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Finance (No. 2) Bill


Finance (No. 2) Bill
Schedule 2 — Venture capital schemes

29

 

(c)   

a relevant concession applied to the individual in respect of those

receipts, and

(d)   

the individual did not derive any taxable income, other than

qualifying care receipts, from the trade.

      (2)  

Sections 824 to 827 of ITTOIA 2005 (capital allowances) are to have effect as

5

if the individual had been a relevant individual for—

(a)   

the pre-commencement tax year, or

(b)   

if sub-paragraph (1)(a)(ii) applies, the pre-commencement tax year

and each earlier tax year in the series.

      (3)  

“The pre-commencement tax year” means the tax year immediately

10

preceding—

(a)   

for an individual who makes an election under paragraph 36, the tax

year 2011-12,

(b)   

otherwise, the tax year 2010-11.

      (4)  

“Relevant concession” has the same meaning as in paragraph 36.

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Schedule 2

Section 5

 

Venture capital schemes

Enterprise investment scheme

1     (1)  

Part 5 of ITA 2007 (enterprise investment scheme) is amended as follows.

      (2)  

In section 179 (meaning of “qualifying business activity”)—

20

(a)   

in subsection (2)(b)(i), omit “wholly or mainly in the United

Kingdom”,

(b)   

omit subsection (3),

(c)   

in subsection (4)(b)(i) and (ii), omit “wholly or mainly in the United

Kingdom”, and

25

(d)   

omit subsection (5).

      (3)  

In section 180 (overview of Chapter 4), before paragraph (a) insert—

“(za)   

UK permanent establishment (see section 180A),

(zb)   

financial health (see section 180B),”.

      (4)  

Before section 181 insert—

30

“180A   

 The UK permanent establishment requirement

(1)   

The issuing company must meet the UK permanent establishment

requirement throughout period B.

(2)   

The UK permanent establishment requirement is that the issuing

company has a permanent establishment in the United Kingdom.

35

180B    

 The financial health requirement

(1)   

The issuing company must meet the financial health requirement at

the beginning of period B.

 
 

Finance (No. 2) Bill
Schedule 2 — Venture capital schemes

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(2)   

The financial health requirement is that the issuing company is not

in difficulty.

(3)   

The issuing company is “in difficulty” if it is reasonable to assume

that it would be regarded as a firm in difficulty for the purposes of

the Community Guidelines on State Aid for Rescuing and

5

Restructuring Firms in Difficulty (2004/C 244/02).”

      (5)  

After section 191 (and before the italic heading “Excluded activities”) insert—

“191A   

 Meaning of “permanent establishment”

(1)   

This section applies for the purposes of this Part.

(2)   

A company has a “permanent establishment” in the United Kingdom

10

if (and only if)—

(a)   

it has a fixed place of business there through which the

business of the company is wholly or partly carried on, or

(b)   

an agent acting on behalf of the company has and habitually

exercises there authority to enter into contracts on behalf of

15

the company.

(3)   

For the purposes of this section “fixed place of business” includes

(without prejudice to the generality of that expression)—

(a)   

a place of management,

(b)   

a branch,

20

(c)   

an office,

(d)   

a factory,

(e)   

a workshop,

(f)   

a mine, an oil or gas well, a quarry or any other place of

extraction of natural resources, and

25

(g)   

a building site or construction or installation project.

(4)   

If the condition in subsection (5) is met, a company is not regarded as

having a permanent establishment in the United Kingdom by reason

of the fact that—

(a)   

a fixed place of business is maintained there for the purpose

30

of carrying on activities for the company, or

(b)   

an agent carries on activities there for and on behalf of the

company.

(5)   

The condition is that, in relation to the business of the company as a

whole, the activities carried on are only of a preparatory or auxiliary

35

character.

(6)   

For this purpose “activities of a preparatory or auxiliary character”

include (without prejudice to the generality of that expression)—

(a)   

the use of facilities for the purpose of storage, display or

delivery of goods or merchandise belonging to the company,

40

(b)   

the maintenance of a stock of goods or merchandise

belonging to the company for the purpose of storage, display

or delivery,

(c)   

the maintenance of a stock of goods or merchandise

belonging to the company for the purpose of processing by

45

another person, and

 
 

Finance (No. 2) Bill
Schedule 2 — Venture capital schemes

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(d)   

purchasing goods or merchandise, or collecting information,

for the company.

(7)   

A company is not regarded as having a permanent establishment in

the United Kingdom by reason of the fact that it carries on business

there through an agent of independent status (including a broker or

5

a general commission agent) acting in the ordinary course of the

agent’s business.

(8)   

A company is not regarded as having a permanent establishment in

the United Kingdom by reason of the fact that it controls a company

that—

10

(a)   

is resident there, or

(b)   

carries on business there (whether through a permanent

establishment or otherwise).

(9)   

The Treasury may by regulations amend this section.”

Venture capital trusts

15

2     (1)  

Part 6 of ITA 2007 (venture capital trusts) is amended as follows.

