Finance Bill (HC Bill 116)

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188 (1) Section 126 (restrictions in respect of non-trading deficit) is amended as
follows.

(2) After subsection (1) insert—

(1A) A loss falls within subsection (1B) so far as it—

(a) 5would (apart from that subsection) be available for relief
under section 124B (excess carried forward post-1 April 2017
losses: relief against total profits), and

(b) arose in an accounting period for which the insurance
company has a relevant non-trading deficit.

(1B) 10A loss (or amount of a loss) falling within this subsection is available
for relief under section 124B only so far as it exceeds the amount of
that relevant non-trading deficit.

(1C) A loss falls within subsection (1D) so far as it—

(a) is an amount which a company (“the surrendering
15company“) may surrender by virtue of section 188BB(4)
(surrender of carried-forward BLAGAB trade losses), and

(b) arose in an accounting period for which the surrendering
company has a relevant non-trading deficit.

(1D) A loss (or amount of a loss) falling within this subsection is available
20for relief under Chapter 3 of Part 5A of CTA 2010 (claims for group
relief) only so far as it exceeds the amount of that relevant non-
trading deficit.

(1E) For the purposes of subsections (1A) and (1C) it is to be assumed
(where relevant) that in previous accounting periods losses which
25arose earlier have been utilised before losses which arose later.”

(3) In subsection (2)—

(a) for “The reference” substitute “In this section references”;

(b) for “is a reference” substitute “are”.

189 In section 127 (no relief against policyholders’ share of I-E profit), in
30subsection (3)—

(a) before paragraph (a) insert—

(za) relief under section 124B (relief of excess carried-
forward BLAGAB trade losses against total profits),”;

(b) after paragraph (c) insert—

(ca) 35relief under Chapter 3 of Part 5A of CTA 2010 (group
relief for carried-forward losses),”.

Part 12 Commencement etc

Parts 1 to 9 and 11

190 (1) 40The amendments made by Parts 1 to 9 and 11 of this Schedule have effect in
relation to accounting periods beginning on or after 1 April 2017.

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(2) For the purposes of those amendments, where a company has 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
5much of that period as falls on or after that date, are treated as
separate accounting periods, and

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

(i) 10in 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.

(3) But sub-paragraph (2)(b) is to be ignored if paragraph 191 or 192 applies.

191 (1) This paragraph applies if—

(a) 15an accounting period of a company (“the straddling period”) is
treated as two separate accounting periods under paragraph
190(2)(a),

(b) it is necessary to apportion an amount (“the amount concerned”) for
the straddling period to the two separate accounting periods, and

(c) 20the amount concerned is either—

(i) an amount chargeable to corporation tax which would have
been less but for Part 10 of TIOPA 2010 (corporate interest
restriction), or

(ii) an amount in respect of which corporation tax relief is
25available which would have been greater but for Part 10 of
TIOPA 2010.

(2) The amount concerned is to be apportioned as follows—

Step 1

Determine what the amount concerned would have been but for Part 10 of
30TIOPA 2010 (“the notional amount”).

Step 2

Determine what amount of the notional amount would have been
apportioned to the first separate accounting period had paragraph 190(2)(b)
applied (“the notional apportioned amount”).

35If the notional apportioned amount is less than the amount concerned,
proceed with steps 3 and 4.

If the notional apportioned amount is equal to or greater than the amount
concerned, the whole of the amount concerned is to be apportioned to the
first separate accounting period.

40Step 3

Take so much of the amount concerned as is equal to the notional
apportioned amount and apportion it to the first accounting period.

Step 4

Take the remainder of the amount concerned and apportion it to the second
45separate accounting period.

