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

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

(8) The relief given under section 188CK in respect of the transferred
company’s total profits of the claim period may not exceed the relief
that would be available on the assumption that the claim is based on
5consortium condition 2 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
company that was beneficially owned by the link company at
10time T,

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

(c) the proportion of any assets of the transferred company
15available for distribution to such equity holders on a winding
up to which the link company would be beneficially entitled
(as determined at that time), and

(d) the proportion of the voting power in the transferred
company that was directly possessed by the link company at
20that time.

(9) For the purposes of this section—

(a) the accounting period of the surrendering company
mentioned in subsection (3)(b) or (7)(b) (as the case may be)
in which the change in ownership occurs is treated as two
25separate 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.

(10) Any apportionment under subsection (9)(b) is to be made on a time
30basis according to the respective lengths of the two periods.

(11) In this section—

• “the link company” means the company which is the link
  company (see section 188CG(1)(d)) for the purposes of the
  meeting of consortium condition 2 as mentioned in
  35subsection (7),

• “the claim period” and “the surrendering company” has the
  same meaning as in Part 5A (see section 188FD(1)).

(12) Chapter 6 of Part 5 (equity holders and profits or assets available for
distribution) applies for the purposes of subsections (4)(b) and (c)
40and (8)(b) and (c).

676CD Cases where consortium condition 3 or 4 was previously met

(1) If the requirement in subsection (3) is met, section 676CB(3) does not
prevent a company from making under section 188CC a claim for
group relief for carried-forward losses falling within subsection (2).

(2) 45A claim falls within this subsection if it is—

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

(b) in relation to an amount surrendered by the transferred
company which is a relevant pre-acquisition loss and is
attributable to an accounting period of that company
specified in the claim (“the specified loss-making period”).

(3) 5The requirement is that consortium condition 3 or consortium
condition 4 is met throughout a period which—

(a) begins before or during the specified loss-making period, and

(b) ends with or after the time when the change in ownership
occurs.

(4) 10For the purposes of a claim by virtue of this section, section 188CC(3)
has effect as if requirement 3 were omitted.

676CE Exceptions to restrictions

(1) Nothing in section 676CB(3) or 676CC affects the giving of group
relief for carried-forward losses by the making of a deduction under
15section 188CK(1) from total profits of the claimant company which
arise after the 5th anniversary of the end of the accounting period of
the transferred company in which the change in ownership occurs.

(2) Nothing in section 676CB(3) or 676CC affects the availability of relief
under Part 5A if immediately before the change in ownership the
20group condition was met in relation to the transferred company and
the claimant company.

But see also section 676CF.

(3) If an accounting period of the claimant company begins before, and
ends after, the anniversary mentioned in subsection (1), then for the
25purposes of that subsection—

(a) the 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
30to the two periods.

(4) Any apportionment under subsection (3)(b) is to be made on a time
basis according to the respective lengths of the two 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
35and reasonable.

(6) In this section “the claimant company” has the same meaning as in
Part 5A (see section 188FD(1)).

676CF Cases where Chapter 2, 2A or 3 also applies

(1) This section applies if—

(a) 40Chapter 2 applies in relation to the change in ownership by
virtue of condition A in section 673 being met,

(b) Chapter 2A applies in relation to the change in ownership, or

(c) Chapter 3 applies in relation to the change in ownership by
virtue of condition B in section 677 being met.

(2) 45This section also applies if—

(a) the condition in subsection (1)(a) would be met if in
subsection (4A) of section 719 (meaning of “change in the
ownership of a company”) the reference to Chapter 2C
included a reference to Chapter 2, or

(b) 5the condition in subsection (1)(c) would be met if in
subsection (4A) of section 719 the reference to Chapter 2C
included a reference to Chapter 3.

(3) Where the company in relation to which the major change
mentioned in section 673(4), 676AA(3) or 677(3) has occurred would
10(apart from this section) be eligible under Part 5A to claim in respect
of a relevant pre-acquisition loss group relief for carried-forward
losses for an accounting period ending after the change in
ownership, no deduction in respect of that loss may be made from
affected profits under section 188CK.

15See section 676CG for the meaning of “affected profits”.

