Corporation Tax (Northern Ireland) Bill (HL Bill 100)

“Northern Ireland Chapter 7 firm” for any purpose for which that
section applies.

6C “NI rate activity”

(1) In this Act “NI rate activity” means—

(a) 5a qualifying trade carried on by a Northern Ireland SME
company, except to the extent that it is an excluded activity,

(b) a qualifying trade, other than an excluded financial trade,
carried on by a NIRE company, to the extent that the trade—

(i) is carried on through a Northern Ireland regional
10establishment of the company, and

(ii) does not consist of an excluded activity,

(c) the back-office activities of an excluded financial trade
carried on by a Northern Ireland SME company which has
made an election for the purposes of section 357KB(2) of CTA
152010,

(d) the back-office activities of an excluded financial trade
carried on by a NIRE company which has made an election
for the purposes of section 357KB(2) of CTA 2010 to the extent
that those activities are carried on through the Northern
20Ireland regional establishment of the company,

(e) a qualifying partnership trade carried on by a Northern
Ireland Chapter 6 firm, except to the extent that it is an
excluded activity,

(f) a qualifying partnership trade, other than an excluded
25financial trade, carried on by a Northern Ireland Chapter 7
firm, to the extent that the trade—

(i) is carried on through a Northern Ireland regional
establishment of the partnership, and

(ii) does not consist of an excluded activity,

(g) 30the back-office activities of an excluded financial trade
carried on by a Northern Ireland Chapter 6 firm which has
made an election for the purposes of section 357WB(2) of
CTA 2010, or

(h) the back-office activities of an excluded financial trade
35carried on by a Northern Ireland Chapter 7 firm which has
made an election for the purposes of section 357WB(2) of
CTA 2010, to the extent that those activities are carried on
through the Northern Ireland regional establishment of the
partnership.

(2) 40In subsection (1)—

• “back-office activities” has the same meaning as in Part 8B of
  CTA 2010 (see section 357XI of that Act);

• “excluded financial trade” means a trade that is an excluded
  trade for the purposes of Part 8B of CTA 2010 merely because
  45it falls within one or more of the following provisions of that
  Act—

  (a)

  section 357XB (lending and investment),

  (b)

  section 357XC (investment management), or

  (c)

  section 357XE (re-insurance trade);

Corporation Tax (Northern Ireland) BillPage 71

• “Northern Ireland regional establishment” has the same
  meaning as in Part 8B of CTA 2010 (see Chapter 5 of that Part
  as read, in relation to a partnership, with section 357WA(4) of
  that Act);

• 5“qualifying partnership trade” has the same meaning as in Part
  8B of CTA 2010 (see section 357WB of that Act);

• “qualifying trade” has the same meaning as in Part 8B of CTA
  2010 (see section 357KB of that Act).

6D NI rate activity treated as separate trade

(1) 10For the purposes of this Act, the NI rate activity carried on by a
Northern Ireland SME company or a NIRE company is to be treated
as a separate trade, distinct from any other activities carried on by the
company as part of the trade.

(2) For the purposes of the corporate partner calculation, the NI rate
15activity carried on by a Northern Ireland firm is to be treated as a
separate trade, distinct from any other activities carried on by the
firm as part of the trade.

(3) In this Act “the corporate partner calculation”, in relation to a trade
carried on by a Northern Ireland firm, means the determination of
20the allowances and charges to which effect is to be given under this
Act in determining under subsection (3) or (4) of section 1259 of CTA
2009 (calculation of firm’s profits and losses) the amount of the
profits of the trade chargeable to corporation tax.

6E Giving effect to allowances and charges: NI rate activity cases

(1) 25This section applies if a Northern Ireland SME company or a NIRE
company is entitled or liable to—

(a) an allowance or charge under Part 2 (plant and machinery
allowances) where the qualifying activity is a trade,

(b) an allowance or charge under Part 3A (business premises
30renovation allowances),

(c) an allowance or charge under Part 5 (mineral extraction
allowances),

(d) an allowance or charge under Part 6 (research and
development), or

(e) 35an allowance under Part 9 (dredging allowances).

(2) For the purposes of the corporate partner calculation, this section
also applies if a Northern Ireland firm is entitled or liable to an
allowance or charge falling within any of subsection (1)(a) to (e).

(3) The allowance or charge is to be given effect in calculating the profits
40of the trade, by treating—

(a) the allowance as an expense of the trade, and

(b) the charge as a receipt of the trade.

