Finance Bill (HC Bill 116)

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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

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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(6) 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 2017 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(7).

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.

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

79 After Chapter 2D insert—

“CHAPTER 2E Post-1 April 2017 trade losses: cases involving the transfer of a trade
676EA 5Introduction to Chapter

(1) This Chapter applies if on or after 1 April 2017 there is a change in
the ownership of a company (“the transferred company”).

(2) In this Chapter—

  • “the change in ownership” means the change in ownership
    10mentioned in subsection (1);

  • “the transferred company” has the meaning given by subsection
    (1).

676EB Restriction on use of trade losses carried-forward on transfer of trade

(1) Subsection (2) applies if—

(a) 15the transferred company transfers a trade to another
company (“the successor company”) within the period of 8
years beginning 3 years before the change in ownership,

(b) the transfer is a transfer to which Chapter 1 of Part 22 applies,
and

(c) 20the transferred company and the successor company are not
related to one another both immediately before the change in
ownership and at the time of the transfer.

(2) A loss made by the transferred company in the transferred trade in
an accounting period beginning before the change in ownership may
25not be deducted under section 45A or 303C from the relevant profits
of an accounting period of the successor company ending after the
change in ownership.

(3) Profits of an accounting period of the successor company ending
after the change in ownership are “relevant profits” if and so far as—

(a) 30they arise before the 5th anniversary of the end of the
accounting period of the transferred company in which the
change in ownership occurs, and

(b) they cannot fairly and reasonably be attributed to the
carrying on by the successor company of the transferred
35trade.

(4) If an accounting period of the transferred company begins before,
and ends after the change in ownership, then for the purposes of
subsection (2)—

(a) the accounting period is treated as two separate accounting
40period, the first ending with the change and the second
consisting on the remainder of the period, and

(b) a loss made in the trade in the accounting period is
apportioned to the two periods.

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

(a) the accounting period is treated as two separate accounting
5periods, the first ending with that date and the second
consisting of the remainder of the period, and

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

(6) Any apportionment under subsection (4)(b) or (5)(b) is to be made on
10a time basis according to the respective lengths of the two deemed
accounting periods.

(7) 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.

676EC 15 Restriction on surrender of trade losses carried forward on transfer of
trade

(1) This section applies if—

(a) the transferred company or a co-transferred company
transfers a trade to another company (“the successor
20company”) within the period of 8 years beginning 3 years
before the change in ownership,

(b) the transfer is a transfer to which Chapter 1 of Part 22 applies,
and

(c) another company (“the claimant company”) would, apart
25from this section, be eligible under Part 5A to make a relevant
claim for group relief for carried-forward losses.

(2) For the purposes of this section a claim for group relief for carried
forward-losses is a relevant claim if it is—

(a) for an accounting period ending after the change in
30ownership, and

(b) in respect of an amount surrendered by the successor
company which is an amount of a loss—

(i) made in the trade by the transferred company or the
co-transferred company in an accounting period
35beginning before the change in ownership, and

(ii) carried forward to the surrender period of the
successor company under section 45A(3), 303B(2) or
303D(3).

(3) The general rule is that the relief is not available.

(4) 40Subsection (3) does not affect the giving of group relief for carried-
forward losses by the making of a deduction under section 188CK(1)
from the 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.

(5) 45Subsection (3) does not affect the availability of relief under Part 5A
if immediately before the change in ownership the group condition
was met in relation to the claimant company and the transferred
company.

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(6) If an accounting period of the transferred company or co-transferred
company begins before, and ends after the change in ownership,
then for the purposes of subsection (2)(b)—

(a) the accounting period is treated as two separate accounting
5period, the first ending with the change and the second
consisting on the remainder of the period, and

(b) a loss made in the trade in the accounting period is
apportioned to the two periods.

(7) If an accounting period of the claimant company begins before, and
10ends after, the anniversary mentioned in subsection (4), then for the
purposes of that subsection—

(a) the accounting period is treated as two separate accounting
period, the first ending with that date and the second
consisting of the remainder of the period, and

(b) 15the profits of the accounting period are apportioned to the
two periods.

(8) Any apportionment under subsection (6)(b) or (7)(b) is to be made on
a time basis according to the respective lengths of the two deemed
accounting periods.

(9) 20But 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.

676ED Indirect transfers of a trade

(1) Subsections (2) and (3) apply if a trade transferred by the transferred
25company or a co-transferred company is transferred on a subsequent
occasion to another company.

(2) The transferred company or (as the case may be) the co-transferred
company is to be treated for the purposes of this Chapter—

(a) as having transferred the trade to that other company, and

(b) 30as having done so at the time it was actually transferred to
that other company.

(3) The deemed transfer is to be treated for the purposes of this Chapter
as a transfer to which Chapter 1 of Part 22 applies if the actual
transfer to the other company was a transfer to which that Chapter
35applies.

(4) Subsections (5) and (6) apply if—

(a) a trade (“the original trade”) is transferred by the transferred
company or a co-transferred company,

(b) the activities of the original trade are included in the activities
40of another trade (“the composite trade”), and

(c) the composite trade is transferred to another company.

(5) The transferred company or (as the case may be) the co-transferred
company is to be treated for the purposes of this Chapter—

(a) as having transferred the original trade to that other
45company, and

(b) as having done so at the time the composite trade was
actually transferred to that other company.

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(6) The deemed transfer is to be treated for the purposes of this Chapter
as a transfer to which Chapter 1 of Part 22 applies if the transfer of
the composite trade to the other company was a transfer to which
that Chapter applies.

