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Finance Bill


Finance Bill
Schedule 16 — Venture capital schemes etc
Part 5 — Other amendments

210

 

(1C)   

For those purposes, a company (“company X”) is a qualifying 100%

subsidiary of another company (“company Y”) at any time when the

conditions in subsection (1)(a) to (e) would be met if—

(a)   

company X were the subsidiary,

(b)   

company Y were the relevant company, and

5

(c)   

in subsection (1) for “at least 90%” in each place there were

substituted “100%”.”

Commencement

17         

This Part of this Schedule is deemed to have come into force on 6th April

2007.

10

Part 5

Other amendments

EIS: approved investment funds

18    (1)  

In Part 5 of ITA 2007 (enterprise investment scheme), in section 251(1)(c)

(approved investment fund as nominee), for “6” substitute “12”.

15

      (2)  

The amendment made by this paragraph has effect in relation to approved

funds which closed or close on or after 7 October 2006.

VCTs: disposal of holding

19    (1)  

Chapter 3 of Part 6 of ITA 2007 (VCT approvals) is amended as follows.

      (2)  

In section 274(3) (requirements for the giving of approval), at the end of

20

paragraph (d) insert “, and

(e)   

the 70% qualifying holdings condition by section 280A”.

      (3)  

After section 280 insert—

“280A   

The 70% qualifying holdings condition: disposal of holding

(1)   

This section applies if—

25

(a)   

a company which is a VCT disposes of shares or securities

(“the holding”) wholly for money, and

(b)   

the holding was comprised in the company’s qualifying

holdings throughout the 6 months ending immediately

before the disposal.

30

(2)   

For the purpose of determining whether the 70% qualifying holdings

condition is, has been or will be met—

(a)   

the company is to be treated as if it continued to hold the

holding for the period of 6 months beginning with the

disposal, and

35

(b)   

the value of the company’s investments in that period is to be

treated as reduced by the amount of money obtained from

the disposal.

(3)   

The value of the holding in the period mentioned in subsection (2)(a)

is to be treated as equal to its value (determined in accordance with

40

this Chapter) immediately before the disposal.

 

 

Finance Bill
Schedule 16 — Venture capital schemes etc
Part 5 — Other amendments

211

 

(4)   

If at any time the value of the company’s investments would by

virtue of subsection (2)(b) be reduced to an amount less than the

value of its qualifying holdings, the value of its investments at that

time is to be treated as equal to the value of its qualifying holdings.

(5)   

If (and to the extent that) the holding was acquired with money the

5

use of which is at any time ignored by virtue of section 280(2),

subsections (2) to (4) do not apply in relation to that time.”

      (4)  

This paragraph is deemed to have come into force on 6th April 2007.

      (5)  

The amendments made by this paragraph have effect in relation to disposals

made on or after that date.

10

VCTs: power to make regulations as to breaches of conditions

20    (1)  

In section 284 of ITA 2007 (power to make regulations as to procedure), in

the existing provision (which becomes subsection (1))—

(a)   

after paragraph (a) insert—

“(aa)   

for and in connection with the making by a company

15

of an application to the Commissioners for Her

Majesty’s Revenue and Customs (“the

Commissioners”) for relief in respect of a breach

(including a future breach) of the conditions for its

VCT approval to continue in force,”,

20

(b)   

in paragraph (c), for the words from “that the conditions” to the end

substitute—

“(i)   

that the conditions for its VCT approval to

continue in force are no longer met, or

(ii)   

that it is likely that those conditions will cease

25

to be met,”, and

(c)   

in paragraph (d) omit “for Her Majesty’s Revenue and Customs”.

      (2)  

After subsection (1) insert—

“(2)   

In subsection (1)(aa), the reference to relief in respect of a breach of

the conditions mentioned there is to a determination by the

30

Commissioners that they will not exercise their power to withdraw

the company’s VCT approval by reason of the breach for such period

as they may determine (and subject to such conditions as they may

determine).