(4) If the allowance or charge relates to an NI rate activity, it is treated
for the purposes of Part 8B of CTA 2010 (trading profits taxable at the
45Northern Ireland rate) as forming part of the Northern Ireland
profits or Northern Ireland losses of the trade.

(5) If the allowance or charge relates to a main rate activity, it is treated
for the purposes of Part 8B of CTA 2010 as forming part of the
mainstream profits or mainstream losses of the trade.

(6) In this section—

(a) 5“the trade” means the trade carried on by the company or
partnership (disregarding for this purpose section 6D), and

(b) “main rate activity” means so much of the trade as is not an
NI rate activity.”

Part 3 10Amendments of Part 2 of CAA 2001: plant and machinery allowances

3 (1) Section 12 (expenditure incurred before qualifying activity carried on) is
amended as follows.

(2) The existing provision becomes subsection (1) of the section.

(3) After that subsection insert—

“(2) 15Subsection (3) applies if—

(a) a company that does not have a Northern Ireland regional
establishment incurs expenditure for the purposes of a trade,

(b) the activities for the purposes of which the expenditure is
incurred would, if the company were a NIRE company, be an
20NI rate activity treated as a separate trade, and

(c) the company subsequently becomes a NIRE company.

(3) The expenditure is to be treated as incurred on the first day of the
first chargeable period in which the company is a NIRE company.

(4) Subsection (5) applies if—

(a) 25a partnership that does not have a Northern Ireland regional
establishment incurs expenditure for the purpose of a trade,

(b) the activities for the purposes of which the expenditure is
incurred would, if the partnership were a Northern Ireland
Chapter 7 firm, be an NI rate activity treated as a separate
30trade, and

(c) the partnership subsequently becomes a Northern Ireland
Chapter 7 firm.

(5) The expenditure is to be treated for the purposes of this Part so far as
relating to the corporate partner calculation as incurred on the first
35day of the first chargeable period in which the partnership is a
Northern Ireland Chapter 7 firm.

(6) In this section “Northern Ireland regional establishment” has the
same meaning as in Part 8B of CTA 2010 (see Chapter 5 of that Part
as read, in relation to a partnership, with section 357WA(4) of that
40Act).”

4 In section 15 (qualifying activities), after subsection (2) insert—

“(2ZA) Where an activity of a company is treated by subsection (1) of section
6D (NI rate activity treated as separate trade) as a separate trade, that

activity is an activity separate from any other activity of the
company.

(2ZB) Where an activity of a Northern Ireland firm is treated by subsection
(2) of section 6D as a separate trade for the purposes of the corporate
5partner calculation, that activity is for the purposes of this Part, so far
as relating to the corporate partner calculation, an activity separate
from every other activity of the Northern Ireland firm.”

5 After section 51J insert—

51JA   Sixth restriction: allocation where profits chargeable at NI rate

(1) 10This section applies if—

(a) section 51B, 51C, 51D or 51E applies, and

(b) the relevant AIA qualifying expenditure for the purposes of
the section in question includes expenditure incurred in a
low-rate year in respect of an NI rate activity.

(2) 15For the purposes of this section expenditure is “incurred in a low-rate
year” if it is incurred in a financial year for which the Northern
Ireland rate is lower than the main rate.

(3) The maximum annual investment allowance that may be allocated
under section 51B, 51C, 51D or 51E to AIA qualifying expenditure
20incurred in a low-rate year in respect of qualifying activities other
than NI rate activities is determined by the formula—

6 (1) Section 61 (disposal events and disposal values) is amended as follows.

(2) In the Table in subsection (2)—

(a) in item 1, in the first column, after “item 2” insert “or 2A”, and

(b) 35after item 2 insert—

(3) After subsection (4) insert—

“(4A) 40The condition referred to in paragraph (b) of item 2A in the Table is
met by the seller if—

(a) the seller is—

(i) a company, or

(ii) a partnership whose partners include one or more
45companies, and

(b) before the sale the plant or machinery is used wholly or
partly for the purposes of a qualifying activity that is not an
NI rate activity.