(4) For the purposes of this section—

(a) the accounting period in which the change in ownership
occurs is treated as two separate accounting periods, the first
ending with the change and the second consisting of the
20remainder of the period, and

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

(5) Any apportionment under subsection (4)(b) is to be made on a time
basis according to the respective lengths of the two deemed
25accounting periods.

(6) 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.

676CG “Affected profits”

(1) 30This section has effect for the purposes of section 676CF.

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

(a) they arise before the 5th anniversary of the end of the
accounting period of the transferred company in which the
35change 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
result of which, the major change mentioned in section
673(4), 676AA(3) or 677(3) (as the case may be) has occurred.

(3) 40If an accounting period of the company in relation to which the major
change mentioned in section 673(4), 676AA(3) or 677(3) has occurred
begins before, and ends after, the anniversary mentioned in
subsection (2), then for the purposes of that subsection—

(a) the accounting period is treated as two separate accounting
45periods, 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) Any 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
5unreasonably in any case, such other method is to be used as is just
and reasonable.

676CH “Relevant pre-acquisition loss”

(1) In this Chapter “relevant pre-acquisition loss” means—

(a) a non-trading deficit from loan relationships for an
10accounting period beginning before the change in ownership
carried forward to the surrender period under section
463G(4) of CTA 2009,

(b) a loss on intangible fixed assets so far as it is made up of
amounts carried forward to the surrender period under
15section 753(3) of CTA 2009 from one or more accounting
periods beginning before the change in ownership,

(c) expenses carried forward to the surrender period under
section 1223 of CTA 2009 (carry forward of expenses of
management of investment business) which were first
20deductible in an accounting period beginning before the
change in ownership,

(d) a loss made in an accounting period beginning before the
change in ownership and carried forward to the surrender
period under section 45A(3) (post- 1 April trade loss),

(e) 25a loss made in an accounting period beginning before the
change in ownership and carried forward to the surrender
period under section 62(5)(b) or 63(3)(a) (loss made in UK
property business),

(f) a loss made in an accounting period beginning before the
30change in ownership and carried forward to the surrender
period under section 303B(2) or 303D(3) (post-1 April non-
decommissioning losses of ring fence trade),

(g) a BLAGAB trade loss made in an accounting period
beginning before the change in ownership and carried
35forward to the surrender period under section 124A(2) or
124C(3) of FA 2012.

(2) In this section “the surrender period” is to be interpreted in
accordance with section 188BB(8).

676CI Interpretation of Chapter

(1) 40In this Chapter “co-transferred company” means any company
which is related to the transferred company both immediately before
and 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) 45the 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
C,

(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
  section 188CF,

• “consortium condition 2” is to be interpreted in accordance with
  5section 188CG,

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

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

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

63 After Chapter 2C insert—

““CHAPTER 2D Asset transferred within group: Restriction of group relief for
carried-forward losses

676DA 15 Introduction to Chapter

(1) This section applies if—

(a) there is a change in the ownership of a company (“the
company”) on or after 1 April 2017, and

(b) the following are met—

• 20conditions 1 and 2, or

• condition 3.

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

(a) 25section 171 of TCGA 1992 (no gain/no loss transfer within a
group), or

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

applies to the acquisition.

(3) Condition 2 is that—

(a) 30in a case within subsection (2)(a), a chargeable gain accrues to
the 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
35within that period.

(4) Condition 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
40(notional transfers within a group).

(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
45company as mentioned in subsection (2) is treated as the same as an

asset (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) 5P was a leasehold, and

(c) the lessee has acquired the reversion.

(7) In this Chapter

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

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

• “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),

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

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

676DB Notional split of accounting period in which change in ownership
20occurs

(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
accounting periods (“notional accounting periods”), the first ending
25with the change and the second consisting of the remainder of the
period.

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

(4) The amounts for the actual accounting period in column 1 of the
30table 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
of subsection (3), “the actual accounting period” and “notional
accounting periods” have the same meaning as in this section.

676DC 35 Disallowance of group relief for carried-forward losses

(1) This section has effect for the purposes of restricting relief under
Chapter 3 of Part 5A (group relief for carried-forward losses).

