Finance Act 2013

• “the separate programme trade”, in relation to a television production company, has the same meaning as in Chapter 2 of Part 15A of CTA 2009 (see section 1216B),
• “the separate video game trade”, in relation to a video games development company, has the same meaning as in Chapter 2 of Part 15B of CTA 2009 (see section 1217B),
• “television production company” has the same meaning as in Part 15A of CTA 2009 (see section 1216AE), and
• “video games development company” has the same meaning as in Part 15B of CTA 2009 (see section 1217AB).

19

After section 357CH insert—

(357CHA) (1) There is a shortfall in qualifying expenditure in relation to the separate programme trade of a television production company or (as the case may be) the separate video game trade of a video games development company for a relevant accounting period if the actual qualifying expenditure of the trade for the accounting period (as adjusted under subsections (8) to (11)) is less than 75% of the average amount of qualifying expenditure. (2) The amount that is to be added to the actual qualifying expenditure for the purposes of section 357CG(5A) is an amount equal to the difference between— (a) 75% of the average amount of qualifying expenditure, and (b) the actual qualifying expenditure, as adjusted under subsections (8) to (11). (3) In this section— (a) the “actual qualifying expenditure” of a trade of a company for an accounting period is the amount of qualifying expenditure that (ignoring section 357CG(5A)) is brought into account in calculating the profits of the trade for the accounting period, and (b) the following terms have the meaning given by section 357CG(6)— - “qualifying expenditure”, - “relevant accounting period”, - “the separate programme trade”, - “the separate video game trade”, - “television production company”, - “video games development company”. (4) The average amount of qualifying expenditure is— $$E N × 365$where—E is the amount of qualifying expenditure that—has been incurred by the company during the relevant period, andhas been brought into account in calculating the profits of the trade for any accounting period ending before the first relevant accounting period, andN is the number of days in the relevant period.$ (5) The relevant period is the shorter of— (a) the period of 4 years ending immediately before the first relevant accounting period, and (b) the period beginning with the day on which the company begins to carry on the trade and ending immediately before the first relevant accounting period. (6) For a relevant accounting period of less than 12 months, the average amount of qualifying expenditure is proportionately reduced. (7) Subsections (8) to (11) apply for the purposes of determining— (a) whether there is a shortfall in qualifying expenditure for a relevant accounting period, and (b) if there is such a shortfall, the amount to be added by virtue of subsection (2). (8) If the amount of the actual qualifying expenditure for a relevant accounting period is greater than the average amount of qualifying expenditure, the difference between the two amounts is to be added to the actual qualifying expenditure for the next relevant accounting period. (9) If— (a) there is not a shortfall in qualifying expenditure for a relevant accounting period, but (b) in the absence of any additional amount, there would be a shortfall in qualifying expenditure for that accounting period, the remaining portion of the additional amount is to be added to the actual qualifying expenditure for the next relevant accounting period. (10) For the purposes of this section— - “additional amount”, in relation to a relevant accounting period, means any amount added to the actual qualifying expenditure for that accounting period by virtue of subsection (8), (9) or (11), and - “the remaining portion” of an additional amount is so much of that amount as exceeds the difference between— 1. the actual qualifying expenditure for the relevant accounting period in the absence of the additional amount, and 2. 75% of the average amount of qualifying expenditure. (11) If— (a) there is not a shortfall in qualifying expenditure for a relevant accounting period, and (b) there would not be a shortfall in qualifying expenditure for that accounting period in the absence of any additional amount, the additional amount is to be added to the actual qualifying expenditure for the next relevant accounting period (in addition to any additional amount so added by virtue of subsection (8)).

20

• (1) Section 357CK (deductions that are not routine deductions) is amended as follows.

• (2) In subsection (1), at the end insert—

(e) subsection (7A) (television production expenditure), (f) subsection (7B) (video games development expenditure).

• (3) After subsection (7) insert—

(7A) Head 5 is— (a) the amount of any qualifying expenditure on a television programme for which an additional deduction for the accounting period is obtained by the company under Part 15A of CTA 2009, and (b) the amount of that additional deduction. (7B) Head 6 is— (a) the amount of any qualifying expenditure on a video game for which an additional deduction for the accounting period is obtained by the company under Part 15B of CTA 2009, and (b) the amount of that additional deduction.

Consequential renumbering

21

• (1) Sections 1217 and 1218 of CTA 2009 are renumbered as follows—

• (a) section 1217 becomes section 1218A, and

• (b) section 1218 becomes section 1218B.

• (2) In the following provisions of CTA 2009, for “section 1218” substitute “ section 1218B ”

• section 985(3),

• section 999(4),

• section 1000(3),

• section 1013(3), and

• section 1021(3).

• (3) In Schedule 4 to CTA 2009—

• (a) in the entry for “company with investment business (in Part 16)”, for “section 1218(1) and (2)” substitute “ section 1218B(1) and (2) ”, and

• (b) in the entry for “investment business in a company (in Part 16)”, for “section 1218(3)” substitute “ section 1218B(3) ”.

• (4) In section 18 of CAA 2001, for “section 1218” substitute “ section 1218B ”.

Commencement

22

• (1) The amendments made by this Schedule come into force in accordance with provision contained in an order made by the Treasury.

• (2) An order under sub-paragraph (1)—

• (a) may make different provision for different purposes;

• (b) may provide for any of those amendments to be treated as having come into force on a day earlier than the day on which the order is made or this Act is passed;

• (c) may make such adaptations of provisions of this Schedule brought into force as appear to be necessary or expedient in consequence of other provisions of this Act not yet having come into force.

23

• (1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after the relevant day.

• (2) “The relevant day” is—

• (a) in the case of amendments relating to Part 15A of CTA 2009, 1 April 2013, and

• (b) in the case of amendments relating to Part 15B of that Act, the day specified by order for the purposes of paragraph 3 of Schedule 17.

• (3) For provision about the case where a company has an accounting period beginning before the relevant day and ending on or after that day, see paragraph 3(3) of Schedule 16 or (as the case may be) paragraph 3(4) of Schedule 17.

SCHEDULE 19

1

Part 12 of CTA 2010 (real estate investment trusts) is amended as follows.

2

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

• (2) For subsection (1) substitute—

(1) In the case of a group UK REIT, the condition in this section is met in relation to an accounting period if— (a) so much of the group's UK profits arising in the period as are UK REIT investment profits (see section 549A), and (b) at least 90% of the rest of the group's UK profits arising in the period, are distributed by the principal company of the group on or before the filing date for the principal company's tax return for the period (see paragraph 14 of Schedule 18 to FA 1998).

• (3) For subsection (4) substitute—

(4) In the case of a company UK REIT, the condition in this section is met in relation to an accounting period if— (a) so much of the profits of the company's property rental business arising in the period as are UK REIT investment profits (see section 549A), and (b) at least 90% of the rest of the profits of the company's property rental business arising in the period, are distributed on or before the filing date for the company's tax return for the period (see paragraph 14 of Schedule 18 to FA 1998). (4A) For the purposes of subsection (4) profits of the company's property rental business are to be calculated in accordance with section 599.

3

• (1) Section 530A (condition as to distribution of profits: increase in profits after delivery of tax return) is amended as follows.

• (2) In subsection (2) for “530(1)(c)” substitute “ 530(1) ”.

• (3) In subsection (6) for “530(4)(b)” substitute “ 530(4) ”.

• (4) After subsection (9) insert—

(10) This section cannot be relied upon to satisfy the requirement of section 530(1)(a) or (4)(a).

4

• (1) Section 531 (conditions as to balance of business) is amended as follows.

• (2) After subsection (4) insert—

(4A) In the case of a group, for the purposes of subsections (1) and (2) a distribution falling within section 549A(6) or (8) received by a member of the group is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(5). (4B) In the case of a company, for the purposes of subsections (1) and (3) a distribution falling within section 549A(6) or (8) received by the company is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(5).

• (3) In subsection (5)(b) after “cash” insert “ or relevant UK REIT shares ”.

• (4) In subsection (6)(b) after “cash” insert “ and relevant UK REIT shares ”.

• (5) After subsection (8) insert—

(9) In this section “relevant UK REIT shares” means— (a) in the case of a group UK REIT, shares held by a member of the group in the principal company of another group UK REIT or in a company UK REIT, and (b) in the case of a company UK REIT, shares held by the company in the principal company of a group UK REIT or in another company UK REIT.

