Finance (No. 2) Bill (HC Bill 134)

Identifying members of a worldwide group

12 After section 454 insert—

““Investment managers

454A Investments held by investment managers

(1) 5This section applies where—

(a) an entity (“S”) is a member of a worldwide group as a result
of one or more other members of the group managing S and
holding rights or interests in relation to S,

(b) the entity managing S does so in the ordinary course of
10carrying on a business of providing investment management
services, and

(c) the management of S is not coordinated to any extent with
the management by any person of any other entity.

(2) For the purposes of this Part—

(a) 15the group does not include entities that are subsidiaries of S,
and

(b) accordingly, none of those entities is regarded as a
consolidated subsidiary of any member of the group.

(3) In this section “subsidiary” has the meaning given by international
20accounting standards.”

13 (1) Section 475 (meaning of “non-consolidated subsidiary” and “consolidated
subsidiary”) is amended as follows.

(2) In subsection (1)(b), at the end insert “or on the basis that X were an asset
held for sale”.

(3) 25For subsection (3) substitute—

“(3) In this section—

• “held for sale” has the meaning given by international
  accounting standards, and

• “subsidiary” has the meaning given by those standards.”

30Interest restriction returns

14 (1) Paragraph 9 of Schedule 7A (extended period for submission of full return
in place of abbreviated return) is amended as follows.

(2) In sub-paragraph (1)(a), omit “abbreviated”.

(3) In sub-paragraph (2)—

(a) 35for “a full interest restriction return” substitute “an interest
restriction return”, and

(b) after “paragraph 8” insert “which is a full interest restriction return”.

(4) In the italic heading before that paragraph, for “in place of abbreviated
return” substitute “for period where no restriction”.

15 (1) 40Paragraph 70 of Schedule 7A (cases where company treated as amending
return) is amended as follows.

(2) In sub-paragraph (1), for “is treated as having amended” substitute “must
amend”.

(3) After that sub-paragraph insert—

“(1A) The amendment must be made before whichever is the later of—

(a) 5the end of the period of 3 months beginning with the day
on which the interest restriction return was submitted, or

(b) the time limit given by paragraph 15(4) of Schedule 18 to
FA 1998.”

(4) For the italic heading before that paragraph substitute “Other cases where
10company must amend its return etc”.

16 After paragraph 70 of Schedule 7A insert—

““Failure to comply with a requirement to amend company tax return

70A (1) This paragraph applies if a company—

(a) is required, as a result of paragraph 69(2), (3) or (6) or 70(1),
15to make an amendment of its company tax return for an
accounting period, and

(b) has failed to make the required amendment by the
amendment deadline.

(2) The company is liable to a penalty of £500.

(3) 20At any time before the end of the period of 12 months beginning
with the amendment deadline, an officer of Revenue and Customs
may, to the best of the officer’s information and belief, make the
required amendments of the company tax return.

(4) If an officer of Revenue and Customs amends the company tax
25return under sub-paragraph (3), the company may amend the
return so as to correct the amendments made by the officer.

(5) An amendment under sub-paragraph (4) must be made before the
end of the period of 3 months beginning with the day on which the
officer amends the return under sub-paragraph (3) (and the time
30limit for amending a company tax return given by paragraph 15(4)
of Schedule 18 to FA 1998 is subject to this sub-paragraph).

(6) Paragraph 29(3) to (7) apply in relation to a penalty under this
paragraph as they apply in relation to a penalty under paragraph
29 but as if the reference in paragraph 29(4) to the filing date were
35to the amendment deadline.

(7) In this paragraph “the amendment deadline” means the end of the
period for the making of the amendment given by paragraph
69(2), (4) or (6) or 70(1A).”

17 (1) Paragraph 71 of Schedule 7A (regulations for purposes of paragraph 70 etc)
40is amended as follows.

(2) In sub-paragraph (1)(a), for “paragraph 70” substitute “paragraph 70(2)”.

(3) In the italic heading before that paragraph, for “paragraph 70” substitute
“paragraph 70(2)”.

