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

(b) any deduction under section 303B(4) or 303D(5), so far as it is
a restricted deduction.

(4) For the purposes of this section a deduction under section 303B(4) or
303D(5) is a “restricted deduction” so far as it would not be available
5but for section 304(5) (reduction of income derived from related
activities).

(5) In this section the “relevant maximum” means the sum of—

(a) 50% of the company’s relevant trading profits for the
accounting period, and

(b) 10the company’s trading profits deductions allowance for the
accounting period.

(6) Section 269ZF contains provision for determining a company’s
relevant trading profits for an accounting period.

(7) A company’s “trading profits deductions allowance” for an
15accounting period—

(a) is so much of the company’s deductions allowance for the
period as is specified in the company’s tax return as its
trading profits deductions allowance for the period, and

(b) accordingly, is nil if no amount of the company’s deductions
20allowance for the period is so specified.

(8) An amount specified under subsection (7)(a) as a company’s trading
profits deductions allowance for an accounting period may not
exceed the difference between—

(a) the amount of the company’s deductions allowance for the
25period, and

(b) the total of any amounts specified for the period under
section 269ZC(5)(a) (non-trading profits deductions
allowance) and section 124D(4) of FA 2012 (BLAGAB trade
profits deductions allowance).

(9) 30A company’s “deductions allowance” for an accounting period is to
be determined in accordance with section 269ZG where, at any time
in that period—

(a) the company is a member of a group (see section 269ZO), and

(b) one or more other companies within the charge to
35corporation tax are members of that group.

Otherwise, a company’s “deductions allowance” for an accounting
period is to be determined in accordance with section 269ZL.

(10) Subsection (2) does not apply in relation to a company for an
accounting period where, in determining the company’s relevant
40trading profits, the amount given by step 1 in section 269ZF(3) is not
greater than nil.

269ZC Restriction on deductions from non-trading profits

(1) This section has effect for determining the taxable total profits of a
company for an accounting period.

(2) 45The sum of any deductions made by the company for the accounting
period under section 457(3) and 463H(4) of CTA 2009 (carry forward

of non-trading deficits from loan relationships against subsequent
non-trading profits) may not exceed the relevant maximum.

But this is subject to subsection (8).

(3) In this section the “relevant maximum” means the sum of—

(a) 550% of the company’s relevant non-trading profits for the
accounting period, and

(b) the amount of the company’s non-trading profits deductions
allowance for the accounting period.

(4) Section 269ZF contains provisions for determining a company’s
10relevant non-trading profits for an accounting period.

(5) A company’s “non-trading profits deductions allowance” for an
accounting period—

(a) is so much of the company’s deductions allowance for the
period as is specified in the company’s tax return as its non-
15trading profits deductions allowance for the period, and

(b) accordingly, is nil if no amount of the company’s deductions
allowance for the period is so specified.

(6) An amount specified under subsection (5)(a) as a company’s non-
trading profits deductions allowance for an accounting period may
20not exceed the difference between—

(a) the amount of the company’s deductions allowance for the
period, and

(b) the total of any amounts specified for the period under
section 269ZB(7)(a) (trading profits deductions allowance)
25and section 124D(4) of FA 2012 (BLAGAB trade profits
deductions allowance).

(7) A company’s “deductions allowance” for an accounting period is to
be determined in accordance with section 269ZG where, at any time
in that period—

(a) 30the company is a member of a group (see section 269ZO), and

(b) one or more other companies within the charge to
corporation tax are members of that group.

Otherwise, a company’s “deductions allowance” for an accounting
period is to be determined in accordance with section 269ZL.

(8) 35Subsection (2) does not apply in relation to a company for an
accounting period where, in determining the company’s relevant
non-trading profits for the period, the amount given by step 1 in
section 269ZF(3) is not greater than nil.

269ZD Restriction on deductions from total profits

(1) 40This section has effect for determining the taxable total profits of a
company for an accounting period.

