Finance Bill (HC Bill 114)

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Anti-forestalling: reorganisations of share capital

4(1)This paragraph applies where—

(a)on or after 6 April 2019 but before 11 March 2020, there is a
reorganisation, and

(b)5on 11 March 2020—

(i)the company is the relevant individual’s personal company
and is either a trading company or the holding company of a
trading group, and

(ii)the relevant individual is an officer or employee of the
10company or (if the company is a member of a trading group)
of one or more companies which are members of the trading
group.

(2)In sub-paragraph (1) “the relevant individual” means—

(a)where a claim under section 169M of TCGA 1992 is made jointly by
15the trustees of a settlement and a qualifying beneficiary, the
qualifying beneficiary;

(b)where a claim under that section is made by an individual, the
individual.

(3)Where an election in respect of the reorganisation is made under section
20169Q of TCGA 1992 (reorganisations: disapplication of section 127) on or
after 11 March 2020, the disposal of the original shares is to be treated for the
purposes of paragraph 2 as taking place at the time of the election and not at
the time of the reorganisation.

(4)References in this paragraph to a reorganisation do not include an exchange
25of shares or securities which is treated as a reorganisation by virtue of
section 135 or 136 of TCGA 1992 (but see paragraph 5).

Anti-forestalling: exchanges of securities etc

5(1)This paragraph applies where—

(a)on or after 6 April 2019 but before 11 March 2020, there is an
30exchange of shares or securities within section 135(1) of TCGA 1992,
and

(b)the condition in sub-paragraph (2) or (3) is met.

(2)The condition in this sub-paragraph is that—

(a)the persons who hold shares or securities in company B immediately
35after the exchange are substantially the same as those who held
shares or securities in company A immediately before the exchange,
or

(b)the persons who have control of company B immediately after the
exchange are substantially the same as those who had control of
40company A immediately before the exchange.

(3)The condition in this sub-paragraph is that—

(a)the relevant shareholders, taken together, hold a greater percentage
of the ordinary share capital in company B immediately after the
exchange than they held in company A immediately before the
45exchange, and

(b)on 11 March 2020—

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(i)company B is the relevant individual’s personal company
and is either a trading company or the holding company of a
trading group, and

(ii)the relevant individual is an officer or employee of company
5B or (if company B is a member of a trading group) of one or
more companies which are members of the trading group.

(4)In sub-paragraph (3)

  • “the relevant individual” means—

    (a)

    where a claim under section 169M of TCGA 1992 is made
    10jointly by the trustees of a settlement and a qualifying
    beneficiary, the qualifying beneficiary;

    (b)

    where a claim under that section is made by an individual,
    the individual;

  • “the relevant shareholders” means the persons who—

    (a)

    15immediately after the exchange, hold shares or securities in
    company B, and

    (b)

    immediately before the exchange, also held shares or
    securities in company A.

(5)For the purposes of sub-paragraph (2)(a), connected persons are to be
20treated as the same person.

(6)Where an election in respect of the exchange is made under section 169Q of
TCGA 1992 (reorganisations: disapplication of section 127) on or after 11
March 2020, the disposal of the original shares is to be treated for the
purposes of paragraph 2 as taking place at the time of the election and not at
25the time of the exchange.

(7)Where, before the exchange, the Commissioners for Her Majesty’s Revenue
and Customs have issued a notification in respect of it under section 138(1)
of TCGA 1992 (advance clearance procedure)—

(a)sections 127 to 131 of that Act apply with the necessary adaptations
30as if—

(i)company A and company B were the same company, and

(ii)the exchange were a reorganisation;

(b)section 169Q of that Act applies as if the exchange were treated as a
reorganisation by virtue of section 135 of that Act.

35Interpretation

6(1)Paragraphs 2 to 5 are to be construed as if they were contained in Chapter 3
of Part 5 of TCGA 1992, subject to sub-paragraph (2).