5

• (1) Section 548 (distributions: liability to tax) is amended as follows.

• (2) In subsection (5) after “2009)” insert “ so far as the distribution is a distribution of exempt profits ”.

• (3) In subsection (6) after “2005)” insert “ so far as the distribution is a distribution of exempt profits ”.

• (4) After subsection (8) insert—

(9) This section does not apply in relation to a distribution falling within section 549A(6) or (8) so far as the distribution is a distribution of exempt profits. (10) For the purposes of this Chapter a distribution is a “distribution of exempt profits” so far as the distribution falls within section 550(2)(a), (aa), (c) or (d). (11) In applying section 550 for the purposes of subsection (10) in relation to a distribution made by the principal company of a post-cessation group or by a post-cessation company— (a) subsection (1)(a) is to be read as referring to the principal company of the post-cessation group, or (as the case may be) (b) subsection (1)(b) is to be read as referring to the post-cessation company.

6

• (1) Section 549 (distributions: supplementary) is amended as follows.

• (2) In subsection (2A) after “shareholder” insert “ so far as they are distributions of exempt profits ”.

• (3) After subsection (3) insert—

(3A) Relevant distribution” does not include a distribution falling within section 549A(6) or (8) so far as the distribution is a distribution of exempt profits.

• (4) In subsection (4) after the first “shareholder” insert “ (so far as they are distributions of exempt profits) ”.

7

After section 549 insert—

(549A) (1) If a company receives a distribution falling within subsection (6) or (8), the distribution is to be treated as profits of a property rental business carried on by the company in the United Kingdom. Such profits are referred to in this Part as “UK REIT investment profits”. (2) The property rental business mentioned in subsection (1) is to be treated as separate from any other property rental business of the company. (3) References to profits of property rental business or UK property rental business are to be read as including UK REIT investment profits accordingly, including where the profits referred to are otherwise profits calculated in accordance with international accounting standards or section 599. (4) Section 549(2) and (2A) applies in relation to distributions falling within subsection (6) or (8) as it applies in relation to relevant distributions. (5) Subsection (1) applies in relation to a distribution only so far as the distribution is a distribution of exempt profits. This is subject to section 531(4A) and (4B). (6) A distribution falls within this subsection if— (a) it is made by the principal company of a group UK REIT to a shareholder of the company which is— (i) a member of another group UK REIT, or (ii) a company UK REIT, and (b) it is a distribution of amounts shown in the financial statements under section 532(2)(a) (statement of group's property rental business) as— (i) profits or gains (or both) of UK members of the group, or (ii) profits or gains (or both) of UK property rental business of non-UK members of the group. (7) In subsection (6) the reference to a distribution made by the principal company includes a reference to a distribution made by the principal company of the post-cessation group. (8) A distribution falls within this subsection if— (a) it is made by a company UK REIT to a shareholder of the company which is— (i) a member of a group UK REIT, or (ii) another company UK REIT, and (b) it is a distribution in respect of profits or gains (or both) of property rental business of the company. (9) In subsection (8) the reference to a distribution made by a company UK REIT includes a reference to a distribution made by the post-cessation company.

8

In section 550 (attribution of distributions) in subsection (2)—

• (a) for paragraph (a) substitute—

(a) first, to distributions in satisfaction of the requirement of section 530(1)(a) or 530(4)(a) (as the case may be), (aa) second, to distributions in satisfaction of the requirement of section 530(1)(b) or 530(4)(b) (as the case may be),

,

• (b) in paragraph (b) for “second” substitute “ third ”,

• (c) in paragraph (c) for “third” substitute “ fourth ”,

• (d) in paragraph (d) for “fourth” substitute “ fifth ”, and

• (e) in paragraph (e) for “fifth” substitute “ sixth ”.

9

In section 588 (joint ventures: effect of notice under section 586) after subsection (6) insert—

(7) Subsections (3) to (6) apply (in particular) for the purpose of interpreting section 549A(6)(a)(i) and (8)(a)(i).

10

In section 589 (joint ventures: effect of notice under section 587) after subsection (6) insert—

(7) Subsections (3) to (6) apply (in particular) for the purpose of interpreting section 549A(6)(a)(i) and (8)(a)(i).

11

In section 605 (property rental business: exclusion of business producing listed income) after subsection (1) insert—

(1A) But see section 549A which treats income falling within class 7 of the table as profits of property rental business.

12

In Chapter 18 of Part 15 of ITA 2007 (deduction of income tax at source) in sections 973 and 974 (which relate to distributions made by UK REITs) after subsection (6) insert—

(7) In relation to references to profits of property rental business, see section 549A of CTA 2010.

13

• (1) The amendments made by paragraph 4(3) to (5) above have effect for accounting periods beginning on or after the day on which this Act is passed.

• (2) Subject to what follows, the amendments made by paragraphs 5 to 7 above have effect in relation to distributions received on or after the day on which this Act is passed.

• (3) A distribution received by a member of a group UK REIT does not fall within section 549A(6) or (8) of CTA 2010 if it is received in an accounting period of the principal company of the group beginning before the day on which this Act is passed.

• (4) A distribution received by a company UK REIT does not fall within section 549A(6) or (8) of CTA 2010 if it is received in an accounting period of the company beginning before the day on which this Act is passed.

SCHEDULE 20

1

CTA 2010 is amended in accordance with paragraphs 2 to 4.

2

In section 1(4) (overview of Act), after paragraph (j) insert—

(ja) tax mismatch schemes (see Part 21BA),

.

