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Finance Act 2010

Type Public General Act

Publication 2010-04-08

Last updated 2023-07-11

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(4) Nothing in sub-paragraph (1) permits a taxable company to amend its return to revise an amount determined under paragraph 7(2), 12(2) or 13(3) merely because the amount determined under that provision differs from the amount which is actually paid or provided (or loaned).

Correction of return by HMRC

22

(1) HMRC may amend a bank payroll tax return so as to correct obvious errors or omissions in it (whether errors of principle, arithmetical mistakes or otherwise).

(2) A correction under this paragraph is made by notice to the taxable company concerned.

(3) No such correction may be made more than 9 months after—

(a) the day on which the return was delivered, or

(b) if the correction is required in consequence of an amendment made under paragraph 21, the day on which that amendment was made.

(4) A correction under this paragraph is of no effect if the taxable company gives notice rejecting it.

(5) Notice of rejection must be given—

(a) to the officer of Revenue and Customs by whom the correction notice was given, and

(b) before the end of the period of 30 days beginning with the date on which the correction notice was given.

Enquiry into return

23

(1) HMRC may enquire into a bank payroll tax return if they give notice to the taxable company of their intention to do so within the time allowed.

(2) If the return was delivered on or before 31 August 2010, notice of enquiry may be given at any time on or before 31 August 2011.

(3) If the return was delivered after 31 August 2010, notice of enquiry may be given at any time up to and including whichever of 31 January, 30 April, 31 July or 31 October next follows the first anniversary of the day on which the return was delivered.

(4) An enquiry extends to anything contained in the return or required to be contained in the return.

(5) The following provisions of Schedule 18 to FA 1998 apply to an enquiry into a bank payroll tax return under this Schedule as they apply to an enquiry into a company tax return under that Schedule—

(a) paragraph 24(4) to (5) (notice of enquiry),

(b) paragraph 25(2) (enquiry following amendment by company) (but as if the reference there to paragraph 24(2) or (3) were to sub-paragraph (2) or (3) of this paragraph),

(d) paragraphs 31A to 31D (referral of questions to the tribunal during enquiry),

(e) paragraph 32(1) (completion of enquiry),

(f) paragraph 33 (direction to complete enquiry), and

(g) paragraph 34 (amendment of return after enquiry).

Determination by HMRC

24

(1) HMRC may determine to the best of their knowledge and belief the amount of bank payroll tax payable by a taxable company if the company has not delivered a bank payroll tax return on or before 31 August 2010.

(2) Notice of the determination—

(a) must be served on the company, and

(b) must state the date on which it is given.

(3) The amount determined by HMRC is taken to be the amount payable by the company (in the same way as if it were an assessment) unless and until the determination is superseded by a relevant assessment.

(4) A relevant assessment is an assessment—

(a) included in a bank payroll tax return delivered by the company within the period of 12 months beginning with the date on which notice of the determination was given, or

(b) made by HMRC under paragraph 20 following delivery of such a return.

(5) If—

(a) proceedings have been commenced for the recovery of an amount determined by HMRC under this paragraph, and

(b) before the proceedings are concluded, the determination is superseded by a relevant assessment,

the proceedings may be continued as if they were proceedings for the recovery of so much of the tax shown in the assessment as has not been paid.

(6) No determination may be made under this paragraph after 31 August 2013.

Discovery assessment by HMRC

25

(1) This paragraph applies if HMRC discover, with respect to a taxable company, any of the following situations—

(a) an amount which ought to have been assessed to bank payroll tax has not been assessed,

(b) an assessment to bank payroll tax is insufficient, or

(2) HMRC may make an assessment (a “discovery assessment”) in the amount or further amount which ought in their opinion to be charged or recovered in order to make good to the Crown the loss of bank payroll tax.

(3) If the company has delivered a bank payroll tax return, HMRC may only make a discovery assessment if condition A or condition B is met.

(4) Condition A is that the situation discovered by HMRC was brought about carelessly or deliberately by the company or a person acting on its behalf.

(5) Condition B is that HMRC could not reasonably have been expected to be aware of the situation at the time when they—

(a) ceased to be entitled to give notice of enquiry into the return, or

(b) completed their enquiries into the return.

26

Notice of a discovery assessment—

(a) must be served on the taxable company, and

(b) must state the date on which it is given and the time by which an appeal may be brought against it.

27

(1) No discovery assessment may be made after the relevant deadline.

(2) The relevant deadline is 5 April 2030 if the situation—

(a) was brought about deliberately by the taxable company, or

(b) was attributable to the taxable company's careless failure to deliver a bank payroll tax return on or before 31 August 2010.

(3) Subject to sub-paragraph (2)(b), the relevant deadline is 5 April 2016 if the situation was brought about carelessly by the taxable company.

(4) In all other cases, the relevant deadline is 5 April 2014.

(5) In this paragraph—

(a) references to the situation are to the one discovered by HMRC, and

(b) references to the taxable company include a person acting on the company's behalf.

28

(1) If a discovery assessment is made with respect to a taxable company, the company may appeal against it.

(2) Notice of appeal must be given—

(a) in writing,

(b) within the period of 30 days beginning with the date on which notice of the assessment was given, and

(3) Any objection to a discovery assessment on the ground that paragraph 25, 26 or 27 was not complied with can only be made on an appeal against the assessment under this paragraph.

Collection and recovery

29

(1) HMRC may publish requirements as to the method or methods of payment to be used by taxable companies for paying bank payroll tax.

(2) Part 6 of TMA 1970 (collection and recovery) applies in relation to a charge to bank payroll tax as it applies in relation to a charge to corporation tax.

(3) See also Chapter 5 of Part 7 of FA 2008 (which makes general provision about payment and enforcement).

Interest on late payments and repayments

30

(1) This paragraph applies if an order is made under section 104(3) of FA 2009 appointing a day on which sections 101 to 103 of that Act are to come into force for the purposes of bank payroll tax.

(2) Part 2 of Schedule 53 to that Act (which makes special provision about the late payment interest start date) has effect for those purposes as if—

(a) the reference in paragraph 4(1) to income tax or capital gains tax included a reference to bank payroll tax, and

(b) the Part included a provision that the late payment interest start date in respect of an amount of bank payroll tax assessed and recoverable under paragraph 25(1)(c) of this Schedule is 31 August 2010.

(3) Interest charged under section 101 of FA 2009 on an amount of bank payroll tax may be enforced as if it were an amount of bank payroll tax payable by the taxable company.

Overpaid tax etc

31

(1) Paragraphs 50 to 51G of Schedule 18 to FA 1998 (overpaid tax etc) apply (so far as relevant) to bank payroll tax assessable for the chargeable period as they apply to corporation tax assessable for an accounting period, subject to the following modifications.

(2) With respect to bank payroll tax, a claim under paragraph 51 may not be made after 31 August 2014.

(3) For the purposes of paragraph 51E, the relevant restrictions for making a discovery assessment under this Schedule are—

(a) the conditions mentioned in paragraph 25(3), and

(b) expiry of the relevant deadline as defined in paragraph 27.

(4) Nothing in sub-paragraph (1) permits a taxable company to make a claim under paragraph 51 of Schedule 18 to FA 1998 with respect to bank payroll tax merely because an amount determined under paragraph 7(2), 12(2) or 13(3) differs from the amount which is actually paid or provided (or loaned).

Appeals and other proceedings

32

(1) Part 5 of TMA 1970 (appeals and other proceedings) applies in relation to an appeal against a discovery assessment to bank payroll tax as it applies in relation to an appeal against an assessment to corporation tax.

