Finance Act 2013

RULES FOR QUALIFYING POLICIES (B1) (1) Sub-paragraph (2) applies in relation to a policy issued in respect of an insurance made on or after 6 April 2013. (2) In order for the policy to be a qualifying policy, when it is issued all the rights under it must be beneficially owned by (and only by)— (a) one individual, or (b) two or more individuals taken together. (This is the case notwithstanding any other provision of this Schedule.) (3) Sub-paragraph (2) does not apply if the policy is protected. (4) A policy is “protected” if it is a new policy (as defined in paragraph 17 below) in relation to— (a) a policy issued in respect of an insurance made before 21 March 2012, or (b) a policy which is protected (whether by virtue of paragraph (a) or this paragraph). (B2) (1) Sub-paragraph (2) applies if any rights under a qualifying policy are, or any share in any rights under a qualifying policy is, assigned on or after 6 April 2013. (2) The policy is not to be a qualifying policy after the assignment (notwithstanding any other provision of this Schedule). (3) Sub-paragraph (2) does not apply if— (a) the assignment is from an individual by way of security for a debt of the individual, (b) the assignment is to an individual on the discharge of a debt of the individual secured by the rights or share, (c) the assignment is from an individual to the individual's spouse or civil partner, (d) the assignment is to an individual in pursuance of an order made by a court, (e) the assignment is to an individual in pursuance of a legally enforceable obligation relating to a divorce or the dissolution of a civil partnership, (f) the assignment is from an individual and, as a result of the assignment, the rights assigned are, or the share assigned is, held on trusts created by the individual, (g) the assignment is to an individual and, as a result of the assignment, the rights assigned are, or the share assigned is, no longer held on trusts, or (h) the assignment— (i) is to the personal representatives of a deceased individual, or (ii) is to an individual where, as a result of the assignment, a deceased beneficiary event (see paragraph A6(2) above) occurs. (4) Section 465(6) of ITTOIA 2005 applies for the purposes of sub-paragraph (3)(f). (5) The Commissioners for Her Majesty's Revenue and Customs may by regulations provide that sub-paragraph (2) does not apply if prescribed conditions are met in relation to the assignment. “Prescribed” means prescribed by the regulations. (6) Regulations under sub-paragraph (5) may— (a) make different provision for different cases or circumstances, and (b) contain incidental, supplementary, consequential, transitional, transitory or saving provision. (7) See paragraphs A1 and A2 above which may apply in consequence of an assignment falling within sub-paragraph (3) or (5). (B3) (1) Sub-paragraph (2) applies if any of the following events occurs— (a) the issue of a policy in respect of an insurance made on or after 6 April 2013; (b) the variation of a policy on or after 6 April 2013 where paragraph 18 below applies in relation to the variation and as a result of the variation— (i) the period over which premiums are payable under the policy is or could be lengthened, or (ii) the total amount of the premiums payable under the policy in any relevant period is or could be increased, or both; (c) a premium limit event in relation to a protected policy on or after 6 April 2013 (see paragraph A2(9) to (12) above); (d) an event on or after 6 April 2013 which would be a premium limit event in relation to a protected policy but for paragraph A2(12) above; (e) the assignment on or after 6 April 2013 of any rights, or any share in any rights, under a policy where the assignment falls within paragraph B2(3)(c) to (g) or (5) above; (f) a deceased beneficiary event (see paragraph A6(2) above) on or after 6 April 2013; (g) the conditions in paragraph 24(3) below being fulfilled for the first time in respect of a new non-resident policy where— (i) the conditions are fulfilled for the first time on or after 6 April 2013, and (ii) but for the conditions being fulfilled, the policy could not be a qualifying policy because of paragraph 24(2). (2) Each individual who is a beneficiary under the policy must, before the end of the statement period, make to the issuer of the policy a statement dealing with the prescribed matters. (3) If an individual does not comply with sub-paragraph (2) the policy is not to be a qualifying policy after the event (notwithstanding any other provision of this Schedule). (4) In sub-paragraph (1)(b)(ii) “relevant period” means any period of 12 months beginning at or after the time of the variation. (5) Sub-paragraph (2)— (a) does not apply in the case of an event mentioned in sub-paragraph (1)(a), (e), (f) or (g) if the policy is a pure protection policy, and (b) does not apply in the case of an event mentioned in sub-paragraph (1)(b), (c) or (d) if the policy is a pure protection policy both before and after the event. “Pure protection policy” has the meaning given by paragraph A6(1)(c) above. (6) Sub-paragraph (2) does not apply in the case of an event mentioned in sub-paragraph (1)(e) where the assignment falls within paragraph B2(3)(e) above and is a mortgage endowment assignment. “Mortgage endowment assignment” is to be read in accordance with paragraph A6(3) above. (7) The Commissioners for Her Majesty's Revenue and Customs may by regulations provide that an individual is not required to comply with sub-paragraph (2) if prescribed conditions are met. “Prescribed” means prescribed by the regulations. (8) Accordingly, if by virtue of regulations under sub-paragraph (7) an individual is not required to comply with sub-paragraph (2), sub-paragraph (3) does not apply because that individual does not comply with sub-paragraph (2). (9) In sub-paragraph (2)— (a) the reference to an individual who is a beneficiary under the policy is to be read in accordance with paragraph A5 above, (b) “the statement period” means— (i) the period of 3 months after the day on which the event occurs, or (ii) if the event occurs before the day on which the first regulations under paragraph (c) below come into force, the period of 3 months after that day, or such longer period as an officer of Revenue and Customs may allow, and (c) “prescribed” means prescribed by regulations made by the Commissioners for Her Majesty's Revenue and Customs. (10) An officer of Revenue and Customs may allow a longer period for the purposes of sub-paragraph (9)(b) only if— (a) the individual in question has made a request in writing to an officer of Revenue and Customs for a longer period to be allowed, and (b) such an officer is satisfied— (i) that there is a reasonable excuse for the required statement not having been made within the period mentioned in sub-paragraph (9)(b)(i) or (ii), and (ii) that the request under paragraph (a) was made without unreasonable delay after the reasonable excuse ceased. (11) Sub-paragraph (12) applies in relation to a policy if the obligations under the policy of its issuer are at any time the obligations of another person (“the transferee”) to whom there has been a transfer of the whole or any part of a business previously carried on by the issuer. (12) In relation to that time, in sub-paragraph (2) the reference to the issuer of the policy is to be read as a reference to the transferee. (13) Regulations under sub-paragraph (7) or (9)(c) may— (a) make different provision for different cases or circumstances, and (b) contain incidental, supplementary, consequential, transitional, transitory or saving provision.

4

• (1) Paragraph 17 (substitutions) is amended as follows.

• (2) In sub-paragraph (2) before paragraph (a) insert—

(za) the new policy cannot be a qualifying policy if the old policy was not a qualifying policy by virtue of— (i) paragraph A1(2), B1(2), B2(2) or B3(3) above, or (ii) sub-paragraph (i) above or this sub-paragraph;

.

