Finance Act 2012

But this is subject to subsection (1A).

• (3) After that subsection insert—

(1A) Where— (a) the requirement of subsection (6) of section 187A (effect of changes in ownership of fixture: fixed value requirement) applies, or may in future apply by reason of a person being required to bring the disposal value of plant and machinery into account in accordance with item 1, 5 or 9 of the Table in section 196, (b) an application is made to the tribunal for the purposes of section 187A(7)(a), and (c) that application is not determined before the end of the period mentioned in subsection (1) of this section, subsection (1) does not apply and an election within section 187A(7)(b) may be made by notice to an officer of Revenue and Customs at any time before the tribunal determines the application or the application is withdrawn.

• (4) For subsection (3)(f) substitute—

(f) in relation to each of the persons making the election— (i) that person's Unique Taxpayer Reference, or (ii) that the person does not have a Unique Taxpayer Reference.

5

• (1) In section 563 (procedure for determining certain questions affecting two or more persons), in subsection (1)(a) for “two” substitute “ one ”.

• (2) Accordingly, in the heading for that section for “two” substitute “ one ”.

Fixtures on which business premises renovation allowance has been made

6

After section 186 insert—

(186A) (1) This section applies if— (a) a person (“the past owner”) has at any time claimed an allowance to which that person was entitled under Part 3A (business premises renovation allowances) in respect of qualifying expenditure under that Part incurred in respect of a qualifying building (“Part 3A expenditure”), (b) there has been a balancing event within section 360N(1) as a result of which an asset representing the whole or part of the Part 3A expenditure (“the Part 3A asset”) ceased to be owned by the past owner, (c) the Part 3A asset was or included plant or machinery, and (d) the current owner makes a claim under this Part in respect of expenditure (“new expenditure”) incurred— (i) on the provision of the plant or machinery, and (ii) at a time when it is a fixture. (2) If the new expenditure exceeds the maximum allowable amount, the excess is to be left out of account in determining the current owner's qualifying expenditure. (3) If the proceeds from the balancing event mentioned in subsection (1)(b) exceed R, the maximum allowance amount is— $$F T × R$where—F is so much of the proceeds from the balancing event as are attributable to the fixture,T is the total amount of the proceeds from the balancing event, andR is the qualifying expenditure incurred by the past owner on the Part 3A asset less the net Part 3A allowances in respect of that asset.$ (4) Where subsection (3) does not apply, the maximum allowable amount is so much of the proceeds from the balancing event as are attributable to the fixture. (5) For the purposes of subsection (3) the “net Part 3A allowances” in respect of the Part 3A asset means— (a) the total of any allowances made under Part 3A in respect of the past owner's qualifying expenditure, less (b) the total of any balancing charges made under that Part in respect of that expenditure. (6) For the purposes of this section, the current owner of the plant or machinery is— (a) the person who acquired the Part 3A asset from the past owner, or (b) any person who is subsequently treated as the owner of the plant or machinery.

7

In section 9 (interaction between fixtures claims and other claims), in subsection (2)—

• (a) in paragraph (a), after “Part 3” insert “ , 3A ”, and

• (b) in paragraph (b), after “section 186(2)” insert “ , 186A(2) ”.

8

In section 57 (available qualifying expenditure), in subsection (3), after “section 186(2)” insert “ , 186A(2) ”.

9

In section 198 (election to apportion sale price on sale of qualifying interest), for subsection (5)(a) substitute—

(a) sections 186, 186A and 187 (fixtures on which industrial buildings allowance, business premises renovation allowance or research and development allowance has been made),

.

10

In section 199 (election to apportion capital sum given by lessee on grant of lease), for subsection (5)(a) substitute—

(a) sections 186, 186A and 187 (fixtures on which industrial buildings allowance, business premises renovation allowance or research and development allowance has been made),

.

Commencement and transitionals

11

The amendments made by paragraphs 2 to 5 have effect—

• (a) for income tax purposes, in relation to new expenditure incurred on or after 6 April 2012, and

• (b) for corporation tax purposes, in relation to new expenditure incurred on or after 1 April 2012.

12

The amendments made by paragraph 6 to 10 have effect—

• (a) for income tax purposes, in relation to balancing events which occur on or after 6 April 2012, and

• (b) for corporation tax purposes, in relation to balancing events which occur on or after 1 April 2012.

13

• (1) Where (ignoring this sub-paragraph) plant or machinery would be treated for the purposes of subsection (1)(b) of section 187A of CAA 2001 as having been owned by a person for a period which began and ended before the commencement date, that period of ownership is, for those purposes, to be regarded as not occurring at a relevant earlier time.

• (2) Section 187A(3)(a) of CAA 2001 (imposition of the pooling requirement) does not apply if the period for which the plant or machinery is treated as having been owned by the past owner as a result of incurring the historic expenditure ends no later than the end of the period of 2 years beginning with the commencement date.

• (3) “The commencement date” means—

• (a) for income tax purposes, 6 April 2012, and

• (b) for corporation tax purposes, 1 April 2012.

SCHEDULE 11

1

CAA 2001 is amended as follows.

2

In section 39 (first-year allowances available for certain types of qualifying expenditure only), at the appropriate place in the list insert—

section 45K	expenditure on plant and machinery for use in designated assisted areas.

