Finance (No. 3) Bill (HC Bill 282)

(2) For subsection (1) substitute—

“(1) This section applies if a non-UK resident company within the charge
to corporation tax prepares its return of accounts for a period of
account in a currency other than sterling (the “accounts currency”).”

(3) 5In subsection (4) omit from “of its” to “United Kingdom”.

30 In section 107 (group relief: restriction on losses etc surrenderable by non-
UK resident) in subsection (1) for “company” (in the second place it occurs)
to the end substitute “company within the charge to corporation tax”.

31 In section 188BI (group relief for carried-forward losses: restriction on
10surrender of losses made when non-UK resident) in subsection (1) for
“company” (in the second place it occurs) to the end substitute “company
within the charge to corporation tax”.

TIOPA 2010

32 Part 10 of TIOPA 2010 (corporate interest restriction) is amended as follows.

33 (1) 15Section 415 (qualifying net group-interest expense: interpretation) is
amended as follows.

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

“(b) either—

(i) the condition in subsection (1A) is met, or

(ii) 20any of the conditions in subsection (2) is met in
relation to the guarantee, indemnity or other financial
assistance in question”.

(3) After subsection (1) insert—

“(1A) The condition is that—

(a) 25the member in question is a company that has not been UK
resident at any time before 29 October 2018,

(b) the financial assistance in question is provided before that
date, and

(c) the financial assistance in question is in respect of a loan
30relationship, derivative contract or relevant arrangement or
transaction (within the meaning of section 382(4)) to which
the member in question is a party for the purposes of its UK
property business.”

34 In section 438 (exemption for interest payable to third parties etc) after
35subsection (5) insert—

“(5A) For the purposes of subsection (4) a guarantee, indemnity or other
financial assistance in favour of the creditor is also ignored if—

(a) it is provided before 29 October 2018,

(b) the company concerned has not been UK resident at any time
40before that date, and

(c) the amount concerned is in respect of a loan relationship,
derivative contract or relevant arrangement or transaction
(within the meaning of section 382(4)) to which the member
in question is a party for the purposes of its UK property
45business.”

Part 3 Commencement and transitional provisions

Commencement

35 This Schedule comes into force on 6 April 2020 (“the commencement date”).

5Transitional provisions

36 Where a period of account of a company begins before and ends on or after
the commencement date, it is to be assumed for the purposes of the
amendments made by this Schedule—

(a) that the period (“the straddling period of account”) consists of two
10separate periods of account—

(i) the first beginning with the date on which the straddling
period of account begins and ending with 5th April 2020, and

(ii) the second beginning with the commencement date and
ending with the date on which the straddling period of
15account ends, and

(b) that separate accounts have been drawn up for each of those separate
periods in accordance with generally accepted accounting practice.

37 (1) This paragraph applies if—

(a) in a tax year ending before the commencement date a company
20makes a loss in a UK property business that is within the charge to
income tax,

(b) relief for the purposes of income tax is not given to the company for
an amount of the loss (“the unrelieved amount”), and

(c) on the commencement date the UK property business ceases to be
25within the charge to income tax and comes within the charge to
corporation tax as a result of section 5(3A) of CTA 2009.

(2) Relief for the purposes of corporation tax is given to the company under this
paragraph for the unrelieved amount.

(3) For this purpose—

(a) 30the unrelieved amount is carried forward to post-commencement
accounting periods of the company (for so long as the company
continues to carry on the UK property business), and

(b) the profits of any such accounting period that are mentioned in sub-
paragraph (4) are to be reduced by the unrelieved amount (so far as
35that amount cannot be used under this paragraph to reduce the
profits of an earlier period).

(4) The profits are—

(a) profits of the UK property business, and

(b) profits arising from loan relationships or derivative contracts that the
40company is a party to for the purposes of that business.

(5) In this paragraph “post-commencement accounting period” means an
accounting period ending after the commencement date.

38 (1) This paragraph applies if—

(a) in the tax year 2019-20 a non-UK resident company is a partner in a
firm which—

(i) carries on a trade, and

(ii) has untaxed income or relievable losses from a UK property
5business, and

(b) accordingly, the company is treated under section 854 of ITTOIA
2005 as having a notional business for the tax year.

(2) The basis period for the notional business for the tax year is taken to end
with 5th April in that tax year (if it would not otherwise do so).

(3) 10In this paragraph “untaxed income” has the meaning given by section 854(6)
of ITTOIA 2005.

