Finance Bill (HC Bill 102)

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initial investing period included a reference to a relevant
investment having been made in the old company before the
acquisition and before the end of the initial investing period,
and

(b) 5in subsection (5)(a) the reference to relevant investments made
in the relevant company included a reference to relevant
investments made in the old company before the acquisition.

(4) In subsection (3) “relevant holding” has the same meaning as in
Chapter 4.”

(4) 10The amendments made by this section have effect—

(a) for the purposes of section 280C of ITA 2007, in relation to investments
made on or after 6 April 2017;

(b) for the purposes of section 294A of ITA 2007, in relation to relevant
holdings issued on or after 6 April 2017.

13 15VCTs: exchange of non-qualifying shares and securities

(1) Section 330 of ITA 2007 (power to facilitate company reorganisations etc
involving exchange of shares) is amended as follows.

(2) After subsection (1) insert—

(1A) The Treasury may by regulations make provision for the purposes of
20this Part for cases where—

(a) a holding of shares or securities that does not meet the
requirements of Chapter 4 is exchanged for other shares or
securities not meeting those requirements, and

(b) the exchange is made for genuine commercial reasons and does
25not form part of a scheme or arrangement the main purpose or
one of the main purposes of which is the avoidance of tax.”

(3) In subsection (2), for “subsection (1)” substitute “subsections (1) and (1A)”.

(4) In subsection (3), for “The regulations” substitute “Regulations under
subsection (1)”.

(5) 30After subsection (3) insert—

(3A) Regulations under subsection (1A) may, among other things, make
provision—

(a) for the new shares or securities to be treated in any respect in the
same way as the original shares and securities for any period;

(b) 35as to when the new shares or securities are to be regarded as
having been acquired;

(c) as to the valuation of the original or the new shares or
securities.”

(6) In subsection (4), for “The regulations” substitute “Regulations under this
40section”.

(7) In subsection (6). in paragraph (c), at the beginning insert “in the case of
regulations under subsection (1)”.

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14 Social investment tax relief

Schedule 1 makes provision about income tax relief for social investments.

15 Business investment relief

(1) Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

(2) 5In section 809VC (qualifying investments), in subsection (1)(a), after “issued
to” insert “or acquired by”.

(3) In section 809VD (condition relating to qualifying investments)—

(a) in subsection (1), omit the “or” at the end of paragraph (b) and after that
paragraph insert—

(ba) 10an eligible hybrid company, or”;

(b) in subsection (2)(b), for “2” substitute “5”;

(c) in subsection (3)(c), for “2” substitute “5”;

(d) after subsection (3) insert—

(3A) A company is an “eligible hybrid company” if—

(a) 15it is a private limited company,

(b) it is not an eligible trading company or an eligible
stakeholder company,

(c) it carries on one or more commercial trades or is
preparing to do so within the next 5 years,

(d) 20it holds one or more investments in eligible trading
companies or is preparing to do so within the next 5
years, and

(e) carrying on commercial trades and making investments
in eligible trading companies are all or substantially all
25of what it does (or of what it is reasonably expected to
do once it begins operating).”;

(e) in subsection (4), for “reference in subsection (3)” substitute “references
in subsections (3) and (3A)”;

(f) in subsection (5)(a), for “2” substitute “5”.

(4) 30In section 809VE (commercial trades), after subsection (5) insert—

(6) A company which is a partner in a partnership is not to be regarded as
carrying on a trade carried on by the partnership.”

(5) In section 809VH (meaning of “potentially chargeable event”)—

(a) in subsection (1)(a), after “eligible stakeholder company” insert “nor an
35eligible hybrid company”;

(b) in subsection (1)(d), for “2-year” substitute “5-year”;

(c) in subsection (2), for paragraph (b) substitute—

(b) the value is received from any person in circumstances
that are directly or indirectly attributable to the
40investment, and”;

(d) omit subsection (4);

(e) in subsection (5)—

(i) for “2-year” substitute “5-year”;

(ii) in paragraph (a), for “2” substitute “5”;

(f) 45in subsection (6), omit the “or” at the end of paragraph (b) and after that

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paragraph insert—

(ba) it is an eligible hybrid company but is not trading and—

(i) it holds no investments in eligible trading
companies, or

(ii) 5none of the eligible trading companies in which
it holds investments is trading, or”;

(g) in subsection (10)(b), after “eligible stakeholder company” insert “or an
eligible hybrid company”.

