Finance Bill (HL Bill 123)

continued    Part 2 continued    

30In paragraph 5 (meaning of “outstanding”: loans where A or B acquires a
right to payment of the loan) in sub-paragraph (2)(b) for “paragraph 1(4)”
substitute “paragraphs 1(4) and 1A(5)”.

31In paragraph 7 (meaning of “outstanding”: loans in currencies other than
5stirling) in sub-paragraph (3) after “relevant step” insert “within paragraph
1”.

32In paragraph 10 (meaning of “outstanding”: loans made in a depreciating
currency) in sub-paragraph (1)(b) after “relevant step” insert “within
paragraph 1”.

3310In paragraph 11(1) (meaning of “outstanding”: quasi-loans) for “paragraph
1” substitute “paragraphs 1 and 1A”.

34In paragraph 12 (certain payments or transfers to be disregarded for the
purposes of paragraph 11) in sub-paragraph (5) for “the relevant step treated
as taken by paragraph 1” substitute “a relevant step treated as taken by
15paragraph 1 or 1A”.

35In paragraph 13 (meaning of “outstanding”: quasi-loans where A or B
acquires a right to the payment or transfer of assets) in sub-paragraph (2)(b)
for “paragraph 1(4)” substitute “paragraphs 1(4) and 1A(5)”.

36In paragraph 15 (meaning of “outstanding”: quasi-loans in currencies other
20than sterling) in sub-paragraph (3) after “relevant step” insert “within
paragraph 1”.

37In paragraph 18 (meaning of “outstanding”: quasi-loans made in a
depreciating currency) in sub-paragraph (1)(b) after “relevant step” insert
“within paragraph 1”.

3825After paragraph 35 insert—

“Exclusion for relevant step within paragraph 1A where initial step excluded

35ZAChapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a
relevant step within paragraph 1A if that Chapter does not apply
by reason of the initial step (within the meaning given by sub-
30paragraph (1)(a) of paragraph 1A).”

Social Security (Contributions) Regulations 2001

39(1)The Social Security (Contributions) Regulations 2001 (S.I. 2001/1004) are
amended as follows.

(2)In regulation 22B (amounts to be treated as earnings: Part 7A of ITEPA 2003)
35in paragraph (3A)(a) after “paragraph 1” insert “or 1A”.

(3)In regulation 22C (amounts to be treated as earnings paid to or for the benefit
of the earner: Schedule 11 to F(No.2)A 2017) in paragraph (1)—

(a)after “paragraph 1” insert “or 1A”, and

(b)after “paragraph 1(2)” insert “or 1A(3) or (4)”.

Section 23

Schedule 3 Entrepreneurs’ relief

Part 1 Reduction in lifetime limit

5Reduction in lifetime limit

1In section 169N of TCGA 1992 (entrepreneurs’ relief: amount of relief)—

(a)in subsection (4), for “£10 million” substitute “£1 million”;

(b)in subsection (4A), for “£10 million” substitute “£1 million”.

Commencement

210The amendments made by paragraph 1 have effect in relation to disposals
made on or after 11 March 2020.

Anti-forestalling: unconditional contracts

3(1)This paragraph applies where an asset is conveyed or transferred on or after
11 March 2020 under a contract made before that date that is not conditional.

(2)15Despite section 28(1) of TCGA 1992 (disposal under unconditional contract
made at time of contract and not at time of later conveyance or transfer), the
disposal is to be treated for the purposes of paragraph 2 as taking place at
the time the asset is conveyed or transferred, and not at the time the contract
is made, unless the condition in sub-paragraph (3) or (4) is met.

(3)20The condition in this sub-paragraph is that—

(a)the parties to the contract are not connected persons,

(b)no purpose of entering into the contract was obtaining an advantage
by reason of the application of section 28(1) of TCGA 1992, and

(c)the person making the conveyance or transfer makes a claim which
25includes a statement that the condition in paragraph (b) is met.

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

(a)the parties to the contract are connected persons,

(b)the contract was entered into wholly for commercial reasons,

(c)no purpose of entering into the contract was obtaining an advantage
30by reason of the application of section 28(1) of TCGA 1992, and

(d)the person making the conveyance or transfer makes a claim which
includes a statement that the conditions in paragraphs (b) and (c) are
met.

(5)Section 169M(2) and (3) of TCGA 1992 apply to a claim under sub-paragraph
35(3)(c) or (4)(d) as if it were a claim under that section.

