 463C.

(4) For what happens when a claim is made under subsection (1)(a), see
section 463D.

(5) 25For what happens when a claim is made under subsection (1)(b), and
the profits available for relief when such a claim is made, see sections
463E and 463F.

463C Time limits for claims under section 463B(1)

(1) A claim under section 463B(1) must be made within—

(a) 30the period of 2 years after the deficit period ends, or

(b) such further period as an officer of Revenue and Customs
allows.

(2) Different claims may be made in respect of different parts of a non-
trading deficit for any deficit period.

(3) 35But no claim may be made in respect of any part of a deficit to which
another such claim relates.

463D Claim to set off deficit against profits for the deficit period

(1) This section applies if a claim is made under section 463B(1)(a) for the
whole or part of the deficit to be set off against profits for the deficit
40period.

(2) The amount of the deficit to which the claim relates must be set off
against the profits of the company for the deficit period which are
identified in the claim.

(3) Those profits are reduced accordingly.

(4) Relief under this section must be given before relief is given against
profits for the deficit period—

(a) under section 37 or 62(1) to (3) of CTA 2010 (deduction of
5losses from total profits for the same or earlier accounting
periods), or

(b) as a result of a claim under section 463B(1)(b) (carry-back) in
respect of a deficit for a later period.

(5) No relief may be given under this section against ring fence profits of
10the company within the meaning of Part 8 of CTA 2010 (oil activities)
or contractor’s ring fence profits of the company within the meaning
of Part 8ZA of that Act (oil contractors).

463E Claim to carry back deficit to earlier periods

(1) This section applies if a claim is made under section 463B(1)(b) for
15the whole or part of the deficit to be carried back to be set off against
profits for accounting periods before the deficit period.

(2) The claim has effect only if it relates to an amount no greater than the
lesser of—

(a) so much of the deficit as is not an amount in relation to which
20a claim is made under section 463B(1)(a), and

(b) the total amount of the profits available for relief under this
section.

(3) Section 463F explains which profits are so available.

(4) The amount to which the claim relates is set off against those profits
25by treating them as reduced accordingly.

(5) If those profits are profits for more than one accounting period, the
relief is applied by setting off the amount to which the claim relates
against profits for a later period before setting off any remainder of
that amount against profits for an earlier period.

463F 30Profits available for relief under section 463E

(1) The profits available for relief under section 463E are the amounts
which (apart from the relief) would be charged under this Part as
profits for accounting periods ending within the permitted period
after giving every prior relief.

(2) 35In this section—

• “the permitted period” means the period of 12 months
  immediately before the deficit period, and

• “prior relief” means a relief which subsection (5) provides must
  be given before relief under section 463E.

(3) 40If an accounting period ending within the permitted period begins
before it, only a part of the amount which (apart from the relief)
would be chargeable under this Part for the period, after giving
every prior relief, is available for relief under section 463E.

(4) That part is so much as is proportionate to the part of the accounting
45period in the permitted period.

(5) The reliefs which must be given before relief under section 463E
are—

(a) relief as a result of a claim under section 459(1)(a) or section
463B(1)(a) (claim for deficit to be set off against total profits
5for the deficit period),

(b) relief in respect of a loss or deficit incurred or treated as
incurred in an accounting period before the deficit period,

(c) relief under Part 6 of CTA 2010 (charitable donations relief in
respect of payments made wholly and exclusively for the
10purposes of a trade),

(d) relief under section 37 of CTA 2010 (losses deducted from
total profits of the same or an earlier accounting period), and

(e) if the company is a company with investment business for the
purposes of Part 16 (companies with investment business)—

(i) 15any deduction in respect of management expenses
under section 1219 (expenses of management of a
company’s investment business),

(ii) relief under Part 6 of CTA 2010 in respect of payments
made wholly and exclusively for the purposes of its
20business, and

(iii) any allowance under Part 2 of CAA 2001 (plant and
machinery allowances).

463G Carry forward of unrelieved deficit

(1) This section applies if conditions A and B are met.

(2) 25Condition A is that—

(a) any amount of the deficit (“the unrelieved amount”) is not—

(i) set off against profits on a claim under section
463B(1), or

(ii) surrendered as group relief under Part 5 of CTA 2010.

(3) 30Condition B is that it is not the case—

(a) that the company ceased to be a company with investment
business in the deficit period, or

(b) (if the company was a company with investment business
immediately before the beginning of the deficit period) that
35its investment business became small or negligible in the
deficit period.

(4) The unrelieved amount is carried forward to the first accounting
period after the deficit period.

(5) The company may make a claim for the whole or part of the
40unrelieved amount to be set off against the company’s total profits
for the first accounting period after the deficit period.

(6) If a claim is made under subsection (5)—

(a) the unrelieved amount, or the part of it to which the claim
relates, must be set off against the company’s total profits for
45the first accounting period after the deficit period, and

(b) those profits are reduced accordingly.