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Finance (No. 3) Act 2010

Type Public General Act

Publication 2010-12-16

Last updated 2023-01-01

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

Part 1 — Income tax, corporation tax and capital gains tax

Income tax and corporation tax

Shared lives care

1

Schedule 1 contains provision extending foster-care relief to other forms of care.

Payments to special guardians and those in receipt of residence orders

2

(1) Part 6 of ITTOIA 2005 (exempt income) is amended as follows.

(2) In section 744 (payments to adopters: England and Wales)—

(a) the existing provision becomes subsection (1),

(b) in that subsection, omit the “and” before paragraph (e) and after that paragraph insert—

(f) payments made under regulations under section 14F of the Children Act 1989 (special guardianship support services) to a person appointed as a child's special guardian, (g) payments made to a person under section 17 of that Act (provision of services for children in need, their families and others) by reason of that person being a person in whose favour a residence order with respect to a child is in force, (h) payments made to a person, in respect of a child, under paragraph 15 of Schedule 1 to that Act (local authority contribution to child's maintenance to recipients in whose favour residence order is in force), and (i) payments made in accordance with— (i) an order under that Schedule (orders for financial relief against parents etc), or (ii) a maintenance agreement, for the benefit of a child, to a person appointed as the child's special guardian or a person in whose favour a residence order with respect to the child is in force.

(2) But a payment is not within subsection (1)(f), (g), (h) or (i) if— (a) it is made to an excluded relative of the child, (b) it is made to a person appointed as the child's special guardian and an excluded relative is also appointed as the child's special guardian, or (c) it is made to a person in whose favour a residence order is in force with respect to the child and that order is also in favour of an excluded relative. (3) In this section— - “excluded relative”, in relation to a child, means— 1. a parent of the child, or 2. a person who is, or has been, the husband or wife or civil partner of a parent of the child; - “maintenance agreement” has the meaning given by paragraph 10(1) of Schedule 1 to the Children Act 1989; - “residence order” has the meaning given by section 8 of that Act.

, and

(d) in the heading, after “adopters” insert “ , etc ”.

(3) In section 745 (payments to adopters: Scotland)—

(a) the existing provision becomes subsection (1),

(b) in that subsection, omit the “and” before paragraph (d) and after that paragraph insert—

(e) payments made to a person under section 50 of the Children Act 1975, or section 22 of the Children (Scotland) Act 1995, by reason of that person being a person with whom a child is to live by virtue of a residence order, and (f) payments of aliment made— (i) in accordance with an award of aliment under the Family Law (Scotland) Act 1985, or (ii) under an agreement (within the meaning of section 7(5) of that Act), for the benefit of a child, to a person in whose favour a residence order with respect to the child is in force.

(2) A payment is not within subsection (1)(e) or (f) if— (a) it is made to an excluded relative of the child, or (b) it is made to a person in whose favour a residence order is in force with respect to the child and that order is also in favour of an excluded relative. (3) In this section— - “excluded relative”, in relation to a child, means— 1. a parent of the child, or 2. a person who is, or has been, the husband or wife or civil partner of a parent of the child; - “residence order” has the meaning given by section 11(2)(c) of the Children (Scotland) Act 1995.

, and

(d) in the heading, after “adopters” insert “ , etc ”.

(4) In section 746 (payments to adopters: Northern Ireland)—

(a) the existing provision becomes subsection (1),

(b) in that subsection, omit the “and” before paragraph (c) and after that paragraph insert—

(d) payments made to a person under Article 18 of the Children (Northern Ireland) Order 1995 (S.I. 1995/755 (NI 2)) (general duty of authority to provide personal social services) by reason of that person being a person in whose favour a residence order with respect to a child is in force, (e) payments made to a person, in respect of a child, under paragraph 17 of Schedule 1 to that Order (local authority contribution to child's maintenance to recipients in whose favour residence order is in force), and (f) payments made in accordance with— (i) an order under that Schedule (orders for financial relief against parents etc), or (ii) a maintenance agreement, for the benefit of a child, to a person in whose favour a residence order with respect to the child is in force.

(2) But a payment is not within subsection (1)(d), (e) or (f) if— (a) it is made to an excluded relative of the child, or (b) it is made to a person in whose favour a residence order is in force with respect to the child and that order is also in favour of an excluded relative. (3) In this section— - “excluded relative”, in relation to a child, means— 1. a parent of the child, or 2. a person who is, or has been, the husband or wife or civil partner of a parent of the child; - “maintenance agreement” has the meaning given by paragraph 12 of Schedule 1 to the Children (Northern Ireland) Order 1995; - “residence order” has the meaning given by Article 8 of that Order.

, and

(d) in the heading, after “adopters” insert “ , etc ”.

(5) The amendments made by this section have effect in relation to the tax year 2010-11 and subsequent tax years.

Qualifying care relief: capital allowances

3

(1) Chapter 2 of Part 7 of ITTOIA 2005 (qualifying care relief) is amended as follows.

(2) In section 824 (capital allowances: introduction), after subsection (2) insert—

(2A) In this group of sections, in relation to a relevant individual— (a) “the care business” means the provision of qualifying care by the individual, (b) “care business expenditure” means qualifying expenditure incurred on the provision of plant or machinery wholly or partly for the care business, (c) “care business pool” means a pool of care business expenditure (even if the balance for the time being is nil), and (d) a reference to “another activity” is to a qualifying activity carried on by the individual other than the care business. (2B) In this group of sections, plant or machinery is referred to as being “in” a pool if qualifying expenditure incurred on its provision has been allocated at any time to that pool.