39 (1) This paragraph applies if—

(a) on or after the commencement date a loss arises in connection with a
loan relationship of a company,

(b) 15the loss is wholly or partly referable to a time before the
commencement date (“the pre-commencement time”), and

(c) had the loss arisen at the pre-commencement time it would have
been brought into account in accordance with Part 3 of ITTOIA 2005
in calculating the profits of the UK property business of the
20company.

(2) Section 327 (disallowance of imported losses etc) does not apply in relation
to so much of the loss as is referable to the pre-commencement time.

40 (1) This paragraph applies for an accounting period (“the loss period”) of a non-
UK resident company beginning on or after the commencement date if—

(a) 25apart from this paragraph, a loss arising in connection with a
derivative contract of the company would by reason of this Schedule
fall to be brought into account in accordance with Part 7 of CTA 2009,

(b) the loss is wholly or partly referable to a time before the
commencement date when the derivative contract was not subject to
30corporation tax, and

(c) had the loss arisen at that time it would not have been brought into
account in accordance with Part 3 of ITTOIA 2005 in calculating the
profits of the UK property business of the company.

(2) The amounts brought into account for the loss period in accordance with
35Part 7 of CTA 2009 must be such as to secure that none of the loss referable
to that time is treated as arising in the loss period or any other accounting
period of the company.

(3) For the purposes of this section a loss is referable to a time when a contract
is not subject to corporation tax so far as, at the time to which the loss is
40referable, the company would not have been chargeable to corporation tax
on any profits arising from the contract.

(4) If the company was not a party to the contract at the time to which the loss
is referable, subparagraph (3) applies as if the reference to the company were
a reference to the person who at that time was in the same position as
45respects the contract as is subsequently held by the company.

(5) An amount which would be brought into account in accordance with Part 7
of CTA 2009 in respect of a derivative contract apart from this paragraph is
treated for the purposes of section 699(1) of CTA 2009 (amounts brought into

account under Part 7 excluded from being otherwise brought into account)
as if it were so brought into account.

(6) Accordingly, that amount must not be brought into account for corporation
tax purposes as respects the derivative contract either in accordance with
5Part 7 of CTA 2009 or otherwise.

41 (1) This paragraph applies for an accounting period (“the relevant period”) of a
non-UK resident company beginning on or after the commencement date
if—

(a) a profit arising in connection with a loan relationship or derivative
10contract of the company (“the first instrument”) falls by reason of this
Schedule to be brought into account in the relevant period in
accordance with Part 5 or Part 7 of CTA 2009,

(b) an amount of the profit (“the profit amount”) is referable to a time
before the commencement date when the first instrument was not
15subject to corporation tax,

(c) had the profit arisen at that time it would not have been brought into
account in accordance with Part 3 of ITTOIA 2005 in calculating the
profits of the UK property business of the company,

(d) at that time the first instrument and another loan relationship or
20derivative contract (“the second instrument”) were in a hedging
relationship with one another, and

(e) an amount of a loss (“the loss amount”) arising in connection with
the second instrument would (apart from this paragraph) be
prevented by reason of paragraph 40 or section 327 of CTA 2009 from
25being brought into account in the relevant period accordance with
Part 5 or Part 7 of CTA 2009.

(2) So much of the loss amount as does not exceed the profit amount may be
brought into account in the relevant period in accordance with Part 5 or Part
7 of CTA 2009.

(3) 30For the purposes of sub-paragraph (1) the first instrument and the second
instrument are in a hedging relationship with one another in so far as one of
them is intended to act as a hedge of the company’s exposure to changes in
the fair value of the other.

(4) In a case where the first instrument and the second instrument are in a
35hedging relationship with one another to a limited extent, subsection (2) has
effect in relation to so much of the loss amount as is just and reasonable
having regard to the extent of that hedging relationship.

(5) For the purposes of this paragraph a profit is referable to a time when the
first instrument is not subject to corporation tax so far as, at the time to which
40the profit is referable, the company would not have been chargeable to
corporation tax on any profits arising from the instrument.

(6) If the company was not a party to the first instrument at the time to which
the profit is referable, subparagraph (5) applies as if the reference to the
company were a reference to the person who at that time was in the same
45position as respects the instrument as is subsequently held by the company.

