Finance (No. 3) Bill

Session 2010 - 11
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Other Bills before Parliament

Finance (No. 3) Bill

Finance (No. 3) Bill
Part 2 — Income tax, corporation tax and capital gains tax
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to relief from capital gains tax in respect of the
investments,
(c)
the reference in section 695A(4) to that Chapter is to be
read as a reference to this section, and
(d)
that Chapter has effect as if sections 699(9) and 701(6)
5
were omitted.”
41
Gift aid: increase of limits on total value of benefits associated with gifts
(1)
In section 418 of ITA 2007 (gifts to charities by individuals: restrictions on
associated benefits), in subsection (3), for “£500” substitute “£2,500”.
(2)
In section 197 of CTA 2010 (gifts to charities by companies: restrictions on
10
associated benefits), in subsection (3), for “£500” substitute “£2,500”.
(3)
Accordingly, omit section 60(1)(b) of FA 2007.
(4)
The amendments made by subsections (1) and (3) have effect in relation to gifts
made on or after 6 April 2011.
(5)
The amendment made by subsection (2) has effect in relation to gifts made in
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an accounting period ending on or after 1 April 2011.
42
Enterprise investment scheme: amount of relief
(1)
Part 5 of ITA 2007 (enterprise investment scheme) is amended in accordance
with subsections (2) to (4).
(2)
In section 158 (form and amount of EIS relief), in subsection (2A) for “20%”
20
substitute “30%”.
(3)
In the following provisions for “EIS rate” substitute “EIS original rate”—
(a)
section 209(3);
(b)
section 210(1)(b);
(c)
section 213(2);
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(d)
section 220(1)(b);
(e)
section 224(2);
(f)
section 229(1)(b).
(4)
After section 256 insert—
“256A
Meaning of “the EIS original rate”
30
In this Part “the EIS original rate”, in relation to EIS relief, means the EIS
rate for the tax year for which the EIS relief was obtained.”
(5)
In Schedule 4 to that Act (index of defined expressions), at the appropriate
place insert—

“EIS original
section 256A”

35

rate (in Part 5)

(6)
This section comes into force on such day as the Treasury may by order
appoint.

Finance (No. 3) Bill
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(7)
The amendments made by this section have effect in relation to the tax year
2011-12 and subsequent tax years.
(8)
But where the EIS relief attributable to shares was obtained for the tax year
2007-08 or an earlier tax year, the references to the EIS original rate in the
provisions mentioned in paragraph (a) to (f) of subsection (3) are to be read as
5
references to 20%.
43
Relief for expenditure on R&D by SMEs
(1)
Part 13 of CTA 2009 (additional relief for expenditure on research and
development) is amended as follows.
(2)
Chapter 2 (relief for small or medium-sized enterprises (“SMEs”)) is amended
10
in accordance with subsections (3) to (6).
(3)
In section 1044 (additional deduction in calculating profits of trade), in
subsection (8), for “75%” substitute “100%”.
(4)
In section 1045 (alternative treatment for pre-trading expenditure: deemed
trading loss), in subsection (7), for “175%” substitute “200%”.
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(5)
In section 1055 (tax credit: meaning of “Chapter 2 surrenderable loss”), in
subsection (2)(b), for “175%” substitute “200%”.
(6)
In section 1058 (amount of tax credit), in subsection (1)(a), for “14%” substitute
“12.5%”.
(7)
Chapter 7 (relief for SMEs and large companies: vaccine research etc) is
20
amended in accordance with subsections (8) to (11).
(8)
In section 1089 (SMEs: amount of deduction), in subsection (2), for “40%”
substitute “20%”.
(9)
In section 1090 (modification of section 1089 for larger SMEs), in subsection (2),
for “40%” substitute “20%”.
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(10)
In section 1092 (SMEs: deemed trading loss for pre-trading expenditure), in
subsection (8)—
(a)
in paragraph (a), for “40%” substitute “20%”, and
(b)
in paragraph (b), for “140%” substitute “120%”.
(11)
In section 1104 (tax credit: meaning of “Chapter 7 surrenderable loss”), in
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subsection (5), for “140%” substitute “120%”.
(12)
This section comes into force on such day as the Treasury may by order
appoint.
(13)
The amendments made by this section have effect in relation to expenditure
incurred on or after 1 April 2011.
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Chargeable gains
44
Value shifting
Schedule 9 contains provision about value shifting.