3

After Part 21B insert—

(938O) (1) This section applies to a company that is (at any time) a party to a tax mismatch scheme. (2) No scheme loss or profit made by the company in any accounting period in relation to the scheme is to be brought into account as a debit or credit for the purposes of Part 5 of CTA 2009 (loan relationships) or Part 7 of that Act (derivative contracts). (3) An amount that would, apart from this section, be brought into account for the purposes of Part 5 or 7 of that Act as respects any matter— (a) is treated, for the purposes of section 464(1) or (as the case may be) 699(1) of that Act (priority of Part 5 or 7 for corporation tax purposes), as if it were so brought into account, and (b) accordingly, may not be brought into account for any other corporation tax purposes as respects that matter. (938P) (1) A scheme is a tax mismatch scheme if condition A or B is met. (2) Condition A is that, at the time the scheme is entered into, there is no practical likelihood that the scheme will fail to secure a relevant tax advantage of £2 million or more. (3) The Treasury may by order substitute a higher amount for the amount for the time being specified in subsection (2). (4) Any such substitution is to have effect in relation to schemes entered into on or after the day on which the order comes into force. (5) Condition B is that— (a) the purpose, or one of the main purposes, of the company in entering into the scheme is to obtain the chance of securing a relevant tax advantage (of any amount), and (b) at the time the scheme is entered into— (i) there is no chance that the scheme will secure a relevant tax disadvantage, or (ii) there is such a chance, but the expected value of the scheme is nevertheless a positive amount. (6) If, at the time the company enters into the scheme, there are chances that the scheme would, if carried out, secure different relevant tax advantages or disadvantages in different circumstances, the amounts and probabilities of each must be taken into account in determining the expected value of the scheme. (7) In determining whether condition A or B is met, it is to be assumed that the parties to the scheme carry it out. (8) Where, at the time the scheme is entered into, the length of the scheme period is uncertain, condition A or B is met if it would be met on any reasonable assumption as to the length of the scheme period. (9) In determining whether condition A or B is met, section 938O (scheme profits and losses to be left out of account) is to be disregarded. (938Q) (1) A loss or profit made by a company in an accounting period is a “scheme loss” or “scheme profit” in relation to a tax mismatch scheme if the loss or profit— (a) arises from a transaction, or series of transactions, that forms part of the scheme, (b) is, or is comprised in, an amount that is brought into account as a debit or credit for the purposes of Part 5 or 7 of CTA 2009, and (c) meets the first or second asymmetry condition. (2) The first asymmetry condition is that the loss or profit affects the amount of any relevant tax advantage secured by the scheme. (3) Where, at the end of the accounting period— (a) it is not certain whether the scheme will secure a relevant tax advantage, or (b) it is not certain what the amount of the relevant tax advantage secured by the scheme will be, a loss or profit is to be treated as meeting the first asymmetry condition if, at that time, there is a chance that the scheme will secure a relevant tax advantage and that the loss or profit will affect its amount. (4) Where— (a) a loss or profit meets the conditions in subsection (1)(a) and (b), and (b) a part, but not the whole, of the loss or profit meets the first asymmetry condition, only that part of the loss or profit is a “scheme loss” or “scheme profit”. (5) The second asymmetry condition is that the loss or profit— (a) does not meet the first asymmetry condition, but (b) arises from a transaction, or series of transactions, that might (if events had turned out differently) have given rise to a loss or profit that would have done so. (6) References in this section to a loss or profit include a loss or profit arising in respect of interest or expenses. (7) In determining whether the condition in subsection (1)(b) or the first or second asymmetry condition is met, section 938O (scheme profits and losses to be left out of account) is to be disregarded. (938R) (1) In this Part “relevant tax advantage”, in relation to a scheme, means an economic profit that— (a) is made by the company over the scheme period, (b) meets the condition in subsection (3), and (c) is not negligible. (2) In this Part “relevant tax disadvantage”, in relation to a scheme, means an economic loss that— (a) is made by the company over the scheme period, (b) meets the condition in subsection (3), and (c) is not negligible. (3) The condition is that the economic profit or loss arises as a result of asymmetries in the way that the company brings, or does not bring, amounts into account as debits and credits for the purposes of Part 5 or 7 of CTA 2009. (4) A reference in this section to asymmetries includes, in particular— (a) asymmetries relating to quantification, and (b) asymmetries relating to timing. (5) In this section— (a) a reference to an economic profit includes an increase in an economic profit and a decrease in an economic loss, and (b) a reference to an economic loss includes an increase in an economic loss and a decrease in an economic profit. (6) In this Part “the scheme period”, in relation to a scheme, means the period during which the scheme has effect. (938S) (1) An economic profit or loss is to be computed for the purposes of this Part taking into account, in particular— (a) profits and losses made as a result of the operation of the Corporation Tax Acts, and (b) any adjustments required to reflect the time value of money. (2) In determining for the purposes of this Part the amount of an economic profit or loss made by the company over the scheme period, profits and losses made by the company are to be taken into account only to the extent that they are attributable to times at which the company is a party to the scheme. (938T) (1) This section applies for the purpose of determining whether a scheme will, or might, secure a relevant tax advantage. (2) The economic profits and losses made by the company over the scheme period must be calculated on the assumption that the company— (a) obtains the full tax benefit of any loss made by the company in relation to a loan relationship or a derivative contract during the period, and (b) incurs the full tax cost of any profit made by the company in relation to a loan relationship or a derivative contract during the period. (3) The “full tax benefit” of a loss is the reduction in the liability of the company to corporation tax that would result if— (a) the loss were brought into account as a debit or as a reduction in a credit for the purposes of Part 5 or 7 of CTA 2009, and (b) the company's profits chargeable to corporation tax, disregarding the loss, were equal to the debit (or the reduction in the credit) determined by reference to the loss. (4) The “full tax cost” of a profit is the increase in the liability of the company to corporation tax that would result if— (a) the profit were brought into account as a credit or as a reduction in a debit for the purposes of Part 5 or 7 of CTA 2009, and (b) the company's profits chargeable to corporation tax, disregarding the profit, were nil. (938U) In this Part “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions. (938V) For the purposes of this Part the following provisions are to be treated as of no effect— (a) section 441 of CTA 2009 (loan relationships for unallowable purposes); (b) section 690 of that Act (derivative contracts for unallowable purposes); (c) Part 6 of TIOPA 2010 (tax arbitrage); (d) Part 7 of that Act (tax treatment of financing costs and income).

4

In Schedule 4 (index of defined expressions), at the appropriate places insert—

economic loss (in Part 21BA)	section 938S
economic profit (in Part 21BA)	section 938S
---	---
relevant tax advantage (in Part 21BA)	section 938R
---	---
relevant tax disadvantage (in Part 21BA)	section 938R
---	---
scheme (in Part 21BA)	section 938U
---	---
scheme loss (in Part 21BA)	section 938Q
---	---
the scheme period (in Part 21BA)	section 938R
---	---
scheme profit (in Part 21BA)	section 938Q
---	---

.

“a tax mismatch scheme (in Part 21BA)	section 938P

.

5

In section 231(8) of TIOPA 2010 (tax arbitrage: overview), for the words from “section” to the end substitute “ sections 938N and 938V of CTA 2010 (this Part treated as of no effect for the purposes of Parts 21B and 21BA of CTA 2010 (group mismatch and tax mismatch schemes)). ”

6

• (1) The amendments made by this Schedule have effect in relation to schemes entered into at any time (including any time before the commencement date).

• (2) But section 938O in Part 21BA of CTA 2010 (as inserted by paragraph 3 of this Schedule) does not apply to—

• (a) scheme losses or profits that relate to a time before the commencement date, or

• (b) scheme profits that relate to a time on or after that date but are made in relation to a scheme entered into before that date.

• (3) In this paragraph “the commencement date” means 5 December 2012.

SCHEDULE 21

Introductory

1

Chapter 9 of Part 13 of CTA 2010 (community amateur sports clubs) is amended as follows.

Meaning of “open to the whole community”

2

• (1) Section 659 (meaning of “open to the whole community”) is amended as follows.

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

(c) the costs associated with membership of the club for any year do not represent a significant obstacle to membership of the club, use of its facilities or full participation in its activities (see subsection (2A)).

• (3) After subsection (2) insert—

(2A) For the purposes of subsection (1)(c) the costs associated with membership of a club for any year represent a significant obstacle to membership of the club, use of its facilities or full participation in its activities if— (a) those costs exceed the amount specified for the year for the purposes of this subsection in regulations made by the Treasury, and (b) the club has not made such arrangements as are necessary to secure that those costs do not represent such an obstacle. (2B) The Treasury may by regulations make provision supplementing subsection (2A), including— (a) provision as to what constitutes full participation in a club's activities; (b) provision as to costs that are, or are not, to be regarded as the costs associated with membership of a club; (c) provision about calculating the amount of the costs associated with membership of a club for any year. (2C) The provision that may be made by regulations under this section includes— (a) different provision for different purposes, and (b) provision having effect in relation to times before the regulations are made. (2D) Section 1171(4) (orders and regulations subject to negative resolution procedure) does not apply to any regulations made under this section if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.

• (4) For subsection (3) substitute—

(3) A club is not prevented from being “open to the whole community” for the purposes of section 658 merely because it charges different fees for different descriptions of person.

Meaning of “organised on an amateur basis”

3

• (1) Section 660 (meaning of “organised on an amateur basis”) is amended as follows.

• (2) In subsection (1), omit the “and” after paragraph (b) and after that paragraph insert—

(ba) it does not exceed the limit on paid players (see subsection (5A)), and

.

• (3) In subsection (4)(g)—

• (a) after “travel” insert “ or subsistence ”, and

• (b) for “travelling to away matches” substitute “ in connection with away matches ”.

• (4) After subsection (4) insert—

(4A) In subsection (4)(g) “subsistence expenses” means expenses on food, drink and temporary living accommodation.

• (5) After subsection (5) insert—

(5A) A club does not exceed the limit on paid players for the purposes of subsection (1) if— (a) the number of persons paid to play for the club does not at any time exceed the specified maximum, (b) the number of such persons in any year does not exceed the specified maximum for that year, (c) the amount paid to any such person in any year in respect of activities undertaken for the club does not exceed the specified maximum for that year, and (d) the total amount paid to such persons in any year in respect of activities undertaken for the club does not exceed the specified maximum for that year. “Specified” means specified in regulations made by the Treasury. (5B) The Treasury may by regulations make provision supplementing subsection (5A), including— (a) provision as when a person is, or is not, to be regarded as a person paid to play for a club, and (b) provision about calculating for the purposes of subsection (5A) the amount paid to such a person.

• (6) After subsection (7) insert—

(8) The Treasury may by regulations make further provision as to when a club is “organised on an amateur basis” for the purposes of section 658. (9) The provision that may be made by regulations under subsection (8) includes— (a) provision as to the conditions which a club must meet in order to be “organised on an amateur basis” for the purposes of section 658; (b) provision as to what are, or are not, to be regarded as “ordinary benefits of an amateur sports club” for the purposes of subsection (1); (c) provision about persons who are, or are not, to be regarded as guests of a member of a club for the purposes of subsection (1). (10) Regulations made under subsection (8) may amend this section or make other amendments to this Chapter. (11) A statutory instrument that contains (whether alone or with other provisions) regulations under subsection (8) that amend this section or make other amendments to this Chapter may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

• (7) After subsection (11) insert—

(12) The provision that may be made by regulations under this section includes— (a) different provision for different purposes, and (b) provision having effect in relation to times before the regulations are made. (13) Section 1171(4) (orders and regulations subject to negative resolution procedure) does not apply to any regulations made under this section if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.