(6)
In section 809VJ (grace period), after subsection (2) insert—

(2A) 10But subsection (2B) applies instead of subsections (1) and (2) where the
potentially chargeable event is a breach of the 5-year start-up rule by
virtue of section 809VH(5)(b).

(2B) The grace period allowed for the steps mentioned in section 809VI(2)(a)
and (2)(b) is the period of 2 years beginning with the day on which a
15relevant person first became aware or ought reasonably to have become
aware of the potentially chargeable event referred to in subsection
(2A).”

(7) In section 809VN (order of disposals etc), in subsections (1)(c) and (5)(a) and
(b), after “eligible stakeholder company” insert “or eligible hybrid company”.

(8) 20The amendments made by this section have effect where the relevant event as
defined in section 809VA of ITA 2007 occurs on or after 6 April 2017.

Income tax: trading and property businesses

16 Calculation of profits of trades and property businesses

Schedule 2 contains provision about the calculation of the profits of a trade,
25profession or vocation or a property business, in particular the calculation of
profits on the cash basis.

17 Trading and property allowances

Schedule 3 contains provision about a trading allowance and a property
allowance giving relief from income tax.

30Corporation tax

18 Carried-forward losses

(1) Schedule 4 makes provision about corporation tax relief for losses and other
amounts that are carried forward.

(2) The Commissioners for Her Majesty’s Revenue and Customs may by
35regulations made by statutory instrument make provision consequential on
any provision made by Schedule 4.

(3) Regulations under subsection (2)—

(a) may make provision amending or modifying any provision of the
Taxes Acts (including any provision inserted by Schedule 4),

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(b) may make incidental, supplemental, transitional, transitory or saving
provision, and

(c) may make different provision for different purposes.

(4) A statutory instrument containing regulations under subsection (2) is subject
5to annulment in pursuance of a resolution of the House of Commons.

(5) In this section “the Taxes Acts” has the same meaning as in the Taxes
Management Act 1970 (see section 118(1) of that Act).

19 Losses: counteraction of avoidance arrangements

(1) Any loss-related tax advantage that would (in the absence of this section) arise
10from relevant tax arrangements is to be counteracted by the making of such
adjustments as are just and reasonable.

(2) Any adjustments required to be made under this section (whether or not by an
officer of Revenue and Customs) may be made by way of—

(a) an assessment,

(b) 15the modification of an assessment,

(c) amendment or disallowance of a claim,

or otherwise.

(3) For the purposes of this section arrangements are “relevant tax arrangements”
if conditions A and B are met.

(4) 20Condition A is that the purpose, or one of the main purposes, of the
arrangements is to obtain a loss-related tax advantage.

(5) Condition B is that it is reasonable to regard the arrangements as
circumventing the intended limits of relief under the relevant provisions or
otherwise exploiting shortcomings in the relevant provisions.

(6) 25In determining whether or not condition B is met all the relevant circumstances
are to be taken into account, including whether the arrangements include any
steps that—

(a) are contrived or abnormal, or

(b) lack a genuine commercial purpose.

(7) 30In this section “loss-related tax advantage” means a tax advantage as a result
of a deduction (or increased deduction) under a provision mentioned in
subsection (8).

(8) The provisions are—

(a) sections 457, 459, 461, 462, 463B, 463G and 463H of CTA 2009 (non-
35trading deficits from loan relationships);

(b) section 753 of CTA 2009 (non-trading losses on intangible fixed assets);

(c) section 1219 of CTA 2009 (management expenses etc);

(d) sections 37, 45, 45A, 45B and 45F of CTA 2010 (deductions in respect of
trade losses);

(e) 40section 62(3) of CTA 2010 (losses of a UK property business);

(f) Part 5 of CTA 2010 (group relief);

(g) Part 5A of CTA 2010 (group relief for carried-forward losses);

(h) sections 303B, 303C and 303D of CTA 2010 (non-decommissioning
losses of ring-fence trades);

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(i) sections 124A, 124B and 124C of FA 2012 (carried-forward BLAGAB
trade losses).