(4B) The condition referred to in paragraph (c) of item 2A in the Table is
50met by the buyer if—

(a) the buyer is a Northern Ireland SME company, a NIRE
company or a Northern Ireland firm in the chargeable period
of the buyer in which the plant or machinery is bought,

(b) the buyer’s expenditure on the acquisition of the plant or
55machinery is qualifying expenditure under this Part or Part 6
(research and development allowances), and

(c) the plant or machinery is used by the buyer wholly or partly
for the purposes of an NI rate activity.”

7 After section 66A insert—

60“Effect of changes in Northern Ireland status of SME company or SME partnership

66B SME company entering NI corporation tax regime

(1) This section applies if—

(a) in a chargeable period beginning after the commencement
day (“the relevant period”) a company is a Northern Ireland
65SME company,

(b) the company was neither a Northern Ireland SME company
nor a NIRE company in the previous chargeable period, and

(c) the company has not become a Northern Ireland SME
company in the relevant period as a result of an election
70under section 357KB(2) of CTA 2010 (back-office activities of
financial trades).

(2) The fact that assets which continue to be used in the relevant period
for the purposes of the trade actually carried on by the company are
as a result of section 15(2ZA) treated as ceasing to be used for the
75purposes of a main rate activity and beginning to be used for the
purposes of an NI rate activity does not give rise to a disposal event
within 61(1)(e) or (f).

(3) If during the relevant period the only qualifying activity carried on
by the company is an NI rate activity, the amount of any unrelieved
80qualifying expenditure in any main pool or special rate pool falling
to be carried forward to the relevant period is to be treated as relating
to plant and machinery used for the purposes of the NI rate activity.

(4) If during the relevant period the company carries on both an NI rate
activity and a main rate activity—

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

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

(ii) a main pool that is to be treated as relating to plant
and machinery used for the purposes of the main rate
10activity, and

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

(i) 15a special rate pool that is to be treated as relating to
plant and machinery used for the purposes of the NI
rate activity, and

(ii) a special rate pool that is to be treated as relating to
plant and machinery used for the purposes of the
20main rate activity.

(5) “Main rate activity” means the company’s trade except so far as it is
an NI rate activity.

(6) “The commencement day” has the meaning given by section 5(4) of
the Corporation Tax (Northern Ireland) Act 2015.

66C 25SME partnership entering NI corporation tax regime

For the purposes of the corporate partner calculation, section 66B
applies in relation to a partnership as if—

(a) references to a company were references to a partnership,

(b) references to a Northern Ireland SME company were
30references to a Northern Ireland Chapter 6 firm,

(c) the reference to a NIRE company were a reference to a
Northern Ireland Chapter 7 firm,

(d) the reference to section 357KB(2) of CTA 2010 were a
reference to section 357WB(2) of that Act, and

(e) 35the reference to section 15(2ZA) were a reference to section
15(2ZB).

66D SME company leaving NI corporation tax regime

(1) This section applies if—

(a) in a chargeable period beginning after the commencement
40day (“the relevant period”) a company is neither a Northern
Ireland SME company nor a NIRE company,

(b) the company was a Northern Ireland SME company in the
previous chargeable period, and

(c) during the relevant period the company carries on a
45qualifying activity.

(2) The fact that assets which continue to be used in the relevant period
for the purposes of the trade actually carried on are as a result of
section 15(2ZA) treated as ceasing to be used for the purposes of an

NI rate activity and beginning to be used for the purposes of the
qualifying activity mentioned in subsection (1)(c) does not give rise
to a disposal event within 61(1)(e) or (f).

(3) Any unrelieved qualifying expenditure which—

(a) 5relates to plant or machinery used for the purposes of an NI
activity, and

(b) falls to be carried forward to the relevant period,

is to be treated as relating to the qualifying activity that the company
carries on in the relevant period.

(4) 10“The commencement day” has the meaning given by section 5(4) of
the Corporation Tax (Northern Ireland) Act 2015.

66E SME partnership leaving NI corporation tax regime

For the purposes of the corporate partner calculation, section 66D
applies in relation to a partnership as if—

(a) 15references to a company were references to a partnership,

(b) references to a Northern Ireland SME company were
references to a Northern Ireland Chapter 6 firm,

(c) the reference to a NIRE company were a reference to a
Northern Ireland Chapter 7 firm, and

(d) 20the reference to section 15(2ZA) were a reference to section
15(2ZB).”