Finance (No. 3) Bill
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Company ceasing to be member of a group
Schedule 10 contains provision about the consequences, for the purposes of
corporation tax on chargeable gains, of a company ceasing to be a member of a
group.
46
Pre-entry losses
5
Schedule 11 contains provision about losses accruing to a company before the
time when it becomes a member of a group of companies and losses accruing
on assets held by a company at such a time.
Foreign profits
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Controlled foreign companies
10
Schedule 12 contains provision in relation to controlled foreign companies.
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Profits of foreign permanent establishments etc
Schedule 13 contains provision about the profits of foreign permanent
establishments of UK resident companies etc.
Investment trusts
15
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Meaning of “investment trust”
(1)
Chapter 4 of Part 24 of CTA 2010 (investment trusts) is amended as follows.
(2)
For section 1158 (meaning of “investment trust” in the Corporation Tax Acts)
substitute—
“1158
Meaning of “investment trust”
20
(1)
For the purposes of the Corporation Tax Acts a company is an
“investment trust” with respect to an accounting period if—
(a)
conditions A to C are met throughout the period, and
(b)
the company is approved for the period by the Commissioners
for Her Majesty’s Revenue and Customs (see section 1159).
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(2)
Condition A is that the business of the company consists of investing its
funds in shares, land or other assets with the aim of spreading
investment risk and giving members of the company the benefit of the
results of the management of its funds.
(3)
Condition B is that the shares making up the company’s ordinary share
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capital (or, if there are such shares of more than one class, those of each
class) are admitted to trading on a regulated market.
(4)
For this purpose “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)).
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(5)
Condition C is that the company is not—
(a)
a venture capital trust (within the meaning of Part 6 of ITA
2007), or

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(b)
a company UK REIT (within the meaning of Part 12 of this Act).
(6)
The Treasury may by regulations provide—
(a)
for one or both of conditions A and B to be treated as met in the
cases, and subject to any conditions, specified in the regulations,
and
5
(b)
for the period for which the condition or conditions are treated
as met.
(7)
The Treasury may also by regulations amend subsection (3) or (4).
(8)
A statutory instrument containing the first regulations under
subsection (6) may not be made unless a draft of the instrument has
10
been laid before and approved by a resolution of the House of
Commons.
(9)
Any other statutory instrument containing regulations under this
section is subject to annulment in pursuance of a resolution of the
House of Commons.”
15
(3)
For section 1159 (conditions for approval) substitute—
“1159
Approval
(1)
The Treasury may by regulations make provision about the approval of
a company for an accounting period for the purposes of section
1158(1)(b), including provision about—
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(a)
applications for approval,
(b)
the determination of applications for approval,
(c)
requirements to be met by the company while approved,
(d)
the withdrawal of approval by notice, or
(e)
the consequences of the withdrawal of approval.
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(2)
The regulations may, in particular—
(a)
include provision under which an application for approval—
(i)
is to be made by reference to the accounting period in
which the application is made or such earlier or later
accounting period as may be specified in the
30
application, and
(ii)
is to constitute an application for approval for that and
all subsequent accounting periods,
(b)
specify the form and content of, and information to accompany,
an application,
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(c)
permit or require the Commissioners to grant or refuse an
application where conditions specified in the regulations are
met (or appear to the Commissioners to be met) in relation to
the company,
(d)
permit or require the Commissioners to withdraw approval
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where—
(i)
conditions specified in the regulations are met (or
appear to the Commissioners to be met) in relation to the
company, or
(ii)
the company has failed to comply with requirements
45
imposed by the regulations,

Finance (No. 3) Bill
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(e)
include provision prohibiting a company from which approval
has been withdrawn from reapplying, or
(f)
include provision under which approval may or must be
withdrawn in relation to an accounting period that ends before
the notice withdrawing approval is given.
5
(3)
Regulations under this section—
(a)
may make different provision for different cases or purposes,
and
(b)
may make incidental, consequential, supplementary or
transitional provision.
10
(4)
A statutory instrument containing the first regulations under this
section may not be made unless a draft of the instrument has been laid
before and approved by a resolution of the House of Commons.
(5)
Any other statutory instrument containing regulations under this
section is subject to annulment in pursuance of a resolution of the
15
House of Commons.
(6)
In this section “the Commissioners” means the Commissioners for Her
Majesty’s Revenue and Customs.”
(4)
Omit sections 1160 to 1165 (which relate to the interpretation of the provisions
replaced by this section).
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(5)
In Schedule 4 (index of defined expressions), omit the following entries—
“company (in Chapter 4 of Part 24)”
“scheme of reconstruction (in Chapter 4 of Part 24)”
“shares (in Chapter 4 of Part 24)”.
(6)
The amendments made by this section have effect in relation to accounting
25
periods beginning on or after such day as the Treasury may by order appoint.
50
Power to make provision about treatment of transactions
In Part 13 of CTA 2010 (special types of company etc), after Chapter 3 insert—
“Chapter 3A
Investment trusts
30
622A
Power to make provision about treatment of transactions
(1)
The Treasury may by regulations provide that a transaction of a
specified kind entered into by an investment trust is to be treated for the
purposes of the Corporation Tax Acts as entered into by it otherwise
than in the course of a trade.
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(2)
Regulations under this section—
(a)
may make different provision for different cases or purposes,
and
(b)
may make incidental, consequential, supplementary or
transitional provision.
40

