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

Finance (No. 2) BillPage 20

(3) In paragraph 3(1)(b) (meaning of relevant first-year expenditure) for “31 March
2018” substitute “31 March 2023”.

(4) In paragraph 24(6) (clawback of first-year tax credit) for “percentage specified
in” substitute “applicable percentage for the purposes of”.

(5) 5In consequence of subsection (2)(d), in F(No.2)A 2017, in Schedule 7, omit
paragraph 28.

(6) The amendments made by subsections (2), (4) and (5) have effect in relation to
chargeable periods beginning on or after 1 April 2018.

(7) Subsection (8) applies if a company has a chargeable period beginning before
101 April 2018 and ending on or after that date (“the straddling period”).

(8) For the purposes of calculating the amount mentioned in paragraph 2(1)(a) of
Schedule A1 to CAA 2001—

(a) so much of the straddling period as falls before 1 April 2018, and so
much of that period as falls on or after that date, are treated as separate
15chargeable periods, and

(b) the company’s surrenderable loss in the straddling period is to be
apportioned between the two separate parts on a just and reasonable
basis.

Double taxation relief

30 20Reduction of relief in cases where losses relieved sideways etc

(1) Part 2 of TIOPA 2010 (double taxation relief) is amended as follows.

(2) After section 71 insert—

“Adjustment of foreign tax on profits of overseas permanent establishment
71A Circumstances in which section 71B applies

(1) 25Section 71B has effect in relation to an accounting period of a company
resident in the United Kingdom which has an overseas permanent
establishment (“the PE”) if, in that or any earlier accounting period,
condition A or B is met.

(2) Condition A is met in relation to an accounting period if, for the
30purposes of any tax chargeable under the law of the PE territory—

(a) a loss or other amount attributable to the PE is deducted from
or otherwise allowed against amounts of any person other than
the company, and

(b) as a result, there is a decrease in the tax chargeable in respect of
35a foreign taxable period ending in the accounting period.

(3) Condition B is met in relation to an accounting period if—

(a) tax is chargeable under the law of the PE territory in respect of
the aggregate profits, or aggregate profits or gains, of the PE
and persons other than the company,

(b) 40a loss or other amount attributable to the PE is deducted from
or otherwise allowed against, or is brought into account as a

Finance (No. 2) BillPage 21

deduction or other allowance in calculating, amounts other
than amounts of the PE, and

(c) as a result, there is a decrease in the tax chargeable in respect of
a foreign taxable period ending in the accounting period.

(4) 5In this section—

  • “foreign taxable period” means any period in respect of which the
    tax in question is chargeable under the law of the PE territory,
    and

  • “the PE territory” means the territory in which the PE is situated.

71B 10Reduction of foreign tax paid on profits of overseas PE

(1) For the purposes of allowing credit relief under this Part, the amount of
foreign tax paid in respect of the company’s qualifying income from the
PE in the accounting period is reduced (but not below nil) by the
relevant amount for that period.

(2) 15In calculating any amount chargeable to corporation tax, any deduction
for an amount of foreign tax paid in respect of the company’s
qualifying income from the PE in the accounting period is reduced (but
not below nil) by the relevant amount for that period.

(3) In this section “the relevant amount” for the accounting period means
20the total of—

(a) the amount of the decrease in the tax chargeable in respect of a
foreign taxable period ending in the accounting period (if the
accounting period is one in relation to which condition A or B
in section 71A is met), and

(b) 25any excess tax carried forward to the accounting period.

(4) For this purpose excess tax is carried forward to the accounting period
so far as the relevant amount for the previous accounting period
exceeds the amount of foreign tax paid in respect of the company’s
qualifying income from the PE in that previous period.

(5) 30In determining the relevant amount, a deduction or allowance of the
kind referred to in condition A or B in section 71A is to be ignored if it
results in a deduction or other allowance that is reduced under section
259JC (counteraction where mismatch arises because of a relevant
multinational and the UK is the parent jurisdiction).

(6) 35If, for any accounting period, it becomes necessary for the relevant
amount to be reduced or increased, an adjustment may be made
(whether or not by an officer of Revenue and Customs)—

(a) by way of an assessment, the modification of an assessment,
amendment or disallowance of a claim, or otherwise, and

(b) 40despite any time limit imposed by or under any enactment.