(2)In those paragraphs—

  • “company A” and “company B” have the same meanings as in section
    40135 of TCGA 1992;

  • “original shares” has the meaning given by section 126 of TCGA 1992;

  • “reorganisation” has the meaning given by that section;

  • “trading company” and “trading group” have the meanings given by
    paragraph 1 of Schedule 7ZA to TCGA 1992.

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Part 2 Re-naming the relief

7(1)In section 169H(1) of TCGA 1992 (relief under Chapter 3 of Part 5:
introduction), for “to be known as “entrepreneurs’ relief”” substitute “to be
5known as “business asset disposal relief””.

(2)In consequence of that amendment—

(a)in the rest of TCGA 1992, for “entrepreneurs’ relief”, wherever
occurring, substitute “business asset disposal relief”;

(b)in section 169V of TCGA 1992 (operation of deferred entrepreneurs’
10relief), for “ER purposes”, wherever occurring, substitute “relevant
purposes”.

(3)Nothing in this paragraph affects the operation of Chapter 3 of Part 5 of
TCGA 1992.

8This Part of this Schedule has effect for the tax year 2020-21 and subsequent
15tax years.

Section 24

Schedule 3 Corporate capital losses

Part 1 Corporate capital loss restriction

20Restriction on deduction from chargeable gains: main provisions

1Part 7ZA of CTA 2010 (restrictions on obtaining certain deductions) is
amended as follows.

2After section 269ZB insert—

269ZBA Restriction on deductions from chargeable gains

(1)25This section has effect for determining the taxable total profits of a
company for an accounting period.

(2)The sum of any deductions made by the company for the accounting
period under section 2A(1)(b) of TCGA 1992 (allowable losses
accruing in earlier accounting periods) may not exceed the relevant
30maximum.

But this is subject to subsection (7).

(3)In this section the “relevant maximum” means the sum of—

(a)50% of the company’s relevant chargeable gains for the
accounting period, and

(b)35the amount of the company’s chargeable gains deductions
allowance for the accounting period.

(4)Section 269ZF contains provision for determining a company’s
relevant chargeable gains for an accounting period.

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(5)A company’s “chargeable gains deductions allowance” for an
accounting period—

(a)is so much of the company’s deductions allowance for the
period as is specified in the company’s tax return as its
5chargeable gains deductions allowance for the period, and

(b)accordingly, is nil if no amount of the company’s deductions
allowance for the period is so specified.

(6)An amount specified under subsection (5)(a) as a company’s
chargeable gains deductions allowance for an accounting period
10may not exceed the difference between—

(a)the amount of the company’s deductions allowance for the
period, and

(b)the total of any amounts specified for the period under—

(i)section 269ZB(7)(a) (trading profits deductions
15allowance),

(ii)section 269ZC(5)(a) (non-trading income profits
deductions allowance), and

(iii)in the case of an insurance company, section
269ZFC(5)(a) (BLAGAB deductions allowance).

(7)20Subsection (2) does not apply in relation to a company for an
accounting period where, in determining the company’s qualifying
chargeable gains for the period, the amount given by step 1 in section
269ZF(3) is not greater than nil.”

3(1)Section 269ZC (restriction on deductions from non-trading profits) is
25amended in accordance with this paragraph.

(2)In subsection (2), for “the relevant maximum” substitute “the difference
between—

(a)the relevant maximum, and

(b)the amount of any deductions made by the company for the
30accounting period under section 2A(1)(b) of TCGA 1992 (allowable
losses accruing in earlier accounting periods).”

(3)For subsection (3) substitute—

(3)In this section the “relevant maximum” means the sum of—

(a)50% of the company’s total relevant non-trading profits for
35the accounting period, and

(b)the amount of the company’s total non-trading profits
deductions allowance for the accounting period.

(3A)A company’s “total non-trading profits deductions allowance” for
the accounting period is the sum of—

(a)40the company’s non-trading income profits deductions
allowance (see subsection (5)), and

(b)the company’s chargeable gains deductions allowance (see
section 269ZBA(5)).”