(3) For section 825 substitute—

(825) (1) This section applies if— (a) at the beginning of a relevant chargeable period of a relevant individual, there is care business expenditure which has not been allocated to a care business pool, (b) the individual is entitled under CAA 2001 to allocate the expenditure, or a part of it, to a care business pool for that period, and (c) the previous chargeable period was not a relevant chargeable period. (2) So much of the expenditure as the individual is entitled to allocate to a care business pool for that period is to be treated for the purposes of CAA 2001 as allocated to the appropriate kind of care business pool for that period (whether or not any of it is actually so allocated). (3) For the different kinds of pool, see section 54 of CAA 2001. (825A) (1) Subsection (2) applies to a care business pool for a relevant chargeable period of a relevant individual if the previous chargeable period was not a relevant chargeable period. (2) CAA 2001 is to apply as if— (a) a disposal event occurs immediately after the beginning of the relevant chargeable period in respect of plant or machinery in the pool, (b) disposal receipts fall to be brought into account in the pool for the period because of that event, and (c) the total of the receipts equals the sum of amount A and amount B (or nil if there are no such amounts). (3) Amount A is the amount of any expenditure treated as allocated to the pool for the period by virtue of section 825 (whether or not any of it is actually so allocated). (4) Amount B is the amount of any unrelieved qualifying expenditure carried forward in the pool from the previous chargeable period. (825B) (1) This section applies if— (a) disposal receipts fall to be brought into account in a pool for a relevant chargeable period by virtue of section 825A, and (b) on the re-start date, the relevant individual still owns any of the plant or machinery which was in that pool and is still using any of it for the purposes of the care business. (2) The re-start date is the first day of the first subsequent chargeable period which is not a relevant chargeable period. (3) A reference in this section to the retained plant or machinery is to so much of the plant or machinery in the pool as the relevant individual— (a) still owns on the re-start date, and (b) is still using on that date for the purposes of the care business. (4) The individual is to be treated under CAA 2001— (a) as having brought the retained plant or machinery into use on the re-start date for the purposes of the care business, (b) as having incurred capital expenditure on the provision of that plant or machinery for those purposes on that date, and (c) as owning that plant and machinery as a result of having incurred that expenditure. (5) The total amount of expenditure which the individual is to be treated as having incurred (for all of the retained plant or machinery) is the smaller of— (a) the total market value of the retained plant or machinery on the re-start date, and (b) an amount equal to the disposal receipts brought into account in the pool as described in subsection (1)(a). (6) If the individual is treated under section 13 of CAA 2001 as having incurred notional expenditure before the re-start date as a result of bringing plant or machinery in the pool into use for the purposes of another activity, the amount mentioned in subsection (5)(b) must be reduced by the total amount of that expenditure, as determined in accordance with section 825C(2). (7) But subsection (6) does not apply if the plant or machinery which was brought into use for the purposes of another activity is the retained plant or machinery (for example, where it was brought into use only partly for the purposes of that other activity). (8) The question whether the provision of the retained plant or machinery is to be treated as wholly or only partly for the purposes of the care business is to be determined according to whether the use referred to in subsection (3)(b) is wholly or only partly for those purposes. (825C) (1) This section applies if— (a) disposal receipts fall to be brought into account in a pool by virtue of section 825A because of a disposal event, and (b) after that disposal event, the relevant individual brings any of the plant or machinery in that pool into use for the purposes of another activity. (2) Section 13 of CAA 2001 has effect as if the total amount of the notional expenditure which the individual is treated under that section as having incurred, for all of the plant or machinery in that pool which is brought into use for the purposes of the other activity, were the smaller of— (a) the total market value of that plant or machinery on the day on which it is brought into use for the purposes of that other activity, and (b) an amount equal to the disposal receipts brought into account in the pool as mentioned in subsection (1)(a). (3) Subsection (2) does not apply to plant or machinery brought into use for the purposes of another activity if— (a) the individual is treated by virtue of section 825B as having already brought that plant or machinery into use for the purposes of the care business, or (b) this section has already applied to that plant or machinery since the disposal event. (4) The amount mentioned in subsection (2)(b) must be reduced by the appropriate sum if some plant or machinery in the pool is brought into use for the purposes of another activity after — (a) the individual is treated by virtue of section 825B as having brought other plant or machinery in that pool into use for the purposes of the care business, or (b) this section has applied to other plant or machinery in that pool since the disposal event. (5) The appropriate sum is— (a) in a case within paragraph (a) of subsection (4), the total amount of expenditure which the individual is treated by virtue of section 825B as having incurred on the provision of that other plant or machinery, and (b) in a case within paragraph (b) of that subsection, the total amount of the notional expenditure (as determined in accordance with subsection (2)) which the individual is treated under section 13 of CAA 2001 as having incurred on the provision of that other plant or machinery since the disposal event. (825D) (1) This section applies to an item of plant or machinery which a relevant individual— (a) is treated by virtue of section 825B as bringing into use, or (b) brings into use in circumstances where section 825C(2) applies. (2) The date (in either case) on which the item is brought or treated as brought into such use is referred to in this section as the applicable date. (3) The first disposal event to occur in respect of the item on or after the applicable date is to be regarded for the purposes of section 60(3) of CAA 2001 as the first such event. (4) That event requires a disposal value to be brought into account regardless of anything to the contrary in section 64(1) of that Act. (5) But a reference in section 62 of that Act to the amount of qualifying expenditure incurred by the individual on the provision of that item is a reference to the amount of qualifying expenditure originally incurred by the individual on its provision (and not to any proportion of the total amount treated by virtue of section 825B or 825C as having been incurred).

(4) The amendments made by this section have effect in relation to chargeable periods ending on or after the day on which this Act is passed (“the commencement day”).

(5) For anyone who was a relevant individual for the most recent chargeable period ending before the commencement day, sections 825B and 825C of ITTOIA 2005 have effect (on and after that day) as if references in those sections to section 825A were references to section 825 as it was in force immediately before the commencement day.

Seafarers’ earnings

4

(1) Section 378 of ITEPA 2003 (deductions from seafarers' earnings: eligibility) is amended as follows.

(2) In subsection (1)(a), after “relevant taxable earnings” insert “ or EEA-resident earnings ”.

(3) After subsection (5) insert—

(6) In this section— - “EEA-resident earnings” means section 15 or 27 earnings for a period— 1. in which the employee is resident for tax purposes in an EEA state (other than the United Kingdom), and 2. which falls within a tax year in which the employee is not ordinarily UK resident, - “resident for tax purposes” means liable, under the law of the EEA state, to tax there by reason of domicile or residence, - “section 15 earnings” means general earnings to which section 15 applies, and - “section 27 earnings” means general earnings to which section 27 applies.

(4) The amendments made by this section have effect for the tax year 2011-12 and subsequent tax years but only in relation to eligible periods beginning on or after 6 April 2011.

Venture capital schemes

5

Schedule 2 contains provision about venture capital schemes.

Enterprise management incentives

6

(1) Schedule 5 to ITEPA 2003 (enterprise management incentives) is amended as follows.

(2) In paragraph 8 (qualifying companies: introduction), omit the “and” at the end of the entry relating to “number of employees” and after the entry relating to “trading activities” insert

, and UK permanent establishment (see paragraph 14A).

(3) After paragraph 14 insert—

(14A) (1) The UK permanent establishment requirement is met if condition A or B is met. (2) Condition A is that the company has a permanent establishment in the United Kingdom. (3) Condition B is that— (a) the company is a parent company, and (b) any other member of the group— (i) meets the conditions in paragraph 14(1)(a) (trading activities requirement), and (ii) has a permanent establishment in the United Kingdom.

(4) In paragraph 15(1) (meaning of “qualifying trade”), omit paragraph (a) (requirement that trade be carried on wholly or mainly in United Kingdom).

(5) The amendments made by this section have effect in relation to options granted on or after the day on which this Act is passed.

Settlor to return excess repayment to trustees etc

7

(1) Section 646 of ITTOIA 2005 (adjustments between settlor and trustees etc) is amended as follows.

(2) For subsection (4) substitute—

(4) Subsection (5) applies if a settlor chargeable to tax under section 624 or 629 obtains a repayment by reason of the payment of the tax by— (a) any trustee, or (b) any other person to whom the income is payable by virtue of or as a result of the settlement.

(3) In subsection (5), for “excess” substitute “ repayment ”.

(4) After subsection (6) insert—

(6A) For the purpose of subsection (5), the settlor may require an officer of Revenue and Customs to provide the settlor with a certificate specifying— (a) that the settlor has obtained a repayment as mentioned in subsection (4), and (b) the amount of the repayment. (6B) A certificate provided under subsection (6A) is conclusive evidence of the facts stated in it.

(5) In subsection (7), for “Any” substitute “ Subject to subsections (6A) and (6B), any ”.

(6) The amendments made by this section have effect in relation to repayments of tax for the tax year 2010-11 or any subsequent tax year.

Collection of income tax where sum deducted by payer

8

In Chapter 16 of Part 15 of ITA 2007, after section 963 (collection of income tax on certain payments by other persons) insert—

(963A) (1) The Commissioners for Her Majesty's Revenue and Customs may by regulations modify, replace or supplement any provision of section 963(2) to (4). (2) Regulations under this section may only be made for the purpose of regulating the time at and manner in which persons making payments within section 963(1)(a) or (b) are to account for and pay income tax which is to be collected from them in respect of those payments. (3) In particular, regulations under this section may, in relation to income tax for which a person is liable to account— (a) modify any provision of Parts 2 to 6 of TMA 1970, or (b) apply any such provision with or without modifications. (4) Regulations under this section may— (a) make different provision for different kinds of payer, (b) make different provision for different circumstances, and (c) authorise the Commissioners for Her Majesty's Revenue and Customs, if they think there are special circumstances justifying it, to make special arrangements in relation to income tax for which a person is liable to account. (5) Regulations under this section may contain incidental, supplemental, consequential and transitional provision and savings. (6) The Commissioners for Her Majesty's Revenue and Customs must not make any regulations under this section unless a draft of them has been laid before and approved by a resolution of the House of Commons. (7) References in this Act and in any other enactment to any of the provisions of section 963(2) to (4) are to be read as references to those provisions as modified, replaced or supplemented by provision made by regulations under this section.

Company distributions

9

Schedule 3 contains provision about company distributions.

REITs: stock dividends

10

Schedule 4 contains provision about the issue of stock dividends by a company UK REIT or the principal company of a group UK REIT.

Financing costs and income of group companies

11

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Consortium claims for group relief

12

Schedule 6 contains provision about claims for group relief from corporation tax made by companies which are members of, or owned by, a consortium.