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)40on 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
5company 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
10the 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
15169Q 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
20of 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
25exchange 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
30after 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
35company 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
40exchange, and

(b)on 11 March 2020—

(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)45the relevant individual is an officer or employee of company
B 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
  jointly by the trustees of a settlement and a qualifying
  5beneficiary, 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)

  immediately after the exchange, hold shares or securities in
  10company 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
treated as the same person.

(6)15Where 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
the time of the exchange.

(7)20Where, 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
as if—

(i)25company 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.

Interpretation

6(1)30Paragraphs 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
  135 of TCGA 1992;

• 35“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.

Part 2 40Re-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
known 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’
relief), for “ER purposes”, wherever occurring, substitute “relevant
5purposes”.

(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
tax years.

Section 25

10Schedule 4 Corporate capital losses

Part 1 Corporate capital loss restriction

Restriction on deduction from chargeable gains: main provisions

115Part 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)This section has effect for determining the taxable total profits of a
20company 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
maximum.

25But 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)the amount of the company’s chargeable gains deductions
30allowance for the accounting period.

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

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

(a)35is so much of the company’s deductions allowance for the
period as is specified in the company’s tax return as its
chargeable 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
may not exceed the difference between—

(a)the amount of the company’s deductions allowance for the
5period, and

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

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

(ii)section 269ZC(5)(a) (non-trading income profits
10deductions allowance), and

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

(7)Subsection (2) does not apply in relation to a company for an
accounting period where, in determining the company’s qualifying
15chargeable 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
amended in accordance with this paragraph.

(2)In subsection (2), for “the relevant maximum” substitute “the difference
20between—

(a)the relevant maximum, and

(b)the amount 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).”

(3)25For 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
the accounting period, and

(b)the amount of the company’s total non-trading profits
30deductions allowance for the accounting period.

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

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

(b)35the company’s chargeable gains deductions allowance (see
section 269ZBA(5)).”

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

(5)In subsection (5) for ““non-trading profits deductions allowance””, in both
40places it occurs, substitute ““non-trading income profits deductions
allowance””.

(6)In subsection (6)—

(a)in the words before paragraph (a), for ““non-trading profits
deductions allowance”” substitute ““non-trading income profits
45deductions allowance””, and

(b)for paragraph (b) substitute—

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

(i)section 269ZB(7)(a) (trading profits
5deductions allowance),

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

(iii)in the case of an insurance company, section
269ZFC(5)(a) (BLAGAB deductions
10allowance).”

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

4In section 269ZD (restriction on deductions from total profits), in subsection
(2)(b), after sub-paragraph (i) (before the “and”) insert—

“(ia)15any deductions made by the company for the
accounting period under section 2A(1)(b) of TCGA
1992 (allowable losses accruing in earlier accounting
periods),”.

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

“(2A)20A company’s “relevant chargeable gains” for an accounting period
are—

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

(b)the company’s chargeable gains deductions allowance for the
25accounting period (see section 269ZBA(5)).

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

(2B)30A company’s “total relevant non-trading profits” for an accounting
period are—

(a)the sum of—

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

(ii)35the company’s qualifying chargeable gains for the
period, less

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

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

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

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

(a)profits 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
45company (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
5all of, the following—

(a)the company’s trading profits,
the 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,
10non-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)15in 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)in the case of the amount in step 3(c), the company’s qualifying
20chargeable 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)make no deductions under section 2A(1)(b) of TCGA
251992 (allowable losses accruing in earlier accounting
periods).”

Insolvent companies

8After section 269ZW insert—

“269ZWA Increase of deductions allowance for insolvent companies

(1)30This 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
a country or territory outside the United Kingdom.

(2)35The 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—

(a)the amount of chargeable gains accruing to the company in
the accounting period after deducting any allowable losses
40accruing to the company in the period, or

(b)if lower, the amount of any allowable losses previously
accruing 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)any chargeable gains (but not any allowable losses) accruing
5to 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
(the “no gain/no loss disposal”),

(ii)10the 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
not, at that time, gone into insolvent liquidation, and

(b)15any 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)the election is made in a winding up accounting
20period, 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)For the purposes of this section, a company has gone into insolvent
25liquidation 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
19), and

(b)30at 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)the accounting period of the company that begins when the
35winding 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
allowance), in subsection (1), after paragraph (a) (but before the “and”)
40insert—

“(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
section,”.

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”).