Finance (No. 3) Bill

Session 2010 - 11
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Finance (No. 3) Bill

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 3 — Capital allowances
222

(a)
which consists of every commercial letting of furnished
holiday accommodation comprised in the company’s EEA
furnished holiday lettings business, and
(b)
in relation to which the profits of which are chargeable to
corporation tax under Chapter 2 of Part 3 of CTA 2009.
5
(4)
Sections 66 and 67 apply in relation to the company’s overseas
property business as if the lettings mentioned in subsection (3)(a)
were not included in it.
(5)
Chapter 2 applies as if sections 37 to 44 and 48 to 54 were omitted.
(6)
If there is a letting of accommodation only part of which is furnished
10
holiday accommodation, just and reasonable apportionments are to
be made for the purpose of determining what is comprised in the
trade treated as carried on.”
Commencement
9
Subject to paragraphs 10 and 11, this Part has effect in relation to accounting
15
periods beginning on or after 1 April 2011.
10
Paragraph 7(3) and (4)(a) have effect in relation to accounting periods
beginning on or after 1 April 2012 (but do not have effect in relation to
relevant periods which begin before, and end on or after, 1 April 2012).
11
Paragraph 7(5) has effect where the accounting period mentioned in section
20
268A(1)(a) of CTA 2009 begins on or after 1 April 2010.
Part 3
Capital allowances
CAA 2001
12    (1)
CAA 2001 is amended as follows.
25
      (2)
After section 13A (use for other purposes of plant or machinery previously
used for long funding lease) insert—
“13B
Use for other purposes of plant or machinery: property businesses
(1)
This section applies if a person who has been using plant or
machinery for the purposes of a relevant qualifying activity—
30
(a)
ceases to use the plant or machinery for that purpose without
ceasing to use it for the purposes of another relevant
qualifying activity (“the other activity”) carried on by the
person, and
(b)
on the date of the cessation, owns the plant or machinery as a
35
result of having incurred capital expenditure on its provision
for the purposes of the other activity.
(2)
The person is to be treated—
(a)
as having incurred capital expenditure (“notional
expenditure”) on the provision of the plant or machinery for
40
the purposes of the other activity on the day after the
cessation,

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 3 — Capital allowances
223

(b)
as owning the plant or machinery as a result of having
incurred that expenditure, and
(c)
as if the plant or machinery on or after that day were different
plant or machinery from the plant or machinery before that
day.
5
(3)
Subject to subsection (4), the amount of the notional expenditure is
the market value of the plant or machinery on the date of cessation.
(4)
If the market value is greater than the actual expenditure, the amount
of the notional expenditure is the amount of the actual expenditure.
(5)
“Relevant qualifying activity” means—
10
(a)
ordinary UK property business or UK furnished holiday
lettings business, or
(b)
ordinary overseas property business or EEA furnished
holiday lettings business,

(as the case may be).”
15
      (3)
In section 15 (qualifying activities)—
(a)
in subsection (1)(b), after “ordinary” insert “UK”,
(b)
in subsection (1)(c), for “furnished” substitute “UK furnished”,
(c)
in subsection (1)(d), for “overseas” substitute “ordinary overseas”,
(d)
after subsection (1)(d) insert—
20
“(da)
an EEA furnished holiday lettings business,”,
(e)
in subsection (3)(a), after “ordinary” insert “UK”, and
(f)
in subsection (3)(b), for “overseas” substitute “ordinary overseas”.
      (4)
In section 16 (ordinary property business)—
(a)
in the heading, after “ordinary” insert “UK”,
25
(b)
after ““ordinary” insert ““UK”, and
(c)
for “furnished” substitute “UK furnished”.
      (5)
In section 17 (furnished holiday lettings businesses)—
(a)
in the heading, for “Furnished” substitute “UK furnished”,
(b)
in subsection (1), for ““furnished” substitute ““UK furnished”, and
30
(c)
in subsection (2), after “All” insert “such”.
      (6)
After section 17 insert—
“17A
Ordinary overseas property business
In this Part “ordinary overseas property business” means an
overseas property business except in so far as it is an EEA furnished
35
holiday lettings business.
17B
EEA furnished holiday lettings businesses
(1)
In this Part “EEA furnished holiday lettings business” means an
overseas property business which consists in, or so far as it consists
in, the commercial letting of furnished holiday accommodation in
40
one or more EEA states.
(2)
All such commercial lettings of furnished holiday accommodation
made by a particular person or partnership or body of persons are to
be treated as one qualifying activity.