676EE 5 Interpretation of Chapter

(1) Section 940B (meaning of “transfer of trade” and related expressions)
applies for the purposes of this Chapter as it applies for the purposes
of Chapter 1 of Part 22.

(2) In this Chapter “co-transferred company” means any company
10which is related to the transferred company both immediately before
and immediately after the change in ownership.

(3) For the purposes of this Chapter any two companies (“T”) and (“C”)
are “related” to one another at any time when—

(a) the group condition is met in relation to T and C, or

(b) 15any 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).

(4) In this Chapter—

  • 20“consortium condition 1” is to be interpreted in accordance with
    section 188CF,

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

  • “consortium condition 3” is to be interpreted in accordance with
    25section 188CH,

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

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

80 (1) 30Section 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) The 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
35nature or conduct of a business referred to in section 677(3) occur on or after
1 April 2017.

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

(2) In subsection (3)(b), for “debit of” substitute “loss on intangible fixed assets
40for”.

82 (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
CTA 2009” to the end substitute “, 463G(6) or 463H(4) of CTA 2009.”

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

(4) Where the change in ownership referred to in section 677(1) occurs before 13
July 2017 this paragraph has effect as if sub-paragraph (2) provided as
5follows—

(2) In subsection (2), in column 1 of row 4 in the table, for the words
from “of CTA 2009” to the end substitute “or 463G(6) of CTA
2009.”

83 (1) In section 690 (meaning of “significant increase in the amount of a
10company’s capital: amount B), in subsection (3) for “3” substitute “5”.

(2) The 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.

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

(2) 15In subsection (1), for paragraph (b) substitute—

(b) the following are met—

  • condition 1, and

  • conditions 2 and 3 or condition 4.

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

(4) 20After subsection (4) insert—

(4A) Condition 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
25(election to reallocate gain or loss to another member of the 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) In subsection (7), in the definition of “the relevant gain”, for “within
30subsection (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.

85 35In section 696 (restriction of debits to be brought into account), in subsection
(4)(b), after “461” insert “or 463B(1)(a)”.

86 (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 “, 463G(6) or 463H(4) of CTA 2009.”

(3) 40In subsection (2), in column 1 of row 7 of the table, for “debit of” substitute
“loss on intangible fixed assets for”.

(4) Where the change in ownership referred to in section 692(1) occurs before 13
July 2017 this paragraph has effect as if sub-paragraph (2) provided as

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follows—

(2) In subsection (2), in column 1 of row 5 in the table, for the words
from “of CTA 2009” to the end substitute “or 463G(6) of CTA
2009.”

87 (1) 5Section 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) The amendments made this paragraph do not have effect unless both the
10change 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.

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

(2) 15In 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
nature or conduct of a trade or business referred to in section 705(2) occur on
20or after 1 April 2017.

89 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
ownership of a company (“C”) if, as a result of the acquisition by a
25person 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).
In this subsection the reference to membership of a group of
30companies is to be interpreted in accordance with section 188FB.

90 In 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,”.

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

35Deduction buying

92 (1) Section 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) 40Chapter 3 of Part 5A (group relief for carried-forward
losses).”

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(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) 5After 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
10accounting 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) 15After 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
20been 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.

25Part 10 Northern Ireland trading losses etc

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

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

95 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
35accounting period has Northern Ireland losses of the trade or
mainstream losses of the trade, references to those Northern Ireland
losses or mainstream losses.

(2) If a company has a Northern Ireland loss and a mainstream loss in
the same accounting period, sections 37 and 45A to 45F have effect in
40relation to each of those losses separately.

(3) If by reason of this section a company is entitled under section 37(2),
45A(5), 45B(5) or 45F(2) to make a claim in relation to a Northern
Ireland loss (or an amount of such a loss) and a claim in relation to a

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mainstream loss (or an amount of such a loss), the company may
make—

(a) one of those claims only, or

(b) both of those claims in either order.

(4) 5Where—

(a) relief is given under section 37, 45A, 45B or 45F for a
Northern Ireland loss (or an amount of such a loss), and

(b) the profits against which the relief is given includes some
profits of the trade that are Northern Ireland profits and some
10that are not,

the relief is given first, so far as possible, against the Northern Ireland
profits.

(5) Where—

(a) relief is given under section 37, 45, 45A, 45B or 45F for a loss
15(or an amount of a loss) that is not a Northern Ireland loss,
and

(b) the profits against which the relief is given include some
profits of the trade that are Northern Ireland profits and some
that are not,

20the relief is given first, so far as possible, against the profits that are
not Northern Ireland profits.

357JC Restriction on deductions

(1) Subsection (2) applies where—

(a) relief is given under section 37 for a Northern Ireland loss
25(“the loss”),

(b) the profits against which the relief is given include profits
that are not Northern Ireland profits, and

(c) at any time during the accounting period for which the relief
is given (“the profit period”) the Northern Ireland rate is
30lower than the main rate.

(2) The reference in section 37(4) to “the amount of the loss” is to the
restricted deduction for the loss, as determined under section 357JJ
(restricted deduction where Northern Ireland rate lower than main
rate).

(3) 35Subsection (4) applies where—

(a) relief is given under section 45A, 45B or 45F for an amount of
a Northern Ireland loss (“the loss”),

(b) the profits against which the relief is given include profits
that are not Northern Ireland profits, and

(c) 40at any time during the accounting period for which the relief
is given (“the profit period”), the Northern Ireland rate is
lower than the main rate.

(4) The reference in section 45A(6), 45B(4) or (as the case may be) 45F(5)
to “the unrelieved amount” is to so much of that amount as is equal
45to the restricted deduction for the loss, as determined under section
357JJ.”