• (3) In sub-paragraph (2)(a) after the first “not” insert “ and paragraph (za) above does not apply ”.

• (4) In sub-paragraph (4) for “(2)” substitute “ (2)(a) to (c) ”.

• (5) After sub-paragraph (4) insert—

(5) In determining under sub-paragraph (2)(a) to (c) above whether the new policy would apart from this paragraph be a qualifying policy, paragraph A1 above is not to be applied in relation to the issue of the new policy; but this does not stop that paragraph being applied in relation to the issue of the new policy after this paragraph has been applied.

5

In paragraph 25 (application of paragraph 17 in cases involving new non-resident policies) after sub-paragraph (2) insert—

(2A) In determining for the purposes of sub-paragraph (2)(a) above whether a policy would, apart from paragraph 24, have been a qualifying policy, paragraphs A1 and B1 to B3 above are to be ignored. (But this does not affect the application of any of those paragraphs in relation to the new policy.)

.

6

• (1) In section 55 of FA 1995 (qualifying life insurance policies: disapplication of paragraph 21 of Schedule 15 to ICTA from appointed date) in subsection (3) after “subject” insert “ to paragraphs A1(2), B2(2) and B3(3) of that Schedule and ”.

• (2) The amendment made by this paragraph is treated as having come into force on the appointed date (see section 55(9) of FA 1995).

PART 2 — Restricted relief qualifying policies

7

Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc) is amended as follows.

8

After section 463 insert—

(463A) (1) This section applies for the purpose of determining if an individual is liable for tax charged under this Chapter. (2) In relation to an event occurring on or after 6 April 2013, section 485 (disregard of certain events in relation to qualifying policies) does not apply in relation to a policy (“policy X”) which is a restricted relief qualifying policy (see paragraph A2 of Schedule 15 to ICTA). (3) If an individual is liable for tax charged under this Chapter as a result of subsection (2), the gain on which the tax is charged in the case of the individual is reduced by the following amount— $$G × TAP TP$where—G is the amount of the gain (apart from this subsection),TAP is the total amount of premiums payable under policy X during the policy X period so far as they are allowable premiums as determined in accordance with section 463B, andTP is the total amount of premiums payable under policy X during the policy X period.$ (4) If section 528 also applies in the case of the individual in relation to the gain, subsection (3) is to be applied to the gain before section 528 and, accordingly, the reduction to be made under section 528 is to be determined by reference to the gain as reduced by subsection (3). (5) The following subsections apply for the purposes of this section (except subsection (2)) and section 463B. (6) “The policy X period” means the period for which policy X has run before the chargeable event occurs. (7) Subsections (8) and (9) apply if policy X is a new policy in relation to another policy. (8) For the purposes of subsection (6) policy X is to be taken to have run— (a) from the issue of the other policy, or (b) if the other policy was also a new policy in relation to an earlier policy, from the issue of the earlier policy, and so on. (9) References to premiums payable under policy X are to be read as including references to premiums payable under any earlier policy taken into account under subsection (8). (10) The following are to be left out of account in determining the premiums payable under a policy— (a) so much of a premium as is charged on the grounds that an exceptional risk of death or disability is involved; (b) subject to subsection (11), so much of the first premium payable the liability for the payment of which— (i) is discharged in accordance with paragraph 15(2) of Schedule 15 to ICTA, or (ii) in the case of a policy in relation to which paragraph 3 of that Schedule applies, is discharged under a provision of the policy falling within paragraph 3(4)(c) of that Schedule. (11) The maximum amount that may be left out of account under subsection (10)(b) in the case of a policy is— $$£ 3,600 × N$where N is the number of complete years for which ran—the other policy involved, orif there is more than one other policy involved, the policy which ran for the most number of complete years.$ (12) In determining the premiums payable under a policy any provision for the waiver of premiums by reason of a person's disability is to be ignored. (13) “New policy” has the meaning given in paragraph 17 of Schedule 15 to ICTA. (463B) (1) This section sets out how to determine the extent to which premiums payable under policy X during the policy X period are allowable premiums for the purposes of section 463A(3). (2) A premium payable under policy X is allowable if it is payable before the restricted relief date. (3) In this section “the restricted relief date” means— (a) 6 April 2013, or (b) if later, the date on which policy X became a restricted relief qualifying policy. (4) Premiums payable under policy X in a relevant premium period are allowable so far as they do not exceed in total the premium limit for the period. (5) In subsection (4) “relevant premium period” means— (a) any period of one year which— (i) begins with a relevant date, and (ii) ends in the policy X period, and (b) if it is not covered by paragraph (a), the period which— (i) begins with the last relevant date to fall within the policy X period, and (ii) ends at the end of the policy X period. (6) In subsection (5) “relevant date” means— (a) the restricted relief date, or (b) any anniversary of the restricted relief date. (7) For the purposes of subsection (4) “the premium limit” for a relevant premium period is determined in accordance with subsections (8) to (10). (8) Determine the premiums payable in the relevant premium period under policies related to policy X. (9) If the total of those premiums is £3,600 or more, the premium limit is nil (and, accordingly, no premiums payable under policy X in the relevant premium period are allowable). (10) If the total of those premiums is less than £3,600, the premium limit is the difference between that total and £3,600. (11) Subsection (4) does not apply if, at the time policy X became a restricted relief qualifying policy, any policy related to policy X was itself a restricted relief qualifying policy. (12) For the purposes of this section a policy is “related” to policy X if it met the following requirements at the time policy X became a restricted relief qualifying policy— (a) the policy is a qualifying policy under which the individual is a beneficiary (as determined in accordance with paragraph A5 of Schedule 15 to ICTA); (b) the policy is neither a protected policy nor a pure protection policy. (13) In subsection (12)(b)— - “protected policy” is to be read in accordance with paragraph A4 of Schedule 15 to ICTA, and - “pure protection policy” has the meaning given by paragraph A6(1)(c) of that Schedule. (14) A policy which is a new policy in relation to a policy “related” to policy X (whether by virtue of subsection (12) or this subsection) is also “related” to policy X if it meets the requirements of subsection (12)(a) and (b) when issued. (15) A policy ceases to be “related” to policy X if it ceases to meet those requirements. (16) If policy X is a restricted relief qualifying policy as provided for by paragraph A2(14) of Schedule 15 to ICTA, references in this section to policy X becoming a restricted relief qualifying policy are to be read as references to the policy determined under subsection (17) becoming a restricted relief qualifying policy. (17) The policy is— (a) the policy (“policy Y”) in relation to which policy X was the new policy, or (b) if policy Y was also a restricted relief qualifying policy as provided for by paragraph A2(14) of Schedule 15 to ICTA, the policy in relation to which policy Y was the new policy, and so on. (18) The following subsections apply for the purposes of this section if— (a) a premium (“premium A”) is payable under policy X on a day (“day A”) which is on or after 21 March 2012 but before 6 April 2013, and (b) the next premium payable under policy X is payable on a day (“day B”) which is— (i) on or after 6 April 2013, and (ii) more than one month after day A. (19) Premium A is to be treated as if, instead of being one premium payable on day A, it were a series of premiums payable at monthly intervals with the first premium in the series payable on day A. (20) The number of premiums in the series is equal to the number of complete months falling within the period beginning with day A and ending with day B. (21) The amount of each premium in the series is the amount of premium A divided by the number of premiums in the series. (463C) (1) This section applies for the purpose of determining if personal representatives are liable for tax charged under this Chapter as provided for by section 466. (2) This section also applies for the purpose of determining if trustees are liable for tax charged under this Chapter as provided for by section 467 where— (a) condition B in that section is met, and (b) the person who created the trusts has died. (3) In relation to an event occurring on or after 6 April 2013, section 485 (disregard of certain events in relation to qualifying policies) does not apply in relation to a policy if the policy is a restricted relief qualifying policy (see paragraph A2 of Schedule 15 to ICTA). (4) If any personal representatives or trustees are liable for tax charged under this Chapter as a result of subsection (3), section 463A(3) is to apply in the case of the personal representatives or the trustees— (a) as if the reference to the individual were to the personal representatives or to the trustees, and (b) as if the restricted relief qualifying policy were policy X. (5) For this purpose— (a) in section 463B(12)(a) the reference to the individual is to be read as a reference to the deceased, and (b) a policy— (i) which would otherwise have ceased to be “related” to policy X for the purposes of section 463B on the deceased's death, but (ii) which continues to run after the deceased's death, is to be treated as “related” to policy X after the deceased's death. (6) A policy which is a new policy (as defined in paragraph 17 of Schedule 15 to ICTA) in relation to a policy treated as “related” to policy X under subsection (5)(b) or this subsection is also to be treated as “related” to policy X if, apart from the deceased's death, it would meet the requirements of section 463B(12)(a) and (b) on its issue. (7) A policy treated as “related” to policy X under subsection (5)(b) or (6) ceases to be so treated if, apart from the deceased's death, it would cease to meet the requirements of section 463B(12)(a) and (b). (8) If section 528A also applies in the case of the personal representatives or the trustees in relation to the gain, section 463A(3) is to be applied to the gain before section 528A and, accordingly, the reduction to be made under section 528A is to be determined by reference to the gain as reduced by section 463A(3). (463D) (1) This section applies if— (a) paragraph A1 of Schedule 15 to ICTA applies in relation to a policy by virtue of paragraph A1(8) in consequence of an event relating to the policy (“the relevant event”), (b) after the relevant event, the policy is not a qualifying policy by virtue of paragraph A1(2), and (c) in relation to an event occurring after the relevant event— (i) an individual is liable for tax charged under this Chapter on a gain from the policy, and (ii) but for the application of paragraph A1 in relation to the policy, section 463A(3) would have applied in the case of the individual so as to reduce the gain. (2) Section 463A(3) is to apply in the case of the individual in relation to the gain as if the policy were policy X. (3) But, for this purpose, section 463B(5) has effect as if the references to the policy X period were to the part of that period falling before the relevant event. (4) If section 528 also applies in the case of the individual in relation to the gain, section 463A(3) is to be applied to the gain before section 528 and, accordingly, the reduction to be made under section 528 is to be determined by reference to the gain as reduced by section 463A(3). (463E) (1) This section applies if— (a) a policy (“policy Z”) is issued, (b) the issue of policy Z is an event falling within paragraph A2(3) of Schedule 15 to ICTA by virtue of paragraph (e), (c) after its issue, policy Z is a qualifying policy but not a restricted relief qualifying policy, (d) policy Z is varied on or after 6 April 2013 and the variation is an event falling within paragraph A1(3) of Schedule 15, (e) after the variation, policy Z is not a qualifying policy by virtue of paragraph A1(2) of that Schedule, (f) in relation to an event occurring after the variation, an individual is liable for tax charged under this Chapter on a gain from policy Z, and (g) but for the application of paragraph A1 of Schedule 15 in relation to policy Z, the individual would not have been liable because of section 485. (2) The gain on which the tax is charged in the case of the individual is reduced by the following amount— $$G × TPV TP$where—G is the amount of the gain (apart from this subsection),TPV is the total amount of premiums payable under policy Z before the variation, andTP is the total amount of premiums payable under policy Z before the chargeable event.$ (3) If section 528 also applies in the case of the individual in relation to the gain, subsection (2) is to be applied to the gain before section 528 and, accordingly, the reduction to be made under section 528 is to be determined by reference to the gain as reduced by subsection (2). (4) Section 463A(10) to (12) applies for the purposes of subsection (2).