(3)   

The provision that may be made by virtue of subsection (1)(aa)

35

includes—

(a)   

provision as to the procedure to be followed in relation to

applications and determinations,

(b)   

provision as to the grounds on which applications may be

made or determined, and

40

(c)   

provision conferring a discretion to be exercised by the

Commissioners.”

 

 

Finance Bill
Schedule 17 — Real Estate Investment Trusts

212

 

Schedule 17

Section 51

 

Real Estate Investment Trusts

1          

Part 4 of FA 2006 (REITs) is amended as follows.

2          

In section 106 (conditions for company)—

(a)   

in subsection (1), for “1 to 3” substitute “1 and 2”, and

5

(b)   

after subsection (8) insert—

“(9)   

For the purpose of Condition 6 a loan shall not be treated as

dependent on the results of the company’s business by

reason only that the terms of the loan provide—

(a)   

for the interest to be reduced in the event of the results

10

improving, or

(b)   

for the interest to be increased in the event of the

results deteriorating.”

3          

In section 107 (conditions for tax-exempt business)—

(a)   

in subsections (1)(a) and (2)(a), for “1 to 3” substitute “1 and 2”,

15

(b)   

in subsections (1)(b) and (2)(b), for “Condition 4” substitute

“Condition 3”,

(c)   

omit subsection (5),

(d)   

in subsection (6), for “1 to 3” substitute “1 and 2”,

(e)   

omit subsections (7) and (7A), and

20

(f)   

in subsections (8) and (9), for “Condition 4” substitute “Condition 3”.

4          

In section 108(2) (profit condition), for paragraph (b) substitute—

“(b)   

“profits” means profits before deduction of tax, calculated in

accordance with international accounting standards and

excluding—

25

(i)   

realised and unrealised gains and losses on the

disposal of property,

(ii)   

changes in the fair value of hedging derivative

contracts (within the meaning of section 120(4)), and

(iii)   

items which are outside the ordinary course of the

30

company’s business (irrespective of their treatment in

the company’s accounts), having regard to that

company’s past transactions.”

5          

In section 109 (notice), after subsection (2) insert—

“(3)   

Subsection (4) applies where a company—

35

(a)   

does not expect to satisfy Condition 4 of section 106 on the

first day of an accounting period, by reason only that its

shares have not been listed and dealt with on a recognised

stock exchange within the preceding 12 months, but

(b)   

reasonably expects to satisfy that Condition throughout the

40

rest of the accounting period in reliance on section 415(1)(b)

of ICTA.

(4)   

Where this subsection applies—

(a)   

subsection (2)(c) does not apply, but

 

 

Finance Bill
Schedule 17 — Real Estate Investment Trusts

213

 

(b)   

the notice under subsection (1) must be accompanied by a

statement by the company containing the assertions specified

in subsection (5).

(5)   

Those assertions are—

(a)   

that Conditions 1, 2, 5 and 6 in section 106 are reasonably

5

expected to be satisfied in respect of the company throughout

the specified accounting period,

(b)   

that Condition 3 in section 106 is reasonably expected to be

satisfied in respect of the company for at least a part of the

first day of the specified accounting period, and throughout

10

the remainder of that period, and

(c)   

that Condition 4 in section 106 is reasonably expected to be

satisfied in respect of the company throughout all of the

specified accounting period apart from the first day.”

6          

In section 115 (profit: financing cost ratio)—

15

(a)   

in the formula in subsection (2), omit “+ Financing Costs”, and

(b)   

in paragraph (a) of that subsection, after “allowances” insert “, of

losses from a previous accounting period and of amounts taken into

account under section 120(3)”.