(9) In this section—

  • “arrangements” includes any agreement, understanding, scheme
    5transaction or series of transactions (whether or not legally
    enforceable);

  • “tax advantage” has the meaning given by section 1139 of CTA 2010.

(10) This section has effect in relation to a tax advantage that relates (or would apart
from this section relate) to an accounting period beginning on or after 1 April
102017 (regardless of when the arrangements in question were made).

(11) Where a tax advantage would (apart from this subsection) relate to an
accounting period beginning before 1 April 2017 and ending on or after that
date (“the straddling period”)—

(a) so much of the straddling period as falls before 1 April 2017, and so
15much of that period as falls on or after that date, are treated as separate
accounting periods, and

(b) the extent (if any) to which the tax advantage relates to the second of
those accounting periods is to be determined by apportioning
amounts—

(i) 20in accordance with section 1172 of CTA 2010 (time basis), or

(ii) if that method would produce a result that is unjust or
unreasonable, on a just and reasonable basis.

(12) In the case of a tax advantage as a result of a deduction (or increased
deduction) under—

(a) 25section 463H of CTA 2009,

(b) section 62(3) of CTA 2010,

(c) section 303B, 303C or 303D of CTA 2010, or

(d) section 124A or 124C of FA 2012,

subsections (10) and (11) have effect as if the references to 1 April 2017 were to
3013 July 2017.

20 Corporate interest restriction

Schedule 5 makes provision about the amounts that may be brought into
account for the purposes of corporation tax in respect of interest and other
financing costs.

21 35Museum and gallery exhibitions

Schedule 6 makes provision about relief in respect of the production of
museum and gallery exhibitions.

22 Grassroots sport

(1) CTA 2010 is amended as follows.

(2) 40In section 1(2) (overview of Act)—

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

(b) after that paragraph insert—

(ga) relief for expenditure on grassroots sport (see Part 6A), and”.

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(3) In section 99(1) (group relief: losses and other amounts which may be
surrendered), after paragraph (d) insert—

(da) amounts allowable as qualifying expenditure on grassroots
sport (see Part 6A),”.

(4) 5In section 105(4) (group relief: order in which amounts are treated as
surrendered)—

(a) after paragraph (a) insert—

(aa) second, expenditure within section 99(1)(da),”,

(b) in paragraph (b), for “second” substitute “third”,

(c) 10in paragraph (c), for “third” substitute “fourth”, and

(d) in paragraph (d), for “fourth” substitute “fifth”.

(5) After Part 6 insert—

Part 6A

Relief for expenditure on grassroots sport

217A Relief for expenditure on grassroots sport

(1) A payment made by a company which is qualifying expenditure on
15grassroots sport (and which is not refunded) is allowed as a deduction
in accordance with this section from the company’s total profits in
calculating the corporation tax chargeable for the accounting period in
which the payment is made.

(2) The deduction is from the company’s total profits for the accounting
20period after any other relief from corporation tax other than—

(a) relief under Part 6,

(b) group relief, and

(c) group relief for carried-forward losses.

(3) If the company is a qualifying sport body at the time of the payment, a
25deduction is allowed for the amount of the payment.

See section 217C for the meaning of “qualifying sport body”.

(4) If the company is not a qualifying sport body at the time of the
payment, a deduction is allowed—

(a) if the payment is to a qualifying sport body, for the amount of
30the payment, and

(b) if the payment does not fall within paragraph (a) (a “direct
payment”), in accordance with subsections (7) and (8).

(5) If at any time on or after 1 April 2017 the company receives income for
use for charitable purposes which are purposes for facilitating
35participation in amateur eligible sport, a deduction is allowed only if,
and in so far as, the payment exceeds an amount which is equal to the
amount of that income which—

(a) the company does not have to bring into account for
corporation tax purposes, and

(b) 40has not previously been taken into account under this
subsection to disallow a deduction under this Part of all or any
part of a payment.

