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

(c) the additional deduction is wholly or partly a Northern
Ireland additional deduction, and

(d) any of the following conditions is met—

(i) the company does not have a surrenderable loss in the
5accounting period;

(ii) the company has a surrenderable loss in the
accounting period, but does not make a claim under
section 1218ZCH of CTA 2009 (museums and
galleries exhibition tax credit claimable if company
10has surrenderable loss) for the period;

(iii) the company has a surrenderable loss in the
accounting period and makes a claim under that
section for the period, but the amount of Northern
Ireland losses surrendered on the claim is less than
15the Northern Ireland additional deduction.

(2) The company is entitled to make another deduction (“a Northern
Ireland supplementary deduction”) in respect of qualifying
expenditure.

(3) See section 357UU for provision about the amount of the Northern
20Ireland supplementary deduction.

(4) The Northern Ireland supplementary deduction—

(a) is made in calculating the profit or loss of the separate
exhibition trade, and

(b) forms part of the Northern Ireland profits or Northern
25Ireland losses of the separate exhibition trade.

(5) In this section “surrenderable loss” has the meaning given by section
1218ZCI of CTA 2009.

357UU Northern Ireland supplementary deduction: amount

(1) This section contains provision for the purposes of section 357UT(2)
30about the amount of the Northern Ireland supplementary deduction.

(2) If the accounting period falls within only one financial year, the
amount of the Northern Ireland supplementary deduction is—

where—

• 35A is the amount of the Northern Ireland additional deduction
  brought into account in the accounting period;

• B is the amount of Northern Ireland losses surrendered in any
  claim under section 1218ZCH of CTA 2009 for the accounting
  period;

• 40MR is the main rate for the financial year;

• NIR is the Northern Ireland rate for the financial year.

(3) If the accounting period falls within more than one financial year, the
amount of the Northern Ireland supplementary deduction is
determined by taking the following steps.

• 45Step 1

Finance (No. 2) BillPage 561

• Calculate, for each financial year, the amount that would be the
  Northern Ireland supplementary deduction for the
  accounting period if it fell within only that financial year (see
  subsection (2)).

• 5Step 2

• Multiply each amount calculated under step 1 by the proportion
  of the accounting period that falls within the financial year
  for which it is calculated.

• Step 3

• 10Add together each amount found under step 2.

357UV Museums and galleries exhibition tax credit: Northern Ireland
supplementary deduction ignored

For the purpose of determining the available loss of a company
under section 1218ZCI of CTA 2009 (amount of surrenderable loss)
15for any accounting period, any Northern Ireland supplementary
deduction made by the company in the period (and any Northern
Ireland supplementary deduction made in any previous accounting
period) is to be ignored.

Losses of separate exhibition trade

357UW 20 Restriction on use of losses before completion period

(1) Section 1218ZDA of CTA 2009 (restriction on use of losses before
completion period) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the
separate exhibition trade in an accounting period preceding the
25completion period is, if the company is a Northern Ireland company
in that period, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (2) and (3) of that section are
30to be read accordingly.

(3) Subsection (4) applies if a Northern Ireland company has, in an
accounting period preceding the completion period—

(a) both Northern Ireland losses of the trade and mainstream
profits of the trade, or

(b) 35both mainstream losses of the trade and Northern Ireland
profits of the trade.

(4) The company may make a claim under section 37 (relief for trade
losses against total profits) for relief for the losses mentioned in
subsection (3)(a) or (b).

(5) 40But relief on such a claim is available only—

(a) in the case of a claim for relief for Northern Ireland losses,
against mainstream profits of the trade of the same period;

(b) in the case of a claim for relief for mainstream losses, against
Northern Ireland profits of the trade of the same period.

(6) 45In this section “the completion period” has the same meaning as in
section 1218ZDA of CTA 2009 (see section 1218ZD(2) of that Act).

357UX Use of losses in the completion period

(1) Section 1218ZDB of CTA 2009 (use of losses in the completion
period) has effect subject as follows.

(2) The reference in subsection (1) of that section to a loss made in the
5separate exhibition trade is, in relation to a loss made in a period in
which the company is a Northern Ireland company, a reference to—

(a) any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsections (2) and (4) of that section are
10to be read accordingly.

(3) The references in subsection (3) of that section to a loss made in the
separate exhibition trade in the completion period are, where the
company is a Northern Ireland company in the period, references
to—

(a) 15any Northern Ireland losses of the trade of the period, or

(b) any mainstream losses of the trade of the period;

and references to losses in subsection (4) of that section are to be read
accordingly.

(4) Subsection (4) of that section has effect, in relation to Northern
20Ireland losses, as if the reference to an additional deduction under
Chapter 3 of Part 15E of CTA 2009 included a reference to a Northern
Ireland supplementary deduction under this Chapter.