Clubs consisting mainly of social members

4

In section 658 (meaning of “community amateur sports club”), in subsection (1A)(c), for “section 661” substitute “ sections 660A and 661 ”.

5

After section 660 insert—

(660A) (1) A club is not to be regarded as a club that has as its main purpose the provision of facilities for, and the promotion of participation in, one or more eligible sports if the percentage of its members who are social members exceeds the percentage specified for the purposes of this section in regulations made by the Treasury. (2) A member is a “social member” for the purposes of this section if the member does not participate, or participates only occasionally, in the sporting activities of the club. (3) The Treasury may by regulations make provision— (a) as to activities that are, or are not, to be regarded as “sporting activities” of a club; (b) as to the circumstances in which a member of a club is, or is not, to be regarded as participating in the sporting activities of the club; (c) as to the circumstances in which a member of a club is, or is not, to be regarded as participating only occasionally in those activities. (4) The provision that may be made by regulations under this section includes— (a) different provision for different purposes, and (b) provision having effect in relation to times before the regulations are made. (5) Section 1171(4) (orders and regulations subject to negative resolution procedure) does not apply to any regulations made under this section if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.

Exemptions

6

In section 662 (exemption from corporation tax for UK trading income), after subsection (5) insert—

(5A) The Treasury may by order amend the figure for the time being specified as the relevant threshold in subsection (5)(a). (5B) A statutory instrument containing an order under subsection (5A) that amends that figure so as to substitute a lower figure may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

7

In section 663 (exemption from corporation tax for UK property income), after subsection (5) insert—

(5A) The Treasury may by order amend the figure for the time being specified as the relevant threshold in subsection (5)(a). (5B) A statutory instrument containing an order under subsection (5A) that amends that figure so as to substitute a lower figure may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

Power to specify income condition

8

• (1) The Treasury may by regulations provide that a club is not entitled to be registered as a community amateur sports club under section 658 of CTA 2010 unless it meets one or more conditions relating to income received by the club.

• (2) The provision that may be made by regulations under this paragraph includes, in particular—

• (a) provision restricting the amount of income, or income of a specified description, that a community amateur sports club may receive for a period, and

• (b) provision prohibiting such a club from receiving income of a specified description.

“Specified” means specified in the regulations.

• (3) Regulations made under this paragraph may—

• (a) amend Chapter 9 of Part 13 of CTA 2010,

• (b) make different provision for different purposes, and

• (c) contain provision having effect in relation to times before the regulations are made or this Act is passed.

• (4) A statutory instrument that contains (whether alone or with other provisions) regulations under this paragraph may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

Commencement

9

• (1) Any power conferred on the Treasury under or by virtue of this Schedule to make regulations or an order comes into force on the day on which this Act is passed (and may be exercised to make provision having effect in relation to times before this Act is passed).

• (2) So far as not already brought into force by virtue of sub-paragraph (1), the amendments made by this Schedule come into force in accordance with provision contained in an order made by the Treasury.

• (3) An order made under sub-paragraph (2) may—

• (a) provide for such amendments to be treated as having come into force on a date not earlier than 1 April 2010;

• (b) make transitional provision or savings.

10

• (1) In a case where a club that was registered as a community amateur sports club before the day on which this Act is passed ceases to be entitled to be registered as such by virtue of this Schedule, an officer of Revenue and Customs may not cancel the club's registration with effect from a date earlier than that day.

• (2) But sub-paragraph (1) does not prevent the cancellation of the club's registration if the officer is satisfied that—

• (a) any information provided by a person (“P”) at the time of registration was inaccurate, and

• (b) the inaccuracy was careless (within the meaning of paragraph 3 of Schedule 24 to FA 2007) or deliberate on P's part.

SCHEDULE 22

PART 1 — “Fixed protection 2014”

1

• (1) This paragraph applies on or after 6 April 2014 in the case of an individual—

• (a) who, on that date, has one or more arrangements under—

• (i) a registered pension scheme, or

• (ii) a relieved non-UK pension scheme of which the individual is a relieved member,

• (b) in relation to whom paragraph 7 of Schedule 36 to FA 2004 (primary protection) does not apply on that date,

• (c) in relation to whom paragraph 12 of that Schedule (enhanced protection) does not apply on that date, and

• (d) in whose case paragraph 14 of Schedule 18 to FA 2011 (transitional provision relating to new standard lifetime allowance for the tax year 2012-13) does not apply on that date,

if notice of intention to rely on it is given to an officer of Revenue and Customs.

• (2) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if—

• (a) the amount specified in section 637P of that Act (individual’s lump sum allowance) were £375,000, and

• (b) the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were—

• (i) if one or more lump sum and death benefit allowance enhancement factors operate in relation to the individual for the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s enhanced lump sum and death benefit allowance (as determined under that paragraph of that Schedule), and

• (ii) otherwise, £1,500,000.

• (3A) For the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s “protected lump sum and death benefit allowance” is £1,500,000.

• (3) But this paragraph ceases to apply if the notice under sub-paragraph (1) is given on or after 15 March 2023 and, on or after 6 April 2014—

• (a) there is benefit accrual in relation to the individual under an arrangement under a registered pension scheme,

• (b) there is an impermissible transfer into any arrangement under a registered pension scheme relating to the individual,

• (c) a transfer of sums or assets held for the purposes of, or representing accrued rights under, any such arrangement is made that is not a permitted transfer, or

• (d) an arrangement relating to the individual is made under a registered pension scheme otherwise than in permitted circumstances.

• (4) For the purposes of sub-paragraph (3)(a) there is benefit accrual in relation to the individual under an arrangement—

• (a) in the case of a money purchase arrangement that is not a cash balance arrangement, if a relevant contribution is paid under the arrangement on or after 6 April 2014,

• (b) in the case of a cash balance arrangement or a defined benefits arrangement, if there is an increase in the value of the individual's rights under the arrangement at any time on or after that date (but subject to sub-paragraph (11)), and

• (c) in the case of a hybrid arrangement—

• (i) where the benefits that may be provided to or in respect of the individual under the arrangement include money purchase benefits other than cash balance benefits, if a relevant contribution is paid under the arrangement on or after 6 April 2014, and

• (ii) in any case, if there is an increase in the value of the individual's rights under the arrangement at any time on or after that date (but subject to sub-paragraph (11)).

• (5) For the purposes of sub-paragraphs (4)(b) and (c)(ii) and (11) whether there is an increase in the value of the individual's rights under the arrangement (and its amount if there is) is to be determined—

• (a) in the case of a cash balance arrangement (or a hybrid arrangement under which cash balance benefits may be provided to or in respect of the individual under the arrangement), by reference to whether there is an increase in the amount that would, on the valuation assumptions, be available for the provision of benefits to or in respect of the member (and, if there is, the amount of the increase), and

• (b) in the case of a defined benefits arrangement (or a hybrid arrangement under which defined benefits may be provided to or in respect of the individual under the arrangement), by reference to whether there is an increase in the benefits amount.

• (6) For the purposes of sub-paragraph (5)(b) “the benefits amount” is—

$$( P × RVF ) + LS$where—LS is the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement (otherwise than by commutation of pension);P is the annual rate of the pension which would, on the valuation assumptions, be payable to the individual under the arrangement;RVF is the relevant valuation factor.$

• (7) Paragraph 17A of Schedule 36 to FA 2004 (impermissible transfers) applies for the purposes of sub-paragraph (3)(b) but as if the references to a relevant existing arrangement were to the arrangement and the reference in sub-paragraph (2) to 5 April 2006 were to 5 April 2014.

