Finance (No.2) Bill

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Finance (No.2) Bill

Finance (No.2) Bill
Schedule 19 — Schedule to be inserted as Schedule 19C to ICTA
368

(d)
the event would, on the relevant assumption, require a
disposal value (the “deductible amount”) to be brought
into account under any provision of the Capital
Allowances Act for any pre-commencement period.
      (2)
The relevant assumption is that the company was carrying on the
5
ring fence trade—
(a)
when the expenditure was incurred, and
(b)
when the event giving rise to the disposal value occurred.
      (3)
For the purpose of allocating qualifying pre-commencement
expenditure to the pool for each pre-commencement period—
10
(a)
find the total amount of the disposal values in the case of
all such events (amount D), and
(b)
taking later periods before earlier periods, reduce (but not
below nil) amount E for any pre-commencement period by
setting against it so much of amount D as does not fall to
15
be set against amount E for a later pre-commencement
period.
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.
20
      (2)
For the purpose of allocating qualifying pre-commencement
expenditure to the pool for that period—
(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
25
(b)
reduce that amount (but not below nil) by setting against it
a sum equal to the aggregate of the amounts of unrelieved
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
30
amount for a pre-commencement period is the amount in the pool
at the end of the period—
(a)
after the addition to the pool of any qualifying pre-
commencement expenditure allocated to the pool for that
period in accordance with paragraph 10(3), but
35
(b)
before determining, and adding to the pool, the amount of
any pre-commencement supplement claimed in respect of
the period.
Claims for pre-commencement supplement
14    (1)
Any claim for pre-commencement supplement in respect of a pre-
40
commencement period must be made as a claim for the
commencement period.
      (2)
Paragraph 74 of Schedule 18 to the Finance Act 1998 (company tax
returns etc: time limit for claims for group relief) applies in

Finance (No.2) Bill
Schedule 19 — Schedule to be inserted as Schedule 19C to ICTA
369

relation to a claim for pre-commencement supplement as it
applies in relation to a claim for group relief.
Part 4
Post-commencement supplement
Supplement in respect of a post-commencement period
5
15    (1)
A qualifying company which incurs a ring fence loss (see
paragraph 17) in a post-commencement period may claim
supplement under this Part of this Schedule (“post-
commencement supplement”) in respect of—
(a)
that period, or
10
(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 is to be treated for the
purposes of the Corporation Tax Acts (other than this Part of this
15
Schedule or Part 4 of Schedule 19B) as if it were a loss—
(a)
which is incurred in carrying on the ring fence trade in that
period, and
(b)
which falls in whole to be set off under section 393 against
trading income from the ring fence trade in succeeding
20
accounting periods.
      (3)
Paragraph 74 of Schedule 18 to the Finance Act 1998 (company tax
returns etc: time limit for claims for group relief) applies in
relation to a claim for post-commencement supplement as it
applies in relation to a claim for group relief.
25
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
paragraph 15 is made is the relevant percentage for that period of
the reference amount for that period.
30
      (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) is to be reduced proportionally.
      (3)
Paragraphs 19 to 23 have effect for the purpose of determining the
reference amount for a post-commencement period.
35
Ring fence losses
17    (1)
If—
(a)
in any post-commencement period (“the period of the
loss”) a qualifying company carrying on a ring fence trade
incurs a loss in the trade, and
40
(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,

Finance (No.2) Bill
Schedule 19 — Schedule to be inserted as Schedule 19C to ICTA
370


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), the following assumption is to
5
be made.
      (3)
The assumption is that every 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.
10
      (4)
This paragraph is subject to paragraph 18 (special rule for
straddling periods).
      (5)
This paragraph has effect for the purposes of this Part of this
Schedule.
Special rule for straddling periods
15
18    (1)
This paragraph applies if the period of the loss in which a ring
fence loss is incurred is the deemed accounting period under
paragraph 3(3) beginning on 1st January 2006 (“the deemed
accounting period”).
      (2)
The amount of the ring fence loss in the deemed accounting period
20
is determined as follows.

Step 1

Calculate so much of the ring fence loss in the straddling period as,
for the purposes of Part 4 of Schedule 19B, is attributable to
qualifying E&A allowances for the straddling period.
25


The amount given by this step is “the qualifying Schedule 19B
amount”.

Step 2

Calculate so much of the ring fence loss in the straddling period as
30
is attributable to allowances for the straddling period under Part 6
of the Capital Allowances Act in respect of relevant expenditure.