(2) References in that Part to tax are to be read accordingly.

33

(1) Where a provision of FA 1998 is applied by this Part of this Schedule, a reference in section 46D of TMA 1970 (questions to be determined by the relevant tribunal) to that provision includes a reference to that provision as so applied.

(2) A reference in section 48 of TMA 1970 (application to appeals and other proceedings) to the Taxes Acts includes a reference to those Acts as applied by this Part of this Schedule.

(3) Where a provision of FA 1998 is applied by this Part of this Schedule—

(a) a reference in section 55 of TMA 1970 (recovery of tax not postponed) to that provision includes a reference to that provision as so applied, and

(b) references in that section to tax are to be read accordingly.

Obligation to preserve records

34

(1) Each taxable company must—

(a) keep such records as may be needed to enable it to establish and verify the amount of bank payroll tax payable by it and to deliver a correct and complete bank payroll tax return, and

(b) preserve those records, and any other relevant records, until the end of 31 August 2016.

(2) Other relevant records are records that—

(a) may be needed for a purpose mentioned in sub-paragraph (1)(a), and

(b) are in the company's possession or power immediately before the commencement of this Schedule.

(3) The obligation under sub-paragraph (1)(b) may be discharged by—

(a) preserving the records in any form and by any means, or

(b) preserving the information contained in them in any form and by any means.

(4) The obligation under sub-paragraph (1)(b) includes an obligation to preserve supporting documents (such as contracts, accounts and correspondence).

35

(1) A taxable company which fails to comply with paragraph 34 is liable to a penalty of an amount not exceeding £3,000.

(2) Sections 100 to 102 of TMA 1970 apply to a penalty under this paragraph as they apply to a penalty under section 12B(5) of that Act.

Information powers

36

(1) Schedule 36 to FA 2008 (information and inspection powers) has effect as if the definition of tax in paragraph 63(1) included bank payroll tax.

(2) Paragraph 21 of that Schedule (taxpayer notices) applies where a taxable company has made a bank payroll tax return as it applies where a person has made a company tax return and, in relation to bank payroll tax—

(a) a reference in that paragraph to a chargeable period is to the chargeable period within the meaning of this Schedule, and

(b) a reference in that paragraph to a notice of enquiry is to a notice of enquiry under paragraph 23 of this Schedule.

Penalties

37

(1) Schedule 24 to FA 2007 (penalties for errors) has effect as if in the Table in paragraph 1—

(a) the list of taxes included bank payroll tax, and

(b) the list of documents included a bank payroll tax return.

(2) In relation to bank payroll tax, any reference in that Schedule to a tax period is to the chargeable period within the meaning of this Schedule.

38

(1) Schedule 55 to FA 2009 (penalties for failure to make returns etc) has effect as if—

(a) a bank payroll tax return were specified in the Table in paragraph 1 (and bank payroll tax were specified in relation to it), and

(b) the reference in paragraph 2 to a return falling within certain items in the Table included a reference to a bank payroll tax return.

(2) Schedule 55 to FA 2009 has effect for the purposes of bank payroll tax in accordance with this paragraph whether or not it has come into force for other purposes.

39

(1) Schedule 56 to FA 2009 (penalties for failure to make payments on time etc) has effect for the purposes of bank payroll tax as follows.

(2) The part of the Table in paragraph 1 headed “Principal amounts” has effect as if bank payroll tax were specified in column 2 and, in relation to that tax—

(a) an amount shown (or treated as shown) in a bank payroll tax return were specified in column 3, and

(b) 31 August 2010 were specified in column 4.

(3) The part of that Table headed “Amounts payable in default of a return being made” has effect as if bank payroll tax were specified in column 2 and, in relation to that tax—

(a) an amount shown in a determination under paragraph 24 of this Schedule were specified in column 3, and

(b) 31 August 2010 were specified in column 4.

(4) The part of that Table headed “Amount shown to be due in other assessments, determinations, etc” has effect as if—

(a) bank payroll tax were a tax falling within any of items 1 to 6, 9 or 10, and

(b) an amount shown (or treated as shown) in a bank payroll tax return were an amount falling within any of those items.

(5) Paragraph 2 (assessments and determinations in default of return) has effect as if the reference in paragraph (a) to a return falling within any item in the Table in Schedule 55 included a reference to a bank payroll tax return.

(6) Paragraph 3 (amount of penalty) has effect as if sub-paragraph (1)(a) included a reference to a payment of bank payroll tax.

(7) Schedule 56 to FA 2009 has effect for the purposes of bank payroll tax in accordance with this paragraph whether or not it has come into force for other purposes.

Miscellaneous

40

(1) The following provisions of TMA 1970 apply for the purposes of bank payroll tax and this Schedule as they apply for the purposes of corporation tax and the Taxes Acts—

(a) section 108 (responsibility of company officers),

(b) section 112 (loss, destruction or damage to assessments, returns etc),

(d) section 115 (delivery and service of documents).

(2) The application of section 115 of TMA 1970 in relation to the delivery of bank payroll tax returns is subject to any requirements published under paragraph 19(1) of this Schedule.

41

Chapter 6 of Part 22 of CTA 2010 (collection etc of tax from UK representatives of non-UK resident companies) applies to this Part of this Schedule as it applies to enactments relating to corporation tax.

42

Section 118(5) to (7) of TMA 1970 (meaning of carelessly etc) applies for the interpretation of this Part of this Schedule, with references to tax being read as references to bank payroll tax.

Part 3 — Definitions

“UK resident bank” and “relevant foreign bank”

43

(1) “UK resident bank” means a company which—

(a) is resident in the United Kingdom,

(b) is an authorised person for the purposes of FISMA 2000 (see section 31 of that Act),

(i) whose activities include the relevant regulated activity described in the provision mentioned in paragraph 44(1)(a), or

(ii) which is both a BIPRU 730k firm and a full scope BIPRU investment firm, whose activities consist wholly or mainly of any of the relevant regulated activities described in the provisions mentioned in paragraph 44(1)(b) to (f) and which meets the capital resources condition,

(d) carries on that relevant regulated activity, or those relevant regulated activities, wholly or mainly in the course of trade, and

(e) is not an excluded company.

(2) “UK resident bank” also includes a company which—

(a) meets the conditions in sub-paragraph (1)(a) and (e), and

(b) is a member of a partnership which meets the conditions in sub-paragraph (1)(b) to (d).

(3) “Relevant foreign bank” means a company which—

(a) is not resident in the United Kingdom,

(b) is an authorised person for the purposes of FISMA 2000 (see section 31 of that Act),

(c) is a person which carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom and—

(i) whose activities include the relevant regulated activity described in the provision mentioned in paragraph 44(1)(a), or

(ii) which is both a BIPRU 730k firm and a full scope BIPRU investment firm, whose activities consist wholly or mainly of any of the relevant regulated activities described in the provisions mentioned in paragraph 44(1)(b) to (f) and which meets the capital resources condition,

(d) carries on that relevant regulated activity, or those relevant regulated activities, wholly or mainly in the course of that trade, and

(e) is not an excluded company.

(4) “Relevant foreign bank” also includes a company which—

(a) meets the conditions in sub-paragraph (3)(a) and (e), and

(b) is a member of a partnership which meets the conditions in sub-paragraph (1)(b) to (d).

“Relevant regulated activity”, “capital resources condition”, “excluded company”, “asset management activities”, “linked entity” etc

44

(1) “Relevant regulated activity” means an activity which is a regulated activity for the purposes of FISMA 2000 by virtue of any of the following provisions of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544)—

(a) article 5 (accepting deposits),

(b) article 14 (dealing in investments as principal),

(d) article 25 (arranging deals in investments),

(e) article 40 (safeguarding and administering investments), and

(f) article 61 (entering into regulated mortgage contracts).