R&D relief for SMEs: removal of intellectual property condition

13

(1) Part 13 of CTA 2009 (additional relief for expenditure on research and development) is amended as follows.

(2) In section 1052 (qualifying expenditure on in-house direct R&D)—

(a) in subsection (1), for “conditions A to E” substitute “ conditions A, B, D and E ”, and

(b) omit subsection (4) (condition C: intellectual property created as result of research and development to which expenditure is attributable to be vested in company).

(3) In section 1053 (qualifying expenditure on contracted out R&D)—

(a) in subsection (1)(b), for “conditions A to D” substitute “ conditions A, C and D ”, and

(b) omit subsection (3) (condition B: same intellectual property condition).

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

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

(6) Omit section 1139 (meaning of “intellectual property”).

(7) In Schedule 4 to CTA 2009 (index of defined expressions), omit the entry relating to “intellectual property (in Part 13)”.

(8) The amendments made by this section have effect in relation to expenditure incurred by a company in an accounting period ending on or after 9 December 2009.

Film tax credit: unused losses

14

(1) Section 1201 of CTA 2009 (film tax credit claimable where company has surrenderable loss) is amended as follows.

(2) In subsection (2)—

(a) for “any period” substitute “ an accounting period ”, and

(b) in paragraph (a), for “the company's loss” substitute “ the company's available loss ”.

(3) After that subsection insert—

(2A) The company's available loss for an accounting period is given by— $$L+RUL$where—L is the amount of the company's loss for the period in the separate film trade, andRUL is the amount of any relevant unused loss of the company.$ (2B) The “relevant unused loss” of a company is so much of any available loss of the company for the previous accounting period as has not been— (a) surrendered under section 1202(1), or (b) carried forward under section 45 of CTA 2010 and set against profits of the separate film trade.

(4) In subsection (4), in the definition of “S”, for “surrendered in previous periods” substitute “ previously surrendered ”.

(5) After that subsection insert—

(5) If a period of account of the separate film trade does not coincide with an accounting period, any necessary apportionments are to be made by reference to the number of days in the periods concerned.

(6) In section 1202(4) of that Act (company's loss reduced by amount surrendered), for “loss in the separate film trade” substitute “ available loss ”.

(7) The amendments made by this section have effect in relation to accounting periods ending on or after 9 December 2009.

(8) In relation to those accounting periods the amendments, and corresponding amendments of paragraphs 6 and 11 of Schedule 5 to FA 2006, are to be treated as always having had effect.

Insurance business transfer schemes: non-profit fund transferred assets

15

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Chargeable gains

Capital gains tax private residence relief: adult placement carers

16

(1) In section 223(8) of TCGA 1992 (amount of relief), before the “and” at the end of paragraph (a) insert—

(aa) section 225D (private residence of adult placement carer),

(2) In section 224 of that Act (amount of relief: further provisions), insert at the end—

(4) This section is subject to section 225D (private residence of adult placement carer).

(3) In that Act, after section 225C insert—

(225D) (1) This section applies where a gain to which section 222 applies accrues to an individual (“A”) and, at any time during A's period of ownership, part of the dwelling-house was occupied by another person (“B”)— (a) in England and Wales, pursuant to an adult placement scheme, (b) in Scotland, pursuant to arrangements which constitute or form part of an adult placement service involving the provision of accommodation for B, or (c) in Northern Ireland, pursuant to arrangements made with an adult placement agency for the provision of accommodation for B. (2) For the purposes of this Part, in determining the periods during which the dwelling-house, or any part of the dwelling-house, was A's only or main residence, B's occupation of part of the dwelling-house pursuant to the scheme or arrangement is to be disregarded. (3) For the purposes of section 224, the occupation of the part of the dwelling-house by B pursuant to the scheme or arrangement does not amount to the use of that part of the dwelling-house by A exclusively for the purpose of a trade, business, profession or vocation. (4) In this section— - “adult placement agency” means an organisation or undertaking— 1. that arranges for the provision of care and support (including accommodation) for persons in need, and 2. in respect of which a requirement to register arises under Article 12 of the Health and Personal Social Services (Quality, Improvement and Regulation) (Northern Ireland) Order 2003, - “adult placement scheme” means a scheme— 1. under which an individual agrees with the person carrying on the scheme to provide care and support (including accommodation) to an adult who is in need of it, and 2. in respect of which a requirement to register arises under section 11 of the Care Standards Act 2000, and - “adult placement service” has the meaning given by paragraph 11 of schedule 12 to the Public Services Reform (Scotland) Act 2010.

(4) The amendments made by this section have effect in relation to disposals made on or after 9 December 2009.

(5) Until the coming into force of paragraph 11 of schedule 12 to the Public Services Reform (Scotland) Act 2010, the reference to that provision in section 225D(4) of TCGA 1992 is to section 2(16) of the Regulation of Care (Scotland) Act 2001.

Reinvestment of ring fence assets: acquisition by member of group

17

(1) After section 198G of TCGA 1992 insert—

(198H) Section 198A or 198B is to apply where— (a) the disposal is by a company which, at the time of the disposal, is a member of a group of companies (within the meaning given in section 170), (b) the acquisition is by another company which, at the time of the acquisition, is a member of the same group, and (c) the claim under that section is made by both companies, as if both companies were the same person.

(2) The amendment made by this section has effect in relation to disposals made on or after 22 April 2009 (whether the acquisition takes place before, on or after that date).

Capital allowances

First-year allowances on zero-emission goods vehicles

18

Schedule 7 contains provision about first-year allowances on zero-emission goods vehicles.

Part 2 — Other taxes and duties

Value added tax

Non-business use of business assets etc

19

Schedule 8 contains—

(a) provision about input tax, and

(b) provision about supplies under paragraph 5(4) of Schedule 4 to VATA 1994.

Supplies of gas, heat or cooling

20

(1) In section 9A of VATA 1994 (reverse charge on gas and electricity supplied by persons outside the United Kingdom)—

(a) for subsection (5) substitute—

(5) Relevant goods” means— (a) gas supplied through a natural gas system situated within the territory of a member State or any network connected to such a system, (b) electricity, and (c) heat or cooling supplied through a network.

, and

(b) in the heading, for “and electricity” substitute “ , electricity, heat or cooling ”.

(2) In Schedule 4 to VATA 1994 (matters to be treated as supply of goods or services), in paragraph 3 after “refrigeration” insert “ or other cooling, ”.

(3) The amendments made by this section have effect in relation to supplies made on or after 1 January 2011.

Supplies of aircraft etc

21

(1) Schedule 8 to VATA 1994 (zero-rating) is amended as follows.

(2) In Note (A1) of Group 8 (transport: definition of “qualifying aircraft” etc), for paragraph (b) substitute—

(b) a “qualifying aircraft” is any aircraft which — (i) is used by an airline operating for reward chiefly on international routes, or (ii) is used by a State institution and meets the condition in Note (B1).

(3) After that Note insert—

(B1) The condition is that the aircraft— (a) is of a weight of not less than 8,000 kilograms, and (b) is neither designed nor adapted for use for recreation or pleasure. (C1) In Note (A1)(b)— - “airline” means an undertaking which provides services for the carriage by air of passengers or cargo (or both); - “State institution” has the same meaning as in Part B of Annex X to the Council Directive 2006/112/EC on the common system of value added tax (transactions which member States may continue to exempt).

(4) The amendments made by this section have effect in relation to supplies made, and acquisitions and importations taking place, on or after 1 January 2011.

Postal services etc

22

(1) In Schedule 8 to VATA 1994 (zero-rating), in Group 8—

(a) in item 4 (transport of passengers), for “the Post Office company” substitute “ a universal service provider ”, and

(b) after Note (4D) insert—

(4E) “Universal service provider” means a person who provides a universal postal service (within the meaning of the Postal Services Act 2000), or part of such a service, in the United Kingdom.