3

After section 45J insert—

(45K) (1) Expenditure is first-year qualifying expenditure if— (a) it is incurred by a company on the provision of plant or machinery for use primarily in an area which at the time the expenditure is incurred is a designated assisted area, (b) it is incurred in the period of 5 years beginning with 1 April 2012, (c) Conditions A to E are met. (2) “Designated assisted area” means an area which— (a) is designated by an order made by the Treasury, and (b) falls wholly within an assisted area. (3) An area may be designated by an order under subsection (2)(a) only if at the time the order is made— (a) the area falls wholly within an enterprise zone, and (b) a memorandum of understanding, in respect of the area, relating to the availability of allowances in respect of expenditure to which this section applies has been entered into by the Treasury and the responsible authority for the area. (4) An order made under subsection (2)(a) may provide that an area designated by the order is to be treated as having been so designated at times falling before the order is made. (5) But where an area has previously been designated by an order under subsection (2)(a), section 14 of the Interpretation Act 1978 does not apply, by virtue of subsection (4), so as to imply a power to make an order (“the new order”) treating that area (or any part of it) as if it were not so designated at times falling before the new order is made. (6) Condition A is that the company is within the charge to corporation tax. (7) Condition B is that the expenditure is incurred for the purposes of a qualifying activity within section 15(1)(a) or (f). (8) Condition C is that the expenditure is incurred for the purposes of— (a) a business of a kind not previously carried on by the company, (b) expanding a business carried on by the company, or (c) starting up an activity which relates to a fundamental change in a product or production process of, or service provided by, a business carried on by the company. (9) Condition D is that the plant or machinery is unused and not second-hand. (10) Condition E is that the expenditure is not replacement expenditure. (11) “Replacement expenditure” means expenditure incurred on the provision of plant or machinery (“new plant or machinery”) intended to perform the same or a similar function, for the purposes of the qualifying activity of the company, as other plant or machinery (“replaced plant or machinery”)— (a) on which the company has previously incurred qualifying expenditure, and (b) which has been superseded by the new plant or machinery. (12) But if and to the extent that— (a) the expenditure is incurred on the provision of new plant or machinery that is capable of and intended to perform a significant additional function, when compared to the replaced plant or machinery, and (b) the additional function enhances the capacity or productivity of the qualifying activity in question, so much of the expenditure as is attributable to the additional function is not to be regarded as replacement expenditure. (13) The part of the expenditure attributable to the additional function is to be determined on a just and reasonable basis. (14) In this section— - “assisted area” means— 1. an area specified as a development area under section 1 of the Industrial Development Act 1982, or 2. Northern Ireland; - “enterprise zone” means an area recognised by the Treasury as an area in respect of which there is a special focus on economic development and identified on a map published by the Treasury for the purposes of this section; - “the responsible authority”, for an area, means— 1. if the area is in England, a local authority for all or part of the area or two or more such local authorities, 2. if the area is in Scotland, the Scottish Ministers, 3. if the area is in Wales, the Welsh Ministers, and 4. if the area is in Northern Ireland, the Department of Enterprise, Trade and Investment in Northern Ireland. (15) The Treasury may by order amend the definition of “assisted area” in subsection (14) in consequence of any changes made to the areas in the United Kingdom granted assisted area status by virtue of Article 107(3) of the Treaty on the Functioning of the European Union. (16) This section is subject to— - section 45L (plant or machinery partly for use outside designated assisted areas), - section 45M (exclusions from section 45K allowances), - section 45N (effect of plant or machinery subsequently being primarily used in an area other than a designated assisted area), and - section 46 (general exclusions). (45L) (1) Expenditure on plant or machinery is not first-year qualifying expenditure under section 45K if— (a) at the time when it is incurred, the company incurring it intends the plant or machinery to be used partly in a non-designated area, and (b) the main purpose, or one of the main purposes, for which any person is a party to the relevant arrangements is the obtaining of a first-year allowance, or a greater first-year allowance, in respect of the part of the expenditure that is attributable to that intended use in a non-designated area. (2) For the purposes of subsection (1)(b), the part of the expenditure that is attributable to that intended use in a non-designated area is to be determined on a just and reasonable basis. (3) In this section— - “non-designated area” means an area which is not a designated assisted area within the meaning of section 45K; - “the relevant arrangements” means— 1. the transaction under which the expenditure is incurred, and 2. any scheme or arrangements of which that transaction forms part. (45M) (1) Expenditure incurred by a person is not first-year qualifying expenditure under section 45K if it is within subsection (2), (4), (6) or (7). (2) Expenditure is within this subsection if, at the time a claim is made under section 3 for a section 45K allowance in respect of the expenditure, the person who incurred the expenditure is, or forms part of, an undertaking within subsection (3). (3) An undertaking is within this subsection if one or both of the following conditions are met— (a) it is reasonable to assume that the undertaking 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); (b) the undertaking is subject to an outstanding recovery order made by virtue of Article 108(2) of the Treaty on the Functioning of the European Union (Commission Decision declaring aid illegal and incompatible with the common market). (4) Expenditure is within this subsection if it is incurred for the purposes of a qualifying activity— (a) in the fishery or aquaculture sector, as covered by Council Regulation (EC) No 104/2000, (b) in the coal sector, steel sector, shipbuilding sector or synthetic fibres sector, (c) relating to the management of waste of undertakings, or (d) relating to— (i) the primary production of agricultural products, (ii) on-farm activities necessary for preparing an animal or plant product for the first sale, or (iii) the first sale of agricultural products by a primary producer to wholesalers, retailers or processors, in circumstances where that sale does not take place on separate premises reserved for that purpose. (5) In subsection (4)(c) the reference to waste of undertakings does not include waste of the person who incurred the expenditure or of any other person forming part of the same undertaking as that person. (6) Expenditure is within this subsection if it is incurred on a means of transport or transport equipment for the purposes of a qualifying activity in the road freight sector or the air transport sector. (7) Expenditure is within this subsection if a relevant grant or relevant payment is made towards— (a) that expenditure, or (b) any other expenditure which is incurred by any person in respect of the same designated assisted area, and on the same single investment project, as that expenditure. (8) A section 45K allowance made in respect of first-year qualifying expenditure is to be withdrawn if— (a) after it is made, a relevant grant or relevant payment is made towards that expenditure, or (b) within the period of 3 years beginning when that expenditure was incurred, a relevant grant or relevant payment is made towards any other expenditure which is incurred by any person in respect of the same designated assisted area, and on the same single investment project, as that expenditure. (9) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (8). (10) If a person who has made a return becomes aware that, after making it, anything in it has become incorrect because of the operation of this section, that person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended. (11) The notice must be given within 3 months beginning with the day on which the person first became aware that anything in the return had become incorrect because of the operation of this section. (12) In this section— - “agricultural product”, “coal sector”, “steel sector”, “shipbuilding sector” and “synthetic fibres sector” have the same meaning as in the General Block Exemption Regulation; - “General Block Exemption Regulation” means Commission Regulation (EC) No 800/2008 (General block exemption Regulation); - “management” and “waste” have the meaning given by Article 1 of Directive 2006/12/EC of the European Parliament and of the Council; - “relevant grant or relevant payment” means a grant or payment which is— 1. a State aid, other than an allowance under this Part, or 2. a grant or subsidy, other than a State aid, which the Treasury by order declares to be relevant for the purposes of the witholding of a section 45K allowance; - “section 45K allowance” means a first-year allowance in respect of expenditure that is first-year qualifying expenditure under section 45K; - “single investment project” has the same meaning as in the General Block Exemption Regulation; - “undertaking” means— 1. an autonomous enterprise, or 2. an enterprise (not within paragraph (a)) and its partner enterprises (if any) and its linked enterprises (if any), (13) Nothing in this section limits references to “State aid” to State aid which is required to be notified to and approved by the European Commission. (14) For the purposes of this section references to expenditure incurred in respect of a designated assisted area includes expenditure incurred on the provision of things for use primarily in that area or on services to be provided primarily in that area. (15) The Treasury may by order make such provision amending this section as appears to them appropriate for the purpose of giving effect to any future amendments of or instruments replacing— (a) the General Block Exemption Regulation, (b) the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02), (c) Council Regulation (EC) No 104/2000, (d) Directive 2006/12/EC of the European Parliament and of the Council, or (e) the Treaty on the Functioning of the European Union. (45N) (1) Expenditure on the provision of plant or machinery is to be treated as never having been first-year qualifying expenditure under section 45K if, at any relevant time— (a) the primary use to which the plant and machinery is put is other than in an area which was a designated assisted area within the meaning of section 45K at the time the expenditure was incurred, or (b) the plant or machinery is held for use otherwise than primarily in an area which was such a designated assisted area at that time. (2) “Relevant time” means a time which— (a) falls within the relevant period, and (b) is a time when the plant or machinery is owned by— (i) the person who incurred the expenditure, or (ii) a person who is, or at any time in that period has been, connected with that person. (3) “The relevant period” means the period of 5 years beginning with— (a) the day on which the plant or machinery in question is first brought into use for the purposes of a qualifying activity carried on by the company, or (b) if earlier, the day on which it is first held for such use. (4) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (1). (5) If a person who has made a return becomes aware that, after making it, anything in it has become incorrect because of the operation of this section, that person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended. (6) The notice must be given within 3 months beginning with the day on which the person first became aware that anything in the return had become incorrect because of the operation of this section.

4

In section 46 (general exclusions applying to first-year qualifying expenditure), in subsection (1), at the appropriate place in the list insert—

section 45K	(expenditure on plant and machinery for use in designated assisted areas).

5

• (1) Section 52 (first-year allowances) is amended as follows.

• (2) In subsection (3), at the appropriate place in the Table insert—

Expenditure qualifying under section 45K (expenditure on plant and machinery for use in designated assisted areas)	100%

• (3) In subsection (5)—

• (a) omit the “and” at the end of the entry for section 212T, and

• (b) after that entry insert— “ section 212U (cap on first-year allowances: expenditure on plant and machinery for use in designated assisted areas), and ”.

6

In section 52A (prevention of double relief) for the words after “not” substitute

claim— (a) an annual investment allowance and a first-year allowance in respect of the same expenditure, or (b) first-year allowances under two or more of the provisions listed in section 39 in respect of the same expenditure.

7

• (1) In Chapter 16B (cap on first-year allowances: zero-emission goods vehicles), after section 212T insert—

(212U) (1) A section 45K allowance is not available in respect of expenditure (“the current expenditure”) incurred by a person (“the investor”) in respect of a particular designated assisted area— (a) if section 45K allowances have previously been made to any person in respect of P&M expenditure of 125 million euros incurred in respect of that area and on the same single investment project as the current expenditure, or (b) (where paragraph (a) does not apply) if, and to the extent that, the aggregate of— (i) the P&M expenditure incurred by any person in respect of that area, and on the same single investment project as the current expenditure, in respect of which section 45K allowances have previously been made, and (ii) the current expenditure, exceeds 125 million euros. (2) For the purposes of subsection (1), any reference to P&M expenditure incurred in respect of a designated assisted area is a reference to expenditure incurred on the provision of plant or machinery for use primarily in that area. (3) For the purposes of subsection (1), expenditure incurred in a currency other than the euro is to be converted into its equivalent in euros using the spot rate of exchange for the day on which the expenditure is incurred. (4) The Treasury may by regulations increase the amount specified in subsection (1)(a) and (b). (5) In this section— - “designated assisted area” has the meaning given by section 45K; - “section 45K allowance” means a first-year allowance in respect of expenditure that is first-year qualifying expenditure under section 45K; - “single investment project” has the same meaning as in Commission Regulation (EC) No 800/2008 (General block exemption Regulation).

• (2) Accordingly, in the heading for that Chapter omit “: zero-emission goods vehicles”.

8

The amendments made by this Schedule have effect for chargeable periods ending on or after 1 April 2012.

SCHEDULE 12

PART 1 — Increased remittance basis charge

Increased charge

1

Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

2

• (1) Section 809C (claim for remittance basis by long-term UK resident: nomination of foreign income and gains to which section 809H(2) is to apply) is amended as follows.

• (2) In subsection (1), for paragraph (b) substitute—

(b) meets the 12-year residence test or the 7-year residence test for that year.

• (3) After that subsection insert—

(1A) An individual meets the 12-year residence test for a tax year if the individual has been UK resident in at least 12 of the 14 tax years immediately preceding that year. (1B) An individual meets the 7-year residence test for a tax year if the individual— (a) does not meet the 12-year residence test for that year, but (b) has been UK resident in at least 7 of the 9 tax years immediately preceding that year.

• (4) In subsection (4), for “£30,000” substitute

— (a) for an individual who meets the 12-year residence test for that year, £50,000; (b) for an individual who meets the 7-year residence test for that year, £30,000.

3

• (1) Section 809H (claim for remittance basis by long-term UK resident: charge) is amended as follows.

