Finance Bill

House of Lords

Session 2013 - 14
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Other Bills before Parliament

Finance Bill

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
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77
Manufactured payments: general
Schedule 29 contains provision for, and in connection with, the application of
the Tax Acts to manufactured payment relationships and payments
representative of dividends and interest.
78
Relationship between rules prohibiting and allowing deductions
5
(1)
In section 31 of ITTOIA 2005 (trade profits: relationship between rules
prohibiting and allowing deductions)—
(a)
after subsection (1) insert—
“(1A)
But, if the relevant permissive rule would allow a deduction in
calculating the profits of a trade in respect of an amount which
10
arises directly or indirectly in consequence of, or otherwise in
connection with, relevant tax avoidance arrangements, that
rule—
(a)
does not have priority under subsection (1)(a), and
(b)
is subject to any relevant prohibitive rule in this Part
15
(and to the provisions mentioned in subsection (1)(b)).”,
and
(b)
after subsection (3) insert—
“(4)
In this section “relevant tax avoidance arrangements” means
arrangements—
20
(a)
to which the person carrying on the trade is a party, and
(b)
the main purpose, or one of the main purposes, of which
is the obtaining of a tax advantage (within the meaning
of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding,
25
scheme, transaction or series of transactions (whether or not
legally enforceable).”
(2)
In section 274 of ITTOIA 2005 (property businesses: relationship between rules
prohibiting and allowing deductions)—
(a)
after subsection (1) insert—
30
“(1A)
But, if the relevant permissive rule would allow a deduction in
calculating the profits of a property business in respect of an
amount which arises directly or indirectly in consequence of, or
otherwise in connection with, relevant tax avoidance
arrangements, that rule—
35
(a)
does not have priority under subsection (1)(a), and
(b)
is subject to any relevant prohibitive rule in this Part
(and to the provisions mentioned in subsection (1)(b)).”,
and
(b)
after subsection (3) insert—
40
“(3A)
In this section “relevant tax avoidance arrangements” means
arrangements—
(a)
to which the person carrying on the property business is
a party, and
(b)
the main purpose, or one of the main purposes, of which
45
is the obtaining of a tax advantage (within the meaning
of section 1139 of CTA 2010).

Finance Bill
Part 1 — Income Tax, Corporation Tax and Capital Gains Tax
Chapter 5 — Other provisions
41


“Arrangements” includes any agreement, understanding,
scheme, transaction or series of transactions (whether or not
legally enforceable).”
(3)
In section 51 of CTA 2009 (trade profits: relationship between rules prohibiting
and allowing deductions)—
5
(a)
after subsection (1) insert—
“(1A)
But, if the relevant permissive rule would allow a deduction in
calculating the profits of a trade in respect of an amount which
arises directly or indirectly in consequence of, or otherwise in
connection with, relevant tax avoidance arrangements, that
10
rule—
(a)
does not have priority under subsection (1)(a), and
(b)
is subject to any relevant prohibitive rule (and to the
provisions mentioned in subsection (1)(b)).”, and
(b)
after subsection (3) insert—
15
“(4)
In this section “relevant tax avoidance arrangements” means
arrangements—
(a)
to which the company carrying on the trade is a party,
and
(b)
the main purpose, or one of the main purposes, of which
20
is the obtaining of a tax advantage (within the meaning
of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding,
scheme, transaction or series of transactions (whether or not
legally enforceable).”
25
(4)
In section 214 of CTA 2009 (property businesses: relationship between rules
prohibiting and allowing deductions)—
(a)
after subsection (1) insert—
“(1A)
But, if the relevant permissive rule would allow a deduction in
calculating the profits of a property business in respect of an
30
amount which arises directly or indirectly in consequence of, or
otherwise in connection with, relevant tax avoidance
arrangements, that rule—
(a)
does not have priority under subsection (1)(a), and
(b)
is subject to any relevant prohibitive rule (and to the
35
provisions mentioned in subsection (1)(b)).”, and
(b)
after subsection (3) insert—
“(3A)
In this section “relevant tax avoidance arrangements” means
arrangements—
(a)
to which the company carrying on the property business
40
is a party, and
(b)
the main purpose, or one of the main purposes, of which
is the obtaining of a tax advantage (within the meaning
of section 1139 of CTA 2010).

“Arrangements” includes any agreement, understanding,
45
scheme, transaction or series of transactions (whether or not
legally enforceable).”