(2) But this section applies only if, in accordance with the relevant
provisions and section 702, an amount is included in respect of
40chargeable gains or, as the case may be, non-trading chargeable
realisation gains in the total profits of the accounting period in which
the relevant gain accrues or arises.

(3) In calculating the company’s taxable total profits of the accounting
period in which the relevant gain accrues or arises, a relevant pre-
45acquisition loss may not be deducted, as a result of section 188CK
(group relief for carried-forward losses: deductions from total

profits) from so much of the total profits of the accounting period as
represents the relevant gain.

(4) “Relevant pre-acquisition loss” means—

(a) a non-trading deficit from loan relationships for an
5accounting period beginning before the change in ownership
carried forward to the surrender period under section
463G(4) of CTA 2009,

(b) a loss on intangible fixed assets so far as it is made up of
amounts carried forward to the surrender period under
10section 753(3) of CTA 2009 from one or more accounting
periods beginning before the change in ownership,

(c) expenses carried forward to the surrender period under
section 1223 of CTA 2009 (carrying forward expenses of
management and other amounts) which were first deductible
15in an accounting period beginning before the change in
ownership,

(d) a loss made in an accounting period beginning before the
change in ownership and carried forward to the surrender
period under section 45A(3) (post- 1 April trade loss);

(e) 20a loss made in an accounting period beginning before the
change in ownership and carried forward to the surrender
period under section 62(5)(b) or 63(3)(a) (loss made in UK
property business),

(f) a loss made in an accounting period beginning before the
25change in ownership and carried forward to the surrender
period under section 303B(2) or 303D(3) (post-1 April non-
decommissioning losses of ring fence trade),

(g) a BLAGAB trade loss made in an accounting period
beginning before the change in ownership and carried
30forward to the surrender period under section 124A(2) or
124C(3) of FA 2012.

(5) In this section “the surrender period” is to be interpreted in
accordance with section 188BB(8).

676DD Meaning of “the relevant provisions”

35In 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
credits and debits are given effect).

676DE 40 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
45gains 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
relevant gain equals Y.

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

64 (1) Section 677 (introduction to Chapter 3) is amended as follows.

(2) In subsection (3), for “6” substitute “8”.

(3) In subsection (5), for “6” substitute “8”.

(4) 5The amendments made by this paragraph do not have effect unless both the
change in ownership referred in section 677(1) and the major change in the
nature or conduct of a business referred to in section 677(3) occur on or after
1 April 2017.

65 (1) Section 681 (restriction on relief for non-trading loss on intangible fixed
10assets) is amended as follows.

(2) In subsection (3)(b), for “debit of” substitute “loss on intangible fixed assets
for”.

66 (1) Section 685 (apportionment of amounts) is amended as follows.

(2) In subsection (2), in column 1 of row 4 in the table, for the words from “of
15CTA 2009” to the end substitute “or 463G(4) of CTA 2009.”

(3) In subsection (2), in column 1 of row 6 of the table, for “debit of” substitute
“loss on intangible fixed assets for”.

67 (1) In section 690 (meaning of “significant increase in the amount of a
company’s capital: amount B), in subsection (3) for “3” substitute “5”.

(2) 20The amendment made by this paragraph does not have effect unless the
change in ownership referred in section 677(1) occurs on or after 1 April
2017.

68 (1) Section 692 (introduction to Chapter 4) is amended as follows.

(2) In subsection (1), for paragraph (b) substitute—

“(b) 25the following are met—

• condition 1, and

• conditions 2 and 3 or condition 4.”

(3) In subsection (4)(a), for “3” substitute “5”.

(4) After subsection (4) insert—

“(4A) 30Condition 4 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
(election to reallocate gain or loss to another member of the group).”

(5) 35In subsection (7), in the definition of “the relevant gain”, for “within
subsection (4)(a) or (b)” substitute “(or amount of a gain) within subsection
(4)(a) or (b) or (4A)”.

(6) The amendments made by this paragraph do not have effect unless the
change in ownership referred to in section 692(1) occurs on or after 1 April
2017.