See section 217B(3) for the meaning of terms used in this subsection.

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(6) But in any case, the amount of the deduction is limited to the amount
that reduces the company’s taxable total profits for the accounting
period to nil.

(7) If the total of all the direct payments made by the company in the
5accounting period is equal to or less than the maximum deduction for
direct payments, a deduction is allowed under subsection (4)(b) in
respect of that total.

(8) If the total of all the direct payments made by the company in the
accounting period is more than the maximum deduction for direct
10payments, a deduction is allowed under subsection (4)(b) in respect of
so much of that total as does not exceed the maximum deduction for
direct payments.

(9) The maximum deduction for direct payments is £2,500 or, if the
accounting period is shorter than 12 months, a proportionately reduced
15amount.

(10) The Treasury may by regulations amend subsection (9) by substituting
a higher amount for the amount for the time being specified there.

217B Meaning of qualifying expenditure on grassroots sport

(1) For the purposes of this Part, a payment is qualifying expenditure on
20grassroots sport if—

(a) it is expenditure incurred for charitable purposes which are
purposes for facilitating participation in amateur eligible sport,
and

(b) apart from this Part, no deduction from total profits, or in
25calculating any component of total profits, would be allowed in
respect of the payment.

For the meaning of charitable purposes, see sections 2, 7 and 8 of the
Charities Act 2011.

(2) Where expenditure is incurred for both—

(a) 30charitable purposes which are purposes for facilitating
participation in amateur eligible sport, and

(b) other purposes,

then, for the purposes of subsection (1), it is to be apportioned between
the purposes in paragraph (a) and the purposes in paragraph (b) on a
35just and reasonable basis.

(3) For the purposes of section 217A(5) and subsection (1)(a)

(a) paying a person to play or take part in a sport does not facilitate
participation in amateur sport, but paying coaches or officials
for their services may do so, and

(b) 40“eligible sport” means a sport that for the time being is an
eligible sport for the purposes of Chapter 9 of Part 13 (see
section 661).

217C Meaning of qualifying sport body

(1) For the purposes of this Part, a “qualifying sport body” is—

(a) 45a recognised sport governing body;

(b) a body which is wholly owned by a recognised sport governing
body.

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(2) A “recognised sport governing body” is a body which is included from
time to time in a list, maintained by the National Sports Councils, of
governing bodies of sport recognised by them.

(3) The Treasury may by regulations—

(a) 5amend this section for the purpose of altering the meaning of
“qualifying sport body”;

(b) designate bodies to be treated as qualifying sport bodies for the
purposes of this Part.

(4) Regulations under section (3)(b) may designate a body by reference to
10its inclusion in a class or description of bodies.

(5) In this section “the National Sports Councils” means—

(a) the United Kingdom Sports Council,

(b) the English Sports Council,

(c) the Scottish Sports Council,

(d) 15the Sports Council for Wales, and

(e) the Sports Council for Northern Ireland.

(6) Regulations under subsection (3)(b) made before 1 April 2018 may
include provision having effect in relation to times before the
regulations are made (but not times earlier than 1 April 2017).

217D 20Relationship between this Part and Part 6

If, but for section 217A, an amount—

(a) would be deductible under Part 6, or

(b) would be deductible under Part 6 but for Chapter 2A of Part 6,

the amount is not deductible under this Part, and nothing in this Part
25affects the amount’s deductibility (or non-deductibility) under Part 6.”

(6) The amendments made by this section have effect for the purpose of allowing
deductions for payments made on or after 1 April 2017.

(7) Where a company has an accounting period beginning before 1 April 2017 and
ending on or after that date, the accounting period for the purposes of the new
30section 217A(9) is so much of the accounting period as falls on or after 1 April
2017.

23 Profits from the exploitation of patents: cost-sharing arrangements

(1) Part 8A of CTA 2010 (profits from the exploitation of patents) is amended as
follows.