(2) “The capital resources condition” is that the company has a capital resources requirement of at least £100 million.

(3) But if the company is a member of a group, “the capital resources condition” is that the company and—

(a) any other companies which—

(i) are members of the group,

(ii) meet either of the conditions in sub-paragraph (4),

(iii) are not excluded companies, and

(iv) are not members of any partnership within paragraph (b), and

(b) any partnership—

(i) the members of which are or include one or more companies that are members of the group and not excluded companies, and

(ii) which meets either of those conditions,

have (in aggregate) capital resources requirements of at least that amount.

(4) The conditions referred to in sub-paragraph (3) are that the company or partnership—

(a) is both a BIPRU 730k firm and a full scope BIPRU investment firm, or

(b) is a company or partnership which carries on in the United Kingdom activities including the relevant regulated activity described in the provision mentioned in sub-paragraph (1)(a).

(5) For the purposes of sub-paragraphs (2) and (3) the capital resources requirement of a company or a partnership is that as at the end of the last period of account of the company or partnership ending no later than the end of the chargeable period.

(6) In determining whether the company is a UK resident bank or a relevant foreign bank by virtue of paragraph 43(2) or (4), the references in sub-paragraph (2) to the company are to the partnership.

(7) If any company or partnership whose capital resources may be material for the purposes of sub-paragraph (2) or (3) prepares its accounts in a currency other than sterling, the amount of its capital resources at the end of the period of account mentioned in that sub-paragraph is to be translated into its sterling equivalent by reference to the average spot rate of exchange on the day on which that period ends.

(8) If any company whose capital resources may be material for the purposes of sub-paragraph (2) or (3) carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom, its capital resources are to be determined as they would be for the purposes of corporation tax (see Chapter 4 of Part 2 of CTA 2009).

(9) “Excluded company” means a company which is—

(a) an insurance company or an insurance special purpose vehicle,

(b) a company which is a member of a group and does not carry on any relevant regulated activities otherwise than on behalf of an insurance company or insurance special purpose vehicle which is a member of the same group,

(c) a company which does not carry on any relevant regulated activities otherwise than as the manager of a pension scheme,

(d) an investment trust (within the meaning given by section 1158 of CTA 2010),

(e) a company which does not carry on any relevant regulated activities other than asset management activities,

(f) an exempt BIPRU commodities firm,

(g) a company which does not carry on any relevant regulated activities otherwise than for the purpose of trading in commodities or commodity derivatives,

(h) a company which does not carry on any relevant regulated activities otherwise than for the purpose of dealing in contracts for differences as principal with persons all or all but an insignificant proportion of whom are retail clients or of dealing in contracts for differences with another person to enable the company or other person to deal in contracts for differences as principal with such persons,

(i) a society incorporated under the Friendly Societies Act 1992,

(j) a society registered as a credit union under the Co-operative and Community Benefit Societies Act 2014 or the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (NI 12)), or

(k) a building society.

(10) “Asset management activities” means activities which consist (or, if they were carried on in the United Kingdom, would consist) of any or all of the following—

(a) acting as the operator of a collective investment scheme (within the meaning of Part 17 of FISMA 2000: see sections 235 and 237 of that Act),

(b) acting as a discretionary investment manager for clients none of which is a linked entity, and

(11) “Linked entity”, in relation to a company (“C”), means—

(a) a member of the same group as C,

(b) a company in which a company which is a member of the same group as C has a major interest (within the meaning of Part 5 of CTA 2009: see section 473 of that Act), or

(i) which is a member of the same group as C, and

(ii) whose share of the profits or losses of a trade carried on by the partnership for an accounting period of the partnership any part of which falls within the chargeable period is at least a 40% share (see Part 17 of CTA 2009 for provisions about shares of partnership profits and losses).

(12) The following have the meanings given in the PRA Handbook made by the Prudential Regulation Authority (as that Handbook has effect from time to time)—

“authorised corporate director”,

“BIPRU 730k firm”,

“capital resources requirement”,

“contracts for differences”,

“discretionary investment manager”,

“exempt BIPRU commodities firm”,

“full scope BIPRU investment firm”,

“pension scheme”,

“principal”, and

“retail clients”.

(13) A company which would be a BIPRU 730k firm and a full scope BIPRU investment firm by virtue of activities carried on in the United Kingdom but for the fact that its registered office (or, if it does not have a registered office, its head office) is not in the United Kingdom is to be treated as being one.

(14) The Treasury may by order amend this paragraph.

(15) An order under this paragraph may be made so as to have effect in relation to any time after the beginning of the chargeable period.

(16) An order under this paragraph is to be made by statutory instrument.

(17) An order under this paragraph may not be made unless a draft of the instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

“Member of a banking group”

45

(1) A company is a “member of a banking group” at any time if—

(a) it is within sub-paragraph (2) at that time, or

(b) it was within that sub-paragraph immediately before the chargeable period.

(2) A company is within this sub-paragraph if—

(a) it is a member of a group,

(b) any of conditions A to C is met, and

(3) Condition A is that the principal company of the group is a UK resident bank or a relevant foreign bank.

(4) Condition B is that—

(a) the principal company of the group is a company which is not resident in the United Kingdom but which (if it were so resident) would be a UK resident bank, or

(b) the principal company of the group is a company which is not resident in the United Kingdom, and is a member of a partnership which is not so resident, but which (if both the company and the partnership were so resident) would be a UK resident bank,

and (in either case) any member of the group is a UK resident bank or a relevant foreign bank.

(5) Condition C is that—

(a) the principal company is the holding company of another company, and

(b) if that other company were the principal company of the group, condition A or B would be met.

(6) For the purposes of condition C a company (“H”) is a “holding company” of another company (“S”) if—

(a) H is an investment company, and

(b) S is—

(i) an effective 51% subsidiary of H, and

(ii) not an effective 51% subsidiary of any company which is not an investment company.

(7) A group meets the exempt activities test if at least 90% of the trading income of the group for the relevant period is derived from exempt activities.

(8) For this purpose—

“exempt activities” means—insurance activities, asset management activities and related activities, andactivities carried on by a company which is not a financial trading company (or a company which would be a financial trading company if it were resident in the United Kingdom) other than lending activities or dealing on own account,

“the relevant period”, in relation to a group, means the last period of account of the group ending no later than the end of the chargeable period, and

“the trading income of the group” for the relevant period is to be calculated in accordance with paragraph 46.

(9) In sub-paragraph (8)—

“insurance activities” means—the effecting or carrying out of contracts of insurance by a regulated insurer, andinvestment business that arises directly from activities falling within paragraph (a);

“lending activities” means—acceptance of deposits or other repayable funds,lending of money, including consumer credit, mortgage credit, factoring (with or without recourse) and financing of commercial transactions (including forfeiting),finance leasing (as lessor),issuing and administering means of payment,provision of guarantees or commitments to provide money,money transmission services,provision of alternative finance arrangements, andother activities carried on in connection with activities falling within any of paragraphs (a) to (g);

“related activities” means—activities which are ancillary to insurance activities or asset management activities of any company which is a member of the group (whether or not the company carrying on the insurance activities or asset management activities), andactivities which would not be carried on but for such insurance activities or asset management activities being carried on,but does not include dealing on own account.

(10) In sub-paragraph (9)—

“activities” includes buying, holding, managing and selling assets;

“regulated insurer”, in relation to a group, means a member of the group that—is authorised under the law of any territory to carry on insurance business, oris a member of a body or organisation which is so authorised.