(2) In Schedule 9 to that Act (exemptions), for Group 3 (postal services) substitute—

(1) The supply of public postal services by a universal service provider. (2) The supply of goods by a universal service provider which is incidental to the supply of public postal services by that provider. (1) “Universal service provider” means a person who provides a universal postal service, or part of such a service, in the United Kingdom. (2) Subject to the following Notes, “public postal services”, in relation to a universal service provider, means any postal services which the provider is required to provide in the discharge of a licence duty. (3) Public postal services include postal services which a universal service provider provides to allow a person access to the provider's postal facilities, where such services are provided pursuant to a licence duty. (4) Services are not “public postal services” if— (a) the price is not controlled by or under a licence, or (b) any of the other terms on which the services are provided are freely negotiated. (5) But Note (4) does not apply if a licence duty requires the universal service provider to make the services available to persons generally— (a) where the price is not controlled by or under the licence, at the same price, or (b) where terms are freely negotiated as mentioned in Note (4)(b), on those terms. (6) In this Group— - “licence” means a licence under Part 2 of the Postal Services Act 2000; - “licence duty” means a duty imposed as a condition of a licence; - “postal facilities”, in relation to a universal service provider, means the resources and systems deployed by the provider, for the purpose of discharging any licence duty to provide a universal postal service or part of such a service; - “postal services” and “universal postal service” have the same meaning as in the Postal Services Act 2000.

(3) The following provisions are omitted—

(a) in section 96(1) of VATA 1994, the definition of “the Post Office company”, and

(b) paragraph 22(3) and (4) of Schedule 8 to the Postal Services Act 2000.

(4) The amendments made by this section have effect in relation to supplies made on or after 31 January 2011.

Tobacco products duty

Long cigarettes

23

(1) In section 4 of TPDA 1979 (calculation of duty on long cigarettes)—

(a) for “than 9 cm.” substitute “ than 8 cm. ”, and

(b) for “each 9 cm. or part thereof” substitute “ the first 8 cm. of it, each 3 cm. portion of the remainder of it (if any) and the remaining portion of it (if any) ”,

and, in the heading, for “9 cm.” substitute “ 8 cm. ”.

(2) The amendments made by this section come into force on 1 January 2011.

Landfill tax

Landfill tax: criteria for determining material to be subject to lower rate

24

(1) In section 42 of FA 1996 (amount of landfill tax), for subsection (4) substitute—

(4) The Treasury must— (a) set criteria to be considered in determining from time to time what material is to be listed, (b) keep those criteria under review, and (c) revise them whenever they consider they should be revised. (5) The Commissioners must publish the criteria (and any revised criteria) set by the Treasury. (6) In determining from time to time what material is to be listed, the Treasury must have regard to— (a) the criteria (or revised criteria) published under subsection (5), and (b) any other factors they consider relevant.

(2) The amendment made by this section has effect in relation to disposals made, or treated as made, on or after 1 April 2011.

Part 3 — Administration

Interest: corporation tax and petroleum revenue tax

25

(1) Schedule 9 contains amendments of FA 2009 relating to late payment interest and repayment interest on amounts of corporation tax and petroleum revenue tax.

(2) That Schedule comes into force on such day as the Treasury may by order appoint.

(3) An order under subsection (2)—

(a) may commence a provision generally or only for specified purposes, and

(b) may appoint different days for different provisions or for different purposes.

(4) The Treasury may by order make any incidental, supplemental, consequential, transitional, transitory or saving provision which appears appropriate in consequence of, or otherwise in connection with, that Schedule.

(5) An order under subsection (4) may—

(a) make different provision for different purposes, and

(b) make provision amending, repealing or revoking any Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).

(6) An order under this section is to be made by statutory instrument.

(7) A statutory instrument containing an order under subsection (4) which includes provision amending or repealing any provision of an Act is subject to annulment in pursuance of a resolution of the House of Commons.

Penalties for failure to make returns etc

26

(1) Schedule 10 contains provision amending Schedule 55 to FA 2009 (penalties in respect of failures to make returns and other documents relating to liabilities for tax).

(2) Schedule 10 comes into force on such day as the Treasury may by order appoint.

(3) An order under subsection (2)—

(a) may commence a provision generally or only for specified purposes, and

(b) may appoint different days for different provisions or for different purposes.

(4) The Treasury may by order make any incidental, supplemental, consequential, transitional, transitory or saving provision which appears appropriate in consequence of, or otherwise in connection with, that Schedule.

(5) An order under subsection (4) may—

(a) make different provision for different purposes, and

(b) make provision amending, repealing or revoking any Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).

(6) An order under this section is to be made by statutory instrument.

(7) A statutory instrument containing an order under subsection (4) which includes provision amending or repealing any provision of an Act is subject to annulment in pursuance of a resolution of the House of Commons.

Penalties for failure to pay tax

27

(1) Schedule 11 contains provision amending Schedule 56 to FA 2009 (penalties in respect of failures to comply with obligations to pay tax).

(2) Schedule 11 comes into force on such day as the Treasury may by order appoint.

(3) An order under subsection (2)—

(a) may commence a provision generally or only for specified purposes, and

(b) may appoint different days for different provisions or for different purposes.

(4) The Treasury may by order make any incidental, supplemental, consequential, transitional, transitory or saving provision which appears appropriate in consequence of, or otherwise in connection with, that Schedule.

(5) An order under subsection (4) may—

(a) make different provision for different purposes, and

(b) make provision amending, repealing or revoking any Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).

(6) An order under this section is to be made by statutory instrument.

(7) A statutory instrument containing an order under subsection (4) which includes provision amending or repealing any provision of an Act is subject to annulment in pursuance of a resolution of the House of Commons.

Recovery of overpaid stamp duty land tax and petroleum revenue tax etc

28

(1) Schedule 12 contains—

(a) provision amending Part 4 of FA 2003 (stamp duty land tax) in respect of the recovery of overpaid tax etc, and

(b) provision amending Schedule 2 to OTA 1975 (management and collection of petroleum revenue tax) in respect of the recovery of overpaid tax etc.

(2) The amendments made by Schedule 12 have effect in relation to claims made on or after 1 April 2011.

(3) The Treasury may by order make any incidental, supplemental, consequential, transitional, transitory or saving provision which appears appropriate in consequence of, or otherwise in connection with, that Schedule.

(4) An order under this section may—

(a) make different provision for different purposes, and

(b) make provision amending, repealing or revoking any Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it).

(5) An order under this section is to be made by statutory instrument.

(6) A statutory instrument containing an order under this section which includes provision amending or repealing any provision of an Act is subject to annulment in pursuance of a resolution of the House of Commons.

Excise duties: compliance checks

29

(1) Schedule 13 contains provision about information and inspection powers, record-keeping and time limits for assessments and claims involving excise duties.

(2) The amendments made by that Schedule come into force on such day as the Treasury may by order made by statutory instrument appoint.

(3) An order under subsection (2)—

(a) may appoint different days for different provisions or for different purposes, and

(b) may include transitional provision and savings.

Part 4 — Miscellaneous provisions

Pension scheme under section 67 of Pensions Act 2008

30

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In section 67 of the Pensions Act 2008 (duty to establish pension scheme) —

(a) omit subsection (3), and

(b) in subsection (4), for “that Chapter” substitute “ Chapter 2 of Part 4 of the Finance Act 2004 ”.

Asbestos compensation settlements

31

Schedule 14 contains provision about the taxation of settlements the purpose of which is to make compensation payments to or in respect of individuals affected by an asbestos-related condition.

Part 5 — Final provisions

Interpretation

32

(1) In this Act—

“BGDA 1981” means the Betting and Gaming Duties Act 1981;

“CAA 2001” means the Capital Allowances Act 2001;

“CTA 2009” means the Corporation Tax Act 2009;

“CTA 2010” means the Corporation Tax Act 2010;

“HODA 1979” means the Hydrocarbon Oil Duties Act 1979;

“ICTA” means the Income and Corporation Taxes Act 1988;

“IHTA 1984” means the Inheritance Tax Act 1984;

“ITA 2007” means the Income Tax Act 2007;

“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;

“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005;

“OTA 1975” means the Oil Taxation Act 1975;

“TCGA 1992” means the Taxation of Chargeable Gains Act 1992;

“TIOPA 2010” means the Taxation (International and Other Provisions) Act 2010;

“TMA 1970” means the Taxes Management Act 1970;

“TPDA 1979” means the Tobacco Products Duty Act 1979;

“VATA 1994” means the Value Added Tax Act 1994;

“VERA 1994” means the Vehicle Excise and Registration Act 1994.