7          

In section 116 (minor or inadvertent breach)—

20

(a)   

in subsection (3), after paragraph (c) insert—

“(ca)   

make provision under paragraph (c) either by

specifying a sum that arises in relation to a company

or by providing for a sum to be treated as arising in

relation to a company;” and

25

(b)   

after that subsection insert—

“(3A)   

The regulations may make provision about, or by reference

to, anything done by or in relation to a company or any sum

arising or treated as arising—

(a)   

after the commencement of the regulations, or

30

(b)   

in the calendar year during which the regulations are

made.”

8          

In section 117 (cancellation of tax advantage), insert at the end—

“(8)   

On an appeal under subsection (7) the Special Commissioners may—

(a)   

quash the notice,

35

(b)   

affirm the notice, or

(c)   

vary the notice.”

9          

In section 120 (calculation of profits)—

(a)   

in paragraph (a) of subsection (4), for “an asset,” substitute “an asset

by the exploitation of which tax-exempt business is conducted,”

40

(b)   

after that paragraph insert—

“(aa)   

a derivative contract is hedging in relation to a

company if or in so far as it is acquired as a hedge of

risk in relation to a liability incurred in connection

with tax-exempt business,” and

45

 

 

Finance Bill
Schedule 17 — Real Estate Investment Trusts

214

 

(c)   

after that subsection insert—

“(4A)   

In subsection (4)(a) the reference to an asset includes a

reference to—

(a)   

the value of an asset, and

(b)   

profits attributable to it.”

5

10         

In section 123(a) (attribution of distributions), for “Condition 4” substitute

“Condition 3”.

11         

After section 126 (movement of assets into ring fence) insert—

“126A   

Demergers

(1)   

This section applies if—

10

(a)   

C (tax-exempt) transfers an asset to a 75% subsidiary (“S”) of

C (residual),

(b)   

C (residual) disposes of its interest in S,

(c)   

on the date of the transfer of the asset, S gives a notice under

section 109 which specifies an accounting period which

15

begins within the period of six months beginning with the

date of the transfer, and

(d)   

this Part begins to apply to S from the beginning of the

specified accounting period.

(2)   

Where this section applies—

20

(a)   

sections 111 and 112 shall not apply to S in relation to the

asset transferred by C (tax-exempt) or in relation to business

conducted by the exploitation of that asset, and

(b)   

section 125 shall not apply to the transfer of the asset by C

(tax-exempt).”

25

12         

In section 127 (interpretation), for “126” substitute “126A”.

13         

In section 133 (early exit), insert at the end—

“(6)   

On an appeal under subsection (5) the Special Commissioners may—

(a)   

quash the direction,

(b)   

affirm the direction, or

30

(c)   

vary the direction.”

14         

In section 138 (joint ventures), after subsection (3) insert—

“(4)   

Regulations may make provision having retrospective effect in

respect of the calendar year in which they are made.”

15         

In paragraph 3 of Schedule 16 (excluded income: owner-occupied property),

35

after sub-paragraph (3) insert—

   “(3A)  

For the purpose of Condition 2, no account shall be taken of the

fact that a property may fall to be described as owner-occupied by

reason only of the provision by the company of services to an

occupant who—

40

(a)   

is in exclusive occupation of the property, and

(b)   

is not connected with a member of the group (within the

meaning given by section 839 of ICTA).”

16    (1)  

Schedule 17 (modifications for groups) is amended as follows.

 

 

Finance Bill
Schedule 17 — Real Estate Investment Trusts

215

 

      (2)  

In paragraph 2(b), for “Conditions 1 to 3” substitute “Conditions 1 and 2”.

      (3)  

Omit paragraph 6(2) and (3).

      (4)  

In paragraph 6(4) and (5), for “Condition 4” substitute “Condition 3”.

      (5)  

In paragraph 14, in the substituted subsection (2)—

(a)   

in the formula in the opening words, omit “+ Financing Costs (all)”,

5

(b)   

in paragraph (a), after “allowances” insert “, of losses from a previous

accounting period and of amounts taken into account under section

120(3)”, and

(c)   

omit paragraph (b).

