10Part 6 Transitional provisions

Interpretation

19 (1) In this Part of this Schedule “the transition period”, in relation to a company
or partnership, means the accounting period of the company or partnership
15that begins, or is treated by section 5(6) as beginning, on the commencement
day.

(2) In sub-paragraph (1) “the commencement day” has the meaning given by
section 5(4).

Plant and machinery allowances: allocation of unrelieved expenditure to pools

20 (1) 20This paragraph applies to a company or partnership if—

(a) in the case of a company, the company is a NIRE company or
Northern Ireland SME company in the transition period, or

(b) in the case of a partnership, the partnership is a Northern Ireland
Chapter 6 firm or a Northern Ireland Chapter 7 firm in the transition
25period.

(2) If at the beginning of the transition period—

(a) an NI rate activity carried on by the company begins to be treated by
section 15(2ZA) of CAA 2001 as a separate qualifying activity for the
purposes of Part 2 of that Act (plant and machinery allowances), or

(b) 30an NI rate activity carried on by the partnership begins to be treated
by section 15(2ZB) of CAA 2001 as a separate qualifying activity for
the purposes of Part 2 of that Act so far as relating to the corporate
partner calculation,

the fact that the NI rate activity begins to be so treated does not give rise to
35a disposal event within section 61(1)(e) or (f) of that Act.

(3) The amount of any unrelieved qualifying expenditure in any main pool
falling to be carried forward under section 59 of CAA 2001 to the transition
period is to be apportioned on a just and reasonable basis to become—

(a) a main pool that is to be treated as relating to plant and machinery
40used for the purposes of the NI rate activity, and

(b) a main pool that is to be treated as relating to plant and machinery
used for the purposes of the main rate activity.

(4) The amount of any unrelieved qualifying expenditure in any special rate
pool falling to be carried forward under section 59 of CAA 2001 to the
transition period is to be apportioned on a just and reasonable basis to
become—

(a) 5a special rate pool that is to be treated as relating to plant and
machinery used for the purposes of the NI rate activity, and

(b) a special rate pool that is to be treated as relating to plant and
machinery used for the purposes of the main rate activity.

(5) Sub-paragraph (6) applies where—

(a) 10unrelieved qualifying expenditure in a single asset pool falls to be
carried forward under section 59 of CAA 2001 to the transition
period, and

(b) immediately before the transition period the plant or machinery is
used—

(i) 15partly for the purposes of activities that become the NI rate
activity, and

(ii) partly for the purposes of activities that become the main rate
activity.

(6) The unrelieved qualifying expenditure is to be treated for the purposes of
20Chapter 16ZA of Part 2 of CAA 2001 as if the allocation to the single asset
pool were under section 212ZB of that Act.

(7) “Main rate activity” means the qualifying activity to which the qualifying
expenditure relates, except so far as it is an NI rate activity.

(8) Other expressions used in this paragraph and in Part 2 of CAA 2001 as
25amended by this Schedule have the same meaning as in that Part.

Know-how allowances: allocation of unrelieved expenditure to pools

21 (1) This paragraph applies if—

(a) in the case of a company, the company is a NIRE company or a
Northern Ireland SME company in the transition period, or

(b) 30in the case of a partnership, the company is a Northern Ireland firm
in the transition period.

(2) Subsection (3) applies if at the beginning of the transition period—

(a) an NI rate activity carried on by the company begins to be treated by
section 6D of CAA 2001 as a separate qualifying trade for the
35purposes of Part 7 of that Act (know-how allowances), or

(b) an NI rate activity carried on by the partnership begins to be treated
by section 6D of CAA 2001 as a separate qualifying trade for the
purposes of Part 7 of that Act so far as relating to the corporate
partner calculation.

(3) 40The amount of any unrelieved qualifying expenditure in any pool falling to
be carried forward under section 461 of CAA 2001 from the previous
chargeable period is to be apportioned on a just and reasonable basis to
become—

(a) a pool that is to be treated as relating to the NI rate activity, and

(b) 45a pool that is to be treated as relating to the main rate activity.