For the purposes of this step “relevant expenditure” means
expenditure incurred by the company on or after 1st January 2006
35
which, but for that fact, would be qualifying E&A expenditure for
the purposes of Schedule 19B.


For the purposes of this step a ring fence loss is attributable to
those allowances to the extent that the amount of the loss (less the
40
qualifying Schedule 19B amount) does not exceed the amount of
those allowances for that period.


The amount given by this step is “the amount of the post-1st
January 2006 E&A allowances”.
45

Step 3

Finance (No.2) Bill
Schedule 19 — Schedule to be inserted as Schedule 19C to ICTA
371


Deduct the qualifying Schedule 19B amount and the amount of the
post-1st January 2006 E&A allowances from the amount of the
ring fence loss in the straddling period.


Step 4
5

Apportion the remaining amount of that loss (if any) to the
deemed accounting period in proportion to the number of days in
the deemed accounting period that fall in the straddling period.


The amount given by this step is “the amount of the apportioned
10
loss”.

Step 5

The amount of the ring fence loss in the deemed accounting period
is the amount of the apportioned loss plus the amount of the post-
1st January 2006 E&A allowances.
15
      (3)
In this paragraph “the straddling period”, in relation to a
qualifying company, means an accounting period of the
company—
(a)
beginning before 1st January 2006, and
(b)
ending on or after that date,
20

disregarding paragraph 3(3).
      (4)
In this paragraph references to the ring fence loss in the straddling
period are to that loss determined on the assumption that the
straddling period is the period of the loss for the purposes of
paragraph 17.
25
      (5)
This paragraph has effect for the purposes of this Part of this
Schedule.
The pool of ring fence losses and the pool of non-qualifying Schedule 19B losses
19    (1)
For the purpose of determining the amount of any post-
commencement supplement, a qualifying company is to be taken
30
at all times in its post-commencement periods to have a
continuing mixed pool (the “ring fence pool”) of—
(a)
the carried forward qualifying Schedule 19B amount,
(b)
the company’s ring fence losses, and
(c)
post-commencement supplement.
35
      (2)
The ring fence pool continues even if the amount in it is nil.
      (3)
For the purpose of determining the amount of any post-
commencement supplement, a qualifying company is also to be
taken in its post-commencement periods to have a non-qualifying
pool consisting of the carried forward non-qualifying Schedule
40
19B amount.
      (4)
But the non-qualifying pool ceases to exist when the amount in it
is reduced to nil.
      (5)
In this paragraph—
“the carried forward qualifying Schedule 19B amount”, in
45
relation to a qualifying company, means the amount in its

Finance (No.2) Bill
Schedule 19 — Schedule to be inserted as Schedule 19C to ICTA
372

qualifying pool for the purposes of Part 4 of Schedule 19B
immediately before 1st January 2006, and
“the carried forward non-qualifying Schedule 19B amount”,
in relation to a qualifying company, means the amount in
its non-qualifying pool for the purposes of Part 4 of
5
Schedule 19B immediately before 1st January 2006.
The ring fence pool
20    (1)
The ring fence pool consists of—
(a)
the carried forward qualifying Schedule 19B amount,
(b)
the company’s ring fence losses, allocated to the pool in
10
accordance with sub-paragraph (2)(a), and
(c)
the company’s post-commencement supplement,
allocated to the pool in accordance with sub-paragraph
(2)(b).
      (2)
The allocation of ring fence losses and post-commencement
15
supplement to the pool is as follows—
(a)
the amount of a ring fence loss is added to the pool 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
20
amount of that supplement is added to the pool in that
period.
      (3)
The amount in the ring fence pool is subject to reductions in
accordance with the following provisions of this Part of this
Schedule.
25
      (4)
If a reduction in the amount in the ring fence pool falls to be made
in any accounting period, the reduction is to be made—
(a)
after the addition to the pool of the amount of any ring
fence losses allocated to the pool in that period in
accordance with sub-paragraph (2)(a), but
30
(b)
before determining, and adding to the pool, the amount of
any supplement claimed in respect of the period,

and references to the amount in the pool are to be read
accordingly.
      (5)
In this paragraph “the carried forward qualifying Schedule 19B
35
amount”, in relation to a qualifying company, means the amount
in its qualifying pool for the purposes of Part 4 of Schedule 19B
immediately before 1st January 2006.
Reductions in respect of utilised ring fence losses
21    (1)
If one or more ring fence losses are set off under section 393 against
40
any profits of a post-commencement period, reductions are to be
made in that period in accordance with this paragraph.
      (2)
If the company has a non-qualifying pool, the amount in the non-
qualifying pool is to be reduced (but not below nil) by setting
against it a sum equal to the total amount so set off.
45
      (3)
If—