      (2)  

In section 274 (requirements for the giving of approval)—

(a)   

in the table in subsection (2), in the first entry, in column 2, for

“included in the official UK list” substitute “admitted to trading on a

regulated market”,

20

(b)   

in the last entry in the table, in columns 1 and 2, for “30%” substitute

“70%”,

(c)   

in paragraphs (c) and (d) of subsection (3), for “30%” substitute

“70%”, and

(d)   

at the end insert—

25

    “(4)  

In this section “regulated market” has the same meaning as

in Directive 2004/39/EC of the European Parliament and

of the Council on markets in financial instruments (see

Article 4.1(14)).

      (5)  

The Treasury may by regulations amend—

30

(a)   

the first entry in the table in subsection (2) (the

listing condition), or

(b)   

subsection (4).”

      (3)  

In section 275(3)(b) (alternative requirements for the giving of approval), for

“30%” substitute “70%”.

35

      (4)  

In section 278(1) (conditions relating to value of investments: general), for

“30%” substitute “70%”.

      (5)  

In section 280(2) (conditions relating to qualifying holdings and eligible

shares), for “30%” substitute “70%”.

      (6)  

In section 285 (interpretation of Chapter 3 of Part 6), for subsection (3)

40

substitute—

“(3A)   

For the purposes of this Chapter, shares in a company are “eligible”

unless they carry—

 
 

Finance (No. 2) Bill
Schedule 2 — Venture capital schemes

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(a)   

a present or future preferential right to dividends that is

within subsection (3B),

(b)   

a present or future preferential right to the company’s assets

on its winding up, or

(c)   

a present or future right to be redeemed.

5

(3B)   

A preferential right to dividends carried by a share in a company is

within this subsection if—

(a)   

the amount of any dividends payable pursuant to the right,

or the date or dates on which they are payable, depend to any

extent on a decision of the company, the holder of the share

10

or any other person, or

(b)   

the amount of any dividends that become payable at any time

pursuant to the right includes any amount that became

payable at any earlier time pursuant to the right, but has not

been paid.”

15

      (7)  

In section 286 (qualifying holdings: introduction), in subsection (3), before

paragraph (a) insert—

“(za)   

UK permanent establishment (see section 286A),

(zb)   

financial health (see section 286B),”.

      (8)  

Before section 287 insert—

20

“286A   

 The UK permanent establishment requirement

   

The requirement of this section, at any time on or after the issue of

the relevant holding, is that the relevant company has a permanent

establishment in the United Kingdom at all times from the issue of

the holding to the time in question.

25

286B    

The financial health requirement

(1)   

The requirement of this section is that the relevant company is not, at

the time of the issue of the relevant holding, in difficulty.

(2)   

The relevant company is “in difficulty” if it is reasonable to assume

that it would be regarded as a firm in difficulty for the purposes of

30

the Community Guidelines on State Aid for Rescuing and

Restructuring Firms in Difficulty (2004/C 244/02).”

      (9)  

In section 289(5) (the proportion of eligible shares requirement), for “285(3)”

substitute “285(3A) and (3B)”.

     (10)  

In section 291 (carrying on of qualifying activity requirement)—

35

(a)   

in subsection (2), for “A qualifying trade carried on wholly or mainly

in the United Kingdom” substitute “Carrying on a qualifying trade”,

(b)   

in subsection (3), omit “wholly or mainly in the United Kingdom”,

and

(c)   

in subsection (4)(b), omit “wholly or mainly in the United Kingdom”.

40

     (11)  

In section 300(2) (meaning of “qualifying trade”), for paragraphs (a) and (b)

substitute—

“(a)   

that a trade will be derived which will be a qualifying trade,

or

(b)   

that a trade will benefit which is or will be a qualifying

45

trade,”.

 
 

Finance (No. 2) Bill
Schedule 2 — Venture capital schemes

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     (12)  

After section 302 (and before the italic heading “Excluded activities”) insert—

“302A   

 Meaning of “permanent establishment”

(1)   

This section applies for the purposes of this Chapter.

(2)   

A company has a “permanent establishment” in the United Kingdom

if (and only if)—

5

(a)   

it has a fixed place of business there through which the

business of the company is wholly or partly carried on, or

(b)   

an agent acting on behalf of the company has and habitually

exercises there authority to enter into contracts on behalf of

the company.

10

(3)   

For the purposes of this section “fixed place of business” includes

(without prejudice to the generality of that expression)—

(a)   

a place of management,

(b)   

a branch,

(c)   

an office,

15

(d)   

a factory,

(e)   

a workshop,

(f)   

a mine, an oil or gas well, a quarry or any other place of

extraction of natural resources, and

(g)   

a building site or construction or installation project.

20

(4)   

If the condition in subsection (5) is met, a company is not regarded as

having a permanent establishment in the United Kingdom by reason

of the fact that—

(a)   

a fixed place of business is maintained there for the purpose

of carrying on activities for the company, or

25

(b)   

an agent carries on activities there for and on behalf of the

company.

