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

(4) After subsection (2) insert—

“(2A) No relief may be given under section 45A or 303C for a loss made by
the company in an accounting period beginning before the change in
ownership by carrying forward the loss and deducting it from the
5company’s total profits of an accounting period ending after the
change in ownership.””

60 After Chapter 2 insert—

““CHAPTER 2A Post-1 April 2017 losses: Further cases involving a change in the
company’s activities

676AA 10 Introduction to Chapter

(1) This Chapter applies if conditions 1 and 2 are met.

(2) Condition 1 is that on or after 1 April 2017 there is a change in the
ownership of a company (“the transferred company”).

(3) Condition 2 is that a major change in the business of the transferred
15company or a co-transferred company occurs within the required
period but not before 1 April 2017.

(4) The required period is—

(a) for the purposes of section 676AF, any period beginning no
more than 3 years before the change in ownership occurs
20which is a period of 5 years in which that change occurs,

(b) for the purposes of sections 676AG to 676AK, the period of 8
years beginning 3 years before the change in ownership.

(5) In this Chapter—

• “the change in ownership” means the change in ownership
  25mentioned in subsection (2);

• “the transferred company” has the meaning given by subsection
  (2);

• “trade” includes an office.

676AB Priority of provisions of Chapters 2 and 3 over this Chapter

(1) 30If and so far as —

(a) a relevant provision of this Chapter, and

(b) a relevant provision of Chapter 2 or 3,

would each (if the other provision were ignored) apply in relation to
the same loss or other amount, the relevant provision of this Chapter
35does not apply in relation to that amount.

(2) In this section “relevant provision”—

(a) in relation to this Chapter means any of the provisions of
sections 676AF to 676AK;

(b) in relation to Chapters 2 and 3 means any of the provisions of
40sections 674 and 679 to 683.

676AC “Major change in the business” of a company

(1) In this Chapter references to a “major change in the business” of a
company include—

(a) a major change in the nature or conduct of any trade or
5business carried on by the company,

(b) a major change in the scale of any trade or business carried on
by the company, and

(c) beginning or ceasing to carry on a particular trade or
business.

(2) 10In subsection (1) the reference to a major change in the “nature or
conduct” of a trade or business includes—

(a) a major change in the type of property dealt in, or services or
facilities provided in, the trade or business concerned,

(b) a major change in customers, outlets or markets of the trade
15or business concerned,

(c) a major change in the nature of the investments held by the
company for the purposes of an investment business.

(3) The definitions in subsections (1) and (2) apply even if the change is
the result of a gradual process which began before the period of 5
20years mentioned in section 676AA(4)(a) or (as the case may be) the
period of 8 years mentioned in section 676AA(4)(b).

(4) Where the condition in subsection (5) is met in the case of any two
companies, the transfer of a trade or business, or any property, from
one of them to the other is to be disregarded in determining for the
25purposes of section 676AA(3) whether or not there is a major change
in the business of either of those companies.

(5) The condition is that the companies are related to one another both—

(a) immediately before the change in ownership, and

(b) at the time of the transfer mentioned in subsection (4).

676AD 30 Notional split of accounting period in which change in ownership
occurs

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

(2) The accounting period in which the change in ownership occurs
(“the actual accounting period”) is treated as two separate
35accounting periods (“notional accounting periods”), the first ending
with the change and the second consisting of the remainder of the
period.

(3) Section 685 (apportionment of amounts) applies for the purposes of
this Chapter as it applies for the purposes of Chapter 3.

(4) 40The amounts for the actual accounting period in column 1 of the
table in section 685(2) are apportioned to the two notional accounting
periods in accordance with section 685.

(5) In this Chapter, and in sections 685 and 686 as they apply by virtue
of subsection (3), “the actual accounting period” and “notional
45accounting periods” have the same meaning as in this section.

