Finance Bill

House of Lords

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 25 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
360

5
In section 4 (rates of capital gains tax), after subsection (3) insert—
“(3A)
The rate of capital gains tax in respect of gains chargeable under
section 2B accruing to a person in a tax year is 28%.”
6
In section 8 (company’s total profits to include chargeable gains), after
subsection (4) insert—
5
“(4A)
Nothing in this section applies in relation to an ATED-related gain
chargeable to, or an ATED-related loss allowable for the purposes of,
capital gains tax by virtue of section 2B.”
7
In section 13 (attribution of gains to members of non-resident companies),
after subsection (1) insert—
10
“(1A)
But this section does not apply if the gain is an ATED-related gain
chargeable to capital gains tax by virtue of section 2B (capital gains
tax on ATED-related gains).”
8
In section 16 (computation of losses), in subsection (3) after “section” insert
“2B,”.
15
9
In Part 2, after Chapter 4 insert—
“Chapter 5
Computation of gains and losses: relevant high value disposals
57A
Gains and losses on relevant high value disposals
(1)
Schedule 4ZZA makes provision about the computation of gains and
20
losses on relevant high value disposals, including provision about
whether a gain or loss is ATED-related or not.
(2)
But if the effect of Schedule 4ZZA applying in relation to a disposal
would be that no ATED-related gain or loss accrues on the disposal,
for the purposes of this Act the gain or loss on the disposal is to be
25
computed ignoring that Schedule (and is not ATED-related).”
10
After section 100 insert—
“100A
Exemption for certain EEA UCITS
(1)
ATED-related gains accruing on relevant high value disposals made
by an EEA UCITS which is not an open-ended investment company
30
or a unit trust scheme are not chargeable gains under section 2B.
(2)
In this section—
“EEA UCITS” has the same meaning as in Part 17 of the
Financial Services and Markets Act 2000 (see section 237 of
that Act);
35
“unit trust scheme” has same meaning as in that Part (see
section 237(1) of that Act);
“open-ended investment company” has the same meaning as in
that Part (see section 236(1) of that Act).”
11    (1)
Section 161 (appropriations to and from stock) is amended as follows.
40
      (2)
In subsection (1) for “subsection (3)” substitute “subsections (3) to (3ZB)”.

Finance Bill
Schedule 25 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
361

      (3)
After subsection (3) insert—
“(3ZA)
But if the person—
(a)
meets the requirement of paragraph (a) or (b) of subsection
(3), and
(b)
(ignoring any election under this section) would be treated
5
under subsection (1) as making a relevant high value disposal
on which an ATED-related gain chargeable to, or loss
allowable for the purposes of, capital gains tax under section
2B would accrue,

the person may not elect under subsection (3) but may elect for
10
subsection (3ZB) to apply.
(3ZB)
Subject to subsection (4), where an election is made for this
subsection to apply—
(a)
a gain or loss accruing on the disposal under subsection (1)
which is not ATED-related is not a chargeable gain or an
15
allowable loss,
(b)
the market value of the asset at the time of the appropriation
is, for the purposes of computing the profits of the trade for
the purposes of tax, to be treated as reduced by the amount of
any gain, or increased by the amount of any loss, which
20
would be a chargeable gain or allowable loss but for
paragraph (a), and
(c)
the chargeable gain or allowable loss which accrues on that
disposal and is ATED-related is unaffected by the election.”
      (4)
In subsection (3A), after “subsection (3)” insert “or (3ZA)”.
25
      (5)
In subsection (4), after “subsection (3)” insert “or (3ZA)”.
12
In section 171 (transfers within a group: general provisions), in subsection
(2), after paragraph (b) insert—
“(ba)
a relevant high value disposal on which (ignoring subsection
(1)) there accrues to company A an ATED-related gain
30
chargeable to, or an ATED-related loss allowable for the
purposes of, capital gains tax by virtue of section 2B; or”.
13
After section 187 insert—
“187A
Deemed disposal under section 185: ATED-related gains and losses
(1)
This section applies if—
35
(a)
(ignoring subsections (2) and (3)) a gain or loss would accrue
to a company on a disposal of an asset deemed to have been
made by virtue of section 185(2), and
(b)
that gain or loss is an ATED-related gain chargeable to, or an
ATED-related loss allowable for the purposes of, capital
40
gains tax under section 2B.
(2)
That gain or loss does not accrue to the company on that disposal.
(3)
But, on a subsequent disposal of the whole or part of the asset, the
whole or a corresponding part of the gain or loss—
(a)
is deemed to accrue to the company (in addition to any gain
45
or loss that actually accrues on that subsequent disposal), and

Finance Bill
Schedule 25 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
362