(7) In this section “the company’s qualifying income from the PE” means
the profits of the PE which are profits chargeable under Chapter 2 of
Part 3 of CTA 2009 of a trade carried on partly, but not wholly, outside
the United Kingdom.”

(3) 45In section 78(1) (meaning of “overseas permanent establishment”)—

(a) for “72” substitute “71A”, and

(b) after “means” insert “, in relation to a company,”.

Finance (No. 2) BillPage 22

(4) In section 112(4) (deduction from income for foreign tax instead of credit
against UK tax), after paragraph (a) insert—

(aa) has effect subject to section 71B(2) (reduction of foreign tax paid
on profits of overseas permanent establishment),”.

(5) 5Section 71B of TIOPA 2010 has effect in relation to accounting periods
beginning on or after 22 November 2017.

(6) For the purposes of sections 71A and 71B of TIOPA 2010, if a company has an
accounting period beginning before, and ending on or after, that date (“the
straddling period”)—

(a) 10so much of the straddling period as falls before that date, and so much
of it as falls on or after that date, are treated as separate accounting
periods, and

(b) any amounts brought into account for the purposes of calculating the
credit relief of the company for the straddling period are apportioned
15to the two separate accounting periods—

(i) in 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.

(7) In determining whether or not section 71B of TIOPA has effect in relation to an
20accounting period of a company—

(a) it is to be assumed that the amendments made by this section were in
force in relation to all previous accounting periods of the company
except those beginning before 22 November 2011, and

(b) no account may be taken of any accounting period beginning before
25that date.

31 Countering effect of avoidance arrangements

(1) TIOPA 2010 is amended as follows.

(2) For section 81 (giving a counteraction notice) substitute—

81 Countering effect of avoidance arrangements

(1) 30This section applies if each of conditions A to D of section 82 is met in
relation to a person.

(2) The effects of a scheme or arrangement that are referable to the purpose
referred to in condition B of that section are to be counteracted by the
making of such adjustments as are necessary.

(3) 35Any adjustments required to be made by this section (whether or not
by an officer of Revenue and Customs) may be made by way of—

(a) an assessment,

(b) the modification of an assessment, or

(c) amendment or disallowance of a claim,

40or otherwise.”

(3) In section 87 (section 83(2) and (4): schemes that would reduce a person‘s tax
liability)—

(a) in subsection (1), after “person” insert “(“P”)”,

Finance (No. 2) BillPage 23

(b) in subsection (3), for “the amount of UK tax payable by the person”
substitute “the total amount of UK tax payable by P and such persons
(if any) as are connected with P”,

(c) in subsection (4), for “the amount of UK tax that would be payable by
5the person” substitute “the total amount of UK tax that would be
payable by P and such persons (if any) as are connected with P”, and

(d) at the end insert—

(7) For the purposes of this section, whether a person is connected
with P is determined in accordance with section 1122 of CTA
102010.”

(4) Omit sections 89 to 95 (counteraction notices).

(5) In section 371SR (double taxation relief: counteraction notices)—

(a) in subsection (1), for “giving of counteraction notice” substitute
“countering effect of avoidance arrangements”, and

(b) 15in the heading, for “counteraction notices” substitute “countering effect
of avoidance arrangements”.

(6) The amendments made by subsections (2), (4) and (5) have effect in relation to
any return under TMA 1970 or Schedule 18 to FA 1998 where the date by which
the return is required to be made is after 31 March 2018.

(7) 20The amendments made by subsection (3) have effect in relation to a credit for
foreign tax which relates to a payment of foreign tax on or after 22 November
2017.

32 Double taxation arrangements specified by Order in Council

(1) In section 2 of TIOPA 2010 (giving effect to arrangements made in relation to
25other territories) after subsection (1) insert—

(1A) For the purposes of this section, arrangements made with a view to
affording relief from double taxation include any arrangements which
modify the effect of arrangements so made.”

(1A) In section 3 of that Act (arrangements may include retrospective or supplementary provision), in subsection (2)—

(a) 30in paragraph (b) omit the final “or”;

(b) after paragraph (c) insert or

(d) provision conferring (with or without other functions)
functions relating to the determination of matters
arising under the arrangements on a public authority in
35the United Kingdom or in a territory outside the United
Kingdom.”