8 After section 212 insert—

“Chapter 16ZA

Asset provided or used only partly for NI rate activity

212ZA   Apportionment of expenditure incurred partly for NI rate activity

(1) If in a chargeable period a company has incurred qualifying
25expenditure on the provision of plant or machinery—

(a) partly for the purposes of an NI rate activity, and

(b) partly for the purposes of a main rate activity,

then for the purposes of any annual investment allowance or first
year allowance to which the company is entitled the expenditure is
30to be apportioned between the NI rate activity and the main rate
activity on a basis which is just and reasonable having regard to the
relevant circumstances.

(2) The relevant circumstances include, in particular, the extent to which
it appears that the plant or machinery is likely to be used for
35purposes of the NI rate activity and the extent to which it appears
that it is likely to be used for the main rate activity.

(3) If the allowance falls to be reduced under section 205 or 210, it is the
reduced amount that is apportioned under subsection (1).

212ZB   Single asset pool etc

(1) 40Qualifying expenditure to which this subsection applies, if allocated
to a pool, must be allocated to a single asset pool.

(2) Subsection (1) applies to qualifying expenditure incurred by a
company carrying on both an NI rate activity and a main rate activity
where the expenditure is incurred—

(a) partly for the purposes of the NI rate activity, and

(b) 5partly for the purposes of the main rate activity.

(3) If a company is required to bring a disposal value into account in a
pool for a chargeable period because the plant or machinery begins
to be used for the purposes of an NI rate activity as well as for the
purposes of a main rate activity, or begins to be used for the purposes
10of a main rate activity as well as for the purposes of an NI rate
activity, an amount equal to that disposal value is allocated (as
expenditure on the plant or machinery) to a single asset pool for that
chargeable period.

(4) In the case of a single asset pool under subsection (1) or (3), there is
15no disposal event merely because the plant or machinery begins to be
used to a greater extent for the purposes of the NI rate activity or for
the purposes of the main rate activity.

212ZC   Allowances and charges on expenditure in single asset pool

(1) This section applies if a company’s expenditure is in a single asset
20pool under section 212ZB(1) or (3).

(2) The amount of—

(a) any writing-down allowance or balancing allowance to
which the company is entitled, or

(b) any balancing charge to which the company is liable,

25is to be apportioned between the NI rate activity and the main rate
activity on a basis which is just and reasonable having regard to the
relevant circumstances.

(3) The relevant circumstances include, in particular, the extent to which
it appears that the plant or machinery was used in the chargeable
30period in question for the purposes of the NI rate activity and the
extent to which it was used in the chargeable period in question for
the purposes of the main rate activity.

212ZD   Effect of significant change in balance of use

(1) This section applies if—

(a) 35expenditure is allocated to a single asset pool under this
Chapter,

(b) there is such a change of circumstances as would make it
appropriate for any apportionment falling to be made under
section 212ZC—

(i) 40for the chargeable period in which the change takes
place (“the relevant chargeable period”), or

(ii) for any subsequent chargeable period,

to be substantially different from the apportionment that
would have been appropriate apart from the change,

(c) 45no disposal value in respect of the plant and machinery
would, apart from this section, fall to be brought into account
for the relevant chargeable period, and

(d) the market value of the plant and machinery at the end of the
relevant chargeable period exceeds the available qualifying
expenditure by more than £1 million.

(2) If this section applies—

(a) 5a disposal value is required to be brought into account in the
single asset pool for the relevant chargeable period, and

(b) section 212ZA applies as if, at the beginning of the following
chargeable period, expenditure has been incurred on the
provision of the plant or machinery of an amount equal to the
10disposal value brought into account as a result of paragraph
(a).

212ZE   Application of Chapter to partnerships

For the purposes of the corporate partner calculation, this Chapter
applies in relation to partnerships as if—

(a) 15references to a company were references to a partnership,

(b) references to a Northern Ireland SME company were
references to a Northern Ireland Chapter 6 firm,

(c) references to a NIRE company were references to a Northern
Ireland Chapter 7 firm, and

(d) 20the reference in section 212ZA(1) to an annual investment
allowance were omitted.

212ZF    “Main rate activity”

In this Chapter “main rate activity” means an activity other than an
an NI rate activity.”

9 25In section 247 (giving effect to allowances and charges: trades), after
subsection (1) insert—

“(1A) Subsection (1) is subject to section 6E (giving effect to allowances and
charges: NI rate activity cases).”