(b)
(if that would not otherwise be the case) is to be treated as an
ATED-related gain or loss accruing on a relevant high value
disposal.
(4)
Nothing in this section affects the treatment, for the purposes of this
Act, of any gain or loss which is not ATED-related and accrues on the
5
disposal of the asset deemed to have been made by virtue of section
185(2).”
14
In section 271 (miscellaneous exemptions)—
(a)
in subsection (1A), after “registered pension scheme” insert “or an
overseas pension scheme”, and
10
(b)
in subsection (10), for the words after “above” substitute “—
“investments” includes futures contracts and options contracts;
“overseas pension scheme” has the same meaning as in Part 4 of
the Finance Act 2004 (see section 150(7) of that Act).”
15
In section 288 (interpretation), in subsection (1), at the appropriate places
15
insert—
““ATED-related”, in relation to a gain or loss, is to be construed
in accordance with section 57A and Schedule 4ZZA;”;
““relevant high value disposal” has the meaning given by
section 2C;”.
20
16
After Schedule 4 insert—
“Schedule 4ZZA
relevant high value disposals: gains and losses
Introductory
1
This Schedule applies for the purposes of determining in relation
25
to a relevant high value disposal made by a person (“P”)—
(a)
whether a gain or loss which is ATED-related accrues to P
on the disposal, and
(b)
whether a gain or loss which is not ATED-related accrues
to P on the disposal.
30
Assets held on 5 April 2013: no paragraph 5 election
2
If the interest disposed of was held by P on 5 April 2013—
(a)
paragraph 3 applies for the purposes of computing the
gain or loss accruing to P which is ATED-related, and
(b)
paragraph 4 applies for the purposes of computing the
35
gain or loss accruing to P which is not ATED-related.
3     (1)
An amount equal to the relevant fraction of the notional post-April
2013 gain or loss is the ATED-related gain or loss (as the case may
be).
      (2)
“Notional post-April 2013 gain or loss” means the gain or loss
40
which (in the absence of section 2B and this Schedule) would have
accrued on the relevant high value disposal had P acquired the
interest on 5 April 2013 for a consideration equal to its market
value on that date.

Finance Bill
Schedule 25 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
363

      (3)
For the purposes of sub-paragraph (2), the amount of the gain or
loss accruing to P is to be computed (whether or not that would
otherwise be the case) as if P were within the charge to capital
gains tax (but not within the charge to corporation tax on
chargeable gains).
5
      (4)
“The relevant fraction” is—

where—

“CD” is the number of days in the relevant ownership period
which are ATED chargeable days;

“TD” is the total number of days in the relevant ownership period.
10
      (5)
“The relevant ownership period” means the period beginning
with 6 April 2013 and ending with the day before the day on which
the relevant high value disposal occurs.
      (6)
“ATED chargeable day” means any day by virtue of which
condition C in section 2C(4) is met in relation to the relevant high
15
value disposal.
4     (1)
The gain or loss accruing on the relevant high value disposal
which is not ATED-related is computed as follows.

Step 1

Determine the amount of the notional pre-April 2013 gain or loss.
20

Step 2

In a case where there is a notional post-April 2013 gain—
     (a)
determine the amount of that gain remaining after the
deduction of the ATED-related gain determined under
paragraph 3, and
25
     (b)
adjust that remaining gain by reducing it by the notional
indexation allowance.

Step 3

In a case where there is a notional post-April 2013 loss, determine
the amount of that loss remaining after deduction of the ATED-
30
related loss determined under paragraph 3.

Step 4

Add—
      (a)
the amount of any gain or loss determined under Step 1,
and
35
      (b)
the amount of any adjusted gain determined under Step 2
or (as the case may be) any loss determined under Step 3,

(treating any amount which is a loss as a negative amount).



If the result is a positive amount, that amount is the gain on the
40
relevant high value disposal which is not ATED-related.

If the result is a negative amount, that amount (expressed as a
positive number) is the loss on the relevant high value disposal
which is not ATED-related.
      (2)
“The notional pre-April 2013 gain or loss” means the gain or loss
45
which would have accrued on 5 April 2013 had the interest been

Finance Bill
Schedule 25 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
364

disposed of for a consideration equal to its market value on that
date.
      (3)
For the purposes of sub-paragraph (2), the amount of the gain or
loss accruing to P is to be computed (whether or not that would
otherwise be the case) as if P were within the charge to corporation
5
tax on chargeable gains (but not within the charge to capital gains
tax).
      (4)
Paragraph 3(2) and (3) (meaning of “notional post-April 2013 gain
or loss”) also applies for the purposes of this paragraph.
      (5)
“Notional indexation allowance” means the relevant fraction of an
10
amount equal to the difference between—
(a)
the indexation allowance which (in the absence of section
2B and this Schedule) would be made under Chapter 4 of
Part 2 in determining the gain accruing on the relevant
high value disposal were that gain being computed for
15
corporation tax purposes, and
(b)
the indexation allowance which is made under Chapter 4
of Part 2 in determining the notional pre-April 2013 gain.
      (6)
“The relevant fraction” is—

where “CD” and “TD” have the same meaning as in paragraph
20
3(4).
Election for paragraph 2 to 4 not to apply to a chargeable interest
5     (1)
A person may make an election under this paragraph for
paragraphs 2 to 4 not to apply in relation to a chargeable interest
held by (or any part of which is held by) the person on 5 April
25
2013.
      (2)
An election is irrevocable.
      (3)
An election must be made by being included in a tax return under
the Management Act for the tax year in which the first relevant
high value disposal by the person of the chargeable interest (or
30
any part of it) on or after 6 April 2013 occurs.
      (4)
The reference in sub-paragraph (3) to an election being included in
a return includes an election being included by virtue of an
amendment of the return.
      (5)
All such adjustments are to be made, whether by way of discharge
35
or repayment of tax, the making of assessments or otherwise, as
are required to give effect to an election.
      (6)
In this paragraph “chargeable interest” has the same meaning as in
Part 3 of the Finance Act 2013 (annual tax on enveloped dwellings)
(see section 107 of that Act).
40
Cases where election made or assets acquired after 5 April 2013
6     (1)
This paragraph applies if—

