House of Lords Amendments

House of Lords

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Finance Bill
Schedule 3 — Sideways relief etc
70

      (2)
After subsection (1) insert—
“(1A)
The first regulations under section 213L(1) may not be made unless
a draft of the instrument containing them has been laid before, and
approved by a resolution of, the House of Commons.”
      (3)
In subsection (2), after “Part” insert “(other than one of which a draft has
5
been approved by a resolution of the House of Commons)”.
4
In Schedule 34 (non-UK schemes: application of certain charges), after
paragraph 7A insert—
“High income excess relief charge
7B    (1)
The Commissioners for Her Majesty’s Revenue and Customs may
10
by regulations make provision for the provisions of this Part of
this Act relating to the high income excess relief charge to apply in
relation to individuals who are or have been members of a
currently-relieved non-UK pension scheme subject to
modifications contained in the regulations.
15
      (2)
Regulations under sub-paragraph (1) may—
(a)
include provision having effect in relation to times before
they are made,
(b)
confer discretion on the Commissioners for Her Majesty’s
Revenue and Customs or officers of Revenue and
20
Customs, and
(c)
make different provision for different cases.”
5
The amendments made by this Schedule have effect for the tax year 2011-12
and subsequent tax years.
Schedule 3
25
Section 24

Sideways relief etc
Amendments of Chapter 2 of Part 4 of ITA 2007
1
Chapter 2 of Part 4 of ITA 2007 (trade losses) is amended as follows.
2
In section 60(1)(c) (overview of Chapter), for “(see sections 75” substitute
“and capital gains relief (see sections 74ZA”.
30
3
In section 64(8) (deduction of losses from general income)—
(a)
in paragraph (ba), for “74A” substitute “74ZA”,
(b)
at the end of paragraph (c), insert “and”, and
(c)
omit paragraph (e).
4
In section 72(5) (relief for individuals for losses in first 4 years of trade)—
35
(a)
in paragraph (ba), for “74A” substitute “74ZA”,
(b)
at the end of paragraph (c), insert “and”, and
(c)
omit paragraph (e).

Finance Bill
Schedule 3 — Sideways relief etc
71

5
Before section 74A insert—
“74ZA
No relief for tax-generated losses
(1)
This section applies if—
(a)
during a tax year a person carries on (alone or in partnership)
a trade, profession or vocation (“the relevant activity”),
5
(b)
the person makes a loss in the relevant activity in that tax
year, and
(c)
the loss arises directly or indirectly in consequence of, or
otherwise in connection with, relevant tax avoidance
arrangements.
10
(2)
No sideways relief or capital gains relief may be given to the person
for the loss (but subject to subsection (5)).
(3)
In subsection (1) “relevant tax avoidance arrangements” means
arrangements—
(a)
to which the person is a party, and
15
(b)
the main purpose, or one of the main purposes, of which is
the obtaining of a reduction in tax liability by means of
sideways relief or capital gains relief.
(4)
In subsection (3) “arrangements” includes any agreement,
understanding, scheme, transaction or series of transactions
20
(whether or not legally enforceable).
(5)
This section has no effect in relation to any loss that derives wholly
from qualifying film expenditure (see section 74D).
(6)
For the purposes of this section—
(a)
capital gains relief is, in relation to a loss, the treatment of a
25
loss as an allowable loss by virtue of section 261B of TCGA
1992 (use of trading loss as a CGT loss), and
(b)
capital gains relief is given for a loss when it is so treated.”
6
Omit section 74B (no relief for tax-generated losses in case of non-active
individuals carrying on trade).
30
7     (1)
Section 74C (meaning of “non-active capacity” for purposes of sections 74A
and 74B etc) is amended as follows.
      (2)
In subsection (1), for “sections 74A and 74B” substitute “section 74A”.
      (3)
In the heading, for “sections 74A and 74B” substitute “section 74A”.
8     (1)
Section 74D (meaning of “qualifying film expenditure” for purposes of
35
sections 74A and 74B) is amended as follows.
      (2)
In subsections (1) and (4), for “74A and 74B” substitute “74ZA and 74A”.
      (3)
In the heading, for “74A and 74B” substitute “74ZA and 74A”.
9
Omit section 81 (dealings in commodity futures).
Other amendments
40
10
In FA 2009, in Schedule 6, in paragraph 1(11)—
(a)
in paragraph (b), for “74B” substitute “74ZA”,

Finance Bill
Schedule 4 — Capital allowance buying
72

(b)
at the end of paragraph (c), insert “and”, and
(c)
omit paragraph (e) (and the “and” before it).
Commencement
11    (1)
The amendments made by this Schedule have effect in relation to a loss if it
arises directly or indirectly in consequence of, or otherwise in connection
5
with—
(a)
arrangements which are entered into on or after 21 October 2009, or
(b)
any transaction forming part of arrangements which is entered into
on or after that date.
      (2)
But those amendments do not have effect where the arrangements are, or
10
any such transaction is, entered into pursuant to an unconditional obligation
in a contract made before that date.
      (3)
“An unconditional obligation” means an obligation which may not be varied
or extinguished by the exercise of a right (whether or not under the contract).
Schedule 4
15
Section 26