9

In section 485 (disregard of certain events in relation to qualifying policies) after subsection (7) insert—

(8) This section is subject to sections 463A and 463C.

PART 3 — Information powers

10

After section 552ZA of ICTA insert—

(552ZB) (1) The Commissioners for Her Majesty's Revenue and Customs may make regulations— (a) requiring relevant persons— (i) to provide prescribed information to persons who apply for the issue of qualifying policies or who are, or may be, required to make statements under paragraph B3(2) of Schedule 15; (ii) to provide to an officer of Revenue and Customs prescribed information about qualifying policies which have been issued by them or in relation to which they are or have been a relevant transferee; (b) making such provision (not falling within paragraph (a)) as the Commissioners think fit for securing that an officer of Revenue and Customs is able— (i) to ascertain whether there has been or is likely to be any contravention of the requirements of the regulations or of paragraph B3(2) of Schedule 15; (ii) to verify any information provided to an officer of Revenue and Customs as required by the regulations. (2) The provision that may be made by virtue of subsection (1)(b) includes, in particular, provision requiring relevant persons to make available books, documents and other records for inspection by or on behalf of an officer of Revenue and Customs. (3) The regulations may— (a) make different provision for different cases or circumstances, and (b) contain incidental, supplementary, consequential, transitional, transitory or saving provision. (4) In this section— - “prescribed” means prescribed by the regulations, - “qualifying policy” includes a policy which would be a qualifying policy apart from— 1. paragraph A1(2), B1(2), B2(2) or B3(3) of Schedule 15, or 2. paragraph 17(2)(za) of that Schedule (including as applied by paragraph 18), and - “relevant person” means a person— 1. who issues, or has issued, qualifying policies, or 2. who is, or has been, a relevant transferee in relation to qualifying policies. (5) For the purposes of this section a person (“X”) is at any time a “relevant transferee” in relation to a qualifying policy if the obligations under the policy of its issuer are at that time the obligations of X as a result of there having been a transfer to X of the whole or any part of a business previously carried on by the issuer.

11

In section 552B of ICTA (duties of overseas insurers' tax representatives) in subsection (2)—

• (a) after paragraph (b) omit “and”, and

• (b) after paragraph (c) insert

and (d) any duties imposed by regulations under section 552ZB,

.