357UY Terminal losses

(1) Section 1218ZDC of CTA 2009 (terminal losses) has effect subject as
25follows.

(2) Where—

(a) a company makes an election under subsection (3) of that
section (election to treat terminal loss as loss brought forward
of different trade) in relation to all or part of a terminal loss,
30and

(b) the terminal loss is a Northern Ireland loss,

that subsection has effect as if the reference in it to a loss brought
forward were to a Northern Ireland loss brought forward.

(3) Where—

(a) 35a company makes a claim under subsection (6) of that section
(claim to treat terminal loss as loss brought forward by
different company) in relation to part or all of a terminal loss,
and

(b) the terminal loss is a Northern Ireland loss,

40that subsection has effect as if the reference in it to a loss brought
forward were to a Northern Ireland loss brought forward.””

18 (1) Schedule 4 to CTA 2010 (index of defined expressions) is amended as
follows.

(2) In the entry for “Northern Ireland expenditure”—

(a) 45for “14A” substitute “14B”, and

(b) for “and 357UJ(2)” substitute “, 357UJ(2) and 357UR(2)”.

(3) Insert at the appropriate places—

FA 2016

19 In Schedule 24 to FA 2016 (tax advantages constituting the grant of state aid),
in Part 1, in the table headed “Creative tax reliefs”, after the entry for
“Orchestra tax relief” insert—

Part 3 Commencement

20 Any power to make regulations conferred on the Treasury by virtue of this
15Schedule comes into force on the day on which this Act is passed.

21 (1) The amendments made by the following provisions of this Schedule have
effect in relation to accounting periods beginning on or after 1 April 2017—

(a) Part 1, and

(b) in Part 2, paragraphs 2 to 15 and 19.

(2) 20Sub-paragraph (3) applies where a company has an accounting period
beginning before 1 April 2017 and ending on or after that date (“the
straddling period”).

(3) For the purposes of Part 15E of CTA 2009—

(a) so much of the straddling period as falls before 1 April 2017, and so
25much of that period as falls on or after that date, are separate
accounting periods, and

(b) any amounts brought into account for the purposes of calculating for
corporation tax purposes the profits of a trade for the straddling
period are apportioned to the two separate accounting periods on
30such basis as is just and reasonable.

22 (1) Section 4 of CT(NI)A 2015 (power to make consequential amendments) has
effect as if paragraphs 16 to 18 of this Schedule were contained in that Act.

(2) Section 5(4) to (6) of CT(NI)A 2015 (commencement) has effect as if—

(a) references to Part 8B of CTA 2010 were to that Part as amended by
35paragraphs 16 and 17 of this Schedule, and

(b) references to the amendments made by Schedules 1 and 2 to
CT(NI)A 2015 included the amendments made by paragraph 18 of
this Schedule.

SCHEDULE 12 Section {j3035 (NI CT)} Trading profits taxable at the Northern Ireland rate

Part 1 Amendments relating to SMEs

5Amendments of CTA 2010

1 CTA 2010 is amended as follows.

2 (1) Section 357H (introduction) is amended as follows.

(2) In subsection (5)—

(a) 10after “that is an SME” insert “and is a Northern Ireland employer”;

(b) for “that is not an SME” substitute “that—

(a) is an SME that is not a Northern Ireland employer and
has made the requisite election, or

(b) is not an SME.””

3 (1) 15Section 357KA (meaning of “Northern Ireland company”) is amended as
follows.

(2) In subsection (1)(b), for “the SME condition” substitute “the SME (Northern
Ireland employer) condition, the SME (election) condition”.

(3) In subsection (2), for “SME condition” substitute “SME (Northern Ireland
20employer) condition”.

(4) After subsection (2) insert—

“(2A) The “SME (election) condition” is that—

(a) the company is an SME in relation to the period,

(b) the company is not a Northern Ireland employer in relation
25to the period,

(c) the company has a NIRE in the period,

(d) the company is not a disqualified close company in relation
to the period, and

(e) an election by the company for the purposes of this
30subsection has effect in relation to the period.””

(5) In subsection (4), after the definition of “Northern Ireland employer”
insert—

• ““disqualified close company”, see section 357KEA;”.”

(6) After subsection (3) insert—

“(3A) 35An election for the purposes of subsection (2A)—

(a) must be made by notice to an officer of Revenue and
Customs,

(b) must specify the accounting period in relation to which it is
to have effect (“the specified accounting period”),

(c) 40must be made before the end of the period of 12 months
beginning with the end of the specified accounting period,
and

(d) if made in accordance with paragraphs (a) to (c) has effect in
relation to the specified accounting period.””

4 (1) Section 357KE (Northern Ireland workforce conditions) is amended as
follows.