(2) The sum of any relevant deductions made by the company for the
accounting period may not exceed the difference between—

(a) the relevant maximum, and

(b) 45the sum of—

(i) any deductions falling within section 269ZB(3) (carry
forward of trade loss against subsequent trade

profits) made by the company for the accounting
period,

(ii) any deductions made by the company for the
accounting period under sections 457(3) and 463H(4)
5of CTA 2009 (carry forward of non-trading deficits
from loan relationships against subsequent non-
trading profits), and

(iii) any deductions made by the company for the
accounting period under sections 124(5), 124A(5) and
10124C(6) of FA 2012 (carry forward of BLAGAB trade
losses against BLAGAB trade profits).

But this is subject to subsection (7) and section 269ZE.

(3) The following deductions made for an accounting period are
“relevant deductions” for the purposes of this section—

(a) 15a deduction under section 463G of CTA 2009 (carry forward
of non-trading deficit against total profits);

(b) a deduction under section 753 of CTA 2009 (non-trading
losses on intangible fixed assets) in respect of a loss treated by
subsection (3) of that section (carry forward of losses) as if it
20were a loss of the accounting period;

(c) a deduction under section 1219 of CTA 2009 (expenses of
management of a company’s investment business) in respect
of an amount treated by section 1223(3) of that Act (carrying
forward of expenses of management and other amounts) as
25expenses of management deductible for the accounting
period;

(d) a deduction under section 1219 of CTA 2009 (expenses of
management of a company’s investment business) in respect
of a loss treated by section 63(3) (carrying forward of certain
30losses made by company with investment business which
ceases to carry on UK property business) as an expense of
management deductible for the accounting period;

(e) a deduction under section 37 (relief for trade losses against
total profits) made in reliance on section 1210(3), 1216DB(3),
351217DB(3), 1217MB(2), 1217SB(2) or 1218ZDB(2) of CTA
2009;

(f) a deduction under section 45A (carry forward of trade loss
against total profits);

(g) a deduction under section 62(3) (relief for losses made in UK
40property business) in respect of a loss treated by subsection
(5)(b) of that section (carry forward of losses) as a loss made
by the company in the accounting period;

(h) a deduction under section 303C (excess carried forward non-
decommissioning losses of ring fence trade: relief against
45total profits);

(i) a deduction under Part 5 (group relief) made in respect of a
loss surrendered under that Part in reliance on section
1210(3), 1216DB(3), 1217DB(3), 1217MB(2), 1217SB(2) or
1218ZDB(2) of CTA 2009;

(j) 50a deduction under Part 5A (group relief for carried-forward
losses);

(k) a deduction under section 124B of FA 2012 (deduction from
total profits of excess carried-forward BLAGAB trade losses).

(4) In this section the “relevant maximum” means the sum of—

(a) 50% of the company’s relevant profits for the accounting
5period, and

(b) the amount of the company’s deductions allowance for the
accounting period.

(5) A company’s “relevant profits” for an accounting period are the sum
of—

(a) 10the company’s relevant trading profits for the accounting
period (see section 269ZF(1)),

(b) the company’s relevant non-trading profits for the
accounting period (see section 269ZF(2), and

(c) the company’s relevant BLAGAB trade profits for the
15accounting period (as defined in section 124D of FA 2012).

(6) A company’s “deductions allowance” for an accounting period is to
be determined in accordance with section 269ZG where, at any time
in that period—

(a) the company is a member of a group (see section 269ZO), and

(b) 20one or more other companies within the charge to
corporation tax are members of that group.

Otherwise, the company’s “deductions allowance” for the
accounting period is to be determined in accordance with section
269ZL.

(7) 25Subsection (2) does not apply in relation to a company for an
accounting period where the sum of—

(a) the amount given by paragraph (1) of step 1 in section
269ZF(3), and

(b) the company’s BLAGAB trade profit for the accounting
30period,

is nil.