(3) In section 158 of IHTA 1984 (double taxation conventions), after subsection (1)
insert—

(1ZA) For the purposes of this section, arrangements made with a view to
40affording relief from double taxation include any arrangements which
modify the effect of arrangements so made.

(1ZB) Arrangements to which effect is given under this section may include
provision conferring (with or without other functions) functions
relating to the determination of matters arising under the arrangements

Finance (No. 2) BillPage 24

on a public authority in the United Kingdom or in a territory outside
the United Kingdom.”

(4) The amendments made by subsections (1) to (3) are to be regarded as always
having had effect.

(5) 5The provision made by section 2(1A) and 3(2)(d) of TIOPA 2010 in relation to
Orders under section 2 of that Act applies, and is to be regarded as always
having applied, in relation to Orders in Council under any provision which
that section replaces (directly or indirectly).

(6) The provision made by section 158(1ZA) and (1ZB) of IHTA 1984 in relation to
10Orders under section 158 of that Act applies, and is to be regarded as always
having applied, in relation to Orders in Council under any provision which
that section replaces (directly or indirectly).

Miscellaneous

33 Bank levy

15Schedule 9 contains provision amending Schedule 19 to FA 2011 (the bank
levy).

34 Debt traded on a multilateral trading facility

(1) In section 987 of ITA 2007 (meaning of “quoted Eurobond”)—

(a) the current text becomes subsection (1);

(b) 20in paragraph (b) of that subsection, after “exchange” insert “or admitted
to trading on a multilateral trading facility operated by an EEA-
regulated recognised stock exchange”;

(c) after that subsection insert—

(2) For the purposes of this section—

(a) 25a recognised stock exchange is an “EEA-regulated
recognised stock exchange” if it is regulated in the
European Economic Area, and

(b) “multilateral trading facility” has the same meaning as
in Article 4.1.22 of Directive 2014/65/EU of the
30European Parliament and of the Council of 15 May 2014
on markets in financial instruments.”

(2) In each of section 151N of TCGA 1992, section 564G of ITA 2007 and section 507
of CTA 2009 (investment bond arrangements)—

(a) in subsection (1)(h), after “exchange” insert “or admitted to trading on
35a multilateral trading facility operated by an EEA-regulated recognised
stock exchange”;

(b) in subsection (2)—

(i) omit the “and” at the end of paragraph (h);

(ii) after paragraph (i) insert—

(j) 40a recognised stock exchange is an “EEA-
regulated recognised stock exchange” if it is
regulated in the European Economic Area, and

(k) “multilateral trading facility” has the same
meaning as in Article 4.1.22 of Directive 2014/

Finance (No. 2) BillPage 25

65/EU of the European Parliament and of the
Council of 15 May 2014 on markets in financial
instruments.”

(3) The amendments made by subsection (1) have effect in relation to payments
5made on or after 1 April 2018.

(4) The amendments made by subsection (2) have effect—

(a) for corporation tax purposes, in relation to accounting periods
beginning on or after 1 April 2018;

(b) for income tax and capital gains tax purposes, for the tax year 2018-19
10and subsequent tax years.

35 Settlements: anti-avoidance etc

Schedule 10 contains provision about capital gains tax and income tax in
connection with settlements.

36 Fixed rate deduction for expenditure on vehicles etc

(1) 15Section 94E of ITTOIA 2005 (excluded vehicles) is amended in accordance with
subsections (2) and (3).

(2) In subsection (3)(b)—

(a) for “the trade” substitute “any relevant trade or business”;

(b) for “section 25A” substitute “sections 25A and 271D”.

(3) 20After subsection (3) insert—

(4) In this section “any relevant trade or business” means any trade or
property business carried on by the person carrying on the trade
mentioned in subsection (1).”