42 (1) Where—

(a) before the commencement date a company is chargeable to income
tax on the profits of its UK property business,

(b) on the commencement date the company becomes chargeable to
corporation tax on the profits arising from a derivative contract that
it is a party to for the purposes of its UK property business, and

(c) there is a tax asymmetry in relation to the derivative contact,

5the amounts to be brought into account in respect of the derivative contract
for the purposes of Part 7 of CTA 2009 are to be adjusted in such manner as
is just and reasonable having regard to the tax asymmetry.

(2) For the purposes of subparagraph (1) there is a tax asymmetry in relation to
the derivative contract if—

(a) 10fair value amounts arising in relation to the derivative contract are
brought into account in calculating for the purposes of income tax
the profits or losses of the company’s UK property business for tax
years ending before the commencement date, but

(b) by reason of regulation 9 of the Disregard Regulations, fair value
15amounts arising in relation to the contract are not brought into
account for the purposes of Part 7 of CTA 2009 for accounting
periods of the company beginning on or after the commencement
date.

(3) In this paragraph—

• 20“fair value amount” means an amount representing a change in the fair
  value of a derivative contract which is recognised in determining a
  company’s profit or loss for a period of account in accordance with
  generally accepted accounting practice;

• “the Disregard Regulations” means the Loan Relationships and
  25Derivative Contracts (Disregard and Bringing into Account of Profits
  and Losses) Regulations 2004 (S.I. 2004/3256S.I. 2004/3256).

43 (1) This paragraph applies if—

(a) an amount representing a change in the fair value of a derivative
contract is recognised in determining a company’s profit or loss for
30a period of account beginning before the commencement date, and

(b) the amount would have been brought into account in calculating for
the purposes of income tax the profits or losses of the company’s UK
property business for a tax year ending before the commencement
date but for its having been treated as an amount of a capital nature.

(2) 35In determining the amounts the company is to bring into account for the
purposes of Part 7 of CTA 2009 for an accounting period beginning on or
after the commencement date—

(a) the derivative contract is to be treated as being one in relation to
which an election has effect under regulation 6A of the Disregard
40Regulations, and

(b) if regulation 7 or 8 of those Regulations applies in relation to the
derivative contract, the amount referred to in subparagraph (1) is to
be treated for the purposes of regulation 10 of those Regulations as
being an amount that has previously been excluded from being
45brought into account for the purposes of Part 7 of CTA 2009 by
regulation 7 or 8 (as the case may be).

(3) In this paragraph—

• “the Disregard Regulations” means the Loan Relationships and
  Derivative Contracts (Disregard and Bringing into Account of Profits
  50and Losses) Regulations 2004 (S.I. 2004/3256S.I. 2004/3256);

Finance (No. 3) BillPage 215

• “recognised” means recognised in accordance with generally accepted
  accounting practice.

44 (1) This paragraph applies if—

(a) before 1 January 2015 a company measures a relevant derivative
5contract at fair value,

(b) on the commencement date the company comes within the charge to
corporation tax by reason of this Schedule, and

(c) the first relevant period of the company begins on or after the
commencement date.

(2) 10The company is to be treated for the purposes of regulation 6A of the
Disregard Regulations as if it was a new adopter.

(3) In this paragraph—

• “the Disregard Regulations” means the Loan Relationships and
  Derivative Contracts (Disregard and Bringing into Account of Profits
  15and Losses) Regulations 2004 (S.I. 2004/3256S.I. 2004/3256), and

• “the first relevant period” and “relevant derivative contract” have the
  meaning given by regulation 6A(5) of the Disregard Regulations.

45 (1) This paragraph applies if on the commencement date—

(a) an asset held by a non-UK resident company for the purposes of its
20UK property business becomes a chargeable intangible asset in
relation to the company by reason of the business coming within the
charge to corporation tax, or

(b) an asset held by a non-UK resident company for the purposes of
enabling it to generate other UK property income becomes a
25chargeable intangible asset in relation to the company by reason of
that income coming within the charge to corporation tax.

(2) Part 8 of CTA 2009 applies as if—

(a) the company had acquired the asset immediately on the
commencement date, and

(b) 30had done so for its accounting value at that time.

(3) In this paragraph—

• “accounting value” and “chargeable intangible asset” have the meaning
  they have in Part 8 of CTA 2009, and

• “other UK property income” has the meaning it has in Part 2 of CTA
  352009.

46 (1) An election under section 792 of CTA 2009 (reallocation of degrouping
charge within a group) may not be made if—

(a) subsection (3A) of section 793 applies to B, and

(b) the relevant time is before 5 July 2016.