• (2) In subsection (1), for paragraph (c) substitute—

(c) the individual meets the 12-year residence test or the 7-year residence test for the relevant tax year.

• (3) After that subsection insert—

(1A) See section 809C(1A) and (1B) for when an individual meets the 12-year residence test or the 7-year residence test for a tax year.

• (4) In subsection (4), for “£30,000”, in each place it occurs, substitute “ the applicable amount ”.

• (5) After subsection (5A) insert—

(5B) The applicable amount” is— (a) if the individual meets the 12-year residence test for the relevant tax year, £50,000; (b) if the individual meets the 7-year residence test for the relevant tax year, £30,000.

4

For section 809V substitute—

(809V) (1) Subsection (2) applies to income or chargeable gains of an individual if— (a) the income or gains would (but for subsection (2)) be regarded as remitted to the United Kingdom by virtue of the bringing of money to the United Kingdom, (b) the money is brought to the United Kingdom by way of one or more direct payments to the Commissioners, and (c) the payments are made in relation to a tax year to which section 809H applies as regards the individual. (2) The income or chargeable gains are to be treated as not remitted to the United Kingdom to the extent that the payments do not exceed the applicable amount (as defined in section 809H). (3) Subsection (2) does not apply to payments if or to the extent that they are repaid by the Commissioners.

Application of Part 1

5

The amendments made by this Part of this Schedule have effect for the tax year 2012-13 and subsequent tax years.

PART 2 — Remittance for investment purposes

Relief for investments

6

For the italic heading preceding section 809V substitute “ Relief for money used to pay tax etc ”.

