Finance Bill (HC Bill 102)

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(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
be if P was a company).

(5) 5Subsection (4) does not apply if—

(a) the company held the right immediately before it became a
party to the arrangement, and

(b) either—

(i) the right had been granted or issued to the company in
10response to an application filed before 1 July 2016, or

(ii) the right had been assigned to the company before the
relevant date.

(6) Subsection (4) also does not apply if—

(a) the company held an exclusive licence in respect of the right
15immediately before it became a party to the arrangement, and

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

(7) 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
20a new qualifying IP right by reason of subsection (4).

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

357GCZC R&D undertaken or contracted out by another party to CSA

(1) 25Subsection (2) applies if—

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

(b) another party to the arrangement (“P”) undertakes research and
development for the purpose of creating or developing the
invention.

(2) 30The research and development is to be treated for the purposes of
sections 357BLC and 357BLD as having been contracted out by the
company to P.

(3) Subsection (4) applies if—

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

(b) 35another party to the arrangement (“P”) contracts out to another
person (“A”) research and development for the purpose of
creating or developing the invention, and

(c) the company makes a payment under the arrangement in
respect of that research and development (whether to P or to A).

(4) 40For the purposes of sections 357BLC and 357BLD—

(a) the company is to be treated as having contracted out to P
research and development which is the same as that contracted
out by P to A, and

(b) the payment mentioned in subsection (3)(c) is to be treated as if
45it were a payment made to P in respect of the research and
development the company is treated as having contracted out
to P.

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(5) In this section “research and development” has the meaning given by
section 1138.

357GCZD Acquisition of qualifying IP rights etc by another party to CSA

(1) Subsection (2) applies if—

(a) 5a company is a party to a cost-sharing arrangement,

(b) a person (“A”) assigns to another party to the arrangement (“P”)
a qualifying IP right,

(c) the qualifying IP right is a right in respect of the invention, and

(d) the company makes under the arrangement a payment in
10respect of the assignment (whether to A or to P).

(2) The payment is to be treated for the purposes of section 357BLE as if it
were a payment to A in respect of the assignment by A to the company
of the right.

(3) Subsection (4) applies if—

(a) 15a company is a party to a cost-sharing arrangement,

(b) a person (“A”) grants or transfers to another party to the
arrangement (“P”) an exclusive licence in respect of qualifying
IP right,

(c) the qualifying IP right is a right granted in respect of the
20invention, and

(d) the company makes a payment under the arrangement in
respect of the grant or transfer (whether to A or to P).

(4) The payment is to be treated for the purposes of section 357BLE as if it
were a payment to A in respect of the grant or transfer by A to the
25company of the licence.

357GCZE Treatment of expenditure in connection with formation of CSA etc

(1) Where—

(a) a company makes a payment to a person (“P”) in consideration
of that person entering into a cost-sharing arrangement with the
30company, and

(b) P holds a qualifying IP right granted in respect of the invention
or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated for the
purposes of section 357BLE as if it was an amount paid in respect of the
35assignment to the company of the right or (as the case may be) the
transfer to the company of the licence.

(2) Where—

(a) a company makes a payment to a party to a cost-sharing
arrangement (“P”) in consideration of P agreeing to the
40company becoming a party to the arrangement (whether in
place of P or in addition to P), and

(b) any party to the arrangement holds a qualifying IP right in
respect of the invention or holds an exclusive licence in respect
of such a right,

45a just and reasonable amount of the payment is to be treated for the
purposes of section 357BLE as if it was an amount paid in respect of the

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assignment to the company of the right or (as the case may be) the
transfer to the company of the licence.

(3) Where—

(a) a company that is a party to a cost-sharing arrangement makes
5a payment to another party to the arrangement in consideration
of that party agreeing to the company becoming entitled to a
greater share of the income attributable to the invention or
acquiring additional rights in relation to the invention, and

(b) any party to the arrangement holds a qualifying IP right in
10respect of the invention or holds an exclusive licence in respect
of such a right,

a just and reasonable amount of the payment is to be treated for the
purposes of section 357BLE as if it was an amount paid in respect of the
assignment to the company of the right or (as the case may be) the
15transfer to the company of the licence.