(2) 5In subsection (2)—

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

(b) at the end of paragraph (c) insert “, and

“(d) in the case of a close company, or of a company which would
be a close company if it were UK resident, individuals who
10are participators in the company.””

(3) After subsection (7) insert—

“(7A) In this section “participator” has the same meaning as in sections
1064 to 1067 (see sections 1068 and 1069).

(7B) In determining for the purposes of this section the amount of
15working time that is spent in any place by a participator in the
company, time spent by the participator in that place is to be
included where—

(a) the time is spent by the participator in providing services to
a person other than the company (“the third party”), and

(b) 20condition A or B is met.

(7C) Condition A is that the provision of the services results in a payment
being made (whether directly or indirectly) to the company by—

(a) the third party, or

(b) a person connected with the third party.

(7D) 25Condition B is that—

(a) the company holds a right that it acquired (whether directly
or indirectly) from the participator, and

(b) any payment in connection with that right is made (whether
directly or indirectly) to the company by—

(i) 30the third party, or

(ii) a person connected with the third party.

(7E) Section 1122 (connected persons) applies for the purposes of this
section.””

5 After section 357KE insert—

35““Meaning of “disqualified close company”

357KEA “Disqualified close company”

(1) A company is a “disqualified close company” in relation to a period
if—

(a) the company is a close company, or would be a close
40company if it were UK resident, at any time in the period, and

(b) conditions A and B are met.

(2) Condition A is that the company has a NIRE in the period as a result
of tax-avoidance arrangements.

(3) Condition B is that—

(a) 50% or more of the working time that is spent in the United
Kingdom during the period by members of the company’s
workforce is working time spent by participators in the
5company otherwise than in Northern Ireland, or

(b) 50% or more of the company’s workforce expenses that are
attributable to working time spent in the United Kingdom
during the period by members of the company’s workforce
are attributable to working time spent by participators in the
10company otherwise than in Northern Ireland.

(4) For the purposes of this section “tax avoidance arrangements” means
arrangements the sole or main purpose of which is to secure that any
profits or losses of the company for the period are Northern Ireland
profits or losses.

(5) 15In subsection (4) “arrangements” includes any agreement,
understanding, scheme, transaction or series of transactions
(whether or not legally enforceable).

(6) The following provisions apply for the purposes of this section as
they apply for the purposes of section 357KE (Northern Ireland
20workforce conditions)—

(a) subsections (2) to (5) and (7A) to (7E) of that section;

(b) regulations made under that section.

(7) In its application by virtue of subsection (6), subsection (5) of section
357KE has effect as if the reference in it to subsection (1)(b) of that
25section were to subsection (3)(b) of this section.””

6 In the heading of Chapter 6 of Part 8B, at the end insert “that are Northern
Ireland employers”.

7 In section 357M (Chapter 6: introductory), in subsection (1), for “SME
condition” substitute “SME (Northern Ireland employer) condition”.

8 30In the heading of Chapter 7 of Part 8B, after “losses etc:” insert “SMEs that
are not Northern Ireland employers and”.

9 In section 357N (Chapter 7: introductory), in subsection (1), after “by virtue
of” insert “the SME (election) condition or”.

10 (1) Section 357OB (Northern Ireland intangibles credits and debits: SMEs) is
35amended as follows.

(2) In the heading, at the end, insert “that are Northern Ireland employers”.

(3) In subsection (1)(a), for “SME condition” substitute “SME (Northern Ireland
employer) condition”.

11 (1) Section 357OC (Northern Ireland intangibles credits and debits: large
40companies) is amended as follows.

(2) In the heading, after “debits:” insert “SMEs that are not Northern Ireland
employers and”.

(3) In subsection (1), after “by virtue of” insert “the SME (election) condition or”.

12 (1) Section 357VB (relevant Northern Ireland IP profits: SMEs) is amended as
follows.

(2) In the heading, at the end, insert “that are Northern Ireland employers”.

(3) In subsection (1)(a), for “SME condition” substitute “SME (Northern Ireland
5employer) condition”.

13 (1) Section 357VC (relevant Northern Ireland IP profits: large companies) is
amended as follows.

(2) In the heading, after “profits:” insert “SMEs that are not Northern Ireland
employers and”.

(3) 10In subsection (1)(a), after “by virtue of” insert “the SME (election) condition
or”.

14 (1) Section 357WA (meaning of “Northern Ireland firm”) is amended as follows.

(2) In subsection (1)(b), for “SME partnership condition” substitute “SME
(Northern Ireland employer) partnership condition, the SME (election)
15partnership condition”.

(3) In subsection (2), for “SME partnership condition” substitute “SME
(Northern Ireland employer) partnership condition”.