7

After section 809V insert—

(809VA) (1) Subsection (2) applies if— (a) a relevant event occurs, (b) but for subsection (2), income or chargeable gains of an individual would be regarded as remitted to the United Kingdom by virtue of that event, and (c) the individual makes a claim for relief under this section. (2) The income or gains are to be treated as not remitted to the United Kingdom. (3) A “relevant event” occurs if money or other property— (a) is used by a relevant person to make a qualifying investment, or (b) is brought to or received in the United Kingdom in order to be used by a relevant person to make a qualifying investment. (4) Subsection (1)(b) includes a case where income or gains would be treated under section 809Y as remitted to the United Kingdom by virtue of the relevant event. (5) Subsection (2) applies by virtue of subsection (3)(b) to the extent only that the investment is made within the period of 45 days beginning with the day on which the money or other property is brought to or received in the United Kingdom. (6) Where some but not all of the money or other property is used to make the investment within that 45-day period, the part of the income or gains to which subsection (2) applies is to be determined on a just and reasonable basis. (7) Subsection (2) does not apply if the relevant event occurs, or the investment is made, as part of or as a result of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax. (8) A claim for relief under this section must be made on or before the first anniversary of the 31 January following the tax year in which the income or gains would, but for subsection (2), be regarded as remitted to the United Kingdom by virtue of the relevant event. (809VB) (1) This section applies to any portion of the income or gains to which section 809VA(2) does not apply because the investment was not made within the period mentioned in section 809VA(5) (“the 45-day period”). (2) That portion is to be treated as not remitted to the United Kingdom to the extent that the remaining money or other property is taken offshore within the 45-day period. (3) Where some but not all of the remaining money or other property is taken offshore within the 45-day period, the part of the income or gains to which subsection (2) applies is to be determined on a just and reasonable basis. (4) If any remaining money or other property is taken offshore within the 45-day period, nothing in subsection (2) prevents anything subsequently done in relation to it (or anything deriving from it) from counting as a remittance of the underlying income or gains to the United Kingdom at the time when the thing is subsequently done. (5) A reference to the “remaining” money or other property is to so much of the money or other property brought to or received in the United Kingdom as is not used within the 45-day period to make the investment (which may in some cases be all of it). (809VC) (1) For the purposes of section 809VA, a person makes an investment if— (a) shares in a company are issued to the person, or (b) the person makes a loan (secured or unsecured) to a company. (2) The company is referred to as “the target company”. (3) The shares or the person's rights under the loan (or both) forming the subject of the investment are referred to as “the holding”. (4) The investment counts as a “qualifying investment” if conditions A and B are met when the investment is made. (5) Conditions A and B are defined in sections 809VD and 809VF. (6) A reference in this section to “shares” includes any securities. (7) If a loan agreement authorises a company to draw down amounts of a loan over a period of time— (a) entry into the agreement does not count for the purposes of this section as the making of a loan, but (b) a separate loan is to be treated as made each time an amount is drawn down under the agreement. (8) Accordingly— (a) a separate investment is treated as made each time an amount is drawn down under the agreement, and (b) the reference in subsection (3) to the person's rights under the loan applies only to so much of the person's rights as relate to the drawdown of that particular amount. (809VD) (1) Condition A is that the target company is— (a) an eligible trading company, (b) an eligible stakeholder company, or (c) an eligible holding company. (2) A company is an “eligible trading company” if— (a) it is a private limited company, (b) it carries on one or more commercial trades or is preparing to do so within the next 2 years, and (c) carrying on commercial trades is all or substantially all of what it does (or of what it is reasonably expected to do once it begins trading). (3) A company is an “eligible stakeholder company” if— (a) it is a private limited company, (b) it exists wholly for the purpose of making investments in eligible trading companies (ignoring any minor or incidental purposes), and (c) it holds one or more such investments or is preparing to do so within the next 2 years. (4) The reference in subsection (3) to making investments is to be read in accordance with section 809VC. (5) A company is an “eligible holding company” if— (a) it is a member of an eligible trading group or of an eligible group that is reasonably expected to become an eligible trading group within the next 2 years, (b) an eligible trading company in the group is a 51% subsidiary of it, and (c) if the ordinary share capital that it owns in the eligible trading company is owned indirectly, each intermediary in the series is also a member of the group. (6) “Group” means a parent company and its 51% subsidiaries. (7) “Parent company” means a company that— (a) has one or more 51% subsidiaries, but (b) is not itself a 51% subsidiary of any company. (8) A group is an “eligible group” if the parent company and each of its 51% subsidiaries are private limited companies. (9) A group is an “eligible trading group” if— (a) it is an eligible group, and (b) carrying on commercial trades is all or substantially all of what the group does (taking the activities of its members as a whole). (10) The reference in subsection (5) to owning ordinary share capital indirectly is to be read in accordance with section 1155 of CTA 2010. (11) A company is a “private limited company” if— (a) it is a body corporate whose liability is limited, (b) it is not a limited liability partnership, and (c) none of its shares are listed on a recognised stock exchange. (809VE) (1) Section 809VD is to be read in accordance with this section. (2) A reference to a “trade” also includes— (a) anything that is treated for corporation tax purposes as if it were a trade, and (b) a business carried on for generating income from land (as defined in section 207 of CTA 2009). (3) A trade is a “commercial trade” if it is conducted on a commercial basis and with a view to the realisation of profits. (4) The carrying on of activities of research and development from which it is intended that a commercial trade will be derived, or will benefit, is to be treated as the carrying on of a commercial trade. (5) But preparing to carry on activities within subsection (4) is not to be treated as the carrying on of a commercial trade. (809VF) (1) Condition B is that no relevant person has (directly or indirectly) obtained or become entitled to obtain any related benefit, and no relevant person expects to obtain any such benefit. (2) A “benefit”— (a) includes the provision of anything that would not be provided to the relevant person in the ordinary course of business, or would be provided but on less favourable terms, but (b) does not include the provision of anything provided to the relevant person in the ordinary course of business and on arm's length terms. (3) A benefit is “related” if— (a) it is directly or indirectly attributable to the making of the investment (whether it is obtained before or after the investment is made), or (b) it is reasonable to assume that the benefit would not be available in the absence of the investment. (4) For the purposes of subsection (2)— (a) a reference to the provision of anything is to the provision of anything in money or money's worth, including property, capital, goods or services of any kind, and (b) “provision” includes any arrangement that allows a person to enjoy or benefit from the thing in question (whether temporarily or permanently). (809VG) (1) Subsection (2) applies if— (a) income or chargeable gains are treated under section 809VA(2) as not remitted to the United Kingdom as a result of a qualifying investment, (b) a potentially chargeable event occurs after the investment is made, and (c) the appropriate mitigation steps are not taken within the grace period allowed for each step. (2) The affected income or gains are to be treated as having been remitted to the United Kingdom immediately after the end of the relevant grace period. (3) Where the step required by section 809VI(2)(a) is not taken within the grace period allowed for that step, “the relevant grace period” is the grace period allowed for that step. (4) Otherwise, “the relevant grace period” is the grace period allowed for the step required by section 809VI(1) or (2)(b). (5) “The affected income or gains” means such portion of the income or gains mentioned in subsection (1)(a) as reflects the portion of the investment affected by the potentially chargeable event. (6) The portion of the investment affected is— (a) if the potentially chargeable event is a disposal of a part of the holding (or a part of the remaining holding), a portion equal to the portion of the holding (or remaining holding) being disposed of, and (b) otherwise, the whole of the investment. (7) Sections 809VN (order of disposals etc) and 809VO (investments made from mixed funds) make further provision for the purposes of this section. (8) If a qualifying investment is made using the money or other property mentioned in section 809VA(3) together with other funds— (a) that investment is to be treated as two separate investments, one made using the money or other property mentioned in section 809VA(3) and one made using the other funds, and (b) references in the business investment provisions to “the investment” and “the holding” relate only to the investment made using the money or other property mentioned in section 809VA(3). (9) If the potentially chargeable event mentioned in subsection (1)(b) is not the first such event to affect the investment, the income or gains mentioned in subsection (1)(a) do not include, as respects that investment— (a) any part already treated under subsection (2) as remitted to the United Kingdom as a result of an earlier event, (b) any part contained in amounts already taken offshore or re-invested by way of appropriate mitigation steps following an earlier event, or (c) any part contained in amounts already used to make a tax deposit without which an amount mentioned in paragraph (b) would not have been enough to satisfy section 809VI(1) or (2)(b) (see section 809VK). (809VH) (1) For the purposes of section 809VG, a “potentially chargeable event” occurs if— (a) the target company is for the first time neither an eligible trading company nor an eligible stakeholder company nor an eligible holding company, (b) the relevant person who made the investment (“P”) disposes of all or part of the holding, (c) the extraction of value rule is breached, or (d) the 2-year start-up rule is breached. (2) The extraction of value rule is breached if— (a) value (in money or money's worth) is received by or for the benefit of P or another relevant person, (b) the value is received— (i) from an involved company, or (ii) from anyone else but in circumstances that are directly or indirectly attributable to the investment or to any other investment made by a relevant person in an involved company, and (c) the value is received other than by virtue of a disposal that is itself a potentially chargeable event. (3) But the extraction of value rule is not breached merely because a relevant person receives value that— (a) is treated for income tax or corporation tax purposes as the receipt of income or would be so treated if that person were liable to such tax, and (b) is paid or provided to the person in the ordinary course of business and on arm's length terms. (4) Each of the following is an “involved company”— (a) the target company, (b) if the target company is an eligible stakeholder company, any eligible trading company in which it has made or intends to make an investment, (c) if the target company is an eligible holding company, any eligible trading company that is a 51% subsidiary of it, and (d) any company that is connected with a company within paragraph (a), (b) or (c). (5) The 2-year start-up rule is breached if— (a) immediately after the end of the period of 2 years beginning with the day on which the investment was made, the target company is non-operational, or (b) at any time after the end of that period, the target company becomes non-operational. (6) The target company is “non-operational” at any time when— (a) it is an eligible trading company but is not trading, (b) it is an eligible stakeholder company but— (i) it holds no investments in eligible trading companies, or (ii) none of the eligible trading companies in which it holds investments is trading, or (c) it is an eligible holding company but— (i) the group of which it is a member is not an eligible trading group, or (ii) none of its 51% subsidiaries in the eligible trading group of which it is a member is an eligible trading company that is trading. (7) In subsection (6), “trading” means carrying on one or more commercial trades (including the carrying on of any activities treated under section 809VE(4) as the carrying on of a commercial trade). (8) If consideration for a disposal of all or part of the holding is or is to be paid in instalments, the disposal is to be treated for the purposes of this section as if it were separate disposals, one for each instalment (and each giving rise to a separate potentially chargeable event). (9) An event listed in subsection (1) does not count as a potentially chargeable event if it is due to an insolvency step taken for genuine commercial reasons (but this does not prevent the extraction of any value in connection with the insolvency step from counting as a potentially chargeable event). (10) For the purposes of subsection (9), an insolvency step is taken if— (a) the target company enters into administration or receivership or is wound up or dissolved, (b) the target company is an eligible stakeholder company and any eligible trading company in which it holds an investment enters into administration or receivership or is wound up or dissolved, (c) the target company is an eligible holding company and any eligible trading company in the group that is a 51% subsidiary of it enters into administration or receivership or is wound up or dissolved, or (d) a similar step is taken in relation to a company mentioned in paragraph (a), (b) or (c) under the law of a country or territory outside the United Kingdom. (809VI) (1) If the potentially chargeable event is a disposal of all or part of the holding, the appropriate mitigation steps are regarded as taken if the whole of the disposal proceeds have been taken offshore or re-invested. (2) For any other case, the appropriate mitigation steps are regarded as taken if— (a) P has disposed of the entire holding (or so much of it as P retains when the potentially chargeable event occurs), and (b) the whole of the disposal proceeds have been taken offshore or re-invested. (3) But if the disposal proceeds exceed X, subsections (1) and (2)(b) apply only to so much of the proceeds as is equal to X. (4) “X” is— (a) the sum originally invested, less (b) so much of that sum as has, on previous occasions involving the same investment— (i) been taken into account in determining the affected income or gains under section 809VG(2), (ii) been taken offshore or re-invested in order to avoid the application of that section, or (iii) been used to make a tax deposit without which the amount actually taken offshore or re-invested would not have been enough to satisfy subsection (1) or (2)(b) (see section 809VK). (5) “The sum originally invested” means the amount of the money, or the market value of the other property, used to make the investment. (6) Market value is to be assessed for these purposes as at the date of the relevant event (see section 809VA). (7) Proceeds are “re-invested” if a relevant person uses them to make another qualifying investment (or the proceeds are themselves a qualifying investment) whether in the same or a different company. (8) In cases where a breach of the extraction of value rule occurs in connection with the winding-up or dissolution of the target company— (a) subsection (2)(a) does not apply, (b) the reference in subsection (2)(b) to the disposal proceeds is to the value received, and (c) references in this section and in succeeding provisions of the business investment provisions to the disposal proceeds are to be read as references to the value received. (809VJ) (1) The grace period allowed for the step mentioned in section 809VI(2)(a) is the period of 90 days beginning— (a) if the potentially chargeable event is a breach of the extraction of value rule, with the day on which the value is received, and (b) otherwise, with the day on which a relevant person first became aware or ought reasonably to have become aware of the potentially chargeable event. (2) The grace period allowed for the step mentioned in section 809VI(1) and (2)(b) is the period of 45 days beginning with the day on which the disposal proceeds first became available for use by or for the benefit of P or any other relevant person. (3) An officer of Revenue and Customs may agree in a particular case to extend the grace period allowed for an appropriate mitigation step in exceptional circumstances. (4) An officer of Revenue and Customs may agree in a particular case to extend the grace period allowed for an appropriate mitigation step in circumstances specified in regulations made by the Commissioners. (5) Regulations under subsection (4) may have effect in relation to investments made before the day on which the regulations are made. (6) Nothing in subsection (4) or in regulations made under it limits the power conferred by subsection (3). (7) The powers conferred on officers of Revenue and Customs by subsections (3) and (4) include power to agree to extend a grace period for a length of time that is indefinite but is capable of becoming definite by means identified in the agreement (such as the satisfaction of conditions). (809VK) (1) This section applies if— (a) there is a disposal of all or part of the holding, (b) the disposal counts as a potentially chargeable event or is part of the appropriate mitigation steps taken in consequence of a potentially chargeable event, (c) a chargeable gain (but not a loss) accrues to P on the disposal, (d) P is chargeable to capital gains tax (but not corporation tax) in respect of that gain, and (e) the actual disposal proceeds are less than Y. (2) The difference between the actual disposal proceeds and Y is referred to in this section as “the shortfall”. (3) “The actual disposal proceeds” means the disposal proceeds but disregarding section 809Z8(4). (4) “Y” is the sum of— (a) the amount (if any) that would, but for this section, be required to be taken offshore or re-invested in order to satisfy section 809VI(1) or (2)(b), and (b) the amount found by applying the highest potential CGT rate to the amount (computed in accordance with TCGA 1992) of the chargeable gain accruing to P on the disposal. (5) The highest potential CGT rate is— (a) if the chargeable gain accrues to P as the trustees of a settlement or accrues to the personal representatives of P, the rate specified in section 4(3) of TCGA 1992, and (b) otherwise, the rate specified in section 4(4) of that Act (regardless of the rate at which income tax is chargeable in respect of P's income). (6) If this section applies, the amount that is required to be taken offshore or re-invested in order to satisfy section 809VI(1) or (2)(b) is reduced by the permitted amount. (7) “The permitted amount” is so much of the shortfall as is used, within the grace period allowed for taking the disposal proceeds offshore or re-investing them, to make a deposit in respect of which a certificate of tax deposit is issued to P under section 12 of the National Loans Act 1968. (8) A reduction may not be made under subsection (6) unless— (a) when details of the deposit are confirmed to Her Majesty's Revenue and Customs, the confirmation letter states that this section is intended to apply to the deposit, and (b) the amount of the deposit is no greater than the shortfall. (809VL) (1) This section explains the effect for the purposes of this Chapter in cases where section 809VG(2) does not apply because the appropriate mitigation steps were taken within the grace period allowed for each step. (2) If disposal proceeds were taken offshore as part of those steps, nothing in section 809VA(2) prevents anything subsequently done in relation to those proceeds (or anything deriving from them) from counting as a remittance of the underlying income or gains to the United Kingdom at the time when the thing is subsequently done. (3) If disposal proceeds were re-invested as part of those steps— (a) the underlying income or gains continue to be treated under section 809VA(2) as not remitted to the United Kingdom, and (b) the business investment provisions apply to the re-investment as they apply to the original investment. (4) In the application of the business investment provisions to the re-investment— (a) treat the potentially chargeable event mentioned in section 809VG(1)(b) as the relevant event, (b) treat the underlying income or gains as the income or gains treated under section 809VA(2) as not remitted to the United Kingdom as a result of the re-investment, and (c) treat the amount used to make the re-investment as the sum originally invested. (5) If the re-investment is made using more than the minimum amount of disposal proceeds required to satisfy section 809VI(1) or (2)(b)— (a) that investment is to be treated as two separate investments, one made using the minimum amount of disposal proceeds and one made using the excess, and (b) references in the business investment provisions to “the investment” and “the holding” relate only to the investment made using the minimum amount of disposal proceeds. (6) “The underlying income or gains” means the affected income or gains (within the meaning of section 809VG) or, if one part of the disposal proceeds is taken offshore and the other part re-invested, a corresponding proportion of the affected income or gains. (7) A further claim must be made in accordance with section 809VA in respect of the re-investment and, if no such claim is made on or before the first anniversary of the 31 January following the tax year in which the re-investment was made, section 809VG(2) applies, as respects the original investment, as if the appropriate mitigation steps had not been taken within the grace period allowed for each step. (8) Section 809VM makes further provision in cases involving a tax deposit. (809VM) (1) This section applies in cases where— (a) section 809VG(2) did not apply because the appropriate mitigation steps were taken within the grace period allowed for each step, (b) the amount required to be taken offshore or re-invested in order to satisfy section 809VI(1) or (2)(b) had been reduced under section 809VK, and (c) but for that reduction, the amount that was actually taken offshore or re-invested would not have been enough to satisfy section 809VI(1) or (2)(b). (2) The tax deposit that gave rise to the reduction is referred to in this section as “the tax deposit”. (3) Use of the tax deposit to pay the relevant tax liability does not count as remitting the underlying income or gains to the United Kingdom (and, accordingly, section 809VA(2) continues to apply to the income or gains). (4) If any of the CTD conditions is breached, the underlying income or gains are to be treated as having been remitted to the United Kingdom immediately after the day on which the breach occurs. (5) “The underlying income or gains” means such portion of the affected income or gains (within the meaning of section 809VG) as is— (a) represented by the payment, in the case of subsection (3), or (b) affected by the breach, in the case of subsection (4). (6) The CTD conditions are as follows— (a) the tax deposit must not be used to pay a tax liability other than the relevant tax liability, (b) if any of the tax deposit is withdrawn by the depositor, the amount withdrawn must be taken offshore or re-invested within the period of 45 days beginning with the day on which the withdrawal was made, and (c) any part of the tax deposit that has been neither used to pay a tax liability nor withdrawn by the due date must be withdrawn by the depositor and taken offshore or re-invested within the period of 45 days beginning with that date. (7) Where the CTD conditions were not breached because the requisite amount was taken offshore or re-invested within the 45-day period mentioned in subsection (6)(b) or (c)— (a) section 809VL applies to the amount taken offshore or re-invested as it applies to disposal proceeds, but (b) read the reference in section 809VL(4)(a) to the potentially chargeable event as a reference to— (i) the withdrawal, in a case within subsection (6)(b), and (ii) the due date, in a case within subsection (6)(c). (8) For the purposes of this section— (a) “the relevant tax liability” means P's liability to capital gains tax for the tax year in which the disposal took place, (b) “the due date” means the date by which the relevant tax liability is required to be paid, (c) “re-invested” has the meaning given in section 809VI(7), and (d) references to withdrawal include repayment for whatever reason. (809VN) (1) Subsection (2) applies if at any time income or chargeable gains of an individual are treated under section 809VA as not remitted to the United Kingdom as a result of— (a) more than one qualifying investment made in the same target company, (b) more than one qualifying investment made in companies in the same eligible trading group, or (c) qualifying investments made in an eligible trading company and in an eligible stakeholder company that holds investments in that trading company. (2) In the application of section 809VG at that time— (a) treat the investments and holdings as if they were a single qualifying investment and a single holding, and (b) assume that a disposal of all or part of that deemed single holding affects the deemed single investment in the order in which the qualifying investments were made (that is to say, on a first in, first out basis). (3) Subsection (4) applies if at any time— (a) income or chargeable gains of an individual are treated under section 809VA as not remitted to the United Kingdom as a result of one or more qualifying investments, (b) in addition to that investment or those investments, a relevant person holds at least one other investment in the same target company, the same eligible trading group or a related eligible company, and (c) that other investment is not a qualifying investment. (4) In the application of section 809VG at that time— (a) treat the investments and holdings as if they were a single investment and a single holding, and (b) assume that a disposal of all or part of that deemed single holding is a disposal of a holding from a qualifying investment until the holdings from all the qualifying investments have been disposed of. (5) The reference to a “related eligible company”— (a) in relation to an eligible trading company, is to an eligible stakeholder company that holds investments in that company, and (b) in relation to an eligible stakeholder company, is to an eligible trading company in which that company holds investments. (6) Subsections (2) and (4) apply whether the investments in question are held by the same relevant person or different ones. (809VO) (1) This section applies if— (a) but for section 809VA(2), income or gains would have been remitted to the United Kingdom by virtue of a relevant event, and (b) section 809Q (transfers from mixed funds) would have applied in determining the amount that would have been so remitted. (2) The relevant event counts as an offshore transfer for the purposes of section 809R(4). (3) The holding is to be treated as containing a proportion of each kind of income and capital contained in the invested property equal to the fixed proportion. (4) “The fixed proportion” is the proportion of that kind of income or capital contained in the invested property by virtue of subsection (2). (5) “The invested property” means the money or other property used to make the investment. (6) Subsection (7) applies in cases where— (a) section 809VG(2) does not apply because an amount is taken offshore, re-invested or used to make a tax deposit, or (b) section 809VM(4) does not apply because an amount is taken offshore or re-invested. (7) The amount taken offshore, re-invested or used to make a tax deposit is treated, immediately after that step, as containing the fixed proportion of each kind of income and capital contained in the holding. (8) In cases where section 809VG(2) applies— (a) the affected income or gains are so much of the fixed amount of each kind of income or gain mentioned in subsection (1)(a) as reflects the portion of the investment affected by the potentially chargeable event (see section 809VG(6)), (b) “the fixed amount” is the amount of that kind of income or gain that the holding is treated as containing by virtue of subsection (3), and (c) section 809Q does not apply in determining the affected income or gains. (9) Section 809R(2) and (3) and section 809S apply for the purposes of this section.