(4)In subsection (4), for “relevant non-trading profits” substitute “total relevant
45non-trading profits”.

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(5)In subsection (5) for ““non-trading profits deductions allowance””, in both
places it occurs, substitute ““non-trading income profits deductions
allowance””.

(6)In subsection (6)—

(a)5in the words before paragraph (a), for ““non-trading profits
deductions allowance”” substitute ““non-trading income profits
deductions allowance””, and

(b)for paragraph (b) substitute—

(b)the total of any amounts specified for the period
10under—

(i)section 269ZB(7)(a) (trading profits
deductions allowance),

(ii)section 269ZBA(5)(a) (chargeable gains
deductions allowance), and

(iii)15in the case of an insurance company, section
269ZFC(5)(a) (BLAGAB deductions
allowance).”

(7)In subsection (8), for “relevant non-trading profits” substitute “qualifying
non-trading income profits and qualifying chargeable gains”.

420In section 269ZD (restriction on deductions from total profits), in subsection
(2)(b), after sub-paragraph (i) (before the “and”) insert—

(ia)any deductions made by the company for the
accounting period under section 2A(1)(b) of TCGA
1992 (allowable losses accruing in earlier accounting
25periods),”.

5In section 269ZF (relevant profits), after subsection (2) insert—

(2A)A company’s “relevant chargeable gains” for an accounting period
are—

(a)the company’s qualifying chargeable gains for the
30accounting period (see subsection (3)), less

(b)the company’s chargeable gains deductions allowance for the
accounting period (see section 269ZBA(5)).

But if the allowance mentioned in paragraph (b) exceeds the
qualifying chargeable gains mentioned in paragraph (a), the
35company’s “relevant chargeable gains” for the accounting period are
nil.

(2B)A company’s “total relevant non-trading profits” for an accounting
period are—

(a)the sum of—

(i)40the company’s qualifying non-trading income profits
for the period, and

(ii)the company’s qualifying chargeable gains for the
period, less

(b)the company’s total non-trading profits deductions
45allowance for the period (see section 269ZC(3A)).”

6In section 269ZF, in subsection (3), for steps 3 to 5 substitute—

Step 3 - trading profits, non-trading income profits and chargeable gains

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Divide the company’s total profits for the accounting period (as modified
under step 1(2)) into—

(a)5profits of a trade of the company (the company’s “trading profits”),

(b)profits, other than chargeable gains, that are not profits of a trade of the
company (the company’s “non-trading income profits”), and

(c)chargeable gains included in the total profits (the company’s
“chargeable gains”).

Step 4 - apportionment of the step 2 amount

(1)Allocate the whole of the step 2 amount to one of, or between two or
all of, the following—

(a)the company’s trading profits,
15the company’s non-trading income profits, and
the company’s chargeable gains.

(2)Reduce, but not below nil, each of the company’s trading profits,
non-trading income profits and chargeable gains by the amount (if
any) allocated to it under paragraph (1).

Step 5 - amount of qualifying trading profits, qualifying non-trading income profits
and qualifying chargeable gains

The amounts resulting from step 3, after any reduction under step 4, are—

(a)in the case of the amount in step 3(a), the company’s qualifying trading
profits,

(b)in the case of the amount in step 3(b), the company’s qualifying non-
trading income profits, and

(c)30in the case of the amount in step 3(c), the company’s qualifying
chargeable gains.”

7In section 269ZF(4) (calculation of modified total profits)—

(a)omit “and” at the end of paragraph (f), and

(b)after paragraph (g) insert “; and

(h)35make no deductions under section 2A(1)(b) of TCGA
1992 (allowable losses accruing in earlier accounting
periods).”

Insolvent companies

8After section 269ZW insert—

269ZWA 40 Increase of deductions allowance for insolvent companies

(1)This section applies in relation to a company if—

(a)the company has gone into insolvent liquidation (see
subsection (4)), or

(b)a corresponding situation exists in relation to the company in
45a country or territory outside the United Kingdom.