(11) A company which is a member of a banking group ceases to be a member of a banking group when it ceases to be within sub-paragraph (2), but only if it ceases to be within that provision as a result of—

(a) an arm's length transaction undertaken for wholly commercial purposes, or

(b) following a recommendation of a relevant regulatory body.

(12) For the purposes of sub-paragraph (11) obtaining a tax advantage is not a commercial purpose.

(13) “Tax advantage” means—

(a) a relief from tax or increased relief from tax (relief here including a tax credit),

(b) a repayment of tax or increased repayment of tax,

(d) the avoidance of a possible assessment to tax (so obtained),

and, for this purpose, “tax” includes bank payroll tax and any other tax.

(14) In sub-paragraph (11) “relevant regulatory body” means—

(a) the Financial Conduct Authority,

(aa) the Prudential Regulation Authority, or

(b) a body discharging functions under the law of a country or territory outside the United Kingdom corresponding to functions discharged by the Financial Conduct Authority or the Prudential Regulation Authority.

(15) In this paragraph “dealing on own account” has the same meaning as in Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (see Article 4(1)(6)).

“The trading income of the group” for the relevant period

46

(1) This paragraph applies for calculating the “trading income of the group” for the relevant period for the purposes of paragraph 45.

(2) The trading income for the group for the relevant period is the aggregate of—

(a) the gross income calculated in accordance with sub-paragraph (3), and

(b) the net income calculated in accordance with sub-paragraph (4).

(3) The income referred to in sub-paragraph (2)(a) is the gross income—

(a) arising from the activities of the group (other than net-basis activities), and

(b) disclosed as such in the financial statements of the group,

without taking account of any deductions (whether for expenses or otherwise).

(4) The income referred to in sub-paragraph (2)(b) is the net income arising from the net-basis activities of the group that—

(a) is accounted for as such under international accounting standards or in accordance with practice which is generally accepted accounting practice in the territory in which the principal company of the group is resident, or

(b) would be accounted for as such if income arising from such activities were accounted for under such standards or in accordance with such practice.

(5) In this paragraph “net-basis activities” means activities normally reported on a net basis in financial statements prepared in accordance with such standards or practice.

“Investment company” etc

47

(1) “Investment company”—

(a) means a company whose business consists wholly or mainly of, and the principal part of whose income is derived from, the making of investments, and

(b) also includes any savings bank or other bank for savings.

(2) “UK resident investment company” means an investment company which is resident in the United Kingdom.

“Financial trading company” etc

48

(1) “Financial trading company” means a company which—

(a) is an authorised person for the purposes of FISMA 2000 (see section 31 of that Act), or

(b) is not within paragraph (a) but carries on a trade consisting wholly or partly in dealing in securities.

(2) “UK resident financial trading company” means a financial trading company which is resident in the United Kingdom.

(3) “Relevant foreign financial trading company” means a company which meets conditions A and B.

(4) Condition A is that the company—

(a) is not resident in the United Kingdom, and

(b) carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

(5) Condition B is that, disregarding any activities of the company other than those carried on through that permanent establishment, the company is a financial trading company.

(6) In this paragraph “securities” includes—

(a) shares,

(b) rights of unit holders in unit trust schemes to which TCGA 1992 applies as a result of section 99 of that Act, and

Other interpretative provisions

49

(1) In this Schedule—

“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

“benefit” includes a facility of any kind;

“building society” means a building society within the meaning of the Building Societies Act 1986;

“the Commissioners” means the Commissioners of Her Majesty's Revenue and Customs;

“contract of insurance” has the meaning given by section 431(2) of ICTA;

“control” has the meaning given by section 995 of ITA 2007;

“employment”, “employee” and “employer” have the same meaning as in the employment income Parts of ITEPA 2003 (see sections 4 and 5 of that Act);

“enactment” includes an enactment or instrument (whenever passed or made);

“HMRC” means Her Majesty's Revenue and Customs;

“insurance company” and “insurance special purpose vehicle” have the meaning given by section 431(2) of ICTA;

“market value” has the same meaning it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act;

“money's worth” has the meaning given by section 62(3) of ITEPA 2003;

“partnership” includes—a limited liability partnership, andan entity established under the law of a territory outside the United Kingdom of a similar character to a partnership (and “member”, in relation to a partnership, is to be read accordingly);

“period of account” and “permanent establishment” have the meaning given by section 1119 of CTA 2010;

“the tax year 2009-10” has the same meaning as in the Income Tax Acts (see section 989 of ITA 2007).

(2) Section 170(2) to (11) of TCGA 1992 (“group”, “principal company”, “effective 51% subsidiary”, “company” etc) has effect for the interpretation of this Schedule as for the interpretation of sections 171 to 181 of that Act.

(3) Section 993 of ITA 2007 (meaning of “connected” persons) applies for the purposes of this Schedule.

(4) For the purposes of this Schedule the territory in which a company is resident is to be determined as for the purposes of the Corporation Tax Acts.

SCHEDULE 2

1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 3

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 ”.

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

4

In section 72(5) (relief for individuals for losses in first 4 years of trade)—

(a) in paragraph (ba), for “74A” substitute “ 74ZA ”,

(b) at the end of paragraph (c), insert “ and ”, and

5

Before section 74A insert—

(74ZA) (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”), (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. (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 (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 (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 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).

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 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

10

In FA 2009, in Schedule 6, in paragraph 1(11)—

(a) in paragraph (b), for “74B” substitute “ 74ZA ”,

(b) at the end of paragraph (c), insert “ and ”, and

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 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 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