(2) In this Act—

“FA”, followed by a year, means the Finance Act of that year;

“F(No.2)A”, followed by a year, means the Finance (No.2) Act of that year.

Short title

33

This Act may be cited as the Finance (No. 3) Act 2010.

SCHEDULE 1

Extension of foster-care relief

1

Chapter 2 of Part 7 of ITTOIA 2005 (foster-care relief) is amended as follows.

2

(1) Section 803 (overview of Chapter 2) is amended as follows.

(2) For subsection (1) substitute—

(1) This Chapter provides relief on income from the provision by an individual of qualifying care. The relief is referred to in this Chapter as “qualifying care relief”.

(3) In subsections (2) and (5), for “foster-care” substitute “ qualifying care ”.

3

(1) Section 804 (person who qualifies for relief) is amended as follows.

(2) For subsection (1) substitute—

(1) An individual qualifies for qualifying care relief for a tax year if the individual— (a) has qualifying care receipts for the tax year (see section 805), and (b) does not derive any taxable income, other than qualifying care receipts, from a relevant trade or arrangement.

(3) In subsection (3), for “foster-care” substitute “ qualifying care ”.

(4) After that subsection insert—

(4) Subsection (1) is subject to section 804A.

4

After section 804 insert—

(804A) (1) This section applies if an individual (“N”) has qualifying care receipts for a tax year in respect of the provision of shared lives care. (2) N does not qualify for qualifying care relief in respect of those receipts if the placement cap is exceeded for the residence (or any of the residences) used by N to provide the care from which those receipts are derived. (3) The placement cap is exceeded for a residence if, at any given time during the relevant period, shared lives care is being provided there (whether by N or anyone else) for more than 3 people in total. (4) The relevant period, in relation to a residence, is the period for which the residence is N's only or main residence during the income period for the receipts (see section 805). (5) If the placement cap is so exceeded but N also has qualifying care receipts for the tax year in respect of the provision of foster care, this Chapter is to apply to N for the tax year as if— (a) references to qualifying care were to foster care, and (b) accordingly, references (other than in this section) to qualifying care receipts did not include receipts in respect of the provision of shared lives care. (6) In determining the number of people for whom shared lives care is being provided at any given time, brothers and sisters (including half-brothers and half-sisters) count as one person.

5

(1) In section 805(1) (meaning of “foster-care receipts”)—

(a) for “foster-care” substitute “ qualifying care ”, and

(b) in paragraph (a), for “foster care” substitute “ qualifying care ”.

(2) Accordingly, in the heading of section 805, for “foster-care” substitute “ qualifying care ”.

6

After section 805 insert—

(805A) For the purposes of this Chapter qualifying care is provided if an individual (alone or in partnership) provides— (a) foster care but not shared lives care, (b) shared lives care but not foster care, or (c) both foster care and shared lives care.

7

After section 806 insert—

(806A) (1) For the purposes of this Chapter shared lives care is provided by an individual if— (a) the individual provides accommodation and care for an adult or child (“X”) who has been placed with the individual, and (b) the conditions in subsection (2) are met. (2) The conditions are— (a) the accommodation is in the individual's own home, (b) the accommodation and care are provided on the basis that X will share the individual's home and daily family life during the placement, (c) the placement is made under a specified social care scheme, (d) the individual does not provide the accommodation and care as a foster carer, and (e) the individual is not excluded within the meaning of section 806(5). (3) Section 806(5) has effect for the purposes of subsection (2)(e) as if references to the child were to X (whatever X's age). (4) “Specified social care scheme” means a social care scheme of a kind specified or described in an order made by the Treasury. (5) An order under subsection (4) may make provision having effect in relation to the tax year current on the day on which the order is made. (6) In this section— - “care” means personal care, including assistance and support; - “home” means an individual's only or main residence; - “social care scheme” means a scheme, service or arrangement for those who, by reason of age, illness, disability or other vulnerability, are in need of care. (806B) (1) In this Chapter “residence” means— (a) a building, or part of a building, occupied or intended to be occupied as a separate residence, or (b) a caravan or houseboat. (2) If a building, or part of a building, designed for permanent use as a single residence is temporarily divided into two or more separate residences, it is still treated as a single residence.

8

(1) In section 807 (calculation of “total foster-care receipts”), for “foster-care” substitute “ qualifying care ”.

(2) Accordingly, in the heading of that section, for “foster-care” substitute “ qualifying care ”.

9

In section 808(1)(b) (the individual's limit), before “child” insert “ adult or ”.

10

For section 809 substitute—

(809) (1) This section applies if in a tax year— (a) the residence used to provide the qualifying care from which an individual's qualifying care receipts for the tax year are derived is also used by another individual to provide qualifying care, and (b) the other individual also has qualifying care receipts for the tax year. (2) Each individual's share of the fixed amount for the tax year is the fixed amount divided by the total number of individuals who— (a) use the residence in the tax year to provide qualifying care, and (b) have qualifying care receipts for the tax year.

11

In section 810(1) (share of fixed income: income period not a year), for “foster-care” substitute “ qualifying care ”.

12

(1) Section 811 (the amount per child) is amended as follows.

(2) For subsection (1) substitute—

(1) An individual's amount per adult or child for a tax year is found by multiplying— (a) the number of weeks during the income period for the tax year in which the individual provides qualifying care for the adult or child, by (b) the weekly amount for the adult or child. (1A) The weekly amount for an adult is £250.

(3) In subsection (3), for “subsection (2)” substitute “ subsection (1A) or (2) ”.

(4) In subsection (4), for “foster care for a child” substitute “ qualifying care for an adult or child ”.

(5) Accordingly, in the heading, before “child” insert “ adult or ”.

13

For section 812 substitute—

(812) Sections 813 and 814 (which give the full form of qualifying care relief) apply if— (a) an individual qualifies for qualifying care relief for a tax year, (b) the individual's total qualifying care receipts for the tax year do not exceed the individual's limit for the tax year, and (c) sections 822 and 823 do not apply (accounting date for trade not 5 April).

14

(1) In section 813(1) (full foster-care relief: trading income), for “foster-care” substitute “ qualifying care ”.

(2) Accordingly, in the heading of section 813, for “foster-care” substitute “ qualifying care ”.

15

(1) In section 814(1) (full foster-care relief: income chargeable under Chapter 8 of Part 5), for “foster-care” substitute “ qualifying care ”.

(2) Accordingly, in the heading of section 814, for “foster-care” substitute “ qualifying care ”.

16

In section 815(a) and (b) (alternative calculation of profits: introduction), for “foster-care” substitute “ qualifying care ”.

17

In section 816(1) and (2)(a) (alternative calculation of profits: trading income), for “foster-care” substitute “ qualifying care ”.

18

In section 817(1) and (2)(a) (alternative calculation of profits: income chargeable under Chapter 8 of Part 5), for “foster-care” substitute “ qualifying care ”.

19

In section 818(1)(a) and (b) (election for alternative method of calculating profits), for “foster-care” substitute “ qualifying care ”.

20

In section 819(1)(b) (adjustment of assessment), for “foster care” substitute “ qualifying care ”.

21

In section 820(a) and (b) (periods of account not ending on 5th April), for “foster-care” substitute “ qualifying care ”.

22

(1) Section 821 (meaning of “relevant limit”) is amended as follows.

(2) In subsection (1)—

(a) for “foster-care” substitute “ qualifying care ”, and

(b) in paragraph (b), before “child” insert “ adult or ”.

(3) In subsection (2), before “child”, in both places where it occurs, insert “ adult or ”.

23

In section 822(1) (full relief), for “foster-care” substitute “ qualifying care ”.

24

In section 823(1)(a) and (2)(a) (alternative method of calculating profits), for “foster-care” substitute “ qualifying care ”.