(4) In section 272 of that Act (application of trading income rules: GAAP), in
25subsection (2), in the table, at the appropriate place insert—

“In Chapter 5A (deductions allowable at a fixed rate)
section 94C exclusion of provisions of Chapter 5A for
firms with partner who is not an individual
sections 94D to 94G expenditure on vehicles”

(5) 30In section 272ZA of that Act (application of trading income rules: cash basis),
in subsection (1), in the table, at the appropriate place insert—

“In Chapter 5A (deductions allowable at a fixed rate)
section 94C exclusion of provisions of Chapter 5A for
firms with partner who is not an individual
sections 94D to 94G 35expenditure on vehicles”

Finance (No. 2) BillPage 26

(6) In section 59 of CAA 2001 (unrelieved qualifying expenditure)—

(a) in subsection (8)—

(i) at the end of paragraph (b), insert “and”;

(ii) omit paragraph (d) (and the “and” before it);

(b) 5after subsection (9) insert—

(9A) Subsection (9B) applies if—

(a) a person carrying on a property business incurs
expenditure in relation to a vehicle,

(b) at the end of a tax year, the person has unrelieved
10qualifying expenditure incurred in relation to the
vehicle to carry forward from the chargeable period
ending with that tax year (“the relevant chargeable
period”), and

(c) in calculating the profits of a property business of a
15person for the following tax year, a deduction is made
under section 94D of ITTOIA 2005 (as applied by section
271E of that Act) in respect of expenditure incurred in
relation to the vehicle.

(9B) None of the unrelieved qualifying expenditure incurred in
20relation to the vehicle may be carried forward as unrelieved
qualifying expenditure from the relevant chargeable period.”

(7) The amendments made by subsections (2), (3) and (6)(a) have effect for the tax
year 2018-19 and subsequent tax years.

(8) The amendments made by subsections (4), (5) and (6)(b) have effect for the tax
25year 2017-18 and subsequent tax years.

(9) Section 94E of ITTOIA 2005 (meaning of “excluded vehicles”) has effect, in its
application as a result of section 271E of that Act (profits of a property business:
application of trading income rules), as if after subsection (2) there were
inserted—

(2A) 30But in determining whether condition A is met no account is to be taken
of any claim for capital allowances made for the tax year 2013-14, the
tax year 2016-17 or either of the intervening tax years.”

37 Carried interest

(1) In the following provisions of F(No.2)A 2015 (which relate to carried interest)
35omit the words from “unless” to “that date”—

(a) section 43(2);

(b) section 43(4);

(c) section 45(3)(b).

(2) The amendments made by subsection (1) have effect in relation to carried
40interest arising on or after 22 November 2017.

(3) For the purposes of subsection (2) “carried interest” and “arising” have the
same meaning as in the provisions amended.

Finance (No. 2) BillPage 27

Part 2 Indirect taxes

Value added tax

38 Online marketplaces

(1) 5VATA 1994 is amended as follows.

(2) In section 69 (breaches of regulatory provisions) after paragraph (g) insert
“or—

(h) section 77E (display of VAT registration numbers on online
marketplaces),”.

(3) 10Before section 77B insert—

“Online marketplaces”.

(4) In section 77B (joint and several liability: operators of online marketplaces)—

(a) in the heading for “operators of online marketplaces” substitute “sellers
identified as non-compliant by the Commissioners”;

(b) in subsection (1) omit “who is not UK-established”;

(c) 15omit subsection (10);

(d) in subsection (12) omit “, and

  • “UK-established””.

(5) After section 77B insert—

77BA Joint and several liability: non-UK sellers in breach of Schedule 1A
20registration requirement

(1) This section applies where—

(a) a person (“P”) who makes taxable supplies of goods through an
online marketplace is in breach of a Schedule 1A registration
requirement, and

(b) 25the operator of the online marketplace knows, or should know,
that P is in breach of a Schedule 1A registration requirement.

(2) If the operator of the online marketplace does not secure the result in
subsection (3), subsection (4) applies.

(3) The result referred to in subsection (2) is that P does not offer goods for
30sale through the online marketplace in any period between—

(a) the end of the period of 60 days beginning with the day on
which the operator first knew, or should have known, that P
was in breach of a Schedule 1A registration requirement, and

(b) P ceasing to be in breach of a Schedule 1A registration
35requirement.

(4) The operator is jointly and severally liable to the Commissioners for the
amount of VAT payable by P in respect of all taxable supplies of goods
made by P through the online marketplace in the relevant period.