Finance Bill
Part 2 — Oil
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(5)
The amendments made by this section have effect in relation to deductions in
respect of amounts which arise directly or indirectly in consequence of, or
otherwise in connection with—
(a)
arrangements which are entered into on or after 21 December 2012, or
(b)
any transaction forming part of arrangements which is entered into on
5
or after that date.
(6)
But those amendments do not have effect where the arrangements are, or any
such transaction is, entered into pursuant to an unconditional obligation in a
contract made before that date.
(7)
“An unconditional obligation” means an obligation which may not be varied
10
or extinguished by the exercise of a right (whether under the contract or
otherwise).
79
Close companies
Schedule 30 (which makes provision about close companies) has effect.
Part 2
15
Oil
Decommissioning relief agreements
80
Decommissioning relief agreements
(1)
There are to be paid out of money provided by Parliament any sums which a
Minister of the Crown is liable to pay under a decommissioning relief
20
agreement.
(2)
A “decommissioning relief agreement” is an agreement which—
(a)
is made between a Minister of the Crown and a qualifying company,
and
(b)
provides that, in such circumstances as are specified in the agreement,
25
if the amount of tax relief in respect of any decommissioning
expenditure incurred by that or another qualifying company is less
than an amount determined in accordance with the agreement (“the
reference amount”), the difference is payable to the company that
incurred the expenditure.
30
(3)
“Qualifying company” means—
(a)
any company that has at any time carried on a ring fence trade,
(b)
any company that is associated with a company carrying on a ring fence
trade,
(c)
any company that has at any time been associated with a company that
35
was carrying on a ring fence trade at that time, and
(d)
in the case of decommissioning expenditure incurred in connection
with any plant or machinery, or any land, situated in the UK sector of a
cross-boundary field, any company that is a party to a joint operating
agreement or unitisation agreement in relation to that field.
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(4)
For the purposes of subsection (2)(b) the amount of tax relief in respect of any
decommissioning expenditure is to be determined in accordance with the
agreement; and in making such a determination tax relief in respect of

Finance Bill
Part 2 — Oil
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expenditure incurred by the qualifying company that is not decommissioning
expenditure may, in such circumstances as are specified in the agreement, be
treated as if it were tax relief in respect of decommissioning expenditure.
(5)
A payment made to a company under a decommissioning relief agreement is
not to be regarded as income or a gain of the company for any purpose of the
5
Tax Acts.
(6)
Section 18(1) of CRCA 2005 (restriction on disclosure by Revenue and Customs
officials) does not prevent—
(a)
disclosure to a Minister of the Crown for the purpose of enabling the
Minister of the Crown to determine the extent of any liability under a
10
decommissioning relief agreement, or
(b)
disclosure to a company that has rights under a decommissioning relief
agreement for the purpose of enabling the company to determine the
reference amount.
(7)
In this section—
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“company” has the meaning given by section 1121 of CTA 2010,
“cross-boundary field” has the meaning given by section 10(9) of the
Petroleum Act 1998,
“decommissioning expenditure” has the meaning given by section 81,
“Minister of the Crown” includes the Treasury,
20
“ring fence trade” has the same meaning as in Part 8 of CTA 2010 (see
section 277 of that Act),
“the UK sector of a cross-boundary field” means that part of a cross-
boundary field lying within the UK marine area (as defined by section
42 of the Marine and Coastal Access Act 2009), and
25
“unitisation agreement” has the meaning given by paragraph 1(2) of
Schedule 17 to FA 1980.
(8)
Subsections (8) to (9) of section 30 of the Petroleum Act 1998 (which specifies
when one body corporate is associated with another) apply for the purposes of
this section as they apply for the purposes of that section.
30
81
Meaning of “decommissioning expenditure”
(1)
In section 80 “decommissioning expenditure” means expenditure incurred in
connection with—
(a)
demolishing any plant or machinery,
(b)
preserving any plant or machinery pending its reuse or demolition,
35
(c)
preparing any plant or machinery for reuse,
(d)
arranging for the reuse of any plant or machinery, or
(e)
the restoration of any land.
(2)
It is immaterial for the purposes of subsection (1)(b) whether the plant or
machinery is reused, is demolished or is partly reused and partly demolished.
40
(3)
It is immaterial for the purposes of subsection (1)(c) and (d) whether the plant
or machinery is in fact reused.
(4)
In subsection (1)(e) “restoration” includes landscaping.
(5)
The Treasury may by order amend this section.
(6)
An order under subsection (5) may include transitional provision and savings.
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Part 2 — Oil
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(7)
The power to make an order under subsection (5) is exercisable by statutory
instrument.
(8)
A statutory instrument containing an order under subsection (5) is subject to
annulment in pursuance of a resolution of the House of Commons.
82
Annual report
5
(1)
For each financial year the Treasury must prepare a report containing the
information in subsection (2).
(2)
The information is—
(a)
the number of decommissioning relief agreements entered into in that
year,
10
(b)
the total number of decommissioning relief agreements in force at the
end of that year,
(c)
the number of payments made under any decommissioning relief
agreements during that year, and the amount of each payment,
(d)
the total number of payments that have been made under any
15
decommissioning relief agreements as at the end of that year, and the
total amount of those payments, and
(e)
an estimate of the maximum amount liable to be paid under any
decommissioning relief agreements.
(3)
The report for a financial year must be laid before the House of Commons as
20
soon as is reasonably practicable after the end of that year.
(4)
In this section “decommissioning relief agreement” has the same meaning as in
section 80.
(5)
This section has effect in relation to financial years ending on or after 31 March
2014.
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83
Effect of claim on PRT
(1)
This section applies where a sum is payable to a company (“the claimant”)
under a decommissioning relief agreement.
(2)
Subsection (3) applies where the reference amount is calculated by reference to
what the claimant’s assessable profit in any chargeable period would be if any
30
expenditure incurred by it were used to reduce its profit in a particular way
(rather than in any way that it has in fact been used).
(3)
For the purposes of petroleum revenue tax—
(a)
the expenditure is treated as having been used to reduce the claimant’s
profit in that way (rather than in any way that it has in fact been used),
35
and
(b)
the claimant is treated as if it had received the tax relief it would receive
if its profit were reduced in that way (so no repayment of tax is to be
made by virtue of this subsection).
(4)
Subsection (5) applies where the reference amount is calculated by reference to
40
what any other company’s assessable profit in any chargeable period would be
if any expenditure incurred by the claimant—
(a)
had been incurred by the other company, and
(b)
were used to reduce the other company’s profit in a particular way.