12

In section 98 of TMA 1970 (special returns etc), in the second column of the Table, after the entry for regulations under section 552ZA(6) of ICTA insert— “ regulations under section 552ZB; ”.

SCHEDULE 10

PART 1 — Introduction

1

Chapter 2 of Part 13 of ITA 2007 (tax avoidance: transfer of assets abroad) is amended as follows.

PART 2 — New exemption for genuine transactions etc

2

• (1) Section 718 (meaning of “person abroad” etc) is amended as follows.

• (2) For subsection (1) substitute—

(1) In this Chapter “person abroad” means— (a) a person who is resident outside the United Kingdom, or (b) an individual who is domiciled outside the United Kingdom.

• (3) Omit subsection (2)(a).

3

In section 720 (charge to tax on income treated as arising under section 721) in subsection (7)—

• (a) for “742” substitute “ 742A ”, and

• (b) after “transaction” insert “ , etc ”.

4

In section 727 (charge to tax on income treated as arising under section 728) in subsection (5)—

• (a) for “742” substitute “ 742A ”, and

• (b) after “transaction” insert “ , etc ”.

5

In section 731 (charge to tax on income treated as arising under section 732) in subsection (4)—

• (a) for “742” substitute “ 742A ”, and

• (b) after “transaction” insert “ , etc ”.

6

• (1) Section 736 (exemptions: introduction) is amended as follows.

• (2) In subsection (1) for “742” substitute “ 742A ”.

• (3) After subsection (2) insert—

(2A) The exemption given by section 742A applies only in the case of a relevant transaction effected on or after 6 April 2012.

7

After section 742 insert—

(742A) (1) Subsection (2) applies for the purpose of determining the liability of an individual to tax under this Chapter by reference to a relevant transaction if— (a) the transaction is effected on or after 6 April 2012, and (b) conditions A and B are met. (2) Income is to be left out of account so far as the individual satisfies an officer of Revenue and Customs that it is attributable to the transaction. (3) Condition A is that— (a) were, viewed objectively, the transaction to be considered to be a genuine transaction having regard to any arrangements under which it is effected and any other relevant circumstances, and (b) were the individual to be liable to tax under this Chapter by reference to the transaction, the individual's liability to tax would, in contravention of a relevant treaty provision, constitute an unjustified and disproportionate restriction on a freedom protected under that relevant treaty provision. (4) In subsection (3) “relevant treaty provision” means— (a) Title II or IV of Part Three of the Treaty on the Functioning of the European Union, (b) Part II or III of the EEA agreement, or (c) the provision of any subsequent treaty replacing a provision mentioned in paragraph (a) or (b). (5) Condition B is that the individual satisfies an officer of Revenue and Customs that, viewed objectively, the transaction must be considered to be a genuine transaction having regard to any arrangements under which it is effected and any other relevant circumstances. (6) Without prejudice to the generality of subsection (3)(a) or (5), in order for the transaction to be considered to be a genuine transaction the transaction must not— (a) be on terms other than those that would have been made between persons not connected with each other dealing at arm's length, or (b) be a transaction that would not have been entered into between such persons so dealing, having regard to any arrangements under which the transaction is effected and any other relevant circumstances. (7) Subsection (8) applies if any asset or income falling within subsection (12) is used for the purposes of, or is received in the course of, activities carried on in a territory outside the United Kingdom by a person (“the relevant person”) through a business establishment which the relevant person has in that territory. (8) Without prejudice to the generality of subsection (3)(a) or (5), in order for the transaction to be considered to be a genuine transaction the activities mentioned in subsection (7) must consist of the provision by the relevant person of goods or services to others on a commercial basis and involve— (a) the use of staff in numbers, and with competence and authority, (b) the use of premises and equipment, and (c) the addition of economic value, by the relevant person, to those to whom the goods or services are provided, commensurate with the size and nature of those activities. (9) In subsection (8)(a) “staff” means employees, agents or contractors of the relevant person. (10) To determine if a person has a “business establishment” in a territory outside the United Kingdom, apply sections 1141, 1142(1) and 1143 of CTA 2010 as if in those provisions— (a) references to a company were to a person, and (b) references to a permanent establishment were to a business establishment. (11) Subsection (6) does not apply if— (a) the relevant transfer is made by an individual who makes it wholly— (i) for personal reasons (and not commercial reasons), and (ii) for the personal benefit (and not the commercial benefit) of other individuals, and (b) no consideration is given (directly or indirectly) for the relevant transfer or otherwise for any benefit received by any individual mentioned in paragraph (a)(ii), and all assets and income falling within subsection (12) are dealt with accordingly. (12) The assets and income falling within this subsection are— (a) any of the assets transferred by the relevant transfer; (b) any assets directly or indirectly representing any of the assets transferred; (c) any income arising from any assets within paragraph (a) or (b); (d) any assets directly or indirectly representing the accumulations of income arising from any assets within paragraph (a) or (b). (13) In subsections (11) and (12) references to the relevant transfer are to— (a) if the transaction mentioned in subsection (1) is a relevant transfer, the transfer, or (b) if the transaction so mentioned is an associated operation, the relevant transfer to which it relates. (14) Subsection (15) applies if— (a) subsection (2) would apply in relation to a transaction but for the individual being unable to satisfy an officer of Revenue and Customs for the purposes of condition B that the transaction meets the requirements set out in subsection (6), but (b) the individual does satisfy an officer of Revenue and Customs that those requirements are met in relation to a part of the transaction. (15) Subsection (2) applies as if the reference to the transaction were to that part of the transaction.

8

In section 751 (the Tribunal's jurisdiction on appeals) after paragraph (d) insert—

(da) section 742A (post-5 April 2012 transactions: exemption for genuine transactions),

.

9

• (1) The amendments made by paragraph 2 above have effect in relation to times on or after 6 April 2012.

• (2) The amendments made by paragraphs 3 to 8 above have effect for the tax year 2012-13 and subsequent tax years.

PART 3 — Amendments relating to the charges under sections 720 and 727

Main provision

10

• (1) Section 721 (individuals with power to enjoy income as a result of a relevant transaction) is amended as follows.

• (2) In subsection (3) after “the income” insert “ of the person abroad ”.

• (3) Before subsection (4) insert—

(3B) The amount of the income treated as arising under subsection (1) is equal to the amount of the income of the person abroad (subject to sections 724 and 725). (3C) Subsection (1) does not apply if— (a) the individual is liable for income tax charged on the income of the person abroad by virtue of a charge not contained in this Chapter, and (b) all that income tax has been paid.

• (4) In subsection (4) after “the income” insert “ of the person abroad ”.

• (5) Omit subsection (5)(a).

11

• (1) Section 724 (special rules where benefit provided out of income of person abroad) is amended as follows.

• (2) In subsection (2) after “on” insert “ an amount equal to ”.