1

Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

2

After Chapter 16 insert—

(212A) 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”). (212B) (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 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. (2) Sections 212C to 212I specify when there is a qualifying change in relation to C on the relevant day. (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 Chapter applies. (212C) (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. (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 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 (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 (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. (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 day (or is nil). (212D) (1) Section 212E explains— (a) what are principal companies of C, and (b) which are consortium principal companies of C, 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, 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) Section 212I explains the meaning of “relevant percentage share” in section 212C(5). (212E) (1) A company (“U”) is a principal company of C if— (a) C is a qualifying 75% subsidiary of U, and (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. (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 (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 (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 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) (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 between them by other companies, and (c) none of those other companies owns less than 5% of that capital. (3) Those other companies are the members of the consortium. (212G) (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 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). (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— (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 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”). (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) (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 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 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 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. (212I) (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. (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 1264 of that Act) the company's share at that time in the profits or losses of the trade. (212J) (1) C or P has a relevant excess of allowances in relation to the relevant 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— (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. (212K) (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— (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 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. (4) For the purposes of this Part the amount of unrelieved qualifying expenditure contained in any 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 relevant trade is to be calculated on the assumptions— (a) that any qualifying expenditure that could have been (but was not) allocated to the pool before the end of the old period had been so allocated at the end of the old period, (b) that any qualifying expenditure prevented from being allocated to the pool by section 58(5) had been so allocated at the end of the old period, and (c) that any transaction taking place on the relevant day that has the effect of reducing the amount of unrelieved qualifying expenditure in the pool had not taken place. (5) Where condition C in section 212C is met— (a) references in subsection (2) to any unrelieved qualifying expenditure in respect of plant and machinery contained in a 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 relevant trade, and (b) the reference in subsection (3) to 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, are to what it would have been but for the qualifying change. (6) In this section “the old period” means the period which is the old period for the purposes of section 212O (or would be if this Chapter applied): see section 212N(3). (7) The plant and machinery in respect of which there is unrelieved qualifying expenditure such as is mentioned in subsection (2), or qualifying expenditure such as is mentioned in subsection (3), is referred to in the following provisions as “the relevant plant and machinery”. (212L) (1) BSV is the balance sheet value of the relevant plant and machinery and is to be found by adding together the amounts (if any) which would be shown in respect of it in the appropriate balance sheet of C or P. (2) For this purpose the amounts shown in the appropriate balance sheet in respect of the relevant plant or machinery are— (a) the amounts shown in that balance sheet as the net book value (or carrying amount) in respect of it, and (b) the amounts shown in that balance sheet as the net investment in respect of finance leases of it. (3) If— (a) any of the relevant plant or machinery is a fixture in any land, and (b) the amount which falls (or would fall) to be shown in the appropriate balance sheet as the net book value (or carrying amount) of the land would include an amount in respect of the fixture, the amount of the net book value (or carrying amount) in respect of the fixture is determined on a just and reasonable basis. (4) If— (a) any of the relevant plant or machinery is subject to a finance lease, and (b) any land or asset which is not plant or machinery is subject to that lease, the amount of the net investment in respect of the finance lease of that plant or machinery is determined on a just and reasonable basis. (5) In this section any reference to any amount shown in the appropriate balance sheet of C or P is the amount which, assuming that a balance sheet of C or P were drawn up in accordance with subsection (6), would fall to be shown in that balance sheet. (6) A balance sheet is drawn up in accordance with this subsection if it is drawn up in accordance with generally accepted accounting practice so as to reflect the position as at the beginning of the relevant day but adjusted to reflect the disposal of any of the relevant plant or machinery which is disposed of on the relevant day. (7) In this section— - “finance lease” means a lease which, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as a finance lease or loan in accounts of C or P; - “fixture”— 1. means any plant or machinery that is so installed or otherwise fixed in or to a building or other description of land as to become, in law, part of that building or other land, and 2. includes any boiler or water-filled radiator installed in a building as part of a space or water heating system. (212M) (1) The qualifying change has an unallowable purpose if the main purpose, or one of the main purposes, of change arrangements is to obtain a relevant tax advantage (for any person). (2) “Change arrangements” means any arrangements made to bring about, or otherwise connected with, the qualifying change; and “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). (3) “Obtain a relevant tax advantage” means become entitled to a reduction in profits, or an increase in losses, for the purposes of corporation tax in consequence of a claim to allowances in respect of qualifying expenditure in respect of the relevant plant and machinery or qualifying expenditure within section 212K(3). (212N) (1) The accounting period of C which is current on the relevant day ends with that day and a new accounting period of C begins with the following day (but subject to subsection (2)). (2) In a case in which condition A, B or D in section 212C is met and the relevant trade was, at the beginning of the relevant day, carried on by C in partnership with another company or other companies subsection (1) does not apply but— (a) the period which, for the purposes of Part 17 of CTA 2009, is the accounting period of the partnership current on the relevant day ends with that day, and (b) there begins with the following day a new accounting period— (i) of the partnership, or (ii) where condition D is met and C's relevant percentage share in the relevant trade is nil after the qualifying change, of the company or partnership by which the relevant trade is carried on after the relevant change. (3) For the purposes of section 212O “the old period” means the accounting period of C or the partnership in which C carries on the relevant trade which ends with the relevant day. (4) For the purposes of section 212P “the new period” means the accounting period— (a) of C or that partnership, or (b) where condition D is met and C's relevant percentage share in the relevant trade is nil after the qualifying change, of the company or partnership by which the relevant trade is carried on after the relevant change, which begins with the following day. (212O) (1) Section 212P has effect where C or P has an excess of allowances in any single asset pool, any class pool or the main pool at the end of the old period; and a pool in the case of which there is an excess of allowances is referred to in this section and section 212P as a “relevant pool”. (2) For the purposes of this section C or P has an excess of allowances in a pool if— $PA>BSVP$ (3) In this section and section 212Q— - PA, in relation to a pool, is the amount specified in section 212K(2) in relation to the pool, and - BSVP, in relation to a pool, is so much of BSV as, on a just and reasonable apportionment, it is appropriate to attribute to the pool. (4) For the purposes of section 212P the amount of the excess of allowances in relation to any relevant pool (“the relevant pool in question”) is the difference between PA and BSVP. (5) But if, in relation to any other pool— $BSVP>PA$ what would otherwise be the amount of the excess of allowances in relation to the relevant pool in question for the purposes of section 212P is reduced by so much of the difference between BSVP and PA as is not taken into account under this subsection in relation to another relevant pool or under section 212Q(8). (212P) (1) The unrelieved qualifying expenditure in each relevant pool is to be taken to be reduced at the beginning of the new period by the amount of the excess of allowances in relation to the pool. (2) The amount of the excess of allowances is to be treated from the beginning of the new period as if it were qualifying expenditure in a new pool of the same description as the relevant pool (and so subject to the same provisions of this Part, other than this Chapter). (3) Where, following the qualifying change, a person ceases to carry on a trade (or part of a trade) and C begins to carry on (whether or not in partnership) the activities of that trade (or part of a trade) as part of its trade, for the purposes of claiming any allowance in respect of qualifying expenditure in the new pool the carrying on of those activities by C is to be regarded as the carrying on of a separate trade. (4) A loss attributable to an allowance claimed in respect of qualifying expenditure in the new pool may not be set off under section 37 of CTA 2010 (trade loss relief against total profits of same or earlier accounting period) otherwise than against the profits of a qualifying activity carried on by C, or any company that is a member of P, at the beginning of the relevant day. (5) And the amount of such a loss which may be so set off by any person is not to exceed the amount of the loss which would have been available for such set off by the person but for the qualifying change. (6) A loss attributable to an allowance claimed in respect of qualifying expenditure in the new pool may not be set off by way of group relief in accordance with Part 5 of CTA 2010 (surrender of losses by way of group relief) by a company (“the claimant company”) unless it would have been available for such set off but for the qualifying change. (7) And the amount of such a loss which is available for such set off by the claimant company is not to exceed the amount of the loss which would have been available for such set off by the claimant company but for the qualifying change. (8) Where any activity not carried on by C, or a company that is a member of P, at the beginning of the relevant day would otherwise be regarded for the purposes of corporation tax as forming part of a qualifying activity carried on by C or the member of P at that time it is not to be so regarded for the purposes of subsection (4). (9) In a case in which condition C in section 212C is met, the references in subsections (1) and (2) to the beginning of the new period are to the time of the qualifying change (and section 948 of CTA 2010 has effect subject to this section). (212Q) (1) This section has effect where C or P has relevant postponed capital allowances. (2) C or P has relevant postponed capital allowances if amount 2 in section 212K(3) is an amount other than nil. (3) Where, following the qualifying change, a person ceases to carry on a trade (or part of a trade) and C begins to carry on (whether or not in partnership) the activities of that trade (or part of a trade) as part of its trade, for the purposes of claiming any allowance in respect of qualifying expenditure such as is mentioned in section 212K(3) the carrying on of those activities by C is to be regarded as the carrying on of a separate trade. (4) A loss attributable to an allowance claimed in respect of qualifying expenditure such as is mentioned in section 212K(3) may not be set off under section 37 of CTA 2010 otherwise than against the profits of a qualifying activity carried on by C, or any company that is a member of P, at the beginning of the relevant day. (5) And the amount of such a loss which may be so set off by any person is not to exceed the amount of the loss which would have been available for such set off by the person but for the qualifying change. (6) A loss attributable to an allowance claimed in respect of qualifying expenditure such as is mentioned in section 212K(3) may not be set off by way of group relief in accordance with Part 5 of CTA 2010 by a company (“the claimant company”) unless it would have been available for such set off but for the qualifying change. (7) And the amount of such a loss which is available for such set off by the claimant company is not to exceed the amount of the loss which would have been available for such set off by the claimant company but for the qualifying change. (8) If, in relation to any pool— $BSVP>PA$ what would otherwise be the amount of qualifying expenditure such as is mentioned in section 212K(3) is to be treated for the purposes of this section as reduced by so much of the difference between BSVP and PA in relation to the pool as is not taken into account under section 212O(5) in relation to a relevant pool. (9) Where any activity not carried on by C, or a company that is a member of P, at the beginning of the relevant day would otherwise be regarded for the purposes of corporation tax as forming part of a qualifying activity carried on by C or the member of P at that time it is not to be so regarded for the purposes of subsection (4). (212R) Any amount required to be brought into account in connection with a disposal event in respect of any relevant plant and machinery is to be apportioned between the new pool and the relevant pool concerned on a just and reasonable basis. (212S) (1) This section applies if any plant and machinery is transferred on the relevant day and (apart from subsection (4)(c) of section 212K) the transfer would have the effect of reducing RTWDV (as determined in accordance with that section). (2) No person other than C or P is entitled to claim an allowance in respect of the plant or machinery after the transfer.