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 3 — Capital allowances
224

(3)
Subsections (3) and (4) of section 17 are to apply for the purposes of
this section as they apply for the purposes of that section.”
      (7)
In section 28(1) and (2) (thermal insulation of buildings)
(a)
after “ordinary” insert “UK”, and
(b)
for “overseas” substitute “ordinary overseas”.
5
      (8)
In section 33(8) (personal security)—
(a)
in paragraph (b), after “ordinary” insert “UK”,
(b)
in paragraph (c), for “furnished” substitute “UK furnished”,
(c)
in paragraph (d), for “overseas” substitute “ordinary overseas”, and
(d)
omit the “or” at the end of paragraph (d), and after that paragraph
10
insert—
“(da)
an EEA furnished holiday lettings business, or”.
      (9)
In section 35(1) (expenditure on plant or machinery for use in dwelling-
house not qualifying expenditure in certain cases)—
(a)
in paragraph (a), after “ordinary” insert “UK”, and
15
(b)
in paragraph (b), for “overseas” substitute “ordinary overseas”.
     (10)
In section 63(3) (cases in which disposal value is nil)—
(a)
in paragraph (b), after “ordinary” insert “UK”,
(b)
in paragraph (c), for “furnished” substitute “UK furnished”,
(c)
in paragraph (d), for “overseas” substitute “ordinary overseas”, and
20
(d)
omit the “or” at the end of paragraph (d), and after that paragraph
insert—
“(da)
an EEA furnished holiday lettings business, or”.
     (11)
In section 248 (ordinary property businesses)—
(a)
in the heading, after “Ordinary” insert “UK”, and
25
(b)
after “ordinary” insert “UK”.
     (12)
In section 249 (furnished holiday lettings businesses)—
(a)
in the heading, for “Furnished” substitute “UK furnished”, and
(b)
in subsection (1), for “furnished” substitute “UK furnished”.
     (13)
In section 250 (overseas property businesses)—
30
(a)
in the heading, for “Overseas” substitute “Ordinary overseas”, and
(b)
for “overseas” substitute “ordinary overseas”.
     (14)
After section 250 insert—
“250A
EEA furnished holiday lettings businesses
(1)
If the qualifying activity of a person who is entitled or liable to an
35
allowance or charge for a chargeable period is an EEA furnished
holiday lettings business, the allowance or charge is to be given effect
in calculating the profits of that business by treating—
(a)
the allowance as an expense of that business, and
(b)
the charge as a receipt of that business.
40
(2)
Section 67A of CTA 2010 (letting of EEA furnished holiday
accommodation treated as trade for purposes of loss relief rules, etc)
applies to profits calculated in accordance with subsection (1).”