(2) 35After section 357BLE insert—

357BLEA Cases where the company is a party to a CSA

(1) Subsection (2) applies if during the relevant period—

(a) the company is a party to a cost-sharing arrangement (see
section 357GC),

(b) 40the company incurs expenditure in making payments under the
arrangement that are within section 357BLC(2) by reason of
section 357GCZC, and

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(c) persons who are not connected with the company make
payments under the arrangement to the company in respect of
relevant research and development undertaken or contracted
out by the company.

(2) 5So much of the expenditure referred to in paragraph (b) of subsection
(1) as is equal to the amount of the payments referred to in paragraph
(c) of that subsection is to be disregarded in determining the R&D
fraction for the sub-stream.

(3) Subsection (4) applies if during the relevant period—

(a) 10the company is a party to a cost-sharing arrangement,

(b) the company incurs expenditure in making payments under the
arrangement that are within subsection (5), and

(c) the company receives payments under the arrangement that are
within subsection (6).

(4) 15So much of the expenditure referred to in paragraph (b) of subsection
(3) as is equal to the amount of the payments referred to in paragraph
(c) of that subsection is to be disregarded in determining the R&D
fraction for the sub-stream.

(5) A payment is within this subsection if—

(a) 20it is within section 357BLD(2) by reason of section 357GCZC, or

(b) it is within section 357BLE(2) or (3) by reason of section
357GCZD.

(6) A payment is within this subsection if—

(a) it is made by persons connected with the company in respect of
25relevant research and development undertaken or contracted
out by the company, or

(b) it is made in respect of an assignment to the company of a
relevant qualifying IP right or a grant or transfer to the
company of an exclusive licence in respect of such a right.”

(3) 30For section 357GC substitute—

357GC Meaning of “cost-sharing arrangement” etc

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

(2) A “cost-sharing arrangement” is an arrangement under which—

(a) each of the parties to the arrangement is required to contribute
35to the cost of, or undertake activities for the purpose of, creating
or developing an item or process,

(b) each of those parties—

(i) is entitled to a share of any income attributable to the
item or process, or

(ii) 40has one or more rights in respect of the item or process,
and

(c) the amount of any income received by each of those parties is
proportionate to its participation in the arrangement as
described in paragraph (a).

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(3) “Invention”, in relation to a cost-sharing arrangement, means the item
or process that is the subject of the arrangement (or any item or process
incorporated within it).

357GCZA Qualifying IP right held by another party to CSA

(1) 5This section applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) another party to the arrangement (“P”) holds a qualifying IP
right granted in respect of the invention, and

(c) the company does not hold an exclusive licence in respect of the
10right.

(2) But this section does not apply if the arrangement produces for the
company a return within section 357BG(1)(c).

(3) The company is to be treated for the purposes of this Part as if it held
the right.

(4) 15The right is to be treated for the purposes of this Part as a new
qualifying IP right in relation to the company if—

(a) the company or P (or both) became a party to the arrangement
on or after 1 April 2017, or

(b) the right is a new qualifying IP right in relation to P (or would
20be if P was a company).

(5) Subsection (4) does not apply if—

(a) the company held an exclusive licence in respect of the right
immediately before it became a party to the arrangement, and

(b) that licence was granted to the company before the relevant
25date.

(6) The right is to be treated for the purposes of this Part as an old
qualifying IP right in relation to the company if it is not to be treated as
a new qualifying IP right by reason of subsection (4).

(7) Subsections (7) and (8) of section 357BP (meaning of “relevant date”)
30apply for the purposes of subsection (5) of this section as they apply for
the purposes of subsection (6) of that section.

357GCZB Exclusive licence held by another party to CSA

(1) This section applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) 35another party to the arrangement (“P”) holds an exclusive
licence in respect of a qualifying IP right granted in respect of
the invention, and

(c) the company does not hold the right or another exclusive
licence in respect of it.

(2) 40But this section does not apply if the arrangement produces for the
company a return within section 357BG(1)(c).

(3) The company is to be treated for the purposes of this Part as if it held an
exclusive licence in respect of the right.

(4) The right is to be treated for the purposes of this Part as a new
45qualifying IP right in relation to the company if—