Other amendments

18 In section 378 (disallowed tax-interest expense amounts carried forward), in
subsections (3) and (6), omit “the later accounting period or”.

19 In section 393(5)(a) (amount of interest allowance for a period that is
5“available” in a later period), for “is made” substitute “has effect”.

20 (1) Section 411 (meaning of “relevant expense amount” and “relevant income
amount”) is amended as follows.

(2) In subsection (1)—

(a) in paragraph (b), after “loan relationship” insert “or related
10transaction”, and

(b) in paragraph (h), after “debt factoring” insert “or any similar
transaction”.

(3) In subsection (2)(f), after “debt factoring” insert “or any similar transaction”.

21 (1) Section 412 (section 411: interpretation) is amended as follows.

(2) 15In subsection (1)—

(a) in the opening words, after “a loan relationship” insert “or related
transaction”,

(b) after paragraph (a) insert—

“(ab) in entering into or giving effect to, or attempting to
20enter into or give effect to, the related transaction,”,”

(c) in paragraph (b), after “the loan relationship” insert “or as a result of
the related transaction”, and

(d) in paragraph (c), after “the loan relationship” insert “or in accordance
with the related transaction”.

(3) 25In subsection (6)—

(a) in paragraph (a), for “(1)(c)” substitute “(1)(b) and (c)”, and

(b) in paragraph (b), for “(1)(e)” substitute “(1)(e) and (f)”.

Commencement

22 (1) The amendments made by paragraphs 2 to 5, 10 and 13 have effect in relation
30to periods of account of worldwide groups that begin on or after 1 January
2018.

(2) The following provisions apply if—

(a) financial statements of a worldwide group are drawn up by or on
behalf of the ultimate parent in respect of a period that begins before,
35and ends on or after, 1 January 2018,

(b) the period in respect of which the financial statements are drawn up
is 18 months or less, and

(c) the financial statements are drawn up before the end of the period of
30 months beginning with the period in respect of which they are
40drawn up.

(3) In this paragraph—

(a) “the group’s actual financial statements” means the financial
statements mentioned in sub-paragraph (2), and

(b) “the straddling period of account” means the period in respect of
which those financial statements are drawn up.

(4) For the purposes of Part 10 of TIOPA 2010, the group’s actual financial
statements are treated as not having been drawn up.

(5) 5Instead, financial statements of the worldwide group are treated for those
purposes as having been drawn up in respect of each of the following
periods—

(a) the period beginning at the time the straddling period of account
begins and ending with 31 December 2017, and

(b) 10the period beginning with 1 January 2018 and ending at the time the
straddling period of account ends.

(6) If condition C or D in section 481 of TIOPA 2010 is met in relation to the
group’s actual financial statements, the financial statements treated as
drawn up by sub-paragraph (5) are treated as drawn up in accordance with
15the generally accepted accounting principles and practice with which the
group’s actual financial statements were drawn up.

(7) If neither of those conditions is met in relation to the group’s actual financial
statements, the financial statements treated as drawn up by sub-paragraph
(5) are IAS financial statements.

(8) 20If, for the purpose of determining amounts recognised in the financial
statements treated as drawn up by sub-paragraph (5), it is expedient to
apportion any amount that is recognised in the group’s actual financial
statements, the apportionment is to be made in accordance with section 1172
of CTA 2010 (apportionment on a time basis).

(9) 25But if it appears that apportionment in accordance with that section would
work unjustly or unreasonably, the apportionment is to be made on a just
and reasonable basis.

(10) Expressions used in this paragraph and in Part 10 of TIOPA 2010 have the
same meaning in this paragraph as they have in that Part.

23 (1) 30Part 10 of TIOPA 2010 has effect, and is to be deemed always to have had
effect, with the amendments set out in paragraphs 6 to 9, 12 and 18 to 21.

(2) But, in the case of the amendment set out in paragraph 6 or 12, the reporting
company of the worldwide group for any period of account beginning
before 1 January 2018 may make an election for the amendment to have no
35effect in relation to the period of account.

(3) Paragraph 12 of Schedule 7A to TIOPA 2010 applies to an election under
sub-paragraph (2).