(2) 40An election under section 792 of CTA 2009 may not be made if—

(a) subsection (3B) of section 793 applies to B, and

(b) the relevant time is before the commencement date.

(3) In this paragraph references to “B” and “the relevant time” must be read in
accordance with section 792 of CTA 2009.

47 (1) 45This paragraph applies if—

(a) before the commencement date a company incurs expenditure for
the purposes of a UK property business it is about to carry on,

(b) the company begins to carry on the business on or after the
commencement date, and

(c) 5when the company begins to carry on the business it is non-UK
resident.

(2) Subsection (7) of section 1147 of CTA 2009 (which enables a company to
obtain relief for expenditure on contaminated or derelict land incurred prior
to carrying on a UK property business) does not apply in relation to the
10expenditure.

48 Where on the commencement date—

(a) a non-UK resident company ceases to be within the charge to income
tax and comes within the charge to corporation tax by reason of this
Schedule, and

(b) 15an accounting period of the company begins in accordance with
section 9(1)(a) of CTA 2009,

the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/
3175) do not have effect in relation to that accounting period.

49 (1) This paragraph applies if on or after 29 October 2018 a company enters into
20an arrangement the main purpose or one of the main purposes of which is
to secure for any person a tax advantage related to the coming into force of
this Schedule.

(2) The tax advantage is to be counteracted by means of adjustments.

(3) The adjustments may be made (whether by an officer of Revenue and
25Customs or the person who would obtain the tax advantage) by way of an
assessment, the modification of an assessment, an amendment or
disallowance of a claim, or otherwise.

(4) In this paragraph—

• “arrangement” includes any agreement, understanding, scheme,
  30transaction or series of transactions (whether or not legally
  enforceable),

• “tax advantage” has the meaning given by section 1139 of CTA 2010.

50 (1) This paragraph applies if—

(a) a company enters into an arrangement of a kind mentioned in
35paragraph 49(1),

(b) the arrangements are effected by taking only ordinary commercial
steps in accordance with a generally prevailing commercial practice,

(c) the tax advantage that the arrangements secure is the benefit of a
relief expressly conferred by Part 10 of TIOPA 2010 (corporate
40interest restriction), and

(d) securing that tax advantage is wholly consistent with the policy
objectives of that Part.

(2) If the arrangement is entered into on or after 29 October 2018, the tax
advantage is not to be counteracted by means of adjustments under
45paragraph 49.

(3) In addition, the tax advantage is not to be counteracted by means of
adjustments under section 461 of TIOPA 2010 irrespective of the date on
which the arrangement was entered into.

Section 18

SCHEDULE 6 5Diverted profits tax

Introduction

1 Part 3 of FA 2015 (diverted profits tax) is amended as follows.

Calculation of taxable diverted profits

2 (1) Section 82 (calculation of taxable diverted profits in section 80 or 81 case:
10introduction) is amended as follows.

(2) In subsection (3) for “(9)” substitute “(10)”.

(3) In subsection (7) (when the “actual provision condition” is met) in paragraph
(a) omit “(ignoring Part 4 of TIOPA 2010 (transfer pricing))”.

(4) After subsection (7) insert—

“(7A) 15For the purposes of subsection (7)(a) ignore any adjustment that is
required to be made to the results of the material provision under
Part 4 of TIOPA 2010 (transfer pricing).”

(5) After subsection (9) insert—

“(10) “Diverted profits” of the relevant company for the accounting period
20means an amount—

(a) in respect of which the company is chargeable to corporation
tax for that period by reason of any adjustment required to be
made to the results of the material provision under Part 4 of
TIOPA 2010 (transfer pricing), and

(b) 25which, in a case where section 81 applies, is attributable (in
accordance with sections 20 to 32 of CTA 2009) to UKPE”.

3 In section 83 (section 80 or 81 cases where no taxable diverted profits arise)
omit subsection (2).

4 In section 84 (section 80 or 81: calculation of profits by reference to the actual
30provision) in subsection (2) for the words from “the amount (if any)” to the
end substitute “an amount equal to so much of the diverted profits of the
company for the accounting period as are not taken into account in an
assessment to corporation tax included before the end of the review period
in the company’s company tax return for that accounting period.”

5 (1) 35Section 85 (section 80 or 81: calculation of profits by reference to the relevant
alternative provision) is amended as follows.