• (8) Sub-paragraphs (7) to (8B) of paragraph 12 of Schedule 36 to FA 2004 (when there is a permitted transfer) apply for the purposes of sub-paragraph (3)(c); and where there is a permitted transfer—

• (a) if it is a permitted transfer by virtue of sub-paragraph (8)(a) of paragraph 12, this paragraph applies in relation to the arrangement to which the transfer is made,

• (b) if it is a permitted transfer by virtue of sub-paragraph (8)(b) of that paragraph, this paragraph applies in relation to the arrangement to which the transfer is made as if it were the same as that from which it is made, and

• (c) if it is a permitted transfer by virtue of sub-paragraph (8)(c) of that paragraph, this paragraph applies in relation to the arrangement to which the transfer is made as if it were the same as that from which it is made and (if the employment is transferred) as if the employment with the transferee were the employment with the transferor.

• (9) Sub-paragraphs (2A) to (2C) of paragraph 12 of Schedule 36 to FA 2004 (“permitted circumstances”) apply for the purposes of sub-paragraph (3)(d).

• (10) Paragraph 14 of Schedule 36 to FA 2004 (when a relevant contribution is paid under an arrangement) applies for the purposes of sub-paragraph (4)(a) and (c)(i).

• (11) Increases in the value of the individual's rights under an arrangement are to be ignored for the purposes of sub-paragraph (4)(b) or (c)(ii) if in no tax year do they exceed the relevant percentage.

• (12) The relevant percentage, in relation to a tax year, means—

• (a) where the arrangement (or a predecessor arrangement) includes provision for the value of the rights of the individual to increase during the tax year at an annual rate specified in the rules of the pension scheme (or a predecessor registered pension scheme) on 11 December 2012—

• (i) that percentage (or, where more than one arrangement includes such provision, the higher or highest of the percentages specified), plus

• (ii) the relevant statutory increase percentage;

• (b) otherwise—

• (i) the percentage by which the consumer prices index for the month of September in the previous tax year is higher than it was for the September before that (or nil per cent if it is not higher), or

• (ii) if higher, the relevant statutory increase percentage.

• (13) In sub-paragraph (12)(a)—

• “predecessor arrangement”, in relation to an arrangement, means another arrangement (under the same or another registered pension scheme) from which some or all of the sums or assets held for the purposes of the arrangement directly or indirectly derive;

• “predecessor registered pension scheme”, in relation to a pension scheme, means another registered pension scheme from which some or all of the sums or assets held for the purposes of the arrangement under the pension scheme directly or indirectly derive.

• (14) In sub-paragraph (12) “the relevant statutory increase percentage”, in relation to a tax year, means the percentage increase in the value of the individual's rights under the arrangement during the tax year so far as it is attributable solely to one or more of the following—

• (a) an increase in accordance with section 15 of the Pension Schemes Act 1993 or section 11 of the Pension Schemes (Northern Ireland) Act 1993 (increase of guaranteed minimum where commencement of guaranteed minimum pension postponed);

• (b) a revaluation in accordance with section 16 of the Pension Schemes Act 1993 or section 12 of the Pension Schemes (Northern Ireland) Act 1993 (early leavers: revaluation of earnings factors);

• (c) a revaluation in accordance with Chapter 2 of Part 4 of the Pension Schemes Act 1993 or the Pension Schemes (Northern Ireland) Act 1993 (early leavers: revaluation of accrued benefits);

• (d) a revaluation in accordance with Chapter 3 of Part 4 of the Pension Schemes Act 1993 or the Pension Schemes (Northern Ireland) Act 1993 (early leavers: protection of increases in guaranteed minimum pensions);

• (e) the application of section 67 of the Equality Act 2010 (sex equality rule for occupational pension schemes).

• (15) Sub-paragraph (16) applies in relation to a tax year if—

• (a) the arrangement is a defined benefits arrangement which is under an annuity contract treated as a registered pension scheme under section 153(8) of FA 2004,

• (b) the contract provides for the value of the rights of the individual to be increased during the tax year at an annual rate specified in the contract, and

• (c) the contract limits the annual rate to the percentage increase in the retail prices index over a 12 month period specified in the contract.

• (16) Sub-paragraph (12)(b)(i) applies as if it referred instead to the annual rate of the increase in the value of the rights during the tax year.

• (17) For the purposes of sub-paragraph (15)(c) the 12 month period must end during the 12 month period preceding the month in which the increase in the value of the rights occurs.

• (18) Subject to sub-paragraphs (19) to (21), sub-paragraph (3) applies in relation to an individual who is a relieved member of a relieved non-UK pension scheme as if the relieved non-UK pension scheme were a registered pension scheme; and the other sub-paragraphs of this paragraph apply accordingly.

• (19) Sub-paragraphs (20) and (21) apply for the purposes of sub-paragraph (3)(a)(instead of sub-paragraph (4)) in determining if there is benefit accrual in relation to an individual under an arrangement under a relieved non-UK pension scheme of which the individual is a relieved member.

• (20) There is benefit accrual in relation to the individual under the arrangement if there is a pension input amount under sections 230 to 237 of FA 2004 (as applied by Schedule 34 to that Act) greater than nil in respect of the arrangement for a tax year; and, in such a case, the benefit accrual is treated as occurring at the end of the tax year.

• (21) There is also benefit accrual in relation to the individual under the arrangement if—

• (a) in a tax year there occurs a benefit crystallisation event in relation to the individual (whether in relation to the arrangement or to any other arrangement under any pension scheme or otherwise), and

• (b) had the tax year ended immediately before the benefit crystallisation event, there would have been a pension input amount under sections 230 to 237 of FA 2004 greater than nil in respect of the arrangement for the tax year,

and, in such a case, the benefit accrual is treated as occurring immediately before the benefit crystallisation event.

• (22) Expressions used in this paragraph and Part 4 of FA 2004 (pension schemes) have the same meaning in this paragraph as in that Part.

• (23) In particular, references to a relieved non-UK pension scheme or a relieved member of such a scheme are to be read in accordance with paragraphs 13(3) and (4) and 18 of Schedule 34 to FA 2004 (application of lifetime allowance charge provisions to members of overseas pension schemes).

2

• (1) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend paragraph 1.

• (2) Regulations under this paragraph may (for example) add to the cases in which paragraph 1 is to apply or is to cease to apply.

• (3) Regulations under this paragraph may include provision having effect in relation to a time before the regulations are made; but—

• (a) the time must be no earlier than 6 April 2014, and

• (b) the provision must not increase any person's liability to tax.

3

• (1) The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision specifying how any notice required to be given to an officer of Revenue and Customs under paragraph 1 is to be given.

• (2) In sub-paragraph (1) the reference to paragraph 1 is to that paragraph as amended from time to time by regulations under paragraph 2.

4

• (1) Regulations under paragraph 2 or 3 may include supplementary or incidental provision.

• (2) The powers to make regulations under paragraphs 2 and 3 are exercisable by statutory instrument.

• (3) A statutory instrument containing regulations under paragraph 2 or 3 is subject to annulment in pursuance of a resolution of the House of Commons.

PART 2 — Other provision

5

Part 4 of FA 2004 (pension schemes) is amended as follows.

6

• (1) Section 218 (standard lifetime allowance etc) is amended as follows.

• (2) After subsection (5B) insert—

(5BA) Where the operation of a lifetime allowance enhancement factor is provided for by any of sections 220, 222, 223 and 224 and the time mentioned in the definition of SLA in the section concerned fell within the period consisting of the tax year 2012-13 and the tax year 2013-14, subsection (4) has effect as if the amount to be multiplied by LAEF were £1,500,000 if that is greater than SLA. (5BB) Where more than one lifetime allowance enhancement factor operates, subsection (5BA) does not apply if subsection (5A) or (5B) applies.

• (3) After subsection (5C) insert—

(5D) Where benefit crystallisation event 7 occurs on or after 6 April 2014 by reason of the payment of a relevant lump sum death benefit in respect of the death of the individual during the period consisting of the tax year 2012-13 and the tax year 2013-14, the standard lifetime allowance at the time of the benefit crystallisation event is £1,500,000.

• (4) The amendments made by this paragraph have effect for the tax year 2014-15 and subsequent tax years.

7

• (1) In section 219 (availability of individual's lifetime allowance) after subsection (5) insert—

(5A) If paragraph 7 of Schedule 36 (primary protection) makes provision for a lifetime allowance enhancement factor in relation to the individual, subsection (5) has effect as if CSLA were £1,500,000 if that is greater than CSLA.

• (2) The amendment made by this paragraph has effect for cases in which the time of the current benefit crystallisation event falls on or after 6 April 2014.

8

• (1) Part 1 of Schedule 29 (authorised lump sums: lump sum rule) is amended as follows.