192 (1) This paragraph applies if—

(a) an accounting period of a company (“the straddling period”) is
treated as two separate accounting periods under paragraph
190(2)(a),

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(b) it is necessary to apportion an amount (“the amount concerned”) for
the straddling period to the two separate accounting period,

(c) the amount concerned is an amount chargeable to corporation tax,
and

(d) 5the amount concerned would not have arisen but for Part 10 of
TIOPA 2010 (whether or not an amount in respect of which
corporation tax relief would have been available would have arisen
instead).

(2) The whole of the amount concerned is apportioned to the second separate
10accounting period.

Part 10

193 Section 5(4) to (6) of CT(NI)A 2015 (commencement) has effect as if
references to Part 8B of CTA 2010 were to that Part as amended by Part 10 of
this Schedule.

15Transitional provision

194 (1) An amount of a non-trading deficit from a company’s loan relationships
which is carried forward under section 463H of CTA 2009 is to be
disregarded for the purposes of section 730F of CTA 2010 (as amended by
paragraph 69(4)), unless it is a post-13 July 2017 amount.

(2) 20An amount of a non-trading deficit from a company’s loan relationships
which is deducted under section 463H(5) of CTA 2009 is to be disregarded
for the purposes sections 188DD and 188ED of CTA 2010, unless it is a post-
13 July 2017 amount.

(3) For the purposes of this paragraph an amount of a non-trading deficit from
25a company’s loan relationships (“the deficit amount”) is a post-13 July 2017
amount—

(a) if the deficit period begins on or after 13 July 2017 or,

(b) (where the deficit period is one that begins before, and ends on or
after 13 July 2017 (a “straddling deficit period”)), so far as the deficit
30is apportioned under sub-paragraphs (4) and (5) to the part of the
deficit period that begins with 13 July 2017.

(4) For the purposes of sub-paragraph (3)(b)—

(a) a straddling deficit period is to be treated as consisting of two parts,
namely the part that precedes, and the part that begins with, 13 July
352017,

(b) the deficit amount is to be apportioned to those parts (see sub-
paragraph (5)).

(5) The apportionment is to be made—

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

(b) 40if that method would produce a result that is unjust or unreasonable,
on a just and reasonable basis.

(6) In this paragraph “deficit period” is to be interpreted in accordance with
section 463A(2) of CTA 2009.

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SCHEDULE 5 Section 20 Corporate interest restriction

Part 1 New Part 10 of TIOPA 2010

1 5In TIOPA 2010, after Part 9A insert—

“Part 10 Corporate interest restriction

CHAPTER 1 Introduction
372 Overview

(1) 10This Part contains provision that—

(a) disallows certain amounts that a company would (apart from
this Part) be entitled to bring into account for the purposes of
corporation tax in respect of interest and other financing
costs, and

(b) 15allows certain amounts disallowed under this Part in
previous accounting periods to be brought into account in
later accounting periods.

(2) In this Chapter—

(a) section 373 defines some key concepts including, in
20particular, “the total disallowed amount” in relation to a
period of account of a worldwide group, and

(b) section 374 provides for Schedule 7A to have effect.

(3) Chapter 2 provides for—

(a) 25the disallowance in certain circumstances of tax-interest
expense amounts of companies that are members of a
worldwide group, and

(b) the carrying forward of disallowed tax-interest expense
amounts, and for bringing those amounts into account in
30certain circumstances in relation to a later period of account
of the worldwide group.

(4) Chapter 3—

(a) defines “a tax-interest expense amount” and “a tax-interest
income amount” of a company for a period of account of a
35worldwide group, which are amounts that are (or apart from
this Part would be) brought into account for the purposes of
corporation tax,

(b) defines “the net tax-interest expense” of a company for a
period of account of a worldwide group, which is any excess
40of the company’s tax-interest expense amounts for the period
over its tax-interest income amounts for the period,

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(c) defines “the net tax-interest income” of a company for a
period of account of a worldwide group, which is any excess
of the company’s tax-interest income amounts for the period
over its tax-interest expense amounts for the period, and

(d) 5defines “aggregate net tax-interest expense” and “aggregate
net tax-interest income” of a worldwide group for a period of
account of the worldwide group, which are made up of each
member of the group’s net tax-interest expense or net tax-
interest income for the period.