• (3) In subsection (3)—

• (a) for “on” substitute “ by reference to ”, and

• (b) after “previous tax year” insert “ under this Chapter ”.

12

• (1) Section 725 (reduction in amount charged where controlled foreign company involved) is amended as follows.

• (2) In subsection (1), as substituted by paragraph 22 of Schedule 20 to FA 2012, for paragraph (b) and the “ and ” before it substitute—

(b) an amount of income is treated as arising to an individual under section 721 for a tax year, and (c) the income mentioned in section 721(2) is or includes a sum forming part of the CFC's chargeable profits for that accounting period.

• (3) After subsection (2) insert—

(2A) In a case in which section 724 applies, the reference to S in the formula in subsection (2) is to be read as a reference to X% of S. (2B) “X%” is determined as follows— $$100 % × A I$where—A is the amount on which the individual is liable as determined under section 724(2), andI is the amount of the income mentioned in section 721(2).$

• (4) In relation to cases in which the amendments made by paragraph 22 of Schedule 20 to FA 2012 are to be ignored in accordance with paragraph 50(9) of that Schedule, the amendment made by sub-paragraph (5) below has effect instead of the amendment made by sub-paragraph (2) above.

• (5) In subsection (1) for paragraph (c) and the “and” before it substitute—

(c) an amount of income is treated as arising to an individual under section 721 for a tax year, and (d) the income mentioned in section 721(2) is or includes a sum forming part of the controlled foreign company's chargeable profits for that accounting period.

13

In section 726 (non-UK domiciled individuals to whom remittance basis applies) in subsection (2) for “the extent” substitute “ the corresponding extent ”.

14

• (1) Section 728 (individuals receiving capital sums as a result of a relevant transaction) is amended as follows.

• (2) After subsection (1) insert—

(1A) The amount of the income treated as arising under subsection (1) is equal to the amount of the income of the person abroad (subject to subsection (2)).

• (3) In subsection (2) for the words from “it applies” to the end substitute

if— (a) in subsection (1) of that section— (i) the reference to section 721 were a reference to this section, and (ii) the reference to section 721(2) were a reference to subsection (1)(a) of this section, and (b) subsections (2A) and (2B) of that section were omitted.

• (4) After subsection (2) insert—

(2A) Subsection (1) does not apply if— (a) the individual is liable for income tax charged on the income of the person abroad by virtue of a charge not contained in this Chapter, and (b) all that income tax has been paid.

• (5) Omit subsection (3)(a).

15

In section 730 (non-UK domiciled individuals to whom remittance basis applies) in subsection (2) for “the extent” substitute “ the corresponding extent ”.

16

• (1) Section 743 (no duplication of charges) is amended as follows.

• (2) After subsection (2) insert—

(2A) Subsection (2B) applies if— (a) in the case of an individual, an amount of income is taken into account in charging income tax under section 720 or 727, and (b) the individual subsequently receives that income. (2B) The income received is treated as not being the individual's income for income tax purposes.

• (3) In subsection (3) for “subsections (1) and (2)” substitute “ this section ”.

• (4) Omit subsection (4).

17

• (1) Section 744 (meaning of taking income into account in charging income tax for section 743) is amended as follows.

• (2) In subsection (1) for “743(1) and (2)” substitute “ 743 ”.

• (3) In subsection (2)—

• (a) in paragraph (a) omit “or value of the benefit”, and

• (b) in paragraph (b) for “income charged” substitute “ the income mentioned in section 721(2) ”.

• (4) In subsection (3) for “that income” substitute “ the income mentioned in section 728(1)(a) ”.

18

• (1) Section 745 (rates of tax applicable to income charged under sections 720 and 727 etc) is amended as follows.

• (2) In subsection (1) for “so far as it” substitute “ if (and to the corresponding extent that) the income mentioned in section 721(2) or 728(1)(a) ”.

• (3) For subsections (3) and (4) substitute—

(3) Subsection (4) applies to income treated as arising to an individual under section 721 or 728 so far as subsection (1) does not apply to it. (4) The charge to income tax under section 720 or 727 operates by treating the income as if it were income within section 19(2) (meaning of “dividend income”) if the income mentioned in section 721(2) or 728(1)(a) would be dividend income were it the income of the individual.

19

In section 746 (deductions and reliefs where individual charged under section 720 or 727) for subsection (2) substitute—

(2) For the purpose of determining the deductions and reliefs allowed to the individual, the individual is to be treated as if the individual had actually received the amount by reference to which the income treated as arising to the individual under section 721 or 728 is determined.

Commencement and transitional provision

20

• (1) The amendments made by this Part of this Schedule have effect for the tax year 2013-14 and subsequent tax years.

• (2) They have effect in relation to relevant transfers occurring before 6 April 2013 as well as relevant transfers occurring on or after that date.

21

• (1) Sections 721(3C) and 728(2A) of ITA 2007 (as inserted by paragraphs 10(3) and 14(4) above) have effect only if the income of the person abroad arises to that person on or after 6 April 2013.

• (2) The amendments made by paragraphs 10(5) and 14(5) above have no effect in relation to income arising to a person abroad before 6 April 2013.

SCHEDULE 11

Deduction from interest payable on compensation

1

Chapter 3 of Part 15 of ITA 2007 (deduction from certain payments of yearly interest) is amended as follows.

2

In section 874 (duty to deduct from certain payments of yearly interest), after subsection (5) insert—

(5A) For the purposes of subsection (1) a payment of interest which is payable to an individual in respect of compensation is to be treated as a payment of yearly interest (irrespective of the period in respect of which the interest is paid). (5B) But the Commissioners for Her Majesty's Revenue and Customs may make regulations which provide that subsection (5A) does not apply in the circumstances prescribed in the regulations.

3

In section 875 (interest paid by building societies), at the end insert “ unless it is treated as a payment of yearly interest by virtue of section 874(5A). ”

4

In section 878 (interest paid by banks), after subsection (1) insert—

(1A) But that duty does apply to such a payment if it is treated as a payment of yearly interest by virtue of section 874(5A).

Deduction from yearly interest: specialties

5

In section 874 of ITA 2007 (duty to deduct from certain payments of yearly interest), after subsection (6) insert—

(6A) In determining for the purposes of subsection (1) whether a payment of interest arises in the United Kingdom no account is to be taken of the location of any deed which records the obligation to pay the interest.

Payment of interest in kind

6

After section 370 of ITTOIA 2005 insert—

(370A) (1) This section applies to the payment of an amount of interest in the form of— (a) goods or services, or (b) a voucher. (2) Where this section applies by virtue of subsection (1)(a), the amount of the payment is to be taken to be equal to the market value, at the time the payment is made, of the goods or services. (3) Where this section applies by virtue of subsection (1)(b), the amount of the payment is to be taken to be equal to whichever is the higher of— (a) the face value of the voucher, (b) the amount of money for which the voucher is capable of being exchanged, or (c) the market value, at the time the payment is made, of any goods or services for which the voucher is capable of being exchanged. (4) In this section references to a voucher are to a voucher, stamp or similar document or token which is capable of being exchanged for money, goods or services.