(5) The relevant period is the period—

Finance (No. 2) BillPage 28

(a) beginning with the day on which the operator first knew, or
should have known, that P was in breach of a Schedule 1A
registration requirement, and

(b) ending with P ceasing to be in breach of a Schedule 1A
5registration requirement.

(6) But if the operator has been given a notice under section 77B in respect
of P, the relevant period does not include—

(a) any period for which the operator is jointly and severally liable
for the amount mentioned in subsection (4) by virtue of section
1077B, or

(b) if the operator secures the result mentioned in section 77B(3),
the period beginning with the day on which the operator is
given the notice and ending with the day on which the operator
secures that result.

(7) 15P is in breach of a Schedule 1A registration requirement if P is liable to
be registered under Schedule 1A to this Act, but is not so registered.

(8) In this section “online marketplace” and “operator”, in relation to an
online marketplace, have the same meaning as in section 77B.”

(6) In section 77C (assessments)—

(a) 20in the heading after “section 77B” insert “or 77BA”;

(b) in subsection (1) after “section 77B” insert “or 77BA”;

(c) for subsection (9) substitute—

(9) In this section “online marketplace” and “operator”, in relation
to an online marketplace, have the same meaning as in section
2577B.”

(7) In section 77D (interest)—

(a) in the heading after “section 77B” insert “or 77BA”;

(b) for subsection (8) substitute—

(8) In this section “online marketplace” and “operator”, in relation
30to an online marketplace, have the same meaning as in section
77B.”

(8) After section 77D insert—

77E Display of VAT registration numbers

(1) This section applies where a person (“P”) offers, or proposes to offer,
35goods for sale through an online marketplace.

(2) The operator of the online marketplace must take reasonable steps to
check that—

(a) any number provided to the operator (by P or another person)
as P’s VAT registration number is valid, and

(b) 40any number displayed on the online marketplace as P’s VAT
registration number (under subsection (3) or otherwise) is valid.

(3) If a number is provided to the operator (by P or another person) as P’s
VAT registration number and the number is valid, the operator must
secure that it is displayed on the online marketplace as P’s VAT
45registration number no later than the time mentioned in subsection (4).

Finance (No. 2) BillPage 29

(4) The time is—

(a) the end of the period of 10 days beginning with the day on
which the operator is provided with the number, or

(b) if the number is provided before P offers goods for sale through
5the online marketplace, the later of—

(i) the end of the period in paragraph (a), and

(ii) the end of the day on which P first offers goods for sale
through the online marketplace.

(5) If the operator becomes aware that a number displayed on the online
10marketplace as P’s VAT registration number (under subsection (3) or
otherwise) is not valid, the operator must secure that it is removed from
the online marketplace before the end of the relevant period.

(6) The relevant period is the period of 10 days beginning with the day on
which the operator first became aware that the number was not valid.

(7) 15A number is provided or displayed as P’s VAT registration number
only if it is provided or displayed in connection with P offering, or
proposing to offer, goods for sale through the online marketplace.

(8) A number provided or displayed as P’s VAT registration number is
valid only if—

(a) 20P is registered under this Act, and

(b) the number is P’s VAT registration number.

(9) In this section—

  • “online marketplace” and “operator”, in relation to an online
    marketplace, have the same meaning as in section 77B;

  • 25VAT registration number” means the number allocated by the
    Commissioners to a person registered under this Act.”

39 VAT refunds to public authorities

(1) In section 33 of VATA 1994 (refunds of VAT in certain cases), subsection (3) is
amended as follows.

(2) 30In paragraph (a) after “a local authority” insert “and a combined authority
established by an order made under section 103(1) of the Local Democracy,
Economic Development and Construction Act 2009”.

(3) After paragraph (a) insert—

(aa) a fire and rescue authority under the Fire and Rescue Services
35Act 2004, if the authority does not fall within paragraph (a);

(ab) the Scottish Fire and Rescue Service;”.

(4) In paragraph (f), omit “a police authority and”.

(5) After paragraph (f) insert—

(fa) the Scottish Police Authority;

(fb) 40the Police Service of Northern Ireland and the Northern Ireland
Policing Board;”.

(6) The amendments made by this section have effect in relation to supplies made,
and acquisitions and importations taking place, on or after the day on which
this Act is passed.