(2) In subsection (4) for paragraph (a) (but not the “and” immediately after it)
substitute—

“(a) so much of the diverted profits (if any) of the company for the
40accounting period as are not taken into account in an

assessment to corporation tax included before the end of the
review period in the company’s company tax return for that
accounting period,”.

(3) In subsection (6) (meaning of “the notional additional amount”)—

(a) 5in the words before paragraph (a) omit “the amount by which”,

(b) in paragraph (a) before “amount” insert “additional”,

(c) at the end of paragraph (a) for “exceeds” substitute “less”, and

(a) in paragraph (b)(i) for the words from “the application” to the end substitute “any adjustment required to be made to the results of the material provision (whether under Part 4 of TIOPA 2010 (transfer pricing) or otherwise),”.

(4) After subsection (6) insert—

“(7) 10In calculating the additional amount mentioned in paragraph (a) of
subsection (6) no account is to be taken of any adjustment required
to be made to the results of the material provision under Part 4 of
TIOPA 2010 or otherwise.”

6 (1) Section 88 (calculation of taxable diverted profits in section 86 case:
15introduction) is amended as follows.

(2) After subsection (5A) insert—

“(5B) In calculating the notional PE profits no account is to be taken of any
adjustment within subsection (5C).

(5C) An adjustment is within this subsection if—

(a) 20it is an adjustment required to be made under Part 4 of
TIOPA 2010 to the results of any provision made or imposed
between the foreign company and the avoided PE,

(b) it is taken into account in an assessment to corporation tax
included in a company tax return of the avoided PE, and

(c) 25the time when it is first taken into account as mentioned in
paragraph (b) is after the end of the review period.”

(3) In subsection (9)(a) omit “(ignoring Part 4 of TIOPA 2010 (transfer pricing)”.

(4) After subsection (9) insert—

“(9A) For the purposes of subsection (9)(a) ignore any adjustment that
30would be required to be made to the results of the material provision
under Part 4 of TIOPA 2010 in calculating what would have been the
notional PE profits for the accounting period.”

7 After section 111 insert—

“111A Adjustment required to be made to the material provision

35A reference in section 82 or 88 to an adjustment required to be made
under Part 4 of TIOPA 2010 (transfer pricing) to the results of any
provision includes a reference to an adjustment required to be made
under any other enactment to the results of the provision if and to the
extent that, but for that other enactment, the adjustment would have
40been required to be made under that Part.”

8 The amendments made by paragraphs 2 to 7 have effect in relation to
accounting periods beginning on or after 29 October 2018.

Extension of period for issuing a preliminary notice

9 (1) Section 93 (preliminary notice) is amended as follows.

(2) In subsection (5) (period for issuing a notice) for the words from “, a
preliminary notice” to the end substitute “—

(a) 5a preliminary notice may not be issued in respect of an
accounting period on the basis that section 80 or 81 applies
more than six months after the last day on which an
amendment of the company tax return for the accounting
period could be made, and

(b) 10a preliminary notice may not be issued in respect of an
accounting period on the basis that section 86 applies more
than 24 months after the end of that accounting period.”

(3) After subsection (5) insert—

“(5A) For the purposes of subsection (5)(a) no account is to be taken of any
15exception to paragraph 15(4) of Schedule 18 to FA 1998 (period for
amending a company tax return).”

(4) The amendments made by this paragraph do not have effect in relation to a
preliminary notice if the period during which it may be issued (but for the
amendments) expires before this Act is passed.

20Relief from corporation tax

10 (1) After section 100 insert—

“100A Relief from corporation tax

(1) This section applies where a charging notice or supplementary
charging notice is issued to a company for an accounting period and
25any of the following events occurs—

(a) the period of 30 days mentioned in subsection (2) of section
102 ends without notice of an appeal against the notice being
given in accordance with that subsection,

(b) an appeal against the notice is finally determined otherwise
30than by the notice being cancelled, or

(c) an appeal against the notice is withdrawn.

(2) The company is not chargeable to corporation tax for the accounting
period in respect of any amount within subsection (3).

(3) An amount is within this subsection if—

(a) 35the company failed before the end of the review period to
take the amount into account in an assessment to corporation
tax included in the company tax return for the accounting
period, and

(b) that failure gave rise to, or to any of, the taxable diverted
40profits in respect of which the notice imposes a charge to
diverted profits tax.”

(2) The amendment made by this paragraph has effect in relation to accounting
periods beginning on or after 1 April 2015.