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 3 — Capital allowances
225

     (15)
In section 536(5)(a) (contributions not made by public bodies and not eligible
for tax relief)—
(a)
in sub-paragraph (i), after “ordinary” insert “UK”,
(b)
in sub-paragraph (ii), for “furnished” substitute “UK furnished”,
(c)
in sub-paragraph (iii), for “overseas” substitute “ordinary overseas”,
5
and
(d)
after sub-paragraph (iii) insert—
“(iiia)
an EEA furnished holiday lettings business;”.
     (16)
In Schedule A1 (first-year tax credits)—
(a)
in paragraph 5(1), for “a UK property business other than a furnished
10
holiday lettings business” substitute “an ordinary UK property
business or an ordinary overseas property business”,
(b)
in paragraph 11(1), for “or a furnished holiday lettings business”
substitute “, a UK furnished holiday lettings business or an EEA
furnished holiday lettings business”,
15
(c)
in paragraph 12(1), for “a UK property business other than a
furnished holiday lettings business” substitute “an ordinary UK
property business or an ordinary overseas property business”,
(d)
in paragraph 20—
(i)
in sub-paragraph (a), for “or a furnished holiday lettings
20
business” substitute “, a UK furnished holiday lettings
business or an EEA furnished holiday lettings business”, and
(ii)
in sub-paragraph (c), for “a UK property business (other than
a furnished holiday lettings business)” substitute “an
ordinary UK property business or an ordinary overseas
25
property business”, and
(e)
in paragraph 21(1)—
(i)
for “a UK” substitute “an ordinary UK”, and
(ii)
for “overseas” substitute “ordinary overseas”.
     (17)
In Part 2 of Schedule 1—
30
(a)
omit the entries for “furnished holiday lettings business” and
“ordinary property business”, and
(b)
at the appropriate place insert—

“EEA furnished holiday lettings
section 17B”

business

35

“ordinary UK property business
section 16”

“ordinary overseas property
section 17A”

business

“UK furnished holiday lettings
section 17”.

business

40
Commencement
13
This Part has effect—
(a)
for corporation tax purposes, in relation to chargeable periods
beginning on or after 1 April 2011, and

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 4 — Chargeable gains
226

(b)
for income tax purposes, in relation to chargeable periods beginning
on or after 6 April 2011.
Part 4
Chargeable gains
TCGA 1992
5
14    (1)
TCGA 1992 is amended as follows.
      (2)
In section 241 (furnished holiday lettings)—
(a)
in the heading, for “Furnished” substitute “UK furnished”,
(b)
in subsection (3A), omit “Schedule 6 (retirement relief etc)”, and
(c)
in subsection (4), after “furnished holiday accommodation” insert “in
10
the United Kingdom”.
      (3)
After that section insert—
“241A
EEA furnished holiday lettings
(1)
The following provisions of this section shall have effect with respect
to the treatment for the purposes of tax on chargeable gains of the
15
commercial letting of furnished holiday accommodation in EEA
states other than the United Kingdom.
(2)
For the purposes of this section as it applies to capital gains tax, the
“commercial letting of furnished holiday accommodation” has the
same meaning as it has for the purposes of Chapter 6 of Part 3 of
20
ITTOIA 2005.
(3)
For the purposes of this section as it applies to corporation tax in
respect of chargeable gains, the “commercial letting of furnished
holiday accommodation” has the same meaning as it has for the
purposes of Chapter 6 of Part 4 of CTA 2009.
25
(4)
Subject to subsections (6) to (10) below, for the purposes of the
provisions mentioned in subsection (5) below—
(a)
any overseas property business which consists of, or so far as
it consists of, the commercial letting of furnished holiday
accommodation in one or more EEA states shall be treated as
30
a trade, and
(b)
all such lettings made by a particular person or partnership
or body of persons shall be treated as one trade.
(5)
The provisions referred to in subsection (4) above are—
sections 152 to 157 (roll-over relief on replacement of business
35
assets),
section 165 (gifts relief),
section 169S(1) (entrepreneurs’ relief),
section 253 (relief for loans to traders), and
Schedule 7AC (exemptions for disposals by companies with
40
substantial shareholdings).
(6)
Subject to subsection (7) below, for the purposes of the provisions
mentioned in subsection (5) above as they apply by virtue of this