8

After the sections inserted by paragraph 7 insert the heading “ Relief for certain UK services ”.

9

Immediately before section 809X insert the heading “Exempt property relief”.

Formerly exempt property used to make investment

10

In section 809Y (property that ceases to be exempt property treated as remitted), after subsection (5) insert—

(6) Subsection (1) does not apply to property that ceases to be exempt property if— (a) the property, or anything into which it is converted, is used by a relevant person to make a qualifying investment within the period of 45 days beginning with the day on which it ceased to be exempt property, and (b) the remittance basis user makes a claim for relief under this subsection on or before the first anniversary of the 31 January following the tax year in which the property ceases to be exempt property. (7) The reference in subsection (6)(a) to anything into which property is converted is— (a) if the property is disposed of, the disposal proceeds, and (b) if the property is converted into money in some other way, the money into which it is converted, (including where the disposal or conversion occurs after the property ceases to be exempt property). (8) If subsection (1) does not apply by virtue of subsection (6)— (a) the property (or thing into which it was converted) used to make the investment is to be treated as containing or deriving from an amount of each kind of income and gain mentioned in section 809Q(4)(a) to (h) equal to the fixed amount, (b) the income or gains treated under section 809X as not remitted to the United Kingdom continue to be treated as not remitted to the United Kingdom even though the property has ceased to be exempt property, and (c) the business investment provisions apply to the income and gains as they apply to income or gains treated under section 809VA(2) as not remitted to the United Kingdom. (9) “The fixed amount” is the amount of that kind of income or gain contained in the property when it was brought to, or received or used in, the United Kingdom (as mentioned in section 809X). (10) If the investment is made using more than just the property (or thing into which it was converted), treat only the part made using the property (or thing into which it was converted) as “the investment” for the purposes of the business investment provisions.

11

In section 809Z2 (personal use rule), in subsection (2), omit paragraph (a) (including the word “and” at the end of it).

12

In section 809Z4 (temporary importation rule), in subsection (3)—

• (a) omit “or” at the end of paragraph (b),

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

• (c) after that paragraph insert—

(d) all or any part of the income or chargeable gains contained in the property (or from which the property derives) is treated, or continues to be treated, under section 809VA(2), 809Y(8)(b) or 809YC(2) as not remitted to the United Kingdom.

Interpretation provisions

13

In section 809M (meaning of “relevant person”), in subsection (1), for “sections 809L, 809N and 809O” substitute “ this Chapter ”.

14

In section 809Z7 (interpretation of Chapter), omit subsection (7).