• (2) In paragraph 2 (which applies for the purpose of determining pension commencement lump sums) after sub-paragraph (8) insert—

(9) Sub-paragraph (10) applies if the member is a protected individual (but not if this paragraph applies with the modifications set out in paragraph 27 or 28 of Schedule 36). (10) Sub-paragraphs (6) and (7) have effect as if CSLA were £1,500,000 if that is greater than CSLA. (11) The member is a “protected individual” if— (a) paragraph 7 of Schedule 36 (primary protection) makes provision for a lifetime allowance enhancement factor in relation to the member, or (b) at the time the member becomes entitled to the lump sum, paragraph 12 of that Schedule (enhanced protection) applies in relation to the member.

• (3) The amendment made by sub-paragraph (2) has effect for cases in which the member becomes entitled to the lump sum on or after 6 April 2014.

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

• (5) The amendment made by sub-paragraph (4) has effect for cases in which the nominated date falls on or after 6 April 2014.

SCHEDULE 23

PART 1 — Income tax treatment of employee shareholder shares

1

ITEPA 2003 is amended in accordance with paragraphs 2 to 15.

2

In section 19(2) (time of receipt of non-money earnings), at the appropriate place insert— “ section 226A (amount treated as earnings: employee shareholder shares). ”

3

In Chapter 12 of Part 3, after section 226 insert—

(226A) (1) This section applies if shares having a market value of no less than £2000 are acquired by an employee in consideration of an employee shareholder agreement. (2) An amount calculated in accordance with subsection (3) is to be treated as earnings from the employment, in respect of the acquisition of the shares, for the tax year in which they are acquired. But this is subject to subsection (4). (3) The amount is— $$MV − P$where—MV is an amount equal to the market value of the shares;P is any payment the employee is treated as making for the shares under section 226B.$ But if P exceeds MV, the amount is nil. (4) If the shares are acquired pursuant to an employment-related securities option, subsection (2) does not apply. (5) If subsection (2) applies, nothing else constitutes earnings under this Part from the employment in respect of the acquisition of the shares. (6) For the purposes of this section and sections 226B to 226D— - shares are “acquired” by an employee if the employee becomes beneficially entitled to them (and they are acquired at the time when the employee becomes so entitled); - “employee shareholder agreement” means an agreement by virtue of which an employee is an employee shareholder (see section 205A(1)(a) to (d) of the Employment Rights Act 1996); - “employee shareholder share” means a share acquired by an employee in consideration of an employee shareholder agreement; - “employee” and “employer company”, in relation to an employee shareholder agreement, mean the individual and the company which enter into the agreement; - “employment-related securities option” has the same meaning as in Chapter 5 of Part 7 (see section 471(5)); - “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act; and the market value of shares is their market value on the day on which they are acquired (but see also subsection (7)). (7) For the purposes of subsection (1), the market value of the shares is to be determined ignoring— (a) any election under section 431 (election for market value of restricted shares to be calculated as if not restricted), and (b) section 437 (market value of convertible securities to be determined as if not convertible). (226B) (1) This section applies if shares having a market value of no less than £2000 are acquired by an employee in consideration of an employee shareholder agreement. (2) Where all the shares acquired in consideration of the agreement are acquired on the same day, the employee is to be treated, for the purposes of this Act, as having made on that day a payment of £2000 for those shares. (3) Where— (a) shares are acquired by the employee in consideration of the agreement on more than one day, and (b) of those shares, shares having a market value of not less than £2000 are acquired on the first of those days, the employee is to be treated for the purposes of this Act as having made, on the first of those days, a payment of £2000 for the shares acquired on that day. (4) If the market value of the shares acquired by the employee on the day mentioned in subsection (2) or (3)(b) exceeds £2000, the amount of the payment under subsection (2) or (3) which the employee is to be treated as having made for each of the shares is an amount equal to the appropriate proportion of the market value of that share. (5) The “appropriate proportion” is the following— $$2000 V$where V is the total market value of the shares acquired by the employee on the day.$ (6) This section is subject to— (a) section 226C (only one payment deemed to be made under agreements with associated companies), and (b) section 226D (no deemed payment if shareholder or a connected person has a material interest in the company). (7) Except as provided by this section, for the purposes of this Act the employee is to be treated as having given no consideration for shares acquired in consideration of the agreement. (8) Section 226A(7) applies for the purposes of this section as it applies for the purposes of section 226A(1). (226C) (1) An employee who is treated as having made a payment under section 226B for shares acquired in consideration of an employee shareholder agreement (“the relevant agreement”) is not to be treated as having made a payment for any other qualifying shares. (2) “Qualifying shares” means employee shareholder shares in— (a) the employer company in relation to the relevant agreement, or (b) an associated company of that company, which are acquired by the employee in consideration of an agreement within subsection (3). (3) An agreement is within this subsection if it is— (a) another employee shareholder agreement with the same employer company, or (b) an employee shareholder agreement with an associated company of that company. (4) For the purposes of this section— (a) a company is an “associated company” of another if— (i) one of the two has control of the other, or (ii) both are under the control of the same person or persons, and (b) if a company controls another when an employee shareholder agreement is entered into with the employee, paragraph (a) applies as if that continued to be the case (in addition to any other circumstances) when any subsequent employee shareholder agreement is entered into with that employee. (5) But subsection (4)(b) does not apply as between two companies if— (a) one of the companies has been dissolved, (b) the period of two years beginning with the date of the dissolution has passed, and (c) the employee has not, at any time in that period, been engaged in any office or employment (including engagement under a contract for services) with any company which is an associated company of the dissolved company. (6) In this section “control” is to be read in accordance with sections 450 and 451 of CTA 2010. (226D) (1) No payment is treated as made under section 226B in respect of any shares if, on the date on which the shares are acquired— (a) the employee has a material interest in the employer company or a relevant parent undertaking, or (b) the employee is connected with an individual who has a material interest in the employer company or a relevant parent undertaking. (2) No payment is treated as made under section 226B in respect of any shares if— (a) at any time in the period of one year ending with the date on which the shares are acquired, the employee had a material interest in the employer company or a relevant parent undertaking, or (b) on the date on which the shares are acquired, the employee is connected with an individual who, at any time in the period of one year ending with that date, had a material interest in the employer company or a relevant parent undertaking. (3) Subsections (4) and (5) define “material interest” for the purposes of this section. Those subsections must be read together with subsections (6) to (8). (4) An individual (“A”) has a material interest in a company if at least 25% of the voting rights in the company are exercisable— (a) by A, (b) by persons connected with A, or (c) by A and persons connected with A together. (5) If a company is a close company, an individual (“A”) has a material interest in it if— (a) A, (b) persons connected with A, or (c) A and persons connected with A together, possess such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive at least 25% of the assets that would then be available for distribution among the participators. (6) For the purposes of subsection (1), A is to be treated as having a material interest in a company at any time if either of the following conditions is met. (7) The first condition is that— (a) A, (b) persons connected with A, or (c) A and persons connected with A together, have an entitlement to acquire such rights as would (together with any existing rights) give A a material interest in the company. (8) The second condition is that there are arrangements in place between— (a) the employer company or a relevant parent undertaking, and (b) A, or persons connected with A, or A and persons connected with A together, which enable A or those persons to acquire such rights as would (together with any existing rights) give A a material interest in the company. (9) In this section— - “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable); - “close company” includes a company that would be a close company but for— 1. section 442(a) of CTA 2010 (exclusion of companies not resident in the United Kingdom), or 2. sections 446 and 447 of CTA 2010 (exclusion of certain quoted companies); - “relevant parent undertaking” means any parent undertaking of the employer company and for this purpose “parent undertaking” is to be read in accordance with section 1162 of the Companies Act 2006.

4

In consequence of the amendment made by paragraph 3—

• (a) in the heading to Chapter 12 of Part 3, for “Payments” substitute “ Other amounts ”, and

• (b) before section 221 insert the heading “Payments”.

5

In section 428 (restricted securities: amount of charge on occurrence of chargeable event), in subsection (7), after paragraph (b) insert—

(ba) any amount treated as earnings from the employee's employment under section 226A (employee shareholder shares: amount treated as earnings) in respect of the acquisition of the employment-related securities (other than an amount of exempt income),

.

6

In section 431 (election for full or partial disapplication of Chapter 2 (restricted securities)), in subsection (3), after paragraph (a) insert—

(aa) determining any amount that is to be treated as earnings from the employment where section 226A applies (employee shareholder shares: amount treated as earnings),

.