269ZE Restriction on deductions from total profits: insurance companies

(1) Where the conditions in subsection (2) are met, section 269ZD has
effect as if, for subsection (2) of that section there were substituted—

“(2) 35The sum of any relevant deductions made by the company
for the accounting period may not exceed the modified loss
cap (as defined in section 269ZE).

But this is subject to subsection (7).””

(2) The conditions are that—

(a) 40the company referred to in section 269ZD(1) carries on
business to which the charge to corporation tax under section
68 of FA 2012 (charge to tax on I-E profit) applies and has an
I-E profit for the accounting period,

(b) the policyholders’ share (if any) of the I-E profit is not the
45whole of that profit, and

(c) the adjusted shareholders’ I-E profit for the accounting
period is less than the BLAGAB-related loss capacity.

(3) The “adjusted shareholders’ I-E profit” is equal to—

(a) the shareholders’ share of the I-E profit, less

(b) any excess capacity.

(4) The “BLAGAB-related loss capacity” is equal to A + B - C where—

• 5A is 50% of the company’s relevant BLAGAB trade profits for
  the accounting period (as defined in section 124D of FA 2012);

• B is the company’s BLAGAB trade profits deductions
  allowance for the period (if any) (as defined in section 124D
  of FA 2012);

• 10C is the total of any deductions made by the company for the
  accounting period under sections 124(5), 124A(5) and 124C(6)
  of FA 2012.

(5) To determine the modified loss cap, take the following steps—

Step 1: find the basic loss cap.

15Step 2: reduce that amount by the BLAGAB-related loss capacity.

Step 3: add to the result of step 2 the adjusted shareholders’ I-E
profit.

The result is the modified loss cap.

(6) In this section “the basic loss cap” means the difference referred to in
20the opening words of section 269ZD(2) (assuming that that section
has effect without the modification set out in subsection (1) of this
section).

(7) In this section “excess capacity” means the amount (if any) by
which—

(a) 25the section 269ZF step 2 amount, is less than

(b) what the section 269ZF step 2 amount would be if in
paragraph (d) of section 269ZF(4) the reference to any I-E
profit were to the policyholders’ share of any I-E profit.

(8) In subsection (7) the reference to the “section 269ZF step 2 amount”
30is to the sum given by paragraph (1) of step 2 of section 269ZF(3) in
calculating the company’s relevant trading profits and relevant non-
trading profits for the accounting period: but for this purpose
disregard paragraph (4) of step 1 of section 269ZF(3).

(9) For the purposes of this section the “shareholders’ share” of an
35insurance company’s I-E profit for an accounting period is equal to—

(a) the amount of the I-E profit, less

(b) the policyholders’ share (if any) of that profit.

(10) In this section references to the policyholders’ share of I-E profit are
to that share as determined in accordance with section 103 of FA
402012.

Relevant profits

269ZF “Relevant trading profits” and “relevant non-trading profits”

(1) A company’s “relevant trading profits” for an accounting period
are—

(a) the company’s qualifying trading profits for the accounting
period (see subsection (3)), less

(b) the company’s trading profits deductions allowance for the
accounting period (see section 269ZB(7)).

5But if the allowance mentioned in paragraph (b) exceeds the profits
mentioned in paragraph (a), the company’s “relevant trading
profits” for the accounting period are nil.

(2) A company’s “relevant non-trading profits” for an accounting period
are—

(a) 10the company’s qualifying non-trading profits for the
accounting period (see subsection (3)), less

(b) the company’s non-trading profits deductions allowance for
the accounting period (see section 269ZC(5)).

But if the allowance mentioned in paragraph (b) exceeds the profits
15mentioned in paragraph (a), the company’s “relevant non-trading
profits” for the accounting period are nil.

