Finance Bill

House of Commons

Session 2002 - 03
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 36 — Schedule to be inserted as Schedule 19B to the Taxes Act 1988
525

section 834(4), to the part of that period which falls within
the accounting period of company Q.
      (5)
This paragraph applies for the purposes of this Schedule.
Taxable ring fence profits of an accounting period
8
For the purposes of this Schedule, a company has taxable ring
5
fence profits for an accounting period if it has an amount of ring
fence profits which is chargeable to corporation tax for that
accounting period after any group relief claimed under Chapter 4
of Part 10.
Part 3
10
Pre-commencement supplement
Supplement in respect of a pre-commencement accounting period
9     (1)
Where—
(a)
a qualifying company claims an allowance under section
441 of the Capital Allowances Act (research and
15
development allowances) for the commencement period,
and
(b)
the claim is for an allowance in respect of qualifying E&A
expenditure incurred before that period,

the company may also claim supplement under this Part of this
20
Schedule (“pre-commencement supplement”) in respect of one or
more pre-commencement periods.
      (2)
Any pre-commencement supplement allowed on a claim in
respect of a pre-commencement period shall be treated as an
allowance under Part 6 of the Capital Allowances Act for the
25
commencement period in respect of qualifying E&A expenditure
incurred by the company.
      (3)
The amount of the supplement for any pre-commencement period
in respect of which a claim under this paragraph is made is the
relevant percentage for that period of the reference amount for
30
that period.
      (4)
If the pre-commencement period is a period of less than twelve
months, the amount of the supplement for the period (apart from
this sub-paragraph) shall be reduced proportionally.
      (5)
Paragraphs 10 to 13 have effect for the purpose of determining the
35
reference amount for a pre-commencement period.
The mixed pool of qualifying E&A expenditure and supplement previously allowed
10    (1)
For the purpose of determining the amount of any pre-
commencement supplement, a qualifying company shall be taken
to have had, at all times in the pre-commencement periods of the
40
company, a continuing mixed pool of qualifying E&A expenditure
and pre-commencement supplement.
      (2)
The pool shall be taken to have consisted of—

Finance Bill
Schedule 36 — Schedule to be inserted as Schedule 19B to the Taxes Act 1988
526

(a)
the company’s qualifying E&A expenditure, allocated to
the pool for each pre-commencement period in accordance
with sub-paragraph (3), and
(b)
the company’s pre-commencement supplement, allocated
to the pool for each pre-commencement period in
5
accordance with sub-paragraph (4).
      (3)
To allocate qualifying E&A expenditure to the pool for any pre-
commencement period, take the following steps—
(a)
Step 1: count as eligible expenditure for that period so
much of the qualifying E&A expenditure mentioned in
10
paragraph 9(1)(b) as was incurred in that period,
(b)
Step 2: find the total of all the eligible expenditure for that
period (amount E),
(c)
Step 3: if paragraph 11 applies, reduce amount E in
accordance with that paragraph,
15
(d)
Step 4: if paragraph 12 applies, reduce (or, as the case may
be, further reduce) amount E in accordance with that
paragraph,

and so much of amount E as remains after making those
reductions shall be taken to have been added to the pool in that
20
period.
      (4)
If any pre-commencement supplement is allowed on a claim in
respect of a pre-commencement period, the amount of that
supplement shall be taken to have been added to the pool in that
period.
25
Treatment of disposal value on disposal of oil licence with exploitation value
11    (1)
This paragraph applies in any case where—
(a)
the qualifying company disposes of an interest in an oil
licence in a pre-commencement period,
(b)
part of the value of the interest (the “deductible amount”)
30
is attributable to qualifying E&A expenditure incurred by
the company, and
(c)
section 555 of the Capital Allowances Act (disposal of oil
licence with exploitation value) has effect in relation to the
disposal.
35
      (2)
For the purpose of allocating qualifying E&A expenditure to the
pool for each pre-commencement period—
(a)
find the total of the deductible amounts in the case of all
such disposals made by the company (amount D), and
(b)
taking later periods before earlier periods, reduce (but not
40
below nil) amount E for any pre-commencement period by
setting against it so much of amount D as does not fall to
be set against amount E for a later pre-commencement
period.
      (3)
In this paragraph “oil licence” has the same meaning as in section
45
555 of the Capital Allowances Act (see section 552(1) of that Act).