Capital allowance buying
1
Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.
2
After Chapter 16 insert—
“Chapter 16A
Avoidance involving allowance buying
20
Introduction
212A
Scope of Chapter
  This Chapter provides for restrictions on the ways in which effect
may be given to an allowance in certain circumstances where there
has been a qualifying change in relation to a company (“C”).
25
212B
Where Chapter applies
(1)
This Chapter applies where—
(a)
C carries on a trade (“the relevant trade”) (whether or not in
partnership with another person or other persons),
(b)
there is a qualifying change in relation to C on any day (“the
30
relevant day”),
(c)
C, or (where the relevant trade is carried on in partnership)
the partnership (“P”), has a relevant excess of allowances in
relation to the relevant trade, and
(d)
the qualifying change has an unallowable purpose.
35
(2)
Sections 212C to 212I specify when there is a qualifying change in
relation to C on the relevant day.

Finance Bill
Schedule 4 — Capital allowance buying
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(3)
Sections 212J to 212L specify when C or P has a relevant excess of
allowances in relation to the relevant trade.
(4)
Section 212M specifies when the qualifying change has an
unallowable purpose.
(5)
Sections 212N to 212S make provision about what happens when this
5
Chapter applies.
Qualifying change
212C
When there is qualifying change in relation to C
(1)
There is a qualifying change in relation to C on the relevant day if one
or more of conditions A to D is met.
10
(2)
Condition A is that—
(a)
the principal company or companies of C at the beginning of
the relevant day is not, or are not, the same as at the end of
that day, or
(b)
there is no principal company of C at the beginning of the
15
relevant day but there is one, or are more than one, at the end
of the relevant day.
(3)
Condition B is that—
(a)
any principal company of C is a consortium principal
company (“CPC”), and
20
(b)
CPC’s ownership proportion at the end of the relevant day is
more than at the beginning of the relevant day.
(4)
Condition C is that on the relevant day—
(a)
C ceases to carry on the whole or part of the relevant trade,
and
25
(b)
it begins to be carried on in partnership by two or more
companies,

in circumstances in which Chapter 1 of Part 22 of CTA 2010 (transfers
of trade without change of ownership) applies in relation to the
transfer of the relevant trade.
30
(5)
Condition D is that—
(a)
the relevant trade is, at the beginning of the relevant day,
carried on by C in partnership, and
(b)
C’s relevant percentage share in the relevant trade at the end
of the relevant day is less than at the beginning of the relevant
35
day (or is nil).
212D
Guide to sections explaining section 212C
(1)
Section 212E explains—
(a)
what are principal companies of C, and
(b)
which are consortium principal companies of C,
40

for the purposes of section 212C(2) and (3).
(2)
Section 212F explains—
(a)
when a company is owned by a consortium, and
(b)
who are the members of the consortium,

Finance Bill
Schedule 4 — Capital allowance buying
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for the purposes of section 212E.
(3)
Section 212G explains the meaning of “qualifying 75% subsidiary”
for the purposes of sections 212E and 212F.
(4)
Section 212H explains the meaning of “ownership proportion” in
section 212C(3).
5
(5)
Section 212I explains the meaning of “relevant percentage share” in
section 212C(5).
212E
Principal companies
(1)
A company (“U”) is a principal company of C if—
(a)
C is a qualifying 75% subsidiary of U, and
10
(b)
U is not a qualifying 75% subsidiary of another company.
(2)
A company (“V”) is a principal company of C if—
(a)
C is a qualifying 75% subsidiary of U,
(b)
U is a qualifying 75% subsidiary of V, and
(c)
V is not a qualifying 75% subsidiary of another company.
15
(3)
If V is a qualifying 75% subsidiary of another company (“W”), W is a
principal company of C unless W is a qualifying 75% subsidiary of
another company, and so on.
(4)
A company (“X”) is a principal company of C if—
(a)
C is owned by a consortium of which X is a member, or
20
(b)
C is a qualifying 75% subsidiary of a company owned by a
consortium of which X is a member,

and X is not a qualifying 75% subsidiary of another company.
(5)
A company (“Y”) is a principal company of C if—
(a)
C is owned by a consortium of which X is a member, or
25
(b)
C is a qualifying 75% subsidiary of a company owned by a
consortium of which X is a member,

and X is a qualifying 75% subsidiary of Y but Y is not a qualifying
75% subsidiary of another company.
(6)
If Y is a qualifying 75% subsidiary of another company (“Z”), Z is a
30
principal company of C unless Z is a qualifying 75% subsidiary of
another company, and so on.
(7)
A company that is a principal company of C by virtue of any of
subsections (4) to (6) is a consortium principal company of C.
212F
When company is owned by consortium and consortium members
35
(1)
This section defines what a company being owned by, or a member
of, a consortium means for the purposes of section 212E.
(2)
A company is owned by a consortium if—
(a)
it is not a qualifying 75% subsidiary of another company,
(b)
at least 75% of its ordinary share capital is beneficially owned
40
between them by other companies, and
(c)
none of those other companies owns less than 5% of that
capital.