Finance Bill
Part 2 — Oil
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(5)
For the purposes of petroleum revenue tax—
(a)
the expenditure is treated as incurred by the other company (and not
the claimant),
(b)
the expenditure is treated as having been used by the other company to
reduce its profit in that way, and
5
(c)
the other company is treated as if it had received the tax relief it would
receive if its profit were reduced in that way (so no repayment of tax is
to be made by virtue of this subsection).
(6)
In this section—
“assessable profit” and “chargeable period” have the same meaning as in
10
Part 1 of OTA 1975,
“company” has the meaning given by section 1121 of CTA 2010,
“decommissioning relief agreement” has the same meaning as in section
80, and
“the reference amount” means the reference amount (within the meaning
15
of that section) that relates to the sum mentioned in subsection (1).
84
Terminal losses accruing by virtue of another’s default
(1)
This section applies where—
(a)
a company defaults on a liability under—
(i)
a relevant agreement, or
20
(ii)
an abandonment programme,

to make a payment towards decommissioning expenditure in respect
of an oil field,
(b)
in consequence of the default, another company (“the other company”)
that has rights under a decommissioning relief agreement at the time of
25
the default incurs decommissioning expenditure in respect of that oil
field, and
(c)
but for paragraph 15 of Schedule 17 to FA 1980 (terminal losses), a sum
(or a sum of a greater amount) would be payable to the other company
under the decommissioning relief agreement.
30
(2)
Paragraph 15 of Schedule 17 to FA 1980 does not apply in relation to any
allowable loss accruing to the other company from that oil field.
(3)
Any allowable unrelievable field loss (within the meaning of section 6 of OTA
1975) that—
(a)
consists of the unrelieved portion of an allowable loss within
35
subsection (2), and
(b)
would (in the absence of this subsection) arise as a result of subsection
(2),

is not to be regarded as arising.
(4)
Nothing in this section affects the operation of section 83(3) or (5).
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(5)
In this section—
“abandonment programme” means an abandonment programme
approved under Part 4 of the Petroleum Act 1998 (including such a
programme as revised),
“company” has the meaning given by section 1121 of CTA 2010,
45
“decommissioning expenditure” has the same meaning as in section 80,

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Part 2 — Oil
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“decommissioning relief agreement” has the same meaning as in that
section,
“oil field” has the same meaning as in OTA 1975,
“relevant agreement” has the meaning given by section 104(5)(a) of FA
1991, and
5
“unrelieved portion”, in relation to an allowable loss, is to be read in
accordance with section 6 of OTA 1975.
85
Claims under agreement not to affect oil allowance
(1)
This section applies where—
(a)
a company defaults on a liability under—
10
(i)
a relevant agreement, or
(ii)
an abandonment programme,

to make a payment towards decommissioning expenditure in respect
of an oil field,
(b)
in consequence of the default, another company that has rights under a
15
decommissioning relief agreement at the time of the default incurs
decommissioning expenditure in respect of that oil field, and
(c)
by virtue of section 83, any expenditure incurred by that company
(whether or not that decommissioning expenditure) is treated as
having been used by that company or any other company (“the affected
20
company”) to reduce its assessable profit in a chargeable period in a
particular way.
(2)
If, in the absence of section 83, the assessable profit accruing to the affected
company from an oil field in that chargeable period would be reduced under
section 8(1) of OTA 1975, the amount of the oil allowance for the oil field
25
utilised by the affected company in that chargeable period for the purposes of
section 8 of that Act is to be determined as if section 83 did not apply.
(3)
In this section—
“abandonment programme” means an abandonment programme
approved under Part 4 of the Petroleum Act 1998 (including such a
30
programme as revised),
“company” has the meaning given by section 1121 of CTA 2010,
“decommissioning expenditure” has the same meaning as in section 80,
“decommissioning relief agreement” has the same meaning as in that
section,
35
“oil field” has the same meaning as in OTA 1975, and
“relevant agreement” has the meaning given by section 104(5)(a) of FA
1991.
Decommissioning security settlements
86
Removal of IHT charges in respect of decommissioning security settlements
40
(1)
In Chapter 3 of Part 3 of IHTA 1984 (settled property: settlements without
interests in possession etc), section 58 (relevant property) is amended as
follows.
(2)
In subsection (1), omit the “and” at the end of paragraph (ea) and before