357GCZF Treatment of income in connection with formation of CSA etc

(1) Where—

(a) a company receives a payment in consideration of its entering
into a cost-sharing arrangement, and

(b) 20the company holds a qualifying IP right granted in respect of
the invention or holds an exclusive licence in respect of such a
right,

a just and reasonable amount of the payment is to be treated as relevant
IP income of the company.

(2) 25Where—

(a) a company that is a party to a cost-sharing arrangement receives
a payment from a person in consideration of its agreeing to that
person becoming a party to the arrangement (whether in place
of the company or in addition to it), and

(b) 30any party to the arrangement holds a qualifying IP right in
respect of the invention or holds an exclusive licence in respect
of such a right,

a just and reasonable amount of the payment is to be treated as relevant
IP income of the company.

(3) 35Where—

(a) a company that is a party to a cost-sharing arrangement receives
a payment from another party to the arrangement in
consideration of its agreeing to that party becoming entitled to
a greater share of the income attributable to the invention or
40acquiring additional rights in relation to the invention, and

(b) any party to the arrangement holds a qualifying IP right in
respect of the invention or holds an exclusive licence in respect
of such a right,

a just and reasonable amount of the payment is to be treated as relevant
45IP income of the company.”

(4) In section 357BP (meaning of “new qualifying IP right”) after subsection (12)

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insert—

(13) This section has effect subject to section 357GCZA (qualifying IP right
held by another party to a cost-sharing arrangement) and section
357GCZB (exclusive licence held by another party to a cost-sharing
5arrangement).”

(5) The amendments made by this section have effect in relation to accounting
periods beginning on or after 1 April 2017.

24 Hybrid and other mismatches

(1) Part 6A of TIOPA 2010 (hybrid and other mismatches) is amended as follows.

(2) 10In section 259B(3) (local taxes), for “is not outside the scope of subsection (2) by
reason only that” substitute “is outside the scope of subsection (2) if”.

(3) In section 259CC(2) (hybrid and other mismatches from financial instruments:
meaning of “permitted” taxable period of a payee), for paragraph (b)
substitute—

(b) 15the period begins at a later time and it is just and reasonable for
the amount of ordinary income to arise for the period (rather
than an earlier one).”

(4) In section 259DD(2) (hybrid transfer deduction/non-inclusion mismatches:
meaning of “permitted” taxable period of a payee), for paragraph (b)
20substitute—

(b) the period begins at a later time and it is just and reasonable for
the amount of ordinary income to arise for the period (rather
than an earlier one).”

(5) In section 259EB (hybrid payer deduction/non-inclusion mismatches and their
25extent), after subsection (1) insert—

(1A) But there is no hybrid payer deduction/non-inclusion mismatch so far
as the relevant deduction is—

(a) a debit in respect of amortisation that is brought into account
under section 729 or 731 of CTA 2009 (writing down the
30capitalised cost of an intangible fixed asset), or

(b) an amount that is deductible in respect of amortisation under a
provision of the law of a territory outside the United Kingdom
that is equivalent to either of those sections.”

(6) In section 259FA (deduction/non-inclusion mismatches relating to transfers by
35permanent establishments), after subsection (4) insert—

(4A) For the purposes of this section “the PE deduction” does not include—

(a) a debit in respect of amortisation that is brought into account
under section 729 or 731 of CTA 2009 (writing down the
capitalised cost of an intangible fixed asset), or

(b) 40an amount that is deductible in respect of amortisation under a
provision of the law of a territory outside the United Kingdom
that is equivalent to either of those sections.”

(7) In section 259GB (hybrid payee deduction/non-inclusion mismatches and

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their extent), after subsection (1) insert—

(1A) But there is no hybrid payee deduction/non-inclusion mismatch so far
as the relevant deduction is—

(a) a debit in respect of amortisation that is brought into account
5under section 729 or 731 of CTA 2009 (writing down the
capitalised cost of an intangible fixed asset), or

(b) an amount that is deductible in respect of amortisation under a
provision of the law of a territory outside the United Kingdom
that is equivalent to either of those sections.”