(5) 10Chapter 4 contains provision about the calculation of “the interest
capacity” of a worldwide group for a period of account of the group,
which is the aggregate of the interest allowance for the period and
any unused interest allowance of the group from the previous 5
years (or, if that aggregate is less than the de minimis amount, the de
15minimis amount).

(6) Chapter 5 makes provision about the calculation of “the interest
allowance” of a worldwide group for a period of account of the
group.

The interest allowance for a period of account is calculated using the
20fixed ratio method unless the group elects for the group ratio method
to be used for the period.

(7) Chapter 6 defines concepts used in Chapter 5 including—

  • the “tax-EBITDA” of a company for a period of account of a
    worldwide group (which is an amount derived from
    25amounts brought into account for the purposes of
    corporation tax);

  • the “aggregate tax-EBITDA” of a worldwide group for a period
    of account of the group (which is an amount derived from the
    tax-EBITDA of members of the group).

(8) 30Chapter 7 defines additional concepts used in Chapter 5 including—

  • “the net group-interest expense”, “the adjusted net group-
    interest expense” and “the qualifying net group-interest
    expense” of a worldwide group for a period of account of the
    group (which are amounts derived from the financial
    35statements of the worldwide group);

  • the “group-EBITDA” of the worldwide group for a period of
    account of the group (which is an amount derived from the
    financial statements of the worldwide group).

(9) Chapter 8 contains provision altering the way in which this Part has
40effect in relation to the provision of public infrastructure assets or the
carrying on of certain other related activities.

(10) Chapter 9 contains special provision altering the operation of certain
provisions of this Part in relation to—

(a) particular types of company (for example, banking
45companies, companies carrying on oil-related activities,
REITs or insurance companies), or

(b) particular types of transaction or accounting (for example,
long funding operating leases or fair value accounting).

(11) Chapter 10 contains rules connected with tax avoidance.

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(12) Chapter 11 contains the remaining interpretative and supplementary
provision, including definitions of—

  • “related party”;

  • “a worldwide group”;

  • 5“ultimate parent”;

  • “period of account” of a worldwide group.

373 Meaning of “subject to interest restrictions”, “the total disallowed
amount” etc

(1) A worldwide group is “subject to interest restrictions” in a period of
10account of the group if—

(a) the aggregate net tax-interest expense of the group for the
period (see section 390), exceeds

(b) the interest capacity of the group for the period (see section
392).

(2) 15“The total disallowed amount” of a worldwide group in a period of
account of the group is—

(a) if the group is subject to interest restrictions in the period, the
amount of the excess mentioned in subsection (1);

(b) otherwise, nil.

(3) 20“The interest reactivation cap” of a worldwide group in a period of
account of the group is (subject to subsection (4))—

(a) the interest allowance of the group for the period (see section
396), less

(b) the aggregate net tax-interest expense of the group for the
25period.

(4) If the amount determined under subsection (3) is a negative amount,
the interest reactivation cap of the worldwide group in the period is
nil.

(5) A worldwide group is “subject to interest reactivations” in a period
30of account of the group if—

(a) the interest reactivation cap of the group in the period is not
nil, and

(b) at least one member of the group is within the charge to
corporation tax at any time during the period, and has an
35amount available for reactivation in the return period that is
not nil (see paragraph 26 of Schedule 7A).

(6) This section has effect for the purposes of this Part.

374 Interest restriction returns

(1) Schedule 7A makes provision about—

(a) 40the preparation and submission of interest restriction returns
by reporting companies of worldwide groups, and

(b) other related matters such as enquiries and information
powers.

(2) Part 1 of that Schedule includes provision—

(a) 45for the appointment of a reporting company of a worldwide
group for a period of account, but

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(b) for companies (“non-consenting companies”) to elect to be
unaffected by allocations of interest restrictions made by the
company.