3

For the heading of Chapter 17 substitute “ Other anti-avoidance ”.

4

Section 247 (giving effect to allowances and charges: trades) is renumbered as subsection (1) of that section; and after that subsection insert—

(2) See Chapter 16A for provision restricting in certain circumstances the ways in which effect may be given to an allowance by virtue of subsection (1)(a).

5

The amendments made by this Schedule have effect where the relevant day is on or after 21 July 2009.

6

But in relation to cases where the relevant day is before 9 December 2009 the amendment made by paragraph 2 has effect—

(a) with the omission of section 212C(2)(b),

(b) as if in section 212K(1) “which is amount 1” were substituted for “ and is to be found by adding together amounts 1 and 2 ”,

(d) with the omission from section 212O(5) of the words “or under section 212Q(8)”,

(e) with the omission of section 212Q, and

(f) with the omission of section 212S.

SCHEDULE 5

Restriction of qualifying expenditure

1

(1) In Chapter 17 of Part 2 of CAA 2001 (plant and machinery: anti-avoidance), after section 228M insert—

(228MA) (1) This section applies where capital expenditure is incurred on the provision of plant or machinery (“the asset”) and at the time the expenditure is incurred— (a) the asset is leased or arrangements exist under which it is to be leased, and (b) arrangements have been entered into in relation to payments under the lease that have the effect of reducing the value of the asset to the lessor (“V”). (2) For the purposes of capital allowances the lessor's qualifying expenditure on the asset is restricted to V. (3) The value of the asset to the lessor is given by— $$V=VI+VR$where—VI is the present value of the lessor's income from the asset, andVR is the present value of the residual value of the asset reduced by the amount of any rental rebate.$ (4) For this purpose— (a) the lessor's income from the asset is the total of all the amounts that— (i) have been received by the lessor, or it is reasonable to expect the lessor will receive, in connection with the lease, and (ii) have been brought into account by the lessor, or it is reasonable to expect the lessor will bring into account, as income in computing profits chargeable to tax, and (b) the residual value of the asset is what it is reasonable to expect will be the market value of the lessor's interest in the asset immediately after the termination of the lease. (5) In determining the lessor's income from the asset, exclude— (a) disposal receipts brought, or to be brought, into account under Part 2, and (b) so much of any amount as represents charges for services or qualifying UK or foreign tax (within the meaning of section 70YE) to be paid by the lessor. (6) Where capital expenditure has previously been incurred by the lessor on the provision of the asset, the reference in subsection (2) to the lessor's qualifying expenditure on the asset is to be read as a reference to the total amount of the lessor's qualifying expenditure on the asset. (7) The following provisions supplement this section— (a) section 228MB provides for the calculation of “present value”, and (b) section 228MC defines what is meant by a rental rebate. (8) In this section and sections 228MB and 228MC “lease” includes any arrangements which provide for plant or machinery to be leased or otherwise made available by a person (“the lessor”) to another person (“the lessee”). (228MB) (1) For the purposes of section 228MA the “present value” of an amount is to be calculated by using the interest rate implicit in the lease. (2) The general rule is that the interest rate implicit in the lease is the interest rate that would apply in accordance with normal commercial criteria, including, in particular, generally accepted accounting practice (where applicable). (3) If the interest rate implicit in the lease cannot be determined in accordance with subsection (2), it is taken to be 1% above LIBOR. (4) For this purpose— (a) LIBOR means the London interbank offered rate on the relevant day for deposits for a term of 12 months in the relevant currency, (b) the relevant day is the day on which the lease was entered into (or if that was not a business day, the first business day after that day), and (c) the relevant currency is the currency in which rentals under the lease are payable. (228MC) (1) For the purposes of section 228MA “rental rebate” means any sum payable to the lessee that is calculated by reference to the termination value of the asset. (2) The general rule is that the termination value of an asset is the value of the asset at or about the time when the lease terminates. (3) Calculation by reference to the termination value includes calculation by reference to any one or more of— (a) the proceeds of sale, if the asset is sold, (b) any insurance proceeds, compensation or similar sums in respect of the asset, and (c) an estimate of the market value of the asset. (4) Calculation by reference to the termination value also includes— (a) determination in a way which, or by reference to factors or criteria which, might reasonably be expected to produce a broadly similar result to calculation by reference to the termination value, or (b) any other form of calculation indirectly by reference to the termination value.

(2) The amendment made by sub-paragraph (1) has effect in relation to capital expenditure incurred on or after 9 December 2009.

Restriction of deduction for rental rebate

2

(1) In Chapter 4 of Part 2 of ITTOIA 2005 (trading income: rules restricting deductions), after section 55A insert—

(55B) (1) Where plant or machinery (“the asset”) is leased and a rental rebate is payable by the lessor, the amount of the deduction allowable in respect of the rebate is limited to— (a) the amount of the lessor's income from the lease, or (b) in the case of a finance lease, that amount excluding the finance charge. (2) “Rental rebate” means any sum payable to the lessee that is calculated by reference to the termination value of the asset. (3) For this purpose— (a) the termination value of an asset is the value of the asset at or about the time when the lease terminates, (b) calculation by reference to the termination value includes calculation by reference to any one or more of— (i) the proceeds of sale, if the asset is sold, (ii) any insurance proceeds, compensation or similar sums in respect of the asset, (iii) an estimate of the market value of the asset, and (c) calculation by reference to the termination value also includes— (i) determination in a way which, or by reference to factors or criteria which, might reasonably be expected to produce a broadly similar result to calculation by reference to the termination value, or (ii) any other form of calculation indirectly by reference to the termination value. (4) For the purposes of this section— (a) the income of the lessor from the lease is the total of all the amounts receivable in connection with the lease that have been brought into account in calculating the lessor's income for income tax purposes, excluding— (i) disposal receipts brought into account under Part 2 of CAA 2001 (see section 60(1) of that Act), and (ii) so much of any amount as represents charges for services or qualifying UK or foreign tax (within the meaning of section 70YE of that Act) to be paid by the lessor, and (b) the finance charge, in relation to a finance lease, is— (i) if the lease is one that, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, so much of the rentals under the lease as fall (or would fall) to be treated as interest, or (ii) in any other case, the amount that, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment. (5) Where the asset is acquired by the lessor in a transaction in relation to which an election is made under section 266 of CAA 2001 (election where predecessor and successor are connected persons), this section applies as if the successor had been the lessor at all material times and everything done to or by the predecessor had been done to or by the successor. (6) Where the whole or part of a rental rebate is disallowed under this section as a deduction in computing profits— (a) the amount disallowed, or (b) if less, the amount by which the rental rebate exceeds the amount of capital expenditure incurred by the lessor, may be treated for the purposes of capital gains tax as an allowable loss accruing to the lessor on the termination of the lease. That allowable loss is deductible only from chargeable gains accruing to the lessor on the disposal of the asset. (7) This section does not apply to a long funding finance lease (see section 148C).