25

In section 824(1)(a) and (2)(b) (capital allowances: introduction), for “foster-care” substitute “ qualifying care ”.

26

In section 825(2) and (4)(a) (carried forward unrelieved qualifying expenditure), for “foster care” substitute “ qualifying care ”.

27

In section 826(b) (excluded capital expenditure), for “foster care” substitute “ qualifying care ”.

28

In section 827(a) (excluded capital expenditure: subsequent treatment of asset), for “foster care” substitute “ qualifying care ”.

29

Accordingly, for the heading of Chapter 2 of Part 7 of ITTOIA 2005 substitute “ qualifying care relief ”.

Consequential amendments

30

ITTOIA 2005 is amended as follows.

31

In section 1(5) (overview of Act), for “foster-care” substitute “ qualifying care ”.

32

(1) In section 23 (rent-a-room and foster-care relief)—

(a) in subsection (3), for “foster-care” substitute “ qualifying care ”, and

(b) in subsection (4), for “foster care” substitute “ qualifying care ”.

(2) Accordingly—

(a) in the heading of that section, for “foster-care” substitute “ qualifying care ”, and

(b) in the heading immediately preceding that section, for “foster-care” substitute “ qualifying care ”.

33

In section 688(2)(b) (income charged), for “foster care” substitute “ qualifying care ”.

34

In the heading of Part 7, for “FOSTER-CARE” substitute “ QUALIFYING CARE ”.

35

In the table in Part 2 of Schedule 4 (index of expressions defined in this Act etc)—

(a) omit the entries for “foster-care receipts” and “foster-care relief”,

(b) after the entry for “provides foster care” insert—

provides qualifying care (in Chapter 2 of Part 7)	section 805A
provides shared lives care (in Chapter 2 of Part 7)	section 806A

qualifying care receipts (in Chapter 2 of Part 7)	section 805
qualifying care relief (in Chapter 2 of Part 7)	section 803(1)

(d) after the entry for “residence” insert—

residence (in Chapter 2 of Part 7)	section 806B

and

(e) in the entry for “total foster-care receipts”, for “foster-care” substitute “ qualifying care ”.

Commencement

36

(1) The amendments made by this Schedule have effect for the tax year 2010-11 and subsequent tax years.

(2) But an individual within sub-paragraph (3) may elect to be treated for income tax purposes as if those amendments had effect instead for the tax year 2011-12 and subsequent tax years (and accordingly to remain entitled, for the tax year 2010-11, to the benefit of any relevant concession so far as applicable to the individual).

(3) An individual is within this sub-paragraph if the individual has qualifying care receipts for the tax year 2010-11 in respect of the provision of shared lives care (with or without qualifying care receipts in respect of the provision of foster care).

(4) A relevant concession is an existing HMRC concession (within the meaning of section 160 of FA 2008)—

(a) which is in force immediately before the passing of this Act, and

(b) to which effect is given (in whole or in part) by this Schedule.

(5) An election under sub-paragraph (2) must be made on or before the first anniversary of the normal self-assessment filing date for the tax year 2010-11 (or such later date as an officer of Revenue and Customs may, in a particular case, allow).

Transitional provision

37

(1) This paragraph applies if—

(a) an individual had qualifying care receipts in respect of the provision of shared lives care—

(i) for the pre-commencement tax year, or

(ii) for a continuous series of tax years up to and including the pre-commencement tax year,

(b) the receipts were receipts of a trade,

(d) the individual did not derive any taxable income, other than qualifying care receipts, from the trade.

(2) Sections 824 to 827 of ITTOIA 2005 (capital allowances) are to have effect as if the individual had been a relevant individual for—

(a) the pre-commencement tax year, or

(b) if sub-paragraph (1)(a)(ii) applies, the pre-commencement tax year and each earlier tax year in the series.

(3) “The pre-commencement tax year” means the tax year immediately preceding—

(a) for an individual who makes an election under paragraph 36, the tax year 2011-12,

(b) otherwise, the tax year 2010-11.

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

SCHEDULE 2

Enterprise investment scheme

1

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

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

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

(b) omit subsection (3),

(d) omit subsection (5).

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

(za) UK permanent establishment (see section 180A), (zb) financial health (see section 180B),

(4) Before section 181 insert—

(180A) (1) The issuing company must meet the UK permanent establishment requirement throughout period B. (2) The UK permanent establishment requirement is that the issuing company has a permanent establishment in the United Kingdom. (180B) (1) The issuing company must meet the financial health requirement at the beginning of period B. (2) The financial health requirement is that the issuing company is not in difficulty. (3) The issuing company is “in difficulty” if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02).

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

(191A) (1) This section applies for the purposes of this Part. (2) A company has a “permanent establishment” in the United Kingdom if (and only if)— (a) it has a fixed place of business there through which the business of the company is wholly or partly carried on, or (b) an agent acting on behalf of the company has and habitually exercises there authority to enter into contracts on behalf of the company. (3) For the purposes of this section “fixed place of business” includes (without prejudice to the generality of that expression)— (a) a place of management, (b) a branch, (c) an office, (d) a factory, (e) a workshop, (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, and (g) a building site or construction or installation project. (4) If the condition in subsection (5) is met, a company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that— (a) a fixed place of business is maintained there for the purpose of carrying on activities for the company, or (b) an agent carries on activities there for and on behalf of the company. (5) The condition is that, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character. (6) For this purpose “activities of a preparatory or auxiliary character” include (without prejudice to the generality of that expression)— (a) the use of facilities for the purpose of storage, display or delivery of goods or merchandise belonging to the company, (b) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of storage, display or delivery, (c) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of processing by another person, and (d) purchasing goods or merchandise, or collecting information, for the company. (7) A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it carries on business there through an agent of independent status (including a broker or a general commission agent) acting in the ordinary course of the agent's business. (8) A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it controls a company that— (a) is resident there, or (b) carries on business there (whether through a permanent establishment or otherwise). (9) The Treasury may by regulations amend this section.

Venture capital trusts

2

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

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

(a) in the table in subsection (2), in the first entry, in column 2, for “included in the official UK list” substitute “ admitted to trading on a regulated market ”,

(b) in the last entry in the table, in columns 1 and 2, for “30%” substitute “ 70% ”,

(d) at the end insert—

(4) In this section “regulated market” has the same meaning as in Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments (see Article 4.1(14)). (5) The Treasury may by regulations amend— (a) the first entry in the table in subsection (2) (the listing condition), or (b) subsection (4).

(3) In section 275(3)(b) (alternative requirements for the giving of approval), for “30%” substitute “ 70% ”.

(4) In section 278(1) (conditions relating to value of investments: general), for “30%” substitute “ 70% ”.

(5) In section 280(2) (conditions relating to qualifying holdings and eligible shares), for “30%” substitute “ 70% ”.

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

(3A) For the purposes of this Chapter, shares in a company are “eligible” unless they carry— (a) a present or future preferential right to dividends that is within subsection (3B), (b) a present or future preferential right to the company's assets on its winding up, or (c) a present or future right to be redeemed. (3B) A preferential right to dividends carried by a share in a company is within this subsection if— (a) the amount of any dividends payable pursuant to the right, or the date or dates on which they are payable, depend to any extent on a decision of the company, the holder of the share or any other person, or (b) the amount of any dividends that become payable at any time pursuant to the right includes any amount that became payable at any earlier time pursuant to the right, but has not been paid.

(7) In section 286 (qualifying holdings: introduction), in subsection (3), before paragraph (a) insert—

(za) UK permanent establishment (see section 286A), (zb) financial health (see section 286B),

(8) Before section 287 insert—

(286A) The requirement of this section, at any time on or after the issue of the relevant holding, is that the relevant company has a permanent establishment in the United Kingdom at all times from the issue of the holding to the time in question. (286B) (1) The requirement of this section is that the relevant company is not, at the time of the issue of the relevant holding, in difficulty. (2) The relevant company is “in difficulty” if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02).

(9) In section 289(5) (the proportion of eligible shares requirement), for “285(3)” substitute “ 285(3A) and (3B) ”.