7

In section 380 of that Act (funding bonds), in subsection (3), at the end insert “ (but does not include any instrument providing for payment in the form of goods or services or a voucher) ”.

8

In section 939 of ITA 2007 (duty to retain bonds where issue treated as payment of interest), in subsection (6), at the end insert “ (but does not include any instrument providing for payment in the form of goods or services or a voucher) ”.

9

In section 975 of that Act (statements about deduction of income tax), in subsection (1)—

• (a) after “if” insert

— (a)

, and

• (b) at the end insert

, and (b) the person is not under a duty to provide a statement under section 975A

.

10

After section 975 of that Act insert—

(975A) (1) Subsection (2) applies if a person makes a payment of interest of which the whole or part is in the form of goods or services or a voucher. (2) The person must provide the recipient of the payment with a statement showing— (a) the gross amount of the payment, (b) the amount of the sum deducted under any provision of Chapters 2 to 7 or under section 919 or 928 (if any), (c) the actual amount paid, and (d) the date on which the payment was made. (3) The amounts mentioned in paragraphs (a) to (c) of subsection (2) are to be calculated in accordance with section 370A of ITTOIA 2005. (4) Subsection (5) applies where a person— (a) is treated as making a payment of an amount of interest (“the deemed interest”) by virtue of section 413 of CTA 2009 or section 380 of ITTOIA 2005 (funding bonds), and (b) is under a duty under section 939(2) to retain funding bonds equal in value to income tax on the deemed interest at the basic rate. (5) The person must provide the recipient of the funding bonds with a statement showing— (a) the gross amount of the deemed interest, (b) the sum representing income tax which the person is treated under section 939(3) as having deducted by retaining funding bonds, (c) the amount of the deemed interest after the deduction of that sum, and (d) the date on which the deemed interest is treated as being paid. (6) The amount of the deemed interest is to be calculated in accordance with section 413 of CTA 2009 or section 380 of ITTOIA 2005, as the case may require. (7) A statement under this section must be provided in writing to the recipient on the date that the payment is made or (as the case may be) the date that the deemed interest is treated as being paid. (8) The duty to comply with this section is enforceable by the recipient. (9) In this section— (a) references to a voucher are to a voucher, stamp or similar document or token which is capable of being exchanged for money, goods or services, and (b) “funding bonds” has the same meaning as in Chapter 12 (see section 939(6)).

11

In section 413 of CTA 2009 (issue of funding bonds), in subsection (3), at the end insert “ (but does not include any instrument providing for payment in the form of goods or services or a voucher) ”.

Commencement

12

• (1) The amendments made by paragraphs 1 to 4 have effect—

• (a) in relation to any payment of interest by a building society which is made on or after 1 September 2013, and

• (b) in relation to any other payment of interest which is made on or after 1 October 2013.

• (2) The amendments made by paragraphs 5 to 11 have effect in relation to any payment of interest which is made on or after the day on which this Act is passed.

SCHEDULE 12

Key amendments to Part 4 of ITTOIA 2005

1

Part 4 of ITTOIA 2005 (savings and investment income) is amended in accordance with paragraphs 2 and 3.

2

In section 365(1) (overview of Part 4)—

• (a) after paragraph (a) insert—

(aa) Chapter 2A (disguised interest),

, and

• (b) omit paragraph (k).

3

After Chapter 2 insert—

(381A) (1) This Chapter applies where a person is party to an arrangement which produces for the person a return in relation to any amount which is economically equivalent to interest. (2) Income tax is charged on the return if the return is not charged to income tax under or as a result of any other provision of this Act or any other Act. (3) Subsection (2) does not apply to a return that would be charged to income tax under or as a result of another provision but for an exemption. (4) For the purposes of this Chapter a return produced for a person by an arrangement in relation to any amount is “economically equivalent to interest” if (and only if)— (a) it is reasonable to assume that it is a return by reference to the time value of that amount of money, (b) it is at a rate reasonably comparable to what is (in all the circumstances) a commercial rate of interest, and (c) at the relevant time there is no practical likelihood that it will cease to be produced in accordance with the arrangement unless the person by whom it falls to be produced is prevented (by reason of insolvency or otherwise) from producing it. (5) In subsection (4)(c) “the relevant time” means the time when the person becomes party to the arrangement or, if later, when the arrangement begins to produce a return for the person. (6) In this Chapter “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). (381B) Tax is charged under this Chapter on the full amount of the return, or any part of the return, arising in the tax year. (381C) The person liable for any tax charged under this Chapter is the person receiving or entitled to the return or the part of the return. (381D) (1) This section applies if at any time a tax other than income tax (“the other tax”) is charged in relation to a return on which income tax is charged under this Chapter. (2) In order to avoid a double charge to tax in respect of the return, a person may make a claim for one or more consequential adjustments to be made in respect of the other tax. (3) On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable. (4) Consequential adjustments may be made— (a) in respect of any period, (b) by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and (c) despite any time limit imposed by or under any enactment. (381E) (1) This Chapter does not apply in relation to an arrangement that produces a return for a person, in relation to an amount, which is economically equivalent to interest where— (a) the arrangement involves only excluded shares, and (b) no relevant arrangement has been made (by any person) in relation to those excluded shares. (2) For the purposes of this section shares are excluded shares if they are admitted to trading on a regulated market and— (a) they were issued before 6 April 2013, or (b) if issued on or after that date, at the time of issue no arrangements involving only the shares would produce a return, in relation to an amount, which is economically equivalent to interest. (3) In subsection (2) “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)). (4) For the purposes of this section an arrangement is relevant, in relation to excluded shares, where— (a) the arrangement is made on or after 6 April 2013, and (b) it is reasonable to assume that the main purpose, or one of the main purposes, of the arrangement is to secure that arrangements involving only the shares produce a return, in relation to an amount, which is economically equivalent to interest.

Consequential amendments

4

The following amendments are in consequence of the amendments made by paragraphs 2(a) and 3.

TCGA 1992

5

TCGA 1992 is amended as follows.

6

In section 37 (consideration chargeable to tax on income), after subsection (2) insert—

(2A) Subsection (1) is not to be taken as excluding from the consideration so taken into account any money or money's worth which is, or is taken into account in computing, a return on which income tax is charged under Chapter 2A of Part 4 of ITTOIA 2005 (disguised interest) (but see section 381D of that Act).

7

In section 39 (exclusion of expenditure by reference to tax on income), after subsection (3) insert—

(3A) This section is not to be taken as excluding, from the sums allowable under section 38 as a deduction in the computation of the gain, expenditure allowable as a deduction in computing a return on which income tax is charged under Chapter 2A of Part 4 of ITTOIA 2005 (disguised interest) (but see section 381D of that Act).