      (6)  

after paragraph 33 insert—

10

“Demergers

34    (1)  

This paragraph applies in relation to a company if—

(a)   

the company ceases to be a member of a group to which

Part 4 applies,

(b)   

at the time immediately after it ceases to be a member of

15

the group, either—

(i)   

it satisfies Conditions 1 and 2 of section 106 and the

conditions specified in sections 107 and 108, or

(ii)   

it is the principal company of a group which

satisfies those conditions as modified by the

20

provisions of paragraphs 5 to 7 above,

(c)   

it gives a notice under section 109 (or that section as

modified by paragraph 8 above) no later than the date on

which it ceases to be a member of the group, and

(d)   

the notice specifies an accounting period which begins on

25

the day on which the company ceases to be a member of

the group.

      (2)  

A company may give a notice under section 109 (or that section as

modified by paragraph 8 above) in accordance with sub-

paragraph (1)(c) even if it does not expect to satisfy Conditions 3

30

to 6 of section 106 throughout the accounting period specified in

the notice.

      (3)  

Where this paragraph applies, the company shall be treated as a

company to which Part 4 applies (or as the principal company of a

group to which Part 4 applies) during the period of six months

35

beginning with the time when it ceases to be a member of the

group.

      (4)  

Where this paragraph applies, the following provisions of Part 4

shall not have effect—

(a)   

section 111 (or that section as modified by paragraphs 9

40

and 10 above),

(b)   

section 112 (or that section as modified by paragraph 11

above), and

(c)   

section 131 (as modified by paragraphs 25 and 26 above).”

      (5)  

But if, at the end of the period of six months mentioned in sub-

45

paragraph (3), Conditions 3 to 6 in section 106 are not satisfied in

 

 

Finance Bill
Schedule 18 — Pensions schemes: abolition of relief for life assurance premium contributions etc

216

 

relation to the company, this paragraph shall not have effect and

the company shall be treated as having ceased to be a company to

which Part 4 applies (or the principal company of a group to

which Part 4 applies) on the date on which it ceased to be a

member of the group.”

5

17         

In section 505(1) of ICTA (charities: exemptions), after paragraph (a) insert—

“(aa)   

exemption from tax under Schedules A and D, or under Parts

2 and 3 of ITTOIA 2005, in respect of distributions to which

section 121 of the Finance Act 2006 (Real Estate Investment

Trusts: distributions) applies to the extent that the

10

distributions—

(i)   

arise in respect of shares vested in a person for

charitable purposes; and

(ii)   

are applied to charitable purposes only;”.

18         

In section 531 of ITA 2007 (charities: exemptions)—

15

(a)   

after subsection (2) insert—

“(2A)   

Distributions to which section 121 of FA 2006 (Real Estate

Investment Trusts: distributions) applies and which are

chargeable to income tax under Part 2 or Part 3 of ITTOIA

2005 are not taken into account in calculating total income so

20

far as they arise in respect of shares vested in a person in trust

for a charitable trust or for charitable purposes.”, and

(b)   

in subsection (3), for “and (2)” substitute “to (2A)”.

Schedule 18

Section 67

 

Pensions schemes: abolition of relief for life assurance premium contributions

25

etc

Introduction

1          

Part 4 of FA 2004 (pension schemes etc) is amended as follows.

Life assurance premium contributions not to be relievable pension contributions

2          

In section 188(3) (relief for members’ contributions: contributions which are

30

not relievable pension contributions), after paragraph (a) insert—

“(aa)   

any contributions which are life assurance premium

contributions (see section 195A),”.

Life assurance premium contributions

3          

After section 195 insert—

35

“195A   

 Life assurance premium contributions

(1)   

Contributions paid by or on behalf of an individual under a

registered pension scheme are life assurance premium contributions

for the purposes of section 188(3)(aa) if—

 

 

 
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