676AE “Affected profits”

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

(2) Profits of an accounting period ending after the change in ownership
are “affected profits” if and so far as—

(a) 5they arise before the 5th anniversary of the end of the
accounting period of the transferred company in which the
change in ownership occurs, and

(b) they can fairly and reasonably be attributed to activities, or
other sources of income, as a result of which, or partly as a
10result of which, the major change referred to in section
676AA(3) has occurred.

(3) If an accounting period of the company begins before, and ends after,
the anniversary mentioned in subsection (2), then for the purposes of
that subsection—

(a) 15the accounting period is treated as two separate accounting
periods, the first ending with that date and the second
consisting of the remainder of the period, and

(b) the profits or losses of the accounting period are apportioned
to the two periods.

(4) 20Any apportionment under subsection (3)(b) is to be made on a time
basis according to the respective lengths of the two deemed
accounting periods.

(5) But if that method of apportionment would work unjustly or
unreasonably in any case, such other method is to be used as is just
25and reasonable.

676AF Restriction on use of carried-forward post-1 April trade losses

A loss made by the transferred company in an accounting period
beginning before the change in ownership may not be deducted from
affected profits of an accounting period ending after the change in
30ownership under any of the following provisions—

(a) section 45A(5) (carry-forward of post-1 April trade losses),

(b) section 45F(3) (carried-forward losses: terminal relief),

(c) section 303C(3) (excess carried-forward non-
decommissioning losses of ring fence trade), and

(d) 35section 124B(3) of FA 2012 (excess carried-forward BLAGAB
trade losses).

676AG Restriction on debits to be brought into account

(1) This section has effect for the purpose of restricting the debits to be
brought into account for the purposes of Part 5 of CTA 2009 (loan
40relationships) in respect of the transferred company’s loan
relationships.

(2) The debits to be brought into account for the purposes of Part 5 of
CTA 2009 for—

(a) the accounting period beginning immediately after the
45change in ownership, or

(b) any subsequent accounting period,

do not include relevant non-trading debits so far as amount A
exceeds amount B.

(3) Amount A is the sum of—

(a) the amount of those relevant non-trading debits, and

(b) 5the amount of any relevant non-trading debits which have
been brought into account for the purposes of that Part for
any previous accounting period ending after the change in
ownership.

(4) Amount B is the amount of the taxable total profits of the accounting
10period ending with the change in ownership.

(5) For the meaning of “relevant non-trading debit”, see section 730.

676AH Restriction on the carry forward of post-1 April 2017 non-trading
deficit from loan relationships

(1) This section has effect for the purpose of restricting the carry forward
15under Chapter 16A of Part 5 of CTA 2009 (non-trading deficits: post
1 April 2017 deficits) of a pre-acquisition non-trading deficit from the
transferred company’s loan relationships.

(2) For the purposes of this section an amount is a “pre-acquisition” non-
trading deficit from a company’s loan relationships if it is a non-
20trading deficit from the company’s loan relationships for an
accounting period beginning before the change in ownership.

(3) Subsection (4) applies if, in the case of a pre-acquisition non-trading
deficit from the transferred company’s loan relationships, the non-
trading deficit in column 1 of row 4 of the table in section 685(2) is
25apportioned in accordance with section 685(2) to the first notional
accounting period.

(4) None of that deficit may, by virtue of section 463G (carry forward of
unrelieved deficit), be set off against affected profits of—

(a) the accounting period beginning immediately after the
30change in ownership, or

(b) any subsequent accounting period.

676AI Restriction on relief for post-1 April 2017 non-trading loss on
intangible fixed assets

(1) This section has effect for the purpose of restricting relief under
35section 753 of CTA 2009 (treatment of non-trading losses) in respect
of a relevant non-trading loss on intangible fixed assets.

(2) An amount is a “relevant non-trading loss on intangible fixed assets”
if and so far as—

• it is by virtue of section 751 of CTA 2009 a non-trading loss on
  40intangible fixed assets for a relevant pre-acquisition
  accounting period, or

• it is made up of an amount falling within paragraph (a) which
  has been carried forward under section 753(3) of CTA 2009.

