Finance Bill (HC Bill 116)

(b) all the receipts which would, apart from Chapter 1 of Part 7
(rent-a-room relief), be brought into account in calculating
the profits of the business, are rent-a-room receipts.

See section 783BQ for definitions relevant to this subsection.

(3) 5If an individual receives—

(a) property income distributions which are treated as profits of
a UK property business by virtue of regulation 69Z18(1) or (2)
of the AIF Regulations (property AIF distributions: liability
to tax), or

(b) 10distributions which are treated as profits of a UK property
business by virtue of section 548(6) of CTA 2010 (REIT
distributions: liability to tax),

that separate property business (see regulation 69Z18(6) of the AIF
Regulations and section 549(5) of CTA 2010) is not a relevant
15property business of the individual.

(4) In subsection (3) “the AIF Regulations” means the Authorised
Investment Funds (Tax) Regulations 2006 (S.I. 2006/964S.I. 2006/964).

783BB “Relievable receipts” of a property business

(1) For the purposes of this Chapter, the “relievable receipts” of an
20individual’s relevant property business for a tax year are all the
amounts which would, apart from this Chapter, be brought into
account as a receipt in calculating the profits of the business for the
tax year.

This is subject to subsections (2) and (3).

(2) 25If—

(a) the individual qualifies for rent-a-room relief for the tax year,
and

(b) the individual has rent-a-room receipts for the tax year which
would, apart from Chapter 1 of Part 7, be brought into
30account in calculating the profits of the property business,

the rent-a-room receipts are not relievable receipts of the business.

(3) Non-relievable balancing charges in respect of the property business
for the tax year are not relievable receipts of the business.

(4) In subsection (3) “non-relievable balancing charges”, in respect of a
35property business for a tax year, means balancing charges falling to
be made for the tax year under Part 2 of CAA 2001 which do not
relate to a business or transaction which is carried on, or entered into,
for the purpose of generating receipts which are relievable receipts
of the property business.

783BC 40 The individual’s “relevant property income”

For the purposes of this Chapter, an individual’s “relevant property
income” for a tax year is the relievable receipts for the tax year of the
individual’s relevant property businesses for the tax year.

783BD The individual’s property allowance

(1) 45For the purposes of this Chapter, an individual’s property allowance
for a tax year is £1,000.

(2) The Treasury may by regulations amend subsection (1) so as to
substitute a higher sum for the sum for the time being specified in
that subsection.

Relief if relevant property income does not exceed property allowance

783BE 5 Full relief: introduction

An individual qualifies for full relief for a tax year if—

(a) the individual has relevant property income for the tax year,

(b) the relevant property income does not exceed the
individual’s property allowance for the tax year, and

(c) 10no election by the individual under section 783BJ has effect
for the tax year (election for full relief not to be given).

783BF Full relief: property profits

(1) If an individual qualifies for full relief for a tax year, this section
applies in relation to the calculation of the profits of the individual’s
15relevant property business for the tax year or, where the individual’s
relevant property income for the tax year consists of the relievable
receipts of two relevant property businesses, the profits of each
property business for the tax year.

(2) The following are not brought into account—

(a) 20the relievable receipts of the property business for the tax
year, and

(b) any expenses associated with those receipts.

Relief if relevant property income exceeds property allowance

783BG Partial relief: alternative calculation of property profits: introduction

25An individual qualifies for partial relief for a tax year if—

(a) the individual has relevant property income for the tax year,

(b) the relevant property income exceeds the individual’s
property allowance for the tax year, and

(c) an election by the individual under section 783BK has effect
30for the tax year (election for partial relief).

783BH Partial relief: alternative calculation of property profits

(1) If an individual qualifies for partial relief for a tax year, this section
applies in relation to the calculation of the profits of the individual’s
relevant property business for the tax year or, where the individual’s
35relevant property income for the tax year consists of the relievable
receipts of two relevant property businesses, the profits of each
property business for the tax year.

(2) The relievable receipts of the property business for the tax year are
brought into account.

(3) 40No relevant expenses are brought into account.

(4) The deductible amount is brought into account.

(5) Subject to section 783BI, the deductible amount is equal to the
individual’s property allowance for the tax year.

(6) In subsection (3) “relevant expenses” means all the amounts—

(a) which would, apart from this section, be brought into
5account as a deduction in calculating the profits of the
business for the tax year, and

(b) which are associated with the relievable receipts.

783BI Deductible amount: splitting of property allowance

(1) This section applies where the individual’s relevant property income
10for the tax year consists of the relievable receipts of two relevant
property businesses.