(2)The company’s deductions allowance for a winding up accounting
period (as determined in accordance with section 269ZR or 269ZW)
is to be treated (for all purposes) as increased by—

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(a)the amount of chargeable gains accruing to the company in
the accounting period after deducting any allowable losses
accruing to the company in the period, or

(b)if lower, the amount of any allowable losses previously
5accruing to the company, so far as not previously deducted
under section 2A(1) of TCGA 1992.

(3)In determining the amount of chargeable gains accruing to the
company in a winding up accounting period for the purposes of
subsection (2), ignore—

(a)10any chargeable gains (but not any allowable losses) accruing
to the company on the disposal of an asset if—

(i)section 171(1) of TCGA 1992 (transfers within a
group: no gain no loss) applied in relation to the
disposal by which the company acquired the asset
15(the “no gain/no loss disposal”),

(ii)the asset was acquired by the company, by virtue of
the no gain/no loss disposal, in a winding up
accounting period, and

(iii)the company making the no gain/no loss disposal has
20not, at that time, gone into insolvent liquidation, and

(b)any chargeable gains (but not any allowable losses)
transferred to the company in accordance with an election
made under section 171A of TCGA 1992 (election to
reallocate gain or loss to another member of the group) if—

(i)25the election is made in a winding up accounting
period, and

(ii)the company from which the chargeable gain is
transferred has not, at the time the election is made,
gone into insolvent liquidation.

(4)30For the purposes of this section, a company has gone into insolvent
liquidation if—

(a)it has gone into liquidation, within the meaning of section
247(2) of the Insolvency Act 1986 or article 6(2) of the
Insolvency (Northern Ireland) Order 1989 (SI 1989/2405 (NI
3519), and

(b)at the time it goes into liquidation, its assets are insufficient
for the payment of its debts and other liabilities and the
expenses of the winding up.

(5)In this section a “winding up accounting period” means—

(a)40the accounting period of the company that begins when the
winding up starts (within the meaning of section 12(7) of
CTA 2009), and

(b)each subsequent accounting period.”

9In section 269ZZ (company tax return to specify amount of deductions
45allowance), in subsection (1), after paragraph (a) (but before the “and”)
insert—

(aa)if section 269ZWA (increase of deductions allowance for
insolvent companies) applies, what that amount would be
without the increase provided for by subsection (2) of that
50section,”.

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Companies without a source of chargeable income

10After section 269ZY of CTA 2010 insert—

269ZYA Deductions allowance for company without a source of chargeable
income

(1)5This section applies in relation to a company and a financial year
(“the relevant financial year”) if—

(a)the company has no source of chargeable income (see
subsection (2)) throughout the relevant financial year, and

(b)if the company is a member of a group (see section 269ZZB)
10at any time during the relevant financial year, each other
company that is, at any time during the relevant financial
year, a member of the group has no source of chargeable
income throughout the relevant financial year.

(2)For the purposes of this section and section 269ZYB, a company “has
15no source of chargeable income” if the company is either—

(a)not within the charge to corporation tax, or

(b)chargeable to corporation tax only because of a chargeable
gain accruing to the company on the disposal of an asset.

(3)A company may make a claim under this section in respect of an
20accounting period if—

(a)the accounting period falls wholly within the relevant
financial year, and

(b)the company is chargeable to corporation tax for the
accounting period only because of a chargeable gain accruing
25to the company on the disposal of an asset.

(4)If a claim is made by a company under this section in respect of an
accounting period (a “claim AP”), the company’s deductions
allowance for the claim AP is the lower of—

(a)the available deductions allowance amount (see subsection
30(9)),

(b)the total amount of allowable losses accruing to the company
in any previous accounting period, so far as not previously
deducted under section 2A(1)(a) or (b) of TCGA 1992, and

(c)the chargeable gains accruing to the company in the claim
35AP.

(5)A claim under this section in respect of an accounting period—

(a)must be made within the period of two years after the end of
the accounting period, but

(b)may not be made before the end of the relevant financial year.