15

For the heading of that section substitute “ Meaning of “foreign income and gains” etc ”.

16

After that section insert—

(809Z8) (1) In this Chapter, in relation to a sale or other disposal, “the disposal proceeds” means— (a) the consideration for the disposal, less (b) any agency fees that are deducted before the consideration is paid or otherwise made available to or for the benefit of the person making the disposal (“the transferor”) or any other relevant person. (2) The following rules apply in determining the consideration for the disposal. (3) If the consideration is provided in the form of anything other than money, the amount of the consideration is the market value of the thing at the time of the disposal. (4) If the disposal is made other than by way of a bargain made at arm's length, the disposal is deemed to be made for a consideration equal to the market value, immediately before the disposal, of the thing being disposed of. (5) Without limiting the generality of subsection (4), a disposal made to another relevant person or to a person connected with a relevant person is treated in all cases as made other than by way of a bargain at arm's length. (6) In subsection (1), “agency fees” means fees and other incidental costs of the disposal that are charged to the transferor by any person by or through whom the disposal is effected, but excluding any such fees or costs that— (a) are charged to the transferor by another relevant person, or (b) are to be passed on to or otherwise applied for the benefit of a relevant person. (7) The exclusion mentioned in subsection (6) does not apply to the extent that the fees or costs— (a) relate to a service actually provided by the relevant person to the transferor in connection with effecting the disposal, and (b) do not exceed the amount that would be charged for that service if it were provided in the ordinary course of business and on arm's length terms. (809Z9) (1) This section applies to a provision of this Chapter that is satisfied if something (for example, disposal proceeds) is taken offshore or used by a relevant person to make a qualifying investment. (2) Things are to be regarded as “taken offshore” if (and only if) they are taken outside the United Kingdom such that, on leaving the United Kingdom, they cease to be available— (a) to be used or enjoyed in the United Kingdom by or for the benefit of a relevant person, or (b) to be used or enjoyed in any other way that would count as remitting income or gains to the United Kingdom. (3) If— (a) the thing required to be taken offshore or invested is money, and (b) it is paid temporarily into an account pending satisfaction of the provision, the provision is satisfied only if the money actually taken offshore or invested is taken from the same account. (4) If the thing required to be taken offshore or invested is something in money's worth, the provision may be satisfied— (a) by taking the thing offshore or investing it, or (b) by taking offshore or investing money or other property of the equivalent value. (5) “The equivalent value” is the market value of the thing in money's worth, assessed as at the date of the sale or other disposal in relation to which the provision is triggered. (6) If the consideration for a disposal is deemed under section 809Z8(4), the provision may be satisfied by taking offshore or investing money or other property of a value equal to— (a) the amount of the deemed consideration, less (b) any agency fees (within the meaning of section 809Z8) that are deducted before the actual consideration is paid or otherwise made available to or for the benefit of a relevant person. (7) Subsections (4)(b) and (6) do not apply in the case of other property of the equivalent value if the other property is— (a) exempt property under section 809X, (b) consideration for the disposal of any such exempt property, or (c) consideration for the disposal of all or part of the holding (see section 809VC) relating to a qualifying investment. (8) Money or other property taken offshore or invested in accordance with subsection (4)(b) or (6) is to be treated for the purposes of this Chapter— (a) as deriving from the thing required to be taken offshore or invested, and (b) as having the same composition of kinds of income and capital as that thing. (9) A provision to which this section applies may be satisfied— (a) by taking the whole thing offshore or investing the whole thing, or (b) by taking one part offshore and investing the other part. (10) References in this section to something being “invested” are to something being used by a relevant person to make a qualifying investment. (11) The provisions to which this section applies include section 809VB(2) but in that case— (a) disregard references in this section to investment, and (b) the assessment date for the purposes of subsection (5) is the date of the relevant event (see section 809VA(3)(b)). (809Z10) In this Chapter— - “the business investment provisions” means sections 809VA to 809VO; - “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs; - “market value” has the same meaning as in TCGA 1992 (see in particular sections 272 and 273 of that Act); - “qualifying investment” has the meaning given by section 809VC (and references to making a qualifying investment are to be read in accordance with that section); - “relevant person” has the meaning given by section 809M; - “the remittance basis user”, in relation to income or chargeable gains of an individual, means that individual.

Application of Part 2

17

The amendments made by this Part of this Schedule have effect where the relevant event (as defined in section 809VA of ITA 2007) or the ceasing to be exempt property (as defined in section 809Y of that Act) occurs on or after 6 April 2012.

PART 3 — Sales of exempt property

Relief from deemed remittance rule

18

After section 809Y of ITA 2007 (property that ceases to be exempt property treated as remitted) insert—

(809YA) (1) Section 809Y(1) does not apply to property if— (a) it ceases to be exempt property because the whole of it is sold whilst it is in the United Kingdom, and (b) conditions A to F are met. (2) Condition A is that the sale is to a person other than a relevant person. (3) Condition B is that the sale is by way of a bargain made at arm's length. (4) Condition C is that, once the sale is completed, no relevant person— (a) has any interest in the property, (b) is able or entitled to benefit from the property by virtue of any interest, right or arrangement, or (c) has any right (whether conditional or unconditional) to acquire any interest mentioned in paragraph (a) or ability or entitlement mentioned in paragraph (b). (5) Condition D is that the whole of the disposal proceeds are released (whether in one go or in instalments) on or before the final deadline. (6) “The final deadline” is the first anniversary of the 5 January following the tax year in which the property ceases to be exempt property (within the meaning of section 809Y). (7) Condition E is that— (a) the whole of the disposal proceeds are taken offshore or used by a relevant person to make a qualifying investment within the period of 45 days beginning with the day on which the proceeds are released, or (b) if the disposal proceeds are paid in instalments, each instalment is taken offshore or used by a relevant person to make a qualifying investment within the period of 45 days beginning with the day on which the instalment is released. (8) But if any of the disposal proceeds are released in the period of 45 days ending with the final deadline, Condition E is satisfied, as respects those proceeds, only if they are taken offshore or used by a relevant person to make a qualifying investment on or before the final deadline. (9) Condition F is that, if Condition E is satisfied wholly or in part by using disposal proceeds to make a qualifying investment, the remittance basis user makes a claim for relief under section 809YC(2) on or before the first anniversary of the 31 January following the tax year in which the property is sold. (10) For the purposes of this section, proceeds or instalments are “released” on the day on which they first become available for use by or for the benefit of any relevant person. (11) This section does not apply if the sale is made as part of or as a result of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax. (809YB) (1) An officer of Revenue and Customs may agree in a particular case to extend any period within which disposal proceeds (or instalments) must be taken offshore or used by a relevant person to make a qualifying investment in order to satisfy Condition E. (2) The power to agree to an extension is exercisable only in exceptional circumstances and only if the remittance basis user requests such an extension. (809YC) (1) This section has effect if section 809Y(1) does not apply to property by virtue of section 809YA. (2) The income and gains treated under section 809X as not remitted to the United Kingdom continue to be treated after the sale as not remitted to the United Kingdom even though the property has ceased to be exempt property. (3) But nothing in subsection (2) prevents anything done in relation to any part of the disposal proceeds after that part is taken offshore (or used to make a qualifying investment) from counting as a remittance of the underlying income or gains to the United Kingdom at the time when the thing is done. (4) Treat the disposal proceeds as containing or deriving from an amount of each kind of income and gain mentioned in section 809Q(4)(a) to (h) equal to the amount of that kind of income or gain contained in the exempt property when it was brought to, or received or used in, the United Kingdom (as mentioned in section 809X). (5) Where Condition E was met by using the disposal proceeds to make a qualifying investment— (a) the business investment provisions apply to the income and gains that continue, by virtue of subsection (2), to be treated as not remitted as they apply to income or gains that are treated under section 809VA(2) as not remitted, and (b) if the investment was made using more than just the disposal proceeds, treat only the part of the investment made using the disposal proceeds as “the investment” for the purposes of those provisions. (809YD) (1) This section applies to an individual (“P”) if— (a) a chargeable gain (but not a loss) accrues to a person on a sale of exempt property, (b) but for section 809YA, section 809Y(1) would have applied to the property by virtue of the sale, and (c) P is either— (i) the person to whom the gain accrues, or (ii) a person to whom a part of the gain is treated as accruing under section 13 of TCGA 1992 (members of non-resident companies). (2) The relevant UK gain is to be treated for the purposes of this Chapter as if— (a) it were a foreign chargeable gain of P, and (b) in the case of section 809E, it were not part of P's UK income and gains. (3) Accordingly, if section 809F applies to P for the applicable tax year and P is not domiciled in the United Kingdom in that year, the relevant UK gain is charged in accordance with section 12 of TCGA 1992 as if it were a foreign chargeable gain. (4) The relevant UK gain is— (a) in a case falling within subsection (1)(c)(i), the gain accruing to P, (b) in a case falling within subsection (1)(c)(ii), the part of the gain treated as accruing to P. (5) The applicable tax year is — (a) if section 10A of TCGA 1992 (temporary non-residents) applies in P's case and the relevant UK gain is within subsection (2) of that section, the year of return as defined in that section, (b) otherwise, the tax year in which the relevant UK gain accrues. (6) In applying this Chapter to the relevant UK gain— (a) treat the amount of any gains mentioned in section 809Q(4)(e) contained in the disposal proceeds by virtue of section 809YC(4) as increased by the amount of the relevant UK gain, (b) disregard section 809U, and (c) anything done in relation to any part of the disposal proceeds before the part is taken offshore or used to make a qualifying investment (or both) does not count as a remittance to the United Kingdom of any of the relevant UK gain. (7) The relevant UK gain is to be treated for the purposes of the following provisions of TCGA 1992 as if it fell within the definition of foreign chargeable gains in section 12(4) of that Act— (a) section 10A, (b) section 12, (c) section 14A, and (d) sections 16ZB to 16ZD. (8) This section has effect despite section 14A(2) of TCGA 1992. (9) This section does not apply with respect to a chargeable gain if P gives notice to Her Majesty's Revenue and Customs under this subsection. (10) A notice under subsection (9)— (a) must be in writing and must identify the gain in question, (b) must be given on or before the first anniversary of the 31 January following the applicable tax year, and (c) may not be revoked after that first anniversary.