(4) Expressions used in this paragraph and in Part 10 of TIOPA 2010 have the
same meaning in this paragraph as they have in that Part.

24 40The amendment made by paragraph 11 has effect in relation to accounting
periods beginning on or after 1 January 2018.

25 The amendments made by paragraph 15 have effect in relation to interest
restriction returns whenever submitted.

26 The amendment made by paragraph 16 does not have effect in relation to
any case where a company tax return is amended before the day on which
this Act is passed.

Part 2 5Other amendments

27 In section 9A of CTA 2010 (designated currency of a UK resident investment
company), in subsection (7)—

(a) in the definition of “financial statements of the group”, for “(within
the meaning of section 351 of TIOPA 2010)” substitute “(and for this
10purpose “subsidiaries” has the meaning given by international
accounting standards)”, and

(b) for the definition of “Y’s group” substitute—

• “““Y’s group” means a worldwide group of which Y is
  the ultimate parent within the meaning of Part 10 of
  15TIOPA 2010,”.

28 The amendment made by paragraph 27 has effect in relation to elections that
are made on or after 1 January 2018.

Section 33

SCHEDULE 9 Bank levy

20Part 1 Chargeable equity and liabilities

Introductory

1 Part 4 of Schedule 19 to FA 2011 (bank levy: chargeable equity and liabilities)
is amended as follows.

25Chargeable equity and liabilities: relevant groups and relevant entities

2 For paragraphs 15 to 23 (and the italic heading preceding paragraph 15)
substitute—

““Chargeable equity and liabilities: relevant groups

15 (1) This paragraph applies if the bank levy is charged as provided for
30by paragraph 4 (groups).

(2) The amount of the chargeable equity and liabilities of the relevant
group is the total of—

(a) the UK-based equity and liabilities, as at the end of the
chargeable period, of—

(i) 35each UK sub-group, and

(ii) each chargeable UK resident entity, and

(b) if a relevant foreign bank is a member of the relevant
group, the UK allocated equity and liabilities of that bank
as at the end of the chargeable period (see paragraph 24).

Chargeable equity and liabilities: relevant entities

15A (1) 5This paragraph applies if the bank levy is charged as provided for
by paragraph 5 (entities which are not members of groups).

(2) The amount of the chargeable equity and liabilities of the relevant
entity is—

(a) in the case of a UK resident bank or building society, the
10amount of the UK-based equity and liabilities of the entity,
as at the end of the chargeable period, or

(b) in the case of a relevant foreign bank, the amount of the UK
allocated equity and liabilities of that bank as at the end of
the chargeable period (see paragraph 24).

15Meaning of “UK sub-group”

15B “UK sub-group” means a group of entities—

(a) which is a group for the purposes of those provisions of
international accounting standards which relate to the
preparation of consolidated financial statements,

(b) 20which has as its parent or parent undertaking for the
purposes of those provisions an entity which is—

(i) if the relevant group is a relevant non-banking
group, a UK resident bank, or

(ii) in any other case, a UK resident entity,

(c) 25the members of which, for the purposes of those
provisions, are all members of the relevant group,

(d) in respect of which consolidated financial statements for
the chargeable period are prepared under international
accounting standards, and

(e) 30the members of which are not members of any larger
group of entities, in respect of which the conditions in
paragraphs (a) to (c) are met, for which such financial
statements are prepared.

Meaning of “chargeable UK resident entity”

15C (1) 35“Chargeable UK resident entity” means a UK resident entity
which—

(a) is a member of the relevant group, but is not a member of
a UK sub-group, and

(b) if the relevant group is a relevant non-banking group, is a
40banking entity.

(2) A UK resident entity is a “banking entity” for the purposes of sub-
paragraph (1) if it is—

(a) a UK resident bank, or

(b) a subsidiary of a UK resident bank.

(3) In sub-paragraph (2)(b) “subsidiary” has the meaning given by
those provisions of international accounting standards which
relate to the preparation of consolidated financial statements.