Finance Bill
Schedule 4 — Capital allowance buying
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(3)
Those other companies are the members of the consortium.
212G
Qualifying 75% subsidiaries
(1)
For the purposes of sections 212E and 212F a company (“the
subsidiary company”) is a qualifying 75% subsidiary of another
company (“the parent company”) if condition 1 or 2 is met and
5
condition 3 is met.
(2)
Condition 1 is that—
(a)
the subsidiary company has ordinary share capital, and
(b)
the subsidiary company is a 75% subsidiary of the parent
company (see section 1154(3) of CTA 2010).
10
(3)
Condition 2 is that—
(a)
the subsidiary company does not have ordinary share capital,
and
(b)
the parent company has control of the subsidiary company.
(4)
Condition 3 is that the parent company—
15
(a)
is beneficially entitled to at least 75% of any profits available
for distribution to equity holders of the subsidiary company,
and
(b)
would be beneficially entitled to at least 75% of any assets of
the subsidiary company available for distribution to its
20
equity holders on a winding-up.
(5)
Chapter 6 of Part 5 of CTA 2010 (equity holders and profits or assets
available for distribution) applies for the purposes of subsection (4)
as that Chapter applies for the purposes of section 151(4)(a) and (b)
of that Act (meaning of “75% subsidiary”).
25
(6)
But in a case where the subsidiary company does not have ordinary
share capital, Chapter 6 of Part 5 of that Act applies for those
purposes as if the members of that company were equity holders of
that company for the purposes of that Chapter.
212H
Ownership proportion
30
(1)
For the purposes of section 212C(3) CPC’s “ownership proportion” is
the lowest of—
(a)
the percentage of the ordinary share capital of C that is
beneficially owned by CPC,
(b)
the percentage to which CPC is beneficially entitled of any
35
profits available for distribution to equity holders of C, and
(c)
the percentage to which CPC would be beneficially entitled
of any assets of C available for distribution to its equity
holders on a winding-up.
(2)
Chapter 6 of Part 5 of CTA 2010 applies for the purposes of
40
subsection (1) as that Chapter applies for the purposes of section
143(3)(b) and (c) (condition 1: surrendering company owned by
consortium) and section 144(3)(b) and (c) (condition 1: claimant
company owned by consortium) of that Act.
(3)
But in a case where the subsidiary company does not have ordinary
45
share capital, Chapter 6 of Part 5 of that Act applies for those

Finance Bill
Schedule 4 — Capital allowance buying
76

purposes as if the members of that company were equity holders of
that company for the purposes of that Chapter.
212I
Relevant percentage share
(1)
For the purposes of section 212C(5) C’s “relevant percentage share”
is C’s percentage share in the profits or losses of the trade.
5
(2)
For this purpose C’s percentage share in the profits or losses of a
trade at any time is determined on a just and reasonable basis.
(3)
In making that determination regard must be had, in particular, to
any matter that would be taken into account in determining under
section 1262 of CTA 2009 (but without regard to sections 1263 and
10
1264 of that Act) the company’s share at that time in the profits or
losses of the trade.
Relevant excess of allowances
212J
Relevant excess of allowances
(1)
C or P has a relevant excess of allowances in relation to the relevant
15
trade if—
            RTWDV > BSV
(2)
Section 212K defines RTWDV and section 212L defines BSV.
(3)
References in this Chapter to plant and machinery do not include
excluded plant and machinery.
(4)
Plant and machinery is “excluded plant and machinery” if—
20
(a)
expenditure incurred on the provision of it is not, as a result
of section 34A, qualifying expenditure for the purposes of
this Part, or
(b)
it is, as a result of section 67, treated for the purposes of this
Part as owned otherwise than by C or P.
25
212K
Relevant tax written-down value
(1)
RTWDV is the relevant tax written-down value and is to be found by
adding together amounts 1 and 2.
(2)
Amount 1 is the total amount of any unrelieved qualifying
expenditure in respect of plant and machinery contained in—
30
(a)
single asset pools,
(b)
class pools, or
(c)
the main pool,

which is available to be carried forward (in accordance with section
59) from the old period and used in calculating the profits of the
35
relevant trade.
(3)
Amount 2 is the total of any qualifying expenditure incurred on the
provision of a ship for the purposes of the relevant trade which, at
the end of the old period, is unrelieved by virtue of notice having
been given under section 130.
40
(4)
For the purposes of this Part the amount of unrelieved qualifying
expenditure contained in any pool which is available to be carried



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