Finance Bill
Schedule 25 — Charge on certain high value disposals by companies etc
Part 1 — Taxation of Chargeable Gains Act 1992
365

(a)
an election is made by P under paragraph 5 in respect of
the chargeable interest which (or a part of which) is the
subject of the relevant high value disposal, or
(b)
the chargeable interest (or part) disposed of by the relevant
high value disposal was not held by P throughout the
5
period beginning with 5 April 2013 and ending with the
disposal.
      (2)
The ATED-related gain or loss accruing on the relevant high value
disposal is computed as follows.

Step 1
10

Determine the amount of the gain or loss which would accrue to
P, ignoring section 2B and this Schedule (but not the remainder of
this Step).

For this purpose, the amount of the gain or loss is to be computed
(whether or not that would otherwise be the case) as if P were
15
within the charge to capital gains tax (but not within the charge to
corporation tax on chargeable gains).

Step 2

An amount equal to the relevant fraction of that gain or loss is the
ATED-related gain or loss accruing on the relevant high value
20
disposal.
      (3)
The gain or loss accruing on the relevant high value disposal
which is not ATED-related is to be computed as follows.

Step 1

In a case where there is a gain under Step 1 of sub-paragraph (2)—
25
     (a)
determine the amount of the gain remaining after the
deduction of the ATED-related gain, and
     (b)
adjust the remaining gain by reducing it by an amount
equal to the notional indexation allowance.

That adjusted gain is the gain accruing on the relevant high value
30
disposal which is not ATED-related.

Step 2

In a case where there is a loss under Step 1 of sub-paragraph (2),
determine the amount of the loss remaining after deduction of the
ATED-related loss.
35

That remaining loss is the loss accruing on the relevant high value
disposal which is not ATED-related.
      (4)
“Notional indexation allowance” means the relevant fraction of
the indexation allowance which would be made under Chapter 4
of Part 2 in determining the gain under Step 1 in sub-paragraph (2)
40
were that gain being computed for corporation tax purposes.
      (5)
Subject to sub-paragraph (6), “the relevant fraction”—
(a)
in sub-paragraph (2) has the same meaning as in
paragraph 3(4), and
(b)
in sub-paragraph (4) has the same meaning as in
45
paragraph 4(6).
      (6)
For the purpose of determining the relevant fraction under sub-
paragraph (5), paragraph 3(5) has effect as if the relevant

Finance Bill
Schedule 25 — Charge on certain high value disposals by companies etc
Part 3 — Commencement
366

ownership period began on the day on which P acquired the
interest or, if later, 31 March 1982.
Adjustments of ATED chargeable days
7     (1)
This paragraph applies where, as a result of a claim under section
106(3) of the Finance Act 2013 (adjustment of chargeable amount),
5
or an amendment of or adjustment to such a claim, there is an
alteration in the number of ATED chargeable days.
      (2)
All such adjustments are to be made, whether by way of discharge
or repayment of tax, the making of assessments or otherwise, as
are required to give effect to any change in liability to tax as a
10
result of that alteration.”
17
In Schedule 7A (restriction on set-off of pre-entry losses), after paragraph 10
insert—
“10A
Section 161(3ZB)(a) and (b) does not apply to a loss if, in the
absence of an election under section 161(3ZA), the loss would have
15
been a pre-entry loss.”
Part 2
Other amendments
Corporation Tax Act 2009
18
In section 2 of CTA 2009 (charge to corporation tax), after subsection (2)
20
insert—
“(2A)
But in subsection (2) “chargeable gains” does not include gains
chargeable to capital gains tax under section 2B of TCGA 1992
(companies etc chargeable to capital gains tax on ATED-related gains
on relevant high value disposals).”
25
Corporation Tax Act 2010
19    (1)
Section 32 of CTA 2010 (meaning of “augmented profits”) is amended as
follows.
      (2)
In subsection (1), in paragraph (a) after “company’s” insert “adjusted”.
      (3)
After that subsection insert—
30
“(1A)
A company’s “adjusted taxable total profits” of a period are what
would have been the company’s taxable total profits of the period in
the absence of sections 1(2A), 2B and 8(4A) of TCGA 1992 and section
2(2A) of CTA 2009 (certain gains on relevant high value disposals by
companies etc chargeable to capital gains tax not corporation tax).”
35
Part 3
Commencement
20
The amendments made by this Schedule have effect in relation to disposals
occurring on or after 6 April 2013.