(4) “Main rate activity” means the trade to which the qualifying expenditure
relates, except so far as it is an NI rate activity.

(5) Other expressions used in this paragraph and in Part 7 of CAA 2001 as
amended by this Schedule have the same meaning as in that Part.

Section 3

5SCHEDULE 2 Other amendments

Part 1 Further amendments connected with Northern Ireland rate

Realisation of intangible fixed assets

1 10After section 738 of CTA 2009 insert—

“738A Realisation of assets previously subject to Northern Ireland rate

(1) This section applies if—

(a) a company is required by section 735, 736 or 738 to bring into
account for tax purposes a credit or debit on the realisation of
15an intangible fixed asset in an accounting period (“the
relevant period”),

(b) the company is not a Northern Ireland company as defined
by section 357KA of CTA 2010 in the relevant period,

(c) the asset is not a pre-commencement asset for the purposes of
20Chapter 8 of Part 8B of CTA 2010 (trading profits taxable at
the Northern Ireland rate: intangible fixed assets),

(d) the credit or debit is treated for the purposes of that Chapter
as including a Northern Ireland element, and

(e) at any time during the relevant period, the Northern Ireland
25rate is lower than the main rate.

(2) The amount of the credit or debit to be brought into account for tax
purposes under section 735, 736 or 738 is reduced by an amount
determined under this section (“the appropriate reduction”).

(3) If the relevant period falls within only one financial year, the
30appropriate reduction is—

(4) If the relevant period falls within more than one financial year, take
the following steps to find the appropriate reduction—

Step 1

Apportion the Northern Ireland element of the credit or debit (see
subsection (5)) between the financial years on a time basis according
to the respective lengths of the parts of the relevant period falling
5within those years.

Step 2

Where an amount is apportioned under step 1 to a financial year in
which the Northern Ireland rate is lower than the main rate, multiply
that amount by the following fraction—

10

Step 3

15To find the appropriate reduction, add together each amount
determined under step 2.

(5) In subsections (3) and (4), the “Northern Ireland element” of the
credit or debit is an amount determined in accordance with sections
357OE to 357OG of CTA 2010.”

20Controlled foreign companies

2 (1) Section 371BC of TIOPA 2010 (charging the CFC charge) is amended as
follows.

(2) In subsection (3), in the definition of “the appropriate rate”, after “subject to”
insert “subsection (4) and”.

(3) 25After subsection (3) insert—

“(4) In determining “the appropriate rate”, it must be assumed that all of
CC’s profits of the relevant corporation tax accounting period on
which corporation tax is chargeable are chargeable at the main rate
rather than the Northern Ireland rate.”

3 (1) 30Section 371UD of TIOPA 2010 (relief against sum charged) is amended as
follows.

(2) After subsection (4) insert—

“(4A) But if, in a case within subsection (7)(b)(i) or (vi), the relevant
allowance is a loss that is for the purposes of Part 8B of CTA 2010
35(trading profits taxable at the Northern Ireland rate) a Northern
Ireland loss, “the relevant sum” is the sum equal to the appropriate
Northern Ireland rate on so much of that relevant allowance as is
specified in the claim.”

(3) In subsection (7), before the “and” at the end of paragraph (a) insert—

“(aa) 40the appropriate Northern Ireland rate” means—

(i) the Northern Ireland rate of corporation tax for the
relevant corporation tax accounting period, or

(ii) if different Northern Ireland rates apply in different
parts of the relevant corporation tax accounting
45period, the average rate over the whole of the relevant
corporation tax accounting period,”.

Part 2 Consequential amendments

4 CTA 2010 is amended as follows.

5 In section 1(3) (overview), before paragraph (b) insert—

“(ac) 5trading profits taxable at Northern Ireland rate (see Part
8B),”.

6 In Schedule 4 (index of defined expressions), insert at the appropriate
places—