Application of Part 3

19

The amendment made by this Part of this Schedule has effect in relation to exempt property that is sold on or after 6 April 2012 (including property sold pursuant to a contract entered into before that date so long as the contract only becomes unconditional on or after that date).

PART 4 — Nominated income

Disapplication of ordering rules

20

• (1) Section 809I of ITA 2007 (remittance basis charge: income and gains treated as remitted) is amended as follows.

• (2) In subsection (1)—

• (a) omit “and” at the end of paragraph (a), and

• (b) at the end of paragraph (b) insert

, and (c) the £10 test is met for that year.

• (3) In subsection (3), after “earlier tax year” insert “ (each such year for which the individual has made a nomination under that section being referred to as a “nomination year”) ”.

• (4) After subsection (4) insert—

(5) The £10 test is met for the tax year mentioned in subsection (1)(a) (“year X”) if, taking each nomination year separately, the cumulative total as respects at least one nomination year exceeds £10. (6) In relation to a nomination year— (a) “the cumulative total” means the sum, for all the tax years in aggregate up to and including year X, of the amounts of relevant income and gains remitted to the United Kingdom in those tax years from that nomination year, and (b) “relevant income and gains” means the income and chargeable gains nominated by the individual under section 809C for that nomination year.

Application of Part 4

21

The amendments made by this Part of this Schedule have effect for determining whether section 809I of ITA 2007 applies for the tax year 2012-13 or any subsequent tax year.

SCHEDULE 13

PART 1 — Denial of relief for contributions paid during period 29 November 2011 to 21 February 2012

1

In Chapter 4 of Part 4 of FA 2004 (registered pension schemes: tax reliefs and exemptions) after section 196A insert—