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

(a) in subsection (2), for “A qualifying trade carried on wholly or mainly in the United Kingdom” substitute “ Carrying on a qualifying trade ”,

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

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

(a) that a trade will be derived which will be a qualifying trade, or (b) that a trade will benefit which is or will be a qualifying trade,

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

(302A) (1) This section applies for the purposes of this Chapter. (2) A company has a “permanent establishment” in the United Kingdom if (and only if)— (a) it has a fixed place of business there through which the business of the company is wholly or partly carried on, or (b) an agent acting on behalf of the company has and habitually exercises there authority to enter into contracts on behalf of the company. (3) For the purposes of this section “fixed place of business” includes (without prejudice to the generality of that expression)— (a) a place of management, (b) a branch, (c) an office, (d) a factory, (e) a workshop, (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, and (g) a building site or construction or installation project. (4) If the condition in subsection (5) is met, a company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that— (a) a fixed place of business is maintained there for the purpose of carrying on activities for the company, or (b) an agent carries on activities there for and on behalf of the company. (5) The condition is that, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character. (6) For this purpose “activities of a preparatory or auxiliary character” include (without prejudice to the generality of that expression)— (a) the use of facilities for the purpose of storage, display or delivery of goods or merchandise belonging to the company, (b) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of storage, display or delivery, (c) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of processing by another person, and (d) purchasing goods or merchandise, or collecting information, for the company. (7) A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it carries on business there through an agent of independent status (including a broker or a general commission agent) acting in the ordinary course of the agent's business. (8) A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it controls a company that— (a) is resident there, or (b) carries on business there (whether through a permanent establishment or otherwise). (9) The Treasury may by regulations amend this section.

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

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

, and (c) any right to dividends carried by shares in the company where the shares— (i) are eligible shares, and (ii) are held by the investing company.

, and

(b) after subsection (7) insert—

(8) In subsection (6) “eligible shares” has the same meaning as in Chapter 3 (see section 285(3A) and (3B)).

Interpretation

3

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

(2) In section 989 (the definitions), omit the definition of “permanent establishment”.

(3) After section 1007 insert—

(1007A) (1) In the Income Tax Acts “permanent establishment”, in relation to a company, is to be read in accordance with Chapter 2 of Part 24 of CTA 2010. (2) This section does not apply for the purposes of— (a) Part 5 of this Act (see instead section 191A), or (b) Chapter 4 of Part 6 of this Act (see instead section 302A).

4

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

(2) In column 2 of the entry for “eligible shares (in Chapter 3 of Part 6)”, for “285(3)” substitute “ 285(3A) and (3B) ”.

(3) In column 1 of the entry for “the 30% eligible shares condition (in Chapter 3 of Part 6)”, for “30%” substitute “ 70% ”.

(4) For the entry for “permanent establishment” substitute—

permanent establishment (except in Part 5 and Chapter 4 of Part 6)	section 1007A
permanent establishment (in Part 5)	section 191A
permanent establishment (in Chapter 4 of Part 6)	section 302A

Consequential repeal

5

In consequence of the amendment made by paragraph 3(2), omit paragraph 562(6) of Schedule 1 to CTA 2010.

Commencement of amendments relating to 70% eligible shares condition

6

(1) The amendments made by paragraphs 2(2)(b) and (c), (3) to (6) and 4(2) and (3) have effect in relation to accounting periods ending on or after the commencement day.

(2) The amendments mentioned in sub-paragraph (1) do not have effect in relation to shares or securities held by a company (“the investing company”) if the shares or securities—

(a) are issued before the commencement day, or

(b) are issued on or after that day and are acquired by the investing company before 6 April 2018 by means of the investment of protected money.

(3) In this paragraph “protected money” means—

(a) money raised by the issue before the commencement day of shares in or securities of the investing company, or

(b) money derived from the investment of such money.

Commencement of other provisions of this Schedule

7

(1) The amendments made by paragraph 1 have effect in relation to shares issued on or after the commencement day.

(2) The amendments made by paragraph 2(2)(a) and (d) have effect in relation to accounting periods ending on or after the commencement day (and have effect in relation to shares issued at any time).

(3) The amendments made by paragraphs 2(7), (8) and (10) to (12), 3, 4(4) and 5 have effect in relation to shares or securities issued on or after the commencement day.

(4) The amendments made by paragraph 2(9) and (13) have effect in relation to shares issued at any time.

Meaning of “the commencement day”

8

(1) In paragraphs 6 and 7 “the commencement day” means such day as the Treasury may by order appoint.

(2) An order may appoint different days for different provisions or different purposes.

SCHEDULE 3

Meaning of “distribution” in the Corporation Tax Acts

1

(1) Part 23 of CTA 2010 (company distributions) is amended as follows.

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

(3) After section 1027 insert—

(1027A) (1) This section applies for the purpose of determining whether a distribution is treated as a repayment of share capital for the purposes of this Chapter. (2) A distribution made out of a reserve arising from a reduction of share capital is to be treated as if it were made out of profits available for distribution otherwise than by virtue of the reduction. (3) The reference in subsection (2) to share capital includes, in the case of share capital issued at a premium representing new consideration, the amount of the premium. (4) The reference in subsection (2) to a reduction of share capital is— (a) in the case of a limited company incorporated in a territory outside the United Kingdom, to a reduction under any provision of the law of that territory corresponding to Chapter 10 of Part 17 of the Companies Act 2006, and (b) in the case of an unlimited company incorporated in a territory outside the United Kingdom, to a reduction under any provision of the law of that territory corresponding to any rule of law of any part of the United Kingdom under which an unlimited company may reduce its share capital. (5) This section does not apply for the purposes of any provision to the extent that the provision relates to income tax.

Meaning of “distribution” in Income Tax Acts

2

In section 989 of ITA 2007 (definitions for the purposes of the Income Tax Acts), in the definition of “distribution”, after “Chapters 2 to 5 of Part 23 of CTA 2010” insert “ , disregarding section 1027A of that Act ”.

Distributions subject to the charge to corporation tax on income

3

(1) Part 9A of CTA 2009 (company distributions) is amended as follows.

(2) In section 931A (charge to tax), omit subsection (2) and for subsection (3) substitute—

(3) A distribution is exempt for the purposes of this Part if it is exempt under— (a) Chapter 2 (distributions received by small companies), or (b) Chapter 3 (distributions received by companies that are not small).

(3) In section 931H (dividends derived from transactions not designed to reduce tax)—

(a) in the heading, for “Dividends” substitute “ Distributions ”,

(b) in subsection (1)—

(i) after “dividend” insert “ or other distribution ”, and

(ii) for “paid” substitute “ made ”,

(d) in subsections (3) and (4)—

(i) for “dividend” substitute “ distribution ”, and

(ii) for “paid” substitute “ made ”, and

(e) in subsection (5)—

(i) for “dividend” substitute “ distribution ”,

(ii) for “paid” (in both places) substitute “ made ”, and

(iii) for “dividends” substitute “ distributions ”.

(4) After section 931R insert—

(931RA) The fact that a dividend or other distribution is exempt does not prevent it from being taken into account in the calculation of chargeable gains.

Distributions giving rise to deemed disposals

4

(1) TCGA 1992 is amended as follows.

(2) In section 22 (disposal where capital sums derived from assets), after subsection (3), insert—

(4) Subsection (1) does not apply where a company receives, or becomes entitled to receive— (a) a capital distribution within the meaning of section 122 (see instead subsection (1) of that section), or (b) a distribution to which the charge to corporation tax on income under Part 9A of CTA 2009 (company distributions) applies or would apply were the distribution not exempt for the purposes of that Part.

(3) In section 122 (deemed disposal on receipt of certain distributions), after subsection (5) insert—

(6) The reference in subsection (5)(b) to a distribution which in the hands of the recipient constitutes income for the purposes of income tax includes, where the recipient is a company, a distribution to which the charge to corporation tax on income under Part 9A of CTA 2009 (company distributions) would apply were the distribution not exempt for the purposes of that Part.

Commencement

5

(1) The amendments made by this Schedule have effect in relation to distributions made on or after 1 July 2009.