(2) The references in section 783BH to the deductible amount are to
amounts which, in total, equal the individual’s property allowance
for the tax year.

(3) 15The question of how to allocate the individual’s property allowance
for the tax year for the purposes of subsection (2) is to be decided by
the individual, subject to subsection (4).

(4) The deductible amount in respect of a relevant property business
must not be such as to result in a loss of the business.

20Elections

783BJ Election for full relief not to be given

(1) An individual may elect not to be given full relief for a tax year (see
section 783BF).

(2) An election must be made on or before the first anniversary of the
25normal self-assessment filing date for the tax year for which the
election is made.

783BK Election for partial relief

(1) An individual may elect for partial relief to be given for a tax year if
the individual’s relevant property income for the tax year exceeds
30the individual’s property allowance for the tax year (see section
783BH).

(2) An election must be made on or before the first anniversary of the
normal self-assessment filing date for the tax year for which the
election is made.

35Exclusions from relief

783BL Exclusion from relief: tax reduction under section 274A

No relief under this Chapter is given to an individual for a tax year
if, in calculating the individual’s liability to income tax for the tax
year, a tax reduction under section 274A (property business: relief for
40non-deductible costs of a dwelling-related loan) is applied at Step 6
of the calculation in section 23 of ITA 2007.

783BM Exclusion from relief: expenses deducted against rent-a-room
receipts

(1) No relief under this Chapter is given to an individual for a tax year
45if—

(a) 5the individual qualifies for rent-a-room relief for the tax year,

(b) the individual has rent-a-room receipts for the tax year which
would, apart from Chapter 1 of Part 7 (rent-a-room relief), be
brought into account in calculating the profits of a property
business, and

(c) 10condition A or B is met.

(2) Condition A is that—

(a) the individual’s total rent-a-room amount for the tax year
does not exceed the individual’s limit for the tax year (see
section 783BQ), and

(b) 15an election by the individual under section 799 has effect to
disapply full rent-a-room relief for the tax year.

(3) Condition B is that—

(a) the individual’s total rent-a-room amount for the tax year
exceeds the individual’s limit for the tax year, and

(b) 20no election by the individual under section 800 has effect to
apply the alternative method of calculating profits for the tax
year.

783BN Exclusion from relief: payments by employer

No relief under this Chapter is given to an individual for a tax year
25if—

(a) the individual has relevant property income for the tax year,
and

(b) the income includes a payment made by, or on behalf of, a
person at a time when the individual is—

(i) 30an employee of the person, or

(ii) the spouse or civil partner of an employee of the
person.

783BO Exclusion from relief: payments by firm

No relief under this Chapter is given to an individual for a tax year
35if—

(a) the individual has relevant property income for the tax year,
and

(b) the income includes a payment made by, or on behalf of, a
80firm at a time when the individual is—

(i) 40a partner in the firm, or

(ii) connected with a partner in the firm.

783BP Exclusion from relief: payments by close company

(1) No relief under this Chapter is given to an individual for a tax year
if—

(a) 45the individual has relevant property income for the tax year,
and

(b) the income includes a payment made by, or on behalf of, a
close company at a time when the individual is—

(i) a participator in the close company, or

(ii) an associate of a participator in the close company.

(2) 5In this section “associate” and “participator” have the same meanings
as in Part 10 of CTA 2010 (see sections 448 and 454).

Interpretation

783BQ Interpretation of this Chapter

In this Chapter—

(a) 10“rent-a-room relief”, “rent-a-room receipts” and “total rent-a-
room amount” have the same meanings as in Chapter 1 of
Part 7 (rent-a-room relief: see sections 784, 786 and 788), and

(b) references to “the individual’s limit” are to be construed in
accordance with section 789 (the individual’s limit for the
15purposes of rent-a-room relief).””

10Part 2 Consequential amendments

ITTOIA 2005

2 ITTOIA 2005 is amended in accordance with paragraphs 3 to 11.

3 20In section 1 (overview of Act), before paragraph (a) of subsection (5) insert—

“(za) provision about a trading allowance and property allowance
(see Part 6A),”.”

4 In Chapter 2 of Part 2 (trading income: income taxed as trade profits), after
section 22 insert—

““Trading allowance

22A 25Trading allowance

(1) The rules for calculating the profits of a trade, profession or vocation
carried on by an individual are subject to Chapter 1 of Part 6A
(trading allowance).

(2) 30That Chapter gives relief on relevant income and, where relief is
given, disallows most deductions under this Part (see, in particular,
sections 783AC, 783AF and 783AI).””