69 In section 696 (restriction of debits to be brought into account), in subsection
5(4)(b), after “461” insert “or 463B(1)(a)”.

70 (1) Section 702 (apportionment of amounts) is amended as follows.

(2) In subsection (2), in column 1 of row 5 of the table, for the words from “of
CTA 2009” to the end substitute “or 463G(4) of CTA 2009.”

(3) In subsection (2), in column 1 of row 7 of the table, for “debit of” substitute
10“loss on intangible fixed assets for”.

71 (1) Section 704 (company carrying on UK property business) is amended as
follows.

(2) In subsection (2), for “3” substitute “5”.

(3) In subsection (10), in the words after paragraph (b), for “3” substitute “5”.

(4) 15The amendments made this paragraph do not have effect unless both the
change in ownership referred in section 704(1) and the major change in the
nature or conduct of a trade or business referred to in section 704(2) occur on
or after 1 April 2017.

72 (1) Section 705 (company carrying on overseas property business) is amended
20as follows.

(2) In subsection (2), for “3” substitute “5”.

(3) In subsection (9), in the words after paragraph (b), for “3” substitute “5”.

(4) The amendments made by this paragraph do not have effect unless both the
change in ownership referred in section 705(1) and the major change in the
25nature or conduct of a trade or business referred to in section 705(2) occur on
or after 1 April 2017.

73 In section 719 (meaning of “change of ownership of a company”), after
subsection (4) insert—

“(4A) For the purposes of Chapters 2A to 2D there is also a change in the
30ownership of a company (“C”) if, as a result of the acquisition by a
person of a holding of the ordinary share capital of the company, the
group condition (as defined in section 188CE) is met in relation to C
and another company (“A”) (which was not a member of the same
group of companies as C before the acquisition).”

74 35In section 721 (when things other than ordinary share capital may be taken
into account), in subsection (4), in the words before paragraph (a), after “2,”
insert “2A, 2B, 2C, 2D,”.

75 In section 727 (extended time limit for assessment) for “3” substitute “5”.

Deduction buying

76 (1) 40Section 730C of CTA 2010 is amended as follows.

(2) In subsection (2)—

(a) omit “or” at the end of paragraph (a),

(b) after paragraph (b) insert “, or

(c) Chapter 3 of Part 5A (group relief for carried-forward
5losses).””

(3) In subsection (3), for “A deductible amount that meets conditions A and B”
substitute “In the case of a relevant claim within subsection (2)(a) or (b), a
deductible amount that meets conditions A and B (a “restricted deductible
amount”)”.

(4) 10After subsection (3) insert—

“(3A) A relevant claim within subsection (2)(c) may not be made in respect
of a loss or other amount which has been carried forward under any
provision mentioned in paragraphs (a) to (e) of section 188BB(1), so
far as that amount is made up of an amount which was (in a previous
15accounting period) a restricted deductible amount.””

(5) In subsection (4)—

(a) for “subsection (3) does” substitute “subsections (3) and (3A) do”,
and

(b) for “the claim” substitute “or as a result of, the claim concerned”.

(6) 20After subsection (7) insert—

“(7A) For the purposes of determining how much of an amount carried
forward as mentioned in subsection (3A) is made up of an amount
which was (in a previous accounting period) a restricted deductible
amount, assume that in previous accounting periods amounts have
25been brought into account as deductions (see section 730B(2)) in the
order that results in the greatest amount being excluded by
subsection (3A).””

(7) The amendments made by this paragraph do not have effect if the relevant
day (as defined in section 730B(1) of CTA 2010) is before 1 April 2017.

30Part 9 Northern Ireland trading losses etc

77 Part 8B of CTA 2010 (trading profits taxable at the Northern Ireland rate) is
amended as follows.

78 In the italic heading before section 357JB for “section 37” substitute “Chapter
352 of Part 4”.

79 For sections 357JB to 357JE substitute—

“357JB Availability of relief

(1) The references in section 37 and sections 45A to 45F (relief for trade
losses) to a loss are, where a company carrying on a trade in an
40accounting period has Northern Ireland losses of the trade or
mainstream losses of the trade, references to those Northern Ireland
losses or mainstream losses.