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(3)
A statutory instrument containing the first regulations under this
section may not be made unless a draft of the instrument has been laid
before and approved by a resolution of the House of Commons.
(4)
Any other statutory instrument containing regulations under this
section is subject to annulment in pursuance of a resolution of the
5
House of Commons.
(5)
In this section “specified” means specified in regulations under this
section.”
Miscellaneous
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Taxable benefits: calculating the appropriate percentage for cars
10
(1)
In section 139 of ITEPA 2003 (cars with a CO2 emissions figure: the appropriate
percentage), as substituted by section 59 of FA 2010 with effect for the tax year
2012-13 and subsequent tax years, in subsection (5) for “100 grams” substitute
“95 grams”.
(2)
The amendment made by this section has effect for the tax year 2013-14 and
15
subsequent tax years.
52
Furnished holiday lettings
Schedule 14 contains provisions about furnished holiday lettings.
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Leases and changes to accounting standards
(1)
This section applies where there is a change in a leasing accounting standard
20
which—
(a)
occurs on or after 1 January 2011, and
(b)
is not within subsection (3),

(in this section referred to as a “leasing change”).
(2)
“Leasing accounting standard” means—
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(a)
International Accounting Standard 17 (leases) issued by the
International Accounting Standards Board,
(b)
Statement of Standard Accounting Practice 21 (accounting for leases
and hire purchase contracts) recognised by the Accounting Standards
Board,
30
(c)
the part of the International Financial Reporting Standard for Small and
Medium-sized Entities issued by the International Accounting
Standards Board which relates specifically to leases,
(d)
the part of the Financial Reporting Standard for Smaller Entities issued
by the Accounting Standards Board which relates specifically to leases,
35
or
(e)
any accounting standard, or part of an accounting standard, which
replaces (wholly or in part) a standard or part mentioned in paragraphs
(a) to (d).
(3)
A change is within this subsection if, and to the extent that, it is one which
40
permits or requires persons, when preparing accounts in accordance with UK
GAAP, to account for a lease, or a transaction accounted for as a lease, in a

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manner equivalent to that provided for by the International Financial
Reporting Standard for Small and Medium-sized Entities issued by the
International Accounting Standards Board (disregarding any leasing change
which may be made to that Standard).
(4)
Changes within subsection (1) include those which may or must be adopted for
5
periods of account which fall wholly or partly before the time the change
occurs or before the day on which this Act is passed.
(5)
For the purposes of the Taxes Acts any reference in those Acts (other than this
section)—
(a)
to a thing being determined or done in accordance with or by reference
10
to generally accepted accounting practice, or
(b)
to accounts prepared (or not prepared) in accordance with
international accounting standards or UK GAAP,

is to be construed as if any leasing change had not occurred.
(6)
Section 997 of ITA 2007 and section 1127 of CTA 2010 (meaning of “generally
15
accepted accounting practice” and related expressions in the Tax Acts) have
effect subject to subsection (5).
(7)
Where a person first prepares or is required to prepare accounts in accordance
with new standards for a period of account (“the relevant period”)—
(a)
subsection (8) applies if, for the period of account immediately before
20
the relevant period, the person prepared or was required to prepare
accounts in accordance with old standards, and
(b)
subsection (9) applies in any other case.
(8)
Where this subsection applies, the Taxes Acts (other than this section) have
effect as if the person prepared or was required to prepare accounts, for the
25
relevant period and any later period of account, in accordance with those old
standards.
(9)
Where this subsection applies, the Taxes Acts (other than this section) have
effect as if the person prepared or was required to prepare accounts, for the
relevant period and any later period of account, in accordance with the
30
corresponding old standards.
(10)
For the purposes of subsection (9)—
(a)
if the new standards are international accounting standards, the
corresponding old standards are international accounting standards
disregarding any leasing change, and
35
(b)
if the new standards are UK GAAP, the corresponding old standards
are UK GAAP disregarding any leasing change.
(11)
In this section—
“accounting body” means the International Accounting Standards Board
or the Accounting Standards Board, or a successor body to either of
40
those Boards;
“accounting standard” includes any statement of practice, guidance or
other similar document issued or recognised by an accounting body;
“change”, in relation to a leasing accounting standard, means the issue,
revocation, amendment or recognition of, or withdrawal of recognition
45
from, the standard by an accounting body;
“international accounting standards” has the same meaning as in section
1127 of CTA 2010;