(3) Part 2 of that Schedule includes provision—

(a) 5for various elections to be made in an interest restriction
return that are relevant to the operation of this Part (for
example, the group ratio election),

(b) entitling the reporting company of a worldwide group to
allocate interest restrictions among its members but with a
10rule that allocates a pro-rata share to a non-consenting
company, and

(c) entitling the reporting company of a worldwide group to
allocate interest reactivations among its members.

(4) The remaining Parts of that Schedule contain provision about—

(a) 15the keeping and preservation of records (see Part 3),

(b) enquiries into interest restriction returns (see Part 4),

(c) determinations made by officers of Revenue and Customs in
the event of the breach of filing or other obligations (see Part
5),

(d) 20information powers exercisable by members of the group
(see Part 6),

(e) information powers exercisable by officers of Revenue and
Customs (see Part 7), and

(f) the amendment of company tax returns to reflect the effect of
25this Part of this Act and supplementary matters (see Parts 8
and 9).

CHAPTER 2 Disallowance and reactivation of tax-interest expense amounts
375 Disallowance of deductions: full interest restriction return submitted

(1) 30This section applies where—

(a) an interest restriction return is submitted for a period of
account of a worldwide group (“the relevant period of
account”),

(b) the return complies with the requirements of paragraph 20(3)
35of Schedule 7A (requirements for full interest restriction
return), and

(c) the return includes a statement that the group is subject to
interest restrictions in the return period.

(2) A company that is listed on the statement under paragraph 22 of
40Schedule 7A (statement of allocated interest restrictions) must, in
any accounting period for which the statement specifies an allocated
disallowance, leave out of account tax-interest expense amounts
that, in total, equal that allocated disallowance.

(3) A non-consenting company in relation to the return may—

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(a) elect that subsection (2) is not to apply in relation to such
relevant accounting period of the company as is specified in
the election, or

(b) revoke an election previously made.

(4) 5If—

(a) an election under this section has effect in relation to an
accounting period of a company, and

(b) paragraph 24 of Schedule 7A allocates to that period a pro-
rata share of the total disallowed amount that is not nil,

10the company must leave out of account in that period tax-interest
expense amounts that, in total, equal that pro-rata share.

(5) See section 377 for provision as to which tax-interest expense
amounts are to be left out of account as a result of this section.

376 Disallowance of deductions: no return, or non-compliant return
15submitted

(1) This section applies where—

(a) a worldwide group is subject to interest restrictions in a
period of account of the group (“the relevant period of
account”),

(b) 20the relevant date has passed, and

(c) condition A, B or C is met.

(2) In this section “the relevant date” means—

(a) where the appointment of a reporting company has effect in
relation to the relevant period of account, the filing date in
25relation to the period (see paragraph 7(5) of Schedule 7A);

(b) otherwise, the last day of the period of 12 months beginning
with the end of the relevant period of account.

(3) Condition A is that no appointment of a reporting company has
effect in relation to the relevant period of account.

(4) 30Condition B is that—

(a) the appointment of a reporting company has effect in relation
to the relevant period of account, and

(b) no interest restriction return has been submitted for the
period.

(5) 35Condition C is that—

(a) the appointment of a reporting company has effect in relation
to the relevant period of account,

(b) an interest restriction return has been submitted for the
period, and

(c) 40the return does not comply with the requirements of
paragraph 20(3) of Schedule 7A (for example by including
inaccurate figures).

(6) A relevant company must, in any accounting period to which
paragraph 24 of Schedule 7A allocates a pro-rata share of the total
45disallowed amount that is not nil, leave out of account tax-interest
expense amounts that, in total, equal that pro-rata share.

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(7) See section 377 for provision as to which tax-interest expense
amounts are to be left out of account as a result of this section.

(8) In this section “relevant company” means a company that was a
member of the worldwide group at any time during the relevant
5period of account.