(3)
“Relevant pre-acquisition accounting period” means an accounting
45period beginning—

(a) before the change in ownership, and

(b) on or after 1 April 2017.

(4) In the case of a relevant non-trading loss on intangible fixed assets,
relief under section 753 of CTA 2009 against the total profits of the
actual accounting period is available only in relation to each of the
5notional accounting periods considered separately.

(5) A relevant non-trading loss on intangible fixed assets may not be
deducted as a result of section 753(3) (losses carried forward) from
affected profits of an accounting period ending after the change in
ownership.

676AJ 10 Restriction on deduction of post-1 April 2017 expenses of
management

(1) This section has effect for the purpose of restricting deductions for
post-1 April 2017 relevant expenses of management of the
transferred company.

(2) 15Any amounts which—

(a) are, or are treated as, expenses of management referable to
the actual accounting period, and

(b) are apportioned to either of the two notional accounting
periods in accordance with section 685,

20are treated for the purposes of Chapter 2 of Part 16 of CTA 2009
(companies with investment business) as expenses of management
referable to that notional accounting period.

(3) Any allowances which are apportioned to either of the notional
accounting periods in accordance with section 685 are treated for the
25purposes of section 253 of CAA 2001 and section 1233 of CTA 2009
(companies with investment business: excess capital allowances) as
falling to be made in that notional accounting period.

(4) In calculating the taxable total profits of an accounting period of the
transferred company ending after the change in ownership—

(a) 30relevant expenses of management, and

(b) relevant allowances,

may not be deducted from affected profits of the accounting period.

(5) In this section “relevant expenses of management” means expenses
of management which are first deductible under section 1219 of CTA
352009 for an accounting period beginning—

(a) on or after 1 April 2017, and

(b) before the change in ownership.

(6) In this section “relevant allowances” means allowances falling to be
made for an accounting period beginning—

(a) 40on or after 1 April 2017, and

(b) before the change in ownership.

676AK Restriction on use of post-1 April 2017 UK property business losses

(1) This section has effect for the purpose of restricting relief under
sections 62 and 63 for a relevant UK property business loss made by
45the transferred company.

(2) In this section “relevant UK property business loss” means a loss
made in a UK property business in an accounting period
beginning—

(a) on or after 1 April 2017, and

(b) 5before the change in ownership.

(3) In relation to a relevant UK property business loss, relief under
section 62(3) is available only in relation to each of the notional
accounting periods considered separately.

(4) A relevant UK property business loss may not be deducted as a
10result of section 62(5) or 63(3) from affected profits of an accounting
period ending after the change in ownership.

676AL “Co-transferred company” and “related company”

(1) In this Chapter “co-transferred company” means any company
which is related to the transferred company both immediately before
15and immediately after the change in ownership.

(2) For the purposes of this Chapter any two companies (“T”) and (“C”)
are “related” to one another at any time when—

(a) the group condition is met in relation to T and C, or

(b) any of consortium conditions 1 to 4 is met in relation to T and
20C,

(whether on the assumption that T is the claimant company and C is
the surrendering company or vice versa).

(3) In this Chapter—

• “consortium condition 1” is to be interpreted in accordance with
  25section 188CF,

• “consortium condition 2” is to be interpreted in accordance with
  section 188CG,

• “consortium condition 3” is to be interpreted in accordance with
  section 188CH,

• 30“consortium condition 4” is to be interpreted in accordance with
  section 188CI,

• “the group condition” is to be interpreted in accordance with
  section 188CE.””

61 After Chapter 2A insert—

““CHAPTER 2B 35Asset transferred within group: restriction of relief for post-1 April
trade losses

676BA Introduction to Chapter

(1) This section applies if there is a change in the ownership of a
company (“the company”) on or after 1 April 2017 and—

(a) 40conditions 1 and 2 are met, or

(b) condition 3 is met.

(2) Condition 1 is that after the change in ownership the company
acquires an asset from another company in circumstances such
that—

(a) section 171 of TCGA 1992 (no gain/no loss transfer within
5group), or

(b) section 775 of CTA 2009 (tax-neutral transfer within group),

applies to the acquisition.