(8) 10In section 259HB (multinational payee deduction/non-inclusion mismatches
and their extent), after subsection (1) insert—

(1A) But there is no multinational payee deduction/non-inclusion mismatch
so far as the relevant deduction is—

(a) a debit in respect of amortisation that is brought into account
15under section 729 or 731 of CTA 2009 (writing down the
capitalised cost of an intangible fixed asset), or

(b) an amount that is deductible in respect of amortisation under a
provision of the law of a territory outside the United Kingdom
that is equivalent to either of those sections.”

(9) 20In section 259KB (imported mismatches: meaning of “excessive PE deduction”
etc), after subsection (3) insert—

(3A) For the purposes of this section a “PE deduction” does not include—

(a) a debit in respect of amortisation that is brought into account
under section 729 or 731 of CTA 2009 (writing down the
25capitalised cost of an intangible fixed asset), or

(b) an amount that is deductible in respect of amortisation under a
provision of the law of a territory outside the United Kingdom
that is equivalent to either of those sections.”

(10) The amendment made by subsection (2)

(a) 30has effect, in the case of its application to Chapter 6 of Part 6A of TIOPA
2010, in relation to excessive PE deductions in relation to which the
relevant PE period begins on or after 13 July 2017,

(b) has effect, in the case of its application to Chapter 9 or 10 of that Part, in
relation to accounting periods beginning on or after that date, and

(c) 35has effect, in the case of its application to any other Chapter of that Part,
in relation to—

(i) payments made on or after date, or

(ii) quasi-payments in relation to which the payment period begins
on or after that date.

(11) 40For the purposes of subsection (10)(a), (b) and (c)(ii), where there is a straddling
period—

(a) so much of the straddling period as falls before 13 July 2017, and so
much of it as falls on or after that date, are to be treated as separate
accounting periods or separate taxable periods (as the case may be),
45and

(b) if it is necessary to apportion an amount for the straddling period to the
two separate periods, it is to be apportioned—

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(i) on a time basis according to the respective length of the separate
periods, or

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

(12) 5A “straddling period” means an accounting period or payment period (as the
case may be) beginning before 13 July 2017 and ending on or after that date.

(13) Part 6A of TIOPA 2010 has effect, and is to be deemed always to have had
effect, with the amendments set out in subsections (3) to (9).

25 Trading profits taxable at the Northern Ireland rate

10Schedule 7 contains—

(a) amendments of Part 8B of CTA 2010 (trading profits taxable at the
Northern Ireland rate), and

(b) amendments consequential on or related to those amendments.

Chargeable gains

26 15Elections in relation to assets appropriated to trading stock

(1) Section 161 of TCGA 1992 (appropriations to and from trading stock) is
amended as follows.

(2) In subsection (3)—

(a) for “a person’s appropriation of an asset for the purposes of a trade”
20substitute “a case where a chargeable gain would have accrued to a
person on the appropriation of an asset for the purposes of a trade as
mentioned in that subsection”, and

(b) for “the chargeable gain or increased by the amount of the allowable
loss referred to in subsection (1), and where that subsection” substitute
25“that chargeable gain, and where subsection (1)”.

(3) In subsection (3ZB)—

(a) in paragraph (a)—

(i) omit “or loss”, and

(ii) omit “or an allowable loss”,

(b) 30in paragraph (b)—

(i) omit “, or increased by the amount of any loss,” and

(ii) omit “or allowable loss”, and

(c) in paragraph (c), at the end insert “and a loss which accrues on that
disposal which is not ATED-related is also unaffected by the election”.

(4) 35The amendments made by this section have effect in relation to appropriations
of assets made on or after 8 March 2017.

27 Substantial shareholding exemption

(1) Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with
substantial shareholding) is amended as follows.