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 4 — Chargeable gains
227

section, where in any chargeable period a person makes a
commercial letting of furnished holiday accommodation in an EEA
state other than the United Kingdom—
(a)
the accommodation shall be taken to be used in that period
only for the purposes of the trade of making such lettings,
5
and
(b)
that trade shall be taken to be carried on throughout that
period.
(7)
Subsection (6) does not apply to any part of a chargeable period
during which the accommodation is neither let commercially nor
10
available to be so let unless it is prevented from being so let or
available by any works of construction or repair.
(8)
Where—
(a)
a gain to which section 222 applies accrues to any individual
on the disposal of an asset, and
15
(b)
by virtue of subsection (4) above the amount or value of the
consideration for the acquisition of the asset is treated as
reduced under section 152 or 153,

the gain to which section 222 applies shall be reduced by the amount
of the reduction mentioned in paragraph (b) above.
20
(9)
Where there is a letting of accommodation only part of which is
holiday accommodation such apportionments shall be made for the
purposes of this section as are just and reasonable.
(10)
Where a person has been charged to tax in respect of chargeable
gains otherwise than in accordance with the provisions of this
25
section, such assessment, reduction or discharge of an assessment,
or, where a claim for repayment is made, such repayment, shall be
made as may be necessary to give effect to those provisions.
(11)
In this section “overseas property business” means—
(a)
an overseas property business within the meaning of the
30
Income Tax Acts (see section 989 of ITA 2007), or
(b)
a overseas property business within the meaning of the
Corporation Tax Acts (see section 1119 of CTA 2010).”
Commencement etc
15
Subject to paragraph 16, this Part has effect—
35
(a)
for corporation tax purposes, in relation to disposals made in
accounting periods beginning on or after 1 April 2011, and
(b)
for capital gains tax purposes, in relation to disposals made on or
after 6 April 2011.
16
Section 241A of TCGA 1992, so far as it applies for the purposes of section
40
section 253 of that Act, has effect—
(a)
for corporation tax purposes, in relation claims made on or after 1
April 2011, and
(b)
for capital gains tax purposes, in relation to claims made on or after
6 April 2011.
45
17    (1)
In relation to disposals within paragraph 15 and claims within paragraph 16,
section 241A of TCGA 1992 is to be treated as having had effect on and after

Finance (No. 3) Bill
Schedule 15 — Chargeable gains: oil activities
Part 1 — Licence swaps
228

1 January 1994 in determining, for the purposes of any of the provisions
referred to in section 241A(5) of that Act, whether a trade was carried on in
any period beginning on or after that date.
      (2)
Sub-paragraph (3) has effect, for the purposes of sub-paragraph (1), in
relation to any expression in section 241A of TCGA 1992 which is defined by
5
reference to any provision of ITTOIA 2005, ITA 2007, CTA 2009 or CTA 2010.
      (3)
As respects any time before the coming into force of that provision, that
expression is to have the meaning that it had under the enactments in force
at that time.
Schedule 15
10
Section 64

Chargeable gains: oil activities
Part 1
Licence swaps
1
In section 195A of TCGA 1992 (oil licence swaps), in subsection (1), for
“195E” substitute “195F”.
15
2
After section 195E of that Act (company that gives mixed consideration)
insert—
“195F
Reimbursed expenditure
(1)
This section applies if—
(a)
expenditure is incurred by company A or company B (see
20
section 195A) on a licence disposed of by it under a licence-
consideration swap or mixed-consideration swap,
(b)
the expenditure is incurred before the disposal,
(c)
the expenditure falls within section 38(1)(b), and
(d)
the expenditure is reimbursed or effectively reimbursed
25
(whether by way of adjustment of the non-licence
consideration (if any) or otherwise) by the company (“the
other company”) to whom the disposal is made (whether
before, on or after the date of the disposal).
(2)
The expenditure is to be treated for the purposes of this Act as
30
expenditure —
(a)
incurred by the other company on the licence immediately
after the disposal, and
(b)
which falls within section 38(1)(b).”
3     (1)
Section 196 of that Act (interpretation of sections 194 to 195E) is amended as
35
follows.
      (2)
In the heading, for “195E” substitute “195F”.
      (3)
In subsection (1B), for “195E” substitute “195F”.
      (4)
In subsection (5)—
(a)
for “195E” substitute “195F”, and
40