8

Omit sections 148A to 148C (provision dealing with the capital gains tax consequences of Chapter 12 of Part 4 of ITTOIA 2005).

9

• (1) Section 263A (agreements for sale and repurchase of securities) is amended as follows.

• (2) Before subsection (1) insert—

(A1) For the purposes of this section there is a repo in respect of securities if— (a) a person (“the original owner”) has agreed to sell the securities to another person (“the interim holder”), and (b) the original owner or a person connected with the original owner— (i) is required to buy back the securities by the agreement or a related agreement, (ii) is required to buy back the securities as a result of the exercise of an option acquired under the agreement or a related agreement, or (iii) exercises an option to buy back the securities which was acquired under the agreement or a related agreement.

• (3) In subsection (1), for the words from “falling” to “repos)” substitute “ where under a repo in respect of securities the original owner has transferred the securities to the interim holder ”.

• (4) Omit subsection (5).

10

After section 263A insert—

(263AA) (1) Subsections (2) to (7) apply for the purposes of section 263A. (2) References to buying back securities include references to— (a) buying similar securities, and (b) in the case of a person connected with the person who is the original owner under the repo, buying the securities sold by the original owner or similar securities. (3) Subsection (2) applies even if the person buying the securities has not held them before. (4) References to repurchase or a repurchaser are to be read accordingly. (5) For the purposes of subsection (2) securities are similar if they give their holders— (a) the same rights against the same persons as to capital and distributions, interest and dividends, and (b) the same remedies to enforce those rights. (6) Subsection (5) applies even if there is a difference in— (a) the total nominal amounts of the securities, (b) the form in which they are held, or (c) the manner in which they can be transferred. (7) Agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into). (8) In section 263A and this section “securities” means— (a) shares in a company wherever resident, (b) loan stock or other securities of— (i) the government of the United Kingdom, (ii) a local authority in the United Kingdom, (iii) another public authority in the United Kingdom, (iv) a company resident in the United Kingdom or other body resident in the United Kingdom, or (c) shares, loan stock, stock or other securities issued by— (i) a government, local authority or other public authority of a territory outside the United Kingdom, or (ii) another body of persons not resident in the United Kingdom.

11

• (1) Section 263F (power to modify repo provisions: non-standard repo cases) is amended as follows.

• (2) In subsection (2), for the words from “cases” to the end substitute “ any case mentioned in section 263A(1). ”

• (3) For subsection (9) substitute—

(9) Post-agreement fluctuations” are fluctuations in the value of— (a) securities transferred in pursuance of the original sale, or (b) representative securities, which occur in the period after the making of the agreement for the original sale. (10) “Representative securities” are securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale.

12

In section 263G (power to modify repo provisions: redemption arrangements)—

• (a) in subsection (2), for the words from “cases” to the end substitute “ any case mentioned in section 263A(1). ”, and

• (b) omit subsection (4).

ITTOIA 2005

13

• (1) ITTOIA 2005 is amended as follows.

• (2) Omit Chapter 12 of Part 4 (disposals of futures and options involving guaranteed returns).

• (3) In section 687(2) (application of charge to tax), at the end insert “ or to income falling within Chapter 2A of Part 4 ”.

• (4) In Schedule 1 (consequential amendments), omit paragraph 435.

• (5) In Schedule 2 (transitionals and savings), omit paragraph 95.

• (6) In Schedule 4 (abbreviations and defined expressions), omit the entry for “future (in Chapter 12 of Part 4)”.

FA 2007

14

In Schedule 14 of FA 2007 (sale and repurchase of securities: minor and consequential amendments), omit paragraphs 22 and 23.

ITA 2007

15

• (1) ITA 2007 is amended as follows.

• (2) Omit the following provisions (which deal with deemed manufactured payments and repos)—

• (a) section 596(5),

• (b) sections 597 to 605,

• (c) section 606(1) to (7) and (9) and (10), and

• (d) sections 607 to 614.

• (3) In Schedule 1 (minor and consequential amendments), omit paragraphs 310, 543 and 544.

• (4) In Schedule 2 (transitionals and savings), omit paragraphs 112 to 124.

• (5) In Schedule 4 (index of defined expressions)—

• (a) omit the entries for—

company UK REIT (in Chapter 4 of Part 11)

,

distribution (in Chapter 4 of Part 11)

,

gross amount (in Chapter 4 of Part 11)

,

group (in Chapter 4 of Part 11)

,

group UK REIT (in Chapter 4 of Part 11)

,

Manufactured dividend (in Chapter 4 of Part 11)

,

principal company (in Chapter 4 of Part 11)

,

property rental business (in Chapter 4 of Part 11)

, and

“the repurchase price of the securities (in Chapter 4 of Part 11)

, and

• (b) in the entry for “distribution (except in Chapter 4 of Part 11)”, omit “(except in Chapter 4 of Part 11)”.

CTA 2010

16

In Schedule 1 of CTA 2010 (minor and consequential amendments), omit paragraphs 540 to 543 and 544(a), (c) and (d).

FA 2010

17

In Schedule 6 of FA 2010 (charities etc), omit paragraph 21(4).

Commencement and transitional provision

18

• (1) Subject to sub-paragraph (2), the amendments made by this Schedule have effect for the tax year 2013-2014 and subsequent tax years.

• (2) Chapter 2A of Part 4 of ITTOIA 2005 does not apply in relation to an arrangement that produces a return for a person, in relation to an amount, which is economically equivalent to interest if—

• (a) the person became party to the arrangement before 6 April 2013, and

• (b) none of the provisions repealed by paragraphs 13(2) and 15(2) applied in relation to the arrangement before that date.

SCHEDULE 13

Amendments of Part 14 of CTA 2010

1

• (1) Part 14 of CTA 2010 (change in company ownership) is amended as follows.

• (2) In section 672 (overview of Part)—

• (a) after subsection (3) insert—

(3A) Chapter 5A restricts relief for certain non-trading deficits and losses where there is a change of ownership of a shell company.

;

• (b) in subsection (7), omit the “and” at the end of paragraph (b) and after that paragraph insert—

(ba) shell company”, see section 705A, and

.