(2) In Chapter 4 of Part 3 of CTA 2009 (trading income: rules restricting deductions), after section 60 insert—

(60A) (1) Where plant or machinery (“the asset”) is leased and a rental rebate is payable by the lessor, the amount of the deduction allowable in respect of the rebate is limited to— (a) the amount of the lessor's income from the lease, or (b) in the case of a finance lease, that amount excluding the finance charge. (2) “Rental rebate” means any sum payable to the lessee that is calculated by reference to the termination value of the asset. (3) For this purpose— (a) the termination value of an asset is the value of the asset at or about the time when the lease terminates, (b) calculation by reference to the termination value includes calculation by reference to any one or more of— (i) the proceeds of sale, if the asset is sold, (ii) any insurance proceeds, compensation or similar sums in respect of the asset, and (iii) an estimate of the market value of the asset, and (c) calculation by reference to the termination value also includes— (i) determination in a way which, or by reference to factors or criteria which, might reasonably be expected to produce a broadly similar result to calculation by reference to the termination value, or (ii) any other form of calculation indirectly by reference to the termination value. (4) For the purposes of this section— (a) the income of the lessor from the lease is the total of all the amounts receivable in connection with the lease that have been brought into account in calculating the lessor's income for corporation tax purposes, excluding— (i) disposal receipts brought into account under Part 2 of CAA 2001 (see section 60(1) of that Act), and (ii) so much of any amount as represents charges for services or qualifying UK or foreign tax (within the meaning of section 70YE of that Act) to be paid by the lessor, and (b) the finance charge, in relation to a finance lease, is— (i) if the lease is one that, under generally accepted accounting practice, falls (or would fall) to be treated as a loan, so much of the rentals under the lease as fall (or would fall) to be treated as interest, or (ii) in any other case, the amount that, in accordance with generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment. (5) Where the asset is acquired by the lessor in a transaction— (a) to which section 948 of CTA 2010 applies (modified application of CAA 2001 in case of transfer of trade without change of ownership), or (b) in relation to which an election is made under section 266 of CAA 2001 (election where predecessor and successor are connected persons), this section applies as if the successor had been the lessor at all material times and everything done to or by the predecessor had been done to or by the successor. (6) Where the whole or part of a rental rebate is disallowed under this section as a deduction in computing profits— (a) the amount disallowed, or (b) if less, the amount by which the rental rebate exceeds the amount of capital expenditure incurred by the lessor, may be treated for the purposes of corporation tax in respect of chargeable gains as an allowable loss accruing to the lessor on the termination of the lease. That allowable loss is deductible only from chargeable gains accruing to the lessor on the disposal of the asset. (7) This section does not apply to a long funding finance lease (see section 362 of CTA 2010).

(3) The amendments made by this paragraph have effect in relation to rental rebates payable on or after 9 December 2009.

Arrangements reducing disposal value of asset

3

(1) In Chapter 5 of Part 2 of CAA 2001 (plant and machinery: general provisions about charges and allowances), after section 64 insert—

(64A) (1) Where— (a) plant or machinery (“the asset”) is subject to a lease, (b) a disposal event occurs with the result that a disposal value in respect of the asset is to be brought into account under Item 1, 2 or 7 of the Table in section 61(2), and (c) arrangements have been entered into that have the effect of reducing the disposal value of the asset in so far as it is attributable to rentals payable under the lease, the disposal value is to be determined as if the arrangements had not been entered into. (2) Subsection (1) does not apply if— (a) the arrangements take the form of a transfer of relevant receipts within section 809AZA of ITA 2007 and the relevant amount has been treated as income under section 809AZB of that Act, or (b) the arrangements take the form of a transfer of relevant receipts within section 752 of CTA 2010 and the relevant amount has been treated as income under section 753 of that Act.

(2) The amendment made by sub-paragraph (1) has effect in relation to disposal events taking place on or after 9 December 2009.

SCHEDULE 6

Part 1 — Definition of “charity”, “charitable company” and “charitable trust”

Definition of “charity” etc

1

(1) For the purposes of the enactments to which this Part applies “charity” means a body of persons or trust that—

(a) is established for charitable purposes only,

(b) meets the jurisdiction condition (see paragraph 2),

(d) meets the management condition (see paragraph 4).

(2) For the purposes of the enactments to which this Part applies—

“charitable company” means a charity that is a body of persons;

“charitable trust” means a charity that is a trust.

(3) Sub-paragraphs (1) and (2) are subject to any express provision to the contrary.

(4) For the meaning of “charitable purpose”, see section 2 of the Charities Act 2011 (which—

(a) applies regardless of where the body of persons or trust in question is established, and

(b) for this purpose forms part of the law of each part of the United Kingdom (see sections 7 and 8 of that Act) ).

Jurisdiction condition

2

(1) A body of persons or trust meets the jurisdiction condition if it falls to be subject to the control of—

(a) a relevant UK court in the exercise of its jurisdiction with respect to charities, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In sub-paragraph (1)(a) “a relevant UK court” means—

(a) the High Court,

(b) the Court of Session, or

(and, for enactments relating to value added tax, includes the High Court of the Isle of Man).

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Registration condition

3

(1) A body of persons or trust meets the registration condition if—

(a) in the case of a body of persons or trust that is a charity within the meaning of section 10 of the Charities Act 2011 , condition A is met, and

(b) in the case of any other body of persons or trust, condition B is met.

(2) Condition A is that the body of persons or trust has complied with any requirement to be registered in the register of charities kept under section 29 of the Charities Act 2011.

(3) Condition B is that the body of persons or trust has complied with any requirement under the law of a territory outside England and Wales to be registered in a register corresponding to that mentioned in sub-paragraph (2).

Management condition

4

(1) A body of persons or trust meets the management condition if its managers are fit and proper persons to be managers of the body or trust.

(2) In this paragraph “managers”, in relation to a body of persons or trust, means the persons having the general control and management of the administration of the body or trust.

Periods over which management condition treated as met

5

(1) This paragraph applies in relation to any period throughout which the management condition is not met.

(2) The management condition is treated as met throughout the period if the Commissioners for Her Majesty's Revenue and Customs consider that—

(a) the failure to meet the management condition has not prejudiced the charitable purposes of the body or trust, or

(b) it is just and reasonable in all the circumstances for the condition to be treated as met throughout the period.

Publication of names and addresses of bodies or trusts regarded by HMRC as charities

6

Her Majesty's Revenue and Customs may publish the name and address of any body of persons or trust that appears to them to meet, or at any time to have met, the definition of a charity in paragraph 1.

Enactments to which this Part applies

7

The enactments to which this Part applies are the enactments relating to—

(a) income tax

(b) capital gains tax,

(d) value added tax,

(e) inheritance tax,

(f) stamp duty,

(g) stamp duty land tax, ...

(h) stamp duty reserve tax , ...

(i) annual tax on enveloped dwellings., and

(j) diverted profits tax.