(2) An amendment corresponding to that made by paragraph 1, having effect in relation to distributions made on or after 1 July 2009, is to be treated as having been made in section 211 of ICTA.

Treatment of distributions of UK resident companies made before 1 July 2009

6

(1) Section 1285 of CTA 2009 (UK company distributions exempt from corporation tax) and section 208 of ICTA (which was the predecessor of section 1285 of CTA 2009) are to be treated as always having had effect (before their repeal) as if references in them to a distribution included a distribution to which sub-paragraph (2) applies.

(2) This sub-paragraph applies to a distribution that—

(a) falls within the meaning of Chapters 2 to 5 of Part 23 of CTA 2010, as amended by paragraph 1, but

(b) does not fall within that meaning disregarding that amendment.

(3) Section 22 of TCGA 1992 (disposal where capital sums derived from assets) is to be treated as always having had effect as if subsection (1) of that section did not apply where a company receives, or becomes entitled to receive—

(a) a capital distribution within the meaning of section 122 of that Act made before 1 July 2009, or

(b) a distribution that is exempt from corporation tax under section 1285 of CTA 2009 or section 208 of ICTA, as modified by sub-paragraph (1).

(4) Section 122 of that Act (deemed disposal on receipt of certain distributions) is to be treated as always having had effect as if references in it to a capital distribution did not include a distribution that is exempt from corporation tax under section 1285 of CTA 2009 or section 208 of ICTA, as modified by sub-paragraph (1).

Election to opt out of effect of Schedule in relation to a distribution made before 22 June 2010

7

(1) If a company so elects, this Schedule has effect in relation to a relevant distribution received by the company as if—

(a) the amendments made by paragraphs 1 to 4 were of no effect, and

(b) paragraphs 5(2) and 6 were of no effect.

(2) An election under this paragraph has effect only in relation to such distributions as are specified in the election.

(3) In this paragraph “relevant distribution” means a distribution made before 22 June 2010.

SCHEDULE 4

Amendment of TCGA 1992

1

After section 142 of TCGA 1992 (capital gains on stock dividends) insert—

(142A) (1) This section applies if share capital issued in lieu of a cash dividend by— (a) a company UK REIT, or (b) the principal company of a group UK REIT, is attributed as mentioned in section 550(2)(a), (c) or (d) of CTA 2010 (attribution of distributions). (2) The case shall not constitute a reorganisation of the company's share capital for the purposes of sections 126 to 128. (3) The person who acquires the share capital by means of its issue shall (notwithstanding section 17(1)) be treated for the purposes of section 38(1)(a) as having acquired that asset for a consideration equal to the cash equivalent of the share capital. (4) Section 414A(2) to (4) of ITTOIA 2005 (meaning of “share capital issued in lieu of a cash dividend”) applies for the purposes of this section as it applies for the purposes of Chapter 5 of Part 4 of that Act. (5) Section 412(1), (2), (4) and (5) of that Act (meaning of “cash equivalent of share capital”) applies for the purposes of this section as it applies in relation to share capital issued as mentioned in section 410(1)(a) of that Act. (6) In this section “company UK REIT” and “principal company of a group UK REIT” are to be read in accordance with Part 12 of CTA 2010 (Real Estate Investment Trusts).

Amendment of ITA 2007

2

In section 973 of ITA 2007 (REITs: income tax due in respect of distributions), after subsection (3) insert—

(3A) In this section, section 974 and any regulations under this section, “distribution” is to be read in accordance with section 554A of CTA 2010 (meaning of “distribution”). (3B) Section 599A of CTA 2010 (amount of distribution consisting of share capital issued in lieu of cash dividend) applies for the purposes of this section, section 974 and any regulations under this section as it applies for the purposes of Part 12 of that Act (Real Estate Investment Trusts).

Amendment of CTA 2010

3

Part 12 of CTA 2010 (Real Estate Investment Trusts) is amended as follows.

4

(1) Section 530 (condition as to distribution of profits) is amended as follows.

(2) In subsection (1), omit paragraph (b) (but not the word “and” at the end of it).

(3) In subsection (4), omit paragraph (a) (including the word “and” at the end of it).

(4) After subsection (6) insert—

(6A) In this section, references (however expressed) to a distribution are to either or both of the following— (a) a dividend in cash, and (b) share capital issued in lieu of a cash dividend. (6B) Section 1051(2) to (4) (meaning of “share capital issued in lieu of a cash dividend”) applies for the purposes of subsection (6A) as it applies for the purposes of section 1049(1)(a). (6C) Subsection (6D) applies if— (a) (apart from that subsection) there would be a a failure to meet the condition in this section in relation to an accounting period, and (b) that failure would arise solely by reason of the operation, by virtue of section 599A(2), of section 412(2) of ITTOIA 2005 (substitution of market value) in relation to any distributions within subsection (6A)(b). (6D) Subsection (1) or (4) (as the case may be) is to have effect in relation to that accounting period as if for the words “on or before” there were substituted “before the end of the period of three months beginning with”.

5

In section 549 (distributions: supplementary), after subsection (2) insert—

(2A) Sections 409 to 414 of ITTOIA 2005 (stock dividend income from UK resident companies) do not apply to relevant distributions received by a shareholder.

6

In section 550 (attribution of distributions), in subsection (2)(a), for “payments” substitute “ distributions ”.

7

In section 553 (meaning of “holder of excessive rights”), in subsection (2)(a), for “dividends” substitute “ distributions ”.

8

After section 554 (regulations: distributions to holders of excessive rights) insert—

(554A) (1) In this Chapter, references (however expressed) to a distribution include share capital issued in lieu of a cash dividend. (2) Section 1051(2) to (4) (meaning of “share capital issued in lieu of a cash dividend”) applies for the purposes of this section as it applies for the purposes of section 1049(1)(a).

9

(1) Section 564 (breach of condition as to distribution of profits) is amended as follows.

(2) In subsection (5)(a), omit “by way of dividend”.

(3) After subsection (9) insert—

(10) In this section and section 565, “distribution” is to be read in accordance with section 530(6A) and (6B).

10

After section 599 (calculation of profits) insert—

(599A) (1) For the purposes of this Part, the amount of a distribution, so far as it consists of share capital issued in lieu of a cash dividend, is the cash equivalent of the share capital. (2) Section 412(1), (2), (4) and (5) of ITTOIA 2005 (meaning of “cash equivalent of share capital”) applies for the purposes of this section as it applies in relation to share capital issued as mentioned in section 410(1)(a) of that Act.

11

In section 605 (property rental business: exclusion of business producing listed income), after subsection (2) insert—

(2A) The reference in class 7 of the table in subsection (2) to dividends from shares includes share capital issued in lieu of a cash dividend (and the reference in subsection (1) to income is to be read accordingly). (2B) Section 1051(2) to (4) (meaning of “share capital issued in lieu of a cash dividend”) applies for the purposes of subsection (2A) as it applies for the purposes of section 1049(1)(a).

Commencement

12

The amendments made by this Schedule have effect in relation to distributions made on or after the day on which this Act is passed.

SCHEDULE 5

Introduction

1

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

Amendment of Chapter 1 (introduction)

2

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

Amendments of Chapter 2 (application of Part)

3

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

4

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

5

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

6

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

7

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8

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

9

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

10

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11

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

12

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

Amendments of Chapter 3 (disallowance of deductions)

13

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

14

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

15

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

16

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

Amendment of Chapter 4 (exemption of financing income)

17

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

Amendments of Chapter 5 (intra-group financing income where payer denied deduction)

18

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

Amendments of Chapter 7 (“financing expense amount” and “financing income amount”)

19

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

20

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

21

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

22

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

23

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

24

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

Amendment of Chapter 8 (the “tested expense amount” and “tested income amount”)

25

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

Amendments of Chapter 9 (the “available amount”)

26

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

27

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

28

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

Amendments of Chapter 10 (other interpretative provisions)

29

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

30

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

31

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

32

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

33

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

Amendment of transitional provision

34

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

Amendments of index of defined expressions

35

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

Commencement

36

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

Election to defer the application of some of the amendments made by this Schedule

37

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

SCHEDULE 6

Introductory

1

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