(3) Condition 2 is that—

(a) in a case within subsection (2)(a), a chargeable gain accrues to
10the company on a disposal of the asset within the period of 5
years beginning with the change in ownership, or

(b) in a case within subsection (2)(b), there is a non-trading
chargeable realisation gain on the realisation of the asset
within that period.

(4) 15Condition 3 is that a chargeable gain on a disposal of an asset within
the period of 5 years beginning immediately after the change in
ownership (or an amount of such a gain) is treated as accruing to the
company by virtue of an election under section 171A of TCGA 1992
(notional transfers within a group).

20(Accordingly, references in this Chapter to the accrual of a relevant
gain are to be read in the light of section 171B(2) and (3) of TCGA
1992.)

(5) For the purposes of subsection (3), an asset (P) acquired by the
company as mentioned in subsection (2) is treated as the same as an
25asset (Q) owned at a later time by the company if the value of Q is
derived in whole or in part from P.

(6) In particular, P is treated as the same as Q for those purposes if—

(a) Q is a freehold,

(b) P was a leasehold, and

(c) 30the lessee has acquired the reversion.

(7) In this Chapter—

• “the change in ownership” means the change in ownership
  mentioned in subsection (1),

• “the company” has the same meaning as in this section,

• 35“non-trading chargeable realisation gain” means a chargeable
  realisation gain (within the meaning of Part 8 of CTA 2009
  (intangible fixed assets)) which is a non-trading credit for the
  purposes of that Part (see section 746 of that Act),

• “realisation” has the meaning given by section 734 of CTA 2009,
  40and

• “the relevant gain” means the gain (or amount of a gain) within
  subsection (3)(a) or (b) or (4).

676BB Notional split of accounting period in which change in ownership
occurs

(1) 45 This section applies for the purposes of this Chapter.

(2) The accounting period in which the change in ownership occurs
(“the actual accounting period”) is treated as two separate

accounting periods (“notional accounting periods”), the first ending
with the change and the second consisting of the remainder of the
period.

(3) Section 702 (apportionment of amounts) applies for the purposes of
5this Chapter as it applies for the purposes of Chapter 4.

(4) The amounts for the actual accounting period in column 1 of the
table in section 702(2) are apportioned to the two notional accounting
periods in accordance with section 702.

(5) In this Chapter, and in sections 702 and 703 as they apply by virtue
10of subsection (3), “the actual accounting period” and “notional
accounting periods” have the same meaning as in this section.

676BC Disallowance of relief for trade losses

(1) This section has effect for the purposes of restricting relief under
sections 45A, 45F and 303C of this Act and section 124B of FA 2012
15for a loss made by the company in a trade before the change in
ownership.

(2) But this section applies only if, in accordance with the relevant
provisions and section 702, an amount is included in respect of
chargeable gains or, as the case may be, non-trading chargeable
20realisation gains in the total profits of the accounting period in which
the relevant gain accrues or arises.

(3) Relief under section 45A or 303C of this Act or section 124B of FA
2012 is available only in relation to each of the notional accounting
periods considered separately.

(4) 25A loss made in an accounting period beginning before the change in
ownership—

(a) may not be deducted as a result of section 45A or 303C of this
Act or section 124B of FA 2012 from so much of the total
profits of an accounting period ending after the change in
30ownership as represents the relevant gain;

(b) may not be deducted by virtue of paragraph (a) of the
definition of “relevant profits” in section 45F(7) from so much
of the total profits of an accounting period ending after the
change in ownership as represents the relevant gain.

676BD 35 Meaning of “the relevant provisions”

In this Chapter “the relevant provisions” means—

(a) section 8(1) of, and Schedule 7A to, TCGA 1992 (amounts
included in respect of chargeable gains in total profits), or

(b) Chapter 6 of Part 8 of CTA 2009 (intangible fixed assets: how
40credits and debits are given effect).