Part 2 — Repeals of superseded definitions and other consequential amendments

FA 1982

8

In section 129(1) of FA 1982 (stamp duty: exemption from duty on grants, transfers to charities etc), for “a body of persons established for charitable purposes only or to the trustees of a trust so established” substitute “ a charitable company or to the trustees of a charitable trust ”.

FA 1983

9

In section 46(3) of FA 1983 (Historic Buildings and Monuments Commission for England) for “a body of persons established for charitable purposes only” substitute “ a charitable company ”.

IHTA 1984

10

In section 272 of IHTA 1984 (general interpretation), omit the definitions of “charity” and “charitable”.

FA 1986

11

In section 90(7) of FA 1986 (stamp duty reserve tax: exceptions from principal charge)—

(a) in paragraph (a), for “a body of persons established for charitable purposes only” substitute “ a charitable company ”, and

(b) in paragraph (b), for “a trust so established” substitute “ a charitable trust ”.

FA 1989

12

In paragraph 4 of Schedule 5 to FA 1989 (employee share ownership trusts), omit sub-paragraph (10).

TCGA 1992

13

(1) TCGA 1992 is amended as follows.

(2) In section 222(8B)(b)(iii) (relief on disposal of private residence), for “established for charitable purposes only” substitute “ a charitable company ”.

(3) In section 256 (charities), omit subsections (6) and (8).

(4) In section 256C (attributing gains to the non-exempt amount: charitable companies), omit subsection (6).

(5) In section 256D (how gains are attributed to the non-exempt amount: charitable companies), omit subsection (7).

F(No.2)A 1997

14

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FA 1999

15

(1) Schedule 19 to FA 1999 (stamp duty and stamp duty reserve tax: unit trusts) is amended as follows.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) In paragraph 15(c), for “bodies of persons established for charitable purposes only or trustees of trusts so established” substitute “ charitable companies or trustees of charitable trusts ”.

CAA 2001

16

In section 63(2) of CAA 2001 (cases in which disposal value is nil)—

(a) in paragraph (a), omit “within the meaning of Part 10 of ITA 2007 (see section 519 of that Act)”, and

(b) in paragraph (aa), omit “within the meaning of Part 11 of CTA 2010 (see section 467 of that Act)”.

ITEPA 2003

17

(1) ITEPA 2003 is amended as follows.

(2) In section 99(3)(b)(ii) (accommodation provided for performance of duties), for “established for charitable purposes only” substitute “ a charitable company ”.

(3) In section 216(3)(b) (provisions not applicable to lower-paid employments) for “established for charitable purposes only” substitute “ a charitable company ”.

(4) In section 223(7)(b)(ii) (payments on account of director's tax other than by the director), for “established for charitable purposes only” substitute “ a charitable company ”.

(5) In section 290(5) (accommodation benefits of ministers of religion), omit the definition of “charity”.

(6) In section 351 (expenses of ministers of religion), omit subsection (5).

(7) In section 714(2) (payroll giving: meaning of “donation”), in the definition of “charity”, omit “means any body of persons or trust established for charitable purposes only and”.

FA 2003

18

Schedule 8 to FA 2003 (SDLT: charities relief) is amended as follows.

19

In paragraph 1 (charities relief), omit sub-paragraph (4).

20

In paragraph 4 (charitable trusts), in sub-paragraph (2), omit “and “charity” has the same meaning as in paragraph 1”.

ITTOIA 2005

21

(1) ITTOIA 2005 is amended as follows.

(2) In section 410(3)(b) (when stock dividend income arises), for “trust established for charitable purposes only” substitute “ charitable trust ”.

(3) In section 545(1) (definitions for Chapter 9 of Part 4), omit the definition of “charitable trust”.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) In Part 2 of Schedule 4 (index of defined expressions)—

(a) in the entry for “charitable trust (in Chapter 9 of Part 4)”—

(i) omit “(in Chapter 9 of Part 4)”, and

(ii) for “section 545(1)” substitute “ paragraph 1 of Schedule 6 to FA 2010 ”, and

(b) in the entry for “charity”, for “section 989 of ITA 2007” substitute “ paragraph 1 of Schedule 6 to FA 2010 ”.

F(No.2)A 2005

22

In section 18(3)(b)(i) of F(No.2)A 2005 (authorised unit trusts and OEICS: specific powers) omit “(within the meaning of section 989 of ITA 2007)”.

ITA 2007

23

(1) ITA 2007 is amended as follows.

(2) In section 479(1)(b) (special rates for trustees' income), for “trust established for charitable purposes only” substitute “ charitable trust ”.

(3) In section 481(1)(c) (other special rates for trustees), for “trust established for charitable purposes only” substitute “ charitable trust ”.

(4) Omit section 519 (meaning of “charitable trust”).

(5) In section 873(2) (discretionary or accumulation settlements), in paragraphs (a) and (b), for “trust established for charitable purposes only” substitute “ charitable trust ”.

(6) In section 989 (definitions), omit the definition of “charity”.

(7) In Schedule 4 (index of defined expressions)—

(a) in the entry for “charitable trust (in Part 10)”—

(i) omit “(in Part 10)”, and

(ii) for “section 519” substitute “ paragraph 1 of Schedule 6 to FA 2010 ”, and

(b) in the entries for “charity”, “charity (in Chapter 2 of Part 8)” and “charity (in Chapter 3 of Part 8)”, for “section 989” substitute “ paragraph 1 of Schedule 6 to FA 2010 ”.

FA 2008

24

In paragraph 60(2) of Schedule 36 to FA 2008 (references to carrying on a business), omit the definition of “charity”.

CTA 2009

25

(1) CTA 2009 is amended as follows.

(2) In section 1319 (other definitions), omit the definition of “charity”.

(3) In Schedule 4 (index of defined expressions), in the entry for “charity”, for “section 1319” substitute “ paragraph 1 of Schedule 6 to FA 2010 ”.

FA 2009

26

In paragraph 8 of Schedule 49 to FA 2009 (general interpretation), omit the definition of “charity”.

CTA 2010

27

(1) CTA 2010 is amended as follows.

(2) In section 202 (meaning of “charity” in Chapter 2 of Part 6)—

(a) for “means” substitute “ includes ”, and

(b) omit paragraph (a).

(3) In section 217 (meaning of “charity” in Chapter 3 of Part 6)—

(a) for “means” substitute “ includes ”, and

(b) omit paragraph (a).

(4) Omit section 467 (meaning of “charitable company” in Part 11).

(5) In section 610(2)(a) (discretionary payments by trustees to companies), omit “as defined in section 467”.

(6) In section 1119 (definitions), omit the definition of “charity”.

(7) In Schedule 4 (index of defined expressions)—

(a) in the entry for “charitable company (in Part 11)”—

(i) omit “(in Part 11)”, and

(ii) for “section 467” substitute “ paragraph 1 of Schedule 6 to FA 2010 ”,

(b) in the entry for “charity (except in Chapters 2 and 3 of Part 6)” for “section 1119” substitute “ paragraph 1 of Schedule 6 to FA 2010 ”,

(c) in the entry for “charity (in Chapter 2 of Part 6)”, for “section 202” substitute “ paragraph 1 of Schedule 6 to FA 2010 (and see section 202 of this Act) ”, and

(d) in the entry for “charity (in Chapter 3 of Part 6)”, for “section 217” substitute “ paragraph 1 of Schedule 6 to FA 2010 (and see section 217 of this Act) ”.

TIOPA 2010

28

In section 326(3) of TIOPA 2010 (charities), omit the definition of “charity” and the “and” immediately after it.

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