(6)40Sections 269ZR to 269ZY (deductions allowances) do not apply to a
claim AP.

(7)Subsection (8) applies if—

(a)there is at least one claim AP falling wholly within the
relevant financial year, and

(b)45there is at least one accounting period falling wholly within
the relevant financial year in respect of which no claim is
made under this section (an “alternative AP”).

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(8)The company’s deductions allowance for an alternative AP is the
lower of—

(a)the deductions allowance that would be available, ignoring
the effect of this section (see sections 269ZR to 269ZY), and

(b)5the available deductions allowance amount (see subsection
(9)).

(9)For the purposes of this section, the “available deductions allowance
amount” is—

(a)£5,000,000, less

(b)10the total of the deductions allowance amounts (if any)
already claimed by—

(i)the company, and

(ii)if the company is a member of a group at any time
during the relevant financial year, each other
15company that is, at any time during the relevant
financial year, a member of the group,

in respect of each claim AP and alternative AP that falls
wholly within the relevant financial year.

(10)In this section, references to the deductions allowance amounts
20claimed by a company in respect of an accounting period—

(a)for a claim AP, are references to any deductions allowance
claimed by the company under this section in respect of the
period, and

(b)for an alternative AP, are references to any other amount
25specified in the company’s tax return as its chargeable gains
deductions allowance for the period.

(11)For the purposes of subsection (9)(b), in the cases listed in the first
column of the table below, the rules in the second column apply to
determine the order in which deductions allowance amounts are to
30be treated as claimed in respect of the accounting periods—

CaseRule
1. There is a claim AP and another
claim AP starting on the same day
or a different day.
The order in which the claims
under this section are made.
352. There is an alternative AP 35
(“AP1”) and another alternative
AP (“AP2”) starting on a later
day.
AP1 before AP2.
3. There is an alternative AP and
40another alternative AP starting on
the same day.
The order in which the tax returns
for the alternative APs are
delivered.
4. There is a claim AP and an
alternative AP starting on the
same day, an earlier day or a later
45day.
The claim AP before the
alternative AP.

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269ZYB Provisional application of section 269ZYA

(1)This section applies in relation to a company and an accounting
period if—

(a)the conditions in section 269ZYA(3)(a) and (b) are met in
5relation to the accounting period, and

(b)the company’s tax return for the accounting period is
delivered before the end of the financial year in which the
accounting period falls (“the relevant financial year”).

(2)The company may make a declaration in the return for the
10accounting period that—

(a)at all earlier times in the relevant financial year—

(i)the company had no source of chargeable income (see
section 269ZYA(2)), and

(ii)if the company is a member of a group, each other
15member of the group had no source of chargeable
income, and

(b)the person intends to make a claim under section 269ZYA(3)
in respect of the accounting period.

(3)Until the declaration ceases to have effect, section 269ZYA has effect
20as if the company had made a claim under that section.

(4)The declaration ceases to have effect if—

(a)it is withdrawn,

(b)it is superseded by a claim made under section 269ZYA, or

(c)the company or, if the company is a member of a group,
25another member of the group, acquires a source of chargeable
income before the end of the relevant financial year.

(5)So far as not previously ceasing to have effect under subsection (4),
the declaration ceases to have effect two years after the end of the
accounting period in respect of which it is made.

(6)30If the declaration ceases to have effect, all necessary adjustments
must be made, by assessment, amendment of returns or otherwise.

(7)Subsection (6) applies despite any limitation on the time within
which assessments or amendments may be made.”

Offshore collective investment vehicles

1135In section 269ZZB of CTA 2010 (meaning of “group”), at the end insert—

(9)For the purposes of the application of this Part in relation to a
collective investment vehicle to which paragraph 4 of Schedule
5AAA to TCGA 1992 applies, the reference in paragraph 4(2) of that
Schedule to “relevant purposes” is to be treated as including a
40reference to the purposes of this section.”

Insurance companies: ring fence

12(1)Section 210A of TCGA 1992 (insurance: ring-fencing of losses) is amended as
follows.