(4) After subsection (2) insert—

“(2A) The “SME (election) partnership condition” is that—

(a) 20the firm is an SME in relation to the firm’s accounting period,

(b) the firm is not a Northern Ireland employer in relation to that
period,

(c) the firm has a NIRE in that period,

(d) the firm is not a disqualified firm in relation to the period,
25and

(e) an election by the firm for the purposes of this subsection has
effect in relation to that period.””

(5) After subsection (3) insert—

“(3A) An election for the purposes of subsection (2A)—

(a) 30must be made by notice to an officer of Revenue and
Customs,

(b) must specify the accounting period in relation to which it is
to have effect (“the specified accounting period”),

(c) must be made before the end of the period of 12 months
35beginning with the end of the specified accounting period,
and

(d) if made in accordance with paragraphs (a) to (c) has effect in
relation to the specified accounting period.””

(6) In subsection (4)—

(a) 40in the opening words, for “to subsections (2) and (3)” substitute “in
relation to a firm”;

(b) for paragraph (b) substitute—

“(b) references to the Northern Ireland workforce
conditions were to the Northern Ireland workforce
partnership conditions (see section 357WBA).””

(7) 5In subsection (5) omit paragraph (c).

15 After section 357WB, insert—

“357WBA Northern Ireland workforce partnership conditions

(1) The Northern Ireland workforce partnership conditions, in relation
to a period, are—

(a) 10that 75% or more of the working time that is spent in the
United Kingdom during the period by members of the firm’s
workforce is spent in Northern Ireland, and

(b) that 75% or more of the firm’s workforce expenses that are
attributable to working time spent in the United Kingdom
15during the period by members of the firm’s workforce are
attributable to time spent in Northern Ireland.

(2) References in this section to members of the firm’s workforce are
to—

(a) employees of the firm,

(b) 20externally provided workers in relation to the firm, and

(c) individuals who are partners in the firm.

(3) In subsection (2) “externally provided worker”, in relation to a firm,
has the same meaning as in Part 13 of CTA 2009 (see section 1128 of
that Act).

25In the application of section 1128 of that Act for the purposes of
subsection (2), references to a company are to be read as references
to a firm and references to a director are to be treated as omitted.

(4) References in this section to the working time spent by members of
the firm’s workforce in a place are to the total time spent by those
30persons in that place while providing services to the firm.

(5) References in this section to “the firm’s workforce expenses” are,
where the period is an accounting period of the firm, to the total of
the deductions made by the firm in the period in respect of members
of the firm’s workforce in calculating the profits of the firm’s trade.

(6) 35References in this section to “the firm’s workforce expenses” are,
where the period is not an accounting period of the firm, to the total
of—

(a) the deductions made by the firm in any accounting period
falling wholly within the period, and

(b) 40the appropriate proportion of the deductions made by the
firm in any accounting period falling partly within the
period,

in respect of members of the firm’s workforce in calculating the
profits of the firm’s trade.

(7) 45For the purposes of subsection (6)(b), “the appropriate proportion” is
to be determined by reference to the number of days in the periods
concerned.

(8) The Commissioners for Her Majesty’s Revenue and Customs may by
regulations specify descriptions of deduction that are, or are not, to
be regarded for the purposes of this section as made in respect of
members of a firm’s workforce.

(9) 5Regulations under this section—

(a) may make different provision for different purposes;

(b) may make incidental, supplemental, consequential and
transitional provision and savings.

(10) Section 357WBB contains supplementary provision applying for the
10purposes of this section.

357WBB Section 357WBA: supplementary

(1) References in section 357WBA or this section to a partner in the firm
include any person entitled to a share of income of the firm.

(2) In determining for the purposes of section 357WBA the amount of
15working time that is spent in any place by a partner in the firm, time
spent by the partner in that place is to be included where—

(a) the time is spent by the partner in providing services to a
person other than the firm (“the third party”), and

(b) condition A or B is met.

(3) 20Condition A is that the provision of the services results in a payment
being made (whether directly or indirectly) to the firm by—

(a) the third party, or

(b) a person connected with the third party.

(4) Condition B is that—

(a) 25the firm holds a right that it acquired (whether directly or
indirectly) from the partner, and

(b) any payment in connection with that right is made (whether
directly or indirectly) to the firm by—

(i) the third party, or

(ii) 30a person connected with the third party.

(5) Section 1122 (connected persons) applies for the purposes of this
section.

(6) References in section 357WBA to deductions made in respect of the
members of the firm’s workforce in calculating profits of the firm’s
35trade include, in relation to a partner in the firm, the appropriate
notional consideration for services provided by the partner (see
subsections (7) and (8)).

(7) For the purposes of subsection (6), “the appropriate notional
consideration for services” provided by a partner is—

(a) 40the amount which the partner would receive in consideration
for services provided to the firm by the partner during the
period in question, were the consideration to be calculated on
the basis mentioned in subsection (8), less

(b) any amount actually received in consideration for such
45services which is not included in the partner’s profit share.