Finance (No.2) Bill
Schedule 19 — Schedule to be inserted as Schedule 19C to ICTA
373

(a)
any of that sum remains after being so set against the
amount in the non-qualifying pool, or
(b)
the company does not have a non-qualifying pool,

the amount in the ring fence pool is to be reduced (but not below
nil) by setting against it so much of that sum as so remains or (as
5
the case may be) a sum equal to the total amount set off as
mentioned in sub-paragraph (1).
      (4)
If the post-commencement period is the deemed accounting
period under paragraph 3(3) beginning on 1st January 2006 (“the
deemed accounting period”), the amount of the profits of the
10
deemed accounting period is determined as follows.
      (5)
The amount of the profits of the straddling period is apportioned
to the deemed accounting period in proportion to the number of
days in the deemed accounting period that fall in the straddling
period.
15
      (6)
The apportioned amount is taken for the purposes of this
paragraph to be the amount of the profits of the deemed
accounting period.
      (7)
In this paragraph “the straddling period”, in relation to a
qualifying company, means an accounting period of the
20
company—
(a)
beginning before 1st January 2006, and
(b)
ending on or after that date,

disregarding paragraph 3(3).
Reductions in respect of unrelieved group ring fence profits
25
22    (1)
If there is an amount of unrelieved group ring fence profits for a
post-commencement period, reductions are to be made in that
period in accordance with this paragraph.
      (2)
If, after making any reductions that fall to be made in accordance
with paragraph 21, the company does not have a non-qualifying
30
pool, the remaining amount in the ring fence pool is to be reduced
(but not below nil) by setting against it a sum equal to the
aggregate of the amounts of unrelieved group ring fence profits
for the period.
      (3)
If, after making any reductions that fall to be made in accordance
35
with paragraph 21, the company has an amount in a non-
qualifying pool, the amount in that pool is to be reduced (but not
below nil) by setting against it a sum equal to the 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 amount in
40
the non-qualifying pool, the remaining amount in the ring fence
pool is to be reduced (but not below nil) by setting against it so
much of that sum as so remains.
      (5)
For the purposes of this paragraph references to the remaining
amount in the ring fence pool are references to so much (if any) of
45
the amount in the ring fence pool as remains after making any
reductions that fall to be made in accordance with paragraph 21.

Finance (No.2) Bill
Schedule 20 — Inheritance tax: rules for trusts etc
Part 1 — “Trusts for bereaved minors” and “accumulation and maintenance” trusts
374

The reference amount for a post-commencement period
23
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
ring fence pool as remains after making any reductions required
by paragraph 21 or 22.”.
5
Schedule 20
Section 157

Inheritance tax: rules for trusts etc
Part 1
“Trusts for bereaved minors” and “accumulation and maintenance” trusts
Trusts for bereaved minors
10
1     (1)
In IHTA 1984, after section 71 insert—
“71A
Trusts for bereaved minors
(1)
This section applies to settled property (including property settled
before 22nd March 2006) if—
(a)
it is held on statutory trusts for the benefit of a bereaved
15
minor under sections 46 and 47(1) of the Administration of
Estates Act 1925 (succession on intestacy and statutory trusts
in favour of issue of intestate), or
(b)
it is held on trusts for the benefit of a bereaved minor and
subsection (2) below applies to the trusts,
20

but this section does not apply to property to which section 89 below
applies.
(2)
This subsection applies to trusts—
(a)
established under the will of a deceased parent of the
bereaved minor, or
25
(b)
established under the Criminal Injuries Compensation
Scheme,

which secure that the conditions in subsection (3) below are met.
(3)
Those conditions are—
(a)
that the bereaved minor, if he has not done so before
30
attaining the age of 18, will on attaining that age become
absolutely entitled to—
(i)
the settled property,
(ii)
any income arising from it, and
(iii)
any income that has arisen from the property held on
35
the trusts for his benefit and been accumulated before
that time,
(b)
that, for so long as the bereaved minor is living and under the
age of 18, if any of the settled property is applied for the
benefit of a beneficiary, it is applied for the benefit of the
40
bereaved minor, and