5 In Chapter 15 of Part 2 (basis periods), after section 204 insert—

“204A Overlap profit and trading allowance under Chapter 1 of Part 6A

(1) 35This section makes provision about the amount of profit treated as
arising in an overlap period which falls within the basis period of a
trade for two tax years (“tax year A” and “tax year B”) where relief is
given under Chapter 1 of Part 6A (trading allowance) in respect of
the trade for at least one of those tax years.

(2) The profit which arises in the overlap period is treated as nil if—

(a) the profits or losses of the trade for tax year A or tax year B
(or both) are treated as nil under section 783AF (full relief:
trade profits), or

(b) 5in relation to tax year A or tax year B (or both)—

(i) section 783AI applies in calculating the profits or
losses of the trade (partial relief: alternative
calculation of trade profits), and

(ii) the deductible amount subtracted at step 2 of section
10783AI(2) in relation to the trade is greater than or
equal to the non-adjusted overlap profit.

(3) Subsection (6) applies if conditions 1 and 2 are met.

(4) Condition 1 is that, in relation to either tax year A or tax year B—

(a) section 783AI applies in calculating the profits or losses of the
15trade, and

(b) the deductible amount subtracted at step 2 of section
783AI(2) in relation to the trade is less than the non-adjusted
overlap profit.

(5) Condition 2 is that neither section 783AF nor section 783AI applies in
20relation to the trade—

(a) where condition 1 is met in relation to tax year A, for tax year
B, or

(b) where condition 1 is met in relation to tax year B, for tax year
A.

(6) 25The profit which arises in the overlap period is treated as equal to the
non-adjusted overlap profit less the deductible amount mentioned in
subsection (4)(b).

(7) Subsection (8) applies if, in relation to each of tax year A and tax year
B—

(a) 30section 783AI applies in calculating the profits or losses of the
trade, and

(b) the deductible amount subtracted at step 2 of section
783AI(2) in relation to the trade is less than the non-adjusted
overlap profit.

(8) 35The profit which arises in the overlap period is treated as equal to the
non-adjusted overlap profit less the higher of the following—

(a) the deductible amount subtracted at step 2 of section
783AI(2) in calculating the profits or losses of the trade for tax
year A, and

(b) 40the deductible amount subtracted at step 2 of section
783AI(2) in calculating the profits or losses of the trade for tax
year B.

(9) In this section “non-adjusted overlap profit” means the amount of
profit that would arise in the overlap period apart from—

(a) 45Chapter 1 of Part 6A, and

(b) this section.””

6 In section 227A (application of Chapter where cash basis used), after

subsection (2) insert—

“(3) This section is subject to section 227C (application of Chapter where
section 227B applies).””

7 After section 227A insert—

“227B 5 Cash basis treatment: full relief under Chapter 1 of Part 6A (trading
allowance)

(1) Subsection (2) applies if—

(a) an individual carries on a trade in a tax year, and

(b) the profits or losses of the trade for the tax year are treated as
10nil under section 783AF (trade profits: full relief under
Chapter 1 of Part 6A) by virtue of the fact that the conditions
in section 783AE(2) are met.

(2) For the purposes of determining if this Chapter applies, an election
under section 25A is to be treated as having effect in relation to the
15trade for the tax year.

227C Application of Chapter where section 227B applies

(1) This section applies if, as a result of the operation of section 227B, the
basis on which profits of a trade are calculated is treated as changed
as mentioned in section 227A(1).

(2) 20This Chapter applies as if—

(a) in sections 232(1) and 233(1), for “the first period of account
for which the new basis is adopted” there were substituted
“the first tax year for which the profits or losses of the trade
are not treated as nil under section 783AF”, and

(b) 25sections 235, 236, 237, 239A and 239B were omitted.

(3) If there is no tax year after the change of basis for which the profits
or losses of the trade are not treated as nil under section 783AF, this
Chapter does not apply.””

8 After section 307F (inserted by Schedule 2 to this Act) insert—

30““Property allowance

307G Property allowance

(1) The rules for calculating the profits of an individual’s property
business are subject to Chapter 2 of Part 6A (property allowance).

(2) That Chapter gives relief on relevant property income and, where
35relief is given, disallows all deductions under this Part which relate
to that income (see, in particular, sections 783BC, 783BF and
783BH).””