(2) 40Omit the following (which relate to requirements to be met by investing
company)—

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(a) in paragraph 1(2), “the investing company and”;

(b) in paragraph 3—

(i) in sub-paragraph (2)(b), “(but see sub-paragraph (3) below)”;

(ii) sub-paragraph (3);

(iii) 5in sub-paragraph (4), “of paragraph 18(1)(b) and”;

(c) in the heading to Part 3, “investing company and”;

(d) paragraph 18 and the preceding italic heading;

(e) in paragraph 23(3), “a member of a trading group or”.

(3) In paragraph 7 (substantial shareholding requirement), for “two” substitute
10“six”.

(4) In paragraph 10 (effect of earlier no-gain/no-loss transfer), in sub-paragraph
(2)(b), after “but for” insert “subsection (1A) or”.

(5) In paragraph 19 (requirements relating to company invested in)—

(a) in sub-paragraph (1)(b), at the beginning insert “in a case where sub-
15paragraph 1A) applies,”;

(b) after sub-paragraph (1) insert—

(1A) This sub-paragraph applies where—

(a) the disposal is a disposal to a person connected with
the investing company, or

(b) 20the requirement in paragraph 7 is met by virtue of
paragraph 15A.”;

(c) at the end insert—

(4) Section 1122 of CTA 2010 (meaning of “connected” persons)
applies for the purposes of sub-paragraph (1A)(a).”

(6) 25The amendments made by this section have effect in relation to disposals made
on or after 1 April 2017.

28 Substantial shareholding exemption: institutional investors

(1) Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with
substantial shareholding) is amended as follows.

(2) 30After paragraph 3 insert—

“Subsidiary exemption: qualifying institutional investors

3A (1) This paragraph applies in relation to a gain or loss accruing to a
company (“the investing company”) on a disposal of shares or an
interest in shares in another company (“the company invested in”).

(2) 35This paragraph applies if—

(a) the requirement in paragraph 7 is met (substantial
shareholder requirement),

(b) the requirement in paragraph 19 is not met (requirement
relating to company invested in), and

(c) 40the investing company is not a disqualified listed company.

(3) If, immediately before the disposal, 80% or more of the ordinary
share capital of the investing company is owned by qualifying

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institutional investors, no chargeable gain or loss accrues on the
disposal.

(4) If, immediately before the disposal, at least 25% but less than 80% of
the ordinary share capital of the investing company is owned by
5qualifying institutional investors, the amount of the chargeable gain
or loss accruing on the disposal is reduced by the percentage of the
ordinary share capital of the investing company which is owned by
the qualifying institutional investors.

(5) A company is a “disqualified listed company” for the purposes of
10this Part of this Schedule if—

(a) any of the shares forming part of the ordinary share capital of
the company are listed on a recognised stock exchange,

(b) the company is not a qualifying institutional investor, and

(c) the company is not a qualifying UK REIT

(6) 15In sub-paragraph (5)(c) “qualifying UK REIT” means a UK REIT
within the meaning of Part 12 of CTA 2010 which—

(a) meets the condition in section 528(4)(b) of that Act (company
not a close company by virtue of having an institutional
investor as a participant), or

(b) 20by virtue of section 443 of that Act (companies controlled by
or on behalf of Crown) is not treated as a close company.

3B (1) This paragraph applies for the purposes of paragraph 3A.

(2) A person “owns” ordinary share capital if the person owns it—

(a) directly,

(b) 25indirectly, or

(c) partly directly and partly indirectly.

(3) Sections 1155 to 1157 of CTA 2010 (meaning of “indirect ownership”
and calculation of amounts owned indirectly) apply for the purposes
of sub-paragraph (2).

(4) 30For the purposes of sections 1155 to 1157 of CTA 2010 as applied by
sub-paragraph (3)—

(a) ordinary share capital may not be owned through a
disqualified listed company;

(b) treat references to a body corporate as including an exempt
35unauthorised unit trust (and references to ordinary share
capital, in the case of such a trust, as references to units in the
trust).

(5) A person is also to be regarded as owning ordinary share capital in a
company in circumstances where a person would, under paragraphs
4012 and 13 of this Schedule, be regarded as holding shares in a
company.