Finance Bill
Schedule 36 — Schedule to be inserted as Schedule 19B to the Taxes Act 1988
527

Reduction in respect of unrelieved group ring fence profits
12    (1)
This paragraph applies if there is an amount of unrelieved group
ring fence profits for a pre-commencement period.
      (2)
For the purpose of allocating qualifying E&A expenditure to the
pool for that period—
5
(a)
find so much (if any) of amount E for that period as
remains after any reduction falling to be made under
paragraph 11, and
(b)
reduce that amount (but not below nil) by setting against it
a sum equal to the aggregate of the amounts of unrelieved
10
group ring fence profits for the period.
The reference amount for a pre-commencement period
13
For the purposes of this Part of this Schedule, the reference
amount for a pre-commencement period is the amount in the pool
at the end of the period—
15
(a)
after the addition to the pool of any qualifying E&A
expenditure allocated to the pool for that period in
accordance with paragraph 10(3), but
(b)
before determining, and adding to the pool, the amount of
any pre-commencement supplement claimed in respect of
20
the period.
Claims for pre-commencement supplement
14    (1)
Any claim for pre-commencement supplement in respect of a pre-
commencement period must be made at the same time as, and as
if it were part of, the claim under section 441 of the Capital
25
Allowances Act mentioned in paragraph 9(1)(a).
      (2)
Subsection (3) of that section (claim for reduced amount) applies
in relation to any such claim.
Part 4
Post-commencement supplement
30
Supplement in respect of a post-commencement period
15    (1)
A qualifying company which incurs a qualifying E&A loss (see
paragraph 17) in a post-commencement period may claim
supplement under this Part of this Schedule (“post-
commencement supplement”) in respect of—
35
(a)
that period, or
(b)
any subsequent accounting period in which it carries on its
ring fence trade.
      (2)
Any post-commencement supplement allowed on a claim in
respect of a post-commencement period shall be treated for the
40
purposes of the Corporation Tax Acts (other than this Part of this
Schedule) as if it were a loss—
(a)
incurred in carrying on the ring fence trade in that period,

Finance Bill
Schedule 36 — Schedule to be inserted as Schedule 19B to the Taxes Act 1988
528

(b)
which falls in whole to be set off under section 393 against
trading income from the ring fence trade in succeeding
accounting periods.
      (3)
Paragraph 74 of Schedule 18 to the Finance Act 1998 (company tax
returns etc: time limit for claims for group relief) shall apply in
5
relation to a claim for post-commencement supplement as it
applies in relation to a claim for group relief.
Amount of post-commencement supplement for a post-commencement period
16    (1)
The amount of the post-commencement supplement for any post-
commencement period in respect of which a claim under
10
paragraph 15 is made is the relevant percentage for that period of
the reference amount for that period.
      (2)
If the post-commencement period is a period of less than twelve
months, the amount of the supplement for the period (apart from
this sub-paragraph) shall be reduced proportionally.
15
      (3)
Paragraphs 19 to 24 have effect for the purpose of determining the
reference amount for a post-commencement period.
Ring fence losses and qualifying E&A losses
17    (1)
Where—
(a)
in any post-commencement period (“the period of the
20
loss”) a qualifying company carrying on a ring fence trade
incurs a loss in the trade, and
(b)
some or all of the loss falls to be set off under section 393
against trading income from the trade in succeeding
accounting periods,
25

so much of the loss as falls to be so set off is a “ring fence loss” of
the company.
      (2)
In determining for the purposes of this Part of this Schedule how
much of a loss incurred in a ring fence trade falls to be set off as
mentioned in sub-paragraph (1)(b), it shall be assumed that every
30
claim is made that could be made by the company under section
393A to set losses incurred in the ring fence trade against ring
fence profits of earlier post-commencement periods.
      (3)
So much of a ring fence loss as is attributable to qualifying E&A
allowances for the period of the loss is a “qualifying E&A loss”.
35
      (4)
A ring fence loss is attributable to qualifying E&A allowances to
the extent that the amount of the ring fence loss does not exceed
the amount of the qualifying E&A allowances for the period of the
loss.
      (5)
But a claim for post-commencement supplement may include an
40
election for a ring fence loss to be treated—
(a)
as attributable to qualifying E&A allowances for the period
of the loss to such lesser extent as may be specified in the
election, or
(b)
as not attributable to such allowances.
45
      (6)
“Qualifying E&A allowances”, in the case of an accounting period,
means allowances for that period under Part 6 of the Capital

Finance Bill
Schedule 36 — Schedule to be inserted as Schedule 19B to the Taxes Act 1988
529

Allowances Act in respect of qualifying E&A expenditure
incurred by the company (including any pre-commencement
supplement treated under paragraph 9(2) as such an allowance).
      (7)
This paragraph has effect for the purposes of this Part of this
Schedule.
5
Ring fence losses and non-qualifying losses
18    (1)
So much of a ring fence loss as is not a qualifying E&A loss is a
non-qualifying loss.
      (2)
Where—
(a)
a loss was incurred by a qualifying company in its ring
10
fence trade in an accounting period ending on or before
31st December 2003, and
(b)
some or all of that loss falls to be set off under section 393
against profits of that trade in accounting periods ending
on or after that date,
15