9 In section 688 (income charged under Chapter 8 of Part 5), before paragraph
(a) of subsection (2) insert—

“(za) 40Chapter 1 of Part 6A (which gives relief on relevant income
which may consist of or include income chargeable under
this Chapter: see, in particular, sections 783AB, 783AC,
783AG and 783AJ),”.”

10 In section 828 (overlap profit), in subsection (3), for “section 204” substitute
45“sections 204 and 204A”.

11 In Part 2 of Schedule 4 (defined expressions)—

(a) at the appropriate places insert—

(b) in the entry for “overlap profit”, for “section 204” substitute “sections
204 and 204A”.

20TIOPA 2010

12 In TIOPA 2010—

(a) in section 22(8) (credit for foreign tax on overlap profit if credit for
that tax already allowed), in the definition of “overlap profit”, for
“section 204” substitute “sections 204 and 204A”, and

(b) 25in section 24(8) (claw-back of relief under section 22(2)), in the
definition of “overlap profit”, for “section 204” substitute “sections
204 and 204A”.

Part 3 Commencement

13 30The amendments made by this Schedule have effect for the tax year 2017-18
and subsequent tax years.

SCHEDULE 4 Section 18 Relief for carried-forward losses

Part 1 Amendment of general rules about carrying forward losses

5Non-trading deficits from loan relationships

1 Part 5 of CTA 2009 (loan relationships) is amended as follows.

2 In the heading of Chapter 16 (non-trading deficits) at the end insert “: pre-1
April 2017 deficits and charities”.

3 In section 456 (introduction to Chapter 16) in subsection (1)—

(a) 10after “if” insert “—

(a) ”, and”

(b) at the end insert “, and

(b) either—

(i) that accounting period begins before 1 April
152017, or

(ii) at the end of that accounting period the
company is a charity”.”

4 After section 463 insert—

““CHAPTER 16A 20Non-trading deficits: post 1 April 2017 deficits

463A Introduction to Chapter

(1) This Chapter applies if—

(a) for any accounting period beginning on or after 1 April 2017
a company has a non-trading deficit from its loan
25relationships under section 301(6), and

(b) at the end of that accounting period the company is not a
charity.

(2) In this Chapter “the deficit” and “the deficit period” mean that deficit
and that period respectively.

(3) 30Sections 463B and 463C deal with claims to set off the deficit against
profits of the deficit period or earlier periods.

(4) Sections 463D to 463F deal with the consequences of such claims.

(5) Sections 463G to 463I provide for so much of the deficit as is not—

(a) set off against profits under section 463B, or

(b) 35surrendered as group relief under Part 5 of CTA 2010,

to be carried forward to later accounting periods.

463B Claim to set off deficit against profits of deficit period or earlier
periods

(1) The company may make a claim for the whole or part of the deficit—

(a) to be set off against any profits of the company (of whatever
description) for the deficit period, or

(b) to be carried back to be set off against profits for earlier
accounting periods.

(2) 5No claim may be made under subsection (1) in respect of so much of
the deficit as is surrendered as group relief under Part 5 of CTA 2010.

(3) For time limits and other provisions applicable to claims under
subsection (1), see section 463C.

(4) For what happens when a claim is made under subsection (1)(a), see
10section 463D.

(5) For what happens when a claim is made under subsection (1)(b), and
the profits available for relief when such a claim is made, see sections
463E and 463F.

463C Time limits for claims under section 463B(1)

(1) 15A claim under section 463B(1) must be made within—

(a) the period of 2 years after the deficit period ends, or

(b) such further period as an officer of Revenue and Customs
allows.

(2) Different claims may be made in respect of different parts of a non-
20trading deficit for any deficit period.

(3) But no claim may be made in respect of any part of a deficit to which
another such claim relates.

463D Claim to set off deficit against profits for the deficit period

(1) This section applies if a claim is made under section 463B(1)(a) for the
25whole or part of the deficit to be set off against profits for the deficit
period.

(2) The amount of the deficit to which the claim relates must be set off
against the profits of the company for the deficit period which are
identified in the claim.

(3) 30Those profits are reduced accordingly.

(4) Relief under this section must be given before relief is given against
profits for the deficit period—

(a) under section 37 or 62(1) to (3) of CTA 2010 (deduction of
losses from total profits for the same or earlier accounting
35periods), or

(b) as a result of a claim under section 463B(1)(b) (carry-back) in
respect of a deficit for a later period.

(5) No relief may be given under this section against ring fence profits of
the company within the meaning of Part 8 of CTA 2010 (oil activities)
40or contractor’s ring fence profits of the company within the meaning
of Part 8ZA of that Act (oil contractors).