(6) Where the assets of a partnership include ordinary share capital of a
company, each partner is to be regarded as owning a proportion of
that share capital equal to the partner’s proportionate interest in that
45ordinary share capital.

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(7) In this Schedule “exempt unauthorised unit trust” has the same
meaning as in the Unauthorised Unit Trusts (Tax) Regulations 2013
(SI 2013/2819SI 2013/2819).”

(3) After paragraph 8 insert—

8A (1) 5This paragraph applies for the purposes of the exemption in
paragraph 3 or 3A in a case where at least 25% of the ordinary share
capital of the investing company is owned by qualifying institutional
investors.

(2) The investing company also holds a “substantial shareholding” in
10the company invested in for the purposes of paragraph 7 if—

(a) the investing company holds ordinary shares, or interests in
ordinary shares, in the company invested in the cost of which
on acquisition was at least £20,000,000, and

(b) by virtue of those shares or interests or any other shares or
15interests in shares in the company invested in, the investing
company—

(i) is beneficially entitled to not less than a proportionate
percentage of the profits available for distribution to
equity holders of the company invested in, and

(ii) 20would be beneficially entitled on a winding up to not
less than a proportionate percentage of the assets of
the company invested in available for distribution to
equity holders.

(3) In sub-paragraph (2)—

  • 25“cost” means the amount or value of the consideration, in
    money or money’s worth, given by the investing company or
    on its behalf wholly and exclusively for the acquisition of the
    ordinary shares or interests in ordinary shares, together with
    the incidental costs to it of the acquisition;

  • 30“proportionate percentage” means a percentage equal to the
    percentage of the ordinary share capital held by the investing
    company by virtue of the ordinary shares and interests in
    ordinary shares referred to in sub-paragraph (2)(a).

(4) For the purposes of sub-paragraph (2)(a) it does not matter whether
35there was a single acquisition or a series of acquisitions.

(5) If—

(a) the percentage (“the actual percentage”) of the profits or
assets to which the investing company is, or would be,
beneficially entitled as mentioned in sub-paragraph (2)(b)(i)
40or (ii) is less than the proportionate percentage, but

(b) having regard to the proportion that the actual percentage
bears to the proportionate percentage, the difference can
reasonably be regarded as insignificant,

the investing company is treated as meeting the condition in sub-
45paragraph (2)(b)(i) or (ii) (as the case may be).

(6) Paragraph 3B (owning ordinary share capital) applies for the
purposes of sub-paragraph (1).

(7) Paragraph 8(2) applies for the purposes of sub-paragraph (2).

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(8) In this paragraph “ordinary shares” means shares in the ordinary
share capital of the company invested in.”

(4) In paragraph 9 (aggregation), in sub-paragraph (1), for “paragraph 7”
substitute “paragraphs 7 and 8A(2)”.

(5) 5After paragraph 30 insert—

“Meaning of “qualifying institutional investor”

30A (1) In this Schedule “qualifying institutional investor” means a person
falling within any of A to G below.

Pension schemes

A 10The trustee or manager of—

(a) a registered pension scheme, other than an investment-
regulated pension scheme, or

(b) an overseas pension scheme, other than one which would
be an investment-regulated pension scheme if it were a
15registered pension scheme.

“Investment-regulated pension scheme” has the same meaning as
in Part 1 of Schedule 29A to the Finance Act 2004.

“Overseas pension scheme” has the same meaning as in Part 4 of
that Act.

20Life assurance businesses

B A company carrying on life assurance business, if immediately
before the disposal its interest in the investing company is held as
part of its long-term business fixed capital.

“Life assurance business” has the meaning given in section 56 of
25the Finance Act 2012.

Section 137 of that Act applies for the purposes of determining
whether an interest forms part of the long-term business fixed
capital of a company.

Sovereign wealth funds etc

C 30A person who cannot be liable for corporation tax or income tax
(as relevant) on the ground of sovereign immunity.

Charities

D A charity.

Investment trusts

E 35An investment trust.

Authorised investment funds

F An authorised investment fund which meets the genuine diversity
of ownership condition throughout the accounting period of the
fund in which the disposal is made.