• (3) After Chapter 5 insert—

(705A) (1) This Chapter applies where there is a change in the ownership of a shell company. (2) In this Chapter— - “the change in ownership” means the change in ownership mentioned in subsection (1); - “the company” means the company mentioned in subsection (1); - “shell company” means a company that— 1. is not carrying on a trade, 2. is not a company with investment business, and 3. is not carrying on a UK property business. (705B) (1) This section applies for the purposes of this Chapter. (2) The accounting period in which the change in ownership occurs (“the actual accounting period”) is treated as two separate accounting periods (“notional accounting periods”), the first ending with the change and the second consisting of the remainder of the period. (3) The amounts for the actual accounting period in column 1 of the table in section 705F(2) are apportioned to the two notional accounting periods in accordance with section 705F. (4) In this Chapter “the actual accounting period” and “notional accounting periods” have the same meaning as in this section. (705C) (1) This section has effect for the purpose of restricting the debits to be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of the company's loan relationships. (2) The debits to be brought into account for the purposes of Part 5 of CTA 2009 for— (a) the accounting period beginning immediately after the change in ownership, or (b) any subsequent accounting period, do not include relevant non-trading debits so far as amount A exceeds amount B. (3) Amount A is the sum of— (a) the amount of those relevant non-trading debits, and (b) the amount of any relevant non-trading debits which have been brought into account for the purposes of that Part for any previous accounting period ending after the change in ownership. (4) Amount B is the amount of the taxable total profits of the accounting period ending with the change in ownership. (5) For the meaning of “relevant non-trading debit”, see section 730. (705D) (1) This section has effect for the purpose of restricting the carry forward of a non-trading deficit from the company's loan relationships under Part 5 of CTA 2009 (loan relationships). (2) Subsection (3) applies if the non-trading deficit in column 1 of row 4 of the table in section 705F(2) is apportioned in accordance with section 705F to the first notional accounting period. (3) None of that non-trading deficit may be carried forward to— (a) the accounting period beginning immediately after the change in ownership, or (b) any subsequent accounting period. (705E) (1) This section has effect for the purpose of restricting relief under section 753 of CTA 2009 (treatment of non-trading losses) in respect of a non-trading loss on intangible fixed assets. (2) Relief under section 753 of CTA 2009 against the total profits of the same accounting period is available only in relation to each of the notional accounting periods considered separately. (3) A non-trading loss on intangible fixed assets for an accounting period beginning before the change in ownership may not be— (a) carried forward under section 753(3) of that Act to an accounting period ending after the change in ownership, or (b) treated under that section as if it were a non-trading debit of that period. (705F) (1) This section applies for the purposes of this Chapter. (2) Any amount for the actual accounting period in column 1 of the following table is to be apportioned to the two notional accounting periods in accordance with the corresponding method of apportionment in column 2 of the table.

Row	1. Amount to be apportioned	2. Method of apportionment
1	The amount for the actual accounting period of any adjusted non-trading profits from the company's loan relationships (see section 705G(2))).	Apportion the amount in column 1 on a time basis according to the respective lengths of the two notional accounting periods.
2	The amount for the actual accounting period of any adjusted non-trading deficit from the company's loan relationships (see section 705G(3)).	Apportion the amount in column 1 on a time basis according to the respective lengths of the two notional accounting periods.
3	The amount of any non-trading debit that falls to be brought into account for the actual accounting period for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of any debtor relationship of the company.	1If condition A in section 705G(4) is met, apportion the amount in column 1 by reference to the time of accrual of the amount to which the debit relates.2If condition B in section 705G(5) is met, apportion the amount in column 1 to the first notional accounting period.
4	The amount of any non-trading deficit carried forward to the actual accounting period under section 457(1) of CTA 2009 (basic rule for deficits: carry forward to accounting periods after deficit period).	Apportion the whole of the amount in column 1 to the first notional accounting period.
5	The amount of any non-trading credits or debits in respect of intangible fixed assets that fall to be brought into account for the actual accounting period under section 751 of CTA 2009 (non-trading gains and losses), but excluding any amount within column 1 of row 6.	Apportion to each notional accounting period the credits or debits that would fall to be brought into account in that period if it were a period of account for which accounts were drawn up in accordance with generally accepted accounting practice.
6	The amount of any non-trading loss on intangible fixed assets carried forward to the actual accounting period under section 753(3) of CTA 2009 and treated under that section as if it were a non-trading debit of that period.	Apportion the whole of the amount in column 1 to the first notional accounting period.
7	Any other amounts by reference to which the profits or losses of the actual accounting period would (but for this Chapter) be calculated.	Apportion the amount in column 1 on a time basis according to the respective lengths of the two notional accounting periods.

(3) If any method of apportionment in column 2 of the table in subsection (2) would work unjustly or unreasonably in any case, such other method is to be used as is just and reasonable. (4) For the meaning of certain expressions used in this section, see section 705G. (705G) (1) This section applies for the purposes of the table in section 705F(2). (2) For the purposes of column 1 of row 1 of the table, the amount for the actual accounting period of any adjusted non-trading profits from the company's loan relationships is the amount which would be the amount of the profits from those relationships chargeable under section 299 of CTA 2009 (charge to tax on non-trading profits) if, in calculating that amount, amounts for that period within column 1 of row 3 or 4 of the table were disregarded. (3) For the purposes of column 1 of row 2 of the table, the amount for the actual accounting period of any adjusted non-trading deficit from the company's loan relationships is the amount which would be the amount of the non-trading deficit from those relationships if, in calculating that amount, amounts for that period within column 1 of row 3 or 4 of the table were disregarded. (4) Condition A is that— (a) the amount in column 1 of row 3 of the table is determined on an amortised cost basis of accounting, and (b) none of the following provisions applies— (i) section 373 of CTA 2009 (late interest treated as not accruing until paid in some cases), (ii) section 407 of that Act (postponement until redemption of debits for connected companies' deeply discounted securities), or (iii) section 409 of that Act (postponement until redemption of debits for close companies' deeply discounted securities). (5) Condition B is that— (a) the amount in column 1 of row 3 of the table is determined on an amortised cost basis of accounting, and (b) any of the provisions mentioned in subsection (4)(b) applies.

• (4) In section 721 (when things other than share capital may be taken into account: Chapters 2 to 5)—

• (a) in the heading, for “5” substitute “ 5A ”;

• (b) in subsection (1), for “5” substitute “ 5A ”;

• (c) in subsection (4), for “or 5” substitute “ , 5 or 5A ”.

• (5) In section 725 (provision applying for the purposes of Chapters 2 to 5)—

• (a) in the heading, for “5” substitute “ 5A ”;

• (b) in subsection (1), for “5” substitute “ 5A ”.

• (6) In section 730 (meaning of “relevant non-trading debit”)—

• (a) in subsection (1), for “and 696” substitute “ , 696 and 705C ”;

• (b) in subsections (3)(c), (4)(c) and (5)(b) for “or 696” substitute “ , 696 or 705C ”.

Consequential amendments

2

In Schedule 4 to that Act (index of defined expressions) insert at the appropriate places—

the actual accounting period (in Chapter 5A of Part 14)	section 705B(4)
the change in ownership (in Chapter 5A of Part 14)	section 705A(2)
---	---
the company (in Chapter 5A of Part 14)	section 705A(2)
---	---
notional accounting periods (in Chapter 5A of Part 14)	section 705B(4)
---	---
shell company (in Chapter 5A of Part 14)	section 705A(2)
---	---

.

Commencement

3

The amendments made by this Schedule have effect in relation to changes in ownership that occur on or after 20 March 2013.

SCHEDULE 14

New Part 14A of CTA 2010

1

After Part 14 of CTA 2010 insert—