7

In section 437 (convertible securities: adjustment of charge), in subsection (1)(a), after “charge)” insert “ , section 226A (employee shareholder shares: amount treated as earnings) ”.

8

In section 446B (charge on acquisition of securities with artificially depressed market value), in subsection (4), after paragraph (b) insert—

(ba) section 226A (employee shareholder shares: amount treated as earnings),

.

9

In section 446T (securities acquired for less than market value: amount of notional loan), in subsection (3), after paragraph (b) insert—

(ba) any amount treated as earnings from the employee's employment under section 226A (employee shareholder shares: amount treated as earnings) in respect of the acquisition of the employment-related securities (other than an amount of exempt income),

.

10

In section 446V (Chapter 3C to be additional to other income tax charges), after paragraph (b) insert—

(ba) section 226A (employee shareholder shares: amount treated as earnings),

.

11

In section 452 (shares in research institution spin-out companies: market value on acquisition), in subsection (2), after paragraph (a) insert—

(aa) determining any amount that is to be treated as earnings from the employment under section 226A (employee shareholder shares: amount treated as earnings),

.

12

In section 479 (securities options: amount of gain realised on chargeable event), after subsection (3) insert—

(3A) Sections 226B to 226D (deemed payment for acquisition of employee shareholder shares) provide for the determination of the amount of consideration, if any, which is given for employee shareholder shares (within the meaning of section 226A(6)).

13

In section 531 (enterprise management incentives: limitation of charge where shares acquired below market value), after subsection (3) insert—

(3A) Sections 226B to 226D (deemed payment for acquisition of employee shareholder shares) provide for the determination of the amount, if any, for which employee shareholder shares (within the meaning of section 226A(6)) are acquired.

14

• (1) Section 532 (enterprise management incentives: consequences after disqualifying events) is amended as follows.

• (2) After subsection (4) insert—

(4A) Sections 226B to 226D (deemed payment for acquisition of employee shareholder shares) provide for the determination of the amount, if any, for which employee shareholder shares (within the meaning of section 226A(6)) are acquired.

• (3) In subsection (5), for “those subsections” substitute “ subsections (2) and (3) ”.

15

In section 554N (exclusions: other cases involving employment-related securities etc), in subsection (7)(b), after “Part 3” insert “ , or an amount treated under section 226A as earnings of A, ”.

16

In Chapter 3 of Part 4 of ITTOIA 2005 (tax on dividends etc from UK companies), after section 385 insert—

(385A) (1) No tax is charged under this Chapter on the amount or value of a payment made by a company on the purchase of shares from an individual if— (a) the payment is made in respect of shares in the company, (b) the shares are exempt employee shareholder shares, and (c) at the time of the disposal, the individual is not an employee of, or an office-holder in, the employer company or an associated company of that company. (2) In this section— - “exempt employee shareholder share”, “employer company” and “associated company” have the same meaning as in sections 236B to 236D of TCGA 1992 (capital gains tax treatment of employee shareholder shares); - “in respect of shares in the company” has the same meaning as in Part 23 of CTA 2010 (company distributions) (see section 1113 of that Act).

PART 2 — Capital gains tax exemption for employee shareholder shares

17

TCGA 1992 is amended as follows.

18

In section 58(2) (spouses and civil partners: disposals excepted from the usual rule)—

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

• (b) after paragraph (b) insert

, or (c) if the disposal is of exempt employee shareholder shares (see sections 236B to 236D),

.

19

• (1) Section 149AA (restricted and convertible employment-related securities) is amended as follows.

• (2) In subsection (1) for “Where” substitute “ Subject to subsection (1A), where ”.

• (3) After that subsection insert—

(1A) Where an individual has acquired an asset consisting of shares which, on acquisition, became employee shareholder shares— (a) the consideration for the acquisition is (subject to section 119A) to be taken to be equal to any amount that constituted earnings under Chapter 1 of Part 3 of ITEPA 2003 (earnings) or section 226A of that Act (employee shareholder shares), and (b) no other consideration is to be treated as having been given for the acquisition of the shares.

• (4) In subsection (2)—

• (a) for “Subsection (1) above applies” substitute “ Subsections (1) and (1A) apply ”, and

• (b) for “is” substitute “ are ”.

• (5) After subsection (6) insert—

(6A) For the purposes of subsection (1A)— - “employee shareholder share” has the meaning given in section 236B(3) (exemption for employee shareholder shares), and - shares are “acquired” by an individual if the individual becomes beneficially entitled to them (and they are so acquired at the time when the individual becomes so entitled).

• (6) In subsection (7)—

• (a) for “In subsection (1) the” substitute “ In subsections (1) and (1A) a ”, and

• (b) after “ITEPA 2003” insert “ or was treated as earnings under section 226A of that Act ”.

• (7) Accordingly, in the heading for that section, after “securities” insert “ and employee shareholder shares ”.

20

After section 236A insert—

(236B) (1) A gain which accrues on the first disposal of an exempt employee shareholder share is not a chargeable gain. (2) A share is an exempt employee shareholder share if it is— (a) an employee shareholder share, and (b) exempt in accordance with sections 236C and 236D. (3) In this section and sections 236C to 236G— - shares are “acquired” by an employee if the employee becomes beneficially entitled to them (and they are acquired at the time when the employee becomes so entitled); - “employee shareholder share” means a share acquired in consideration of an employee shareholder agreement and held by the employee; - “employee shareholder agreement” means an agreement by virtue of which an employee is an employee shareholder (see section 205A(1)(a) to (d) of the Employment Rights Act 1996); - “employee” and “employer company”, in relation to an employee shareholder agreement, mean the individual and the company which enter into the agreement. (236C) (1) An employee shareholder share acquired in consideration of an employee shareholder agreement (“the relevant agreement”) is exempt for the purposes of section 236B only if, immediately after its acquisition, the total value of qualifying shares which have been acquired by the employee does not exceed £50,000. (2) “Qualifying share” means an employee shareholder share in— (a) the employer company in relation to the relevant agreement, or (b) an associated company of that company, which is acquired by the employee in consideration of an agreement within subsection (3). (3) An agreement is within this subsection if it is— (a) the relevant agreement, (b) another employee shareholder agreement with the same employer company, or (c) an employee shareholder agreement with an associated company of that company. (4) For the purposes of this section— (a) a company is an “associated company” of another if— (i) one of the two has control of the other, or (ii) both are under the control of the same person or persons, and (b) if a company controls another when an employee shareholder agreement is entered into with the employee, paragraph (a) applies as if that continued to be the case (in addition to any other circumstances) when any subsequent employee shareholder agreement is entered into with that employee. (5) But subsection (4)(b) does not apply as between two companies if— (a) one of the companies has been dissolved, (b) the period of two years beginning with the date of the dissolution has passed, and (c) the employee has not, at any time in that period, been engaged in any office or employment (including engagement under a contract for services) with any company which is an associated company of the dissolved company. (6) If a number of qualifying shares are acquired by an employee on a day and— (a) before that day, the value of qualifying shares that have been acquired by the employee does not exceed £50,000, and (b) at the end of that day, that value does exceed that sum, the appropriate proportion of the shares (rounded down, if necessary, to the nearest share) is to be treated for the purposes of subsection (1) as having been acquired separately and before the others. (7) The “appropriate proportion” is the following— $$50000 – B T$where—B is the value of qualifying shares acquired before the day;T is the total value of qualifying shares acquired on the day.$ (8) For the purposes of this section, the value of a share (at any time) is its unrestricted market value at the time when it was acquired by the employee. (9) The unrestricted market value of a share when it is acquired by an employee is what the market value of the share would be immediately after the acquisition, but for any restriction. For this purpose “restriction” has the meaning given by section 432(8) of ITEPA 2003 (restricted securities for the purposes of Chapter 2 of Part 7 of that Act). (236D) (1) An employee shareholder share is not exempt for the purposes of section 236B if, on the date on which the share is acquired— (a) the employee has a material interest in the employer company or a relevant parent undertaking, or (b) the employee is connected with an individual who has a material interest in the employer company or a relevant parent undertaking. (2) An employee shareholder share is not exempt for the purposes of section 236B if— (a) at any time in the period of one year ending with the date on which the share is acquired, the employee had a material interest in the employer company or a relevant parent undertaking, or (b) on the date on which the share is acquired, the employee is connected with an individual who, at any time in the period of one year ending with that date, had a material interest in the employer company or a relevant parent undertaking. (3) Subsections (4) and (5) define “material interest” for the purposes of this section. Those subsections must be read together with subsections (6) to (8). (4) An individual (“A”) has a material interest in a company if at least 25% of the voting rights in the company are exercisable— (a) by A, (b) by persons connected with A, or (c) by A and persons connected with A together. (5) If a company is a close company, an individual (“A”) has a material interest in it if— (a) A, (b) persons connected with A, or (c) A and persons connected with A together, possess such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive at least 25% of the assets that would then be available for distribution among the participators. (6) For the purposes of subsection (1), A is to be treated as having a material interest in a company at any time if either of the following conditions is met. (7) The first condition is that— (a) A, (b) persons connected with A, or (c) A and persons connected with A together, have an entitlement to acquire such rights as would (together with any existing rights) give A a material interest in the company. (8) The second condition is that there are arrangements in place between— (a) the employer company or a relevant parent undertaking, and (b) A, or persons connected with A, or A and persons connected with A together, which enable A or those persons to acquire such rights as would (together with any existing rights) give A a material interest in the company. (9) In this section— - “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable); - “close company” includes a company that would be a close company but for— 1. section 442(a) of CTA 2010 (exclusion of companies not resident in the United Kingdom), or 2. sections 446 and 447 of CTA 2010 (exclusion of certain quoted companies); - “relevant parent undertaking” means any parent undertaking of the employer company and for this purpose “parent undertaking” is to be read in accordance with section 1162 of the Companies Act 2006. (236E) (1) Sections 104 (share pooling), 105 (disposal on or before acquisition) and 106A (identification of securities) do not apply to exempt employee shareholder shares. (2) Subsection (3) applies where— (a) an employee holds shares of the same class in a company, (b) some, but not all, of the shares are exempt employee shareholder shares, and (c) the employee disposes of some, but not all, of the shares in that holding. (3) Where this subsection applies— (a) the employee may determine what proportion of the shares disposed of are to be treated as exempt employee shareholder shares (up to the number of such shares which the employee holds), and (b) the consideration received for the shares disposed of is to be apportioned accordingly. (4) For the purposes of this section shares in a company are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt with on a recognised stock exchange. (236F) (1) Section 127 (equation of original shares and new holding on reorganisation) does not apply to exempt employee shareholder shares. (2) The reference in subsection (1) to section 127 includes that section as applied by sections 135 and 136 (other company reconstructions). (236G) (1) This section applies where an individual has acquired shares in consideration of entering into an employee shareholder agreement. (2) The individual is not to be regarded as disposing of an asset by reason of the individual ceasing to have, or not acquiring, the rights mentioned in section 205A of the Employment Rights Act 1996 (rights which an employee shareholder does not have) in consequence of entering into the agreement.