377 Disallowance of deductions: identification of the tax-interest amounts
to be left out of account

(1) This section applies where—

(a) a company is required to leave tax-interest expense amounts
10out of account in an accounting period under section 375 or
376, and

(b) the total of the tax-interest expense amounts that, apart from
that provision, would be brought into account in the
accounting period exceeds the total of the tax-interest
15expense amounts that are required by that provision to be left
out of account in that period.

(2) Tax-interest expense amounts must (subject to the following
provisions of this section) be left out of account in the following
order.

20First, leave out of account tax-interest expense amounts that meet
condition A in section 382 and would (if brought into account) be
brought into account under Part 5 of CTA 2009 (non-trading debits
in respect of loan relationships).

Second, leave out of account tax-interest expense amounts that meet
25condition B in section 382 and would (if brought into account) be
brought into account under Part 5 of CTA 2009 as a result of section
574 of that Act (non-trading debits in respect of derivative contracts).

Third, leave out of account tax-interest expense amounts that meet
condition A in section 382 and would (if brought into account) be
30brought into account under Part 3 of CTA 2009 as a result of section
297 of that Act (debits in respect of loan relationships treated as
expenses of trade).

Fourth, leave out of account tax-interest expense amounts that meet
condition B in section 382 and would (if brought into account) be
35brought into account under Part 3 of CTA 2009 as a result of section
573 of that Act (debits in respect of derivative contracts treated as
expenses of trade).

Fifth, leave out of account tax-interest expense amounts that meet
condition C in section 382 and do not also meet condition A or B in
40that section (finance leases, debt factoring and service concession
arrangements).

(3) The company may—

(a) elect that subsection (2) is not to apply to the accounting
period, or

(b) 45revoke an election previously made.

(4) An election under this section must specify the particular tax-interest
expense amounts that are to be left out of account.

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378 Disallowed tax-interest expense amounts carried forward

(1) For the purposes of this Part a tax-interest expense amount of a
company is “disallowed” in an accounting period if the company is
required to leave it out of account in that accounting period under
5section 375 or 376.

(2) A tax-interest expense amount of a company that is disallowed in an
accounting period is (subject to the remaining provisions of this
section) carried forward to subsequent accounting periods.

(3) Where—

(a) 10a tax-interest expense amount of a company would (apart
from this Part) be brought into account in calculating the
profits or losses of a trade carried on by the company in an
accounting period,

(b) the tax-interest expense amount is disallowed in that
15accounting period, and

(c) in a subsequent accounting period (“the later accounting
period”) the company ceases to carry on the trade, or the scale
of the activities in the trade becomes small or negligible,

the tax-interest expense amount is not carried forward to the later
20accounting period or accounting periods after the later accounting
period.

(4) Where—

(a) a tax-interest expense amount of a company would (apart
from this Part) be brought into account in calculating the
25profits or losses of a trade carried on by the company in an
accounting period,

(b) the tax-interest expense amount is disallowed in that
accounting period, and

(c) in a subsequent accounting period (“the later accounting
30period”) the trade is uncommercial and non-statutory,

the tax-interest expense amount is not carried forward to the later
accounting period or accounting periods after the later accounting
period.

(5) For the purposes of subsection (4), a trade is “uncommercial and non-
35statutory” in an accounting period if, were the company to have
made a loss in the trade in the period, relief for the loss under section
37 of CTA 2010 (relief for trade losses against total profits) would
have been unavailable by virtue of section 44 of that Act (trade must
be commercial or carried on for statutory functions).

(6) 40Where—

(a) a tax-interest expense amount of a company would (apart
from this Part) be brought into account in calculating the
profits or losses of an investment business carried on by the
company in an accounting period,

(b) 45the tax-interest expense amount is disallowed in that
accounting period, and

(c) in a subsequent accounting period (“the later accounting
period”) the company ceases to carry on the investment