so much of the loss as falls to be so set off is a ring fence loss and
that loss is a non-qualifying loss.
      (3)
This paragraph has effect for the purposes of this Part of this
Schedule.
The pool of qualifying E&A losses and the pool of non-qualifying losses
20
19    (1)
For the purpose of determining the amount of any post-
commencement supplement, a qualifying company shall be taken
at all times in its post-commencement periods to have—
(a)
a continuing pool of the company’s non-qualifying losses
(the “non-qualifying pool”), and
25
(b)
a continuing mixed pool of the company’s qualifying E&A
losses and post-commencement supplement (the
“qualifying pool”).
      (2)
A pool continues even if the amount in it is nil.
The non-qualifying pool
30
20    (1)
The non-qualifying pool consists of the company’s non-qualifying
losses, allocated to the pool in accordance with sub-paragraph (2).
      (2)
A non-qualifying loss is allocated to the pool by adding the
amount of the non-qualifying loss to the pool in the period of the
loss.
35
      (3)
In the case of a non-qualifying loss incurred in an accounting
period ending on or before 31st December 2003, the period of the
loss shall be taken for the purposes of sub-paragraph (2) to be the
first accounting period of the company that ends on or after 1st
January 2004.
40
      (4)
The amount in the non-qualifying pool is subject to reductions in
accordance with the following provisions of this Part of this
Schedule.
      (5)
Where a reduction in the amount in the non-qualifying pool falls
to be made in any accounting period—
45

Finance Bill
Schedule 36 — Schedule to be inserted as Schedule 19B to the Taxes Act 1988
530

(a)
the reduction is to be made after the addition to the pool of
any non-qualifying loss allocated to the pool in that period
in accordance with sub-paragraph (2), and
(b)
references to the amount in the non-qualifying pool shall
be construed accordingly.
5
The qualifying pool
21    (1)
The qualifying pool consists of—
(a)
the company’s qualifying E&A losses, allocated to the pool
in accordance with sub-paragraph (2)(a), and
(b)
the company’s post-commencement supplement,
10
allocated to the pool in accordance with sub-paragraph
(2)(b).
      (2)
The allocation of qualifying E&A losses and post-commencement
supplement to the pool is as follows—
(a)
the amount of a qualifying E&A loss is added to the pool
15
in the period of the loss, and
(b)
if any post-commencement supplement is allowed on a
claim in respect of a post-commencement period, the
amount of that supplement is added to the pool in that
period.
20
      (3)
The amount in the qualifying pool is subject to reductions in
accordance with the following provisions of this Part of this
Schedule.
      (4)
Where a reduction in the amount in the qualifying pool falls to be
made in any accounting period, the reduction is to be made—
25
(a)
after the addition to the pool of the amount of any
qualifying E&A losses allocated to the pool in that period
in accordance with sub-paragraph (2)(a), but
(b)
before determining, and adding to the pool, the amount of
any supplement claimed in respect of the period,
30

and references to the amount in the pool shall be construed
accordingly.
Reductions in respect of utilised ring fence losses
22    (1)
If one or more ring fence losses are set off under section 393 against
any profits of a post-commencement period, reductions shall be
35
made in that period in accordance with this paragraph.
      (2)
The amount in the non-qualifying pool shall be reduced (but not
below nil) by setting against it a sum equal to the total amount so
set off.
      (3)
If any of that sum remains after being so set against the amount in
40
the non-qualifying pool, the amount in the qualifying pool shall be
reduced (but not below nil) by setting against it so much of that
sum as so remains.

Finance Bill
Schedule 37 — Stamp duty land tax and stamp duty
Part 1 — Amendments to Part 4 of the Finance Act 2003: general
531

Reductions in respect of unrelieved group ring fence profits
23    (1)
If there is an amount of unrelieved group ring fence profits for a
post-commencement period, reductions shall be made in that
period in accordance with this paragraph.
      (2)
In the following provisions of this paragraph, references to the
5
remaining amount in a pool are references to so much (if any) of
the amount in the pool as remains after making any reductions
that fall to be made in accordance with paragraph 22.
      (3)
The remaining amount in the non-qualifying pool shall be
reduced (but not below nil) by setting against it a sum equal to the
10
aggregate of the amounts of unrelieved group ring fence profits
for the period.
      (4)
If any of that sum remains after being so set against the remaining
amount in the non-qualifying pool, the remaining amount in the
qualifying pool shall be reduced (but not below nil) by setting
15
against it so much of that sum as so remains.
The reference amount for a post-commencement period
24
For the purposes of this Part of this Schedule the reference amount
for a post-commencement period is so much of the amount in the
qualifying pool as remains after making any reductions required
20
by paragraph 22 or 23.”.
Schedule 37
Section 290

Stamp duty land tax and stamp duty
Part 1
Amendments to Part 4 of the Finance Act 2003: general
25
Introduction
1
Part 4 of the Finance Act 2003 (c. 14) (stamp duty land tax) is amended in
accordance with this Part of this Schedule.
Variation of lease
2
In section 43 (land transactions)—
30
(a)
in paragraph (c) of subsection (3) (variation of chargeable interest),
after “interest” insert “(other than a lease)”;
(b)
after that paragraph insert—
“(d)
the variation of a lease is an acquisition and disposal
of a chargeable interest only where it takes effect, or is
35
treated for the purposes of this Part, as the grant of a
new lease.”.