10 In Schedule A1 (first year tax credits), in paragraph 2, after sub-paragraph
30(3) insert—

“(4) The Treasury may by order—

(a) amend sub-paragraph (1) so as to provide for a different
percentage to apply where the surrenderable loss relates to a
qualifying activity that is an NI rate activity, and

(b) 35substitute for any percentage for the time being specified in
sub-paragraph (1) such other percentage as the Treasury
thinks fit.”

Part 4 Amendments of CAA 2001 relating to other allowances

40Business premises renovation allowances

11 (1) Section 360Z (giving effect to allowances and charges: trades) is amended as
follows.

(2) In subsection (3), for the words from “subject to” onwards substitute “subject

to—

“(a) section 6E (giving effect to allowances and charges: NI rate
activity cases), and

(b) the following provisions of this Chapter.”

(3) 5After that subsection insert—

“(4) If a company or partnership is as a result of section 6D (NI rate
activity treated as separate trade) treated for the purposes of this Act
as carrying on two separate trades, the question of whether an
allowance or charge relates to the NI rate activity or the main rate
10activity is to be determined by reference to the purposes for which
the qualifying building is used.

(5) If the qualifying building is used both for the purposes of the NI rate
activity and for the purposes of the main rate activity, allowances
and charges are to be apportioned on a just and reasonable basis
15between the trade consisting of the NI rate activity and the trade
consisting of the main rate activity, according to the proportion of
use for the purposes of the NI rate activity.

(6) In this section “main rate activity” means an activity other than an NI
rate activity.”

20Mineral extraction allowances

12 In section 394 (mineral extraction allowances), after subsection (2) insert—

“(2A) If a company or partnership is as a result of section 6D (NI rate
activity treated as separate trade) treated for the purposes of this Act
as carrying on two separate trades, each of them is for the purposes
25of this Part to be treated as a mineral extraction trade if the separate
trades would together be so treated.”

13 (1) Section 432 (giving effect to allowances and charges) is amended as follows.

(2) The existing provision becomes subsection (1) of the section.

(3) After that subsection insert—

“(2) 30This section is subject to section 6E (giving effect to allowances and
charges: NI rate activity cases).”

Research and development

14 After section 439 insert—

439A   Qualifying expenditure incurred for purposes of NI rate activity

(1) 35Subsection (2) applies if—

(a) a company that does not have a Northern Ireland regional
establishment incurs expenditure for the purposes of a trade,

(b) the activities for the purposes of which the expenditure is
incurred would, if the company were a NIRE company, be an
40NI rate activity treated as a separate trade, and

(c) the company subsequently becomes a NIRE company.

(2) The expenditure is to be treated as incurred on the first day of the
first chargeable period in which the company is a NIRE company.

(3) Subsection (4) applies if—

(a) a partnership that does not have a Northern Ireland regional
5establishment incurs expenditure for the purposes of a trade,

(b) the activities for the purposes of which the expenditure is
incurred would, if the partnership were a Northern Ireland
Chapter 7 firm, be an NI rate activity treated as a separate
trade, and

(c) 10the partnership subsequently becomes a Northern Ireland
Chapter 7 firm.

(4) The expenditure is to be treated as incurred on the first day of the
first chargeable period in which the partnership is a Northern
Ireland Chapter 7 firm.

(5) 15In this section “Northern Ireland regional establishment” has the
same meaning as in Part 8B of CTA 2010 (see Chapter 5 of that Part
as read, in relation to a partnership, with section 357WA(4) of that
Act).”

15 (1) Section 450 (giving effect to allowances and charges) is amended as follows.

(2) 20The existing provision becomes subsection (1) of the section.

(3) After that subsection insert—

“(2) This section is subject to section 6E (giving effect to allowances and
charges: NI rate activity cases).”

Dredging allowances

16 25In section 484 (dredging allowances), after subsection (2) insert—

“(2A) If a company or partnership is as a result of section 6D (NI rate
activity treated as separate trade) treated for the purpose of this Act
as carrying on two separate trades, each of them is for the purposes
of this Part to be treated as a qualifying trade if the separate trades
30would together be so treated.”

17 (1) Section 489 (giving effect to allowances) is amended as follows.

(2) The existing provision becomes subsection (1) of the section.

(3) After that subsection insert—

“(2) This section is subject to section 6E (giving effect to allowances and
35charges: NI rate activity cases).”

Part 5 Consequential amendments

18 In Schedule 1 (index of defined expressions) insert at the appropriate
places—