Election to disregard non-UK allocated equity and liabilities

15D (1) 5This paragraph applies if—

(a) the bank levy is charged as provided for by paragraph 4
(groups), and

(b) a UK resident entity, which is a member of the relevant
group, has a foreign permanent establishment.

(2) 10For the purposes of this Part of this Schedule, a UK resident entity
“has a foreign permanent establishment” if the entity carries on a
trade in a territory outside the United Kingdom through a
permanent establishment (the “foreign permanent
establishment”) in that territory.

(3) 15The relevant group’s responsible member may, for the purposes
of determining the UK-based equity and liabilities of a UK sub-
group or a chargeable UK resident entity, elect to disregard the
non-UK allocated equity and liabilities attributable to—

(a) any or all of the foreign permanent establishments of any
20or all of the UK resident entities which are members of the
UK sub-group;

(b) any or all of the foreign permanent establishments of the
chargeable UK resident entity.

(4) See paragraph 15Z1 for further provision about non-UK allocated
25equity and liabilities.

15E (1) This paragraph applies if—

(a) the bank levy is charged as provided for by paragraph 5
(entities which are not members of groups), and

(b) the relevant entity is a UK resident entity which has a
30foreign permanent establishment.

(2) The relevant entity may, for the purposes of determining its UK-
based equity and liabilities, elect to disregard the non-UK
allocated equity and liabilities attributable to any or all of its
foreign permanent establishments.

15F (1) 35An election made under paragraph 15D or 15E in respect of a UK
resident entity—

(a) must be made in the form and manner specified by the
Commissioners for Her Majesty’s Revenue and Customs,

(b) must contain such information and declarations as the
40Commissioners may require, and

(c) may be revoked at any time—

(i) in the case of an election under paragraph 15D, by
the relevant group’s responsible member;

(ii) in the case of an election under paragraph 15E, by
45the relevant entity.

(2) In this Schedule, “designated FPE entity” means a UK resident
entity in respect of which an election is made under paragraph
15D or 15E.

Determining the assets, equity and liabilities of UK resident entities

15G (1) 5This paragraph applies, in relation to a UK resident entity, for the
purposes of paragraphs 15H(2), 15L(3) and 15Z1.

(2) The assets, equity and liabilities, as at the end of the chargeable
period, of the entity are to be determined by reference to—

(a) the amounts recognised in the entity’s financial statements
10for the chargeable period as prepared under international
accounting standards, or

(b) if no such financial statements are prepared, the amounts
which would have been so recognised had such financial
statements been prepared under international accounting
15standards.

Determining the UK-based equity and liabilities of UK resident entities

15H (1) This paragraph applies in relation to a UK resident entity, other
than a designated FPE entity, which is—

(a) where the bank levy is charged as provided for by
20paragraph 4 (groups), a chargeable UK resident entity;

(b) where the bank levy is charged as provided for by
paragraph 5 (entities which are not members of groups),
the relevant entity.

(2) To determine the UK-based equity and liabilities of the UK
25resident entity, as at the end of the chargeable period—

(a) determine the amount of the entity’s equity and liabilities,
in accordance with paragraph 15G(2), and

(b) adjust that amount in accordance with paragraph 15N.

15I (1) This paragraph applies in relation to a designated FPE entity
30which is—

(a) where the bank levy is charged as provided for by
paragraph 4 (groups), a chargeable UK resident entity;

(b) where the bank levy is charged as provided for by
paragraph 5 (entities which are not members of groups),
35the relevant entity.

(2) To determine the UK-based equity and liabilities of the entity, as
at the end of the chargeable period, take Steps 1 to 5 in paragraph
15Z1.

Determining the UK-based equity and liabilities of UK sub-groups

15J (1) 40This paragraph applies in relation to a UK sub-group if—

(a) each member of the UK sub-group is a UK resident entity,

(b) none of those members is a designated FPE entity, and

(c) the relevant group’s responsible member has not made an
entity-by-entity election (see paragraph 15L) in relation to
45the UK sub-group.

(2) The assets, equity and liabilities, as at the end of the chargeable
period, of the UK sub-group are to be determined by reference to
the amounts recognised in the sub-group’s consolidated financial
statements for the chargeable period.