(3) To determine a company’s qualifying trading profits and qualifying
non-trading profits for an accounting period—

Step 1 - modified total profits

30Step 2 - negative amount for apportioning under step 4

Step 3 - trade profits and non-trade profits

Divide the company’s total profits for the accounting period (as
45modified under step 1(2)) into—

• profits of a trade of the company (the company’s “trade
  profits”), and

• profits that are not profits of a trade of the company (the
  company’s “non-trade profits”).

50Step 4 - apportioning the step 2 amount

Take the step 2 amount and do one of the following—

• reduce the company’s trade profits by the whole of that
  amount,

• 5reduce the company’s non-trade profits by the whole of that
  amount, or

• reduce the company’s trade profits by part of that amount
  and reduce the company’s non-trade profits by the
  remaining part of that amount.

10Apply this step in a way which ensures that neither the company’s
trade profits nor the company’s non-trade profits are reduced below
nil.

Step 5 - amount of qualifying trading or non-trading profits (if not
determined under step 1 or 2)

15The amounts resulting from step 3, after any reduction under step 4,
are—

• in the case of the amount in step 3(a), the company’s
  qualifying trading profits, and

• in the case of the amount in step 3(b), the company’s
  20qualifying non-trading profits.

(4)
For the purposes of subsection (3) the company’s total profits for an
accounting period are to be calculated with the following
modifications—

(a) ignore any income so far as it falls within, and is dealt with
25under, Part 9A of CTA 2009 (company distributions);

(b) ignore any ring fence profits (as defined in section 276);

(c) ignore any contractor’s ring fence profits (as defined in
section 356LD);

(d) if the company is an insurance company, ignore any I-E profit
30(see section 141(2) of FA 2012);

(e) make no deductions under sections 45(4)(b) and 45B (carry
forward of trade loss against subsequent trade profits) other
than deductions that would be ignored for the purposes of
section 269ZB by reason of—

(i) 35sections 1209(3), 1210(5A) or 1211(7A) of CTA 2009
(losses of film trade),

(ii) sections 1216DA(3), 1216DB(5A) or 1216DC(7A) of
that Act (losses of television programme trade),

(iii) sections 1217DA(3), 1217DB(5A) or 1217DC(7A) of
40that Act (losses of video game trade),

(iv) sections 1217MA(3) or 1217MC(9) of that Act (losses
of theatrical trade),

(v) sections 1217SA(3) or 1217SC(9) of that Act (losses of
orchestral trade),

(vi) 45sections 1218ZDA(3) or 1218ZDC(9) of that Act
(losses of museum or gallery exhibition trade),

(vii) sections 65(4B) or 67A(5A) of this Act (losses of UK or
EEA furnished holiday lettings business),

(viii) section 304(7) (certain losses of ring fence trades), or

(ix) 50section 356NJ(2) (pre-1 April 2017 loss arising from oil
contractor activities);

(f) make no restricted deductions (as defined in section
269ZB(4)) under section 303B(4) or 303D(5)); and

(g) make no deductions under section 457(3) or 463H(4) of CTA
2009 (carry forward of non-trading deficits from loan
5relationships against subsequent non-trading profits).

(5) The following are “excluded deductions” for an accounting period
(“the current accounting period”)—

(a) a deduction for the current accounting period which is a
relevant deduction for the purposes of section 269ZD (see
10subsection (3) of that section);

(b) a deduction under section 37 (relief for trade losses against
total profits) in relation to a loss made in an accounting
period after the current accounting period;

(c) a deduction under section 45F (terminal losses);

(d) 15a deduction under section 260(3) of CAA 2001 (special leasing
of plant or machinery: carry back of excess allowances) in
relation to capital allowances for an accounting period after
the current accounting period; and

(e) a deduction under section 463E of CTA 2009 (non-trading
20deficit from loan relationships) in relation to a deficit for a
period after the current account period.

Deductions allowance

269ZG Deductions allowance for company in a group

(1) This section makes provision as to the deductions allowance of a
25company for an accounting period where, at any time in the period—

(a) the company is a member of a group, and

(b) one or more other companies within the charge to
corporation tax are members of that group.