PART 3 — Corporation tax

21

CTA 2009 is amended as follows.

22

In section 1005 (definitions), at the appropriate place insert—

“employee shareholder share” has the meaning given by section 226A(6) of ITEPA 2003,

.

23

• (1) Section 1009 (relief for employee share acquisitions: employee's tax position) is amended as follows.

• (2) In subsection (2)(a), for “earnings within Chapter 1 of Part 3 of ITEPA 2003” substitute “ relevant earnings ”.

• (3) After subsection (2) insert—

(2A) Relevant earnings” means— (a) earnings within Chapter 1 of Part 3 of ITEPA 2003, and (b) any amount that is treated as earnings by virtue of section 226A of that Act (employee shareholder shares).

• (4) After subsection (5) insert—

(6) Where the shares are employee shareholder shares, this section is subject to section 1038B.

24

In section 1010(1) (acquisition of shares: relief if shares neither restricted nor convertible), after “section 1012” insert “ and, in the case of employee shareholder shares, section 1038B ”.

25

• (1) Section 1011 (acquisition of shares: relief if shares are restricted or convertible) is amended as follows.

• (2) In subsections (2) and (3), for “earnings of the employee within Chapter 1 of Part 3 of ITEPA 2003” substitute “ relevant earnings of the employee ”.

• (3) For subsection (4) substitute—

(4) For the purposes of subsections (2) and (3) “relevant earnings” means— (a) earnings within Chapter 1 of Part 3 of ITEPA 2003, and (b) any amount that is treated as earnings by virtue of section 226A of that Act (employee shareholder shares) (but see also section 1038B of this Act), except that it does not include any amount of exempt income (within the meaning of section 8 of ITEPA 2003).

26

In section 1018(1) (acquisition of shares pursuant to option: relief if shares neither restricted nor convertible), after “section 1020” insert “ and, in the case of employee shareholder shares, section 1038B ”.

27

In section 1019(1) (acquisition of shares pursuant to option: relief if shares are restricted or convertible), after “section 1020” insert “ and, in the case of employee shareholder shares, section 1038B ”.

28

In section 1022 (takeover of company whose shares are subject to option), after subsection (4) insert—

(5) Where the shares are employee shareholder shares, this section is subject to section 1038B.

29

In section 1026 (restricted shares: relief available on chargeable event), after subsection (4) insert—

(5) Where the shares are employee shareholder shares, this section is subject to section 1038B.

30

In section 1027 (restricted shares: relief available on death of employee), after subsection (4) insert—

(5) Where the shares are employee shareholder shares, this section is subject to section 1038B.

31

In section 1033 (convertible securities: relief available on chargeable event), after subsection (4) insert—

(5) Where the shares are employee shareholder shares, this section is subject to section 1038B.

32

In section 1034 (convertible securities: relief available following death of employee), after subsection (4) insert—

(5) Where the shares are employee shareholder shares, this section is subject to section 1038B.

33

• (1) At the end of Chapter 6 of Part 12 insert—

(1038B) For the purposes of this Part, any payment treated as made under section 226B of ITEPA 2003 (employee treated as paying £2000 for employee shareholder shares) in respect of the acquisition of shares is to be ignored when determining— (a) whether a person is subject to a charge to tax under that Act, (b) the amount that counts (or would have counted) as employment income under that Act, or (c) the consideration given by a person in relation to the acquisition of the shares.

• (2) Accordingly, in the heading for that Chapter, at the end insert “ ETC ”.

34

In section 1292 (provision of qualifying benefits), after subsection (6) insert—

(6ZA) In determining whether condition A or B is met, any payment treated as made under section 226B of ITEPA 2003 (deemed payment for employee shareholder shares) is to be ignored.

35

In section 1293 (timing and amount of certain qualifying benefits), after subsection (5) insert—

(5A) In determining for the purposes of subsections (3) and (5) the amount that is, or would be, charged to tax under ITEPA 2003, any payment treated as made under section 226B of that Act (deemed payment for employee shareholder shares) is to be ignored.

36

In Schedule 4 (index of definitions), at the appropriate place insert—

employee shareholder share (in Part 12)	section 226A(6) of ITEPA 2003 (see section 1005 of this Act)

.

PART 4 — Employment income exemption

37

In Chapter 11 of Part 4 of ITEPA (employment income: miscellaneous exemptions), after section 326A insert—

(326B) (1) No liability to income tax arises by virtue of— (a) the provision of relevant advice by a relevant independent adviser, or (b) the payment or reimbursement, in accordance with section 205A(7) of the Employment Rights Act 1996, of any reasonable costs incurred in obtaining relevant advice. (2) “Relevant advice” means— (a) advice, other than tax advice, which is provided for the purposes of section 205A(6)(a) of that Act (advice as to terms and effect of employee shareholder agreement), and (b) tax advice which is so provided and consists only of an explanation of the tax effects of employee shareholder agreements generally. (3) In this section— - “employee shareholder agreement” means an agreement by virtue of which an employee is an employee shareholder (see section 205A(1)(a) to (d) of that Act); - “relevant independent adviser” has the meaning that it has for the purposes of section 203(3)(c) of that Act.

PART 5 — Commencement

38

The amendments made by this Schedule come into force in accordance with provision made by the Treasury by order made by statutory instrument.

SCHEDULE 24

Entrepreneurs’ relief to apply to shares acquired under EMI option

1

• (1) In Chapter 3 of Part 5 of TCGA 1992 (entrepreneurs' relief) section 169I (material disposal of business assets) is amended as follows.

• (2) In subsection (5) for “or B” substitute “ , B, C or D ”.

• (3) After subsection (7) insert—