(5)   

The condition is that, in relation to the business of the company as a

whole, the activities carried on are only of a preparatory or auxiliary

character.

30

(6)   

For this purpose “activities of a preparatory or auxiliary character”

include (without prejudice to the generality of that expression)—

(a)   

the use of facilities for the purpose of storage, display or

delivery of goods or merchandise belonging to the company,

(b)   

the maintenance of a stock of goods or merchandise

35

belonging to the company for the purpose of storage, display

or delivery,

(c)   

the maintenance of a stock of goods or merchandise

belonging to the company for the purpose of processing by

another person, and

40

(d)   

purchasing goods or merchandise, or collecting information,

for the company.

(7)   

A company is not regarded as having a permanent establishment in

the United Kingdom by reason of the fact that it carries on business

there through an agent of independent status (including a broker or

45

a general commission agent) acting in the ordinary course of the

agent’s business.

 
 

Finance (No. 2) Bill
Schedule 2 — Venture capital schemes

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(8)   

A company is not regarded as having a permanent establishment in

the United Kingdom by reason of the fact that it controls a company

that—

(a)   

is resident there, or

(b)   

carries on business there (whether through a permanent

5

establishment or otherwise).

(9)   

The Treasury may by regulations amend this section.”

     (13)  

In section 313 (interpretation of Chapter 4 of Part 6)—

(a)   

in subsection (6), omit the “and” at the end of paragraph (a) and after

paragraph (b) insert “, and

10

(c)   

any right to dividends carried by shares in the

company where the shares—

(i)   

are eligible shares, and

(ii)   

are held by the investing company.”, and

(b)   

after subsection (7) insert—

15

“(8)   

In subsection (6) “eligible shares” has the same meaning as in

Chapter 3 (see section 285(3A) and (3B)).”

Interpretation

3     (1)  

Chapter 1 of Part 16 of ITA 2007 (definitions) is amended as follows.

      (2)  

In section 989 (the definitions), omit the definition of “permanent

20

establishment”.

      (3)  

After section 1007 insert—

“1007A  

 Meaning of “permanent establishment”

(1)   

In the Income Tax Acts “permanent establishment”, in relation to a

company, is to be read in accordance with Chapter 2 of Part 24 of

25

CTA 2010.

(2)   

This section does not apply for the purposes of—

(a)   

Part 5 of this Act (see instead section 191A), or

(b)   

Chapter 4 of Part 6 of this Act (see instead section 302A).”

4     (1)  

Schedule 4 to that Act (index of defined expressions) is amended as follows.

30

      (2)  

In column 2 of the entry for “eligible shares (in Chapter 3 of Part 6)”, for

“285(3)” substitute “285(3A) and (3B)”.

      (3)  

In column 1 of the entry for “the 30% eligible shares condition (in Chapter 3

of Part 6)”, for “30%” substitute “70%”.

      (4)  

For the entry for “permanent establishment” substitute—

35

 

“permanent establishment (except in

section 1007A

 
 

Part 5 and Chapter 4 of Part 6)

  
 

permanent establishment (in Part 5)

section 191A

 
 
 

Finance (No. 2) Bill
Schedule 2 — Venture capital schemes

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permanent establishment (in Chapter

section 302A”.

 
 

4 of Part 6)

  
 

Consequential repeal

5          

In consequence of the amendment made by paragraph 3(2), omit paragraph

562(6) of Schedule 1 to CTA 2010.

5

Commencement of amendments relating to 70% eligible shares condition

6     (1)  

The amendments made by paragraphs 2(2)(b) and (c), (3) to (6) and 4(2) and

(3) have effect in relation to accounting periods ending on or after the

commencement day.

           

This is subject to the following provisions of this paragraph.

10

      (2)  

The amendments mentioned in sub-paragraph (1) do not have effect in

relation to shares or securities held by a company (“the investing company”)

if the shares or securities—

(a)   

are issued before the commencement day, or

(b)   

are issued on or after that day and are acquired by the investing

15

company by means of the investment of protected money.

      (3)  

In this paragraph “protected money” means—

(a)   

money raised by the issue before the commencement day of shares

in or securities of the investing company, or

(b)   

money derived from the investment of such money.

20

Commencement of other provisions of this Schedule

7     (1)  

The amendments made by paragraph 1 have effect in relation to shares

issued on or after the commencement day.

      (2)  

The amendments made by paragraph 2(2)(a) and (d) have effect in relation

to accounting periods ending on or after the commencement day (and have

25

effect in relation to shares issued at any time).

      (3)  

The amendments made by paragraphs 2(7), (8) and (10) to (12), 3, 4(4) and 5

have effect in relation to shares or securities issued on or after the

commencement day.

      (4)  

The amendments made by paragraph 2(9) and (13) have effect in relation to

30

shares issued at any time.

Meaning of “the commencement day”

8     (1)  

In paragraphs 6 and 7 “the commencement day” means such day as the

Treasury may by order appoint.

      (2)  

An order may appoint different days for different provisions or different

35

purposes.

 
 

 
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