(2) The company’s deductions allowance for the accounting period is
30the sum of—

(a) any amounts of group deductions allowance allocated to the
company for the period in accordance with sections 269ZH to
269ZK, and

(b) the appropriate amount of non-group deductions allowance
35of the company for the period,

up to a limit of £5,000,000.

(3) The “appropriate amount of non-group deductions allowance” of the
company, for the accounting period, is—

(4) If the accounting period is less than 12 months—

(a) the appropriate amount of non-group deductions allowance,
and

(b) the limit in subsection (2),

are proportionally reduced.

269ZH 5 Group deductions allowance and the nominated company

(1) This section applies where—

(a) two or more members of a group are companies within the
charge to corporation tax, and

(b) all the companies within the charge to corporation tax that
10are members of the group together nominate (“the group
allowance nomination”) one of their number (“the nominated
company”) for the purposes of this Part.

(2) The “group deductions allowance” for the group is £5,000,000 for
each accounting period of the nominated company throughout
15which the group allowance nomination has effect.

(3) If the group allowance nomination takes effect, or ceases to have
effect, part of the way through an accounting period of the
nominated company, the “group deductions allowance” for the
group for that period is—

20

(4) If an accounting period of the nominated company is less than 12
months, the group deductions allowance for that period is
proportionally reduced.

(5) A group allowance nomination must state the date on which it is to
30take effect (which may be earlier than the date the nomination is
made).

(6) A group allowance nomination is of no effect unless it is signed by
the appropriate person on behalf of each company that is, when the
nomination is made, a member of the group and within the charge to
35corporation tax.

(7) A group allowance nomination ceases to have effect—

(a) immediately before the date on which a new group
allowance nomination in respect of the group takes effect,

(b) upon the appropriate person in relation to a company within
40the charge to corporation tax that is a member of the group
notifying an officer of Revenue and Customs, in writing, that
the group allowance nomination is revoked, or

(c) upon the nominated company ceasing to be a company
within the charge to corporation tax or ceasing to be a
45member of the group.

(8) The Commissioners for Her Majesty’s Revenue and Customs may by
regulations make further provision about a group allowance
nomination or any notification under this section including, in
particular, provision—

(a) 5about the form and manner in which a nomination or
notification may be made,

(b) about how a nomination may be revoked and the form and
manner of such revocation,

(c) requiring a person to notify HMRC of the making or
10revocation of a nomination,

(d) requiring a person to give information to HMRC in
connection with the making or revocation of a nomination or
the giving of a notification,

(e) imposing time limits in relation to making or revoking a
15nomination or giving a notification, and

(f) providing that a nomination or its revocation, or a
notification, is of no effect, or ceases to have effect, if time
limits or other requirements under the regulations are not
met.

(9) 20In this Part “the appropriate person”, in relation to a company,
means—

(a) the proper officer of the company, or

(b) such other person as may for the time being have the express,
implied or apparent authority of the company to act on its
25behalf for the purposes of this Part.

(10) Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of
company officers: meaning of “proper officer”) apply for the
purposes of subsection (9) as they apply for the purposes of that
section.

269ZI 30Group allowance allocation statement: submission

(1) A company must submit a group allowance allocation statement to
HMRC for each of its accounting periods in which it is the nominated
company in relation to a group.

This is subject to subsections (2) and (3).

(2) 35If a company ceases to be the nominated company in relation to a
group before it submits a group allowance allocation statement to
HMRC for an accounting period—

(a) that company may not submit the statement, and

(b) the company that is for the time being the nominated
40company in relation to the group must do so.

(3) But if a new group allowance nomination in respect of the group
takes effect on a date before it is made, that does not affect the
validity of the submission of any group allowance allocation
statement submitted before the date the new nomination is made.

(4) 45A group allowance allocation statement under this section must be
received by HMRC before the first anniversary of the filing date for
the company tax return for the accounting period to which the
statement relates.