(3) 5To determine the UK-based equity and liabilities of the UK sub-
group, as at the end of the chargeable period—

(a) determine the amount of the UK sub-group’s equity and
liabilities in accordance with sub-paragraph (2), and

(b) adjust that amount in accordance with paragraph 15N.

15K (1) 10This paragraph applies in relation to a UK sub-group if—

(a) at least one member of the UK sub-group is—

(i) a non-UK resident entity, or

(ii) a designated FPE entity, and

(b) the relevant group’s responsible member has not made an
15entity-by-entity election (see paragraph 15L) in relation to
the UK sub-group.

(2) In this Schedule, “residual UK sub-group” means, in relation to a
UK sub-group to which this paragraph applies, the group of
entities consisting of the members of the UK sub-group which—

(a) 20are UK resident entities, but

(b) are not designated FPE entities.

(3) The assets, equity and liabilities of the residual UK sub-group are
to be determined by reference to the amounts which, if financial
statements had been prepared for the residual UK sub-group for
25the chargeable period under international accounting standards,
would have been recognised in those statements.

(4) The amount of the UK-based equity and liabilities of the UK sub-
group, as at the end of the chargeable period, is the total amount
of—

(a) 30the equity and liabilities of the residual UK sub-group as at
the end of that period, adjusted in accordance with
paragraph 15N, and

(b) the adjusted equity and liabilities of each designated FPE
entity which is a member of the UK sub-group (see Step 5
35in paragraph 15Z1).

15L (1) If the relevant group’s responsible member makes an election
under this paragraph (an “entity-by-entity election”) in relation to
a UK sub-group, the UK-based equity and liabilities of the UK sub-
group are to be determined in accordance with this paragraph.

(2) 40The amount of the UK-based equity and liabilities of the UK sub-
group as at the end of the chargeable period is the total amount
of—

(a) the adjusted equity and liabilities of each UK resident
entity, other than a designated FPE entity, which is a
45member of the UK sub-group, and

(b) the adjusted equity and liabilities of each designated FPE
entity which is a member of the UK sub-group (see Step 5
in paragraph 15Z1).

(3) To determine the “adjusted equity and liabilities” of a UK resident
entity for the purposes of sub-paragraph (2)(a)—

(a) determine the amount of the entity’s equity and liabilities
in accordance with paragraph 15G(2), and

(b) 5adjust that amount in accordance with paragraph 15N.

(4) An election made under this paragraph has effect in relation to the
chargeable period during which the election is made and each
subsequent chargeable period (unless it is revoked under sub-
paragraph (6)(c)).

(5) 10But an election under this paragraph has no effect in relation to a
UK sub-group for a chargeable period if the purpose, or one of the
main purposes, of making the election is to avoid or reduce a
charge or assessment to the bank levy.

(6) An election made under this paragraph in respect of the relevant
15group—

(a) must be made in the form and manner specified by the
Commissioners for Her Majesty’s Revenue and Customs,

(b) must contain such information and declarations as the
Commissioners may require, and

(c) 20may be revoked by the relevant group’s responsible
member at any time.

Adjustments: general

15M For the purposes of paragraphs 15N to 15Z, references to a
“chargeable UK sub-group or entity” are references to—

(a) 25in a case to which paragraph 15H or 15L(3) applies, the UK
resident entity,

(b) in a case to which paragraph 15J applies, the UK sub-
group,

(c) in a case to which paragraph 15K applies, the residual UK
30sub-group, or

(d) in a case to which paragraph 15Z1 applies, the designated
FPE entity.

15N (1) To adjust the amount of the equity and liabilities of a chargeable
UK sub-group or entity for the purposes of paragraph 15H(2)(b),
3515J(3)(b), 15K(4)(a), 15L(3)(b) or Step 3 in paragraph 15Z1, take the
following steps—

Step 1

Take the amount of the equity and liabilities of the chargeable UK
sub-group or entity, other than excluded equity and liabilities, as
40at the end of the chargeable period.

Step 2

Adjust that amount in accordance with paragraphs 15O to 15U (so
far as applicable).

Step 3