676BE Meaning of “amount of profits which represents a relevant gain”

(1) In this Chapter, the amount of any profits which represents a
relevant gain is found by comparing—

(a) the amount (“Y”) of the relevant gain, with

(b) the amount (“Z”) which is included in respect of chargeable
gains or, as the case may be, non-trading chargeable
realisation gains for the accounting period concerned.

(2) If Y does not exceed Z, the amount of the profits which represents the
5relevant gain equals Y.

(3) If Y exceeds Z, the amount of those profits equals Z.””

62 After Chapter 2B insert—

““CHAPTER 2C Disallowance of group relief for carried-forward losses: general
provision

676CA 10 Introduction to Chapter

(1) This Chapter applies if on or after 1 April 2017 there is a change in
the ownership of a company (“the transferred company”).

(2) In this Chapter—

• “the change in ownership” means the change in ownership
  15mentioned in subsection (1);

• “the transferred company” has the meaning given by subsection
  (1).

676CB Restriction on surrender of carried-forward losses

(1) Subsection (3) applies if a company (“the claimant company”)
20would, (apart from this section), be eligible under Part 5A to make a
relevant claim for group relief for carried-forward losses.

(2) For the purposes of this section a claim for group relief for carried-
forward losses is a “relevant claim” if it is—

(a) for an accounting period ending after the change in
25ownership, and

(b) in respect of an amount surrendered by the transferred
company or a co-transferred company which is a relevant
pre-acquisition loss.

(3) The general rule is that the relief is not available.

(4) 30The general rule is subject to the exceptions in sections 676CD and
676CE.

(5) For the purposes of this section—

(a) the accounting period of the company mentioned in
subsection (2)(b) in which the change in ownership occurs is
35treated as two separate accounting periods, the first ending
with the change and the second consisting of the remainder
of the period, and

(b) the profits or losses of the accounting period are apportioned
to the two periods.

(6) 40Any apportionment under subsection (5)(b) is to be made on a time
basis according to the respective lengths of the two periods.

(7) But if that method of apportionment would work unjustly or
unreasonably in any case, such other method is to be used as is just
and reasonable.

676CC Cases where consortium condition 1 or 2 was previously met

(1) 5Subsection (4) applies in relation to a claim for group relief for
carried-forward losses by the transferred company if conditions A
and B are met.

(2) Condition A is that the claim is—

(a) for an accounting period ending after the change in
10ownership, and

(b) in respect of a relevant pre-acquisition loss.

(3) Condition B is that consortium condition 1 was met in relation to—

(a) the transferred company (as the company owned by a
consortium as mentioned in section 188CF(1)(b)), and

(b) 15the surrendering company (as the company mentioned in
section 188CF(1)(c)),

immediately before the change in ownership (“time T”).

(4) The relief given under section 188CK in respect of the transferred
company’s total profits of the claim period may not exceed the relief
20that would be available on the assumption that the claim is based on
consortium condition 1 and the ownership proportion for the
purposes of that condition is equal to the lowest of the following
proportions—

(a) the proportion of the ordinary share capital of the transferred
25company that was beneficially owned by the surrendering
company at time T,

(b) the proportion of any profits available for distribution to
equity holders of the transferred company to which the
surrendering company was beneficially entitled at that time,

(c) 30the proportion of any assets of the transferred company
available for distribution to such equity holders on a winding
up to which the surrendering company would be beneficially
entitled (as determined at that time), and

(d) the proportion of the voting power in the transferred
35company that was directly possessed by the surrendering
company at that time.

(5) Subsection (8) applies in relation to a claim for group relief for
carried-forward losses by the transferred company if conditions A
and B are met.

(6) 40Condition A is that the claim is—

(a) for an accounting period ending after the change in
ownership, and

(b) in respect of a a relevant pre-acquisition loss.

(7) Condition B is that consortium condition 2 was met in relation to—

(a) 45the transferred company (as the company owned by a
consortium as mentioned in section 188CG(1)(b)), and

(b) the surrendering company (as the company mentioned in
section 188CG(1)(c)),