(196B) (1) An employer (“E”) is not to be given relief in respect of a contribution (“E's contribution”) paid by E under a registered pension scheme if conditions A, B and C are met. (2) Condition A is that— (a) under an arrangement (“the asset-backed arrangement”)— (i) a person (“the borrower”) receives money or another asset (“the advance”) from another person (“the lender”), (ii) the borrower, or a person connected with the borrower, makes a disposal of an asset (“the security”) to or for the benefit of the lender or a person connected with the lender, and (iii) the lender, or a person connected with the lender, is entitled to payments in respect of the security, (b) the borrower is E or a person connected with E, and (c) the advance is (wholly or partly) paid or provided by the lender out of E's contribution (directly or indirectly), and the case is not one in relation to which either condition A in section 196C or condition A in section 196D is met. (3) For the purposes of subsection (2)(a)(iii) it does not matter if an entitlement of the lender, or a person connected with the lender, is subject to any condition. (4) Condition B is that the asset-backed arrangement is not a structured finance arrangement. (5) Condition C is that it is reasonable to suppose that the amount of one or more of the payments mentioned in subsection (2)(a)(iii) has been, or is to be, determined (wholly or partly) on the basis that, in essence, the whole or a part of the advance represents a loan which is (wholly or partly) to be repaid by way of one or more of those payments. (6) For the purposes of subsection (5) it does not matter— (a) that the repayment of the loan might be subject to any condition, or (b) that the accounts of any person do not record a financial liability in respect of the whole or a part of the advance or that the whole or a part of the advance is not otherwise treated as representing a loan for the purposes of the accounts of any person, but, subject to that, all relevant circumstances are to be taken into account in order to get to the essence of the matter. (7) For the purposes of this section— (a) the borrower and the lender are not connected with one another if that would otherwise be the case, (b) if the borrower is not E, references to a person connected with the borrower include a person connected with E who would not otherwise be connected with the borrower, and (c) “loan” includes any advance of money. (196C) (1) An employer (“E”) is not to be given relief in respect of a contribution (“E's contribution”) paid by E under a registered pension scheme if conditions A and B are met. (2) Condition A is that— (a) under an arrangement (“the asset-backed arrangement”) a person (“the transferor”) makes a disposal of an asset (“the security”) to a partnership, (b) the transferor is E or a person connected with E, (c) the transferor, or a person connected with the transferor, is a member of the partnership immediately after the disposal (whether or not a member immediately before it), (d) under the asset-backed arrangement the partnership receives money or another asset (“the advance”) from a person (“the lender”) other than the transferor, (e) the advance is (wholly or partly) paid or provided by the lender out of E's contribution (directly or indirectly), (f) there is a relevant change in relation to the partnership (see section 196E), and (g) under the asset-backed arrangement the share in the partnership's profits of the person involved in the relevant change (see section 196E) is determined by reference (wholly or partly) to payments in respect of the security. (3) If the transferor is not E, for the purposes of this section references to a person connected with the transferor include a person connected with E who would not otherwise be connected with the transferor. (4) For the purposes of subsection (2)(g) it does not matter if any determination of the share in the partnership's profits of the person involved in the relevant change as mentioned is subject to any condition. (5) Condition B is that the asset-backed arrangement is not a structured finance arrangement. (196D) (1) An employer (“E”) is not to be given relief in respect of a contribution (“E's contribution”) paid by E under a registered pension scheme if conditions A and B are met. (2) Condition A is that— (a) a partnership holds an asset (“the security”) at any time before an arrangement (“the asset-backed arrangement”) is made, (b) under the asset-backed arrangement the partnership receives money or another asset (“the advance”) from another person (“the lender”), (c) the advance is (wholly or partly) paid or provided by the lender out of E's contribution (directly or indirectly), (d) there is a relevant change in relation to the partnership (see section 196E), and (e) under the asset-backed arrangement the share in the partnership's profits of the person involved in the relevant change (see section 196E) is determined by reference (wholly or partly) to payments in respect of the security. (3) For the purposes of subsection (2)(e) it does not matter if any determination of the share in the partnership's profits of the person involved in the relevant change as mentioned is subject to any condition. (4) Condition B is that the asset-backed arrangement is not a structured finance arrangement. (196E) (1) For the purposes of sections 196C and 196D there is a relevant change in relation to the partnership if condition X or Y is met. (2) Condition X is that, in connection with the asset-backed arrangement, the lender or a person connected with the lender becomes a member of the partnership at any time. (3) Condition Y is that— (a) in connection with the asset-backed arrangement, there is at any time a change in a member's share in the partnership's profits, and (b) the member is the lender or a person connected with the lender or a person who in connection with the asset-backed arrangement becomes at any time connected with the lender. (4) For the purposes of subsections (2) and (3) an event occurs in connection with the asset-backed arrangement if it occurs directly or indirectly in consequence of it or otherwise in connection with it. (5) For the purposes of sections 196C and 196D references to the person involved in the relevant change are— (a) if it is condition X that is met, to the lender or the person connected with the lender (as the case may be), and (b) if it is condition Y that is met, to the member of the partnership in whose share in the partnership's profits there is a change. (196F) (1) This section applies if— (a) an employer (“E”) pays a contribution (“E's contribution”) under a registered pension scheme, (b) conditions A and C in section 196B are met or condition A in section 196C or 196D is met, (c) the asset-backed arrangement is a structured finance arrangement and, accordingly, condition B in section 196B, 196C or 196D (as the case may be) is not met, (d) at any time (“the relevant time”) E, or a person connected with E, enters into an arrangement (“the avoidance arrangement”), and (e) the main purpose, or one of the main purposes, of E or the person connected with E in entering into the avoidance arrangement is to secure that the total amount of the relevant payments will be less than the amount of E's contribution. (2) If the relevant time is the same as the time at which the advance is received or earlier, section 196B, 196C or 196D (as the case may be) applies in relation to E's contribution as if condition B in that section were met. (3) Otherwise, the amount of the relevant financial liability as at the relevant time is treated as follows as relevant— (a) for corporation tax purposes, the amount is treated as if it were a profit which E has in respect of E's loan relationships chargeable to corporation tax under section 299 of CTA 2009 for E's accounting period in which the relevant time falls, or (b) for income tax purposes, the amount is treated as if it were an amount of income of E chargeable to income tax under Chapter 8 of Part 5 of ITTOIA 2005 for the tax year in which the relevant time falls. (4) The amount treated as profit or income by subsection (3)(a) or (b) is not to exceed the total amount of relief given in respect of E's contribution. (5) For the purposes of this section— (a) “the advance” and “the asset-backed arrangement” have the same meaning as in section 196B, 196C or 196D (as the case may be), (b) “the relevant financial liability” means the financial liability mentioned in section 809BZA(3), 809BZF(3) or 809BZJ(3) of ITA 2007 or section 758(3), 763(3) or 767(3) of CTA 2010 (as the case may be) in respect of the advance, (c) “the relevant payments” means the payments which reduce that liability as so mentioned, and (d) the amount of the relevant financial liability as at the relevant time is to be determined in accordance with generally accepted accounting practice. (196G) (1) This section applies if— (a) an employer (“E”) pays a contribution (“E's contribution”) under a registered pension scheme, (b) conditions A and C in section 196B are met or condition A in section 196C or 196D is met, (c) the asset-backed arrangement is a structured finance arrangement and, accordingly, condition B in section 196B, 196C or 196D (as the case may be) is not met, and (d) there occurs an event (“the relevant event”)— (i) which is not the making of a relevant payment, but (ii) by virtue of which, in accordance with generally accepted accounting practice, the amount of the relevant financial liability is reduced to nil or in part. (2) If the relevant financial liability is reduced to nil, Chapter 5B of Part 13 of ITA 2007 or Chapter 2 of Part 16 of CTA 2010 (as the case may be) is no longer to apply in relation to the asset-backed arrangement from when the relevant event occurs. (3) But no person is, by virtue of subsection (2), to be placed in a position which is more advantageous than the position in which the person would have been had this section never applied; and, in order to give effect to this principle, such assessments to tax or adjustments to any assessment to tax as are just and reasonable are to be made. (4) In any case, the amount of the reduction of the relevant financial liability mentioned in subsection (1)(d) is treated as follows as relevant— (a) for corporation tax purposes, the amount is treated as if it were a profit which E has in respect of E's loan relationships chargeable to corporation tax under section 299 of CTA 2009 for E's accounting period in which the relevant event occurs, or (b) for income tax purposes, the amount is treated as if it were an amount of income of E chargeable to income tax under Chapter 8 of Part 5 of ITTOIA 2005 for the tax year in which the relevant event occurs. (5) The amount treated as profit or income by subsection (4)(a) or (b) is not to exceed the total amount of relief given in respect of E's contribution. (6) For the purposes of this section— (a) “the advance” and “the asset-backed arrangement” have the same meaning as in section 196B, 196C or 196D (as the case may be), (b) “the relevant financial liability” means the financial liability mentioned in section 809BZA(3), 809BZF(3) or 809BZJ(3) of ITA 2007 or section 758(3), 763(3) or 767(3) of CTA 2010 (as the case may be) in respect of the advance, (c) “relevant payment” means a payment which reduces that liability as so mentioned, and (d) the amount of the relevant financial liability before its reduction by virtue of the relevant event and the amount of the reduction are to be determined in accordance with generally accepted accounting practice. (196H) (1) This section applies if— (a) an employer (“E”) pays a contribution (“E's contribution”) under a registered pension scheme, (b) conditions A and C in section 196B are met or condition A in section 196C or 196D is met, (c) the asset-backed arrangement is a structured finance arrangement and, accordingly, condition B in section 196B, 196C or 196D (as the case may be) is not met, and (d) after the beginning of 21 March 2012, an event (“the relevant event”) listed in subsection (4) occurs. (2) Section 196G applies as if the relevant event were an event (other than the making of a relevant payment) by virtue of which, in accordance with generally accepted accounting practice, the amount of the relevant financial liability is reduced to nil. (3) For this purpose, in section 196G(4) references to E's accounting period, or the tax year, in which the relevant event occurs are to be read as references to E's accounting period, or the tax year, in which falls the time immediately before the occurrence of the relevant event. (4) The events are— (a) if E is a company within the charge to corporation tax when E's contribution is paid, E ceases to be within that charge; (b) if E is a limited liability partnership in relation to which section 863(1) of ITTOIA 2005 or section 1273(1) of CTA 2009 applies when E's contribution is paid, that provision ceases to apply in relation to E; (c) if E is a firm for the purposes of ITTOIA 2005 (see section 847) or CTA 2009 (see section 1257) (other than a limited liability partnership) when E's contribution is paid, the partnership ceases to carry on the trade, profession or business in question; (d) in any case— (i) if E is a company, E enters administration or the winding up of E starts; (ii) if E is a partnership, the partnership is dissolved; (iii) if E is an individual, E dies. (5) Sections 10(3) and 12(7) of CTA 2009 apply for the purposes of subsection (4)(d)(i). (196I) (1) This section applies if— (a) an employer pays a contribution under a registered pension scheme, (b) condition A in section 196B, 196C or 196D is met, (c) the asset-backed arrangement is a structured finance arrangement and, accordingly, condition B in section 196B, 196C or 196D (as the case may be) is not met, and (d) the advance gives rise to a loan within the meaning of Chapter 3 (see section 162). (2) Section 180(4) does not prevent the advance from being a scheme administration employer payment (if it would otherwise do so). (3) For the purposes of this section “the advance” and “the asset-backed arrangement” have the same meaning as in section 196B, 196C or 196D (as the case may be). (196J) (1) This section applies for the purposes of sections 196B to 196I. (2) References to relief being given in respect of a contribution paid by an employer under a registered pension scheme are references to relief being given by way of— (a) the contribution being deducted in computing the amount of the employer's profits for the purposes of Part 2 of ITTOIA 2005 or Part 3 of CTA 2009 (trading income), (b) the contribution being treated as an expense of management of the employer for the purposes of Chapter 2 of Part 16 of CTA 2009 (expenses of management: companies with investment business), or (c) the contribution being brought into account at Step 1 in section 76(7) of ICTA (expenses of insurance companies) in respect of the employer. (3) Whether a person is connected with another person is determined in accordance with section 1122 of CTA 2010. (4) “Structured finance arrangement” means an arrangement which is a type 1, type 2 or type 3 finance arrangement for the purposes of Chapter 5B of Part 13 of ITA 2007 or Chapter 2 of Part 16 of CTA 2010 (structured finance arrangements). (5) Sections 774 to 776 of CTA 2010 apply as they apply for the purposes of Chapter 2 of Part 16 of that Act.

2

In section 280(1) of FA 2004 (abbreviations)—

• (a) omit the “and” after the definition of “ITA 2007”, and

• (b) after the definition of “CTA 2009” insert

, and “CTA 2010” means the Corporation Tax Act 2010

.

3

• (1) The amendment made by paragraph 1 above has effect in accordance with sub-paragraphs (2) to (6); and the amendments made by paragraph 2 above have effect accordingly.

• (2) Sections 196B to 196J of FA 2004 have effect in relation to contributions paid by employers on or after 29 November 2011 but before 22 February 2012.

• (3) Section 196G of FA 2004 also has effect in relation to contributions paid by employers before 29 November 2011 where the event mentioned in section 196G(1)(d) occurs on or after that date (and, for the purpose of applying section 196G in relation to such contributions, assume that sections 196B to 196D also have effect in relation to such contributions).

• (4) In cases where the relevant event occurs before 21 March 2012, section 196G has effect as if subsection (3) were omitted.

• (5) Section 196H of FA 2004 also has effect in relation to contributions paid by employers before 29 November 2011 (and, for the purpose of applying section 196H in relation to such contributions, assume that sections 196B to 196D also have effect in relation to such contributions).

• (6) Section 196I of FA 2004 also has effect in relation to contributions paid by employers before 29 November 2011 (and, for the purpose of applying section 196I in relation to such contributions, assume that sections 196B to 196D also have effect in relation to such contributions).

PART 2 — Transitional provision relating to Part 1

Application and interpretation

4

• (1) This Part of this Schedule applies if—

• (a) before 29 November 2011, an employer (“E”) pays a contribution (“E's contribution”) under a registered pension scheme (“the relevant scheme”),

• (b) at any time, relief is given in respect of E's contribution,

• (c) if the reference in paragraph 3(2) above to 29 November 2011 were instead a reference to the date on which E's contribution is paid, E would have no entitlement to relief in respect of E's contribution by virtue of section 196B, 196C or 196D of FA 2004, and

• (d) the asset-backed arrangement is not completed before 29 November 2011.

• (2) For the purposes of sub-paragraph (1)(c) section 196F of FA 2004 is to be ignored.

5

For the purposes of this Part of this Schedule—

• (a) terms used in section 196B, 196C or 196D of FA 2004 (as the case may be) have the same meaning as in that section, and

• (b) as necessary, assume that section 196B, 196C or 196D of FA 2004 (as the case may be) has effect in relation to E's contribution.

6

• (1) This paragraph applies for the purposes of this Part of this Schedule.

• (2) Sub-paragraph (3) applies if the section which would have applied as mentioned in paragraph 4(1)(c) above is section 196B of FA 2004.